SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1996 Commission File Number 33-68956
SPECIALTY FOODS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-2488181
(State or other jurisdiction (I.R.S. Employer
of Identification No.)
incorporation or organization)
9399 West Higgins Road
Suite 800 60018-4940
Rosemont, IL (Zip Code)
(Address of principal
executive offices)
(847) 685-1000
(Registrant's telephone
number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 period 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
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's knowledge,
in definitive proxy or information statements incorporated by
Reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( X )
State the aggregate market value of voting stock held by non-
affiliates of the Registrant. No market presently exists for the
Registrant's Common Stock.
Number of shares of common stock outstanding as of March 20,
1997: 100 shares.
Documents incorporated by reference: None.
TABLE OF CONTENTS
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial
Condition and Results
of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
This Annual Report or Form 10-K contains certain forward-looking statements
within the meaning of the federal securities laws which reflect the Company's
expectations and are based upon currently available information. Actual
results, performance, achievements or other information may vary materially
from such statments and are subject to future known and unknown risks,
uncertainties and events, including, among other factors, weather,
economic and market conditions, costs and availability of raw materials,
competitive activites or other business conditions.
PART I
ITEM 1. BUSINESS
This Annual Report or Form 10-K contains certain forward-looking
statements within the meaning of the federal securities laws
which reflect the Company's expectations and are based upon
currently available information. Actual results, performance,
achievements or other information may vary materially from such
statements and are subject to future known and unknown risks and
uncertainties and events including those in the forepart and
elsewhere herein.
Specialty Foods Corporation serves as the holding company for a
number of companies engaged primarily in the production and
distribution of breads, cookies, specialty Italian cheeses, and
pre-cooked meat products. All of the capital stock of SFC is
owned by Specialty Foods Acquisition Corporation (SFAC). SFAC
SFC and their subsidiaries are referred to in this report on Form
10-K as the Company or the Successor. SFAC and SFC were formed
in June 1993 to acquire (the Acquisition) the North American food
businesses (the Acquired Companies or the Predecessor Company) of
Beledia N.V., a subsidiary of Artal Group S.A. The Company
operates in two primary product groupings: Bakery Operations and
Cheese and Meat Operations.
BAKERY OPERATIONS
Metz Baking Company (Metz) is a leading broad-line wholesale
baking company serving the Midwestern United States. Metz's
product line includes breads, buns, rolls and sweet goods. These
products are marketed by Metz under the Taystee, Holsum, Old
Home, Master, Country Hearth, Egekvist and D'Italiano brand names
and numerous private labels. Such trademarks are either owned by
Metz or subject to long-term licensing arrangements. Metz also
is marketing bread and bun products under the Pillsbury and
Healthy Choice trademarks in test markets in certain of its
service areas. Metz expects these licenses to continue on a long-
term basis once such test-marketing is completed. Metz
distributes its products through a company-owned direct store
delivery (DSD) system to customers in 16 states. Management
believes that the stability of Metz's revenue base is
significantly enhanced by the breadth of its product line, the
balance between its branded and private label sales, and the
scope and diversity of the geographic area it serves.
The Company also owns and operates Mother's Cake & Cookie Co.
(Mother's). Mother's is a producer and distributor of branded
cookie products and fruit cobblers sold primarily through retail
grocers in the Western United States. Mother's products are
marketed under the Mother's, Mrs. Wheatley's, Bakery Wagon and
Marie Lu brand names. Mother's sells its cookie products
primarily to retail grocers through a DSD system that is
primarily company-owned.
The Company also owns and operates Andre-Boudin Bakeries, Inc.
(Boudin), a chain of 40 bakery cafes and kiosks located in the
San Francisco Bay area, Southern California, Dallas and the
greater Chicago area. In addition, Boudin operates catalog, mail-
order and catering businesses.
CHEESE AND MEAT OPERATIONS
Stella Foods, Inc. (Stella) is one of the largest producers of
specialty cheeses in the United States. Stella's product line
consists of specialty Italian cheeses (parmesan, romano, ricotta,
string cheese and retail pack mozzarella), other European-style
specialty cheeses (feta, blue cheese and Lorraine brand cheese)
and basic Italian cheeses (bulk pack mozzarella and provolone).
These products are sold through retail grocers, to foodservice
accounts and to commercial food processors primarily under the
Stella, Frigo, Gardenia, Dragone and Lorraine trademarks. Stella
has established substantial positions in a number of higher-
margin specialty cheese categories, and has a balanced
involvement in all three of the industry's primary distribution
channels: retail, foodservice and manufacturers of prepared
foods.
Stella also manages H&M Food Systems Company, Inc. (H&M), a
producer of custom formulated, pre-cooked meat products. H&M's
products are sold primarily to national restaurant chains and
prepared-food producers.
DIVESTITURES
In 1996, the Company announced and implemented a plan to sell
certain of its non-core businesses. Set forth below is a
description of those non-core businesses for which the Company
has finalized its decision to sell or that have been sold to the
date of this report.
In December, 1996, the Company sold Bloch & Guggenheimer, Inc.
(B&G) and Burns & Ricker, Inc. (B&R) by means of a stock
transaction. Under the Company's ownership, B&G manufactured,
marketed and distributed pickles, peppers and spices primarily
through retail grocers in the greater New York metropolitan area,
and B&R manufactured, marketed and distributed baked premium
snack products through brokers and distributors to grocery
stores.
In February, 1997, the Company sold substantially all of the
assets of Gai's Seattle French Baking Company and related
operating companies (collectively Gai's). Under the Company's
ownership, Gai's was a wholesale restaurant and institutional
bakery company servicing western Washington State and northern
Oregon.
In the fourth quarter of 1996, the Company finalized its decision
to dispose of San Francisco French Bread Company (SFFB), a
subsidiary of the Company managed by Metz. SFFB is a leading
wholesale producer of genuine sourdough French bread in the
United States with operations based primarily in Northern
California.
Total gross proceeds for these divestitures are estimated to be
approximately $140 million, with net proceeds of approximately
$110 million after the repurchase of receivables and
other transaction costs. These divestitures have been reported as
discontinued operations in the accompanying financial statements.
In August, 1996, the Company completed the sales of substantially
all of the assets of Venice Bakery Ltd. (VBL) and The Bagel
Place, Inc. (TBP). Under the Company's ownership, VBL was a
wholesale bakery company servicing British Columbia, and TBP
manufactured, marketed and distributed bagels and other bakery
products in California.
FINANCING STRUCTURE
SFC's financing structure at December 31, 1996 consisted of the
following: a $125 million Revolving Credit Facility at the
operating subsidiary level (Revolving Credit Facility); $175
million Term Loan Facility at the SFC level (Term Loan Facility);
$225 million of 10 1/4% Senior Notes due 2001 (10 1/4% Senior
Notes); $150 million of 11 1/8% Senior Notes due 2002 (11 1/4%
Senior Notes); and $200 million of 11 1/4% Senior Subordinated
Notes due 2003 (Senior Subordinated Notes). In addition, SFC is
a party to an accounts receivable securitization facility
pursuant to which the accounts receivable of the Company's
operating subsidiaries are transferred to a master trust
(Accounts Receivable Facility). At December 31, 1996, the
maximum amount of accounts receivable that could be sold to the
Accounts Receivable Facility was $115 million.
RAW MATERIALS
The Company is a major purchaser of milk, flour, sugar, meat,
other agricultural products, vegetable oils, and plastic and
paper for packaging materials. Although the Company has some long-
term contracts, the bulk of such raw materials are purchased on
the open market or pursuant to short-term agreements. The prices
paid for food product raw materials generally reflect external
forces, among which weather conditions and commodity market
activities are most significant. Although the prices of the
principal raw materials used by the Company can be expected to
fluctuate as a result of government actions and/or market forces
(which would directly affect the cost of products and value of
inventories), such materials are generally in adequate supply and
available from numerous sources. Occasionally, and where
possible, the Company makes advance purchases of commodities
significant to its business in order to lock in what is perceived
to be favorable pricing and to protect itself from basic market
price fluctuations. The Company seeks to pass through increases
in the costs of commodity ingredients to its customers where
possible. The Company's ability to do so is dependent primarily
upon competitive conditions and pricing methodologies employed in
the various markets in which the Company conducts its business.
In 1996, the Company's Cheese Operations were adversely affected
by historically high milk prices. The Company believes that milk
prices are likely to moderate in 1997 from such historically high
levels. However, there can be no assurance that price increases will
not occur and that the Company's financial performance will not be
adversely affected by milk prices in the future.
TRADEMARKS, PATENTS AND LICENSES
The Company owns or licenses a number of trademarks and
tradenames which management believes provide significant value to
several of the Company's businesses because of their recognition
by customers and consumers. The Company owns or licenses a
number of patents, but such patents and licenses are not
considered material to the conduct of the Company's businesses,
and the Company does not believe that any of its businesses are
substantially dependent on patent protection.
SEASONALITY, WORKING CAPITAL
The Company's businesses are moderately seasonal with higher
sales, operating profit and cash flows generally occurring in the
third and fourth quarters of the year. This seasonality is due
primarily to higher bread sales in the summer months and higher
cheese sales in the fall and winter months. The cheese business
tends to build inventory of its hard-style cheeses for aging in
the spring and summer when milk prices tend to be lower.
CUSTOMERS, SALES AND BACKLOG
No one customer accounts for more than 10% of the Company's net
sales. In general, the backlog of orders is not deemed to be
significant or material for an understanding of the Company's
businesses.
COMPETITION
The Company's products compete in highly competitive lines of
business. In particular, the Company's Bakery Operations face
intense competition as a result of continued overcapacity in the
industry and the increased presence of in-store bakeries.
Competitors include national and international companies and
numerous regional and local companies. Some of the competitors
have greater financial and other resources than the Company,
while others have lower fixed costs and greater operating
flexibility. The Company does not encounter material foreign
competition. Competition is based primarily on price, quality,
service and freshness.
ENVIRONMENTAL MATTERS
In June, 1993, Stella became aware that some of the whey by-
product at its Ogdensburg plant which was disposed of by means of
land spreading may have affected the ground water serving certain
homes located in the vicinity of the land spread location.
Stella voluntarily undertook to provide water to approximately 50
homes and began environmental studies, working in conjunction
with the New York State Department of Environmental Conservation
(DEC) and the New York State Department of Health, to determine
whether Stella was responsible for the alleged problems, and, if
so, to identify appropriate corrective actions. In early 1995,
DEC and Stella agreed that only approximately 15 homes were
potentially affected by the whey spreading. In April, 1995,
Stella was named as the defendant in a lawsuit brought in New
York State Supreme Court by approximately 75 residents of about
30 homes in the vicinity of the land spread location seeking
recovery of damages allegedly caused by Stella's whey disposal.
The Company does not believe that the damages to be
recovered from Stella as a result of the Ogdensburg lawsuit, if
any, would have a material adverse effect on the financial
condition or results of operations of the Company, however, there
can be no assurance that the Ogdensburg lawsuit will not have such a
material adverse effect.
In addition, the past and present business operations of the
Company and the past and present ownership and operation of real
property by the Company are subject to extensive and changing
federal, state, local and foreign environmental laws and
regulations pertaining to the discharge of materials into the
environment, the handling and disposition of wastes (including
solid and hazardous wastes) or otherwise relating to protection
of the environment. Compliance with federal, state, local and
foreign environmental laws and regulations is not expected to
have a material impact on the Company's capital expenditures,
earnings or competitive position. No assurance can be given,
however, that additional environmental issues relating to
presently known matters or identified sites or to other matters
or sites will not require additional, currently unanticipated
investigation, assessment or expenditures.
REGULATION
PUBLIC HEALTH
The Company is subject to the Federal Food, Drug and Cosmetic Act
and regulations administered by the Food and Drug Administration
(FDA), or, with respect to meat products, the United States
Department of Agriculture (USDA). These comprehensive regulatory
schemes govern, among other things, the manufacture, composition,
ingredient labeling, packaging and safety of food. For example,
the FDA regulates manufacturing practices for food through its
current "good manufacturing practices" regulations, specifies the
"recipes," called standards of identity, for certain foods,
including many of the kinds of products marketed by the Company's
subsidiaries, and prescribes the format and content of certain
information required to appear on the labels of food products.
The Company has revised the labeling of its products to comply
with regulations promulgated by the FDA pursuant to the Nutrition
Labeling and Education Act of 1990. The Company also has revised
the labeling of its meat products to comply with similar
regulations adopted by the USDA. These regulations require
nutritional labeling on all foods that are a meaningful source of
nutrition, including many of the Company's products, and place
limitations on the use of certain terms while requiring the use
of other terms.
The operations and the products of the Company's businesses also
are subject to state and local regulation through such measures
as licensing of plants, enforcement by state health agencies of
various state standards and inspection of the facilities.
The Company also is subject to regulation by certain other
governmental agencies, including the United States Department of
Agriculture and certain state and local regulatory agencies.
DAIRY SUPPORT
The Company purchases substantial quantities of bulk milk. The
prices paid for bulk milk in the United States are controlled in
most areas by Federal Milk Marketing Orders or state regulatory
agencies. Such orders and agencies establish base minimum prices
that processors must pay for bulk milk according to the class of
intended use. In most areas, the prices paid for bulk milk by
processors are higher than these minimums due to premiums charged
by suppliers and shippers. These regulations and other factors
have resulted in significant fluctuations in bulk milk prices in
the past. There can be no assurance that price swings will not
occur and that the Company's financial performance will not be
adversely affected by price fluctuations in the future.
FEDERAL TRADE COMMISSION
The Company is subject to certain regulations by the Federal
Trade Commission (FTC). Advertising of the Company's businesses
is subject to regulation by the FTC pursuant to the Federal Trade
Commission Act and the regulations promulgated thereunder.
EMPLOYEE SAFETY REGULATIONS
The Company is subject to certain health and safety regulations
including regulations issued pursuant to the Occupational Safety
and Health Act. These regulations require the Company to comply
with certain manufacturing, health and safety standards to
protect its employees from accidents.
EMPLOYEES
At December 31, 1996, the Company employed approximately 14,000
persons. Approximately 64% of the Company's labor force are or
will be covered by collective bargaining agreements upon
completion of current negotiations.
RECENT DEVELOPMENTS
On January 15, 1997, the Company announced the appointment of
Lawrence S. Benjamin, the President and Chief Executive Officer
of Stella since August 1994, as President and Chief Executive
Officer of the Company. The appointment was made following the
resignation of Paul J. Liska, the Company's former President and
Chief Executive Officer.
In January, 1997, the Accounts Receivable Facility was amended to
increase the maximum allowable amount of accounts receivable that
could be sold to the facility to $124 million.
In February, 1997, the lenders under the Term Loan Facility and
Revolving Credit Facility agreed to amendments of several
provisions of the Term Loan Facility and Revolving Credit
Facility. The amendments, among other things, reduce SFC's
financial covenant levels. In addition, the amendments allow the
Company to retain for reinvestment in acquisitions and capital
expenditure projects up to $110 million of the proceeds from
business divestitures completed by the Company. In connection
with the amendments, certain of the stockholders of SFAC have
agreed to contribute to the equity of the Company an amount equal
to $19,500,000 (a description of such agreement appears in Part
III, Item 13, under the heading "Certain Transactions with
Stockholders of SFAC").
In March, 1997, the Company announced that management of the
operations of H&M will be consolidated with the operations of
Stella.
Also, see a description of certain sales of non-core businesses
in the Section under the heading "Divestitures."
ITEM 2. PROPERTIES
The Company uses various owned and leased plants, warehouses, and
other facilities in its operations. These facilities are located
primarily in the Midwest, and in California, Texas and the
Northeast. Management believes that the facilities are suitable
and adequate for the conduct of the businesses. The following is
a summary of significant facilities that were operated as of
December 31, 1996. The summary excludes those facilities deemed
immaterial by management, which are comprised primarily of bakery
thrift stores and depots operated by the Bakery Operations and
retail cafes operated by Boudin. The summary also excludes those
facilities operated by Gai's (see a description of the sale of
the assets of Gai's in Item 1 under the heading
"Divestitures.")
NUMBER OF FACILITIES
---------------------------------------
OWNED LEASED TOTAL
------- ------- ------
Bakery Operations 20 49 69
Cheese and Meat Operations 19 4 23
------- ------- ------
39 53 92
======= ======= ======
Certain of the foregoing properties are subject to mortgages for
the benefit of the lenders under the Revolving Credit Facility,
including five properties used in the Bakery Operations and two
properties used in the Cheese and Meat Operations.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in litigation
matters, including employment and breach of contract, arising out
of the ordinary course of business. The Company does not believe
that any single matter, if adversely determined, would have a
material adverse effect on the Company's financial condition or
results of operations. However, if all or a majority of such
matters were adversely decided against the Company, such
judgments could have a material adverse effect on the Company's
financial condition. The Company does not believe at this time
that there is a reasonable possibility that all or a majority of
such matters will be decided against the Company. In addition,
the Company is party to other claims and litigation that arise in the
normal course of business. Management believes that the ultimate outcome
of these claims and litigation will not have a material adverse effect on
the Company's results of operations or financial condition. However, there
can be no assurance that the outcome of the Company's litigation matters
will not have a material adverse effect on the Company's results of
operations or finacial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
There is no public market for the Common Stock of the Registrant,
all of which is held by SFAC.
Certain of the Company's debt agreements contain covenants which
restrict or prohibit (with de minimis exceptions) SFC from paying
dividends or making other distributions to SFAC. Refer to
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" for additional discussion of such
restrictions.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth below for 1992 has been derived from
the combined financial statements of the Predecessor Company.
The results of operations for 1993 include the results of
operations of the Predecessor Company for the period January 1,
1993 to August 16, 1993 and the results of operations of SFC for
the period August 17, 1993 to December 31, 1993.
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
(In milllions, except per share data)
Net sales $ 1,661 $ 1,627 $ 1,643 $ 1,691 $ 1,378
===== ===== ===== ===== =====
Income (loss) from
continuing
operations (1) (2) $ (435) $ (222) $ (31) $ (6) $ 13
===== ===== ===== ===== =====
Income (loss) from
discontinued
operations $ (11) $ (47) $ 11 $ (3) $ (2)
===== ===== ===== ===== =====
Total assets $ 616 $ 1,092 $ 1,354 $ 1,395 $ 769
===== ===== ===== ===== =====
Long-term debt $ 838 $ 836 $ 806 $ 777 $ 315
===== ===== ===== ===== =====
(1) In 1996, a goodwill write-down increased the loss from
continuing operations by $356 million. Additionally, a restructuring charge
further increased the 1996 loss from continuing operations by $28 million.
(2) In 1995, a goodwill write-down increased the loss from
continuing operations by $204 million.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Annual Report or Form 10-K contains certain forward-looking
statements within the meaning of the federal securities laws which
reflect the Company's expectations and are based upon currently
available information. Actual results, performance, achievements or
other information may vary materially from such statements and are
subject to future known and unknown risks and uncertainties and events
including those in the forepart and elsewhere herein.
The following table sets forth, for the periods indicated, the
percentage of net sales represented by certain items in SFC's
statements of operations.
1996 1995 1994
------- ------- -------
Net sales 100.0% 100.0% 100.0%
Cost of sales 72.8 71.7 72.3
------- ------- -------
Gross profit 27.2 28.3 27.7
Operating expenses:
Selling, distribution, general and
administrative 23.9 22.1 22.4
Amortization of intangible assets 0.8 1.1 1.1
Restructuring charges 1.7 - -
Goodwill write-down 21.4 12.5 -
------- ------- -------
Total operating expenses 47.8 35.7 23.5
------- ------- -------
Operating profit (loss) (20.6) (7.4) 4.2
Interest 5.7 5.8 5.3
Other, net (.2) 0.3 0.8
------- ------- -------
Loss from continuing operations (26.1)% (13.5)% (1.9)%
======= ======= =======
Shown below are the net sales of the Company's operating units
for 1996, 1995, and 1994, with percentage increases or decreases
based on comparisons to preceding years.
(In millions) % Change
------------- --------
1996 1995 1994 1996 vs. 1995 1995 vs. 1996
------ ------ ------ ------------- -------------
Bakery Operations $ 701 $ 695 $ 662 1% 5%
Cheese and Meat
Operations 960 932 981 3 (5)
------ ------ ------ ------ ------
$ 1,661 $ 1,627 $ 1,643 2% (1)%
====== ====== ====== ====== ======
RESULTS OF OPERATIONS
1996 COMPARED TO 1995
Consolidated net sales from continuing operations increased 2% to
$1.661 billion in 1996 compared to $1.627 billion in 1995.
Excluding the impact of acquisitions and divestitures, net sales
increased by $65 million (4%) during the same period. Net sales
of the Bakery Operations increased $6 million (1%) to $701
million in 1996. The increase was due primarily to price
increases taken to recover increased ingredient costs. Net sales
of the Cheese and Meat Operations increased $28 million (3%) to
$960 million. Net sales at Stella increased $28 million (4%)
primarily due to price increases reflecting a significant
increase in the cost of milk in 1996, partially offset by a
decline in volume which resulted from a fire at its Lena,
Wisconsin manufacturing plant in January, 1996.
SFC's gross profit margin decreased to 27.2% in 1996 from 28.3%
in 1995 primarily due to the increased cost of milk at Stella,
increased rental expense from sale leaseback activity, higher
costs associated with sourcing parmesan cheese, and an
unfavorable mix shift at Mother's.
Selling, distribution, and general and administrative expenses
increased $37 million (10%) in 1996 to $397 million. Selling
expense increased due to costs associated with new product
introductions and expanded distribution of products at both
Stella and Mother's. Distribution expenses increased primarily
due to contractual wage and fringe benefit increases for route
sales representatives at Metz and Mother's. General and
administrative expense increases are attributed to staff upgrades
at the Company's core businesses, Stella and Metz, wage and
fringe increases, and severance expenses associated with payments
to former senior executives of the Company.
Operating results in 1996 also reflect a writedown of goodwill
for $356 million and costs associated with a restructuring
program totaling $28 million. Both of these charges are more
fully described in notes 4 and 5, respectively, to the
accompanying consolidated financial statements.
Interest expense for 1996 was consistent with 1995.
Other (income) expense, net was $3 million of income in 1996
compared to $6 million of expense in 1995. The net other income
in 1996 results primarily from the Company's insurance recovery,
partially offset by a loss incurred in connection with the
disposition of VBL, the Company's Canadian bakery operations, and
a loss on the sale and leaseback of certain equipment. The
breakdown of other (income) expense is more fully described in
Note 22 to the accompanying consolidated financial statements.
As a result of the above factors, net loss from continuing
operations increased to $435 million in 1996 compared to $222
million in 1995.
The Company reports minimal state income tax and no federal
income tax due to its net operating loss position for tax
purposes.
The extraordinary loss of $18 million in 1995 resulted from the
write off of deferred financing costs associated with certain
borrowings that were repaid by SFC in the first and third
quarters of 1995.
In the fourth quarter of 1996, the Company finalized its decision
to dispose of B&G/B&R, Gai's, and SFFB. These divestitures are
reported as discontinued operations in accordance with Accounting
Principles Board Opinion No. 30 and are more fully described in
note 3 to the accompanying consolidated financial statements.
Because of the highly leveraged status of SFC, earnings before
interest, taxes, depreciation, and amortization ("EBITDA") is an
important performance measure used by SFC and its stakeholders.
SFC believes that EBITDA provides additional information for
determining its ability to meet future debt service requirements.
However, EBITDA is not a defined term under generally accepted
accounting principles ("GAAP") and is not indicative of operating
or cash flow from operations as determined under GAAP. SFC's
EBITDA from continuing operations in 1996 and 1995 is calculated
as follows:
(In thousands)
1996 1995
--------- ---------
Operating loss $ (342,194) $ (120,680)
Goodwill write-down 355,664 203,824
Property write-downs included in
restructuring charges 23,300 -
Amortization 12,886 17,903
Depreciation 36,380 36,876
Business interruption claim (included
in other income) 5,286 -
--------- ---------
$ 91,322 $ 137,923
========= =========
1995 COMPARED TO 1994
Consolidated net sales of continuing operations decreased 1% to
$1.627 billion, compared to $1.643 billion in 1994. Excluding
the impact of acquisitions and divestitures, net sales increased
$5 million in the period, or less than 1%. Net sales of the
Bakery Operations increased $33 million (5%) to $695 million.
This increase was due primarily to the acquisition in May, 1995
of two bakeries and the related routes, the expansion of cookie
distribution in non-grocery channels, and price increases. Net
sales of the Cheese and Meat Operations, consisting of Stella,
H&M and Gordon's Wholesale, Inc. (a wholesale distributor sold in
May, 1994), decreased $49 million (5%) to $932 million. Net
sales at Stella increased $2 million, while declining $11 million
(6%) at H&M, and declining $40 million (100%) at Gordon's due to
its divestment in May, 1994. Stella's increase was primarily due
to a favorable mix shift to higher price hard-style cheeses. The
decline at H&M was due to near-record low beef and pork commodity
prices and the loss of significant volume from its largest
customer at that time.
SFC's gross profit margin increased to 28.3% in 1995 from 27.7%
in 1994 primarily due to the divestiture of the low-margin
Gordon's business and the impact of the continuing productivity
improvements resulting from cost reduction programs initiated in
1994, partially offset by the lower gross margins experienced by
SFC's Bakery Operations due to higher flour costs in the last
half of 1995.
Selling, distribution, and general and administrative expenses
decreased $8 million (2%) in 1995 to $360 million. Selling
expense increased compared to 1994 primarily due to wage and
fringe benefit increases. Distribution expense was consistent
with 1994 levels as contractual wage and fringe benefit increases
for route sales representatives was offset by the impact of the
divestiture of Gordon's, and lower levels of workers'
compensation expense in the Bakery Operations. General and
administrative expense decreases are attributable to a reduction
in the workforce due to plant closures and a lower level of
workers' compensation and fringe benefit expense.
Operating results in 1995 also reflect a writedown of goodwill
for $204 million. This charge is more fully described in note 4
to the accompanying consolidated financial statements.
Interest expense for 1995 increased 9% to $95 million from $87
million in 1994. The increase was due to higher interest rates
and additional outstanding borrowings during 1995.
Other (income) expense, net was $6 million of expense in 1995
compared to $13 million of expense in 1994. The net other
expense for both years includes approximately $5 million for the
discount on receivables sold and additionally in 1994 relates to
the write-off of $6 million of deferred financing costs as a
result of the refinancing of the Accounts Receivable Facility in
1994.
As a result of the above factors, net loss from continuing
operations increased to $222 million in 1995 from $31 million in
1994.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities totaled $35 million in
1996. The increase in net cash used in operating activities in
1996 was primarily attributable to the Company's lower operating
results and increased working capital usage. Working capital
requirements have increased in 1996 primarily as a result of the
timing of cash outlays and collection of insurance proceeds
related to the fire at Stella's Lena, Wisconsin facility, cash
expenditures associated with acquisition liabilities, and lower
accounts payable levels resulting from the Company's effort to
normalize relations with suppliers. In 1995, cash provided by
operating activities of $33 million was principally driven by the
Company's aggressive working capital management and the benefit
from the sale of work-in-process cheese inventory. In 1994, cash
provided by operating activities of $25 million was principally
driven by the Company's aggressive working capital management.
Net cash provided by investing activities totaled $59 million in
1996. The activity in 1996 was primarily attributable to the net
proceeds from the sale of B&G/B&R and sale leaseback
transactions, offset by increased capital expenditures, which
have been reduced by proceeds from the insurance claim related to
the fine at Stella's Lena, Wisconsin facility. In 1995
and 1994, cash used in investing activities of $36 million and
$31 million, respectively, resulted from capital expenditures and
acquisitions.
Net cash used in financing activities amounted to $4 million in
1996 as a slight increase in revolving credit borrowings was
offset by normal payments on long-term debt. In 1995, cash
provided by financing activities of $18 million reflects the
impact of the issuance of $150 million of 11 1/8% Senior Notes,
the establishment of $175 million Term Loan Facility, and
borrowings under the new Revolving Credit Facility, offset by the
subsequent repayment of the Company's original term loan facility
and original revolving credit facility. In 1994, cash provided
by financing activities of $5 million reflected the additional
long-term debt borrowings.
Based upon the above, the net increase (decrease) in cash in
1996, 1995 and 1994 was $20 million, $15 million, and ($0.2)
million, respectively.
In February, 1997, the lenders for the Term Loan Facility and
Revolving Credit Facility agreed to amend several provisions of
the agreements pertaining to these facilities which is described
in note 13 to the accompanying consolidated financial statements.
As of December 31, 1996, the Company has a cash balance of $38
million. Additionally, the Company has borrowed $78 million
under its $125 million Revolving Credit Facility. Outstanding
letters of credit of $25 million as of December 31, 1996 also
reduce available funds under the facility. Management believes
that these funds along with operating cash flows, proceeds from
the Gai's and SFFB divestitures and the insurance claim relating
to the fire at Stella's Lena, Wisconsin facility should be
adequate to fund the Company's short term obligations, although
there can be no assurances that cash flow will be adequate to
meet such obligations. Longer term, the Company will also consider
refinancing and additional asset sales to address future
liquidity and capital structure issues. In any case, the Company
expects that by the year 2000 it will be required to refinance a
significant portion of its indebtedness. Currently, the Company
has no specific refinancing plans.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Information on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The number of persons presently serving on the Board of Directors
of the Company is eleven. Set forth below are the names, ages,
other positions and offices held and a brief account of the
business experience for each director. All members of the Board
of Directors serve until a successor is elected.
NAME AGE OTHER POSITIONS
- ---- --- ---------------
Robert B. Haas 49 Chairman of the Board of SFAC and
SFC since their organization and
Chairman of the Board of Haas Wheat
Advisory Partners Incorporated (Haas
Wheat) since 1992; Chairman of the
Board of Haas Wheat & Partners
Incorporated, a private investment
firm, since January, 1995; Chairman
of the Board of Haas & Partners
Incorporated, a private investment
firm, since 1989. Mr. Haas also is
Chairman of the Board of Playtex
Products, Inc. and a Director of
Sybron International Corporation.
Thomas J. Baldwin 38 Director of SFAC and SFC since May,
1996; Chief Executive Officer of
Christmas Corner, Inc. since January,
1995 and President of RB Ventures
since July, 1994. Mr. Baldwin was
also Managing Director of Invus Group
Ltd. from 1990 until February, 1995.
Lawrence S. Benjamin 41 Director of SFAC and SFC since
February, 1997; President and Chief
Executive Officer of SFAC and SFC
since January, 1997; and President
and Chief Executive Officer of Stella
since August, 1994. Mr. Benjamin
held various positions from 1986
through August, 1994 with operating
units of Kraft General Foods, Inc.,
including President of All American
Gourmet Company, Vice President of
Kraft Frozen Products Group and Vice
President and General Manager of the
Specialty Ingredients Unit of Kraft.
J. Taylor Crandall 43 Director of SFAC and SFC since
August, 1993; Vice President and
Chief Financial Officer of Keystone,
Inc. (Keystone) since October, 1986
and President, Director and sole
stockholder of Acadia MGP, Inc.
(managing general partner of Acadia
FW Partners, L.P., the sole general
partner of Acadia Partners, L.P.
(Acadia)) since March, 1992.
Mr. Crandall also is a Director of
Bell & Howell Holdings Company.
Charles J. Delaney 37 Director of SFAC and SFC since
August, 1993 and President of UBS
Capital L.L.C. (UBS Capital) since
January, 1993; First Vice President
in charge of Leveraged Finance Group
of Corporate Banking Division of
Union Bank of Switzerland since May,
1989. Mr. Delaney also is a Director
of Peoples Telephone Company, Inc.
Daniel L. Doctoroff 38 Director of SFAC and SFC since
August, 1993 and Managing Director of
Oak Hill Partners, Inc. (Acadia's
investment advisor) and its
predecessor since August, 1987; and
Vice President and Director of Acadia
MGP, Inc. since March, 1992; and Vice
President of Keystone since March,
1992. Mr. Doctoroff also is a
Director of Bell & Howell Holdings
Company, Kemper Corporation and
Capstar Hotel Company.
Jerry M. Meyer 57 Director of SFAC and SFC since
June, 1996 and Chairman of the Board,
President and Chief Executive Officer
of Pinnacle Brands, Inc. since 1991.
Mr. Meyer also is a Director of
Century Capital Financial, Inc. and
City National Bank in Kilgore and
Longview, Texas.
Andrew J. Nathanson 39 Director of SFAC and SFC since
August, 1993 and Managing Director of
Donaldson, Lufkin & Jenrette
Securities Corporation since January,
1991. Mr. Nathanson also is a
Director of Coram Healthcare, Inc.
David G. Offensend 43 Director of SFAC and SFC since
August, 1993 and Founder of Evercore
Partners, LLC since October, 1995.
Mr. Offensend was also Managing Director
of Oak Hill Partners, Inc. and its
predecessor from April, 1990 to
September, 1995; Executive Vice
President of PTJ, Inc. (the general
partner of Penobscot - MG Partners)
from April, 1990 to September, 1995;
Vice President and Director of Acadia
MGP, Inc. from March, 1992 to September,
1995; and Vice President of Keystone from
March,1992 to September, 1995. Mr.
Offensend also is a Director of Ivex
Packaging Corporation.
Anthony P. Scotto 50 Director of SFAC and SFC since
August, 1993 and Managing Director of
Oak Hill Partners, Inc. and its
predecessor since March, 1988.
Mr. Scotto also is a Director of Ivex
Packaging Corporation and Holophane
Corporation.
Douglas D. Wheat 46 Director of SFAC and SFC since
August, 1993 and President of Haas
Wheat since November, 1992; President
of Haas Wheat & Partners,
Incorporated, a private investment
firm, since January, 1995. Mr. Wheat
was Co-Chairman of Grauer & Wheat,
Inc., a private investment firm, from
April, 1989 to October, 1992. Mr.
Wheat also is a Director of Playtex
Products, Inc.
EXECUTIVE OFFICERS
Set forth below are the names, ages, positions held and a brief
account of the business experience for each executive officer of
the Company and certain executive officers of the Company's
subsidiaries who may be deemed executive officers of the Company.
No family relationship exists among the identified executive
officers. Executive officers of the Company are elected by and
serve at the discretion of the Board of Directors of the Company.
NAME AGE POSITION
- ---- --- --------
Lawrence S. Benjamin 41 See Directors.
John E. Kelly 44 Vice President, Secretary and
General Counsel of SFAC and SFC since
January, 1994. Mr. Kelly was Vice
President and Associate General
Counsel of Kraft General Foods, Inc.
from December, 1990 until January,
1994, and Vice President and
Corporate Counsel of Kraft General
Foods, Inc. from December, 1988 until
December, 1990.
Robert L. Fishbune 41 Vice President and Chief Financial
Officer of SFAC and SFC since May,
1996. Mr. Fishbune was a Partner at
Coopers & Lybrand L.L.P. from 1988
until May, 1996.
John R. Reisenberg 52 Vice President of Human Resources
SFAC and SFC since November, 1993.
Mr. Reisenberg held
various positions with Kraft General
Foods from 1969 through 1993,
including Group Vice President and
General Manager - Foodservice and
Trademark Licensing from 1987 to 1993
and Group Vice President and Director
- Human Resources from 1981 to 1987.
Henry J. Metz 46 Chief Executive Officer of Metz
since August, 1993 and President of
Metz since February, 1983. Mr. Metz
was Chief Operating Officer of Metz
from 1988 until August, 1993.
Richard G. Scalise 42 President and Chief Executive
Officer of H&M since August, 1994.
Mr. Scalise held various positions
from 1985 through August, 1994 with
Armour Swift-Eckrich, Inc. including
Vice President and General Manager of
Deli Foodservice.
Stephen J. Liguori 40 President and Chief Executive
Officer of Mother's since February,
1996. Mr. Liguori held various
positions with Frito Lay, Inc.
including Vice President and General
Manager of the Dallas marketing area
from January, 1994 until February,
1996, and Vice President of Brand
Marketing from January, 1991 until
December, 1993.
David G. Barrows 39 President and Chief Executive
Officer of Boudin since August, 1995.
Mr. Barrows was the Vice President of
Marketing for Sizzler International
Inc. from August, 1992 until July,
1995. Mr. Barrows also held various
marketing positions with Taco Bell
Corp. (including Manager of Strategic
Marketing and Director of National
Program Development) from 1989 until
August, 1992
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows compensation in 1996 of Mr. Benjamin,
the President and Chief Executive Officer of SFAC and SFC (CEO),
who served as President and Chief Executive Officer of Stella
during the Company's 1996 fiscal year, each of the four most
highly compensated executive officers (including the CEO) of the
Company (including its operating subsidiaries) who were serving
as executive officers at December 31, 1996, and Mr. Liska, the
former President and Chief Executive Officer of SFAC and SFC who
served during the Company's 1996 fiscal year, and who resigned
from his position effective as of January 15, 1997.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
--------------------------------- -------------------
Awards
-----------------------
Restricted Securities
Other Annual Stock Underlying All Other
Name and Year Salary Bonus Compensation Awards Options/SARs Compensation
Principal Position (1) ($)(1) ($)(1)(2) ($) ($) (4) (#) (5) ($) (6)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lawrence S. Benjamin 1996 320,000 72,000 - (7) - 50,000 1,000
President and Chief 1995 283,000 257,000 157,000 (7) - 50,000 197,000
Executive Officer of 1994 106,000 - 20,000 (7) - 100,000 18,000
SFAC and SFC (3)
John E. Kelly 1996 400,000 162,000 118,000 (8) - - 1,000
Vice President and 1995 326,000 29,000 94,000 (8) - 40,000(12) 1,000
General Counsel of 1994 300,000 170,000 98,000 (8) - 230,000(12) 1,000
SFAC and SFC (14)
Robert L. Fishbune 1996 191,000 81,000 88,000 (9) - 100,000 54,000
Vice President and 1995 - - - - - -
Chief Financial 1994 - - - - - -
Officer of SFAC and SFC (15)
Henry J. Metz 1996 320,000 240,000 93,000 (10) - 50,000 72,000
President 1995 287,000 15,000 - (10) - 75,000 1,000
and Chief Executive 1994 251,000 144,000 - (10) - 60,000 -
Officer of Metz
Paul J. Liska 1996 560,000 227,000 180,000 (11) - - 2,000
former President and 1995 386,000 48,000 119,000 (11) - 50,000(13) 1,000
Chief Executive 1994 280,000 115,000 100,000 (11) - 300,000(13) 3,000
of SFAC and SFC (16)
</TABLE>
(1) The table shows compensation received by the
named executive officers of the Company during 1994, 1995 and
1996.
(2) Includes annual bonus awards for services
rendered in 1994, 1995 and 1996 that were paid under SFC's
incentive bonus plan. The bonus plan provides certain key
employees of the Company with annual cash awards based upon
the financial performance of the Company. This plan is
administered by the Compensation Committee of the Board of
Directors. Awards for Messrs. Kelly and Liska in 1994 and
1995 were based upon SFC's achievement of certain
predetermined consolidated EBITDA (defined as income from
operations plus depreciation of property, plant and equipment
and amortization of intangible assets) objectives. Awards for
Messrs. Kelly, Fishbune and Liska in 1996 were based upon the
sale of certain of the Company's businesses. Awards for
Messrs. Benjamin and Metz were based upon the achievement by
Stella and Metz, respectively, of certain EBITDA objectives.
Under the provisions of the plan, executive officers have
target incentive compensation of 50% to 75% of the year's base
salary.
(3) Mr. Benjamin served as President and Chief Executive Officer
of Stella during the Company's 1996 fiscal year. Mr. Benjamin was
appointed President and Chief Executive Officer of SFAC and SFC
as of January 15, 1997.
(4) In 1994, SFAC sold shares of restricted stock
to each of the following named executive officers in the
amounts set forth opposite their respective names: Mr.
Benjamin, 4,298 shares; Mr. Kelly, 89,390 shares; Mr. Metz,
957,750 shares and. Mr. Liska, 76,620 shares. In 1995, SFAC
sold shares of restricted stock to each of the following named
executive officers in the amounts set forth opposite their
respective names: Mr. Benjamin, 14,578 shares; and Mr. Liska,
18,222 shares. All such shares of restricted stock were sold
at a price of $.726703211 per share. In 1996, no shares of
restricted stock were sold to any of the named executive
employees. Due to the fact that the Common Stock is not
publicly traded, it is not possible to calculate a precise
value for the restricted stock. These securities vest in four
equal portions over an 18 month period that commenced on the
respective date of purchase by each executive. SFAC has no
present intention to pay dividends on such shares. On each of
August 18, 1994, November 17, 1994, January 20, 1995, February
22, 1995, June 13, 1995, July 28, 1995, September 21, 1995,
October 15, 1995, February 21, 1996, and May 15, 1996, the
Board of Directors of SFAC determined that a per share price
of $.726703211 is not greater than the fair market value of
the Common Stock. On August 14, 1996, the Board of Directors
of SFAC determined that a per share price of $.726703211 is
equal to the fair market value of the Common Stock.
Accordingly, the dollar value of the restricted stock awards
made to each of the named executive officers equals the
consideration paid by the named executive officers. As of
December 31, 1996, the aggregate number of shares of
restricted stock and the value therefor, net of consideration
paid, for such shares held by executive officers named in the
Summary Compensation Table was as follows: Mr. Benjamin,
18,876 shares, $0; Mr. Kelly, 89,390 shares, $0; Mr. Fishbune,
0 shares, $0; Mr. Metz, 957,750 shares, $0; Mr. Liska, 94,842
shares, $0.
(5)In 1994, options were granted under the
Specialty Foods Acquisition Corporation 1994 Stock Option Plan
(SFAC Stock Option Plan) and the Specialty Foods Acquisition
Corporation 1994 Performance Stock Option Plan for Certain
Employees (Stock LTIP) in the following amounts: Mr.
Benjamin, options for 100,000 shares under the SFAC Stock
Option Plan and no options under the Stock LTIP; Mr. Kelly,
options for 150,000 shares under the SFAC Stock Option Plan
and 80,000 shares under the Stock LTIP; Mr. Metz, options for
60,000 shares under the SFAC Stock Option Plan and no options
under the Stock LTIP; and Mr. Liska, options for 200,000
shares under the SFAC Stock Option Plan and 100,000 shares
under the Stock LTIP. In 1995, options were granted under the
SFAC Stock Option Plan and the Stock LTIP in the following
amounts: Mr. Benjamin, options for 50,000 shares under the
Stock Option Plan and no options under the Stock LTIP; Mr.
Kelly, options for 40,000 shares under the Stock Option Plan
and no options under the Stock LTIP; Mr. Metz, options for
75,000 shares under the Stock Option Plan and no options under
the Stock LTIP; and Mr. Liska, options for 50,000 shares under
the Stock Option Plan and no options under the Stock LTIP. In
1996, options were granted under the SFAC Stock Option Plan in
the following amounts: Mr. Benjamin, options for 50,000
shares; Mr. Kelly, no options; Mr. Fishbune, options for
100,000 shares; Mr. Metz, options for 50,000 shares; and Mr.
Liska, no options. No options were granted under the Stock
LTIP to any of the named executives in 1996. See "Item 11
Executive Compensation - Stock Option and Long Term
Performance Related Incentive Plans" for a description of the
terms and conditions of the SFAC Stock Option Plan and Stock
LTIP.
(6) The amounts set forth for 1994 include
payments of life insurance premiums on behalf of Messrs.
Benjamin, Kelly, and Liska and reimbursement of $17,000 of
moving and relocation expenses to Mr. Benjamin. The amounts
set forth for 1995 include life insurance premiums on behalf
of Messrs. Benjamin, Kelly, Metz, and Liska and reimbursement
of $196,000 of moving and relocation expenses to Mr. Benjamin.
The amounts set forth for 1996 include life insurance premiums
on behalf of Messrs. Benjamin, Kelly, Fishbune, Metz, and
Liska, reimbursement of $53,000 of moving and relocation
expenses to Mr. Fishbune, and reimbursement of $71,000 of
moving and relocation expenses to Mr. Metz.
(7) The amounts set forth for Mr. Benjamin in
1994 reflect $15,000 of tax reimbursement payments made to Mr.
Benjamin in 1994 in connection with moving and relocation
expenses. The amounts set forth for Mr. Benjamin in 1995
reflect $144,000 of tax reimbursement payment made to Mr.
Benjamin in 1995 in connection with moving and relocation
expenses. No amounts are set forth for Mr. Benjamin in 1996
because the dollar amount of perquisites and other personal
benefits received by Mr. Benjamin in 1996 falls below the
reporting threshold established by the SEC. Currently,
disclosure is required only when the aggregate value of
perquisites and other personal benefits exceeds the lesser of
$50,000 or ten percent of total salary and bonus.
(8) The amounts set forth for Mr. Kelly in 1994
reflect $43,000 of contributions paid on Mr. Kelly's behalf by
SFC to a retirement account maintained by Mr. Kelly (the terms
and conditions of which are more fully described in this
section under the subheading "Executive Retirement Accounts
Maintained by Certain HQ Employees") and $37,000 of tax
reimbursement payments made to Mr. Kelly in 1994. The amount
set forth for Mr. Kelly in 1995 reflect $45,000 of
contributions paid on Mr. Kelly's behalf to a retirement
account maintained by Mr. Kelly and $35,000 of tax
reimbursement payment made to Mr. Kelly in 1995. The amounts
set forth for Mr. Kelly in 1996 reflect $55,000 of
contributions paid on Mr. Kelly's behalf to a retirement
account maintained by Mr. Kelly and $43,000 of tax
reimbursement payment made to Mr. Kelly in 1996.
(9) The amounts set forth for Mr. Fishbune in
1996 reflect $29,000 of contributions paid on Mr. Fishbune's
behalf by SFC to a retirement account maintained by Mr.
Fishbune (the terms and conditions of which are more fully
described in this section under the subheading "Executive
Retirement Accounts Maintained by Certain HQ Employees"),
$23,000 of tax reimbursement payments made to Mr. Fishbune in
1996, and $20,000 of tax reimbursement payment made to Mr.
Fishbune in 1996 in connection with moving and relocation
expenses.
(10) No amounts are set forth for Mr. Metz in 1994
or 1995 because the dollar amount of perquisites and other
personal benefits received by Mr. Metz in such years falls
below the reporting threshold established by the SEC.
Currently, disclosure is required only when the aggregate
value of the perquisites and other personal benefits exceeds
the lesser of $50,000 or ten percent of total salary and bonus
for any such year. The amounts set forth for Mr. Metz in
1996 reflect $54,000 of tax reimbursement payments in 1996 in
connection with moving and relocation expenses, and $39,000
for personal use of Metz's airplane.
(11) The amounts set forth for Mr. Liska in 1994
reflect $44,000 of contributions paid on Mr. Liska's behalf by
SFC to a retirement account maintained by Mr. Liska (the terms
and conditions of which are more fully described in this
section under the subheading "Executive Retirement Accounts
Maintained by Certain HQ Employees") and $38,000 of tax
reimbursement payments made to Mr. Liska in 1994. The amount
set forth for Mr. Liska in 1995 reflect $59,000 of
contributions paid on Mr. Liska's behalf to a retirement
account maintained by Mr. Liska and $47,000 of tax
reimbursement payment made to Mr. Liska in 1995. The amounts
set forth for Mr. Liska in 1996 reflect $86,000 of
contributions paid on Mr. Liska's behalf to a retirement
account maintained by Mr. Liska and $67,000 of tax
reimbursement payment made to Mr. Liska in 1996.
(12) In 1994, Mr. Kelly was granted options for
the purchase of 150,000 shares of common stock of SFAC granted
pursuant to a Stock Option Agreement between SFAC and Mr.
Kelly dated as of February 1, 1994. In 1995, Mr. Kelly was
granted options for the purchase of 40,000 shares of common
stock of SFAC granted pursuant to a Stock Option Agreement
between SFAC and Mr. Kelly dated as of February 1, 1995. Upon
Mr. Kelly's resignation from the Company, SFAC and Mr. Kelly
shall enter into an Amended and Restated Non-Qualified Stock
Option Agreement, which, among other things, will reduce the
number of shares subject to the option to 132,500 (the terms
and conditions of which are more completely described in this
section under the heading "Agreements with Mr. Kelly").
(13) In 1994, Mr. Liska was granted options for
the purchase of 200,000 shares of common stock of SFAC granted
pursuant to a Stock Option Agreements between SFAC and Mr.
Liska dated as of February 1, 1994. In 1995, Mr. Liska was
granted options for the purchase of 50,000 shares of common
stock of SFAC granted pursuant to a Stock Option Agreement
between SFAC and Mr. Liska dated as of February 1, 1995. SFAC
and Mr. Liska entered into an Amended and Restated Non-
Qualified Stock Option Agreement dated as of January 15, 1997,
which, among other things, reduced the number of shares
subject to the option to 162,500 (the terms and conditions of
which are more completely described in this section under the
heading "Agreements with Mr. Liska").
(14) Mr. Kelly shall receive certain post-
termination compensation upon his resignation pursuant to a
Termination Agreement with SFAC and SFC, dated as of February
20, 1997, which agreement is more completely described in this
subsection under the heading "Agreements with Mr. Kelly."
15) Mr. Fishbune joined the Company in May 1996,
and, therefore, did not receive any compensation from the
Company in 1994 or 1995.
(16) Mr. Liska resigned from his position with
SFAC and SFC effective as of January 15, 1997 and shall
receive certain post-termination compensation pursuant to a
Termination Agreement with SFAC and SFC, dated as of January
14, 1997, which agreement is more completely described in this
subsection under the heading "Agreements with Mr. Liska."
OPTIONS/SARS GRANT TABLE
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
- -------------------------------------------------------------------------------------------------------------
Individual Grants Potential Realizable Value
Assumed Annual Rates of
Stock Price Appreciation
for Option Term (2)
- -------------------------------------------------------------------------------------------------------------
Number of
Securities % of Total
Underlying Options/SARs Exercise
Options/SARs Granted to or Base
Granted Employees in Price Expiration
Name (#) (1) Fiscal Year ($/Sh) Date 5%($) 10%($)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence S. Benjamin
President and Chief
Executive Officer of
SFAC and SFC 50,000 4.90% 0.726703211 2/1/06 22,851 57,910
John E. Kelly
Vice President and
General Counsel of
SFAC and SFC - - - - - -
Robert L. Fishbune
Vice President and
Chief Financial
Officer of
SFAC and SFC 100,000 9.80% 0.726703211 2/1/06 45,704 115,822
Henry J. Metz
President
and Chief Executive
Officer of Metz 50,000 4.90% 0.726703211 2/1/06 22,851 57,910
Paul J. Liska
former President and
Chief Executive Officer
of SFAC and SFC - - - - - -
</TABLE>
(1) Options to purchase common stock of SFAC
granted pursuant to the SFAC Stock Option Plan. See "Section
11 Executive Compensation - Stock Option and Long Term
Performance Related Incentive Plans" for the terms and
conditions of the SFAC Stock Option Plan.
(2) All options were granted at an exercise price
of $.726703211 per share of Common Stock. Due to the fact that
the Common Stock is not publicly traded, it is not currently
possible to calculate a precise value for unexercised options.
On each of August 18, 1994, November 17, 1994, January 20,
1995, February 22, 1995, June 13, 1995, July 28, 1995,
September 21, 1995, October 15, 1995, February 21, 1996 and
May 15, 1996, the Board of Directors of SFAC determined that a
per share price of $.726703211 is not below the fair market
value of the Common Stock. On August 14, 1996, the Board of
Directors of SFAC determined that a per share price of
$.726703211 is equal to the fair market value of the Common
Stock.
AGGREGATED OPTIONS/SARS EXERCISED IN LAST FISCAL YEAR AND YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Fiscal Year-End (#) Fiscal Year-End ($)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized($) Unexercisable(1) Unexercisable
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lawrence S. Benjamin 0 0 75,000/125,000 (2)
President and Chief
Executive Officer of
SFAC and SFC
John E. Kelly 0 0 85,000/190,000 (3) (2)
Vice President and
General Counsel of
SFAC and SFC
Robert L. Fishbune 0 0 25,000/75,000 (2)
Vice President and
Chief Financial Officer of
SFAC and SFC
Henry J. Metz 0 0 76,250/108,750 (2)
President and
Chief Executive Officer
of Metz
Paul J. Liska 0 0 112,500/250,000 (4) (2)
former President and Chief
Executive Officer of
SFAC and SFC
</TABLE>
(1) Options to purchase Common Stock.
(2) All options were granted at an exercise price
of $.726703211 per share of Common Stock. Due to the fact that
the Common Stock is not publicly traded, it is not currently
possible to calculate a precise value for unexercised options.
On each of August 18, 1994, November 17, 1994, January 20,
1995, February 22, 1995, June 13, 1995, July 28, 1995,
September 21, 1995, October 15, 1995, February 21, 1996 and
May 15, 1996, the Board of Directors of SFAC determined that a
per share price of $.726703211 is not below the fair market
value of the Common Stock. On August 14, 1996, the Board of
Directors of SFAC determined that a per share price of
$.726703211 is equal to the fair market value of the Common
Stock.
(3) In 1994, Mr. Kelly was granted options for
the purchase of 150,000 shares of common stock of SFAC granted
pursuant to a Stock Option Agreement between SFAC and Mr.
Kelly dated as of February 1, 1994. In 1995, Mr. Kelly was
granted options for the purchase of 40,000 shares of common
stock of SFAC granted pursuant to a Stock Option Agreement
between SFAC and Mr. Kelly dated as of February 1, 1995. Upon
Mr. Kelly's resignation from the Company, SFAC and Mr. Kelly
shall enter into an Amended and Restated Non-Qualified Stock
Option Agreement, which, among other things, will reduce the
number of shares subject to the option to 132,500 (the terms
and conditions of which are more completely described in this
section under the heading "Agreements with Mr. Kelly").
(4) In 1994, Mr. Liska was granted options for
the purchase of 200,000 shares of common stock of SFAC granted
pursuant to a Stock Option Agreements between SFAC and Mr.
Liska dated as of February 1, 1994. In 1995, Mr. Liska was
granted options for the purchase of 50,000 shares of common
stock of SFAC granted pursuant to a Stock Option Agreement
between SFAC and Mr. Liska dated as of February 1, 1995. SFAC
and Mr. Liska entered into an Amended and Restated Non-
Qualified Stock Option Agreement dated as of January 15, 1997,
which, among other things, reduced the number of shares
subject to the option to 162,500 (the terms and conditions of
which are more completely described in this section under the
heading "Agreements with Mr. Liska").
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Estimated Future Payouts
Under Nonstock
Perfomance or Price-Based Plans
Number of Other Period -------------------------------
Shares, Units or Until Maturation Threshold Target Maximum
Name Other Rights (#)(1) or Payout ($) (2) ($)(3) ($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Lawrence S. Benjamin 0 units (3) 0 - (6)
President and Chief
Executive Officer of
SFAC and SFC
John E. Kelly 0 units (2) 0 - (4)
Vice President and
General Counsel of
SFAC and SFC
Robert L. Fishbune 0 units (3) 0 - (5)
Vice President and
Chief Financial
Officer of
SFAC and SFC
Henry J. Metz 0 units (3) 0 - (5)
President and
Chief Executive Officer
of Metz
Paul J. Liska 0 units (2) 0 - (4)
former President
and Chief Executive
Officer of SFAC and SFC
</TABLE>
(1) This column contains the number of
performance units granted to each of the named executive
officers in 1996 under the terms of the Specialty Foods
Corporation Long Term Incentive Compensation Plan (the Cash
LTIP) or the Long Term Incentive Compensation Plans of the
Company's operating units (the Subsidiary LTIPs). With
respect to those executive officers that are HQ employees,
each performance unit represents the right to receive 0.1% of
the ultimate cash award under the Cash LTIP. The payment of
awards under the Cash LTIP is conditional on the achievement
by SFAC of specified consolidated EBITDA targets in fiscal
1998, or earlier in the event of a change in control. Award
payments under each Subsidiary LTIP will accrue to employees
of the relevant subsidiary in fiscal 1998 based upon such
subsidiary's attainment of EBITDA in excess of the specified
EBITDA targets for such year. The maximum amount payable
under the Cash LTIP (of which Mr. Fishbune is a participant)
is $15 million. The maximum amount payable under the Metz
Subsidiary LTIP (of which Mr. Metz is a participant) is $20
million. The maximum amount payable under the Stella
Subsidiary LTIP (of which Mr. Benjamin is a participant) is
$12 million. See "Section 11 Executive Compensation - Stock
Option and Long Term Performance Related Incentive Plans" for
the terms and conditions of the Cash LTIP and Subsidiary
LTIPs.
(2) Under the Cash LTIP, payment is conditional
upon the achievement by SFAC of specified consolidated EBITDA
targets in fiscal 1998, or earlier in the event of a change of
control. The awards, if and to the extent earned, will be
paid over a three-year period commencing in 1999, with no
interest accruing on the award amounts during such period.
(3) Under the Subsidiary LTIPs, payment is
conditional on the achievement by the relevant subsidiary in
fiscal 1998 of EBITDA in excess of the specified EBITDA
targets for such year. The awards, if and to the extent
earned, will be paid over a three-year period commencing in
1999, with no interest accruing on the award amounts during
such period.
(4) Under the Cash LTIP, an aggregate award of $1 million will be
made available to all participants for each
percentage point by which the consolidated EBITDA of SFAC for
fiscal 1998 exceeds the consolidated EBITDA target for SFAC in
fiscal 1998, up to a maximum aggregate award of $15 million
based upon the attainment of fiscal 1998 consolidated EBITDA
that exceeds the fiscal 1998 consolidated EBITDA target by
15%.
(5) Under the Metz Subsidiary LTIP, an aggregate
award of $1,333,333 will be made available to all participants
for each percentage point by which EBITDA of Metz for fiscal
1998 exceeds the EBITDA target for Metz in fiscal 1998, up to
a maximum aggregate award of $20 million based upon the
attainment of fiscal 1998 EBITDA that exceeds the fiscal 1998
EBITDA target by 15%.
(6) Under the Stella Subsidiary LTIP, an aggregate
award of $800,000 will be made available to all
participants for each percentage point by which EBITDA of
Stella for fiscal 1998 exceeds the EBITDA target for Stella in
fiscal 1998, up to a maximum aggregate award of $12 million
based upon the attainment of fiscal 1998 EBITDA that exceeds
the fiscal 1998 EBITDA target by 15%.
METZ-MOTHER'S CAKE & COOKIE COMPANY CONSOLIDATED PENSION PLAN FOR
NON-UNION EMPLOYEES
The following table indicates the estimated annual benefits
payable upon retirement to Mr. Metz for the specified
compensation and years of service classifications under the Metz-
Mother's Cake & Cookie Company Consolidated Pension Plan for Non-
Union Employees (Pension Plan), as of December 31, 1996, assuming
that Mr. Metz remain in service with Metz until their retirement.
Mr. Metz is the only named executive officer participating in the
Pension Plan.
PENSION PLAN TABLE FOR THE PENSION PLAN
Remuneration Years of Service
------------ ---------------------------------------------
15 20 25 30 35
------ ------ ------ ------ ------
125,000 20,657 28,463 36,269 44,075 44,075
150,000 25,794 35,507 45,220 54,933 54,933
175,000 30,935 42,554 54,173 65,792 65,792
200,000 36,075 49,600 63,125 76,650 76,650
225,000 39,422 54,189 68,956 83,723 83,723
250,000 40,027 55,018 70,009 85,000 85,000
300,000 40,027 55,018 70,009 85,000 85,000
400,000 40,027 55,018 70,009 85,000 85,000
450,000 40,027 55,018 70,009 85,000 85,000
500,000 40,027 55,018 70,009 85,000 85,000
"Compensation" under the Pension Plan generally refers to total
annual cash compensation (up to $150,000 for 1994 and 1995, as
limited by the Code section 401(a) (17)), including pre-tax
salary deferrals, but excluding certain specified items such as
compensation received under the Metz Baking Company Executive
Incentive Compensation Plan, the Metz Baking Company Deferred
Compensation Plan or the Metz Baking Company Plant Managers Bonus
Incentive Plan.
Although the amount reported as annual compensation for Mr. Metz
in the Summary Compensation table is $560,000, Mr. Metz's covered
compensation under the Metz Plan in 1995 was $150,000 (as limited
by Code section 401(a)(171). As of December 31, 1996, Mr. Metz
had approximately 25 years of credited service under the Pension
Plan. Benefits are computed on a straight life annuity basis and
are not subject to deduction for Social Security or other offset
amounts.
CERTAIN EMPLOYMENT ARRANGEMENTS
EMPLOYMENT AGREEMENT WITH MR. BENJAMIN
SFAC and SFC entered into an Amended and Restated Executive
Employment Agreement with Mr. Benjamin effective January 1, 1997,
replacing that certain Executive Employment Agreement dated as of
August 15, 1994 among Mr. Benjamin, SFAC and Stella Holdings,
Inc., as amended. The Employment Agreement for Mr. Benjamin
provides for the initial term of employment to end December 31,
1999, which term will automatically be renewed for additional one-
year extension periods unless the renewal is canceled by SFAC or
SFC or Mr. Benjamin upon six months' prior notice. The
Employment Agreement provides for an initial base salary of
$560,000 and an annual target bonus of 75% of base salary upon
attainment by the Company of specified EBITDA targets.
Pursuant to the Employment Agreement, Mr. Benjamin has been or
will be granted options pursuant to the SFAC Stock Option Plan to
purchase an aggregate amount of 500,000 of Common Stock, and, to
date, such options have been granted in blocks of options to
purchase 100,000 shares, 50,000 shares, and 50,000 shares. These
options will vest (and therefore become and remain exercisable)
and will be exercisable at a price of $0.726703211 per share on
the dates set forth below: 100,000 shares, vested by February 1,
1998, exercisable until February 1, 2004; 50,000 shares, vested
by February 1, 1999, exercisable until February 1, 2005; and
50,000 shares, vested by February 1, 1999, exercisable until
February 1, 2006.
In the event of termination of Mr. Benjamin's employment for any
reason, SFAC and SFC will have the right to repurchase all shares
of Common Stock and vested options held by Mr. Benjamin at the
time of termination. Options not vested will lapse upon
termination (except that upon Mr. Benjamin's death, disability,
termination without cause or voluntary termination with good
reason, options that would have vested within six months of the
date of termination are treated as vested). In the event of Mr.
Benjamin's death, disability, termination without cause or
voluntary termination for good reason, Mr. Benjamin will have the
right to put his shares of Common Stock to SFAC. In addition,
upon termination in such circumstances, SFAC and SFC will make
certain post-termination salary and bonus payments to such
executive (or his estate).
Mr. Benjamin's Employment Agreement also provides that Mr.
Benjamin may be entitled to receive, under certain circumstances,
payments to offset (at least in part) certain tax consequences to
him as a result of his exercise of stock options and/or his
termination in connection with a change of control of SFAC.
These payments are limited in some circumstances to the tax
savings actually realized by SFAC and in other circumstances by
various dollar amounts.
Mr. Benjamin has agreed to be bound by certain confidentiality,
non-competition and non-solicitation restrictions set forth in
his Employment Agreement.
EMPLOYMENT AGREEMENT WITH MR. FISHBUNE
SFAC and SFC entered into an Executive Employment Agreement with
Mr. Fishbune effective May 13, 1996. The Employment Agreement
for Mr. Fishbune provides for the initial term of employment to
end December 31, 1998, which term will automatically be renewed
for up to a one-year extension period unless the renewal is
canceled by SFAC or SFC or Mr. Fishbune upon six months' prior
notice. The Employment Agreement provides for an initial base
salary of $300,000 and an annual target bonus of 50% of base
salary upon attainment by the Company of specified EBITDA
targets.
Pursuant to the Employment Agreement, Mr. Fishbune has been
granted options pursuant to the SFAC Stock Option Plan to
purchase 100,000 shares of Common Stock. These options will vest
(and therefore become and remain exercisable) over time so that
all such options will be vested by February 1, 1999. These
options, once vested, will be exercisable until February 1, 2006
at a price of $0.726703211 per share.
Mr. Fishbune's Employment Agreement also provides that Mr.
Fishbune may be entitled to receive, under certain circumstances,
payments to offset (at least in part) certain tax consequences to
him as a result of his exercise of stock options and/or his
termination in connection with a change of control of SFAC or
SFC. These payments are limited in some circumstances to the tax
savings actually realized by SFAC or SFC and in other
circumstances by various dollar amounts.
Mr. Fishbune has agreed to be bound by certain confidentiality,
non-competition and non-solicitation restrictions set forth in
his Employment Agreement.
AGREEMENTS WITH MR. KELLY
SFAC, SFC and Mr. Kelly entered into a Termination Agreement (the
Kelly Termination Agreement), dated as of February 20, 1997,
which, among other things, provides for the termination of the
Executive Employment Agreement, dated as of January 1, 1994 among
SFAC, SFC and Mr. Kelly, as amended, as of a date mutually
agreeable by the parties (the Resignation Date). As of the
filing date of this report, the Resignation Date had not yet
occurred or been determined. The Kelly Termination Agreement
provides for the cancellation upon the Resignation Date of the
Non-Qualified Stock Option Agreement dated as of February 1, 1995
and the Performance Stock Option Agreement dated February 1,
1994, each between SFAC and Mr. Kelly. The Kelly Termination
Agreement also provides upon the Resignation Date for SFAC and
Mr. Kelly to amend and restate the Non-Qualified Stock Option
Agreement dated as of February 1, 1994 to, among other things,
reduce the number of shares subject to an option to purchase
Common Stock of SFAC from 190,000 to 132,500 shares. Pursuant to
the Kelly Termination Agreement, Mr. Kelly shall receive (a)
$30,260.42 every one-half month for a minimum of four months, and
a maximum of twelve months, depending on future employment, (b) a
$100,000 bonus upon the sale of Gai's, and (c) a $147,916.68
bonus upon the sale of SFFB provided the sale occurs on or before
the forty-fifth (45th) day after the Resignation Date. The Kelly
Termination Agreement also provides for the cancellation of that
certain Limited Recourse Secured Promissory Note dated as of June
15, 1995 in the principal amount of $290,681.28, and, in
connection with such cancellation, for Mr. Kelly to deliver to
SFAC (x) Subordinated Debentures with a then-current accreted
value of $151,711.96, and (y) 191,233 shares of Common Stock with
a value of $138,969.32, based upon founder's cost of $.726703211
per share.
AGREEMENTS WITH MR. LISKA
SFAC, SFC and Mr. Liska entered into a Termination Agreement (the
Liska Termination Agreement), dated as of January 14, 1997,
which, among other things, terminated the Executive Employment
Agreement, dated as of January 1, 1996, among SFAC, SFC and Mr.
Liska. The Liska Termination Agreement provides for the
cancellation of the Non-Qualified Stock Option Agreements dated
as of February 1, 1994 and February 1, 1995 and the Performance
Stock Option Agreement dated as of February 1, 1994, each between
SFAC and Mr. Liska. The Liska Termination Agreement also
provided for SFAC and Mr. Liska to amend and restate the Stock
Option Agreement dated as of November 17, 1994 between SFAC and
Mr. Liska to, among other things, reduce the number of shares
subject to an option to purchase Common Stock of SFAC from
250,000 to 162,500. Pursuant to
the Liska Termination Agreement, Mr. Liska shall receive
$40,833.33 every one-half month for six months commencing on
January 15, 1997. The Liska Termination Agreement also provides
for the cancellation of that certain Limited Recourse Secured
Promissory Note dated as of June 15, 1995 in the principal amount
of $290,681.28, and, in connection with such cancellation, for
Mr. Liska to deliver to SFAC (x) Subordinated Debentures with a
then current accreted value of $172,034.04, and (y) 163,268
shares of Common Stock with a value of $118,647.24, based upon
founder's cost of $.726703211 per share.
EXECUTIVE RETIREMENT ACCOUNTS MAINTAINED BY CERTAIN HEADQUARTER
(HQ) EMPLOYEES
Certain HQ employees, including Messrs. Kelly, Fishbune and Liska
have established retirement accounts into which they contribute
up to 15% of base pay (on an after-tax basis) to annuity or money
market funds. The Company provides certain contributions to each
employee's retirement account and reimbursement for the tax
impact incurred by participating employees on all contributions
made in connection with the plan.
STOCK OPTION AND LONG TERM PERFORMANCE RELATED INCENTIVE PLANS
SPECIALTY FOODS ACQUISITION CORPORATION 1994 STOCK OPTION PLAN
Effective January 1, 1994, SFAC adopted the Specialty Foods
Acquisition Corporation 1994 Stock Option Plan, which was amended
and restated in February, 1995 (the SFAC Stock Option Plan). An
aggregate of 5,852,917 shares, representing approximately 8.04%
of the fully-diluted common equity of SFAC, may be subject to
options granted under the SFAC Stock Option Plan. Options may be
granted to key employees (including officers and directors) and
consultants of SFAC and its operating subsidiaries. Options
granted under the SFAC Stock Option Plan may either be
nonqualified stock options (NQSOs) or incentive stock options
(ISOs).
Generally, options for employees of the operating subsidiaries
will become eligible for grant in five installments during fiscal
years 1994-1998. The last four tranches will be granted only if
and to the extent 1994-1997 EBITDA targets are attained. The
Compensation Committee (the Committee) of the Board of Directors
of SFAC (the SFAC Board), which has been appointed by the SFAC
Board to administer the SFAC Stock Option Plan, has discretion to
establish and adjust targets and award levels.
The option term will generally be 10 years. The exercise price
per share of ISOs will equal or exceed the fair market value of
the Common Stock on the date of grant. The exercise price per
share of NQSOs may be below such fair market value.
SPECIALTY FOODS ACQUISITION CORPORATION LONG TERM INCENTIVE
COMPENSATION PLAN
Effective January 1, 1994, SFAC adopted the Specialty Foods
Acquisition Corporation Long Term Incentive Compensation Plan,
which was amended and restated in February, 1995 (the Cash LTIP).
The payment of awards under the Cash LTIP is conditional on the
achievement by SFAC of consolidated EBITDA in fiscal year 1998 in
excess of a specified consolidated EBITDA target for such year.
The Committee (which has been appointed by the SFAC Board to
administer the Cash LTIP) may, in its discretion, grant
performance units under the Cash LTIP to HQ Employees. The total
number of performance units potentially available for grants
during the five-fiscal year period ending on December 31, 1998
(the performance cycle) is 1,000. Each performance unit
represents the right to receive 0.1% of the ultimate cash award
pool. The maximum award pool under the Cash LTIP is $15 million.
In all circumstances, up and to the extent earned, awards will be
paid over a three-year period commencing in 1999, with no
interest accruing on the award amounts during such period.
Performance units may be allocated to participants by the
Committee during or following any fiscal year in the performance
cycle.
The SFAC Board or the Committee may, in their discretion, adjust
awards, the award pool and EBITDA targets to reflect certain
corporate transactions.
SPECIALTY FOODS ACQUISITION CORPORATION 1994 PERFORMANCE STOCK
OPTION PLAN FOR CERTAIN EMPLOYEES
Effective January 1, 1994, SFAC adopted the Specialty Foods
Acquisition Corporation 1994 Performance Stock Option Plan for
Certain Employees, which was amended and restated in February,
1995 (the Stock LTIP). An aggregate of 354,722 shares may be
subject to options granted to key HQ Employees under the Stock
LTIP (representing approximately 0.49% of the fully diluted
common equity of SFAC). These options may be granted at any time
through the end of the fiscal year 1998. These options will vest
on December 31, 1998 if SFC meets certain specified EBITDA
performance targets for the fiscal year ending December 31, 1998.
If SFC fails to meet such specified EBITDA performance targets,
these options will vest January 1, 2003.
Only NQSOs may be granted under the Stock LTIP. The option term
will generally be 10 years. The option exercise price will be
determined by the Committee (which has been appointed by the SFAC
Board to administer the Stock LTIP) and may be less than the fair
market value of the Common Stock on the date of grant.
SUBSIDIARY LONG TERM INCENTIVE COMPENSATION PLANS
Effective January 1, 1994, SFC adopted Long Term Incentive
Compensation Plans for each of its operating units, which were
amended and restated in February, 1995 (collectively, the
Subsidiary LTIPs). The compensation committee of the Board of
Directors of SFC (which has been appointed by the SFC Board of
Directors to administer the Subsidiary LTIPs) may, in its
discretion, grant performance units under each Subsidiary LTIP to
employees of the business group covered thereby for the
achievement by that business group of EBITDA in fiscal year 1998
in excess of the specified EBITDA target for such business group
in such fiscal year. The total number of performance units
potentially available for grants under each Subsidiary LTIP
during the five year period ending December 31, 1998 is 1,000.
Each performance unit will represent the right to receive 0.1% of
the ultimate award pool.
The maximum award pools under the Subsidiary LTIPs range from $5
million to $20 million, depending on the size of the business
group. The maximum aggregate amount payable under all Subsidiary
LTIPs is $49 million. In all circumstances, the awards, if and to
the extent earned, will be paid over a three-year period
commencing 1999, with no interest accruing on the award amounts
during such period. The portion that will actually be awarded
depends upon the amount by which the actual EBITDA achieved in
fiscal year 1998 exceeds targeted 1998 EBITDA.
The Board of Directors of SFC and its compensation committee have
discretion to adjust awards, the award pools and EBITDA targets
to reflect certain corporate transactions.
COMPENSATION OF DIRECTORS
Employees of SFAC, SFC or their subsidiaries do not receive any
additional compensation for services as a director or on
committees of the board of directors of SFAC, SFC or any of their
subsidiaries. Directors of SFAC, SFC or their subsidiaries are
reimbursed for reasonable out-of-pocket expenses incurred in
connection with attendance at Board of Directors and committee
meetings and are covered by director's liability insurance. Each
of Messrs. Baldwin and Meyer also receive directors fees of
$20,000 annually.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN
COMPENSATION DECISIONS
J. Taylor Crandall, Robert B. Haas and Anthony P. Scotto are all
of the members of the compensation committee of the Board of
Directors of each of SFAC and SFC (Compensation Committee).
Messrs. Crandall, Haas and Scotto own a beneficial interest in or
is (or was during a portion of the Company's 1996 fiscal year) an
executive officer of one or more of the entities that received
fees from the Company in connection with the Acquisition and/or
have entered into financial advisory arrangements with SFC as
described below.
Mr. Haas is a controlling shareholder and Chairman of the Board
of Haas Wheat. Haas Wheat is a party to a financial advisory
agreement with SFC pursuant to which Haas Wheat has agreed to
provide certain financial advisory and other consulting services
to SFC for a five-year period in consideration for an annual fee
of $700,000. Haas Wheat and Acadia have a contractual agreement
under which Haas Wheat remits a portion of its annual fee to
Acadia.
J. Taylor Crandall is Vice President and Chief Financial Officer
of Keystone and is President, Director and Sole Stockholder of
Acadia MGP, Inc., the managing general partner of Acadia FW
Partners, L.P., the sole general partner of Acadia. Mr. Scotto
is a Managing Director of Oak Hill Partners, Inc. and its
predecessor. Each of Penobscot and Keystone have entered into
five-year financial advisory agreements with SFC, pursuant to
which they are paid annual fees, $200,000 per year in the case of
Penobscot and $100,000 per year in the case of Keystone.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
All of the capital stock of SFC is beneficially owned by SFAC.
The following table sets forth, as of March 20, 1997, certain
information regarding the beneficial ownership of voting
securities of SFAC by (i) each person known by the Company to be
the beneficial owner of more than 5% of the Common Stock of SFAC
(Common Stock), which is SFAC's only outstanding class of voting
securities, (ii) each of the directors and named executive
officers of SFC, and (iii) all executive officers and directors
of SFC.
Percentage of
Outstanding
Name and Address Number of Shares Shares of Common
of Beneficial Owner of Common Stock Stock (a)
- --------------------------------------------------------------------------------
Acadia Partners, L.P. (b)
201 Main Street
Fort Worth, Texas 76102 23,596,345 37.38%
Artal Luxembourg S.A.(c)
39 Boulevard Royal
Luxembourg 2449 5,959,327 9.44%
Keystone, Inc. (d)
201 Main Street
Fort Worth, Texas 76102 5,891,500 9.33%
UBS Capital LLC (e)
299 Park Avenue
New York, New York 10171 5,366,913 8.50%
Robert B. Haas (f)
300 Crescent Court, Suite 1700
Dallas, Texas 75201 5,111,051 8.10%
DLJ Merchant Banking
Partners, L.P. (g)
277 Park Avenue
New York, New York 10172 3,815,712 6.04%
Thomas J. Baldwin -- --
J. Taylor Crandall (b) -- --
Charles J. Delaney -- --
Daniel L. Doctoroff (b) -- --
Jerry M. Meyer -- --
Andrew J. Nathanson (g) -- --
David G. Offensend (b) -- --
Anthony P. Scotto (b) -- --
Douglas D. Wheat (h) 2,396,776 3.80%
Lawrence S. Benjamin (i) 218,876 *
Paul J. Liska (j) 494,074 *
John E. Kelly (j) 430,657 *
Henry J. Metz (i) 1,159,000 1.84%
All directors and executive
officers as a group (b)(g)(i) 9,782,455 15.50%
_______________
* Less than 1%.
(a) This column reflects percentages of the aggregate number of
outstanding shares of Common Stock on March 20, 1997. The
holdings of all of the stockholders listed in this table may
be diluted by the exercise of options which, under employment
arrangements and stock option plans approved by SFAC and SFC,
may be granted to certain employees. The SFAC Stock Option
Plan makes available to certain operating company employees
and HQ Employees options to purchase 5,852,917 shares of
Common Stock, representing approximately 8.04% of SFAC's
fully diluted common equity. See "Item 11-Executive
Compensation-Stock Option and Long Term Performance Related
Incentive Plans." The Stock LTIP makes available to certain
HQ Employees options to purchase a maximum of 354,722 shares
of Common Stock, representing approximately 0.49% of SFAC's
fully diluted common equity. See "Item 11-Executive
Compensation-Stock Option and Long Term Performance Related
Incentive Plans."
(b) Acadia's shares of Common Stock include shares owned by FWHY-
Coinvestments VII Partners, L.P. (FWHY), SFC Partners, L.P.
(SFCP) and SFC Partners II, L.P. (SFCII), parties related to
Acadia. The general partner of Acadia is Acadia FW Partners,
L.P. (Acadia FW), the managing general partner of which is
Acadia MGP, Inc. (Acadia MGP), a corporation controlled by J.
Taylor Crandall. In addition, Mr. Crandall controls Group
31, Inc., the general partner of each of FWHY, SFCP and
SFCII. Therefore, Acadia FW and Acadia MGP may be deemed to
beneficially own the shares of Common Stock held by Acadia,
and Mr. Crandall may be deemed to beneficially own the shares
of Common Stock held by Acadia, SFCP, SFCII and FWHY. Messrs.
Doctoroff, Offensend and Scotto are limited partners of SFCII
and disclaim beneficial ownership of the shares of Common
Stock held by SFCII. The address of Acadia FW, Acadia MGP,
FWHY, SFCP, SFCII and Mr. Crandall is 201 Main Street, Fort
Worth, Texas 76102.
(c) Artal Luxembourg S.A. is a wholly-owned subsidiary of
Lorraine Investments Luxembourg S.A.("Lorraine Luxembourg"),
a Luxembourg company. The issued and outstanding capital
stock of Lorraine Luxembourg is in the form of bearer shares.
The address of Lorraine Luxembourg is 39, Boulevard Royal, L-
2449 Luxembourg. All decisions with respect to Lorraine
Luxembourg and its subsidiaries are made by the Board of
Directors of Lorraine Luxembourg. The members of the Board of
Directors of Lorraine Luxembourg are as follows: Eric
Wittouck, Guy Ullens and Roger Morley.
(d) Keystone is controlled by Robert M. Bass. As such, Mr. Bass
may be deemed to beneficially own the shares of Common Stock
held by Keystone. The address of Mr. Bass and Keystone is
201 Main Street, Fort Worth, Texas 76102.
(e) UBS Capital is a wholly-owned merchant banking subsidiary
of Union Bank of Switzerland. The shares of capital stock of
Union Bank of Switzerland are publicly held.
(f) Mr. Haas' shares of Common Stock include 101,011 shares
owned by HWP Specialty Subsidiary Partners, 25,253 shares
owned by HWP Specialty Subsidiary Partners II, and 1,000,000
shares owned by the Haas Family Long-Term Trust. The shares
owned by HWP Specialty Subsidiary Partners and HWP Specialty
Subsidiary Partners II also are beneficially owned by Mr.
Douglas Wheat.
(g) DLJ Merchant Banking Partners, L.P's shares consist of
shares of Common Stock held by the following entities
(collectively, the DLJ Entities): DLJ Merchant Banking
Partners, L.P. (DLJMBP), DLJ International Partners, C.V.
(DLJIP), DLJ Offshore Partners, C.V. (DLJOP), DLJ Merchant
Banking Funding, Inc. (DLJMBF), DLJ First ESC L.L.C.
(DLJFESC), an "employee securities corporation" (as defined
in the Investment Company Act of 1940) formed to hold
securities under employee compensation plans, and Donaldson,
Lufkin & Jenrette Securities Corporate (DLJSC, together with
DLJMBP, DLJIP, DLJOP, DLJMBF, DLJFESC and DLJSC, the "DLJ
Entities"). The address of each DLJMBP, DLJMBF, DLJFESC and
DLJSC is 277 Park Avenue, New York, New York 10172. The
address of each of DLJIP and DLJOP is John B. Gorsiraweg 6,
Willemstad, Curacao, Netherlands Antilles. Mr. Nathanson is a
Managing Director of Donaldson, Lufkin & Jenrette Securities
Corporation. As such, Mr. Nathanson may be deemed to
beneficially own the shares of Common Stock held by the DLJ
Entities. Mr. Nathanson disclaims beneficial ownership of the
shares of Common Stock held by the DLJ Entities. The
aggregate number of shares of Common Stock held by all
directors and officers includes all shares of Common Stock
held by the DLJ Entities, even though Mr. Nathanson disclaims
beneficial ownership of such shares.
(h) Mr. Wheat's shares of Common Stock include 101,011 shares
owned by HWP Specialty Subsidiary Partners and 25,253 shares
owned by HWP Specialty Subsidiary Partners II, which also are
beneficially owned by Mr. Robert B. Haas.
(i) All shares of Common Stock purchased by members of
management are subject to an 18-month vesting schedule. In
each case, 25% of the shares vest upon the executive
officer's effective date of employment by the Company, 25%
vest on the 6-month anniversary of such date, 25% vest on the
1-year anniversary of such date and the remaining 25% vest on
the 18-month anniversary of such date. Shares of Common Stock
not yet vested are, upon termination of the executive officer
for any reason, subject to repurchase at cost.
(j) All shares of Mr. Liska and Mr. Kelly are fully vested and
are not subject to repurchase by the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCKHOLDERS' AGREEMENT
Simultaneously with the closing of the Acquisition, Haas Wheat,
Acadia, Keystone, UBS Capital, Artal Belgium S.A. and DLJMBP (in
some cases acting through affiliates) (collectively, with certain
of their affiliates, the Principal Stockholders) acquired all of
the Common Stock not acquired by the purchasers of the Debenture
Units, at a price of $0.726703211 per share. On August 16, 1993,
the Principal Stockholders entered into a stockholders' agreement
governing the relationships among such stockholders (the
Stockholders' Agreement). Subsequent transferees of the Common
Stock that are affiliates of the Principal Stockholders or
members of management have also agreed to be bound by the
Stockholders' Agreement. The Stockholders' Agreement imposes on
the parties thereto certain restrictions and conditions on the
transfer of Common Stock, subject to certain exceptions. The
Stockholders' Agreement provides the parties with the right to
participate in certain sales of Common Stock by other parties.
The parties to the Stockholders' Agreement were granted certain
preemptive rights with respect to issuance of Common Stock by
SFAC and the right, in certain circumstances, to have their
Common Stock registered for public sale under the Securities Act
of 1933. The Stockholders' Agreement also sets forth provisions
relating to corporate governance of SFAC. Pursuant to the
Stockholders' Agreement, Acadia has nominated three Directors,
Keystone has nominated two Directors, Haas Wheat has nominated
two Directors, and UBS Capital, Artal Belgium S.A. and DLJMBP
have each nominated one Director. Under certain conditions Acadia
and Keystone can increase the number of Directors they can
nominate.
CERTAIN TRANSACTIONS WITH STOCKHOLDERS OF SFAC
Certain of the Principal Stockholders and their affiliates were
paid financial advisory fees by the Company in 1996 pursuant to
financial advisory agreements with the Company (Financial
Advisory Agreements).
Haas Wheat, Penobscot and Keystone each entered into Financial
Advisory Agreements with SFC. SFC paid Haas Wheat an annual fee
of $700,000 (a portion of which Haas Wheat is obligated by
agreement to remit to Acadia), Penobscot an annual fee of
$200,000 and Keystone an annual fee of $100,000. See "Item 11-
Executive Compensation-Compensation Committee Interlocks and
Insider Participation in Compensation Decisions."
In November, 1996, SF Leasing L.L.C. (of which Acadia and
Keystone each owns a 45% interest and Haas Wheat owns a 10%
interest) purchased from Metz and Stella all of the equipment at
three manufacturing facilities for the aggregate amount of
$18,380,000 (which price was based on the appraised value of such
equipment), and leased such equipment back to Metz and Stella in
a transaction that was deemed by the parties to be equivalent to
an arms length transaction. The Board of Directors of the
Company determined that the foregoing transaction was on terms no
less favorable to the Company, Metz and Stella than could
otherwise have been obtained by the Company, Metz or Stella in a
transaction with an unaffiliated third party.
In 1996, SFC and Stella sold an insurance receivable generated in
connection with the fire at Stella's Lena, Wisconsin facility to
Acadia, Keystone and Haas Wheat in the aggregate face amount and
for the aggregate purchase price set forth opposite their
respective names: Acadia, face amount of $8,775,000, purchase
price of $8,643,375; Keystone, face amount of $8,775,000,
purchase price of $8,643,375; and Haas Wheat, face amount of
$1,950,000, purchase price of $1,920,750. The Board
of Directors of the Company determined that the foregoing
transactions were on terms no less favorable to SFC and Stella
that would otherwise have been obtained by SFC or Stella in a
transaction with an unaffiliated third party.
In March, 1997, Acadia, Keystone, Haas Wheat, SFAC, SFC and The
Chase Manhattan Bank entered into an Equity Investment Agreement
whereby Acadia, Keystone and Haas Wheat agreed (and each of such
other Principal Stockholders which exercises its preemptive
rights pursuant to the Principal Stockholders Agreement shall
have the right) to purchase equity of SFAC in the aggregate
amount of $19,500,000. The Equity Investment Agreement provides
that the equity investment may be fully satisfied by the
contribution to the equity of SFAC of each such party's
respective interest in the insurance receivable arising from the
fire at Stella's Lena, Wisconsin facility, which receivable was
purchased from SFC and Stella. In exchange for the Equity
Investment, SFAC shall issue to the investing shareholders common
or preferred stock of SFAC in an amount to be determined by the
Board of Directors of SFAC and the investing shareholder.
TAX SHARING AGREEMENT
SFAC and SFC have entered into a tax sharing agreement pursuant
to which SFC agreed to pay to SFAC its pro rata share of SFAC's
consolidated income tax liability.
TRANSACTIONS WITH MANAGEMENT
SFAC and SFC entered into the Liska Termination Agreement with
Mr. Liska, the former President and Chief Executive Officer of
SFAC and SFC, providing for certain severance payments to Mr.
Liska. SFAC also entered into an Amended and Restated Non-
Qualified Stock Option Agreement which, among other things,
reduced the number of options to purchase shares of Common Stock
of SFAC. See "Item 11 - Executive Compensation - Agreements with
Mr. Liska". SFAC and SFC entered into the Kelly Termination
Agreement with Mr. Kelly providing for certain severance payments
to Mr. Kelly upon his resignation from the Company. The Kelly
Termination Agreement provides for SFAC and Mr. Kelly to enter
into an Amended and Restated Non-Qualified Stock Option Agreement
which will, among other things, reduce the number of options to
purchase shares of Common Stock of SFAC. See "Item 11 -
Executive Compensation - Agreements with Mr. Kelly". In
addition, SFAC and SFC have entered into employment agreements
with Mr. Benjamin (President and Chief Executive Officer of SFC,
SFAC and Stella) and Mr. Fishbune (Vice President and Chief
Financial Officer of SFAC and SFC). See "Item 12-Security
Ownership of Certain Beneficial Owners and Management."
In April, 1996, SFAC sold shares of SFAC common stock to Mr.
Liguori at a price of $0.726703211 per share (Purchased Shares).
The Purchased Shares sold to Mr. Liguori had been previously
repurchased by SFAC from time to time from former employees of
the Company. In connection with this transaction, Mr. Liguori
bought 134,402 shares. Mr. Liguori paid for his Purchased Shares
by delivering to SFAC a limited recourse promissory note secured
by all of the SFAC's securities held by such executive officer,
including his Purchased Shares. Such note will be due on the
first to occur of June 15, 2002 and 60 days after the date on
which such executive officer's employment with the Company
terminates. The Purchase Shares will vest as follows: 20% on the
date of purchase and 20% on each of the first four anniversaries
of the date of purchase. Upon certain events of termination,
SFAC and SFC may repurchase Mr. Liguori's unvested Purchase
Shares at the cost of purchase and any of Mr. Liguori's vested
Purchase Shares at the fair market value thereof at such time.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a)(1) - (2) Financial Statements and Schedule.
See Index to Financial Information on page F-1.
(3) Exhibits.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
3.1 Certificate of Incorporation of SFC.
(Incorporated by reference to Exhibit 3.1 to
Amendment No. 2 to SFC's Registration
Statement on Form S-4, dated November 10, 1993
(SFC's 1993 Form S-4) (Registration No. 33-
68956).)
3.2 Amended and Restated By-Laws of SFC.
(Incorporated by reference to Exhibit 3.2 to
SFC's Report on Form 10-K for the year ended
December 31, 1994.)
4.1 Indenture, dated as of August 16,
1993, between SFAC and United States Trust
Company of New York, as Trustee (Trustee)
governing the 13% Senior Secured Discount
Debentures due 2005. (Incorporated by
reference to Exhibit 4.1 to SFAC's
Registration Statement on Form S-4, dated
November 10, 1993 (SFAC's Form S-4)
(Registration No. 33-68958).)
4.2 Amendment No. 1 to the Indenture
governing the 13% Senior Secured Discount
Debentures, dated as of October 28, 1994,
between SFAC and the Trustee (Incorporated by
reference to Exhibit 10.49 to SFAC's Report on
Form 10-Q for the quarter ended September 30,
1994).
4.3 Registration Rights Agreement, dated
as of August 16, 1993, among SFAC, SFC and the
purchasers, named therein. (Incorporated by
reference to Exhibit 4.3 to SFC's 1993 Form S-
4 (Registration No. 33-68956).)
4.4 Indenture, dated as of August 16,
1993, between SFC and the Trustee governing
the 10 1/4% Senior Notes due 2001.
(Incorporated by reference to Exhibit 4.1 to
SFC's 1993 Form S-4 (Registration No. 33-
68956).)
4.5 Amendment No. 1 to the Indenture
governing the 10 1/4% Senior Notes, due 2001
dated as of October 28, 1994, between SFC and
the Trustee. (Incorporated by reference to
Exhibit 10.37 to SFC's Report on Form 10-Q
for the quarter ended September 30, 1994).
4.6 Indenture, dated as of August 16,
1993, between SFC and the Trustee governing
the 11 1/4% Senior Subordinated Notes due
2003. (Incorporated by reference to Exhibit
4.2 to SFAC's 1993 Form S-4 (Registration No.
33-68956).)
4.7 Amendment No. 1 to the Indenture
governing the 11 1/4% Senior Subordinated
Notes due 2003, dated as of October 28, 1994,
between SFC and the Trustee. (Incorporated by
reference to Exhibit 10.38 to SFC's Report on
Form 10-Q for the quarter ended September 30,
1994.)
4.8 Indenture, dated as of July 17,
1995, between SFC and the Trustee governing
the 11 1/8% Senior Notes due 2002.
(Incorporated by reference to Exhibit 4.6
SFC's Report on Form 10-Q for the quarter
ended June 30, 1995.)
4.9 Registration Rights Agreement, dated
as of July 17, 1995, among SFC and the initial
purchasers of the 11 1/8% Senior Notes due
2002 issued by SFC. (Incorporated by
reference to Exhibit 4.7 to SFC's Report on
Form 10-Q for the quarter ended June 30,
1995.)
10.1 Stock Purchase Agreement, dated as
of August 9, 1993, among the sellers party
thereto and SFC. (Incorporated by reference
to Exhibit 10.1 to SFC's 1993 Form S-4
(Registration No. 33-68956).)
10.2 Amendment No. 1, dated as of August
16, 1993, to the Stock Purchase Agreement
among the sellers party thereto and SFC.
(Incorporated by reference to Exhibit 10.2 to
SFC's 1993 Form S-4 (Registration No. 33-
68956).)
10.3 Security Escrow Agreement, dated as
of August 16, 1993, by and among the sellers
party thereto and SFC. (Incorporated by
reference to Exhibit 10.3 to SFC's 1993 Form S-
4 (Registration No. 33-68956).)
10.4 Settlement Agreement, dated as of
March 31, 1995, between SFC and Beledia N.V.
(Incorporated by reference to Exhibit 10.4 to
SFC's Registration Statement on Form S-4
dated July 21, 1995 (SFC's 1995 Form S-4).)
10.5 Financial Advisory Agreement, dated
as of August 16, 1993, among SFAC, SFC and
Penobscot. (Incorporated by reference to
Exhibit 10.5 to SFC's 1993 Form S-4
(Registration No. 33-68756).)
10.6 Financial Advisory Agreement, dated as of
August 16, 1993, among SFAC, SFC and Keystone
(Incorporated by reference to Exhibit 10.6 to
the SFC's 1993 Form S-4 (Registration No. 33-
68956).)
10.7 Financial Advisory Agreement, dated as of
August 16, 1993, among SFAC, SFC and Haas
Wheat. (Incorporated by reference to Exhibit
10.7 to SFC's 1993 Form S-4 (Registration No.
33-68956).)
10.8 Financial Advisory Agreement, dated
as of August 16, 1993, among SFAC, SFC and UBS
Capital. (Incorporated by reference to
Exhibit 10.8 to SFC's 1993 Form S-4
(Registration No. 33-68956).)
10.9 Financing Commitment Fee Agreement,
dated as of August 16, 1993, among SFAC, SFC
and Acadia. (Incorporated by reference to
Exhibit 10.9 to SFC's 1993 Form S-4
(Registration No. 33-68956).)
10.10 Financing Commitment Fee
Agreement, dated as of August 16, 1993, among
SFAC, SFC and Keystone. (Incorporated by
reference to Exhibit 10.10 to SFC's 1993 Form
S-4 (Registration No. 33-68956).)
10.11 Financing Commitment Fee
Agreement, dated as of August 16, 1993, among
SFAC, SFC and UBS Capital. (Incorporated by
reference to Exhibit 10.11 to SFAC's 1993 Form
S-4 (Registration No. 33-68956).)
10.12 Tax Sharing Agreement, dated as
of August 16, 1993, among SFAC, SFC and
certain subsidiaries of SFC. (Incorporated by
reference to Exhibit 10.12 to SFC's 1993 Form
S-4 (Registration No. 33-68958).)
10.13 Tax Sharing Agreement, dated as
of August 16, 1993, between SFAC and SFC.
(Incorporated by reference to Exhibit 10.13 to
SFC's 1993 Form S-4 (Registration No. 33-
68956).)
10.14 Corporate Services Agreement,
dated as of June 30, 1994, between SFAC and
SFC. (Incorporated by reference to Exhibit
10.14 to SFC's Report on Form 10-K for the
year ended December 31, 1994.)
10.15 Term Loan Agreement, dated as
of July 17, 1995, among the SFC, certain
lenders and Chemical Bank, as Administrative
Agent. (Incorporated by reference to Exhibit
10.16 to SFC's 1995 Form S-4 (SFC's 1995 Form
S-4) (Registration No. 33-68956).)
10.16 Amendment to Term Loan
Agreement, dated as of February 28, 1996,
among SFC, certain of its subsidiaries,
certain lenders and Chemical Bank, as
Administrative Agent. (Incorporated by
reference to Exhibit 10.16 to SFC's Report on
Form 10-K for the year ended December 30,
1995.)
10.17 Second Amendment and Waiver to Term
Loan Agreement, dated as of August 2, 1996,
among SFC, certain of its subsidiaries,
certain lenders and The Chase Manhattan Bank
(Chase), successor to Chemical Bank, as
Administrative Agent. (Incorporated by
reference to Exhibit 10.53 to SFC's report on
Form 10-Q for the quarter ended June 29,
1996.)
10.18 Third Amendment to Term Loan
Agreement, dated as of October 24, 1996, among
SFC, certain of its subsidiaries, certain
lenders and Chase, as Administrative Agent.
(Incorporated by reference to Exhibit 10.57 to
SFC's report on Form 10-Q for the quarter
ended September 28, 1996.)
10.19* Fourth Amendment to Term Loan
Agreement, dated as of February 25, 1996,
among SFC, certain of its subsidiaries,
certain lenders and Chase, as Administrative
Agent.
10.20 Revolving Credit Agreement,
dated as of August 16, 1993, as amended and
restated July 17, 1995, by and among certain
subsidiaries SFC, certain lenders and Chemical
Bank, as Administrative Agent. (Incorporated
by reference to Exhibit 10.23 to SFC's 1995
Form S-4 (Registration No. 33-68956).)
10.21 Borrower Guarantee, dated as of
August 16, 1993, by SFC in favor of Chemical
Bank, as Administrative Agent for the lenders
under the Revolving Credit Agreement.
(Incorporated by reference to Exhibit 10.16 to
SFC's 1993 Form S-4 (Registration No. 33-
68956).)
10.22 Pooling Agreement, dated as of
November 16, 1994, by and among Specialty
Foods Finance Corporation (SFFC), SFC, as
Master Servicer, and Chemical Bank, as Trustee
(the Pooling Agreement). (Incorporated by
reference to Exhibit 10.22 to SFC's Report on
Form 10-K for the year ended December 31,
1994.)
10.23 Series 1994-1 Supplement to the
Pooling Agreement, dated as of November 16,
1994, by and among SFFC, SFC, as Master
Servicer, and Chemical Bank, as Trustee.
(Incorporated by reference to Exhibit 10.23 to
SFC's Report on Form 10-K for the year ended
December 31, 1994.)
10.24 Series 1996-1 Supplement to the
Pooling Agreement, dated as of August 1, 1996,
by and among SFFC, SFC, as Master Servicer,
and Chase, as Trustee. (Incorporated by
reference to Exhibit 10.56 to SFC's Report on
Form 10-Q for the quarter ended September 28,
1996.)
10.25* Amendment No. 1 Series to 1996-1
Supplement, dated as of November 29, 1996, by
and among SFFC, SFC, as Master Servicer, and
Chase, as initial VFC Certificateholders, and
Chase, as Trustee.
10.26* Amendment No. 2 to Series 1996-1
Supplement, dated as of December 13, 1996, by
and among SFFC, SFC, as Master Servicer, and
Chase, as initial VFC Certificateholders, and
Chase, as Trustee.
10.27* Series 1997-1 Supplement to the
Pooling Agreement, dated as of January 31,
1997, by and among SFFC, SFC, as Master
Servicer, and Chase, as Trustee.
10.28 Amended and Restated Receivables
Sales Agreement, dated as of November 16,
1994, by and among SFFC, SFC, as Master
Servicer, and certain subsidiaries to SFC.
(Incorporated by reference to Exhibit 10.24 to
SFC's Report on Form 10-K for the year ended
December 31, 1994.)
10.29 Servicing Agreement, dated as of
November 16, 1994, by and among SFFC, SFC, as
Master Servicer, and certain subsidiaries of
SFC. (Incorporated by reference to Exhibit
10.25 to SFC's Report on Form 10-K for the
year ended December 31, 1994.)
10.30* Amendment No. 1 to SFC Master Trust
Pooling and Servicing Agreements, dated as of
December 16, 1996, by and among SFFC, SFC, as
Master Servicer, and Chase, as Trustee.
10.31* Amendment No. 2 to SFC Master Trust
Pooling Agreement, dated as of December 27,
1996, by and among SFFC, SFC, as Master
Servicer, and Chase, as Trustee.
