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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER 340-28130
SUIZA FOODS CORPORATION
(Exact name of Registrant as specified in its charter)
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<S> <C>
DELAWARE 75-2559681
(State or other jurisdiction (I.R.S. Employer
of Identification No.)
incorporation or
organization)
</TABLE>
3811 TURTLE CREEK BLVD.
SUITE 1300
DALLAS, TEXAS 75219
(214) 528-0939
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
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<S> <C>
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) NEW YORK STOCK EXCHANGE
OF THE ACT: COMMON STOCK, $.01 PAR VALUE (Name of Each Exchange on Which Registered)
(Title of Class)
</TABLE>
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/
The aggregate market value of the Registrant's voting stock held by
non-affiliates of the Registrant at March 25, 1997, based on the $27.625 per
share closing price for the Company's common stock on the New York Stock
Exchange was approximately $333.9 million.
The number of shares of the Registrant's Common Stock outstanding as of
March 25, 1997 was 15,153,229.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders are incorporated
by reference into Part II of this Form 10-K. Portions of the Registrant's
definitive Proxy Statement for its Annual Meeting of Stockholders to be held on
or about May 13, 1997 (to be filed) are incorporated by reference into Part III
of this Form 10-K.
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TABLE OF CONTENTS
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ITEM PAGE
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PART I
1 Business.............................................................................. 1
2 Properties............................................................................ 10
3 Legal Proceedings..................................................................... 11
4 Submission of Matters to a Vote of Stockholders....................................... 11
PART II
5 Market for Registrant's Common Equity and Related Stockholder Matters................. 11
6 Selected Financial Data............................................................... 11
7 Management's Discussion and Analysis of Financial Condition and Results of 13
Operations..........................................................................
8 Financial Statements and Supplementary Data........................................... 13
9 Changes in and Disagreements with Accountants on Accounting and Financial 13
Disclosure..........................................................................
PART III
10 Directors and Executive Officers of the Registrant.................................... 13
11 Executive Compensation................................................................ 13
12 Security Ownership of Certain Beneficial Owners and Management........................ 13
13 Certain Relationships and Related Transactions........................................ 13
PART IV
14 Exhibits, Financial Statement Schedule and Reports on Form 8-K........................ 14
</TABLE>
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PART I
ITEM 1. BUSINESS.
GENERAL
Suiza Foods Corporation (the "Company") is a leading manufacturer and
distributor of fresh milk products, refrigerated ready-to-serve fruit drinks and
coffee in Puerto Rico, fresh milk and related dairy products in Florida,
California and Nevada, and packaged ice in Florida and the southwestern United
States. The Company conducts its dairy operations primarily through its Puerto
Rico dairy subsidiaries ("Suiza-Puerto Rico"), Velda Farms, Inc. ("Velda
Farms"), Swiss Dairy Corporation ("Swiss Dairy") and Model Dairy, Inc. ("Model
Dairy") and its ice operations through Reddy Ice Corporation ("Reddy Ice"). Each
of these operating subsidiaries is a strong regional competitor with an
established reputation for customer service and product quality. These
subsidiaries market their products through extensive distribution networks to a
diverse group of customers, including convenience stores, grocery stores,
schools and institutional food service customers.
The Company has grown primarily through acquisitions, having consummated 38
acquisitions since it was formed in 1988. Through these acquisitions, the
Company has realized economies of scale and operating efficiencies by
eliminating duplicative manufacturing, distribution, purchasing and
administrative operations.
BUSINESS STRATEGY
The Company's strategy is to continue to expand its dairy, ice and related
food businesses primarily through acquisitions of dairy, ice and related food
businesses in new markets and subsequent consolidating or add-on acquisitions in
its existing markets. After entering new markets through acquisitions of strong
regional operators, the Company will pursue consolidating or add-on acquisitions
where such opportunities exist. In addition, the Company will seek to expand its
existing operations by adding new customers, extending its product lines and
securing distribution rights for additional branded product lines.
The Company's acquisition strategy has historically focused on established
regional dairy and ice operations that have significant market share and
long-standing customer relationships. Suiza-Puerto Rico, which was founded in
1939, has served the Puerto Rico market for over 50 years. Velda Farms has
served the Florida dairy market for over 40 years. Reddy Ice entered the retail
ice business in the 1920s. Swiss Dairy, which was acquired in September 1996,
has served its market for approximately 50 years. The predecessor of Model Dairy
was founded in 1906.
The Company has recently implemented its consolidation strategy by acquiring
and integrating dairy operations into Suiza-Puerto Rico and Velda Farms, and a
number of ice companies into Reddy Ice. Management has enhanced the
profitability of the acquired operations through enhanced purchasing power and
by consolidating delivery routes, production, acquired brand names and human
resources into the Company's larger scale operations. In June 1994, the Company
acquired Mayaguez Dairy, Inc. ("Mayaguez Dairy"), formerly the third largest
dairy manufacturer and distributor in Puerto Rico. Since the acquisition, the
Company has consolidated Mayaguez Dairy's production into its existing Puerto
Rico facilities and has eliminated the fixed costs of Mayaguez Dairy's former
manufacturing facility and duplicative administrative expenses. In November
1994, the Company acquired the Florida Division of Flav-O-Rich, Inc., a
subsidiary of Mid-America Dairymen, Inc. ("Flav-O-Rich"). Located in St.
Petersburg, Florida, Flav-O-Rich manufactured and distributed fresh dairy
products in peninsular Florida. Since the acquisition, the Company has
re-allocated production among its Florida facilities, consolidated Flav-O-Rich's
distribution operations with its own and reduced Flav-O-Rich's personnel
expenses. In January 1996, the Company acquired Skinners' Dairy, Inc.
("Skinners") in Jacksonville, Florida. Skinners' manufactured and distributed
fresh dairy products in peninsular Florida, primarily in the Jacksonville area.
Since the acquisition, the Company has closed the Skinners' manufacturing plant,
transferred Skinners'
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volume to the Company's Winter Haven facility, consolidated Skinners'
distribution with its own and reduced Skinners' personnel expenses. In most
cases, the Company has closed the manufacturing facilities of acquired ice
businesses and transferred the acquired business's volume to one of the
Company's existing ice manufacturing facilities.
INDUSTRY OVERVIEW
DAIRY
According to published industry statistics, approximately $22.8 billion of
fresh milk products were sold in 1995 at the wholesale level in the United
States compared to $21.5 billion sold in 1988. Management believes that the
dairy industry is mature in both the mainland United States and Puerto Rico.
The dairy industry has excess capacity and has been in the process of
consolidation for many years. Excess capacity has resulted from the development
of more efficient manufacturing techniques, the establishment of captive dairy
manufacturing operations by large grocery retailers and relatively little growth
in the demand for fresh milk products. As the industry has consolidated, many
smaller dairy processors have been eliminated and several large regional dairy
processors have emerged. According to published industry statistics, in 1995
there were approximately 651 fresh milk processing plants in the United States,
a decline of 540 from the 1,191 plants operating in 1982. The number of plants
with 20 or more manufacturing employees declined from 792 to 447 over the same
period. As a result of this consolidation trend, which management believes will
continue, the Company has had favorable opportunities to pursue its business
strategy.
ICE
The ice industry is highly fragmented and is regional because of the
relatively high cost of transporting ice. Demand for ice is seasonal, with peak
demand occurring in the second and third calendar quarters. The availability of
ice during periods of high demand is important to grocery retailers and
convenience stores. The ice industry has therefore emerged as a service oriented
business requiring efficient manufacturing facilities and distribution systems
capable of accommodating peak demand levels. Management believes that the
Company is one of the largest manufacturers and distributors of ice in the
United States and that it has significant market share in each of the markets in
which it operates.
PRODUCTS AND SERVICES
The following table sets forth the total net sales of the Company's largest
product lines, fresh milk products and ice, in dollars and as a percentage of
consolidated total net sales in 1994, 1995 and 1996 (dollars in millions):
<TABLE>
<CAPTION>
1994 1995 1996
-------------------- -------------------- --------------------
DOLLARS PERCENT DOLLARS PERCENT DOLLARS PERCENT
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Fresh milk products............... $ 227.9 66.8% $ 291.8 67.8% $ 363.5 69.8%
Ice............................... 47.7 14.0 50.5 11.7 52.8 10.1
</TABLE>
The change in the percentage of consolidated total net sales represented by
sales of fresh milk and by sales of ice from 1994 to 1996 is primarily the
result of significant dairy acquisitions in the last half of 1996.
DAIRY
The Company's regional dairy operations manufacture and distribute fluid
milk, fruit drinks, coffee, juices, water and related products under proprietary
brand names and on a private-label basis for large customers. The Company also
purchases and distributes certain other products such as yogurt, packaged ice
cream and ice cream novelties.
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ICE
The Company manufactures and distributes ice products for retail, commercial
and institutional markets. The Company's primary product is cocktail ice in
eight pound bags, which it sells principally to convenience and grocery stores.
The Company also sells cocktail ice in various bag sizes ranging from three
pounds to 40 pounds to restaurants, bars, stadiums, vendors and caterers. In
addition, the Company sells block ice in ten and 300 pound sizes to commercial
and industrial customers.
SALES AND DISTRIBUTION
DAIRY
The Company markets and sells its dairy product line to a variety of retail
and food service outlets including grocery stores, club stores, convenience
stores, gas stores, schools, restaurants, hotels and cruise ships. The Company's
regional dairy operations serve over 19,000 customers in its markets utilizing a
fleet of approximately 1,000 delivery vehicles. Suiza-Puerto Rico is the larger
of two fresh milk processors in Puerto Rico and distributes its products to
approximately 8,800 grocery stores, retail outlets and schools, and also
distributes third party brand name ice cream and other refrigerated and frozen
foods principally to medium-sized and large grocery stores. Velda Farms serves
approximately 9,500 customers throughout peninsular Florida and focuses its
distribution efforts on food service accounts, convenience stores, club stores
and schools. Swiss Dairy distributes fresh milk and a limited number of other
products to high volume retailers in Southern California and Nevada, including
grocery and club stores. More than 88% of Swiss Dairy's net sales during 1996
were made to three large retailers. Model Dairy distributes fresh milk, ice
cream and related products to grocery stores, retail outlets, schools and food
service accounts in northern Nevada and in certain adjoining areas of northern
California.
ICE
The Company markets its ice products to convenience and grocery stores for
retail sales and, to a lesser extent, to business and institutional customers
that utilize the Company's products in their operations. The Company serves
approximately 21,000 sites from 22 ice manufacturing facilities and 6
distribution centers. The Company provides ice merchandisers to a substantial
majority of these sites. During 1996, the Company's largest two ice customers
accounted for approximately 17% of net ice sales (1.7% of total net sales). The
Company's ice distribution fleet consists of approximately 120 delivery
vehicles, the majority of which are owned. In order to meet peak demand, the
Company expands its fleet during the summer season with short-term leased
vehicles.
RAW MATERIALS AND SUPPLY
DAIRY
The Company purchases milk, its primary raw material, from farmers and farm
co-operatives under contractual arrangements. Certain aspects of the Company's
milk supply arrangements are regulated by governmental authorities. Fluid milk
is generally readily available. The Company has traditionally experienced slight
shortages in its milk supply in Puerto Rico during the months of September and
October each year. Management estimates that these shortages, when they occur,
reduce its Puerto Rico dairy sales by less than 2% during these months. Other
raw materials, such as coffee, juice concentrates, sweeteners, and packaging
supplies are generally available from numerous suppliers and the Company is not
dependent on any single supplier for these materials. Certain of these raw
materials are purchased under long term contracts in order to obtain lower
costs.
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ICE
Except with respect to its water supply and electricity, the Company is not
dependent upon any single supplier for materials used in the manufacturing and
packaging of its ice products. The Company has not experienced any material
supply problems in the past with respect to its ice business.
COMPETITION
The Company's businesses are highly competitive. The Company has a number of
competitors in each of its major product, service and geographic markets, and
many of these competitors are larger, more established and better capitalized
than the Company.
DAIRY
PUERTO RICO
The Company owns and operates two of the three fresh milk manufacturing
facilities in Puerto Rico. The Company's competitor, Vaqueria Tres Monjitas
("Tres Monjitas"), operates a single manufacturing plant. The Company
manufactures and distributes approximately 66% of the fresh milk sold in Puerto
Rico while Tres Monjitas, which is well capitalized, manufactures and
distributes approximately 34%. The Company competes primarily on the basis of
service, price, brand name recognition and quality. Because of the Company's
size, the quality of its manufacturing facilities, the efficiency of its largely
non-union work force, the strength of its distribution network and the strength
of its brand name, management believes the Company can continue to compete
effectively in the Puerto Rico dairy business.
The Company does not presently face competition in the Puerto Rico fresh
dairy business from outside Puerto Rico, nor does it expect to in the
foreseeable future. The Company's fresh dairy business does, however, compete
with shelf stable milk products, which are manufactured by one manufacturer in
Puerto Rico and also imported from the mainland United States and Canada.
Management believes that shelf stable milk competes with fresh milk primarily
where the consumer lacks adequate refrigeration or in small quantity uses, such
as coffee creamers. Management further believes that sales of shelf stable milk
are approximately one-tenth as large as sales of fresh milk and that sales of
shelf stable products have shown moderate volume increases in recent years.
In the refrigerated ready-to-serve fruit drink segment, Tres Monjitas is the
Company's largest direct competitor located in Puerto Rico. In addition to
competition from other local manufacturers and distributors of refrigerated
ready-to-serve fruit drinks, the Company competes against numerous other
beverage companies, including large United States-based manufacturers and
marketers of carbonated and non-carbonated beverages. These competitors are
generally larger and better capitalized than the Company. Although management
believes that competition will continue to grow from fruit drink and other
beverage companies, management anticipates that the Company will be able to
continue to compete effectively in the fruit drink segment because of the
strength and efficiency of its distribution network, its recognizable brands and
the established presence of its products in the dairy case.
UNITED STATES
The Company's competitors in its U.S. dairy processing and distribution
business include other large, independent dairy processing companies and dairy
processors owned by grocery chains, many of which are larger and better
capitalized than the Company. Due to the cost of transporting fresh milk,
competition in the fluid dairy business tends to be regional rather than
national, with flexibility of service, price, breadth of product line and
quality as the primary competitive factors.
In addition to competition from other dairy manufacturers, the Company's
Florida and Nevada dairy operations compete with food service companies and
other distributors of dairy products, many of which are large, well-capitalized,
national companies. Although competition in the dairy and food distribution
4
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business is intense, management believes that the Company's focus on customer
service and tailored product lines and the strength and efficiency of its
distribution system allow it to compete effectively. In its Florida and Nevada
ice cream distribution businesses, the Company competes with large integrated
dairy and ice cream manufacturing companies and independent distributors of
national ice cream brands. Because the Company offers brands manufactured by
third parties as well as its own brand of ice cream products, the Company
competes effectively in these markets by offering convenience stores and other
small retailers a broad line of ice cream products and frozen novelties. By
carrying a broad line of popular national and other brands, the Company
generates profitable sales volumes from retail sites that single line or other
more limited distributors may find uneconomical to service.
ICE
The Company competes primarily with smaller independent regional ice
manufacturers and machines that manufacture and package ice at store locations.
In addition to this direct competition, certain convenience and grocery
retailers operate commercial ice plants for internal use. During peak season,
however, the Company frequently services retailers that manufacture their own
ice. To further compete in this segment, the Company also offers ice machines
that manufacture and package ice at customer locations.
Competition in the ice business is based primarily on service, price and
quality. In order to successfully compete, an ice manufacturer must be able to
substantially increase production and distribution on a seasonal basis while
maintaining cost efficiency. Management believes that the size and quality of
the Company's ice facilities, its high regional market share and its route
density allow it to compete effectively. Because only one ice manufacturer
typically serves an individual retail site, the Company's ice products generally
do not face competition at the retail level.
Several major grocery chains within the Company's ice markets manufacture
ice at their own ice plants. While the Company does not supply these and other
vertically integrated grocery retailers/ manufacturers, such companies generally
manufacture ice products for internal use only and do not compete for third
party accounts. However, a significant increase in the utilization of captive
commercial ice plants or on-site manufacturing by retailers currently serviced
by the Company could have an adverse effect on the Company's operations.
TRADEMARKS
The Company has developed or acquired a number of trademarks and brand
names, of which eight are registered, for use in its dairy and ice businesses,
and holds licenses for the use of several additional registered trademarks from
third parties. Although the Company's use of its trademarks has created goodwill
and results in product differentiation, management does not believe that the
loss of any of the Company's trademarks would have a material adverse effect on
its operations. The Company also holds a patent on an ice machine that
manufactures and packages ice at store locations.
GOVERNMENT REGULATION
PUBLIC HEALTH
As a manufacturer and distributor of food products, the Company is subject
to the Federal Food, Drug and Cosmetic Act and regulations promulgated
thereunder by the Food and Drug Administration ("FDA"). This comprehensive
regulatory scheme governs the manufacture (including composition and
ingredients), labeling, packaging and safety of food. The FDA regulates
manufacturing practices for foods through its current good manufacturing
practices regulations, specifies the standards of identity for certain foods,
including many of the products sold by the Company, and prescribes the format
and content of certain information required to appear on food product labels.
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In addition, the FDA enforces the Public Health Service Act and regulations
issued thereunder, which authorize regulatory activity necessary to prevent the
introduction, transmission or spread of communicable diseases. These regulations
require, for example, pasteurization of milk and milk products. The Company and
its products are also subject to state and local regulation through such
measures as the licensing of dairy manufacturing facilities, enforcement by
state and local health agencies of state standards for the Company's products,
inspection of the Company's facilities and regulation of the Company's trade
practices in connection with the sale of dairy products.
The Company utilizes quality control laboratories to test milk and other
ingredients and finished products. Product quality and freshness are essential
to the successful retail distribution of dairy and refrigerated ready-to-serve
fruit drinks. To monitor product quality at its facilities, the Company
maintains quality control programs to test products during various processing
stages. Management believes that the Company's dairy and ice facilities and
manufacturing practices comply with applicable government regulations.
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.
ENVIRONMENTAL REGULATIONS
The Company is subject to certain federal, state and local environmental
regulations. Certain of the Company's dairy facilities discharge biodegradable
wastewater into municipal waste treatment facilities in excess of levels
permitted under local regulations. Because of this, Velda Farms pays wastewater
surcharges of approximately $150,000 annually to municipal water treatment
authorities. These authorities may, however, require Velda Farms to comply with
such regulations and construct pre-treatment facilities or take other action to
reduce effluent discharge in the future.
The Company maintains above-ground or underground petroleum storage tanks at
many of its facilities. These tanks are periodically inspected to determine
compliance with applicable regulations. The Company may be required to make
expenditures from time to time in order to maintain compliance of these tanks.
The federal government has banned the production of a refrigerant used by
the Company in its ice merchandisers. The continued use of this refrigerant,
however, is permitted and there are sufficient quantities of the refrigerant
available to meet the Company's needs for the next several years. The Company is
taking steps to facilitate its conversion to new, reformulated refrigerants.
Management does not anticipate that conversion costs will be material.
Management does not expect environmental compliance to have a material
impact on the Company's capital expenditures, earnings or competitive position
in the foreseeable future.
U.S. MILK INDUSTRY REGULATION
The average price paid to producers for Grade A milk in most of the mainland
United States is monitored by Federal Milk Marketing Orders. In California and
Nevada, milk prices are monitored by state agencies. In the federal milk markets
and the California and Nevada milk markets, raw milk prices are currently
supported by the federal government through standing offers to buy storable
forms of dairy products such as cheese, nonfat dry milk powder and butter.
Congress has recently passed legislation to phase out federal support prices by
December 31, 1999.
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PUERTO RICO MILK INDUSTRY REGULATION
The milk industry in Puerto Rico is regulated under Puerto Rico Law Number
34 of June 11, 1957. This statute establishes a production ceiling for milk
production by dairy farmers in order to manage the supply and demand of milk
products and to stabilize prices. In addition, the Puerto Rico statute provides
that the government will establish maximum prices for the dairy farm, processor
and retailer and that such prices be reviewed at least once a year.
The Office for the Regulation of the Milk Industry, an agency of the Puerto
Rico Department of Agriculture, is charged with: (i) ensuring the quality of
milk products; (ii) setting the price of milk at the dairy farm level and
maximum prices at the processor and retail levels; and (iii) administering and
managing licenses and other matters within the industry. As part of its review
and price setting process, this agency examines the financial condition of each
of the participants in the industry as well as overall economic trends within
the industry. As a general rule, pricing at each of the industry levels reflects
an attempt to provide a fair return to processors and farmers and maintain
prices acceptable to consumers. The latest price increase for dairy
manufacturers in Puerto Rico was in 1994 and, prior to that, in 1990.
EMPLOYEES
As of December 31, 1996 the Company employed 2,450 employees in the
following categories:
<TABLE>
<CAPTION>
NON-UNION UNION TOTAL
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<S> <C> <C> <C>
Dairy
Puerto Rico.............................................................. 953 74 1,027
Florida.................................................................. 714 -- 714
California............................................................... 12 120 132
Nevada................................................................... 45 114 159
Ice........................................................................ 407 -- 407
Corporate.................................................................. 11 -- 11
----- --- ---------
Total.................................................................. 2,142 308 2,450
----- --- ---------
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</TABLE>
The Puerto Rico union employees are subject to two collective bargaining
agreements that expire in July and October 1997. The California and Nevada union
employees are subject to collective bargaining agreements that expire in August
1999 and June 2000, respectively.
OUTLOOK AND UNCERTAINTIES
Certain information in this Annual Report may contain "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended. All statements other than statements of historical fact are
"forward-looking statements" for purposes of these provisions, including any
projections of earnings, revenues or other financial items, any statements of
the plans and objectives of management for future operations, any statements
concerning proposed new products or services, any statements regarding future
economic conditions or performance, and any statement of assumptions underlying
any of the foregoing. In some cases, forward-looking statements can be
identified by the use of terminology such as "may," "will," "expects," "plans,"
"anticipates," "estimates," "potential," or "continue," or the negative thereof
or other comparable terminology. Although the Company believes that the
expectations reflected in its forward-looking statements are reasonable, it can
give no assurance that such expectations or any of its forward-looking
statements will prove to be correct, and actual results could differ materially
from those projected or assumed in the Company's forward-looking statements. The
Company's future financial condition and results, as well as any forward-looking
statements, are subject to inherent risks and uncertainties, some of which are
summarized in this section.
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POTENTIAL LIMITATIONS ON EXPANSION. The Company may encounter increased
competition for acquisitions in the future, which could result in acquisition
prices the Company does not consider acceptable. There can be no assurance that
the Company will find suitable acquisition candidates at acceptable prices or
succeed in integrating any acquired business into the Company' existing business
or in retaining key customers of acquired businesses. There can also be no
assurance that the Company will have sufficient available capital resources to
realize its acquisition strategy.
COMPETITION. The Company's regional dairy businesses are subject to
significant competition. Many of the Company's competitors are larger, better
capitalized and have greater financial, operation and marketing resources than
the Company.
The dairy industry has excess capacity and has been in the process of
consolidation for many years. Excess capacity has resulted from the development
of more efficient manufacturing techniques, the establishment of captive dairy
manufacturing operations by large grocery retailers and relatively little growth
in the demand for fresh milk products. The increased use of captive dairy
manufacturing operations by the Company's customers could have an adverse effect
on the Company's operations.
The packaged ice business is also highly competitive. The Company faces a
number of competitors in the packaged ice business, including smaller
independent ice manufacturers, convenience and grocery retailers that operate
captive commercial ice plants and retailers that manufacture and package ice at
store locations. A significant increase in the utilization of captive commercial
ice plants or on-site manufacturing by operators of large retail chains served
by the Company could have an adverse effective on the Company's operations.
SUBSTANTIAL INDEBTEDNESS. The Company's senior credit facility and related
debt service obligations (i) limit the Company's ability to obtain additional
financing in the future; (ii) require the Company to dedicate a significant
portion of the Company's cash flow to the payment of principal and interest on
its indebtedness, thereby reducing the funds available to the Company for other
purposes; (iii) limit the Company's flexibility in planning for, or reacting to,
changes in its business and market conditions; and (iv) impose additional
financial and operational restrictions on the Company, including restrictions on
dividends.
The Company's ability to make scheduled payments on its indebtedness depends
on its financial and operating performance, which is subject to prevailing
economic conditions and to financial, business and other factors, some of which
are beyond the Company's control. The failure of the Company to comply with the
financial and other restrictive covenants under the senior credit facility may
result in an event of default which, if not cured or waived, could have a
material adverse effect on the Company. In addition, although the Company has
entered into various interest rate agreements to reduce its exposure to interest
rate fluctuations under the senior credit facility, the Company remains subject
to interest rate risk with respect to a substantial portion of its indebtedness.
GOVERNMENT REGULATION; RAW MATERIAL COSTS. The supply and price of milk in
Puerto Rico are regulated under Puerto Rico law. The government of Puerto Rico
establishes an industry-wide production ceiling and sets the prices that may be
charged for milk at the dairy farm level and the maximum prices that may be
charged at the processor and retail levels. The price controls in Puerto Rico
make the Company vulnerable to increases in the costs of manufacturing,
packaging and distributing its products. There can be no assurance that the
Company's operating results will not be adversely affected by price levels set
by Puerto Rico.
The price of raw milk in the mainland United States fluctuates based on
supply and demand, with minimum support prices established monthly on a regional
basis by federal or state government agencies. Congress has recently passed
legislation to phase out support prices over a specified period. There can be no
assurance that a material increase in milk prices in the mainland United States
will not occur or that any such increase would not reduce the profitability of
the Company's operations.
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SEASONALITY OF ICE BUSINESS. The Company's ice business is seasonal, with
its highest sales occurring during the second and third calendar quarters.
Because the Company's results of operations for its ice business depend
significantly on sales during its peak season, adverse weather during this
season (such as an unusually mild or rainy period) could have a disproportionate
impact on the Company's results of operations for the full year.
DEPENDENCE ON KEY PERSONNEL. The future success of the Company's business
operations is dependent in part on the efforts and skills of certain key members
of management, including Gregg L. Engles, Chairman and Chief Executive Officer
of the Company. The loss of any of its key members of management could have an
adverse effect on the Company. The Company has not obtained key man life
insurance with respect to any of its key members of management.
LIMITATIONS ON FAVORABLE TAX TREATMENT. Under Section 936 of the Internal
Revenue Code of 1986, as amended, a portion of the Company's income derived from
its dairy, fruit drink and plastic bottle operations in Puerto Rico qualifies
for a tax credit that has the effect of reducing or eliminating United States
income taxes on income derived from these operations. In the Revenue
Reconciliation Act of 1993, the United States Congress imposed certain
limitations on the availability of the Section 936 credit. In August 1996,
Congress passed the Small Business Job Protection Act of 1996 which contains
further restrictions on the availability of Section 936 credits and eliminates
Section 936 altogether by December 31, 2005. These limitations, combined with
certain other provisions in the Internal Revenue Code that govern the allocation
among affiliated corporations of credits derived under Section 936, may limit
the amount of the tax credit available to the Company prior to the expiration of
Section 936.
9
<PAGE>
ITEM 2. PROPERTIES.
