As filed with the Securities and Exchange Commission on July 19, 1999
Registration Statement No.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SFAC NEW HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 2022 52-2173534
(State or other Jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Identification Number)
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
SFAC 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.
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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.|_|
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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. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Title of Each Class Amount to Be Proposed Maximum Proposed Maximum Amount of
of Securities to Be Registered Registered Offering Price Per Aggregate Offering registration fee
Security Price (2)
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<S> <C> <C> <C> <C>
13% Senior Secured Discount Debentures due
2009......................................... $587,126,474 15% $88,068,971 (1) $24,484
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f)(2) of the Securities Act of 1933.
(2) The registration fee has been calculated pursuant to Rule 457(f)(2) under
the Securities Act of 1933. The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter
become effective in accordance with Section 8(a) of the Securities Act of
1933 or until the Registration Statement shall become effective on such
date as the Commission, acting pursuant to said Section 8(a), may
determine.
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The information in this preliminary prospectus is not complete and may be
changed. We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
Subject To Completion, Dated July 19, 1999
PRELIMINARY PROSPECTUS
SFAC New Holdings, Inc.
Exchange Offers for:
$587,126,474 of our 13% Senior Secured Discount Debentures due 2009
and
$55,000 of 13% Senior Secured Discount Debentures due 2005 of
Specialty Foods Acquisition Corporation
Terms of the exchange offers:
o They expire at 5:00 p.m., New York City time, on , 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 new 13% debentures we will issue in the exchange offer
are substantially identical to those of our private 13% debentures, except
that transfer restrictions and registration rights relating to our private
13% debentures will not apply to the new 13% debentures.
o The notes of Specialty Foods Acquisition Corporation which we are offering
to acquire in exchange for new 13% debentures are all structurally
subordinated to both our private 13% debentures and the new 13%
debentures.
o The new 13% debentures 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.
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The date of this prospectus is __________, 1999.
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TABLE OF CONTENTS
Page No.
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Prospectus Summary.........................................................1
Risk Factors..............................................................11
Use of Proceeds...........................................................21
Capitalization............................................................22
Selected Consolidated Financial Data......................................23
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................25
Business..................................................................32
Management................................................................42
Security Ownership........................................................52
Relationships and Related Transactions....................................55
The Exchange Offers.......................................................57
Description of Our Other Indebtedness and Our Accounts Receivable
Transfer Program.................................................71
Description of the New 13% Debentures.....................................79
Description of the Initial 13% Debentures................................120
Description of the SFAC 13% Debentures...................................121
Plan of Distribution.....................................................143
United States Federal Income Tax Considerations..........................144
Legal Matters............................................................144
Experts..................................................................144
Where You Can Obtain Additional Information..............................144
Index to Financial Information...........................................F-1
Report of Independent Auditors...........................................F-2
ii
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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
We are a holding corporation which, through 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 private exchange transactions that we completed on
June 11, 1999. The restructuring and private exchange transactions, which we
refer to as the "Restructuring Transactions," 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.
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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.
SFAC 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.
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Summary of The Exchange Offers
We are offering to exchange $587,126,474 aggregate principal amount of our
new 13% Senior Secured Discount Debentures due 2009, which we refer to as our
"New 13% Debentures," for a like aggregate principal amount of substantially
identical debentures that we issued in a private exchange offer on June 11,
1999, which we refer to as our "initial 13% Debentures."
In addition, we are offering to exchange $101,142 aggregate principal
amount of our New 13% Debentures for $55,000 principal amount of 13% Senior
Secured Discount Debentures of Specialty Foods Acquisition Corporation plus
accrued interest as of the date of the exchange, which we refer to as "SFAC 13%
Debentures."
We refer to our initial 13% Debentures and the SFAC 13% Debentures
collectively as "Old 13% Debentures." In order to exchange your Old 13%
Debentures, you must properly tender them and we must accept your tender. We
will exchange all outstanding Old 13% Debentures that are validly tendered and
not validly withdrawn. We refer to the exchange offer for our initial 13%
Debentures and the exchange offer for the SFAC 13% Debentures collectively as
the "exchange offers."
On June 11, 1999, in a private transaction, we exchanged $587,025,332
aggregate principal amount of our initial 13% Debentures (CUSIP No. 78411N) and
31,925 shares of our common stock, for $319,195,000 aggregate principal amount
of SFAC 13% Debentures (CUSIP No. 847498-AC-9).
Expiration Date
The exchange offers will expire at 5:00 p.m., New York City time, on
____________, 1999, unless we decide to extend it.
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 New
13% Debentures,
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,
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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 Old 13% Debentures
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 Old 13% Debentures 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 tender your
Old 13% Debentures by following the procedure for book-entry transfer described
in this prospectus. If your Old 13% Debentures 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 Old 13% Debentures in the exchange
offers. For more information on tendering your Old 13% Debentures, 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 Old 13% Debentures and you cannot get your
required documents to the exchange agent on time, you may tender your Old 13%
Debentures 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 Old 13% Debentures 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 Old 13% Debentures and Delivery of New 13% Debentures
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If all conditions required for proper acceptance of Old 13% Debentures are
fulfilled, we will accept any and all Old 13% Debentures 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 Old 13% Debenture that we do not accept
for exchange to you without expense as promptly as practicable after the
expiration date. We will deliver the New 13% Debentures as promptly as
practicable after the expiration date and acceptance of the Old 13% Debentures
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
Exchanging your initial 13% Debentures for New 13% Debentures will not be
a taxable event to you for United States Federal income tax purposes. If you are
a holder of SFAC 13% Debentures, exchanging your SFAC 13% Debentures for New 13%
Debentures 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 New 13% Debentures received in the exchange and your
adjusted tax basis in your SFAC 13% Debentures exchanged therefor. Please refer
to the section of this prospectus entitled "United States Federal Income Tax
Considerations."
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 New 13%
Debentures. 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 Old 13% Debentures.
Consequences of Failure to Exchange Old 13% Debentures
If you do not exchange your Old 13% Debentures in these exchange offers,
or if you do not properly tender your Old 13% Debentures in these exchange
offers,
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o you will no longer be able to obligate us to register our initial
13% Debentures 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 SFAC 13%
Debentures at all;
o you will not be able to resell, offer to resell or otherwise
transfer our initial 13% Debentures 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; and
o SFAC 13% Debentures that are not exchanged will be subordinated and
junior in right of payment to the New 13% Debentures, the 11% Senior
Subordinated Discount Debentures due 2009 issued by SFC Sub, Inc., a
Delaware corporation which is our direct parent (which we refer to
as the "11% Debentures) and any untendered 10 1/4% Senior Notes due
2001 issued by Specialty Foods, which we refer to as "SFC 10 1/4%
Notes," 11 1/8% Senior Notes due 2002 issued by Specialty Foods,
which we refer to as "SFC 11 1/8% Notes" and 11 1/4% Senior
Subordinated Notes due 2003 issued by Specialty Foods, which we
refer to as "SFC Subordinated Notes." We collectively refer to the
SFC 10 1/4% Notes, the SFC 11 1/8% Notes and the SFC Subordinated
Notes as the "SFC Notes."
Please refer to the section in this prospectus entitled "Risk
Factors--Your failure to participate in the exchange offers will have adverse
consequences."
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Summary of Terms of the New 13% Debentures
Issuer
SFAC New Holdings, Inc.
Notes Offered
$587,126,474 aggregate principal amount of our New 13% Debentures. The
form and terms of the New 13% Debentures received in exchange for our initial
13% Debentures are the same as the form and terms of our initial 13% Debentures
except that the New 13% Debentures 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 New 13%
Debentures will evidence the same debt as our initial 13% Debentures (excluding
the $55,000 aggregate principal amount of SFAC 13% Debentures outstanding as of
the date of the private exchange) and both our initial 13% Debentures and the
New 13% Debentures will be governed by the same indenture.
The form and terms of the New 13% Debentures received in exchange for the
SFAC 13% Debentures will be substantially the same in all material respects as
those of the SFAC 13% Debentures except that the New 13% Debentures will be
issued by us, will have a maturity date of June 15, 2009, are redeemable at any
time at redemption prices that vary according to time and provide for
restrictive covenants and events of default. In addition, except in connection
with an early redemption or purchase by us, there will not be any payment of
cash interest on the New 13% Debentures prior to December 15, 2004. Moreover,
the New 13% Debentures evidence our debt and not the debt of Specialty Foods
Acquisition Corporation and the SFAC 13% Debentures and the New 13% Debentures
are not governed by the same indenture.
Maturity Date
June 15, 2009
Interest on the New 13% Debentures
Interest on the New 13% Debentures will accrue at 13% per year, compounded
semi-annually, from date of original issuance. Payment of all interest accrued
prior to June 15, 2004 will be deferred and will be paid only at maturity or
upon our earlier redemption or purchase of the New 13% Debentures. All accrued
but deferred interest will also bear interest at the rate of 13% per year,
compounded semi-annually. Beginning June 15, 2004, the New 13% Debentures will
accrue interest at 13% per year, payable in cash semi-annually in arrears on
June 15 and December 15 of each year commencing December 15, 2004.
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Interest on the New 13% Debentures 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
The New 13% Debentures 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 to them. Please refer to the section of this prospectus
entitled "United States Federal Income Tax Considerations."
Sinking Funds
None.
Optional Redemption
We will be able to redeem the New 13% Debentures, in whole or in part, at
our option, at any time, at a redemption price (expressed as a percentage of
accreted value on the optional redemption date) of 50.0% on or before June 15,
2000, 55.0% on or before June 15, 2001, 60.0% on or before June 15, 2002, 75% on
or before June 15, 2003, plus (after June 15, 2004) accrued and unpaid interest,
if any, to the redemption date.
Change of Control
Upon a change of control of SFAC New Holdings, you will have the right to
require us to repurchase all of your New 13% Debentures at a repurchase price
equal to the prices described above under "Optional Redemption." We cannot
assure you that we will have available or that we will be able to obtain
sufficient funds to repurchase your New 13% Debentures when required upon a
change of control. Please refer to the section in this prospectus entitled
"Description of the New 13% Debentures --Repurchase at the Option of
Holders--Change of Control."
Ranking
Except as described below, the New 13% Debentures will:
o be secured by a first priority lien on and security interest in all
of the outstanding capital stock of SFC New Holdings,
o rank senior in right of payment with all our subordinated
indebtedness and equal in right of payment with all our senior
secured indebtedness,
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o be effectively junior in right of payment to all of our
subsidiaries' existing or future indebtedness, whether or not
secured.
Restrictive Covenants
The indentures under which the New 13% Debentures 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,
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 New 13% Debentures--Certain Covenants."
Absence of a Public Market for the Notes
The New 13% Debentures are new securities and there is currently no
established market for them. We cannot assure you that a market for the New 13%
Debentures will develop or be liquid. The SFAC 13% Debentures, but not our
initial 13% Debentures, are currently freely tradable in the over-the-counter
market. Our initial 13% Debentures 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 SFAC 13%
Debentures in the over-the-counter market, but the New 13% Debentures will not
be eligible for trading in this market until the exchange offers are completed.
Form of New 13% Debentures
The New 13% Debentures 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. You will not receive
New 13% Debentures
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in registered form unless one of the events described in the section of this
prospectus entitled "Description of the New 13% Debentures--Book Entry; Delivery
and Form" occurs. Instead, beneficial interests in the New 13% Debentures 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 13% Debentures in the exchange offers.
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Pro Forma Ratio of Earnings to Fixed Charges
The following table contains our pro forma 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 Acquisition
Corporation's consolidated financial statements. Our earnings were insufficient
to cover our fixed charges for the past five years fiscal years.
<TABLE>
<CAPTION>
Year ended December 31,
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Quarter ended
1994 1995 1996 1997 1998 March 31, 1999
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<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges................... 0.21 0.34 0.12 0.22 0.28 0.04
Deficiency (in millions)........... 95.4 87.3 121.4 111.9 106.6 36.4
</TABLE>
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RISK FACTORS
Before tendering your initial 13% Debentures 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
New 13% Debentures;
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 Old 13% Debentures or the New 13% Debentures, 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, Specialty Foods Acquisition Corporation has reported positive
operating profits in our financial statements. However, due to the high level of
our interest expense Specialty Foods Acquisition Corporation has, it has
reported net losses and negative cash flows from operating activities. Specialty
Foods Acquisition Corporation's interest expense was $134
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million in fiscal 1998 and $135 million in fiscal 1997. As a result of our
restructuring on June 11, 1999, we have acquired Specialty Foods Acquisition
Corporation's business operations. Given our current levels of debt and our
interest costs on the New 13% Debentures, we expect to continue to incur high
interest expense 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 Old 13% Debentures and the New
13% Debentures, 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 Old 13% Debentures and the New 13% Debentures
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 New 13% Debentures."
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
13
<PAGE>
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 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.
14
<PAGE>
We may suffer adverse effects from changes in demographic trends and
consumer preferences.
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
15
<PAGE>
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
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.
16
<PAGE>
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 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." A
negative outcome of this litigation for us could adversely affect our business.
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. Any successful claim against us in an amount materially exceeding
our insurance coverage could have a material adverse effect on our business,
financial condition and results of operations. 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. However,
while we have been able to obtain this insurance in the past, we cannot assure
you that will continue to be able to do so in the future.
Payment of principal and interest on the notes effectively depends on
receiving income from our subsidiaries which have no obligations to make any
payments on the 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 New
17
<PAGE>
13% Debentures. Our subsidiaries are separate legal entities that have no
obligation to pay any amounts due under the New 13% Debentures or to make any
funds available for payments due under the New 13% Debentures, whether by
dividends, loans or other payments. Our subsidiaries do not guarantee the
payment of the New 13% Debentures. The New 13% Debentures 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 New 13% Debentures is
structurally junior in right of payment to the claims of our subsidiaries'
creditors, who would be entitled to realize their claims on our subsidiaries'
assets before you.
The New 13% Debentures will be structurally junior in right of payment to
the existing or future claims, whether or not secured, of our subsidiaries'
creditors, who would be entitled to realize their claims before you. If any of
our subsidiaries is dissolved, liquidated, reorganized or becomes bankrupt, the
assets of that subsidiary will be available to satisfy obligations of the
subsidiary before any payment may be made on the New 13% Debentures.
The indentures for the Old 13% Debentures and the New 13% Debentures
permit us and our subsidiaries to incur additional indebtedness in certain
circumstances. Please refer to the section of this prospectus entitled
"Description of the New 13% Debentures." Accordingly, there might only be a
limited amount of assets available to satisfy your claims as a holder of the New
13% Debentures upon an acceleration of the maturity of the New 13% Debentures.
Our controlling stockholders may take actions that may be contrary to your
interests.
A subsidiary of Specialty Foods Corp. owns 90% of our capital stock. As a
result, Specialty Foods Corp. is in a position to elect all of our directors
who, in turn, appoint all of our executive officers. In addition, Specialty
Foods Corp. 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,
Specialty Foods Corp. 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."
We may be unable to pay our debt obligations if a change of control occurs
under the indenture.
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<PAGE>
Upon certain change of control events, you may require us to repurchase
all or a portion of your New 13% Debentures at the purchase prices contained in
the section of this prospectus entitled "Prospectus Summary--Summary of Terms of
the New 13% Debentures--Optional Redemption." 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 the New 13%
Debentures. 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 New 13% Debentures."
A court could declare the New 13% Debentures 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 SFAC New Holdings as a debtor-in-possession in a bankruptcy
proceeding, could file a lawsuit claiming that the issuance of the SFAC 13%
Debentures constitutes a fraudulent conveyance. If the court were to make such a
finding, it may also find that the issuance of the New 13% Debentures is part of
the fraudulent conveyance. If it did so, the court could:
o void our obligations under the New 13% Debentures;
o declare the New 13% Debentures junior in right of payment to other
indebtedness; or
o take other actions detrimental to you as a holder of the New 13%
Debentures.
To make this determination, a court would have to find that:
o we did not receive fair consideration or reasonably equivalent value
for the SFAC 13% Debentures, and that,
o at the time the SFAC 13% Debentures were issued, we were insolvent
or rendered insolvent by the issuance of the SFAC 13% Debentures;
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.
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.
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<PAGE>
Moreover, regardless of solvency, a court could also void the issuance of
the New 13% Debentures if it determined that the transaction or the issuance of
the SFAC 13% Debentures was made with intent to hinder, delay or defraud
creditors, or a court could subordinate the New 13% Debentures to the claims of
all existing and future creditors on similar grounds.
You may find it difficult to sell your New 13% Debentures.
The New 13% Debentures 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 New 13% Debentures 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 New 13% Debentures;
o the liquidity of any market for the New 13% Debentures that may
develop;
o your ability to sell your New 13% Debentures; or
o the price at which you would be able to sell your New 13%
Debentures.
If a market for the New 13% Debentures were to exist, the New 13%
Debentures 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 SFAC 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 New 13% Debentures. We
cannot assure you that the market for the New 13% Debentures, if any, will not
be subject to similar disruptions. Any disruption may adversely affect you as a
holder of the New 13% Debentures.
Holders of SFAC 13% Debentures who do not participate in the exchange
offers will be subordinated and junior in right of payment to the New 13%
Debentures and the 11% Debentures.
Any SFAC 13% Debentures that remain outstanding after the exchange offers
will be structurally subordinated to all New 13% Debentures and any untendered
and tendered but unaccepted initial 13% Debentures and will also be structurally
subordinated to $322,249,152 aggregate principal amount of 11% Debentures.
If you hold initial 13% Debentures, your failure to participate in the
exchange offers will have adverse consequences.
The initial 13% Debentures 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
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<PAGE>
not exchange your initial 13% Debentures for New 13% Debentures pursuant to the
exchange offers, or if you do not properly tender your Old 13% Debentures in the
exchange offers, you will not be able to resell, offer to resell or otherwise
transfer the initial 13% Debentures 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 the initial 13% notes under the Securities
Act except in the limited circumstances provided under our registration rights
agreement.
If you do not exchange your SFAC 13% Debentures for New 13% Debentures
pursuant to the exchange offers or if you do not properly tender your SFAC 13%
Debentures, you will no longer be able to obligate us to register additional New
13% Debentures under the Securities Act.
Certain persons who participate in the exchange offers must deliver a
prospectus in connection with resales of the New 13% Debentures.
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 New 13% Debentures 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 New 13%
Debentures. In these cases, if you transfer any New 13% Debenture without
delivering a prospectus meeting the requirements of the Securities Act or
without an exemption from registration of your New 13% Debentures 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 New 13% Debentures to you after we timely receive your
Old 13% Debentures, 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 Old 13% Debentures. We are under
no duty to notify you of defects or irregularities with respect to your tender
of Old 13% Debentures for exchange. If your Old 13% Debentures 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 our registration rights
agreement will terminate.
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<PAGE>
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the New 13%
Debentures in exchange for the outstanding Old 13% Debentures. We are making
these exchange offers solely to satisfy our obligations under our registration
rights agreement.
The original issuance of the SFAC 13% Debentures occurred in 1993 and
resulted in an aggregate of approximately $147.7 million in net proceeds to
Specialty Foods Acquisition Corporation The net proceeds were used to finance
the 1993 acquisition of the underlying businesses of Specialty Foods.
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<PAGE>
CAPITALIZATION
The following table shows our pro forma capitalization as of March 31,
1999 after giving effect to the Restructuring Transactions. 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."
<TABLE>
<CAPTION>
As of March 31, 1999
--------------------
(in thousands)
<S> <C>
Cash and Cash Equivalents (1) ............................ --
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 due 2009 ......... 304,583
----------
SFC Sub, Inc. .......................................
11% Senior Secured Debentures due 2009 ......... 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
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
==========
</TABLE>
(1) Reflects the estimated fees of approximately $18.9 million paid in
connection with our private exchange offer that was completed on June 11,
1999.
(2) Reflects the write-off of deferred debt issuance costs on the original SFC
Notes of $16.9 million in connection with the exchange offers made by
Specialty Foods that were completed on June 11, 1999.
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<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 Acquisition
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 Acquisition 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.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
(In millions)
<S> <C> <C> <C> <C> <C>
Net Sales $ 742 $ 718 $ 706 $ 704 $ 667
Loss from continuing
operations (1) $ (106) $ (112) $ (326) $ (245) $ (97)
Income (loss) from discontinued
operations (2)(3) $ 10 $ 165 $ (161) $ (61) $ 45
Loss per share from continuing
operations $ (1.69) $ (1.78) $ (5.12) $ (3.84) $ (1.50)
Weighted number of shares
outstanding 62.8 63.1 63.6 63.9 64.6
Total Assets $ 534 $ 518 $ 515 $ 979 $ 1,237
Long-Term Debt $ 1,250 $ 1,134 $ 1,173 $ 1,134 $ 1,071
</TABLE>
- ----------
(1) Included in continuing operations is a goodwill write-down of $203 million
in 1996 and $157 million in 1995.
(2) Included in discontinued operations is a goodwill write-down of $152
million in 1996 and $97 million in 1995. Additionally, discontinued
operations included a gain on disposal of $133 million in 1997.
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<PAGE>
(3) Interest expense is not allocated to discontinued operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The following table provides the percentage of the net sales of Specialty
Foods Acquisition Corporation represented by certain items in our statements of
operations for the periods presented. The data used to compute the ratio has
been derived from Specialty Foods Acquisition Corporation's consolidated
financial statements. In this section, "we" and "our" and similar expressions
refer to Specialty Foods Acquisition Corporation priort to the Restructuring
Transactions and SFAC New Holdings, Inc. and its subsidiareies for subsequent
periods.
<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% 100.0%
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
administrative 51.3 51.2 49.6 54.4 55.3
Amortization of intangible assets 0.2 0.1 1.0 0.4 0.1
Goodwill write-down -- -- 28.9 -- --
------ ------ ------ ------ ------
Total operating expenses 51.5 51.3 79.5 54.8 55.4
------ ------ ------ ------ ------
Operating profit (loss) 4.1 3.9 (26.0) 0.5 (0.1)
Interest expense, net 18.0 18.8 18.7 18.3 18.4
Other expenses, net 0.4 0.7 1.4 0.4 0.5
------ ------ ------ ------ ------
Loss from continuing operations (14.3)% (15.6)% (46.1)% (18.2)% (19.0)%
====== ====== ====== ====== ======
</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 shift to higher margin
products and moderately favorable commodities. However the benefit was offset by
inflationary cost increases and higher depreciation expense.
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<PAGE>
Our selling, distribution, and general and administrative expenses, which
we refer to as "SDG&A", increased $14.2 million in 1999 to $108.8 million,
primarily due to the inclusion of acquisitions completed in 1998. However, as a
percentage of sales, SDG&A expenses decreased one percentage point to 54.3% in
1999 due to the fact that we realized cost synergies as a result of the 1998
acquisitions.
Our net interest expense increased $5.3 million in 1999 to $36.7 million
from $31.4 million in 1998. The increase was primarily due to higher levels of
accreted interest, higher interest expense on our senior secured debt and lower
interest income in 1999.
Our net other expense in 1999 and 1998 consists principally of discount
expense on our Accounts Receivable Transfer Facility.
As a result of the above factors, our net loss from continuing operations
increased to $36.5 million in 1999 compared to $32.4 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 $12.8 million, or 3.5%, in 1998 to $380.8 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 $0.5 million, or 0.4%, to
$134.0 million from $134.5 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
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1998. However, the decrease was offset by additional indebtedness that we
incurred as a result of the accretion of interest on our SFAC 13% Debentures and
our 11% Debentures.
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 of these factors, our net loss from continuing
operations decreased to $106.0 million in 1998 compared to $112.3 million in
1997, a decrease of 5.6%.
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 $368.0
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 increased in 1997 by $2.1 million, or 1.6%, to
$134.5 million from $132.4 million in 1996. This increase was principally due to
the additional indebtedness we incurred in connection with the accretion of
interest on our SFAC 13% Debentures and our 11% Debentures.
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 $112.3
million in 1997 compared to $325.8 million in 1996.
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As a result of our net operating loss tax 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 the Accounts Receivable 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)....................... $30,511 $27,358 $(183,193) $1,024 $(212)
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 $57,715 $48,445 $47,979 $10,335 $5,441
====== ====== ====== ====== =====
</TABLE>
Liquidity and Capital Resources
In 1998, our net cash used in operating activities totaled $44.8 million,
including cash requirements of $19.6 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.
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Our net cash used in operating activities in 1997 was $97.6 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.
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 $56.0 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 $61.0 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, $1.9 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 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 Specialty
Foods Acquisition Corporation's in 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
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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 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.
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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 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
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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 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.
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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, we and SFC New Holdings acquired substantially all of
the oustanding debt securities of Specialty Foods and Specialty Foods
Acquisition Corporation, in exchange for our securities and securities of SFC
New Holdings. We own all of the capital stock of SFC New Holdings. We, SFC 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 primarily to retail grocers,
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club stores and mass merchants. 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 company 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 Corporation 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.
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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 in
1998 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.
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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 due 2001 issued by SFC New
Holdings, which we refer to as "11 1/4% Senior Notes";
o $149.9 million of 12 1/8% Senior Notes due 2002 issued by SFC New
Holdings, which we refer to as "12 1/8% Senior Notes";
o $197.7 million of 13 1/4% Senior Subordinated Notes due 2003 issued
by SFC New Holdings, which we refer to as "Subordinated Notes";
o our initial 13% Debentures, which had an accreted value at June 30,
1999 of $314.4 million; and
o SFC Sub Inc.'s 11% Debentures, 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 Corporation exchanged them for
our securities in the private exchange transactions that were completed on June
11, 1999, there are also outstanding the following securities of our parent
companies:
o $4,305,000 of SFC 10 1/4% Notes;
o $75,000 of SFC 11 1/8% Notes;
o $2,354,000 of SFC Subordinated Notes;
o $54,176 of SFAC 13% Debentures.
Collectively, we refer to the SFC 10 1/4% Notes, the SFC 11 1/8% Notes and the
SFC Subordinated Notes as the "SFC Notes."
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.
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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 Offers
In May 1999, we and our subsidiary SFC New Holdings commenced private
exchange offers for debt securities of both Specialty Foods Acquisition
Corporation and Specialty Foods. Those private exchange transactions were
completed on June 11, 1999. We offered holders of the SFAC 13% Debentures who
were "accredited investors" within the meaning of Rule 501(a)(1)(2) or (3) of
the Securities Act the opportunity to exchange their existing debt for our
initial 13% Debentures and an aggregate of 31,925 shares of our common stock.
The initial 13% Debentures include provisions which (as compared to the terms of
the SFAC 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 us the right to redeem the initial 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 the SFAC 13% Debentures holding an
aggregate of 10.0% of our equity interest.
SFC New Holdings offered to exchange an aggregate of up to $225,000,000
aggregate principal amount of its initial 11 1/4% Senior Notes and up to
$5,659,368 aggregate principal amount of 11% Debentures of SFC Sub for all of
the outstanding SFC 10 1/4% Senior Notes; up to $150,000,000 aggregate principal
amount of its initial 12 1/8% Senior Notes and up to $3,772,912 aggregate
principal amount of 11% Debentures for all of the outstanding SFC 11 1/8% Senior
Notes; and up to $200,000,000 aggregate principal amount of its initial
Subordinated Notes and up to $18,864,558 aggregate principal amount of 11%
Debentures for all of the outstanding SFC Subordinated Notes.
The New 13% Debentures we are offering by means of this prospectus have
the same terms and covenants as the initial 13% Debentures for which they will
be exchanged, and will remain structurally senior to the SFAC 13% Debentures.
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
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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.
We conduct substantially all of our business through our subsidiaries.
Consequently, our ability and the ability of SFC 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 us and Specialty Foods. In addition, if a subsidiary
is liquidated or reorganized, our rights and the rights of SFC 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 SFC 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 in the industry 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.
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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 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.
39
<PAGE>
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 of this matter is currently being conducted and is expected to
conclude during the third quarter of 1999. Although litigation always has an
element of 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.
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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.
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 our 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.
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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.
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.
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<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 Corporation since February 1997; President and Chief Executive
Officer of Specialty Foods and Specialty Foods Acquisition Corporation 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.
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<PAGE>
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
General Counsel of Specialty Foods and Specialty Foods Acquisition Corporation
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 Corporation 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 Corporation since May 1999 and
Vice President and General Counsel - Business Units of Specialty Foods and
Specialty Foods Acquisition Corporation 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 Corporation 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 Corporation 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.
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<PAGE>
Mr. Crandall has been Director of Specialty Foods and Specialty Foods
Acquisition Corporation 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 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 Corporation 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 Corporation 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 Corporation 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 Corporation 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 Corporation 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 Corporation 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.
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<PAGE>
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 SFC 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.
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.
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<PAGE>
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 SFC 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 62,000 100,000 80,000
Financial Officer of us and SFC 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, Specialty Foods 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).
(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).
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<PAGE>
(6) In 1998, Specialty Foods 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
Corporation common stock, par value $.01 per share, underlying unexercised stock
options at December 31, 1998 and the value of unexercised, in-the-money options
at that date.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-the-
Options/SARs at Fiscal Money Options/SARs at Fiscal
Year-End Year-End
Name (#) Exercisable/Unexercisable ($) Exercisable/Unexercisable
---- ----------------------------- -----------------------------
<S> <C> <C>
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
President and Chief Executive
Officer of Mother's 26,250/8,750 (1)
</TABLE>
- ----------
(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
Corporation common stock is not publicly traded, it is not currently
possible to calculate a precise value for the Specialty Foods Acquisition
Corporation common stock. In October 1997, the Board of Directors of
Specialty Foods
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<PAGE>
Acquisition Corporation realized that certain previously granted stock
options had exercise prices which exceeded the fair market value of the
Specialty Foods Acquisition Corporation common stock. In view of this
diminished value, the Board of Directors of Specialty Foods Acquisition
Corporation 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 Corporation repriced the exercise
price of existing options from $0.726703211 to $0.021322 per share of
Specialty Foods Acquisition Corporation common stock, which the Board of
Directors of Specialty Foods Acquisition Corporation 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
<TABLE>
<CAPTION>
Annual Final
Average
Compensation Years of Service
------------ ----------------
15 20 25 30 35
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
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
</TABLE>
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)), 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.
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<PAGE>
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 Corporation, 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 Corporation 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.
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
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<PAGE>
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 Corporation 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.
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
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<PAGE>
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 Corporation 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 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
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<PAGE>
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.
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<PAGE>
SECURITY OWNERSHIP
SFC Sub, Inc. owns 90% of our capital stock and the remaining 10% is
held by the holders of the SFAC 13% Debentures. All of the capital stock of SFC
Sub, Inc. is owned by Specialty Foods, and all of the capital stock of Specialty
Foods is owned by Specialty Foods Acquisition Corporation The following table
provides, as of June 15, 1999, information regarding the beneficial ownership of
voting securities of Specialty Foods Acquisition Corporation by (i) each person
known by Specialty Foods Acquisition Corporation 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.
<TABLE>
<CAPTION>
Percentage of
Name and Address Number of Shares Outstanding Shares
of Beneficial Owner of Common Stock of Common Stock (1)
- ------------------- --------------- -------------------
<S> <C> <C>
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%
</TABLE>
54
<PAGE>
- ----------
* Less than 1%
(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 Corporation, Specialty
Foods, SFC 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 Corporation 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 Corporation 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 Corporation 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.
(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.
55
<PAGE>
(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.
56
<PAGE>
RELATIONSHIPS AND RELATED TRANSACTIONS
Stockholders' Agreement
In 1993, simultaneously with acquiring 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 Corporation 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 Corporation 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
Corporation 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 Corporation 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 Corporation 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
Corporation
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
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<PAGE>
Leasing, L.L.C. resold to Metz all of the equipment at that 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 Corporation under which SFC New Holdings has agreed to pay to
Specialty Foods Acquisition Corporation the pro rata share of Specialty Foods
Acquisition Corporation'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 Corporation's consolidated income tax liability attributable
to each such subsidiary. Specialty Foods, SFC Sub, Inc., SFAC New Holdings and
Specialty Foods Acquisition Corporation are also parties to a tax sharing
agreement under which:
o Specialty Foods has agreed to pay to Specialty Foods Acquisition
Corporation the pro rata share of Specialty Foods Acquisition
Corporation'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.
58
<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 initial 13% Debentures, 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 Old 13% Debentures. The New 13% Debentures will be
substantially identical in all material respects to our initial 13% Debentures
except that the New 13% Debentures 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 SFAC
13% Debentures, who did participate in the private exchange transactions that
were completed on June 11, 1999, with the opportunity to exchange their
securities for New 13% Debentures. Many of these holders were not eligible to
participate in those private exchanges 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 initial 13% Debentures and the
exchange offer for the SFAC 13% Debentures 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 initial 13% Debentures;
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 Old 13% Debentures,
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 initial 13% Debentures.
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.
59
<PAGE>
This prospectus, together with the letter of transmittal, is being sent to
all record holders of our initial 13% Debentures as of __________, 1999. It is
also being sent to current holders of SFAC 13% Debentures as of the same date.
Based on interpretations by the staff of the Securities and Exchange
Commission, in no-action letters issued to third parties, we believe that the
New 13% Debentures issued pursuant to the exchange offers may be offered for
resale, resold or otherwise transferred by each holder of New 13% Debentures
other than (1) a broker-dealer who acquires the Old 13% Debentures 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 New 13% Debentures in the ordinary course of its
business,
o is not participating in, and does not intend to participate in, a
distribution of the New 13% Debentures within the meaning of the
Securities Act and has no arrangement or understanding with any
person to participate in a distribution of the New 13% Debentures
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 Old 13% Debentures in exchange for New 13% Debentures,
each holder, other than a broker-dealer, will be required to make
representations to that effect. If a holder of Old 13% Debentures is
participating in or intends to participate in, a distribution of the New 13%
Debentures, or has any arrangement or understanding with any person to
participate in a distribution of the New 13% Debentures 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 New 13% Debentures for its own account in
exchange for Old 13% Debentures 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 New 13% Debentures. 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 New 13% Debentures received in exchange for Old 13% Debentures
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
60
<PAGE>
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."
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 initial 13% Debentures, 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 our initial 13% Debentures, 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
initial 13% Debentures or the shorter period of time that will
terminate when all of the applicable Old 13% Debentures have been
sold under this shelf registration statement.
If a shelf registration statement is filed, we will provide to each holder
of the Old 13% Debentures 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 Old
13% Debentures being registered. A holder that sells Old 13% Debentures pursuant
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<PAGE>
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.
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 initial 13% Debentures until:
o the date on which that initial 13% Debenture has been exchanged by a
person other than a broker-dealer for a New 13% Debenture in the
registered exchange offers,
o following the exchange by a broker-dealer in the registered exchange
offers of an Old 13% Debenture for a New 13% Debenture, the date on
which this New 13% Debenture 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 13% Debenture 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 13% Debenture is distributed to the
public under Rule 144 promulgated under the Securities Act, or
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o the date on which the initial 13% Debenture 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 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 Old 13% Debentures who
do not exchange their Old 13% Debentures for New 13% Debentures in the exchange
offers generally will no longer be entitled to registration rights and will not
be able to offer or sell their Old 13% Debentures, unless such Old 13%
Debentures 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
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<PAGE>
notify the holders of the Old 13% Debentures 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:
o to delay acceptance of any Old 13% Debentures, to extend the
exchange offers or to terminate the exchange offers and not permit
acceptance of Old 13% Debentures 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 Old 13% Debentures of this
amendment including providing public announcement, or giving oral or written
notice to the holders of the Old 13% Debentures. 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 Old 13% Debentures. 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 Old 13% Debentures 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 Old 13%
Debentures 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 SFAC 13% Debentures, send a timely confirmation of a
book-entry transfer of your SFAC 13% Debentures 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
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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 Old 13%
Debentures which are the subject of this 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 Old 13% Debentures, 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 Old 13% Debentures 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 Old 13% Debentures on your behalf.
Your tender of Old 13% Debentures 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 Old 13% Debentures may tender these Old 13% Debentures in
the exchange offers. A holder, with respect to the exchange offers, is any
person in whose name Old 13% Debentures 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 Old 13% Debentures that are registered
in the name of a broker, dealer, commercial bank, trust company or other nominee
and you wish to tender your Old 13% Debentures, 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 Old 13% Debentures,
either make appropriate arrangements to register ownership of the Old 13%
Debentures 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 Old 13% Debentures are tendered:
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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 New 13% Debentures 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.
If the letter of transmittal is signed by the record holder(s) of the Old
13% Debentures tendered, the signature must correspond with the name(s) written
on the face of the Old 13% Debentures 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 Old 13%
Debentures.
If the letter of transmittal is signed by a person other than the
registered holder of any Old 13% Debentures listed, such Old 13% Debentures must
be endorsed or accompanied by bond powers and a proxy that authorize such person
to tender the Old 13% Debentures 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 Old 13% Debentures.
If the letter of transmittal or any Old 13% Debentures 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 Old 13%
Debentures tendered, or a timely confirmation received of a book-entry transfer
of Old 13% Debentures 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 New 13%
Debentures in exchange for Old 13% Debentures 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 Old 13% Debentures, or a timely confirmation received of a book-entry
transfer of Old 13% Debentures 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 Old 13% Debentures. Our determination will be final
and binding. We reserve the absolute right to reject any and all Old 13%
Debentures not properly tendered or any Old 13% Debentures
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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 Old 13%
Debentures. 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 Old 13% Debentures 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 Old 13% Debentures. Neither we nor the exchange agent will incur any
liability for failure to give such notification. Tenders of Old 13% Debentures
will not be deemed to have been made until such irregularities have been cured
or waived. Any Old 13% Debentures received by the exchange agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned without cost by the exchange agent to the
tendering holders of such Old 13% Debentures, 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 New 13% Debentures, to:
o purchase or make offers for any Old 13% Debentures 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 Old 13%
Debentures 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 Old 13% Debentures for Exchange; Delivery of New 13%
Debentures
Upon satisfaction or waiver of all of the conditions to the exchange
offers, we will accept all Old 13% Debentures properly tendered, promptly after
the expiration date, and will issue the New 13% Debentures promptly after the
expiration date and acceptance of the Old 13% Debentures. Please refer to the
section of this prospectus entitled "--Conditions" below. For purposes of the
exchange offers, Old 13% Debentures 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 New 13% Debentures for Old 13% Debentures 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 Old 13%
Debentures or a timely book-entry confirmation of such Old 13% Debentures 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 Old 13% Debentures are not accepted for any
reason set forth
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in the terms and conditions of the exchange offers or if Old 13% Debentures are
submitted for a greater principal amount than the holder desires to exchange,
such unaccepted or non-exchanged Old 13% Debentures will be returned without
expense to the tendering holder thereof, or, in the case of Old 13% Debentures
tendered by book-entry transfer procedures described below, the non-exchanged
Old 13% Debentures 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.
Book-Entry Transfer
The exchange agent will make a request to establish an account with
respect to the Old 13% Debentures 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 Old 13% Debentures by
causing The Depository Trust Company to transfer such Old 13% Debentures 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 Old 13% Debentures 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 Old 13%
Debentures will be deemed to include The Depository Trust Company's book-entry
delivery method.
Guaranteed Delivery Procedure
If you are a registered holder of Old 13% Debentures and desire to tender
such Old 13% Debentures, and (1) the Old 13% Debentures are not immediately
available, or (2) time will not permit your 13% Debentures 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 Old 13% Debentures and the amount of Old
13% Debentures tendered, stating that the tender is being made
thereby and
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guaranteeing that within five business days after the expiration
date the certificates for all tendered Old 13% Debentures, 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 Old 13% Debentures, 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.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, you may withdraw tenders
of Old 13% Debentures 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 Old 13%
Debentures to be withdrawn,
o identify the Old 13% Debentures to be withdrawn, including, if
applicable, the registration number or numbers and total principal
amount of these Old 13% Debentures,
o be signed by the person having tendered the Old 13% Debentures to be
withdrawn in the same manner as the original signature on the letter
of transmittal by which these Old 13% Debentures were tendered
including any required signature guarantees, or be accompanied by
documents of transfer sufficient to permit the trustee with respect
to the Old 13% Debentures to register the transfer of these Old 13%
Debentures into the name of the person having made the original
tender and withdrawing the tender,
o specify the name in which these Old 13% Debentures are to be
registered, if different from that of the person having tendered the
Old 13% Debentures to be withdrawn, and
o if applicable because the Old 13% Debentures 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
Old 13% Debentures to be withdrawn.
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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 Old 13% Debentures so withdrawn will be
deemed not to have been validly tendered for exchange for purposes of the
exchange offers. Any Old 13% Debentures 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 Old 13% Debentures 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
Old 13% Debentures will be credited to an account maintained with The Depository
Trust Company for the Old 13% Debentures, as promptly as practicable after
withdrawal, rejection of tender, expiration date or earlier termination of the
exchange offers. Properly withdrawn Old 13% Debentures may be retendered by
following one of the procedures described under "--Procedures for 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 Old 13% Debentures for exchange, or issue New 13% Debentures
in exchange for any Old 13% Debentures, and we may terminate or amend the
exchange offers as provided in this prospectus before the acceptance of these
Old 13% Debentures, 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 New 13% Debentures issued pursuant to the
exchange offers in exchange for the Old 13% Debentures 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
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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.
If we determine that we may terminate the exchange offers, as provided
above, we may:
o refuse to accept any Old 13% Debentures and return any Old 13%
Debentures that have been tendered to their holders
o extend the exchange offers and retain all Old 13% Debentures
tendered before the expiration date, subject to the rights of such
holders of tendered Old 13% Debentures to withdraw their tendered
Old 13% Debentures, or
o waive the termination event with respect to the exchange offers and
accept all properly tendered Old 13% Debentures 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 Old 13% Debentures being tendered for exchange.
We have no obligation to, and will not knowingly, accept tenders of Old
13% Debentures 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 New 13% Debentures to be
received by the holder or holders of Old 13% Debentures 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 New 13% Debentures at the same carrying value as the
Old 13% Debentures, 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
New 13% Debentures.
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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:
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
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the beneficial owners of the Old 13% Debentures, 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.
We will pay all transfer taxes, if any, applicable to the exchange of Old
13% Debentures 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 New 13% Debentures or Old 13% Debentures
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 Old 13%
Debentures tendered, or
o tendered Old 13% Debentures 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
Old 13% Debentures 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
If you do not exchange your initial 13% Debentures for New 13% Debentures
pursuant to the exchange offers or if you do not properly tender your initial
13% Debentures in the exchange offers, you will not be able to resell, offer to
resell or otherwise transfer your initial 13% Debentures 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 your initial 13% Debentures
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 13% Debentures at all. The restrictions on transfer of
your initial 13% Debentures arise because we issued the initial 13% Debentures
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 your initial 13% Debentures in the exchange
offers for the purpose of participating in a distribution of the New 13%
Debentures, 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 the initial 13% Debentures are tendered and accepted in the exchange
offers, the trading market,
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if any, for the initial 13% Debentures would be adversely affected. Please refer
to the section in this prospectus entitled "Risk Factors."
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 SFC New Holdings 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 Specialty Foods, 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
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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 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. Amounts repaid under the Revolving II Facility may not
be reborrowed.
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. A fee is paid 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, SFC New Holdings, Specialty Foods,
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 and/or SFC New Holdings 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 SFC New Holdings'
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;
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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.
Covenants
The Credit Facilities restrict SFC New Holdings and its 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 SFC New Holdings' 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 its 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 it or its subsidiaries may
engage; and
o change the nature of our business and the business conducted by SFC
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:
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o SFC New Holdings maintain a ratio of consolidated total
indebtedness, senior secured indebtedness and operating company
indebtedness to consolidated EBITDA (as those terms are defined in
the Term Loan Agreement) that does not exceed certain limits;
o SFC New Holdings maintain an interest coverage ratio (as defined in
the Term Loan Agreement) in excess of certain limits; and
o SFC New Holdings 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 the failure by SFC New Holdings or any of its 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 the failure by SFC New Holdings or any of its 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 SFC New Holdings' or its
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 the bankruptcy, insolvency or similar event of SFC New Holdings of
any of its material subsidiaries;
o certain ERISA defaults by SFC New Holdings or any commonly
controlled entity;
o undischarged and unstayed final judgments in excess of $5.0 million
in the aggregate, against SFC New Holdings or any of its 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.
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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 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 exchange offers by Specialty Foods and Specialty
Foods Acquisition Corporation that were completed on June 11, 1999, Specialty
Foods contributed to SFC New Holdings 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 those exchange offers, SFC New Holdings
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:
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o the transfer of receivables to the Master Trust under the
Receivables Transfer Agreement;
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 exchange transactions that were completed on June 11,
Specialty Foods, and since those exchange offers, SFC New Holdings, 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 SFC New Holdings (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.
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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.;
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 the bankruptcy, insolvency or similar event of Finance Corp., SFC
New Holdings or any of its 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 the failure of Finance Corp., SFC New Holdings or any of its
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;
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o the failure of SFC New Holdings or 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 the indebtedness of SFC New Holdings or any of
its 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;
o the existence of judgments, unsatisfied or unstayed for at least 60
days, in excess of $5.0 million in the aggregate, against SFC New
Holdings or any of its material subsidiaries; or
o a change in control (as defined in the Receivables Transfer
Agreement).
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DESCRIPTION OF THE NEW 13% DEBENTURES
General
The following summary of certain provisions of the indenture does not
purport to be complete and is qualified in its entirety by reference to the
indenture, including the definitions therein of certain terms used below.
However, the summary does summarize all material provisions of the indenture.
The definitions of certain terms used in the following summary are set forth
under "Certain Definitions."
The New 13% Debentures will rank equally in right of payment with all
senior borrowings of SFAC New Holdings and senior in right of payment to all
subordinated indebtedness of SFAC New Holdings. In addition, the New 13%
Debentures will be secured by a first priority lien and security interest in all
of the issued and outstanding Capital Stock of SFC New Holdings and intercompany
notes, if any, owing to SFAC New Holdings. However, the operations of SFAC New
Holdings are conducted through its Subsidiaries and, therefore, SFAC New
Holdings is dependent upon the cash flow of its Subsidiaries to meet its
obligations, including its obligations under the New 13% Debentures and the
indenture. The New 13% Debentures will be effectively subordinated to all
indebtedness and other liabilities of SFAC New Holdings' Subsidiaries. By
acceptance of a New 13% Debenture, each holder acknowledges and agrees that,
upon certain events of bankruptcy of SFAC New Holdings and any of its
Subsidiaries, payment of the Accreted Value (as defined) or the principal and
premium, if any, and interest on the New 13% Debentures shall be subordinate in
right of payment to all obligations of SFC New Holdings and its Subsidiaries,
notwithstanding application of the doctrine of substantive consolidation. The
New 13% Debentures will be effectively subordinated to the 11 1/4% Senior Notes,
the 12 1/8% Senior Notes (together, the "Senior Notes") and the Subordinated
Notes.
Principal, Maturity and Interest
The New 13% Debentures will have an Accreted Value as of their date of
issue equal to the Accreted Value of the initial 13% Debnentures for which they
are exchanged. The initial 13% Debentures, in the aggregate, had an Accreted
Value of $312,160,055 as of June 11, 1999. The New 13% Debentures will mature on
June 15, 2009. The New 13% Debentures will bear interest at the rate of 13% per
annum, compounded semi-annually, from the Original Issue Date. Payment of all
interest accrued prior to June 15, 2004 will be deferred and will be paid only
at maturity or upon the earlier redemption or purchase of New 13% Debentures by
SFC New Holdings depending on the redemption price. All accrued but deferred
interest will also bear interest at the rate of 13% per annum, compounded
semi-annually. After June 15, 2004, interest will accrue at 13% per annum and
will be payable in cash semi-annually in arrears on June 15 and December 15 of
each year, commencing on December 15, 2004, to holders of record on the
immediately preceding December 1 and June 1. Interest on the New 13% Debentures
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the Original Issue Date. Interest will be computed
on the basis
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of a 360-day year comprised of twelve 30-day months. The New 13% Debentures will
be payable as to principal, interest and additional payments at the office or
agency of SFAC New Holdings maintained for such purpose within the City and
State of New York or, at the option of SFAC New Holdings, payment of interest
may be made by check mailed to the holders of the New 13% Debentures at their
respective addresses set forth in the register of holders of New 13% Debentures.
Until otherwise designated by SFAC New Holdings, SFAC New Holdings's office or
agency in New York will be the office of the trustee maintained for such
purpose. The New 13% Debentures will be issued in registered form, without
coupons, and in denominations of $1,000 and integral multiples thereof.
Optional Redemption
The New 13% Debentures are redeemable, in whole or in part, at SFAC New
Holdings's option at any time, upon not less than 30 nor more than 60 days'
notice to the holders of New 13% Debentures, at the redemption prices (expressed
as percentages of Accreted Value) set forth below plus, after June 15, 2004,
accrued and unpaid interest thereon to the applicable redemption date:
Percentage of
Year Accreted Value
On or before June 15, 2000.......................... 50.0 %
On or before June 15, 2001.......................... 55.0 %
On or before June 15, 2002.......................... 60.0%
On or before June 15, 2003.......................... 75.0%
After June 15, 2003................................. 100.0%
Mandatory Redemption
Except as set forth below under "Redemption or Repurchase at the Option of
Holders," SFAC New Holdings is not required to make mandatory redemption or
sinking fund payments with respect to the New 13% Debentures.
Redemption or Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, each holder of New 13%
Debentures will have the right to require SFAC New Holdings to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of such holder's New
13% Debentures pursuant to the offer described below (the "Change of Control
Offer") at a repurchase price equal to 50.0% (on or before June 15, 2000), 55.0%
(on or before June 15, 2001), 60.0% (on or before June 15, 2002), 75.0% (on or
before June 15, 2003) or 100.0% (after June 15, 2003) of the Accreted Value
thereof on the date of purchase plus, after June 15, 2004, accrued and unpaid
interest thereon to the applicable repurchase date (in any case, the "Change of
Control Payment").
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Within 60 days following any Change of Control, SFAC 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 New 13%
Debentures tendered will be accepted for payment;
(2) the purchase price and the purchase date, which shall be not later
than 30 Business Days from the date such notice is mailed (the
"Change of Control Payment Date");
(3) that any New 13% Debenture not tendered will continue to accrete or
accrue interest;
(4) that, unless SFAC New Holdings defaults in the payment of the Change
of Control Payment, all New 13% Debentures accepted for payment
pursuant to the Change of Control Offer will cease to accrete or
accrue interest after the Change of Control Payment Date;
(5) that holders electing to have any New 13% Debentures purchased
pursuant to a Change of Control Offer will be required to surrender
the New 13% Debentures, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the New 13% Debentures 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 New 13% Debentures
delivered for purchase, and a statement that such holder is
withdrawing his election to have the New 13% Debentures purchased;
and
(7) that holders whose New 13% Debentures are being purchased only in
part will be issued New 13% Debentures equal in principal amount to
the unpurchased portion of the New 13% Debentures surrendered, which
unpurchased portion must be equal to $1,000 in principal amount or
an integral portion thereof. SFAC 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
New 13% Debentures in connection with a Change of Control.
On the Change of Control Payment Date, SFAC New Holdings will, to the
extent lawful,
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(1) accept for payment New 13% Debentures 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 New 13% Debentures or portions
thereof so tendered, and
(3) deliver or cause to be delivered to the trustee the New 13%
Debentures so accepted together with an Officers' Certificate
stating the New 13% Debentures or portions thereof tendered to SFAC
New Holdings. The trustee will promptly mail to each holder of New
13% Debentures so accepted payment in an amount equal to the
purchase price for the New 13% Debentures, and the trustee shall
promptly authenticate and mail to each holder a New 13% Debenture
equal in principal amount to any unpurchased portion of the New 13%
Debentures surrendered by such holder, if any; provided that each
such New 13% Debenture will be in a principal amount of $1,000 or an
integral multiple thereof. SFAC 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:
(i) the sale, lease or transfer, in one or a series of related
transactions, of all or substantially all of the assets of SFAC New
Holdings, SFC Sub, SFC or SFAC 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 Related Parties (as defined below)),
(ii) the adoption of a plan relating to the liquidation or dissolution of
SFAC New Holdings, SFC or SFAC,
(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 Related Parties) owns, directly or indirectly, more of the
voting power of the voting stock of SFAC New Holdings, SFC Sub, SFC
or SFAC other than the Principals and their Related Parties,
(iv) the first day on which a majority of the members of the Board of
Directors of SFAC New Holdings, SFC Sub, SFC or SFAC are not
Continuing Directors, and
(v) SFAC New Holdings ceases to own 100% of the outstanding Equity
Interests (other than Permitted Preferred Stock) of SFC New
Holdings.
For the purposes of the foregoing clauses (i) to (v), any shares of voting
stock that are required to be voted for a nominee of any Principal or Related
Party pursuant to a binding
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agreement between the holder thereof and such Principal or Related Party shall
be deemed to be held by such Principal or Related Party, as the case may be, for
purposes of determining the percentage of voting power held by any person.
"Principals" means Haas Wheat & Partners Incorporated, Acadia Partners,
L.P. and Keystone, Inc.
"Related 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 clauses (D)
or (E),
(C) any partner or stockholder of any Principal as of the date of the
indenture who acquires any assets or voting stock of SFAC New
Holdings, SFC Sub, SFC or SFAC 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
indenture, or
(E) co-investment entities established by any Principal within 90 days
of the date of the indenture 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 Related Party of Haas Wheat & Partners
Incorporated and
(y) any officer or director of Oak Hill Partners, Inc. as of the
date of the indenture shall be deemed a Related 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 SFAC New Holdings, SFC or SFAC, as applicable, who
(a) was a member of such Board of Directors on the date of the indenture or (b)
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.
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Asset Sales
The indenture provides that SFAC New Holdings will not, and will not
permit any of its Subsidiaries to,
(i) 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 "Accounts Receivable
Subsidiary" covenant described below (provided that the sale, lease,
conveyance or other disposition of all or substantially all of the
assets of SFAC New Holdings shall be governed by the provisions of
the indenture described below under the caption "Merger,
Consolidation or Sale of Assets") or
(ii) issue or sell equity securities of any of its Subsidiaries (other
than Permitted Preferred Stock), 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) SFAC 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 trustee) of
the assets sold or otherwise disposed of and
(y) at least 80% of the consideration therefor received by
SFAC 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 SFAC New Holdings's
or such Subsidiary's most recent balance sheet or
in the notes thereto) of SFAC New Holdings or any
Subsidiary (other than liabilities that are by
their terms subordinated to the New 13%
Debentures) 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 SFAC New
Holdings or any such Subsidiary from such
transferee that, within 30 days (or 90 days, in
the case of Marketable Securities
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received in connection with a pooling of
interest transaction) of the consummation of the
Asset Sale,
are converted by SFAC 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.
Within 365 days after the receipt of cash proceeds from any Asset Sale,
SFAC New Holdings (or such Subsidiary) may, at its option, apply the Net
Proceeds from such Asset Sale to an investment in another business, capital
expenditures or other long-term assets, in each case, similar or related to the
line of business as SFAC New Holdings or any of its Subsidiaries were engaged in
on the date of the indenture, or to permanently reduce Indebtedness (with a
corresponding permanent reduction of any commitments with respect thereto) of a
Subsidiary of SFAC New Holdings, including, without limitation, the Senior Term
Debt and the Senior Revolving Debt. Pending the final application of any such
Net Proceeds, SFAC 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
"New 13% Debenture Excess Proceeds."
When the aggregate amount of New 13% Debenture Excess Proceeds exceeds $15
million, within five days of such date, SFAC New Holdings will be required to
make an offer to all holders of New 13% Debentures (a "New 13% Debenture Asset
Sale Offer") to purchase the maximum principal amount of New 13% Debentures that
may be purchased out of the New 13% Debenture Excess Proceeds at an offer price
in cash in an amount equal to the redemption prices set forth in the covenant
entitled "Optional Redemption" on the date fixed for the closing of such offer
in accordance with the procedures set forth in the indenture. To the extent that
the aggregate amount of New 13% Debentures tendered pursuant to a New 13%
Debenture Asset Sale Offer is less than the amount of New 13% Debenture Excess
Proceeds, SFAC New Holdings may use such deficiency for general corporate
purposes. If the aggregate principal amount of New 13% Debentures surrendered by
holders thereof exceeds the amount of New 13% Debenture Excess Proceeds, the
trustee will select the New 13% Debentures to be purchased on a pro rata basis.
Upon completion of such offer to purchase, the amount of New 13% Debenture
Excess Proceeds will be deemed to be reset at zero.
The foregoing limitations will not apply to Asset Sales to SFAC New
Holdings or any of its Wholly Owned Subsidiaries.
The Term Loan Agreement and the Note Indentures restrict SFC New Holdings'
ability to make distributions to SFAC New Holdings to redeem New 13% Debentures
in the event of a Change of Control or an Asset Sale. 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 New 13% Debenture Asset Sale Offer is required at a time when SFC New Holdings
is prohibited from making distributions to SFAC New Holdings, SFC New Holdings
could seek the consent of its lenders or could attempt to refinance the
borrowings that contain such prohibition. If SFAC New Holdings is unable to
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purchase tendered New 13% Debentures upon the occurrence of a Change of Control,
SFAC New Holdings's failure to purchase such New 13% Debentures would constitute
an Event of Default under the indenture.
Selection and Notice
If less than all of the New 13% Debentures are to be redeemed at any time,
selection of New 13% Debentures for redemption will be made by the trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the New 13% Debentures are listed, or, if the New 13%
Debentures are not so listed, on a pro rata basis, by lot or by such method as
the trustee shall deem fair and appropriate; provided that no New 13% Debenture
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 New 13% Debentures to be redeemed at its
registered address. If any New 13% Debenture is to be redeemed in part only, the
notice of redemption that relates to such New 13% Debenture shall state the
portion of the principal amount thereof to be redeemed. A New 13% Debenture in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original New 13% Debenture.
On and after the redemption date, the New 13% Debentures or portions of them
called for redemption will cease to accrete or accrue interest.
Certain Covenants
Restricted Payments
The indenture provides that SFAC 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
SFAC New Holdings's or any of its Subsidiaries' Equity Interests
(other than dividends or distributions payable in Equity Interests
(other than Disqualified Stock) of SFAC New Holdings or dividends or
distributions payable to SFAC New Holdings or any Wholly Owned
Subsidiary of SFAC New Holdings);
(ii) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of SFAC New Holdings or any Subsidiary or other Affiliate
of SFAC New Holdings (other than any such Equity Interests owned by
SFAC New Holdings or any Wholly Owned Subsidiary of SFAC New
Holdings);
(iii) purchase, redeem, defease or otherwise acquire or retire for value,
or declare, or pay any interest or other distribution on or in
respect of, any Indebtedness that is subordinated to the New 13%
Debentures (other than interest payable in the form of additional
amounts of any such subordinated Indebtedness having no sinking fund
payments prior to June 15, 2009); or
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(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:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(b) SFAC 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 SFAC New Holdings and its Subsidiaries after the
date of the indenture (including all Restricted Payments permitted by the next
succeeding paragraph except clause (vi) thereof), is less than the sum of
(x) 50% of the Consolidated Net Income of SFAC New Holdings for the
period (taken as one accounting period) from the date of the
indenture to the end of SFAC New Holdings's most recently ended
fiscal quarter for which internal financial statements are available
at the time of such Restricted Payment (or, if such Consolidated Net
Income for such period is a deficit, 100% of such deficit), plus
(y) 100% of the aggregate Net Proceeds received by SFAC New Holdings
since the date of the indenture from the issue or sale of Equity
Interests of SFAC New Holdings (other than Equity Interests sold to
a Subsidiary of SFAC New Holdings and other than Disqualified Stock)
or any debt security of SFAC New Holdings that is convertible into
or exchangeable for any Equity Interest of SFAC New Holdings (other
than Disqualified Stock) that has been so converted or exchanged,
plus
(z) 100% of any common equity capital contribution received by SFAC New
Holdings since the date of the indenture.
