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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 26, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 19367
AMERISERVE FOOD DISTRIBUTION, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 75-2296149
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
15305 DALLAS PARKWAY, SUITE 1600 (972) 364-2000
P.O. BOX 9016 (Registrant's Telephone Number,
ADDISON, TX 75001-9016 Including Area Code)
(Address of Principal Executive Offices)
</TABLE>
Former name, address and fiscal year, if changed since last report:
14841 Dallas Parkway, Dallas, Texas 75240
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
All shares of the registrant's common stock are held by one affiliate. As
of November 10, 1998, there were 600 shares of common stock of the registrant
outstanding.
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AMERISERVE FOOD DISTRIBUTION, INC.
FORM 10-Q INDEX
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of September
26, 1998 and December 27, 1997........................ 3
Condensed Consolidated Statements of Operations for the
three and nine months ended September 26, 1998 and
September 27, 1997.................................... 4
Condensed Consolidated Statements of Cash Flows for the
nine months ended September 26, 1998 and September 27,
1997.................................................. 5
Notes to Condensed Consolidated Financial Statements... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................. 17
Item 2. Changes in Securities............................. 17
Item 3. Defaults Upon Senior Securities................... 17
Item 4. Submission of Matters to a Vote of Security
Holders................................................ 17
Item 5. Other Information................................. 17
Item 6. Exhibits and Reports on Form 8-K.................. 17
SIGNATURES.................................................. 19
EXHIBITS....................................................
</TABLE>
2
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PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERISERVE FOOD DISTRIBUTION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 26, DECEMBER 27,
1998 1997
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(UNAUDITED)
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Current assets:
Cash and cash equivalents................................. $ 2,975 $ 231,131
Accounts receivable....................................... 36,121 43,625
Undivided interest in accounts receivable trust........... 191,625 154,371
Allowance for doubtful accounts........................... (26,495) (15,566)
Inventories............................................... 275,389 150,148
Other current assets...................................... 32,066 23,768
---------- ----------
Total current assets.............................. 511,681 587,477
Property and equipment, net............................... 187,225 130,856
Intangible assets, net.................................... 1,047,225 737,870
Other noncurrent assets................................... 28,398 6,118
---------- ----------
$1,774,529 $1,462,321
========== ==========
</TABLE>
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
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Current liabilities:
Current portion of long-term debt......................... $ 6,564 $ 5,019
Accounts payable.......................................... 542,661 345,379
Accrued and other current liabilities..................... 168,081 101,219
---------- ----------
Total current liabilities......................... 717,306 451,617
Long-term debt.............................................. 895,361 874,219
Other noncurrent liabilities................................ 99,917 38,430
Stockholder's equity:
Common stock, $.01 par value per share; 10,000 shares
authorized, 600 shares outstanding..................... -- 6
Preferred stock, $.01 par value per share; 10,000 shares
authorized, none outstanding........................... -- --
Additional paid-in capital................................ 224,609 174,603
Accumulated deficit....................................... (162,664) (76,554)
---------- ----------
Total stockholder's equity........................ 61,945 98,055
---------- ----------
$1,774,529 $1,462,321
========== ==========
</TABLE>
See accompanying notes.
Note: The balance sheet at December 27, 1997 has been derived from the
audited financial statement at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
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AMERISERVE FOOD DISTRIBUTION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
SEPTEMBER 26, SEPTEMBER 27, SEPTEMBER 26, SEPTEMBER 27,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales.................................. $2,217,416 $1,232,580 $4,987,365 $1,973,589
Cost of goods sold......................... 2,014,761 1,110,099 4,517,507 1,778,643
---------- ---------- ---------- ----------
Gross profit............................... 202,655 122,481 469,858 194,946
Distribution, selling and administrative
expenses................................. 165,645 90,160 377,689 150,882
Depreciation of property and equipment..... 7,483 5,962 20,030 10,054
Amortization of intangible assets.......... 8,259 4,915 22,318 7,234
Restructuring charges and other unusual
items.................................... 14,649 44,550 61,953 44,550
---------- ---------- ---------- ----------
Operating income (loss).................... 6,619 (23,106) (12,132) (17,774)
---------- ---------- ---------- ----------
Other income (expense):
Interest expense, net...................... (20,914) (17,883) (57,764) (25,125)
Loss on sale of accounts receivable........ (7,135) (2,221) (16,150) (2,221)
Interest income -- affiliates.............. 439 177 757 413
---------- ---------- ---------- ----------
(27,610) (19,927) (73,157) (26,933)
---------- ---------- ---------- ----------
Loss before income taxes................... (20,991) (43,033) (85,289) (44,707)
Provision for income taxes................. 297 1,235 821 606
---------- ---------- ---------- ----------
Loss before extraordinary item............. (21,288) (44,268) (86,110) (45,313)
Extraordinary loss......................... -- 2,156 -- 2,156
---------- ---------- ---------- ----------
Net loss................................... $ (21,288) $ (46,424) $ (86,110) $ (47,469)
========== ========== ========== ==========
</TABLE>
See accompanying notes.
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AMERISERVE FOOD DISTRIBUTION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------
SEPTEMBER 26, SEPTEMBER 27,
1998 1997
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Operating Activities:
Net loss.................................................. $ (86,110) $ (47,469)
Adjustments to reconcile net loss to net cash provided by
(used for) operating activities:
Depreciation and amortization.......................... 42,348 17,288
Impairment of property, equipment and other assets..... 16,462 12,404
Extraordinary loss..................................... -- 2,156
Changes in assets and liabilities...................... (90,270) 35,456
--------- ----------
Net cash provided by (used for) operating activities...... (117,570) 19,835
--------- ----------
Investing Activities:
Business acquired, net of cash acquired................... (313,501) (830,000)
Capital expenditures...................................... (39,347) (8,762)
Net cash transfers to affiliates.......................... (5,207) (8,268)
--------- ----------
Net cash used for investing activities.................... (358,055) (847,030)
--------- ----------
Financing Activities:
Net increase (decrease) in borrowings under credit
facilities............................................. 15,300 (69,100)
Net proceeds from sale of accounts receivable............. 190,000 225,000
Proceeds from capital contribution........................ 50,000 130,000
Proceeds from issuance of long-term debt.................. -- 705,000
Repayments of long-term debt.............................. (7,831) (64,596)
Debt financing fees incurred.............................. -- (26,620)
--------- ----------
Net cash provided by financing activities................... 247,469 899,684
--------- ----------
Net increase (decrease) in cash............................. (228,156) 72,489
Cash at beginning of period................................. 231,131 2,162
--------- ----------
Cash at end of period....................................... $ 2,975 $ 74,651
========= ==========
Supplemental disclosures:
Cash paid during the period for:
Interest............................................... $ 68,747 $ 16,907
Income taxes, net of refunds........................... 821 2,445
Businesses acquired:
Fair value of assets acquired.......................... $ 744,405 $1,069,117
Cash paid.............................................. (313,501) (830,000)
--------- ----------
Liabilities assumed.................................... $ 430,904 $ 239,117
========= ==========
Noncash investing and financing activities:
Capital expenditures through capital leases (included
in long-term debt).................................... $ 14,718 $ 14,800
</TABLE>
See accompanying notes.
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AMERISERVE FOOD DISTRIBUTION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 26, 1998 (UNAUDITED)
1. INTERIM FINANCIAL DATA
The accompanying unaudited condensed consolidated financial statements of
AmeriServe Food Distribution, Inc. (the Company), a wholly owned subsidiary of
Nebco Evans Holding Company (NEHC), have been prepared in accordance with
generally accepted accounting principles for interim financial information and
the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and notes required by generally
accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting only of
adjustments of a normal and recurring nature) considered necessary for a fair
presentation of the financial position and results of operations have been
included. Operating results for the nine months ended September 26, 1998 are not
necessarily indicative of the results that might be expected for the entire
fiscal year ended December 26, 1998. This report should be read in conjunction
with the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 27,
1997.
Certain prior year amounts have been reclassified to conform to the current
year presentation.
2. ACQUISITIONS
On May 21, 1998, the Company acquired ProSource, Inc. (ProSource) for
$313.5 million in cash, which reflected $15.00 per share for all of the
outstanding common stock, repayment of existing indebtedness of ProSource of
$159.5 million and direct costs of the acquisition. ProSource, which reported
net sales of $3.9 billion for its fiscal year ended December 27, 1997, was in
the foodservice distribution business, specializing in quick service and casual
dining chain restaurants. ProSource serviced approximately 12,700 restaurants,
principally in the United States, in such chains as Burger King, Chick-fil-A,
Chili's, Lone Star Steak House, Long John Silver's, Olive Garden, Red Lobster,
Sonic, TCBY and TGI Friday's. Funding for the transactions related to the
acquisition was provided by expansion of the Company's Accounts Receivable
Program to include ProSource accounts receivable ($125 million -- see Note 4), a
capital contribution to the Company from NEHC of $50 million and cash and cash
equivalents on hand. The acquisition has been accounted for under the purchase
method.
Following is the preliminary ProSource purchase price allocation (the final
purchase price allocation will be based on the final determination of the fair
values of assets acquired and liabilities assumed):
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<CAPTION>
(IN MILLIONS)
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Accounts receivable......................................... $ 224.3
Inventories................................................. 148.6
Property and equipment...................................... 35.3
Goodwill and other intangibles.............................. 318.5
Other assets................................................ 17.6
Accounts payable............................................ (303.9)
Restructuring reserves...................................... (59.2)
Other liabilities........................................... (67.7)
-------
$ 313.5
=======
</TABLE>
The restructuring reserves of $59.2 million were included in the
preliminary purchase price allocation above in connection with the Company's
business plan to integrate the operations of ProSource. The reserves represent
accruals for costs to be incurred by the Company related to the termination of
redundant employees ($27.7 million), lease termination costs in connection with
the closing of duplicative facilities ($28.8 million) and certain other costs to
exit ProSource activities ($2.7 million). See Note 3 for additional discussion.
6
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Effective June 11, 1997, the Company acquired the PFS Division of PepsiCo,
Inc. (PFS) for a final purchase price of $842 million in cash including all
direct costs. PFS distributed food products, supplies and equipment to over
17,000 franchised and company-owned restaurants in the Pizza Hut, Taco Bell and
KFC systems, which were spun-off by PepsiCo, Inc. in October 1997 and are now
operating as Tricon Global Restaurants, Inc. The acquisition has been accounted
for under the purchase method. PFS reported net sales of $3.4 billion for its
fiscal year ended December 25, 1996.
The following unaudited pro forma results of operations for the nine months
ended September 26, 1998 assume the acquisition of ProSource occurred at the
beginning of that period, and for the nine months ended September 27, 1997
assume the acquisitions of both PFS and ProSource occurred at the beginning of
that period.
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NINE MONTHS ENDED
------------------------------
SEPTEMBER 26, SEPTEMBER 27,
1998 1997
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(IN MILLIONS)
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Net sales................................................. $6,647.4 $6,467.5
Loss before extraordinary item............................ (87.2) (27.7)
Net loss.................................................. (87.2) (36.1)
</TABLE>
3. RESTRUCTURING CHARGES AND OTHER UNUSUAL ITEMS
Included in "Restructuring charges and other unusual items" in the
Condensed Consolidated Statements of Operations for the three and nine months
ended September 26, 1998 and September 27, 1997 are the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------ ------------------------------
SEPTEMBER 26, SEPTEMBER 27, SEPTEMBER 26, SEPTEMBER 27,
1998 1997 1998 1997
------------- ------------- ------------- -------------
(IN MILLIONS)
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Restructuring charges, principally
exit costs for future lease
terminations and employee
severance.......................... $ -- $14.8 $17.4 $14.8
Impairment of property, equipment and
other assets....................... -- 12.4 16.5 12.4
Financing-related fees and other
one-time indirect costs incurred in
connection with the ProSource and
PFS acquisitions................... -- 13.4 4.6 13.4
Costs incurred to integrate acquired
operations and other unusual
items.............................. 14.6 4.0 23.5 4.0
----- ----- ----- -----
$14.6 $44.6 $62.0 $44.6
===== ===== ===== =====
</TABLE>
In the second quarter of 1998, the Company recorded restructuring accruals
and noncash impairment charges reflecting actions to be taken with respect to
the Company's then existing facilities as a result of the ProSource acquisition.
During the second quarter of 1998, management performed an extensive review of
the then existing and recently acquired ProSource operations with the objective
of developing a business plan for the restructuring and consolidation of the
organizations. The business plan, which was approved by the Company's Board of
Directors in the second quarter and represented a revision of the plan developed
at the time of the PFS acquisition in 1997, identified a number of actions
designed to improve the efficiency and effectiveness of the combined
organization's warehouse and transportation network and operations support
infrastructure. These actions, which are expected to be substantially completed
by mid-2000, include construction of new strategically located warehouse
facilities, closures of a number of existing warehouse facilities and expansions
of others, dispositions of property and equipment, conversions of computer
systems, centralization of support functions, reductions in workforce and
relocation of employees.
In the third quarter of 1997, the Company recorded restructuring and
impairment charges associated with a similar business plan and related actions
in connection with the acquisition of PFS.
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Included above are charges totaling $6.4 million, recorded in the second
quarter of 1998, associated with the discontinuance of service to the Wendy's
concept, consisting primarily of costs related to future equipment lease
terminations and employee severance. As previously reported, the Company was
informed by Wendy's International, Inc. (Wendy's), the franchiser of the Wendy's
concept, that a competitor has been selected as its distributor in certain
geographic markets and that Wendy's would begin to transfer the business of its
company-owned units away from the Company beginning in August 1998. In addition,
Wendy's has notified the Company that the Company would be removed as an
authorized distributor to its franchisee operators during the third quarter of
1998, resulting in the loss of the entire Wendy's business. The Company expects
that the transfer of the company-owned and franchised business will be largely
completed by the end of 1998. In total, the Company's net sales to the Wendy's
concept, including ProSource net sales on a pro forma basis, were approximately
$600 million in 1997, or 7% of total pro forma net sales of $8.9 billion. The
Company expects that the loss of the Wendy's business will negatively impact the
Company's operating profits by $10-15 million on an annualized basis, excluding
costs directly associated with the discontinuance of the business.
The last category in the above table includes costs arising from
integration and consolidation actions associated with the PFS, ProSource and
previous acquisitions. These costs, which under current accounting rules are not
considered exit costs and are expensed as incurred, have primarily consisted of
start-up costs of new warehouse facilities and computer systems conversion,
employee relocation and other incremental costs to realign the operations
support infrastructure. Also included in this category are costs to remediate
the Year 2000 computer program code problem and operating cost inefficiencies
associated with the phase-out of the Wendy's business in the current quarter.
4. ACCOUNTS RECEIVABLE PROGRAM
Under a five-year Accounts Receivable Program (the Program) effective July
1997, the Company received $225 million upon the initial sale of accounts
receivable to a wholly owned, special purpose, bankruptcy-remote subsidiary,
AmeriServe Funding Corporation (Funding), and concurrent sale of the accounts
receivable by Funding to AmeriServe Master Trust (the Trust). In May 1998, in
connection with the acquisition of ProSource, the Company received additional
proceeds of $125 million under the Program upon the sale of ProSource accounts
receivable. In July 1998, the Company received additional proceeds under the
Program of approximately $80 million upon completion of an amendment of the
Program and implementation by the Company of additional reporting requirements.
The Trust financed the amounts disbursed in connection with the purchases of
accounts receivable through the issuance of a total of $430 million in interest
bearing certificates. Because of seasonal and other variations in the balances
of accounts receivable held by the Trust, the amounts advanced and financed by
the certificates were reduced to $415 million as of September 26, 1998. At that
date, accounts receivable sold to the Trust totaled $606.6 million and the
undivided interest in the Trust (receivables sold less the $415 million proceeds
to the Company) totaled $191.6 million.
5. CREDIT FACILITY
In May 1998, the Company entered into an amended credit agreement with a
group of financial institutions that currently provides for a credit facility,
expiring in 2003, of up to $220 million. The amended credit facility replaces
the previous $150 million revolving credit facility. Interest rates on
borrowings against the facility are indexed to certain key variable rates.
Borrowings against the facility are limited based on levels of the Company's
inventories of food and paper products and supplies. Restrictive covenants under
the agreement include minimum interest coverage and maximum leverage. As of
September 26, 1998, borrowings under the facility were $15.3 million, and $28.4
million in outstanding letters of credit were supported by the facility.
6. GUARANTOR SUBSIDIARIES
The Company's principal operating subsidiaries fully, unconditionally,
jointly and severally guarantee the Company's $500 million 10 1/8% Senior
Subordinated Notes and $350 million 8 7/8% Senior Notes.
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The guarantor subsidiaries are direct and indirect wholly owned
subsidiaries of the Company. The Company and the guarantor subsidiaries conduct
substantially all of the operations of the Company and its subsidiaries on a
consolidated basis. Separate financial statements of the guarantor subsidiaries
are not separately presented because, in the opinion of management, such
financial statements are not material to investors.
The only significant subsidiary of the Company that is not a guarantor
subsidiary is Funding, which is a wholly owned, special purpose,
bankruptcy-remote subsidiary. Funding has no operating revenues or expenses, and
its only asset is an undivided interest in an accounts receivable trust (the
Trust -- see Note 4). Funding's interest in the Trust is junior to the claims of
the holders of certificates issued by the Trust. Accordingly, as creditors of
the Company, the claims of the holders of the Senior Subordinated Notes and
Senior Notes against the accounts receivable held in the Trust are similarly
junior to the claims of holders of the certificates issued by the Trust.
Following is summarized combined financial information (in accordance with
Rule 1-02(bb) of Regulation S-X) at September 26, 1998 and for the nine months
then ended for the guarantor subsidiaries of the Company (in thousands):
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<S> <C>
Current assets.............................................. $ 208,167
Current liabilities......................................... 350,357
Noncurrent assets........................................... 414,389
Noncurrent liabilities...................................... 68,346
Net sales................................................... $1,648,430
Operating income............................................ 9,986
Net income.................................................. 6,693
</TABLE>
7. STOCK OPTION PLAN
In May 1998, NEHC adopted the 1998 Management Stock Option Plan (the Plan).
The Plan authorizes the issuance of up to one million shares of new Class A
common stock of NEHC through exercise of non-qualified stock options granted
primarily to key management employees of the Company. The shares offered have
been registered under The Securities Act of 1933, as amended, through a
Registration Statement on Form S-8 dated May 18, 1998.
Under the Plan, the Compensation Committee of the Board of Directors may
from time to time grant options, to be exercised within 10 years of the grant
date, at a price generally not less than the fair market value of the shares, as
determined by an independent appraisal firm.
On May 20, 1998, 436,270 options at $32.85 per share were granted under the
Plan. The options granted vest and become exercisable in two equal installments
upon each of the third and fourth anniversaries of the grant date; however, in
the event of an Initial Public Offering (as defined in the Plan), half of the
then outstanding and unvested options would become vested.
NEHC has elected to follow Accounting Principles Board Opinion No. 25 (APB
25) and related Interpretations in accounting for stock options. Under APB 25,
because the exercise price of NEHC's stock options granted equals the fair
market value of the underlying shares on the date of grant, no compensation
expense has been recognized.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
This quarterly report contains certain forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934 and Section
27A of the Securities Act of 1933. Actual results could differ materially from
those projected in such forward-looking statements and readers are cautioned not
to place undue reliance on the forward-looking statements which speak only as of
the date hereof. The Company
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undertakes no obligation to update these forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the occurrence or
nonoccurrence of anticipated events.
AmeriServe Food Distribution, Inc. (the Company) is a foodservice
distributor specializing in distribution to chain restaurants. The Company
distributes a wide variety of food items as well as paper goods, cleaning and
other supplies and equipment to approximately 37,000 restaurants. The Company's
customers are principally franchisers/owners and/or franchisees in the Arby's,
Burger King, Chick-fil-A, Dairy Queen, KFC, Long John Silver's, Pizza Hut,
Sonic, Taco Bell and TCBY quick service restaurant systems and the Chili's, Lone
Star Steak House, Olive Garden, Red Lobster and TGI Friday's casual dining
restaurant systems.
The Company is a wholly owned subsidiary of Nebco Evans Holding Company
(NEHC), which is an indirect subsidiary of Holberg Industries, Inc.
On May 21, 1998, the Company acquired ProSource, Inc. (ProSource) for
$313.5 million in cash, which reflected $15.00 per share for all of the
outstanding common stock, repayment of existing indebtedness of ProSource of
$159.5 million and direct costs of the acquisition. ProSource, which reported
net sales of $3.9 billion for its fiscal year ended December 27, 1997, was in
the foodservice distribution business, specializing in quick service and casual
dining chain restaurants. ProSource serviced approximately 12,700 restaurants,
principally in the United States, in such chains as Burger King, Chick-fil-A,
Chili's, Lone Star Steak House, Long John Silver's, Olive Garden, Red Lobster,
Sonic, TCBY and TGI Friday's. Funding for the transactions related to the
acquisition was provided by expansion of the Company's Accounts Receivable
Program to include ProSource accounts receivable (proceeds of $125
million -- see Note 4), a capital contribution to the Company from NEHC of $50
million and cash and cash equivalents on hand. Because of similarities in
activities, the Company intends to consolidate certain operations of ProSource
with those of the Company (see Notes 2 and 3). The acquisition has been
accounted for under the purchase method. Thirteen and eighteen weeks of results
for the former ProSource operations are included in the Company's operating
results for the three and nine months ended September 26, 1998, respectively.
The year-over-year comparisons of operating results for the quarter and
year-to-date presented below are significantly impacted by the inclusion of the
former ProSource operations from the acquisition date.
Effective June 11, 1997, the Company acquired the PFS Division of PepsiCo,
Inc. (PFS) for a final purchase price of $842 million in cash including all
direct costs. PFS, which reported net sales of $3.4 billion for its fiscal year
ended December 25, 1996, distributed food products, supplies and equipment to
over 17,000 franchised and company-owned restaurants in the Pizza Hut, Taco Bell
and KFC systems, which were spun-off by PepsiCo, Inc. in October 1997 and are
now operating as Tricon Global Restaurants, Inc. (Tricon). The acquisition has
been accounted for under the purchase method. Thirty-six weeks of results for
the former PFS operations are included in the Company's operating results for
the nine months ended September 26, 1998, compared to twelve weeks in the same
period of 1997; therefore, the year-over-year comparisons of year-to-date
operating results presented below are significantly impacted by the PFS
acquisition. The quarterly results are comparable with respect to the inclusion
of the former PFS operations.
In April 1997, the Company began providing foodservice distribution to
approximately 2,600 Arby's restaurants under a three-year contract. While the
majority of Arby's restaurants are serviced directly by the Company, some are
serviced by other cooperating independent distributors.
As previously reported, the Company was informed by Wendy's International,
Inc. (Wendy's), the franchiser of the Wendy's concept, that a competitor has
been selected as its distributor in certain geographic markets and that Wendy's
would begin to transfer the business of its company-owned units away from the
Company beginning in August 1998. Also as previously reported, Wendy's has
notified the Company that the Company would be removed as an authorized
distributor to its franchisee operators during the third quarter of 1998,
resulting in the loss of the entire Wendy's business. The Company expects that
the transfer of the company-owned and franchised business will be largely
completed by the end of 1998. In total, the Company's net sales to the Wendy's
concept, including ProSource net sales on a pro forma basis, were approximately
$600 million in 1997, or 7% of total pro forma net sales of $8.9 billion. The
Company expects that the loss of
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the Wendy's business will negatively impact the Company's operating profits by
$10-15 million on an annualized basis, excluding costs directly associated with
the discontinuance of the business.
RECENT DEVELOPMENTS
As previously reported, the Company and Tricon, the Company's largest
customer, have agreed to extend their long-term distribution agreement that
became effective July 1997 from five years to seven and one-half years, with an
additional two and one-half year extension option. The agreement also provides
for a change in the methodology for calculating the distribution fee, which is
added to product cost to determine selling prices, from a percentage mark-up of
product cost to a dollar amount per case of product. This change results in
pricing that more closely correlates with the Company's distribution cost
structure. The agreement also provides for incentives for both parties to reduce
costs through more efficient distribution practices. The Company distributes
food and supplies to 6,900 Tricon-owned restaurants in the U.S. under the
agreement, representing approximately $1.7 billion in annual net sales.
RESULTS OF OPERATIONS
This discussion should be read in conjunction with the Condensed
Consolidated Financial Statements and notes thereto in Item 1.
The following table presents certain financial information of the Company,
expressed as a percentage of net sales:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
SEPTEMBER 26, SEPTEMBER 27, SEPTEMBER 26, SEPTEMBER 27,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales......................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold................ 90.9 90.1 90.6 90.1
Gross profit...................... 9.1 9.9 9.4 9.9
Distribution, selling and
administrative expenses......... 7.5 7.3 7.6 7.6
Operating income before
depreciation, amortization and
unusual items................... 1.7 2.6 1.8 2.2
</TABLE>
Third Quarter and Year-to-Date 1998 Compared to the Same Periods of 1997:
Net sales in 1998 increased $984.8 million, or 80%, to $2.2 billion in the
quarter and $3.0 billion, or 153%, to $5.0 billion year-to-date. The increase
for the quarter reflected the impact of the ProSource acquisition, partially
offset by a decline in sales of approximately $75 million due to the phase-out
of the Wendy's business. The acquisitions of ProSource and PFS each contributed
$1.5 billion to the year-to-date increase, as the incremental Arby's business
was largely offset by the Wendy's phase-out.
Gross profit in 1998 increased $80.2 million, or 65%, to $202.7 million in
the quarter and $274.9 million, or 141%, to $469.9 million year-to-date. The
factors explaining the net sales growth also accounted for the increase in gross
profit. The margin decline of .8 of a point to 9.1% in the quarter and .5 of a
point to 9.4% year-to-date reflected the impact of the ProSource acquisition.
ProSource's casual dining business has higher product case costs as compared to
the Company's other business, resulting in a lower gross profit margin. The
Company's profitability is largely determined by the relationship of the
negotiated mark-up, or distribution fee that is added to product cost to
determine sales prices, to the cost of the Company's warehouse, transportation
and administrative activities. Therefore, a decline in the gross profit margin
does not necessarily indicate a decline in profitability in dollars.
Distribution, selling and administrative expenses in 1998 increased $75.5
million, or 84%, to $165.6 million in the quarter and $226.8 million, or 150%,
to $377.7 million year-to-date, reflecting the acquisitions of ProSource and,
for the year-to-date only, PFS. The increase in the quarter and year-to-date
also reflected certain unusually low 1997 expenses in the former PFS operations
prior to and immediately following the sale
11
<PAGE> 12
of the business to the Company, as well as strategic administrative spending in
1998. Distribution, selling and administrative expenses as a percent of net
sales increased .2 of a point for the quarter to 7.5% and were flat at 7.6%
year-to-date. The comparisons of these percentage measures reflects the higher
level of expenses explained above, offset (partially for the quarter and fully
year-to-date) by the effect of ProSource's lower operating expense margin.
ProSource's lower operating expense margin is a function of higher case sales
prices in ProSource's casual dining business as compared to the Company's other
business (see gross profit discussion above).
Operating income in 1998 before depreciation of property and equipment,
amortization of intangible assets and restructuring charges and other unusual
items increased $4.7 million, or 15%, to $37.0 million in the quarter and $48.1
million, or 109% to $92.2 million year-to-date, due primarily to the
acquisitions of ProSource and, for the year-to-date only, PFS. This growth was
depressed by approximately $1.5 million due to the phase-out of the Wendy's
business. As a percent of net sales, this income measure declined .9 of a point
to 1.7% for the quarter and .4 of a point to 1.8% year-to-date. These changes
were driven by the lower gross profit margin as discussed above.
Depreciation of property and equipment in 1998 increased $1.5 million to
$7.5 million in the quarter and $10.0 million to $20.0 million year-to-date,
primarily reflecting the acquisitions of ProSource and, for the year-to-date
only, PFS.
Amortization of intangible assets in 1998 increased $3.3 million to $8.3
million in the quarter and $15.1 million to $22.3 million year-to-date,
reflecting the amortization of the intangible assets arising from the purchase
price allocations for ProSource and, for the year-to-date only, PFS.
Restructuring charges and other unusual items totaled $14.6 million for the
quarter and $62.0 million year-to-date. The expense for the quarter includes
start-up costs of new distribution centers, computer system conversion costs and
employee relocation expenses and other incremental operating costs directly
associated with the integration of the acquired businesses. Also included are
costs to remediate the Year 2000 computer program code problem and operating
cost inefficiencies arising from the Wendy's phase-out. The year-to-date amount
includes restructuring, impairment and other costs related to the ProSource
acquisition recorded in the second quarter of 1998. The charges in 1997
consisted primarily of restructuring, impairment and other costs associated with
the acquisition of PFS. See Note 3 for further information.
Interest expense, net of interest income, in 1998 increased $2.8 million to
$20.5 million in the quarter and $32.3 million to $57.0 million year-to-date,
reflecting interest on additional net debt to finance the acquisitions.
Loss on sale of accounts receivable of $7.1 million in the quarter and
$16.2 million year-to-date relates to the Company's ongoing Accounts Receivable
Program effective July 1997. Under the program, accounts receivable are sold to
a consolidated, wholly owned, special purpose, bankruptcy-remote subsidiary,
which in turn sells the receivables to a master trust. The loss on sale of
accounts receivable primarily represents the return to investors in certificates
issued by the master trust to fund the purchases of the accounts receivable. The
increase in this line item reflects expansion of the program to include the
accounts receivable of ProSource, as well as other initiatives to further
utilize this cost effective financing vehicle (see Note 4). The year-to-date
increase also reflects the 1997 partial year existence of the program.
Provision for income taxes in 1998 represents estimated current state
income taxes payable. The Company's net deferred tax assets are offset entirely
by a valuation allowance, reflecting the Company's significant net operating
loss carryforward position.
Extraordinary loss in 1997 of $2.2 million resulted from an early
extinguishment of debt. This noncash charge represents the unamortized balance
of deferred financing costs associated with a previous credit facility.
Excluding restructuring charges and other unusual items, the net loss in
1998 was $6.6 million in the quarter and $24.2 million year-to-date, largely due
to higher financing costs and amortization of intangibles that more than offset
the operating income from PFS and ProSource.
12
<PAGE> 13
Comparison of Results of Operations on a Pro Forma Basis:
This supplementary information is provided to enhance the analysis of
results of operations. The following pro forma results represent the combined
historical results of the Company, PFS and ProSource for the periods presented.
These pro forma combined results do not purport to represent what the actual
results would have been if the acquisitions of PFS and ProSource had occurred at
the beginning of fiscal 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------------------- ---------------------------------------------
SEPTEMBER 26, SEPTEMBER 27, SEPTEMBER 26, SEPTEMBER 27,
1998 % 1997 % 1998 % 1997 %
------------- ----- ------------- ----- ------------- ----- ------------- -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales...................... $2,217.4 100.0 $2,178.4 100.0 $6,647.4 100.0 $6,467.5 100.0
Cost of goods sold............. 2,014.8 90.9 1,978.6 90.8 6,046.2 91.0 5,876.2 90.9
-------- ----- -------- ----- -------- ----- -------- -----
Gross profit................... 202.6 9.1 199.8 9.2 601.2 9.0 591.3 9.1
Distribution, selling and
administrative expenses...... 165.6 7.5 160.2 7.4 500.6 7.5 484.7 7.5
-------- ----- -------- ----- -------- ----- -------- -----
Operating income before
depreciation, amortization
and unusual items............ $ 37.0 1.7 $ 39.6 1.8 $ 100.6 1.5 $ 106.6 1.6
======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
Management fees to Holberg Industries, Inc. included in operating expenses
were $.9 million and $2.7 million for the 1998 quarter and year-to-date,
respectively, and $1.7 million for the 1997 quarter and year-to-date.
The Company estimates that the pro forma results for 1998 reflect
approximately $5.7 million and $11.7 million for the quarter and year-to-date,
respectively, in distribution, selling and administrative cost inefficiencies in
the pre-existing Company (pre-acquisitions) and ProSource distribution networks
not yet restructured. Such amounts reflected in the 1997 pro forma results were
$2.9 million for the quarter and year-to-date. No estimates were developed for
ProSource prior to the current quarter.
The net sales growth in 1998 of $39.0 million (1.8%) in the quarter and
$179.9 million (2.8%) year-to-date was driven by growth in case sales to major
customers in the former ProSource operations and the addition of the Lone Star
Steak House business, partially offset by the phase-out of the Wendy's business.
As of the end of the third quarter, stores served by the Company totaled 37,420
in 1998 compared to 38,940 in 1997, including approximately 700 stores in Canada
and Mexico in both years. The decrease was driven by the phase-out of the
Wendy's business, resignations by the Company of individually small inefficient
accounts and closures by Tricon of under-performing units, partially offset by
additional units in both the casual dining and quick serve business of the
former ProSource operations.
Gross profit growth in 1998 of $2.8 million (1.4%) in the quarter and $9.9
million (1.7%) year-to-date reflected the factors impacting net sales growth.
Gross profit growth for the quarter and particularly the year-to-date was
depressed by the effect of deflation in commodity prices as a significant
portion of the Company's sales have been at prices based on product cost plus a
percentage markup. The gross margin decline of .1 of a point for the quarter and
year-to-date reflects the relatively higher growth of the casual dining
business, which has a lower gross profit margin than the quick service business.