The Company conducts its manufacturing and distribution operations from the
following facilities:
<TABLE>
<CAPTION>
MANUFACTURING &
REGION DISTRIBUTION DISTRIBUTION ONLY
-------------- ---------------------- --------------------
<S> <C> <C> <C>
DAIRY: California Riverside
Florida Miami Daytona Beach
St. Petersburg Fort Myers
Winterhaven Jacksonville
Naples
Orlando
Ocala
Riviera Beach
Sarasota
Tampa
Vero Beach
Nevada Reno
Puerto Rico Aguadilla Adjuntas (coffee)
Caguas (coffee) Arecibo
Lares (coffee) Ponce
San Juan San Juan (coffee)
ICE: Arizona Phoenix
Tucson
Yuma
Florida Auburndale St. Petersburg
Crescent City
Davie
Jacksonville
New Smyrna Beach
Opa Locka
Tampa
Nevada Las Vegas
New Mexico Albuquerque
Texas Austin Bryan
Dallas Galveston
Fort Worth Livingston
Houston (2) Port Neches
Killeen
Pilot Point
Rockwall
Splendora
Waco
Utah Salt Lake City
</TABLE>
The Company maintains two administrative offices located in leased premises
in Dallas, including its executive offices located at 3811 Turtle Creek
Boulevard, Suite 1300, Dallas, Texas 75219.
10
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
The Company is from time to time a party to legal proceedings that arise in
the ordinary course of business. Management does not believe that the resolution
of any threatened or pending legal proceedings will have a material adverse
affect on the Company's financial position, results of operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock (the "Common Stock") began trading in the Nasdaq
National Market on April 17, 1996. The following table sets forth, for the
periods from April 17, 1996 to December 31, 1996, the high and low sales prices
of the Common Stock as quoted on the Nasdaq National Market. At March 25, 1997,
there were approximately 56 record holders of the Common Stock. The Common Stock
began trading on the New York Stock Exchange on March 5, 1997.
<TABLE>
<S> <C> <C>
Year Ended December 31, 1996:
Second Quarter (from April 17, 1996).............................. $ 18.75 $ 14.00
Third Quarter..................................................... $ 17.75 $ 15.75
Fourth Quarter.................................................... $ 20.75 $ 16.75
</TABLE>
The Company has never declared or paid a cash dividend on the Common Stock.
Management intends to retain all earnings to cover working capital fluctuations
and to fund capital expenditures, scheduled debt repayments and acquisitions and
does not anticipate paying cash dividends on the Common Stock in the foreseeable
future. The Company's senior credit facility prohibits the payment of dividends
by the Company on any shares of Common Stock, other than dividends payable
solely in Common Stock.
ITEM 6. SELECTED FINANCIAL DATA.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE DATA)
The following table presents selected consolidated financial data of the
Company for the five years ended December 31, 1996 derived from the Company's
audited consolidated financial statements. The selected financial data do not
purport to indicate results of operations as of any future date or for any
future period. Effective with a corporate combination in March 1995 (the
"Combination") the Company became the holding company for the operations of
Suiza-Puerto Rico, Velda Farms and Reddy Ice. The Combination has been accounted
for using the pooling of interests method of accounting. Results of operations
of Suiza-Puerto Rico and Velda Farms are included from the dates such operations
were acquired in purchase business combinations (December 16, 1993 and April 10,
1994, respectively).
11
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1992 1993 1994 1995 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales...................................... $ 44,452 $ 51,675 $ 341,108 $ 430,466 $ 520,916
Costs of sales................................. 14,586 20,412 240,468 312,633 388,548
---------- ---------- ---------- ---------- ----------
Gross profit................................... 29,866 31,263 100,640 117,833 132,368
Operating costs and expenses:
Selling and distribution....................... 14,483 15,434 54,248 64,289 70,709
General and administrative..................... 6,110 6,305 16,935 19,277 21,913
Amortization of intangibles and other.......... 1,911 822 3,697 3,703 4,624
---------- ---------- ---------- ---------- ----------
Total operating costs and expenses........... 22,504 22,561 74,880 87,269 97,246
---------- ---------- ---------- ---------- ----------
Income from operations........................... 7,362 8,702 25,760 30,564 35,122
Other (income) expense:
Interest expense, net.......................... 8,495 7,697 19,279 19,921 17,470
Merger and other costs......................... 1,199 -- 1,660 10,238 571
Other income, net.............................. (408) (419) (268) (469) (4,012)
---------- ---------- ---------- ---------- ----------
Total other (income) expense................. 9,286 7,278 20,671 29,690 14,029
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes and
extraordinary loss............................. (1,924) 1,424 5,089 874 21,093
Income taxes (benefit)........................... -- 4 844 2,450 (6,836)
---------- ---------- ---------- ---------- ----------
Income (loss) before extraordinary loss.......... (1,924) 1,420 4,245 (1,576) 27,929
Extraordinary loss from early extinguishment of
debt........................................... 2,491 -- 197 8,462 2,215
---------- ---------- ---------- ---------- ----------
Net income (loss) (1)............................ $ (4,415) $ 1,420 $ 4,048 $ (10,038) $ 25,714
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Weighted average shares outstanding.............. 1,763,502 2,487,174 6,156,387 6,109,398 9,921,822
Income (loss) before extraordinary loss per
share.......................................... $ (1.09) $ .57 $ .69 $ (.26) $ 2.81
Extraordinary loss per share..................... (1.41) -- (.03) (1.38) (0.22)
---------- ---------- ---------- ---------- ----------
Net income (loss) per share (1).................. $ (2.50) $ .57 $ .66 $ (1.64) $ 2.59
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital (deficit)...................... $ 616 $ (3,609) $ 2,099 $ (1,554) $ 26,880
Total assets................................... 46,991 167,948 238,952 232,522 384,148
Long-term debt, net of current portion......... 54,739 132,123 173,327 171,745 226,693
Total stockholders' equity (deficit)........... (15,408) 162 9,887 9,460 93,532
</TABLE>
- ------------------------
(1) Net income (loss) and related per share amounts include the following
nonrecurring and extraordinary charges and benefits:
<TABLE>
<S> <C> <C> <C> <C> <C>
Merger, financing and other costs
(a)............................................ $ (1,199) $ -- $ (1,602) $ (9,554) $ (354)
Tax benefits (b)................................. -- -- -- -- 13,950
Extraordinary loss from early
extinguishment of debt (c)..................... -- -- (197) (8,462) (2,215)
--------- --------- --------- --------- ---------
$ (1,199) $ -- $ (1,799) $ (18,016) $ 11,381
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
12
<PAGE>
(a) Consists of costs incurred in connection with the Combination and a
prior merger, an uncompleted public offering of the Company's common
stock, an uncompleted debt offering, uncompleted acquisitions and debt
refinancing costs, net of associated income taxes of $58 in 1994, $684 in
1995 and $217 in 1996.
(b) Includes sale of Puerto Rico tax credits of $3,400 (net of related
expenses), reflected in other income, and the recognition of $11,750 in
deferred income tax benefits recorded as a credit to tax expense, both
effects related to tax credits generated by Suiza-Puerto Rico, partially
offset by additional income tax expense of $1,200 related to the sale of
the tax credits.
(c) Net of associated income taxes of $700 in 1995 and $900 in 1996.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Incorporated herein by reference to the Company's Annual Report to
Stockholders for the year ended December 31, 1996 at pages 18 through 23.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following information is set forth in the Company's Annual Report to
Stockholders for the year ended December 31, 1996, which is incorporated herein
by reference: all Consolidated Financial Statements, pages 24 through 27; all
Notes to Consolidated Financial Statements, pages 28 through 42; and the
"Independent Auditors' Report", page 43. With the exception of the information
herein expressly incorporated by reference, the Company's Annual Report to
Stockholders for the year ended December 31, 1996 is not deemed filed as part of
this Annual Report on Form 10-K.
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.
Incorporated herein by reference to the Company's proxy statement for the
May 13, 1997 Annual Meeting of Stockholders under the caption "Executive
Officers and Directors."
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated herein by reference to the Company's proxy statement for the
May 13, 1997 Annual Meeting of Stockholders under the caption "Executive
Compensation and Other Information," provided that the Performance Graph and the
Compensation Committee's and Stock Option Committee's Report on Executive
Compensation are expressly not incorporated herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated herein by reference to the Company's proxy statement for the
May 13, 1997 Annual Meeting of Stockholders under the caption "Security
Ownership of Certain Beneficial Owners and Management."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated herein by Reference to the Company's proxy statement for the
May 13, 1997 Annual Meeting of Stockholders under the captions "Executive
Compensation and Other Information--Compensation Committee Interlocks and
Insider Participation" and "Certain Relationships and Related Transactions".
13
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
<TABLE>
<S> <C> <C>
(a)(1) The following consolidated financial statements are incorporated by reference to the
Company's Annual Report to Stockholders for the fiscal year ended December 31, 1996 attached
hereto:
Consolidated Balance Sheets as of December 31, 1996 and 1995
Consolidated Statements of Operations for the fiscal years ended December 31,
1996, 1995 and 1994
Consolidated Statements of Shareholders' Equity for the fiscal years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the fiscal years ended December 31,
1996, 1995 and 1994
Notes to Consolidated Financial Statements
Independent Auditors' Report of Deloitte & Touche LLP
(a)(2) Financial Statement Schedules
No financial statement schedules are required as all material required
information is disclosed in the notes to the Company's Consolidated Financial
Statements.
(a)(3) Management Contract or Compensatory Plan
See Index to Exhibits on Page 16. Each of the following Exhibits described on the
Index to Exhibits is a management contract or compensatory plan: Exhibits 10.1
through 10.12.
(b) Reports on Form 8-K
(1) Form 8-K filed on September 20, 1996 to report the acquisition of Garrido.
(2) Form 8-K/A filed on September 24, 1996, amending the Form 8-K filed on September
20, 1996, containing Item 7, historical and pro forma financial statements for
Garrido.
(3) Form 8-K filed on September 24, 1996 to report the acquisition of Swiss Dairy.
(4) Form 8-K/A filed September 25, 1996, amending the Form 8-K filed on September 20,
1996 and Form 8-K filed on September 24, 1996, containing the acquisition
agreement for Garrido.
(5) Form 8-K filed on December 31, 1996 to report the acquisition of Model Dairy.
(c) Exhibits
See Index to Exhibits on Page 16.
(d) Financial Statement Schedules
No financial statement schedules are required as all material required
information is disclosed in the notes to the Company's Consolidated Financial
Statements.
</TABLE>
14
<PAGE>
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.
SUIZA FOODS CORPORATION
By: /s/ GREGG L. ENGLES
-----------------------------------------
Gregg L. Engles
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
By: /s/ TRACY L. NOLL
-----------------------------------------
Tracy L. Noll
VICE PRESIDENT, CHIEF FINANCIAL OFFICER
AND PRINCIPAL ACCOUNTING OFFICER
Dated March 28, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons in the capacities and on
the dates indicated.
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ GREGG L. ENGLES
- ------------------------------ Director March 28, 1997
Gregg L. Engles
/s/ CLETES O. BESHEARS
- ------------------------------ Director March 28, 1997
Cletes O. Beshears
/s/ HECTOR M. NEVARES
- ------------------------------ Director March 28, 1997
Hector M. Nevares
/s/ GAYLE O. BESHEARS
- ------------------------------ Director March 28, 1997
Gayle O. Beshears
/s/ STEPHEN L. GREEN
- ------------------------------ Director March 28, 1997
Stephen L. Green
/s/ ROBERT L. KAMINSKI
- ------------------------------ Director March 28, 1997
Robert L. Kaminski
/s/ DAVID F. MILLER
- ------------------------------ Director March 28, 1997
David F. Miller
/s/ P. EUGENE PENDER
- ------------------------------ Director March 28, 1997
P. Eugene Pender
/s/ ROBERT PICCININI
- ------------------------------ Director March 28, 1997
Robert Piccinini
15
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -------------------------------------------------------------------------------------------------------
<S> <C>
2.1** Amended and Restated Reorganization Agreement
3.1** Certificate of Incorporation of the Company
3.2** Certificate of Amendment of Certificate of Incorporation of the Company
3.3** Certificate of Correction of Certificate of Amendment of Certificate of Incorporation
3.4** Certificate of Amendment of Certificate of Amendment of Certificate of Incorporation of the Company
3.5** Bylaws of the Company
4.1** Specimen of Common Stock Certificate
4.2** Registrations Rights (Exhibit G-2 to Amended and Restated Reorganization Agreement)
10.1** Suiza Foods Corporation Exchange Stock Option and Restricted Stock Option Plan
10.2** Exchange Stock Option and Restricted Stock Agreement between the Company and
Cletes O. Beshears
10.3** Exchange Stock Option Agreement between the Company and Gayle O. Beshears
10.4** Exchange Stock Option Agreement between the Company and Gayle O. Beshears
10.5*** Suiza Foods Corporation 1995 Stock Option and Restricted Stock Plan
10.6** Employment Agreement between Suiza Management Corporation and Gregg L. Engles
10.7** Amendment No. 1 to Employment Agreement between Suiza Management Corporation and Gregg L. Engles
10.8** Employment Agreement between Suiza Management Corporation and Cletes O. Beshears
10.9** Amendment No. 1 to Employment Agreement between Suiza Management Corporation and Cletes O. Beshears
10.10** Employment Agreement between Suiza Dairy Corporation, Suiza Fruit Corporation,
Neva Plastics Manufacturing Corp. and Hector M. Nevares
10.11** Amendment No. 1 to Hector M. Nevares' Employment Agreement
10.12** Amendment No. 2 to Hector M. Nevares' Employment Agreement
10.13* Second Amended and Restated Credit Agreement with First Union National Bank of North Carolina
10.14* Amended and Restated Supplemental Credit Agreement with First Union National Bank of North Carolina
10.15** Noncompetition Agreement by and between Velda Farms, L.P. and The Morningstar
Group Inc.
10.16 Stock Purchase Agreement among G Acquisition Corp. and Jose M. Rodriguez Garrido and Jorge Rodriguez
Garrido (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K/A filed with the Commission
on September 25, 1996 and incorporated herein by this reference)
10.17 Asset Purchase Agreement by and among Suiza Foods Corporation, Swiss Dairy Corporation, a Delaware
corporation, Swiss Dairy, a Corporation, a California corporation and the principal stockholders of
Swiss Dairy, a Corporation identified therein (filed as Exhibit 2.1 to the Company's Current Report on
Form 8-K filed with the Commission on September 24, 1996 and incorporated herein by this reference)
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -------------------------------------------------------------------------------------------------------
10.18 Stock Purchase Agreement by and between T. Rowe Price Small-Corp. Value Fund, Inc. and Suiza Foods
Corporation (filed as Exhibit 10.24 to the Company's Registration Statement on Form S-1 (Registration
No. 333-13119) and incorporated herein by this reference)
<S> <C>
10.19 Asset Purchase Agreement by and among Suiza Foods Corporation, Model Dairy, Inc., J & T Enterprises,
Bahan & Bahan, the Estate of Thomas E. Bahan, the Thomas E. Bahan Trust and James N. Bahan (filed as
Exhibit 2.1 to the Company's Current Report on Form 8-K filed with the Commission on December 31, 1996
and incorporated herein by this reference)
11.1* Statement re computation of per share earnings
13.1* Annual Report to Stockholders (only those portions incorporated by reference into the form 10-K are
filed herewith)
21.1*** List of Subsidiary Corporations
23.1* Consent of Deloitte & Touche LLP
27.1* Financial Data Schedule
</TABLE>
- ------------------------
* Filed herewith
** Filed as an Exhibit to the Company's Registration Statement on Form S-1
(Registration No. 333-1858) and incorporated herein by this reference
*** Filed as an Exhibit to the Company's Registration Statement on Form S-1
(Registration No. 333-18263) and incorporated herein by this reference
17
<PAGE>
*****************************************************************************
SUIZA FOODS CORPORATION
----------------------------------------
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
$200,000,000 OF $300,000,000 AGGREGATE CREDIT FACILITY
DATED AS OF MARCH 5, 1997
----------------------------------------
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
AS AGENT
THE FIRST NATIONAL BANK OF CHICAGO,
AS SYNDICATION AGENT
*****************************************************************************
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is attached
but is inserted for convenience of reference only.
Page
----
Section 1. Definitions and Accounting Matters. . . . . . . . . . . . . . .
1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . .
1.02 Accounting Terms and Determinations . . . . . . . . . . . . . .
1.03 Classes and Types of Loans. . . . . . . . . . . . . . . . . . .
Section 2. Commitments, Loans, Notes and Prepayments . . . . . . . . . . .
2.01 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.02 Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . .
2.03 Changes of Commitments. . . . . . . . . . . . . . . . . . . . .
2.04 Commitment Fee. . . . . . . . . . . . . . . . . . . . . . . . .
2.05 Lending Offices . . . . . . . . . . . . . . . . . . . . . . . .
2.06 Several Obligations; Remedies Independent . . . . . . . . . . .
2.07 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.08 Optional Prepayments and Conversions or Continuations of Loans.
2.09 Mandatory Prepayments and Reductions of Commitments . . . . . .
2.10 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . .
Section 3. Payments of Principal and Interest. . . . . . . . . . . . . . .
3.01 Repayment of Loans. . . . . . . . . . . . . . . . . . . . . . .
3.02 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 4. Payments; Pro Rata Treatment; Computations; Etc.. . . . . . . .
4.01 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.02 Pro Rata Treatment. . . . . . . . . . . . . . . . . . . . . . .
4.03 Computations. . . . . . . . . . . . . . . . . . . . . . . . . .
4.04 Minimum Amounts . . . . . . . . . . . . . . . . . . . . . . . .
4.05 Certain Notices . . . . . . . . . . . . . . . . . . . . . . . .
4.06 Non-Receipt of Funds by the Agent . . . . . . . . . . . . . . .
4.07 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . .
Section 5. Yield Protection, Etc.. . . . . . . . . . . . . . . . . . . . .
5.01 Additional Costs. . . . . . . . . . . . . . . . . . . . . . . .
5.02 Limitation on Types of Loans. . . . . . . . . . . . . . . . . .
5.03 Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . .
5.04 Treatment of Affected Loans . . . . . . . . . . . . . . . . . .
5.05 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . .
5.06 Net Payments; Taxes . . . . . . . . . . . . . . . . . . . . . .
5.07 Replacement of Lenders. . . . . . . . . . . . . . . . . . . . .
5.08 Additional Costs in Respect of Letters of Credit. . . . . . . .
(i)
<PAGE>
Section 6. Conditions Precedent. . . . . . . . . . . . . . . . . . . . . .
6.01 Conditions to Effectiveness . . . . . . . . . . . . . . . . . .
6.02 Conditions to all Extensions of Credit. . . . . . . . . . . . .
Section 7. Representations and Warranties. . . . . . . . . . . . . . . . .
7.01 Corporate Existence . . . . . . . . . . . . . . . . . . . . . .
7.02 Financial Condition . . . . . . . . . . . . . . . . . . . . . .
7.03 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . .
7.04 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.05 Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.06 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.07 Use of Credit . . . . . . . . . . . . . . . . . . . . . . . . .
7.08 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.09 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.10 Investment Company Act. . . . . . . . . . . . . . . . . . . . .
7.11 Public Utility Holding Company Act. . . . . . . . . . . . . . .
7.12 Material Agreements and Liens . . . . . . . . . . . . . . . . .
7.13 Environmental Matters . . . . . . . . . . . . . . . . . . . . .
7.14 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . .
7.15 Subsidiaries, Etc.. . . . . . . . . . . . . . . . . . . . . . .
7.16 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . .
7.17 True and Complete Disclosure. . . . . . . . . . . . . . . . . .
7.18 Real Property . . . . . . . . . . . . . . . . . . . . . . . . .
7.19 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.20 Subordinated Note Purchase Agreement. . . . . . . . . . . . . .
Section 8. Covenants of the Company. . . . . . . . . . . . . . . . . . . .
8.01 Financial Statements, Etc.. . . . . . . . . . . . . . . . . . .
8.02 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . .
8.03 Existence, Etc. . . . . . . . . . . . . . . . . . . . . . . . .
8.04 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.05 Prohibition of Fundamental Changes. . . . . . . . . . . . . . .
8.06 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . .
8.07 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . .
8.08 Investments . . . . . . . . . . . . . . . . . . . . . . . . . .
8.09 Restricted Payments . . . . . . . . . . . . . . . . . . . . . .
8.10 Leverage Ratio. . . . . . . . . . . . . . . . . . . . . . . . .
8.11 Minimum Net Worth . . . . . . . . . . . . . . . . . . . . . . .
8.12 Fixed Charges Ratio . . . . . . . . . . . . . . . . . . . . . .
8.13 Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . .
8.14 Capital Expenditures. . . . . . . . . . . . . . . . . . . . . .
8.15 Interest Rate Protection Agreements . . . . . . . . . . . . . .
8.16 Lines of Business . . . . . . . . . . . . . . . . . . . . . . .
8.17 Transactions with Affiliates. . . . . . . . . . . . . . . . . .
(ii)
<PAGE>
8.18 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . .
8.19 Certain Obligations Respecting Subsidiaries; Additional
Mortgaged Properties . . . . . . . . . . . . . . . . . . . . .
8.20 Modifications of Certain Documents. . . . . . . . . . . . . . .
8.21 Further Assurances. . . . . . . . . . . . . . . . . . . . . . .
8.22 Puerto Rico Security Documents. . . . . . . . . . . . . . . . .
Section 9. Events of Default . . . . . . . . . . . . . . . . . . . . . . .
Section 10. The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.01 Appointment, Powers and Immunities. . . . . . . . . . . . . . .
10.02 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . .
10.03 Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.04 Rights as a Lender. . . . . . . . . . . . . . . . . . . . . . .
10.05 Indemnification . . . . . . . . . . . . . . . . . . . . . . . .
10.06 Non-Reliance on Agent and Other Lenders . . . . . . . . . . . .
10.07 Failure to Act. . . . . . . . . . . . . . . . . . . . . . . . .
10.08 Resignation or Removal of Agent . . . . . . . . . . . . . . . .
10.09 Agency Fee. . . . . . . . . . . . . . . . . . . . . . . . . . .
10.10 Consents under Other Loan Documents . . . . . . . . . . . . . .
10.11 Syndication Agent . . . . . . . . . . . . . . . . . . . . . . .
Section 11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . .
11.01 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.03 Expenses, Etc.. . . . . . . . . . . . . . . . . . . . . . . . .
11.04 Amendments, Etc.. . . . . . . . . . . . . . . . . . . . . . . .
11.05 Successors and Assigns. . . . . . . . . . . . . . . . . . . . .
11.06 Assignments and Participations. . . . . . . . . . . . . . . . .
11.07 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.08 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.09 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . .
11.10 Governing Law; Submission to Jurisdiction; Service
of Process and Venue . . . . . . . . . . . . . . . . . . . . .
11.11 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . .
11.12 Treatment of Certain Information; Confidentiality . . . . . . .
11.13 Intention of Parties. . . . . . . . . . . . . . . . . . . . . .
SCHEDULE I -- Existing Material Agreements and Liens
SCHEDULE II -- Environmental Matters
SCHEDULE III -- Subsidiaries and Investments
SCHEDULE IV -- Real Property
SCHEDULE V -- Litigation
SCHEDULE VI -- Existing Puerto Rico Security Documents
SCHEDULE VII -- Existing Mortgages
(iii)
<PAGE>
EXHIBIT A-1 -- Form of Facility A Note
EXHIBIT A-2 -- Form of Facility B Note
EXHIBIT B -- Form of Mortgage
EXHIBIT C -- Form of Deed of Trust
EXHIBIT D-1 -- Form of Opinion of Counsel to the Obligors
EXHIBIT D-2 -- Form of Opinion of Puerto Rico Counsel to the Obligors
EXHIBIT E -- Form of Opinion of Local Counsel
EXHIBIT F -- Form of Opinion of Special New York Counsel to First Union
EXHIBIT G -- Form of Confidentiality Agreement
EXHIBIT H -- Form of Assignment and Acceptance
(iv)
<PAGE>
SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of March 5, 1997
between: SUIZA FOODS CORPORATION, a corporation duly organized and validly
existing under the laws of the State of Delaware (the "COMPANY"); each of the
lenders that is a signatory hereto identified under the caption "LENDERS" on
the signature pages hereto or that, pursuant to Section 11.06(b) hereof,
shall become a "Lender" hereunder (individually, a "LENDER" and,
collectively, the "LENDERS"); and FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, a national banking association, as agent for the Lenders (in such
capacity, together with its successors in such capacity, the "AGENT").
WHEREAS, the Company, the Lenders and the Agent are party to an Amended
and Restated Credit Agreement dated as of July 17, 1996 as amended by
Amendment and Waiver dated as of August 7, 1996, Amendment No. 2 dated as of
September 6, 1996, and Amendment No. 3 dated as of December 2, 1996 (as
heretofore modified and supplemented and in effect immediately prior to the
Effective Date referred to below, the "EXISTING CREDIT AGREEMENT") providing,
subject to the terms and conditions thereof, for extensions of credit (by
making of loans and issuing letters of credit) to be made by the Lenders to
the Company in an aggregate principal or face amount not exceeding
$160,000,000.
WHEREAS, the parties hereto now wish to amend and restate the Existing
Credit Agreement by, among other things, increasing the aggregate amount of
the Facility A Commitments under the Existing Credit Agreement available to
the Company to $50,000,000, increasing the aggregate amount of the Facility B
Commitments under the Existing Credit Agreement available to the Company to
$150,000,000, and by amending certain of the other provisions thereof and, in
that connection, wish to amend and restate the Existing Credit Agreement in
its entirety, it being the intention of the parties hereto that the loans and
letters of credit outstanding under the Existing Credit Agreement to or for
the account of the Company on the Effective Date (as hereinafter defined)
shall continue and remain outstanding and not be repaid on the Effective
Date, and accordingly the Loans and Commitments (as hereinafter defined) are
not in novation or discharge thereof.
WHEREAS, each of the Obligors (as hereinafter defined) expects to derive
benefit, directly or indirectly, from the loans so made to the Company, both
in its separate capacity and as a member of the integrated group, since the
successful operation of each of the Company and its Subsidiaries is dependent
on the continued successful performance of the functions of the integrated
group as a whole.
Accordingly, the parties hereto hereby agree that the Existing Credit
Agreement shall, as of the Effective Date (the occurrence of which is subject
to the satisfaction of the conditions precedent specified in Section 6.01
hereof), be amended and restated in its entirety as follows:
Section 1. DEFINITIONS AND ACCOUNTING MATTERS.
1.01 CERTAIN DEFINED TERMS. As used herein, the following terms shall have
the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa):
CREDIT AGREEMENT 1
<PAGE>
"ADDITIONAL PUERTO RICO SECURITY DOCUMENTS" shall have the meaning assigned
to such term in Section 8.21 hereof.
"AFFILIATE" shall mean any Person that directly or indirectly controls,
or is under common control with, or is controlled by, the Company and, if
such Person is an individual, any member of the immediate family (including
parents, spouse, children and siblings) of such individual and any trust
whose principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or
trust. As used in this definition, "control" (including, with its
correlative meanings, "controlled by" and "under common control with") shall
mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities
or partnership or other ownership interests, by contract or otherwise),
PROVIDED that, in any event, any Person that owns directly or indirectly
securities having 10% or more of the voting power for the election of
directors or other governing body of a corporation or 10% or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such other Person) will be deemed to control such
corporation or other Person. Notwithstanding the foregoing, (a) no
individual shall be an Affiliate solely by reason of his or her being a
director, officer or employee of the Company or any of its Subsidiaries and
(b) none of the Wholly Owned Subsidiaries of the Company shall be Affiliates.