The foregoing provisions will 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 indenture and the
Note Indentures;
(ii) the redemption, repurchase, retirement or other acquisition of any
of SFAC New Holdings's Equity Interests or Indebtedness subordinated
in right of payment to the New 13% Debentures of SFAC New Holdings
in exchange for,
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or out of the proceeds of, the substantially concurrent sale (other
than to a Subsidiary of SFAC New Holdings) of other Equity Interests
of SFAC New Holdings (other than any Disqualified Stock);
(iii) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of SFAC New Holdings or any Subsidiary
of SFAC New Holdings held by any member of SFAC New Holdings's (or
any of its Subsidiaries') management; provided, however, that the
aggregate price paid since the date of the indenture 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 SFAC New Holdings or any Subsidiary of SFAC New
Holdings from any reissuance of Equity Interests by SFAC New
Holdings or such Subsidiary to members of management of SFAC New
Holdings and its Subsidiaries;
(iv) dividends by SFAC New Holdings to SFC or SFC Sub in an amount
sufficient to enable SFC to pay, when due, interest on any SFC
Senior Notes or SFC Subordinated Notes that remain outstanding
following the SFC Exchange Offers, in accordance with the terms
thereof; and
(v) Permitted Refinancings (as defined below) of Indebtedness
subordinated in right of payment to the New 13% Debentures.
Not later than the date of making any Restricted Payment (other than
Restricted Payments pursuant to clause (iv) of the foregoing paragraph, SFAC New
Holdings will deliver to the trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the covenant "Restricted Payments" were computed, which
calculations may be based upon SFAC New Holdings's latest available financial
statements.
Incurrence of Indebtedness and Issuance of Preferred Stock
The indenture provides that SFAC 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 SFAC
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
SFAC New Holdings may incur Indebtedness or issue shares of Disqualified Stock
if
(i) the Fixed Charge Coverage Ratio for SFAC New Holdings's most
recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred, or such Disqualified
Stock is issued, would have been at least 2.25 to 1 determined on a
pro forma basis (including a pro forma application of the
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net proceeds therefrom) as if the additional Indebtedness had been
incurred, or the Disqualified Stock has been issued, as the case may
be, at the beginning of such four-quarter period, and
(ii) any such Indebtedness is unsecured and subordinated or equal in
right of payment to the New 13% Debentures and has a Weighted
Average Life to Maturity that is greater than the remaining Weighted
Average Life to Maturity of the New 13% Debentures, and
provided further, that SFAC New Holdings and its Subsidiaries may incur
Indebtedness and issue shares of preferred stock if the Fixed Charge Coverage
Ratio for SFAC New Holdings' most recently ended four full fiscal quarters for
which internal financial statements are available immediately preceding the date
on which such Indebtedness is incurred, or such preferred stock is issued, would
have been at least 2.50 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 preferred stock had been issued, as the
case may be, at the beginning of such four-quarter period.
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 the SFAC indenture,
(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,
(c) the incurrence by SFAC New Holdings and its Subsidiaries of the
Existing Indebtedness,
(d) the incurrence by SFAC New Holdings of Indebtedness represented by
the New 13% Debentures and by SFC New Holdings of Indebtedness
represented by the New Senior Notes and the New Subordinated Notes,
(e) the incurrence by SFAC 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
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all or any part of the purchase price or cost of construction or
improvement of property used in the business of SFAC New Holdings or
such Subsidiary, in an aggregate principal amount not to exceed $5
million at any time outstanding,
(f) the incurrence by SFAC 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 SFAC 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, replaced,
defeased or refunded or
(y) the remaining Weighted Average Life to Maturity of the
New 13% Debentures; and
(4) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of
payment to the New 13% Debentures, the Refinancing
Indebtedness shall be subordinated in right of payment to the
New 13% Debentures on terms at least as favorable to the
holders of the New 13% Debentures as those contained in the
documentation 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 SFAC New Holdings and any
of its Wholly Owned Subsidiaries,
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(h) the incurrence by SFAC 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 indenture to be outstanding,
(i) the issuance by SFC New Holdings of Permitted Preferred Stock and
(j) the incurrence by SFAC New Holdings of Indebtedness (in addition to
Indebtedness permitted by any other clause of this paragraph) in an
aggregate principal amount at any one 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 indenture.
Rights Offering
The indenture provides that SFAC New Holdings shall cause SFC New Holdings
to grant the holders of the New 13% Debentures the right to participate in any
and all offerings of Permitted Preferred Stock of SFC New Holdings (each an
"Offering"). SFAC New Holdings shall cause SFC New Holdings to require that each
Offering be made in conjunction with a Rights Offering that
(i) entitles each holder of New 13% Debentures owned on the date the
Offering is commenced to acquire all or any portion of that number
of shares of Permitted Preferred Stock equal to the product of
(a) the number of shares of Permitted Preferred Stock offered in
such Offering and
(b) the ratio of the aggregate principal amount of New 13%
Debentures then held by such holder to the aggregate principal
amount of New 13% Debentures then outstanding and
(ii) permits SFC New Holdings to offer any shares of Permitted Preferred
Stock that remain unsubscribed in such offering, to any Person on
the same terms and conditions as set forth in such Offering;
provided however, that the consummation of each Offering shall be within 60 days
following the commencement thereof.
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Liens
The indenture provides that neither SFAC 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 indenture provides that SFAC 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 SFAC 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 SFAC New Holdings or any of its
Subsidiaries,
(b) making loans or advances to SFAC New Holdings or any of its Subsidiaries or
(c) transferring any of its properties or assets to SFAC 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 indenture,
(ii) the Term Loan Agreement and the Revolving Credit Agreement as in
effect as of the date of the indenture,
(iii) the indenture and the Note Indentures,
(iv) applicable law,
(v) any instrument governing Indebtedness or Capital Stock of a person
acquired by SFAC 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,
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(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 indenture.
Merger, Consolidation or Sale of Assets
The indenture provides that SFAC New Holdings may not consolidate or merge
with or into (whether or not SFAC 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) SFAC New Holdings is the surviving corporation or the entity or the
person formed by or surviving any such consolidation or merger (if
other than SFAC 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 SFAC 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 SFAC
New Holdings pursuant to a supplemental indenture, in a form
reasonably satisfactory to the trustee, under the New 13% Debentures
and the indenture,
(iii) immediately after such transaction, no Default or Event of Default
exists and
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(iv) SFAC 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 SFAC 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 indenture provides that SFAC 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
(a) such Affiliate Transaction is on terms that are no less favorable to SFAC
New Holdings or the relevant Subsidiary than those that would have been
obtained in a comparable transaction by SFAC New Holdings or such
Subsidiary with an unrelated person and
(b) SFAC New Holdings delivers to the trustee
(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 SFAC New
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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 SFAC 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 SFAC New Holdings and/or its Wholly Owned
Subsidiaries,
(C) transactions permitted by the provisions of the indenture described above
under the covenant "Restricted Payments,"
(D) management fees payable pursuant to management agreements as in effect on
the date of the indenture,
(E) transactions permitted by the "Accounts Receivable Subsidiary" covenant
described below and
(F) transactions between SFAC New Holdings or any of its Subsidiaries on the
one hand, and DLJ or any of its Affiliates ("DLJSC") on the other hand,
involving the provision of financial, consulting or underwriting services
by DLJSC, as the case may be, provided that the fees payable to DLJSC do
not exceed the usual and customary fees of DLJSC for similar services, in
each case, shall not be deemed Affiliate Transactions.
Accounts Receivable Subsidiary
The indenture provides that SFAC 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 SFAC New Holdings
and its Subsidiaries (provided that the aggregate amount of
Investments pursuant to this clause (i)(A) made since the date
of the indenture (including any such Investments made
concurrently with the consummation of the private exchange
transactions we completed on June 11, 1999) 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
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Indebtedness constituting such Investments by the Accounts
Receivable Subsidiary since the date of this indenture) or
(B) payments required in connection with the termination of
all arrangements relating to the sale of 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 (determined upon collection of such accounts receivable and on an
aggregate basis for the Company and all of its Subsidiaries) not materially less
than that which would be obtained in an arm's length transaction (taking into
account the distributions on the Capital Stock of the Accounts Receivable
Subsidiary made pursuant to clause (g) upon collection of such accounts
receivable) 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 indenture (and not written off or
required to be written off in accordance with the normal business practice of
the Accounts Receivable Subsidiary);
(c) may not permit the Accounts Receivable Subsidiary to sell any accounts
receivable purchased from SFAC 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 and covenants and other agreements of SFAC New Holdings or any of its
Subsidiaries with respect to the accounts receivable sold by SFAC 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 indenture or in any replacement or substitute
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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
indenture; provided that neither SFAC 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 SFAC 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 held by SFC New Holdings, 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
SFAC New Holdings and its Subsidiaries; and
(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.
Reports
Whether or not required by rules and regulations of the SEC, so long as
any New 13% Debentures are outstanding, SFAC New Holdings will furnish to the
holders of New 13% Debentures 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 SFAC 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
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thereon by SFAC New Holdings' certified independent accountants. In addition,
SFAC 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
Commission, SFAC New Holdings will file a copy of all such information with the
Commission for public availability (so long as the Commission will accept such
filings) and make such information available to prospective purchasers who
request it in writing. SFAC New Holdings will also furnish to holders of the New
13% Debentures and prospective purchasers of the New 13% Debentures designated
by holders of New 13% Debentures that are Transfer Restricted Securities, upon
their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act until such time as SFAC New Holdings either
exchanges the New 13% Debentures for registered New 13% Debentures or has
registered the New 13% Debentures for resale under the Securities Act.
Security
The New 13% Debentures are secured by a pledge of all of the issued and
outstanding Capital Stock (other than the Permitted Preferred Stock) of SFC New
Holdings and intercompany notes owing to SFAC New Holdings (if any).
SFAC New Holdings has entered into a pledge agreement (the "Pledge
Agreement") providing for the pledge by SFAC New Holdings to United States Trust
Company of New York, as collateral agent (in such capacity, the "Collateral
Agent"), for the benefit of the holders of the New 13% Debentures, of all of the
issued and outstanding Capital Stock of SFC New Holdings (other than the
Permitted Preferred Stock) and all notes representing intercompany indebtedness
owing to SFAC New Holdings that may from time to time be outstanding
(collectively, the "Collateral"). Such pledge secures the payment and
performance when due of all of the Obligations of SFAC New Holdings under the
indenture and the New 13% Debentures as provided in the Pledge Agreement.
So long as no Event of Default shall have occurred and be continuing, and
subject to certain terms and conditions in the indenture and the Pledge
Agreement, SFAC New Holdings will be entitled to receive all cash dividends,
interest and other payments made upon or with respect to the Collateral pledged
by them and to exercise any voting and other consensual rights pertaining to the
Collateral. Upon the occurrence and during the continuance of an Event of
Default,
(a) all rights of SFAC New Holdings to exercise such voting and other
consensual rights shall cease, and all such rights shall become vested in
the Collateral Agent, which to the extent permitted by law, shall have the
sole right to exercise such voting and other consensual rights,
(b) all rights of SFAC New Holdings to receive all cash dividends,
interest and other payments upon or with respect to the Collateral shall
cease and such cash dividends, interest and other payments shall be paid
to the Collateral Agent and
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(c) the Collateral Agent may sell the Collateral or any part thereof in
accordance with the terms of the Pledge Agreement. All funds distributed
under the Pledge Agreement and received by the Collateral Agent for the
benefit of the holders of the New 13% Debenture shall be distributed by
the Collateral Agent in accordance with the provisions of the indenture.
Under the terms of the Pledge Agreement, upon an Event of Default, the
Collateral Agent will determine the circumstances and manner in which the
Collateral shall be disposed of, including, but not limited to, the
determination of whether to sell all or part of the Collateral. Moreover, upon
the full and final payment and performance of all obligations of SFAC New
Holdings under the indenture and the New 13% Debentures, the Pledge Agreement
will terminate and the pledged collateral will be released.
Events of Default and Remedies
The indenture, provides 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 New 13% Debentures;
(ii) default in payment when due, of principal of, or premium, if any, on the
New 13% Debentures when the same becomes due and payable at maturity, upon
redemption (including in connection with an offer to purchase) or
otherwise;
(iii) failure by SFAC New Holdings to comply with the provisions described above
under the captions "Asset Sale" or "Merger, Consolidation or Sale of
Assets," or failure by SFAC 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 SFAC New Holdings for 60 days after notice to SFAC New Holdings
by the trustee or the holders of at least 25% in principal amount of the
New 13% Debentures then outstanding to comply with any other agreements in
the indenture or the New 13% Debentures;
(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 SFAC New Holdings or any of its Subsidiaries (or the
payment of which is guaranteed by SFAC New Holdings or any of its
Subsidiaries), whether such Indebtedness or guarantee now exists, or is
created after the date of the indenture, which default
(a) is caused by a failure to pay at final maturity principal of such
Indebtedness (a "Final Payment Default") or
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(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 Senior Notes or the
Subordinated Notes;
(vi) failure by SFAC New Holdings, any of its Significant Subsidiaries or any
group of Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary, to pay final 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;
(vii) certain events of bankruptcy or insolvency with respect to SFAC New
Holdings, any of its Significant Subsidiaries or any group of Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary; and
(viii) SFAC New Holdings breaches certain covenants in the Pledge Agreement or
the Pledge Agreement is held in any judicial proceeding to be
unenforceable or invalid or ceases for any reason to be in full force and
effect.
If any Event of Default occurs and is continuing, the trustee or the
holders of at least 25% in principal amount of the then outstanding New 13%
Debentures may declare all the New 13% Debentures to be due and payable
immediately. Upon such declaration, the Accreted Value of (if prior to June 15,
2003) or the principal of and accrued interest on (if on or after June 15, 2003)
all New 13% Debentures shall 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 SFAC New Holdings, any Significant
Subsidiary or any group of Subsidiaries that, taken as a whole, would constitute
a Significant Subsidiary, all outstanding New 13% Debentures will become due and
payable without further action or notice. Holders of the New 13% Debentures may
not enforce the indenture or the New 13% Debentures except as provided in the
indenture. Subject to certain limitations, holders of a majority in principal
amount of the then outstanding New 13% Debentures may direct the
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trustee in its exercise of any trust or power. The trustee may withhold from
holders of the New 13% Debentures notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
The holders of not less than a majority in aggregate principal amount of
the New 13% Debentures then outstanding by notice to trustee may on behalf of
the holders of all of the New 13% Debentures waive any existing Default or Event
of Default and its consequences under the 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, the New 13%
Debentures.
SFAC New Holdings is required to deliver to the trustee annually a
statement regarding Compliance with the indenture, and SFAC New Holdings is
required upon becoming aware of any Default or Event of Default, to deliver to
the trustee a statement specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No past, present or future director, officer, employee, incorporator or
stockholder of SFAC New Holdings, as such, shall have any liability for any
obligations of SFAC New Holdings under the New 13% Debentures or the indenture
or for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each holder of New 13% Debentures by accepting a New 13%
Debenture waives and releases all such liability. The waiver and release are
part of the consideration for issuance of the New 13% Debentures. 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 be against public policy.
Legal Defeasance and Covenant Defeasance
SFAC New Holdings may, at its option and at any time elect to have its
obligations discharged with respect to the outstanding New 13% Debentures
("Legal Defeasance"). Legal defeasance means that SFAC New Holdings will be
deemed to have paid and discharged the entire indebtedness represented by the
outstanding New 13% Debentures, except for
(i) the rights of holders of the New 13% Debentures to receive payments,
solely from the trust fund described below, in respect of the principal
of, premium, if any, and interest on the New 13% Debentures when such
payments are due,
(ii) SFAC New Holdings's obligations with respect to the New 13% Debentures
concerning issuing temporary New 13% Debentures, registration of New 13%
Debentures, mutilated, destroyed, lost or stolen New 13% Debentures and
the maintenance of an office or agency for payment in money for security
payments held in trust,
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(iii) the rights, powers, trust, and duties and immunities of the trustee, and
SFAC New Holdings's obligations in connection therewith and
(iv) the Legal Defeasance provisions of the indenture.
In addition, SFAC New Holdings may, at its option and at any time, elect
to have the obligations of SFAC New Holdings released with respect to certain
covenants that are described in the indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the New 13% Debentures. 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 New 13% Debentures.
In order to exercise either Legal Defeasance or Covenant Defeasance,
(i) SFAC New Holdings must irrevocably deposit with the trustee or paying
agent, in trust, for the benefit of the holders of the New 13% Debentures,
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 the New 13% Debentures 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 New 13% Debentures;
(ii) in the case of Legal Defeasance, SFAC New Holdings will have delivered to
the trustee an opinion of counsel in the United States reasonably accepted
to the trustee confirming that
(A) SFAC New Holdings has received from, or there has been published by,
the IRS a ruling or
(B) since the date of the indenture, there has been a change in the
applicable federal income tax law, in either case, to the effect
that, and based thereon such opinion of counsel shall confirm that,
the holders of such outstanding New 13% Debenture 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, SFAC New Holdings shall have delivered
to the trustee an opinion of counsel in the United States reasonably
acceptable to the trustee confirming that the holders of such outstanding
New 13% Debentures 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
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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 any of the Note
Indentures, the Term Loan Agreement, the Revolving Credit Agreement or
any other material agreement or instrument to which SFAC New Holdings is
a party or by which SFAC New Holdings is bound;
(vi) SFAC New Holdings shall have delivered to the trustee an opinion of
counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;
(vii) SFAC New Holdings shall have delivered to the trustee an Officers'
Certificate stating that the deposit was not made by SFAC New Holdings
with the intent of preferring the holders of the New 13% Debentures over
the other creditors of SFAC New Holdings or with the intent of defeating,
hindering, delaying or defrauding creditors of SFAC New Holdings or
others; and
(viii) SFAC New Holdings shall have delivered to the 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 New 13% Debentures in accordance with
the indenture. The registrar and the trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and SFAC New
Holdings may require a holder to pay any taxes and fees required by law or
permitted by the indenture. SFAC New Holdings is not required to transfer or
exchange any New 13% Debenture selected for redemption. Also, SFAC New Holdings
is not required to transfer or exchange any New 13% Debenture for a period of 15
days before a selection of the New 13% Debentures is to be redeemed.
The registered holder of a New 13% Debenture will be treated as the owner
of it for all purposes.
Amendment, Supplement and Waiver
Except as provided in the next succeeding paragraphs, the indenture and
the New 13% Debentures may be amended or supplemented with the consent of the
holders of at least a
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majority in principal amount of the New 13% Debentures then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for the New 13% Debentures), and any existing default (other than a default or
Event of Default in the payment of principal or premium, if any, or interest on
the New 13% Debentures, except a payment default resulting from an acceleration
that has been rescinded) or compliance with any provision of the indenture or
the New 13% Debentures may be waived with the consent of the holders of a
majority in principal amount of the then outstanding New 13% Debentures
(including consents obtained in connection with a tender offer or exchange offer
for the New 13% Debentures).
Without the consent of each holder affected, an amendment or waiver may
not (with respect to any New 13% Debenture held by a non-consenting holder of
New 13% Debentures)
(i) reduce the principal amount of New 13% Debentures whose holders must
consent to an amendment, supplement or waiver,
(ii) reduce the principal of or change the fixed maturity of any New 13%
Debenture or alter the provisions with respect to the redemption of the
New 13% Debentures,
(iii) reduce the rate of or change the time for payment of interest on any New
13% Debenture,
(iv) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the New 13% Debentures (except a
rescission of acceleration of the New 13% Debentures by the holders of at
least a majority in aggregate principal amount thereof and a waiver of
the payment default that resulted from such acceleration),
(v) make any New 13% Debenture payable in money other than that stated in the
New 13% Debentures,
(vi) make any change in the provisions of the indenture relating to waivers of
past Defaults or the rights of holders of New 13% Debentures to receive
payments of principal of or interest on the New 13% Debentures,
(vii) waive a redemption payment with respect to any New 13% Debenture,
(viii) make any change in the foregoing amendment and waiver provisions, or
(ix) make any change to the collateral and security provisions in the
indenture that adversely affects any holder.
Without the consent of at least 75% in principal amount of the New 13%
Debentures then outstanding (including consents obtained in connection with a
tender offer or exchange offer for the New 13% Debentures), no waiver or
amendment to the indenture may make any change in the provisions described above
under the caption "Change of Control" that adversely affects the rights of any
holder of New 13% Debentures.
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Notwithstanding the foregoing, without the consent of any holder of New
13% Debentures, SFAC New Holdings and the trustee may amend or supplement the
indenture, or the New 13% Debentures to cure any ambiguity, defect or
inconsistency, to provide for uncertificated New 13% Debentures in addition to
or in place of certificated New 13% Debentures, to provide for the assumption of
SFAC New Holdings's obligations to holders of the New 13% Debentures 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 New 13% Debentures or that
does not adversely affect the legal rights under the indenture of any such
holder, or to comply with requirements of the Commission in order to effect or
maintain the qualification of the indenture under the Trust Indenture Act.
Concerning the Trustee
The indenture contains certain limitations on the rights of the trustee,
should the trustee become a creditor of SFAC 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 trustee is permitted to engage
in other transactions; however, if the 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 New
13% Debentures have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default
shall occur (which shall not be cured), the trustee will be required, in the
exercise of its power, to use the degree of care of a prudent and reasonable
person in the conduct of its own affairs. Subject to such provisions, the
trustee will be under no obligation to exercise any of its rights or powers
under the indenture at the request of any holder of New 13% Debentures, unless
such holder shall have offered to the trustee security and indemnity
satisfactory to it against any loss, liability or expense.
Certain Definitions
Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Accounts Receivable Agreements" means
(i) 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
Certificateholders,
(ii) 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
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Specialty Foods, as Master Servicer, and The Chase Manhattan Bank, as
trustee on behalf of the Certificateholders,
(iii) 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,
(iv) 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
(v) 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 in 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 SFAC 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 made by the Seller of such account receivable so the
face amount thereof.
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"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.
"Accreted Value" means
(i) with respect to the New 13% Debentures, the sum of
(a) the stated principal amount of each New 13% Debenture at the
Original Issue Date plus
(b) the interest accrued (and deferred) at a rate of 13% per annum on
such principal amount through June 15, 2004, compounded
semi-annually on each June 15 and December 15, from the date of
issuance of the New 13% Debentures through the date of determination
and
(ii) with respect to the SFAC 13% Debentures, "Accreted Value" as defined in
the SFAC indenture
"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
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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
SFAC 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.
"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 than six months from the date of acquisition,
(iii) certificates of deposit and Eurodollar time deposits with maturities of
six months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each
case, with any lender party to the 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
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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.
"Certificate of Incorporation means the certificate of incorporation of
SFAC New Holdings as filed with the Secretary of State of the State of Delaware.
"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 Assets 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
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 deducted 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 (other than the Accounts Receivable
Subsidiary) 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,
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(ii) the Net Income of any Subsidiary of the referent person (or the Accounts
Receivable Subsidiary) shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that
Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval (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 the
Accounts Receivable 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 indenture 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 New 13% Debentures, 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
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the holder thereof, in whole or in part, on or prior to the date on which the
New 13% Debentures mature.
"85% Owned Subsidiary" of a person means any Subsidiary of such person at
least 85% of the outstanding Capital Stock (other than, in the case of SFC New
Holdings, Permitted Preferred 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 SFAC New Holdings and its
Subsidiaries (other than under the Term Loan Agreement, the Revolving Credit
Agreement and the Note Indentures) in existence on the date of the indenture,
until such amounts are repaid.
"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 SFAC 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
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 SFAC New Holdings for any period commencing prior to the date
of 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), excluding, in the case of SFAC
New Holdings, the interest expense of the Accounts Receivable Subsidiary
with respect to Non-Recourse Indebtedness, plus
(b) the interest expense of any other person for such period with respect to
Indebtedness that is guaranteed by the referent person, plus
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(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 indenture.
"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
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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 financial 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 SFAC New
Holdings or any Subsidiary of SFAC New Holdings as consideration for such Asset
Sale and are
(a) traded on the New York Stock Exchange, the American Stock Exchange
or the National Association of Securities Dealers Automated
Quotation National Market System and
(b) 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 SFAC 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 SFAC New Holdings. For 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
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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 SFAC 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 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
(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
(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.
"Original Issue Date" means June 11, 1999.
"Permitted Investments" means
(a) any Investments in SFAC New Holdings or in an 85% Owned Subsidiary
of SFAC New Holdings that is engaged in the same or a similar or
related line of business as SFAC New Holdings or any of its
Subsidiaries were engaged in on the date of the indenture;
(b) any Investments in Cash Equivalents;
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(c) Investments by SFAC New Holdings or any Subsidiary of SFAC New
Holdings in a person that is engaged in the same or a similar or
related line of business as SFAC New Holdings or any of its
Subsidiaries were engaged in on the date of the indenture, if as a
result of such Investment
(i) such person becomes an 85% Owned Subsidiary of SFAC 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, SFAC New Holdings or an 85% Owned
Subsidiary of SFAC 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 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 securing Indebtedness of Subsidiaries of SFAC New Holdings
permitted under the "Incurrence of Indebtedness and Issuance of
Preferred Stock" covenant;
(b) Liens in favor of SFAC New Holdings and its Wholly Owned
Subsidiaries;
(c) Liens on property of a person existing at the time such person is
merged into or consolidated with SFAC New Holdings or any Subsidiary
of SFAC New Holdings; provided that such Liens were in existence
prior to the contemplation of such merger or consolidation;
(d) Liens on property existing at the time of acquisition thereof by
SFAC New Holdings or any Subsidiary of SFAC New Holdings; provided,
that such Liens were in existence prior to the contemplation of such
acquisition;
(e) Liens existing on the date of the indenture and renewals, extensions
and replacements thereof; provided, that such renewals, extensions
or replacements shall not apply to any property or assets not
previously subject to such Liens or increase the principal amount of
Obligations secured thereby;
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(f) 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;
(g) carriers', warehousemen's, mechanics', materialmen's, repairmen's,
landlords' or other like Liens arising in the ordinary course of
business;
(h) 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;
(i) 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;
(j) 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 SFAC New Holdings and its
Subsidiaries;
(k) 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;
(l) licenses for the use of intellectual property rights or like
intangible assets; and
(m) Liens incurred in the ordinary course of business of SFAC New
Holdings or any Subsidiary of SFAC 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).
"Permitted Preferred Stock" means preferred stock of SFC New Holdings that
(i) ranks senior to the Common Stock of SFC New Holdings in respect of
dividends and distributions in a liquidation of SFC New Holdings;
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(ii) does not mature or is not mandatorily redeemable, pursuant to a
sinking fund or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, prior to June 15, 2010;
(iii) provides that dividends may be paid, at the option of SFC New
Holdings, by the issuance of additional shares of Permitted
Preferred Stock, or if permitted under the terms of SFC New
Holdings' outstanding indebtedness, in cash after June 15, 2005; and
(iv) is issued by SFC New Holdings in compliance with the provisions of
the indenture described under "Rights Offering."
"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 than 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 SFAC New Holdings
and the holders of
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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.
"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.
"SFAC indenture" means the indenture dated as of August 16, 1993, by and
between Specialty Foods Acquisition Corporation and United States Trust Company
of New York, as trustee, pursuant to which Specialty Foods Acquisition
Corporation issued its 13% Secured Discount Debentures due 2005.
"SFC New Holdings" means SFC New Holdings, Inc., a Delaware corporation
and its subsidiaries.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulations S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"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 SFAC New Holdings or of any of its Subsidiaries.
"Tax Sharing Agreement" means the Tax Sharing Agreement, as amended, dated
as of August 16, 1993, between Specialty Foods Acquisition Corporation and
Specialty Foods, as amended to include SFAC New Holdings and SFC New Holdings as
of the date of the indenture.
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"Term Loan Agreement" means 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.
"Weighted Average Life of 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 (other than, in the case of SFC New
Holdings, Permitted Preferred 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 New 13% Debenture to be issued to a holder exchanging an Old 13%
Debenture 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 New 13% Debentures of that series 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 Old 13% Debentures holds such security in certificated
form, New 13% Debentures issued to such holder will be in physical form.
Following initial issuance, New 13% Debentures in physical form will be issued
to a holder of New 13% Debentures upon request to SFAC New Holdings and the
applicable trustee subject to compliance with the
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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 SFAC New Holdings within 90 days, SFAC
New Holdings will issue certificated New 13% Debentures 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 on, and transfer thereof will be effected only through,
records maintained by the Depository and its participants.
The Depository has advised SFAC 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 SFAC New Holdings, the Depository will
credit the accounts of Direct Participants designated by SFAC New Holdings with
the principal amounts of the New 13% Debentures 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 indenture.
Neither SFAC 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
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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 New 13% Debentures 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 New 13% Debentures, SFAC New Holdings and the trustee
will treat the persons in whose names the New 13% Debentures are registered as
the owners of such New 13% Debentures for the purpose of receiving payment of
principal and interest on such New 13% Debentures and for all other purposes
whatsoever. Therefore, neither SFAC New Holdings, the trustee nor any paying
agent has any direct responsibility or liability for the payment of principal or
interest on the New 13% Debentures to owners of beneficial interests in the
global securities. The Depository has advised SFAC 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 SFAC 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
SFAC 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 SFAC New Holdings, all payments of principal and interest on
the global securities will be made by SFAC New Holdings in immediately available
funds.
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DESCRIPTION OF THE INITIAL 13% DEBENTURES
The Old 13% Debentures are comprised of: (1) the initial 13% Debentures
that we issued and sold in connection with the exchange offers that were
completed on June 11, 1999, and (2) the SFAC 13% Debentures that were the
subject of the June 11, 1999 private exchange transactions, but which did not
participate in those exchange offers. The form and terms of our initial 13%
Debentures are the same as the form and terms of the New 13% Debentures except
that (a) our initial 13% Debentures are not registered under the Securities Act
and bear legends restricting their transfer and (b) holders of our initial 13%
Debentures 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 New 13% Debentures" and
"The Exchange Offers--Termination of Certain Rights."
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DESCRIPTION OF THE SFAC 13% DEBENTURES
General
The following summary of certain provisions of the SFAC indenture does not
purport to be complete and is qualified in its entirety by reference to the SFAC
indenture, as amended by the first supplemental indenture 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 SFAC indentures, as
amended. The definitions of certain terms used in the following summary are set
forth under "Certain Definitions."
Effective Subordination of the SFAC 13% Debentures
The SFAC 13% Debentures rank pari passu in right of payment with all
senior borrowings of Specialty Foods Acquisition Corporation and senior in right
of payment to all subordinated indebtedness of Specialty Foods Acquisition
Corporation In addition, the SFAC 13% Debentures are secured by a first priority
lien and security interest in all of the issued and outstanding Capital Stock
and intercompany notes, if any, owing to Specialty Foods Acquisition Corporation
of Specialty Foods. However, the operations of Specialty Foods Acquisition
Corporation are conducted through its Subsidiaries and, therefore, Specialty
Foods Acquisition Corporation is dependent upon the cash flow of its
Subsidiaries to meet its obligations, including its obligations under the SFAC
13% Debentures and the SFAC indenture. The SFAC 13% Debentures are effectively
subordinated to all indebtedness and other liabilities of Specialty Foods
Acquisition Corporation's Subsidiaries.
Principal, Maturity and Interest
The SFAC 13% Debentures are limited in aggregate principal amount to
$319,250,000 and mature on August 15, 2005. After August 15, 1999, interest will
accrue at the rate of 13% 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 SFAC 13% Debentures accrues from the most recent date to which interest
has been paid. Interest is computed on the basis of a 360-day year comprised of
twelve 30-day months. The SFAC 13% Debentures are payable as to principal,
interest and Additional Payments at the office or agency of Specialty Foods
Acquisition Corporation maintained for such purpose within the City and State of
New York or, at the option of Specialty Foods Acquisition Corporation, payment
of interest may be made by check mailed to the holders of the SFAC 13%
Debentures at their respective addresses set forth in the register of holders of
SFAC 13% Debentures. Until otherwise designated by Specialty Foods Acquisition
Corporation, Specialty Foods Acquisition Corporation's office or agency in New
York will be the office of the trustee maintained for such purpose. The SFAC 13%
Debentures are issued in registered form, without coupons, and in denominations
of $1,000 and integral multiples thereof.
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Optional Redemption
After August 15, 1999, the SFAC 13% Debentures will be subject to
redemption at the option of Specialty Foods Acquisition Corporation, in whole or
in part, upon not less than 30 nor more than 60 days' notice to the holders of
SFAC 13% Debentures, 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:
Year Percentage
1999.................................................... 104.33%
2000.................................................... 102.889%
2001.................................................... 101.444%
2002 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 SFAC 13%
Debentures will have the right to require Specialty Foods Acquisition
Corporation to repurchase all or any part (equal to $1,000 or an integral
multiple thereof) of such holder's SFAC 13% Debentures 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 60
days following any Change of Control, Specialty Foods Acquisition Corporation
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 SFAC 13%
Debentures tendered will be accepted for payment;
(2) the purchase price and the purchase date, which shall be not later
than 30 Business Days from the date such notice is mailed (the
"Change of Control Payment Date");
(3) that any SFAC 13% Debenture not tendered will continue to accrete or
accrue interest;
(4) that, unless Specialty Foods Acquisition Corporation defaults in the
payment of the Change of Control Payment, all SFAC 13% Debentures
accepted for payment pursuant to the Change of Control Offer will
cease to accrete or accrue interest after the Change of Control
Payment Date;
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(5) that holders electing to have any SFAC 13% Debentures purchased
pursuant to a Change of Control Offer will be required to surrender
the SFAC 13% Debentures, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the SFAC 13% Debentures 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 SFAC 13% Debentures
delivered for purchase, and a statement that such holder is
withdrawing his election to have the SFAC 13% Debentures purchased;
and
(7) that holders whose SFAC 13% Debentures are being purchased only in
part will be issued SFAC 13% Debentures equal in principal amount to
the unpurchased portion of the SFAC 13% Debentures surrendered,
which unpurchased portion must be equal to $1,000 in principal
amount or an integral portion thereof. Specialty Foods Acquisition
Corporation will comply with the requirements of Rule 14e-1 under
the Securities Exchange Act of 1934, as amended (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 SFAC 13% Debentures in connection with a Change of
Control.
On the Change of Control Payment Date, Specialty Foods Acquisition
Corporation will, to the extent lawful, (1) accept for payment SFAC 13%
Debentures 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 SFAC 13% Debentures or portions thereof so tendered
and (3) deliver or cause to be delivered to the trustee the SFAC 13% Debentures
so accepted together with an Officers' Certificate stating the SFAC 13%
Debentures or portions thereof tendered to Specialty Foods Acquisition
Corporation. The paying agent will promptly mail to each holder of SFAC 13%
Debentures so accepted payment in an amount equal to the purchase price for the
SFAC 13% Debentures, and the trustee shall promptly authenticate and mail to
each holder a SFAC 13% Debenture equal in principal amount to any unpurchased
portion of the SFAC 13% Debentures surrendered by such holder, if any; provided
that each such SFAC 13% Debenture will be in a principal amount of $1,000 or an
integral multiple thereof. Specialty Foods Acquisition Corporation 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 SFAC 13% Debentures are to be redeemed at any
time, selection of SFAC 13% Debentures for redemption will be made by the
trustee in compliance with the
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requirements of the principal national securities exchange, if any, on which the
SFAC 13% Debentures are listed, or, if the SFAC 13% Debentures are not so
listed, on a pro rata basis, by lot or by such method as the trustee shall deem
fair and appropriate; provided that no SFAC 13% Debenture 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 SFAC 13% Debentures to be redeemed at its registered address. If any
SFAC 13% Debenture is to be redeemed in part only, the notice of redemption that
relates to such SFAC 13% Debenture shall state the portion of the principal
amount thereof to be redeemed. A SFAC 13% Debenture in principal amount equal to
the unredeemed portion thereof will be issued in the name of the holder thereof
upon cancellation of the original SFAC 13% Debenture. On and after the
redemption date, the SFAC 13% Debentures or portions of them called for
redemption will cease to accrete or accrue interest.
Security
The SFAC 13% Debentures are secured by a pledge of all of the issued and
outstanding Capital Stock and intercompany notes owing to Specialty Foods
Acquisition Corporation (if any) of Specialty Foods.
Specialty Foods Acquisition Corporation has entered into a pledge
agreement (the "Pledge Agreement") providing for the pledge by Specialty Foods
Acquisition Corporation to United States Trust Company of New York, as
collateral agent (in such capacity, the "Collateral Agent"), for the benefit of
the Holders of the SFAC 13% Debentures, of all of the issued and outstanding
Capital Stock of Specialty Foods and all notes representing intercompany
indebtedness owing by Specialty Foods to Specialty Foods Acquisition Corporation
that may from time to time be outstanding (collectively, the "Collateral"). Such
pledge secures the payment and performance when due of all of the Obligations of
Specialty Foods Acquisition Corporation under the SFAC indenture and the SFAC
13% Debentures as provided in the Pledge Agreement.
So long as no Event of Default shall have occurred and be continuing, and
subject to certain terms and conditions in the SFAC indenture and the Pledge
Agreement, Specialty Foods Acquisition Corporation will be entitled to receive
all cash dividends, interest and other payments made upon or with respect to the
Collateral pledged by them and to exercise any voting and other consensual
rights pertaining to the Collateral. Upon the occurrence and during the
continuance of an Event of Default, (a) all rights of Specialty Foods
Acquisition Corporation to exercise such voting and other consensual rights
shall cease, and all such rights shall become vested in the Collateral Agent,
which to the extent permitted by law, shall have the sole right to exercise such
voting and other consensual rights, (b) all rights of Holding to receive all
cash dividends, interest and other payments shall upon or with respect to the
Collateral shall cease and such cash dividends, interest and other payments
shall be paid to the Collateral Agent and (c) the Collateral Agent may sell the
Collateral or any part thereof in accordance with the terms of the Pledge
Agreement. All funds distributed under the Pledge Agreement and received by the
Collateral Agent for the benefit of the holders of the SFAC
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13% Debenture shall be distributed by the Collateral Agent in accordance with
the provisions of the SFAC indenture.
Under the terms of the Pledged Agreement, upon an Event of Default, the
Collateral Agent will determine the circumstances and manner in which the
Collateral shall be disposed of, including, but not limited but not limited to,
the determination of whether to sell all or part of the Collateral. Moreover,
upon the full and final payment and performance of all obligations of Specialty
Foods Acquisition Corporation under the SFAC indenture and the SFAC 13%
Debentures, the Pledge Agreement will terminate and the pledged collateral will
be released.
Events of Default and Remedies
The SFAC 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 SFAC
13% Debentures;
(ii) default in payment when due, of principal of, or premium, if any, on
the SFAC 13% Debentures 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 Acquisition Corporation for 60 days after
notice to Specialty Foods Acquisition Corporation by the trustee or
the holders of at least 25% in principal amount of the SFAC 13%
Debentures then outstanding to comply with any other agreements in
the SFAC indenture or the SFAC 13% Debentures;
(iv) certain events of bankruptcy or insolvency with respect to Specialty
Foods Acquisition Corporation, any of its Significant Subsidiaries
or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary; and
(v) Specialty Foods Acquisition Corporation breaches certain covenants
in the Pledge Agreement or the Pledge Agreement is held in any
judicial proceeding to be unenforceable or invalid or ceases for any
reason to be in full force and effect.
If any Event of Default occurs and is continuing, the trustee or the
holders of at least 25% in principal annum of the then outstanding SFAC 13%
Debentures may declare all the SFAC 13% Debentures to be due and payable
immediately. Upon such declaration, the Accreted Value of (if prior to August
15, 1999) or the principal of and accrued interest on (if on or after August 15,
1999) all SFAC 13% Debentures shall 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
Acquisition Corporation, any
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Significant Subsidiary or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary all outstanding SFAC 13% Debenture
will become due and payable without further action or notice. Holders of the
SFAC 13% Debentures may not enforce the SFAC indenture or the SFAC 13%
Debentures except as provided in the SFAC indenture. Subject to certain
limitations, holders of a majority in principal amount of the then outstanding
SFAC 13% Debentures may direct the trustee in its exercise of any trust or
power. The trustee may withhold from holders of the SFAC 13% Debentures notice
of any continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
In the case of an Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of Specialty Foods
Acquisition Corporation with the intention of avoiding payment of the premium,
if any, that Specialty Foods Acquisition Corporation would have had to pay if
Specialty Foods Acquisition Corporation then had elected to redeem the SFAC 13%
Debentures pursuant to the optional redemption provisions of the SFAC 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 August 15,
1999 by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of Specialty Foods Acquisition Corporation with the intention of avoiding
the prohibition on redemption of the SFAC 13% Debentures prior to such date,
then the premium specified in the SFAC indenture shall also become immediately
due and payable to the extent permitted by law.
The holders of not less than a majority in aggregate principal amount of
the SFAC 13% Debentures then outstanding by notice to trustee may on behalf of
the holders of all of the SFAC 13% Debentures waive any existing Default or
Event of Default and its consequences under the SFAC 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, the SFAC
13% Debentures.
Specialty Foods Acquisition Corporation is required to deliver to the
trustee annually a statement regarding Compliance with the SFAC indenture, and
Specialty Foods Acquisition Corporation is required upon becoming aware of any
Default or Event of Default, to deliver to the trustee a statement specifying
such Default or Event of Default.
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No Personal Liability of Directors, Officers, Employees and Stockholders
No post, present or future director, officer, employee, incorporator or
stockholder of Specialty Foods Acquisition Corporation, as such, shall have any
liability for any obligations of Specialty Foods Acquisition Corporation under
the SFAC 13% Debentures or the SFAC indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each holder of
SFAC 13% Debentures by accepting a SFAC 13% Debenture waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the SFAC 13% Debentures. 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 be against public policy.
Legal Defeasance and Covenant Defeasance
Specialty Foods Acquisition Corporation may, at its option and at any time
elect to have its obligations discharged with respect to the outstanding SFAC
13% Debentures ("Legal Defeasance"). Legal defeasance means that Specialty Foods
Acquisition Corporation will be deemed to have paid and discharged the entire
indebtedness represented by the outstanding SFAC 13% Debentures, except for
(i) the rights of holders of the SFAC 13% Debentures to receive
payments, solely from the trust fund described below, in respect of
the principal of, premium, if any, and interest on the SFAC 13%
Debentures when such payments are due,
(ii) Specialty Foods Acquisition Corporation's obligations with respect
to the SFAC 13% Debentures concerning issuing temporary SFAC 13%
Debentures, registration of SFAC 13% Debentures, mutilated,
destroyed, lost or stolen SFAC 13% Debentures and the maintenance of
an office or agency for payment in money for security payments held
in trust,
(iii) the rights, powers, trust, and duties and immunities of the trustee,
and Specialty Foods Acquisition Corporation's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the
SFAC indenture.
In addition, Specialty Foods Acquisition Corporation may, at its option and at
any time, elect to have the obligations of Specialty Foods Acquisition
Corporation released with respect to certain covenants that are described in the
SFAC indenture ("Covenant Defeasance") and thereafter any omission to comply
with such obligations shall not constitute a Default or Event of Default with
respect to the SFAC 13% Debentures. 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 SFAC 13%
Debentures.
In order to exercise either Legal Defeasance or Covenant Defeasance,
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(i) Specialty Foods Acquisition Corporation must irrevocably deposit
with the trustee or paying agent, in trust, for the benefit of the
holders of the SFAC 13% Debentures, 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 the SFAC 13%
Debentures 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 SFAC
13% Debentures;
(ii) in the case of Legal Defeasance, Specialty Foods Acquisition
Corporation will have delivered to the trustee an opinion of counsel
in the United States reasonably accepted to the trustee confirming
that (A) Specialty Foods Acquisition Corporation has received from,
or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of the SFAC indenture, there has been a
change in the applicable federal income tax law, in either case, to
the effect that, and based thereon such opinion of counsel shall
confirm that, the holders of such outstanding SFAC 13% Debenture
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 Acquisition
Corporation shall have delivered to the trustee an opinion of
counsel in the United States reasonably acceptable to the trustee
confirming that the holders of such outstanding SFAC 13% Debentures
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 any of the
indentures, the Term Loan Agreement, the Revolving Credit Agreement
or any other material agreement or instrument to which Specialty
Foods Acquisition Corporation is a party or by which Specialty Foods
Acquisition Corporation is bound;
(vi) Specialty Foods Acquisition Corporation shall have delivered to the
trustee on opinion of counsel to the effect that after the 91st day
following the deposit, the
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trust funds will not be subject to the affect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;
(vii) Specialty Foods Acquisition Corporation shall have delivered to the
trustee an Officers' Certificate stating that the deposit was not
made by Specialty Foods Acquisition Corporation with the intent of
preferring the holders of the SFAC 13% Debentures over the other
creditors of Specialty Foods Acquisition Corporation or with the
intent of defeating, hindering, delaying or defrauding creditors of
Specialty Foods Acquisition Corporation or others; and
(viii) Specialty Foods Acquisition Corporation shall be delivered to the
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 SFAC 13% Debentures in accordance with
the SFAC indenture. The Registrar and the trustee may require a holder, among
other things, to furnish appropriate endorsements and transfer documents and
Specialty Foods Acquisition Corporation may require a holder to pay any taxes
and fees required by law or permitted by the SFAC indenture. Specialty Foods
Acquisition Corporation is not required to transfer or exchange any SFAC 13%
Debenture selected for redemption. Also, Specialty Foods Acquisition Corporation
is not required to transfer or exchange any SFAC 13% Debenture for a period of
15 days before a selection of the SFAC 13% Debentures to be redeemed.
The registered holder of a SFAC 13% Debenture will be treated as the owner
of it for all purposes.
Amendment, Supplement and Waiver
Except as provided In the next succeeding paragraphs, the SFAC indenture
and the SFAC 13% Debentures may be amended or supplemented with the consent of
the holders of at least a majority in principal amount of the SFAC 13%
Debentures then outstanding (including consents obtained in connection with a
tender offer or exchange offer for the SFAC 13% Debentures), and any existing
default or compliance with any provision of the SFAC indenture or the SFAC 13%
Debentures may be waived with the consent of the holders of a majority in
principal amount of the then outstanding SFAC 13% Debentures (including consents
obtained in connection with a tender offer or exchange offer for the SFAC 13%
Debentures).
Without the consent of each holder affected, an amendment or waiver may
not (with respect to any SFAC 13% Debenture held by a non-consenting holder of
SFAC 13% Debentures)
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(i) reduce the principal amount of SFAC 13% Debentures whose holders
must consent to an amendment, supplement or waiver,
(ii) reduce the principal of or change the fixed maturity of any SFAC 13%
Debenture or alter the provisions with respect to the redemption of
the SFAC 13% Debentures,
(iii) reduce the rate of or change the time for payment of interest on any
SFAC 13% Debenture,
(iv) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the SFAC 13% Debentures (except a
rescission of acceleration of the SFAC 13% Debentures by the holders
of at least a majority in aggregate principal amount thereof and a
waiver of the payment default that resulted from such acceleration),
(v) make any SFAC 13% Debenture payable in money other than that stated
in the SFAC 13% Debentures,
(vi) make any change in the provisions of the SFAC indenture relating to
waivers of past Defaults or the rights of holders of SFAC 13%
Debentures to receive payments of principal of or interest on the
SFAC 13% Debentures,
(vii) waive a redemption payment with respect to any SFAC 13% Debenture or
(vii) make any change in the foregoing amendment and waiver provisions.
Without the consent of at least 75% in principal amount of the SFAC 13%
Debentures then outstanding (including consents obtained in connection with a
tender offer or exchange offer for the SFAC 13% Debentures), no waiver or
amendment to the SFAC indenture may make any change in the provisions described
above under the caption "Change of Control" that adversely affects the rights of
any holder of SFAC 13% Debentures.
Notwithstanding the foregoing, without the consent of any holder of SFAC
13% Debentures, Specialty Foods Acquisition Corporation and the trustee may
amend or supplement the SFAC indenture, or the SFAC 13% Debentures to cure any
ambiguity, defect or inconsistency, to provide for uncertificated SFAC 13%
Debentures in addition to or in place of certificated SFAC 13% Debentures, to
provide for the assumption of Specialty Foods Acquisition Corporation's
obligations to holders of the SFAC 13% Debentures 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 SFAC 13% Debentures or that does not adversely
affect the legal rights under the SFAC indenture of any such holder, or to
comply with requirements of the Commission in order to effect or maintain the
qualification of the SFAC indenture under the Trust indenture Act.
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Concerning the Trustee
The indenture contains certain limitations on the rights of the trustee,
should the trustee become a creditor of Specialty Foods Acquisition Corporation,
to obtain payment of claims in certain cases, or to realize on certain property
received in respect of any such claim as security or otherwise. The trustee is
permitted to engage in other transactions; however, if the 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 SFAC
13% Debentures have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The SFAC indenture provides that in case an Event of Default
shall occur (which shall not be cured), the trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the trustee will be under no
obligation to exercise any of its rights or powers under the SFAC indenture at
the request of any holder of SFAC 13% Debentures, unless such holder shall have
offered to the trustee security and indemnity satisfactory to it against any
loss, liability or expense.
Certain Definitions
Set forth below are certain defined terms used in the SFAC indenture.
Reference is made to the SFAC indenture 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 the Receivable Transfer and
Servicing Agreement, dated as of August 16, 1993, among the Account Receivable
Subsidiary, Specialty Foods, the Servicers and the Banks party thereto and
Chemical Bank, as agent for the Banks, the Receivable Sale Agreement, dated as
of August 16, 1993, among Specialty Foods, the Sellers party thereto and the
Accounts Receivable Subsidiary and 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 in
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 Acquisition Corporation 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
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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 made by the Seller of
such account receivable so the face amount thereof.
"Accounts Receivable Subsidiary" means a newly created, wholly owned
subsidiary of Specialty Foods Acquisition Corporation designated as such by
Specialty Foods Acquisition Corporation, (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 Acquisition Corporation nor any other Subsidiary of
Specialty Foods Acquisition Corporation 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.
"Accreted Value" means, as of any date of determination prior to August
15, 1999, the sum of (a) the initial offering price of each SFAC 13% Debenture
and (b) that portion of the excess of the principal amount of each SFAC 13%
Debenture over such initial offering price as shall have been accreted thereon
through such date, such amount to be so accreted on a daily basis at the rate of
13% per annum of the initial offering price of the SFAC 13% Debentures,
compounded semi-annually on each February 15 and August 15 from the date of
issuance of the SFAC 13% Debentures through the date of determination.
"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 Specialty Foods Acquisition Corporation 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.
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"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 than six months from the date of
acquisition,
(iii) certificates of deposit and Eurodollar time deposits with maturities
of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight
bank deposits, in each case, with any lender party to the 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.
"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
Acquisition Corporation'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 Related Parties (as defined below)),
(ii) the adoption of a plan relating to the liquidation or dissolution of
Specialty Foods Acquisition Corporation,
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(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 Related Parties) owns, directly or indirectly, more of the
voting power of the voting stock of Specialty Foods Acquisition
Corporation than the Principals and their Related Parties,
(iv) the first day on which a majority of the members of the Board of
Directors of Specialty Foods Acquisition Corporation are not
Continuing Directors and
(v) Specialty Foods Acquisition Corporation ceases to own 100% of the
outstanding Equity Interests of Specialty Foods. 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 Related Party pursuant
to a binding agreement between the holder thereof and such Principal
or Related Party shall be deemed to be held by such Principal or
Related 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 and its Subsidiaries
to the Accounts Receivable Subsidiary during such period to the extent such
Account Receivable Discount was deducted 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 (other than the Accounts
Receivable Subsidiary) 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 (or the Accounts Receivable Subsidiary) shall be excluded to the
extent that the declaration or payment
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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 the Accounts Receivable 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 SFAC indenture 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 Acquisition Corporation who (i) was
a member of such Board of Directors on the date of the SFAC indenture 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.
"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 SFAC 13% Debentures, 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 its 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 SFAC 13% Debentures
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.
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"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 Acquisition
Corporation and its Subsidiaries (other than under the Term Loan Agreement, the
Revolving Credit Agreement and the Note indentures) in existence on the date of
the SFAC indenture, until such amounts are repaid.
"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 Acquisition Corporation 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
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 Acquisition Corporation for any period commencing prior to
the date of the private exchange transactions we completed on June 11, 1999, pro
forma effect shall be given to the private exchange transactions we completed on
June 11, 1999 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),
excluding, in the case of Specialty Foods Acquisition Corporation, the interest
expense of the Accounts Receivable Subsidiary with respect to Non-Recourse
Indebtedness, 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
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(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 SFAC indenture.
"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
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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 financial 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 Acquisition
Corporation. For 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 (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
(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.
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"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursement obligations, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Permitted Investments" means
(a) any Investments in Specialty Foods Acquisition Corporation or in an
85% Owned Subsidiary of Specialty Foods Acquisition Corporation that
is engaged in the same or a similar or related line of business as
Specialty Foods Acquisition Corporation or any of its Subsidiaries
were engaged in on the date of the SFAC indenture;
(b) any Investments in Cash Equivalents;
(c) Investments by Specialty Foods Acquisition Corporation or any
Subsidiary of Specialty Foods Acquisition Corporation in a person
that is engaged in the same or a similar or related line of business
as Specialty Foods Acquisition Corporation or any of its
Subsidiaries were engaged in on the date of the SFAC indenture, if
as a result of such Investment (i) such person becomes an 85% Owned
Subsidiary of Specialty Foods Acquisition Corporation 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 Acquisition Corporation or an 85%
Owned Subsidiary of Specialty Foods Acquisition Corporation;
(d) Investments in agricultural commodities futures, options and other
hedging obligations in the ordinary course of business; and
(e) Investments (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.
"Permitted Liens" means
(a) Liens in favor of Specialty Foods Acquisition Corporation and its
Wholly Owned Subsidiaries;
(b) Liens on property of a person existing at the time such person is
merged into or consolidated with Specialty Foods Acquisition
Corporation or any Subsidiary of Specialty Foods Acquisition
Corporation; provided that such Liens were in existence prior to the
contemplation of such merger or consolidation;
(c) Liens on property existing at the time of acquisition thereof by
Specialty Foods Acquisition Corporation or any Subsidiary of
Specialty Foods Acquisition
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Corporation; provided, that such Liens were in existence prior to
the contemplation of such acquisition;
(d) Liens existing on the date of the SFAC indenture and renewals,
extensions and replacements thereof; provided, that such renewals,
extensions or replacements shall not apply to any property or assets
not previously subject to such Liens or increase the principal
amount of Obligations secured thereby;
(e) 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;
(f) carriers', warehousemen's, mechanics', materialmen's, repairmen's,
landlords' or other like Liens arising in the ordinary course of
business;
(g) 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;
(h) 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;
(i) 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 Specialty Foods Acquisition
Corporation and its Subsidiaries;
(j) 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;
(k) licenses for the use of intellectual property rights or like
intangible assets; and
(l) Liens incurred in the ordinary course of business of Specialty Foods
Acquisition Corporation or any Subsidiary of Specialty Foods
Acquisition Corporation with respect to obligations that do not
exceed $5 million at any one time outstanding
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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 than 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.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Revolving Credit Agreement" means that certain Revolving Credit
Agreement, dated as of August 16, 1993 by and among certain Subsidiaries of
Specialty Foods, the lenders party thereto and Chemical Bank, as administrative
agent, 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.
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"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulations S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"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 clauses (D) or (E), (C) any partner or stockholder of any Principal
as of the date of the SFAC indenture who acquires any assets or voting stock of
Specialty Foods Acquisition Corporation 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 SFAC indenture or (E)
co-investment entities established by any Principal within 90 days of the date
of the SFAC indenture 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 Related Party of Haas Wheat & Partners
Incorporated and (y) any officer or director of Oak Hill Partners, Inc. as of
the date of the SFAC indenture shall be deemed a Related Party of Acadia
Partners, L.P. and Keystone, Inc.
"Subordinated Debentures" means Specialty Foods Acquisition Corporation's
11.0% Senior Subordinated Debentures due 2006.
"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 Acquisition Corporation or of any of
its Subsidiaries.
"Tax Sharing Agreement" means that certain tax sharing agreement, dated as
of the date of the SFAC indenture, by and among Specialty Foods, Specialty Foods
Acquisition Corporation and each of their Subsidiaries, as in effect on the date
of the SFAC indenture.
"Term Loan Agreement" means that certain Term Loan Agreement, dated as of
August 16, 1993, by and among Specialty Foods, the lenders party thereto and
Chemical Bank, as administrative agent, 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,
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modified, renewed, refunded, replaced or refinanced from time to time, whether
or not with the same lenders.
"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.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New 13% Debentures for its own account
pursuant to the exchange offers in exchange for Old 13% Debentures 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 New 13%
Debentures 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 New
13% Debentures. 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 New 13% Debentures
received in exchange for Old 13% Debentures where these Old 13% Debentures 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 New 13% Debentures by
broker-dealers. New 13% Debentures 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 New 13% Debentures 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 New 13% Debentures. Any broker-dealer that
resells New 13% Debentures 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 New 13% Debentures may be deemed to be an underwriter
within the meaning of the Securities Act and any profit of any such resale of
New 13% Debentures 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.
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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 New 13% Debentures 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 initial 13%
Debentures or SFAC 13% Debentures and will hold New 13% Debentures 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 such debentures as
part of an integrated investment (including a "straddle") comprised of such
debentures and one or more other positions, dealers in securities or holders of
initial 13% Debentures, SFAC 13% Debentures, or New 13% Debentures 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 New 13% Debentures 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 debentures 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.
Taxation of Holders of Private 13% Debentures on the Exchange
In the opinion of our counsel, Paul, Weiss, Rifkind, Wharton & Garrison,
the exchange of a initial 13% Debenture for a New 13% Debenture will not be a
taxable event to a holder of our initial 13% Debenture, 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 a New 13%
Debenture that was received in exchange for our initial 13% Debenture as it had
in our outstanding initial 13% Debenture immediately before such exchange.
Further, the tax consequences of ownership and disposition of such a New 13%
Debenture will be the same as the tax consequences of ownership and disposition
of our outstanding initial 13% Debenture.
Taxation of Holders of SFAC 13% Debentures on the Exchange
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In the opinion of our counsel, Paul, Weiss, Rifkind, Wharton & Garrison,
the exchange of an outstanding SFAC 13% Debenture for an New 13% Debenture
should be a taxable event to a holder of an outstanding SFAC 13% Debenture.
Tendering holders should recognize gain or loss equal to the difference between
(i) the issue price of any New 13% Debentures received in the exchange offer and
(ii) such holder's adjusted tax basis in its SFAC 13% Debentures exchanged
therefor. Because the SFAC 13% Debentures are not, and the New 13% Debentures
will not be, traded on an established securities market, the issue price of a
New 13% Debenture will be its stated principal amount. A holder's adjusted tax
basis in its SFAC 13% Debentures will generally be equal to the amount paid for
the SFAC 13% Debentures and, in the case of a holder that purchased the SFAC 13%
Debentures 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 SFAC 13% Debentures
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 SFAC 13% Debenture was held for
more than one year. The deductibility of capital losses is subject to
limitation. A holder's initial tax basis in a New 13% Debenture that was
received in exchange for an SFAC 13% Debenture will be equal to the stated
principal amount of such New 13% Debenture.
The Treatment of the New 13% Debentures
Original Issue Discount on 13% Debentures Received in Exchange for Private
13% Debentures
New 13% Debentures that are received in exchange for our initial 13%
Debentures will have original issue discount for Federal income tax purposes.
Consequently, holders of such New 13% Debentures will be required to include
original issue discount in ordinary income over the period that they hold such
debentures on the basis of a constant yield method.
Because such New 13% Debentures are treated for Federal income tax
purposes as the same as our initial 13% Debentures, the amount of original issue
discount on such New 13% Debentures will be calculated as if the New 13%
Debentures and initial 13% Debentures were a single debenture that was issued at
the time such initial 13% Debenture was issued, for an issue price equal to the
issue price of the initial 13% Debenture, and any accrued original issue
discount on the initial 13% Debenture at the time of the exchange will carry
over and be treated as accrued original issue discount on the New 13% Debenture.
The issue price of a initial 13% Debenture is its stated principal amount less
the amount allocated to any of our common stock received in exchange for such
initial 13% Debenture and such common stock pursuant to the "investment unit"
rules. Pursuant to these rules, when a debenture is issued together with certain
property, the issue price of the debenture should be allocated to each of the
debenture and property in proportion to their relative fair market values.