(See gross profit discussion under "Results of Operations" above).
Operating expenses in 1998 rose $5.4 million (3.4%) in the quarter and
$15.9 million (3.3%) year-to-date. Distribution, selling and administrative
expenses as a percent of net sales increased .1 of a point to 7.5% for the
quarter and were flat year-to-date at 7.5%. Higher expenses reflected the effect
of increased net sales, the impact of certain unusually low 1997 expenses in the
former PFS operations prior to and immediately following the sale of the
business to the Company, as well as strategic administrative spending in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Capital resources are expected to be sufficient to support ongoing business
needs as well as activities to integrate acquisitions. These resources include
cash provided by operating activities, capital and operating
13
<PAGE> 14
lease financing of new warehouse facilities and equipment, and a credit facility
of up to $220 million (See Note 5).
Also, the Company anticipates that certain transactions related to the
Accounts Receivable Program expected to be completed in November 1998 will
result in additional proceeds to the Company of approximately $20 million and
additional financing capacity of up to $70 million (based on accounts receivable
levels) above the current $415 million (see Note 4).
Year-to-Date 1998 Compared to Year-to-Date 1997:
Net cash used for operating activities in 1998 was $117.6 million compared
to $19.8 million in cash provided in 1997. This performance reflects changes in
accounts payable to align payment terms of the Company and the acquired
businesses, payments related to the Company's consolidation plan charged against
previously established reserves and higher interest payments, partially offset
by the cash earnings from the acquired PFS and ProSource operations.
Net cash used for investing activities in 1998 decreased $489.0 million to
$358.1 million, primarily reflecting the difference in the purchase prices of
ProSource and PFS. Capital expenditures in 1998 increased $30.6 million to $39.3
million, driven by the impact of the acquisitions of PFS and ProSource and
reflecting software capitalized in connection with new computer applications.
Net cash provided by financing activities in 1998 reflected transactions to
partially fund the ProSource acquisition. Borrowings under the credit facility
reflect short-term funding of working capital requirements. Net cash provided by
financing activities in 1997 reflected several transactions to fund the
acquisition of PFS.
SEASONALITY AND INFLATION
Historically, the Company's sales and operating results have reflected
seasonal variations. The Company experiences lower net sales and income from
operations in the first and fourth quarters, with the effects being more
pronounced in the first quarter. Additionally, the effect of these seasonal
variations is more pronounced in regions where winter weather is generally more
inclement.
Inflation has not had a material impact on the Company's operations. Food
price deflation has negatively affected the Company's profitability as a
significant portion of the Company's sales has been at prices based on product
cost plus a percentage markup. The Company has taken action to modify certain
sales contracts to mitigate the adverse effects of food price deflation. (See
discussion under "Recent Developments" above.)
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
Consolidation and Integration of Acquisitions
The Company's acquisitions of PFS and ProSource present opportunities to
significantly improve operating efficiencies of the combined businesses by
eliminating redundant facilities, achieving warehouse economies of scale with
new and larger facilities, improving truck fleet utilization through increased
deliveries per route and leveraging the operations support infrastructure.
The Company had previously developed a consolidation plan identifying
several actions to consolidate and integrate the PFS business, and has
identified additional such actions related to the ProSource business. Because of
the ProSource acquisition, the actions identified in the revised plan are now
expected to be completed by mid-2000. These actions include construction of new
warehouse facilities, closures of a number of existing warehouse facilities and
expansions of others, dispositions of property and equipment, conversions of
computer systems, centralization of support functions, reductions in workforce
and relocation of employees. The Company currently intends to maintain a largely
standalone distribution network and operations support infrastructure for the
casual dining business of ProSource. Though still in the early stages, the
Company is on schedule in the consolidation plan. The Company has closed eight
warehouse facilities and transferred the business to new or existing facilities,
expanded its Minneapolis, MN facility and commenced operations at two new
state-of-the-art facilities in Orlando, FL and Denver, CO.
14
<PAGE> 15
Under current accounting rules, certain costs associated with these
actions, principally asset writedowns and exit cost accruals for lease
terminations and employee severance, have been accounted for as part of the PFS
and ProSource purchase price allocations or the restructuring charges recorded
in the third quarter of 1997 and the second quarter of 1998. Other incremental
costs associated with the actions that do not qualify as exit costs are expensed
as incurred and reported as a component of "Restructuring charges and other
unusual items" in the Condensed Consolidated Statements of Operations. Such
integration costs include start-up costs of new facilities and other temporary
inefficiencies arising from the warehouse and transportation network
reconfiguration, as well as incremental expenses associated with the
consolidation of the operations support infrastructure. Though difficult to
estimate, total cash integration costs to be expended over the remaining
consolidation period are expected to be in the range of $25-50 million.
While management believes it has the resources to meet its objectives, the
ultimate level and timing of cost efficiencies to be achieved upon the
completion of the consolidation plan are subject to the Company's ability to
manage through the complexities of the plan and respond to unanticipated events.
Ultimate cost savings expected to be achieved after completion of the
consolidation and integration actions are estimated to be approximately $100
million annually.
Computer Systems and Potential Year 2000 Issue
The Company's business activity requires the processing of several thousand
transactions on a daily basis in the purchasing, warehousing, transportation and
sale of food and supply items to restaurant customers. The Company's financial
and operational stability is reliant upon the orderly flow of goods through the
entire supply chain; i.e., from providers of food commodities to food processors
to the Company to customers' restaurants and finally to consumers. This flow of
goods depends on the use of computerized systems throughout the supply chain.
The Company has taken a number of steps to assess and remediate its
exposure to the Year 2000 program code problem. The Company's findings to date
include:
- As measured by lines of program code, approximately 20% of the Company's
software is not Year 2000 compliant. Remediation of this code is underway
and expected to be completed by mid-1999.
- The remaining 80% of software includes applications that are currently
being replaced by an integrated packaged software platform purchased in
1997, and several previously existing packaged software applications that
the Company will continue to utilize. The providers of the packaged
software have certified that their products are Year 2000 compliant. The
Company will, by mid-1999, perform procedures to verify such compliance.
- The Company has completed an assessment of its computer hardware and
determined that approximately 30% of these devices are not Year 2000
compliant. Remediation of this hardware will be completed by mid-1999.
- The Company is approximately 50% complete in its assessment of other
mechanical equipment and devices with electronic components possibly
susceptible to the Year 2000 issue. Risk identified to date has been
minimal and little is anticipated. This assessment will be completed in
early 1999.
- The Company has requested information regarding Year 2000 readiness from
its 1,600 trading partners, including product suppliers, service
providers and customers. Based on responses from these trading partners,
the Company has to date identified approximately 50 vendors as critical
that are being contacted directly for more insight into remediation
progress.
- The Company is using the services of outside experts to assist internal
resources in the identification and remediation of Year 2000 issues in
the various areas of exposure discussed above.
Given the environment the Company operates in, with rapid movement of high
volumes of products in cooperation with a large number of trading partners, the
risk of the Year 2000 issue to the Company is high and could result in a
significant adverse effect on the Company's operations. The Company believes
that software and equipment within its control are or will be timely compliant.
The risk lies principally with the
15
<PAGE> 16
Company's large base of suppliers and customers. Within these groups there is a
wide range of exposure and resources focusing on potential Year 2000 issues. The
Company is limited in its ability to determine with a high degree of reliability
the state of readiness of trading partners and to influence these partners to
ascertain timely compliance.
By early 1999, the Company expects to complete a contingency plan to deal
with possible disruptions. The plan will be based on existing business
continuity plans.
As referenced above, the Company is in the process of replacing certain
critical applications within its management information system with a new
packaged software platform and hardware configuration. The new system will
complement the Company's consolidation effort by providing the flexibility to
support the varied processes of the combined business and by allowing greater
centralization of support functions. The implementation of the system is on
schedule and expected to be completed in mid-1999. The Company intends to
integrate the quick service operations of ProSource in time to support that
business with the new system. The Company will continue to utilize applications
currently supporting ProSource's casual dining business.
The costs to implement the new system will approximate $55-60 million and
to perform the assessment and remediation of the Year 2000 issue will
approximate an additional $15-25 million. A total of $25 million has been
expended to date for both projects combined. A significant portion of the costs
to implement the new system is being capitalized. The costs to perform the
assessment and remediation of the Year 2000 issue are expensed as incurred and
reported as a component of "Restructuring charges and other unusual items" in
the Condensed Consolidated Statements of Operations.
Industry and Customer Risk
The Company's future results are subject to economic and competitive risks
and uncertainties in the chain restaurant and foodservice distribution
industries and in the economy, generally. The trend of consolidation in the
Company's segment of the foodservice distribution industry, as evidenced by the
Company's acquisition activity, may further intensify competitive pressures.
While the Company will take appropriate actions to retain desired business, some
loss of customers during this transition period is expected. Management believes
that completion of the consolidation and integration plan will enhance the
Company's position as one of the most efficient distributors in its industry
and, therefore, highly competitive in pricing and customer service.
The Company provides foodservice distribution to Tricon-owned restaurants
under a long-term exclusive distribution agreement effective July 1997 (recently
extended to up to 10 years from 5 years -- see discussion under "Recent
Developments" above). The Company is subject to the inherent risk of customer
concentration, as approximately 20% of net sales are to Tricon, including
ProSource net sales on a pro forma basis. Tricon is actively engaged in the sale
to franchisees of company-owned restaurants covered by the distribution
agreement. While the distribution agreement provides that prior to sales of
Pizza Hut and Taco Bell restaurants, such franchisees will enter into
distribution agreements on substantially similar terms, there can be no
assurance that the transition from company-owned to franchised status will not
affect the Company's results.
Risk of Leverage
The Company is and will continue to be highly leveraged as a result of the
indebtedness incurred in connection with the acquisitions. The Company's ability
to meet interest payments, refinance the debt or ultimately repay the debt is
subject to the risks and uncertainties discussed above.
For additional factors that could cause the Company's actual results to
differ materially from expected and historical results, see the "Risk Factors"
set forth in the Company's Post-Effective Amendment No. 1 on Form S-1 to the
Form S-4 Registration Statement, filed with the Securities and Exchange
Commission on April 10, 1998.
16
<PAGE> 17
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1 -- Amended and Restated Certificate of Incorporation of
AmeriServe Food Distribution, Inc. (formerly AmeriServ
Food Company, successor to AmeriServe Food Distribution,
Inc.), (incorporated by reference to Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K filed March 28,
1998).
3.2 -- Amended and Restated By-Laws of AmeriServe Food
Distribution, Inc. (formerly AmeriServ Food Company,
Successor to AmeriServe Food Distribution, Inc.),
(incorporated by reference to Exhibit 3.2 to the
Registrant's Annual Report on Form 10-K filed March 28,
1998).
4.1 -- Indenture, dated as of October 15, 1997, by and among the
Company, the Subsidiary Guarantors and State Street Bank
and Trust Company, with respect to the Senior Notes
(incorporated by reference to Exhibit 4.1 to the
Registrant's Registration Statement on Form S-4 No.
333-38337 filed October 21, 1997).
4.2 -- Supplemental 8 7/8% New Senior Notes Indenture, dated as
of December 23, 1997, by and among AmeriServe Food
Distribution, Inc., AmeriServ Food Company, and State
Street Bank and Trust Company, as Trustee (incorporated
by reference to Exhibit 4.2 to the Registrant's Current
Report on Form 8-K, dated December 28, 1997).
4.3 -- Second Supplemental 8 7/8% New Senior Notes Indenture,
dated as of May 21, 1998, by and among AmeriServe Food
Distribution, Inc. and State Street Bank and Trust
Company (incorporated by reference to Exhibit 4.1 to the
Registrant's Current Report on Form 8-K dated May 21,
1998).
4.4 -- Indenture, dated as of July 11, 1997, by and among the
Company, the Subsidiary Guarantors and State Street Bank
and Trust Company, with respect to the New Senior
Subordinated Notes (incorporated by reference to the
Registrant's Registration Statement on Form S-4 No.
333-33225 filed August 8, 1997).
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.5 -- Supplemental 10 1/8% New Senior Subordinated Notes
Indenture, dated as of December 23, 1997, by and among
AmeriServe Food Distribution, Inc., AmeriServ Food
Company, and State Street Bank and Trust Company, as
Trustee (incorporated by reference to Exhibit 4.1 to The
Registrant's Current Report on Form 8-K, dated December
28, 1997).
4.6 -- Second Supplemental 10 1/8% New Senior Subordinated Notes
Indenture, dated as of May 21, 1998, by and among
AmeriServe Food Distribution, Inc. and State Street Bank
and Trust Company (incorporated by reference to Exhibit
4.3 to the Registrant's Current Report on Form 8-K dated
May 21, 1998).
10.1 -- Third Amended and Restated Credit Agreement, dated as of
May 21, 1998 among AmeriServe Food Distribution, Inc.,
Bank of America National Trust and Savings Association,
as Administrative Agent, Donaldson, Lufkin and Jenrette
Securities Corporation, as Documentation Agent, Bank of
America National Trust and Savings Association, as Letter
of Credit Issuing Lender and the Other Financial
Institutions Party Thereto, Arranged by BancAmerica
Robertson Stephens.*
27.1 -- Financial Data Schedule.*
</TABLE>
- ---------------
* Filed herewith.
(b) Reports on Form 8-K.
During the third quarter of 1998, the Company and each of the Subsidiary
Guarantors filed the following:
1. Current Report on Form 8-K filed with the Securities and Exchange
Commission on July 22, 1998 disclosing, under Item 5, notifications
received from a customer, Wendy's International, Inc., indicating the
customer's decision to remove the Company as an authorized distributor to
its franchisee operators.
2. Current Report on Form 8-K/A filed with the Securities and Exchange
Commission on August 4, 1998 amending Items 7(a), 7(b) and 7(c) of the
Current Report on Form 8-K filed on May 22, 1998 regarding the acquisition
of ProSource, Inc., for the purpose of presenting Financial Statements and
Exhibits, including ProSource, Inc. Audited Financial Statements and
Unaudited Pro Forma Financial Statements.
3. Current Report on Form 8-K filed with the Securities and Exchange
Commission on September 16, 1998 disclosing, under Item 5, an extension
through 2005 of the Company's exclusive distribution agreement with Tricon
Global Restaurants, Inc.
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized:
AmeriServe Food Distribution, Inc.
(Registrant)
By: /s/ DIANA M. MOOG
----------------------------------
Diana M. Moog,
Executive Vice President
and Chief Financial Officer
November 10, 1998
By: /s/ S.J. SZLAUDERBACH
----------------------------------
S.J. Szlauderbach,
Vice President and
Chief Accounting Officer
November 10, 1998
19
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1 -- Amended and Restated Certificate of Incorporation of
AmeriServe Food Distribution, Inc. (formerly AmeriServ
Food Company, successor to AmeriServe Food Distribution,
Inc.), (incorporated by reference to Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K filed March 28,
1998).
3.2 -- Amended and Restated By-Laws of AmeriServe Food
Distribution, Inc. (formerly AmeriServe Food Company,
Successor to AmeriServe Food Distribution, Inc.),
(incorporated by reference to Exhibit 3.2 to the
Registrant's Annual Report on Form 10-K filed March 28,
1998).
4.1 -- Indenture, dated as of October 15, 1997, by and among the
Company, the Subsidiary Guarantors and State Street Bank
and Trust Company, with respect to the Senior Notes
(incorporated by reference to Exhibit 4.1 to the
Registrant's Registration Statement on Form S-4 No.
333-38337 filed October 21, 1997).
4.2 -- Supplemental 8 7/8% New Senior Notes Indenture, dated as
of December 23, 1997, by and among AmeriServe Food
Distribution, Inc., AmeriServ Food Company, and State
Street Bank and Trust Company, as Trustee (incorporated
by reference to Exhibit 4.2 to the Registrant's Current
Report on Form 8-K, dated December 28, 1997).
4.3 -- Second Supplemental 8 7/8% New Senior Notes Indenture,
dated as of May 21, 1998, by and among AmeriServe Food
Distribution, Inc. and State Street Bank and Trust
Company (incorporated by reference to Exhibit 4.1 to the
Registrant's Current Report on Form 8-K dated May 21,
1998).
4.4 -- Indenture, dated as of July 11, 1997, by and among the
Company, the Subsidiary Guarantors and State Street Bank
and Trust Company, with respect to the New Senior
Subordinated Notes (incorporated by reference to the
Registrant's Registration Statement on Form S-4 No.
333-33225 filed August 8, 1997).
4.5 -- Supplemental 10 1/8% New Senior Subordinated Notes
Indenture, dated as of December 23, 1997, by and among
AmeriServe Food Distribution, Inc., AmeriServ Food
Company, and State Street Bank and Trust Company, as
Trustee (incorporated by reference to Exhibit 4.1 to The
Registrant's Current Report on Form 8-K, dated December
28, 1997).
4.6 -- Second Supplemental 10 1/8% New Senior Subordinated Notes
Indenture, dated as of May 21, 1998, by and among
AmeriServe Food Distribution, Inc. and State Street Bank
and Trust Company (incorporated by reference to Exhibit
4.3 to the Registrant's Current Report on Form 8-K dated
May 21, 1998).
10.1 -- Third Amended and Restated Credit Agreement, dated as of
May 21, 1998 among AmeriServe Food Distribution, Inc.,
Bank of America National Trust and Savings Association,
as Administrative Agent, Donaldson, Lufkin and Jenrette
Securities Corporation, as Documentation Agent, Bank of
America National Trust and Savings Association, as Letter
of Credit Issuing Lender and the Other Financial
Institutions Party thereto arranged by BancAmerica
Robertson Stephens.*
27.1 -- Financial Data Schedule.*
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
Exhibit 10.1
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THIRD AMENDED AND RESTATED
CREDIT AGREEMENT
DATED AS OF MAY 21, 1998
AMONG
AMERISERVE FOOD DISTRIBUTION, INC.,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS ADMINISTRATIVE AGENT,
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION,
AS DOCUMENTATION AGENT,
AND
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
AS LETTER OF CREDIT ISSUING LENDER
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
ARRANGED BY
BANCAMERICA ROBERTSON STEPHENS
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
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ARTICLE I DEFINITIONS............................................................................. 1
1.1 Certain Defined Terms............................................................................... 1
1.2 Other Interpretive Provisions....................................................................... 26
1.3 Accounting Principles............................................................................... 27
ARTICLE II THE CREDIT.............................................................................. 27
2.1 Amounts and Terms of Commitments.................................................................... 27
2.2 Loan Accounts....................................................................................... 27
2.3 Procedure for Borrowing............................................................................. 28
2.4 Conversion and Continuation Elections............................................................... 29
2.5 Voluntary Termination or Reduction of Commitments................................................... 30
2.6 Optional Prepayments................................................................................ 30
2.7 Mandatory Prepayments of Loans...................................................................... 31
2.8 Repayment........................................................................................... 31
2.9 Interest............................................................................................ 31
2.10 Fees................................................................................................ 32
(a) Arrangement, Agency Fees................................................................... 32
(b) Commitment Fees............................................................................ 33
2.11 Computation of Fees and Interest.................................................................... 33
2.12 Payments by the Company............................................................................. 33
2.13 Payments by the Lenders to the Administrative Agent................................................. 34
2.14 Sharing of Payments, etc............................................................................ 34
2.15 Increase in Commitments............................................................................. 35
ARTICLE III THE LETTERS OF CREDIT................................................................... 35
3.1 The Letter of Credit Subfacility.................................................................... 35
3.2 Issuance, Amendment and Renewal of Letters of Credit................................................ 36
3.3 Existing Letters of Credit; Risk Participations, Drawings and Reimbursements........................ 38
3.4 Repayment of Participations......................................................................... 40
3.5 Role of the Issuing Lender.......................................................................... 41
3.6 Obligations Absolute................................................................................ 42
3.7 Cash Collateral Pledge.............................................................................. 42
3.8 Letter of Credit Fees............................................................................... 42
3.9 Uniform Customs and Practice........................................................................ 43
ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY.................................................. 43
4.1 Taxes............................................................................................... 44
4.2 Illegality.......................................................................................... 45
4.3 Increased Costs and Reduction of Return............................................................. 45
</TABLE>
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<TABLE>
<CAPTION>
Section Page
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4.4 Funding Losses...................................................................................... 45
4.5 Inability to Determine Rates........................................................................ 46
4.6 Substitution of Affected Lender..................................................................... 46
4.7 Certificates of Lenders............................................................................. 48
4.8 Survival............................................................................................ 48
ARTICLE V COLLATERAL AND GUARANTY................................................................. 47
5.1 Collateral--Personal Property....................................................................... 47
5.2 Mortgages........................................................................................... 47
5.3 Guaranty............................................................................................ 47
5.4 Company Stock....................................................................................... 48
5.5 Intercreditor Agreement............................................................................. 48
ARTICLE VI CONDITIONS PRECEDENT.................................................................... 48
6.1 Conditions of Restatement........................................................................... 48
(a) Credit Agreement and Notes................................................................. 48
(b) Resolutions; Incumbency.................................................................... 48
(c) Organization Documents..................................................................... 48
(d) Legal Opinions............................................................................. 48
(e) Certificate................................................................................ 49
(f) Collateral Documents....................................................................... 49
(g) Insurance Policies......................................................................... 49
(h) Other Documents............................................................................ 50
6.2 Other Conditions to Effectiveness of Restatement.................................................... 50
(a) ProSource Acquisition...................................................................... 50
(b) Equity Contribution........................................................................ 50
(c) Accounts Receivables Securitization........................................................ 50
(d) Indebtedness............................................................................... 50
(e) Governmental Approvals..................................................................... 50
(f) Certificate................................................................................ 50
(g) Borrowing Base Certificate................................................................. 50
(h) Purchase by Lenders........................................................................ 51
(i) Loans...................................................................................... 51
6.3 Conditions to All Credit Extensions................................................................. 51
(a) Notice, Application........................................................................ 51
(b) Continuation of Representations and Warranties............................................. 51
(c) No Existing Default........................................................................ 51
ARTICLE VII REPRESENTATIONS AND WARRANTIES.......................................................... 51
7.1 Corporate Existence and Power....................................................................... 51
7.2 Corporate Authorization; No Contravention........................................................... 52
7.3 Governmental Authorization.......................................................................... 52
7.4 Binding Effect...................................................................................... 52
</TABLE>
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<TABLE>
<CAPTION>
Section Page
<S> <C>
7.5 Litigation.......................................................................................... 52
7.6 No Default.......................................................................................... 53
7.7 ERISA Compliance.................................................................................... 53
7.8 Use of Proceeds; Margin Regulations................................................................. 53
7.9 Title to Properties................................................................................. 54
7.10 Taxes............................................................................................... 54
7.11 Financial Condition................................................................................. 54
7.12 Environmental Matters............................................................................... 55
7.13 Regulated Entities.................................................................................. 56
7.14 No Burdensome Restrictions.......................................................................... 56
7.15 Copyrights, Patents, Trademarks and Licenses, etc................................................... 56
7.16 Subsidiaries........................................................................................ 56
7.17 Insurance........................................................................................... 56
7.18 Full Disclosure..................................................................................... 56
7.19 ProSource Acquisition Agreement..................................................................... 57
ARTICLE VIII AFFIRMATIVE COVENANTS................................................................... 57
8.1 Financial Statements................................................................................ 57
8.2 Certificates; Other Information..................................................................... 58
8.3 Notices............................................................................................. 59
8.4 Preservation of Corporate Existence, etc............................................................ 60
8.5 Maintenance of Property............................................................................. 60
8.6 Insurance........................................................................................... 60
8.7 Payment of Obligations.............................................................................. 60
8.8 Compliance with Laws................................................................................ 61
8.9 Compliance with ERISA............................................................................... 61
8.10 Inspection of Property and Books and Records........................................................ 61
8.11 Environmental Laws.................................................................................. 61
8.12 Use of Proceeds..................................................................................... 61
8.13 Further Assurances.................................................................................. 61
8.14 INTENTIONALLY LEFT BLANK............................................................................ 62
8.15 Post-Closing Real Estate Matters.................................................................... 62
ARTICLE IX NEGATIVE COVENANTS...................................................................... 63
9.1 Limitation on Liens................................................................................. 63
9.2 Asset Dispositions, etc............................................................................. 65
9.3 Consolidations and Mergers.......................................................................... 66
9.4 Loans and Investments............................................................................... 66
9.5 Limitation on Indebtedness.......................................................................... 67
9.6 Transactions with Affiliates........................................................................ 68
9.7 Use of Proceeds..................................................................................... 69
9.8 Contingent Obligations.............................................................................. 69
9.9 Joint Ventures...................................................................................... 69
</TABLE>
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<TABLE>
<CAPTION>
Section Page
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9.10 Rental Obligations.................................................................................. 69
9.11 Restricted Payments................................................................................. 70
9.12 Minimum Interest Coverage........................................................................... 71
9.13 Maximum Leverage.................................................................................... 71
9.14 ERISA............................................................................................... 71
9.15 Modification of Certain Agreements.................................................................. 72
9.16 Negative Pledges, Restrictive Agreements, etc....................................................... 72
9.17 Maximum Capital Expenditures........................................................................ 72
9.18 Change in Business.................................................................................. 73
9.19 Accounting Changes.................................................................................. 73
9.20 Restructuring Costs................................................................................. 73
9.21 Receivables Facility................................................................................ 73
9.22 Marketing Costs..................................................................................... 73
ARTICLE X EVENTS OF DEFAULT....................................................................... 74
10.1 Event of Default.................................................................................... 74
(a) Non-Payment................................................................................ 74
(b) Representation or Warranty................................................................. 74
(c) Specific Defaults.......................................................................... 74
(d) Other Defaults............................................................................. 74
(e) Cross-Default.............................................................................. 74
(f) Insolvency; Voluntary Proceedings.......................................................... 74
(g) Involuntary Proceedings.................................................................... 75
(h) ERISA...................................................................................... 75
(i) Monetary Judgments......................................................................... 75
(j) Non-Monetary Judgments..................................................................... 75
(k) Change of Control.......................................................................... 76
(l) Impairment of Security etc................................................................. 76
(m) NEHC....................................................................................... 76
10.2 Remedies............................................................................................ 76
10.3 Rights Not Exclusive................................................................................ 77
ARTICLE XI THE AGENTS.............................................................................. 77
11.1 Appointment and Authorization....................................................................... 77
11.2 Delegation of Duties................................................................................ 77
11.3 Liability of Administrative Agent................................................................... 77
11.4 Reliance by Administrative Agent.................................................................... 78
11.5 Notice of Default................................................................................... 78
11.6 Credit Decision..................................................................................... 79
11.7 Indemnification of Administrative Agent............................................................. 79
11.8 Administrative Agent in Individual Capacity......................................................... 80
11.9 Successor Agent..................................................................................... 80
11.10 Withholding Tax..................................................................................... 80
</TABLE>
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<TABLE>
<CAPTION>
Section Page
<S> <C>
11.11 Collateral Matters.................................................................................. 82
11.12 Documentation Agent................................................................................. 82
ARTICLE XII MISCELLANEOUS........................................................................... 83
12.1 Amendments and Waivers.............................................................................. 83
12.2 Notices............................................................................................. 84
12.3 No Waiver; Cumulative Remedies...................................................................... 84
12.4 Costs and Expenses.................................................................................. 85
12.5 Company Indemnification............................................................................. 85
12.6 Payments Set Aside.................................................................................. 86
12.7 Successors and Assigns.............................................................................. 86
12.8 Assignments, Participations, etc.................................................................... 86
12.9 Confidentiality..................................................................................... 88
12.10 Set-off............................................................................................. 89
12.11 Automatic Debits of Fees............................................................................ 89
12.12 Notification of Addresses, Lending Offices, etc..................................................... 89
12.13 Counterparts........................................................................................ 89
12.14 Severability........................................................................................ 89
12.15 No Third Parties Benefited.......................................................................... 90
12.16 Governing Law and Jurisdiction...................................................................... 90
12.17 Waiver of Jury Trial................................................................................ 90
12.18 Entire Agreement.................................................................................... 91
</TABLE>
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<TABLE>
<S> <C>
SCHEDULES
Schedule 2.1 Commitments
Schedule 3.3 Existing Letters of Credit
Schedule 7.5 Litigation
Schedule 7.7 ERISA
Schedule 7.11 Permitted Obligations
Schedule 7.12 Environmental Matters
Schedule 7.15 Copyrights, Patents, Trademarks, Licenses and Related
Matters
Schedule 7.16 Subsidiaries and Minority Interests
Schedule 7.17 Insurance Matters
Schedule 9.1 Permitted Liens
Schedule 9.4 Existing Investments
Schedule 9.5 Permitted Indebtedness
Schedule 9.8 Contingent Obligations
Schedule 12.2 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Note
Exhibit E Form of Legal Opinion of Wachtell, Lipton, Rosen & Katz
Exhibit F Form of Legal Opinion of Kevin Rogan
Exhibit G Form of Assignment and Acceptance
Exhibit H Form of Guaranty
Exhibit I Form of NEHC Guaranty
Exhibit J Form of Borrowing Base Certificate
</TABLE>
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THIRD AMENDED AND RESTATED
CREDIT AGREEMENT
This THIRD AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of
May 21, 1998, among AmeriServe Food Distribution, Inc., a Delaware corporation
(the "Company"), the several financial institutions from time to time party to
this Agreement (collectively the "Lenders"; individually each a "Lender"), Bank
of America National Trust and Savings Association, as letter of credit issuing
bank, Bank of America National Trust and Savings Association, as administrative
agent for the Lenders, and Donaldson, Lufkin & Jenrette Securities Corporation,
as documentation agent.
WHEREAS, the Company, certain financial institutions, Bank of America
Illinois, as letter of credit issuing bank, and Bank of America National Trust
and Savings Association, as agent, are parties to a Second Amended and Restated
Credit Agreement dated as of July 11, 1997, as heretofore amended (as so
amended the "Existing Credit Agreement"); and
WHEREAS, the parties hereto have agreed to amend and restate the
Existing Credit Agreement so as to, among other things, (a) amend the pricing,
certain covenants and certain other provisions of the Existing Credit
Agreement, (b) permit the acquisition of ProSource, Inc., a Delaware
corporation and (c) revise in certain respects the composition of the lender
group; and
WHEREAS, the parties hereto intend that this Agreement and the Loan
Documents executed in connection herewith not effect a novation of the
obligations of the Company under the Existing Credit Agreement and the "Loan
Documents" (as defined in the Existing Credit Agreement), but merely a
restatement, and where applicable, an amendment to the terms governing such
obligations;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the Existing Credit Agreement shall be amended
and restated to read in its entirety as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. The following terms have the following
meanings:
Acquisition means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly,
in (a) the acquisition of all or substantially all of the assets of a
Person, or of any business or division of a Person, (b) the
acquisition of in excess of 50% of the capital stock, partnership
interests, membership interests or equity of any Person, or otherwise
causing any Person to become a Subsidiary, or (c) a merger or
consolidation or any other combination with another Person (other than
a Person that is a Subsidiary) provided that the Company or the
Subsidiary is the surviving entity.
Acquisition EBITDA means for any four fiscal quarter period,
if the Company makes an Acquisition during such period, the EBITDA of
such acquired entity as if the Acquisition had taken place on the
first day of such period.
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Adjusted EBITDA means as at the end of any fiscal quarter for
the Computation Period then ending (a) the Company's consolidated
EBITDA plus (b) Receivables Financing Costs to the extent deducted in
the calculation of EBITDA plus (c) any cash restructuring charges
which are reflected in the operating expenses of the Company's income
statement (but not in excess of $15,000,000 in fiscal year 1998,
$25,000,000 in fiscal year 1999 and $25,000,000 in fiscal year 2000)
plus (d) AmeriServe Marketing Program Costs which are reflected in
operating expenses taken between the date hereof and December 31, 1998
in an amount not in excess of $30,000,000 plus (e) ProSource Marketing
Program Costs which are reflected in operating expenses taken between
the date hereof and December 31, 1998 in an amount not to exceed
$25,000,000 plus (f) for the purpose of the Leverage Ratio only, LTM
EBITDA for any four fiscal quarter period ending on or before December
26, 1998 plus (g) costs reflected in operating expenses associated
with the J.D. Edwards computer system conversion so long as those
expenses represent integration costs and there is a corresponding
reduction in the amount of Capital Expenditures permitted for such
fiscal year pursuant to Section 9.17; provided that for the purpose of
the calculation of the Leverage Ratio only, Acquisition EBITDA (not
including any Acquisition EBITDA related to the ProSource Acquisition)
will be added in the calculation of Adjusted EBITDA; provided, further
that for the purpose of the calculation of the Leverage Ratio only,
for any calculations including the second fiscal quarter of 1998,
Adjusted EBI'IDA shall be calculated on a pro forma basis as if the
ProSource Acquisition had occurred on the first day of the second
fiscal quarter of 1998; and provided, further, that no amounts added
back to Consolidated Net Income pursuant to the definition of EBITDA
shall be added back a second time pursuant to this definition.
Adjusted Interest Expense means Interest Expense plus, without
duplication, Receivables Financing Costs.
Administrative Agent means B of A in its capacity as agent for
the Lenders hereunder, and any successor agent arising under Section
11.9.
Administrative Agent's Payment Office means the address for
payments set forth on Schedule 12.2 hereto in relation to the
Administrative Agent, or such other address as the Administrative
Agent may from time to time specify.