"APPLICABLE COMMITMENT FEE RATE" shall mean 0.25% per annum; PROVIDED
that if the Leverage Ratio as at the last day of any fiscal quarter of the
Company ending on or after the Effective Date shall fall within any of the
ranges set forth below then, upon the delivery to the Agent of a certificate
of a Responsible Financial Officer of the Company (which shall accompany the
financial statements for such fiscal quarter delivered under Section 8.01(a)
hereof on which the calculation of such Leverage Ratio is based)
demonstrating such fact prior to the end of the next succeeding fiscal
quarter, the "Applicable Commitment Fee Rate" shall be adjusted upwards or
downwards, as the case may be, to the rate per annum set forth below opposite
such range during the period commencing on the third Business Day following
the date of receipt of such certificate to but not including the date the
next such certificate to be delivered under this definition is delivered or
due, whichever is earlier (except that, notwithstanding the foregoing, the
Applicable Commitment Fee Rate shall not as a consequence of this proviso be
so reduced for any period during which an Event of Default shall have
occurred and be continuing):
Range of
Leverage Ratio Applicable Commitment Fee Rate
- ----------------------------------- --------------------------------------
Less than 2.0:1 0.20%
Equal to or greater than 0.25%
2.0:1 but less
than 2.50:1
Equal to or greater than 0.375%
2.50:1
CREDIT AGREEMENT 2
<PAGE>
"APPLICABLE LENDING OFFICE" shall mean, for each Lender and for each
Type of Loan, the "Lending Office" of such Lender (or of an affiliate of such
Lender) designated for such Type of Loan on the signature pages hereof or
such other office of such Lender (or of an affiliate of such Lender) as such
Lender may from time to time specify to the Agent and the Company as the
office by which its Loans of such Type are to be made and maintained.
"APPLICABLE MARGIN" shall mean: with respect to Loans that are Base
Rate Loans, 0% and/or Eurodollar Loans, 1.0% per annum; PROVIDED that if the
Leverage Ratio as at the last day of any fiscal quarter of the Company ending
on or after the Effective Date shall fall within any of the ranges set forth
below then, upon the delivery to the Agent of a certificate of a Responsible
Financial Officer of the Company (which shall accompany the financial
statements for such fiscal quarter delivered under Section 8.01(a) hereof on
which the calculation of such Leverage Ratio is based) demonstrating such
fact prior to the end of the next succeeding fiscal quarter, the "Applicable
Margin" for each Loan shall be adjusted upwards or downwards, as the case may
be, to the rate per annum for the respective Type and Class of Loan set forth
below opposite such range during the period commencing on the third Business
Day following the date of receipt of such certificate to but not including
the date the next succeeding such certificate to be delivered hereunder is
delivered or due, whichever is earlier (except that, notwithstanding the
foregoing, the Applicable Margin for any such Loan shall not as a consequence
of this proviso be so reduced for any period during which an Event of Default
shall have occurred and be continuing):
Applicable Margin (%p.a.)
Range of ---------------------------------------
Leverage Ratio Base Rate Loans Eurodollar Loans
- ------------------------------- ---------------------------------------
Less than 2.0:1 0% 0.75%
Equal to or greater than 0% 1.0%
2.0:1 but less
than 2.50:1
Equal to or greater than 0% 1.25%
2.50:1 but less than
3.25:1
Equal to or greater than 0.25% 1.50%
3.25:1 but less than
3.50:1
"BANKRUPTCY CODE" shall mean the Federal Bankruptcy Code of 1978, as
amended from time to time.
CREDIT AGREEMENT 3
<PAGE>
"BASE RATE" shall mean, for any day, a rate per annum equal to the
higher of (a) the Federal Funds Rate for such day PLUS 1/2 of 1% and (b) the
Prime Rate for such day. Each change in any interest rate provided for
herein based upon the Base Rate resulting from a change in the Base Rate
shall take effect at the time of such change in the Base Rate.
"BASE RATE LOANS" shall mean Loans that bear interest at rates based
upon the Base Rate.
"BASIC DOCUMENTS" shall mean, collectively, the Loan Documents and,
except for purposes of the definitions of "Secured Obligations" and
"Guaranteed Obligations" in any of the Security Documents, the Purchase
Agreements.
"BUSINESS DAY" shall mean (a) any day on which commercial banks are not
authorized or required to close in North Carolina and (b) if such day relates
to a borrowing of, a payment or prepayment of principal of or interest on, a
Conversion of or into, or an Interest Period for, a Eurodollar Loan or a
notice by the Company with respect to any such borrowing, payment,
prepayment, Conversion or Interest Period, any day on which dealings in
Dollar deposits are carried out in the London interbank market.
"CAPITAL EXPENDITURES" shall mean, for any period, expenditures
(including, without limitation, the aggregate amount of Capital Lease
Obligations incurred during such period) made by the Company or any of its
Subsidiaries to acquire or construct fixed assets, plant and equipment
(including renewals, improvements and replacements, but excluding repairs)
during such period computed in accordance with GAAP.
"CAPITAL LEASE OBLIGATIONS" shall mean, for any Person, all obligations
of such Person to pay rent or other amounts under a lease of (or other
agreement conveying the right to use) Property to the extent such obligations
are required to be classified and accounted for as a capital lease on a
balance sheet of such Person under GAAP, and, for purposes of this Agreement,
the amount of such obligations shall be the capitalized amount thereof,
determined in accordance with GAAP.
"CASUALTY EVENT" shall mean, with respect to any Property of any Person,
any loss of or damage to, or any condemnation or other taking of, such
Property for which such Person or any of its Subsidiaries receives insurance
proceeds, proceeds of a condemnation award or other compensation.
"CLASS" shall have the meaning assigned to such term in Section 1.03
hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"COLLATERAL ACCOUNT" shall mean with respect to the Company and any of
its Subsidiaries, the Collateral Account as defined in the Security
Agreement.
"COMMISSION" shall mean the Securities and Exchange Commission or any
governmental agency substituted therefor.
CREDIT AGREEMENT 4
<PAGE>
"COMMITMENTS" shall mean the Facility A Commitments and the Facility B
Commitments.
"COMMONWEALTH" shall mean the Commonwealth of Puerto Rico and its political
subdivisions, municipalities, agencies and instrumentalities.
"COMPANY" shall have the meaning assigned to such term in the preamble of
this Agreement.
"CONTINUE", "CONTINUATION" and "CONTINUED" shall refer to the continuation
pursuant to Section 2.08 hereof of a Eurodollar Loan from one Interest Period to
the next Interest Period.
"CONVERT", "CONVERSION" and "CONVERTED" shall refer to a conversion
pursuant to Section 2.08 hereof of one Type of Loans into another Type of Loans,
which may be accompanied by the transfer by a Lender (at its sole discretion) of
a Loan from one Applicable Lending Office to another.
"DEBT SERVICE" shall mean, for any period, the sum, for the Company and
its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) all payments of principal of
Indebtedness (including, without limitation, the principal component of any
payments in respect of Capital Lease Obligations) scheduled to be made during
such period PLUS (b) all Interest Expense for such period, it being
understood that, if any installment of principal of the Facility C Loans, or
the Facility B Loans shall have been prepaid during or prior to such period,
the amount of principal of the Facility C Loans and the Facility B Loans
included in Debt Service for such period shall be equal to the aggregate
amount of principal of the Facility C Loans and the Facility B Loans
originally scheduled to be paid hereunder and under the Restated Supplemental
Credit Agreement during such period.
"DEFAULT" shall mean an Event of Default or an event that with notice or
lapse of time or both would become an Event of Default.
"DISPOSITION" shall mean any sale, assignment, transfer or other
disposition of any Property (whether now owned or hereafter acquired) by the
Company or any of its Subsidiaries to any other Person, excluding any sale,
assignment, transfer or other disposition of any Property sold or disposed of
in the ordinary course of business and on ordinary business terms.
"DIVIDEND PAYMENT" shall mean dividends (in cash, Property or
obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any shares of any
class of stock of the Company or of any warrants, options or other rights to
acquire the same (or to make any payments to any Person, such as "phantom
stock" payments, where the amount thereof is calculated with reference to the
fair market or equity value of the Company or any of its Subsidiaries), but
excluding dividends payable solely in shares of common stock of the Company.
CREDIT AGREEMENT 5
<PAGE>
"DOLLARS" and "$" shall mean lawful money of the United States.
"EBITDA" shall mean, for any period, the sum, for the Company and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) operating income (calculated
before income taxes, Interest Expense, extraordinary and unusual items and
income or loss attributable to equity in Affiliates) for such period PLUS (b)
depreciation and amortization (to the extent deducted in determining
operating income) for such period PLUS (c) other income not exceeding
$2,000,000 for such period.
"EFFECTIVE DATE" shall mean the date on which all of the conditions to
effectiveness of this Agreement set forth in Section 6.01 hereof shall have
been satisfied or waived.
"ENVIRONMENTAL CLAIM" shall mean, with respect to any Person, any
written or oral notice, claim, demand or other communication (collectively, a
"claim") by any other Person alleging or asserting such Person's liability
for investigatory costs, cleanup costs, governmental response costs, damages
to natural resources or other Property, personal injuries, fines or penalties
arising out of, based on or resulting from (a) the presence, or Release into
the environment, of any Hazardous Material at any location, whether or not
owned by such Person, or (b) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law. The term
"Environmental Claim" shall include, without limitation, any claim by any
governmental authority for enforcement, cleanup, removal, response, remedial
or other actions or damages pursuant to any applicable Environmental Law, and
any claim by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from the presence
of Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.
"ENVIRONMENTAL LAWS" shall mean any and all present and future Federal,
state, local and foreign laws, rules or regulations, and any orders or
decrees, in each case as now or hereafter in effect, relating to the
regulation or protection of human health, safety or the environment or to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or toxic or hazardous substances or wastes into the
indoor or outdoor environment, including, without limitation, ambient air,
soil, surface water, ground water, wetlands, land or subsurface strata, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals or toxic or hazardous substances or wastes.
"EQUITY ISSUANCE" shall mean (a) any issuance or sale by the Company or
any of its Subsidiaries after the Effective Date of (i) any capital stock,
(ii) any warrants or options exercisable in respect of capital stock (other
than any warrants or options issued to directors, officers or employees of
the Company or any of its Subsidiaries, pursuant to employee benefit plans
established in the ordinary course of business and any capital stock of the
Company or any of its Subsidiaries issued upon the exercise of such warrants
or options) or (iii) any other security or instrument representing an equity
interest (or the right to obtain any equity interest) in the Company or any
of its Subsidiaries or (b) the receipt by the Company or any of its
Subsidiaries
CREDIT AGREEMENT 6
<PAGE>
whether directly (or indirectly through one or more of its Subsidiaries)
after the Effective Date of any capital contribution (whether or not
evidenced by any equity security issued by the recipient of such
contribution); PROVIDED that Equity Issuance shall not include (x) any such
issuance or sale by any Subsidiary of the Company to the Company or any
Wholly Owned Subsidiary of the Company or (y) any capital contribution by the
Company or any Wholly Owned Subsidiary of the Company to any Subsidiary of
the Company.
"EQUITY RIGHTS" shall mean, with respect to any Person, any
subscriptions, options, warrants, commitments, preemptive rights or
agreements of any kind (including, without limitation, any stockholders' or
voting trust agreements) for the issuance, sale, registration or voting of,
or securities convertible into, any additional shares of capital stock of any
class, or partnership or other ownership interests of any type in, such
Person.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA AFFILIATE" shall mean any corporation or trade or business that
is a member of any group of organizations (i) described in Section 414(b) or
(c) of the Code of which the Company is a member and (ii) solely for purposes
of potential liability under Section 302(c)(11) of ERISA and Section
412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and
Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of
which the Company is a member.
"EURODOLLAR BASE RATE" shall mean, with respect to any Eurodollar Loan
for any Interest Period therefor, the rate per annum for deposits in Dollars
for a period comparable to such Interest Period which appears on the Telerate
Page 3750 as of 11:00 a.m. London time two Business Days preceding the first
day of such Interest Period or, if Telerate Page 3750 is unavailable at such
time, the rate which appears on the Reuters Screen ISDA Page as of such date
and time; PROVIDED, however, that if the Agent determines that the relevant
foregoing source is unavailable for the relevant Interest Period, Eurodollar
Base Rate shall mean the rate of interest determined by the Agent to be the
average (rounded upward, if necessary, to the nearest 1/100th of 1%) of the
rates per annum at which deposits in Dollars in immediately available funds
are offered to the Agent or other money center banks two Business Days
preceding the first day of such Interest Period by leading banks in the
London interbank market as of 11:00 a.m. London time for delivery on the
first day of such Interest Period, for the number of days comprised therein
and in an amount comparable to the amount of the relevant Loan.
"EURODOLLAR LOANS" shall mean Loans that bear interest at rates based on
rates referred to in the definition of "Eurodollar Base Rate" in this Section
1.01.
"EURODOLLAR RATE" shall mean, for any Eurodollar Loan for any Interest
Period therefor, a rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) determined by the Agent to be equal to the Eurodollar Base Rate for
such Loan for such Interest Period divided by 1 MINUS the Reserve Requirement
(if any) for such Loan for such Interest Period.
CREDIT AGREEMENT 7
<PAGE>
"EVENT OF DEFAULT" shall have the meaning assigned to such term in
Section 9 hereof.
"EXCESS CASH FLOW" shall mean, for any period, the sum, determined
without duplication, for the Company and its Subsidiaries, of (a) EBITDA for
such period MINUS (b) Capital Expenditures made during such period (other
than Capital Expenditures made from the proceeds of Indebtedness permitted
under Section 8.07 hereof) MINUS (c) the aggregate amount of Debt Service for
such period PLUS (d) decreases (if any) (or MINUS increases (if any)) in
Working Capital for such period, MINUS (e) income taxes paid in cash for such
period.
"EXCLUDED DISPOSITION" shall mean the Disposition of (i) an Investment
Tax Credit or (ii) any motor vehicles or other equipment no longer used or
useful in the business of the Company or any of its Subsidiaries to the
extent the proceeds thereof are used to acquire similar replacement Property
within a period of 30 days after the end of the fiscal quarter in which such
Disposition was made.
"EXISTING LENDER" shall mean each Lender under the Existing Credit
Agreement.
"EXISTING SUBSIDIARY GUARANTEE AND SECURITY AGREEMENT" shall mean the
Subsidiary Guarantee and Security Agreement dated as of March 31, 1995
between each Subsidiary of the Company party thereto and the Agent, as the
same shall be modified and supplemented and in effect from time to time.
"FACILITY A COMMITMENT" shall mean, for each Facility A Lender, the
obligation of such Lender to make Facility A Loans to the Company in an
aggregate principal amount at any one time outstanding up to but not
exceeding the amount set opposite the name of such Lender on the signature
pages hereof under the caption "Facility A Commitment" (as the same may be
reduced from time to time pursuant to Section 2.03 hereof). The original
aggregate principal amount of the Facility A Commitments is $50,000,000.
"FACILITY A COMMITMENT PERCENTAGE" shall mean, with respect to any
Facility A Lender, the ratio of (a) the amount of the Facility A Commitment
of such Lender to (b) the aggregate amount of the Facility A Commitments of
all of the Facility A Lenders.
"FACILITY A LENDERS" shall mean the Lenders having Facility A
Commitments and/or holding Facility A Loans from time to time.
"FACILITY A LOANS" shall mean the loans provided for by Section
2.01(a)(i) hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"FACILITY A NOTES" shall mean the promissory notes provided for by
Section 2.07(a) hereof and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and
supplemented and in effect from time to time.
"FACILITY B COMMITMENT" shall mean, for each Facility B Lender, the
obligation of such Lender to make a Facility B Loan to the Company in a
principal amount up to but not exceeding
CREDIT AGREEMENT 8
<PAGE>
the amount set opposite the name of such Lender on the signature pages hereof
under the caption "Facility B Commitment" (as the same may be reduced from
time to time pursuant to Section 2.03 hereof). The aggregate principal
amount of the Facility B Commitments as of the Effective Date is $150,000,000.
"FACILITY B LENDERS" shall mean the Lenders having Facility B
Commitments and/or holding Facility B Loans from time to time.
"FACILITY B LOANS" shall mean the loans provided for by Section 2.01(b)
hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"FACILITY B NOTES" shall mean the promissory notes provided for by
Section 2.07(b) hereof and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and
supplemented and in effect from time to time. The term "Facility B Notes"
shall include any Registered Notes evidencing Facility B Loans executed and
delivered pursuant to Section 2.07(e).
"FACILITY C COMMITMENTS" shall have the meaning set forth in the
Restated Supplemental Credit Agreement.
"FACILITY C COMMITMENT TERMINATION DATE" shall have the meaning set
forth in the Restated Supplemental Credit Agreement.
"FACILITY C LOANS" shall mean the loans provided for in the Restated
Supplemental Credit Agreement.
"FACILITY C NOTES" shall have the meaning set forth in the Restated
Supplemental Credit Agreement.
"FACTOR'S LIEN CONTRACT" shall mean one or more certain agreements for
the creation of a factor's lien under the provisions of Act No. 86 of June
24, 1954 of the Commonwealth, as amended, between each of the Obligors
operating in the Commonwealth and the Agent, as the same shall be modified
and supplemented and in effect from time to time.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the
Business Day next succeeding such day, PROVIDED that (a) if the day for which
such rate is to be determined is not a Business Day, the Federal Funds Rate
for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day and (b) if
such rate is not so published for any Business Day, the Federal Funds Rate
for such Business Day shall be the average rate charged to First Union on
such Business Day on such transactions as determined by the Agent.
CREDIT AGREEMENT 9
<PAGE>
"FIRST UNION" shall mean First Union National Bank of North Carolina.
"FIXED CHARGES" shall mean, for any period, the sum, for the Company and
its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) the aggregate amount of Debt
Service for such period, PLUS (b) the aggregate amount of taxes paid in
respect of the income or profit of the Company and its Subsidiaries for such
period, PLUS (c) Capital Expenditures made during such period, PLUS (d) any
Dividend Payments made for such period PLUS (e) Management Fees for such
period (but only to the extent such Management Fees are not included in the
calculation of EBITDA); provided that Capital Expenditures shall not include
Capital Expenditures permitted to be incurred pursuant to the last sentence
of Section 8.14 hereof.
"FIXED CHARGES RATIO" shall mean, as at any date, the ratio of (a)
EBITDA for the period of four consecutive fiscal quarters ending on or most
recently ended prior to such date to (b) Fixed Charges for such period.
"GAAP" shall mean generally accepted accounting principles applied on a
basis consistent with those that, in accordance with the last sentence of
Section 1.02(a) hereof, are to be used in making the calculations for
purposes of determining compliance with this Agreement.
"GARRIDO" shall mean Garrido y Compa ia, Inc., a Puerto Rico corporation.
"GARRIDO NEGATIVE PLEDGE AGREEMENT" shall mean the Garrido Negative
Pledge Agreement dated as of September 6, 1996 between the Agent and Garrido,
as the same shall be modified and supplemented and in effect from time to
time.
"GUARANTEE" shall mean a guarantee, an endorsement, a contingent
agreement to purchase or to furnish funds for the payment or maintenance of,
or otherwise to be or become contingently liable under or with respect to,
the Indebtedness, other obligations, net worth, working capital or earnings
of any Person, or a guarantee of the payment of dividends or other
distributions upon the stock or equity interests of any Person, or an
agreement to purchase, sell or lease (as lessee or lessor) Property,
products, materials, supplies or services primarily for the purpose of
enabling a debtor to make payment of such debtor's obligations or an
agreement to assure a creditor against loss, and including, without
limitation, causing a bank or other financial institution to issue a letter
of credit or other similar instrument for the benefit of another Person, but
excluding endorsements for collection or deposit in the ordinary course of
business. The terms "GUARANTEE" and "GUARANTEED" used as a verb shall have a
correlative meaning.
"GUARANTEE AGREEMENT" shall mean the Guarantee Agreement dated as of
September 6, 1996 between Suiza Dairy, Suiza Fruit, Neva Plastics, Reddy Ice
Corporation, Velda Farms, Inc., Suiza Management Corporation and the Agent,
as the same shall be modified and supplemented and in effect from time to
time.
"GUEST CHOICE" shall mean Guest Choice, Inc. a Delaware corporation.
CREDIT AGREEMENT 10
<PAGE>
"HAZARDOUS MATERIAL" shall mean, collectively, (a) any petroleum or
petroleum products, flammable materials, explosives, radioactive materials,
asbestos, urea formaldehyde foam insulation, and transformers or other
equipment that contain polychlorinated biphenyls ("PCB'S"), (b) any chemicals
or other materials or substances that are now or hereafter become defined as
or included in the definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "extremely hazardous wastes", "restricted hazardous
wastes", "toxic substances", "toxic pollutants", "contaminants", "pollutants"
or words of similar import under any Environmental Law and (c) any other
chemical or other material or substance, exposure to which is now or
hereafter prohibited, limited or regulated under any Environmental Law.
"INDEBTEDNESS" shall mean, for any Person: (a) obligations created,
issued or incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of Property to another
Person subject to an understanding or agreement, contingent or otherwise, to
repurchase such Property from such Person); (b) obligations of such Person to
pay the deferred purchase or acquisition price of Property or services, other
than trade accounts payable (other than for borrowed money) arising, and
accrued expenses incurred, in the ordinary course of business so long as such
trade accounts payable are payable within 120 days of the date the respective
goods are delivered or the respective services are rendered; (c) Indebtedness
of others secured by a Lien on the Property of such Person, whether or not
the respective indebtedness so secured has been assumed by such Person; (d)
obligations of such Person in respect of letters of credit or similar
instruments issued or accepted by banks and other financial institutions for
account of such Person; (e) Capital Lease Obligations of such Person; and (f)
Indebtedness of others Guaranteed by such Person.
"INTEREST COVERAGE RATIO" shall mean, as at any date, the ratio of (a)
EBITDA for a period of four consecutive fiscal quarters ending on, or most
recently ended prior to, such date to (b) Interest Expense for such period.
"INTEREST EXPENSE" shall mean, for any period, the sum, for the Company
and its Subsidiaries (determined on a consolidated basis without duplication
in accordance with GAAP), of the following: (a) all interest in respect of
Indebtedness (including, without limitation, the interest component of any
payments in respect of Capital Lease Obligations, but excluding amortization
of any deferred loan costs incurred in connection with the transactions
contemplated hereby and by the Restated Supplemental Credit Agreement)
capitalized or expensed during such period (whether or not actually paid
during such period), but excluding any non-cash interest, PLUS (b) the net
amount payable (or MINUS the net amount receivable) under Interest Rate
Protection Agreements during such period (whether or not actually paid or
received during such period) MINUS (c) all interest income for such period.
"INTEREST PERIOD" shall mean with respect to any Eurodollar Loan, each
period commencing on the date such Eurodollar Loan is made or Converted from
a Base Rate Loan or the last day of the next preceding Interest Period for
such Loan and ending on the numerically corresponding day in the first,
second, third or sixth calendar month thereafter, as the Company may select
as provided in Section 4.05 hereof, except that each Interest Period for a
Eurodollar Loan that commences on the last Business Day of a calendar month
(or on any day for which
CREDIT AGREEMENT 11
<PAGE>
there is no numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month. Notwithstanding the foregoing: (i) if any
Interest Period for any Facility A Loan would otherwise end after the
Revolving Credit Commitment Termination Date, such Interest Period shall end
on the Revolving Credit Commitment Termination Date; (ii) no Interest Period
for any Facility B Loan may commence before and end after any Principal
Payment Date for such Facility B Loan unless, after giving effect thereto,
the aggregate principal amount of the Facility B Loans having Interest
Periods that end after such Principal Payment Date shall be equal to or less
than the aggregate principal amount of such Facility B Loans scheduled to be
outstanding after giving effect to the payments of principal required to be
made on such Principal Payment Date; (iii) each Interest Period that would
otherwise end on a day that is not a Business Day shall end on the next
succeeding Business Day (or, if such next succeeding Business Day falls in
the next succeeding calendar month, on the next preceding Business Day); and
(iv) notwithstanding clauses (i) through (iii) above, no Interest Period
shall have a duration of less than one month for any Eurodollar Loan and, if
the Interest Period for any such Loan would otherwise be a shorter period,
such Loan shall not be available hereunder for such period.
"INTEREST RATE PROTECTION AGREEMENT" shall mean, for any Person, an
interest rate swap, cap or collar agreement or similar arrangement between
such Person and one or more financial institutions providing for the transfer
or mitigation of interest risks either generally or under specific
contingencies.
"INTEREST RATE PROTECTION OBLIGATIONS" shall mean the obligations of any
Obligor in respect of Interest Rate Protection Agreements permitted under
Section 8.08(d) hereof.
"INVESTMENT" shall mean, for any Person: (a) the acquisition (whether
for cash, Property, services or securities or otherwise) of capital stock,
bonds, notes, debentures, partnership or other ownership interests or other
securities of any other Person or any agreement to make any such acquisition
(including, without limitation, any "short sale" or any sale of any
securities at a time when such securities are not owned by the Person
entering into such sale); (b) the making of any deposit with, or advance,
loan or other extension of credit to, any other Person (including the
purchase of Property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such Property to such Person),
but excluding any such advance, loan or extension of credit having a term not
exceeding 90 days representing the purchase price of inventory or supplies
sold by such Person in the ordinary course of business); (c) the entering
into of any Guarantee of, or other contingent obligation with respect to,
Indebtedness or other liability of any other Person and (without duplication)
any amount committed to be advanced, lent or extended to such Person; or (d)
the entering into of any Interest Rate Protection Agreement.
"INVESTMENT TAX CREDIT" shall have the meaning set forth in the Restated
Supplemental Credit Agreement.
"ISSUING BANK" shall mean First Union, as the issuer of Letters of
Credit under Section 2.10 hereof, together with its successors and assigns in
such capacity.
CREDIT AGREEMENT 12
<PAGE>
"LETTER OF CREDIT" shall have the meaning assigned to such term in the
first sentence of Section 2.10 hereof.
"LETTER OF CREDIT DOCUMENTS" shall mean, with respect to any Letter of
Credit, collectively, any application therefor and any other agreements,
instruments, guarantees or other documents (whether general in application or
applicable only to such Letter of Credit) governing or providing for (a) the
rights and obligations of the parties concerned or at risk with respect to
such Letter of Credit or (b) any collateral security for any of such
obligations, each as the same shall be modified and supplemented and in
effect from time to time.
"LETTER OF CREDIT INTEREST" shall mean, for each Facility A Lender, such
Facility A Lender's participation interest in the Issuing Bank's liability
under Letters of Credit (or, in the case of the Issuing Bank, the Issuing
Bank's retained interest therein) and such Facility A Lender's rights and
interests in Reimbursement Obligations and fees, interest and other amounts
payable in connection with Letters of Credit and Reimbursement Obligations.
"LETTER OF CREDIT LIABILITY" shall mean, without duplication, at any
time and in respect of any Letter of Credit, the sum of (a) the undrawn face
amount of such Letter of Credit PLUS (b) the aggregate unpaid principal
amount of all Reimbursement Obligations of the Company at such time due and
payable in respect of all drawings made under such Letter of Credit. For
purposes of this Agreement, a Facility A Lender (other than the Issuing Bank)
shall be deemed to hold a Letter of Credit Liability in an amount equal to
its participation interest in the related Letter of Credit under Section 2.10
hereof, and the Issuing Bank shall be deemed to hold a Letter of Credit
Liability in an amount equal to its retained interest in such Letter of
Credit after giving effect to the acquisition by the Facility A Lenders other
than the Issuing Bank of their participation interests under said Section
2.10, together with its successors and assigns in such capacity.
"LEVERAGE RATIO" shall mean, as at any date, the ratio of (a) the
aggregate outstanding principal amount of Indebtedness at such date to (b)
EBITDA for the period of four consecutive fiscal quarters ending on, or most
recently ended prior to, such date; provided that if the Company or any of
its Subsidiaries shall have acquired any business, Property or Person during
such period (whether before, on or after the Effective Date), EBITDA shall,
to the extent the Company shall have delivered audited financial statements
(or, if audited financial statements are not available to the Company,
unaudited financial statements (i) reviewed by independent certified
accountants of recognized national standing and acceptable to the Majority
Lenders and (ii) in form satisfactory to the Majority Lenders) for the
acquired business, Property or Person for such period, be adjusted to reflect
on a pro forma basis EBITDA for such business, Property or Person as if such
business, Property or Person had been acquired at the beginning of such
period.