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Except as set forth below under "--Acquisition Premium" and "--Bond
Premium," the amount of original issue discount on such a New 13% Debenture is
equal to the excess of (i) its "stated redemption price at maturity" (the sum of
all payments to be made on the debenture, whether denominated as interest or
principal, other than payments of "qualified stated interest") over (ii) its
issue price. "Qualified stated interest" on a debenture is the stated interest
that is unconditionally payable in cash or property (other than debt instruments
of New SFAC Holdings) at least annually at a single fixed rate. Any amount of
original issue discount included in income will increase a holder's adjusted tax
basis in such New 13% Debentures, and any payments (other than payments of
qualified stated interest) will decrease a holder's adjusted tax basis in such
exchange notes. Such payments will not be subject to Federal income tax.
Original Issue Discount on 13% Debentures Received in Exchange for SFAC
13% Debentures
New 13% Debentures that are received in exchange for SFAC 13% Debentures
will have original issue discount for Federal income tax purposes. Consequently,
holders of such Senior Subordinated Debentures will be required to include
original issue discount in ordinary income over the period that they hold such
debentures 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 New 13% Debenture will
be equal to the excess of (i) its "stated redemption price at maturity" (the sum
of all payments to be made on the debenture, whether denominated as interest or
principal, other than payments of "qualified stated interest") over (ii) its
issue price. "Qualified stated interest" on a debenture is the stated interest
that is unconditionally payable in cash or property (other than debt instruments
of New SFAC Holdings) at least annually at a single fixed rate.
Any amount of original issue discount included in income will increase a
holder's adjusted tax basis in such debentures, and any payments (other than
payments of qualified stated interest) will decrease a holder's adjusted tax
basis in such debentures. Such payments will not be subject to Federal income
tax.
Optional Right of Redemption
During certain times, we have the right to redeem the New 13% Debentures
at increasing percentages of less than their total accreted value at such times.
See "Description of the New 13% Debentures -- Optional Redemption." Because the
rules governing the calculation of original issue discount require us to presume
that such an option will be exercised by us if it minimizes the yield to the
holder, we intend to take the position that, solely for the purposes of
calculating original issue discount, we will be deemed to exercise such options
to redeem at the times such redemptions are possible. If such optional
redemptions do not actually occur contrary to the assumption set forth in the
preceeding sentence, then pursuant to the original issue discount rules, at the
each time such a redemption was deemed to occur yet does not actually ocur, the
New 13% Debenture will be considered retired and reissued for an amount equal to
its then adjusted issue price.
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Applicable High Yield Debt Obligations
The New 13% Debentures 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 New 13% Debentures are AHYDOs, New
SFAC Holdings will not be entitled to deduct original issue discount that
accrues with respect to such debentures until amounts attributed to such
original issue discount are paid in cash. In addition, to the extent the yield
to maturity of such debentures exceeds the sum of the AFR plus six percentage
points, New SFAC Holdings 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 New 13%
Debenture purchased the debenture, subsequent to the original offering, for an
amount that is less than the "revised issue price" (the sum of the issue price
of the New 13% Debenture and the aggregate amount of original interest discount
includible in the gross income of all holders for periods before the acquisition
of the New 13% Debenture 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 New 13% Debenture) of the New 13% Debenture, 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 New 13% Debenture 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 New 13%
Debenture at the time of such payment or disposition. In addition, the holder
may be required to defer, until the maturity of the New 13% Debenture 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 New 13% Debenture.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the New 13% Debenture,
unless the holder elects to accrue on a constant interest method. A holder of a
New 13% Debenture 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 New
13% Debenture purchased the debenture, subsequent to the original offering, for
an amount that is greater than the "adjusted issue price" (the sum of the issue
price of the New 13% Debenture and the aggregate amount of original interest
discount includible in the gross income of all holders for periods before the
acquisition of the New 13% Debenture by such holder, reduced by the amount
(other than qualified stated interest) of all payments previously received on
the New 13% Debenture) of the New 13% Debenture, the amount of such excess will
be treated
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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 New 13% Debenture 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 New 13% Debenture 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 New 13% Debenture as the New 13% Debenture's issue price.
Bond Premium
If a subsequent holder's tax basis in a New 13% Debenture exceeds the sum
of all amounts (other than qualified stated interest) payable on such debenture
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 debenture 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 debenture. 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 debenture in prior periods exceed the total amount
treated by the holder as a bond premium deduction on the debenture 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 debenture 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 New 13% Debentures
If a New 13% Debenture 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 New 13% Debenture (to
the extent such amount does not represent accrued but unpaid interest) and such
holder's adjusted tax basis in such debenture. 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 New 13% Debenture
for more than one year at the time of the disposition. The deductibility of
capital losses is subject to limitations.
Reporting Requirements
New SFAC Holdings will provide annual information statements to holders of
New 13% Debentures and to the Internal Revenue Service setting forth the amount
of original issue discount determined to be attributable to each of the New 13%
Debentures for that year.
154
<PAGE>
THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER OF NEW 13% DEBENTURES IN
LIGHT OF HIS PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION. EACH HOLDER OF
NEW 13% DEBENTURES SHOULD CONSULT HIS OWN ADVISOR AS TO THE SPECIFIC TAX
CONSEQUENCES TO SUCH HOLDER OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF NEW
13% DEBENTURES, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS, OR SUBSEQUENT VERSIONS THEREOF.
LEGAL MATTERS
The validity of the New 13% Debentures will be passed upon for us by Paul,
Weiss, Rifkind, Wharton & Garrison, New York, New York.
EXPERTS
The financial statements of Specialty Foods Acquisition 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.
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 indenture for the New 13% Debentures requires 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 New 13% Debentures, and this prospectus is part
of our registration statement. For further information on us and the New 13%
Debentures, you should refer to our registration statement and its exhibits.
This prospectus summarizes material provisions of contracts and other documents
to which we refer you. Since the prospectus may not contain all the information
that you may find important, you should review the full text of these
155
<PAGE>
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 New 13% Debentures remain outstanding, we will furnish you as a holder of
the New 13% Debentures 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 New 13% Debentures remain outstanding, we have agreed to make
available to any prospective purchaser of the New 13% Debentures or beneficial
owner of the notes in connection with any sale of these notes the information
required by Rule 144 under the Securities Act.
156
<PAGE>
INDEX TO FINANCIAL INFORMATION
Page
----
Annual Information - Specialty Foods Acquisiton Corporation
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
Financial Statement Schedule:
Condensed Financial Information of Specialty Foods Acquisition
Corporation...............................................................F-26
Interim Information - Specialty Foods Acqusition Corporation
Condensed Consolidated Balance Sheets as of March 31, 1999 and
December 31, 1998.........................................................F-29
Condensed Consolidated Statements of Operations for the three
months ended March 31, 1999 and 1998......................................F-30
Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 1999 and 1998.............................................F-31
Notes to Financial Statements...............................................F-32
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 Acquisition Corporation:
We have audited the accompanying consolidated balance sheets of Specialty Foods
Acquisition 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. In connection with our audits of the financial statements, we
also have audited the related financial statements schedule. These consolidated
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule 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
Acquisition 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. Also in our opinion, the related financial
statement schedule when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG LLP
Chicago, Illinois
March 19, 1999
F-2
<PAGE>
SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
December 31,
-----------------------------
1998 1997
----------- -----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 5,881 $ 234,267
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 142,440 342,308
Property, plant, and equipment, net 234,944 146,023
Intangible assets, net 113,438 842
Other noncurrent assets 43,573 28,334
----------- -----------
Total assets $ 534,395 $ 517,507
=========== ===========
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 1,250,198 1,134,355
Other noncurrent liabilities 31,355 30,645
----------- -----------
Total liabilities 1,403,523 1,290,392
----------- -----------
Redeemable preferred stock 19,500 19,500
Stockholders' equity:
Common stock: par value $0.01; authorized 100,000 shares;
issued 64,648 shares 646 646
Additional paid-in capital 42,750 42,750
Accumulated deficit (930,659) (834,416)
</TABLE>
F-3
<PAGE>
<TABLE>
<S> <C> <C>
Cost of common shares in treasury (1,365) (1,365)
----------- -----------
Total stockholders' equity (888,628) (792,385)
----------- -----------
Total liabilities and stockholders' equity $ 534,395 $ 517,507
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
SPECIALTY FOODS ACQUISITION 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 380,766 367,996 350,431
Amortization of intangibles 1,471 900 7,032
Goodwill write-down -- -- 203,304
--------- --------- ---------
382,237 368,896 560,767
--------- --------- ---------
Operating profit (loss) 30,511 27,358 (183,193)
Other:
Interest expense, net 133,961 134,546 132,373
Other expense, net 3,129 4,729 9,132
--------- --------- ---------
Loss before income taxes (106,579) (111,917) (324,698)
Provision (benefit) for income taxes (613) 380 1,093
--------- --------- ---------
Loss from continuing operations (105,966) (112,297) (325,791)
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 $ (96,243) $ 52,237 $(486,578)
Extraordinary items -- (5,714) --
--------- --------- ---------
</TABLE>
F-5
<PAGE>
<TABLE>
<S> <C> <C> <C>
Net income (loss) $ (96,243) $ 46,523 $(486,578)
========= ========= =========
Earnings (loss) per basic and diluted share:
From continuing operations $ (1.69) $ (1.78) $ (5.12)
From discontinued operations 0.16 2.61 (2.53)
Extraordinary items -- (0.09) --
--------- --------- ---------
Net income (loss) $ (1.53) $ 0.74 $ (7.65)
========= ========= =========
Weighted average shares outstanding
basic and diluted 62,768 63,097 63,638
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
(In thousands)
<TABLE>
<CAPTION>
Common Stock Additional Cumulative Treasury stock
------------------- paid-in Accumulated translation ------------------
Shares Amount Capital deficit adjustment Shares Amount
------ ------ ------- --------- ----- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 64,648 $646 $42,750 $(394,361) $(837) 174 $ (126)
Shares issued -- -- -- -- -- (159) 116
Purchase of treasury stock, net -- -- -- -- -- 1,144 (836)
Cumulative translation adjustment -- -- -- -- 837 -- --
Net loss -- -- -- (486,578) -- -- --
------ ---- ------- --------- ----- ----- -------
Balance at December 31, 1996 64,648 $646 $42,750 $(880,939) $ -- 1,159 $ (846)
Purchase of treasury stock, net -- -- -- -- -- 721 (519)
Net income -- -- -- 46,523 -- -- --
------ ---- ------- --------- ----- ----- -------
Balance at December 31, 1997 64,648 646 42,750 (834,416) -- 1,880 (1,365)
Net loss -- -- -- (96,243) -- -- --
------ ---- ------- --------- ----- ----- -------
Balance at December 31, 1998 64,648 $646 $42,750 $(930,659) $ -- 1,880 $(1,365)
====== ==== ======= ========= ===== ===== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
SPECIALTY FOODS ACQUISITION 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 $(105,966) $(112,297) $(325,791)
Adjustments to reconcile to net cash from
continuing operating activities:
Depreciation and amortization 27,204 21,087 27,868
Debt issuance cost amortization 10,109 6,120 6,081
Accretion of interest 48,601 43,148 38,285
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 (15,551) (14,785) (1,756)
--------- --------- ---------
Net cash used by continuing operating activities (33,117) (56,084) (35,359)
Net cash provided (used) by discontinued
operations (11,717) (41,564) 27,055
--------- --------- ---------
Net cash used by operating activities (44,834) (97,648) (8,304)
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 --
</TABLE>
F-8
<PAGE>
<TABLE>
<S> <C> <C> <C>
Other -- 1,319 (1,574)
--------- --------- ---------
Net cash provided (used) by financing activities 56,006 (61,010) (1,915)
Increase (decrease) in cash and cash equivalents (228,386) 186,086 46,539
Balance - beginning of year 24,267 48,181 1,642
--------- --------- ---------
Balance - end of year $ 5,881 $ 234,267 $ 48,181
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE>
SPECIALTY FOODS ACQUISITION 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-10
<PAGE>
SPECIALTY FOODS ACQUISITION 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-11
<PAGE>
SPECIALTY FOODS ACQUISITION 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 expended 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 receivable, 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.
F-12
<PAGE>
SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
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.
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 relate 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:
F-13
<PAGE>
SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
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
Goodwill, net 18,069 18,592
Accounts payable (6,727) (10,058)
Accrued expenses and other liabilities (3,178) (5,251)
-------- --------
$ 86,632 $ 65,192
======== ========
(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.
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Net sales $ 831,533 $ 828,243
Net earnings (loss) from continuing operations $(110,590) $(115,026)
Net earnings (loss) per share from continuing operations $ (1.76) $ (1.82)
</TABLE>
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
F-14
<PAGE>
SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
presented or the future results of the combined operations and do not
include 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
========
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.
F-15
<PAGE>
SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
(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.
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
------- -------
24,310 20,272
Less obsolescence and other allowances (944) (84)
------- -------
$23,366 $20,188
======= =======
F-16
<PAGE>
SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
(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.
(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 interest 21,869 21,518
Acquisition liabilities 4,899 7,582
F-17
<PAGE>
SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
Other 21,717 26,488
------- -------
$80,741 $80,906
======= =======
(13) Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Revolving Credit Facility $ 75,000 $ --
Term Loan Facility 169,080 173,750
10% Senior Notes due 2001 225,000 225,000
11 1/8% Senior Notes due 2002 150,000 150,000
11 1/4% Senior Subordinated Notes due 2003 200,000 200,000
13% Senior Secured Discount Debentures due 2005 295,191 260,258
11% Senior Subordinated Discount Debentures due
2006, payable to related parties 134,698 121,043
Other 4,679 6,865
----------- -----------
1,253,648 1,136,916
Less current portion (3,450) (2,561)
----------- -----------
$ 1,250,198 $ 1,134,355
=========== ===========
</TABLE>
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,
F-18
<PAGE>
SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
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% Senior 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 Senior Secured Discount Debentures accrete at an interest rate of 13%
up to the maturity amount of $319,250 on August 15, 1999. Beginning
February 15, 2000, semi-annual interest payments are required through the
maturity date on August 15, 2005. The Senior Subordinated Discount
Debentures are held by stockholders of the Company and accrete at an
interest rate of 11% up to the maturity amount of $185,067 on August 15,
2001. Beginning February 15, 2002, semi-annual interest payments are
required through the maturity date on August 15, 2006.
The 10 1/4% and 11 1/8% Senior Notes, the 11 1/4% Senior Subordinated
Notes and the 11% Senior Subordinated Discount Debentures are unsecured.
The 13% Senior Secured Discount Debentures are secured by a first priority
lien on and a security interest in all of the outstanding capital stock of
SFC and all intercompany notes, if any, owing to the Company.
During the fourth quarter of 1998, the Company commenced private exchange
offers for its publicly held debt. Under the offers, existing debt of SFC
and SFAC held by certain holders would be exchanged for the debt of two
new intermediate holding companies. SFAC is offering certain holders of
its Senior Debentures the opportunity to exchange their existing debt for
new 13% Senior Secured Discount Debentures (the "New Senior Debentures")
of a new intermediate holding company. The New Senior Debentures include
provisions which extend the cash pay interest and maturity dates, give
SFAC a call option at prescribed discounts of accreted value and provide
consenting holders of its Senior Debentures up to an aggregate of ten
percent of the equity interest of the 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 and will remain structurally
senior to the New Senior Debentures. 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 $18,000 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.
F-19
<PAGE>
SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
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 Senior Subordinated Notes contain
certain restrictive covenants, including, to the detriment of the holders
of the Senior Debentures and the Senior Subordinated Debentures, certain
covenants that restrict 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 Senior 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 431,120
----------
Total aggregate maturities $1,253,648
==========
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.
F-20
<PAGE>
SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
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.
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 but excluding
related party Senior Subordinated Discount Debentures at December 31, 1998
are as follows:
Carrying Estimated
Amounts Fair Values
---------- ----------
Financial liabilities:
Long-term debt, including current
maturities $1,118,950 $ 728,184
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
F-21
<PAGE>
SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
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.
The components of net deferred taxes are as follows:
1998 1997
-------- --------
Deferred tax assets related to:
Accrued expenses and other liabilities $ 72,570 $ 57,518
Net operating losses and credits 90,799 65,197
Other 3,351 6,538
-------- --------
Total deferred tax assets 166,720 129,253
Valuation allowance 149,552 113,357
-------- --------
Total net deferred tax assets 17,168 15,896
Deferred tax liabilities related to:
Depreciation 17,168 15,541
Inventories -- 355
-------- --------
Total deferred tax liabilities 17,168 15,896
-------- --------
Net deferred tax asset (liability) $ -- $ --
======== ========
F-22
<PAGE>
SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
At December 31, 1998, the Company has federal net operating loss
carryforwards of $235,000 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 $127,000 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 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.
F-23
<PAGE>
SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
(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-24
<PAGE>
SPECIALTY FOODS ACQUISITION 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 December 31,
1997 and a summary of the funded status as of December 31, 1998 and
December 31, 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)
======== ======== ======== ========
</TABLE>
F-25
<PAGE>
SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
<TABLE>
<S> <C> <C> <C> <C>
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>
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
F-26
<PAGE>
SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
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.
The assumptions used in the measurement of the Company's benefit
obligations are shown in the following table:
<TABLE>
<CAPTION>
Pension Plans Post-retirement Medical
----------------- -----------------------
1998 1997 1998 1997
----- ---- -------- ----
<S> <C> <C> <C> <C>
Discount Rate (Y/E Disclosures) 6.75% 7.00% 6.50% to 7.00%
6.75%
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
F-27
<PAGE>
SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
$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.
(19) Stock-Based Compensation Plans
The Company's stock option plans provide for the granting of non-qualified
stock options and incentive stock options to certain key employees,
directors and consultants of the Company. Generally, options outstanding
under the Company's stock option plans (i) are granted at prices which
equate to the fair value of the stock at the date of grant, (ii) vest
ratably over a four year service vesting period, and (iii) expire ten
years subsequent to award.
The exercise price per share is $.02 for current employees and $.73 for
former employees. A summary of the status of the Company's stock options
as of December 31, 1998, 1997, and 1996 and changes during the years ended
on those dates is presented below:
Number of Shares
-------------------------------
1998 1997 1996
----- ------ ------
Outstanding at beginning of year 3,632 3,436 4,589
Granted 500 1,400 933
Exercised -- -- --
Terminated (236) (1,204) (2,086)
----- ------ ------
Outstanding at year-end 3,896 3,632 3,436
===== ====== ======
Options exercisable at year-end 2,013 1,376 1,819
===== ====== ======
F-28
<PAGE>
SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
Options available for future grant 1,957 2,221 2,417
===== ====== ======
The Company applies Accounting Principles Board Opinion No. 25 and related
Interpretations in accounting for its stock compensation plans.
Accordingly, no compensation cost has been recognized for its stock
compensation plans. The Company has evaluated the requirements of FASB
Statement No. 123 and has determined that it does not have a material
impact on the Company's financial position or results of operations.
(20) 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 June 1997, pursuant to an agreement among the Company, Acadia,
Keystone, and Haas Wheat ("the signing stockholders"), the signing
stockholders purchased a total of 19,500 units of equity for an aggregate
purchase price of $19,500. Each unit was comprised of one share of
cumulative preferred stock of the Company and one warrant to purchase
395.1 shares of common stock of the Company, at an exercise price of $0.02
per share.
The shares of preferred stock are in the aggregate face amount of $19,500
and have a par value of $1 per share. The shares of preferred stock have a
liquidation value of $1 per share and are entitled to a dividend rate of
16% per annum. As of December 31, 1998, the preferred stock had dividends
in arrears of $4,706. Presently, no dividends can be declared or paid
since such declaration or payment would cause or result in default of
outstanding debt instruments of the Company. The preferred stock is
cumulative, non-convertible, non-participating, and non-redeemable by the
holder or the Company prior to August 16, 2006. Thereafter, any holder or
the Company may redeem all or a portion of the preferred stock provided
that such redemption would not cause or result in a default in any
outstanding debt instrument of the Company or its subsidiaries at such
time.
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
F-29
<PAGE>
SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
(In thousands)
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 repurchased 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 served as the Syndication Agent and Collateral Agent under
both Loan Agreements.
(21) 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-30
<PAGE>
Schedule I
Page 1
SPECIALTY FOODS ACQUISITION CORPORATION
Condensed Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
December 31,
-------------------------
1998 1997
--------- ---------
<S> <C> <C>
Assets
Cash $ 1 $ 1
Investment in SFC (450,974) (403,804)
Deferred debt issuance costs 4,235 4,843
Due from SFC 7,499 7,376
Other assets -- --
--------- ---------
Total assets $(439,239) $(391,584)
========= =========
Liabilities and Stockholders' Equity
Senior secured discount debentures $ 295,191 $ 260,258
Senior subordinated discount debentures 134,698 121,043
--------- ---------
Total liabilities 429,889 381,301
Redeemable preferred stock 19,500 19,500
Stockholders' equity:
Common stock 646 646
Additional paid-in capital 42,750 42,750
Accumulated deficit (930,659) (834,416)
Cost of common shares in treasury (1,365) (1,365)
--------- ---------
Total stockholders' equity (888,628) (792,385)
--------- ---------
Total liabilities and stockholders' equity $(439,239) $(391,584)
========= =========
</TABLE>
The accompanying condensed financial statements should be read in conjunction
with the consolidated financial statements of the Company.
F-31
<PAGE>
Schedule I Cont.
Page 2
SPECIALTY FOODS ACQUISITION CORPORATION
Condensed Statements of Operations
(In thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Equity in earnings (loss) of SFC $ (46,166) $ 91,361 $(446,550)
Operating expenses 972 945 968
--------- --------- ---------
Income (loss) from operations (47,138) 90,416 (447,518)
--------- --------- ---------
Nonoperating expense:
Interest expense (48,601) (43,148) (38,285)
Amortization of deferred debt issuance costs (609) (609) (609)
--------- --------- ---------
Total nonoperating expense (49,210) (43,757) (38,894)
--------- --------- ---------
Income (loss) before income taxes (96,348) 46,659 (486,412)
Income taxes (105) 136 166
--------- --------- ---------
Net income (loss) $ (96,243) $ 46,523 $(486,578)
========= ========= =========
</TABLE>
The accompanying condensed financial statements should be read in conjunction
with the consolidated financial statements of the Company.
F-32
<PAGE>
Schedule I Cont.
Page 2
SPECIALTY FOODS ACQUISITION CORPORATION
Condensed Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (96,243) $ 46,523 $(486,578)
Debt issuance cost amortization 609 609 609
Accretion of interest 48,601 43,148 38,285
Equity in earnings of SFC 46,166 (91,361) 446,550
Changes in operating assets
and liabilities:
Other assets -- -- (91)
--------- --------- ---------
Net cash (used) by
operating activities (867) (1,081) (1,225)
Cash flows from financing activities:
Purchase of treasury stock -- -- (837)
Proceeds from issuance of
treasury stock -- -- 117
Dividend from subsidiary 1,004 1,122 3,671
Issuance of preferred stock -- 19,500 --
Purchase of Senior Secured
Discount Debentures -- -- (1,712)
Advances from SFC 122 (18,375) (37)
Other (259) (1,166) 23
--------- --------- ---------
Net cash provided
by financing activities 867 1,081 1,225
Net increase in cash and cash equivalents -- -- --
Cash at beginning of period 1 1 1
--------- --------- ---------
$ 1 $ 1 $ 1
========= ========= =========
</TABLE>
The accompanying condensed financial statements should be read in conjunction
with the consolidated financial statements of the Company.
F-33
<PAGE>
SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- -----------
<S> <C> <C>
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 16,993 $ 5,881
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 159,818 142,440
Property, plant, and equipment, net 233,001 234,944
Intangible assets, net 110,281 113,438
Other noncurrent assets 34,253 43,573
----------- -----------
Total assets $ 537,353 $ 534,395
=========== ===========
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 1,020,537 1,250,198
Other noncurrent liabilities 30,506 31,355
----------- -----------
Total liabilities 1,439,626 1,403,523
Redeemable preferred stock 19,500 19,500
Stockholders' equity (921,773) (888,628)
----------- -----------
Total liabilities and stockholders' equity $ 537,353 $ 534,395
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-34
<PAGE>
SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except share data)
Three months ended March 31,
1999 1998
--------- ---------
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 108,780 94,605
Amortization of intangibles 1,017 212
--------- ---------
Total operating expenses 109,797 94,817
--------- ---------
Operating profit 1,024 (212)
Other expenses:
Interest expense, net 36,745 31,397
Other expense, net 679 801
--------- ---------
Loss before income taxes (36,400) (32,410)
Provision for income taxes 141 29
--------- ---------
Loss from continuing operations (36,541) (32,439)
Discontinued operations:
Net income 3,810 2,362
Loss on disposal, net (412) --
--------- ---------
3,398 2,362
--------- ---------
Net loss $ (33,143) $ (30,077)
========= =========
Earnings (loss) per share:
From continuing operations $ (.58) $ (.52)
From discontinued operations .05 .04
--------- ---------
Net loss $ (.53) $ (.48)
========= =========
Weighted average shares outstanding 62,768 62,768
========= =========
See accompanying notes to condensed consolidated financial statements.
F-35
<PAGE>
SPECIALTY FOODS ACQUISITION 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 $ (36,541) $ (32,439)
Adjustments to reconcile to net cash
from continuing operating activities
Depreciation and amortization 9,331 5,653
Debt issuance cost amortization 2,915 1,469
Accretion of interest 13,100 11,617
Changes in operating assets and liabilities,
net of effects from businesses acquired or sold (3,779) (17,701)
--------- ---------
Net cash used by continuing operating activities (14,974) (31,401)
Net cash provided (used) by discontinued operations 2,191 (2,391)
--------- ---------
Net cash used by operating activities (12,783) (33,792)
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 (868) (472)
--------- ---------
Net cash provided (used) by financing activities 21,347 (9,715)
Increase (decrease) in cash and cash equivalents 11,112 (50,248)
Cash - beginning of period 5,881 234,267
--------- ---------
Cash - end of period $ 16,993 $ 184,019
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-36
<PAGE>
NOTE 1 - Interim Financial Information
In the opinion of management, the accompanying unaudited interim
condensed financial information of Specialty Foods Acquisition
Corporation (SFAC) 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-37
<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 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 the new intermediate holding
F-38
<PAGE>
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 Senior 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. Senior 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-39
<PAGE>
SFAC New Holdings, Inc.
Exchange offers for:
$587,126,474 of our 13% Senior Secured Discount Debentures due 2009
and
$55,000 13% Senior Secured Discount Debentures due 2005
of Specialty Foods Acquisition Corporation
---------------------------
PROSPECTUS
_________, 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 SFAC 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,
II-1
<PAGE>
despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity
for such expenses which the Court of Chancery or such other court shall
deem proper.
(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.
* * *
II-2
<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 SFAC New Holdings, Inc.
3.2* Certificate of Amendment of SFAC New Holdings, Inc.
3.3* Certificate of Amendment of SFAC New Holdings, Inc.
3.4* By-Laws of SFAC New Holdings, Inc.
3.5* Certificate of Designation of SFAC New Holdings, Inc.
4.1* Registration Rights Agreement, dated as of June 11,
1999, among SFAC New Holdings, Inc. and holders of its
13% Senior Secured Discount Debentures due 2009.
4.2* Indenture, dated as of June 11, 1999, between SFAC New
Holdings, Inc. and United States Trust Company of New
York, as trustee, governing the 13% Senior Secured
Discount Debentures due 2009 issued by SFAC New
Holdings, Inc.
4.3 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. (Incorporated by reference to Exhibit 4.1 to SFC
New Holding, Inc.'s Registration Statement on Form S-4
(Registration No. 33-83063))
4.4 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. (Incorporated by
reference to Exhibit 4.2 to SFC New Holding, Inc.'s
Registration Statement on Form S-4 (Registration No.
33-83063))
4.5 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. (Incorporated by
reference to Exhibit 4.3 to SFC New Holding, Inc.'s
Registration Statement on Form S-4 (Registration No.
33-83063))
II-3
<PAGE>
Exhibit
Number Description of Document
------ -----------------------
4.6 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. (Incorporated
by reference to Exhibit 4.4 to SFC New Holding, Inc.'s
Registration Statement on Form S-4 (Registration No.
33-83063))
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 Corporation, Specialty
Foods Corp. and certain subsidiaries of Specialty Foods
Corp. (Incorporated by reference to Exhibit 10.17 to
Specialty Foods Acquisition Corporation'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 Corporation, SFC New Holdings, Inc.
and certain subsidiaries of SFC New Holdings, Inc.
(Incorporated by reference to Exhibit 10.2 to SFC New
Holding, Inc.'s Registration Statement on Form S-4
(Registration No. 33-83063))
10.3 Tax Sharing Agreement, dated as of August 16, 1993,
between Specialty Foods Acquisition Corporation and
Specialty Foods Corp. (Incorporated by reference to
Exhibit 10.18 to Specialty Foods Acquisition
Corporation'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 Corporation and SFC New Holdings, Inc.
(Incorporated by reference to Exhibit 10.4 to SFC New
Holding, Inc.'s Registration Statement on Form S-4
(Registration No. 33-83063))
10.5* SFAC and SFC Group Tax Sharing Agreement, dated as of
June 11, 1999, between Specialty Foods Acquisition
Corporation, Specialty Foods Corp., SFC Sub, Inc. and
SFAC New Holdings, Inc.
II-4
<PAGE>
Exhibit
Number Description of Document
------ -----------------------
10.6 Assignment and Assumption Agreement, dated as of June
11, 1999, between Specialty Foods Corp. and SFC New
Holdings, Inc. (Incorporated by reference to Exhibit
10.5 to SFC New Holding, Inc.'s Registration Statement
on Form S-4 (Registration No. 33-83063))
10.7 Corporate Services Agreement, dated as of June 30, 1994,
between Specialty Foods Acquisition Corporation 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)
10.8 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 Corporation's Report on Form 10-K for the
year ended December 31, 1997)
10.9 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 Corporation Report on Form 8-K dated
June 30, 1999)
10.10 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
Corporation's Report on Form 10-K for the year ended
December 31, 1997)
II-5
<PAGE>
Exhibit
Number Description of Document
------ -----------------------
10.11 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 Corporation Report on Form
8-K dated June 30, 1999)
10.12 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 Corporation's Report on Form 10-K for the
year ended December 31, 1994)
10.13 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 Corporation's Report on Form 10-K for
the year ended December 31, 1994)
10.14 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 Corporation's Report on Form 10-Q for
the Quarter ended September 28, 1996)
10.15 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 Corporation's
Report on Form 10-K for the year ended December 31,
1996)
II-6
<PAGE>
Exhibit
Number Description of Document
------ -----------------------
10.16 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)
10.17 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 Corporation's Report on Form 10-K for
the year ended December 31, 1996)
10.18 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 Corporation's Report on Form 10-Q for the
Quarter ended March 31, 1998)
10.19 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 Corporation's Report on Form
10-Q for the Quarter ended March 31, 1998)
10.20 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 Corporation's Report on Form 10-Q for the
Quarter ended March 31, 1998)
II-7
<PAGE>
Exhibit
Number Description of Document
------ -----------------------
10.21 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 Corporation's Report
on Form 8-K dated June 30, 1999).
10.22 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
Corporation's Report on Form 8-K dated June 30, 1999)
10.23 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 Corporation's Report on Form 10-Q for the
Quarter ended March 31, 1998)
10.24 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 Corporation's Report on Form
10-K for the year ended December 31, 1994)
10.25 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
Corporation's Report on Form 10-K for the year ended
December 31, 1994)
10.26 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
Corporation's Report on Form 10-K for the year ended
December 31, 1996)
II-8
<PAGE>
Exhibit
Number Description of Document
------ -----------------------
10.27 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 Corporation's Report on Form
10-K for the year ended December 31, 1996)
10.28 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 Corporation's Report on Form
10-K for the year ended December 31, 1996)
10.29 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 Corporation's Report on Form 8-K dated
June 8, 1999)
10.30 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 Corporation's Report on
Form 10-K for the year ended December 31, 1996)
10.31 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 Corporation's Report on
Form 10-K for the year ended December 31, 1996)
II-9
<PAGE>
Exhibit
Number Description of Document
------ -----------------------
10.32 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 Corporation's Report on
Form 10-K for the year ended December 31, 1996)
10.33 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 Corporation's Report on
Form 10-Q for the Quarter ended March 31, 1998)
10.34 Amended and Restated Executive Employment Agreement,
dated as of March 15, 1999, among Specialty Foods
Acquisition Corporation, 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)
10.35 Amended and Restated Executive Employment Agreement,
dated as of March 15, 1999, among Specialty Foods
Acquisition Corporation, 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)
10.36 Amended and Restated Executive Employment Agreement,
dated as of March 15, 1999, among Specialty Foods
Acquisition Corporation, 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)
10.37 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)
10.38 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)
II-10
<PAGE>
Exhibit
Number Description of Document
------ -----------------------
10.39 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 Corporation's Report on Form 10-K for
the year ended December 31, 1997)
10.40 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 Corporation's Report on Form 10-K for
the year ended December 31, 1997)
10.41 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)
10.42 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)
10.43 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 Corporation's Report on Form 10-K for
the year ended December 31, 1997)
10.44 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)
10.45 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)
10.46 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)
II-11
<PAGE>
Exhibit
Number Description of Document
------ -----------------------
10.47 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)
10.48 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)
10.49 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 Corporation's Report on Form 10-Q for
the Quarter ended March 31, 1998)
10.50 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)
10.51 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 Corporation's Report on Form 10-K for
the year ended December 31, 1997)
10.52 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)
10.53 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)
10.54 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)
II-12
<PAGE>
Exhibit
Number Description of Document
------ -----------------------
10.55 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)
10.56 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)
10.57 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)
10.58 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)
10.59 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)
10.60 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)
10.61 Amended and Restated Metz Baking Company Pension Plan
for Non-Union Employees. (Incorporated by reference to
Exhibit 10.52 to Specialty Foods Acquisition
Corporation's Report on Form 10-K for the year ended
December 31, 1994)
10.62 Amended and Restated Mother's Cake & Cookie Company
Retirement Plan. (Incorporated by reference to Exhibit
10.51 to Specialty Foods Acquisition Corporation's
report on Form 10-K for the year ended December 31,
1994)
II-13
<PAGE>
Exhibit
Number Description of Document
------ -----------------------
10.63 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)
10.64 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)
10.65 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)
10.66 Executive Employment Agreement, dated as of May 1, 1999,
by and among Specialty Foods Acquisition Corporation,
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)
10.67 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)
10.68 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)
10.69 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)
10.70 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)
II-14
<PAGE>
Exhibit
Number Description of Document
------ -----------------------
10.71 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)
10.72* Stockholders Agreement, dated as of June 11, 1999, by
and between SFAC New Holdings, Inc. and holders of the
13% Senior Secured Discount Debentures due 2009 issued
by SFAC New Holdings, Inc.
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 13% Senior Secured Discount
Debentures due 2009.
27* Financial Data Schedule
99.1** Form of Letter of Transmittal.
99.2** Form of Notice of Guaranteed Delivery.
- ----------
* To be filed herewith.
** To be filed by amendment.
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
II-15
<PAGE>
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.
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
II-16
<PAGE>
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) SFAC New Holdings 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.
II-17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Deerfield, Illinois on
July 16, 1999.
SFAC NEW HOLDINGS, INC.
By: /s/ SEAN M. STACK
------------------------------------
Name: Sean M. Stack
Title: Vice President, Treasurer and
Assistant Secretary
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Robert
L. Fishbune and Sean M. Stack, or any one of them, with full power to act
without the other, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature and Title Capacity Date
- ------------------- -------- ----
/s/ Lawrence S. Benjamin Principal Executive Officer July 16, 1999
- ------------------------ and Director
Lawrence S. Benjamin
/s/ Robert L. Fishbune Principal Financial and July 16, 1999
- ------------------------ Accounting Officer
Robert L. Fishbune
<PAGE>
Signature and Title Capacity Date
- ------------------- -------- ----
/s/ Robert B. Haas Chairman of the Board of July 16, 1999
- ------------------------ Directors
Robert B. Haas
Director
- ------------------------
Thomas J. Baldwin
/s/ J. Taylor Crandall Director July 16, 1999
- ------------------------
J. Taylor Crandall
/s/ Jerry M. Meyer Director July 16, 1999
- ------------------------
Jerry M. Meyer
/s/ Andrew J. Nathanson Director July 16, 1999
- ------------------------
Andrew J. Nathanson
Director
- ------------------------
David G. Offensend
/s/ Marc C. Particelli Director July 16, 1999
- ------------------------
Marc C. Particelli
/s/ Anthony P. Scotto Director July 16, 1999
- ------------------------
Anthony P. Scotto
/s/ Douglas D. Wheat Director July 16, 1999
- ------------------------
Douglas D. Wheat
<PAGE>
EXHIBITS INDEX
3.1* Certificate of Incorporation of SFAC New Holdings, Inc.
3.2* Certificate of Amendment of SFAC New Holdings, Inc.
3.3* Certificate of Amendment of SFAC New Holdings, Inc.
3.4* By-Laws of SFAC New Holdings, Inc.
3.5* Certificate of Designation of SFAC New Holdings, Inc.
4.1* Registration Rights Agreement, dated as of June 11, 1999,
among SFAC New Holdings, Inc. and holders of its 13% Senior
Secured Discount Debentures due 2009.
4.2* Indenture, dated as of June 11, 1999, between SFAC New
Holdings, Inc. and United States Trust Company of New York, as
trustee, governing the 13% Senior Secured Discount Debentures
due 2009 issued by SFAC New Holdings, Inc.
4.3 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. (Incorporated by
reference to Exhibit 4.1 to SFC New Holding, Inc.'s
Registration Statement on Form S-4 (Registration No.
33-83063))
4.4 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. (Incorporated by reference to Exhibit
4.2 to SFC New Holding, Inc.'s Registration Statement on Form
S-4 (Registration No. 33-83063))
4.5 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. (Incorporated by reference to Exhibit
4.3 to SFC New Holding, Inc.'s Registration Statement on Form
S-4 (Registration No. 33-83063))
4.6 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. (Incorporated by
reference to Exhibit 4.4 to SFC New Holding, Inc.'s
Registration Statement on Form S-4 (Registration No.
33-83063))
5.1** Opinion of Paul, Weiss, Rifkind, Wharton & Garrison regarding
the legality of the securities being registered.
<PAGE>
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 Corporation, Specialty Foods Corp.
and certain subsidiaries of Specialty Foods Corp.
(Incorporated by reference to Exhibit 10.17 to Specialty Foods
Acquisition Corporation'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
Corporation, SFC New Holdings, Inc. and certain subsidiaries
of SFC New Holdings, Inc. (Incorporated by reference to
Exhibit 10.2 to SFC New Holding, Inc.'s Registration Statement
on Form S-4 (Registration No. 33-83063))
10.3 Tax Sharing Agreement, dated as of August 16, 1993, between
Specialty Foods Acquisition Corporation and Specialty Foods
Corp. (Incorporated by reference to Exhibit 10.18 to Specialty
Foods Acquisition Corporation'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
Corporation and SFC New Holdings, Inc. (Incorporated by
reference to Exhibit 10.4 to SFC New Holding, Inc.'s
Registration Statement on Form S-4 (Registration No.
33-83063))
10.5* SFAC and SFC Group Tax Sharing Agreement, dated as of June 11,
1999, between Specialty Foods Acquisition Corporation,
Specialty Foods Corp., SFC Sub, Inc. and SFAC New Holdings,
Inc.
10.6 Assignment and Assumption Agreement, dated as of June 11,
1999, between Specialty Foods Corp. and SFC New Holdings, Inc.
(Incorporated by reference to Exhibit 10.5 to SFC New Holding,
Inc.'s Registration Statement on Form S-4 (Registration No.
33-83063))
10.7 Corporate Services Agreement, dated as of June 30, 1994,
between Specialty Foods Acquisition Corporation 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)
<PAGE>
10.8 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 Corporation's
Report on Form 10-K for the year ended December 31, 1997)
10.9 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 Corporation Report on Form 8-K dated June 30,
1999)
10.10 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 Corporation's Report on Form 10-K
for the year ended December 31, 1997)
10.11 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 Corporation Report on Form 8-K
dated June 30, 1999)
10.12 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 Corporation's Report on
Form 10-K for the year ended December 31, 1994)
<PAGE>
10.13 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 Corporation's Report on Form
10-K for the year ended December 31, 1994)
10.14 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 Corporation's Report on Form
10-Q for the Quarter ended September 28, 1996)
10.15 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 Corporation's Report on Form 10-K for the year
ended December 31, 1996)
10.16 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)
10.17 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 Corporation's Report on Form
10-K for the year ended December 31, 1996)
10.18 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 Corporation's Report on Form
10-Q for the Quarter ended March 31, 1998)
<PAGE>
10.19 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 Corporation's Report on Form 10-Q for the Quarter
ended March 31, 1998)
10.20 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 Corporation's Report on Form 10-Q for the Quarter
ended March 31, 1998)
10.21 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 Corporation's Report on
Form 8-K dated June 30, 1999).
10.22 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 Corporation's Report on Form 8-K dated June 30,
1999)
10.23 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 Corporation's
Report on Form 10-Q for the Quarter ended March 31, 1998)
10.24 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
Corporation's Report on Form 10-K for the year ended December
31, 1994)
<PAGE>
10.25 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 Corporation's Report on Form 10-K for the
year ended December 31, 1994)
10.26 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 Corporation's Report on Form 10-K
for the year ended December 31, 1996)
10.27 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 Corporation's Report on Form 10-K for the year
ended December 31, 1996)
10.28 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 Corporation's Report on Form 10-K for the year
ended December 31, 1996)
10.29 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 Corporation's
Report on Form 8-K dated June 8, 1999)
10.30 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 Corporation's Report on Form 10-K for the
year ended December 31, 1996)
<PAGE>
10.31 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 Corporation's Report on Form 10-K for the
year ended December 31, 1996)
10.32 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 Corporation's Report on Form 10-K for the
year ended December 31, 1996)
10.33 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
Corporation's Report on Form 10-Q for the Quarter ended March
31, 1998)
10.34 Amended and Restated Executive Employment Agreement, dated as
of March 15, 1999, among Specialty Foods Acquisition
Corporation, 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)
10.35 Amended and Restated Executive Employment Agreement, dated as
of March 15, 1999, among Specialty Foods Acquisition
Corporation, 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)
10.36 Amended and Restated Executive Employment Agreement, dated as
of March 15, 1999, among Specialty Foods Acquisition
Corporation, 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)
10.37 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>
10.38 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)
10.39 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 Corporation's Report on Form 10-K for the year
ended December 31, 1997)
10.40 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 Corporation's Report on Form 10-K for the year
ended December 31, 1997)
10.41 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)
10.42 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)
10.43 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
Corporation's Report on Form 10-K for the year ended December
31, 1997)
10.44 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)
10.45 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)
10.46 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)
<PAGE>
10.47 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)
10.48 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)
10.49 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
Corporation's Report on Form 10-Q for the Quarter ended March
31, 1998)
10.50 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)
10.51 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
Corporation's Report on Form 10-K for the year ended December
31, 1997)
10.52 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)
10.53 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)
10.54 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)
<PAGE>
10.55 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)
10.56 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)
10.57 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)
10.58 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)
10.59 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)
10.60 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)
10.61 Amended and Restated Metz Baking Company Pension Plan for
Non-Union Employees. (Incorporated by reference to Exhibit
10.52 to Specialty Foods Acquisition Corporation's Report on
Form 10-K for the year ended December 31, 1994)
10.62 Amended and Restated Mother's Cake & Cookie Company Retirement
Plan. (Incorporated by reference to Exhibit 10.51 to Specialty
Foods Acquisition Corporation's report on Form 10-K for the
year ended December 31, 1994)
10.63 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)
<PAGE>
10.64 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)
10.65 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)
10.66 Executive Employment Agreement, dated as of May 1, 1999, by
and among Specialty Foods Acquisition Corporation, 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)
10.67 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)
10.68 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)
10.69 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)
10.70 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)
10.71 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)
10.72* Stockholders Agreement, dated as of June 11, 1999, by and
between SFAC New Holdings, Inc. and holders of the 13% Senior
Secured Discount Debentures due 2009 issued by SFAC New
Holdings, Inc.
<PAGE>
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 13% Senior Secured Discount Debentures due
2009.
27* Financial Data Schedule
99.1** Form of Letter of Transmittal.
99.2** Form of Notice of Guaranteed Delivery.
- ----------
* To be filed herewith.
** To be filed by amendment.
Exhibit 3.1
CERTIFICATE OF INCORPORATION
of
SFAC Merger Holdings, Inc.
The undersigned incorporator, in order to form a corporation under the
General Corporation Law of the State of Delaware, certifies as follows:
1. Name. The name of the corporation is SFAC Merger Holdings, Inc. (the
"Corporation").
2. Address; Registered Office and Agent. The address of the Corporation's
registered office is 9 East Loockerman Street, City of Dover, County of Kent,
State of Delaware; and its registered agent at such address is National
Corporate Research, Ltd.
3. Purposes. The purpose of the Corporation is to engage in, carry on and
conduct any lawful act or activity for which corporations may be organized under
the Delaware General Corporation Law.
4. Number of Shares. The total number of shares of all classes of stock
that the Corporation shall have authority to issue is 319,650 shares, consisting
of (a) Three Hundred and Nineteen Thousand, Two Hundred and Fifty (319,250)
shares of common stock, no par value per share (the "Common Stock") and (b) Four
Hundred (400) shares of preferred stock, no par value per share (the "Preferred
Stock").
<PAGE>
2
The designation, relative rights, preferences and limitations of the
shares of each class are as follows:
4.1 Common Stock.
4.1.1 Each share of Common Stock shall have one vote, and, except as
otherwise provided in respect of any other class or series of stock now or
hereafter provided for, the exclusive voting power for all purposes shall be
vested in the holders of the Common Stock.
4.1.2 Subject to the provisions of law and any other class or series
of stock now or hereafter provided for, each outstanding share of Common Stock
shall be entitled to receive such dividends and other distributions in cash,
property or shares of stock of the Corporation as may be declared thereon by the
Board of Directors from time to time out of assets of the Corporation legally
available therefor.
4.1.3 In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of the Common
Stock shall be entitled, after payment or provision for payment of the debts and
other liabilities of the Corporation and the amount to which the holders of any
other class or series of stock now or hereafter provided for having a preference
on distributions in the liquidation, dissolution or winding up of the
Corporation shall be entitled, together with any other class or series of stock
now or hereafter provided for not having a preference on distributions in the
liquidation, dissolution or winding up of the Corporation, to share ratably in
the remaining assets of the Corporation.
<PAGE>
3
4.2 Preferred Stock.
4.2.1 The shares of Preferred Stock may be issued from time to time
in one or more series of any number of shares, provided that the aggregate
number of shares issued and not canceled of any and all such series shall not
exceed the total number of shares of Preferred Stock hereinabove authorized, and
with distinctive serial designations, all as shall hereafter be stated and
expressed in the resolution or resolutions providing for the issue of such
shares of Preferred Stock from time to time adopted by the Board pursuant to
authority so to do which is hereby vested in the Board. Each series of shares of
Preferred Stock (a) may have such voting powers, full or limited, or may be
without voting powers; (b) may be subject to redemption at such time or times
and at such prices; (c) may be entitled to receive dividends (which may be
cumulative or non-cumulative) at such rate or rates, on such conditions and at
such times, and payable in preference to, or in such relation to, the dividends
payable on any other class or classes or series of stock; (d) may have such
rights upon the dissolution of, or upon any distribution of the assets of, the
Corporation; (e) may be made convertible into or exchangeable for, shares of any
other class or classes or of any other series of the same or any other class or
classes of shares of the Corporation at such price or prices or at such rates of
exchange and with such adjustments; (f) may be entitled to the benefit of a
sinking fund to be applied to the purchase or redemption of shares of such
series in such amount or amounts; (g) may be entitled to the benefit of
conditions and restrictions upon the creation of indebtedness of the Corporation
or any subsidiary, upon the issue of any additional shares (including additional
shares of such series or of any other series) and
<PAGE>
4
upon the payment of dividends or the making of other distributions on, and the
purchase, redemption or other acquisition by the Corporation or any subsidiary
of, any outstanding shares of the Corporation and (h) may have such other
relative, participating, optional or other special rights, qualifications,
limitations or restrictions thereof; all as shall be stated in said resolution
or resolutions providing for the issue of such shares of Preferred Stock. Any of
the voting powers, designations, preferences, rights and qualifications,
limitations or restrictions of any such series of Preferred Stock may be made
dependent upon facts ascertainable outside of the resolution or resolutions
providing for the issue of such Preferred Stock adopted by the Board pursuant to
the authority vested in it by this Section 4.2.1, provided that the manner in
which such facts shall operate upon the voting powers, designations,
preferences, rights and qualifications, limitations or restrictions of such
series of Preferred Stock is clearly and expressly set forth in the resolution
or resolutions providing for the issue of such Preferred Stock. The term "facts"
as used in the next preceding sentence shall have the meaning given to it in
section 151(a) of the Delaware General Corporation Law. Shares of Preferred
Stock of any series that have been redeemed (whether through the operation of a
sinking fund or otherwise) or that if convertible or exchangeable, have been
converted into or exchanged for shares of any other class or classes shall have
the status of authorized and unissued shares of Preferred Stock of the same
series and may be reissued as a part of the series of which they were originally
a part or may be reclassified and reissued as part of a new series of shares of
Preferred Stock to be created by resolution or resolutions of the Board or as
part of any other series of shares of Preferred Stock, all subject to the
<PAGE>
5
conditions or restrictions on issuance set forth in the resolution or
resolutions adopted by the Board providing for the issue of any series of shares
of Preferred Stock.
4.2.2 Subject to the provisions of any applicable law or of the
By-laws of the Corporation, as from time to time amended, with respect to the
closing of the transfer books or the fixing of a record date for the
determination of stockholders entitled to vote and except as otherwise provided
by law or by the resolution or resolutions providing for the issue of any series
of shares of Preferred Stock, the holders of outstanding shares of Common Stock
shall exclusively possess voting power for the election of directors and for all
other purposes, each holder of record of shares of Common Stock being entitled
to one vote for each share of Common Stock standing in his or her name on the
books of the Corporation. Except as otherwise provided by the resolution or
resolutions providing for the issue of any series of shares of Preferred Stock,
the holders of shares of Common Stock shall be entitled, to the exclusion of the
holders of shares of Preferred Stock of any and all series, to receive such
dividends as from time to time may be declared by the Board. In the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, after payment shall have been made to the holders of shares of
Preferred Stock of the full amount to which they shall be entitled pursuant to
the resolution or resolutions providing for the issue of any series of shares of
Preferred Stock, the holders of shares of Common Stock shall be entitled, to the
exclusion of the holders of shares of Preferred Stock of any and all series, to
share, ratably according to the number of shares of Common Stock held by them,
in all remaining assets of the Corporation available for distribution to its
stockholders.
<PAGE>
6
4.2.3 Subject to the provisions of this Certificate of Incorporation
and except as otherwise provided by law, the stock of the Corporation,
regardless of class, may be issued for such consideration and for such corporate
purposes as the Board may from time to time determine.
5. Name and Address of Incorporator. The name and mailing address of the
incorporator are: Mitchell S. Fishman, 1285 Avenue of the Americas, New York,
New York 10019-6064.
6. Election of Directors. Members of the Board of Directors may be elected
either by written ballot or by voice vote.
7. Limitation of Liability. No Director of the Corporation shall be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a Director, except for liability (a) for any
breach of the Director's duty of loyalty to the Corporation or its stockholders,
(b) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (c) under Section 174 of the Delaware
General Corporation Law or (d) for any transaction from which the Director
derived any improper personal benefits.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
Director of the Corporation existing at the time of such repeal or modification.
<PAGE>
7
8. Indemnification.
8.1 To the extent not prohibited by law, the Corporation shall
indemnify any person who is or was made, or threatened to be made, a party to
any threatened, pending or completed action, suit or proceeding (a
"Proceeding"), whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of the Corporation
to procure a judgment in its favor, by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was a Director or
officer of the Corporation, or is or was serving in any capacity at the request
of the Corporation for any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise (an "Other Entity"), against
judgments, fines, penalties, excise taxes, amounts paid in settlement and costs,
charges and expenses (including attorneys' fees and disbursements). Persons who
are not Directors or officers of the Corporation may be similarly indemnified in
respect of service to the Corporation or to an Other Entity at the request of
the Corporation to the extent the Board at any time specifies that such persons
are entitled to the benefits of this Section 8.
8.2 The Corporation shall, from time to time, reimburse or advance
to any Director or officer or other person entitled to indemnification hereunder
the funds necessary for payment of expenses, including attorneys' fees and
disbursements, incurred in connection with any Proceeding, in advance of the
final disposition of such Proceeding; provided, however, that, if required by
the Delaware General Corporation Law, such expenses incurred by or on behalf of
any Director or officer or other person may be paid in advance of the final
disposition of a Proceeding
<PAGE>
8
only upon receipt by the Corporation of an undertaking, by or on behalf of such
Director or officer (or other person indemnified hereunder), to repay any such
amount so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right of appeal that such Director,
officer or other person is not entitled to be indemnified for such expenses.
8.3 The rights to indemnification and reimbursement or advancement
of expenses provided by, or granted pursuant to, this Section 8 shall not be
deemed exclusive of any other rights to which a person seeking indemnification
or reimbursement or advancement of expenses may have or hereafter be entitled
under any statute, this Certificate of Incorporation, the By-laws of the
Corporation (the "Bylaws"), any agreement, any vote of stockholders or
disinterested Directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office.
8.4 The rights to indemnification and reimbursement or advancement
of expenses provided by, or granted pursuant to, this Section 8 shall continue
as to a person who has ceased to be a Director or officer (or other person
indemnified hereunder) and shall inure to the benefit of the executors,
administrators, legatees and distributees of such person.
8.5 The 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 an Other Entity, against any
liability asserted against such person and incurred by such person in any such
<PAGE>
9
capacity, or arising out of such person's status as such, whether or not the
Corporation would have the power to indemnify such person against such liability
under the provisions of this Section 8, the By-laws or under Section 145 of the
Delaware General Corporation Law or any other provision of law.
8.6 The provisions of this Section 8 shall be a contract between the
Corporation, on the one hand, and each Director and officer who serves in such
capacity at any time while this Section 8 is in effect and any other person
indemnified hereunder, on the other hand, pursuant to which the Corporation and
each such Director, officer, or other person intend to be legally bound. No
repeal or modification of this Section 8 shall affect any rights or obligations
with respect to any state of facts then or theretofore existing or thereafter
arising or any proceeding theretofore or thereafter brought or threatened based
in whole or in part upon any such state of facts.
8.7 The rights to indemnification and reimbursement or advancement
of expenses provided by, or granted pursuant to, this Section 8 shall be
enforceable by any person entitled to such indemnification or reimbursement or
advancement of expenses in any court of competent jurisdiction. The burden of
proving that such indemnification or reimbursement or advancement of expenses is
not appropriate shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, its independent legal counsel and
its stockholders) to have made a determination prior to the commencement of such
action that such indemnification or reimbursement or advancement of expenses is
proper in the circumstances nor an actual determination by the Corporation
(including its Board of
<PAGE>
10
Directors, its independent legal counsel and its stockholders) that such person
is not entitled to such indemnification or reimbursement or advancement of
expenses shall constitute a defense to the action or create a presumption that
such person is not so entitled. Such a person shall also be indemnified for any
expenses incurred in connection with successfully establishing his or her right
to such indemnification or reimbursement or advancement of expenses, in whole or
in part, in any such proceeding.
8.8 Any Director or officer of the Corporation serving in any
capacity (a) another corporation of which a majority of the shares entitled to
vote in the election of its directors is held, directly or indirectly, by the
Corporation or (b) any employee benefit plan of the Corporation or any
corporation referred to in clause (a) shall be deemed to be doing so at the
request of the Corporation.
8.9 Any person entitled to be indemnified or to reimbursement or
advancement of expenses as a matter of right pursuant to this Section 8 may
elect to have the right to indemnification or reimbursement or advancement of
expenses interpreted on the basis of the applicable law in effect at the time of
the occurrence of the event or events giving rise to the applicable Proceeding,
to the extent permitted by law, or on the basis of the applicable law in effect
at the time such indemnification or reimbursement or advancement of expenses is
sought. Such election shall be made, by a notice in writing to the Corporation,
at the time indemnification or reimbursement or advancement of expenses is
sought; provided, however, that if no such notice is given, the right to
indemnification or
<PAGE>
11
reimbursement or advancement of expenses shall be determined by the law in
effect at the time indemnification or reimbursement or advancement of expenses
is sought.
9. Adoption, Amendment and/or Repeal of By-Laws. The Board of Directors
may from time to time (after adoption by the undersigned of the original
By-laws) make, alter or repeal the By-laws by a vote of two-thirds of the entire
Board of Directors that would be in office if no vacancy existed, whether or not
present at a meeting; provided, however, that any By-laws made, amended or
repealed by the Board of Directors may be amended or repealed, and any By-laws
may be made, by the stockholders of the Corporation by vote of a majority of the
holders of shares of stock of the Corporation entitled to vote in the election
of Directors of the Corporation.
WITNESS the signature of this Certificate as of October 14, 1998.
/s/ Mitchell S. Fishman
---------------------------------
Mitchell S. Fishman, Incorporator
Exhibit 3.2
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
SFAC MERGER HOLDINGS, INC.
------------------------------------------
Pursuant to Section 241 of the General
Corporation Law of the State of Delaware
------------------------------------------
I, the undersigned, sole Incorporator of SFAC Merger Holdings, Inc.
a Delaware corporation (hereinafter called the "Corporation"), do hereby certify
as follows:
FIRST: Article 1 of the Corporation's Certificate of Incorporation
is hereby amended to read in its entirety as set forth below:
1. Name. The name of the corporation is SFAC New Holdings, Inc.
(hereinafter the "Corporation").
SECOND: The Corporation has not received payment for any of its
stock and the foregoing amendment was duly adopted in accordance with Section
241 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to
be duly executed in its corporate name this 3rd day of June, 1999.
SFAC MERGER HOLDINGS, INC.,
By: /s/ Mitchell S. Fishman
------------------------------------
Name: Mitchell S. Fishman
Title: Incorporator
Exhibit 3.3
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
SFAC NEW HOLDINGS, INC.
------------------------------------------
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
------------------------------------------
SFAC New Holdings, Inc., a Delaware corporation (hereinafter called
the "Corporation"), does hereby certify as follows:
FIRST: Article 4 of the Corporation's Certificate of Incorporation
is hereby amended by deleting the first paragraph therein in its entirety and by
inserting in lieu and instead thereof the following:
4. Number of Shares. The total number of shares of all classes of
stock that the Corporation shall have authority to issue is three hundred twenty
thousand, two hundred and fifty (320,250) shares, consisting of (a) three
hundred and nineteen thousand, two hundred and fifty (319,250) shares of common
stock, no par value per share (the "Common Stock") and (b) one thousand (1,000)
shares of preferred stock, no par value per share (the "Preferred Stock").
SECOND: The foregoing amendment was duly adopted in accordance with
Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned have caused this Certificate to
be duly executed in its corporate name as of this 8th day of June, 1999.
SFC SUB, INC.
By: /s/ Robert L. Fishbune
-------------------------------------------
Name: Robert L. Fishbune
Title: Vice President & Assistant Secretary
By: /s/ Sean Stack
-------------------------------------------
Name: Sean Stack
Title: Vice President, Treasurer & Secretary
Exhibit 3.4
BY-LAWS
of
SFAC NEW HOLDINGS, INC.
(A Delaware Corporation)
Effective as of June 2, 1999
ARTICLE 1
DEFINITIONS
As used in these By-laws, unless the context otherwise requires, the term:
1.1 "Assistant Secretary" means an Assistant Secretary of the Corporation.
1.2 "Assistant Treasurer" means an Assistant Treasurer of the Corporation.