10.32* Amendment No. 3 to SFC Master Trust
Pooling Agreement, dated as of February 24,
1997, by and among SFFC, SFC, as Master
Servicer, and Chase, as Trustee.
10.33* Amendment No. 1 to Amended and
Restated Receivables Sale Agreement, dated as
of December 16, 1996, by and among SFFC, SFC,
as Master Servicer, and certain subsidiaries
of SFC.
10.34* Amendment No. 2 to Amended and
Restated Receivables Sale Agreement, dated as
of December 27, 1996, by and among SFFC, SFC,
as Master Servicer, and certain subsidiaries
of SFC.
10.35* Amendment No. 3 to Amended and
Restated Receivables Sale Agreement, dated as
of February 24, 1997, by and among SFFC, SFC,
as Master Servicer, and certain subsidiaries
of SFC.
10.36 Amended and Restated SFAC 1994
Stock Option Plan. (Incorporated by reference
to Exhibit 10.26 to SFC's Report on Form 10-K
for the year ended December 31, 1994.)
10.37 Amended and Restated SFAC 1994
Performance Stock Option Plan for Certain
Employees. (Incorporated by reference to
Exhibit 10.27 to SFC's Report on Form 10-K for
the year ended December 31, 1994.)
10.38 Amended and Restated SFAC Long-
Term Incentive Compensation Plan for Certain
Employees. (Incorporated by reference to
Exhibit 10.28 to SFC's Report on Form 10-K for
the year ended December 31, 1994.)
10.39 Form of Amended and Restated
Subsidiary Long-Term Incentive Compensation
Plan (with appendices showing differing
material terms of each separate plan).
(Incorporated by reference to Exhibit 10.29
SFC's Report on Form 10-K for the year ended
December 31, 1994.)
10.40 Letter Agreement, dated as of
November 26, 1993, between SFC and Chemical
Bank, confirming adherence to International
Swap Dealers Association, Inc. 1991 ISDA
Definitions and Master Agreement in connection
with Rate Collar Transaction between the
parties. (Incorporated by reference to Exhibit
10.25 to SFC's Report on Form 10-K for the
year ended December 31, 1993).
10.41 Employment Agreement, effective
as of August 15, 1994, among SFAC, Stella and
Lawrence S. Benjamin. (Incorporated by
reference to Exhibit 10.33 to SFC's Report on
Form 10-K for the year ended December 31,
1994.)
10.42 Form of HQ Employee Employment
Agreement entered into with the following
Executive Officers: Paul J. Liska, John E.
Kelly, Robert E. Baker, and John R. Reisenberg
(with schedule showing differing material
terms for each such HQ Employee that is a
party to an employment agreement).
(Incorporated by reference to Exhibit 10.29 to
SFC's Report on Form 10-K for the year ended
December 31, 1993).
10.43 Amendment No. 1, effective as
of November 17, 1994, to the Employment
Agreement among SFC, SFAC and Paul J. Liska.
(Incorporated by reference to Exhibit 10.35 to
SFC's Report on Form 10-K for the year ended
December 31, 1994.)
10.44 Form of Executive Securities
Purchase Agreement among certain named
executive officers, respectively, and the
Principal Stockholders, SFAC and SFC (with
schedule showing differing material terms for
each such officer's agreement). (Incorporated
by reference to Exhibit 10.30 SFC's Report on
Form 10-K for the year ended December 31,
1993.)
10.45 June 1995 Amendment to
Executive Employment Agreement, dated as of
June 15, 1995, among Paul J. Liska, SFC and
SFAC. (Incorporated by reference to Exhibit
10.40 to SFC's 1995 Form S-4 (Registration No.
33-94836).)
10.46 Stock Purchase Agreement, dated as
of June 15, 1995, between Paul J. Liska and
SFAC. (Incorporated by reference to Exhibit
10.41 to SFC's 1995 Form S-4 (Registration No.
33-94836).)
10.47 Amended and Restated Executive
Employment Agreement, dated as of May 30,
1996, among Paul J. Liska, SFC and SFAC.
(Incorporated by reference to Exhibit 10.54 to
SFC's Form 10-Q for the quarter ended June 29,
1996.)
10.48 June 1995 Amendment to Executive
Employment Agreement, dated as of June 15,
1995, among John E. Kelly, SFC and SFAC
(Incorporated by reference to Exhibit 10.42 to
SFC's 1995 Form S-4 (Registration No. 33-
94836).)
10.49 Stock Purchase Agreement, dated as
of June 15, 1995, between John E. Kelly and
SFAC (Incorporated by reference to Exhibit
10.43 to SFC's 1995 Form S-4 (Registration No.
33-94836).)
10.50 June, 1995 Amendment to Executive
Employment Agreement, dated as of June 15,
1995, among Robert E. Baker, SFC and SFAC
(Incorporated by reference to exhibit 10.44 to
SFC's 1995 Form S-4 (Registration No. 33-
94836).)
10.51 Stock Purchase Agreement, dated as
June 15, 1995, between Robert E. Baker and
SFAC (Incorporated by reference to Exhibit
10.45 to SFC's 1995 to SFC's 1995 Form S-4
(Registration No. 33-94836).)
10.52 Stock Purchase Agreement dated as of
June 15, 1995, between Henry J. Metz and SFAC
(Incorporated by reference to Exhibit 10.46 to
SFC's 1995 Form S-4 (Registration No. 33-
94836).)
10.53 August 1995 Amendment to Executive
Employment Agreement, dated as of August 1,
1995, among Lawrence S. Benjamin, Stella and
SFAC. (Incorporated by reference to Exhibit
10.65 to SFC's Report on Form 10-Q for the
quarter ended September 30, 1995.)
10.54 August 1995 Amendment to Executive
Employment Agreement, dated as of August 1,
1995, among Paul Liska and SFAC and SFC.
(Incorporated by reference to Exhibit 10.66 to
SFAC's Report on Form 10-Q for the quarter
ended September 30, 1995.)
10.55 Termination Agreement,
effective as of January 13, 1995, among SFC,
SFAC and Sam K. Reed. (Incorporated by
reference to Exhibit 10.37 to SFC's Report on
Form 10-K for the year ended December 31,
1994.)
10.56 Amended and Restated General
Biscuit of America-West Retirement Plan.
(Incorporated by reference to Exhibit 10.38 to
SFC's Report on Form 10-K for the year ended
December 31, 1994.)
10.57 Amended and Restated Metz
Baking Company Pension Plan for Non-Union
Employees. (Incorporated by reference to
Exhibit 10.39 SFC's Report on Form 10-K for
the year ended December 31, 1994.)
10.58 Amended and Restated DSD/Bloch
& Guggenheimer Defined Benefit Pension Plan.
(Incorporated by reference to Exhibit 10.40 to
SFC's Report on Form 10-K for the year ended
December 31, 1994.)
10.59 Securities Purchase Agreement, dated
as of August 1, 1995, between Paul J. Liska
and SFAC. (Incorporated by reference to
Exhibit 10.45 to SFC's Report on Form 10-K for
the year ended December 30, 1995.)
10.60 Amendment to Securities Purchase
Agreement, dated as of January 2, 1996,
between Paul J. Liska and SFAC. (Incorporated
by reference to Exhibit 10.46 to SFC's Report
on Form 10-K for the year ended December 30,
1995.)
10.61 Executive Securities Purchase
Agreement, dated as of December 15, 1994,
among Lawrence S. Benjamin, SFAC and SFC.
(Incorporated by reference to Exhibit 10.47 to
SFC's Report on Form 10-K for the year ended
December 30, 1995.)
10.62 Stock Purchase Agreement, dated as
of June 15, 1995, between Lawrence S. Benjamin
and SFAC. (Incorporated by reference to
Exhibit 10.48 to SFC's Report on Form 10-K for
the year ended December 30, 1995.)
10.63 Securities Purchase Agreement, dated
as of August 1, 1995, between Lawrence S.
Benjamin and SFAC. (Incorporated by reference
to Exhibit 10.49 to SFC's Report on Form 10-K
for the year ended December 30, 1995.)
10.64 Amendment to Securities Purchase
Agreement, dated as of January 2, 1996,
between Lawrence S. Benjamin and SFAC.
(Incorporated by reference to Exhibit 10.50 to
SFC's Report on Form 10-K for the year ended
December 30, 1995.)
10.65 Termination Agreement, dated as of
March 1, 1996, among SFAC, SFC and Thomas
Herskovits. (Incorporated by reference to
Exhibit 10.51 to SFC's Report on Form 10-K for
the year ended December 30, 1995.)
10.66 Amended and Restated Stock Option
Agreement, dated as of March 1, 1996, between
SFAC and Thomas Herskovits. (Incorporated by
reference to Exhibit 10.52 to SFC's Report on
Form 10-K for the year ended December 30,
1995.)
10.67 Executive Employment Agreement,
dated as of May 31, 1996, among SFAC, SFC and
Robert L. Fishbune. (Incorporated by
reference to Exhibit 10.55 to SFC's Report on
Form 10-Q for the quarter ended June 29,
1996.)
10.68* Executive Employment Agreement,
dated as of January 1, 1997, among SFAC, SFC
and Lawrence S. Benjamin.
10.69* Executive Employment Agreement,
dated as of March 1, 1997, among SFAC, SFC and
Robert B. Aiken.
10.70* Termination Agreement, dated as of
January 14, 1997, among SFAC, SFC and Paul J.
Liska.
10.71* Amended and Restated Non-Qualified
Stock Option Agreement, dated as of November
17, 1994, as Amended and Restated, dated as of
January 15, 1997, among SFAC and Paul J.
Liska.
10.72* Termination Agreement, dated as of
February 20, 1997, among SFAC, SFC and John E.
Kelly.
10.73* Purchase Agreement, dated as of
August 12, 1996, among SFC, Stella and Acadia,
as amended on October 7, 1996.
10.74* First Amendment to Purchase
Agreement, dated as of December 27, 1996,
among SFC, Stella and Acadia.
10.75* Purchase Agreement, dated as of
August 12, 1996, among SFC, Stella and
Keystone, as amended on October 7, 1996.
10.76* First Amendment to Purchase
Agreement, dated as of December 27, 1996,
among SFC, Stella and Keystone.
10.77* Purchase Agreement, dated as of
August 12, 1996, among SFC, Stella and Haas
Wheat, as amended on October 7, 1996.
10.78* First Amendment to Purchase
Agreement, dated as of December 27, 1996,
among SFC, Stella and Haas Wheat.
10.79* Master Lease Agreement, dated as of
November 14, 1996, among SF Leasing L.L.C.,
Stella and Metz.
10.80* Stock Purchase Agreement, dated as
of November 26, 1996, between SFC and B
Companies Acquisition Corporation.
10.81* Equity Investment Agreement, dated
as of March 24, 1997, among SFAC, SFC, Acadia,
Keystone, Haas Wheat and Chase.
12.1* Statement re Computation of
Ratio and Earnings to Fixed Charges.
21.1* Subsidiaries of SFC.
27* Financial Data Schedule.
- -----------------
* Filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
SPECIALTY FOODS CORPORATION
BY: /s/ Lawrence S. Benjamin
LAWRENCE S. BENJAMIN
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
MARCH 27, 1997
Pursuant to the requirements of the Securities Exchange of Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
SIGNATURE AND TITLE CAPACITY DATE
/s/ Lawrence S. Benjamin Principal Executive March 27, 1997
Lawrence S. Benjamin Officer and Director
President and Chief
Executive Officer
/s/ Robert L. Fishbune Principal Financial and March 27, 1997
Robert L. Fishbune Accounting Officer
Vice President and Chief
Financial Officer
/s/ Robert B. Haas Chairman of the Board March 27, 1997
Robert B. Haas of Directors
/s/ Thomas J. Baldwin Director March 27, 1997
Thomas J. Baldwin
/s/ J. Taylor Crandall Director March 27, 1997
J. Taylor Crandall
/s/ Charles J. Delaney Director March 27, 1997
Charles J. Delaney
/s/ Daniel L. Doctoroff Director March 27, 1997
Daniel L. Doctoroff
/s/ Jerry M. Meyer Director March 27, 1997
Jerry M. Meyer
/s/ Andrew J. Nathanson Director March 27, 1997
Andrew J. Nathanson
/s/ David G. Offensend Director March 27, 1997
David G. Offensend
/s/ Anthony P. Scotto Director March 27, 1997
Anthony P. Scotto
/s/ Douglas D. Wheat Director March 27, 1997
Douglas D. Wheat
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Specialty Foods Corporation:
We have audited the accompanying consolidated balance sheets of
Specialty Foods Corporation and Subsidiaries as of December 31,
1996 and 1995 and the related consolidated statements of
operations, changes in stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31,
1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Specialty Foods Corporation and Subsidiaries as of
December 31, 1996 and 1995 and the results of their operations
and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 21, 1997
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share data)
December 31,
-------------------------------------
1996 1995
--------- ---------
Assets
Current assets:
Cash $ 37,508 $ 17,331
Accounts receivable, net 33,031 50,086
Inventories 124,976 122,618
Net assets of discontinued operations 59,154 134,118
Other current assets 27,672 8,385
--------- ---------
Total current assets 282,341 332,538
Property, plant, and equipment, net 265,207 297,209
Intangible assets, net 25,142 412,695
Due from Specialty Foods Acquisition
Corporation 10,999 11,037
Other noncurrent assets 32,590 38,361
--------- ---------
Total assets $ 616,279 $ 1,091,840
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $ 4,049 $ 3,591
Accounts payable 120,421 128,455
Accrued expenses 108,588 111,751
--------- ---------
Total current liabilities 233,058 243,797
Long-term debt 838,059 835,772
Other noncurrent liabilities 39,205 56,927
--------- ---------
Total liabilities 1,110,322 1,136,496
--------- ---------
Stockholders' equity:
Common stock: par value $0.01;
authorized 100 shares;
issued 100 shares - -
Additional paid-in capital 275,000 275,000
Accumulated deficit (769,043) (318,819)
Cumulative translation adjustment - (837)
-------- ---------
Total stockholders' equity
(deficit) (494,043) (44,656)
-------- ---------
Total liabilities and
stockholders' equity $ 616,279 $ 1,091,840
======== =========
See accompanying notes to consolidated financial statements.
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share data)
Years ended December 31,
-----------------------------------
1996 1995 1994
---- ---- ----
Net sales $1,661,296 $1,626,733 $1,643,239
Cost of sales 1,209,494 1,165,663 1,187,249
--------- --------- ---------
Gross profit 451,802 461,070 455,990
--------- --------- ---------
Operating expenses:
Selling, distribution, general
and administrative 397,146 360,023 367,961
Amortization of intangibles 12,886 17,903 17,578
Restructuring charges 28,300 - -
Goodwill write-down 355,664 203,824 -
--------- --------- --------
793,996 581,750 385,539
--------- --------- --------
Operating profit (loss) (342,194) (120,680) 70,451
Other:
Interest expense 94,833 94,848 87,226
Other (income) expense, net (2,859) 5,537 13,068
--------- --------- --------
Loss before income taxes (434,168) (221,065) (29,843)
Provision for income taxes 1,201 1,410 1,618
--------- --------- --------
Loss from continuing operations (435,369) (222,475) (31,461)
Discontinued operations:
Earnings (loss) 2,312 (47,468) 10,746
Loss on disposal (13,493) - -
--------- --------- --------
(11,181) (47,468) 10,746
Loss before extroardinary items (446,550) (269,943) (20,715)
Extraordinary items - (18,279) -
--------- --------- ---------
Net loss $ (446,550) $ (288,222) $ (20,715)
========= ========= =========
See accompanying notes to consolidated financial statements.
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
(In thousands)
<TABLE>
<CAPTION>
Additional Cumulative
Common Stock paid-in Accumulated translation
Shares Amount capital deficit adjustment
------ ------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 100 $ - $275,000 $ (7,045) $ (353)
Dividend to parent - - - (1,634) -
Cumulative translation adjustment - - - - (506)
Net loss - - - (20,715) -
------ ----- ---------- ----------- -----------
Balance at December 31, 1994 100 - 275,000 (29,394) (859)
Dividend to parent - - - (1,203) -
Cumulative translation adjustment - - - - 22
Net loss - - - (288,222) -
------ ----- --------- ----------- -----------
Balance at December 31, 1995 100 $ - 275,000 (318,819) (837)
Dividend to parent - - - (3,674) -
Cumulative translation adjustment - - - - 837
Net loss - - - (446,550) -
------ ----- -------- ----------- -----------
Balance at December 31, 1996 100 $ - 275,000 $(769,043) $ -
====== ===== ======== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
Years ended December 31,
----------------------------------
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Loss from continuing operations $(435,369) $(222,475) $ (31,461)
Adjustments to reconcile to net
cash from continuing operating
activities
Depreciation and amortization 49,266 54,779 51,788
Debt issuance cost amortization 5,472 6,895 10,426
Write-down of goodwill 355,664 203,824 -
Restructuring - property write-down 23,300 - -
Gain on involuntary conversion (17,508) - -
Loss on disposal of property, plant,
and equipment, net 11,916 536 188
Changes in assets and
liabilities, net:
Accounts receivable 14,845 (8,805) (10,036)
Inventories (3,658) 8,084 (9,453)
Prepaid expenses and other assets (19,625) 1,723 507
Accounts payable (6,357) 24,180 20,209
Accrued expenses and other (13,127) (35,331) (6,712)
======== ======= =======
Net cash provided (used) by
continuing operating activities (35,181) 33,410 25,456
Cash flows from investing activities:
Proceeds from divestiture of business 69,333 - 5,819
Capital expenditures (67,069) (34,222) (29,261)
Property related insurance proceeds 30,246 - -
Proceeds from saleleaseback, net 28,420 - -
Acquisition of businesses, net of cash - (5,400) (12,617)
Other (1,780) 3,264 5,183
------- -------- -------
Net cash provided (used) by
investing activities 59,150 (36,358) (30,876)
Cash flows from financing activities:
Increase in revolving credit 5,700 22,600 4,500
Payments on long-term debt (2,955) (374,675) (15,445)
Proceeds from long-term debt - 380,916 16,479
Dividends (3,674) (1,203) -
Payments of debt issuance costs (3,738) (8,646) (687)
Other 875 (680) 373
------- ------- -------
Net cash provided (used) by
financing activities (3,792) 18,312 5,220
Increase (decrease) in cash 20,177 15,364 (200)
Cash - beginning of year 17,331 1,967 2,167
------- ------- -------
Cash - end of year $ 37,508 $ 17,331 $ 1,967
======= ======= =======
See accompanying notes to consolidated financial statements.
(1) COMPANY BACKGROUND
Specialty Foods Acquisition Corporation (SFAC) and its direct,
wholly-owned subsidiary, Specialty Foods Corporation (SFC),
(together with their subsidiaries, the Company) operate a
diversified group of businesses within the food industry segment.
These specialty food businesses are primarily engaged in the
production and distribution of breads, cookies, specialty and
common Italian cheeses, and pre-cooked meat products. The
operating companies of SFC consist of the following:
Bakery Operations
Metz Baking Company (Metz) - Metz is a leading bread-line
wholesale baking company servicing the Midwestern United States.
Metz's product line includes breads, buns, rolls, and sweet
goods.
Mother's Cake & Cookie Co. (Mother's) - Mother's is a
manufacturer and distributor of branded cookie products. Mothers
sells its cookie products primarily to retail grocers in the
Western United States.
Andre-Boudin Bakeries, Inc. (Boudin) - Boudin is a chain of
approximately 40 bakery cafes and kiosks located in California,
Dallas and the greater Chicago area.
Cheese and Meat Operations
Stella Foods, Inc. (Stella) - Stella is one of the largest
producers of specialty cheese in the United States with
distribution to retail grocers, foodservice accounts, and
commercial food processors. Stella's product-line consists of
specialty Italian cheeses (parmesan, romano, and ricotta), other
European style specialty cheeses (feta, blue cheese, and
Lorraine), and other basic Italian cheeses (mozzarella and
provolone).
H&M Food Systems Company, Inc. (H&M) - H&M is a producer of
custom formulated, pre-cooked meat products and sells primarily
to national restaurant chains and prepared-food producers.
During 1996, the Company made the decision to divest certain
businesses as described in Note 3. Accordingly, these businesses
are reported as discontinued operations in the consolidated
financial statements.
(2)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
SFC's financial statements are presented on a consolidated basis.
All significant intercompany accounts and transactions have been
eliminated. Acquisitions recorded as purchases are included in
the Statement of Operations from the date of acquisition.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and related disclosures at the date of
the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates.
RECLASSIFICATIONS
Certain amounts included in the 1995 and 1994 financial
statements have been reclassified to conform to the manner in
which the 1996 financial statements have been presented.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
determined principally by the first in, first out (FIFO) method.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost. Depreciation
is provided by the straight-line method over the assets'
estimated useful lives or, in the case of leasehold improvements,
over the terms of the leases, if shorter, as follows:
Years
-----
Buildings and improvements 7-40
Machinery and equipment 3-20
Office furniture and vehicles 3-10
Expenditures for maintenance, repairs, and minor replacements are
charged to current operations. Expenditures for major
replacements and betterment are capitalized.
The cost and related accumulated depreciation of property and
equipment retired or sold is eliminated from the property and
equipment accounts at the time of retirement or sale, and the
resulting gain or loss is included in income.
INTANGIBLE ASSETS
Intangible assets, which consist primarily of the excess of cost
over fair value of net assets acquired, arose primarily in
connection with the formation of the Company and are amortized on
a straight-line basis over the periods of expected benefit, which
range from two to forty years. The Company annually evaluates
whether events and circumstances have occurred that indicate that
the remaining estimated useful life of intangible assets may
warrant revision or that the remaining balance of intangible
assets may not be recoverable. When factors indicate that
intangible assets should be evaluated for possible impairment,
the Company assesses recoverability of intangible assets based on
its expectations concerning operating cash flows after interest
and capital expenditures. An impairment is recorded if the
discounted value of such cash flows is less than the recorded
value of the intangible assets. The Company utilizes a discount
rate which reflects its weighted average cost of capital. Based
on application of this methodology, impairments were recorded in
both 1996 and 1995 (see Note 4).
DEFERRED DEBT ISSUANCE COSTS
Deferred debt issuance costs are being amortized by the straight-
line method over the terms of the related debt agreements and are
classified as other non-current assets.
ADVERTISING COSTS
Advertising costs are expensed as incurred.
(3) DISCONTINUED OPERATIONS
During the fourth quarter of 1996, the Company finalized its
decision to divest of:
Bloch & Guggenheimer, Inc. (B&G)/Burns & Ricker, Inc. (B&R)
- Pickle, pepper, and specialty snack food businesses operated
under common management. The sale of the combined business of
B&R/B&G was completed on December 27, 1996.
Gai's Seattle French Baking Company (Gai's) - A restaurant
and institutional bakery operation serving the northwestern
United States. The sale of Gai's was completed on February 24,
1997.
San Francisco French Bread (SFFB) - A sourdough hearth bread
operation located in California. The sale of SFFB is expected
to close during the second quarter of 1997.
These divestitures have been reported as discontinued operations
in the accompanying financial statements in accordance with
Accounting Principles Board Opinion No. 30. Operating results
for these businesses, including revenues of $335,000, $321,000,
and $324,000 for the years ended December 31, 1996, 1995, and
1994, respectively, as well as the applicable goodwill writedown
of $49,570 in 1995, have been reclassified to discontinued
operations. The Consolidated Statement of Operations for 1996
include incurred and estimated losses on disposals. No interest
expense has been allocated to discontinued operations.
Total gross proceeds for the divestitures are estimated to
approximate $140,000 with net proceeds approximating $110,000,
after the repurchase of receivables and transaction
costs.
Net assets of the discontinued operations as of December 31, 1996
and 1995 consisted of the following:
December 31,
---------------------------
1996 1995
---- ----
Accounts receivable, net of allowance $ 2,753 $ 4,900
Inventories 4,130 26,454
Other current assets 1,019 2,666
Plant and equipment, net 47,935 72,221
Goodwill, net 23,397 59,711
Accounts payable (3,927) (20,095)
Accrued expenses and other liabilities (16,153) (11,739)
-------- -------
$ 59,154 $ 134,118
======== =======
(4) GOODWILL WRITE-DOWN
As described under "Intangible Assets" in Note 2, "Summary of
Significant Accounting Policies", the Company annually evaluates
its intangible assets. Based on the Company's goodwill
assessment, write-downs of goodwill were recorded in the fourth
quarter of 1996 and 1995, which are presented in the accompanying
Consolidated Statements of Operations as follows:
1996 1995
---- ----
Continuing operations $ 355,664 $ 203,824
Discontinued operations - 49,570
------- -------
$ 355,664 $ 253,394
======= =======
In determining the amounts of the goodwill write-downs, the
Company developed its best estimate of future operating cash
flows, after interest and capital expenditures, over the
remaining useful life of the goodwill. The Company's estimates
were based on recent historic financial trends and current market
conditions. The goodwill of each business was evaluated
separately for impairment. Individual business unit sales growth
projections ranged from two to five percent. Interest costs were
allocated based on the relative level of investment in each
business. Each of the
Company's fixed-rate debt obligations were assumed to be
refinanced at existing interest rates. The Company calculated
the present value of estimated future cash flows using a discount
rate which represents its weighted average cost of capital of
11.8% and 11.4% in 1996 and 1995, respectively.
Since the formation of the Company in 1993, the operating units
have not achieved anticipated annual sales and operating earnings
targets. During 1995, certain conditions in the Bakery
Operations and Meat Operations prompted management to writedown a
portion of the goodwill related to these operations. In 1996,
lower than projected cash flows at all operating units has forced
management to reassess its strategy and future plans.
The resulting write-down in 1996 is attributable to several
factors:
The forecast prepared at the end of 1995 projected
substantially higher cash flow levels for each of the operating
units. The cash flow levels were to be realized through a
combination of initiatives focused on sales growth and operating
improvements. Actual results and cash flow levels declined in
1996 due to difficult commodity conditions and increased spending
in other expense categories which did not deliver the projected
sales growth or operating efficiencies. As discussed in the
Company's quarterly reports on Form 10-Q for the second and third
quarters, these shortfalls also resulted in violations of
existing financial covenants under the Company's long-term debt
agreements (which have been amended). After a thorough
evaluation of 1996 results and future opportunities, management
has lowered its future expectations of operating profitability
and cash flow generating capability of each of its business
units.
Due to 1996's cash flow shortfall, the Company has incurred
additional off-balance sheet debt and financing costs. Higher
projected costs related to these financings further reduce future
cash flow projections.
Higher levels of working capital and capital expenditures
are reflected in the forecast prepared as of the end of 1996.
The increased cash applied to working capital results from an
initiative to lower the level of accounts payable and reflects
the cash costs of restructuring. Increased capital expenditures,
which have been approved by the Board of Directors and the
lenders under the Term Loan Agreement and Revolving Credit
Agreement, are necessary to drive future productivity
improvements.
Due to the divestiture of certain businesses in 1996, each
of the continuing operating units are allocated higher levels of
interest expense and corporate overhead costs. The increased
level of costs have further depressed individual operating unit
projections.
As of December 31, 1996 there is $19,078 of goodwill remaining on
the Company's Balance Sheet. Management believes the Company's
remaining goodwill and long-term assets will be recovered over
their useful lives. However, any further significant declines in
projected cash flows may result in additional write-downs of
other long-lived assets.
(5) RESTRUCTURING CHARGES
During the fourth quarter of 1996, management authorized and
committed the Company to undertake certain restructuring moves
principally involving the consolidation of several manufacturing
facilities. The restructuring charge of $28,300 includes $23,300
for the writedown of plant and facilities to net realizable
value. The remaining portion of the restructuring charge relates
to termination benefits and holding costs that will be incurred
over the next year during the execution of the plan. The Company
does not expect to incur material incremental costs. As of
December 31, 1996, no costs have been charged against this
restructuring accrual.
(6) STELLA FIRE
On January 5, 1996, a Stella cheese manufacturing plant located
in Lena, Wisconsin was substantially destroyed by fire. The
plant, which was responsible for approximately 20% of Stella's
production, produced mozzarella and ricotta cheeses. The Company
has rebuilt the plant and resumed production during the fourth
quarter of 1996.
The Company has comprehensive insurance coverage for up to
$100,000 per incident. The policy includes replacement cost for
property, extra expense and business interruption coverage.
As of December 31, 1996, the Company has recorded an insurance
claim in the amount of $71,481 and has received $35,000 from its
insurance carriers. In the Company's statement of cash flows for
the year ended December 31, 1996, the insurance proceeds which
relate to destroyed property ($30,246) have been classified with
investing activities, while the remainder of the proceeds have
been classified with operating activities. Additionally, in the
Statement of Operations for the year ended December 31, 1996, the
portion of the claim representing coverage for the lost operating
profit ($5,286) and the portion representing the excess of
replacement cost over book value of assets destroyed and written
off ($17,508), have been recorded as other income. The Company
has recently filed its final proof of loss and expects to collect
the net remaining receivable balance in 1997.
Due to the lag time between incurring recoverable expenditures
and receipt of insurance proceeds, the Company sold an insurance
receivable generated in connection with the fire to Acadia
Partners, L.P. (Acadia), Keystone, Inc. (Keystone), and Haas
Wheat Advisory Partners Incorporated (Haas Wheat) in the
aggregate amount and for the aggregate purchase price set forth
opposite their respective name: Acadia, face amount of $8,775,
purchase price of $8,643; Keystone, face amount $8,775, purchase
price of $8,643; and Haas Wheat, face amount $1,950, purchase
price of $1,921. Each of the above parties is a stockholder or
an affiliate of a stockholder of SFAC. The net proceeds from the
sales have been classified with operating activities in the
Company's Statement of Cash Flows.
(7) ACQUISITION LIABILITIES
In connection with the formation of the Company, estimated
liabilities were recorded for the expected cash expenditures to
consolidate facilities, streamline operations, and settle
environmental, legal and tax matters. Cash expenditures
associated with these liabilities were $15,640, $27,651, and
$28,186 for the years ended December 31, 1996, 1995, and 1994.
In December 1996, the Company reduced its estimate of the future
cash expenditures related to these acquisition liabilities and
credited $21,634 against goodwill. As of December 31, 1996,
there are $30,608 of remaining acquisition liabilities, of which
$19,079 is classified as current.
(8) EXTRAORDINARY ITEMS
In 1995, two refinancings resulted in the early extinguishment of
debt. Accordingly, deferred debt issuance costs totaling $18,279
were written off and recorded as extraordinary items.
(9) ACCOUNTS RECEIVABLE
Specialty Foods Finance Corporation (SFFC), a wholly-owned
subsidiary of SFC, was established for the purpose of acquiring
substantially all of the trade accounts receivable generated by
the operating subsidiaries of SFC. Under the terms of the
Accounts Receivable Facility expiring November 20, 1999, SFFC
sells for cash an undivided interest in eligible accounts
receivable. On August 1, 1996, the maximum allowable amount of
accounts receivable that could be sold by the Company pursuant to
the Accounts Receivable Facility was increased from $95,000 to
$115,000, and subsequent to year end, to $124,000. The amount
outstanding at any date varies based upon the level of eligible
receivables. The discount on receivables sold is included in
other expense and is determined based upon a defined calculation
tied to LIBOR plus 3/8%. At December 31, 1996 and 1995, the
consolidated accounts receivable balance has been reduced by
$98,000 and $95,000, respectively, due to the receivables sold.
In 1994, deferred costs of $5,506 relating to the previous
Accounts Receivable securitization program were written off and
recorded as other expenses upon such facility's replacement by
the Accounts Receivable Facility. Trade accounts receivable are
reported net of the allowance for doubtful accounts of $1,955 and
$2,435 1996 and 1995, respectively.
(10) INVENTORIES
The components of inventories are as follows:
1996 1995
---- ----
Raw materials and packaging $ 21,865 $ 20,539
Work in progress 54,676 53,832
Finished goods 47,271 48,379
Other 2,627 2,170
------- -------
126,439 124,920
Less obsolescence and other
allowances (1,463) (2,302)
------- -------
$124,976 $122,618
======= =======
(11) PROPERTY, PLANT, AND EQUIPMENT
The components of property, plant and equipment are as follows:
1996 1995
---- ----
Land $ 15,379 $ 18,937
Buildings and improvements 124,900 108,791
Machinery and equipment 215,177 219,050
Office furniture and vehicles 31,086 27,508
Construction in progress 11,019 11,062
------- -------
397,561 385,348
Less accumulated depreciation (132,354) (88,139)
------- -------
$265,207 $297,209
======= =======
Depreciation expense of continuing operations was $36,380,
$36,876, and $34,259 for the years ended December 31, 1996, 1995,
and 1994, respectively.
(12) ACCRUED EXPENSES
The components of accrued expenses are as follows:
1996 1995
---- ----
Accrued payroll $ 8,863 $ 9,031
Other taxes payable 5,375 5,199
Workers' compensation 14,421 15,968
Compensated absences 9,894 10,638
Accrued interest 21,898 24,531
Acquisition liabilities 19,079 25,726
Other 29,058 20,658
------- -------
$108,588 $111,751
======= =======
(13) LONG-TERM DEBT
Long-term debt consists of the following:
1996 1995
---- ----
Term Loan Facility $ 174,250 $ 174,750
Revolving Credit Facility 78,300 72,600
10 1/4% Senior Notes due 2001 225,000 225,000
11 1/8% Senior Notes due 2002 150,000 150,000
11 1/4% Senior Subordinated Notes due 2003 200,000 200,000
Other 14,558 17,013
-------- --------
842,108 839,363
Less current portion (4,049) (3,591)
-------- --------
$ 838,059 $ 835,772
======== ========
With respect to the Term Loan Facility, SFC will be required to
make principal payments of $500 annually through 1999 and $86,500
and $86,250 in the years 2000 and 2001, respectively. The Term
Loan Facility is secured by a pledge of all capital stock of each
of the operating subsidiaries.
At December 31, 1996, SFC has a Revolving Credit Facility
totaling $125,000 with a syndicate of banks. Amounts outstanding
under the facility total $78,300 at December 31, 1996. In
addition to amounts outstanding under the facility, letters of
credit totaling $25,503 reduce available funds in a like amount
at December 31, 1996. Proceeds from the facility are used to
finance working capital requirements and are available for other
corporate purposes. The facility matures in April 2001 and is
secured by substantially all of the personal property and certain
real property of the operating subsidiaries.
Semi-annual interest payments are required through maturity on
the 10 1/4% Senior Notes and the 11 1/4% Senior Subordinated
Notes on each February 15 and each August 15. Semi-annual
interest payments are required through maturity on the 11 1/8%
Senior Notes on April 1 and October 1.
The 10 1/4% Senior Notes, the 11 1/4% Senior Subordinated Notes,
and the 11 1/8% Senior Notes are unsecured.
Other long-term debt consists primarily of industrial development
bonds and miscellaneous notes payable with interest rates ranging
from 2.75% to 10.5% at December 31, 1996.
The provisions of the Term Loan Facility and the Revolving Credit
Facility contain covenants which require SFC to maintain
specified financial ratios. SFC also has other limitations
regarding capital expenditures, sales of assets, loans and
investments, encumbrances of assets and assumption of additional
indebtedness. In addition, the agreements governing the Term
Loan Facility and the Revolving Credit Facility and the
indentures governing the Senior Notes and the Senior Subordinated
Notes contain certain restrictive covenants, including, to the
detriment of the holders of the Senior Debentures and the Senior
Subordinated Debentures, certain covenants that restrict or
prohibit (with de minimis exceptions) SFC's ability to pay
dividends or make other distributions to SFAC. Specifically, as
a result of the Company's net losses and accumulated deficit,
SFC's ability to make distributions to SFAC under the indentures
of the Senior Notes and the Senior Subordinated Notes has been
impaired and these indentures will require modification before
any such distribution to SFAC can be made.
In February, 1997, the lenders for the Term Loan Facility and
Revolving Credit Facility agreed to amendments of several
provisions of the Term Loan Facility. The amendments, among
other things, reduce SFC's financial covenant levels. In
addition, the amendment allows the Company to retain for
investment in acquisitions and capital expenditure projects up to
$110,000 of the proceeds from business divestitures completed by
the Company. As a result of this amendment, the interest rate on
the Term Loan Facility and Revolving Credit Facility was
increased from LIBOR plus 2 3/4% to LIBOR plus 3%. In addition,
in connection with the amendment, certain of the shareholders of
SFAC agreed to make an equity contribution, as described in Note
20.
Aggregate maturities of debt are as follows:
1997 $ 4,049
1998 3,234
1999 3,154
2000 88,441
2001 390,247
Thereafter 352,983
-------
Total aggregate maturities $842,108
=======
Cash paid for interest was $91,412, $87,704, and $74,738 for the
years ended December 31, 1996, 1995, and 1994, respectively.
(14) FINANCIAL INSTRUMENTS
CONCENTRATION OF CREDIT RISK
The Company's exposure to credit loss in the event of nonpayment
of accounts receivable by customers is represented in the amount
of those receivables. The Company performs ongoing credit
evaluations of its customers' financial condition and generally
requires no collateral from those customers. As of December 31,
1996, the Company does not believe it has any significant
concentration of credit risk with respect to its trade accounts
receivable.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
During September, 1995, the Company entered into an interest rate
collar agreement to reduce its exposure to changes in the cost of
its variable rate borrowings. Under the agreement, which became
effective in October, 1995, and terminates in October, 1998, the
Company would receive payments from the counterparties should the
three-month LIBOR exceed 7% and make payments to the
counterparties should the rate fall below 5.26%. The payments
would be calculated based upon a notional principal amount of
$270,000. The net differential of interest to be paid or
received under the agreement is recognized as incurred. To date,
no amounts have been paid or received under the interest rate
collar agreement. Off-balance-sheet risk from the interest rate
collar agreement at December 31, 1996 includes the risk
associated with changes in market values and interest rates. The
counterparties to this contract are major financial institutions.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments include long-term debt and
the interest rate collar agreement. The estimated fair value and
carrying amount of long term debt including current maturities
but excluding related party Senior Subordinated Discount
Debentures at December 31, 1996 are as follows:
Estimated
Carrying Fair
Amounts Values
-------- ---------
Financial liabilities:
Long-term debt, including
current maturities $ 842,108 $ 866,882
Interest rate collar agreement $ - $ (28)
The fair value of long-term debt and the interest rate collar
agreement have been determined based on quoted market prices and
market interest rates at December 31, 1996.
(15) LEASE COMMITMENTS
The Company leases equipment and facilities under various
noncancelable operating leases. Future minimum lease payments
under all noncancelable operating leases are as follows:
1997 $ 24,413
1998 21,709
1999 19,028
2000 16,749
2001 11,521
Thereafter 26,679
-------
Total minimum lease payments $ 120,099
=======
Total rental expense for the fiscal years ended 1996, 1995, and
1994 was $24,372, $17,654, and $14,943 respectively.
(16) INCOME TAXES
The provision for income taxes for 1996, 1995, and 1994 relate to
state and Canadian income taxes payable. Since the Company has
no federal currently payable or deferred income tax expense due
to its net operating loss position, an effective tax rate
reconciliation is not presented.
The components of net deferred taxes are as follows:
1996 1995
---- ----
Deferred tax assets related to:
Accrued expenses and other liabilities $ 28,068 $ 37,570
Net operating losses and credits 75,625 65,219
Restructuring reserve 9,905 -
Other (583) 1,333
------- -------
Total deferred tax assets 113,015 104,122
Valuation allowance 64,784 54,265
------- -------
Total net deferred tax assets 48,231 49,857
Deferred tax liabilities related to:
Depreciation 44,153 45,259
Inventories 4,078 4,598
------- -------
Total deferred tax liabilities 48,231 49,857
------- -------
Net deferred tax asset (liabilty) $ - $ -
======= =======
At December 31, 1996, the Company has Federal net operating loss
carryforward of $192,000, including $45,000 of loss carryforwards
from predecessor companies, which are subject to limitations that
may substantially limit future utilization. Also at December 31,
1996, the Company has $107,000 of state net operating loss
carryforwards and $4,000 of state tax credit carryforwards. Net
operating loss and credit carryforwards expire in varying amounts
through the year 2011.
Cash paid for income taxes was $2,543, $2,906 and $1,478 for the
years ended December 31, 1996, 1995, and 1994, respectively.
(17) LITIGATION AND OTHER CONTINGENCIES
LITIGATION
In the normal course of business activities, the Company is a
party to certain legal proceedings and claims. Although the
outcome of such matters cannot be determined with certainty, it
is management's opinion that the final outcome will not have a
material adverse effect on the Company's financial position or
results of operations.
OTHER
Various operating subsidiaries are self-insured or retain a
portion of losses with the respect to workers' compensation
claims. In connection with such, irrevocable letters of credit
or surety bonds aggregating $34,741 at December 31, 1996 were
provided to state regulatory agencies or insurance companies.
(18) EMPLOYEE BENEFITS
PENSION BENEFITS
Certain of the operating subsidiaries sponsor single-employer,
noncontributory, defined benefit pension plans. The operating
subsidiaries also participate in numerous multi-employer,
noncontributory, defined benefit pension plans. Substantially
all the Company's employees are covered by the defined benefit or
multi-employer plans.
Benefits for employees are based on various requirements
including length of service and average compensation.
Contributions are funded to the extent deductible for Federal
income tax purposes.
Pension expense for the single-employer defined benefit pension
plans was as follows:
1996 1995 1994
---- ---- ----
Service cost of benefits
earned during the year $ 2,117 $ 1,678 $ 2,337
Interest cost on the projected
benefit obligation 3,658 3,558 3,290
Actual return on plan assets (6,729) (10,937) 2,924
Net amortization and deferral 2,021 6,888 (7,286)
------ ------ ------
Net periodic pension cost $ 1,067 $ 1,187 $ 1,265
====== ====== ======
The following tables set forth the funded status of the plans and
the amounts recognized in the consolidated balance sheets:
1996 1995
---- ----
Actuarial present value of accumulated
benefit obligations, including vested
benefits of $45,270 and $46,833 at
December 31, 1996 and 1995, respectively $ 46,140 $ 48,243
====== ======
Plan assets at fair value, primarily
listed stocks and corporate and
government bonds 57,396 53,040
Less actuarial present value of
projected benefit obligations (54,218) (57,094)
------ ------
Excess (deficiency) of plan assets
over projected benefit obligations 3,178 (4,054)
Unrecognized prior service costs 995 492
Unrecognized net gain (12,435) (3,724)
Unrecognized transition asset (489) (597)
------ ------
Accrued pension cost $ (8,751) $ (7,883)
====== =======
The significant actuarial assumptions used to determine the
obligations are:
1996 1995 1994
---- ---- ----
Range of weighted average 7.5% 7.5% 7.5%
discount rates
Range of increase in future 4.0% 4.0% to 4.0% to
compensation levels 5.0% 5.5%
Range of assumed long-term 9.0% 8.0% to 8.0% to
rates of return on assets 9.0% 9.0%
Certain of the operating subsidiaries also participate in various
multi-employer defined benefit pension plans on behalf of
employees pursuant to various collective bargaining agreements.
Contributions to these plans amounted to approximately $14,988,
$13,299, and $13,472 for the years ended December 31, 1996, 1995,
and 1994, respectively.
The Company has various defined contribution plans which
cover non-bargaining-unit employees meeting eligibility
requirements. Contributions to these plans were approximately
$2,651, $2,530, and $3,221 for the years ended December 31, 1996,
1995, and 1994, respectively.
POST-RETIREMENT HEALTH CARE BENEFITS
Components of the expense recognized for the years ended
December 31, 1996, 1995, and 1994 for the retiree health care
plan were as follows:
1996 1995 1994
---- ---- ----
Service costs $ 446 $ 455 $ 425
Interest cost on projected obligation 661 718 665
Net amortization and deferral (832) (173) (6)
----- ----- -----
Net retiree health care expense $ 275 $ 1,000 $ 1,084
===== ===== =====
The following table sets forth the amounts recognized in the
balance sheets at December 31, 1996 and 1995:
1996 1995
---- ----
Actuarial present value of accumulated
postretirement benefit obligation
Retirees $ 4,113 $ 4,772
Active eligible 2,015 2,293
Active ineligible 3,758 4,272
Unrecognized net gain 4,362 2,978
------- -------
Retiree health care liability recognized $ 14,248 $ 14,315
======= =======
The weighted average discount rate assumptions used to determine
the accumulated postretirement benefit obligation for the retiree
health care plan for 1996 and 1995 were 7.57% and 6.68%,
respectively.
The health care trend rate used to determine the pre-age 65
accumulated postretirement benefit obligation was 11% for 1996,
decreasing to 6% by the year 2002 and beyond. A flat 6% rate per
year is used for the post-age 65 obligation. Increasing the
assumed health care trend rate by 1% each year would increase the
accumulated postretirement benefit obligation as of December 31,
1996 and 1995 approximately $942 and $1,284, respectively, and
the aggregate of the service and interest cost components of
1996, 1995, and 1994 net retiree healthcare expense approximately
$134, $146, and $120, respectively.
LONG TERM INCENTIVE COMPENSATION PLANS
The Company has adopted long-term incentive compensation plans
for several of its businesses which provide for cash awards upon
the achievement of specified earnings targets in the year ending
December 31, 1998. Based on performance through 1996, it is
unlikely that any of the businesses will achieve plan earnings
targets.
(19) RELATED PARTY TRANSACTIONS
CERTAIN TRANSACTIONS WITH STOCKHOLDERS OF AND AFFILIATES OF
STOCKHOLDERS OF SFAC
Certain of SFACOs stockholders and their affiliates previously
entered into financial advisory arrangements (the Financial
Advisory Agreements) with SFACOs subsidiary, SFC. Haas Wheat
& Partners (Haas Wheat), an affiliate of Acadia Partners, L.P.
(Acadia), and Keystone, Inc. (Keystone) each entered into such
Financial Advisory Agreements. Under the terms of the Financial
Advisory Agreements, SFC pays Haas Wheat an annual fee of $700 (a
portion of which Haas Wheat is obligated by agreement to remit to
Acadia), the Acadia affiliate an annual fee of $200, and Keystone
an annual fee of $100.
In March 1997, pursuant to an agreement between Acadia, Haas
Wheat Advisory Partners Incorporated and Keystone (the signing
shareholders) and the Company, the signing shareholders agreed to
contribute their $19,500 insurance receivable to equity of the
Company. The conversion of the insurance receivable to equity
will occur in the second quarter of 1997.
In November 1996, SF Leasing L.L.C. (of which Acadia and Keystone
each owns a 45% interest and Haas Wheat owns a 10% interest)
purchased from the Company all of the equipment at three
manufacturing facilities for the aggregate amount of $18,380
(which price was based on the appraised value of such equipment),
and leased such equipment back to the Company in a transaction
that was deemed by the parties to be equivalent to an arms length
transaction.
The Board of Directors of the Company determined that the
foregoing transactions were on terms no less favorable to the
Company than could otherwise have been obtained by the Company in
a transaction with an unaffiliated third party.
(20) ACQUISITIONS AND OTHER DIVESTITURES
In May 1995, the Company completed the acquisition of two Chicago-
area bakeries and, in September 1995, acquired a specialty snack
business. Total consideration for these acquisitions was $12,400
and they were accounted for by the purchase method. Pro forma
information has not been presented for the above acquisitions as
the acquisitions are not, individually or collectively,
significant to the Company's results of operations.
On May 18, 1996, the Company sold its baking business in North
Vancouver, British Columbia for cash proceeds of $1,500. The
assets sold consisted primarily of accounts receivable, equipment
and customer routes. A loss of $4,500 ($3,800 after taxes),
resulted from the transaction and is recorded in other expense.
The 1996 revenues of this business through the date of sale
approximated $9,000. In a separate transaction, on August 2,
1996, the Company sold the building and land associated with the
above business for aggregate proceeds of $4,700, which
approximated the financial statement carrying value.
(21) SALE LEASEBACK TRANSACTIONS
During 1996, the Company entered into several agreements for the
sale and leaseback of production equipment at four bakeries and
two cheese plants for a net sales price of $28,420 (including the
sale and leaseback described in Note 20.) The leases are
classified as operating leases and, accordingly, the book value
of the equipment was removed from the balance sheet. Losses of
$3,432 realized on the sale of equipment at three facilities were
recognized immediately and recorded in other expense while net
gains of $4,859 realized on the equipment sales at the other
facilities are being deferred and amortized to income as rent
expense adjustments over the lease term of 4 to 6 1/2 years.
(22) OTHER EXPENSE (INCOME)
Other expense (income) is comprised of the following:
1996 1995 1994
---- ---- ----
Loss on disposal of property,
plant and equipment $ 11,916 $ 536 $ 188
Discount on receivables sold 4,829 5,037 5,839
Write-off of deferred costs - - 5,506
Involuntary conversion of
property, plant, and equipment
due to fire (note 6) (17,508) - -
Business interruption (note 60 (5,286) - -
Other 3,190 (36) 1,535
------ ------ ------
$ (2,859) $ 5,537 $ 13,068
====== ====== ======
EXHIBIT 10.19
3
FOURTH AMENDMENT, dated as of February 25, 1997 (this
"Amendment"), to:
(a) the Term Loan Agreement, dated as of July 17,
1995, as amended (the "Existing Term Loan Agreement" and, as
amended hereby and as from time to time further amended,
supplemented or otherwise modified, the "Term Loan
Agreement") among SPECIALTY FOODS CORPORATION, a Delaware
corporation (the "Term Loan Borrower"), the several banks
and other financial institutions from time to time parties
thereto (the "Term Loan Lenders"), and THE CHASE MANHATTAN
BANK (formerly, Chemical Bank), a New York banking
corporation, as administrative agent for the Term Loan
Lenders (the "Administrative Agent"); and
(b) the Revolving Credit Agreement dated as of
August 16, 1993 and amended and restated as of July 17,
1995, as amended (the "Existing Revolving Credit Agreement"
and, as amended hereby and as from time to time further
amended, supplemented or otherwise modified, the "Revolving
Credit Agreement"), among each of the subsidiaries of
SPECIALTY FOODS CORPORATION signatory thereto (collectively,
the "Revolving Credit Borrowers"), the several banks and
other financial institutions from time to time parties
thereto (collectively, the "Revolving Credit Lenders") and
the Administrative Agent.
W I T N E S S E T H :
WHEREAS, the Term Loan Borrower, the
Administrative Agent and the Term Loan Lenders wish to amend
certain terms of the Existing Term Loan Agreement in the
manner provided for herein; and
WHEREAS, the Revolving Credit Borrowers, the
Administrative Agent and the Revolving Credit Lenders wish
to amend certain terms of the Existing Revolving Credit
Agreement in the manner provided for herein;
NOW THEREFORE, in consideration of the premises
contained herein, the parties hereto agree as follows:
I. SECTION Definitions.
1. Defined Terms. Unless otherwise defined in
this Amendment, terms which are defined in the Existing Term
Loan Agreement and Existing Revolving Credit Agreement and
used herein are so used as so defined. Unless otherwise
indicated, all Section, subsection and Schedule references
are to the Existing Term Loan Agreement.
II. SECTION Amendment of Certain Terms in Existing Term
Loan Agreement.
(a) Amendments to Subsection 1.1. The
definition of the term "Applicable Margin" contained in
subsection 1.1 of the Existing Term Loan Agreement is hereby
amended to read in its entirety as follows:
"`Applicable Margin': for each Type of Term
Loan, (a) until the Fourth Amendment Effective Date,
the rate per annum set forth under the relevant column
heading below:
ABR Loans Eurodollar Loans
1-3/4% 2-3/4%
and (b) from and including the Fourth Amendment
Effective Date, the rate per annum set forth under the
relevant column heading below:
ABR Loans Eurodollar Loans
2% 3%
(b) For purposes of determining compliance with
the provisions of subsections 6.1(a), (b) and (c) of the
Existing Term Loan Agreement as amended hereby for the
respective dates and periods referred to in Sections II(2),
II(3) and II(4) of this Fourth Amendment, the definitions of
each of the following terms is hereby amended as follows:
(i) the definition of "Consolidated EBITDA" is
amended by deleting the "provided, however," clause
therein in its entirety;
(ii) the definition of "Consolidated Fixed
Charges" is amended by deleting the parenthetical
clause in clause (c) thereof in its entirety;
(iii) the definition of "Consolidated Interest
Expense" is amended by deleting the "provided,
however," clause in the first sentence thereof and the
last sentence thereof in their respective entireties;
and
(iv) the definition of "Consolidated Total
Indebtedness" is amended by deleting the "provided,
however," clause therein in its entirety.
(c) Subsection 1.1 of the Existing Term Loan
Agreement is hereby amended by adding thereto the following
definitions, each in its proper alphabetical order:
"`Fourth Amendment': the Fourth Amendment,
dated as of February 25, 1997, to this Agreement and
the Revolving Credit Agreement."
"`Fourth Amendment Effective Date': as
defined in the Fourth Amendment."
2. Amendment of Subsection 6.1(a)
(Consolidated Total Indebtedness to Consolidated EBITDA).
The Administrative Agent and the Term Loan Lenders hereby
agree with the Term Loan Borrower to amend the entries under
the column entitled "Ratio" in subsection 6.1(a) of the
Existing Term Loan Agreement corresponding to the last
Fiscal Quarter in Fiscal Year 1996 and the Fiscal Quarters
in Fiscal Year 1997 to be as follows:
Test Period
Fiscal Year (by Fiscal Quarter) Ratio
1996 4th 9.85
1997 1st 9.75
2nd 9.40
3rd 9.05
4th 7.75
3. Amendment of Subsection 6.1(b) (Interest
Coverage). The Administrative Agent and the Term Loan
Lenders hereby agree with the Term Loan Borrower to amend
the entries under the column entitled "Ratio" in subsection
6.1(b) of the Existing Term Loan Agreement corresponding to
the last Fiscal Quarter in Fiscal Year 1996 and the Fiscal
Quarters in Fiscal Year 1997 to be as follows:
Test Period
Fiscal Year (by Fiscal Quarter) Ratio
1996 4th 0.80
1997 1st 0.85
2nd 0.90
3rd 1.00
4th 1.15
4. Amendment of Subsection 6.1(c) (Fixed Charge Coverage). The
Administrative Agent and the Term Loan Lenders hereby agree with the Term Loan
Borrower to amend the entries under the column entitled "Fixed Charge Coverage
Ratio" in subsection 6.1(c) of the Existing Term Loan Agreement corresponding
to the last Fiscal Quarter in Fiscal Year 1996 and the Fiscal Quarters in
Fiscal Year 1997 to be as follows:
Test Period
Fiscal Year (by Fiscal Quarter) Ratio
1996 4th 0.50
1997 1st 0.50
2nd 0.50
3rd 0.55
4th 0.65
SECTION III Consent under Existing Revolving Credit Agreement.
In accordance with subsection 9.1 of the Existing Term Loan Agreement
and subsection 9.1 of the Existing Revolving Credit Agreement, each of the
Revolving Credit Borrowers and the Lenders parties to this Amendment consents
and agrees to the amendment of terms of the Term Loan Agreement pursuant to
this Amendment, and each of the Revolving Credit Borrowers agrees to comply
with the provisions of Section 6 of the Revolving Credit Agreement, with the
references therein to the Term Loan Agreement being deemed to be references
to the Term Loan Agreement as amended hereby.
SECTION IV Amendment to Third Amendment.
The Administrative Agent and the Required Lenders hereby agree
with the Term Loan Borrower and the Revolving Credit Borrowers to amend
Section IV(b) of the Third Amendment to be as follows: (b) Except with the
consent of the Required Lenders, the Term Loan Borrower shall not use Asset Sale
Proceeds under subsection 6.6(e) of the Existing Term Loan Agreement received
after the Third Amendment Effective Date to consummate one or more Acquisitions
or to make Capital Expenditures or investments in other long-term assets of the
Operating Subsidiaries as provided for in subsection 6.6(e) of the Existing
Term Loan Agreement that are not permitted under the first sentence of
subsection 6.8 of the Existing Term Loan Agreement, provided that, if and to
the extent that the aggregate Asset Sale Proceeds received after the Third
Amendment Effective Date are within one of the categories specified below,
the portion of such aggregate Asset Sale Proceeds set forth in Column I
opposite such category may be used for Capital Expenditures permitted only by
reason of the last sentence of subsection 6.8 of the Existing Term Loan
Agreement ("Incremental Capital Expenditures"), and the portion of such
aggregate Asset Sale Proceeds set forth in Column II opposite such
category may be used for acquisitions ("Acquisition Expenditures"); provided,
however, that in no event shall the aggregate amount of the
Incremental Capital Expenditures and Acquisition Expenditures exceed the
Maximum Incremental Capital Expenditures (such permitted
Incremental Capital Expenditures and Acquisitions, the "Permitted Third
Amendment Purposes"):
Column I ColumnII
Category of aggregate Asset Sale
Proceeds received after the Incremental Capital Acquisition
Third Amendment Effective Date Expenditures Sublimit
- ----------------------------------------------------------------------------
More than $110,000,000 Maximum $35,000,000
Incremental Capital
Expenditures
Less than or Equal to $110,000,000 Maximum Lesser of
Incremental Capital $35,000,000 and
Expenditures the Maximum
Incremental
Capital
Expenditures
Where: "Maximum Incremental Capital Expenditures" at
any time means (x) $110,000,000 (or, if at such time the
aggregate Asset Sale Proceeds received after the Third
Amendment Effective Date is less than $110,000,000, the
amount of such aggregate Asset Sale Proceeds) minus (y)
$53,052,000, which is the aggregate amount of Capital
Expenditures permitted for the 1997 fiscal year of the Term
Loan Borrower under subsection 6.8 of the Existing Term Loan
Agreement without giving effect to the last sentence
thereof.
SECTION V Other Agreements.
In order to induce the Lenders to enter into this Fourth Amendment, the
Term Loan Borrower hereby agrees that: (a) Except with the
consent of the Required Lenders, within three Business Days
after the date of the receipt of Asset Sale Proceeds from
any asset sale under and as permitted by subsection 6.6(e)
of the Existing Term Loan Agreement occurring after the
Third Amendment Effective Date the Asset Sale Proceeds from
which, together with the Asset Sale Proceeds for all other
such asset sales after the Third Amendment Effective Date,
exceed $110,000,000, the Term Loan Borrower shall prepay the
Term Loans as provided in subsection 2.6 of the Existing
Term Loan Agreement and then cause the Revolving Credit
Borrowers to prepay the Revolving Credit Loans and reduce
the Revolving Credit Commitments as provided in subsection
2.10 of the Existing Revolving Credit Agreement with such
excess Asset Sale Proceeds. (b) In the event that the
aggregate Asset Sale Proceeds from asset sales under and as
permitted by subsection 6.6(e) of the Existing Term Loan
Agreement occurring after the Third Amendment Effective Date
that are not in excess of $110,000,000 are not used to
consummate one or more Acquisitions or make Capital
Expenditures (including Incremental Capital Expenditures)
within one year from the receipt thereof as contemplated by
said subsection 6.6(e), such Asset Sale Proceeds shall be
used to prepay the Term Loans as provided in subsection 2.6
of the Existing Term Loan Agreement and then to prepay the
Revolving Credit Loans and reduce the Revolving Credit
Commitments as provided in the Existing Revolving Credit
Agreement. (c) Failure by the Term Loan Borrower to
comply with any of the provisions of this Section V shall
constitute an Event of Default under the Existing Term Loan
Agreement and the Revolving Credit Agreement.
SECTION VI Miscellaneous Provisions
1. Consent to Amendment.
Each Lender executing and delivering this Amendment hereby
consents to the agreements and amendments provided for
herein.
2. Conditions Precedent. (a) This Amendment
shall, become effective on and as of the date first written
above (the "Fourth Amendment Effective Date"), provided that
each of the conditions precedent set forth below shall have
been waived by or fulfilled to the satisfaction of the
Administrative Agent on or prior to such date:
(i)Amendment. The Administrative Agent shall have received
counterparts of this Amendment, duly executed by the Term
Loan Borrower, the Revolving Credit Borrowers and the
Administrative Agent, and consented to by the Required
Lenders under the Term Loan Agreement and the Revolving
Credit Agreement.
(ii) Amendment Documents. The
Administrative Agent shall have received each of the
following (together with this Amendement, the "Amendment
Documents"):
a. Consents to Security Documents and Guarantees. A Consent,
with a counterpart for each Lender, inform and substance
reasonably satisfactory to the Administrative Agent, from
each party to any Security Document acknowledging and
consenting to the execution, delivery and performance of this
amendment and the transactions contemplated hereby, in each
case, executed and delivered by a duly authorized Officer
of such party: and
b. Collateral Investment Agreement. The Collateral Investment
Agreement, in form and substance satisfactory to the
Administrative Agent duly executed and delivered by the Term
Loan Borrower.
C. Equity Investment Agreement. An agreement
(the "Equity Investment Agreement") among Acadia Partners,
L.P., Haas Wheat Advisory Partners Incorporated and
Keystone, Inc. (collectively, the "Signing Shareholders"),
the Parent and the Term Loan Borrower pursuant to the terms
of which the Signing Shareholders shall agree to contribute
to the equity of the Parent, which shall in turn contribute
to the equity of the Term Loan Borrower, an amount equal to
$19,500,000, which may be satisfied by the contribution to
the Parent by shareholders of the Parent, including the
Signing Shareholders, of insurance receivables in such
amount generated in connection with the Lena Fire and
purchased by the Signing Shareholders, which Equity
Investment Agreement shall in form and substance be
satisfactory to the Administrative Agent and be duly
executed and delivered by the parties thereto. (iii)
Corporate Proceedings of the Term Loan Borrower. The
Administrative Agent shall have received a copy of the
resolutions, in form and substance reasonably satisfactory
to the Administrative Agent, of the Board of Directors of
the Term Loan Borrower authorizing or confirming the
execution, delivery and performance of the Amendment
Documents to which it is a party certified by the Secretary
or an Assistant Secretary of the Term Loan Borrower as of
the Fourth Amendment Effective Date and each such
certificate shall state that the resolutions thereby
certified have not been amended, modified, revoked or
rescinded as of the date of such certificate. (iv) No
Default or Event of Default. On and as of the Fourth
Amendment Effective Date and after giving effect to this
Amendment, no Default or Event of Default shall have
occurred and be continuing except to the extent and only to
the extent waived herein. (v) Representations and
Warranties. The representations and warranties made by the
Term Loan Borrower in the Term Loan Agreement after giving
effect to this Amendment and the transactions contemplated
hereby shall be true and correct in all material respects on
and as of the Fourth Amendment Effective Date as if made on
such date, except where such representations and warranties
relate to an earlier date in which case such representations
and warranties shall be true and correct in all material
respects as of such earlier date and except to the extent
and only to the extent waived herein; provided that all
references to the Term Loan Agreement in such
representations and warranties shall be and are deemed to
mean this Amendment as well as the Term Loan Agreement as
amended hereby. (vi) Certificate. The Administrative
Agent shall have received a Certificate of a Responsible
Officer of the Term Loan Borrower certifying the matters
referred to in paragraphs (v) and (vi) above. (vii)
Amendment Fee. The Administrative Agent shall have received
from the Term Loan Borrower, for the account of each of the
Term Loan Lenders and Revolving Credit Lenders executing and
delivering this Amendment on or prior to the Fourth
Amendment Effective Date, an amount, in immediately
available funds, equal to (i) 0.125% of the principal amount
of the Term Loan of such Lender outstanding as of the date
hereof plus (ii) 0.125% of the amount of the Revolving
Credit Commitment of such Lender in effect as of the date
hereof. (viii) Other. The Administrative Agent shall have
received copies of opinions, certificates, or agreements as
shall reasonably be requested by the Administrative Agent or
the Required Lenders.
3. Continuing Effect; No Other
Amendments. Except as expressly amended hereby, all of the
terms and provisions of the Term Loan Agreement and the
Revolving Credit Agreement are and shall remain in full
force and effect.
4. Expenses. The Term Loan Borrower
and the Revolving Credit Borrowers agree to reimburse the
Administrative Agent for all its reasonable costs and out-of-
pocket expenses incurred in connection with the preparation
and delivery of this Amendment, including, without
limitation, the reasonable fees and disbursements of counsel
to such Administrative Agent.
5. Counterparts. This
Amendment may be executed in any number of counterparts by
the parties hereto, each of which counterparts when so
executed shall be an original, but all counterparts taken
together shall constitute one and the same instrument.
6. GOVERNING LAW.
THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.* * *
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their respective duly authorized officers as of
the date first above written.
SPECIALTY FOODS CORPORATION,as Term Loan Borrower
BY: /s/ Peter L. Sereda Name: Peter L. Sereda Title: Vice
President & TreasurerBELSEA HOLDINGS INC.,as Revolving
Credit Borrower
BY: /s/ Peter L. Sereda Name: Peter L.
Sereda Title: Vice President & TreasurerH & M FOOD SYSTEMS
COMPANY, INC.,as Revolving Credit Borrower
BY: /s/ Peter L.
Sereda Name: Peter L. Sereda Title: Vice President &
TreasurerMETZ HOLDINGS, INC., as RevolvingCredit Borrower
BY: /s/ Peter L. Sereda Name: Peter L. Sereda Title: Vice
President & TreasurerMOTHER'S CAKE AND COOKIE CO.,as
Revolving Credit Borrower
BY: /s/ Peter L. Sereda Name:Peter L. Sereda Title: Vice President &
Treasurer SFFB HOLDINGS, INC.,as Revolving Credit Borrower
BY: /s/ Peter L. Sereda Name: Peter L. Sereda Title: Vice President &
TreasurerSTELLA HOLDINGS, INC., formerly known as Stella
Foods, Inc., as RevolvingCredit Borrower
BY: /s/ Peter L. Sereda Name: Peter L. Sereda Title: Vice President &
TreasurerTBP HOLDINGS, INC., asRevolving Credit Borrower
BY: /s/ Peter L. Sereda Name: Peter L. Sereda Title: Vice
President & TreasurerTHE CHASE MANHATTAN BANK (formerly,
Chemical Bank), as Administrative Agent and as a Lender
BY: /s/ Marcus Gustafson Name: Marcus Gustafson Title:
Vice PresidentCONSENTED TO:ABN AMRO Bank N.V.By: ABN AMRO
North America, Inc., as agent
BY:/s/ Diego Puiggari Name: Diego Puiggari Title: Vice President
BY: /s/ Laurie Tuzo Name:Laurie Tuzo Title: Group Vice PresidentBANK OF
AMERICA ILLINOIS
BY: Name: Title: THE BANK OF NEW YORK
BY: /s/ Mark T. Familo Name: Mark T. Familo Title: Assistant Vice
PresidentBANQUE FRANCAISE DU COMMERCE EXTERIEUR
BY: /s/ Mark A. Harrington Name: Mark A. Harrington Title:
Vice President
BY: Name: Title:BANQUE PARIBAS
BY: Name: Title:
BY: Name: Title:PARIBAS CAPITAL FUNDING LLC
BY: Name: Title:
BY: Name: Title:CAISSE NATIONALE DE CREDIT AGRICOLE
BY: Name: Title: CERES FINANCE LTDBy: Chancellor Senior
Secured Management, Inc. as Financial Manager
BY: Name: Title:COMPAGNIE FINANCIERE DE CIC ET DE L'UNION
EUROPEENNE
BY: Name: Title:
BY: Name: Title:FIRST INTERSTATE BANK OF TEXAS, N.A.
BY: Name: Title:THE FIRST NATIONAL BANK OF BOSTON
BY: Name: Title: MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management, L.P., as Investment
Advisor
BY: Name: Title: MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
BY: Name: Title:NATIONSBANK OF TEXAS N.A.
BY: Name: Title:COOPERATIVE CENTRALE RAIFFISEN -
BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK
BRANCH
BY: Name: Title:
BY: Name: Title: SENIOR HIGH INCOME PORTFOLIO, INC.
BY: Name: Title: SOCIETE GENERALE, SOUTHWEST AGENCY
BY: Name: Title: STRATA FUNDING LTD.By: Chancellor Senior
Secured Management, Inc. as Financial Manager
BY: Name: Title: WELLS FARGO BANK, N.A.
BY: Name: Title:SENIOR DEBT PORTFOLIO
By:Boston Management and Research as Investment Advisor
BY: Name: Title:DLJ CAPITAL FUNDING, INC.
BY: Name: Title:
ACKNOWLEDGMENT AND CONSENT ACKNOWLEDGMENT AND
CONSENT, dated as of February 25, 1997, to Fourth
Amendment, dated as of February 25, 1997 (the "Amendment")
to: (a) the Term Loan Agreement, dated as of July 17,
1995, (as may have been amended, supplemented, waived or
otherwise modified prior to the date hereof, the "Existing
Term Loan Agreement" and, as amended hereby and as from
time to time further amended, supplemented or otherwise
modified, the "Term Loan Agreement") among SPECIALTY FOODS
CORPORATION, a Delaware corporation (the "Term Loan
Borrower"), the several banks and other financial
institutions from time to time parties thereto (the "Term
Loan Lenders"), and THE CHASE MANHATTAN BANK (formerly,
Chemical Bank), a New York banking corporation, as
administrative agent (the "Administrative Agent"); and (b)
the Revolving Credit Agreement dated as of August 16, 1993
and amended and restated as of July 17, 1995 (as amended
and restated and as the same may have been further amended,
supplemented, waived or otherwise modified prior to the
date hereof, the "Existing Revolving Credit Agreement" and,
as amended hereby and as from time to time further amended,
supplemented or otherwise modified, the "Revolving Credit
Agreement"), among each of the subsidiaries of SPECIALTY
FOODS CORPORATION signatory thereto (collectively, the
"Revolving Credit Borrowers"), the several banks and other
financial institutions from time to time parties thereto
(collectively, the "Revolving Credit Lenders") and the
Administrative Agent.W I T N E S S E T H : WHEREAS,
the Amendment provides that the Administrative Agent shall
have received, with a counterpart for each Term Loan
Lender, a Consent, in form and substance reasonably
satisfactory to the Administrative Agent, of each party to
any Security Document acknowledging and consenting to the
execution, delivery and performance of the Amendment and
the transactions contemplated thereby, in each case,
executed and delivered by a duly authorized officer of such
party; NOW, THEREFORE, the undersigned hereby agree
as follows: The undersigned hereby acknowledge and
consent to the execution, delivery and performance of the
Amendment and the transactions contemplated thereby.Terms
defined in the Existing Term Loan Agreement, the Existing
Revolving Credit Agreement and the Amendment shall have
their defined meanings when used herein. IN WITNESS
WHEREOF, the undersigned have caused this Supplement to be
executed and delivered by a duly authorized officer on the
date first above written.
MBC Holdings, Inc. Metz Holdings, Inc.Metz Baking Company,
an Iowa corp.Metz Baking Company, a Delaware corp.TBP
Holdings, Inc.MCC-DSD Holdings, Inc.Mother's Cake & Cookie
Co.HMFS Holdings, Inc.H&M Food Systems Company, Inc.WFB
Holdings, Inc.Pacific Coast Baking Co., Inc.Belsea
Holdings, Inc.Gai's Seattle French Baking CompanyLangendorf
Baking Co. of Seattle, Inc.General Bagels CorporationOregon
French Baking CorporationSeattle English Muffin CompanySFFB
Holdings, Inc.San Francisco French Bread CompanyAndre-
Boudin Bakeries, Inc.Fisherman's Wharf Sourdough French
Bread Bakeries, Inc.Boudin International, Inc.Laura Todd
of AmericaSteve's Drayage, Inc.San Francisco Sourdough
Bakeries, Inc.Larraburu BakeryParisian Bakeries, Inc.San
Francisco Baking CulturesSan Francisco Sourdough CompanySan
Francisco Bay Area Equipment and SupplyStella Holdings,
Inc.Stella Foods East, Inc.Stella Foods, Inc.Stella Cheese
Company, Inc.GWI Holdings, Inc.GWI, Inc.By:
Name: Title:
Accepted as of the date firstabove written:SPECIALTY FOODS
CORPORATIONBy:
Name: Title:
EXHIBIT 10.25
2
3
Doc#:DS3:499379.1 31-073
Doc#:DS3:499379.1 31-073
EXECUTION COPY
AMENDMENT NO. 1 TO
SERIES 1996-1 SUPPLEMENT
AMENDMENT No. 1, dated as of November 29, 1996 (this
"Amendment"), to the Series 1996-1 Supplement, dated as of August
1, 1996 (the "Series 1996-1 Supplement"), among Specialty Foods
Finance Corporation, a Delaware corporation (the "Company"),
Specialty Foods Corporation, a Delaware corporation, as master
servicer (the "Master Servicer"), The Chase Manhattan Bank, as
initial VFC Certificateholder (the "Initial VFC
Certificateholder"), and The Chase Manhattan Bank, as trustee (in
such capacity, the "Trustee"), which supplements the Pooling
Agreement, dated as of November 16, 1994 (the "Pooling
Agreement"), among the Company, the Master Servicer and the
Trustee.
W I T N E S S E T H :
WHEREAS, the Company, the Master Servicer, the Initial
VFC Certificateholder and the Trustee wish to amend the Series
1996-1 Supplement in the manner provided for in this Amendment.
NOW, THEREFORE, the parties hereto hereby agree as
follows:
1. Defined Terms. Unless otherwise defined herein,
terms defined in the Pooling Agreement or the Series 1996-1
Supplement, as the case may be, shall have their defined meanings
when used herein.
2. Amendment of Section 1.1. The definition of
"Scheduled Termination Date" is amended by deleting the text,
"December 1, 1996" and substituting in its place the text,
"December 16, 1996".
3. Conditions to Effectiveness. This Amendment shall
become effective upon receipt by the Trustee of:
a. a counterpart hereof, duly executed and
delivered by each of the Company, the Master Servicer, the
Initial VFC Certificateholder and the Trustee;
b. a consent to this Amendment, in the form of
Annex A, from the Enhancement Provider;
c. an Officer's Certificate of a Responsible
Officer of the Company certifying that this Amendment shall
not adversely affect the interests of the VFC
Certificateholders;
d. an Opinion of Counsel by Paul, Weiss, Rifkind,
Wharton & Garrison opining that (i) this Amendment is
authorized pursuant to the Pooling Agreement and the Series
1996-1 Supplement and (ii) all conditions precedent to the
execution, delivery and performance of this Amendment are
satisfied in full; and
e. written confirmation from each of Standard &
Poor's Corporation and Moody's Investors Service Inc.
stating that the execution and delivery of this Amendment
will not result in a reduction or withdrawal of the rating
of the Term Certificates.
4. Continuing Effect of Series 1996-1 Supplement.
Except as expressly amended, modified and supplemented hereby,
the provisions of the Series 1996-1 Supplement are and shall
remain in full force and effect.
5. GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAW.
6. Counterparts. This Amendment may be executed in
two or more counterparts (and by different parties on separate
counterparts), each of which shall be an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this
Amendment to be duly executed by their respective officers as of
the day and year first above written.
SPECIALTY FOODS FINANCE CORPORATION
By:/s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
SPECIALTY FOODS CORPORATION, as
Master Servicer
By:/s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
THE CHASE MANHATTAN BANK, as
Trustee
By: /s/Dennis Kildea
Name: Dennis Kildea
Title: Trust Officer
THE CHASE MANHATTAN BANK, as
Initial VFC Certificateholder
By:/s/ Roger A. Parker
Name: Roger A. Parker
Title: Vice President
ANNEX A
[FORM OF CONSENT]
The Chase Manhattan Bank,
as Trustee
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Structured Finance Services (ABS)
Dear Sirs:
We refer to Amendment No. 1, dated as of November 29,
1996 (the "Amendment"), to the Series 1996-1 Supplement, dated as
of August 1, 1996 (the "Series 1996-1 Supplement"), among
Specialty Foods Finance Corporation, a Delaware corporation (the
"Company"), Specialty Foods Corporation, a Delaware corporation,
as master servicer (the "Master Servicer"), The Chase Manhattan
Bank, as initial VFC Certificateholder (the "Initial VFC
Certificateholder"), and The Chase Manhattan Bank, as trustee (in
such capacity, the "Trustee"), which supplements the Pooling
Agreement, dated as of November 16, 1994 (the "Pooling
Agreement"), among the Company, the Master Servicer and the
Trustee. We hereby certify that we have been given adequate
notice pursuant to Section 9.5 of the Series 1996-1 Supplement
and Section 10.1 of the Pooling Agreement.
We hereby consent to the execution and delivery by the
Company, the Master Servicer, the Initial VFC Certificateholder
and the Trustee of, and the changes effected to the Series 1996-1
Supplement by, the Amendment (substantially in the form
previously distributed to us).
Sincerely,
CAPITAL MARKETS ASSURANCE
CORPORATION, as Enhancement
Provider
By:________________________________
Name:
Title:
Dated: November __, 1996
EXHIBIT 10.26
4
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Doc#:DS3:499381.1 31-073
Doc#:DS3:499381.1 31-073
AMENDMENT NO. 2 TO
SERIES 1996-1 SUPPLEMENT
AMENDMENT No. 2, dated as of December 13, 1996 (this
"Amendment"), to the Series 1996-1 Supplement, dated as of August
1, 1996 (as amended or modified from time to time, the "Series
1996-1 Supplement"), among Specialty Foods Finance Corporation, a
Delaware corporation (the "Company"), Specialty Foods
Corporation, a Delaware corporation, as master servicer (the
"Master Servicer"), The Chase Manhattan Bank, as initial VFC
Certificateholder (the "Initial VFC Certificateholder"), and The
Chase Manhattan Bank, as trustee (in such capacity, the
"Trustee"), which supplements the Pooling Agreement, dated as of
November 16, 1994 (as amended or modified from time to time, the
"Pooling Agreement"), among the Company, the Master Servicer and
the Trustee.
W I T N E S E T H :
WHEREAS, the Company, the Master Servicer, the Initial
VFC Certificateholder and the Trustee wish to amend the Series
1996-1 Supplement in the manner provided for in this Amendment.
NOW, THEREFORE, the parties hereto hereby agree as
follows:
1. Defined Terms. Unless otherwise defined herein,
terms defined in the Pooling Agreement or the Series 1996-1
Supplement, as the case may be, shall have their defined meanings
when used herein.
2. Amendment of Section 1.1. The definition of
"Scheduled Termination Date" is amended by deleting the text,
"December 16, 1996" and substituting in its place the text,
"January 31, 1997".
3. Conditions to Effectiveness. This Amendment shall
become effective upon receipt by the Trustee of:
a. a counterpart hereof, duly executed and
delivered by each of the Company, the Master Servicer, the
Initial VFC Certificateholder and the Trustee;
b. a consent to this Amendment, in the form of
Annex A, from the Enhancement Provider;
c. an Officer's Certificate of a Responsible
Officer of the Company certifying that this Amendment shall
not adversely affect the interests of the VFC
Certificateholders;
d. an Opinion of Counsel by Paul, Weiss, Rifkind,
Wharton & Garrison opining that (i) this Amendment is
authorized pursuant to the Pooling Agreement and the Series
1996-1 Supplement and (ii) all conditions precedent to the
execution, delivery and performance of this Amendment are
satisfied in full; and
e. written confirmation from each of Standard &
Poor's Corporation and Moody's Investors Service Inc.
stating that the execution and delivery of this Amendment
will not result in a reduction or withdrawal of the rating
of the Term Certificates.
4. Continuing Effect of Series 1996-1 Supplement.
Except as expressly amended, modified and supplemented hereby,
the provisions of the Series 1996-1 Supplement are and shall
remain in full force and effect.
5. GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAW.
6. Counterparts. This Amendment may be executed in
two or more counterparts (and by different parties on separate
counterparts), each of which shall be an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this
Amendment to be duly executed by their respective officers as of
the day and year first above written.
SPECIALTY FOODS FINANCE CORPORATION
By:/s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
SPECIALTY FOODS CORPORATION, as
Master Servicer
By:/s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
THE CHASE MANHATTAN BANK, as
Trustee
By: /s/ Dennis Kildea
Name: Dennis Kildea
Title:Trustee
THE CHASE MANHATTAN BANK, as
Initial VFC Certificateholder
By:/s/ Roger A. Parker
Name: Roger A. Parker
Title:Vice President
ANNEX A
[FORM OF CONSENT]
The Chase Manhattan Bank,
as Trustee
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Structured Finance Services (ABS)
Dear Sirs:
We refer to Amendment No. 2, dated as of December 13,
1996 (the "Amendment"), to the Series 1996-1 Supplement, dated as
of August 1, 1996 (as amended or modified from time to time, the
"Series 1996-1 Supplement"), among Specialty Foods Finance
Corporation, a Delaware corporation (the "Company"), Specialty
Foods Corporation, a Delaware corporation, as master servicer
(the "Master Servicer"), The Chase Manhattan Bank, as initial VFC
Certificateholder (the "Initial VFC Certificateholder"), and The
Chase Manhattan Bank, as trustee (in such capacity, the
"Trustee"), which supplements the Pooling Agreement, dated as of
November 16, 1994 (as amended or modified from time to time, the
"Pooling Agreement"), among the Company, the Master Servicer and
the Trustee. We hereby certify that we have been given adequate
notice pursuant to Section 9.5 of the Series 1996-1 Supplement
and Section 10.1 of the Pooling Agreement.
We hereby consent to the execution and delivery by the
Company, the Master Servicer, the Initial VFC Certificateholder
and the Trustee of, and the changes effected to the Series 1996-1
Supplement by, the Amendment (substantially in the form
previously distributed to us).
Sincerely,
CAPITAL MARKETS ASSURANCE
CORPORATION, as Enhancement
Provider
By:________________________________
Name:
Title:
Dated: December __, 1996
EXHIBIT 10.27
### Document last closed 10:29:28 AM January 31, 1997 ### [Execution Copy]
============================================================
=====
SPECIALTY FOODS FINANCE CORPORATION,
SPECIALTY FOODS CORPORATION,
as Master Servicer,
and
THE CHASE MANHATTAN BANK,
as Trustee
SERIES 1997-1 SUPPLEMENT
Dated as of January 31, 1997
to
POOLING AGREEMENT
Dated as of November 16, 1994
SFC MASTER TRUST
============================================================
=====
TABLE OF CONTENTS
Page
Section
ARTICLE I DEFINITIONS 1
SECTION 1.1. Definitions 1
ARTICLE II DESIGNATION OF CERTIFICATES; PURCHASE AND
SALE OF THE VFC CERTIFICATES 26
SECTION 2.1. Designation 26
SECTION 2.2. The Series 1997-1 Certificates 26
SECTION 2.3. Delivery 27
SECTION 2.4. Procedure for Increasing the Invested
Amount 27
SECTION 2.5. Procedure for Decreasing the Invested Amount
29
SECTION 2.6. Commitment Certification 31
SECTION 2.7. Interest; Certain Fees 31
SECTION 2.8. Interest Rate Indemnity 33
ARTICLE III ARTICLE III OF THE AGREEMENT 34
SECTION 3C.2. Establishment of Series Accounts. 34
SECTION 3C.3. Daily Allocations. 36
SECTION 3C.4. Selection of Funding Periods; Determination
of Interest Rates 37
SECTION 3C.5. Determination of Series 1997-1 Amortization
Principal Payments 40
SECTION 3C.6. Applications 40
SECTION 3C.7. The Principal/Interest Surety Bond. 43
ARTICLE IV DISTRIBUTIONS AND REPORTS 45
SECTION 4C.1. Distributions 45
SECTION 4C.2. Statements and Notices 45
SECTION 4C.3. Notices 47
ARTICLE V ADDITIONAL EARLY AMORTIZATION EVENTS 48
SECTION 5.1. Additional Early Amortization Events 48
ARTICLE VI SERVICING FEE 50
SECTION 6.1. Servicing Compensation 50
ARTICLE VII COVENANTS, REPRESENTATIONS AND WARRANTIES
51
SECTION 7.1. Representations and Warranties of the
Company and the Master Servicer 51
SECTION 7.2. Covenants of the Company 51
SECTION 7.3. Covenants of the Master Servicer 51
SECTION 7.4. Additional Supplements 52
ARTICLE VIII MISCELLANEOUS 52
SECTION 8.1. Ratification of Agreement 52
SECTION 8.2. Governing Law 52
SECTION 8.3. Further Assurances 52
SECTION 8.4. No Waiver; Cumulative Remedies 52
SECTION 8.5. Amendments 53
SECTION 8.6. Notices 53
SECTION 8.7. Successors and Assigns 53
SECTION 8.8. Counterparts 56
SECTION 8.9. Enhancement Provider 56
SECTION 8.10. Administrative Agent for the Issuer 56
SECTION 8.11. No Bankruptcy Petition 56
SECTION 8.12. Costs and Expenses 56
ARTICLE IX FINAL DISTRIBUTIONS 57
SECTION 9.1. Certain Distributions 57
EXHIBITS
Exhibit A Form of VFC Certificate, Series 1997-1
Exhibit B Form of Subordinated Company
Certificate,
Series 1997-1
Exhibit C [Reserved]
Exhibit D Form of Daily Report
Exhibit E-1 Form of Monthly Settlement Statement
Exhibit E-2 Form of Funding Period Settlement Statement
Exhibit F Form of Notice of Increase
Exhibit G Form of Commitment Certification
SCHEDULES
Schedule 1 Trust Accounts
Schedule 2 Cure Period Trigger Dates
SERIES 1997-1 SUPPLEMENT, dated as of January 31,
1997 (this "Supplement"), among Specialty Foods Finance
Corporation, a Delaware corporation (the "Company"),
Specialty Foods Corporation, a Delaware corporation, as
master servicer (the "Master Servicer"), and The Chase
Manhattan Bank, a New York banking corporation, in its
capacity as trustee (the "Trustee") under the Agreement (as
hereafter defined).
W I T N E S S E T H :
WHEREAS, the parties hereto entered into a Pooling
Agreement, dated as of November 16, 1994 (as amended,
supplemented or otherwise modified from time to time, the
"Agreement");
WHEREAS, the Agreement provides, among other
things, that the Company, the Master Servicer and the
Trustee may at any time and from time to time enter into
supplements to the Agreement for the purpose of authorizing
the issuance on behalf of the Trust by the Company for
execution and redelivery to the Trustee for authentication
of one or more Series of Investor Certificates;
WHEREAS, the parties hereto entered into a Series
1994-1 Supplement to the Agreement, dated as of November 16,
1994;
WHEREAS, the parties hereto entered into a Series
1996-1 Supplement to the Agreement, dated as of August 1,
1996; and
WHEREAS, the Company, the Master Servicer and the
Trustee wish to supplement the Agreement as hereinafter set
forth;
NOW, THEREFORE, in consideration of the mutual
covenants herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are
hereby expressly acknowledged, the parties hereto agree as
follows:
I. ARTICLE
DEFINITIONS
a) SECTION Definitions. The following words
and phrases shall have the following meanings with respect
to Series 1997-1 and the definitions of such terms are
applicable to the singular as well as the plural form of
such terms and to the masculine as well as the feminine and
neuter genders of such terms:
"Accrued Expense Amount" shall mean, for each
Business Day during an Accrual Period, the sum of (i) the
Daily Interest Deposit for such Business Day, (ii) (A) if
such Business Day is prior to the 20th day of such Accrual
Period, 1/10 of each of the Series 1997-1 Monthly
Servicing Fee and the portion of each of the Issuer Usage
Fees, the Liquidity Usage Fees, the Liquidity Non-Usage
Fees, the Issuer Administrative Fees, the Alternate Fees
and the Surety Bond Fees to be paid on the next succeeding
Settlement Date (up to but not exceeding, in each case,
the full amount thereof), assuming that the aggregate Face
Amount of Issuer CP on each day is the same as the
aggregate Face Amount of Issuer CP on the first day of
such Accrual Period or (B) if such Business Day is on or
after the 20th day of such Accrual Period and if the
Issuer notifies the Master Servicer and the Trustee on
such Business Day that Aggregate Daily Collections
previously transferred to the Series 1997-1 Non-Principal
Collection Sub-account are insufficient to pay the Series
1997-1 Monthly Servicing Fee and the portion of each of
the Issuer Usage Fees, the Liquidity Usage Fees, the
Liquidity Non-Usage Fees, the Issuer Administrative Fees,
the Alternate Fees and the Surety Bond Fees to be paid on
the next succeeding Settlement Date, an amount reasonably
expected by the Issuer to be equal to such insufficiency,
which amount shall be specified in such notice to the
Master Servicer and the Trustee, and (iii) the Program
Costs for such Business Day.
"Acquiring VFC Certificateholder" shall have the
meaning specified in subsection 8.7(c).
"Additional Interest" shall mean with respect to
any outstanding Past Due Interest, interest thereon, until
paid in full, at a per annum rate equal to the sum of (i)
Base Rate as in effect from day to day computed on the
basis of a year of 360 days and actual days elapsed and
(ii) 2.00%.
"Adjusted Eurodollar Rate" for any Eurodollar
Tranche for any Eurodollar Period shall mean an interest
rate per annum equal to (i) (A) the rate (rounded upward,
if necessary, to the nearest whole multiple of 1/16 of 1%
per annum) for deposits in U.S. Dollars, in a principal
amount of not less than $1,000,000 for a period
approximating such Eurodollar Period, which appears on the
Reuters Screen LIBO Page as of 11:00 a.m. London time on
the second LIBO Business Day before (and for value on) the
first day of that Eurodollar Period, divided by (B) (1)
one, minus (2) the Eurodollar Reserve Requirements
(expressed as a decimal) applicable during that Eurodollar
Period) or (ii) if no applicable rate appears on the
Reuters Screen LIBO Page on the second LIBO Business Day
before the first day of that Eurodollar Period, (A) the
rate at which deposits in U.S. Dollars, in a principal
amount of not less than $1,000,000 for a period
approximating such Eurodollar Period, are offered by The
Chase Manhattan Bank at approximately 11:00 a.m. London
time on such LIBO Business Day (for value on the first day
of such Eurodollar Period), divided by (B) (1) one, minus
(2) the Eurodollar Reserve Requirements (expressed as a
decimal) applicable during that Eurodollar Period.
"Adjusted Invested Amount" shall mean, as of any
date of determination, the greater of (i) (A) the Invested
Amount on such date, minus (B) the amount on deposit in
the Series 1997-1 Principal Collection Sub-subaccount on
such date and (ii) $500,000.
"Aged Receivables Denominator" shall mean, with
respect to each Seller or Seller Group, as the case may
be, the prior Settlement Period which is set forth
opposite such Seller or such Seller Group (and, with
respect to any Seller or Seller Group added after the
Issuance Date, the "Aged Receivables Denominator" set
forth on the Additional Seller Supplement for such Seller
or such Seller Group):
Seller Aged Receivables
Denominator
Gai's Seller Group 3rd prior Settlement
Period
H&M 3rd prior Settlement
Period
Metz Seller Group 3rd prior Settlement
Period
Mother's 4th prior Settlement
Period
SFSB 3rd prior Settlement
Period
Stella Seller Group 3rd prior Settlement
Period
TBP 3rd prior Settlement
Period.
"Aged Receivables Numerator" shall mean, with
respect to each Seller or Seller Group, as the case may
be, the number of days past due which is set forth
opposite such Seller or such Seller Group (and, with
respect to any Seller or Seller Group added after the
Issuance Date, the "Aged Receivables Numerator" set forth
on the Additional Seller Supplement for such Seller or
such Seller Group):
Seller Aged Receivables
Numerator
Gai's Seller Group 61-90 days
H&M 61-90 days
Metz Seller Group 61-90 days
Mother's 91-120 days
SFSB 61-90 days
Stella Seller Group 61-90 days
TBP 61-90 days.
"Aged Receivables Ratio" shall mean, as of the
last day of each Settlement Period, the percentage
equivalent of a fraction, the numerator of which shall be
the sum of (i) the aggregate unpaid balance of Receivables
originated by each Seller or each Seller Group that were
past due by the number of days in the related Aged
Receivables Numerator with respect to such Seller or such
Seller Group and (ii) the aggregate amount of Receivables
of such Seller or Seller Group which were charged off as
uncollectible prior to the day which is, in the case of
all Sellers other than Mother's, 91 days after its
original due date and, in the case of Mother's, 121 days
after its original due date, in each case, during the
Settlement Period, and the denominator of which shall be
the aggregate Principal Amount of Receivables originated
by such Seller or such Seller Group during the prior
Settlement Period that is the related Aged Receivables
Denominator with respect to such Seller or such Seller
Group.
"Aggregate Commitment Amount" shall mean, with
respect to any date of determination, the aggregate amount
of the Commitments of all VFC Certificateholders on such
date.
"Aggregate Dilution Reserve Ratio" shall mean, as
of any Settlement Date and continuing to, but excluding,
the next Settlement Date, an amount equal to (i) the sum
of the products, with respect to each Seller or each
Seller Group, of the Dilution Reserve Ratio for such
Seller or such Seller Group at the last day of the
Settlement Period immediately preceding such earlier
Settlement Date times the aggregate outstanding Principal
Amount of Eligible Receivables of such Seller or such
Seller Group at such last day divided by (ii) the
aggregate outstanding Principal Amount of Eligible
Receivables of all Sellers at such last day.
"Aggregate Loss Reserve Ratio" shall mean, as of
any Settlement Date and continuing to, but excluding, the
next Settlement Date, an amount equal to (i) the sum of
the products, with respect to each Seller or each Seller
Group, of the Loss Reserve Ratio for such Seller or such
Seller Group at the last day of the Settlement Period
immediately preceding such earlier Settlement Date times
the aggregate outstanding Principal Amount of Eligible
Receivables of such Seller or such Seller Group at such
last day divided by (ii) the aggregate outstanding
Principal Amount of Eligible Receivables of all Sellers at
such last day.
"Agreement" shall mean the Pooling Agreement,
dated as of November 16, 1994, among the Company, the
Master Servicer and the Trustee, as amended, supplemented
or otherwise modified from time to time.
"Allocated Receivables Amount" shall mean, on any
date of determination with respect to Series 1997-1, the
lower of (i) the Target Receivables Amount on such day and
(ii) the Aggregate Receivables Amount on such day times
the percentage equivalent of a fraction the numerator of
which is the Adjusted Invested Amount on such day and the
denominator of which is the Aggregate Adjusted Invested
Amounts on such day. Notwithstanding the foregoing, in
the event that with respect to any Settlement Period the
Company has elected to exclude the Receivables owing by
any one Obligor (including Affiliates of such Obligor) for
purposes of calculating any of the Default Ratio,
Delinquency Ratio or Loss-to-Liquidation Ratio with
respect to such Settlement Period, all Receivables owing
by such Obligor (including Affiliates of such Obligor)
shall for the next succeeding Settlement Period be
excluded from the Aggregate Receivables Amount.
"Alternate Fees" shall have the meaning specified
in subsection 2.7(e).
"Amortization Period" shall mean the period
following the Revolving Period and ending on the earlier
to occur of (i) the date when the Invested Amount shall
have been reduced to zero and all accrued interest on and
fees in respect of the VFC Certificates shall have been
paid and all amounts owing to the Enhancement Provider
under the Insurance Agreement have been paid in full and
(ii) the Series Termination Date.
"Applicable Margin" shall mean with respect to any
VFC Certificateholder other than the Issuer a percentage
rate per annum as agreed in writing between such VFC
Certificateholder and the Company, notice of which shall
have been given to the Trustee.
"Available Funds" shall mean, at any time, funds
then available to the Company that are not required,
pursuant to the terms of any of the Pooling and Servicing
Agreements, to be applied to the payment of any amounts
other than amounts specified as being payable solely out
of Available Funds, howsoever such funds may be
denominated in any such Pooling and Servicing Agreement.
"Avoidance Event" shall have the meaning specified
in subsection 3C.7(b)(iv).
"Avoided Payment" shall have the meaning specified
in subsection 3C.7(b)(iv).
"Base Rate" means a fluctuating interest rate
per annum equal to the higher of (i) the rate of
interest published in the Wall Street Journal as the
prime rate, or, in the event that no such rate is
published, the rate of interest announced publicly by
The Chase Manhattan Bank in New York, New York, as its
prime or reference rate, whether or not such rate is the
lowest rate offered by such institution to its corporate
borrowers and (ii) 0.50% per annum above the Federal
Funds Rate.
"Business Day" shall mean any day that is both a
Business Day under the Agreement and, if the term is used
in connection with respect to notices, determinations,
fundings and payments in connection with any Funding
Period during which the Funding Period Rate is the
Adjusted Eurodollar Rate or the Liquidity Rate determined
in whole or in part by reference to the "Eurodollar Rate,"
as defined in the Liquidity Agreement, a LIBO Business
Day.
"Carrying Cost Reserve Ratio" shall mean, as of
any Settlement Date and continuing to, but excluding, the
next Settlement Date, an amount (expressed as a
percentage) equal to (i) the product of (A) the greatest
of (1) 2.00 times Days Sales Outstanding as of such day,
(2) 60 and (3) the weighted average length of all then
outstanding Funding Periods and (B) the Discount Rate as
of such day divided by (ii) 360.
"Certificate Maximum" shall mean, as of any date
of determination, an amount equal to the least of (i) the
Aggregate Commitment Amount as of such date, (ii) the
excess, if any, of $125,000,000 over the aggregate
"Invested Amount" of the "Term Certificates" issued
pursuant to the Series 1994-1 Supplement outstanding on
such day and (iii) $44,000,000.
"Certificate Purchase Agreement" shall mean any
agreement or agreements pursuant to which a VFC
Certificateholder has acquired one or more VFC
Certificates and extended a Commitment to the Company, a
copy of which shall have been delivered to and approved by
the Enhancement Provider (such approval not be
unreasonably withheld).
"Change in Control" shall mean the occurrence of
any of: (i) any Change in Control under the Term Loan
Agreement (as such term is defined therein on the Issuance
Date); (ii) except upon the exercise by the administrative
agent under the Term Loan Agreement of any of its remedies
in accordance with the terms of the SFC Pledge Agreement
(as in effect on the Issuance Date), the Company shall at
any time not be directly wholly-owned by Specialty Foods
Corporation; or (iii) except as permitted pursuant to
Section 9.15 of the Receivables Sale Agreement, any Seller
shall at any time not be wholly-owned, either directly or
indirectly, by Specialty Foods Corporation.
"Commitment" shall mean, as to any VFC
Certificateholder, its obligation to maintain and, subject
to certain conditions, increase, its investment in the
Invested Amount, in an aggregate amount not to exceed at
any one time outstanding the aggregate maximum amount set
forth in a Certificate Purchase Agreement as such VFC
Certificateholder's "Commitment," as such amount may be
reduced from time to time as provided in such Certificate
Purchase Agreement.
"Commitment Certification" shall have the meaning
specified in Section 2.6.
"Control Party" shall mean, with respect to any
event, (i) the Enhancement Provider, or (ii) if a Surety
Default has occurred and is continuing, then "Control
Party" shall mean the holders of VFC Certificates
representing Fractional Undivided Interests aggregating
more than 50% of the Invested Amount adversely affected by
such event (or the Trustee acting on behalf of such
holders).
"CP Disruption" means the inability of the Issuer,
at any time, whether as a result of a prohibition or any
other event or circumstance whatsoever, to raise funds
through the issuance of its commercial paper notes
(whether or not constituting Issuer CP, as defined below)
in the United States commercial paper market.
"Cure Period Trigger Date" shall mean, with
respect to any of the representations, warranties and
covenants of the Company, any Servicing Party or any
Seller, as the case may be, that are contained in the
subsection of the applicable Transaction Document which is
cross referenced in Schedule 2 under the heading of
"Applicable Section", the breach or violation of which
would result (i) in the case of a breach or violation by
the Company, in a Potential Early Amortization or a
purchase obligation of the Company pursuant to Section 2.5
or 2.6 of the Agreement, (ii) in the case of any Servicing
Party, a Potential Servicer Default or (iii) in the case
of any Seller, a Potential Purchase Termination Event (as
defined in the Receivables Sale Agreement), the date
occurring the number of days specified for the applicable
subsection in Schedule 2 under the heading "Cure Period
Trigger Date" following the occurrence of such breach or
violation (or if the number of days so specified is zero,
the date of such breach or violation). The foregoing
provisions shall apply to such breaches and violations
notwithstanding any other grace period or cure provisions
stated to apply thereto under the applicable Transaction
Documents. The Company shall, and the Control Party may,
give prompt written notice of each occurrence of a Cure
Period Trigger Date to the Trustee (and the Enhancement
Provider if given by the Control Party).