Affected Lender means any Lender that has given notice to the
Company (which has not been rescinded) of (i) any obligation by the
Company to pay any amount pursuant to Section 4.1 or 4.3 or (ii) the
occurrence of any circumstances of the nature described in Section
4.2.
Affiliate means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person. A Person shall be deemed to
control another Person if the controlling Person possesses, directly
or indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the
ownership of voting securities, membership
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interests, by contract, or otherwise, or in the case of any Lender
which is an investment fund, any other fund which is advised by the
same investment advisor or an Affiliate thereof.
Agent-Related Persons means B of A and any successor
Administrative Agent arising under Section 11.9 and any successor
letter of credit issuing bank hereunder, together with their
respective Affiliates (including, in the case of B of A, the
Arranger), and the officers, directors, employees, agents and
attorneys- in-fact of such Persons and Affiliates.
Agents means the Administrative Agent and the Documentation
Agent.
Agreement means this Credit Agreement.
AmeriServ Acquisition means the acquisition by the Company of
the stock of AmeriServ Food Company in January 1996.
AmeriServe Marketing Program Costs means Marketing Costs of
the Company and its Subsidiaries (other than ProSource and its
Subsidiaries).
Applicable Base Rate Margin means (a) initially, 0.75% and (b)
on and after any date specified below on which the Applicable Base
Rate Margin is to be adjusted the rate per annum set forth in the
table below opposite the applicable Leverage Ratio:
<TABLE>
<CAPTION>
LEVERAGE RATIO APPLICABLE BASE RATE MARGIN
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<S> <C>
Less than 2.0 to 1.0 0.25%
Less than 2.5 to 1.0 0.50%
but greater than or equal to 2.0 to 1.0
Less than 3.0 to 1.0 0.75%
but greater than or equal to 2.5 to 1.0
Less than 3.5 to 1.0 1.0%
but greater than or equal to 3.0 to 1.0
Equal to or greater than 3.5 to 1.0 1.25%
</TABLE>
The Applicable Base Rate Margin shall be adjusted, to the extent
applicable, 45 days (or, in the case of the last calendar quarter of
any year, 90 days) after the end of each calendar quarter, based on
the Leverage Ratio as of the last day of such calendar quarter
commencing with the calendar quarter ending December 26, 1998; it
being understood that if the Company fails to deliver the financial
statements as required by subsection 8.1(a) or 8.1(b), as applicable,
and the related Compliance Certificate required by subsection 8.2(b)
by the 45th day (or, if applicable, the 90th day) after any calendar
quarter the Applicable Base Rate Margin shall be 1.25% for any Loan
bearing interest based on the Base Rate until such financial
statements and Compliance Certificate are delivered.
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Applicable Offshore Rate Margin means (a) initially 2.00% and
(b) on and after any date specified below on which the Applicable
Offshore Rate Margin is to be adjusted the rate per annum set forth in
the table below opposite the applicable Leverage Ratio:
<TABLE>
<CAPTION>
LEVERAGE RATIO APPLICABLE OFFSHORE RATE MARGIN
-------------- -------------------------------
<S> <C>
Less than 2.0 to 1.0 1.50%
Less than 2.5 to 1.0 1.75%
but greater than or equal to 2.0 to 1.0
Less than 3.0 to 1.0 2.00%
but greater than or equal to 2.5 to 1.0
Less than 3.5 to 1.0 2.25%
but greater than or equal to 3.0 to 1.0
Equal to or greater than 3.5 to 1.0 2.50%
</TABLE>
The Applicable Offshore Rate Margin shall be adjusted, to the extent
applicable, 45 days (or, in the case of the last calendar quarter of
any year, 90 days) after the end of each calendar quarter, based on
the Leverage Ratio as of the last day of such quarter commencing with
the calendar quarter ending December 26, 1998; it being understood
that if the Company fails to deliver the financial statements required
by subsection 8.1(a) or 8.1(b), as applicable, and the related
Compliance Certificate required by subsection 8.2(b) by the 45th day
(or, if applicable, the 90th day) after any calendar quarter, the
Applicable Offshore Rate Margin shall be 2.50% for Loans bearing
interest based on the Offshore Rate until such financial statements
and Compliance Certificate are delivered.
Approved Bank has the meaning specified in the definition of
"Cash Equivalent Investments".
Arranger means BancAmerica Robertson Stephens, a Delaware
corporation.
Assignee has the meaning specified in subsection 12.8(a).
Attorney Costs means and includes all fees and disbursements
of any law firm or other external counsel, the allocated cost of
internal legal services and all disbursements of internal counsel.
Bankruptcy Code means the Federal Bankruptcy Reform Act of
1978 (11 U.S.C. Section 101, et seq.).
Base Rate means, for any day, the higher of: (a) 0.50% per
annum above the latest Federal Funds Rate; and (b) the rate of
interest in effect for such day as publicly announced from time to
time by B of A in San Francisco, California, as its "reference rate."
(The "reference rate" is a rate set by B of A based upon various
factors including B of A's costs and desired return, general economic
conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above, or below such
announced rate.)
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Any change in the reference rate announced by B of A shall
take effect at the opening of business on the day specified in the
public announcement of such change.
Base Rate Loan means a Loan that bears interest based on the
Base Rate or an L/C Advance.
BofA means Bank of America National Trust and Savings
Association, a national banking association.
Borrowing means a borrowing hereunder consisting of Loans of
the same Type made to the Company on the same day by the Lenders under
Article II, and, other than in the case of Base Rate Loans, having the
same Interest Period.
Borrowing Base means an amount equal to 60% of the net amount
(after deduction of such reserves and allowances as the Administrative
Agent or the Required Lenders reasonably deem proper and necessary
based on customary credit and collection criteria utilized by asset
based lenders) of the Eligible Inventory, as set forth in the most
recent Borrowing Base Certificate.
Borrowing Base Certificate means a certificate in
substantially the form attached hereto as Exhibit J.
Borrowing Date means any date on which a Borrowing occurs
under Section 2.3.
Business Day means any day other than a Saturday, Sunday or
other day on which commercial banks in San Francisco are authorized or
required by law to close and, if the applicable Business Day relates
to any Offshore Rate Loan, means such a day on which dealings are
carried on in the applicable offshore dollar interbank market.
Capital Adequacy Regulation means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
Capital Expenditures means all expenditures which, in
accordance with GAAP, would be required to be capitalized and shown on
the consolidated balance sheet of the Company, but (i) excluding
expenditures made in connection with the replacement, substitution or
restoration of assets to the extent financed (A) from insurance
proceeds (or other similar recoveries) paid on account of the loss of
or damage to the assets being replaced or restored or (B) with awards
of compensation arising from the taking by eminent domain or
condemnation of the assets being replaced and (ii) excluding
expenditures incurred by the creation of Capitalized Lease Obligations
and financed thereby.
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Capitalized Lease Obligations means all monetary obligations
of the Company or any of its Subsidiaries under any leasing or similar
arrangement which, in accordance with GAAP, would be classified as
capitalized leases, and, for purposes of this Agreement and each other
Loan Document, the amount of such obligations shall be the capitalized
amount thereof, determined in accordance with GAAP, and the stated
maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which
such lease may be terminated by the lessee without payment of a
penalty.
Cash Collateralize means to pledge and deposit with or deliver
to the Administrative Agent, for the benefit of the Agents, the
Issuing Lender and the Lenders, as additional collateral for the L/C
Obligations, cash or deposit account balances pursuant to
documentation in form and substance satisfactory to the Administrative
Agent and the Issuing Lender (which documents are hereby consented to
by the Lenders). Derivatives of such term shall have a corresponding
meaning. The Company hereby grants the Administrative Agent, for the
benefit of the Agents, the Issuing Lender and the Lenders, a security
interest in all such cash and deposit account balances. Cash
collateral shall be maintained in blocked, interest bearing deposit
accounts at B of A.
Cash Equivalent Investments shall mean (i) securities issued
or directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is pledged in
support thereof) having maturities of not more than one year from the
date of acquisition, (ii) marketable direct obligations issued by any
State of the United States of America or any local government or other
political subdivision thereof rated (at the time of acquisition of
such security) at least BBB by Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. ("S&P") or Baa2 the
equivalent thereof by Moody's Investors Service, Inc. ("Moody's")
having maturities of not more than one year from the date of
acquisition, (iii) U.S. dollar denominated time deposits, certificates
of deposit and bankers' acceptances of (x) any Lender, (y) any
domestic commercial bank of recognized standing having capital and
surplus in excess of $250,000,000 or (z) any bank whose short-term
commercial paper rating (at the time of acquisition of such security)
by S&P of at least A-2 or the equivalent thereof (any such bank, an
"Approved Bank"), in each case with maturities of not more than six
months from the date of acquisition, (iv) commercial paper and
variable or fixed rate notes issued by any Lender or Approved Bank or
by the parent company of any Lender or Approved Bank and commercial
paper and variable rate notes issued by, or guaranteed by, any
industrial or financial company with a short-term commercial paper
rating (at the time of acquisition of such security) of at least A-2
or the equivalent thereof by S&P or at least P-2 or the equivalent
thereof by Moody's, or guaranteed by any industrial company with a
long-term unsecured debt rating (at the time of acquisition of such
security) of at least BBB or the equivalent thereof by S&P or at least
Baa2 or the equivalent thereof by Moody's and in each case maturing
within one year after the date of acquisition, (v) repurchase
agreements with any Lender or any primary dealer maturing within one
year from the date of acquisition that are fully
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<PAGE> 14
collateralized by investment instruments that would otherwise be Cash
Equivalent Investments; provided that the terms of such repurchase
agreements comply with the guidelines set forth in the Federal
Financial Institutions Examination Council Supervisory Policy --
Repurchase Agreements of Depository Institutions With Securities
Dealers and Others, as adopted by the Comptroller of the Currency on
October 31, 1985 and (vi) loan participations in aggregate of no more
than $10,000,000 having maturities of not more than 30 days from the
date of the acquisition.
Change of Control means the failure of (a) Holberg or its
shareholders, or any thereof, to own directly or indirectly, in excess
of 50% of the voting power of all issued and outstanding shares of
stock of the Company; (b) NEHC to own directly 100% of the outstanding
shares of voting stock of the Company (other than shares under stock
options held by, or issued under stock options to, directors,
officers, employees and former directors not in excess of 10% of the
shares of voting stock of the Company); or (c) Holberg Inc. or its
shareholders as of the date hereof, or any thereof, to own at least
50% of the outstanding shares of voting stock of Holberg. For
purposes of this definition, voting stock of a corporation shall not
include capital stock of such corporation if such stock has only the
minimal voting rights required by such corporation's jurisdiction of
organization with respect to any capital stock issued by such
corporation.
Closing Date means the date on which all conditions precedent
set forth in Sections 6.1 and 6.2 are satisfied or waived by all
Lenders.
Code means the Internal Revenue Code of 1986, and regulations
promulgated thereunder.
Collateral means any collateral granted to the Administrative
Agent for the benefit of the Agents, or the Lenders, to secure the
Obligations of the Company, or any Guarantor, under any Loan Document.
Collateral Documents means the Security Agreement, the Pledge
Agreement, the Subsidiary Pledge Agreement, the Trademark Security
Agreement, the NEHC Pledge Agreement, the ProSource Trademark Security
Agreement and the Mortgages.
Commitment means, as to each Lender, the commitment of such
Lender to make Loans pursuant to Section 2.1. The initial amount of
each Lender's Commitment is set forth in Schedule 2.1.
Commitment Fee Rate means 0.50%.
Compliance Certificate means a certificate substantially in
the form of Exhibit C.
Computation Period means as at any fiscal quarter end, the
period of four consecutive quarters then ending or in the case of the
Interest Coverage Ratio, if shorter, the period commencing on the
first day of the third fiscal quarter of 1998.
7
<PAGE> 15
Consolidated Net Income means, with respect to the Company and
its Subsidiaries for any period, the net income (or loss) of the
Company and its Subsidiaries for such period.
Contingent Obligation means, as to any Person, any direct or
indirect liability of that Person, whether or not contingent, with or
without recourse, (a) with respect to any Indebtedness, lease,
dividend (declared and not paid), letter of credit or other obligation
(the "primary obligations") of another Person (the "primary obligor"),
including any obligation of that Person (i) to purchase, repurchase or
otherwise acquire such primary obligations or any security therefor,
(ii) to advance or provide funds for the payment or discharge of any
such primary obligation, or to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth
or solvency or any balance sheet item, level of income or financial
condition of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (iv) otherwise to
assure or hold harmless the holder of any such primary obligation
against loss in respect thereof (each, a "Guaranty Obligation"); (b)
with respect to any Surety Instrument (other than any Letter of
Credit) issued for the account of that Person or as to which that
Person is otherwise liable for reimbursement of drawings or payments;
(c) to purchase any materials, supplies or other property from, or to
obtain the services of, another Person if the relevant contract or
other related document or obligation requires that payment for such
materials, supplies or other property, or for such services, shall be
made regardless of whether delivery of such materials, supplies or
other property is ever made or tendered, or such services are ever
performed or tendered; or (d) with respect to any Hedging Agreement.
The amount of any Contingent Obligation shall, in the case of Guaranty
Obligations, be deemed equal to the stated or determinable amount of
the primary obligation in respect of which such Guaranty Obligation is
made or, if not stated or if indeterminable, the maximum reasonably
anticipated liability in respect thereof, and in the case of other
Contingent Obligations, shall be equal to the maximum reasonably
anticipated liability in respect thereof.
Contractual Obligation means, as to any Person, any provision
of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other
instrument, document or agreement to which such Person is a party or
by which it or any of its property is bound.
Conversion/Continuation Date means any date on which, under
Section 2.4, the Company (a) converts Loans of one Type to another
Type, or (b) continues as Loans of the same Type, but with a new
Interest Period, Loans having Interest Periods expiring on such date.
Corporate Allocations means the amount paid by the Company to
Holberg for managerial and administration services performed by
Holberg for the Company.
8
<PAGE> 16
Credit Extension means and includes (a) the making of any
Loans hereunder, and (b) the Issuance of any Letters of Credit
hereunder (including the Existing Letters of Credit).
Default means any event or circumstance which, with the giving
of notice, the lapse of time, or both, would (if not cured or
otherwise remedied during such time) constitute an Event of Default.
DU means Donaldson, Lufkin & Jenrette Securities Corporation.
Documentation Agent means Donaldson, Lufkin & Jenrette
Securities Corporation in its capacity as documentation agent for the
Lenders hereunder.
Dollars, dollars and $ each mean lawful money of the United
States.
EBITDA means, for any Computation Period, the sum of
(a) Consolidated Net Income of the Company for such
period excluding, to the extent reflected in determining such
Consolidated Net Income, extraordinary gains and losses for such
period and non-recurring gains and charges,
plus
(b) to the extent deducted in determining Consolidated
Net Income, Interest Expense, income tax expense, depreciation,
depletion and amortization for such period.
Effective Amount means (i) with respect to any Loans on any
date, the aggregate outstanding principal amount thereof after giving
effect to any Borrowings and prepayments or repayments of Loans
occurring on such date; and (ii) with respect to any outstanding L/C
Obligations on any date, the amount of such L/C Obligations on such
date after giving effect to any Issuances of Letters of Credit
occurring on such date and any other changes in the aggregate amount
of the L/C Obligations as of such date, including as a result of any
reimbursements of outstanding unpaid drawings under any Letters of
Credit or any reductions in the maximum amount available for drawing
under Letters of Credit taking effect on such date.
Eligible Assignee means (i) a commercial bank organized under
the laws of the United States, or any state thereof, and having a
combined capital and surplus of at least $100,000,000; (ii) a
commercial bank organized under the laws of any other country which is
a member of the Organization for Economic Cooperation and Development
(the "OECD"), or a political subdivision of any such country, and
having a combined capital and surplus of at least $100,000,000,
provided that such bank is acting through a branch or agency located
in the country in which it is organized or another country which is
also a member of the OECD; and (iii) a Person that is primarily
engaged in the business of commercial banking and that is (A) a
Subsidiary of a Lender, (B) a Subsidiary of a Person of which a Lender
is a Subsidiary, or (C) a Person of which a Lender is a Subsidiary.
9
<PAGE> 17
Eligible Inventory means, at the time of any determination
thereof, all Inventory of the Company or any of its Subsidiaries
arising in the ordinary course of business of such Company or
Subsidiary, calculated on a FIFO basis (except the Inventory of
ProSource may be calculated on a weighted moving average basis until
the J.D. Edwards software conversion is completed), as to which the
following requirements have been fulfilled to the reasonable
satisfaction of the Administrative Agent:
(a) the Company or such Subsidiary has lawful and
absolute title to such Inventory;
(b) the Company or such Subsidiary has the full and
unqualified right to assign and grant a Lien in such Inventory to the
Administrative Agent as security for the Obligations and any
obligations arising under Hedging Agreements;
(c) pursuant to the Security Agreement, all of such
Inventory is subject to a Lien in favor of the Agent for the benefit
of the Lenders, which Lien would be prior to the rights of, and
enforceable as such against, any other Person other than any rights
under contract or law of any lessor of premises on which the Inventory
is located provided that the value of Eligible Inventory shall be
calculated net of any such rights, which rights shall be assumed to be
equal to two months rent unless otherwise determined by the Company or
the Administrative Agent;
(d) none of the Inventory is subject to any Lien in favor
of any Person other than the Lien of the Administrative Agent pursuant
to the Security Agreement, other than any rights under contract or law
of any lessor of premises on which the Inventory is located provided
that the value of Eligible Inventory shall be calculated net of any
such rights, which rights shall be assumed to be equal to two months
rent unless otherwise demonstrated by the Company or the
Administrative Agent;
(e) none of such Inventory is obsolete, unsalable,
damaged, or otherwise unfit for sale or further processing;
(f) the use of all of such Inventory complies with the
rules and regulations of the Federal Fair Labor Standards Act of 1932
(including Sections 206 and 207 thereof), and any rules or regulations
promulgated thereunder;
(g) none of such Inventory includes an earned rebate or,
to the extent it does, such portion that represents an earned rebate
shall not be included in the calculation of the amount of the Eligible
Inventory;
(h) such Inventory is recorded net of cash discounts
taken from vendors; and
(i) such Inventory includes a freight adjustment only to
the extent it is actually incurred.
10
<PAGE> 18
Any Inventory which is at any time Eligible Inventory, but which subsequently
falls to meet any of the foregoing requirements, shall forthwith cease to be
Eligible Inventory.
Environmental Claims means all claims, however asserted, by
any Governmental Authority or other Person alleging potential
liability or responsibility for violation of any Environmental Law, or
for release or injury to the environment.
Environmental Laws means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any
Governmental Authorities, in each case relating to environmental,
health, safety and land use matters.
ERISA means the Employee Retirement Income Security Act of
1974, as amended, and regulations promulgated thereunder.
ERISA Affiliate means any trade or business (whether or not
incorporated) under common control with the Company within the meaning
of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of
the Code for purposes of provisions relating to Section 412 of the
Code).
ERISA Event means (a) a Reportable Event with respect to a
Pension Plan; (b) the failure to make a required contribution to a
Pension Plan if such failure is sufficient to give rise to a Lien
under Section 302(f) of ERISA; (c) a withdrawal by the Company or any
ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA
during a plan year in which it was a substantial employer (as defined
in Section 4001 (a)(2) of ERISA) or a cessation of operations which is
treated as such a withdrawal under Section 4062(e) of ERISA; (d) a
complete or partial withdrawal by the Company or any ERISA Affiliate
from a Multiemployer Plan or notification that a Multiemployer Plan is
in reorganization; (e) the filing of a notice of intent to terminate,
the treatment of a Plan amendment as a termination under Section 4041
or 4041A of ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (f) an event or
condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan or Multiemployer Plan; or
(g) the imposition of any liability under Title IV of ERISA, other
than PBGC premiums due but not delinquent under Section 4007 of ERISA,
upon the Company or any ERISA Affiliate.
Event of Default means any of the events or circumstances
specified in Section 10.1.
Exchange Act means the Securities and Exchange Act of 1934,
and regulations promulgated thereunder.
Existing Credit Agreement has the meaning specified in the
recitals.
11
<PAGE> 19
Existing Letters of Credit means the letters of credit
described in Schedule 3.3.
Federal Funds Rate means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of New
York (including any such successor, "H.15(519)") on the preceding
Business Day opposite the caption "Federal Funds (Effective)"; or, if
for any relevant day such rate is not so published on any such
preceding Business Day, the rate for such day will be the arithmetic
mean as determined by the Administrative Agent of the rates for the
last transaction in overnight Federal funds arranged prior to 9:00
a.m. (New York City time) on that day by each of three leading brokers
of Federal funds transactions in New York City selected by the
Administrative Agent.
Fee Letter has the meaning specified in subsection 2.10(a).
FRB means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
GAAP means generally accepted accounting principles set forth
from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting
profession); provided that for the purpose of calculating any
financial covenant or financial ratio, GAAP shall mean such generally
accepted accounting principles which are applicable to the
circumstances as of the date hereof and provided further that upon a
change in GAAP which would, if applicable, affect the calculation of
financial covenants or financial ratios, the parties shall discuss the
amendment of such covenants and ratios and the definition of GAAP.
Governmental Authority means any nation or government, any
state or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
Guarantor means (a) NEHC; (b) as of the date hereof, each
Subsidiary listed on Schedule 7.16; and (c) thereafter, the Persons
referred to in clauses (a) and (b) and each other Person which from
time to time executes and delivers a counterpart of the Guaranty.
Guaranty means the guaranty of the Guarantors (other than
NEHC) in substantially the form of Exhibit H.
Guaranty Obligation has the meaning specified in the
definition of Contingent Obligation.
12
<PAGE> 20
Hedging Agreement means any agreement (including any master
agreement and any agreement, whether or not in writing, relating to
any single transaction) that is an interest rate swap agreement, basis
swap, forward rate agreement, commodity swap, commodity option, equity
or equity index swap or option, bond option, interest rate option,
forward foreign exchange agreement, rate cap, collar or floor
agreement, currency swap agreement, cross-currency rate swap
agreement, swaption, currency option or any other, similar agreement
(including any option to enter into any of the foregoing).
Holberg means Holberg Industries, Inc., a Delaware
corporation.
Honor Date has the meaning specified in subsection 3.3(c).
Impermissible Qualification means, relative to the opinion or
certification of any independent public accountant as to any financial
statement of any Obligor, any qualification or exception to such
opinion or certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of
matters relevant to such financial statement; or
(c) which relates to the treatment or classification of
any item in such financial statement and which, as a condition to its
removal, would require an adjustment to such item the effect of which
would be to cause such Obligor to be in default of any of its
obligations under Sections 9.12 or 9.13.
Indebtedness of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued,
undertaken or assumed as the deferred purchase price of property or
services (other than trade payables entered into in the ordinary
course of business on ordinary terms); (c) all non-contingent
reimbursement or payment obligations with respect to Surety
Instruments (it being understood that undrawn letters of credit are
contingent reimbursement obligations); (d) all obligations evidenced
by notes, bonds, debentures or similar instruments, including
obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses; (e) all indebtedness created or
arising under any conditional sale or other title retention agreement,
or incurred as financing, in either case with respect to property
acquired by the Person (even though the rights and remedies of the
seller or bank under such agreement in the event of default are
limited to repossession or sale of such property); (f) all Capital
Lease Obligations; (g) all net obligations with respect to Hedging
Agreements; (h) all indebtedness referred to in clauses (a) through
(g) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Lien
upon or in property (including accounts and contracts rights) owned by
such Person, even though such Person has not assumed or become liable
for the payment of such Indebtedness; and (i) all Guaranty Obligations
in respect of indebtedness or obligations of others of the kinds
referred to in clauses (a) through (g) above.
13
<PAGE> 21
Indemnified Obligations has the meaning specified in Section
12.5.
Indemnified Person has the meaning specified in Section 12.5.
Independent Auditor has the meaning specified in Section
8.l(b).
Initial Financial Projections means the projections provided
to the Lenders prior to the date hereof included in the Information
Memorandum dated May, 1998.
Insolvency Proceeding means (a) any case, action or proceeding
before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidation, receivership,
dissolution, winding- up or relief of debtors, or (b) any general
assignment for the benefit of creditors, composition, marshaling of
assets for creditors, or other, similar arrangement in respect of its
creditors generally or any substantial portion of its creditors;
undertaken under U.S. federal, state or foreign law, including the
Bankruptcy Code.
Intercreditor Agreement means the Intercreditor Agreement
dated as of July 11, 1997 between the Administrative Agent and Norwest
Bank Minnesota, National Association as Trustee under the Pooling and
Servicing Agreement, as affirmed as of the date hereof.
Interest Coverage Ratio means, for the Computation Period most
recently ended on or before such date, the ratio of (a) Adjusted
EBITDA for such Computation Period to (b) Adjusted Interest Expense
for such Computation Period.
Interest Expense means, for any period, the consolidated
interest expense (calculated without offset for interest income) of
the Company and its Subsidiaries for such period including interest
expense related to Capitalized Lease Obligations.
Interest Payment Date means, as to any Loan other than a Base
Rate Loan, the last day of each Interest Period applicable to such
Loan and, as to any Base Rate Loan, the last Business Day of each
calendar quarter; provided,however, that if any Interest Period for an
Offshore Rate Loan exceeds three months, the date that falls three
months after the beginning of such Interest Period is also an Interest
Payment Date.
Interest Period means, as to any Offshore Rate Loan, the
period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as an Offshore Rate Loan, and ending on the date one, two,
three or six months thereafter as selected by the Company in its
Notice of Borrowing or Notice of Conversion/Continuation;
provided that:
14
<PAGE> 22
(i) if any Interest Period would otherwise end on
a day that is not a Business Day, that Interest Period shall
be extended to the following Business Day unless the result of
such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period
shall end on the preceding Business Day;
(ii) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest
Period; and
(iii) no Interest Period shall extend beyond the
Revolving Termination Date.
Inventory means all goods now or hereafter (a) held by the
Company or any of its Subsidiaries for sale or lease, (b) furnished or
to be furnished by the Company or any of its Subsidiaries to a third
party under any contract of service, (c) held by the Company or any of
its Subsidiaries as raw materials or work in process or (d) used or
consumed by the Company or any of its Subsidiaries in the ordinary
course of business.
Invested Amount means, at any time, the outstanding principal
amount that is owed to holders (other than Subsidiaries of the
Company) of securities issued by, or loans to, the trust established
under the Pooling and Servicing Agreement or any other trust
established with respect to a Qualified Receivables Transaction.
IRS means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
Issuance Date has the meaning specified in subsection 3.1(a).
Issue means, with respect to any Letter of Credit, to
incorporate the Existing Letters of Credit into this Agreement, or to
issue or to extend the expiry of, or to renew or increase the amount
of, such Letter of Credit; and the terms "Issued," "Issuing" and
"Issuance" have corresponding meanings.
Issuing Lender means B of A in its capacity as issuer of one
or more Letters of Credit hereunder, together with any replacement
letter of credit issuer arising under subsection 11.1(b) or Section
11.9.
Joint Venture means a single-purpose corporation, partnership,
limited liability company, joint venture or other similar legal
arrangement (whether created by contract or conducted through a
separate legal entity) now or hereafter formed by the Company or any
of its Subsidiaries with another Person in order to conduct a common
venture or enterprise with such Person. No Receivables Subsidiary or
Special Purpose Vehicle shall be considered a Joint Venture.
15
<PAGE> 23
L/C Advance means each Lender's participation in any L/C
Borrowing in accordance with its Percentage.
L/C Amendment Application means an application form for
amendment of outstanding standby or commercial documentary letters of
credit as shall at any time be in use at the Issuing Lender, as the
Issuing Lender shall request.
L/C Application means an application form for issuances of
standby or commercial documentary letters of credit as shall at any
time be in use at the Issuing Lender, as the Issuing Lender shall
request.
L/C Borrowing means an extension of credit resulting from a
drawing under any Letter of Credit which shall not have been
reimbursed on the date when made nor converted into a Borrowing of
Loans under subsection 3.3(c).
L/C Commitment means the commitment of the Issuing Lender to
Issue, and the commitment of the Lenders severally to participate in
Letters of Credit (including the Existing Letters of Credit) from time
to time Issued or outstanding under Article III, in an aggregate
amount not to exceed on any date the amount of $50,000,000, as the
same shall be reduced as a result of a reduction in the L/C Commitment
pursuant to Section 2.5; provided that the L/C Commitment is a part of
the combined Commitments, rather than a separate, independent
commitment.
L/C Fee Rate means, at any time, the Applicable Offshore Rate
Margin; provided that each of the foregoing rates shall be increased
by 2 % at any time an Event of Default exists.
L/C Obligations means, at any time, the sum of (a) the
aggregate undrawn amount of all Letters of Credit then outstanding,
plus (b) the amount of all unreimbursed drawings under all Letters of
Credit, including all outstanding L/C Borrowings.
L/C-Related Documents means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other document
relating to any Letter of Credit, including any of the Issuing
Lender's standard form documents for letter of credit issuances.
Lender has the meaning specified in the introductory clause
hereto. References to the "Lenders" shall include B of A, including
in its capacity as Issuing Lender; for purposes of clarification only,
to the extent that B of A may have any rights or obligations in
addition to those of the Lenders due to its status as Issuing Lender,
its status as such will be specifically referenced.
Lending Office means, as to any Lender, the office or offices
of such Lender specified as its "Lending Office" or "Domestic Lending
Office" or "Offshore Lending
16
<PAGE> 24
Office", as the case may be, on Schedule 12.2, or such other office or
offices as such Lender may from time to time notify the Company and
the Agent.
Letters of Credit means the Existing Letters of Credit and any
letters of credit (whether standby letters of credit or commercial
documentary letters of credit) Issued by the Issuing Lender pursuant
to Article III.
Leverage Ratio means, as at any fiscal quarter end for the
Company and its Subsidiaries on a consolidated basis, the ratio of
(i) Senior Secured Debt as of such fiscal quarter end
to
(ii) Adjusted EBITDA.
Lien means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement of
any kind or nature whatsoever in respect of any property (including
those created by, arising under or evidenced by any conditional sale
or other title retention agreement, the interest of a lessor under a
capital lease, any financing lease having substantially the same
economic effect as any of the foregoing, or the filing of any
financing statement naming the owner of the asset to which such lien
relates as debtor, under the Uniform Commercial Code or any comparable
law) and any contingent or other agreement to provide any of the
foregoing, but not including the interest of a lessor under an
operating lease.
Loan has the meaning specified in Section 2.1, and may be a
Base Rate Loan or an Offshore Rate Loan (each a "Type" of Loan).
Loan Documents means this Agreement, any Notes, the Fee
Letter, the L/C-Related Documents, the Pledge Agreement, the
Subsidiary Pledge Agreements, the Guaranty, the NEHC Guaranty, the
Security Agreement, the Trademark Security Agreement, the ProSource
Trademark Security Agreement the Mortgages, and all other documents
delivered to the Agent or any Lender in connection herewith.
LTM EBITDA means (a) $112,013,000 for the four fiscal quarter
period ended the end of the second fiscal quarter of 1998, (b)
$74,676,000 for the four fiscal quarter period ended the end of the
third fiscal quarter of 1998 and (c) $37,338,000 for the four fiscal
quarter period ended with the end of the fourth fiscal quarter of
1998.
Marketing Costs means expenses on the Company's consolidated
income statement or reductions of balance sheet reserves arising in
conjunction with the entering into by the Company and its Subsidiaries
of service agreements with certain customers.
17
<PAGE> 25
Margin Stock means margin stock" as such term is defined in
Regulation T, U or X of the FRB.
Material Adverse Effect means (a) a material adverse change
in, or a material adverse effect upon, the operations, business,
properties, condition (financial or otherwise) or prospects of the
Company or the Company and its Subsidiaries taken as a whole; (b) a
material impairment of the ability of the Company, NEHC or any
Subsidiary to perform under any Loan Document and to avoid any Event
of Default; or (c) a material adverse effect upon the legality,
validity, binding effect or enforceability against the Company or any
Subsidiary of any Loan Document.
Moody's has been specified in the definition of "Cash
Equivalent Investments".
Mortgage means a mortgage, leasehold mortgage, deed of trust
or similar document granting a Lien on real property in appropriate
form for filing or recording in the applicable jurisdiction and
otherwise reasonably satisfactory to the Administrative Agent.
Mortgaged Property means the real property subject to a
Mortgage.
Multiemployer Plan means a "multiemployer plan", within the
meaning of Section 4001(a)(3) of ERISA, to which the Company or any
ERISA Affiliate may have any liability.
NEHC means Nebco Evans Holding Company, a Delaware
corporation.
NEHC Guaranty means the guaranty of NEHC in substantially the
form of Exhibit I.
NEHC Pledge Agreement means the Amended and Restated Pledge
Agreement dated the date hereof between NEHC and the Administrative
Agent.
Note means a promissory note executed by the Company in favor
of a Lender pursuant to subsection 2.2(b), in substantially the form
of Exhibit D.
Notice of Borrowing means a notice in substantially the form
of Exhibit A.
Notice of Conversion/Continuation means a notice in
substantially the form of Exhibit B.
Obligations means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan Document
owing by the Company or any Subsidiary to any Lender, the Agent, or
any Indemnified Person, whether direct or indirect (including those
acquired by assignment), absolute or contingent, due or to become due,
now existing or hereafter arising.
OECD has the meaning specified in the definition of "Eligible
Assignee."
