As filed with the Securities and Exchange Commission on August 9, 1999
Registration Statement No. 333-83063
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
Amendment No. 1
to
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SFC NEW HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 2022 52-2173533
(State or other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification
incorporation or Classification Number)
organization) Code Number)
520 Lake Cook Road
Suite 550
Deerfield, IL 60015
(847) 405-5300
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive office)
Larry S. Benjamin
President and Chief Executive Officer
SFC New Holdings, Inc.
520 Lake Cook Road
Suite 550
Deerfield, Illinois 60015
(847) 405-5300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
With A Copy To:
Mitchell S. Fishman, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
(212) 373-3000
Approximate date of commencement of proposed sale to public:
As soon as practicable after the Registration Statement becomes effective.
----------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box.|_|
----------------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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 earlier effective registration statement
for the same offering. |_|
================================================================================
<PAGE>
PROSPECTUS
SFC New Holdings, Inc.
Exchange Offers for:
$220,695,000 of our 11 1/4% Senior Notes due 2001
$149,925,000 of our 12 1/8% Senior Notes due 2002
$197,646,000 of our 13 1/4% Senior Subordinated Notes due 2003
and
$4,305,000 of 10 1/4% Senior Notes due 2001 of Specialty Foods Corporation
$75,000 of 11 1/8% Senior Notes due 2002 of Specialty Foods Corporation
$2,354,000 of 11 1/4% Senior Subordinated Notes due 2003 of Specialty Foods
Corporation
Terms of the exchange offers:
o They expire at 5:00 p.m., New York City time, on September 13, 1999,
unless extended.
o All notes that are validly tendered and not withdrawn will be exchanged.
o Tenders of notes may be withdrawn at any time before the expiration of the
exchange offer.
o The terms of the exchange notes we will issue in the exchange offer are
substantially identical to those of our initial notes, except that
transfer restrictions and registration rights relating to the initial
notes will not apply to the exchange notes.
o The notes of Specialty Foods Corporation which we are offering to acquire
in exchange for exchange notes are all structurally subordinated to both
our initial notes and the exchange notes.
o The exchange notes are new securities and there is currently no
established market for them.
Before participating in these exchange offers please refer to the section in
this prospectus entitled "Risk Factors" beginning on page 12.
Neither the Securities and Exchange Commission nor any state commission
has approved the notes to be distributed in the exchange offers, nor have any of
these organizations determined that this prospectus is truthful or complete. Any
representation to the contrary is a criminal offence.
------------------------------------------------------
The date of this prospectus is August 9, 1999.
------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page No.
--------
Prospectus Summary...........................................................1
Risk Factors................................................................12
Use of Proceeds.............................................................22
Pro Forma Capitalization....................................................23
Selected Consolidated Financial Data........................................24
Management's Discussion and Analysis of Financial Condition
and Results of Operations..............................................25
Business....................................................................33
Management..................................................................43
Security Ownership..........................................................53
Relationships and Related Transactions......................................56
The Exchange Offers.........................................................58
Description of Our Other Indebtedness and Our Accounts Receivable
Transfer Program.......................................................73
Description of the Exchange Notes...........................................81
Description of the Initial Notes...........................................131
Description of the SFC Notes...............................................132
Plan of Distribution.......................................................159
United States Federal Income Tax Considerations............................160
Legal Matters..............................................................171
Experts....................................................................171
Where You Can Obtain Additional Information................................172
Index to Financial Information.............................................F-1
Report of Independent Auditors.............................................F-2
i
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY
This summary highlights some information from this prospectus. Because it
is a summary, it does not contain all of the information that you should
consider before participating in the exchange offers. You should read the entire
prospectus carefully, including the section entitled "Risk Factors" and the
financial statements and the related notes to those statements included in this
prospectus.
About Our Business
General
SFAC New Holdings, Inc. is a holding corporation which, through us, SFC
New Holdings, Inc., owns a group of specialty food businesses. We are a leading
producer, marketer and distributor of retail bread, cookies and other baked
goods throughout the United States and we are now the nation's third largest
cookie company. Our operations include Metz Baking Company, Mother's Cake &
Cookie Co., Archway Cookies, Inc. and Andre-Boudin Bakeries, Inc.
Since 1996, we have increased our focus on our core baked goods businesses
while divesting non-core businesses including B&G Foods/Burns & Ricker, Inc.,
Gai's Seattle French Baking Co. and San Francisco French Bread. In addition, in
1997 we sold Stella Foods, Inc., a producer of specialty and Italian cheeses,
for $405 million, and, in April 1999, we sold H&M Foods Systems Company, Inc., a
manufacturer and distributor of specialty meats and meat-based prepared foods to
restaurants and food manufacturers, for $132 million. The net proceeds that we
received from the sales have been used to reduce our indebtedness, invest in our
businesses or acquire baked goods companies. In recent years, the baked goods
industry has undergone substantial consolidation, which is being driven by
opportunities to reduce costs by combining manufacturing, distribution and
administrative capabilities.
These exchange offers are being made to fulfill our obligations under the
registration rights agreement that we entered in connection with the
restructuring transaction and prior exchange offers that we completed on June
11, 1999. The restructuring and prior exchange offers were designed to give us
added flexibility to pursue our strategic plan and to allow us to maximize value
through selective acquisitions.
Since May 1998, we have completed seven acquisitions of baking companies
that complement our existing business, expand our geographic scope and
strengthen our competitive position. In October 1998, we acquired Archway for
approximately $90 million and used an additional $26 million to repay some of
Archway's indebtedness. The Archway acquisition created, together with Mother's,
the nation's third largest cookie business and provides us with a strong,
established brand name, a more diversified product line and a nation-wide
presence. The Archway acquisition also provides us with opportunities to realize
significant operational and distribution synergies.
- --------------------------------------------------------------------------------
1
<PAGE>
- --------------------------------------------------------------------------------
In June 1999, we acquired Grocers Baking Company of Grand Rapids, Michigan
for $33.2 million plus an additional $5.8 million of indebtedness. Grocers,
which had 1998 sales of approximately $60 million, sells a variety of bread,
buns, sweet goods, cookie dough and other frozen products throughout Michigan.
Additionally, in July 1999, we completed a small add-on acquisition of a
Detroit-based baker, Blue-Bird Products, Inc. These acquisitions will provide
our Metz business unit with both cost savings and new revenue opportunities.
We also completed four smaller, strategic bread acquisitions in 1998 for a
total aggregate consideration of $19.6 million. We acquired Pane Corporation,
which does business as San Diego Bread Company and sells a variety of specialty
breads, including a sourdough product that complements Boudin's premium
sourdough bread brand in California. This acquisition provides our Boudin
operating unit with the opportunity to strengthen its position in Southern
California. Our Metz business also acquired three bakery companies in 1998:
Clear Lake Bakery, Inc., which bakes and distributes a variety of bread, buns,
rolls, doughnuts and sweet rolls throughout Iowa; Grandma Sycamore's, which
distributes its brand name bread throughout Utah and neighboring states; and
Eagle (Rock Island) Bakery, which produces private label bread and buns
distributed in Iowa and Illinois. These bread acquisitions provide us with
significant opportunities to reduce our manufacturing and distribution costs and
to strengthen Metz's competitive position in its core Midwestern territory.
Business Strategy
Our strategy is to build the enterprise value of our operating companies,
which we believe is best attained in the current baking industry environment by
realizing significant cost synergies from acquisitions. Since May 1998, we have
consummated seven bakery acquisitions and we intend to continue to acquire
bakery businesses to the extent our financial resources allow. We have
identified potential acquisition candidates that would provide us with a range
of synergy opportunities if they were combined with our existing bakery
business. When our financial capabilities preclude us from pursuing additional
acquisitions, we will explore available options to maximize the value of our
stakeholders' investments.
SFC New Holdings, Inc. was formed in 1998 and is a Delaware corporation.
Our principal executive offices are located at 520 Lake Cook Road, Suite 550,
Deerfield, Illinois 60015. Our telephone number is (847) 405-5300.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
Summary of The Exchange Offers
We are offering to exchange $220,695,000 aggregate principal amount of our
new 11 1/4% Senior Notes due 2001, which we refer to as "11 1/4% Senior Notes,"
$149,925,000 aggregate principal amount of our new 12 1/8% Senior Notes due
2002, which we refer to as "12 1/8% Senior Notes," and $197,646,000 aggregate
principal amount of our new 13 1/4% Senior Subordinated Notes due 2003, which we
refer to as "Subordinated Notes," for the same aggregate principal amount of
substantially identical notes that we issued in a private transaction on June
11, 1999. We refer to the notes that we are offering to acquire collectively as
our "private exchange notes."
In addition, we are offering to exchange
o $4,305,000 aggregate principal amount of our 11 1/4% Senior Notes,
for the same principal amount of the 10 1/4% Senior Notes due 2001
(CUSIP No. 847499-AC-4) of Specialty Foods Corporation, which we
refer to as "SFC 10 1/4% Senior Notes;"
o $75,000 aggregate principal amount of our 12 1/8% Senior Notes for
the same principal amount of the 11 1/8% Senior Notes due 2002
(CUSIP No. 847499-AF-7) of Specialty Foods Corporation, which we
refer to as "SFC 11 1/8% Senior Notes;" and
o $2,354,000 aggregate principal amount of our Subordinated Notes for
the same principal amount of the 11 1/4% Senior Subordinated Notes
due 2003 (CUSIP No. 847499-AD-2) of Specialty Foods Corporation,
which we refer to as "SFC Subordinated Notes." In this prospectus,
we refer to the SFC 10 1/4% Senior Notes, the SFC 11 1/8% Senior
Notes and the SFC Subordinated Notes collectively as the "SFC
Notes."
We refer to our private exchange notes and the SFC Notes collectively as
"initial notes." In order to exchange your initial notes, you must properly
tender them and we must accept your tender. We will exchange all outstanding
initial notes that are validly tendered and not validly withdrawn. We refer to
the exchange offer for our private exchange notes and the exchange offer for the
SFC Notes collectively as the "exchange offers."
On June 11, 1999, in a private transaction, we exchanged:
o $220,695,000 aggregate principal amount of our initial 11 1/4%
Senior Notes (CUSIP No. 784123-AA-9), $5,551,086 aggregate principal
amount of 11% Senior Subordinated Discount Debentures due 2009
issued by SFC Sub, Inc., a Delaware corporation, which we refer to
as "11% Debentures," for $220,695,000 aggregate principal amount of
SFC 10 1/4% Senior Notes;
o $149,925,000 aggregate principal amount of our initial 12 1/8%
Senior Notes (CUSIP No. 784123-AB-7) and $3,771,026 aggregate
principal amount of
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
11% Debentures for $149,925,000 aggregate principal amount of SFC
11 1/8% Senior Notes; and
o $197,646,000 aggregate principal amount of our initial 13 1/4%
Senior Subordinated Notes (CUSIP No. 784123-AC-5) and $18,642,522 of
11% Debentures for $197,646,000 aggregate principal amount of SFC
Subordinated Notes.
Expiration Date
The exchange offers will expire at 5:00 p.m., New York City time, on
September 13, 1999, unless we decide to extend them.
Conditions to the Exchange offers
The exchange offers are subject to the following customary conditions:
o there is no change in the laws and regulations which would impair
our ability to proceed with the exchange offer,
o there is no change in the current interpretation of the staff of the
Securities and Exchange Commission which permits resales of the
exchange notes,
o there is no stop order issued by the staff of the Securities and
Exchange Commission which would suspend the effectiveness of the
registration statement of which this prospectus is a part,
o there is no litigation which would impair our ability to proceed
with the exchange offers,
o we obtain all the governmental approvals we deem necessary for the
exchange offers, and
o there is no change or development involving a prospective change in
our business or financial affairs which might materially impair our
ability to proceed with the exchange offers.
Please refer to the section in this prospectus entitled "The Exchange
Offers--Terms of the Exchange Offers--Conditions."
Procedures for Tendering Initial Notes
To participate in the exchange offers, you must complete, sign and date
the letter of transmittal, or a facsimile of the letter of transmittal, and
transmit it together with all other documents required by the letter of
transmittal, including the initial notes to be exchanged, to United States Trust
Company of New York, as exchange agent, at the address indicated on the cover
page of the letter of transmittal. In the alternative, you can
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
tender your initial notes by following the procedure for book-entry transfer
described in this prospectus. If your initial notes are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee, we urge
you to contact that person promptly to tender your initial notes in the exchange
offers. For more information on tendering your initial notes, please refer to
the sections in this prospectus entitled "The Exchange Offers--Terms of the
Exchange Offers--Procedures for Tendering" and "--Book Entry Transfer."
Guaranteed Delivery Procedures
If you wish to tender your initial notes and you cannot get your required
documents to the exchange agent on time, you may tender your initial notes
according to the guaranteed delivery procedures described under the section of
this prospectus entitled "The Exchange Offers--Terms of the Exchange
Offers--Guaranteed Delivery Procedure."
Withdrawal Rights
You may withdraw the tender of your initial notes at any time before 5:00
p.m., New York City time, on the expiration date of the exchange offers. To
withdraw, you must send a written or facsimile transmission notice of withdrawal
to the exchange agent at its address indicated under the "The Exchange
Offers--Terms of the Exchange Offers--Exchange Agent" before 5:00 pm., New York
City time, on the expiration date of the exchange offers.
Acceptance of Initial Notes and Delivery of Exchange Notes
If all conditions required for proper acceptance of initial notes are
fulfilled, we will accept any and all initial notes that are properly tendered
in the exchange offers on or before 5:00 p.m., New York City time, on the
expiration date. We will return any initial note that we do not accept for
exchange to you without expense as promptly as practicable after the expiration
date. We will deliver the exchange notes as promptly as practicable after the
expiration date and acceptance of the initial notes for exchange. Please refer
to the section in this prospectus entitled "The Exchange Offers--Terms of the
Exchange Offers."
Federal Income Tax Considerations Relating to the Exchange Offers
If you are a holder of our private exchange notes, exchanging your private
exchange notes for exchange notes will not be a taxable event to you for United
States Federal income tax purposes. If you are a holder of SFC Notes, exchanging
your SFC Notes for exchange notes should be a taxable event to you for United
States Federal income tax purposes, and you should recognize gain or loss equal
to the difference between the issue price of any exchange notes received in the
exchange and your adjusted tax basis in your SFC Notes exchanged therefor.
Please refer to the section of this prospectus entitled "United States Federal
Income Tax Considerations."
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
Exchange Agent
United States Trust Company of New York is serving as exchange agent in
the exchange offers.
Fees and Expenses
We will bear all expenses related to the exchange offers. Please refer to
the section in this prospectus entitled "The Exchange Offers--Terms of the
Exchange Offers--Fees and Expenses."
Use of Proceeds
We will not receive any proceeds from the issuance of the exchange notes.
We are making these exchange offers solely to satisfy certain of our obligations
under our registration rights agreement. Please refer to the sections in this
prospectus entitled "Use of Proceeds" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources" for a discussion of our use of the proceeds from the original
issuance of the initial notes.
Consequences of Failure to Exchange Initial Notes
If you do not exchange your initial notes in these exchange offers, or if
you do not properly tender your initial notes in these exchange offers,
o you will no longer be able to obligate us to register our private
exchange notes under the Securities Act except in the limited
circumstances provided under our registration rights agreement, and
you will not be entitled to obligate us to register the SFC Notes at
all;
o you will not be able to resell, offer to resell or otherwise
transfer our private exchange notes unless they are registered under
the Securities Act or unless you resell them, offer to resell or
otherwise transfer them under an exemption from the registration
requirements of, or in a transaction not subject to, the Securities
Act;
o SFC Notes that are not exchanged will be subordinated and junior in
right of payment to the exchange notes, the 11% Debentures and the
13% Senior Secured Discount Debentures due 2009 issued by SFAC New
Holdings, which we refer to as "New 13% Debentures"; and
o SFC Notes that are not exchanged will not be entitled to any
increase in the interest rate.
Please refer to the section in this prospectus entitled "Risk
Factors--Your failure to participate in the exchange offers will have adverse
consequences."
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
Summary of Terms of the Exchange Notes
Issuer
SFC New Holdings, Inc.
Notes Offered
$225,000,000 aggregate principal amount of our 11 1/4% Senior Notes,
$150,000,000 aggregate principal amount of our 12 1/8% Senior Notes, and
$200,000,000 aggregate principal amount of our Subordinated Notes. The form and
terms of the exchange notes received in exchange for our private exchange notes
are the same as the form and terms of our private exchange notes except that the
exchange notes will be registered under the Securities Act, will not bear
legends restricting their transfer and will not be entitled to registration
rights under our registration rights agreement. The exchange notes will evidence
the same debt as our private exchange notes and both our private exchange notes
and the exchange notes will be governed by the same indenture.
The form and terms of the exchange notes received in exchange for the SFC
Notes are substantially the same as the form of the SFC Notes but the terms of
the exchange notes provide that the exchange notes will be issued by us, accrue
interest at higher rates than the SFC Notes, require us to make cash payments to
the holders of the Subordinated Notes if the Subordinated Notes are not redeemed
by November 15, 2002 and provide for restrictive covenants and events of
default. In addition, the exchange notes evidence our debt and not the debt of
Specialty Foods and the SFC Notes and the exchange notes are not governed by the
same indenture.
Maturity Dates
o 11 1/4% Senior Notes -- August 15, 2001
o 12 1/8% Senior Notes -- October 1, 2002
o Subordinated Notes -- August 15, 2003
Interest on the Exchange Notes
Interest on the 11 1/4% Senior Notes will accrue at 11 1/4% per annum and
will be payable semi-annually in arrears on February 15 and August 15 of each
year, commencing on August 15, 1999, to holders of record on the immediately
preceding February 1 and August 1.
Interest on the 12 1/8% Senior Notes will accrue at 12 1/8% per annum and
will be payable semi-annually in arrears on April 1 and October 1 of each year,
commencing on October 1, 1999, to holders of record on the immediately preceding
March 15 and September 15.
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
Interest on the Subordinated Notes will accrue at 13 1/4% per annum and
all but 1% of such accrued interest will be payable semi-annually in arrears in
cash on February 15 and August 15 of each year, commencing on August 15, 1999,
to holders of record on the immediately preceding February 1 and August 1. The
remaining interest on the Subordinated Notes will be payable through the
issuance of Subordinated Notes required to be issued as interest payable in
kind, which we refer to as "PIK Subordinated Notes." We will issue PIK
Subordinated Notes at the rate of 1% per annum payable semi-annually in arrears
on February 15 and August 15 of each year, commencing August 15, 1999.
We will pay all accrued but unpaid interest on the SFC Notes on the first
interest payment date of each of our private exchange notes. In addition, on the
SFC Notes that we acquired on June 11, 1999, we will pay (i) additional interest
on each of those SFC Notes at the rate of 1% per annum, commencing April 1,
1999, on the first interest payment date of each of our private exchange notes,
and (ii) additional interest on the SFC Subordinated Notes that we acquired on
June 11, 1999 through the issuance of PIK Subordinated Notes at the rate of 1%
per annum, commencing April 1, 1999, on August 15, 1999. The effective date of
the additional interest that we will pay is April 1, 1999.
Interest on the exchange 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
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Original Issue Discount
If you are a holder of our private exchange notes tendering to the
exchange, the 11 1/4% Senior Notes, the 12 1/8% Senior Notes, and the
Subordinated Notes will have "original issue discount" for Federal income tax
purposes. If you are a holder of SFC Notes tendering to the exchange, the
Subordinated Notes will have "original issue discount" for Federal income tax
purposes. Consequently, holders will be required to include amounts in gross
income for Federal income tax purposes in advance of the receipt of cash
attributable thereto. See "United States Federal Income Tax Considerations."
Sinking Funds
None.
Optional Redemption
We will be able to redeem the 11 1/4% Senior Notes and Subordinated Notes,
in whole or in part, at our option, at any time, at the redemption prices
contained in this prospectus under the heading "Description of the Exchange
Notes--Optional Redemption," plus accrued and unpaid interest on the notes
redeemed to the redemption date. However, if we do not redeem the Subordinated
Notes, in whole, on or before November 15, 2002, we will be required to pay the
holders of the Subordinated Notes $50.00 per $1,000
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
principal amount of their Subordinated Notes, which we refer to as the
"Non-Redemption Payment," on November 16, 2002.
We are not entitled to redeem the 12 1/8% Senior Notes before October 1,
1999. After that date, we may redeem the 12 1/8% Senior Notes, in whole or in
part, at our option, at any time, at the redemption prices set forth of page 87
in this prospectus, plus accrued and unpaid interest on the notes redeemed to
the redemption date.
Change of Control
Upon a change of control of SFC New Holdings, you will have the right to
require us to repurchase all of your exchange notes at a repurchase price equal
to 101% of the aggregate principal amount of these exchange notes, together with
accrued and unpaid interest, if any, to the date of repurchase. We cannot assure
you that we will have available or that we will be able to obtain sufficient
funds to repurchase your exchange notes when required upon a change of control.
Please refer to the section in this prospectus entitled "Description of the
Exchange Notes --Repurchase at the Option of Holders--Change of Control."
Ranking
Except as described below, the exchange notes will:
o be general unsecured obligations,
o rank without preference with all our other existing and future
unsecured senior indebtedness,
o be effectively junior in right of payment to all our existing and
future secured indebtedness to the extent of the assets that secure
this indebtedness, and
o be effectively junior in right of payment to all of our
subsidiaries' existing or future indebtedness, whether or not
secured.
The Subordinated Notes are subordinated in right of payment to the prior
payment in full in cash or cash equivalents of all of our senior debt, including
the 11 1/4% Senior Notes and the 12 1/8% Senior Notes.
Restrictive Covenants
The indentures under which the exchange notes will be issued limit our and
our subsidiaries' ability to:
o pay dividends on, and repurchase or redeem our capital stock and our
subsidiaries' capital stock and repurchase or redeem our
subordinated obligations,
9
<PAGE>
- --------------------------------------------------------------------------------
o incur additional indebtedness or issue preferred stock,
o grant or suffer to exist additional secured claims against our and
our subsidiaries' properties,
o invest and sell assets and subsidiary stock, and
o engage in transactions with related entities.
In addition, the indentures limit our ability to consolidate, merge and
transfer substantially all of our assets, and also contain restrictions on
distributions from our subsidiaries. All of these limitations and prohibitions
have a number of important qualifications and exceptions. Please refer to the
sections in this prospectus entitled "Risk Factors--Restrictions imposed by our
debt agreement may significantly limit our ability to execute our business
strategy and increase the risk of default under our debt obligations" and
"Description of the Exchange Notes--Certain Covenants."
Absence of a Public Market for the Notes
The exchange notes are new securities and there is currently no
established market for them. We cannot assure you that a market for the exchange
notes will develop or be liquid. The SFC Notes, but not our private exchange
notes, are currently freely tradable in the over-the-counter market. Our private
exchange notes are not eligible for trading in the Private Offerings, Resales
and Trading through Automated Linkages market. Following commencement of the
exchange offers, you may continue to trade the SFC Notes in the over-the-counter
market, but the exchange notes will not be eligible for trading in this market
until the exchange offers have been completed.
Form of Exchange Notes
The exchange notes will be represented by one or more permanent global
securities in bearer form deposited on behalf of The Depository Trust Company
with United States Trust Company of New York, as custodian in connection with
the 11 1/4% Senior Notes and the 12 1/8% Senior Notes, and with United States
Trust Company of Texas, N.A., as custodian in connection with the Subordinated
Notes. You will not receive exchange notes in registered form unless one of the
events described in the section of this prospectus entitled "Description of the
Exchange Notes--Book Entry; Delivery and Form" occurs. Instead, beneficial
interests in the exchange notes will be shown on, and transfers of these
interests will be effected only through, records maintained in book-entry form
by The Depository Trust Company with respect to its participants.
Risk Factors
You should consider carefully the information provided in the section in
this prospectus entitled "Risk Factors" beginning on page 12 and all the other
information provided to you in this prospectus in deciding whether to tender
your initial notes in the exchange offers.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
Ratio of Earnings to Fixed Charges
The following table contains our ratio of earnings to fixed charges and
the resulting deficiencies for each of the periods indicated. The data used to
compute the ratio has been derived from Specialty Foods Corporation's
consolidated financial statements. Our earnings were insufficient to cover our
fixed charges for the periods presented.
Year ended December 31,
----------------------------------
Quarter ended
1994 1995 1996 1997 1998 March 31, 1999
------ ------ ------ ------ ------ --------------
Ratio of earnings
to fixed charges............ 0.29 0.47 0.18 0.32 0.43 0.07
Deficiency (in millions) ... $64.1 $51.7 $81.5 $67.2 $56.4 $22.9
- --------------------------------------------------------------------------------
11
<PAGE>
RISK FACTORS
Before tendering your initial notes in the exchange offers, you should
carefully consider the information below, as well as all other information
provided to you in this prospectus, including information in the section of this
prospectus entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Special Note Regarding Forward-looking Statements."
We have substantial debt which may limit our ability to borrow, restrict
the use of our cash flows, constrain our business strategy and prevent us from
meeting our debt obligations.
We have substantial debt and debt service requirements. Our substantial
debt may have the following consequences:
o limiting our ability to borrow additional amounts for working
capital, capital expenditures or other purposes;
o preventing us from satisfying our obligations with respect to the
exchange notes;
o consuming a substantial portion of our cash flow from operations in
the form of debt service payments; and
o limiting our ability to complete acquisitions, to capitalize on
significant business opportunities and to react to changes in
general economic conditions, interest rates, competitive pressures
and adverse changes in government regulation.
We cannot assure you that our cash flow and capital resources will be
sufficient to repay the initial or exchange notes, our other existing
indebtedness and any indebtedness that we may incur in the future, or that we
will be successful in obtaining alternative financing. If we are unable to repay
our debts, we may be forced to reduce or cease some of our operations, sell
additional assets, obtain additional equity capital or refinance or restructure
our debt. Please refer to the sections in this prospectus entitled "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Business."
We expect to continue to incur negative cash flow from operations and may
continue to incur net losses due to the high level of interest expense arising
from our substantial debt.
Since 1997, we have reported positive operating profits in our financial
statements. However, due to the high level of our interest expense, we have
reported net losses and negative cash flows from operating activities. Our
interest expense was $84.8 million in fiscal 1998 and $90.8 million in fiscal
1997. Given our current levels of debt and higher interest costs on the exchange
notes, we expect to continue to incur high interest expense
12
<PAGE>
which will result in reported net losses and negative cash flows from operating
activities for the foreseeable future.
Continued losses and negative cash flow may prevent us from pursuing our
strategies for growth and could limit our ability to meet our debt service
obligations, including our obligations under the initial and exchange notes,
capital expenditure requirements or working capital needs. Please refer to the
section in the prospectus entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
Restrictions imposed by our debt agreements may significantly limit our
ability to execute our business strategy and increase the risk of default under
our debt obligations.
The indentures for the initial and exchange notes contain a number of
significant covenants. These covenants will limit our ability to, among other
things:
o borrow additional money;
o make capital expenditures and other investments;
o pay dividends;
o merge, consolidate, or dispose of our assets; and
o enter into transactions with related entities.
If we fail to comply with these covenants we will default under the
indentures. A default, if not waived, could result in acceleration of our
indebtedness, in which case the debt would become immediately due and payable.
If this occurs, we may not be able to repay our debt or borrow sufficient funds
to refinance it. Even if new financing is available, it may not be on terms that
are acceptable to us. In addition, complying with these covenants may cause us
to take actions that we otherwise would not take, or not take actions that we
otherwise would take. Please refer to the sections in this prospectus entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources," "Business--Strategy" and
"Description of the Exchange Notes."
Factors affecting our business operations may limit our ability to
increase our future earnings and cash flows.
Our continued and future success depends on our ability to increase our
earnings and cash flow which, in turn, depends on factors specific to the food
industry and numerous other factors beyond our control. These include changes in
general economic conditions; adverse changes in local markets; limited shelf
life of food products; lack of attractiveness of a particular food product line
after its novelty has worn off; evolving consumer preferences and nutritional
and health-related concerns; federal, state and local
13
<PAGE>
food processing controls; consumer product liability claims; risks of product
tampering; our continued ability to hire and retain qualified management
personnel; and the availability and expense of liability insurance and other
overhead expenses.
In the future, we may acquire or try to acquire products and businesses
from, make investments in, or enter into strategic alliances with, companies
which have products or distribution networks in our current markets or in areas
into which we intend to expand our distribution network. Any future
acquisitions, investments, strategic alliances or related efforts will be
accompanied by risks such as:
o the difficulty of assimilating the operations of the respective
entities;
o the potential disruption of our ongoing business;
o the inability of management to capitalize on the opportunities
presented by acquisitions, investments, strategic alliances or
related efforts;
o the inability to maintain uniform standards, controls, procedures
and policies; and
o the impairment of relationships with employees and customers as a
result of changes in management.
We cannot assure you that we would be successful in overcoming these risks
or any other problems encountered with these acquisitions, investments,
strategic alliances or related efforts. Please refer to the section in this
prospectus entitled "Business--Strategy."
The baking industry is highly competitive, which might adversely affect
our results of operations and cause us to be unable to implement our business
strategy.
The baking industry is highly competitive. Competition in the baking
industry is based on a variety of factors including price, breadth of products
offered, product quality and customer service. Significant changes in marketing
or pricing strategies by one or more of our competitors could adversely affect
our business. Some of our competitors have greater financial, marketing and
other resources than we have, while smaller competitors may have lower fixed
costs and greater operating flexibility. Generally, our competitors generate
positive cash flows and have substantially less debt than we have. Please refer
to the section of this prospectus entitled "Business--Competition."
Our inability to compete adequately in the baking industry could result in
price reductions, reduced margins and losses of our market share.
We may suffer adverse effects from changes in demographic trends and
consumer preferences.
14
<PAGE>
The baking industry is affected by changes in consumer preferences, tastes
and eating habits, local, regional and national economic conditions and
demographic trends. Factors such as increased raw material, labor and benefits
costs, the availability of experienced management and hourly employees and
difficulties or delays in developing and introducing new products to suit
consumer preferences may adversely affect the baking industry in general and our
businesses in particular. Consequently, our success will depend on our ability
to recognize and react to such trends adequately. Any changes in these factors
could adversely affect our profitability. In addition, the failure of customers
to respond favorably to our marketing or new products, could have an adverse
effect on our profitability.
Many of our employees are unionized and a prolonged work stoppage at any
of our facilities could have a material adverse effect on our business and
results of operations.
We, through our subsidiaries, are parties to numerous collective
bargaining agreements with unions representing employees involved in the
manufacture and distribution of our bakery products. These contracts generally
run for periods of three to five years. While we believe that our relations with
our employees are generally good, we cannot assure you that there will not be
one or more localized work stoppages in the future. Any prolonged work stoppage
at a subsidiary could have a material adverse effect on the subsidiary and us.
Fluctuations in the price of raw materials may adversely affect our
financial performance.
Flour, sugar, vegetable oils and other agricultural products, and plastic
and paper for packaging, constitute significant components of our cost of goods
sold. The prices of these commodity raw materials often fluctuate, which may
adversely affect our financial performance. Please refer to the sections of this
prospectus entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business--Raw Materials."
The heavy regulation of the food industry may limit our growth and affect
our competitive position.
Our operations are extensively regulated by the United States Food and
Drug Administration and other state and local authorities. These regulations
apply to the processing, packaging, storage, distribution and labeling of our
products, as well as environmental compliance. Our processing facilities and
products may be inspected periodically by federal, state and local authorities.
We believe that our operating subsidiaries are currently in substantial
compliance with all material governmental laws and regulations, and that they
maintain all material permits and licenses relating to their operations.
Nevertheless, we cannot assure you that these subsidiaries currently comply with
those laws and regulations in all respects, that they will be able to maintain
compliance with existing laws or regulations, or that they will comply with any
future laws and regulations. If any of our subsidiaries fail to comply with any
applicable laws
15
<PAGE>
and regulations, both civil remedies, including fines, injunctions, recalls or
seizures, and criminal sanctions may be imposed on the subsidiary. Any penalty
imposed on any of our subsidiaries could have an adverse effect on that
subsidiary and on us. See "Business--Legal and Regulatory Matters--Regulation."
Complying with environmental laws may adversely affect our results of
operations.
Extensive and changing federal, state, local and foreign environmental
laws and regulations govern our and our subsidiaries' past and present business
operations, and ownership and operation of real property. These laws and
regulations apply to the discharge of materials into the environment, the
handling and disposition of wastes (including solid and hazardous wastes), and
other matters relating to protecting the environment. Although we do not expect
the costs of complying with federal, state, local and foreign environmental laws
and regulations to have a material impact on our capital expenditures, earnings
or competitive position, we cannot assure you that additional environmental
issues will not require additional investigation, assessment or expenditures
beyond what we currently expect. Please refer to the section of this prospectus
entitled "Business--Environmental Matters."
Failure to address the year 2000 problem may cause disruptions in our
operations and in our services to our customers, which would affect our results
of operations and financial condition.
Many computer systems and software products will not function properly in
the year 2000 and beyond due to a once-common programming standard that
represents years using two digits. This problem is often referred to as the
"year 2000 problem." It is possible that our currently installed computer
systems, software products or other information technology systems, including
imbedded technology, or those of our suppliers, contractors or major systems
developers, working either alone or in conjunction with other software or
systems, will not properly function in the year 2000 because of the year 2000
problem. If we or our customers, suppliers, contractors and major systems
developers are unable to address these year 2000 issues in a timely manner, we
could suffer a material adverse effect on our results of operations and
financial condition. Although we currently believe we have addressed our year
2000 problem, we are not able to determine the potential impact of a failure of
some or all of our systems if our compliance efforts are not completely
successful. Similarly, we are unable to assess the potential impact on our
business of a failure or disruption to any of our suppliers, customers, service
providers or major third parties. Please also refer to the section of this
prospectus entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Year 2000."
There may be a negative effect on our financial condition if our
subsidiaries' trademarks are challenged.
We believe that trademarks owned or licensed by us or by our subsidiaries
have significant value and are important to the marketing of our products.
Although these
16
<PAGE>
trademarks are registered in the United States, we cannot be sure that these
trademarks cannot be circumvented, or that the trademarks do not or will not
violate the proprietary rights of others, or would be upheld if challenged, or
that we or our subsidiaries would not be prevented from using our trademarks.
Any challenge to our use of these trademarks could have an adverse effect on our
financial condition and results of operations, either as a result of a negative
ruling with regards to our use, validity or enforceability of the trademarks, or
because of the time consumed and the legal costs of defending against a claim.
In addition, we cannot be sure that we will have the financial resources
necessary to enforce or defend our trademarks. Please refer to the section of
this prospectus entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
Our financial condition and results may be affected by adverse publicity.
Our ability to compete depends in part on maintaining our and our
subsidiaries' reputations with the consumer. Publicity resulting from food
quality, illness, injury, or other health concerns, including food-borne illness
claims, or operating issues stemming from any or all of our subsidiaries'
operations, or even a competitor's operations, can adversely affect a business
such as ours. As a result, it is possible that such adverse publicity may
adversely affect our financial condition and results of operations.
Litigation against us could have an adverse effect on our business.
We are involved in a litigation pertaining to one of our former
subsidiaries, and routine litigation in the ordinary course of business. Please
refer to the section of this prospectus entitled "Business--Legal Matters."
Although we are not currently subject to any material product liability
litigation, product liability litigation involving any of our products may arise
in the future. Our quality control programs are designed to maintain high
standards for the food and materials and food preparation procedures that we
use. Products are inspected periodically by our personnel at both the
point-of-sale locations and the manufacturing facilities to ensure that they
conform to our standards. In addition to insurance held by our suppliers, we
maintain insurance relating to personal injury and product liability in amounts
that we consider adequate for the baking industry. While we have been able to
obtain this insurance in the past, we may not be able to do so in the future.
Any successful claim against us in an amount materially exceeding our coverage
could have a material adverse effect on our business, financial condition and
results of operations.
Payment of principal and interest on the exchange notes effectively
depends on receiving income from our subsidiaries which have no obligations to
make any payments on the exchange notes.
We are a holding company with few direct operations and few assets of
significance other than the stock of our subsidiaries. As such, we are dependent
on the cash flows of our subsidiaries to meet our obligations, including the
payment of principal and interest on the exchange notes. Our subsidiaries are
separate legal entities that have
17
<PAGE>
no obligation to pay any amounts due under the exchange notes or to make any
funds available for payments due under the exchange notes, whether by dividends,
loans or other payments. Our subsidiaries do not guarantee the payment of the
exchange notes. The exchange notes therefore will be effectively junior in right
of payment to the claims of the creditors of our subsidiaries, including trade
creditors and holders of indebtedness of our subsidiaries. Our current and
future subsidiaries have and will continue to have significant amounts of
financing and other indebtedness in connection their operations. Please refer to
the sections of this prospectus entitled "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources," "Business" and "Description of Our Other Indebtedness and Our
Accounts Receivable Transfer Program."
Payment of principal and interest on the exchange notes is effectively
junior in right of payment to the claims of our secured creditors and our
subsidiaries' creditors who would be entitled to realize their claims on our
assets before you.
The exchange notes are unsecured and will be effectively junior in right
of payment to all our existing and future secured indebtedness to the extent of
the value of the assets securing that indebtedness. If any of our subsidiaries
is dissolved, liquidated, reorganized or becomes bankrupt, the assets of that
subsidiary will be available to satisfy obligations of any secured debt before
any payment may be made on the exchange notes. In addition, to the extent our
assets cannot satisfy in full the secured indebtedness, the holders of this
indebtedness would have a claim for any shortfall that would rank equally in
right of payment with the exchange notes. If the indebtedness were issued by a
subsidiary, the holders' claim for any shortfall would effectively rank senior
to the exchange notes with respect to such subsidiary's assets.
In addition, the exchange notes also will be effectively junior in right
of payment to all of our subsidiaries' existing or future indebtedness, whether
or not secured. The indenture for the initial and exchange notes permits us and
our subsidiaries to incur additional indebtedness in certain circumstances.
Please refer to the section of this prospectus entitled "Description of the
Exchange Notes." Accordingly, there might only be a limited amount of assets
available to satisfy your claims as a holder of the exchange notes upon an
acceleration of the maturity of the exchange notes.
Our controlling stockholder may take actions that may be contrary to your
interests.
SFAC New Holdings owns all of our capital stock. As a result, SFAC New
Holdings is in a position to elect all of our directors who, in turn, appoint
all of our executive officers. In addition, SFAC New Holdings is in a position
to amend our certificate of incorporation and by-laws, effect corporate
transactions such as mergers and asset sales and otherwise control our
management and policies without the approval of any other security holder,
subject to the provisions of the indenture. Accordingly, SFAC New Holdings will
be able to, directly or indirectly, control all of our affairs in a manner that
may be contrary to your interests. Please refer to the section of this
prospectus entitled "Security Ownership."
18
<PAGE>
We may be unable to pay our debt obligations if a change of control occurs
under the indenture.
Upon certain change of control events, you may require us to repurchase
all or a portion of your exchange notes at a purchase price equal to 101% of the
principal amount of the notes plus any additional amounts and any accrued and
unpaid interest on the notes. Our ability to repurchase the notes upon a change
in control event will be limited by the terms of our other debt agreements. Upon
a change of control event, we may be required immediately to repay the
outstanding principal and other amounts owed by us under our credit facility or
other financing agreements.
We may not be able to repay amounts outstanding under that credit facility
or obtain necessary consents under that facility to repurchase these notes. Any
requirement to offer to purchase the notes may result in our having to refinance
our outstanding indebtedness, which we may not be able to do. The term "change
of control" is defined in the section of this prospectus entitled "Description
of the Exchange Notes."
A court could declare the exchange notes void, junior in right of payment
or take other actions detrimental to you.
An unpaid creditor or representative of creditors, such as a trustee in
bankruptcy or SFC New Holdings as a debtor-in-possession in a bankruptcy
proceeding, could file a lawsuit claiming that the issuance of the private
exchange notes constitutes a fraudulent conveyance. If the court were to make
such a finding, it may also find that the issuance of the exchange notes is part
of the fraudulent conveyance. If it did so, the court could:
o void our obligations under the exchange notes;
o declare the exchange notes junior in right of payment to other
indebtedness; or
o take other actions detrimental to you as a holder of the exchange
notes.
To make this determination, a court would have to find that:
o we did not receive fair consideration or reasonably equivalent value
for the private exchange notes, and that,
o at the time the private exchange notes were issued, we were
insolvent or rendered insolvent by the issuance of the private
exchange notes; were engaged in a business or transaction for which
our remaining assets constituted unreasonably small capital; or
intended to incur, or believed that we would incur, debts which it
would be beyond our ability to pay as they matured.
19
<PAGE>
The measure of insolvency for these purposes will vary depending upon the
law of the jurisdiction and upon the valuation assumptions and the methodology
applied by the court.
Moreover, regardless of solvency, a court could also void the issuance of
the exchange notes if it determined that the transaction or the private exchange
transactions were made with intent to hinder, delay or defraud creditors, or a
court could subordinate the exchange notes to the claims of all existing and
future creditors on similar grounds.
You may find it difficult to sell your exchange notes.
The exchange notes will be registered under the Securities Act but will
not be eligible for trading on the Private Offerings, Resales and Trading
through Automated Linkages market. The exchange notes will constitute a new
issue of securities with no established trading market, and there can be no
assurance as to:
o the development of any market for the exchange notes;
o the liquidity of any market for the exchange notes that may develop;
o your ability to sell your exchange notes; or
o the price at which you would be able to sell your exchange notes.
If a market for the exchange notes were to exist, the exchange notes could
trade at prices that may be higher or lower than their principal amount or
purchase price, depending on many factors, including prevailing interest rates,
the market for similar debentures and the financial performance of SFC New
Holdings. Historically, the market for non-investment grade debt has been
subject to disruptions that have caused substantial volatility in the prices of
securities similar to the exchange notes. We cannot assure you that the market
for the exchange notes, if any, will not be subject to similar disruptions. Any
disruption may adversely affect you as a holder of the exchange notes.
Holders of SFC Notes who do not participate in the exchange offers will
not be entitled to an increased interest rate and will be subordinated and
junior in right of payment to the exchange notes and our private exchange notes,
the 11% Debentures and the New 13% Debentures.
Once the exchange offers have been completed, holders of outstanding SFC
Notes will not be entitled to any increase in the interest rate on their notes
or have any further rights to have their outstanding notes registered. The SFC
Notes will be subordinated and junior in right of payment to the exchange notes
and any untendered and tendered but unaccepted initial notes, 11% Debentures and
New 13% Debentures.
20
<PAGE>
Your failure to participate in the exchange offers will have adverse
consequences.
Our private exchange notes were not registered under the Securities Act or
under the securities laws of any state and you may not resell them, offer them
for resale or otherwise transfer them unless they are subsequently registered or
resold under an exemption from the registration requirements of the Securities
Act and applicable state securities laws. If you do not exchange your private
exchange notes for exchange notes pursuant to the exchange offers, or if you do
not properly tender your private exchange notes in the exchange offers, you will
not be able to resell, offer to resell or otherwise transfer the private
exchange notes unless they are registered under the Securities Act or unless you
resell them, offer to resell or otherwise transfer them under an exemption from
the registration requirements of, or in a transaction not subject to, the
Securities Act. In addition, you will no longer be able to obligate us to
register our private exchange notes under the Securities Act except in the
limited circumstances provided under our registration rights agreement.
If you do not exchange your SFC Notes for exchange notes pursuant to the
exchange offers or if you do not properly tender your SFC Notes you will no
longer be able to obligate us to register additional exchange notes under the
Securities Act.
Certain persons who participate in the exchange offers must deliver a
prospectus in connection with resales of the exchange notes.
Based on no-action letters issued by the staff of the Securities and
Exchange Commission, we believe that you may offer for resale, resell or
otherwise transfer the exchange notes without compliance with the registration
and prospectus delivery requirements of the Securities Act. However, in some
instances described in this prospectus under "The Exchange Offers," you will
remain obligated to comply with the registration and prospectus delivery
requirements of the Securities Act to transfer your exchange notes. In these
cases, if you transfer any exchange note without delivering a prospectus meeting
the requirements of the Securities Act or without an exemption from registration
of your exchange notes under this Act, you may incur liability under the
Securities Act. We do not and will not assume or indemnify you against this
liability.
If you wish to participate, you must make sure that you comply with the
exchange offer procedures.
We will only issue exchange notes to you after we timely receive your
initial notes, a properly completed and duly executed letter of transmittal, and
all other required documents. Therefore, you should allow enough time to ensure
timely delivery of your initial notes. We are under no duty to notify you of
defects or irregularities with respect to your tender of initial notes for
exchange. If your initial notes are not tendered or are tendered but not
accepted, they will, after the exchange offers end, continue to have the
existing restrictions upon transfer. In addition, when the exchange offers end,
certain registration rights under the Registration Rights Agreement will
terminate.
21
<PAGE>
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the exchange
notes in exchange for the outstanding initial notes. We are making these
exchange offers solely to satisfy our obligations under our registration rights
agreement.
The original issuance of the SFC 10 1/4% Senior Notes and the SFC
Subordinated Notes occurred in 1993 and resulted in an aggregate of
approximately $413 million in net proceeds to Specialty Foods. The net proceeds
were used to finance the 1993 acquisition of the underlying businesses of
Specialty Foods.
The original issuance of the SFC 11 1/8% Senior Notes in 1995 resulted in
an aggregate of approximately $145 million in net proceeds to Specialty Foods.
The net proceeds were used to refinance a portion of the Term Loan Agreement and
to pay fees and expenses incurred in connection with the refinancing undertaken
by Specialty Foods at the time.
22
<PAGE>
PRO FORMA CAPITALIZATION
The following table shows our pro forma capitalization as of March 31,
1999 reflecting the impact of the exchange offers on our capitalization. You
should read this table together with the consolidated financial statements and
related notes included in this prospectus beginning on page F-1 and the
information in the section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
As of March 31, 1999
--------------------
(dollars in thousands)
Cash and Cash Equivalents (1) ......................... $ --
Long-term debt, including current portion
SFC New Holdings, Inc.:
Term Loan ................................... 168,646
Revolving Credit Facility ................... 99,708
11 1/4% Senior Notes due 2001 ............... 220,695
12 1/8% Senior Notes due 2002 ............... 149,925
13 1/4% Senior Subordinated Notes due 2003 .. 197,646
Other ....................................... 4,245
-----------
Subtotal .......................... 840,865
SFAC New Holdings, Inc. ..........................
13% Senior Secured Debentures ............... 304,583
SFC Sub, Inc. ....................................
11% Senior Secured Debentures ............... 166,317
-----------
Specialty Foods Corporation
10 1/4% Senior Notes due 2001 ............... 4,305
11 1/8% Senior Notes due 2002 ............... 75
11 1/4% Senior Subordinated Notes due 2003 .. 2,354
-----------
Subtotal .................................. 6,734
Specialty Foods Acquisition Corporation
13% Senior Secured Debentures ............... 53
-----------
Total long-term debt, including current portion ....... 1,318,552
===========
Preferred stock ....................................... 19,500
Stockholders' equity (2) .............................. (938,626)
-----------
Total capitalization .................................. $ 399,426
===========
- ----------
(1) Includes a pro forma adjustment to reflect the estimated fees of
approximately $18.9 million paid in connection with our private exchange
offer that was completed on June 11, 1999.
(2) Includes a pro forma adjustment to reflect the write-off of deferred debt
issuance costs on the original SFAC and SFC Notes of $16.9 million.
23
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected net sales and income (loss) from operations data for 1998,
1997 and 1996 and the total assets and long-term debt data as of December 31,
1998 and 1997 presented below have been derived from Specialty Foods
Corporation's consolidated financial statements included in this prospectus
beginning on page F-1. The selected net sales and income (loss) from operations
data for 1995 and 1994 and the total assets and long-term debt data as of
December 31, 1996, 1995 and 1994 presented below have been derived from
Specialty Foods Corporation's consolidated financial statements that are not
included in this prospectus.
You should read the following information in conjunction with
"Capitalization," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Business," our consolidated financial statements
and the related notes and the other financial data appearing in this prospectus.
1998 1997 1996 1995 1994
----- ----- ----- ----- ------
(In millions)
Net sales $ 742 $ 718 $ 706 $ 704 $ 667
===== ===== ===== ===== ======
Loss from continuing
operations (1) $ (56) $ (67) $(285) $(209) $ (65)
===== ===== ===== ===== ======
Income (loss) from discontinued
operations (2)(3) $ 10 $ 165 $(161) $ (61) $ 45
===== ===== ===== ===== ======
Total assets $ 530 $ 513 $ 522 $ 985 $1,242
===== ===== ===== ===== ======
Long-term debt $ 820 $ 753 $ 834 $ 831 $ 802
===== ===== ===== ===== ======
- ----------
(1) Included in continuing operations is a goodwill writedown of $203 million
in 1996 and $157 million in 1995.
(2) Included in discontinued operations is a goodwill writedown of $152
million in 1996 and $97 million in 1995. Additionally, discontinued
operations included a gain on disposal of $133 million in 1997.
(3) Interest expense is not allocated to discontinued operations.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The following table provides information about the percentage of our net
sales represented by certain items in our statements of operations for the
periods presented. The data used to compute the percentages has been derived
from Specialty Foods Corporation's financial statements.
<TABLE>
<CAPTION>
Quarter ended
Year ended December 31, March 31,
------------------------------- -------------------
1998 1997 1996 1999 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 100.00%
Cost of sales 44.4 44.8 46.5 44.7 44.7
------- ------- ------- ------- -------
Gross profit 55.6 55.2 53.5 55.3 55.3
Operating expenses:
Selling, distribution, general and 51.1 51.2 49.4 54.2 55.2
administrative
Amortization of intangible assets 0.2 0.1 1.0 0.4 0.1
Goodwill write-down -- -- 28.9 -- --
------- ------- ------- ------- -------
Total operating expenses 51.3 51.3 79.3 54.6 55.3
------- ------- ------- ------- -------
Operating profit (loss) 4.3 3.9 (25.8) 0.7 0.0
Interest expense, net 11.4 12.6 13.2 11.8 11.5
Other expenses, net 0.4 0.7 1.4 0.4 0.5
------- ------- ------- ------- -------
Loss from continuing operations (7.5)% (9.4)% (40.4)% (11.5)% (12.0)%
======= ======= ======= ======= =======
</TABLE>
Results of Operations
First Quarter 1999 Compared to First Quarter 1998
Our consolidated net sales from continuing operations increased 17.2% to
$200.3 million in 1999 compared to $170.9 million in 1998. This increase in net
sales was primarily due to the inclusion of Archway's sales in 1999, price
increases taken at Metz and higher cafe sales at Boudin.
Our gross profit margin remained constant at 55.3% in 1999 and 1998. Our
gross profit margin benefitted from higher pricing, a volume shift to higher
margin products and moderately favorable commodities. However, the benefit was
offset by inflationary cost increases and higher depreciation expense.
Our selling, distribution, and general and administrative expenses, which
we refer to as "SDG&A", increased $14.1 million in 1999 to $108.5 million
primarily due to the inclusion of acquisitions completed in 1998. However, as a
percentage of sales, SDG&A
25
<PAGE>
expenses decreased one percentage point to 54.2% in 1999 due to the fact that we
realized cost synergies as a result of the 1998 acquisitions.
Our net interest expense increased $3.9 million in 1999 to $23.5 million
from $19.6 million in 1998. The increase is primarily due to higher borrowings
under our Revolving Credit Facility and lower interest income earned on our cash
equivalents in 1999.
Our net other expense in 1999 and 1998 consists principally of discount
expense on our Accounts Receivable Facility.
As a result of the above factors, our net loss from continuing operations
increased to $23.0 million in 1999 compared to $20.4 million in 1998.
As a result of our net operating loss position, for tax purposes we report
minimal state income tax and no federal income tax due.
1998 Compared to 1997
Our consolidated net sales from continuing operations increased 3.4% to
$742.3 million in 1998, compared to $718.1 million in 1997. This increase was
due to increased sales volume at Metz and the inclusion of ten weeks of
Archway's sales in 1998. However, the increase was partially offset by our
having one less week of sales in 1998 (because 1997 was a fifty-three week
fiscal year for our operating units), changes in our customer mix and lower
pricing at Mother's. The increase in volume at Metz was the result of its
expansion into central Illinois and its increased private label business.
Our gross profit margin increased to 55.6% in 1998 from 55.2% in 1997. Our
gross profit margin benefitted from a shift at Mother's towards higher margin
products and customers and lower commodity costs at Metz. However, the benefit
was partially offset by increases in manufacturing costs and higher depreciation
expense.
Our SDG&A increased $12.7 million, or 3.5%, in 1998 to $379.8 million.
However, as a percentage of sales, SDG&A expenses remained constant in 1998. The
increase in SDG&A in 1998 was caused by the inclusion of ten weeks of Archway's
operations, contractual wage increases, increased marketing expenses at Mother's
and Metz's new business initiatives. However, staff reductions at both Mother's
and Metz tempered the increased level of our 1998 SDG&A expenditures.
Our net interest expense in 1998 decreased $6.0 million, or 6.6%, to $84.8
million from $90.8 million in 1997. The decrease was primarily due to lower
borrowings under our Revolving Credit Facility and the interest we earned on our
cash equivalents. Proceeds from the sale of Stella increased our available cash
and decreased our required borrowing levels in 1998.
26
<PAGE>
Our net other expense was $3.1 million in 1998 compared to $4.7 million in
1997, a decrease of $1.6 million or 34%. This reduction in 1998 was primarily
due to a decrease in our loss on disposals of property, plant and equipment.
As a result of all these factors, our net loss from continuing operations
decreased to $55.9 million in 1998 compared to $67.5 million in 1997, a decrease
of 17.2%.
As a result of our net operating loss position, for tax purposes we report
minimal state income tax and no federal income tax due.
1997 Compared to 1996
Our consolidated net sales from continuing operations increased 1.7% to
$718.1 million in 1997, compared to $706.0 million in 1996. The $12.1 million
increase was principally due to increased cafe sales at Boudin and an additional
week of sales resulting from 1997 being a fifty-three week fiscal year.
Our gross profit margin increased to 55.2% in 1997 from 53.5% in 1996,
primarily as a result of lower commodity costs.
SDG&A expenses increased by $17.6 million, or 5.0%, in 1997 to $367.1
million. Selling expenses increased primarily because we increased the number of
Boudin's cafe locations and increased promotional spending at Mother's.
Distribution expenses increased due to contractual wage increases in Metz's and
Mother's direct-store-delivery systems. General and administrative expenses
decreased, primarily as a result of reduced corporate overhead expenses at
Specialty Foods and the fact that severance expenses in 1996 related to some of
our former senior executives were non-recurring.
Our net interest expense decreased in 1997 by $2.7 million, or 2.9%, to
$90.8 million from $93.5 million in 1996, principally because we had lower
borrowings under the Revolving Credit Facility.
Our net other expense was $4.7 million in 1997, compared to $9.1 million
in 1996. The decrease was due primarily to a decrease in our loss on disposals
of property, plant and equipment in 1997. This decrease occurred due to our
recording in 1996 a non-recurring loss on disposals of property, plant and
equipment in connection with a sale-leaseback transaction.
As a result of the above factors and a goodwill write-off of $203.3
million in 1996, our net loss from continuing operations decreased to $67.5
million in 1997 compared to $285.8 million in 1996.
As a result of our net operating loss position, for tax purposes we report
minimal state income tax and no federal income tax due.
Our extraordinary loss of $5.7 million in 1997 resulted from writing off
deferred financing costs associated with the Revolving Credit Facility, the Term
Loan Facility and
27
<PAGE>
the Accounts Receivable Transfer Facility, each of which we refinanced in the
first quarter of 1998.
In view of our highly leveraged capital structure, we and many of our
stakeholders consider EBITDA to be an important performance measure. EBITDA
consists of earnings (loss) before income taxes plus all net interest expense
and all depreciation and amortization expense. You should not think of EBITDA as
an alternative measure of operating results or cash flows from operating
activities, as determined in accordance with generally accepted accounting
principles. However, EBITDA is a widely used financial measure of the potential
capacity of a company to incur and service debt, and accordingly we believe that
EBITDA provides additional information for determining our ability to meet our
future obligations and debt service requirements. Our reported EBITDA may not be
comparable to similarly titled measures used by other companies. Our EBITDA from
continuing operations for the twelve months ended December 31, 1998, 1997 and
1996 and the three months ended March 31, 1999 and 1998 is calculated as
follows:
<TABLE>
<CAPTION>
Twelve Months Ended Three Months Ended
December 31, March 31,
------------ ---------
(In thousands)
1998 1997 1996 1999 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Continuing operations:
Operating profit (loss) $ 31,483 $ 28,303 $(182,225) $ 1,267 $ 29
Goodwill write-down -- -- 203,304 -- --
Amortization 1,471 900 7,032 1,017 212
Depreciation 25,733 20,187 20,836 8,314 5,441
--------- --------- --------- --------- ---------
EBITDA $ 58,687 $ 49,390 $ 48,947 $ 10,598 $ 5,682
========= ========= ========= ========= =========
</TABLE>
Liquidity and Capital Resources
In 1998, our net cash used in operating activities totaled $44.0 million,
including cash requirements of $18.8 million related to continuing operations,
$13.5 million related to working capital and $11.7 million for discontinued
businesses. Net of the effects of acquisitions, our use of cash related to
working capital was primarily related to reducing our accounts payable by $8.5
million through taking advantage of certain discount opportunities and
expenditures associated with acquisition liabilities and restructuring payments
which contributed to our $12.4 million reduction in accrued liabilities. Our use
of cash related to working capital was offset by $8.9 million provided by
increased funding under the Accounts Receivable Transfer Facility.
Our net cash used in operating activities in 1997 was $95.6 million. Our
increase in net cash used in operating activities in 1997 compared to 1996 was
primarily due to increased cash requirements related to discontinued operations,
payments of accrued acquisition liabilities, restructuring payments and
reductions in accounts payable and accrued expenses.
28
<PAGE>
In 1998, we invested a total of $239.6 million in our business. This
amount included $135.0 million to acquire businesses, $35.4 million to purchase
previously leased transportation and production equipment and $56 million to
make planned capital expenditures.
Our net cash provided by financing activities amounted to $55.1 million in
1998, primarily as a result of additional borrowings under the Revolving Credit
Facility, offset by refinancing costs and scheduled payments on long-term debt.
Our net cash used in financing activities amounted to $63.1 million in 1997, as
a paydown of revolving credit borrowings and normal payments on long-term debt
were partially offset by our issuance of redeemable preferred stock. In 1996,
our cash used by financing activities, $3.2 million, was primarily due to
payments of long-term debt and refinancing costs, slightly offset by increased
revolver borrowings.
As of March 31, 1999, we had a cash balance of $17.0 million and $97.8
million of borrowings under our $122.8 million Revolving Credit Facility.
Outstanding letters of credit of $10.2 million as of March 31, 1999 reduce our
available funds under the facility.
We expect our 1999 working capital requirements to be lower than 1998, and
our planned 1999 capital expenditures are substantially reduced from 1998
levels. Our liquidity was significantly enhanced by the $110 million of net
proceeds that we received on the sale of H&M on April 12, 1999. We believe that
our available funds and the proceeds from the H&M sale will be adequate to fund
our 1999 operations, capital expenditures and certain targeted bakery
acquisitions. To satisfy our debt service obligations beyond 1999, we may need
to sell additional assets, refinance or restructure our existing indebtedness or
issue new equity. However, we cannot assure you that our available funds will be
adequate to meet our needs.
On June 11, 1999, we completed our private exchange transactions. In
addition, in June 1999, we amended and restated the Revolving Credit Facility,
the Term Loan Facility and the Accounts Receivable Transfer Facility. The
Revolving Credit Facility and the Term Loan Facility contain restrictive
covenants that require us to maintain specified leverage and interest coverage
ratios and other limitations regarding capital expenditures, sales of assets,
loans and investments and encumbrances of assets. In addition, those facilities
significantly limit our ability to incur additional debt. The Revolving Credit
Facility and Term Loan Facility mature in January 2001. The Accounts Receivable
Transfer Facility begins to amortize December 15, 2000 and matures in January
2001.