"Daily Interest Deposit" shall mean, for any
Business Day, an amount equal to the sum of (i) the
aggregate accrued but unpaid Funding Period Interest on
the VFC Certificates for all outstanding Funding Periods
to the extent not previously deposited to the Series
1997-1 Non-Principal Collection Sub-subaccount; provided,
however, that if such Business Day is the first, second or
third Business Day preceding the Funding Period Settlement
Date for any Funding Period the accrued Funding Period
Interest for such Funding Period shall be deemed to be the
full amount of Funding Period Interest scheduled (or in
the case of the Unallocated Balance, expected in good
faith by the Master Servicer) to be due and payable on
such Funding Period Settlement Date, plus (ii) the
aggregate amount of all previously accrued and unpaid
Daily Interest Deposits, plus (iii) the aggregate amount
of all accrued and unpaid Additional Interest accrued
since the previous Business Day.
"Daily Report" shall mean a report prepared by the
Master Servicer on each Business Day for the period
specified therein, in substantially the form of Exhibit D.
"Days Sales Outstanding" shall mean, as of any
Settlement Date and continuing to, but excluding, the next
Settlement Date, the number of days equal to the product
of (i) 91 and (ii) the amount obtained by dividing (A) the
difference between (1) the aggregate Principal Amount of
Receivables and (2) the aggregate bad debt reserve of the
Sellers, in each case as at the last day of the Settlement
Period immediately preceding such earlier Settlement Date,
by (B) aggregate net sales of the Sellers for the three
Settlement Periods immediately preceding such earlier
Settlement Date.
"Decrease" shall have the meaning specified in
subsection 2.5(a).
"Dealer Fees" shall mean commercial paper dealer
fees and commissions incurred by the Issuer in connection
with the issuance of Issuer CP.
"Default Ratio" shall mean, as of the last
Business Day of any Settlement Period and continuing to,
but excluding, the last day of the next Settlement Period,
a ratio (expressed as a percentage) equal to (i) the
aggregate outstanding Principal Amount of all Defaulted
Receivables on the last day of such earlier Settlement
Period over (ii) the aggregate outstanding Principal
Amount of all Receivables on such last day; provided,
however, to the extent that 2% or more of the Default
Ratio at the end of any Settlement Period is attributable
to Receivables owing by any Obligor (including Affiliates
of such Obligor), then, upon the election of the Company
(such election to be made separately in respect of each
Settlement Period), the Default Ratio shall be
recalculated to exclude all Receivables of any one such
Obligor (including Affiliates of such Obligor) that would
otherwise have been included in such calculation.
"Delinquency Ratio" shall mean, as of the last
Business Day of any Settlement Period and continuing to,
but excluding, the last day of the next Settlement Period,
a ratio (expressed as a percentage) equal to (i) the
aggregate outstanding Principal Amount of all Delinquent
Receivables on the last day of such earlier Settlement
Period over (ii) the aggregate outstanding Principal
Amount of all Receivables on such last day; provided,
however, to the extent that 2% or more of the Delinquency
Ratio at the end of any Settlement Period is attributable
to Receivables owing by any Obligor (including Affiliates
of such Obligor), then, upon the election of the Company
(such election to be made separately in respect of each
Settlement Period), the Delinquency Ratio shall be
recalculated to exclude all Receivables of any one such
Obligor (including Affiliates of such Obligor) that would
otherwise have been included in such calculation.
"Dilution Horizon Factor" with respect to each
Seller or each Seller Group, as the case may be, shall
mean, the factor set forth opposite such Seller or such
Seller Group (and, with respect to any Seller or Seller
Group added after the Issuance Date, the "Dilution Horizon
Factor" set forth on the Additional Seller Supplement for
such Seller or such Seller Group):
Seller Dilution Horizon Factor
Gai's Seller Group .1
H&M one
Metz Seller Group .1
Mother's 1.5
SFSB .1
Stella Seller Group 1.5
TBP .5;
provided that (i) in the case of H&M, the Dilution Horizon
Factor in respect of all Receivables for which Foodmaker,
Inc. is the Obligor shall be 0.25, (ii) in the case of
Gai's Seller Group, Metz Seller Group, SFSB and TBP, the
Dilution Horizon Factor in respect of Dilution Adjustments
for Receivables originated by such Seller or such Seller
Group, as the case may be, which are made for reasons
other than sales shall be one and (iii) in the case of
Mother's, the Dilution Horizon Factor in respect of
Dilution Adjustments for Receivables originated by
Mother's with payment terms of 2% 10 or Net 30 days shall
be one.
"Dilution Ratio" with respect to each Seller or
each Seller Group, shall mean, as of the last day of each
Settlement Period, an amount (expressed as a percentage)
equal to the aggregate amount of Dilution Adjustments in
respect of such Seller or such Seller Group made during
such Settlement Period divided by the aggregate Principal
Amount of Receivables which were originated by such Seller
or such Seller Group during such Settlement Period.
"Dilution Reserve Ratio" with respect to each
Seller or each Seller Group, shall mean, as of any
Settlement Date and continuing to, but excluding, the next
Settlement Date, an amount (expressed as a percentage)
which is calculated as follows:
DRR = [(c * d) + [(e-d) * (e/d)]] * f
Where:
DRR = Dilution Reserve Ratio;
c = the Ratings Multiple;
d = the average of the Dilution Ratio
with respect to such Seller or such Seller
Group during the period of twelve consecutive
Settlement Periods ending prior to such
Settlement Date;
e = the highest Dilution Ratio with
respect to such Seller or such Seller Group
for any Settlement Period during the period
of twelve consecutive Settlement Periods
ending prior to such Settlement Date; and
f = the quotient of (i) the product of
(A) the aggregate Principal Amount of
Receivables which were originated by such
Seller or such Seller Group during the
preceding Settlement Period and (B) the
Dilution Horizon Factor with respect to such
Seller or such Seller Group and (ii) the
difference between (A) the aggregate
outstanding Principal Amount of all
Receivables and (B) the aggregate outstanding
Principal Amount of all Delinquent
Receivables and Defaulted Receivables, in
each case, originated by such Seller or such
Seller Group as of the last day of the
Settlement Period preceding such earlier
Settlement Date;
provided that, in the case of any Seller or Seller Group
for which two separate Dilution Horizon Factors are
designated in respect of such Seller or Seller Group, the
Dilution Reserve Ratio shall be calculated as set forth
above, except that two separate ratios shall be calculated
(each based upon the applicable Dilution Horizon Factor,
and the Receivables related to such Dilution Horizon
Factor, for such Seller or Seller Group) and the actual
Dilution Reserve Ratio for such Seller or Seller Group
will be equal to the sum of the two ratios so calculated.
"Discount Rate" shall mean, as of any date of
determination, the sum of (i) the product of (A) the
weighted average of the Funding Period Rates in effect
with respect to the outstanding VFC Certificates as of the
end of the Settlement Period immediately preceding the
most recent Settlement Date and (B) 1.25 and (ii) an
amount equal to (A) the sum of (1) the aggregate amount of
Issuer Usage Fees, Liquidity Usage Fees, Liquidity Non-
Usage Fees, Issuer Administrative Fees, Alternate Fees and
Surety Bond Fees accrued with respect to the outstanding
VFC Certificates during the Settlement Period immediately
preceding the most recent Settlement Date and (2) the
Monthly Allocable Trustee's Fees for the Settlement Period
immediately preceding the most recent Settlement Date,
divided by (B) the average daily Adjusted Invested Amount
during such Settlement Period.
"Distribution Date" shall mean each Settlement
Date and each Funding Period Settlement Date.
"Early Amortization Event" shall have the meaning
specified in Section 5.1 of this Supplement and Section
7.1 of the Agreement.
"Enhancement Provider" shall mean, with respect to
Series 1997-1, Capital Markets Assurance Corporation, a
New York stock insurance company, or any successor
thereto.
"ERISA Entity" shall mean either an "employee
benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended,
(whether or not subject to the Employment Retirement
Income Security Act of 1974, as amended), a "plan" as
defined in Section 4975 of the Internal Revenue Code of
1986, as amended, an entity deemed to hold plan assets of
any such employee benefit plan or plans, or an entity
otherwise using the assets of any such employee benefit
plan or plans to acquire VFC Certificates.
"Eurodollar Period" shall mean with respect to any
Eurodollar Tranche:
(i) initially, the period commencing on the
Business Day that any portion of the Unallocated
Balance is allocated to a Funding Period pursuant
to subsection 3C.4(c), thereby giving rise to such
Eurodollar Tranche and ending one, two or three
months thereafter, as selected by the Master
Servicer pursuant to subsection 3C.4(c); and
(ii) thereafter, each period commencing on
the last day of the next preceding Eurodollar
Period applicable to such Eurodollar Tranche and
ending one, two or three months thereafter;
provided, however, that all of the foregoing provisions
relating to Eurodollar Periods are subject to the
following:
(A) if any Eurodollar Period would otherwise
end on a day that is not a Business Day, such
Eurodollar Period shall be extended to the next
succeeding Business Day unless the result of such
extension would be to carry such Eurodollar Period
into another calendar month in which event such
Eurodollar Period shall end on the immediately
preceding Business Day; and
(B) any Eurodollar Period that begins on the
last Business Day of a calendar month (or a day
for which there is no numerically corresponding
day in the calendar month at the end of such
Eurodollar Period) shall end on the last Business
Day of a calendar month.
"Eurodollar Tranche" shall mean a portion of the
Invested Amount allocable to VFC Certificates held by a
Person other than the Issuer for which Funding Period
Interest is calculated by reference to an Adjusted
Eurodollar Rate for a particular Eurodollar Period.
"Eurodollar Reserve Requirements" shall mean for
any Eurodollar Period, the daily average (rounded upward,
if necessary, to the nearest whole multiple of 1/16 of 1%
per annum) of the aggregate (without duplication) of the
rates (expressed as a decimal fraction) of reserve
requirements in effect on each day during such Eurodollar
Period (including, without limitation, basic,
supplemental, marginal and emergency reserves under any
regulations of the Board of Governors of the Federal
Reserve System or other Governmental Authority having
jurisdiction with respect thereto) dealing with reserve
requirements prescribed for eurocurrency funding
(currently referred to as "Eurocurrency liabilities" in
Regulation D of such Board) maintained by a member bank of
such System.
"Face Amount" shall mean in relation to any Issuer
CP (i) if issued on a discount basis, the face amount
stated therein and (ii) if issued on an interest-bearing
basis, the principal amount stated therein plus the amount
of all interest stated to accrue thereon to its stated
maturity date.
"Federal Funds Rate" means, for any day, a
fluctuating interest rate per annum equal to the
weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of
New York, or, if such rate is not so published for any
day which is a Business Day, the average of the
quotations for such day on such transactions received by
the Master Servicer from three Federal funds brokers of
recognized standing selected by it.
"Final Order" shall have the meaning specified in
subsection 3C.7(b)(iv).
"Funding Period" shall mean (i) with reference to
any portion of the Invested Amount allocable to VFC
Certificates held by the Issuer, (A) in the case of any
Funding Period with respect to which the Issuer has funded
its investment in the VFC Certificates for such Funding
Period by issuing Issuer CP, (1) initially, a period of 1
to 90 days, commencing on a Business Day and otherwise
determined in accordance with the requirements of
subsection 3C.4(b), commencing on the Issuance Date, and
(2) thereafter, a period of 1 to 90 days, determined in
accordance with the requirements of subsection 3C.4(b),
commencing on the last day of the immediately preceding
Funding Period for such portion of the Invested Amount,
and (B) in the case of any Funding Period with respect to
which the Issuer has funded its investment in the VFC
Certificates for such Funding Period with proceeds of
loans under the Liquidity Agreement, the applicable
Liquidity Interest Period, determined in accordance with
the requirements of subsection 3C.4(b); provided, however,
that the Funding Period applicable to the amount of any
Increase allocated to the Issuer subsequent to the
Issuance Date shall be a period of 1 to 90 days or a
Liquidity Interest Period, as applicable, determined in
accordance with the requirements of subsection 3C.4(b),
commencing on the applicable Increase Date and (ii) with
reference to any portion of the Invested Amount allocable
to VFC Certificates held by any Person other than the
Issuer, a Eurodollar Period (to the extent such portion of
the Invested Amount is allocated to a Eurodollar Tranche),
an Accrual Period (to the extent such portion of the
Invested Amount constitutes a portion of the Unallocated
Balance) and such other period as may be agreed between
the Company, the Master Servicer and such other Person (to
the extent such portion of the Invested Amount bears
interest at a rate agreed among such parties) with notice
thereof provided to the Trustee.
"Funding Period Determination Date" shall mean
with respect to any Funding Period Settlement Date, the
Business Day immediately preceding such Funding Period
Settlement Date.
"Funding Period Interest" shall mean (i) with
respect to that portion of the Invested Amount of the VFC
Certificates allocated to a Funding Period as provided in
Section 3C.4, the aggregate interest accrued at the
Funding Period Rate for such Funding Period on such
allocated portion of the Invested Amount of the VFC
Certificates, calculated on the basis specified in
subsection 2.7(g) and (ii) as of any Funding Period
Settlement Date with respect to the Unallocated Balance
outstanding from time to time, the aggregate interest
accrued thereon at the Base Rate in effect from time to
time from and including the preceding Funding Period
Settlement Date with respect to the Unallocated Balance to
but excluding the current Funding Period Settlement Date
with respect to the Unallocated Balance, calculated on the
basis specified in subsection 2.7(g).
"Funding Period Rate" shall mean, for any Funding
Period and that portion of the Invested Amount allocated
to that Funding Period:
(i) to the extent that the VFC Certificates
evidencing such Invested Amount are held by the
Issuer, (A) the rate equivalent to the rate (or if
more than one rate, the weighted average of the
rates), adjusted to include all applicable Dealer
Fees, at which commercial paper notes of the
Issuer having a term equal to such Funding Period
and issued to fund the Issuer's investment in such
VFC Certificates, were sold by any placement agent
or commercial paper dealer selected by the Issuer,
as agreed between each such agent or dealer and
the Issuer and notified by the Issuer to the
Master Servicer; provided, however, if the rate
(or rates) as agreed between any such agent or
dealer and the Issuer with regard to any Funding
Period is a discount rate (or rates), the "Funding
Period Rate" for such Funding Period shall be the
rate (or if more than one rate, the weighted
average of the rates) resulting from converting
such discount rate (or rates) to an interest-
bearing equivalent rate (or rates) per annum; or
(B) to the extent that the Issuer does not fund
such portion of its investment in such VFC
Certificates for such Funding Period by issuing
Issuer CP, a rate equal to (1) the applicable
Liquidity Rate or (2) such other rate as the
Issuer and the Company shall agree to in writing;
or
(ii) to the extent that the VFC Certificates
evidencing such Invested Amount are held by a
Person other than the Issuer, either (A) (1) the
Base Rate in effect from time to time during such
Funding Period or (2) the sum of (x) the Adjusted
Eurodollar Rate for such Funding Period and (y)
the Applicable Margin, as the Company shall select
in accordance with the provisions of
subsection 3C.4(a) or (B) such other rate as such
Person and the Company shall agree to in writing.
"Funding Period Settlement Date" shall mean (i)
with respect to any Funding Period, the last day of such
Funding Period and (ii) with respect to the Unallocated
Balance outstanding from time to time during any Accrual
Period, the Settlement Date immediately following the end
of such Accrual Period.
"Funding Period Settlement Statement" shall have
the meaning specified in Section 4C.2.
"Gai's Seller Group" shall mean the collective
reference to each of the following Sellers: Gai's and
Langendorf.
"Increase" shall have the meaning specified in
subsection 2.4(a).
"Increase Amount" shall have the meaning specified
in subsection 2.4(a).
"Increase Date" shall have the meaning specified
in subsection 2.4(a).
"Initial Invested Amount" shall mean
$3,500,380.32.
"Initial Subordinated Certificate Amount" shall
mean the Subordinated Certificate Amount on the Issuance
Date.
"Insurance Agreement" shall mean the Insurance and
Reimbursement Agreement dated as of the date hereof among
the Enhancement Provider, the Company, the Master Servicer
and the Trustee, as the same may be amended, supplemented
or otherwise modified from time to time.
"Invested Amount" shall mean, with respect to any
date of determination, an amount equal to the Initial
Invested Amount, plus the amount of all Increases effected
pursuant to Section 2.4 made on or prior to such day,
minus the amount of all distributions to the VFC
Certificateholders in reduction of the Invested Amount
pursuant to Section 2.5 or Section 3C.6 on or prior to
such day.
"Invested Percentage" shall mean, with respect to
any Business Day (i) during the Revolving Period, the
percentage equivalent of a fraction, the numerator of
which is the Allocated Receivables Amount as of the end of
the preceding Business Day and the denominator of which is
the Aggregate Receivables Amount as of the end of the
preceding Business Day and (ii) during the Amortization
Period, the percentage equivalent of a fraction, the
numerator of which is the Allocated Receivables Amount as
of the end of the last Business Day of the Revolving
Period and the denominator of which is the greater of (A)
the Aggregate Receivables Amount as of the end of the
preceding Business Day and (B) the sum of the numerators
used to calculate the Invested Percentage for all Series
of Investor Certificates outstanding on the Business Day
for which such percentage is determined.
"Issuance Date" shall mean January 31, 1997.
"Issuer" shall mean Triple-A One Funding
Corporation, a Delaware corporation.
"Issuer Administrative Fees" shall have the
meaning specified in subsection 2.7(f).
"Issuer Administrative Fee Rate" shall mean 0.05%
per annum.
"Issuer CP" shall mean commercial paper notes of
the Issuer issued to fund the Issuer's investment in the
VFC Certificates.
"Issuer Usage Fees" shall have the meaning
specified in subsection 2.7(b).
"Issuer Usage Fee Rate" shall mean 0.16% per
annum.
"LIBO Business Day" shall mean a day, other than a
Saturday or Sunday, on which banks are not required or
authorized to close in New York or London and on which
dealings are carried on in the London interbank market.
"Liquidity Agent" shall mean at any time, the
financial institution then serving as the "Liquidity
Agent" under and as defined in the Liquidity Agreement.
"Liquidity Agreement" shall mean that certain
Liquidity Agreement dated as of January 31, 1997, among
the Issuer, the financial institutions party thereto from
time to time as "Liquidity Banks", Kredietbank N.V., as
agent for the Liquidity Banks, as amended, restated or
otherwise modified from time to time.
"Liquidity Bank" shall have the meaning specified
in the Liquidity Agreement.
"Liquidity Commitment" shall have the meaning with
reference to any Liquidity Bank specified in the Liquidity
Agreement; provided, however, that the aggregate Liquidity
Commitments at any time shall not exceed the Issuer's
Commitment at such time.
"Liquidity Interest Period" shall have the meaning
specified in the Liquidity Agreement.
"Liquidity Nonrenewal Date" shall mean the date on
which the aggregate Liquidity Commitments under the
Liquidity Agreement are less than the Issuer's Commitment.
"Liquidity Non-Usage Fee Rate" shall have the
meaning specified in the Liquidity Agreement.
"Liquidity Non-Usage Fees" shall have the meaning
specified in subsection 2.7(d).
"Liquidity Rate" shall mean with respect to any
loan (or loans) made to the Issuer under the Liquidity
Agreement to fund its investment in any portion of the
Invested Amount of the VFC Certificates held by it for any
Funding Period, the rate equivalent to the rate per annum
(or if more than one rate, the weighted average of the
rates per annum) at which interest accrues under the
Liquidity Agreement on the principal balance of such
loans.
"Liquidity Rate Disruption Event" shall mean
either (i) receipt by the Issuer of notice from the
Liquidity Agent that the introduction of, or any change
in, or in the interpretation of, any law or regulation
makes it unlawful, or any central bank or other
governmental authority asserts that it is unlawful, for
any Liquidity Bank or its applicable lending office to
perform its obligations under the Liquidity Agreement to
make "Eurodollar Rate Advances" or to fund or maintain
"Eurodollar Rate Advances" under and as defined in the
Liquidity Agreement or (ii) a determination by the Issuer
that as a result of any Decrease or otherwise, the
aggregate Invested Amount allocated to VFC Certificates
held by the Issuer and to a Funding Period with respect to
which the Funding Period Rate is a Liquidity Rate
determined in whole or in part by reference to the
"Eurodollar Rate," as defined in the Liquidity Agreement,
less than $1,000,000.
"Liquidity Usage Fees" shall have the meaning
specified in subsection 2.7(e).
"Liquidity Usage Fee Rate" shall have the meaning
specified in the Liquidity Agreement.
"Loss Horizon Period" with respect to each Seller
or each Seller Group, as the case may be, shall mean the
number of Settlement Periods set forth opposite such
Seller or such Seller Group (and, with respect to any
Seller or Seller Group added after the Issuance Date, the
"Loss Horizon Period" set forth on the Additional Seller
Supplement for such Seller or such Seller Group):
Seller Loss Horizon Period
Gai's Seller Group 3 Settlement Periods
H&M 3 Settlement Periods
Metz Seller Group 3 Settlement Periods
Mother's 4 Settlement Periods
SFSB 3 Settlement Periods
Stella Seller Group 3 Settlement Periods
TBP 3 Settlement Periods.
"Loss Reserve Ratio" with respect to each Seller
or each Seller Group, as the case may be, shall mean, as
of any Settlement Date and continuing to, but excluding,
the next Settlement Date, an amount (expressed as a
percentage) which is calculated as follows:
LRR = [(a * b)/c] * d
where:
LRR = Loss Reserve Ratio;
a = the sum of the aggregate Principal
Amount of Receivables originated by such
Seller or such Seller Group during the most
recent Loss Horizon Period with respect to
such Seller or such Seller Group preceding
such date;
b = the greater of (i) the highest
three-month rolling average of the Aged
Receivables Ratio with respect to such Seller
or such Seller Group that occurred during the
period of twelve consecutive Settlement
Periods preceding such earlier Settlement
Date and (ii) the Aged Receivables Ratio with
respect to such Seller or such Seller Group
as of the last day of the Settlement Period
preceding such earlier Settlement Date;
c = the difference between (i) the
aggregate outstanding Principal Amount of all
Receivables and (ii) the aggregate
outstanding Principal Amount of all
Delinquent Receivables and Defaulted
Receivables, in each case, originated by such
Seller or such Seller Group as of the last
day of the Settlement Period preceding such
earlier Settlement Date; and
d = the Ratings Multiple;
provided that if the sum of the Loss Reserve Ratio with
respect to a Seller or Seller Group plus the Dilution
Reserve Ratio with respect to such Seller or Seller Group
shall exceed 100%, the Loss Reserve Ratio with respect to
such Seller or Seller Group shall be the percentage which
is equal to 100% minus the Dilution Reserve Ratio with
respect to such Seller or Seller Group.
"Loss-to-Liquidation Ratio" shall mean, as of the
last Business Day of any Settlement Period and continuing
to, but excluding, the last day of the next Settlement
Period, a ratio (expressed as a percentage) equal to (i)
the difference, if any, between (A) the sum of (1) the
aggregate reduction in the outstanding Principal Amount of
all Receivables as a result of Charge-Offs and (2) the
aggregate Principal Amount of Receivables (other than
Charge-Offs) that became more than 90 days past due, in
each case, during the immediately preceding twelve
Settlement Periods and (B) the aggregate amount of
Recoveries during such twelve Settlement Periods over (ii)
the aggregate amount of Collections during such twelve
Settlement Periods; provided, however, to the extent that
2% or more of the Loss-to-Liquidation Ratio at the end of
any Settlement Period is attributable to Receivables owing
by any Obligor (including Affiliates of such Obligor),
then, upon the election of the Company (which election
shall be made separately in respect of each Settlement
Period), the Loss-to-Liquidation Ratio shall be
recalculated for such Settlement Period to exclude all
Receivables of any one such Obligor (including any
Affiliates of such Obligor) that would otherwise have been
included in such calculation.
"Metz Seller Group" shall mean the collective
reference to each of the following Sellers: Metz and Metz
Delaware.
"Monthly Allocable Trustee's Fees" shall mean in
respect of any Settlement Period, the product of (i) one-
twelfth of the annual fees to be paid to the Trustee by
the Master Servicer pursuant to the first sentence of
Section 8.5 of the Agreement during the fiscal year in
which such Settlement Period falls and (ii) the daily
average Invested Percentage (expressed as a decimal)
during such Settlement Period.
"Net Worth" shall mean, at a particular date with
respect to the Company, all amounts which would, in
conformity with GAAP, be included under shareholder's
equity on a balance sheet of the Company.
"Participant" shall have the meaning specified in
subsection 8.7(b)
"Past Due Interest" shall mean with reference to
any Funding Period Settlement Date, any portion of the
Funding Period Interest originally due on a previous
Funding Period Settlement Date that remains outstanding on
the current Funding Period Settlement Date.
"Principal/Interest Surety Bond" shall mean the
surety bond issued by the Enhancement Provider in favor of
the Trustee pursuant to the Insurance Agreement.
"Program Costs" shall mean, for any Business Day,
the sum of (i) all expenses, indemnities and other amounts
then due and payable to the VFC Certificateholders under
the Agreement, this Supplement or any Certificate Purchase
Agreement (excluding, however, the principal of and
interest on the VFC Certificates, Issuer Usage Fees,
Liquidity Usage Fees, Liquidity Non-Usage Fees, Issuer
Administrative Fees, Alternate Fees and Surety Bond Fees)
and (ii) the product of (A) all unpaid fees and expenses
then due and payable to the Trustee or counsel to, and
independent auditors of, the Company (other than any
Monthly Allocable Trustee's Fees and fees and expenses
payable on or in connection with the closing of the
issuance of the VFC Certificates) and any corporate income
or franchise taxes then due and payable by the Company,
and (B) the Invested Percentage (expressed as a decimal)
on such Business Day.
"Rating Agency" shall mean the collective
reference to S&P and Moody's.
"Ratings Multiple" shall mean 2.00.
"Record Date" shall mean, with respect to any
Settlement Date, the last Business Day of the immediately
preceding Settlement Period.
"Required Reserves" shall mean, as of any date of
determination, an amount equal to the sum of (i) the
product of (A) the Adjusted Invested Amount on such day
and (B) the sum of (1) the Aggregate Loss Reserve Ratio,
(2) the Aggregate Dilution Reserve Ratio and (3) the
Carrying Cost Reserve Ratio, (ii) the product of (A) the
face amount of the Receivables in the Trust on such day,
(B) the Adjusted Invested Amount divided by the Aggregate
Adjusted Invested Amount and (C) the Servicing Reserve
Ratio, (iii) the amount of any Accrued Expense Amount in
respect of which sufficient Aggregate Daily Collections
have not been transferred to the Series 1997-1 Non-
Principal Collection Sub-account and (iv) the aggregate
amount of accrued but unpaid Monthly Allocable Trustee's
Fees.
"Required Reserves Ratio" shall mean, as of any
date of determination, the quotient of (i) Required
Reserves on such day and (ii) the Adjusted Invested Amount
on such day.
"Required Subordinated Percentage" shall mean, as
of any date of determination, the greater of (i) 15% and
(ii) the Required Reserves Ratio as of such day; provided,
however, that, during any period during which the
Revolving Credit Lenders (or the administrative agent
under the Revolving Credit Agreement on their behalf) have
given notice to the Revolving Credit Borrowers that the
Revolving Credit Lenders are refusing to lend to such
Borrowers under the Revolving Credit Agreement, then the
Enhancement Provider may, in its sole discretion, require
the Required Subordinated Percentage to equal the sum of
(A) the Required Subordinated Percentage computed as
described above and (B) 8%.
"Reuters Screen LIBO Page" shall mean the display
designated as page "LIBO" on the Reuters Monitor Money
Rates Service (or such other page as may replace the LIBO
page on that service for the purpose of displaying London
interbank offered rates of major banks).
"Revolving Period" shall mean the period
commencing on the Issuance Date and terminating on the
earliest to occur of (i) the close of business on the date
on which an Early Amortization Event occurs, (ii) the date
on which the Commitments of all VFC Certificateholders
shall have terminated, (iii) the Scheduled Termination
Date and (iv) if the Issuer is the sole VFC
Certificateholder, the Liquidity Nonrenewal Date.
"Responsible Officer" shall mean, when used with
respect to the Trustee, any officer assigned to the Global
Trust Services Division (or any successor thereto),
including any Vice President, Assistant Vice President,
Trust Officer, any Assistant Secretary, any trust officer
or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above
designated officers and having direct responsibility for
the administration of this Agreement.
"Scheduled Termination Date" shall mean the
earlier of (a) November 20, 1999 and (b) the date on which
the commitments of the Revolving Credit Lenders under the
Revolving Credit Agreement shall have been terminated,
unless, at or prior to such date, SFC replaces the
Revolving Credit Agreement with a replacement agreement
providing SFC with working capital which in the reasonable
opinion of the Control Party would be sufficient to
operate SFC's businesses at such date.
"Seller Group" shall mean any of Gai's Seller
Group Metz Seller Group or Stella Seller Group, as the
context requires, provided that the Company may, with the
consent of the Control Party, from time to time add one or
more new Seller Groups, or change the Sellers in any
existing Seller Group, so long as, concurrently with such
addition or change, the Company provides new or changed
definitions for the Aged Receivables Denominator, the Aged
Receivables Numerator, the Dilution Horizon Factor and the
Loss Horizon Period with respect to such added or changed
Seller Groups (and such definitions will be deemed to be
automatically amended to the extent of such additions or
changes).
"Series Accounts" shall have the meaning specified
in subsection 3C.2(a).
"Series 1994-1 Supplement" shall mean the Series
1994-1 Supplement, dated as of November 16, 1994, among
the Company, the Master Servicer and the Trustee, as
amended, supplemented or otherwise modified from time to
time.
"Series 1997-1" shall mean the Series 1997-1, the
Principal Terms of which are set forth in this Supplement.
"Series 1997-1 Accrued Interest Sub-subaccount"
shall have the meaning specified in subsection 3C.2(a).
"Series 1997-1 Amortization Principal Payment"
shall have the meaning specified in Section 3C.5.
"Series 1997-1 Certificateholders' Interest" shall
have the meaning specified in subsection 2.2(a).
"Series 1997-1 Collection Subaccount" shall have
the meaning specified in subsection 3C.2(a).
"Series 1997-1 Monthly Servicing Fee" shall have
the meaning specified in Section 6.1.
"Series 1997-1 Non-Principal Collection Sub-
subaccount" shall have the meaning specified in
subsection 3C.2(a).
"Series 1997-1 Principal Collection Sub-
subaccount" shall have the meaning specified in
subsection 3C.2(a).
"Series Termination Date" shall mean one Business
Day after the second Settlement Date following the Surety
Draw Date, provided that, so long as no Surety Default
shall have occurred and is outstanding on such date, the
Series Termination Date shall be any Business Day
occurring after such Settlement Date and prior to the
Trust Termination Date, as selected by the Enhancement
Provider upon ten days' prior written notice to the
Trustee.
"Servicing Reserve Ratio" shall mean, as of any
Settlement Date and continuing to, but excluding, the next
Settlement Date, an amount (expressed as a percentage)
equal to (a) the product of (i) 1.00% and (ii) the greater
of (A) 2.00 times Days Sales Outstanding as of such day
and (B) 60 divided by (b) 360.
"Stella Seller Group" shall mean the collective
reference to each of the following Sellers: Stella and
Stella East.
"Subordinated Certificate" shall mean the
Subordinated Company Certificate, Series 1997-1, executed
by the Company and authenticated by the Trustee,
substantially in the form of Exhibit B.
"Subordinated Certificate Amount" shall mean, for
any date of determination, an amount equal to the
Allocated Receivables Amount on such date minus the
Adjusted Invested Amount on such date.
"Subordinated Certificate Increase Amount" shall
have the meaning specified in subsection 2.4(a).
"Subordinated Certificate Reduction Amount" shall
have the meaning specified in subsection 2.5(d).
"Subordinated Interest" shall have the meaning
specified in subsection 2.2(b).
"Surety Bond Fees" shall have the meaning
specified in the Insurance Agreement.
"Surety Default" shall mean any of the following
events (notice of each of which (other than the event in
clause (i) below) shall be promptly given by the
Enhancement Provider to the Trustee, the Master Servicer
and the Company):
(i) the Enhancement Provider fails to pay
when, as and in the amounts required, any amount
payable under the Principal/Interest Surety Bond
and such failure continues unremedied for two
Business Days;
(ii) default is made by the Enhancement
Provider in the payment when due of any amount due
under any other surety bond or financial guarantee
insurance policy issued by the Enhancement
Provider in support of any obligation rated by
S&P, Moody's or any other nationally or
internationally recognized rating agency and such
default shall continue unremedied for ten calendar
days; provided that, for the purposes of this
clause (ii), default shall not include any failure
to make payment under a surety bond or other
financial guarantee insurance policy on the basis
that all conditions to and defenses against
payment have not been duly satisfied or waived and
with respect to which the obligation to make
payment is being contested in good faith by
appropriate proceedings which shall not be limited
to legal proceedings;
(iii) (A) the Superintendent of Insurance of
the State of New York (or any Person succeeding to
the duties of such Superintendent) shall apply for
an order (1) pursuant to Section 7402 of the New
York Insurance Law (or any successor provisions
thereto), directing him to rehabilitate the
Enhancement Provider, (2) pursuant to Section 7404
of the New York Insurance Law (or any successor
provision thereto), directing him to liquidate the
business of the Enhancement Provider or (3)
pursuant to Section 7416 of the New York Insurance
Law (or any successor provision thereto),
dissolving the corporate existence of the
Enhancement Provider and such application shall
not be dismissed or withdrawn during a period of
60 consecutive days or a court of competent
jurisdiction enters an order granting the relief
sought; (B) the above-referenced Superintendent of
Insurance (or any successor) shall determine that
the Enhancement Provider is insolvent within the
meaning of Section 1309 of the New York Insurance
Law; (C) the Enhancement Provider shall commence a
voluntary case or other proceeding seeking
rehabilitation, liquidation, reorganization or
other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the
appointment or a trustee, receiver, liquidator,
custodian or other similar official of it or any
substantial part of its property, or shall consent
to any such relief or to the appointment of or
taking possession by any such official in an
involuntary case or other proceeding commenced
against it, or shall make a general assignment for
the benefit of creditors; or (D) an involuntary
case or other proceeding shall be commenced
against the Enhancement Provider seeking
rehabilitation, liquidation, reorganization or
other relief with respect to it or its debts under
a bankruptcy, insolvency or other similar law now
or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial
part of its property, such case or proceeding is
not dismissed or otherwise terminated within a
period of 60 consecutive days or a court of
competent jurisdiction enters an order granting
the relief sought in such case or proceeding; or
(iv) a court of competent jurisdiction shall
have determined in a final order that the
Principal/Interest Surety Bond is no longer in
full force and effect.
"Surety Draw Date" shall mean, the date which is
180 days after the expected end of the Amortization
Period, but in any event no later than the date which is
270 days after the commencement of the Amortization
Period. The "expected end of the Amortization Period"
shall be the date, following the commencement of the
Amortization Period, which is 1.5 times Days Sales
Outstanding (as of such commencement date).
"Surety Purchase Demand" shall have the meaning
specified in subsection 3C.7(b)(iii).
"Target Receivables Amount" shall mean, on any
date of determination, the product of (i) a fraction
(expressed as a decimal) the numerator of which is one and
the denominator of which is one minus the Required
Subordinated Percentage and (ii) the Adjusted Invested
Amount on such day.
"Transferee" shall have the meaning specified in
subsection 8.7(d).
"Trust Accounts" shall have the meaning specified
in subsection 3C.2(a).
"Unallocated Balance" shall have the meaning
specified in subsection 3C.4(c).
"VFC Certificate" shall mean a VFC Certificate,
Series 1997-1, executed by the Company and authenticated
by or on behalf of the Trustee, substantially in the form
of Exhibit A.
"VFC Certificateholder" shall mean each holder of
a VFC Certificate.
"VFC Certificateholder Percentage" shall mean, as
to any VFC Certificateholder and as of any date, the
percentage equivalent of a fraction, the numerator of
which is the aggregate Invested Amount allocated to all
VFC Certificates held by such VFC Certificateholder as of
such date and the denominator of which is the aggregate
Invested Amount as of such date.
"Waiver Percentage" shall mean 50%.
a) In the event that any term or provision
contained herein shall conflict with or be inconsistent with
any term or provision contained in the Agreement, the terms
and provisions of this Supplement shall govern. All
capitalized terms not otherwise defined herein are defined
in the Agreement. All Article, Section or
subsection references herein shall mean Article, Section or
subsections of the Supplement, except as otherwise provided
herein. Unless otherwise stated herein, as the context
otherwise requires or if such term is otherwise defined in
the Agreement, each capitalized term used or defined herein
shall relate only to the Series 1997-1 and no other Series
of Investor Certificates issued by the Trust.
II. ARTICLE
DESIGNATION OF CERTIFICATES; PURCHASE AND SALE
OF THE VFC CERTIFICATES
A. SECTION 2.1 Designation. The Certificates
created and authorized pursuant to the Agreement and this
Supplement shall be divided into two classes, which shall be
designated respectively as (i) the "VFC Certificates,
Series 1997-1" and (ii) the "Subordinated Company
Certificate, Series 1997-1". The VFC Certificates shall be
issued in the form of Definitive Certificates, to be
delivered to the VFC Certificateholder(s) in accordance with
Section 2.3.
a) SECTION 2.2 The Series 1997-1 Certificates.
The VFC Certificates shall represent fractional undivided
interests in the Trust, consisting of the right to receive
the Invested Percentage (expressed as a decimal) of (i)
Collections received with respect to the Receivables and
(ii) all other funds on deposit in the Collection Account
and in any subaccount thereof (the "Series 1997-1
Certificateholders' Interest").
a) The Subordinated Certificate shall
represent a fractional undivided interest in the Trust,
consisting of the right to receive Collections with respect
to the Receivables allocated to the Series 1997-1
Certificateholders' Interest and not required to be
distributed to or for the benefit of the VFC
Certificateholders (the "Subordinated Interest"). The
Exchangeable Company Certificate and any other Series of
Investor Certificates outstanding shall represent the
ownership interest in the remainder of the Trust not
allocated pursuant hereto to the Series 1997-1
Certificateholders' Interest or the Subordinated Interest.
c) The VFC Certificates and the
Subordinated Certificate shall be issued in registered form
in substantially the forms of Exhibits A and B,
respectively, and shall, upon issue, be executed and
delivered by the Company to the Trustee for authentication
and redelivery as provided in Section 2.3 hereof and Section
5.2 of the Agreement.
A. SECTION 2.3 Delivery. On the Issuance Date,
the Company shall sign on behalf of the Trust and shall
direct in writing pursuant to Section 5.2 of the Agreement
the Trustee to duly authenticate, and the Trustee, upon
receiving such direction, shall so authenticate (i) the VFC
Certificates in such names and such denominations and
deliver such VFC Certificates to each VFC Certificateholder
in accordance with such written directions and (ii) a
Subordinated Certificate and deliver such Subordinated
Certificate to the Company as holder thereof in accordance
with such written directions. The VFC Certificates shall be
issued in minimum denominations of $1,000,000 and in
integral multiples of $100,000 in excess thereof. The
Trustee shall mark on its books the actual Invested Amount
allocated among the VFC Certificateholders and Subordinated
Certificate Amount outstanding on any date of determination,
which, absent manifest error, shall constitute prima facie
evidence of the outstanding Invested Amount allocated among
the VFC Certificateholders and Subordinated Certificate
Amount from time to time.
a) SECTION 2.4 Procedure for Increasing the
Invested Amount. Subject to the terms and conditions of
subsection 2.4(b), on any Business Day during the Revolving
Period, the Invested Amount may be increased (an "Increase")
upon the request of the Master Servicer or the Company (each
date on which an increase in the Invested Amount occurs
hereunder being herein referred to as the "Increase Date"
applicable to such Increase) up to an amount equal to the
Certificate Maximum on such day; provided, that the Master
Servicer or the Company, as the case may be, shall have
given the Trustee and each VFC Certificateholder requested
to participate in such Increase irrevocable written notice
(effective upon receipt), substantially in the form of
Exhibit F hereto, of such request no later than the
applicable times specified in Section 3C.4 with respect to
the Funding Period or Periods to apply to such Increase.
Such notice shall state (w) the Increase Date, (x) the
proposed amount of such Increase (the "Increase Amount"),
(y) the VFC Certificateholders designated to participate in
such Increase and (z) the amount of such Increase to be
allocated to each such participating VFC Certificateholder.
Upon satisfaction of the conditions precedent set forth in
subsection 2.4(b) of this Supplement, together with, in the
case of any participating VFC Certificateholder, any
additional conditions specified in the applicable
Certificate Purchase Agreement, each participating VFC
Certificateholder shall remit its share of the applicable
Increase to the Trustee for deposit in the Series 1997-1
Collection Subaccount in immediately available funds by no
later than 2:00 p.m., New York City time, on the applicable
Increase Date, for remittance to the Company in accordance
with the written payment instructions of the Company; it
being understood, however, that the failure to satisfy any
condition precedent applicable with respect to a particular
participating VFC Certificateholder under the applicable
Certificate Purchase Agreement, will not relieve any other
participating VFC Certificateholder from its obligation to
fund its share of any Increase on the applicable Increase
Date. No VFC Certificateholder shall be obligated to fund
any Increase, unless concurrently with any such Increase in
the Invested Amount, the Subordinated Certificate Amount
shall be increased by an amount (the "Subordinated
Certificate Increase Amount") such that after giving effect
to such increase, the sum of the Adjusted Invested Amount
plus the Subordinated Certificate Amount equals the Target
Receivables Amount.
b) No VFC Certificateholder shall be required
to fund its portion of any Increase Amount on any Increase
Date hereunder unless:
(i) the related Increase Amount is equal to
$1,000,000 or an integral multiple of $500,000 in excess
thereof;
(ii) after giving effect to the Increase
Amount, (A) the Invested Amount would not exceed the
Certificate Maximum, (B) the portion of the aggregate
Invested Amount allocated to the VFC Certificates of each
VFC Certificateholder participating in such Increase would
not exceed such VFC Certificateholder's Commitment, and (C)
the Allocated Receivables Amount would equal or exceed the
Target Receivables Amount on such Increase Date; and
(iii) no Early Amortization Event or Potential
Early Amortization Event shall have occurred and be
continuing or shall result from such Increase.
By accepting any Increase Amount, the Company
shall be deemed to have certified that as of such Increase
Date, (x) no Early Amortization Event or Potential Early
Amortization Event has occurred and is continuing and
(y) all of the representations and warranties of the
Company, the Sellers and the Master Servicer set forth in
the Agreement, this Supplement, the Receivables Sale
Agreement, the Insurance Agreement and each Certificate
Purchase Agreement are true and correct as though made on
and as of such Increase Date.
a) SECTION 2.5 Procedure for Decreasing the
Invested Amount. On any Funding Period Settlement Date
during the Revolving Period, upon the written request of the
Master Servicer or the Company, the Invested Amount may be
reduced (a "Decrease") by the pro rata distribution to the
applicable VFC Certificateholders in reduction of the
Invested Amount allocated to such Funding Period of some or
all of the funds on deposit in the Series 1997-1 Principal
Collection Sub-subaccount on such day; provided that (i) the
Master Servicer or the Company shall have given the Trustee,
the Enhancement Provider and each applicable VFC
Certificateholder irrevocable written notice (effective upon
receipt) thereof, prior to 11:00 a.m., New York City time,
on the Business Day preceding the date of such Decrease
(unless the Funding Period Rate with respect to such Funding
Period is determined by reference to the "Eurodollar Rate,"
as defined in the Liquidity Agreement, in which case such
notice must be received prior to 11:00 a.m., New York City
time, on the third Business Day preceding the date of such
Decrease), which notice shall state the amount of such
Decrease and how such amount is to be allocated among the
VFC Certificateholders holding VFC Certificates the Invested
Amount of which has been allocated to such Funding Period;
and (ii) the amount of such Decrease shall not exceed either
the aggregate Invested Amount allocated to such Funding
Period or, with respect to any VFC Certificateholder, the
aggregate portion of the Invested Amount allocated to VFC
Certificates held by such VFC Certificateholder and to such
Funding Period.
b) On any Business Day during the Revolving
Period, upon the written request of the Master Servicer or
the Company on behalf of the Trust, the Invested Amount may
be reduced by the pro rata distribution to the VFC
Certificateholders in accordance with their VFC
Certificateholder Percentages of some or all of the funds on
deposit in the Series 1997-1 Principal Collection Sub-
subaccount on such day; provided, however, that (i) the
Master Servicer or the Company shall have given the Trustee,
the Enhancement Provider and each VFC Certificateholder
irrevocable written notice (effective upon receipt), prior
to 11:00 a.m., New York City time, on the Business Day
preceding the date of such Decrease and which notice shall
state the amount of such Decrease; (ii) the minimum amount
of such Decrease shall be $100,000; (iii) no payment in
reduction of the Invested Amount allocated to any VFC
Certificate shall be made in connection with such Decrease
unless, concurrently with such payment, the Master Servicer
or the Company shall have paid to the VFC Certificateholders
all amounts due and payable pursuant to Section 2.8, if any,
and (iv) the Master Servicer shall have specified the amount
by which the Invested Amount allocated to each VFC
Certificate shall be reduced.
c) If on any day the Commitment of any VFC
Certificateholder is reduced or terminated (other than in
connection with the termination of the Revolving Period) and
after giving effect to such reduction or termination, the
aggregate portion of the Invested Amount allocated to the
VFC Certificates held by such VFC Certificateholder exceeds
the amount of such VFC Certificateholder's Commitment, then
the Company shall, on the next Funding Period Settlement
Date with respect to any portion of the Invested Amount
allocated to the VFC Certificates held by such VFC
Certificateholder, and on each such Funding Period
Settlement Date thereafter until the aggregate portion of
the Invested Amount allocated to the VFC Certificates held
by such VFC Certificateholder is equal to or less than the
amount of such VFC Certificateholder's Commitment, effect a
mandatory Decrease of the Invested Amount by distribution to
the applicable VFC Certificateholder of an amount equal to
the least of (i) the portion of the Invested Amount
allocated to the Funding Period then ending that is also
allocated to the VFC Certificates held by such VFC
Certificateholder, (ii) the excess of the aggregate portion
of the Invested Amount allocated to the VFC Certificates
held by such VFC Certificateholder over the amount of such
VFC Certificateholder's Commitment and (iii) the funds on
deposit in the Series 1997-1 Principal Collection Sub-
subaccount on such day. The Company or the Master Servicer
shall give the Trustee, the Enhancement Provider and the
applicable VFC Certificateholder irrevocable written notice
of such Decrease (effective upon receipt), prior to 11:00
a.m., New York City time, on the Business Day preceding the
date of such Decrease, which notice shall state the amount
of such Decrease.
d) Simultaneously with any such Decrease
during the Revolving Period, the Subordinated Certificate
Amount shall be reduced by an amount (the "Subordinated
Certificate Reduction Amount") such that after giving effect
to such Decrease, the Allocated Receivables Amount is not
less than the Targeted Receivables Amount. During the
Revolving Period, after the distribution described in
subsection (a), (b) or (c) above, as applicable, has been
made, and the Subordinated Certificate Amount shall have
been reduced by the Subordinated Certificate Reduction
Amount, a distribution may be made to the holder of the
Subordinated Certificate out of remaining funds on deposit
in the Series 1997-1 Principal Collection Sub-subaccount in
an amount equal to the lesser of (x) the Subordinated
Certificate Reduction Amount and (y) the amount of such
remaining funds on deposit in the Series 1997-1 Principal
Collection Sub-subaccount.
e) Any reduction in the Invested Amount on any
Business Day (except for that portion of a reduction on a
Funding Period Settlement Date in an amount not exceeding
the portion of the Invested Amount allocated by the Trustee
(based upon the instructions of the Master Servicer) to the
applicable Funding Period) shall be allocated by each
applicable VFC Certificateholder (with notice of such
allocation to the Master Servicer and the Trustee) among
outstanding Funding Periods so as to minimize amounts
payable pursuant to Section 2.8, if any, so long as such
allocation is not, in the reasonable judgment of such VFC
Certificateholder, otherwise disadvantageous to such VFC
Certificateholder.
A. SECTION 2.6 Commitment Certification. At such
time as any VFC Certificateholder shall extend, increase,
terminate or reduce its Commitment, whether pursuant to any
applicable Certificate Purchase Agreement or any assignment
thereunder, such VFC Certificateholder and the Company shall
certify to the Trustee the amount of such VFC
Certificateholder's Commitment by delivery to the Trustee of
a certificate in substantially the form of Exhibit G hereto
(a "Commitment Certification"); provided, however, that in
the case of any voluntary reduction or termination by the
Company of any Commitment consistent with the terms of the
applicable Certificate Purchase Agreement, such Commitment
Certification need only be signed by the Company. The
Trustee shall be entitled to rely on such Commitment
Certification for all purposes hereunder until such time as
it shall have received from the Company and the applicable
VFC Certificateholder a revised Commitment Certification.
The Trustee shall maintain at its address referred to in
Section 8.6 a copy of each Commitment Certification
delivered to it.
a) SECTION 2.7 Interest; Certain Fees. Interest
shall be payable on the VFC Certificates on each Funding
Period Settlement Date pursuant to subsection 3C.6(a).
b) So long as the Issuer is a VFC
Certificateholder, a facility usage fee with respect to each
Accrual Period or portion thereof (the "Issuer Usage Fees")
shall be payable in arrears on the related Settlement Date
for the sole account of the Issuer pursuant to subsection
3C.6(b). The Issuer Usage Fees payable on each Settlement
Date shall be calculated by the Issuer (and notified by the
Issuer to the Master Servicer on or before the corresponding
Determination Date) and shall equal the product of (i) the
Issuer Usage Fee Rate, (ii) the average daily sum of (A) the
Face Amount of Issuer CP during the preceding Accrual Period
and (B) the average daily principal balance of loans
outstanding under the Liquidity Agreement and (iii) the
actual number of days in such Accrual Period divided by 360.
c) So long as the Issuer is a VFC
Certificateholder, a liquidity usage fee with respect to
each Accrual Period or portion thereof (the "Liquidity Usage
Fees") shall be payable in arrears on the related Settlement
Date for the sole account of the Issuer pursuant to
subsection 3C.6(b). The Liquidity Usage Fees payable on
each Settlement Date shall be calculated by the Issuer (and
notified by the Issuer to the Master Servicer on or before
the corresponding Determination Date) and shall be equal to
the product of (i) the Liquidity Usage Fee Rate, (ii) the
average daily Face Amount of Issuer CP during the preceding
Accrual Period and (iii) the actual number of days in such
Accrual Period divided by 360.
d) So long as the Issuer is a VFC
Certificateholder, a liquidity non-usage fee with respect to
each Accrual Period or portion thereof (the "Liquidity Non-
Usage Fees") shall be payable in arrears on the related
Settlement Date for the sole account of Issuer pursuant to
subsection 3C.6(b). The Liquidity Non-Usage Fees payable on
each Settlement Date shall be calculated by the Issuer (and
notified by the Issuer to the Master Servicer on or before
the corresponding Determination Date) and shall be equal to
the product of (i) the Liquidity Non-Usage Fee Rate and
(ii) the average daily excess during such Accrual Period of
(A) the aggregate undrawn Liquidity Commitments over (B) the
Face Amount of Issuer CP and (iii) the actual number of days
in such Accrual Period divided by 360.
e) With respect to each VFC
Certificateholder other than the Issuer, such fees as shall
be specified in the applicable Certificate Purchase
Agreement ("Alternate Fees") shall be payable as specified
in such Receivables Purchase Agreement and notified to the
Trustee and the Enhancement Provider. The Alternate Fees
payable hereunder shall be calculated by the Master Servicer
and reported to the Trustee and the Enhancement Provider.
f) So long as the Issuer is a VFC
Certificateholder, an administrative fee with respect to
each Accrual Period or portion thereof (the "Issuer
Administrative Fees") shall be payable in arrears on the
related Settlement Date for the sole account of the Issuer
pursuant to subsection 3C.6(b). The Issuer Administrative
Fees payable on each Settlement Date shall be calculated by
the Master Servicer and shall be equal to the product of (i)
the Issuer Administrative Fee Rate, (ii) the average daily
Commitment of the Issuer, whether used or unused, during
such Accrual Period and (iii) the actual number of days in
such Accrual Period divided by 360.
g) To the extent the Trustee determines (based
on the information set forth in the applicable report
prepared by the Master Servicer) that funds on deposit in
the Series 1997-1 Non-Principal Collection Sub-subaccount at
any Settlement Date are insufficient to pay any of the fees
described in the foregoing subsections (b), (c), (d), (e)
and (f), the Trustee shall so notify the Company and the
Company shall immediately pay the Trustee the amount of any
such deficiency; provided, however, that any such deficiency
shall be payable solely out of Available Funds, shall be non-
recourse other than with respect to Available Funds, and
shall not constitute a claim against the Company to the
extent that insufficient Available Funds exist to make such
payment.
h) Calculations of interest (at per annum
rates other than the Base Rate) and fees under this
Supplement shall be made on the basis of actual days elapsed
in the applicable period and a 360-day year. Calculations
of interest at the Base Rate under this Supplement shall be
made on the basis of actual days elapsed in the applicable
period and a 365-day year. Each determination of the
Adjusted Eurodollar Rate, the Funding Period Rate, the
Issuer Usage Fees, the Liquidity Usage Fees, the Issuer
Administrative Fees and the Liquidity Non-Usage Fees by the
Issuer shall be conclusive and binding upon each of the
parties hereto in the absence of manifest error.
A. SECTION 2.8 Interest Rate Indemnity. The
Company agrees to indemnify the Enhancement Provider and
each VFC Certificateholder and to hold the Enhancement
Provider and each VFC Certificateholder harmless from any
loss or expense which the Enhancement Provider or such VFC
Certificateholder may sustain or incur as a consequence of
(a) default by the Company in making an Increase after the
Company has given irrevocable notice requesting the same in
accordance with the provisions of this Supplement, (b)
default by the Company in making any prepayment in
connection with a Decrease after the Company has given
irrevocable notice thereof in accordance with the provisions
of Section 2.5 or (c) the making of a prepayment, whether in
connection with a Decrease or otherwise, in an amount in
excess of the portion of the Invested Amount allocated to a
Funding Period ending on the date of such prepayment. Such
indemnification shall include, without limitation, any loss
(including those of anticipated profits, net of anticipated
profits in respect of the reemployment of such funds in the
manner determined by such VFC Certificateholder), cost or
expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by any VFC
Certificateholder to fund or maintain the applicable portion
of the Invested Amount or such requested Increase; provided,
however, that any payments made by the Company pursuant to
this subsection shall be made solely from Available Funds,
shall be non-recourse other than with respect to Available
Funds, and shall not constitute a claim against the Company
to the extent that insufficient Available Funds exist to
make such payment. This covenant shall survive the
termination of this Supplement and the payment of all
amounts payable hereunder. A certificate as to any
additional amounts payable pursuant to the foregoing
sentence submitted by any VFC Certificateholder to the
Company and the Master Servicer shall be conclusive absent
manifest error.
III. ARTICLE
ARTICLE III OF THE AGREEMENT
Any provision of Article III of the Agreement
which distributes Collections to the Company on the basis of
the Company's Percentage shall continue to apply
irrespective of the issuance of the VFC Certificates.
Section 3.1 of the Agreement shall be read in its entirety
as provided in the Agreement. Article III of the Agreement
(except for Section 3.1 thereof and any portion thereof
relating to another Series) shall read in its entirety as
follows and shall be exclusively applicable to the VFC
Certificates and the Subordinated Certificate:
SECTION 3C.2. Establishment of Series Accounts.
(a) The Trustee shall cause to be established and
maintained in the name of the Trustee, on behalf of the
Trust, (i) for the benefit of the VFC Certificateholders and
for the benefit, subject to the prior interest of the VFC
Certificateholders, of the holder of the Subordinated
Certificate, a subaccount of the Collection Account (the
"Series 1997-1 Collection Subaccount"), which subaccount is
the Series Collection Subaccount with respect to Series
1997-1, bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the VFC
Certificateholders and for the benefit, subject to the prior
interest of the VFC Certificateholders, of the holder of the
Subordinated Certificate; (ii) for the benefit of the VFC
Certificateholders and for the benefit, subject to the prior
interest of the VFC Certificateholders, of the holder of the
Subordinated Certificate, two subaccounts of the Series
1997-1 Collection Subaccount: the Series 1997-1 Principal
Collection Sub-subaccount and the Series 1997-1
Non-Principal Collection Sub-subaccount (respectively, the
"Series 1997-1 Principal Collection Sub-subaccount" and the
"Series 1997-1 Non-Principal Collection Sub-subaccount"),
each bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the VFC
Certificateholders and for the benefit, subject to the prior
interest of the VFC Certificateholders, of the holder of the
Subordinated Certificate; and (iii) for the benefit of the
VFC Certificateholders, a subaccount of the Series 1997-1
Non-Principal Collection Sub-subaccount (the "Series 1997-1
Accrued Interest Sub-subaccount"; all accounts established
pursuant to this subsection 3C.2(a) being referred to herein
collectively as the "Series Accounts" and the accounts
listed on Schedule 1 being referred to herein, collectively
as the "Trust Accounts"). The Trustee shall possess all
right, title and interest in all funds from time to time on
deposit in, and all Eligible Investments credited to, the
Series Accounts and Trust Accounts and in all proceeds
thereof. The Trust Accounts and the Series Accounts shall
be under the sole dominion and control of the Trustee for,
in the case of the Series Accounts, the exclusive benefit of
the VFC Certificateholders and to the extent applicable,
subject to the prior interest of the VFC Certificateholders,
to the holder of the Subordinated Certificate.
(b) All Eligible Investments in the Series
Accounts shall be held by the Trustee for the exclusive
benefit of the VFC Certificateholders and, subject to the
prior interest of the VFC Certificateholders, of the holder
of the Subordinated Certificate; provided, however, that
funds on deposit in a Series Account may, at the direction
of the Master Servicer, be invested together with funds held
in sub-subaccounts of the Collection Account that are not
Series Accounts. After giving effect to any distribution to
the Company pursuant to subsection 3C.3(c), amounts on
deposit and available for investment in the Series 1997-1
Principal Collection Sub-subaccount shall be invested by the
Trustee at the written direction of the Company in Eligible
Investments that mature, or that are payable or redeemable
upon demand of the holder thereof, (i) in the case of any
such investment made during the Revolving Period, on or
prior to the next Business Day and (ii) in the case of any
such investment made during the Amortization Period, on or
prior to the next subsequent Funding Period Determination
Date. Amounts on deposit and available for investment in
the Series 1997-1 Non-Principal Collection Sub-subaccount
and the Series 1997-1 Accrued Interest Sub-subaccount shall
be invested by the Trustee at the written direction of the
Company in Eligible Investments that mature, or that are
payable or redeemable upon demand of the holder thereof, on
or prior to the next subsequent Determination Date or
Funding Period Determination Date, as the case may be. As
of the Determination Date or Funding Period Determination
Date, as the case may be, all interest and other investment
earnings (net of losses and investment expenses) on funds
deposited in the Series 1997-1 Accrued Interest Sub-
subaccount shall be deposited in the Series 1997-1 Non-
Principal Collection Sub-subaccount. All interest and
investment earnings (net of losses and investment expenses)
on funds deposited in the Series 1997-1 Principal Collection
Sub-subaccount shall be deposited in the Series 1997-1 Non-
Principal Collection Sub-subaccount. The Trustee shall not
in any way be held liable by reason of any insufficiency in
any Account held by the Trustee resulting from any
investment loss on any Eligible Investment included therein
(except to the extent that the Trustee is the obligor and
has defaulted thereon).
a) SECTION 3C.3. Daily Allocations. The
portion of Aggregate Daily Collections allocated to the VFC
Certificateholders pursuant to Article III of the Agreement
shall be allocated and distributed as set forth in this
Article III.
b) (i) On each Business Day, an amount equal to
the Accrued Expense Amount for such day shall be transferred
from the Series 1997-1 Collection Subaccount to the Series
1997-1 Non-Principal Collection Sub-subaccount.
(ii) If, on any Business Day during the Revolving
Period, the Enhancement Provider has not been reimbursed
pursuant to the Insurance Agreement for any interest
payments made under the Principal/Interest Surety Bond, an
amount equal to the lesser of (A) the remaining amount on
deposit in the Series 1997-1 Collection Subaccount on such
day and (B) the amount of such reimbursement then due to the
Enhancement Provider for interest payments made under the
Principal/Interest Surety Bond plus accrued and unpaid
interest thereon at the rate stated in respect thereof in
the Insurance Agreement shall be transferred from the Series
1997-1 Collection Subaccount and paid to the Enhancement
Provider.
(iii) Following the transfers pursuant to clauses
(i) and (ii) above, any remaining funds on deposit in the
Series 1997-1 Collection Subaccount shall be transferred to
the Series 1997-1 Principal Collection Sub-subaccount.
(c) On each Business Day during the Revolving
Period (including Distribution Dates), amounts on deposit in
the Series 1997-1 Principal Collection Sub-subaccount shall
be distributed by the Trustee to the Company (but only to
the extent that the Trustee has received a Daily Report
which reflects the receipt of the Collections on deposit
therein); provided that such distribution shall be made only
to the extent that, after giving effect to such
distribution, (i) the Target Receivables Amount would not
exceed the Allocated Receivables Amount and (ii) each VFC
Certificateholder's Commitment equals or exceeds the
aggregate portion of the Invested Amount allocated to such
VFC Certificateholder; provided further that if the Company
(or the Master Servicer, on behalf of the Company) shall
have given the Trustee irrevocable written notice prior to
the making of any distribution to the Company pursuant to
this subsection 3C.3(c)(i) on any day, the Company or the
Master Servicer may instruct the Trustee in writing
(specifying the related amount) to retain or deposit, as
applicable, all or a portion of such amounts on deposit in
the Series 1997-1 Principal Collection Sub-subaccount, the
Series 1997-1 Non-Principal Collection Sub-subaccount or the
Series 1997-1 Collection Subaccount (together with, to the
extent that the Company so directs the Trustee, any amounts
which the Company is otherwise entitled to receive as a
result of its ownership of Investor Certificates issued
pursuant to the Series 1994-1 Supplement and any other
Available Funds that the Company may elect from time to time
to deposit into the Series 1997-1 Principal Collection Sub-
subaccount, the Series 1997-1 Non-Principal Collection Sub-
subaccount or the Series 1997-1 Collection Subaccount, as
the case may be) for further application hereunder; and
provided further that such distribution to the Company shall
not, in any event, be made if a Cure Period Trigger Date has
occurred and is continuing (and the breach or violation
giving rise to such Cure Period Trigger Date has not been
cured or waived as of such date). Amounts distributed to
the Company hereunder shall be deemed to be paid first from
Collections received directly by any Servicing Party and
second from Collections received in the Lockboxes.
(ii) On each Business Day during the
Amortization Period (including Distribution Dates), funds
deposited in the Series 1997-1 Principal Collection Sub-
subaccount shall be invested in Eligible Investments that
mature on or prior to the next Funding Period Determination
Date. No amounts on deposit in the Series 1997-1 Principal
Collection Sub-subaccount shall be distributed by the
Trustee to the Company during the Amortization Period. The
Trustee shall not in any way be liable by reason of any
insufficiency in any account held by the Trustee resulting
from any investment loss on any Eligible Investment included
therein (except to the extent that the Trustee is the
obligor and has defaulted thereon).
d) On each Business Day an amount equal to the
Daily Interest Deposit for such day shall be transferred
from the Series 1997-1 Non-Principal Collection Sub-
subaccount to the Series 1997-1 Accrued Interest Sub-
subaccount.
e) The allocations to be made pursuant to this
Section 3C.3 are subject to the provisions of Sections 2.6,
7.2 and 9.1 of the Agreement and shall be based solely on
information provided to the Trustee by the Master Servicer
in the applicable Daily Report.
SECTION 3C.4. Selection of Funding Periods;
Determination of Interest Rates. (a) At all times
hereafter, the aggregate outstanding Invested Amount
allocable to each VFC Certificate shall be allocated to a
Funding Period. The Master Servicer, subject to the
limitations described below, shall select Funding Periods
and the applicable Funding Period Rates for such Funding
Periods for each VFC Certificate and shall allocate the
outstanding Invested Amount allocable to such VFC
Certificate to such selected Funding Periods and Funding
Period Rates, except that the Unallocated Balance, if any,
outstanding from time to time, shall at all times be
allocated to a Funding Period coinciding with the Accrual
Period then in effect.
(b) Notwithstanding anything herein to the
contrary, the selection by the Master Servicer of Funding
Periods and Funding Period Rates with respect to VFC
Certificates held by the Issuer shall be subject to the
Issuer's prior approval. The Master Servicer shall specify
its preferences with respect to such Funding Periods and
Funding Period Rates by notice to the Issuer (which may be
telephonic notice confirmed promptly in writing), specifying
the Business Day on which the applicable Funding Period or
Periods are requested to commence, the requested duration of
the applicable Funding Period or Periods, the requested
Funding Period Rate or Rates and the portions of the
Invested Amount requested to be allocated to each such
requested Funding Period. Any such notice must be received
by the Issuer no later than 11:00 a.m. New York City time on
the Business Day preceding the commencement of the
applicable Funding Period (or so long as the Liquidity Rate
is applicable to all Funding Periods with respect to VFC
Certificates held by the Issuer, no later than 12:00 p.m.
New York City time on the Business Day on which the
applicable Funding Period commences if interest is to accrue
for such Funding Period at the "Base Rate" (as defined in
the Liquidity Agreement); provided, however, that (x) if the
Issuer shall not have received notice from the Master
Servicer or shall not have approved the Master Servicer's
selection before the applicable time specified in this
subsection 3C.4(b) with respect to any Funding Period, such
Funding Period and the applicable Funding Period Rate shall
be selected by the Issuer and (y) if interest on the portion
of the Invested Amount allocated to such Funding Period is
requested to accrue at a Liquidity Rate determined in whole
or in part by reference to the "Eurodollar Rate," as defined
in the Liquidity Agreement, the Issuer must receive notice
from the Master Servicer with regard thereto by 1:00 p.m.
New York City time on the third LIBO Business Day preceding
the first day of such Funding Period. In addition, Funding
Periods and Funding Period Rates with respect to VFC
Certificates held by the Issuer shall be subject to the
following additional restrictions: (i) no more than five
such Funding Periods shall be outstanding at any time, (ii)
any such Funding Period that commences before the
commencement of the Amortization Period and would otherwise
end on a date occurring after the commencement of the
Amortization Period shall if the Issuer so elects by notice
to the Company end on the date of the commencement of the
Amortization Period, (iii) from and after the commencement
of the Amortization Period, all such Funding Periods and
Funding Period Rates shall be selected by the Issuer (and
the Issuer shall provide notice to the Master Servicer of
such selections), (iv) if a CP Disruption shall have
occurred and be continuing, the Issuer may, upon notice to
the Master Servicer, terminate any such Funding Period then
in effect if the Issuer has funded its investment in the
relevant VFC Certificate for such Funding Period by issuing
Issuer CP, (v) if a Liquidity Rate Disruption Event shall
have occurred and be continuing, and as a result thereof it
shall be unlawful for any Liquidity Bank or its applicable
lending office to maintain outstanding any existing
"Eurodollar Rate Advance" under and as defined in the
Liquidity Agreement, the Issuer may, upon notice to the
Master Servicer, terminate any such Funding Period then in
effect if the Issuer has funded its investment in the
relevant VFC Certificate for such Funding Period with any
such "Eurodollar Rate Advance," and (vi) any such Funding
Period that would otherwise end on a day that is not a
Business Day shall be extended to the next succeeding
Business Day, unless (A) the Funding Period Rate with
respect to such Funding Period is a Liquidity Rate
determined in whole or in part by reference to the
"Eurodollar Rate," as defined in the Liquidity Agreement,
and (B) such next succeeding Business Day would be in the
following calendar month, in which case such Funding Period
shall end on the next preceding Business Day. On or before
the first day of each Funding Period with respect to VFC
Certificates held by the Issuer, the Master Servicer shall
notify the Trustee of the duration of such Funding Period
and the applicable Funding Period Rate.
(c) The Master Servicer may select Funding
Periods and Funding Period Rates with respect to VFC
Certificates held by a Person other than the Issuer by
notice to the Trustee and the related VFC Certificateholders
specifying the Business Day on which the applicable Funding
Period is to commence, the duration of the applicable
Funding Period and the portion of the Invested Amount
requested to be allocated to such Funding Period. Any such
notice must be received by the Trustee (i) to the extent
that the applicable Funding Period Rate is the Base Rate no
later than 12:30 p.m. New York City time on the Business Day
on which the applicable Funding Period commences, (ii) to
the extent that the applicable Funding Period Rate is the
Adjusted Eurodollar Rate, no later than 1:00 p.m. New York
City time on the third Business Day preceding the
commencement of the applicable Funding Period and (iii) to
the extent that the applicable Funding Rate is another rate
agreed among the Master Servicer, the Company and such
Person other than the Issuer holding VFC Certificates, such
other time as shall have been agreed among such parties and
notified to the Trustee, which notice must be received by
the Trustee by 11:00 a.m. New York City time. Any portion
of the Invested Amount with respect to VFC Certificates held
by a Person other than the Issuer on any day that has not
been allocated to a Eurodollar Tranche or as to which
another rate has not been agreed among the Master Servicer,
the Company and such Person other than the Issuer, shall
accrue interest for such day at the Base Rate (the aggregate
amount of such unallocated portions of such Invested Amount
being referred to herein as the "Unallocated Balance"). Any
reduction in the Invested Amount with respect to any VFC
Certificate held by a Person other than the Issuer shall be
allocated first, to reduce the portion of the Invested
Amount thereof constituting Unallocated Balance, and second,
to reduce the portion of the Invested Amount thereof
allocated to other Funding Periods. Notwithstanding
anything to the contrary contained in this
subsection 3C.4(c), the portion of the Invested Amount with
respect to VFC Certificates held by a Person other than the
Issuer allocated to Eurodollar Tranches or as to which
another rate has been agreed among the Master Servicer, the
Company and such Person other than the Issuer shall be
subject to such other limitations as such Person shall
specify in the applicable Certificate Purchase Agreement.
(d) The amount of interest distributable with
respect to the VFC Certificates on any Funding Period
Settlement Date shall be an amount equal to the sum of (i)
the aggregate Funding Period Interest for such Funding
Period Settlement Date, plus (ii) all outstanding Past Due
Interest, plus (iii) the amount of any accrued but unpaid
Additional Interest.
SECTION 3C.5. Determination of Series 1997-1
Amortization Principal Payments. The amount (the "Series
1997-1 Amortization Principal Payment") distributable from
the Series 1997-1 Principal Collection Sub-subaccount on
each Funding Period Settlement Date during the Amortization
Period shall be equal to the lesser of (a) the aggregate
Invested Amount allocated to such Funding Period and (b) the
amount on deposit in such account on such Funding Period
Settlement Date.
SECTION 3C.6. Applications. (a) The Master
Servicer shall instruct the Trustee in writing (which
instruction shall specify the amounts to be distributed), on
each Funding Period Settlement Date, to distribute to the
applicable VFC Certificateholders from amounts on deposit in
the Series 1997-1 Accrued Interest Sub-subaccount (including
any amounts deposited therein pursuant to subsection
3C.7(b)(i)), an amount equal to the sum of (i) Funding
Period Interest on the VFC Certificates for such Funding
Period, (ii) all outstanding Past Due Interest and (iii) all
accrued but unpaid Additional Interest.
(b) On each Settlement Date, the Master Servicer
shall instruct the Trustee in writing (which instruction
shall specify the amounts to be applied or distributed, as
the case may be) to apply funds on deposit in the Series
1997-1 Non-Principal Collection Sub-subaccount (after taking
into consideration the distribution to the VFC
Certificateholders from the Series 1997-1 Non-Principal
Collection Sub-subaccount or any subaccount thereof pursuant
to subsection 3C.6(a)) in the following order of priority to
the extent funds are available:
(i) an amount equal to the Series 1997-1
Monthly Servicing Fee for the Accrual Period ending on
such Settlement Date shall be withdrawn from the Series
1997-1 Non-Principal Collection Sub-subaccount by the
Trustee and paid to the Master Servicer (or to the
Trustee, if on such date the Trustee is then acting as
Master Servicer in order to liquidate the Receivables and
the Related Property);
(ii) an amount equal to the Surety Bond Fees
for the Accrual Period ending on such Settlement Date
shall be withdrawn from the Series 1997-1 Non-Principal
Collection Sub-subaccount by the Trustee and paid to the
Enhancement Provider, provided that, if the Enhancement
Provider shall have failed to make a payment in respect of
a principal or interest drawing under the
Principal/Interest Surety Bond and such failure shall be
continuing after the stated date on which such payment was
to be made, the Enhancement Provider shall not receive
such Surety Bond Fees (which shall be held in the Series
1997-1 Non-Principal Collection Sub-subaccount) until such
payment is made;
(iii) an amount equal to the Liquidity Usage
Fees, the Liquidity Non-Usage Fees, the Issuer Usage Fees,
the Issuer Administrative Fees and the Alternate Fees, if
any, for the Accrual Period ending on such Settlement Date
shall be withdrawn from the Series 1997-1 Non-Principal
Collection Sub-subaccount by the Trustee and paid, in the
case of the Liquidity Usage Fees, the Liquidity Non-Usage
Fees, the Issuer Usage Fees and the Issuer Administrative
Fees to the Issuer or as the Issuer shall direct, and in
the case of the Alternate Fees to the VFC
Certificateholders other than the Issuer; and
(iv) an amount equal to any Program Costs due
and payable shall be withdrawn from the Series 1997-1 Non-
Principal Collection Sub-subaccount by the Trustee and
paid to the Persons owed such amounts.
Any remaining amount on deposit in the Series 1997-1 Non-
Principal Collection Sub-subaccount not allocated pursuant
to clauses (i) through (v) above shall be paid to the holder
of the Subordinated Certificate.
(c) During the Revolving Period, to the extent
that the Company has elected or is required to effect a
Decrease as described in Section 2.5, the Master Servicer
shall cause the Trustee to pay to the VFC Certificateholders
in reduction of the Invested Amount on each applicable
Decrease date, amounts on deposit in the Series 1997-1
Principal Collection Sub-subaccount, up to the amount of the
applicable Decrease.
(d) During the Amortization Period, the Master
Servicer shall instruct the Trustee in writing (which
instruction shall specify the amounts to be applied or
distributed, as the case may be) to apply, on each Funding
Period Settlement Date, amounts on deposit in the Series
1997-1 Principal Collection Sub-subaccount (including any
amounts deposited therein pursuant to subsection
3C.7(b)(ii)) in the following order of priority:
(i) an amount equal to the Series 1997-1
Amortization Principal Payment for such Funding Period
Settlement Date shall be distributed from the Series
1997-1 Principal Collection Sub-subaccount to the
applicable VFC Certificateholders in reduction of the
Invested Amount allocated to such Funding Period, and,
unless after giving effect to such payment the Invested
Amount has been repaid in full, any amounts remaining on
deposit in the Series 1997-1 Principal Collection
Sub-subaccount shall be retained therein for application
in accordance with the terms of this Supplement on the
next succeeding Funding Period Settlement Date;
(ii) if the Invested Amount has been repaid
in full after giving effect to clause (i) and the
Enhancement Provider has not been reimbursed pursuant to
the Insurance Agreement for principal and interest
payments made under the Principal/Interest Surety Bond, an
amount equal to the lesser of (A) the remaining amount on
deposit in the Series 1997-1 Principal Collection Sub-
subaccount on such day and (B) the amount of such
reimbursement then due to the Enhancement Provider for
principal payments made under the Principal/Interest
Surety Bond plus accrued and unpaid interest thereon at
the rate stated in respect thereof in the Insurance
Agreement shall be transferred from the Series 1997-1
Principal Collection Sub-subaccount and paid to the
Enhancement Provider;
(iii) if the Invested Amount has been repaid
in full after giving effect to clause (i), all amounts
owing to the Enhancement Provider pursuant to the
Insurance Agreement have been repaid in full and any
amounts are owed to the Trustee or any other Person, on
account of its expenses incurred in respect of the
performance of its responsibilities as Master Servicer for
the liquidation of the Receivables and the Related
Property, such amounts shall be transferred from the
Series 1997-1 Principal Collection Sub-subaccount and paid
to the Trustee or such other Person; and
(iv) if the Invested Amount has been repaid
in full after giving effect to clause (i) and all of the
amounts set forth in clauses (ii) and (iii) above have
been repaid, the remaining amount on deposit in the Series
1997-1 Principal Collection Sub-subaccount on such Funding
Period Settlement Date, if any, shall be distributed to
the holder of the Subordinated Certificate.
SECTION 3C.7. The Principal/Interest Surety Bond.
(a) Issuance of Principal/Interest Surety Bond. On or prior
to the Issuance Date, the Enhancement Provider shall have
issued the Principal/Interest Surety Bond in favor of the
Trustee for the benefit of the holders of the VFC
Certificates.
(b) Draws on the Principal/Interest Surety Bond.
(i) If, on any Funding Period Determination Date, the amount
on deposit in the Series 1997-1 Accrued Interest Sub-
subaccount (and available to be distributed) is less than
the accrued and unpaid interest that is due and payable on
the related Funding Period Settlement Date, then the Trustee
by delivering a notice to the Enhancement Provider pursuant
to the Principal/Interest Surety Bond shall, not later than
2:00 p.m., New York City time, on such Funding Period
Determination Date, demand payment under the
Principal/Interest Surety Bond in an amount equal to such
insufficiency in accordance with the Principal/Interest
Surety Bond. The Enhancement Provider shall pay or cause to
be paid such amount to the Trustee for deposit, on the
related Funding Period Settlement Date, to the Series 1997-1
Accrued Interest Sub-subaccount in accordance with the
Principal/Interest Surety Bond. In the event that such
amount shall be paid by the Enhancement Provider after such
Funding Period Settlement Date, the Trustee shall pay such
amount, promptly following receipt thereof, to the extent
necessary to complete payment of the accrued but unpaid
interest in respect of the VFC Certificates to have been
made on such Funding Period Settlement Date plus any
interest in respect thereof, to the VFC Certificateholders
as their respective interests then appear, and deposit the
remainder in the Series 1997-1 Accrued Interest Sub-
subaccount.
(ii) If, on any Funding Period Determination Date
to occur on or after the Surety Draw Date, the outstanding
Invested Amount is greater than zero, then the Trustee by
delivering a notice to the Enhancement Provider pursuant to
the Principal/Interest Surety Bond shall, not later than
2:00 p.m., New York City time, on such Funding Period
Determination Date, demand payment under the
Principal/Interest Surety Bond in an amount equal to such
Invested Amount in accordance with the Principal/Interest
Surety Bond. The Enhancement Provider shall pay or cause to
be paid such amount to the Trustee for payment, on the
related Funding Period Settlement Date, to the VFC
Certificateholders as their respective interests then
appear. In the event that such amount shall be paid by the
Enhancement Provider after such Funding Period Settlement
Date, the Trustee shall pay such amount, promptly following
receipt thereof, to the extent necessary to complete payment
of the Invested Amount, to the VFC Certificateholders as
their respective interests then appear, and deposit the
remainder in the Series 1997-1 Principal Collection Sub-
subaccount.
(iii) If, on any Funding Period Determination
Date to occur during the Amortization Period, the
Enhancement Provider elects to purchase (a "Surety Purchase
Demand") all of the then outstanding VFC Certificates in
accordance with the provisions set forth in Section 2.7 of
the Insurance Agreement, then the Enhancement Provider shall
so purchase the VFC Certificates for an amount equal to the
Invested Amount and all accrued and unpaid interest thereon
as of such date. The Enhancement Provider shall pay or
cause to be paid such amount to the Trustee for payment to
the VFC Certificateholders as their respective interests
then appear in accordance with the Insurance Agreement on
the related Funding Period Settlement Date.
(iv) If the payment of any amount which is
guaranteed pursuant to the Principal/Interest Surety Bond is
voided (an "Avoidance Event") under any applicable
Insolvency Proceeding (as defined in the Principal/Investor
Surety Bond), and, as a result of such an Avoidance Event,
any VFC Certificateholder is required to return such voided
payment, or any portion of such voided payment (an "Avoided
Payment"), upon payment by such VFC Certificateholder of
such Avoided Payment and receipt by the Trustee on behalf of
such VFC Certificateholder of (A) a certified copy of a
final order of a court exercising jurisdiction in such
Insolvency Proceeding to the effect that such VFC
Certificateholder is required to return any such payment or
portion thereof during the term of the Principal/Interest
Surety Bond because such payment was voided under applicable
law, with respect to which order the appeal period has
expired without an appeal having been filed (the "Final
Order"), and (B) an assignment, substantially in the form
attached as Exhibit B to the Principal/Interest Surety Bond,
properly completed and executed by such VFC
Certificateholder irrevocably assigning to the Enhancement
Provider all rights and claims of such VFC Certificateholder
relating to or arising under such Avoided Payment, then the
Trustee shall deliver to the Enhancement Provider a Notice
for Payment in the form of Exhibit A to the
Principal/Interest Surety Bond appropriately completed and
executed by the Trustee.
(c) Following any payment by the Enhancement
Provider pursuant to this Section 3C.7 and the application
of such payment in accordance with the terms hereof, the
Enhancement Provider shall be subrogated to the rights of
the VFC Certificateholders under the Pooling and Servicing
Agreements, to the extent of any payments made by the
Enhancement Provider to such VFC Certificateholders pursuant
to the Principal/Interest Surety Bond; provided, however,
that the Enhancement Provider shall not be entitled to be
subrogated to any of the rights of the VFC
Certificateholders under the Pooling and Servicing
Agreements until the VFC Certificateholders have received
payment of all accrued but unpaid interest in respect of the
VFC Certificates and repayment in full of the Invested
Amount. Nothing in this subsection 3C.7(c) shall affect in
any way the rights of the Enhancement Provider to receive
distributions from the Series Accounts or the Trust Accounts
pursuant to the express provisions of this Article III.
(d) Each VFC Certificateholder by accepting any
VFC Certificate shall be deemed to acknowledge and agree to
the terms of Section 2.7 of the Insurance Agreement and to
agree that it will, if so requested by the Enhancement
Provider, transfer its VFC Certificates to the Enhancement
Provider as contemplated in such Section 2.7.
IV. ARTICLE
DISTRIBUTIONS AND REPORTS
Article IV of the Agreement (except for any
portion thereof relating to another Series) shall read in
its entirety as follows and shall be exclusively applicable
to the VFC Certificates:
a) SECTION 4C.1. Distributions. On each
Distribution Date, the Trustee shall distribute (by wire
transfer) to each VFC Certificateholder and the Enhancement
Provider such Person's share, as determined by the Master
Servicer and reported to the Trustee on the preceding
Determination Date or Funding Period Determination Date, as
applicable, of the amounts to be distributed to the VFC
Certificateholders and the Enhancement Provider pursuant to
Article III. The Trustee will endeavor to make all such
payments to the applicable parties by 3:00 p.m. (New York
City time) on the applicable Distribution Date, but shall
incur no liability to any Person in the event that it fails
to make any such payment by such time.
b) All allocations and distributions
hereunder by the Trustee shall be in accordance with and
based solely upon the applicable Daily Reports and Monthly
Settlement Statement or Funding Period Settlement Statement
and subject to subsection 3.1(h) of the Agreement.
SECTION 4C.2. Statements and Notices. (a)
Settlement Statements. On each Determination Date, the
Master Servicer shall deliver to the Enhancement Provider,
the Trustee and each Rating Agency a Monthly Settlement
Statement substantially in the form attached hereto as
Exhibit E-1 setting forth, among other things, the Loss
Reserve Ratio, the Dilution Reserve Ratio, the Carrying Cost
Reserve Ratio and the Servicing Reserve Ratio, each as
recalculated for the next succeeding Settlement Period. On
each Funding Period Determination Date, the Master Servicer
shall deliver to the Enhancement Provider, the Trustee and
each Rating Agency a completed settlement statement (a
"Funding Period Settlement Statement"), substantially in the
form attached hereto as Exhibit E-2.
(b) Annual Certificateholders' Tax Statement. On
or before April 1 of each calendar year (or such earlier
date as required by applicable law), beginning with calendar
year 1997, the Company on behalf of the Trustee shall
furnish, or cause to be furnished, to each Person who at any
time during the preceding calendar year was a VFC
Certificateholder, a statement prepared by the Company
containing the aggregate amount distributed to such Person
for such calendar year or the applicable portion thereof
during which such Person was a VFC Certificateholder,
together with such other information as is required to be
provided by an issuer of indebtedness under the Internal
Revenue Code and such other customary information as the
Trustee or the Company deems necessary or desirable to
enable the VFC Certificateholders to prepare their tax
returns. Such obligation of the Company shall be deemed to
have been satisfied to the extent that substantially
comparable information shall have been provided by the
Trustee pursuant to any requirements of the Internal Revenue
Code as from time to time in effect.
(c) Early Amortization Period Notices. Promptly
after the receipt by a Responsible Officer of the Trustee of
notice of the occurrence of an Early Amortization Event with
respect to Series 1997-1, the Trustee shall give notice
(which notice shall in any event be given (by telephone or
otherwise) not later than the second Business Day after such
receipt) of such occurrence to (i) the Enhancement Provider
and each Rating Agency and (ii) each VFC Certificateholder.
(d) Surety Default Notices. Promptly after the
receipt by a Responsible Officer of the Trustee of notice of
the occurrence of a Surety Default, the Trustee shall give
notice of such occurrence to each VFC Certificateholder and
each Rating Agency.
(e) Principal Payment Notices. During the
Amortization Period, on each date which is three Business
Days prior to a Funding Period Settlement Date, the Trustee
shall deliver to each VFC Certificateholder a notice by fax,
followed by a hard copy delivered by overnight carrier,
setting forth the amount on deposit and available for
distribution in the Series 1997-1 Principal Collection Sub-
subaccount as of the opening of business on such date.
(f) Forwarding of Other Notices and Documents.
The Trustee shall promptly (but in any event within two
Business Days following receipt thereof) forward to each VFC
Certificateholder copies of the following documents and/or
notices upon receipt thereof by a Responsible Officer of the
Trustee:
(1) Financial Statements of Company. All financial
statements delivered by the Company pursuant to subsection
2.7(a) of the Agreement.
(ii) Early Amortization, Insolvency and Lien
Notices. Any notice delivered by the Company pursuant to
subsection 2.7(g) or 7.2(a) of the Agreement or any notice
delivered by the Master Servicer pursuant to Section 7.1 of
the Agreement.
(iii) Daily Reports. Upon request by a VFC
Certificateholder, Daily Reports delivered by the Master
Servicer pursuant to subsection 4.2(a) of the Servicing
Agreement.
(iv) Settlement Statements; Quarterly Master
Servicer Certificates. All Monthly Settlement Statements,
Funding Period Settlement Statements and certificates
delivered by the Master Servicer pursuant to Sections 4.3
and 4.4 of the Servicing Agreement.
(v) Accountants' Letters. All letters delivered by
the Master Servicer's independent public accountants
pursuant to Section 4.5 of the Servicing Agreement.
(vi) SEC Filings by Master Servicer. All filings
with the Securities and Exchange Commission delivered by the
Master Servicer pursuant to subsection 4.14(d) of the
Servicing Agreement.
(g) Termination of Sellers. The Master Servicer
shall promptly notify each Rating Agency, concurrently with
its notification of the Trustee and the Enhancement
Provider, of the termination of any Seller pursuant to
Section 9.14 of the Receivables Sale Agreement.
SECTION 4C.3. Notices. Notices required to be
given to the VFC Certificateholders hereunder will be given
by first class mail to the address of such holders as they
appear in the Certificate Register, or, if expressly
required herein, by telephonic notice via a telephone or
telecopy number provided by each VFC Certificateholder to
the Trustee.
V. ARTICLE
ADDITIONAL EARLY AMORTIZATION EVENTS
A. SECTION 5.1 Additional Early Amortization
Events. If any one of the events specified in Section 7.1
of the Agreement (after any grace periods or consents
applicable thereto) shall occur during the Revolving Period,
an Early Amortization Event shall occur as provided in such
Section 7.1 of the Agreement if any one of the following
events shall occur during the Revolving Period with respect
to the VFC Certificates:
a) failure on the part of the Company to make
any payment (i) in respect of principal owing on any VFC
Certificates within one Business Day of the date such
principal is due, (ii) in respect of interest or fees owing
on any VFC Certificates within two Business Days of the date
such amount is due or (iii) in respect of any other amounts
owing by the Company under any Pooling and Servicing
Agreement or the Insurance Agreement to or for the benefit
of the VFC Certificateholders or the Enhancement Provider
within five Business Days of the date such other amount is
due;
b) failure on the part of the Company duly to
observe or perform in any material respect any covenants or
agreements of the Company set forth in any Pooling and
Servicing Agreement, the Insurance Agreement or any
Certificate Purchase Agreement which has a material adverse
effect on the Enhancement Provider or the VFC
Certificateholders (which determination shall be made
without regard to whether any Enhancement is then available
from any Enhancement Provider) which continues unremedied
for 30 days from the earlier of (i) the date upon which a
Responsible Officer of the Company obtains knowledge of such
failure or (ii) the date on which written notice of such
failure, requiring the same to be remedied, shall have been
given to the Company by the Trustee, or the Company and the
Trustee by the Control Party;
c) any representation or warranty made by the
Company in any Pooling and Servicing Agreement to or for the
benefit of the VFC Certificateholders or the Enhancement
Provider or in the Insurance Agreement or in any Certificate
Purchase Agreement (i) shall prove to have been incorrect in
any material respect when made or when delivered which
continues to be incorrect for a period of 30 days after the
day on which notice of such failure, requiring the same to
be remedied, shall have been given by the Trustee to the
Company (or the Control Party to the Company and the
Trustee) and (ii) as a result of such incorrectness, the
interests of the VFC Certificateholders (without giving
effect to the availability of any Enhancement) or the
Enhancement Provider are materially and adversely affected;
provided, however, that an Early Amortization Event with
respect to Series 1997-1 shall not be deemed to have
occurred under this paragraph if the incorrectness of such
representation or warranty gives rise to an obligation to
repurchase the related Receivables and the Company has
repurchased the related Receivable or all such Receivables,
if applicable, in accordance with the provisions of the
Pooling Agreement within five Business Days of when the
Company was obligated to do so;
d) the Allocated Receivables Amount shall be less
than the Target Receivables Amount for a period of five
consecutive days;
e) a Purchase Termination Event (as defined in the
Receivables Sales Agreement) which allows the Company to
cease purchasing Receivables from all Sellers thereunder
shall have occurred and be continuing under the Receivables
Sale Agreement;
f) as at the end of any Settlement Period, the Loss-
to-Liquidation Ratio shall exceed 4.5%;
g) as at the end of any Settlement Period, the
Delinquency Ratio shall exceed 5.0%;
h) as at the end of any Settlement Period, the
Default Ratio shall exceed 6.0%;
i) for any Settlement Period, Days Sales
Outstanding shall be more than 40 days;
j) as at the last date of any fiscal quarter of the
Company, Net Worth shall be less than an amount equal to (i)
10% times (ii) the Invested Amount;
k) a Servicer Default with respect to the Master
Servicer or any Significant Servicer shall have occurred and
be continuing or at any time a Servicer Default with respect
to three or more Servicers shall have occurred and be
continuing;
l) a Change in Control shall have occurred;
a) the Trust shall for any reason cease to have a
valid and perfected first priority undivided ownership or
security interest in the Trust Assets (subject to any
Permitted Liens);
m) any of the Pooling Agreement, the Servicing
Agreement, this Supplement or the Receivables Sale Agreement
shall cease, for any reason, to be in full force and effect,
or the Company shall so assert in writing;
n) the "Commitments" under (and as defined in) the
Revolving Credit Agreement of the Revolving Credit Lenders
thereunder shall have been terminated by the Revolving
Credit Lenders prior to their stated term or such Revolving
Credit Lenders shall have refused to make any extensions of
credit under the Revolving Credit Agreement for a period of
150 consecutive days following notice of such refusal
delivered to the borrowers thereunder; or
o) (i) any of Specialty Foods Corporation or the
Sellers shall default in the payment of principal of or
interest on any indebtedness in an aggregate amount, with
respect to such Person, at any one time equal to or
exceeding $10,000,000, which default continues unremedied
and unwaived for a period in excess of 60 days, or (ii)
indebtedness of SFC or any Seller becomes due prior to its
stated maturity in an aggregate amount, with respect to such
Person, equal to or exceeding $10,000,000;
then, after the applicable grace period, if any, set forth
in such subsections (notice of which event shall be given by
the Trustee to each Rating Agency to the extent that a
Responsible Officer has actual knowledge thereof) the
Control Party, by notice then given in writing to the
Company, the Master Servicer and the Trustee, may declare
that an early amortization event (an "Early Amortization
Event") has occurred as of the date of such notice with
respect to Series 1997-1.
VI. ARTICLE
SERVICING FEE
A. SECTION 6.1 Servicing Compensation. A monthly
servicing fee (the "Series 1997-1 Monthly Servicing Fee")
shall be payable to the Master Servicer, on behalf of the
Servicing Parties, on each Settlement Date for the Accrual
Period then ending, in an amount equal to the product of (a)
the Servicing Fee and (b) a fraction the numerator of which
is the daily average Adjusted Invested Amount for such
Accrual Period and the denominator of which is the daily
average of the Aggregate Adjusted Invested Amount for such
Accrual Period; provided, however, that if an Early
Amortization Period has commenced and Specialty Foods
Corporation is acting as Master Servicer, the Series 1997-1
Monthly Servicing Fee shall be deferred until all amounts
due under the VFC Certificates have been paid in full. The
Series 1997-1 Monthly Servicing Fee is the Monthly Servicing
Fee, referred to in Section 2.5 of the Servicing Agreement,
which is allocable to Series 1997-1.
ARTICLE VII
COVENANTS, REPRESENTATIONS AND WARRANTIES
A. SECTION 7.1 Representations and Warranties of
the Company and the Master Servicer. The Company and the
Master Servicer hereby represent and warrant to the
Enhancement Provider, the Trustee and each of the VFC
Certificateholders that each and all of their respective
representations and warranties contained in each of the
Pooling and Servicing Agreements is true and correct in all
material respects as of the date hereof.
A. SECTION 7.2 Covenants of the Company. The
Company hereby agrees that:
a) it shall observe each and all of its respective
covenants (both affirmative and negative) contained in each
Pooling and Servicing Agreement and Certificate Purchase
Agreement in all material respects;
a) it shall not terminate the Agreement unless in
strict compliance with the terms of the Agreement;
a) it shall not change in any material respect
the terms or provisions of the Policies so as to adversely
affect the general quality of the Receivables without the
prior written consent of the Control Party; and
a) it shall not make any change or modification (or
permit any change or modification to be made) in any
material respect to the Policies, except (i) if such changes
or modifications are necessary under any Requirement of Law
or (ii) if such changes or modifications are consented to by
the Enhancement Provider.
A. SECTION 7.3 Covenants of the Master Servicer.
The Master Servicer hereby agrees that: (a) it shall
observe each and all of its covenants (both affirmative and
negative) contained in each Pooling and Servicing Agreement
in all material respects; and (b) it shall deliver to each
VFC Certificateholder which is an Eligible Certificateholder
by 11:00 a.m. (New York City time) on the Determination Date
or Funding Period Determination Date prior to each
Settlement Date or Funding Period Settlement Date, a Monthly
Settlement Statement or Funding Period Settlement Statement,
as applicable.
A. SECTION 7.4 Additional Supplements. The
Company and the Master Servicer each hereby agrees that, so
long as the Enhancement Provider is the Control Party in
respect of the Series 1997-1, then no additional Supplement
shall be issued under the Agreement unless the Control Party
shall have consented to the form and substance of the
Principal Terms contained in such Supplement, which consent
shall not be unreasonably withheld (it being understood that
it is not unreasonable if the Control Party withholds such
consent because it determines in its sole discretion that
its rights would be diminished or otherwise adversely
affected under any of the Transaction Documents as a result
of the issuance of such Supplement).
ARTICLE VIII
MISCELLANEOUS
A. SECTION 8.1 Ratification of Agreement. As
supplemented by this Supplement, the Agreement is in all
respects ratified and confirmed and the Agreement as so
supplemented by this Supplement shall be read, taken and
construed as one and the same instrument.
A. SECTION 8.2 Governing Law. THIS SUPPLEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE
OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAW.
A. SECTION 8.3 Further Assurances. Each of the
Company and the Trustee agrees, from time to time, to do and
perform any and all acts and to execute any and all further
instruments required or reasonably requested by the Control
Party more fully to effect the purposes of this Supplement
and the sale of the VFC Certificates hereunder, including,
without limitation, in the case of the Company, the
execution of any financing statements or continuation
statements relating to the Receivables and the other Trust
Assets for filing under the provisions of the UCC of any
applicable jurisdiction.
A. SECTION 8.4 No Waiver; Cumulative Remedies. No
failure to exercise and no delay in exercising, on the part
of the Enhancement Provider, the Trustee or any VFC
Certificateholder, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exhaustive of any
rights, remedies, powers and privileges provided by law.
B. SECTION Amendments. This Supplement may
only be amended, supplemented or otherwise modified from
time to time if such amendment, supplement or modification
is effected in accordance with the provisions of Section
10.1 of the Agreement. The Master Servicer shall give each
VFC Certificateholder notice of any proposed amendment to
this Supplement or to the Agreement on or before the later
of (a) the date that is 10 days prior thereto and (b) the
date of any initial notice thereof is provided to the
Enhancement Provider.
A. SECTION 8.5 Notices. All notices, requests and
demands to or upon any party hereto to be effective shall be
given in the manner set forth (i) in the case of the
Company, the Master Servicer and the Trustee, in Section
10.5 of the Agreement and (ii) in the case of the
Enhancement Provider, at its address set forth below:
The Enhancement
Provider: Capital Markets Assurance Corporation
885 Third Avenue
New York, New York 10022
Attention: Head of Exposure
Management
Telecopy: (212) 755-5462
Any notice required or permitted to be mailed to a VFC
Certificateholder shall be given as provided in Section
4C.3.
a) SECTION 8.7 Successors and Assigns. This
Supplement 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 under this Supplement without the prior
written consent of the VFC Certificateholders.
b) Any VFC Certificateholder may, upon the
satisfaction of all applicable requirements under Section
5.3 of the Agreement, in the ordinary course of its business
and in accordance with applicable law, at any time sell to
one or more financial institutions or other entities
("Participants") participations in its VFC Certificate and
its rights hereunder pursuant to documentation in form and
substance satisfactory to such VFC Certificateholder and the
Participant. In the event of any such sale by a VFC
Certificateholder to a Participant, such VFC
Certificateholder's obligations under this Supplement shall
remain unchanged and such VFC Certificateholder shall remain
solely responsible for the performance thereof. The Company
agrees that each VFC Certificateholder is entitled, in its
own name, to enforce for the benefit of, or as agent for,
any Participant any and all rights, claims and interest of
such Participant in respect of the Trust and the Company's
obligations under this Supplement.
c) Any VFC Certificateholder may, in the
ordinary course of its business and in accordance with
applicable law, at any time sell all or any part of its
rights and obligations under this Supplement and the VFC
Certificates to (i) its Affiliates, any other VFC
Certificateholder, the Liquidity Agent or any Liquidity Bank
and (ii) with the prior consent of the Company, such consent
not to be unreasonably withheld, one or more banks or other
entities (an "Acquiring VFC Certificateholder"), but only to
the extent that (i) such Acquiring VFC Certificateholder
shall have also either acquired a corresponding share of
such assigning VFC Certificateholder's Commitment or
otherwise extended a Commitment to the Company on terms
acceptable to the Company and (ii) all requisite Commitment
Certifications shall have been delivered to the Trustee.
d) The Company and the Master Servicer each
authorizes each VFC Certificateholder to disclose to any
Participant or Acquiring VFC Certificateholder (each, a
"Transferee") and any prospective Transferee any and all
financial information in such VFC Certificateholder's
possession concerning the Company, any Servicing Party, any
Seller or the Receivables which has been delivered to such
VFC Certificateholder by the Company or the Master Servicer
pursuant to this Supplement or which has been delivered to
such VFC Certificateholder by or on behalf of the Company in
connection with such VFC Certificateholder's credit
evaluation of the Company, any Servicing Party, any Seller,
the Trust and the Trust Assets prior to becoming a party to
this Supplement; provided, however, if any such information
is subject to a confidentiality agreement between such VFC
Certificateholder and the Company or the Master Servicer,
the Transferee or prospective Transferee shall have agreed
to be bound by the terms and conditions of such
confidentiality agreement.
e) If, pursuant to this subsection, any
interest in this Supplement or the VFC Certificates is
transferred to any Transferee which is organized under the
laws of any jurisdiction other than the United States or any
State thereof, the transferor VFC Certificateholder shall
cause such Transferee, concurrently with the effectiveness
of such transfer, (i) to represent to the transferor VFC
Certificateholder (for the benefit of the transferor VFC
Certificateholder, the Trustee, the Company and the Master
Servicer) that under applicable law and treaties no taxes
will be required to be withheld by the Trustee, the Company,
the Master Servicer or the transferor VFC Certificateholder
with respect to any payments to be made to such Transferee
in respect of the VFC Certificates, (ii) to furnish to the
transferor VFC Certificateholder (and, in the case of any
Acquiring VFC Certificateholder not registered in the
Certificate Register, the Trustee and the Company) either
U.S. Internal Revenue Service Form 4224 or U.S. Internal
Revenue Service Form 1001 (wherein such Transferee claims
entitlement to complete exemption from U.S. federal
withholding tax on all interest payments hereunder) and
(iii) to agree (for the benefit of the transferor VFC
Certificateholder, the Trustee, the Company and the Master
Servicer) to provide the transferor VFC Certificateholder
(and, in the case of any Acquiring VFC Certificateholder not
registered in the Certificate Register, the Trustee, the
Company and the Master Servicer) a new Form 4224 or Form
1001 upon the expiration or obsolescence of any previously
delivered form and comparable statements in accordance with
applicable U.S. laws and regulations and amendments duly
executed and completed by such Transferee, and to comply
from time to time with all applicable U.S. laws and
regulations with regard to such withholding tax exemption.
f) The Transfer Agent and Registrar shall
not register the transfer of any VFC Certificate unless:
(i) the person in whose name the VFC Certificate
is to be registered upon transfer represents and warrants
that it, and each of the accounts for which it is
purchasing, is a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act), and
acknowledges that it has received such information
regarding the Trust and the VFC Certificates as it has
requested and that it is aware that the transferor is
relying upon the foregoing certification to claim the
exemption from registration provided by Rule 144A; or
(ii) the Trustee has received transfer
documentation from the holder of such VFC Certificate
indicating, and a written opinion of counsel acceptable to
the Company and the Trustee confirming, that the transfer
is being made pursuant to an exemption from, or a
transaction not otherwise subject to, the registration
requirements of the Securities Act, and such transaction
has been approved by the Company;
and such transferee further represents and warrants to the
Trustee as to one of the following:
(x) such transferee is an ERISA Entity; or
(y) such transferee is not an ERISA Entity.