18
<PAGE> 26
Offshore Rate means, for any Interest Period, with respect to
Offshore Rate Loans comprising part of the same Borrowing, the rate of
interest per annum (rounded upward to the next 1/16th of 1%)
determined by the Administrative Agent as follows:
<TABLE>
<S> <C>
Offshore Rate = IBOR
--------------------------------------
1.00 - Eurodollar Reserve Percentage
</TABLE>
where,
Eurodollar Reserve Percentage means for any day for any
Interest Period the maximum reserve percentage (expressed as a
decimal, rounded upward to the next 1/100th of 1%) in effect
on such day (whether or not applicable to any Lender) under
regulations issued from time to time by the FRB for
determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement)
with respect to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities"); and
IBOR means the rate of interest per annum determined by the
Agent as the rate at which dollar deposits in the approximate
amount of B of A's Offshore Rate Loan for such Interest Period
would be offered by B of A's Grand Cayman Branch, Grand Cayman
B.W.I. (or such other office as may be designated for such
purpose by B of A), to major banks in the offshore dollar
interbank market at their request at approximately 12:00 noon
(New York City time) two Business Days prior to the
commencement of such Interest Period.
The Offshore Rate shall be adjusted automatically as
to all Offshore Rate Loans then outstanding as of the
effective date of any change in the Eurodollar Reserve
Percentage.
Offshore Rate Loan means a Loan that bears interest based on
the Offshore Rate.
Organization Documents means, for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate
of determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement,
and all applicable resolutions of the board of directors (or any
committee thereof) of such corporation.
Other Taxes means any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies
which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Documents.
Participant has the meaning specified in subsection 12.8(d).
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PBGC means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions
under ERISA.
Pension Plan means a pension plan (as defined in Section 3(2)
of ERISA) subject to Title IV of ERISA, other than a Multiemployer
Plan, with respect to which a Company or any ERISA Affiliate may have
any liability.
Percentage means, as to any Lender, the percentage which (a)
the amount of such Lender's Commitment is of (b) the aggregate amount
of all of the Lenders' Commitments.
Permitted Indebtedness has the meaning specified in Section
9.5.
Permitted Liens has the meaning specified in Section 9.1.
Person means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
PFS means PFS, a division of the PepsiCo, Inc.
PFS Acquisition means the acquisition of PFS by the Company
pursuant to the PFS Acquisition Agreement.
PFS Acquisition Agreement means the Asset Purchase Agreement
between PepsiCo, Inc. and NEHC dated May 23, 1997.
Plan means an employee benefit plan (as defined in Section
3(3) of ERISA) which the Company sponsors or maintains or to which the
Company makes, is making, or is obligated to make contributions and
includes any Pension Plan.
Pledge Agreement means the Amended and Restated Pledge
Agreement dated the date hereof between the Company and the
Administrative Agent.
Pooling and Servicing Agreement means the Pooling and
Servicing Agreement dated as of July 1, 1997 among AmeriServe Funding
Corporation, AmeriServe Food Distribution, Inc., and Norwest Bank
Minnesota, National Association, as Trustee, as amended, amended and
restated, supplemented or otherwise modified from time to time.
Preferred Stock means preferred stock of the Company issued on
terms acceptable to the Required Lenders.
ProSource has the meaning specified in the recitals.
ProSource Acquisition means the acquisition of ProSource by
the Company pursuant to the ProSource Acquisition Agreement.
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ProSource Acquisition Agreement means the Agreement and Plan
of Merger by and among the Company, Steamboat Acquisition Corp. and
ProSource dated as of January 29, 1998.
ProSource Marketing Program Costs mean Marketing Costs of
ProSource and its Subsidiaries.
ProSource Trademark Security Agreement means the Trademark
Security Agreement dated the date hereof between ProSource and the
Administrative Agent.
Purchase Money Note means a promissory note evidencing the
obligation of a Receivables Subsidiary to pay all or any portion of
the purchase price for Receivables and other Receivables Program
Assets to the Company or any other Receivables Seller in connection
with a Qualified Receivables Transaction, which note shall be repaid
from cash available to the maker of such note, other than (i) cash
required to be held as reserves pursuant to Receivables Documents,
(ii) amounts paid in respect of interest, principal and (iii) other
amounts owing under Receivables Documents and amounts paid in
connection with the purchase of newly generated Receivables.
Qualified Receivables Transaction means (i) the Receivables
Bridge Facilities and (ii) any transaction or series of transactions
that may be entered into by the Company and/or any Subsidiary pursuant
to which the Company and/or any Subsidiary may sell, convey or
otherwise transfer to a Receivables Subsidiary (in the case of a
transfer by the Company and/or any other Receivables Seller) and any
other Person (in the case of a transfer by a Receivables Subsidiary),
or may grant a security interest in, any Receivables Program Assets
(whether now existing or arising in the future); provided that:
(a) no portion of the indebtedness or any other obligations
(contingent or otherwise) of a Receivables Subsidiary or Special
Purpose Vehicle (i) is guaranteed by the Company or any other
Receivables Seller (excluding guarantees of obligations pursuant to
Standard Securitization Undertakings), (ii) is recourse to or
obligates the Company or any other Receivables Seller in any way other
than pursuant to Standard Securitization Undertakings or (iii)
subjects any property or asset of the Company or any other Receivables
Seller, directly or indirectly, contingently or otherwise, to the
satisfaction of obligations incurred in such transactions, other than
pursuant to Standard Securitization Undertakings;
(b) neither the Company nor any other Receivables Seller has
any material contract, agreement, arrangement or understanding with a
Receivables Subsidiary or a Special Purpose Vehicle (except in
connection with a Purchase Money Note or Qualified Receivables
Transaction) other than on terms no less favorable to the Company or
such Receivables Seller than those that might be obtained at the time
from Persons that are not affiliates of the Company, other than fees
payable in the ordinary course of business in connection with
servicing accounts receivable; and
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(c) the Company and the other Receivables Sellers do not have
any obligation to maintain or preserve the financial condition of a
Receivables Subsidiary or a Special Purpose Vehicle or cause such
entity to achieve certain levels of operating results.
Receivable Stated Amount means, with respect to a Receivables
Investor Instrument, the maximum amount of the funding commitment with
respect thereto.
Receivables means all rights of the Company or any other
Receivables Seller to payments (whether constituting accounts, chattel
paper, instruments, general intangibles or otherwise) arising from the
sale of goods, services or future services by the Company and/or a
Receivables Seller, and includes the right to payment of any interest
or finance charge and other obligations with respect thereto and any
other rights to payment recorded as a receivable.
Receivables Bridge Facilities means the Receivables Documents
in effect at, or becoming effective contemporaneously with, the
Closing Date.
Receivables Documents means (x) each and every receivables
purchase agreement, pooling and servicing agreement, series supplement
thereto, certificate purchase agreement, guaranty, Purchase Money
Note, license agreement, sublicense agreement, credit agreement,
agreement to acquire undivided interests or other agreement to
transfer, or create a security interest in, Receivables Program
Assets, in each case as amended, modified, supplemented or amended and
restated and in effect from time to time entered into by the Company,
another Receivables Seller and/or a Receivables Subsidiary, and (y)
each other instrument, agreement and other document entered into by
the Company, any other Receivables Seller and/or a Receivables
Subsidiary relating to the transactions contemplated by the items
referred to in clause (x) above, in each case as amended, modified,
supplemented or amended and restated and in effect from time to time.
Receivables Financing Costs means any loss attributable to the
sale of Receivables Program Assets.
Receivables Investor Instruments means trust certificates,
purchased interests or any other securities, instruments or agreements
evidencing an interest in the Receivables Program Assets held by a
Person other than the Company and its Subsidiaries (excluding
Receivables Subsidiaries).
Receivables Program Assets means (a) all Receivables which are
described as being transferred by the Company, another Receivables
Seller and/or a Receivables Subsidiary pursuant to the Receivables
Documents, (b) all Receivables Related Assets, and (c) all collections
(including recoveries) and other proceeds of the assets described in
the foregoing clauses.
Receivables Program Obligations means (a) notes, trust
certificates, undivided interests, partnership interests or other
interests representing the right to be paid a
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specified principal amount from the Receivables Program Assets, and
(b) related obligations of the Company, a Subsidiary and/or a Special
Purpose Vehicle (including, without limitation, rights in respect of
interest or yield, breach of warranty claims and expense reimbursement
and indemnity provisions). The Receivables Program Obligations shall
also include Purchase Money Notes and guarantees by the Company of
obligations pursuant to Standard Securitization Undertakings.
Receivables Related Assets means (i) any rights arising under
the documentation governing or relating to Receivables (including
rights in respect of liens securing such Receivables and other credit
support in respect of such Receivables), (ii) any collections and
other proceeds of such Receivables, (iii) any lockboxes or bank
accounts, all documents, instruments and agreements relating to such
lockboxes or bank accounts, and any amounts from time to time
deposited therein, (iv) spread accounts, trust accounts and other
similar accounts (and any amounts on deposit therein) established in
connection with a Qualified Receivables Transaction, (v) any warranty,
indemnity, dilution and other intercompany claim arising out of
Receivables Documents and (vi) other assets (including those
contemplated by Receivables Documents) which are customarily
transferred or in respect of which security interests are customarily
granted in connection with asset securitization transactions involving
accounts receivable.
Receivables Seller means the Company and any Subsidiary of the
Company (other than a Receivables Subsidiary) which is a party to a
Receivables Document.
Receivables Subsidiary means a special purpose wholly-owned
subsidiary of the Company created in connection with the transactions
contemplated by a Qualified Receivables Transaction, which subsidiary
engages in no activities other than those incidental to such Qualified
Receivables Transaction and which is designated as a Receivables
Subsidiary by the Company's Board of Directors. Any such designation
by the Board of Directors shall be evidenced by filing with the
Administrative Agent a certified copy of the resolution of the Board
of Directors of the Company giving effect to such designation and an
officers' certificate certifying, to the best of such officer's
knowledge and belief after consulting with counsel, that such
designation, and the transactions in which the Receivables Subsidiary
will engage, comply with the requirements of the definition of
Qualified Receivables Transaction.
Register has the meaning specified in Section 12.8.
Reportable Event means, any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, other than any such
event for which the 30-day notice requirement under ERISA has been
waived in regulations issued by the PBGC.
Required Lenders means, at any time, Lenders having an
aggregate Percentage of 51% or more.
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Requirement of Law means, as to any Person, any law (statutory
or common), treaty, rule or regulation or determination of an
arbitrator or of a Governmental Authority, in each case applicable to
or binding upon the Person or any of its property or to which the
Person or any of its property is subject.
Responsible Officer means the chief executive officer or the
president of the Company, or any other officer having substantially
the same authority and responsibility; or, with respect to compliance
with financial covenants, the chief financial officer or the treasurer
of the Company, or any other officer having substantially the same
authority and responsibility.
Restructuring Costs means any cash integration expenditures
related to the AmeriServ Acquisition, the PFS Acquisition or the
ProSource Acquisition incurred by the Company reflected as (i) a
non-operating expense in the Company's income statement, (ii) a
reduction of the restructuring reserve on the Company's balance sheet
(not including Marketing Costs), or (iii) restructuring charges taken
in the years 1998, 1999, and 2000 to the extent added to Adjusted
EBITDA pursuant to clause (c) of the definition of "Adjusted EBITDA;"
provided that "Restructuring Costs" shall not include any expenditures
related to the J.D. Edwards software installation.
Revolving Termination Date means the earlier to occur of:
(a) June 30, 2003; and
(b) the date on which the Commitments terminate
in accordance with the provisions of this Agreement.
S&P has the meaning specified in the definition of "Cash
Equivalent Investments".
SEC means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
Security Agreement means the Second Amended and Restated
Security Agreement dated the date hereof between the Company, its
Subsidiaries and the Administrative Agent.
Senior Secured Debt means, as to the Company and its
Subsidiaries, (i) the Obligations, (ii) Capitalized Lease Obligations,
(iii) obligations with respect to drawn Surety Instruments, (iv)
Invested Amounts and (v) other senior secured obligations.
Senior Subordinated Notes means the Company's $500,000,000
10?% senior subordinated notes due July 15, 2007.
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Senior Unsecured Notes means the Company's $350,000,000 8?%
senior unsecured notes due October 15, 2007.
Special Purpose Vehicle means a trust, partnership or other
special purpose Person established by the Company and/or its
Subsidiaries to implement a Qualified Receivables Transaction.
Standard Securitization Undertakings means representations,
warranties, covenants and indemnities entered into by the Company
and/or any Subsidiary which are reasonably customary in an accounts
receivable transaction.
Subordinated Debt means all unsecured Indebtedness of the
Company for money borrowed which is subordinated, upon terms
reasonably satisfactory to the Required Lenders, in right of payment
to the payment in full in cash of all Obligations, which is payable to
NEHC and on which interest is payable in kind, not in cash, until
after June 30, 2003.
Subsidiary of a Person means any corporation, association,
partnership, limited liability company, limited liability partnership,
joint venture or other business entity of which more than 50% of the
voting stock, membership interests or other equity interests (in the
case of Persons other than corporations), is owned or controlled
directly or indirectly by the Person, or one or more of the
Subsidiaries of the Person, or a combination thereof. Unless the
context otherwise clearly requires, references herein to a
"Subsidiary" refer to a Subsidiary of the Company. No Special Purpose
Vehicle will be considered a "Subsidiary".
Subsidiary Pledge Agreement means the Pledge Agreement dated
the date hereof between ProSource, ProSource Services Corporation and
the Administrative Agent.
Surety Instruments means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties,
shipside bonds, surety bonds and similar instruments.
Tax Sharing Agreement means that certain Tax Sharing Agreement
effective as of the first day of the 1989 consolidated return year
between Holberg and the Company as successor by merger to certain
former subsidiaries of the Company.
Taxes means any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender and the Agent,
such taxes (including income taxes or franchise taxes) as are imposed
on or measured by each Lender's net income by the jurisdiction (or any
political subdivision thereof) under the laws of which such Lender or
the Agent, as the case may be, is organized or maintains a lending
office.
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Trademark Security Agreement means the Amended and Restated
Trademark Security Agreement dated July 11, 1997 between AmeriServ
Food Company and the Administrative Agent.
Type has the meaning specified in the definition of "Loan."
UCP has the meaning specified in Section 3.9.
Unfunded Pension Liability means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the
current value of that Plan's assets, determined in accordance with the
assumptions used for funding the Pension Plan pursuant to Section 412
of the Code for the applicable plan year.
United States and U.S. each means the United States of
America.
Wholly-Owned Subsidiary means any corporation in which (other
than directors' qualifying shares required by law) 100% of the capital
stock of each class having ordinary voting power, and 100% of the
capital stock of every other class, in each case, at the time as of
which any determination is being made, is owned, beneficially and of
record, by the Company, or by one or more of the other Wholly-Owned
Subsidiaries, or both.
1.2 Other Interpretive Provisions.
(a) The meanings of defined terms are equally applicable
to the singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar
words refer to this Agreement as a whole and not to any particular provision of
this Agreement; and subsection, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and
all instruments, documents, agreements, certificates, indentures, notices and
other writings, however evidenced.
(ii) The term "including" is not limiting
and means "including without limitation."
(iii) In the computation of periods of time
from a specified date to a later specified date, the word "from"
means "from and including"; the words "to" and "until" each mean "to
but excluding", and the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i)
references to agreements (including this Agreement) and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document, and (ii)
references to any statute or regulation are to be construed as including all
statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting the statute or regulation.
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(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and other Loan Documents may use
several different limitations, tests or measurements to regulate the same or
similar matters. All such limitations, tests and measurements are cumulative
and shall each be performed in accordance with their terms.
(g) This Agreement and the other Loan Documents are the
result of negotiations among and have been reviewed by counsel to the Agents,
the Company and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Lenders or the Agents
merely because of the Agents' or Lenders' involvement in their preparation.
1.3 Accounting Principles.
(a) Unless the context otherwise clearly requires, all
accounting terms not expressly defined herein shall be construed, and all
financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal
quarter" refer to such fiscal periods of the Company.
ARTICLE II
THE CREDIT
2.1 Amounts and Terms of Commitments. Each Lender severally
agrees, on the terms and conditions set forth herein, to make loans to the
Company (each such loan, a "Loan"), from time to time on any Business Day
during the period from the Closing Date to the Revolving Termination Date, in
an aggregate amount not to exceed at any time outstanding such Lender's
Percentage of $200,000,000; provided that, after giving effect to any Borrowing
of Loans, the aggregate amount of all Loans plus the Effective Amount of all
L/C Obligations shall not exceed the lesser of (i) the Commitments or (ii) the
Borrowing Base. Within the foregoing limits, and subject to the other terms
and conditions hereof, the Company may borrow under this subsection 2.1, prepay
under Section 2.6 and reborrow under this subsection 2.1.
2.2 Loan Accounts. (a) The Loans made by each Lender and the
Letters of Credit Issued by the Issuing Lender shall be evidenced by one or
more accounts or records maintained by such Lender or Issuing Lender, as the
case may be, in the ordinary course of business. The accounts or records
maintained by the Administrative Agent, the Issuing Lender and each Lender
shall be rebuttable presumptive evidence of the amount of the Loans made by the
Lenders to the Company and the Letters of Credit Issued for the account of the
Company, and the interest and
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payments thereon. Any failure so to record or any error in doing so shall not,
however, limit or otherwise affect the obligation of the Company hereunder to
pay any amount owing with respect to the Loans or any Letter of Credit.
(b) Upon the request of any Lender made through the
Administrative Agent, the Loans made by such Lender may be evidenced by one or
more Notes, instead of loan accounts. Each such Lender shall endorse on the
schedules annexed to its Note(s) the date, amount and maturity of each Loan
made by it and the amount of each payment of principal made by the Company with
respect thereto. Each such Lender is irrevocably authorized by the Company to
endorse its Note(s) and each Lender's record shall be conclusive absent
manifest error; provided, however, that the failure of a Lender to make, or an
error in making, a notation thereon with respect to any Loan shall not limit or
otherwise affect the obligations of the Company hereunder or under any such
Note to such Lender.
2.3 Procedure for Borrowing. (a) Each Borrowing shall be made
upon the Company's irrevocable written notice delivered to the Administrative
Agent in the form of a Notice of Borrowing, which notice must be received by
the Administrative Agent (i) prior to 8:30 a.m. (San Francisco time) two
Business Days prior to the requested Borrowing Date, in the case of Offshore
Rate Loans; and (ii) prior to 8:30 a.m. (San Francisco time) on the requested
Borrowing Date, in the case of Base Rate Loans, specifying:
(A) the amount of the Borrowing, which
shall be in an aggregate minimum amount of $500,000 and a
multiple of $100,000 provided, that if the amount of the
unused Commitments or the availability under the Borrowing
Base is less than $500,000, then the Company may borrow such
amount in Base Rate Loans;
(B) the requested Borrowing Date, which
shall be a Business Day,
(C) the Type of Loans comprising the
Borrowing; and
(D) the duration of the Interest Period
applicable to such Loans included in such notice. If the
Notice of Borrowing fails to specify the duration of the
Interest Period for any Borrowing comprised of Offshore Rate
Loans, such Interest Period shall be one month.
(b) The Administrative Agent will promptly notify each
Lender of its receipt of any Notice of Borrowing and of the amount of such
Lender's share of that Borrowing based upon such Lender's Percentage.
(c) Each Lender will make the amount of its share of each
Borrowing available to the Administrative Agent for the account of the Company
at the Administrative Agent's Payment Office by 11:00 a.m. (San Francisco time)
on the Borrowing Date requested by the Company in funds immediately available
to the Administrative Agent. The proceeds of all such
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Loans will then be made available to the Company by the Administrative Agent at
such office by crediting the account of the Company on the books of B of A with
the aggregate of the amounts made available to the Administrative Agent by the
Lenders and in like funds as received by the Administrative Agent or as
otherwise set forth in the Notice of Borrowing.
(d) After giving effect to any Borrowing, there may not
be more than six different Interest Periods in effect.
2.4 Conversion and Continuation Elections. (a) The Company may,
upon irrevocable written notice to the Administrative Agent in accordance with
subsection 2.4(b):
(i) elect, as of any Business Day, in
the case of Base Rate Loans, or as of the last day of the applicable
Interest Period, in the case of any other Type of Loans, to convert
any such Loans (or any part thereof in an amount not less than
$500,000, or that is in an integral multiple of $100,000 in excess
thereof) into Loans of any other Type; or
(ii) elect as of the last day of the
applicable Interest Period, to continue any Loans having Interest
Periods expiring on such day (or any part thereof in an amount not
less than $500,000 or that is in an integral multiple of $100,000 in
excess thereof);
provided, that if at any time the aggregate amount of Offshore Rate Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $500,000, such Offshore Rate Loans shall
automatically convert into Base Rate Loans, and on and after such date the
right of the Company to continue such Loans as, and convert such Loans into,
Offshore Rate Loans shall terminate.
(b) The Company shall deliver a Notice of
Conversion/Continuation to be received by the Administrative Agent (i) not
later than 8:30 a.m. (San Francisco time) at least two Business Days in advance
of the Conversion/Continuation Date, if the Loans are to be converted into or
continued as Offshore Rate Loans; and (ii) not later than 8:30 a.m. (San
Francisco time) on the Conversion/Continuation Date, if the Loans are to be
converted into Base Rate Loans, specifying:
(A) the proposed Conversion/Continuation
Date;
(B) the aggregate amount of Loans to be
converted or renewed;
(C) the Type of Loans resulting from the
proposed conversion or continuation; and
(D) other than in the case of
conversions into Base Rate Loans, the duration of the
requested Interest Period.
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(c) If upon the expiration of any Interest Period
applicable to Offshore Rate Loans, the Company has failed to timely select a
new Interest Period to be applicable to such Offshore Rate Loans, or if any
Default or Event of Default then exists, the Company shall be deemed to have
elected to convert such Offshore Rate Loans into Base Rate Loans effective as
of the expiration date of such Interest Period.
(d) The Administrative Agent will promptly notify each
Lender of its receipt of a Notice of Conversion/Continuation, or, if no timely
notice is provided by the Company, the Administrative Agent will promptly
notify each Lender of the details of any automatic conversion. All conversions
and continuations shall be made ratably according to the respective outstanding
principal amounts of the Loans with respect to which the notice was given held
by each Lender.
(e) Unless the Required Lenders otherwise agree, during
the existence of a Default or Event of Default, the Company may not elect to
have a Loan converted into or continued as an Offshore Rate Loan.
(f) After giving effect to any conversion or continuation
of Loans, there may not be more than six different Interest Periods in effect.
2.5 Voluntary Termination or Reduction of Commitments. The
Company may, upon not less than five Business Days' prior notice to the
Administrative Agent, terminate the Commitments, or permanently reduce the
Commitments by an aggregate minimum amount of $5,000,000 or any multiple of
$100,000 in excess thereof; unless, after giving effect thereto and to any
prepayments of Loans made on the effective date thereof, (a) the Effective
Amount of all Loans, and L/C Obligations together would exceed the amount of
the Commitments then in effect, or (b) the Effective Amount of all L/C
Obligations then outstanding would exceed the L/C Commitment. Once reduced in
accordance with this Section, the Commitments may not be increased. Any
reduction of the Commitments shall be applied to each Lender according to its
Percentage. If and to the extent specified by the Company in the notice to the
Administrative Agent, some or all of the reduction in the combined Commitments
shall be applied to reduce the L/C Commitment. All accrued commitment and
letter of credit fees to, but not including, the effective date of any
reduction or termination of Commitments, shall be paid on the effective date of
such reduction or termination.
2.6 Optional Prepayments. (a) Subject to Section 4.4 the Company
may, from time to time, upon irrevocable written notice to the Administrative
Agent (which notice must be received by 8:30 a.m. (San Francisco time) on the
day of prepayment in the case of Base Rate Loans and 8:30 a.m. (San Francisco
time) two Business Days prior to the date of prepayment in the case of Offshore
Rate Loans), ratably prepay any Borrowing of Loans in whole or in part, in an
aggregate amount of $500,000 or a higher integral multiple of $100,000.
(b) Each notice of prepayment shall specify the date and
amount of such prepayment and the Loans to be prepaid. The Administrative
Agent will promptly notify each Lender of its receipt of any such notice and of
such Lender's share of such prepayment based
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upon such Lender's Percentage. If any such notice is given by the Company, the
Company shall make such prepayment and the payment amount specified in such
notice shall be due and payable on the date specified therein, together with
accrued interest to such date on the amount prepaid and any amounts required
pursuant to Section 4.4. Each prepayment of Loans shall be applied to each
Lender's Loans according to such Lender's Percentage.
2.7 Mandatory Prepayments of Loans.
(a) If on any date the Effective Amount of L/C
Obligations exceeds the L/C Commitment, the Company shall Cash Collateralize on
such date the outstanding Letters of Credit in an amount equal to the excess of
the maximum amount then available to be drawn under the Letters of Credit over
the Aggregate L/C Commitment.
(b) If on any day the outstanding Loans plus the
Effective Amount of the L/C Obligations exceeds the Borrowing Base, the Company
shall on such date make a prepayment of the Loans equal to the excess and, if
the Loans shall be prepaid in full, Cash Collateralize the L/C Obligations by
the remainder of such excess. Any prepayment shall be applied to each Lender's
Loans according to its Percentage.
2.8 Repayment.
The Company shall pay to the Administrative Agent, for the account of
the Lenders, on the Revolving Termination Date the aggregate principal amount
of all Loans outstanding on such date.
2.9 Interest. (a) Each Loan shall bear interest on the
outstanding principal amount thereof from the applicable Borrowing Date at a
rate per annum equal to the Offshore Rate or the Base Rate, as the case may be
(and subject to the Company's right to convert to other Types of Loans under
Section 2.4), plus the Applicable Offshore Rate Margin or Applicable Base Rate
Margin, as the case may be.
(b) Interest on each Loan shall be paid in arrears on
each Interest Payment Date. Interest shall also be paid on the date of any
prepayment of Loans under Section 2.6 or 2.7 for the portion of the Loans so
prepaid and upon payment (including prepayment) in full thereof and, during the
existence of any Event of Default, interest shall be paid on demand of the
Agent at the request or with the consent of the Required Lenders.
(c) Notwithstanding subsection (a) of this Section, while
any Event of Default exists or after acceleration, the Company shall pay
interest (after as well as before entry of judgment thereon to the extent
permitted by law) on the principal amount of all outstanding Loans, at a rate
per annum which is determined by adding 2% per annum to the Applicable Base
Rate Margin or Applicable Offshore Rate Margin then in effect for such Loans;
provided, however, that, on and after the expiration of any Interest Period
applicable to any Offshore Rate Loan outstanding on the date of occurrence of
such Event of Default or acceleration, the principal amount of such Loan shall,
during the continuation of such Event of Default or after acceleration, bear
interest at a rate per annum equal to the Base Rate plus the Applicable Base
Rate Margin then in effect plus 2%.
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(d) Anything herein to the contrary notwithstanding, the
obligations of the Company to any Lender hereunder shall be subject to the
limitation that payments of interest shall not be required for any period for
which interest is computed hereunder, to the extent (but only to the extent)
that contracting for or receiving such payment by such Lender would be contrary
to the provisions of any law applicable to such Lender limiting the highest
rate of interest that may be lawfully contracted for, charged or received by
such Lender, and in such event the Company shall pay such Lender interest at
the highest rate permitted by applicable law.
2.10 Fees. In addition to certain fees described in Section 3.8:
(a) Arrangement, Agency Fees. The Company shall pay to
the Administrative Agent for its own account and the Arranger's own account,
the fees as required by the letter agreement ("Fee Letter") between the Company
and the Arranger and the Administrative Agent dated May 15,1998, as amended.
(b) Commitment Fees. The Company shall pay to the
Administrative Agent for the account of each Lender a commitment fee equal to
the Commitment Fee Rate times the average daily unused portion of such Lender's
Commitment, computed on a quarterly basis in arrears on the last Business Day
of each calendar quarter. For purposes of calculating utilization under this
subsection, the Commitments shall be deemed used to the extent of the Effective
Amount of Loans then outstanding, plus the Effective Amount of L/C Obligations
then outstanding. Such commitment fee shall accrue from the Closing Date to
the Revolving Termination Date and shall be due and payable quarterly in
arrears on the last Business Day of each fiscal quarter commencing on the first
such date after the date hereof through the Revolving Termination Date, with
the final payment to be made on the Revolving Termination Date; provided that,
in connection with any reduction or termination of Commitments under Section
2.5 or Section 2.7, the accrued commitment fee calculated for the period ending
on such date shall also be paid on the date of such reduction or termination,
with the following quarterly payment being calculated on the basis of the
period from such reduction or termination date to such quarterly payment date.
The commitment fees provided in this subsection shall accrue at all times after
the above- mentioned commencement date, including at any time during which one
or more conditions in Article VI are not met.
2.11 Computation of Fees and Interest. (a) All computations of
interest for Base Rate Loans when the Base Rate is determined by B of A's
"reference rate" shall be made on the basis of a year of 365 or 366 days, as
the case may be, and actual days elapsed. All other computations of fees and
interest shall be made on the basis of a 360-day year and actual days elapsed
(which results in more interest being paid than if computed on the basis of a
365-day year). Interest and fees shall accrue during each period during which
interest or such fees are computed from the first day thereof to the last day
thereof.
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(b) Each determination of an interest rate by the
Administrative Agent shall be conclusive and binding on the Company and the
Lenders in the absence of manifest error.
2.12 Payments by the Company. (a) All payments to be made by the
Company shall be made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein, all payments by the Company shall be made
to the Administrative Agent for the account of the Lenders at the
Administrative Agent's Payment Office, and shall be made in dollars and in
immediately available funds, no later than 11:00 a.m. (San Francisco time) on
the date specified herein. The Administrative Agent will promptly distribute
to each Lender its Percentage of any such payment. Any payment received by the
Administrative Agent later than 2:00 p.m. (San Francisco time) shall be deemed
to have been received on the following Business Day and any applicable interest
or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition
of "Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and
such extension of time shall in such case be included in the computation of
interest or fees, as the case may be.
(c) Unless the Administrative Agent receives notice from
the Company prior to the date on which any payment is due to the Lenders that
the Company will not make such payment in full as and when required, the
Administrative Agent may assume that the Company has made such payment in full
to the Administrative Agent on such date in immediately available funds and the
Administrative Agent may) but shall not be so required), in reliance upon such
assumption, distribute to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent the Company has not made
such payment in full to the Administrative Agent, each Lender shall repay to
the Administrative Agent on demand such amount distributed to such Lender,
together with interest thereon at the Federal Funds Rate for each day from the
date such amount is distributed to such Lender until the date repaid.
2.13 Payments by the Lenders to the Administrative Agent. (a)
Unless the Administrative Agent receives notice from a Lender on or prior to
the Closing Date or, with respect to any Borrowing after the Closing Date, at
least one Business Day prior to the date of such Borrowing, that such Lender
will not make available as and when required hereunder to the Administrative
Agent for the account of the Company the amount of that Lender's Percentage,
the Administrative Agent may assume that each Lender has made such amount
available to the Administrative Agent in immediately available funds on the
Borrowing Date and the Administrative Agent may (but shall not be so required),
in reliance upon such assumption, make available to the Company on such date a
corresponding amount. If and to the extent any Lender shall not have made its
full amount available to the Administrative Agent in immediately available
funds and the Administrative Agent in such circumstances has made available to
the Company such amount, that Lender shall on the Business Day following such
Borrowing Date make such amount available to the Administrative Agent, together
with interest at the Federal Funds Rate for each day during such period. A
notice of the Administrative Agent submitted to any Lender with respect to
amounts owing under this subsection (a) shall be conclusive, absent
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manifest error. If such amount is so made available, such payment to the
Administrative Agent shall constitute such Lender's Loan on the date of
Borrowing for all purposes of this Agreement. If such amount is not made
available to the Administrative Agent on the Business Day following the
Borrowing Date, the Administrative Agent will notify the Company of such
failure to fund and, upon demand by the Administrative Agent, the Company shall
pay such amount to the Administrative Agent for the Administrative Agent's
account, together with interest thereon for each day elapsed since the date of
such Borrowing, at a rate per annum equal to the interest rate applicable at
the time to the Loans comprising such Borrowing.
(b) The failure of any Lender to make any Loan on any
Borrowing Date shall not relieve any other Lender of any obligation hereunder
to make a Loan on such Borrowing Date, but no Lender shall be responsible for
the failure of any other Lender to make the Loan to be made by such other
Lender on any Borrowing Date.
2.14 Sharing of Payments, etc. If, other than as expressly
provided elsewhere herein, any Lender shall obtain on account of the Loans made
by it any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) in excess of its ratable share of such payment
(determined in accordance with the provisions of this Agreement), such Lender
shall immediately (a) notify the Administrative Agent of such fact, and (b)
purchase from the other Lenders such participations in the Loans made by them
as shall be necessary to cause such purchasing Lender to share the excess
payment pro rata with each of them; provided, however, that if all or any
portion of such excess payment is thereafter recovered from the purchasing
Lender, such purchase shall to that extent be rescinded and each other Lender
shall repay to the purchasing Lender the purchase price paid therefor, together
with an amount equal to such paying Lender's ratable share (according to the
proportion of (i) the amount of such paying Lender's required repayment to (ii)
the total amount so recovered from the purchasing Lender) of any interest or
other amount paid or payable by the purchasing Lender in respect of the total
amount so recovered. The Company agrees that any Lender so purchasing a
participation from another Lender may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off, but subject
to Section 12.10 hereof) with respect to such participation as fully as if such
Lender were the direct creditor of the Company in the amount of such
participation. The Administrative Agent will keep records (which shall be
conclusive and binding in the absence of manifest error) of participations
purchased under this Section and will in each case notify the Lenders following
any such purchases or repayments.