Year 2000
The year 2000 issue is the result of computer programs using a two-digit
format to define the applicable year. For example, "1999" is recorded as "99."
Computer systems using a two-digit date format will be unable to interpret dates
beyond the year 1999, as the computer will be unable to differentiate between
"1900" and "2000." Consequently, the year 2000 issue could cause system failures
and other computer errors, resulting in business and operational disruptions. We
developed a three-phase program to address the year 2000 issue as it relates to
our information systems and other computer-based
29
<PAGE>
operations. Phase I was the identification of which of our systems could be
affected by the year 2000 issue. Phase I was completed in 1998.
Phase II, which was completed during 1999, included the development and
implementation of the corrective steps necessary to ensure year 2000 issue
compliance. Phase III, the final testing of all systems potentially at risk to
ensure remediation of any year 2000 related problems, was completed during 1999.
We have completed our review of our systems and have contacted software
suppliers to assess major areas of potential exposure due to the year 2000
issue. While a number of our systems have been determined to be year 2000 issue
compliant, certain applications required remediation. We have completed our
remediation and have replaced certain non-year 2000 issue compliant hardware and
software. We have completed our testing of year 2000 issue related software
changes. In addition, we have contacted key third parties to assess their level
of year 2000 issue compliance. Our significant suppliers have informed us that
they have completed their year 2000 issue compliance changes.
We have spent approximately $1.3 million on our year 2000 compliance
program.
We are not able to determine the potential impact of a failure of some or
all of our systems in the event our compliance efforts are not completely
successful. We are also unable to assess the potential effect on our operations
and financial condition of a systems failure or disruption to any of our
suppliers, customers, service providers or other major third parties.
Quantitative and Qualitative Disclosure about Market Risk
During 1998, we entered into interest rate swap agreements to reduce our
exposure to changes in the cost of our variable rate borrowings, as required by
our term loan facility. Under the interest rate swap agreements, which expire in
January 2000, we receive floating rate payments from the counterparties based
upon the three-month LIBOR and we make fixed rate payments at 5.753% and 5.765%
to the respective counterparties. The payments are calculated based upon a
notional principal amount of $100 million. We recognize the net differential of
interest to be paid or received under the remaining agreements as it is
incurred. In 1998, we made net payments totaling $30,000 to the counterparties.
Off-balance-sheet risk from the interest rate swap agreements includes the risk
associated with changes in market values and interest rates. The counterparties
to the agreements are major financial institutions.
Special Note Regarding Forward-looking Statements
Any statements in this prospectus about our expectations, beliefs, plans,
objectives, assumptions or future events or performance are not historical facts
and are forward-looking statements. These statements are often, but not always,
made through the use of words or phrases such as "will likely result," "expect,"
"will continue," "anticipate," "estimate," "intend," "plan," "projection,"
"would" and "outlook." Accordingly, these statements involve estimates,
assumptions and uncertainties which could cause actual
30
<PAGE>
results to differ materially from those expressed in them. Any forward-looking
statements are qualified in their entirety by reference to the factors discussed
throughout this prospectus. The following cautionary statements identify
important factors that could cause our actual results to differ materially from
those projected in the forward-looking statements made in this prospectus. Among
the key factors that have a direct bearing on our results of operations are:
o general economic and business conditions; the existence or absence
of adverse publicity; the existence or absence and effect of
litigation; changes in, or failure to comply with, government
regulations; changes in marketing and technology; changes in
political, social and economic conditions; changes in interest
rates;
o industry conditions, including competition and consolidation in the
baking industry and excess industry capacity;
o our highly leveraged capital structure and substantial principal
repayment and interest payment obligations;
o cost and availability of raw materials such as flour and sugar;
o weather in geographic areas where grain and other raw materials used
in the baking industry are grown and produced;
o success of acquisitions and operating initiatives; changes in
business strategy or development plans;
o timing of and value received in connection with asset divestitures;
o costs and other effects of legal and administrative proceedings;
o costs and timely success of year 2000 issue compliance;
o dependence on senior management; availability of qualified
personnel; and labor and employee benefit costs;
o access to capital markets and other risks relating to the
availability of financing; and
o other factors referenced in this prospectus, including in the
section entitled "Risk Factors."
Because the risk factors referred to above could cause actual results or
outcomes to differ materially from those expressed in any of our forward-looking
statements, you should not place undue reliance on any such forward-looking
statements. Further, any forward-looking statement speaks only as of the date on
which it is made and we undertake no obligation to update any forward-looking
statement or statements to reflect
31
<PAGE>
events or circumstances after the date on which such statement is made or to
reflect the occurrence of unanticipated events. New factors emerge from time to
time, and it is not possible for us to predict which will arise. In addition, we
cannot assess the impact of each factor on our business or the extent to which
any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements.
32
<PAGE>
BUSINESS
We produce, market and distribute bakery products, including bread,
cookies and other baked goods, throughout the United States. Our operations,
which we collectively refer to as the "Businesses," are comprised of:
o Metz Baking Company, a retail bread company;
o Mother's Cake and Cookie Co. and Archway Cookies, Inc., retail
cookie marketers and distributors;
o Andre-Boudin Bakeries, Inc., a marketer of premium branded specialty
breads and related products.
As of June 11, 1999, in private transactions, we and SFAC New Holdings
acquired debt securities of Specialty Foods and Specialty Foods Acquisition
Corp., in exchange for our securities and securities of SFAC New Holdings. SFAC
New Holdings owns all of our capital stock. We, SFAC New Holdings and each of
our subsidiaries, including the Businesses, are separate corporate entities.
Unless otherwise stated, references to the terms "we," "our," "Company" and
other terms similar to those terms used in this prospectus mean, collectively,
Specialty Foods Corporation, Specialty Foods Acquisition Corporation, SFC New
Holdings, SFAC New Holdings and all of those entities' subsidiaries, including
the Businesses.
General
We operate principally in one business segment--bakery products, including
bread, cookies, baked goods and bakery cafes. We believe our cookie operations
are the third largest in the United States. We also believe that we have a
leading regional position in multiple product lines within the bread and baked
goods markets of the baking industry. We operate one of the largest food
distribution systems in the country, with a network of more than 2,490
direct-store-delivery routes in 45 states.
Metz, established in 1922 and headquartered in Deerfield, Illinois, is a
leading retail bread company serving a 17 state area of the Midwestern United
States. Metz's product line includes breads, buns, rolls and sweet goods. These
products are marketed by Metz under a large number of brand names, including
Taystee, Holsum, Old Home, Master, Country Hearth, Egekvist, D'Italiano,
Pillsbury, Healthy Choice and numerous private labels. Metz manufactures its
products in 23 bakeries located in 8 states and distributes its products through
a network of approximately 1,550 company-owned direct-store-delivery system
routes to retail grocers, club stores, mass merchandisers, convenience stores
and other outlets.
Our cookie business consists of two companies, Mother's and Archway, and
is headquartered in Oakland, California. Combined, Mother's and Archway are the
nation's third largest cookie company. Our cookies are distributed through an
extensive direct-store-delivery system with over 900 routes serving 45 states.
We sell our cookies
33
<PAGE>
primarily to retail grocers, club stores and mass merchandisers. Additionally,
Archway cookies are sold through franchisees that resell the cookies through
similar distribution channels in certain U.S. geographical areas and Canada.
Mother's, founded in 1914, is the second largest retail cookie marketer
and distributor in the Western United States. Mother's products are marketed
under the Mother's, Mrs. Wheatley's, Bakery Wagon and Marie Lu brand names.
Mother's also distributes imported cookies under the Lu brand. Mother's has the
leading share position in the Western United States in many "variety" cookie
segments (such as oatmeal). Archway, established in 1936, is the nation's
leading producer of home style soft cookie varieties. Archway bakes more than
one billion cookies annually, and produces more than 60 varieties of cookies,
including home style, holiday and sugar free products, all under the Archway
brand name. Mother's products are manufactured in a bakery located in
California. Archway products are manufactured at our facilities in Iowa and
Ohio.
Boudin, which was founded in 1849 and is based in San Francisco, is a
marketer of premium branded specialty breads and bread-related products. Boudin
sells most of its products through more than 40 company-owned and operated
bakery cafes in California and the Chicago area. Boudin also distributes some of
its products through its own direct-mail catalog, restaurants and supermarkets.
History and Development
Specialty Foods was formed in June 1993 to acquire the North American food
businesses of a subsidiary of Artal Group S.A. Specialty Foods commenced
operations in August 1993. Specialty Foods Acquisition Corp. owns all of
Specialty Foods' capital stock.
In 1996, we adopted a strategy of divesting certain brands, regions and
product lines to improve the focus of our businesses. In December 1996, we sold
Bloch & Guggenheimer, Inc. and Burns & Ricker, Inc. Under our ownership, Bloch &
Guggenheimer manufactured, marketed and distributed pickles, peppers and spices,
primarily through retail grocers in the greater New York metropolitan area.
Burns & Ricker manufactured, marketed and distributed baked premium snack
products through brokers and distributors to grocery stores.
In February 1997, we divested our subsidiary, Gai's Seattle French Baking
Company, a restaurant and institutional bakery operation serving the
northwestern United States. In March 1997, we divested our subsidiary San
Francisco French Bread Company, a sourdough bread operation located in
California. In August 1997, we divested a restaurant and institutional bakery
operated by Metz located in Illinois. In December 1997, we sold our subsidiary
Stella Foods, Inc., which was one of the largest specialty cheese producers in
the United States, for $405 million. On April 14, 1999, we divested our
subsidiary H&M Food Systems Company, Inc. by selling all the stock of its
holding company for approximately $132 million.
34
<PAGE>
In 1998, as part of our strategy to strengthen our remaining core bakery
operations, we completed five acquisitions of bakery companies. The acquired
companies complement our existing businesses, expand our geographic scope and
strengthen our competitive position. In October 1998, we acquired Archway,
which, added to Mother's, represents the nation's third largest cookie business.
The Archway acquisition provides us with a strong established brand name, a more
diversified product line and a nation-wide presence. The Archway acquisition
also provides opportunities to realize significant operational and distribution
synergies. We acquired the capital stock of Archway for approximately $90
million, and used an additional approximately $26 million to repay certain
indebtedness of Archway.
In 1998, we also completed four smaller, strategic bread acquisitions for
a total aggregate consideration of $19.6 million. Boudin acquired Pane
Corporation, which does business as San Diego Bread Company. San Diego Bread
Company sells a variety of specialty breads, including a private label sourdough
that complements Boudin's premium sourdough bread brand in California. The
acquisition of the San Diego Bread Company provides Boudin with the opportunity
to strengthen its position in Southern California.
Metz also acquired three bakery companies in 1998:
o Clear Lake Bakery, Inc., which bakes and distributes a variety of
bread, buns, rolls, doughnuts and sweet rolls throughout Iowa;
o Grandma Sycamore's Bakery, which distributes its brand name bread
throughout Utah and neighboring states; and
o Eagle (Rock Island) Bakery, which produces private label bread and
buns distributed in Iowa and Illinois.
We believe these bread acquisitions provide significant opportunities for
reducing Metz's costs and for strengthening Metz's competitive position in its
core Midwestern service area.
On June 7, 1999, we acquired Grocers Baking Company of Grand Rapids,
Michigan for $33.2 million plus the assumption of an additional $5.8 million of
indebtedness. Grocers had 1998 sales of approximately $60 million. Grocers sells
a variety of bread, buns, sweet goods, cookie dough and other frozen products in
Western Michigan under several leading brands, including Oven Fresh, Lumber Jack
and April Hill. Additionally, in July 1999, we completed a small add-on
acquisition of a Detroit-based baker, Blue-Bird Products, Inc.
We intend to continue to selectively acquire bakery businesses in order to
build enterprise value by realizing significant cost synergies. We have
identified additional potential acquisition candidates, each of which will
provide a range of opportunities for synergy if they are combined with our
existing bakery businesses. However, since we have a significant amount of debt,
we might be unable to complete all of our targeted acquisitions.
35
<PAGE>
Financing Structure
Our financing structure at the date of this prospectus consists of the
following:
o $122.8 million Revolving Credit Facility at the operating company
level, which we refer to as our "Revolving Credit Facility";
o $168.2 million Term Loan Facility at the SFC New Holdings level,
which we refer to as our "Term Loan Facility";
o $220.7 million of 11 1/4% Senior Notes;
o $149.9 million of 12 1/8% Senior Notes;
o $197.7 million of Subordinated Notes;
o New 13% Debentures, with an accreted value at June 30, 1999 of
$314.4 million; and
o 11% Senior Subordinated Discount Debentures due 2009 issued by SFC
Sub, Inc., a Delaware corporation which is the direct parent of SFAC
New Holdings, with an accreted value at June 30, 1999 of $170.3
million.
In addition, because not all holders of outstanding debt securities of
Specialty Foods and Specialty Foods Acquisition Corp. exchanged them for our
securities in the private transactions that were completed on June 11, 1999,
there are also outstanding the following securities:
o $4,305,000 of SFC 10 1/4% Senior Notes;
o $75,000 of SFC 11 1/8% Senior Notes;
o $2,354,000 of SFC Subordinated Notes;
o $54,176 of 13% Senior Secured Discount Debentures issued by
Specialty Foods Acquisition Corp., which we refer to as "13%
Debentures."
We are also a party to an accounts receivable securitization facility
under which the accounts receivable of our operating subsidiaries are
transferred to a master trust, which we refer to as our "Accounts Receivable
Transfer Facility." The maximum amount of accounts receivable that can be sold
to the Accounts Receivable Transfer Facility is $50 million.
36
<PAGE>
Refinancing Transaction
The Revolving Credit Facility, the Term Loan Facility and the Accounts
Receivable Facility were refinanced in March 1998 and again in June 1999. As a
result, the Term Loan and Revolving Credit Facilities have a final maturity date
of January 31, 2001. The Accounts Receivable Facility also has a final maturity
date of January 31, 2001 and begins to amortize on December 15, 2000. For
additional information, see the section of this prospectus entitled "Description
of Our Other Indebtedness and Our Accounts Receivable Transfer Program."
Private Exchange Transactions
In May 1999, we commenced private transactions to exchange our private
exchange notes for debt securities of both Specialty Foods and Specialty Foods
Acquisition Corp. Those private transactions were completed on June 11, 1999.
Specialty Foods Acquisition Corp. offered holders of its 13% Debentures who were
"accredited investors" within Rule 501(a)(1)(2) or (3) of the Securities Act the
opportunity to exchange their existing debt for New 13% Debentures of SFAC New
Holdings and an aggregate of 31,925 shares of common stock of SFAC New Holdings.
The New 13% Debentures include provisions which (as compared to the terms of the
existing 13% Debentures):
o extend the first date on which interest must be paid in cash to
December 15, 2004 and extend the final maturity date to June 15,
2009;
o give SFAC New Holdings the right to redeem the New 13% Debentures,
in whole or in part, at any time, at specified percentages of their
accreted value, commencing at 50% of such amount until June 15,
2000;
o resulted in consenting holders of its 13% Debentures holding an
aggregate of 9.99% of the equity interest of SFAC New Holdings.
We offered to exchange an aggregate of up to $225,000,000 aggregate
principal amount of our initial 11 1/4% Senior Notes, up to $150,000,000
aggregate principal amount of our initial 12 1/8% Senior Notes, up to
$200,000,000 aggregate principal amount of our initial Subordinated Notes and up
to $28,296,838 of 11% Debentures, for the SFC Notes.
The exchange notes we are offering by means of this prospectus have
substantially the same terms and covenants as our private exchange notes for
which they will be exchanged, and will remain structurally senior to the New 13%
Debentures. Those exchange offers were made only to "accredited investors" under
the Securities Act. The holders of the SFC Subordinated Notes were offered a
consent payment of $35 per $1,000 note to consent to the transaction, and the
holders of the SFC 11 1/8% Senior Notes and the SFC 10 1/4% Senior Notes were
offered a consent payment of $10 per $1,000 note. In addition, we obtained the
consent of the lenders to our Revolving Credit Facility and Term Loan Facility
to amend their agreements to conform to our new holding company structure.
37
<PAGE>
We conduct substantially all of our business through our subsidiaries.
Consequently, our ability and the ability of SFAC New Holdings or of any new
intermediate holding company to meet our individual obligations to our creditors
depends on our subsidiaries' earnings, cash flow, ability to pay dividends and
ability to advance funds to SFC New Holdings. In addition, if a subsidiary is
liquidated or reorganized, our rights and the rights of SFAC New Holdings and of
any new intermediate holding company, and of these companies' creditors and
securities holders, including the holders of debt securities, to participate in
the subsidiary's assets will be limited by prior claims of the subsidiary's
creditors (except to the extent that we are, or SFAC New Holdings or the
intermediate holding company is, also a creditor with recognized claims against
the subsidiary).
Strategy
Our strategy is to build the enterprise value of our operating companies,
which we believe is best attained in the current baking industry environment by
realizing significant cost synergies from acquisitions. Since May 1998, we have
consummated seven bakery acquisitions and we intend to continue to acquire
bakery businesses to the extent our financial resources allow. We have
identified potential acquisition candidates that would provide us with a range
of synergy opportunities if they were combined with our existing bakery
business. When our financial capabilities preclude us from pursuing additional
acquisitions, we will explore available options to maximize the value of our
stakeholders' investments.
Competition
Our bakery businesses compete in the highly competitive bakery products
industry. Competition is likely to increase due to continued industry
consolidation and overcapacity in certain areas of the country. Our competitors
include large multi-product food companies (such as Bestfoods), national bakers
(such as Interstate Brands and Earthgrains), cookie companies with national
distribution (such as Keebler and Nabisco) and numerous smaller regional and
local companies. Many of our larger competitors have significantly greater
financial, marketing and other resources than we do, while smaller competitors
may have lower fixed costs and greater operating flexibility. We are also more
highly leveraged than most of our competitors, which may place us at a
competitive disadvantage or restrict our ability to implement our acquisition
strategy in a consolidating industry. We do not encounter material foreign
competition. Competition in our industry is based on a number of factors
including price, quality, brand loyalty, service, freshness, marketing
effectiveness and obtaining access to retail outlets and adequate shelf space.
Raw Materials
We are a major purchaser of flour, sugar, vegetable oils and other
agricultural products, as well as of plastic, paper and corrugated products for
packaging materials. Although we have some long-term contracts, we buy the bulk
of our raw materials on the open market or under short-term agreements. The
prices we pay for food product raw materials generally reflect external forces,
among which weather conditions and
38
<PAGE>
commodity market activities are the most significant. Although the prices of our
principal raw materials fluctuate as a result of government actions and/or
market forces (which directly affect the cost of products and value of
inventories), raw materials are generally in adequate supply and readily
available from numerous sources. Occasionally, and where possible, we make
advance purchases of important commodities in order to lock in what we perceive
to be favorable prices and to limit exposure to short-term market price
fluctuations. We attempt to pass through increases in the costs of purchased
ingredients to our customers where possible. Our ability to do so depends
primarily upon competitive conditions and the pricing methodologies we use in
our various geographical areas.
Seasonality
Our business is moderately seasonal, with higher sales, operating profit
and cash flows generally occurring in the second, third and fourth quarters of
the year. This seasonality is due primarily to higher bread, bun and cookie
sales in the summer and fall months and during the year-end holiday season.
Customers, Sales and Backlog
No single customer accounts for more than 10% of our net sales. Our
principal customers are retail food outlets, club stores, mass merchandisers and
consumers who buy directly through our bakery cafes. In general, we do not
believe that our order backlog is significant or material for an understanding
of our business.
Legal and Regulatory Matters
Litigation
On May 20, 1993, prior to our acquisition of our former subsidiary Stella
Foods, Inc. from Artal, Cacique, Inc. commenced proceedings against Stella in
the California Superior Court, Alameda County. Cacique's action relates to
"Hispanic"-style cheese, which was produced by Stella between 1993 and September
1994. In November 1997, we sold Stella to a third party, but we retained
liability with respect to Cacique's action. We have indemnified the purchaser in
connection with the action, and we continue to control the defense of the
action.
Cacique's complaint asserts claims for misappropriation of trade secrets,
trademark interference, inducing breach of contract, interference with business
relations, unfair competition, and conspiracy to commit certain of these causes
of action.
Cacique claims damages for lost profits of approximately $14 million, as
well as punitive damages and attorneys' fees. Stella has filed a cross-complaint
seeking approximately $14 million in damages that alleges that Cacique engaged
in predatory pricing practices.
A trial on this matter is currently being conducted and is expected to
conclude during the third quarter of 1999. Although litigation always has an
element of
39
<PAGE>
uncertainty, and we can give no assurances about the impact that this litigation
will have on us, our management believes that the ultimate resolution of this
matter will not have a material adverse effect on our financial condition or
results of operations.
We are also involved in contractual disputes, administrative and legal
proceedings and investigations of various types, arising out of the ordinary
course of business. Although litigation always has an element of uncertainty,
and we therefore cannot give any assurances about the impact that these matters
will have on us, we do not believe that any single matter, if adversely
determined, would have a material adverse effect on our financial condition or
results of operations. We do not currently believe that there is a reasonable
possibility that all or a majority of these matters will be decided against us.
Regulation
Public Health
We must comply with the Federal Food, Drug and Cosmetic Act and
regulations administered by the Food and Drug Administration. This comprehensive
regulatory scheme governs, among other things, the manufacture, composition,
ingredient labeling, packaging and safety of food. For example, the FDA
regulates manufacturing practices for food through its current "good
manufacturing practices" regulations, specifies the recipes for certain foods,
including many of the kinds of products marketed by our subsidiaries, and
prescribes the format and content of certain information required to appear on
the labels of food products.
We have revised the labeling of our products to comply with regulations
administered by the FDA under the Nutrition Labeling and Education Act of 1990.
These regulations require nutritional labeling on all foods that are a
meaningful source of nutrition, including many of our products. Furthermore,
these regulations limit the use of certain terms on labels, while requiring the
use of certain other terms.
Our operations and products are also governed by state and local
regulation through measures such as licensing of plants, enforcement by state
health agencies of various state standards and inspection of our facilities.
A party who violates federal, state or local regulations may be subject to
cease and desist orders, injunctions and/or monetary penalties. Offending
products also may be seized and condemned. We believe that our facilities and
practices will continue to comply with applicable government regulations in all
material respects.
Employee Safety Regulations
We must comply with health and safety regulations, including regulations
issued under the Occupational Safety and Health Act. These regulations, which
are aimed at protecting our employees from accidents, require us to comply with
manufacturing, health and safety standards.
40
<PAGE>
Other
We also must comply with regulations imposed by other governmental
agencies, including the United States Department of Agriculture and the Federal
Trade Commission. For example, under the Federal Trade Commission Act and its
related regulations, the FTC is permitted to regulate advertising by our
businesses.
Environmental Matters
Our business operations and our ownership and operation of real property
are governed by extensive and changing federal, state, local and foreign
environmental laws and regulations. These regulations pertain to the discharge
of materials into the environment, the handling and disposition of wastes
(including solid and hazardous wastes), and other matters relating to protection
of the environment. We do not expect that the costs of complying with
environmental laws and regulations will have a material impact on our capital
expenditures, earnings or competitive position. However, we cannot assure you
that new environmental issues relating to any matter or any site, whether
presently known or not, will not require additional, currently unanticipated
investigation, assessment or expenditures.
Trademarks, Patents and Licenses
We own or license a number of trademarks and trade names which our
management believes provide significant value to several of the Businesses
because of their recognition by customers and consumers. We own or license a
number of patents, but those patents and licenses are not considered to be
material to the conduct of the Businesses, and we do not believe that any of our
businesses are substantially dependent upon patent protection.
Employees
As of June 30, 1999, we employed approximately 8,500 persons.
Approximately 62% of our labor force is or will be covered by collective
bargaining agreements when we complete currently on-going negotiations. Our
collective bargaining agreements generally run for three to five years. We
believe that our relations with our employees are generally good.
Properties
We use various owned and leased plants, warehouses, and other facilities
in our operations. These facilities are located primarily in the Midwest and
California. Our management believes that the facilities are properly equipped
with suitable machinery. These facilities and related equipment are generally
well maintained and are adequate for the conduct of our current operations. Our
management also believes that our facilities have sufficient capability and
capacity to meet our long-term needs.
41
<PAGE>
The following is a summary of significant facilities that we were
operating as of June 30, 1999.
Number of Facilities
Owned Leased Total
----- ------ -----
32 66 98
We have mortgages on substantially all of our owned facilities for the
benefit of the lenders under our Revolving Credit Facility.
We also operate 349 retail outlets and retail bakery stores.
42
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table provides you with information about our executive
officers and directors, and executive officers of our subsidiaries who may be
deemed to be our executive officers.
Name Age Position
- ---- --- --------
Executive Officers
Lawrence S. Benjamin...... 43 Chief Executive Officer, President and Director
Robert B. Aiken........... 36 President and Chief Executive Officer of Metz
Robert L. Fishbune........ 43 Vice President and Chief Financial Officer
Henry J. Metz............. 48 Chairman of Metz
Patrick J. O'Dea.......... 38 President and Chief Executive Officer of
Mother's
David E. Schreibman....... 31 Vice President, Secretary & General Counsel
Lawrence J. Strain........ 46 President of Boudin
Directors
Robert B. Haas............ 52 Chairman of the Board of Directors
Thomas J. Baldwin......... 40 Director
J. Taylor Crandall........ 45 Director
Jerry M. Meyer............ 58 Director
Andrew J. Nathanson....... 41 Director
David G. Offensend........ 46 Director
Marc C. Particelli........ 44 Director
Anthony P. Scotto......... 52 Director
Douglas D. Wheat.......... 48 Director
Mr. Benjamin has been Director of Specialty Foods and Specialty Foods
Acquisition Corp. since February 1997; President and Chief Executive Officer of
Specialty Foods and Specialty Foods Acquisition Corp. since January 1997; and
President and Chief Executive Officer of Stella Foods, Inc. (a former subsidiary
of Specialty Foods) from August 1994 until December 1997. Mr. Benjamin held
various positions from 1986 through August 1994 with operating units of Kraft
Foods, Inc., including President of All American Gourmet Company, Vice President
of Kraft Frozen Products Group and Vice President and General Manager of the
Specialty Ingredients Unit of Kraft General Foods, Inc.
Mr. Aiken has been President of Metz since April 1998 and Chief Executive
Officer of Metz since January 1999. Mr. Aiken was Vice President, Secretary and
43
<PAGE>
General Counsel of Specialty Foods and Specialty Foods Acquisition Corp. from
February 1997 until April 1998. From October 1995 until February 1997, Mr. Aiken
was Executive Vice President, General Counsel and Secretary of Metz.
Mr. Fishbune has been Vice President and Chief Financial Officer of
Specialty Foods and Specialty Foods Acquisition Corp. since May 1996. Mr.
Fishbune was a Partner at Coopers & Lybrand L.L.P. from 1988 until May 1996.
Mr. Metz has been Chairman of Metz since January 1999. Mr. Metz was Chief
Executive Officer of Metz from August 1993 through December 1998, and President
of Metz from February 1983 to April 1998. Mr. Metz was Chief Operating Officer
of Metz from 1988 until August 1993.
Mr. O'Dea has been President and Chief Executive Officer of Mother's since
April 1997. Mr. O'Dea was Vice President, Retail of Stella Foods, Inc. from 1995
to March 1997. Prior to joining Stella Foods, Inc., Mr. O'Dea spent 12 years
with Procter & Gamble, most recently as Director of Marketing for its Snack Food
Business.
Mr. Schreibman has been Vice President, Secretary and General Counsel of
Specialty Foods and Specialty Foods Acquisition Corp. since May 1999 and Vice
President and General Counsel - Business Units of Specialty Foods and Specialty
Foods Acquisition Corp. since October 1998. Mr. Schreibman was Chief Counsel -
Mergers and Acquisitions for the Sara Lee Corporation from October 1995 to
October 1998. Prior to October 1995, Mr. Schreibman was in private law practice
as an associate with Sidley & Austin.
Mr. Strain has been President of Boudin since January 1999; Vice President
of Bakery Operations from August 1990 through December 1998. Prior to 1990, Mr.
Strain was Vice President and operating partner of Boudin International, Inc.
Mr. Haas has been Chairman of the Board of Specialty Foods and Specialty
Foods Acquisition Corp. since their organization in 1993 and Chairman of the
Board of Haas Wheat & Partners Incorporated, a private investment firm, since
1992 and Chairman of the Board of Haas & Partners Incorporated, a private
investment firm, since 1989. Mr. Haas is Chairman of the Board of Playtex
Products, Inc., NBC Acquisition Corp. and Nebraska Book Company, Inc. and a
Director of Sybron International Corporation.
Mr. Baldwin has been Director of Specialty Foods and Specialty Foods
Acquisition Corp. since May 1996; Chief Executive Officer of Christmas Corner,
Inc. since January 1995 and President of PB Ventures since July 1994. Mr.
Baldwin was also Managing Director of Invus Group, Ltd. from 1990 through
February 1995.
Mr. Crandall has been Director of Specialty Foods and Specialty Foods
Acquisition Corp. since August 1993; Vice President and Chief Financial Officer
of Keystone, Inc., an affiliate of the Company, since October 1986 and
President, Director and sole stockholder of Acadia MGP, Inc. (managing general
partner of Acadia FW Partners, L.P.), the sole general partner of Acadia
Partners, L.P., an affiliate of Specialty
44
<PAGE>
Foods since March 1992. Mr. Crandall also is a Director of Bell & Howell
Holdings Company, Physicians Reliance Network, Sunterra Corp., Integrated
Orthopedics and Washington Mutual.
Mr. Meyer has been Director of Specialty Foods and Specialty Foods
Acquisition Corp. since June 1996. Mr. Meyer also is a Director of Century
Capital Financial, Inc. and City National Bank in Kilgore and Longview, Texas.
Mr. Nathanson has been Director of Specialty Foods and Specialty Foods
Acquisition Corp. since August 1993 and Managing Director of Donaldson, Lufkin &
Jenrette Securities Corporation since January 1991. Mr. Nathanson also is a
Director of Duane Reade, Inc.
Mr. Offensend has been Director of Specialty Foods and Specialty Foods
Acquisition Corp. since August 1993 and Founder of Evercore Partners, LLC since
October 1995. Mr. Offensend was also Managing Director of Oak Hill Partners,
Inc. and its predecessor from April 1990 to September 1995; Vice President and
Director of Acadia MGP, Inc. from March 1992 to September 1995; and Vice
President of Keystone from March 1992 to September 1995.
Mr. Particelli has been Director of Specialty Foods and Specialty Foods
Acquisition Corp. since November 1997 and Managing Director of Oak Hill
Partners, Inc. since August 1997. Mr. Particelli was Principal of Odyssey
Partners L.P. from October 1995 to August 1997 and Senior Vice President of Booz
Allen & Hamilton Inc. prior to October 1995.
Mr. Scotto has been Director of Specialty Foods and Specialty Foods
Acquisition Corp. since August 1993; Managing Director of Oak Hill Partners,
Inc. and its predecessor since March 1988; and Consultant to Oak Hill Capital
Management, Inc. since November 1998. Mr. Scotto also is a Director of Ivex
Packaging Corporation, Holophane Corporation and Grove Worldwide LLC.
Mr. Wheat has been Director of Specialty Foods and Specialty Foods
Acquisition Corp. since June 1993 and President of Haas Wheat & Partners
Incorporated, a private investment firm, since November 1992. Mr. Wheat was
Co-Chairman of Grauer & Wheat, Inc., a private investment firm, from April 1989
to October 1992. Mr. Wheat also is a Director of Playtex Products, Inc.
Compensation of Executive Officers
The following table shows the compensation for the years ended December
31, 1998, December 31, 1997 and December 31, 1996 of Mr. Benjamin, our President
and Chief Executive Officer who holds the same positions in SFAC New Holdings,
who we refer to as the "CEO," and each of our four most highly compensated
executive officers (excluding the CEO but including our operating subsidiaries).
We have an annual bonus plan and a long-term incentive plan in which our
executive officers may participate.
45
<PAGE>
The CEO and four most highly compensated executive officers hold their
respective positions at SFC New Holdings and at SFAC New Holdings, but they are
not compensated separately by each entity.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation (1)
---------------------------------------------- --------------------------
Awards
--------------------------
Securities
Other Annual Underlying
Fiscal Compensation Options/SARs All Other
Name and Principal Position Year Salary($) Bonus($) ($)(1) (#)(2) Compensation($)
- --------------------------- --------- --------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence S. Benjamin .............. 1998 625,000 1,774,000 89,000 -- 101,000(3)
President and Chief Executive 1997 560,000 1,015,000 84,000 1,300,000 89,000
Officer of us and SFAC New 1996 320,000 72,000 -- 50,000 --
Holdings
William D. Day (4) ................ 1998 300,000 528,000 -- -- 8,500(5)
President and Chief Executive 1997 209,000 215,000 31,000 -- 600
Officer of H&M 1996 145,000 -- -- 15,000 400
Robert L. Fishbune ................ 1998 376,000 601,500 62,000 -- 64,000(6)
Vice President and Chief 1997 350,000 298,000 0 62,000 100,000 80,000
Financial Officer of us and SFAC 1996 191,000 150,000 51,000 100,000 29,000
New Holdings
Henry J. Metz ..................... 1998 338,000 262,500 -- -- 500(7)
Chairman of Metz 1997 334,000 251,000 -- -- 1,000
1996 320,000 240,000 93,000 50,000 2,000
Patrick J. O'Dea .................. 1998 295,000 225,000 -- -- 30,300(8)
President and Chief Executive 1997 260,000 260,000 -- -- 207,000
Officer of Mother's 1996 184,000 -- -- 20,000 400
</TABLE>
- ----------
(1) The amounts listed for Mr. Benjamin include $71,000 and $76,000 for tax
reimbursement payments made in 1997 and 1998, respectively. The amounts
for Mr. Fishbune in 1996, 1997 and 1998 include $43,000, $50,000 and
$49,000, respectively, for tax reimbursement payments. In 1997, Mr. Day
received $31,000 in tax reimbursement. In 1996, Mr. Metz received $54,000
of tax reimbursement payments and $39,000 for personal use of the Metz
airplane.
(2) Options were generally granted to our employees, including the named
executive officers, under our 1994 Stock Option Plan, which was amended in
February 1995 and which we refer to as our "Stock Option Plan." Options
granted are either non-qualified stock options or incentive stock options.
Options granted generally have a ten year term.
(3) In 1998, we made a $90,000 contribution to a retirement account maintained
by Mr. Benjamin. Mr. Benjamin (and Mr. Fishbune) have established accounts
into which they contribute up to 15% of their base pay (on an after-tax
basis) to annuity or money-market funds. We provide contributions to their
retirement accounts and we reimburse them for taxes incurred as a result
of our contributions. The amounts listed for 1998 for Mr. Benjamin also
include life insurance premiums ($3,000) and personal financial planning
services ($8,000).
46
<PAGE>
(4) H&M was sold in April 1999.
(5) The amounts listed for Mr. Day in 1998 include life insurance premiums
($1,500) and reimbursement of moving and relocation expenses ($7,000).
(6) In 1998, we made a $56,000 contribution to a retirement account maintained
by Mr. Fishbune (see note 3 for a description of the account). The amounts
listed for Mr. Fishbune also include life insurance premiums ($1,500) and
personal financial planning services ($6,500).
(7) In 1998, Mr. Metz received a $500 reimbursement for relocation expenses.
(8) The amounts listed for Mr. O'Dea in 1998 include a $30,000 relocation
allowance and payment of $300 in life insurance premiums.
Aggregated Options/SARs Exercised In Last Fiscal Year And Year-End Option/SAR
Values
The following table describes, for the named executive officers, aggregated
information concerning the number of shares of Specialty Foods Acquisition Corp.
common stock, par value $.01 per share, underlying unexercised stock options at
December 31, 1998 and the value of unexercised, in-the-money options at that
date.
Number of
Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Fiscal Year-End Fiscal Year-End
(#) Exercisable/ ($) Exercisable/
Name Unexercisable Unexercisable
---- ---------------- --------------------
Lawrence S. Benjamin 825,000/675,000 (1)
President and Chief
Executive Officer of
us and SFAC New
Holdings
William D. Day 18,750/6,250 (1)
President and Chief
Executive Officer of
H&M
Robert L. Fishbune 100,000/100,000 (1)
Vice President and
Chief Financial
Officer of us and SFAC
New Holdings
Henry J. Metz 153,750/31,250 (1)
Chairman of Metz
Patrick J. O'Dea 26,250/8,750 (1)
President and Chief
Executive Officer of
Mother's
47
<PAGE>
- ----------
(1) All of the options listed in this table have an exercise price of
$0.021322 per share. Due to the fact that the Specialty Foods Acquisition
Corp. common stock is not publicly traded, it is not currently possible to
calculate a precise value for the Specialty Foods Acquisition Corp. common
stock. In October 1997, the Board of Directors of Specialty Foods
Acquisition Corp. realized that certain previously granted stock options
had exercise prices which exceeded the fair market value of the Specialty
Foods Acquisition Corp. common stock. In view of this diminished value,
the Board of Directors of Specialty Foods Acquisition Corp. determined
that adjusting the exercise price of stock options previously awarded to
existing employees (including the named executive officers) was in our
best interest. On October 30, 1997, the Board of Directors of Specialty
Foods Acquisition Corp. repriced the exercise price of existing options
from $0.726703211 to $0.021322 per share of Specialty Foods Acquisition
Corp. common stock, which the Board of Directors of Specialty Foods
Acquisition Corp. determined was not below the fair market value of that
common stock.
Metz-Mother's Cake & Cookie Company Consolidated Pension Plan for Non-Union
Employees
The following table provides you with information about the estimated
annual benefits payable upon retirement for the specified compensation and years
of service classifications under the Metz-Mother's Cake & Cookie Company
Consolidated Pension Plan for Non-Union Employees, which we refer to as the
"Pension Plan." Messrs. Metz and O'Dea are the only named executive officers
participating in the Pension Plan.
Pension Plan Table For The Pension Plan
Annual Final
Average
Compensation Years of Service
- ------------ ----------------
15 20 25 30 35
------- ------- ------- ------- -------
125,000 $23,988 $32,547 $41,105 $49,564 $49,664
150,000 $29,369 $39,834 $50,299 $60,764 $60,764
175,000 $33,833 $46,466 $59,100 $71,734 $71,734
200,000 $37,495 $52,035 $66,575 $81,115 $81,115
225,000 $41,158 $57,604 $74,050 $90,497 $90,497
250,000 $42,746 $60,038 $77,291 $94,564 $94,564
300,000 $42,746 $60,018 $77,291 $94,564 $94,564
350,000 $42,746 $60,018 $77,291 $94,564 $94,564
400,000 $42,746 $60,018 $77,291 $94,564 $94,564
450,000 $42,746 $60,018 $77,291 $94,564 $94,564
500,000 $42,746 $60,018 $77,291 $94,564 $94,564
Compensation under the Pension Plan generally refers to total annual cash
compensation (up to $160,000 for 1998, as limited by the IRS Code section
401(a)(17)),
48
<PAGE>
including pre-tax salary deferrals, but excluding certain specified items such
as compensation received under the Metz Long-Term Incentive Compensation Plan,
the Mother's Long-Term Incentive Compensation Plan, the Metz Annual Bonus
Incentive Plan and the Mother's Annual Bonus Incentive Plan.
In 1998, the amount of compensation covered under the Pension Plan Messrs.
Metz and O'Dea was $160,000 (as limited by IRS Code section 401(a)(171)). As of
December 31, 1998, Mr. Metz had approximately 27 years of credited service under
the Pension Plan and Mr. O'Dea had approximately one and one-half years of
credited service under the Pension Plan. Benefits are computed on a straight
life annuity basis and are not subject to deduction for Social Security or other
offset amounts.
Employment Arrangements
The following summaries of some of our employment agreements and
arrangements are not necessarily complete, so you should also read the text of
the agreements and arrangements, copies of which are listed as exhibits to the
registration statement and have either been filed as exhibits or incorporated by
reference into this prospectus.
Employment Agreement with Mr. Benjamin
Specialty Foods Acquisition Corp., Specialty Foods and certain of their
subsidiaries, including the Businesses, which we collectively refer to as the
"Employers," entered into an Amended and Restated Executive Employment Agreement
with Mr. Benjamin, dated as of March 15, 1999 and effective January 1, 1999.
Under this employment agreement, the initial term of employment ends June 30,
2001. However, the employment agreement will automatically be renewed for
additional one-year periods unless one of the parties cancels the renewal and
notifies the other party six months before the renewal term would begin. In
addition, if the employment agreement is terminated under certain circumstances,
the Employers will make post-termination salary and bonus payments to Mr.
Benjamin (or his estate). The employment agreement provides for an initial base
salary of $655,000 and an annual target bonus of 75% of base salary if we meet
specified EBITDA targets.
Mr. Benjamin's employment agreement also provides that he may be entitled
to receive, under certain circumstances, payments to offset (at least in part)
certain tax consequences to him if he exercises stock options, receives certain
payments, and/or has his contract terminated in connection with a change of
control of Specialty Foods Acquisition Corp. or Specialty Foods. These payments
are limited, in some circumstances, to the tax savings actually realized by the
Employers, and in other circumstances, by various dollar amounts.
Mr. Benjamin has agreed to be bound by certain confidentiality,
non-competition and non-solicitation restrictions described in his employment
agreement.
49
<PAGE>
Employment Agreement with Mr. Fishbune
The Employers also entered into an Amended and Restated Executive
Employment Agreement, dated as of March 15, 1999 and effective January 1, 1999,
with Mr. Fishbune. The initial term of Mr. Fishbune's employment agreement ends
December 31, 2000, but will be automatically renewed for additional one-year
periods unless the renewal is canceled by the Employers or Mr. Fishbune upon six
months' prior notice. In addition, if Mr. Fishbune's employment agreement is
terminated under certain circumstances, the Employers will make post-termination
salary and bonus payments to him (or his estate). Mr. Fishbune's employment
agreement provides for an initial base salary of $400,000 and an annual target
bonus of 75% of base salary if we meet specified EBITDA targets.
Mr. Fishbune's Employment Agreement also provides that he may be entitled
to receive, under certain circumstances, payments to offset (at least in part)
certain tax consequences to him if he exercises stock options, receives certain
payments, and/or has his contract terminated in connection with a change of
control of Specialty Foods Acquisition Corp. or Specialty Foods. These payments
are limited, in some circumstances, to the tax savings actually realized by the
Employers, and in other circumstances, by various dollar amounts.
Mr. Fishbune has agreed to be bound by certain confidentiality,
non-competition and non-solicitation restrictions described in his employment
agreement.
Employment Agreement with Mr. O'Dea
Specialty Foods, Mother's and MCC-DSD Holdings, Inc. (parent company of
Mother's and a wholly owned subsidiary of Specialty Foods) entered into an
Amended and Restated Executive Employment Agreement with Mr. O'Dea, effective
July 15, 1997. Mr. O'Dea's employment agreement provides for an initial
employment term ending December 31, 2000. However, this employment agreement may
be terminated at an earlier date under certain listed circumstances. Mr. O'Dea's
employment agreement provides for an initial base salary of $280,000 and an
annual target bonus of 75% of base salary if we meet specified performance
targets. In addition, if Mr. O'Dea's employment agreement is terminated in
certain circumstances, the Employers will make post-termination salary and bonus
payments to him (or his estate).
Mr. O'Dea has agreed to be bound by certain confidentiality,
non-competition and non-solicitation restrictions set forth in his employment
agreement.
Divestiture Award Agreements
Certain of our executive officers and other key employees, including
Messrs. Benjamin, Fishbune and Metz, have entered into Divestiture Award
Agreements with us. According to these agreements, a recipient will receive or
has received a percentage of the net cash proceeds received by us (after
deducting fees and expenses) if we sell certain of our subsidiaries.
50
<PAGE>
Change in Control Arrangements
Under the Mother's Amended and Restated Supplemental Long-Term Incentive
Compensation Plan, adopted in 1999, which we refer to as the "Mother's Long-Term
Plan," certain management employees, including certain named executive officers,
are eligible to receive awards based upon the total value of Mother's. We will
determine the amounts of any award payments to be made under the Mother's
Long-Term Plan on June 1, 2001, or earlier if there is a change in control of
Mother's. The award amounts under the Mother's Long-Term Plan will be offset, in
certain cases, by amounts payable under certain of the Deferred Bonus Agreements
described below.
Certain of our executive officers and other key employees, including
Messrs. Benjamin, Fishbune, Metz and O'Dea, entered into Deferred Bonus
Agreements with us. Under these agreements, they are entitled to receive
deferred bonus payments in amounts equal to their bonus payments under our
annual bonus plans. A payment of vested amounts relating to bonuses earned
through 1998 was made on March 31, 1999. Further payments relating to 1998 bonus
amounts earned through 1998 will be made on January 15, 2000. Messrs. Benjamin
and Fishbune waived the payments due to them on March 31, 1999 after they
received payments under the Divestiture Award Agreements relating to H&M
described above. In addition, on March 31, 2001 Messrs. Benjamin, Fishbune and
O'Dea will receive payments of amounts vested relating to any bonuses they may
earn for 1999 and 2000. However, if there is a change in control, the awards
that relate to bonuses earned prior to the change in control vest immediately
and will be paid within 90 days.
Compensation of Directors
Our employees do not receive any additional compensation for serving as
one of our directors or on one of our committees of the board of directors. We
reimburse our directors for reasonable out-of-pocket expenses that they incur in
connection with attending board of directors meetings or committee meetings. Our
directors are also covered by director's liability insurance. Each of Messrs.
Baldwin and Meyer also receive directors fees of $20,000 annually.
Compensation Committee Interlocks and Insider Participation In Compensation
Decisions
J. Taylor Crandall, Robert B. Haas, Anthony P. Scotto and Douglas D. Wheat
are all of the members of the compensation committee of the board of directors
of each of Specialty Foods Acquisition Corp. and Specialty Foods. Each of
Messrs. Crandall, Haas, Scotto and Wheat owns a beneficial interest in or is an
executive officer of one or more of the entities that have entered into
financial advisory arrangements with Specialty Foods, as described below.
Messrs. Haas and Wheat are controlling shareholders and are Chairman of
the Board and President, respectively, of Haas Wheat & Partners Incorporated.
Haas Wheat & Partners Incorporated was a party to a financial advisory agreement
with Specialty
51
<PAGE>
Foods pursuant to which Haas Wheat agreed to provide financial advisory and
other consulting services to Specialty Foods for a five-year period in exchange
for an annual fee of $700,000. Specialty Foods' board of directors approved a
one-year extension of the agreement in August 1998.
J. Taylor Crandall is Vice President and Chief Financial Officer of
Keystone and is President, Director and sole stockholder of Acadia MGP, Inc.,
the managing general partner of Acadia FW Partners, L.P., the sole general
partner of Acadia. Mr. Scotto is a Managing Director of Oak Hill Partners, Inc.
and its predecessor. Each of Penobscot-MB Partners, which we refer to as
"Penobscot," an affiliate of Acadia, and Keystone entered into a five-year
financial advisory agreement with Specialty Foods, under which they were paid an
annual fee, $200,000 per year in the case of Penobscot and $100,000 per year in
the case of Keystone. Specialty Foods' Board of Directors approved a one-year
extension of the agreement in August 1998.
52
<PAGE>
SECURITY OWNERSHIP
All of our outstanding common stock is held by SFAC New Holdings SFC Sub
owns 90% of the capital stock of SFAC New Holdings and the remaining 10% is held
by the holders of the 13% Debentures. All of the capital stock of SFC Sub is
owned by Specialty Foods, and all of the capital stock of Specialty Foods is
owned by Specialty Foods Acquisition Corp. The following table provides, as of
June 28, 1999, information regarding the beneficial ownership of voting
securities of Specialty Foods Acquisition Corp. by (i) each person known by
Specialty Foods Acquisition Corp. to be the beneficial owner of more than 5% of
any class of its voting securities, (ii) each of our directors and named
executive officers, and (iii) all of our executive officers and directors as a
group.
Percentage of
Name and Address Number of Shares Outstanding Shares
of Beneficial Owner of Common Stock of Common Stock (1)
- ------------------- --------------- -------------------
Acadia Partners, L.P. (2) ................ 27,063,347 40.86%
201 Main Street
Fort Worth, Texas 76102
Keystone, Inc. (3) ....................... 9,358,502 14.13%
201 Main Street
Fort Worth, Texas 76102
Artal Luxembourg S.A. (4) ................ 5,959,327 9.49%
Aandorenstraat 2
3300 Tienen, Belgium
Robert B. Haas (5) ....................... 5,881,496 9.26%
300 Crescent Court, Suite 1700
Dallas, Texas 75201
UBS Capital LLC (6) ...................... 5,366,913 8.55%
299 Park Avenue
New York, New York 10171
DLJ Merchant Banking Partners, L.P. (7) .. 3,812,562 6.07%
277 Park Avenue
New York, New York 10172
Thomas J. Baldwin ........................ -- --
J. Taylor Crandall (2) ................... -- --
Jerry M. Meyer ........................... -- --
Andrew J. Nathanson (7) .................. -- --
David G. Offensend ....................... -- --
Marc C. Particelli ....................... -- --
Anthony P. Scotto (2) .................... -- --
Douglas D. Wheat (8) ..................... 276,264 *
Henry J. Metz (9) ........................ 1,217,750 1.93%
Lawrence S. Benjamin (10) ................ 1,001,771 1.57%
Robert L. Fishbune (11) .................. 125,000 *
Patrick J. O'Dea (12) .................... 35,000 *
All directors and executive officers
as a group ............................... 8,587,793 13.24%
- ----------
* Less than 1%
53
<PAGE>
(1) The holdings of all of the stockholders listed in this table may be
diluted by the exercise of the warrants listed in footnotes (b), (c) and
(e) below or options which, under employment arrangements and stock option
plans approved by Specialty Foods Acquisition Corp., Specialty Foods, SFAC
New Holdings and us, may be granted to certain employees. The Stock Option
Plan makes available to certain operating company employees and
headquarters employees options to purchase 5,852,917 shares of Specialty
Foods' common stock.
(2) Acadia's shares of common stock include shares owned by FWHY-Coinvestments
VII Partners, L.P., SFC Partners, L.P. and SFC Partners II, L.P., parties
related to Acadia. Acadia's shares of common stock also include 3,467,002
shares of common stock issuable upon the exercise of 8,775 warrants issued
by Specialty Foods Acquisition Corp. in favor of Acadia under a Warrant
Agreement dated June 27, 1997. Please refer to the section of this
prospectus entitled "Relationships and Related Transactions." The general
partner of Acadia is Acadia FW Partners, L.P., the managing general
partner of which is Acadia MGP, Inc., a corporation controlled by J.
Taylor Crandall. In addition, Mr. Crandall controls Group 31, Inc., the
general partner of each of FWHY, SFC Partners and SFC Partners II.
Therefore, Acadia FW and Acadia MGP may be deemed to beneficially own the
shares of common stock held by Acadia, SFC Partners, SFC Partners II and
FWHY. Mr. Scotto is a limited partner of SFC Partners II and disclaims
beneficial ownership of the shares of common stock held by SFC Partners
II. The address of Acadia FW, Acadia MGP, FWHY, SFC Partners, SFC Partners
II and Mr. Crandall is 201 Main Street, Fort Worth, Texas 76102.
(3) Keystone's shares of common stock include 3,467,002 shares of common stock
issuable upon the exercise of 8,775 warrants issued by Specialty Foods
Acquisition Corp. in favor of Keystone under a Warrant Agreement dated
June 27, 1997. Please refer to the section of this prospectus entitled
"Relationships and Related Transactions." Keystone is controlled by Robert
M. Bass. As such, Mr. Bass may be deemed to beneficially own the shares of
common stock held by Keystone. The address of Mr. Bass and Keystone is 201
Main Street, Fort Worth, Texas 76102.
(4) The parent entity of Artal Luxembourg S.A. is Artal Group S.A., a
Luxembourg company.
(5) Mr. Haas' shares of common stock include 101,011 shares owned by HWP
Specialty Subsidiary Partners, 25,253 shares owned by HWP Specialty
Subsidiary Partners II, and 1,000,000 shares owned by the Haas Family
Long-Term Trust. Mr. Haas' shares of common stock also include 770,445
shares of common stock issuable upon the exercise of 1,950 warrants issued
by Specialty Foods Acquisition Corp. in favor of Mr. Haas under a Warrant
Agreement dated September 19, 1997. Please refer to the section of this
prospectus entitled "Relationships and Related Transactions." The shares
owned by HWP Specialty Subsidiary Partners and HWP Specialty Subsidiary
Partners II also are beneficially owned by Mr. Douglas Wheat.
(6) Union Bank of Switzerland owns indirectly 100% of the capital stock of UBS
Capital LLC.
(7) The following entities hold shares of common stock: DLJ Merchant Banking
Partners, L.P.; DLJ International Partners, C.V.; DLJ Offshore Partners,
C.V.; DLJ Merchant Banking Funds, Inc.; DLJ First ESC L.L.C., an "employee
securities corporation" (as defined in the Investment Company Act of 1940)
formed to hold securities of employees of DLJ Merchant Banking, DLJ
International Partners, DLJ Banking Partners and DLJ First ESC); and
Donaldson, Lufkin & Jenrette Securities Corporation. Except for his
allocable portion of the shares held by DLJ First ESC, Mr. Nathanson
disclaims beneficial ownership of the shares of common stock held by the
DLJ Entities.
(8) Mr. Wheat's shares of common stock include 101,011 shares owned by HWP
Specialty Subsidiary Partners and 25,253 shares owned by HWP Specialty
Subsidiary Partners II, which also are beneficially owned by Mr. Robert B.
Haas, and 150,000 shares owned by the Carrol Wheat Jr. Children's Trust,
for which Mr. Wheat serves as a trustee.
(9) Mr. Metz's shares of common stock include 185,000 shares that Mr. Metz has
the right to acquire upon the exercise of options.
(10) Mr. Benjamin's shares of common stock include 825,000 shares that Mr.
Benjamin has the right to acquire upon the exercise of options.
54
<PAGE>
(11) Mr. Fishbune's shares of common stock include 125,000 shares that Mr.
Fishbune has the right to acquire upon the exercise of options.
(12) Mr. O'Dea's shares of common stock include 35,000 shares that Mr. O'Dea
has the right to acquire upon the exercise of options.
55
<PAGE>
RELATIONSHIPS AND RELATED TRANSACTIONS
Stockholders' Agreement
In 1993, simultaneously with the closing of the acquisitions of the
businesses underlying Specialty Foods, Haas Wheat, Acadia, Keystone, UBS Capital
LLC, Artal Belgium S.A. and DLJ Merchant Banking (in some cases acting through
affiliates) acquired common stock of Specialty Foods Acquisition Corp. at a
price of $0.726703211 per share. On August 16, 1993, these principal
stockholders entered into a stockholders' agreement governing the relationships
among them. Under this stockholders' agreement, if the principal stockholders
transfer the common stock to any of their affiliates or to members of
management, the transferees must also agree to be bound by the stockholders'
agreement.
The stockholders' agreement imposes restrictions and conditions on the
transfer of Specialty Foods Acquisition Corp. common stock, subject to certain
exceptions. Under the stockholders' agreement, the parties have the right to
participate in certain sales of the Specialty Foods Acquisition Corp. common
stock by other parties. In addition, the parties to the stockholders' agreement
were granted certain preemptive rights with respect to the issuance of common
stock by Specialty Foods Acquisition Corp. and the right, in certain
circumstances, to have their common stock registered for public sale under the
Securities Act of 1933.
The stockholders' agreement also contains provisions relating to the
corporate governance of Specialty Foods Acquisition Corp. Under the
stockholders' agreement, Acadia has the right to nominate three directors,
Keystone has the right to nominate two directors, Haas Wheat has the right to
nominate two directors, and UBS Capital, Artal Belgium and DLJ Merchant Banking
Partners each have the right to nominate one director. Under certain conditions,
Acadia and Keystone can increase the number of directors they can nominate.
Certain Transactions with Stockholders of Specialty Foods Acquisition Corp.
In 1998, Specialty Foods paid annual financial advisory fees to Haas Wheat
($700,000), Penobscot ($200,000) and Keystone ($100,000) under financial
advisory agreements with these parties. In 1998, the Board of Directors of
Specialty Foods extended the terms of each of the financial advisory agreements
between Specialty Foods and Haas Wheat, Penobscot and Keystone for one year.
Please refer to the section of this prospectus entitled "Executive
Compensation--Compensation Committee Interlocks and Insider Participation in
Compensation Decisions."
In November 1996, SF Leasing L.L.C. (of which Acadia and Keystone each
owns a 45% interest and Haas Wheat owns a 10% interest) purchased from Metz all
of the equipment at a Metz manufacturing facility for $3,222,000, a price that
was based on the appraised value of the equipment. The equipment was then leased
back to Metz in a transaction that was deemed by the parties to be equivalent to
an arms length transaction. In September 1998, SF Leasing, L.L.C. resold to Metz
all of the equipment at that
56
<PAGE>
manufacturing facility for $3,013,381. During 1998, SF Leasing L.L.C. received
$614,439 in rental payments from Metz. Specialty Foods' Board of Directors
determined that the foregoing transactions were on terms no less favorable to it
and Metz than could have been obtained by Specialty Foods and Metz in a
transaction with an unaffiliated third party.
In December 1998, Specialty Foods retained Donaldson, Lufkin and Jenrette
Securities Corporation, which we refer to as "DLJ," an affiliate of DLJ Merchant
Banking Partners, to serve as its financial advisor in connection with its
proposed sale of H&M. Upon completion of the sale of H&M, the Company paid DLJ
approximately $1,600,000 as compensation for its financial advisory services.
In March 1998, Specialty Foods paid DLJ $5,092,000 in connection with its
refinancing of its Revolving Credit Facility and Term Loan Facility. DLJ acts as
the Syndication Agent and Collateral Agent under both of those loan agreements.
In 1998, Specialty Foods paid DLJ a $100,000 retainer in connection with its
recently completed exchange offers.
Tax Sharing Agreement
SFC New Holdings has entered into a tax sharing agreement with Specialty
Foods Acquisition Corp. under which SFC New Holdings has agreed to pay to
Specialty Foods Acquisition Corp. the pro rata share of Specialty Foods
Acquisition Corp.'s consolidated income tax liability attributable solely to SFC
New Holdings and each of its subsidiaries. SFC New Holdings and each of its
subsidiaries are also parties to a tax sharing agreement under which each
subsidiary has agreed to pay to SFC New Holdings the pro rata share of Specialty
Foods Acquisition Corp.'s consolidated income tax liability attributable to each
such subsidiary. Specialty Foods, SFC Sub, Inc., SFAC New Holdings and Specialty
Foods Acquisition Corp. are also parties to a tax sharing agreement under which:
o Specialty Foods has agreed to pay to Specialty Foods Acquisition
Corp. the pro rata share of Specialty Foods Acquisition Corp.'s
consolidated income tax liability attributable solely to Specialty
Foods, SFC Sub, Inc. and SFAC New Holdings, and
o SFC Sub, Inc. and SFAC New Holdings have each agreed to pay to
Specialty Foods the pro rata share of such tax liability
attributable to each of SFC Sub, Inc. and SFAC New Holdings
57
<PAGE>
THE EXCHANGE OFFERS
Purpose of the Exchange Offers
Our registration rights agreement requires us to file not later than
October 9, 1999, which is 120 days following the date of original issuance of
our private exchange notes, the registration statement of which this prospectus
is a part for registered exchange offers with respect to an issue of new notes
in exchange for the initial notes. The exchange notes will be substantially
identical in all material respects to our private exchange notes except that the
exchange notes will be registered under the Securities Act, will not bear
legends restricting their transfer and will not be entitled to registration
rights under our registration rights agreement. This summary of the registration
rights agreement does not contain all the information that you should consider
and we refer you to the provisions of the registration rights agreement, which
has been filed as an exhibit to the registration statement of which this
prospectus is a part and a copy of which is available as indicated under the
heading "Where You Can Obtain More Information."