1.3 "Board" means the Board of Directors of the Corporation.
1.4 "By-laws" means these by-laws of the Corporation, as amended from time
to time.
1.5 "Certificate of Incorporation" means the initial certificate of
incorporation of the Corporation, as amended, supplemented or restated from time
to time.
1.6 "Chairman" means the Chairman of the Board of Directors of the
Corporation.
1.7 "Corporation" means SFAC Merger Holdings, Inc.
1.8 "Directors" means directors of the Corporation.
1.9 "Entire Board" means all directors of the Corporation in office,
whether or not present at a meeting of the Board, but disregarding vacancies.
1.10 "General Corporation Law" means the General Corporation Law of the
State of Delaware, as amended from time to time.
1.11 "Managing Director" means a Managing Director of the Corporation.
<PAGE>
1.12 "Office of the Corporation" means the executive office of the
Corporation, anything in Section 131 of the General Corporation Law to the
contrary notwithstanding.
1.13 "President" means the President of the Corporation.
1.14 "Chief Operating Officer" means the Chief Operating Officer of the
Corporation.
1.15 "Secretary" means the Secretary of the Corporation.
1.16 "Stockholders" means the stockholders of the Corporation.
1.17 "Treasurer" means the Treasurer of the Corporation.
1.18 "Vice President" means a Vice President of the Corporation.
ARTICLE 2
STOCKHOLDERS
2.1 Place of Meetings. Every meeting of Stockholders shall be held at the
Office of the Corporation or at such other place within or without the State of
Delaware as shall be specified or fixed in the notice of such meeting or in the
waiver of notice thereof.
2.2 Annual Meeting. A meeting of Stockholders shall be held annually for
the election of Directors and the transaction of other business at such hour and
on such business day in April or as otherwise may be determined by the Board and
designated in the notice of meeting.
2.3 Deferred Meeting for Election of Directors, Etc. If the annual meeting
of Stockholders for the election of Directors and the transaction of other
business is not held within the month specified in Section 2.2 hereof, the Board
shall call a meeting of Stockholders for the election of Directors and the
transaction of other business as soon thereafter as convenient.
2.4 Other Special Meetings. A special meeting of Stockholders (other than
a special meeting for the election of Directors), unless otherwise prescribed by
statute, may be called at any time by the Board or by the President or by the
Secretary. At any special meeting of Stockholders only such business may be
transacted as is related to the purpose or purposes of such meeting set forth in
the notice thereof given pursuant to Section 2.6 hereof or in any waiver of
notice thereof given pursuant to Section 2.7 hereof.
2.5 Fixing Record Date. For the purpose of (a) determining the
Stockholders entitled (i) to notice of or to vote at any meeting of Stockholders
or any
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<PAGE>
adjournment thereof, (ii) to express consent to corporate action in writing
without a meeting, or (iii) to receive payment of any dividend or other
distribution or allotment of any rights, or to exercise any rights in respect of
any change, conversion or exchange of stock; or (b) any other lawful action, the
Board may fix a record date, which record date shall not precede the date upon
which the resolution fixing the record date was adopted by the Board and which
record date shall not be (x) in the case of clause (a)(i) above, more than sixty
nor less than ten days before the date of such meeting, (y) in the case of
clause (a)(ii) above, more than ten days after the date upon which the
resolution fixing the record date was adopted by the Board, and (z) in the case
of clause (a)(iii) or (b) above, more than sixty days prior to such action. If
no such record date is fixed:
2.5.1 The record date for determining Stockholders entitled to
notice of or to vote at a meeting of Stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or,
if notice is waived, at the close of business on the day next preceding
the day on which the meeting is held;
2.5.2 The record date for determining Stockholders entitled to
express consent to corporate action in writing without a meeting, when no
prior action by the Board is required under the General Corporation Law,
shall be the first day on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the Corporation by
delivery to its registered office in the State of Delaware, its principal
place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of Stockholders are
recorded; and when prior action by the Board is required under the General
Corporation Law, the record date for determining Stockholders entitled to
consent to corporate action in writing without a meeting shall be at the
close of business on the date on which the Board adopts the resolution
taking such prior action; and
2.5.3 The record date for determining Stockholders for any purpose
other than those specified in Sections 2.5.1 and 2.5.2 shall be at the
close of business on the day on which the Board adopts the resolution
relating thereto.
When a determination of Stockholders entitled to notice of or to vote at
any meeting of Stockholders has been made as provided in this Section 2.5, such
determination shall apply to any adjournment thereof unless the Board fixes a
new record date for the adjourned meeting. Delivery made to the Corporation's
registered office in accordance with Section 2.5.2 shall be by hand or by
certified or registered mail, return receipt requested.
2.6 Notice of Meetings of Stockholders. Except as otherwise provided in
Sections 2.5 and 2.7 hereof, whenever under the provisions of any statute, the
Certificate of Incorporation or these By-laws, Stockholders are required or
permitted to take any action at a meeting, written notice shall be given stating
the place, date and hour of the meeting and, in the case of a special meeting,
the purpose or purposes
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<PAGE>
for which the meeting is called. Unless otherwise provided by any statute, the
Certificate of Incorporation or these By-laws, a copy of the notice of any
meeting shall be given, personally or by mail, not less than ten or more than
sixty days before the date of the meeting, to each Stockholder entitled to
notice of or to vote at such meeting. If mailed, such notice shall be deemed to
be given when deposited in the United States mail, with postage prepaid,
directed to the Stockholder at his or her address as it appears on the records
of the Corporation. An affidavit of the Secretary or an Assistant Secretary or
of the transfer agent of the Corporation that the notice required by this
Section 2.6 has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken,
and at the adjourned meeting any business may be transacted that might have been
transacted at the meeting as originally called. If, however, the adjournment is
for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each Stockholder of record entitled to vote at the meeting.
2.7 Waivers of Notice. Whenever the giving of any notice is required by
statute, the Certificate of Incorporation or these By-laws, a waiver thereof, in
writing, signed by the Stockholder or Stockholders entitled to said notice,
whether before or after the event as to which such notice is required, shall be
deemed equivalent to notice. Attendance by a Stockholder at a meeting shall
constitute a waiver of notice of such meeting except when the Stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting has
not been lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the Stockholders need be
specified in any written waiver of notice unless so required by statute, the
Certificate of Incorporation or these By-laws.
2.8 List of Stockholders. The Secretary shall prepare and make, or cause
to be prepared and made, at least ten days before every meeting of Stockholders,
a complete list of the Stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each Stockholder and the number
of shares registered in the name of each Stockholder. Such list shall be open to
the examination of any Stockholder, the stockholder's agent, or attorney, at the
stockholder's expense, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting, either
at a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any Stockholder who is present. The Corporation shall maintain the
Stockholder list in written form or in another form capable of conversion into
written form within a reasonable time. Upon the willful neglect or refusal of
the Directors to produce such a list at any meeting for the election of
Directors, they shall be ineligible for election to any office at such meeting.
The stock ledger shall be the only evidence as to who are the Stockholders
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<PAGE>
entitled to examine the stock ledger, the list of Stockholders or the books of
the Corporation, or to vote in person or by proxy at any meeting of
Stockholders.
2.9 Quorum of Stockholders: Adjournment. Except as otherwise provided by
any statute, the Certificate of Incorporation or these By-laws, the holders of
one-third of all outstanding shares of stock entitled to vote at any meeting of
Stockholders, present in person or represented by proxy, shall constitute a
quorum for the transaction of any business at such meeting. When a quorum is
once present to organize a meeting of Stockholders, it is not broken by the
subsequent withdrawal of any Stockholders. The holders of a majority of the
shares of stock present in person or represented by proxy at any meeting of
Stockholders, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. Shares of its own
stock belonging to the Corporation or to another corporation, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held, directly or indirectly, by the Corporation, shall neither
be entitled to vote nor be counted for quorum purposes; provided, however, that
the foregoing shall not limit the right of the Corporation to vote stock,
including but not limited to its own stock, held by it in a fiduciary capacity.
2.10 Voting Proxies. Unless otherwise provided in the Certificate of
Incorporation, every Stockholder of record shall be entitled at every meeting of
Stockholders to one vote for each share of capital stock standing in his or her
name on the record of Stockholders determined in accordance with Section 2.5
hereof. If the Certificate of Incorporation provides for more or less than one
vote for any share on any matter, each reference in the By-laws or the General
Corporation Law to a majority or other proportion of stock shall refer to such
majority or other proportion of the votes of such stock. The provisions of
Sections 212 and 217 of the General Corporation Law shall apply in determining
whether any shares of capital stock may be voted and the persons, if any,
entitled to vote such shares; but the Corporation shall be protected in assuming
that the persons in whose names shares of capital stock stand on the stock
ledger of the Corporation are entitled to vote such shares. Holders of
redeemable shares of stock are not entitled to vote after the notice of
redemption is mailed to such holders and a sum sufficient to redeem the stocks
has been deposited with a bank, trust company, or other financial institution
under an irrevocable obligation to pay the holders the redemption price on
surrender of the shares of stock. At any meeting of Stockholders (at which a
quorum was present to organize the meeting), all matters, except as otherwise
provided by statute or by the Certificate of Incorporation or by these By-laws,
shall be decided by a majority of the votes cast at such meeting by the holders
of shares present in person or represented by proxy and entitled to vote
thereof, whether or not a quorum is present when the vote is taken. All
elections of Directors shall be by written ballot unless otherwise provided in
the Certificate of Incorporation. In voting on any other question on which a
vote by ballot is required by law, or is demanded by any Stockholder entitled to
vote, the voting shall be by ballot. Each ballot shall be signed by the
Stockholder voting or the stockholder's proxy and shall state the number of
shares voted. On all other questions, the voting may be viva voce. Each
Stockholder entitled to vote at a meeting of Stockholders or to express consent
or dissent to corporate action in writing
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<PAGE>
without a meeting may authorize another person or persons to act for such
Stockholder by proxy. The validity and enforceability of any proxy shall be
determined in accordance with Section 212 of the General Corporation Law. A
Stockholder may revoke any proxy that is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or by delivering a proxy in accordance with applicable law bearing a later
date to the Secretary.
2.11 Voting Procedures and Inspectors of Election at Meetings of
Stockholders. The Board, in advance of any meeting of Stockholders, may appoint
one or more inspectors to act at the meeting and make a written report thereof.
The Board may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at a
meeting, the person presiding at the meeting may appoint, and on the request of
any Stockholder entitled to vote thereat shall appoint, one or more inspectors
to act at the meeting. Each inspector, before entering upon the discharge of his
or her duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his or her
ability. The inspectors shall (a) ascertain the number of shares outstanding and
the voting power of each, (b) determine the shares represented at the meeting
and the validity of proxies and ballots, (c) count all votes and ballots, (d)
determine and retain for a reasonable period a record of the disposition of any
challenges made to any determination by the inspectors, and (e) certify their
determination of the number of shares represented at the meeting and their count
of all votes and ballots. The inspectors may appoint or retain other persons or
entities to assist the inspectors in the performance of their duties. Unless
otherwise provided by the Board, the date and time of the opening and the
closing of the polls for each matter upon which the Stockholders will vote at a
meeting shall be determined by the person presiding at the meeting and shall be
announced at the meeting. No ballot, proxies or votes, or any revocation thereof
or change thereto, shall be accepted by the inspectors after the closing of the
polls unless the Court of Chancery of the State of Delaware upon application by
a Stockholder shall determine otherwise.
2.12 Organization. At each meeting of Stockholders, the Chairman, or in
the absence of the Chairman the President, or in the absence of the President a
Vice President, and in case more than one Vice President shall be present, the
Vice President designated by the Board (or in the absence of any such
designation, the most senior Vice President, based on age, present), shall act
as chairman of the meeting. The Secretary, or in his or her absence one of the
Assistant Secretaries, shall act as secretary of the meeting. In case none of
the officers above designated to act as chairman or secretary of the meeting,
respectively, shall be present, a chairman or a secretary of the meeting, as the
case may be, shall be chosen by a majority of the votes cast at such meeting by
the holders of shares of capital stock present in person or represented by proxy
and entitled to vote at the meeting.
2.13 Order of Business. The order of business at all meetings of
Stockholders shall be as determined by the chairman of the meeting, but the
order of
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<PAGE>
business to be followed at any meeting at which a quorum is present may be
changed by a majority of the votes cast at such meeting by the holders of shares
of capital stock present in person or represented by proxy and entitled to vote
at the meeting.
2.14 Written Consent of Stockholders Without a Meeting. Unless otherwise
provided in the Certificate of Incorporation, any action required by the General
Corporation Law to be taken at any annual or special meeting of Stockholders may
be taken without a meeting, without prior notice and without a vote, if a
consent or consents in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered (by hand or by certified or registered mail, return receipt
requested) to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
Stockholders are recorded. Every written consent shall bear the date of
signature of each Stockholder who signs the consent and no written consent shall
be effective to take the corporate action referred to therein unless, within 60
days of the earliest dated consent delivered in the manner required by this
Section 2.14, written consents signed by a sufficient number of holders to take
action are delivered to the Corporation as aforesaid. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those Stockholders who have not consented in writing.
ARTICLE 3
DIRECTORS
3.1 General Powers. Except as otherwise provided in the Certificate of
Incorporation, the business and affairs of the Corporation shall be managed by
or under the direction of the Board. The Board may adopt such rules and
regulations, not inconsistent with the Certificate of Incorporation or these
By-laws or applicable laws, as it may deem proper for the conduct of its
meetings and the management of the Corporation. In addition to the powers
expressly conferred by these By-laws, the Board may exercise all powers and
perform all acts that are not required, by these By-laws or the Certificate of
Incorporation or by statute, to be exercised and performed by the Stockholders.
3.2 Number; Qualification; Term of Office. The Board shall consist of one
or more members. The number of Directors shall be fixed initially by the
incorporator and may thereafter be changed from time to time by action of the
Stockholders or by action of the Board. Directors need not be Stockholders. Each
Director shall hold office until a successor is elected and qualified or until
the Director's death, resignation or removal.
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3.3 Election. Directors shall, except as otherwise required by statute or
by the Certificate of Incorporation, be elected by a plurality of the votes cast
at a meeting of Stockholders by the holders of shares entitled to vote in the
election.
3.4 Newly Created Directorships and Vacancies. Unless otherwise provided
in the Certificate of Incorporation, newly created Directorships resulting from
an increase in the number of Directors and vacancies occurring in the Board for
any other reason, including the removal of Directors without cause, may be
filled by the affirmative votes of a majority of the entire Board, although less
than a quorum, or by a sole remaining Director, or may be elected by a plurality
of the votes cast by the holders of shares of capital stock entitled to vote in
the election at a special meeting of Stockholders called for that purpose. A
Director elected to fill a vacancy shall be elected to hold office until a
successor is elected and qualified, or until the Director's earlier death,
resignation or removal.
3.5 Resignation. Any Director may resign at any time by written notice to
the Corporation. Such resignation shall take effect at the time therein
specified, and, unless otherwise specified in such resignation, the acceptance
of such resignation shall not be necessary to make it effective.
3.6 Removal. Subject to the provisions of Section 141(k) of the General
Corporation Law, any or all of the Directors may be removed with or without
cause by vote of the holders of a majority of the shares then entitled to vote
at an election of Directors.
3.7 Compensation. Each Director, in consideration of his or her service as
such, shall be entitled to receive from the Corporation such amount per annum or
such fees for attendance at Directors' meeting, or both, as the Board may from
time to time determine, together with reimbursement for the reasonable
out-of-pocket expenses, if any, incurred by such Director in connection with the
performance of his or her duties. Each Director who shall serve as a member of
any committee of Directors in consideration of serving as such shall be entitled
to such additional amount per annum or such fees for attendance at committee
meetings, or both, as the Board may from time to time determine, together with
reimbursement for the reasonable out-of-pocket expenses, if any, incurred by
such Director in the performance of his or her duties. Nothing contained in this
Section 3.7 shall preclude any Director from serving the Corporation or its
subsidiaries in any other capacity and receiving proper compensation therefor.
3.8 Times and Places of Meetings. The Board may hold meetings, both
regular and special, either within or without the State of Delaware. The times
and places for holding meetings of the Board may be fixed from time to time by
resolution of the Board or (unless contrary to a resolution of the Board) in the
notice of the meeting.
3.9 Annual Meetings. On the day when and at the place where the annual
meeting of Stockholders for the election of Directors is held, and as soon as
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practicable thereafter, the Board may hold its annual meeting, without notice of
such meeting, for the purposes of organization, the election of officers and the
transaction of other business. The annual meeting of the Board may be held at
any other time and place specified in a notice given as provided in Section 3.11
hereof for special meetings of the Board or in a waiver of notice thereof.
3.10 Regular Meetings. Regular meetings of the Board may be held without
notice at such times and at such places as shall from time to time be determined
by the Board.
3.11 Special Meetings. Special meetings of the Board may be called by the
Chairman, the President or the Secretary or by any two or more Directors then
serving on at least one day's notice to each Director given by one of the means
specified in Section 3.14 hereof other than by mail, or on at least three days'
notice if given by mail. Special meetings shall be called by the Chairman,
President or Secretary in like manner and on like notice on the written request
of any two or more of the Directors then serving.
3.12 Telephone Meetings. Directors or members of any committee designated
by the Board may participate in a meeting of the Board or of such committee by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this Section 3.12 shall constitute
presence in person at such meeting.
3.13 Adjourned Meetings. A majority of the Directors present at any
meeting of the Board, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. At least one day's
notice of any adjourned meeting of the Board shall be given to each Director
whether or not present at the time of the adjournment, if such notice shall be
given by one of the means specified in Section 3.14 hereof other than by mail,
or at least three days' notice if by mail. Any business may be acted at an
adjourned meeting that might have been transacted at the meeting as originally
called.
3.14 Notice Procedure. Subject to Section 3.11 and 3.17 hereof, whenever,
under the provisions of any statute, the Certificate of Incorporation or these
By-laws, notice is required to be given to any Director, such notice shall be
deemed given effectively if given in person or by telephone, by mail addressed
to such Director at such Director's address as it appears on the records of the
Corporation, with postage thereon prepaid, or by telegram, telex, telecopy or
similar means addressed as aforesaid.
3.15 Waiver of Notice. Whenever the giving of any notice is required by
statute, the Certificate of Incorporation or these By-laws, a waiver thereof, in
writing, signed by the person or persons entitled to said notice, whether before
or after the event as to which such notice is required, shall be deemed
equivalent to notice. Attendance by a person at a meeting shall constitute a
waiver of notice of such
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meeting except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
on the ground that the meeting has not been lawfully called or convened. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the Directors or a committee of Directors need be specified in any
written waiver of notice unless so required by statute, the Certificate of
Incorporation or these By-laws.
3.16 Organization. At each meeting of the Board, the Chairman, or in the
absence of the Chairman the President, or in the absence of the President a
chairman chosen by a majority of the Directors present, shall preside. The
Secretary shall act as secretary at each meeting of the Board. In case the
Secretary shall be absent from any meeting of the Board, an Assistant Secretary
shall perform the duties of secretary at such meeting; and in the absence from
any such meeting of the Secretary and all Assistant Secretaries, the person
presiding at the meeting may appoint any person to act as secretary of the
meeting.
3.17 Quorum of Directors. The presence in person of a majority of the
entire Board shall be necessary and sufficient to constitute a quorum for the
transaction of business at any meeting of the Board, but a majority of a smaller
number may adjourn any such meeting to a later date.
3.18 Action by Majority Vote. Except as otherwise expressly required by
statute, the Certificate of Incorporation or these By-laws, the act of a
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board.
3.19 Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if all Directors or members of such committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
ARTICLE 4
COMMITTEES OF THE BOARD
The Board may, by resolution passed by a vote of the entire Board,
designate one or more committees, each committee to consist of one or more of
the Directors of the Corporation. The Board may designate one or more Directors
as alternate members of any committee to replace absent or disqualified members
at any meeting of such committee. If a member of a committee shall be absent
from any meeting, or disqualified from voting thereat, the remaining member or
members present and not disqualified from voting, whether or not such member or
members constitute a quorum, may, by a unanimous vote, appoint another member of
the Board to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in a resolution of the Board
passed as aforesaid,
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shall have and may exercise all the powers and authority of the Board in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be impressed on all papers that may require it, but
no such committee shall have the power or authority of the Board in reference to
amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation under Section 251 or 252 of the General Corporation Law, selling,
leasing or exchanging all or substantially all of the Corporation's property and
assets, dissolving or revoking the dissolution of the Corporation or amending
the By-laws of the Corporation; and, unless the resolution designating it
expressly so provides, no such committee shall have the power and authority to
declare a dividend, to authorize the issuance of stock or to adopt a certificate
of ownership and merger pursuant to Section 253 of the General Corporation Law.
Such committee or committees shall have such name or names as may be determined
from time to time by resolution adopted by the Board. Unless otherwise specified
in the resolution of the Board designating a committee, at all meetings of such
committee a majority of the total number of members of the committee shall
constitute a quorum for the transaction of business, and the vote of a majority
of the members of the committee present at any meeting at which there is quorum
shall be the act of the committee. Each committee shall keep regular minutes of
its meetings. Unless the Board otherwise provides, each committee designated by
the Board may make, alter and repeal rules for the conduct of its business. In
the absence of such rules each committee shall conduct its business in the same
manner as the Board conducts its business pursuant to Article 3 of these
By-laws.
ARTICLE 5
OFFICERS
5.1 Positions. The officers of the Corporation shall be a Chairman, a
President, a Chief Operating Officer, a Secretary, a Treasurer and such other
officers as the Board may appoint, including one or more Vice Presidents, one or
more Managing Directors and one or more Assistant Secretaries and Assistant
Treasurers, who shall exercise such powers and perform such duties as shall be
determined from time to time by the Board. The Board may designate one or more
Vice Presidents as Executive Vice Presidents and may use descriptive words or
phrases to designate the standing, seniority or areas of special competence of
the Vice Presidents elected or appointed by it. Any number of offices may be
held by the same person unless the Certificate of Incorporation or these By-laws
otherwise provide.
5.2 Appointment. The officers of the Corporation shall be chosen by the
Board annually or at such other time or times as the Board shall determine.
5.3 Compensation. The compensation of all officers of the Corporation
shall be fixed by the Board. No officer shall be prevented from receiving a
salary or other compensation by reason of the fact that the officer is also a
Director.
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5.4 Term of Office. Each officer of the Corporation shall hold office
until such officer's successor is chosen and qualifies or until such officer's
earlier death, resignation or removal. Amy officer may resign at any time upon
written notice to the Corporation. Such resignation shall take effect at the
date of receipt of such notice or at such later time as is therein specified,
and, unless otherwise specified, the acceptance of such resignation shall not be
necessary to make it effective. The resignation of an officer shall be without
prejudice to the contract rights of the Corporation, if any. Any officer elected
or appointed by the Board may be removed at any time, with or without cause, by
vote of a majority of the entire Board. Any vacancy occurring in any office of
the Corporation shall be filled by the Board. The removal of an officer without
cause shall be without prejudice to the officer's contract rights, if any. The
election or appointment of an officer shall not of itself create contract
rights.
5.5 Fidelity Bonds. The Corporation may secure the fidelity of any or all
of its officers or agents by bond or otherwise.
5.6 Chairman. The Chairman shall preside at all meetings of the Board and
shall exercise such powers and perform such other duties as shall be determined
from time to time by the Board.
5.7 President. The President shall be the Chief Executive Officer of the
Corporation and shall have the general supervision over the business of the
Corporation, subject, however, to the control of the Board and of any duly
authorized committee of Directors. The President shall preside at all meetings
of the Stockholders and at all meetings of the Board at which the Chairman is
not present. The President may sign and execute in the name of the Corporation
deeds, mortgages, bonds, contracts and other instruments except in cases in
which the signing and execution thereof shall be expressly delegated by the
Board or by these By-laws to some other officer or agent of the Corporation or
shall be required by statute otherwise to be signed or executed and, in general,
the President shall perform all duties incident to the office of President of a
corporation and such other duties as may from time to time be assigned to the
President by the Board.
5.8 Chief Operating Officer. The Chief Operating Officer shall be the
Chief Operating Officer of the Corporation and shall be responsible for the day
to day supervision of the business of the Corporation and the businesses
conducted by the Corporation's subsidiaries, subject, however, to the
supervision of the President and the control of the Board and of any duly
authorized committee of Directors. At the request of the President, or, in the
President's absence, at the request of the Board, the Chief Operating Officer
shall perform all of the duties of the President and, in so performing, shall
have all the powers of, and be subject to all restrictions upon, the President.
The Chief Operating Officer may sign and execute in the name of the Corporation
deeds, mortgages, bonds, contracts or other instruments, except in cases in
which the signing and execution thereof shall be expressly delegated by the
Board or by these By-laws to some other officer or agent of the Corporation, or
shall be required by statute otherwise to be signed or executed, and the Chief
Operating
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Officer shall perform such other duties as from time to time may be assigned to
the Chief Operating Officer by the Board or by the President.
5.9 Vice President. At the request of the President, or in the President's
and the Chief Operating Officer's absence, at the request of the Board, the Vice
Presidents shall (in such order as may be designated by the Board or, in the
absence of any such designation, in order of seniority based on age) perform all
of the duties of the President and, in so performing, shall have all the powers
of, and be subject to all restrictions upon, the President. Any Vice President
may sign and execute in the name of the Corporation deeds, mortgages, bonds,
contracts or other instruments, except in cases in which the signing and
execution thereof shall be expressly delegated by the Board or by these By-laws
to some other officer or agent of the Corporation, or shall be required by
statute otherwise to be signed or executed, and each Vice President shall
perform such other duties as from time to time may be assigned to such Vice
President by the Board or by the President.
5.10 Managing Directors. Managing Directors shall perform such duties as
from time to time may be assigned to them by the Board or by the President. Any
Managing Director may sign and execute in the name of the Corporation deeds,
mortgages, bonds, contracts or other instruments, except in cases in which the
signing and execution thereof shall be expressly delegated by the Board or by
the By-laws to some other officer or agent of the Corporation, or shall be
required by statute otherwise to be signed or executed.
5.11 Secretary. The Secretary shall attend all meetings of the Board and
of the Stockholders and shall record all the proceedings of the meetings of the
Board and of the Stockholders in a book to be kept for that purpose, and shall
perform like duties for committees of the Board, when required. The Secretary
shall give, or cause to be given, notice of all special meetings of the Board
and of the Stockholders and shall perform such other duties as may be prescribed
by the Board or by the President, under whose supervision the Secretary shall
be. The Secretary shall have custody of the corporate seal of the Corporation,
and the Secretary, or an Assistant Secretary, shall have authority to impress
the same on any instrument requiring it, and when so impressed the seal may be
attested by the signature of the Secretary or by the signature of such Assistant
Secretary. The Board may give general authority to any other officer to impress
the seal of the Corporation and to attest the same by such officer's signature.
The Secretary or an Assistant Secretary may also attest all instruments signed
by the President or any Vice President. The Secretary shall have charge of all
the books, records and papers of the Corporation relating to its organization
and management, shall see that the reports, statements and other documents
required by statute are property kept and filed and, in general, shall perform
all duties incident to the office of Secretary of a corporation and such other
duties as may from time to time be assigned to the Secretary by the Board or by
the President.
5.12 Treasurer. The Treasurer shall have charge and custody of, and be
responsible for, all funds, securities and notes of the Corporation, receive and
give
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receipts for moneys due and payable to the Corporation from any sources
whatsoever; deposit all such moneys and valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the
Board; against proper vouchers, cause such funds to be disbursed by checks or
drafts on the authorized depositories of the Corporation signed in such manner
as shall be determined by the Board and be responsible for the accuracy of the
amounts of all moneys so disbursed; regularly enter or cause to be entered in
books or other records maintained for the purpose full and adequate account of
all moneys received or paid for the account of the Corporation; have the right
to require from time to time reports or statements giving such information as
the Treasurer may desire with respect to any and all financial transactions of
the Corporation from the officers or agents transacting the same; render to the
President or the Board, whenever the President or the Board shall require the
Treasurer to do so, an account of the financial condition of the Corporation and
of all financial transactions of the Corporation; exhibit at all reasonable
times the records and books of account to any of the Directors upon application
at the office of the Corporation where such records and books are kept; disburse
the funds of the Corporation as ordered by the Board, and, in general, perform
all duties incident to the office of Treasurer of a corporation and such other
duties as may from time to time be assigned to the Treasurer by the Board or the
President.
5.13 Assistant Secretaries and Assistant Treasurers. Assistant Secretaries
and Assistant Treasurers shall perform such duties as shall be assigned to them
by the Secretary or by the Treasurer, respectively, or by the Board or by the
President.
ARTICLE 6
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
6.1 Execution of Contracts. The Board, except as otherwise provided in
these Bylaws, may prospectively or retroactively authorize any officer or
officers, employee or employees or agent or agents, in the name and on behalf of
the Corporation, to enter into any contract or execute and deliver any
instrument, and any such authority may be general or confined to specific
instances, or otherwise limited.
6.2 Loans. The Board may prospectively or retroactively authorize the
President or any other officer, employee or agent of the Corporation to effect
loans and advances at any time for the Corporation from any bank, trust company
or other institution, or from any firm, corporation or individual, and for such
loans and advances the person so authorized may make, execute and deliver
promissory notes, bonds or other certificates or evidences of indebtedness of
the Corporation, and, when authorized by the Board to do so, may pledge and
hypothecate or transfer any securities or other property of the Corporation as
security for any such loans or advances. Such authority conferred by the Board
may be general or conformed to specific instances, or otherwise limited.
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6.3 Checks, Drafts, Etc. All checks, drafts and other orders for the
payment of money out of the funds of the Corporation and all evidences of
indebtedness of the Corporation shall be signed on behalf of the Corporation in
such manner as shall from time to time be determined by resolution of the Board.
6.4 Deposits. The funds of the Corporation not otherwise employed shall be
deposited from time to time to the order of the Corporation with such banks,
trust companies, investment banking firms, financial institutions or other
depositories as the Board may select or as may be selected by an officer,
employee or agent of the Corporation to whom such power to select may from time
to time be delegated by the Board.
ARTICLE 7
STOCK AND DIVIDENDS
7.1 Certificates Representing Shares. The shares of capital stock of the
Corporation shall be represented by certificates in such form (consistent with
the provisions of Section 158 of the General Corporation Law) as shall be
approved by the Board. Such certificates shall be signed by the Chairman, the
President or a Vice President and by the Secretary or an Assistant Secretary or
the Treasurer or an Assistant Treasurer, and may be impressed with the seal of
the Corporation or a facsimile thereof. The signatures of the officers upon a
certificate may be facsimiles, if the certificate is countersigned by a transfer
agent or registrar other than the Corporation itself or its employee. In case
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon any certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, such
certificate may, unless otherwise ordered by the Board, be issued by the
Corporation with the same effect as if such person were such officer, transfer
agent or registrar at the date of issue.
7.2 Transfer of Shares. Transfers of shares of capital stock of the
Corporation shall be made only on the books of the Corporation by the holder
thereof or by the holder's duly authorized attorney appointed by a power of
attorney duly executed and filed with the Secretary or a transfer agent of the
Corporation, and on surrender of the certificate or certificates representing
such shares or capital stock property endorsed for transfer and upon payment of
all necessary transfer taxes. Every certificate exchanged, returned or
surrendered to the Corporation shall be marked "Canceled," with the date of
cancellation, by the Secretary or an Assistant Secretary or the transfer agent
of the Corporation. A person in whose name shares of capital stock shall stand
on the books of the Corporation shall be deemed by the owner thereof to receive
dividends, to vote as such owner and for all other purposes as respects the
Corporation. No transfer of shares of capital stock shall be valid as against
the Corporation, its Stockholders and creditors for any purpose, except to
render the transferee liable for the debts of the Corporation to the extent
provided by law, until such transfer shall have been entered on the books of the
Corporation by an entry showing from and to whom transferred.
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7.3 Transfer and Registry Agents. The Corporation may from time to time
maintain one or more transfer offices or agents and registry offices or agents
at such place or places as may be determined from time to time by the Board.
7.4 Lost, Destroyed, Stolen and Mutilated Certificates. The holder of any
shares of capital stock of the Corporation shall immediately notify the
Corporation of any loss, destruction, theft or mutilation of the certificate
representing such shares, and the Corporation may issue a new certificate to
replace the certificate alleged to have been lost, destroyed, stolen or
mutilated. The Board may, in its discretion, as a condition to the issue of any
such new certificate, require the owner of the lost, destroyed, stolen or
mutilated certificate, or his or her legal representatives, to make proof
satisfactory to the Board of such loss, destruction, theft or mutilation and to
advertise such fact in such manner as the Board may require, and to give the
Corporation and its transfer agents and registrars, or such of them as the Board
may require, a bond in such form, in such sums and with such surety or sureties
as the Board may direct, to indemnify the Corporation and its transfer agents
and registrars against any claim that may be made against any of them on account
of the continued existence of any such certificate so alleged to have been lost,
destroyed, stolen or mutilated and against any expense in connection with such
claim.
7.5 Rules and Regulations. The Board may make such rules and regulations
as it may deem expedient, not inconsistent with these By-laws or with the
Certificate of Incorporation, concerning the issue, transfer and registration of
certificates representing shares of its capital stock.
7.6 Restriction on Transfer of Stock. A written restriction on the
transfer or registration of transfer of capital stock of the Corporation, if
permitted by Section 202 of the General Corporation Law and noted conspicuously
on the certificate representing such capital stock, may be enforced against the
holder of the restricted capital stock or any successor or transferee of the
holder, including an executor, administrator, trustee, guardian or other
fiduciary entrusted with like responsibility for the person or estate of the
holder. Unless noted conspicuously on the certificate representing such capital
stock, a restriction, even though permitted by Section 202 of the General
Corporation Law, shall be ineffective except against a person with actual
knowledge of the restriction. A restriction on the transfer or registration of
transfer of capital stock of the Corporation may be imposed either by the
Certificate of Incorporation or by an agreement among any number of Stockholders
or among such Stockholders and the Corporation. No restriction so imposed shall
be binding with respect to capital stock issued prior to the adoption of the
restriction unless the holders of such capital stock are parties to an agreement
or voted in favor of the restriction.
7.7 Dividends, Surplus, Etc. Subject to the provisions of the Certificate
of Incorporation and of law, the Board:
7.7.1 may declare and pay dividends or make other distributions on
the outstanding shares of capital stock in such amounts and at such time
or
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times as it, in its discretion, shall deem advisable giving due
consideration to the condition of the affairs of the Corporation;
7.7.2 may use and apply, in its discretion, any of the surplus of
the Corporation in purchasing or acquiring any shares of capital stock of
the Corporation, or purchase warrants therefor, in accordance with law, or
any of its bonds, debentures, notes, scrip or other securities or
evidences of indebtedness; and
7.7.3 may set aside from time to time out of such surplus or net
profits such sum or sums as, in its discretion, it may think proper, as a
reserve fund to meet contingencies, or for equalizing dividends or for the
purpose of maintaining or increasing the property or business of the
Corporation, or for any purpose it may think conducive to the best
interests of the Corporation.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnity Undertaking. To the extent not prohibited by law, the
Corporation shall indemnify any person who is or was made, or threatened to be
made, a party to any threatened, pending or completed action, suit or proceeding
(a "Proceeding"), whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of the Corporation
to procure a judgment in its favor, by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was a Director or
officer of the Corporation, or is or was serving in any capacity at the request
of the Corporation for any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise (an "Other Entity"), against
judgments, fines, penalties, excise taxes, amounts paid in settlement and costs,
charges and expenses (including attorneys' fees and disbursements). Persons who
are not Directors or officers of the Corporation may be similarly indemnified in
respect of service of the Corporation to the extent the Board at any time
specifies that such persons are entitled to the benefits of this Section 8.
8.2 Advancement of Expenses. The Corporation shall, from time to time,
reimburse or advance to any Director or officer or other person entitled to
indemnification hereunder the funds necessary for payment of expenses, including
attorneys' fees and disbursements, incurred in connection with any Proceeding,
in advance of the final disposition of such Proceeding; provided, however, that,
if required by the General Corporation Law, such expenses incurred by or on
behalf of any Director or officer or other person may be paid in advance of the
final disposition of a Proceeding only upon receipt by the Corporation of an
undertaking, by or on behalf of such Director or officer (or other person
identified hereunder), to repay any such amount so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right of appeal that such Director, officer or other person is not
entitled to be indemnified for such expenses.
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8.3 Rights Not Exclusive. The rights to indemnification and reimbursement
or advancement of expenses provided by, or granted pursuant to, this Section 8
shall not be deemed exclusive of any other rights to which a person seeking
indemnification or reimbursement or advancement of expenses may have or
hereafter be entitled under any statute, the Certificate of Incorporation, these
By-laws, any agreement, any vote of Stockholders or disinterested Directors or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office.
8.4 Continuation of Benefits. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Section 8 shall continue as to a person who has ceased to be a Director or
officer (or other person indemnified hereunder) and shall inure to the benefit
of the executors, administrators, legatees and distributees of such person.
8.5 Insurance. The 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 any Other Entity, against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
Corporation would have the power to indemnify such person against such liability
under the provisions of this Section 8, the Certificate of Incorporation or
under Section 145 of the General Corporation Law or any other provision of law.
8.6 Binding Effect. The provisions of this Section 8 shall be a contract
between the Corporation, on the one hand, and each Director and officer who
serves in such capacity at any time while this Section 8 is in effect and any
other person indemnified hereunder, on the other hand, pursuant to which the
Corporation and each such Director, officer or other person intend to be legally
bound. No repeal or modification of this Section 8 shall affect any rights or
obligations with respect to any state of facts then or theretofore existing or
thereafter arising or any proceeding theretofore or thereafter brought or
threatened based in whole or in part upon any such state of facts.
8.7 Procedural Rights. The rights to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Section 8
shall be enforceable by any person entitled to such indemnification or
reimbursement or advancement of expenses in any court of competent jurisdiction.
The burden of proving that such indemnification or reimbursement or advancement
of expenses is not appropriate shall be on the Corporation. Neither the failure
of the Corporation (including its Board of Directors, its independent legal
counsel and its Stockholders) to have made a determination prior to the
commencement of such action that such indemnification or reimbursement or
advancement of expenses is proper in the circumstances nor an actual
determination by the Corporation (including its Board of Directors, its
independent legal counsel and its Stockholders) that such person is not entitled
to such indemnification or reimbursement or advancement of expenses shall
- 18 -
<PAGE>
constitute a defense to the action or create a presumption that such person is
not so entitled. Such a person shall also be indemnified for any expenses
incurred in connection with successfully establishing his or her right to such
indemnification or reimbursement or advancement of expenses, in whole or in
part, in any such proceeding.
8.8 Service Deemed at Corporation's Request. Any Director or officer of
the Corporation serving in any capacity (a) another corporation by which a
majority of the shares entitled to vote in the election of its directors is
held, directly or indirectly, by the Corporation, or (b) any employee benefit
plan of the Corporation or any corporation referred to in clause (a) shall be
deemed to be doing so at the request of the Corporation.
8.9 Election of Applicable Law. Any person entitled to be indemnified or
to reimbursement or advancement of expenses as a matter of right pursuant to
this Section 8 may elect to have the right to indemnification or reimbursement
or advancement of expenses interpreted on the basis of the applicable law in
effect at the time of the occurrence of the event or events giving rise to the
applicable Proceeding, to the extent permitted by law, or on the basis of the
applicable law in effect at the time such indemnification or reimbursement or
advancement of expenses is sought. Such election shall be made, by a notice in
writing to the Corporation, at the time indemnification or reimbursement or
advancement of expenses is sought; provided, however, that if no such notice is
given, the right to indemnification or reimburse ment or advancement of expenses
shall be determined by the law in effect at the time indemnification or
reimbursement or advancement of expenses is sought.
ARTICLE 9
BOOKS AND RECORDS
9.1 Books and Records. There shall be kept at the principal office of the
Corporation correct and complete records and books of account recording the
financial actions of the Corporation and minutes of the proceedings of the
Stockholders, the Board and any committee of the Board. The Corporation shall
keep at its principal office, or at the office of the transfer agent or
registrar of the Corporation, a record containing the names and addresses of all
Stockholders, the number and class of shares held by each and the dates when
they respectively became the owners of record thereof.
9.2 Form of Records. Any records maintained by the Corporation in the
regular course of its business, including its stock ledger, books of account,
and minute books, may be kept on, or be in the form of, punch cards, magnetic
tape, photographs, microphotographs, or any other information storage device,
provided that the records so kept can be converted into clearly legible written
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
- 19 -
<PAGE>
9.3 Inspection of Books and Records. Except as otherwise provided by law,
the Board shall determine from time to time whether, and, if allowed, when and
under what conditions and regulations, the accounts, books, minutes and other
records of the Corporation, or any of them, shall be open to the Stockholders
for inspection.
ARTICLE 10
SEAL
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
ARTICLE 11
FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and may be changed, by
resolution of the Board.
ARTICLE 12
PROXIES AND CONSENTS
Unless otherwise directed by the Board, the Chairman, the President, any
Vice President, the Secretary or the Treasurer, or any one of them, may execute
and deliver on behalf of the Corporation proxies respecting any and all shares
or other ownership interests of any other entity owned by the Corporation
appointing such person or persons as the officer executing the same shall deem
proper to represent and vote the shares or other ownership interests so owned at
any and all meetings of holders of shares or other ownership interests, whether
general or special, and/or to execute and deliver consents respecting such
shares or other ownership interests; or any of the aforesaid officers may attend
any meeting of the holders of shares or other ownership interests of such other
entity and thereat vote or exercise any or all other powers of the Corporation
as the holder of such shares or other ownership interests.
ARTICLE 13
EMERGENCY BY-LAWS
Unless the Certificate of Incorporation provides otherwise, the following
provisions of this Article 13 shall be effective during an emergency, which is
defined as when a quorum of the Corporation's Directors cannot be readily
assembled because of some catastrophic event. During such emergency:
- 20 -
<PAGE>
13.1 Notice to Board Members. Any one member of the Board or any one of
the following officers: Chairman, President, any Vice President, any Managing
Director, Secretary, or Treasurer, may call a meeting of the Board. Notice of
such meeting need be given only to those Directors whom it is practicable to
reach, and may be given in any practical manner, including by publication and
radio. Such notice shall be given at least six hours prior to commencement of
the meeting.
13.2 Temporary Directors and Quorum. One or more officers of the
Corporation present at the emergency Board meeting, as is necessary to achieve a
quorum, shall be considered to be Directors for the meeting, and shall so serve
in order of rank, and within the same rank, in order of seniority. In the event
that less than a quorum of the Directors are present (including any officers who
are to serve as Directors for the meeting), those Directors present (including
the officers serving as Directors) shall constitute a quorum.
13.3 Actions Permitted To Be Taken. The Board as constituted in Section
13.2, and after notice as set forth in Section 13.1 may:
13.3.1 prescribe emergency powers to any officer of the Corporation;
13.3.2 delegate to any officer or Director, any of the powers of the
Board;
13.3.3 designate lines of succession of officers and agents, in the
event that any of them are unable to discharge their duties;
13.3.4 relocate the principal place of business, or designate
successive or simultaneous principal places of business; and
13.3.5 take any other convenient, helpful or necessary action to
carry on the business of the Corporation.
ARTICLE 14
AMENDMENTS
These By-laws may be altered, amended, or repealed and new By-laws
may be adopted by a vote of the holders of shares entitled to vote in the
election of Directors or by a vote of two-thirds of the entire Board.
Notwithstanding the preceding sentence, none of the provisions of this Article
14 shall be altered, amended or repealed by the Board. Any By-laws adopted,
altered or amended by the Board may be altered, amended or repealed by the
Stockholders entitled to vote thereon only to the extent and in the manner
provided in the Certificate of Incorporation and these By-laws.
- 21 -
Exhibit 3.5
SFAC NEW HOLDINGS, INC.
CERTIFICATE OF DESIGNATION OF THE SERIES A PREFERRED STOCK,
SERIES B PREFERRED STOCK, SERIES C PREFERRED STOCK AND
SERIES D PREFERRED STOCK, SETTING FORTH THE POWERS,
PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS AND
RESTRICTIONS OF SUCH SERIES OF PREFERRED STOCK
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The following resolution was duly adopted by the Board of Directors of
SFAC New Holdings, Inc., a Delaware corporation (the "Corporation"), pursuant to
the provisions of Section 151 of the General Corporation Law of the State of
Delaware on June 2, 1999, by the unanimous written consent of the Board of
Directors:
WHEREAS, the Board of Directors is authorized, within the limitations and
restrictions stated in the certificate of incorporation of the Corporation (the
"Certificate of Incorporation"), to provide by resolution or resolutions for the
issuance of shares of preferred stock, no par value, of the Corporation (the
"Preferred Stock"), in one or more series with such voting powers, and such
designations, preferences and relative, participating, optional and other
special rights, and qualifications, limitations or restrictions as shall be
stated and expressed in the resolution or resolutions providing for the issuance
of thereof adopted by the Board of Directors, and as are not stated and
expressed in the Certificate of Incorporation, or any amendment thereto,
including (but without limiting the generality of the foregoing) such provisions
as may be desired concerning voting, redemption, dividends, dissolution or the
distribution of assets and
<PAGE>
2
such other subjects or matters as may be fixed by resolution or resolutions of
the Board of Directors under the General Law of the State of Delaware; and
WHEREAS, it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to authorize and fix the terms of four series of
Preferred Stock and the numbers of shares constituting each such series:
NOW, THEREFORE, BE IT RESOLVED:
1. Designation and Number of Preferred Stock. There shall be hereby
established four series of preferred stock. The shares of each such series shall
be designated as Series A Preferred Stock (the "Series A Preferred Stock"), the
Series B Preferred Stock (the "Series B Preferred Stock"), the Series C
Preferred Stock (the "Series C Preferred Stock") and the Series D Preferred
Stock (the "Series D Preferred Stock" and, together with the Series A Preferred
Stock, the Series B Preferred Stock and the Series C Preferred Stock, the
"Preferred Stock"). The number of shares initially constituting the Preferred
Stock shall be 894 1/4, no par value per share, of which 225 shares shall be
Series A Preferred Stock, 150 shares shall be Series B Preferred Stock, 200
shares shall be Series C Preferred Stock and 319 1/4 shares shall be Series D
Preferred Stock, each of which number may be decreased (but not increased) by
the Board of Directors without a vote of stockholders; provided, however, that
such number may not be decreased below the number of then outstanding shares of
such series of Preferred Stock.
2. Rank. (a) The Series A Preferred Stock and the Series B Preferred Stock
shall, with respect to distributions and distributions of assets and rights upon
the liquidation, winding up and dissolution of the Corporation, (i) rank pari
passu
<PAGE>
3
with respect to each other and (ii) rank senior to the Series C Preferred Stock
and the Series D Preferred Stock.
(b) The Series C Preferred Stock shall, with respect to
distributions and distributions of assets and rights upon the liquidation,
winding up and dissolution of the Corporation, (i) rank subordinate to the
Series A Preferred Stock and the Series B Preferred Stock and (ii) rank senior
to the Series D Preferred Stock.
(c) Each series of Preferred Stock shall, with respect to
distributions and distributions of assets and rights upon the liquidation,
winding up and dissolution of the Corporation, rank senior to (i) all classes of
common stock of the Corporation (including, without limitation, the Common
Stock, no par value per share, of the Corporation (the"Common Stock")) and (ii)
each other class or series of Capital Stock of the Corporation hereafter created
which by its terms does not expressly rank pari passu with or senior to the
Preferred Stock (the Common Stock and each other class or series of Capital
Stock of the Corporation are hereinafter collectively referred to as the "Junior
Stock").
3. Dividends. (a) The holders of shares of Preferred Stock, in preference
to holders of shares of Junior Stock of the Corporation, shall be entitled to
receive, when, as and if declared by the Board of Directors, out of the assets
of the Corporation legally available therefor, cumulative cash dividends at the
rates for each series of Preferred Stock as provided in the following
paragraphs.
<PAGE>
4
(b) The holders of shares of Series A Preferred Stock shall be
entitled to receive dividends at an annual rate equal to $102,500.00 per annum,
payable semi-annually in arrears on February 15 and August 15 of each year,
commencing on August 15, 1999.
(c) The holders of shares of Series B Preferred Stock shall be
entitled to receive dividends at an annual rate equal to $111,250.00 per annum,
payable semi-annually in arrears on April 1 and October 1 of each year,
commencing on October 1, 1999.
(d) The holders of shares of Series C Preferred Stock shall be
entitled to receive dividends at an annual rate equal to $112,500.00 per annum,
payable semi-annually in arrears on February 15 and August 15 of each year,
commencing on August 15, 1999.
(e) The holders of shares of Series D Preferred Stock shall be
entitled to receive dividends at an annual rate equal to $130,000.00 per annum,
payable semi-annually in arrears on February 15 and August 15 of each year,
commencing on August 15, 1999.
(f) Dividends payable pursuant to Sections 3(b) - (e) shall begin to
accrue and be cumulative from the Issue Date, and shall accrue on a daily basis,
in each case whether or not declared. Dividends paid on the shares of Preferred
Stock in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated to the Series A Preferred
Stock and the Series B Preferred Stock pro rata on a share-by-share basis among
all such shares of Series A Preferred Stock and Series B Preferred Stock at the
time outstanding. No dividends shall
<PAGE>
5
be payable on the Series C Preferred Stock or the Series D Preferred Stock until
the dividends payable on the Series A Preferred Stock and the Series B Preferred
Stock have been paid in full. Upon payment in full of the Series A Preferred
Stock and the Series B Preferred Stock, dividends paid on the shares of
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall then be allocated to the Series C
Preferred Stock pro rata on a share-by-share basis among all such shares of
Series C Preferred Stock at the time outstanding. No dividends shall be payable
on the Series D Preferred Stock until the dividends payable on the Series C
Preferred Stock have been paid in full. Upon payment in full of the Series C
Preferred Stock, dividends paid on the shares of Series D Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share among all
such shares of Series D Preferred Stock.
(g) The Board of Directors may fix a record date for the
determination of holders of shares of Preferred Stock entitled to receive
payment of a dividend declared thereon, which record date shall be no more than
60 days or less than 10 days prior to the date fixed for the payment thereof.
Accumulated but unpaid dividends for any past dividend periods may be declared
and paid at any time, without reference to any regular dividend payment date, to
holders of record on such date, not more than 60 nor less than 10 days preceding
the payment date thereof, as may be fixed by the Board of Directors.
(h) The holders of shares of Preferred Stock shall not be entitled
to receive any dividends or other distributions except as provided herein.
<PAGE>
6
4. Liquidation. (a) In the event of any voluntary or involuntary
liquidation, winding up or dissolution of the Corporation, the holders of shares
of each series of Preferred Stock then outstanding shall be entitled to be paid
for each share of Preferred Stock held thereby, out of the assets of the
Corporation legally available for distribution to its stockholders, before any
payment shall be made or any assets distributed to the holders of any shares of
Junior Stock, a payment (the "Liquidation Payment") equal to $1,000,000 per
share plus, if applicable, the additional amounts specified below with respect
to each class of Preferred Stock if liquidation occurs during the twelve-month
period beginning:
(i) in the case of the Series A Preferred Stock:
Date Amount
August 15, 1998 $ 51,250.00
August 15, 1999 25,630.00
(ii) in the case of the Series B Preferred Stock:
Date Amount
October 1, 1999 $ 55,620.00
October 1, 2000 27,810.00
(iii) in the case of the Series C Preferred Stock:
Date Amount
August 15, 1998 $ 32,140.00
August 15, 1999 16,070.00
(iv) in the case of the Series D Preferred Stock:
Date Amount
August 15, 1999 $ 43,330.00
August 15, 2000 28,890.00
August 15, 2001 14,440.00
<PAGE>
7
Except as provided in the preceding sentence, holders of Preferred Stock shall
not be entitled to any distribution in the event of any liquidation, dissolution
or winding up of the affairs of the Corporation. If upon any liquidation,
winding up or dissolution of the Company, the assets of the Corporation are not
sufficient to pay in full the foregoing liquidation payments payable to the
holders of outstanding shares of Preferred Stock, then the distribution shall be
made in accordance with the amount that would be payable on such distribution if
the amounts to which the holders of outstanding shares of Preferred Stock are
entitled were paid in full (a) first, to holders of all shares of Series A
Preferred Stock and Series B Preferred Stock, which shall share ratably in such
distribution of assets, (b) second, to holders of all shares of Series C
Preferred Stock, (c) third, to holders of all shares of Series D Preferred Stock
and (d) fourth, to holders of Junior Stock.
(b) For the purposes of this Section 4, neither the voluntary sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all or part of the property or assets of
the Corporation nor the consolidation or merger of the Corporation with one or
more other corporations shall be deemed to be a liquidation, dissolution or
winding up, voluntary or involuntary, of the affairs of the Corporation (unless
such sale, conveyance, exchange or transfer is in connection with a liquidation,
dissolution or winding up of the affairs of the Corporation).
5. Optional Redemption.
(a) To the extent not prohibited under any loan or other financing
agreement to which the Corporation is a party or by which it is bound, the
<PAGE>
8
Corporation, at its option, may redeem at any time, in whole or in part, in the
manner provided in Section 5(c), from any source of funds legally available
therefor, any or all of the shares of the Preferred Stock, at the relevant
redemption price per share for that series of Preferred Stock, as provided in
the following paragraphs (the "Optional Redemption Price").
(b) The redemption prices for each class of the Preferred Stock
shall be as set forth below plus, in each case, accrued and unpaid dividends
thereon to the applicable redemption date calculated at the dividend rate
specified in Section 3 for each series, if redeemed during the twelve-month
period beginning on August 15 (in the case of the Series A Preferred Stock, the
Series C Preferred Stock and the Series D Preferred Stock) or on October 1 (in
the case of the Series B Preferred Stock) of the years indicated below:
Series A Preferred Stock
Year Amount
1998 $ 1,051,250
1999 1,025,063
2000 and thereafter 1,000,000
Series B Preferred Stock
Year Amount
1999 $ 1,055,620
2000 1,027,810
2001 and thereafter 1,000,000
<PAGE>
9
Series C Preferred Stock
Year Amount
1998 $ 1,032,140
1999 1,016,070
2000 and thereafter 1,000,000
Series D Preferred Stock
Year Amount
1999 $ 1,043,330
2000 1,028,890
2001 1,014,440
2002 and thereafter 1,000,000
At the election of the Board of Directors, such redemption payments
for the Preferred Stock may be paid to the holders of the Preferred Stock at the
date of redemption of the Preferred Stock either in cash or exclusively in kind
by delivery of SFC 10 1/4% Senior Notes (in the case of Series A Preferred
Stock), SFC 11 1/8% Senior Notes (in the case of Series B Preferred Stock), SFC
Subordinated Notes (in the case of Series C Preferred Stock) and SFAC 13%
Debentures (in the case of Series D Preferred Stock) the principal amount of
which, plus any amount then payable in accordance with the terms thereof upon
the optional redemption thereof, is equal to the applicable Optional Redemption
Price set forth in this Section.
(c) At least thirty (30) days and not more than sixty (60) days
before the date fixed by the Corporation for the redemption of a series of
Preferred Stock (the "Optional Redemption Date"), the Corporation shall mail a
notice of Redemption (the "Optional Redemption Notice") by first class mail,
postage prepaid, to each holder
<PAGE>
10
of record of that series of Preferred Stock on the record date fixed for such
redemption at such holder's address as it appears on the stock register of the
Corporation; provided, however, that neither the failure to give such notice nor
any deficiency therein shall affect the validity of the procedure for the
redemption of any shares of that series of Preferred Stock to be redeemed except
as to the holder or holders to whom the Corporation has failed to give said
notice or except as to the holder or holders whose notice was defective. The
Optional Redemption Notice shall state:
(i) that the Corporation is exercising its option to redeem a
series of Preferred Stock and the relevant series of Preferred Stock (the
"Redeemed Preferred Stock");
(ii) the Optional Redemption Price;
(iii) whether all or less than all of the outstanding shares
of the Redeemed Preferred Stock redeemable thereunder are to be redeemed
and the total number of shares of the Redeemed Preferred Stock being
redeemed;
(iv) the number of shares of Redeemed Preferred Stock held by
such holder, as of the appropriate record date, that the Corporation
intends to redeem;
(v) the Optional Redemption Date;
(vi) whether the Corporation has elected to pay the redemption
payment in cash or by delivery of securities; and
(vii) that the holder is to surrender to the Corporation, at
the place or places where certificates for shares of Redeemed Preferred
Stock are to be surrendered for redemption, in the manner and at the price
designated, his
<PAGE>
11
or her certificate or certificates representing the shares of Redeemed
Preferred Stock to be redeemed.
(d) In the event of an optional redemption pursuant to paragraph
5(a) of only a portion of the then outstanding shares of the Redeemed Preferred
Stock, the Corporation shall effect such redemption pro rata according to the
number of shares held by each holder of the Redeemed Preferred Stock, except
that the Corporation may redeem such shares held by holders of fewer than 100
shares (or shares held by holders who would hold less than 100 shares as a
result of such redemption), as may be determined by the Corporation.
(e) Each holder of Redeemed Preferred Stock shall surrender the
certificate or certificates representing such shares of Redeemed Preferred Stock
to the Corporation, duly endorsed, in the manner and at the place designated in
the Optional Redemption Notice, and on the Optional Redemption Date the full
Optional Redemption Price for such shares shall be payable in cash to the Person
whose name appears on such certificate or certificates as the owner thereof, and
each surrendered certificate shall be canceled and retired. In the event that
less than all of the shares represented by any such certificate are redeemed, a
new certificate shall be issued by the Corporation representing the unredeemed
shares.
(f) Unless the Corporation defaults in the payment in full of the
Optional Redemption Price, the holders of such redeemed shares shall cease to
have any further rights with respect thereto on the Optional Redemption Date,
other than the right to receive the Optional Redemption Price.
<PAGE>
12
6. Voting Rights. (a) The holders of Preferred Stock shall not be entitled
or permitted to vote on any matter required or permitted to be voted upon by the
stockholders of the Corporation, except as otherwise required under Delaware law
or as set forth in paragraph (b) below. In exercising any voting rights, each
outstanding share of Preferred Stock shall entitle the holder thereof to one
vote.
(b) So long as any share of Preferred Stock is outstanding, the
Company shall not, without the affirmative vote at a meeting or the written
consent with or without a meeting of the holders of at least 66 2/3% of all
outstanding shares of Preferred Stock (i) authorize or issue any Senior Stock or
Parity Stock or reclassify any Junior Stock as Parity Stock or Senior Stock or
reclassify any Parity Stock as Senior Stock or (ii) amend, alter or repeal (by
merger or otherwise) any of the provisions of the Certificate of Incorporation
or the by-laws, so as in any such case to materially adversely affect the
preferences, special rights, powers or privileges of the shares of Preferred
Stock. Each series of Preferred Stock shall vote together with all other series
of Preferred Stock of the Corporation as a single class.
7. Reissuance of Preferred Stock. Shares of Preferred Stock that have been
redeemed or otherwise acquired by the Corporation shall be retired and canceled
and shall resume the status of authorized and unissued shares of Preferred Stock
undesignated as to Series and may be redesignated and reissued as part of any
series of Preferred Stock; provided, that the issuance of such shares as
Preferred Stock must be in compliance with the terms of this Certificate of
Designation.
8. Business Day. If any payment or redemption shall be required by the
terms hereof to be made on a day that is not a Business Day, such payment or
<PAGE>
13
redemption shall be made on the immediately succeeding Business Day.
9. Definitions. As used in this Certificate of Designation, the following
terms shall have the following meanings (with terms defined in the singular
having comparable meanings when used in the plural and vice versa), unless the
context otherwise requires:
"Board of Directors" means the board of directors of the Corporation or
any duly authorized committee thereof.
"Business Day" means any day except a Saturday, a Sunday, or other day on
which commercial banks in the State of New York are authorized or required by
law or executive order to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock and any and
all rights, warrants or options exchangeable for or convertible into such
capital stock (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
"Common Stock" shall have the meaning ascribed to it in Section 2 hereof.