2.15 Increase in Commitments. The Company may, from time to time
on any Business Day on or before July 21, 1998, with the written consent of the
Administrative Agent, increase the Commitments by delivering a written request
at least three Business Days prior to the desired effective date of such
increase (the "Commitment Increase") identifying additional Lender(s) (or
additional Commitments for existing Lenders) and the amount of its commitment
(or additional amount of its Commitment); provided, however, that any increase
of the Commitments shall not cause the aggregate Commitments to exceed
$200,000,000. The effective date of the Commitment Increase shall be agreed
upon by the Company and the Administrative Agent. Upon the effectiveness
thereof, the Lenders' Percentages shall be adjusted. If any Lender shall incur
any
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cost or expense with respect to the Commitment Increase, including any loss or
expense arising from the liquidation or reemployment of funds obtained by it to
maintain any Offshore Rate Loans or from fees to terminate the deposits from
which such funds were obtained, the Company will upon notice from such Lender
reimburse such Lender therefor.
ARTICLE III
THE LETTERS OF CREDIT
3.1 The Letter of Credit Subfacility. (a) On the terms and
conditions set forth herein (i) the Issuing Lender agrees, (A) from time to
time on any Business Day during the period from the Closing Date to the
Revolving Termination Date to issue Letters of Credit for the account of the
Company, and to amend or renew Letters of Credit previously issued by it, in
accordance with subsections 3.2(c) and 3.2(d), and (B) to honor drafts under
the Letters of Credit; and (ii) the Lenders severally agree to participate in
Letters of Credit Issued for the account of the Company; provided, that the
Issuing Lender shall not be obligated to Issue, and no Lender shall be
obligated to participate in, any Letter of Credit if as of the date of Issuance
of such Letter of Credit (the "Issuance Date") (1) the Effective Amount of all
L/C Obligations plus the Effective Amount of all Loans exceeds the combined
Commitments, (2) the participation of any Lender in the Effective Amount of all
L/C Obligations plus the Effective Amount of the Loans of such Lender exceeds
such Lender's Commitment, or (3) the Effective Amount of L/C Obligations
exceeds the L/C Commitment. Within the foregoing limits, and subject to the
other terms and conditions hereof, the Company's ability to obtain Letters of
Credit shall be fully revolving, and, accordingly, the Company may, during the
foregoing period, obtain Letters of Credit to replace Letters of Credit which
have expired or which have been drawn upon and reimbursed.
(b) The Issuing Lender is under no obligation to Issue
any Letter of Credit if:
(i) any order, judgment or decree of any
Governmental Authority or arbitrator shall by its terms purport to
enjoin or restrain the Issuing Lender from Issuing such Letter of
Credit, or any Requirement of Law applicable to the Issuing Lender or
any request or directive (whether or not having the force of law) from
any Governmental Authority with jurisdiction over the Issuing Lender
shall prohibit, or request that the Issuing Lender refrain from, the
Issuance of letters of credit generally or such Letter of Credit in
particular or shall impose upon the Issuing Lender with respect to
such Letter of Credit any restriction, reserve or capital requirement
(for which the Issuing Lender is not otherwise compensated hereunder)
not in effect on the Closing Date, or shall impose upon the Issuing
Lender any unreimbursed loss, cost or expense which was not applicable
on the Closing Date and which the Issuing Lender in good faith deems
material to it;
(ii) the Issuing Lender has received
written notice from any Lender, the Administrative Agent or the
Company, on or prior to the Business Day prior to the requested date
of Issuance of such Letter of Credit, that one or more of the
applicable conditions contained in Article VI is not then satisfied;
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(iii) the expiry date of any requested
Letter of Credit is (A) more than 365 days after the date of Issuance,
unless the Required Lenders have approved such expiry date in writing,
or (B) after the Revolving Termination Date, unless all of the Lenders
have approved such expiry date in writing;
(iv) the expiry date of any requested
Letter of Credit is prior to the maturity date of any financial
obligation to be supported by the requested Letter of Credit;
(v) any requested Letter of Credit does
not provide for drafts, or is not otherwise in form and substance
acceptable to the Issuing Lender, or the Issuance of a Letter of
Credit shall violate any applicable policies of the Issuing Lender;
(vi) any standby Letter of Credit is for
the purpose of supporting the issuance of any letter of credit by any
other Person;
(vii) such Letter of Credit is in a face
amount less than $25,000 or denominated in a currency other than
Dollars; or
(viii) it is not a standby letter of
credit.
3.2 Issuance, Amendment and Renewal of Letters of Credit. (a)
Each Letter of Credit shall be issued upon the irrevocable written request of
the Company received by the Issuing Lender (with a copy sent by the Company to
the Administrative Agent) at least four days (or such shorter time as the
Issuing Lender may agree in a particular instance in its sole discretion) prior
to the proposed date of issuance. Each such request for issuance of a Letter
of Credit shall be by facsimile, confirmed immediately in an original writing,
in the form of an L/C Application, and shall specify in form and detail
satisfactory to the Issuing Lender: (i) the proposed date of issuance of the
Letter of Credit (which shall be a Business Day); (ii) the face amount of the
Letter of Credit; (iii) the expiry date of the Letter of Credit; (iv) the name
and address of the beneficiary thereof; (v) the documents to be presented by
the beneficiary of the Letter of Credit in case of any drawing thereunder; (vi)
the full text of any certificate to be presented by the beneficiary in case of
any drawing thereunder; and (vii) such other matters as the Issuing Lender may
require.
(b) At least two Business Days prior to the Issuance of
any Letter of Credit, the Issuing Lender will confirm with the Administrative
Agent (by telephone or in writing) that the Administrative Agent has received a
copy of the L/C Application or L/C Amendment Application from the Company and,
if not, the Issuing Lender will provide the Administrative Agent with a copy
thereof. Unless the Issuing Lender has received notice on or before the
Business Day immediately preceding the date the Issuing Lender is to issue a
requested Letter of Credit from the Administrative Agent (A) directing the
Issuing Lender not to issue such Letter of Credit because such issuance is not
then permitted under subsection 3.1(a) as a result of the limitations set forth
in clauses (1) through (3) thereof or subsection 3.1 (b))(ii); or (B) that one
or more conditions specified in Article VI are not then satisfied; then,
subject to the terms and conditions
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hereof, the Issuing Lender shall, on the requested date, issue a Letter of
Credit for the account of the Company in accordance with the Issuing Lender's
usual and customary business practices.
(c) From time to time while a Letter of Credit is
outstanding and prior to the Revolving Termination Date, the Issuing Lender
will, upon the written request of the Company received by the Issuing Lender
(with a copy sent by the Company to the Administrative Agent) at least five
days (or such shorter time as the Issuing Lender may agree in a particular
instance in its sole discretion) prior to the proposed date of amendment, amend
any Letter of Credit issued by it. Each such request for amendment of a Letter
of Credit shall be made by facsimile, confirmed immediately in an original
writing, made in the form of an L/C Amendment Application and shall specify in
form and detail satisfactory to the Issuing Lender: (i) the Letter of Credit to
be amended; (ii) the proposed date of amendment of the Letter of Credit (which
shall be a Business Day); (iii) the nature of the proposed amendment; and (iv)
such other matters as the Issuing Lender may require. The Issuing Lender shall
be under no obligation to amend any Letter of Credit if: (A) the Issuing
Lender would have no obligation at such time to issue such Letter of Credit in
its amended form under the terms of this Agreement; or (B) the beneficiary of
any such Letter of Credit does not accept the proposed amendment to the Letter
of Credit. No Lender shall be obligated to participate in any amended Letter
of Credit if such Lender would have no obligation at such time to participate
in such Letter of Credit in its amended form under the terms of this Agreement
if such Letter of Credit were newly issued pursuant to Section 3.1. The
Administrative Agent will promptly notify the Lenders of the receipt by it of
any L/C Application or L/C Amendment Application.
(d) The Issuing Lender and the Lenders agree that, while
a Letter of Credit is outstanding and prior to the Revolving Termination Date,
at the option of the Company and upon the written request of the Company
received by the Issuing Lender (with a copy sent by the Company to the
Administrative Agent) at least five days (or such shorter time as the Issuing
Lender may agree in a particular instance in its sole discretion) prior to the
proposed date of notification of renewal, the Issuing Lender shall be entitled
to authorize the automatic renewal of any Letter of Credit issued by it. Each
such request for renewal of a Letter of Credit shall be made by facsimile,
confirmed immediately in an original writing, in the form of an L/C Amendment
Application, and shall specify in form and detail satisfactory to the Issuing
Lender: (i) the Letter of Credit to be renewed; (ii) the proposed date of
notification of renewal of the Letter of Credit (which shall be a Business
Day); (iii) the revised expiry date of the Letter of Credit; and (iv) such
other matters as the Issuing Lender may require. The Issuing Lender shall be
under no obligation so to renew any Letter of Credit if: (A) the Issuing
Lender would have no obligation at such time to issue or amend such Letter of
Credit in its renewed form under the terms of this Agreement; or (B) the
beneficiary of any such Letter of Credit does not accept the proposed renewal
of the Letter of Credit. No Lender shall be obligated to participate in any
renewal of any Letter of Credit if such Lender would have no obligation at such
time to participate in such Letter of Credit in its renewed form under the
terms of this Agreement if such Letter of Credit were newly issued pursuant to
Section 3.1. If any outstanding Letter of Credit shall provide that it shall
be automatically renewed unless the beneficiary thereof receives notice from
the Issuing Lender that such Letter of Credit shall not be renewed, and if at
the time of renewal the Issuing Lender would be
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entitled to authorize the automatic renewal of such Letter of Credit in
accordance with this subsection 3.2(d) upon the request of the Company but the
Issuing Lender shall not have received any L/C Amendment Application from the
Company with respect to such renewal or other written direction by the Company
with respect thereto, the Issuing Lender shall nonetheless be permitted to
allow such Letter of Credit to renew, and the Company and the Lenders hereby
authorize such renewal, and, accordingly, the Issuing Lender shall be deemed to
have received an L/C Amendment Application from the Company requesting such
renewal.
(e) The Issuing Lender may, at its election (or as
required by the Administrative Agent at the direction of the Required Lenders),
deliver any notices of termination or other communications to any Letter of
Credit beneficiary or transferee, and take any other action as necessary or
appropriate, at any time and from time to time, in order to cause the expiry
date of such Letter of Credit to be a date not later than the Revolving
Termination Date.
(f) This Agreement shall control in the event of any
conflict with any L/C Related Document (other than any Letter of Credit).
(g) The Issuing Lender will also deliver to the
Administrative Agent, concurrently or promptly following its delivery of a
Letter of Credit, or amendment to or renewal of a Letter of Credit, to an
advising bank or a beneficiary, a true and complete copy of each such Letter of
Credit or amendment to or renewal of a Letter of Credit.
3.3 Existing Letters of Credit; Risk Participations, Drawings and
Reimbursements. (a) On and after the Closing Date, the Existing Letters of
Credit shall be deemed for all purposes, including for purposes of the fees to
be collected pursuant to subsections 3.8(a) and 3.8(c), and reimbursement of
costs and expenses to the extent provided herein, Letters of Credit outstanding
under this Agreement and entitled to the benefits of this Agreement and the
other Loan Documents, and shall be governed by the applications and agreements
pertaining thereto and by this Agreement. Each Lender shall be deemed to, and
hereby irrevocably and unconditionally agrees to, purchase from the Issuing
Lender on the Closing Date a participation in each such Letter of Credit and
each drawing thereunder in an amount equal to the product of (i) such Lender's
Percentage times (ii) the maximum amount available to be drawn under such
Letter of Credit and the amount of such drawing, respectively. For purposes of
subsection 2.1(e) and subsection 2.10(b), the Existing Letters of Credit shall
be deemed to utilize pro rata the Commitment of each Lender.
(b) Immediately upon the Issuance of each Letter of
Credit in addition to those described in subsection 3.3(a), each Lender shall
be deemed to, and hereby irrevocably and unconditionally agrees to, purchase
from the Issuing Lender a participation in such Letter of Credit and each
drawing thereunder in an amount equal to the product of (i) the Percentage of
such Lender, times (ii) the maximum amount available to be drawn under such
Letter of Credit and the amount of such drawing, respectively. For purposes of
subsection 2.1(e), each Issuance of a Letter of Credit shall be deemed to
utilize the Commitment of each Lender by an amount equal to the amount of such
participation.
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(c) In the event of any request for a drawing under a
Letter of Credit by the beneficiary or transferee thereof, the Issuing Lender
will promptly notify the Company. The Company shall reimburse the Issuing
Lender prior to 10:00 a.m. (San Francisco time), on each date that any amount
is paid by the Issuing Lender under any Letter of Credit (each such date, an
"Honor Date"), in an amount equal to the amount so paid by the Issuing Lender.
In the event the Company fails to reimburse the Issuing Lender for the full
amount of any drawing under any Letter of Credit by 10:00 a.m. (San Francisco
time) on the Honor Date, the Issuing Lender will promptly notify the
Administrative Agent and the Administrative Agent will promptly notify each
Lender thereof, and the Company shall be deemed to have requested that Loans
consisting of Base Rate Loans be made by the Lenders to be disbursed on the
Honor Date under such Letter of Credit, subject to the amount of the unutilized
portion of the Commitment and subject to the conditions set forth in Section
6.3. Any notice given by the Issuing Lender or the Agent pursuant to this
subsection 3.3(c) may be oral if immediately confirmed in writing (including by
facsimile); provided that the lack of such an immediate confirmation shall not
affect the conclusiveness or binding effect of such notice.
(d) Each Lender shall upon any notice pursuant to
subsection 3.3(e) make available to the Administrative Agent for the account of
the Issuing Lender an amount in Dollars and in immediately available funds
equal to its Percentage of the amount of the drawing, whereupon the
participating Lenders shall (subject to subsection 3.3(e)) each be deemed to
have made a Loan consisting of a Base Rate Loan to the Company in that amount.
If any Lender so notified fails to make available to the Administrative Agent
for the account of the Issuing Lender the amount of such Lender's Percentage of
the amount of the drawing by no later than 12:00 noon (San Francisco time) on
the Honor Date, then interest shall accrue on such Lender's obligation to make
such payment, from the Honor Date to the date such Lender makes such payment,
at a rate per annum equal to the Federal Funds Rate in effect from time to time
during such period. The Administrative Agent will promptly give notice of the
occurrence of the Honor Date, but failure of the Administrative Agent to give
any such notice on the Honor Date or in sufficient time to enable any Lender to
effect such payment on such date shall not relieve such Lender from its
obligations under this Section 3.3.
(e) With respect to any unreimbursed drawing that is not
converted into Loans consisting of Base Rate Loans to the Company in whole or
in part, because of the Company's failure to satisfy the conditions set forth
in Section 6.3 or for any other reason, the Company shall be deemed to have
incurred from the Issuing Lender an L/C Borrowing in the amount of such
drawing, which L/C Borrowing shall be due and payable on demand (together with
interest) and shall bear interest at a rate per annum equal to the Base Rate
plus the Applicable Base Rate Margin plus 2% per annum, and each Lender's
payment to the Issuing Lender pursuant to subsection 3.3(d) shall be deemed
payment in respect of its participation in such L/C Borrowing and shall
constitute an L/C Advance from such Lender in satisfaction of its participation
obligation under this Section 3.3.
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(f) Each Lender's obligation in accordance with this
Agreement to make the Loans or L/C Advances, as contemplated by this Section
3.3, as a result of a drawing under a Letter of Credit, shall be absolute and
unconditional and without recourse to the Issuing Lender and shall not be
affected by any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Lender may have against the
Issuing Lender, the Company or any other Person for any reason whatsoever; (ii)
the occurrence or continuance of a Default, an Event of Default or a Material
Adverse Effect; or (iii) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing; provided, however, that each
Lender's obligation to make Loans under this Section 3.3 is subject to the
conditions set forth in Section 6.3.
3.4 Repayment of Participations. (a) Upon (and only upon)
receipt by the Agent for the account of the Issuing Lender of immediately
available funds from the Company (i) in reimbursement of any payment made by
the Issuing Lender under the Letter of Credit with respect to which any Lender
has paid the Administrative Agent for the account of the Issuing Lender for
such Lender's participation in the Letter of Credit pursuant to Section 3.3 or
(ii) in payment of interest thereon, the Administrative Agent will pay to each
Lender, in the same funds as those received by the Administrative Agent for the
account of the Issuing Lender, the amount of such Lender's Percentage of such
funds, and the Issuing Lender shall receive the amount of the Percentage of
such funds of any Lender that did not so pay the Agent for the account of the
Issuing Lender.
(b) If the Administrative Agent or the Issuing Lender is
required at any time to return to the Company, or to a trustee, receiver,
liquidator, custodian, or any official in any Insolvency Proceeding, any
portion of the payments made by the Company to the Administrative Agent for the
account of the Issuing Lender pursuant to subsection 3.4(a) in reimbursement of
a payment made under the Letter of Credit or interest or fee thereon, each
Lender shall, on demand of the Administrative Agent, forthwith return to the
Agent or the Issuing Lender the amount of its Percentage of any amounts so
returned by the Administrative Agent or the Issuing Lender plus interest
thereon from the date such demand is made to the date such amounts are returned
by such Lender to the Administrative Agent or the Issuing Lender, at a rate per
annum equal to the Federal Funds Rate in effect from time to time.
3.5 Role of the Issuing Lender. (a) Each Lender and the Company
agree that, in paying any drawing under a Letter of Credit, the Issuing Lender
shall not have any responsibility to obtain any document (other than any sight
draft and certificates expressly required by the Letter of Credit) or to
ascertain or inquire as to the validity or accuracy of any such document or the
authority of the Person executing or delivering any such document.
(b) No Agent-Related Person nor any of the respective
correspondents, participants or assignees of the Issuing Lender shall be liable
to any Lender for: (i) any action taken or omitted in connection herewith at
the request or with the approval of the Lenders (including the Required
Lenders, as applicable); (ii) any action taken or omitted in the absence of
gross negligence or willful misconduct; or (iii) the due execution,
effectiveness, validity or enforceability of any L/C-Related Document.
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(c) The Company hereby assumes all risks of the acts or
omissions of any beneficiary or transferee with respect to its use of any
Letter of Credit; provided, however, that this assumption is not intended to,
and shall not, preclude the Company's pursuing such rights and remedies as it
may have against the beneficiary or transferee at law or under any other
agreement. No Agent-Related Person, nor any of the respective correspondents,
participants or assignees of the Issuing Lender, shall be liable or responsible
for any of the matters described in clauses (i) through (vii) of Section 3.6;
provided, however, anything in such clauses to the contrary notwithstanding,
that the Company may have a claim against the Issuing Lender, and the Issuing
Lender may be liable to the Company, to the extent, but only to the extent, of
any direct, as opposed to consequential or exemplary, damages suffered by the
Company which the Company proves were caused by the Issuing Lender's willful
misconduct or gross negligence or the Issuing Lender's willful failure to pay
under any Letter of Credit after the presentation to it by the beneficiary of a
sight draft and certificate(s) strictly complying with the terms and conditions
of a Letter of Credit. In furtherance and not in limitation of the foregoing:
(i) the Issuing Lender may accept documents that appear on their face to be in
order, without responsibility for further investigation, regardless of any
notice or information to the contrary; and (ii) the Issuing Lender shall not be
responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may
prove to be invalid or ineffective for any reason.
3.6 Obligations Absolute. The obligations of the Company under
this Agreement and any L/C-Related Document to reimburse the Issuing Lender for
a drawing under a Letter of Credit, and to repay any L/C Borrowing and any
drawing under a Letter of Credit converted into Loans, shall be unconditional
and irrevocable, and shall be paid strictly in accordance with the terms of
this Agreement and each such other L/C-Related Document under all
circumstances, including the following:
(i) any lack of validity or enforceability of
this Agreement or any L/C Related Document;
(ii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the obligations of
the Company in respect of any Letter of Credit or any other amendment
or waiver of or any consent to departure from all or any of the
L/C-Related Documents;
(iii) the existence of any claim, set-off, defense
or other right that the Company may have at any time against any
beneficiary or any transferee of any Letter of Credit (or any Person
for whom any such beneficiary or any such transferee may be acting),
the Issuing Lender or any other Person, whether in connection with
this Agreement, the transactions contemplated hereby or by the
L/C-Related Documents or any unrelated transaction;
(iv) any draft, demand, certificate or other
document presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any
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respect or any statement therein being untrue or inaccurate in any
respect; or any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under any Letter of
Credit;
(v) any payment by the Issuing Lender under any
Letter of Credit against presentation of a draft or certificate that
does not strictly comply with the terms of any Letter of Credit; or
any payment made by the Issuing Lender under any Letter of Credit to
any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors,
liquidator, receiver or other representative of or successor to any
beneficiary or any transferee of any Letter of Credit, including any
arising in connection with any Insolvency Proceeding;
(vi) any exchange, release or non-perfection of
any collateral, or any release or amendment or waiver of or consent to
departure from any other guarantee, for all or any of the obligations
of the Company in respect of any Letter of Credit; or
(vii) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing, including
any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Company or a guarantor.
3.7 Cash Collateral Pledge. Upon (i) the request of the Agent,
(A) if the Issuing Lender has honored any full or partial drawing request on
any Letter of Credit and such drawing has resulted in an L/C Borrowing
hereunder, or (B) if, as of the Revolving Termination Date, any Letters of
Credit may for any reason remain outstanding and partially or wholly undrawn,
or (ii) the occurrence of the circumstances described in subsection 2.7(a)
requiring the Company to Cash Collateralize Letters of Credit, then, the
Company shall immediately Cash Collateralize the Obligations in an amount equal
to the L/C Obligations.
3.8 Letter of Credit Fees. (a) The Company shall pay to the
Administrative Agent for the account of each of the Lenders a letter of credit
fee with respect to the Letters of Credit equal to L/C Fee Rate of the average
daily maximum amount available to be drawn of the outstanding Letters of
Credit, computed on a quarterly basis in arrears on the last Business Day of
each calendar quarter based upon Letters of Credit outstanding for that quarter
as calculated by the Administrative Agent. Such letter of credit fees shall be
due and payable quarterly in arrears on the last Business Day of each calendar
quarter during which Letters of Credit are outstanding, commencing on the first
such quarterly date to occur after the Closing Date, through the Revolving
Termination Date (or such later date upon which the outstanding Letters of
Credit shall expire), with the final payment to be made on the Revolving
Termination Date (or such later expiration date).
(b) The Company shall pay to the Issuing Lender a letter
of credit fronting fee for each Letter of Credit Issued after the Closing Date
by the Issuing Lender equal to the rate set forth in the Fee Letter on the face
amount (or increased face amount, as the case may be) of such Letter of Credit.
Such Letter of Credit fronting fee shall be due and payable on each date of
Issuance of a Letter of Credit.
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(c) The Company shall pay to the Issuing Lender from time
to time on demand the normal issuance, presentation, amendment and other
processing fees, and other standard costs and charges, of the Issuing Lender
relating to letters of credit as from time to time in effect.
3.9 Uniform Customs and Practice. The Uniform Customs and
Practice for Documentary Credits as published by the International Chamber of
Commerce ("UCP") most recently at the time of issuance of any Letter of Credit
shall (unless otherwise expressly provided in the Letters of Credit) apply to
the Letters of Credit.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
4.1 Taxes. (a) Any and all payments by the Company to each
Lender or the Administrative Agent under this Agreement and any other Loan
Document shall be made free and clear of, and without deduction or withholding
for, any Taxes. In addition, the Company shall pay all Other Taxes.
(b) The Company agrees to indemnify and hold harmless
each Lender and the Administrative Agent for the full amount of Taxes or Other
Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section) paid by the Lender or the Administrative
Agent and any liability (including penalties, interest, additions to tax and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date the Lender or the
Administrative Agent makes written demand therefor.
(c) If the Company shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Lender or the Administrative Agent, then:
(i) the sum payable shall be increased
as necessary so that after making all required deductions and
withholdings (including deductions and withholdings applicable to
additional sums payable under this Section) such Lender or the
Administrative Agent, as the case may be, receives an amount equal to
the sum it would have received had no such deductions or withholdings
been made;
(ii) the Company shall make such
deductions and withholdings;
(iii) the Company shall pay the full
amount deducted or withheld to the relevant taxing authority or other
authority in accordance with applicable law; and
(iv) the Company shall also pay to each
Lender or the Administrative Agent for the account of such Lender, at
the time interest is paid, all additional amounts which the respective
Lender specifies as necessary to preserve the after-tax yield the
Lender would have received if such Taxes or Other Taxes had not been
imposed.
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The Company shall not, however, be required to pay any amounts pursuant to
clause (i) of the preceding sentence to any Lender or the Issuing Lender, as
the case may be, organized under the laws of a jurisdiction outside of the
United States, unless such Lender or the Issuing Lender, as the case may be,
has provided to the Company, within sixty (60) days after the receipt by such
Lender or the Issuing Lender of a written request therefor, either (x) a
facially complete Internal Revenue Service Form 4224, Form 1001 or Form W-8 or
other applicable form, certificate or document prescribed by the Internal
Revenue Service of the United States certifying as to such Lender's or the
Issuing Lender's entitlement to an exemption from, or reduction of, United
States withholding tax on payments to be made hereunder or under any other Loan
Document or in respect of any Letter of Credit or tax on payments to made
hereunder or thereunder or (y) a letter stating that such Lender or the Issuing
Lender is unable lawfully to provide a properly completed and executed Form
4224 or Form 1001.
(d) Within 30 days after the date of any payment by the
Company of Taxes or Other Taxes, the Company shall furnish the Administrative
Agent the original or a certified copy of a receipt evidencing payment thereof,
or other evidence of payment satisfactory to the Agent.
(e) If the Company is required to pay additional amounts
to any Lender or the Administrative Agent pursuant to subsection (c) of this
Section, then such Lender shall use reasonable efforts (consistent with legal
and regulatory restrictions) to change the jurisdiction of its Lending Office
so as to eliminate any such additional payment by the Company which may
thereafter accrue, if such change in the judgment of such Lender is not
otherwise disadvantageous to such Lender.
4.2 Illegality. (a) If any Lender determines that the
introduction of any Requirement of Law, or any change in any Requirement of
Law, or in the interpretation or administration of any Requirement of Law, has
made it unlawful, or that any central bank or other Governmental Authority has
asserted that it is unlawful, for any Lender or its applicable Lending Office
to make Offshore Rate Loans, then, on notice thereof by the Lender to the
Company through the Administrative Agent, any obligation of that Lender to make
Offshore Rate Loans shall be suspended until the Lender notifies the
Administrative Agent and the Company that the circumstances giving rise to such
determination no longer exist.
(b) If a Lender determines that it is unlawful to
maintain any Offshore Rate Loan, the Company shall, upon its receipt of notice
of such fact and demand from such Lender (with a copy to the Administrative
Agent), prepay in full such Offshore Rate Loans of that Lender then
outstanding, together with interest accrued thereon and amounts required under
Section 4.4, either on the last day of the Interest Period thereof, if the
Lender may lawfully continue to maintain such Offshore Rate Loans to such day,
or immediately, if the Lender may not lawfully continue to maintain such
Offshore Rate Loan. If the Company is required to so prepay any Offshore Rate
Loan, then concurrently with such prepayment, the Company shall borrow from the
affected Lender, in the amount of such repayment, a Base Rate Loan.
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(c) If the obligation of any Lender to make or maintain
Offshore Rate Loans has been so terminated or suspended, the Company may elect,
by giving notice to the Lender through the Administrative Agent that all Loans
which would otherwise be made by the Lender as Offshore Rate Loans shall be
instead Base Rate Loans.
(d) Before giving any notice to the Administrative Agent
under this Section, the affected Lender shall designate a different Lending
Office with respect to its Offshore Rate Loans if such designation will avoid
the need for giving such notice or making such demand and will not, in the
judgment of the Lender, be illegal or otherwise disadvantageous to the Lender.
4.3 Increased Costs and Reduction of Return. (a) If any Lender
determines that, due to either (i) the introduction of or any change in or in
the interpretation of any law or regulation or (ii) the compliance by that
Lender with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), there shall be
any increase in the cost to such Lender of agreeing to make or making, funding
or maintaining any Offshore Rate Loan or participating in Letters of Credit,
or, in the case of the Issuing Lender, any increase in the cost to the Issuing
Lender of agreeing to issue, issuing or maintaining any Letter of Credit or of
agreeing to make or making, funding or maintaining any unpaid drawing under any
Letter of Credit, then the Company shall be liable for, and shall from time to
time, upon demand (with a copy of such demand to be sent to the Administrative
Agent), pay to the Administrative Agent for the account of such Lender,
additional amounts as are sufficient to compensate such Lender for such
increased costs.
(b) If any Lender shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration
of any Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or (iv)
compliance by the Lender (or its Lending Office) or any corporation controlling
the Lender with any Capital Adequacy Regulation, affects or would affect the
amount of capital required or expected to be maintained by the Lender or any
corporation controlling the Lender and (taking into consideration such Lender's
or such corporation's policies with respect to capital adequacy and such
Lender's desired return on capital) that the amount of such capital is
increased as a consequence of its Commitments, loans, credits or obligations
under this Agreement, then, upon demand of such Lender to the Company through
the Administrative Agent, the Company shall pay to the Lender, from time to
time as specified by the Lender, additional amounts sufficient to compensate
the Lender (or such corporation) for such increase.
4.4 Funding Losses. The Company shall reimburse each Lender and
hold each Lender harmless from any loss or expense which the Lender may sustain
or incur as a consequence of:
(a) the failure of the Company to make on a timely basis
any payment of principal of any Offshore Rate Loan;
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(b) the failure of the Company to borrow, continue or
convert a Loan after the Company has given (or is deemed to have given) a
Notice of Borrowing or a Notice of Conversion/Continuation;
(c) the failure of the Company to make any prepayment in
accordance with any notice delivered under Section 2.6;
(d) the prepayment (including pursuant to Section 2.7) or
other payment (including after acceleration thereof) of an Offshore Rate Loan
on a day that is not the last day of the relevant Interest Period; or
(e) the automatic conversion under Section 2.4 of any
Offshore Rate Loan to a Base Rate Loan on a day that is not the last day of the
relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees
payable to terminate the deposits from which such funds were obtained. For
purposes of calculating amounts payable by the Company to the Lenders under
this Section and under subsection 4.3(a), each Offshore Rate Loan made by a
Lender (and each related reserve, special deposit or similar requirement) shall
be conclusively deemed to have been funded at the IBOR used in determining the
Offshore Rate for such Offshore Rate Loan by a matching deposit or other
borrowing in the interbank eurodollar market for a comparable amount and for a
comparable period, whether or not such Offshore Rate Loan is in fact so funded.
4.5 Inability to Determine Rates. If the Administrative Agent
determines that for any reason adequate and reasonable means do not exist for
determining the Offshore Rate for any requested Interest Period with respect to
a proposed Offshore Rate Loan, or that the Offshore Rate applicable pursuant to
subsection 2.9(a) for any requested Interest Period with respect to a proposed
Offshore Rate Loan does not adequately and fairly reflect the cost to the
Lenders of funding such Loan the Administrative Agent will promptly so notify
the Company and each Lender. Thereafter, the obligation of the Lenders to make
or maintain Offshore Rate Loans, hereunder shall be suspended until the
Administrative Agent revokes such notice in writing. Upon receipt of such
notice, the Company may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted by it. If the Company does not revoke
such Notice, the Lenders shall make, convert or continue the Loans, as proposed
by the Company, in the amount specified in the applicable notice submitted by
the Company, but such Loans shall be made, converted or continued as Base Rate
Loans instead of Offshore Rate Loans.
4.6 Substitution of Affected Lender. At any time any Lender is an
Affected Lender, the Company may replace such Affected Lender as a party to
this Agreement with one or more other bank(s) or financial institution(s)
satisfactory to the Agent (and upon notice from the Company such Affected
Lender shall assign pursuant to an Assignment and Acceptance Agreement, and
without recourse or warranty, its Commitments, if any, its Loans, its Note, its
participation in Letters of Credit, if any, and all of its other rights and
obligations hereunder to such replacement bank(s) or other financial
institution(s) for a purchase price equal to the sum of the principal
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amount of the Loans so assigned, all accrued and unpaid interest thereon, its
ratable share of all accrued and unpaid non-use fees and Letter of Credit fees,
any amounts payable under Section 4.4 as a result of such Lender receiving
payment of any Eurodollar Loan prior to the end of an Interest Period therefor
and all other obligations owed to such Affected Lender hereunder).
4.7 Certificates of Lenders. Any Lender claiming reimbursement or
compensation under this Article IV shall deliver to the Company (with a copy to
the Administrative Agent) a certificate setting forth in reasonable detail the
amount payable to the Lender hereunder and such certificate shall be conclusive
and binding on the Company in the absence of manifest error.