This prospectus also covers an offer being made to provide holders of SFC
Notes, who did participate in the private transactions that were completed on
June 11, 1999, with the opportunity to exchange their securities for exchange
notes. Many of these holders were not eligible to participate in the private
transactions because they did not qualify as "accredited investors" under Rule
501(a)(1), (2) or (3) of the Securities Act of 1933. We refer to the exchange
offer for our private exchange notes and the exchange offer for the SFC Notes
collectively as the "exchange offers."
We are required to:
o use our reasonable best efforts to cause the registration statement
to be declared effective no later than December 8, 1999, which is
180 days after the date of issuance of our private exchange notes;
o keep the exchange offers effective for not less than 30 days or
longer if required by applicable law after the date that notice of
the exchange offers is mailed to holders of the initial notes, and
o use our reasonable best efforts to consummate the exchange offers no
later than December 23, 1999, which is 195 days after the date of
issuance of our private exchange notes.
The exchange offers being made here, if commenced and consummated within
the time periods described in this paragraph, will satisfy those requirements
under the registration rights agreement.
This prospectus, together with the letter of transmittal, is being sent to
all record holders of our private exchange notes as of August 9, 1999. It is
also being sent to current holders of SFC Notes as of the same date.
58
<PAGE>
Based on interpretations by the staff of the Securities and Exchange
Commission, in no-action letters issued to third parties, we believe that the
exchange notes issued pursuant to the exchange offers may be offered for resale,
resold or otherwise transferred by each holder of exchange notes other than (1)
a broker-dealer who acquires the initial notes directly from us for resale
pursuant to Rule 144A under the Securities Act or any other available exemption
under the Securities Act, and (2) any holder that directly or indirectly through
one or more intermediaries, controls or is controlled by, or is under common
control with, us, without compliance with the registration and prospectus
delivery provisions of the Securities Act, so long as this holder:
o is acquiring the exchange notes in the ordinary course of its
business,
o is not participating in, and does not intend to participate in, a
distribution of the exchange notes within the meaning of the
Securities Act and has no arrangement or understanding with any
person to participate in a distribution of the exchange notes within
the meaning of the Securities Act, and
o is not a person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common
control with, us.
By tendering the initial notes in exchange for exchange notes, each
holder, other than a broker-dealer, will be required to make representations to
that effect. If a holder of initial notes is participating in or intends to
participate in, a distribution of the exchange notes, or has any arrangement or
understanding with any person to participate in a distribution of the exchange
notes to be acquired in these exchange offers, this holder may be deemed to have
received restricted securities and may not rely on the applicable
interpretations of the staff of the Securities and Exchange Commission. Any such
holder will have to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction.
Each broker-dealer that receives exchange notes for its own account in
exchange for initial notes may be deemed to be an underwriter within the meaning
of the Securities Act and must acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
these exchange notes. The letter of transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an underwriter within the meaning of the Securities Act. This prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with offers to resell, resales and other transfers
of exchange notes received in exchange for initial notes which were acquired by
such broker-dealer as a result of market making or other trading activities. We
have agreed that we will make this prospectus available to any broker-dealer for
a period of time not less than 90 days after the consummation of the exchange
offers for use in connection with any such offer to resell, resale or other
transfer. Please refer to the section in this prospectus entitled "Plan of
Distribution."
59
<PAGE>
Shelf Registration Statement
In the event that:
(1) because of any change in law or applicable interpretations thereof
by the staff of the Securities and Exchange Commission, we are not
permitted to effect the exchange offers, or
(2) for any other reason, the exchange offers are not consummated within
195 days from the date of issuance of our private exchange notes, or
(3) any holder so requests with respect to securities not eligible to be
exchanged for exchange securities in the exchange offers, or
(4) any applicable law or interpretations do not permit any holder to
participate in the exchange offers, or
(5) any holder that participates in the exchange offers does not receive
freely transferrable exchange securities in exchange for tendered
securities,
then in the case of clauses (1) through (5) of this sentence, we will be
obligated, at our sole expense, to:
o use our reasonable best efforts to file, as promptly as practicable
and in no event more than 45 days following this request, with the
Securities and Exchange Commission a shelf registration statement
covering resales of the private exchange notes, and
o use our reasonable best efforts to keep the shelf registration
statement continuously effective, supplemented and amended as
required by the Securities Act, in order to permit the prospectus
which is a part of this shelf registration statement to be usable by
holders for a period of two years after the date of issuance of our
private exchange notes or the shorter period of time that will
terminate when all of the applicable initial notes have been sold
under this shelf registration statement.
If a shelf registration statement is filed, we will provide to each holder
of the initial notes being registered copies of the prospectus that is a part of
the shelf registration statement. We will also notify each of these holders when
the shelf registration statement has become effective and take certain other
actions as are required to permit unrestricted resales of the initial notes
being registered. A holder that sells initial notes pursuant to the shelf
registration statement will be required to be named as a selling security holder
in the related prospectus and to deliver a prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
registration rights agreement that are applicable to such a holder, including
indemnification rights and obligations.
60
<PAGE>
Liquidated Damages
In the event that:
(1) we do not file the registration statement or the shelf registration
statement, as the case may be, with the Securities and Exchange
Commission on or before the dates specified above for these filings,
(2) the registration statement or the shelf registration statement, as
the case may be, is not declared effective on or before the dates
specified above for its effectiveness,
(3) the exchange offers are not consummated on or before December 23,
1999, or
(4) the shelf registration statement is filed and declared effective but
thereafter ceases to be effective or usable in connection with its
intended purpose (each such event referred to in clauses (1)
through( 4), being called a registration default),
then we will be obligated to pay liquidated damages to each holder of transfer
restricted securities, as described below. Transfer restricted securities means
each of our private exchange notes until:
o the date on which that initial note has been exchanged by a person
other than a broker-dealer for an exchange note in the registered
exchange offers,
o following the exchange by a broker-dealer in the registered exchange
offers of an initial note for an exchange note, the date on which
this exchange note is sold to a purchaser who receives from this
broker-dealer on or before the date of the sale a copy of the
prospectus contained in the exchange offers registration statement,
o the date on which the initial note has been effectively registered
under the Securities Act and disposed of in accordance with the
shelf registration statement,
o the date on which the initial note is distributed to the public
under Rule 144 promulgated under the Securities Act, or
o the date on which the initial note is eligible for resale pursuant
to Rule 144 without volume restrictions.
Liquidated damages will be an additional amount during the first 90-day
period immediately following the occurrence of one or more such registration
defaults, in an amount equal to $0.05 per week per $1,000 principal amount of
transfer restricted securities held by such holder. The amount of liquidated
damages thereafter will increase
61
<PAGE>
each week by an additional $0.05 per $1,000 principal amount of transfer
restricted securities, up to a maximum amount of liquidated damages of $0.30 per
week per $1,000 principal amount of transfer restricted securities. Liquidated
damages will accrue from the date a registration default occurs until the date
on which:
o the registration statement is filed,
o the registration statement or shelf registration statement is
declared effective and the exchange offer is consummated for all
validly tendered securities,
o the shelf registration statement is declared effective, or
o the shelf registration statement again becomes effective or made
usable, as the case may be.
Following the cure of all registration defaults, the accrual of liquidated
damages will cease.
Upon completion of the exchange offers, holders of initial notes who do
not exchange their initial notes for exchange notes in the exchange offers
generally will no longer be entitled to registration rights and will not be able
to offer or sell their initial notes, unless such initial notes are subsequently
registered under the Securities Act, which, subject to certain limited
exceptions, we will have no obligation to do, or pursuant to an exemption from,
or in a transaction not subject to, the Securities Act and applicable state
securities laws. Please refer to the section in this prospectus entitled "Risk
Factors--Your failure to participate in the exchange offers will have adverse
consequences."
Terms of the Exchange Offers
Expiration Date; Extensions; Amendments; Termination
The exchange offers will expire at 5:00 p.m., New York City time, on ,
1999, unless we extend it in our reasonable discretion. The expiration date of
the exchange offers will be at least 30 business days after the commencement of
the exchange offers in accordance with Rule 14e-l(a) under the Securities
Exchange Act of 1934 and our registration rights agreement.
To extend the expiration date, we will need to notify the exchange agent
of any extension by oral, promptly confirmed in writing, or written notice. We
will also need to notify the holders of the initial notes by mailing an
announcement or by means of a press release or other public announcement
communicated, unless otherwise required by applicable law or regulation, before
9:00 a.m., New York City time, on the next business day after the previously
scheduled expiration date.
We expressly reserve the right:
62
<PAGE>
o to delay acceptance of any initial notes, to extend the exchange
offers or to terminate the exchange offers and not permit acceptance
of initial notes not previously accepted if any of the conditions
described below under "--Conditions" have occurred and have not been
waived by us, if permitted to be waived, by giving oral or written
notice of this delay, extension or termination to the exchange
agent, or
o to amend the terms of the exchange offers in any manner.
If we amend the exchange offers in a manner determined by us to constitute
a material change, we will promptly disclose this amendment in a manner
reasonably calculated to inform the holders of the initial notes of this
amendment including providing public announcement, or giving oral or written
notice to the holders of the initial notes. A material change in the terms of
the exchange offers could include, among other things, a change in the timing of
the exchange offers, a change in the exchange agent, and other similar changes
in the terms of the exchange offers. If any material change is made to terms of
the exchange offers, we will disclose this change by means of a post-effective
amendment to the registration statement of which this prospectus is a part and
will distribute an amended or supplemented prospectus to each registered holder
of initial notes. In addition, we will also extend the exchange offers for an
additional five to ten business days as required by the Securities Exchange Act
of 1934, depending on the significance of the amendment, if the exchange offers
would otherwise expire during this period. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by oral, promptly confirmed in writing, or written notice thereof to the
exchange agent.
Procedures for Tendering
To tender your initial notes in the exchange offers, you must complete,
sign and date the letter of transmittal, or a facsimile thereof, have the
signatures thereon guaranteed if required by the letter of transmittal, and mail
or otherwise deliver the letter of transmittal or the facsimile, or an agent's
message, together with the certificates representing the initial notes being
tendered and any other required documents, to the exchange agent on or before
5:00 p.m., New York City time, on the expiration date. Alternatively, you may:
o if you hold SFC Notes, send a timely confirmation of a book-entry
transfer of your SFC Notes into the exchange agent's account at The
Depository Trust Company pursuant to the procedure for book-entry
transfer described below, on or before 5:00 p.m. on the expiration
date, or
o comply with the guaranteed delivery procedures described below.
The term agent's message means a message, transmitted by The Depository
Trust Company to, and received by, the exchange agent and forming a part of a
book-entry confirmation, which states that The Depository Trust Company has
received an express acknowledgment from its participant tendering initial notes
which are the subject of this
63
<PAGE>
book-entry confirmation that this participant has received and agrees to be
bound by the terms of the letter of transmittal, and that we may enforce this
agreement against this participant.
The method of delivery of the initial notes, the letter of transmittal and
all other required documents is at your election and risk. Instead of delivery
by mail, we recommend that you use an overnight or hand-delivery service. If you
choose the mail, we recommend that you use registered mail, properly insured,
with return receipt requested. In all cases, you should allow sufficient time to
assure timely delivery. You should not send any letters of transmittal or
initial notes to us. You must deliver all documents to the exchange agent at its
address provided below. You may also request your respective brokers, dealers,
commercial banks, trust companies or nominees to tender your initial notes on
your behalf.
Your tender of initial notes will constitute an agreement between you and
us in accordance with the terms and subject to the conditions provided in this
prospectus and in the letter of transmittal.
Only a holder of initial notes may tender these initial notes in the
exchange offers. A holder, with respect to the exchange offers, is any person in
whose name initial notes are registered or any other person who has obtained a
properly completed bond power from the registered holder.
If you are the beneficial owner of initial notes that are registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
and you wish to tender your initial notes, you should contact this registered
holder promptly and instruct this registered holder to tender on your behalf. If
you wish to tender on your own behalf, you must, before completing and executing
the letter of transmittal and delivering your initial notes, either make
appropriate arrangements to register ownership of the initial notes in your name
or obtain a properly completed bond power from the registered holder. The
transfer of registered ownership may take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an eligible guarantor institution within the meaning of Rule
17ad-15 under the Securities Exchange Act of 1934, each referred to as an
eligible institution, unless the initial notes are tendered:
o by a registered holder, or by a participant in The Depository Trust
Company whose name appears on a security position listing as the
owner, who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the letter of
transmittal if the exchange notes are being issued directly to this
registered holder or deposited into the participant's account at The
Depository Trust company, or
o for the account of an eligible institution.
64
<PAGE>
If the letter of transmittal is signed by the record holder(s) of the
initial notes tendered, the signature must correspond with the name(s) written
on the face of the initial notes without alteration, enlargement or any change
whatsoever. If the letter of transmittal is signed by a participant in The
Depository Trust Company, the signature must correspond with the name as it
appears on the security position listing as the holder of the initial notes.
If the letter of transmittal is signed by a person other than the
registered holder of any initial notes listed, such initial notes must be
endorsed or accompanied by bond powers and a proxy that authorize such person to
tender the initial notes on behalf of the registered holder in satisfactory form
to us as determined in our sole discretion, in each case as the name of the
registered holder or holders appears on the initial notes.
If the letter of transmittal or any initial notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing. Unless we waive the
requirement, evidence satisfactory to us of their authority to so act must also
be submitted with the letter of transmittal.
A tender will be deemed to have been received as of the date when the
tendering holder's duly signed letter of transmittal accompanied by the initial
notes tendered, or a timely confirmation received of a book-entry transfer of
initial notes into the exchange agent's account at The Depository Trust Company
with an agent's message, or a notice of guaranteed delivery from an eligible
institution is received by the exchange agent. Issuances of exchange notes in
exchange for initial notes tendered pursuant to a notice of guaranteed delivery
by an eligible institution will be made only against delivery of the letter of
transmittal, and any other required documents, and the tendered initial notes,
or a timely confirmation received of a book-entry transfer of initial notes into
the exchange agent's account at The Depository Trust Company with an agent's
message, with the exchange agent.
We will determine, in our sole discretion, all questions as to the
validity, form, eligibility, including time of receipt, acceptance and
withdrawal of the tendered initial notes. Our determination will be final and
binding. We reserve the absolute right to reject any and all initial notes not
properly tendered or any initial notes which, if accepted, would, in our opinion
or our counsel's opinion, be unlawful. We also reserve the absolute right to
waive any conditions of the exchange offers or irregularities or defects in
tender as to particular initial notes. Our interpretation of the terms and
conditions of the exchange offers, including the instructions in the letter of
transmittal, will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of initial notes must be
cured within such time as we shall determine. We, the exchange agent or any
other person will be under no duty to give notification of defects or
irregularities with respect to tenders of initial notes. Neither we nor the
exchange agent will incur any liability for failure to give such notification.
Tenders of initial notes will not be deemed to have been made until such
irregularities have been cured or waived. Any initial notes received by the
exchange agent that are not properly tendered and as to which the defects or
irregularities have not been cured or
65
<PAGE>
waived will be returned without cost by the exchange agent to the tendering
holders of such initial notes, unless otherwise provided in the letter of
transmittal, as promptly as practicable following the expiration date.
In addition, we reserve the right in our sole discretion, subject to the
provisions of the indenture for the initial and exchange notes, to:
o purchase or make offers for any initial notes that remain
outstanding subsequent to the expiration date, or, as described
under "--Expiration Date; Extensions; Amendments; Termination," to
terminate the exchange offers in accordance with the terms of our
registration rights agreement, and
o to the extent permitted by applicable law, purchase initial notes in
the open market, in privately negotiated transactions or otherwise.
The terms of these purchases or offers could differ from the terms
of the exchange offers.
Acceptance of Initial Notes for Exchange; Delivery of Exchange Notes
Upon satisfaction or waiver of all of the conditions to the exchange
offers, we will accept all initial notes properly tendered, promptly after the
expiration date, and will issue the exchange notes promptly after the expiration
date and acceptance of the initial notes. Please refer to the section of this
prospectus entitled "--Conditions" below. For purposes of the exchange offers,
initial notes will be deemed to have been accepted as validly tendered for
exchange when, as and if we had given oral or written notice to the exchange
agent.
In all cases, issuance of exchange notes for initial notes that are
accepted for exchange pursuant to the exchange offers will be made only after
timely receipt by the exchange agent of certificates for such initial notes or a
timely book-entry confirmation of such initial notes into the exchange agent's
account at the book-entry transfer facility, a properly completed and duly
executed letter of transmittal or an agent's message and all other required
documents, in each case, in form satisfactory to us and the exchange agent. If
any tendered initial notes are not accepted for any reason set forth in the
terms and conditions of the exchange offers or if initial notes are submitted
for a greater principal amount than the holder desires to exchange, such
unaccepted or non-exchanged initial notes will be returned without expense to
the tendering holder thereof, or, in the case of initial notes tendered by
book-entry transfer procedures described below, the non-exchanged initial notes
will be credited to an account maintained with the book-entry transfer facility,
as promptly as practicable after withdrawal, rejection of tender, the expiration
date or earlier termination of the exchange offers.
66
<PAGE>
Book-Entry Transfer
The exchange agent will make a request to establish an account with
respect to the initial notes at The Depository Trust Company for purposes of the
exchange offers within two business days after the date of this prospectus. Any
financial institution that is a participant in The Depository Trust Company's
systems may make book-entry delivery of initial notes by causing The Depository
Trust Company to transfer such initial notes into the exchange agent's account
at The Depository Trust Company in accordance with The Depository Trust
Company's procedures for transfer.
However, although delivery of initial notes may be effected through
book-entry transfer into the exchange agent's account at The Depository Trust
Company, an agent's message or the letter of transmittal or facsimile thereof
with any required signature guarantees and any other required documents must, in
any case, be transmitted to and received by the exchange agent at the address
indicated below under "--Exchange Agent" on or before the expiration date or the
guaranteed delivery procedures described below must be complied with. Delivery
of documents to The Depository Trust Company does not constitute delivery to the
exchange agent. All references in the prospectus to deposit of initial notes
will be deemed to include The Depository Trust Company's book-entry delivery
method.
Guaranteed Delivery Procedure
If you are a registered holder of initial notes and desire to tender such
initial notes, and (1) the initial notes are not immediately available, or (2)
time will not permit your initial notes or other required documents to reach the
exchange agent before the expiration date, or (3) the procedures for book-entry
transfer cannot be completed on a timely basis and an agent's message delivered,
you may still tender in the exchange offers if:
o you tender through an eligible institution,
o prior to the expiration date, the exchange agent receives from this
eligible institution a properly completed and duly executed letter
of transmittal, or facsimile thereof, and notice of guaranteed
delivery, substantially in the form provided by us, by facsimile
transmission, mail or hand delivery, setting forth your name and
address as holder of the initial notes and the amount of initial
notes tendered, stating that the tender is being made thereby and
guaranteeing that within five business days after the expiration
date the certificates for all tendered initial notes, in proper form
for transfer, or a book-entry confirmation with an agent's message,
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
o the certificates for all tendered initial 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 five business days after the expiration
date.
67
<PAGE>
Withdrawal of Tenders
Except as otherwise provided in this prospectus, you may withdraw tenders
of initial notes at any time before 5:00 p.m., New York City time, on the
expiration date.
For a withdrawal to be effective, you must send a written or facsimile
transmission notice of withdrawal to the exchange agent before 5:00 p.m., New
York City time, on the expiration date at the address provided below under
"--Exchange Agent" and before acceptance of the notes for exchange by us. Any
notice of withdrawal must:
o specify the name of the person having tendered the initial notes to
be withdrawn,
o identify the initial notes to be withdrawn, including, if
applicable, the registration number or numbers and total principal
amount of these initial notes,
o be signed by the person having tendered the initial notes to be
withdrawn in the same manner as the original signature on the letter
of transmittal by which these initial notes were tendered including
any required signature guarantees, or be accompanied by documents of
transfer sufficient to permit the trustee with respect to the
initial notes to register the transfer of these initial notes into
the name of the person having made the original tender and
withdrawing the tender,
o specify the name in which these initial notes are to be registered,
if different from that of the person having tendered the initial
notes to be withdrawn, and
o if applicable because the initial notes have been tendered pursuant
to the book-entry procedures, specify the name and number of the
participant's account at The Depository Trust Company to be
credited, if different than that of the person having tendered the
initial notes to be withdrawn.
We will determine all questions as to the validity, form and eligibility,
including time of receipt, of notices of withdrawal and our determination will
be final and binding on all parties. Any initial notes so withdrawn will be
deemed not to have been validly tendered for exchange for purposes of the
exchange offers. Any initial notes which have been tendered for exchange which
are not exchanged for any reason will be returned to the holder thereof without
cost to such holder. In the case of initial notes tendered by book-entry
transfer into the exchange agent's account at The Depository Trust Company
pursuant to the book-entry transfer procedures described above, these initial
notes will be credited to an account maintained with The Depository Trust
Company for the initial notes, as promptly as practicable after withdrawal,
rejection of tender, expiration date or earlier termination of the exchange
offers. Properly withdrawn initial notes may be retendered by following one of
the procedures described under "--Procedures for
68
<PAGE>
Tendering" and "--Book-Entry Transfer" above at any time on or before the
expiration date.
Conditions
Notwithstanding any other term of the exchange offers, we will not be
required to accept initial notes for exchange, or issue exchange notes in
exchange for any initial notes, and we may terminate or amend the exchange
offers as provided in this prospectus before the acceptance of these initial
notes, if:
o an action or proceeding has been instituted or threatened in any
court or before any governmental agency or body that in our judgment
would reasonably be expected to prohibit, prevent or otherwise
impair our ability to proceed with the exchange offers;
o a change in the current interpretation of the staff of the
Securities and Exchange Commission has occurred which current
interpretation permits the exchange notes issued pursuant to the
exchange offers in exchange for the initial notes to be offered for
resale, resold or otherwise transferred by their holders, other than
in certain circumstances;
o a law, statute, rule or regulation has been adopted or enacted
which, in our judgment, would reasonably be expected to impair our
ability to proceed with the exchange offers;
o a stop order has been issued by the Securities and Exchange
Commission or any state securities authority suspending the
effectiveness of the registration statement of which this prospectus
is a part or the qualification of the indenture for the notes under
the Trust Indenture Act of 1939 or proceedings shall have been
initiated or, to our knowledge, threatened for that purpose;
o a governmental approval has not been obtained, which approval we
deem in our sole discretion, necessary for the consummation of the
exchange offers; or
o a change, or a development involving a prospective change, in our
business or financial affairs has occurred which, in our sole
judgment, might materially impair our ability to proceed with the
exchange offers.
These conditions are for our sole benefit and may be asserted by us
regardless of the circumstances giving rise to any such condition or may be
waived by us, in whole or in part, at any time and from time to time, if we
determine in our reasonable discretion that any of the foregoing events or
conditions has occurred or exists or has not been satisfied, subject to
applicable law. Our failure at any time to exercise any of these rights will not
be deemed a waiver of any of these rights and each of these rights will be
deemed an ongoing right which we may assert at any time and from time to time.
69
<PAGE>
If we determine that we may terminate the exchange offers, as provided
above, we may:
o refuse to accept any initial notes and return any initial notes that
have been tendered to their holders
o extend the exchange offers and retain all initial notes tendered
before the expiration date, subject to the rights of such holders of
tendered initial notes to withdraw their tendered initial notes, or
o waive the termination event with respect to the exchange offers and
accept all properly tendered initial notes that have not been
withdrawn or otherwise amend the terms of the exchange offers in any
respect as provided under the section in this prospectus entitled
"--Expiration Date; Extensions; Amendments; Termination."
The exchange offers are not conditioned upon any minimum principal amount
of initial notes being tendered for exchange.
We have no obligation to, and will not knowingly, accept tenders of
initial notes from our affiliates within the meaning of Rule 405 under the
Securities Act or from any other holder or holders who are not eligible to
participate in the exchange offers under applicable law or its interpretation,
by the Securities and Exchange Commission, or if the exchange notes to be
received by the holder or holders of initial notes in the exchange offers, upon
receipt, will not be tradable by this holder without restriction under the
Securities Act and the Securities Exchange Act of 1934 and without material
restrictions under the blue sky or securities laws of substantially all of the
states of the United States.
Accounting Treatment
We will record the exchange notes at the same carrying value as the
initial notes, as reflected in our accounting records on the date of the
exchange. Accordingly, we will not recognize any gain or loss for accounting
purposes. We will amortize the costs of the exchange offers over the term of the
exchange notes.
Exchange Agent
We have appointed United States Trust Company of New York as exchange
agent for the exchange offers. You should direct all questions and requests for
assistance or additional copies of this prospectus or the letter of transmittal
to the exchange agent as follows:
70
<PAGE>
By Mail:
United States Trust Company of New York
P.O. Box 843 Cooper Station
New York, NY 10276
Attn: Corporate Trust Services
By Overnight Courier and By Hand
after 4:30 p.m. on the expiration date:
United States Trust Company of New York
770 Broadway, 13th Floor
New York, NY 10003
By Hand before 4:30 p.m.:
United States Trust Company of New York
111 Broadway
New York, NY 10006
ATTN: Lower Level Corporate Trust Window
Facsimile Transmission: (212) 780-0592
Attention: Customer Service
Confirm by Telephone: (800) 548-6565
Fees and Expenses
We will bear the expenses of soliciting tenders pursuant to the exchange
offers. The principal solicitation for tenders pursuant to the exchange offers
is being made by mail; however, our offices and regular employees may make
additional solicitations by telegraph, telephone, telecopy or in person.
We will not make any payments to brokers, dealers or other persons
soliciting acceptances of the exchange offers. However, we will pay the exchange
agent reasonable and customary fees for its services and will reimburse the
exchange agent for its reasonable out-of-pocket expenses in connection with the
exchange offers. We may also pay brokerage houses and other custodians, nominees
and fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of the prospectus, letters of transmittal and related
documents to the beneficial owners of the initial notes, and in handling or
forwarding tenders for exchange.
We will pay the expenses incurred in connection with the exchange offers,
including fees and expenses of the exchange agent and trustee and accounting,
legal, printing and related fees and expenses.
71
<PAGE>
We will pay all transfer taxes, if any, applicable to the exchange of
initial notes pursuant to the exchange offers. However, tendering holders will
pay the amount of any such transfer taxes, whether imposed on the registered
holder or any other persons, if:
o certificates representing exchange notes or initial notes for
principal amounts not tendered or accepted for exchange are to be
delivered to, or are to be registered or issued in the name of, any
person other than the registered holder of the initial notes
tendered, or
o tendered initial notes are registered in the name of any person
other than the person signing the letter of transmittal, or
o a transfer tax is imposed for any reason other than the exchange of
initial notes pursuant to the exchange offers.
If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the letter of transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
Your Failure to Participate in the Exchange Offers Will Have Adverse
Consequences
Our private exchange notes. If you do not exchange our private exchange
notes for exchange notes pursuant to the exchange offers or if you do not
properly tender our private exchange notes in the exchange offers, you will not
be able to resell, offer to resell or otherwise transfer our private exchange
notes unless they are registered under the Securities Act or unless you resell
them, offer to resell or otherwise transfer them under an exemption from the
registration requirements of, or in a transaction not subject to, the Securities
Act. In addition, you will no longer be able to obligate us to register our
private exchange notes under the Securities Act except in the limited
circumstances provided under our registration rights agreement and you will not
be entitled to obligate us to register your initial notes at all. The
restrictions on transfer of our private exchange notes arise because we issued
our private exchange notes pursuant to exemptions from, or in transactions not
subject to, the registration requirements of the Securities Act and applicable
state securities laws. In addition, if you want to exchange our private exchange
notes in the exchange offers for the purpose of participating in a distribution
of the exchange notes, you may be deemed to have received restricted securities,
and, if so, will be required to comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. To the extent our private exchange notes are tendered and accepted
in the exchange offers, the trading market, if any, for our private exchange
notes would be adversely affected. Please refer to the section in this
prospectus entitled "Risk Factors."
SFC Notes. If you do not exchange your SFC Notes for exchange notes
pursuant to the exchange offers or if you do not properly tender your SFC Notes
you will no longer be able to obligate us to register additional exchange notes
under the Securities Act.
72
<PAGE>
DESCRIPTION OF OUR OTHER INDEBTEDNESS AND
OUR ACCOUNTS RECEIVABLE TRANSFER PROGRAM
Term Loan Facility and Revolving Credit Facility
DLJ Capital Funding, Inc. and certain financial institutions and other
entities, which we collectively refer to as the "Lenders," currently provide
Specialty Foods and us with (i) the Term Loan Facility, which is a secured
senior term loan facility, in an aggregate principal amount of $168,211,259
million (as of June 30, 1999), which we refer to as the "Term Loans," and (ii)
the Revolving Credit Facility, which provides certain of Specialty Foods'
operating subsidiaries with up to $122,801,241 million in aggregate principal
amount of secured revolving loans, which we refer to as the "Revolving Loans,"
and letters of credit, which we refer to collectively with the Revolving Loans
and the Term Loans, the "Loans"; we refer to the Revolving Credit Facility and
the Term Loan Facility collectively as the "Credit Facilities." The maturity
date of both the Term Loans and the Revolving Loans is January 31, 2001.
General
The Term Loan Facility is governed by the Term Loan Agreement, by and
among SFC New Holdings and the Lenders. The Revolving Credit Facility is
governed by the Revolving Credit Agreement, by and among certain of SFC New
Holdings operating subsidiaries and the Lenders. Loans outstanding under the
Term Loan Agreement will bear interest based on either, at the election of the
borrower (the terms are defined in the Term Loan Agreement):
o the alternate base rate, equal to the greater of (a) the reserve
adjusted federal funds effective rate plus 0.50%, and (b) the
administrative agent's base rate, plus the applicable term loan
margin for base rate loans; or
o the reserve adjusted LIBO rate, plus the applicable term loan margin
for LIBO rate loans.
Repayment
The Term Loans are required to be repaid in quarterly installments of
$434,375 through and including October 31, 2000 and $165,605,000 at the stated
maturity date, January 31, 2001.
The $122.8 million Revolving Credit Facility is comprised of two
sub-facilities. The Revolving I Facility is a $25 million commitment under which
revolving loans may be borrowed, prepaid and reborrowed by the revolving loan
borrowers (as defined in the Revolving Credit Facility). Letters of credit may
be issued under the Revolving I Facility, which terminates on January 31, 2001.
As of June 30, 1999 there were no borrowings under the Revolving I
Facility and $10.3 million of Letters of Credit issued which reduce availability
under that facility. As
73
<PAGE>
of June 30, 1999, the $97.8 million Revolving II Facility, which matures on
January 31, 2001, was fully drawn down by the revolving loan borrowers. We may
not reborrow amounts repaid under the Revolving II Facility.
Revolving loans bear interest based on, at the election of the borrower,
either (terms are as defined in the Revolving Credit Facility) :
o the applicable base rate equal to the greater of:
(a) the reserve adjusted federal funds rate plus 0.50%;
(b) the administrative agent's base rate plus the applicable base
rate revolving loan margin; or
o the reserve adjusted LIBO rate plus the applicable revolving LIBO
loan margin.
Fees on letters of credit outstanding are paid at the applicable base rate
revolving loan margin per annum. We pay a fee on unused commitments under the
Revolving Credit Facility.
Security and Guaranties
The Revolving Loans and other obligations under the Revolving Credit
Facility are or will be guaranteed by us, SFAC New Holdings, several new holding
companies, which we refer to as the "Holding Companies," and each of the Holding
Companies' domestic operating subsidiaries, other than inactive subsidiaries and
other than subsidiaries constituting revolving credit borrowers (as that term is
defined in the Revolving Credit Facility).
The Term Loan Facility is secured on an equal basis by a grant of a
security interest in all of the capital stock of Finance Corp., which is defined
below, and each Holding Company and a pledge of all inter-company notes payable
to us from our three main operating companies. The Revolving Credit Facility
(and any related guarantees of it) is also secured by mortgages on some of the
real property of some of our subsidiaries, grants of security interests in
substantially all of the other assets of each Holding Company and each of our
subsidiaries. The secured assets do not include:
o the collateral securing the Accounts Receivable Facility;
o the assets of inactive, foreign or certain non-wholly owned
subsidiaries; or
o the stock of foreign subsidiaries in excess of 65% of that stock.
74
<PAGE>
Covenants
The Credit Facilities restrict us and our subsidiaries from creating,
incurring, assuming, or suffering to exist indebtedness, and from issuing
capital stock, with certain exceptions (including indebtedness permitted under
the relevant indentures).
The Credit Facilities also contain restrictions that, among other things,
limit our ability to:
o incur, create and maintain liens;
o incur and maintain guarantee obligations;
o undertake certain fundamental corporate changes;
o dispose of assets;
o declare and pay dividends and other payments of our capital stock;
o make more than a certain amount of capital expenditures in any year;
o invest, lend and advance funds, and make acquisitions;
o make optional payments or purchases of 11 1/4% Senior Notes, 12 1/8%
Senior Notes and Subordinated Notes, and amend our debt and
capitalization documents;
o enter transactions with affiliates (with certain exceptions);
o enter sale/leaseback transactions (with certain exceptions);
o change our fiscal year-end;
o enter agreements containing negative pledge clauses;
o change the lines of business in which we and our subsidiaries may
engage; and
o change the nature of our business and the business conducted by SFAC
New Holdings and Finance Corp.
In addition to the covenants described above, the Credit Facilities
require, among other things, that, as of certain dates and for certain periods
described in Term Loan Agreement:
o we maintain a ratio of consolidated total indebtedness, senior
secured indebtedness and operating company indebtedness to
consolidated EBITDA
75
<PAGE>
(as those terms are defined in the Term Loan Agreement) that does
not exceed certain limits;
o we maintain an interest coverage ratio (as defined in the Term Loan
Agreement) in excess of certain limits; and
o we maintain a certain minimum consolidated EBITDA (as defined in the
Term Loan Agreement).
Events of Default
The Term Loan Agreement and the Revolving Credit Agreement contain events
of default that are customary in facilities of these types, including, among
others:
o our failure or the failure of any of our subsidiaries which is a
borrower to make principal payments when due, or to make payments of
interest or fees within five days of them becoming due;
o the material breach of representations or warranties at the time
they were made;
o our failure or the failure of any of our subsidiaries to perform or
observe any covenant under the relevant agreement or the other loan
documents (in some cases after certain grace periods);
o the failure to pay when due (subject to grace periods), whether due
by acceleration or otherwise, any of our or our subsidiaries'
indebtedness in excess of $5.0 million in the aggregate, or the
occurrence of any event which enables the holder of any that
indebtedness to accelerate the maturity of it;
o our bankruptcy, insolvency or similar event, or the bankruptcy,
insolvency or similar event of any of our material subsidiaries;
o certain ERISA defaults by us or any commonly controlled entity;
o undischarged and unstayed final judgments in excess of $5.0 million
in the aggregate, against us or any of our material subsidiaries,
which remain unsatisfied or unstayed for at least 30 days;
o the impairment of loan documentation, any security interest or any
guaranty; or
o a change in control.
In addition, each of the Term Loan Agreement and the Revolving Credit
Agreement state that there will be an event of default under an agreement if
there is an
76
<PAGE>
event of default under the other agreement or a termination event under the
Receivables Transfer Agreement, which is defined below.
Accounts Receivable Transfer Program
General
As part of the private transactions that were completed on June 11, 1999,
Specialty Foods contributed to us stock of Specialty Foods Finance Corporation,
which we refer to as "Finance Corp.," a wholly owned special purpose subsidiary
through which some of our operating companies sell their accounts receivable. In
connection with the private transactions, we also assumed the responsibilities
of the master servicer under the related accounts receivable finance documents
from Specialty Foods.
Under the terms of the non-recourse, off-balance sheet accounts receivable
transfer program, which we refer to as the "Accounts Receivable Transfer
Program," certain of our operating subsidiaries, which we refer to as the
"Accounts Receivable Sellers," transfer on a daily basis all of their accounts
receivable to Finance Corp., at a discount to the face amount of the
receivables. Finance Corp. then transfers, at a discount to the face amount of
the receivables, an undivided interest in the receivables to a Master Trust
created under the terms of a Pooling Agreement and related Supplement, which we
refer to together as the "Receivables Transfer Agreement." To fund the purchase
price of the receivables transferred to it by Finance Corp., the Master Trust
draws upon a $50 million variable funding certificate representing an undivided
interest in the assets of the Master Trust.
The transfers of receivables by the Accounts Receivable Sellers to Finance
Corp., and by Finance Corp. to the Master Trust, are intended to be non-recourse
to the master servicer and the Accounts Receivable Sellers. However, the master
servicer and the Accounts Receivable Sellers share certain joint and several
obligations for breaches of certain specified covenants made by each of the
Accounts Receivable Sellers in the documentation for the Accounts Receivable
Transfer Program.
In addition, Finance Corp. was organized in a way to enable bankruptcy
counsel to give its reasoned legal opinion that the assets and liabilities of
Finance Corp., on the one hand, should not be substantively consolidated, in a
bankruptcy proceeding of the master servicer or any of the Accounts Receivable
Sellers, with our assets and liabilities or the assets and liabilities of the
Accounts Receivable Sellers, on the other hand.
Finance Corp. purchases all of the Accounts Receivable Sellers' accounts
receivable at discounts to their face amount. The amounts of the discounts are
determined from time to time. Finance Corp. funds the ongoing purchase of these
receivables from proceeds received from:
o the transfer of receivables to the Master Trust under the
Receivables Transfer Agreement;
77
<PAGE>
o collections of receivables previously transferred to Finance Corp.;
o the variable funding certificate;
o additional capital contributions by us; and
o in certain instances, by the issuance by Finance Corp. of
subordinated notes to the Accounts Receivable Sellers in return for
certain accounts receivable.
Collections and Servicing of Receivables
Prior to the private transactions that were completed on June 11,
Specialty Foods, and since those exchange offers, we, act as Master Servicer,
and certain Accounts Receivable Sellers act as servicers, for Finance Corp. The
Master Servicer and the servicers provide collection and other services to
Finance Corp. in return for a servicing fee. All payments made by third party
obligors to any of the Accounts Receivable Sellers or the Master Servicer will
be transferred to the collection account held by the trustee of the Master Trust
for the benefit of the holders of the variable funding certificates. Before the
obligations of the Master Trust to acquire undivided interests in the
receivables are terminated, collection of accounts receivable sold to Finance
Corp. will be applied, according to the provisions and restrictions contained in
the Receivables Transfer Agreement, to:
o pay servicing and other fees and expenses;
o pay operating expenses of Finance Corp.;
o purchase additional receivables from the Accounts Receivable
Sellers;
o satisfy other obligations of Finance Corp., including payments on
subordinated notes; and
o pay dividends to us (after meeting certain minimum equity
requirements and other restrictions).
During an amortization period, collections will be applied to repay the
variable funding certificate holders and to satisfy obligations owed to the
trustee before any collections are distributed to Finance Corp. as the holder of
a certificate representing a subordinated interest in the assets of the Master
Trust.
Security
Finance Corp. granted to the Master Trust, for the benefit of the holders
of the variable funding certificates, a first priority security interest in:
o all accounts receivables purchased by Finance Corp.;
78
<PAGE>
o all of Finance Corp.'s interest in certain agreements;
o all of Finance Corp.'s interest in certain assets; and
o cash collections of all purchased accounts receivable.
As part of the transfer of receivables to Finance Corp., each Accounts
Receivable Seller has transferred and assigned to Finance Corp. the receivables
and related merchandise, contracts and equipment.
Repayment Events
The variable funding certificates issued by the Master Trust under the
Accounts Receivable Transfer Program have an expected final distribution date of
January 31, 2001. The amortization of the variable funding certificates will
begin on December 15, 2000. However, purchases of receivables under the
Receivable Transfer Agreements will terminate before the expected final
distribution date if certain events occur, including, among others:
o our bankruptcy, insolvency or similar event, or the bankruptcy,
insolvency or similar event of Finance Corp. or any of our
significant subsidiaries;
o the failure of Finance Corp. to make principal payments within one
day of their due date, or interest payments within two days of their
due date;
o the breach of material representations and warranties at the time
they were made;
o our failure or the failure of Finance Corp. or any of our
subsidiaries to perform or observe any covenant under the
Receivables Transfer Agreements (in some cases after certain notice
and/or grace periods) or to meet certain ratios with respect to the
receivables;
o the termination before the stated term, by the lenders under the
Revolving Credit Agreement, of the commitments to lend under that
agreement, or the refusal by those lenders to extend credit for a
period of 150 consecutive days;
o our failure or the failure of any Accounts Receivable Seller to make
payments of any indebtedness in excess of $5.0 million in the
aggregate, when they are due or within any applicable grace period;
o the default of any of our indebtedness or any indebtedness of our
subsidiaries in excess of $5.0 million in the aggregate, or the
occurrence of any event which enables the holder of that
indebtedness to accelerate its maturity;
79
<PAGE>
o the existence of judgments, unsatisfied or unstayed for at least 60
days, in excess of $5.0 million in the aggregate, against us or any
of our material subsidiaries; or
o a change in control (as defined in the Receivables Transfer
Agreement).
80
<PAGE>
DESCRIPTION OF THE EXCHANGE NOTES
General
The terms of the exchange notes include those stated in the applicable
indenture. The exchange notes are subject to all such terms, and holders of
exchange notes are referred to the indentures. The following summary of certain
provisions of the indentures does not purport to be complete and is qualified in
its entirety by reference to the indentures, including the definitions therein
of certain terms used below. However, the summary does summarize all material
provisions of the indentures. The definitions of certain terms used in the
following summary are set forth below under "Certain Definitions."
Principal, Maturity and Interest
The 11 1/4% Senior Notes are limited in aggregate principal amount to $225
million and will mature on August 15, 2001. The 12 1/8% Senior Notes are limited
in aggregate principal amount to $150 million and will mature on October 1,
2002. The Subordinated Notes are limited in aggregate principal amount to $200
million plus the amount of Subordinated Notes required to be issued as "PIK
Subordinated Notes," in connection with the Subordinated Notes, and will mature
on August 15, 2003.
Interest on the 11 1/4% Senior Notes will accrue at 11 1/4% per annum and
will be payable semi-annually in arrears on February 15 and August 15 of each
year, commencing on February 15, 2000, to holders of record on the immediately
preceding February 1 and August 1. Interest on the 12 1/8% Senior Notes will
accrue at 12 1/8% per annum and will be payable semi-annually in arrears on
April 1 and October 1 of each year, commencing on April 1, 2000, to holders of
record on the immediately preceding March 15 and September 15.
Interest on the Subordinated Notes will accrue at 13 1/4% per annum and
all but 1% of such accrued interest will be payable semi-annually in arrears on
February 15 and August 15 of each year, commencing on February 15, 2000, to
holders of record on the immediately preceding February 1 and August 1. The
remaining interest on the Subordinated Notes will be payable in kind through the
issuance of PIK Subordinated Notes at the rate of 1% per annum payable
semi-annually in arrears on February 15 and August 15 of each year, commencing
February 15, 2000.
Interest on the exchange 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
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. The exchange notes will be payable as to
principal and interest at the office or agency of SFC New Holdings maintained
for such purpose within the City and State of New York or, at the option of SFC
New Holdings, payment of interest may be made by check mailed to the holders of
the exchange notes. Until otherwise designated by SFC New Holdings, SFC New
Holdings office or agency in New York will be the office of the applicable
exchange note trustee maintained for such purpose. The exchange notes will be
81
<PAGE>
issued in registered form, without coupons, and in denominations of $1,000 and
integral multiples thereof.
Effective Subordination of the 11 1/4% Senior Notes
The 11 1/4% Senior Notes will be effectively subordinated to (i) all
existing and future liabilities of SFC New Holdings Subsidiaries and (ii) all of
SFC New Holdings borrowings under the Term Loan Agreement, which borrowings are
secured by substantially all of the assets of SFC New Holdings and a pledge of
all of the capital stock of each First Tier Subsidiary and the Accounts
Receivable Subsidiary.
In the event of dissolution, bankruptcy, liquidation or reorganization of
SFC New Holdings Subsidiaries, the holders of the 11 1/4% Senior Notes will not
receive any amounts in respect of the 11 1/4% Senior Notes until after the
payment in full of the claims of the creditors of SFC New Holdings Subsidiaries.
In addition, upon the occurrence of certain events of default under the
agreement relating to the Senior Debt, SFC New Holdings will be prohibited from
making any payments in respect of the 11 1/4% Senior Notes under certain
circumstances.
Effective Subordination of the 12 1/8% Senior Notes
The 12 1/8% Senior Notes will be effectively subordinated to (i) all
existing and future liabilities and indebtedness of SFC New Holdings
Subsidiaries and (ii) all of SFC New Holdings borrowings under the Term Loan
Agreement, which borrowings are secured by substantially all of the assets of
SFC New Holdings and a pledge of all of the capital stock of each First Tier
Subsidiary and the Accounts Receivable Subsidiary.
In the event of dissolution, bankruptcy, liquidation or reorganization of
SFC New Holdings Subsidiaries, the holders of the 12 1/8% Senior Notes will not
receive any amounts in respect of the 12 1/8% Senior Notes until after the
payment in full of the claims of the creditors of SFC New Holdings Subsidiaries.
In addition, upon the occurrence of certain events of default under the
agreement relating to the Senior Debt, SFC New Holdings will be prohibited from
making any payments in respect of the 12 1/8% Senior Notes under certain
circumstances.
Subordination of the Subordinated Notes
The payment of principal of, premium, if any, and interest on the
Subordinated Notes will be (as it is with respect to the initial Subordinated
Notes of SFC New Holdings) subordinated in right of payment, as set forth in the
Subordinated Note indenture, to the prior payment in full in cash or Cash
Equivalents of all Senior Debt of SFC New Holdings, including the 11 1/4% Senior
Notes and the 12 1/8% Senior Notes, whether outstanding on the date of the
Subordinated Note indenture or thereafter created, incurred, assumed or
guaranteed.
Upon any payment or distribution to creditors of SFC New Holdings in a
liquidation or dissolution of SFC New Holdings or in a bankruptcy,
reorganization,
82
<PAGE>
insolvency, receivership or similar proceeding relating to SFC New Holdings or
its property, in an assignment for the benefit of creditors or any marshaling of
SFC New Holdings assets and liabilities, holders of Senior Debt of SFC New
Holdings, including holders of the 11 1/4% Senior Notes and the 12 1/8% Senior
Notes, will be entitled to receive payment in full in cash or Cash Equivalents
of all outstanding Obligations in respect of such Senior Debt before the holders
of the Subordinated Notes will be entitled to receive any payment or
distribution with respect to the Subordinated Notes and, until all Obligations
with respect to Senior Debt of SFC New Holdings are paid in full in cash or Cash
Equivalents, any payment or distribution to which the holders of the
Subordinated Notes would be entitled shall be made to the holders of Senior Debt
(except that holders of the Subordinated Notes may receive securities that are
subordinated to at least the same extent as the Subordinated Notes to Senior
Debt and any securities issued in exchange for Senior Debt, subject to certain
authorization of a bankruptcy court).
SFC New Holdings also may not make any payment or distribution in respect
of the Subordinated Notes (except in such subordinated securities to the extent
permitted) if:
(a) a default in the payment of the principal of, premium, if any, or
interest on any Designated Senior Debt occurs and is continuing
beyond any applicable period of grace (whether upon maturity, as a
result of acceleration or otherwise), or
(b) any other default occurs and is continuing with respect to any
Designated Senior Debt that permits holders of the Designated Senior
Debt as to which such default relates to accelerate its maturity and
the Subordinated Note trustee receives a notice of such default (a
"Payment Blockage Notice") from the holders, or from the trustee,
agent or other representative of the holders, of any such Designated
Senior Debt.
Notwithstanding the foregoing, a notice of default under the foregoing
clause (b) may only be given by the Representative for the holders of Senior
Debt under the Term Loan Agreement or the Revolving Credit Agreement if Senior
Debt is outstanding under the Term Loan Agreement or the Revolving Credit
Agreement (including obligations in respect of letters of credit) at the time
such notice is to be given. Payments on the Subordinated Notes may and shall be
resumed:
o in the case of a payment default, upon the date on which such
default is cured or waived, and
o in case of a nonpayment default, upon 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 period of payment blockage may be commenced within 360 days after
the receipt by the Subordinated Note trustee of any prior Payment Blockage
Notice. No nonpayment default that existed or was continuing on the date of
delivery of any Payment
83
<PAGE>
Blockage Notice to the Subordinated Note 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.
The Subordinated Note indenture further requires that SFC New Holdings
promptly notify holders of Senior Debt if payment of the Subordinated Notes is
accelerated because of an Event of Default.
"Senior Debt" means:
(i) all Senior Term Debt outstanding from time to time;
(ii) all Senior Revolving Debt outstanding from time to time;
(iii) the 11 1/4% Senior Notes and the 12 1/8% Senior Notes;
(iv) Hedging Obligations; and
(v) any other Indebtedness that is permitted to be incurred by SFC New
Holdings pursuant to the Subordinated Note indenture unless the
instrument under which such Indebtedness is incurred expressly
provides that it is on a parity with or subordinated in right of
payment to the Subordinated Notes.
"Senior Debt" shall include, without limitation, interest on any of the
Obligations described in the preceding clauses (i) through (v) accruing after
the filing of a petition by or against SFC New Holdings under any Bankruptcy
Law, in accordance with and at the rate (including any rate applicable upon any
default or event of default) specified in the applicable agreement under which
such Obligations are created, whether or not the claim for such interest is
allowed as a claim after such filing in any proceeding under such Bankruptcy
Law. Notwithstanding anything to the contrary in the foregoing, Senior Debt
shall not include:
o any Indebtedness of SFC New Holdings to any of its Subsidiaries or
other Affiliates;
o any Indebtedness incurred for the purchase of goods or materials or
for services obtained in the ordinary course of business (other than
the Senior Revolving Debt); and
o any Indebtedness that is incurred in violation of the Subordinated
Note indenture.
84
<PAGE>
"Designated Senior Debt" means:
o the Senior Term Debt;
o the Senior Revolving Debt;
o the 11 1/4% Senior Notes and the 12 1/8% Senior Notes; and
o any other Senior Debt permitted under the Subordinated Note
indenture, the principal amount of which is $25 million or more.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, holders of the Subordinated Notes may recover
less ratably than creditors of SFC New Holdings who are holders of Senior Debt,
including holders of the 11 1/4% Senior Notes and the 12 1/8% Senior Notes. The
Subordinated Note indenture will limit, subject to certain financial tests, the
amount of additional Indebtedness, including Senior Debt, that SFC New Holdings
and its Subsidiaries can incur. See "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock."
The operations of SFC New Holdings are conducted through its Subsidiaries
and, therefore, SFC New Holdings is dependent upon the cash flow of its
Subsidiaries to meet its obligations, including its obligations under the
exchange notes and the indentures. The exchange notes will be effectively
subordinated to all indebtedness and other liabilities of SFC New Holdings
Subsidiaries.
Optional Redemption
The 11 1/4% Senior Notes and the Subordinated Notes will be subject to
redemption at the option of SFC New Holdings, in whole or in part, upon not less
than 30 nor more than 60 days' notice to the holders of 11 1/4% Senior Notes or
Subordinated Notes (as the case may be), at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on August 15 of the years indicated below:
11 1/4% Senior Notes
Year Percentage
1998........................................ 105.625%
1999........................................ 102.813%
2000 and thereafter......................... 100.000%
85
<PAGE>
Subordinated Notes
Year Percentage
1998........................................ 103.786%
1999........................................ 101.893%
2000 and thereafter......................... 100.000%
In addition to the foregoing, if SFC New Holdings does not redeem the
Subordinated Notes, in whole, prior to November 15, 2002, the holders of the
Subordinated Notes will be entitled to receive a payment of $50.00 per $1,000
principal amount of Subordinated Notes (the "Non-Redemption Payment") on
November 16, 2002.
Except as set forth below, the 12 1/8% Senior Notes are not redeemable at
SFC New Holdings option prior to October 1, 1999. Thereafter, the 12 1/8% Senior
Notes will be subject to redemption at the option of SFC New Holdings, in whole
or in part, upon not less than 30 nor more than 60 days' notice to the holders
of exchange notes, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest thereon to
the applicable redemption date, if redeemed during the twelve-month period
beginning on October 1 of the years indicated below:
12 1/8% Senior Notes
Year Percentage
1999........................................ 106.063%
2000........................................ 103.031%
2001 and thereafter......................... 100.000%
In addition, if a Change of Control (as defined below) shall occur prior
to October 1, 1999, within 90 days after the occurrence of such Change of
Control, SFC New Holdings shall have the option to redeem the 12 1/8% Senior
Notes, in whole or in part, upon not less than 30 nor more than 60 days' notice
to the holders of the 12 1/8% Senior Notes, at a redemption price equal to the
principal amount thereof plus the Yield Protection Amount, plus accrued and
unpaid interest thereon to the applicable redemption date.
"Yield Protection Amount" means, with respect to the 12 1/8% Senior Notes,
the greater of :
o 1.0% of the principal amount of 12 1/8% Senior Notes to be redeemed,
and
o the excess, expressed as a percentage of the total principal amount
of the 12 1/8% Senior Notes outstanding on the date of determination
and applied to the principal amount of such 12 1/8% Senior Notes to
be redeemed, of (A) the present value of all remaining required
principal and interest
86
<PAGE>
payments due on all such 12 1/8% Senior Notes outstanding on the
date of determination through the final stated maturity of all such
12 1/8% Senior Notes, computed using a discount rate equal to the
Treasury Rate plus the Applicable Spread, over (B) the principal
amount of all such 12 1/8% Senior Notes outstanding on the date of
determination.
"Applicable Spread" is defined as 100 basis points.
"Treasury Rate" is defined as the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled by and published in the most recent Federal Reserve Statistical Release
H.15 (519) that has become publicly available at least two Business Days prior
to the date fixed for prepayment (or, if such Statistical Release is no longer
published, any publicly available source of similar market data)) most nearly
equal to the then remaining Weighted Average Life to Maturity of the applicable
12 1/8% Senior Notes; provided, that if the Weighted Average Life to Maturity of
such 12 1/8% Senior Notes is not equal to the constant maturity of a United
States Treasury security for which a weekly average yield is given, the Treasury
Rate shall be obtained by linear interpolation (calculated to the nearest
one-twelfth of a year) from the weekly average yields of United States Treasury
securities for which such yields are given, except that if the Weighted Average
Life to Maturity of such 12 1/8% Senior Notes is less than one year, the weekly
average yield on actually traded United States Treasury securities adjusted to a
constant maturity of one year shall be used.
Mandatory Redemption
Except as set forth below under "Redemption or Repurchase at the Option of
Holders," SFC New Holdings is not required to make mandatory redemption or
sinking fund payments with respect to the exchange notes.
Redemption or Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, each holder of exchange notes
will have the right to require SFC New Holdings to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such holder's exchange
notes pursuant to the offer described below (the "Change of Control Offer") at a
purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase (the "Change of
Control Payment"). Within 30 days following any Change of Control, SFC New
Holdings will mail a notice to each holder stating:
(1) that the Change of Control Offer is being made pursuant to the
covenant entitled "Change of Control" and that all exchange notes
tendered will be accepted for payment;
87
<PAGE>
(2) the purchase price and the purchase date, which shall be no later
than 30 Business Days from the date such notice is mailed (the
"Change of Control Payment Date");
(3) that any exchange note not tendered will continue to accrue
interest;
(4) that, unless SFC New Holdings defaults in the payment of the Change
of Control Payment, all exchange notes accepted for payment pursuant
to the Change of Control Offer will cease to accrue interest after
the Change of Control Payment Date;
(5) that holders electing to have any exchange notes purchased pursuant
to a Change of Control Offer will be required to surrender the
exchange notes, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the exchange notes completed, to the
Paying Agent at the address specified in the notice prior to the
close of business on the third Business Day preceding the Change of
Control Payment Date;
(6) that holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the
second Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the
name of the holder, the principal amount of exchange notes delivered
for purchase, and a statement that such holder is withdrawing his
election to have such exchange notes purchased; and
(7) that holders whose exchange notes are being purchased only in part
will be issued exchange notes equal in principal amount to the
unpurchased portion of the exchange notes surrendered, which
unpurchased portion must be equal to $1,000 in principal amount or
an integral multiple thereof. SFC New Holdings will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of
exchange notes in connection with a Change of Control.
On the Change of Control Payment Date, SFC New Holdings will, to the
extent lawful,
(1) accept for payment exchange notes or portions thereof 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 exchange notes or portions thereof
so tendered, and
88
<PAGE>
(3) deliver or cause to be delivered to the trustees the exchange notes
so accepted together with an Officers' Certificate stating the
exchange notes or portions thereof tendered to SFC New Holdings.
The Paying Agent will promptly mail to each holder of exchange notes so
accepted payment in an amount equal to the purchase price for such exchange
notes, and the applicable trustee will promptly authenticate and mail to each
holder an exchange note equal in principal amount to any unpurchased portion of
the exchange notes surrendered by such holder, if any; provided, that each such
exchange note will be in a principal amount of $1,000 or an integral multiple
thereof. The Subordinated Note indenture will provide that prior to making the
Change of Control Payment in respect of the Subordinated Notes, but in any event
within 60 days following a Change of Control, SFC New Holdings 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
Subordinated Notes required by this covenant. SFC New Holdings will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
"Change of Control" means the occurrence of any of the following:
o the sale, lease or transfer, in one or a series of related
transactions, of all or substantially all of the assets of SFC New
Holdings, SFC Sub, Inc., SFAC New Holdings, Specialty Foods or
Specialty Foods Acquisition Corp. to any person or group (as such
term is used in Section 13(d)(3) of the Exchange Act) (other than
the Principals or their Specified Parties (as defined below));
o the adoption of a plan relating to the liquidation or dissolution of
SFC New Holdings, SFC Sub, Inc., Specialty Foods Acquisition Corp.,
SFAC New Holdings or Specialty Foods;
o the consummation of any transaction the result of which is that any
person or group (as defined above) (other than the Principals and
their Specified Parties) owns, directly or indirectly, more of the
voting power of the voting stock of SFC New Holdings, SFC Sub, Inc.,
SFAC New Holdings, Specialty Foods Acquisition Corp. or Specialty
Foods other than the Principals and their Specified Parties; or
o the first day on which a majority of the members of the Board of
Directors of SFC New Holdings, SFC Sub, Inc., SFAC New Holdings,
Specialty Foods Acquisition Corp. or Specialty Foods are not
Continuing Directors. For the purposes of the foregoing sentence,
any shares of voting stock that are required to be voted for a
nominee of any Principal or Specified Party pursuant to a binding
agreement between the holder thereof and such Principal or Specified
Party will be deemed to be held by such Principal or Specified
Party, as the case may be, for purposes of determining the
percentage of voting power held by any person.
89
<PAGE>
"Principals" means Haas Wheat & Partners Incorporated, Acadia Partners,
L.P. and Keystone, Inc.
"Specified Party" with respect to any Principal means:
(A) any controlling stockholder or partner, a direct or indirect 80% (or
more) owned Subsidiary, or spouse or immediate family member (in the
case of an individual) of such Principal;
(B) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons
beneficially holding an 80% or more controlling interest of which
consist of such Principal and/or such other Persons referred to in
the immediately preceding clause (A) or the succeeding Clause (D) or
(E);
(C) any partner or stockholder of any Principal as of the date of the
indentures who acquires any assets or voting stock of SFC New
Holdings, SFC Sub, Inc., SFAC New Holdings, Specialty Foods
Acquisition Corp. or Specialty Foods pursuant to a general
distribution by such Principal to each of its partners or
stockholders;
(D) any officer or director of any principal as of the date of the
indentures; or
(E) co-investment entities established by any Principal within 90 days
of the date of the indentures and controlled by such principal, any
affiliated party (including any officer or director) of such
Principal or of the general partner of such Principal (or of the
general partner of any general partner of such Principal) or any
combination of the foregoing; provided, however, that (x) each of
Douglas D. Wheat and HWP Specialty Partners, L.P. shall be deemed a
Specified Party of Haas Wheat & Partners Incorporated and (y) any
officer or director of Oak Hill Partners, Inc. as of the date of the
indentures shall be deemed a Specified Party of Acadia Partners,
L.P. and Keystone, Inc.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of Specialty Foods, SFC New Holdings, Specialty Foods
Acquisition Corp. or SFAC New Holdings, as applicable, who (i) was a member of
such Board of Directors on the date of the indentures or (ii) was nominated for
election or elected to such Board of Directors with the affirmative vote of a
majority of the Continuing Directors who were members of such Board at the time
of such nomination or election.