"Corporation" shall have the meaning ascribed to it in the first paragraph
of this Resolution.
"Issue Date" means the first date on which shares of Preferred Stock are
issued.
"Junior Stock" shall have the meaning ascribed to it in Section 2 hereof.
"Liquidation Payment" shall have the meaning ascribed to it in Section 4
hereof.
<PAGE>
14
"Optional Redemption Date" means, with respect to any shares of a series
of Preferred Stock, the date on which such shares are to be redeemed by the
Corporation pursuant to Section 5 hereof.
"Optional Redemption Notice" shall have the meaning ascribed to it in
Section 5(c) hereof.
"Optional Redemption Price" shall have the meaning ascribed to it in
Section 5(a) hereof.
"Parity Stock" means any Capital Stock of the Corporation, including the
Preferred Stock, ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Preferred Stock.
"Person" means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, governmental body or other entity of any kind.
"Preferred Stock" shall have the meaning ascribed to it in Section 1
hereof.
"Redeemed Preferred Stock" shall have the meaning ascribed to it in
Section 5(c) hereof.
"Senior Stock" means any Capital Stock of the Corporation ranking senior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Preferred Stock.
"SFAC" means Specialty Foods Acquisition Corporation, a Delaware
corporation.
<PAGE>
15
"SFAC 13% Debentures" means the 13% Senior Secured Discount Debentures due
2005 issued by SFAC pursuant to an indenture dated as of August 16, 1993, by and
between SFAC and the Trustee.
"SFC" means Specialty Foods Corporation, a Delaware corporation.
"SFC 11 1/8% Senior Notes" means the 11 1/8% Senior Notes due 2002 issued
by SFC pursuant to an indenture dated as of July 17, 1995, by and between SFC
and the Trustee.
"SFC Subordinated Notes" means the 11 1/4% Senior Subordinated Notes due
2003 issued by SFC pursuant to an indenture dated as of August 16, 1993, by and
between SFC and the Trustee.
"SFC 10 1/4% Senior Notes" means the 10 1/4% Senior Notes due 2001 issued
by SFC pursuant to an indenture dated as of August 16, 1993, by and between SFC
and the Trustee.
"Subsidiary" means with respect to any Person any corporation, partnership
or other entity of which at least a majority of the securities or other
ownership interests having by the terms thereof ordinary voting power to elect
the board of directors or other persons performing similar functions of such
corporation, partnership or other entity directly or indirectly are owned or
controlled by such Person or one or more Subsidiaries of such Person or by such
Person and one or more Subsidiaries of such Person.
"Trustee" means United States Trust Company of New York.
<PAGE>
16
IN WITNESS WHEREOF, SFAC New Holdings, Inc. has caused this Certificate to
be duly executed by its duly authorized officers this 9th day of June, 1999.
SFAC NEW HOLDINGS, INC.
By: /s/ Sean M. Stack
--------------------------------
Name: Sean M. Stack
Title: Vice-President, Treasurer
and Asst. Secretary
ATTEST:
By: /s/ Geoffrey Perusse
------------------------------
Name: Geoffrey Perusse
Exhibit 4.1
$
13% SENIOR SECURED DISCOUNT DEBENTURES DUE 2009
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of June 11, 1999
Among
SFAC NEW HOLDINGS, INC.
and
Holders of the 13% Senior Secured Discount Debentures due 2009
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
1. Registered Exchange Offer..............................................1
2. Shelf Registration.....................................................4
3. Liquidated Damages.....................................................6
4. Hold-Back Agreements...................................................7
5. Registration Procedures................................................7
6. Registration Expenses.................................................12
7. Indemnification.......................................................12
8. Contribution..........................................................15
9. Rules 144 and 144A....................................................16
10. Underwritten Registrations............................................16
11. Miscellaneous.........................................................16
(a) Amendments and Waivers.........................................16
(b) Notices........................................................17
(c) Successors and Assigns.........................................17
(d) Counterparts...................................................17
(e) Definition of Terms............................................17
(f) Headings.......................................................17
(g) Governing Law..................................................18
(h) No Inconsistent Agreements.....................................18
(i) No Piggyback on Registrations..................................18
(j) Severability...................................................18
(k) Entire Agreement...............................................18
(l) Attorneys' Fees................................................18
(m) Securities Held by the Company or its Affiliates...............19
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of June 11, 1999 (this
"Agreement"), by and among SFAC New Holdings, Inc., a Delaware corporation (the
"Company") and the Holders of Securities (as defined herein) who have received
Securities pursuant to the Initial Exchange Offer (as defined herein) or in any
subsequent exchange offer (the "Holders").
The Company proposes to exchange (i) its 13% Senior Secured Discount
Debentures due 2009 (collectively, the "Securities" and each a "Security") and
(ii) an aggregate of up to 31,925 shares of common stock, no par value (the
"Debentureholder Common Stock"), of the Company for all outstanding 13% Senior
Secured Discount Debentures due 2005 issued by Specialty Foods Acquisition
Corporation (the "SFAC Debentures") (such offer is referred to as the "Initial
Exchange Offer"), upon the terms and subject to the conditions set forth in the
Offer to Exchange and Consent Solicitation dated May 10, 1999 of the Company
(the "Offering Circular").
The Securities and the Debentureholder Common Stock are being offered
exclusively to holders of the SFAC Debentures who are institutional investors
who meet the definition of "Accredited Investor" under Rule 501(a)(1), (a)(2) or
(a)(3) of Regulation D under the Securities Act of 1933, as amended (the
"Securities Act").
As an inducement to the holders of the SFAC Debentures to tender their
SFAC Debentures pursuant to the Initial Exchange Offer, the Company has
undertaken to register Exchange Securities (as defined herein) under the
Securities Act and to take certain other actions with respect to the Exchange
Securities.
Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Offering Circular.
In consideration of the premises and the mutual agreements set forth
herein, the parties hereto hereby agree as follows:
1. Registered Exchange Offer. The Company shall (i) prepare and, promptly,
but in any event, not later than 120 days following the date of original
issuance of the Securities (the "Original Issue Date"), file with the Securities
and Exchange Commission (the "Commission") a registration statement (the
"Exchange Offer Registration Statement") on an appropriate form under the
Securities Act with respect to a proposed offer to the Holders of the Securities
(the "Registered Exchange Offer") to issue and deliver to such Holders of the
Securities, in exchange for the Securities, a like aggregate principal amount of
debt securities of the Company (collectively, the "Exchange Securities" and
individually an "Exchange Security") that are identical in all material respects
to the Securities, except for the transfer
<PAGE>
2
restrictions relating to the Securities, (ii) use its reasonable best efforts to
cause the Exchange Offer Registration Statement to become effective under the
Securities Act as promptly as practicable after the filing thereof, but in no
event later than 180 days after the Original Issue Date and the Registered
Exchange Offer to be consummated no later than 195 days after the Original Issue
Date and (iii) keep the Exchange Offer Registration Statement effective for not
less than 30 days (or longer, if required by applicable law) after the date on
which notice of the Registered Exchange Offer is mailed to the Holders (such
period being called the "Exchange Offer Registration Period"). The Exchange
Securities will be issued under the Indenture or an indenture (the "Exchange
Securities Indenture") between the Company and the Trustee, as trustee (the
"Exchange Securities Trustee"), such indenture to be identical in all material
respects to the Indenture, except for the transfer restrictions relating to the
Securities (as described above). The Registered Exchange Offer shall not be
subject to any conditions, other than that the Registered Exchange Offer does
not violate applicable law or any applicable interpretation of the staff of the
Commission.
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall promptly commence the Registered Exchange Offer, it
being the objective of such Registered Exchange Offer to enable each Holder
electing to exchange Securities for Exchange Securities (assuming that such
Holder (a) is not an affiliate of the Company or an Exchanging Dealer (as
defined herein) not complying with the requirements of the next sentence, (b)
acquires the Exchange Securities in the ordinary course of such Holder's
business and (c) has no arrangements or understandings with any person to
participate in the distribution of the Exchange Securities) to trade such
Exchange Securities from and after their receipt without any limitations or
restrictions under the Securities Act and without material restrictions under
the securities laws of the several states of the United States. The Company, the
Holders and each Exchanging Dealer acknowledge that, pursuant to current
interpretations by the Commission's staff of Section 5 of the Securities Act,
each Holder that is a broker-dealer electing to exchange Securities, acquired
for its own account as a result of market-making activities or other trading
activities, for Exchange Securities (an "Exchanging Dealer"), is required to
deliver a prospectus containing substantially the information set forth in Annex
A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures"
section and the "Purpose of the Exchange Offer" section and in Annex C hereto in
the "Plan of Distribution" section of such prospectus in connection with a sale
of any such Exchange Securities received by such Exchanging Dealer pursuant to
the Registered Exchange Offer.
(c) In connection with the Registered Exchange Offer, the Company
shall:
(i) mail to each Holder a copy of the prospectus forming part
of the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
<PAGE>
3
(ii) keep the Registered Exchange Offer open for not less than
30 days (or longer, if required by applicable law) after the date on which
notice of the Registered Exchange Offer is mailed to the Holders;
(iii) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of
New York;
(iv) permit Holders to withdraw tendered Securities at any
time prior to the close of business, New York City time, on the last
business day on which the Registered Exchange Offer shall remain open; and
(v) otherwise comply in all respects with all laws that are
applicable to the Registered Exchange Offer.
(d) As soon as practicable after the close of the Registered
Exchange Offer, the Company shall:
(i) accept for exchange all Securities validly tendered and
not properly withdrawn pursuant to the Registered Exchange Offer;
(ii) deliver to the Trustee for cancellation all Securities so
accepted for exchange; and
(iii) cause the Trustee or the Exchange Securities Trustee, as
the case may be, promptly to authenticate and deliver to each Holder,
Exchange Securities equal in principal amount to the Securities of such
Holder so accepted for exchange.
(e) The Company shall use its reasonable best efforts to keep the
Exchange Offer Registration Statement effective and to amend and supplement the
prospectus contained therein in order to permit such prospectus to be used by
all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Securities; provided that (i) in the case where
such prospectus and any amendment or supplement thereto must be delivered by an
Exchanging Dealer, such period shall be the lesser of 180 days and the date on
which all Exchanging Dealers have sold all Exchange Securities held by them and
(ii) the Company shall make such prospectus and any amendment or supplement
thereto available to any broker-dealer for use in connection with any resale of
any Exchange Securities for a period of not less than 90 days after the
consummation of the Registered Exchange Offer.
(f) The Indenture or the Exchange Securities Indenture, as the case
may be, shall provide that the Securities and the Exchange Securities shall vote
and consent together on all matters as one class and that none of the Securities
or
<PAGE>
4
the Exchange Securities will have the right to vote or consent as a separate
class on any matter.
(g) Interest on each Exchange Security issued pursuant to the
Registered Exchange Offer will accrue from the last interest payment date on
which interest was paid on the Securities surrendered in exchange therefor or,
if no interest has been paid on the Securities, from the Original Issue Date.
(h) Each Holder participating in the Registered Exchange Offer may
be required to represent to the Company that at the time of the consummation of
the Registered Exchange Offer (i) any Exchange Securities received by such
Holder in the Exchange Offer will be acquired in the ordinary course of
business, (ii) such Holder will have no arrangements or understanding with any
person to participate in the distribution of the Securities or the Exchange
Securities within the meaning of the Securities Act and (iii) such Holder is not
an affiliate of the Company or, if it is such affiliate, such Holder will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable.
(i) Notwithstanding any other provisions hereof, the Company will
ensure that (i) any Exchange Offer Registration Statement and any amendment
thereto and any prospectus forming part thereof and any supplement thereto
complies in all material respects with the Securities Act and the rules and
regulations of the Commission thereunder, (ii) any Exchange Offer Registration
Statement and any amendment thereto does not, when it becomes effective, contain
an untrue statement of a material fact or fail to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
and (iii) any prospectus forming part of any Exchange Offer Registration
Statement, and any supplement to such prospectus, does not, as of the
consummation of the Registered Exchange Offer, include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
2. Shelf Registration. If (i) because of any change in law or applicable
interpretations thereof by the Commission's staff the Company is not permitted
to effect the Registered Exchange Offer as contemplated by Section 1 hereof, or
(ii) the Exchange Offer Registration Statement is not declared effective within
180 days following the Original Issue Date, or (iii) for any other reason the
Registered Exchange Offer is not consummated within 195 days after the Original
Issue Date, or (iv) any Holder so requests with respect to Securities not
eligible to be exchanged for Exchange Securities in the Registered Exchange
Offer and held by it following the consummation of the Registered Exchange
Offer, or (v) any applicable law or interpretations do not permit any Holder to
participate in the Registered Exchange Offer, or (vi) any Holder that
participates in the Registered Exchange Offer does not receive freely
transferrable Exchange Securities in exchange for tendered Securities, then the
following provisions shall apply:
<PAGE>
5
(a) The Company shall use its reasonable best efforts to file as
promptly as practicable (but in no event more than 45 days after so required or
requested pursuant to this Section 2) with the Commission, and thereafter shall
use its reasonable best efforts to cause to be declared effective, a shelf
registration statement on an appropriate form under the Securities Act relating
to the offer and sale of the Registrable Securities (as defined herein) by the
Holders thereof from time to time in accordance with the methods of distribution
set forth in such registration statement (hereafter, a "Shelf Registration
Statement") and, together with any Exchange Offer Registration Statement, a
"Registration Statement").
(b) The Company shall use its reasonable best efforts to keep the
Shelf Registration Statement continuously effective in order to permit the
prospectus forming part thereof to be used by Holders of Registrable Securities
for a period of two years from the Original Issue Date or such shorter period
that will terminate when all the Registrable Securities covered by the Shelf
Registration Statement have been sold pursuant thereto (in any such case, such
period being called the "Shelf Registration Period"). The Company shall be
deemed not to have used its reasonable best efforts to keep the Shelf
Registration Statement effective during the requisite period if it voluntarily
takes any action that would result in Holders of Registrable Securities covered
thereby not being able to offer and sell such Registrable Securities during that
period. The Company shall not permit any securities other than the Exchange
Securities to be included in the Shelf Registration Statement.
(c) Notwithstanding any other provisions hereof, the Company will
ensure that (i) any Shelf Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Shelf Registration Statement and any amendment
thereto (in either case, other than with respect to information included therein
in reliance upon or in conformity with written information furnished to the
Company by or on behalf of any Holder specifically for use therein (the
"Holders' Information")) does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of any Shelf Registration Statement, and any
supplement to such prospectus (in either case, other than with respect to
Holders' Information), does not include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
3. Liquidated Damages. (a) The parties hereto agree that the Holders of
Registrable Securities will suffer damages if the Company fails to fulfill its
obligations under Section 1 or Section 2, as applicable, and that it would not
be feasible to ascertain the extent of such damages. Accordingly, if (i) the
applicable
<PAGE>
6
Registration Statement is not filed with the Commission on or prior to 120 days
after the Original Issue Date, (ii) the Exchange Offer Registration Statement or
the Shelf Registration Statement, as the case may be, is not declared effective
within 180 days after the Original Issue Date (or in the case of a Shelf
Registration Statement required to be filed in response to a change in law or
the applicable interpretations of the Commission's staff, if later, within 30
days after publication of the change in law or interpretation), (iii) the
Registered Exchange Offer is not consummated on or prior to 195 days after the
Original Issue Date, or (iv) the Shelf Registration Statement is filed and
declared effective within 120 days after the Original Issue Date or in the case
of a Shelf Registration Statement required to be filed in response to a change
in law or the applicable interpretations of Commission's staff, if later, within
30 days after publication of the change in law or interpretation) but shall
thereafter cease to be effective (at any time that the Company is obligated to
maintain the effectiveness thereof) without being succeeded within 30 days by an
additional Registration Statement filed and declared effective (each such event
referred to in clauses (i) through (iv), a "Registration Default"), the Company
will be obligated to pay, or cause to be paid, in addition to amounts otherwise
due under the Indenture and the Exchange Securities, as liquidated damages, and
not as a penalty, to each Holder of Registrable Securities, 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
Accreted Value of Registrable Securities held by such Holder. The amount of the
liquidated damages thereafter will increase each week by an additional $0.05 per
$1,000 Accreted Value of Registrable Securities, up to a maximum amount of
liquidated damages of $0.30 per week per $1,000 Accreted Value of Registrable
Securities, until (i) the applicable Registration Statement is filed, (ii) the
Exchange Offer Registration Statement is declared effective and the Registered
Exchange Offer is consummated with respect to all validly tendered Securities,
(iii) the Shelf Registration Statement is declared effective or (iv) the Shelf
Registration Statement again becomes effective, as the case may be. Following
the cure of all Registration Defaults, the accrual of liquidated damages will
cease. As used herein, the term "Registrable Securities" means (i) each Security
until the date on which such Security has been exchanged for a freely
transferable Exchange Security in the Registered Exchange Offer, (ii) each
Security until the date on which it has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iii) each Security until the date on which it is distributed to
the public pursuant to Rule 144 under the Securities Act or is saleable pursuant
to Rule 144(k) under the Securities Act. Notwithstanding anything to the
contrary in this Section 3(a), the Company shall not be required to pay
liquidated damages to a Holder of Registrable Securities if such Holder failed
to comply with its obligations to make the representations set forth in the
second to last paragraph of Section 1 or failed to provide the information
required to be provided by it, if any, pursuant to Section 5(n) upon the
Company's request.
(b) The Company shall notify the Trustee and the Paying Agent under
the Indenture immediately upon the happening of each and every
<PAGE>
7
Registration Default. The Company shall pay the liquidated damages due on the
Registrable Securities by depositing with the Paying Agent (which may not be the
Company for these purposes), in trust, for the benefit of the Holders thereof,
prior to 10:00 a.m., New York City time, on or before the next interest payment
date specified by the Indenture and the Securities, immediately available funds
in sums sufficient to pay the liquidated damages then due. The liquidated
damages due shall be payable on each interest payment date specified by the
Indenture and the Securities to the record holder entitled to receive the
interest payment to be made on such date. Each obligation to pay liquidated
damages shall be deemed to accrue from and including the date of the applicable
Registration Default.
(c) The parties hereto agree that the liquidated damages provided
for in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Registrable
Securities by reason of the failure of (i) the Shelf Registration Statement or
the Exchange Offer Registration Statement to be filed, (ii) the Shelf
Registration Statement to remain effective or (iii) the Exchange Offer
Registration Statement to be declared effective and the Registered Exchange
Offer to be consummated, in each case to the extent required by this Agreement.
4. Hold-Back Agreements. The Company agrees without the prior written
consent of the Holders of a majority of the aggregate principal amount of the
then outstanding Registrable Securities, not to effect any public or private
sale or distribution (including a sale pursuant to Regulation D under the
Securities Act) of any securities the same as or similar to those covered by a
Registration Statement filed pursuant to Section 1 or 2 hereof, or any
securities convertible into or exchangeable or exercisable for such securities,
during the 10 days prior to, and during the 30-day period beginning on, (A) the
effective date of any Registration Statement filed pursuant to Sections 1 and 2
hereof unless the Holders of a majority in principal amount of Registrable
Securities to be included in such Registration Statement consent or (B) the
commencement of an underwritten public distribution of Registrable Securities,
where the managing underwriter so requests.
5. Registration Procedures. In connection with any Registration Statement,
the following provisions shall apply:
(a) The Company shall (i) include the information set forth in Annex
A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures"
section and the "Purpose of the Exchange Offer" section and in Annex C hereto in
the "Plan of Distribution" section of the prospectus forming a part of the
Exchange Offer Registration Statement, and include the information set forth in
Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered
Exchange Offer and (ii) if requested by the Holders, include the information
required by Items 507 or 508 of Regulation S-K, as applicable, in the prospectus
forming a part of the Exchange Offer Registration Statement.
<PAGE>
8
(b) The Company shall advise each Exchanging Dealer and the Holders
(if applicable) and, if requested by any such person, confirm such advice in
writing (which advice pursuant to clauses (ii) - (v) hereof shall be accompanied
by an instruction to suspend the use of the prospectus until the requisite
changes have been made):
(i) when any Registration Statement and any amendment thereto
has been filed with the Commission and when such Registration Statement or
any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments,
supplements to any Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities or the
Exchange Securities for sale in any jurisdiction or the initiation
threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the making of
any changes in any Registration Statement or the prospectus included
therein in order that the statements therein are not misleading and do not
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading.
(c) The Company will use its best efforts to prevent the issuance of
any order suspending the effectiveness of the Registration Statement or of any
order preventing or suspending the use of a prospectus or suspending the
qualification (or exemption from qualification) of any of the Securities for
sale in any jurisdiction, and if any such order is issued, and will use its
reasonable best efforts to obtain the withdrawal at the earliest possible time
of any order suspending the effectiveness of any Registration Statement.
(d) The Company will furnish to each Holder of Registrable
Securities included within the coverage of any Shelf Registration Statement,
without charge, at least one conformed copy of such Shelf Registration Statement
and any post-effective amendment thereto, including financial statements and
schedules and, if any such Holder so requests in writing, all exhibits thereto
(including those, if any, incorporated by reference).
<PAGE>
9
(e) The Company will, during the Shelf Registration Period, promptly
deliver to each Holder of Registrable Securities included within the coverage of
any Shelf Registration Statement, without charge, as many copies of the
prospectus (including each preliminary prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request; and the Company consents to the use of such prospectus
or any amendment or supplement thereto by each of the selling Holders of
Registrable Securities in connection with the offer and sale of the Registrable
Securities covered by such prospectus or any amendment or supplement thereto.
(f) The Company will furnish to each Exchanging Dealer, and to any
Holder who so requests, without charge, at least one conformed copy of the
Exchange Offer Registration Statement and any post-effective amendment thereto,
including financial statements and schedules and, if any Exchanging Dealer or
any Holder requests in writing, all exhibits thereto (including those, if any,
incorporated by reference).
(g) The Company will, during the Exchange Offer Registration Period
or the Shelf Registration Period, as applicable, promptly deliver to each
Exchanging Dealer and such other persons that are required to deliver a
prospectus following the Registered Exchange Offer, without charge, as many
copies of the final prospectus included in the Exchange Offer Registration
Statement or the Shelf Registration Statement and any amendment or supplement
thereto as such Exchanging Dealer or other persons may reasonably request; and
the Company consents to the use of such prospectus or any amendment or
supplement thereto by any such Exchanging Dealer or other persons, as
applicable, as aforesaid.
(h) Prior to the effective date of any Registration Statement, the
Company will use its reasonable best efforts to register or qualify, or
cooperate with the Holders of Securities or Exchange Securities included therein
and their respective counsel in connection with the registration or
qualification of, such Securities or Exchange Securities for offer and sale
under the securities or blue sky laws of such jurisdictions as any such Holder
reasonably requests in writing and do any and all other acts or things necessary
or advisable to enable the offer and sale in such jurisdictions of the
Securities or Exchange Securities covered by such Registration Statement;
provided that the Company will not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to take any
action which would subject it to general service of process or to taxation in
any such jurisdiction where it is not then so subject.
(i) The Company will cooperate with the Holders of Securities or
Exchange Securities to facilitate the timely preparation and delivery of
certificates representing Securities or Exchange Securities to be sold pursuant
to any Registration Statement free of any restrictive legends and in such
denominations and
<PAGE>
10
registered in such names as the Holders thereof may request in writing prior to
sales of Securities or Exchange Securities pursuant to such Registration
Statement.
(j) If any event contemplated by Section 5(b)(ii) through (v) occurs
during the period for which the Company is required to maintain an effective
Registration Statement, the Company will promptly prepare and file with the
Commission a post-effective amendment to the Registration Statement or a
supplement to the related prospectus or file any other required document so
that, as thereafter delivered to purchasers of the Securities or Exchange
Securities from a Holder, the prospectus will not include an untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Securities and the
Exchange Securities, as the case may be, and provide the applicable trustee with
printed certificates for the Securities or the Exchange Securities, as the case
may be, in a form eligible for deposit with The Depository Trust Company.
(l) The Company will comply with all applicable rules and
regulations of the Commission and will make generally available to its security
holders as soon as practicable after the effective date of the applicable
Registration Statement an earning statement satisfying the provisions of Section
11(a) of the Securities Act; provided that in no event shall such earning
statement be delivered later than 45 days after the end of a 12 month period (or
90 days, if such period is a fiscal year) beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of the
applicable Registration Statement, which statement shall cover such 12-month
period.
(m) The Company will cause the Indenture or the Exchange Securities
Indenture, as the case may be, to be qualified under the Trust Indenture Act as
required by applicable law in a timely manner.
(n) The Company may require each Holder of Registrable Securities to
be registered pursuant to any Shelf Registration Statement to furnish to the
Company such information concerning the Holder and the distribution of such
Registrable Securities as the Company may from time to time reasonably require
for inclusion in such Shelf Registration Statement, and the Company may exclude
from such registration the Registrable Securities of any Holder that fails to
furnish such information within a reasonable time after receiving such request.
(o) In the case of a Shelf Registration Statement, each Holder of
Registrable Securities to be registered pursuant thereto agrees by acquisition
of such Registrable Securities that, upon receipt of any notice from the Company
pursuant to Section 5(b)(ii) through (v), such Holder will discontinue
disposition of
<PAGE>
11
such Registrable Securities until such Holder's receipt of copies of the
supplemental or amended prospectus contemplated by Section 5(j) or until advised
in writing (the "Advice") by the Company that the use of the applicable
prospectus may be resumed. If the Company shall give any notice under Section
5(b)(ii) through (v) during the period that the Company is required to maintain
an effective Registration Statement (the "Effectiveness Period"), such
Effectiveness Period shall be extended by the number of days during such period
from and including the date of the giving of such notice to and including the
date when each seller of Registrable Securities covered by such Registration
Statement shall have received (x) the copies of the supplemental or amended
prospectus contemplated by Section 5(j) (if an amended or supplemental
prospectus is required) or (y) the Advice (if no amended or supplemental
prospectus is required).
(p) In the case of a Shelf Registration Statement, the Company shall
enter into such customary agreements (including, if requested, an underwriting
agreement in customary form) and take all such other action, if any, as Holders
of a majority in aggregate principal amount of the Securities and Exchange
Securities being sold or the managing underwriters (if any) shall reasonably
request in order to facilitate any disposition of Securities or Exchange
Securities pursuant to such Shelf Registration Statement.
(q) In the case of a Shelf Registration Statement, the Company shall
(i) make reasonably available for inspection by a representative of, and Special
Counsel (as defined below) acting for, Holders of a majority in aggregate
principal amount of the Securities and Exchange Securities being sold and any
underwriter participating in any disposition of Securities and Exchange
Securities pursuant to such Shelf Registration Statement, all relevant financial
and other records, pertinent corporate documents and properties of the Company
and it subsidiaries and (ii) use its reasonable best efforts to have its
officers, directors, employees, accountants and counsel supply all relevant
information reasonably requested by such representative, Special Counsel or any
such underwriter (an "Inspector") in connection with such Shelf Registration
Statement.
(r) In the case of a Shelf Registration Statement, the Company
shall, if requested by Holders of a majority in aggregate principal amount of
the Securities and Exchange Securities being sold, their Special Counsel, or the
managing underwriters (if any) in connection with such Shelf Registration
Statement, use its reasonable best efforts to cause (i) its counsel to deliver
an opinion relating to the Shelf Registration Statement and the Securities and
Exchange Securities, as applicable, in customary form, (ii) its officers to
execute and deliver all customary documents and certificates requested by
Holders of a majority in aggregate principal amount of the Securities and
Exchange Securities being sold, their Special Counsel or the managing
underwriters (if any) and (iii) its independent public accountants to provide a
comfort letter in customary form subject to receipt of appropriate
<PAGE>
12
documentation as contemplated, and only if permitted, by Statement of Auditing
Standards No. 72.
6. Registration Expenses. The Company will bear all fees and expenses
incurred in connection with the performance of its obligations under Sections 1,
2, 3, 4 and 5 and the Company will reimburse the Holders for the reasonable fees
and disbursements of one firm of attorneys in addition to any local counsel)
chosen by the Holders of a majority in aggregate principal amount of the
Securities and Exchange Securities to be sold pursuant to each Registration
Statement or Shelf Registration Statement (including, without limitation, any
underwritten registrations) (the "Special Counsel") acting for the Holders in
connection therewith and other reasonable and necessary out-of-pocket expenses
of the Holders incurred in connection with the registration of Exchange
Securities. The Company shall pay all documentary, stamp, transfer or other
transactional taxes attributable to the issuance or delivery of the Exchange
Securities in exchange for the Securities; provided that the Company shall not
be required to pay taxes payable in respect of any transfer involved in the
issuance or delivery of any Exchange Security in a name other than that of the
holder of the Securities in respect of which such Exchange Security is being
issued.
7. Indemnification. (a) In the event of a Shelf Registration Statement or
in connection with any prospectus delivery pursuant to an Exchange Offer
Registration Statement by an Exchanging Dealer, as applicable, the Company shall
indemnify and hold harmless each Holder (including, without limitation, any such
Exchanging Dealer), its affiliates, their respective officers, directors,
employees, representatives and agents, and each person, if any, who controls
such Holder within the meaning of the Securities Act or the Exchange Act
(collectively referred to for purposes of this Section 7 and Section 8 as a
Holder) from and against any loss, claim, damage or liability, joint or several,
or any action in respect thereof (including, without limitation, any loss,
claim, damage, liability or action relating to purchases and sales of Securities
or Exchange Securities), to which that Holder may become subject, whether
commenced or threatened, under the Securities Act, the Exchange Act, any other
federal or state statutory law or regulation, at common law or otherwise as
incurred, insofar as such loss, claim, damage, liability or action, directly or
indirectly, arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any such Registration Statement
or any prospectus forming part thereof or in any amendment or supplement thereto
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and shall reimburse each Holder promptly upon demand for any legal
or other expenses reasonably incurred by that Holder in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action (including, without limitation, reasonable costs and expenses incurred
in connection with investigating, preparing,
<PAGE>
13
pursing or defending against any of the foregoing) as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage, liability or action arises
out of, or is based upon, an untrue statement or alleged untrue statement in or
omission or alleged omission from any of such documents in reliance upon and in
conformity with any Holders' Information; and provided, further, that with
respect to any such untrue statement in or omission from any related preliminary
prospectus, the indemnity agreement contained in this Section 7(a) shall not
inure to the benefit of any Holder from whom the person asserting any such loss,
claims, damage, liability or action received Securities or Exchange Securities
to the extent that such loss, claim, damage, liability or action of or with
respect to such Holder results from the fact that (A) a copy of the final
prospectus was not sent or given to such person at or prior to the written
confirmation of the sale of such Securities or Exchange Securities to such
person and (B) the untrue statement in or omission from the related preliminary
prospectus was corrected in the final prospectus unless, in either case, such
failure to deliver the final prospectus was a result of non-compliance by the
Company with Section 5(d), 5(e) or 5(g).
(b) In the event of a Shelf Registration Statement, each Holder
shall indemnify and hold harmless the Company, its affiliates, their respective
officers, directors, employees, representatives and agents, each person, if any,
who controls the Company within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 7(b) and
Section 8 as the Company), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Company may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, in the light of the circumstances
under which they were made, not misleading, but in each case only to the extent
that the untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with any Holders'
Information furnished to the Company by such Holder, and shall reimburse the
Company for any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending or preparing to defend against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that no such Holder shall be liable for any indemnity claims hereunder in excess
of the amount of net proceeds received by such Holder from the sale of
Securities or Exchange Securities pursuant to such Shelf Registration Statement.
<PAGE>
14
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 7(a) or 7(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 7 except to the extent
(but only to the extent) that it has been materially prejudiced (through the
forfeiture of substantive rights or defenses) by such failure; and provided,
further, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have to an indemnified party otherwise than
under this Section 7. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party
within 20 business days after receipt of written notice from such indemnified
party of such claim or action, to assume, at its expense, the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than the reasonable costs of investigation; provided, however,
that an indemnified party shall have the right to retain its own counsel in any
such action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expenses of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there may
be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 7(a) and 7(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably
<PAGE>
15
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment. No indemnifying party shall,
without the prior written consent of the indemnified party (which consent shall
not be unreasonably withheld), effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceeding (whether or not any indemnified party is a party thereto).
8. Contribution. If the indemnification provided for in Section 7 is
unavailable or insufficient to hold harmless an indemnified party under Section
7(a) or 7(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, shall have a joint and several obligation to contribute to
the amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability, or action in respect thereof, (i) in such proportion
as shall be appropriate to reflect the relative benefits received by the Company
from the offering and sale of the Securities, on the one hand, and a Holder with
respect to the sale by such Holder of Securities or Exchange Securities, on the
other, or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and such Holder on the other with respect to the
statements or omissions that resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and a Holder on the other with respect to such offering and such sale shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Securities (before deducting expenses) received by or on behalf of the
Company as set forth in the table on the cover of the Offering Circular, on the
one hand, bear to the total proceeds received by such Holder with respect to its
sale of Securities or Exchange Securities, on the other. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to the Company or information supplied by the
Company on the one hand or to any Holders' Information supplied by such Holder
on the other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The parties hereto agree that it would not be just and equitable if
contributions pursuant to this Section 8 were to be determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of loss, claim, damage or liability, or action
in respect thereof, referred to above in this Section 8 shall be deemed to
include, for purposes of this Section 8, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
or preparing to defend any such
<PAGE>
16
action or claim to the extent such party would have been indemnified for such
fees. Notwithstanding the provisions of this Section 8, an indemnifying party
that is a Holder of Securities or Exchange Securities shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Securities or Exchange Securities sold by such indemnifying party to any
purchaser exceeds the amount of any damages which such indemnifying party has
otherwise paid or become liable to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from a person who was not guilty of such
misrepresentation. The indemnity and contribution agreements contained in this
Section 8 are in addition to any liability that the indemnifying parties may
have to the indemnified parties.
9. Rules 144 and 144A. The Company covenants that it shall file the
reports required to be filed by it under the Securities Act and the Exchange Act
in a timely manner and, if at any time the Company is not required to file such
reports, it will, upon the written request of any Holder of Registrable
Securities, make publicly available other information so long as necessary to
permit sales of such Holder's securities pursuant to Rules 144 and 144A. The
Company covenants that it will take such further action as any Holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rules 144 and 144A (including, without limitation, the requirements
of Rule 144(d)(4)). Upon the written request of any Holder of Registrable
Securities, the Company shall deliver to such Holder a written statement as to
whether it has complied with such requirements. Notwithstanding the foregoing,
nothing in this Section 9 shall be deemed to require the Company to register any
of its securities pursuant to the Exchange Act.
10. Underwritten Registrations. If any of the Registrable Securities
covered by any Shelf Registration Statement are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected by the Holders of a majority
in aggregate principal amount of such Registrable Securities included in such
offering, subject to the consent of the Company (which shall not be unreasonably
withheld or delayed). No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's Registrable
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements; provided that the provisions of this sentence
may not be amended, modified or supplemented except in accordance with the
provisions of the first sentence of this paragraph.
<PAGE>
17
11. Miscellaneous. (a) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, unless the Company
has obtained the written consent of Holders of a majority in aggregate principal
amount of the Securities or Exchange Securities, taken as a single class.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders whose Securities or Exchange Securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of a majority in aggregate
principal amount of the Securities or Exchange Securities being sold by such
Holders pursuant to such Registration Statement; provided, that Section 1(a), 3
and 7 shall not be amended, modified or supplemented, and waivers or consents to
departures from this proviso may not be given, unless the Company has obtained
the written consent of each Holder.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, certified
first-class mail, telecopier or air courier guaranteeing next-day delivery:
(i) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this Section
11(b), which address initially is, with respect to each Holder, the
address of such Holder maintained by the Registrar under the Indenture;
and
(ii) if to the Company, initially at the address of the
Company set forth in the Offering Circular.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; one business day after
being delivered to a next-day air courier; five business days after being
deposited in the mail postage prepaid; and when receipt is acknowledged by the
recipient's telecopier machine, if sent by telecopier.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
(c) Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopier) and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
<PAGE>
18
(e) Definition of Terms. For purposes of this Agreement, (a) the
term "business day" means any day on which the New York Stock Exchange, Inc. is
open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act and (c) except where otherwise expressly provided,
the term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
(g) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York.
(h) No Inconsistent Agreements. The Company represents, warrants and
agrees that (i) it has not entered into, shall not, on or after the date of this
Agreement, enter into any agreement that is inconsistent with the rights granted
to the Holders in this Agreement or otherwise conflicts with the provisions
hereof, (ii) it has not previously entered into any agreement which remains in
effect granting any registration rights with respect to any of its debt
securities to any person and (iii) without limiting the generality of the
foregoing, without the written consent of the Holders of a majority in aggregate
principal amount of the then outstanding Registrable Securities, it shall not
grant to any person the right to request the Company to register any debt
securities of the Company under the Securities Act unless the rights so granted
are not in conflict or inconsistent with the provisions of this Agreement.
(i) No Piggyback on Registrations. Neither the Company nor any of
its security holders (other than the Holders of Registrable Securities in such
capacity) shall have the right to include any securities of the Company in any
Shelf Registration or Registered Exchange Offer other than Registrable
Securities.
(j) Severability. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
<PAGE>
19
(k) Entire Agreement. This Agreement contains the entire agreement
among the parties hereto with respect to the transactions contemplated herein
and supersedes all prior agreements, negotiations, or understandings between the
parties with respect to such subject matter.
(l) Attorneys' Fees. In any proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the prevailing party, as determined by the courts, shall be
entitled to recover reasonable attorney's fees in addition to its costs and
expenses and any other available remedy.
(m) Securities Held by the Company or its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its affiliates (as such term is defined in Rule 405 under the Securities Act)
(other than Holders deemed to be such affiliates solely by reason of their
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the holders of such required
percentage.
<PAGE>
20
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
SFAC NEW HOLDINGS, INC.
By: /s/ Sean M. Stack
--------------------------------
Name: Sean M. Stack
Title: Vice President, Treasurer
and Assistant Secretary
HOLDERS:
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter"within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Securities received in exchange for
Securities where such Securities were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
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 Securities
received in exchange for Securities where such Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 180 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until __________, __, all
dealers effecting transactions in the Exchange Securities may be required to
deliver a prospectus.1/
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers for
their own account pursuant to the Registered Exchange Offer may be sold from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange
Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such Exchange Securities. Any broker-dealer that resells
Exchange Securities that were received by it for its own account pursuant to the
Registered Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Securities may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Exchange Securities and any commission or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that, by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Registered Exchange Offer (including the expenses of one counsel
for the Holders of the Securities) other than commissions or concessions of any
broker-dealers and will
- --------
1/ In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Registered Exchange Offer prospectus.
<PAGE>
2
indemnify the Holders of the Securities (including any broker-dealers) against
certain liabilities, including under the Securities Act.
<PAGE>
ANNEX D
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name: ____________________________________
Address: _________________________________
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; 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.
Exhibit 4.2
================================================================================
SFAC NEW HOLDINGS, INC.
$587,025,331.77
13% SERIES A SENIOR SECURED DISCOUNT DEBENTURES DUE 2009
AND
13% SERIES B SENIOR SECURED DISCOUNT DEBENTURES DUE 2009
--------------------------------------------
INDENTURE
Dated as of June 11, 1999
--------------------------------------------
-------------------------------------------------
UNITED STATES TRUST COMPANY OF NEW YORK
-------------------------------------------------
Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE......................1
Section 1.1 Definitions..............................................1
Section 1.2 Other Definitions.......................................19
Section 1.3 Incorporation by Reference of Trust Indenture Act.......19
Section 1.4 Rules of Construction...................................20
ARTICLE 2 THE DEBENTURES.................................................20
Section 2.1 Form and Dating.........................................20
Section 2.2 Execution and Authentication............................21
Section 2.3 Registrar and Paying Agent..............................22
Section 2.4 Paying Agent to Hold Money in Trust.....................22
Section 2.5 Holder Lists............................................22
Section 2.6 Transfer and Exchange...................................23
Section 2.7 Replacement Debentures..................................29
Section 2.8 Outstanding Debentures..................................30
Section 2.9 Treasury Debentures.....................................30
Section 2.10 Temporary Debentures....................................30
Section 2.11 Cancellation............................................31
Section 2.12 Defaulted Interest......................................31
ARTICLE 3 REDEMPTION AND PREPAYMENT......................................31
Section 3.1 Notices to Trustee......................................31
Section 3.2 Selection of Debentures To Be Redeemed..................31
Section 3.3 Notice of Redemption....................................32
Section 3.4 Effect of Notice of Redemption..........................33
Section 3.5 Deposit of Redemption Price.............................33
Section 3.6 Debentures Redeemed in Part.............................33
Section 3.7 Optional Redemption.....................................34
Section 3.8 Mandatory Redemption....................................34
Section 3.9 Offer to Purchase by Application of Excess Proceeds.....34
ARTICLE 4 COVENANTS......................................................36
Section 4.1 Payment of Debentures...................................36
Section 4.2 Maintenance of Office or Agency.........................37
Section 4.3 Reports.................................................37
Section 4.4 Compliance Certificate..................................38
Section 4.5 Taxes...................................................39
Section 4.6 Stay, Extension and Usury Laws..........................39
Section 4.7 Restricted Payments.....................................39
Section 4.8 Dividend and Other Payment Restrictions
Affecting Subsidiaries..................................41
i
<PAGE>
Page
----
Section 4.9 Incurrence of Indebtedness and Issuance
of Preferred Stock......................................41
Section 4.10 Asset Sales.............................................44
Section 4.11 Transactions with Affiliates............................45
Section 4.12 Liens...................................................46
Section 4.13 Accounts Receivable Subsidiary..........................46
Section 4.14 Corporate Existence.....................................48
Section 4.15 Offer to Repurchase Upon Change of Control..............49
Section 4.16 Rights Offering.........................................50
ARTICLE 5 SUCCESSORS.....................................................51
Section 5.1 Merger, Consolidation, or Sale of Assets................51
Section 5.2 Successor Corporation Substituted.......................52
ARTICLE 6 DEFAULTS AND REMEDIES..........................................52
Section 6.1 Events of Default.......................................52
Section 6.2 Acceleration............................................54
Section 6.3 Other Remedies..........................................55
Section 6.4 Waiver of Past Defaults.................................55
Section 6.5 Control by Majority.....................................55
Section 6.6 Limitations on Suits....................................55
Section 6.7 Rights of Holders of Debentures to Receive Payment......56
Section 6.8 Collection Suit by Trustee..............................56
Section 6.9 Trustee May File Proofs of Claim........................56
Section 6.10 Priorities..............................................57
Section 6.11 Undertaking for Costs...................................57
ARTICLE 7 TRUSTEE........................................................58
Section 7.1 Duties of Trustee.......................................58
Section 7.2 Rights of Trustee.......................................59
Section 7.3 Individual Rights of Trustee............................60
Section 7.4 Trustee's Disclaimer....................................60
Section 7.5 Notice of Defaults......................................60
Section 7.6 Reports by Trustee to Holders of the Debentures.........60
Section 7.7 Compensation and Indemnity..............................61
Section 7.8 Replacement of Trustee..................................62
Section 7.9 Successor Trustee by Merger, Etc........................63
Section 7.10 Eligibility; Disqualification...........................63
Section 7.11 Preferential Collection of Claims Against Holdings......63
ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE.......................63
Section 8.1 Option to Effect Legal Defeasance or
Covenant Defeasance.....................................63
ii
<PAGE>
Page
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Section 8.2 Legal Defeasance and Discharge..........................63
Section 8.3 Covenant Defeasance.....................................64
Section 8.4 Conditions to Legal or Covenant Defeasance..............64
Section 8.5 Deposited Money and Government Securities
to be Held in Trust; Other Miscellaneous Provisions.....66
Section 8.6 Repayment to Company....................................67
Section 8.7 Reinstatement...........................................67
ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER...............................67
Section 9.1 Without Consent of Holders of Debentures................67
Section 9.2 With Consent of Holders of Debentures...................68
Section 9.3 Compliance with Trust Indenture Act.....................70
Section 9.4 Revocation and Effect of Consents.......................70
Section 9.5 Notation on or Exchange of Debentures...................70
Section 9.6 Trustee to Sign Amendments, Etc.........................70
ARTICLE 10 COLLATERAL AND SECURITY........................................71
Section 10.1 Pledge Agreement........................................71
Section 10.2 Recording and Opinions..................................71
Section 10.3 Release of Collateral...................................72
Section 10.4 Certificates of Holdings................................73
Section 10.5 Certificates of the Trustee.............................73
Section 10.6 Authorization of Actions to Be Taken by
the Trustee Under the Pledge Agreement..................73
Section 10.7 Authorization of Receipt of Funds by
the Trustee Under the Pledge Agreement..................73
Section 10.8 Termination of Security Interest........................74
ARTICLE 11 MISCELLANEOUS..................................................74
Section 11.1 Trust Indenture Act Controls............................74
Section 11.2 Notices.................................................74
Section 11.3 Communication by Holders of Debentures with
Other Holders of Debentures.............................75
Section 11.4 Certificate and Opinion as to Conditions Precedent......75
Section 11.5 Statements Required in Certificate or Opinion...........76
Section 11.6 Rules by the Trustee and Agents.........................76
Section 11.7 No Personal Liability of Directors, Officers,
Employees and Stockholders..............................76
Section 11.8 Governing Law...........................................76
Section 11.9 No Adverse Interpretation of Other Agreements...........76
Section 11.10 Successors..............................................77
Section 11.11 Severability............................................77
iii
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Section 11.12 Counterpart Originals...................................77
Section 11.13 Table of Contents, Headings, Etc........................77
SCHEDULES
Schedule 1 - Transaction Liens
Schedule 2 - SFC Sale Assets
EXHIBITS
Exhibit A - FORM OF DEBENTURE
Exhibit B - CERTIFICATE OF TRANSFEROR
Exhibit C - FORM OF PLEDGE AGREEMENT
iv
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INDENTURE dated as of June 11, 1999 between SFAC New Holdings, Inc.,
a Delaware corporation ("Holdings"), and United States Trust Company of New
York, as trustee (the "Trustee").
Holdings and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the 13% Series A
Senior Secured Discount Debentures due 2009 (the "Series A Debentures") and the
13% Series B Senior Secured Discount Debentures due 2009 (the "Series B
Debentures" and, together with the Series A Debentures, the "Debentures"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.1 Definitions.
"Accounts Receivable Agreements" means (i) the Pooling Agreement
dated as of November 16, 1994, as amended, among the Accounts Receivable
Subsidiary, the Company or SFC, as Master Servicer, and The Chase Manhattan
Bank, as trustee on behalf of the Certificateholders, (ii) the Series 1998-1
Supplement to the Pooling Agreement, dated as of March 31, 1998, as amended,
among the Accounts Receivable Subsidiary, the Company or SFC, as Master
Servicer, and The Chase Manhattan Bank, as trustee on behalf of the
Certificateholders, (iii) the Servicing Agreement dated as of November 16, 1994,
as amended, among the Accounts Receivable Subsidiary, the Company or SFC, as
Master Servicer, certain subsidiaries of the Company, as Servicers, and The
Chase Manhattan Bank, as trustee, (iv) the Amended and Restated Receivables Sale
Agreement, dated as of November 16, 1994, as amended, among the Accounts
Receivable Subsidiary, the Company or SFC, as Master Servicer, and certain
subsidiaries of the Company, as Sellers and (v) any related instruments and
agreements executed in connection therewith, together with any replacement or
additional Pooling Agreements and Receivables Sale Agreements, and including any
related 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 parties.
"Accounts Receivable Discount" means, with respect to any account
receivable sold by the Company 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
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2
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 Persons other than 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 made by the seller of
such account receivable to the face amount thereof.
"Accounts Receivable Subsidiary" means a Wholly Owned Subsidiary of
the Company designated as such by the Company, (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 the Company nor any other Subsidiary of the Company 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 the Company 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 purpose of accounts receivable.
"Accreted Value" means (i) with respect to the Debentures, the sum
of (a) the stated principal amount of each Debenture at the Original Issue Date
plus (b) the interest accrued (and deferred) at a rate of 13% per annum on such
principal amount through June 15, 2004, compounded semi-annually on each June 15
and December 15, from the Original Issue Date through the date of determination
and (ii) with respect to the SFAC 13% Debentures, "Accreted Value" as defined in
the SFAC 13% Debenture.
"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
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3
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 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.
"Agent" means any Registrar or Paying Agent.
"Archway" means Archway Cookies, LLC, a Delaware limited liability
company and a Wholly Owned Subsidiary of Mother's.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of Holdings, or
any authorized committee of the Board of Directors.
"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 than six months
from the date of acquisition, (iii) certificates of deposit and Eurodollar time
deposits with maturities of six months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six months and overnight bank
deposits, in each case, with any lender party to the 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.
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4
"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 the assets of Holdings, SFC Sub, SFC or SFAC to any
Person or group (as such term is used in Section 13(d)(3) of the Exchange Act)
(other than the Principals of their Specified Parties), (ii) the adoption of a
plan relating to the liquidation or dissolution of Holdings, SFC Sub, SFC or
SFAC, (iii) the consummation of any transaction the result of which is that any
Person or group (other than the Principals and their Specified Parties) owns,
directly or indirectly, more of the voting power of the voting stock of
Holdings, SFC Sub, SFC or SFAC other than the Principals and their Specified
Parties, (iv) the first day on which a majority of the members of the Board of
Directors of Holdings, SFC Sub, SFC or SFAC are not Continuing Directors and (v)
Holdings ceases to own 100% of the outstanding Equity Interests (other than
Permitted Preferred Stock) of the Company. 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.
"Collateral" means any assets of Holdings defined as Collateral in
the Pledge Agreement.
"Collateral Agent" shall have the meaning set forth in the Pledge
Agreement.
"Company" means SFC New Holdings, Inc., a Delaware corporation and a
Wholly Owned Subsidiary of Holdings.
"Company Note Offering" means the offering of the Senior Notes and
the Senior Subordinated Notes by the Company.
"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 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
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5
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, and any commitment, availability or other fees payable
to the Accounts Receivable Subsidiary in respect of, sales of accounts
receivable by such Person and its Subsidiaries to the Accounts Receivable
Subsidiary during such period to the extent such amount was deducted 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 (other than the Accounts
Receivable Subsidiary) 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 government 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 the
Accounts Receivable 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 this Indenture 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.
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6
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of Holdings, SFC Sub, SFC or SFAC, as
applicable, who (i) was a member of such Board of Directors on the date of this
Indenture or (ii) was nominated for election or elected to such Board of
Directors with the affirmative vote of a majority of the Continuing Directors
who were members of such Board at the time of such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of
the Trustee specified in Section 10.2 hereof or such other address as to which
the Trustee may give notice to Holdings.
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"Debenture Custodian" means the Trustee, as custodian with respect
to the Debentures in global form, or any successor entity thereto.
"Debentureholder Common Stock" means the aggregate of shares of
common stock of Holdings issued on the Original Issue Date to the Holders.
"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.
"Definitive Debentures" means Debentures that are in the form of
Exhibit A attached hereto and that do not include the information called for by
footnotes 1 and 2 thereof.
"Depository" means, with respect to the Debentures issuable in whole
or in part in global form, the Person specified in Section 2.3 hereof as the
Depository with respect to the Debentures, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depository" shall mean or include such successor.
"Disqualified Stock" means, with respect to the Debentures, 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 Debentures mature.
"85% Owned Subsidiary" of a Person means any Subsidiary of such
Person at least 85% of the outstanding Capital Stock (other than, in the case of
the Company, Permitted Preferred 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.
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7
"11% Debenture Indenture" means that certain indenture, dated as of
the date hereof, by and between SFC Sub and United States Trust Company of New
York, as trustee, as amended or supplemented from time to time, relating to the
11% Debentures.
"11% Debentures" means, collectively, SFC Sub's 11% Series A Senior
Subordinated Discount Debentures due 2009 and SFC Sub's 11% Series B Senior
Subordinated Discount Debentures due 2009, issued pursuant to the 11% Debenture
Indenture.
"11 1/4% Senior Indenture" means that certain indenture, dated as of
the date hereof, by and between the Company and United States Trust Company of
New York, as trustee, as amended and supplemented from time to time, relating to
the 11 1/4% Senior Notes.
"11 1/4% Senior Notes" means, collectively, the Company's 11 1/4%
Series A Senior Notes due 2001 and the Company's 11 1/4% Series B Senior Notes
due 2001, issued pursuant to the 11 1/4% Senior Indenture.
"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).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Offer" means the offer that may be made by Holdings
pursuant to the Registration Rights Agreement to exchange Series A Debentures
for Series B Debentures.
"Existing Indebtedness" means Indebtedness of Holdings and its
Subsidiaries (other than under the Term Loan Agreement, the Revolving Credit
Agreement and the Note Indentures) in existence on the date of this Indenture,
until such amounts are repaid.
"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
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
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8
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 Holdings or the Company for
any period commencing prior to the date of the Transaction, pro forma effect
shall be given to the Transaction, 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), excluding, in the case of Holdings, the interest expense of the Accounts
Receivable Subsidiary with respect to Non-Recourse Indebtedness, 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, and any commitment,
availability or other fees payable to the Accounts Receivables Subsidiary in
respect of, 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 this Indenture.
"Global Debenture" means a Debenture that is in the form of Exhibit
A attached hereto that contains the paragraph referred to in footnote 1 and the
additional schedule referred to in footnote 2 thereto.
"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
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9
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Holder" means a Person in whose name a Debenture is registered.
"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.
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Initial Exchange Offer" means the exchange offer for the SFAC 13%
Debentures made by Holdings in accordance with the terms and conditions set
forth in the Offering Circular.
"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.
"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
<PAGE>
10
agreement to give any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing
pursuant to the Registration Rights Agreement.
"Marketable Securities" means, in connection with any Asset Sale,
any readily marketable equity or debt securities that are received by Holdings
or any Subsidiary of Holdings as consideration for such Asset Sale and are (a)
traded on the New York Stock Exchange, the American Stock Exchange or the
National Association of Securities Dealers Automated Quotation National Market
System and (b) 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 the aggregate amount of securities of any one such
corporation held immediately following the consummation of any Asset Sale by
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 by 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 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.
"Metz" means Metz Baking Company, an Iowa corporation and a Wholly
Owned Subsidiary of the Company.
"Mother's" means Mother's Cake & Cookie Co., a California
corporation and a Wholly Owned Subsidiary of the Company.
"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 provisions 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
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
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11
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 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 (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 (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.
"Note Indentures" means, collectively, the 11 1/4% Senior Indenture,
the 12 1/8% Senior Indenture and the Senior Subordinated Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursement obligations, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Offering Circular" means the Offer to Exchange and Consent
Solicitation of Holdings dated May 10, 1999 pursuant to which Holdings (i)
offered to exchange the Debentures and Debentureholder Common Stock for any and
all of the SFAC 13% Debentures and (ii) solicited consents from the holders of
the SFAC 13% Debentures to certain amendments to the SFAC 13% Indenture.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate that meets the
requirements of Section 11.5 hereof and is signed on behalf of Holdings by the
Chairman of the Board, the President or any Vice President and by the Treasurer,
or Assistant Treasurer, the Secretary or Assistant Secretary.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
11.5 hereof. The counsel may be an employee of or counsel to Holdings, any
Subsidiary of Holdings or the Trustee.
"Original Issue Date" means the first day on which the Debentures
are issued.
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12
"Permitted Investments" means (a) any Investments in Holdings or in
an 85% Owned Subsidiary of Holdings that is engaged in the same or a similar or
related line of business as Holdings or any of its Subsidiaries were engaged in
on the date of this Indenture; (b) any investments in Cash Equivalents; (c)
Investments by Holdings or any Subsidiary of Holdings in a Person that is
engaged in the same or a similar or related line of business as Holdings or any
of its Subsidiaries were engaged in on the date of this Indenture, if as a
result of such Investment (i) such Person becomes an 85% Owned Subsidiary of
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, Holdings or an 85% Owned Subsidiary of Holdings; (d)
Investments in the Accounts Receivable Subsidiary permitted by Section 4.13
hereof; (e) Investments in agricultural commodities futures, options and other
hedging obligations in the ordinary course of business; and (f) Investments (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 securing Indebtedness of
Subsidiaries of Holdings permitted under Section 4.9 hereof; (b) Liens in favor
of Holdings and its Wholly Owned Subsidiaries; (c) Liens on property of a Person
existing at the time such Person is merged into or consolidated with Holdings or
any Subsidiary of Holdings; provided that such Liens were in existence prior to
the contemplation of such merger or consolidation; (d) Liens on property
existing at the time of acquisition thereof by Holdings or any Subsidiary of
Holdings; provided, that such Liens were in existence prior to the contemplation
of such acquisition; (e) Liens existing on the date of the SFAC 13% Indenture
(including the Accounts Receivable Agreements) and Liens created on the date
hereof in connection with the Transaction as set forth on Schedule 1 attached
hereto 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; (f) 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; (g) carriers',
warehousemen's, mechanics', materialmen's, repairmen's, landlord's or other like
Liens arising in the ordinary course of business; (h) 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; (i) 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; (j) 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 Holdings
<PAGE>
13
and its Subsidiaries; (k) 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; (l) licenses for the use of intellectual property rights or like
intangible assets; and (m) Liens incurred in the ordinary course of business of
Holdings or any Subsidiary of 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).
"Permitted Preferred Stock" means preferred stock of the Company
that (i) ranks senior to the common stock of the Company in respect of dividends
and distributions in a liquidation of the Company; (ii) does not mature or is
not mandatorily redeemable, pursuant to a sinking fund or otherwise, or
redeemable at the option of the holder thereof, in whole or in part, prior to
June 15, 2010; (iii) provides that dividends may be paid, at the option of the
Company, by the issuance of additional shares of Permitted Preferred Stock, or
if permitted under the terms of the Company's outstanding indebtedness, in cash
after June 15, 2005; and (iv) is issued by the Company in compliance with
Section 4.16.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust or unincorporated organization
(including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or business).
"PIK Notes" means any additional Senior Subordinated Notes issued by
the Company as interest payable-in-kind in lieu of a cash payment of $5.00 per
$1,000 principal amount of Senior Subordinated Notes due on the interest payment
date for such Senior Subordinated Notes in accordance with the terms of the
Senior Subordinated Indenture.
"Pledge Agreement" means that certain Pledge Agreement, dated as of
the date of this Indenture and substantially in the form attached as Exhibit C
hereto, as such agreement may be amended, modified or supplemented from time to
time.
"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 the SFC Sale Assets.
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14
"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 Receivables 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
than 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 June 11, 1999 by and among Holdings and the
Holders, as such agreement may be amended, modified or supplemented from time to
time.
"Responsible Officer" means, when used with respect to the Trustee,
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"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 SFC,
the lenders party thereto and DLJ Funding Corp., as administrative agent,
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,
<PAGE>
15
supplemented, extended, modified, renewed, refunded, replaced or refinanced from
time to time, whether or not with the same lenders.
"Rights Offering" means the issuance by the Company of Permitted
Preferred Stock through a rights offering mechanism.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Notes" means, collectively, the Company's 11 1/4% Senior
Notes and the Company's 12 1/8% Senior Notes.
"Senior Revolving Debt" means all Obligations from time to time
outstanding under the Revolving Credit Agreement.
"Senior Subordinated Indenture" means that certain indenture, dated
as of June 11, 1999, by and between the Company and U.S. Trust Company of Texas,
N.A., as trustee, as amended or supplemented from time to time, relating to the
Senior Subordinated Notes.
"Senior Subordinated Notes" means, collectively, the Company's 13
1/4% Series A Senior Subordinated Notes due 2003 and the Company's 13 1/4%
Series B Senior Subordinated Notes due 2003, issued pursuant to the Senior
Subordinated Indenture.
"Senior Term Debt" means all Obligations from time to time
outstanding under the Term Loan Agreement.
"SFAC" means Specialty Foods Acquisition Corporation, a Delaware
corporation.
"SFAC 13% Debentures" means the 13% Senior Secured Discount
Debentures due 2005 issued pursuant to the SFAC 13% Indenture.