4.8 Survival. The agreements and obligations of the Company in
this Article IV shall survive the payment of all other Obligations.
ARTICLE V
COLLATERAL AND GUARANTY
5.1 Collateral--Personal Property. The Obligations shall be
secured by a first lien and security interest, subject only to Permitted Liens,
in all personal property of the Company and the Guarantors (other than NEHC)
pursuant to the Security Agreement, covering the Company's and such Guarantor's
presently existing and after-acquired Inventory, Accounts Receivable, General
Intangibles, Equipment, and the other collateral more particularly described
therein and in all stock owned by the Company and its Subsidiaries pursuant to
the Pledge Agreement and the Subsidiary Pledge Agreement; provided, however,
that (i) the Company will pledge not more than 65% of the stock owned in
foreign Subsidiaries and (ii) the Obligations shall not be secured by
Receivables Program Assets transferred to a Receivables Subsidiary with respect
to a Qualified Receivables Transaction.
5.2 Mortgages. The Obligations shall be secured by a first lien
and security interest, subject to Permitted Liens, in all owned real property
of the Company and its Subsidiaries (except foreign Subsidiaries) pursuant to
the Mortgages. The Obligations shall also be secured by a first lien and
security interest, subject to Permitted Liens, in (a) all leases of
distribution centers entered into after the date hereof, (b) all leases of
distribution centers subject to leasehold mortgages in favor of the Agent on
the date hereof, and (c) all leases related to the Orlando, Florida and Denver,
Colorado distribution centers. The Company shall use commercially reasonable
efforts to provide mortgages on all leases related to the national accounts
division of ProSource. The fee and leasehold mortgages described above are
collectively called the "Mortgages".
5.3 Guaranty. The Obligations shall be guaranteed by the
Guarantors pursuant to the Guaranty and the NEHC Guaranty. The Company shall
cause each Subsidiary hereafter acquired (other than a foreign Subsidiary) to
become a Guarantor and to become a party to the Security Agreement and, if it
owns stock, the Subsidiary Pledge Agreement.
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5.4 Company Stock. The Obligations shall be secured by a first
lien and security interest in the stock of the Company pursuant to the NEHC
Pledge Agreement.
5.5 Intercreditor Agreement. The Lenders and other parties hereto
hereby authorize and direct the Administrative Agent to reaffirm the
Intercreditor Agreement. All of the parties to this Agreement hereby agree to
be bound by the Intercreditor Agreement as if they were parties thereto. No
Lender or other party hereto shall assign any of its rights or obligations
under this Agreement to any other Person unless such other Person shall have
agreed in writing to be bound by the terms of the Intercreditor Agreement as if
such Person were a party thereto.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions of Restatement. The amendment and restatement of
the Existing Credit Agreement and the obligation of each Lender to make its
initial Credit Extension hereunder is subject to the condition that the
Administrative Agent shall have received on or before the date of the initial
Credit Extension all of the following, in form and substance satisfactory to
the Administrative Agent and each Lender, and in sufficient copies for each
Lender:
(a) Credit Agreement and Notes. This Agreement and the
Notes executed by each party thereto;
(b) Resolutions; Incumbency
(i) Copies of the resolutions of the
board of directors of the Company and each Subsidiary that may become
party to a Loan Document authorizing the transactions contemplated
hereby, certified as of the Closing Date by the Secretary or an
Assistant Secretary of such Person; and
(ii) A certificate of the Secretary or
Assistant Secretary of the Company, and each Subsidiary that may
become party to a Loan Document certifying the names and true
signatures of the officers of the Company or such Subsidiary
authorized to execute, deliver and perform, as applicable, this
Agreement, and all other Loan Documents to be delivered by it
hereunder;
(c) Organization Documents. Each of the articles or
certificate of incorporation and the bylaws of the Company and each Subsidiary
party to any Loan Document as in effect on the Closing Date, certified by the
Secretary or Assistant Secretary of the Company or such Subsidiary as of the
Closing Date.
(d) Legal Opinions.
Opinions of Wachtell, Lipton, Rosen & Katz and Kevin
Rogan, counsel to the Company and its Subsidiaries and addressed to the Agents
and the Lenders, substantially in the form of Exhibits E and F;
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(e) Certificate. A certificate signed by a Responsible
Officer, dated as of the Closing Date, stating that:
(i) the representations and warranties
contained in Article VII are true and correct on and as of such date,
as though made on and as of such date;
(ii) no Default or Event of Default
exists or would result from the Credit Extension; and
(iii) there has occurred since the date of
the applicable fiscal year end financial statement referred to in
Section 7.11 no event or circumstance that has resulted or could
reasonably be expected to result in a Material Adverse Effect.
(f) Collateral Documents. The Collateral Documents
(excluding Mortgages of leased property), executed by the Company or the
applicable Guarantor, in appropriate form for recording, where necessary,
together with:
(i) copies of all UCC-1 and UCC-3
statements filed, registered or recorded to perfect the security
interests of the Administrative Agent for the benefit of the Lenders,
together with other evidence satisfactory to the Administrative Agent
that there has been filed, registered or recorded all financing
statements and other filings, registrations and recordings necessary
and advisable to perfect the Liens of the Administrative Agent for the
benefit of the Lenders in accordance with applicable law;
(ii) all certificates and instruments
representing the pledged Collateral, together with stock transfer
powers executed in blank with signatures guaranteed as the
Administrative Agent or the Lenders may specify;
(iii) evidence that all other actions
necessary or, in the opinion of the Administrative Agent or the
Lenders, desirable to perfect and protect the first priority security
interest created by the Collateral Documents have been taken;
(iv) funds sufficient to pay any filing
or recording tax or fee in connection with any and all UCC-l and UCC-3
financing statements and the Mortgages;
(v) evidence that all other actions
necessary or, in the opinion of the Administrative Agent or the
Lenders, desirable to perfect and protect the first priority Lien
created by the Collateral Documents, and to enhance the Administrative
Agent's ability to preserve and protect its interests in and access to
the Collateral, have been taken;
(g) Insurance Policies. Standard lenders' payable
endorsements with respect to the insurance policies or other instruments or
documents evidencing insurance coverage on the properties of the Company in
accordance with Section 8.6; and
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(h) Other Documents. Such other approvals, opinions,
documents or materials as the Administrative Agent or any Lender may reasonably
request.
6.2 Other Conditions to Effectiveness of Restatement. The
amendment and restatement of the Existing Credit Agreement shall be subject, in
addition to the conditions set forth in Section 6.1, to the following
conditions:
(a) ProSource Acquisition. The ProSource Acquisition
shall have occurred pursuant to the terms of the ProSource Acquisition
Agreement without material amendment or waiver.
(b) Equity Contribution. At least $50,000,000 in net
cash proceeds shall be contributed to the Company by NEHC on the Closing Date
pursuant to a common equity contribution.
(c) Accounts Receivables Securitization. Concurrently
with the initial Loan, the Company shall have received not less than
$325,000,000 in proceeds from the Receivables Bridge Facilities or another
Qualified Receivables Transaction.
(d) Indebtedness. All indebtedness for borrowed money of
ProSource and its Subsidiaries shall have been paid in full and all related
Liens shall have been released.
(e) Governmental Approvals. All governmental,
shareholder and third party consents, including Hart-Scott-Rodino clearance,
and approvals necessary in connection with the ProSource Acquisition, the
financings and equity issuances contemplated hereby and the continued
operations of the business of the Company and its Subsidiaries shall have been
obtained and be in full force and effect, and all applicable waiting periods
shall have expired without any action being taken or threatened by any
competent authority which would restrain, prevent or otherwise impose adverse
conditions upon the ProSource Acquisition, or the financing thereof, in each
case except for such governmental and third party approvals which the failure
to obtain would not, individually or in the aggregate, have a Material Adverse
Effect.
(f) Certificate. Company shall have delivered a
Certificate of its Chief Financial Officer to the effect that all the
conditions set forth in Sections 6.2(a) - (e) above shall have been
accomplished.
(g) Borrowing Base Certificate. The Company shall have
delivered a Borrowing Base Certificate as of March 28, 1998 calculated on a pro
forma basis as if the ProSource Acquisition had taken place on such date.
(h) Purchase by Lenders. The Lenders shall have
purchased and sold appropriate amounts of the outstanding Loans under the
Existing Credit Agreement, to cause each Lender to hold its Percentage of the
Loans, after giving effect to this amendment and restatement. Each Lender,
which shall have its Percentage reduced to zero, shall have no further
obligations under the Existing Credit Agreement or this Agreement. If any
Lender shall suffer a loss
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as a result of the effectiveness of such purchase or sale being during an
Interest Period, the Company shall reimburse such Lender the amount of such
loss. Each such Lender shall furnish the Company with a certificate setting
forth the basis for determining the amount to be paid to it under this Section.
(i) Loans. After giving effect to the ProSource
Acquisition, no more than $50,000,000 in Loans shall be outstanding on the
Closing Date.
6.3 Conditions to All Credit Extensions. The obligation of each
Lender to make any Loan to be made by it (including its initial Loan) or to
continue or convert any Loan under Section 2.4 and the obligation of the
Issuing Lender to Issue any Letter of Credit (including the initial Letter of
Credit) is subject to the satisfaction of the following conditions precedent on
the relevant Borrowing Date, Conversion/Continuation Date or Issuance Date:
(a) Notice, Application. The Administrative Agent shall
have received (with, in the case of the initial Loan only, a copy for each
Lender) a Notice of Borrowing or a Notice of Conversion/Continuation, as
applicable, or in the case of any Issuance of any Letter of Credit, the Issuing
Lender and the Administrative Agent shall have received an L/C Application or
L/C Amendment Application, as required under Section 3.2;
(b) Continuation of Representations and Warranties. The
representations and warranties in Article VII shall be true and correct on and
as of such Borrowing Date or Conversion/Continuation Date with the same effect
as if made on and as of such Borrowing Date or Conversion/Continuation Date
(except to the extent such representations and warranties expressly refer to an
earlier date, in which case they shall be true and correct as of such earlier
date); and
(c) No Existing Default. No Default or Event of Default
shall exist or shall result from such Borrowing or continuation or conversion.
Each Notice of Borrowing, L/C Application or L/C Amendment Application
submitted by the Company hereunder shall constitute a representation and
warranty by the Company hereunder, as of the date of each such notice and as of
each Borrowing Date, or Issuance Date, as applicable, that the conditions in
this Section 6.3 are satisfied.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to each Agent and each Lender that:
7.1 Corporate Existence and Power. The Company and each of its
Subsidiaries:
(a) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation;
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(b) has the power and authority and all governmental
licenses, authorizations, consents and approvals to own its assets, carry on
its business and to execute, deliver, and perform its obligations under the
Loan Documents;
(c) is duly qualified as a foreign corporation and is
licensed and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification or license; and
(d) is in compliance with all Requirements of Law;
except, in each case referred to in clause (c) or clause (d), to the extent
that the failure to do so could not reasonably be expected to have a Material
Adverse Effect.
7.2 Corporate Authorization; No Contravention. The execution,
delivery and performance by the Company and its Subsidiaries of this Agreement
and each other Loan Document to which such Person is party, have been duly
authorized by all necessary corporate action, and do not and will not:
(a) contravene the terms of any of that Person's
Organization Documents;
(b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, any document evidencing
any Contractual Obligation to which such Person is a party or any order,
injunction, writ or decree of any Governmental Authority to which such Person
or its property is subject; or
(c) violate any Requirement of Law.
7.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company or
any of its Subsidiaries of this Agreement or any other Loan Document.
7.4 Binding Effect. This Agreement and each other Loan Document
to which the Company or any of its Subsidiaries is a party constitute the
legal, valid and binding obligations of the Company and any of its Subsidiaries
to the extent it is a party thereto, enforceable against such Person in
accordance with their respective terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, or similar laws affecting the enforcement
of creditors' rights generally or by equitable principles relating to
enforceability.
7.5 Litigation. Except as specifically disclosed in Schedule 7.5,
there are no actions, suits, proceedings, claims or disputes pending, or to the
best knowledge of the Company, threatened or contemplated, at law, in equity,
in arbitration or before any Governmental Authority, against the Company, or
its Subsidiaries or any of their respective properties which:
(a) purport to affect or pertain to this Agreement or any
other Loan Document, or any of the transactions contemplated hereby or thereby;
or
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(b) would reasonably be expected to have a Material
Adverse Effect. No injunction, writ, temporary restraining order or any order
of any nature has been issued by any court or other Governmental Authority
purporting to enjoin or restrain the execution, delivery or performance of this
Agreement or any other Loan Document, or directing that the transactions
provided for herein or therein not be consummated as herein or therein
provided.
7.6 No Default. No Default or Event of Default exists or would
result from the incurring of any Obligations by the Company. As of the Closing
Date, neither the Company nor any Subsidiary is in default under or with
respect to any Contractual Obligation in any respect which, individually or
together with all such defaults, could reasonably be expected to have a
Material Adverse Effect, or that would, if such default had occurred after the
Closing Date, create an Event of Default under subsection 10.1(e).
7.7 ERISA Compliance. Except as specifically disclosed in
Schedule 7.7:
(a) Each Plan is in compliance in all material respects
with the applicable provisions of ERISA, the Code and other federal or state
law. Each Plan which is intended to qualify under Section 401(a) of the Code
has received a favorable determination letter from the IRS and to the best
knowledge of the Company, nothing has occurred which would cause the loss of
such qualification. The Company and each ERISA Affiliate has made all required
contributions to any Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of the
Company, threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a Material Adverse Effect. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably be expected to result in a
Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably
expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability;
(iii) neither the Company nor any ERISA Affiliate has incurred, or reasonably
expects to incur, any liability under Title IV of ERISA with respect to any
Pension Plan (other than premiums due and not delinquent under Section 4007 of
ERISA); (iv) neither the Company nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability (and no event has occurred which,
with the giving of notice under Section 4219 of ERISA, would result in such
liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; and (v) neither the Company nor any ERISA Affiliate has engaged in a
transaction that could be subject to Section 4069 or 4212(c) or ERISA.
7.8 Use of Proceeds; Margin Regulations. The proceeds of the
Loans are to be used solely for the purposes set forth in and permitted by
Section 8.12 and Section 9.7. Neither the Company nor any Subsidiary is
generally engaged in the business of purchasing or selling Margin Stock or
extending credit for the purpose of purchasing or carrying Margin Stock.
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7.9 Title to Properties. The Company and each Subsidiary have
good record and marketable title in fee simple to, or valid leasehold interests
in, all real property necessary or used in the ordinary conduct of their
respective businesses, except for such defects in title as could not,
individually or in the aggregate, have a Material Adverse Effect. As of the
Closing Date, the property of the Company and its Subsidiaries is subject to no
Liens, other than Permitted Liens.
7.10 Taxes. The Company and its Subsidiaries have filed all
federal and other material tax returns and reports required to be filed, and
have paid all federal and other material taxes, assessments, fees and other
governmental charges levied or imposed upon them or their properties, income or
assets otherwise due and payable, except those which are being contested in
good faith by appropriate proceedings and for which adequate reserves have been
provided in accordance with GAAP. There is no proposed tax assessment against
the Company or any Subsidiary that would, if made, have a Material Adverse
Effect.
7.11 Financial Condition. (a) (i) The audited consolidated
financial statements of the Company and its Subsidiaries dated December 27,1997
and the related consolidated statements of income or operations, shareholders'
equity and cash flows for the fiscal year ended on that date and (ii) the
unaudited consolidated financial statements of the Company and its Subsidiaries
dated March 28,1998, and the related consolidated statements of income or
operations, shareholders' equity and cash flows for the fiscal quarter ended on
that date:
(A) were prepared in accordance with
GAAP consistently applied throughout the period covered
thereby, except as otherwise expressly noted therein, subject
in the case of the March 28, 1998 statements to ordinary, good
faith year end audit adjustments;
(B) fairly present the financial
condition of the Company and its Subsidiaries as of the date
thereof and results of operations for the period covered
thereby; and
(C) except as specifically disclosed in
Schedule 7.11, show all material indebtedness and other
liabilities, direct or contingent, of the Company and its
consolidated Subsidiaries as of the date thereof, including
liabilities for taxes, material commitments and Contingent
Obligations.
(b) (i) The audited financial statements of ProSource
dated December 27,1997 and the related consolidated statements of income or
operations, shareholders' equity and cash flows for the fiscal year ended on
that date and (ii) the unaudited financial statements of ProSource dated March
28, 1998, and the related consolidated statements of income or operations,
shareholders' equity and cash flows for the fiscal quarter ended on that date:
(A) were prepared in accordance with
GAAP consistently applied throughout the period covered
thereby, except as otherwise expressly noted therein,
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subject in the case of the March 28, 1998 statements to
ordinary, good faith year end audit adjustments;
(B) fairly present the financial
condition of ProSource as of the date thereof and results of
operations for the period covered thereby; and
(C) except as specifically disclosed in
Schedule 7.11, show all material indebtedness and other
liabilities, direct or contingent, of ProSource as of the date
thereof, including liabilities for taxes, material commitments
and Contingent Obligations.
(c) The pro forma consolidated closing balance sheet of
the Company and its Subsidiaries dated as of December 27, 1997 delivered to the
Lenders prior to the date hereof:
(i) after giving effect to the ProSource
Acquisition and the repayment of indebtedness described in Section
6.2(d) and any transaction adjustments as provided in the ProSource
Acquisition Agreement or related to the ProSource Acquisition, fairly
presents the financial condition of the Company and its Subsidiaries
as of the date thereof; and
(ii) except as specifically disclosed in
Schedule 7.11, after giving effect to the ProSource Acquisition, the
repayment of indebtedness described in Section 6.2 (d), and any
transaction adjustments as provided in the ProSource Acquisition
Agreement or related to the ProSource Acquisition shows all material
indebtedness and other liabilities, direct or contingent, of the
Company and its consolidated Subsidiaries as of the date thereof,
including liabilities for taxes, material commitments and Contingent
Obligations.
(d) The Initial Financial Projections delivered to the
Agents and the Lenders prior to the execution of this Agreement were prepared
by the Company in good faith and based upon historical financial information
and assumptions the Company deems reasonable and appropriate in light of
current circumstances.
(e) Since the dates of the financial statements referred
to in subsections (a) - (c) above, there has been no Material Adverse Effect.
7.12 Environmental Matters. The Company conducts in the ordinary
course of business a review of the effect of existing Environmental Laws and
existing Environmental Claims on its business, operations and properties, and
as a result thereof the Company has reasonably concluded that, except as
specifically disclosed in Schedule 7.12, such Environmental Laws and
Environmental Claims could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
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7.13 Regulated Entities. None of the Company, any Person
controlling the Company, or any Subsidiary, is an "Investment Company" within
the meaning of the Investment Company Act of 1940. The Company is not subject
to regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, any state public utilities code, or any
other federal or state statute or regulation limiting its ability to incur
Indebtedness.
7.14 No Burdensome Restrictions. Neither the Company nor any
Subsidiary is a party to or bound by any Contractual Obligation, or subject to
any restriction in any Organization Document, or any Requirement of Law, which,
in the absence of a default thereunder, could reasonably be expected to have a
Material Adverse Effect.
7.15 Copyrights, Patents, Trademarks and Licenses, etc. The
Company or its Subsidiaries own or are licensed or otherwise have the right to
use all of the patents, trademarks, service marks, trade names, copyrights,
contractual franchises, authorizations and other rights that are reasonably
necessary for the operation of their respective businesses, without conflict
with the rights of any other Person. To the best knowledge of the Company, no
slogan or other advertising device, product, process, method, substance, part
or other material now employed, or now contemplated to be employed, by the
Company or any Subsidiary infringes upon any rights held by any other Person.
Except as specifically disclosed in Schedule 7.15, no claim or litigation
regarding any of the foregoing is pending or threatened, and no patent,
invention, device, application, principle or any statute, law, rule,
regulation, standard or code is pending or, to the knowledge of the Company,
proposed, which, in either case, could reasonably be expected to have a
Material Adverse Effect.
7.16 Subsidiaries. As of the Closing Date, the Company has no
Subsidiaries other than those specifically disclosed in part (a) of Schedule
7.16 hereto and has no equity investments in any other corporation or entity
other than those specifically disclosed in part (b) of Schedule 7.16.
7.17 Insurance. Except as specifically disclosed in Schedule 7.17,
the properties of the Company and its Subsidiaries are insured with insurance
companies not Affiliates of the Company rated at least "A" by A.M. Best
Company, in such amounts, with such deductibles and covering such risks as are
customarily carried by companies engaged in similar businesses and owning
similar properties in localities where the Company or such Subsidiary operates.
7.18 Full Disclosure. None of the representations or warranties
made by the Company or any Subsidiary in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of the Company or any Subsidiary in connection with the Loan
Documents (including the offering and disclosure materials delivered by or on
behalf of the Company to the Lenders prior to the Closing Date), contains any
untrue statement of a material fact or omits any material fact required to be
stated therein or necessary to make the statements made therein, in light of
the circumstances under which they are made, not misleading as of the time when
made or delivered.
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7.19 ProSource Acquisition Agreement. The representations and
warranties contained in the ProSource Acquisition Agreement (a true and correct
copy of which ProSource Acquisition Agreement, together with all schedules and
exhibits thereto, has been delivered to the Lenders), are true and correct in
all respects except where the failure to be so true and correct, upon
consummation of the ProSource Acquisition, could not reasonably be expected to
have a Material Adverse Effect. As of the date of the ProSource Acquisition,
(i) the Company shall have taken all necessary corporate actions to authorize
the ProSource Acquisition; and (ii) no representation made by the Company in
any notices or filings with the shareholders of the Company, with the SEC or
any applicable state securities commissions or with any governmental authority,
including, without limitation, any representations concerning any agreement
with, or financing provided by, the Lenders, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time when
made or delivered. Notwithstanding the foregoing, all representations made in
this Section 7.19 with respect to representations of the Seller, shall be made
only to the best of the Company's knowledge.
ARTICLE VIII
AFFIRMATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, unless the Required Lenders waive compliance in
writing:
8.1 Financial Statements. The Company shall deliver to the
Administrative Agent, in form and detail satisfactory to the Administrative
Agent and the Required Lenders, with sufficient copies for each Lender:
(a) as soon as available and in any event within 45 days
after the end of each of the first three fiscal quarters of each
fiscal year of the Company, (i) consolidated balance sheet of the
Company and its Subsidiaries as of the end of such fiscal quarter, and
(ii) consolidated statement of earnings and cash flow of the Company
and its Subsidiaries for such fiscal quarter and for the period
commencing at the end of the previous fiscal year and ending with the
end of such fiscal quarter setting forth in each case a comparison of
the results with the corresponding fiscal quarter of the previous
year, certified by the chief financial officer of the Company; and
(b) as soon as available and in any event within 90 days
after the end of each fiscal year of the Company, a copy of the annual
audit report for such fiscal year for the Company and its
Subsidiaries, including therein consolidated balance sheet of the
Company and its Subsidiaries as of the end of such fiscal year and
consolidated statement of earnings and cash flow of the Company and
its Subsidiaries for such fiscal year, together with, in comparative
form, the figures for the previous fiscal year, certified (without any
Impermissible Qualification) in a manner reasonably acceptable to the
Administrative Agent and the Required Lenders by independent public
accountants reasonably acceptable to the Administrative Agent and the
Required Lenders (the "Independent Auditor"); and
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(c) as soon as available and in any event by January 31
of each year, for the three year period commencing on the first day of that
Fiscal Year, the following pro forma projected financial information, each
certified as true and correct by the president or chief financial officer of
the Company to the best of such officer's knowledge: (i) the Company's pro
forma balance sheets prepared in accordance with GAAP for the next three fiscal
years, and (ii) projected pro forma statements of earnings and cash flows and
other operating information for the Company which information presents fairly,
on a pro forma basis, the balance sheets of the Company and the Company's best
good faith estimate and projections of the Company's financial position and
results of operations as of the dates and for the periods indicated.
8.2 Certificates; Other Information. The Company shall furnish to
the Administrative Agent, with sufficient copies for each Lender:
(a) concurrently with the delivery of the financial
statements referred to in subsection 8.1 (b), a certificate of the Independent
Auditor stating that in making the examination necessary therefor no knowledge
was obtained of any Default or Event of Default, except as specified in such
certificate or that the computation of compliance with the financial ratios and
restrictions contained in Sections 9.10 through 9.13, 9.17, 9.20 and 9.22
provided to the Lenders and the Administrative Agent does not fairly present
the information set forth therein;
(b) concurrently with the delivery of the financial
statements referred to in subsections 8.1(a) and (b), a Compliance Certificate
executed by a Responsible Officer;
(c) monthly within 20 days after each month a Borrowing
Base Certificate;
(d) annually, a schedule of insurance carried by the
Company and its Subsidiaries including the amounts of such insurance,
deductibles and risks covered;
(e) promptly, (i) if the Company has capital stock that
is publicly traded, copies of all financial statements and reports that the
Company sends to its shareholders, and (ii) copies of all financial statements
and regular, periodical or special reports (including Forms 10K, 1OQ and 8K)
that the Company or any Subsidiary may file with the SEC; and
(f) promptly upon receipt, copies of its accountants'
management letters; and
(g) promptly, such additional information regarding the
business, financial or corporate affairs of the Company or any Subsidiary as
the Administrative Agent, at the request of any Lender, may from time to time
reasonably request.
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8.3 Notices. The Company shall promptly notify the Administrative
Agent and each Lender:
(a) of the occurrence of any Default or Event of Default,
and of the occurrence or existence of any event or circumstance that the
Company reasonably expects will become a Default or Event of Default;
(b) of any matter that has resulted or may result in a
Material Adverse Effect, including (i) breach or non-performance of, or any
default under, a Contractual Obligation of the Company or any Subsidiary; (ii)
any dispute, litigation, investigation, proceeding or suspension between the
Company or any Subsidiary and any Governmental Authority; or (iii) the
commencement of, or any material development in, any litigation or proceeding
affecting the Company or any Subsidiary, including pursuant to any applicable
Environmental Laws;
(c) of the occurrence of any of the following events
affecting the Company or any ERISA Affiliate (but in no event more than 10 days
after such event), and deliver to the Administrative Agent and each Lender a
copy of any notice with respect to such event that is filed with a Governmental
Authority and any notice delivered by a Governmental Authority to the Company
or any ERISA Affiliate with respect to such event:
(i) an ERISA Event;
(ii) a material increase in the Unfunded
Pension Liability of any Pension Plan;
(iii) the adoption of, or the commencement
of contributions to, any Plan subject to Section 412 of the Code by
the Company or any ERISA Affiliate;
(iv) the adoption of any amendment to a
Plan subject to Section 412 of the Code, if such amendment results in
a material increase in contributions or Unfunded Pension Liability;
(d) of any material change in accounting policies or
financial reporting practices by the Company or any of its consolidated
Subsidiaries;
(e) of the occurrence of any material labor dispute;
(f) of the occurrence of an "Early Amortization Event,"
as defined in the Pooling and Servicing Agreement; or
(g) any event which will give rise to a prepayment
pursuant to Section 2.7(c).
Each notice under this Section shall be accompanied by a
written statement by a Responsible Officer setting forth details of the
occurrence referred to therein, and stating what action the Company or any
affected Subsidiary proposes to take with respect thereto and at what time.
Each notice under subsection 8.3(a) shall describe with particularity any and
all clauses or provisions of this Agreement or other Loan Document that have
been (or foreseeably will be) breached or violated.
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8.4 Preservation of Corporate Existence, etc. The Company shall,
and shall cause each Subsidiary to:
(a) preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its state or
jurisdiction of incorporation except in connection with transactions permitted
by Section 9.3 and sales of assets permitted by Section 9.2;
(b) preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal conduct of its business except
in connection with transactions permitted by Section 9.3 and sales of assets
permitted by Section 9.2;
(c) use reasonable efforts, in the ordinary course of
business, to preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents,
trademarks, trade names and service marks, the non-preservation or non-renewal
of which could reasonably be expected to have a Material Adverse Effect.
8.5 Maintenance of Property. The Company shall maintain, and
shall cause each Subsidiary to maintain, and preserve all its property which is
used or useful in its business in good working order and condition, ordinary
wear and tear excepted, and make all necessary repairs thereto and renewals and
replacements thereof except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect.
8.6 Insurance. The Company shall maintain, and shall cause each
Subsidiary to maintain, with financially sound and reputable independent
insurers, insurance with respect to its properties and business against loss or
damage of the kinds customarily insured against by Persons engaged in the same
or similar business, of such types and in such amounts as are customarily
carried under similar circumstances by such other Persons.
8.7 Payment of Obligations. The Company shall, and shall cause
each Subsidiary to, pay and discharge as the same shall become due and payable,
all its respective obligations and liabilities, including:
(a) all tax liabilities, assessments and governmental
charges or levies upon it or its properties or assets, unless the same are
being contested in good faith by appropriate proceedings and adequate reserves
in accordance with GAAP are being maintained by the Company or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law
become a Lien upon its property; and
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(c) all indebtedness, as and when due and payable, but
subject to any subordination provisions contained in any instrument or
agreement evidencing such Indebtedness.
8.8 Compliance with Laws. The Company shall comply, and shall
cause each Subsidiary to comply, in all material respects with all Requirements
of Law of any Governmental Authority having jurisdiction over it or its
business (including the Federal Fair Labor Standards Act), except such as may
be contested in good faith or as to which a bona fide dispute may exist.
8.9 Compliance with ERISA. The Company shall, and shall cause
each of its ERISA Affiliates to: (a) maintain each Plan in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
federal or state law; (b) cause each Plan which is qualified under Section
401(a) of the Code to maintain such qualification; and (c) make all required
contributions to any Plan subject to Section 412 of the Code.
8.10 Inspection of Property and Books and Records. The Company
shall maintain and shall cause each Subsidiary to maintain proper books of
record and account, in which full, true and correct entries in conformity with
GAAP consistently applied shall be made of all financial transactions and
matters involving the assets and business of the Company and such Subsidiary.
The Company shall permit, and shall cause each Subsidiary to permit,
representatives and independent contractors of the Administrative Agent or any
Lender at the expense of the Administrative Agent or Lender, as the case may
be, to visit and inspect any of their respective properties, to examine their
respective corporate, financial and operating records, and make copies thereof
or abstracts therefrom, and to discuss their respective affairs, finances and
accounts with their respective directors, officers, and independent public
accountants, all at such reasonable times during normal business hours and as
often as may be reasonably desired, upon reasonable advance notice to the
Company; provided, however, when an Event of Default exists the Administrative
Agent or any Lender may do any of the foregoing at the expense of the Company
at any time during normal business hours and without advance notice, otherwise
the expenses of only one field audit by the Administrative Agent per year shall
be paid by the Company.
8.11 Environmental Laws. The Company shall, and shall cause each
Subsidiary to, conduct its operations and keep and maintain its property in
compliance with all Environmental Laws.
8.12 Use of Proceeds. The Company shall use the proceeds of the
Loans to repay existing Indebtedness, fund the ProSource Acquisition and pay
related fees and expenses and to provide for working capital, capital
expenditures and other general corporate purposes not in contravention of any
Requirement of Law or of any Loan Document.
8.13 Further Assurances. Promptly upon the written request of the
Administrative Agent, or the Required Lenders, the Company shall, and shall
cause each Subsidiary to, execute, acknowledge, deliver, record, re-record,
file, re-file, register and re-register, any and all such further acts, deeds,
conveyances, security agreements, mortgages, assignments, estoppel
certificates, financing statements and continuations thereof, termination
statements, notices of assignment, transfers, certificates, assurances and
other instruments the Administrative Agent or the
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Required Lenders as the case may be, may reasonably request from time to time
in order (a) to ensure that (i) the Obligations are secured by substantially
all assets of the Company and (ii) the Obligations are secured by substantially
all of the assets of each Subsidiary (including, promptly upon the acquisition
or creation thereof, any Subsidiary created or acquired after the date hereof),
(b) to perfect and maintain the validity, effectiveness and priority of any of
the Loan Documents and the Liens intended to be created thereby, and (c) to
better assure, convey, grant, assign, transfer, preserve, protect and confirm
to the Administrative Agent and the Lenders the rights granted or now or
hereafter intended to be granted to the Administrative Agent and the Lenders
under any Loan Documents or under any other document executed in connection
therewith. Contemporaneously with the execution and delivery of any document
referred to above, the Company shall, and shall cause each Subsidiary to,
deliver all resolutions, opinions and corporate documents as the Administrative
Agent or the Required Lenders may reasonably request to confirm the
enforceability of such document and the perfection of the security interest
created thereby, if applicable.
8.14 INTENTIONALLY LEFT BLANK
8.15 Post-Closing Real Estate Matters. Within 90 days after the
date hereof (or, in the case of owned or leased properties acquired after the
date hereof, within 90 days following such acquisition) the Company shall
deliver to the Administrative Agent the following:
(a) consents from the Landlord of each leased property to
be subject to a Mortgage in form and substance reasonably satisfactory to the
Administrative Agent;
(b) the Mortgages;
(c) UCC financing statements related to the Mortgages;
(d) with respect to the Mortgaged Property, an A.L.T.A.