For purposes of this paragraph (f), any such advice to the
Trustee in writing may be in the form of a letter, notice or
other written document and, with respect to clauses (i),
(ii) and (iii) and (x) and (y) above, the requirements of
such clauses will be deemed to be satisfied by appropriate
notation on the transfer notice set forth on such VFC
Certificate or by other written advice to the Trustee
stating in substance one of the entries on such transfer
notice.
g) The Transfer Agent and Registrar shall
not register any transfer of any VFC Certificate to an ERISA
Entity unless the Trustee determined that after giving
effect to such transfer no more than 25% of the VFC
Certificates are held by ERISA Entities.
A. SECTION 8.8 Counterparts. This Supplement may
be executed in any number of counterparts and by the
different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original,
and all of which taken together shall constitute one and the
same agreement.
A. SECTION 8.9 Enhancement Provider. The
Enhancement Provider shall have rights under the Agreement,
the Servicing Agreement and this Supplement (including the
right to withhold consents) only (a) if either (i) the
Enhancement Provider is then providing Enhancement for
Series 1997-1 or (ii) the Enhancement Provider is owed any
amounts in respect of the Principal/Interest Surety Bond and
(b) no Surety Default has occurred and is continuing.
A. SECTION 8.10 Administrative Agent for the
Issuer. The parties hereto acknowledge that Capital Markets
Assurance Corporation acts as Administrative Agent (the
"Administrative Agent") for the Issuer and that the
Administrative Agent may act on behalf of the Issuer under
this Supplement. To the extent the Administrative Agent so
acts, the Administrative Agent's performance of any
obligation of the Issuer under this Supplement will be
deemed to be performance of such obligation by the Issuer.
A. SECTION 8.11 No Bankruptcy Petition. Each VFC
Certificateholder, by its acquisition of a VFC Certificate,
agrees that, prior to the date that is one year and one day
after the later of (a) the last day of the Amortization
Period and (b) the last day of the Amortization Period of
any other Outstanding Series, it will not institute against,
or join any other Person in instituting against, the Company
any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other similar proceedings under
any federal or state bankruptcy or similar law.
A. SECTION 8.12 Costs and Expenses. The Company
agrees to pay all reasonable out-of-pocket expenses of the
Trustee (including, without limitation, reasonable fees and
disbursements of the Trustee's attorneys) in connection with
(i) the preparation, execution and delivery of this
Supplement, the Agreements and the other Transaction
Documents and amendments or waivers of any such documents
and (ii) enforcement by the Trustee of the obligations and
liabilities of the Company and the Master Servicer under the
Agreement, this Supplement and the related documents;
provided, however, that any payments made by the Company
pursuant to this Section shall be paid solely from Available
Funds, shall be non-recourse other than with respect to
Available Funds necessary to make such payments, and shall
not constitute a claim against the Company to the extent
that insufficient Available Funds exist to make such
payment.
ARTICLE IX
FINAL DISTRIBUTIONS
a) SECTION 9.1 Certain Distributions. Not later
than 2:00 p.m., New York City time, on the Distribution Date
following the date on which the proceeds are deposited into
the Series 1997-1 Non-Principal Collection Sub-subaccount
and the Series 1997-1 Principal Collection Sub-subaccount
pursuant to subsection 7.2(b) of the Agreement, the Trustee
shall distribute such amounts pursuant to Article III.
b) Notwithstanding anything to the contrary
in this Supplement or the Agreement, any distribution made
pursuant to this Section shall be deemed to be a final
distribution pursuant to Section 9.3 of the Agreement with
respect to the VFC Certificates.
IN WITNESS WHEREOF, the Company, the Master
Servicer and the Trustee have caused this Series 1997-1
Supplement to be duly executed by their respective officers
as of the day and year first above written.
SPECIALTY FOODS FINANCE CORPORATION, as Company
By:/s/ Peter L. Sereda
Title: Vice President, Treasurer
and Assistant Secretary
SPECIALTY FOODS CORPORATION
as Master Servicer
By: /s/ Peter L. Sereda
Title: Vice President and
Treasurer
THE CHASE MANHATTAN BANK, not in its
individual capacity but solely as Trustee
By:/s/ Dennis Kildea
Title: Trust Officer
Schedule 1
Trust Accounts
The Collection Account has been established by and
at The Chase Manhattan Bank, account number 323602762.
The Collection Account is for the account of The
Chase Manhattan Bank, as trustee for the SFC Master Trust.
Schedule 2
Cure Period
Trigger Date Applicable Subsection or event
30 days Pooling Agreement: Subsections
2.3(a), (b), (d), (e), (f) (first sentence),
(g) and (h)
10 days Pooling Agreement: Subsection 2.3(i)
0 days Pooling Agreement: Subsections
2.3(e) and (f) (second sentence)
10 days Pooling Agreement: Subsection
2.4(a)
5 days Pooling Agreement: Subsections
2.4(b) and (c)
30 days Pooling Agreement: Subsections
2.7(a), (b) (first sentence), (d), (i)
10 days Pooling Agreement: Subsection 2.7(c)
5 days Pooling Agreement: Subsections
2.7(b) (second two sentences), (f), (g) and
(h)
10 days Pooling Agreement: Section 2.8
(all subsections thereunder)
30 days Servicing Agreement: Sections 3.1,
3.2, 3.4, 3.5, 3.6 (first sentence)
10 days Servicing Agreement: Sections 3.3,
3.8, 3.9
5 days Servicing Agreement: Section 3.7
0 days Servicing Agreement: Section 3.6
(second sentence)
30 days Servicing Agreement: Sections 4.4,
4.5, 4.13, 5.1, 5.2
10 days Servicing Agreement: Sections 4.6,
4.7, 4.9, 4.12
5 days Servicing Agreement: Sections
4.2(b), 4.3, 4.8, 4.10, 4.11, 4.14, 5.3, 5.4
1 day Servicing Agreement: Section
4.2(a)
0 days Servicing Agreement: Section 4.1
30 days Receivables Sale Agreement:
Subsections 4.1(a), (b), (d), (e), (f) (first
sentence), (g), (h), (j) and (k)
10 days Receivables Sale Agreement:
Subsections 4.1(i), (l), (m), (n) and (o)
0 days Receivables Sale Agreement:
Subsections 4.1(c) and (f) (second sentence)
10 days Receivables Sale Agreement:
Subsection 4.2(a)
5 days Receivables Sale Agreement:
Subsections 4.2(b) and (c)
30 days Receivables Sale Agreement:
Sections 5.1, 5.2, 5.3, 5.4, 5.8 and 5.13
10 days Receivables Sale Agreement:
Sections 5.5, 5.6, 5.7, 5.11 and 5.12
1 day Receivables Sale Agreement:
Sections 5.9, 5.10 and 5.14
10 days Receivables Sale Agreement:
Sections 6.4, 6.5, 6.6, 6.7, 6.8, 6.9 and
6.10
5 days Receivables Sale Agreement:
Sections 6.1, 6.2 and 6.3
30 days Insurance Agreement: Section 3.1
(all subsections except (c) and (g))
10 days Insurance Agreement: Subsection
3.1(g)
0 days Insurance Agreement: Subsection
3.1(c)
10 days Insurance Agreement: Section 4.1
(all subsections except (c))
5 days Insurance Agreement: Subsection
4.1(c)
5 days Occurrence of a Master
Servicer Consolidation Event
196014.05 03/24/97 8:23 AM
EXHIBIT 10.30
10
11
Doc#:DS3:499362.1 31-073
Doc#:DS3:499362.1 31-073
AMENDMENT NO. 1 TO SFC MASTER TRUST
POOLING AND SERVICING AGREEMENTS
Amendment, dated as of December 16, 1996 (this
"Amendment") to each of:
(a) the Pooling Agreement, dated as of November 16,
1994 (the "Pooling Agreement"), among Specialty Foods
Finance Corporation, a Delaware corporation (the "Company"),
Specialty Foods Corporation, a Delaware corporation, as
master servicer (the "Master Servicer"), and The Chase
Manhattan Bank (formerly known as Chemical Bank), as trustee
(in such capacity, the "Trustee"); and
(b) the Servicing Agreement, dated as of November 16,
1994, among the Company, the Master Servicer, each of the
subsidiaries of the Master Servicer from time to time party
thereto (each a "Servicer") and the Trustee.
W I T N E S S E T H :
WHEREAS, the parties hereto wish to amend the Pooling
Agreement and the Servicing Agreement in the manner provided for
in this Amendment.
NOW, THEREFORE, the parties hereto hereby agree as
follows:
1. Defined Terms. Unless otherwise defined herein,
terms defined in the Pooling Agreement or the Servicing Agreement
shall have their defined meanings when used herein, as the
context requires.
2. Amendment of the Pooling Agreement. The Pooling
Agreement is hereby amended as follows:
(a) Exhibit F to the Pooling Agreement (Form of Annual
Opinion of Counsel) is hereby amended by replacing such
exhibit in its entirety with the exhibit attached hereto as
Annex A.
(b) Subsection 2.8(g) of the Pooling Agreement is
hereby amended by deleting such subsection in its entirety
and inserting in lieu thereof the following:
"(g) Business of the Company. Engage at any time
in any business or business activity other than the
acquisition of Receivables pursuant to the Receivables Sale
Agreement, the assignments and transfers hereunder and the
other transactions contemplated by the Transaction
Documents, and any activity incidental to the foregoing and
necessary or convenient to accomplish the foregoing, or
enter into or be a party to any agreement or instrument
other than in connection with the foregoing, except those
activities, agreements or instruments set forth on Schedule
5 or otherwise consented to pursuant to an amendment
authorized by Section 10 herein.
(c) Subsection 9.4(b) of the Pooling Agreement is
hereby deleted in its entirety.
Nothing in this Amendment shall prevent the Master Servicer, the
Company and the Trustee with the consent of each Enhancement
Provider from amending (in accordance with Section 10.1(a) of the
Pooling Agreement) the Pooling Agreement to authorize the sale of
any Receivables by the Trust to the Company or any third party
(other than any Seller) upon the termination of such Seller
pursuant to and in accordance with the terms and conditions set
forth in Section 9.14 of the Receivables Sale Agreement.
3. Amendment of the Servicing Agreement. The
Servicing Agreement is hereby amended as follows: Article II of
the Servicing Agreement is hereby amended by adding the following
paragraph after Section 2.6:
"2.7. Termination of Servicers. Upon the termination
of a Seller pursuant to Section 9.14 of the Receivables Sale
Agreement, such Seller shall automatically be terminated as
a Servicer for all purposes hereunder without any action on
any Person's part."
4. Conditions to Effectiveness. This Amendment shall
become effective upon receipt by the Trustee of:
(a) a counterpart hereof, duly executed and delivered
by each of the Company, the Master Servicer, the Servicers
and the Trustee;
(b) a consent to this Amendment, in the form of Annex
B, from Capital Markets Assurance Corporation, as the
Enhancement Provider and the Control Party for each of the
Term Certificates, Series 1994-1, and the VFC Certificates,
Series 1996-1;
(c) an officer's certificate of a Responsible Officer
of the Company certifying that this Amendment shall not
adversely affect in any material respect the interests of
the Series 1994-1 Term Certificateholders or the Series 1996-
1 Initial VFC Certificateholder;
(d) a secretary's certificate from each of the Company
and the Master Servicer certifying (i) board resolutions
authorizing the execution and delivery of this Amendment,
(ii) the incumbency of the natural persons authorized to
execute and deliver this Amendment, (iii) the charter and
bylaws of the Company or the Master Servicer, as the case
may be, being correct and in full force and effect and (iv)
copies of "good standing" certificates issued by the
Secretary of State of the State of Delaware, certifying that
each of the Company and the Master Servicer, as the case may
be, is in good standing and has paid all taxes due to the
State of Delaware, and including as annexes thereto the
certificate of incorporation of the Company or the Master
Servicer, as the case may be;
(e) an opinion of counsel of Paul, Weiss, Rifkind,
Wharton & Garrison, counsel to the Company and the Master
Servicer, opining as to (i) this Amendment being authorized
pursuant to the Pooling Agreement, the Series 1994-1
Supplement and the Series 1996-1 Supplement, and (ii) all
conditions precedent to the execution, delivery and
performance of this Amendment being satisfied in full; and
(f) written confirmation from each of Standard &
Poor's Corporation and Moody's Investors Service Inc.
stating that the execution and delivery of this Amendment
will not result in a reduction or withdrawal of the rating
of the Term Certificates.
5. Continuing Effect of the Pooling Agreement and
Servicing Agreement. Except as expressly amended, modified and
supplemented hereby, the provisions of the Pooling Agreement and
Servicing Agreement are and shall remain in full force and
effect.
6. GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAW.
7. Counterparts. This Amendment may be executed in
two or more counterparts (and by different parties on separate
counterparts), each of which shall be an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this
Amendment to be duly executed by their respective officers as of
the day and year first above written.
SPECIALTY FOODS FINANCE CORPORATION
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
SPECIALTY FOODS CORPORATION, as Master
Servicer
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
THE CHASE MANHATTAN BANK, as Trustee
By: /s/ Dennis Kildea
Name: Dennis Kildea
Title Trust Officer
BLOCH & GUGGENHEIMER, INC.
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
BURNS & RICKER, INC.
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
B & G FOODS, INC.
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
GAI'S SEATTLE FRENCH BAKING COMPANY
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
H&M FOOD SYSTEMS COMPANY, INC.
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
LANGENDORF BAKING CO. OF SEATTLE, INC.
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
METZ BAKING COMPANY (DE)
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
METZ BAKING COMPANY (IOWA)
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
MOTHER'S CAKE & COOKIE CO.
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
ROSELAND MANUFACTURING, INC.
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
SAN FRANCISCO SOURDOUGH BAKERIES
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
STELLA FOODS EAST, INC.
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
STELLA FOODS, INC.
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
TBP HOLDINGS, INC.
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
ANNEX A
EXHIBIT F TO
POOLING AGREEMENT
FORM OF ANNUAL OPINION OF COUNSEL
PROVISIONS TO BE INCLUDED
IN ANNUAL OPINION OF COUNSEL DELIVERED PURSUANT
TO SECTION 10.2(b) OF THE POOLING AGREEMENT
The opinion set forth below, which is to be delivered
pursuant to Section 10.2(b) of the Pooling Agreement, dated as of
November 16, 1994, among Specialty Foods Finance Corporation (the
"Company"), Specialty Foods Corporation, as Master Servicer, and
The Chase Manhattan Bank (formerly known as Chemical Bank), as
Trustee, may be subject to certain qualifications, assumptions,
limitations and exceptions taken or made in the opinion of
counsel delivered on the Initial Closing Date with respect to
similar matters.
1. With respect to the transfer by the Sellers to the
Company of all of such Sellers' right, title and interest in, to
and under the Receivables, Related Property and proceeds of each
thereof pursuant to the terms of the Amended and Restated
Receivables Sale Agreement, dated as of November 16, 1994 (as
amended, supplemented or otherwise modified, the "Receivables
Sale Agreement), among the Company, the Master Servicer and each
Subsidiary of the Master Servicer from time to time party thereto
(each a "Seller"), no filing or other action, other than such
filing or action described in such opinion, is necessary from the
date of such opinion through 90 days into the following calendar
year to continue the perfected and priority status of the
interest of the Company in such Receivables, Related Property and
proceeds of each thereof (collectively, the "Sellers' Property").
2. With respect to the transfer by the Company to the
Trust of all of Company's right, title and interest in, to and
under the Receivables, Related Property, proceeds of each
thereof, the Receivables Sale Agreement and the other Trust
Assets pursuant to the terms of the Pooling Agreement, no filing
or other action, other than such filing or action described in
such opinion, is necessary from the date of such opinion through
90 days into the following calendar year to continue the
perfected and priority status of the interest of the Trust in
such Receivables, Related Property, proceeds of each thereof, the
Receivables Sale Agreement and the other Trust Assets (the "Trust
Property").
3. Set forth on Schedule A to this opinion is a list
of all UCC Financing Statements which have been filed by the
Sellers relating to the Sellers' Property and by the Company
relating to the Trust Property (collectively, the "Filed UCC
Financing Statements") and the earliest and latest date under the
applicable UCC on which continuation statements may be filed for
each such financing statement.1
4. Set forth on Schedule B hereto are all changes
made by any Seller and the Company of its name, identity or
corporate structure since the date of the most recent Annual
Opinion of Counsel delivered. Each Seller or the Company, as the
case may be, has timely filed amendments to the applicable Filed
UCC Financing Statements reflecting any such change.
ANNEX B
[FORM OF CONSENT]
The Chase Manhattan Bank,
as Trustee
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Structured Finance Services (ABS)
Dear Sirs:
We refer to the Amendment, dated as of December 16,
1996 (the "Amendment"), to each of: (a) the Pooling Agreement,
dated as of November 16, 1994 (the "Pooling Agreement"), among
Specialty Foods Finance Corporation, a Delaware corporation (the
"Company"), Specialty Foods Corporation, a Delaware corporation,
as master servicer (the "Master Servicer"), and The Chase
Manhattan Bank (formerly known as Chemical Bank), as trustee (in
such capacity, the "Trustee"), and (b) the Servicing Agreement,
dated as of November 16, 1994, among the Company, the Master
Servicer, each of the subsidiaries of the Master Servicer from
time to time party thereto (each a "Servicer") and the Trustee.
We hereby certify that we have been given adequate notice
pursuant to Section 10.1 of the Pooling Agreement, Section 8.5 of
the Series 1994-1 Supplement and Section 9.5 of the Series 1996-1
Supplement.
We hereby consent to the execution and delivery of the
Amendment (substantially in the form previously distributed to
us) by the Company, the Master Servicer, the Servicers and the
Trustee on our behalf.
Sincerely,
CAPITAL MARKETS ASSURANCE CORPORATION
By:
Name:
Title:
Dated: December __, 1996
EXHIBIT 10.31
AMENDMENT NO. 2 TO SFC MASTER TRUST
POOLING AGREEMENT
Amendment, dated as of December 27 1996 (the
"Amendment") to the Pooling Agreement, dated as of November
16, 1994 (as amended the "Pooling Agreement"), among
Specialty Foods Finance Corporation, a Delaware corporation
(the "Company"), Specialty Foods Corporation, a Delaware
corporation, as master servicer (the "Master Servicer"), and
The Chase Manhattan Bank (formerly known as Chemical Bank),
as trustee (in such capacity, the "Trustee").
W I T N E S S E T H :
WHEREAS, the Company has informed the Trustee that it
would like to sell those Receivables originated by the 1996
Terminated Sellers (as defined below);
WHEREAS, such sale would be a repurchase of assets
previously sold to the Trust by the Company;
WHEREAS, the Trustee has agreed to accept the
Company's offer to purchase such Receivables;
WHEREAS, the parties hereto wish to amend the Pooling
Agreement in the manner provided for in this Amendment.
NOW, THEREFORE, the parties hereto hereby agree as
follows:
1. Defined Terms. Unless otherwise defined herein,
terms defined in the Pooling Agreement shall have their
defined meanings when used herein, as the context requires.
2. Amendment of the Pooling Agreement. The Pooling
Agreement is hereby amended as follows:
(a) Article X of the Pooling
Agreement is hereby amended by adding
the following paragraph after Section
10.21:
(i) "10.22 Termination
of Certain Sellers. In accordance with
Section 2.8(g) hereof, as amended by
Amendment No. 1 to the Pooling
Agreement, and the procedure set forth
in Section 10.1 hereof, the Trustee
acknowledges that as of the 1996 Seller
Termination Date (as defined herein),
Burns & Ricker, Inc., B&G Foods, Inc.,
Bloch & Guggenheimer, Inc., and Roseland
Manufacturing, Inc. (the "1996
Terminated Sellers") will be terminated
as Sellers pursuant to Section 9.14 of
the Amended and Restated Receivables
Sale Agreement (as amended by Amendment
No. 2 thereto) and as Servicers under
the Servicing Agreement.
Upon the 1996 Seller Termination Date
and simultaneously with the payment to
the Trustee of the Purchase Price (as
defined below), the Trustee agrees to
sell, assign and convey to the Company
(without recourse, representation or
warranty) all right, title and interest
of the Trust in the Receivables
originated by the 1996 Terminated
Sellers and other Trust Assets related
to such Receivables originated by a 1996
Terminated Seller, and all proceeds
thereof. Upon receipt of the Purchase
Price, the Trustee shall deposit such
funds in the Collection Account and
shall treat them as Collections for all
purposes hereunder. The Trustee shall
also (i) notify The Bank of New York, as
the the lockbox bank, of the termination
of the Lockbox Account (The Bank of New
York - Account No. 8900208228), (ii)
execute a Master Bill of Sale and
Assignment for the Receivables of each
1996 Terminated Seller and (iii) sign
and deliver to the Company for filing
the necessary UCC financing statements
releasing the liens against the 1996
Terminated Sellers.
In accordance with Section 2.8(g)
hereof, the Company shall be permitted
to assign and convey such Receivables,
other Trust Assets and proceeds to (A) B
Companies Acquisition Corp. and/or (B)
any affiliate of B Companies Acquisition
Corp., in exchange for the Purchase
Price. For purposes of this section the
"Purchase Price" means with respect to
each 1996 Terminated Seller an amount of
immediately available funds equal to the
product of (x) the then aggregate
outstanding Principal Amount of
Receivables of such Seller (which is
understood to be net of Charge-Offs)
multiplied by (y) the most recent
Discounted Percentage with respect to
the Receivables of such 1996 Terminated
Seller as determined in accordance with
Schedule 3 of the Receivables Sale
Agreement (the "Purchase Price").
(b) Article 1 of the Pooling
Agreement is hereby further amended to
add the following definition after the
definition of "Mother's":
""1996 Seller Termination Date" shall
mean December __, 1996."
3. Conditions to Effectiveness. This Amendment
shall become effective upon receipt by the Trustee of:
(a) The Purchase Price;
(b) a counterpart hereof, duly
executed and delivered by each of the
Company, the Master Servicer, the Servicers
and the Trustee;
(c) a consent to this Amendment,
in the form of Annex A, from Capital Markets
Assurance Corporation, as the Enhancement
Provider and the Control Party for each of
the Term Certificates, Series 1994-1, and VFC
Certificates, Series 1996-1;
(d) a secretary's certificate
from each of the Company and the Master
Servicer certifying (i) board resolutions
authorizing the execution and delivery of
this Amendment, (ii) the incumbency of the
natural persons authorized to execute and
deliver this Amendment, (iii) the charter and
bylaws of the Company or the Master Servicer,
as the case may be, being correct and in full
force and effect and (iv) copies of "good
standing" certificates issued by the
Secretary of State of the State of Delaware,
certifying that each of the Company and the
Master Servicer, as the case may be, is in
good standing and has paid all taxes due to
the State of Delaware, and including as
annexes thereto the certificate of
incorporation of the Company or the Master
Servicer, as the case may be;
(e) an officer's certificate of
a Responsible Officer of the Company
certifying that this Amendment shall not
adversely affect in any material respect the
interests of the Series 1994-1 Term
Certificateholders or the Series 1996-1
Initial VFC Certificateholder;
(f) an opinion of counsel of
Paul, Weiss, Rifkind, Wharton & Garrison,
counsel to the Company and the Master
Servicer, opining as to (i) this Amendment
being authorized pursuant to the Pooling
Agreement, the Series 1994-1 Supplement and
the Series 1996-1 Supplement, and (ii) all
conditions precedent to the execution,
delivery and performance of this Amendment
being satisfied in full; and
(g) written confirmation from
each of Standard & Poor's Corporation and
Moody's Investors Service Inc. stating that
the execution and delivery of this Amendment
will not result in a reduction or withdrawal
of the rating of the Term Certificates.
4. Continuing Effect of the Pooling
Agreement. Except as expressly amended,
modified and supplemented hereby, the
provisions of the Pooling Agreement are and
shall remain in full force and effect.
5. GOVERNING LAW. THIS AMENDMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAW.
6. Counterparts. This Amendment may
be executed in two or more counterparts (and
by different parties on separate
counterparts), each of which shall be an
original, but all of which together shall
constitute one and the same instrument
IN WITNESS WHEREOF, the parties have
caused this Amendment to be duly executed by
their respective officers as of the day and
year first above written.
SPECIALTY FOODS FINANCE CORPORATION
By: /s/Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
SPECIALTY FOODS CORPORATION, as Master
Servicer
By: /s/Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
THE CHASE MANHATTAN BANK, as Trustee
By: /s/Dennis Kildea
Name: Dennis Kildea
Title: Trust Officer
Annex A
[FORM OF CONSENT]
Consent of Capital Markets Assurance Corporation
The Chase Manhattan Bank,
as Trustee
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Structured Finance Services (ABS)
Dear Sirs:
We refer to the Amendment, dated as of December ___,
1996 (the "Amendment"), to the Pooling Agreement, dated as
of November 16, 1994 (the "Pooling Agreement"), among
Specialty Foods Finance Corporation, a Delaware corporation
(the "Company"), Specialty Foods Corporation, a Delaware
corporation, as master servicer the "Master Servicer"), and
The Chase Manhattan Bank (formerly known as Chemical Bank),
as trustee (in such capacity, the "Trustee"). We hereby
certify that we have been given adequate notice pursuant to
Section 10.1 of the Pooling Agreement, Section 8.5 of the
Series 1994-1 Supplement and Section 9.5 of the Series 1996-
1 Supplement.
We hereby consent to the execution and delivery of
the Amendment (substantially in the form previously
distributed to us) by the Company, the Master Servicer and
the Trustee on our behalf.
Sincerely,
CAPITAL MARKETS ASSURANCE CORPORATION
By:
Name:
Title:
Dated: December ____, 1996
EXHIBIT 10.32
Doc#:DS3:461453.4 23-116
Doc#:DS3:461453.4 23-116
AMENDMENT NO. 3 TO SFC MASTER TRUST
POOLING AGREEMENT
Amendment, dated as of February 24, 1997 (the
"Amendment") to the Pooling Agreement, dated as of November
16, 1994, as amended (the "Pooling Agreement"), by and among
Specialty Foods Finance Corporation, a Delaware corporation
(the "Company"), Specialty Foods Corporation, a Delaware
corporation, as master servicer (the "Master Servicer"), and
The Chase Manhattan Bank (formerly known as Chemical Bank),
as trustee (in such capacity, the "Trustee").
W I T N E S S E T H :
WHEREAS, the Company has informed the Trustee that it
desires to sell those Receivables originated by the 1997
Terminated Sellers (as defined below);
WHEREAS, such sale would be a repurchase of
receivables previously sold to the Trust by the Company;
WHEREAS, the Trustee has agreed to accept the
Company's offer to purchase such Receivables;
WHEREAS, the parties hereto wish to amend the Pooling
Agreement in the manner provided for in this Amendment.
NOW, THEREFORE, the parties hereto hereby agree as
follows:
1. Defined Terms. Capitalized terms not defined
herein shall have the meanings ascribed to them in the
Pooling Agreement, supplemented by the Series 1994-1
Supplement, dated as of November 16, 1994, by and among the
Company, the Master Servicer and the Trustee, and the Series
1997-1 Supplement, dated as of January 31, 1997, by and
among the Company, the Master Servicer and the Trustee.
2. Amendment of the Pooling Agreement. The Pooling
Agreement is hereby amended as follows:
(a) Article X of the Pooling
Agreement is hereby amended by adding
the following paragraph after Section
10.22:
(i) "10.23 Termination
of Certain Sellers. In accordance with
Section 2.8(g) hereof, as amended by
Amendment No. 1 to the Pooling
Agreement, and the procedure set forth
in Section 10.1 hereof, the Trustee
acknowledges that as of the 1997 Seller
Termination Date (as defined herein),
Gai's Seattle French Baking Company,
Langendorf Baking Co. of Seattle, Inc.
and TBP, Inc. (formerly, The Bagel
Place, Inc.) (the "1997 Terminated
Sellers") will be terminated as Sellers
pursuant to Section 9.14 of the Amended
and Restated Receivables Sale Agreement
(as amended by Amendment No. 3 thereto)
and as Servicers under the Servicing
Agreement.
Upon the 1997 Seller Termination Date
and simultaneously with the payment to
the Trustee of the Purchase Price (as
defined below), the Trustee agrees to
sell, assign and convey to the Company
(without recourse, representation or
warranty) all right, title and interest
of the Trust in the Receivables
originated by the 1997 Terminated
Sellers and other Trust Assets related
to such Receivables originated by each
1997 Terminated Seller, and all proceeds
thereof. Upon receipt of the Purchase
Price, the Trustee shall deposit such
funds in the Collection Account and
shall treat them as Collections for all
purposes hereunder. The Trustee shall
also (i) notify the Seafirst Bank and
Wells Fargo Bank, the lockbox banks, of
the termination of the Lockbox Accounts
(Seafirst Bank - Account No. 67605808,
and Wells Fargo Bank - Account No.
4518073499), (ii) execute a Master Bill
of Sale and Assignment for the
Receivables of each 1997 Terminated
Seller and (iii) sign and deliver to the
Company for filing the necessary UCC
financing statements releasing the liens
against the 1997 Terminated Sellers.
In accordance with Section 2.8(g)
hereof, the Company shall be permitted
to assign and convey such Receivables,
and other Trust Assets and proceeds
related to such Receivables to (A)
United States Bakery and/or (B) any
affiliate of United States Bakery, in
exchange for the Purchase Price. For
purposes of this section the "Purchase
Price" means with respect to each 1997
Terminated Seller an amount of
immediately available funds equal to the
product of (x) the then aggregate
outstanding Principal Amount of
Receivables of such Seller (which is
understood to be net of Charge-Offs)
multiplied by (y) the most recent
Discounted Percentage with respect to
the Receivables of such 1997 Terminated
Seller as determined in accordance with
Schedule 3 of the Receivables Sale
Agreement (the "Purchase Price").
(b) Article 1 of the Pooling
Agreement is hereby further amended to
add the following definition after the
definition of "Mother's":
""1997 Seller Termination Date" shall
mean February __, 1997."
3. Conditions to Effectiveness. This Amendment
shall become effective upon receipt by the Trustee of:
(a) The Purchase Price;
(b) a counterpart hereof, duly
executed and delivered by each of the
Company, the Master Servicer, the Servicers
and the Trustee;
(c) a consent to this Amendment,
in the form of Annex A, from Capital Markets
Assurance Corporation, as the Enhancement
Provider and the Control Party for each of
the Term Certificates, Series 1994-1, and VFC
Certificates, Series 1997-1;
(d) a secretary's certificate
from each of the Company and the Master
Servicer certifying (i) board resolutions
authorizing the execution and delivery of
this Amendment, (ii) the incumbency of the
natural persons authorized to execute and
deliver this Amendment, (iii) the charter and
bylaws of the Company or the Master Servicer,
as the case may be, being correct and in full
force and effect and (iv) copies of "good
standing" certificates issued by the
Secretary of State of the State of Delaware,
certifying that each of the Company and the
Master Servicer, as the case may be, is in
good standing and has paid all taxes due to
the State of Delaware, and including as
annexes thereto the certificate of
incorporation of the Company or the Master
Servicer, as the case may be;
(e) an officer's certificate of
a Responsible Officer of the Company
certifying that this Amendment shall not
adversely affect in any material respect the
interests of the Series 1994-1 Term
Certificateholders or the Series 1997-1 VFC
Certificateholders;
(f) an opinion of counsel of
Paul, Weiss, Rifkind, Wharton & Garrison,
counsel to the Company and the Master
Servicer, opining as to (i) this Amendment
being authorized pursuant to the Pooling
Agreement, the Series 1994-1 Supplement and
the Series 1997-1 Supplement, and (ii) all
conditions precedent to the execution,
delivery and performance of this Amendment
being satisfied in full; and
(g) written confirmation from
each of Standard & Poor's Corporation and
Moody's Investors Service Inc. stating that
the execution and delivery of this Amendment
will not result in a reduction or withdrawal
of the rating, if any, of the Term
Certificates and the VFC Certificates.
4. Continuing Effect of the Pooling
Agreement. Except as expressly amended,
modified and supplemented hereby, the
provisions of the Pooling Agreement are and
shall remain in full force and effect.
5. GOVERNING LAW. THIS AMENDMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAW.
6. Counterparts. This Amendment may
be executed in two or more counterparts (and
by different parties on separate
counterparts), each of which shall be an
original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have
caused this Amendment to be duly executed by
their respective officers as of the day and
year first above written.
SPECIALTY FOODS FINANCE CORPORATION
By: /s/Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
SPECIALTY FOODS CORPORATION, as Master
Servicer
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
THE CHASE MANHATTAN BANK, as Trustee
By: /s/ Dennis Kildea
Name: Dennis Kildea
Title: Trust Officer
Annex A
[FORM OF CONSENT]
Consent of Capital Markets Assurance Corporation
The Chase Manhattan Bank,
as Trustee
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Structured Finance Services (ABS)
Dear Sirs:
We refer to the Amendment, dated as of
February ___, 1997 (the "Amendment"), to the Pooling Agreement,
dated as of November 16, 1994, as amended (the "Pooling
Agreement"), by and among Specialty Foods Finance Corporation,
a Delaware corporation (the "Company"), Specialty Foods
Corporation, a Delaware corporation, as master servicer (the
"Master Servicer"), and The Chase Manhattan Bank (formerly
known as Chemical Bank), as trustee (in such capacity, the
"Trustee"). We hereby certify that we have been given or have
duly waived adequate notice pursuant to Section 10.1 of the
Pooling Agreement, Section 8.5 of the Series 1994-1 Supplement,
dated as of November 16, 1994, by and among the Company, the
Master Servicer and the Trustee and Section 8.5 of the Series
1997-1 Supplement, dated as of January 31, 1997, by and among
the Company, the Master Servicer and the Trustee.
We hereby consent to the execution and
delivery of the Amendment (substantially in the form previously
distributed to us) by the Company, the Master Servicer and the
Trustee on our behalf.
Sincerely,
CAPITAL MARKETS ASSURANCE
CORPORATION
By:
Name:
Title:
Dated: February ____, 1997
EXHIBIT 10.33
Doc#:DS3:499372.1 31-073
Doc#:DS3:499372.1 31-073
AMENDMENT NO. 1 TO
AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT
Amendment, dated as of December 16, 1996 (this
"Amendment") to the Amended and Restated Receivables Sale
Agreement, dated as of November 16, 1994 (the "Receivables Sale
Agreement") among Specialty Foods Finance Corporation, a Delaware
corporation (the "Company"), Specialty Foods Corporation, a
Delaware corporation, as master servicer (the "Master Servicer")
and each of the subsidiaries of the Master Servicer from time to
time party thereto (each a "Seller").
W I T N E S S E T H :
WHEREAS, the parties hereto wish to amend the
Receivables Sale Agreement in the manner provided for in this
Amendment;
NOW, THEREFORE, the parties hereto hereby agree as
follows:
1. Defined Terms. Unless otherwise defined herein,
terms defined in the Receivables Sale Agreement shall have their
defined meanings when used herein, as the context requires.
2. Amendment of the Receivables Sale Agreement. The
Receivables Sale Agreement is hereby amended as follows: Article
VII of the Receivables Sale Agreement is hereby amended by adding
the following paragraph after Section 7(e):
"(f) a Responsible Officer of any Seller receives
notice or becomes aware that a notice of Lien has been filed
by the PBGC against such Seller, the Company or the Trust
under Section 412(n) of the Internal Revenue Code or Section
302(f) of ERISA for a failure to make a required installment
or other payment to a plan to which Section 412(n) of the
Internal Revenue Code or Section 302(f) of ERISA applies;
or".
3. Conditions to Effectiveness. This Amendment shall
become effective upon receipt by the Trustee of:
(a) a counterpart hereof, duly executed and delivered
by each of the Company, the Master Servicer and the Sellers;
and
(b) a consent to this Amendment, in the form of Annex
A, from Capital Markets Assurance Corporation, as the
Enhancement Provider for each of the Term Certificates,
Series 1994-1, and the VFC Certificates, Series 1996-1.
4. Continuing Effect of the Receivables Sale
Agreement. Except as expressly amended, modified and
supplemented hereby, the provisions of the Receivables Sale
Agreement are and shall remain in full force and effect.
5. GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAW.
6. Counterparts. This Amendment may be executed in
two or more counterparts (and by different parties on separate
counterparts), each of which shall be an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this
Amendment to be duly executed by their respective officers as of
the day and year first above written.
SPECIALTY FOODS FINANCE CORPORATION
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
SPECIALTY FOODS CORPORATION, as Master
Servicer
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
BLOCH & GUGGENHEIMER, INC.
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
BURNS & RICKER, INC.
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
B & G FOODS, INC.
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
GAI'S SEATTLE FRENCH BAKING COMPANY
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
H&M FOOD SYSTEMS COMPANY, INC.
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
LANGENDORF BAKING CO. OF SEATTLE, INC.
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
METZ BAKING COMPANY (DE)
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
METZ BAKING COMPANY (IOWA)
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
MOTHER'S CAKE & COOKIE CO.
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
ROSELAND MANUFACTURING, INC.
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
SAN FRANCISCO SOURDOUGH BAKERIES
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
STELLA FOODS EAST, INC.
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
STELLA FOODS, INC.
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
TBP HOLDINGS, INC.
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
ANNEX A
[FORM OF CONSENT]
The Chase Manhattan Bank,
as Trustee
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Structured Finance Services (ABS)
Dear Sirs:
We refer to the Amendment, dated as of December 16,
1996 (the "Amendment"), to the Amended and Restated Receivables
Sale Agreement, dated as of November 16, 1994 (the "Receivables
Sale Agreement") among Specialty Foods Finance Corporation, a
Delaware corporation (the "Company"), Specialty Foods
Corporation, a Delaware corporation, as master servicer (the
"Master Servicer"), and each of the subsidiaries of the Master
Servicer from time to time party thereto. We hereby certify that
we have been given adequate notice pursuant to Section 10.1 of
the Pooling Agreement.
We hereby consent to the execution and delivery of the
Amendment (substantially in the form previously distributed to
us) by the Company, the Master Servicer and the Sellers on our
behalf.
Sincerely,
CAPITAL MARKETS ASSURANCE CORPORATION
By:
Name:
Title:
Dated: December __, 1996
EXHIBIT 10.34
2
3
Doc#:DS3:499379.1 31-073
Doc#:DS3:499379.1 31-073
EXECUTION COPY
AMENDMENT NO. 1 TO
SERIES 1996-1 SUPPLEMENT
AMENDMENT No. 1, dated as of November 29, 1996 (this
"Amendment"), to the Series 1996-1 Supplement, dated as of August
1, 1996 (the "Series 1996-1 Supplement"), among Specialty Foods
Finance Corporation, a Delaware corporation (the "Company"),
Specialty Foods Corporation, a Delaware corporation, as master
servicer (the "Master Servicer"), The Chase Manhattan Bank, as
initial VFC Certificateholder (the "Initial VFC
Certificateholder"), and The Chase Manhattan Bank, as trustee (in
such capacity, the "Trustee"), which supplements the Pooling
Agreement, dated as of November 16, 1994 (the "Pooling
Agreement"), among the Company, the Master Servicer and the
Trustee.
W I T N E S S E T H :
WHEREAS, the Company, the Master Servicer, the Initial
VFC Certificateholder and the Trustee wish to amend the Series
1996-1 Supplement in the manner provided for in this Amendment.
NOW, THEREFORE, the parties hereto hereby agree as
follows:
1. Defined Terms. Unless otherwise defined herein,
terms defined in the Pooling Agreement or the Series 1996-1
Supplement, as the case may be, shall have their defined meanings
when used herein.
2. Amendment of Section 1.1. The definition of
"Scheduled Termination Date" is amended by deleting the text,
"December 1, 1996" and substituting in its place the text,
"December 16, 1996".
3. Conditions to Effectiveness. This Amendment shall
become effective upon receipt by the Trustee of:
a. a counterpart hereof, duly executed and
delivered by each of the Company, the Master Servicer, the
Initial VFC Certificateholder and the Trustee;
b. a consent to this Amendment, in the form of
Annex A, from the Enhancement Provider;
c. an Officer's Certificate of a Responsible
Officer of the Company certifying that this Amendment shall
not adversely affect the interests of the VFC
Certificateholders;
d. an Opinion of Counsel by Paul, Weiss, Rifkind,
Wharton & Garrison opining that (i) this Amendment is
authorized pursuant to the Pooling Agreement and the Series
1996-1 Supplement and (ii) all conditions precedent to the
execution, delivery and performance of this Amendment are
satisfied in full; and
e. written confirmation from each of Standard &
Poor's Corporation and Moody's Investors Service Inc.
stating that the execution and delivery of this Amendment
will not result in a reduction or withdrawal of the rating
of the Term Certificates.
4. Continuing Effect of Series 1996-1 Supplement.
Except as expressly amended, modified and supplemented hereby,
the provisions of the Series 1996-1 Supplement are and shall
remain in full force and effect.
5. GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAW.
6. Counterparts. This Amendment may be executed in
two or more counterparts (and by different parties on separate
counterparts), each of which shall be an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this
Amendment to be duly executed by their respective officers as of
the day and year first above written.
SPECIALTY FOODS FINANCE CORPORATION
By:/s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
SPECIALTY FOODS CORPORATION, as
Master Servicer
By:/s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
THE CHASE MANHATTAN BANK, as
Trustee
By: /s/Dennis Kildea
Name: Dennis Kildea
Title: Trust Officer
THE CHASE MANHATTAN BANK, as
Initial VFC Certificateholder
By:/s/ Roger A. Parker
Name: Roger A. Parker
Title: Vice President
ANNEX A
[FORM OF CONSENT]
The Chase Manhattan Bank,
as Trustee
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Structured Finance Services (ABS)
Dear Sirs:
We refer to Amendment No. 1, dated as of November 29,
1996 (the "Amendment"), to the Series 1996-1 Supplement, dated as
of August 1, 1996 (the "Series 1996-1 Supplement"), among
Specialty Foods Finance Corporation, a Delaware corporation (the
"Company"), Specialty Foods Corporation, a Delaware corporation,
as master servicer (the "Master Servicer"), The Chase Manhattan
Bank, as initial VFC Certificateholder (the "Initial VFC
Certificateholder"), and The Chase Manhattan Bank, as trustee (in
such capacity, the "Trustee"), which supplements the Pooling
Agreement, dated as of November 16, 1994 (the "Pooling
Agreement"), among the Company, the Master Servicer and the
Trustee. We hereby certify that we have been given adequate
notice pursuant to Section 9.5 of the Series 1996-1 Supplement
and Section 10.1 of the Pooling Agreement.
We hereby consent to the execution and delivery by the
Company, the Master Servicer, the Initial VFC Certificateholder
and the Trustee of, and the changes effected to the Series 1996-1
Supplement by, the Amendment (substantially in the form
previously distributed to us).
Sincerely,
CAPITAL MARKETS ASSURANCE
CORPORATION, as Enhancement
Provider
By:________________________________
Name:
Title:
Dated: November __, 1996
EXHIBIT 10.35
Doc#:DS3:462652.5 23-116
Doc#:DS3:462652.5 23-116
AMENDMENT NO. 3 TO SFC
AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT
Amendment, dated as of February 24, 1997 (this
"Amendment") to the Amended and Restated Receivables Sale
Agreement, dated as of November 16, 1994, as amended (the
"Receivables Sale Agreement"), by and among Specialty Foods
Finance Corporation, a Delaware corporation (the "Company"),
Specialty Foods Corporation, a Delaware corporation (the
"Master Servicer") and its wholly owned subsidiaries named
therein (the "Sellers").
W I T N E S S E T H :
WHEREAS, the parties hereto wish to amend the
Receivables Sale Agreement in the manner provided for in
this Amendment;
NOW, THEREFORE, the parties hereto hereby agree as
follows:
1. Defined Terms. Capitalized terms used herein
shall have the meanings ascribed to them in the Receivables
Sale Agreement.
2. Amendment of the Receivables Sale Agreement.
Article IX of the Receivables Sale Agreement is hereby
amended by adding the following phrase to Section 9.14(b)(i)
after the phrase "(i) each of":
TBP, Inc. (formerly, The Bagel Place, Inc.),
3. Termination of Certain Sellers. The Company,
pursuant to Section 9.14(b) and Amendment No. 3 to SFC
Master Trust Pooling Agreement ("Amendment No. 3"), hereby
terminates as of the 1997 Seller Termination Date and
simultaneously with the payment of the Purchase Price (as
both terms are defined in Amendment No. 3) to the Trustee,
all obligations of Gai's Seattle French Baking Company, a
Washington corporation, Langendorf Baking Co. of Seattle,
Inc., a Washington corporation, and TBP, Inc., a California
corporation (together, the "1997 Terminated Sellers"), under
the Receivables Sale Agreement.
4. Conditions to Effectiveness. This Amendment
shall become effective upon receipt by the Trustee of:
(a) a counterpart hereof, duly executed and
delivered by each of the Company, the Master Servicer
and the 1997 Terminated Sellers; and
(b) a consent to this Amendment, in the form of
Annex A, from Capital Markets Assurance Corporation, as
the Enhancement Provider for each of the Term
Certificates, Series 1994-1, and the VFC Certificates,
Series 1997-1.
5. Continuing Effect of the Receivables Sale
Agreement. Except as expressly amended, modified and
supplemented hereby, the provisions of the Receivables Sale
Agreement are and shall remain in full force and effect.
6. GOVERNING LAW. THIS AMENDMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAW.
7. Counterparts. This Amendment may be executed in
two or more counterparts (and by different parties on
separate counterparts), each of which shall be an original,
but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have caused this
Amendment to be duly executed by their respective officers
as of the day and year first above written.
SPECIALTY FOODS FINANCE CORPORATION
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
SPECIALTY FOODS CORPORATION, as Master
Servicer
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
GAI'S SEATTLE FRENCH BAKING COMPANY
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
LANGENDORF BAKING CO. OF SEATTLE, INC.
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
TBP, INC.
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: Vice President & Treasurer
Annex A
[FORM OF CONSENT]
The Chase Manhattan Bank,
as Trustee
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Structured Finance Services (ABS)
Dear Sirs:
We refer to the Amendment, dated as of February ___,
1997 (the "Amendment"), to the Amended and Restated
Receivables Sale Agreement, dated as of November 16, 1994,
as amended (the "Receivables Sale Agreement"), among
Specialty Foods Finance corporation, a Delaware corporation
(the "Company"), Specialty Foods Corporation, a Delaware
corporation, as master servicer (the "Master Servicer"),
and each of the subsidiaries of the Master Servicer from
time to time party thereto. We hereby certify that we have
been given or have duly waived adequate notice pursuant to
Section 10.1 of the Pooling Agreement, dated as of November
16, 1994, as amended, among the Company, the Master
Servicer, and The Chase Manhattan Bank (formerly known as
Chemical Bank), as trustee.
We hereby consent to the execution and delivery of
the Amendment (substantially in the form previously
distributed to us) by the Company, the Master Servicer and
the Sellers on our behalf.
Sincerely,
CAPITAL MARKETS ASSURANCE CORPORATION
By:
Name:
Title:
Dated: February ____, 1997
EXHIBIT 10.68
Execution Copy
- 5 -
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement"),
effective as of January 1, 1997, among SPECIALTY FOODS
ACQUISITION CORPORATION, a Delaware corporation ("SFAC"),
SPECIALTY FOODS CORPORATION, a Delaware corporation ("SFC"), and
LAWRENCE S. BENJAMIN (the "Executive"). This Agreement replaces
that certain Executive Employment Agreement dated as of August
15, 1994 among SFAC, Stella Holdings, Inc., a Delaware
corporation, and the Executive. SFAC and SFC are each sometimes
herein referred to individually as an "Employer" and are
sometimes referred to collectively as the "Employers."
The Employers wish to employ the Executive, and the
Executive wishes to accept such employment, on the terms and
conditions set forth in this Agreement.
Accordingly, the Employers and the Executive hereby agree as
follows:
1. Employment, Duties and Acceptance.
1.1 Employment Duties. The Employers hereby employ
the Executive for the Term (as defined in Section 2), to render
exclusive and full-time services to the Employers, as President
and Chief Executive Officer of each of SFAC and SFC and as a
member of the Board of Directors of each Employer, and to perform
such other duties (consistent with the customary duties of a
corporate officer) as may be assigned to the Executive by the
Board of Directors of either Employer (collectively, the
"Boards").
1.2 Acceptance. The Executive hereby accepts such
employment and agrees to render the services described above.
During the Term, the Executive agrees to devote the Executive's
entire business time, energy and skill to such employment, and to
use the Executive's best efforts, skill and ability to promote
the Employers' interests. The Executive further agrees to accept
election, and to serve during all or any part of the Term, as an
officer or director of any subsidiary of either Employer, without
any compensation therefor other than that specified in this
Agreement, if elected to any such position by the shareholders of
either Employer, the Boards or the shareholders or Board of
Directors of any such subsidiary, as the case may be.
2. Terms of Employment.
2.1 The Term. The term of the Executive's employment
under this Agreement (the "Term") shall commence as of January 1,
1997 (the "Effective Date") and shall, unless sooner terminated
pursuant to Section 2.3 hereof, end on December 31, 1999 or on
such later December 31 to which the Term is extended pursuant to
Section 2.2.
2.2 Extension. On June 30 of each calendar year
starting with June 30, 1999, the then scheduled expiration date
of the Term shall automatically be extended, without any action
required of either the Executive or the Employers, for twelve
additional months, unless the Executive, on the one hand, or the
Employers, on the other hand, shall have given written notice of
non-extension to the other no later than such June 30. If such
written notice of non-extension is given, the Term shall end on
the then-scheduled termination date (taking into account any
previous extensions pursuant to this Section 2.2). By way of
example, unless written notice of non-extension is given by June
30, 1999, the otherwise scheduled expiration date of December 31,
1999 shall be extended to December 31, 2000.
2.3 Early Termination. The Term shall end earlier
than the December 31 termination date scheduled in accordance
with the foregoing provisions of this Article 2, if sooner
terminated pursuant to Article 4.
3. Compensation; Benefits.
3.1 Salary. As compensation for all services to be
rendered pursuant to this Agreement, the Employers agree to pay
the Executive during the 12 months of the Term ending on December
31, 1997, a base salary at an annual rate of $560,000 (the "Base
Salary"). The annual Base Salary rate may be increased from time
to time, in the sole discretion of the Boards.
3.2 Bonus. In addition to the amounts to be paid to
the Executive pursuant to Section 3.1, the Executive will be
eligible to receive with respect to each fiscal year of the
Employers commencing with their fiscal year ending December 31,
1997, an incentive bonus (the "Incentive Bonus") equal to a
percentage of Base Salary for such fiscal year based on the
achievement of the Employers of performance targets ("Performance
Targets") to be set in the beginning of such fiscal year by the
compensation committee of the Boards, such that if the minimum
Performance Target is not achieved, the Incentive Bonus shall be
zero; if the intermediate Performance Target is achieved, the
Incentive Bonus shall be equal to 75% of Base Salary; and if the
maximum Performance Target is achieved, the Incentive Bonus shall
be equal to 150% of Base Salary (provisions for pro rata
Incentive Bonus amounts for achievements between the minimum
Performance Target and the intermediate Performance Target or
between the intermediate Performance Target and the maximum
Performance Target, as the case may be, shall also be
established). The Incentive Bonus for each fiscal year shall be
paid to the Executive within 30 days of the receipt by the
Employers of their audited financial statements for such fiscal
year. If, in a given fiscal year, the Employers achieve
Performance Targets such that an Incentive Bonus exceeding 50% of
Base Salary is to be paid to the Executive for such year, the
Executive may, in his sole discretion, elect to receive the
amount (the "Excess Amount") by which such Incentive Bonus
exceeds 50% of the Base Salary for such year either: (i) in
cash, or (ii) in a combination of 11% Senior Subordinated
Discount Debentures due 2006 of SFAC ("Subordinated Debentures")
and common stock, par value $0.01 per share, of SFAC ("Common
Stock"). Such combination shall consist of Subordinated
Debentures with a then accreted value (calculated assuming an 11%
annual implied rate of return) (the "Accreted Value") equal to
63% of the Excess Amount and shares of Common Stock with a then
Fair Market Value (as defined in Article 11 hereof) equal to 37%
of the Excess Amount. At Executive's request, the Employers will
inform the Executive of such Fair Market Value reasonably in
advance of the time the Executive must make such election. All
Subordinated Debentures and Common Stock issued to the Executive
as part of an Incentive Bonus under this Section 3.2 shall
hereafter be referred to as "Bonus Securities." Bonus Securities
shall vest immediately upon issuance and accordingly shall for
all purposes under this Agreement be treated as and included in
the definition of Vested Securities (as defined below in Section
3.5.2).
3.3 Business Expenses. The Employers shall pay or
reimburse the Executive for all reasonable expenses actually
incurred or paid by the Executive during the Term in the
performance of the Executive's services under this Agreement,
upon presentation of expense statements or vouchers or such other
supporting information as the Employers customarily require of
their other senior executives.
3.4 Vacation. During the Term, the Executive shall be
entitled to a paid vacation period or periods taken in accordance
with the vacation policy of the Employers during each year of the
Term; provided, that the Executive shall be entitled to not less
than four (4) weeks paid vacation for each year of the Term.
3.5 Fringe Benefits; Securities Investment; Stock
Options.
3.5.1 Benefits. During the Term, the
Executive shall be entitled to all benefits for which the
Executive shall be eligible under any long term incentive plan,
qualified pension plan, 401(k) plan, annuity plan, group
insurance plan or other so-called "fringe" benefit plan which
SFAC or SFC provides to its executive officers generally,
including, without limitation, the SFC Executive Retirement
Annuity Plan. In addition, the Employers shall (i) pay dues and
normal operating assessments relating to the Executive's
membership at a Chicagoland Country Club (it being understood
that initiation fees will not be paid by the Employers) and
reimburse the Executive for any business entertainment and
meeting fees incurred by the Executive at such club, (ii) pay for
a full comprehensive annual physical examination of the
Executive, (iii) pay the reasonable fees in connection with
personal financial counseling on behalf of the Executive,
including fees relating to tax return preparation, and (iv) pay
all charges in connection with the use of an AT&T calling card
(the use of which shall be restricted to the Executive and the
Executive's spouse).
3.5.2 Securities Investment. Pursuant to an
Executive Securities Purchase Agreement to be dated as of
December 15, 1994 (the "Closing Date"), between the Executive and
the Employers, the Executive purchased from SFAC a combination of
11% Senior Subordinated Discount Debentures of SFAC due 2006 (the
"Subordinated Debentures") and common stock, par value $0.01 per
share, of SFAC (the "Common Stock") for an aggregate purchase
price of $10,000. The Subordinated Debentures and Common Stock
purchased pursuant to this Section 3.5.2 (the "Initial
Securities") shall be considered vested securities ("Vested
Securities") as follows: (i) 25% of the Initial Securities shall
become Vested Securities on the Closing Date, (ii) an additional
25% of such Initial Securities shall become Vested Securities on
the 181st day following the Closing Date, (iii) an additional 25%
of the Initial Securities shall become Vested Securities on the
first anniversary of the Closing Date, and (iv) the remaining 25%
of such Initial Securities shall become Vested Securities on the
181st day following the first anniversary of the Closing Date;
each such 25% block of Initial Securities to be comprised of 25%
of the Subordinated Debentures sold to the Executive under this
Section 3.5.2 and 25% of the shares of Common Stock sold to the
Executive under this Section 3.5.2. Vested Securities shall be
transferable by the Executive, subject only to restrictions
("Transfer Restrictions") on the transfer of Initial Securities
set forth in (i) the Stockholders Agreement, dated as of August
16, 1993, among SFAC and its principal stockholders, as amended
(the "Principal Stockholders Agreement"), (ii) the Stockholders
Agreement, dated as of August 16, 1993, among SFAC and all of its
stockholders, as amended (the "Investors Stockholders
Agreement"), and (iii) the Securities Purchase Agreement, dated
as of August 16, 1993, among SFAC, its principal Stockholders and
all holders of the Subordinated Debentures, as amended (the
"Securities Purchase Agreement"); provided, that any Vested
Securities transferred pursuant to an exemption from Transfer
Restrictions for transfer to Affiliates provided for in Section
2.1(a)(ii) of the Principal Stockholders Agreement or Section
6.4(a) of the Securities Purchase Agreement shall remain subject
to the Employers' repurchase rights, and shall be benefited by
the Executive's (or his Beneficiary's) right to require
repurchase, under Article 4 hereof. Initial Securities not yet
vested shall not be transferable; except, that the Executive may
transfer such Initial Securities (i) in connection with the
Executive's exercise of rights as an Other Stockholder (as
defined in the Principal Stockholders Agreement) under Section
2.1(b) of the Principal Stockholders Agreement or as an Other
Holder (as defined in the Securities Purchase Agreement) under
Section 6.4(a) of the Securities Purchase Agreement, so long as
the Executive has previously transferred all of his Vested
Securities as a "Transferor" or an "Other Stockholder" under
Section 2.1(b) of the "Principal Stockholders" Agreement, as a
"Transferor" or "Other Holder" under Section 6.4(a) of the
Securities Purchase Agreement or in a registered public offering;
or (ii) to the Executive's spouse or children or a trust
established for their benefit (so long as such trust is
controlled by the Executive or his estate), which Initial
Securities, notwithstanding such transfer to the Executive's
spouse or children or to such trust, shall remain subject to the
Employers' repurchase rights, and shall be benefited by the
Executive's (or his Beneficiary's) right to require repurchase,
under Article 4 hereof; (iii) in a registered public offering in
which the Executive has a right to participate pursuant to
Article 1 of Exhibit A to the Principal Stockholders Agreement,
so long as the Executive is not an "Initiating Holder" (as
defined herein); provided, that this clause (iii) shall apply
only if the Executive has previously transferred all Vested
Securities in the manner described in clause (i) above or will
transfer all of such Vested Securities in connection with such
public offering; or (iv) in order to comply with the requirements
of Section 2.2 of the Principal Stockholders Agreement.
3.5.3 Management Option and Bonus. The
Executive shall participate in the management stock option plan
(the "Option Plan"). To date, the Executive has been granted
options to purchase a total of 200,000 shares of Common Stock of
SFAC. At the February, 1997 Board of Directors meeting SFAC will
grant the Executive options to purchase an additional 300,000
shares of Common Stock of SFAC at an exercise price per share to
be determined by the SFAC Board of Directors. The Executive
shall remain a participant in the Stella Foods, Inc. cash Long-
Term Incentive Plan, and shall be eligible to receive awards of
additional Performance Units thereunder for 1997 and 1998. In
addition, the Executive will be afforded an opportunity to
participate, in a manner agreed to by the Parties, in the Long-
Term Incentive Plan of the Employers when such Plan is revised.
3.5.4 Tax Equalization Amounts. If in any
calendar year (the "Exercise Year"), the Executive exercises one
or more Options, the Employers shall make a payment to the
Executive equal to the Tax Equalization Amount, computed in the
manner set forth below. Except as provided in paragraph (d)
below, the Tax Equalization Amount shall be paid no later than
April 15 of the year following the Exercise year.
(a) The Tax Equalization Amount shall equal
the lesser of (i) the Employers' Tax Benefit Amount, or (ii) the
Executive Tax Rate Differential Amount.
(b) The Employers' Tax Benefit Amount shall
equal the excess, if any, of (i) the amount of consolidated
Federal income tax liabilities that the Employers would have had
for the taxable year of the Employers that includes the last day
of the Exercise Year (the "Applicable Employer Taxable Year"),
without taking into account any deduction to which the Employers
are entitled directly by reason of the exercise of such Options,
over (ii) the amount of consolidated Federal income tax liability
of the Employers for the Applicable Employer Taxable Year, taking
into account any deduction to which the Employers are entitled
directly by reason of the exercise of such Options. The amount
of the Employers' Tax Benefit Amount shall be determined by the
Accounting Firm (as defined in Section 3.9).
(c) The Executive's Tax Rate Differential
Amount shall equal the amount obtained by dividing "x" by "y",
where "x" equals the excess, if any, of (i) the Executive's
Federal income tax liability for the Exercise Year, over (ii) the
amount of Federal income tax liability that the Executive would
have had for the Exercise Year if income recognized directly by
reason of the exercise of the Options exercised in the Exercise
Year ("Option Income") had been treated as long-term capital
gain, and "y" equals the number obtained by subtracting the
Executive's marginal Federal income tax rate for ordinary
compensation income under Subtitle A and Section 3101 of the Code
(expressed by a decimal) (the "Income Tax Rate") from one; such
that, by way of example, if the Executive's Option Income for the
Exercise Year were $100,000 and the Income Tax Rate were 40% and
the Federal tax rate applicable to long-term capital gains were
28%, the Tax Rate Differential Amount would equal $20,000,
calculated as follows: The amount described in clause (i) above
would, in such case, be $40,000 and the amount described in
clause (ii) above would, in such case, be $28,000, and therefore
the excess of the clause (i) amount over the clause (ii) amount
would, in such case, be $12,000 --- $12,000 divided by 0.6 equals
$20,000 ($12,000/1-0.4 = $20,000). The amount of the Executive's
Tax Rate Differential Amount shall be determined by the
Accounting Firm.
(d) If (i) for any Exercise Year, the
Employers' Tax Benefit Amount is less than the Executive's Tax
Rate Differential Amount (a "Shortfall"), and (ii) in any of the
seven following taxable years of the Employer immediately
following the Applicable Employer Taxable Year (a "Subsequent
Year"), there is a Subsequent Year Employers' Tax Benefit Amount
(as defined below) attributable to such Exercise Year, then the
Employers shall make a payment to the Executive no later than
April 15 of the year following such Subsequent Year equal to the
lesser of (A) the Subsequent Year Employers' Tax Benefit Amount
with respect to such Exercise Year, or (B) the excess, if any, of
(I) the Shortfall with respect to such Exercise Year, over (II)
any amounts previously paid to the Executive pursuant to this
Section 3.5.5(d) with respect to such Exercise Year. For
purposes of this Section 3.5.5(d), the Subsequent Year Employers'
Tax Benefit Amount with respect to a particular Exercise Year and
Subsequent Year shall equal the excess, if any, of (x) the amount
of Federal income tax liability that the Employers would have had
for the Subsequent Year (the "Applicable Employer Subsequent
Taxable Year"), without taking into account any deduction to
which the Employers are entitled directly by reason of the
exercise of Options by the Executive during the Exercise Year or
any subsequent taxable year of the Executive (including by way of
a net operating loss carryover), over (y) the amount of Federal
income tax liability of the Employers for the Applicable Employer
Subsequent Taxable Year taking into account any deduction to
which the Employers are entitled (in any year) directly by reason
of the exercise of Options exercised by the Executive in the
Exercise Year but not in any subsequent taxable year of the
Executive (including by way of a net operating loss carryover).
The amount of the Subsequent Year Employers' Tax Benefit Amount
shall be determined by the Accounting Firm.
(e) For purposes of this Section 3.5.5, the
Federal income tax liability of any person shall mean all
liabilities of such person under Subtitle A and Section 3101 of
the Code.
3.6 Automobile. In addition, the Executive will
receive an automobile allowance of $1,100.00 per month during the
term of this Agreement.
3.7 Withholding. All compensation of the Executive by
the Employers provided for in this Agreement, whether in the form
of cash, securities or "fringe" benefits, shall be subject to
such deductions or amounts to be withheld as required by
applicable law and regulations. Whenever compensation provided
for under this Agreement is to be delivered to the Executive in a
form other than cash, the Employers may require as a condition of
delivery that the Executive remit to the Employers an amount
sufficient to satisfy all federal, state and other governmental
withholding tax requirements related thereto. If the
compensation referred to in the preceding sentence is in the form
of securities (whether by the vesting of securities or
otherwise), the Employers shall, if the Executive so requests and
the Employers consent (such consent not to be withheld
unreasonably), satisfy the requirements of the preceding
sentence, to the extent permitted by applicable law, by deducting
from the number of securities otherwise deliverable to the
Executive, a number of securities having a fair market value
equal to the amount required to satisfy all federal, state and
other governmental withholding tax requirements related thereto.
3.8 Source of Payment; Nature of Certain Payments.
Any amounts payable to or on behalf of the Executive under this
Agreement may be paid by either Employer, as determined by the
Employers in their exclusive discretion. No payment made to the
Executive pursuant to Section 3.5.4 or 3.9 shall be deemed, for
any purpose, a payment of purchase price for Common Stock or
Subordinated Debentures.
3.9 Certain Additional Payments by the Employers.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event that (i) a Section 280G Change (as
defined below) occurs and (ii) any payment, distribution, other
compensation or benefit by either Employer to (or for the benefit
of) the Executive pursuant to the terms of this Agreement, as now
in effect or as amended from time to time (hereinafter, a
"Payment"), is determined (as hereinafter provided) to be subject
to the tax (the "Excise Tax") imposed by Section 4999 of the Code
(or any similar tax that may hereafter be imposed), the Employers
shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive,
after deduction of any Excise Tax on the Total Payments (as
defined below) and any federal, state and local income tax and
Excise Tax upon the additional amount provided for by this
paragraph (a), shall be equal to the Total Payments; provided,
however, that the aggregate payments required to be paid to or
for the benefit of the Executive pursuant to this Section 3.9
shall not exceed (x) $3 million, if such payments result from a
Section 280G Change that occurs prior to the earlier of (I) a
Public Offering, or (II) December 31, 1998, or (y) $5 million, if
such Payments resulted from a Section 280G Change that occurs at
any other time, plus, in either case, an amount equal to the
interest and penalties, if any, attributable to the portion of
the Excise Tax for which the Gross-Up Payment, as limited by this
proviso, reimburses the Executive. Thus, by way of example, if a
Gross Up Payment equal to $10 million would be due, but for the
proviso set forth in the preceding sentence, with respect to a
Section 280G Change that occurs in 1996, the Employers'
obligation with respect to interest and penalties imposed on the
Executive with respect to the Excise Tax shall be limited to an
amount equal to 50% of such Interest and penalties.
(b) Subject to the provisions of Section 3.9(c),
all determinations required to be made under this Section 3.9
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and, subject to the provisions
below, the assumptions to be utilized in arriving at such
determination, shall be made by KPMG Peat Marwick (or other
independent auditor of the Employers at the time) (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Employers and the Executive within 15
business days of the receipt of notice from the Executive that
there has been a Payment with respect to which a Gross-Up Payment
is owing, or such earlier time as is requested by the Employers.
All fees and expenses of the Accounting Firm shall be paid solely
by the Employers. Any Gross-Up Payment, as determined pursuant
to this Section 3.9, shall be paid by the Employers to the
Executive within five business days of the receipt of the
Accounting Firm's determination. The parties acknowledge that
unless the Accounting Firm is able to provide the Executive with
the opinion described in the third following sentence with
respect to such Payment, the Accounting Firm shall determine the
amount of the Gross-Up Payment that is due at the time of any
Payment. If the Accounting Firm determines that no Excise Tax is
payable by the Executive, it shall furnish the Executive with a
written opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not result
in the imposition of the negligence or similar penalty. Any
determination by the Accounting Firm shall be binding upon the
Employers and the Executive. The parties hereto acknowledge
that, as a result of uncertainty in the application of Section
4999 of the Code, it is possible that Gross-Up Payments will not
have been made by the Employers that should have been made
(hereinafter, an "Underpayment"), consistent with the provisions
of this Section 3.9. In the event that the Executive is required
to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and
any such Underpayment shall be promptly paid by the Employers to
or for the benefit of the Executive, unless the Executive has
failed to comply with Section 3.9(c) and such failure has
materially deprived the Employers of the right to contest any
claim by the Internal Revenue Service with respect to such
payments.
For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal
income taxes at the highest marginal rate of federal income
taxation for the calendar year in which the Gross-Up Payment is
to be made and the applicable state and local taxes at the
highest marginal rate of taxation for the calendar year in which
the Gross-Up Payments is to be made, net of the maximum reduction
in federal income taxes which could be obtained from deduction of
such state and local taxes.
(c) The Executive shall notify the Employers in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Employers of a Gross-
Up Payment. Such notification shall be given as soon as
practicable but, in any event, no later than ten business days
after the Executive is informed in writing of such claim and
shall apprise the Employers of the nature of such claim and the
date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day
period following the date on which he gives such notice to the
Employers (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the
Employers notify the Executive in writing prior to the expiration
of such period that they desire to contest such claim, and if the
Employers acknowledge in writing their liability, subject to the
limitations set forth in Section 3.9(a), to the Executive
pursuant to this Section 3.9 with respect to any amounts payable
in connection with such claim, the Executive shall:
(i) give the Employers any information
reasonably requested by the Employers and reasonably
available to the Executive relating to such claim;
(ii) take all such actions in connection
with contesting such claim as the Employers shall
reasonably request in writing from time to time,
including, without limitation, accepting legal
representation with respect to such claim by an
attorney selected by the Employers and agreeing to
extend the statute of limitations as requested by the
Employers;
(iii) cooperate with the Employers
in good faith in order to effectively contest such
claim; and
(iv) permit the Employers to participate
in any proceeding relating to such claim;
provided, however, that the Employers shall bear and pay directly
all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis,
for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without
limitation of the foregoing provisions of this Section 3.9(c),
the Employers shall control all proceedings taken in connection
with such contest and, at their sole option, may pursue or forego
any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim
and may, at their sole option, either direct the Executive to pay
the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as the Employers shall determine; provided, however, that
if the Employers direct the Executive to pay such claim and sue
for a refund, the Employers shall advance the amount of such
payment to the Executive, on an interest-free, after-tax basis.
Furthermore, the Employers' control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would
be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an
amount advanced by the Employers pursuant to Section 3.9(c), the
Executive becomes entitled to receive any refund with respect to
such claim, the Executive shall (subject to the Employers'
complying with the requirements of Section 3.9(c)), promptly pay
to the Employers the amount of such refund (together with any
interest received or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount
advanced by the Employers pursuant to Section 3.9(c), a
determination is made that the Executive shall not be entitled to
any refund with respect to such claim and the Employers do not
notify the Executive in writing of their intent to contest such
denial of refund prior to the expiration of 30 days after such
determination, then to the extent of the Gross-Up Payment such
advance shall be forgiven and shall not be required to be repaid
and shall, to such extent, offset the amount of Gross-Up Payment
required to be paid, and the remaining portion of such advance
shall forthwith become due and payable.
(e) For purposes of this Agreement:
A "Section 280G Change" shall mean a "change
in the ownership or effective control" of either Employer or a
"change in the ownership of a substantial portion of the assets"
of either Employer, in each case within the meaning of Section
280G(b)(2)(A)(i) of the Code.
A "Public Offering" shall mean an initial
public offering of stock of either Employer if at any time
thereafter stock of either Employer is "readily tradable on an
established securities market or otherwise" (within the meaning
of Section 280G(b)(5)(A)(ii) of the Code).
"Total Payments" shall mean any payments or
benefits received or to be received by the Executive under this
Agreement or the plans discussed in Section 3.5.3, as now in
effect or as amended from time to time.
(f) Benefits granted the Executive under that
certain Stock Purchase Agreement dated as of June 15, 1995 by and
among the Executive and the Employers (the "Stock Purchase
Agreement") shall be deemed to be benefits under this Agreement
for purposes of this Section 3.9.
3.10 Performance Based Compensation. It is the
intention of the parties that, if Section 162(m) of the Code is
or will be applicable with respect to one or more payments
hereunder, the Executive will consider in good faith any requests
by the Employers to take actions to cause such payments to meet
the requirements of Section 162(m)(4)(B) or (C) of the Code, and
thus to be excluded from the definition of "applicable employee
remuneration" within the meaning of Section 162(m)(4) of the
Code.
4. Termination.
4.1 Death. If the Executive shall die during the
Term, upon the date of the Executive's death:
(a) the Term shall terminate and no further
amounts or benefits shall be payable hereunder, except that the
Employers shall be obligated to pay to the Beneficiary (as
defined below), within 60 days of the date of the Executive's
death, (i) all unpaid Base Salary accrued through and including
the date of the Executive's death, (ii) a lump sum amount equal
to Base Salary for 18 months, at the rate in effect on the date
of the Executive's death (the "Annual Base Salary Upon Death"),
and (iii) an additional lump sum bonus amount equal to the sum of
(x) 75% of 1.5 x Annual Base Salary Upon Death and (y) 75% of
Annual Base Salary Upon Death pro rated for the period commencing
on the first day of the fiscal year during which the Executive's
death occurred and ending on the date of Executive's death; it
being understood that such 75% bonus level has been agreed to
because it is impossible to determine the performance of the
Employers for future periods. The "Beneficiary" shall be (i) the
beneficiary designated by the Executive on a form prescribed for
such purpose by the Employers, or (ii) in the absence of such
designation, the Executive's executor or legal representative, in
such capacity;
(b) for the 180 days following such date, the
Employers shall have the right to purchase (i) all but not less
than all of the Vested Securities and of the Vested Acquired
Securities (as defined in that certain Securities Purchase
Agreement dated as of August 1, 1995 (the "August Purchase
Agreement"), at a price equal to the Full Value (as defined
below) thereof on the date of the Executive's death, and/or (ii)
all but not less than all other Initial Securities and Initial
Acquired Securities (as defined in the August Purchase Agreement)
, at cost, plus, in the case of the Subordinated Debentures,
accreted discount thereon through and including the date of such
purchase; provided, that Initial Securities and Initial Acquired
Securities that would have vested within the six-month period
following the date of the Executive's death shall be treated, for
all purposes under this Section 4.1, as Vested Securities or as
Vested Acquired Securities, as the case may be. "Full Value"
means (i) in the case of the Subordinated Debentures, the then
accreted value thereof (calculated assuming an 11% annual implied
rate of return), and (ii) in the case of the Common Stock, the
Fair Market Value (as defined in Section 10.2 hereof) thereof;
(c) for the 180 days following such date, the
Beneficiary shall have the right to require the Employers to
purchase (subject to Section 4.6 hereof) all but not less than
all of the Vested Securities and the Vested Acquired Securities,
at a price equal to the Full Value thereof on the date of the
Executive's death, together with all but not less than all of the
other Initial Securities, at cost, plus, in the case of the
Subordinated Debentures included among such other Initial
Securities and the Initial Acquired Securities, accreted discount
thereon through and including the date of such purchase, and
(d) for the 180 days following such date, the
Employers shall have the right to repurchase all but not less
than all of the Purchased Shares, as defined in the Stock
Purchase Agreement, at a price equal to the Fair Market Value
thereof as of the date of the Executive's death, provided, that
the proceeds shall first be used to pay any outstanding principal
of and interest accrued but not paid under the Note (as defined
in the Stock Purchase Agreement).
4.2 Disability.
4.2.1 If during the Term the Executive shall
become physically or mentally disabled, whether totally or
partially, such that the Executive is unable to perform the
Executive's services hereunder for (i) a period of six
consecutive months, or (ii) for shorter periods aggregating six
months during any twelve month period, the Employers may on any
day (the "Disability Termination Date") after the last day of the
six consecutive months of disability or the day on which the
shorter periods of disability shall have equaled an aggregate of
six months (but, in each case, before the Executive has recovered
from such disability), by written notice to the Executive,
terminate the Term (a "Disability Termination") and no further
amounts or benefits shall be payable hereunder, except that the
Employers shall be obligated to pay to the Executive within 60
days of the Disability Termination Date, (i) all unpaid Base
Salary accrued through and including the Disability Termination
Date, (ii) a lump sum amount equal to Base Salary for 18 months,
at the rate in effect on the Disability Termination Date (the
"Annual Base Salary Upon Disability"), and (iii) an additional
lump sum bonus amount equal to the sum of (x) 75% of 1.5 x Annual
Base Salary Upon Disability and (y) 75% of Annual Base Salary
Upon Disability prorated for the period commencing on the first
day of the fiscal year during which the Disability Termination
occurred and ending on the Disability Termination Date; it being
understood that such 75% bonus level has been agreed to because
it is impossible to determine the performance of the Employers
for future periods. If the Executive shall die before receiving
all amounts required to be paid by the Employers in accordance
with the foregoing, such amounts shall be paid to the
Beneficiary.
4.2.2 In the event of a Disability
Termination:
(a) for the 180 days following the
Disability Termination Date, the Employers shall have the right
to purchase (i) all but not less than all of the Vested
Securities and the Vested Acquired Securities, at a price equal
to the Full Value thereof on the Disability Termination Date,
and/or (ii) all but not less than all other Initial Securities
and Initial Acquired Securities, at cost, plus, in the case of
the Subordinated Debentures, accreted discount thereon through
and including the date of such purchase; provided, that Initial
Securities and Initial Acquired Securities that would have vested
within the six-month period following the Disability Termination
Date shall be treated, for all purposes under this Section 4.2.2,
as Vested Securities or as Vested Securities, as the case may be;
(b) for the 180 days following the
Disability Termination Date, the Executive shall have the right
to require the Employers to purchase (subject to Section 4.6
hereof) all but not less than all of the Vested Securities and
the Vested Acquired Securities, at a price equal to the Full
Value thereof on the Disability Termination Date, together with
all but not less than all of the other Initial Securities and
Initial Acquired Securities, at cost, plus, in the case of the
Subordinated Debentures included among such other Initial
Securities, accreted discount thereon through and including the
date of such purchase;
(c) for the 180 days following the
Disability Termination Date, the Employers shall have the right
to repurchase all but not less than all of the Purchased Shares
at a price equal to the Fair Market Value thereof on the
Disability Termination Date; provided, that the proceeds shall
first be used to pay any outstanding principal of and interest
accrued but not paid under the Note; and
(d) for the 180 days following the
Disability Termination Date, the Executive shall have the right
to require the Employers to repurchase all but not less than all
of the Purchased Shares (subject to Section 4.6 hereof), at a
price equal to the Fair Market Value thereof on the Disability
Termination Date; provided, that the proceeds shall first be used
to pay any outstanding principal of and interest accrued but not
paid under the Note.
4.3 Cause; Voluntary Termination.
4.3.1 In the event of the conviction of the
Executive of any felony involving intentional conduct on the part
of the Executive, the conviction of the Executive of any lesser
crime or offense involving the illegal use or conversion of
property of the Employers or any of their subsidiaries or
affiliates, the willful misconduct by the Executive in connection
with the performance of the Executive's duties hereunder (which
shall not be deemed to include an action by the Executive taken
in good faith in the best interest of the Employers) or the
continued breach by the Executive of any material provision of
this Agreement after notice of such breach has been actually
received by the Executive from the Employers (the "deemed
receipt" provisions of Article 8 hereof being inapplicable to
this Section 4.3.1), the Employers may at any time, by written
notice to the Executive, terminate the Term (a "Termination For
Cause") and, upon such Termination For Cause, the Term shall
terminate and the Executive shall be entitled to receive no
further amounts or benefits hereunder; provided, that the
Employers shall be obligated to pay to the Executive, within 60
days of the date of termination, all unpaid Base Salary accrued,
and provide the Executive with all benefits and expense
reimbursement to which the Executive would otherwise be entitled,
through and including the date of termination.
4.3.2. Upon a voluntary termination of the term
by the Executive (a "Voluntary Termination") without Good Reason
(as defined in Section 4.4.2), the Term shall terminate and the
Executive shall be entitled to receive no further amounts or
benefits hereunder; provided, that the Employers shall be
obligated to pay to the Executive, within 60 days of the date of
termination, all unpaid Base Salary accrued, and provide the
Executive with all benefits and expense reimbursement to which
the Executive would otherwise be entitled, through and including
the date of termination.
4.3.3 Upon either a Termination For Cause or a
Voluntary Termination without Good Reason, for the 180 days
following the date of termination, the Employers shall have the
right to purchase (i) all but not less than all of the Vested
Securities, at a price equal to the Full Value thereof on the
date of termination, and/or (ii) all but not less than all other
Initial Securities, at cost, plus, in the case of the
Subordinated Debentures, accreted discount thereon through and
including the date of such purchase, and/or (iii) all but not
less than all of the Vested Purchased Shares, at a price equal to
the Fair Market Value thereof on the date of termination, and/or
(iv) all but not less than all other Purchased Shares which are
unvested on the date of such termination, at cost, provided, that
the proceeds shall first be used to pay any outstanding principal
of and interest accrued but not paid under the Note. The
Executive shall not have the right to require the Employer to
repurchase such Vested Securities, Initial Securities, Vested
Purchased Shares and Initial Purchased Shares.
4.4 Termination by Employers Without Cause;
Termination by the Executive for Good Reason.
4.4.1 Upon a Termination Without Cause (as
defined below) or a Voluntary Termination with Good Reason (as
defined below):
(a) the Employers shall pay to the
Executive, within 60 days of the date of termination, all unpaid
Base Salary accrued, and provide the Executive with all benefits
and expense reimbursement to which the Executive would otherwise
be entitled, through and including the date of termination;
(b) subject to Sections 4.4.4 and 4.4.6, the
Employers shall pay the following to the Executive:
(i) the Employers shall continue
payments of Base Salary to the Executive (the
"Continued Salary"), at the rate and at such times as
are in effect on the date of termination (the "Base
Salary Upon Termination"), for the 18 month period
following the date of termination (the "Payment
Period"), except as provided in Section 4.4.4,
(ii) the Employers shall continue
health and life insurance benefits during the Payment
Period (the "Continued Benefits"), and
(iii) the Employers shall pay
to the Executive, at the end of the Payment Period, a
bonus (the "Continued Bonus," and together with the
Continued Salary and the Continued Benefits, the
"Continued Payments") in an amount equal to 75% of the
aggregate base salary paid to the Executive during the
period commencing on the day after the last day of the
last fiscal year completed prior to the date of
termination and ending on the last day of the Payment
Period; it being understood that such 75% bonus level
has been agreed to because it is impossible to
determine the performance of the Employers for future
periods;
(c) for the 180 days following the date of
termination, the Employers shall have the right to purchase (i)
all but not less than all of the Vested Securities and the Vested
Acquired Securities, at a price equal to the Full Value thereof
on the date of termination, and/or (ii) all but not less than all
other Initial Securities and Initial Acquired Securities, at
cost, plus, in the case of the Subordinated Debentures, accreted
discount thereon through and including the date of such purchase;
(d) for the 180 days following the date of
termination, the Executive shall have the right to require the
Employers to purchase (subject to Section 4.6 hereof) all but not
less than all of the Vested Securities and the Vested Acquired
Securities, at a price equal to the Full Value thereof on the
date of termination, together with all but not less than all of
the other Initial Securities and Initial Acquired Securities, at
cost, plus, in the case of the Subordinated Debentures included
among such other Initial Securities, accreted discount thereon
through and including the date of such purchase;
(e) within 180 days of the date of
termination, the Employers shall have the right to repurchase all
but not less than all of the Purchased Shares at a price equal to
the Fair Market Value thereof on the date of termination;
provided, that the proceeds shall first be used to pay any
outstanding principal of and interest accrued but not paid under
the Note; and
(f) for the 180 days following the date of
termination, the Executive shall have the right to require the
Employers to repurchase (subject to Section 4.6 hereof) all but
not less than all of the Purchased Shares at a price equal to the
Fair Market Value thereof on the date of termination; provided,
that the proceeds shall first be used to pay any outstanding
principal of and interest accrued but not paid under the note.
4.4.2 Definitions:
(a) "Termination Without Cause" means the
termination of the Term by the Employers for reasons other than
those described in Sections 4.1, 4.2 or 4.3.
(b) "Good Reason" means the continuation of
any of the following (without the Executive's express prior
consent) after written notice provided by the Executive and the
failure by the Employers to remedy such event within thirty (30)
days after receipt of such notice:
(i) a reduction in the Executive's
Base Salary, as in effect at the date hereof pursuant
to Section 2.2 or as in effect pursuant to increases
from time to time made during the Term;
(ii) failure by the Employers to
pay to the Executive an Incentive Bonus, as provided
for in this Agreement;
(iii) a failure by the
Employers to provide any benefit or compensation plan
(including any pension, profit sharing, annuity, life
insurance, health, accidental death or dismemberment or
disability plan), or any substantially similar benefit
or compensation plan, which has been made available to
other comparable executives of the Employers on terms
no less favorable to the Executive than the terms
offered to such other executives; provided, however,
that nothing in this clause (iii) shall be construed to
mean that the Employers shall be constrained from
amending or eliminating any benefit or compensation
plan as such is applied to the Executive and to other
comparable executives of the Employers; provided,
further, that a failure by the Employers to include the
Executive in any stock option plan or bonus plan shall
not constitute Good Reason hereunder;
(iv) the assignment to the
Executive of any duties materially inconsistent with
the Executive's position as President and Chief
Executive Officer of the Employers;
(v) a materially adverse change in
the Executive's title or the line of authority through
which the Executive is required to report, it being
understood that the Executive shall at all times report
to the Boards;
(vi) failure by the Employers to
obtain the written agreement of any successor in
interest to the business of the Employers to assume and
perform the obligations of the Employers under this
Agreement;
(vii) a relocation of the
corporate headquarters of the Employers requiring the
Executive to relocate to a place other than the greater
Chicago, Illinois metropolitan area; or
(viii) any material breach of
this Agreement by the Employers.
4.4.3 In the event of a Termination Without
Cause or a Voluntary Termination for Good Reason, the Executive
shall not be required to mitigate his damages hereunder;
provided, however, that, notwithstanding the foregoing, if there
are any damages hereunder by reason of the events of termination
described above which are "contingent on" a Section 280G Change
within the meaning of Section 280G(b)(2)(A) of the Code after a
Public Offering (i) the Executive shall be required to mitigate
such damages hereunder, including any such damages theretofore
paid, but not in excess of the extent, if any, necessary to
prevent the Employers from losing any tax deductions to which
they would otherwise be entitled in connection with such damages
if they were not so "contingent on" a Section 280G Change
(provided, that, the parties agree that this clause (i) shall not
require the Executive to violate Section 5.2 hereof) and (ii) in
addition to any obligation under the preceding clause (i), and
without duplication of any amounts required to be paid to the
Employers thereunder, if any such termination occurs and the
Executive, whether or not required to mitigate his damages under
clause (i) above, thereafter obtains other employment, the total
compensation received in connection with such other employment,
whether paid to the Executive or deferred for his benefit, for
services prior to the end of the Modified Payment Period (as
defined below) (up to the aggregate amount of damages described
in Section 4.4.1(b)) shall be paid over to the Employers as
received with respect to such period. Notwithstanding the
provisions of this Section 4.4.3, the Employers shall not have
the right to enforce their rights under this Section 4.4.3 by set
off against or by otherwise withholding any amounts receivable by
the Executive (or payable on the Executive's behalf) under this
Agreement upon or following the time at which they are required
to be paid under this Agreement.
4.4.4 In the event that any amounts or other
benefit payable pursuant to Section 4.4 or 4.5 (other than
Section 4.4.6) (including, but not limited to, the Continued
Payments, the receipt of any security upon the exercise of any
Option, or the lapse of any direct or indirect restriction on the
ability to transfer any such security for the fair market value
thereof) would be deemed "contingent on" a Section 280G Change
(within the meaning of Section 280G(b)(2)(A) of the Code) that
occurs subsequent to a Public Offering:
(a) the Continued Salary shall be paid, the
Continued Bonus shall be calculated by reference to and the
Continued Benefits shall be provided for the shorter of (i) 18
months following the date of termination, and (ii) the remainder
of the Term (even if such remaining period is less than twelve
months) (the "Modified Payment Period"), and
(b) the Continued Salary and the Continued
Bonus (as modified in clause (a) of this Section 4.4.4) shall be
paid to the Executive by the Employers, within 60 days of the
date of termination, in a lump sum, which lump sum shall be
discounted to the present value, on the date of payment, of the
Continued Salary (as if paid at the times the Base Salary would
have been paid to the Executive under Section 2.2 if the
Executive had been employed by the Employers during the Modified
Payment Period) and the Continued Bonus (as if paid on the last
day of the Modified Payment Period) at the Discount Rate.
"Discount Rate" shall mean the discount rate described in Section
280G(d)(4) of the Code. The parties hereby elect, to the extent
permitted for purposes of such Section 280G(d)(4), to base the
Discount Rate on the applicable federal rate in effect on the
date hereof.
4.4.5 It is the intention of the parties that,
if there has been a Public Offering and a Section 280G Change
occurs, payments to be made to the Executive in the event of a
Termination Without Cause or a Voluntary Termination for Good
Reason qualify as "reasonable compensation for personal services
to be rendered on or after the date of the change" within the
meaning of Section 280G(b)(4)(A) of the Code and Q&A 42(b) of
Proposed Regulation Section 1.280G-1 thereunder (as amended from
time to time), and the provisions of this Agreement shall, in the
event of any ambiguity, be interpreted in a manner consistent
with the foregoing.
4.4.6 Upon a Termination Without Cause or a
Voluntary Termination with Good Reason that occurs both (i) prior
to a Public Offering, and (ii) following a Change of Control (as
defined below) all unvested Initial Securities shall become
Vested Securities. A "Change of Control" shall, for the purposes
of this Section 4.4.6, be deemed to have occurred upon the date,
if any, at which a person or group (as such term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended) other than Acadia Partners, L.P., Keystone, Inc., HWP
Partners, L.P. and their respective Affiliates (as defined in
Section 2.1(a) of the Principal Stockholders Agreement) has the
collective ability to directly or indirectly designate a majority
of the members of the SFAC Board (whether by contract or
otherwise).
4.5 Termination by Non-Extension of Term. Upon a
termination of the Term by reason of the non-extension of the
Term pursuant to Section 2.2:
(a) without regard to whether notice of such
termination is given by the Employers or the Executive, the Term
shall terminate and the Executive shall be entitled to receive no
further amounts or benefits hereunder; provided, that the
Employers shall be obligated to pay to the Executive all unpaid
Base Salary accrued, and provide the Executive with all benefits,
bonuses and expense reimbursement to which the Executive would
otherwise be entitled, through and including the date of
termination of the Term;
(b) if such termination occurs by reason of the
giving by any party of a notice of non-extension, for the 180
days following the date of termination of the Term, the Employers
shall have the right to repurchase all but not less than all of
the Vested Securities, at a price equal to the Full Value thereof
on the date of termination of the Term; and
(c) in addition to the provisions of clauses (a)
and (b) above, if the Employers give notice of non-extension
pursuant to Section 2.2:
(i) unless the notice of non-extension
would be deemed "contingent on" a Section 280G Change
(within the meaning of Section 280G(b)(2)(A) of the
Code) that occurs subsequent to a Public Offering, the
Employers shall continue payments of Base Salary to the
Executive, at the rate and at such times as are in
effect on the date of the termination of the Term, for
the 18 month period following the date of termination,
and
(ii) for the 180 days following the date
of termination of the Term, the Executive shall have
the right to require the Employers to purchase (subject
to Section 4.6 hereof) (i) all but not less than all of
the Vested Securities and the Vested Initial
Securities, at a price equal to the Fair Market Value
thereof on the date of termination of the Term, and
(ii) all but not less than all of the Purchased Shares
at a price equal to the Fair Market Value thereof on
the date of termination of the Term; provided, that any
proceeds from any such purchase and sale shall first be
used to pay any outstanding principal of and interest
accrued but not paid under the note.
4.6 Certain Provisions Regarding Repurchase
Obligations. The rights of the Executive (or the Beneficiary, as
the case may be) to require the Employers to purchase Securities
from the Executive pursuant to Article 4 hereof ("Put Rights")
shall be limited by this Section 4.6. The Executive (or the
Beneficiary) shall not have the right to require the Employers to
purchase any securities pursuant to Article 4 to the extent that
such purchase (i) would constitute or cause a breach or violation
of or a default (whether immediately or with notice or lapse of
time or both) under any debt agreement of either Employer or of
any of their subsidiaries (whether currently in existence or
entered into subsequent to the date hereof) or (ii) would violate
any law applicable to the Employers. If the Employers can buy
some but not all of the securities that the Executive (or the
Beneficiary) have requested the Employers to purchase (the "Put
Securities"), the Employers shall purchase as many Put Securities
as can be purchased without causing such breach, default or
violation. Thereafter, at the time it becomes possible for the
Employers to repurchase all (but not less than all) remaining Put
Securities without causing such breach, default or violation, the
Employers shall promptly purchase all such remaining Put
Securities. In the event that either the Term Loan Agreement,
dated as of August 16, 1993, among SFC, certain lenders listed
therein and Chemical Bank, as administrative agent, or the
Revolving Credit Agreement dated as of August 16, 1993, among the
Revolving Credit Borrowers signatory thereto, the lenders named
therein and Chemical Bank, as administrative agent, imposes
restrictions on the Employers' ability to satisfy the Executive's
Put Rights, the Employers shall, at the time such Put Rights are
required to be satisfied, use all commercially reasonable efforts
to obtain amendments to or waivers from such agreements that have
the effect of removing such restrictions.
5. Protection of Confidential Information: Non-
Competition; No Solicitation.
5.1 In view of the fact that the Executive's work for
the Employers will bring the Executive into close contact with
many confidential affairs of the Employers not readily available
to the public, and plans for future developments, the Executive
agrees:
5.1.1 To keep and retain in the strictest
confidence all confidential matters of the Employers, including,
without limitation, to the extent the following are confidential,
trade "know how," secrets, customer lists, pricing policies,
operational methods, technical processes, formulae, inventions
and research projects, and other business affairs of the
Employers, learned by the Executive heretofore or hereafter, and
not to disclose them to anyone outside of the Employers, either
during or after the Executive's employment with the Employers,
except in the course of performing the Executive's duties
hereunder or with the Employers' express written consent; and
5.1.2 To deliver promptly to the Employers on
termination of the Executive's employment by the Employers, or at
any time the Employers may so request, all memoranda, notes,
records, reports, manuals, drawings, blueprints and other
documents (and all copies thereof) relating to the Employers'
business and all property associated therewith, which the
Executive may then possess or have under the Executive's control
unless such information is necessary to enable the Executive to
file any federal or state tax return or make any other report or
filing or take any other action required by any law, regulation
or order of any court or regulatory commission, department or
agency.
Notwithstanding the foregoing, nothing contained
in this Section 5.1 shall restrict the Executive from using,
disclosing or retaining any information (i) which is in the
public domain or could readily be known or determined without
being employed by the Employers or which enters the public domain
through no breach of the Executive's obligations to the
Employers, (ii) which the Executive acquired prior to his
employment by the Employers, (iii) which the Executive properly
acquired or acquires from parties independent of the Employers,
(iv) which the Executive is required to disclose by law,
regulation, order or legal process, (v) which is desirable to
establish the Executive's claim or defense in any litigation
between the parties, provided that the Executive uses his best
efforts to ensure that confidential treatment will be afforded
such information.
5.2 During the term of the Executive's employment by
the Employers and, in the event of the termination of the
Executive's employment for any reason, for the 180-day period
immediately following the date of termination, the Executive
shall not, directly or indirectly, enter the employ of, or render
any services to, any person, firm or corporation engaged in any
business competitive with the business of the Employers or of any
of their subsidiaries; in any state in which any such business is
conducted or in which the Employers have specific plans to
conduct business at the time of such termination, the Executive
shall not engage in such business on the Executive's own account;
and the Executive shall not become interested in any such
business, directly or indirectly, as an individual, partner,
shareholder, director, officer, principal, agent, employee,
trustee, consultant, or in any other relationship or capacity;
provided, however, that nothing contained in this Section 5.2
shall be deemed to prohibit the Executive from acquiring, solely
as an investment, up to one percent (1%) of the outstanding
shares of capital stock of any public corporation. The Executive
shall not be deemed to be in breach of this Section 5.2 because
(i) a public corporation of which he owns more than 1% of the
outstanding capital stock begins to engage in any such prohibited
activities or (ii) his ownership interest in a public corporation
engaged in such activities increases to more than 1% of such
corporation's issued and outstanding capital stock in either case
without any volitional act on the part of the Executive, if, in
the case of either clause (i) or (ii) above, within sixty (60)
days of learning of such event, the Executive disposes of the
amount of capital stock necessary to cause his ownership to be
less than 1% of the amount of such capital stock issued and
outstanding.
5.3 When the Executive's employment by the Employers
terminates for any reason whatsoever, then during the period
commencing on the date of such termination and ending on the
second anniversary thereof, the Executive shall not without the
express written consent of SFAC, directly or indirectly, (i)
solicit any employee of the Employers or of any of their
subsidiaries to terminate his employment with the Employers or
with such subsidiary or (ii) hire any such employee.
5.4 If the Executive commits a breach, or threatens to
commit a breach, of any of the provisions of Sections 5.1, 5.2 or
5.3 hereof, the Employers shall have, in addition to any other
remedies they may have, the following rights and remedies:
5.4.1 The right and remedy to have the
provisions of this Agreement specifically enforced by any court
having equity jurisdiction, it being acknowledged and agreed that
any such breach or threatened breach will cause irreparable
injury to the Employers and that money damages will not provide
an adequate remedy to the Employers; and
5.4.2 The right and remedy to require the
Executive to account for and pay over to the Employers all
compensation, profits, monies, accruals, increments or other
benefits (collectively "Benefits") derived or received by the
Executive as the result of any transactions constituting a breach
of any of the provisions of the preceding paragraph, and the
Executive hereby agrees to account for and pay over such Benefits
to the Employers.
5.4.3 Each of the rights and remedies
enumerated above shall be independent of the other, and shall be
severally enforceable, and all of such rights and remedies shall
be in addition to, and not in lieu of, any other rights and
remedies available to the Employers under law or in equity.
5.5 If any of the covenants contained in Section 5.1,
5.2 or 5.3, or any part thereof, hereafter is construed to be
invalid or unenforceable, the same shall not affect the remainder
of the covenant or covenants, which shall be given full effect,
without regard to the invalid portions.
5.6 If any of the covenants contained in Section 5.1,
5.2 or 5.3, or any part thereof, is held to be unenforceable
because of the duration of such provision or the area covered
thereby, the parties agree that the court making such
determination shall have the power to reduce the duration and/or
area of such provision and, in its reduced form, said provision
shall then be enforceable.