"SFAC 13% Indenture" means the indenture dated as of August 16,
1993, by and between SFAC and United States Trust Company of New York, as
trustee, as amended or supplemented from time to time, relating to the SFAC 13%
Debentures.
"SFC" means Specialty Foods Corporation, a Delaware corporation, and
a Wholly Owned Subsidiary of SFAC.
"SFC 11 1/8% Senior Notes" means the 11 1/8% Senior Notes due 2002
issued by SFC pursuant to the SFC 11 1/8% Senior Indenture.
<PAGE>
16
"SFC 11 1/8% Senior Indenture" means that certain Indenture, dated
as of July 17, 1995, by and between SFC and United States Trust Company of New
York, as trustee, as amended from time to time, relating to the SFC 11 1/8%
Senior Notes.
"SFC Exchange Offers" means the Offers to Exchange and Consent
Solicitations of the Company dated May 10, 1999 pursuant to which the Company
(i) offered to exchange (a) up to $225,000,000 aggregate principal amount of 11
1/4% Senior Notes and up to $5,659,368 aggregate principal amount of 11%
Debentures for all outstanding SFC 10 1/4% Senior Notes; (b) up to $150,000,000
aggregate principal amount of 12 1/8% Senior Notes and up to $3,772,912
aggregate principal amount of 11% Debentures for all outstanding SFC 11 1/8%
Senior Notes; and (c) up to $200,000,000 aggregate principal amount of Senior
Subordinated Notes and up to $18,864,558 aggregate principal amount of 11%
Debentures for all outstanding SFC Subordinated Notes; and (ii) solicited
consents from the holders of the SFC Notes to certain amendments to the
indentures pursuant to which such SFC Notes were issued.
"SFC Notes" means, collectively, the SFC 10 1/4% Senior Notes, the
SFC 11 1/8% Senior Notes and the SFC Subordinated Notes.
"SFC Sale Assets" means the real estate of Mother's, Metz and
Archway listed on Schedule 2 attached hereto which is being held for sale by SFC
as of the date of this Indenture.
"SFC Senior Notes" means, collectively, the SFC 10 1/4% Senior Notes
and the SFC 11 1/8% Senior Notes.
"SFC Sub" means SFC Sub, Inc., a Delaware corporation, and a Wholly
Owned Subsidiary of SFC.
"SFC Subordinated Notes" means the 11 1/4% Senior Subordinated Notes
due 2003 issued by SFC pursuant to the SFC Subordinated Note Indenture.
"SFC Subordinated Note Indenture" means that certain Indenture,
dated as of August 16, 1993, by and between SFC and United States Trust Company
of New York, as trustee, as amended from time to time, relating to the SFC
Subordinated Notes.
"SFC 10 1/4% Senior Notes" means the 10 1/4% Senior Notes due 2001
issued by SFC pursuant to the SFC 10 1/4% Senior Indenture.
"SFC 10 1/4% Senior Indenture" means that certain Indenture, dated
as of August 16, 1993, by and between SFC and United States Trust Company of New
York, as trustee, as amended from time to time, relating to the SFC 10 1/4%
Senior Notes.
<PAGE>
17
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date of this Indenture.
"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 clauses (D) or (E), (C) any partner or stockholder of any Principal
as of the date of this Indenture who acquires any assets or voting stock of
Holdings, SFC Sub, SFC or SFAC 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 this Indenture or (E) co-investment entities
established by any Principal within 90 days of the date of this Indenture 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 this Indenture shall be deemed a Specified Party of Acadia
Partners, L.P. and Keystone, Inc.
"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 Holdings or of any of its other Subsidiaries.
"Tax Sharing Agreement" means the Tax Sharing Agreement, as amended,
dated as of August 16, 1993, between SFAC and SFC, as amended to include
Holdings and the Company as of the date of the Indenture.
"Term Loan Agreement" means that certain Term Loan Agreement, dated
as of August 16, 1993, by and among SFC, the lenders party thereto and Chemical
Bank, as administrative agent, 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
<PAGE>
18
case as amended, supplemented, extended, modified, renewed, refunded, replaced
or refinanced from time to time, whether or not with the same lenders.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA.
"Transaction" means the corporate and financial restructuring of
SFAC, SFC and their Subsidiaries, including Holdings, the Company and SFC Sub,
described in the Offering Circular, of which the SFC Exchange Offers and the
Initial Exchange Offer are two components.
"Transfer Restricted Debentures" means each Debenture, until the
earliest to occur of (a) the date on which such Debenture is exchanged in the
Exchange Offer and entitled to be resold to the public by the holder thereof
without complying with the prospectus delivery requirements of the Securities
Act, (b) the date on which such Debenture has been effectively registered under
the Securities Act and disposed of in accordance with a shelf registration
statement pursuant to the Registration Rights Agreement and (c) the date on
which such Debenture is distributed to the public pursuant to Rule 144 under the
Securities Act.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"12 1/8% Senior Indenture" means that certain indenture, dated as of
June 11, 1999, by and between the Company and the United States Trust Company of
New York, as trustee, as amended or supplemented from time to time, relating to
the 12 1/8% Senior Notes.
"12 1/8% Senior Notes" means the Company's 12 1/8% Series A Senior
Notes due 2002 and the Company's 11 1/8% Series B Senior Notes due 2002, issued
pursuant to the 12 1/8% Senior Indenture.
"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 (other than, in the case of the
Company, Permitted Preferred Stock) or other ownership interests of which (other
than directors'
<PAGE>
19
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.
Section 1.2 Other Definitions. Terms not otherwise defined herein
shall have the meanings assigned to them in the Debentures. As used in this
Indenture, the following terms shall have the meanings assigned in the Sections
referred to opposite such terms below.
Defined in
Term Section
---- -------
"Affiliate Transaction".......................... 4.11
"Asset Sale"..................................... 4.10
"Asset Sale Offer"............................... 3.9
"Change of Control Offer"........................ 4.15
"Change of Control Payment"...................... 4.15
"Change of Control Payment Date"................. 4.15
"Covenant Defeasance"............................ 8.3
"DLJSC".......................................... 4.11
"DTC"............................................ 2.3
"Event of Default"............................... 6.1
"Excess Proceeds"................................ 4.10
"Final Payment Default".......................... 6.1
"incur".......................................... 4.9
"Legal Defeasance"............................... 8.2
"Offer Amount"................................... 3.9
"Offer Period"................................... 3.9
"Offering"....................................... 4.16
"Paying Agent"................................... 2.3
"Payment Default"................................ 6.1
"Permitted Refinancing".......................... 4.9
"Purchase Date".................................. 3.9
"Refinancing Indebtedness"....................... 4.9
"Registrar"...................................... 2.3
"Restricted Payments"............................ 4.7
Section 1.3 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
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20
"indenture securities" means the Debentures;
"indenture security holder" means a Holder of a Debenture;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Debentures means Holdings and any successor obligor
upon the Debentures.
All other terms used in this Indenture that are defined by the TIA
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
Section 1.4 Rules of Construction. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and transactions;
and
(6) references to sections of or rules under the Securities
Act shall be deemed to include substitute, replacement or successor
sections or rules adopted by the SEC from time to time.
ARTICLE 2
THE DEBENTURES
Section 2.1 Form and Dating. The Debentures and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit A
hereto. The Debentures may have notations, legends or endorsements required by
law, stock exchange rule or usage. Each Debenture shall be dated the date of its
authentication. The Debentures shall be in denominations of $1,000 and integral
multiples thereof.
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21
The terms and provisions contained in the Debentures shall
constitute, and are hereby expressly made, a part of this Indenture and Holdings
and the Trustee, by their execution and delivery of this Indenture, expressly
agree to such terms and provisions and to be bound thereby.
Debentures issued in global form shall be substantially in the form
of Exhibit A attached hereto (including footnotes 1 and 2 thereto), or in
definitive form, substantially in the form of Exhibit A hereto (not including
footnotes 1 and 2 thereto). Each Global Debenture shall represent such of the
outstanding Debentures as shall be specified therein and each shall provide that
it shall represent the aggregate amount of outstanding Debentures from time to
time endorsed thereon and that the aggregate amount of outstanding Debentures
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of a Global
Debenture to reflect the amount of any increase or decease in the amount of
outstanding Debentures represented thereby shall be made by the Trustee or the
Debenture Custodian, at the direction of the Trustee, in accordance with
instructions given by the Holder thereof as required by Section 2.6 hereof.
Section 2.2 Execution and Authentication. Two Officers shall sign
the Debentures for Holdings by manual or facsimile signature Holdings' seal
shall be reproduced on the Debentures and may be in facsimile form.
If an Officer whose signature is on a Debenture no longer holds that
office at the time a Debenture is authenticated, the Debenture shall
nevertheless be valid.
A Debenture shall not be valid until authenticated by the manual
signature of an authorized signatory of the Trustee. The signature shall be
conclusive evidence that the Debenture has been authenticated under this
Indenture.
The Trustee shall, upon receipt of a written order of Holdings
signed by two Officers, authenticate Debentures for original issue up to the
aggregate principal amount stated in paragraph 4 of the Debentures. The
aggregate principal amount of Debentures outstanding at any time may not exceed
such amount except as provided in Section 2.7 hereof.
The Trustee may appoint an authenticating agent acceptable to
Holdings to authenticate Debentures. An authenticating agent may authenticate
Debentures whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holdings or an
Affiliate of Holdings.
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22
Section 2.3 Registrar and Paying Agent. Holdings shall maintain an
office or agency where Debentures may be presented for registration of transfer
or for exchange ("Registrar") and an office or agency where Debentures may be
presented for payment ("Paying Agent"). The Registrar shall keep a register of
the Debentures and of their transfer and exchange. Holdings may appoint one or
more co-registrars and one or more additional paying agents. The term
"Registrar" includes any co-registrar, and the term "Paying Agent" includes any
additional paying agent. Holdings may change any Paying Agent or Registrar
without notice to any Holder. Holdings shall notify the Trustees in writing of
the name and address of any Agent not a party to this Indenture. If Holdings
fails to appoint or maintain another entity as Registrar or Paying Agent, the
Trustee shall act as such. Holdings or any of its Subsidiaries may act as Paying
Agent or Registrar.
Holdings initially appoints The Depository Trust Company ("DTC") to
act as Depository with respect to the Global Debentures.
Holdings initially appoints the Trustee to act as the Registrar,
Paying Agent and the Debenture Custodian with respect to the Global Debentures.
Section 2.4 Paying Agent to Hold Money in Trust. Holdings shall
require each Paying Agent other than the Trustee to agree in writing that the
Paying Agent will hold in trust for the benefit of Holders or the Trustee all
money held by the Paying Agent for the payment of principal or interest on the
Debentures, and will notify the Trustee of any default by Holdings in making any
such payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. Holdings at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than Holdings or a Subsidiary)
shall have no further liability for the money. If Holdings or a Subsidiary acts
as Paying Agent, it shall segregate and hold in a separate trust fund for the
benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy
or reorganization proceedings relating to Holdings, the Trustee shall serve as
Paying Agent and conversion agent (if any) for the Debentures.
Section 2.5 Holder Lists. The Trustee shall preserve in as current a
form as is reasonably practicable the most recent list available to it of the
names and addresses of all Holders and shall otherwise comply with TIA ss.
312(a). If the Trustee is not the Registrar, Holdings shall furnish to the
Trustee at least seven Business Days before each interest payment date and at
such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably require of the names and addresses
of the Holders of Debentures.
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23
Section 2.6 Transfer and Exchange.
(a) Transfer and Exchange of Definitive Debentures. When
Definitive Debentures are presented by a Holder to the Registrar with a request:
(x) to register the transfer of the Definitive
Debentures; or
(y) to exchange such Definitive Debentures for an equal
principal amount of Definitive Debentures of other authorized
denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
Definitive Debentures presented or surrendered for register of transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar duly
executed by such Holder or by his attorney, duly authorized in writing;
and
(ii) in the case of a Definitive Debenture that is a Transfer
Restricted Debenture, such request shall be accompanied by the following
additional information and documents, as applicable:
(A) If such Transfer Restricted Debenture is being
delivered to the Registrar by a Holder for registration in the name
of such Holder, without transfer, a certification to that effect
from such Holder (in substantially the form of Exhibit B hereto); or
(B) if such Transfer Restricted Debenture is being
transferred to a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) in accordance with Rule 144A under
the Securities Act or pursuant to an exemption from registration in
accordance with Rule 144 or Rule 904 under the Securities Act or
pursuant to an effective registration statement under the Securities
Act, a certification to that effect from such Holder (in
substantially the form of Exhibit B hereto); or
(C) if such Transfer Restricted Debenture is being
transferred in reliance on another exemption from the registration
requirements of the Securities Act, a certification to that effect
from such Holder (in substantially the form of Exhibit B hereto) and
an Opinion of Counsel from such Holder or the transferee reasonably
acceptable to Holdings and to the Registrar to the effect that such
transfer is in compliance with the Securities Act.
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24
(b) Transfer of a Definitive Debenture for a Beneficial
Interest in a Global Debenture. A Definitive Debenture may not be exchanged for
a beneficial interest in a Global Debenture except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive
Debenture, duly endorsed or accompanied by appropriate instruments of transfer,
in form satisfactory to the Trustee, together with:
(i) if such Definitive Debenture is a Transfer
Restricted Debenture, a certification from the Holder thereof (in
substantially the form of Exhibit B hereto) to the effect that such
Definitive Debenture is being transferred by such Holder to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act) in
accordance with Rule 144A under the Securities Act; and
(ii) whether or not such Definitive Debenture is a
Transfer Restricted Debenture, written instructions from the Holder
thereof directing the Trustee to make, or to direct the Debenture
Custodian to make, an endorsement on the Global Debenture to reflect an
increase in the aggregate principal amount of the Debentures represented
by the Global Debenture, in which case the Trustee shall cancel such
Definitive Debenture and cause, or direct the Debenture Custodian to
cause, in accordance with the standing instructions and procedures
existing between the Depository and the Debenture Custodian, the aggregate
principal amount of Debentures represented by the Global Debenture to be
increased accordingly. If no Global Debentures are then outstanding,
Holdings shall issue and, upon receipt of an authentication order in
accordance with Section 2.2, the Trustee shall authenticate a new Global
Debenture in the appropriate principal amount.
(c) Transfer and Exchange of Global Debentures. The transfer
and exchange of Global Debentures or beneficial interests therein shall be
effected through the Depository, in accordance with this Indenture, which shall
include restrictions on transfer comparable to those set forth herein to the
extent required by the Securities Act and the procedures of the Depository
therefor.
(d) Transfer of a Beneficial Interest in a Global Debenture
for a Definitive Debenture.
(i) Any Person having a beneficial interest in a Global
Debenture may upon written request exchange such beneficial interest for a
Definitive Debenture. Upon receipt by the Trustee of written instructions
or such other form of instructions as is customary for the Depository,
from the Depository or its nominee on behalf of any Person having a
beneficial interest in a Global Debenture, and, in the case of a Transfer
Restricted Debenture, the following additional information and documents
(all of which may be submitted by facsimile):
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25
(A) if such beneficial interest is being
transferred to the Person designated by the Depository as being the
beneficial owner, a certification to that effect from such Person
(in substantially the form of Exhibit B hereto); or
(B) if such beneficial interest is being
transferred to a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) in accordance with Rule 144A under
the Securities Act or pursuant to an exemption from registration in
accordance with Rule 144 or Rule 904 under the Securities Act or
pursuant to an effective registration statement under the Securities
Act, a certification to that effect from the transferor (in
substantially the form of Exhibit B hereto); or
(C) if such beneficial interest is being
transferred in reliance on another exemption from the registration
requirements of the Securities Act, a certification to that effect
from the transferor (in substantially the form of Exhibit B hereto)
and an Opinion of Counsel from the transferee or transferor
reasonably acceptable to Holdings and to the Registrar to the effect
that such transfer is in compliance with the Securities Act.
In which case the Trustee or the Debenture Custodian, at the direction of
the Trustees, shall, in accordance with the standing instructions and
procedures existing between the Depository and the Debenture Custodian,
cause the aggregate principal amount of Global Debentures to be reduced
accordingly and, following such reduction, Holdings shall execute and,
upon receipt of an authentication order in accordance with Section 2.2,
the Trustee shall authenticate and deliver to the transferee a Definitive
Debenture in the appropriate principal amount.
(ii) Definitive Debentures issued in exchange for a
beneficial interest in a Global Debenture pursuant to this Section 2.6(d)
shall be registered in such names and in such authorized denominations as
the Depository, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee shall
deliver such Definitive Debentures to the Persons in whose names such
Debentures are so registered.
(e) Restrictions on Transfer and Exchange of Global
Debentures. Notwithstanding any other provisions of this Indenture (other than
the provisions set forth in subsection (f) of this Section 2.6), a Global
Debenture may not be transferred as a whole except by the Depository to a
nominee of the Depository or by a nominee of the Depository to the Depository or
another nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
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26
(f) Authentication of Definitive Debentures in Absence of
Depository. If at any time:
(i) the Depository for the Debentures notifies Holdings
that the Depository is unwilling or unable to continue as Depository for
the Global Debentures and a successor Depository for the Global Debentures
is not appointed by Holdings within 90 days after delivery of such notice;
or
(ii) Holdings, at its sole discretion, notifies the
Trustee in writing that it elects to cause the issuance of Definitive
Debentures under this Indenture,
then Holdings shall execute, and the Trustee, upon receipt of an authentication
order in accordance with Section 2.2, shall authenticate and deliver Definitive
Debentures in an aggregate principal amount equal to the principal amount of the
Global Debentures in exchange for such Global Debentures.
(g) Legends.
(i) Except as permitted by the following paragraphs (ii)
or (iii), each Debenture certificate evidencing Global Debentures and
Definitive Debentures (and all Debentures issued in exchange therefor or
substitution thereof) shall bear legends in substantially the following
form:
"THE DEBENTURE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND THE DEBENTURE EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE DEBENTURE
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING
ON THE EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT. THE
HOLDER OF THE DEBENTURE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF
HOLDINGS THAT (A) SUCH DEBENTURE MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, OR IN ACCORDANCE WITH
<PAGE>
27
RULE 144 UNDER THE SECURITIES ACT, OR PURSUANT TO ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED
UPON AN OPINION OF COUNSEL), (b) TO HOLDINGS, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 904 UNDER THE SECURITIES ACT OR (d) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (2) IN EACH
CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY
ANY PURCHASER OF THE DEBENTURE EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (1) ABOVE.
FOR PURPOSES OF SECTION 1272, 1273 AND 1275 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, THIS SECURITY IS BEING ISSUED WITH
ORIGINAL ISSUE DISCOUNT ("OID"); FOR EACH $1,000 PRINCIPAL AMOUNT OF
THIS SECURITY, THE ISSUE PRICE IS $531.77. THE AMOUNT OF ORIGINAL
ISSUE DISCOUNT IS $468.23, THE ISSUE DATE IS JUNE 11, 1999 AND THE
YIELD TO MATURITY IS 13% PER ANNUM."
(ii) Upon any sale or transfer of a Transfer Restricted
Debenture (including any Transfer Restricted Debenture represented by a
Global Debenture) pursuant to Rule 144 under the Securities Act or
pursuant to an effective registration statement under the Securities Act:
(A) in the case of any Transfer Restricted
Debenture that is a Definitive Debenture, the Registrar shall permit
the Holder thereof to exchange such Transfer Restricted Debenture
for a Definitive Debenture that does not bear the first legend set
forth in (i) above and rescind any restriction on the transfer of
such Transfer Restricted Debenture; and
(B) in the case of any Transfer Restricted
Debenture represented by a Global Debenture, such Transfer
Restricted Debenture shall not be required to bear the first legend
set forth in (i) above, although it shall continue to be subject to
the provisions of Section 2.6(c) hereof; provided, however, that
with respect to any request for an exchange of a Transfer Restricted
Debenture that is represented by a Global Debenture for a Definitive
Debenture that does not bear the first legend set forth in (i)
above, which request is made in
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28
reliance upon Rule 144, the Holder thereof shall certify in writing
to the Registrar that such request is being made pursuant to Rule
144 (such certification to be substantially in the form of Exhibit B
hereto).
(iii) Notwithstanding the foregoing, upon consummation
of the Exchange Offer, Holdings shall issue, and, upon receipt of an
authentication order in accordance with Section 2.2, the Trustee shall
authenticate, Series B Debentures in exchange for Series A Debentures
accepted for exchange in the Exchange Offer, which Series B Debentures
shall not bear the first legend set forth in (i) above, and the Registrar
shall rescind any restriction on the transfer of such Debentures, in each
case unless the Holder of the Series A Debentures tendered into the
Exchange Offer is either (A) a broker-dealer who purchased such Series A
Debentures directly from Holdings to resell pursuant to Rule 144A or any
other available exemption under the Securities Act, (B) a Person
participating in the distribution of the Series A Debentures or (C) a
Person who is an affiliate (as defined in Rule 144A) of Holdings.
(h) Cancellation and/or Adjustment of Global Debentures. At
such time as all beneficial interests in Global Debentures have either been
exchanged for Definitive Debentures, redeemed, repurchased or cancelled, all
Global Debentures shall be returned to or retained and cancelled by the Trustee.
At any time prior to such cancellation, if any beneficial interest in a Global
Debenture is exchanged for Definitive Debentures, redeemed, repurchased or
cancelled, the principal amount of Debentures represented by such Global
Debenture shall be reduced accordingly and an endorsement shall be made on such
Global Debenture by the Trustee or the Debentures Custodian, at the direction of
the Trustee, to reflect such reduction.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges,
Holdings shall execute and the Trustee shall authenticate Definitive
Debentures and Global Debentures at the Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but Holdings may require payment of
a sum sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such transfer taxes or
similar governmental charge payable upon exchange or transfer pursuant to
Sections 3.7, 4.10, 4.15 and 9.5 hereto).
(iii) The Registrar shall not be required to register
the transfer of or exchange any Debenture selected for redemption in whole
or in part, except the unredeemed portion of any Debenture being redeemed
in part.
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29
(iv) All Definitive Debenture and Global Debentures
issued upon any registration of transfer or exchange of Definitive
Debentures or Global Debentures shall be the valid obligations of
Holdings, evidencing the same debt, and entitled to the same benefits
under this Indenture, as the Definitive Debentures or Global Debentures
surrendered upon such registration of transfer or exchange.
(v) Holdings shall not be required:
(A) to issue, to register the transfer of or to
exchange Debentures during a period beginning at the opening of
business 15 days before the day of any selection of Debentures for
redemption under Section 3.2 hereof and ending at the close of
business on the day of selection; or
(B) to register the transfer of or to exchange any
Debenture so selected for redemption in whole or in part, except the
unredeemed portion of any Debenture being redeemed in part; or
(C) to register the transfer of or to exchange a
Debenture between a record date and the next succeeding interest
payment date.
(vi) Prior to due presentment for the registration of a
transfer of any Debenture, the Trustee, any Agent and Holdings may deem
and treat the Person in whose name any Debenture is registered as the
absolute owner of such Debenture for the purpose of receiving payment of
principal of and interest on such Debentures, and neither the Trustee, any
Agent nor Holdings shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Definitive
Debentures and Global Debentures upon receipt of an authentication order
in accordance with the provisions of Section 2.2 hereof.
Section 2.7 Replacement Debentures. If any mutilated Debenture is
surrendered to the Trustee, or Holdings and the Trustee receives evidence to its
satisfaction of the destruction, loss or theft of any Debenture, Holdings shall
issue and the Trustee, upon the receipt of a written order of Holdings signed by
two Officers of Holdings, shall authenticate a replacement Debenture if the
Trustee's requirements are met. If required by the Trustee or Holdings, an
indemnity bond must be supplied by the Holder that is sufficient in the judgment
of the Trustee and Holdings to protect Holdings, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Debenture is
replaced. Holdings may charge for its expenses in replacing a Debenture.
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Every replacement Debenture is an additional obligation of Holdings
and shall be entitled to all the benefits of this Indenture equally and
proportionately with all other Debentures duly issued, hereunder.
Section 2.8 Outstanding Debentures. The Debentures outstanding at
any time are all the Debentures authenticated by the Trustee except for those
cancelled by it, those delivered to it for cancellation, those reductions in the
interest in a Global Debenture effected by the Trustee in accordance with the
provisions hereof, and those described in this Section as not outstanding.
Except as set forth in Section 2.9 hereof, a Debenture does not cease to be
outstanding because Holdings or an Affiliate holds the Debenture.
If a Debenture is replaced pursuant to Section 2.7 hereof, it ceases
to be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Debenture is held by a bona fide purchaser.
If the principal amount of any Debenture is considered paid under
Section 4.1 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than Holdings, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Debentures payable on that date, then on and after that date
such Debentures shall be deemed to be no longer outstanding and shall cease to
accrue interest.
Section 2.9 Treasury Debentures. In determining whether the Holders
of the required principal amount of Debentures have concurred in any direction,
waiver or consent, Debentures owned by Holdings, or by any Affiliate of Holdings
shall be considered as though not outstanding, except that for the purpose of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Debentures that a Trustee knows are so owned
shall be so disregarded.
Section 2.10 Temporary Debentures. Until Definitive Debentures are
ready for delivery, Holdings may prepare and the Trustee shall authenticate
temporary Debentures upon receipt of a written order of Holdings signed by two
Officers of Holdings. Temporary Debentures shall be substantially in the form of
Definitive Debentures but may have variations that Holdings considers
appropriate for temporary Debentures. Without unreasonable delay, Holdings shall
prepare and the Trustee shall authenticate Definitive Debentures in exchange for
temporary Debentures.
Holders of temporary Debentures shall be entitled to all of the
benefits of this Indenture.
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Section 2.11 Cancellation. Holdings at any time may deliver
Debentures to the Trustee for cancellation. The Registrar and Paying Agent shall
forward to the Trustee any Debentures surrendered to them for registration of
transfer, exchange or payment. The Trustee and no one else shall cancel all
Debentures surrendered for registration of transfer, exchange, payment,
replacement or cancellation and shall destroy cancelled Debentures (subject to
the record retention requirement of the Exchange Act). Certification of the
destruction of all cancelled Debentures shall be delivered to Holdings.
Holding's may not issue new Debentures to replace Debentures that it has paid or
that have been delivered to the Trustee for cancellation.
Section 2.12 Defaulted Interest. If Holdings defaults in a payment
of interest on the Debentures, it shall pay the defaulted interest in any lawful
manner plus, to the extent lawful, interest payable on the defaulted interest to
the Persons who are Holders on a subsequent special record date, in each case at
the rate provided in the Debentures and in Section 4.1 hereof. Holdings shall
notify the Trustee in writing of the amount of defaulted interest proposed to be
paid on each Debenture and the date of the proposed payment. Holdings shall fix
or cause to be fixed each such special record date and payment date, provided
that no such special record date shall be less than 10 days prior to the related
payment date for such defaulted interest. At least 15 days before the special
record date, Holdings (or the Trustee in the name and at the expense of
Holdings) shall mail or cause to be mailed to Holders a notice that states the
special record date, the related payment date and the amount of such interest to
be paid.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.1 Notices to Trustee. If Holdings elects to redeem
Debentures pursuant to the optional redemption provisions of Section 3.7 hereof,
it shall furnish to the Trustee, at least 40 days but not more than 60 days
before a redemption date, an Officers' Certificate setting forth (i) the Section
of this Indenture pursuant to which the redemption shall occur, (ii) the
redemption date, (iii) the principal amount of Debentures to be redeemed and
(iv) the redemption price.
Section 3.2 Selection of Debentures To Be Redeemed. If less than all
of the Debentures are to be redeemed, the Trustee shall select the Debentures to
be redeemed among the Holders of the Debentures on a pro rata basis, by lot or
in accordance with any other method the Trustee considers fair and appropriate
(and in such manner as complies with applicable legal and stock exchange
requirements, if any). In the event of partial redemption by lot, the particular
Debentures to be redeemed shall be selected, unless otherwise provided herein,
not less than 30 nor
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more than 60 days prior to the redemption date by the Trustee from the
outstanding Debentures not previously called for redemption.
The Trustee shall promptly notify Holdings in writing of the
Debentures selected for redemption and, in the case of any Debenture selected
for partial redemption, the principal amount thereof to be redeemed. Debentures
and portions of Debentures selected shall be in amounts of $1,000 or whole
multiples of $1,000, except that if all of the Debentures of a Holder are to be
redeemed, the entire outstanding amount of Debentures held by such Holder, even
if not a multiple of $1,000, shall be redeemed. Except as provided in the
preceding sentence, provisions of this Indenture that apply to Debentures called
for redemption also apply to portions of Debentures called for redemption.
Section 3.3 Notice of Redemption. Subject to the provisions of
Section 3.9 hereof, at least 30 days but not more than 60 days before a
redemption date, Holdings shall mail or cause to be mailed, by first class mail,
a notice of redemption to each Holder whose Debentures are to be redeemed at its
registered address.
The notice shall identify the Debentures to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Debenture is being redeemed in part, the portion of
the principal amount of such Debenture to be redeemed and that, after the
redemption date upon surrender of such Debenture, a new Debenture or Debentures
in principal amount equal to the unredeemed portion shall be issued;
(d) the name and address of the Paying Agent;
(e) that Debentures called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(f) that, unless Holdings defaults in making such redemption
payment, interest on Debentures called for redemption ceases to accrue on and
after the redemption date;
(g) the paragraph of the Debentures and/or Section of this
Indenture pursuant to which the Debentures called for redemption are being
redeemed; and
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(h) that no representation is made as to the correctness or
accuracy of the CUSIP, ISIN or Common Code number, if any, listed in such notice
or printed on the Debentures.
At Holdings' written request, the Trustee shall give the notice of
redemption in Holdings' name and at its expense; provided, however, that
Holdings shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
Section 3.4 Effect of Notice of Redemption. Once notice of
redemption is mailed in accordance with Section 3.3 hereof, Debentures called
for redemption become irrevocably due and payable on the redemption date at the
redemption price. A notice of redemption may not be conditional.
Section 3.5 Deposit of Redemption Price. One Business Day prior to
the redemption date, Holdings shall deposit with the Trustee or with the Paying
Agent money sufficient to pay the redemption price of and accrued interest on
all Debentures to be redeemed on that date. The Trustee or the Paying Agent
shall promptly return to Holdings any money deposited with the Trustee or the
Paying Agent by Holdings in excess of the amounts necessary to pay the
redemption price of, and accrued interest on, all Debentures to be redeemed.
If Holdings complies with the provisions of the preceding paragraph,
on and after the redemption date, interest shall cease to accrue on the
Debentures or the portions of Debentures called for redemption. If a Debenture
is redeemed on or after an interest record date but on or prior to the related
interest payment date, then any accrued and unpaid interest shall be paid to the
Person in whose name such Debenture was registered at the close of business on
such record date. If any Debenture called for redemption shall not be so paid
upon surrender for redemption because of the failure of Holdings to comply with
the preceding paragraph, interest shall be paid on the unpaid principal, from
the redemption date until such principal is paid, and to the extent lawful on an
interest not paid on such unpaid principal, in each case at the rate provided in
the Debentures and in Section 4.1 hereof.
Section 3.6 Debentures Redeemed in Part. Upon surrender of a
Debenture that is redeemed in part, Holdings shall issue and the Trustee shall
authenticate for the Holder at the expense of Holdings a new Debenture equal in
principal amount to the unredeemed portion of the Debenture surrendered.
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Section 3.7 Optional Redemption.
(a) At any time, notwithstanding the existence of a default or
an Event of Default or any other provision in this Indenture, Holdings shall
have the option to redeem the Debentures pursuant to this Section 3.7 in whole
or in part, upon not less than 30 nor more than 60 days' notice to the Holders,
at the redemption prices (expressed as percentages of Accreted Value) set forth
below plus, after June 15, 2003, accrued and unpaid interest thereon to the
applicable redemption date:
Percentage of
Year Accreted Value
---- --------------
On or before June 15, 2000..................... 50.0%
On or before June 15, 2001..................... 55.0%
On or before June 15, 2002..................... 60.0%
On or before June 15, 2003..................... 75.0%
After June 15, 2003............................ 100.0%
(b) Any redemption pursuant to this Section 3.7 shall be made
pursuant to the provisions of Sections 3.1 through 3.6 hereof.
Section 3.8 Mandatory Redemption. Except as set forth in Section 3.9
hereof or pursuant to Section 4.15 hereof, Holdings is not required to make
mandatory redemption or sinking fund payments with respect to the Debentures.
Section 3.9 Offer to Purchase by Application of Excess Proceeds. In
the event that, pursuant to Section 4.10 hereof, Holdings shall be required to
commence an offer to all Holders to purchase Debentures (an "Asset Sale Offer"),
it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), Holdings shall purchase the principal amount of Debentures required to
be purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less
than the Offer Amount has been tendered, all Debentures tendered in response to
the Asset Sale Offer. Payment for any Debentures so purchased shall be made in
the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date and on
or before the related interest payment date, any accrued and unpaid interest
shall be paid to the Person in whose name a Debenture is registered at the close
of business on
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such record date, and no additional interest shall be payable to Holders who
tender Debentures pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, Holdings shall send,
by first class mail, a notice to the Trustee and each of the Holders. The notice
shall contain all instructions and materials necessary to enable such Holders to
tender Debentures pursuant to the Asset Sale Offer. The Asset Sale Offer shall
be made to all Holders. The notice, which shall govern the terms of the Asset
Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this
Section 3.9 and Section 4.10 hereof and the length of time the Asset Sale Offer
shall remain open;
(b) the Offer Amount, the purchase price and the Purchase
Date;
(c) that any Debenture not tendered or accepted for payment
shall continue to accrue interest;
(d) that unless Holdings defaults in making such payment, any
Debenture accepted for payment pursuant to the Asset Sale Offer shall cease to
accrue interest after the Purchase Date;
(e) that Holders electing to have a Debenture purchased
pursuant to an Asset Sale Offer may only elect to have all of such Debenture
purchased and may not elect to have only a portion of such Debenture purchased;
(f) that Holders electing to have a Debenture purchased
pursuant to any Asset Sale Offer shall be required to surrender the Debenture,
with the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Debenture completed, to Holdings, a Depository, if appointed by Holdings, or
a Paying Agent at the address specified in the notice prior to the close of
business on the third Business Day, preceding the Purchase Date;
(g) that Holders shall be entitled to withdraw their election
if Holdings, the Depository or the Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Debenture the Holder delivered for purchase and a statement that
such Holder is withdrawing his election to have such Debenture purchased;
(h) that, if the aggregate principal amount of Debentures
surrendered by Holders exceeds the Offer Amount, Holdings shall select the
Debentures to be purchased on a pro rata basis (with such adjustments as may be
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36
deemed appropriate by Holdings so that only Debentures in denominations of
$1,000, or integral multiples thereof, shall be purchased); and
(i) that Holders whose Debentures were purchased only in part
shall be issued new Debentures equal in principal amount to the unpurchased
portion of the Debentures surrendered.
On or before the Purchase Date, Holdings shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Debentures tendered pursuant to the Asset Sale Offer, or if less
than the Offer Amount has been tendered, all Debentures tendered, and shall
deliver to the Trustee an Officers' Certificate stating that such Debentures or
portions thereof were accepted for payment by Holdings in accordance with the
terms of this Section 3.9. Holdings, the Depository or the Paying Agent, as the
case may be, shall promptly (but in any case not later than five days after the
Purchase Date) mail or deliver to each tendering Holder an amount equal to the
purchase price of the Debentures tendered by such Holder and accepted by
Holdings for purchase, and Holdings shall promptly issue a new Debenture, and
the Trustee shall authenticate and mail or deliver such new Debenture to such
Holder, in a principal amount equal to any unpurchased portion of the Debenture
surrendered. Any Debenture not so accepted shall be promptly mailed or delivered
by Holdings to the Holder thereof. Holdings shall publicly announce the results
of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.9, any
purchase pursuant to this Section 3.9 shall be made pursuant to the provisions
of Sections 3.1 through 3.6 hereof.
ARTICLE 4
COVENANTS
Section 4.1 Payment of Debentures. Holdings shall pay or cause to be
paid the principal of, premium, if any, and interest on the Debentures on the
dates and in the manner provided in the Debentures. Principal, premium, if any,
additional payments and interest shall be considered paid on the date due if the
Paying Agent, if other than Holdings or a Subsidiary thereof holds as of 11:00
a.m. Eastern Time on the due date money deposited by Holdings in immediately
available funds and designated for and sufficient to pay all principal, premium,
if any, and interest then due. Holdings shall pay all Liquidated Damages, if
any, in the same manner on the dates and in the amounts set forth in the
Registration Rights Agreement and shall inform the Trustee of any such payments
of Liquidated Damages pursuant thereto.
Holdings shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1%
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37
per annum in excess of the then applicable interest rate on the Debentures to
the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and
on overdue Liquidated Damages (without regard to any applicable grace period) at
the same rate to the extent lawful.
Section 4.2 Maintenance of Office or Agency. Holdings shall maintain
in the Borough of Manhattan, The City of New York an office or agency (which may
be an office of the Trustee or an affiliate of the Trustee or Registrar) where
Debentures may be surrendered for registration of transfer or for exchange and
where notices and demands to or upon Holdings in respect of the Debentures and
this Indenture may be served. Holdings shall give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time Holdings shall fail to maintain any such required office
or agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
Holdings may also from time to time designate one or more other
offices or agencies where the Debentures may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve Holdings of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York for such purposes. Holdings shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
Holdings hereby designates the Corporate Trust Office of the Trustee
as one such office or agency of Holdings in accordance with Section 2.3.
Section 4.3 Reports.
(a) Whether or not required by the rules and regulations of
the SEC, so long as any Debentures are outstanding, Holdings shall furnish to
all Holders 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
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 Holdings' certified
independent accountants. In addition, 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. Whether or not required by the rules and regulations of
the SEC, Holdings shall file a copy of all such information with the SEC for
public availability (so long as the SEC will accept such filings) and shall
promptly make such information available to all investors who request it in
writing.
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(b) For so long as any Transfer Restricted Debentures remain
outstanding, Holdings shall furnish to all Holders and prospective purchasers of
the Debentures designated by the Holders of Transfer Restricted Debentures,
promptly upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
Section 4.4 Compliance Certificate.
(a) Holdings shall deliver to the Trustee, within 90 days
after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of Holdings, its Subsidiaries and the Accounts
Receivable Subsidiary during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether Holdings
has kept, observed, performed and fulfilled its obligations under this Indenture
and the Pledge Agreement, and further stating, as to each such Officer signing
such certificate, that to the best of his or her knowledge Holdings has kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and the Pledge Agreement and is not in default in the performance or
observance of any of the terms, provisions and conditions of this Indenture or
the Pledge Agreement (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he or she may have
knowledge and what action Holdings is taking or proposes to take with respect
thereto) and that to the best of his or her knowledge no event has occurred and
remains in existence by reason of which payments on account of the principal of
or interest, if any, on the Debentures is prohibited or if such event has
occurred, a description of the event and what action Holdings is taking or
proposes to take with respect thereto.
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
year-end financial statements delivered pursuant to Section 4.3(a) above shall
be accompanied by a written statement of Holdings' independent public
accountants (who shall be a firm of established national reputation) that in
making the examination necessary for certification of such financial statements,
nothing has come to their attention that would lead them to believe that
Holdings has violated any provisions of Article 4 or Article 5 hereof or, if any
such violation has occurred, specifying the nature and period of existence
thereof, it being understood that such accountants shall not be liable directly
or indirectly to any Person for any failure to obtain knowledge of any such
violation.
(c) Holdings shall, so long as any of the Debentures are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action Holdings is taking or proposes to
take with respect thereto.
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39
Section 4.5 Taxes. Holdings shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders of the Debentures.
Section 4.6 Stay, Extension and Usury Laws. Holdings covenants (to
the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and Holdings (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
Section 4.7 Restricted Payments. Holdings shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly: (i) declare or pay
any dividend or make any distribution on account of Holdings' or any of its
Subsidiaries' Equity Interests (other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of Holdings or dividends or
distributions payable to Holdings or any Wholly Owned Subsidiary of Holdings);
(ii) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of Holdings or any Subsidiary or other Affiliate of Holdings (other
than any such Equity Interests owned by Holdings or any Wholly Owned Subsidiary
of Holdings); (iii) purchase, redeem, defease or otherwise acquire or retire for
value, or declare, or pay any interest or other distribution on or in respect
of, any Indebtedness that is subordinated in right of payment to the Debentures
(other than interest payable in the form of additional amounts of any such
subordinated Indebtedness having no sinking fund payments prior to June 15,
2009); 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:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) 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 Section 4.9 hereof; and
(c) such Restricted Payment, together with the aggregate of
all other Restricted Payments made by Holdings and its Subsidiaries after the
date of
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40
this Indenture (including all Restricted Payments permitted by the next
succeeding paragraph, except clause (v) thereof), is less than the sum of (x)
50% of the Consolidated Net Income of Holdings for the period (taken as one
accounting period) from the date of this Indenture to the end of 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 cash proceeds received by Holdings since the date of this
Indenture from the issue or sale of Equity Interests of Holdings (other than
Equity Interests sold to a Subsidiary of Holdings and other than Disqualified
Stock) or any debt security of Holdings that is convertible into or exchangeable
for any Equity Interest of Holdings (other than Disqualified Stock) that has
been so converted or exchanged, plus (z) 100% of any common equity capital
contribution received by Holdings since the date of this Indenture.
The foregoing provisions shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture and the Note Indentures; (ii) the redemption, repurchase, retirement
or other acquisition of any of Holdings' Equity Interests or any Indebtedness
that is subordinated in right of payment to the Debentures in exchange for, or
out of the proceeds of, the substantially concurrent sale (other than to a
Subsidiary of Holdings) of other Equity Interests of Holdings (other than any
Disqualified Stock); (iii) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of Holdings or any Subsidiary of
Holdings held by any member of Holdings' (or any of its Subsidiaries')
management; provided, however, that the aggregate price paid since the date of
this Indenture 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 Holdings or any Subsidiary of Holdings from any reissuance
of Equity Interests by Holdings or such Subsidiary to members of management of
Holdings and its Subsidiaries; (iv) dividends by Holdings to SFC or SFC Sub in
an amount sufficient to enable SFC to pay, when due, interest on any SFC Senior
Notes or SFC Subordinated Notes that remain outstanding following the SFC
Exchange Offers, in accordance with the terms thereof; (v) Permitted
Refinancings of Indebtedness that is subordinated in right of payment to the
Debentures; (vi) payments to SFC Sub to reimburse it for its out-of-pocket
administrative expenses in an aggregate amount not to exceed $1 million in any
fiscal year; and (vii) payments to SFC Sub pursuant to the Tax Sharing Agreement
as in effect on the date of this Indenture to the extent that SFC Sub is
actually required to make cash outlays to pay taxes.
Not later than the date of making any Restricted Payment (other than
Restricted Payments pursuant to clause (v), (vi) and (vii) of the foregoing
paragraph), Holdings shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations
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41
required by this Section 4.7 were computed, which calculations may be based upon
Holdings' latest available financial statements.
Section 4.8 Dividend and Other Payment Restrictions Affecting
Subsidiaries. Holdings shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction (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 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 Holdings or any of its Subsidiaries, (b) making loans
or advances to Holdings or any of its Subsidiaries or (c) transferring any of
its properties or assets to 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 this Indenture, (ii) the Term Loan
Agreement and the Revolving Credit Agreement as in effect as of the date of this
Indenture, (iii) this Indenture and the Note Indentures, (iv) applicable law,
(v) any instrument governing Indebtedness or Capital Stock of a Person acquired
by 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 this Indenture.
Section 4.9 Incurrence of Indebtedness and Issuance of Preferred
Stock. Holdings shall not, and shall 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 Holdings shall not issue any
Disqualified Stock and shall not permit any of its Subsidiaries to issue any
shares of preferred stock; provided,
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42
however, that Holdings may incur Indebtedness or issue shares of Disqualified
Stock if (i) the Fixed Charge Coverage Ratio for 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 2.25 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) any such Indebtedness is unsecured and
subordinated pari passu in right of payment to the Debentures and has a Weighted
Average Life to Maturity that is greater than the remaining Weighted Average
Life to Maturity of the Debentures, and; provided, further, that the Company and
its Subsidiaries may incur Indebtedness and issue shares of preferred stock if
the Fixed Charge Coverage Ratio for the Company's most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such Indebtedness is incurred, or such
preferred stock is issued, would have been at least 2.50 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 preferred
stock had been issued, as the case may be, at the beginning of such four-quarter
period.
The foregoing limitations shall not apply to:
(a) the incurrence by the Company 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 the SFAC 13%
Indenture;
(b) the incurrence by the Company or its Subsidiaries of
Senior Revolving Debt (and guarantees thereof by the Company 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 Section 4.10
hereof;
(c) the incurrence by Holdings and its Subsidiaries of the
Existing Indebtedness;
(d) the incurrence by Holdings of Indebtedness represented by
the Debentures and by the Company of Indebtedness represented by the Senior
Notes and the Senior Subordinated Notes (including any PIK Notes);
(e) the incurrence by 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
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43
any part of the purchase price or cost of construction or improvement of
property used in the business of Holdings or such Subsidiary, in an aggregate
principal amount not to exceed $5 million at any time outstanding;
(f) the incurrence by 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:
(i) 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);
(ii) 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
Holdings;
(iii) 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 Debentures; and
(iv) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated to the Debentures,
the Refinancing Indebtedness shall be subordinated in right of payment to
the Debentures on terms at least as favorable to the Holders of the
Debentures as those contained in the documentation 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 Holdings and
any of its Wholly Owned Subsidiaries;
(h) the incurrence by 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 this Indenture to be outstanding;
(i) the issuance by the Company of Permitted Preferred Stock;
and
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44
(j) the incurrence by Holdings of Indebtedness or its
Subsidiaries (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 this Indenture.
Section 4.10 Asset Sales. (a) Holdings shall not, and shall not
permit any of its Subsidiaries to, (i) 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 Section 4.13 hereof (provided
that the sale, lease, conveyance or other disposition of all or substantially
all of the assets of Holdings shall be governed by Section 5.1 hereof) or (ii)
issue or sell equity securities of any of its Subsidiaries (other than Permitted
Preferred Stock), 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) 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 Trustee) of the assets sold or
otherwise disposed of and (y) at least 80% of the consideration therefor
received by 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 Holdings' or such Subsidiary's most recent balance sheet or in the notes
thereto) of Holdings or any Subsidiary (other than liabilities that are by their
terms subordinated to the Debentures) 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 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 Holdings or such Subsidiary
into cash (to the extent of the cash received), shall be deemed to be cash for
purposes of this provision.
(b) Within 30 days after the receipt of cash proceeds from any
Principal Business Asset Sale, Holdings (or such Subsidiary) shall 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 such Net Proceeds exceed the
amounts required to permanently reduce Senior Term Debt and Senior Revolving
Debt, such excess Net Proceeds shall be deemed to constitute "Excess Proceeds"
(as defined in Subsec tion 4.10(c) hereof) and shall be applied in accordance
with the procedures set forth in Subsection 4.10(c) below.
(c) 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
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45
Sale), Holdings (or such Subsidiary) may, at its option, apply the Net Proceeds
from such Asset Sale to an investment in another business, capital expenditures
or other long-term assets, in each case, in the same, similar or related to the
line of business as Holdings or any of its Subsidiaries were engaged in on the
date of this Indenture, or to permanently reduce Indebtedness (with a
corresponding permanent reduction of any commitments with respect thereto) of a
Subsidiary of Holdings, including, without limitation, the Senior Term Debt, the
Senior Revolving Debt, the Senior Notes and the Senior Subordinated Notes.
Pending the final application of any such Net Proceeds, 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 "Excess Proceeds." When the aggregate
amount of Excess Proceeds exceeds $15 million, within five days of such date,
Holdings shall be required to make an offer to all Holders of Debentures (an
"Asset Sale Offer") pursuant to Section 3.9 hereof to purchase the maximum
principal amount of Debentures that may be purchased out of the Excess Proceeds
at an offer price in cash in an amount equal to 50.0% (if made on or before June
15, 2000), 55.0% (if made on or before June 15, 2001), 60% (if made on or before
June 15, 2002), 75.0% (if made on or before June 15, 2003) or 100.0% (if made on
or before June 15, 2003) of the Accreted Value thereof on the date fixed for the
closing of such offer, in accordance with the procedures in Section 3.9 hereof.
To the extent that the aggregate amount of Debentures tendered pursuant to an
Asset Sale Offer is less than the amount of Excess Proceeds, Holdings may use
such deficiency for general corporate purposes. If the aggregate principal
amount of Debentures surrendered to Holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Debentures to be purchased on a pro rata
basis. Upon completion of such offer to purchase, the amount of Excess Proceeds
shall be deemed to be reset at zero.
Neither Section 3.9 nor this Section 4.10 shall apply to Asset Sales
to Holdings or any of its Wholly Owned Subsidiaries.
Section 4.11 Transactions with Affiliates. Holdings shall not, and
shall 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
(a) such Affiliate Transaction is on terms that are no less favorable to
Holdings or the relevant Subsidiary than those that would have been obtained in
a comparable transaction by Holdings or such Subsidiary with an unrelated Person
and (b) Holdings delivers to the Trustee (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
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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 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 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
Holdings and/or its Wholly Owned Subsidiaries, (C) transactions permitted by
Section 4.7 hereof (including payments under the Tax Sharing Agreement as in
effect on the date of this Indenture), (D) fees payable pursuant to financial
advisory agreements as in effect on the date of this Indenture, (E) transactions
permitted by Section 4.13 hereof and (F) transactions between Holdings or any of
its Subsidiaries on the one hand, and Donaldson Lufkin & Jenrette Securities
Corporation ("DLJSC") or any of its Affiliates on the other hand, involving the
provision of financial, consulting or underwriting services by DLJSC; provided
that the fees payable to DLJSC do not exceed the usual and customary fees of
DLJSC for similar services, in each case, shall not be deemed Affiliate
Transactions.
Section 4.12 Liens. Holdings shall not, and shall not permit any of
its Subsidiaries to, 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.
Section 4.13 Accounts Receivable Subsidiary.
Holdings:
(a) may, and may permit any of its Subsidiaries to,
notwithstanding the provisions of Section 4.7 hereof, 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 Holdings and its Subsidiaries (provided that the
aggregate amount of Investments pursuant to this clause (i)(A) made since the
date of this Indenture (including any such Investments made concurrently with
the consummation of the Transaction) shall 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
Investment by the Accounts Receivable Subsidiary since the date of this
Indenture) or (B) payments required in connection with the termination of all
then existing arrangements relating to the sale of 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;
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(b) shall not, and shall not permit any of its Subsidiaries
to, sell accounts receivable to the Accounts Receivable Subsidiary except for
consideration in an amount (determined upon collection of such accounts
receivable and on an aggregate basis for the Company and all of its
Subsidiaries) not materially less than that which would be obtained in an arm's
length transaction (taking into account the distributions on the Capital Stock
of the Accounts Receivable Subsidiary made pursuant to clause (g) upon
collection of such account receivable) 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 this Indenture (and not
written off or required to be written off in accordance with the normal business
practice of the Accounts Receivable Subsidiary);
(c) shall not permit the Accounts Receivable Subsidiary to
sell any accounts receivable purchased from 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) shall not, and shall 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
Holdings or any of its Subsidiaries with respect to the accounts receivable sold
by Holdings or any of its Subsidiaries to the Accounts Receivable Subsidiaries,
or with respect to the servicing thereof as set forth in the Accounts Receivable
Agreements as in effect on the date of this Indenture 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 this Indenture; provided that neither Holdings nor any of its Subsidiaries
shall at any time guarantee or be otherwise liable for the collectibility of
accounts receivable sold by them;
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(e) shall 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 Holdings and its
Subsidiaries and activities incidental thereto;
(f) shall not permit the Accounts Receivable Subsidiary to
incur any Indebtedness other than the Accounts Receivable Subsidiary Notes,
Indebtedness owed to the Company 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
the Company on a monthly basis as a distribution held by the Company, 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 the Company, (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 Holdings and its Subsidiaries; and
(h) shall not, and shall 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 (i) if the Accounts
Receivable Subsidiary pursuant to or within the meaning of any Bankruptcy Law
(A) commences a voluntary case, (B) consents to the entry of an order for relief
against it in an involuntary case, (C) consents to the appointment of a
Custodian of it or for all or substantially all of its property, (D) makes a
general assignment for the benefit of its creditors, or (E) generally is not
paying its debts as they become due, or (ii) if a court of competent
jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for
relief against the Accounts Receivable Subsidiary in an involuntary case, (B)
appoints a Custodian of the Accounts Receivable Subsidiary or for all or
substantially all of the property of the Accounts Receivable Subsidiary, or (C)
orders the liquidation of the Accounts Receivable Subsidiary, and, with respect
to clause (ii) hereof, the order or decree remains unstayed and in effect for 60
consecutive days.
Section 4.14 Corporate Existence. Subject to Article 5 hereof,
Holdings shall do or cause to be done all things necessary to preserve and keep
in full force and effect (i) its corporate existence, and the corporate,
partnership or other existence or each of its Subsidiaries, in accordance with
the respective organizational documents (as the same may be amended from time to
time) of Holdings or any such Subsidiary and (ii) the rights (charter and
statutory), licenses and franchises of Holdings and its Subsidiaries; provided,
however, that Holdings shall not be required
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to preserve any such right, license or franchise, or the corporate, partnership
or other existence of any of its Subsidiaries if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of Holdings and its Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in an material respect to the Holders of the
Debentures.
Section 4.15 Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of
Debentures shall have the right to require Holdings to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's
Debentures pursuant to the offer described below (the "Change of Control Offer")
at a repurchase price equal to 50.0% (on or before June 15, 2000), 55.0% (after
June 15, 2000 but before June 15, 2001), 60% (after June 15, 2001 but before
June 15, 2002), 75.0% (after June 15, 2002 but before June 15, 2003) or 100.0%
(after June 15, 2003) of the Accreted Value thereof on the date of purchase
plus, after June 15, 2004, accrued and unpaid interest thereon to the applicable
repurchase date (in any case, the "Change of Control Payment"). Within 60 days
following any Change of Control, Holdings shall mail a notice to each Holder
stating:
(i) that the Change of Control Offer is being made
pursuant to this Section 4.15 and that all Debentures tendered shall be
accepted for payment;
(ii) 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");
(iii) that any Debenture not tendered shall continue to
accrete or accrue interest;
(iv) that, unless Holdings defaults in the payment of
the Change of Control Payment, all Debentures accepted for payment
pursuant to the Change of Control Offer shall cease to accrete or accrue
interest after the Change of Control Payment Date;
(v) that Holders electing to have any Debentures
purchased pursuant to a Change of Control Offer shall be required to
surrender the Debentures, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Debentures 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;
(vi) that Holders shall be entitled to withdraw their
election if the Paying Agent receives, not later than the close of
business on
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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 Debentures delivered for purchase,
and a statement that such Holder is withdrawing his election to have the
Debentures purchased, and
(vii) that Holders whose Debentures are being purchased
only in part shall be issued new Debentures equal in principal amount to
the unpurchased portion of the Debentures surrendered, which unpurchased
portion must be equal to $1,000 in principal amount or an integral
multiple thereof.
Holdings shall comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of Debentures
in connection with a Change of Control.
(b) On the Change of Control Payment Date, Holdings shall, to
the extent lawful, (1) accept for payment Debentures 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
Debentures or portions thereof so tendered and (3) deliver or cause to be
delivered to the Trustee the Debentures so accepted together with an Officers'
Certificate stating the Debentures or portions thereof tendered to Holdings. The
Trustee shall promptly mail to each Holder of Debentures so accepted payment in
an amount equal to the purchase price for the Debentures, and the Trustee shall
promptly authenticate and mail to each Holder a new Debenture equal in principal
amount to any unpurchased portion of the Debentures surrendered by such Holder,
if any; provided that each such new Debenture shall be in a principal amount of
$1,000 or an integral multiple thereof. Holdings shall publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
Section 4.16 Rights Offering. Holdings shall cause the Company to
grant the holders of the Debentures the right to participate in any and all
offerings of Permitted Preferred Stock of the Company (each an "Offering").
Holdings shall cause the Company to require that each Offering be made in
conjunction with a Rights Offering that (i) entitles each holder of Debentures
owned on the date the Offering is commenced to acquire all or any portion of
that number of shares of Permitted Preferred Stock equal to the product of (a)
the number of shares of Permitted Preferred Stock offered in such Offering and
(b) the ratio of the aggregate principal amount of Debentures then held by such
holder to the aggregate principal amount of Debentures then outstanding and (ii)
permits the Company to offer any shares of Permitted Preferred Stock offered
that remain unsubscribed in such offering, to any Person on the same terms and
conditions as set forth in such Offering;
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51
provided however, that the consummation of each Offering shall be within 60 days
following the commencement thereof.
ARTICLE 5
SUCCESSORS
Section 5.1 Merger, Consolidation, or Sale of Assets. Holdings shall
not consolidate or merge with or into (whether or not 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) Holdings is the surviving corporation or the entity
or the Person formed by or surviving any such consolidation or merger (if
other than 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 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
Holdings pursuant to a supplemental indenture, in a form reasonable
satisfactory to the Trustee, under the Debentures and this Indenture:
(iii) immediately after such transaction, no Default or
Event of Default exists; and
(iv) 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
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 applicable to Holdings
set forth in Section 4.9 hereof.
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Section 5.2 Successor Corporation Substituted. Upon any
consolidation or merger, or any sale, lease, conveyance or other disposition of
all or substantially all of the assets of Holdings in accordance with Section
5.1 hereof, the successor corporation formed by such consolidation or into or
with which Holdings is merged or to which such sale, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to "Holdings" shall
refer instead to the successor corporation and not to Holdings), and may
exercise every right and power of Holdings under this Indenture with the same
effect as if such successor Person has been named as Holdings herein; provided,
however, that the predecessor Holdings shall not be released from the obligation
to pay the principal of and interest on the Debentures except in the case of a
sale of all of Holdings' assets that complies with the provisions of this
Article 5.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.1 Events of Default.
An "Event of Default" occurs if:
(1) Holdings defaults in the payment of interest or Liquidated
Damages on any Debenture when the same becomes due and payable and the Default
continues for a period of 30 days;
(2) Holdings defaults in the payment of the principal of, or
premium, if any, on any Debenture when the same becomes due and payable at
maturity, upon redemption (including, in connection with an offer to purchase)
or otherwise;
(3) Holdings fails to observe or perform any covenant,
condition or agreement on the part of Holdings to be observed or performed
pursuant to Sections 4.10 or 5.1 hereof or Holdings fails for a period of 15
days to observe or perform any covenant, condition or agreement on the part of
Holdings to be observed or performed pursuant to Sections 4.7 or 4.9 hereof;
(4) Holdings fails to comply with any of its other agreements
or covenants in, or provisions of, the Debentures or this Indenture and the
Default continues for the period and after the notice specified below;
(5) default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
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53
evidenced any Indebtedness for money borrowed by Holdings or any of its
Subsidiaries (or the payment of which is guaranteed by Holdings or any of its
Subsidiaries), whether such Indebtedness or guarantee now exists, or is created
after the date of this Indenture, which default (a) is caused by a 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
Senior Notes or the Senior Subordinated Notes;
(6) Holdings, any of its Significant Subsidiaries or any group
of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary, fails 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 or
unstayed for a period of 60 days;
(7) Holdings, any of its Significant Subsidiaries or any group
of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against
it in an involuntary case,
(C) consents to the appointment of a Custodian of it or
for all or substantially all of its property,
(D) makes a general assignment for the benefit of its
creditors, or
(E) generally is not paying its debts as they become
due; or
(8) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
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54
(A) is for relief against Holdings, any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary in an involuntary case.
(B) appoints a Custodian of Holdings, any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary or for all or
substantially all of the property of Holdings or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary, or
(C) orders the liquidation of Holdings, any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary,
and the order or decree remains unstayed and in effect for 60 consecutive days;
and
(9) Holdings shall breach any of the material covenants in
Section 7 of the Pledge Agreement or the Pledge Agreement is held in any
judicial proceeding to be unenforceable or invalid or ceases for any reason to
be in full force and effect.