"LIEN" shall mean, with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such Property. For purposes of this Agreement and the other Loan Documents,
a Person shall be deemed to own, subject to a Lien, any Property that it has
acquired or holds subject to the interest of a vendor or lessor under any
CREDIT AGREEMENT 13
<PAGE>
conditional sale agreement, capital lease or other title retention agreement
(other than an operating lease) relating to such Property.
"LOANS" shall mean the Facility A Loans and the Facility B Loans.
"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the Restated
Supplemental Credit Agreement, the Notes, the Facility C Notes, the Letter of
Credit Documents and the Security Documents.
"MAJORITY LENDERS" shall mean, as at any time, Facility A Lenders and
Facility B Lenders having at least a majority of the sum of (a) the aggregate
unused amount, if any, of the Facility A Commitments and the Facility B
Commitments as at such time PLUS (b) the aggregate outstanding principal
amount of the Facility A Loans and Facility B Loans at such time PLUS (c) the
aggregate amount of all Letter of Credit Liabilities at such time.
"MANAGEMENT FEES" shall mean, for any period, any amounts paid or
incurred by the Company or any of its Subsidiaries to any Person on account
of fees, salaries and other compensation in respect of services rendered in
connection with the management or supervision of the Company and/or any of
its Subsidiaries (but excluding customary and reasonable compensation and
other benefits paid or provided to officers, employees and directors for
services rendered to the Company or any of its Subsidiaries in such
capacities or any such amounts by any Subsidiary of the Company to the
Company or any other Subsidiary of the Company).
"MARGIN STOCK" shall mean "margin stock" within the meaning of Regulations
U and X.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on (a)
the Property, business, operations, financial condition, prospects,
liabilities or capitalization of the Company and its Subsidiaries taken as a
whole, (b) the ability of any Obligor to perform its obligations under any of
the Loan Documents to which it is a party, (c) the validity or enforceability
of any of the Loan Documents, (d) the rights and remedies of the Lenders and
the Agent under any of the Loan Documents or (e) the timely payment of the
principal of or interest on the Loans or the Reimbursement Obligations or
other amounts payable in connection therewith or under the Loan Documents.
"MODEL DAIRY" shall mean Model Dairy Inc., a Delaware corporation.
"MORTGAGES" shall mean, collectively, (a) the mortgages or deeds of
trust identified in Schedule VII hereto and (b) one or more mortgages or
deeds of trust, in the respective forms of Exhibits B and C hereto or of
Exhibits C and D to the Restated Supplemental Credit Agreement (with such
modifications thereto requested by the Agent as may be appropriate to effect
a lien on real property in the state where the respective property to be
covered by such instrument is located), executed by the respective Obligors
who own or lease such property in favor of the Agent (or, in the case of a
deed of trust, in favor of the trustee for the benefit of the Agent and the
Lenders) pursuant to Section 8.19(c) and 8.19(d) hereof or Section 8.19(c)
and 8.19(d) of the
CREDIT AGREEMENT 14
<PAGE>
Restated Supplemental Credit Agreement covering the respective Properties
and/or leasehold interests identified in Schedule IV hereto or subject to the
requirements of said Section 8.19(c) and 8.19(d) hereof or Section 8.19(c)
and 8.19(d) of the Restated Supplemental Credit Agreement, as the case may
be, in each case as the same shall be modified and supplemented and in effect
from time to time.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by the Company or
any ERISA Affiliate and that is covered by Title IV of ERISA.
"NET AVAILABLE PROCEEDS" shall mean:
(a) in the case of any Disposition, the amount of Net Cash Payments
received in connection with such Disposition;
(b) in the case of any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation received
by the Company and its Subsidiaries in respect of such Casualty Event net
of (i) reasonable expenses incurred by the Company and its Subsidiaries in
connection therewith and (ii) contractually required repayments of
Indebtedness to the extent secured by a Lien on such Property and any
income and transfer taxes payable by the Company or any of its Subsidiaries
in respect of such Casualty Event; and
(c) in the case of any Equity Issuance, the aggregate amount of all
cash received by the Company and its Subsidiaries in respect of such Equity
Issuance net of reasonable expenses incurred by the Company and its
Subsidiaries in connection therewith.
"NET CASH PAYMENTS" shall mean, with respect to any Disposition, the
aggregate amount of all cash payments, and the fair market value of any
non-cash consideration, received by the Company and its Subsidiaries directly
or indirectly in connection with such Disposition; PROVIDED that (a) Net Cash
Payments shall be net of (i) the amount of any legal, title and recording tax
expenses, commissions and other fees and expenses paid by the Company and its
Subsidiaries in connection with such Disposition and (ii) any Federal, state
and local income or other taxes estimated to be payable by the Company and
its Subsidiaries as a result of such Disposition (but only to the extent that
such estimated taxes are in fact paid to the relevant Federal, state or local
governmental authority within six months of the date of such Disposition) and
(b) Net Cash Payments shall be net of any repayments by the Company or any of
its Subsidiaries of Indebtedness to the extent that (i) such Indebtedness is
secured by a Lien on the Property that is the subject of such Disposition and
(ii) the transferee of (or holder of a Lien on) such Property requires that
such Indebtedness be repaid as a condition to the Disposition thereof.
"NET PURCHASE PRICE" shall have the meaning set forth in the Restated
Supplemental Credit Agreement.
CREDIT AGREEMENT 15
<PAGE>
"NET WORTH" shall mean, as at any date, the sum for the Company and its
Subsidiaries (determined on a consolidated basis without duplication) of (a)
the amount of capital stock PLUS (b) the amount of additional paid-in capital
plus (c) the amount of retained earnings (or, in the case of any retained
earnings deficit, MINUS the amount of such deficit).
"NEVA PLASTICS" shall mean Neva Plastics Manufacturing Corp., a Delaware
corporation.
"NEW LENDER" shall mean Credit Lyonnais New York Branch.
"NOTES" shall mean the Facility A Notes and the Facility B Notes.
"OBLIGOR" shall mean the Company and each Subsidiary of the Company party
to any Security Document.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED ACQUISITION" shall have the meaning set forth in the Restated
Supplemental Credit Agreement.
"PERMITTED INVESTMENTS" shall mean: (a) direct obligations of the
United States, or of any agency thereof, or obligations guaranteed as to
principal and interest by the United States, or of any agency thereof, in
either case maturing not more than one year from the date of acquisition
thereof; (b) direct obligations issued by any state of the United States or
any political subdivision of any such state or any public instrumentality
thereof maturing within one year from the date of acquisition thereof and, at
the time of such acquisition, having the highest rating obtainable from
either Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc.
("S&P") or Moody's Investors Services, Inc. ("MOODY'S"); (c) certificates of
deposit issued by any bank or trust company organized under the laws of the
United States or any state thereof or the Commonwealth and having capital,
surplus and undivided profits of at least $500,000,000, maturing not more
than six months from the date of acquisition thereof; (d) commercial paper
rated A-1 or better or P-1 by S&P or Moody's, respectively, maturing not more
than six months from the date of acquisition thereof; and (e) Eurodollar time
deposits having a maturity of less than six months purchased directly from
any such bank (whether such deposit is with such bank or any other such bank).
"PERSON" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization
or government (or any agency, instrumentality or political subdivision
thereof).
"PLAN" shall mean an employee benefit or other plan established or
maintained by the Company or any ERISA Affiliate and that is covered by Title
IV of ERISA, other than a Multiemployer Plan.
CREDIT AGREEMENT 16
<PAGE>
"POST-DEFAULT RATE" shall mean, in respect of any principal of any Loan,
any Reimbursement Obligation or any other amount under this Agreement, any
Note or any other Loan Document that is not paid when due (whether at stated
maturity, by acceleration, by mandatory prepayment or otherwise), and in
respect of any principal of any Loan during any period commencing upon the
occurrence of any Event of Default and thereafter for so long as any Event of
Default shall be continuing, a rate per annum during the period from and
including the due date to but excluding the earlier of the date on which such
amount is paid in full or such Event of Default ceases to be continuing equal
to 2% PLUS the Base Rate as in effect from time to time PLUS the Applicable
Margin for Base Rate Loans (PROVIDED that, if the amount so in default is
principal of a Eurodollar Loan and the due date thereof is a day other than
the last day of the Interest Period therefor, the "Post-Default Rate" for
such principal shall be, for the period from and including such due date to
but excluding the last day of such Interest Period, 2% PLUS the interest rate
for such Loan as provided in Section 3.02(b) hereof and, thereafter, the rate
provided for above in this definition).
"PRIME RATE" shall mean the rate of interest from time to time announced
by First Union at its principal office as its prime commercial lending rate.
"P.R. INVENTORY AGREEMENT" shall mean the P.R. Inventory Agreement dated
as of July 17, 1996 between each Subsidiary of the Company that owns
Inventory in the Commonwealth (other than Garrido) and the Agent, as the same
shall be modified and supplemented and in effect from time to time.
"PRINCIPAL PAYMENT DATES" shall mean the Quarterly Dates falling on or
nearest to March 31, June 30, September 30 and December 31 of each year,
commencing with March 31, 1997, through and including March 31, 2003.
"PROCESS AGENT" shall have the meaning assigned to such term in Section
11.10(c) hereof.
"PROPERTY" shall mean any right or interest in or to property of any
kind whatsoever, whether real, personal (including, without limitation, cash)
or mixed and whether tangible or intangible.
"PUERTO RICO SECURITY DOCUMENTS" shall mean each of the agreements
listed in Schedule VI hereto, the P.R. Inventory Agreement, and each of the
Additional Puerto Rico Security Documents, in each case, as any such
agreement shall be modified and supplemented and in effect from time to time.
"PURCHASE AGREEMENTS" shall have the meaning set forth in the Restated
Supplemental Credit Agreement.
"QUARTERLY DATES" shall mean the last Business Day of March, June,
September and December in each year, the first of which shall be March 31,
1997.
"REGISTER" shall have the meaning assigned to such term in Section
11.06(g) hereof.
"REGISTERED HOLDER" shall have the meaning assigned to such term in
Section 5.06(b)(ii) hereof.
CREDIT AGREEMENT 17
<PAGE>
"REGISTERED LOANS" shall have the meaning assigned to such term in
Section 2.07(e) hereof.
"REGISTERED NOTE" shall have the meaning assigned to such term in
Section 2.07(e) hereof.
"REGULATIONS A, D, U AND X" shall mean, respectively, Regulations A, D,
U and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be modified and supplemented and in effect from
time to time.
"REGULATORY CHANGE" shall mean, with respect to any Lender, any change
after the date of this Agreement in United States, Federal, state or foreign
law or regulations or in the law or regulations of the Commonwealth
(including, without limitation, Regulation D) or the adoption or making after
such date of any interpretation, directive or request applying to a class of
banks including such Lender of or under any Federal, state or foreign law or
regulations or in the law or regulations of the Commonwealth (whether or not
having the force of law and whether or not failure to comply therewith would
be unlawful) by any court or governmental or monetary authority charged with
the interpretation or administration thereof.
"REIMBURSEMENT OBLIGATIONS" shall mean, at any time, the obligations of
the Company then outstanding, or that may thereafter arise in respect of all
Letters of Credit then outstanding, to reimburse amounts paid by the Issuing
Bank in respect of any drawings under a Letter of Credit.
"RELEASE" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the indoor or outdoor environment, including, without limitation, the
movement of Hazardous Materials through ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata.
"RESERVE REQUIREMENT" shall mean, for any Interest Period for any
Eurodollar Loan, the average maximum rate at which reserves (including,
without limitation, any marginal, supplemental or emergency reserves) are
required to be maintained during such Interest Period under Regulation D by
member banks of the Federal Reserve System in New York City with deposits
exceeding one billion Dollars against "Eurocurrency liabilities" (as such
term is used in Regulation D). Without limiting the effect of the foregoing,
the Reserve Requirement shall include any other reserves required to be
maintained by such member banks by reason of any Regulatory Change with
respect to (i) any category of liabilities that includes deposits by
reference to which the Eurodollar Base Rate is to be determined as provided
in the definition of "Eurodollar Base Rate" in this Section 1.01 or (ii) any
category of extensions of credit or other assets that includes Eurodollar
Loans.
CREDIT AGREEMENT 18
<PAGE>
"RESPONSIBLE FINANCIAL OFFICER" shall mean, with respect to any Person,
the Chairman of the Board of Directors, the President, the Chief Executive
Officer, the Chief Financial Officer or the Treasurer of such Person.
"RESTATED SUPPLEMENTAL CREDIT AGREEMENT" shall mean the Restated
Supplemental Credit Agreement dated as of the date hereof between the
Company, the Lenders and the Agent providing for the Facility C Commitments
and the Facility C Loans, as the same may be amended, modified and
supplemented and in effect from time to time.
"REVOLVING CREDIT COMMITMENT TERMINATION DATE" shall mean the Quarterly
Date falling on or nearest to March 31, 2001.
"SECURITY AGREEMENT" shall mean the Security Agreement dated as of March
31, 1995 between the Company and the Agent, as the same may be amended,
modified and supplemented and in effect from time to time.
"SECURITY DOCUMENTS" shall mean, collectively, the Security Agreement,
the Mortgages, each Supplemental Subsidiary Guarantee and Security Agreement,
the Existing Subsidiary Guarantee and Security Agreement, the Guarantee
Agreement, the Puerto Rico Security Documents and all Uniform Commercial Code
financing statements and/or other filings required hereby or thereby to be
filed with respect to the security interests in personal Property and
fixtures created pursuant hereto or thereto.
"SUBORDINATED NOTE PURCHASE AGREEMENT" shall mean the Note Purchase
Agreement dated as of March 31, 1995, as amended, by and among the Company,
John Hancock Mutual Life Insurance Company, John Hancock Life Insurance
Company of America, Pacific Mutual Life Insurance Company and PM Group Life
Insurance Co.
"SUBSIDIARY" shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power
to elect a majority of the board of directors or other persons performing
similar functions of such corporation, partnership or other entity
(irrespective of whether or not at the time securities or other ownership
interests of any other class or classes of such corporation, partnership or
other entity shall have or might have voting power by reason of the happening
of any contingency) is at the time directly or indirectly owned or controlled
by such Person or one or more Subsidiaries of such Person or by such Person
and one or more Subsidiaries of such Person.
"SUBSIDIARY GUARANTORS" shall mean Suiza Dairy, Suiza Fruit, Model
Dairy, Neva Plastics, Reddy Ice Corporation, Swiss Dairy, Velda Farms, Inc.
and Suiza Management Corporation, each a Delaware corporation, and each
Supplemental Guarantor.
"SUIZA DAIRY" shall mean Suiza Dairy Corporation, a Delaware corporation.
"SUIZA FRUIT" shall mean Suiza Fruit Corporation, a Delaware corporation.
CREDIT AGREEMENT 19
<PAGE>
"SUPPLEMENTAL CREDIT AGREEMENT" shall mean the Supplemental Credit
Agreement dated as of September 6, 1996, as amended by Amendment No. 1
thereto dated as of December 2, 1996, between the Company, the Lenders and
the Agent.
"SUPPLEMENTAL GUARANTOR" shall mean each Subsidiary of the Company party
to a Supplemental Subsidiary Guarantee and Security Agreement.
"SUPPLEMENTAL SECURITY DOCUMENTS" shall mean, collectively, each
Supplemental Subsidiary Guarantee and Security Agreement between a
Supplemental Guarantor and the Agent, each amendment to the Security
Agreement, the Existing Subsidiary Guarantee and Security Agreement and the
Guarantee Agreement and all Uniform Commercial Code financing statements
and/or other filings required hereby or thereby to be filed with respect to
the security interests in personal Property and fixtures created pursuant
hereto or thereto.
"SUPPLEMENTAL SUBSIDIARY GUARANTEE AND SECURITY AGREEMENT" shall mean,
collectively, (i) the Supplemental Subsidiary Guarantee and Security
Agreement dated as of September 6, 1996 between the Agent and Swiss Dairy,
(ii) the Supplemental Subsidiary Guarantee and Security Agreement dated as of
December 2, 1996 between the Agent and Model Dairy and (iii) each
Supplemental Subsidiary Guarantee and Security Agreement, substantially in
the form of Exhibit B to the Restated Supplemental Credit Agreement, as the
same shall be modified and supplemented from time to time.
"SWISS DAIRY" shall mean Swiss Dairy Corporation, a Delaware corporation
and a Wholly Owned Subsidiary of the Company.
"TAXES" shall have the meaning assigned to such term in Section 5.06(a)
hereof.
"TERM LOAN COMMITMENT TERMINATION DATE" shall mean March 31, 1997.
"TYPE" shall have the meaning assigned to such term in Section 1.03 hereof.
"UNITED STATES" shall mean the United States of America.
"U.S. TAXES" shall have the meaning assigned to such term in
Section 5.06(b) hereof.
"WHOLLY OWNED SUBSIDIARY" shall mean, with respect to any Person, any
corporation, partnership or other entity of which all of the equity
securities or other ownership interests (other than, in the case of a
corporation, directors' qualifying shares) are directly or indirectly owned
or controlled by such Person or one or more Wholly Owned Subsidiaries of such
Person or by such Person and one or more Wholly Owned Subsidiaries of such
Person.
"WORKING CAPITAL" shall mean, for any period, the excess of (a) the
aggregate amount of inventory, accounts receivable and prepaid expenses of
the Company and its Subsidiaries over
CREDIT AGREEMENT 20
<PAGE>
(b) the aggregate amount of accounts payable and current accrued expenses of
the Company and its Subsidiaries.
1.02 ACCOUNTING TERMS AND DETERMINATIONS.
(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered
to the Lenders hereunder shall (unless otherwise disclosed to the Lenders
in writing at the time of delivery thereof in the manner described in
subsection (b) below) be prepared, in accordance with generally accepted
accounting principles applied on a basis consistent with those used in the
preparation of the latest financial statements furnished to the Lenders
hereunder. All calculations made for the purposes of determining
compliance with this Agreement shall (except as otherwise expressly
provided herein) be made by application of generally accepted accounting
principles applied on a basis consistent with those used in the preparation
of the latest annual or quarterly financial statements furnished to the
Lenders pursuant to Section 8.01 hereof unless (i) the Company shall have
objected to determining such compliance on such basis at the time of
delivery of such financial statements or (ii) the Majority Lenders shall so
object in writing within 30 days after delivery of such financial
statements, in either of which events such calculations shall be made on a
basis consistent with those used in the preparation of the latest financial
statements as to which such objection shall not have been made.
(b) The Company shall deliver to the Lenders at the same time as the
delivery of any annual or quarterly financial statement under Section 8.01
hereof (i) a description in reasonable detail of any material variation
between the application of accounting principles employed in the
preparation of such statement and the application of accounting principles
employed in the preparation of the next preceding annual or quarterly
financial statements as to which no objection has been made in accordance
with the last sentence of subsection (a) above and (ii) reasonable
estimates of the difference between such statements arising as a
consequence thereof.
(c) To enable the ready and consistent determination of compliance
with the covenants set forth in Section 8 hereof, the Company will not,
without the prior consent of the Majority Lenders, change the last day of
its fiscal year from December 31 of each year, or the last days of the
first three fiscal quarters in each of its fiscal years from March 31,
June 30 and September 30 of each year, respectively.
1.03 CLASSES AND TYPES OF LOANS. Loans hereunder are distinguished by
"Class" and by "Type". The "Class" of a Loan (or of a Commitment to make a Loan
or the related Note) refers to whether such Loan is a Facility A Loan, or a
Facility B Loan, each of which constitutes a Class. The "Type" of a Loan refers
to whether such Loan is a Base Rate Loan or a Eurodollar Loan, each of which
constitutes a Type. Loans may be identified by both Class and Type.
CREDIT AGREEMENT 21
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Section 2. COMMITMENTS, LOANS, NOTES AND PREPAYMENTS.
2.01 LOANS.
(a) FACILITY A LOANS.
(i) On the Effective Date, (i) the "Facility A Loans" (as defined in
the Existing Credit Agreement) held by the Existing Lenders under the
Existing Credit Agreement shall automatically, and without any action on
the part of any Person, be deemed to be Facility A Loans hereunder,
(ii) the New Lender shall be a Facility A Lender and a party hereto, and
(iii) the Facility A Lenders shall take such steps, which may include the
making of assignments and Facility A Loans and other adjustments among the
Facility A Lenders, as shall be necessary so that after giving effect to
such assignments and adjustments, the Facility A Lenders shall hold
Facility A Loans hereunder ratably in accordance with their respective
Facility A Commitments. On the Effective Date all Interest Periods under
the Existing Credit Agreement in respect of the "Facility A Loans" under
and as defined in the Existing Credit Agreement shall automatically be
terminated (and the Company shall on the Effective Date make payments to
the Existing Lenders that held such "Facility A Loans" under Section 5.05
thereof to compensate for such termination as if such termination were a
payment or prepayment referred to in said Section 5.05), and, subject to
the provisions of paragraph (c) below, the Company shall be permitted to
Continue such "Facility A Loans" as Eurodollar Loans hereunder, or to
convert such "Facility A Loans" into Base Rate Loans hereunder.
(ii) Each Facility A Lender severally agrees, on the terms and
conditions of this Agreement, to make loans to the Company in Dollars
during the period from and including the Effective Date to but not
including the Revolving Credit Commitment Termination Date in an aggregate
principal amount (including any Loans outstanding to it by reason of the
assignments and other adjustments under the immediately preceding paragraph
and also taking into account the provisions of clause (c) below) at any
one time outstanding up to but not exceeding the amount of the Facility A
Commitment of such Lender as in effect from time to time (such Loans being
herein called "Facility A Loans"); provided that in no event shall the
aggregate principal amount of all Facility A Loans, together with the
aggregate amount of all Letter of Credit Liabilities, exceed the aggregate
amount of the Facility A Commitments as in effect from time to time.
Subject to the terms and conditions of this Agreement, during such period
the Company may borrow, repay and reborrow the amount of the Facility A
Commitments by means of Base Rate Loans and/or Eurodollar Loans and may
Convert Facility A Loans of one Type into Facility A Loans of another Type
(as provided in Section 2.08 hereof) or Continue Facility A Loans of one
Type as Facility A Loans of the same Type (as provided in Section 2.08
hereof).
CREDIT AGREEMENT 22
<PAGE>
(b) FACILITY B LOANS.
(i) On the Effective Date, (i) the "Facility B Loans" (as defined in
the Existing Credit Agreement) held by the Existing Lenders under the
Existing Credit Agreement shall automatically, and without any action on
the part of any Person, be deemed to be Facility B Loans hereunder,
(ii) the New Lender shall be a Facility B Lender and a party hereto, and
(iii) the Facility B Lenders shall take such steps, which may include the
making of assignments and Facility B Loans and other adjustments among the
Facility B Lenders, as shall be necessary and as the Agent shall reasonably
direct so that after giving effect to such assignments and adjustments, the
Facility B Lenders shall hold Facility B Loans hereunder ratably in
accordance with their respective Facility B Commitments. On the Effective
Date all Interest Periods under the Existing Credit Agreement in respect of
the "Facility B Loans" under and as defined in the Existing Credit
Agreement shall automatically be terminated (and the Company shall on the
Effective Date make payments to the Existing Lenders that held such
"Facility B Loans" under Section 5.05 thereof to compensate for such
termination as if such termination were a payment or prepayment referred to
in said Section 5.05), and, subject to the provisions of paragraph (c)
below, the Company shall be permitted to Continue such "Facility B Loans"
as Eurodollar Loans hereunder, or to convert such "Facility B Loans" into
Base Rate Loans hereunder.
(ii) Each Facility B Lender severally agrees, on the terms and
conditions of this Agreement, to make a single term loan to the Company in
Dollars on the Effective Date (PROVIDED that the same shall occur no later
than the Term Loan Commitment Termination Date) in a principal amount up to
but not exceeding the amount of the Facility B Commitment of such Lender
less the amount of any Facility B Loan outstanding to it by reason of the
assignments and Loans and other adjustments under the immediately preceding
paragraph and also taking into account the provisions of clause (c) below.
Subject to the terms and conditions of this Agreement, the Company may
borrow the amount of the Facility B Loan Commitments by means of Base Rate
Loans and/or Eurodollar Loans and thereafter may Convert Facility B Loans
of one Type into Facility B Loans of another Type (as provided in
Section 2.08 hereof) or Continue Facility B Loans of one Type as Facility B
Loans of the same Type (as provided in Section 2.08 hereof).
(c) CONVERSIONS. On the Effective Date, (i) all outstanding
"Facility C Loans" (as defined in the Supplemental Credit Agreement) held
by the Existing Lenders shall, for all purposes of this Agreement,
automatically, and without any action on the part of any Person, be deemed
converted to Facility B Loans repayable with interest in accordance with
the terms of this Agreement, (ii) outstanding Facility A Loans (after
giving effect to Section 2.01(a)(i) hereof) shall be deemed converted to
Facility B Loans (or other appropriate adjustments shall be made upon the
instructions of the Agent) in such amounts as may be required so that,
after giving effect to the transactions contemplated
CREDIT AGREEMENT 23
<PAGE>
by clause (b) above and by this clause (c), the aggregate principal
amount of Facility B Loans outstanding hereunder shall be
$150,000,000, and (iii) all Interest Periods under the Supplemental
Credit Agreement shall be automatically terminated and the Company
shall make payments to the Existing Lenders that held such "Facility C
Loans" under Section 5.05 thereof to compensate for such conversions
as if such conversions were payments or prepayments under said Section
5.05. Each Lender hereby agrees to the provisions contained in this
clause (c) in its capacity as a Lender hereunder as well as in its
capacity as a Lender under the Supplemental Credit Agreement.
(d) ADJUSTMENTS GENERALLY. On the date three Business Days prior to
the Effective Date, the Agent shall notify each Lender of the amount of
Loans required to be made by such Lender (if any) to the Company on the
Effective Date, the amount of increase or decrease in each Commitment of
such Lender and of any other assignments or adjustments that the Agent
deems necessary and advisable such that after giving effect to the
transactions contemplated in this Section to occur on the Effective Date,
each Lender's Commitments shall be in accordance with the Commitments set
forth opposite its name on the signature pages hereof, each Lender's Loans
of any Class to the Company shall not exceed its pro rata portion of all
Loans of any such Class then outstanding to the Company hereunder and the
unused Commitments of all the Lenders plus all outstanding Loans under this
Agreement shall not exceed $200,000,000 in aggregate principal amount. Any
such assignments shall be deemed to occur hereunder automatically on the
Effective Date and without any requirement for additional documentation and
in the case of any such assignment, the assigning party shall be deemed to
represent and warrant to each assignee that it has not created any adverse
claim upon the interest being assigned and that such interest is free and
clear of any adverse claim. Each Lender hereby agrees to give effect to
the instructions of the Agent to such Lender contained in the notice
described above.
(e) LIMIT ON CERTAIN LOANS. No more than four separate Interest
Periods in respect of Eurodollar Loans of any Class from each Lender may be
outstanding at any one time.
2.02 BORROWINGS.
(a) The Company shall give the Agent notice of each borrowing
hereunder as provided in Section 4.05 hereof.
(b) With respect to each borrowing, not later than 3:30 p.m.
Charlotte, North Carolina time on the date specified for such borrowing,
each Lender shall make available the amount of the Loan or Loans to be made
by it to the Company on such date to the Agent at any account designated by
the Agent, in immediately available funds, for account of the Company. The
amount so received by the Agent shall, subject to the terms and conditions
of this Agreement, be made available to the Company by depositing the same,
in immediately available funds, in an account designated by the Company or
otherwise upon its instructions.