5.7 The parties hereto intend to and hereby confer
jurisdiction to enforce the covenants contained in Sections 5.1,
5.2 and 5.3 upon the courts of any state within the geographical
scope of such covenants where the Executive is engaged in
activities in violation of such covenants or the Employers are
damaged or harmed in any way by the Executive's violation of such
covenants. In the event that the courts of any one or more of
such states shall hold such covenants wholly unenforceable by
reason of the breadth of such covenants or otherwise, it is the
intention of the parties hereto that such determination not bar
or in any way affect the Employers' right to the relief provided
above in the courts of any other states within the geographical
scope of such covenants as to breaches of such covenants in such
other respective jurisdictions, the above covenants as they
relate to each state being for this purpose severable into
diverse and independent covenants.
6. Inventions and Patents. The Executive agrees that all
processes, technologies and inventions (collectively
"Inventions"), including new contributions, improvements, ideas
and discoveries, whether patentable or not, conceived, developed,
invented or made by him while employed by the Employers shall
belong to the Employers, provided that such Inventions grew out
of the Executive's work with the Employers or any of their
subsidiaries or affiliates, are related in any manner to the
business (commercial or experimental) of the Employers or any of
their subsidiaries or affiliates or are conceived or made on the
Employers' time or with the use of the Employers' facilities or
materials. The Executive shall further: (a) promptly disclose
such Inventions to the Employers; (b) assign to the Employers,
without additional compensation, all patent and other rights to
such Inventions for the United States and foreign countries; (c)
sign all papers necessary to carry out the foregoing; and (d)
give testimony in support of the Executive's inventorship.
7. Intellectual Property. The Employers shall be the
exclusive owners of all the products and proceeds of the
Executive's services with the Employers, including, but not
limited to, all materials, ideas, concepts, formats, suggestions,
developments, arrangements, packages, programs and other
intellectual properties that the Executive may acquire, obtain,
develop or create in connection with and during the Executive's
employment by the Employers, free and clear of any claims by the
Executive (or anyone claiming under the Executive) of any kind or
character whatsoever (other than the Executive's right to receive
payments hereunder). The Executive shall, at the request of the
Employers, execute such assignments, certificates or other
instruments as the Employers may from time to time deem necessary
or desirable to evidence, establish, maintain, perfect, protect,
enforce or defend their right, title or interest in or to any
such properties.
8. Notices. All notices, requests, consents and other
communications required or permitted to be given hereunder shall
be in writing and shall be deemed to have been duly given if
delivered personally, sent by overnight courier or mailed first-
class, postage prepaid, by registered or certified mail (notices
mailed shall be deemed to have been given on the date mailed) or
sent by telecopier, as follows (or to such other address as
either party shall designate by notice in writing to the other in
accordance herewith):
If to the Employers, to:
Specialty Foods Acquisition Corporation
Specialty Foods Corporation
9399 West Higgins Road, Suite 800
Rosemont, Illinois 60018
Telecopier: 847/685-1010
Attention: General Counsel
with copies to:
Haas Wheat & Partners Incorporated
300 Crescent Court, Suite 1700
Dallas, Texas 75201
Telecopier: 214/871-8317
Attention: Robert B. Haas and Douglas D. Wheat
and:
Keystone, Inc.
201 Main Street, Suite 3100
Forth Worth, Texas 76102
Telecopier: 817/338-2064
Attention: J. Taylor Crandall
and:
Oak Hill Partners, Inc.
Park Avenue Tower
65 East 55th Street, 32nd Floor
New York, New York 10022
Telecopier: 212/826-6245
Attention; Daniel L. Doctoroff
If to the Executive, to:
Mr. Lawrence S. Benjamin
787 E. Illinois Avenue
Lake Forest, Illinois 60045
9. General.
9.1 This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Illinois
applicable to agreements made and to be performed entirely in
Illinois; provided, that all provisions of this Agreement
governing the issuance and rights in respect of securities of
SFAC, including, without limitation, Initial Securities and
Vested Securities, shall be governed by and construed in
accordance with the laws of the State of Delaware.
9.2 The section headings contained herein are for
reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
9.3 This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter
hereof, and supersedes all prior agreements, arrangements and
understandings, written or oral, relating to the subject matter
hereof. No representation, promise or inducement has been made
by either party that is not embodied in this Agreement, and
neither party shall be bound by or liable for any alleged
representation, promise of inducement not so set forth.
9.4 This Agreement, and the Executive's rights and
obligations hereunder, may not be assigned by the Executive. The
Employers may assign their rights, together with their
obligations, hereunder (i) to any subsidiary of or successor-in-
interest to any of them, or (ii) to third parties in connection
with any sale, transfer or other disposition of all or
substantially all of the business or assets of any of them; in
any event the obligations of the Employers hereunder shall be
binding on their successors or permitted assigns, whether by
merger, consolidation or acquisition of all or substantially all
of either of their businesses or assets.
9.5 This Agreement may be amended, modified,
superseded, canceled, renewed or extended and the terms or
covenants hereof may be waived, only by a written instrument
executed by the parties hereto, or in the case of a waiver, by
the party waiving compliance. The failure of a party at any time
or times to require performance of any provision hereof shall in
no manner affect the right at a later time to enforce the same.
No waiver by either party of the breach of any term or covenant
contained in this Agreement, whether by conduct or otherwise, in
any one or more instances, shall be deemed to be, or construed
as, a further or continuing waiver of any such breach, or a
waiver of the breach of any other term or covenant contained in
this Agreement.
9.6 This Agreement or any amendment hereto may be
signed in any number of counterparts, each of which shall be an
original, but all of which taken together shall constitute one
agreement (or amendment as the case may be).
9.7 This Agreement shall be of no force or effect
until it has been approved by, the Compensation Committees of the
Boards.
10. Certain Definitions.
10.1 As used herein the term "subsidiary" shall mean
any corporation or other business entity controlled directly or
indirectly by the corporation or other business entity in
question, and the term "affiliate" shall mean and include any
corporation or other business entity directly or indirectly
controlling, controlled by or under common control with the
corporation or other business entity in question.
10.2 As used herein, the "Fair Market Value" of the
Common Stock shall mean the fair market value of the Common Stock
determined by the SFAC Board in good faith on a going concern
basis without regard to any minority discount (the "Initial
Value"), which determination shall be evidenced by a resolution
of the SFAC Board and the Initial Value shall be the Fair Market
Value of the Common Stock for all purposes; provided, that
following the termination of the Executive's employment by the
Employers, for any reason, pursuant to Article 4 hereof, if the
Executive or the Beneficiary disagrees with the SFAC Board's
determination that the Initial Value is the fair market value of
the Common Stock and delivers written notice of such disagreement
to the Employers within 30 days after the date on which the SFAC
Board's determination of the Initial Value is communicated to the
Executive or the Beneficiary, the Fair Market Value of the Common
Stock shall be determined in a binding arbitration proceeding,
the arbitrator for which shall be a nationally recognized
investment banking firm selected jointly by the Employers and the
Executive (or the Beneficiary, as the case may be); provided,
that if the Employers and the Executive (or the Beneficiary, as
the case may be) cannot agree on an arbitrator, an arbitrator
shall be selected in accordance with the rules of the American
Arbitration Association. Notwithstanding the foregoing, (i) if
the Fair Market Value, as determined by the Arbitrator (the
"Arbitration Value"), does not deviate from the Initial Value by
an amount equal to more than 10% of the Initial Value then the
Fair Market Value shall equal the Initial Value for all purposes,
and (ii) if the Arbitration Value deviates from the Initial Value
by an amount equal to more than 10% of the Initial Value (whether
such deviation is higher or lower than the Initial Value) then
the Fair Market Value shall equal the Arbitration Value for all
purposes. If, following an arbitration proceeding, the
Arbitration Value exceeds an amount equal to the sum of (x) the
Initial Value plus (y) an amount equal to 10% of the Initial
Value, the Employers shall pay all costs associated with the
arbitration; in all other cases, the Executive (or the
Beneficiary, as the case may be) shall pay all of such costs.
10.3 Survival. The provisions of Sections 5, 6 and 7
shall survive any termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
SPECIALTY FOODS ACQUISITION
CORPORATION
By: /s/ Robert L. Fishbune
Name: Robert L. Fishbune
Title: Vice President
By: /s/ John R. Reisenberg
Name: John R. Reisenberg
Title: Vice President
SPECIALTY FOODS CORPORATION
By: /s/ Robert L. Fishbune
Name: Robert Fishbune
Title: Vice President
By: /s/ John R. Reisenberg
Name: John R. Reisenberg
Title: Vice President
/s/ Lawrence S. Benjamin
LAWRENCE S. BENJAMIN
EXHIBIT 10.69
Execution Copy
- 21 -
EXECUTIVE EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), dated as of March 1,
1997, among SPECIALTY FOODS ACQUISITION CORPORATION, a Delaware
corporation ("SFAC"), SPECIALTY FOODS CORPORATION, a Delaware
corporation ("SFC"), and ROBERT B. AIKEN, JR. (the "Executive").
SFAC and SFC are each sometimes herein referred to individually
as an "Employer" and are sometimes referred to collectively as
the "Employers."
The Employers wish to employ the Executive, and the
Executive wishes to accept such employment, on the terms and
conditions set forth in this Agreement.
Accordingly, the Employers and the Executive hereby agree as
follows:
1. Employment, Duties and Acceptance.
1.1 Employment Duties. The Employers hereby employ
the Executive for the Term (as defined in Section 2), to render
exclusive and full-time services to the Employers, as Vice
President and General Counsel of each of SFAC and SFC, and to
perform such other duties (consistent with the customary duties
of a corporate officer) as may be assigned to the Executive by
the Board of Directors (collectively, the "Boards"), Chief
Executive Officer or Chief Operating Officer of either Employer.
1.2 Acceptance. The Executive hereby accepts such
employment and agrees to render the services described above.
During the Term, the Executive agrees to devote the Executive's
entire business time, energy and skill to such employment, and to
use the Executive's best efforts, skill and ability to promote
the Employers' interests. The Executive further agrees to accept
election, and to serve during all or any part of the Term, as an
officer or director of either Employer, or any subsidiary of
either Employer, without any compensation therefor other than
that specified in this Agreement, if elected to any such position
by the shareholders of either Employer, the Boards or the
shareholders or Board of Directors of any such subsidiary, as the
case may be.
2. Terms of Employment.
2.1 The Term. The term of the Executive's employment
under this Agreement (the "Term") shall commence as of February
3, 1997 (the "Effective Date") and shall, unless sooner
terminated pursuant to Section 2.3 hereof, end on December 31,
1998 or on such later December 31 to which the Term is extended
pursuant to Section 2.2.
2.2 Extension. On June 30 of 1998, the then scheduled
expiration date of the Term shall automatically be extended,
without any action required of either the Executive or the
Employers, for twelve additional months, unless the Executive, on
the one hand, or the Employers, on the other hand, shall have
given written notice of non-extension to the other no later than
such June 30. If such written notice of non-extension is given,
the Term shall end on the then-scheduled termination date (taking
into account any previous extensions pursuant to this Section
2.2). By way of example, unless written notice of non-extension
is given by June 30, 1998, the otherwise scheduled expiration
date of December 31, 1998 shall be extended to December 31, 1999.
If the Executive remains employed by the Employers after December
31, 1999, then the Term shall be deemed to be ended and the
Executive's employment shall be "employment-at-will" unless the
parties otherwise agree in writing.
2.3 Early Termination. The Term shall end earlier
than the December 31 termination date scheduled in accordance
with the foregoing provisions of this Article 2, if sooner
terminated pursuant to Article 4.
3. Compensation; Benefits.
3.1 Salary. As compensation for all services to be
rendered pursuant to this Agreement, the Employers agree to pay
the Executive during the 12 months of the Term ending on December
31, 1997, a base salary at an annual rate of $275,000 (the "Base
Salary"); provided, that payment of Base Salary shall commence as
of February 3, 1997, and shall not be payable in respect of any
period prior to such date. The annual Base Salary rate may be
increased from time to time, in the sole discretion of the
Boards.
3.2 Bonus. In addition to the amounts to be paid to
the Executive pursuant to Section 3.1, the Executive will be
eligible to receive with respect to each fiscal year of the
Employers commencing with their fiscal year ending December 31,
1997, an incentive bonus (the "Incentive Bonus") equal to a
percentage of Base Salary for such fiscal year based on the
achievement of the Employers of performance targets ("Performance
Targets") to be set in the beginning of such fiscal year by the
compensation committee of the Boards, such that if the minimum
Performance Target is not achieved, the Incentive Bonus shall be
zero; if the intermediate Performance Target is achieved, the
Incentive Bonus shall be equal to 50% of Base Salary; and if the
maximum Performance Target is achieved, the Incentive Bonus shall
be equal to 100% of Base Salary (provisions for pro rata
Incentive Bonus amounts for achievements between the minimum
Performance Target and the intermediate Performance Target or
between the intermediate Performance Target and the maximum
Performance Target, as the case may be, shall also be
established). The Incentive Bonus for each fiscal year shall be
paid to the Executive within 30 days of the receipt by the
Employers of their audited financial statements for such fiscal
year. Notwithstanding anything herein to the contrary, Executive
shall, subject to the Employers meeting required performance
objectives, receive a bonus for the year ended December 31, 1997
calculated in a manner as if the Executive had been employed by
the Employers pursuant to the terms of this Agreement beginning
on January 1, 1997.
3.3 Business Expenses. The Employers shall pay or
reimburse the Executive for all reasonable expenses actually
incurred or paid by the Executive during the Term in the
performance of the Executive's services under this Agreement,
upon presentation of expense statements or vouchers or such other
supporting information as the Employers customarily require of
their other senior executives.
3.4 Vacation. During the Term, the Executive shall be
entitled to a paid vacation period or periods taken in accordance
with the vacation policy of the Employers during each year of the
Term; provided, that the Executive shall be entitled to not less
than four (4) weeks paid vacation for each year of the Term.
3.5 Fringe Benefits; Securities Investment; Stock
Options.
3.5.1 Benefits. During the Term, the
Executive shall be entitled to all benefits for which the
Executive shall be eligible under any long term incentive plan,
qualified pension plan, 401(k) plan, annuity plan, group
insurance plan or other so-called "fringe" benefit plan which
SFAC or SFC provides to its executive officers generally,
including, without limitation, the SFC Executive Retirement
Annuity Plan. In addition, the Employers shall pay the
reasonable fees in connection with personal financial counseling
on behalf of the Executive, including fees relating to tax return
preparation beginning for the 1997 tax year.
3.5.2 Securities Investment. Section not
applicable. (See Executive Securities Purchase Agreement dated as
of December 15, 1994, and Stock Purchase Agreement dated as of
June 15, 1995).
3.5.3 Management Option and Bonus. The
Executive shall continue to participate in the management stock
option plan (the "Option Plan") of the Employers. The number of
additional stock options to be granted to the Executive under the
Option Plan shall be 100,000, at an exercise price as agreed to
by the Parties.
3.6 Automobile. In addition, the Executive will
receive an automobile allowance of $1,100.00 per month during the
term of this Agreement.
3.7 Withholding. All compensation of the Executive by
the Employers provided for in this Agreement, whether in the form
of cash, securities or "fringe" benefits, shall be subject to
such deductions or amounts to be withheld as required by
applicable law and regulations. Whenever compensation provided
for under this Agreement is to be delivered to the Executive in a
form other than cash, the Employers may require as a condition of
delivery that the Executive remit to the Employers an amount
sufficient to satisfy all federal, state and other governmental
withholding tax requirements related thereto. If the
compensation referred to in the preceding sentence is in the form
of securities (whether by the vesting of securities or
otherwise), the Employers shall, if the Executive so requests and
the Employers consent (such consent not to be withheld
unreasonably), satisfy the requirements of the preceding
sentence, to the extent permitted by applicable law, by deducting
from the number of securities otherwise deliverable to the
Executive, a number of securities having a fair market value
equal to the amount required to satisfy all federal, state and
other governmental withholding tax requirements related thereto.
3.8 Source of Payment; Nature of Certain Payments.
Any amounts payable to or on behalf of the Executive under this
Agreement may be paid by either Employer, as determined by the
Employers in their exclusive discretion. No payment made to the
Executive pursuant to Section 3.9 shall be deemed, for any
purpose, a payment of purchase price for Common Stock or
Subordinated Debentures.
3.9 Certain Additional Payments by the Employers.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event that (i) a Section 280G Change (as
defined below) occurs and (ii) any payment, distribution, other
compensation or benefit by either Employer to (or for the benefit
of) the Executive pursuant to the terms of this Agreement, as now
in effect or as amended from time to time (hereinafter, a
"Payment"), is determined (as hereinafter provided) to be subject
to the tax (the "Excise Tax") imposed by Section 4999 of the Code
(or any similar tax that may hereafter be imposed), the Employers
shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive,
after deduction of any Excise Tax on the Total Payments (as
defined below) and any federal, state and local income tax and
Excise Tax upon the additional amount provided for by this
paragraph (a), shall be equal to the Total Payments; provided,
however, that the aggregate payments required to be paid to or
for the benefit of the Executive pursuant to this Section 3.9
shall not exceed 400% of the Base Salary in effect pursuant to
Section 3.1 in the year in which the Section 280G Change occurs,
plus an amount equal to the interest and penalties, if any,
attributable to the portion of the Excise Tax for which the Gross-
Up Payment, as limited by this provision, reimburses the
Executive.
(b) Subject to the provisions of Section 3.9(c),
all determinations required to be made under this Section 3.9
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and, subject to the provisions
below, the assumptions to be utilized in arriving at such
determination, shall be made by KPMG Peat Marwick (or other
independent auditor of the Employers at the time) (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Employers and the Executive within 15
business days of the receipt of notice from the Executive that
there has been a Payment with respect to which a Gross-Up Payment
is owing, or such earlier time as is requested by the Employers.
All fees and expenses of the Accounting Firm shall be paid solely
by the Employers. Any Gross-Up Payment, as determined pursuant
to this Section 3.9, shall be paid by the Employers to the
Executive within five business days of the receipt of the
Accounting Firm's determination. The parties acknowledge that
unless the Accounting Firm is able to provide the Executive with
the opinion described in the third following sentence with
respect to such Payment, the Accounting Firm shall determine the
amount of the Gross-Up Payment that is due at the time of any
Payment. If the Accounting Firm determines that no Excise Tax is
payable by the Executive, it shall furnish the Executive with a
written opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not result
in the imposition of the negligence or similar penalty. Any
determination by the Accounting Firm shall be binding upon the
Employers and the Executive. The parties hereto acknowledge
that, as a result of uncertainty in the application of Section
4999 of the Code, it is possible that Gross-Up Payments will not
have been made by the Employers that should have been made
(hereinafter, an "Underpayment"), consistent with the provisions
of this Section 3.9. In the event that the Executive is required
to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and
any such Underpayment shall be promptly paid by the Employers to
or for the benefit of the Executive, unless the Executive has
failed to comply with Section 3.9(c) and such failure has
materially deprived the Employers of the right to contest any
claim by the Internal Revenue Service with respect to such
payments.
For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal
income taxes at the highest marginal rate of federal income
taxation for the calendar year in which the Gross-Up Payment is
to be made and the applicable state and local taxes at the
highest marginal rate of taxation for the calendar year in which
the Gross-Up Payments is to be made, net of the maximum reduction
in federal income taxes which could be obtained from deduction of
such state and local taxes.
(c) The Executive shall notify the Employers in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Employers of a Gross-
Up Payment. Such notification shall be given as soon as
practicable but, in any event, no later than ten business days
after the Executive is informed in writing of such claim and
shall apprise the Employers of the nature of such claim and the
date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day
period following the date on which he gives such notice to the
Employers (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the
Employers notify the Executive in writing prior to the expiration
of such period that they desire to contest such claim, and if the
Employers acknowledge in writing their liability, subject to the
limitations set forth in Section 3.9(a), to the Executive
pursuant to this Section 3.9 with respect to any amounts payable
in connection with such claim, the Executive shall:
(i) give the Employers any information
reasonably requested by the Employers and reasonably
available to the Executive relating to such claim;
(ii) take all such actions in connection
with contesting such claim as the Employers shall
reasonably request in writing from time to time,
including, without limitation, accepting legal
representation with respect to such claim by an
attorney selected by the Employers and agreeing to
extend the statute of limitations as requested by the
Employers;
(iii) cooperate with the Employers
in good faith in order to effectively contest such
claim; and
(iv) permit the Employers to participate
in any proceeding relating to such claim,
provided, however, that the Employers shall bear and pay directly
all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis,
for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without
limitation of the foregoing provisions of this Section 3.9(c),
the Employers shall control all proceedings taken in connection
with such contest and, at their sole option, may pursue or forego
any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim
and may, at their sole option, either direct the Executive to pay
the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as the Employers shall determine; provided, however, that
if the Employers direct the Executive to pay such claim and sue
for a refund, the Employers shall advance the amount of such
payment to the Executive, on an interest-free, after-tax basis.
Furthermore, the Employers' control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would
be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an
amount advanced by the Employers pursuant to Section 3.9(c), the
Executive becomes entitled to receive any refund with respect to
such claim, the Executive shall (subject to the Employers'
complying with the requirements of Section 3.9(c)), promptly pay
to the Employers the amount of such refund (together with any
interest received or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount
advanced by the Employers pursuant to Section 3.9(c), a
determination is made that the Executive shall not be entitled to
any refund with respect to such claim and the Employers do not
notify the Executive in writing of their intent to contest such
denial of refund prior to the expiration of 30 days after such
determination, then to the extent of the Gross-Up Payment such
advance shall be forgiven and shall not be required to be repaid
and shall, to such extent, offset the amount of Gross-Up Payment
required to be paid, and the remaining portion of such advance
shall forthwith become due and payable.
(e) For purposes of this Agreement:
A "Section 280G Change" shall mean a "change
. . . in the ownership or effective control" of either Employer
or a "change . . . in the ownership of a substantial portion of
the assets" of either Employer, in each case within the meaning
of Section 280G(b)(2)(A)(i) of the Code.
A "Public Offering" shall mean an initial
public offering of stock of either Employer if at any time
thereafter stock of either Employer is "readily tradable on an
established securities market or otherwise" (within the meaning
of Section 280G(b)(5)(A)(ii) of the Code).
"Total Payments" shall mean any payments or
benefits received or to be received by the Executive under this
Agreement or the plans discussed in Section 3.5.3, as now in
effect or as amended from time to time.
3.10 Performance Based Compensation. It is the
intention of the parties that, if Section 162(m) of the Code is
or will be applicable with respect to one or more payments
hereunder, the Executive will consider in good faith any requests
by the Employers to take actions to cause such payments to meet
the requirements of Section 162(m)(4)(B) or (C) of the Code, and
thus to be excluded from the definition of "applicable employee
remuneration" within the meaning of Section 162(m)(4) of the
Code.
4. Termination.
4.1 Death. If the Executive shall die during the
Term, upon the date of the Executive's death:
(a) the Term shall terminate and no further
amounts or benefits shall be payable hereunder, except that the
Employers shall be obligated to pay to the Beneficiary (as
defined below) in exchange for a release in form and substance
acceptable to the Employers acting reasonably, within 60 days of
the date of the Executive's death, (i) all unpaid Base Salary
accrued through and including the date of the Executive's death,
(ii) a lump sum amount equal to Base Salary for one year, at the
rate in effect on the date of the Executive's death (the "Annual
Base Salary Upon Death"), and (iii) an additional lump sum bonus
amount equal to the sum of (x) 50% of Annual Base Salary Upon
Death and (y) 50% of Annual Base Salary Upon Death pro rated for
the period commencing on the first day of the fiscal year during
which the Executive's death occurred and ending on the date of
Executive's death; it being understood that such 50% bonus level
has been agreed to because it is impossible to determine the
performance of the Employers for future periods. The
"Beneficiary" shall be (i) the beneficiary designated by the
Executive on a form prescribed for such purpose by the Employers,
or (ii) in the absence of such designation, the Executive's
executor or legal representative, in such capacity;
(b) for the 180 days following such date, the
Employers shall have the right to purchase (i) all but not less
than all of the Vested Securities (as defined below), at a price
equal to the Full Value (as defined below) thereof on the date of
the Executive's death, and/or (ii) all but not less than all
other Initial Securities (as defined below), at cost, plus, in
the case of the Subordinated Debentures, accreted discount
thereon through and including the date of such purchase;
provided, that Initial Securities that would have vested within
the six-month period following the date of the Executive's death
shall be treated, for all purposes under this Section 4.1, as
Vested Securities. "Full Value" means (i) in the case of the
Subordinated Debentures, the then accreted value thereof
(calculated assuming an 11% annual implied rate of return), and
(ii) in the case of the Common Stock, the Fair Market Value (as
defined in Section 10.2 hereof) thereof;
(c) for the 180 days following such date, the
Beneficiary shall have the right to require the Employers to
purchase (subject to Section 4.6 hereof) all but not less than
all of the Vested Securities, at a price equal to the Full Value
thereof on the date of the Executive's death, together with all
but not less than all of the other Initial Securities, at cost,
plus, in the case of the Subordinated Debentures included among
such other Initial Securities, accreted discount thereon through
and including the date of such purchase; and
(d) for purposes of this Agreement, the term
"Vested Securities" shall mean the combination of (i) "Vested
Securities", as defined in that certain Executive Securities
Purchase Agreement dated as of December 15, 1994 by and among the
Parties (the "Securities Purchase Agreement"), and (ii) "Vested
Purchased Shares", as defined in that certain Stock Purchase
Agreement dated as of December 15, 1995 by and between the
Executive and SFAC (the "Stock Purchase Agreement"); and the term
"Initial Securities" shall mean the combination of (i) "Initial
Securities", as defined in the Securities Purchase Agreement and
(ii) "Initial Purchased Shares", as defined in the Stock Purchase
Agreement.
4.2 Disability.
4.2.1 If during the Term the Executive shall
become physically or mentally disabled, whether totally or
partially, such that the Executive is unable to perform the
Executive's services hereunder for (i) a period of six
consecutive months, or (ii) for shorter periods aggregating six
months during any twelve month period, the Employers may on any
day (the "Disability Termination Date") after the last day of the
six consecutive months of disability or the day on which the
shorter periods of disability shall have equaled an aggregate of
six months (but, in each case, before the Executive has recovered
from such disability), by written notice to the Executive,
terminate the Term (a "Disability Termination") and no further
amounts or benefits shall be payable hereunder, except that the
Employers shall be obligated to pay to the Executive in exchange
for a release in form and substance acceptable to the Employers
acting reasonably, within 60 days of the Disability Termination
Date, (i) all unpaid Base Salary accrued through and including
the Disability Termination Date, (ii) a lump sum amount equal to
Base Salary for one year, at the rate in effect on the Disability
Termination Date (the "Annual Base Salary Upon Disability"), and
(iii) an additional lump sum bonus amount equal to the sum of (x)
50% of Annual Base Salary Upon Disability and (y) 50% of Annual
Base Salary Upon Disability prorated for the period commencing on
the first day of the fiscal year during which the Disability
Termination occurred and ending on the Disability Termination
Date; it being understood that such 50% bonus level has been
agreed to because it is impossible to determine the performance
of the Employers for future periods. If the Executive shall die
before receiving all amounts required to be paid by the Employers
in accordance with the foregoing, such amounts shall be paid to
the Beneficiary.
4.2.2 In the event of a Disability
Termination:
(a) for the 180 days following the
Disability Termination Date, the Employers shall have the right
to purchase (i) all but not less than all of the Vested
Securities, at a price equal to the Full Value thereof on the
Disability Termination Date, and/or (ii) all but not less than
all other Initial Securities, at cost, plus, in the case of the
Subordinated Debentures, accreted discount thereon through and
including the date of such purchase; provided, that Initial
Securities that would have vested within the six-month period
following the Disability Termination Date shall be treated, for
all purposes under this Section 4.2.2, as Vested Securities; and
(b) for the 180 days following the
Disability Termination Date, the Executive shall have the right
to require the Employers to purchase (subject to Section 4.6
hereof) all but not less than all of the Vested Securities, at a
price equal to the Full Value thereof on the Disability
Termination Date, together with all but not less than all of the
other Initial Securities, at cost, plus, in the case of the
Subordinated Debentures included among such other Initial
Securities, accreted discount thereon through and including the
date of such purchase.
4.3 Cause; Voluntary Termination.
4.3.1 In the event of the conviction of the
Executive of any felony involving intentional conduct on the part
of the Executive, the conviction of the Executive of any lesser
crime or offense involving the illegal use or conversion of
property of the Employers or any of their subsidiaries or
affiliates, the willful misconduct by the Executive in connection
with the performance of the Executive's duties hereunder (which
shall not be deemed to include an action by the Executive taken
in good faith in the best interest of the Employers) or the
continued breach by the Executive of any material provision of
this Agreement after notice of such breach has been actually
received by the Executive from the Employers (the "deemed
receipt" provisions of Article 8 hereof being inapplicable to
this Section 4.3.1), the Employers may at any time, by written
notice to the Executive, terminate the Term (a "Termination For
Cause") and, upon such Termination For Cause, the Term shall
terminate and the Executive shall be entitled to receive no
further amounts or benefits hereunder; provided, that the
Employers shall be obligated to pay to the Executive within 60
days of the date of termination, all unpaid Base Salary accrued,
and provide the Executive with all benefits and expense
reimbursement to which the Executive would otherwise be entitled,
through and including the date of termination.
4.3.2. Upon a voluntary termination of the term
by the Executive (a "Voluntary Termination") without Good Reason
(as defined in Section 4.4.2), the Term shall terminate and the
Executive shall be entitled to receive no further amounts or
benefits hereunder; provided, that the Employers shall be
obligated to pay to the Executive in exchange for a release in
form and substance acceptable to the Employers acting reasonably,
within 60 days of the date of termination, all unpaid Base Salary
accrued, and provide the Executive with all benefits and expense
reimbursement to which the Executive would otherwise be entitled,
through and including the date of termination.
4.3.3 Upon either a Termination For Cause or a
Voluntary Termination without Good Reason, for the 180 days
following the date of termination, the Employers shall have the
right to purchase (i) all but not less than all of the Vested
Securities, at a price equal to the Full Value thereof on the
date of termination, and/or (ii) all but not less than all other
Initial Securities, at cost, plus, in the case of the
Subordinated Debentures, accreted discount thereon through and
including the date of such purchase; the Executive shall not have
the right to require the Employer to repurchase such Vested
Securities or other Initial Securities.
4.4 Termination by Employers Without Cause;
Termination by the Executive for Good Reason.
4.4.1 Upon a Termination Without Cause (as
defined below) or a Voluntary Termination with Good Reason (as
defined below):
(a) the Employers shall pay to the
Executive, within 60 days of the date of termination, all unpaid
Base Salary accrued, and provide the Executive with all benefits
and expense reimbursement to which the Executive would otherwise
be entitled, through and including the date of termination,
(b) subject to Sections 4.4.4 and 4.4.6, the
Employers shall, in exchange for a release in form and substance
acceptable to the Employers acting reasonably, pay the following
to the Executive:
(i) the Employers shall continue
payments of Base Salary to the Executive (the
"Continued Salary"), at the rate and at such times as
are in effect on the date of termination (the "Base
Salary Upon Termination"), for the 12 month period
following the date of termination (the "Payment
Period"), except as provided in Section 4.4.4,
(ii) the Employers shall continue
health and life insurance benefits during the Payment
Period (the "Continued Benefits"), and
(iii) the Employers shall pay
to the Executive, at the end of the Payment Period, a
bonus (the "Continued Bonus," and together with the
Continued Salary and the Continued Benefits, the
"Continued Payments") in an amount equal to 50% of the
aggregate base salary paid to the Executive during the
period commencing on the day after the last day of the
last fiscal year completed prior to the date of
termination and ending on the last day of the Payment
Period; it being understood that such 50% bonus level
has been agreed to because it is impossible to
determine the performance of the Employers for future
periods,
(c) for the 180 days following the date of
termination, the Employers shall have the right to purchase (i)
all but not less than all of the Vested Securities, at a price
equal to the Full Value thereof on the date of termination,
and/or (ii) all but not less than all other Initial Securities,
at cost, plus, in the case of the Subordinated Debentures,
accreted discount thereon through and including the date of such
purchase, and
(d) for the 180 days following the date of
termination, the Executive shall have the right to require the
Employers to purchase (subject to Section 4.6 hereof) all but not
less than all of the Vested Securities, at a price equal to the
Full Value thereof on the date of termination, together with all
but not less than all of the other Initial Securities, at cost,
plus, in the case of the Subordinated Debentures included among
such other Initial Securities, accreted discount thereon through
and including the date of such purchase.
4.4.2 Definitions:
(a) "Termination Without Cause" means the
termination of the Term by the Employers for reasons other than
those described in Sections 4.1, 4.2 or 4.3.
(b) "Good Reason" means the continuation of
any of the following (without the Executive's express prior
consent) after written notice provided by the Executive and the
failure by the Employers to remedy such event within thirty (30)
days after receipt of such notice:
(i) a reduction in the Executive's
Base Salary, as in effect at the date hereof pursuant
to Section 2.2 or as in effect pursuant to increases
from time to time made during the Term;
(ii) failure by the Employers to
pay to the Executive an Incentive Bonus, as provided
for in this Agreement;
(iii) a failure by the
Employers to provide any benefit or compensation plan
(including any pension, profit sharing, annuity, life
insurance, health, accidental death or dismemberment or
disability plan), or any substantially similar benefit
or compensation plan, which has been made available to
other comparable executives of the Employers on terms
no less favorable to the Executive than the terms
offered to such other executives; provided, however,
that nothing in this clause (iii) shall be construed to
mean that the Employers shall be constrained from
amending or eliminating any benefit or compensation
plan as such is applied to the Executive and to other
comparable executives of the Employers; provided,
further, that a failure by the Employers to include the
Executive in any stock option plan or bonus plan shall
not constitute Good Reason hereunder;
(iv) the assignment to the
Executive of any duties materially inconsistent with
the Executive's position as Vice President and General
Counsel of the Employers;
(v) a materially adverse change in
the Executive's title or the line of authority through
which the Executive is required to report, it being
understood that the Executive shall at all times report
to either the Chief Executive Officer of the Employers;
(vi) failure by the Employers to
obtain the written agreement of any successor in
interest to the business of the Employers to assume and
perform the obligations of the Employers under this
Agreement;
(vii) a relocation of the
corporate headquarters of the Employers requiring the
Executive to relocate to a place other than the greater
Chicago, Illinois metropolitan area; or
(viii) any material breach of
this Agreement by the Employers.
4.4.3 In the event of a Termination Without
Cause or a Voluntary Termination for Good Reason, the Executive
shall not be required to mitigate his damages hereunder;
provided, however, that, notwithstanding the foregoing, if there
are any damages hereunder by reason of the events of termination
described above which are "contingent on" a Section 280G Change
within the meaning of Section 280G(b)(2)(A) of the Code after a
Public Offering (i) the Executive shall be required to mitigate
such damages hereunder, including any such damages theretofore
paid, but not in excess of the extent, if any, necessary to
prevent the Employers from losing any tax deductions to which
they would otherwise be entitled in connection with such damages
if they were not so "contingent on" a Section 280G Change
(provided, that, the parties agree that this clause (i) shall not
require the Executive to violate Section 5.2 hereof) and (ii) in
addition to any obligation under the preceding clause (i), and
without duplication of any amounts required to be paid to the
Employers thereunder, if any such termination occurs and the
Executive, whether or not required to mitigate his damages under
clause (i) above, thereafter obtains other employment, the total
compensation received in connection with such other employment,
whether paid to the Executive or deferred for his benefit, for
services prior to the end of the Modified Payment Period (as
defined below) (up to the aggregate amount of damages described
in Section 4.4.1(b)) shall be paid over to the Employers as
received with respect to such period. Notwithstanding the
provisions of this Section 4.4.3, the Employers shall not have
the right to enforce their rights under this Section 4.4.3 by set
off against or by otherwise withholding any amounts receivable by
the Executive (or payable on the Executive's behalf) under this
Agreement upon or following the time at which they are required
to be paid under this Agreement.
4.4.4 In the event that any amounts or other
benefit payable pursuant to Section 4.4 or 4.5 (other than
Section 4.4.6) (including, but not limited to, the Continued
Payments, the receipt of any security upon the exercise of any
Option, or the lapse of any direct or indirect restriction on the
ability to transfer any such security for the fair market value
thereof) would be deemed "contingent on" a Section 280G Change
(within the meaning of Section 280G(b)(2)(A) of the Code) that
occurs subsequent to a Public Offering:
(a) the Continued Salary shall be paid, the
Continued Bonus shall be calculated by reference to and the
Continued Benefits shall be provided for the shorter of (i) 12
months following the date of termination, and (ii) the remainder
of the Term (even if such remaining period is less than twelve
months) (the "Modified Payment Period"), and
(b) the Continued Salary and the Continued
Bonus (as modified in clause (a) of this Section 4.4.4) shall be
paid to the Executive by the Employers, within 60 days of the
date of termination, in a lump sum, which lump sum shall be
discounted to the present value, on the date of payment, of the
Continued Salary (as if paid at the times the Base Salary would
have been paid to the Executive under Section 2.2 if the
Executive had been employed by the Employers during the Modified
Payment Period) and the Continued Bonus (as if paid on the last
day of the Modified Payment Period) at the Discount Rate.
"Discount Rate" shall mean the discount rate described in Section
280G(d)(4) of the Code. The parties hereby elect, to the extent
permitted for purposes of such Section 280G(d)(4), to base the
Discount Rate on the applicable federal rate in effect on the
date hereof.
4.4.5 It is the intention of the parties that,
if there has been a Public Offering and a Section 280G Change
occurs, payments to be made to the Executive in the event of a
Termination Without Cause or a Voluntary Termination for Good
Reason qualify as "reasonable compensation for personal services
to be rendered on or after the date of the change" within the
meaning of Section 280G(b)(4)(A) of the Code and Q&A 42(b) of
Proposed Regulation Section 1.280G-1 thereunder (as amended from
time to time), and the provisions of this Agreement shall, in the
event of any ambiguity, be interpreted in a manner consistent
with the foregoing.
4.4.6 Upon a Termination Without Cause or a
Voluntary Termination with Good Reason that occurs both (i) prior
to a Public Offering, and (ii) following a Change of Control (as
defined below) all unvested Initial Securities shall become
Vested Securities. A "Change of Control" shall, for the purposes
of this Section 4.4.6, be deemed to have occurred upon the date,
if any, at which a person or group (as such term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended) other than Acadia Partners, L.P., Keystone, Inc., HWP
Partners, L.P. and their respective Affiliates (as defined in
Section 2.1(a) of the Principal Stockholders Agreement) has the
collective ability to directly or indirectly designate a majority
of the members of the SFAC Board (whether by contract or
otherwise).
4.5 Termination by Non-Extension of Term. Upon a
termination of the Term by reason of Section 2.2:
(a) without regard to whether such termination of
the Term occurs by reason of a notice of non-extension or by the
expiration of the Term on December 31, 1999, the Term shall
terminate and the Executive shall be entitled to receive no
further amounts or benefits hereunder; provided, that the
Employers shall be obligated to pay to the Executive all unpaid
Base Salary accrued, and provide the Executive with all benefits,
bonuses and expense reimbursement to which the Executive would
otherwise be entitled, through and including the date of
termination of the Term;
(b) if such termination occurs by reason of the
giving by any party of a notice of non-extension, for the 180
days following the date of termination of the Term, the Employers
shall have the right to repurchase all but not less than all of
the Vested Securities, at a price equal to the Full Value thereof
on the date of termination, and all, but not less than all, of
the Initial Securities, at cost, plus, in the case of the
Subordinated Debentures, accreted discount thereon through and
including the date of such purchase; and
(c) in addition to the provisions of clauses (a)
and (b) above, if the Employers give notice of non-extension
pursuant to Section 2.2:
(i) unless the notice of non-extension
would be deemed "contingent on" a Section 280G Change
(within the meaning of Section 280G(b)(2)(A) of the
Code) that occurs subsequent to a Public Offering, the
Employers shall, in exchange for a release in form and
substance acceptable to the Employers acting
reasonably, continue payments of Base Salary to the
Executive, at the rate and at such times as are in
effect on the date of the termination of the Term, for
the 180 day period following the date of termination,
and
(ii) for the 180 days following the date
of termination of the Term, the Executive shall have
the right to require the Employers to purchase (subject
to Section 4.6 hereof) all but not less than all of the
Vested Securities, at a price equal to the Full Value
thereof on the date of termination of the Term, and
all, but not less than all, other Initial Securities,
at cost, plus, in the case of the Subordinated
Debentures, accreted discount thereon through and
including the date of such purchase.
4.6 Certain Provisions Regarding Repurchase
Obligations. The rights of the Executive (or the Beneficiary, as
the case may be) to require the Employers to purchase Initial
Securities from the Executive pursuant to Article 4 hereof ("Put
Rights") shall be limited by this Section 4.6. The Executive (or
the Beneficiary) shall not have the right to require the
Employers to purchase any securities pursuant to Article 4 to the
extent that such purchase (i) would constitute or cause a breach
or violation of or a default (whether immediately or with notice
or lapse of time or both) under any debt agreement of either
Employer or of any of their subsidiaries (whether currently in
existence or entered into subsequent to the date hereof) or (ii)
would violate any law applicable to the Employers. If the
Employers can buy some but not all of the securities that the
Executive (or the Beneficiary) have requested the Employers to
purchase (the "Put Securities"), the Employers shall purchase as
many Put Securities as can be purchased without causing such
breach, default or violation. Thereafter, at the time it becomes
possible for the Employers to repurchase all (but not less than
all) remaining Put Securities without causing such breach,
default or violation, the Employers shall promptly purchase all
such remaining Put Securities. In the event that either the Term
Loan Agreement, dated as of July 17, 1995, as amended, among SFC,
certain lenders listed therein and Chemical Bank, as
administrative agent, or the Revolving Credit Agreement dated as
of August 16, 1993, as amended, among the Revolving Credit
Borrowers signatory thereto, the lenders named therein and
Chemical Bank, as administrative agent, imposes restrictions on
the Employers' ability to satisfy the Executive's Put Rights, the
Employers shall, at the time such Put Rights are required to be
satisfied, use all commercially reasonable efforts to obtain
amendments to or waivers from such agreements that have the
effect of removing such restrictions.
5. Protection of Confidential Information: Non-
Competition; No Solicitation.
5.1 In view of the fact that the Executive's work for
the Employers will bring the Executive into close contact with
many confidential affairs of the Employers not readily available
to the public, and plans for future developments, the Executive
agrees:
5.1.1 To keep and retain in the strictest
confidence all confidential matters of the Employers, including,
without limitation, to the extent the following are confidential,
trade "know how," secrets, customer lists, pricing policies,
operational methods, technical processes, formulae, inventions
and research projects, and other business affairs of the
Employers, learned by the Executive heretofore or hereafter, and
not to disclose them to anyone outside of the Employers, either
during or after the Executive's employment with the Employers,
except in the course of performing the Executive's duties
hereunder or with the Employers' express written consent; and
5.1.2 To deliver promptly to the Employers on
termination of the Executive's employment by the Employers, or at
any time the Employers may so request, all memoranda, notes,
records, reports, manuals, drawings, blueprints and other
documents (and all copies thereof) relating to the Employers'
business and all property associated therewith, which the
Executive may then possess or have under the Executive's control
unless such information is necessary to enable the Executive to
file any federal or state tax return or make any other report or
filing or take any other action required by any law, regulation
or order of any court or regulatory commission, department or
agency.
Notwithstanding the foregoing, nothing contained
in this Section 5.1 shall restrict the Executive from using,
disclosing or retaining any information (i) which is in the
public domain or could readily be known or determined without
being employed by the Employers or which enters the public domain
through no breach of the Executive's obligations to the
Employers, (ii) which the Executive acquired prior to his
employment by the Employers, (iii) which the Executive properly
acquired or acquires from parties independent of the Employers,
(iv) which the Executive is required to disclose by law,
regulation, order or legal process, (v) which is desirable to
establish the Executive's claim or defense in any litigation
between the parties, provided that the Executive uses his best
efforts to ensure that confidential treatment will be afforded
such information.
5.2 During the term of the Executive's employment by
the Employers and, in the event of the termination of the
Executive's employment for any reason, for the 180-day period
immediately following the date of termination, the Executive
shall not, directly or indirectly, enter the employ of, or render
any services to, any person, firm or corporation engaged in any
business competitive with the business of the Employers or of any
of their subsidiaries; in any state in which any such business is
conducted or in which the Employers have specific plans to
conduct business at the time of such termination, the Executive
shall not engage in such business on the Executive's own account;
and the Executive shall not become interested in any such
business, directly or indirectly, as an individual, partner,
shareholder, director, officer, principal, agent, employee,
trustee, consultant, or in any other relationship or capacity;
provided, however, that nothing contained in this Section 5.2
shall be deemed to prohibit the Executive from acquiring, solely
as an investment, up to one percent (1%) of the outstanding
shares of capital stock of any public corporation. The Executive
shall not be deemed to be in breach of this Section 5.2 because
(i) a public corporation of which he owns more than 1% of the
outstanding capital stock begins to engage in any such prohibited
activities or (ii) his ownership interest in a public corporation
engaged in such activities increases to more than 1% of such
corporation's issued and outstanding capital stock in either case
without any volitional act on the part of the Executive, if, in
the case of either clause (i) or (ii) above, within sixty (60)
days of learning of such event, the Executive disposes of the
amount of capital stock necessary to cause his ownership to be
less than 1% of the amount of such capital stock issued and
outstanding.
5.3 When the Executive's employment by the Employers
terminates for any reason whatsoever, then during the period
commencing on the date of such termination and ending on the
second anniversary thereof, the Executive shall not without the
express written consent of SFAC, directly or indirectly, (i)
solicit any employee of the Employers or of any of their
subsidiaries to terminate his employment with the Employers or
with such subsidiary or (ii) hire any such employee.
5.4 If the Executive commits a breach, or threatens to
commit a breach, of any of the provisions of Sections 5.1, 5.2 or
5.3 hereof, the Employers shall have, in addition to any other
remedies they may have, the following rights and remedies:
5.4.1 The right and remedy to have the
provisions of this Agreement specifically enforced by any court
having equity jurisdiction, it being acknowledged and agreed that
any such breach or threatened breach will cause irreparable
injury to the Employers and that money damages will not provide
an adequate remedy to the Employers; and
5.4.2 The right and remedy to require the
Executive to account for and pay over to the Employers all
compensation, profits, monies, accruals, increments or other
benefits (collectively "Benefits") derived or received by the
Executive as the result of any transactions constituting a breach
of any of the provisions of the preceding paragraph, and the
Executive hereby agrees to account for and pay over such Benefits
to the Employers.
5.4.3 Each of the rights and remedies
enumerated above shall be independent of the other, and shall be
severally enforceable, and all of such rights and remedies shall
be in addition to, and not in lieu of, any other rights and
remedies available to the Employers under law or in equity.
5.5 If any of the covenants contained in Section 5.1,
5.2 or 5.3, or any part thereof, hereafter is construed to be
invalid or unenforceable, the same shall not affect the remainder
of the covenant or covenants, which shall be given full effect,
without regard to the invalid portions.
5.6 If any of the covenants contained in Section 5.1,
5.2 or 5.3, or any part thereof, is held to be unenforceable
because of the duration of such provision or the area covered
thereby, the parties agree that the court making such
determination shall have the power to reduce the duration and/or
area of such provision and, in its reduced form, said provision
shall then be enforceable.
5.7 The parties hereto intend to and hereby confer
jurisdiction to enforce the covenants contained in Sections 5.1,
5.2 and 5.3 upon the courts of any state within the geographical
scope of such covenants where the Executive is engaged in
activities in violation of such covenants or the Employers are
damaged or harmed in any way by the Executive's violation of such
covenants. In the event that the courts of any one or more of
such states shall hold such covenants wholly unenforceable by
reason of the breadth of such covenants or otherwise, it is the
intention of the parties hereto that such determination not bar
or in any way affect the Employers' right to the relief provided
above in the courts of any other states within the geographical
scope of such covenants as to breaches of such covenants in such
other respective jurisdictions, the above covenants as they
relate to each state being for this purpose severable into
diverse and independent covenants.
6. Inventions and Patents. The Executive agrees that all
processes, technologies and inventions (collectively
"Inventions"), including new contributions, improvements, ideas
and discoveries, whether patentable or not, conceived, developed,
invented or made by him while employed by the Employers shall
belong to the Employers, provided that such Inventions grew out
of the Executive's work with the Employers or any of their
subsidiaries or affiliates, are related in any manner to the
business (commercial or experimental) of the Employers or any of
their subsidiaries or affiliates or are conceived or made on the
Employers' time or with the use of the Employers' facilities or
materials. The Executive shall further: (a) promptly disclose
such Inventions to the Employers; (b) assign to the Employers,
without additional compensation, all patent and other rights to
such Inventions for the United States and foreign countries; (c)
sign all papers necessary to carry out the foregoing; and (d)
give testimony in support of the Executive's inventorship.
7. Intellectual Property. The Employers shall be the
exclusive owners of all the products and proceeds of the
Executive's services with the Employers, including, but not
limited to, all materials, ideas, concepts, formats, suggestions,
developments, arrangements, packages, programs and other
intellectual properties that the Executive may acquire, obtain,
develop or create in connection with and during the Executive's
employment by the Employers, free and clear of any claims by the
Executive (or anyone claiming under the Executive) of any kind or
character whatsoever (other than the Executive's right to receive
payments hereunder). The Executive shall, at the request of the
Employers, execute such assignments, certificates or other
instruments as the Employers may from time to time deem necessary
or desirable to evidence, establish, maintain, perfect, protect,
enforce or defend their right, title or interest in or to any
such properties.
8. Notices. All notices, requests, consents and other
communications required or permitted to be given hereunder shall
be in writing and shall be deemed to have been duly given if
delivered personally, sent by overnight courier or mailed first-
class, postage prepaid, by registered or certified mail (notices
mailed shall be deemed to have been given on the date mailed) or
sent by telecopier, as follows (or to such other address as
either party shall designate by notice in writing to the other in
accordance herewith):
If to the Employers, to:
Specialty Foods Acquisition Corporation
Specialty Foods Corporation
9399 West Higgins Road, Suite 800
Rosemont, Illinois 60018
Telecopier: 847/685-1010
Attention: Chief Executive Officer
If to the Executive, to:
Mr. Robert Aiken
2726 N. Lawndale Ave.
Evanston, IL 60201
9. General.
9.1 This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Illinois
applicable to agreements made and to be performed entirely in
Illinois; provided, that all provisions of this Agreement
governing the issuance and rights in respect of securities of
SFAC, including, without limitation, Initial Securities and
Vested Securities, shall be governed by and construed in
accordance with the laws of the State of Delaware.
9.2 The section headings contained herein are for
reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
9.3 This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter
hereof, and supersedes all prior agreements, arrangements and
understandings, written or oral, relating to the subject matter
hereof. No representation, promise or inducement has been made
by either party that is not embodied in this Agreement, and
neither party shall be bound by or liable for any alleged
representation, promise of inducement not so set forth.
9.4 This Agreement, and the Executive's rights and
obligations hereunder, may not be assigned by the Executive. The
Employers may assign their rights, together with their
obligations, hereunder (i) to any subsidiary of or successor-in-
interest to any of them, or (ii) to third parties in connection
with any sale, transfer or other disposition of all or
substantially all of the business or assets of any of them; in
any event the obligations of the Employers hereunder shall be
binding on their successors or permitted assigns, whether by
merger, consolidation or acquisition of all or substantially all
of either of their businesses or assets.
9.5 This Agreement may be amended, modified,
superseded, canceled, renewed or extended and the terms or
covenants hereof may be waived, only by a written instrument
executed by the parties hereto, or in the case of a waiver, by
the party waiving compliance. The failure of a party at any time
or times to require performance of any provision hereof shall in
no manner affect the right at a later time to enforce the same.
No waiver by either party of the breach of any term or covenant
contained in this Agreement, whether by conduct or otherwise, in
any one or more instances, shall be deemed to be, or construed
as, a further or continuing waiver of any such breach, or a
waiver of the breach of any other term or covenant contained in
this Agreement.
9.6 This Agreement or any amendment hereto may be
signed in any number of counterparts, each of which shall be an
original, but all of which taken together shall constitute one
agreement (or amendment as the case may be).
9.7 This Agreement shall be of no force or effect
until it has been approved by the Boards.
10. Certain Definitions.
10.1 As used herein the term "subsidiary" shall mean
any corporation or other business entity controlled directly or
indirectly by the corporation or other business entity in
question, and the term "affiliate" shall mean and include any
corporation or other business entity directly or indirectly
controlling, controlled by or under common control with the
corporation or other business entity in question.
10.2 As used herein, the "Fair Market Value" of the
Common Stock shall mean the fair market value of the Common Stock
determined by the SFAC Board in good faith on a going concern
basis without regard to any minority discount (the "Initial
Value"), which determination shall be evidenced by a resolution
of the SFAC Board and the Initial Value shall be the Fair Market
Value of the Common Stock for all purposes; provided, that
following the termination of the Executive's employment by the
Employers, for any reason, pursuant to Article 4 hereof, if the
Executive or the Beneficiary disagrees with the SFAC Board's
determination that the Initial Value is the fair market value of
the Common Stock and delivers written notice of such disagreement
to the Employers within 30 days after the date on which the SFAC
Board's determination of the Initial Value is communicated to the
Executive or the Beneficiary, the Fair Market Value of the Common
Stock shall be determined in a binding arbitration proceeding,
the arbitrator for which shall be a nationally recognized
investment banking firm selected jointly by the Employers and the
Executive (or the Beneficiary, as the case may be); provided,
that if the Employers and the Executive (or the Beneficiary, as
the case may be) cannot agree on an arbitrator, an arbitrator
shall be selected in accordance with the rules of the American
Arbitration Association. Notwithstanding the foregoing, (i) if
the Fair Market Value, as determined by the Arbitrator (the
"Arbitration Value"), does not deviate from the Initial Value by
an amount equal to more than 10% of the Initial Value then the
Fair Market Value shall equal the Initial Value for all purposes,
and (ii) if the Arbitration Value deviates from the Initial Value
by an amount equal to more than 10% of the Initial Value (whether
such deviation is higher or lower than the Initial Value) then
the Fair Market Value shall equal the Arbitration Value for all
purposes. If, following an arbitration proceeding, the
Arbitration Value exceeds an amount equal to the sum of (x) the
Initial Value plus (y) an amount equal to 10% of the Initial
Value, the Employers shall pay all costs associated with the
arbitration; in all other cases, the Executive (or the
Beneficiary, as the case may be) shall pay all of such costs.
10.3 Survival. The provisions of Sections 5, 6 and 7
shall survive any termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of March 1, 1997.
SPECIALTY FOODS ACQUISITION
CORPORATION
By: /s/ Lawrence S. Benjamin
Name: Lawrence S. Benjamin
Title: President & CEO
SPECIALTY FOODS CORPORATION
By: /s/ John R. Reisenberg
Name: John R. Reisenberg
Title: Vice President
Robert B. Aiken, Jr.
ROBERT B. AIKEN, JR
EXHIBIT 10.70
AMENDED AND RESTATED
3
TERMINATION AGREEMENT
TERMINATION AGREEMENT (the "Agreement"), effective as of
January 15, 1997 and dated as of this 14th day of January, 1997,
by and among SPECIALTY FOODS ACQUISITION CORPORATION, a Delaware
corporation ("SFAC"), SPECIALTY FOODS CORPORATION, a Delaware
corporation ("SFC"), and PAUL J. LISKA (the "Executive"). SFAC
and SFC are each sometimes herein referred to as the "Employers."
The Employers and the Executive are sometimes herein referred to
as the "Parties."
WHEREAS, the Executive was employed as President and Chief
Executive Officer of SFAC and SFC pursuant to an Executive
Employment Agreement between the Parties effective as of January
1, 1996 (the "Executive Employment Agreement"); and
WHEREAS, it has been agreed by the Parties that, effective
as of January 15, 1997, the employment of the Executive with SFAC
and SFC shall terminate; and
WHEREAS, except as expressly set forth to the contrary in
this Agreement, the Parties wish to acknowledge termination of
the Executive Employment Agreement and all such relationships
contemplated therein, and to amend and restate certain option
agreements that have been entered into between the Employers and
the Executive;
NOW, THEREFORE, in consideration of the promises and
covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are
acknowledged, the Parties agree as follows:
1. Termination of Employment. The Executive's employment
with the Employers and, except as expressly set forth to the
contrary in this Agreement, the Parties' obligations and rights
under the Executive Employment Agreement, shall terminate
effective as of January 15, 1997 (the "date of termination").
2. Terms of Termination.
a. The Employers shall promptly pay to the Executive
all unpaid Base Salary, as defined in Section 3 of the Executive
Employment Agreement, and provide the Executive with all benefits
and expense reimbursements to which the Executive is entitled,
through and including the date of termination.
b. The Employers shall pay to the Executive the sum
of $40,833.33 every one-half month for a term from the date of
termination until the first to occur of (i) the receipt by the
Executive of twenty-four (24) such payments or (ii) until such
time as the Executive commences employment on a full time or
substantially full time basis with another employer; provided,
however, that in no event shall the Executive receive fewer than
twelve (12) such payments. The Employers may cause these
payments to be made to the Executive through the normal SFC
payroll system.
c. The Employers shall continue health and life
insurance benefits for the Executive and his family for a period
of 12 months after the date of termination, provided, however,
that such benefits may be terminated on 30 days written notice to
the Executive once the Executive and his family are eligible to
receive generally comparable benefits from another source.
d. With respect to the subordinated debentures
and common stock of SFAC purchased by the Executive while he
was employed by the Employers, the Parties agree as follows:
(i) that certain Limited Recourse Secured
Promissory Note dated as of June 15, 1995 in
the principal amount of $290,681.28 (the
"Note") is deemed to be in default;
(ii) pursuant to the Note and the related Pledge
Agreement, the Executive is delivering to
SFAC certain pledged security which consists
of (x) Discount Debentures in the principal
amount of $280,734.65 with a current accreted
value of $172,034.04, and (y) 163,268 shares
of common stock with a value of $118,647.24
if valued at Founder's Cost of .726703211 per
share;
(iii)the Note shall be marked "CANCELED" and
returned to the Executive; and
(iv) the remaining 331,574 shares of common stock
of SFAC outstanding in the name of the
Executive shall be deemed to be fully vested
and shall be returned to the possession of
the Executive.
e. The Employers and the Executive acknowledge that
that certain Non-Qualified Stock Option Agreement dated February
1, 1994, that certain Non-Qualified Stock Option Agreement dated
as of February 1, 1995, that certain Performance Stock Option
Agreement dated February 1, 1994 and that certain Performance
Stock Option Agreement dated November 17, 1994, each between SFAC
and the Executive are each hereby declared to be null and void
and without future effect. Upon the execution of this Agreement,
that certain Non-Qualified Stock Option Agreement dated as of
November 17, 1994 shall be amended and restated and reissued to
the Executive in the form of the Amended and Restated Option
Agreement set forth as EXHIBIT 1 to this Agreement.
f. All payments made to the Executive under
subparagraphs (a) and (b) above shall be subject to such
deductions or amounts withheld as required by applicable laws and
regulations.
3. Releases. In consideration for the promises made by
the Parties and the payments to be made by the Employers pursuant
to this Agreement, the Parties agree to the following releases:
(a) The Executive hereby releases and forever
discharges the Employers and any parent, subsidiary, affiliate or
other entity related to the Employers, as well as its or their
predecessors, successors and assigns, shareholders, directors,
officers, agents, representatives and employees, past, present
and future, individually and collectively, from any and all
claims, demands, causes of actions or liabilities which the
Executive ever had or now has, or which his heirs, executors or
administrators hereafter can, shall or may have upon or by reason
of any matter, cause or thing whatsoever, whether known or
unknown, arising out of or in any way connected with his
employment with, and/or termination of employment from the
Employers; provided, however, that nothing herein shall in any
way prohibit the Executive from enforcing the terms of this
Agreement. Without limiting the foregoing, this release applies
to any right which the Executive has or may have to commence or
maintain a charge or action alleging discrimination under any
federal, state or local statute or order, including Title VII of
the Civil Rights Act of 1964, as amended, the Age Discrimination
in Employment Act of 1967, as amended and the Employee Retirement
Income Security Act of 1974, as amended and any right the
Executive has or may have to commence or maintain a claim or
action alleging wrongful termination, breach of contract,
commission of tort, or any combination thereof, whether based in
law or in equity. The Executive agrees not to make, assert or
maintain any charge, claim, demand or action which would be
covered by this release. In addition, the Executive represents
that no incident has occurred during his employment with the
Employers that could form the basis for any claim by the
Executive against the Employers under the so-called Worker's
Compensation Laws of any jurisdiction.
(b) The Employers individually, and the Employers on
behalf of any parent, subsidiary, affiliate or other entity
related to the Employers, as well as its or their predecessors,
successors and assigns, shareholders (other than shareholders of
SFAC), directors (in their capacity as directors of SFAC and
SFC), officers, agents, representatives and employees, past,
present and future, hereby release and forever discharge the
Executive, his heirs, executors, administrators, agents and
assigns, individually and collectively, from any and all claims,
demands, causes of action or liabilities, which the Employers
ever had, or now have, or which their successors and assigns can,
shall or may have upon or by reason of any matter, cause or thing
whatsoever, whether known or unknown, arising out of or in any
way connected with the Executive's employment with, and/or
termination of employment from the Employers, other than any
possible violation by the Executive of Sections 5, 6 or 7 of the
Employment Agreement, provided, however, that nothing herein
shall in any way prohibit SFC from enforcing the terms of this
Agreement. The Employers agree not to make, assert or maintain
any charge, claim, demand or action which would be covered by
this release.
4. Non-Disparagement. The Parties agree that they
shall not, directly or indirectly, individually or in concert
with others, criticize, disparage, slander, defame or engage in
any conduct or make any statement calculated or likely to have
the effect of undermining, disparaging or otherwise reflecting
poorly upon the other, his or its abilities or his or its
reputation. For purposes of this Section, the term "Parties"
will be deemed to include, for SFAC and SFC, their directors and
officers, and the directors and officers of their affiliates.
5. Confidentiality/Press Releases. The Parties agree
that they will not issue a press release concerning the
Executive's termination of employment with the Employers unless
the text and the timing thereof has been approved in writing by
all Parties; provided , however, that (i) the Executive's written
consent shall not be unreasonably withheld or delayed, and (ii)
nothing herein shall prevent the Employers from making any
announcement that they are required to make under applicable law
or the rules of any entity with whom their securities are
registered.
6. Severability. The provisions of this Agreement shall
be severable. The unenforceability or invalidity of any one or
more provisions, clauses or sentences hereof shall not render any
other provision, clause or sentence herein contained
unenforceable or invalid. The portion of the Agreement which is
not invalid or unenforceable shall be considered enforceable and
binding on the Parties and the invalid or unenforceable
provision(s), clause(s) or sentence(s) shall be deemed excised,
modified or restricted to the extent necessary to render the same
valid and enforceable, and this Agreement shall be construed as
if such invalid or unenforceable provision(s), clause(s) or
sentence(s) were omitted, modified or restricted.
7. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State
of Illinois applicable to agreements made and to be performed
entirely in Illinois; provided, however, that all provisions of
this Agreement governing the repurchase of the Securities and
rights thereto and therein shall be governed by and construed in
accordance with the laws of the State of Delaware.
8. Survival of Certain Provisions. In consideration for
the payment made by the Employers to the Executive hereunder, the
Parties acknowledge and agree that Sections 5, 6 and 7 of the
Executive Employment Agreement are not affected in any way by
this Agreement, except as expressly set forth herein, and shall
continue in full force and effect.
9. Attorney Fees. If the Employers, on the one hand, or
the Executive, on the other hand, breach the terms of this
Agreement, the breaching party shall indemnify the non-breaching
party against all liability, costs and expenses, including
reasonable attorneys' fees, related to such breach.
10. Entire Agreement. This Agreement constitutes the
entire agreement between the Parties concerning the subject
matter hereof, and supersedes all prior and contemporaneous
agreements, if any, between the Parties relating to the subject
matter hereof; provided, however, that this Section shall not be
deemed to apply to any provision of the Executive Employment
Agreement referred to or incorporated herein which, by the terms
of Section 8 hereof, shall survive the execution and delivery of
this Agreement.
11. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Employers and their
successors and assigns, and shall be binding upon and inure to
the benefit of the Executive and his legal representatives and
assigns.
12. Resignation. On the termination date, the Executive
shall submit a resignation in form acceptable to the Parties from
all directorship and officer positions held with the Employers or
any of their subsidiaries.
13. Non-Waiver of Right to Indemnification. The provisions
of Section 3 hereof notwithstanding, nothing in this Agreement
shall be construed as a release or waiver of any right that the
Executive may have to indemnification pursuant to (i) the
Certificate of Incorporation or the By-Laws of the Employers or
any of its subsidiaries or affiliates, or (ii) any agreement
pursuant to which the Executive is entitled to indemnification
for any claims by parties other than the Employers arising out of
the Executive's service as an officer or director of the
Employers or any of their subsidiaries or affiliates.
14. Counterparts. This Agreement may be executed in one or
more counterparts (including by means of faxed signature pages),
any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute
one and the same instrument.
IN WITNESS WHEREOF, the Parties have executed this
Termination Agreement as of the date above written.
SPECIALTY FOODS ACQUISITION
CORPORATION
By: /s/ Robert B. Haas
Name: Robert B. Haas
Title: Chairman of the
Board
SPECIALTY FOODS CORPORATION
By: /s/ Robert B. Haas
Name: Robert B. Haas
Title: Chairman of the Board
/s/ Paul J. Liska
PAUL J. LISKA
SPECIALTY FOODS ACQUISITION CORPORATION
1994 STOCK OPTION PLAN
Date of Grant: 11/17/94
Expiration Date: 11/17/04
Grantee: Paul J. Liska
No. of Shares: 162,500
Option Price/Share: $0.7267032211
Option Control Number: 0017 (Amended and Restated)
AMENDED AND RESTATED
NON-QUALIFIED STOCK OPTION AGREEMENT
AMENDED AND RESTATED STOCK OPTION AGREEMENT dated as of
November 17, 1994, as Amended and Restated as of January 15,
1997, by and between SPECIALTY FOODS ACQUISITION CORPORATION, a
Delaware corporation (the "Company"), and PAUL J. LISKA (the
"Grantee").
All words and phrases not otherwise expressly defined herein
shall have the same meanings as are ascribed to such words and
phrases in the Specialty Foods Acquisition Corporation 1994 Stock
Option Plan (the "Plan").
The Committee has determined that the objectives of the Plan
will be furthered by granting to the Grantee an option pursuant
to the Plan.
In consideration of the foregoing and of the mutual
undertakings set forth in this Amended and Restated Option
Agreement, the Company and the Grantee agree as follows:
Section 1. Grant of Option. Subject to the provisions
of the Plan and this Amended and Restated Option Agreement, the
Company hereby grants to the Grantee under the Plan a non-
qualified stock option to purchase one hundred sixty two
thousand, five hundred (162,500) shares of Stock at a purchase
price of $0.726703211 per share.
Section 2. Exercisability. The option is exercisable
with respect to 100% of the shares of Stock subject thereto.
Section 3. Method of Option Exercise. The option or any
part thereof may be exercised only by giving to the Company
written notice of exercise in the form attached to this Amended
and Restated Option Agreement or in such other form as is
prescribed by the Committee. Full payment of the purchase price
shall be made on the option exercise date by certified or
official bank check or, in the Committee's discretion, by
personal check (subject to collection), payable to the Company,
or delivery of shares of Stock already owned by the Grantee for
at least six months prior to the option exercise date. The
Grantee shall have no right to pay the option exercise price, or
to receive shares of Stock with respect to an option exercise,
prior to the option exercise date. For purposes of this Amended
and Restated Option Agreement, the "option exercise date" shall
be deemed to be the first business day immediately following the
date written notice of exercise is received by the Company.
Section 4. Termination of Employment. Notwithstanding
anything in the Plan to the contrary, the option granted to the
Grantee pursuant to this Amended and Restated Option Agreement
shall not terminate upon the Grantee's termination of employment
with SFAC, regardless of the reason.
Section 5. Withholding Tax Requirements. Shares of
Stock deliverable to the Grantee upon exercise, pursuant to the
terms of the Plan and this Amended and Restated Option Agreement,
shall be subject to tax withholding as provided in Section 10 of
the Plan. Subject to the Committee's consent, the Grantee may
elect to satisfy all or part of such requirements by delivery of
unrestricted shares of Stock owned by the Grantee as provided in
Section 10.2 of the Plan.
Section 6. Plan Provisions to Prevail. Except as set
forth in Section 4(a) hereof, this Amended and Restated Option
Agreement shall be subject to all of the terms and provisions of
the Plan, which are incorporated hereby and made a part hereof,
including, without limitation, the provisions of Section 8 of the
Plan (generally relating to consents required by securities and
other laws) and Section 11 of the Plan (generally relating to the
effects of certain reorganizations and other extraordinary
transactions). Except as set forth in Section 4(a) hereof, in the
event there is any inconsistency between the provisions of this
Amended and Restated Option Agreement and the Plan, the
provisions of the Plan shall govern.
Section 7. Grantee's Acknowledgments. By entering into
this Amended and Restated Option Agreement, the Grantee agrees
and acknowledges that (a) he has received and read a copy of the
Plan, including Section 14.3 of the Plan (generally relating to
waivers of claims to continued exercisability of awards, damages
and severance entitlements related to non-continuation of
awards), and accepts this option upon all of the terms thereof,
and (b) no member of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or
any award thereunder or under this Amended and Restated Option
Agreement.
Section 8. Non-Transferability. No option granted to
the Grantee under the Plan or this Amended and Restated Option
Agreement shall be assignable or transferable by the Grantee
(whether by operation of law or otherwise and whether voluntarily
or involuntarily), other than by will or by the laws of descent
and distribution. During the lifetime of the Grantee, all rights
granted to the Grantee under the Plan or under this Amended and
Restated Option Agreement shall be exercisable only by the
Grantee.
Section 9. Notices. Any notice to be given to the
Company hereunder shall be in writing and shall be addressed to
9399 West Higgins Road, Suite 800, Rosemont, Illinois 60018,
Attn: General Counsel or at such other address as the Company
may hereafter designate to the Grantee by notice as provided
herein. Any notice to be given to the Grantee hereunder shall be
addressed to the Grantee at the address set forth below or at
such other address as the Grantee may hereafter designate to the
Company by notice as provided herein. Notices hereunder shall be
deemed to have been duly given when received by personal delivery
or by registered or certified mail to the party entitled to
receive the same.
Section 10. Successors and Assigns. This Amended and
Restated Option Agreement shall be binding upon and inure to the
benefit of the parties hereto and the successors and assigns of
the Company and, to the extent set forth in the Plan, the heirs
and personal representatives of the Grantee.
Section 11. Governing Law. This Agreement shall be
governed by the laws of the State of Illinois applicable to
agreements made and to be performed entirely within such State.
Section 12. Modifications to Agreement. This Amended and
Restated Option Agreement may not be altered, modified, changed
or discharged, except by a writing signed by or on behalf of both
the Company and the Grantee.
IN WITNESS WHEREOF, the parties hereto have executed this
Amended and Restated Option Agreement as of the date and year
first above written.
SPECIALTY FOODS ACQUISITION
CORPORATION
By: ________________
Name: Robert B. Haas
Title: Chairman of the Board
_______________________
(Grantee)
1048 Ashland Ave.
River Forest, Illinois 60305
NOTICE OF EXERCISE
Specialty Foods Acquisition Corporation
9399 West Higgins Road
Suite 800
Rosemont, Illinois 60018
Dear Sir or Madam:
I have read the SPECIALTY FOODS ACQUISITION CORPORATION 1994
STOCK OPTION PLAN.
1. Name (Please Print)
_______________________________________
EIN (Social Security Number or
Employer Identification Number
if estate)
_______________________________________
Operating Company
_______________________________________
Company Location
_______________________________________
(City and State or County)
Company Telephone Number
_______________________________________
Title
_______________________________________
Citizenship
_______________________________________
Home Address (Include Country
_______________________________________
if not USA)
_______________________________________
Home Telephone Number
_______________________________________
2. I would like to exercise the following Options:
Date of Option # of Option
Purchase
Type Grant* Control No. Shares Price
Price**
________ __/__/__ ________ ________ ________ ________
________ __/__/__ ________ ________ ________ ________
________ __/__/__ ________ ________ ________ ________
* Insert month, day and year.
** Multiply # of Shares by Option Price.
3. Please register the shares which I am purchasing as
indicated below (shares will be registered only in the name
of the Optionee or in the name of the Optionee and that of
his or her spouse as joint tenants).
____________________________________________________________
_____________
(Fill in name or names)
4. Please issue stock certificates (no more than two per option
exercised) in the following denominations: (Note: Only one
certificate for each option exercised may be for less than
100 shares.)
Total # of
Shares
________ certificate(s) for ________ shares each
_______________
________ certificate(s) for ________ shares each
_______________
TOTAL: _______________
5. I am paying the Purchase Price by (please check as
applicable).
Check*
Wire Transfer
* Only Certified Check, Cashier's Check or a Broker's Check.
Make check payable to SPECIALTY FOODS ACQUISITION
CORPORATION.
6. I will promptly pay the amount that you advise me is
required for applicable withholding taxes. I understand
that you may not release the certificates representing the
shares I have purchased unless such payment is made or
arrangements satisfactory to the Company for such payment
have been made.
__________________________________
(Signature)
__________________________________
(Date)
EXHIBIT 10.71
AMENDED AND RESTATED
2
3
SPECIALTY FOODS ACQUISITION CORPORATION
1994 STOCK OPTION PLAN
Date of Grant: 11/17/94
Expiration Date: 11/17/04
Grantee: Paul J. Liska
No. of Shares: 162,500
Option Price/Share: $0.7267032211
Option Control Number: 0017 (Amended and Restated)
AMENDED AND RESTATED
NON-QUALIFIED STOCK OPTION AGREEMENT
AMENDED AND RESTATED STOCK OPTION AGREEMENT dated as of
November 17, 1994, as Amended and Restated as of January 15,
1997, by and between SPECIALTY FOODS ACQUISITION CORPORATION, a
Delaware corporation (the "Company"), and PAUL J. LISKA (the
"Grantee").
All words and phrases not otherwise expressly defined herein
shall have the same meanings as are ascribed to such words and
phrases in the Specialty Foods Acquisition Corporation 1994 Stock
Option Plan (the "Plan").
The Committee has determined that the objectives of the Plan
will be furthered by granting to the Grantee an option pursuant
to the Plan.
In consideration of the foregoing and of the mutual
undertakings set forth in this Amended and Restated Option
Agreement, the Company and the Grantee agree as follows:
Section 1. Grant of Option. Subject to the provisions
of the Plan and this Amended and Restated Option Agreement, the
Company hereby grants to the Grantee under the Plan a non-
qualified stock option to purchase one hundred sixty two
thousand, five hundred (162,500) shares of Stock at a purchase
price of $0.726703211 per share.
Section 2. Exercisability. The option is exercisable
with respect to 100% of the shares of Stock subject thereto.
Section 3. Method of Option Exercise. The option or any
part thereof may be exercised only by giving to the Company
written notice of exercise in the form attached to this Amended
and Restated Option Agreement or in such other form as is
prescribed by the Committee. Full payment of the purchase price
shall be made on the option exercise date by certified or
official bank check or, in the Committee's discretion, by
personal check (subject to collection), payable to the Company,
or delivery of shares of Stock already owned by the Grantee for
at least six months prior to the option exercise date. The
Grantee shall have no right to pay the option exercise price, or
to receive shares of Stock with respect to an option exercise,
prior to the option exercise date. For purposes of this Amended
and Restated Option Agreement, the "option exercise date" shall
be deemed to be the first business day immediately following the
date written notice of exercise is received by the Company.
Section 4. Termination of Employment. Notwithstanding
anything in the Plan to the contrary, the option granted to the
Grantee pursuant to this Amended and Restated Option Agreement
shall not terminate upon the Grantee's termination of employment
with SFAC, regardless of the reason.
Section 5. Withholding Tax Requirements. Shares of
Stock deliverable to the Grantee upon exercise, pursuant to the
terms of the Plan and this Amended and Restated Option Agreement,
shall be subject to tax withholding as provided in Section 10 of
the Plan. Subject to the Committee's consent, the Grantee may
elect to satisfy all or part of such requirements by delivery of
unrestricted shares of Stock owned by the Grantee as provided in
Section 10.2 of the Plan.
Section 6. Plan Provisions to Prevail. Except as set
forth in Section 4(a) hereof, this Amended and Restated Option
Agreement shall be subject to all of the terms and provisions of
the Plan, which are incorporated hereby and made a part hereof,
including, without limitation, the provisions of Section 8 of the
Plan (generally relating to consents required by securities and
other laws) and Section 11 of the Plan (generally relating to the
effects of certain reorganizations and other extraordinary
transactions). Except as set forth in Section 4(a) hereof, in the
event there is any inconsistency between the provisions of this
Amended and Restated Option Agreement and the Plan, the
provisions of the Plan shall govern.
Section 7. Grantee's Acknowledgments. By entering into
this Amended and Restated Option Agreement, the Grantee agrees
and acknowledges that (a) he has received and read a copy of the
Plan, including Section 14.3 of the Plan (generally relating to
waivers of claims to continued exercisability of awards, damages
and severance entitlements related to non-continuation of
awards), and accepts this option upon all of the terms thereof,
and (b) no member of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or
any award thereunder or under this Amended and Restated Option
Agreement.
Section 8. Non-Transferability. No option granted to
the Grantee under the Plan or this Amended and Restated Option
Agreement shall be assignable or transferable by the Grantee
(whether by operation of law or otherwise and whether voluntarily
or involuntarily), other than by will or by the laws of descent
and distribution. During the lifetime of the Grantee, all rights
granted to the Grantee under the Plan or under this Amended and
Restated Option Agreement shall be exercisable only by the
Grantee.
Section 9. Notices. Any notice to be given to the
Company hereunder shall be in writing and shall be addressed to
9399 West Higgins Road, Suite 800, Rosemont, Illinois 60018,
Attn: General Counsel or at such other address as the Company
may hereafter designate to the Grantee by notice as provided
herein. Any notice to be given to the Grantee hereunder shall be
addressed to the Grantee at the address set forth below or at
such other address as the Grantee may hereafter designate to the
Company by notice as provided herein. Notices hereunder shall be
deemed to have been duly given when received by personal delivery
or by registered or certified mail to the party entitled to
receive the same.
Section 10. Successors and Assigns. This Amended and
Restated Option Agreement shall be binding upon and inure to the
benefit of the parties hereto and the successors and assigns of
the Company and, to the extent set forth in the Plan, the heirs
and personal representatives of the Grantee.
Section 11. Governing Law. This Agreement shall be
governed by the laws of the State of Illinois applicable to
agreements made and to be performed entirely within such State.
Section 12. Modifications to Agreement. This Amended and
Restated Option Agreement may not be altered, modified, changed
or discharged, except by a writing signed by or on behalf of both
the Company and the Grantee.
IN WITNESS WHEREOF, the parties hereto have executed this
Amended and Restated Option Agreement as of the date and year
first above written.
SPECIALTY FOODS ACQUISITION
CORPORATION
By: /s/ Robert B. Haas
Name: Robert B. Haas
Title: Chairman of the Board
/s/ Paul J. Liska
(Grantee)
1048 Ashland Ave.
River Forest, Illinois 60305
NOTICE OF EXERCISE
Specialty Foods Acquisition Corporation
9399 West Higgins Road
Suite 800
Rosemont, Illinois 60018
Dear Sir or Madam:
I have read the SPECIALTY FOODS ACQUISITION CORPORATION 1994
STOCK OPTION PLAN.
1. Name (Please Print)
_______________________________________
EIN (Social Security Number or
Employer Identification Number
if estate)
_______________________________________
Operating Company
_______________________________________
Company Location
_______________________________________
(City and State or County)
Company Telephone Number
_______________________________________
Title
_______________________________________
Citizenship
_______________________________________
Home Address (Include Country
_______________________________________
if not USA)
_______________________________________
Home Telephone Number
_______________________________________
2. I would like to exercise the following Options:
Date of Option # of Option
Purchase
Type Grant* Control No. Shares Price
Price**
________ __/__/__ ________ ________ ________ ________
________ __/__/__ ________ ________ ________ ________
________ __/__/__ ________ ________ ________ ________
* Insert month, day and year.
** Multiply # of Shares by Option Price.
3. Please register the shares which I am purchasing as
indicated below (shares will be registered only in the name
of the Optionee or in the name of the Optionee and that of
his or her spouse as joint tenants).
____________________________________________________________
_____________
(Fill in name or names)
4. Please issue stock certificates (no more than two per option
exercised) in the following denominations: (Note: Only one
certificate for each option exercised may be for less than
100 shares.)
Total # of
Shares
________ certificate(s) for ________ shares each
_______________
________ certificate(s) for ________ shares each
_______________
TOTAL: _______________
5. I am paying the Purchase Price by (please check as
applicable).
Check*
Wire Transfer
* Only Certified Check, Cashier's Check or a Broker's Check.
Make check payable to SPECIALTY FOODS ACQUISITION
CORPORATION.
6. I will promptly pay the amount that you advise me is
required for applicable withholding taxes. I understand
that you may not release the certificates representing the
shares I have purchased unless such payment is made or
arrangements satisfactory to the Company for such payment
have been made.
__________________________________
(Signature)
__________________________________
(Date)
EXHIBIT 10.72
AMENDED AND RESTATED
2
TERMINATION AGREEMENT
TERMINATION AGREEMENT (the "Agreement"), dated as of this
20th day of February, 1997, by and among SPECIALTY FOODS
ACQUISITION CORPORATION, a Delaware corporation ("SFAC"),
SPECIALTY FOODS CORPORATION, a Delaware corporation ("SFC"), and
JOHN E. KELLY (the "Executive"). SFAC and SFC are each sometimes
herein referred to as the "Employers." The Employers and the
Executive are sometimes herein referred to as the "Parties."
WHEREAS, the Executive was employed as Vice President and
General Counsel of SFAC and SFC pursuant to an Executive
Employment Agreement between the Parties effective as of January
1, 1994, as amended (as so amended, the "Executive Employment
Agreement"); and
WHEREAS, it has been agreed by the Parties that, effective
as of the Resignation Date (as herein defined), the employment of
the Executive with SFAC and SFC shall terminate; and
WHEREAS, except as expressly set forth to the contrary in
this Agreement, effective as of the Resignation Date, the Parties
wish to acknowledge termination of the Executive Employment
Agreement and all such relationships contemplated therein, and to
amend and restate certain option agreements that have been
entered into between the Employers and the Executive;
NOW, THEREFORE, in consideration of the promises and
covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are
acknowledged, the Parties agree as follows:
1. Termination of Employment. The Executive's employment
with the Employers and, except as expressly set forth to the
contrary in this Agreement, the Parties' obligations and rights
under the Executive Employment Agreement, shall terminate
effective as of such date on or about March 15, 1997 as is
mutually agreed to by the Parties (the "Resignation Date"). On
the Resignation Date, the Executive shall submit to the Employers
a letter of resignation in the form of the letter of resignation
set forth as EXHIBIT 1 to this Agreement signed by the Executive.
2. Terms of Termination.
a. Upon the Resignation Date, the Employers shall
promptly pay to the Executive all unpaid Base Salary, as defined
in Section 3 of the Executive Employment Agreement, and provide
the Executive with all benefits and expense reimbursements to
which the Executive is entitled, through and including the
Resignation Date.
b. Commencing on the Resignation Date, the Employers
shall pay to the Executive the sum of $30,260.42 every one-half
month for a term from the date of termination until the first to
occur of (i) the receipt by the Executive of twenty-four (24)
such payments or (ii) until such time as the Executive commences
employment on a full time or substantially full time basis with
another employer; provided, however, that in no event shall the
Executive receive fewer than eight (8) such payments. The
Employers may cause these payments to be made to the Executive
through the normal SFC payroll system.
c. The Employers shall continue health and life
insurance benefits for the Executive and his family for a period
of 12 months after the Resignation Date, provided, however, that
such benefits may be terminated on 30 days written notice to the
Executive once the Executive and his family are eligible to
receive generally comparable benefits from another source.
d. With respect to the subordinated debentures
and common stock of SFAC purchased by the Executive while he
was employed by the Employers, the Parties agree as follows:
(i) as of the date of this Agreement, that
certain Limited Recourse Secured Promissory
Note dated as of June 15, 1995 in the
principal amount of $290,681.28 (the "Note")
is deemed to be in default;
(ii) pursuant to the Note and the related Pledge
Agreement, the Executive is delivering to
SFAC as of the date of this Agreement certain
pledged security which consists of (x)
Discount Debentures in the principal amount
of $245,635.97 with a current accreted value
of $151,711.96, and (y) 191,233 shares of
common stock with a value of $138,969.32 if
valued at Founder's Cost of .726703211 per
share;
(iii)the Note shall be marked "CANCELLED" and
returned to the Executive; and
(iv) the remaining 298,157 shares of common stock
of SFAC outstanding in the name of the
Executive shall be deemed to be fully vested
and shall be returned to the possession of
the Executive.
e. The Employers and the Executive acknowledge that,
effective as of the Resignation Date, that certain Non-Qualified
Stock Option Agreement dated as of February 1, 1995 and that
certain Performance Stock Option Agreement dated February 1,
1994, each between SFAC and the Executive are each hereby
declared to be null and void and without future effect. Upon the
Resignation Date, that certain Non-Qualified Stock Option
Agreement dated as of February 1, 1994 shall be amended and
restated and reissued to the Executive in the form of the Amended
and Restated Option Agreement set forth as EXHIBIT 2 to this
Agreement.
f. Upon the first to occur of (i) the closing of the
sale by the Employers of the assets used by subsidiaries of the
Employers in the conduct of their Northwest baking operations,
and (ii) the closing of the sale by the Employers of the assets
used by subsidiaries of the Employers in the conduct of their San
Francisco French Bread baking operations, the Employers shall pay
to the Executive the sum of $100,000.00; provided, that the
closing of any such sale must occur on or before the forty-fifth
(45th) day after the Resignation Date for such payment to be due
to the Executive. Upon the closing of the sale of the second of
such businesses, the Employers shall pay to the Executive the sum
of $147,916.68; provided, that the closing of such sale must
occur on or before the forty-fifth (45th) day after the
Resignation Date for such payment to be due to the Executive.
Notwithstanding the above, in the event that the Executive
continues to perform his employment duties through the
Resignation Date in a manner consistent with his past
performance, including, without limitation, the management of the
sale of the two baking businesses set forth above, but that,
because of a so called second request under the Hart-Scott-Rodino
Act of 1976, as amended, the sale of the San Francisco French
Bread baking operations does not occur by the Resignation Date,
then the Parties will negotiate in good faith to reach agreement
on an alternative compensation arrangement for the Executive that
is fair to the Executive and to the Employers, as mutually agreed
to by the Parties.
g. All payments made to the Executive under
subparagraphs (a), (b) and (f) above shall be subject to such
deductions or amounts withheld as required by applicable laws and
regulations.
3. Releases. In consideration for the promises made by
the Parties and the payments to be made by the Employers pursuant
to this Agreement, the Parties agree to the following releases,
effective as of the Resignation Date:
(a) The Executive hereby releases and forever
discharges the Employers and any parent, subsidiary, affiliate or
other entity related to the Employers, as well as its or their
predecessors, successors and assigns, shareholders, directors,
officers, agents, representatives and employees, past, present
and future, individually and collectively, from any and all
claims, demands, causes of actions or liabilities which the
Executive ever had or now has, or which his heirs, executors or
administrators hereafter can, shall or may have upon or by reason
of any matter, cause or thing whatsoever, whether known or
unknown, arising out of or in any way connected with his
employment with, and/or termination of employment from the
Employers; provided, however, that nothing herein shall in any
way prohibit the Executive from enforcing the terms of this
Agreement. Without limiting the foregoing, this release applies
to any right which the Executive has or may have to commence or
maintain a charge or action alleging discrimination under any
federal, state or local statute or order, including Title VII of
the Civil Rights Act of 1964, as amended, the Age Discrimination
in Employment Act of 1967, as amended and the Employee Retirement
Income Security Act of 1974, as amended and any right the
Executive has or may have to commence or maintain a claim or
action alleging wrongful termination, breach of contract,
commission of tort, or any combination thereof, whether based in
law or in equity. The Executive agrees not to make, assert or
maintain any charge, claim, demand or action which would be
covered by this release. In addition, the Executive represents
that no incident has occurred during his employment with the
Employers that could form the basis for any claim by the
Executive against the Employers under the so-called Worker's
Compensation Laws of any jurisdiction.
(b) The Employers individually, and the Employers on
behalf of any parent, subsidiary, affiliate or other entity
related to the Employers, as well as its or their predecessors,
successors and assigns, shareholders (other than shareholders of
SFAC), directors (in their capacity as directors of SFAC and
SFC), officers, agents, representatives and employees, past,
present and future, hereby release and forever discharge the
Executive, his heirs, executors, administrators, agents and
assigns, individually and collectively, from any and all claims,
demands, causes of action or liabilities, which the Employers
ever had, or now have, or which their successors and assigns can,
shall or may have upon or by reason of any matter, cause or thing
whatsoever, whether known or unknown, arising out of or in any
way connected with the Executive's employment with, and/or
termination of employment from the Employers, other than any
possible violation by the Executive of Sections 5, 6 or 7 of the
Employment Agreement, provided, however, that nothing herein
shall in any way prohibit SFC from enforcing the terms of this
Agreement. The Employers agree not to make, assert or maintain
any charge, claim, demand or action which would be covered by
this release.
4. Non-Disparagement. The Parties agree that they
shall not, directly or indirectly, individually or in concert
with others, criticize, disparage, slander, defame or engage in
any conduct or make any statement calculated or likely to have
the effect of undermining, disparaging or otherwise reflecting
poorly upon the other, his or its abilities or his or its
reputation. For purposes of this Section, the term "Parties"
will be deemed to include, for SFAC and SFC, their directors and
officers, and the directors and officers of their affiliates.
5. Confidentiality/Press Releases. The Parties agree
that they will not issue a press release concerning the
Executive's termination of employment with the Employers unless
the text and the timing thereof has been approved in writing by
all Parties; provided , however, that (i) the Executive's written
consent shall not be unreasonably withheld or delayed, and (ii)
nothing herein shall prevent the Employers from making any
announcement that they are required to make under applicable law
or the rules of any entity with whom their securities are
registered.
6. Severability. The provisions of this Agreement shall
be severable. The unenforceability or invalidity of any one or
more provisions, clauses or sentences hereof shall not render any
other provision, clause or sentence herein contained
unenforceable or invalid. The portion of the Agreement which is
not invalid or unenforceable shall be considered enforceable and
binding on the Parties and the invalid or unenforceable
provision(s), clause(s) or sentence(s) shall be deemed excised,
modified or restricted to the extent necessary to render the same
valid and enforceable, and this Agreement shall be construed as
if such invalid or unenforceable provision(s), clause(s) or
sentence(s) were omitted, modified or restricted.
7. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State
of Illinois applicable to agreements made and to be performed
entirely in Illinois; provided, however, that all provisions of
this Agreement governing the repurchase of the Securities and
rights thereto and therein shall be governed by and construed in
accordance with the laws of the State of Delaware.
8. Survival of Certain Provisions. In consideration for
the payment made by the Employers to the Executive hereunder, the
Parties acknowledge and agree that Sections 5, 6 and 7 of the
Executive Employment Agreement are not affected in any way by
this Agreement, except as expressly set forth herein, and shall
continue in full force and effect.
9. Attorney Fees. If the Employers, on the one hand, or
the Executive, on the other hand, breach the terms of this
Agreement, the breaching party shall indemnify the non-breaching
party against all liability, costs and expenses, including
reasonable attorneys' fees, related to such breach.
10. Entire Agreement. This Agreement constitutes the
entire agreement between the Parties concerning the subject
matter hereof, and supersedes all prior and contemporaneous
agreements, if any, between the Parties relating to the subject
matter hereof; provided, however, that this Section shall not be
deemed to apply to any provision of the Executive Employment
Agreement referred to or incorporated herein which, by the terms
of Section 8 hereof, shall survive the execution and delivery of
this Agreement.
11. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Employers and their
successors and assigns, and shall be binding upon and inure to
the benefit of the Executive and his legal representatives and
assigns.
12. Resignation. On the Resignation Date, the Executive
shall submit a resignation in form acceptable to the Parties from
all directorship and officer positions held with the Employers or
any of their subsidiaries.
13. Non-Waiver of Right to Indemnification. The provisions
of Section 3 hereof notwithstanding, nothing in this Agreement
shall be construed as a release or waiver of any right that the
Executive may have to indemnification pursuant to (i) the
Certificate of Incorporation or the By-Laws of the Employers or
any of its subsidiaries or affiliates, or (ii) any agreement
pursuant to which the Executive is entitled to indemnification
for any claims by parties other than the Employers arising out of
the Executive's service as an officer or director of the
Employers or any of their subsidiaries or affiliates.
14. Counterparts. This Agreement may be executed in one or
more counterparts (including by means of faxed signature pages),
any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute
one and the same instrument.
IN WITNESS WHEREOF, the Parties have executed this
Termination Agreement as of the date above written.
SPECIALTY FOODS ACQUISITION
CORPORATION
By: /s/ Lawrence S. Benjamin
Name: Lawrence S. Benjamin
Title: President & Chief
Executive Officer
SPECIALTY FOODS CORPORATION
By: /s/ Lawrence S. Benjamin
Name: Lawrence S. Benjamin
Title: President & Chief Executive Officer
/s/ John E. Kelly
JOHN E. KELLY
f:\users\johngrp\employ\kellyx.doc
EXHIBIT 2
SPECIALTY FOODS ACQUISITION CORPORATION
1994 STOCK OPTION PLAN
Date of Grant: 2/1/94
Expiration Date: 2/1/04
Grantee: John E. Kelly
No. of Shares: 132,500
Option Price/Share: $0.7267032211
Option Control Number: 0001 (Amended and Restated)
AMENDED AND RESTATED
NON-QUALIFIED STOCK OPTION AGREEMENT
AMENDED AND RESTATED STOCK OPTION AGREEMENT dated as of
February 1, 1994, as Amended and Restated as of _____, __, 1997,
by and between SPECIALTY FOODS ACQUISITION CORPORATION, a
Delaware corporation (the "Company"), and JOHN E. KELLY (the
"Grantee").
All words and phrases not otherwise expressly defined herein
shall have the same meanings as are ascribed to such words and
phrases in the Specialty Foods Acquisition Corporation 1994 Stock
Option Plan (the "Plan").
The Committee has determined that the objectives of the Plan
will be furthered by granting to the Grantee an option pursuant
to the Plan.
In consideration of the foregoing and of the mutual
undertakings set forth in this Amended and Restated Option
Agreement, the Company and the Grantee agree as follows:
Section 1. Grant of Option. Subject to the provisions
of the Plan and this Amended and Restated Option Agreement, the
Company hereby grants to the Grantee under the Plan a non-
qualified stock option to purchase one hundred thirty two
thousand, five hundred (132,500) shares of Stock at a purchase
price of $0.726703211 per share.
Section 2. Exercisability. The option is exercisable
with respect to 100% of the shares of Stock subject thereto.
Section 3. Method of Option Exercise. The option or any
part thereof may be exercised only by giving to the Company
written notice of exercise in the form attached to this Amended
and Restated Option Agreement or in such other form as is
prescribed by the Committee. Full payment of the purchase price
shall be made on the option exercise date by certified or
official bank check or, in the Committee's discretion, by
personal check (subject to collection), payable to the Company,
or delivery of shares of Stock already owned by the Grantee for
at least six months prior to the option exercise date. The
Grantee shall have no right to pay the option exercise price, or
to receive shares of Stock with respect to an option exercise,
prior to the option exercise date. For purposes of this Amended
and Restated Option Agreement, the "option exercise date" shall
be deemed to be the first business day immediately following the
date written notice of exercise is received by the Company.
Section 4. Termination of Employment. Notwithstanding
anything in the Plan to the contrary, the option granted to the
Grantee pursuant to this Amended and Restated Option Agreement
shall not terminate upon the Grantee's termination of employment
with SFAC, regardless of the reason.
Section 5. Withholding Tax Requirements. Shares of
Stock deliverable to the Grantee upon exercise, pursuant to the
terms of the Plan and this Amended and Restated Option Agreement,
shall be subject to tax withholding as provided in Section 10 of
the Plan. Subject to the Committee's consent, the Grantee may
elect to satisfy all or part of such requirements by delivery of
unrestricted shares of Stock owned by the Grantee as provided in
Section 10.2 of the Plan.
Section 6. Plan Provisions to Prevail. Except as set
forth in Section 4(a) hereof, this Amended and Restated Option
Agreement shall be subject to all of the terms and provisions of
the Plan, which are incorporated hereby and made a part hereof,
including, without limitation, the provisions of Section 8 of the
Plan (generally relating to consents required by securities and
other laws) and Section 11 of the Plan (generally relating to the
effects of certain reorganizations and other extraordinary
transactions). Except as set forth in Section 4(a) hereof, in the
event there is any inconsistency between the provisions of this
Amended and Restated Option Agreement and the Plan, the
provisions of the Plan shall govern.
Section 7. Grantee's Acknowledgments. By entering into
this Amended and Restated Option Agreement, the Grantee agrees
and acknowledges that (a) he has received and read a copy of the
Plan, including Section 14.3 of the Plan (generally relating to
waivers of claims to continued exercisability of awards, damages
and severance entitlements related to non-continuation of
awards), and accepts this option upon all of the terms thereof,
and (b) no member of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or
any award thereunder or under this Amended and Restated Option
Agreement.
Section 8. Non-Transferability. No option granted to
the Grantee under the Plan or this Amended and Restated Option
Agreement shall be assignable or transferable by the Grantee
(whether by operation of law or otherwise and whether voluntarily
or involuntarily), other than by will or by the laws of descent
and distribution. During the lifetime of the Grantee, all rights
granted to the Grantee under the Plan or under this Amended and
Restated Option Agreement shall be exercisable only by the
Grantee.
Section 9. Notices. Any notice to be given to the
Company hereunder shall be in writing and shall be addressed to
9399 West Higgins Road, Suite 800, Rosemont, Illinois 60018,
Attn: General Counsel or at such other address as the Company
may hereafter designate to the Grantee by notice as provided
herein. Any notice to be given to the Grantee hereunder shall be
addressed to the Grantee at the address set forth below or at
such other address as the Grantee may hereafter designate to the
Company by notice as provided herein. Notices hereunder shall be
deemed to have been duly given when received by personal delivery
or by registered or certified mail to the party entitled to
receive the same.
Section 10. Successors and Assigns. This Amended and
Restated Option Agreement shall be binding upon and inure to the
benefit of the parties hereto and the successors and assigns of
the Company and, to the extent set forth in the Plan, the heirs
and personal representatives of the Grantee.
Section 11. Governing Law. This Agreement shall be
governed by the laws of the State of Illinois applicable to
agreements made and to be performed entirely within such State.
Section 12. Modifications to Agreement. This Amended and
Restated Option Agreement may not be altered, modified, changed
or discharged, except by a writing signed by or on behalf of both
the Company and the Grantee.
IN WITNESS WHEREOF, the parties hereto have executed this
Amended and Restated Option Agreement as of the date and year
first above written.
SPECIALTY FOODS ACQUISITION
CORPORATION
By: ___________________
Name: Lawrence S. Benjamin
Title: President & Chied
Executive Officer
__________________________
John E. Kelly (Grantee)
230 North Catalpa Street.
Addison, Illinois 60101
NOTICE OF EXERCISE
Specialty Foods Acquisition Corporation
9399 West Higgins Road
Suite 800
Rosemont, Illinois 60018
Dear Sir or Madam:
I have read the SPECIALTY FOODS ACQUISITION CORPORATION 1994
STOCK OPTION PLAN.