1992 (or other form acceptable to the Administrative Agent and the
Supermajority Lenders) mortgagee policy of title insurance issued by a title
insurance company satisfactory to the Administrative Agent insuring that the
Mortgage creates and constitutes a valid first Lien against the Mortgaged
Property in favor of the Administrative Agent, subject only to exceptions
acceptable to the Administrative Agent, such endorsements and affirmative
insurance as the Administrative Agent may reasonably request;
(e) copies of all documents creating exceptions to title
reflected in the title policies delivered pursuant to (d) above;
(f) to the extent required by the Administrative Agent,
opinions of local counsel in form and substance satisfactory to the
Administrative Agent; and
(g) amendments to existing Mortgages and date-down
endorsements to existing title policies to the extent reasonably required by
the Administrative Agent.
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The Lenders and the Company hereby acknowledge and agree that (a) the Company
has previously granted to the Administrative Agent (and has obtained landlord
consents for) leasehold mortgages on certain of the distribution centers leased
by the Company prior to the date hereof (such leased distribution centers,
other than such centers of ProSource and its Subsidiaries, being collectively
referred to herein as the "Existing Distribution Centers"); and (b) the
obligations of the Company under this Section 8.15 shall be applicable only to
the owned and leased real property acquired by the Company after the date
hereof and leased property related to the distribution centers in Orlando,
Florida and Denver, Colorado, and the Company has no obligation to grant to
Administrative Agent any additional leasehold mortgages with respect to other
Existing Distribution Centers or ProSource distribution centers leased on the
date hereof (other than with respect to the national accounts division of
ProSource). The Company's obligations under this Section with respect to
leased properties of the national accounts division of ProSource shall be
limited to commercially reasonable efforts and the Company shall have no
obligations with respect to other leased property of ProSource as of the date
hereof.
ARTICLE IX
NEGATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, unless the Required Lenders waive compliance in
writing:
9.1 Limitation on Liens. The Company shall not, and shall not
suffer or permit any Subsidiary to, directly or indirectly, make, create,
incur, assume or suffer to exist any Lien upon or with respect to any part of
its property, whether now owned or hereafter acquired, other than the following
("Permitted Liens"):
(a) any Lien existing on property of the Company or any
Subsidiary on the Closing Date and set forth in Schedule 9.1 securing
Indebtedness outstanding on such date;
(b) any Lien created under any Loan Document and any Lien
in favor of a Lender or its Affiliates and securing the Hedging Agreements;
(c) Liens for taxes, fees, assessments or other
governmental charges which are not delinquent or remain payable without
penalty, or to the extent that non-payment thereof is permitted by Section 8.7;
provided that no notice of lien has been filed or recorded under the Code;
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary
course of business which are not delinquent or remain payable without penalty
or which are being contested in good faith and by appropriate proceedings,
which proceedings have the effect of preventing the forfeiture or sale of the
property subject thereto;
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(e) Liens (other than any Lien imposed by ERISA)
consisting of pledges or deposits required in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
social security legislation;
(f) Liens on the property of the Company or its
Subsidiary securing (i) the non-delinquent performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, (ii) contingent
obligations on surety and appeal bonds, and (iii) other non-delinquent
obligations of a like nature; in each case, incurred in the ordinary course of
business;
(g) Liens consisting of judgment or judicial attachment
liens, provided that the enforcement of such Liens is effectively stayed;
(h) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the businesses of the Company and its
Subsidiaries;
(i) Liens on assets of corporations which become
Subsidiaries after the date of this Agreement; provided, however, (i) that such
Liens existed at the time the respective corporations became Subsidiaries and
were not created in anticipation thereof and (ii) the principal amount of the
Indebtedness secured by any and all such Liens shall not at any time exceed
$4,000,000;
(j) purchase money security interests on any property
acquired or held by the Company or its Subsidiaries in the ordinary course of
business, securing Indebtedness incurred or assumed for the purpose of
financing all or any part of the cost of acquiring such property; provided that
(i) any such Lien attaches to such property concurrently with or within 20 days
after the acquisition thereof, (ii) such Lien attaches solely to the property
so acquired in such transaction, (iii) the principal amount of the debt secured
thereby does not exceed 100% of the cost of such property and (iv) the
principal amount of the Indebtedness secured by any and all such purchase money
security interests shall not at any time exceed $5,000,000;
(k) Liens securing obligations in respect of capital
leases on assets subject to such leases, provided that such capital leases are
otherwise permitted hereunder;
(l) Liens arising solely by virtue of any statutory or
common law provision relating to banker's liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained with a
creditor depository institution; provided that (i) such deposit account is not
a dedicated cash collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations promulgated
by the FRB, and (ii) such deposit account is not intended by the Company or any
Subsidiary to provide collateral to the depository institution;
(m) other Liens to secure obligations, so long as the
aggregate amount secured by such Liens does not exceed $5,000,000 at any time;
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(n) Liens on Receivables Program Assets; and
(o) Liens on assets of foreign Subsidiaries securing
Indebtedness not in excess of $10,000,000 at any time outstanding.
9.2 Asset Dispositions, etc. The Company will not, and will not
permit any of its Subsidiaries to, sell, transfer, lease, contribute or
otherwise convey, or grant options, warrants or other rights with respect to,
all or any substantial part of its assets (including accounts receivable and
capital stock of Subsidiaries) to any Person, unless
(a) such sale, transfer, lease, contribution or
conveyance is in the ordinary course of its business or is permitted by Section
9.3;
(b) such sale, transfer, lease, contribution or
conveyance is a disposition of real estate or warehouses owned or leased on the
date hereof made within two years after the date hereof in connection with the
Company's warehouse consolidation plan;
(c) with respect to any real estate or warehouses
purchased after the date hereof, such sale is pursuant to a sale-leaseback
arrangement so long as a leasehold mortgage is granted with respect thereto in
form satisfactory to the Administrative Agent;
(d) with respect to any sale, transfer, lease,
contribution or conveyance which is not made in connection with the acquisition
of assets by the Company, the net book value of such assets, together with the
net book value of all other assets sold, transferred, leased, contributed or
conveyed otherwise than in the ordinary course of business by the Company or
any of its Subsidiaries pursuant to this clause since the Closing Date, does
not exceed $10,000,000;
(e) with respect to any sale, transfer, lease,
contribution or conveyance (other than any sale, transfer, lease, contribution
or conveyance of assets of the ProSource national accounts division) which is
made in connection with the acquisition of assets by the Company, the net book
value of such assets does not exceed the net book value of the assets acquired
by the Company in connection with any such acquisition;
(f) such sale, transfer, lease, contribution or
conveyance is of obsolete or unuseful Equipment and the aggregate proceeds of
all such sales, transfers, leases, contributions or conveyance of such
Equipment is $5,000,000 or less in any fiscal year;
(g) such sale, transfer, lease, contribution or
conveyance shall be of Receivables Program Assets pursuant to a Qualified
Receivables Transaction to a Receivables Subsidiary; or
(h) such sale, transfer, lease, contribution or
conveyance shall be of Receivables Program Assets pursuant to a Qualified
Receivables Transaction by a Receivables Subsidiary to a Special Purpose
Vehicle.
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9.3 Consolidations and Mergers. The Company shall not, and shall
not suffer or permit any Subsidiary to, merge, consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions) all or substantially all of its assets (whether
now owned or hereafter acquired) to or in favor of any Person, except:
(a) any Subsidiary may merge with the Company, provided
that the Company shall be the continuing or surviving corporation, or with any
one or more Subsidiaries; provided that if any transaction shall be between a
Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be
the continuing or surviving corporation and if any transaction shall be between
a Guarantor and a Subsidiary which is not a Guarantor, the Guarantor shall be
the continuing or surviving corporation;
(b) any Subsidiary may sell all or substantially all of
its assets (upon voluntary liquidation or otherwise) to the Company or another
Wholly-Owned Subsidiary, which wholly-owned Subsidiary is a Guarantor if the
selling Subsidiary is a Guarantor;
(c) so long as no Default has occurred and is continuing,
or would occur after giving effect thereto, the Company or any of its
Subsidiaries may purchase all or substantially all of the assets of any Person,
or acquire such Person by merger, if such acquisition is approved by the
Administrative Agent and Required Lenders;
(d) as permitted by Section 9.2; or
(e) as permitted by Section 9.4(g).
9.4 Loans and Investments. The Company shall not purchase or
acquire, or suffer or permit any Subsidiary to purchase or acquire, or make any
commitment therefor, any capital stock, equity interest, or any obligations or
other securities of, or any interest in, any Person, or make or commit to make
any Acquisitions, or make or commit to make any advance, loan, extension of
credit or capital contribution to or any other investment in, any Person
including any Affiliate of the Company, except for:
(a) investments in Cash Equivalents Investments;
(b) extensions of credit in the nature of accounts
receivable or notes receivable arising from the sale or lease of goods or
services in the ordinary course of business;
(c) in the ordinary course of business extensions of
credit by the Company to any of its Subsidiaries or by any of its Subsidiaries
to another of its Subsidiaries;
(d) until such time as a Default shall have occurred and
be continuing, loans and advances to Holberg made on or after the Closing Date
not to exceed $10,000,000 at any time outstanding; provided that upon the
occurrence of such a Default, any outstanding loans and advances permitted by
this clause (d) must be immediately repaid in full;
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(e) investments in a Receivables Subsidiary, consisting
of Receivables Program Assets and Purchase Money Notes in payment for
Receivables Program Assets;
(f) investments by a Receivables Subsidiary in a Special
Purpose Vehicle;
(g) (i) Acquisitions (other than those permitted under
Section 9.3(c)) and investments in amounts (including cash paid and
Indebtedness assumed or refinanced) not in excess of $25,000,000 (or after June
30, 2001, $50,000,000) for any single acquisition or series of related
acquisitions and not in excess of (A) $25,000,000 in the aggregate from the
Closing Date through June 30, 1999, (B) $25,000,000 (plus any amount permitted
to be expended pursuant to clause (A) but not so expended) in the aggregate
from July 1, 1999 through June 30, 2000 and (C) $25,000,000 (plus any amount
permitted to be expended pursuant to clause (B) but not any such amount carried
forward from clause (A)) in the aggregate from July 1, 2000 through June 30,
2001, but not in excess of $60,000,000 for all such Acquisitions through June
30, 2001 or $100,000,000 for all such Acquisitions after the date hereof, so
long as, in the case of an Acquisition, (A) the entity acquired had a positive
operating income for the 12 months prior to the Acquisition, (B) the entity
acquired engaged only in lines of business in which the Company is engaged, (C)
in the case of a stock Acquisition, the Acquisition is approved by the Board of
Directors of the acquired entity, and (D) giving effect to the Acquisition (x)
the Company would have been in compliance with all covenants hereof as if such
Acquisition took place on the first day of the fiscal quarter period ending at
the end of the last fiscal quarter as demonstrated by a certificate of a
Responsible Officer delivered prior to such Acquisition and (y) at least
$50,000,000 of the Commitments remain unused (it being understood that the
principal amount of Loans and the outstanding L/C Obligations shall be deemed
usage), and (ii) existing investments listed on Schedule 9.4; and
(h) loans and advances to employees not to exceed
$5,000,000 at any time outstanding.
9.5 Limitation on Indebtedness. The Company shall not, and shall
not suffer or permit any Subsidiary to, create, incur, assume, suffer to exist,
or otherwise become or remain directly or indirectly liable with respect to,
any Indebtedness, other than the following ("Permitted Indebtedness"):
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness consisting of Contingent Obligations
permitted pursuant to Section 9.8;
(c) Indebtedness existing on the Closing Date and set
forth in Schedule 9.5;
(d) Indebtedness secured by Liens permitted by subsection
9.1(j) in an aggregate amount outstanding not to exceed $5,000,000.
(e) Subordinated Debt;
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(f) Indebtedness with respect to any assets acquired by
the Company or any of its Subsidiaries (or assets owned by Subsidiaries the
stock of which is acquired by the Company or any of its Subsidiaries) in
existence at the time of the acquisition of such assets or stock, which
Indebtedness was not incurred in contemplation of the acquisition; provided
that such Indebtedness does not in an aggregate amount outstanding exceed
$5,000,000;
(g) Capitalized Lease Obligations not in excess of
$50,000,000 created in any one fiscal year and not in excess of $100,000,000 at
any time outstanding;
(h) Other notes payable to vendors not in excess of
$5,000,000 at any time outstanding;
(i) the Senior Subordinated Notes;
(j) Indebtedness of foreign Subsidiaries not in excess of
$10,000,000 at any time outstanding;
(k) Other Indebtedness not in excess of $5,000,000 at any
time outstanding;
(l) Receivables Program Obligations, pursuant to a
Qualified Receivables Transaction; and
(m) the Senior Unsecured Notes.
9.6 Transactions with Affiliates. The Company will not, and will
not permit any of its Subsidiaries to, enter into, or cause, suffer or permit
to exist any arrangement or contract with any of its other Affiliates (a)
unless such arrangement or contract is fair and equitable to the Company or
such Subsidiary and is an arrangement or contract of the kind which would be
entered into by a prudent Person in the position of the Company or such
Subsidiary with a Person which is not one of its Affiliates, it being
understood that any Qualified Receivables Transaction shall be deemed to
satisfy this clause (a); (b) except (i) the arrangement between Holberg and the
Company under the Tax Sharing Agreement, and (ii) the insurance arrangement
between NEHC and its Subsidiaries and an affiliate of Holberg, the fees with
respect to which shall not exceed the usual and customary fees for such
services; (c) except arrangements or contracts which provide for investments in
Affiliates of the Company or any of its Subsidiaries to the extent such
investments are permitted pursuant to Section 9.4 provided, however, that
unless an Event of Default shall have occurred and be continuing, Corporate
Allocations permitted under Section 9.11 can be paid; (d) transactions between
the Company or its Subsidiaries on the one hand and DLJ or its Affiliates on
the other hand involving the provision of financial, investment banking,
lending, management, consulting or underwriting services by DLJ or its
Affiliates; provided that the fees payable to DLJ or its Affiliates do not
exceed the usual and customary fees of DLJ or its Affiliates, as the case may
be, for such services or the usual and customary fees of other New York
investment banking firms for such services; or (e) transactions between the
Company and Holberg involving the provision of financial, management or
consulting services provided that (i) the fees payable by the Company for such
services do not exceed the usual and customary fees
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for such services (it being agreed that a payment of $3,250,000 with respect to
the ProSource Acquisition and related transactions is permitted) and (ii) the
payment of any such fees shall be subject to the consent of the Administrative
Agent or, if in excess of $2,000,000 in any fiscal year, the Required Lenders.
9.7 Use of Proceeds. Other than on the Closing Date in connection
with the ProSource Acquisition, the Company shall not, and shall not suffer or
permit any Subsidiary to, use any portion of the Loan proceeds or any Letter of
Credit, directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to
repay or otherwise refinance indebtedness of the Company or others incurred to
purchase or carry Margin Stock, (iii) to extend credit for the purpose of
purchasing or carrying any Margin Stock or (iv) to acquire any security in any
transaction that is subject to Section 13 or 14 of the Exchange Act.
9.8 Contingent Obligations. The Company shall not, and shall not
suffer or permit any Subsidiary to, create, incur, assume or suffer to exist
any Contingent Obligations except:
(a) endorsements for collection or deposit in the
ordinary course of business;
(b) Hedging Agreements entered into in the ordinary
course of business as bona fide hedging transactions;
(c) Contingent Obligations of the Company and its
Subsidiaries existing as of the Closing Date and listed in Schedule 9.8;
(d) other Contingent Obligations so long as the aggregate
amount of such Contingent Obligations outstanding at any one time does not
exceed $3,000,000;
(e) Receivables Program Obligations; and
(f) guarantees of the Obligations, the Senior
Subordinated Notes and the Senior Unsecured Notes.
9.9 Joint Ventures. The Company shall not, and shall not suffer
or permit any Subsidiary to enter into any Joint Venture, other than in the
ordinary course of business and other than as permitted by Section 9.4(g).
9.10 Rental Obligations. The Company will not, and will not permit
any of its Subsidiaries to, enter into at any time any arrangement which does
not create a Capitalized Lease Liability and which involves the leasing by the
Company or any of its Subsidiaries from any lessor of any real or personal
property (or any interest therein), except arrangements which, together with
all other such arrangements which shall then be in effect, will not require the
payment of an aggregate amount of rentals by the Company and its Subsidiaries
in excess of (excluding escalations resulting from a rise in the consumer price
or similar index) $67,500,000 for any fiscal year; provided, however, that any
calculation made for purposes of this section shall exclude any amounts
required to be expended for maintenance and repairs, insurance, taxes,
assessments, and other similar charges.
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9.11 Restricted Payments. On and at all times after the Closing
Date:
(a) the Company will not declare, pay or make any
dividend or distribution (in cash, property or obligations) on any
shares of any class of capital stock (now or hereafter outstanding) of
the Company or on any warrants, options or other rights with respect
to any shares of any class of capital stock (now or hereafter
outstanding) of the Company (other than dividends or distributions
payable in its common stock or warrants to purchase its common stock
or splitups or reclassifications of its stock into additional or other
shares of its common stock) or apply, or permit any of its
Subsidiaries to apply, any of its funds, property or assets to the
purchase, redemption, sinking fund or other retirement of, or agree or
permit any of its Subsidiaries to purchase or redeem, any shares of
any class of capital stock (now or hereafter outstanding) of the
Company, or warrants, options or other rights with respect to any
shares of any class of capital stock (now or hereafter outstanding) of
the Company;
(b) the Company will not, and will not permit any of its
Subsidiaries to
(i) make any payment or prepayment of principal
of, or make any payment of interest on, any Subordinated Debt, the
Senior Subordinated Notes, or the Senior Unsecured Notes on any day
other than the stated, scheduled date for such payment or prepayment
set forth in the documents and instruments memorializing such
Subordinated Debt, the Senior Subordinated Notes, or the Senior
Unsecured Notes, or which would violate the subordination provisions
of such Subordinated Debt or the Senior Subordinated Notes; or
(ii) redeem, purchase or defease any Subordinated
Debt, Senior Unsecured Notes or the Senior Subordinated Notes;
(c) except as otherwise permitted under this Section
9.11, the Company will not make any payment to NEHC or Holberg, including
without limitation, in respect of Corporate Allocations and will not make any
payment with respect to annual management fees; and
(d) the Company will not, and will not permit any
Subsidiary to, make any deposit for any of the foregoing purposes;
provided, however, that, unless immediately before or after giving effect
thereto, any Event of Default shall have occurred and be continuing, the
Company may declare, pay or make payments in respect of
(i) Corporate Allocations during any fiscal year
of the Company in an aggregate amount not to exceed $5,000,000 in any
fiscal year;
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(ii) Payments with respect to the insurance
arrangements permitted pursuant to Section 9.6(b)(ii);
(iii) Payments permitted pursuant to Section
9.6(e);
(iv) Payments under the Tax Sharing Agreement; and
(v) commencing after January 11, 2003, payments
of dividends in amounts not greater than interest payable by NEHC on
its $100,387,000 12?% Senior Discount Notes so long as (A) the Company
would be in pro forma compliance with all covenants hereunder, as if
such dividends were paid on the last day of the last fiscal quarter
ended before such proposed payment and (B) the proceeds of the
dividends shall be applied to such interest on such Senior Discount
Notes.
9.12 Minimum Interest Coverage. The Company will not permit the
Interest Coverage Ratio for any Computation Period to be less than the ratio
set forth below opposite the period in which such Computation Period ends:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
End of the third fiscal quarter of 1998 through the
next to last day of the second fiscal quarter of 2000 1.25 to 1.0
The last day of the second fiscal quarter of 2000 through
the next to last day of the second fiscal quarter of 2001 1.35 to 1.0
The last day of the second fiscal quarter of 2001 through
the next to last day of the second fiscal quarter of 2002 1.50 to 1.0
The last day of the second fiscal quarter 2002 and
thereafter 1.75 to 1.0
</TABLE>
9.13 Maximum Leverage. The Company will not permit the Leverage
Ratio at any fiscal quarter end to exceed the following ratios during the
following periods:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
The last day of the second fiscal quarter of 1998 through
the next to last day of the second fiscal quarter of 2000 3.75 to 1.0
The last day of the second fiscal quarter of 2000 through
the next to last day of the second fiscal quarter of 2001 3.50 to 1.0
The last day of the second fiscal quarter of 2001 through
the next to last day of the second fiscal quarter of 2002 3.25 to 1.0
The last day of the second fiscal quarter of 2002 and
thereafter 3.00 to 1.0
</TABLE>
9.14 ERISA. The Company shall not, and shall not suffer or permit
any of its ERISA Affiliates to: (a) engage in a prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably be expected to result in
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liability of the Company in an aggregate amount in excess of $5,000,000 or (b)
engage in a transaction that could be subject to Section 4069 or 4212(c) of
ERISA.
9.15 Modification of Certain Agreements. The Company will not
consent to any amendment, supplement or other modification of any of the terms
or provisions contained in, or applicable to, the Tax Sharing Agreement or any
document or instrument evidencing or applicable to any Subordinated Debt, the
Senior Subordinated Notes or the Senior Unsecured Notes other than any
amendment, supplement or other modification which extends the date or reduces
the amount of any required repayment or redemption.
9.16 Negative Pledges, Restrictive Agreements, etc. The Company
will not, and will not permit any of its Subsidiaries to, enter into any
agreement (excluding this Agreement, any other Loan Document and any agreement
governing any Indebtedness permitted either by clause (c), clause (i) or clause
(m) of Section 9.5 as in effect on the Closing Date or by either of clause (d)
or clause (f) of Section 9.5 as to the assets financed with the proceeds of
such Indebtedness) prohibiting
(a) the creation or assumption of any Lien upon its
properties, revenues or assets (other than Receivables Program Assets), whether
now owned or hereafter acquired, or the ability of the Company or any
Subsidiary to amend or otherwise modify this Agreement or any other Loan
Document; or
(b) the ability of any Subsidiary (other than a
Receivables Subsidiary) to make any payments, directly or indirectly, to the
Company by way of dividends, advances, repayments of loans or advances,
reimbursements of management and other intercompany charges, expenses and
accruals or other returns on investments, or any other agreement or arrangement
which restricts the ability of any Subsidiary (other than a Receivables
Subsidiary) to make any payment, directly or indirectly, to the Company.
9.17 Maximum Capital Expenditures. The Company will not permit the
aggregate amount of all Capital Expenditures made by the Company and its
Subsidiaries to exceed $75,000,000 in the period from the Closing Date through
December 31, 1998, $50,000,000 in fiscal year 1999 and $40,000,000 in any
fiscal year thereafter; provided; that the amounts so permitted in any year
shall be reduced by expenses associated with the J.D. Edwards computer
conversion added to Adjusted EBITDA pursuant to clause (f) of the definition of
"Adjusted EBITDA"; provided, further that in addition to the foregoing Capital
Expenditures, the Company and its Subsidiaries may make Capital Expenditures
aggregating from the date hereof not in excess of $25,000,000 in connection
with real estate and warehouse construction projects (net of proceeds of sales
of such projects with respect to which all Capital Expenditures were made after
the date hereof); and provided, further, that if the Company and its
Subsidiaries do not expend the full amount scheduled to be permitted in any
period, the amount not so expended may be carried over for expenditures in the
next fiscal year but not after such next fiscal year.
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9.18 Change in Business. The Company shall not, and shall not
suffer or permit any Subsidiary to, engage in any material line of business
substantially different from those lines of business carried on by the Company
and its Subsidiaries on the date hereof.
9.19 Accounting Changes. The Company shall not, and shall not
suffer or permit any Subsidiary to, make any significant change in accounting
treatment or reporting practices, except as required by GAAP, or change the
fiscal year of the Company or of any Subsidiary.
9.20 Restructuring Costs. The Company shall not, and shall not
suffer or permit any Subsidiary to, incur Restructuring Costs in excess of the
following amounts in the following periods:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
Closing through the end of fiscal year 1998 $65,000,000
Fiscal year 1999 $55,000,000
Fiscal year 2000 $50,000,000
Fiscal Year 2001 $10,000,000
Each fiscal year thereafter $ 5,000,000
</TABLE>
provided, however, that if the Company and its Subsidiaries do not incur the
full amount of restructuring costs scheduled to be permitted in any such
period, the amount not so incurred may be carried over for incurrence in the
next period but not after such next period.
9.21 Receivables Facility. The Company and its Subsidiaries shall
not amend or modify, or permit the amendment or modification of, any provision
of a Receivables Document if, as a result of such amendment or modification:
(a) a Receivables Subsidiary would not be required to
apply all funds available to it (after giving effect to the allocation
of funds to reserves required under the terms of the Receivables
Documents and to the payment of interest, principal and other amounts
owed under the Receivables Documents) to pay the purchase price for
Receivables (including any deferred portion of the purchase price); or
(b) the degree of recourse to the Company or its
Subsidiaries under or in the respect of the Receivables Documents is
increased in any material respect.
Notwithstanding anything to the contrary contained in this Section,
any changes to the Receivables Documents which relate to the Company's and/or
any other Receivables Seller's servicing or origination of Receivables Program
Assets shall be permitted.
9.22 Marketing Costs. The Company and its Subsidiaries shall not
incur between the date hereof and December 31, 1998 Marketing Costs in excess
of $30,000,000 for AmeriServe and its Subsidiaries (other than ProSource and
its Subsidiaries) or $25,000,000 for ProSource and its Subsidiaries.
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ARTICLE X
EVENTS OF DEFAULT
10.1 Event of Default. Any of the following shall constitute an
"Event of Default":
(a) Non-Payment. The Company fails to pay, (i) when and
as required to be paid herein, any amount of principal of any Loan or of any
L/C Obligation or (ii) within 5 days after the same becomes due, any interest,
fee or any other amount payable hereunder or under any other Loan Document; or
(b) Representation or Warranty. Any representation or
warranty by the Company, NEHC, or any Subsidiary made or deemed made herein, in
any other Loan Document, or which is contained in any certificate, document or
financial or other statement by the Company, NEHC, any Subsidiary or any
Responsible Officer, furnished at any time under this Agreement, or in or under
any other Loan Document, is incorrect in any material respect on or as of the
date made or deemed made; or
(c) Specific Defaults. The Company fails to perform or
observe any term, covenant or agreement contained in any of Section 8.1, 8.2,
8.3 or 8.9 or in Article IX; or
(d) Other Defaults. The Company, any Subsidiary party
thereto or NEHC fails to perform or observe any other term or covenant
contained in this Agreement or any other Loan Document, and such default shall
continue unremedied for a period of 20 days after the date upon which written
notice thereof is given to the Company by the Administrative Agent or any
Lender; or
(e) Cross-Default. NEHC, the Company or any Subsidiary
(other than a Receivables Subsidiary) (i) fails to make any payment (including
any mandatory prepayment or redemption) in respect of any Indebtedness or
Contingent Obligation having an aggregate principal amount (including undrawn
committed or available amounts and including amounts owing to all creditors
under any combined or syndicated credit arrangement) of more than $5,000,000
when due (whether by scheduled maturity, required prepayment, acceleration,
demand, or otherwise) and such failure continues after the applicable grace or
notice period, if any, specified in the relevant document on the date of such
failure; or (ii) fails to perform or observe any other condition or covenant,
or any other event shall occur or condition exist, under any agreement or
instrument relating to any such Indebtedness or Contingent Obligation, and such
failure continues after the applicable grace or notice period, if any,
specified in the relevant document on the date of such failure if the effect of
such failure, event or condition is to cause, or to permit the holder or
holders of such Indebtedness or beneficiary or beneficiaries of such
Indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause such Indebtedness to be declared to be
due and payable prior to its stated maturity, or such Contingent Obligation to
become payable or cash collateral in respect thereof to be demanded or; or
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(f) Insolvency; Voluntary Proceedings. The Company, NEHC
or any Subsidiary other than a Receivables Subsidiary (i) ceases or fails to be
solvent, or generally fails to pay, or admits in writing its inability to pay,
its debts as they become due, subject to applicable grace periods, if any,
whether at stated maturity or otherwise; (ii) voluntarily ceases to conduct its
business in the ordinary course; (iii) commences any Insolvency Proceeding with
respect to itself; or (iv) takes any action to effectuate or authorize any of
the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary
Insolvency Proceeding is commenced or filed against the Company, NEHC or any
Subsidiary other than a Receivables Subsidiary, or any writ, judgment, warrant
of attachment, execution or similar process, is issued or levied against a
substantial part of the Company's, NEHC's or any Subsidiary's properties, and
any such proceeding or petition shall not be dismissed, or such writ, judgment,
warrant of attachment, execution or similar process shall not be released,
vacated or fully bonded within 60 days after commencement, filing or levy; (ii)
the Company, NEHC or any Subsidiary other than a Receivables Subsidiary admits
the material allegations of a petition against it in any Insolvency Proceeding,
or an order for relief (or similar order under non-U.S. law) is ordered in any
Insolvency Proceeding; or (iii) the Company, NEHC or any Subsidiary other than
a Receivables Subsidiary acquiesces in the appointment of a receiver, trustee,
custodian, conservator, liquidator, mortgagee in possession (or agent
therefor), or other similar Person for itself or a substantial portion of its
property or business; or
(h) ERISA. (i) An ERISA Event shall occur with respect
to a Pension Plan or Multiemployer Plan which has resulted or could reasonably
be expected to result in liability of the Company under Title IV of ERISA to
the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in
excess of $5,000,000 unless the ERISA Event is a contribution failure
sufficient to give rise to a Lien under Section 302(f) of ERISA in which case
the dollar liability threshold does not apply; the aggregate amount of Unfunded
Pension Liability among all Pension Plans at any time exceeds $5,000,000; or
(iii) the Company or any ERISA Affiliate shall fail to pay when due, after the
expiration of any applicable grace period, any installment payment with respect
to its withdrawal liability under Section 4201 of ERISA under a Multiemployer
Plan in an aggregate amount in excess of $5,000,000; or
(i) Monetary Judgments. One or more non-interlocutory
judgments, non- interlocutory orders, decrees or arbitration awards is entered
against the Company, NEHC or any Subsidiary other than a Receivables Subsidiary
involving in the aggregate a liability (to the extent not covered by
independent third-party insurance as to which the insurer does not dispute
coverage) as to any single or related series of transactions, incidents or
conditions, of $2,000,000 or more, and the same shall remain unsatisfied,
unvacated and unstayed pending appeal for a period of 10 days after the entry
thereof; or
(j) Non-Monetary Judgments. Any non-monetary judgment,
order or decree is entered against the Company, NEHC or any Subsidiary which
does or would reasonably be expected to have a Material Adverse Effect, and
there shall be any period of 10 consecutive days
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during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or
(k) Change of Control. There occurs any Change of
Control or any "Change of Control" or like event as defined in any other
indenture or other agreement or instrument pursuant to which Indebtedness or
equity is issued or Receivables are sold by NEHC, the Company or any
Subsidiary; or
(l) Impairment of Security, etc. Any Loan Document, or
any Lien granted thereunder, shall (except in accordance with its terms), in
whole or in part, terminate, cease to be effective or cease to be the legally
valid, binding and enforceable obligation of the Company, NEHC or any
Subsidiary party thereto; the Company, NEHC, or any Subsidiary shall, directly
or indirectly, contest in any manner such effectiveness, validity, binding
nature or enforceability; or any Lien securing any Liability shall, in whole or
in part, cease to be a perfected first priority Lien; provided, however, no
Event of Default hereunder shall exist to the extent (A) the failure of such
Lien to remain effective is due solely to the negligence of the Agent or the
Lenders or (B) the failure to maintain perfection of such Lien is due solely to
the failure of the Agent to file appropriate Uniform Commercial Code
continuation statements; or
(m) NEHC. NEHC shall guarantee any Indebtedness of any
Affiliate, other than the Company and the Subsidiaries of the Company.
10.2 Remedies. If any Event of Default occurs, the Administrative
Agent shall, at the request of, or may, with the consent of, the Required
Lenders,
(a) declare the commitment of each Lender to make Loans
and any obligation of the Issuing Lender to Issue Letters of Credit to be
terminated, whereupon such commitments and obligation shall be terminated;
(b) declare an amount equal to the maximum aggregate
amount that is or at any time thereafter may become available for drawing under
any outstanding Letters of Credit (whether or not any beneficiary shall have
presented, or shall be entitled at such time to present, the drafts or other
documents required to draw under such Letters of Credit) to be immediately due
and payable, and declare the unpaid principal amount of all outstanding Loans,
all interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Lenders all
rights and remedies available to it and the Lenders under the Loan Documents or
applicable law;
provided, however, that upon the occurrence of any event specified in
subsection (f) or (g) of Section 10.1 (in the case of clause (i) of subsection
(g) upon the expiration of the 60-day period mentioned therein), the obligation
of each Lender to make Loans and any obligation of the Issuing Lender to Issue
Letters of Credit shall automatically terminate and the unpaid principal
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amount of all outstanding Loans and all interest and other amounts as aforesaid
shall automatically become due and payable without further act of the
Administrative Agent, the Issuing Lender or any Lender.
10.3 Rights Not Exclusive. The rights provided for in this
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other rights, powers, privileges or remedies provided by law or in equity,
or under any other instrument, document or agreement now existing or hereafter
arising.
ARTICLE XI
THE AGENTS
11.1 Appointment and Authorization. (a) Each Lender hereby
irrevocably (subject to Section 11.9) appoints, designates and authorizes the
Administrative Agent to take such action on its behalf under the provisions of
this Agreement and each other Loan Document and to exercise such powers and
perform such duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the
Administrative Agent shall not have any duties or responsibilities, except
those expressly set forth herein, nor shall the Administrative Agent have or be
deemed to have any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or any other Loan Document or otherwise exist
against the Administrative Agent.