An Event of Default shall not be deemed to have occurred under
clauses (3), (5) or (6) until the Trustee shall have received written notice
from Holdings or any of the Holders or unless a Responsible Officer shall have
actual knowledge of such Event of Default. A Default under clause (4) is not an
Event of Default until the Trustee notifies Holdings, or the Holders of at least
25% in principal amount of the then outstanding Debentures notify Holdings and
the Trustee in writing of the Default and Holdings does not cure the Default
within 60 days after receipt of the notice. The notice must specify the Default,
demand that it be remedied and state that the notice is a "Notice of Default."
Section 6.2 Acceleration. If an Event of Default (other than an
Event of Default specified in clauses (7) and (8) of Section 6.1) occurs and is
continuing, the Trustee by notice to the Company or the Holders of at least 25%
in principal amount of the then outstanding Debentures by written notice to
Holdings and the Trustee may declare all the Debentures to be due and payable.
Upon such declaration the Accreted Value of (if prior to June 15, 2003) or the
principal of and any accrued interest on (if on or after June 15, 2003) all
Debentures shall be due and payable immediately. If an Event of Default
specified in clause (7) or (8) of Section 6.1 relating to Holdings, any
Significant Subsidiary or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary occurs, such an amount shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Holder. The Holders of a majority in
principal amount of the then outstanding Debentures by written notice to
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the Trustee may rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree and if all existing Events of
Default (except nonpayment of principal or interest that has become due solely
because of the acceleration) have been cured or waived.
Section 6.3 Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of, premium, if any, and interest on the Debentures or to enforce
the performance of any provision of the Debentures or this Indenture.
The Trustee may maintain a proceeding even if it does not posses any
of the Debentures or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Debenture in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
Section 6.4 Waiver of Past Defaults. Holders of not less than a
majority in aggregate principal amount of the Debentures then outstanding by
written notice to the Trustee may on behalf of the Holders of all of the
Debentures waive an existing Default or Event of Default and its consequences,
except a continuing Default or Event of Default in the payment of the Accreted
Value or principal of, premium, if any, or interest on the Debentures (including
in connection with an offer to purchase); provided, however, that the Holders of
a majority in aggregate principal amount of the outstanding Debentures may
rescind an acceleration and its consequences, including any related payment
default that resulted from such acceleration. Upon any such waiver, such Default
shall cease to exist, and any Event of Default arising therefrom shall be deemed
to have been cured for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.
Section 6.5 Control by Majority. Holders of a majority in principal
amount of the then outstanding Debentures may direct the time, method and place
of conducting any proceeding for exercising any remedy available to the Trustee
or exercising any trust or power conferred on it. However, the Trustee may
refuse to follow any direction that conflicts with the law or this Indenture,
that the Trustee determines may be unduly prejudicial to the rights of other
Holders of Debentures or that may involve the Trustee in personal liability.
Section 6.6 Limitations on Suits. A Holder of a Debenture may pursue
a remedy with respect to this Indenture or the Debentures only if:
(a) the Holder of a Debenture gives to the Trustee written
notice of a continuing Event of Default;
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(b) the Holders of at least 25% in principal amount of the
then outstanding Debentures make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Debenture or Holders of Debentures offer
and, if requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the provision
of indemnity; and
(e) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Debentures do not give the Trustee a
direction inconsistent with the request.
A Holder of a Debenture may not use this Indenture to prejudice the rights of
another Holder of a Debenture or to obtain a preference or priority over another
Holder of a Debenture.
Section 6.7 Rights of Holders of Debentures to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
of a Debenture to receive payment of principal of, premium, if any, and interest
on the Debenture, on or after the respective due dates expressed in the
Debenture (including in connection with an offer to purchase), or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
Section 6.8 Collection Suit by Trustee. If an Event of Default
specified in Section 6.1(1) or (2) occurs and is continuing, the Trustee is
authorized to recover judgment in its own name and as trustee of an express
trust against Holdings for the whole amount of principal of, premium, if any,
and interest remaining unpaid on the Debentures and interest on overdue
principal and, to the extent lawful, interest and such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
Section 6.9 Trustee May File Proofs of Claim. The Trustee is
authorized to file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel) and the Holders of the Debentures allowed
in any judicial proceedings relative to Holdings (or any other obligor upon the
Debentures), its creditors or its property and shall be entitled and empowered
to collect, receive and distribute any money or other property payable or
deliverable on any such claims
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and any custodian in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee, and in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.7 hereof. To the extent that the payment
of any such compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section 7.7
hereof out of the estate in any such proceeding, shall be denied for any reason,
payment of the same shall be secured by a Lien on, and shall be paid out of, any
and all distributions, dividends, money, securities and other properties that
the Holders of the Debentures may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Debentures
or the rights of any Holder, or to authorize the Trustee to vote in respect of
the claim of any Holder, in any such proceeding.
Section 6.10 Priorities. If the Trustee collects any money pursuant
to this Article, it shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 7.7 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Debentures for amounts due and unpaid on the
Debentures for principal, premium, if any, and interest, ratably, without
preference or priority of any kind, according to the amounts due and payable on
the Debentures for principal, if any, and interest, respectively; and
Third: to Holdings or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment
to Holders of Debentures.
Section 6.11 Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as a Trustee, a court in its discretion
may require the filing by any party litigant in the suit of an undertaking to
pay the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder of a Debenture pursuant to
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Section 6.7 hereof, or a suit by Holders of more than 10% in principal amount of
the then outstanding Debentures.
ARTICLE 7
TRUSTEE
Section 7.1 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent and reasonable person would exercise or use under the circumstances in
the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely
by the express provisions of this Indenture and the Trustee need perform
only those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture.
(c) The Trustee may not be relieved from liabilities for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.5 hereof.
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(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b) and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or incur any liability. The Trustee shall be
under no obligation to exercise any of its rights and powers under this
Indenture at the request of any Holders of Debentures, unless such Holder shall
have offered to the Trustee security and indemnity satisfactory to it against
any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with Holdings. Money
held in trust by the Trustee need not be segregated from other funds except to
the extent required by law.
Section 7.2 Rights of Trustee.
(a) The Trustee may conclusively rely upon any document
believed by it to be genuine and to have been signed or presented by the proper
Person. The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel and the written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture,
any demand, request, direction or notice from Holdings shall be sufficient if
signed by an Officer of Holdings.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders unless such Holders shall have offered to the
Trustee reasonable
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security or indemnity against costs, expenses and liability that might be
incurred by it in compliance with such request or direction.
Section 7.3 Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Debentures
and may otherwise deal with Holdings or any Affiliate of Holdings with the same
rights it would have if it were not Trustee. However, in the event that the
Trustee acquires any conflicting interest it must eliminate such conflict within
90 days, apply to the SEC for permission to continue as trustee or resign. Any
Agent may do the same with like rights and duties. The Trustee is also subject
to Sections 7.10 and 7.11 hereof.
Section 7.4 Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Debentures, it shall not be accountable for Holdings' use
of the proceeds from the Debentures or any money paid to Holdings or upon
Holdings' direction under any provision of this Indenture, it shall not be
responsible for the use or application of any money received by any Paying Agent
other than the Trustee, and it shall not be responsible for any statement or
recital herein or any statement in the Debentures or any other document in
connection with the sale of the Debentures or pursuant to this Indenture other
than its certificate of authentication.
Section 7.5 Notice of Defaults. If a Default or Event of Default
occurs and is continuing and if it is actually known by the Trustee, the Trustee
shall mail to Holders of Debentures a notice of the Default or Event of Default
within 90 days after it occurs. Except in the case of a Default or Event of
Default in payment of principal of, premium, if any, or interest on any
Debenture, the Trustee may withhold the notice if and so long as a committee of
its Responsible Officers in good faith determines that withholding the notice is
in the interests of the Holders of the Debentures.
Section 7.6 Reports by Trustee to Holders of the Debentures. Within
60 days after each May 15 beginning with the May 15 following the date of this
Indenture, the Trustee shall mail to the Holders of the Debentures a brief
report dated as of such reporting date that complies with TIA ss. 313(a) (but in
no event described in TIA ss. 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA ss. 313(b)(2). The Trustee shall also transmit by mail all
reports as required by TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of
Debentures shall be mailed to Holdings and filed with the SEC and each stock
exchange on which the Debentures are listed. Holdings shall promptly notify the
Trustee when the Debentures are listed on any stock exchange.
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Section 7.7 Compensation and Indemnity. Holdings shall pay to the
Trustee from time to time reasonable compensation for its acceptance of this
Indenture and services hereunder. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. Holdings
shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
Holdings shall indemnify the Trustee for, and hold it harmless
against, any and all losses, liabilities or expenses incurred by it arising out
of or in connection with the acceptance or administration of its duties under
this Indenture, including the costs and expenses of enforcing this Indenture
against Holdings (including this Section 7.7) and defending itself against any
claim (whether asserted by Holdings or any Holder or any other person) or
liability in connection with the exercise or performance of any of its powers or
duties hereunder, except to the extent any such loss, liability or expense may
be attributable to its negligence or bad faith. The Trustee shall notify
Holdings promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify Holdings shall not relieve Holdings of its obligations
hereunder. Holdings shall defend the claim and the Trustee shall cooperate in
the defense. The Trustee may have separate counsel and Holdings shall pay the
reasonable fees and expenses of such counsel. Holdings need not pay for any
settlement made without its consent, which consent shall not be unreasonably
withheld.
All payments and reimbursements under this Section shall be made
with interest at the rate per annum borne by the Debentures. As security for the
performance of the obligations of Holdings under this Section, the Trustee shall
have a first lien on any property or funds held by the Trustee under this
Indenture, except that held in trust to pay principal and interest on particular
Debentures. Holdings' payment obligations pursuant to this Section and any lien
arising hereunder shall survive the resignation or removal of the Trustee, the
discharge of Holdings' obligations pursuant to Article 8 or otherwise and the
termination of this Indenture; provided, however, that such lien shall survive
only for so long as the Trustee shall hold any property or funds hereunder. The
Trustee's right to receive payment of any amounts due under this Section shall
not be subordinate to any other liability or indebtedness of Holdings (even
though the Debentures may be subordinate to such other liability or
indebtedness).
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.1(7) or (8) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law;
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Section 7.8 Replacement of Trustee. A resignation or removal of the
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying Holdings. The Holders of Debentures of
a majority in principal amount of the then outstanding Debentures may remove the
Trustee by so notifying the Trustee and Holdings in writing. Holdings may remove
the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a Custodian or public officer takes charge of the Trustee
or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, Holdings shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Debentures may appoint
a successor Trustee to replace the successor Trustee appointed by Holdings.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, Holdings, or the
Holders of Debentures of at least 10% in principal amount of the then
outstanding Debentures may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Debenture
who has been a Holder of a Debenture for at least six months, fails to comply
with Section 7.10, such Holder of a Debenture may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to Holdings. Thereupon, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Holders of the Debentures. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, provided all sums owing
to the Trustee hereunder have been paid
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and subject to the Lien provided for in Section 7.7 hereof. Notwithstanding
replacement of the Trustee pursuant to this Section 7.8, Holdings' obligations
under Section 7.7 hereof shall continue for the benefit of the retiring Trustee.
Section 7.9 Successor Trustee by Merger, Etc. If the Trustee
consolidates, merges or converts into, or transfers all or substantially all of
its corporate trust business to, another corporation, the successor corporation
without any further act shall be the successor Trustee.
Section 7.10 Eligibility; Disqualification. There shall at all times
be a Trustee hereunder that is a corporation organized and doing business under
the laws of the United States of America or of any state thereof that is
authorized under such laws to exercise corporate trustee power, that is subject
to supervision or examination by federal or state authorities and that has a
combined capital and surplus of at least $50 million as set forth in its most
recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA
ss. 310(b).
Section 7.11 Preferential Collection of Claims Against Holdings. The
Trustee is subject to TIA ss. 311(a), excluding any creditor relationship listed
in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject
to TIA ss. 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.1 Option to Effect Legal Defeasance or Covenant
Defeasance. Holdings may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.2 or 8.3 hereof be applied to all outstanding Debentures upon
compliance with the conditions set forth below in this Article 8.
Section 8.2 Legal Defeasance and Discharge. Upon Holdings' exercise
under Section 8.1 hereof of the option applicable to this Section 8.2, Holdings
shall, subject to the satisfaction of the conditions set forth in Section 8.4
hereof, be deemed to have been discharged from its obligations with respect to
all outstanding Debentures on the date the conditions set forth below are
satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance
means that Holdings shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Debentures, which shall thereafter
be deemed to be "outstanding" only for the purposes of Section 8.5 and the other
Sections of this
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Indenture referred to in (i) and (ii) below, and to have satisfied all its other
obligations under such Debentures and this Indenture (and the Trustee, on demand
of and at the expense of Holdings, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (i) the rights of Holders of
such outstanding Debentures to receive, solely from the trust fund described in
Section 8.5, payments in respect of the principal of, premium, if any, and
interest on such Debentures when such payments are due, (ii) Holdings'
obligations with respect to the Debentures under Article 2 and Section 4.2
hereof, (iii) the rights, powers, trust, duties and immunities of the Trustee,
and Holdings' obligations in connection therewith and (iv) this Article 8.
Subject to compliance with this Article 8, Holdings may exercise its option
under this Section 8.2 notwithstanding the prior exercise of its option under
Section 8.3 hereof.
Section 8.3 Covenant Defeasance. Upon Holdings' exercise under
Section 8.1 hereof of the option applicable to this Section 8.3, Holdings shall,
subject to the satisfaction of the conditions set forth in Section 8.4 hereof,
be released from its obligations under the covenants contained in Sections 4.7,
4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.15 and Article 5 hereof with respect to the
outstanding Debentures on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Debentures shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Debentures shall not be deemed outstanding for accounting purposes). For this
purpose, such Covenant Defeasance means that, with respect to the outstanding
Debentures, Holdings may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Section 6.1 hereof,
but, except as specified above, the remainder of this Indenture and such
Debentures shall be unaffected thereby. In addition, upon Holdings' exercise
under Section 8.1 hereof of the option applicable to this Section 8.3, subject
to the satisfaction of the conditions set forth in Section 8.4 hereof, Sections
6.1(5) and 6.1(6) shall not constitute Events of Default.
Section 8.4 Conditions to Legal or Covenant Defeasance. The
following shall be the conditions to the application of either Section 8.2 or
8.3 hereof to the outstanding Debentures:
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In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) Holdings must irrevocably deposit with the Trustee or
Paying Agent, in trust, for the benefit of the Holders, cash in United States
dollars, non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay principal of, premium, if any, and
interest on the Debentures on the stated date for payment thereof 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 the Debentures;
(b) in the case of an election under Section 8.2 hereof,
Holdings shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that (A) Holdings has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
Debentures will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.3 hereof,
Holdings shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
Debentures will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the incurrence of Indebtedness all or a portion of the proceeds
of which will be used to defease the Debentures pursuant to this Article 8
concurrently with such incurrence) or insofar as Section 6.1(7) and 6.1(8)
hereof are concerned, at any time in the period ending on the 91st day after the
date of such deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a Default under, this
Indenture or a default under the Term Loan Agreement, the Revolving Credit
Agreement, the Note Indentures or any other material agreement or instrument to
which Holdings or any of its Subsidiaries is a party or by which Holdings or any
of its Subsidiaries is bound;
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(f) Holdings shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(g) Holdings shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by Holdings with the intent of
preferring the Holders over any other creditors of Holdings or with the intent
of defeating, hindering, delaying or defrauding any other creditors of Holdings;
and
(h) Holdings shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
Section 8.5 Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions. Subject to Section 8.6 hereof, all money
and non-callable Government Securities (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee, collectively for
purposes of this Section 8.5, the "Trustee") pursuant to Section 8.4 hereof in
respect of the outstanding Debentures shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Debentures and this
Indenture, to the payment, either directly or through any Paying Agent
(including Holdings acting as Paying Agent), as the Trustee may determine, to
the Holders of such Debentures of all sums due and to become due thereon in
respect of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
Holdings shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.4 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding
Debentures.
Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to Holdings from time to time upon Holdings'
request any money or non-callable Government Securities held by it as provided
in Section 8.4 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.4(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
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Section 8.6 Repayment to Company. Any money deposited with the
Trustee or any Paying Agent, or then held by Holdings, in trust for the payment
of the principal of, premium, if any, or interest on any Debenture and remaining
unclaimed for two years after such principal, premium, if any, or interest has
become due and payable shall be paid to Holdings on its request or (if then held
by Holdings) shall be discharged from such trust; and the Holder of such
Debenture shall thereafter, as an unsecured general creditor, look only to
Holdings for payment hereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of Holdings as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of Holdings cause be published once, in The New York Times and The Wall
Street Journal (national edition), notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to Holdings.
Section 8.7 Reinstatement. If the Trustee or Paying Agent is unable
to apply any United States dollars or non-callable Government Securities in
accordance with Section 8.2 or 8.3 hereof, as the case may be, by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application, then Holdings' obligations under this
Indenture and the Debentures shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.2 or 8.3 hereof until such time as
the Trustee or Paying Agent is permitted to apply all such money in accordance
with Section 8.2 or 8.3 hereof, as the case may be; provided, however, if
Holdings makes any payment of principal of, premium, if any, or interest on any
Debenture following the reinstatement of its obligations, Holdings shall be
subrogated to the rights of the Holders of such Debentures to receive such
payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.1 Without Consent of Holders of Debentures.
Notwithstanding Section 9.2 of this Indenture, Holdings and the Trustee may
amend or supplement this Indenture or the Debentures without the consent of any
Holder of a Debenture:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Debentures in addition to or
in place of certificated Debentures;
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(c) to provide for the assumption of Holdings' obligations to
the Holders of the Debentures in the case of a merger or consolidation pursuant
to Article 5 hereof;
(d) to make any change that would provide any additional
rights or benefits to the Holders of the Debentures or that does not adversely
affect the legal rights hereunder of any Holder of the Debenture; or
(e) to comply with requirements of the SEC in order to effect
or maintain the qualification of this Indenture under the TIA.
Upon the request of Holdings accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.2 hereof, the Trustee shall join with Holdings in the execution of any amended
or supplemental Indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations that may be
therein contained, but the Trustee shall not be obligated to enter into such
amended or supplemental Indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
Section 9.2 With Consent of Holders of Debentures. Holdings and the
Trustee may amend or supplement this Indenture (including Section 4.10 hereof)
and the Debentures may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the Debentures then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for the Debentures), and subject to Sections 6.4 and 6.7 hereof,
any existing Default or Event of Default (other than a Default or Event of
Default in the payment of principal of, premium, if any, or interest on the
Debentures, except a payment default resulting from an acceleration that has
been rescinded) or compliance with any provision of this Indenture or the
Debentures may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Debentures (including consents obtained
in connection with a tender offer or exchange offer for the Debentures). Without
the consent of at least 75% in principal amount of the Debentures then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for such Debentures), no waiver or amendment to this Indenture
may make any change in the provisions of Section 4.15 hereof that adversely
affects the rights of any Holder of such Debentures.
Upon the request of Holdings accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Debentures as aforesaid, and upon
receipt by the Trustee of the documents described in Section 7.2 hereof, the
Trustee shall join with Holdings in the execution of such amended or
supplemental Indenture unless such
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amended or supplemental Indenture affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise, in which case the Trustee may in
its discretion, but shall not be obligated to, enter into such amended or
supplemental Indenture.
It shall not be necessary for the consent of the Holders of
Debentures under this Section 9.2 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, Holdings shall mail to the Holders of Debentures affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
Holdings to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such amended or supplemental Indenture
or waiver. Subject to Sections 6.4 and 6.7 hereof, the Holders of a majority in
aggregate principal amount of the Debentures then outstanding may waive
compliance in a particular instance by Holdings with any provision of this
Indenture or the Debentures. However, without the consent of each Holder
affected, an amendment or waiver may not (with respect to any Debentures held by
a non-consenting Holder):
(a) reduce the principal amount of Debentures whose Holders
must consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of
any Debenture or alter or waive any of the provisions with respect to the
redemption of the Debentures except as provided above with respect to Sections
4.15 and 4.10 hereof;
(c) reduce the rate of or change the time for payment of
interest, including default interest, on any Debenture;
(d) waive a Default or Event of Default in the payment of
principal of, premium, if any, or interest on the Debentures (except a
rescission of acceleration of the Debentures by the Holders of at least a
majority in aggregate principal amount of the then outstanding Debentures and a
waiver of the payment default that resulted from such acceleration);
(e) make any Debenture payable in money other than that stated
in the Debentures;
(f) make any change in the provisions of this Indenture
relating to waivers of past Defaults or the rights of Holders of Debentures to
receive payments of principal of or interest on the Debentures;
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(g) waive a redemption payment with respect to any Debenture;
(h) make any change in Section 6.4 or 6.7 hereof or in the
foregoing amendment and waiver provisions; or
(i) make any change in Article 10 hereof that adversely
affects any Holder.
Section 9.3 Compliance with Trust Indenture Act. Every amendment or
supplement to this Indenture or the Debentures shall be set forth in an amended
or supplemental Indenture that complies with the TIA as then in effect.
Section 9.4 Revocation and Effect of Consents. Until an amendment,
supplement or waiver becomes effective, a consent to it by a Holder of a
Debenture is a continuing consent by the Holder of a Debenture and every
subsequent Holder of a Debenture or portion of a Debenture that evidences the
same debt as the consenting Holder's Debenture, even if notation of the consent
is not made on any Debenture. However, any such Holder of a Debenture or
subsequent Holder of a Debenture may revoke the consent as to its Debenture if
the Trustee receives written notice of revocation before the date the waiver,
supplement or amendment becomes effective. An amendment, supplement or waiver
becomes effective in accordance with its terms and thereafter binds every
Holder.
Section 9.5 Notation on or Exchange of Debentures. The Trustee may
place an appropriate notation about an amendment, supplement or waiver on any
Debenture thereafter authenticated. Holdings in exchange for all Debentures may
issue and the Trustee shall authenticate new Debentures that reflect the
amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Debenture
shall not affect the validity and effect of such amendment, supplement or
waiver.
Section 9.6 Trustee to Sign Amendments, Etc. The Trustee shall sign
any amended or supplemental indenture authorized pursuant to this Article 9 if
the amendment or supplement does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. Holdings may not sign an amendment or
supplemental Indenture until the Board of Directors approves it. In executing
any amended or supplemental indenture, the Trustee shall be entitled to receive
and (subject to Section 7.1) shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel stating that the execution of
such amended or supplemental indenture is authorized or permitted by this
Indenture.
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ARTICLE 10
COLLATERAL AND SECURITY
Section 10.1 Pledge Agreement. The due and punctual payment of the
principal of and interest on the Debentures when and as the same shall be due
and payable, whether on an interest payment date, at maturity, by acceleration,
repurchase, redemption or otherwise, and interest on the overdue principal of
and interest (to the extent permitted by law), if any, on the Debentures and
performance of all other obligations of Holdings to the Holders of Debentures or
the Trustee under this Indenture and the Debentures, according to the terms
hereunder or thereunder, shall be secured as provided in the Pledge Agreement
which Holdings has entered into simultaneously with the execution of this
Indenture. Each Holder of Debentures, by its acceptance thereof, consents and
agrees to the terms of the Pledge Agreement (including, without limitation, the
provisions providing for foreclosure and release of Collateral) as the same may
be in effect or may be amended from time to time in accordance with its terms
and authorizes and directs the Collateral Agent to enter into the Pledge
Agreement and to perform its obligations and exercise its rights thereunder in
accordance therewith. Holdings shall deliver to the Trustee copies of all
documents delivered to the Collateral Agent pursuant to the Pledge Agreement,
and shall do or cause to be done all such acts and things as may be necessary or
proper, or as may be required by the provisions of the Pledge Agreement, to
assure and confirm to the Trustee and the Collateral Agent the security interest
in the Collateral contemplated hereby, by the Pledge Agreement or any part
thereof, as from time to time constituted, so as to render the same available
for the security and benefit of this Indenture and of the Debentures secured
hereby, according to the intent and purposes herein express. Holdings shall
take, or shall cause its Subsidiaries to take, upon request of the Trustee, any
and all actions reasonably required to cause the Pledge Agreement to create and
maintain, as security for the Obligations of Holdings hereunder, a valid and
enforceable perfected first priority Lien in and on all the Collateral, in favor
of the Collateral Agent for the benefit of the Holders of Debentures, superior
to and prior to the rights of all third Persons and subject to no other Liens
than Permitted Liens.
Section 10.2 Recording and Opinions.
(a) Holdings shall furnish to the Trustee simultaneously with
the execution and delivery of this Indenture an Opinion of Counsel either (i)
stating that in the opinion of such counsel all action has been taken with
respect to the recording, registering and filing of this Indenture, financing
statements or other instruments necessary to make effective the Lien intended to
be created by the Pledge Agreement, and reciting with respect to the security
interests in the Collateral, the details of such action, or (ii) stating that,
in the opinion of such counsel, no such action is necessary to make such Lien
effective.
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(b) Holdings shall furnish to the Collateral Agent and the
Trustee on June 15 in each year beginning with June 15, 2000, an Opinion of
Counsel, dated as of such date, either (i) (A) stating that, in the opinion of
such counsel, action has been taken with respect to the recording, registering,
filing, rerecording, re-registering and refiling of all supplemental indentures,
financing statements, continuation statements or other instruments of further
assurance as is necessary to maintain the Lien of the Pledge Agreement and
reciting with respect to the security interests in the Collateral the details of
such action or referring to prior Opinions of Counsel in which such details are
given, (B) stating that, based on relevant laws as in effect on the date of such
Opinion of Counsel, all financing statements and continuation statements have
been executed and filed that are necessary as of such date and during the
succeeding 12 months fully to preserve and protect, to the extent such
protection and preservation are possible by filing, the rights of the Holders of
Debentures and the Collateral Agent and the Trust hereunder and under the Pledge
Agreement with respect to the security interests in the Collateral, or (ii)
stating that, in the opinion of such counsel, no such action is necessary to
maintain such Lien and assignment.
(c) Holdings shall otherwise comply with the provisions of TIA
ss.314(b).
Section 10.3 Release of Collateral.
(a) Subject to subsections (b) and (c) of this Section 10.3,
Collateral may be released from the Lien and security interest created by the
Pledge Agreement on the terms set forth in the Pledge Agreement.
(b) At any time when a Default or Event of Default shall have
occurred and be continuing and the maturity of the Debentures shall have been
accelerated (whether by declaration or otherwise) and the Trustee shall have
delivered a notice of acceleration to the Collateral Agent, no release of
Collateral pursuant to the provisions of the Pledge Agreement shall be effective
as against the Holders of Debentures.
(c) The release of any Collateral from the terms of this
Indenture and the Pledge Agreement shall not be deemed to impair the security
under this Indenture in contravention of the provisions hereof if and to the
extent the Collateral is released pursuant to the terms of the Pledge Agreement.
To the extent applicable, Holdings shall cause TIA ss.314(d) relating to the
release of property or securities from the Lien and security interest of the
Pledge Agreement and relating to the substitution therefor of any property or
securities to be subjected to the Lien and security interest of the Pledge
Agreement to be complied with. Any certificate or opinion required by TIA ss.
314(d) may be made by an Officer of Holdings except in cases where TIA ss.
314(d) requires that such certificate or opinion be made by an independent
Person, which Person shall be an independent engineer, appraiser or
<PAGE>
73
other expert selected or approved by the Trustee and the Collateral Agent in the
exercise of reasonable care.
Section 10.4 Certificates of Holdings. Holdings shall furnish to the
Trustee and the Collateral Agent, prior to each proposed release of Collateral
pursuant to the Pledge Agreement, (i) all documents required by TIA ss. 314(d)
and (ii) an Opinion of Counsel, which may be rendered by internal counsel to
Holdings, to the effect that such accompanying documents constitute all
documents required by TIA ss. 314(d). The Trustee may, to the extent permitted
by Sections 7.1 and 7.2 hereof, accept as conclusive evidence of compliance with
the foregoing provisions the appropriate statements contained in such documents
and such Opinion of Counsel.
Section 10.5 Certificates of the Trustee. In the event that Holdings
wishes to release Collateral in accordance with the Pledge Agreement and has
delivered the certificates and documents required by the Pledge Agreement and
Sections 10.3 and 10.4 hereof, the Trustee shall determine whether it has
received all documentation required by TIA ss. 314(d) in connection with such
release and, based on such determination and the Opinion of Counsel delivered
pursuant to Section 10.4(b), shall deliver a certificate to the Collateral Agent
setting forth such determination.
Section 10.6 Authorization of Actions to Be Taken by the Trustee
Under the Pledge Agreement. Subject to the provisions of Section 7.1 and 7.2
hereof, the Trustee may, in its sole discretion and without the consent of the
Holders of Debentures, direct, on behalf of the Holders of Debentures, the
Collateral Agent to, take all actions it deems necessary or appropriate in order
to (a) enforce any of the terms of the Pledge Agreement and (b) collect and
receive any and all amounts payable in respect of the Obligations of Holdings
hereunder. The Trustee shall have power to institute and maintain such suits and
proceedings as it may deem expedient to prevent any impairment of the Collateral
by any acts that may be unlawful or in violation of the Pledge Agreement or this
Indenture, and such suits and proceedings as the Trustee may deem expedient to
preserve or protect its interests and the interests of the Holders of Debentures
in the Collateral (including power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any legislative or
other governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would impair the security interest hereunder or be prejudicial to
the interests of the Holders of Debentures or of the Trustee).
Section 10.7 Authorization of Receipt of Funds by the Trustee Under
the Pledge Agreement. The Trustee is authorized to receive any funds for the
benefit of the Holders of Debentures distributed under the Pledge Agreement and
to make further distributions of such funds to the Holders of Debentures
according to the provisions of this Indenture.
<PAGE>
74
Section 10.8 Termination of Security Interest. Upon the payment in
full of all Obligations of Holdings under this Indenture and the Debentures or
upon Legal Defeasance, the Trustee shall, at the request of Holdings, deliver a
certificate to the Collateral Agent stating that such Obligations have been paid
in full, and instruct the Collateral Agent to release the Liens pursuant to this
Indenture and the Pledge Agreement.
ARTICLE 11
MISCELLANEOUS
Section 11.1 Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies or conflicts with the duties imposed by TIA ss.
318(c), the imposed duties shall control.
Section 11.2 Notices. Any notice or communications by Holdings or
the Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested),
telex, telecopier or overnight air courier guaranteeing next day deliver to the
others' address:
If to Holdings:
SFAC New Holdings, Inc.
520 Lake Cook Road, Suite 550
Deerfield, Illinois 60015
Telecopier No.: (847) 405-5310
Attention: Sean Stack, Vice President and Treasurer
With a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopier No.: (212) 757-3990
Attention: Mitchell S. Fishman, Esq.
If to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Telecopier No.: (212) 852-1626
Attention: Corporate Trust Administration
<PAGE>
75
Holdings or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
All notice or communication to a Holder shall be mailed by first
class mail, certified or registered, return receipt requested, or by overnight
air courier guaranteeing next day delivery to its address shown on the register
kept by the Registrar. Any notice or communication shall also be so mailed to
any Person described in TIA ss. 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If Holdings mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
Section 11.3 Communication by Holders of Debentures with Other
Holders of Debentures. Holders may communicate pursuant to TIA ss. 312(b) with
other Holders with respect to their rights under this Indenture or the
Debentures. Holdings, the Trustee, the Registrar and anyone else shall have the
protection of TIA ss. 312(c).
Section 11.4 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by Holdings to the Trustee to take any action
under this Indenture, Holdings shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.5 hereof) stating that, in the opinion of the signers, all conditions
precedent and covenants, if any, provided for in this Indenture relating to the
proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.5 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
<PAGE>
76
Section 11.5 Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture (other than a certificate provided pursuant to
TIA ss. 314(a)(4)) shall comply with the provisions of TIA ss. 314(e) and shall
include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been satisfied; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
Section 11.6 Rules by the Trustee and Agents. The Trustee may make
reasonable rules for action by or at a meeting of Holders. The Registrar or
Paying Agent may make reasonable rules and set reasonable requirements for its
functions.
Section 11.7 No Personal Liability of Directors, Officers, Employees
and Stockholders. No past, present or future director, officer, employee,
incorporator or stockholder of Holdings, as such, shall have any liability for
any obligations of Holdings under the Debentures, this Indenture or the Pledge
Agreement or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Debentures by accepting a
Debenture waives and releases all such liability. The waiver and release are
part of the consideration for issuance of the Debentures.
Section 11.8 Governing Law. THE INTERNAL LAW OF THE STATE OF NEW
YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE AND THE DEBENTURES.
Section 11.9 No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret any other indenture, loan or debt
agreement of Holdings or its Subsidiaries or of any other Person. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
<PAGE>
77
Section 11.10 Successors. All agreements of Holdings in this
Indenture and the Debentures shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.
Section 11.11 Severability. In case any provision in this Indenture
or in the Debentures shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 11.12 Counterpart Originals. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
Section 11.13 Table of Contents, Headings, Etc. The Table of
Contents, Cross-Reference Table and Headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part of this Indenture and shall in no way modify or restrict
any of the terms or provisions hereof.
[Signatures on following page]
<PAGE>
78
[Debenture Indenture - Signature Page]
Dated as of June 11, 1999 SFAC NEW HOLDINGS, INC.
By: /s/ Sean M. Stack
---------------------------------------
Name: Sean M. Stack
Title: Vice President, Treasurer and
Assistant Secretary
Dated as of June 11, 1999 UNITED STATES TRUST COMPANY OF
NEW YORK, Trustee
By: /s/ Cynthia Chaney
---------------------------------------
Name: Cynthia Chaney
Title: Assistant Vice-President
<PAGE>
79
SCHEDULE 1
TRANSACTION LIENS
1. A lien in respect of the pledge by Specialty Foods Corporation of 100
shares of common stock of SFC Sub, Inc. securing Specialty Food
Corporation's obligations under the Term Loan Agreement (as defined in the
Indenture).
2. A lien in respect of the pledge by SFC New Holdings, Inc. of 100% of the
sole membership interest of MA Holdings, LLC securing SFC New Holdings,
Inc.'s obligations under the Term Loan Agreement (as defined in the
Indenture).
3. A lien in respect of the pledge by SFAC New Holdings, Inc. of 100 shares
of common stock, 225 shares of Series A Preferred Stock, 150 shares of
Series B Preferred Stock and 200 shares of Series C Preferred Stock of SFC
New Holdings, Inc. securing SFAC New Holdings, Inc.'s obligations under
the 13% Senior Secured Discount Debentures due 2009.
<PAGE>
80
SCHEDULE 2
SFC SALE ASSETS
1. Property owned by Archway Cookies, LLC (formerly Archway Cookies, Inc.),
consisting of:
(a) Property situated at 5351 West Dickman Road - Fort Custer Urban
Renewal Plat of Battle Creek Lot 63, except the easterly 10 feet
hereof.
(b) Property situated at 5451 West Dickman Road - Fort Custer Urban
Renewal Plat of Battle Creek Lots 84 and 85.
2. Property owned by Mother's Cake & Cookie Co., consisting of:
(a) Lot 1, Block 1, Standard Meat Company Addition to the City of Fort
Worth, Tarrant County, Texas, according to the Plat recorded in
Volume 388-58, Page 846, Plat Records, Tarrant County, Texas, SAVE
AND EXCEPT that portion of the above-described tract conveyed to the
City of Fort Worth by deed recorded in Volume 9016, Page 696, Real
Property Records, Tarrant County, Texas.
(b) Lot 2, Block 1, Standard Meat Company Addition to the City of Fort
Worth, Tarrant County, Texas, according to the Plat recorded in
Volume 388-114, Page 881, Plat Records, Tarrant County, Texas.
(c) Lot 1 and a portion of Lot 2, Block 1, Gulf States Subdivision to
the City of Forth Worth, Tarrant County, Texas, according to the
Plat recorded in Volume 388-66, Page 25, Plat Records, Tarrant
County, Texas, SAVE AND EXCEPT that portion of Lot 1 conveyed to the
City of Forth Worth by deed recorded in Volume 9016, Page 700, Real
Property Records, Tarrant County, Texas.
(d) 0.517 acres of land, more or less, situated in the A. McLemore
Survey, Abstract No. 1056, Tarrant County, Texas, and being the same
tract of land as described in deed to Standard Meat Company recorded
in Volume 6009, Page 423, Deed Records, Tarrant County, Texas, SAVE
AND EXCEPT that portion of the above described tract conveyed to the
City of Fort Worth by deed recorded in Volume 9016, Page 692, Real
Property Records, Tarrant County, Texas.
(e) 0.48 acres of land, more or less, situated in the A. McLemore
Survey, Abstract No. 1056, Tarrant County, Texas, and being the same
tract of land as described in deed to Standard Meat Company recorded
in
<PAGE>
81
Volume 6927, Page 2119, Deed Records, Tarrant County, Texas, SAVE
AND EXCEPT that portion of the above described tract conveyed to the
City of Fort Worth, by deed recorded in Volume 9016, Page 692, Real
Property Records, Tarrant County, Texas .
(f) Lot 6, Block 12, Riverside Addition, Third Filing, to the City of
Fort Worth, Tarrant County, Texas, according to the Plat recorded in
Volume 204-A, Page 114, Plat Records, Tarrant County, Texas, SAVE
AND EXCEPT that portion of the above described tract conveyed to the
City of Fort Worth by deed recorded in Volume 9016, Page 682, Real
Property Records, Tarrant County, Texas.
(g) Lot 15, Block 12, Riverside Addition, Third Filing, to the City of
Fort Worth, Tarrant County, Texas, according to the Plat recorded in
Volume 204-A, Page 114, Plat Records, Tarrant County, Texas.
(h) A portion of Lots 1 and 2, Block 1, of Page Land Company's East Side
Addition to the City of Fort Worth, Tarrant County, Texas, according
to Plat recorded in Volume 204, Page 74, Plat Records, Tarrant
County, Texas, SAVE AND EXCEPT that portion of the above described
tract conveyed to the City of Fort Worth by deed recorded in Volume
9016, Page 682, Real Property Records, Tarrant County, Texas.
<PAGE>
EXHIBIT A
(Face of Debenture)
13% [Series A][Series B] Senior Secured Discount Debentures due 2009
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED, THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT
("ORIGINAL ISSUE DATE"); FOR EACH $1,000 PRINCIPAL AMOUNT OF THIS SECURITY, THE
ISSUE PRICE IS $531.77. THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $468.23, THE
ISSUE DATE IS JUNE 11, 1999 AND THE YIELD TO MATURITY IS 13% PER ANNUM.
No. $_____________
SFAC NEW HOLDINGS, INC.
promises to pay to
or registered assigns,
the principal sum of
Dollars on June 15, 2009
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
Dated: ________________________ SFAC NEW HOLDINGS, INC.
By: _____________________________________
Name:
Title:
(SEAL)
By: _____________________________________
Name:
Title:
This is one of the Debentures referred
to in the within-mentioned Indenture:
UNITED STATES TRUST
COMPANY OF NEW YORK
as Trustee
By:______________________________
Authorized Signatory
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<PAGE>
(Back of Debenture)
13% [Series A][Series B] Senior Secured Discount Debentures due 2009
[Unless and until it is exchanged in whole or in part for Debentures in
definitive form, this Debenture may not be transferred except as a whole by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository or by the Depository or any
such nominee to a successor Depository or a nominee of such successor
Depository. Unless this certificate is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York, New York) ("DTC"),
to the issuer or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or such other
name as may be requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or such other entity as may be requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]1/
"[THE DEBENTURE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
DEBENTURE EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE DEBENTURE EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION PROVIDED BY RULE
144A UNDER THE SECURITIES ACT. THE HOLDER OF THE DEBENTURE EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF HOLDINGS THAT (A) SUCH DEBENTURE MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A OR IN ACCORDANCE WITH RULE 144 UNDER THE
SECURITIES ACT, OR PURSUANT TO ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL),
(b) TO HOLDINGS, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT
OR (d) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
- --------
1/ This paragraph should be included only if the Debenture is issued in global
form.
A-2
<PAGE>
THE SECURITIES ACT AND (2) IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE
RESALE RESTRICTIONS SET FORTH IN (1) ABOVE."]*
* Bracketed language should be included only if the Debenture is a Transfer
Restricted Debenture.
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. Interest. SFAC New Holdings, Inc., a Delaware corporation
("Holdings"), promises to pay interest on the principal amount of this Debenture
at 13% per annum from June 15, 2004 until maturity and promises to pay
Liquidated Damages (as defined below) in accordance with the following
paragraphs. Holdings shall pay interest and Liquidated Damages semi-annually on
June 15 and December 15 of each year, or if any such day is not a Business Day,
on the next succeeding Business Day (each an "Interest Payment Date"). Interest
on the Debentures will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from and including June 15, 2004);
provided that if there is no existing Default in the payment of interest, and if
this Debenture is authenticated between a record date referred to on the face
hereof and the next succeeding Interest Payment Date, interest shall accrue from
such next succeeding Interest Payment Date; provided, further, that the first
Interest Payment Date shall be December 15, 2004.
The Holder of this Debenture is entitled to the benefits of the
Registration Rights Agreement, dated June 11, 1999, among Holdings and the
Holders of the Debentures named therein (the "Registration Rights Agreement")
pursuant to which Holdings has agreed (a) to file with the SEC promptly (but in
any event on or prior to 120 days after the Original Issue Date), the Exchange
Offer Registration Statement on the appropriate form relating to the Registered
Exchange Offer for the Debentures under the Securities Act, and (b) to cause
such Exchange Offer Registration Statement to become effective within 180 days
after the Original Issue Date. Upon the occurrence of certain Registration
Defaults (as defined in the Registration Rights Agreement), Holdings will pay or
cause to be paid, in addition to amounts otherwise due under the Indenture and
the Exchange Securities, as liquidated damages, and not as a penalty
("Liquidated Damages"), to each holder of Registrable Securities (as defined in
the Registration Rights Agreement), during the first 90-day period immediately
following the occurrence of such Registration Default an amount equal to $.05
per week per $1,000 Accreted Value of Registrable Securities held by such
holder. The amount of the liquidated damages thereafter will increase each week
by an additional $.05 per $1,000 Accreted Value of Registrable Securities, up to
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<PAGE>
a maximum amount of liquidated damages of $0.30 per week per $1,000 Accreted
Value of Registrable Securities, until all Registration Defaults are cured. All
accrued Liquidated Damages will be paid in the same manner as interest payments
on the Notes on semiannual damages payment dates that correspond to interest
payment dates for the Debentures and upon redemption dates, Change of Control
Payment Dates and Asset Sale payment dates. Following the cure of a Registration
Default, the accrual of Liquidated Damages will cease.
Holdings shall pay interest (including post-petition interest in any
proceeding under Bankruptcy Law) on overdue principal and premium, if any, from
time to time on demand at a rate that is 1% per annum in excess of the rate then
in effect; it shall pay interest (including post-petition interest in any
proceeding under Bankruptcy Law) on overdue installments of interest. Holdings
shall pay interest (including post-petition interest in any proceeding under
Bankruptcy Law) on overdue Liquidated Damages (without regard to any applicable
grace periods) from time to time on demand at the same rate to the extent
lawful. Interest and Liquidated Damages will be computed on the basis of a
360-day year of twelve 30-day months.
2. Method of Payment. Holdings will pay interest and Liquidated
Damages on the Debentures (except defaulted interest) to the Persons who are
registered Holders of Debentures at the close of business on the June 1 or
December 1 next preceding the Interest Payment Date, even if such Debentures are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Debentures will be payable both as to principal and interest at
the office or agency of Holdings maintained for such purpose within or without
the City and State of New York, or, at the option of Holdings, payment of
interest may be made by check mailed to the Holders at their addresses set forth
in the register of Holders.
3. Paying Agent and Registrar. Initially, United States Trust
Company of New York, the Trustee under the Indenture, will act as Paying Agent
and Registrar. Holdings may change any Paying Agent or Registrar without notice
to any Holder. Holdings or any of its Subsidiaries may act in any such capacity.
4. Indenture and Pledge Agreement. Holdings issued the Debentures
under an Indenture, dated as of June 11, 1999 (the "Indenture"), between
Holdings and the Trustee. The terms of the Debentures include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The
Debentures are subject to all such terms, and Holders are referred to the
Indenture and such Act for a statement of such terms. The Debentures are secured
obligations of Holdings, limited to $587,025,331.77 in aggregate principal
amount. The Debentures are secured by a pledge of the common stock and preferred
stock of SFC New Holdings, Inc. and intercompany notes owing to Holdings (if
any), pursuant to the Pledge Agreement referred to in the Indenture.
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<PAGE>
5. Optional Redemption.
(a) At any time, Holdings shall have the option to redeem the
Debentures pursuant to Section 3.7 of the Indenture in whole or in part, upon
not less than 30 nor more than 60 days' notice to the Holders, at the redemption
prices (expressed as percentages of Accreted Value) set forth below plus after
June 15, 2004 accrued and unpaid interest thereon to the applicable redemption
date:
Percentage of
Year Accreted Value
---- --------------
On or before June 15, 2000..................... 50.0%
On or before June 15, 2001..................... 55.0%
On or before June 15, 2002..................... 60.0%
On or before June 15, 2003..................... 75.0%
After June 15, 2003............................ 100.0%
(b) Any redemption pursuant to Section 3.7 of the Indenture
shall be made pursuant to the provisions of Sections 3.1 through 3.6 of the
Indenture.
6. Mandatory Redemption. Except as set forth in paragraph 7 below,
or pursuant to Section 4.15 of the Indenture, Holdings is not required to make
mandatory redemption or sinking fund payments with respect to the Debentures.
7. Repurchase at Option of Holder. (a) If there is a Change of
Control, each Holder of Debentures shall have the right to require Holdings to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
such Holder's Debentures pursuant to the offer described below (the "Change of
Control Offer") at a repurchase price equal to 50.0% (on or before June 15,
2000), 55.0% (after June 15, 2000 but before June 15, 2001), 60% (after June 15,
2001 but before June 15, 2002), 75.0% (after June 15, 2002 but before June 15,
2003) or 100.0% (after June 15, 2003) of the Accreted Value thereof on the date
of purchase plus, after June 15, 2004, accrued and unpaid interest thereon to
the applicable repurchase date (in any case, the "Change of Control Payment").
Within 60 days following any Change of Control, Holdings shall mail a notice to
each Holder stating: (1) that the Change of Control Offer is being made pursuant
to Section 4.15 of the Indenture and that all Debentures tendered shall 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 Debenture not tendered shall
continue to accrete or accrue interest; (4) that, unless Holdings defaults in
the payment of the Change of Control Payment, all Debentures accepted for
payment pursuant to the Change of Control Offer shall cease to accrete or accrue
interest after the Change of Control Payment Date; (5) that Holders electing to
have
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<PAGE>
any Debentures purchased pursuant to a Change of Control Offer shall be required
to surrender the Debentures, with the form entitled "Option of Holder to Elect
Purchase"on the reverse of the Debenture completed, to Holdings, a Depository,
if appointed by Holdings, or a Paying Agent at the address specified in the
notice prior to the close of business on the third Business Day, preceding the
Purchase Date; (6) that Holders shall be entitled to withdraw their election if
Holdings, the Depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Debenture the Holder delivered for purchase and a statement that
such Holder is withdrawing his election to have such Debenture purchased; (7)
that, if the aggregate principal amount of Debentures surrendered by Holders
exceeds the Offer Amount, Holdings shall select the Debentures to be purchased
on a pro rata basis (with such adjustments as may be deemed appropriate by
Holdings so that only Debentures in denominations of $1,000, or integral
multiples thereof, shall be purchased); and (8) that Holders whose Debentures
were purchased only in part shall be issued new Debentures equal in principal
amount to the unpurchased portion of the Debentures surrendered.
(b) If Holdings or a Subsidiary consummates any Asset Sale
(other than a Principal Business Asset Sale), within five days of each date on
which the aggregate amount of Excess Proceeds exceeds $15 million, Holdings
shall commence an offer to all Holders of Debentures (an "Asset Sale Offer")
pursuant to Section 3.9 of the Indenture to purchase the maximum principal
amount of Debentures that may be purchased out of the Excess Proceeds at an
offer price in cash in an amount equal to 50.0% (if made on or before June 15,
2000), 55.0% (after June 15, 2000 but before June 15, 2001), 60% (after June 15,
2001 but before June 15, 2002), 75.0% (after June 15, 2002 but before June 15,
2003) or 100.0% (if made on or before June 15, 2003) of the Accreted Value
thereof on the date fixed for the closing of such offer, in accordance with the
procedures in Section 3.9 of the Indenture. To the extent that the aggregate
amount of Debentures tendered pursuant to an Asset Sale Offer is less than the
amount of Excess Proceeds, Holdings (or such Subsidiary) may use such deficiency
for general corporate purposes. Holders of Debentures that are subject of an
offer to purchase will receive an Asset Sale Offer from Holdings prior to any
related purchase date and may elect to have such Debentures purchased by
completing the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Debentures.
8. Notice of Redemption. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Debentures are to be redeemed at its registered address. Debentures
in denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Debentures held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on
Debentures or portions thereof called for redemption.
A-6
<PAGE>
9. Denominations, Transfer, Exchange. The Debentures are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Debentures may be registered and Debentures
may be exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and Holdings may require a Holder to pay any taxes and fees
required by law or permitted by the Indenture. Holdings need not exchange or
register the transfer of any Debenture or portion of a Debenture selected for
redemption, except for the unredeemed portion of any Debenture being redeemed in
part. Also, it need not exchange or register the transfer of any Debentures for
a period of 15 days before a selection of Debentures to be redeemed or during
the period between a record date and the corresponding Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a Debenture may
be treated as its owner for all purposes.
11. Amendments, Supplement and Waivers. Subject to certain
exceptions, the Indenture or the Debentures may be amended or supplemented with
the consent of the Holders of at least a majority in principal amount of the
then outstanding Debentures, and any existing default or compliance with any
provision of the Indenture or the Debentures may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding
Debentures. Without the consent of any Holder of a Debenture, the Indenture or
the Debentures may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Debentures in addition to or in
place of certificated Debentures, to provide for the assumption of Holdings'
obligations to Holders of the Debentures in case of a merger or consolidation,
to make any change that would provide any additional rights or benefits to the
Holders of the Debentures or that does not adversely affect the legal rights
under the Indenture of any such Holder, or to comply with the requirements of
the SEC in order to effect or maintain the qualification of the Indenture under
the Trust Indenture Act. Without the consent of the Holders of at least 75% in
principal amount of the Debentures then outstanding (including consents obtained
in connection with a tender offer or exchange offer for such Debentures), no
waiver or amendment to the Indenture may make any change in the provisions of
Section 4.15 of the Indenture that adversely affects the rights of any Holder of
such Debentures.
12. Defaults and Remedies. Events of Default include: (i) default
for 30 days in the payment when due of interest or Liquidated Damages on the
Debentures; (ii) default in payment when due of principal of or premium, if any,
on the Debentures when the same becomes due and payable at maturity, upon
redemption (including in connection with an offer to purchase) or otherwise,
(iii) failure by Holdings to comply with the provisions described under Sections
4.10 or 5.1 of the Indenture or failure by Holdings for 15 days to comply with
the provisions described under Sections 4.7 or 4.9; (iv) failure by Holdings for
60 days after notice to
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<PAGE>
Holdings by the Trustee or the Holders of at least 25% in principal amount of
the Debentures then outstanding to comply with any other agreements in the
Indenture, the Debentures or the Pledge Agreement; (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
Holdings or any of its Subsidiaries (or the payment of which is guaranteed by
Holdings or any of its Subsidiaries), whether such Indebtedness or guarantee now
exists, or is created after the date of the 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 Senior Notes or the Senior Subordinated Notes; (vi)
failure by 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; (vii)
certain events of bankruptcy or insolvency with respect to Holdings, any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary; and (viii) Holdings shall breach any
of the material covenants in Section 7 of the Pledge Agreement or the Pledge
Agreement is held in any judicial proceeding to be unenforceable or invalid or
ceases for any reason to be in full force and effect. If any Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Debentures may declare all the
Debentures to be due and payable immediately. Upon such declaration, the
Accreted Value of (if prior to June 15, 2004) or the principal of and accrued
interest on (if on or after June 15, 2004) all Debentures shall 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
Holdings, any Significant Subsidiary or any group of Subsidiaries that, taken as
a whole, would constitute a Significant Subsidiary, all outstanding Debentures
will become due and payable without further action or notice. Holders of the
Debentures may not enforce the Indenture or the Debentures except as provided in
the Indenture. Subject to certain limitations, Holders of a majority in
principal amount of the then outstanding Debentures may direct the Trustee in
its exercise of any trust or power. The Trustee may withhold from Holders of the
Debentures notice of any continuing Default or Event of Default (except a
Default or
A-8
<PAGE>
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest. The Holders of a
majority in aggregate principal amount of the Debentures then outstanding by
notice to the Trustee may on behalf of the Holders of all of the Debentures
waive any existing Default or Event of Default and its consequences under the
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 Debentures. Holdings is required to deliver to the Trustee
annually a statement regarding compliance with the Indenture, and Holdings is
required upon becoming aware of any Default or Event of Default, to deliver to
the Trustee a statement specifying such Default or Event of Default.
13. Structural Subordination. By acceptance of a Debenture, each
Holder acknowledges and agrees that, upon certain events of bankruptcy of
Holdings and any of its Subsidiaries, as set forth in Sections 6.1(6) and 6.1(7)
of the Indenture, payment of the Accreted Value or the principal of, premium, if
any, and interest on the Debentures shall be subordinated in right of payment to
all obligations of the Company and its Subsidiaries, notwithstanding application
of the doctrine of substantive consolidation.
14. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for Holdings or its Affiliates, and may otherwise deal with Holdings or
its Affiliates, as if it were not Trustee.
15. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, of Holdings, as such, shall not have any liability
for any obligations of Holdings under the Debentures or the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Debenture waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Debentures.
16. Authentication. This Debenture shall not be valid until
authenticated by the manual signature of an authorized signatory of the Trustee
or an authenticating agent.
17. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18. Cusip Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, Holdings has caused
CUSIP numbers to be printed on the Debentures and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is
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<PAGE>
made as to the accuracy of such numbers either as printed on the Debentures or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
19. Additional Rights of Holders of Transfer Restricted Debentures.
In addition to the rights provided to Holders of Debentures under the Indenture,
Holders of Transfer Restricted Debentures shall have all the rights set forth in
the Registration Rights Agreement referred to above.
Holdings will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
SFAC New Holdings, Inc.
520 Lake Cook Road, Suite 550
Deerfield, Illinois 60015
Attention: Secretary
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<PAGE>
Assignment Form
To assign this Debenture, fill in the form below: (I) or (we) assign and
transfer this Debenture to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Debenture on the books of Holdings. The agent may substitute
another to act for him.
Date:_______________________
Your Signature:___________________________________________________
(Sign exactly as your name appears on the face of this Debenture)
Signature Guarantee.
A-11
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Debenture purchased by Holdings
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
|_| Section 4.10 |_| Section 4.15
If you want to elect to have only part of the Debenture purchased by
Holdings pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $______________
Date:_________________ Your Signature:___________________________________
(Sign exactly as your name appears on the Note)
Tax Identification No.:___________________________
Signature Guarantee.
A-12
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF DEBENTURES
Re: 13% [Series A] [Series B] Senior Secured Discount
Debentures due 2009 of Specialty Foods Acquisition
Corporation.
This Certificate relates to $____ principal amount of Debentures
held in *__________ book entry or *______________ definitive form by __________
(the "Transferor").
The Transferor**/:
|_| has requested the Trustee by written order to exchange for its
beneficial interest in the Global Debenture held by the depository a Debenture
or Debentures in definitive, registered form of authorized denominations and an
aggregate principal amount equal to its beneficial interest in such global
Debenture (or the portion thereof indicated above); or
|_| has requested the Trustee by written order to exchange or register the
transfer of a Debenture or Debentures.
In connection with such requests and in respect of each such
Debenture, the Transferor does hereby certify that the Transferor us familiar
with the Indenture relating to the above captioned Debentures and as provided in
Section 2.06 of such Indenture, the transfer of this Debenture does not require
registration under the Securities Act (as defined below) because:*
|_| Such Debenture is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.06(a)(ii)(A) or Section
2.06(d)(i)(A) of the Indenture).
|_| Such Debenture is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act") in reliance on Rule 144A (in satisfaction of Section
2.06(a)(ii)(B), Section 2.06(b)(A) or Section 2.06(d)(i)(B) of the Indenture) or
pursuant to an exemption from registration in accordance with Rule 904 under the
Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section
2.06(d)(i)(B) of the Indenture.)
- --------
2/ Check applicable box.
B-1
<PAGE>
|_| Such Debenture is being transferred in accordance with Rule 144 under
the Securities Act, or pursuant to an effective registration statement under the
Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section
2.06(d)(i)(B) of the Indenture).
|_| Such Debenture is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Securities Act,
other than Rule 144A or Rule 904 under the Securities Act. An Opinion of Counsel
to the effect that such transfer does not require registration under the
Securities Act accompanies this Certificate (in satisfaction of Section
2.06(a)(ii)(C) or Section 2.06(d)(i)(C) of the Indenture).
_________________________________
[INSERT NAME OF TRANSFEROR]
By:______________________________
Date:____________________
B-2
Exhibit 10.5
SFAC AND SFC GROUP TAX SHARING AGREEMENT
TAX SHARING AGREEMENT, made as of June 11, 1999, by and among
Specialty Foods Acquisition Corporation ("SFAC"), Specialty Foods Corporation
("SFC"), SFC Sub, Inc. ("SFC, Sub") and SFAC New Holdings, Inc. ("SFAC
Holdings"). SFAC and all of the direct or indirect domestic subsidiaries of SFAC
which are includible in the consolidated Federal income tax return
("Consolidated Return") of the affiliated group (within the meaning of Section
1504 of the Internal Revenue Code of 1986, as may be amended from time to time
(the "Code")) of which SFAC is the common parent corporation for any fiscal year
ending on or after December 31, 1999, or portion thereof, shall be hereinafter
referred to as the "SFAC Group." SFC, SFC Sub and SFAC Holdings shall be
hereinafter referred to as the "SFC Group." For the purposes of this Agreement,
a "separate consolidated income tax return" of the SFC Group shall refer to a
consolidated income tax return including solely the members of the SFC Group.
WHEREAS, SFAC, SFC and their subsidiaries contemplate a proposed
corporate and financial restructuring transaction (the "Transaction");
WHEREAS, in connection with the Transaction, SFAC and SFC New
Holdings, Inc. ("SFC Holdings") have entered into an assignment and assumption
agreement dated as of June 11, 1999 whereby SFC Holdings has assumed the rights
and liabilities of SFC under the tax sharing agreement dated as of August 16,
1993 between SFAC and SFC;
<PAGE>
2
WHEREAS, simultaneously herewith, SFC Holdings is entering into an
amended and restated tax sharing agreement with SFAC;
WHEREAS, SFAC and SFC wish to provide for payment of the
consolidated Federal income tax and certain state and local tax liabilities of
the SFC Group by SFAC; and
WHEREAS, SFAC and SFC wish to provide for the contribution to such
payment by SFC;
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
covenants and promises herein contained, SFAC, SFC Sub, SFAC Holdings and SFC
agree as follows:
1. Allocation and Payment of Tax
Liability of Members of SFAC Group.
1.1 Each member of the SFC Group agrees to join with SFAC in any
Consolidated Return filed by SFAC for any taxable year (or portion thereof) with
respect to the SFC Group.
1.2 Each member of the SFC Group hereby designates SFAC as its
agent, as long as such member of the SFC Group is a member of the SFAC Group,
for the purpose of taking any and all action necessary or incidental to the
filing of Consolidated Returns. Each member of the SFC Group agrees to furnish
SFAC with any and all information requested by SFAC in order to carry out the
provisions of this Agreement; to cooperate with SFAC in filing any return or
consent contemplated by this Agreement; to take such action as SFAC may request,
including, but not limited
<PAGE>
3
to, the filing of all elections and the filing of requests for the extension of
time within which to file tax returns; and to cooperate in connection with any
refund claim.