CREDIT AGREEMENT 24
<PAGE>
2.03 CHANGES OF COMMITMENTS.
(a) The aggregate amount of each of the Facility A Commitments shall
be automatically reduced to zero on the Revolving Credit Commitment
Termination Date.
(b) The Company shall have the right at any time or from time to time
(i) to terminate or reduce the aggregate unused amount of any of the
Facility B Commitments, (ii) so long as no Facility A Loans or Letter of
Credit Liabilities in respect of Letters of Credit are outstanding, to
terminate the Facility A Commitments, and (iii) to reduce the aggregate
unused amount of any of the Facility A Commitments (for which purpose use
of the Facility A Commitments shall be deemed to include the aggregate
amount of Letter of Credit Liabilities); PROVIDED that (x) the Company
shall give notice of each such termination or reduction as provided in
Section 4.05 hereof and (y) each such partial reduction shall be in an
aggregate amount at least equal to $2,000,000 (or a larger multiple of
$1,000,000).
(c) Any portion of the Facility B Commitments not used on the
Effective Date shall be automatically terminated.
(d) The Commitments once terminated or reduced may not be reinstated.
2.04 COMMITMENT FEE. The Company shall pay to the Agent for account of
each Facility A Lender a commitment fee on the daily average unused amount of
such Lender's Facility A Commitment (for which purpose the aggregate amount of
any Letter of Credit Liabilities in respect of Letters of Credit shall be deemed
to be a pro rata (based on the Facility A Commitments) use of each Facility A
Lender's Commitment), for the period from and including the Effective Date to
but not including the earlier of the date such Commitment is terminated and the
Revolving Credit Commitment Termination Date, at a rate per annum equal to the
Applicable Commitment Fee Rate. Accrued commitment fees shall be payable on
each Quarterly Date and on the earlier of (i) the date the relevant Commitments
are terminated and (ii) the Revolving Credit Commitment Termination Date.
2.05 LENDING OFFICES. The Loans of each Type made by each Lender shall be
made and maintained at such Lender's Applicable Lending Office for Loans of such
Type.
2.06 SEVERAL OBLIGATIONS; REMEDIES INDEPENDENT. The failure of any Lender
to make any Loan to be made by it on the date specified therefor shall not
relieve any other Lender of its obligation to make its Loan on such date, but
neither any Lender nor the Agent shall be responsible for the failure of any
other Lender to make a Loan to be made by such other Lender, and no Lender shall
have any obligation to the Agent or any other Lender for the failure by such
Lender to make any Loan required to be made by such Lender. The amounts payable
by the Company at any time hereunder and under the Notes to each Lender shall be
a separate and independent debt and each Lender shall be entitled, subject to
the prior written consent of the Majority Lenders, to protect and enforce its
rights arising out of this Agreement and the Notes,
CREDIT AGREEMENT 25
<PAGE>
and it shall not be necessary for any other Lender or the Agent to be
joined as an additional party in, any proceedings for such purposes.
2.07 NOTES.
(a) The Facility A Loans made (or continued, as the case may be)
by each Lender shall be evidenced by a single promissory note of the
Company substantially in the form of Exhibit A-1 hereto, dated the
Effective Date, payable to such Lender in a principal amount equal to
the amount of its Facility A Commitment as originally in effect and
otherwise duly completed.
(b) The Facility B Loan made (or continued, as the case may be)
by each Lender shall be evidenced by a single promissory note of the
Company substantially in the form of Exhibit A-2 hereto, dated the
Effective Date, payable to such Lender in a principal amount equal to
the amount of its Facility B Commitment as originally in effect and
otherwise duly completed.
(c) The date, amount, Type, interest rate and duration of
Interest Period (if applicable) of each Loan of each Class made by
each Lender, and each payment made on account of the principal
thereof, shall be recorded by such Lender on its books and, prior to
any transfer of the Note evidencing the Loans of such Class held by
it, endorsed by such Lender on the schedule attached to such Note or
any continuation thereof; PROVIDED that the failure of such Lender to
make any such recordation or endorsement shall not affect the
obligations of the Company to make a payment when due of any amount
owing hereunder or under such Note in respect of the Loans to be
evidenced by such Note.
(d) No Lender shall be entitled to have its Notes subdivided, by
exchange for promissory notes of lesser denominations or otherwise, except
in connection with a permitted assignment of all or any portion of such
Lender's relevant Commitments, Loans and Notes pursuant to Section 11.06(b)
hereof.
(e) Notwithstanding the foregoing, any Lender that is not a U.S.
Person and is not a "bank" within the meaning of Section 881(c)(3)(A) of
the Code may request the Company (through the Agent), and the Company
agrees thereupon, to record on the Register referred to in Section 11.06(g)
hereof any Facility B Loans held by such Lender under this Agreement.
Loans recorded on the Register ("REGISTERED LOANS") may not be evidenced by
promissory notes other than Registered Notes as defined below and, upon the
registration of any Facility B Loan, any promissory note (other than a
Registered Note) evidencing the same shall be null and void and shall be
returned to the Company. The Company agrees, at the request of any Lender
that is the holder of Registered Loans, to execute and deliver to such
Lender a promissory note in registered form to evidence such Registered
Loans (i.e. containing the optional registered note language as indicated
in Exhibit A-2 hereto) and registered as provided in Section 11.06(g)
hereof (herein, a "REGISTERED NOTE"), dated the Effective Date, payable to
such Lender and otherwise duly completed. A Facility B Loan once recorded
on the Register may not be removed from
CREDIT AGREEMENT 26
<PAGE>
the Register so long as it remains outstanding and a Registered Note may
not be exchanged for a promissory note that is not a Registered Note.
2.08 OPTIONAL PREPAYMENTS AND CONVERSIONS OR CONTINUATIONS OF LOANS.
Subject to Section 4.04 hereof, the Company shall have the right to prepay
Loans, or to Convert Loans of one Type into Loans of another Type or Continue
Loans of one Type as Loans of the same Type, at any time or from time to time,
PROVIDED that:
(a) the Company shall give the Agent notice of each such prepayment,
Conversion or Continuation as provided in Section 4.05 hereof (and, upon
the date specified in any such notice of prepayment, the amount to be
prepaid shall become due and payable hereunder);
(b) Eurodollar Loans may be prepaid or Converted on any day, PROVIDED
that, if such prepayment or Conversion falls on a day other than the last
day of an Interest Period for such Loans, the Company shall pay any and all
amounts required by Section 5.05 hereof as a result thereof; and
(c) Prepayments of the Facility B Loans under this Section 2.08 shall
be applied ratably as among the remaining installments of the Facility B
Loans.
Notwithstanding the foregoing, and without limiting the rights and remedies of
the Lenders under Section 9 hereof, in the event that any Event of Default shall
have occurred and be continuing, the Agent may (and at the request of the
Majority Lenders shall) suspend the right of the Company to borrow any Loan as a
Eurodollar Loan or to Convert any Loan into a Eurodollar Loan, or to Continue
any Loan as a Eurodollar Loan, in which event all Eurodollar Loans outstanding
shall be automatically Converted (on the last day(s) of the respective Interest
Periods therefor) to, or all Base Rate Loans shall be Continued, as the case may
be, as Base Rate Loans.
2.09 MANDATORY PREPAYMENTS AND REDUCTIONS OF COMMITMENTS.
(a) CASUALTY EVENTS. Not later than 60 days following the receipt by
the Company or any of its Subsidiaries (other than a Supplemental
Guarantor) of the proceeds of insurance, condemnation award or other
compensation in respect of any Casualty Event affecting any Property of the
Company or any of its Subsidiaries (other than Property of a Supplemental
Guarantor or acquired with the proceeds of Facility C Loans under the
Restated Supplemental Credit Agreement) (or upon such earlier date as the
Person owning such Property shall have determined not to repair or replace
the Property affected by such Casualty Event), the Company shall prepay the
Loans (and/or provide cover for Letter of Credit Liabilities as specified
in paragraph (f) below), and the Facility A Commitments shall be subject to
automatic reduction, in an aggregate amount, if any, equal to 100% of the
Net Available Proceeds of such Casualty Event not theretofore applied to
the repair or replacement of such Property or prepayment of the Facility B
Loans, such prepayment and reduction to be effected in each such case in
the manner and to the extent specified in paragraph (e) below. Nothing in
this paragraph (a)
CREDIT AGREEMENT 27
<PAGE>
shall be deemed to limit any obligation of the Company or any of its
Subsidiaries pursuant to any of the Security Documents to remit to a
collateral or similar account (including, without limitation, the
Collateral Account) maintained by the Agent pursuant to any of the
Security Documents the proceeds of insurance, condemnation award or
other compensation received in respect of any Casualty Event.
Notwithstanding the foregoing, in the event that a Casualty Event
shall occur with respect to Property of the Company or any of its
Subsidiaries (other than Property of a Supplemental Guarantor or
acquired with the proceeds of Facility C Loans under the Restated
Supplemental Credit Agreement) and covered by any Mortgage, the
Company shall prepay the Loans (and/or provide cover for Letter of
Credit Liabilities) on the dates and in the amounts to the extent
specified in such Mortgage. In the event of a Casualty Event
involving Property of a Supplemental Guarantor or acquired with the
proceeds of Facility C Loans under the Restated Supplemental Credit
Agreement, the Net Available Proceeds of such Casualty Event shall be
applied in accordance with the terms of the Restated Supplemental
Credit Agreement.
(b) SALE OF ASSETS. Without limiting the obligation of the Company
to obtain the consent of the Majority Lenders pursuant to Section 8.05(c)
hereof to any Disposition not otherwise permitted hereunder, in the event
that the Net Available Proceeds of any Disposition of Property of the
Company or any of its Subsidiaries (other than Property of a Supplemental
Guarantor or acquired with the proceeds of Facility C Loans under the
Restated Supplemental Credit Agreement) other than an Excluded Disposition
(herein, the "CURRENT DISPOSITION"), and of all prior Dispositions of
Property of the Company or any of its Subsidiaries (other than Property of
a Supplemental Guarantor or acquired with the proceeds of Facility C Loans
under the Restated Supplemental Credit Agreement) as to which a prepayment
has not yet been made under this Section 2.09(b), shall exceed $500,000
then, no later than 5 Business Days prior to the occurrence of the Current
Disposition, the Company will deliver to the Lenders a statement, certified
by a Responsible Financial Officer of the Company, in form and detail
satisfactory to the Agent, of the amount of the Net Available Proceeds of
the Current Disposition and of all such prior Dispositions and the Company
will prepay the Loans (or cause the Loans to be prepaid) and the Facility A
Commitments shall be subject to automatic reduction, in an aggregate amount
equal to 100% of the Net Available Proceeds of the Current Disposition and
such prior Dispositions not theretofore used to prepay Facility B Loans,
such prepayment and reduction to be effected in each case in the manner and
to the extent specified in paragraph (e) below. In the case of all
Dispositions of Property of a Supplemental Guarantor or acquired with the
proceeds of Facility C Loans under the Restated Supplemental Credit
Agreement, the Company will make (or cause to be made) prepayments of the
Facility C Loans as required by the Restated Supplemental Credit Agreement.
(c) EQUITY ISSUANCE; INVESTMENT TAX CREDITS. Upon any Equity
Issuance or the issuance of any Indebtedness (other than Indebtedness
permitted under Section 8.07 hereof) or the Disposition of any Investment
Tax Credit after the Closing Date (as defined in the Restated Supplemental
Credit Agreement), the Company shall (i) prepay the
CREDIT AGREEMENT 28
<PAGE>
Facility C Loans or the Facility B Loans in an aggregate amount equal
to 100% of the Net Available Proceeds thereof or (ii) in connection
with a Disposition of any Investment Tax Credit, apply any part of the
Net Available Proceeds thereof, within six months of receipt, to the
purchase price of a Permitted Acquisition if any and use the balance
of such Net Available Proceeds to prepay the Facility C Loans or the
Facility B Loans as contemplated in clause (i) above. Promptly after
each such Equity Issuance the Company shall advise the Agent in
writing of its designated application of such Net Available Proceeds
thereof. Any such prepayments of the Facility C Loans shall be
effected in the manner specified in the Restated Supplemental Credit
Agreement. Any such prepayment of the Facility B Loans shall be
effected in the manner and to the extent specified in paragraph (e)
below.
(d) EXCESS CASH FLOW. Not later than 90 days after the end of each
fiscal year of the Company, commencing with the fiscal year ending December
31, 1997, the Company shall prepay the Facility B Loans and Facility C
Loans in an aggregate amount equal to the excess of (A) 50% of Excess Cash
Flow for such fiscal year (or, if the Leverage Ratio is less than 2.50 to
1, 25% of such Excess Cash Flow) over (B) the aggregate amount of
prepayments of Facility B Loans and Facility C Loans made during such
fiscal year pursuant to Section 2.08 hereof and Section 2.08 of the
Restated Supplemental Credit Agreement. Mandatory prepayments arising from
Excess Cash Flow required prior to the Facility C Commitment Termination
Date shall be applied to the Facility B Loans in the manner and to the
extent specified in paragraph (e) below. Mandatory prepayments arising
from Excess Cash Flow required on or after the Facility C Commitment
Termination Date shall be applied to the Facility B Loans and the Facility
C Loans pro rata based on the aggregate principal amounts thereof then
outstanding and such prepayments of Facility B Loans shall be effected in
each case in the manner and to the extent specified in paragraph (e) below.
(e) APPLICATION. Prepayments and reductions of Commitments described
in paragraphs (a), (b), (c) and (d) above shall be effected as follows:
(i) first, the amount of the prepayment specified in such
paragraphs shall be applied to the Facility B Loans then
outstanding, 50% of which amount shall be applied in the inverse
order of the maturities of the installments thereof and (after
taking into account such application) the remainder thereof
shall be applied ratably to then remaining installments of
principal of the Facility B Loans; and
(ii) second, the Facility A Commitments shall be
automatically reduced in an amount equal to any excess over the
amount referred to in the foregoing clause (i) (and to the
extent that, after giving effect to such reduction, the
aggregate principal amount of Facility A Loans, together with
the aggregate amount of all Letter of Credit Liabilities, would
exceed the Facility A Commitments, the Company shall prepay
Facility A Loans in an aggregate amount equal to such excess
(and, to the extent that the amount of any such
CREDIT AGREEMENT 29
<PAGE>
prepayment to be applied to the Facility A Loans exceeds the
outstanding amount thereof, provide cover for Letter of Credit
Liabilities as specified in paragraph (f) below).
(f) COVER FOR LETTER OF CREDIT LIABILITIES. In the event that the
Company shall be required pursuant to this Section 2.09 to provide cover
for Letter of Credit Liabilities, the Company shall effect the same by
paying to the Agent in immediately available funds an amount equal to the
required amount, which funds shall be retained by the Agent in the
Collateral Account (as collateral security in the first instance for the
Letter of Credit Liabilities) until such time as the Letters of Credit
shall have been terminated and all of such Letter of Credit Liabilities
paid in full.
2.10 LETTERS OF CREDIT. Subject to the terms and conditions of this
Agreement, the Facility A Commitments may be utilized, upon the request of the
Company, in addition to the Facility A Loans provided for by Section 2.01(a)
hereof, by the issuance by the Issuing Bank of letters of credit (collectively,
"LETTERS OF CREDIT") including (a) Letters of Credit issued under the Existing
Agreement and outstanding on the Effective Date, for account of any of the
Subsidiaries of the Company, and (b) in respect of all (1) Letters of Credit
described in clause (a) above that are amended, renewed or otherwise modified
and (2) other Letters of Credit, for account of the Company and any of its
Subsidiaries PROVIDED that in no event shall (i) the aggregate amount of all
Letter of Credit Liabilities in respect of Letters of Credit, together with the
aggregate principal amount of the Facility A Loans, exceed the aggregate amount
of the Facility A Commitments as in effect from time to time, (ii) the
outstanding aggregate amount of all Letter of Credit Liabilities in respect of
Letters of Credit exceed $10,000,000, (iii) the expiration date of any Letter of
Credit extend beyond the earlier of the Revolving Credit Commitment Termination
Date and the date 12 months following the issuance of such Letter of Credit and
(iv) the aggregate amount of all Letter of Credit Liabilities in respect of
Letters of Credit provided for in clause (a) above exceed $200,000. The
following additional provisions shall apply to Letters of Credit:
(a) The Company shall give the Agent at least three Business Days'
irrevocable prior notice (effective upon receipt) specifying the Business
Day (which shall be no later than 30 days preceding the Revolving Credit
Commitment Termination Date) each Letter of Credit is to be issued and the
account party or parties therefor and describing in reasonable detail the
proposed terms of such Letter of Credit (including the beneficiary thereof)
and the nature of the transactions or obligations proposed to be supported
thereby (including whether such Letter of Credit is to be a commercial
letter of credit or a standby letter of credit). Upon receipt of any such
notice, the Agent shall advise the Issuing Bank of the contents thereof.
(b) On each day during the period commencing with the issuance by the
Issuing Bank of any Letter of Credit (from the Effective Date in the case
of outstanding Letters of Credit) and until such Letter of Credit shall
have expired or been terminated, the Facility A Commitment of each Facility
A Lender shall be deemed to be utilized for all purposes of this Agreement
in an amount equal to such Lender's Facility A
CREDIT AGREEMENT 30
<PAGE>
Commitment Percentage of the then undrawn face amount of such Letter
of Credit. Each Facility A Lender (other than the Issuing Bank)
agrees that, upon the issuance of any Letter of Credit hereunder, it
shall automatically acquire a participation in the Issuing Bank's
liability under such Letter of Credit in an amount equal to such
Lender's Facility A Commitment Percentage of such liability, and each
Facility A Lender (other than the Issuing Bank) thereby shall
absolutely, unconditionally and irrevocably assume, as primary obligor
and not as surety, and shall be unconditionally obligated to the
Issuing Bank to pay and discharge when due, its Facility A Commitment
Percentage of the Issuing Bank's liability under such Letter of Credit.
(c) Upon receipt from the beneficiary of any Letter of Credit of any
demand for payment under such Letter of Credit, the Issuing Bank shall
promptly notify the Company (through the Agent) of the amount to be paid by
the Issuing Bank as a result of such demand and the date on which payment
is to be made by the Issuing Bank to such beneficiary in respect of such
demand (but the failure to give such notice shall not impair the Company's
obligations). Notwithstanding the identity of the account party of any
Letter of Credit, the Company hereby unconditionally agrees to pay and
reimburse the Agent for account of the Issuing Bank for the amount of each
demand for payment under such Letter of Credit that is in substantial
compliance with the provisions of such Letter of Credit at or prior to the
date on which payment is to be made by the Issuing Bank to the beneficiary
thereunder, without presentment, demand, protest or other formalities of
any kind and irrespective of any claim, set-off, defense or other right
which the Company or any of its Subsidiaries or Affiliates may have at any
time against such Issuing Bank or any other Person, under all
circumstances, including without limitation, any of the following
circumstances: (i) any lack of validity or enforceability of this
Agreement or any of the Loan Documents; (ii) the existence of any claim,
set-off, defense or other right which the Company or any of its
Subsidiaries or Affiliates may have at any time against a beneficiary named
in any Letter of Credit or any transferee thereof (or any Person for whom
any such transferee may be acting), the Issuing Bank, any Lender or any
other Person, whether in connection with this Agreement, any Letter of
Credit, the transactions contemplated herein or any unrelated transactions
(including any underlying transactions between the Company or any of its
Subsidiaries or Affiliates and the beneficiary named in any Letter of
Credit; (iii) any draft, certificate or any other document presented under
a Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; (iv) the surrender or impairment of any security
for the performance or observance of any of the terms of any of the Loan
Documents; or (v) the existence of any Default.
(d) Forthwith upon its receipt of a notice referred to in
paragraph (c) of this Section 2.10, the Company shall advise the Agent
whether or not the Company intends to borrow hereunder to finance its
obligation to reimburse the Issuing Bank for the amount of the related
demand for payment and, if it does, submit a notice of such borrowing as
provided in Section 4.05 hereof.
CREDIT AGREEMENT 31
<PAGE>
(e) Each Facility A Lender (other than the Issuing Bank) shall pay to
the Agent for account of the Issuing Bank at its principal office in
Dollars and in immediately available funds, the amount of such Lender's
Facility A Commitment Percentage of any payment under a Letter of Credit
upon notice by the Issuing Bank (through the Agent) to such Facility A
Lender requesting such payment and specifying such amount. Each such
Facility A Lender's obligation to make such payment to the Agent for
account of the Issuing Bank under this paragraph (e), and the Issuing
Bank's right to receive the same, shall be absolute and unconditional and
shall not be affected by any circumstance whatsoever (except as provided in
the proviso at the end of this sentence), including, without limitation,
the failure of any other Facility A Lender to make its payment under this
paragraph (e), the financial condition of the Company (or any other account
party), the existence of any Default or the termination of the Commitments;
PROVIDED that no Facility A Lender shall be obligated to make any payment
to the Agent for account of the Issuing Bank in respect of any payment made
by the Issuing Bank under a Letter of Credit where such payment was made in
respect of a demand for payment that was not in substantial compliance with
the provisions of such Letter of Credit or to the extent that the Company
shall not be required to indemnify any Lender or the Agent in the
circumstances provided in clause (x) of the penultimate sentence of the
last paragraph of this Section 2.10. Each such payment to the Issuing Bank
shall be made without any offset, abatement, withholding or reduction
whatsoever. If any Facility A Lender shall default in its obligation to
make any such payment to the Agent for account of the Issuing Bank, for so
long as such default shall continue the Agent may at the request of the
Issuing Bank withhold from any payments received by the Agent under this
Agreement or any Note for account of such Facility A Lender the amount so
in default and, to the extent so withheld, pay the same to the Issuing Bank
in satisfaction of such defaulted obligation.
(f) Upon the making of each payment by a Facility A Lender to the
Issuing Bank pursuant to paragraph (e) above in respect of any Letter of
Credit, such Lender shall, automatically and without any further action on
the part of the Agent, the Issuing Bank or such Lender, acquire (i) a
participation in an amount equal to such payment in the Reimbursement
Obligation owing to the Issuing Bank by the Company hereunder and under the
Letter of Credit Documents relating to such Letter of Credit and (ii) a
participation in a percentage equal to such Lender's Facility A Commitment
Percentage in any interest or other amounts payable by the Company
hereunder and under such Letter of Credit Documents in respect of such
Reimbursement Obligation (other than the commissions, charges, costs and
expenses payable to the Issuing Bank pursuant to paragraph (g) of this
Section 2.10). Upon receipt by the Issuing Bank from or for account of the
Company of any payment in respect of any Reimbursement Obligation or any
such interest or other amount (including by way of setoff or application of
proceeds of any collateral security), the Issuing Bank shall promptly pay
to the Agent for account of each Facility A Lender entitled thereto, such
Facility A Lender's Facility A Commitment Percentage of such payment, each
such payment by the Issuing Bank to be made in the same money and funds in
which received by the Issuing Bank. In the event any payment received by
the Issuing Bank and so paid to the Facility A Lenders hereunder is
rescinded
CREDIT AGREEMENT 32
<PAGE>
or must otherwise be returned by the Issuing Bank, each Facility
A Lender shall, upon the request of the Issuing Bank (through the Agent),
repay to the Issuing Bank (through the Agent) the amount of such payment
paid to such Lender, with interest at the rate specified in paragraph (j)
of this Section 2.10.
(g) The Company shall pay to the Agent for account of each Facility A
Lender (ratably in accordance with their respective Commitment Percentages)
a letter of credit fee in respect of each Letter of Credit in an amount
equal to the percentage equivalent of the Applicable Margin for Eurodollar
Loans (less 0.25%) of the daily average undrawn face amount of such Letter
of Credit for the period from and including the date of issuance of such
Letter of Credit (i) in the case of a Letter of Credit that expires in
accordance with its terms, to and including such expiration date and
(ii) in the case of a Letter of Credit that is drawn in full or is
otherwise terminated other than on the stated expiration date of such
Letter of Credit, to but excluding the date such Letter of Credit is drawn
in full or is terminated (such fee to be non-refundable, to be paid in
arrears on each Quarterly Date and on the Revolving Credit Commitment
Termination Date and to be calculated for any day after giving effect to
any payments made under such Letter of Credit on such day). In addition,
the Company shall pay to the Agent for account of the Issuing Bank a
fronting fee in respect of each Letter of Credit in an amount equal to
0.25% per annum of the daily average undrawn face amount of such Letter of
Credit for the period from and including the date of issuance of such
Letter of Credit (i) in the case of a Letter of Credit that expires in
accordance with its terms, to and including such expiration date and
(ii) in the case of a Letter of Credit that is drawn in full or is
otherwise terminated other than on the stated expiration date of such
Letter of Credit, to but excluding the date such Letter of Credit is drawn
in full or is terminated (such fee to be non-refundable, to be paid in
arrears on each Quarterly Date and on the Revolving Credit Commitment
Termination Date and to be calculated for any day after giving effect to
any payments made under such Letter of Credit on such day) plus all
commissions, charges, costs and expenses in the amounts customarily charged
by the Issuing Bank from time to time in like circumstances with respect to
the issuance of each Letter of Credit and drawings and other transactions
relating thereto.
(h) Promptly following the end of each fiscal quarter, the Issuing
Bank shall deliver (through the Agent) to each Facility A Lender and the
Company a notice describing the aggregate amount of all Letters of Credit
outstanding at the end of such quarter. Upon the request of any Facility A
Lender from time to time, the Issuing Bank shall deliver any other
information reasonably requested by such Lender with respect to each Letter
of Credit then outstanding.
(i) The issuance by the Issuing Bank of each Letter of Credit shall,
in addition to the conditions precedent set forth in Section 6 hereof, be
subject to the conditions precedent that (i) such Letter of Credit shall be
in such form, contain such terms and support such transactions as shall be
reasonably satisfactory to the Issuing Bank consistent with its then
current practices and procedures with respect to letters of credit of the
same type and (ii) the Company shall have executed and delivered such
applications,
CREDIT AGREEMENT 33
<PAGE>
agreements and other instruments relating to such Letter of Credit as the
Issuing Bank shall have reasonably requested consistent with its then
current practices and procedures with respect to letters of credit of the
same type, PROVIDED that in the event of any conflict between any such
application, agreement or other instrument and the provisions of this
Agreement or any Security Document, the provisions of this Agreement and
the Security Documents shall control.
(j) To the extent that any Lender shall fail to pay any amount
required to be paid pursuant to paragraph (e) or (f) of this Section 2.10
on the due date therefor, such Lender shall pay interest to the Issuing
Bank (through the Agent) on such amount from and including such due date to
but excluding the date such payment is made at a rate per annum equal to
the Federal Funds Rate, PROVIDED that if such Lender shall fail to make
such payment to the Issuing Bank within three Business Days of such due
date, then, retroactively to the due date, such Lender shall be obligated
to pay interest on such amount at the Post-Default Rate.
(k) The issuance by the Issuing Bank of any modification or
supplement to any Letter of Credit hereunder shall be subject to the same
conditions applicable under this Section 2.10 to the issuance of new
Letters of Credit, and no such modification or supplement shall be issued
hereunder unless either (i) the respective Letter of Credit affected
thereby would have complied with such conditions had it originally been
issued hereunder in such modified or supplemented form or (ii) each
Facility A Lender shall have consented thereto.
The Company hereby indemnifies and holds harmless each Facility A Lender and
the Agent from and against any and all claims and damages, losses,
liabilities, costs or expenses that such Lender or the Agent may incur (or
that may be claimed against such Lender or the Agent by any Person
whatsoever) by reason of or in connection with the execution and delivery or
transfer of or payment or refusal to pay by the Issuing Bank under any Letter
of Credit; PROVIDED that the Company shall not be required to indemnify any
Lender or the Agent for any claims, damages, losses, liabilities, costs or
expenses to the extent, but only to the extent, caused by (x) the willful
misconduct or gross negligence of the Issuing Bank in determining whether a
request presented under any Letter of Credit complied with the terms of such
Letter of Credit or (y) in the case of the Issuing Bank, such Lender's
failure to pay under any Letter of Credit after the presentation to it of a
request strictly complying with the terms and conditions of such Letter of
Credit. Nothing in this Section 2.10 is intended to limit the other
obligations of the Company, any Lender or the Agent under this Agreement.