(b) The Issuing Lender shall act on behalf of the Lenders
with respect to any Letters of Credit Issued by it and the documents associated
therewith until such time and except for so long as the Administrative Agent
may agree at the request of the Required Lenders to act for such Issuing Lender
with respect thereto; provided, however, that the Issuing Lender shall have all
of the benefits and immunities (i) provided to the Administrative Agent in this
Article XI with respect to any acts taken or omissions suffered by the Issuing
Lender in connection with Letters of Credit Issued by it or proposed to be
Issued by it and the application and agreements for letters of credit
pertaining to the Letters of Credit as fully as if the term "Administrative
Agent," as used in this Article XI, included the Issuing Lender with respect to
such acts or omissions and (ii) as additionally provided in this Agreement with
respect to the Issuing Lender.
11.2 Delegation of Duties. The Administrative Agent may execute
any of its duties under this Agreement or any other Loan Document by or through
agents, employees or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.
11.3 Liability of Administrative Agent. None of the Agent-Related
Persons shall (i) be liable for any action taken or omitted to be taken by any
of them under or in connection with this Agreement or any other Loan Document
or the transactions contemplated hereby (except for its
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own gross negligence or willful misconduct) or (ii) be responsible in any
manner to any of the Lenders for any recital, statement, representation or
warranty made by the Company or any Subsidiary or Affiliate of the Company, or
any officer thereof, contained in this Agreement or in any other Loan Document,
or in any certificate, report, statement or other document referred to or
provided for in, or received by the Agent under or in connection with, this
Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of the Company or any other party to any Loan
Document to perform its obligations hereunder or thereunder. No Agent-Related
Person shall be under any obligation to any Lender to ascertain or to inquire
as to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Company or any of the Company's
Subsidiaries or Affiliates.
11.4 Reliance by Administrative Agent. (a) The Administrative
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any writing, resolution, notice, consent, certificate, affidavit, letter,
telegram, facsimile, telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons, and upon advice and statements of
legal counsel (including counsel to the Company), independent accountants and
other experts selected by the Administrative Agent. The Administrative Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such advice
or concurrence of the Required Lenders as it deems appropriate and, if it so
requests, it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent
shall in all cases be fully protected in acting, or in refraining from acting,
under this Agreement or any other Loan Document in accordance with a request or
consent of the Required Lenders (or the Supermajority Lenders or all Lenders as
required herein) and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.
(b) For purposes of determining compliance with the
conditions specified in Section 6.1, each Lender that has executed this
Agreement shall be deemed to have consented to, approved or accepted or to be
satisfied with, each document or other matter either sent by the Administrative
Agent to such Lender for consent, approval, acceptance or satisfaction, or
required thereunder to be consented to or approved by or acceptable or
satisfactory to the Lender unless such Lender has provided written notice to
the Agent of its lack of consent, approval or satisfaction.
11.5 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default, except with respect to defaults in the payment of principal, interest
and fees required to be paid to the Administrative Agent for the account of the
Lenders, unless the Administrative Agent shall have received written notice
from a Lender or the Company referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a "notice of
default." The Administrative Agent
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will promptly notify the Lenders of its receipt of any such notice. The
Administrative Agent shall take such action with respect to such Default or
Event of Default as may be requested by the Required Lenders in accordance with
Article X; provided, however, that unless and until the Administrative Agent
has received any such request, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable or in
the best interest of the Lenders.
11.6 Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that
no act by the Administrative Agent hereinafter taken, including any review of
the affairs of the Company and its Subsidiaries, shall be deemed to constitute
any representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to the Administrative Agent that it has, independently and
without reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Company and its Subsidiaries, and
all applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to the Company hereunder. Each Lender also represents that it will,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to
make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Company. Except for notices, reports and other
documents expressly herein required to be furnished to the Lenders by the
Administrative Agent, the Administrative Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of the Company which may come into the possession
of any of the Agent-Related Persons.
11.7 Indemnification of Administrative Agent. Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify
upon demand the Agent-Related Persons (to the extent not reimbursed by or on
behalf of the Company and without limiting the obligation of the Company to do
so), pro rata, from and against any and all Indemnified Obligations; provided,
however, that no Lender shall be liable for the payment to the Agent-Related
Persons of any portion of such Indemnified Obligations resulting solely from
such Person's gross negligence or willful misconduct. Without limitation of the
foregoing, each Lender shall reimburse the Administrative Agent upon demand for
its ratable share of any costs or out-of-pocket expenses (including Attorney
Costs) incurred by the Administrative Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, any
other Loan Document, or any document contemplated by or referred to herein, to
the extent that the Administrative Agent is not reimbursed for such expenses by
or on behalf of the Company. The undertaking in this
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Section shall survive the payment of all Obligations hereunder and the
resignation or replacement of the Administrative Agent.
11.8 Administrative Agent in Individual Capacity. B of A and its
Affiliates may make loans to, issue letters of credit for the account of,
accept deposits from, acquire equity interests in and generally engage in any
kind of banking, trust, financial advisory, underwriting or other business with
the Company and its Subsidiaries and Affiliates as though B of A were not the
Administrative Agent or B of A were not the Issuing Lender hereunder and
without notice to or consent of the Lenders. The Lenders acknowledge that,
pursuant to such activities, B of A or its Affiliates may receive information
regarding the Company or its Affiliates (including information that may be
subject to confidentiality obligations in favor of the Company or such
Subsidiary) and acknowledge that the Administrative Agent shall be under no
obligation to provide such information to them. With respect to its Loans, B
of A shall have the same rights and powers under this Agreement as any other
Lender and may exercise the same as though it were not the Administrative Agent
or the Issuing Lender.
11.9 Successor Agent. The Administrative Agent may, and at the
request of the Required Lenders shall, resign as Administrative Agent upon 30
days' notice to the Lenders. If the Administrative Agent resigns under this
Agreement, the Required Lenders shall appoint from among the Lenders a
successor agent for the Lenders. If no successor agent is appointed prior to
the effective date of the resignation of the Administrative Agent, the
Administrative Agent may appoint, after consulting with the Lenders and the
Company, a successor agent from among the Lenders. Upon the acceptance of its
appointment as successor agent hereunder, such successor agent shall succeed to
all the rights, powers and duties of the retiring Administrative Agent and the
term "Administrative Agent" shall mean such successor agent and the retiring
Agent's appointment, powers and duties as Administrative Agent shall be
terminated. After any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Article XI and Sections 12.4 and
12.5 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Administrative Agent under this Agreement. If no successor
agent has accepted appointment as Administrative Agent by the date which is 30
days following a retiring Administrative Agent's notice of resignation, the
retiring Administrative Agent's resignation shall nevertheless thereupon become
effective and the Lenders shall perform all of the duties of the Administrative
Agent hereunder until such time, if any, as the Required Lenders appoint a
successor agent as provided for above. Notwithstanding the foregoing, however,
B of A may not be removed as the Administrative Agent at the request of the
Required Lenders unless B of A shall also simultaneously be replaced as
"Issuing Lender" hereunder pursuant to documentation in form and substance
reasonably satisfactory to B of A.
11.10 Withholding Tax. (a) If any Lender is a "foreign
corporation, partnership or trust" within the meaning of the Code and such
Lender claims exemption from, or a reduction of, U.S. withholding tax under
Sections 1441 or 1442 of the Code or if any Lender claims exemption from
withholding tax pursuant to Section 871(h) or 881(c) of the Code, such Lender
agrees with and in favor of the Administrative Agent, to deliver to the
Administrative Agent:
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(i) if such Lender claims an exemption
from, or a reduction of, withholding tax under a United States tax
treaty, properly completed IRS Form 1001 before the payment of any
interest in the first calendar year and before the payment of any
interest in each third succeeding calendar year during which interest
may be paid under this Agreement;
(ii) if such Lender claims that interest
paid under this Agreement is exempt from United States withholding tax
because it is effectively connected with a United States trade or
business of such Lender, two properly completed and executed copies of
IRS Form 4224 before the payment of any interest is due in the first
taxable year of such Lender and in each succeeding taxable year of
such Lender during which interest may be paid under this Agreement,
and IRS Form W-9;
(iii) in the case of any Lender that is
exempt from withholding tax pursuant to Section 881(h) or 881(c) of
the Code, properly completed IRS Form W-8 or any applicable successor
form before the payment of any interest is due; and
(iv) such other form or forms as may be
required under the Code or other laws of the United States as a
condition to exemption from, or reduction of, United States
withholding tax.
Such Lender agrees to promptly notify the Administrative Agent of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Lender sells, assigns, grants a participation in, or otherwise transfers
all or part of the Obligations of the Company to such Lender, such Lender
agrees to notify the Administrative Agent of the percentage amount in which it
is no longer the beneficial owner of Obligations of the Company to such Lender.
To the extent of such percentage amount, the Administrative Agent will treat
such Lender's IRS Form 1001 as no longer valid.
(c) If any Lender claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Administrative Agent sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations of the Company to such Lender, such Lender agrees to undertake sole
responsibility for complying with the withholding tax requirements imposed by
Sections 1441 and 1442 of the Code.
(d) If any Lender is entitled to a reduction in the
applicable withholding tax, the Administrative Agent may withhold from any
interest payment to such Lender an amount equivalent to the applicable
withholding tax after taking into account such reduction. If the forms or other
documentation required by subsection (a) of this Section are not delivered to
the Administrative Agent, then the Administrative Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.
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(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the Administrative
Agent did not properly withhold tax from amounts paid to or for the account of
any Lender (because the appropriate form was not delivered, was not properly
executed, or because such Lender failed to notify the Administrative Agent of a
change in circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason) such Lender shall
indemnify the Administrative Agent fully for all amounts paid, directly or
indirectly, by the Administrative Agent as tax or otherwise, including
penalties and interest, and including any taxes imposed by any jurisdiction on
the amounts payable to the Administrative Agent under this Section, together
with all costs and expenses (including Attorney Costs). The obligation of the
Lenders under this subsection shall survive the payment of all Obligations and
the resignation or replacement of the Administrative Agent.
11.11 Collateral Matters.
(a) The Administrative Agent is authorized on behalf of
all the Lenders; without the necessity of any notice to or further consent from
the Lenders, from time to time to take any action with respect to any
Collateral or the Loan Documents which may be necessary to perfect and maintain
perfected tile security interest in and Liens upon the Collateral granted
pursuant to the Loan Documents.
(b) The Lenders irrevocably authorize the Administrative
Agent, at its option and in its discretion, to release any Lien granted to or
held by the Administrative Agent upon any Collateral (i) upon termination of
the Commitments and payment m full of all Loans and all other obligations known
to the Administrative Agent and payable under this Agreement or any other Loan
Document; (ii) constituting property sold or to be sold or disposed of as part
of or in connection with any disposition permitted hereunder; (iii)
constituting property in which the Company or any Subsidiary owned no interest
at the time the Lien was granted or at any time thereafter; (iv) constituting
property leased to the Company or any Subsidiary under a lease which has
expired or been terminated in a transaction permitted under this Agreement or
is about to expire and which has not been, and is not intended by the Company
or such Subsidiary to be, renewed or extended; (v) consisting of an instrument
evidencing Indebtedness or other debt instrument, if the indebtedness thereby
has been paid in full; or (vi) if approved, authorized or ratified in writing
by the Required Lenders or, if required by Section 12.1(e), all the Lenders.
Upon request by the Administrative Agent at any time, the Lenders will confirm
in writing the Administrative Agent's authority to release particular types or
items of Collateral pursuant to this subsection 11.11(b).
11.12 Documentation Agent. No Lender identified as a "Documentation
Agent" shall have any right, power, obligation, liability, responsibility or
duty under this Agreement other than those applicable to all Lenders as such.
Without limiting the foregoing, none of the Lenders so identified as a
"Documentation Agent" shall have or be deemed to have any fiduciary
responsibility with any Lender. Each Lender acknowledges that it has not
relied, and will not rely, on
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any of the Lenders so identified and decided to enter into this Agreement or in
taking or not taking action hereunder.
ARTICLE XII
MISCELLANEOUS
12.1 Amendments and Waivers. No amendment or waiver of any
provision of this Agreement, any other Loan Document or the Intercreditor
Agreement, and no consent with respect to any departure by the Company, NEHC or
any applicable Subsidiary therefrom, shall be effective unless the same shall
be in writing and signed by the Required Lenders (or by the Administrative
Agent at the written request of the Required Lenders) and the Company and
acknowledged by the Administrative Agent, and then any such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided, however, that no such waiver, amendment, or consent
shall, unless in writing and signed by all the Lenders and the Company and
acknowledged by the Administrative Agent, do any of the following:
(a) increase or extend the Commitment of any Lender (or
reinstate any Commitment terminated pursuant to Section 10.2);
(b) reduce the amount of, postpone or delay any date
fixed by this Agreement or any other Loan Document for any payment or
prepayment of principal, interest, fees or other amounts due to the Lenders (or
any of them) hereunder or under any other Loan Document or amend the
application of payments with respect thereto;
(c) reduce the principal of, or the rate of interest
specified herein on any Loan, or (subject to clause (ii) below) any fees or
other amounts payable hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required for the
Lenders or any of them to take any action hereunder;
(e) release all or any substantial part of the Collateral
or release any Guarantor;
(f) extend any Letter of Credit expiration date to a date
beyond the Revolving Termination Date; or
(g) amend this Section, or Section 2.14, or any provision
herein providing for consent or other action by all Lenders;
and, provided further that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Issuing Lender in addition to the Required Lenders or
all the Lenders, as the case may be, affect the rights or duties of the Issuing
Lender under this Agreement or any L/C-Related Document relating to any Letter
of Credit Issued or to be Issued by it, (ii) no amendment, waiver or
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consent shall, unless in writing and signed by the Administrative Agent in
addition to the Required Lenders or all the Lenders, as the case may be, affect
the rights or duties of the Administrative Agent under this Agreement or any
other Loan Document, and (iii) the Fee Letters may be amended, or rights or
privileges thereunder waived, in a writing executed by the parties thereto and;
provided, further, that, at the Company's request, the Administrative Agent
shall, without the consent of any Lender, release the security interest of the
Administrative Agent and the Lenders in any property subject to Capitalized
Lease Obligations permitted under Section 9.5(g).
12.2 Notices. (a) All notices, requests and other communications
shall be in writing (including, unless the context expressly otherwise
provides, by facsimile transmission, provided that any matter transmitted by
the Company by facsimile (i) shall be immediately confirmed by a telephone call
to the recipient at the number specified on Schedule 12.2 and (ii) shall be
followed promptly by delivery of a hard copy original thereof) and mailed,
faxed or delivered to the address or facsimile number specified for notices on
Schedule 12.2; or, as directed to the Company or the Administrative Agent, to
such other address as shall be designated by such party in a written notice to
the other parties, and as directed to any other party, at such other address as
shall be designated by such party in a written notice to the Company and the
Administrative Agent.
(b) All such notices, requests and communications shall,
when transmitted by overnight delivery, or faxed, be effective when delivered
for overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II, III or XI shall not be effective until actually
received by the Administrative Agent, and notices to the Issuing Lender
pursuant to Article III shall not be effective until actually received by the
Issuing Lender at the address specified for the Issuing Lender on Schedule
12.2.
(c) Any agreement of the Administrative Agent and the
Lenders herein to receive certain notices by telephone or facsimile is solely
for the convenience and at the request of the Company. The Administrative
Agent and the Lenders shall be entitled to rely on the authority of any Person
purporting to be a Person authorized by the Company to give such notice and the
Administrative Agent and the Lenders shall not have any liability to the
Company or other Person on account of any action taken or not taken by the
Administrative Agent or the Lenders in reliance upon such telephonic or
facsimile notice. The obligation of the Company to repay the Loans and L/C
Obligations shall not be affected in any way or to any extent by any failure by
the Administrative Agent and the Lenders to receive written confirmation of any
telephonic or facsimile notice or the receipt by the Administrative Agent and
the Lenders of a confirmation which is at variance with the terms understood by
the Administrative Agent and the Lenders to be contained in the telephonic or
facsimile notice.
12.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder, shall operate as a waiver thereof;
nor shall any single or partial exercise of any
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right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege.
12.4 Costs and Expenses. The Company shall:
(a) whether or not the transactions contemplated hereby
are consummated, pay or reimburse B of A (including in its capacity as
Administrative Agent and Issuing Lender) and DLJ (including in its capacity as
Documentation Agent) within five Business Days after demand for all costs and
expenses incurred by B of A (including in its capacity as Administrative Agent
and Issuing Lender) and DLJ (including in its capacity as Documentation Agent)
in connection with the development, preparation, delivery, administration and
execution of, and any amendment, supplement, waiver or modification to (in each
case, whether or not consummated), this Agreement, any Loan Document and any
other documents prepared in connection herewith or therewith, and the
consummation of the transactions contemplated hereby and thereby, including
reasonable Attorney Costs incurred by B of A (including in its capacity as
Administrative Agent and Issuing Lender) and DLJ (including in its capacity as
Documentation Agent) with respect thereto; and
(b) pay or reimburse the Administrative Agent, the
Arranger and each Lender within five Business Days after demand for all costs
and expenses (including Attorney Costs) incurred by them in connection with the
enforcement, attempted enforcement, or preservation of any rights or remedies
under this Agreement or any other Loan Document during the existence of an
Event of Default or after acceleration of the Loans (including in connection
with any "workout" or restructuring regarding the Loans, and including in any
Insolvency Proceeding or appellate proceeding).
12.5 Company Indemnification. Whether or not the transactions
contemplated hereby are consummated, the Company shall indemnify and hold the
Agent-Related Persons, and each Lender and each of its respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans, the termination of the Letters of Credit and the
termination, resignation or replacement of any Agent or replacement of any
Lender) be imposed on, incurred by or asserted against any such Person in any
way relating to or arising out of this Agreement or any document contemplated
by or referred to herein, or the transactions contemplated hereby, or any
action taken or omitted by any such Person under or in connection with any of
the foregoing, including with respect to any investigation, litigation or
proceeding (including any Insolvency Proceeding or appellate proceeding)
related to or arising out of this Agreement or the Loans or Letters of Credit
or the use of the proceeds thereof, whether or not any Indemnified Person is a
party thereto (all the foregoing, collectively, the "Indemnified Obligations");
provided, that the Company shall have no obligation hereunder to any
Indemnified Person with respect to Indemnified Obligations resulting solely
from the gross negligence or willful misconduct of such Indemnified Person.
The agreements in this Section shall survive payment of all other Obligations.
85
<PAGE> 93
12.6 Payments Set Aside. To the extent that the Company makes a
payment to the Administrative Agent or the Lenders, or the Administrative Agent
or the Lenders exercise their right of set-off, and such payment or the
proceeds of such set-off or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required (including
pursuant to any settlement entered into by the Administrative Agent or such
Lender in its discretion) to be repaid to a trustee, receiver or any other
party, in connection with any Insolvency Proceeding or otherwise, then (a) to
the extent of such recovery the obligation or part thereof originally intended
to be satisfied shall be revived and continued in full force and effect as if
such payment had not been made or such set-off had not occurred and (b) each
Lender severally agrees to pay to the Administrative Agent upon demand its pro
rata share of any amount so recovered from or repaid by the Administrative
Agent, which had previously been received by such Lender.
12.7 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Company may not assign or
transfer any of its rights or obligations under this Agreement without the
prior written consent of the Administrative Agent and each Lender.
12.8 Assignments, Participations, etc. (a) Any Lender may, with
the written consent of the Company at all times other than during the existence
of an Event of Default and the Administrative Agent, which consents shall not
be unreasonably withheld, at any time assign and delegate to one or more
Eligible Assignees (provided that no written consent of the Company, or the
Administrative Agent shall be required in connection with an assignment and
delegation by B of A or DLJ or in connection with any assignment and delegation
by a Lender to an Eligible Assignee that is an Affiliate of such Lender) (each
an "Assignee") all, or any part of all, of the Loans, the Revolving Commitment,
the L/C Obligations and the other rights and obligations of such Lender
hereunder, in a minimum amount of $5,000,000 (provided that no minimum amount
shall be applicable to any assignment and delegation to an existing Lender or
an Affiliate of a Lender or to an assignment of the entire remaining amount of
the Loans and Commitment of a Lender) provided, however, that the Company and
the Administrative Agent may continue to deal solely and directly with such
Lender in connection with the interest so assigned to an Assignee until (i)
written notice of such assignment, together with payment instructions,
addresses and related information with respect to the Assignee, shall have been
given to the Company and the Administrative Agent by such Lender and the
Assignee; (ii) such Lender and its Assignee shall have delivered to the Company
and the Agent an Assignment and Acceptance substantially in the form of Exhibit
G ("Assignment and Acceptance"), together with any Note or Notes subject to
such assignment, (iii) the assignor Lender or Assignee has paid to the
Administrative Agent a processing fee in the amount of $3,000 and (iv) the
information in the Assignment and Acceptance is recorded in the Register
pursuant to subsection (d) hereof.
(b) From and after the date that the Administrative Agent
notifies the assignor Lender that it has received (and provided its consent
with respect to) an executed Assignment
86
<PAGE> 94
and Acceptance and payment of the above-referenced processing fee and it has
recorded the information in the Register, (i) the Assignee thereunder shall be
a party hereto and, to the extent that rights and obligations hereunder have
been assigned to it pursuant to such Assignment and Acceptance, shall have the
rights and obligations of a Lender under the Loan Documents and (ii) the
assignor Lender shall, to the extent that rights and obligations hereunder and
under the other Loan Documents have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Loan Documents.
(c) Within five Business Days after its receipt of notice
by the Administrative Agent that it has received an executed Assignment and
Acceptance and payment of the processing fee (and provided that it consents to
such assignment in accordance with subsection 12.8(a)), the Company shall
execute and deliver to the Administrative Agent, new Notes evidencing such
Assignee's assigned Loans and Commitment and, if the assignor Lender has
retained a portion of its Loans and its Commitments, replacement Notes in the
principal amount of the Loans retained by the assignor Lender (such Notes to be
in exchange for, but not in payment of, the Notes held by such Lender).
Immediately upon each Assignee making its processing fee payment under the
Assignment and Acceptance, this Agreement shall be deemed to be amended to the
extent, but only to the extent, necessary to reflect the addition of the
Assignee and the resulting adjustment of the Commitments arising therefrom.
The Commitment allocated to each Assignee shall reduce such Commitments of the
assigning Lender pro tanto.
(d) The Company hereby designates the Administrative
Agent to serve as the Company's agent, solely for purposes of this Section
12.8(d), to maintain a register (the "Register") on which it will record the
Commitments from time to time of each of the Lenders, the address and any U.S.
federal taxpayers identification number of each Lender, the Loans made by each
of the Lenders and each repayment in respect of the principal amount of the
Loans of each Lender. Failure to make any such recordation, or any error in
such recordation shall not affect Lender's obligations in respect of such
Loans. With respect to any Lender, the transfer of the Commitments of such
Lender and the rights to the principal of, and interest on, any Loan made
pursuant to such Commitments shall not be effective until such transfer is
recorded on the Register maintained by the Administrative Agent with respect to
ownership of such Commitments and loans and prior to such recordation all
amounts owing to the transferor with respect to such Commitments and Loans
shall remain owing to the transferor. The registration of assignment or
transfer of all or part of any Commitments and Loans shall be recorded by the
Administrative Agent on the Register only upon the acceptance by the
Administrative Agent of a properly executed and delivered Assignment and
Acceptance pursuant to this Section 12.8. Coincident with the delivery of such
an Assignment and Acceptance to the Administrative Agent for acceptance and
registration of assignment or transfer of all or part of a Loan, or as soon
thereafter as practicable, the assigning or transferor Lender shall surrender
the Note evidencing such Loan, and thereupon one or more new Notes in the same
aggregate principal amount shall be issued to the assigning or transferor
Lender and/or the new Lender. The Company agrees to indemnify the
Administrative Agent from and against any and all losses, claims, damages and
liabilities of whatsoever nature which may be imposed on, asserted against or
incurred by the Administrative Agent in performing its duties under this
Section 12.8(d).
87
<PAGE> 95
(e) Any Lender may at any time sell to one or more
commercial banks or other Persons not Affiliates of the Company (a
"Participant") participating interests in any Loans, the Commitment of that
Lender and the other interests of that Lender (the "originating Lender")
hereunder and under the other Loan Documents; provided, however, that (i) the
originating Lender's obligations under this Agreement shall remain unchanged,
(ii) the originating Lender shall remain solely responsible for the performance
of such obligations, (iii) the Company, the Issuing Lender and the
Administrative Agent shall continue to deal solely and directly with the
originating Lender in connection with the originating Lender's rights and
obligations under this Agreement and the other Loan Documents and (iv) no
Lender shall transfer or grant any participating interest under which the
Participant has rights to approve any amendment to, or any consent or waiver
with respect to, this Agreement or any other Loan Document, except to the
extent such amendment, consent or waiver would require unanimous consent of the
Lenders as described in the first proviso to Section 12.1. In the case of any
such participation, the Participant shall be entitled to the benefit of
Sections 4.1, 4.3 and 12.5 as though it were also a Lender hereunder, and if
amounts outstanding under this Agreement are due and unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an Event
of Default, each Participant shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this Agreement to
the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement.
(f) Notwithstanding any other provision in this
Agreement, any Lender may at any time create a security interest in, or pledge,
all or any portion of its rights under and interest in this Agreement and the
Note held by it in favor of any Federal Reserve Bank in accordance with
Regulation A of the FRB or U.S. Treasury Regulation 31 CFR Section 203.14, and
such Federal Reserve Bank may enforce such pledge or security interest in any
manner permitted under applicable law.
12.9 Confidentiality. Each Lender agrees to take and to cause its
Affiliates to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as "confidential" or
"secret" by the Company and provided to it by the Company or any Subsidiary, or
by the Administrative Agent on such Company's or Subsidiary's behalf, under
this Agreement or any other Loan Document, and neither it nor any of its
Affiliates shall use any such information other than in connection with or in
enforcement of this Agreement and the other Loan Documents or in connection
with other business now or hereafter existing or contemplated with the Company
or any Subsidiary; except to the extent such information (i) was or becomes
generally available to the public other than as a result of disclosure by the
Lender, or (ii) was or becomes available on a non-confidential basis from a
source other than the Company, provided that such source is not bound by a
confidentiality agreement with the Company known to the Lender; provided,
however, that any Lender may disclose such information (A) at the request or
pursuant to any requirement of the National Association of Insurance
Commissioners or any Governmental Authority to which the Lender is subject or
in connection with an examination of such Lender by any such authority; (B)
pursuant to subpoena or other court process; (C) when required to do so in
accordance with the provisions of any applicable Requirement of Law; (D) to the
extent reasonably required in connection with any litigation or proceeding to
which the
88
<PAGE> 96
Agent, any Lender or their respective Affiliates may be party; (E) to the
extent reasonably required in connection with the exercise of any remedy
hereunder or under any other Loan Document; (F) to such Lender's independent
auditors and other professional advisors; (G) to any Participant or Assignee,
actual or potential, provided that such Person agrees in writing to keep such
information confidential to the same extent required of the Lenders hereunder;
(H) as to any Lender or its Affiliate, as expressly permitted under the terms
of any other document or agreement regarding confidentiality to which the
Company or any Subsidiary is party or is deemed party with such Lender or such
Affiliate; and (I) to its Affiliates.
12.10 Set-off. In addition to any rights and remedies of the
Lenders provided by law, if an Event of Default exists or the Loans have been
accelerated, each Lender is authorized at any time and from time to time,
without prior notice to the Company, any such notice being waived by the
Company to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held by, and other indebtedness at any time owing by, such Lender to or
for the credit or the account of the Company against any and all Obligations
owing to such Lender, now or hereafter existing, irrespective of whether or not
the Agent or such Lender shall have made demand under this Agreement or any
Loan Document and although such Obligations may be contingent or unmatured.
Each Lender agrees promptly to notify the Company and the Administrative Agent
after any such set-off and application made by such Lender; provided, however,
that the failure to give such notice shall not affect the validity of such
set-off and application.
12.11 Automatic Debits of Fees. With respect to any commitment fee,
arrangement fee, letter of credit fee or other fee, or any other cost or
expense (including Attorney Costs) due and payable to the Administrative Agent,
the Issuing Lender, B of A or the Arranger under the Loan Documents, the
Company hereby irrevocably authorizes B of A to debit any deposit account of
the Company with B of A in an amount such that the aggregate amount debited
from all such deposit accounts does not exceed such fee or other cost or
expense. If there are insufficient funds in such deposit accounts to cover the
amount of the fee or other cost or expense then due, such debits will be
reversed (in whole or in part, in B of A's sole discretion) and such amount not
debited shall be deemed to be unpaid. No such debit under this Section shall
be deemed a set-off.
12.12 Notification of Addresses, Lending Offices, etc. Each Lender
shall notify the Administrative Agent in writing of any changes in the address
to which notices to the Lender should be directed, of addresses of any Lending
Office, of payment instructions in respect of all payments to be made to it
hereunder and of such other administrative information as the Agent shall
reasonably request.
12.13 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
12.14 Severability. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the
89
<PAGE> 97
legality or enforceability of the remaining provisions of this Agreement or any
instrument or agreement required hereunder.
12.15 No Third Parties Benefited. This Agreement is made and
entered into for the sole protection and legal benefit of the Company, the
Lenders, the Agents and the Agent-Related Persons, and their permitted
successors and assigns, and no other Person shall be a direct or indirect legal
beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any of the other Loan Documents.
12.16 Governing Law and Jurisdiction. (a) THIS AGREEMENT AND THE
NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF ILLINOIS; PROVIDED THAT THE AGENT, THE LENDERS AND THE BORROWER SHALL
RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF ILLINOIS OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENTS
AND THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE AGENTS
AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO
THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE
COMPANY, THE AGENTS AND THE LENDERS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
ILLINOIS LAW.
12.17 Waiver of Jury Trial. THE COMPANY, THE LENDERS AND THE AGENTS
EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR
ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
THE COMPANY, THE LENDERS AND THE AGENTS EACH AGREE THAT ANY SUCH CLAIM OR CAUSE
OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
90
<PAGE> 98
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
12.18 Entire Agreement. This Agreement, together with the other
Loan Documents, embodies the entire agreement and understanding among the
Company, the Lenders and the Agents, and supersedes all prior or
contemporaneous agreements and understandings of such Persons, verbal or
written, relating to the subject matter hereof and thereof.
91
<PAGE> 99
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered in New York, New York by their proper and duly
authorized officers as of the day and year first above written.
AMERISERVE FOOD DISTRIBUTION, INC.
By: /s/ Kevin J. Rogan
----------------------------------
Name: Kevin J. Rogan
----------------------------------
Title: Secretary
----------------------------------
<PAGE> 100
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
By: /s/ R. Guy Stapleton
----------------------------------
Name: R. Guy Stapleton
----------------------------------
Title: Managing Director
----------------------------------
<PAGE> 101
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Issuing Lender and Lender
By: /s/ R. Guy Stapleton
----------------------------------
Name: R. Guy Stapleton
----------------------------------
Title: Managing Director
----------------------------------
<PAGE> 102
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION, as
Documentation Agent
By: /s/ Harold J. Philipps
----------------------------------
Name: Harold J. Philipps
----------------------------------
Title: Managing Director
----------------------------------
<PAGE> 103
LASALLE NATIONAL BANK,
as a Lender
By: /s/ James M. Minich
----------------------------------
Name: James M. Minich
----------------------------------
Title: Vice President
----------------------------------
<PAGE> 104
THE MITSUBISHI TRUST AND BANKING
CORPORATION, CHICAGO BRANCH,
as a Lender
By: /s/ Nobuo Tominaga
----------------------------------
Name: Nobuo Tominaga
----------------------------------
Title: Chief Manager
----------------------------------
<PAGE> 105
SOUTHERN PACIFIC BANK,
as a Lender
By: /s/ Chris Kelleher
----------------------------------
Name: Chris Kelleher
----------------------------------
Title: Vice President
----------------------------------
<PAGE> 106
TRANSAMERICA BUSINESS CREDIT
CORPORATION, as a Lender
By: /s/ Thomas V. Fernandes
----------------------------------
Name: Thomas V. Fernandes
----------------------------------
Title: Senior Account Executive
----------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-START> DEC-28-1997
<PERIOD-END> SEP-26-1998
<CASH> 2,975
<SECURITIES> 0
<RECEIVABLES> 36,121
<ALLOWANCES> (26,495)
<INVENTORY> 275,389
<CURRENT-ASSETS> 511,681
<PP&E> 270,302
<DEPRECIATION> (83,077)
<TOTAL-ASSETS> 1,774,529
<CURRENT-LIABILITIES> 707,678
<BONDS> 850,000
0
0
<COMMON> 0
<OTHER-SE> 61,945
<TOTAL-LIABILITY-AND-EQUITY> 1,774,529
<SALES> 4,987,365
<TOTAL-REVENUES> 4,987,365
<CGS> 4,517,507
<TOTAL-COSTS> 4,517,507
<OTHER-EXPENSES> 481,990
<LOSS-PROVISION> 1,845
<INTEREST-EXPENSE> 62,804
<INCOME-PRETAX> (85,289)
<INCOME-TAX> 821
<INCOME-CONTINUING> (86,110)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (86,110)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