Asset Sales
The indentures provide that SFC New Holdings will not, and will not permit
any of its Subsidiaries to:
90
<PAGE>
o sell, lease, convey or otherwise dispose of any assets (including by
way of a sale-and-leaseback) other than in the ordinary course of
business and other than sales of accounts receivable to the Accounts
Receivable Subsidiary in accordance with the provisions of the
"Accounts Receivable Subsidiary" covenant described below (provided
that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of SFC New Holdings shall be
governed by the provisions of the indentures described below under
the caption "Merger, Consolidation or Sale of Assets"), or
o issue or sell equity securities of any of its Subsidiaries, in each
case whether in a single transaction or a series of related
transactions,
(a) that have a fair market value in excess of $3 million or
(b) for net proceeds in excess of $3 million (each of the
foregoing, an "Asset Sale"), unless
(x) SFC New Holdings (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 applicable
trustee) of the assets sold or otherwise disposed of,
and
(y) at least 80% of the consideration therefor received by
SFC New Holdings or such Subsidiary is in the form of
cash or Cash Equivalents;
provided, however, that the amount of:
(A) any liabilities (as shown on SFC New Holdings or such Subsidiary's
most recent balance sheet or in the notes thereto) of SFC New
Holdings or any Subsidiary (other than liabilities that are by their
terms subordinated in right of payment to the applicable exchange
notes) that are assumed by the transferee of any such assets, and
(B) any notes or other obligations of such transferee or Marketable
Securities received by SFC New Holdings or any such Subsidiary from
such transferee that, within 30 days (or 90 days, in the case of
Marketable Securities received in connection with a pooling of
interest transaction) of the consummation of the Asset Sale, are
converted by SFC New Holdings or such Subsidiary into cash (to the
extent of the cash received),
shall be deemed to be cash for purposes of this provision.
91
<PAGE>
Application of Cash Proceeds from Principal Business Asset Sale
Pursuant to the indentures, within 30 days after the receipt of cash
proceeds from any Principal Business Asset Sale, SFC New Holdings (or such
Subsidiary) must apply 75% of the Net Proceeds thereof to permanently reduce
Senior Term Debt and, to the extent that cash proceeds are not used in
connection therewith, to permanently reduce Senior Revolving Debt. To the extent
that the Net Proceeds exceeds the amounts required to permanently reduce Senior
Term Debt and Senior Revolving Debt, such excess Net Proceeds shall be deemed to
constitute excess proceeds and shall be applied to the repayment of the exchange
notes in accordance with the procedures set forth in the indentures and as
described in the following three paragraphs.
Application of Cash Proceeds from any Asset Sale
12 1/8% Senior Notes. Pursuant to the 12 1/8% Senior Note indenture,
within 365 days after the receipt of cash proceeds from any Asset Sale (other
than 75% of the cash proceeds from a Principal Business Asset Sale), SFC New
Holdings (or such Subsidiary) may, at its option, apply the Net Proceeds from
such Asset Sale either:
(a) to permanently reduce Senior Term Debt;
(b) to permanently reduce Senior Revolving Debt with a corresponding
permanent reduction in commitments with respect thereto; or
(c) to an investment in another business, capital expenditures or other
long-term assets, in each case, in the same, similar or related line
of business as SFC New Holdings or any of its Subsidiaries were
engaged in on the date of the 12 1/8% Senior Note indenture.
Pending the final application of any such Net Proceeds, SFC New Holdings (or
such Subsidiary) may temporarily reduce Senior Revolving Debt or otherwise
invest such Net Proceeds in any manner that is not prohibited by the 12 1/8%
Senior Note indenture. Any Net Proceeds from an Asset Sale that are not finally
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 $15 million, within five days of such date, SFC New Holdings
will be required to make an offer to all holders of 12 1/8% Senior Notes (a "12
1/8% Asset Sale Offer") to purchase the maximum principal amount of 12 1/8%
Senior Notes that may be purchased out of the Excess Proceeds at an offer price
in cash in an amount equal to 100% of the outstanding principal amount thereof
plus accrued and unpaid interest, if any, to the date fixed for the closing of
such offer, in accordance with the procedures set forth in the 12 1/8% Senior
Note indenture. To the extent that the aggregate amount of 12 1/8% Senior Notes
tendered pursuant to a 12 1/8% Asset Sale Offer is less than the amount of
Excess Proceeds, SFC New Holdings may use such deficiency for general corporate
purposes or to offer to redeem 11 1/4% Senior Notes pursuant to the provisions
of the 11 1/4% Senior Note indenture and Subordinated Notes pursuant to the
provisions of the Subordinated Note indenture. If the aggregate principal amount
of initial 12 1/8% notes surrendered by holders thereof exceeds the amount of
Excess Proceeds, the
92
<PAGE>
12 1/8% Senior Note trustee will select the 12 1/8% Senior Notes to be purchased
on pro rata basis. Upon completion of such offer to purchase, the amount of
Excess Proceeds will be deemed to be reset at zero.
11 1/4% Senior Notes. Pursuant to the 11 1/4% Senior Note indenture,
within 365 days after the receipt of cash proceeds from any Asset Sale (other
than 75% of the cash proceeds from a Principal Business Asset Sale), SFC New
Holdings (or such Subsidiary) may, at its option, apply the Net Proceeds from
such Asset Sale either:
(a) to permanently reduce Senior Term Debt;
(b) to permanently reduce Senior Revolving Debt with a corresponding
permanent reduction in commitments with respect thereto; or
(c) to an investment in another business, capital expenditures or other
long-term assets, in each case, in the same, similar or related line
of business as SFC New Holdings or any of its Subsidiaries were
engaged in on the date of the 11 1/4% Senior Note indenture.
Pending the final application of any such Net Proceeds, SFC New Holdings (or
such Subsidiary) may temporarily reduce Senior Revolving Debt or invest such Net
Proceeds in cash or Cash Equivalents. Any Net Proceeds from an Asset Sales that
are not finally applied or invested as provided in the first sentence of this
paragraph will be deemed to constitute "Senior Excess Proceeds." When the
aggregate amount of Senior Excess Proceeds exceeds $15 million, within five days
of such date, SFC New Holdings will be required to make an offer to all holders
of 11 1/4% Senior Notes (an "11 1/4% Asset Sale Offer") to purchase the maximum
principal amount of 11 1/4% Senior Notes that may be purchased out of the Senior
Excess Proceeds at an offer price in cash in an amount equal to 100% of the
outstanding principal amount thereof plus accrued and unpaid interest, if any,
to the date fixed for the closing of such offer, in accordance with the
procedures set forth in the 11 1/4% Senior Note indenture. To the extent that
the aggregate amount of 11 1/4% Senior Notes tendered pursuant to a 11 1/4%
Asset Sale Offer is less than the amount of Senior Excess Proceeds, SFC New
Holdings may use such deficiency for general corporate purposes or to offer to
redeem Subordinated Notes pursuant to the provisions of the Subordinated Note
indenture. If the aggregate principal amount of initial 11 1/4% notes
surrendered by holders thereof exceeds the amount of Senior Excess Proceeds, the
11 1/4% Senior Note trustee will select the 11 1/4% Senior Notes to be purchased
on a pro rata basis. Upon completion of such offer to purchase, the amount of
Senior Excess Proceeds will be deemed to be reset at zero.
Subordinated Notes. Pursuant to the Subordinated Note indenture, within
365 days after the receipt of cash proceeds from any Asset Sale (other than 75%
of the cash proceeds from a Principal Business Asset Sale), SFC New Holdings (or
such Subsidiary) may, at its option, apply the Net Proceeds from such Asset Sale
either:
(a) to permanently reduce Senior Term Debt;
93
<PAGE>
(b) to permanently reduce Senior Revolving Debt with a corresponding
permanent reduction in commitments with respect thereto;
(c) to offer to redeem 11 1/4% Senior Notes pursuant to the provisions
of the 11 1/4% Senior Note indenture; or
(d) to an investment in another business, capital expenditures or other
long-term assets, in each case, in the same, similar or related line
of business as SFC New Holdings or any of its Subsidiaries were
engaged in on the date of the Subordinated Note indenture.
Pending the final application of any such Net Proceeds, SFC New Holdings (or
such Subsidiary) may temporarily reduce Senior Revolving Debt or invest such Net
Proceeds in cash or Cash Equivalents. Any Net Proceeds from an Asset Sale that
are not finally applied or invested as provided in the first sentence of this
paragraph will be deemed to constitute "Subordinated Excess Proceeds." When the
aggregate amount of Subordinated Excess Proceeds exceeds $15 million, SFC New
Holdings will be required to make an offer to all holders of Subordinated Notes
(a "Subordinated Note Asset Sale Offer") to purchase the maximum principal
amount of Subordinated Notes that may be purchased out of the Subordinated
Excess Proceeds at an offer price in cash in an amount equal to 100% of the
outstanding principal amount thereof plus accrued and unpaid interest, if any,
to the date fixed for the closing of such offer, in accordance with the
procedures set forth in the Subordinated Note indenture. To the extent that the
aggregate amount of Subordinated Notes tendered pursuant to a Subordinated Note
Asset Sale Offer is less than the amount of Subordinated Excess Proceeds, SFC
New Holdings may use such deficiency for general corporate purposes. If the
aggregate principal amount of Subordinated Notes surrendered by holders thereof
exceeds the amount of Subordinated Excess Proceeds, the Subordinated Note
trustee will select the Subordinated Notes to be purchased on a pro rata basis.
Upon completion of such offer to purchase, the amount of Subordinated Excess
Proceeds will be deemed to be reset at zero.
The foregoing limitations will not apply to Asset Sales to SFC New
Holdings or any of its Wholly Owned Subsidiaries.
The Term Loan Agreement will prohibit SFC New Holdings from purchasing any
exchange notes in the event of a Change of Control or an Asset Sale and will
provide that certain change of control events with respect to SFC New Holdings
would constitute a default thereunder. In addition, the Senior Note indentures
will restrict SFC New Holdings ability to repurchase the Subordinated Notes. Any
future credit agreements or other financing agreements to which SFC New Holdings
becomes a party may contain similar provisions. In the event a Change of Control
occurs or a Senior Note Asset Sale Offer or a Subordinated Note Asset Sale Offer
is required at a time when SFC New Holdings is prohibited from purchasing
exchange notes, SFC New Holdings could seek the consent of its lenders to the
purchase of exchange notes or could attempt to refinance the borrowings that
contain such prohibition. If SFC New Holdings does not obtain such a consent or
repay such borrowings, SFC New Holdings will remain prohibited from
94
<PAGE>
purchasing exchange notes. In such case, SFC New Holdings failure to purchase
tendered exchange notes would constitute an Event of Default under the
applicable indenture.
Selection and Notice
If less than all of the exchange notes are to be redeemed at any time,
selection of exchange notes for redemption will be made by the applicable
trustee in compliance with the requirements of the principal national securities
exchange, if any, on which such exchange notes are listed, or, if such exchange
notes are not so listed, on a pro rata basis, by lot or by such method as such
trustee shall deem fair and appropriate, provided that no note of $1,000 or less
shall be redeemed in part. Notices of redemption shall be mailed by first class
mail at least 30 but not more than 60 days before the redemption date to each
holder of exchange notes to be redeemed at its registered address. If any
exchange note is to be redeemed in part only, the notice of redemption that
relates to such exchange note shall state the portion of the principal amount
thereof to be redeemed. A registered exchange note in principal amount equal to
the unredeemed portion thereof will be issued in the name of the holder thereof
upon cancellation of the original exchange note. On and after the redemption
date, interest ceases to accrue on the exchange notes or portions of them called
for redemption.
Certain Covenants
Restricted Payments
The indentures provide that SFC New Holdings will not, and will not permit
any of its Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any distribution on account of
SFC New Holdings or any of its Subsidiaries' Equity Interests (other
than dividends or distributions payable in Equity Interests (other
than Disqualified Stock) of SFC New Holdings or dividends or
distributions payable by a Subsidiary of SFC New Holdings to SFC New
Holdings or any Wholly Owned Subsidiary of SFC New Holdings);
(ii) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of SFC New Holdings or any Subsidiary or other Affiliate
of SFC New Holdings (other than any such Equity Interests owned by
SFC New Holdings or any Wholly Owned Subsidiary of SFC New
Holdings);
(iii) purchase, redeem, defease or otherwise acquire or retire for value
any Indebtedness of SFAC New Holdings or any Indebtedness that is
subordinated to the 11 1/4% Senior Notes, the 12 1/8% Senior Notes
or the Subordinated Notes, as the case may be; 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 such
Restricted Payment:
95
<PAGE>
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) SFC New Holdings 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 the covenant
entitled "Incurrence of Indebtedness and Issuance of Preferred
Stock"; and
(c) such Restricted Payment, together with the aggregate of all
other Restricted Payments made by SFC New Holdings and its
Subsidiaries after the date of the indentures (including all
Restricted Payments permitted by the next succeeding paragraph
except clauses (iv) and (vii) thereof and, to the extent
deducted in determining the Consolidated Net Income of SFC New
Holdings in clause (x) below, clause (vi) thereof), is less
than the sum of
(x) 50% of the Consolidated Net Income of SFC New Holdings
for the period (taken as one accounting period) from the
date of the indentures to the end of SFC New Holdings
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, 100% of such deficit),
plus
(y) 100% of the aggregate Net Proceeds received by SFC New
Holdings since the date of the indentures (excluding any
proceeds received on such date in connection with the
Transaction) from the issue or sale of Equity Interests
of SFC New Holdings (other than Equity Interests sold to
a Subsidiary of SFC New Holdings and other than
Disqualified Stock) or any debt security of SFC New
Holdings that is convertible into or exchangeable for
any Equity Interest of SFC New Holdings (other than
Disqualified Stock) that has been so converted or
exchanged, plus
(z) 100% of any common equity capital contribution received
by SFC New Holdings since the date of the indentures.
The foregoing provisions do 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 the indentures;
96
<PAGE>
(ii) the redemption, repurchase, retirement or other acquisition of any
of SFC New Holdings Equity Interests or Indebtedness subordinated in
right of payment to the applicable exchange notes of SFC New
Holdings in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Subsidiary of SFC New
Holdings) of other Equity Interests of SFC New Holdings (other than
any Disqualified Stock);
(iii) the repurchase, redemption or other acquisition or retirement for
value (or the payment of a dividend to SFAC New Holdings for such
repurchase, redemption or other acquisition or retirement for value)
of any Equity Interests of SFC New Holdings, SFAC New Holdings or
any Subsidiary of SFC New Holdings held by any member of SFC New
Holdings (or any of its Subsidiaries') management; provided,
however, that the aggregate price paid since the date of the
indentures for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed an amount equal to $5 million plus
the aggregate cash proceeds received by SFC New Holdings or any
Subsidiary of SFC New Holdings from any reissuance of Equity
Interests by SFC New Holdings or such Subsidiary to members of
management of SFC New Holdings and its Subsidiaries;
(iv) Permitted Refinancings (as defined below) of Indebtedness
subordinated in right of payment to the applicable New Notes;
(v) payments to SFAC New Holdings to reimburse it for its out-of-pocket
administrative expenses in an aggregate amount not to exceed $1
million in any fiscal year;
(vi) payments to Specialty Foods Acquisition Corp. and/or SFAC New
Holdings pursuant to the Tax Sharing Agreements as in effect on the
date of the indentures to the extent that Specialty Foods
Acquisition Corp. and/or SFAC New Holdings is actually required to
make cash outlays in connection therewith; and
(vii) payments or distributions to Specialty Foods in an aggregate amount
equal to the interest required to be paid by Specialty Foods from
time to time on any of its outstanding SFC Notes.
Not later than the date of making any Restricted Payment (other than
Restricted Payments pursuant to clauses (iv), (v) and (vi) above), SFC New
Holdings shall deliver to the applicable trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by the covenant "Restricted Payments" were
computed, which calculations may be based upon SFC New Holdings latest available
financial statements.
97
<PAGE>
Incurrence of Indebtedness and Issuance of Preferred Stock
The indentures provide that SFC New Holdings will not, and will not permit
any of its Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guaranty or otherwise become directly or indirectly liable with respect
to (collectively, "incur") any Indebtedness (including Acquired Debt), and SFC
New Holdings will not issue any Disqualified Stock and will not permit any of
its Subsidiaries to issue any shares of preferred stock; provided, however, that
SFC New Holdings may incur Indebtedness or issue shares of Disqualified Stock,
and Subsidiaries of SFC New Holdings may incur up to $10 million in aggregate
principal amount of Indebtedness at any time outstanding, if:
(i) the Fixed Charge Coverage Ratio for SFC New Holdings 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 2.75 to
1 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; and
(ii) in the case of any incurrence of additional Indebtedness of
SFC New Holdings, such Indebtedness is unsecured and
subordinated or pari passu in right of payment to the Senior
Notes and has a Weighted Average Life to Maturity that is
greater than the remaining Weighted Average Life to Maturity
of each of the 11 1/4% Senior Notes and the 12 1/8% Senior
Notes.
The foregoing limitations do not apply to:
(a) the incurrence by SFC New Holdings of Senior Term Debt in an
aggregate principal amount at any time outstanding not to exceed an
amount equal to $315 million less the aggregate amount of all
repayments, optional or mandatory, of the principal of any Senior
Term Debt (other than repayments that are immediately reborrowed)
that have been made since the date of Specialty Foods' indentures
(provided, however, that Subsidiaries of SFC New Holdings shall not
be permitted to guarantee the Senior Term Debt);
(b) the incurrence by SFC New Holdings or its Subsidiaries of Senior
Revolving Debt (and guarantees thereof by SFC New Holdings and its
Subsidiaries) in an aggregate principal amount at any time
outstanding not to exceed an amount equal to $125 million less the
aggregate amount of all proceeds of sales or other dispositions of
assets applied to permanently reduce the commitments with respect to
such Indebtedness pursuant to the "Limitation on Asset Sales"
covenant;
98
<PAGE>
(c) the incurrence by SFC New Holdings and its Subsidiaries of the
Existing Indebtedness;
(d) the incurrence by SFC New Holdings of Indebtedness represented by
the 11 1/4% Senior Notes, the 12 1/8% Senior Notes and the
Subordinated Notes;
(e) the incurrence by SFC New Holdings or any of its Subsidiaries 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 used in the business
of SFC New Holdings or such Subsidiary, in an aggregate principal
amount not to exceed $5 million at any time outstanding;
(f) the incurrence by SFC New Holdings or any of its Subsidiaries of
Indebtedness issued in exchange for, or the proceeds of which are
used to extend, refinance, renew, replace, defease or refund,
Indebtedness referred to in clauses (c), (d) or (e) above or
previously incurred under this clause (f) (the "Refinancing
Indebtedness"); provided, however, that
(1) the principal amount of such Refinancing Indebtedness shall
not exceed the aggregate principal amount, tender or
prepayment premium and unpaid interest on the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of reasonable expenses incurred in connection
therewith);
(2) any Refinancing Indebtedness incurred by any Subsidiary shall
only extend, refinance, renew, replace, defease or refund
Indebtedness of such Subsidiary or any Wholly Owned Subsidiary
of SFC New Holdings;
(3) the Refinancing Indebtedness shall have a Weighted Average
Life to Maturity equal to or greater than either
(x) the remaining Weighted Average Life to Maturity of the
Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded or
(y) the remaining Weighted Average Life to Maturity of the
applicable exchange notes; and
(4) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of
payment to the 11 1/4% Senior Notes, the 12 1/8% Senior Notes
or the Subordinated Notes, the Refinancing Indebtedness shall
be subordinated in right of payment to the notes on terms at
least as favorable to the holders of the exchange notes as
those contained in the documentation
99
<PAGE>
governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded (any such extension,
refinancing, renewal, replacement, defeasance or refunding, a
"Permitted Refinancing");
(g) intercompany Indebtedness between or among SFC New Holdings and any
of its Wholly Owned Subsidiaries;
(h) the incurrence by SFC New Holdings or 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 the indentures to be outstanding;
and
(i) the incurrence by SFC New Holdings of Indebtedness (in addition to
Indebtedness permitted by any other clause of this paragraph) in an
aggregate principal amount at any time outstanding not to exceed the
sum of (A) $35 million plus (B) up to $40 million of permanent
reductions in commitments for Senior Revolving Debt (other than
pursuant to the mandatory repayment provisions thereof) made since
the date of the indentures.
Liens
The indentures provide that neither SFC New Holdings nor any of its
Subsidiaries may directly or indirectly create, incur, assume or suffer to exist
any Lien 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.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The indentures provide that SFC New Holdings will not, and will 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 (other than
encumbrances or restrictions imposed by law or judicial or regulatory action) if
such encumbrance or restriction would by its terms prohibit or limit any
Subsidiary from:
(a) (i) paying dividends or making any other distributions to SFC
New Holdings or any of its Subsidiaries (A) on its Capital
Stock or (B) with respect to any other interest or
participation in, or measured by, its profits or
(ii) paying any indebtedness owed to SFC New Holdings or any of its
Subsidiaries;
(b) making loans or advances to SFC New Holdings or any of its
Subsidiaries; or
100
<PAGE>
(c) transferring any of its properties or assets to SFC New Holdings or
any of its Subsidiaries, except for such encumbrances or
restrictions existing under or by reasons of:
(i) Existing Indebtedness as in effect on the date of the
indentures;
(ii) the Term Loan Agreement and the Revolving Credit Agreement as
in effect as of the date of the indentures;
(iii) the indentures, the 11 1/4% Senior Notes, the 12 1/8% Senior
Notes and the Subordinated Notes;
(iv) applicable law;
(v) any instrument governing Indebtedness or Capital Stock of a
person acquired by SFC New Holdings 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 anticipation 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;
(vi) customary non-assignment provisions in leases entered into in
the ordinary course of business;
(vii) with respect to clause (c) above, purchase money obligations
for property acquired in the ordinary course of business;
provided that such restrictions are only applicable to the
property acquired through such purchase money obligations;
(viii) permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such
Refinancing Indebtedness are no more restrictive than those
contained in the agreements governing the Indebtedness being
refinanced; or
(ix) any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or
refinancings of the Indebtedness or the Capital Stock
referred to in the foregoing clauses (i), (ii) or (v);
provided that such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or
refinancings are not more restrictive with respect to such
dividend and other payment restrictions than those contained
in the applicable instrument governing such Indebtedness or
Capital Stock (as the case may be) as in effect on the date
of the indentures.
101
<PAGE>
Merger, Consolidation or Sale of Assets
The indentures provide that SFC New Holdings may not consolidate or merge
with or into (whether or not SFC New Holdings 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) SFC New Holdings is the surviving corporation or the entity or the
person formed by or surviving any such consolidation or merger (if
other than SFC New Holdings) 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 SFC New Holdings) 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 SFC
New Holdings pursuant to a supplemental indenture in a form
reasonably satisfactory to the applicable trustee, under the
applicable exchange notes and the applicable indentures;
(iii) immediately after such transaction no Default or Event of Default
exists; and
(iv) SFC New Holdings or any entity or person formed by or surviving any
such consolidation or merger, or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been
made (A) shall have Consolidated Net Worth (immediately after the
transaction) equal to or greater than the Consolidated Net Worth of
SFC New Holdings immediately preceding the transaction and (B)
shall, 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 the covenant entitled "Incurrence
of Indebtedness and Issuance of Preferred Stock."
Transactions with Affiliates
The indentures provide that SFC New Holdings will not, and will not permit
any of its Subsidiaries to, in one or a series of related transactions, sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (including the Accounts Receivable Subsidiary and its Subsidiaries)
(each of the foregoing, an "Affiliate Transaction"), unless:
102
<PAGE>
(a) such Affiliate Transaction is on terms that are no less favorable to
SFC New Holdings or the relevant Subsidiary than those that would
have been obtained in a comparable transaction by SFC New Holdings
or such Subsidiary with an unrelated person; and
(b) SFC New Holdings delivers to the trustees:
(i) with respect to (x) any Affiliate Transaction constituting the
purchase or sale of goods and services in the ordinary course
of business in excess of $10 million or (y) any other
Affiliate Transaction involving aggregate payments in excess
of $500,000, a resolution of the Board of Directors set forth
in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (a) above and such Affiliate
Transaction has been approved by a majority of the
disinterested members of the Board of Directors; and
(ii) with respect to any Affiliate Transaction (other than the
purchase or sale of goods and services in the ordinary course
of business) involving aggregate payments in excess of $20
million, an opinion as to the fairness to SFC New Holdings or
such Subsidiary from a financial point of view issued by an
investment banking firm of national standing;
provided, however, that:
(A) any employment agreement entered into by SFC New Holdings or any of
its Subsidiaries in the ordinary course of business and consistent
with business practices of companies similarly situated;
(B) transactions between or among SFC New Holdings and/or its Wholly
Owned Subsidiaries;
(C) transactions permitted by the provisions of the indentures described
above under the "Restricted Payments" described above;
(D) financial advisory fees payable pursuant to financial advisory
agreements as in effect on the date of the indentures;
(E) transactions permitted by the "Accounts Receivable Subsidiary"
covenant described below; and
(F) transactions between SFC New Holdings or any of its Subsidiaries on
the one hand, and DLJ on the other hand, involving the provision of
financial, consulting or underwriting services by DLJ, provided that
the fees payable to DLJ do not exceed the usual and customary fees
of DLJ for similar services,
103
<PAGE>
in each case, shall not be deemed Affiliate Transactions.
Accounts Receivable Subsidiary
The indentures provide that SFC New Holdings:
(a) may, and may permit any of its Subsidiaries to, notwithstanding the
provisions of the "Restricted Payments" covenant described above, make
Investments in the Accounts Receivable Subsidiary:
(i) the proceeds of which are applied within five Business Days of
the making thereof solely to finance:
(A) the purchase of accounts receivable of SFC New Holdings
and its Subsidiaries (provided that the aggregate amount
of Investments pursuant to this clause (i)(A) made since
the date of the indentures (including any such
Investments made concurrently with the consummation of
the Transaction) will not exceed $56 million, plus the
amount of any return of capital (excluding payment of
dividends) or any repayment of the principal amount of
any Indebtedness constituting such Investments by the
Accounts Receivable Subsidiary since the date of the
indentures); or
(B) payments required in connection with the termination of
all then existing arrangements relating to the sale of
accounts receivable or participation interests therein
by the Accounts Receivable Subsidiary (provided that the
Accounts Receivable Subsidiary shall receive cash, Cash
Equivalents and accounts receivable having an aggregate
fair market value not less than the amount of such
payments in exchange therefor); and
(ii) in the form of Accounts Receivable Subsidiary Notes to the
extent permitted by clause (b) below;
(b) may not, and may not permit any of its Subsidiaries to, sell accounts
receivable to the Accounts Receivable Subsidiary except for consideration in an
amount not less than that which would be obtained in an arm's length transaction
and solely in the form of cash or Cash Equivalents; provided that the Accounts
Receivable Subsidiary may pay the purchase price for any such accounts
receivable in the form of Accounts Receivable Subsidiary Notes so long as, after
giving effect to the issuance of any such Accounts Receivable Subsidiary Notes,
the aggregate principal amount of all Accounts Receivable Subsidiary Notes
outstanding shall not exceed 10% of the aggregate purchase price paid for all
outstanding accounts receivable purchased by the Accounts Receivable Subsidiary
since the date of the indentures (and not written off or required to be written
off in accordance with the normal business practice of the Accounts Receivable
Subsidiary);
104
<PAGE>
(c) may not permit the Accounts Receivable Subsidiary to sell any accounts
receivable purchased from SFC New Holdings and its Subsidiaries or participation
interests therein to any other person except on an arm's length basis and solely
for consideration in the form of cash or Cash Equivalents or certificates
representing undivided interests of a Receivables Trust; provided that the
Accounts Receivable Subsidiary may not sell such certificates to any other
person except on an arm's length basis and solely for consideration in the form
of cash or Cash Equivalents;
(d) may not, and may not permit any of its Subsidiaries to, enter into any
guarantee, subject any of their respective properties or assets (other than the
accounts receivable sold by them to the Accounts Receivable Subsidiary) to the
satisfaction of any liability or obligation or otherwise incur any liability or
obligation (contingent or otherwise), in each case, on behalf of the Accounts
Receivable Subsidiary or in connection with any sale of accounts receivable or
participation interests therein by or to the Accounts Receivable Subsidiary,
other than customary obligations relating to breaches of representations,
warranties, covenants and other agreements of SFC New Holdings or any of its
Subsidiaries with respect to the accounts receivable sold by SFC New Holdings or
any of its Subsidiaries to the Accounts Receivable Subsidiary or with respect to
the servicing thereof as set forth in the Accounts Receivable Agreements as in
effect on the date of the indentures or in any replacement or substitute
agreement, so long as the obligations set forth in such replacement or
substitute agreement are no more burdensome in any material respect than those
contained in the Accounts Receivable Agreements as in effect on the date of the
indentures; provided that neither SFC New Holdings nor any of its Subsidiaries
shall at any time guarantee or be otherwise liable for the collectibility of
accounts receivable sold by them;
(e) may not permit the Accounts Receivable Subsidiary to engage in any
business or transaction other than the purchase and sale of accounts receivable
or participation interests therein of SFC New Holdings and its Subsidiaries and
activities incidental thereto;
(f) may not permit the Accounts Receivable Subsidiary to incur any
Indebtedness other than the Accounts Receivable Subsidiary Notes, Indebtedness
owed to SFC New Holdings and Non-Recourse Indebtedness; provided that the
aggregate principal amount of all such Indebtedness of the Accounts Receivable
Subsidiary shall not exceed the book value of its total assets as determined in
accordance with GAAP;
(g) shall cause the Accounts Receivable Subsidiary to remit to SFC New
Holdings on a monthly basis as a distribution, all available cash and Cash
Equivalents not held in a collection account pledged to acquirors of accounts
receivable or participation interests therein, to the extent not applied to (x)
pay interest or principal on the Accounts Receivable Subsidiary Notes or any
Indebtedness of the Accounts Receivable Subsidiary owed to SFC New Holdings, (y)
pay or maintain reserves for reasonable operating expenses of the Accounts
Receivable Subsidiary or to satisfy reasonable minimum operating capital
requirements or (z) to finance the purchase of additional accounts receivable of
SFC New Holdings and its Subsidiaries; and
105
<PAGE>
(h) may not, and may not permit any of its Subsidiaries to, sell accounts
receivable to, or enter into any other transaction with or for the benefit of,
the Accounts Receivable Subsidiary upon the occurrence of certain events of
bankruptcy or insolvency with respect to the Accounts Receivable Subsidiary.
Subordinated Debt
The Subordinated Note indenture provides that SFC New Holdings will not
incur, create, issue, assume, guarantee or otherwise become directly or
indirectly liable for any Indebtedness that is subordinate or junior in right of
payment to any Senior Debt and senior in any respect in right of payment to the
Subordinated Notes.
Reports
Whether or not required by the rules and regulations of the SEC, so long
as any exchange notes are outstanding, SFC New Holdings will furnish to the
holders of exchange notes 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 SFC New Holdings 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 SFC New Holdings certified independent accountants. In addition, SFC New
Holdings will provide in each such quarterly and annual report such income
statement information as its Board of Directors determines in good faith to be
appropriate with respect to each of its major product groupings. In addition,
whether or not required by the rules and regulations of the SEC, SFC New
Holdings will file a copy of all such information with the SEC for public
availability and make such information available to prospective purchasers of
the exchange notes who request it in writing. SFC New Holdings will also furnish
to holders of the exchange notes and prospective purchasers of the exchange
notes designated by holders of exchange notes that are Transfer Restricted
Securities (as defined below), upon their request, the information required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act until such
time as SFC New Holdings either exchanges the exchange notes for new notes or
has registered the exchange notes for resale under the Securities Act.
Events of Default and Remedies
The Senior Note indentures provide that each of the following constitutes
an Event of Default:
(i) default for 30 days in the payment when due of interest, Additional
Payments or Liquidated Damages on the 11 1/4% Senior Notes or the
12 1/8% Senior Notes, as the case may be;
(ii) default in payment when due of principal of, or premium, if any, on
the 11 1/4% Senior Notes or the 12 1/8% Senior Notes, as the case
may be, when the same becomes due and payable at maturity, upon
redemption (including in connection with an offer to purchase) or
otherwise;
106
<PAGE>
(iii) failure by SFC New Holdings to comply with the provisions described
above under the captions "Asset Sale" or "Merger, Consolidation or
Sale of Assets," or failure by SFC New Holdings for 15 days to
comply with the provisions described above under the captions
"Restricted Payments" or "Incurrence of Indebtedness or Preferred
Stock;"
(iv) failure by SFC New Holdings for 60 days after notice to SFC New
Holdings by the applicable trustee or the holders of at least 25% in
principal amount of the 11 1/4% Senior Notes or the 12 1/8% Senior
Notes then outstanding to comply with any other agreements in the
Senior Note indentures or the 11 1/4% Senior Notes or the 12 1/8%
Senior 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 SFC New Holdings or any of
its Subsidiaries (or the payment of which is guaranteed by SFC New
Holdings or any of its Subsidiaries), whether such Indebtedness or
guarantee now exists, or is created after the date of the Senior
Note indentures, which default (a) is caused by a failure to pay
when due principal or interest on such Indebtedness within the grace
period provided in such Indebtedness (a "Payment Default") or (b)
results in the acceleration of such Indebtedness prior to its
express maturity and, in each case, the principal amount of such
Indebtedness, together with the principal amount of any other
Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $10 million or
more;
(vi) failure by SFC New Holdings, any of its Significant Subsidiaries or
any group of Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary, to pay any final judgment of or judgments
(other than any judgment to the extent a reputable insurance company
has accepted liability) aggregating in excess of $10 million, which
judgments remain undischarged or unstayed for a period of 60 days;
and
(vii) certain events of bankruptcy or insolvency with respect to SFC New
Holdings, any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary.
The Subordinated Note indenture provides that each of the following
constitutes an Event of Default:
(i) default for 30 days in the payment when due of interest on the
Subordinated Notes, whether or not prohibited by the subordination
provisions of the Subordinated Note indenture;
(ii) default in payment when due of principal of, or premium, if
any, on the Subordinated Notes when the same becomes due and payable at
maturity, upon redemption (including in connection with an offer to
purchase) or otherwise,
107
<PAGE>
whether or not prohibited by the subordination provisions of the
Subordinated Note indenture;
(iii) failure by SFC New Holdings to comply with the provisions described
above under the captions "Asset Sale" or "Merger, Consolidation or
Sale of Assets" or failure by SFC New Holdings for 15 days to comply
with the provisions described above under the captions "Restricted
Payments" or "Incurrence of Indebtedness or Preferred Stock";
(iv) failure by SFC New Holdings for 60 days after notice to SFC New
Holdings by the Subordinated Note trustee or the holders of at least
25% in principal amount of the Subordinated Notes then outstanding
to comply with any other agreements in the Subordinated Note
indenture or the Subordinated 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 SFC New Holdings or any of
its Subsidiaries (or the payment of which is guaranteed by SFC New
Holdings or any of its Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the
Subordinated Note indenture, which default:
(a) is caused by a failure to pay at final maturity principal of
such Indebtedness within the grace period provided in such
Indebtedness (a "Final Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to its
express final maturity and, in each case, either:
(1) the principal amount of such Indebtedness, together with
the principal amount of any other Indebtedness under
which there has been a Final Payment Default or the
maturity of which has been so accelerated, aggregates
$10 million or more, and such Final Payment Default or
acceleration shall not have been cured or rescinded
within 10 days after the occurrence thereof;
(2) the principal amount of such Indebtedness, together with
the principal amount of any other Indebtedness under
which there has been a Final Payment Default or the
maturity of which has been so accelerated, aggregates
$50 million or more; or
(3) a Final Payment Default or acceleration shall have
occurred with respect to the Senior Term Debt, the
Senior Revolving Debt, the 11 1/4% Senior Notes or the
12 1/8% Senior Notes;
108
<PAGE>
(vi) failure by SFC New Holdings, any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary, to pay any
final judgment or judgments (other than any judgment to the
extent a reputable insurance company has accepted liability)
aggregating in excess of $10 million, which judgments remain
undischarged for a period of 60 days; and
(vii) certain events of bankruptcy or insolvency with respect to SFC
New Holdings, any of its Significant Subsidiaries or any group
of Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary.
If any Event of Default occurs and is continuing, the applicable trustee
or the holders of at least 25% in principal amount of the then outstanding 11
1/4% Senior Notes, the 12 1/8% Senior Notes or Subordinated Notes may declare
all the 11 1/4% Senior Notes, the 12 1/8% Senior Notes or Subordinated Notes, as
the case may be, to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to SFC New Holdings, any Significant
Subsidiary or any group of Subsidiaries that, taken as a whole, would constitute
a Significant Subsidiary, all outstanding exchange notes will become due and
payable without further action or notice. The Subordinated Note indenture will
provide that so long as any Designated Senior Debt (as defined therein) is
outstanding, such declaration shall not become effective until the earlier of
(x) the day which is five Business Days after the receipt by Representatives of
Designated Senior Debt of such written notice of acceleration (which notice may
only be given during the continuation of an Event of Default) or (y) the date of
acceleration of any Designated Senior Debt. Holders of the exchange notes may
not enforce the indentures or the exchange notes except as provided in the
indentures. Subject to certain limitations, holders of a majority in principal
amount of the then outstanding 11 1/4% Senior Notes, the 12 1/8% Senior Notes or
Subordinated Notes may direct the applicable trustee in its exercise of any
trust or power. Each trustee may withhold from holders of the applicable
exchange 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.
If an Event of Default occurs by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of SFC New Holdings with the
intention of avoiding payment of the premium, if any, that SFC New Holdings
would have had to pay if SFC New Holdings then had elected to redeem any
exchange notes pursuant to the optional redemption provisions of the applicable
indenture, an equivalent premium shall also become and be immediately due and
payable to the extent permitted by law.
If an Event of Default occurs on or after October 1, 1999 by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of SFC New
Holdings with the intention of avoiding payment of the premium, if any, that SFC
New Holdings would have had to pay if SFC New Holdings then had elected to
redeem the 12 1/8% Senior Notes pursuant to the optional redemption provisions
of the 12 1/8% Senior Note indenture, an equivalent premium shall also become
and be immediately due and payable to the extent
109
<PAGE>
permitted by law. If an Event of Default occurs prior to October 1, 1999 by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of SFC New Holdings with the intention of avoiding the prohibition on redemption
of the 12 1/8% Senior Notes prior to such date, then the premium of 106.954%
(expressed as a percentage of the principal amount of such 12 1/8% Senior Notes)
shall also become immediately due and payable to the extent permitted by law.
The holders of a majority in aggregate principal amount of the applicable
exchange notes then outstanding by notice to the applicable trustee may on
behalf of the holders of all of the 11 1/4% Senior Notes, 12 1/8% Senior Notes
or Subordinated Notes, as the case may be, waive any existing Default or Event
of Default and its consequences under the applicable indenture (including
annulling a declaration of acceleration of maturity) except a continuing Default
or Event of Default in the payment of interest on, or the principal of, such
exchange notes.
SFC New Holdings is required to deliver to each trustee annually a
statement regarding compliance with the applicable indenture, and SFC New
Holdings is required upon becoming aware of any Default or Event of Default, to
deliver to each trustee a statement specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No past, present or future director, officer, employee, incorporator or
stockholder of SFC New Holdings, as such, shall have any liability for any
obligations of SFC New Holdings under the exchange notes or the indentures or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each holder of exchange notes by accepting an exchange note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the exchange note. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the SEC that such a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
SFC New Holdings may, at its option and at any time, elect to have its
obligations discharged with respect to the outstanding 11 1/4% Senior Notes, the
12 1/8% Senior Notes or Subordinated Notes ("Legal Defeasance"). Legal
Defeasance means that SFC New Holdings will be deemed to have paid and
discharged the entire indebtedness represented by the outstanding 11 1/4% Senior
Notes, the 121/8% Senior Notes or Subordinated Notes, as the case may be, except
for:
(i) the rights of holders of such outstanding exchange notes to receive,
solely from the trust fund described below, payments in respect of
the principal of, premium, if any, and interest on such exchange
notes when such payments are due;
(ii) SFC New Holdings obligations with respect to such exchange notes
concerning issuing temporary exchange notes, registration of
exchange
110
<PAGE>
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;
(iii) the rights, powers, trust, duties and immunities of the applicable
trustee, and SFC New Holdings obligations in connection therewith;
and
(iv) the Legal Defeasance provisions of the applicable indenture.
In addition, SFC New Holdings may, at its option and at any time, elect to have
the obligations of SFC New Holdings released with respect to certain covenants
that are described in the indentures ("Covenant Defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or Event
of Default with respect to the 11 1/4% Senior Notes, the 12 1/8% Senior Notes or
the Subordinated Notes, as the case may be. In the event Covenant Defeasance
occurs, certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the 11 1/4% Senior
Notes, the 12 1/8% Senior Notes or the Subordinated Notes, as the case may be.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(i) SFC New Holdings must irrevocably deposit with the applicable
trustee or Paying Agent, in trust, for the benefit of the holders of
the 11 1/4% Senior Notes, the 12 1/8% Senior Notes or the
Subordinated Notes, as the case may be, cash in U.S. 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, if any, and interest on such exchange notes
on the stated maturity or on the applicable redemption date, as the
case may be, of such principal or installment of principal of,
premium, if any, or interest on such outstanding exchange notes;
(ii) in the case of Legal Defeasance, SFC New Holdings shall have
delivered to the applicable trustee an opinion of counsel in the
United States reasonably acceptable to such trustee confirming that
(A) SFC New Holdings has received from, or there has been published
by the IRS a ruling or (B) since the date of the indentures, 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 such outstanding exchange
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;
111
<PAGE>
(iii) in the case of Covenant Defeasance, SFC New Holdings shall have
delivered to the applicable trustee an opinion of counsel in the
United States reasonably acceptable to such trustee confirming that
the holders of such outstanding exchange 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;
(iv) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit;
(v) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, the
applicable indenture, the Term Loan Agreement, the Revolving Credit
Agreement or any other material agreement or instrument to which SFC
New Holdings is a party or by which SFC New Holdings is bound;
(vi) SFC New Holdings shall have delivered to the applicable 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;
(vii) SFC New Holdings shall have delivered to the applicable trustee an
Officers' Certificate stating that the deposit was not made by SFC
New Holdings with the intent of preferring the holders of such
exchange notes over the other creditors of SFC New Holdings or with
the intent of defeating, hindering, delaying or defrauding creditors
of SFC New Holdings or others; and
(viii) SFC New Holdings shall have delivered to the applicable trustee an
Officers' Certificate and an opinion of counsel, each stating that
all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
Transfer and Exchange
A holder may transfer or exchange notes in accordance with the indentures.
The Registrar and the applicable trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and SFC New
Holdings may require a holder to pay any taxes and fees required by law or
permitted by the indentures. SFC New Holdings is not required to transfer or
exchange any exchange note selected for redemption. Also, SFC New Holdings is
not required to transfer or exchange any 11 1/4%
112
<PAGE>
Senior Note, 12 1/8% Senior Note or Subordinated Note for a period of 15 days
before a selection of such exchange notes to be redeemed.
The registered holder of an exchange note will be treated as the owner of
it for all purposes.
Amendment, Supplement and Waiver
Except as provided in the next succeeding paragraphs, the Senior Note
indentures and the Senior Notes or the Subordinated Note indenture and the
Subordinated Notes, may be amended or supplemented with the consent of the
holders of at least a majority in principal amount of the applicable exchange
notes then outstanding (including consents obtained in connection with a tender
offer or exchange offer for exchange notes), and any existing default or
compliance with any provision of the Senior Note indentures and the Senior Notes
or the Subordinated Note indenture and the Subordinated Notes, may be waived
with the consent of the holders of a majority in principal amount of the
applicable, then outstanding exchange notes (including consents obtained in
connection with a tender offer or exchange offer for such exchange notes).
Without the consent of each holder affected, an amendment or waiver may
not (with respect to any exchange note held by a non-consenting holder of
exchange notes):
(i) reduce the principal amount of exchange notes whose holders must
consent to an amendment, supplement or waiver,
(ii) reduce the principal of or change the fixed maturity of any exchange
note or alter the provisions with respect to the redemption of the
New Notes;
(iii) reduce the rate of or change the time for payment of interest on any
exchange note;
(iv) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the exchange notes (except a
rescission of acceleration of the 11 1/4% Senior Notes, the 12 1/8%
Senior Notes or Subordinated Notes by the holders of at least a
majority in aggregate principal amount of the Senior Notes or
Subordinated Notes, as the case may be, and a waiver of the payment
default that resulted from such acceleration);
(v) make any exchange note payable in money other than that stated in
the exchange notes;
(vi) make any change in the provisions of the indentures relating to
waivers of past Defaults or the rights of holders of exchange notes
to receive payments of principal of or interest on the exchange
notes;
(vii) waive a redemption payment with respect to any exchange note;
113
<PAGE>
(viii) make any change in the subordination provisions of the Subordinated
Note indenture that adversely affects any holder of Subordinated
Notes; or
(viii) make any change in the foregoing amendment and waiver provisions.
Without the consent of at least 75% in principal amount of the 11 1/4%
Senior Notes, the 12 1/8% Senior Notes or Subordinated Notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for such exchange notes), no waiver or amendment to the applicable indenture may
make any change in the provisions described above under the caption "Change of
Control" that adversely affect the rights of any holder of such notes.
Notwithstanding the foregoing, without the consent of any holder of
exchange notes, SFC New Holdings and the trustees may amend or supplement the
indentures or the exchange notes to cure any ambiguity, defect or inconsistency,
to provide for uncertificated exchange notes in addition to or in place of
certificated exchange notes, to provide for the assumption of SFC New Holdings
obligations to holders of the exchange notes in the case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the holders of the exchange notes or that does not adversely affect
the legal rights under the indentures of any such holder.
Concerning the Trustees
The indentures contain certain limitations on the rights of the trustees,
should a trustee become a creditor of SFC New Holdings, 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 trustees will be permitted to
engage in other transactions; however, if any trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue or resign.
The holders of a majority in principal amount of the then outstanding
Senior Notes or Subordinated Notes will have the right to direct the time,
method and place of conducting any proceeding for exercising any remedy
available to the applicable trustee, subject to certain exceptions. The
indentures provide that in case an Event of Default shall occur (which shall not
be cured), the trustees 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 trustees will be under no obligation to exercise any of
their rights or powers under the indentures at the request of any holder of
exchange notes, unless such holder shall have offered to the applicable 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 indentures.
Reference is made to the indentures for a full disclosure of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
114
<PAGE>
"Accounts Receivable Agreements" means
o the Pooling Agreement dated as of November 16, 1994, as amended,
among the Accounts Receivable Subsidiary, SFC New Holdings or
Specialty Foods, as Master Servicer, and The Chase Manhattan Bank,
as trustee on behalf of the Certificate holders;
o the Series 1998-1 Supplement to the Pooling Agreement, dated as of
March 31, 1998, as amended, among the Accounts Receivable
Subsidiary, SFC New Holdings or Specialty Foods, as Master Servicer,
and The Chase Manhattan Bank, as trustee on behalf of the
Certificate holders;
o the Servicing Agreement dated as of November 16, 1994, as amended,
among the Accounts Receivable Subsidiary, SFC New Holdings or
Specialty Foods, as Master Servicer, certain of the subsidiaries of
SFC New Holdings, as servicers, and The Chase Manhattan Bank, as
trustee;
o the Amended and Restated Receivables Sale Agreement, dated as of
November 16, 1994, as amended, among the Accounts Receivable
Subsidiary, SFC New Holdings or Specialty Foods, as Master Servicer,
and certain of the subsidiaries of SFC New Holdings, as sellers; and
o any related instruments and agreements executed in connection
therewith.
"Accounts Receivable Discount" means, with respect to any account
receivable sold by SFC New Holdings or any of its Subsidiaries to the Accounts
Receivable Subsidiary,
(a) the difference between (i) the face amount of such account
receivable and (ii) the aggregate amount of consideration (after
giving effect to any subsequent adjustments thereto) received upon
the sale of such account receivable (with any Accounts Receivable
Subsidiary Notes received as consideration in such sale being valued
at the principal amount thereof for this purpose), less
(b) the amount of such difference that is calculated on the basis of, or
with reference to, (i) the historical bad debt allowance or accounts
receivable write-offs of the seller of such account receivable, (ii)
fees and other operating expenses of the Accounts Receivable
Subsidiary payable to parties other than SFC New Holdings and its
Subsidiaries and acquirors of accounts receivable or participation
interests therein (in their capacity as acquirors) to the extent
that such fees and expenses do not exceed such amounts as would be
obtained in an arm's length transaction and (iii) credits to the
obligor of such account receivable applied to the face amount of
such account receivable in respect of discount expense (including
prompt payment and volume discounts), rebates, refunds, promotional
allowances, billing error expense and similar adjustments and
allowances made by the seller of such account receivable.
115
<PAGE>
"Accounts Receivable Subsidiary" means a wholly owned subsidiary of SFC
New Holdings designated as such by SFC New Holdings,
(a) that has total assets at the time of such designation with a book
value of $100,000 or less, and
(b) with which neither SFC New Holdings nor any other Subsidiary of SFC
New Holdings has any obligation (i) to subscribe for additional
shares of Capital Stock or other equity interests therein (other
than to finance the purchase of additional accounts receivable of
SFC New Holdings and its Subsidiaries) or (ii) to maintain or
preserve such Accounts Receivable Subsidiary's financial condition
or to cause it to achieve certain levels of operating results.
"Accounts Receivable Subsidiary Notes" means the notes to be issued by the
Accounts Receivable Subsidiary for the purchase of accounts receivable.
"Acquired Debt" means, with respect to any specified person, Indebtedness
of any other person existing at the time such other person merged with or into
or became a Subsidiary of such specified person, including Indebtedness incurred
in connection with, or in contemplation of, such other person merging with or
into or becoming a Subsidiary of 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, however
that
(i) beneficial ownership of 20% or more of the voting securities of a
person shall be deemed to be control;
(ii) no lender party to the Term Loan Agreement or the Revolving Credit
Agreement (or any of its affiliates) shall be deemed to be an
Affiliate of SFC New Holdings or any of its Subsidiaries solely by
virtue of being party to the Term Loan Agreement or the Revolving
Credit Agreement; and
(iii) an officer of a person shall not be deemed an Affiliate of such
person unless such officer directly or indirectly controls such
person.
"Business Day" means each day other than a Legal Holiday.
116
<PAGE>
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the liability in respect of a capital lease that would at such time
be required to be capitalized on the balance sheet in accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock, including,
without limitation, partnership interests.
"Cash Equivalents" means
(i) cash;
(ii) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof
having maturities of not more that 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 Term Loan
Agreement or the Revolving Credit Agreement or with any domestic
commercial bank having capital and surplus in excess of
$500,000,000;
(iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and
(iii) entered into with any financial institution meeting the
qualifications specified in clause (iii) above; and
(v) commercial paper issued by any lender party to the Term Loan
Agreement or the Revolving Credit Agreement (or the parent company
of any such lender) and commercial paper rated A-1 or the equivalent
thereof by Moody's Investors Service, Inc. and in each case maturing
within six months after the date of acquisition.
"Consolidated Cash Flow" means, with respect to any person for any period,
the Consolidated Net Income of such person for such period plus:
(a) 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 Consolidated Net Income), plus
(b) provision for taxes based on income or profits to the extent such
provision for taxes was included in computing Consolidated Net
Income, plus
(c) consolidated interest expense of such person for such period,
whether paid or accrued (including amortization of original issue
discount, non-cash interest payments and the interest component of
any payments associated
117
<PAGE>
with Capital Lease Obligations), to the extent such expense was
deducted in computing Consolidated Net Income, plus
(d) all depreciation, amortization (including amortization of goodwill
and other intangibles) and other non-cash charges (excluding any
non-cash charge constituting an extraordinary item of loss or
expense and any non-cash charge that requires an accrual of or a
reserve for cash charges for any future period) of such person for
such period to the extent such depreciation, amortization and other
non-cash charges were deducted in computing Consolidated Net Income,
plus
(e) one-third of all operating lease payments of such person paid or
accrued during such period, in each case, on a consolidated basis
and determined in accordance with GAAP, plus
(f) without duplication, the amount of Accounts Receivable Discount
attributable to sales of accounts receivable by such person and its
Subsidiaries to the Accounts Receivable Subsidiary during such
period to the extent such Account Receivable Discount was deduced in
computing Consolidated Net Income for such period.
"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 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
to the referent person or a Wholly Owned Subsidiary of the referent
person;
(ii) the Net Income of any Subsidiary of the referent person 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 (which 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 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, the sum of:
118
<PAGE>
(i) the consolidated equity of the common stockholders of such person
and its consolidated Subsidiaries, plus
(ii) the respective amounts reported on such person's most recent balance
sheet 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 the
indentures in the book value of any asset owned by such person
or a consolidated Subsidiary of such person;
(y) all investments 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, all of the foregoing determined in
accordance with GAAP.
"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.
"Disqualified Stock" means, with respect to the 11 1/4% Senior Notes, the
12 1/8% Senior Notes or the Subordinated Notes, any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the holder thereof, in whole or in part, on or prior
to the date on which the 11 1/4% Senior Notes, the 12 1/8% Senior Notes or the
Subordinated Notes, as the case may be, mature.
"85% Owned Subsidiary" of a person means any Subsidiary of such person at
least 85% of the outstanding Capital Stock or other ownership interests
(including at least 51% of the outstanding voting Capital Stock or other voting
ownership interests) of which are owned directly or indirectly by such person.
"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 SFC New Holdings and its
Subsidiaries (other than under the Term Loan Agreement, the Revolving Credit
Agreement and the indentures) in existence on the date of the indentures, until
such amounts are repaid.
119
<PAGE>
"First Tier Subsidiaries" means direct Wholly Owned Subsidiaries of SFC
New Holdings on the date of the applicable Note indentures and any such
subsidiaries acquired thereafter other than the Accounts Receivable Subsidiary.
"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 SFC New
Holdings or any of its Subsidiaries incurs or redeems any Indebtedness (other
than revolving credit borrowings) or issues or redeems preferred stock or
consummates an Asset Sale or any Material Acquisition subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the event for which the calculation of the Fixed Charge
Coverage Ratio is made, then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, guarantee or redemption of
Indebtedness, or such issuance or redemption of preferred stock, or the
consummation of such Asset Sale or such Material Acquisition, as if the same had
occurred at the beginning of the applicable period. For purposes of calculating
the Fixed Charge Coverage Ratio of SFC New Holdings for any period commencing
prior to the date of the recent restructuring of Specialty Foods and Specialty
Foods Acquisition Corp., which we refer to as the "Transaction," pro forma
effect shall be given to the Transaction and the financing thereof as if the
same had occurred at the beginning of such period.
"Fixed Charges" means, with respect to any person for any period, the sum
of
(a) consolidated interest expense of such person for such period,
whether paid or accrued, to the extent such expense was deducted in
computing Consolidated Net Income (including amortization of
original issue discount, non-cash interest payments and the interest
component of any payments associated with Capital Lease Obligations
but excluding amortization of deferred financing fees), plus
(b) the interest expense of any other person for such period with
respect to Indebtedness that is guaranteed by the referent person,
plus
(c) the product of
(i) all cash dividend payments (and non-cash dividend payments in
the case of a person that is a Subsidiary) on any series of
preferred stock of such person, times
(ii) 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, expressed as a
decimal, plus
(d) one-third of all operating lease payments of such person paid or
accrued during such period, in each case, on a consolidated basis
and in accordance with GAAP, plus
120
<PAGE>
(e) the amount of Accounts Receivable Discount attributable to sales of
accounts receivable by such person and its Subsidiaries to the
Accounts Receivable Subsidiary during such period.
"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 approved by a significant segment of the accounting profession,
which are in effect on the date of the indentures.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"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.
"Indebtedness" means, with respect to any person, the principal amount of
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
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property (including pursuant to capital leases) 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, and also includes, to the extent not otherwise included, the guarantee of
items that would be included within this definition.
"Investments" means, with respect to any person, all investments by such
person in other persons (including Affiliates) in the forms of loans (including
guarantees), advances or capital contributions (excluding commission, travel,
relocation 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 and all other items that are
or would be classified as investments on a balance sheet prepared in accordance
with GAAP.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in New York City or at a place of payment are authorized by law 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 for the intervening
period.
121
<PAGE>
"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).
"Marketable Securities" means, in connection with any Asset Sale, any
readily marketable equity or debt securities that are received by SFC New
Holdings or any Subsidiary of SFC New Holdings as consideration for such Asset
Sale and are
o traded on the New York Stock Exchange, the American Stock Exchange
or the National Association of Securities Dealers Automated
Quotation National Market System, and
o issued by a corporation that has outstanding one or more issues of
debt or preferred stock securities that are rated investment grade
by Moody's Investor Services, Inc. or Standard & Poor's Corporation;
provided, that in no event shall the excess of aggregate amount of securities of
any one such corporation held immediately following the consummation of any
Asset Sale by SFC New Holdings and its Subsidiaries over 10 times the average
daily trading volume of such securities during the 20 trading days immediately
preceding the consummation of such Asset Sale be deemed Marketable Securities.
"Material Acquisition" means any material acquisition of a business,
Capital Stock, property or assets or any other material transaction as a result
of which a person becomes a Subsidiary of SFC New Holdings. For the purposes of
this definition, an acquisition or other transaction shall be deemed "material"
if it has an aggregate value of $5 million or more.
"Net Income" means, with respect to any person, the net income (loss) of
such person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions), and
excluding any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by SFC New
Holdings or any of its Subsidiaries in respect of 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 secured by a Lien on the asset or assets the
subject of such
122
<PAGE>
Asset Sale and any reserve for adjustment in respect of the sale price of such
asset or assets.
"Non-Recourse Indebtedness" of any person means Indebtedness of such
person that:
o is not guaranteed by any other person (except a Wholly Owned
Subsidiary of the referent person);
o is not recourse to and does not obligate any other person (except a
Wholly Owned Subsidiary of the referent person) in any way;
o does not subject any property or assets of any other person (except
a Wholly Owned Subsidiary of the referent person), directly or
indirectly, contingently or otherwise, to the satisfaction thereof;
and
o is not required by GAAP to be reflected on the financial statements
of any other person (other than a Subsidiary of the referent person)
prepared in accordance with GAAP.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursement obligations, damages and other liabilities
payable under the documentation governing any Indebtedness. With respect to the
Subordinated Notes, "Obligations" shall include, without limitation, liabilities
in respect of any indemnity, any reimbursement, compensation or contribution
obligations, any liquidated damage provision (including Liquidated Damages), any
breach of representation or warranty or any rights of redemption or rescission
under the Subordinated Note indenture, [the Purchase Agreements, the
Registration Rights Agreement] or by law or otherwise (other than amounts
payable to the Subordinated Note trustee pursuant to the provisions of the
Subordinated Note indenture with respect to compensation and indemnification of
the Subordinated Note trustee).
"Paying Agent" means United States Trust Company of New York.