1. Name (Please Print)
_______________________________________
EIN (Social Security Number or
Employer Identification Number
if estate)
_______________________________________
Operating Company
_______________________________________
Company Location
_______________________________________
(City and State or County)
Company Telephone Number
_______________________________________
Title
_______________________________________
Citizenship
_______________________________________
Home Address (Include Country
_______________________________________
if not USA)
_______________________________________
Home Telephone Number
_______________________________________
2. I would like to exercise the following Options:
Date of Option # of Option
Purchase
Type Grant* Control No. Shares Price
Price**
________ __/__/__ ________ ________ ________ ________
________ __/__/__ ________ ________ ________ ________
________ __/__/__ ________ ________ ________ ________
* Insert month, day and year.
** Multiply # of Shares by Option Price.
3. Please register the shares which I am purchasing as
indicated below (shares will be registered only in the name
of the Optionee or in the name of the Optionee and that of
his or her spouse as joint tenants).
____________________________________________________________
_____________
(Fill in name or names)
4. Please issue stock certificates (no more than two per option
exercised) in the following denominations: (Note: Only one
certificate for each option exercised may be for less than
100 shares.)
Total # of
Shares
________ certificate(s) for ________ shares each
_______________
________ certificate(s) for ________ shares each
_______________
TOTAL: _______________
5. I am paying the Purchase Price by (please check as
applicable).
Check*
Wire Transfer
* Only Certified Check, Cashier's Check or a Broker's Check.
Make check payable to SPECIALTY FOODS ACQUISITION
CORPORATION.
6. I will promptly pay the amount that you advise me is
required for applicable withholding taxes. I understand
that you may not release the certificates representing the
shares I have purchased unless such payment is made or
arrangements satisfactory to the Company for such payment
have been made.
__________________________________
(Signature)
__________________________________
(Date)
EXHIBIT 10.73
10
AUGUST PURCHASE AGREEMENT
THIS AUGUST PURCHASE AGREEMENT (the "August Agreement") is
entered into as of this 12th day of August, 1996 by and among
SPECIALTY FOODS CORPORATION, a Delaware corporation ("SFC"),
STELLA FOODS, INC., a Delaware corporation ("Stella"), and ACADIA
PARTNERS, L.P.("Purchaser").
WHEREAS, SFC and Stella are named insureds under certain
insurance policies described in Schedule 1 to this August
Agreement (the "Insurance Policies"), which provide property
damage and business interruption coverage to SFC and Stella,
including coverage with respect to Stella's Lena, Wisconsin
cheese production plant (the "Lena Facility"); and
WHEREAS, on January 5, 1996, the Lena Facility was
substantially destroyed by fire; and
WHEREAS, as of the date of this August Agreement SFC and
Stella had submitted claims for reimbursement for losses in
connection with the fire at the Lena Facility to insurance
companies under the Insurance Policies, a listing of which
partial claim settlement submissions are set forth on Schedule 2
to this August Agreement, which, as of the date hereof, totaled
in the aggregate $50,000,000; and
WHEREAS, as of the date of this August Agreement SFC and
Stella had received from the insurance companies payments
relating to the submitted claims in the amount of $30,000,000 and
had established on the books of SFC (or Stella) a receivable in
the amount of $20,000,000 (the "Insurance Receivable"),
representing the difference between the amount of the claims
submitted and the amount collected as of such date; and
WHEREAS, it would be beneficial to SFC and Stella, due to
timing differences between the date claims are submitted and the
date that claims are paid, if SFC and Stella could sell from time
to time, as the need arises, a portion, or portions, of the
Insurance Receivable so as to realize cash that could be used to
defray certain costs, including costs incurred in the rebuilding
of the Lena Facility;
NOW, THEREFORE, subject to the terms and conditions set
forth herein, SFC and Stella desire to sell to Purchaser and
Purchaser desires to purchase from SFC and Stella that dollar
amount of the Insurance Receivable which is set forth opposite
Purchaser's name on Schedule 3 to this August Agreement (such
amount being hereinafter referred to as the " Purchased
Receivable") and to establish a mechanism whereby (i) portions
of the Purchased Receivable can be repaid as proceeds are
collected, and (ii) additional portions of the Insurance
Receivable can be sold to Purchaser pursuant to the terms and
conditions of this August Agreement.
ARTICLE 1
PURCHASE AND SALE OF RECEIVABLE
Section 1.01 Basic Transaction. (a) On and subject to
the terms established in this August Agreement, Purchaser hereby
purchases from SFC and Stella, and SFC and Stella hereby sell,
convey, assign, transfer and deliver to Purchaser, all of SFC's
and Stella's right, title and interest in and to the Purchased
Receivable, such conveyance to be evidenced by means of the
delivery from SFC and Stella to Purchaser of a General Assignment
and Bill of Sale in form and substance acceptable to counsel of
Purchaser.
(b) From time to time SFC and Stella may offer to sell, and
Purchaser may agree to purchase, additional portions of the
Insurance Receivable, on and subject to the terms established in
this August Agreement. In such event such purchase and sale of
all of SFC's and Stella's right, title and interest in and to
such additional portion of the Insurance Receivable shall be
evidenced by means of delivery from SFC and Stella to Purchaser
of a General Assignment and Bill of Sale in form and substance
acceptable to counsel of Purchaser, and Schedule 3 to this August
Agreement (and, as a result, the definition of "Purchased
Receivable") shall be updated to reflect such change.
Section 1.02 Consideration. (a) Simultaneously with the
execution and delivery of this August Agreement and with the
delivery of the General Assignment and Bill of Sale, Purchaser
shall pay to SFC and Stella $4,432,500 by wire transfer in
immediately available funds to the bank and account specified to
Purchaser by SFC and Stella. This amount is calculated as
follows: 99.00% of the face amount of the Purchased Receivable
(such amount being hereinafter referred to as the "Purchase
Price"), further reduced by .50% of the face amount of the
Purchased Receivable (representing a non-refundable transaction
fee).
(b) Simultaneously with the execution and delivery of any
General Assignment and Bill of Sale and the revision of Schedule
3 to this August Agreement (and, as a result, the definition of
"Purchased Receivable") as contemplated by Section 1.01(b),
Purchaser shall pay to SFC and Stella by wire transfer in
immediately available funds to the bank and account specified to
Purchaser by SFC and Stella the Purchase Price for such Purchased
Receivable which shall equal 99% of the face amount of any such
Insurance Receivable being purchased, further reduced by .50% of
the face amount (representing a non-refundable transaction fee).
Section 1.03 The Closing. The Closing of the purchase and
sale of the Purchased Receivable shall take place on the date of
this August Agreement.
ARTICLE 2
WARRANTIES AND REPRESENTATIONS OF SFC AND STELLA
SFC and Stella, jointly and severally, hereby represent and
warrant to Purchaser as of the date of this August Agreement and
on the date of any subsequent purchase and sale of any Insurance
Receivable (except to the extent a particular warranty and
representation is made as of a particular date) as follows:
Section 2.01 Corporate Organization and Power. Each of
SFC and Stella is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority to carry
on its business as now being conducted and to own and operate the
properties and assets now owned and being operated by it. Each
is qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each
jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification, except such
jurisdictions where the failure to qualify will not have a
material adverse effect on the business, prospects or financial
condition of the business.
Section 2.02 Authority; Authorization. The execution,
delivery and performance by each of SFC and Stella of this August
Agreement has been duly authorized by SFC's and Stella's Boards
of Directors. The performance of this August Agreement and the
other agreements contemplated hereby constitutes a valid and
binding obligation of SFC and Stella, to the extent each are
parties to such agreements, enforceable in accordance with their
terms.
Section 2.03 No Violation. The execution, delivery and
performance of this August Agreement and the other agreements
contemplated hereby by SFC and Stella, and the consummation of
the transactions contemplated hereby and thereby, do not and will
not (i) conflict with or result in any breach of any of, (ii)
constitute a default under, (iii) result in a violation of, (iv)
result in the creation of any lien, security interest, charge or
encumbrance under, (v) give any third party the right to
accelerate any obligation under the provisions of, or (vi)
require any authorization, consent, approval, exemption or other
action by any court, other governmental body, or other third
party under the provisions of, the charter or by-laws of SFC or
Stella or any indenture, mortgage, lease, loan agreement or other
agreement or instrument by which SFC or Stella is bound or to
which the Purchased Receivable is subject, or under any law,
statute, rule, regulation, judgment or decree to which SFC or
Stella is subject.
Section 2.04 Creation of the Insurance Receivable. The
Insurance Policies, as listed on Schedule 1 to this August
Agreement, represent policies that name SFC and Stella as named
insureds and which provide property damage and business
interruption coverage to SFC and Stella, including coverage with
respect to the Lena Facility. SFC and Stella estimate that the
total amount of claims to be submitted under such policies in
connection with the fire at the Lena Facility will ultimately
exceed $55,000,000. The claims for reimbursement pursuant to
such policies listed on Schedule 2 (as may be updated from time
to time by SFC and Stella) represent, in SFC's and Stella's good
faith belief, good and valid claims against the insurance
companies under the Insurance Policies, and each of the claims
has been submitted to the insurance companies in the amounts and
on the dates set forth on Schedule 2. As of the date of this
August Agreement, SFC and Stella have (i) submitted claims in the
amount of $50,000,000; (ii) received from the insurance companies
payments relating to the claims in the amount of $30,000,000 and
(iii) established on the books of SFC (or Stella) a receivable in
the amount of $20,000,000.
Section 2.05 Title to Receivable. SFC and Stella are the
sole and exclusive legal and equitable owners of all right, title
and interest in and to, and SFC and Stella have good and
marketable title to, the Insurance Receivable and such receivable
is not subject to:
(i) any contract, lease, license or
restriction on disposition; or
(ii) any mortgage, pledge, lien, charge or
encumbrance of any kind or character,
direct or indirect, whether accrued,
absolute, contingent or otherwise.
Section 2.06 Collection. The Purchased Receivables
are, as of the date of this August Agreement, valid and
enforceable claims against the insurance companies whose names
are listed on Schedule 1 (subject to no defenses, offsets or
counterclaims) and the Purchased Receivables will be collectible
in full within 60 days of the date of this August Agreement.
ARTICLE 3
WARRANTIES AND REPRESENTATIONS OF PURCHASER
Purchaser hereby represents and warrants to SFC and Stella
as of the date of this August Agreement and on the date of any
subsequent purchase and sale of any Insurance Receivable as
follows :
Section 3.01 Corporate Organization and Power. Purchaser
is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its corporation
and has the power and authority to carry on its business as now
being conducted and to own and operate the properties and assets
now owned and being operated by it. Purchaser is qualified to do
business and is in good standing under the laws of each
jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification, except such
jurisdictions where the failure to qualify will not have a
material adverse effect on the business, prospects or financial
condition of the business.
Section 3.02 Authority; Authorization. The execution,
delivery and performance by Purchaser of this August Agreement
has been duly authorized by Purchaser's governing body. The
performance of this August Agreement and the other agreements
contemplated hereby constitutes a valid and binding obligation of
Purchaser, enforceable in accordance with their terms.
Section 3.03 No Violation. The execution, delivery and
performance of this August Agreement and the other agreements
contemplated hereby by Purchaser, and the consummation of the
transactions contemplated hereby and thereby, do not and will not
(i) conflict with or result in any breach of any of, (ii)
constitute a default under, (iii) result in a violation of, (iv)
result in the creation of any lien, security interest, charge or
encumbrance under, (v) give any third party the right to
accelerate any obligation under the provisions of, or (vi)
require any authorization, consent, approval, exemption or other
action by any court, other governmental body, or other third
party under the provisions of, the charter or by-laws of
Purchaser or any indenture, mortgage, lease, loan agreement or
other agreement or instrument by which Purchaser is bound, or
under any law, statute, rule, regulation, judgment or decree to
which Purchaser is subject.
ARTICLE 4
COLLECTION/REDEMPTION PROVISIONS
Section 4.01 Establishment of Agency Relationship for
Collection of the Purchased Receivable.
(a) Purchaser hereby appoints SFC to act as its
exclusive agent for the collection from the insurance companies
of the amounts due and owing with respect to the Purchased
Receivable. SFC and Stella agree to use all reasonable
commercial efforts to diligently pursue the collection of the
Purchased Receivable. Purchaser agrees to cooperate fully with
SFC and Stella in their efforts to collect the Purchased
Receivable. Upon receipt of proceeds in connection with the
Insurance Receivable, subject to the provisions of Section
4.02(b), SFC is authorized and directed to retain such amounts in
a non-segregated account without restrictions on the interim use
thereof, until such time as the full amount of the Purchased
Receivable has been collected, as determined by the procedures
set forth in Section 4.01(b).
(b) The parties acknowledge that, simultaneously
with the execution of this August Agreement, SFC and Stella are
entering into substantially similar agreements for the purchase
and sale of portions of the remaining uncollected balance of the
Insurance Receivable with other purchasers. A complete listing
of all such agreements and the amount of the Insurance
Receivable being purchased and sold pursuant to each agreement,
including this August Agreement, are set forth on Schedule 3.
Purchaser acknowledges the existence of the other agreements
listed on Schedule 3 and agrees with SFC and Stella, for the
benefit of SFC and Stella and for the benefit of the other
purchasers pursuant to the other agreements, that SFC and Stella
shall apply amounts received from the insurance companies on
account of the Insurance Receivable to the Purchased
Receivables on a proportional basis between each of the
purchasers, including the Purchaser, as their interests appear on
Schedule 3 until the full portion of the Insurance Receivable
purchased and sold by means of the agreements listed on Schedule
3 is collected by SFC and Stella in their capacities as agents
for all of the purchasers, including Purchaser. By way of
example, if the amount of all of the Purchased Receivables
equals $1,000,000 and there are two purchasers, one who purchased
$600,000 and one who purchased $400,000, then all amounts
received on account of the Insurance Receivable will be applied
against the Purchased Receivables until a total of $1,000,000 has
been collected, and each portion of such amount shall be applied
60% to the first purchaser and 40% to the second purchaser.
Section 4.02 Delivery of Proceeds.
(a) When the full amount of the Purchased
Receivable has been collected, as determined by the procedures
set forth in Section 4.01(b), SFC will promptly notify Purchaser,
and shall, on the fourth business day after the giving of such
notice (provided the purchase and sale has not be rescinded prior
to such date), transfer said amount to Purchaser by wire transfer
in immediately available funds to such bank and account as is
designated by Purchaser.
(b) Notwithstanding the provisions of Section
4.02(a), a purchaser, including Purchaser, may demand from time
to time in writing the delivery of any proceeds that have been
collected with respect to the Purchased Receivables. If SFC
receives such a demand from a purchaser, including from
Purchaser, SFC shall, within two business days of the receipt of
such demand, circulate notice of such demand to all of the
purchasers, including Purchaser, together with a form of election
whereby all of the purchasers, including Purchaser (other than
the purchaser who submitted the original demand, or Purchaser if
Purchaser submitted the original demand), can elect to become a
party to such demand. If all of the purchasers, including
Purchaser, become a party to such demand by 5:00 pm (New York
City time) on the second business day after the receipt of such
form of election, SFC will, on the first business day thereafter,
confirm to all of the purchasers, including Purchaser, the total
amount of proceeds demanded and the percentage of such amount
that will be transferred to each of the purchasers, including
Purchaser, it being agreed that any such delivery of proceeds
will be done on a proportional basis between each of the
purchasers and Purchaser, as their interests appear on Schedule
3. On the fourth business day after the date the confirmation is
given (provided the purchase and sale of such portion of the
Purchased Receivable has not been rescinded prior to such date),
SFC shall transfer to Purchaser, by wire transfer in immediately
available funds to such bank and account as is designated by
Purchaser, the amount of proceeds set forth on the confirmation
notice opposite Purchaser's name. If any of the purchasers,
including Purchaser, fail to affirmatively join in such demand by
the specified time, the demand shall be deemed to be null and
void and no proceeds will be distributed pursuant thereto. There
shall be no limit as to the number or frequency a purchaser,
including Purchaser, may make demands pursuant to this Section
4.02(b).
Section 4.03 Right of Rescission. Purchaser may elect to
rescind the purchase and sale of the Purchased Receivable by
giving notice of such decision to SFC or Stella (i) at any time
on or after the 45th day after the date of this August Agreement
and before the 90th day after the date of this August Agreement,
or (ii) at any time upon receipt of notice from SFC and Stella
that the Purchased Receivable has been collected in full, or
(iii) any time upon receipt of the confirmation notice
contemplated by Section 4.02(b). On the second business day
following the giving of a rescission notice (the "Rescission
Closing Date"), Purchaser shall reconvey to SFC and Stella all of
its right, title and interest in and to the Purchased Receivable
that is the subject of such notice, free and clear of all liens
and encumbrances whatsoever by means of delivery of a General
Assignment and Bill of Sale in form and substance substantially
equivalent to the General Assignment and Bill of Sale attached
hereto as Attachment 1, together with such other documents,
including release documentation if Purchaser has created a
security interest in the Purchased Receivable, as are reasonably
requested by SFC and Stella, and SFC and Stella shall refund to
Purchaser an amount equal to the sum of (i) the Purchase Price,
which was paid for the Purchased Receivable with respect to which
the election to rescind was given, plus (ii) such Purchase Price
multiplied by .10 multiplied by a fraction, the numerator of
which is the number of days from the date of this August
Agreement to the Rescission Closing Date, and the denominator of
which is 365.
ARTICLE 5
ADDITIONAL AGREEMENTS
Section 5.01 Survival. The representations, warranties,
covenants and agreements set forth in this August Agreement shall
survive the Closing and the consummation of the transactions
contemplated hereby.
Section 5.02 Indemnification.
(a) SFC and Stella, jointly and severally, agree
to indemnify Purchaser and hold it harmless from and against any
loss, liability, damage or expense (including reasonable legal
expenses and costs) which Purchaser may suffer, sustain or become
subject to, as the result of a breach of any representation,
warranty, covenant or agreement by SFC or Stella contained in
this August Agreement.
(b) Purchaser agrees to indemnify SFC and Stella
and hold them harmless from and against any loss, liability,
damage or expense (including reasonable legal expenses and costs)
which SFC and Stella may suffer, sustain or become subject to, as
the result of a breach of any representation, warranty, covenant
or agreement by Purchaser contained in this August Agreement.
Section 5.03 Expenses and Transfer Taxes. Each party will
pay all of its expenses, including attorneys' fees, in connection
with the negotiation of this August Agreement, the consummation
of the transactions contemplated by this August Agreement, and
the performance of its obligations hereunder; provided that SFC
and Stella will pay the reasonable attorneys' fees of Purchaser,
not to exceed $5,000.00.
Section 5.04 Third Party Beneficiaries. This August
Agreement does not create any rights in parties who are not a
party to this August Agreement, except as set forth in Section
4.01(b) and 4.02(b).
ARTICLE 6
MISCELLANEOUS
Section 6.01 Amendment and Waiver.
(a) This August Agreement may be amended, or any
provision of this August Agreement may be waived, provided that
any such amendment or waiver will be binding upon SFC and Stella
only if set forth in a writing executed by SFC and Stella, and
any such amendment or waiver will be binding upon Purchaser only
if set forth in a writing executed by Purchaser.
(b) No course of dealing between or among any
persons having any interest in this August Agreement will be
deemed effective to modify, amend or discharge any part of this
August Agreement or any rights or obligations of any person under
or by reason of this August Agreement.
Section 6.02 Notices. Except as otherwise expressly set
forth in this August Agreement, all notices, demands and other
communications to be given or delivered under or by reason of the
provisions of this August Agreement will be in writing and will
be deemed to have been given and to have been received when
delivered personally, or by documented overnight delivery
service, or sent by telecopy, telefax, or other electronic
transmission service, provided confirmation is electronically
confirmed. Notices, demands and communications to SFC, Stella
and Purchaser will, unless another address is specified in
writing, be sent to the address indicated below:
Notices to SFC and Notices to Purchaser:
Stella:
Acadia Partners, L.P.
Specialty Foods c/o Oak Hill Partners
Corporation Park Avenue Tower
9399 W. Higgins Rd., 65 East 55th St., 32nd
Suite 800 Flr.
Rosemont, Illinois New York, N.Y. 10022
60018 Attention: Anthony P.
Attention: General Scotto
Counsel Fax: 212/826-6245
Fax: 847/685-1010
Section 6.03 Assignment. This August Agreement, and all
of the provisions hereof, will be binding upon and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns, except that neither this August Agreement, nor
any of the rights, interests or obligations hereunder, may be
assigned by any party without prior written consent of the other
parties.
Section 6.04 Severability. Whenever possible, each
provision of this August Agreement will be interpreted in such
manner as to be effective and valid under applicable law, but if
any provision of this August Agreement is held to be prohibited
by or invalid under applicable law, such provisions will be
ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the
remaining provision of this August Agreement.
Section 6.05 No Strict Construction. The language used in
this August Agreement will be deemed to be the language chosen by
the parties hereto to express their mutual intent, and no rule of
strict construction will be applied against any person.
Section 6.06 Captions. The captions used in this August
Agreement are for convenience of reference only and do not
constitute a part of this August Agreement and will not be deemed
to limit, characterize or in any way affect any provision of this
August Agreement, and all provisions of this August Agreement
will be enforced and construed as if no caption had been used in
this August Agreement.
Section 6.07 Complete Agreement. This document and the
documents referred to herein contain the complete agreement
between the parties and supersede any prior understandings,
agreements or representations by or between the parties, written
or oral, which may have related to the subject matter hereof in
any way; provided that the Agreement between the parties dated
May 21, 1996 shall remain in full force and effect in accordance
with its terms.
Section 6.08 Governing Law/Jurisdiction.
(a) The substantive law (and not the law of
conflicts) of the State of New York will govern all questions
concerning the construction, validity and interpretation of this
August Agreement and the performance of the obligations imposed
by this August Agreement.
(b) The parties hereby irrevocably and
unconditionally consent to submit to the exclusive jurisdiction
of the courts of the State of New York and of the United States
of America located in the City of New York for any actions, suits
or proceedings arising out of or relating to this August
Agreement and the transactions contemplated hereby (and agree not
to commence any action, suit or proceeding relating thereto
except in such courts), and further agree that service of any
process, summons, notice or document by U.S. registered mail to
the address set forth above shall be effective service of process
for any action, suit or proceeding brought by a party against a
party in any such court relating to this August Agreement or the
transaction contemplated hereby. The parties hereby irrevocably
and unconditionally waive any objection to the laying of venue of
any action, suit or proceeding arising out of this August
Agreement or the transactions contemplated hereby, in the courts
of the State of New York or the United States of America located
in the City of New York, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such
court that any such action, suit or proceeding brought in any
such court has been brought in an inconvenient forum.
Section 6.09 Failure to Exercise Rights. It is
understood and agreed that no failure or delay by Purchaser in
exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege under this August
Agreement.
Section 6.10 Counterparts. This August Agreement may be
executed in one or more counterparts (including by means of faxed
signature pages), any one of which need not contain the
signatures of more than one party, but all such counterparts
taken together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
August Agreement on the day and year first above written.
SPECIALTY FOODS CORPORATION
By: /s/ Robert L. Fishbune
Name: Robert L. Fishbune
Title: Vice President &
Chief Financial
Officer
STELLA FOODS, INC.
By: /s/ John E. Kelly
Name: John E. Kelly
Title: Vice President &
General Counsel
ACADIA PARTNERS, L.P.
By: /s/ Daniel L. Doctoroff
Name: Daniel L. Doctoroff
Title: Vice President
REVISED AND EFFECTIVE AS OF OCTOBER 7, 1996
Schedule 3
Listing of Agreements
Amount of Purchased
Purchaser Receivable Percentage Interest
(8/12/96)
1. Acadia $4,500,000 45%
Partners, L.P.
2. Keystone, Inc. $4,500,000 45%
3. Haas Wheat $1,000,000 10%
Advisory
Partners
Incorporated
Total $10,000,000 100%
Amount of October
Purchaser Purchased Percentage Interest
Receivable
(10/7/96)
1. Acadia $4,275,000 45%
Partners, L.P.
2. Keystone, Inc. $4,275,000 45%
3. Haas Wheat $950,000 10%
Advisory
Partners
Incorporated
Total $9,500,000 100%
Specialty Foods Stella Foods, Inc. Acadia Partners,
Corporation L.P.
By: _/s/ John E. By: _/s/ John E. By: _/s/ Daniel L.
Kelly Kelly Doctoroff
Attachment 1
GENERAL ASSIGNMENT AND BILL OF SALE
THIS GENERAL ASSIGNMENT AND BILL OF SALE dated as of the __
day of ________, 1996, is made and delivered pursuant to, and
subject to the terms of Section 4.03 of the Purchase Agreement
dated as of May __, 1996 (the "Agreement"), by and among
SPECIALTY FOODS CORPORATION, a Delaware corporation ("SFC"),
STELLA FOODS, INC., a Delaware corporation ("Stella" and with SFC
collectively referred to as "Sellers"), and __________________
("Purchaser"). The terms of the Agreement are incorporated
herein by reference, and capitalized terms not otherwise defined
in this General Assignment and Bill of Sale shall have the same
meanings as in the Agreement.
KNOW ALL MEN BY THESE PRESENTS, that Purchaser does hereby
sell, convey, assign, transfer and deliver to Sellers, and their
successors and assigns, all of the Purchaser's right, title and
interest, free and clear of all liabilities, obligations, liens
and encumbrances in the Purchased Receivable.
IN WITNESS WHEREOF, Purchaser, by its duly authorized
officers, has caused this General Assignment and Bill of Sale to
be duly executed as of the day and year first above written.
___________________________________
By: _______________________
Name:
_______________________
Title:
_______________________
Subscribed and sworn to before me
on this __ day of ________, 1996:
_________________________
Notary Public
(Seal)
EXHIBIT 10.74
2
FIRST AMENDMENT TO AUGUST PURCHASE AGREEMENT
THIS FIRST AMENDMENT dated as of December 27, 1996 is made
to that certain AUGUST PURCHASE AGREEMENT (the "August
Agreement") dated as of August 12, 1996 by and among SPECIALTY
FOODS CORPORATION, a Delaware corporation ("SFC"), STELLA FOODS,
INC., a Delaware corporation ("Stella"), and ACADIA PARTNERS,
L.P. ("Purchaser").
WHEREAS, the parties desire to amend certain aspects of the
August Agreement and simultaneously enter into that certain
Equity Conversion Letter Agreement;
NOW, THEREFORE, subject to the terms and conditions set
forth herein, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties
agree as follows:
1. Defined terms used herein but not defined herein shall have
the meanings ascribed to them in the August Agreement.
2. Section 2.6 of the August Agreement is hereby amended to
read in its entirety as follows:
"Section 2.6 Collection. The Purchased Receivables
are, as of the date of this August Agreement, valid and
enforceable claims against the insurance companies whose
names are listed on Schedule 1."
3. Section 4.03 of the August Agreement is deleted in its
entirety.
4. The effectiveness of this Amendment is expressly conditioned
on the final negotiation and execution before March 15, 1997 of
an agreement between the parties hereto, the other Purchasers and
Specialty Foods Acquisition Corporation, the corporate parent of
SFC ("SFAC"), that is satisfactory in form and substance to all
such parties setting forth a procedure whereby the Purchasers,
and certain permitted assigns of the Purchasers, can exchange the
Accounts Receivable for Common Stock in SFAC.
5. Except as expressly amended hereby, all of the terms and
provisions of the August Agreement are and shall remain in full
force and effect.
6. This First Amendment may be executed in one or more
counterparts (including by means of faxed signature pages), any
one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
First Amendment to the August Agreement on the day and year first
above written.
SPECIALTY FOODS CORPORATION
By: /s/ Robert L Fishbune
Name: Robert L. Fishbune
Title: Vice President &
Chief Financial
Officer
STELLA FOODS, INC.
By: /s/ John E. Kelly
Name: John E. Kelly
Title: Vice President &
General Counsel
ACADIA PARTNERS, L.P.
By: /s/ Steven Gruber
Name: Steven Gruber
Title: Vice President
EXHIBIT 10.75
15
AUGUST PURCHASE AGREEMENT
THIS AUGUST PURCHASE AGREEMENT (the "August Agreement") is
entered into as of this 12th day of August, 1996 by and among
SPECIALTY FOODS CORPORATION, a Delaware corporation ("SFC"),
STELLA FOODS, INC., a Delaware corporation ("Stella"), and
KEYSTONE, INC.("Purchaser").
WHEREAS, SFC and Stella are named insureds under certain
insurance policies described in Schedule 1 to this August
Agreement (the "Insurance Policies"), which provide property
damage and business interruption coverage to SFC and Stella,
including coverage with respect to Stella's Lena, Wisconsin
cheese production plant (the "Lena Facility"); and
WHEREAS, on January 5, 1996, the Lena Facility was
substantially destroyed by fire; and
WHEREAS, as of the date of this August Agreement SFC and
Stella had submitted claims for reimbursement for losses in
connection with the fire at the Lena Facility to insurance
companies under the Insurance Policies, a listing of which
partial claim settlement submissions are set forth on Schedule 2
to this August Agreement, which, as of the date hereof, totaled
in the aggregate $50,000,000; and
WHEREAS, as of the date of this August Agreement SFC and
Stella had received from the insurance companies payments
relating to the submitted claims in the amount of $30,000,000 and
had established on the books of SFC (or Stella) a receivable in
the amount of $20,000,000 (the "Insurance Receivable"),
representing the difference between the amount of the claims
submitted and the amount collected as of such date; and
WHEREAS, it would be beneficial to SFC and Stella, due to
timing differences between the date claims are submitted and the
date that claims are paid, if SFC and Stella could sell from time
to time, as the need arises, a portion, or portions, of the
Insurance Receivable so as to realize cash that could be used to
defray certain costs, including costs incurred in the rebuilding
of the Lena Facility;
NOW, THEREFORE, subject to the terms and conditions set
forth herein, SFC and Stella desire to sell to Purchaser and
Purchaser desires to purchase from SFC and Stella that dollar
amount of the Insurance Receivable which is set forth opposite
Purchaser's name on Schedule 3 to this August Agreement (such
amount being hereinafter referred to as the " Purchased
Receivable") and to establish a mechanism whereby (i) portions
of the Purchased Receivable can be repaid as proceeds are
collected, and (ii) additional portions of the Insurance
Receivable can be sold to Purchaser pursuant to the terms and
conditions of this August Agreement.
ARTICLE 1
PURCHASE AND SALE OF RECEIVABLE
Section 1.01 Basic Transaction. (a) On and subject to
the terms established in this August Agreement, Purchaser hereby
purchases from SFC and Stella, and SFC and Stella hereby sell,
convey, assign, transfer and deliver to Purchaser, all of SFC's
and Stella's right, title and interest in and to the Purchased
Receivable, such conveyance to be evidenced by means of the
delivery from SFC and Stella to Purchaser of a General Assignment
and Bill of Sale in form and substance acceptable to counsel of
Purchaser.
(b) From time to time SFC and Stella may offer to sell, and
Purchaser may agree to purchase, additional portions of the
Insurance Receivable, on and subject to the terms established in
this August Agreement. In such event such purchase and sale of
all of SFC's and Stella's right, title and interest in and to
such additional portion of the Insurance Receivable shall be
evidenced by means of delivery from SFC and Stella to Purchaser
of a General Assignment and Bill of Sale in form and substance
acceptable to counsel of Purchaser, and Schedule 3 to this August
Agreement (and, as a result, the definition of "Purchased
Receivable") shall be updated to reflect such change.
Section 1.02 Consideration. (a) Simultaneously with the
execution and delivery of this August Agreement and with the
delivery of the General Assignment and Bill of Sale, Purchaser
shall pay to SFC and Stella $4,432,500.00 by wire transfer in
immediately available funds to the bank and account specified to
Purchaser by SFC and Stella. This amount is calculated as
follows: 99.00% of the face amount of the Purchased Receivable
(such amount being hereinafter referred to as the "Purchase
Price"), further reduced by .50% of the face amount of the
Purchased Receivable (representing a non-refundable transaction
fee).
(b) Simultaneously with the execution and delivery of any
General Assignment and Bill of Sale and the revision of Schedule
3 to this August Agreement (and, as a result, the definition of
"Purchased Receivable") as contemplated by Section 1.01(b),
Purchaser shall pay to SFC and Stella by wire transfer in
immediately available funds to the bank and account specified to
Purchaser by SFC and Stella the Purchase Price for such Purchased
Receivable which shall equal 99% of the face amount of any such
Insurance Receivable being purchased, further reduced by .50% of
the face amount (representing a non-refundable transaction fee).
Section 1.03 The Closing. The Closing of the purchase and
sale of the Purchased Receivable shall take place on the date of
this August Agreement.
ARTICLE 2
WARRANTIES AND REPRESENTATIONS OF SFC AND STELLA
SFC and Stella, jointly and severally, hereby represent and
warrant to Purchaser as of the date of this August Agreement and
on the date of any subsequent purchase and sale of any Insurance
Receivable (except to the extent a particular warranty and
representation is made as of a particular date) as follows:
Section 2.01 Corporate Organization and Power. Each of
SFC and Stella is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority to carry
on its business as now being conducted and to own and operate the
properties and assets now owned and being operated by it. Each
is qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each
jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification, except such
jurisdictions where the failure to qualify will not have a
material adverse effect on the business, prospects or financial
condition of the business.
Section 2.02 Authority; Authorization. The execution,
delivery and performance by each of SFC and Stella of this August
Agreement has been duly authorized by SFC's and Stella's Boards
of Directors. The performance of this August Agreement and the
other agreements contemplated hereby constitutes a valid and
binding obligation of SFC and Stella, to the extent each are
parties to such agreements, enforceable in accordance with their
terms.
Section 2.03 No Violation. The execution, delivery and
performance of this August Agreement and the other agreements
contemplated hereby by SFC and Stella, and the consummation of
the transactions contemplated hereby and thereby, do not and will
not (i) conflict with or result in any breach of any of, (ii)
constitute a default under, (iii) result in a violation of, (iv)
result in the creation of any lien, security interest, charge or
encumbrance under, (v) give any third party the right to
accelerate any obligation under the provisions of, or (vi)
require any authorization, consent, approval, exemption or other
action by any court, other governmental body, or other third
party under the provisions of, the charter or by-laws of SFC or
Stella or any indenture, mortgage, lease, loan agreement or other
agreement or instrument by which SFC or Stella is bound or to
which the Purchased Receivable is subject, or under any law,
statute, rule, regulation, judgment or decree to which SFC or
Stella is subject.
Section 2.04 Creation of the Insurance Receivable. The
Insurance Policies, as listed on Schedule 1 to this August
Agreement, represent policies that name SFC and Stella as named
insureds and which provide property damage and business
interruption coverage to SFC and Stella, including coverage with
respect to the Lena Facility. SFC and Stella estimate that the
total amount of claims to be submitted under such policies in
connection with the fire at the Lena Facility will ultimately
exceed $55,000,000. The claims for reimbursement pursuant to
such policies listed on Schedule 2 (as may be updated from time
to time by SFC and Stella) represent, in SFC's and Stella's good
faith belief, good and valid claims against the insurance
companies under the Insurance Policies, and each of the claims
has been submitted to the insurance companies in the amounts and
on the dates set forth on Schedule 2. As of the date of this
August Agreement, SFC and Stella have (i) submitted claims in the
amount of $50,000,000; (ii) received from the insurance companies
payments relating to the claims in the amount of $30,000,000 and
(iii) established on the books of SFC (or Stella) a receivable in
the amount of $20,000,000.
Section 2.05 Title to Receivable. SFC and Stella are the
sole and exclusive legal and equitable owners of all right, title
and interest in and to, and SFC and Stella have good and
marketable title to, the Insurance Receivable and such receivable
is not subject to:
(i) any contract, lease, license or
restriction on disposition; or
(ii) any mortgage, pledge, lien, charge or
encumbrance of any kind or character,
direct or indirect, whether accrued,
absolute, contingent or otherwise.
Section 2.06 Collection. The Purchased Receivables
are, as of the date of this August Agreement, valid and
enforceable claims against the insurance companies whose names
are listed on Schedule 1 (subject to no defenses, offsets or
counterclaims) and the Purchased Receivables will be collectible
in full within 60 days of the date of this August Agreement.
ARTICLE 3
WARRANTIES AND REPRESENTATIONS OF PURCHASER
Purchaser hereby represents and warrants to SFC and Stella
as of the date of this August Agreement and on the date of any
subsequent purchase and sale of any Insurance Receivable as
follows :
Section 3.01 Corporate Organization and Power. Purchaser
is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its corporation
and has the power and authority to carry on its business as now
being conducted and to own and operate the properties and assets
now owned and being operated by it. Purchaser is qualified to do
business and is in good standing under the laws of each
jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification, except such
jurisdictions where the failure to qualify will not have a
material adverse effect on the business, prospects or financial
condition of the business.
Section 3.02 Authority; Authorization. The execution,
delivery and performance by Purchaser of this August Agreement
has been duly authorized by Purchaser's governing body. The
performance of this August Agreement and the other agreements
contemplated hereby constitutes a valid and binding obligation of
Purchaser, enforceable in accordance with their terms.
Section 3.03 No Violation. The execution, delivery and
performance of this August Agreement and the other agreements
contemplated hereby by Purchaser, and the consummation of the
transactions contemplated hereby and thereby, do not and will not
(i) conflict with or result in any breach of any of, (ii)
constitute a default under, (iii) result in a violation of, (iv)
result in the creation of any lien, security interest, charge or
encumbrance under, (v) give any third party the right to
accelerate any obligation under the provisions of, or (vi)
require any authorization, consent, approval, exemption or other
action by any court, other governmental body, or other third
party under the provisions of, the charter or by-laws of
Purchaser or any indenture, mortgage, lease, loan agreement or
other agreement or instrument by which Purchaser is bound, or
under any law, statute, rule, regulation, judgment or decree to
which Purchaser is subject.
ARTICLE 4
COLLECTION/REDEMPTION PROVISIONS
Section 4.01 Establishment of Agency Relationship for
Collection of the Purchased Receivable.
(a) Purchaser hereby appoints SFC to act as its
exclusive agent for the collection from the insurance companies
of the amounts due and owing with respect to the Purchased
Receivable. SFC and Stella agree to use all reasonable
commercial efforts to diligently pursue the collection of the
Purchased Receivable. Purchaser agrees to cooperate fully with
SFC and Stella in their efforts to collect the Purchased
Receivable. Upon receipt of proceeds in connection with the
Insurance Receivable, subject to the provisions of Section
4.02(b), SFC is authorized and directed to retain such amounts in
a non-segregated account without restrictions on the interim use
thereof, until such time as the full amount of the Purchased
Receivable has been collected, as determined by the procedures
set forth in Section 4.01(b).
(b) The parties acknowledge that, simultaneously
with the execution of this August Agreement, SFC and Stella are
entering into substantially similar agreements for the purchase
and sale of portions of the remaining uncollected balance of the
Insurance Receivable with other purchasers. A complete listing
of all such agreements and the amount of the Insurance
Receivable being purchased and sold pursuant to each agreement,
including this August Agreement, are set forth on Schedule 3.
Purchaser acknowledges the existence of the other agreements
listed on Schedule 3 and agrees with SFC and Stella, for the
benefit of SFC and Stella and for the benefit of the other
purchasers pursuant to the other agreements, that SFC and Stella
shall apply amounts received from the insurance companies on
account of the Insurance Receivable to the Purchased
Receivables on a proportional basis between each of the
purchasers, including the Purchaser, as their interests appear on
Schedule 3 until the full portion of the Insurance Receivable
purchased and sold by means of the agreements listed on Schedule
3 is collected by SFC and Stella in their capacities as agents
for all of the purchasers, including Purchaser. By way of
example, if the amount of all of the Purchased Receivables
equals $1,000,000 and there are two purchasers, one who purchased
$600,000 and one who purchased $400,000, then all amounts
received on account of the Insurance Receivable will be applied
against the Purchased Receivables until a total of $1,000,000 has
been collected, and each portion of such amount shall be applied
60% to the first purchaser and 40% to the second purchaser.
Section 4.02 Delivery of Proceeds.
(a) When the full amount of the Purchased
Receivable has been collected, as determined by the procedures
set forth in Section 4.01(b), SFC will promptly notify Purchaser,
and shall, on the fourth business day after the giving of such
notice (provided the purchase and sale has not be rescinded prior
to such date), transfer said amount to Purchaser by wire transfer
in immediately available funds to such bank and account as is
designated by Purchaser.
(b) Notwithstanding the provisions of Section
4.02(a), a purchaser, including Purchaser, may demand from time
to time in writing the delivery of any proceeds that have been
collected with respect to the Purchased Receivables. If SFC
receives such a demand from a purchaser, including from
Purchaser, SFC shall, within two business days of the receipt of
such demand, circulate notice of such demand to all of the
purchasers, including Purchaser, together with a form of election
whereby all of the purchasers, including Purchaser (other than
the purchaser who submitted the original demand, or Purchaser if
Purchaser submitted the original demand), can elect to become a
party to such demand. If all of the purchasers, including
Purchaser, become a party to such demand by 5:00 pm (New York
City time) on the second business day after the receipt of such
form of election, SFC will, on the first business day thereafter,
confirm to all of the purchasers, including Purchaser, the total
amount of proceeds demanded and the percentage of such amount
that will be transferred to each of the purchasers, including
Purchaser, it being agreed that any such delivery of proceeds
will be done on a proportional basis between each of the
purchasers and Purchaser, as their interests appear on Schedule
3. On the fourth business day after the date the confirmation is
given (provided the purchase and sale of such portion of the
Purchased Receivable has not been rescinded prior to such date),
SFC shall transfer to Purchaser, by wire transfer in immediately
available funds to such bank and account as is designated by
Purchaser, the amount of proceeds set forth on the confirmation
notice opposite Purchaser's name. If any of the purchasers,
including Purchaser, fail to affirmatively join in such demand by
the specified time, the demand shall be deemed to be null and
void and no proceeds will be distributed pursuant thereto. There
shall be no limit as to the number or frequency a purchaser,
including Purchaser, may make demands pursuant to this Section
4.02(b).
Section 4.03 Right of Rescission. Purchaser may elect to
rescind the purchase and sale of the Purchased Receivable by
giving notice of such decision to SFC or Stella (i) at any time
on or after the 45th day after the date of this August Agreement
and before the 90th day after the date of this August Agreement,
or (ii) at any time upon receipt of notice from SFC and Stella
that the Purchased Receivable has been collected in full, or
(iii) any time upon receipt of the confirmation notice
contemplated by Section 4.02(b). On the second business day
following the giving of a rescission notice (the "Rescission
Closing Date"), Purchaser shall reconvey to SFC and Stella all of
its right, title and interest in and to the Purchased Receivable
that is the subject of such notice, free and clear of all liens
and encumbrances whatsoever by means of delivery of a General
Assignment and Bill of Sale in form and substance substantially
equivalent to the General Assignment and Bill of Sale attached
hereto as Attachment 1, together with such other documents,
including release documentation if Purchaser has created a
security interest in the Purchased Receivable, as are reasonably
requested by SFC and Stella, and SFC and Stella shall refund to
Purchaser an amount equal to the sum of (i) the Purchase Price,
which was paid for the Purchased Receivable with respect to which
the election to rescind was given, plus (ii) such Purchase Price
multiplied by .10 multiplied by a fraction, the numerator of
which is the number of days from the date of this August
Agreement to the Rescission Closing Date, and the denominator of
which is 365.
ARTICLE 5
ADDITIONAL AGREEMENTS
Section 5.01 Survival. The representations, warranties,
covenants and agreements set forth in this August Agreement shall
survive the Closing and the consummation of the transactions
contemplated hereby.
Section 5.02 Indemnification.
(a) SFC and Stella, jointly and severally, agree
to indemnify Purchaser and hold it harmless from and against any
loss, liability, damage or expense (including reasonable legal
expenses and costs) which Purchaser may suffer, sustain or become
subject to, as the result of a breach of any representation,
warranty, covenant or agreement by SFC or Stella contained in
this August Agreement.
(b) Purchaser agrees to indemnify SFC and Stella
and hold them harmless from and against any loss, liability,
damage or expense (including reasonable legal expenses and costs)
which SFC and Stella may suffer, sustain or become subject to, as
the result of a breach of any representation, warranty, covenant
or agreement by Purchaser contained in this August Agreement.
Section 5.03 Expenses and Transfer Taxes. Each party will
pay all of its expenses, including attorneys' fees, in connection
with the negotiation of this August Agreement, the consummation
of the transactions contemplated by this August Agreement, and
the performance of its obligations hereunder; provided that SFC
and Stella will pay the reasonable attorneys' fees of Purchaser,
not to exceed $5,000.00.
Section 5.04 Third Party Beneficiaries. This August
Agreement does not create any rights in parties who are not a
party to this August Agreement, except as set forth in Section
4.01(b) and 4.02(b).
ARTICLE 6
MISCELLANEOUS
Section 6.01 Amendment and Waiver.
(a) This August Agreement may be amended, or any
provision of this August Agreement may be waived, provided that
any such amendment or waiver will be binding upon SFC and Stella
only if set forth in a writing executed by SFC and Stella, and
any such amendment or waiver will be binding upon Purchaser only
if set forth in a writing executed by Purchaser.
(b) No course of dealing between or among any
persons having any interest in this August Agreement will be
deemed effective to modify, amend or discharge any part of this
August Agreement or any rights or obligations of any person under
or by reason of this August Agreement.
Section 6.02 Notices. Except as otherwise expressly set
forth in this August Agreement, all notices, demands and other
communications to be given or delivered under or by reason of the
provisions of this August Agreement will be in writing and will
be deemed to have been given and to have been received when
delivered personally, or by documented overnight delivery
service, or sent by telecopy, telefax, or other electronic
transmission service, provided confirmation is electronically
confirmed. Notices, demands and communications to SFC, Stella
and Purchaser will, unless another address is specified in
writing, be sent to the address indicated below:
Notices to SFC and Notices to Purchaser:
Stella:
Keystone, Inc.
Specialty Foods 201 Main St., Suite 3100
Corporation Ft. Worth, TX 76102
9399 W. Higgins Rd., Attention: J. Taylor
Suite 800 Crandall
Rosemont, Illinois Fax: 817/338-2064
60018
Attention: General
Counsel
Fax: 847/685-1010
Section 6.03 Assignment. This August Agreement, and all
of the provisions hereof, will be binding upon and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns, except that neither this August Agreement, nor
any of the rights, interests or obligations hereunder, may be
assigned by any party without prior written consent of the other
parties.
Section 6.04 Severability. Whenever possible, each
provision of this August Agreement will be interpreted in such
manner as to be effective and valid under applicable law, but if
any provision of this August Agreement is held to be prohibited
by or invalid under applicable law, such provisions will be
ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the
remaining provision of this August Agreement.
Section 6.05 No Strict Construction. The language used in
this August Agreement will be deemed to be the language chosen by
the parties hereto to express their mutual intent, and no rule of
strict construction will be applied against any person.
Section 6.06 Captions. The captions used in this August
Agreement are for convenience of reference only and do not
constitute a part of this August Agreement and will not be deemed
to limit, characterize or in any way affect any provision of this
August Agreement, and all provisions of this August Agreement
will be enforced and construed as if no caption had been used in
this August Agreement.
Section 6.07 Complete Agreement. This document and the
documents referred to herein contain the complete agreement
between the parties and supersede any prior understandings,
agreements or representations by or between the parties, written
or oral, which may have related to the subject matter hereof in
any way; provided that the Agreement between the parties dated
May 21, 1996 shall remain in full force and effect in accordance
with its terms.
Section 6.08 Governing Law/Jurisdiction.
(a) The substantive law (and not the law of
conflicts) of the State of New York will govern all questions
concerning the construction, validity and interpretation of this
August Agreement and the performance of the obligations imposed
by this August Agreement.
(b) The parties hereby irrevocably and
unconditionally consent to submit to the exclusive jurisdiction
of the courts of the State of New York and of the United States
of America located in the City of New York for any actions, suits
or proceedings arising out of or relating to this August
Agreement and the transactions contemplated hereby (and agree not
to commence any action, suit or proceeding relating thereto
except in such courts), and further agree that service of any
process, summons, notice or document by U.S. registered mail to
the address set forth above shall be effective service of process
for any action, suit or proceeding brought by a party against a
party in any such court relating to this August Agreement or the
transaction contemplated hereby. The parties hereby irrevocably
and unconditionally waive any objection to the laying of venue of
any action, suit or proceeding arising out of this August
Agreement or the transactions contemplated hereby, in the courts
of the State of New York or the United States of America located
in the City of New York, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such
court that any such action, suit or proceeding brought in any
such court has been brought in an inconvenient forum.
Section 6.09 Failure to Exercise Rights. It is
understood and agreed that no failure or delay by Purchaser in
exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege under this August
Agreement.
Section 6.10 Counterparts. This August Agreement may be
executed in one or more counterparts (including by means of faxed
signature pages), any one of which need not contain the
signatures of more than one party, but all such counterparts
taken together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
August Agreement on the day and year first above written.
SPECIALTY FOODS CORPORATION
By: /s/ Robert L. Fishbune
Name: Robert L. Fishbune
Title: Vice President &
Chief Financial
Officer
STELLA FOODS, INC.
By: /s/ John E. Kelly
Name: John E. Kelly
Title: Vice President &
General Counsel
KEYSTONE, INC.
By: /s/ Daniel L. Doctoroff
Name: _Daniel L. Doctoroff
Title: Vice President
REVISED AND EFFECTIVE AS OF OCTOBER 7, 1996
Schedule 3
Listing of Agreements
Amount of Purchased
Purchaser Receivable Percentage Interest
(8/12/96)
1. Acadia $4,500,000 45%
Partners, L.P.
2. Keystone, Inc. $4,500,000 45%
3. Haas Wheat $1,000,000 10%
Advisory
Partners
Incorporated
Total $10,000,000 100%
Amount of October
Purchaser Purchased Percentage Interest
Receivable
(10/7/96)
1. Acadia $4,275,000 45%
Partners, L.P.
2. Keystone, Inc. $4,275,000 45%
3. Haas Wheat $950,000 10%
Advisory
Partners
Incorporated
Total $9,500,000 100%
Specialty Foods Stella Foods, Inc. Keystone, Inc.
Corporation
By: /s/ John E. By: /s/ John E. By: /s/ Daniel L.
Kelly Kelly Doctoroff
Attachment 1
GENERAL ASSIGNMENT AND BILL OF SALE
THIS GENERAL ASSIGNMENT AND BILL OF SALE dated as of the __
day of ________, 1996, is made and delivered pursuant to, and
subject to the terms of Section 4.03 of the Purchase Agreement
dated as of May __, 1996 (the "Agreement"), by and among
SPECIALTY FOODS CORPORATION, a Delaware corporation ("SFC"),
STELLA FOODS, INC., a Delaware corporation ("Stella" and with SFC
collectively referred to as "Sellers"), and __________________
("Purchaser"). The terms of the Agreement are incorporated
herein by reference, and capitalized terms not otherwise defined
in this General Assignment and Bill of Sale shall have the same
meanings as in the Agreement.
KNOW ALL MEN BY THESE PRESENTS, that Purchaser does hereby
sell, convey, assign, transfer and deliver to Sellers, and their
successors and assigns, all of the Purchaser's right, title and
interest, free and clear of all liabilities, obligations, liens
and encumbrances in the Purchased Receivable.
IN WITNESS WHEREOF, Purchaser, by its duly authorized
officers, has caused this General Assignment and Bill of Sale to
be duly executed as of the day and year first above written.
___________________________________
By: _______________________
Name:
_______________________
Title:
_______________________
Subscribed and sworn to before me
on this __ day of ________, 1996:
_________________________
Notary Public
(Seal)
EXHIBIT 10.76
2
FIRST AMENDMENT TO AUGUST PURCHASE AGREEMENT
THIS FIRST AMENDMENT dated as of December 27, 1996 is made
to that certain AUGUST PURCHASE AGREEMENT (the "August
Agreement") dated as of August 12, 1996 by and among SPECIALTY
FOODS CORPORATION, a Delaware corporation ("SFC"), STELLA FOODS,
INC., a Delaware corporation ("Stella"), and KEYSTONE, INC.
("Purchaser").
WHEREAS, the parties desire to amend certain aspects of the
August Agreement and simultaneously enter into that certain
Equity Conversion Letter Agreement;
NOW, THEREFORE, subject to the terms and conditions set
forth herein, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties
agree as follows:
1. Defined terms used herein but not defined herein shall have
the meanings ascribed to them in the August Agreement.
2. Section 2.6 of the August Agreement is hereby amended to
read in its entirety as follows:
"Section 2.6 Collection. The Purchased Receivables
are, as of the date of this August Agreement, valid and
enforceable claims against the insurance companies whose
names are listed on Schedule 1."
3. Section 4.03 of the August Agreement is deleted in its
entirety.
4. The effectiveness of this Amendment is expressly conditioned
on the final negotiation and execution before March 15, 1997 of
an agreement between the parties hereto, the other Purchasers and
Specialty Foods Acquisition Corporation, the corporate parent of
SFC ("SFAC"), that is satisfactory in form and substance to all
such parties setting forth a procedure whereby the Purchasers,
and certain permitted assigns of the Purchasers, can exchange the
Accounts Receivable for Common Stock in SFAC.
5. Except as expressly amended hereby, all of the terms and
provisions of the August Agreement are and shall remain in full
force and effect.
6. This First Amendment may be executed in one or more
counterparts (including by means of faxed signature pages), any
one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
First Amendment to the August Agreement on the day and year first
above written.
SPECIALTY FOODS CORPORATION
By: /s/ Robert L. Fishbune
Name: Robert L. Fishbune
Title: Vice President &
Chief Financial
Officer
STELLA FOODS, INC.
By: /s/ John E. Kelly
Name: John E. Kelly
Title: Vice President &
General Counsel
KEYSTONE, INC.
By: /s/ Daniel L. Doctoroff
Name: Daniel L. Doctoroff
Title: Vice President
EXHIBIT 10.77
18
AUGUST PURCHASE AGREEMENT
THIS AUGUST PURCHASE AGREEMENT (the "August Agreement") is
entered into as of this 12th day of August, 1996 by and among
SPECIALTY FOODS CORPORATION, a Delaware corporation ("SFC"),
STELLA FOODS, INC., a Delaware corporation ("Stella"), and HAAS
WHEAT ADVISORY PARTNERS INCORPORATED ("Purchaser").
WHEREAS, SFC and Stella are named insureds under certain
insurance policies described in Schedule 1 to this August
Agreement (the "Insurance Policies"), which provide property
damage and business interruption coverage to SFC and Stella,
including coverage with respect to Stella's Lena, Wisconsin
cheese production plant (the "Lena Facility"); and
WHEREAS, on January 5, 1996, the Lena Facility was
substantially destroyed by fire; and
WHEREAS, as of the date of this August Agreement SFC and
Stella had submitted claims for reimbursement for losses in
connection with the fire at the Lena Facility to insurance
companies under the Insurance Policies, a listing of which
partial claim settlement submissions are set forth on Schedule 2
to this August Agreement, which, as of the date hereof, totaled
in the aggregate $50,000,000; and
WHEREAS, as of the date of this August Agreement SFC and
Stella had received from the insurance companies payments
relating to the submitted claims in the amount of $30,000,000 and
had established on the books of SFC (or Stella) a receivable in
the amount of $20,000,000 (the "Insurance Receivable"),
representing the difference between the amount of the claims
submitted and the amount collected as of such date; and
WHEREAS, it would be beneficial to SFC and Stella, due to
timing differences between the date claims are submitted and the
date that claims are paid, if SFC and Stella could sell from time
to time, as the need arises, a portion, or portions, of the
Insurance Receivable so as to realize cash that could be used to
defray certain costs, including costs incurred in the rebuilding
of the Lena Facility;
NOW, THEREFORE, subject to the terms and conditions set
forth herein, SFC and Stella desire to sell to Purchaser and
Purchaser desires to purchase from SFC and Stella that dollar
amount of the Insurance Receivable which is set forth opposite
Purchaser's name on Schedule 3 to this August Agreement (such
amount being hereinafter referred to as the " Purchased
Receivable") and to establish a mechanism whereby (i) portions
of the Purchased Receivable can be repaid as proceeds are
collected, and (ii) additional portions of the Insurance
Receivable can be sold to Purchaser pursuant to the terms and
conditions of this August Agreement.
ARTICLE 1
PURCHASE AND SALE OF RECEIVABLE
Section 1.01 Basic Transaction. (a) On and subject to
the terms established in this August Agreement, Purchaser hereby
purchases from SFC and Stella, and SFC and Stella hereby sell,
convey, assign, transfer and deliver to Purchaser, all of SFC's
and Stella's right, title and interest in and to the Purchased
Receivable, such conveyance to be evidenced by means of the
delivery from SFC and Stella to Purchaser of a General Assignment
and Bill of Sale in form and substance acceptable to counsel of
Purchaser.
(b) From time to time SFC and Stella may offer to sell, and
Purchaser may agree to purchase, additional portions of the
Insurance Receivable, on and subject to the terms established in
this August Agreement. In such event such purchase and sale of
all of SFC's and Stella's right, title and interest in and to
such additional portion of the Insurance Receivable shall be
evidenced by means of delivery from SFC and Stella to Purchaser
of a General Assignment and Bill of Sale in form and substance
acceptable to counsel of Purchaser, and Schedule 3 to this August
Agreement (and, as a result, the definition of "Purchased
Receivable") shall be updated to reflect such change.
Section 1.02 Consideration. (a) Simultaneously with the
execution and delivery of this August Agreement and with the
delivery of the General Assignment and Bill of Sale, Purchaser
shall pay to SFC and Stella $985,000.00 by wire transfer in
immediately available funds to the bank and account specified to
Purchaser by SFC and Stella. This amount is calculated as
follows: 99.00% of the face amount of the Purchased Receivable
(such amount being hereinafter referred to as the "Purchase
Price"), further reduced by .50% of the face amount of the
Purchased Receivable (representing a non-refundable transaction
fee).
(b) Simultaneously with the execution and delivery of any
General Assignment and Bill of Sale and the revision of Schedule
3 to this August Agreement (and, as a result, the definition of
"Purchased Receivable") as contemplated by Section 1.01(b),
Purchaser shall pay to SFC and Stella by wire transfer in
immediately available funds to the bank and account specified to
Purchaser by SFC and Stella the Purchase Price for such Purchased
Receivable which shall equal 99% of the face amount of any such
Insurance Receivable being purchased, further reduced by .50% of
the face amount (representing a non-refundable transaction fee).
Section 1.03 The Closing. The Closing of the purchase and
sale of the Purchased Receivable shall take place on the date of
this August Agreement.
ARTICLE 2
WARRANTIES AND REPRESENTATIONS OF SFC AND STELLA
SFC and Stella, jointly and severally, hereby represent and
warrant to Purchaser as of the date of this August Agreement and
on the date of any subsequent purchase and sale of any Insurance
Receivable (except to the extent a particular warranty and
representation is made as of a particular date) as follows:
Section 2.01 Corporate Organization and Power. Each of
SFC and Stella is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority to carry
on its business as now being conducted and to own and operate the
properties and assets now owned and being operated by it. Each
is qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each
jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification, except such
jurisdictions where the failure to qualify will not have a
material adverse effect on the business, prospects or financial
condition of the business.
Section 2.02 Authority; Authorization. The execution,
delivery and performance by each of SFC and Stella of this August
Agreement has been duly authorized by SFC's and Stella's Boards
of Directors. The performance of this August Agreement and the
other agreements contemplated hereby constitutes a valid and
binding obligation of SFC and Stella, to the extent each are
parties to such agreements, enforceable in accordance with their
terms.
Section 2.03 No Violation. The execution, delivery and
performance of this August Agreement and the other agreements
contemplated hereby by SFC and Stella, and the consummation of
the transactions contemplated hereby and thereby, do not and will
not (i) conflict with or result in any breach of any of, (ii)
constitute a default under, (iii) result in a violation of, (iv)
result in the creation of any lien, security interest, charge or
encumbrance under, (v) give any third party the right to
accelerate any obligation under the provisions of, or (vi)
require any authorization, consent, approval, exemption or other
action by any court, other governmental body, or other third
party under the provisions of, the charter or by-laws of SFC or
Stella or any indenture, mortgage, lease, loan agreement or other
agreement or instrument by which SFC or Stella is bound or to
which the Purchased Receivable is subject, or under any law,
statute, rule, regulation, judgment or decree to which SFC or
Stella is subject.
Section 2.04 Creation of the Insurance Receivable. The
Insurance Policies, as listed on Schedule 1 to this August
Agreement, represent policies that name SFC and Stella as named
insureds and which provide property damage and business
interruption coverage to SFC and Stella, including coverage with
respect to the Lena Facility. SFC and Stella estimate that the
total amount of claims to be submitted under such policies in
connection with the fire at the Lena Facility will ultimately
exceed $55,000,000. The claims for reimbursement pursuant to
such policies listed on Schedule 2 (as may be updated from time
to time by SFC and Stella) represent, in SFC's and Stella's good
faith belief, good and valid claims against the insurance
companies under the Insurance Policies, and each of the claims
has been submitted to the insurance companies in the amounts and
on the dates set forth on Schedule 2. As of the date of this
August Agreement, SFC and Stella have (i) submitted claims in the
amount of $50,000,000; (ii) received from the insurance companies
payments relating to the claims in the amount of $30,000,000 and
(iii) established on the books of SFC (or Stella) a receivable in
the amount of $20,000,000.
Section 2.05 Title to Receivable. SFC and Stella are the
sole and exclusive legal and equitable owners of all right, title
and interest in and to, and SFC and Stella have good and
marketable title to, the Insurance Receivable and such receivable
is not subject to:
(i) any contract, lease, license or
restriction on disposition; or
(ii) any mortgage, pledge, lien, charge or
encumbrance of any kind or character,
direct or indirect, whether accrued,
absolute, contingent or otherwise.
Section 2.06 Collection. The Purchased Receivables
are, as of the date of this August Agreement, valid and
enforceable claims against the insurance companies whose names
are listed on Schedule 1 (subject to no defenses, offsets or
counterclaims) and the Purchased Receivables will be collectible
in full within 60 days of the date of this August Agreement.
ARTICLE 3
WARRANTIES AND REPRESENTATIONS OF PURCHASER
Purchaser hereby represents and warrants to SFC and Stella
as of the date of this August Agreement and on the date of any
subsequent purchase and sale of any Insurance Receivable as
follows :
Section 3.01 Corporate Organization and Power. Purchaser
is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its corporation
and has the power and authority to carry on its business as now
being conducted and to own and operate the properties and assets
now owned and being operated by it. Purchaser is qualified to do
business and is in good standing under the laws of each
jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification, except such
jurisdictions where the failure to qualify will not have a
material adverse effect on the business, prospects or financial
condition of the business.
Section 3.02 Authority; Authorization. The execution,
delivery and performance by Purchaser of this August Agreement
has been duly authorized by Purchaser's governing body. The
performance of this August Agreement and the other agreements
contemplated hereby constitutes a valid and binding obligation of
Purchaser, enforceable in accordance with their terms.
Section 3.03 No Violation. The execution, delivery and
performance of this August Agreement and the other agreements
contemplated hereby by Purchaser, and the consummation of the
transactions contemplated hereby and thereby, do not and will not
(i) conflict with or result in any breach of any of, (ii)
constitute a default under, (iii) result in a violation of, (iv)
result in the creation of any lien, security interest, charge or
encumbrance under, (v) give any third party the right to
accelerate any obligation under the provisions of, or (vi)
require any authorization, consent, approval, exemption or other
action by any court, other governmental body, or other third
party under the provisions of, the charter or by-laws of
Purchaser or any indenture, mortgage, lease, loan agreement or
other agreement or instrument by which Purchaser is bound, or
under any law, statute, rule, regulation, judgment or decree to
which Purchaser is subject.
ARTICLE 4
COLLECTION/REDEMPTION PROVISIONS
Section 4.01 Establishment of Agency Relationship for
Collection of the Purchased Receivable.
(a) Purchaser hereby appoints SFC to act as its
exclusive agent for the collection from the insurance companies
of the amounts due and owing with respect to the Purchased
Receivable. SFC and Stella agree to use all reasonable
commercial efforts to diligently pursue the collection of the
Purchased Receivable. Purchaser agrees to cooperate fully with
SFC and Stella in their efforts to collect the Purchased
Receivable. Upon receipt of proceeds in connection with the
Insurance Receivable, subject to the provisions of Section
4.02(b), SFC is authorized and directed to retain such amounts in
a non-segregated account without restrictions on the interim use
thereof, until such time as the full amount of the Purchased
Receivable has been collected, as determined by the procedures
set forth in Section 4.01(b).
(b) The parties acknowledge that, simultaneously
with the execution of this August Agreement, SFC and Stella are
entering into substantially similar agreements for the purchase
and sale of portions of the remaining uncollected balance of the
Insurance Receivable with other purchasers. A complete listing
of all such agreements and the amount of the Insurance
Receivable being purchased and sold pursuant to each agreement,
including this August Agreement, are set forth on Schedule 3.
Purchaser acknowledges the existence of the other agreements
listed on Schedule 3 and agrees with SFC and Stella, for the
benefit of SFC and Stella and for the benefit of the other
purchasers pursuant to the other agreements, that SFC and Stella
shall apply amounts received from the insurance companies on
account of the Insurance Receivable to the Purchased
Receivables on a proportional basis between each of the
purchasers, including the Purchaser, as their interests appear on
Schedule 3 until the full portion of the Insurance Receivable
purchased and sold by means of the agreements listed on Schedule
3 is collected by SFC and Stella in their capacities as agents
for all of the purchasers, including Purchaser. By way of
example, if the amount of all of the Purchased Receivables
equals $1,000,000 and there are two purchasers, one who purchased
$600,000 and one who purchased $400,000, then all amounts
received on account of the Insurance Receivable will be applied
against the Purchased Receivables until a total of $1,000,000 has
been collected, and each portion of such amount shall be applied
60% to the first purchaser and 40% to the second purchaser.
Section 4.02 Delivery of Proceeds.
(a) When the full amount of the Purchased
Receivable has been collected, as determined by the procedures
set forth in Section 4.01(b), SFC will promptly notify Purchaser,
and shall, on the fourth business day after the giving of such
notice (provided the purchase and sale has not be rescinded prior
to such date), transfer said amount to Purchaser by wire transfer
in immediately available funds to such bank and account as is
designated by Purchaser.
(b) Notwithstanding the provisions of Section
4.02(a), a purchaser, including Purchaser, may demand from time
to time in writing the delivery of any proceeds that have been
collected with respect to the Purchased Receivables. If SFC
receives such a demand from a purchaser, including from
Purchaser, SFC shall, within two business days of the receipt of
such demand, circulate notice of such demand to all of the
purchasers, including Purchaser, together with a form of election
whereby all of the purchasers, including Purchaser (other than
the purchaser who submitted the original demand, or Purchaser if
Purchaser submitted the original demand), can elect to become a
party to such demand. If all of the purchasers, including
Purchaser, become a party to such demand by 5:00 pm (New York
City time) on the second business day after the receipt of such
form of election, SFC will, on the first business day thereafter,
confirm to all of the purchasers, including Purchaser, the total
amount of proceeds demanded and the percentage of such amount
that will be transferred to each of the purchasers, including
Purchaser, it being agreed that any such delivery of proceeds
will be done on a proportional basis between each of the
purchasers and Purchaser, as their interests appear on Schedule
3. On the fourth business day after the date the confirmation is
given (provided the purchase and sale of such portion of the
Purchased Receivable has not been rescinded prior to such date),
SFC shall transfer to Purchaser, by wire transfer in immediately
available funds to such bank and account as is designated by
Purchaser, the amount of proceeds set forth on the confirmation
notice opposite Purchaser's name. If any of the purchasers,
including Purchaser, fail to affirmatively join in such demand by
the specified time, the demand shall be deemed to be null and
void and no proceeds will be distributed pursuant thereto. There
shall be no limit as to the number or frequency a purchaser,
including Purchaser, may make demands pursuant to this Section
4.02(b).
Section 4.03 Right of Rescission. Purchaser may elect to
rescind the purchase and sale of the Purchased Receivable by
giving notice of such decision to SFC or Stella (i) at any time
on or after the 45th day after the date of this August Agreement
and before the 90th day after the date of this August Agreement,
or (ii) at any time upon receipt of notice from SFC and Stella
that the Purchased Receivable has been collected in full, or
(iii) any time upon receipt of the confirmation notice
contemplated by Section 4.02(b). On the second business day
following the giving of a rescission notice (the "Rescission
Closing Date"), Purchaser shall reconvey to SFC and Stella all of
its right, title and interest in and to the Purchased Receivable
that is the subject of such notice, free and clear of all liens
and encumbrances whatsoever by means of delivery of a General
Assignment and Bill of Sale in form and substance substantially
equivalent to the General Assignment and Bill of Sale attached
hereto as Attachment 1, together with such other documents,
including release documentation if Purchaser has created a
security interest in the Purchased Receivable, as are reasonably
requested by SFC and Stella, and SFC and Stella shall refund to
Purchaser an amount equal to the sum of (i) the Purchase Price,
which was paid for the Purchased Receivable with respect to which
the election to rescind was given, plus (ii) such Purchase Price
multiplied by .10 multiplied by a fraction, the numerator of
which is the number of days from the date of this August
Agreement to the Rescission Closing Date, and the denominator of
which is 365.
ARTICLE 5
ADDITIONAL AGREEMENTS
Section 5.01 Survival. The representations, warranties,
covenants and agreements set forth in this August Agreement shall
survive the Closing and the consummation of the transactions
contemplated hereby.
Section 5.02 Indemnification.
(a) SFC and Stella, jointly and severally, agree
to indemnify Purchaser and hold it harmless from and against any
loss, liability, damage or expense (including reasonable legal
expenses and costs) which Purchaser may suffer, sustain or become
subject to, as the result of a breach of any representation,
warranty, covenant or agreement by SFC or Stella contained in
this August Agreement.
(b) Purchaser agrees to indemnify SFC and Stella
and hold them harmless from and against any loss, liability,
damage or expense (including reasonable legal expenses and costs)
which SFC and Stella may suffer, sustain or become subject to, as
the result of a breach of any representation, warranty, covenant
or agreement by Purchaser contained in this August Agreement.
Section 5.03 Expenses and Transfer Taxes. Each party will
pay all of its expenses, including attorneys' fees, in connection
with the negotiation of this August Agreement, the consummation
of the transactions contemplated by this August Agreement, and
the performance of its obligations hereunder; provided that SFC
and Stella will pay the reasonable attorneys' fees of Purchaser,
not to exceed $5,000.00.
Section 5.04 Third Party Beneficiaries. This August
Agreement does not create any rights in parties who are not a
party to this August Agreement, except as set forth in Section
4.01(b) and 4.02(b).
ARTICLE 6
MISCELLANEOUS
Section 6.01 Amendment and Waiver.
(a) This August Agreement may be amended, or any
provision of this August Agreement may be waived, provided that
any such amendment or waiver will be binding upon SFC and Stella
only if set forth in a writing executed by SFC and Stella, and
any such amendment or waiver will be binding upon Purchaser only
if set forth in a writing executed by Purchaser.
(b) No course of dealing between or among any
persons having any interest in this August Agreement will be
deemed effective to modify, amend or discharge any part of this
August Agreement or any rights or obligations of any person under
or by reason of this August Agreement.
Section 6.02 Notices. Except as otherwise expressly set
forth in this August Agreement, all notices, demands and other
communications to be given or delivered under or by reason of the
provisions of this August Agreement will be in writing and will
be deemed to have been given and to have been received when
delivered personally, or by documented overnight delivery
service, or sent by telecopy, telefax, or other electronic
transmission service, provided confirmation is electronically
confirmed. Notices, demands and communications to SFC, Stella
and Purchaser will, unless another address is specified in
writing, be sent to the address indicated below:
Notices to SFC and Notices to Purchaser:
Stella:
Haas Wheat Advisory
Specialty Foods Partners Incorporated
Corporation 300 Crescent Crt., Suite
9399 W. Higgins Rd., 1700
Suite 800 Dallas, TX 75201
Rosemont, Illinois Attention: Douglas D.
60018 Wheat
Attention: General Fax: 214/871-8317
Counsel _
Fax: 847/685-1010
Section 6.03 Assignment. This August Agreement, and all
of the provisions hereof, will be binding upon and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns, except that neither this August Agreement, nor
any of the rights, interests or obligations hereunder, may be
assigned by any party without prior written consent of the other
parties.
Section 6.04 Severability. Whenever possible, each
provision of this August Agreement will be interpreted in such
manner as to be effective and valid under applicable law, but if
any provision of this August Agreement is held to be prohibited
by or invalid under applicable law, such provisions will be
ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the
remaining provision of this August Agreement.
Section 6.05 No Strict Construction. The language used in
this August Agreement will be deemed to be the language chosen by
the parties hereto to express their mutual intent, and no rule of
strict construction will be applied against any person.
Section 6.06 Captions. The captions used in this August
Agreement are for convenience of reference only and do not
constitute a part of this August Agreement and will not be deemed
to limit, characterize or in any way affect any provision of this
August Agreement, and all provisions of this August Agreement
will be enforced and construed as if no caption had been used in
this August Agreement.
Section 6.07 Complete Agreement. This document and the
documents referred to herein contain the complete agreement
between the parties and supersede any prior understandings,
agreements or representations by or between the parties, written
or oral, which may have related to the subject matter hereof in
any way; provided that the Agreement between the parties dated
May 21, 1996 shall remain in full force and effect in accordance
with its terms.
Section 6.08 Governing Law/Jurisdiction.
(a) The substantive law (and not the law of
conflicts) of the State of New York will govern all questions
concerning the construction, validity and interpretation of this
August Agreement and the performance of the obligations imposed
by this August Agreement.
(b) The parties hereby irrevocably and
unconditionally consent to submit to the exclusive jurisdiction
of the courts of the State of New York and of the United States
of America located in the City of New York for any actions, suits
or proceedings arising out of or relating to this August
Agreement and the transactions contemplated hereby (and agree not
to commence any action, suit or proceeding relating thereto
except in such courts), and further agree that service of any
process, summons, notice or document by U.S. registered mail to
the address set forth above shall be effective service of process
for any action, suit or proceeding brought by a party against a
party in any such court relating to this August Agreement or the
transaction contemplated hereby. The parties hereby irrevocably
and unconditionally waive any objection to the laying of venue of
any action, suit or proceeding arising out of this August
Agreement or the transactions contemplated hereby, in the courts
of the State of New York or the United States of America located
in the City of New York, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such
court that any such action, suit or proceeding brought in any
such court has been brought in an inconvenient forum.
Section 6.09 Failure to Exercise Rights. It is
understood and agreed that no failure or delay by Purchaser in
exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege under this August
Agreement.
Section 6.10 Counterparts. This August Agreement may be
executed in one or more counterparts (including by means of faxed
signature pages), any one of which need not contain the
signatures of more than one party, but all such counterparts
taken together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
August Agreement on the day and year first above written.
SPECIALTY FOODS CORPORATION
By: /s/ Robert L. Fishbune
Name: Robert L. Fishbune
Title: Vice President &
Chief Financial
Officer
STELLA FOODS, INC.
By: /s/ John E. Kelly
Name: John E. Kelly
Title: Vice President &
General Counsel
HAAS WHEAT ADVISORY
PARTNERS INCORPORATED
By: /s/ Douglas D. Wheat
Name: Douglas D. Wheat
Title: President
REVISED AND EFFECTIVE AS OF OCTOBER 7, 1996
Schedule 3
Listing of Agreements
Amount of Purchased
Purchaser Receivable Percentage Interest
(8/12/96)
1. Acadia $4,500,000 45%
Partners, L.P.
2. Keystone, Inc. $4,500,000 45%
3. Haas Wheat $1,000,000 10%
Advisory
Partners
Incorporated
Total $10,000,000 100%
Amount of October
Purchaser Purchased Percentage Interest
Receivable
(10/7/96)
1. Acadia $4,275,000 45%
Partners, L.P.
2. Keystone, Inc. $4,275,000 45%
3. Haas Wheat $950,000 10%
Advisory
Partners
Incorporated
Total $9,500,000 100%
Specialty Foods Stella Foods, Inc. Haas Wheat Advisory
Corporation Partners
Incorporated
By: /s/ John E. By: /s/ John E. By: /s/ Douglas D.
Kelly Kelly Wheat
Attachment 1
GENERAL ASSIGNMENT AND BILL OF SALE
THIS GENERAL ASSIGNMENT AND BILL OF SALE dated as of the __
day of ________, 1996, is made and delivered pursuant to, and
subject to the terms of Section 4.03 of the Purchase Agreement
dated as of May __, 1996 (the "Agreement"), by and among
SPECIALTY FOODS CORPORATION, a Delaware corporation ("SFC"),
STELLA FOODS, INC., a Delaware corporation ("Stella" and with SFC
collectively referred to as "Sellers"), and __________________
("Purchaser"). The terms of the Agreement are incorporated
herein by reference, and capitalized terms not otherwise defined
in this General Assignment and Bill of Sale shall have the same
meanings as in the Agreement.
KNOW ALL MEN BY THESE PRESENTS, that Purchaser does hereby
sell, convey, assign, transfer and deliver to Sellers, and their
successors and assigns, all of the Purchaser's right, title and
interest, free and clear of all liabilities, obligations, liens
and encumbrances in the Purchased Receivable.
IN WITNESS WHEREOF, Purchaser, by its duly authorized
officers, has caused this General Assignment and Bill of Sale to
be duly executed as of the day and year first above written.
___________________________________
By: _______________________
Name:
_______________________
Title:
_______________________
Subscribed and sworn to before me
on this __ day of ________, 1996:
_________________________
Notary Public
(Seal)
SCHEDULE 2
Insurance Claims Submitted
Requested Received
Date Applicable Date Applicable
Nature of Claim Submitted Carrier Amount Received Carrier Amount
Property Damage 1/17/96 St. Paul 2,500,000 1/23/96 St. Paul 2,500,000
Inventory/
stock loss & 1/17/96 Aetna 1,250,000 1/31/96 Aetna 1,250,000
debris removal
and clean up 1/17/96 Lexington 1,250,000 2/16/96 Lexington 1,250,000
costs
Property Damage 2/2/96 St. Paul 2,500,000 2/12/96 St. Paul 2,500,000
Building,
machinery & eqt., 2/2/96 Aetna 1,250,000 2/16/96 Aetna 1,250,000
BI
2/2/96 Lexington 1,250,000 2/16/96 Lexington 1,250,000
Property Damage 2/2/96 Allianz 5,000,000 2/22/96 Allianz 5,000,000
Building,
machinery & eqt.,
BI
Property Damage 3/22/96 TIG Ins. Co. 2,500,000 4/22/96 TIG Ins. Co. 2,500,000
Building,
machinery & eqt. 3/22/96 Pacific Ins. 500,000 4/24/96 Pacific Ins. 500,000
BI 3/22/96 Wausau Ins. 250,000 4/30/96 Wausau Ins. 250,000
3/22/96 Commonwealth 1,250,000 5/8/96 Commonwealth 1,250,000
at 5/17/96 19,500,000
3/22/96 Security Ins 500,000 6/4/96 Security Ins. 500,000
Property Damage 5/17/96 Commonwealth 1,250,000 7/9/96 Commonwealth 1,250,000
Building,
machinery & eqt. 5/17/96 Wausau Ins. 250,000 7/10/96 Wausau Ins. 250,000
BI 5/17/96 TIG Insuranc 2,500,000 7/31/96 TIG Insuran 2,500,000
5/17/96 Pacific Ins. 500,000 8/1/96 Pacific Ins. 500,000
5/17/96 Security Ins. 500,000 8/6/96 Security Ins. 500,000
Property Damage 5/17/96 Hartford 10,000,000 8/6/96 Hartford 5,000,000
Building,
machinery & eqt.,
BI
Property Damage 7/5/96 Hartford 10,000,000
Building,
machinery & eqt.,
BI
Property Damage 7/23/96 Hartford 5,000,000
Building,
machinery & eqt.,
BI
TOTALS 50,000,000 30,000,000
EXHIBIT 10.78
2
FIRST AMENDMENT TO AUGUST PURCHASE AGREEMENT
THIS FIRST AMENDMENT dated as of December 27, 1996 is made
to that certain AUGUST PURCHASE AGREEMENT (the "August
Agreement") dated as of August 12, 1996 by and among SPECIALTY
FOODS CORPORATION, a Delaware corporation ("SFC"), STELLA FOODS,
INC., a Delaware corporation ("Stella"), and HAAS WHEAT ADVISORY
PARTNERS INCORPORATED ("Purchaser").
WHEREAS, the parties desire to amend certain aspects of the
August Agreement and simultaneously enter into that certain
Equity Conversion Letter Agreement;
NOW, THEREFORE, subject to the terms and conditions set
forth herein, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties
agree as follows:
1. Defined terms used herein but not defined herein shall have
the meanings ascribed to them in the August Agreement.
2. Section 2.6 of the August Agreement is hereby amended to
read in its entirety as follows:
"Section 2.6 Collection. The Purchased Receivables
are, as of the date of this August Agreement, valid and
enforceable claims against the insurance companies whose
names are listed on Schedule 1."
3. Section 4.03 of the August Agreement is deleted in its
entirety.
4. The effectiveness of this Amendment is expressly conditioned
on the final negotiation and execution before March 15, 1997 of
an agreement between the parties hereto, the other Purchasers and
Specialty Foods Acquisition Corporation, the corporate parent of
SFC ("SFAC"), that is satisfactory in form and substance to all
such parties setting forth a procedure whereby the Purchasers,
and certain permitted assigns of the Purchasers, can exchange the
Accounts Receivable for Common Stock in SFAC.
5. Except as expressly amended hereby, all of the terms and
provisions of the August Agreement are and shall remain in full
force and effect.
6. This First Amendment may be executed in one or more
counterparts (including by means of faxed signature pages), any
one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
First Amendment to the August Agreement on the day and year first
above written.
SPECIALTY FOODS CORPORATION
By: /s/ Robert L. Fishbune
Name: Robert L. Fishbune
Title: Vice President &
Chief Financial
Officer
STELLA FOODS, INC.
By: /s/ John E. Kelly
Name: John E. Kelly
Title: Vice President &
General Counsel
HAAS WHEAT ADVISORY
PARTNERS INCORPORATED
By: /s/ Douglas D. Wheat
Name: Douglas D. Wheat
Title: President
EXHIBIT 10.79
19
Execution Copy
MASTER LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT, dated as of November 14th, 1996
("Agreement"), between SF Leasing L.L.C., a corporation with an
office at 300 Crescent Court, Suite 1700, Dallas, Texas, 75021
(hereinafter called, together with its successors and assigns, if
any, "Lessor"), and STELLA FOODS, INC., a Delaware corporation with
its mailing address and principal place of business at 25 Tri-State
International Office Center, Suite 250, Lincolnshire, Illinois
60069 ("Stella"), and METZ BAKING COMPANY, an Iowa corporation with
its mailing address and principal place of business at 520 Lake
Cook Rd., Suite 520, Deerfield, Illinois 60015, ("Metz"; Metz and
Stella are each individually referred to herein as a "Lessee" and
collectively as the "Lessees").
WITNESSETH:
I. LEASING:
(a) This Agreement shall be effective from and after the date
of execution hereof. Subject to the terms and conditions set forth
below, Lessor agrees to purchase from and lease to Stella, and
Stella agrees to sell to and lease from Lessor, the equipment
described in Annex A to any schedule hereto entered into from time
to time by Stella and Lessor (the "Stella Equipment"; and (ii)
Lessor agrees to purchase from and lease to Metz, and Metz agrees
to sell to and lease from Lessor, the equipment described in Annex
A to the schedules hereto entered into from time to time by Metz
and Lessor (the "Metz Equipment"; the Stella Equipment and the Metz
Equipment are collectively referred to herein as the "Equipment";
the schedules referred to above are collectively referred to as the
"Schedules"). Stella shall enter into those Schedules pursuant to
which Stella Equipment is sold to Lessor, and Metz shall enter into
those Schedules pursuant to which Metz Equipment is sold to Lessor.
Terms specified in a Schedule and not otherwise defined or
specified herein shall have the meanings ascribed to them in such
Schedule.
(b) The obligation of Lessor to purchase Equipment from
Lessees and to lease the same to Lessees as provided above, shall
be subject to receipt by Lessor, on or prior to the earlier of the
Lease Commencement Date (as defined below) of each of the following
documents in form and substance reasonably satisfactory to Lessor:
(i) a Schedule relating to the Equipment then to be leased
hereunder, (ii) a Bill of Sale, in the form of Annex B to the
applicable Schedule, in favor of Lessor, (iii) evidence of
insurance which complies with the requirements of Section IX, (iv)
a Premises Lease in the form of Annex F to the applicable Schedule
(each individually referred to as a "Premises Lease"), (v) a
Sublease (each individually referred to herein as a "Sublease") in
the form of Annex G to the applicable Schedule, and (vi) such other
documents as Lessor may reasonably request. Simultaneously with the
execution of the Bill of Sale, the relevant Lessee, shall also
execute a Certificate of Acceptance, in the form of Annex C to the
applicable Schedule, covering all of the Equipment described in the
Bill of Sale. Although the Stella Equipment will be leased to
Stella and the Metz Equipment will be leased to Metz, Metz and
Stella acknowledge that all financial obligations and
responsibilities of Stella and Metz hereunder with respect to all
Equipment shall be joint and several.
(c) Upon execution by the relevant Lessee of any Certificate
of Acceptance, the Equipment described thereon shall be deemed to
have been delivered to, and irrevocably accepted by, such Lessee
for lease hereunder.
II. TERM, RENT AND PAYMENT:
(a) The rent payable hereunder (the "Rent") and the relevant
Lessee's right to use the Equipment shall commence on the date of
execution by such Lessee of the Certificate of Acceptance for such
Equipment ("Lease Commencement Date"). The term (the "Term") of
this Agreement and for the initial Schedule executed hereunder (the
"Initial Schedule") shall commence on the Lease Commencement Date
for the Initial Schedule and, if this Agreement is executed in the
first day of any month, shall end on the last day of the forty-
eighth (48th) month thereafter, otherwise it shall end on the last
day of the forty-ninth (49th) month thereafter (the "Expiration
Date"). The Term of all other Schedules shall commence on the
Lease Commencement Date of such Schedule and shall end on the
Expiration Date.
(b) Rent shall be paid to Lessor by wire transfer of
immediately available funds to: any account as Lessor may direct
in writing and otherwise as provided in the applicable Schedule;
and shall be effective upon receipt. Payments of Rent shall be in
the amount set forth in, and due in accordance with, the provisions
of the applicable Schedule. In no event shall any Rent payments be
refunded to Lessees. If Rent is not paid within ten (10) days of
its due date, Lessees agree to pay a late charge of Five Cents
($0.05) per dollar on, and in addition to, the amount of such Rent,
but not exceeding the lawful maximum, if any. On the Lease
Commencement Date for each Schedule, Lessees shall pay to Lessor a
funding fee in an amount equal to 1.25% of the Capitalized Lessor's
Cost with respect to the Equipment described in such Schedule. All
payments due under this Agreement, whether or not specifically
denominated as Rent shall be collectible in the same manner as
Rent.
III. TAXES:
Lessees shall have no liability for taxes, fees, assessments
or the like imposed, assessed or levied by the United States of
America or any State or political subdivision thereof or against
Lessor which are on, measured by the net income or corporate
existence of Lessor. Except as provided above, Lessees shall
report (to the extent that it is legally permissible) and pay
promptly all other taxes, fees and assessments due, imposed,
assessed or levied against any Equipment (or the purchase,
ownership, delivery, leasing, possession, use or operation
thereof), this Agreement (or any rentals or receipts hereunder),
any Schedule, Lessor or Lessees by any foreign, federal, state or
local government or taxing authority during or related to the term
of this Agreement, including, without limitation, all license and
registration fees, and all sales, use, personal property, excise,
gross receipts, franchise, stamp or other taxes, imposts, duties
and charges, together with any penalties, fines or interest thereon
(all hereinafter called "Taxes") provided, however, Lessor will,
if requested by either Lessees, promptly provide to such Lessee the
Resale Exemption Certificates for the appropriate states that
relate to the purchase of the Equipment, and the relevant Lessee
will, if requested by Lessor, provide to Lessor the Manufacturer's
Exemption Certificates for the appropriate states. Lessees shall
(i) reimburse or pay Lessor upon receipt of written request for
reimbursement or payment for any Taxes charged to or assessed
against Lessor and paid by Lessor, provided Lessor shall provide
Lessees with written notice of any such charge or assessment
together with the notice relating thereto received by Lessor, (ii)
on request of Lessor, submit to Lessor written evidence of Lessees'
payment of Taxes, (iii) on all reports or returns show the
ownership of the Stella Equipment by Stella and ownership of the
Metz Equipment by Metz, and (iv) send a copy of all reports or
returns pertaining to personal property taxes to Lessor. Lessor
agrees that (i) Lessees, if permitted under applicable law, will
have the right to file for a refund of any such Taxes levied,
imposed or paid in the State of California or the State of Nebraska
with respect to any Equipment (or the purchase, ownership,
delivery, leasing, possession, use or operation thereof), (ii)
Lessor shall assist Lessees with respect to any such filing (made
at Lessee's cost and expense) including, but not limited to, making
the filing in either of Lessee's names, provided Lessees indemnify
Lessor therefor; and (iii) that, provided no Default exists
hereunder at the time the refund is received, Lessees shall have
the sole and exclusive right to any such refund received without an
additional increase in rent or payment of any nature to the Lessor.
If a Default exists as provided above, Lessor shall receive such
refund, and the refund shall be held until applied to any amounts
due from Lessees to Lessor.
IV. REPORTS:
(a) Lessees will notify Lessor in writing, within ten (10)
days after any tax or other lien shall attach to any Equipment, of
the full particulars thereof and of the location of such Equipment
on the date of such notification.
(b) Each Lessee's fiscal year is on a calendar year basis.
Lessees will deliver to Lessor, within ninety (90) days of the
close of each fiscal year of Lessee, the report on Form 10-K for
each of Specialty Foods Corporation ("SFC") and Specialty Foods
Acquisition Corporation ("SFAC"). Lessees will deliver to Lessor
quarterly, within forty-five (45) days of the close of each fiscal
quarter of Lessees, the report on Form 10-Q for each of SFC and
SFAC. Lessees will deliver to Lessor, as soon as available, but in
any event not later than 45 days after the end of each month in
each fiscal year of SFC, the unaudited consolidated and
consolidating balance sheets of SFC and its operating subsidiaries
(including Stella and Metz ) as at the end of each month and the
related unaudited (x) consolidated and consolidating statements of
operations of SFC and its operating subsidiaries (including Stella
and Metz ) for such month and the portion of the fiscal year
through the end of such month, and (y) statements of changes in
stockholder's equity and cash flows of SFC for the portion of the
fiscal year through the end of such month, certified by the chief
financial officer or controller of SFC as being fairly stated in
all material respects (subject to normal year-end audit
adjustments) (such balance sheets and statements, together with the
above-referenced reports on Form 10-K and Form 10-Q are
collectively referred to herein as the "Financial Statements"). In
addition, Lessees shall provide to Lessor the updated consolidated
financial projections of SFC on or before December 1 of each year,
or at any other time SFC is required to deliver or voluntarily
delivers such projections to the creditor under the Credit
Agreement (as hereinafter defined). All such financial statements
shall be complete and correct in all material respects and shall be
prepared in reasonable detail and (other than the financial
projections referred to above) in accordance with generally
accepted accounting principles ("GAAP") applied consistently
throughout the periods reflected therein and with prior periods
(except as approved by such accountants or officer, as the case may
be, and disclosed therein), except that the monthly financial
statements provided above shall only be consistent with GAAP in all
material respects and shall not be required to include footnotes.
(c) Lessees will permit Lessor to inspect the Equipment and
all maintenance and other records with respect thereto during
normal business hours upon reasonable notice.
(d) Lessees will keep the Equipment described on Equipment
Schedules at the Equipment Location (specified in the applicable
Schedule) within the Continental United States and will not move
any of the Equipment from the Equipment Location without the prior
written consent of Lessor, which consent shall not unreasonably be
withheld, conditioned or delayed. Upon Lessor's request, Lessees
promptly will notify Lessor in writing of the location of any
Equipment as of the date of such notification.
(e) Lessees will promptly and fully report to Lessor in
writing if any piece or unit of Equipment is lost or damaged and
the aggregate estimated replacement or repair costs would exceed
$100,000.
(f) Lessees will promptly and fully report to Lessor in
writing the occurrence of any Environmental Emission from any of
the Equipment which requires notice to any governmental entity
pursuant to Environmental Laws or which result in an Environmental
Claim.
(g) Lessees will notify Lessor of the occurrence of any
Default or event which, after the giving of notice or lapse of time
(or both) could become such a Default, promptly after senior
management becomes aware of such occurrence. For purposes of this
section, senior management shall be deemed to be each of Lessee's
Chief Executive Officer, Chief Operating Officer, and their direct
reports.
(h) Within forty-five (45) days after the close of each of
Lessee's fiscal quarter and, in addition, upon any request by
Lessor each Lessee will furnish a certificate of an authorized
officer of such Lessee stating that such officer has reviewed the
activities of such Lessee and that, to the best of such officer's
knowledge, there exists no Default (as hereinafter defined) or
event which, with the giving of notice or the lapse of time (or
both), would become a Default.
V. DELIVERY, USE AND OPERATION:
(a) The parties acknowledge that this transaction relating to
Equipment described on Equipment Schedules is a sale/leaseback
transaction, and that the Stella Equipment is in Stella's
possession as of the Lease Commencement Date and the Metz Equipment
is in Metz' possession as of the Lease Commencement Date.
(b) Lessees agree that the Equipment will be used by the
relevant Lessee solely in the conduct of its business and in a
manner complying in all material respects with all applicable
Federal, state, and local laws and regulations and any applicable
insurance policies and which does not result in any Environmental
Loss, and Lessees shall not discontinue use of the Equipment.
Lessees will allow only qualified personnel selected, employed
(directly or as independent contractors) and controlled by Lessees
to operate the Equipment.
(c) Lessees will keep the Equipment free and clear of all
liens and encumbrances other than (i) those which result from acts
of Lessor and (ii) liens for fees, taxes, levies, duties or other
governmental charges of any kind, liens of mechanics, materialmen,
laborers, employees or suppliers and similar liens arising by
operation of law incurred by either Lessee in the ordinary course
of business for sums that are not yet delinquent or are being
contested in good faith by negotiations or by appropriate
proceedings which suspend the collection thereof (provided,
however, that such proceedings do not involve any substantial
danger (as determined in Lessor's sole reasonable discretion) of
the sale, forfeiture or loss of the Equipment or any interest
therein). Lesse will defend, at its own expense, Lessor's interest
in the Equipment from such liens and encumbrances and will notify
Lessor immediately upon receipt of notice of any lien or
encumbrance.
VI. SERVICE:
(a) Stella will, at its sole expense, maintain each unit of
Stella Equipment in good operating order, repair, condition and
appearance in accordance with manufacturer's recommendations in all
material respects and consistent with and customary to industry
practice, normal wear and tear excepted. In addition, Stella will:
maintain the Stella Equipment in a similar manner and fashion as if
the Stella Equipment were owned by Stella; maintain the Equipment
under a preventive maintenance program by qualified personnel,
including Stella's employees who possess a working knowledge of the
mechanical operation of the Stella Equipment, including electrical
systems, motors, drives, controls, accessories, lubricants and all
other items necessary to make the machinery operate substantially
in accordance with its manufacturer's original specifications; have
any repairs made to the Stella Equipment in a professional and
workmanlike manner; have the Stella Equipment meet in all material
respects all local, state, and Federal laws, regulations and codes
that regulate the use and operation of such Equipment and will not
contribute to or be used in any way as to directly or indirectly
violate in any material respect any local, state or Federal law,
including Food and Drug Administration and Environmental Protection
Agency; and maintain a maintenance log on the Stella Equipment
showing all routine and non-routine maintenance and repairs. The
log shall list in summary form maintenance, repairs or
modifications performed on the Stella Equipment, the date of any
and all such service and by whom the service was performed. This
log shall be made available to the Lessor at its request during
normal working hours of Stella Foods, Inc. Stella shall, if at any
time reasonably requested by Lessor, affix in a prominent position
on each unit of Stella Equipment plates, tags or other identifying
labels showing the interest therein of Lessor.
(b) Metz will, at its sole expense, maintain each unit of
Metz Equipment in good operating order, repair, condition and
appearance in accordance with manufacturer's recommendations in all
material respects and consistent with and customary to industry
practice, normal wear and tear excepted. In addition, Metz will:
maintain the Metz Equipment in a similar manner and fashion as if
the Metz Equipment were owned by Metz; maintain the Metz Equipment
under a preventive maintenance program by qualified personnel,
including Metz' employees who possess a working knowledge of the
mechanical operation of the Metz Equipment, including electrical
systems, motors, drives, controls, accessories, lubricants and all
other items necessary to make the machinery operate substantially
in accordance with its manufacturer's original specifications; have
any repairs made to the Metz Equipment in a professional and
workmanlike manner; have the Metz Equipment meet in all material
respects all local, state, and Federal laws, regulations and codes
that regulate the use and operation of such Metz Equipment and will
not contribute to or be used in any way as to directly or
indirectly violate in any material respect any local, state or
Federal law, including Food and Drug Administration and
Environmental Protection Agency; and maintain a maintenance log on
the Metz Equipment showing all routine and non-routine maintenance
and repairs. The log shall list in summary form maintenance,
repairs or modifications performed on the Metz Equipment, the date
of any and all such service and by whom the service was performed.
This log shall be made available to the Lessor at its request
during normal working hours of Metz Baking Company. Metz shall, if
at any time reasonably requested by Lessor, affix in a prominent
position on each unit of Metz Equipment plates, tags or other
identifying labels showing the interest therein of Lessor.
(c) Neither Metz nor Stella, as the case may be, will,
without the prior consent of Lessor, which consent shall not be
unreasonably withheld, conditioned or delayed, affix or install any
accessory, equipment or device on any Stella Equipment or Metz
Equipment, as the case may be, if such addition will impair the
value, originally intended function or use of such Equipment. All
additions, repairs, parts, supplies, accessories, equipment, and
devices furnished, attached or affixed to any Equipment which are
not readily removable shall be made only in compliance in all
material respects with applicable law, shall be free and clear of
all liens, encumbrances or rights of others, and shall become the
property of Lessor. Neither Metz nor Stella, as the case may be,
will, without the prior written consent of Lessor (such consent
shall not be unreasonably delayed or withheld) and subject to such
conditions as Lessor may impose for its protection, affix or
install any Stella Equipment or Metz Equipment, as the case may be,
to or in any other personal or real property.
(d) Any alterations or modifications to the Equipment that
may, at any time during the term of this Agreement, be required to
comply with any applicable law, rule or regulation shall be made at
the expense of Lessees.
VII. STIPULATED LOSS VALUE:
Lessees shall promptly and fully notify Lessor in writing if
any unit of Equipment shall be or become worn out, lost, stolen,
destroyed, irreparably damaged in the reasonable determination of
Lessees, or permanently rendered unfit for use from any cause
whatsoever including, but not limited to, the exercise of eminent
domain or condemnation rights (such occurrences being hereinafter
called "Casualty Occurrences"). On the rental payment date next
succeeding a Casualty Occurrence (the "Payment Date"), Lessees
shall either (as selected by Lessees):
(a) replace the unit of Equipment having suffered the
Casualty Occurrence with equipment of comparable make and model,
having an equal or greater value, utility and remaining useful life
assuming that such Equipment has been maintained in accordance with
the provisions of this Agreement (as reasonably determined by
Lessor for all Equipment other than Equipment having an aggregate
value of less than $100,000), free and clear of all liens and
encumbrances, and shall deliver to Lessor a bill of sale, an
Equipment Schedule, such Uniform Commercial Code financing
statements or statements of amendment and such other documents,
instruments, filings and/or certificates as reasonably may be
required by Lessor with respect to such replacement Equipment; or
(b) pay Lessor the sum of (x) the Stipulated Loss Value of
such unit calculated in accordance with Annex D to the applicable
Schedule as of the rental payment date next preceding such Casualty
Occurrence ("Calculation Date"); and (y) all Rents, rental and
other amounts which are due hereunder as of the Payment Date. Upon
payment of all sums due hereunder, the Term of this lease as to
such unit shall terminate and (except in the case of the loss,
theft or complete destruction of such unit) Lessor shall be
entitled to recover possession of such unit.