Section 3. PAYMENTS OF PRINCIPAL AND INTEREST.
3.01 REPAYMENT OF LOANS.
(a) The Company hereby promises to pay to the Agent for account of
each Facility A Lender the entire outstanding principal amount of such
Lender's Facility A
CREDIT AGREEMENT 34
<PAGE>
Loans, and each such Facility A Loan shall mature, on
the Revolving Credit Commitment Termination Date.
(b) The Company hereby promises to pay to the Agent for account of
each Facility B Lender the principal of such Lender's Facility B Loan in 25
installments payable on the Principal Payment Dates falling on or nearest
to the dates specified below, each in an amount equal to such Lender's
ratable share of the aggregate amount set forth opposite such date, as
follows:
Date Amount of Installment ($)
----------------------------- ---------------------------------------
March 31, 1997 4,000,000
June 30, 1997 4,000,000
September 30, 1997 4,000,000
December 31, 1997 4,000,000
March 31, 1998 4,500,000
June 30, 1998 4,500,000
September 30, 1998 4,500,000
December 31, 1998 4,500,000
March 31, 1999 5,000,000
June 30, 1999 5,000,000
September 30, 1999 5,000,000
December 31, 1999 5,000,000
March 31, 2000 5,500,000
June 30, 2000 5,500,000
September 30, 2000 5,500,000
December 31, 2000 5,500,000
March 31, 2001 6,000,000
June 30, 2001 6,000,000
September 30, 2001 6,000,000
December 31, 2001 6,000,000
March 31, 2002 6,500,000
June 30, 2002 6,500,000
September 30, 2002 6,500,000
December 31, 2002 6,500,000
March 31, 2003 24,000,000
------------
$150,000,000
If the Company does not borrow the full amount of the aggregate Facility B
Commitments on or before the Term Loan Commitment Termination Date, the
shortfall shall be applied to reduce the foregoing installments ratably.
3.02 INTEREST. The Company hereby promises to pay to the Agent for
account of each Lender interest on the unpaid principal amount of each Loan
for the period from and including
CREDIT AGREEMENT 35
<PAGE>
the date of such Loan to but excluding the date such Loan shall be paid in
full, at the following rates per annum:
(a) during such periods as such Loan is a Base Rate Loan, the Base
Rate (as in effect from time to time) PLUS the Applicable Margin, and
(b) during such periods as such Loan is a Eurodollar Loan, for each
Interest Period relating thereto, the Eurodollar Rate for such Loan for
such Interest Period PLUS the Applicable Margin.
Notwithstanding the foregoing, the Company hereby promises to pay to the
Agent for account of each Lender interest at the applicable Post-Default Rate
as follows:
(i) on any principal of any Loan made by such Lender, on any
Reimbursement Obligation held by such Lender and on any other amount
payable by the Company hereunder or under the Notes held by such
Lender to or for account of such Lender that shall not be paid in full
when due (whether at stated maturity, by acceleration, by mandatory
prepayment or otherwise), for the period from and including the due
date thereof to but excluding the date the same is paid in full; and
(ii) on the principal of all Loans made by such Lender commencing
upon the occurrence of any Event of Default, and thereafter for so
long as any Event of Default shall be continuing.
Accrued interest on each Loan shall be payable (i) in the case of a Base Rate
Loan, quarterly on the Quarterly Dates, (ii) in the case of a Eurodollar
Loan, on the last day of each Interest Period therefor and, if such Interest
Period is longer than three months, at three-month intervals following the
first day of such Interest Period, and (iii) at the option of the Agent, in
the case of any Loan upon the payment or prepayment thereof or the Conversion
of such Loan to a Loan of another Type (but only on the principal amount so
paid, prepaid or Converted) except that interest payable at the Post-Default
Rate shall be payable from time to time on demand. Promptly after the
determination of any interest rate provided for herein or any change therein,
the Agent shall give notice thereof to the Lenders to which such interest is
payable and to the Company.
Section 4. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
4.01 PAYMENTS.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest, Reimbursement Obligations and other amounts to be made
by the Company under this Agreement and the Notes of the Company, and,
except to the extent otherwise provided therein, all payments to be made by
the Obligors under any other Loan Document, shall be made in Dollars, in
immediately available funds, to the Agent at any
CREDIT AGREEMENT 36
<PAGE>
account designated by the Agent not later than 2:00 p.m. Charlotte, North
Carolina time on the date on which such payment shall become due (each such
payment made after such time on such due date to be deemed to have been
made on the next succeeding Business Day).
(b) Any Lender for whose account any such payment is to be made may
(but shall not be obligated to) debit the amount of any such payment that
is not made by such time to any ordinary deposit account of the Company
with such Lender (with notice to the Company and the Agent).
(c) The Company shall, at the time of making each payment under this
Agreement or any Note for account of any Lender, specify to the Agent
(which shall so notify the intended recipient(s) thereof) the Loans,
Reimbursement Obligations or other amounts payable hereunder to which such
payment is to be applied (and in the event that the Company fails to so
specify, or if an Event of Default has occurred and is continuing, the
Agent may distribute such payment to the Lenders for application in such
manner as it or the Majority Lenders, subject to Section 4.02 hereof, may
determine to be appropriate).
(d) Except to the extent otherwise provided in the last sentence of
Section 2.10(e) hereof, each payment received by the Agent under this
Agreement or any Note for account of any Lender shall be paid by the Agent
promptly to such Lender, in immediately available funds, for account of
such Lender's Applicable Lending Office for the Loan or other obligation in
respect of which such payment is made.
(e) If the due date of any payment under this Agreement or any Note
would otherwise fall on a day that is not a Business Day, such date shall
be extended to the next succeeding Business Day, and interest shall be
payable for any principal so extended for the period of such extension.
4.02 PRO RATA TREATMENT. Except to the extent otherwise provided
herein: (a) each borrowing of Loans of a particular Class from the Lenders
under Section 2.01 hereof shall be made from the relevant Lenders, each
payment of commitment fee under Section 2.04 hereof in respect of Commitments
of a particular Class shall be made for account of the relevant Lenders, and
each termination or reduction of the amount of the Commitments of a
particular Class under Section 2.03 hereof shall be applied to the respective
Commitments of such Class of the relevant Lenders, pro rata according to the
amounts of their respective Commitments of such Class; (b) the making,
Conversion and Continuation of Loans of a particular Type and Class (other
than Conversions provided for by Section 5.04 hereof) shall be made pro rata
among the relevant Lenders according to the amounts of their respective
Commitments (in the case of making of Loans) or their respective Loans (in
the case of Conversions and Continuations of Loans); (c) each payment or
prepayment of principal of Loans of any Class by the Company shall be made
for account of the relevant Lenders pro rata in accordance with the
respective unpaid principal amounts of the Loans of such Class held by them;
and (d) each payment of interest on any Loans of any Class by the Company
shall be made for account of the relevant Lenders pro
CREDIT AGREEMENT 37
<PAGE>
rata in accordance with the amounts of interest on such Loans then due and
payable to the respective Lenders.
4.03 COMPUTATIONS. Interest on Eurodollar Loans, commitment fees and
letter of credit fees shall be computed on the basis of a year of 360 days
and actual days elapsed (including the first day but, except as otherwise
provided in Section 2.10(g) hereof, excluding the last day) occurring in the
period for which payable and interest on Base Rate Loans and Reimbursement
Obligations shall be computed on the basis of a year of 365 or 366 days, as
the case may be, and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable.
4.04 MINIMUM AMOUNTS. Except for mandatory prepayments made pursuant to
Section 2.09 hereof and Conversions or prepayments made pursuant to Section
5.04 hereof, (a) each borrowing and Conversion of principal of Base Rate
Loans shall be in an aggregate amount at least equal to $500,000 or a larger
multiple of $100,000, (b) each borrowing and Conversion of Eurodollar Loans
shall be in an aggregate amount at least equal to $2,000,000 or a larger
multiple of $1,000,000, (c) each partial prepayment of principal of
Eurodollar Loans shall be in an aggregate amount at least equal to $2,000,000
or a larger multiple of $1,000,000 and each partial prepayment of principal
of Base Rate Loans shall be in an aggregate amount at least equal to $500,000
or a larger multiple of $100,000 (borrowings, Conversions or prepayments of
or into Loans of different Types or, in the case of Eurodollar Loans, having
different Interest Periods at the same time hereunder to be deemed separate
borrowings, Conversions and prepayments for purposes of the foregoing, one
for each Type or Interest Period).
4.05 CERTAIN NOTICES. Notices by the Company to the Agent of
terminations or reductions of the Commitments, of Borrowings, Conversions,
Continuations and optional prepayments of Loans and of Classes of Loans, of
Types of Loans and of the duration of Interest Periods shall be irrevocable
(other than with respect to notices of optional prepayments, which shall be
revocable, PROVIDED that upon any such revocation the Company shall be
obligated to pay the Lenders any amounts payable under Section 5.05 hereof as
a consequence of such revocation) and shall be effective only if received by
the Agent not later than 1:30 p.m. Charlotte, North Carolina time on the
number of Business Days prior to the date of the relevant termination,
reduction, borrowing, Conversion, Continuation or prepayment or the first day
of such Interest Period specified below:
Number of Business
Notice Days Prior
- ---------------------------------------------- -------------------
Termination or reduction of Commitments 3
Borrowing or prepayment of, or Conversions into, Base Same Day
Rate Loans
Borrowing or prepayment of, Conversions into, 3
Continuations as, or duration of Interest Period
CREDIT AGREEMENT 38
<PAGE>
for, Eurodollar Loans
Each such notice of termination or reduction shall specify the amount and the
Class of the Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation or optional prepayment shall specify the
Class of Loans to be borrowed, Converted, Continued or prepaid and the amount
(subject to Section 4.04 hereof) and Type of each Loan to be borrowed,
Converted, Continued or prepaid and the date of borrowing, Conversion,
Continuation or optional prepayment (which shall be a Business Day). Each
such notice of the duration of an Interest Period shall specify the Loans to
which such Interest Period is to relate. The Agent shall promptly notify the
Lenders of the contents of each such notice. In the event that the Company
fails to select the Type of Loan, or the duration of any Interest Period for
any Eurodollar Loan, within the time period and otherwise as provided in this
Section 4.05, such Loan (if outstanding as a Eurodollar Loan) will be
automatically Converted into a Base Rate Loan on the last day of the then
current Interest Period for such Loan or (if outstanding as a Base Rate Loan)
will remain as, or (if not then outstanding) will be made as, a Base Rate
Loan.
4.06 NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Agent shall have
been notified by a Lender or the Company (the "PAYOR") prior to the date on
which the Payor is to make payment to the Agent of (in the case of a Lender)
the proceeds of a Loan to be made by such Lender hereunder or (in the case of
the Company) a payment to the Agent for account of one or more of the Lenders
hereunder (such payment being herein called the "REQUIRED PAYMENT"), which
notice shall be effective upon receipt, that the Payor does not intend to
make the Required Payment to the Agent, the Agent may assume that the
Required Payment has been made and may, in reliance upon such assumption (but
shall not be required to), make the amount thereof available to the intended
recipient(s) on such date; and, if the Payor has not in fact made the
Required Payment to the Agent, the recipient(s) of such payment shall, on
demand, repay to the Agent the amount so made available together with
interest thereon in respect of each day during the period commencing on the
date (the "ADVANCE DATE") such amount was so made available by the Agent
until the date the Agent recovers such amount at a rate per annum equal to
the Federal Funds Rate for such day and, if such recipient(s) shall fail
promptly to make such payment, the Agent shall be entitled to recover such
amount, on demand, from the Payor, together with interest as aforesaid,
PROVIDED that if neither the recipient(s) nor the Payor shall return the
Required Payment to the Agent within three Business Days of the Advance Date,
then, retroactively to the Advance Date, the Payor and the recipient(s) shall
each be obligated to pay interest on the Required Payment as follows:
(i) if the Required Payment shall represent a payment to be made by
the Company to the Lenders, the Company and the recipient(s) shall each be
obligated retroactively to the Advance Date to pay interest in respect of
the Required Payment at the Post-Default Rate (and, in case the
recipient(s) shall return the Required Payment to the Agent, without
limiting the obligation of the Company under Section 3.02 hereof to pay
interest to such recipient(s) at the Post-Default Rate in respect of the
Required Payment) and
CREDIT AGREEMENT 39
<PAGE>
(ii) if the Required Payment shall represent proceeds of a Loan to be
made by the Lenders to the Company, the Payor and the Company shall each be
obligated retroactively to the Advance Date to pay interest in respect of
the Required Payment at the rate of interest provided for such Required
Payment pursuant to Section 3.02 hereof (and, in case the Company shall
return the Required Payment to the Agent, without limiting any claim the
Company may have against the Payor in respect of the Required Payment).
4.07 SHARING OF PAYMENTS, ETC.
(a) The Company agrees that, in addition to (and without limitation
of) any right of set-off, banker's lien or counterclaim a Lender may
otherwise have, each Lender shall be entitled, at its option but with the
prior written consent of the Majority Lenders, to offset balances held by
it for account of the Company at any of its offices, in Dollars or in any
other currency, against any principal of or interest on any of such
Lender's Loans, Reimbursement Obligations or any other amount payable to
such Lender hereunder, that is not paid when due (regardless of whether
such balances are then due to the Company), in which case it shall promptly
notify the Company and the Agent thereof, PROVIDED that such Lender's
failure to give such notice shall not affect the validity thereof.
(b) If any Lender shall obtain from any Obligor payment of any
principal of or interest on any Loan of any Class or Letter of Credit
Liability owing to it or payment of any other amount under this Agreement
or any other Loan Document through the exercise of any right of set-off,
Lender's lien or counterclaim or similar right or otherwise (other than
from the Agent as provided herein), and, as a result of such payment, such
Lender shall have received a greater percentage of the principal of or
interest on the Loans of such Class or Letter of Credit Liabilities or such
other amounts then due hereunder or thereunder by such Obligor to such
Lender than the percentage received by any other Lender, it shall promptly
purchase from such other Lenders participations in (or, if and to the
extent specified by such Lender, direct interests in) the Loans of such
Class or such other amounts, respectively, owing to such other Lenders (or
in interest due thereon, as the case may be) in such amounts, and make such
other adjustments from time to time as shall be equitable, to the end that
all the Lenders shall share the benefit of such excess payment (net of any
expenses that may be incurred by such Lender in obtaining or preserving
such excess payment) pro rata in accordance with the unpaid principal of
and/or interest on the Loans of such Class or Letter of Credit Liabilities
or such other amounts, respectively, owing to each of the Lenders. To such
end all the Lenders shall make appropriate adjustments among themselves (by
the resale of participations sold or otherwise) if such payment is
rescinded or must otherwise be restored.
(c) The Company agrees that any Lender so purchasing such a
participation (or direct interest) may exercise all rights of set-off,
banker's lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender were a direct holder of
CREDIT AGREEMENT 40
<PAGE>
Loans or other amounts (as the case may be) owing to such Lender in the
amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to exercise, and retain
the benefits of exercising, any such right with respect to any other
indebtedness or obligation of any Obligor. If, under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured
claim in lieu of a set-off to which this Section 4.07 applies, such Lender
shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders
entitled under this Section 4.07 to share in the benefits of any recovery
on such secured claim.
Section 5. YIELD PROTECTION, ETC.
5.01 ADDITIONAL COSTS.
(a) The Company shall pay directly to each Lender from time to time
such amounts as such Lender may determine to be necessary to compensate
such Lender for any costs that such Lender determines are attributable to
its making or maintaining of any Eurodollar Loans or its obligation to make
any Eurodollar Loans hereunder or any reduction in any amount receivable by
such Lender hereunder in respect of any of such Loans or such obligation
(such increases in costs and reductions in amounts receivable being herein
called "ADDITIONAL COSTS"), resulting from any Regulatory Change that:
(i) shall subject any Lender (or its Applicable Lending Office for
any of such Loans) to any tax, duty or other charge in respect of such
Loans or its Notes or changes the basis of taxation of any amounts payable
to such Lender under this Agreement or its Notes in respect of any of such
Loans (excluding changes in the rate of tax on the overall net income of
such Lender or of its Applicable Lending Office by the jurisdiction in
which such Lender is organized or has its principal office or in which its
Applicable Lending Office is organized or located or, in each case, any
political subdivision or taxing authority thereof or therein); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement utilized in the
determination of the Eurodollar Rate for such Loan) relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of, such Lender (including, without limitation, any of such
Loans or any deposits referred to in the definitions of "Eurodollar Base
Rate" in Section 1.01 hereof), or any commitment of such Lender (including,
without limitation, the Commitments of such Lender hereunder); or
(iii) imposes any other condition affecting this Agreement or its
Notes (or any of such extensions of credit or liabilities) or its
Commitments.
CREDIT AGREEMENT 41
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If any Lender requests compensation from the Company under this Section
5.01(a), the Company may, by notice to such Lender (with a copy to the
Agent), suspend the obligation of such Lender thereafter to make or Continue
Eurodollar Loans, to Convert Loans of another Type into Eurodollar Loans or
to Convert Eurodollar Loans into Loans of another Type until the Regulatory
Change giving rise to such request ceases to be in effect (in which case the
provisions of Section 5.04 hereof shall be applicable), PROVIDED that such
suspension shall not affect the right of such Lender to receive the
compensation so requested.
(b) Without limiting the effect of the provisions of paragraph (a) of
this Section 5.01, in the event that, by reason of any Regulatory Change,
any Lender (i) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits or other
liabilities of such Lender that includes deposits by reference to which the
interest rate on Eurodollar Loans is determined as provided in this
Agreement or a category of extensions of credit or other assets of such
Lender that includes Eurodollar Loans or (ii) becomes subject to
restrictions on the amount of such a category of liabilities or assets that
it may hold then, if such Lender so elects by notice to the Company (with a
copy to the Agent), the obligation of such Lender to make or Continue, or
to Convert Loans of another type into, Eurodollar Loans, hereunder (as the
case may be) shall be suspended until any such Regulatory Change ceases to
be in effect (in which case the provisions of Section 5.04 hereof shall be
applicable).
(c) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the Company shall pay directly to
each Lender from time to time on request such amounts as such Lender may
determine to be necessary to compensate such Lender (or, without
duplication, the bank holding company of which such Lender is a subsidiary)
for any costs that it determines are attributable to the maintenance by
such Lender (or any Applicable Lending Office or such bank holding
company), pursuant to any law or regulation or any interpretation,
directive or request (whether or not having the force of law and whether or
not failure to comply therewith would be unlawful) of any court or
governmental or monetary authority (i) following any Regulatory Change or
(ii) hereafter implementing any risk-based capital guideline or other
requirement (whether or not having the force of law and whether or not the
failure to comply therewith would be unlawful) heretofore or hereafter
issued by any government or governmental or supervisory authority
implementing at the national level the Basle Accord (including, without
limitation, the Final Risk-Based Capital Guidelines of the Board of
Governors of the Federal Reserve System (12 C.F.R. Part 208, Appendix A;
12 C.F.R. Part 225, Appendix A) and the Final Risk-Based Capital Guidelines
of the Office of the Comptroller of the Currency (12 C.F.R. Part 3,
Appendix A)), of capital in respect of its Commitments or Loans (such
compensation to include, without limitation, an amount equal to any
reduction of the rate of return on assets or equity of such Lender (or any
Applicable Lending Office or such bank holding company) to a level below
that which such Lender (or any Applicable Lending Office or such bank
holding company) could have achieved but for such law, regulation,
interpretation, directive or request). For purposes of this
Section 5.01(c) and Section 5.08
CREDIT AGREEMENT 42
<PAGE>
hereof, "BASLE ACCORD" shall mean the proposals for risk-based capital
framework described by the Basle Committee on Banking Regulations and
Supervisory Practices in its paper entitled "International Convergence
of Capital Measurement and Capital Standards" dated July 1988, as amended,
modified and supplemented and in effect from time to time or any
replacement thereof.
(d) Each Lender shall notify the Company of any event occurring after
the date of this Agreement entitling such Lender to compensation under
paragraph (a) or (c) of this Section 5.01 as promptly as practicable, but
in any event within 45 days, after such Lender obtains actual knowledge
thereof; PROVIDED that (i) if any Lender fails to give such notice within
45 days after it obtains actual knowledge of such an event, such Lender
shall, with respect to compensation payable pursuant to this Section 5.01
in respect of any costs resulting from such event, only be entitled to
payment under this Section 5.01 for costs incurred from and after the date
45 days prior to the date that such Lender does give such notice and
(ii) each Lender will designate a different Applicable Lending Office for
the Loans of such Lender affected by such event if such designation will
avoid the need for, or reduce the amount of, such compensation and will
not, in the sole opinion of such Lender, be disadvantageous to such Lender,
except that such Lender shall have no obligation to designate an Applicable
Lending Office located in the United States. Each Lender will furnish to
the Company a certificate setting forth the basis and amount of each
request by such Lender for compensation under paragraph (a) or (c) of this
Section 5.01. Determinations and allocations by any Lender for purposes of
this Section 5.01 of the effect of any Regulatory Change pursuant to
paragraph (a) or (b) of this Section 5.01, or of the effect of capital
maintained pursuant to paragraph (c) of this Section 5.01, on its costs or
rate of return of maintaining Loans or its obligation to make Loans, or on
amounts receivable by it in respect of Loans, and of the amounts required
to compensate such Lender under this Section 5.01, shall be conclusive in
the absence of manifest error, PROVIDED that such determinations and
allocations are made on a reasonable basis.
5.02 LIMITATION ON TYPES OF LOANS. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any Eurodollar Base
Rate for any Interest Period:
(a) the Agent determines, which determination shall be conclusive,
that quotations of interest rates for the relevant deposits referred to in
the definition of "Eurodollar Base Rate" in Section 1.01 hereof are not
being provided in the relevant amounts or for the relevant maturities for
purposes of determining rates of interest for Eurodollar Loans as provided
herein; or
(b) The Majority Lenders determine, which determination shall be
conclusive, and notify the Agent that the relevant rates of interest
referred to in the definitions of "Eurodollar Base Rate" in Section 1.01
hereof upon the basis of which the rate of interest for Eurodollar Loans
for such Interest Period is to be determined are not likely adequately to
cover the cost to such Lenders of making or maintaining Eurodollar Loans
for such Interest Period;
CREDIT AGREEMENT 43
<PAGE>
then the Agent shall give the Company and each Lender prompt notice thereof
(describing the circumstances giving rise to such event) and, so long as such
condition remains in effect, the Lenders shall be under no obligation to make
additional Eurodollar Loans, to Continue Eurodollar Loans, to Convert Loans
of another Type into Eurodollar Loans and the Company shall, on the last
day(s) of the then current Interest Period(s) for the outstanding Eurodollar
Loans either prepay such Loans or Convert such Loans into Loans of another
Type in accordance with Section 2.08 hereof.
5.03 ILLEGALITY. Notwithstanding any other provision of this Agreement,
in the event that it becomes unlawful for any Lender or its Applicable
Lending Office to honor its obligation to make or maintain Eurodollar Loans
hereunder, then such Lender shall promptly notify the Company thereof (with a
copy to the Agent) and such Lender's obligation to make or Continue, or to
Convert Loans of any other Type into, Eurodollar Loans shall be suspended
until such time as such Lender may again make and maintain Eurodollar Loans
(in which case the provisions of Section 5.04 hereof shall be applicable).
5.04 TREATMENT OF AFFECTED LOANS. If the obligation of any Lender to
make Eurodollar Loans ("AFFECTED LOANS"), or to Continue, or to Convert Loans
of another Type into Affected Loans shall be suspended pursuant to Section
5.01 or 5.03 hereof, such Lender's Affected Loans shall be automatically
Converted into Base Rate Loans on the last day(s) of the then current
Interest Period(s) therefor (or, in the case of a Conversion required by
Section 5.01(b), 5.01(c) or 5.03 hereof, on such earlier date as such Lender
may specify to the Company with a copy to the Agent) and, unless and until
such Lender gives notice as provided below that the circumstances specified
in Section 5.01 or 5.03 hereof that gave rise to such Conversion no longer
exist:
(a) to the extent that such Lender's Affected Loans have been so
Converted, all payments and prepayments of principal that would otherwise
be applied to such Lender's Affected Loans shall be applied instead to its
Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by such
Lender as Affected Loans shall be made or Continued instead as Base Rate
Loans, and all Base Rate Loans of such Lender that would otherwise be
Converted into Affected Loans (as the case may be) shall remain as Base
Rate Loans.
If such Lender gives notice to the Company with a copy to the Agent that the
circumstances specified in Section 5.01 or 5.03 hereof that gave rise to the
Conversion of such Lender's Affected Loans pursuant to this Section 5.04 no
longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) at a time when Affected Loans made by other Lenders, and of
the same Class as such Lender's Loans are outstanding, such Lender's Base
Rate Loans of each Class (subject to Section 2.10 hereof) shall be
automatically Converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding Affected Loans and of such Class, to the
extent necessary so that, after giving effect thereto, all Loans of such
Class
CREDIT AGREEMENT 44
<PAGE>
held by the Lenders holding Affected Loans and by such Lender are held pro
rata (as to principal amounts, Types and Interest Periods) in accordance with
their respective Commitments.
5.05 COMPENSATION. The Company shall pay to the Agent for account of
each Lender, upon the request of such Lender through the Agent, such amount
or amounts as shall be sufficient (in the reasonable opinion of such Lender)
to compensate it for any loss, cost or expense that such Lender determines is
attributable to:
(a) any payment, mandatory or optional prepayment or Conversion of a
Eurodollar Loan made by the Company for any reason (including, without
limitation, the acceleration of the Loans pursuant to Section 9 hereof) on
a date other than the last day of the Interest Period for such Loan; or
(b) any failure by the Company for any reason (including, without
limitation, the failure of any of the conditions precedent specified in
Section 6 hereof to be satisfied) to borrow a Eurodollar Loan from such
Lender on the date for such borrowing specified in the relevant notice of
borrowing given pursuant to Section 2.02 hereof or in the notice from the
Agent given pursuant to Section 2.01(c);
(c) any failure for any reason (including, without limitation, as
provided in Section 5.02 or 5.03 hereof) of a Loan of such Lender to be
Continued as or Converted into a Eurodollar Loan on the date for such
Continuation or Conversion specified in the relevant notice given under
Section 4.05 hereof; or
(d) the revocation of any notice of optional prepayment or any
failure for any reason to make any optional prepayment on the date
specified therefor in the relevant notice of prepayment given pursuant to
Section 4.05 hereof.
Without limiting the effect of the preceding sentence, such compensation
shall include an amount equal to the excess, if any, of (i) the amount of
interest that otherwise would have accrued on the principal amount so paid,
prepaid, Converted or not borrowed or prepaid for the period from the date of
such payment, prepayment, Conversion or failure to borrow or prepay to the
last day of the then current Interest Period for such Loan (or, in the case
of a failure to borrow, the Interest Period for such Loan that would have
commenced on the date specified for such borrowing) at the applicable rate of
interest for such Loan (MINUS the Applicable Margin) provided for herein over
(ii) the amount of interest that otherwise would have accrued on such
principal amount at a rate per annum equal to the interest component of the
amount such Lender would have bid on the date of such payment, prepayment,
conversion or failure to borrow or prepay in the London interbank market for
Dollar deposits of leading banks in amounts comparable to such principal
amount and with maturities comparable to such period (as reasonably
determined by such Lender).