"Permitted Investments" means:
(a) any Investments in SFC New Holdings or in an 85% Owned Subsidiary of
SFC New Holdings that is engaged in the same or a similar or related
line of business as SFC New Holdings or any of its Subsidiaries were
engaged in on the date of the indentures;
(b) any Investments in Cash Equivalents;
(c) Investments by SFC New Holdings or any Subsidiary of SFC New
Holdings in a person that is engaged in the same or a similar or
related line of business as SFC New Holdings or any of its
Subsidiaries were engaged in on the date of the indentures, if as a
result of such Investment
123
<PAGE>
(i) such person becomes an 85% Owned Subsidiary of SFC New
Holdings, 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, SFC New Holdings or an 85% Owned
Subsidiary of SFC New Holdings;
(d) Investments in the Accounts Receivable Subsidiary permitted by the
"Accounts Receivable Subsidiary" covenant;
(e) Investments in agricultural commodities futures, options and other
hedging obligations in the ordinary course of business; and
(f) Investments in any Person other than SFAC New Holdings or a
Subsidiary of SFAC New Holdings that is not also a Subsidiary of SFC
New Holdings (in addition to Investments permitted by the foregoing
clauses (a) through (e)) that, in the aggregate, do not exceed $25
million at any one time outstanding.
"Permitted Liens" means:
(a) Liens on the Capital Stock of the First Tier Subsidiaries and the
Accounts Receivable Subsidiary and other assets of SFC New Holdings,
if any, securing Senior Term Debt and any Indebtedness permitted
under clause (h) or (i) of the "Incurrence of Indebtedness and
Issuance of Preferred Stock" covenant;
(b) Liens securing the Senior Revolving Debt;
(c) Liens in favor of SFC New Holdings and its Wholly Owned
Subsidiaries;
(d) Liens on property of a person existing at the time such person is
merged into or consolidated with SFC New Holdings or any Subsidiary
of SFC New Holdings; provided, that such Liens were in existence
prior to the contemplation of such merger or consolidation;
(e) Liens on property existing at the time of acquisition thereof by SFC
New Holdings or any Subsidiary of SFC New Holdings; provided, that
such Liens were in existence prior to the contemplation of such
acquisition;
(f) Liens to secure Indebtedness permitted by clause (e) of the second
paragraph of the covenant entitled "Incurrence of Indebtedness and
Issuance of Preferred Stock" covering solely the assets acquired
with such Indebtedness and the proceeds of such assets;
124
<PAGE>
(g) Liens existing on the date of the indentures and renewals,
extensions and replacements thereof; provided, that such renewals,
extensions or renewals shall not apply to any property or assets not
previously subject to such Liens or increase the principal amount of
Obligations secured thereby;
(h) 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 pursued;
provided, that any reserve or other appropriate provision as shall
be required in conformity with GAAP shall have been made therefor;
(i) carriers', warehousemen's, mechanics', materialmen's, repairmen's,
landlords' or other like Liens arising in the ordinary course of
business;
(j) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and
deposits securing liability to insurance carriers under insurance or
self-insurance arrangements;
(k) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like
nature incurred in the ordinary course of business;
(l) easements, rights-of-way, encroachments and other survey defects,
restrictions and other similar encumbrances and title defects which,
in the aggregate, do not in any case materially detract from the
value of the property subject thereto or materially interfere with
the ordinary conduct of the business of SFC New Holdings and its
Subsidiaries;
(m) any Lien arising pursuant to any order of attachment, distraint or
other legal process arising in connection with court or arbitration
proceedings so long as the execution or other enforcement thereof is
effectively stayed, the claims secured thereby are being contested
in good faith by appropriate proceedings, adequate reserves have
been established with respect to such claims in accordance with GAAP
and no Default or Event of Default would result thereby;
(n) licenses for the use of intellectual property rights or like
intangible assets; and
(o) Liens incurred in the ordinary course of business of SFC New
Holdings or any Subsidiary of SFC New Holdings with respect to
obligations that do not exceed $5 million at any one time
outstanding and that are not incurred in connection with the
borrowing of money or the obtaining of advances or credit (other
than trade credit).
125
<PAGE>
"Principal Business Asset Sale" means any sale, issuance, conveyance,
transfer, lease or other disposition (including, without limitation, by way of
merger, consolidation or sale and leaseback transaction but not the grant of a
pledge or security interest), directly or indirectly, in one or a series of
related transactions, of all of the Capital Stock or all or substantially all of
the properties and assets of Mother's, Metz or Archway, other than certain real
estate currently held for sale by Mothers, Metz or Archway as of the Original
Issue Date.
"Receivables Trust" means a trust organized solely for the purpose of
securitizing the accounts receivable held by the Accounts Receivable Subsidiary
that:
(a) shall not engage in any business other than (i) the purchase of
accounts receivable or participation interests therein from the
Accounts Receivable Subsidiary and the servicing thereof, (ii) the
issuance of and distribution of payments with respect to the
securities permitted to be issued under clause (b) below and (iii)
other activities incidental to the foregoing;
(b) shall not at any time incur Indebtedness or issue any securities,
except (i) certificates representing undivided interests in the
Trust issued to the Accounts Receivable Subsidiary and (ii) debt
securities issued in an arm's length transaction for consideration
solely in the form of cash and Cash Equivalents, all of which (net
of any issuance fees and expenses) shall promptly be paid to the
Accounts Receivable Subsidiary; and
(c) shall distribute to the Accounts Receivable Subsidiary as a
distribution on the Accounts Receivable Subsidiary's beneficial
interest in the Receivables Trust no less frequently that once every
six months all available cash and Cash Equivalents held by it, to
the extent not required for reasonable operating expenses or
reserves therefor or to service any securities issued pursuant to
clause (b) above that are not held by the Accounts Receivable
Subsidiary.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of the date of the indenture, by and among SFC New Holdings
and the holders of the New 13% Debentures, as such agreement may be amended,
modified or supplemented from time to time.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Revolving Credit Agreement" means that certain Revolving Credit
Agreement, dated as of March 16, 1998 by and among certain Subsidiaries of
Specialty Foods and the lenders party thereto, providing for up to $125 million
in aggregate principal amount of revolving loans and letters of credit, together
with any replacement or additional loan agreement or agreements, and including
any related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, supplemented,
extended, modified, renewed, refunded, replaced or refinanced from time to time,
whether or not with the same lenders.
126
<PAGE>
"Senior Revolving Debt" means all Obligations from time to time
outstanding under the Revolving Credit Agreement.
"Senior Term Debt" means all Obligations from time to time outstanding
under the Term Loan Agreement.
"Significant Subsidiary" means any Subsidiary which would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulations S-X,
promulgated pursuant to the Securities Act of 1933, as amended, as such
Regulation is in effect on the date of the indentures.
"Subsidiary" of any person means 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; provided,
however, that the Accounts Receivable Subsidiary and its Subsidiaries shall not
be deemed Subsidiaries of SFC New Holdings or of any of its other Subsidiaries.
"Tax Sharing Agreement" means that certain Tax Sharing Agreement, as
amended, dated as of August 16, 1993 between Specialty Foods Acquisition Corp.
and Specialty Foods, as amended to include SFC New Holdings and SFAC New
Holdings as parties as of the date of the indenture.
"Term Loan Agreement" means:
(A) for purpose of the 12 1/8% Senior Note indenture, that certain Term
Loan Agreement, dated as of July 17, 1995, by and among Specialty
Foods, Chemical Bank and the other lenders party thereto providing
for $175 million in aggregate principal amount of term loans,
together with any replacement or additional credit agreement or
agreements, and including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection
therewith, and in each case as amended, supplemented, extended,
modified, renewed, refunded, replaced or refinanced from time to
time, whether or not with the same lenders, and
(B) for the purposes of the 11 1/4% Senior Note indenture and the
Subordinated Note indenture, that certain Term Loan Agreement, dated
as of August 16, 1993, by and among Specialty Foods and the lenders
party thereto providing for up to $315 million in aggregate
principal amount of term loans, together with any replacement or
additional credit agreement or agreements, and including any related
notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended,
supplemented, extended, modified, renewed, refunded, replaced or
refinanced from time to time, whether or not with the same lenders.
127
<PAGE>
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
(a) the then outstanding principal amount of such Indebtedness, into
(b) the sum of the products obtained by multiplying
(x) the amount of each then remaining installment, sinking fund,
serial maturity or other scheduled required payments of
principal, including payment at final maturity, in respect
thereof, by
(y) the number of years (calculated to the nearest one-twelfth)
that will elapse between such date and the making of such
payment.
"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 or by such
person and one or more Wholly Owned Subsidiaries of such person.
Global Securities
Each exchange note to be issued to a holder exchanging an initial note
held through a global security will be issued in the form of one or more global
securities that will be deposited with, or on behalf of, DTC, which we refer to
as the "Depository." Unless and until it is exchanged in whole or in part for
exchange notes of that class in definitive form, a global security may not be
transferred except as a whole to a nominee of the Depository for such global
security, or by a nominee of the Depository to the Depository or another nominee
of the Depository, or by the Depository or any such nominee to a successor
Depository or a nominee of such successor Depository.
Physical Securities
If a holder of initial notes holds such security in physical form,
exchange notes issued to such holder will be in physical form. Following initial
issuance, physical exchange notes will be issued to a holder of exchange notes
upon request to SFC New Holdings and the applicable trustee subject to
compliance with the procedures therefor of the Depository. If the Depository is
at any time unwilling or unable to continue as a depository for the global
securities and a successor depository is not appointed by SFC New Holdings
within 90 days, SFC New Holdings will issue certificated exchange notes in
exchange for the global securities.
Book-Entry System
Each global security will be registered in the name of Cede & Co., the
nominee of the Depository. Accordingly, beneficial interests in the global
securities will be shown
128
<PAGE>
on, and transfer thereof will be effected only through, records maintained by
the Depository and its participants.
The Depository has advised SFC New Holdings as follows: the Depository is
a limited purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the United States Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depository holds securities that its participants ("Direct Participants")
deposit with the Depository. The Depository also facilitates the settlement
among Direct Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in such Direct Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants include
securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations. The Depository is owned by a number of its
Direct Participants and by the NYSE, the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. Access to the Depository's
book-entry system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to the Depository and its Direct and
Indirect Participants are on file with the SEC.
The Depository advises that its established procedures provide that (i)
upon issuance of the global securities by SFC New Holdings, the Depository will
credit the accounts of Direct Participants designated by SFC New Holdings with
the principal amounts of the exchange notes issued pursuant to the exchange
offers and (ii) ownership of interests in the global securities will be shown
on, and the transfer of the ownership will be effected only through, records
maintained by the Depository, the Direct Participants and the Indirect
Participants.
So long as a nominee of the Depository is the registered owner of the
global securities, such nominee for all purposes will be considered the sole
owner or holder of such global securities under the indentures.
Neither SFC New Holdings, the trustee, any paying agent nor the registrar
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the global
securities, or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
Principal and interest payments on the exchange notes registered in the
name of the Depository's nominee will be made in immediately available funds to
the Depository's nominee as the registered owner of the global securities. Under
the terms of the exchange notes, SFC New Holdings and the trustee will treat the
persons in whose names the exchange notes are registered as the owners of such
exchange notes for the purpose of receiving payment of principal and interest on
such exchange notes and for all other
129
<PAGE>
purposes whatsoever. Therefore, neither SFC New Holdings, the trustee nor any
paying agent has any direct responsibility or liability for the payment of
principal or interest on the exchange notes to owners of beneficial interests in
the global securities. The Depository has advised SFC New Holdings and the
trustee that its current practice is, upon receipt of any payment of principal
or interest, to credit Direct Participants' accounts on the payment date in
accordance with their respective holdings of beneficial interests in the global
securities as shown on the Depository's records. Payments by Direct and Indirect
Participants to owners of beneficial interests in the global securities will be
governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of such Direct and Indirect
Participants and not of the Depository, the trustee, or SFC New Holdings,
subject to any statutory requirements that may be in effect from time to time.
Payment of principal and interest to the Depository is the responsibility of SFC
New Holdings or the trustee; disbursement of such payments to the owners of
beneficial interests in the global securities shall be the responsibility of the
Depository and Direct and Indirect Participants.
So long as the Depository continues to make its Same-Day Funds Settlement
System available to SFC New Holdings, all payments of principal and interest on
the global securities will be made by SFC New Holdings in immediately available
funds.
130
<PAGE>
DESCRIPTION OF THE INITIAL NOTES
The initial notes are comprised of: (1) the notes that we issued and sold
in connection with the exchange offers that were completed on June 11, 1999, and
(2) the SFC Notes that were the subject of the June 11, 1999 private
transactions, but which did not participate in those exchange offers. The form
and terms of our private exchange notes are the same as the form and terms of
the exchange notes except that (a) our private exchange notes are not registered
under the Securities Act and bear legends restricting the transfer of them and
(b) holders of our private exchange notes have certain rights under a
registration rights agreement which will terminate upon the consummation of
these exchange offers. We refer you to the sections of this prospectus entitled
"Description of the Exchange Notes" and "The Exchange Offers--Termination of
Certain Rights."
131
<PAGE>
DESCRIPTION OF THE SFC NOTES
We will pay all accrued but unpaid interest on the SFC Notes that we
acquired on June 11, 1999 on the first interest payment date of each of our
private exchange notes. In addition, we will pay (i) additional interest on each
of those SFC Notes at the rate of 1% per annum, on the first interest payment
date of each of our private exchange notes, and (ii) additional interest on the
SFC Subordinated Notes that we acquired on June 11, 1999 through the issuance of
PIK Subordinated Noes at the rate of 1% per annum, on August 15, 1999.
General
The following summary of certain provisions of the SFC Note indentures
does not purport to be complete and is qualified in its entirety by reference to
the SFC Note indentures, as amended by the first supplemental indentures dated
as of June 8, 1999, including the definitions therein of certain terms used
below. However, the summary does summarize all material provisions of the SFC
Note indentures, as amended. The definitions of certain terms used in the
following summary are set forth below under "Certain Definitions."
Principal, Maturity and Interest
The SFC 10 1/4% Senior Notes are limited in aggregate principal amount to
$225 million and mature on August 15, 2001. The SFC 11 1/8% Senior Notes are
limited in aggregate principal amount to $150 million and mature on October 1,
2002. The SFC Subordinated Notes are limited in aggregate principal amount to
$200 million and mature on August 15, 2003. Interest on the SFC 10 1/4% Senior
Notes and the SFC Subordinated Notes accrues at the rate of SFC 10 1/4% and SFC
11 1/4% per annum, respectively, and is payable semi-annually in arrears on
February 15 and August 15 of each year, commencing on February 15, 1994, to
holders of record on the immediately preceding February 1 and August 1. Interest
on the SFC 11 1/8% Senior Notes accrues at the rate of SFC 11 1/8% per annum and
is payable semi-annually in arrears on April 1 and October 1 of each year,
commencing on October 1, 1995, to holders of record on the immediately preceding
March 15 and September 15. Interest on the SFC Notes accrues from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of original issuance. Interest is computed on the basis of a
360-day year comprised of twelve 30-day months. The SFC Notes are payable as to
principal and interest at the office or agency of Specialty Foods maintained for
such purpose within the City and State of New York or, at the option of
Specialty Foods, payment of interest may be made by check mailed to the holders
of the SFC Notes. Until otherwise designated by Specialty Foods, Specialty
Foods' office or agency in New York is the office of the applicable SFC trustee
maintained for such purpose. The SFC Notes are issued in registered form,
without coupons, and in denominations of $1,000 and integral multiples thereof.
132
<PAGE>
Effective Subordination of the SFC 10 1/4% Senior Notes
The SFC 10 1/4% Senior Notes are effectively subordinated to (i) all
existing and future liabilities of Specialty Foods' Subsidiaries and (ii) all of
Specialty Foods' borrowings under the Term Loans, which borrowings are secured
by substantially all of the assets of Specialty Foods and a pledge of all of the
capital stock of each First Tier Subsidiary.
Effective Subordination of the SFC 11 1/8% Senior Notes
The operations of Specialty Foods are conducted through its Subsidiaries
and, therefore, Specialty Foods is dependent upon the cash flow of its
Subsidiaries to meet its obligations, including its obligations under the SFC 11
1/8% Senior Notes and the SFC 11 1/8% Senior indenture. The SFC 11 1/8% Senior
Notes are effectively subordinated to (i) all existing and future liabilities
and indebtedness of Specialty Foods' Subsidiaries, which includes borrowings
under the Revolving Credit Facility, and (ii) all of Specialty Foods' borrowings
under the Term Loan Facility, which borrowings are secured by substantially all
of the assets of Specialty Foods and a pledge of all of the capital stock of
each First Tier Subsidiary and the Accounts Receivable Subsidiary.
In the event of dissolution, bankruptcy, liquidation or reorganization of
Specialty Foods' Subsidiaries, the holders of the SFC 11 1/8% Senior Notes will
not receive any amounts in respect of the SFC 11 1/8% Senior Notes until after
the payment in full of the claims of the creditors of Specialty Foods'
Subsidiaries. In addition, upon the occurrence of certain events of default
under the agreement relating to the Senior Debt, Specialty Foods will be
prohibited from making any payments in respect of the SFC 11 1/8% Senior Notes
under certain circumstances.
Subordination of the SFC Subordinated Notes
The payment of principal of, premium, if any, and interest on the SFC
Subordinated Notes is subordinated in right of payment, as set forth in the SFC
Subordinated Note indenture, to the prior payment in full in cash or Cash
Equivalents of all Senior Debt of Specialty Foods, including the SFC Senior
Notes, whether outstanding on the date of the SFC Subordinated Note indenture or
thereafter created, incurred, assumed or guaranteed.
Upon any payment or distribution to creditors of Specialty Foods in a
liquidation or dissolution of Specialty Foods or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to
Specialty Foods or its property, in an assignment for the benefit of creditors
or any marshaling of Specialty Foods' assets and liabilities, holders of Senior
Debt of Specialty Foods, including holders of the SFC Senior Notes, will be
entitled to receive payment in full in cash or Cash Equivalents of all
outstanding Obligations in respect of such Senior Debt before the holders of the
SFC Subordinated Notes will be entitled to receive any payment or distribution
with respect to the SFC Subordinated Notes and, until all Obligations with
respect to Senior Debt of
133
<PAGE>
Specialty Foods are paid in full in cash or Cash Equivalents, any payment or
distribution to which the holders of the SFC Subordinated Notes would be
entitled shall be made to the holders of Senior Debt (except that holders of the
SFC Subordinated Notes may receive securities that are subordinated to at least
the same extent as the SFC Subordinated Notes to Senior Debt and any securities
issued in exchange for Senior Debt, subject to certain authorization of a
bankruptcy court).
Specialty Foods also may not make any payment or distribution in respect
of the SFC Subordinated Notes (except in such subordinated securities to the
extent permitted) if:
(a) a default in the payment of the principal of, premium, if any, or
interest on any Designated Senior Debt occurs and is continuing
beyond any applicable period of grace (whether upon maturity, as a
result of acceleration or otherwise), or
(b) any other default occurs and is continuing with respect to any
Designated Senior Debt that permits holders of the Designated Senior
Debt as to which such default relates to accelerate its maturity and
the SFC Subordinated Note trustee receives a notice of such default
(a "Payment Blockage Notice") from the holders, or from the trustee,
agent or other representative of the holders, of any such Designated
Senior Debt.
Notwithstanding the foregoing, a notice of default under the foregoing
clause (b) may only be given by the Representative for the holders of Senior
Debt under the Term Loan Agreement or the Revolving Credit Agreement if Senior
Debt is outstanding under the Term Loan Agreement or the Revolving Credit
Agreement (including obligations in respect of letters of credit) at the time
such notice is to be given. Payments on the SFC Subordinated Notes may and shall
be resumed (i) in the case of a payment default, upon the date on which such
default is cured or waived and (ii) in case of a nonpayment default, upon 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
period of payment blockage may be commenced within 360 days after the receipt by
the SFC Subordinated Note trustee of any prior Payment Blockage Notice. No
nonpayment default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the SFC Subordinated Note 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.
The SFC Subordinated Note indenture further requires that Specialty Foods
promptly notify holders of Senior Debt if payment of the SFC Subordinated Notes
is accelerated because of an Event of Default.
134
<PAGE>
"Senior Debt" means:
o all Senior Term Debt outstanding from time to time,
o all Senior Revolving Debt outstanding from time to time,
o the SFC Senior Notes,
o Hedging Obligations, and
o any other Indebtedness that is permitted to be incurred by Specialty
Foods pursuant to the SFC Subordinated Note indenture unless the
instrument under which such Indebtedness is incurred expressly
provides that it is on a parity with or subordinated in right of
payment to the SFC Subordinated Notes.
"Senior Debt" shall include, without limitation, interest on any of the
Obligations described in the preceding clauses (i) through (v) accruing after
the filing of a petition by or against Specialty Foods under any Bankruptcy Law,
in accordance with and at the rate (including any rate applicable upon any
default or event of default) specified in the applicable agreement under which
such Obligations are created, whether or not the claim for such interest is
allowed as a claim after such filing in any proceeding under such Bankruptcy
Law. Notwithstanding anything to the contrary in the foregoing, Senior Debt
shall not include (x) any Indebtedness of Specialty Foods to any of its
Subsidiaries or other Affiliates, (y) any Indebtedness incurred for the purchase
of goods or materials or for services obtained in the ordinary course of
business (other than the Senior Revolving Debt) and (z) any Indebtedness that is
incurred in violation of the SFC Subordinated Note indenture.
"Designated Senior Debt" means:
o the Senior Term Debt,
o the Senior Revolving Debt,
o the SFC Senior Notes, and
o any other Senior Debt permitted under the SFC Subordinated Note
indenture, the principal amount of which is $25 million or more.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, holders of the SFC Subordinated Notes may
recover less ratably than creditors of Specialty Foods who are holders of Senior
Debt, including holders of the SFC Senior Notes.
135
<PAGE>
Optional Redemption - SFC 11 1/8% Senior Notes
Except as set forth below, the SFC 11 1/8% Senior Notes are not redeemable
at Specialty Foods' option prior to October 1, 1999. Thereafter, the SFC 11 1/8%
Senior Notes will be subject to redemption at the option of Specialty Foods, in
whole or in part, upon not less than 30 nor more than 60 days' notice to the
holders of SFC 11 1/8% Senior Notes, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on October 1, of the years indicated below:
Year Percentage
1999........................................ 105.562%
2000........................................ 102.781%
2001 and thereafter......................... 100.000%
If a Change of Control (as defined below) shall occur prior to October 1,
1999, within 90 days after the occurrence of such Change of Control, Specialty
Foods shall have the option to redeem the SFC 11 1/8% Senior Notes, in whole or
in part, upon not less than 30 nor more than 60 days' notice to the holders of
the SFC 11 1/8% Senior Notes, at a redemption price equal to the principal
amount thereof plus the Yield Protection Amount, plus accrued and unpaid
interest thereon to the applicable redemption date.
Optional Redemption - SFC 10 1/4% Senior Notes and SFC Subordinated Notes
The SFC 10 1/4% Senior Notes and the SFC Subordinated Notes will be
subject to redemption at the option of Specialty Foods, in whole or in part,
upon not less than 30 nor more than 60 days' notice to the holders of SFC 10
1/4% Senior Notes and the SFC Subordinated Notes, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on August 15 of the years indicated below:
SFC 10 1/4% Senior Notes
Year Percentage
1998...................................... 105.125%
1999...................................... 102.563%
2000 and thereafter....................... 100.000%
136
<PAGE>
SFC Subordinated Notes
Year Percentage
1998................................... 103.214%
1999................................... 101.607%
2000 and thereafter.................... 100.000%
Redemption or Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, each holder of SFC Notes will
have the right to require Specialty Foods to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such holder's SFC Notes pursuant
to the offer described below (the "Change of Control Offer") at a purchase price
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase (the "Change of Control Payment").
Within 30 days following any Change of Control, Specialty Foods will mail a
notice to each holder stating:
(1) that the Change of Control Offer is being made pursuant to the
covenant entitled "Change of Control" and that all SFC Notes
tendered will be accepted for payment;
(2) the purchase price and the purchase date, which shall be no later
than 30 Business Days from the date such notice is mailed (the
"Change of Control Payment Date");
(3) that any SFC Note not tendered will continue to accrue interest;
(4) that, unless Specialty Foods defaults in the payment of the Change
of Control Payment, all SFC Notes accepted for payment pursuant to
the Change of Control Offer will cease to accrue interest after the
Change of Control Payment Date;
(5) that holders electing to have any SFC Notes purchased pursuant to a
Change of Control Offer will be required to surrender the SFC Notes,
with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the SFC Notes completed, to the Paying Agent at the
address specified in the notice prior to the close of business on
the third Business Day preceding the Change of Control Payment Date;
(6) that holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the
second Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the
name of the holder, the principal
137
<PAGE>
amount of SFC Notes delivered for purchase, and a statement that
such holder is withdrawing his election to have such SFC Notes
purchased; and
(7) that holders whose SFC Notes are being purchased only in part will
be issued new Notes equal in principal amount to the unpurchased
portion of the SFC Notes surrendered, which unpurchased portion must
be equal to $1,000 in principal amount or an integral multiple
thereof. Specialty Foods will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of SFC Notes in
connection with a Change of Control.
On the Change of Control Payment Date, Specialty Foods will, to the extent
lawful, (1) accept for payment SFC Notes or portions thereof 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 SFC Notes or portions
thereof so tendered, and (3) deliver or cause to be delivered to the SFC
trustees the Notes so accepted together with an Officers' Certificate stating
the SFC Notes or portions thereof tendered to Specialty Foods. The Paying Agent
will promptly mail to each holder of Notes so accepted payment in an amount
equal to the purchase price for such SFC Notes, and the applicable SFC trustee
will promptly authenticate and mail to each holder a new SFC Note equal in
principal amount to any unpurchased portion of the SFC Notes surrendered by such
holder, if any; provided, that each such new SFC Note will be in a principal
amount of $1,000 or an integral multiple thereof. The SFC Subordinated Note
indenture will provide that prior to making the Change of Control Payment in
respect of the SFC Subordinated Notes, but in any event within 60 days following
a Change of Control, Specialty Foods 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 SFC Subordinated Notes
required by this covenant. Specialty Foods will publicly announce the results of
the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
Selection and Notice
If less than all of the SFC Senior Notes or all of the SFC Subordinated
Notes are to be redeemed at any time, selection of SFC Notes for redemption will
be made by the applicable SFC trustee in compliance with the requirements of the
principal national securities exchange, if any, on which such SFC Notes are
listed, or, if such SFC Notes are not so listed, on a pro rata basis, by lot or
by such method as such SFC trustee shall deem fair and appropriate, provided
that no SFC Note of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each holder of SFC Notes to be redeemed at
its registered address. If any SFC Note is to be redeemed in part only, the
notice of redemption that relates to such Note shall state the portion of the
principal amount thereof to be redeemed. A new SFC Note in principal amount
equal to the unredeemed portion thereof will be issued in the name of the holder
thereof upon cancellation of the original
138
<PAGE>
SFC Note. On and after the redemption date, interest ceases to accrue on the SFC
Notes or portions of them called for redemption.
SFC Subordinated Debt
The SFC Subordinated Note indenture provides that Specialty Foods will not
incur, create, issue, assume, guarantee or otherwise become directly or
indirectly liable for any Indebtedness that is subordinate or junior in right of
payment to any Senior Debt and senior in any respect in right of payment to the
SFC Subordinated Notes.
Events of Default and Remedies
The SFC Senior indentures provide that each of the following constitutes
an Event of Default:
(i) default for 30 days in the payment when due of interest on the
applicable SFC Senior Notes;
(ii) default in payment when due of principal of, or premium, if any, on
the applicable SFC Senior Notes when the same becomes due and
payable at maturity, upon redemption (including in connection with
an offer to purchase) or otherwise;
(iii) failure by Specialty Foods for 60 days after notice to Specialty
Foods by the applicable SFC Senior Note trustee or the holders of at
least 25% in principal amount of the SFC Senior Notes then
outstanding to comply with any other agreements in the applicable
SFC Senior indenture or the SFC Senior Notes; and
(iv) certain events of bankruptcy or insolvency with respect to Specialty
Foods, any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary.
The SFC Subordinated Note indenture provides that each of the following
constitutes an Event of Default:
(i) default for 30 days in the payment when due of interest on the SFC
Subordinated Notes, whether or not prohibited by the subordination
provisions of the SFC Subordinated Note indenture;
(ii) default in payment when due of principal of, or premium, if any, on
the SFC Subordinated Notes when the same becomes due and payable at
maturity, upon redemption (including in connection with an offer to
purchase) or otherwise, whether or not prohibited by the
subordination provisions of the SFC Subordinated Note indenture;
139
<PAGE>
(iii) failure by Specialty Foods for 60 days after notice to Specialty
Foods by the SFC Subordinated Note trustee or the holders of at
least 25% in principal amount of the SFC Subordinated Notes then
outstanding to comply with any other agreements in the SFC
Subordinated Note indenture or the SFC Subordinated Notes; and
(iv) certain events of bankruptcy or insolvency with respect to Specialty
Foods, any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary.
If any Event of Default occurs and is continuing, the applicable SFC
trustee or the holders of at least 25% in principal amount of the then
outstanding SFC Senior Notes or SFC Subordinated Notes may declare all the SFC
Senior Notes or SFC Subordinated Notes, as the case may be, to be due and
payable immediately. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency with respect to
Specialty Foods, any Significant Subsidiary or any group of Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary, all outstanding
Notes will become due and payable without further action or notice. The SFC
Subordinated Note indenture will provide that so long as any Designated Senior
Debt (as defined therein) is outstanding, such declaration shall not become
effective until the earlier of (x) the day which is five Business Days after the
receipt by Representatives of Designated Senior Debt of such written notice of
acceleration (which notice may only be given during the continuation of an Event
of Default) or (y) the date of acceleration of any Designated Senior Debt.
Holders of the SFC Notes may not enforce the SFC Note indentures or the SFC
Notes except as provided in the SFC Note indentures. Subject to certain
limitations, holders of a majority in principal amount of the then outstanding
SFC Senior Notes or SFC Subordinated Notes may direct the applicable SFC trustee
in its exercise of any trust or power. Each SFC trustee may withhold from
holders of the applicable 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.
If an Event of Default occurs on or after August 15, 1998 by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of Specialty
Foods with the intention of avoiding payment of the premium, if any, that
Specialty Foods would have had to pay if Specialty Foods then had elected to
redeem any SFC 10 1/4% Senior Notes or SFC Subordinated Notes pursuant to the
optional redemption provisions of the applicable SFC Note indenture, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law.
If an Event of Default occurs on or after October 1, 1999 by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of Specialty
Foods with the intention of avoiding payment of the premium, if any, that
Specialty Foods would have had to pay if Specialty Foods then had elected to
redeem the SFC 11 1/8% Senior Notes pursuant to the optional redemption
provisions of the SFC 11 1/8% Senior indenture, an equivalent premium shall also
become and be immediately due and payable to the extent permitted by law. If an
Event of Default occurs prior to October 1, 1999 by reason of
140
<PAGE>
any willful action (or inaction) taken (or not taken) by or on behalf of
Specialty Foods with the intention of avoiding the prohibition on redemption of
the SFC 11 1/8% Senior Notes prior to such date, then the premium specified in
the SFC 11 1/8% Senior indenture shall also become immediately due and payable
to the extent permitted by law.
The holders of a majority in aggregate principal amount of the SFC Senior
Notes or SFC Subordinated Notes then outstanding by notice to the applicable SFC
trustee may on behalf of the holders of all of the SFC 10 1/4% Senior Notes, SFC
11 1/8% Senior Notes or SFC Subordinated Notes, as the case may be, waive any
existing Default or Event of Default and its consequences under the applicable
SFC Note indenture (including annulling a declaration of acceleration of
maturity) except a continuing Default or Event of Default in the payment of
interest on, or the principal of, such Notes.
No Personal Liability of Directors, Officers, Employees and Stockholders
No past, present or future director, officer, employee, incorporator or
stockholder of Specialty Foods, as such, shall have any liability for any
obligations of Specialty Foods under the Notes or the SFC Note indentures or for
any claim based on, in respect of, or by reason of, such obligations or their
creation. Each holder of SFC Notes by accepting a SFC Note waives and releases
all such liability. The waiver and release are part of the consideration for
issuance of the SFC Note. Such waiver may not be effective to waive liabilities
under the federal securities laws and it is the view of the Commission that such
a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
Specialty Foods may, at its option and at any time, elect to have its
obligations discharged with respect to the outstanding SFC Senior Notes or SFC
Subordinated Notes ("Legal Defeasance"). Legal Defeasance means that Specialty
Foods will be deemed to have paid and discharged the entire indebtedness
represented by the outstanding SFC Senior Notes or SFC Subordinated Notes, as
the case may be, except for
(i) the rights of holders of such outstanding SFC Notes to receive,
solely from the trust fund described below, payments in respect of
the principal of, premium, if any, and interest on such SFC Notes
when such payments are due,
(ii) Specialty Foods' obligations with respect to such SFC Notes
concerning issuing temporary SFC Notes, registration of SFC 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,
(iii) the rights, powers, trust, duties and immunities of the applicable
SFC trustee, and Specialty Foods' obligations in connection
therewith, and
(iv) the Legal Defeasance provisions of the applicable SFC Note
indenture.
141
<PAGE>
In addition, Specialty Foods may, at its option and at any time, elect to have
the obligations of Specialty Foods released with respect to certain covenants
that are described in the SFC Note indentures ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the SFC 10 1/4% Senior Notes, the
SFC 11 1/8% Senior Notes or the SFC Subordinated Notes, as the case may be. In
the event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the SFC 10 1/4% Senior Notes, the SFC 11 1/8% Senior Notes or the SFC
Subordinated Notes, as the case may be.
In order to exercise either Legal Defeasance or Covenant Defeasance,
(i) Specialty Foods must irrevocably deposit with the applicable SFC
trustee or Paying Agent, in trust, for the benefit of the holders of
the SFC 10 1/4% Senior Notes, the SFC 11 1/8% Senior Notes or the
SFC Subordinated Notes, as the case may be, cash in U.S. 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, if any, and interest on such Notes on the
stated maturity or on the applicable redemption date, as the case
may be, of such principal or installment of principal of, premium,
if any, or interest on such outstanding SFC Notes;
(ii) in the case of Legal Defeasance, Specialty Foods shall have
delivered to the applicable SFC trustee an opinion of counsel in the
United States reasonably acceptable to such SFC trustee confirming
that (A) Specialty Foods has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the
date of the SFC Note indentures, 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 such outstanding SFC 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;
(iii) in the case of Covenant Defeasance, Specialty Foods shall have
delivered to the applicable SFC trustee an opinion of counsel in the
United States reasonably acceptable to such SFC trustee confirming
that the holders of such 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;
142
<PAGE>
(iv) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit;
(v) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, the
applicable SFC Note indenture, the Term Loan Agreement, the
Revolving Credit Agreement or any other material agreement or
instrument to which Specialty Foods is a party or by which Specialty
Foods is bound;
(vi) Specialty Foods shall have delivered to the applicable SFC 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;
(vii) Specialty Foods shall have delivered to the applicable SFC trustee
an Officers' Certificate stating that the deposit was not made by
Specialty Foods with the intent of preferring the holders of such
Notes over the other creditors of Specialty Foods or with the intent
of defeating, hindering, delaying or defrauding creditors of
Specialty Foods or others; and
(viii) Specialty Foods shall have delivered to the applicable SFC trustee
an Officers' Certificate and an opinion of counsel, each stating
that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
Transfer and Exchange
A holder may transfer or exchange SFC Notes in accordance with the SFC
Note indentures. The Registrar and the applicable SFC trustee may require a
holder, among other things, to furnish appropriate endorsements and transfer
documents and Specialty Foods may require a holder to pay any taxes and fees
required by law or permitted by the SFC Note indentures. Specialty Foods is not
required to transfer or exchange any Note selected for redemption. Also,
Specialty Foods is not required to transfer or exchange any SFC Senior Note or
SFC Subordinated Note for a period of 15 days before a selection of such SFC
Notes to be redeemed.
The registered holder of a SFC Note will be treated as the owner of it for
all purposes.
Amendment, Supplement and Waiver
Except as provided in the next succeeding paragraphs, the SFC 10 1/4%
Senior indenture and the SFC 10 1/4% Senior Notes, the SFC 11 1/8% Senior
indenture and the SFC 11 1/8% Senior Notes, or the SFC Subordinated Note
indenture and the SFC
143
<PAGE>
Subordinated Notes, may be amended or supplemented with the consent of the
holders of at least a majority in principal amount of the applicable SFC Notes
then outstanding (including consents obtained in connection with a tender offer
or exchange offer for such SFC Notes), and any existing default or compliance
with any provision of the SFC 10 1/4% Senior indenture and the SFC 10 1/4%
Senior Notes, the SFC 11 1/8% Senior indenture and the SFC 11 1/8% Senior Notes
or the SFC Subordinated Note indenture and the SFC Subordinated Notes, may be
waived with the consent of the holders of a majority in principal amount of the
applicable, then outstanding SFC Notes (including consents obtained in
connection with a tender offer or exchange offer for such SFC Notes).
Without the consent of each holder affected, an amendment or waiver may
not (with respect to any SFC Note held by a non-consenting holder of SFC Notes)
(i) reduce the principal amount of SFC Notes whose holders must consent
to an amendment, supplement or waiver,
(ii) reduce the principal of or change the fixed maturity of any SFC Note
or alter the provisions with respect to the redemption of the SFC
Notes,
(iii) reduce the rate of or change the time for payment of interest on any
SFC Note,
(iv) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the SFC Notes (except a
rescission of acceleration of the SFC 10 1/4% Senior Notes, the SFC
11 1/8% Senior Notes or SFC Subordinated Notes by the holders of at
least a majority in aggregate principal amount of the SFC 10 1/4%
Senior Notes, the SFC 11 1/8% Senior Notes or SFC Subordinated
Notes, as the case may be, and a waiver of the payment default that
resulted from such acceleration),
(v) make any SFC Note payable in money other than that stated in the
applicable SFC Notes,
(vi) make any change in the provisions of the SFC Note indentures
relating to waivers of past Defaults or the rights of holders of SFC
Notes to receive payments of principal of or interest on the SFC
Notes,
(vii) waive a redemption payment with respect to any SFC Note,
(viii) make any change in the subordination provisions of the SFC
Subordinated Note indenture that adversely affects any holder of SFC
Subordinated Notes, or
(ix) make any change in the foregoing amendment and waiver provisions.
Without the consent of at least 75% in principal amount of the SFC 10 1/4%
Senior Notes, the SFC 11 1/8% Senior Notes or SFC Subordinated Notes then
outstanding
144
<PAGE>
(including consents obtained in connection with a tender offer or exchange offer
for such Notes), no waiver or amendment to the applicable SFC Note indenture may
make any change in the provisions described above under the caption "Change of
Control" that adversely affect the rights of any holder of such Notes.
Notwithstanding the foregoing, without the consent of any holder of SFC
Notes, Specialty Foods and the SFC trustees may amend or supplement the
applicable SFC Note indentures or the SFC Notes to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated SFC Notes, to provide for the assumption of Specialty Foods'
obligations to holders of the SFC Notes in the case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the holders of the SFC Notes or that does not adversely affect the
legal rights under the SFC Note indentures of any such holder.
Concerning the SFC Trustees
The SFC Note indentures contain certain limitations on the rights of the
SFC trustees, should a SFC trustee become a creditor of Specialty Foods, 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 SFC trustees
will be permitted to engage in other transactions; however, if any SFC trustee
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 SFC
10 1/4% Senior Notes, the SFC 11 1/8% Senior Notes or SFC Subordinated Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the applicable SFC trustee,
subject to certain exceptions. The SFC Note indentures provide that in case an
Event of Default shall occur (which shall not be cured), the SFC trustees 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
SFC trustees will be under no obligation to exercise any of their rights or
powers under the SFC Note indentures at the request of any holder of Notes,
unless such holder shall have offered to the applicable SFC 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 SFC Note indentures.
Reference is made to the SFC Note indentures for a full disclosure of all such
terms, as well as any other capitalized terms used herein for which no
definition is provided.
"Accounts Receivable Agreements" means (i) the Pooling Agreement, dated as
of November 16, 1994, among the Accounts Receivable Subsidiary, Specialty Foods,
as Master Servicer, and Chemical Bank, as trustee on behalf of the
certificateholders, (ii) the Series 1994-1 Supplement to the Pooling Agreement,
dated as of November 16, 1994, among the Accounts Receivable Subsidiary,
Specialty Foods, as Master Servicer, and
145
<PAGE>
Chemical Bank, as trustee on behalf of the certificateholders, (iii) the
Servicing Agreement, dated as of November 16, 1994, among the Accounts
Receivable Subsidiary, Specialty Foods, as Master Servicer, certain of the
subsidiaries of Specialty Foods, as servicers, the Chemical Bank, as trustee on
behalf of the certificateholders, (iv) the Amended and Restated Receivables Sale
Agreement, dated as of November 16, 1994, among Capital Markets Assurance
Corporation, the Accounts Receivable Subsidiary, as Master Servicer, and
Chemical Bank, as trustee on behalf of the certificateholders, and (vi) any
related instruments and agreements executed in connection therewith.
"Accounts Receivable Discount" means, with respect to any account
receivable sold by Specialty Foods or any of its Subsidiaries to the Accounts
Receivable Subsidiary, (a) the difference between (i) the face amount of such
account receivable and (ii) the aggregate amount of consideration (after giving
effect to any subsequent adjustments thereto) received upon the sale of such
account receivable (with any Accounts Receivable Subsidiary Notes received as
consideration in such sale being valued at the principal amount thereof for this
purpose), less (b) the amount of such difference that is calculated on the basis
of, or with reference to, (i) the historical bad debt allowance or accounts
receivable write-offs of the seller of such account receivable, (ii) fees and
other operating expenses of the Accounts Receivable Subsidiary payable to
parties other than Specialty Foods and its Subsidiaries and acquirors of
accounts receivable or participation interests therein (in their capacity as
acquirors) to the extent that such fees and expenses do not exceed such amounts
as would be obtained in an arm's length transaction and (iii) credits to the
obligor of such account receivable applied to the face amount of such account
receivable in respect of discount expense (including prompt payment and volume
discounts), rebates, refunds, promotional allowances, billing error expense and
similar adjustments and allowances made by the seller of such account
receivable.
"Accounts Receivable Subsidiary" means a newly created, wholly owned
subsidiary of Specialty Foods designated as such by Specialty Foods, (a) that
has total assets at the time of such designation with a book value of $100,000
or less and (b) with which neither Specialty Foods nor any other Subsidiary of
Specialty Foods has any obligation (i) to subscribe for additional shares of
Capital Stock or other equity interests therein (other than to finance the
purchase of additional accounts receivable of Specialty Foods and its
Subsidiaries) or (ii) to maintain or preserve such Accounts Receivable
Subsidiary's financial condition or to cause it to achieve certain levels of
operating results.
"Accounts Receivable Subsidiary Notes" means the notes to be issued by the
Accounts Receivable Subsidiary for the purchase of accounts receivable.
"Acquired Debt" means, with respect to any specified person, Indebtedness
of any other person existing at the time such other person merged with or into
or became a Subsidiary of such specified person, including Indebtedness incurred
in connection with, or in contemplation of, such other person merging with or
into or becoming a Subsidiary of 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
146
<PAGE>
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, however that (i) beneficial
ownership of 20% or more of the voting securities of a person shall be deemed to
be control, (ii) no lender party to the Term Loan Agreement or the Revolving
Credit Agreement (or any of its affiliates) shall be deemed to be an Affiliate
of Specialty Foods or any of its Subsidiaries solely by virtue of being party to
the Term Loan Agreement or the Revolving Credit Agreement and (iii) an officer
of a person shall not be deemed an Affiliate of such person unless such officer
directly or indirectly controls such person.
"Applicable Spread" is defined as 100 basis points.
"Business Day" means each day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the liability in respect of a capital lease that would at such time
be required to be capitalized on the balance sheet in accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock, including,
without limitation, partnership interests.
"Cash Equivalents" means
(i) cash,
(ii) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof
having maturities of not more that 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 Term Loan
Agreement or the Revolving Credit Agreement or with any domestic
commercial bank having capital and surplus in excess of
$500,000,000,
(iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and
(iii) entered into with any financial institution meeting the
qualifications specified in clause (iii) above, and
(v) commercial paper issued by any lender party to the Term Loan
Agreement or the Revolving Credit Agreement (or the parent company
of any such
147
<PAGE>
lender) and commercial paper rated A-1 or the equivalent thereof by
Moody's Investors Service, Inc. 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 or transfer, in one or a series of related
transactions, of all or substantially all of Specialty Foods' or
Specialty Foods Acquisition Corp.'s' assets to any person or group
(as such term is used in Section 13(d)(3) of the Exchange Act)
(other than the Principals or their Specified Parties (as defined
below)),
(ii) the adoption of a plan relating to the liquidation or dissolution of
Specialty Foods or Specialty Foods Acquisition Corp.,
(iii) the consummation of any transaction the result of which is that any
person or group (as defined above) (other than the Principals and
their Specified Parties) owns, directly or indirectly, more of the
voting power of the voting stock of Specialty Foods or Specialty
Foods Acquisition Corp. than the Principals and their Specified
Parties, or
(iv) the first day on which a majority of the members of the Board of
Directors of Specialty Foods or Specialty Foods Acquisition Corp.
are not Continuing Directors. For the purposes of the foregoing
sentence, any shares of voting stock that are required to be voted
for a nominee of any Principal or Specified Party pursuant to a
binding agreement between the holder thereof and such Principal or
Specified Party will be deemed to be held by such Principal or
Specified Party, as the case may be, for purposes of determining the
percentage of voting power held by any person.
"Consolidated Cash Flow" means, with respect to any person for any period,
the Consolidated Net Income of such person for such period plus (a) an amount
equal to any extraordinary loss, plus (b) provision for taxes based on income or
profits to the extent such provision for taxes was included in computing
Consolidated Net Income, plus (c) consolidated interest expense of such person
for such period, whether paid or accrued (including amortization of original
issue discount, non-cash interest payments and the interest component of any
payments associated with Capital Lease Obligations), to the extent such expense
was deducted in computing Consolidated Net Income, plus (d) all depreciation,
amortization (including amortization of goodwill and other intangibles) and
other non-cash charges (excluding any non-cash charge constituting an
extraordinary item of loss or expense and any non-cash charge that requires an
accrual of or a reserve for cash charges for any future period) of such person
for such period to the extent such depreciation, amortization and other non-cash
charges were deducted in computing Consolidated Net Income, plus (e) one-third
of all operating lease payments of such person paid or accrued during such
period, in each case, on a consolidated basis and determined in accordance with
GAAP, plus (f) without duplication, the amount of Accounts Receivable Discount
attributable to sales of accounts receivable by such person
148
<PAGE>
and its Subsidiaries to the Accounts Receivable Subsidiary during such period to
the extent such Account Receivable Discount was deduced in computing
Consolidated Net Income for such period.
"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 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
to the referent person or a Wholly Owned Subsidiary of the referent
person,
(ii) the Net Income of any Subsidiary of the referent person 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 (which 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 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, the sum of (i)
the consolidated equity of the common stockholders of such person and its
consolidated Subsidiaries plus (ii) the respective amounts reported on such
person's most recent balance sheet 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 the SFC Note indentures in the book value of any asset
owned by such person or a consolidated Subsidiary of such person, (y) all
investments 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, all of
the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of Specialty Foods or Specialty Foods Acquisition
Corp. who (i) was a member of such Board of Directors on the date of the SFC
Note indentures or (ii) was nominated for election or elected to such Board of
Directors with the affirmative vote of a
149
<PAGE>
majority of the Continuing Directors who were members of such Board at the time
of such nomination or election.
"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.
"Disqualified Stock" means, with respect to the SFC 10 1/4% Senior Notes,
the SFC 11 1/8% or the SFC Subordinated Notes, any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the holder thereof, in whole or in part, on or prior
to the date on which the SFC 10 1/4% Senior Notes, the SFC 11 1/8% Senior Notes
or SFC Subordinated Notes, as the case may be, mature.
"85% Owned Subsidiary" of a person means any Subsidiary of such person at
least 85% of the outstanding Capital Stock or other ownership interests
(including at least 51% of the outstanding voting Capital Stock or other voting
ownership interests) of which are owned directly or indirectly by such person.
"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 Specialty Foods and its
Subsidiaries (other than under the Term Loan Agreement, the Revolving Credit
Agreement and the SFC Note indentures) in existence on the date of the SFC Note
indentures, until such amounts are repaid.
"First Tier Subsidiaries" direct Wholly Owned Subsidiaries of Specialty
Foods on the date of the indenture and any such subsidiaries acquired thereafter
other than the Accounts Receivable Subsidiary.
"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 Specialty
Foods or any of its Subsidiaries incurs or redeems any Indebtedness (other than
revolving credit borrowings) or issues or redeems preferred stock or consummates
any Material Acquisition subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the event for
which the calculation of the Fixed Charge Coverage Ratio is made, then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect to such
incurrence, guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred stock, or the consummation of such Material Acquisition,
as if the same had occurred at the beginning of the applicable period. For
purposes of calculating the Fixed Charge Coverage Ratio of Specialty Foods for
any period commencing prior to the date of the Refinancing Transactions, pro
forma effect shall be given to the Refinancing Transactions and the financing
thereof as if the same had occurred at the beginning of such period.
150
<PAGE>
"Fixed Charges" means, with respect to any person for any period, the sum
of (a) consolidated interest expense of such person for such period, whether
paid or accrued, to the extent such expense was deducted in computing
Consolidated Net Income (including amortization of original issue discount,
non-cash interest payments and the interest component of any payments associated
with Capital Lease Obligations but excluding amortization of deferred financing
fees), plus (b) the interest expense of any other person for such period with
respect to Indebtedness that is guaranteed by the referent person, plus (c) the
product of (i) all cash dividend payments (and non-cash dividend payments in the
case of a person that is a Subsidiary) on any series of preferred stock of such
person, times (ii) 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, expressed as a decimal, plus (d) one-third of
all operating lease payments of such person paid or accrued during such period,
in each case, on a consolidated basis and in accordance with GAAP, plus (e) the
amount of Accounts Receivable Discount attributable to sales of accounts
receivable by such person and its Subsidiaries to the Accounts Receivable
Subsidiary during such period.
"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 approved by a significant segment of the accounting profession,
which are in effect on the date of the SFC Note indentures.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"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.
"Indebtedness" means, with respect to any person, the principal amount of
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
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property (including pursuant to capital leases) 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, and also includes, to the extent not otherwise included, the guarantee of
items that would be included within this definition.
"Investments" means, with respect to any person, all investments by such
person in other persons (including Affiliates) in the forms of loans (including
guarantees), advances
151
<PAGE>
or capital contributions (excluding commission, travel, relocation 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 and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in New York City or at a place of payment are authorized by law 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 for the intervening
period.
"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).
"Material Acquisition" means any material acquisition of a business,
Capital Stock, property or assets or any other material transaction as a result
of which a person becomes a Subsidiary of Specialty Foods. For the purposes of
this definition, an acquisition or other transaction shall be deemed "material"
if it has an aggregate value of $5 million or more.
"Net Income" means, with respect to any person, the net income (loss) of
such person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with any sale of assets Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions), and
excluding any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).
"Non-Recourse Indebtedness" of any person means Indebtedness of such
person that
(i) is not guaranteed by any other person (except a Wholly Owned
Subsidiary of the referent person),
(ii) is not recourse to and does not obligate any other person (except a
Wholly Owned Subsidiary of the referent person) in any way,
(iii) does not subject any property or assets of any other person (except
a Wholly Owned Subsidiary of the referent person), directly or
indirectly, contingently or otherwise, to the satisfaction thereof,
and
152
<PAGE>
(iv) is not required by GAAP to be reflected on the financial statements
of any other person (other than a Subsidiary of the referent person)
prepared in accordance with GAAP.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursement obligations, damages and other liabilities
payable under the documentation governing any Indebtedness. With respect to the
SFC Subordinated Notes, "Obligations" shall include, without limitation,
liabilities in respect of any indemnity, any reimbursement, compensation or
contribution obligations, any liquidated damage provision (including Liquidated
Damages), any breach of representation or warranty or any rights of redemption
or rescission under the SFC Subordinated Note indenture, the Purchase
Agreements, the Registration Rights Agreement or by law or otherwise (other than
amounts payable to the SFC Subordinated Note trustee pursuant to the provisions
of the SFC Subordinated Note indenture with respect to compensation and
indemnification of the SFC Subordinated Note trustee).
"Paying Agent" means United States Trust Company of New York.
"Permitted Investments" means
(a) any Investments in Specialty Foods or in an 85% Owned Subsidiary of
Specialty Foods that is engaged in the same or a similar or related
line of business as Specialty Foods or any of its Subsidiaries were
engaged in on the date of the SFC Note indentures;
(b) any Investments in Cash Equivalents;
(c) Investments by Specialty Foods or any Subsidiary of Specialty Foods
in a person that is engaged in the same or a similar or related line
of business as Specialty Foods or any of its Subsidiaries were
engaged in on the date of the SFC Note indentures, if as a result of
such Investment (i) such person becomes an 85% Owned Subsidiary of
Specialty Foods 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, Specialty Foods or an 85%
Owned Subsidiary of Specialty Foods;
(d) Investments in agricultural commodities futures, options and other
hedging obligations in the ordinary course of business; and
(e) Investments in any Person other than Specialty Foods Acquisition
Corp. or a Subsidiary of Specialty Foods Acquisition Corp. that is
not also a Subsidiary of Specialty Foods (in addition to Investments
permitted by the foregoing clauses (a) through (d)) that, in the
aggregate, do not exceed $25 million at any one time outstanding.
153
<PAGE>
"Permitted Liens" means
(a) Liens on the Capital Stock of the First Tier Subsidiaries and the
Accounts Receivable Subsidiary and other assets of Specialty Foods,
if any, securing Senior Term Debt;
(b) Liens securing the Senior Revolving Debt;
(c) Liens in favor of Specialty Foods and its Wholly Owned Subsidiaries;
(d) Liens on property of a person existing at the time such person is
merged into or consolidated with Specialty Foods or any Subsidiary
of Specialty Foods; provided, that such Liens were in existence
prior to the contemplation of such merger or consolidation;
(e) Liens on property existing at the time of acquisition thereof by
Specialty Foods or any Subsidiary of Specialty Foods; provided, that
such Liens were in existence prior to the contemplation of such
acquisition;
(f) Liens existing on the date of the SFC Note indentures and renewals,
extensions and replacements thereof; provided, that such renewals,
extensions or renewals shall not apply to any property or assets not
previously subject to such Liens or increase the principal amount of
Obligations secured thereby;
(g) 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 pursued;
provided, that any reserve or other appropriate provision as shall
be required in conformity with GAAP shall have been made therefor;
(h) carriers', warehousemen's, mechanics', materialmen's, repairmen's,
landlords' or other like Liens arising in the ordinary course of
business;
(i) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and
deposits securing liability to insurance carriers under insurance or
self-insurance arrangements;
(j) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like
nature incurred in the ordinary course of business;
(k) easements, rights-of-way, encroachments and other survey defects,
restrictions and other similar encumbrances and title defects which,
in the aggregate, do not in any case materially detract from the
value of the
154
<PAGE>
property subject thereto or materially interfere with the ordinary
conduct of the business of Specialty Foods and its Subsidiaries;
(l) any Lien arising pursuant to any order of attachment, distraint or
other legal process arising in connection with court or arbitration
proceedings so long as the execution or other enforcement thereof is
effectively stayed, the claims secured thereby are being contested
in good faith by appropriate proceedings, adequate reserves have
been established with respect to such claims in accordance with GAAP
and no Default or Event of Default would result thereby;
(m) licenses for the use of intellectual property rights or like
intangible assets; and
(n) Liens incurred in the ordinary course of business of Specialty Foods
or any Subsidiary of Specialty Foods with respect to obligations
that do not exceed $5 million at any one time outstanding and that
are not incurred in connection with the borrowing of money or the
obtaining of advances or credit (other than trade credit).
"Principals" means Haas Wheat & Partners Incorporated, Acadia Partners,
L.P. and Keystone, Inc.
"Receivables Trust" means a trust organized solely for the purpose of
securitizing the accounts receivable held by the Accounts Receivable Subsidiary
that
(a) shall not engage in any business other than (i) the purchase of
accounts receivable or participation interests therein from the
Accounts Receivable Subsidiary and the servicing thereof, (ii) the
issuance of and distribution of payments with respect to the
securities permitted to be issued under clause (b) below and (iii)
other activities incidental to the foregoing,
(b) shall not at any time incur Indebtedness or issue any securities,
except (i) certificates representing undivided interests in the
Trust issued to the Accounts Receivable Subsidiary and (ii) debt
securities issued in an arm's length transaction for consideration
solely in the form of cash and Cash Equivalents, all of which (net
of any issuance fees and expenses) shall promptly be paid to the
Accounts Receivable Subsidiary, and
(c) shall distribute to the Accounts Receivable Subsidiary as a
distribution on the Accounts Receivable Subsidiary's beneficial
interest in the Receivables Trust no less frequently that once every
six months all available cash and Cash Equivalents held by it, to
the extent not required for reasonable operating expenses or
reserves therefor or to service any securities issued pursuant to
clause (b) above that are not held by the Accounts Receivable
Subsidiary.
155
<PAGE>
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Revolving Credit Agreement" means that certain Amended and Restated
Revolving Credit Agreement, dated as of July 17, 1995 by and among certain
Subsidiaries of Specialty Foods, Chemical Bank and the other lenders party
thereto, providing for up to $125 million in aggregate principal amount of
revolving loans and letters of credit, together with any replacement or
additional loan agreement or agreements, and including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, supplemented, extended,
modified, renewed, refunded, replaced or refinanced from time to time, whether
or not with the same lenders.
"Senior Revolving Debt" means all Obligations from time to time
outstanding under the Revolving Credit Agreement.
"Senior Term Debt" means all Obligations from time to time outstanding
under the Term Loan Agreement.
"Significant Subsidiary" means any Subsidiary which would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulations S-X,
promulgated pursuant to the Securities Act of 1933, as amended, as such
Regulation is in effect on the date of the SFC Note indentures.
"Specified Party" with respect to any Principal means (A) any controlling
stockholder or partner, a direct or indirect 80% (or more) owned Subsidiary, or
spouse or immediate family member (in the case of an individual) of such
Principal, (B) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially holding an
80% or more controlling interest of which consist of such Principal and/or such
other Persons referred to in the immediately preceding clause (A) or the
succeeding Clause (D) or (E), (C) any partner or stockholder of any Principal as
of the date of the SFC Note indentures who acquires any assets or voting stock
of Specialty Foods or Specialty Foods Acquisition Corp. pursuant to a general
distribution by such Principal to each of its partners or stockholders, (D) any
officer or director of any principal as of the date of the SFC Note indentures
or (E) co-investment entities established by any Principal within 90 days of the
date of the SFC Note indentures and controlled by such principal, any affiliated
party (including any officer or director) of such Principal or of the general
partner of such Principal (or of the general partner of any general partner of
such Principal) or any combination of the foregoing; provided, however, that (x)
each of Douglas D. Wheat, Mark W. Stephens, Thomas L. Harrison and HWP Specialty
Partners, L.P. shall be deemed a Specified Party of Haas Wheat & Partners
Incorporated and (y) any officer or director of Oak Hill Partners, Inc. as of
the date of the SFC Note indentures shall be deemed a Specified Party of Acadia
Partners, L.P. and Keystone, Inc.
156
<PAGE>
"Subsidiary" of any person means 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; provided,
however, that the Accounts Receivable Subsidiary and its Subsidiaries shall not
be deemed Subsidiaries of Specialty Foods or of any of its other Subsidiaries.
"Tax Sharing Agreement" means that certain tax sharing agreement, dated as
of the date of the SFC Note indentures, by and between Specialty Foods and
Specialty Foods Acquisition Corp., as in effect on the date of the SFC Note
indentures.