VIII. LOSS OR DAMAGE:
Lessees hereby assume and shall bear the entire risk of any
loss, theft, damage to, or destruction of, any unit of Equipment
from any cause whatsoever unless caused by the gross negligence or
willful misconduct of Lessor.
IX. INSURANCE:
Lessees agree, at their own expense, to keep all Equipment
insured for such amounts as specified in Paragraph D of the
applicable Equipment Schedule and against such hazards as are
customary in industry practice, including, but not limited to,
insurance for damage to or loss of such Equipment and liability
coverage for personal injuries, death or property damage, with
Lessor named as additional insureds and, stating that said
insurance is primary to any other valid and collectible insurance
available to Lessor and, only with respect to property insurance
and boiler and machinery coverage, with a loss payable clause
solely in favor of Lessor (provided the proceeds therefrom shall be
distributed in accordance with the terms of this Agreement), as its
interest may appear, irrespective of any breach of warranty or
other act or omission of Lessees. The limits of liability for said
policies and additional provisions required for said policies are
listed in the applicable Equipment Schedule and are to be complied
with by Lessee. All such policies shall contain terms which are
customary in the industry and shall be with companies reasonably
satisfactory to Lessor provided any insurer with a rating of B+ or
better from A. M. Best shall be satisfactory to Lessor. Lessees
agree to deliver to Lessor evidence of insurance reasonably
satisfactory to Lessor. No insurance shall be subject to any
co-insurance clause. Upon and during the continuance of a Default
Lessees appoint Lessor as Lessees' attorney-in-fact to make proof
of loss and claim for insurance, and to make adjustments with
insurers and to receive payment of and execute or endorse all
documents, checks or drafts in connection with payments made as a
result of such insurance policies; otherwise Lessees shall be
responsible for such matters. In the event Lessor is responsible
for such matters, any documented expense of Lessor in adjusting or
collecting insurance shall be borne by Lessees, including any
deductible assessment. Lessees will not make adjustments with
insurers except (i) with respect to claims for damage to any unit
of Equipment where the repair costs do not exceed $200,000, or (ii)
with Lessor's written consent (which consent shall not be
unreasonably withheld, conditioned or delayed). Said policies
shall provide that the insurance may not be altered or canceled by
the insurer until after thirty (30) dayswritten notice to Lessor.
Upon and during the continuance of a Default Lessor may, at its
option, apply proceeds of insurance, in whole or in part, to (i)
repair or replace Equipment or any portion thereof, or (ii) satisfy
any obligation of Lessees to Lessor hereunder; otherwise, the
insurance proceeds received as a result of a Casualty Occurrence
shall be applied as directed by Lessees in accordance with Section
VII hereof either to Lessee's obligations to make the payments
contemplated by subsection (b) or to reimburse Lessee for the costs
of any replacement or repair.
X. RETURN OF EQUIPMENT:
(a) Upon any expiration or termination of this Agreement or
any Schedule, Lessees shall promptly, at their own cost and
expense: (i) perform any testing and repairs required to place the
affected units of Equipment in the same condition and appearance as
when received by Lessees (reasonable wear and tear excepted) and in
good working order for their originally intended purpose; (ii) if
deinstallation, disassembly or crating is required, cause such
units to be deinstalled, disassembled and crated by an authorized
manufacturer's representative or such other service person as is
reasonably satisfactory to Lessor; (iii) return such units, free
and clear of all liens and encumbrances, to a location anywhere
within a two hundred and fifty (250) mile radius of the location
where the Equipment is, as Lessor shall direct; and (iv) satisfy
the requirements of Annex E to the applicable Schedule.
(b) Until Lessees have fully complied with the requirements
of Paragraph (a) above, Lessees' Rent payment obligation and all
other obligations under this Agreement shall continue from month to
month notwithstanding any expiration or termination of the Term.
Lessor may terminate such continued leasehold interest upon ten
(10) days' notice to Lessees. In addition to these rents, Lessor
shall have all of its other rights and remedies available as a
result of this nonperformance.
(c) Lessee hereby waives all claims for damage or liability
in connection with Lessor's entry onto any premises where Equipment
is located to take possession of the Equipment, except to the
extent caused soley by the gross negligence or willful misconduct
of Lessor.
Xl. DEFAULT:
(a) Lessor may in writing declare this Agreement in default
("Default") if: (1) Lessees breach their obligation to pay Rent or
any other sum when due; (2) Lessees breach any of their insurance
obligations under Section IX hereof and (3) Lessees breach any of
their other obligations hereunder and fails to cure that breach
within thirty (30) days after written notice thereof or Lessees
breach any of their obligations under any Premises Lease or
Sublease executed between Lessor and either Lessee from time to
time, and Lessees fail to cure such breach before the expiration of
the applicable cure or grace periods; (4) any representation or
warranty made by either Lessee in connection with this Agreement
shall be false or misleading in any material respect; (5) either
Lessee becomes insolvent or ceases to do business as a going
concern; (6) a petition is filed by or against either Lessee under
any bankruptcy or insolvency laws and, if such petition is filed
against either Lessee, such petition is not dismissed within forty-
five (45) days; (7) either Lessee shall have terminated its
corporate existence, consolidated with, merged into, or conveyed or
leased substantially all of its assets as an entirety to any person
(such actions being referred to as an "Event") unless Lessees
provide Lessor thirty (30) days' prior written notice of such Event
and on or prior to such Event: (x) such person is organized and
existing under the laws of the United States or any state, and
executes and delivers to Lessor an agreement containing an
effective assumption by such person of the due and punctual
performance of this Lease; and (y) Lessor is reasonably satisfied
as to the creditworthiness of such person; (8) there occurs a
default after expiration of any applicable cure periods under any
guaranty executed in connection with this Agreement; (9) if SFC is
in default under the Term Loan Agreement dated as of July 17, 1995,
as amended, or any replacement or refinancing of such credit
agreement (collectively, the "Credit Agreement"), and the creditor
thereunder has accelerated the obligations thereunder, or if either
Lessee is in default under any obligation in excess of $10,000,000
for borrowed money, for the deferred purchase price of property or
any lease agreement and the creditor thereunder has
accelerated the obligations thereunder; or (10) either Lessee
ceases to be a wholly-owned subsidiary of SFC. Any default under
the terms of this or any other agreement between Lessor and either
Lessee may be declared by Lessor a default under this and any such
other agreement. Any provision of this Agreement to the contrary
notwithstanding, Lessor may exercise all rights and remedies
hereunder independently with respect to each Schedule, but a
declaration of Default shall apply to all Schedules except as
specifically excepted by Lessor. Lessees acknowledge that a
default in or failure to comply with any of its obligations under
the Agreement by either Lessee shall be deemed a default or failure
by both Lessees. Each Lessee hereby waives any requirement that a
notice from Lessor not become effective until a period of days has
elapsed.
(b) After Default and during the continuance thereof, at the
request of Lessor, Lessees shall comply with the provisions of
Section X(a) hereof. After Default and during the continuance
thereof, Lessees hereby authorizes Lessor to enter, with or without
legal process, any premises where any Equipment is located and take
possession thereof in accordance with applicable law. After
Defaultand during the continuance thereof, Lessees shall, without
further demand, forthwith pay to Lessor (i) as liquidated damages
for loss of a bargain and not as a penalty, the Stipulated Loss
Value of the Equipment (calculated in accordance with Annex D to
the applicable Schedule(s) as of the Rent Payment Date next
preceding the declaration of default), and the Make Whole Amount
and (ii)all Rent and other sums then due hereunder. Lessor may,
but shall not be required to, sell the Equipment at private or
public sale, in bulk or in parcels, with or without notice, and
without having the Equipment present at the place of sale; or
Lessor may, but shall not be required to, lease, otherwise dispose
of or keep idle all or part of the Equipment; and Lessor may use
the relevant Lessee's premises, subject to the Premises Lease, for
any or all of the foregoing without liability for rent, costs,
damages or otherwise. The proceeds of sale, lease or other
disposition, if any, shall be applied in the following order of
priorities: (1) to pay all of Lessor's costs, charges and expenses
incurred in taking, removing, holding, repairing and selling,
leasing or otherwise disposing of Equipment; then, (2) to the
extent not previously paid by Lessees, to pay Lessor all sums due
from Lessees hereunder then, (3) to reimburse to Lessees any sums
previously paid by Lessees as liquidated damages; and (4) any
surplus shall be retained by Lessor. Lessees shall pay any
deficiency in clauses (1) and (2) forthwith.
(c) In addition to the foregoing rights, after Default and
during the continuance thereof Lessor may cancel the lease as to
any or all of the Equipment.
(d) Separate suits may be brought to collect any damages for
any periods, and such suits shall not in any manner prejudice
Lessor's right to collect any such damages for any subsequent
period, or Lessor may defer any such suits until after the
expiration of the Term, in which event the right to bring the suits
shall not be deemed to have occurred until the end of the Term.
(e) Upon Default and during the continuance thereof, Lessor
may, as a matter of right and without notice to Lessee and without
regard to the value of the Equipment or the solvency of Lessees,
apply to any court having jurisdiction to appoint a receiver or
receivers of the Equipment. Any such receiver shall have all of
the usual powers of receivers in similar cases, all of the powers
and duties of Lessor in case of entry, and shall continue to have
such powers until confirmation of the sale of the Equipment, unless
such receivership is sooner terminated.
(f) The foregoing remedies are cumulative, and any or all
thereof may be exercised in lieu of or in addition to each other or
any remedies at law, in equity, or under statute. Lessees waive
notice of sale or other disposition (and the time and place
thereof), and the manner and place of any advertising. If
permitted by law, Lessees shall pay reasonable attorney's fees
actually incurred by Lessor in enforcing the provisions of this
Lease, the Premises Leases and Subleases and any ancillary
documents. Waiver of any Default shall not be a waiver of any
other or subsequent default.
XII. ASSIGNMENT:
(a) LESSEES SHALL NOT ASSIGN, MORTGAGE, SUBLET OR
HYPOTHECATE ANY EQUIPMENT OR THE INTEREST OF EITHER LESSEE
HEREUNDER WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR (SUCH CONSENT
SHALL NOT BE UNREASONABLY DELAYED OR WITHHELD).
(b) Lessor may, without the consent of either Lessee, assign
this Agreement or any Schedule, or the right to enter into any
Schedule. Lessees agrees that they will, jointly and severally,
pay all Rent and other amounts payable under each Schedule to the
Lessor named therein; provided, however, if Lessees receive written
notice of an assignment from Lessor, Lessees will pay all Rent and
other amounts payable under any assigned Schedule to such assignee
or as instructed by Lessor. Each Schedule, incorporating by
reference the terms and conditions of this Agreement, constitutes a
separate instrument of lease, and the Lessor named therein or its
assignee shall have all rights as "Lessor" thereunder separately
exercisable by such named Lessor or assignee as the case may be,
exclusively and independently of Lessor or any assignee with
respect to other Schedules executed pursuant hereto. Without
limiting the generality of the foregoing, the grant of the security
interest in Section XVII hereof, shall as it relates to the
Equipment leased under each Schedule (and to the proceeds and other
collateral referred to in Section XVII), be deemed to have been
granted solely to the Lessor named therein or to its assignee, as
applicable and such Equipment (and other related collateral) shall
not be deemed to collateralize Lessee's obligations under any of
the Schedules to which such named Lessor or assignee, as the case
may be, is not a party. Lessees further agree to confirm in writing
receipt of a notice of assignment as reasonably may be requested by
assignee. Lessees hereby waive and agree not to assert against any
such assignee any defense, set-off, recoupment claim or
counterclaim which Lessees have or may at any time have against
Lessor or any other person for any reason whatsoever.
Notwithstanding the foregoing, Lessees hereby reserve its right to
bring any such defense, set-off, recoupment claim or counterclaim
in a separate cause of action against the originally named Lessor.
(c) Subject always to the foregoing, this Agreement inures to
the benefit of, and is binding upon, the successors and assigns of
the parties hereto.
XIII. NET LEASE; NO SET-OFF, ETC.:
This Agreement is a net lease. Lessees' obligation to pay
Rent and other amounts due hereunder shall be absolute and
unconditional. Lessees shall not be entitled to any abatement or
reductions of, or set-offs against, said Rent or other amounts,
including, without limitation, those arising or allegedly arising
out of claims (present or future, alleged or actual, and including
claims arising out of strict tort or negligence of Lessor) of
Lessees against Lessor under this Agreement or otherwise. This
Agreement shall not terminate and the obligations of Lessees shall
not be affected by reason of any defect in or damage to, or loss of
possession, use or destruction of, any Equipment from whatsoever
cause. It is the intention of the parties that Rents and other
amounts due hereunder shall continue to be payable in all events in
the manner and at the times set forth herein unless the obligation
to do so shall have been terminated pursuant to the express terms
hereof.
XIV. INDEMNIFICATION:
(a) Lessees, jointly and severally, hereby agree to defend,
indemnify, save and keep harmless Lessor and its affiliates and any
of their shareholders, directors, and officers, and any of their
its agents, employees, successors and assigns (hereinafter referred
to as "Indemnified Party"), from and against any and all losses,
damages, penalties, injuries, claims, actions and suits, including
reasonable legal expenses, of whatsoever kind and nature, in
contract or tort, whether caused solely by the active or passive
negligence, partial or sole negligence of Indemnified Party or
otherwise, (but excluding gross negligence or willful misconduct,
except as respects claims involving Lessees' employees and
employees of any subsidiary of Lessee), and including, but not
limited to, any Indemnified Party's strict liability in tort,
arising out of (i) the selection, manufacture, purchase, acceptance
or rejection of Equipment, the ownership of Equipment during the
Term, and the delivery, lease, possession, maintenance, uses,
condition, return or operation of the Equipment (including, without
limitation, latent and other defects, whether or not discoverable
by any Indemnified Party or Lessees and any claim for patent,
trademark or copyright infringement or environmental damage), or
(ii) the condition of Equipment sold or disposed of after use by
Lessees, any sublessee or employees of Lessees.
(b) Lessees shall defend, indemnify and hold harmless any
Indemnified Party from and against any Environmental Claim or
Environmental Loss arising during the Term of this Agreement or the
ownership of the Equipment thereafter or arising after the Term of
this Agreement but allegedly resulting from actions or omissions
during the Term of this Agreement, even if the Environmental Claim
or Environmental Loss is caused in whole or in party by any
Indemnified Party. Unless Lessees are then contesting in good
faith such Environmental Claim or Environmental Loss. or such
Lessee has set aside on its books appropriate reserves therefor,
Lessees shall fully and promptly pay, perform and discharge any
such Environmental Claim or Environmental Loss Nothwithstanding
the foregoing, Lessees shall have no such indemnification
obligations to the extent such Environmental Claim or
Environemental Loss was caused solely by any Indemnified Party's
gross negligence or willful misconduct.
(c) All of the Indemnified Party's rights, privileges
and indemnities contained in this Section (including, but not
limited to, those which arise during or are accrued with respect to
the Term) shall survive the expiration or other termination of
this Agreement and the rights, privileges and indemnities contained
herein are expressly made for the benefit of, and shall be
enforceable by the Indemnified Party and its successors and
assigns.
XV. DISCLAIMER:
LESSEES ACKNOWLEDGE THAT IT HAS SELECTED THE EQUIPMENT WITHOUT
ANY ASSISTANCE FROM LESSOR, ITS AGENTS OR EMPLOYEES. LESSOR DOES
NOT MAKE, HAS NOT MADE, NOR SHALL IT BE DEEMED TO MAKE OR HAVE
MADE, ANY WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED,
WRITTEN OR ORAL, WITH RESPECT TO THE EQUIPMENT LEASED HEREUNDER OR
ANY COMPONENT THEREOF, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY
AS TO DESIGN, COMPLIANCE WITH SPECIFICATIONS, QUALITY OF MATERIALS
OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE, USE OR
OPERATION, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR
TITLE. All such risks, as between Lessor and Lessees, are to be
borne by Lessees. Without limiting the foregoing, Lessor shall
have no responsibility or liability to Lessees or any other person
with respect to any of the following (i) any liability, loss or
damage caused or alleged to be caused directly or indirectly by any
Equipment, any inadequacy thereof, any deficiency or defect (latent
or otherwise) therein, or any other circumstance in connection
therewith; (ii) the use, operation or performance of any Equipment
or any risks relating thereto; (iii) any interruption of service,
loss of business or anticipated profits or consequential damages;
or (iv) the delivery, operation, servicing, maintenance, repair,
improvement or replacement of any Equipment, except to the extent
caused by the gross negligence or willful misconduct of Lessor or
any third party after the expiration of the Term. If, and so long
as, no Default exists under this Lease, Lessees shall be, and
hereby are, authorized during the Term of this Lease to assert and
enforce, at Lessees' sole cost and expense, from time to time, in
the name of and for the account of Lessor and/or Lessees, as their
interests may appear, whatever claims and rights Lessor or any
Lessee may have against any Supplier of the Equipment.
In the event the Lessees receive any amounts with respect to
any such claim against any Supplier, and such loss relates to an
impairment of the value of or damage to the Equipment, to the
extent such loss relates to such impairment or loss, Lessees shall
promptly apply such funds to repair, maintain or replace the
Equipment, and to the extent not so applied, remit such funds to
Lessor. To the extent the proceeds received from the Supplier do
not relate to the impairment of the value of or damage to the
Equipment, such proceeds shall be retained by Lessees.
XVI. REPRESENTATIONS AND WARRANTIES OF LESSEE:
Stella and Metz each hereby represents and warrants to Lessor
that on the date hereof and on the date of execution of each
Schedule:
(a) it has full corporate power and capacity to enter into,
and perform under, this Agreement and all related documents
(together, the "Documents") and is duly qualified to do business
wherever necessary to carry on its present business and operations,
and in the jurisdiction(s) where the Equipment is or is to be
located.
(b) the Documents have been duly authorized, executed and
delivered by it and constitute valid, legal and binding agreements,
enforceable in accordance with their terms, except to the extent
that the enforcement of remedies therein provided may be limited
under applicable bankruptcy, insolvency, reorganization and
moratorium laws or similar laws affecting creditors' rights or
remedies and equitable defenses or principles, regardless of
whether a proceeding is sought in equity or in law.
(c) no approval, consent or withholding of objections is
required from any governmental authority or instrumentality with
respect to the entry into or performance by it of the Documents
except such as have already been obtained.
(d) entry into and performance of the Documents will not:
(i) violate any judgment, decree, order, law or regulation
applicable to any Lessee or any provision of any Lessee's articles
of incorporation, charter or by-laws; or (ii) result in any breach
of, constitute a default under or result in the creation of any
lien, charge, security interest or other encumbrance pursuant to
any indenture, mortgage, deed of trust, bank loan or credit
agreement or other agreement or instrument (other than this
Agreement) to which any Lessee is a party.
(e) there are no suits or proceedings pending or threatened
in court or before any commission, board or other administrative
agency against or affecting it, which is reasonably likely to have
a material adverse effect on the ability of any Lessee to fulfill
its obligations under this Agreement.
(f) the Equipment accepted by it under any Certificate of
Acceptance is and will remain tangible personal property which
shall not by annexation or otherwise become part of any real
property.
(g) each of the Financial Statements delivered to Lessor has
been prepared in accordance with GAAP consistently applied except
as expressly provided otherwise herein, and since the date of the
most recent Financial Statement, there has been no material adverse
change.
(h) each Lessee is and will be at all times validly existing
and in good standing under the laws of the state of its
incorporation (specified in the first sentence of this Agreement).
(I) the Equipment it leases will at all times be used for
commercial or business purposes.
(j) immediately prior to the sale contemplated by this
Agreement, it is the owner of the Equipment which it is selling to
Lessor pursuant to this Agreement.
(k) the Equipment is free and clear of all liens, claims and
encumbrances, except for those which arise by operation of law.
(l) to the best of its knowledge, with due inquiry, there
have been no Environmental Emissions from any of the Equipment
which has resulted in an Environmental Loss.
(m) it has operated and maintained the Equipment in
compliance in all material respects with all applicable
Environmental Laws.
(n) no software, copyright or patent is necessary to operate
the Equipment in the normal course of business.
(o) except as disclosed in the applicable Schedule, the
premises where the Equipment is located is owned by the relevant
Lessee and it is not subject to any mortgage.
XVII. OWNERSHIP FOR TAX PURPOSES; GRANT OF SECURITY INTEREST;
USURY SAVINGS:
(a) For income tax purposes, Lessor will treat Stella as
owner of the Stella Equipment and Metz as the owner of the Metz
Equipment. Accordingly, Lessor agrees (i) to treat Stella as owner
of the Stella Equipment and Metz as the owner of Metz Equipment on
its federal income tax return, (ii) not to take actions or
positions inconsistent with such treatment on or with respect to
its federal income tax return, and not claim any tax benefits
available to an owner of the Equipment on or with respect to its
federal income tax return. The foregoing undertakings by Lessor
shall not be violated by Lessor's taking a tax position through
inadvertence so long as such inadvertent tax position is reversed
by Lessor promptly upon its discovery. Lessor shall in no event be
liable to Lessees if either Lessee fails to secure any of the tax
benefits available to the owner of the Equipment.
(b) In order to secure the prompt payment of the Rent and all
of the other amounts from time to time outstanding under and with
respect to this Agreement and the Schedules, and the performance
and observance by Lessees of all the agreements, covenants and
provisions thereof (including, without limitation, all of the
agreements, covenants and provisions of the Lease that are
incorporated therein), Stella (with respect to the Stella
Equipment) and Metz (with respect to the Metz Equipment) hereby
grant to Lessor a first priority security interest in such
Equipment leased under the Schedules, together with all additions,
attachments, accessions, accessories and accessions thereto whether
or not furnished by the supplier of the Equipment and any and all
substitutions, replacements or exchanges therefor, in each such
case in which the relevant Lessee shall from time to time acquire
an interest and any and all insurance and/or other proceeds of the
property in and against which a security interest is granted
hereunder.
As soon as practicable, Lessee shall provide to Lessor a
Uniform Commercial Code lien search report with respect to the
Equipment described on each Schedule. If such report reflects a
financing statement or other lien with respect to the Equipment
described on such Schedule, then Lessee shall cause such third
party interest in the Equipment to be released of record in the
applicable Uniform Commerical Code filing officer(s) within seven
days of notice thereof.
(c) It is the intention of the parties hereto to comply with
any applicable usury laws to the extent that any Schedule is
determined to be subject to such laws; accordingly, it is agreed
that, notwithstanding any provision to the contrary in any
Schedule or the Lease, in no event shall any Schedule require the
payment or permit the collection of interest in excess of the
maximum amount permitted by applicable law. If any such excess
interest is contracted for, charged or received under any Schedule
or the Lease, or in the event that all of the principal balance
shall be prepaid, so that under any of such circumstances the
amount of interest contracted for, charged or received under any
Schedule or the Lease shall exceed the maximum amount of interest
permitted by applicable law, then in such event (1) the provisions
of this paragraph shall govern and control, (2) neither Stella,
Metz nor any other person or entity now or hereafter liable for the
payment hereof shall be obligated to pay the amount of such
interest to the extent that it is in excess of the maximum amount
of interest permitted by applicable law, (3) any such excess which
may have been collected shall be either applied as a credit against
the then unpaid principal balance or refunded to Lessees, at the
option of the Lessor, and (4) the effective rate of interest shall
be automatically reduced to the maximum lawful contract rate
allowed under applicable law as now or hereafter construed by the
courts having jurisdiction thereof. It is further agreed that
without limitation of the foregoing, all calculations of the rate
of interest contracted for, charged or received under any Schedule
or the Lease which are made for the purpose of determining whether
such rate exceeds the maximum lawful contract rate, shall be made,
to the extent permitted by applicable law, by amortizing,
prorating, allocating and spreading in equal parts during the
period of the full stated term of the indebtedness evidenced
hereby, all interest at any time contracted for, charged or
received from either Lessee or otherwise by Lessor in connection
with such indebtedness; provided, however, that if any applicable
state law is amended or the law of the United States of America
preempts any applicable state law, so that it becomes lawful for
Lessor to receive a greater interest per annum rate than is
presently allowed, Lessees agrees that, on the effective date of
such amendment or preemption, as the case may be, the lawful
maximum hereunder shall be increased to the maximum interest per
annum rate allowed by the amended state law or the law of the
United States of America (but not in excess of the interest rate
contemplated hereunder).
XVIII. END OF LEASE OPTIONS:
(a) Upon the expiration of the Term hereunder and provided
that Lessees are not then in Default under this Agreement, Lessees
shall have the right to purchase all but not less than all of the
Equipment upon the following terms and conditions:
If Lessees desire to exercise this option, Lessees shall pay to
Lessor on the last day of the Term , in addition to the scheduled
Rent (if any) then due on such date and all other sums then due
hereunder, the purchase price for the Equipment, determined as
hereinafter provided. The purchase price of the Equipment shall be
an amount equal to the Fixed Purchase Price of such Equipment (as
specified on the relevant Schedules), plus all taxes and charges
upon sale and all other reasonable and documented expenses incurred
by Lessor in connection with such sale. Upon satisfaction of the
conditions specified in this Paragraph, Lessor will transfer all of
Lessor's interest in and to the Equipment to Stella and/or Metz, as
directed by Lessees in writing, on an AS IS, WHERE IS BASIS,
without recourse or warranty, express or implied, of any kind
whatsoever. Lessor shall not be required to make and may
specifically disclaim any representation or warranty as to the
condition of such Equipment and other matters (except that Lessor
shall warrant that it has conveyed whatever interest it received
from Lessees in the Equipment free and clear of any lien or
encumbrance created by, through or under Lessor). Lessor shall
execute and deliver to Lessee such Uniform Commercial Code
Statements of Termination as reasonably may be required in order to
terminate any interest of Lessor in and to the Equipment so
purchased, at Lessees' sole cost and expense. If the Equipment is
not so purchased, it shall be returned pursuant to Paragraph (b) of
this Section.
(b) Return. Upon the expiration of the Term, if the
Equipment is not purchased as provided in Paragraph (a) of this
Section, Lessees shall return all of the Equipment to Lessor upon
the following terms and conditions. Lessees shall (i) pay to
Lessor on the last day of the Term, in addition to the scheduled
Rent then due on such date and all other sums then due hereunder, a
terminal rental adjustment amount equal to the Fixed Purchase Price
of the Equipment, and (ii) return such Equipment to Lessor in
accordance with Section X hereof. Thereafter, upon return of all
of the Equipment , Lessor and Lessees shall arrange for the
commercially reasonable sale, scrap or other disposition of the
Equipment. Upon satisfaction of the conditions specified in this
Paragraph (b), Lessor will transfer to the buyer, on an AS IS,
WHERE IS BASIS, without recourse or warranty, express or implied,
of any kind whatsoever, all of Lessor's interest in and to the
Equipment. Lessor shall not be required to make and may
specifically disclaim any representation or warranty as to the
condition of the Equipment and other matters (except that Lessor
shall warrant that it has conveyed whatever interest it received in
the Equipment from Lessees free and clear of any liens or
encumbrances created by, through or under Lessor). Lessor shall
execute and deliver to Lessees such Uniform Commercial Code
Statements as reasonably may be required in order to terminate any
interest of Lessor in and to the Equipment at Lessees' sole cost
and expense. Upon the sale, scrap or other disposition of such
Equipment, the net sales proceeds with respect to the Equipment
sold will be paid to, and held and applied by, Lessor as follows:
Lessor shall promptly thereafter pay to Lessees an amount equal to
the Residual Risk Amount (as specified in the relevant Schedule) of
the Equipment (less all reasonable and documented costs, fees and
expenses, including storage, reasonable and necessary maintenance
and other remarketing fees incurred by Lessor in connection with
the sale, scrap, or disposition of the Equipment) plus all net
proceeds, if any, of such sale in excess of the Residual Risk
Amount of such Equipment and applicable taxes, if any. Such
payment, if any, shall be allocated between Lessees as directed by
Lessees in writing. In the process of the sale of the Equipment,
Lessor will use commercially reasonable efforts to obtain the
highest cash bids for the Equipment, it being understood that
Lessees are the sole beneficiaries in the event the net proceeds
from the sale exceed the Fixed Purchase Price, and that Lessees
bear the primary loss in the event the Fixed Purchase Price exceeds
the net proceeds therefrom.
(c) Notice of Election. Lessees shall give Lessor
written notice of its election of the options specified in this
Section not less than one hundred eighty (180) days nor more than
three hundred sixty-five (365) days before the expiration of the
Term. If Lessees fail timely to provide such notice with respect
to its options at the end of the Term, without further action
Lessees automatically shall be deemed to have elected to purchase
all of the Equipment pursuant to Paragraph (a) of this Section.
XIX. MISCELLANEOUS:
(a) LESSEES HEREBY UNCONDITIONALLY WAIVE ITS RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF,
DIRECTLY OR INDIRECTLY, THIS LEASE, ANY OF THE RELATED DOCUMENTS,
ANY DEALINGS BETWEEN LESSEES AND LESSOR RELATING TO THE SUBJECT
MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE
RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN LESSEES AND LESSOR.
The scope of this waiver is intended to be all encompassing of any
and all disputes that may be filed in any court (including, without
limitation, contract claims, tort claims, breach of duty claims,
and all other common law and statutory claims). THIS WAIVER IS
IRREVOCABLE AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LEASE,
ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS
RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. In the
event of litigation, this Agreement may be filed as a written
consent to a trial by the court.
(b) Any cancellation or termination by Lessor, pursuant to
any provision of this Agreement, any Schedule, supplement or
amendment hereto, or the lease of any Equipment hereunder, shall
not release Lessees from any then outstanding obligations to Lessor
hereunder.
(c) Subject to Section XVII, all Equipment shall at all
times remain personal property of Lessor regardless of the degree
of its annexation to any real property and shall not by reason of
any installation in, or affixation to, real or personal property
become a part thereof. Lessees shall obtain and deliver to Lessor
(to be recorded at Lessees' expense) from any person having an
interest in the property where the Equipment is to be located,
waivers of any lien, encumbrance or interest which such person
might have or hereafter obtain or claim with respect to the
Equipment.
(d) Time is of the essence of this Agreement. Lessor's
failure at any time to require strict performance by Lessees of any
of the provisions hereof shall not waive or diminish Lessor's right
thereafter to demand strict compliance therewith.
(e) Lessees agree, upon Lessor's request, to execute any
instrument necessary or expedient for filing, recording or
perfecting the interest of Lessor hereunder or under the Premises
Lease and to carry out the intent and purpose of this Agreement and
the Premises Lease.
(f) All notices required to be given hereunder shall be in
writing, personally delivered, delivered by overnight courier
service, sent by facsimile transmission (with confirmation of
receipt), or sent by certified mail, return receipt requested,
addressed to the other party at its respective address stated above
or at such other address as such party shall from time to time
designate in writing to the other party; and shall be effective
from the date of receipt.
(g) This Agreement and any Schedule and Annexes thereto
constitute the entire agreement of the parties with respect to the
subject matter hereof. NO VARIATION OR MODIFICATION OF THIS
AGREEMENT OR ANY WAIVER OF ANY OF ITS PROVISIONS OR CONDITIONS,
SHALL BE VALID UNLESS IN WRITING AND SIGNED BY AN AUTHORIZED
REPRESENTATIVE OF THE PARTIES HERETO. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(h) The representations, warranties and covenants of Lessees
herein shall be deemed to survive the closing hereunder. Lessor's
obligations to acquire specific items of Equipment shall be
conditioned upon Lessees providing to Lessor such information with
respect to each Lessee's financial condition as Lessor may
reasonably require, and Lessor being satisfied that there shall
have been no material adverse change in the business or financial
condition of Lessee from the date of execution hereof. The
obligations of Lessees under Sections III, X, and XIV which accrue
during the term of this Agreement and obligations which by their
express terms survive the termination of this Agreement, shall
survive the termination of this Agreement.
(i) In case of a failure of Lessees to comply with any
provision of this Agreement, Lessor shall have the right, but shall
not be obligated, to effect such compliance, in whole or in part,
provided that Lessor has provided either Lessee three (3) business
days' prior written notice of its intention to effect such
compliance prior to Lessor's exercise of this right unless Lessor
determines that Lessees' failure materially and adversely affects
the value or utility of the Equipment or Lessor's rights and
interests therein or available remedies. All moneys spent and
expenses and obligations incurred or assumed by Lessor in effecting
such compliance (together with interest thereon at the rate
specified in Paragraph (j) of this Section) shall constitute
additional Rent due to Lessor within five (5) days after the date
Lessor sends notice to either Lessee requesting payment. Lessor's
effecting such compliance shall not be a waiver of Lessee's
default.
(j) Any Rent or other amount not paid to Lessor when due
hereunder shall bear interest, both before and after any judgment
or termination hereof, at the lesser of eighteen percent (18%) per
annum or the maximum rate allowed by law.
(k) Any provisions in this Agreement and any Schedule which
are in conflict with any statute, law or applicable rule shall be
deemed omitted, modified or altered to conform thereto.
(I) So long as no Default shall have occurred and be
continuing hereunder, and conditioned upon Lessees performing all
of the covenants and conditions hereof, as to claims of Lessor or
persons claiming under Lessor, Lessees shall peaceably and quietly
hold, possess and use the Equipment during the Term of this
Agreement subject to the terms and conditions hereof.
(m) Whether or not any Equipment is leased hereunder,
Lessees shall pay (i) upon execution of the Initial Schedule and
(ii) thereafter upon demand as additional Rent hereunder all
reasonable documented transaction expenses including, but not
limited to, expenses of counsel, due diligence, appraisals, lien
searches, Uniform Commercial Code and/or Estoppel/Waiver Agreement
and/or Lease Option Agreement or premises lease filing fees, and
field audits and (iii) all reasonable costs and expenses, including
expenses of counsel, incurred in connection herewith or the
enforcement of any provision hereof or any related agreement.
XX. CHOICE OF LAW; JURISDICTION:
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS
(WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE),
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE,
REGARDLESS OF THE LOCATION OF THE EQUIPMENT. The parties agree
that any action or proceeding arising out of or relating to this
Agreement may be commenced in any United States District Court in
the State of Illinois.
XXI. CHATTEL PAPER:
To the extent that any Schedule would constitute chattel
paper, as such term is defined in the Uniform Commercial Code as in
effect in any applicable jurisdiction, no security interest therein
may be created through the transfer or possession of this Agreement
in and of itself without the transfer or possession of the original
of a Schedule executed pursuant to this Agreement and incorporating
this Agreement by reference; and no security interest in this
Agreement and a Schedule may be created by the transfer or
possession of any counterpart of the Schedule other than the
original thereof, which shall be identified as the document marked
"Original" and all other counterparts shall be marked "Duplicate".
XXII. EARLY PURCHASE OPTION:
Lessees may, so long as no Default exists hereunder, at any
time during the Term, elect to purchase all (but not less than all)
of the Equipment described on all Schedules executed hereunder as
of a Rent Payment Date ("Early Purchase Date") upon at least ten
(10) days' prior written irrevocable notice to Lessor.
If Lessees elect to purchase the Equipment as provided above,
on the Early Purchase Date, Lessees shall pay to Lessor the
purchase price for the Equipment, determined as hereinafter
provided. The purchase price of the Equipment shall be an amount
equal to the sum of (A) the Termination Value (calculated as of the
Early Purchase Date) for the Equipment, plus (B) all taxes and
charges upon sale, plus (C) all Rent and other sums due and unpaid
as of the Termination Date, plus (D) the Make Whole Amount, plus
(E) if the Termination Date is before the eighth (8th) Rent Payment
Date, an amount equal to three percent (3%) of such Termination
Value. Upon satisfaction of the conditions specified in this
Paragraph, Lessor will transfer, on an AS IS WHERE IS BASIS,
without recourse or warranty, express or implied of any kind
whatsoever, all of Lessor's interest in and to the Equipment to
Stella and/or Metz as directed by Lessees in writing. Lessor shall
not be required to make and may specifically disclaim any
representation or warranty as to the condition of such Equipment
and other matters (except that Lessor shall warrant that it has
conveyed whatever interest it received in the Equipment from Lessee
free and clear of any lien or encumbrance created by, through or
under Lessor. Lessor shall execute and deliver to Lessees, at
Lessees' cost and expense, such Uniform Commercial Code Statements
of Termination as reasonably may be required in order to terminate
any interest of Lessor in and to the Equipment.
XXIII. DEFINITIONS:
As used in this Agreement and all Schedules, the following terms
shall have the following meanings:
"Adverse Environmental Condition" shall refer to (i) the
existence or the continuation of the existence, of an
Environmental Emission (including, without limitation, a
sudden or non-sudden accidental or non-accidental
Environmental Emission), of, or exposure to, any Contaminant,
odor or audible noise in violation of any Applicable
Environmental Law, at, in, by, from or related to any
Equipment, (ii) the environmental aspect of the
transportation, storage, treatment or disposal of materials
in connection with the operation of any Equipment in
violation of any Applicable Environmental Law, or (iii) the
violation, or alleged violation, of any Environmental Law
connected with any Equipment.
"Affiliate" shall refer, with respect to any given
Person, to any Person that directly or indirectly through one
or more intermediaries, controls, or is controlled by, or is
under common control with, such Person.
"Applicable Treasury Yield" at any time shall mean the yield
to maturity of United States Treasury Notes with a maturity equal
to the remaining average life of the Term as published in The Wall
Street Journal three (3) Business Days prior to the Termination
Date. If no maturity exactly corresponds to such remaining Term,
the Applicable Treasury Yield shall be interpolated on a straight-
line basis, utilizing the yields for the two maturities which most
closely correspond to the requisite maturity.
"Assumed Interest Rate" for any Equipment will be the
rate set forth in the applicable Schedule.
"Calculation Date" shall have the meaning set forth in Section
VII herein.
"Capitalized Lessor's Cost" for any Equipment will be the
amount as set forth in Section B of the applicable Schedule.
"Casualty Occurrences" shall have the meaning set forth in
Section VII herein.
"Contaminant" shall refer to those substances in those
amounts which are regulated by or form the basis of liability
under any Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyls ("PCBs"), and radioactive
substances.
"Default" shall have the meaning set forth in Section XI
herein.
"Early Purchase Date" shall have the meaning set forth in
Section XXII.
"Environmental Claim" shall refer to any accusation,
allegation, notice of violation, claim, demand, abatement or
other order or direction (conditional or otherwise) by any
governmental authority or any Person for personal injury
(including sickness, disease or death), tangible or
intangible property damage, damage to the environment or
other adverse effects on the environment, or for fines,
penalties or restrictions, resulting from or based upon any
Adverse Environmental Condition.
"Environmental Emission" shall refer to any actual or
threatened release, spill, omission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching
or migration into the indoor or outdoor environment, or into
or out of any of the Equipment, including, without
limitation, the movement of any Contaminant through or in the
air, soil, surface water, groundwater, or property.
"Environmental Law" shall mean any Federal, foreign,
state or local law, rule or regulation pertaining to the
protection of the environment, including, but not limited to,
the Comprehensive Environmental Response, Compensation, and
Liability Act ("CERCLA") (42 U.S.C. Section 9601 et seq.),
the Hazardous Material Transportation Act (49 U.S.C. Section
1801 et seq.), the Federal Water Pollution Control Act (33
U.S.C. Section 1251 et seq.) the Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et seq.), the Clean Air
Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances
Control Act (15 U.S.C. Section 2601 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 Section 1361
et seq.), and the Occupational Safety and Health Act (19
U.S.C. Section 651 et seq.), as these laws have been amended
or supplemented, and any analogous foreign, Federal, state or
local statutes, and the regulations promulgated pursuant
thereto.
"Environmental Loss" shall mean any loss, cost, damage,
liability, deficiency, fine, penalty or expense (including,
without limitation, reasonable attorneys' fees, engineering
and other professional or expert fees), investigation,
removal, cleanup and remedial costs (voluntarily or
involuntarily incurred) and damages to, loss of the use of or
decrease in value of the Equipment arising out of or related
to any Adverse Environmental Condition.
"Equipment" shall mean the equipment as described in Annex A
to any schedule hereto.
"Fixed Purchase Price" for any Equipment shall be the amount
set forth in Section B of the applicable Schedule.
"Interim Rent" for any Equipment shall have the meaning set
forth in Section C (1) of the applicable Schedule.
"Lease Commencement Date" shall mean the date of execution by
the relevant Lessee of the Certificate of Acceptance for such
Equipment.
"Make Whole Amount" shall mean that amount equal to the
excess, if any, of (i) the aggregate present value as of the
Termination Date of the sum of (A) the remaining scheduled Rent
payments coming due after such date, plus (B) the full amount of
the Fixed Purchase Price that but for exercise of any early
termination option would be payable on the last Rent Payment Date
during the Term, discounted to the date of payment at the
Reinvestment Rate, over (ii) the aggregate present value as of the
Termination Date of the sum of (A) the remaining scheduled Rent
payments, plus (B) the full amount of the Fixed Purchase Price that
but for exercise of any early termination option would be payable
on the last Rent Payment Date during the Term, discounted to the
date of payment at the Assumed Interest Rate (specified in the
applicable Schedule); provided, however, that if the Reinvestment
Rate is equal to or higher than the Assumed Interest Rate, the Make
Whole Amount shall be zero.
"Payment Date" shall have the meaning set forth in Section VII
herein.
"Person" shall include any individual, partnership,
corporation, trust, unincorporated organization, government or
department or agency thereof and any other entity.
"Reinvestment Rate" shall mean the sum of (i) the Applicable
Treasury Yield plus (ii) the Spread.
"Rent Payment Date" for any Equipment shall have the meaning
set forth in Section C (2) of the applicable Schedule.
"Residual Risk Amount" for any Equipment shall be the amount
set forth in Section C(2) of the applicable Schedule.
"Spread" for any Equipment shall be the amount set forth in
Section B of the applicable Schedule.
"Stipulated Loss Value" for any Equipment shall be the amount
as set forth in Annex D to the applicable Schedule.
"Taxes" shall have the meaning set forth in Section III
herein.
"Term" shall have the meaning set forth in Section II herein.
"Termination Value" for any Equipment shall be equal to the
Stipulated Loss Value, as set forth in Annex D to any applicable
Schedule.
IN WITNESS WHEREOF, Lessees and Lessor have caused this Master
Lease Agreement to be executed by their duly authorized
representatives as of the date first above written.
LESSOR LESSEES:
SF LEASING L.L.C. STELLA FOODS, INC.
By:/s/ Douglas D. Wheat By: /s/ Peter L.
Sereda
Name: Douglas D. Wheat Name: Peter L. Sereda
Title:VP & Treasurer Title: VP &
Treasurer
METZ BAKING COMPANY
By: /s/ Peter L. Sereda
Name: Peter L. Sereda
Title: VP & Treasurer
EXHIBIT 10.80
[Execution Copy]
- 16 -
- 17 -
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is entered into as of this 26th day of
November, 1996 by and between SPECIALTY FOODS CORPORATION, a
Delaware corporation ("Seller"), and B COMPANIES ACQUISITION
CORP., a Delaware corporation ("Buyer").
Seller owns all of the issued and outstanding capital stock
of BGH HOLDINGS, INC., a Delaware corporation ("BGH Holdings"),
which in turn owns all of the issued and outstanding capital
stock of B&G-DSD HOLDINGS, INC., a Delaware corporation ("B&G-
DSD"), which owns all of the issued and outstanding capital stock
of (i) BLOCH & GUGGENHEIMER, INC., a Delaware corporation ("B&G")
and (ii) B&G FOODS, INC., a Delaware corporation ("B&G Foods").
B&G Foods in turn owns all of the issued and outstanding capital
stock of ROSELAND MANUFACTURING, INC., a Delaware corporation
("Roseland"). B&G-DSD, B&G, B&G Foods and Roseland are
collectively referred to as the "B&G COMPANIES".
Seller owns all of the issued and outstanding capital stock
of BRH HOLDINGS, INC., a Delaware corporation ("BRH Holdings"),
which in turn owns all of the issued and outstanding capital
stock of BURNS & RICKER, INC., a Delaware corporation ("B&R" and,
together with the B&G Companies, the "Companies").
Subject to the terms and conditions set forth herein, Buyer
desires to purchase from Seller and Seller desires to sell to
Buyer all of such shares of BGH Holdings and of BRH Holdings.
The parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF STOCK
Section 1.01 Definitions. As used herein, the terms set
forth below shall have the following meanings:
"Accounts Receivable Facility" means that certain
accounts receivable securitization facility pursuant to which
certain subsidiaries of Seller, including certain of the
Companies, have transferred their accounts receivable.
"Accounts Receivable Purchase Agreement" means that
certain agreement attached hereto as Exhibit A.
"Adjusted Closing Date Balance Sheet" has the meaning
set forth in Section 1.03(e).
"Affiliate" of a Person means any Person which,
directly or indirectly, controls, is controlled by, or is under
common control with, such Person; provided, that for purposes of
this Agreement, the term Affiliate, with respect to Seller, shall
not include any stockholder of Specialty Foods Acquisition
Corporation ("SFAC").
"Aggregate Environmental Threshold" has the meaning set
forth in Section 4.26(g).
"Bank" has the meaning set forth in Section 5.06.
"Basket" has the meaning set forth in Section 7.02(a).
"BRS" has the meaning set forth in Section 5.06.
"Business Day" means a day that is not a Saturday,
Sunday or other day on which banking institutions in New York,
New York are not required to be open.
"Cash Contribution" has the meaning set forth in
Section 5.06.
"Closing" has the meaning set forth in Section 1.04.
"Closing Date" means the specific date on which the
Closing shall be held as provided in Section 1.04.
"Closing Date Balance Sheet" has the meaning set forth
in Section 1.03(d).
"Code" means the Internal Revenue Code of 1986, as
amended.
"Commitment Letter" has the meaning set forth in
Section 5.06.
"Environmental Matters" means, any matter arising out
of, relating to or resulting from the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials and any matters relating to
emissions, discharges, or releases of Hazardous Materials.
"Environmental Laws" means all federal, state and local
laws dealing with Environmental Matters, including, without
limitation, the Comprehensive Environmental Response Compensation
and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et. seq.,
the Emergency Planning and Community Right to Know Act of 1986,
42 U.S.C. Section 11001 et. seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 690 et. seq., the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et. seq., the
Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C.
Section 136 et. seq., and the Clean Air Act, 42 U.S.C., Section
7401 et. seq.
"Environmental Threshold" has the meaning set forth in
Section 4.26(g).
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"ERISA Affiliate" shall mean each of the Companies and
any other entity, including BGH Holdings and BRH Holdings, that
at any time since January 1, 1990, is or has been, together with
such Company, BGH Holdings or BRH Holdings, treated as a single
employer under Section 414(b), 414(c) or 414(m) of the Code.
"Estimated Net Assets Statement" has the meaning set
forth in Section 1.03(b).
"Excluded Liability Amount" shall mean the sum of:
(i) the full amount of accounts payable on
the books of BGH Holdings, BRH Holdings
and the Companies on the Latest Balance
Sheet Date or the Closing Date, as the
case may be, which, as of such date as
determined in a manner consistent with
the manner in which the Companies have
historically received, recorded and aged
their accounts payable, are recorded as
being in excess of one (1) week past due
from the date payment was due in the
ordinary course of business to the third
party vendor (without taking into
account early payment dates because of
any discounts, allowances, rebates or
other inducements for early payment), it
being agreed that all amounts due and
owing to Owens Illinois pursuant to the
letter agreement dated May 7, 1996 with
the Companies are not listed as "past
due" and shall, therefore, be treated as
not being "past due" for purposes of
this adjustment (it being further agreed
that as of the Latest Balance Sheet
Date, the amount calculated under this
clause (i) is $4,093,076); plus
(ii) the sum of (a) the full amount that will
be due and owing on the Latest Balance
Sheet Date or the Closing Date, as the
case may be, to Eagle Rock Avenue
Associates, including the present value
of interest that will accrue thereon
through April 18, 1999 (discounted to
the Closing Date at a 10% per annum
discount rate) and (b) an amount equal
to the present value of $19,645 per
month for each month through April 18,
1999 (discounted to the Closing Date at
a 10% per annum discount rate), in each
case on account of the Notes that have
or will be delivered to landlord
pursuant to paragraph 4 of Section 1 of
the Memorandum of Agreement relating to
the lease by the Companies of the
Roseland facility (identified as Item 5
on Schedule 4.16) (it being further
agreed that as of the Latest Balance
Sheet Date, the amount calculated under
this clause (ii) is $1,043,212); plus
(iii) the current and non-current
portions, as of the Latest Balance Sheet
Date or the Closing Date, as the case
may be, of all Capital Leases, including
the Capital Leases between the Companies
and General Electric Credit Corporation,
Cargill Leasing Corporation and R.N.A.
Investment Associates (it being further
agreed that as of the Latest Balance
Sheet Date, the amount calculated under
this clause (iii) is $838,474); plus
(iv) the aggregate amount of the guaranteed
minimum profit payments that the
Companies are obligated to make to
Belco, Inc. from the Latest Balance
Sheet Date or the Closing Date, as the
case may be, through July 31, 1997 that
are referenced in Section 3 of the Co-
Packing and Lease Termination Agreement
dated as of October 27, 1995 (identified
on Schedule 4.16) (it being further
agreed that as of the Latest Balance
Sheet Date, the amount calculated under
this clause (iv) is $135,416); plus
(v) the aggregate amount of the non-compete
payments that the Companies are
obligated to make to Jonathan Belding
("Belding") from the Latest Balance
Sheet Date or the Closing Date, as the
case may be, through July 31, 1997 that
are referenced in the letter from B&R to
Belding dated October 27, 1996
(identified on Schedule 4.16) (it being
further agreed that as of the Latest
Balance Sheet Date, the amount
calculated under this clause (v) is
$43,940); plus
(vi) the amount, if any, of the reserve
established by the Companies as an
estimate of the cost of finalizing a
settlement with Belding and Belco, Inc.
relating to the closing out of the co-
pack relationship with Belco, Inc. (it
being further agreed that as of the
Latest Balance Sheet Date the aggregate
amount calculated under this clause (vi)
is $92,424); plus
(vii) the reserve established by the
Companies as the above-market portion of
the lease expense relating to the East
Brunswick facility governed by that
certain lease Agreement dated August 1,
1994 between Wilbel, Inc. and the
Companies (as successor-in-interest to
Belco, Inc.) through its expiration in
August, 1997 (it being further agreed
that as of the Latest Balance Sheet
Date, the aggregate amount calculated
under this clause (vii) is $98,000).
"Financial Statements" has the meaning set forth in
Section 4.06.
"Financing" has the meaning set forth in Section
5.06(a).
"Food, Drug and Cosmetic Act" means the Federal Food,
Drug and Cosmetic Act approved June 25, 1938.
"GAAP" means United States generally accepted
accounting principles.
"Hazardous Materials" means any pollutants,
contaminants, or hazardous or toxic substances, materials,
wastes, constituents or chemicals that are regulated by, or form
the basis for liability under, any Environmental Laws, including,
without limitation, petroleum products, asbestos and radioactive
materials.
"HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Income Taxes" means (a) federal, state or local income
or franchise taxes or other similar taxes measured by income and
all other taxes reported on Returns which include federal, state
or local income or franchise taxes or other similar taxes
measured by income, together with any interest or penalties
imposed with respect thereto, and (b) any obligations under any
agreements or arrangements with respect to any Income Taxes
described in clause (a) above.
"Indemnified Party" has the meaning set forth in
Section 7.02(c).
"Indemnifying Party" has the meaning set forth in
Section 7.02(c).
"Initial Accounts Receivable Purchase Price" has the
meaning set forth in Section 1.03(a) of the Accounts Receivable
Purchase Agreement.
"Initial Purchase Price" has the meaning set forth in
Section 1.03(a).
"Insured Liability" has the meaning set forth in
Section 7.06(a).
"Latest Balance Sheet" has the meaning set forth in
Section 4.06.
"Latest Balance Sheet Date" means September 28, 1996.
"Leased Real Estate" has the meaning set forth in
Section 4.16.
"Lien" means any lien, encumbrance, license, defect of
title, easement, charge, security interest, mortgage, pledge,
right of first refusal, restrictive covenant, preemptive right or
option or contractual transfer restrictions.
"Losses" has the meaning set forth in Section 7.02(a).
"Material Contracts" has the meaning set forth in
Section 4.20.
"Net Assets" means the total Current Assets of BGH
Holdings, BRH Holdings and the Companies, on a consolidated
basis, less total Current Liabilities of BGH Holdings, BRH
Holdings and the Companies, on a consolidated basis. "Current
Assets" shall consist of (i) Cash and Cash Equivalents, (ii)
Trade Receivables (but only those Trade Recevables which were not
sold to Specialty Foods Finance Corporation ("SFFC") pursuant to
the terms and conditions of the Accounts Receivable Facility),
(iii) Inventory, (iv) Pre-Paid Expenses, and (v) Other Current
Assets, but excluding (x) current deferred Income Tax assets and
estimated Income Tax payments on behalf of BGH Holdings, BRH
Holdings and the Companies, and (y) all of those Trade
Receivables that have been sold to SFFC pursuant to the terms and
conditions of the Accounts Receivable Facility. "Current
Liabilities" shall consist of (i) Accounts Payable (other than
accounts payable included within the Excluded Liability Amount),
(ii) Accrued Expense, (iii) other current liabilities (including,
without limitation, current portions of long-term indebtedness or
capital lease obligations) included in the Excluded Liability
Amount and (iv), with respect to Net Assets reflected in the
Adjusted Closing Date Balance Sheet, all liabilities as of the
Closing Date not included in the Excluded Liability Amount;
provided that "Current Liabilities" shall exclude (x) current
deferred Income Tax Liabilities and current Income Tax
Liabilities, (y) the Excluded Liability Amount and (z)
intercompany current liabilities. Capitalized terms used in this
definition appear on the consolidated balance sheet of Holdings
and the Companies appearing as Attachment 4.06 to Schedule 4.06.
"Letter of Credit" has the meaning set forth in Section
5.06.
"Neutral Auditors" has the meaning set forth in Section
1.03(e).
"Other Taxes" means all Taxes which are not Income
Taxes.
"Owned Real Estate" has the meaning set forth in
Section 4.15.
"Permitted Exceptions" has the meaning set forth in
Section 4.15.
"Person" means an individual, a corporation, a
partnership, an association, a trust, or any other entity or
organization, including a government or political subdivision or
an agency or instrumentality thereof.
"Personal Property Leases" has the meaning set forth in
Section 4.17.
"Pre-Closing Period" means (i) all tax periods that end
on or before the Closing Date, or (ii) for tax periods that begin
before the Closing Date and end after the Closing Date, the
allocable portion of such period ending on the Closing Date as
set forth in Section 8.02(c) or 8.04(b).
"Post Closing Period" means (i) all tax periods that
begin after the Closing Date, or (ii) for tax periods that begin
before the Closing Date and end after the Closing Date, the
allocable portion of such period beginning on the day after the
Closing Date as set forth in Section 8.02(c) or Section 8.04(b).
"Purchase Price" has the meaning set forth in Section
1.03(a).
"Released" means released, spilled, leaked, discharged,
disposed of, pumped, poured, emitted, emptied, injected, leached,
dumped or allowed to escape.
"Remediation" means investigation, remediation,
removal, containment, monitoring or other response action.
"Resolution Period" has the meaning set forth in
Section 1.03(e).
"Returns" means any returns, reports and forms required
to be filed with any Taxing Authority.
"Seller's, BGH Holdings', BRH Holdings' and the
Companies knowledge," or "to the knowledge of Seller, BGH
Holdings, BRH Holdings and the Companies," or any similar phrase,
means the actual knowledge of Messrs. Brown, Burke, Cantwell,
Fishbune, Haecker, Kelly, Levine, Pilnick, Polaner, Wenner, or
Ms. Morzorati, in each case after reasonable investigation.
"Shares" has the meaning set forth in Section 1.02.
"State Income Tax Stub Period" has the meaning set
forth in Section 8.02(c).
"State Income Tax" means (i) any state or local income
or franchise taxes measured by income together with any interest
or penalties imposed with respect thereto, and (ii) any
obligations under any agreements or arrangements with respect to
any taxes described in clause (i) above.
"Tax Attribute" means any deduction, net operating
loss, basis, credit or any other tax item of a similar nature.
"Tax Authority" means, with respect to any Tax, the
governmental entity or political subdivision thereof that imposes
such Tax, and the agency (if any) charged with the collection of
such Tax for such entity or subdivision.
"Taxes" means any federal, state, local or foreign
income, gross receipt, license, payroll, employment, excise,
severance, stamp, occupation, premium, capital stock, franchise,
profits, withholding, social security, unemployment, disability,
real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any
interest, penalty or addition thereto.
"Title Commitments" shall have the meaning set forth on
Section 2.01(h).
"Title Company" shall have the meaning set forth in
Section 2.01(h).
Section 1.02 Basic Transaction. Seller agrees to and will
sell, transfer, assign and deliver to Buyer at the Closing good
and marketable title to, free and clear of all Liens of every
kind, and Buyer agrees to and will purchase and accept from
Seller, on the terms and subject to the conditions set forth in
this Agreement, 100% of the issued and outstanding shares of
capital stock of BGH Holdings (the "BGH Shares") and 100% of the
issued and outstanding shares of capital stock of the BRH
Holdings (the "BRH Shares" and, together with the BGH Shares, the
"Shares").
Section 1.03 Consideration for Purchase of Shares.
(a) Aggregate Consideration. At Closing, Buyer will
pay to Seller $68,168,000, (i) increased dollar for dollar to the
extent Net Assets set forth on the Estimated Net Assets Statement
exceeds Net Assets as reflected in the Latest Balance Sheet, or
decreased dollar for dollar to the extent Net Assets set forth on
the Estimated Net Assets Statement is less than Net Assets
reflected in the Latest Balance Sheet, and (ii) decreased by (x)
the Initial Accounts Receivable Purchase Price, and (y) the
Excluded Liability Amount as of the Closing Date (the "Initial
Purchase Price"). The Initial Purchase Price will be paid by
wire transfer or equivalent means, in immediately available funds
in the United States as Seller shall direct to Buyer. The
Initial Purchase Price shall be adjusted to reflect changes in
the net worth of Holdings and the Companies, as set forth in
Section 1.03(c) below. The Initial Purchase Price, as so
adjusted, is referred to as the "Purchase Price".
(b) Delivery of Estimated Closing Balance Sheet.
Seller shall deliver to Buyer three days prior to the Closing
Date, a statement of the estimated Net Assets that will exist at
Closing (the "Estimated Net Assets Statement") and the Excluded
Liability Amount as of the Closing Date accompanied by the
calculation of the amount of the Initial Purchase Price. The
Estimated Net Assets Statement and the Excluded Liability Amount
as of the Closing Date shall be prepared by Seller in good faith
and in accordance with GAAP applied on a basis consistent with
the manner in which the Latest Balance Sheet was prepared and
shall be reasonably acceptable to Buyer.
(c) Adjustment of Initial Purchase Price. The Initial
Purchase Price shall be (i) increased dollar for dollar to the
extent Net Assets reflected in the Adjusted Closing Date Balance
Sheet exceeds Net Assets reflected in the Estimated Net Assets
Statement, or (ii) decreased dollar for dollar to the extent Net
Assets reflected in the Adjusted Closing Date Balance Sheet are
less than Net Assets reflected in the Estimated Net Assets
Statement and (iii) adjusted to reflect the finalization of the
Excluded Liability Amount as of the Closing Date. To the extent
that any such adjustment to the Excluded Liability Amount results
in (i) an increase in the amount thereof, such increase shall be
paid by Seller to Buyer or (ii) a decrease in the amount thereof,
such decrease shall be paid by Buyer to Seller. If the parties
agree, any such payment owing by one party to the other under the
preceding sentence may be netted against amounts payable as a
result of the determination of the Adjusted Closing Date Balance
Sheet. Any adjustments to the Initial Purchase Price made
pursuant to this Section 1.03(c) shall bear simple interest from
and including the Closing Date to, but not including, the date of
payment at 7% per annum, based on a 365-day year. Any
adjustments to the Initial Purchase Price made pursuant to this
Section 1.03(c), together with interest thereon, shall, within
five (5) Business Days after the day the Adjusted Closing Date
Balance Sheet is agreed to by Buyer and Seller or any remaining
disputed items are ultimately determined by the Neutral Auditors,
be paid by wire transfer in immediately available funds to an
account in the United States specified by the party to whom such
payment is owed.
(d) Procedures for Determination of the Closing Date
Balance Sheet. As soon as practicable, but in no event later
than sixty (60) days following the Closing Date, Seller shall
prepare an unaudited consolidated balance sheet of BGH Holdings,
BRH Holdings and the Companies as of the close of business on the
day prior to the Closing Date (the "Closing Date Balance Sheet").
The Closing Date Balance Sheet shall fairly present in all
material respects the financial position of BGH Holdings, BRH
Holdings and the Companies prepared on a consolidated basis in
accordance with GAAP consistent with the manner in which the
Latest Balance Sheet was prepared; and provided that any
increases to asset categories (including without limitation
increases in prepaid items) or decreases in liability categories
(including without limitation decreases in reserves or accruals)
from the Latest Balance Sheet to the Closing Date Balance Sheet
shall result only from cash transactions (which cash transactions
may include actual settlements of liabilities for which reserves
or accruals have been established). The Closing Date Balance
Sheet will reflect adjustments of a normal year-end nature,
including, but not limited to, appropriate prorations for
personal property, real estate, occupancy and water taxes, the
amount of any license or registration fees with respect to any
licenses or registrations of Holdings or the Companies which
remain in effect after Closing; the amount of sewer rents and
charges for water, telephone, electricity and other utilities and
fuel; and any other items which are normally prorated in
connection with similar transactions.
During the preparation of the Closing Date Balance
Sheet, and the period of any dispute within the contemplation of
this Section 1.03, Buyer shall (i) provide Seller and Seller's
authorized representatives with such access necessary to prepare
the Closing Date Balance Sheet during normal business hours to
the books, records (including workpapers, schedules, memoranda
and other documents), facilities and employees of Holdings and
the Companies, (ii) provide Seller as promptly as practicable
after the Closing Date (but in no event later than twenty (20)
Business Days after the Closing Date) with normal month end
closing financial information for Holdings and the Companies for
the period ending on the day prior to the Closing Date, and (iii)
cooperate as may be reasonably necessary with Seller and Seller's
authorized representatives, including the provision on a timely
basis of all information necessary or useful in preparing the
Closing Date Balance Sheet.
(e) Delivery of the Closing Date Balance Sheet;
Dispute Resolution. Seller shall deliver a copy of the Closing
Date Balance Sheet to Buyer promptly after it has been prepared.
After receipt of the Closing Date Balance Sheet, Buyer shall have
thirty (30) days to review the Closing Date Balance Sheet.
Unless Buyer delivers written notice to Seller on or prior to the
30th day after Buyer's receipt of the Closing Date Balance Sheet
specifying in reasonable detail the characterization and amount
of all disputed items and the basis therefor, Buyer shall be
deemed to have accepted and agreed to the Closing Date Balance
Sheet. If Buyer so notifies Seller of its objection to the
Closing Date Balance Sheet, Buyer and Seller shall, within thirty
(30) days following such notice (the "Resolution Period"),
attempt to resolve their differences and any resolution by them
as to any disputed amounts shall be final, binding and
conclusive.
If at the conclusion of the Resolution Period
there remain items in dispute, then all disputed items shall be
submitted to Arthur Andersen, L.L.P., a nationally recognized
independent public accounting firm (the "Neutral Auditors"). All
fees and expenses relating to the work, if any, to be performed
by the Neutral Auditors shall be borne equally by Seller and
Buyer. The Neutral Auditors shall act as an arbitrator to
determine, based solely on presentations by Seller and Buyer, and
not by independent review, only those issues still in dispute.
The Neutral Auditors' determination shall be made within thirty
(30) days of their selection, shall be set forth in a written
statement delivered to Seller and Buyer and shall be final,
binding and conclusive. The term "Adjusted Closing Date Balance
Sheet," as hereinafter used, shall mean the definitive Closing
Date Balance Sheet agreed to by Buyer and Seller in accordance
with this Section 1.03(e) or the definitive Closing Date Balance
Sheet resulting from the determinations made by the Neutral
Auditors in accordance with this Section 1.03(e) (in addition to
those items theretofore agreed to by Seller and Buyer).
Section 1.04 The Closing. The closing of the purchase and
sale of the Shares and other transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of
Dechert Price & Rhoads in New York, New York, at 8:30 a.m. local
time, on December 18, 1996 or at such other place or on such
other date as is mutually agreeable to the parties; provided,
however, that if any of the conditions to Closing set forth in
this Agreement have not been satisfied or waived by the party
entitled to the benefit of such condition, subject to Section
6.01, the Closing shall take place on the third Business Day
after all conditions have been satisfied or waived. The actual
date and time of the Closing are herein referred to as the
"Closing Date." On the first Business Day immediately prior to
the Closing Date, a pre-closing shall be held at the same
location specified above for the Closing.
Section 1.05 Procedures at Closing. At the Closing, the
parties shall take the following steps (provided, however, that
upon their completion all such steps shall be deemed to have
occurred simultaneously):
(a) Seller shall deliver to Buyer the documents
referred to in Section 2.01(g).
(b) Buyer shall deliver to Seller the documents
referred to in Section 2.02(f).
(c) Seller shall deliver to Buyer certificates in
valid form evidencing the Shares, duly endorsed in blank or
accompanied by duly executed stock powers.
(d) Buyer shall pay the Initial Purchase Price to
Seller.
(e) Buyer and Seller shall execute and deliver a cross-
receipt acknowledging receipt from the other, respectively, of
the Shares and the Initial Purchase Price.
(f) The closing under the Accounts Receivable Purchase
Agreement will take place.
ARTICLE 2
CONDITIONS TO CLOSING
Section 2.01 Conditions to Buyer's Obligations. The
obligation of Buyer to consummate the transactions contemplated
by this Agreement is subject to the satisfaction of the following
conditions on or before (with satisfaction continuing on) the
Closing Date:
(a) The representations and warranties set forth in
Article 4 hereof, both individually and considered as a whole,
which are qualified as to materiality shall be true and correct
in all respects and such representations and warranties that are
not so qualified shall be true and correct in all material
respects at and as of the Closing Date, except for those
warranties and representations that were given as of a specific
date, in which event such warranties and representations shall
have been true and correct in all material respects or, if
qualified as to materiality, in all respects, as of such date.
(b) Seller will have performed in all material
respects all of the covenants and agreements required to be
performed by it under this Agreement which are to be performed
prior to the Closing, and Seller shall have caused BGH Holdings,
BRH Holdings and the Companies to have performed in all material
respects all of the covenants and agreements required to be
performed by them under this Agreement which are to be performed
prior to the Closing.
(c) There will have been no material adverse change in
the operations, financial condition, operating results, assets or
liabilities of BGH Holdings, BRH Holdings or the Companies, all
taken as a whole, and there will have been no material casualty
loss or damage to the assets of the Companies all taken as a
whole (whether or not covered by insurance).
(d) Those consents, approvals, or other actions by
third parties that are required for the consummation of the
transactions contemplated hereby which are set forth on Schedule
2.01(d) will have been obtained.
(e) All governmental approvals required for the
consummation of the transactions contemplated hereby shall have
been obtained and all filings required pursuant to any applicable
law or regulation, including pursuant to the HSR Act, will have
been made and any approvals required thereunder will have been
obtained, or any waiting period required thereby will have
expired or have been terminated, as the case may be.
(f) No action or proceeding by or before any court or
governmental or administrative body or agency will be pending
wherein a judgment, decree or order might be issued that would
prevent any of the transactions contemplated or cause such
transactions to be declared unlawful or rescinded.
(g) On the Closing Date, Seller will have delivered to
Buyer the following:
(i) A certificate dated the Closing Date
executed by the President or a Vice
President of Seller stating that the
preconditions specified in subsections
(a), (b) and (c) hereof have been
satisfied;
(ii) Good standing certificates for Holdings
and each of the Companies from their
states of organization, dated not
earlier than five (5) business days
prior to the Closing Date;
(iii) Certified copies of the resolutions
duly adopted by Seller's board of
directors authorizing the execution,
delivery and performance of this
Agreement and the other agreements
contemplated hereby;
(iv) The written resignations of the
directors of BGH Holdings, BRH Holdings,
and of the Companies and the written
resignations of such officers of BGH
Holdings, BRH Holdings and of the
Companies who are not employees of BGH
Holdings, BRH Holdings or the Companies;
(v) The minute books, stock records and
stock ledgers of BGH Holdings, BRH
Holdings and each of the Companies; and
(vi) An affidavit stating, under penalties of
perjury, that neither BGH Holdings, BRH
Holdings nor any of the Companies is or
has ever been a United States Real
Property Holding Corporation (as defined
in Section 897(c)(2) of the Code) during
the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code.
(h) Seller shall have delivered to Buyer, at Seller's
sole expense, ALTA title insurance binders or commitments
(collectively, the "Title Commitments," and each a "Title
Commitment"), in final form, from Chicago Title Insurance Company
or such other companies reasonably acceptable to Buyer
(collectively, the "Title Company"), committing the Title Company
to issuing ALTA form of title insurance policies insuring the
relevant Company's fee title to each parcel of the Owned Real
Estate in the respective amounts listed on Schedule 2.01(h) which
amounts are equal to the current fair market values of each of
such parcels, subject to no Liens or exceptions to title other
than the Permitted Exceptions and the so-called standard or pre-
printed exceptions (collectively, the "Title Polices"); provided
that the commitment of the Title Company to issue the Title
Policies may be subject to and the Title Commitments may set
forth or be subject to such standard requirements relating to the
issuance of final policies of title insurance as are reasonably
acceptable to Buyer, including a requirement that Buyer pay the
Title Company's premiums and other charges for the issuance of
the Title Policies. Each of the Title Commitments shall be
effective as of a date occurring not earlier than the date of the
execution of this Agreement and, if required by Buyer, the
effective dates of each of the Title Commitments shall be brought
down to the Closing Date, provided that Buyer provides Seller
with written notice thereof at least two weeks prior to the
Closing Date. If required in connecting with the Financing,
Seller shall and shall cause BGH Holdings, BRH Holdings and the
Companies, at no cost to BGH Holdings, BRH Holdings or the
Companies, to reasonably cooperate with Buyer as may be
reasonably necessary to cause the Title Company to issue Title
Commitments for extended form title insurance coverage deleting
or insuring over those so-called standard or pre-printed
exceptions. Buyer acknowledges that the Title Company may raise
additional exceptions in connection with deleting or insuring
over of such exceptions.
(i) Buyer, Seller and SFFC will have entered into that
certain Accounts Receivable Purchase Agreement and the
transaction contemplated thereby will be positioned to close
simultaneously with the closing of the transaction contemplated
by this Agreement.
(j) Buyer shall have received copies of releases
releasing each security interest set forth on Schedule 4.14 which
is not to be in existence as of Closing, and releases or
discharges of record with respect to the BONY Mortgage Documents
and the San-Del Mortgages, as such terms are defined in Schedule
4.15 of the BGH Holdings and B&G Companies disclosure schedules
attached to this Agreement.
(k) Buyer shall have received the duly executed
Estoppel Certificates from the landlords under each of the Leases
identified on Schedule 2.01(d), dated after the date of this
Agreement, and shall have received the Lessor Consents identified
on Schedule 2.01(d).
(l) All proceedings to be taken by Seller and all
documents required to be delivered by Seller in connection with
the transactions contemplated hereby will be reasonably
satisfactory in form and substance to Buyer.
(m) On or prior to 5:00 p.m., Eastern Standard Time,
on the 30th day following the date of this Agreement, Buyer shall
have either (i) completed its arrangements for the Financing and
received the proceeds therefrom, or (ii) delivered to Seller the
Letter of Credit or Cash Contribution.
(n) A certificate from Seller, under penalties of
perjury, stating that none of Seller BGH Holdings, BRH Holdings
or any of the Companies is a foreign corporation, foreign
partnership, foreign trust or foreign estate and listing both the
U.S. Employer Identification Number and principal business office
address of each of Seller, BGH Holdings, BRH Holdings and the
Companies.
Any condition specified in this Section 2.01 may be
waived by Buyer, provided that no such waiver will be effective
unless it is set forth in a writing executed by Buyer.
Section 2.02 Conditions to Seller's Obligations. The
obligation of Seller to consummate the transactions contemplated
by this Agreement is subject to the satisfaction of the following
conditions on or before (with satisfaction continuing on) the
Closing Date:
(a) The representations and warranties set forth in
Article 5 hereof, both individually and considered as a whole,
which are qualified as to materiality shall be true and correct
in all respects and such representations and warranties that are
not so qualified shall have been true and correct in all material
respects as of the Closing Date, except for those warranties and
representations that were given as of a specific date, in which
event such warranties and representations shall have been true
and correct in all material respects or, if qualified as to
materiality, in all respects, as of such date.
(b) Buyer will have performed in all material respects
all of the covenants and agreements required to be performed by
it under this Agreement prior to the Closing.
(c) All consents, approvals or actions by third
parties that are required for consummation of the transactions
contemplated hereby which are set forth on Schedule 2.01(d)
hereto will have been obtained.
(d) All governmental approvals required to consummate
the transactions contemplated hereby shall have been obtained,
and all filings required pursuant to any applicable law or
regulation, including pursuant to the HSR Act, will have been
made, and any approvals required thereunder will have been
obtained or any waiting period required thereby will have expired
or have been terminated, as the case may be.
(e) No action or proceeding before any court or
government body will be pending wherein a judgment, decree or
order might be issued that would prevent any of the transactions
contemplated hereby or cause such transactions to be declared
unlawful or be rescinded.
(f) On the Closing Date, Buyer will have delivered to
Seller the following:
(i) An officers' certificate executed by the
President or a Vice President of Buyer
dated the Closing Date, stating that the
preconditions specified in subsections
(a) and (b) hereof have been satisfied;
(ii) Certified copies of the resolutions
adopted by Buyer's board of directors
authorizing the execution, delivery and
performance of this Agreement and the
other agreements contemplated hereby;
and
(iii) Such other documents as Seller may
reasonably request in connection with
the transactions contemplated hereby.
(g) Buyer, Seller and SFFC will have entered into that
certain Accounts Receivable Purchase Agreement and the
transaction contemplated thereby will be positioned to close
simultaneously with the closing of the transaction contemplated
by this Agreement.
(h) Seller will have received from Buyer a copy of any
solvency opinion delivered to Buyer at Closing, together with a
letter stating that the opinion is also being delivered for the
benefit of Seller and that Seller is entitled to rely on it.
Any condition specified in this Section 2.02 may be
waived by Seller, provided that no such waiver will be effective
unless it is set forth in a writing executed by Seller.
ARTICLE 3
COVENANTS PRIOR TO CLOSING
Section 3.01 Affirmative Covenants of Seller. Prior to
the Closing, unless Buyer has otherwise consented, Seller will
cause BGH Holdings, BRH Holdings and the Companies to take the
following actions:
(a) Continue to conduct operations at all locations at
which operations are presently conducted, but only in the
ordinary and usual course of business, including, without
limitation, the observance by the Companies of their historical
practices and timing with respect to the purchase of raw
materials and the creation and sale of finished goods inventory.
(b) Use reasonable commercial efforts to retain
employees and preserve present business relationships with
customers, suppliers and others having dealings with BGH
Holdings, BRH Holdings or the Companies, and continue to
compensate its employees consistent with past custom and
practice.
(c) Maintain its assets in the same operating
condition that existed on the date hereof, ordinary wear and tear
excepted, and to notify Buyer of any loss of, damage to or
destruction of any material asset.
(d) Maintain its books, accounts and records
consistent with past practice and in accordance with the
principles used in the preparation of the financial statements
referred to in Section 4.06 of this Agreement.
(e) Continue its historical practices with respect to
the maintenance and protection of its trademarks, trade names,
corporate names, copyrights, trade secrets, licenses and other
proprietary rights.
(f) Comply in all material respects with applicable
legal requirements and contractual obligations.
(g) Maintain the current insurance upon its assets and
properties and with respect to the conduct of its business.
(h) Promptly inform Buyer in writing of any event or
circumstance that has or could reasonably be expected to have a
material adverse effect upon BGH Holdings, BRH Holdings or the
Companies or the business, financial condition, results of
operation or operations thereof, all considered as a whole.
(i) Permit Buyer and its employees and agents to have
reasonable access to its books, records, contracts, leases, key
management personnel, plants and equipment as Buyer shall
reasonably request, except in cases where Seller reasonably
determines that such information or access is competitively
sensitive, in which event the parties will work in good faith to
attempt to have the information or access provided in a format or
manner, or subject to additional agreed upon restrictions, that
are reasonably acceptable to Seller.
(j) Use reasonable commercial efforts to cause the
satisfaction of all conditions to Buyer's or Seller's obligations
to close to the extent satisfaction of such conditions is in the
control of Seller, BGH Holdings, BRH Holdings or the Companies,
including making all necessary filings and obtaining all third
party and governmental approvals necessary to consummate the
transactions contemplated by this Agreement.
(k) Use reasonable commercial efforts to obtain and
deliver to Buyer at the Closing (i) estoppel certificates (such
estoppel certificates not to be conditioned on any increased
rental, other payment, reduced term, or other material change of
lease terms), in a form reasonably acceptable to Buyer (the
"Estoppel Certificates"), from each lessor of the Leases and (ii)
landlord consents in a form reasonably acceptable to Buyer with
respect to those leases identified on Schedule 2.01(d) (the
"Lessor Consents").
(1) Use reasonable commercial efforts to have
satisfied or discharged all of the Exceptions That Will Not Exist
At Closing, as defined in Section 4.15.
Section 3.02 Negative Covenants of Seller. Prior to the
Closing, without the prior written consent of Buyer, Seller will
cause BGH Holdings, BRH Holdings and each of the Companies to
not:
(a) Take any action that, if taken prior to the date
hereof, would have required disclosure under Section 4.09 of this
Agreement;
(b) Terminate or amend any plan, program, agreement or
arrangement listed on Schedule 4.21 or 4.22, or establish or
contribute to any new plan, program or arrangement covering its
employees;
(c) Accelerate the sale of any inventory or delay the
payment of any obligation other than in the ordinary course;
(d) Effect any amendment to the Certificate or
Articles of Incorporation or By-Laws of any of BGH Holdings, BRH
Holdings or the Companies;
(e) Merge or consolidate BGH Holdings, BRH Holdings or
any of the Companies with any other corporation, association,
partnership, or joint venture;
(f) Declare or pay any dividends on or make any
distributions of any kind with respect to any of its capital
stock other than in connection with settling intercompany
accounts pursuant to Section 7.11 of this Agreement or
distribution of cash pursuant to Section 7.13 of this Agreement;
(g) Borrow or agree to borrow any funds or incur, or
assume or become subject to, whether directly, by way of guaranty
or otherwise, any obligation or liability (absolute or
contingent) for borrowed money;
(h) Take any action, directly or indirectly, to cause,
promote or authorize any transaction competing or interfering
with any of the transactions contemplated by this Agreement,
including without limitation any merger, consolidation or
reorganization, acquisition or disposition of assets, tender
offer or exchange offer;
(i) Offer, issue or sell any shares of the capital
stock or other securities of BGH Holdings, BRH Holdings or the
Companies (including, without limitation, debt securities);
(j) Pay, discharge, waive, satisfy or compromise or
adjust any material claim, liability or obligation (absolute,
accrued, contingent or otherwise), other than the payment,
discharge, waiver or satisfaction in the ordinary course of
business consistent with past practice of liabilities or
obligations reflected or reserved against in the Latest Balance
Sheet or incurred in the ordinary course of business consistent
with past practice since the date of the Latest Balance Sheet;
(k) Sell, transfer, surrender, terminate, sublease or
lease, or license or sublicense any properties or assets to, or
enter into any agreement or arrangement with, any of the
Companies' (or any of the Companies' Affiliates, which for the
purposes of this Section (k) only, shall be deemed to include all
of the stockholders of SFAC), officers or directors or any
Affiliates or associate of any of such officers or directors of
any of BGH Holdings, BRH Holdings or the Companies, except
compensation paid in the ordinary course of business consistent
with past practices to current officers pursuant to, and in
accordance with the terms of, agreements disclosed in Schedule
4.21;
(l) Sell, assign or transfer any assets (including,
without limitation, the Companies' Seneca Castle facility),
except inventory in the ordinary course of business and
consistent with past practices, or in the case of accounts
receivable, pursuant to the terms of the Accounts Receivable
Facility; or
(m) Either as lessor or lessee (i) enter into, amend,
terminate, renew, extend, subordinate its interest under or
exercise any purchase option under any lease or sublease of real
property, including without limitation, the Leased Real Estate or
the property located at 200 Nealsen St., Hurlock, MD., or (ii)
enter into any lease or sublease of real property, including
without limitation, any of the Leased Real Estate unless such
lease or sublease can be terminated at an immaterial cost by BGH
Holdings, BRH Holdings or the Companies upon no more than thirty
days prior written notice, or consent to any amendment,
termination, renewal, subordination of its interest under or
extension of any lease or sublease relating to any of the Leased
Real Estate or the Owned Real Estate.
(n) Agree or commit, whether in writing or otherwise,
to do any of the foregoing.
Section 3.03 Covenants of Buyer. Prior to the Closing,
Buyer will use its reasonable commercial efforts to:
(a) Cause the satisfaction of all conditions to
Buyer's and Seller's obligations to close to the extent
satisfaction of such condition is in the control of Buyer and to
cooperate with Seller in obtaining all third party and
governmental approvals necessary to consummate the transactions
contemplated hereby; and
(b) Obtain the Financing.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants as follows:
Section 4.01 Corporate Organization, Power and
Subsidiaries. Each of BGH Holdings, BRH Holdings, the Companies
and Seller is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation and
has the corporate power and authority to carry on its business as
now being conducted, and to own or lease and operate the
properties and assets now owned or leased and being operated by
it. Each of BGH Holdings, BRH Holdings, the Companies and Seller
is qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each
jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification, except such
jurisdictions where the failure to qualify will not have a
material adverse effect on the business, financial condition,
results of operations or operations of such Company. The copies
of BGH Holdings and BRH Holdings and each of the Companies'
certificate of incorporation and by-laws which have been
furnished to Buyer reflect all amendments made thereto and are
correct and complete. Except as set forth on Schedule 4.01,
neither BGH Holdings nor BRH Holdings has any direct or indirect
equity interest, or the right or obligation to acquire an equity
interest, in any other person or entity. Except as set forth in
Schedule 4.01, none of the Companies has a direct or indirect
equity interest, or the right or obligation to acquire an equity
interest, in any other person or entity.
Section 4.02 Authority; Authorization. Seller has full
legal capacity, power and authority to execute, deliver and
perform this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by
Seller of this Agreement has been duly and validly authorized by
Seller. This Agreement constitutes the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance
with its terms.
Section 4.03 No Violations. Except as set forth on
Schedule 4.03, the execution, delivery and performance of this
Agreement by Seller and the consummation of the transactions
contemplated hereby do not and will not (a) conflict with or
result in any breach of any of, (b) constitute a default under,
(c) result in a Lien on any of the assets of BGH Holdings, BRH
Holdings or the Companies, or (d) result in a violation of, the
articles of incorporation or by-laws of any of Seller, BGH
Holdings, BRH Holdings or the Companies or any indenture,
mortgage, or loan agreement by which Seller, BGH Holdings, BRH
Holdings or the Companies is bound or to which any of its
properties are subject, or any law, statute, rule, regulation,
judgment or decree to which any of Seller, BGH Holdings, BRH
Holdings or the Companies is subject. Seller may execute,
deliver and perform this Agreement without the necessity of
obtaining any consent, approval, authorization or waiver, giving
any notice, or making any filing or disclosure, except as set
forth on Schedule 4.03 hereto.
Section 4.04 Shares. The authorized, issued and
outstanding equity capital of BGH Holdings, BRH Holdings and each
of the Companies is as set forth on Schedule 4.04. The Shares of
each of BGH Holdings, BRH Holdings and all issued shares of the
Companies have been duly authorized and validly issued and are
fully paid and non-assessable and have not been issued in
violation of any preemptive rights. There are no restrictions
affecting the transferability of the Shares, except as disclosed
on Schedule 4.04. At Closing, there will be no restrictions
affecting the transferability of the Shares. There are no
outstanding options, rights, warrants, conversion rights,
convertible securities or other agreements or commitments to
which Seller, Holdings or the Companies are a party or by which
they are bound, providing for the issuance of additional Shares
of capital stock of Holdings or the Companies, and there are no
proxies, voting trusts, or shareholder or other agreements with
respect to the voting or transfer of any capital stock of or
other equity interests in BGH Holdings, BRH Holdings or the
Companies.
Section 4.05 Ownership of Shares.
(a) Except as set forth on Schedule 4.05, Seller is
the record and beneficial owner of all outstanding Shares of BGH
Holdings and BRH Holdings. Except as set forth on Schedule 4.05,
Seller has good and marketable title to the Shares, free and
clear of any Liens. At Closing, Seller will have good and
marketable title to the Shares, free and clear of any Lien and
have the right, title, power and authority to sell, assign,
transfer and deliver the Shares to Buyer.
(b) Except as set forth on Schedule 4.05, BGH Holdings
is the record and beneficial owner of all outstanding capital
stock of B&G-DSD. Except as set forth on Schedule 4.05, BGH
Holdings has good and marketable title to the capital stock of
the B&G-DSD, free and clear of any Lien. At Closing, BGH
Holdings will have good and marketable title to the capital stock
of B&G-DSD, free and clear of any Lien.
(c) Except as set forth on Schedule 4.05, B&G-DSD is
the record and beneficial owner of all outstanding capital stock
of B&G Foods and B&G. Except as set forth on Schedule 4.05, B&G-
DSD has good and marketable title to the capital stock of each of
B&G Foods and B&G, free and clear of any Lien. At Closing, B&G-
DSD will have good and marketable title to the capital stock of
B&G Foods and B&G, free and clear of any Lien.
(d) Except as set forth on Schedule 4.05, B&G Foods is
the record and beneficial owner of all outstanding capital stock
of Roseland. Except as set forth on Schedule 4.05, B&G Foods has
good and marketable title to the capital stock of Roseland, free
and clear of any Lien. At Closing, B&G Foods will have good and
marketable title to the capital stock of Roseland, free and clear
of any Liens.
(e) Except as set forth on Schedule 4.05, BRH Holdings
is the record and beneficial owner of all outstanding capital
stock of B&R. Except as set forth on Schedule 4.05, BRH Holdings
has good and marketable title to the capital stock of B&R, free
and clear of any Lien. At Closing, BRH Holdings will have good
and marketable title to the capital stock of B&R, free and clear
of any Lien.
Section 4.06 Financial Statements.
(a) Attached as Schedule 4.06 (a) are copies of the
unaudited consolidated balance sheet of BGH Holdings, BRH
Holdings and the Companies as of September 28, 1996 (the "Latest
Balance Sheet"), and the unaudited balance sheet and consolidated
income statement for BGH Holdings, BRH Holdings and the Companies
for the fiscal years ended December 30, 1995 and December 31,
1994 (the "Financial Statements"). The Latest Balance Sheet and
the Financial Statements are in accordance with the books and
records of BGH Holdings, BRH Holdings and the Companies, present
fairly in all material respects the financial position of BGH
Holdings, BRH Holdings and the Companies at said dates and the
results of operations of BGH Holdings, BRH Holdings and the
Companies for the periods covered, and have been prepared in
accordance with GAAP consistently applied. BGH Holdings', BRH
Holdings' and the Companies' unaudited consolidated income
statement as of September 28, 1996, a copy of which is also
attached as part of Schedule 4.06, has been prepared in
accordance with GAAP consistently applied, subject to normal year-
end adjustments, and presents fairly in all material respects the
results of operations of BGH Holdings, BRH Holdings and the
Companies for the period covered.
(b) Attached as Schedule 4.06 (b) hereto is a schedule
of the liabilities comprising the Excluded Liability Amount as of
the Latest Balance Sheet Date. There are no long-term
liabilities of BGH Holdings, BRH Holdings or the Companies as of
the Latest Balance Sheet Date that are required to be reflected
on a balance sheet prepared in accordance with GAAP consistently
applied other than the Excluded Liability Amount as of the Latest
Balance Sheet Date set forth on Schedule 4.06 (b). As of the
Closing Date, there will be no long-term liabilities of BGH
Holdings, BRH Holdings or the Companies that are required to be
reflected on a balance sheet prepared in accordance with GAAP
consistently applied other than the Excluded Liability Amount as
of the Closing Date. The Excluded Liabilities as of the Closing
Date will be calculated in a manner consistent with the manner of
calculation of the Excluded Liabilities as of the Latest Balance
Sheet Date.
Section 4.07 No Undisclosed Liabilities. Except as
disclosed on Schedule 4.07 or otherwise in this Agreement or in
the Schedules hereto, and except as reflected, or reserved
against in the Latest Balance Sheet or incurred thereafter in the
ordinary course of business (and which do not and cannot
reasonably be expected to have, in the aggregate, a material
adverse effect on BGH Holdings, BRH Holdings and the Companies,
taken as a whole), BGH Holdings, BRH Holdings and the Companies
have no liabilities or obligations other than liabilities and
obligations that are immaterial in nature and incurred in the
ordinary course of business. The Financial Statements do not
include or reflect any assets, liabilities, equity, results of
operations or cash flows of any person, corporation, partnership
or other business other than BGH Holdings, BRH Holdings and the
Companies.
Section 4.08 No Material Adverse Change. Except as
disclosed on Schedule 4.08, since the date of the Latest Balance
Sheet (i) each of BGH Holdings, BRH Holdings and the Companies
has conducted its business only in the ordinary course and in
conformity with past practice, and (ii) there has been no
material adverse change in the business, operations, operating
results, assets or liabilities of BGH Holdings, BRH Holdings and
the Companies, all considered as a whole.
Section 4.09 Absence of Certain Changes. Except as
disclosed on Schedule 4.09, since the date of the Latest Balance
Sheet, none of BGH Holdings, BRH Holdings or the Companies has:
(a) Created, incurred, assumed or guaranteed any
indebtedness or become subject to any liabilities, except current
liabilities incurred in the ordinary course of business and
liabilities under contracts entered into in the ordinary course
of business;
(b) Subjected any of its assets, tangible or
intangible, to any Lien, except liens for current property taxes
not yet due and payable;
(c) Sold, assigned or transferred any assets, except
inventory in the ordinary course of business and consistent with
past practices or, in the case of accounts receivable, pursuant
to the terms of the Accounts Receivable Facility;
(d) Sold, assigned, transferred or permitted to lapse
any patents, trademarks, trade names, copyrights, trade secrets
or other intangible assets or rights thereto;
(e) Suffered any extraordinary losses, whether or not
covered by insurance, forgiven or canceled any debts or claims or
waived any right of material value;
(f) Entered into any transaction (except as
contemplated otherwise herein) other than in the ordinary course
of business or any transaction (not involving purchase and sales
of inventory) involving commitments for expenditures in excess of
$150,000;
(g) Made capital expenditures not previously committed
or new commitments for capital expenditures individually in
excess of $75,000 or that aggregate in excess of $150,000;
(h) Increased the compensation, bonuses, or benefits
payable or to become payable by Holdings or the Companies to any
of its officers or to any other employees, except for scheduled
annual increases in the normal course of business, consistent
with past practice and not exceeding six percent per annum;
(i) Suffered any work stoppage or labor dispute;
(j) Changed any of the accounting principles followed
by it or the methods of applying such principals;
(k) Except in accordance with GAAP applied on a basis
consistent with the Financial Statements, written down or written
up the value of, or changed the method of valuing any inventory,
changed the manner in which cost allocations are made; or written
off as uncollectible any note, trade account or other receivable;
(l) Conducted its operations otherwise than in the
ordinary due course; or
(m) Entered into any agreements to do any of the
things previously set forth in this Section 4.09.
Section 4.10 Directors, Officers and Bank Accounts.
Schedule 4.10 contains a complete and accurate list of all
officers and directors of each of BGH Holdings, BRH Holdings and
the Companies and a complete and accurate list (including
addresses) of all bank accounts, safe deposit boxes and lock
boxes maintained by each of BGH Holdings, BRH Holdings or the
Companies which will be retained by any of BGH Holdings, BRH
Holdings or the Companies after Closing, and a list of all
authorized signatories thereto.
Section 4.11 Accounts Receivable. All outstanding
receivables generated by the Companies, including, without
limitation, those accounts receivable that are to be sold to
Buyer by SFFC pursuant to the terms and conditions of the
Accounts Receivable Purchase Agreement are bona fide receivables
arising out of arms-length transactions and will, at Closing, be
valid and enforceable claims against customers (subject to no
defenses, offsets or counterclaims) for goods or services
delivered or rendered in the ordinary course of business.
Section 4.12 Inventory. All inventories reflected on the
Latest Balance Sheet (including, without limitation, finished
goods, work-in-process, raw materials and supplies) were as of
such date and all inventories existing on the Closing Date will
be:
(a) Properly valued at the lower of cost or fair
market value in accordance with GAAP consistently applied and
consistent with prior practices of the Companies;
(b) Valued so as to include no material amounts that
are not of good and merchantable quality, and salable and usable
for the purposes intended in the ordinary course of business;
(c) In conformity with warranties customarily given to
purchasers of like products; and
(d) At levels adequate and not excessive in relation
to the circumstances of the Companies' business and in accordance
with past inventory stocking practices.
Except as set forth on Schedule 4.12, no inventory is
held on consignment by or for the Companies and none of the
Companies is under any material liability or obligation with
respect to the return of inventory or merchandise. All
ingredients and finished products in inventory (i) comply in all
material respects with the Food, Drug and Cosmetic Act and all
acts amending or supplementing the Food, Drug and Cosmetic Act
(including, without limitation, the Food Additive Amendment of
1958), and with the pure food and drug laws of each and all
states of the United States into which any such product would
normally be shipped by the Companies, (ii) are not adulterated or
misbranded within the meaning of the Food, Drug and Cosmetic Act
or such state laws, (iii) are not prohibited from introduction
into interstate commerce under the provisions of Section 404 or
505 of the Food, Drug and Cosmetic Act, and (iv) do not contain a
hazardous substance or a banned substance.
Section 4.13 Insurance. Schedule 4.13 contains a complete
and correct list and summary description (including the name of
the insurer, coverage and expiration date) of all policies of
insurance relating to BGH Holdings', BRH Holdings' or the
Companies' businesses which are in force, or which are still open
for retroactive premium adjustments, including the amounts
thereof, maintained by BGH Holdings, BRH Holdings or the
Companies or in which BGH Holdings, BRH Holdings or the Companies
is a named insured or on which BGH Holdings, BRH Holdings or the
Companies is directly or indirectly paying premiums. All
premiums due and payable have been paid and all such policies are
in full force and effect in accordance with their respective
terms. Such policies comply with applicable law in all material
respects and are consistent in all material respects with
insurance coverage levels maintained by or for the Companies
since August 16, 1993. Such policies will remain in full force
and effect through the Closing Date.
Section 4.14 Title to Assets and Conditions.
(a) Except as set forth on Schedules 4.14, 4.15, 4.16
or 4.17, each of BGH Holdings, BRH Holdings and the Companies is
the sole and exclusive legal and equitable owner of all right,
title and interest in and has good and marketable title to all of
the properties or assets used in BGH Holdings, BRH Holdings or
such Company's business. Except as set forth in Schedules 4.14
and 4.15, such properties and assets are not subject to any Lien
which materially detracts from the value or interfere with the
present use of such properties or assets.
(b) Except as set forth on Schedule 4.14, all
properties and assets of the Companies are in satisfactory
operating condition and repair, ordinary wear and tear excepted.
Section 4.15 Owned Real Estate.
(a) None of Seller, BGH Holdings or BRH Holdings is
the legal or beneficial owner of any real estate.
(b) Schedule 4.15 sets forth a list of all of the real
estate owned by each of the Companies (such real estate is
collectively referred to herein as the "Owned Real Estate"),
including the street addresses and legal descriptions for all of
the Owned Real Estate. Except as set forth on Schedule 4.15(b),
with respect to each parcel of Owned Real Estate, the Company
identified on Schedule 4.15 as the Owner thereof has (and will
continue to have immediately following consummation of the
transactions contemplated hereby) good, valid, marketable, and
indefeasible fee simple title to, and, except as set forth on
Schedule 4.15 is in actual possession of, such parcel of Owned
Real Estate, including the buildings, structures, fixtures and
improvements situated thereon and the appurtenances thereto. To
the knowledge of Seller, each of the legal descriptions included
on Schedule 4.15 is accurate, current and complete. Seller has
delivered to Buyer complete copies of current surveys pertaining
to each parcel of the Owned Real Estate, and to Seller's
knowledge, such surveys are accurate in all material respects,
and no changes or improvements have been made to such properties
which would be reflected in an updated survey. The Owned Real
Estate is free and clear of all Liens, except (i) matters set
forth on Schedule 4.15 and referred to as "Exceptions that will
not exist at Closing" (the "Exceptions That Will Not Exist At
Closing"), (ii) matters set forth on Schedule 4.15 and referred
to as "Permitted Exceptions", none of which is material in amount
and none of which, individually or in the aggregate, impairs, or
grants or evidences rights which if exercised would impair, the
use of the affected property in the manner such property is
currently being used, or impairs the current operations of any of
the Companies (iii) defects of title, conditions, easements,
encroachments, covenants or restrictions, if any, none of which
is material in amount and none of which, individually or in the
aggregate, materially impairs, or grants or evidences rights
which if exercised would materially impair, the use of the
affected property in the manner such property is currently being
used, or impairs the current operations of any of the Companies,
and (iv) zoning or land use ordinances, none of which, to
Seller's knowledge, individually or in the aggregate, impairs the
use of the affected property in the manner such property is
currently being used or impairs the current operations of any of
the Companies (collectively, "Permitted Exceptions"). To
Seller's knowledge, none of Seller, BRH Holdings, BGH Holdings,
or the Companies has received written notice of any violation of
or non-conformity with any zoning, subdivision, wetlands or other
similar law, code, rule, regulation or ordinance from any
governmental authority with respect to any of the Owned Real
Estate, or of any condemnation action, eminent domain proceeding
or other litigation concerning any of the Owned Real Estate.
Except as set forth on the Title Commitments or on the surveys
delivered to Buyer by Seller as provided in this Section 4.15, to
the knowledge of Seller, no portion of any of the improvements
erected on the Owned Real Estate encroaches on adjoining property
or public streets. To Seller's knowledge none of Seller, BRH
Holdings, BGH Holdings, or the Companies has received any written
notice of the existence of any such encroachment not disclosed by
the Title Commitments or the aforesaid surveys. The water, gas,
electricity and other utilities serving each parcel of the Owned
Real Estate have been and are currently adequate to service the
normal operation of each parcel of the Owned Real Estate, as
conducted in the past and as currently conducted.
(c) On and as of the Closing Date, all of the Owned
Real Estate shall be free and clear of and none of the Owned Real
Estate shall be subject to any of the Exceptions That Will Not
Exist At Closing.
Section 4.16 Real Estate Leases.
(a) Neither BGH Holdings nor BRH Holdings leases any
real estate. Seller does not own or lease any real estate used
in connection with the businesses of BGH Holdings, BRH Holdings,
or the Companies.
(b) Schedule 4.16 sets forth a list of all of the
leases or rights of occupancy pursuant to which the Companies (or
any of them) lease or sublease any real property or interest
therein (collectively, the "Leases"), including the
identification of each of the Lessors thereof and the street
addresses of the real estate demised under any of the Leases
(collectively, the "Leased Real Estate"). Except as set forth in
Schedule 4.16, one or more of the Companies is the lessee under
all Leases, and no party other than one or more of the Companies
has any right to possession, occupancy or use of any of the
Leased Real Estate. A true and correct copy of each of the
Leases has been delivered to Buyer, together with all amendments
and modifications thereto, and no changes, amendments or
modifications have been made thereto since the date of such
delivery, except as permitted by Section 3.02 (k). Each of the
Leases is valid and is in full force and effect and is binding
and enforceable in accordance with its terms except to the extent
such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting
the enforcement of creditors' rights or by general equitable
principles. Except as set forth in Schedule 4.16, none of the
Companies is in default (after expiration of applicable cure or
grace periods) under any provision of any of the Leases, the
failure of which to perform would permit the lessor thereunder to
terminate such Lease, and, to Seller's knowledge, no event has
occurred which (with or without notice, lapse of time or both)
would render any of the Companies in default under any of such
provisions which default would permit the lessor thereunder to
terminate such Lease. To the knowledge of Seller, BRH Holdings,
BGH Holdings, or the Companies, no other party to any of the
Leases is in default under any of the material commitments and
obligations thereof, and no event has occurred which (with or
without notice, lapse of time or both) would render any such
other party in default under any of such provisions.