CREDIT AGREEMENT 45
<PAGE>
5.06 NET PAYMENTS; TAXES.
(a) All payments to be made hereunder and under the Notes and any
other Loan Documents by the Company shall be made without setoff,
counterclaim or other defense. Subject to Section 5.06(b) hereof with
respect to U.S. Taxes, all such payments shall be made free and clear of
and without deduction for or on account of, any present or future income,
stamp or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any governmental authority (other than taxes imposed on the
Agent, any Lender or its Applicable Lending Office by the jurisdiction in
which the Agent or such Lender is organized or has its principal office or
in which its Applicable Lending Office is organized or located or, in each
case, any political subdivision or taxing authority thereof or therein)
(collectively, "TAXES"). If any Taxes are imposed and required to be
withheld from any amount payable by the Company hereunder or under the
Notes, the Company shall be obligated to (i) pay such additional amount so
that the Agent and the Lenders will receive a net amount (after giving
effect to the payment of such additional amount and to the deduction of all
Taxes) equal to the amount due hereunder, (ii) pay such Taxes to the
appropriate taxing authority for the account of the Agent, for the benefit
of the Lenders and (iii) as promptly as possible thereafter, sending the
Agent a certified copy of any original official receipt showing payment
thereof, together with such additional documentary evidence as the Agent
may from time to time reasonably require. If the Company fails to pay any
Taxes when due to the appropriate taxing authority or fails to remit to the
Agent the required receipts or other required documentary evidence, the
Company shall be obligated to indemnify the Agent and each Lender for any
incremental taxes, interest or penalties that may become payable by the
Agent or such Lender as a result of such failure. The obligations of the
Company under this Section 5.06(a) shall survive the repayment of the Loans
and the termination of the Commitments.
(b) The Company agrees to pay to each Lender that is not a
U.S. Person such additional amounts as are necessary in order that the net
payment of any amount due to and received by such non-U.S. Person hereunder
after deduction for or withholding in respect of any U.S. Tax imposed with
respect to such payment (or in lieu thereof, payment of such U.S. Tax by
such non-U.S. Person), will not be less than the amount stated herein to be
then due and payable, PROVIDED that the foregoing obligation to pay such
additional amounts shall not apply:
(i) to any payment to a Lender (other than in respect of a
Registered Loan) hereunder unless such Lender is, on the date hereof
(or on the date it becomes a Lender as provided in Section 11.06(b)
hereof) and on the date of any change in the Applicable Lending Office
of such Lender, either entitled to submit a Form 1001 (relating to
such Lender and entitling it to a complete exemption from withholding
on all interest to be received by it hereunder in respect of the
Loans) or Form 4224 (relating to all interest to be received by such
Lender hereunder in respect of the Loans), or
CREDIT AGREEMENT 46
<PAGE>
(ii) to any payment to any Lender hereunder in respect of a
Registered Loan (a "REGISTERED HOLDER"), unless such Registered
Holder (or, if such Registered Holder is not the beneficial owner
of such Registered Loan, the beneficial owner thereof) is, on the
date hereof (or on the date such Registered Holder becomes a Lender
as provided in Section 11.06(b) hereof) and on the date of any
change in the Applicable Lending Office of such Lender, entitled
to submit a Form W-8, together with an annual certificate stating
that (x) such Registered Holder (or beneficial owner, as the case
may be) is not a "bank" within the meaning of Section 881(c)(3)(A)
of the Code, and (y) such Registered Holder (or beneficial owner,
as the case may be) shall promptly notify the Company if at any
time, such Registered Holder (or beneficial owner, as the case may
be) determines that it is no longer in a position to provide such
certificate to the Company (or any other form of certification
adopted by the relevant taxing authorities of the United States
of America for such purposes), or
(iii) to any U.S. Tax imposed solely by reason of the failure
by such non-U.S. Person (or, if such non-U.S. Person is not the
beneficial owner of the relevant Loan, such beneficial owner) to
comply with applicable certification, information, documentation
or other reporting requirements concerning the nationality,
residence, identity or connections with the United States of such
non-U.S. Person (or such beneficial owner, as the case may be) if
such compliance is required by statute or regulation of the United
States as a precondition to relief or exemption from such U.S. Tax.
For the purposes of this Section 5.06(b), (v) "FORM 1001" shall mean Form
1001 (Ownership, Exemption, or Reduced Rate Certificate) of the Department of
the Treasury of the United States, (w) "FORM 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States, (x) "FORM W-8" shall mean Form W-8
(Certificate of Foreign Status of the Department of Treasury of the United
States of America) (or in relation to any of such Forms such successor and
related forms as may from time to time be adopted by the relevant taxing
authorities of the United States to document a claim to which such Form
relates), (y) "U.S. PERSON" shall mean a citizen, national or resident of the
United States, a corporation, partnership or other entity created or
organized in or under any laws of the United States, or any estate or trust
that is subject to Federal income taxation regardless of the source of its
income and (z) "U.S. TAXES" shall mean any present or future tax, assessment
or other charge or levy imposed by or on behalf of the United States or any
taxing authority thereof or therein.
Within 30 days after paying any amount to the Agent or any Lender from
which it is required by law to make any deduction or withholding, and within
30 days after it is required by law to remit such deduction or withholding to
any relevant taxing or other authority, the Company shall deliver to the
Agent for delivery to such non-U.S. Person evidence satisfactory to such
Person of such deduction, withholding or payment (as the case may be).
CREDIT AGREEMENT 47
<PAGE>
5.07 REPLACEMENT OF LENDERS. If any Lender requests compensation
pursuant to Section 5.01 or 5.06 hereof, or any Lender's obligation to make
or Continue, or to Convert Loans of any Type into, any other Type of Loan
shall be suspended pursuant to Section 5.01 or 5.03 hereof (any such Lender
so requesting compensation, or whose obligations are so suspended being
herein called a "RELEVANT LENDER"), the Company upon three Business Days
notice, may require that such Relevant Lender transfer all of its right,
title and interest under this Agreement and such Relevant Lender's Notes to
any bank or other financial institution identified by the Company that is
reasonably satisfactory to the Agent (i) if such bank or other financial
institution (a "PROPOSED LENDER") agrees to assume all of the obligations of
such Relevant Lender hereunder, and to purchase all of such Relevant Lender's
Loans hereunder for consideration equal to the aggregate outstanding
principal amount of such Relevant Lender's Loans, together with accrued, but
unpaid interest thereon to the date of such purchase, and satisfactory
arrangements are made for payment to such Relevant Lender of all other
amounts payable hereunder to such Relevant Lender on or prior to the date of
such transfer (including any fees accrued hereunder and any amounts that
would be payable under Section 5.05 hereof as if all of such Relevant
Lender's Loans were being prepaid in full on such date) and (ii) if such
Relevant Lender has requested compensation pursuant to Section 5.01 or 5.06
hereof, such Proposed Lender's aggregate requested compensation, if any,
pursuant to said Section 5.01 or 5.06 with respect to such Relevant Lender's
Loans is lower than that of the Relevant Lender. Subject to compliance with
the provisions of Section 11.06(b) hereof, such Proposed Lender shall be a
"Lender" for all purposes hereunder. Without prejudice to the survival of
any other agreement of the Company hereunder, the agreements of the Company
contained in Sections 5.01, 5.06 and 11.03 hereof (without duplication of any
payments made to such Relevant Lender by the Company or the Proposed Lender)
shall survive for the benefit of such Relevant Lender under this Section 5.07
with respect to the time prior to such replacement.
5.08 ADDITIONAL COSTS IN RESPECT OF LETTERS OF CREDIT. Without limiting
the obligations of the Company under Section 5.01 hereof (but without
duplication), if as a result of any Regulatory Change or any risk-based
capital guideline or other requirement heretofore or hereafter issued by any
government or governmental or supervisory authority implementing at the
national level the Basle Accord there shall be hereafter imposed, modified or
deemed applicable any tax, reserve, special deposit, capital adequacy or
similar requirement against or with respect to or measured by reference to
Letters of Credit issued or to be issued hereunder and the result shall be to
increase the cost to any Lender or Lenders of issuing (or purchasing
participations in) or maintaining its obligation hereunder to issue (or
purchase participations in) any Letter of Credit hereunder or reduce any
amount receivable by any Lender hereunder in respect of any Letter of Credit
(which increases in cost, or reductions in amount receivable, shall be the
result of such Lender's or Lenders' reasonable allocation of the aggregate of
such increases or reductions resulting from such event), then, upon demand by
such Lender or Lenders (through the Agent), the Company shall pay immediately
to the Agent for account of such Lender or Lenders, from time to time as
specified by such Lender or Lenders (through the Agent), such additional
amounts as shall be sufficient to compensate such Lender or Lenders (through
the Agent) for such increased costs or reductions in amount. A statement as
to such increased costs or reductions in amount incurred by any such Lender
or Lenders, submitted by such Lender or
CREDIT AGREEMENT 48
<PAGE>
Lenders to the Company shall be conclusive in the absence of manifest error
as to the amount thereof.
Section 6. CONDITIONS PRECEDENT.
6.01 CONDITIONS TO EFFECTIVENESS. The effectiveness of this Agreement
(and the amendment and restatement of the Existing Credit Agreement to be
effected thereby), and the obligation of any Lender to extend or continue
credit hereunder on the Effective Date, are subject to (i) the condition
precedent that the Effective Date shall occur on or before March 31, 1997 and
(ii) the receipt by the Agent of the following documents, each of which shall
be satisfactory to the Agent (and to the extent specified below, to each
Lender or the Majority Lenders, as the case may be) in form and substance:
(a) CORPORATE DOCUMENTS. Certified copies of the charter and by-laws
(or equivalent documents) of each Obligor and of all corporate authority
for each Obligor (including, without limitation, board of director
resolutions and evidence of the incumbency of officers, together with
specimen signatures of each such officer) with respect to the execution,
delivery and performance of such of the Basic Documents to which such
Obligor is intended to be a party and each other document to be delivered
by such Obligor from time to time in connection herewith and the extensions
of credit hereunder (and the Agent and each Lender may conclusively rely on
such certificate until it receives notice in writing from such Obligor to
the contrary).
(b) OFFICER'S CERTIFICATE. A certificate of a Responsible Financial
Officer of the Company, dated the Effective Date, to the effect set forth
in the first sentence of Section 6.02(a) hereof.
(c) OPINION OF COUNSEL TO THE OBLIGORS. Opinions, each dated the
Effective Date, of Hughes & Luce, counsel to the Obligors, substantially in
the form of Exhibit D-1 hereto, and of Axtmayer Adsuar Mu iz & Goyco,
special Puerto Rico counsel to the Subsidiary Guarantors operating in the
Commonwealth, substantially in the form of Exhibit D-2 hereto and, in each
case, covering such other matters as the Agent or any Lender may reasonably
request (and each Obligor hereby instructs such counsel to deliver such
opinion to the Lenders and the Agent).
(d) OPINION OF COUNSEL TO FIRST UNION. An opinion, dated the
Effective Date, of Milbank, Tweed, Hadley & McCloy, special New York
counsel to First Union, substantially in the form of Exhibit F hereto (and
First Union hereby instructs such counsel to deliver such opinion to the
Lenders).
(e) NOTES. The Notes, duly completed and executed.
(f) INSURANCE. Certificates of insurance evidencing the existence of
all insurance required to be maintained by the Company and its Subsidiaries
pursuant to Section 8.04 hereof and the designation of the Agent as the
loss payee or additional
CREDIT AGREEMENT 49
<PAGE>
named insured, as the case may be, thereunder. In addition, the Company
shall have delivered a certificate of a Responsible Financial Officer of
the Company setting forth the insurance obtained by it in accordance with
the requirements of Section 8.04 and stating that such insurance is in full
force and effect and that all premiums then due and payable thereon have
been paid.
(g) PUERTO RICO TAX EXEMPTION AND TAX RULING. Evidence that each tax
exemption grant heretofore issued to Suiza Fruit and Neva Plastics by the
Commonwealth in respect of manufacturing income from its respective
operations in the Commonwealth shall be in full force and effect, and the
Agent shall have received true and complete copies thereof, certified by a
Responsible Financial Officer of the relevant Subsidiary Guarantor.
(h) SOLVENCY ANALYSIS. A certificate from a Responsible Financial
Officer of the Company to the effect that, as of the Effective Date and
after giving effect to the initial extension of credit hereunder and to the
other transactions contemplated hereby, (i) the aggregate value of all
Properties of the Company and its Subsidiaries, at their present fair
saleable value (i.e., the amount that may be realized within a reasonable
time, considered to be six months to one year, either through collection or
sale at the regular market value, conceiving the latter as the amount that
could be obtained for the Property in question within such period by a
capable and diligent businessman from an interested buyer who is willing to
purchase under ordinary selling conditions), exceeds the amount of all the
debts and liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) of the Company and its Subsidiaries, (ii) the
Company and its Subsidiaries will not have, on a consolidated basis,
unreasonably small capital with which to conduct their business operations
as heretofore conducted and (iii) the Company and its Subsidiaries will
have, on a consolidated basis, sufficient cash flow to enable them to pay
their debts as they mature. The Agent shall have also received (x) a
certificate from a Responsible Financial Officer of the Company certifying
that the financial projections and underlying assumptions contained in such
analyses were at the time made, and on the Effective Date are, fair and
reasonable and accurately computed and (y) appropriate factual information
supporting the conclusions of the solvency analyses and the financial
condition certificate required to be delivered as provided above.
(i) FINANCIAL INFORMATION. (i) Copies of the pro forma projections
of the Company and its Subsidiaries for the period from the Effective Date
through December 31, 1997 and (ii) unaudited consolidating financial
statements of the Company and its Subsidiaries for the twelve-month period
ended on December 31, 1996.
(j) PROCESS AGENT ACCEPTANCE. A letter from the Process Agent to the
Agent, in form and substance satisfactory to the Agent, accepting the
appointment of the Process Agent by the Obligors operating in the
Commonwealth (other than Garrido and Guest Choice) as provided in
Section 11.10(c) hereof.
CREDIT AGREEMENT 50
<PAGE>
(k) 1997 BUDGET. A budget for the fiscal year ending December 31,
1997 setting forth for each Subsidiary of the Company and for the Company
and its Subsidiaries as a whole, anticipated income, expense and capital
expenditure items for each quarter during such fiscal year.
(l) PAYMENT OF FEES AND EXPENSES, ETC. Evidence that the Company
shall have paid such fees and expenses as the Company shall have agreed to
pay to the Agent in connection herewith, including, without limitation, the
reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special
New York counsel to First Union, and Fiddler Gonzalez & Rodriguez, special
Puerto Rico counsel to First Union, in connection with the negotiation,
preparation, execution and delivery of this Agreement and the Notes and the
other Loan Documents and the making of the Loans hereunder (to the extent
that statements for such fees and expenses have been delivered to the
Company).
(m) INTEREST RATE PROTECTION AGREEMENTS. Evidence that the Company
and/or the Obligors shall have entered into one or more Interest Rate
Protection Agreements as to the notional principal amount at least equal to
(i) $14,000,000 for a period ending on May 13, 1997 and (ii) $55,000,000
for a period ending on June 30, 1998.
(n) RESTATED SUPPLEMENTAL CREDIT AGREEMENT. The Restated
Supplemental Credit Agreement, duly executed and delivered by each of the
parties thereto, together with evidence that all of the conditions
precedent to the effectiveness thereof have been satisfied or waived.
(o) ACCRUED INTEREST. Evidence that (i) all interest accrued on the
outstanding Facility A Loans, Facility B Loans and Facility C Loans to the
Effective Date and (ii) all amounts payable by the Company (if any) under
Sections 2.01(a)(i), 2.01(b)(i) and 2.01(c) hereof have been paid in full.
(p) OTHER DOCUMENTS. Such other documents as the Agent or any Lender
or special New York counsel to First Union may reasonably request.
6.02 CONDITIONS TO ALL EXTENSIONS OF CREDIT.
(a) the effectiveness of this Agreement (and the amendment and
restatement of the Existing Credit Agreement to be effected thereby) and
the obligation of the Lenders to make any Loan or otherwise extend any
credit to the Company upon the occasion of each borrowing hereunder
(including the borrowing on the Effective Date) are subject to the further
conditions precedent that, both immediately prior to such effectiveness and
to the making of such Loan or other extension of credit and also after
giving effect thereto and to the intended use thereof:
(i) No Default shall have occurred and be continuing; and
CREDIT AGREEMENT 51
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(ii) The representations and warranties made by the Company in
Section 7 hereof, and by each Obligor in each of the other Loan Documents
to which it is a party, shall be true and complete on and as of the date of
such effectiveness or the date of the making of such Loan or other
extension of credit, as the case may be, with the same force and effect as
if made on and as of such date (or, if any such representation or warranty
is expressly stated to have been made as of a specific date, as of such
specific date).
Each notice of borrowing or request for the issuance of a Letter of Credit by
the Company hereunder shall constitute a certification by the Company to the
effect set forth in the first sentence of this Section 6.02(a) (both as of
the date of such notice and, unless the Company otherwise notifies the Agent
prior to the date of such borrowing or issuance, as of the date of such
borrowing or issuance).
(b) The Agent shall have received (i) such Additional Puerto Rico
Security Documents as shall be reasonably requested by the Agent in proper
form for filing in the corresponding Section of the Registry of Property of
the Commonwealth as are required from time to time pursuant to this
Agreement and payment of all required filing fees, taxes and all other
expenses related to such filings and (ii) an opinion of counsel for the
Obligors in form and substance reasonably satisfactory to the Agent in
connection with such Additional Puerto Rico Security Documents.
Section 7. REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants to the Agent and the Lenders that (with respect to matters
pertaining to itself and each of its Subsidiaries):
7.01 CORPORATE EXISTENCE. Each of the Company and its Subsidiaries: (a)
is a corporation, partnership or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization; (b) has all requisite corporate or other power, and has all
material governmental licenses, authorizations, consents and approvals
necessary to own its assets and carry on its business as now being or as
proposed to be conducted; and (c) is qualified to do business and is in good
standing in all jurisdictions in which the nature of the business conducted
by it makes such qualification necessary and where failure so to qualify
could (either individually or in the aggregate) have a Material Adverse
Effect.
7.02 FINANCIAL CONDITION. The Company has heretofore furnished to each
of the Lenders the following:
(a) unaudited consolidating balance sheets of the Company and its
Subsidiaries as at December 31, 1996, and the related consolidating
statements of income and operating cash flow for the twelve-month period
ended on said date; and
(b) an audited consolidated balance sheet of the Company and its
Subsidiaries as at December 31, 1996 and the related consolidated
statements of income, retained
CREDIT AGREEMENT 52
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earnings and cash flow of the Company and its Subsidiaries for the fiscal
period ended on said date, with the opinion thereon of Deloitte Touche LLP.
All such financial statements fairly present the financial condition of the
respective entities as at the respective dates, and the respective results of
operations for the respective periods ended on said respective dates, all in
accordance with generally accepted accounting principles and practices
applied on a consistent basis. None of such respective entities has on the
date hereof any material contingent liabilities, liabilities for taxes,
unusual forward or long-term commitments or unrealized or anticipated losses
from any unfavorable commitments, except as referred to or reflected or
provided for in the respective balance sheets referred to above. Since
December 31, 1996 (with respect to the Company and each of its Subsidiaries),
there has been no material adverse change in the respective financial
condition, operations, business or prospects of each such entity from that
set forth in the respective financial statements as at such date.
7.03 LITIGATION. Except as disclosed in Schedule V hereto, there are no
legal or arbitral proceedings, or any proceedings by or before any
governmental or regulatory authority or agency, now pending or (to the
knowledge of the Company) threatened against the Company or any of its
Subsidiaries that, if adversely determined could (either individually or in
the aggregate) have a Material Adverse Effect.
7.04 NO BREACH. None of the execution and delivery of this Agreement
and the Notes and the other Basic Documents, the consummation of the
transactions herein and therein contemplated or compliance with the terms and
provisions hereof and thereof will conflict with or result in a breach of, or
require any consent under, the charter or by-laws of any Obligor, or any
applicable law or regulation, or any order, writ, injunction or decree of any
court or governmental authority or agency, or any material agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which any of them or any of their Property is bound or to which any of them
is subject, or constitute a default under any such agreement or instrument,
or (except for the Liens created pursuant to the Security Documents) result
in the creation or imposition of any Lien upon any Property of the Company or
any of its Subsidiaries pursuant to the terms of any such agreement or
instrument.
7.05 ACTION. Each Obligor has all necessary corporate power, authority
and legal right to execute, deliver and perform its obligations under each of
the Basic Documents to which it is a party; the execution, delivery and
performance by each Obligor of each of the Basic Documents to which it is a
party have been duly authorized by all necessary corporate action on its part
(including, without limitation, any required shareholder approvals); and this
Agreement has been duly and validly executed and delivered by each Obligor
and constitutes, and each of the Notes and the other Basic Documents to which
it is a party when executed and delivered by such Obligor (in the case of the
Notes, for value) will constitute, its legal, valid and binding obligation,
enforceable against each Obligor in accordance with its terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or similar laws of general applicability affecting the enforcement
of creditors' rights and (b) the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). Each Security Document is effective to create in
CREDIT AGREEMENT 53
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favor of the Agent for the benefit of the Lenders a legal, valid and
enforceable first priority Lien upon all right, title and interest of the
Obligor or Obligors party thereto in the Property described therein and such
Lien has been perfected, except as otherwise permitted under Section 8.06
hereof or in such Security Document.
7.06 APPROVALS. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the execution, delivery
or performance by any Obligor of the Basic Documents to which it is a party
or for the legality, validity or enforceability hereof or thereof, except for
filings and recordings in respect of the Liens created pursuant to the
Security Documents.
7.07 USE OF CREDIT. None of the Company nor any of its Subsidiaries is
engaged principally, or as one of its important activities, in the business
of extending credit for the purpose, whether immediate, incidental or
ultimate, of buying or carrying Margin Stock, and no part of the proceeds of
the Loans hereunder will be used to buy or carry any Margin Stock.
7.08 ERISA. Each Plan, and, to the knowledge of the Company, each
Multiemployer Plan, is in compliance in all material respects with, and has
been administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law, and no
event or condition has occurred and is continuing as to which the Company
would be under an obligation to furnish a report to the Lenders under Section
8.01(e) hereof.
7.09 TAXES. The Company and its Subsidiaries (other than the Obligors
operating in the Commonwealth) are members of an affiliated group of
corporations filing consolidated returns for Federal income tax purposes, of
which the Company is the "common parent" (within the meaning of Section 1504
of the Code) of such group. The Company and its Subsidiaries have filed all
Federal income tax returns and all other material tax returns that are
required to be filed by them and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by the Company or any of its
Subsidiaries. The charges, accruals and reserves on the books of the Company
and its Subsidiaries in respect of taxes and other governmental charges are,
in the opinion of the Company, adequate. The Company has not given or been
requested to give a waiver of the statute of limitations relating to the
payment of Federal, state, local and foreign taxes or other impositions.
Neva Plastics and Suiza Fruit each hold industrial tax exemption grants
entitling each of them to a 90% exemption from income and property taxes and
a 60% exemption from municipal license taxes. The grant held by Neva
Plastics will expire on August 31, 2000 for income tax purposes, on June 30,
2001 for municipal tax purposes and on January 1, 2000 for property tax
purposes. The grant held by Suiza Fruit will expire on October 12, 2002 for
income and property tax purposes and on June 30, 2003 for municipal license
tax purposes.
7.10 INVESTMENT COMPANY ACT. Neither the Company nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of
1940, as amended.
CREDIT AGREEMENT 54
<PAGE>
7.11 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Company nor any of
its Subsidiaries is a "holding company", or an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company", within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
7.12 MATERIAL AGREEMENTS AND LIENS.
(a) Part A of Schedule I hereto is a complete and correct list, as of
the Effective Date, and after giving effect to the transactions
contemplated hereunder to occur on such date, of each credit agreement,
loan agreement, indenture, purchase agreement, guarantee, letter of credit
or other arrangement providing for or otherwise relating to any
Indebtedness or any extension of credit (or commitment for any extension of
credit) to, or guarantee by, the Company or any of its Subsidiaries, and
the aggregate principal or face amount outstanding or that may become
outstanding under each such arrangement is correctly described in Part A of
said Schedule I.
(b) Part B of Schedule I hereto is a complete and correct list, as of
the Effective Date (and after giving effect to the transactions
contemplated hereunder to occur on such date), of each Lien securing
Indebtedness of any Person and covering any Property of the Company or any
of its Subsidiaries that will continue after the Effective Date, and the
aggregate Indebtedness secured (or that may be secured) by each such Lien
and the Property covered by each such Lien is correctly described in Part B
of said Schedule I.
7.13 ENVIRONMENTAL MATTERS. Each of the Company and its Subsidiaries
has obtained all environmental, health and safety permits, licenses and other
authorizations required under all Environmental Laws to carry on its business
as now being or as proposed to be conducted, except to the extent failure to
have any such permit, license or authorization would not (either individually
or in the aggregate) have a Material Adverse Effect. Each of such permits,
licenses and authorizations is in full force and effect and each of the
Company and its Subsidiaries is in compliance with the terms and conditions
thereof, and is also in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in any applicable Environmental Law or in any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder, except to the
extent failure to comply therewith would not (either individually or in the
aggregate) have a Material Adverse Effect.
In addition, except as to matters with respect to which the Company and
its Subsidiaries could not reasonably be expected to incur liabilities in
excess of $250,000 in the aggregate:
(a) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened by any governmental or other entity with respect to any alleged
failure by the Company or any of its Subsidiaries to have any
environmental, health or safety permit, license or other authorization
required
CREDIT AGREEMENT 55
<PAGE>
under any Environmental Law in connection with the conduct of the
business of the Company or any of its Subsidiaries or with respect to any
generation, treatment, storage, recycling, transportation, discharge or
disposal, or any Release of any Hazardous Materials generated by the
Company or any of its Subsidiaries.
(b) Neither the Company nor any of its Subsidiaries owns, operates or
leases a treatment, storage or disposal facility requiring a permit under
the Resource Conservation and Recovery Act of 1976, as amended, or under
any comparable state or local statute; and
(i) no polychlorinated biphenyls (PCB's) is or has been present
at any site or facility now or previously owned, operated or leased by
the Company or any of its Subsidiaries;
(ii) no asbestos or asbestos-containing materials is or has been
present at any site or facility now or previously owned, operated or
leased by the Company or any of its Subsidiaries;
(iii) there are no underground storage tanks, other than those
disclosed in consultant reports provided to the Agent by the Company
or its Subsidiaries, or surface impoundments for Hazardous Materials,
active or abandoned, at any site or facility now or previously owned,
operated or leased by the Company or any of its Subsidiaries;
(iv) no Hazardous Materials have been Released at, on or under
any site or facility now or previously owned, operated or leased by
the Company or any of its Subsidiaries in a reportable quantity
established by statute, ordinance, rule, regulation or order; and
(v) no Hazardous Materials have been otherwise Released at, on
or under any site or facility now or previously owned, operated or
leased by the Company or any of its Subsidiaries that would (either
individually or in the aggregate) have a Material Adverse Effect.
(c) Neither the Company nor any of its Subsidiaries has transported
or arranged for the transportation of any Hazardous Material to any
location that is listed on the National Priorities List ("NPL") under the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), listed for possible inclusion on the NPL by
the Environmental Protection Agency in the Comprehensive Environmental
Response and Liability Information System, as provided for by 40 C.F.R.
Section 300.5 ("CERCLIS"), or on any similar state or local list or that is
the subject of Federal, state or local enforcement actions or other
investigations that may lead to Environmental Claims against the Company or
any of its Subsidiaries.