"Term Loan Agreement" means that certain Term Loan Agreement, dated as of
July 17, 1995, by and among Specialty Foods, Chemical Bank and the other lenders
party thereto, providing for $175 million in aggregate principal amount of term
loans, together with any replacement or additional credit agreement or
agreements, and including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each case as
amended, supplemented, extended, modified, renewed, refunded, replaced or
refinanced from time to time, whether or not with the same lenders.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled by and
published in the most recent Federal Reserve Statistical Release H.15 (519) that
has become publicly available at least two Business Days prior to the date fixed
for prepayment (or, if such Statistical Release is no longer published, any
publicly available source of similar market data)) most nearly equal to the then
remaining Weighted Average Life to Maturity of the applicable SFC Notes;
provided, that if the Weighted Average Life to Maturity of such SFC Notes is not
equal to the constant maturity of a United States Treasury security for which a
weekly average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the Weighted Average Life to Maturity of such SFC Notes is
less than one year, the weekly average yield on actually traded United States
securities adjusted to a constant maturity of one year shall be used.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding principal amount of such Indebtedness into (b) the sum of the
products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other scheduled required payments
of principal, including payment at final maturity, in respect thereof, by (y)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment.
"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
157
<PAGE>
directors' qualifying shares) shall at the time be owned by such person or by
one or more Wholly Owned Subsidiaries of such person or by such person and one
or more Wholly Owned Subsidiaries of such person.
"Yield Protection Amount" means, with respect to the SFC Notes, the
greater of (i) 1.0% of the principal amount of the applicable SFC Notes to be
redeemed and (ii) the excess, expressed as a percentage of the total principal
amount of the applicable SFC Notes outstanding on the date of determination and
applied to the principal amount of such Notes to be redeemed, of (A) the present
value of all remaining required interest and principal payments due on all such
Notes outstanding on the date of determination through the final stated maturity
of all such Notes, computed using a discount rate equal to the Treasury Rate
plus the Applicable Spread, over (B) the principal amount of all such Notes
outstanding on the date of determination.
158
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offers in exchange for initial notes acquired by it as
a result of market-making or other trading activities may be deemed to be an
underwriter within the meaning of the Securities Act and, therefore, must
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales, offers to resell or other transfers of the exchange
notes received by it in the exchange offers. Accordingly, each such
broker-dealer must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of these
exchange notes. The letter of transmittal states that by acknowledging that it
will delver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an underwriter within the meaning of the Securities Act.
This prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of exchange notes received in
exchange for initial notes where these initial notes were acquired as a result
of market-making activities or other trading activities. We have agreed that,
starting on the consummation of the exchange offers, and ending on the close of
business 180 days after the completion of the exchange offers, we will make this
prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any resale.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offers may be sold from time to time in one or more
transactions in the over-the-counter markets, in negotiated transactions,
through the writing of options on the exchange notes or a combination of these
methods of resale, at market prices prevailing at the time of resale, at prices
related to these prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through such broker-dealer and/or
the purchasers of any such exchange notes. Any broker-dealer that resells
exchange notes that were received by it for its own account pursuant to the
exchange offers and any broker or dealer that participates in a distribution of
these exchange notes may be deemed to be an underwriter within the meaning of
the Securities Act and any profit of any such resale of exchange notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The letter of transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
underwriter within the meaning of the Securities Act.
159
<PAGE>
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of our counsel, Paul, Weiss, Rifkind, Wharton & Garrison,
the following discussion is an accurate general description of certain of the
material anticipated United States Federal income tax consequences of the
acquisition, ownership, and disposition of exchange notes by U.S. holders (as
defined below). This summary is based upon current laws, regulations, rulings,
and judicial decisions all of which are subject to change, possibly
retroactively. This summary deals only with holders that hold SFC Notes or
initial notes and will hold exchange notes as capital assets within the meaning
of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"),
and does not address tax considerations applicable to investors that may be
subject to special tax rules such as banks, insurance companies, tax-exempt
organizations, persons that will hold notes as part of an integrated investment
(including a "straddle") comprised of exchange notes and one or more other
positions, dealers in securities or holders of, initial notes and/or exchange
notes that are not U.S. holders (as defined below). In addition, this discussion
does not consider the effect of any state, local, foreign, estate, gift or other
tax laws. Investors considering acquiring exchange notes pursuant to the
exchange offer should consult their own tax advisors with respect to the
application of the Federal income tax laws to their particular situations, as
well as any tax consequences arising under the laws of any state, local or
foreign taxing jurisdiction.
As used in this prospectus, the term U.S. holder means a beneficial owner
of notes that is, for United States Federal income tax purposes, (1) a citizen
or resident of the United States, (2) a domestic corporation or other entity
taxable as a corporation, (3) an estate the income of which is subject to United
States Federal income taxation regardless of its source, (4) a trust if (A) a
United States court is able to exercise supervision over the administration of
the trust and (B) one or more United States persons have authority to control
all substantial decisions of the trust, or (5) otherwise subject to United
States Federal income taxation with respect to its worldwide income on a net
income basis.
The Treatment of Holders of Private Exchange Notes
Taxation of Holders of Private Exchange Notes on the Exchange
In the opinion of our counsel, Paul, Weiss, Rifkind, Wharton & Garrison,
the exchange of an outstanding private exchange note for an exchange note will
not be a taxable event to a holder of our private exchange note, and a holder
will not recognize any taxable gain or loss as a result of such an exchange.
Accordingly, a holder will have the same adjusted basis and holding period in an
exchange note that was received in exchange for our private exchange note as it
had in our outstanding private exchange note immediately before such exchange.
Further, the tax consequences of ownership and disposition of such an exchange
note will be the same as the tax consequences of ownership and disposition of
our outstanding private exchange note.
160
<PAGE>
The Treatment of Exchange Notes Received in Exchange for Private Exchange
Notes
Payments of Stated Interest and Original Issue Discount
A holder of an 11 1/4% Senior Note, a 12 1/8% Senior Note, or a
Subordinated Note that is received in exchange for our private exchange note
will be required (absent an election described below to treat all interest on
the note as original issue discount) to report as income for U.S. Federal income
tax purposes the portion of the stated interest on such exchange note that is
"qualified stated interest" in accordance with the holder's method of accounting
for tax purposes. Qualified stated interest on a note is the stated interest
that is unconditionally payable in cash or property (other than debt instruments
of the issuer) at least annually at a single fixed rate.
Such exchange notes that are received in exchange for our private exchange
notes will have original issue discount for Federal income tax purposes.
Consequently, holders of such exchange notes will be required to include
original issue discount in ordinary income over the period that they hold such
notes on the basis of a constant yield method.
Because such exchange notes are treated for Federal income tax purposes as
the same as our private exchange notes, the amount of original issue discount on
such an exchange note will be calculated as if the exchange note and the private
exchange note were a single note that was issued at the time such private
exchange note was issued, for an issue price equal to the issue price of the
private exchange note, and any accrued original issue discount on the private
exchange note at the time of the exchange will carry over and be treated as
accrued original issue discount on the exchange note. The issue price of each of
our private exchange notes is its stated principal amount less the amount
allocated to any 11% Debentures received in exchange for such private exchange
note and such 11% Debentures pursuant to the "investment unit" rules. Pursuant
to these rules, when a note is issued together with certain property, the issue
price of the note should be allocated to each of the note and property in
proportion to their relative fair market values.
Except as set forth below under "--Acquisition Premium" and "--Bond
Premium," the amount of original issue discount on such an exchange note will be
equal to the excess of (i) the sum of the principal amount due at maturity plus
the amount of certain additional payments set forth below over (ii) the issue
price of such exchange note. Any amount of original issue discount included in
income will increase a holder's adjusted tax basis in such exchange notes, and
any payments (other than payments of qualified stated interest), including
additional payments described below, will decrease a holder's adjusted tax basis
in such exchange notes. Such payments will not be subject to Federal income tax.
The additional payments described in the preceding paragraph are as
follows: (i) in the case of holders of 11 1/4% Senior Notes or 12 1/8% Senior
Notes, the amount of additional interest on SFC 10 1/4% Senior Notes or 11 1/8%
Senior Notes accepted for exchange for our private exchange notes, commencing
April 1, 1999, and any other payments to be made on the 11 1/4% Senior Notes or
12 1/8% Senior Notes other
161
<PAGE>
than qualified stated interest; and (ii) in the case of holders of Subordinated
Notes, the amount the Non-Redemption Premium, the amount of interest on a
Subordinated Note payable in cash or in PIK Subordinated Notes, the amount of
additional interest on the SFC Subordinated Notes accepted for exchange for our
private exchange notes at the rate of 2% per annum, commencing April 1, 1999,
payable in cash or in PIK Subordinated Notes, and any other payments to be made
on the Subordinated Notes other than qualified stated interest. The amount of
such interest actually paid in additional PIK Subordinated Notes will be taken
into account as set forth below under "Issuance of PIK Subordinated Notes as
Additional Interest on SFC Subordinated Notes and Exercise of Election to Issue
PIK Subordinated Notes on the Subordinated Notes."
Election to Treat All Interest as Original Issue Discount
A holder of an exchange note, subject to certain limitations, may elect to
include in gross income for Federal income tax purposes all interest that
accrues on such note by using the constant yield method described above. For
purposes of the election, interest includes all stated and unstated interest,
acquisition discount, original issue discount, de minimis original issue
discount, market discount, and de minimis market discount, as adjusted by any
amortizable bond premium or acquisition premium (as discussed below). In
applying the constant yield method to a note with respect to which an election
is made, the issue price of the note will equal the electing holder's adjusted
basis in the note immediately after its acquisition, the issue date of the note
will be the date of its acquisition, and no payments on the note will be treated
as payments of qualified stated interest. This election is generally applicable
only to the note with respect to which it is made and may not be revoked without
the consent of the Internal Revenue Service. Such an election, if made in
respect of a market discount bond, will constitute an election to include market
discount in income currently on all market discount bonds held by such holder
during or after the taxable year in which the note is acquired. See the
discussion below under "--Market Discount." If the election is made with respect
to a note with amortizable bond premium, the holder will be deemed to have
elected to apply amortizable bond premium against interest with respect to all
debt instruments with amortizable bond premium held by the electing holder
during or after the taxable year in which the note is acquired. See the
discussion below under "--Bond Premium."
Issuance of PIK Subordinated Notes as Additional Interest on SFC
Subordinated Notes and Exercise of Election to Issue PIK
Subordinated Notes on the Subordinated Notes
In the case of holders who receive PIK Subordinated Notes in lieu of
certain interest on any SFC Subordinated Notes previously held by such holder
and in the event that the Issuer elects to issue PIK Subordinated Notes in
respect of paying cash interest to holders of Subordinated Notes, such issuance
of PIK Subordinated Notes will not be treated, for United States Federal income
tax purposes, as a payment of interest, and the Subordinated Notes will be
deemed to be "reissued" solely for purposes for computing the amount of original
issue discount includible in income during the then remaining term of the
Subordinated Notes. Under these rules, the Subordinated Notes will be deemed to
be reissued at their then adjusted issue price, and the amount of original issue
discount includible in ordinary income over the remaining term of the exchange
notes, determined on the basis of a constant yield method, will equal the excess
of the (i) the sum of the principal amount due at maturity of the Subordinated
Notes and PIK Subordinated Notes
162
<PAGE>
issued in lieu of cash payments, plus all remaining cash payments of stated
interest and the amount of the Non-Redemption Payment on the Subordinated Notes
and PIK Subordinated Notes over (ii) the adjusted issue price of the
Subordinated Notes.
Applicable High Yield Debt Obligations
The exchange notes that are received in exchange for our private exchange
notes will constitute "applicable high yield debt obligations" ("AHYDOs") for
Federal income tax purposes if their yield to maturity is equal to or greater
than the sum of the applicable Federal rate (the "AFR") plus five percentage
points. If the exchange notes are AHYDOs, the Issuer will not be entitled to
deduct original issue discount that accrues with respect to such notes until
amounts attributed to such original issue discount are paid in cash. In
addition, to the extent the yield to maturity of such notes exceeds the sum of
the AFR plus six percentage points, the Issuer will not be entitled to claim a
deduction for interest expense, for Federal income tax purposes, that is
attributable to such excess yield.
Market Discount
The market discount rules generally provide that if a holder of an
exchange note that is received in exchange for our private exchange note
purchased the note, subsequent to the original offering, for an amount that is
less than the "revised issue price" (the sum of the issue price of the exchange
note and the aggregate amount of original interest discount includible in the
gross income of all holders for periods before the acquisition of the exchange
note by such holder, which probably should be reduced by, although it is not
expressly stated in the Code, the amount of all payments previously received on
the exchange note) of the exchange note, the amount of the difference will be
treated as "market discount" for Federal income tax purposes, unless such
difference is less than a specified de minimis amount. Such a holder will be
required to treat any principal payment on, or any gain on the sale, exchange,
retirement or other disposition of, a exchange note as ordinary income to the
extent of the market discount which has not previously been included in income
and is treated as having accrued on such exchange note at the time of such
payment or disposition. In addition, the holder may be required to defer, until
the maturity of the note or its earlier disposition in a taxable transaction,
the deduction of all or a portion of the interest expense on any indebtedness
incurred or continued to purchase or carry such exchange note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the exchange note, unless
the holder elects to accrue on a constant interest method. A holder of an
exchange note may elect to include market discount in income currently as it
accrues (on either a ratable or constant interest method), in which case the
rule described above regarding deferral of interest deductions will not apply.
This election to include market discount in income currently, once made, applies
to all market discount obligations acquired on or after the first taxable year
to which the election applies and may not be revoked without the consent of the
Internal Revenue Service.
163
<PAGE>
Acquisition Premium
The acquisition premium rules generally provide that if a holder of an
exchange note that is received in exchane for our private exchange note
purchased the note, subsequent to the original offering, for an amount that is
greater than the "adjusted issue price" (the sum of the issue price of the
exchange note and the aggregate amount of original interest discount includible
in the gross income of all holders for periods before the acquisition of the
exchange note by such holder, reduced by the amount (other than qualified stated
interest) of all payments previously received on the exchange note) of the
exchange note, the amount of such excess will be treated as "acquisition
premium" for Federal income tax purposes, and the amount of original issue
discount that the holder includes in gross income is reduced to reflect such
acquisition premium. Acquisition premium is allocated on a pro rata basis to
each accrual of original issue discount reducing original issue discount by a
constant fraction, the numerator of which is the excess of the adjusted basis of
the exchange note over its adjusted issue price, and the denominator of which is
the excess of the sum of all amounts (other than qualified stated interest)
payable on the exchange note after the purchase date over its adjusted issue
price. Alternatively, a holder may elect to amortize acquisition premium on a
constant yield basis, treating the holder's basis in the exchange note as the
exchange note's issue price.
Bond Premium
If a subsequent holder's tax basis in a exchange note that is received in
exchange for our private exchange note exceeds the sum of all amounts (other
than qualified stated interest) payable on such note after the acquisition date,
such excess would be treated as "amortizable bond premium." The Holder may elect
to amortize such excess over the period from the acquisition date of the note to
the maturity date. Amortizable bond premium allocable to a period may be offset
against qualified stated interest on the related security to the extent such
qualified stated interest for the period exceeds the holder's yield for the
period (the yield being the discount rate that, when used in computing the
present value of all remaining payments to be made (including qualified stated
interest) produces an amount equal to the holder's basis in the note. Additional
amortizable premium for a period may be treated as a bond premium deduction to
the extent that the holder's total interest inclusions on the note in prior
periods exceed the total amount treated by the holder as a bond premium
deduction on the note in prior periods. Any excess over such total interest
inclusions is carried forward to the next accrual period. A holder that elects
to amortize bond premium must reduce its adjusted basis in the note by the
amount of allowable amortization. An election to amortize bond premium applies
to the amortizable bond premium on all taxable bonds held during or after the
holder's taxable year for which the election is made and may be revoked only
with the consent of the Internal Revenue Service.
Sale, Exchange or Retirement of Exchange Notes Received in Exchange
for Outstanding SFC Notes
If an exchange note that is received in exchange for our private exchange
note is redeemed, sold or otherwise disposed of, a holder generally will
recognize gain or loss equal to the difference between the amount realized on
the sale or other disposition of such exchange note (to the extent such amount
does not represent accrued but unpaid interest) and such adjusted holder's
adjusted tax basis in such note. Except as set forth in
164
<PAGE>
the discussion of market discount set forth above, such gain or loss will be
capital gain or loss and will be long-term if the holder has held the exchange
note for more than one year at the time of the disposition. The deductibility of
capital losses is subject to limitations.
Reporting Requirements
The Issuer will provide annual information statements to holders of
exchange notes that are received in exchange for our private exchange notes and
to the Internal Revenue Service setting forth the amount of original issue
discount determined to be attributable to each of the exchange notes for that
year.
The Treatment of Holders of SFC Notes
Taxation of Holders of SFC Notes on the Exchange
In the opinion of our counsel, Paul, Weiss, Rifkind, Wharton & Garrison,
the exchange of an outstanding SFC Note for an exchange note should be a taxable
event to a holder of an outstanding SFC Note. Tendering holders should recognize
gain or loss equal to the difference between (i) the issue price of any exchange
notes received in the exchange offer and (ii) such holder's adjusted tax basis
in its SFC Notes exchanged therefor. Because the SFC Notes are not, and the
exchange notes will not be, traded on an established securities market, the
issue price of an exchange note that is received in exchange for an SFC Note
will be its stated principal amount. A holder's adjusted tax basis in its SFC
Notes will generally be equal to the amount paid for the SFC Notes and, in the
case of a holder that purchased such SFC Notes after their original issuance at
a discount to their initial issue price, market discount which such holder may
have elected to include in income and reduced by, in the case of a holder that
purchased the SFC Notes after their original issuance at a premium, any such
acquisition premium which the holder may have elected to deduct from income. The
gain or loss recognized on such an exchange, if any, will be capital gain or
loss, except to the extent that such gain is attributable to accrued market
discount that the holder has not elected to include in income. The portion
representing capital gain or loss will be long-term capital gain or loss if such
SFC Note was held for more than one year. The deductibility of capital losses is
subject to limitation. A holder's initial tax basis in an exchange note that was
received in exchange for an SFC Note will be equal to the stated principal
amount of such exchange note.
The Treatment of the 11 1/4% Senior Notes and the 12 1/8% Senior Notes
Received in Exchange for Outstanding SFC Notes
Payments of Interest
Interest payable on an 11 1/4% Senior Note that is received in exchange
for an outstanding SFC Note or a 12 1/8% Senior Note that is received in
exchange for an outstanding SFC Note will be includible in the income of a
holder in accordance with such holder's regular method of accounting.
165
<PAGE>
Market Discount
The market discount rules generally provide that if a subsequent holder of
such 11 1/4% Senior Note or such 12 1/8% Senior Note purchases the note for an
amount that is less than its stated principal amount, the amount of the
difference will be treated as "market discount" for Federal income tax purposes,
unless such difference is less than a specified de minimis amount. Such a holder
will be required to treat any principal payment on, or any gain on the sale,
exchange, retirement or other disposition of, an 11 1/4% Senior Note or a 12
1/8% Senior Note as ordinary income to the extent of the market discount which
has not previously been included in income and is treated as having accrued on
such 11 1/4% Senior Note or 12 1/8% Senior Note at the time of such payment or
disposition. In addition, the holder may be required to defer, until the
maturity of the note or its earlier disposition in a taxable transaction, the
deduction of all or a portion of the interest expense on any indebtedness
incurred or continued to purchase or carry such 11 1/4% Senior Note or 12 1/8%
Senior Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of an 11 1/4% Senior Note or a
12 1/8% Senior Note, unless the holder elects to accrue on a constant interest
method. A holder of an 11 1/4% Senior Note or a 12 1/8% Senior Note may elect to
include market discount in income currently as it accrues (on either a ratable
or constant interest method), in which case the rule described above regarding
deferral of interest deductions will not apply. This election to include market
discount in income currently, once made, applies to all market discount
obligations acquired on or after the first taxable year to which the election
applies and may not be revoked without the consent of the Internal Revenue
Service.
Bond Premium
If a subsequent holder's tax basis in such 11 1/4% Senior Note or 12 1/8%
Senior Note exceeds its stated principal amount, such excess would be treated as
"amortizable bond premium." The Holder may elect to amortize such excess over
the period from the acquisition date of the note to the maturity date.
Amortizable bond premium allocable to a period may be offset against qualified
stated interest on the related security to the extent such qualified stated
interest for the period exceeds the holder's yield for the period (the yield
being the discount rate that, when used in computing the present value of all
remaining payments to be made (including qualified stated interest) produces an
amount equal to the holder's basis in the note. Additional amortizable premium
for a period may be treated as a bond premium deduction to the extent that the
holder's total interest inclusions on the note in prior periods exceed the total
amount treated by the holder as a bond premium deduction on the note in prior
periods. Any excess over such total interest inclusions is carried forward to
the next accrual period. A holder that elects to amortize bond premium must
reduce its adjusted basis in the note by the amount of allowable amortization.
An election to amortize bond premium applies to the amortizable bond premium on
all taxable bonds held during or after the holder's taxable year for which the
election is made and may be revoked only with the consent of the Internal
Revenue Service.
166
<PAGE>
Sale, Exchange or Retirement of New 11 1/4% Senior Notes or New
12 1/8% Senior Notes
If an 11 1/4% Senior Note that is received in exchange for an outstanding
SFC Note or a 12 1/8% Senior Note that is received in exchange for an
outstanding SFC Note is redeemed, sold or otherwise disposed of, a holder
generally will recognize gain or loss equal to the difference between the amount
realized on the sale or other disposition of such 11 1/4% Senior Note or 12 1/8%
Senior Note (to the extent such amount does not represent accrued but unpaid
interest) and such holder's adjusted tax basis in such note. Except as set forth
in the discussion of market discount set forth above, such gain or loss will be
capital gain or loss and will be long-term if the holder has held the exchange
note for more than one year at the time of the disposition. The deductibility of
capital losses is subject to limitations.
The Treatment of the Subordinated Notes Received in Exchange for
Outstanding SFC Notes
Payments of Stated Interest and Original Issue Discount
A holder of a Subordinated Note that is received in exchange for an
outstanding SFC Note will be required (absent an election described below to
treat all interest on the note as original issue discount) to report as income
for U.S. Federal income tax purposes the portion of the stated interest on the
note that is "qualified stated interest" in accordance with the holder's method
of accounting for tax purposes. Qualified stated interest on a note is the
stated interest that is unconditionally payable in cash or property (other than
debt instruments of the issuer) at least annually at a single fixed rate.
Such Subordinated Notes will have original issue discount for Federal
income tax purposes. Consequently, holders of such Subordinated Notes will be
required to include original issue discount in ordinary income over the period
that they hold such notes on the basis of a constant yield method.
Except as set forth below under "--Acquisition Premium" and "--Bond
Premium," the amount of original issue discount on such a Subordinated Note will
be equal to the excess of (i) the sum of the principal amount due at maturity
plus the amount of the Non-Redemption Premium, the amount of the interest on a
Subordinated Note payable in cash or in PIK Subordinated Notes, and any other
payments to be made on the note other than qualified stated interest over (ii)
the issue price of such Subordinated Note. The amount of such interest actually
paid in additional PIK Subordinated Notes will be taken into account as set
forth below under "Exercise of Election to Issue PIK Subordinated Notes on the
Subordinated Notes."
Any amount of original issue discount included in income will increase a
holder's adjusted tax basis in such notes, and any payments (other than payments
of qualified stated interest) will decrease a holder's adjusted tax basis in
such notes. Such payments will not be subject to Federal income tax.
167
<PAGE>
Election to Treat All Interest as Original Issue Discount.
A holder of such a Subordinated Note, subject to certain limitations, may
elect to include in gross income for Federal income tax purposes all interest
that accrues on such note by using the constant yield method described above.
For purposes of the election, interest includes all stated and unstated
interest, acquisition discount, original issue discount, de minimis original
issue discount, market discount, and de minimis market discount, as adjusted by
any amortizable bond premium or acquisition premium (as discussed below). In
applying the constant yield method to a note with respect to which an election
is made, the issue price of the note will equal the electing holder's adjusted
basis in the note immediately after its acquisition, the issue date of the note
will be the date of its acquisition, and no payments on the note will be treated
as payments of qualified stated interest. This election is generally applicable
only to the note with respect to which it is made and may not be revoked without
the consent of the Internal Revenue Service. Such an election, if made in
respect of a market discount bond, will constitute an election to include market
discount in income currently on all market discount bonds held by such holder
during or after the taxable year in which the note is acquired. See the
discussion below under "--Market Discount." If the election is made with respect
to a note with amortizable bond premium, the holder will be deemed to have
elected to apply amortizable bond premium against interest with respect to all
debt instruments with amortizable bond premium held by the electing holder
during or after the taxable year in which the note is acquired. See the
discussion below under "--Bond Premium."
Exercise of Election to Issue PIK Subordinated Notes on the
Subordinated Notes
In the event that the Issuer elects to issue PIK Subordinated Notes in
respect of paying cash interest to holders of such Subordinated Notes, such
issuance of PIK Subordinated Notes will not be treated, for United States
Federal income tax purposes, as a payment of interest, and the Subordinated
Notes will be deemed to be "reissued" solely for purposes for computing the
amount of original issue discount includible in income during the then remaining
term of the Subordinated Notes. Under these rules, the Subordinated Notes will
be deemed to be reissued at their then adjusted issue price, and the amount of
original issue discount includible in ordinary income over the remaining term of
the exchange notes, determined on the basis of a constant yield method, will
equal the excess of the (i) the sum of the principal amount due at maturity of
the Subordinated Notes and PIK Subordinated Notes issued in lieu of cash
payments, plus all remaining cash payments of stated interest and the amount of
the Non-Redemption Payment on the Subordinated Notes and PIK Subordinated Notes
over (ii) the adjusted issue price of the Subordinated Notes.
Applicable High Yield Debt Obligations
The Subordinated Notes will constitute "applicable high yield debt
obligations" ("AHYDOs") for Federal income tax purposes if their yield to
maturity is equal to or greater than the sum of the applicable Federal rate (the
"AFR") plus five percentage points. If the Subordinated notes are AHYDOs, the
Issuer will not be entitled to deduct original issue discount that accrues with
respect to such notes until amounts attributed to such original issue discount
are paid in cash. In addition, to the extent the yield to maturity of such notes
exceeds the sum of the AFR plus six percentage points, the Issuer
168
<PAGE>
will not be entitled to claim a deduction for interest expense, for Federal
income tax purposes, that is attributable to such excess yield.
Market Discount
The market discount rules generally provide that if a holder of a
Subordinated Note purchased the note, subsequent to the original offering, for
an amount that is less than the "revised issue price" (the sum of the issue
price of the Subordinated Note and the aggregate amount of original interest
discount includible in the gross income of all holders for periods before the
acquisition of the Subordinated Note by such holder, which probably should be
reduced by, although it is not expressly stated in the Code, the amount of all
payments previously received on the Subordinated Note) of the Subordinated Note,
the amount of the difference will be treated as "market discount" for Federal
income tax purposes, unless such difference is less than a specified de minimis
amount. Such a holder will be required to treat any principal payment on, or any
gain on the sale, exchange, retirement or other disposition of, a Subordinated
Note as ordinary income to the extent of the market discount which has not
previously been included in income and is treated as having accrued on such
Subordinated Note at the time of such payment or disposition. In addition, the
holder may be required to defer, until the maturity of the exchange note or its
earlier disposition in a taxable transaction, the deduction of all or a portion
of the interest expense on any indebtedness incurred or continued to purchase or
carry such Subordinated Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Subordinated Note,
unless the holder elects to accrue on a constant interest method. A holder of a
Subordinated Note may elect to include market discount in income currently as it
accrues (on either a ratable or constant interest method), in which case the
rule described above regarding deferral of interest deductions will not apply.
This election to include market discount in income currently, once made, applies
to all market discount obligations acquired on or after the first taxable year
to which the election applies and may not be revoked without the consent of the
Internal Revenue Service.
Acquisition Premium
The acquisition premium rules generally provide that if a holder of a
Subordinated Note purchased the note, subsequent to the original offering, for
an amount that is greater than the "adjusted issue price" (the sum of the issue
price of the exchange note and the aggregate amount of original interest
discount includible in the gross income of all holders for periods before the
acquisition of the exchange note by such holder, reduced by the amount (other
than qualified stated interest) of all payments previously received on the
Subordinated Note) of the Subordinated Note, the amount of such excess will be
treated as "acquisition premium" for Federal income tax purposes, and the amount
of original issue discount that the holder includes in gross income is reduced
to reflect such acquisition premium. Acquisition premium is allocated on a pro
rata basis to each accrual of original issue discount reducing original issue
discount by a constant fraction, the numerator of which is the excess of the
adjusted basis of the Subordinated Note over its adjusted issue price, and the
denominator of which is the excess of the sum of all amounts (other than
qualified stated interest) payable on the Subordinated Note after the purchase
date over its adjusted issue price. Alternatively, a holder may elect to
amortize acquisition premium on
169
<PAGE>
a constant yield basis, treating the holder's basis in the Subordinated Note as
the Subordinated Note's issue price.
Bond Premium
If a subsequent holder's tax basis in a Subordinated Note exceeds the sum
of all amounts (other than qualified stated interest) payable on such note after
the acquisition date, such excess would be treated as "amortizable bond
premium." The Holder may elect to amortize such excess over the period from the
acquisition date of the note to the maturity date. Amortizable bond premium
allocable to a period may be offset against qualified stated interest on the
related security to the extent such qualified stated interest for the period
exceeds the holder's yield for the period (the yield being the discount rate
that, when used in computing the present value of all remaining payments to be
made (including qualified stated interest) produces an amount equal to the
holder's basis in the note. Additional amortizable premium for a period may be
treated as a bond premium deduction to the extent that the holder's total
interest inclusions on the note in prior periods exceed the total amount treated
by the holder as a bond premium deduction on the note in prior periods. Any
excess over such total interest inclusions is carried forward to the next
accrual period. A holder that elects to amortize bond premium must reduce its
adjusted basis in the note by the amount of allowable amortization. An election
to amortize bond premium applies to the amortizable bond premium on all taxable
bonds held during or after the holder's taxable year for which the election is
made and may be revoked only with the consent of the Internal Revenue Service.
Sale, Exchange or Retirement of Subordinated Notes
If a Subordinated Note that is received in exchange for an outstanding SFC
Notes is redeemed, sold or otherwise disposed of, a holder generally will
recognize gain or loss equal to the difference between the amount realized on
the sale or other disposition of such Subordinated Note (to the extent such
amount does not represent accrued but unpaid interest) and such holder's tax
basis in such note. Except as set forth in the discussion of market discount set
forth above, such gain or loss will be capital gain or loss and will be
long-term if the holder has held the exchange note for more than one year at the
time of the disposition. The deductibility of capital losses is subject to
limitations.
Reporting Requirements
The Issuer will provide annual information statements to holders of
Subordinated Notes that are received in exchange for outstanding SFC Notes and
to the Internal Revenue Service setting forth the amount of original issue
discount determined to be attributable to each of the Subordinated Notes for
that year.
Information Reporting and Backup Withholding Tax
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest (including original issue discount) on
an exchange note and payment of the proceeds of the sale of an exchange note to
certain non-corporate, not otherwise exempt holders, and a 31% backup
withholding tax may apply to such payments if the holder (i) fails to furnish or
certify its correct taxpayer identification number to the payor in the manner
required, (ii) is notified by the Internal Revenue Service that it has
170
<PAGE>
failed to report payments of interest and dividends properly, or (iii) under
certain circumstances, fails to certify that it has not been notified by the
Internal Revenue Service that it is subject to backup withholding for failure to
report interest and dividend payments. Any amounts withheld under the backup
withholding rules from a payment to a holder will be allowed as a credit against
such holder's United States Federal income tax liability and may entitle the
holder to a refund.
THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER OF EXCHANGE NOTES IN LIGHT
OF HIS PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION. EACH HOLDER OF
EXCHANGE NOTES SHOULD CONSULT HIS OWN ADVISOR AS TO THE SPECIFIC TAX
CONSEQUENCES TO SUCH HOLDER OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF
EXCHANGE NOTES, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS, OR SUBSEQUENT VERSIONS THEREOF.
LEGAL MATTERS
The validity of the exchange notes will be passed upon for us by Paul,
Weiss, Rifkind, Wharton & Garrison, New York, New York.
EXPERTS
The financial statements of Specialty Foods Corporation and subsidiaries
as of December 31, 1998 and 1997, and for each of the years in the three-year
period ended December 31, 1998, have been included in this prospectus and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere in this prospectus, and upon
the authority of said firm as experts in accounting and auditing.
171
<PAGE>
WHERE YOU CAN OBTAIN ADDITIONAL INFORMATION
We are not currently subject to the periodic reporting and other
informational requirements of the Securities Exchange Act of 1934. However, we
will be subject to those requirements upon the completion of the exchange
offers. In addition, the indentures require that we file reports under the
Securities Exchange Act of 1934 with the Securities and Exchange Commission and
provide those reports to the trustee and holders of the notes. You can inspect
and copy at prescribed rates the reports and other information that we file with
the Securities and Exchange Commission at the public reference facilities
maintained by the Securities and Exchange Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and also at the regional
offices of the Securities and Exchange Commission located at 7 World Trade
Center, Suite 1300, New York, New York 10048 and the Citicorp Center at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You may obtain
information on the operation of the public reference facilities by calling the
Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
Exchange Commission also maintains an internet web site at http://www.sec.gov
that contains reports, proxy and information statements and other information.
You can also obtain copies of such materials from us upon request.
We have filed a registration statement on Form S-4 with the Securities and
Exchange Commission covering the exchange notes, and this prospectus is part of
our registration statement. For further information on us and the exchange
notes, you should refer to our registration statement and its exhibits. This
prospectus summarizes material provisions of contracts and other documents that
we refer you to. Since the prospectus may not contain all the information that
you may find important, you should review the full text of these documents. We
have included copies of these documents as exhibits to our registration
statement.
We have agreed that, whether or not we are required to do so by the rules
and regulations of the Securities and Exchange Commission, for so long as any of
the exchange notes remain outstanding, we will furnish you as a holder of the
exchange notes and will, if permitted, file with the Securities and Exchange
Commission (1) all quarterly and annual financial information that would be
required to be contained in a filing with the Securities and Exchange Commission
on Forms 10-Q and 10-K if we 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 our certified independent accountants, and (2) all reports that would be
required to be filed with the Securities and Exchange Commission on Form 8-K if
we were required to file such reports. In addition, for so long as any of the
exchange notes remain outstanding, we have agreed to make available to any
prospective purchaser of the exchange notes or beneficial owner of the notes in
connection with any sale of these notes the information required by Rule 144
under the Securities Act.
172
<PAGE>
INDEX TO FINANCIAL INFORMATION
Page
----
Annual Information
Independent Auditors' Report.................................................F-2
Consolidated Balance Sheets -
December 31, 1998 and 1997.................................................F-3
Consolidated Statements of Operations
Years ended December 31, 1998, 1997, and 1996..............................F-4
Consolidated Statements of Changes in Stockholders' Equity -
Years ended December 31, 1998, 1997, and 1996..............................F-5
Consolidated Statements of Cash Flows -
Years ended December 31, 1998, 1997, and 1996..............................F-6
Notes to Financial Statements................................................F-7
Interim Information
Condensed Consolidated Balance Sheets as of March 31, 1999 and
December 31, 1998.........................................................F-25
Condensed Consolidated Statements of Operations for the three
months ended March 31, 1999 and 1998......................................F-26
Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 1999 and 1998.............................................F-27
Notes to Financial Statements...............................................F-28
All other financial statement schedules are omitted as not applicable or because
the required information is presented in the consolidated financial statements
or related notes.
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Specialty Foods Corporation:
We have audited the accompanying consolidated balance sheets of Specialty Foods
Corporation and Subsidiaries as of December 31, 1998 and 1997 and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1998.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Specialty Foods
Corporation and Subsidiaries as of December 31, 1998 and 1997 and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1998 in conformity with generally accepted accounting
principles.
KPMG LLP
Chicago, Illinois
March 19, 1999
F-2
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1997
--------- ---------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 5,880 $ 234,266
Accounts receivable, net 19,327 15,504
Inventories 23,366 20,188
Net assets of discontinued operations 86,632 65,192
Other current assets 7,234 7,157
--------- ---------
Total current assets 142,439 342,307
Property, plant, and equipment, net 234,944 146,023
Intangible assets, net 113,438 842
Other noncurrent assets 39,338 23,491
--------- ---------
Total assets $ 530,159 $ 512,663
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $ 3,450 $ 2,561
Accounts payable 37,779 41,925
Accrued expenses 80,741 80,906
--------- ---------
Total current liabilities 121,970 125,392
Long-term debt 820,309 753,054
Due to Specialty Foods Acquisition Corporation 7,499 7,376
Other noncurrent liabilities 31,355 30,645
--------- ---------
Total liabilities 981,133 916,467
--------- ---------
Stockholders' equity:
Additional paid-in capital 275,000 275,000
Accumulated deficit (725,974) (678,804)
--------- ---------
Total stockholders' equity (450,974) (403,804)
--------- ---------
Total liabilities and stockholders' equity $ 530,159 $ 512,663
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Net sales $ 742,315 $ 718,105 $ 705,996
Cost of sales 329,567 321,851 328,422
--------- --------- ---------
Gross profit 412,748 396,254 377,574
--------- --------- ---------
Operating expenses:
Selling, distribution, general and administrative expenses 379,794 367,051 349,463
Amortization of intangibles 1,471 900 7,032
Goodwill write-down -- -- 203,304
--------- --------- ---------
381,265 367,951 559,799
--------- --------- ---------
Operating profit (loss) 31,483 28,303 (182,225)
Other:
Interest expense, net 84,750 90,789 93,479
Other expense, net 3,129 4,729 9,132
--------- --------- ---------
Loss before income taxes (56,396) (67,215) (284,836)
Provision (benefit) for income taxes (507) 244 927
--------- --------- ---------
Loss from continuing operations (55,889) (67,459) (285,763)
Discontinued operations:
Earnings (loss) 10,324 31,404 (146,273)
Gain (loss) on disposal (601) 133,130 (14,514)
--------- --------- ---------
9,723 164,534 (160,787)
--------- --------- ---------
Income (loss) before extraordinary items (46,166) 97,075 (446,550)
Extraordinary items -- (5,714) --
--------- --------- ---------
Net income (loss) $ (46,166) $ 91,361 $(446,550)
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
(In thousands, except share data)
<TABLE>
<CAPTION>
Common stock Additional Cumulative
----------------------- paid-in Accumulated Translation
Shares Amount Capital Deficit Adjustment
--------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 100 -- $ 275,000 $(319,656) $ (837)
Dividend to parent -- -- -- (2,837) --
Cumulative translation adjustment -- -- -- -- 837
Net loss -- -- -- (446,550) --
--------- ----------- --------- --------- ---------
Balance at December 31, 1996 100 $ -- $ 275,000 $(769,043) $ --
Dividend to parent -- -- -- (1,122) --
Net loss -- -- -- 91,361 --
--------- ----------- --------- --------- ---------
Balance at December 31, 1997 100 $ -- $ 275,000 $(678,804) $ --
Dividend to parent -- -- -- (1,004) --
Net loss -- -- -- (46,166) --
--------- ----------- --------- --------- ---------
Balance at December 31, 1998 100 $ -- $ 275,000 $(725,974) --
========= =========== ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Loss from continuing operations $ (55,889) $ (67,459) $(285,763)
Adjustments to reconcile to net cash from continuing
operating activities:
Depreciation and amortization 27,204 21,087 27,868
Debt issuance cost amortization 9,500 5,511 5,472
Write-down of goodwill -- -- 203,304
Loss on disposal of property, plant, and equipment, net 436 1,521 5,747
Changes in assets and liabilities, net of effects from acquisitions of
businesses:
Accounts receivable 8,916 6,241 14,612
Inventories 1,338 398 214
Prepaid expenses and other assets 274 1,576 (5,987)
Accounts payable (8,478) (9,093) 2,064
Accrued expenses and other (15,537) (13,809) (1,627)
--------- --------- ---------
Net cash used by continuing operating activities (32,236) (54,027) (34,096)
Net cash provided (used) by discontinued operations (11,717) (41,564) 27,055
--------- --------- ---------
Net cash used by operating activities (43,953) (95,591) (7,041)
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired (135,035) -- --
Net proceeds from divestitures of businesses -- 384,096 69,333
Capital expenditures (91,445) (36,071) (25,218)
Cash restricted for the purchase of property, plant
and equipment (8,017) -- --
Proceeds from sale leaseback, net -- -- 13,370
Other (5,061) (3,281) (727)
--------- --------- ---------
Net cash provided (used) by investing activities (239,558) 344,744 56,758
Cash flows from financing activities:
Increase (decrease) in revolving credit 75,000 (78,300) 5,700
Payments on long-term debt (6,115) (3,529) (2,303)
Payments of debt issuance costs (12,879) -- (3,738)
Issuance of redeemable preferred stock -- 19,500 --
Other (881) (738) (2,837)
--------- --------- ---------
Net cash provided (used) by financing activities 55,125 (63,067) (3,178)
Increase (decrease) in cash and cash equivalents (228,386) 186,086 46,539
Balance - beginning of year 234,266 48,180 1,641
Balance - end of year $ 5,880 $ 234,266 $ 48,180
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
(1) Company Background
Specialty Foods Acquisition Corporation ("SFAC") through its direct,
wholly-owned subsidiary, Specialty Foods Corporation ("SFC"), is a leading
producer, marketer and distributor of bakery products, including retail
bread, cookies and other baked goods. The continuing operations of SFC
consist of the following operating companies:
o Metz Baking Company ("Metz") - Metz is a leading retail bread
company serving a sixteen state area of the Midwestern United
States. Metz's product line includes breads, buns, rolls and
sweet goods.
o Mother's Cake & Cookie Co. ("Mother's") - Mother's is the
second largest retail cookie producer and distributor in the
Western United States. Mother's sells its branded cookie
products primarily to retail grocers.
o Archway Cookies, Inc. ("Archway") - Acquired in 1998, Archway
is one of the nation's leading cookie makers, producing more
than one billion cookies annually. Archway sells its branded
cookie products through a network of independent distributors
who resell to retail food outlets and chain stores throughout
the U.S. and Canada.
o Andre-Boudin Bakeries, Inc. ("Boudin") - Boudin is a leading
marketer of premium branded specialty breads and bread-related
products. Boudin sells most of its products through a chain of
46 bakery cafes and kiosks located in California and the
greater Chicago area.
The Company's discontinued operations are described in Note 3.
(2) Summary of Significant Accounting Policies
Basis of Presentation
The Company's financial statements are presented on a consolidated basis.
All significant intercompany accounts and transactions have been
eliminated. Acquisitions recorded as purchases are included in the
Consolidated Statement of Operations from the date of acquisition.
Divestitures reported as discontinued operations have been removed from
continuing operations and reclassified to discontinued operations in
accordance with Accounting Principles Board Opinion No. 30.
F-7
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
Use of Estimates in the Preparation of Financial Statements
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
related disclosures at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications
Certain amounts included in the 1997 and 1996 financial statements have
been reclassified to conform to the manner in which the 1998 financial
statements have been presented.
Cash Equivalents
Cash equivalents represent investments in overnight bank deposits and
commercial paper with a maturity of less than three months.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
principally by the first-in, first-out (FIFO) method.
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost. Depreciation is
provided by the straight-line method over the assets' estimated useful
lives or, in the case of leasehold improvements, over the terms of the
leases, if shorter, as follows:
Years
-----
Buildings and improvements 7-40
Machinery and equipment 3-20
Office furniture and vehicles 3-10
Expenditures for maintenance, repairs, and minor replacements are charged to
current operations. Expenditures for major replacements and betterment are
capitalized.
The cost and related accumulated depreciation of property and equipment retired
or sold is eliminated from the property and equipment accounts at the time of
retirement or sale, and the resulting gain or loss is reported in the
Consolidated Statement of Operations.
F-8
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
Intangible Assets
Intangible assets, which consist primarily of the excess of cost over fair
value of net assets acquired, are amortized on a straight-line basis over
the periods of expected benefit, which range from five to forty years. The
Company annually evaluates whether events and circumstances have occurred
that indicate that the remaining estimated useful life of intangible
assets may warrant revision or that the remaining balance of intangible
assets may not be recoverable. When factors indicate that intangible
assets should be evaluated for possible impairment, the Company assesses
recoverability of intangible assets based on its expectations concerning
operating cash flows after interest and capital expenditures. An
impairment is recorded if the discounted value of such cash flows is less
than the recorded value of the intangible assets. The Company utilizes a
discount rate which reflects its weighted average cost of capital. Based
on application of this methodology, an impairment was recorded in 1996
(see Note 5).
Deferred Debt Issuance Costs
Deferred debt issuance costs are being amortized by the straight-line
method over the terms of the related debt agreements and are classified as
other noncurrent assets.
Advertising Costs
Advertising costs are expensed as incurred.
(3) Discontinued Operations
In March 1999, SFC signed a definitive agreement to sell its subsidiary,
H&M Food Systems Company, Inc. ("H&M"), for $132 million. H&M is a
producer of custom formulated, pre-cooked meat products that are sold
primarily to national restaurant chains and prepared-food producers. SFC
will realize net cash proceeds of approximately $110 million after it has
repurchased H&M's financed accounts receivables, established a $5 million
one-year escrow and paid transaction costs. Upon the closing of this
transaction, expected in the second quarter of 1999, SFC will report a
gain on the sale of H&M.
In addition, during 1997 and 1996 the Company divested of:
o Stella Foods, Inc. ("Stella") - One of the largest specialty
cheese producers in the United States with distribution to
retail grocers, foodservice accounts, and commercial food
processors. The sale of Stella was completed on December 5,
1997 for $405 million.
o Gai's Seattle French Baking Company ("Gai's") - A restaurant
and institutional bakery operation serving the northwestern
United States. The sale of Gai's was completed on February 24,
1997.
F-9
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
o San Francisco French Bread ("SFFB") - A sourdough hearth bread
operation located in California. The sale of SFFB was
completed on March 31, 1997.
o A restaurant and institutional bakery operated by Metz located
in Illinois. The sale of this bakery was completed on August
23, 1997.
o Bloch and Guggenheimer, Inc. ("B&G")/Burns & Ricker, Inc.
("B&R") - Pickle, pepper, and specialty snack food businesses
operated under common management. The sale of the combined
business of B&G/B&R was completed on December 27, 1996.
These divestitures have been reported as discontinued operations in the
accompanying financial statements in accordance with Accounting Principles
Board Opinion No. 30. Operating results for these businesses, including
revenues of $181,038, $935,424, and $1,333,194 for 1998, 1997, and 1996,
respectively, as well as the applicable goodwill write-down of $152,360 in
1996, have been reclassified to discontinued operations. No interest
expense has been allocated to discontinued operations.
In 1998, the earnings from discontinued operations relates solely to H&M.
The net loss on disposal of discontinued operations for 1998 consists of
adjustments to the estimated losses on the sale of Gai's, SFFB, and the
Illinois restaurant and institutional bakery. The net gain on disposal of
discontinued operations for 1997 consisted of the gain realized on the
sale of Stella and Gai's, an adjustment to the estimated loss on the
disposal of SFFB, and the loss realized on disposal of the Illinois
restaurant and institutional bakery. The net loss on disposal of
discontinued operations for 1996 consisted of the realized loss on the
sale of B&G/B&R, estimated loss on the sale of SFFB, and the 1996
operating losses from the measurement date through the disposal date of
B&G/B&R, SFFB and of Gai's.
Net assets of the discontinued operations as of December 31, 1998 and 1997
related to H&M and consisted of the following:
1998 1997
-------- --------
Accounts receivable, net of allowance $ 3,587 $ 3,658
Inventories 16,824 15,388
Plant and equipment, net 53,205 41,852
Other assets 4,852 1,011
Goodwil, net 18,069 18,592
Accounts Payable (6,727) (10,058)
-------- --------
Accrued expenses and other liabilitiues $ 86,632 $ 65,192
======== ========
F-10
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
(4) Acquisitions
On October 26, 1998, SFC acquired all of the outstanding capital stock of
Archway, a privately held Michigan corporation, from the previous
stockholders. The purchase price totaled approximately $90,000 plus
$26,000 to repay certain indebtedness of Archway.
Additionally, in 1998, SFC also acquired four retail bakeries in separate
transactions for a total aggregate consideration of $19,600.
All of the acquisitions have been accounted for as purchases and,
accordingly, the respective purchase prices have been allocated to the
applicable assets and liabilities based upon their estimated fair values
as of the acquisition date. On a combined basis, the excess of the
purchase price over the fair values of the net assets acquired was
approximately $110,000 and has been recorded as goodwill, which is being
amortized on a straight-line basis over 40 years. The acquisitions were
funded by a combination of cash and borrowings under SFC's existing
revolving credit facility. Operating results of acquired businesses have
been included in the Consolidated Statements of Operations since their
respective acquisition dates.
The following unaudited pro forma consolidated results of operations are
presented as if the above acquisitions had been made at the beginning of
the periods presented.
1998 1997
--------- ---------
Net sales $ 831,533 $ 828,243
Net earnings (loss) from continuing operations $ (60,513) $ (70,188)
The consolidated pro forma information is not necessarily indicative of
the combined results that would have occurred had the acquisitions been
made at the beginning of the periods presented or the future results of
the combined operations and do not include the projected cost reductions
and revenue increases of the combined operations. Additionally, pro forma
net sales exclude sales of Archway's franchisees and third party
distributor mark-up.
(5) Goodwill Write-Down
As described under "Intangible Assets" in Note 2, "Summary of Significant
Accounting Policies", the Company annually evaluates its intangible
assets. Based on the Company's goodwill assessment, a write-down of
goodwill was recorded in the fourth quarter of 1996, which is presented in
the accompanying Consolidated Statements of Operations as follows:
Continuing operations $203,304
Discontinued operations 152,360
--------
$355,664
========
F-11
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
In determining the amounts of the goodwill write-down, the Company
developed its best estimate of future operating cash flows, after interest
and capital expenditures, over the remaining useful life of the goodwill.
The Company's estimates were based on recent historic financial trends and
then current market conditions. The goodwill of each business was
evaluated separately for impairment. Individual business unit sales growth
projections ranged from two to five percent. Interest costs were allocated
based on the relative level of investment in each business. Each of the
Company's fixed-rate debt obligations were assumed to be refinanced at
existing interest rates. The Company calculated the present value of
estimated future cash flows using a discount rate which represented its
weighted average cost of capital of 11.8% in 1996.
As of December 31, 1998, there was $109,745 of goodwill on the Company's
balance sheet resulting from acquisitions made during 1998. Management
believes the Company's remaining goodwill will be recovered over its
useful life.
(6) Acquisition Liabilities
In connection with the formation of the Company and subsequent
acquisitions, estimated liabilities were recorded for the expected cash
expenditures to consolidate facilities, streamline operations, and settle
environmental, legal and tax matters. In 1998, $4,450 of additional
estimated acquisition liabilities were recorded as a result of current
year acquisitions. Cash expenditures associated with acquisition
liabilities were $4,440, $14,043, and $10,593 for 1998, 1997, and 1996,
respectively. As of December 31, 1998, there are $15,797 of remaining
acquisition liabilities, of which $4,899 is classified as current.
(7) Extraordinary Items
In the first quarter of 1998, the Company refinanced its accounts
receivable, revolver, and term loan financing facilities. Due to this
early extinguishment of debt, the Company wrote-off deferred debt issuance
costs related to these facilities of $5,714 and has recorded them as
extraordinary items in 1997.
(8) Accounts Receivable
Specialty Foods Finance Corporation ("SFFC"), a wholly-owned subsidiary of
SFC, was established for the purpose of acquiring substantially all of the
trade accounts receivable generated by the operating subsidiaries of SFC.
Under the terms of the Accounts Receivable Facility ("Facility"), SFFC
sells for cash an undivided interest in eligible accounts receivable.
F-12
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
Under the terms of the Facility, the maximum amount of eligible
receivables that can be sold to the Facility is $75,000. The amount
outstanding under the Facility varies based upon the level of eligible
receivables and advance rate factors. As of December 31, 1998, the amount
outstanding under the Facility was $50,000. The discount on receivables
sold is included in other expense and totaled $2,445, $1,933, and $1,846
in 1998, 1997, and 1996, respectively.
Trade accounts receivable are reported net of the allowance for doubtful
accounts of $1,149 and $1,099 in 1998 and 1997, respectively.
(9) Inventories
The components of inventories are as follows:
1998 1997
-------- --------
Raw materials and packaging $ 12,244 $ 9,477
Work in progress 264 452
Finished goods 8,593 7,662
Other 3,209 2,681
-------- --------
Less obsolescence and other allowances 24,310 20,272
(944) (84)
-------- --------
$ 23,366 $ 20,188
======== ========
(10) Property, Plant, and Equipment
The components of property, plant and equipment are as follows:
1998 1997
--------- ---------
Land $ 11,586 $ 10,898
Buildings and improvements 90,963 72,130
Machinery and equipment 136,732 104,676
Office furniture and vehicles 63,320 29,248
Construction in progress 36,734 8,639
--------- ---------
339,335 225,591
Less accumulated depreciation (104,391) (79,568)
--------- ---------
$ 234,944 $ 146,023
========= =========
Depreciation expense was $25,733, $20,187, and $20,836 in 1998, 1997, and
1996, respectively.
F-13
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
(11) Restricted Cash
In 1998, the Company entered into various agreements to purchase certain
machinery, equipment and building improvements. Funds were designated for
these purchases and deposited in an escrow account which amounted to
$7,915 as of December 31, 1998. The escrow account is classified as a
noncurrent asset.
(12) Accrued Expenses
The components of accrued expenses are as follows:
1998 1997
------- -------
Accrued payroll $ 8,782 $ 6,229
Other taxes payable 4,087 3,085
Workers' compensation 11,896 9,768
Compensated absences 7,491 6,236
Accrued interests 21,869 21,518
Acquisition liabilities 4,899 7,582
Other 21,717 26,488
------- -------
$80,741 $80,096
======= =======
(13) Long-Term Debt
Long-term debt consists of the following:
1998 1997
--------- ---------
Revolving Credit Facility $ 75,000 $ --
Term Loan Facility 169,080 173,750
10 1/4% Senior Notes due 2001 225,000 225,000
11 1/8% Senior Notes due 2002 150,000 150,000
11 1/4% Subordinated Notes due 2003 200,000 200,000
Other 4,679 6,865
--------- ---------
823,759 755,615
Less current portion (3,450) (2,561)
--------- ---------
$ 820,309 $ 753,054
========= =========
F-14
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
During March 1998, the Company refinanced its Revolving Credit Facility
("Revolver") and Term Loan Facility ("Term Loan") with a new syndicate of
financial institutions. Both facilities mature on January 31, 2000.
Proceeds from these facilities can be used to finance working capital
requirements and are available for other corporate purposes, including
acquisitions.
As required under the terms of the Revolver and Term Loan Agreements, the
Company reduced the commitment amount available under the Revolver from
$125,000 to $122,801 and the Term Loan was reduced to $169,080 with excess
asset sale proceeds during 1998. The Company is required to make quarterly
payments on the Term Loan in the amount of $434.
The Revolver bears an interest rate of LIBOR plus 250 basis points. The
Revolver is secured by the assets of the operating companies. Amounts
outstanding under the Revolver totaled $75,000 as of December 31, 1998. In
addition to amounts outstanding under the Revolver, letters of credit
commitments totaling $10,200 as of December 31, 1998 reduce available
funds under the Revolver.
The Term Loan bears an interest rate of LIBOR plus 375 basis points. The
Term Loan is secured by the assets of SFC and a pledge of the stock of
each of the direct subsidiaries of SFC.
Semi-annual interest payments are required through maturity on the 10 1/4%
Senior Notes and the 11 1/4% Subordinated Notes on February 15 and August
15 each year. Semi-annual interest payments are required through maturity
on the 11 1/8% Senior Notes on April 1 and October 1 each year.
The 10 1/4% and 11 1/8% Senior Notes and the 11 1/4% Senior Subordinated
are unsecured. During the fourth quarter of 1998, the Company commenced
private exchange offers for its publicly held debt. Under the offers, the
existing debt of SFC held by certain holders would be exchanged for the
debt of a new intermediate holding company. SFC is offering certain
holders of its existing notes the opportunity to exchange their existing
debt for new notes (the "New Notes") of another intermediate holding
company. The New Notes have substantially the same terms and covenants as
the existing notes. In addition, SFC is seeking the consent of its Term
Loan and Revolver lenders to amend existing agreements to conform to the
new holding company structure. The proposed exchange offer has not been
consummated. Remaining on the Company's balance sheet are unamortized
deferred financing fees of approximately $14,000 related to the existing
debt that is subject to the exchange offer. Upon the completion of the
exchange offer, this amount would be written off as an extraordinary item.
Other long-term debt consists primarily of miscellaneous notes payable
with interest rates ranging from 7.9% to 10.5% at December 31, 1998.
The provisions of the Term Loan and the Revolver contain covenants which
require the Company to maintain specified leverage and interest coverage
ratios. The Company also has other limitations regarding capital
expenditures, sales of assets, loans and investments, encumbrances of
assets and assumption of additional indebtedness. In addition, the
agreements governing the Term Loan and the Revolver and the indentures
governing the Senior Notes and the Subordinated Notes contain certain
restrictive covenants, including, to the detriment of the holders of the
SFAC Senior Debentures and the SFAC Senior Subordinated Debentures,
certain covenants that restrict
F-15
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
or prohibit (with de minimis exceptions) SFC's ability to pay dividends or
make other distributions to SFAC. Specifically, as a result of the
Company's net losses and accumulated deficit, SFC's ability to make
distributions to SFAC under the indentures of the Senior Notes and the
Subordinated Notes has been impaired and these indentures will require
modification before any such distribution to SFAC can be made.
Aggregate maturities of debt are as follows:
1999 $ 3,450
2000 243,308
2001 225,234
2002 150,259
2003 200,277
Thereafter 1,231
----------
Total aggregate maturities $ 823,759
==========
Cash paid for interest was $82,508, $85,603, and $90,533 for the years
ended December 31, 1998, 1997, and 1996, respectively.
(14) Financial Instruments
Concentration of Credit Risk
The Company's exposure to credit loss in the event of nonpayment of
accounts receivable by customers is represented in the amount of those
receivables. The Company performs ongoing credit evaluations of its
customers' financial condition and generally requires no collateral from
those customers. As of December 31, 1998, the Company does not believe it
has any significant concentration of credit risk with respect to its trade
accounts receivable.
Financial Instruments With Off-Balance-Sheet Risk
During 1998, the Company entered into interest rate swap agreements to
reduce its exposure to changes in the cost of its variable rate borrowings
as required by its Term Loan Agreement. Under the interest rate swap
agreements, which expire in January 2000, the Company receives floating
rate payments from the counterparties based upon the three-month LIBOR and
makes fixed rate payments at 5.753% and 5.765% to the respective
counterparties. The payments are calculated based upon a notional
principal amount of $100,000. The net differential of interest to be paid
or received under the remaining agreements is recognized as incurred. In
1998, net payments totaling $30 were made to the counterparties.
Off-balance-sheet risk from the interest rate swap agreements at December
31, 1998 includes the risk associated with changes in market values and
interest rates. The counterparties to the agreements are major financial
institutions.
F-16
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
Fair Value of Financial Instruments
The Company's financial instruments include long-term debt and the
interest rate swap agreements. The estimated fair value and carrying
amount of long term debt including current maturities at December 31, 1998
are as follows:
Estimated
Carrying Fair
Amounts Values
--------- ---------
Financial liabilities:
Long-term debt, including
current maturities $ 823,759 $ 696,259
Interest rate swap agreements $ -- $ (906)
The fair value of long-term debt and the interest rate swap agreements
have been determined based on quoted market prices and market interest
rates at December 31, 1998.
(15) Lease Commitments
The Company leases equipment and facilities under various noncancelable
operating leases. Future minimum lease payments under all noncancelable
operating leases are as follows:
1999 $ 11,668
2000 10,879
2001 9,530
2002 8,337
2003 6,406
Thereafter 24,443
---------
Total minimum lease payments $ 71,263
=========
Total rental expense for 1998, 1997, and 1996 was $17,318, $19,557, and
$17,018 respectively.