(c) Except as set forth in Schedule 4.16, the
Companies are in actual possession of the Leased Real Estate.
Except as set forth in Schedule 4.16, the Companies have good and
valid title to all the leasehold estates conveyed under the
Leases free and clear of all Liens except for (i) (A) those
provided under the relevant lease; (B) matters shown on Schedule
4.16; and (C) defects of title, conditions, easements, covenants
or restrictions, if any, none of which items referred to clauses
(A), (B) or (C) above is substantial in amount, and none of
which, individually or in the aggregate, materially impairs or
grants or evidences rights which, if exercised, would materially
impair the current use of the affected property in the manner
such property is currently being used by the Companies, or
impairs the operations of any of the Companies; (ii) zoning or
land use ordinances, none of which, to Seller's knowledge,
individually or in the aggregate, materially impairs the use of
the affected property in the manner such property is currently
being used, or impairs the current operations of any of the
Companies; and (iii) liens for taxes not yet due and payable (iv)
any mortgage liens granted by any lessor under any of the Leases
of the lessor's interest in the underlying real estate or the
Leases. To Seller's knowledge, none of the Companies has
received written notice of any violation of or non-conformity
with any zoning, subdivision, wetlands or other similar law,
code, rule, regulation or ordinance from any governmental
authority with respect to any of the Leased Real Estate, or of
any condemnation action, eminent domain proceeding or other
litigation concerning any of such properties.
(d) Except as set forth in Schedule 4.16, the basic
rent, all additional rent and all other charges and amounts
payable under the Leases have been paid to date and not more than
one month in advance. All work required to be performed under
the Leases by the landlords thereunder or by any of the Companies
have been performed, and, to the extent that any of the Companies
is responsible for payment of such work, has been fully paid for,
whether directly to the contractor performing such work or to
such landlord as reimbursement therefor, except for items which
any of the Companies is disputing in good faith (which items are
set forth in Schedule 4.16).
(e) Except as set forth on Schedule 4.16, there are no
brokerage commissions or finder's fees due from Seller or any of
the Companies which are unpaid with regard to any of the Leases
or the Leased Real Estate or which will become due at any time in
the future with regard to the Leases or the Leased Real Estate.
(f) Except as set forth in Schedule 4.16, there have
been no casualties which are reasonably likely to result in the
termination of any of the Leases or the exercise of any buy-out
provision contained in any of the Leases relative to damage by
casualty.
(g) Except as set forth on Schedule 4.16, (i) no
consent of any of the lessors under any of the Leases is required
by reason of any of the transactions contemplated by this
Agreement, and (ii) none of the rights of any of the Companies
under any of the Leases will be impaired by the consummation of
the transactions contemplated by this Agreement and all of such
rights will be enforceable by the Companies after the Closing
Date without the consent or agreement of any other party,
including all rights to purchase any of the Leased Real Estate or
to renew any of the Leases pursuant to options to purchase or
renew contained in any of the Leases. Any lessor under any of
the Leases whose consent or agreement is required is identified
as such on Schedule 4.16.
Section 4.17 Personal Property Leases.
(a) Neither BGH Holdings nor BRH Holdings leases any
personal property.
(b) Schedule 4.17 contains a complete and accurate
list of all leases of personal property, including vehicle and
equipment leases, leased by the Companies that require annual
payments in excess of $10,000 (the "Personal Property Leases").
Seller has delivered to Buyer copies of all the Personal Property
Leases.
(c) The Personal Property Leases are in full force and
effect and are valid, binding and enforceable in accordance with
their respective terms.
(d) No amount payable under any Personal Property
Lease is past due.
(e) Except as set forth on Schedule 4.17, the
Companies have, and, to the knowledge of each of Seller, BGH
Holdings, BRH Holdings and the Companies, each other party
thereto has complied with all material commitments and
obligations on its part to be performed or observed under each
Personal Property Lease.
(f) Neither Seller, BGH Holdings, BRH Holdings nor the
Companies has received any notice of a default (which has not
been cured), offset or claim under any Personal Property Lease,
or any other communication calling upon Seller, Holdings or the
Companies to comply with any provision of any Personal Property
Lease, and no event or condition has happened or presently exists
which constitutes a default or, after notice or lapse of time or
both, would constitute a default under any Personal Property
Lease.
Section 4.18 Motor Vehicles. All motor vehicles used in
the Company's business, whether owned or leased, are listed on
Schedule 4.18. All licenses, permits, inspections and other
authorizations necessary for the use of such vehicles by the
Companies have been obtained and are in full force and effect.
Section 4.19 Intellectual Property. Schedule 4.19
contains a complete and accurate list of all patents and patent
applications, trademark registrations and applications, copyright
registrations and applications, and all unregistered trademarks,
tradenames, service marks and logos, and registered and assumed
or fictitious names used by any of BGH Holdings, BRH Holdings or
the Companies in the conduct of its businesses specifying as to
each such item, as applicable: (i) the owner of the item; (ii)
the jurisdictions in which the item is issued or registered or in
which any application for issuance or registration has been
filed, including the respective issuance, registration, or
application number; and (iii) the date of issuance or
registration of the item. Schedule 4.19 also contains a complete
and accurate list and description of all licenses and other
agreements relating to any of the foregoing. Except as set forth
on Schedule 4.19:
(a) Each of BGH Holdings, BRH Holdings and the
Companies owns, has the exclusive right to use, and has the right
to bring actions for the infringement of, all patents,
trademarks, service marks and trade names set forth on Schedule
4.19 and to the knowledge of Seller, each of BGH Holdings, BRH
Holdings and the Companies has the right to use without cost the
other intellectual property necessary for the operation of its
business as currently conducted. The trademarks, service marks
and trade names set forth on Schedule 4.19 are the only such
intellectual property rights used in the conduct of the
Companies' business in the manner in which it is currently being
conducted.
(b) The operation of the businesses of each of BGH
Holdings, BRH Holdings and the Companies does not, to the
knowledge of Seller, infringe on the patents, trademarks, service
marks, trade names, trade dress, copyrights, industrial design
rights, trade secrets or other intellectual property rights of
any third party and, to the knowledge of Seller, no claim has
been made, notice given, or dispute arisen to that effect.
(c) None of the Companies, BGH Holdings, BRH Holdings
nor Seller has given any indemnification to any third party
against infringement of patent, trademark, copyright or other
intellectual property rights.
(d) None of the Companies, BGH Holdings, BRH Holdings
nor Seller has any pending claim that a third party has violated
or infringed any of its patents, trademarks, service marks, trade
names, trade dress, copyrights, industrial design rights, trade
secrets or other proprietary rights.
(e) Except for computer software licenses and implied
licenses relating to any equipment used by the Companies in the
ordinary course of business, no trademark, service mark or trade
name is used pursuant to a license from a third party or licensed
to a third party. None of the Companies, BGH Holdings, BRH
Holdings, Seller nor any other party is in breach of or default
under any such license and each such license is now and
immediately following the Closing will be valid and in full force
and effect.
(f) All of the patents, trademark and service mark
registrations, and copyright registrations set forth on Schedule
4.19 are valid and in full force, are held of record in the name
of the designated Company free and clear of all liens,
encumbrances and other claims, and are not the subject of any
cancellation or reexamination proceeding or any other proceeding
challenging their extent or validity. The designated Company on
Schedule 4.19 is the applicant of record in all patent
applications, and applications for trademark, service mark, and
copyright registrations, and no opposition, extension of time to
oppose, interference, rejection, or refusal to register has been
received in connection with any such application.
(g) No order, holding, decision or judgment has been
rendered by any governmental authority, and no agreement, consent
or stipulation exists, which would limit the use by any of the
Companies of any intellectual property or any advertising or
promotional claim or campaign.
Seller has delivered to Buyer copies of each document listed
on Schedule 4.19.
Section 4.20 Material Contracts. All contracts,
agreements, instruments, plans and leases (other than those
disclosed on another schedule to this Agreement or entered into
after the date hereof with the written consent of Buyer) to which
any of BGH Holdings, BRH Holdings or the Companies are parties,
or by which any of BGH Holdings', BRH Holdings' or any of the
Companies' properties are subject or bound, meeting any of the
descriptions set forth below (together with all contracts,
agreements and leases disclosed on another Schedule to this
Agreement, the "Material Contracts"), are listed on Schedule
4.20.
(a) Any purchase order, agreement or commitment
obligating any of BGH Holdings, BRH Holdings or the Companies to
purchase or sell any products or services or pay any amount and
which either (i) was not entered into in the normal course of
business, or (ii) is not terminable without payment or penalty
upon sixty (60) days' (or less) notice, or (iii) is in an
aggregate amount exceeding $25,000;
(b) Any loan agreement, promissory note, indenture, or
letter of credit that will affect any of BGH Holdings, BRH
Holdings or the Companies or their assets after Closing, any
contract or agreement for the deferred purchase price of property
(excluding normal trade payables), or any instrument guaranteeing
any indebtedness;
(c) Any contract or agreement by which any of BGH
Holdings, BRH Holdings or the Companies is guaranteeing any
obligations of any person or entity, or any person or entity is
guaranteeing any obligations of any of BGH Holdings or BRH
Holdings or the Companies;
(d) Any joint venture, partnership or other
arrangement involving a sharing of profits;
(e) Any sales agency, brokerage, distribution or
similar contract;
(f) Any agreement which includes provisions regarding
minimum volumes or volume discounts;
(g) Any agreement pursuant to which a rebate,
discount, bonus, commission or other payment with respect to the
sale of any product of the Companies will be payable or required
after the Closing;
(h) Any consulting agreement or arrangement;
(i) Any contract or agreement involving the sale by or
to the Companies of products on consignment;
(j) Any contract or agreement containing a power of
attorney;
(k) Any contract or agreement restricting any of BGH
Holdings, BRH Holdings or the Companies from carrying on business
anywhere in the world; and
(l) Any contract or arrangement with any Affiliate of
Holdings or the Companies; and
(m) Any subordination, non-disturbance, attornment or
similar agreement relating to the Leased Real Estate.
Except as set forth on Schedule 4.20:
(i) all Material Contracts are in full force and
effect and are valid, binding and enforceable
against BGH Holdings, BRH Holdings or such
Company (and, to the knowledge of Seller, BGH
Holdings, BRH Holdings and the Companies,
other parties thereto) in accordance with
their terms;
(ii) none of BGH Holdings, BRH Holdings or the
Companies is, and, to the knowledge of
Seller, BGH Holdings, BRH Holdings and the
Companies, no other party to any Material
Contract is, in breach of any provision of,
in violation of, or in default under the
terms of any Material Contract;
(iii) no event has occurred which, after the
giving of notice or passage of time or both,
would constitute a default under or result in
the breach of any Material Contract by any of
BGH Holdings, BRH Holdings or the Companies,
or to the knowledge of Seller, BGH Holdings,
BRH Holdings or the Companies, by any other
party; and
(iv) no consent of any other party under any
Material Contract is required by reason of
any of the transactions contemplated by this
Agreement, and none of the material rights of
any of the Companies under any of the
Material Contracts will be impaired by the
consummation of the transactions contemplated
by this Agreement and all of such rights will
be enforceable by the Companies after the
Closing Date without the consent or agreement
by any other party.
Seller has delivered to Buyer copies of each Material
Contract.
Section 4.21 Employees. Schedule 4.21 contains a complete
and accurate list of all of the following to which Holdings or
the Companies is a party or by which it is bound, whether written
or unwritten, all of which are collectively referred to herein as
the "Benefit Plans".
(a) Employment contracts with employees of Holdings or
the Companies;
(b) Collective bargaining agreements;
(c) Commission, incentive or bonus plans or
arrangements;
(d) Pension and retirement plans as defined in ERISA
Section 3(2), including multiemployer pension plans as defined in
ERISA Section 3(37), and multiemployer health and welfare plans
to which any obligation to contribute exists under a collective
bargaining or similar agreement;
(e) Profit sharing plans;
(f) Non-qualified deferred compensation plans;
(g) Medical, dental, life or health insurance plans;
(h) Stock purchase, stock option, phantom stock or
similar plans;
(i) Severance plans or policies;
(j) Welfare benefit plans as defined in Section 3(1)
of ERISA;
(k) All other material employee fringe benefits; and
(l) Any plan or arrangement that provided any of the
benefits described above but was terminated since August 16, 1993
or, to the Seller's knowledge, in the three-year period preceding
such date.
Except as set forth on Schedule 4.21, BGH Holdings, BRH
Holdings and each of the Companies has complied in all material
respects with its obligations related to, and is not in default
under, any of the foregoing and each of the foregoing has been
operated in compliance with its terms, the Code and ERISA in all
material respects since August 16, 1993 and, to the Seller's
knowledge, in the three year period preceding such date. Seller
has delivered to Buyer a true and complete list of the name,
position and present rate of compensation, including accrued
bonuses, of each employee of each of BGH Holdings, BRH Holdings
and the Companies. Except as set forth on Schedule 4.21, on the
date hereof there are no unfair labor practices, employment
related litigation, administrative proceedings or controversies
pending or, to the knowledge of Seller, Holdings or the
Companies, threatened involving any employee of Holdings or the
Companies. Each of BGH Holdings, BRH Holdings and the Companies
is in compliance in all material respects with its obligations
under all statutes, executive orders and other governmental
regulations governing its employment practices, including without
limitation, provisions relating to wages, hours, equal
opportunity, discrimination in employment, and payment of social
security and other taxes. None of BGH Holdings, BRH Holdings or
the Companies has suffered or sustained any labor disputes
resulting in any work stoppage, and no such work stoppage is
threatened. Except as set forth on Schedule 4.21, to Seller's,
Holdings' and the Companies' knowledge on the date hereof, there
are no attempts being made to organize any employees presently
employed by the Companies. All payments to employees which would
have been paid in the ordinary course of business on or before
the Closing Date shall have been paid as of the Closing. As of
the Closing, none of the employees of BGH Holdings, BRH Holdings
or the Companies will then, or, will by the passage of time
hereafter become, entitled to receive any vacation time or
vacation pay attributable to services rendered prior to the
Closing except as provided for in the Adjusted Closing Date
Balance Sheet. Accrued bonuses of employees of BGH Holdings, BRH
Holdings or the Companies existing at the Closing Date will be
consistent with the past compensation practices of the Companies
and will be fully set forth on the Adjusted Closing Date Balance
Sheet.
Section 4.22 ERISA. Except as set forth on Schedule 4.22,
with respect to each Benefit Plan that is an employee pension
benefit plan (as defined in Section 3(2) of ERISA (an "ERISA
Plan")):
(a) Each of BGH Holdings, BRH Holdings and the
Companies has, with respect to each ERISA Plan, fulfilled the
obligations under the minimum funding standards of ERISA and the
Code and is in compliance in all material respects with the
applicable provisions of ERISA and the Code, and (i) has not
incurred any liability to the Pension Benefit Guaranty
Corporation or under an ERISA Plan, (ii) to Seller's knowledge,
has not received any written notice providing that BGH Holdings,
BRH Holdings or the Companies has any liability to the Pension
Benefit Guaranty Corporation or under an ERISA Plan, and (iii) to
Seller's knowledge, no event has occurred which would be
reasonably likely to result in liability to the Pension Benefit
Guaranty Corporation or under an ERISA Plan, in each case in
connection with the termination of an ERISA Plan pursuant to
Title IV of ERISA, where such liability would have a material
adverse effect on the financial condition of BGH Holdings, BRH
Holdings or the Companies;
(b) With respect to any ERISA Plan, there have been no
prohibited transactions (as defined in Section 4975(c) of the
Code and Section 406 of ERISA) or reportable events (as defined
in Section 4043(b) of ERISA and regulations thereunder);
(c) Each ERISA Plan which is intended to be a
qualified plan under Section 401(a) of the Code is qualified
under Code Section 401(a) and has received a favorable
determination letter from the Internal Revenue Service and no
such letter has been revoked or threatened to be revoked;
(d) No withdrawal liability (as defined in ERISA
Section 4201) has been incurred by or asserted against BGH
Holdings, BRH Holdings, the Companies or any of its ERISA
Affiliates with respect to a withdrawal from any multiemployer
pension (as defined in Section 3(37) of ERISA) or any
contractually imposed withdrawal liability under any
multiemployer health and welfare plan which has not been
satisfied in full. To Seller's knowledge, no liability could be
imposed against any of BGH Holdings, BRH Holdings or any of the
Companies for any withdrawal liability, as defined in ERISA
Section 4201, if as of the Closing Date, any of the Companies or
any ERISA Affiliate were to have a complete withdrawal, as
defined in ERISA Section 4203, from any multiemployer plan, as
defined in ERISA Section 3(37). No liability has been assessed
against any of BGH Holdings, BRH Holdings or the Companies under
Title IV of ERISA with respect to any ERISA Plan or any other
employee pension benefit plan, as defined in ERISA Section 3(2),
contributed to or maintained by an ERISA Affiliate;
(e) Except as set forth on Schedule 4.22, all material
reports, returns and similar documents with respect to the
Benefit Plans required to be filed with any government agency or
distributed to any Benefit Plan participant have been duly and
timely filed or distributed;
(f) Each of BGH Holdings, BRH Holdings and the
Companies has complied with the notice and continuation coverage
requirements of Section 4980B of the Code and the regulations
thereunder ("COBRA") with respect to each Benefit Plan that is a
group health plan within the meaning of Section 5000(b)(1) of the
Code;
(g) Except as set forth on Schedule 4.22, there are no
pending investigations by any governmental agency involving the
Benefit Plans, no termination proceedings involving the Benefit
Plans, and no threatened or pending claims (except for claims for
benefits payable in the normal operation of the Benefit Plans),
suits or proceedings against any Benefit Plans asserting any
rights or claims to benefits under any Benefit Plan which could
give rise to any material liability, nor to the knowledge of
Seller, are there any facts which could rise to any material
liability in the event of any such investigation, claim, suit or
proceeding;
(h) Except as set forth on Schedule 4.22, no payment
which is or may be made by any of BGH Holdings, BRH Holdings, or
the Companies, or from any Benefit Plan, to any employee, former
employee, director or agent of any of BGH Holdings, BRH Holdings
or the Companies under the terms of any Benefit Plan, either
alone or in conjunction with any other payment, has been or could
in all reasonably likelihood be characterized as an excess
parachute payment under Section 280G of the Code; and
(i) No Benefit Plan, other than on ERISA Plan,
provides or will provide any benefits to any current retiree or
any future retiree of any of BGH Holdings, BRH Holdings or the
Companies, except as required under COBRA.
Section 4.23 Taxes.
(a) Each of BGH Holdings, BRH Holdings and the
Companies (or an Affiliate on behalf of Holdings and the
Companies) has filed when due (after giving effect to applicable
extensions of the time for filing) all Returns for Taxes that it
was required to file and has timely paid in full all Taxes shown
to be due on such Tax Returns or, except as disclosed in Schedule
4.23(a), for which notice of assessment or demand for payment has
been received. All such Returns for Taxes were correct and
complete in all material respects. Except as set forth on
Schedule 4.23, neither BGH Holdings, BRH Holdings nor the
Companies is currently the beneficiary of any extension of time
within which to file any Tax Return. To The knowledge of Seller,
Holdings and the Companies, no claim has been made by a Tax
Authority in a jurisdiction where any of BGH Holdings, BRH
Holdings or the Companies do not file Income Tax Returns that any
of BGH Holdings, BRH Holdings or the Companies is subject to
taxation by that jurisdiction. There is no Lien affecting any of
the assets of BGH Holdings, BRH Holdings or the Companies that
arose in connection with any failure or alleged failure to pay
any Tax.
(b) Except as set forth on Schedule 4.23, there is
currently no dispute or claim raised by any Tax Authority in
writing concerning any Tax liability of BGH Holdings, BRH
Holdings or the Companies and no notification of an intent to
examine has been received from any Tax Authority. Schedules 4.23
(a) and (b) list all Income Tax Returns of BGH Holdings, BRH
Holdings and the Companies for taxable periods ended on or after
December 31, 1993 and indicates those Tax Returns that have been
audited and indicates those Tax Returns that currently are the
subject of audit. Seller has delivered to Buyer copies of those
portions of all filed Income Tax Returns, examination reports
related to Taxes, and statements of deficiencies related to Taxes
assessed against or agreed to by Seller, BGH Holdings, BRH
Holdings or the Companies for any taxable period ended on or
after December 31, 1993 that pertain to BGH Holdings, BRH
Holdings or the Companies.
(c) Except as set forth on Schedule 4.23, neither
Seller, BGH Holdings, BRH Holdings, nor the Companies have waived
any statute of limitations in respect of Taxes applicable to BGH
Holdings, BRH Holdings or the Companies or agreed to any
extension of time with respect to an Income Tax assessment or
deficiency applicable to BGH Holdings, BRH Holdings or the
Companies.
(d) The transactions contemplated by this Agreement
are not subject to tax withholding pursuant to the provisions of
Section 3406 or Subchapter A of Chapter 3 of the Code or any
other provisions of applicable law. Neither Seller, BGH
Holdings, BRH Holdings nor the Companies is a Person other than a
United States Person within the meaning of the Code.
(e) Except as set forth on Schedule 4.23, neither BGH
Holdings, BRH Holdings nor any of the Companies is a party to any
tax allocation or tax sharing agreement. Since August 16, 1993,
neither BGH Holdings, BRH Holdings nor the Companies has been a
member of an affiliated group filing a consolidated Federal
Income Tax Return other than a group the common parent of which
is Specialty Foods Acquisition Corporation.
(f) Neither BGH Holdings, BRH Holdings nor the
Companies is a party to any joint venture, partnership or other
arrangement or contract which could be treated as a partnership
for Federal Income Tax purposes.
(g) Except as disclosed on Schedule 4.23(g), neither
BGH Holdings, BRH Holdings nor any Company has ever (i) filed any
consent agreement under Section 341(f) of the Code; (ii) been the
subject a Tax ruling that continuing effect; (iii) been the
subject of a closing agreement with any Tax Authority that has
continuing effect; (iv) filed or been the subject of an election
under Section 338(g) or Section (h)(10) of the Code or caused or
been the subject of a deemed election under Section 338(e) of the
Code; or (v) granted a power of attorney with respect to any Tax
matters that has continuing effect. Except as disclosed on 4.23,
neither BGH Holdings, BRH Holdings nor any Company has agreed to
make, nor is it required to make, any adjustment under Section
481 of the Code by reason of a change of accounting method or
otherwise. Neither BGH Holdings, BRH Holdings nor any Company is
a party to any agreement that under any circumstances could
obligate it to make any payments that would not be deductible
under Section 280G of the Code. BGH Holdings, BRH Holdings and
the Companies have withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing
to any employee, shareholder, creditor, independent contractor or
other party.
Section 4.24 Litigation.
(a) Except as set forth on Schedule 4.24, neither BGH
Holdings, BRH Holdings nor any of the Companies is engaged in or
a party to or, to the knowledge of Seller, BGH Holdings, BRH
Holdings or the Companies, threatened with, any suit, action,
proceeding, investigation or legal, administrative, arbitration
or other method of settling disputes or disagreements or any
governmental investigation. There are no actions, suits,
proceedings, orders or investigations pending or, to the
knowledge of Seller, BGH Holdings, BRH Holdings and the
Companies, threatened against any of Seller, BGH Holdings or the
Companies, at law or in equity, or before or by any federal,
state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign,
which question or challenge the validity of this Agreement or the
consummation of the transactions contemplated hereby.
(b) Except as set forth on Schedule 4.24, neither BGH
Holdings, BRH Holdings nor any of the Companies is currently, and
none has been since August 16, 1993, subject to any judgment,
decree, binding arbitration, order, settlement or consent
agreement (other than generally issued executive or regulatory
orders which are intended to apply to substantially all companies
in the industry) which could reasonably be expected to have a
material adverse effect on the business, financial condition,
results of operations or operations of BGH Holdings, BRH Holdings
and the Companies, all taken as a whole.
Section 4.25 Compliance with Law, and Licenses and
Permits.
(a) Neither BGH Holdings, BRH Holdings nor the
Companies is in violation of any law ordinance, code, rule or
regulation, including, without limitation, any Environmental Law
or any law or regulation pertaining to occupational safety or
health, environmental protection, price discrimination,
antitrust, equal employment opportunity, employees' retirement
income security or any other law, ordinance, judicial decree,
order or regulation applicable to it, which could reasonably be
expected to have a material adverse affect on the business,
financial condition, results of operations or operations of BGH
Holdings, BRH Holdings and the Companies, all taken as a whole.
Except as set forth on Schedule 4.25, no notice has been issued
since January 1, 1993 by any governmental body or other person of
any violation of any law, ordinance, code, rule or regulation or
requiring or calling attention to the necessity the payment of
penalties or of any work, repairs, new construction,
installation, alteration or Remediation in connection with any
real or personal property or equipment of the Companies.
(b) Each of BGH Holdings, BRH Holdings and the
Companies has duly filed all reports and returns and has obtained
all material licenses, permits, approvals, franchises, clearances
and other authorizations as are necessary in order to enable it
to own, operate, and use its assets and conduct its businesses as
it is currently being conducted and occupy and lease its real
property. All such material licenses, permits, approvals,
franchises, clearances and authorizations are listed on Schedule
4.25, and are in full force and effect.
Section 4.26 Environmental Matters
(a) Except as disclosed on Schedule 4.26, the
operations of the Companies, including, without limitation, the
use and operation by the Companies of each parcel of Owned Real
Estate and the Leased Real Estate identified on Schedule 2.01(d)
has been, and on the Closing Date will be, in compliance in all
material respects with all Environmental Laws.
(b) Except as disclosed on Schedule 4.26, no Hazardous
Materials have been Released in violation of applicable
Environmental Law, or in a manner that requires Remediation of
property under applicable Environmental Law at, on, or under any
Owned Real Estate or the Leased Real Estate identified on
Schedule 2.01(d) or, to Seller's knowledge, at any other property
formerly used in connection with the operation of the businesses.
(c) Except as disclosed on Schedule 4.26, there are no
claims, notices, civil, criminal or administrative actions,
suits, hearings, investigations, inquiries or proceedings
("Environmental Proceedings") pending or to the knowledge of
Seller, BGH Holdings, BRH Holdings or the Companies threatened
that are based on or related to Environmental Matters.
(d) Except as disclosed on Schedule 4.26, neither
Holdings nor any of the Companies has used any waste disposal
treatment, storage or recycling site, or otherwise disposed of,
transported, or arranged for the transportation of, any Hazardous
Materials to any place or location which is listed or, to
Seller's knowledge, proposed for listing under CERCLA or any
similar state list, or in violation of any Environmental Laws and
none of the Owned Real Property, or, to the Seller's knowledge,
Leased Real Property identified on Schedule 2.01(d) are listed
under CERCLA or any similar State List.
(e) Except as disclosed on Schedule 4.26, there are no
underground storage tanks, regulated concentrations of
polychlorinated biphenyls ("PCBs"), surface impoundments at, on,
under or within any Owned Real Estate or, to the Seller's
knowledge, Leased Real Estate identified on Schedule 2.01(d), and
any underground storage tanks which were removed by anyone from
any Owned Real Estate during the period when the Companies owned
such real estate or, by or on behalf of the Companies from any
Leased Real Estate or, to the Seller's knowledge, by any other
person from any Leased Real Estate identified on Schedule 2.01(d)
during the term of the relevant lease, in each case were removed
in compliance in all material respects with all Environmental
Laws as such laws existed at the time of such removal and any
Remediation required by Environmental Laws in connection with
such removal was conducted in compliance in all material respects
with all Environmental Laws.
(f) Except as disclosed on Schedule 4.26, neither
Holdings nor the Companies has filed or received any oral or
written notice of a Release or threat of Release of a Hazardous
Material or been notified that it is or may be a potentially
responsible party at any waste disposal site or other location
used for the disposal, treatment or storage of any Hazardous
Materials.
(g) No individual item disclosed on Schedule 4.26 (g)
will result in Losses in excess of $10,000 (the "Environmental
Threshold"), and the aggregate of all such items will not result
in Losses in excess of $200,000 (the "Aggregate Environmental
Threshold").
(h) Schedule 4.26 identifies all environmental audits
or assessments or occupational health studies undertaken since
August 16, 1993 by employees of, or consultants engaged by, the
Companies, and, to the knowledge of Seller, Holdings and the
Companies, by any governmental agency, the results of ground
water and soil testing, the results of underground fuel, water or
waste tank tests and soil samples, written communications with
environmental agencies, and OSHA citations or communications
which are in the possession or control of Seller, BGH Holdings,
BRH Holdings or the Companies ("Environmental Reports"), and
copies of all such Environmental Reports have been provided to
Buyer.
Section 4.27 Adequacy of the Companies' Assets/Related
Party Transactions. Except as described on Schedule 4.27:
(a) The Companies' assets are (i) the same in all
material respects as those assets used in the conduct of the
Companies' businesses since August 16, 1993, and (ii) constitute,
in the aggregate, all of the property necessary for the conduct
of the Companies' business in the manner in which it is currently
being conducted; and
(b) There are no contracts or arrangements currently
in effect between BGH Holdings, BRH Holdings and/or the
Companies, on the one hand, and Seller and any of its
subsidiaries or Affiliates other than BGH Holdings, BRH Holdings
and the Companies, on the other hand.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants:
Section 5.01 Corporate Organization and Power. Buyer is a
corporation duly organized and validly existing under the laws of
the State of Delaware, with full corporate power and authority to
execute, deliver and perform this Agreement and the other
agreements contemplated hereby.
Section 5.02 Authority; Authorization. Buyer has full
legal capacity, power and authority to execute, deliver and
perform this Agreement and the other agreements contemplated
hereby and to consummate the transactions contemplated hereby and
thereby. Buyer may execute, deliver and perform this Agreement
without the necessity of obtaining any consent, approval,
authorization or waiver, giving any notice, or making any filings
or disclosures, except as set forth on Schedule 5.02 hereto. The
execution, delivery and performance by Buyer of this Agreement
and the other agreements contemplated hereby have been duly and
validly authorized by Buyer. This Agreement and the other
agreements contemplated hereby constitutes the legal, valid and
binding obligation of Buyer, enforceable against Buyer in
accordance with their terms.
Section 5.03 No Violation. The execution, delivery and
performance of this Agreement and all other agreements
contemplated hereby by Buyer and the consummation of the
transactions contemplated hereby do not and will not (a) conflict
with or result in any breach of any of, (b) constitute a default
under, or (c) result in a violation of the articles of
incorporation or by-laws of Buyer or any indenture, mortgage, or
loan agreement to which Buyer is bound or affected, or any law,
statute, rule, regulation, judgment or decree to which Buyer is
subject.
Section 5.04 Litigation. There are no actions, suits,
proceedings, orders or investigations pending or, to Buyer's
knowledge, threatened against Buyer at law or in equity, or
before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which question or challenge the validity of
this Agreement or the consummation of the transactions
contemplated hereby.
Section 5.05 Acquisition of Shares for Investment. Buyer
has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of
its purchase of the Shares. Buyer confirms that Seller has made
available to Buyer the opportunity to ask questions of the
officers and management employees of Seller, BGH Holdings, BRH
Holdings and the Companies and to acquire additional information
about the business and financial condition of the Companies.
Buyer is acquiring the Shares for investment and not with a view
toward the "distribution" thereof within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). Buyer
agrees that the Shares may not be sold or otherwise disposed of
without registration under the Securities Act, except pursuant to
an exemption from such registration available under the
Securities Act, and without compliance with state, local, or
foreign securities laws, in each case, to the extent applicable.
Section 5.06 Financing/Sufficient Funds.
(a) Buyer agrees to use its reasonable commercial
efforts to obtain and accept a commitment letter in form and
substance reasonably satisfactory (and Seller acknowledges that
the Letter of Heller Financial, Inc. dated November 19, 1996, if
accepted by Buyer, would be satisfactory to Seller (a "Commitment
Letter")) no later than 5:00 p.m. (New York time) on December 10,
1996 (the "Delivery Date") from a commercial lending institution
indicating such institution's willingness to provide to Buyer
aggregate senior bank financing of approximately $50 million.
Upon receipt of a Commitment Letter, Buyer will promptly deliver
to Seller a true and complete copy thereof, and thereafter will
deliver copies of all other final documentation received by Buyer
or Bruckman, Rosser, Sherrill & Co., Inc. ("BRS") relating to
such senior bank financing. In the event that Buyer or BRS has
not delivered to Seller a Commitment Letter to Seller on or prior
to the Delivery Date, Seller shall have the right at any time
after the Delivery Date and prior to the actual delivery to
Seller of a Commitment Letter to (i) terminate this Agreement
pursuant to a written notice delivered by Seller to Buyer, and/or
(ii) commence negotiations with persons other than Buyer
regarding the terms of a potential sale or other business
combination involving any or all of BGH Holdings, BRH Holdings or
the Companies.
(b) BRS has delivered to Seller a letter setting forth
its commitment to provide an aggregate of up to $30,000,000 of
equity and subordinated debt financing. The financing specified
in Section 5.06 (a) and this Section 5.06 (b) is referred to
herein as the "Financing". The aggregate proceeds of the
Financing, if obtained, will be in an amount sufficient to effect
the purchase of the Shares hereunder and pay all related fees and
expenses.
(c) If, at any time on or after 5:00 p.m. on December
27, 1996, all of the conditions specified in Section 2.01 have
been satisfied or waived by Buyer, but the Closing has not
occurred as a result of Buyer's failure to obtain the proceeds of
the Financing, then:
(i) Buyer shall either (x) obtain a letter
of credit in the face amount of $5
million and containing such other terms
and conditions as are reasonably
acceptable to Seller (the "Letter of
Credit") which shall at all times
thereafter prior to the Closing remain
effective for the sole purpose of
satisfying Buyer's obligation to Seller
or (y) obtain from BRS a cash
contribution in the amount of $5 million
in a form reasonably satisfactory to
Seller (a "Cash Contribution") which
shall at all times thereafter prior to
Closing remain an unencumbered asset of
Buyer; and for so long as such Letter of
Credit remains effective or Cash
Contribution remains an unencumbered
asset of Buyer, this Agreement shall
remain in full force and effect, subject
only to a termination hereof in
accordance with Section 6.01; or
(ii) In the event that either (x) Buyer fails
to deliver to Seller the Letter of
Credit or evidence of the Cash
Contribution in accordance with the
provisions of (i) above or (y) either
the Letter of Credit expires, terminates
or otherwise becomes ineffective for its
intended purpose or the Cash
Contribution is not retained as an
unencumbered asset of Buyer, then Seller
shall have the right at any time
thereafter to either (x) terminate this
Agreement pursuant to a written notice
delivered by Seller to Buyer, and/or (y)
commence negotiations with persons other
than Buyer regarding the terms of a
potential sale or other business
combination involving any or all of BGH
Holdings, BRH Holdings or the Companies.
(d) Seller hereby agrees that so long as Buyer
complies with the provisions of this Section 5.06(b)(i), Seller's
sole recourse upon Buyer's failure to satisfy its obligations
under this Agreement shall be to draw either upon the Letter of
Credit and/or commence litigation against Buyer to recover all or
a portion of the Cash Contribution, as the case may be, and
Seller further agrees that under such circumstances, Seller shall
have no recourse whatsoever against BRS or any of its officers,
directors, partners, shareholders, employees, agents,
representatives or other Affiliates (other than Buyer).
ARTICLE 6
TERMINATION
Section 6.01 Termination. This Agreement may be
terminated at any time prior to the Closing:
(a) By mutual written consent of Seller and Buyer;
(b) By either Seller or Buyer by written notice if
there has been a material breach on the part of Buyer or Seller
of the representations and warranties or covenants of such other
party set forth in this Agreement, which has not been cured
within ten (10) Business Days of notice thereof or if events have
occurred which have made it impossible to satisfy a condition
precedent to the terminating party's obligation to consummate the
transactions contemplated hereby; provided that the party giving
such notice shall not be in material breach of its
representations and warranties or covenants hereunder at the time
of such notice;
(c) By either Seller or Buyer by written notice if the
Closing hereunder has not been consummated by January 31, 1997,
provided that (i) if a party's willful breach of its
representations and warranties or covenants under this Agreement
has prevented the consummation of the transactions contemplated
hereby, or that party shall not be entitled to terminate this
Agreement pursuant to this Section 6.01(c), and (ii) if Buyer has
obtained the Financing, but the Closing has not occurred because
of Buyer's failure to obtain the proceeds thereof, the Buyer
shall not be entitled to terminate this Agreement pursuant to
this Section 6.01(c);
(d) By Seller in accordance with the provisions of
Section 5.06(b); or
(e) By Seller if the parties receive a so called
"Second Request" under the HSR Act.
Section 6.02 Effect of Termination. In the event of
termination of this Agreement by either Seller or Buyer as
provided above, this Agreement will forthwith become void and
there will be no liability on the part of either Buyer or Seller,
except for (i) material willful breaches of and intentional
misstatements in or pursuant to this Agreement prior to the time
of such termination, and (ii) the provisions set forth in Section
6.03 below.
Section 6.03 Confidentiality. In the event of any
termination of this Agreement, each of Seller and Buyer shall
continue to be bound by the terms and conditions of that certain
Confidentiality Agreement between Buyer and Seller dated August
20, 1996.
ARTICLE 7
ADDITIONAL AGREEMENTS
Section 7.01 Survival. The representations, warranties,
covenants and agreements set forth in this Agreement and in the
Accounts Receivable Purchase Agreement will survive the Closing
Date and the consummation of the transactions contemplated
hereby; provided, however, that the representations and
warranties of Seller contained in Article 4 of this Agreement,
the representations and warranties of Buyer contained in Article
5 of this Agreement, and the representations and warranties
contained in the Accounts Receivable Purchase Agreement shall
survive only until the end of the 18th complete month following
the Closing Date, provided, however, that the representations and
warranties contained in Sections 4.02, 4.04, 4.05, and 4.23 shall
survive without limitations as to time, and provided further that
the representations and warranties contained in Section 4.26
shall survive for five (5) years to the extent they relate to
formerly Owned Real Estate, formerly Leased Real Estate and
properties other than Owned Real Estate and Leased Real Estate.
No claim for the recovery of indemnifiable damages based upon the
inaccuracy of such representations and warranties may be asserted
by a party after such representations and warranties shall be
thus extinguished; provided, however, that claims first asserted
in writing within the applicable period shall not thereafter be
barred.
Section 7.02 Indemnification.
(a) Seller agrees to indemnify Buyer and hold it
harmless from and against any loss, claim, liability, damage,
cost or expense, including reasonable legal expenses and costs
(collectively, the "Losses") which Buyer, BGH Holdings, BRH
Holdings or the Companies may suffer, sustain or become subject
to, as the result of, arising out of or connected with; (i) any
breach of the representations and warranties made by Seller in
this Agreement or by SFFC in the Accounts Receivable Sale
Agreement or in any certificate or instrument furnished or to be
furnished by Seller to Buyer hereunder (each a "Loss Event"); or
(ii) the breach or non-fulfillment of any agreement or covenant
made by Seller in this Agreement or in any instrument furnished
or to be furnished by Seller to Buyer hereunder or by SFFC in the
Accounts Receivable Sale Agreement; provided, however, that
Seller will not be liable for any such Loss arising out of a
breach by Seller of any representation or warranty contained in
this Agreement or by Seller or SFFC contained in the Accounts
Receivable Purchase Agreement unless the aggregate amount of all
such Losses resulting to Buyer from all such breaches or claims
exceeds $1,000,000 of the Purchase Price (the "Basket"), in which
case Seller will be liable for all such amounts in excess of the
Basket. Notwithstanding the foregoing, (i) any Loss Event
relating to a breach of Section 4.26(g), or which could have been
brought under Section 4.26(g), shall only be subject to rights of
indemnification hereunder if the aggregate Losses resulting to
Buyer from such Loss Event exceed the Environmental Threshold,
and then only to the extent of such excess amount (provided that
if the aggregate Losses resulting to Buyer from one or more of
such Loss Events exceed the Aggregate Environmental Threshold,
the Environmental Threshold shall no longer apply and all such
Losses in excess of the Aggregate Environmental Threshold shall
be subject to rights of indemnification hereunder (including the
Basket)), (ii) the Basket shall not apply to any recovery as a
result of a breach of the warranties and representations set
forth in Sections 4.04, 4.05 or 4.06 (b), (iii) in the event (x)
any Loss resulting from a singular Loss Event exceeds $500,000 (a
"Significant Loss"), and (y) the aggregate amount of all Losses
prior to such date together with the amount of such Significant
Loss exceeds the Basket, Seller will be liable for the entire
amount of the Significant Loss, (iv) the Basket shall not apply
to any recovery as a result of a breach of the representations
and warranties set forth in Section 4.07 resulting from
undisclosed liabilities for borrowed money, (v) the Basket shall
not apply to any recovery as a result of a breach of a
representation or warranty contained in this Agreement of which
an officer of Seller had actual knowledge on the Closing Date,
and (vi) in no event shall Seller's aggregate liability arising
out of breaches by Seller of representations or warranties
contained in this Agreement exceed one-half of the Purchase
Price, except to the extent that a Loss is a direct result of a
breach of a representation or warranty contained in this
Agreement of which an officer of Seller had actual knowledge on
the Closing Date, then, in which case, the aggregate liability of
Seller arising out of such breach by Seller of such
representation and warranty shall not exceed the Purchase Price.
(b) Buyer agrees to indemnify Seller and hold it
harmless from and against any Losses which Seller may suffer,
sustain or become subject to, as the result of a breach of any
representation, warranty, covenant, or agreement by Buyer
contained in this Agreement or in the Accounts Receivable
Purchase Agreement.
(c) If a claim by a third party is made against an
indemnified party (the "Indemnified Party"), and if such party
intends to seek indemnity with respect thereto under this
Agreement, from the other party (the "Indemnifying Party"), the
Indemnified Party shall promptly, but in any event, within twenty
(20) Business Days, notify the Indemnifying Party in writing of
such claims setting forth such claims in reasonable detail, but
failure to give such notice shall not relieve the Indemnifying
Party of any liability hereunder except to the extent that the
Indemnifying Party is actually prejudiced thereby. With respect
to claims for monetary damages only, if the Indemnifying Party
acknowledges in writing its obligations to indemnify the
Indemnified Party to the full extent provided by this Section
7.02, the Indemnifying Party shall be entitled, at its option, to
assume and control the defense of such liabilities, payments and
obligations at its expense and through counsel of its choice if
it gives prompt notice of its intention to do so to the
Indemnified Party. The Indemnifying Party shall not be entitled
to settle or compromise any such claim, action, suit or
proceeding without the prior written consent of the Indemnified
Party, which consent shall not be unreasonably withheld; except
that the consent of the Indemnified Party shall not be required
if such settlement would entail solely the payment of cash
damages for which the Indemnifying Party shall be responsible and
shall effect payment simultaneously with the execution of any
settlement, and does not entail any admission or stipulation
which might adversely affect the Indemnified party (or its
successors and assigns), or the business, financial condition,
results of operations, operations or prospects thereof. The
Indemnified Party shall cooperate with it in connection
therewith; provided, that the Indemnified Party may participate
in (but not control) such settlement or defense through counsel
chosen by such Indemnified Party, provided that the fees and
expenses of such counsel shall be borne by such Indemnified
Party. So long as the Indemnifying Party is reasonably
contesting any such claim in good faith, the Indemnified Party
shall not pay or settle any such claim. Notwithstanding the
foregoing, the Indemnified Party shall have the right to pay or
settle any such claim, provided that in such event it shall waive
any right to indemnity therefor by the Indemnifying Party. If
the Indemnifying Party does not notify the Indemnified Party in
writing within thirty (30) days after the receipt of the
Indemnified Party's notice of a claim of indemnity hereunder that
it elects to undertake the defense thereof, the Indemnified Party
shall have the right to contest, settle or compromise the claim
but shall not thereby waive any right to indemnity therefor
pursuant to this Agreement.
(d) Notwithstanding anything to the contrary contained
in this Agreement, any indemnification owed under this Agreement
shall be reduced by the amount of any reimbursements received by
the Indemnified Party from any insurance carriers or from third
parties for the same Loss Event.
(e) Notwithstanding anything to the contrary contained
in this Agreement, Buyer, Holdings and the Companies shall have
no right to indemnification with respect to any Loss if any
matter forming the basis for such Loss relating to amounts or
levels of cash and cash equivalents, trade receivables,
inventories, prepaid expenses, other current assets, accounts
payable or accrued expenses as such terms are used in the balance
sheets attached as Schedule 4.06 was or could have been asserted
as a reduction in the value of Net Assets pursuant to the
provisions of Section 1.03 of this Agreement.
(f) The indemnification rights provided in this
Section 7.02 and in Sections 8.04 and 9.10 shall be the sole and
exclusive remedy available to each of the parties to this
Agreement as against the other party for any breach of a
representation or warranty, or failure to fulfill any covenant or
agreement contained herein or the Accounts Receivable Purchase
Agreement. Section 7.02 shall not be interpreted to permit a
double recovery with respect to Taxes for which indemnification
is provided under Section 8, nor to permit a party to recover
amounts with respect to Taxes that are such party's
responsibility under Section 8.
(g) The parties agree that any indemnification
payments made pursuant to this Agreement shall be treated for tax
purposes as adjustments to the Purchase Price, unless otherwise
required by applicable law.
Section 7.03 Expenses. Except as otherwise expressly
provided herein, each party will pay all of its expenses,
including attorneys' and accountants' fees, incurred in
connection with the negotiation of this Agreement and the
performance of its obligations hereunder (whether or not the
Closing occurs) and the consummation of the transactions
contemplated by this Agreement.
Section 7.04 Press Releases and Announcements. No press
releases, announcements or other disclosures related to this
Agreement or the transactions contemplated herein will be issued
or made by any parties hereto or by Holdings or the Companies
without the joint approval of Buyer and Seller, except for any
public disclosure which either party in good faith believes is
required by law (in which case such party will consult with the
other party prior to making such disclosure). Buyer and Seller
will cooperate to prepare a joint press release to be issued on
the Closing Date. Notwithstanding the generality of the
foregoing, in the event that the Agreement is terminated solely
under Section 5.06, neither party will make any press release,
announcement, public statement or other disclosure that is
harmful to the reputation of the other party or its Affiliates,
or their respective shareholders, directors, officer, employees,
agents, representatives; provided, that Seller shall be permitted
to specifically state that the transaction was terminated as a
result of a lack of financing.
Section 7.05 Continuing Access to Records. Except as
otherwise required by Section 8.06(c), for a period of not less
than five (5) years from the Closing Date: (i) Buyer agrees to
give Seller reasonable cooperation, access, and staff assistance,
as reasonably necessary, during normal business hours with
respect to books and records and other financial data delivered
to Buyer hereunder or in the possession of Holdings or the
Companies for periods prior to Closing as may be necessary for
general business purposes, and (ii) Seller agrees to give Buyer
reasonable cooperation, access and staff assistance, as needed,
during normal business hours with respect to books and records
and other financial data relating to Holdings or the Companies
that are retained by Seller, as may be reasonably necessary for
general business purposes.
Section 7.06 Existing Insurance Coverage.
(a) From and after the Closing, Seller shall use
reasonable efforts (which shall not require acceptance of adverse
changes in its existing insurance policies or in any replacement
insurance policies or other unreasonably adverse effects on
Seller), subject to the terms of Seller's insurance policies, to
retain the right to make claims and receive recoveries, subject
to the provisions of this Section 7.06, for the benefit of
Holdings and the Companies under existing insurance policies of
Seller which benefit Holdings or the Companies and which are not
transferred to Buyer at Closing or retained by Holdings or the
Companies. With respect to any actions, suits and proceedings
against, and any losses, liabilities, damages or expenses of,
Holdings or the Companies arising out of events or circumstances
which are covered by any such existing insurance policies (each
an "Insured Liability"), Seller shall promptly pay to Buyer,
Holdings and the Companies the proceeds of such insurance
policies in respect of any such Insured Liability actually
received by Seller (it being understood that any proceeds of such
insurance policies applied directly by the insurance carrier(s)
to such Insured Liability shall be deemed to be a payment made by
Seller in respect of such Insured Liability). Subject to the
right of Buyer to seek indemnification pursuant to the provisions
of Section 7.02(a), (i) Buyer, Holdings and the Companies shall
be fully liable, jointly and severally, for all deductibles,
retentions, exclusions and any portion of retrospective premium
adjustments attributable to such Insured Liabilities as
reasonably determined by Seller and Seller's insurance carrier,
and other amounts, losses and expenses to the full extent not
paid, for whatever reason, by such insurance carrier(s) or not
covered by such insurance policies, it being understood that
Seller shall be under no obligation to make any such payments or
to advance any such payments; and (ii) Buyer agrees to reimburse,
indemnify and hold Seller and its Affiliates harmless for out-of-
pocket costs and expenses (including, without limitation, any
retroactive premium adjustments and current or prospective
premium increases imposed on Seller or any of its Affiliates
resulting from Insured Liabilities, but not including normal
internal administrative expenses) incurred after the Closing Date
by Seller to carry out any obligations pursuant to this Section
7.06. Buyer and Seller shall mutually agree on an acceptable
arrangement for the submission of claims for such Insured
Liabilities to the appropriate insurer.
(b) With respect to any master insurance policies that
apply to Holdings and/or the Companies, or to other subsidiaries
of Seller which Seller is unable to separate at Closing, Buyer
shall be liable and shall promptly pay to Seller any and all
retroactive premium adjustments attributable to the activities of
Holdings and the Companies under such policies as reasonably
determined by Seller and Seller's insurance carrier.
(c) Nothing contained herein to the contrary shall
prohibit Seller from managing its risk management program with
respect to Post-Closing periods, including, without limitation,
the cancellation or reduction of the amount or scope of insurance
coverage with respect to Pre- or Post-Closing periods, in a
manner consistent with its reasonable business judgment as
applied to the continuing operations of Seller and its Affiliates
(other than Holdings and the Companies).
Section 7.07 Companies Performance. Seller will cause
Holdings and the Companies to perform all of their obligations
hereunder and under the other agreements contemplated hereby
which are to be performed prior to Closing.
Section 7.08 Continuing Assistance. Subsequent to the
Closing, Buyer will use commercially reasonable efforts to
provide to Seller, and Seller will use commercially reasonable
efforts to provide to Buyer, such assistance that the other party
reasonably may request in connection with the transfer of
ownership and control of the Shares and the consummation of the
transactions contemplated by this Agreement.
Section 7.09 Employee Matters.
(a) Buyer agrees that for a period of at least one
year after the Closing Date it will provide all employees of the
Companies which continue to be employed by Buyer, Holdings or the
Companies during such period with benefits which are in the
aggregate substantially equivalent to those benefits provided to
such employees by Holdings and the Companies immediately prior to
the Closing. In addition, Buyer agrees to give to the fullest
extent possible such employees service credit for all periods of
employment with Seller or its Affiliates (including the
Companies) prior to the Closing Date for purposes of eligibility
and vesting (but not benefit accrual) under any plan adopted by
the Companies or by Buyer or any Affiliate of Buyer to provide
benefits to such employees.
(b) Buyer represents that it does not contemplate a
plant closing or mass lay-off of employees of the Companies, or
any terminations that in the aggregate would constitute a mass
lay-off of employees of the Companies, within 90 days of the
Closing.
Section 7.10 Third Party Beneficiaries. This Agreement
does not create any rights in parties who are not a party to this
Agreement.
Section 7.11 Elimination of Inter-Companies and Affiliate
Accounts. Effective immediately prior to Closing, all inter-
company receivables, payables and loans then existing between
Holdings and the Companies, on the one hand, and Seller and any
of Seller's subsidiaries (other than Holdings or the Companies),
on the other hand, shall be settled by way of a capital
contribution in kind with respect to a net inter-company amount
due from Holdings or the Company to Seller or any of Seller's
subsidiaries (other than Holdings or the Companies) or by way of
a dividend in kind with respect to a net inter-company amount due
from Seller or any of Seller's subsidiaries (other than Holdings
or the Companies) to Holdings or the Companies. Any such
settlement shall be accomplished in the manner reasonably
selected by Seller, without any violation of any law or
regulation or the incurrence of any tax, penalties, interest or
other charges (other than taxes with respect to which Seller
shall be responsible).
Section 7.12 Cash Management.
(a) BGH Holdings and BRH Holdings and the Companies
participate in Seller's central cash management system and shall
continue to so participate in accordance with prior practice
until the Closing.
(b) Seller shall be responsible for funding all
disbursements of BGH Holdings and BRH Holdings and the Companies
that are presented for payment prior to the opening of business
on the Closing Date.
(c) Effective as of the close of business on the day
prior to the Closing Date, Seller shall not have any further
right to any funds in any account listed on Schedule 4.10 and in
any event will not remove any funds or assets from BGH Holdings,
BRH Holdings or the Companies to the extent such funds or assets
are reflected on the Closing Date Balance Sheet, and if so
removed, will be owed by Seller to Buyer. Effective at the
opening of business on the Closing Date, Buyer and the Companies
shall take physical possession of each of such accounts and the
balances therein and of the unused check stock, if any, related
to such accounts.
Section 7.13 Surety Bonds and Letters of Credit. Promptly
after Closing, Buyer shall use its commercially reasonable
efforts to cause itself or one or more of its affiliates,
including Holdings and the Companies, to be substituted in all
respects for Seller or any of Seller's subsidiaries other than
Holdings and the Companies, effective as of Closing, under all of
the surety bonds and letters of credit listed on Schedule 4.20 to
this Agreement.
Section 7.14 License Applications. Seller has made or
will make before the Closing timely application or notification
for the renewal, reissuance or, if required, transfer of all such
licenses, permits, approvals, franchises, clearances and other
authorizations for which any law, ordinance, code, rule or
regulation (including, without limitation, any Environmental Law)
requires that applications or notices must be filed on or before
the Closing to maintain the licenses, permits, approvals,
franchises, clearances and other authorizations in full force and
effect up to and through the Closing.
Section 7.15 Purchased Accounts Receivable.
(a) Seller guarantees to Buyer that, except to the
extent of the reserve for doubtful accounts in an amount equal to
one percent (1%) (the "Receivable Reserve") of the face amount of
the Purchased Accounts Receivable (as such term is defined in the
Accounts Receivable Purchase Agreement), the Purchased Accounts
Receivable will be valid and legally binding obligations of the
account debtors thereof and will be collected by Buyer or its
designee on or before 120 days after the Closing Date. Any
Purchased Accounts Receivable, or portion thereof in excess of
the Receivable Reserve not so collected may, at the option of
Buyer, be assigned, without representation, warranty or recourse,
by Buyer to Seller, and the face amount thereof, or the unpaid
portion thereof, as the case may be, shall be paid by Seller to
Buyer.
(b) Buyer shall use all reasonable commercial efforts
to collect the Purchased Accounts Receivable. For purposes of
determining whether an account receivable of a particular
customer has been collected, payments received from that customer
shall be applied on a first-in, first-out basis, except for
instances when (i) Buyer or the Companies has converted the
customer to a "cash on delivery" payment terms in accordance with
its normal credit policies, or (ii) as a result of a bona fide
dispute relating to a Purchased Accounts Receivable, the customer
has directed Buyer or the Companies in writing to apply its
payment to a receivable other than the Purchased Accounts
Receivable.
Section 7.16 Buyer's Notice. Buyer agrees to notify
Seller prior to Closing of any matter of which Buyer becomes
aware of that could reasonably constitute a violation by Seller
of any of Seller's warranties, representations, covenants or
agreements under this Agreement.
Section 7.17 Allocation of Purchase Price. Buyer and
Seller agree to discuss the allocation of the Purchase Price as
between the Shares of BGH Holdings and BRH Holdings. If the
parties are able to reach agreement on an allocation, such
allocation shall be reflected in an allocation schedule which
shall be attached to this Agreement. In the event such a
schedule is so attached, Buyer and Seller agree to allocate for
all purposes, and to account for and report the purchase and sale
contemplated hereby for all purposes (including, without
limitation, financial, accounting and tax purposes) in accordance
with such allocations, and not to take any position (whether in
financial statements, audits, tax returns or otherwise) which is
inconsistent with such allocations without the prior written
consent of the other, except to the extent such consistency is
not permitted by applicable law or generally accepted accounting
principles.
ARTICLE 8
TAX MATTERS
Section 8.01 Allocation of Federal and State Income Taxes.
Seller shall timely prepare and file all Tax Returns for any U.S.
Federal Income Taxes and any State Income Taxes attributable to
Holdings or the Companies for any Pre-Closing Period and shall
pay all Taxes related to such Tax Returns including, but not
limited to, liabilities with respect to U.S. Federal Income Taxes
and/or State Income Taxes for Pre-Closing Periods which are
assessed or asserted after the Closing Date (collectively, "Post-
Closing Assessments"). Buyer shall timely prepare and file all
Tax Returns for any U.S. Federal Income Taxes and any State
Income Taxes attributable to BGH Holdings, BRH Holdings or the
Companies for any Post-Closing Period and shall pay all Taxes
related to such Tax Returns.
Section 8.02 Determination of Pre- and Post-Closing
Taxable Income for Federal Income Tax Purposes.
(a) In General. For purposes of computing the U.S.
Federal Income Taxes and State Income Taxes attributable to BGH
Holdings, BRH Holdings or the Companies for the Pre-Closing
Period beginning on January 1, 1996 and ending on the Closing
Date, Seller and Buyer expressly acknowledge and agree that items
of income and deduction shall be allocated for Federal and State
Income Taxes to the Pre-Closing Period on the one hand, and to
the Post-Closing Period, on the other hand, in accordance with
Treas. Reg. 1.1502-76(b)(2)(i).
(b) No Contrary Elections. Consistent with the
general allocation agreement set forth in Section 8.02(a), each
of Seller and Buyer expressly acknowledge and agree that it shall
not (either directly or through any of their respective
Affiliates) make any election available under Treas. Reg.
1.1502-76(b)(2)(ii) regarding ratable allocation of a period's
items or any corresponding provision of any Law.
(c) Special Provision Regarding State Income Taxes.
Buyer and Seller expressly acknowledge and agree that if BGH
Holdings, BRH Holdings and the Companies are permitted but not
required under any applicable State Income Tax Laws to treat the
Closing Date as the last day of a taxable period beginning on
January 1, 1996 and ending on the Closing Date (the "State Income
Tax Stub Period"), then Buyer and Seller shall treat the Closing
Date as the last day of such period and compute State Taxable
Income with respect to such jurisdiction consistent with the
computation of Federal Income Taxes under Section 8.02 (a) and
(b). Consistent with the general provisions of this Article 8,
if BGH Holdings, BRH Holdings and the Companies are not permitted
under applicable State Income Tax Laws to treat the Closing Date
as the last day of the State Income Tax Stub Period (a "Straddle
Tax"), then the parties shall allocate the State Income Taxes
with respect to such jurisdiction between the Pre-Closing Period
and the Post-Closing Period in accordance with the principles of
Treas. Reg. Sec. 1.1502-76(b)(2) (i). Buyer shall be responsible
for the preparation and filing of all Tax Returns related to
Straddle Taxes and shall pay all Taxes shown as due and payable
on such Tax Returns. At least thirty (30) days prior to the due
date for any such Tax Return, Buyer shall submit to Seller
calculation of Seller's allocable share of the Straddle Tax for
the Pre-Closing Period. Within 5 days of Seller's receipt of
such calculation, Seller shall have the right to contest such
calculation. To the extent Seller and Buyer are unable to
resolve any such disagreement within 15 days prior to the due
date for such Tax Return, such disagreement shall be referred to
the Neutral Auditors for final resolution. No later than the due
date for such Tax Return, (x) Seller shall pay to Buyer the
excess, if any, of the amount by which the State Income Tax
allocable to the State Income Tax Stub Period (as finally
resolved) exceeds the aggregate estimated payments made by Seller
(or by any Affiliate of Seller in respect of Holdings or the
Companies) prior to the Closing Date (the "Pre-Closing Estimated
Payments"), and (y) Buyer shall pay to Seller the excess, if any,
of the amount by which the Pre-Closing Estimated Payments exceed
the State Income Tax allocable to the State Income Tax Stub
Period as finally resolved.
Section 8.03 Other Taxes. Except as set forth in the last
sentence of this section 8.03, Seller shall timely prepare and
file all Tax Returns related to Other Taxes of BRH Holdings, BGH
Holdings, or the Companies that are required to be filed on or
before the Closing Date and shall pay all Taxes related to such
Tax Returns. Buyer shall timely prepare and file all Tax Returns
related to Other Taxes of BRH Holdings, BGH Holdings, or the
Companies that are required to be filed after the Closing Date
and shall pay all Taxes related to such Tax Returns.
Notwithstanding anything to the contrary set forth herein, Buyer
shall pay all taxes incurred in connection with the transfer of
the Shares including, without limitation, any sales, use or
transfer taxes.
Section 8.04 Indemnification.
(a) Seller shall indemnify and hold harmless Buyer,
BRH Holdings, BGH Holdings, and the Companies from and against
(i) any Tax liability with respect to Income Tax Returns for
which Seller is responsible for the preparation, filing and
payment of Taxes pursuant to Section 8.01, including the portion
of any Straddle Taxes for which Seller is responsible under
Section 8.02(c); (ii) any Tax liability for periods prior to and
including the Closing Date resulting from BRH Holdings, BGH
Holdings, or the Company being severally liable for any Taxes of
any consolidated group of corporations of which BRH Holdings, BGH
Holdings, or the Company (prior to the Closing Date) is or was a
member pursuant to Treasury Regulations Section 1.1502-6 or any
analogous state or local tax provision; (iii) any Tax liability
for any predecessor of BRH Holdings, BGH Holdings, or the Company
for any period prior to and including the Closing Date; and (iv)
any liability for any other taxes of BRH Holdings, BGH Holdings,
or the Company for any Pre-Closing Period to the extent such
liability exceeds the accrual for such Other Taxes on the Closing
Balance Sheet. Buyer shall indemnify and hold harmless Seller
from and against any tax liability with respect to Income Tax
Returns for which Buyer is responsible for the preparation,
filing and payment of Taxes pursuant to Section 8.01, including
the portion of any Straddle Taxes for which Seller is responsible
under Section 8.02 (c). Seller shall pay such amounts as it is
required hereunder and Buyer shall pay such amounts as it is
required to pay Seller hereunder in each case within fifteen (15)
calendar days after payment of any applicable Tax liability by
Buyer, BRH Holdings, BGH Holdings, or the Company.
(b) Any Other Taxes for a period of time including
both a Pre-Closing Period and a Post-Closing Period shall be
apportioned between such period based, in the case of real and
personal property Taxes, on a per diem basis, and in the case of
all other Taxes, on the actual activities of BRH Holdings, BGH
Holdings, or the Companies during such periods, as if the books
of BRH Holdings, BGH Holdings, or the Companies were closed on
the Closing Date.
Section 8.05 Refunds and Carrybacks.
(a) Seller shall be entitled to any refunds or credits
of Federal or State Income Taxes or Other Taxes attributable to
or arising in Pre-Closing Periods.
(b) Buyer, BGH Holding, BRH Holdings or the Companies,
as the case may be, shall be entitled to any refunds or credits
of Federal or State Income Taxes or Other Taxes attributable to
Post-Closing Periods.
(c) Buyer shall cause BGH Holding, BRH Holdings and
the Companies to promptly forward to Seller or to reimburse
Seller for any refunds or credits due Seller pursuant to this
Section 8.05, after receipt thereof, and Seller shall promptly
forward to Buyer or reimburse Buyer pursuant to this Section
8.05, for any refunds or credits due Buyer after receipt thereof.
(d) Buyer agrees that, with respect to any Income Tax
neither Buyer nor BGH Holdings, BRH Holdings or the Companies
shall carry back any item of loss, deduction or credit which
arises in any taxable period ending after the Closing Date
("Subsequent Loss") into any taxable period ending on or before
the Closing Date. If a Subsequent Loss with respect to any
Income Tax is carried back into any taxable period ending on or
before the Closing Date, Seller shall be entitled to any refund
or credit of taxes realized as a result thereof and Buyer shall
promptly forward any such refund or the amount of such credit
received by the Buyer, Holdings or the Companies to Seller
pursuant to Section 8.0 5 (c).
Buyer shall not, without Seller's consent, file or
permit Holdings or the Companies to file any Amended Tax Return
for any period ending on or prior to the Closing Date, or
beginning before the Closing Date and ending after the Closing
Date, without Seller's written consent.
Section 8.06 Interperiod Adjustments. If there is any
adjustment to a Tax Return of Seller, BGH Holdings, BRH Holdings
or the Companies for any tax period and an item of deduction,
credit, loss or expense is disallowed in a period for which
Seller is or may be liable for taxes hereunder, (or an item of
income is required to be recognized on a return with respect to
such period which was not reported on the return), in either such
case resulting in a tax detriment suffered by Seller or by either
BGH Holdings, BRH Holdings or the Companies, as the case may be,
for such period, and such disallowance or recognition results in
a tax benefit to Buyer, BGH Holdings, BRH Holdings or the
Companies for a Post-Closing Period (the "Tax Benefit"), or vice
versa, then the party receiving the Tax Benefit shall pay to the
party receiving the Tax Detriment the lesser of the amount of the
Tax Benefit or Tax Detriment actually received (each such payment
a "Tax Benefit Reimbursement"). The foregoing computation shall
be made separately for U. S. Federal Income Tax and State Income
Tax purposes. Each such Tax Benefit Reimbursement shall be paid
within thirty (30) calendar days after the Tax Benefit and Tax
Detriment are actually received and shall not be reduced by any
time value of money or other discount component. If a party
should fail to pay any Tax Benefit Reimbursement within five (5)
Business Days of the determination of the amount thereof, such
amount shall accrue interest at an amount equal to 10% per annum
compounded annually from the date of determination to the date of
payment.
Section 8.07 Covenants.
(a) Termination of Existing Tax-Sharing Agreements.
All tax-sharing agreements or similar arrangements with respect
to or involving BGH Holdings, BRH Holdings and the Companies
shall be terminated (but only with respect to BGH Holdings, BRH
Holdings and the Companies) effective as of the Closing.
(b) Cooperation and Records Retention. Seller and
Buyer shall (i) each provide the other, and Buyer shall cause BGH
Holdings, BRH Holdings and the Companies to provide Seller, with
such assistance as may reasonably be requested by any of them in
connection with the preparation of any Tax Return, audit or other
examination by any Taxing Authority or judicial or administrative
proceedings relating to liability for taxes, which the other
party may be liable for, (ii) each retain and provide the other,
and Buyer shall cause BGH Holdings, BRH Holdings and the
Companies to retain and provide Seller, with any records or other
information which may be relevant to such Tax Return, audit or
examination, proceeding or determination, and (iii) each provide
the other with any final determination of any such audit or
examination, proceeding or determination that affects any amount
required to be shown on any such Tax Return of the other for any
period. Without limiting the generality of the foregoing, Buyer
shall retain, and shall cause BGH Holdings, BRH Holdings and the
Companies to retain, and Seller shall retain, until the
applicable statutes of limitations (including any extensions)
have expired, copies of all Tax Returns, supporting work
schedules and other records or information which may be relevant
to such returns for all tax periods or portions thereof ending
before or including the Closing Date and shall not destroy or
otherwise dispose of any such records without first providing the
other party with a reasonable opportunity to review and copy the
same. In the event that a party fails to reasonably comply with
any request by the other to provide any assistance, records,
information or other items contemplated by this Section 8.07 (b),
the requesting party shall have the right, in addition to any
other remedies which it might have under this Agreement or under
Law, to retain (at the other party's expense) such accountants,
attorneys or other advisors as reasonably necessary for the
purpose of conducting an audit of the books and records of the
other party or its Affiliates, as applicable, in order to obtain
such requested assistance, records, information or other items.
(c) Tax Proceedings. Seller shall exercise, at its
expense, the control, handling, disposition and settlement of any
governmental inquiry, examination or proceeding that could result
in a determination with respect to Taxes due or payable by BGH
Holdings, BRH Holdings or the Companies for which Seller may be
liable, or against which Seller may be required to indemnify
Buyer pursuant hereto. Notwithstanding the foregoing, Buyer
shall have the right to participate in controlling, handling,
disposing and settling (together with Seller) any issue relating
to any Tax Return that includes a Pre-Closing Period and a Post-
Closing Period, and Seller shall promptly notify Buyer of such an
issue and provided further that, if there is a disagreement with
respect to the manner in which the issues related to such a Tax
Return should be handled, the party with the greater economic
interest in the resolution of such issues shall have the ultimate
right to determine the disposition of such issues. Buyer shall
notify Seller of its election to participate as provided above
within sixty (60) days of Buyer's receipt of Seller's notice. If
Seller does not receive such a notice, it shall be conclusively
presumed that Buyer has elected not to so participate. In the
event Buyer does not elect to participate as provided above,
Seller shall promptly notify Buyer if, in connection with any
such inquiry, examination or proceeding, any government authority
proposes to make any assessment or adjustment with respect to tax
items of BGH Holdings, BRH Holdings or the Companies, which
assessments or adjustments could affect Holdings or the Companies
following the Closing Date, and shall not agree to any such
assessment or adjustment without the consent of Buyer, which
consent shall not be unreasonably withheld. Buyer shall notify
Seller in writing within thirty (30) days, (but in no event later
than ten (10) days prior to the time in which such Tax Authority
has required a response), of receiving either verbal or written
notice of learning of any such inquiry, examination or
proceeding. Any failure of Buyer to so notify Seller shall
release Seller from any obligation or indemnification with
respect to such Tax under this Agreement to the extent Seller is
actually prejudiced thereby. Buyer shall cooperate (and shall
cause Holdings and the Companies to cooperate) with Seller, as
Seller may reasonably request, in any such inquiry, examination
or proceeding.
(d) Preparation of Tax Return Package for Short Year
Ending on the Closing Date. Buyer agrees to cause BGH Holdings,
BRH Holdings and the Companies to prepare the usual and customary
"Tax Reporting Packages" which have historically been prepared
for Holdings and the Companies with respect to the period
beginning January 1, 1996 and ending on the Closing Date. Buyer
shall provide Seller with a copy of such "Tax Reporting Packages"
as soon as practicable and, in any event, no later than the
earlier of (i) the date which is one hundred and eighty calendar
days (180) after the Closing Date, or (ii) June 1, 1997. Buyer
agrees to cause BGH Holdings, BRH Holdings and the Companies to
prepare an estimated "Tax Reporting Package" for this same period
by March 1, 1997 if so requested by Seller.
Section 8.08 Disagreements Over Tax Matters. The parties
shall cooperate fully with each other in all matters relating to
Taxes and in the determination of amounts payable hereunder. In
the case of disagreement as to the course of action to be pursued
in dealing with Tax Authorities (including, without limitation,
matters with respect to preparation and filing of Tax Returns,
conduct of audits, and proceedings in courts), the decision of
the party (Seller, on the one hand, or Buyer, on the other hand)
which will economically benefit from or be burdened by the course
of action (or in the case both parties benefit and/or are
burdened, the decision of the party with the greatest benefit or
burden) shall control, but the controlling party shall indemnify
the other party from and against losses, damages and expenses
incurred by the indemnified party in pursuance of such course of
action in excess of the losses, damages and expenses which would
have been incurred by the indemnified party had the course of
action proposed by the indemnified party been pursued. Any party
involved in any formal or informal act or proceeding relating to
tax matters which affects the other party shall promptly give
such other party notice thereof and keep such other party fully
and timely informed of developments.
Section 8.09 338(h)(10) Election. Buyer shall not make
any election pursuant to Section 338 of the Code or take any
action or commit any omission, or permit Holdings or the
Companies to take any action or commit any omission that is
deemed to be such an election.
ARTICLE 9
MISCELLANEOUS
Section 9.01 Amendment and Waiver.
(a) This Agreement may be amended, or any provision of
this Agreement may be waived, provided that any such amendment
and waiver will be binding upon Seller only if set forth in a
writing executed by Seller and any such amendment or waiver will
be binding upon Buyer only if set forth in a writing executed by
Buyer.
(b) No course of dealing between or among any persons
having any interest in this Agreement will be deemed effective to
modify, amend or discharge any part of this Agreement or any
rights or obligations of any person under or by reason of this
Agreement.
Section 9.02 Notices. Except as otherwise expressly set
forth in this Agreement, all notices, demands and other
communications to be given or delivered under or by reason of the
provisions of this Agreement will be in writing and will be
deemed to have been given when delivered personally or by
documented overnight delivery service, or sent by telecopy,
telefax or other electronic transmission service, provided a
confirmation copy is also sent no later than the next Business
Day by first class mail (return receipt requested and first class
postage prepaid), or by certified mail or registered mail (return
receipt requested and first class postage prepaid). Notices,
demands and communications to Buyer or Seller will, unless
another address is specified in writing, be sent to the address
indicated below:
Notices to Seller:
Specialty Foods Corporation
9399 W. Higgins Road, Suite 800
Rosemont, Illinois 60018
Attn.: General Counsel
FAX: 847/685-1010
Notices to Buyer: with a copy to:
B Companies Acquisition Corp. Dechert Price &
Rhoads
c/o Bruckmann, Rosser, Sherrill & Co., 477
Madison Avenue
Inc. New York, NY 10022
126 East 56th Street Attn.: Karl
S. Okamoto, Esq.
New York, NY 10022 FAX: 212/308-2041
Attn.: Mr. Stephen C. Sherrill
FAX: 212/521-3799
or to such address as any party shall specify by written notice
so given.
Section 9.03 Assignment. This Agreement and all of the
provisions hereof will be binding upon and inure to the benefit
of the parties hereto and their respective successors and
permitted assigns, except that neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by
either party without the prior written consent of the other
party. Notwithstanding the foregoing, Buyer may assign all or
any portion of its rights and obligations hereunder (including
its rights under Section 4.12): (i) as collateral security to
one or more persons that provide the Financing; (ii) to any
person that acquires all or any substantial portion of the
businesses of Buyer or the Companies following the Closing in
connection with the disposition by Buyer of its businesses or of
the Companies; and (iii) to an Affiliate of Buyer (any such
person referred to in Subsections (i), (ii) and (iii) is referred
to herein as an "Assignee"). Such assignment shall be made
pursuant to documentation in form and substance reasonably
acceptable to Seller which documents shall include, without
limitation, in the case of the assignments contemplated in clause
(ii) and (iii) hereof, an assumption by the Assignee of all of
the obligations of Buyer hereunder. In the event of any such
assignment and assumption, all rights and obligations of Buyer
shall be assumed by the Assignee, but Buyer shall remain liable
for any and all such obligations to Seller regardless of such
assignment.
Section 9.04 Severability. Whenever possible, each
provision of this Agreement will be interpreted in such manner as
to be effective and valid under applicable law, but if any
provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective
only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining
provisions of this Agreement.
Section 9.05 No Strict Construction. The language used in
this Agreement will be deemed to be the language chosen by the
parties hereto to express their mutual intent. Seller and Buyer
each acknowledges that it has been represented by counsel in
connection with this Agreement and the transactions contemplated
by this Agreement. Accordingly, any rule of law, or any legal
decision that would require interpretation of any claimed
ambiguities in this Agreement against the party that drafted it
has no application and is expressly waived. The provisions of
this Agreement shall be interpreted in a reasonable manner to
effect the intent of Buyer and Seller.
Section 9.06 Captions. The captions used in this
Agreement are for convenience of reference only and do not
constitute a part of this Agreement and will not be deemed to
limit, characterize or in any way affect any provision of this
Agreement, and all provisions of this Agreement will be enforced
and construed as if no caption had been used in this Agreement.
Section 9.07 Complete Agreement. This document and the
documents referred to herein contain the complete agreement
between the parties and supersede any prior understandings,
agreements or representations by or between the parties, written
or oral, which may have related to the subject matter hereof in
any way.
Section 9.08 Governing Law/Jurisdiction.
(a) THE SUBSTANTIVE LAW (AND NOT THE LAW OF CONFLICTS)
OF THE STATE OF NEW YORK WILL GOVERN ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND
THE PERFORMANCE OF THE OBLIGATIONS IMPOSED BY THIS AGREEMENT.
(b) The parties hereby irrevocably and unconditionally
consent to submit to the exclusive jurisdiction of the courts of
the State of New York and of the United States of America located
in the City of New York for any actions, suits, or proceedings
arising out of or relating to this Agreement and the transactions
contemplated hereby (and agree not to commence any action, suit
or proceeding relating thereto except in such courts), and
further agree that service of any process, summons, notice or
document by U.S. registered mail to the address set forth above
shall be effective service of process for any action, suit or
proceeding brought by a party against a party in any such court
relating to this Agreement or the transaction contemplated
hereby. The parties hereby irrevocably and unconditionally waive
any objection to the laying of venue of any action, suit or
proceeding arising out of this Agreement or the transactions
contemplated hereby, in the courts of the State of New York or
the United States of America located in the City of New York, and
hereby further irrevocably and unconditionally waive and agree
not to plead or claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in
an inconvenient forum.
Section 9.09 Counterparts. This Agreement may be executed
in one or more counterparts (including by means of faxed
signature pages), any one of which need not contain the
signatures of more than one party, but all such counterparts
taken together will constitute one and the same instrument.
Section 9.10 Advisor Fees. Buyer has not used an
investment advisor or broker in connection with the transactions
contemplated by this Agreement, and there are no claims for
investment banker, broker, or finder fees or similar compensation
in connection with the transactions contemplated by this
Agreements based on any arrangement or agreement by or on behalf
of Buyer, except pursuant to an arrangement with BRS, for which
Buyer is solely responsible. Neither Seller, BGH Holdings, BRH
Holdings, nor the Companies have retained any investment advisor
or incurred any liability or obligation for any investment banker
fees, or similar compensation in connection with the transactions
contemplated by this Agreement, except pursuant to an arrangement
with Merrill Lynch & Co., for which Seller is solely responsible.
Notwithstanding anything to the contrary in Section 7.02, Buyer
will indemnify Seller for any breach of its representation in
this Section, and Seller will indemnify Buyer for any breach of
its representation in this Section.
Section 9.11 Disclaimer Regarding Projections. In
connection with Buyer's investigation of the Companies, Buyer has
received from Seller or its representatives certain projections,
including the information contained in (i) the Confidential
Information Package, (ii) responses to requests by Buyer for
additional information, and (iii) the management presentation.
Buyer acknowledges that there are uncertainties inherent in
attempting to make such projections and other forecasts and
plans, that Buyer is familiar with such uncertainties, that Buyer
is taking full responsibility for making its own evaluation of
the adequacy and accuracy of all estimates, projections and other
forecasts and plans so furnished to it (including the
reasonableness of the assumptions underling such estimates,
projections and forecasts), and that Buyer shall have no claim
against Seller with respect thereto. Accordingly, Buyer agrees
that Seller makes no representation or warranty with respect to
such projections and other forecasts and plans, except that
Seller has no knowledge of any information that would render the
projections misleading in any material respects.
Section 9.12 Filings and Applications.
(a) Each of Seller and Buyer shall use its reasonable
commercial efforts and shall fully cooperate with the other to
make promptly all registrations, filings and applications, give
all notices and obtain all governmental and third party permits,
authorizations, consents, approvals, orders, qualifications and
waivers which are necessary or desirable for the consummation of
the transactions contemplated hereby (collectively, the
"Consents"), and each party shall keep the other party fully
apprised of its actions with respect to all of the foregoing.
(b) If applicable, within five (5) Business Days of
this Agreement, Buyer and Seller shall each file or cause to be
filed with the Federal Trade Commission and the United States
Department of Justice any notifications required to be filed
under the HSR Act with respect to the transactions contemplated
herein and will each bear the costs and expenses of their
respective filings. Buyer will pay the filing fee therefore.
Each of Buyer and Seller will use its respective good faith
efforts to respond to any requests for additional information
made by either of such agencies and to cause the waiting periods
under the HSR Act to terminate or expire at the earliest possible
date and to resist in good faith, at each of their respective
cost and expense (including, without limitation, the institution
or defense of legal proceedings), any assertion that the
transactions contemplated herein constitute a violation of the
antitrust laws, all to the end of expediting consummation of the
transactions contemplated herein, and each party shall keep the
other party fully apprised of its actions with respect to all of
the foregoing.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
SPECIALTY FOODS CORPORATION
By: /s/ Robert L. Fishbune
Name: Robert L. Fishbune
Title: Vice President
B COMPANIES ACQUISITION CORP.
By: /s/ Stephen C. Sherrill
Name: Stephen C. Sherrill
Title: President
LIST OF SCHEDULES
Exhibit A Accounts Receivable Agreement
Schedule 2.01(d) Consents and Approvals
Schedule 2.01(h) Title Policies
Schedule 4.01 Corporate Organization, Power and
Subsidiaries
Schedule 4.03 No Violations
Schedule 4.04 Shares
Schedule 4.05 Ownership of Shares
Schedule 4.06 Financial Statements
Schedule 4.07 Undisclosed Liabilities
Schedule 4.08 No Material Adverse Change
Schedule 4.09 Absence of Certain Changes
Schedule 4.10 Directors, Officers and Bank Accounts
Schedule 4.12 Inventory
Schedule 4.13 Insurance
Schedule 4.14 Title to Assets and Conditions
Schedule 4.15 Owned Real Estate
Schedule 4.16 Real Estate Leases
Schedule 4.17 Personal Property Leases
Schedule 4.18 Motor Vehicles
Schedule 4.19 Intellectual Property
Schedule 4.20 Material Contracts
Schedule 4.21 Employees
Schedule 4.22 ERISA
Schedule 4.23 Taxes
Schedule 4.24 Litigation
Schedule 4.25 Compliance with Law, and Licenses and
Permits
Schedule 4.26 Environmental Matters
Schedule 4.26 (d) Environmental Matters Subject to
Environmental Threshold and
Aggregate Environmental Threshold.
Schedule 4.27 Adequacy of Companies' Assets/Related
Party Transactions
Schedule 5.02 Authority; Authorization
[Execution Copy]
STOCK PURCHASE AGREEMENT
by and between
SPECIALTY FOODS CORPORATION
and
B COMPANIES ACQUISITION CORP.
GOVERNING THE OUTSTANDING CAPITAL STOCK OF BGH HOLDINGS, INC.
AND BRH HOLDINGS, INC.
November 26, 1996
TABLE OF CONTENTS
Page
ARTICLE 1
PURCHASE AND SALE OF STOCK
Section 1.01 Definitions 2
Section 1.02 Basic Transaction 12
Section 1.03 Consideration for Purchase of Shares 12
Section 1.04 The Closing 15
Section 1.05 Procedures at Closing 16
ARTICLE 2
CONDITIONS TO CLOSING
Section 2.01 Conditions to Buyer's Obligations 16
Section 2.02 Conditions to Seller's Obligations 21
ARTICLE 3
COVENANTS PRIOR TO CLOSING
Section 3.01 Affirmative Covenants of Seller 23
Section 3.02 Negative Covenants of Seller 25
Section 3.03 Covenants of Buyer 27
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 4.01 Corporate Organization, Power and Subsidiaries28
Section 4.02 Authority; Authorization 28
Section 4.03 No Violations 29
Section 4.04 Shares 29
Section 4.05 Ownership of Shares 30
Section 4.06 Financial Statements 31
Section 4.07 No Undisclosed Liabilities 32
Section 4.08 No Material Adverse Change 32
Section 4.09 Absence of Certain Changes 32
Section 4.10 Directors, Officers and Bank Accounts 33
Section 4.11 Accounts Receivable 34
Page
Section 4.12 Inventory 34
Section 4.13 Insurance 35
Section 4.14 Title to Assets and Conditions 36
Section 4.15 Owned Real Estate 36
Section 4.16 Real Estate Leases 38
Section 4.17 Personal Property Leases 41
Section 4.18 Motor Vehicles 41
Section 4.19 Intellectual Property 42
Section 4.20 Material Contracts 44
Section 4.21 Employees 46
Section 4.22 ERISA 48
Section 4.23 Taxes 51
Section 4.24 Litigation 53
Section 4.25 Compliance with Law, and Licenses and
Permits 54
Section 4.26 Environmental Matters 54
Section 4.27 Adequacy of the Companies' Assets/Related Party
Transactions 56
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 5.01 Corporate Organization and Power 57
Section 5.02 Authority; Authorization 57
Section 5.03 No Violation 57
Section 5.04 Litigation 58
Section 5.05 Acquisition of Shares for Investment 58
Section 5.06 Financing/Sufficient Funds 58
ARTICLE 6
TERMINATION
Section 6.01 Termination 61
Section 6.02 Effect of Termination 62
Section 6.03 Confidentiality 62
ARTICLE 7
ADDITIONAL AGREEMENTS
Page
Section 7.01 Survival 62
Section 7.02 Indemnification 63
Section 7.03 Expenses 66
Section 7.04 Press Releases and Announcements 66
Section 7.05 Continuing Access to Records 67
Section 7.06 Existing Insurance Coverage 67
Section 7.07 Companies Performance 68
Section 7.08 Continuing Assistance 69
Section 7.09 Employee Matters 69
Section 7.10 Third Party Beneficiaries 69
Section 7.11 Elimination of Inter-Companies and Affiliate
Accounts 69
Section 7.12 Cash Management 70
Section 7.13 Surety Bonds and Letters of Credit 70
Section 7.14 License Applications 71
Section 7.15 Purchased Accounts Receivable 71
Section 7.16 Buyer's Notice 72
Section 7.17 Allocation of Purchase Price 72
ARTICLE 8
TAX MATTERS
Section 8.01 Allocation of Federal and State Income Taxes 72
Section 8.02 Determination of Pre- and Post-Closing Taxable
Income
for Federal Income Tax Purposes 73
Section 8.03 Other Taxes 74
Section 8.04 Indemnification 74
Section 8.05 Refunds and Carrybacks 75
Section 8.06 Interperiod Adjustments 76
Section 8.07 Covenants 77
Section 8.08 Disagreements Over Tax Matters 79
Section 8.09 338(h)(10) Election 80
Page
ARTICLE 9
MISCELLANEOUS
Section 9.01 Amendment and Waiver 80
Section 9.02 Notices 80
Section 9.03 Assignment 81
Section 9.04 Severability 82
Section 9.05 No Strict Construction 82
Section 9.06 Captions 82
Section 9.07 Complete Agreement 82
Section 9.08 Governing Law/Jurisdiction 83
Section 9.09 Counterparts 83
Section 9.10 Advisor Fees 84
Section 9.11 Disclaimer Regarding Projections 84
Section 9.12 Filings and Applications 85
EXHIBIT 10.81
Execution Copy
EQUITY INVESTMENT AGREEMENT
EQUITY INVESTMENT AGREEMENT dated as of March 24, 1997
by and among SPECIALTY FOODS ACQUISITION CORPORATION, a
Delaware corporation ("SFAC"), SPECIALTY FOODS CORPORATION,
a Delaware corporation ("SFC" or the "Term Loan Borrower"),
ACADIA PARTNERS, L.P. ("ACADIA"), HAAS WHEAT ADVISORY
PARTNERS INCORPORATED ("HWAP"), KEYSTONE, INC. ("KEYSTONE")
and THE CHASE MANHATTAN BANK (formerly, "Chemical Bank"), a
New York banking corporation, as administrative agent (the
"Administrative Agent") for the Term Loan Lenders (as
defined below).
W I T N E S S E T H:
WHEREAS, the Term Loan Borrower, the Revolving Credit
Borrowers (as defined below), the Administrative Agent, the
Term Loan Lenders and the Revolving Credit Lenders (as
defined below) have entered into the Fourth Amendment, dated
as of February 25, 1997 (the "Fourth Amendment"), to:
(a) the Term Loan Agreement, dated as of July 17,1995
(as amended pursuant to the First Amendment thereto dated as
of February 28, 1996, the Second Amendment thereto dated as
of August 2, 1996, and the Third Amendment thereto dated as
of October 24, 1996, and as the same may be further amended,
supplemented or otherwise modified from time to time, the
"Term Loan Agreement"), among the Term Loan Borrower, the
several banks and other financial institutions from time to
time parties thereto (the "Term Loan Lenders"), and the
Administrative Agent; and
(b) the Revolving Credit Agreement, dated as of August
16, 1993, and amended and restated as of July 17, 1995 (as
amended pursuant to the First Amendment thereto dated as of
February 28, 1996, the Second Amendment thereto dated as of
August 2, 1996, and the Third Amendment thereto dated as of
October 24, 1996, and as the same may be further amended,
supplemented or otherwise modified from time to time, the
"Revolving Credit Agreement"), among each of the
subsidiaries of SFC signatory thereto (collectively, the
"Revolving Credit Borrowers") the several banks and other
financial institutions from time to time parties thereto
(collectively, the "Revolving Credit Lenders"; the Term Loan
Lenders and the Revolving Credit Lenders are collectively
referred to as the "Lenders", and each individually, as a
"Lender") and the Administrative Agent.
WHEREAS, it is a condition precedent to the
effectiveness of the Fourth Amendment that the parties
hereto shall have executed and delivered to the
Administrative Agent this Agreement.
NOW THEREFORE, in consideration of the mutual covenants
set forth herein, and to induce the Administrative Agent and
the Lenders to enter into the Fourth Amendment, the parties
hereto hereby agree with the Administrative Agent, for the
ratable benefit of the Term Loan Lenders and the Revolving
Credit Lenders, as follows:
1. Defined Terms.
(a) Unless otherwise defined in this Agreement, terms
which are defined in the Term Loan Agreement, the Revolving
Credit Agreement and the Fourth Amendment and used herein
are used as so defined. Unless otherwise indicated, all
Section, subsection and Schedule references are to the Term
Loan Agreement, as amended by the Fourth Amendment.
(b) The following terms shall have the following
meanings:
"Agreement" shall mean this Equity Investment
Agreement, as the same may be amended, modified or otherwise
supplemented from time to time.
"Equity Investment Date" shall mean June 30, 1997.
"Signing Shareholder" shall mean each of Acadia, HWAP
and Keystone, acting in their individual capacities.
2. Equity Investment.
(a) On or before the Equity Investment Date, each
Signing Shareholder, acting individually and not jointly and
severally, shall purchase equity of SFAC, in an amount
equal to the amount set forth on Schedule 1 to this
Agreement opposite the name of such Signing Shareholder
(each such individual obligation being referred to as an
"Equity Investment"); provided, however, that the obligation
to make an Equity Investment may, at the option of each
Signing Shareholder acting with respect to the Equity
Investment it is required to make, be fully satisfied by the
contribution to the equity of SFAC by certain of the
existing shareholders of SFAC, including such Signing
Shareholder (collectively, the "Purchasing Shareholders"),
of insurance receivables, in the face amount equal to the
amount set forth on Schedule 1 to this Agreement opposite
the name of such Signing Shareholder, that were generated by
Stella Foods, Inc., a wholly-owned indirect subsidiary of
SFC ("Stella"), in connection with the fire at Stella's
Lena, Wisconsin manufacturing facility and purchased by such
Signing Shareholder.
(b) In consideration for each such Equity Investment,
SFAC shall issue to the Purchasing Shareholders making such
Equity Investment common or preferred stock (convertible or
straight preferred) with or without warrants to purchase
common stock of SFAC in an amount to be determined by the
Board of Directors of SFAC and the Purchasing Shareholders.
(c) Promptly upon the contribution of each Equity
Investment to the equity of SFAC, SFAC shall contribute such
Equity Investment to the equity of SFC.
3. Representations and Warranties.
(a) Each of SFAC, SFC, Acadia, HWAP and Keystone
represents and warrants to the Administrative Agent and to
each other that it has the full legal capacity, power and
authority to execute, deliver and perform this Agreement and
that this Agreement constitutes the valid and binding
obligation of such entity, enforceable in accordance with
its terms.
(b) Each of SFAC and SFC further represents and
warrants to the Administrative Agent that the consummation
of each Equity Investment, as contemplated by this
Agreement, shall be accomplished in a manner that does not
violate the terms and conditions of the Term Loan Agreement
or the Revolving Credit Agreement.
4. Certification of Completion. Within five (5)
business days of the completion of each Equity Investment,
SFAC and SFC shall each deliver duly executed Officer's
Certificates to the Administrative Agent certifying that the
provisions of Sections 2 and 3 have been complied with in
all respects with respect to such Equity investment.
5. Authority of Administrative Agent. The parties
acknowledge that the rights and responsibilities of the
Administrative Agent under this Agreement with respect to
any action taken by the Administrative Agent or the exercise
or non-exercise by the Administrative Agent of any option,
right, request, judgment or other right or remedy provided
for herein or resulting or arising out of this Agreement
shall, as between the Administrative Agent and the Lenders,
be governed by the Term Loan Agreement and by such other
agreements with respect thereto as may exist from time to
time among them, but, as between the Administrative Agent
and SFAC and SFC, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Lenders
with full and valid authority so to act or refrain from
acting, and the parties hereto shall not be under any
obligation, or entitlement, to make any inquiry respecting
such authority.
6. Notices. All notices, requests and demands to or
upon the parties hereto to be effective shall be in writing
(or by telex, fax or similar electronic transfer confirmed
in writing) and shall be deemed to have been duly given or
made (a) when delivered by hand, or (b) if given by mail,
when deposited in the mails by certified mail, return
receipt requested, or (c) if by telex, fax, or similar
electronic transfer, when sent and receipt has been
confirmed, addressed to the Administrative Agent or SFC at
its address or transmission number for notices provided in
subsection 9.2 of the Term Loan Agreement, to SFAC in care
of SFC at its address or transmission number for notices
provided in subsection 9.2 of the Term Loan Agreement, and
to the other parties, at the addresses set forth below their
signatures. Any party may change its address and
transmission number for notices by notice to the other
parties in the manner provided in this section.
7. Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without validating
the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other
jurisdiction.
8. Amendments in Writing; No Waiver, Cumulative
Remedies.
(a) None of the terms or provisions of this Agreement
may be waived, amended, supplemented or otherwise modified
except by a written instrument executed by the parties,
provided, that any provision of this Agreement may be waived
by the Administrative Agent and the Lenders in a letter or
agreement executed by the Administrative Agent or telex or
facsimile transmission from the Administrative Agent.
(b) Neither the Administrative Agent nor any Lender
shall by any act (except by a written instrument pursuant to
Section 8(a) hereof), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any default or in any
breach of any of the terms and conditions hereof. No
failure to exercise, nor any delay in exercising, on the
part of the Administrative Agent or any Lender, any right,
power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power
or privilege. A waiver by the Administrative Agent or any
Lender of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which
the Administrative Agent or such Lender would otherwise have
on any future occasion.
(c) The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently, and are
not exclusive of any other rights or remedies provided by
law.
9. Section Headings. The section headings used in
this Agreement are for convenience of reference only and are
not to affect the construction hereof or be taken into
consideration in the interpretation hereof.
10. Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of the parties
hereto and shall inure to the benefit of the Administrative
Agent and the Lenders and their successors and assigns.
11. Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
12. Counterparts. This Agreement may be executed in
any number of counterparts by the parties hereto, each of
which counterparts when so executed shall be an original,
but all counterparts taken together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Equity Investment Agreement to be duly executed and
delivered as of the date first above written.
SPECIALTY FOODS ACQUISITION CORPORATION
By: /s/ John E. Kelly
Name: John E. Kelly
Title: Vice President
SPECIALTY FOODS CORPORATION
By: /s/ Robert B. Aiken
Name: Robert B. Aiken
Title: Vice President
ACADIA PARTNERS, L.P.
By: /s/ Steven Gruber
Name: Steven Gruber
Title: Vice President
Address: c/o Oak Hill Partners
Park Avenue Tower
65 East 55th St. 32nd Floor
New York, NY 10022
Attn: Mr. Anthony P.
Scotto
HAAS WHEAT ADVISORY PARTNERS
INCORPORATED
By: /s/ Douglas D. Wheat
Name: Douglas D. Wheat
Title: President
Address: 300 Crescent Court, Suite 1700
Dallas, Texas 75201
Attn: Mr. Douglas D. Wheat
KEYSTONE, INC.
By: /s/ Daniel L. Doctoroff
Name: Daniel L. Doctoroff
Title: Vice President
Address: 201 Main Street, Suite 3100
Ft. Worth, Texas 76102
Attn: Mr. J. Taylor
Crandall
Agreed and Accepted:
THE CHASE MANHATTAN BANK
(Formerly, Chemical Bank) as
Administrative Agent and as a Lender
By: /s/ Neil Boylan
Name: Neil Boylan
Title: Vice President
SCHEDULE 1
Signing Shareholder
Equity Investment
Acadia Partners, L.P.
$8,775,000
Haas Wheat Advisory Partners
$1,950,000
Incorporated
Keystone, Inc.
$8,775,000
Specialty Foods Corporation
Computation of Ratio of Earnings to Fixed Charges
(in thousands, except ratios)
1992 1993 1994 1995 1996
Earnings:
Income (loss) from
continuing operations 12,550 (5,830) (31,461) (222,475) (435,369)
Add:
Provision for taxes 3,817 5,772 1,618 1,410 1,201
Fixed Charges 27,310 55,104 92,207 100,733 102,957
Earnings as adjusted (A) 43,677 55,046 62,364 (120,332) (331,211)
Fixed charges:
Interest Expense 21,336 45,400 76,800 87,953 89,361
Amortization of deferred
debt issuance costs 387 3,886 10,426 6,895 5,472
Rents under leases
representative of an
interest factor 5,587 5,818 4,981 5,885 8,124
Fixed charges as adjusted (B) 27,310 55,104 92,207 100,733 102,957
Ratio of earnings to fixed
charges (A) divided by (B) 1.60 - 1 - 1 - 1 - 1
1 Earnings are inadequate to cover fixed charges by $434,168
in 1996, $221,065 in 1995, $29,843 in 1994, and $58 in 1993.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 37508
<SECURITIES> 0
<RECEIVABLES> 34986
<ALLOWANCES> 1955
<INVENTORY> 124976
<CURRENT-ASSETS> 282341
<PP&E> 397561
<DEPRECIATION> 132354
<TOTAL-ASSETS> 616279
<CURRENT-LIABILITIES> 233058
<BONDS> 589557
0
0
<COMMON> 0
<OTHER-SE> (494043)
<TOTAL-LIABILITY-AND-EQUITY> 616279
<SALES> 1661296
<TOTAL-REVENUES> 1661296
<CGS> 1209494
<TOTAL-COSTS> 397146
<OTHER-EXPENSES> 393991
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94833
<INCOME-PRETAX> (434168)
<INCOME-TAX> 1201
<INCOME-CONTINUING> (435369)
<DISCONTINUED> (11181)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (446500)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
SUBSIDIARIES OF SPECIALTY FOODS CORPORATION
Name State of Incorporation
MBC Holdings, Inc. Delaware
Metz Holdings, Inc. Delaware
Metz Baking Company Iowa
Metz Baking Company Delaware
WFB Holdings, Inc. Delaware
Pacific Coast Baking Company, Inc. Delaware
SFFB Holdings, Inc. Delaware
San Francisco French Bread Company California
Andre-Boudin Bakeries, Inc. California
Fisherman's Wharf Sourdough French
Bread Bakeries, Inc. California
Boudin International, Inc. California
Laura Todd of America California
Steve's Drayage California
A. Trocano Construction, Inc. California
Gelsi, Inc. California
San Francisco Sourdough Bakeries, Inc. California
Parisian Bakeries, Inc. California
San Francisco Bay Area Equipment and Supply California
San Francisco Baking Cultures California
San Francisco Sourdough Company California
Larraburu Bakery California
Belsea Holdings, Inc. Delaware
GSFBC Holdings, Inc. Washington
Lang Holdings, Inc. Washington
GBC Holdings, Inc. Washington
OFBC Holdings, Inc. Washington
SEM Holdings, Inc. Washington
Former VB Holdings, Ltd. British Columbia
TPB Holdings, Inc. California
B.P. Bar, Inc. California
Stella Holdings, Inc. Delaware
Stella Cheese Company, Inc. Delaware
BC Acquisition, Inc. Delaware
BM Acquisition, Inc. Delaware
Stella Foods, Inc. Delaware
Frigo Cheese Corporation Wisconsin
HMFS Holdings, Inc. Delaware
H&M Foods Systems, Inc. Delaware
MCC-DSD Holdings, Inc. Delaware
Mother's Cake & Cookie Co. California
GWI Holdings, Inc. Delaware
GWI, Inc. Delaware