1.3 For the fiscal year ended December 31, 1999, and for each
subsequent fiscal year for which this Agreement may remain in effect, SFC shall
be required to pay to SFAC (in the manner provided in Paragraph 1.4 hereof), in
satisfaction of the SFC Group's share of the consolidated Federal income tax
liability (including for all purposes of this Agreement, alternative minimum tax
liability) of the SFAC Group, an amount equal to the product of the actual
consolidated Federal income tax liability of the SFAC Group, as computed by
SFAC, and a fraction, the numerator of which is the Federal income tax liability
that would have been payable by the SFC Group for such year if it had filed a
separate consolidated income tax return for such year and all prior years,
taking into account the adjustments provided for in Treasury Regulation ss.
1.1552-1(a)(2)(ii), and the denominator of which is the sum of such Federal
income tax liability and the (positive) Federal income tax liabilities of all
other members of the SFAC Group computed on a similar basis for such year;
provided, however, that SFC shall not be required to pay to SFAC for any fiscal
year an amount greater than the Federal income tax liability the SFC Group would
have incurred for such year if it had filed a separate consolidated income tax
return for such year and all prior years during which this Agreement is in
effect.
1.4 SFC shall make payment to SFAC of any amount allocated to it
pursuant to this Section 1.4, and SFAC shall have sole responsibility for making
any required payments to the Internal Revenue Service (the "IRS") in
satisfaction of the consolidated Federal income tax liability of the SFAC Group
(including the SFC
<PAGE>
4
Group) for each fiscal year. SFAC shall provide notice to SFC, in accordance
with Section 12 hereof, of any and all amounts allocated to SFC pursuant to this
Section 1.4 no later than ten (10) days prior to the date on which such payment
is due under this Section 1.4. For each quarter of each fiscal year after the
year ended December 31, 1999, SFC, as long as SFC is a member of the SFAC Group,
shall make payment to SFAC of an amount, determined by SFAC and communicated to
SFC in a notice given in accordance with Section 12 hereof no later than five
(5) days prior to the date on which such payment is due under this Section 1.4,
equal to the product of the installment payment of estimated Federal income tax
that the SFAC Group is required to pay to the IRS for such quarter under Section
6655 of the Code and a fraction, the numerator of which is the amount of the
installment payment of estimated Federal income tax that the SFC Group would
have been required to pay to the IRS for such quarter under Section 6655 of the
Code if the SFC Group were filing a separate consolidated income tax return for
such taxable year, taking into account the adjustments provided for in Treasury
Regulation ss. 1.1552-1(a)(2)(ii), ("Separate Return Installment") and the
denominator of which is the sum of the installment payments of Federal income
tax of each member of the SFAC Group for such quarter determined on such a
separate income tax return method; provided, however, that SFC shall not be
required to make any payment to SFAC pursuant to this Section 1.4 for any
quarter in an amount greater than its Separate Return Installment for such
quarter. Payments pursuant to this Section 1.4 shall be made no later than the
fifth day prior to the due date of an estimated Federal income tax payment or,
if later, the fifth day after notice of the amount of such payment is given by
SFAC. The amount
<PAGE>
5
of any overpayment or underpayment pursuant to this Section 1.4 shall be
credited against or added to, as the case may be, the amount otherwise required
to be paid for the fiscal quarter within which the amount of such overpayment or
underpayment first becomes reasonably ascertainable, and, in the case of any
such underpayment, notice is provided to SFC by SFAC; provided, however, that,
upon written request (including supporting schedules) of SFC, made after the
close of any fiscal year but within the period described in Section 6425(a)(1)
of the Code, SFAC shall repay to SFC, within the period described in Section
6425(b)(1) of the Code, the amount of any net remaining overpayment of
consolidated tax liability made by SFC for such year.
1.5 For the fiscal year ended December 31, 1999, and for each
subsequent fiscal year for which this Agreement may remain in effect, each of
SFC Sub and SFAC Holdings shall be required to pay to SFC (in the manner
provided in Section 1.6 hereof), as a payment in lieu of SFC Sub's and SFAC
Holding's respective share of the consolidated Federal income tax liability and
alternative minimum tax liability of the SFAC Group, an amount equal to the
Federal income tax liability or alternative minimum tax liability that would
have been payable by each of SFC Sub and SFAC Holdings for such year if it had
filed a separate consolidated income tax return for such year and all prior
years ending after the date hereof for itself. In computing such tax liability,
each of SFC Sub and SFAC Holdings shall be entitled to take into account
deductions and credits attributable to the carryover or carryback of any losses
or credits of each of SFC Sub and SFAC Holdings, respectively, but only after
taking into account any limitations actually imposed on the
<PAGE>
6
use of such losses and credits (including, but not limited to, limitations
imposed pursuant to Section 172, 382, 383, 384, 904, 1212 or 1502 of the Code or
the regulations thereunder). Payments shall be required to be made in each
fiscal year pursuant to this Section 1.6 without regard to the actual
consolidated Federal income tax liability, if any, of the SFC Group or the SFAC
Group for such year.
1.6 Each of SFC Sub and SFAC Holdings shall make payment to SFC of
any amount allocated to it pursuant to this Section 1.5, and SFC shall have sole
responsibility for making any required payments to SFAC with respect to the
consolidated Federal income tax liability of the SFC Group for each fiscal year.
For each quarter of each fiscal year to which this agreement applies, each of
SFC Sub and SFAC Holdings, as long as it is a member of the SFC Group, shall
make payment to SFC of an amount equal to the amount of the installment payment
of estimated Federal income tax and alternative minimum tax that each would have
been required to pay to the IRS for such quarter under Section 6655 of the Code
if it were filing a separate consolidated income tax return for such taxable
year for itself, no later than the fifth day prior to the date an estimated
Federal income tax payment is due. The amount of any overpayment or underpayment
pursuant to this Section 1.5 shall be credited against or added to, as the case
may be, the amount otherwise required to be paid for the fiscal quarter within
which the amount of such overpayment or underpayment first becomes reasonably
ascertainable; provided, however, that, upon written request (including
supporting schedules) of SFC Sub or SFAC Holdings, made after the close of any
fiscal year but within the period described in Section 6425(a)(1) of the Code,
SFC shall repay to SFC Sub or SFAC Holdings, as the case may be,
<PAGE>
7
within the period described in Section 6425(b)(1) of the Code, the amount of any
net remaining overpayment of consolidated tax liability made by it for such
year.
2. Adjustments.
Any adjustment of income, deduction or credit of any party to this
Agreement that results after the fiscal year in question by reason of any
carryback, amended return, claim for refund or audit shall be given effect by
redetermining amounts payable and reimbursable for such fiscal year hereunder as
if such adjustment had been part of the original determination hereunder,
whether such adjustment relates to the SFAC Group or any member of the SFC
Group. In the case of a refund, SFAC shall pay to each member of the SFC Group
its share (determined in accordance with the preceding sentence) of the refund
within 20 days after the refund is received, and, in the case of an increase in
tax liability, each member of the SFC Group shall pay to SFAC its share
(determined in accordance with the preceding sentence) of such increased tax
liability within 20 days after receiving notice of such liability from SFAC. If
any interest is to be paid as a result of a consolidated Federal income tax
deficiency or refund, such interest shall be allocated between SFAC and each
member of the SFC Group in the same manner as their shares of the deficiency or
refund. Any penalty imposed with respect to any Consolidated Return filed on
behalf of the SFAC Group shall be the sole responsibility of SFAC.
<PAGE>
8
3. State Taxes.
3.1 Each member of the SFC Group agrees, at the request of SFAC, to
join with SFAC or any direct or indirect subsidiary of SFAC in any combined or
consolidated state or local income or franchise tax return ("Combined Return")
for any taxable year for which SFAC or any such direct or indirect subsidiary of
SFAC files a Combined Return that may include any member of the SFC Group.
3.2 If, at any time from and after the date of this Agreement, the
liability for any state or local income or franchise tax of any member of the
SFC Group and SFAC or any other direct or indirect subsidiary of SFAC is
determined on a consolidated or combined basis, this Agreement shall be applied
in like manner to all matters relating to such taxes.
4. Adjudications.
In any audit, conference, or other proceeding with the IRS or the
relevant state or local authorities, or in any judicial proceedings concerning
the determination of the Federal income tax liability of the SFAC Group
(including any of the members of the SFC Group) or the state or local income tax
liability of any combined or consolidated group including any member of the SFAC
Group in addition to any member of the SFC Group, SFAC and each relevant member
of the SFC Group shall be represented by persons selected by SFAC. The
settlement and terms of settlement of any issues relating to such proceeding
shall be in the sole discretion of SFAC, and each member of the SFC Group hereby
appoints SFAC as its agent for the purposes of proposing and concluding any such
settlement.
<PAGE>
9
5. Entire Agreement; Assignment.
This Agreement embodies the entire understanding between the parties
relating to its subject matter and supersedes and terminates all prior
agreements and understandings among the parties with respect to such subject
matter.
6. Termination.
This Agreement may be terminated at any time upon mutual agreement
of the parties hereto; provided, however, that such termination shall not
relieve SFAC or any member of the SFC Group of any obligations pursuant to
Sections 1.4, 1.6, 2 and 3 hereof.
7. Effective Date.
This Agreement shall be effective for the taxable year of the SFAC
Group ended December 31, 1999, and for all taxable years thereafter.
8. Captions.
All section captions contained in this Agreement are for convenience
only and shall not be deemed a part of this Agreement.
9. Counterparts.
This Agreement may be executed in counterparts, each of which shall
constitute an original and all of which, when taken together, shall constitute
one agreement.
<PAGE>
10
10. Governing Law.
This Agreement shall be governed by the laws applicable to contracts
entered into and to be fully performed within the State of New York by residents
thereof.
11. Successors and Assigns.
This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns.
12. Notices.
Any payment, notice or communication required or permitted to be
given under this Agreement shall be in writing (including telegraphic, telecopy,
telex, facsimile transmission or cable communication) and mailed, telegraphed,
telecopied, telexed, faxed, cabled or delivered:
If to SFAC, to it at:
Specialty Foods Acquisition Corporation
520 Lake Cook Road, Suite 550
Deerfield, IL 60015
Attention: Robert B. Haas
Telecopy: (847) 405-5310
If to SFC, to it at:
Specialty Foods Corporation
520 Lake Cook Road, Suite 550
Deerfield, IL 60015
Attention: Robert B. Haas
Telecopy: (847) 405-5310
<PAGE>
11
If to SFC, Sub, to it at:
SFC Sub, Inc.
520 Lake Cook Road, Suite 550
Deerfield, IL 60015
Attention: Robert B. Haas
Telecopy: (847) 405-5310
If to SFAC Holdings, to it at:
SFAC New Holdings, Inc.
520 Lake Cook Road, Suite 550
Deerfield, IL 60015
Attention: Robert B. Haas
Telecopy: (847) 405-5310
or to such other address as a party shall furnish in writing in a notice
similarly given to the other parties. All such notices and communications shall
be deemed given (i) if mailed, four days after the date of mailing, or (ii) when
delivered to the telegraph company, transmitted by telecopier, confirmed by
telex answerback, sent by facsimile transmission, or delivered to the cable
company, respectively.
13. No Third-Party Beneficiaries.
Nothing in this document shall be deemed to create any right in any
person not a party hereto and this instrument shall not be construed in any
respect to be a contract in whole or in part for the benefit of any third party
except as aforesaid.
<PAGE>
12
IN WITNESS WHEREOF, SFAC and SFC Holdings have executed this
Agreement as of the day and year first above written.
SPECIALTY FOODS ACQUISITION CORPORATION
By: /s/ Sean M. Stack
--------------------------------------------
Name: Sean M. Stack
Title: Vice President, Treasurer & Assistant
Secretary
SPECIALTY FOODS CORPORATION
By: /s/ Sean M. Stack
--------------------------------------------
Name: Sean M. Stack
Title: Vice President, Treasurer & Assistant
Secretary
SFC SUB, INC.
By: /s/ Sean M. Stack
--------------------------------------------
Name: Sean M. Stack
Title: Vice President, Treasurer & Assistant
Secretary
SFAC NEW HOLDINGS, INC.
By: /s/ Sean M. Stack
--------------------------------------------
Name: Sean M. Stack
Title: Vice President, Treasurer & Assistant
Secretary
Exhibit 10.72
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (the "Agreement") is entered into as of
June 11, 1999, among SFAC New Holdings, Inc., a Delaware corporation (the
"Company"), SFC Sub, Inc., a Delaware corporation, and each holder of record of
Debentureholder Common Stock (hereinafter defined) who may hereafter execute
this Agreement or a separate agreement to be bound by the terms hereof (such
holders of record of Debentureholder Common Stock who may hereafter execute this
Agreement or a separate agreement to be bound by the terms hereof are sometimes
in this Agreement each individually referred to as a "Stockholder" and
collectively referred to as the "Stockholders");
W I T N E S S E T H :
WHEREAS, the Company, a Delaware corporation, is a holding company
which directly owns all of the issued and outstanding capital stock of SFC New
Holdings, Inc.;
WHEREAS, the authorized capital stock of the Company consists of
320,000 shares of common stock, no par value per share (the "Common Stock");
WHEREAS, the Company has made an offer to exchange its 13% Senior
Secured Discount Debentures due 2009 (the "New 13% Debentures") and an aggregate
of up to 31,925 shares of Common Stock for all the outstanding 13% Senior
Secured Discount Debentures due 2005 of Specialty Foods Acquisition Corporation,
a Delaware corporation (such holders of New 13% Debentures who receive such
shares of Common Stock are hereinafter referred to as holders of the
"Debentureholder Common Stock");
WHEREAS, the Stockholders have agreed, inter alia, to restrict the
transfer of their Debentureholder Common Stock and the Company has agreed to
provide certain registration rights in respect of the Debentureholder Common
Stock.
NOW, THEREFORE, in consideration of the covenants and agreements
herein, the parties hereto agree as follows:
<PAGE>
2
ARTICLE I
TRANSFERS OF SECURITIES
1.1 Transfer of Debentureholder Common Stock. No Stockholder shall
transfer or encumber (voluntarily or involuntarily) any Debentureholder Common
Stock except as provided in this Section 1.1:
(a) A Stockholder may transfer shares of Debentureholder
Common Stock (i) pursuant to Section 1.1(b) or (c), or (ii) to an Affiliate of
such Stockholder, provided that such transfer to an Affiliate is not made with a
view to circumventing the provisions of this Section 1.1, and provided further
that such Stockholder shall not transfer control of any such Affiliate so long
as it holds Debentureholder Common Stock to a person or entity which is not an
Affiliate of such Stockholder without first reacquiring such shares of
Debentureholder Common Stock or complying with the terms of Section 1.1(b). For
purposes of this Agreement, an "Affiliate" of a Stockholder shall mean (A) in
all cases, any person or entity controlling, controlled by or under common
control with such Stockholder, including a general partner of such Stockholder
which is a partnership and to the extent not otherwise described in this clause
(A), co-investment entities established by any Stockholder within 90 days of the
date the Stockholder acquires Debentureholder Common Stock and controlled by
such Stockholder, any affiliated party (including any officer or director) of
such Stockholder or of the general partner of such Stockholder (or of the
general partner of any general partner of such Stockholder) and any combination
of the foregoing and (B) with respect to an individual Stockholder or individual
Affiliate thereof, the spouse or children of such Stockholder or Affiliate or a
trust established for the benefit of any of the foregoing which trust is
controlled by such Stockholder or Affiliate or the estate of such Stockholder or
Affiliate. Any Stockholder (1) may transfer shares of Debentureholder Common
Stock to an entity the beneficial interest of which is held solely by officers
or employees of such Stockholder and its Affiliates; provided that no such
transfer shall be effective until such prospective transferee has delivered to
the Company a written agreement in form and substance satisfactory to the
Company that the Debentureholder Common Stock to be received by such prospective
transferee is subject to all of the provisions of this Agreement and that such
prospective transferee is bound hereby, (2) may, if it is a partnership,
transfer shares of Debentureholder Common Stock to its general and limited (if
any) partners pursuant to a dissolution of such partnership or with the consent
of the Company (which consent shall not be unreasonably withheld) provided that
prior to any such dissolution an entity shall be designated as nominee for
notice purposes only for all transferee partners (and their successors and
assigns) and thereafter all notices with respect to this Agreement to such
transferees (and their successors and assigns) shall be sent to such nominee and
all notices with respect to this Agreement on behalf of such transferees (and
their successors and assigns) shall only be valid if received from such nominee;
and provided further that any such transferee (and their successors and assigns)
shall no longer be considered Affiliates
<PAGE>
3
of each other or of any other party to this Agreement merely by reason of having
been a partner in the dissolved partnership or by reason of the nominee
arrangement described above. Any transfer pursuant to this Section 1.1(a) shall
comply with Section 1.1(d) and (e) and Section 1.4.
(b) Right of First Offer. (i) Notwithstanding any other
provision of this Agreement, at any time, and from time to time, any Stockholder
(the "Selling Stockholder") shall have the right to offer to sell all or any
portion of his Debentureholder Common Stock to the Company ( a "Company Offer"),
in its sole discretion; provided that the Selling Holder shall have first
received a bona fide third party offer. In the event that a Stockholder elects
to exercise its rights under this Section 1.1(b), such Stockholder shall provide
written notice to the Company of the terms of its Company Offer ( the "Company
Offer Notice"). The Company Offer Notice shall set forth the number of shares of
Debentureholder Common Stock offered to be sold, the price per share, and other
proposed terms, if any, relating to such sale. Upon receipt of the Company Offer
Notice, the Company shall be entitled to purchase all, but not less than all, of
the Offered Shares upon the terms and conditions set forth in the Company Offer
Notice. Any transfer pursuant to this Section 1.1(b)(i) shall comply with
Section 1.1(b)(ii).
(ii) The Company Offer may be accepted within 25 days of
receipt of the Company Offer Notice (the "Company Offer Option Period") on
the terms and conditions set forth in the Company Offer Notice. If the
Company gives such written notice within the Company Offer Option Period,
then the Selling Stockholder shall be obligated to sell to the Company,
and the Company shall be obligated to purchase from the Selling
Stockholder, the shares subject to the Company Offer Notice at the price
and on the terms and conditions set forth in the Company Offer Notice
within 25 days of such acceptance. If the Company does not give written
notice to the Selling Stockholder within the Company Offer Option Period,
the Selling Stockholder shall be free to sell such shares to such third
party at a price equal to or greater than the price contained in the
Company Offer Notice, provided that (a) such sale is consummated within
120 days following the delivery of the Company Offer Notice or at such
other time and place as the parties to the transaction may agree and (b)
the transferee of the Selling Stockholder agrees to be bound by all of the
terms and provisions of this Agreement.
(iii) The Company may assign its right to purchase
Offered Shares to anyone so long as the Company remains primarily
responsible to the Selling Stockholder for the performance of its
obligations and the obligations of the assignee hereunder.
<PAGE>
4
(c) A Stockholder may transfer shares of Debentureholder
Common Stock in a registered public offering in which holders of Debentureholder
Common Stock have a right to participate pursuant to Exhibit A hereto and,
thereafter, may transfer Debentureholder Common Stock pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended (the "1933 Act"). Any
such shares so transferred will no longer be considered Debentureholder Common
Stock or subject to this Agreement.
(d) Transfers pursuant to Section 1.1(a) shall not be subject
to Section 1.1(b). No transfer of shares of Debentureholder Common Stock
described in Section 1.1(b) may be made unless prior to the consummation
thereof, the Stock holder transferring such shares delivers to the Company a
written agreement of the proposed transferee to become a Stockholder and be
bound by the terms hereof.
(e) In addition, for the purposes of this Section 1.1, any
proposed transfer of an equity interest in a Stockholder which is an entity
formed for the purpose of acquiring shares of Debentureholder Common Stock or
the principal asset of which is shares of Debentureholder Common Stock shall be
deemed to be a proposed transfer of such portion of the shares of
Debentureholder Common Stock owned by such Stockholder as corresponds to the
portion of the equity of such Stockholder that has been proposed to be
transferred and such Stockholder agrees not to permit such transfer of such
equity interest unless the transferor offers to the Company rights in respect of
such proposed transfer which are the economic equivalent of their rights under
this Section 1.1; provided, however, that this Section 1.1(e) shall not apply
to: (i) the redemption of an equity interest in a Stock holder, or (ii) a
transfer of an equity interest in a Stockholder to an Affiliate of the
Stockholder who established or organized such Stockholder.
1.2 Drag-Along Rights. (a) So long as this Agreement shall remain in
effect and an initial public offering of the Company's capital stock shall not
have occurred, if at any time the Company receives a proposal to effect a
business combination with another business entity (a "Merger Proposal") that is
not an Affiliate of the Company or its Stockholders and the Board of Directors
of the Company by a majority vote determines to accept such Merger Proposal,
then the Board of Directors of the Company shall be entitled to deliver a
written notice (the "Buyout Notice") with respect to such Merger Proposal to all
of the Stockholders, which notice shall state (i) the intention to effectuate
such transaction, (ii) the name and address of the person or entity making the
Merger Proposal and (iii) the purchase price or other consideration payable in
connection with such Merger Proposal; provided, however, that no Stockholder
shall be required to sell its shares of Debentureholder Common Stock pursuant to
this Section 1.2 if the Company has not received an opinion of an independent
valuator of national standing that such Merger Proposal is fair to the holders
of Debentureholder Common Stock. The Buyout Notice shall also state any other
material terms and conditions of the Merger Proposal and shall include a copy of
all writings, if any, necessary to establish the terms of
<PAGE>
5
such Merger Proposal. Upon receipt of the Buyout Notice, the Stockholders shall
be obligated to sell all of their shares of Debentureholder Common Stock to such
other business entity upon the terms and conditions of the Merger Proposal, with
the proceeds of any such sale to be divided amongst the holders as if the
Company were being liquidated, and otherwise to take all necessary action to
cause the Company to consummate the proposed transaction, including voting their
shares of Debenture holder Common Stock in favor of (or giving their consent in
writing to) such sale transaction.
(b) The closing of any sale pursuant to this provision shall
be held at the principal office of the Company no more than ninety (90) and no
less than thirty (30) days after delivery of the Buyout Notice or at such other
time and place as the parties to the transaction may agree. The price per share
and form of consideration for sales of Debentureholder Common Stock made
pursuant to this Section 1.2 shall be the same for each holder of
Debentureholder Common Stock in such transaction.
(c) Notwithstanding anything contained in this Section 1.2 to
the contrary, (i) in no event shall any Stockholder be required to make any
representation or warranty in connection with any Merger Proposal that pertains
to matters other than title to the shares of Debentureholder Common Stock and
such Stockholder's capacity, authority or power to consummate or participate in
any Merger Proposal, (ii) all representations and warranties made by any
Stockholder shall be made severally and not jointly and (iii) the aggregate
liability of any Stockholder shall not exceed such Stockholder's net proceeds
from participating in any Merger Proposal.
1.3 Tag-Along Rights. (a) So long as this Agreement shall remain in
effect and an initial public offering of the Company's capital stock shall not
have occurred, if SFC or a Stockholder or Stockholders holding in the aggregate
more than 50% of the shares of Common Stock or Debentureholder Common Stock,
respectively (the "Controlling Shareholder") wishes to transfer all or any
portion of its or their shares of Common Stock to another person or business
entity (the "Third Party Purchaser"), the Controlling Shareholder shall send
written notice (the "Offering Notice") to each holder of shares of
Debentureholder Common Stock (each an "Other Holder" and collectively the "Other
Holders") at least thirty (30) business days prior to the proposed consummation
of such sale, setting forth the name of such Third Party Purchaser, the number
of shares of Common Stock proposed to be transferred by the Controlling
Shareholder (for purposes of this section, the "Offered Shares"), the proposed
amount and form of consideration and terms and conditions of payment offered by
such Third Party Purchaser, the percent of Debentureholder Common Stock that
such Other Holder may sell to such Third Party Purchaser (determined as set
forth below) and a representation that such Third Party Purchaser has been
informed of the "tag-along" rights (provided for in this Section 1.3) and has
agreed to
<PAGE>
6
purchase shares of Debentureholder Common Stock in accordance with the terms
thereof.
(b) Upon receipt of the Offering Notice, the Other Holders
shall have the right to sell to such Third Party Purchaser, upon the terms and
subject to the conditions set forth in the Offering Notice, that number of
shares of Debentureholder Common Stock equal to the product of (x) the aggregate
number of Offered Shares and (y) a fraction with a numerator equal to the number
of shares of Debentureholder Common Stock that such Other Holders own and a
denominator equal to the number of shares of Common Stock then owned by the
Controlling Shareholder plus the total number of shares of Debentureholder
Common Stock then owned by all Other Holders. If such Third Party Purchaser
fails to purchase shares of Debentureholder Common Stock from any Other Holder
that has properly exercised its tag-along rights, then the Controlling
Shareholder shall not be permitted to consummate the proposed sale of the
Offered Shares, and any such attempted sale shall be null and void. The
Controlling Shareholder shall effect the sale of the Offered Shares and the
number of Offered Shares to be sold to such Third Party Purchaser by the
Controlling Shareholder shall be reduced accordingly. The tag-along rights
provided herein must be exercised by each Other Holder within fifteen (15)
business days following its receipt of the Offering Notice, by delivery of a
written notice to the Controlling Shareholder indicating such Other Holder's
intention to exercise its rights and specifying the number of shares of
Debentureholder Common Stock (up to the maximum number of shares of
Debentureholder Common Stock owned by such Other Holder required to be purchased
by such Third Party Purchaser) it wishes to sell.
(c) In order to exercise its right to sell shares of
Debentureholder Common Stock to the Third Party Purchaser, each Other Holder
must agree to make substantially the same representations, warranties,
covenants, indemnities and other similar agreements, with respect to its title
to the shares of Debentureholder Common Stock and such Other Holder's capacity,
authority or power to consummate or participate in such proposed sale to a Third
Party Purchaser, as the Controlling Shareholder makes in connection with the
proposed sale by it of Offered Shares to the Third Party Purchaser; provided
that all representations and warranties shall be made several and not jointly,
and provided further that with respect to such representations, warranties and
agreements of Other Holders, the aggregate amount of such liability arising
therefrom shall not exceed such Other Holder's net proceeds from participating
in such sale.
1.4 Transfers Subject to Compliance with Securities Laws. No shares
of Debentureholder Common Stock may be transferred by any Stockholder (other
than pursuant to an effective registration statement under the 1933 Act) unless
such Stockholder first delivers to the Company an opinion of counsel, reasonably
satisfactory to the Company, to the effect that such transfer is not required to
be registered under the 1933 Act.
<PAGE>
7
ARTICLE II
REGISTRATION OF DEBENTUREHOLDER COMMON STOCK
2.1 Registration Rights. The Company hereby grants to each
Stockholder registration rights with respect to the shares of Debentureholder
Common Stock on the terms set forth in Schedule A hereto. All references to
"this Agreement" contained herein are hereby deemed to include such Schedule A.
ARTICLE III
STOCKHOLDER LISTS
3.1 Stockholder Lists. Upon the written request of any Stockholder,
the Company shall provide to such Stockholder, within 10 business days of the
Company's receipt of such request, given in the manner provided in Section 5.7,
a list of all then current holders of the Debentureholder Common Stock together
with address information sufficient to permit the giving of notices hereunder.
ARTICLE IV
TERMINATION
4.1 Termination. This Agreement shall terminate at the earlier of
(i) , 2009 or (ii) any date on which the Company and Stockholders owning 50%
or more of the outstanding shares of Debentureholder Common Stock agree in
writing to such termination.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of the holders of
Debenture Holder Common Stock that:
5.1 Due Incorporation. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
5.2 Authority to Execute and Perform Agreement. This Agreement has
been duly executed and delivered by and is the valid and binding obligation of,
the Company, enforceable in accordance with its terms, except to the extent that
its
<PAGE>
8
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (regardless of whether enforcement
is sought in a proceeding at law or in equity).
ARTICLE VI
MISCELLANEOUS
6.1 Amendment. This Agreement may be altered or amended only with
the consent of the Company and Stockholders owning 50% or more of the
outstanding shares of Debentureholder Common Stock.
6.2 Transactions with Affiliates. The Company shall not, and shall
not permit its subsidiaries to, enter into any transactions with any Stockholder
or any Affiliate of any Stockholder (other than transactions contemplated by
this Agreement) without the prior written consent of a majority of the members
of the Board not appointed by such Stockholder or its Affiliates.
6.3 Specific Performance. The parties recognize that the obligations
imposed on them in this Agreement are special, unique and of extraordinary
character, and that in the event of breach by any party, damages will be an
insufficient remedy; consequently, it is agreed that the parties hereto may have
specific performance (in addition to damages) as a remedy for the enforcement
hereof, without proving damages.
6.4 Assignment. Except as other provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors of the parties hereto; provided, however, that this
Agreement may not be assigned by any party without the prior written consent of
the Stockholders except that (i) the Company may assign its rights herein to any
successor to all or substantially all its assets (by merger or otherwise), (ii)
each Stockholder may assign its or his rights to any transferee of any or all of
such Stockholder's Debentureholder Common Stock pursuant to Section 1.1(a) or
1.1(b) hereof who becomes a party to this Agreement, and (iii) each
Stockholder's rights under Sec tion 2.1 shall inure to the benefit of any holder
of Registrable Securities as defined in Exhibit A. Any assignment of rights
hereunder shall be coupled with the assumption by the assignee of all of the
obligations of the assignor hereunder and shall thereby relieve such assignor of
such obligations. Any purported assignment made in violation of this Section 6.4
shall be void and of no force and effect.
6.5 Shares Subject to this Agreement. All shares of Debenture holder
Common Stock of the Company now owned or hereafter acquired by the Stockholders
shall be subject to the terms of this Agreement.
<PAGE>
9
6.6 Legend. A copy of this Agreement shall be filed with the
Secretary of the Company and kept with the records of the Company. Each
certificate representing Debentureholder Common Stock now held or hereafter
acquired by any Stockholder shall, for as long as this Agreement is effective,
bear legends substantially in the following forms:
THE SALE, ASSIGNMENT, HYPOTHECATION, PLEDGE, ENCUMBRANCE OR OTHER
DISPOSITION (EACH A "TRANSFER") OF ANY OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF THE STOCKHOLDERS'
AGREEMENT, DATED AS OF JUNE 11, 1999, AMONG THE COMPANY, SFC SUB, INC. AND
THE STOCKHOLDERS NAMED THEREIN, A COPY OF WHICH MAY BE INSPECTED AT THE
COMPANY'S PRINCIPAL OFFICE. THE COMPANY WILL NOT REGISTER THE TRANSFER OF
SUCH SECURITIES ON THE BOOKS OF THE COMPANY UNLESS AND UNTIL THE TRANSFER
HAS BEEN MADE IN COMPLIANCE WITH THE TERMS OF SUCH STOCKHOLDERS'
AGREEMENT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE. SUCH SECURITIES MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
Such certificate shall bear any additional endorsement which may be
required for compliance with state securities or blue sky laws.
6.7 Notices. Any and all notices, designations, consents, offers,
acceptances, or any other communication provided for herein shall be given in
writing and deemed received when delivered by overnight courier or hand
delivery, or when sent by facsimile transmission which shall be addressed, or
sent, as follows:
SFAC New Holdings, Inc.
520 Lake Cook Road, Suite 550
Deerfield, IL 60015
Fax No. (847) 405-5310
with a copy to:
Mitchell S. Fishman, Esq.
<PAGE>
10
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Fax No. (212) 757-3990
And in the case of any other Stockholder such address as such
Stockholder shall specify upon becoming party hereto or bound
hereby;
or, in each case, such other address as the Stockholder shall specify to the
Company and the other parties hereto.
6.8 Counterparts. This Agreement may be executed in one or more
counterparts and each counterpart shall be deemed to be an original and which
counterparts together shall constitute one and the same agreement of the parties
hereto.
6.9 Section Headings. Headings contained in this Agreement are
inserted only as a matter of convenience and in no way define, limit or extend
the scope or intent of this Agreement or any provisions hereof.
6.10 Choice of Law. This Agreement shall be governed by the internal
laws of the State of Delaware.
6.11 Entire Agreement. This Agreement (including Schedule A attached
hereto), executed by the parties hereto, dated the date hereof, relating to the
transfer of Debentureholder Common Stock contains the entire understanding of
the parties hereto respecting the subject matter hereof and thereof and
supersedes all prior and contemporaneous agreements, discussions, and
understandings with respect to such subject matters.
6.12 Cumulative Rights. The rights of the Company under this
Agreement are cumulative and in addition to all similar and other rights of the
Company under other agreements with the Stockholders and others.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
SFAC NEW HOLDINGS, INC.
By: /s/ Sean M. Stack
--------------------------------------
Name: Sean M. Stack
Title: Vice President, Treasurer
and Assistant Secretary
SFC SUB, INC.
By: /s/ Sean M. Stack
--------------------------------------
Name: Sean M. Stack
Title: Vice President, Treasurer
and Assistant Secretary
Holders of Debentureholder Common
Stock as set forth on Schedule 1
By:
--------------------------------------
Name:
Title:
<PAGE>
Exhibit A
This Schedule A is a part of and is incorporated into that certain
Stockholders Agreement (the "Stockholders Agreement"), dated as of June 11, 1999
between SFAC New Holdings, Inc., a Delaware corporation (the "Company"), SFC
Sub, Inc., a Delaware corporation and each holder of record of Debentureholder
Common Stock. Capitalized terms used in this Exhibit A and not otherwise defined
shall have the meanings ascribed to them in the Stockholders Agreement. Certain
capitalized terms used herein are defined in Section 8 of this Exhibit A.
1. Registration on Demand.
1.1 Demand. At any time after the fifth anniversary of the
date hereof, one or more Stockholders holding Registrable Debentureholder
Securities (the "Initiating Holders") representing more than 50% of the issued
and outstanding shares of Debentureholder Common Stock may make a written
request that the Company effect the registration under the Securities Act of
1933, as amended (the "1933 Act") of all or part of such Initiating Holders'
Registrable Debentureholder Securities. Subject to Section 1.7, the Company
promptly will give written notice of such demand registration to all other
Stockholders holding Registrable Debentureholder Securities and thereupon will
use its reasonable best efforts to effect, at the earliest possible date, the
registration under the 1933 Act, including by means of a shelf registration
pursuant to Rule 415 under the 1933 Act if so requested in such request, of
(a) the Registrable Debentureholder Securities which the
Company has been so requested to register by such Initiating Holders, and
(b) all other Registrable Debentureholder Securities
which the Company has been requested to register by the other Stockholders
holding Registrable Debentureholder Securities (such holders together with
the Initiating Holders hereinafter are referred to as the "Selling
Holders") by written request given to the Company within 30 days after the
giving of such written notice by the Company, all to the extent necessary
to permit the disposition of the Registrable Debentureholder Securities by
the Selling Holders in the manner preferred by such Selling Holders.
1.2 Registration of Other Securities. Whenever the Company
shall effect a registration pursuant to Section 1.1 hereof, no securities other
than Registrable Debentureholder Securities shall be included among the
securities covered by such registration unless (i) the managing underwriter of
such offering shall have advised each Selling Holder of Registrable
Debentureholder Securities to be covered by such registration in writing that
the inclusion of such other securities would not adversely affect such offering
or (ii) the Selling Holders of not less than 50% of all Registrable
Debentureholder Securities to be covered by such registration shall have
consented in writing to the inclusion of such other securities.
<PAGE>
2
1.3 Registration Statement Form. Registrations under this
Section 1 shall be on such appropriate registration form of the Securities and
Exchange Commission (the "Commission") as shall be reasonably selected by the
Company and reasonably acceptable to a majority in interest of the Initiating
Holders.
1.4 Effective Registration Statement. A registration requested
pursuant to this Section 1 shall not be deemed to have been effected (i) unless
a registration statement with respect thereto has become effective and remained
effective in compliance with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities covered by such registration statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement (unless the failure to so
dispose of such Registrable Securities shall be caused solely by reason of a
failure on the part of the Selling Holders); provided, that except with respect
to any registration statement filed pursuant to Rule 415 under the 1933 Act,
such period need not exceed 135 days, (ii) if after it has become effective,
such registration is interfered with by any stop order, injunction or other
order or requirement of the Commission or other governmental agency or court for
any reason not attributable to the Selling Holders and has not thereafter become
effective, or (iii) if the conditions to closing specified in the underwriting
agreement, if any, entered into in connection with such registration are not
satisfied or waived, other than by a reason solely attributable to the actions
or inactions by the Selling Holders.
1.5 Selection of Underwriters. The underwriter or underwriters
of each underwritten offering of the Registrable Securities so to be registered
shall be selected by the Company assuming such selection is reasonably
acceptable to the Initiating Holders.
1.6 Priority in Requested Registration. If the managing
underwriter of any underwritten offering shall advise the Company in writing
(and the Company shall so advise each Selling Holder of Registrable Securities
requesting registration of such advice) that, in its opinion, the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering, the Company will include in such
registration, to the extent of the number which the Company is so advised can be
sold in such offering, Registrable Debentureholder Securities requested to be
included in such registration, pro rata among the Selling Holders requesting
such registration on the basis of the total number of shares of Registrable
Debentureholder Securities requested to be registered by such holders; provided,
that if the number of Registrable Debentureholder Securities that such managing
underwriter advises can be sold in such offering is less than 75% of the total
number of Registrable Debentureholder Securities requested to be registered by
the Initiating Holders, a majority in interest of the Initiating Holders may
withdraw their written request made pursuant to Section 1.1 and such written
request will not be considered a request for registration pursuant to Section
1.7.
<PAGE>
3
1.7 Limitations on Registration on Request. Notwithstanding
anything in this Section 1 to the contrary, in no event will the Company be
required to effect, in the aggregate, more than one registration pursuant to
this Section 1.
1.8 Expenses. The Company will pay all Registration Expenses
in connection with any registration requested pursuant to this Section 1.
2. Piggyback Registration.
2.1 Right to Include Registrable Securities. If the Company,
at any time following the initial public offering of its Common Stock, proposes
to register any of its Common Stock under the 1933 Act by registration on any
form other than Forms S-4 or S-8, or any successor forms, other than pursuant to
Section 1 hereof, whether or not for sale for its own account, it will each such
time give prompt written notice to all Stockholders holding Registrable
Debentureholder Securities of its intention to do so and of such Stockholders'
rights under this Section 2 at least 45 days prior to the date such registration
is proposed to be consummated. Upon the written request of any Stockholder (a
"Requesting Holder") made as promptly as practicable and in any event within 30
days after the receipt of any such notice (which request shall specify the
Registrable Debentureholder Securities intended to be disposed of by such
Requesting Holder), the Company will use its best efforts to effect the
registration under the 1933 Act of all Registrable Debentureholder Securities
which the Company has been so requested to register by the Requesting Holders
thereof; provided, however, that if, at any time after giving written notice of
its intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each Requesting Holder of Registrable Debentureholder
Securities and (i) in the case of a determination not to register, shall be
relieved of its obligation to register any Registrable Debentureholder
Securities in connection with such registration (but not from any obligation of
the Company to pay the Registration Expenses in connection therewith), without
prejudice, however, to the rights of any holder or holders of Registrable
Debentureholder Securities entitled to do so to cause such registration to be
effected as a registration under Section 1, and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Debentureholder Securities, for the same period as the delay in
registering such other securities. No registration effected under this Section 2
shall relieve the Company of its obligation to effect any registration upon
request under Section 1.
2.2 Priority in Piggyback Registrations. If the managing
underwriter of any underwritten offering shall inform the Company by letter of
its opinion that the number of Registrable Securities requested to be included
in such registration would materially adversely affect such offering, and the
Company has so advised the Requesting Holders in writing, then the Company will
include in such
<PAGE>
4
registration, to the extent of the number of Registrable Securities which the
Company is so advised can be sold in (or during the time of) such offering
without having such material adverse effect, first, all securities proposed by
the Company to be sold for its own account or securities to be registered by the
Company for the accounts of other Persons pursuant to the exercise of demand
registration rights if such securities must be included to prevent a breach of
any applicable registration rights agreement between the Company and such other
Person, but only in such amount and to the extent required by such agreement,
second, Registrable Debentureholder Securities requested to be included in such
registration by the holders thereof pursuant to this Section 2, pro rata among
such holders on the basis of the number of Registrable Debentureholder
Securities requested to be so registered by such holders, and third, all other
securities proposed to be registered.
2.3 Expenses. The Company will pay all Registration Expenses
in connection with any registration effected pursuant to this Section 2.
3. Registration Procedures. If and whenever the Company is required
to use its best efforts to effect the registration of any Registrable Securities
under the 1933 Act as provided in Sections 1 and 2, the Company will, as
expeditiously as possible:
3.1 prepare and within 60 days from the date of notice file
with the Commission the requisite registration statement to effect such
registration and thereafter use its best efforts to cause such registration
statement to become effective as soon as possible thereafter;
3.2 prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities covered by such registration statement until such
time as all of such Registrable Securities have been disposed of in accordance
with the intended methods of disposition by the seller or sellers thereof set
forth in such registration statement;
3.3 furnish to each seller of Registrable Securities covered
by such registration statement, such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the 1933 Act, in conformity with the requirements of the 1933 Act, and such
other documents, as such seller may reasonably request;
<PAGE>
5
3.4 use its best efforts (x) to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities or blue sky laws of such States of the
United States of America where an exemption is not available and as the sellers
of Registrable Securities covered by such registration statement shall
reasonably request, (y) to keep such registration or qualification in effect for
so long as such registration statement remains in effect and (z) to take any
other action which may be reasonably necessary or advisable to enable such
sellers to consummate the disposition in such jurisdictions of the securities to
be sold by such sellers, except that the Company shall not for any such purpose
be required to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this Section 3.4
be obligated to be so qualified or to consent to general service of process in
any such jurisdiction;
3.5 use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved by such
other federal or state governmental agencies or authorities as may be necessary
in the opinion of counsel to the Company and counsel to the seller or sellers of
Registrable Securities to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
3.6 furnish at the effective date of such registration
statement to each seller of Registrable Securities, and each such seller's
underwriters, if any, a signed counterpart of:
(a) an opinion of counsel for the Company, dated the
effective date of such registration statement and, if applicable, the date
of the closing under the underwriting agreement, and
(b) a "comfort" letter dated the effective date of such
registration statement (and, if such registration statement includes an
underwritten public offering, a letter of like kind dated the date of the
closing of the underwriting agreement) signed by the independent public
accountants who have certified the Company's financial statements included
or incorporated by reference in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' comfort letter, with respect to events subsequent to the date of
such financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' comfort letters delivered to the underwriters in
underwritten public offerings of securities and, in the case of the accountants'
comfort letter, such other financial matters, and, in the case of the legal
opinion, such other legal matters, as the underwriters may reasonably request;
<PAGE>
6
3.7 Notify the holders of Registrable Securities and the
managing underwriter or underwriters, if any, promptly and confirm such advice
in writing promptly thereafter:
(i) when the registration statement, the prospectus or
any prospectus supplement related thereto or post-effective amendment to the
registration statement has been filed, and, with respect to the registration
statement or any post-effective amendment thereto, when the same has become
effective;
(ii) of any request by the Commission for amendments or
supplements to the registration statement or the prospectus or for additional
information;
(iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the registration statement or the
initiation of any proceedings by any Person for that purpose; and
(iv) of the receipt by the Company of any notification
with respect to the suspension of the qualification of any Registrable
Securities for sale under the securities or blue sky laws of any jurisdiction or
the initiation or threat of any proceeding for such purpose;
3.8 notify each seller of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act, upon discovery that, or upon the
happening of any event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, in the light of the
circumstances under which they were made, and at the request of any such seller
promptly prepare and furnish to it a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made;
3.9 use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of the registration statement at the earliest
possible moment;
3.10 otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission, and, if required, make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months, but not more
than eighteen months, beginning with the first full calendar month after the
effective date of such
<PAGE>
7
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the 1933 Act and Rule 158 promulgated thereunder, and promptly
furnish to each such seller of Registrable Securities a copy of any amendment or
supplement to such registration statement or prospectus;
3.11 provide and cause to be maintained a transfer agent and
registrar (which, in each case, may be the Company) for all Registrable
Securities covered by such registration statement from and after a date not
later than the effective date of such registration; and
3.12 use its reasonable best efforts to list all Registrable
Securities covered by such registration statement on any national securities
exchange on which Registrable Securities of the same class covered by such
registration statement are then listed (or qualify them for inclusion in the
National Association of Securities Dealers Automated Quotations National Market
System, as the case may be).
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing.
The Company will not file any registration statement or amendment
thereto or any prospectus or any supplement thereto (including such documents
incorporated by reference and proposed to be filed after the initial filing of
the registration statement) to which the holders of at least a majority of the
Registrable Securities covered by such registration statement or the underwriter
or underwriters, if any, shall reasonably object, provided that the Company may
file such document in a form required by law or upon advice of its counsel.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3.7, such holder will
forthwith discontinue such holder's disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable Securities
until such holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3.7 and, if so directed by the Company, will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such holder's possession of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the 1933 Act
pursuant to this Agreement, the Company will give the Selling Holders, the
underwriters and their respective counsel and accountants, the timely
opportunity to participate in the
<PAGE>
8
preparation of such registration statement, each prospectus included therein or
filed with the Commission, and each amendment thereof or supplement thereto, and
will give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be reasonably necessary, in the opinion of each of such Selling Holders
and such underwriters' respective counsel, to conduct appropriate due diligence
within the meaning of the 1933 Act.
5. Rule 144. So long as the Common Stock shall be registered
pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Company will file the reports
required to be filed by it under the Exchange Act and will take such further
action as any Stockholder may reasonably request, all to the extent required
from time to time to enable such Stockholder to sell Registrable Securities
without registration under the 1933 Act within the limitation of the exemptions
provided by Rule 144 or any similar rule or regulation hereafter adopted by the
Commission. Upon the request of any Stockholder, the Company will deliver to
such Stockholder a written statement as to whether it has complied with such
requirements.
6. Hold-Back. (a) Each Stockholder holding Registrable Securities
included in a registration statement hereunder agrees not to effect any public
sale or distribution of shares of Common Stock during the period specified by
the managing underwriter or underwriters of the underwritten offer being made
pursuant to such registration statement (which period shall not exceed seven
days prior to and 120 days following the effective date of such registration
statement), except as part of such registration, if and to the extent reasonably
requested by the Company or such managing underwriter or underwriters.
(b) The Company agrees (x) not to sell, make any short sale
of, loan, grant any option for the purchase of, effect any public sale or
distribution of or otherwise dispose of its equity securities or securities
convertible into or exchangeable or exercisable for any of such securities
during the seven days prior to and the 90 days after any underwritten
registration has become effective, except as part of such underwritten
registration and except pursuant to registrations on Form S-4, S-8 or any
successor or similar forms thereto and (y) to cause each holder of its
securities or any securities convertible into or exchangeable or exercisable for
any of such securities, in each case purchased directly from the Company at any
time after the date of this Agreement (other than in a public offering) to agree
not to sell, make any short sale of, loan, grant any option for the purchase of,
effect any public sale or distribution of or otherwise dispose of such during
such period.
<PAGE>
9
7. Indemnification.
7.1 Indemnification by the Company. The Company will, and
hereby does, indemnify and hold harmless, in the case of any registration
statement filed pursuant to Section 1 or 2, each seller of any Registrable
Securities covered by such registration statement and each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls such seller or any such underwriter
within the meaning of the 1933 Act, and their respective directors, officers,
partners, agents and affiliates, against any losses, claims, damages or
liabilities, joint or several, to which such seller or underwriter or any such
director, officer, partner, agent, affiliate or controlling person may become
subject under the 1933 Act or otherwise, including, without limitation, the fees
and expenses of legal counsel, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the 1933 Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances in which they were made not
misleading, and the Company will reimburse such seller or underwriter and each
such director, officer, partner, agent, affiliate and controlling Person for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such seller or underwriter, as the case may be, specifically stating that it is
for use in the preparation thereof; and provided, further, that the Company
shall not be liable to any Person who participates as an underwriter in the
offering or sale of Registrable Securities or any other Person, if any, who
controls such underwriter within the meaning of the 1933 Act, in any such case
to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such Person's failure to
send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such seller or any such director, officer, partner, agent,
affiliate or controlling person and shall survive the transfer of such
securities by such seller.
<PAGE>
10
7.2 Indemnification by the Sellers. As a condition to
including any Registrable Securities in any registration statement, the Company
shall have received an undertaking satisfactory to it from the prospective
seller of such Registrable Securities, to indemnify and hold harmless (in the
same manner and to the same extent as set forth in Section 7.1) the Company, and
each director of the Company, each officer of the Company and each other Person,
if any, who participates as an underwriter in the offering or sale of such
securities and each other Person who controls the Company or any such
underwriter within the meaning of the 1933 Act, with respect to any statement or
alleged statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company by such seller
specifically stating that it is for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement; provided, however, that the liability of such
indemnifying party under this Section 7.2 shall be limited to the amount of
proceeds received by such indemnifying party in the offering giving rise to such
liability. Such indemnity shall remain in full force and effect, regardless of
any investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such securities
by such seller.
7.3 Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in Section 7.1 or 7.2, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party,
give written notice to the latter of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 7, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it may
wish, to assume the defense thereof, with counsel reasonably satis factory to
such indemnified party; provided, however, that any indemnified party may, at
its own expense, retain separate counsel to participate in such defense.
Notwithstanding the foregoing, in any action or proceeding in which both the
Company and an indemnified party is, or is reasonably likely to become, a party,
such indemnified party shall have the right to employ separate counsel at the
Company's expense and to control its own defense of such action or proceeding
if, in the reasonable opinion of counsel to such indemnified party, (a) there
are or may be legal defenses available to such indemnified party or to other
indemnified parties that are different from or additional to those available to
the Company or (b) any conflict or potential conflict exists between the Company
and such indemnified party that would make such separate representation
advisable; provided, however, that in no
<PAGE>
11
event shall the Company be required to pay fees and expenses under this Section
5 for more than one firm of attorneys in any jurisdiction in any one legal
action or group of related legal actions. No indemnifying party shall be liable
for any settlement of any action or proceeding effected without its written
consent, which consent shall not be unreasonably withheld. No indemnifying party
shall, without the consent of each indemnified party, which consent shall not be
unreasonably withheld, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation or which requires action by the
indemnified party.
(a) Contribution. If the indemnification provided for in
this Section 7 shall for any reason be held by a court to be unavailable to an
indemnified party under Section 7.1 or 7.2 hereof in respect of any loss, claim,
damage or liability, or any action in respect thereof, then, in lieu of the
amount paid or payable under Section 7.1 or 7.2 the indemnified party and the
indemnifying party under Section 7.1 or 7.2 shall contribute to the aggregate
losses, claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating the same), (i) in such
proportion as is appropriate to reflect the relative fault of the Company and
the prospective sellers of Registrable Securities covered by the registration
statement which resulted in such loss, claim, damage or liability, or action or
proceeding in respect thereof, with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action or proceeding in
respect thereof, as well as any other relevant equitable considerations or (ii)
if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as shall be appropriate to reflect the relative benefits
received by the Company and such prospective sellers from the offering of the
securities covered by such registration statement, provided, that for purposes
of this clause (ii), the relative benefits received by the prospective sellers
shall be deemed not to exceed the amount of proceeds received by such
prospective sellers. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any Person who was not guilty of such fraudulent misrepresentation. Such
prospective sellers' obligations to contribute as provided in this Section 5 are
several in proportion to the relative value of their respective Registrable
Securities covered by such registration statement and not joint. In addition, no
Person shall be obligated to contribute hereunder any amounts in payment for any
settlement of any action or claim effected without such Person's consent, which
consent shall not be unreasonably withheld.
7.4 Other Indemnification. Indemnification and contribution
similar to that specified in the preceding subdivisions of this Section 7.4
(with appropriate modifications) shall be given by the Company and each seller
of Registrable Securities with respect to any required registration or other
qualification of securities under any federal or state law or regulation of any
governmental authority other than the 1933 Act.
<PAGE>
12
7.5 Indemnification Payments. The indemnification and
contribution required by this Section 7 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred.
8. Definitions. As used in this Exhibit A, unless the context
otherwise requires, the following terms have the following respective meanings:
"Person" means any individual, firm, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, government (or an agency or political subdivision thereof) or other
entity of any kind.
"Registrable Debentureholder Securities" means shares of
Debentureholder Common Stock, each a "Debentureholder Share", but with respect
to any Debentureholder Share, only until such time as such Debentureholder Share
(i) has been effectively registered under the Act and disposed of in accordance
with the Registration Statement covering it or (ii) has been sold (or is
eligible for sale, which sale is not subject to volume limitations) to the
public pursuant to Rule 144 (or any similar provision then in force) under the
Act.
"Registrable Securities" means shares of Common Stock, no par value
per share, of the Company, each a "Share", but with respect to any Share, only
until such time as such Share (i) has been effectively registered under the Act
and disposed of in accordance with the Registration Statement covering it or
(ii) has been sold (or is eligible for sale, which sale is not subject to volume
limitations) to the public pursuant to Rule 144 (or any similar provision then
in force) under the Act.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Sections 1, 2 or 3, including, without
limitation, all registration and filing fees, all fees of the New York Stock
Exchange, Inc., other national securities exchanges or the National Association
of Securities Dealers, Inc., all fees and expenses of complying with federal
securities or blue sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and disbursements of counsel
for the Company and of its independent public accountants, including the
expenses of "cold comfort" letters required by or incident to such performance
and compliance, any fees and disbursements of underwriters customarily paid by
issuers or sellers of securities (excluding any underwriting discounts or
commissions with respect to the Registrable Securities) and the fees and
expenses of one counsel to the Selling Holders (selected by Selling Holders
representing at least 50% of the Registrable Securities covered by such
registration).
Exhibit 12.1
Specialty Foods Acquisition Corporation
Computation of Ratio of Earnings to Fixed Charges
(in millions, except ratios)
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 March 1999
---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Pre-Tax Income (loss) from continuing operations . (95.4) (244.1) (324.7) (111.9) (106.6) (36.4)
Add:
Goodwill write-down .............................. 0.0 156.8 203.3 0.0 0.0 0.0
Fixed Charged .................................... 120.6 132.8 138.2 142.8 147.3 38.0
------ ------ ------ ------ ------ ------
Earnings as adjusted (A) ............................ 25.2 45.5 16.8 30.9 40.7 1.6
------ ------ ------ ------ ------ ------
Fixed charges:
Interest Expense ................................. 105.6 120.9 126.4 130.1 131.5 34.0
Amortization of deferred debt issuance costs ..... 10.9 7.5 6.1 6.1 10.1 2.9
estimate of interest within rental expense ....... 4.1 4.4 5.7 6.6 5.7 1.1
------ ------ ------ ------ ------ ------
Fixed charges as adjusted (B) ....................... 120.6 132.8 138.2 142.8 147.3 38.1
------ ------ ------ ------ ------ ------
Ratio of earnings to fixed charges (A) divided by (B) 0.21(1) 0.34(1) 0.12(1) 0.22(1) 0.28(1) 0.04(1)
------ ------ ------ ------ ------ ------
(1) deficiency ...................................... (95.4) (87.3) (121.4) (111.9) (106.6) (36.4)
------ ------ ------ ------ ------ ------
</TABLE>
Exhibit 21.1
List of Subsidiaries of SFAC New Holdings, Inc.
SFC New Holdings, Inc.
Metz Baking Company (Iowa)
Metz Baking Company (Delaware)
The Clear Lake Bakery, Inc.
Grocers Baking Company
GWI Holdings, Inc.
GWI, Inc.
MA Holdings, LLC
Mother's Cake & Cookie Co.
Archway Cookies, LLC
Pacific Coast Baking Co., Inc.
Belsea Holdings, Inc.
GSFBC Holdings, Inc.
LANG Holdings, Inc.
GBC Holdings, Inc.
OFBC Holdings, Inc.
SEM Holdings, Inc.
Former VB Holdings, Ltd.
SFFB Holdings, Inc.
SanFran FB, Inc.
Andre-Boudin Bakeries, Inc.
Fisherman's Wharf Sourdough French Bread Bakeries, Inc.
Boudin International, Inc.
Laura Todd of America
Steve's Drayage
A. Trocano Construction, Inc.
Gelsi, Inc.
Pane Corporation
San Francisco Bay Area Equipment and Supply
SanFran SB Holdings, Inc.
PBI Holdings, Inc.
San Francisco Baking Cultures
SFSC, Inc.
Larraburu Bakery
Exhibit 23.1
Consent of KPMG LLP
The Board of Directors
SFAC New Holdings, Inc.:
We consent to the inclusion herein of our report dated March 19, 1999 relating
to the consolidated balance sheets of Specialty Foods Acquisition 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, and related
schedule, and to the reference to our firm under the heading "Experts" in the
prospectus.
/s/ KPMG LLP
Chicago, Illinois
July 15, 1999
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
--------------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) _______
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UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I. R. S. Employer
if not a U. S. national bank) Identification No.)
114 West 47th Street 10036-1532
New York, New York (Zip Code)
(Address of principal
executive offices)
--------------------------
SFAC New Holdings, Inc.
(Exact name of obligor as specified in its charter)
Delaware 52-2173534
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
520 Lake Cook Road 60015
Suite 550 (Zip code)
Deerfield, IL
(Address of principal executive offices)
--------------------------
13% Senior Secured Discount Debentures
(Title of the indenture securities)
<PAGE>
-2-
GENERAL
1. General Information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with the Obligor
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
SFC New Holdings, Inc., SFC Sub Inc., SFAC New Holdings, Inc., Specialty
Foods Corporation and Specialty Foods Acquisition Corporation currently
are not in default under any of its indentures. Accordingly, responses to
Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15 of Form T-1 are not
required under General Instruction B.
16. List of Exhibits
T-1.1 -- Organization Certificate, as amended, issued by the
State of New York Banking Department to transact
business as a Trust Company, is incorporated by
reference to Exhibit T-1.1 to Form T-1 filed on
September 15, 1995 with the Commission pursuant to the
Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE>
-3-
16. List of Exhibits
(cont'd)
T-1.4 -- The By-Laws of United States Trust Company of New York,
as amended, is incorporated by reference to Exhibit
T-1.4 to Form T-1 filed on September 15, 1995 with the
Commission pursuant to the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990
(Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of
the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee
pursuant to law or the requirements of its supervising
or examining authority.
NOTE
As of July 19, 1999, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States Trust
Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
------------------
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 19th day
of July 1999.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /s/Cynthia Chaney
------------------------
Cynthia Chaney
Assistant Vice President
CC/kk
<PAGE>
Exhibit T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
/s/Gerard F. Ganey
---------------------
By: Gerard F. Ganey
Senior Vice President
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
MARCH 31, 1999
($ IN THOUSANDS)
ASSETS
Cash and Due from Banks $ 139,755
Short-Term Investments 85,326
Securities, Available for Sale 528,160
Loans 2,081,103
Less: Allowance for Credit Losses 17,114
----------
Net Loans 2,063,989
Premises and Equipment 57,765
Other Assets 125,780
----------
Total Assets $3,000,775
==========
LIABILITIES
Deposits:
Non-Interest Bearing $ 623,046
Interest Bearing 1,875,364
----------
Total Deposits 2,498,410
Short-Term Credit Facilities 184,281
Accounts Payable and Accrued Liabilities 126,652
----------
Total Liabilities $2,809,343
==========
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 53,041
Retained Earnings 121,759
Unrealized Gains on Securities
Available for Sale (Net of Taxes) 1,637
----------
Total Stockholder's Equity 191,432
----------
Total Liabilities and
Stockholder's Equity $3,000,775
==========
I, Richard E. Brinkmann, Managing Director & Comptroller of the named bank do
hereby declare that this Statement of Condition has been prepared in conformance
with the instructions issued by the appropriate regulatory authority and is true
to the best of my knowledge and belief.
Richard E. Brinkmann, Managing Director & Controller
May 18, 1999
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