In 1998, the Company purchased certain transportation and production
equipment which had been subject to operating lease arrangements. The cost
of purchasing these leased assets was approximately $35,400.
(16) Income Taxes
The provision (benefit) for income taxes for 1998, 1997, and 1996 relates
to state and Canadian income taxes payable (refundable). An effective tax
rate reconciliation is not presented because the Company has no federal
tax currently payable or deferred income tax expense due to its net
operating loss position.
F-17
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
The components of net deferred taxes are as follows:
1998 1997
------- -------
Deferred tax assets related to:
Accrued expenses and other liabilities $24,607 $20,670
Net operating losses and credits 63,820 44,514
Other 2,471 4,590
------- -------
Total deferred tax assets 90,898 69,774
Valuation allowance 72,906 53,878
------- -------
Total net deferred tax assets 17,992 15,896
Deferred tax liabilities related to:
Depreciation and amortization 17,992 15,541
Inventories -- 355
------- -------
Total deferred tax liabilities 17,992 15,896
Net deferred tax asset (liability) $ -- $ --
======= =======
At December 31, 1998, the Company has federal net operating loss carryforwards
of $163,000 including $9,000 of loss carryforwards from predecessor companies,
which are subject to limitations that may substantially limit future
utilization. Also at December 31, 1998, the Company has $91,000 of state net
operating loss carryforwards and $3,000 of state tax credit carryforwards. The
net operating loss carryforwards and state tax credits exclude H&M's allocable
portions. Net operating loss and credit carryforwards expire in varying amounts
through the year 2018.
Cash paid (received) for income taxes was $(613), $123 and $432 for 1998, 1997,
and 1996, respectively.
(17) Litigation and Other Contingencies
Litigation
The Company has retained liability with respect to a proceeding against
Stella. In 1993, Stella was alleged to have misappropriated confidential
and proprietary trade secrets of a competitor and infringed upon the
competitor's purported trademark. Stella has filed a cross complaint
against the competitor for predatory pricing practices. The proceeding is
scheduled for trial during the second quarter of 1999. The Company
continues to vigorously defend against the allegations and pursue its
claim. Although any litigation has an element of uncertainty, management
believes the
F-18
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
ultimate resolution of this matter will not have a material adverse effect
on the Company's financial condition or results of operations.
In the normal course of business activities, the Company is a party to
certain legal proceedings and claims. Although the outcome of such matters
cannot be determined with certainty, it is management's opinion that the
final outcome will not have a material adverse effect on the Company's
financial position or results of operations.
Other
Various operating subsidiaries are self-insured or retain a portion of
losses with the respect to workers' compensation claims. Accordingly, the
Company provides irrevocable letters of credit or surety bonds which total
$10,200 at December 31, 1998 to state regulatory agencies or insurance
companies.
(18) Employee Benefits
Pension and Other Post-retirement Benefits
Certain of the operating subsidiaries sponsor single-employer,
non-contributory, defined benefit pension plans. The operating
subsidiaries also participate in numerous multi-employer,
non-contributory, defined benefit pension plans. Substantially all of the
Company's employees are covered by the defined benefit or multi-employer
plans. Certain of the subsidiaries also sponsor post-retirement health
care benefit plans.
F-19
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
Benefits for employees are based on various factors including length of
service and average compensation. Contributions are funded to the extent
deductible for federal income tax purposes. The following table provides a
reconciliation of the changes in the plans' benefit obligations and fair
value of assets during the years ended December 31, 1998 and 1997 and a
summary of the funded status as of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
Pension Plans Post-retirement Medical
-------------------- ----------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Change in Benefit Obligation
Benefit obligation at beginning of year $ 61,072 $ 54,218 $ 8,226 $ 9,886
Service cost 2,248 1,914 393 345
Interest cost 4,111 3,956 542 602
Participant Contributions -- -- 29 --
Plan amendments 35 1,220 -- --
Settlement (gain) or loss -- -- -- (1,295)
Benefits paid (3,609) (2,527) (591) (339)
Actuarial (gain) or loss 1,371 2,291 111 (973)
-------- -------- -------- --------
Benefit obligation at end of year $ 65,228 $ 61,072 $ 8,710 $ 8,226
======== ======== ======== ========
Change in Plan Assets
Fair value of plan assets at
beginning of year $ 62,167 $ 57,854 $ -- $ --
Actual return on plan assets 7,368 6,840 -- --
Benefits paid (3,609) (2,527) -- --
Other 1,028 -- -- --
-------- -------- -------- --------
Fair value of plan assets at end of year $ 66,954 $ 62,167 $ -- $ --
======== ======== ======== ========
Summary of Funded Status
Funded status $ 1,726 $ 1,095 $ (8,710) $ (8,226)
Unrecognized transition amount (274) (381) -- --
Unrecognized prior service cost 1,447 1,561 -- --
Unrecognized net (gain) or loss (11,593) (11,241) (3,243) (4,816)
-------- -------- -------- --------
Accrued benefit cost $ (8,694) $ (8,966) $(11,953) $(13,042)
======== ======== ======== ========
Amounts Recognized in Consolidated
Balance Sheets
Accrued expenses $ 2,842 $ 2,464 -- $ 251
Other non-current liabilities 5,852 6,502 11,953 12,791
-------- -------- -------- --------
$ 8,694 $ 8,966 $ 11,953 $ 13,042
======== ======== ======== ========
</TABLE>
F-20
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
One of the Company's qualified pension plans had a projected benefit
obligation in excess of plan assets as of December 31, 1998 and 1997. The
projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for this plan was $13,815, $13,815, and $12,675,
respectively, as of December 31, 1998 and $12,669, $12,669, and $11,616,
respectively, as of December 31, 1997.
The following table provides the components of net periodic benefit cost
for the plans for the fiscal years ended December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
Pension Plans Post-retirement Medical
--------------------------------------------------------------
1998 1997 1996 1998 1997 1996
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Service cost - benefits earned during
the period $ 2,248 $ 1,914 $ 2,116 $ 393 $ 345 $ 446
Interest cost on the benefit obligation 4,111 3,956 3,658 542 602 661
Expected return on plan assets (6,175) (5,087) (6,290) -- -- --
Net amortization and deferral 1,583 (832)
Transition amount (107) (107) -- -- -- --
Prior service costs 149 146 -- -- -- --
(Gain)/loss (498) (607) -- (805) (292) --
------- ------- ------- ------- ------- -------
Net periodic benefit cost $ (272) $ 215 $ 1,067 $ 130 $ 655 $ 275
======= ======= ======= ======= ======= =======
</TABLE>
Gains and losses in excess of 10% of the greater of the benefit obligation
or the market-related value of assets are amortized over the average
remaining service period of active participants for pension plans. Gains
and losses in excess of 10% of the benefit obligation are amortized over
five years for the post-retirement plan.
The Company sponsors defined benefit health care plans that provide
post-retirement medical and life benefits to certain full-time employees
who meet minimum age and service requirements. The plans are contributory,
with retiree contributions adjusted annually, and contain other
cost-sharing features such as deductibles and co-insurance. The accounting
for these plans anticipates future cost-sharing changes to the written
plans that are consistent with the Company's expressed intent to increase
the retiree contribution rate annually for the expected general inflation
rate for the year.
F-21
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
The assumptions used in the measurement of the Company's benefit
obligations are shown in the following table:
<TABLE>
<CAPTION>
Post-retirement
Pension Plans Medical
-----------------------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Discount Rate (Y/E Disclosures) 6.75% 7.00% 6.50% to 6.75% 7.00%
Salary Scale 4.00% 4.00% N/A N/A
Long Term Rate of Return on Assets 10.00% 9.00% N/A N/A
</TABLE>
For measurement purposes, a 9.5% annual rate of increase in the per capita
cost of covered health care benefit was assumed for 1998. The rate is
assumed to decrease gradually to 5.5% for 2002 and remain at that level
thereafter.
The health care trend rate used to determine the pre-age 65 accumulated
post-retirement benefit obligation was 14% for 1998, decreasing to 6% by
the year 2002 and beyond. A flat 16 % rate per year is used for the
post-age 65 obligation. Increasing the assumed health care trend rate by
1% each year would increase the accumulated post-retirement benefit
obligation as of December 31, 1998 and 1997 approximately $664 and $658,
respectively, and the aggregate of the service and interest cost
components of 1998, 1997, and 1996 net retiree healthcare expense
approximately $97, $98, and $134 respectively. Decreasing the assumed
health care trend rate by 1% each year would decrease the accumulated
post-retirement benefit obligation as of December 31, 1998 approximately
$547, and the aggregate of the service and interest cost components for
1998 net retiree healthcare expense approximately $79.
Certain of the operating subsidiaries also participate in various
multi-employer defined benefit pension plans on behalf of employees
pursuant to various collective bargaining agreements. Contributions to
these plans included in continuing operations amounted to approximately
$15,441, $14,822, and $14,535 for the years ended December 31, 1998, 1997,
and 1996, respectively.
The Company has various defined contribution plans which cover
non-bargaining unit employees meeting eligibility requirements.
Contributions to these plans were approximately $1,915, $1,444, and $1,296
for the years ended December 31, 1998, 1997, and 1996, respectively.
Long Term Incentive Compensation Plans
The Company has adopted long-term incentive compensation plans for several
of its businesses which provide for cash awards upon the achievement of
specified earnings or enterprise values. Amounts related to long-term
incentive plans will be accrued when amounts due participants vest. As of
December 31, 1998, no amounts have been accrued.
F-22
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
(19) Related Party Transactions
Certain Transactions with Stockholders of and Affiliates of Stockholders
of SFAC
Certain of SFAC's stockholders and their affiliates previously entered
into financial advisory arrangements (the "Financial Advisory Agreements")
with SFAC's subsidiary, SFC. Haas Wheat & Partners ("Haas Wheat"),
Penobscot ("Penobscot"), an affiliate of Acadia Partners, L.P. ("Acadia"),
and Keystone, Inc. ("Keystone") each entered into such Financial Advisory
Agreements. In August 1998, the Board of Directors approved a one-year
extension of the financial advisory arrangements. Under the terms of the
Financial Advisory Agreements, SFC pays Haas Wheat an annual fee of $700 (
a portion of which Haas Wheat is obligated by agreement to remit to
Acadia), Penobscot an annual fee of $200, and Keystone an annual fee of
$100.
In 1996, SF Leasing L.L.C. (of which Acadia and Keystone each owns a 45%
interest and Haas Wheat owns a 10% interest) purchased from Metz all of
the equipment at a manufacturing facility for $3,222 (which was based on
the appraised value of such equipment) and leased such equipment back to
Metz. During 1998, the Company made rental payments totaling $614 to SF
Leasing L.L.C. for equipment that was leased by the Company. In September
1998, the Company purchased from SF Leasing L.L.C. this equipment for an
aggregate amount of $3,013.
In June 1997, the Company retained Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ", an affiliate of DLJMBP, which is a stockholder of the
Company), to serve as the Company's financial advisor in connection with
its sale of Stella. The Company paid DLJ approximately $5,400 as
compensation for such financial advisory services. In December 1998, DLJ
was retained as the financial advisor for the sale of H&M. Upon the
completion of the H&M sale, the Company will pay DLJ approximately $1,600.
In March 1998, the Company paid DLJ $5,092 in connection with the
Company's refinancing of its Revolving Credit Facility and Term Loan
Facility. DLJ serves as the Syndication Agent and Collateral Agent under
both Loan Agreements.
F-23
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
(20) Other Expense (Income)
Other expense (income) is comprised of the following:
1998 1997 1996
------ ------ ------
Loss on disposal of property, plant
and equipment $ 436 $1,521 $5,747
Discount on receivables sold 2,445 1,933 1,846
Other 248 1,275 1,539
------ ------ ------
$3,129 $4,729 $9,132
====== ====== ======
F-24
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---- ----
Assets (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 16,992 $ 5,880
Accounts receivable, net 20,915 19,327
Inventories 25,307 23,366
Net assets of discontinued operations 87,839 86,632
Other current assets 8,764 7,234
----------- -----------
Total current assets 159,817 142,439
Property, plant, and equipment, net 233,001 234,944
Intangible assets, net 110,281 113,438
Other noncurrent assets 30,171 39,338
----------- -----------
Total assets $ 533,270 $ 530,159
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt (Note 5) $ 268,144 $ 3,450
Accounts payable 44,662 37,779
Accrued expenses 75,777 80,741
----------- -----------
Total current liabilities 388,583 121,970
Long-term debt 577,548 820,309
Due to Specialty Foods Acquisition Corporation 8,243 7,499
Other noncurrent liabilities 30,506 31,355
----------- -----------
Total liabilities 1,004,880 981,133
Stockholders' equity (471,610) (450,974)
----------- -----------
Total liabilities and stockholders' equity $ 533,270 $ 530,159
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-25
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
Three months ended March 31,
1999 1998
---- ----
<S> <C> <C>
Net sales $ 200,265 $ 170,924
Cost of sales 89,444 76,319
--------- ---------
Gross profit 110,821 94,605
Operating expenses:
Selling, distribution, general and administrative 108,537 94,364
Amortization of intangibles 1,017 212
--------- ---------
Total operating expenses 109,554 94,576
--------- ---------
Operating profit 1,267 29
Other expenses:
Interest expense, net 23,493 19,630
Other expense, net 679 801
--------- ---------
Loss before income taxes (22,905) (20,402)
Provision for income taxes 130 29
--------- ---------
Loss from continuing operations (23,035) (20,431)
Discontinued operations:
Net income 3,810 2,362
Loss on disposal, net (412) --
--------- ---------
3,398 2,362
--------- ---------
Net loss $ (19,637) $ (18,069)
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-26
<PAGE>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three months ended March 31,
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Loss from continuing operations $ (23,035) $ (20,431)
Adjustments to reconcile to net cash
from continuing operating activities
Depreciation and amortization 9,331 5,653
Debt issuance cost amortization 2,762 1,316
Changes in operating assets and liabilities,
net of effects from businesses acquired or sold (3,780) (17,699)
--------- ---------
Net cash used by continuing operating activities (14,722) (31,161)
Net cash provided (used) by discontinued operations 2,191 (2,391)
--------- ---------
Net cash used by operating activities (12,531) (33,552)
Cash flows from investing activities:
Capital expenditures (3,658) (5,977)
Proceeds from the sale of business 3,800 --
Other 2,406 (764)
--------- ---------
Net cash provided (used) by investing activities 2,548 (6,741)
Cash flows from financing activities:
Increase in revolving credit 22,801 --
Refinancing costs (586) (9,243)
Other (1,120) (712)
--------- ---------
Net cash provided (used) by financing activities 21,095 (9,955)
Increase (decrease) in cash and cash equivalents 11,112 (50,248)
Cash - beginning of period 5,880 234,266
--------- ---------
Cash - end of period $ 16,992 $ 184,018
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-27
<PAGE>
NOTE 1 - Interim Financial Information
In the opinion of management, the accompanying unaudited interim condensed
financial information of Specialty Foods Corporation (SFC) and its
subsidiaries (collectively, the Company) contains all adjustments,
consisting only of those of a recurring nature, necessary to present
fairly the Company's financial position and results of operations. All
significant intercompany accounts, transactions and profits have been
eliminated.
These financial statements are for interim periods and do not include all
information normally provided in annual financial statements and should be
read in conjunction with the financial statements of the Company for the
year ended December 31, 1998 included in the annual report filed on Form
10-K and any reports on Form 8-K filed during the quarter. The results of
operations for interim periods are not necessarily indicative of the
results that may be expected for the full year.
Certain amounts in the 1998 financial statements have been reclassified to
conform to the manner in which the 1999 financial statements have been
presented.
NOTE 2 - Inventories
The components of inventories are as follows:
March 31, December 31,
1999 1998
---- ----
(In thousands)
Raw materials and packaging $ 12,519 $ 12,244
Work in progress 588 264
Finished goods 9,282 8,593
Other 3,934 3,209
-------- --------
26,323 24,310
Less obsolescence and other allowances (1,016) (944)
-------- --------
$ 25,307 $ 23,366
======== ========
Inventories are stated at the lower of cost or market. Cost is determined
principally by the first-in first-out ("FIFO") method.
F-28
<PAGE>
NOTE 3 - Sale of H&M Food Systems, Inc. (H&M)
In March 1999, SFC signed a definitive agreement to sell its subsidiary,
H&M, for $132 million. H&M is a producer of custom formulated, pre-cooked
meat products that are sold primarily to national restaurant chains and
prepared-food producers. The transaction closed on April 12, 1999.
Accordingly, SFC will report the net gain on the sale, expected to
approximate $29 million, during the second quarter of 1999. The Company
realized net cash proceeds of $110 million after it repurchased H&M's
financed receivables, established a $5 million one-year escrow and paid
transaction costs.
H&M is classified as a discontinued operation in the accompanying
financial statements. The net assets of H&M are reported as a single line
item in SFC's Balance Sheets for March 31, 1999 and December 31, 1998, and
the results of H&M's operation are reported in the discontinued operations
section of the accompanying Consolidated Statements of Operations.
NOTE 4 - Acquisition
On May 13, 1999, SFC announced that its wholly-owned operating company,
Metz Baking Company, signed a definitive agreement to acquire Grocers
Baking Company. Grocers Baking Company, which had approximately $60
million of sales during 1998, is a privately-held manufacturer and
distributor of retail bread, buns, and sweet goods based in Western
Michigan. The transaction, which is subject to certain regulatory
approvals, is expected to close during the second quarter of 1999.
NOTE 5 - Debt
On May 12, 1999, the Company commenced new private exchange offers ("New
Offers") for its publicly held debt following the termination of its
previous exchange offers on April 30, 1999. Under the New Offers, holders
of existing debt of SFC and its Parent Company, Specialty Foods
Acquisition Corporation ("SFAC") are being offered the opportunity to
exchange their existing debt for the debt of three new intermediate
holding companies as described below:
o Holders of SFAC 13% Senior Secured Discount Debentures are being
offered the opportunity to exchange their existing securities for
new 13% Senior Secured Discount Debentures ("New Senior Debentures")
of one of the new intermediate holding companies. The New Senior
Debentures include provisions that will extend the initial cash pay
interest date from February 2000 to December 2004, extend the
maturity date from August 2005 to June 2009, and provide the Company
with the option to redeem the New Senior Debentures at prescribed
discounts of accreted value. Consenting holders of the New Senior
Debentures will also receive up to an aggregate of ten percent of
the equity interest of one of the new intermediate holding
companies. Additionally, holders of SFAC's 11% Senior Subordinated
Discount Debentures are being offered the opportunity to exchange
their existing securities for new 11% Senior Subordinated Discount
Debentures ("New 11% Debentures") of one of
F-29
<PAGE>
the new intermediate holding companies. The New 11% Debentures
include provisions that will extend the initial cash pay interest
date from August 2001 to December 2005 and extend the maturity date
from August 2006 to December 2009.
o Holders of SFC Subordinated Notes and Senior Notes are being offered
the opportunity to exchange their existing securities for new notes
("New Notes") of one of the new intermediate holding companies. The
New Notes will have substantially the same terms and covenants as
the existing SFC notes and will be structurally senior to the New
Senior Debentures. Subordinated Note holders who exchange for the
New Notes will receive a consent fee of $35 per $1,000 note and an
increased coupon rate of 200 basis points of which 100 basis points
will be paid in cash and 100 basis points payable in kind. Senior
Note holders who exchange for the New Notes will receive a consent
fee of $10 per $1,000 note and an increased coupon rate of 100 basis
points. In addition, consenting holders of the New Notes will
receive up to an aggregate of $28.2 million of New 11% Debentures of
one of the new intermediate holding companies.
Concurrent with the above described offers, the Company is seeking the
consent for the Corporate organization changes from its Revolving Credit,
Term Loan, and Accounts Receivable Facility lenders ("Senior Secured Debt
Lenders"). Additionally, the Company is seeking the consent of its Senior
Secured Debt Lenders to extend the maturity of the facilities from January
2000 to January 2001. As of March 31, 1999, $ 264.7 million of the
Revolving Credit and Term Loan Facilities were reclassed to a current
liability based on the existing maturity date. Consummation of the
exchange offers and the extension of the Senior Secured Debt facilities
would result in a reclassification of the amount outstanding under the
Revolving Credit and Term Loan Facilities back to a non-current liability.
The Company's management believes that completion of an exchange offer and
the extension of its senior secured indebtedness are essential elements in
continuing to operate the Company's business as currently conducted.
F-30
<PAGE>
SFC New Holdings, Inc.
Exchange offers for:
11 1/4% Senior Notes due 2001
12 1/8% Senior Notes due 2002
13 1/4% Senior Subordinated Notes due 2003
of SFC New Holdings, Inc.
and
10 1/4% Senior Notes due 2001
11 1/3% Senior Notes due 2002
11 1/4% Senior Subordinated Notes due 2003
of Specialty Foods Corporation
---------------------------
PROSPECTUS
August 9, 1999
---------------------------
No person has been authorized to give any information or to make any
representations other than those contained in this prospectus, and, if given or
made, such information or representations must not be relied upon as having been
authorized. This prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the securities to
which it relates or an offer to sell or the solicitation of an offer to buy such
securities in any circumstances in which such offer or solicitation is unlawful.
Neither the delivery of this prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that there has been no change in the
affairs of SFC New Holdings since the date hereof or that the information
contained herein is correct as of any time subsequent to its date.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Article 8 of the Company's Certificate of Incorporation and By-Laws
provide for the indemnification by the Company of each person who is or was or
had agreed to become a director, officer, employee or agent of the Company, or,
at the request of the Company, a director, officer, employee or agent of another
enterprise, against all expenses and other amounts for which indemnification may
be made under law. Section 145 of the General Corporation Law of the State of
Delaware sets forth provisions which define the extent to which a corporation
organized under the laws of Delaware may indemnify directors, officers,
employees, and agents. Section 145 provides in pertinent part as follows:
(a) A corporation shall have power to indemnify any person who was
or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right
of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was
or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation
to procure a judgment in its favor by reason of the fact that he is or was
a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
<PAGE>
fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b), or
in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) (unless
ordered by a court) shall be made by the corporation only as authorized in
the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b). Such determination shall be made (1) by the board
of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) if such a
quorum is not obtainable, or, even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion,
or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending a civil, criminal, administrative, or investigative
action, suit or proceeding may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of
an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such
expenses (including attorneys' fees) incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the board
of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section, shall not be
deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any
by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under this section.
* * *
<PAGE>
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee, or agent and shall inure to the benefit of
the heirs, executors and administrators of such a person.
Item 21. Exhibits and Financial Statements.
Exhibit
Number Description of Document
- ------ -----------------------
3.1* Certificate of Incorporation of SFC New Holdings, Inc.
3.2* By-Laws of SFC New Holdings, Inc.
3.3* Certificate of Designation of SFC New Holdings, Inc.
4.1* Registration Rights Agreement, dated as of June 11, 1999,
among SFC New Holdings, Inc. and holders of its 11 1/4% Senior
Notes due 2001, its 12 1/8% Senior Notes due 2002 and its 13
1/4% Senior Subordinated Notes due 2003.
4.2* Indenture, dated as of June 11, 1999, between SFC New
Holdings, Inc. and United States Trust Company of New York, as
trustee, governing the 11 1/4% Senior Notes due 2001 issued by
SFC New Holdings, Inc.
4.3* Indenture, dated as of June 11, 1999, between SFC New
Holdings, Inc. and United States Trust Company of New York, as
trustee, governing the 12 1/8% Senior Notes due 2002 issued by
SFC New Holdings, Inc.
4.4* Indenture, dated as of June 11, 1999, between SFC New
Holdings, Inc. and U.S. Trust Company of Texas, N.A., as
trustee, governing the 13 1/4% Senior Subordinated Notes due
2003 issued by SFC New Holdings, Inc.
5.1** Opinion of Paul, Weiss, Rifkind, Wharton & Garrison regarding
the legality of the securities being registered.
8.1** Opinion of Paul, Weiss, Rifkind, Wharton & Garrison regarding
certain tax matters.
10.1 Tax Sharing Agreement, dated as of August 16, 1993, among
Specialty Foods Acquisition Corp., Specialty Foods Corp. and
certain subsidiaries of Specialty Foods Corp. (Incorporated by
reference to Exhibit 10.17 to Specialty Foods Acquisition
Corp.'s Registration Statement on Form S-4 (Registration No.
33-68958))
10.2* First Amended and Restated SFC Group Tax Sharing Agreement,
dated as of June 11, 1999, among Specialty Foods Acquisition
Corp., SFC New Holdings, Inc. and certain subsidiaries of SFC
New Holdings, Inc.
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
10.3 Tax Sharing Agreement, dated as of August 16, 1993, between
Specialty Foods Acquisition Corp. and Specialty Foods Corp.
(Incorporated by reference to Exhibit 10.18 to Specialty Foods
Acquisition Corp.'s Registration Statement on Form S-4
(Registration No. 33-68958))
10.4* First Amended and Restated SFAC Tax Sharing Agreement, dated
as of June 11, 1999, among Specialty Foods Acquisition Corp.
and SFC New Holdings, Inc.
10.5* Assignment and Assumption Agreement, dated as of June 11,
1999, between Specialty Foods Corp. and SFC New Holdings, Inc.
10.6 Corporate Services Agreement, dated as of June 30, 1994,
between Specialty Foods Acquisition Corp. and Specialty Foods
Corp. (Incorporated by reference to Exhibit 10.14 to Specialty
Foods Corp.'s Report on Form 10-K for the year ended December
31, 1994)
10.7 Term Loan Agreement, dated as of March 16, 1998, among
Specialty Foods Corp., various financial institutions, DLJ
Capital Funding, Inc., as syndication agent, and ABN Amro Bank
N.V., as administrative agent. (Incorporated by reference to
Exhibit 10.24 to Specialty Foods Acquisition Corp.'s Report on
Form 10-K for the year ended December 31, 1997)
10.8 Amended and Restated Term Loan Agreement, dated as of June 11,
1999, among SFC New Holdings, Inc., as the Borrower, Various
Financial Institutions, as the Term Loan Lenders, DLJ Capital
Funding, Inc., as the Syndication Agent and Collateral Agent
for the Term Loan Lenders, ABN Amro Bank, N.V. as the
Administrative Agent for the Term Loan Lenders and Banque
Paribas, as the Documentation Agent for the Term Loan Lenders.
(Incorporated by reference to Exhibit 99.3 to Specialty Foods
Acquisition Corp. Report on Form 8-K dated June 30, 1999)
10.9 Revolving Credit Agreement, dated as of March 16, 1998, among
certain subsidiaries of Specialty Foods Corp., various
financial institutions, DLJ Capital Funding, Inc., as
syndication agent, and ABN Amro Bank N.V., as administrative
agent. (Incorporated by reference to Exhibit 10.25 to
Specialty Foods Acquisition Corp.'s Report on Form 10-K for
the year ended December 31, 1997)
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
10.10 Amended and Restated Revolving Credit Agreement, dated as of
June 11, 1999, among certain subsidiaries of SFC New Holdings,
Inc., as the Revolving Credit Borrowers, Various Financial
Institutions, as the Revolving Credit Lenders, DLJ Capital
Funding, Inc., as the Syndication Agent and Collateral Agent
for the Revolving Credit Lenders, ABN Amro Bank, N.V. as the
Administrative Agent for the Revolving Credit Lenders and
Banque Paribas, as the Documentation Agent for the Revolving
Credit Lenders. (Incorporated by reference to Exhibit 99.2 to
Specialty Foods Acquisition Corp. Report on Form 8-K dated
June 30, 1999)
10.11 Pooling Agreement, dated as of November 16, 1994, by and among
Specialty Foods Finance Corp., Specialty Foods Corp., as
Master Servicer, and Chase Manhattan Bank, as trustee (the
"Pooling Agreement"). (Incorporated by reference to Exhibit
10.29 to Specialty Foods Acquisition Corp.'s Report on Form
10-K for the year ended December 31, 1994)
10.12 Series 1994-1 Supplement to the Pooling Agreement, dated as of
November 16, 1994, by and among Specialty Foods Finance Corp.,
Specialty Foods Corp., as Master Servicer, and Chase Manhattan
Bank, as trustee. (Incorporated by reference to Exhibit 10.30
to Specialty Foods Acquisition Corp.'s Report on Form 10-K for
the year ended December 31, 1994)
10.13 Series 1996-1 Supplement to the Pooling Agreement, dated as of
August 1, 1996, by and among Specialty Foods Finance Corp.,
Specialty Foods Corp., as Master Servicer, and Chase Manhattan
Bank, as trustee. (Incorporated by reference to Exhibit 10.67
to Specialty Foods Acquisition Corp.'s Report on Form 10-Q for
the Quarter ended September 28, 1996)
10.14 Amendment No. 1 to Series 1996-1 Supplement to the Pooling
Agreement, dated as of November 29, 1996, by and among
Specialty Foods Finance Corp., Specialty Foods Corp., as
Master Servicer, Chase Manhattan Bank, as initial VFC
Certificate holder, and Chase Manhattan Bank, as trustee.
(Incorporated by reference to Exhibit 10.34 to Specialty Foods
Acquisition Corp.'s Report on Form 10-K for the year ended
December 31, 1996)
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
10.15 Amendment No. 2 to Series 1996-1 Supplement to the Pooling
Agreement, dated as of December 13, 1996, by and among
Specialty Foods Finance Corp., Specialty Foods Corp., as
Master Servicer, Chase Manhattan Bank, as initial VFC
Certificate holder, and Chase Manhattan Bank, as trustee.
(Incorporated by reference to Exhibit 10.26 to Specialty Foods
Corp.'s Report on Form 10-K for the year ended December 31,
1996)
10.16 Series 1997-1 Supplement to the Pooling Agreement, dated as of
January 31, 1997, by and among Specialty Foods Finance Corp.,
Specialty Foods Corp., as Master Servicer, and Chase Manhattan
Bank, as trustee. (Incorporated by reference to Exhibit 10.36
to Specialty Foods Acquisition Corp.'s Report on Form 10-K for
the year ended December 31, 1996)
10.17 Series 1998-1 Certificate Purchase Agreement, dated as of
March 31, 1998, by and among Specialty Foods Finance Corp.,
Specialty Foods Corp., as Master Servicer, and Bankers Trust
Company, as Agent. (Incorporated by reference to Exhibit 10.78
to Specialty Foods Acquisition Corp.'s Report on Form 10-Q for
the Quarter ended March 31, 1998)
10.18 Series 1998-1 Supplement, dated as of March 31, 1998, to the
Pooling Agreement, dated as of November 16, 1994, by and among
Specialty Foods Finance Corp., Specialty Foods Corp., as
Master Servicer, and Chase Manhattan Bank, as trustee.
(Incorporated by reference to Exhibit 10.79 to Specialty Foods
Acquisition Corp.'s Report on Form 10-Q for the Quarter ended
March 31, 1998)
10.19 Amendment to Series 1998-1 Supplement, dated as of March 31,
1998, by and among Specialty Foods Finance Corp., Specialty
Foods Corp., as Master Servicer, Chase Manhattan Bank, as
trustee, and Bankers Trust, as the sole VFC Certificate holder
under that certain Certificate Purchase Agreement.
(Incorporated by reference to Exhibit 10.81 to Specialty Foods
Acquisition Corp.'s Report on Form 10-Q for the Quarter ended
March 31, 1998)
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
10.20 Amendment No. 3 to Series 1998-1 Supplement and Amendment No.
1 to Series 1998-1 Certificate Purchase Agreement, dated as of
June 10, 1999, between Specialty Foods Finance Corp.,
Specialty Foods Corp., SFC New Holdings, Inc., The Chase
Manhattan Bank, Various Financial Institutions and Bankers
Trust Company, as a VFC Certificateholder and as agent for the
VFC Certificateholder. (Incorporated by reference to Exhibit
99.5 to Specialty Foods Acquisition Corp.'s Report on Form 8-K
dated June 30, 1999).
10.21 Amendment No. 4 to Series 1998-I Supplement, dated as of June
10, 1999, by and among Specialty Foods Finance Corp., SFC New
Holdings, Inc., The Chase Manhattan Bank, as trustee, Various
Financial Institutions and Bankers Trust, as a VFC
Certificateholder and as agent for the VFC Certificateholder.
(Incorporated by reference to Exhibit 99.6 to Specialty Foods
Acquisition Corp.'s Report on Form 8-K dated June 30, 1999)
10.22 Performance Guaranty, dated as of March 31, 1998, by and among
Specialty Foods Corp., as Master Servicer, in favor of
Specialty Foods Finance Corp. (Incorporated by reference to
Exhibit 10.82 to Specialty Foods Acquisition Corp.'s Report on
Form 10-Q for the Quarter ended March 31, 1998)
10.23 Amended and Restated Receivables Sales Agreement, dated as of
November 16, 1994, by and among Specialty Foods Finance Corp.,
Specialty Foods Corp., as Master Servicer, and certain
subsidiaries of Specialty Foods Corp. (Incorporated by
reference to Exhibit 10.31 to Specialty Foods Acquisition
Corp.'s Report on Form 10-K for the year ended December 31,
1994)
10.24 Servicing Agreement, dated as of November 16, 1994, by and
among Specialty Foods Finance Corp., Specialty Foods Corp., as
Master Servicer, and certain subsidiaries of Specialty Foods
Corp. (Incorporated by reference to Exhibit 10.32 to Specialty
Foods Acquisition Corp.'s Report on Form 10-K for the year
ended December 31, 1994)
10.25 Amendment No. 1 to Specialty Foods Corp. Master Trust Pooling
and Servicing Agreements, dated as of December 16, 1996, by
and among Specialty Foods Finance Corp., Specialty Foods
Corp., as Master Servicer, and Chase Manhattan Bank, as
trustee. (Incorporated by reference to Exhibit 10.38 to
Specialty Foods Acquisition Corp.'s Report on Form 10-K for
the year ended December 31, 1996)
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
10.26 Amendment No. 2 to Specialty Foods Corp. Master Trust Pooling
Agreement, dated as of December 27, 1996, by and among
Specialty Foods Finance Corp., Specialty Foods Corp., as
Master Servicer, and Chase Manhattan Bank, as trustee.
(Incorporated by reference to Exhibit 10.40 to Specialty Foods
Acquisition Corp.'s Report on Form 10-K for the year ended
December 31, 1996)
10.27 Amendment No. 3 to Specialty Foods Corp. Master Trust Pooling
Agreement, dated as of February 24, 1997, by and among
Specialty Foods Finance Corp., Specialty Foods Corp., as
Master Servicer, and Chase Manhattan Bank, as trustee.
(Incorporated by reference to Exhibit 10.41 to Specialty Foods
Acquisition Corp.'s Report on Form 10-K for the year ended
December 31, 1996)
10.28 Amendment No. 7 to Specialty Foods Corp. Master Trust
Amendment No. 7 to the Master Trust Pooling Agreement and the
Receivables Sale Agreement and Amendment No. 2 to the
Servicing Agreement and Consent Related thereto, dated as of
June 10, 1999, by and among Specialty Foods Finance Corp.,
Specialty Foods Corp., SFC New Holdings, Inc. and The Chase
Manhattan Bank, as trustee. (Incorporated by reference to
Exhibit 99.4 to Specialty Foods Acquisition Corp.'s Report on
Form 8-K dated June 8, 1999)
10.29 Amendment No. 1 to Amended and Restated Receivables Sale
Agreement, dated as of December 16, 1996, by and among
Specialty Foods Finance Corp., Specialty Foods Corp., as
Master Servicer, and certain subsidiaries of Specialty Foods
Corp. (Incorporated by reference to Exhibit 10.42 to Specialty
Foods Acquisition Corp.'s Report on Form 10-K for the year
ended December 31, 1996)
10.30 Amendment No. 2 to Amended and Restated Receivables Sale
Agreement, dated as of December 27, 1996, by and among
Specialty Foods Finance Corp., Specialty Foods Corp., as
Master Servicer, and certain subsidiaries of Specialty Foods
Corp. (Incorporated by reference to Exhibit 10.43 to Specialty
Foods Acquisition Corp.'s Report on Form 10-K for the year
ended December 31, 1996)
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
10.31 Amendment No. 3 to Amended and Restated Receivables Sale
Agreement, dated as of February 24, 1997, by and among
Specialty Foods Finance Corp., Specialty Foods Corp., as
Master Servicer, and certain subsidiaries of Specialty Foods
Corp. (Incorporated by reference to Exhibit 10.44 to Specialty
Foods Acquisition Corp.'s Report on Form 10-K for the year
ended December 31, 1996)
10.32 Specialty Foods Corp. Master Trust Amendment No. 5 to each of
the Pooling Agreement and Receivables Sale Agreement and
Amendment No. 1 to the Servicing Agreement. (Incorporated by
reference to Exhibit 10.80 to Specialty Foods Acquisition
Corp.'s Report on Form 10-Q for the Quarter ended March 31,
1998)
10.33 Amended and Restated Executive Employment Agreement, dated as
of March 15, 1999, among Specialty Foods Acquisition Corp.,
Specialty Foods Corp. and Lawrence S. Benjamin. (Incorporated
by reference to Exhibit 10.38 to Specialty Foods Corp.'s
Report on Form 10-K for the year ended December 31, 1998)
10.34 Amended and Restated Executive Employment Agreement, dated as
of March 15, 1999, among Specialty Foods Acquisition Corp.,
Specialty Foods Corp. and Robert L. Fishbune. (Incorporated by
reference to Exhibit 10.43 to Specialty Foods Corp.'s Report
on Form 10-K for the year ended December 31, 1998)
10.35 Amended and Restated Executive Employment Agreement, dated as
of March 15, 1999, among Specialty Foods Acquisition Corp.,
Specialty Foods Corp. and Robert L. Fishbune. (Incorporated by
reference to Exhibit 10.43 to Specialty Food Corp.'s Report on
Form 10-K for the year ended December 31, 1998)
10.36 Executive Employment Agreement, dated as of July 15, 1997,
among Specialty Foods Corp., Mother's Cake & Cookie Company,
MCC-DSD Holdings, Inc. and Patrick J. O'Dea. (Incorporated by
reference to Exhibit 10.44 to Specialty Foods Corp.'s Report
on Form 10-K for the year ended December 31, 1998)
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
10.37 Mother's Cake & Cookie Co. Amended and Restated Supplemental
Long Term Incentive Compensation Plan. (Incorporated by
reference to Exhibit 10.48 to Specialty Foods Corp.'s Report
on Form 10-K for the year ended December 31, 1998)
10.38 Deferred Bonus Agreement, dated as of October 27, 1997,
between Specialty Foods Corp. and Lawrence S. Benjamin.
(Incorporated by reference to Exhibit 10.53 to Specialty Foods
Acquisition Corp.'s Report on Form 10-K for the year ended
December 31, 1997)
10.39 Special Bonus Agreement, dated as of December 21, 1997,
between Specialty Foods Corp. and Lawrence S. Benjamin.
(Incorporated by reference to Exhibit 10.54 to Specialty Foods
Acquisition Corp.'s Report on Form 10-K for the year ended
December 31, 1997)
10.40 Retention Bonus Agreement, dated as of March 15, 1999, between
Specialty Foods Corp. and Lawrence S. Benjamin. (Incorporated
by reference to Exhibit 10.52 to Specialty Foods Corp.'s
Report on Form 10-K for the year ended December 31, 1998)
10.41 Participation Award Agreement, dated as of March 15, 1999,
between Mother's Cake & Cookie Company and Lawrence S.
Benjamin. (Incorporated by reference to Exhibit 10.53 to
Specialty Foods Corp.'s Report on Form 10-K for the year ended
December 31, 1998)
10.42 Deferred Bonus Agreement, dated as of July 15, 1997, between
Specialty Foods Corp. and Robert L. Fishbune. (Incorporated by
reference to Exhibit 10.55 to Specialty Foods Acquisition
Corp.'s Report on Form 10-K for the year ended December 31,
1997)
10.43 Retention Bonus Agreement, dated as of March 15, 1999, between
Specialty Foods Corp. and Robert L. Fishbune. (Incorporated by
reference to Exhibit 10.55 to Specialty Foods Corp.'s Report
on Form 10-K for the year ended December 31, 1998)
10.44 Deferred Bonus Agreement, dated as of June 16, 1998, between
Andre-Boudin Bakeries, Inc. and Larry Strain. (Incorporated by
reference to Exhibit 10.56 to Specialty Foods Corp.'s Report
on Form 10-K for the year ended December 31, 1998)
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
10.45 Deferred Bonus Agreement, dated as of July 15, 1997, between
Mother's Cake & Cookie Company and Patrick J. O'Dea.
(Incorporated by reference to Exhibit 10.58 to Specialty Foods
Corp.'s Report on Form 10-K for the year ended December 31,
1998)
10.46 Retention Bonus Agreement, dated as of March 15, 1999, between
Mother's Cake & Cookie Company and Patrick J. O'Dea.
(Incorporated by reference to Exhibit 10.59 to Specialty Foods
Corp.'s Report on Form 10-K for the year ended December 31,
1998)
10.47 Retention Bonus Agreement, dated as of March 15, 1999, between
Specialty Foods Corp. and David E. Schreibman. (Incorporated
by reference to Exhibit 10.60 to Specialty Foods Corp.'s
Report on Form 10-K for the year ended December 31, 1998)
10.48 Deferred Bonus Agreement, dated as of July 15, 1997, between
Metz Baking Company and Henry J. Metz. (Incorporated by
reference to Exhibit 10.57 Specialty Foods Acquisition Corp.'s
Report on Form 10-Q for the Quarter ended March 31, 1998)
10.49 Divestiture Award Agreement, dated as of March 15, 1999,
between Metz Baking Company and Robert L. Fishbune.
(Incorporated by reference to Exhibit 10.66 to Specialty Foods
Corp.'s Report on Form 10-K for the year ended December 31,
1998)
10.50 Divestiture Award Agreement, dated as of July 15, 1997,
between Metz Baking Company and Henry J. Metz. (Incorporated
by reference to Exhibit 10.65 to Specialty Foods Acquisition
Corp.'s Report on Form 10-K for the year ended December 31,
1997)
10.51 Divestiture Award Agreement, dated as of March 15, 1999,
between H&M Food System Company, Inc. and Lawrence S.
Benjamin. (Incorporated by reference to Exhibit 10.68 to
Specialty Foods Corp.'s Report on Form 10-K for the year ended
December 31, 1998)
10.52 Divestiture Award Agreement, dated as of March 15, 1999,
between Metz Baking Company and Lawrence S. Benjamin.
(Incorporated by reference to Exhibit 10.69 to Specialty Foods
Corp.'s Report on Form 10-K for the year ended December 31,
1998)
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
10.53 Divestiture Award Agreement, dated as of March 15, 1999,
between H&M Food System Company, Inc. and Robert L. Fishbune.
(Incorporated by reference to Exhibit 10.70 to Specialty Foods
Corp.'s Report on Form 10-K for the year ended December 31,
1998)
10.54 Divestiture Award Agreement, dated as of March 15, 1999,
between Mother's Cake & Cookie Company and Robert L. Fishbune.
(Incorporated by reference to Exhibit 10.71 to Specialty Foods
Corp.'s Report on Form 10-K for the year ended December 31,
1998)
10.55 Divestiture Award Agreement, dated as of March 15, 1999,
between Andre-Boudin Bakeries, Inc. and Robert L. Fishbune.
(Incorporated by reference to Exhibit 10.72 to Specialty Foods
Corp.'s Report on Form 10-K for the year ended December 31,
1998)
10.56 Divestiture Award Agreement, dated as of October 19, 1998
between H&M Food System Company, Inc. and David E. Schreibman.
(Incorporated by reference to Exhibit 10.73 to Specialty Foods
Corp.'s Report on Form 10-K for the year ended December 31,
1998)
10.57 Divestiture Award Agreement, dated as of March 15, 1999,
between Metz Baking Company and David E. Schreibman.
(Incorporated by reference to Exhibit 10.74 to Specialty Foods
Corp.'s Report on Form 10-K for the year ended December 31,
1998)
10.58 Divestiture Award Agreement, dated as of March 15, 1999,
between Mother's Cake & Cookie Company and David E.
Schreibman. (Incorporated by reference to Exhibit 10.75 to
Specialty Foods Corp.'s Report on Form 10-K for the year ended
December 31, 1998)
10.59 Divestiture Award Agreement, dated as of March 15, 1999,
between Andre-Boudin Bakeries, Inc. and David E. Schreibman.
(Incorporated by reference to Exhibit 10.76 to Specialty Foods
Corp.'s Report on Form 10-K for the year ended December 31,
1998)
10.60 Amended and Restated Metz Baking Company Pension Plan for
Non-Union Employees. (Incorporated by reference to Exhibit
10.52 to Specialty Foods Acquisition Corp.'s Report on Form
10-K for the year ended December 31, 1994)
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
10.61 Amended and Restated Mother's Cake & Cookie Company Retirement
Plan. (Incorporated by reference to Exhibit 10.51 to Specialty
Foods Acquisition Corp.'s report on Form 10-K for the year
ended December 31, 1994)
10.62 Coordination Document for the Metz Baking Company-Mother's
Cake & Cookie Co. Consolidated Pension Plan. (Incorporated by
reference to Exhibit 10.80 to Specialty Foods Corp.'s Report
on Form 10-K for the year ended December 31, 1998)
10.63 Form of 1998 Annual Bonus Plan. (Incorporated by reference to
Exhibit 10.84 to Specialty Foods Corp.'s Report on Form 10-K
for the year ended December 31, 1998)
10.64 Form of 1999 Annual Bonus Plan. (Incorporated by reference to
Exhibit 10.85 to Specialty Foods Corp.'s Report on Form 10-K
for the year ended December 31, 1998)
10.65 Executive Employment Agreement, dated as of May 1, 1999, by
and among Specialty Foods Acquisition Corp., Specialty Foods
Corp., Metz Baking Company, Mother's Cake & Cookie Company,
Archway Cookies, Inc., and Andre-Boudin Bakeries, Inc. and
David E. Schreibman. (Incorporated by reference to Exhibit
10.87 to Specialty Foods Corp.'s Report on Form 10-Q for the
Quarter ended March 31, 1999)
10.66 Amended and Restated Retention Bonus Agreement, dated as of
May 1, 1999, by and between Specialty Foods Corp. and David E.
Schreibman. (Incorporated by reference to Exhibit 10.88 to
Specialty Foods Corp.'s Report on Form 10-Q for the Quarter
ended March 31, 1999)
10.67 Amended and Restated Divestiture Award Agreement, dated as of
May 1, 1999, by and between Metz Baking Company and David E.
Schreibman. (Incorporated by reference to Exhibit 10.89 to
Specialty Foods Corp.'s Report on Form 10-Q for the Quarter
ended March 31, 1999)
10.68 Amended and Restated Divestiture Award Agreement, dated as of
May 1, 1999, by and between Mother's Cake & Cookie Company and
David E. Schreibman. (Incorporated by reference to Exhibit
10.90 to Specialty Foods Corp.'s Report on Form 10-Q for the
Quarter ended March 31, 1999)
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
10.69 Amended and Restated Divestiture Award Agreement, dated as of
May 1, 1999, by and between Andre-Boudin Bakeries, Inc. and
David E. Schreibman. (Incorporated by reference to Exhibit
10.91 to Specialty Foods Corp.'s Report on Form 10-Q for the
Quarter ended March 31, 1999)
10.70 Participation Award Agreement, dated as of May 1, 1999,
between Mother's Cake & Cookie Company and Patrick J. O'Dea.
(Incorporated by reference to Exhibit 10.92 to Specialty Foods
Corp.'s Report on Form 10-Q for the Quarter ended March 31,
1999)
12.1* Statement re Computation of Ratio of Earnings to Fixed
Charges.
21.1* Subsidiaries of SFC New Holdings, Inc.
23.1* Consent of KPMG.
23.2** Consent of Paul, Weiss, Rifkind, Wharton & Garrison (See
Exhibit 5.1).
24.1* Power of attorney (included on the signature page of this
registration statement).
25.1* Statement on Form T-1, of the Eligibility of United States
Trust Company of New York, as Trustee under the Indenture
relating to the 11 1/4% Senior Notes due 2001 and the 12 1/8%
Senior Notes due 2002.
25.2* Statement on Form T-1, of the Eligibility of U.S. Trust
Company of Texas, N.A., as Trustee under the Indenture
relating to the 13 1/4% Senior Subordinated Notes due 2003.
27* Financial Data Schedule
99.1** Form of Letter of Transmittal.
99.2** Form of Notice of Guaranteed Delivery.
- ---------------------
* Previously filed.
** Filed herewith.
<PAGE>
Item 22. Undertakings.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 20, 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, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
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 this 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 this
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 low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement or
any material change to such information in this 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 offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(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.
<PAGE>
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes as follows:
(a) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other Items of the applicable form.
(b) Every prospectus (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the requirements of section
10(a)(3) of the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Deerfield, Illinois on August 9, 1999.
SFC NEW HOLDINGS, INC.
By: /s/ Sean M. Stack
-----------------------------------
Name: Sean M. Stack
Title: Vice President, Treasurer and
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature and Title Capacity Date
- ------------------- -------- ----
<S> <C> <C>
* Principal Executive Officer August 9, 1999
- ----------------------------------------------- and Director
Lawrence S. Benjamin
* Principal Financial and August 9, 1999
- ----------------------------------------------- Accounting Officer
Robert L. Fishbune
* Chairman of the Board of August 9, 1999
- ----------------------------------------------- Directors
Robert B. Haas
- ----------------------------------------------- Director
Thomas J. Baldwin
* Director August 9, 1999
- -----------------------------------------------
J. Taylor Crandall
* Director August 9, 1999
- -----------------------------------------------
Jerry M. Meyer
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Signature and Title Capacity Date
- ------------------- -------- ----
<S> <C> <C>
* Director August 9, 1999
- -----------------------------------------------
Andrew J. Nathanson
- ----------------------------------------------- Director
David G. Offensend
* Director August 9, 1999
- -----------------------------------------------
Marc C. Particelli
* Director August 9, 1999
- -----------------------------------------------
Anthony P. Scotto
*
Director August 9, 1999
- -----------------------------------------------
Douglas D. Wheat
</TABLE>
*By: /s/ Sean M. Stack
------------------------------------------
Sean M. Stack
Attorney-in-fact
<PAGE>
EXHIBIT INDEX
3.1* Certificate of Incorporation of SFC New Holdings, Inc.
3.2* By-Laws of SFC New Holdings, Inc.
3.3* Certificate of Designation of SFC New Holdings, Inc.
4.1* Registration Rights Agreement, dated as of June 11, 1999, among
SFC New Holdings, Inc. and holders of its 11 1/4% Senior Notes
due 2001, its 12 1/8% Senior Notes due 2002 and its 13 1/4%
Senior Subordinated Notes due 2003.
4.2* Indenture, dated as of June 11, 1999, between SFC New Holdings,
Inc. and United States Trust Company of New York, as trustee,
governing the 11 1/4% Senior Notes due 2001 issued by SFC New
Holdings, Inc.
4.3* Indenture, dated as of June 11, 1999, between SFC New Holdings,
Inc. and United States Trust Company of New York, as trustee,
governing the 12 1/8% Senior Notes due 2002 issued by SFC New
Holdings, Inc.
4.4* Indenture, dated as of June 11, 1999, between SFC New Holdings,
Inc. and U.S. Trust Company of Texas, N.A., as trustee, governing
the 13 1/4% Senior Subordinated Notes due 2003 issued by SFC New
Holdings, Inc.
5.1** Opinion of Paul, Weiss, Rifkind, Wharton & Garrison regarding the
legality of the securities being registered.
8.1** Opinion of Paul, Weiss, Rifkind, Wharton & Garrison regarding
certain tax matters.
10.1 Tax Sharing Agreement, dated as of August 16, 1993, among
Specialty Foods Acquisition Corp., Specialty Foods Corp. and
certain subsidiaries of Specialty Foods Corp. (Incorporated by
reference to Exhibit 10.17 to Specialty Foods Acquisition Corp.'s
Registration Statement on Form S-4 (Registration No. 33-68958))
10.2* First Amended and Restated SFC Group Tax Sharing Agreement, dated
as of June 11, 1999, among Specialty Foods Acquisition Corp., SFC
New Holdings, Inc. and certain subsidiaries of SFC New Holdings,
Inc.
10.3 Tax Sharing Agreement, dated as of August 16, 1993, between
Specialty Foods Acquisition Corp. and Specialty Foods Corp.
(Incorporated by reference to Exhibit 10.18 to Specialty Foods
Acquisition Corp.'s Registration Statement on Form S-4
(Registration No. 33-68958))
<PAGE>
10.4* First Amended and Restated SFAC Tax Sharing Agreement, dated as
of June 11, 1999, among Specialty Foods Acquisition Corp. and SFC
New Holdings, Inc.
10.5* Assignment and Assumption Agreement, dated as of June 11, 1999,
between Specialty Foods Corp. and SFC New Holdings, Inc.
10.6 Corporate Services Agreement, dated as of June 30, 1994, between
Specialty Foods Acquisition Corp. and Specialty Foods Corp.
(Incorporated by reference to Exhibit 10.14 to Specialty Foods
Corp.'s Report on Form 10-K for the year ended December 31, 1994)
10.7 Term Loan Agreement, dated as of March 16, 1998, among Specialty
Foods Corp., various financial institutions, DLJ Capital Funding,
Inc., as syndication agent, and ABN Amro Bank N.V., as
administrative agent. (Incorporated by reference to Exhibit 10.24
to Specialty Foods Acquisition Corp.'s Report on Form 10-K for
the year ended December 31, 1997)
10.8 Amended and Restated Term Loan Agreement, dated as of June 11,
1999, among SFC New Holdings, Inc., as the Borrower, Various
Financial Institutions, as the Term Loan Lenders, DLJ Capital
Funding, Inc., as the Syndication Agent and Collateral Agent for
the Term Loan Lenders, ABN Amro Bank, N.V. as the Administrative
Agent for the Term Loan Lenders and Banque Paribas, as the
Documentation Agent for the Term Loan Lenders. (Incorporated by
reference to Exhibit 99.3 to Specialty Foods Acquisition Corp.
Report on Form 8-K dated June 30, 1999)
10.9 Revolving Credit Agreement, dated as of March 16, 1998, among
certain subsidiaries of Specialty Foods Corp., various financial
institutions, DLJ Capital Funding, Inc., as syndication agent,
and ABN Amro Bank N.V., as administrative agent. (Incorporated by
reference to Exhibit 10.25 to Specialty Foods Acquisition Corp.'s
Report on Form 10-K for the year ended December 31, 1997)
10.10 Amended and Restated Revolving Credit Agreement, dated as of June
11, 1999, among certain subsidiaries of SFC New Holdings, Inc.,
as the Revolving Credit Borrowers, Various Financial
Institutions, as the Revolving Credit Lenders, DLJ Capital
Funding, Inc., as the Syndication Agent and Collateral Agent for
the Revolving Credit Lenders, ABN Amro Bank, N.V. as the
Administrative Agent for the Revolving Credit Lenders and Banque
Paribas, as the Documentation Agent for the Revolving Credit
Lenders. (Incorporated by reference to Exhibit 99.2 to Specialty
Foods Acquisition Corp. Report on Form 8-K dated June 30, 1999)
<PAGE>
10.11 Pooling Agreement, dated as of November 16, 1994, by and among
Specialty Foods Finance Corp., Specialty Foods Corp., as Master
Servicer, and Chase Manhattan Bank, as trustee (the "Pooling
Agreement"). (Incorporated by reference to Exhibit 10.29 to
Specialty Foods Acquisition Corp.'s Report on Form 10-K for the
year ended December 31, 1994)
10.12 Series 1994-1 Supplement to the Pooling Agreement, dated as of
November 16, 1994, by and among Specialty Foods Finance Corp.,
Specialty Foods Corp., as Master Servicer, and Chase Manhattan
Bank, as trustee. (Incorporated by reference to Exhibit 10.30 to
Specialty Foods Acquisition Corp.'s Report on Form 10-K for the
year ended December 31, 1994)
10.13 Series 1996-1 Supplement to the Pooling Agreement, dated as of
August 1, 1996, by and among Specialty Foods Finance Corp.,
Specialty Foods Corp., as Master Servicer, and Chase Manhattan
Bank, as trustee. (Incorporated by reference to Exhibit 10.67 to
Specialty Foods Acquisition Corp.'s Report on Form 10-Q for the
Quarter ended September 28, 1996)
10.14 Amendment No. 1 to Series 1996-1 Supplement to the Pooling
Agreement, dated as of November 29, 1996, by and among Specialty
Foods Finance Corp., Specialty Foods Corp., as Master Servicer,
Chase Manhattan Bank, as initial VFC Certificate holder, and
Chase Manhattan Bank, as trustee. (Incorporated by reference to
Exhibit 10.34 to Specialty Foods Acquisition Corp.'s Report on
Form 10-K for the year ended December 31, 1996)
10.15 Amendment No. 2 to Series 1996-1 Supplement to the Pooling
Agreement, dated as of December 13, 1996, by and among Specialty
Foods Finance Corp., Specialty Foods Corp., as Master Servicer,
Chase Manhattan Bank, as initial VFC Certificate holder, and
Chase Manhattan Bank, as trustee. (Incorporated by reference to
Exhibit 10.26 to Specialty Foods Corp.'s Report on Form 10-K for
the year ended December 31, 1996)
10.16 Series 1997-1 Supplement to the Pooling Agreement, dated as of
January 31, 1997, by and among Specialty Foods Finance Corp.,
Specialty Foods Corp., as Master Servicer, and Chase Manhattan
Bank, as trustee. (Incorporated by reference to Exhibit 10.36 to
Specialty Foods Acquisition Corp.'s Report on Form 10-K for the
year ended December 31, 1996)
<PAGE>
10.17 Series 1998-1 Certificate Purchase Agreement, dated as of March
31, 1998, by and among Specialty Foods Finance Corp., Specialty
Foods Corp., as Master Servicer, and Bankers Trust Company, as
Agent. (Incorporated by reference to Exhibit 10.78 to Specialty
Foods Acquisition Corp.'s Report on Form 10-Q for the Quarter
ended March 31, 1998)
10.18 Series 1998-1 Supplement, dated as of March 31, 1998, to the
Pooling Agreement, dated as of November 16, 1994, by and among
Specialty Foods Finance Corp., Specialty Foods Corp., as Master
Servicer, and Chase Manhattan Bank, as trustee. (Incorporated by
reference to Exhibit 10.79 to Specialty Foods Acquisition Corp.'s
Report on Form 10-Q for the Quarter ended March 31, 1998)
10.19 Amendment to Series 1998-1 Supplement, dated as of March 31,
1998, by and among Specialty Foods Finance Corp., Specialty Foods
Corp., as Master Servicer, Chase Manhattan Bank, as trustee, and
Bankers Trust, as the sole VFC Certificate holder under that
certain Certificate Purchase Agreement. (Incorporated by
reference to Exhibit 10.81 to Specialty Foods Acquisition Corp.'s
Report on Form 10-Q for the Quarter ended March 31, 1998)
10.20 Amendment No. 3 to Series 1998-1 Supplement and Amendment No. 1
to Series 1998-1 Certificate Purchase Agreement, dated as of June
10, 1999, between Specialty Foods Finance Corp., Specialty Foods
Corp., SFC New Holdings, Inc., The Chase Manhattan Bank, Various
Financial Institutions and Bankers Trust Company, as a VFC
Certificateholder and as agent for the VFC Certificateholder.
(Incorporated by reference to Exhibit 99.5 to Specialty Foods
Acquisition Corp.'s Report on Form 8-K dated June 30, 1999).
10.21 Amendment No. 4 to Series 1998-I Supplement, dated as of June 10,
1999, by and among Specialty Foods Finance Corp., SFC New
Holdings, Inc., The Chase Manhattan Bank, as trustee, Various
Financial Institutions and Bankers Trust, as a VFC
Certificateholder and as agent for the VFC Certificateholder.
(Incorporated by reference to Exhibit 99.6 to Specialty Foods
Acquisition Corp.'s Report on Form 8-K dated June 30, 1999)
10.22 Performance Guaranty, dated as of March 31, 1998, by and among
Specialty Foods Corp., as Master Servicer, in favor of Specialty
Foods Finance Corp. (Incorporated by reference to Exhibit 10.82
to Specialty Foods Acquisition Corp.'s Report on Form 10-Q for
the Quarter ended March 31, 1998)
<PAGE>
10.23 Amended and Restated Receivables Sales Agreement, dated as of
November 16, 1994, by and among Specialty Foods Finance Corp.,
Specialty Foods Corp., as Master Servicer, and certain
subsidiaries of Specialty Foods Corp. (Incorporated by reference
to Exhibit 10.31 to Specialty Foods Acquisition Corp.'s Report on
Form 10-K for the year ended December 31, 1994)
10.24 Servicing Agreement, dated as of November 16, 1994, by and among
Specialty Foods Finance Corp., Specialty Foods Corp., as Master
Servicer, and certain subsidiaries of Specialty Foods Corp.
(Incorporated by reference to Exhibit 10.32 to Specialty Foods
Acquisition Corp.'s Report on Form 10-K for the year ended
December 31, 1994)
10.25 Amendment No. 1 to Specialty Foods Corp. Master Trust Pooling and
Servicing Agreements, dated as of December 16, 1996, by and among
Specialty Foods Finance Corp., Specialty Foods Corp., as Master
Servicer, and Chase Manhattan Bank, as trustee. (Incorporated by
reference to Exhibit 10.38 to Specialty Foods Acquisition Corp.'s
Report on Form 10-K for the year ended December 31, 1996)
10.26 Amendment No. 2 to Specialty Foods Corp. Master Trust Pooling
Agreement, dated as of December 27, 1996, by and among Specialty
Foods Finance Corp., Specialty Foods Corp., as Master Servicer,
and Chase Manhattan Bank, as trustee. (Incorporated by reference
to Exhibit 10.40 to Specialty Foods Acquisition Corp.'s Report on
Form 10-K for the year ended December 31, 1996)
10.27 Amendment No. 3 to Specialty Foods Corp. Master Trust Pooling
Agreement, dated as of February 24, 1997, by and among Specialty
Foods Finance Corp., Specialty Foods Corp., as Master Servicer,
and Chase Manhattan Bank, as trustee. (Incorporated by reference
to Exhibit 10.41 to Specialty Foods Acquisition Corp.'s Report on
Form 10-K for the year ended December 31, 1996)
10.28 Amendment No. 7 to Specialty Foods Corp. Master Trust Amendment
No. 7 to the Master Trust Pooling Agreement and the Receivables
Sale Agreement and Amendment No. 2 to the Servicing Agreement and
Consent Related thereto, dated as of June 10, 1999, by and among
Specialty Foods Finance Corp., Specialty Foods Corp., SFC New
Holdings, Inc. and The Chase Manhattan Bank, as trustee.
(Incorporated by reference to Exhibit 99.4 to Specialty Foods
Acquisition Corp.'s Report on Form 8-K dated June 8, 1999)
<PAGE>
10.29 Amendment No. 1 to Amended and Restated Receivables Sale
Agreement, dated as of December 16, 1996, by and among Specialty
Foods Finance Corp., Specialty Foods Corp., as Master Servicer,
and certain subsidiaries of Specialty Foods Corp. (Incorporated
by reference to Exhibit 10.42 to Specialty Foods Acquisition
Corp.'s Report on Form 10-K for the year ended December 31, 1996)
10.30 Amendment No. 2 to Amended and Restated Receivables Sale
Agreement, dated as of December 27, 1996, by and among Specialty
Foods Finance Corp., Specialty Foods Corp., as Master Servicer,
and certain subsidiaries of Specialty Foods Corp. (Incorporated
by reference to Exhibit 10.43 to Specialty Foods Acquisition
Corp.'s Report on Form 10-K for the year ended December 31, 1996)
10.31 Amendment No. 3 to Amended and Restated Receivables Sale
Agreement, dated as of February 24, 1997, by and among Specialty
Foods Finance Corp., Specialty Foods Corp., as Master Servicer,
and certain subsidiaries of Specialty Foods Corp. (Incorporated
by reference to Exhibit 10.44 to Specialty Foods Acquisition
Corp.'s Report on Form 10-K for the year ended December 31, 1996)
10.32 Specialty Foods Corp. Master Trust Amendment No. 5 to each of the
Pooling Agreement and Receivables Sale Agreement and Amendment
No. 1 to the Servicing Agreement. (Incorporated by reference to
Exhibit 10.80 to Specialty Foods Acquisition Corp.'s Report on
Form 10-Q for the Quarter ended March 31, 1998)
10.33 Amended and Restated Executive Employment Agreement, dated as of
March 15, 1999, among Specialty Foods Acquisition Corp.,
Specialty Foods Corp. and Lawrence S. Benjamin. (Incorporated by
reference to Exhibit 10.38 to Specialty Foods Corp.'s Report on
Form 10-K for the year ended December 31, 1998)
10.34 Amended and Restated Executive Employment Agreement, dated as of
March 15, 1999, among Specialty Foods Acquisition Corp.,
Specialty Foods Corp. and Robert L. Fishbune. (Incorporated by
reference to Exhibit 10.43 to Specialty Foods Corp.'s Report on
Form 10-K for the year ended December 31, 1998)
10.35 Amended and Restated Executive Employment Agreement, dated as of
March 15, 1999, among Specialty Foods Acquisition Corp.,
Specialty Foods Corp. and Robert L. Fishbune. (Incorporated by
reference to Exhibit 10.43 to Specialty Food Corp.'s Report on
Form 10-K for the year ended December 31, 1998)
10.36 Executive Employment Agreement, dated as of July 15, 1997, among
Specialty Foods Corp., Mother's Cake & Cookie Company, MCC-DSD
Holdings, Inc. and Patrick J. O'Dea. (Incorporated by reference
to Exhibit 10.44 to Specialty Foods Corp.'s Report on Form 10-K
for the year ended December 31, 1998)
<PAGE>
10.37 Mother's Cake & Cookie Co. Amended and Restated Supplemental Long
Term Incentive Compensation Plan. (Incorporated by reference to
Exhibit 10.48 to Specialty Foods Corp.'s Report on Form 10-K for
the year ended December 31, 1998)
10.38 Deferred Bonus Agreement, dated as of October 27, 1997, between
Specialty Foods Corp. and Lawrence S. Benjamin. (Incorporated by
reference to Exhibit 10.53 to Specialty Foods Acquisition Corp.'s
Report on Form 10-K for the year ended December 31, 1997)
10.39 Special Bonus Agreement, dated as of December 21, 1997, between
Specialty Foods Corp. and Lawrence S. Benjamin. (Incorporated by
reference to Exhibit 10.54 to Specialty Foods Acquisition Corp.'s
Report on Form 10-K for the year ended December 31, 1997)
10.40 Retention Bonus Agreement, dated as of March 15, 1999, between
Specialty Foods Corp. and Lawrence S. Benjamin. (Incorporated by
reference to Exhibit 10.52 to Specialty Foods Corp.'s Report on
Form 10-K for the year ended December 31, 1998)
10.41 Participation Award Agreement, dated as of March 15, 1999,
between Mother's Cake & Cookie Company and Lawrence S. Benjamin.
(Incorporated by reference to Exhibit 10.53 to Specialty Foods
Corp.'s Report on Form 10-K for the year ended December 31, 1998)
10.42 Deferred Bonus Agreement, dated as of July 15, 1997, between
Specialty Foods Corp. and Robert L. Fishbune. (Incorporated by
reference to Exhibit 10.55 to Specialty Foods Acquisition Corp.'s
Report on Form 10-K for the year ended December 31, 1997)
10.43 Retention Bonus Agreement, dated as of March 15, 1999, between
Specialty Foods Corp. and Robert L. Fishbune. (Incorporated by
reference to Exhibit 10.55 to Specialty Foods Corp.'s Report on
Form 10-K for the year ended December 31, 1998)
10.44 Deferred Bonus Agreement, dated as of June 16, 1998, between
Andre- Boudin Bakeries, Inc. and Larry Strain. (Incorporated by
reference to Exhibit 10.56 to Specialty Foods Corp.'s Report on
Form 10-K for the year ended December 31, 1998)
10.45 Deferred Bonus Agreement, dated as of July 15, 1997, between
Mother's Cake & Cookie Company and Patrick J. O'Dea.
(Incorporated by reference to Exhibit 10.58 to Specialty Foods
Corp.'s Report on Form 10-K for the year ended December 31, 1998)
10.46 Retention Bonus Agreement, dated as of March 15, 1999, between
Mother's Cake & Cookie Company and Patrick J. O'Dea.
(Incorporated by reference to Exhibit 10.59 to Specialty Foods
Corp.'s Report on Form 10-K for the year ended December 31, 1998)
<PAGE>
10.47 Retention Bonus Agreement, dated as of March 15, 1999, between
Specialty Foods Corp. and David E. Schreibman. (Incorporated by
reference to Exhibit 10.60 to Specialty Foods Corp.'s Report on
Form 10-K for the year ended December 31, 1998)
10.48 Deferred Bonus Agreement, dated as of July 15, 1997, between Metz
Baking Company and Henry J. Metz. (Incorporated by reference to
Exhibit 10.57 Specialty Foods Acquisition Corp.'s Report on Form
10-Q for the Quarter ended March 31, 1998)
10.49 Divestiture Award Agreement, dated as of March 15, 1999, between
Metz Baking Company and Robert L. Fishbune. (Incorporated by
reference to Exhibit 10.66 to Specialty Foods Corp.'s Report on
Form 10-K for the year ended December 31, 1998)
10.50 Divestiture Award Agreement, dated as of July 15, 1997, between
Metz Baking Company and Henry J. Metz. (Incorporated by reference
to Exhibit 10.65 to Specialty Foods Acquisition Corp.'s Report on
Form 10-K for the year ended December 31, 1997)
10.51 Divestiture Award Agreement, dated as of March 15, 1999, between
H&M Food System Company, Inc. and Lawrence S. Benjamin.
(Incorporated by reference to Exhibit 10.68 to Specialty Foods
Corp.'s Report on Form 10-K for the year ended December 31, 1998)
10.52 Divestiture Award Agreement, dated as of March 15, 1999, between
Metz Baking Company and Lawrence S. Benjamin. (Incorporated by
reference to Exhibit 10.69 to Specialty Foods Corp.'s Report on
Form 10-K for the year ended December 31, 1998)
10.53 Divestiture Award Agreement, dated as of March 15, 1999, between
H&M Food System Company, Inc. and Robert L. Fishbune.
(Incorporated by reference to Exhibit 10.70 to Specialty Foods
Corp.'s Report on Form 10-K for the year ended December 31, 1998)
10.54 Divestiture Award Agreement, dated as of March 15, 1999, between
Mother's Cake & Cookie Company and Robert L. Fishbune.
(Incorporated by reference to Exhibit 10.71 to Specialty Foods
Corp.'s Report on Form 10-K for the year ended December 31, 1998)
10.55 Divestiture Award Agreement, dated as of March 15, 1999, between
Andre-Boudin Bakeries, Inc. and Robert L. Fishbune. (Incorporated
by reference to Exhibit 10.72 to Specialty Foods Corp.'s Report
on Form 10-K for the year ended December 31, 1998)
10.56 Divestiture Award Agreement, dated as of October 19, 1998 between
H&M Food System Company, Inc. and David E. Schreibman.
(Incorporated by reference to Exhibit 10.73 to Specialty Foods
Corp.'s Report on Form 10-K for the year ended December 31, 1998)
<PAGE>
10.57 Divestiture Award Agreement, dated as of March 15, 1999, between
Metz Baking Company and David E. Schreibman. (Incorporated by
reference to Exhibit 10.74 to Specialty Foods Corp.'s Report on
Form 10-K for the year ended December 31, 1998)
10.58 Divestiture Award Agreement, dated as of March 15, 1999, between
Mother's Cake & Cookie Company and David E. Schreibman.
(Incorporated by reference to Exhibit 10.75 to Specialty Foods
Corp.'s Report on Form 10-K for the year ended December 31, 1998)
10.59 Divestiture Award Agreement, dated as of March 15, 1999, between
Andre-Boudin Bakeries, Inc. and David E. Schreibman.
(Incorporated by reference to Exhibit 10.76 to Specialty Foods
Corp.'s Report on Form 10-K for the year ended December 31, 1998)
10.60 Amended and Restated Metz Baking Company Pension Plan for
Non-Union Employees. (Incorporated by reference to Exhibit 10.52
to Specialty Foods Acquisition Corp.'s Report on Form 10-K for
the year ended December 31, 1994)
10.61 Amended and Restated Mother's Cake & Cookie Company Retirement
Plan. (Incorporated by reference to Exhibit 10.51 to Specialty
Foods Acquisition Corp.'s report on Form 10-K for the year ended
December 31, 1994)
10.62 Coordination Document for the Metz Baking Company-Mother's Cake &
Cookie Co. Consolidated Pension Plan. (Incorporated by reference
to Exhibit 10.80 to Specialty Foods Corp.'s Report on Form 10-K
for the year ended December 31, 1998)
10.63 Form of 1998 Annual Bonus Plan. (Incorporated by reference to
Exhibit 10.84 to Specialty Foods Corp.'s Report on Form 10-K for
the year ended December 31, 1998)
10.64 Form of 1999 Annual Bonus Plan. (Incorporated by reference to
Exhibit 10.85 to Specialty Foods Corp.'s Report on Form 10-K for
the year ended December 31, 1998)
10.65 Executive Employment Agreement, dated as of May 1, 1999, by and
among Specialty Foods Acquisition Corp., Specialty Foods Corp.,
Metz Baking Company, Mother's Cake & Cookie Company, Archway
Cookies, Inc., and Andre-Boudin Bakeries, Inc. and David E.
Schreibman. (Incorporated by reference to Exhibit 10.87 to
Specialty Foods Corp.'s Report on Form 10-Q for the Quarter ended
March 31, 1999)
<PAGE>
10.66 Amended and Restated Retention Bonus Agreement, dated as of May
1, 1999, by and between Specialty Foods Corp. and David E.
Schreibman. (Incorporated by reference to Exhibit 10.88 to
Specialty Foods Corp.'s Report on Form 10-Q for the Quarter ended
March 31, 1999)
10.67 Amended and Restated Divestiture Award Agreement, dated as of May
1, 1999, by and between Metz Baking Company and David E.
Schreibman. (Incorporated by reference to Exhibit 10.89 to
Specialty Foods Corp.'s Report on Form 10-Q for the Quarter ended
March 31, 1999)
10.68 Amended and Restated Divestiture Award Agreement, dated as of May
1, 1999, by and between Mother's Cake & Cookie Company and David
E. Schreibman. (Incorporated by reference to Exhibit 10.90 to
Specialty Foods Corp.'s Report on Form 10-Q for the Quarter ended
March 31, 1999)
10.69 Amended and Restated Divestiture Award Agreement, dated as of May
1, 1999, by and between Andre-Boudin Bakeries, Inc. and David E.
Schreibman. (Incorporated by reference to Exhibit 10.91 to
Specialty Foods Corp.'s Report on Form 10-Q for the Quarter ended
March 31, 1999)
10.70 Participation Award Agreement, dated as of May 1, 1999, between
Mother's Cake & Cookie Company and Patrick J. O'Dea.
(Incorporated by reference to Exhibit 10.92 to Specialty Foods
Corp.'s Report on Form 10-Q for the Quarter ended March 31, 1999)
12.1* Statement re Computation of Ratio of Earnings to Fixed Charges.
21.1* Subsidiaries of SFC New Holdings, Inc.
23.1* Consent of KPMG.
23.2** Consent of Paul, Weiss, Rifkind, Wharton & Garrison (See Exhibit
5.1).
24.1* Power of attorney (included on the signature page of this
registration statement).
25.1* Statement on Form T-1, of the Eligibility of United States Trust
Company of New York, as Trustee under the Indenture relating to
the 11 1/4% Senior Notes due 2001 and the 12 1/8% Senior Notes
due 2002.
25.2* Statement on Form T-1, of the Eligibility of U.S. Trust Company
of Texas, N.A., as Trustee under the Indenture relating to the 13
1/4% Senior Subordinated Notes due 2003.
27* Financial Data Schedule
99.1** Form of Letter of Transmittal.
<PAGE>
99.2** Form of Notice of Guaranteed Delivery.
- -----------------------
* Previously filed.
** Filed herewith.
EXHIBIT 5
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 Avenue of the Americas
New York, New York 10019-6064
(212) 373-3000
August 9, 1999
SFC New Holdings, Inc.
520 Lake Cook Road
Suite 550
Deerfield, Illinois 60015
Registration Statement on Form S-4 (Registration No. 333-83063)
Ladies and Gentlemen:
In connection with the referenced Registration Statement on Form S-4
(the "Registration Statement") filed on July 16, 1999 by SFC New Holdings, Inc.
(the "Issuer"), a Delaware corporation, with the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "Act"),
and the rules and regulations under the Act (the "Rules"), we have been
requested to render our opinion as to the legality of the securities being
registered. The Registration Statement registers under the Act the issuance of
the Issuer's 11 1/4% Senior Notes due 2001 (the "11 1/4% Exchange Notes"), the
12 1/8% Senior Notes due 2002 (the "12 1/8% Exchange Notes") and 13 1/4%
Subordinated Notes due 2003 (the "Subordinated Exchange Notes" and, together
with the 11 1/4% Exchange Notes and the 12 1/8% Exchange Notes, the "Exchange
Notes").
The 11 1/4% Exchange Notes are to be offered in exchange for (i) the
Issuer's outstanding 11 1/4% Senior Notes due 2001 (the "Initial 11 1/4% Notes")
and
<PAGE>
SFC New Holdings, Inc.
August 9, 1999
Page -2-
(ii) the outstanding 10 1/4% Senior Notes due 2001 of Specialty Foods
Corporation, a Delaware corporation ("SFC"), and will be issued under the
Indenture (the "11 1/4% Indenture"), dated as of June 11, 1999, between the
Issuer and United States Trust Company of New York, as trustee (the "Senior
Trustee"). The 12 1/8% Exchange Notes are to be offered in exchange for (i) the
Issuer's outstanding 12 1/8% Senior Notes due 2002 (the "Initial 12 1/8% Notes")
and (ii) the outstanding 11 1/8% Senior Notes due 2002 of SFC, and will be
issued under the Indenture (the "12 1/8% Indenture"), dated as of June 11, 1999,
between the Issuer and the Senior Trustee. The 13 1/4% Exchange Notes are to be
offered in exchange for (i) the Issuer's outstanding 13 1/4% Senior Notes due
2003 (the "Initial 13 1/4% Notes" and, together with the Initial 11 1/4% Notes
and the Initial 12 1/8% Notes, the "Initial Notes") and (ii) the outstanding 11
1/4% Senior Notes due 2003 of SFC, and will be issued under the Indenture (the
"13 1/4% Indenture" and, together with the 11 1/4% Indenture and the 12 1/8%
Indenture, the "Indentures"), dated as of June 11, 1999, between the Issuer and
U.S. Trust Company of Texas, N.A., as trustee (the "Subordinated Trustee").
Capitalized terms used and not otherwise defined in this letter have
the respective meanings given those terms in the Registration Statement.
In connection with this opinion, we have examined originals,
conformed copies or photocopies, certified or otherwise identified to our
satisfaction, of the following documents (collectively, the "Documents"):
(i) the Registration Statement (including its exhibits);
<PAGE>
SFC New Holdings, Inc.
August 9, 1999
Page -3-
(ii) the 11 1/4% Indenture included as Exhibit 4.2 to the
Registration Statement;
(iii) the proposed form of the 11 1/4% Exchange Notes included as
Exhibit A to the 11 1/4% Indenture;
(iv) the 12 1/8% Indenture included as Exhibit 4.3 to the
Registration Statement;
(v) the proposed form of the 12 1/8% Exchange Notes included as
Exhibit A to the 12 1/8% Indenture;
(vi) the 13 1/4% Indenture included as Exhibit 4.3 to the
Registration Statement;
(vii) the proposed form of the 13 1/4% Exchange Notes included as
Exhibit A to the 13 1/4% Indenture; and
(viii) the Registration Rights Agreement, dated as of June 11, 1999,
among the Issuer and holders of the Initial Notes (the
"Registration Rights Agreement").
In addition, we have examined: (i) those corporate records of the Issuer that we
have considered appropriate; and (ii) those other certificates, agreements and
documents that we deemed relevant and necessary as a basis for the opinion
expressed below.
In our examination of the documents and in rendering the opinion set
forth below, we have assumed, without independent investigation, (i) the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity of the original documents of all documents
submitted to us as certified,
<PAGE>
SFC New Holdings, Inc.
August 9, 1999
Page -4-
photostatic, reproduced or conformed copies of validly existing agreements or
other documents, the authenticity of all the latter documents and the legal
capacity of all individuals who have executed any of the documents which we
examined, (ii) that the Exchange Notes will be issued as described in the
Registration Statement, (iii) that the 11 1/4% Indenture and the 12 1/8%
Indenture were duly authorized, executed and delivered by the Senior Trustee and
are valid and binding agreements of the Senior Trustee, (iv) that the 13 1/4%
Indenture was duly authorized, executed and delivered by the Subordinated
Trustee and is a valid and binding agreement of the Subordinated Trustee, (v)
that the Registration Rights Agreement was duly authorized, executed and
delivered by or on behalf of each of the holders of the Initial Notes and is a
valid and binding agreement of each of the holders of the Initial Notes and (vi)
that the Exchange Notes will be in substantially the form attached to the
applicable Indenture and that any information omitted from them will be properly
added. We have also relied upon certificates of public officials and officers of
the Issuer.
Based on the above, and subject to the stated assumptions,
exceptions and qualifications, we are of the opinion that, when the Exchange
Notes are duly issued, authenticated and delivered in accordance with the terms
of the applicable Indenture and the Registration Rights Agreement, the Exchange
Notes will be legal, valid and binding obligations of the Issuer enforceable
against it in accordance with their terms.
Our opinion is subject to the qualification that the enforceability
of the Indentures and the Exchange Notes may be (i) subject to bankruptcy,
insolvency,
<PAGE>
SFC New Holdings, Inc.
August 9, 1999
Page -5-
fraudulent conveyance or transfer, reorganization, moratorium and other similar
laws affecting creditors' rights generally and (ii) general principles of equity
(regardless of whether enforcement is considered in a proceeding at law or in
equity).
Our opinion is limited to matters of New York law. Our opinion is
rendered only with respect to the laws, and the rules, regulations and orders
under them, which are currently in effect.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Legal
Matters" in the prospectus included in the Registration Statement. In giving
this consent, we do not admit that we come within the category of persons whose
consent is required by the Act or the Rules.
Very truly yours,
/s/ Paul, Weiss, Rifkind, Wharton & Garrison
PAUL, WEISS, RIFKIND, WHARTON &
GARRISON
EXHIBIT 8
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 Avenue of the Americas
New York, New York 10019-6064
August 9, 1999
SFC New Holdings, Inc.
520 Lake Cook Road
Suite 550
Deerfield, Illinois 60015
Registration Statement on Form S-4 (Registration No. 333-83063)
Ladies and Gentlemen:
In connection with the referenced Registration Statement on Form S-4
(the "Registration Statement") filed on July 16, 1999 by SFC New Holdings, Inc.
(the "Issuer"), a Delaware corporation, with the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "Act"),
and the rules and regulations under the Act (the "Rules"), we have been
requested to render this opinion. Capitalized terms used and not otherwise
defined shall have the meanings given those terms in the Registration Statement.
In this regard, we have reviewed copies of the Registration
Statement (including its exhibits) with respect to the offer by the Issuer to
exchange (i) up to $225,000,000 aggregate principal amount of its 11 1/4% Senior
Notes due 2001 for up to $220,695,000 aggregate principal amount of its
outstanding 11 1/4% Senior Notes due 2001 and up to $4,305,000 aggregate
principal amount of the 10 1/4% Senior Notes due 2001 of Specialty Foods
Corporation, a Delaware corporation ("SFC"), (ii) up to $150,000,000 aggregate
principal amount of its 12 1/8% Senior Notes due 2002 for up to $149,925,000
aggregate principal amount of its outstanding 12 1/8%
<PAGE>
SFC New Holdings, Inc.
August 9, 1999
Page -2-
Senior Notes due 2002 and up to $75,000 aggregate principal amount of the
11 1/8% Senior Notes due 2002 of SFC and (iii) up to $200,000,000 aggregate
principal amount of its 13 1/4% Subordinated Notes due 2003 for up to
$197,646,000 aggregate principal amount of our 13 1/4% Subordinated Notes due
2003 and up to $2,354,000 aggregate principal amount of the 11 1/4% Subordinated
Notes due 2003 of SFC. We have also made those other investigations of fact and
law and have examined the originals, or copies authenticated to our
satisfaction, of those other documents, records, certificates or other
instruments that in our judgment are necessary or appropriate to enable us to
render our opinion.
Our opinion is limited to the Internal Revenue Code of 1986, as
amended (the "Code"), administrative rulings, judicial decisions, Treasury
regulations and other applicable authorities, all as in effect today. The
statutory provisions, regulations and interpretations upon which our opinion is
based are subject to change and those changes could apply retroactively. Any
change could affect the continuing validity of our opinion. We assume no
responsibility to advise you of any subsequent changes in existing law or facts,
nor do we assume any responsibility to update this opinion with respect to any
matters expressly stated in this letter, and no opinions are to be implied or
may be inferred beyond the matters expressly so stated.
Based upon and subject to the above, the legal matters and
conclusions stated in the Registration Statement under the heading "Certain
Federal Income Tax Considerations" constitute our opinion with respect to those
matters.
<PAGE>
SFC New Holdings, Inc.
August 9, 1999
Page -3-
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Legal
Matters" in the Prospectus included in the Registration Statement. In giving
this consent, we do not admit that we come within the category of persons whose
consent is required by the Act or the Rules.
Very truly yours,
/s/ Paul, Weiss, Rifkind, Wharton & Garrison
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
Exhibit 99.1
LETTER OF TRANSMITTAL
SFC NEW HOLDINGS, INC.
Offers to Exchange
$225,000,000 of its 11 1/4% Senior Notes due 2001,
$150,000,000 of its 12 1/8% Senior Notes due 2002 and
$200,000,000 of its 13 1/4% Senior Subordinated Notes due 2003
(the "Exchange Notes")
which have been registered under the Securities Act
of 1933, as amended, for $220,695,000 of its
outstanding 11 1/4% Senior Notes due 2001,
$149,925,000 of its outstanding 12 1/8% Senior Notes due 2002 and
$197,646,000 of its outstanding 13 1/4% Senior Subordinated Notes due 2003,
and
$4,305,000 of the outstanding 10 1/4% Senior Notes due 2001 of
Specialty Foods Corporation, $75,000 of the outstanding 11 1/8%
Senior Notes due 2002 of Specialty Foods Corporation and
$2,354,000 of the outstanding 11 1/4% Senior Subordinated Notes due 2003 of
Specialty Foods Corporation (the "Initial Notes")
Pursuant to the Prospectus, dated August 9, 1999
- --------------------------------------------------------------------------------
THE EXCHANGE OFFERS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON SEPTEMBER
13, 1999 OR SUCH LATER DATE AND TIME TO WHICH THE EXCHANGE OFFERS MAY BE
EXTENDED (THE "EXPIRATION DATE").
- --------------------------------------------------------------------------------
The Exchange Agent for the Exchange Offers is:
UNITED STATES TRUST COMPANY OF NEW YORK
By Registered or Certified Mail:
United States Trust Company of New York
P.O. Box 843 Cooper Station
New York, New York 10276
Attention: Corporate Trust Services
By Hand Before 4:30 p.m.:
United States Trust Company of New York
111 Broadway
New York, New York 10006
Attention: Lower Level Corporate Trust Window
By Overnight Courier and By Hand After 4:30 p.m. on the Expiration Date:
United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
By Facsimile for Eligible Institutions:
(212) 420-6211
Attention: Customer Service
For confirmation and/or information call:
(800) 548-6565
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX BELOW
---------------------------
<PAGE>
List below the Initial Notes to which this Letter of Transmittal relates.
If the space provided below is inadequate, the certificate numbers and principal
amount of Initial Notes should be listed on a separate signed schedule affixed
hereto.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
DESCRIPTION OF INITIAL NOTES (1) (2) (3)
- -------------------------------------------------------------------------------------------------------
Principal Amount
Principal of Initial Notes
Name(s) and Address(es) of Registered Holder(s) Certificate Amount of Tendered
(Please fill in, if blank) Number(s)* Initial Notes (if less than all)**
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
- -------------------------------------------------------------------------------------------------------
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered
the full aggregate principal amount represented by such Initial Notes.
- -------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
The undersigned acknowledges that he or she has received and reviewed the
Prospectus, dated August 9, 1999 (the "Prospectus"), of SFC New Holdings, Inc.,
a Delaware corporation (the "Company"), and this Letter of Transmittal (the
"Letter"), which together constitute the Company's offers (the "Exchange
Offers") to exchange up to (i) $220,695,000 in aggregate principal amount of the
11 1/4% Senior Notes due 2001, $149,925,000 in aggregate principal amount of the
12 1/8% Senior Notes due 2002 and $197,646,000 in aggregate principal amount of
the 13 1/4% Senior Subordinated Notes due 2003 (the "Exchange Notes") for the
same aggregate principal amount of substantially identical notes that the
Company issued in a private transaction on June 11, 1999 (the "Private Exchange
Notes"), and (ii) $4,305,000 in aggregate principal amount of the 11 1/4% Senior
Notes due 2001 for the same principal amount of the 10 1/4% Senior Notes due
2001 of Specialty Foods Corporation, $75,000 in aggregate principal amount of
the 12 1/8% Senior Notes due 2002 for the same principal amount of the 11 1/8%
Senior Notes due 2002 of Specialty Foods Corporation and $2,354,000 in aggregate
principal amount of the 13 1/4% Senior Subordinated Notes due 2003 for the same
principal amount of the 11 1/4% Senior Subordinated Notes due 2003 of Specialty
Foods Corporation. The 10 1/4% Senior Notes due 2001 of Specialty Foods
Corporation, the 11 1/8% Senior Notes due 2002 of Speciality Foods Corporation
and the 11 1/4% Senior Subordinated Notes due 2003 of Specialty Foods
Corporation are collectively referred to as the "SFC Notes." The Private
Exchange Notes and the SFC Notes are collectively referred to as the "Initial
Notes." The Initial Notes were issued and sold in transactions exempt from
registration under the Securities Act of 1933, as amended.
The undersigned has completed the appropriate boxes above and below and
signed this Letter to indicate the action the undersigned desires to take with
respect to the Exchange Offers.
This Letter is to be used either if certificates of Initial Notes are to
be forwarded herewith or if delivery of Initial Notes is to be made by
book-entry transfer to an account maintained by the Exchange Agent at The
Depository Trust Company, pursuant to the procedures set forth in "The Exchange
Offers--Terms of the Exchange Offers--Procedures for Tendering" in the
Prospectus. Delivery of this Letter and any other required documents should be
made to the Exchange Agent. Delivery of documents to a book-entry transfer
facility does not constitute delivery to the Exchange Agent.
Holders whose Initial Notes are not immediately available or who cannot
deliver their Initial Notes and all other documents required hereby to the
Exchange Agent on or prior to the Expiration Date must tender their Initial
Notes according to the guaranteed delivery procedure set forth in the Prospectus
under the caption "The Exchange Offers--Terms of the Exchange Offers--Procedures
for Tendering." See Instruction 1.
|_| CHECK HERE IF INITIAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution _________________ |_| The Depository Trust Company
Account Number _________________________________________________________________
Transaction Code Number ________________________________________________________
|_| CHECK HERE IF INITIAL NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s) ___________________________________________________
Name of Eligible Institution that Guaranteed Delivery __________________________
If delivered by book-entry transfer:
Account Number _________________________________________________________________
Date of execution of Notice of Guaranteed Delivery _____________________________
3
<PAGE>
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: __________________________________________________________________________
Address: _______________________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that
it is acquiring the Exchange Notes in the ordinary course of business of the
undersigned, that it is not engaged in, and does not intend to engage in, or has
no arrangement or understanding with any person to participate in, a
distribution of Exchange Notes and that it is not an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act of 1933, as amended (the
"Securities Act"). If the undersigned is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Initial Notes that were
acquired as a result of market-making activities or other trading activities, it
may be deemed to be an "underwriter" within the meaning of the Securities Act
and must acknowledge that it will deliver a prospectus meeting the requirements
of the Securities Act in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
4
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offers, the
undersigned hereby tenders to the Company the aggregate principal amount of
Initial Notes indicated above. Subject to, and effective upon, the acceptance
for exchange of the Initial Notes tendered hereby, the undersigned hereby sells,
assigns and transfers to, or upon the order of, the Company all right, title and
interest in and to such Initial Notes as are being tendered hereby.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Initial Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim when the same are accepted by the Company. The
undersigned will, upon request, execute and deliver any additional documents
deemed by the Company or the Exchange Agent to be necessary or desirable to
complete the sale, assignment and transfer of the Initial Notes tendered hereby.
The undersigned also acknowledges that these Exchange Offers are being
made in reliance on the Company's belief, based on interpretations by the staff
of the Securities and Exchange Commission (the "SEC") to third parties in
unrelated transactions, that the Exchange Notes issued in exchange for the
Initial Notes pursuant to the Exchange Offers may be offered for resale, resold
and otherwise transferred by holders thereof (other than (i) any such holder
that is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act or (ii) any broker-dealer that purchases Notes from the Company
to resell pursuant to Rule 144A under the Securities Act ("Rule 144A") or any
other available exemption) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holders' business and
such holders have no arrangement or understanding with any person to participate
in the distribution of such Exchange Notes and are not participating in, and do
not intend to participate in, the distribution of such Exchange Notes. The
undersigned acknowledges that any holder of Initial Notes using the Exchange
Offers to participate in a distribution of the Exchange Notes (i) cannot rely on
the position of the staff of the SEC enunciated in its interpretive letter with
respect to Exxon Capital Holdings Corporation (available April 13, 1989) or
similar letters and (ii) must comply with the registration and prospectus
requirements of the Securities Act in connection with a secondary resale
transaction.
The undersigned represents that (i) the Exchange Notes acquired pursuant
to the Exchange Offers are being obtained in the ordinary course of business of
the person receiving such Exchange Notes, whether or not such person is the
holder, (ii) such holder or such other person has no arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes within the meaning of the Securities Act and is not participating
in, and does not intend to participate in, the distribution of such Exchange
Notes within the meaning of the Securities Act, and (iii) such holder or such
other person is not an "affiliate," as defined in Rule 405 under the Securities
Act, of the Company or, if such holder or such other person is an affiliate,
such holder or such other person will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
All authority conferred or agreed to be conferred in this Letter and every
obligation of the undersigned hereunder shall be binding upon the successors,
assigns, heirs, executors, administrators, trustees in bankruptcy and legal
representatives of the undersigned and shall not be affected by, and shall
survive, the death or incapacity of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in the instructions
contained in this Letter.
The undersigned understands that tenders of the Initial Notes pursuant to
any one of the procedures described under "The Exchange Offers--Terms of the
Exchange Offers--Procedures for Tendering" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Company in accordance with the terms and subject to the conditions of
the Exchange Offers.
5
<PAGE>
The undersigned recognizes that, under certain circumstances set forth in
the Prospectus under "The Exchange Offers--Terms of the Exchange
Offers--Conditions," the Company may not be required to accept for exchange any
of the Initial Notes tendered. Initial Notes not accepted for exchange or
withdrawn will be returned to the undersigned at the address set forth below
unless otherwise indicated under "Special Delivery Instructions" below.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please issue the Exchange Notes (and, if applicable,
substitute certificates representing Initial Notes for any Initial Notes not
exchanged) in the name of the undersigned. Similarly, unless otherwise indicated
under the box entitled "Special Delivery Instructions" below, please deliver the
Exchange Notes (and, if applicable, substitute certificates representing Initial
Notes for any Initial Notes not exchanged) to the undersigned at the address
shown above in the box entitled "Description of Initial Notes."
THE BOOK-ENTRY TRANSFER FACILITY, AS THE HOLDER OF RECORD OF CERTAIN
INITIAL NOTES, HAS GRANTED AUTHORITY TO BOOK-ENTRY TRANSFER FACILITY
PARTICIPANTS WHOSE NAMES APPEAR ON A SECURITY POSITION LISTING WITH RESPECT TO
SUCH INITIAL NOTES AS OF THE DATE OF TENDER OF SUCH INITIAL NOTES TO EXECUTE AND
DELIVER THE LETTER OF TRANSMITTAL AS IF THEY WERE THE HOLDERS OF RECORD.
ACCORDINGLY, FOR PURPOSES OF THIS LETTER OF TRANSMITTAL, THE TERM "HOLDER" SHALL
BE DEEMED TO INCLUDE SUCH BOOK-ENTRY TRANSFER FACILITY PARTICIPANTS.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF INITIAL
NOTES" ABOVE AND SIGNING THIS LETTER AND DELIVERING SUCH NOTES AND THIS LETTER
TO THE EXCHANGE AGENT, WILL BE DEEMED TO HAVE TENDERED THE INITIAL NOTES AS SET
FORTH IN SUCH BOX ABOVE.
6
<PAGE>
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(Complete Accompanying Substitute Form W-9)
Dated: _________________________________________________________________________
X ______________________ _________________________________________________
X ______________________ _________________________________________________
Signature(s) of Owner(s)/or Authorized Signatory Date
Area Code and Telephone Number _________________________________________________
If a holder is tendering any Initial Notes, this Letter must be signed by
the registered holder(s) as the name(s) appear(s) on the certificate(s) for the
Initial Notes or by any person(s) authorized to become registered holder(s) by
endorsements and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other person acting in a fiduciary
or representative capacity, please set forth full title. See Instruction 3.
Names __________________________________________________________________________
__________________________________________________________________________
(Please Type or Print)
Capacity: ______________________________________________________________________
______________________________________________________________________
Address ______________________________________________________________________
(Include Zip Code)
SIGNATURE GUARANTEE
(If required by Instruction 3)
Signature(s) Guaranteed by
an Eligible Institution: _______________________________________________________
(Authorized Signature)
________________________________________________________________________________
(Title)
________________________________________________________________________________
(Name of Firm)
Dated: _________________________________________________________________________
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 3 and 4)
To be completed ONLY if certificates for Exchange Notes are to be issued
in the name of and sent to someone other than the person or persons whose
signature(s) appear on this Letter above.
Issue: Exchange Notes to:
Name(s): _______________________________________________________________________
(Please Type or Print)
_______________________________________________________________________
(Please Type or Print)
Address: _______________________________________________________________________
_______________________________________________________________________
(Zip Code)
Social Security Number: ________________________________________________________
(Complete Substitute Form W-9)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4)
To be completed ONLY if certificates for Exchange Notes are to be sent to
someone other than the person or persons whose signature(s) appear(s) on this
Letter above or to such person or persons at an address other than shown in the
box entitled "Description of Initial Notes" on this Letter above.
Mail: Exchange Notes to:
Name(s): _______________________________________________________________________
(Please Type or Print)
_______________________________________________________________________
(Please Type or Print)
Address: _______________________________________________________________________
_______________________________________________________________________
(Zip Code)
- --------------------------------------------------------------------------------
IMPORTANT: UNLESS GUARANTEED DELIVERY PROCEDURES ARE COMPLIED WITH, THIS
LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE (IN EACH CASE, TOGETHER WITH
THE CERTIFICATE(S) FOR INITIAL NOTES OR A CONFIRMATION OF BOOK-ENTRY TRANSFER OF
SUCH INITIAL NOTES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE
EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
8
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offers
1. Delivery of this Letter and Initial Notes; Guaranteed Delivery Procedure.
This Letter is to be used to forward, and must accompany, all certificates
representing Initial Notes tendered pursuant to the Exchange Offers unless such
certificates are accompanied by an Agent's Message (as defined in the
Prospectus) in which case you need not submit this Letter to the Exchange Agent.
Certificates representing the Initial Notes in proper form for transfer (or a
confirmation of book-entry transfer of such Initial Notes into the Exchange
Agent's account at the book- entry transfer facility) must be received by the
Exchange Agent at its address set forth herein on or before the Expiration Date.
A tender will not be deemed to have been timely received when the tendering
holder's properly completed and duly signed Letter or an Agent's Message
accompanied by the Initial Notes is mailed prior to the Expiration Date but is
received by the Exchange Agent after the Expiration Date.
The method of delivery of this Letter, the Initial Notes and all other
required documents is at the election and risk of the tendering holders, but the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. If such delivery is by mail, it is recommended that registered
mail properly insured, with return receipt requested, be used. In all cases,
sufficient time should be allowed to permit timely delivery.
If a holder desires to tender Initial Notes and such holder's Initial
Notes are not immediately available or time will not permit such holder's Letter
of Transmittal, Initial Notes (or a confirmation of book-entry transfer of
Initial Notes into the Exchange Agent's account at the book-entry transfer
facility with an Agent's Message) or other required documents to reach the
Exchange Agent on or before the Expiration Date, such holder may still tender in
the Exchange Offers if:
(a) the tender is made through an Eligible Institution (as defined
below);
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form provided by us (by facsimile transmission, mail
or hand delivery), setting forth your name and address as holder of the
Initial Notes and the amount of Initial Notes tendered, stating that the
tender is being made thereby and guaranteeing that within three business
days after the Expiration Date the certificates for all physically
tendered Initial Notes, in proper form for transfer, or a book-entry
confirmation with an Agent's Message, 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
(c) the certificates for all physically tendered Initial Notes, in
proper form for transfer, or a book-entry confirmation as the case may be,
and all other documents required by this Letter of Transmittal are
received by the Exchange Agent within five business days after the
Expiration Date.
See "The Exchange Offers--Terms of the Exchange Offers--Procedures for
Tendering" in the Prospectus.
2. Withdrawals.
Any holder who has tendered Initial Notes may withdraw the tender by
delivering written notice of withdrawal (which may be sent by telegram,
facsimile (receipt confirmed by telephone and an original delivered by
guaranteed overnight courier)) to the Exchange Agent prior to the close of
business on the Expiration Date and prior to acceptance for exchange thereof by
us. For a withdrawal to be effective, a written notice of withdrawal must (i)
specify the name of the person having tendered the Initial Notes to be withdrawn
(the "Depositor"), (ii) identify the Initial Notes to be withdrawn (including
the certificate number or numbers and principal amount of such Initial Notes),
(iii) signed by the holder in the same manner as the original signature on the
Letter by which such Initial Notes were tendered or as otherwise set forth in
Instruction 3 below (including
9
<PAGE>
any required signature guarantees), or be accompanied by documents of transfer
sufficient to have the Trustee (as defined in the Prospectus) register the
transfer of such Initial Notes pursuant to the terms of the Indenture into the
name of the person withdrawing the tender and (iv) specify the name in which any
such Initial Notes are to be registered, if different from that of the
Depositor. If Initial Notes have been tendered pursuant to the procedure for
book-entry transfer, any notice of withdrawal must specify the name and number
of the participant's account at the book-entry transfer facility to be credited,
if different from that of the Depositor, with the withdrawn Initial Notes or
otherwise comply with the book-entry transfer facility's procedures. See "The
Exchange Offers--Terms of the Exchange Offers--Withdrawal of Tenders" in the
Prospectus.
3. Signatures on this Letter; Bond Powers and Endorsements; Guarantee of
Signatures.
If this Letter is signed by the registered holder of the Initial Notes
tendered hereby, the signature must correspond with the name as written on the
face of the certificates without alteration, enlargement or any change
whatsoever.
If this Letter is signed by a participant in DTC, the signature must
correspond with the name as it appears on the security position listing as the
holder of the Initial Notes.
If this Letter or any Initial Notes or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing. Unless waived by us, evidence
satisfactory to us of their authority to so act must also be submitted with the
Letter of Transmittal.
If any tendered Initial Notes are owned of record by two or more joint
owners, all such owners must sign this Letter.
The signatures on this Letter or a notice of withdrawal, as the case may
be, must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or an "eligible guarantor" institution within the meaning of Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended (each, an "Eligible
Institution"), unless the Initial Notes are tendered : (i) by a registered
holder (or by a participant in DTC whose name appears on a security position
listing as the owner) who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on this Letter and the Exchange
Notes are being issued directly to such registered holder (or deposited into the
participant's account at DTC), or (ii) for the account of an Eligible
Institution.
4. Special Issuance and Delivery Instructions.
Tendering holders of Initial Notes should indicate in the applicable box
the name and address to which Exchange Notes issued pursuant to the Exchange
Offers are to be issued or sent, if different from the name or address of the
person signing this Letter. In the case of issuance in a different name, the
employer identification or social security number of the person named must also
be indicated. If no such instructions are given, any Exchange Notes will be
issued in the name of, and delivered to, the name or address of the person
signing this Letter and any Initial Notes not accepted for exchange will be
returned to the name or address of the person signing this Letter.
5. Backup Federal Income Tax Withholding and Substitute Form W-9.
Under the federal income tax laws, payments that may be made by the
Company on account of Exchange Notes issued pursuant to the Exchange Offers may
be subject to backup withholding at the rate of 31%. In order to avoid such
backup withholding, each tendering holder should complete and sign the
Substitute Form W-9 included in this Letter and either (a) provide the correct
taxpayer identification number ("TIN") and certify, under penalties of perjury,
that the TIN provided is correct and that (i) the holder has not been notified
by the Internal Revenue Service (the "IRS") that the holder is subject to backup
withholding as a result of failure to report all interest or dividends or (ii)
the IRS has notified the holder that the holder is no longer subject to backup
withholding; or (b) provide an adequate basis for exemption. If the tendering
holder has not been issued a TIN
10
<PAGE>
and has applied for one, or intends to apply for one in the near future, such
holder should write "Applied For" in the space provided for the TIN in Part I of
the Substitute Form W-9, sign and date the Substitute Form W-9, and sign the
Certificate of Payee Awaiting Taxpayer Identification Number. If "Applied For"
is written in Part I, the Company (or the Paying Agent under the Indenture
governing the Exchange Notes) shall retain 31% of payments made to the tendering
holder during the sixty (60) day period following the date of the Substitute
Form W-9. If the holder furnishes the Exchange Agent or the Company with his or
her TIN within sixty (60) days after the date of the Substitute Form W-9, the
Company (or the Paying Agent) shall remit such amounts retained during the sixty
(60) day period to the holder and no further amounts shall be retained or
withheld from payments made to the holder thereafter. If, however, the holder
has not provided the Exchange Agent or the Company with his or her TIN within
such sixty (60) day period, the Company (or the Paying Agent) shall remit such
previously retained amounts to the IRS as backup withholding. In general, if a
holder is an individual, the taxpayer identification number is the Social
Security number of such individual. If the Exchange Agent or the Company is not
provided with the correct taxpayer identification number, the holder may be
subject to a $50 penalty imposed by the IRS. Certain holders (including, among
others, all corporations and certain foreign individuals) are not subject to
these backup withholding and reporting requirements. In order for a foreign
individual to qualify as an exempt recipient, such holder must submit a
statement (generally, IRS Form W-8), signed under penalties of perjury,
attesting to that individual's exempt status. Such statements can be obtained
from the Exchange Agent. For further information concerning backup withholding
and instructions for completing the Substitute Form W-9 (including how to obtain
a taxpayer identification number if you do not have one and how to complete the
Substitute Form W-9 if Initial Notes are registered in more than one name),
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
Failure to complete the Substitute Form W-9 will not, by itself, cause
Initial Notes to be deemed invalidly tendered, but may require the Company (or
the Paying Agent) to withhold 31% of the amount of any payments made on account
of the Exchange Notes. Backup withholding is not an additional federal income
tax. Rather, the federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
6. Transfer Taxes.
The Company will pay all transfer taxes, if any, applicable to the
transfer of Initial Notes to it or its order pursuant to the Exchange Offers.
If, however, Exchange Notes and/or substitute Initial Notes not exchanged or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Initial Notes
tendered hereby, or if tendered Initial Notes are registered in the name of any
person other than the person signing this Letter, or if a transfer tax is
imposed for any reason other than the transfer of Initial Notes to the Company
or its order pursuant to the Exchange Offers, the amount of any such transfer
taxes (whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted herewith, the amount of such
transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Initial Notes specified in this Letter.
7. Waiver of Conditions.
Conditions enumerated in the Prospectus may be waived by the Company, in
whole or in part, at any time from time to time in its reasonable discretion.
8. No Conditional Tenders.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Initial Notes, by execution of this Letter,
shall waive any right to receive notice of the acceptance of their Initial Notes
for exchange.
11
<PAGE>
Neither the Company nor any other person is obligated to give notice of
defects or irregularities in any tender, nor shall any of them incur any
liability for failure to give any such notice.
9. Inadequate Space.
If the space provided herein is inadequate, the aggregate principal amount
of Initial Notes being tendered and the certificate number or numbers (if
available) should be listed on a separate schedule attached hereto and
separately signed by all parties required to sign this Letter.
10. Mutilated, Lost, Stolen or Destroyed Initial Notes.
If any certificate has been lost, mutilated, destroyed or stolen, the
holder should promptly notify United States Trust Company of New York at the
telephone number indicated above. The holder will then be instructed as to the
steps that must be taken to replace the certificate(s). This Letter of
Transmittal and related documents cannot be processed until the Initial Notes
have been replaced.
11. Requests for Assistance or Additional Copies.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter may be directed to United
States Trust Company of New York at the address and telephone number indicated
above.
12
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(See Instruction 5)
PAYER'S NAME: SFC NEW HOLDINGS, INC.
- --------------------------------------------------------------------------------
SUBSTITUTE
Form W-9
Department of the
Treasury
Internal Revenue Service
Part I--Taxpayer Identification Number
Enter your taxpayer identification number in the appropriate box. For most
individuals, this is your social security number. If you do not have a number,
see how to obtain a "TIN" in the enclosed Guidelines.
NOTE: If the account is in more than one name, see the chart on page 2 of the
enclosed Guidelines to determine what number to give.
______________________________
Social Security Number
OR
______________________________
Employer Identification Number
- --------------------------------------------------------------------------------
Part II--For Payees Exempt From Backup Withholding (see enclosed Guidelines)
- --------------------------------------------------------------------------------
Payer's Request for
Taxpayer Identification
Number (TIN) and
Certification
CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
(1) the number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (the "IRS") that I am subject to
backup withholding as a result of a failure to report all interest or
dividends or the IRS has notified me that I am no longer subject to backup
withholding.
- --------------------------------------------------------------------------------
SIGNATURE ___________________________________________ DATE _____________________
- --------------------------------------------------------------------------------
Certification Guidelines--You must cross out item (2) of the above certification
if you have been notified by the IRS that you are subject to backup withholding
because of underreporting of interest or dividends on your tax return. However,
if after being notified by the IRS that you were subject to backup withholding
you received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2).
- --------------------------------------------------------------------------------
CERTIFICATION OF PAYEE AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify, under penalties of perjury, that a Taxpayer Identification
Number has not been issued to me, and that I mailed or delivered an application
to receive a Taxpayer Identification Number to the appropriate Internal Revenue
Service Center or Social Security Administration Office (or I intend to mail or
deliver an application in the near future). I understand that if I do not
provide a Taxpayer Identification Number to the payer, 31 percent of all
payments made to me on account of the Exchange Notes shall be retained until I
provide a Taxpayer Identification Number to the payer and that, if I do not
provide my Taxpayer Identification Number within sixty (60) days, such retained
amounts shall be remitted to the Internal Revenue Service as backup withholding
and 31 percent of all reportable payments made to me thereafter will be withheld
and remitted to the Internal Revenue Service until I provide a Taxpayer
Identification Number.
SIGNATURE _____________________________ DATE _______________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU ON ACCOUNT OF THE EXCHANGE NOTES.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
13
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the
Payer.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
================================================================================
For this type of account: Give the
SOCIAL SECURITY
NUMBER OF --
================================================================================
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined funds,
the first individual on the
account(1)
3. Husband and wife The actual owner of the
(joint account) account or, if joint funds,
either person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the minor is
account) the only contributor, the
minor(1)
6. Account in the name of the The ward, minor, or
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person
7. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also trustee)
b. So-called trust account The actual owner(1)
that is not a legal or
valid trust under State
law
8. Sole proprietorship account The owner(4)
================================================================================
================================================================================
For this type of account: Give the
EMPLOYER
IDENTIFICATION
NUMBER OF --
================================================================================
9. A valid trust, estate, or The legal entity (Do not
pension trust furnish the identifying number
of the personal representative
or trustee unless the legal
entity itself is not designated
in the account title).(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held The partnership
in the name of the
business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of
Agriculture in the name
of a public entity (such as
a State or local
government, school
district, or prison) that
receives agricultural
program payments
================================================================================
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a social security number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's, or incompetent person's name and furnish such
person's social security number.
(4) Show your individual name. You may also enter your business name. You may
use either your Social Security number or your Employer Identification
number.
(5) List first and circle the name of the legal trust, estate, or pension
trust
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
14
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Obtaining a Number
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number, at
the local office of the Social Security Administration or the Internal Revenue
Service (the "IRS") and apply for a number.
Payee Exempt from Backup Withholding
Payees specifically exempted from backup withholding on ALL payments including
the following:
o A corporation.
o A financial institution.
o An organization exempt from tax under Section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual retirement
plan or a custodial account under Section 403(b)(7) of the Code, if the
account satisfies the requirements of Section 401(f)(2) of the Code.
o The United States or any agency or instrumentality thereof.
o A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
o A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
o An international organization or any agency or instrumentality thereof.
o A registered dealer in securities or commodities registered in the U.S.,
the District of Columbia or a possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under Section 584(a) of the Code.
o An exempt charitable remainder trust, or a trust described in Section 4947
of the Code.
o An entity registered at all times during the tax year under the Investment
Company Act of 1940.
o A foreign central bank of issue.
Payment of dividends and patronage dividends not generally subject to backup
withholding include the following:
o Payments to nonresident aliens subject to withholding under Section 1441
of the Code.
o Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
o Payments of patronage dividends where the amount received is not paid in
money.
o Payments made by certain foreign organizations.
o Section 404(k) payments made by an ESOP.
Payments of interest not generally subject to backup withholding include the
following:
o Payment of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you
have not provided your correct taxpayer identification number to the
payer.
o Payment of tax-exempt interest (including exempt interest dividends under
Section 852 of the Code).
o Payment described in Section 6049(b)(5) to nonresident aliens.
o Payments on tax-free covenant bonds under Section 1451 of the Code.
o Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE
FORM AND RETURN IT TO THE PAYER. IF YOU ARE A NONRESIDENT ALIEN OR A FOREIGN
ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH THE PAYER A COMPLETED
INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see Sections 6041, 6041A(a), 6042, 6044, 6045, 6049,
and 6050A and 6050N of the Code and the regulations promulgated thereunder.
Privacy Act Notice--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold 31%
of taxable interest, dividends, and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) Civil Penalty for False Information With Respect to Withholding.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) Criminal Penalty for Falsifying Information.-- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
15
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
for
Tenders of Outstanding
11 1/4% Senior Notes due 2001,
12 1/8% Senior Notes due 2002 and
13 1/4% Subordinated Notes due 2003
and
10 1/4% Senior Notes due 2001 of Specialty Foods Corporation,
11 1/8% Senior Notes due 2002 of Specialty Foods Corporation and
11 1/4% Senior Subordinated Notes due 2003 of Specialty Foods Corporation
in Exchange for
11 1/4% Senior Notes due 2001
12 1/8% Senior Notes due 2002
13 1/4% Senior Subordinated Notes due 2003
Registered Under the Securities Act of 1933, as amended,
of
SFC NEW HOLDINGS, INC.
Registered holders of outstanding (i) 11 1/4% Senior Notes due 2001, 12
1/8% Senior Notes due 2002 and 13 1/4% Senior Subordinated Notes due 2003 (the
"Private Exchange Notes"), and (ii) 10 1/4% Senior Notes due 2001 of Specialty
Foods Corporation, 11 1/8% Senior Notes due 2002 of Specialty Foods Corporation
and 11 1/4% Senior Subordinated Notes due 2003 of Specialty Foods Corporation
(the "SFC Notes" and, together with the Private Exchange Notes, the "Initial
Notes") who wish to tender their Initial Notes in exchange for a like principal
amount of 11 1/4% Senior Notes due 2001, 12 1/8% Senior Notes due 2002 and 13
1/4% Senior Subordinated Notes due 2003 (the "Exchange Notes") and whose Initial
Notes are not immediately available or who cannot deliver their Initial Notes
and Letter of Transmittal (and any other documents required by the Letter of
Transmittal) to United States Trust Company of New York (the "Exchange Agent")
prior to the Expiration Date, may use this Notice of Guaranteed Delivery or one
substantially equivalent hereto. This Notice of Guaranteed Delivery may be
delivered by hand or sent by facsimile transmission (receipt confirmed by
telephone and an original delivered by guaranteed overnight courier) or letter
to the Exchange Agent. See "The Exchange Offers-- Terms of the Exchange Offers--
Procedures for Tendering" in the Prospectus.
THE EXCHANGE OFFERS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON SEPTEMBER
13, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). INITIAL NOTES TENDERED
PURSUANT TO THE EXCHANGE OFFERS MAY BE WITHDRAWN, SUBJECT TO THE PROCEDURES
DESCRIBED IN THE PROSPECTUS, AT ANY TIME PRIOR TO THE EXPIRATION DATE.
The Exchange Agent for the Exchange Offers is:
UNITED STATES TRUST COMPANY OF NEW YORK
By Registered or Certified Mail:
United States Trust Company of New York
P.O. Box 843 Cooper Station
New York, New York 10276
Attention: Corporate Trust Services
<PAGE>
By Hand Before 4:30 p.m.:
United States Trust Company of New York
111 Broadway
New York, New York 10006
Attention: Lower Level Corporate Trust Window
By Overnight Courier and By Hand After 4:30 p.m. on the Expiration Date:
United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
By Facsimile for Eligible Institutions:
(212) 420-6211
Attention: Customer Service
For confirmation and/or information call:
(800) 548-6565
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of instructions via a facsimile transmission to
a number other than as set forth above will not constitute a valid delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in the Prospectus), such
signature guarantee must appear in the applicable space provided on the Letter
of Transmittal for Guarantee of Signatures.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount of Initial Notes
indicated below, upon the terms and subject to the conditions contained in the
Prospectus dated August 9, 1999 of SFC New Holdings, Inc. (the "Prospectus"),
receipt of which is hereby acknowledged.
DESCRIPTION OF SECURITIES TENDERED
<TABLE>
<CAPTION>
Name and address of
registered holder as it Aggregate Principal Amount
appears on the Initial Notes Certificate Number(s) of Represented by Principal Amount of Initial
(Please Print) Initial Notes Tendered Initial Notes Notes Tendered
- ---------------------------- ------------------------ -------------------------- ---------------------------
<S> <C> <C> <C>
- ---------------------------- ------------------------ -------------------------- ---------------------------
- ---------------------------- ------------------------ -------------------------- ---------------------------
- ---------------------------- ------------------------ -------------------------- ---------------------------
- ---------------------------- ------------------------ -------------------------- ---------------------------
</TABLE>
<PAGE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(Not to be used for signature guarantee)
The undersigned, a firm that is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office, branch,
agency or correspondent in the United States, hereby guarantees to deliver to
the Exchange Agent at one of its addresses set forth above, the certificates
representing the Initial Notes, together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, and any other documents required by the Letter of
Transmittal within three New York Stock Exchange, Inc. trading days after the
date of execution of this Notice of Guaranteed Delivery.
Name of Firm: __________________________________________________________________
(Authorized Signature)
Address: _________________________________________ Title: ______________________
__________________________________________________ Name: _______________________
(Zip Code) (Please type or print)
Area Code and Telephone Number: ______________________ Date: ___________________
NOTE: DO NOT SEND INITIAL NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. INITIAL
NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