CREDIT AGREEMENT 56
<PAGE>
(d) No Hazardous Material generated by the Company or any of its
Subsidiaries has been recycled, treated, stored, disposed of or Released by
the Company or any of its Subsidiaries at any location other than those
listed in Schedule II hereto.
(e) No oral or written notification of a Release of a Hazardous
Material has been filed by or on behalf of the Company or any of its
Subsidiaries and no site or facility now or previously owned, operated or
leased by the Company or any of its Subsidiaries is listed or proposed for
listing on the NPL, CERCLIS or any similar state list of sites requiring
investigation or clean-up.
(f) No Liens have arisen under or pursuant to any Environmental Laws
on any site or facility owned, operated or leased by the Company or any of
its Subsidiaries, and no government action has been taken or is in process
that could subject any such site or facility to such Liens and neither the
Company nor any of its Subsidiaries would be required to place any notice
or restriction relating to the presence of Hazardous Materials at any site
or facility owned by it in any deed to the real property on which such site
or facility is located.
(g) All environmental investigations, studies, audits, tests, reviews
or other analyses conducted by or that are in the possession of the Company
or any of its Subsidiaries in relation to facts, circumstances or
conditions at or affecting any site or facility now or previously owned,
operated or leased by the Company or any of its Subsidiaries and that could
result in a Material Adverse Effect have been made available to the
Lenders.
7.14 CAPITALIZATION. As of the Effective Date:
(a) the authorized capital stock of the Company consists of
21,000,000 shares, consisting of 20,000,000 shares of common stock, par
value $0.01 per share, and 1,000,000 shares of preferred stock, par value
$0.01 per share;
(b) the Company has 15,020,229 shares of issued and outstanding
common stock, and all of such issued shares are duly and validly issued and
outstanding and are not held in treasury;
(c) the Company has no issued or outstanding preferred stock;
(d) except for (i) options to purchase 577,760 shares of common stock
granted under the Company's Exchange Stock Option and Restricted Stock
Plan, (ii) options to purchase up to 1,017,478 shares of common stock
granted (980,206) or available (37,272) for future grants under the
Company's 1995 Stock Option and Restricted Stock Plan, (iii) options to
purchase up to 1,150,000 shares of common stock available for future grants
under the Company's 1997 Stock Option and Restricted Stock Plan, and
(iv) options to purchase up to 250,000 shares of common stock available for
future grants
CREDIT AGREEMENT 57
<PAGE>
under the Company's 1997 Employee Stock Purchase Plan, there are no
outstanding Equity Rights with respect to the Company; and
(e) there are no outstanding obligations of the Company or any of its
Subsidiaries to repurchase, redeem, or otherwise acquire any shares of
capital stock of the Company or any of its Subsidiaries or to make payments
to any Person, such as "phantom stock" payments, where the amount thereof
is calculated with reference to the fair market value or equity value of
the Company or any of its Subsidiaries.
7.15 SUBSIDIARIES, ETC.
(a) Set forth in Part A of Schedule III hereto is a complete and
correct list, as of the date hereof, of all of the Subsidiaries of the
Company, together with, for each such Subsidiary, (i) the jurisdiction of
organization of such Subsidiary, (ii) each Person holding ownership
interests in such Subsidiary and (iii) the nature of the ownership
interests held by each such Person and the percentage of ownership of such
Subsidiary represented by such ownership interests. Except as disclosed in
Part A of Schedule III hereto, (x) each of the Company and its Subsidiaries
owns, free and clear of Liens (other than Liens created pursuant to the
Security Documents), and has the unencumbered right to vote, all
outstanding ownership interests in each Person shown to be held by it in
Part A of Schedule III hereto, (y) all of the issued and outstanding
capital stock of each such Person organized as a corporation is validly
issued, fully paid and nonassessable and (z) there are no outstanding
Equity Rights with respect to such Person.
(b) Set forth in Part B of Schedule III hereto is a complete and
correct list, as of the date of this Agreement, of all Investments (other
than Investments disclosed in Part A of said Schedule III hereto) held by
the Company or any of its Subsidiaries in any Person and, for each such
Investment, (x) the identity of the Person or Persons holding such
Investment and (y) the nature of such Investment. Except as disclosed in
Part B of Schedule III hereto, each of the Company and its Subsidiaries
owns, free and clear of all Liens (other than Liens created pursuant to the
Security Documents), all such Investments.
(c) None of the Subsidiaries of the Company is, on the Effective
Date, subject to any indenture, agreement, instrument or other arrangement
of the type described in Section 8.19(b) hereof.
7.16 TITLE TO ASSETS. The Company owns and has on the date hereof, and
will own and have on the Effective Date, good and marketable title (subject
only to Liens permitted by Section 8.06 hereof) to the Properties shown to be
owned in the most recent financial statements referred to in Section 7.02
hereof (other than Properties disposed of in the ordinary course of business
or otherwise permitted to be disposed of pursuant to Section 8.05 hereof).
The Company owns and has on the date hereof, and will own and have on the
Effective Date, good and marketable title to, and enjoys on the date hereof,
and will enjoy on the Effective Date,
CREDIT AGREEMENT 58
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peaceful and undisturbed possession of, all Properties (subject only to Liens
permitted by Section 8.06 hereof) that are necessary for the operation and
conduct of its businesses.
7.17 TRUE AND COMPLETE DISCLOSURE. The information, reports, financial
statements, exhibits and schedules furnished in writing by or on behalf of
the Obligors to the Agent or any Lender in connection with the negotiation,
preparation or delivery of this Agreement and the other Loan Documents or
included herein or therein or delivered pursuant hereto or thereto, when
taken as a whole do not contain any untrue statement of material fact or omit
to state any material fact necessary to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading. All written information furnished after the date hereof by the
Company and its Subsidiaries to the Agent and the Lenders in connection with
this Agreement and the other Loan Documents and the transactions contemplated
hereby and thereby will be true, complete and accurate in every material
respect, or (in the case of projections) based on reasonable estimates, on
the date as of which such information is stated or certified. There is no
fact known to the Company that could have a Material Adverse Effect that has
not been disclosed herein, in the other Loan Documents or in a report,
financial statement, exhibit, schedule, disclosure letter or other writing
furnished to the Lenders for use in connection with the transactions
contemplated hereby or thereby.
7.18 REAL PROPERTY. Set forth on Schedule IV attached hereto is a list,
as of the Effective Date, of all of the real property interests held by the
Company and its Subsidiaries, indicating in each case whether the respective
Property is owned or leased, the identity of the owner or lessee and the
location of the respective Property.
7.19 SOLVENCY. As of the Effective Date and after giving effect to the
initial extension of credit hereunder and the other transactions contemplated
hereby, (a) the aggregate value of all Properties of the Company and its
Subsidiaries at their present fair saleable value (i.e., the amount that may
be realized within a reasonable time, considered to be six months to one
year, either through collection or sale at the regular market value,
conceiving the latter as the amount that could be obtained for the Property
in question within such period by a capable and diligent businessman from an
interested buyer who is willing to purchase under ordinary selling
conditions), exceeds the amount of all the debts and liabilities (including
contingent, subordinated, unmatured and unliquidated liabilities) of the
Company and its Subsidiaries, (b) the Company and its Subsidiaries will not,
on a consolidated basis, have unreasonably small capital with which to
conduct their business operations as heretofore conducted and (c) the Company
and its Subsidiaries will have, on a consolidated basis, sufficient cash flow
to enable them to pay their debts as they mature.
7.20 SUBORDINATED NOTE PURCHASE AGREEMENT. All Indebtedness and other
obligations under the Subordinated Note Purchase Agreement have been paid in
full and said Agreement has been terminated.
Section 8. COVENANTS OF THE COMPANY. The Company covenants and
agrees with the Lenders and the Agent that, so long as any Commitment or Loan
or Letter of Credit Liability is outstanding and until payment in full of all
amounts payable by the Company hereunder:
CREDIT AGREEMENT 59
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8.01 FINANCIAL STATEMENTS, ETC. The Company shall deliver, or shall
cause to be delivered, to each of the Lenders:
(a) as soon as available and in any event within 45 days after the
end of each quarterly fiscal period of each fiscal year of the Company,
consolidated and consolidating statements of income, retained earnings and
cash flow of the Company and its Subsidiaries for such period and for the
period from the beginning of the respective fiscal year to the end of such
period, and the related consolidated and consolidating balance sheets of
the Company and its Subsidiaries as at the end of such period, setting
forth in each case in comparative form the corresponding consolidated and
consolidating figures for the corresponding periods in the preceding fiscal
year, accompanied by a certificate of a Responsible Financial Officer of
the Company, which certificate shall state that said consolidated financial
statements fairly present the consolidated financial condition and results
of operations of the Company and its Subsidiaries, and said consolidating
financial statements fairly present the respective individual
unconsolidated financial condition and results of operations of the Company
and of each of its Subsidiaries, in each case in accordance with generally
accepted accounting principles, consistently applied, as at the end of, and
for, such period (subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 90 days after the
end of each fiscal year of the Company, consolidated and consolidating
statements of income, retained earnings and cash flow of the Company and
its Subsidiaries for such fiscal year and the related consolidated and
consolidating balance sheets of the Company and its Subsidiaries as at the
end of such fiscal year, setting forth in each case in comparative form the
corresponding consolidated and consolidating figures for the preceding
fiscal year, and accompanied (i) in the case of said consolidated
statements and balance sheet of the Company, by an opinion thereon of
independent certified public accountants of recognized national standing,
which opinion shall state that said consolidated financial statements
fairly present the consolidated financial condition and results of
operations of the Company and its Subsidiaries as at the end of, and for,
such fiscal year in accordance with generally accepted accounting
principles, and a certificate of such accountants stating that, in making
the examination necessary for their opinion, they obtained no knowledge,
except as specifically stated, of any Default, and (ii) in the case of said
consolidating statements and balance sheets, by a certificate of a
Responsible Financial Officer of the Company, which certificate shall state
that said consolidating financial statements fairly present the respective
individual unconsolidated financial condition and results of operations of
the Company and of each of its Subsidiaries, in each case in accordance
with generally accepted accounting principles, consistently applied, as at
the end of, and for, such fiscal year;
(c) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, that the
Company shall have filed with the Commission or any national securities
exchange;
CREDIT AGREEMENT 60
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(d) promptly upon mailing thereof to the shareholders of the Company
generally, copies of all financial statements, reports and proxy statements
so mailed;
(e) as soon as possible, and in any event within ten days after the
Company knows or has reason to believe that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan has occurred
or exists, a statement signed by a Responsible Financial Officer of the
Company setting forth details respecting such event or condition and the
action, if any, that the Company or its ERISA Affiliate proposes to take
with respect thereto (and a copy of any report or notice required to be
filed with or given to PBGC by the Company or an ERISA Affiliate with
respect to such event or condition):
(i) any reportable event, as defined in Section
4043(b) of ERISA and the regulations issued thereunder, with
respect to a Plan, as to which PBGC has not by regulation
waived the requirement of Section 4043(a) of ERISA that it
be notified within 30 days of the occurrence of such event
(PROVIDED that a failure to meet the minimum funding
standard of Section 412 of the Code or Section 302 of ERISA,
including, without limitation, the failure to make on or
before its due date a required installment under Section
412(m) of the Code or Section 302(e) of ERISA, shall be a
reportable event regardless of the issuance of any waivers
in accordance with Section 412(d) of the Code); and any
request for a waiver under Section 412(d) of the Code for
any Plan;
(ii) the distribution under Section 4041 of ERISA
of a notice of intent to terminate any Plan or any action
taken by the Company or an ERISA Affiliate to terminate any
Plan;
(iii) the institution by PBGC of proceedings
under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the
receipt by the Company or any ERISA Affiliate of a notice
from a Multiemployer Plan that such action has been taken by
PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a
Multiemployer Plan by the Company or any ERISA Affiliate
that results in liability under Section 4201 or 4204 of
ERISA (including the obligation to satisfy secondary
liability as a result of a purchaser default) or the receipt
by the Company or any ERISA Affiliate of notice from a
Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA or that
it intends to terminate or has terminated under Section
4041A of ERISA;
(v) the institution of a proceeding by a
fiduciary of any Multiemployer Plan against the Company or
any ERISA Affiliate to enforce Section 515 of ERISA, which
proceeding is not dismissed within 30 days; and
CREDIT AGREEMENT 61
<PAGE>
(vi) the adoption of an amendment to any Plan
that, pursuant to Section 401(a)(29) of the Code or Section
307 of ERISA, would result in the loss of tax-exempt status
of the trust of which such Plan is a part if the Company or
an ERISA Affiliate fails to timely provide security to the
Plan in accordance with the provisions of said Sections;
(f) promptly after the Company knows or has reason to believe that
any Default has occurred, a notice of such Default describing the same in
reasonable detail and, together with such notice or as soon thereafter as
possible, a description of the action that the Company has taken or
proposes to take with respect thereto;
(g) promptly upon receipt thereof, copies of all management letters
and other material reports which are submitted to the Board of Directors of
the Company or any of its Subsidiaries by their independent certified
public accountants in connection with any annual audit of the Company
and/or any such Subsidiary by such accountants;
(h) as soon as available and in any event on or before December 31 of
each fiscal year, a budget for the next following fiscal year setting forth
for each Subsidiary of the Company and for the Company and its Subsidiaries
as a whole, anticipated income, expense and capital expenditure items for
each quarter during such fiscal year, together with pro forma unaudited
balance sheets of the Company and its Subsidiaries and the related pro
forma statements of retained earnings, and quarterly, concurrently with the
delivery of the financial statements for such fiscal year pursuant to
clause (a) above, a report setting forth a detailed comparison of actual
performance to the budget referred to above; and
(i) from time to time such other information regarding the financial
condition, operations, business or prospects of the Company or any of its
Subsidiaries (including, without limitation, any Plan or Multiemployer Plan
and any reports or other information required to be filed under ERISA) as
any Lender or the Agent may reasonably request.
The Company will furnish to each Lender, at the time it furnishes each set of
financial statements pursuant to clause (b) above, a certificate of a
Responsible Financial Officer of the Company (i) to the effect that no Default
has occurred and is continuing (or, if any Default has occurred and is
continuing, describing the same in reasonable detail and describing the action
that the Company has taken or proposes to take with respect thereto) and
(ii) setting forth in reasonable detail the computations necessary to determine
whether the Company is in compliance with Sections 8.10, 8.11, 8.12, 8.13 and
8.14 hereof as of the end of the respective quarterly fiscal period or fiscal
year.
8.02 LITIGATION. The Company will promptly give to each Lender notice of
all legal or arbitral proceedings, and of all proceedings by or before any
governmental or regulatory authority or agency, and any material development in
respect of such legal or other proceedings, affecting the Company or any of its
Subsidiaries, except proceedings that, if adversely determined, would not
(either individually or in the aggregate) have a Material Adverse Effect.
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Without limiting the generality of the foregoing, the Company will give to each
Lender notice of the assertion of any Environmental Claim by any Person against,
or with respect to the activities of, the Company or any of its Subsidiaries and
notice of any alleged violation of or non-compliance with any Environmental Laws
or any permits, licenses or authorizations, other than any Environmental Claim
or alleged violation that, if adversely determined, would not (either
individually or in the aggregate) have a Material Adverse Effect.
8.03 EXISTENCE, ETC. The Company will, and will cause each of its
Subsidiaries to:
(a) preserve and maintain its legal existence and all of its material
rights, privileges, licenses and franchises (PROVIDED that nothing in this
Section 8.03 shall prohibit any transaction expressly permitted under
Section 8.05 hereof);
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if failure
to comply with such requirements could (either individually or in the
aggregate) have a Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental charges
or levies imposed on it or on its income or profits or on any of its
Property prior to the date on which penalties attach thereto, except for
any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which
adequate reserves are being maintained;
(d) maintain all of its Properties used or useful in its business in
good working order and condition, ordinary wear and tear excepted;
(e) keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting
principles consistently applied; and
(f) permit representatives of any Lender or the Agent, during normal
business hours, to examine, copy and make extracts from its books and
records, to inspect any of its Properties, and to discuss its business and
affairs with its officers, all to the extent reasonably requested by such
Lender or the Agent (as the case may be).
8.04 INSURANCE. The Company will, and will cause each of its Subsidiaries
to, maintain insurance with financially sound and reputable insurance companies,
and with respect to Property and risks of a character usually maintained by
corporations engaged in the same or similar business similarly situated, against
loss, damage and liability of the kinds and in the amounts customarily
maintained by such corporations. The Company will in any event maintain (with
respect to itself and each of its Subsidiaries):
(1) Casualty Insurance -- insurance against loss or damage covering
all of the tangible real and personal Property and improvements of the
Company and each of its
CREDIT AGREEMENT 63
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Subsidiaries by reason of any Peril (as defined below) in such amounts
(subject to such deductibles as shall be satisfactory to the Majority
Lenders) as shall be reasonable and customary and sufficient to avoid
the insured named therein from becoming a co-insurer of any loss under
such policy but in any event in an amount (i) in the case of fixed
assets and equipment (including, without limitation, vehicles), at
least equal to 100% of the actual replacement cost of such assets
(including, without limitation, foundation, footings and excavation
costs), subject to deductibles as aforesaid (PROVIDED that recovery
limits may be applicable to losses caused by flood or earthquake) and
(ii) in the case of inventory, not less than the fair market value
thereof, subject to deductibles as aforesaid.
(2) Automobile Liability Insurance for Bodily Injury and Property
Damage -- insurance against liability for bodily injury and property damage
in respect of all vehicles (whether owned, hired or rented by the Company
or any of its Subsidiaries) at any time located at, or used in connection
with, its Properties or operations in such amounts as are then customary
for vehicles used in connection with similar Properties and businesses, but
in any event to the extent required by applicable law.
(3) Comprehensive General Liability Insurance -- insurance against
claims for bodily injury, death or Property damage occurring on, in or
about the Properties (and adjoining streets, sidewalks and waterways) of
the Company and its Subsidiaries, in such amounts as are then customary for
Property similar in use in the jurisdictions where such Properties are
located.
(4) Workers' Compensation Insurance -- workers' compensation
insurance (including, without limitation, Employers' Liability Insurance)
to the extent required by applicable law.
(5) Product Liability Insurance -- insurance against claims for
bodily injury, death or Property damage resulting from the use of products
sold by the Company or any of its Subsidiaries in such amounts as are then
customarily maintained by responsible persons engaged in businesses similar
to that of the Company and its Subsidiaries.
(6) Business Interruption Insurance -- insurance against loss of
operating income (up to an aggregate amount equal to $15,000,000 and
subject to a deductible, or self-insured amount, not in excess of $500,000)
by reason of any Peril.
(7) Other Insurance -- such other insurance, including, without
limitation, War-Risk Insurance when and to the extent obtainable from the
United States Government, in each case as generally carried by owners of
similar Properties in the jurisdictions where such Properties are located,
in such amounts and against such risks as are then customary for Property
similar in use.
Such insurance shall be written by financially responsible companies selected by
the Company and having an A. M. Best rating of "A-" or better and being in a
financial size category of VIII or larger, or by other companies acceptable to
the Majority Lenders, and (other than workers'
CREDIT AGREEMENT 64
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compensation) shall name the Agent as loss payee (to the extent covering risk
of loss or damage to tangible property) and as an additional named insured as
its interests may appear (to the extent covering any other risk). Each
policy referred to in this Section 8.04 shall provide that it will not be
canceled or reduced, or allowed to lapse without renewal, except after not
less than 30 days' notice to the Agent and shall also provide that the
interests of the Agent and the Lenders shall not be invalidated by any act or
negligence of the Company or any Person having an interest in any Property
covered by the Mortgages nor by occupancy or use of any such Property for
purposes more hazardous than permitted by such policy nor by any foreclosure
or other proceedings relating to such Property. The Company will advise the
Agent promptly of any policy cancellation, reduction or amendment.
On or before the Effective Date, the Company will deliver to the Agent
certificates of insurance satisfactory to the Agent evidencing the existence
of all insurance required to be maintained by the Company hereunder setting
forth the respective coverages, limits of liability, carrier, policy number
and period of coverage (and attaching original copies of any policies with
respect to casualty insurance). Thereafter, each year the Company will
deliver to the Agent certificates of insurance evidencing that all insurance
required to be maintained by the Company hereunder will be in effect through
the calendar year following the date of such certificates, subject only to
the payment of premiums as they become due. In addition, the Company will
not modify any of the provisions of any policy with respect to casualty
insurance without delivering the original copy of the endorsement reflecting
such modification to the Agent accompanied by (if requested by the Agent) a
written report of a firm of independent insurance brokers of nationally
recognized standing, stating that, in their opinion, such policy (as so
modified) adequately protects the interests of the Lenders and the Agent, is
in compliance with the provisions of this Section 8.04, and is comparable in
all respects with insurance carried by responsible owners and operators of
Properties similar to those covered by the Mortgages. The Company will not
obtain or carry separate insurance concurrent in form or contributing in the
event of loss with that required by this Section 8.04 unless the Agent is the
named insured thereunder, with loss payable as provided herein. The Company
will immediately notify the Agent whenever any such separate insurance is
obtained and shall deliver to the Agent the certificates evidencing the same.
Without limiting the obligations of the Company under the foregoing
provisions of this Section 8.04, in the event the Company shall fail to
maintain in full force and effect insurance as required by the foregoing
provisions of this Section 8.04, then the Agent may, but shall have no
obligation so to do, procure insurance covering the interests of the Lenders
and the Agent in such amounts and against such risks as the Agent (or the
Majority Lenders) shall deem appropriate, and the Company shall reimburse the
Agent in respect of any premiums paid by the Agent in respect thereof.
For purposes hereof, the term "PERIL" shall mean, collectively, fire,
lightning, flood, windstorm, hail, earthquake, explosion, riot and civil
commotion, vandalism and malicious mischief, damage from aircraft, vehicles and
smoke and all other perils covered by the "all-risk" endorsement then in use in
the jurisdictions where the Properties of the Company and its Subsidiaries are
located.
CREDIT AGREEMENT 65
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8.05 PROHIBITION OF FUNDAMENTAL CHANGES. (a) The Company will not, nor
will it permit any of its Subsidiaries to, enter into any transaction of merger
or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution).
(b) The Company will not, nor will it permit any of its Subsidiaries
to, acquire any business or Property from, or capital stock of, or be a
party to any acquisition of, any Person except:
(i) for purchases of inventory and other Property to be
sold or used in the ordinary course of business;
(ii) Investments permitted under Section 8.08 hereof;
(iii) Capital Expenditures permitted under Section 8.14
hereof;
(iv) Permitted Acquisitions and the acquisition of any
capital stock, business or Property of any Person with the proceeds of
Facility A Loans PROVIDED that unless otherwise consented to by the
Majority Lenders (w) no more than $1,000,000 of the proceeds of
Facility A Loans may be used, directly or indirectly, to finance
any single acquisition and no more than $5,000,000 in the aggregate
of the proceeds of Facility A Loans may be used, directly or
indirectly, to finance acquisitions in any fiscal year, (x) the Net
Purchase Price of any such acquisition financed with the proceeds
of Facility A Loans shall not exceed $1,000,000 in a single
transaction (or series of related transactions) and $5,000,000 in
the aggregate for any fiscal year, (y) at the time of such
acquisition no Default shall have occurred and be continuing and
(z) any future earn-out payments in connection with any such
acquisition shall be counted at the time such earn-out payment is
made in determining whether the dollar limitations contained in
this clause (iv) have been exceeded.
(c) The Company will not, nor will it permit any of its Subsidiaries
to, convey, sell, lease, transfer or otherwise dispose of, in one
transaction or a series of transactions, any part of its business or
Property, whether now owned or hereafter acquired (including, without
limitation, receivables and leasehold interests), but excluding:
(i) any Excluded Disposition;
(ii) obsolete or worn-out Property, tools or equipment no
longer used or useful in its business (other than any Excluded
Disposition) or real Property no longer used or useful in its
business so long as the aggregate amount thereof sold in any single
fiscal year by the Company and its Subsidiaries shall not have a
fair market value in excess of $1,000,000; and
CREDIT AGREEMENT 66
<PAGE>
(iii) any inventory or other Property sold or disposed of
in the ordinary course of business and on ordinary business terms.
(d) Notwithstanding the foregoing provisions of this Section
8.05, so long as no Default shall have occurred and be continuing,
and after giving effect to any of the succeeding transactions, no
Default would exist hereunder and so long as the Liens created
under the Security Documents continue to be in effect:
(i) any Subsidiary of the Company may be merged or
consolidated with or into: (x) the Company if the Company shall be
the continuing or surviving corporation or (y) any other such
Subsidiary; and
(ii) any Subsidiary of the Company may sell, lease, transfer
or otherwise dispose of any or all of its Property (upon voluntary
liquidation or otherwise) to the Company or a Subsidiary of the
Company.
8.06 LIMITATION ON LIENS. The Company will not, nor will it permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any
of its Property, whether now owned or hereafter acquired, except:
(a) Liens created pursuant to the Security Documents;
(b) Liens in existence on the date hereof and listed in Part B of
Schedule I hereto;
(c) Liens imposed by any governmental authority for taxes,
assessments or charges not yet delinquent or that are being contested in
good faith and by appropriate proceedings if, unless the amount thereof is
not material with respect to it or its financial condition, adequate
reserves with respect thereto are maintained on the books of the Company or
the affected Subsidiaries, as the case may be, in accordance with GAAP;
(d) carriers', warehousemen's, mechanics', materialmen's, landlord's,
repairmen's or other like Liens arising in the ordinary course of business
that are not overdue for a period of more than 30 days or that are being
contested in good faith and by appropriate proceedings;
(e) Liens securing judgments but only to the extent for an amount and
for a period not resulting in an Event of Default under Section 9(i)
hereof;
(f) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
(g) deposits or pledges to secure the performance of bids, trade
contracts (other than for Indebtedness), leases, statutory obligations,
surety and appeal bonds,
CREDIT AGREEMENT 67
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performance bonds and other obligations of a like nature incurred in
the ordinary course of business;
(h) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the
use of Property or minor imperfections in title thereto that, in the
aggregate, are not material in amount, and that do not in any case
materially detract from the value of the Property subject thereto or
interfere with the ordinary conduct of the business of the Company or any
of its Subsidiaries;
(i) Liens upon tangible personal Property acquired after the date
hereof (by purchase, construction or otherwise), or upon other property
acquired after the date hereof as a Capital Expenditure, by the Company or
any of its Subsidiaries, each of which Liens either (A) existed on such
Property before the time of its acquisition and was not created in
anticipation thereof or (B) was created solely for the purpose of securing
Indebtedness representing, or incurred to finance, refinance or refund, the
cost of such Property; PROVIDED that (i) no such Lien shall extend to or
cover any Property of the Company or such Subsidiary other than the
Property so acquired, (ii) the principal amount of Indebtedness secured by
any such Lien shall at no time exceed the fair market value (as determined
in good faith by a Responsible Financial Officer of the Company) of such
Property at the time it was acquired, and (iii) the principal amount of all
Indebtedness (other than Indebtedness permitted by Section 8.07(d) hereof)
secured by such Liens shall not exceed $500,000 in the aggregate;
(j) Liens upon real Property heretofore leased or leased after the
date hereof (under operating or capital leases) in the ordinary course of
business by the Company or any of its Subsidiaries in favor of the lessor
created at the inception of the lease transaction, securing obligations of
the Company or any of its Subsidiaries under or in respect of such lease
and extending to or covering only the Property subject to such lease and
improvements thereon;
(k) Liens of sellers or creditors of sellers of farm products
encumbering such farm products when sold to any of the Obligors pursuant to
the Food Security Act of 1985 or pursuant to similar state laws to the
extent such Liens may be deemed to extend to the assets of such Obligors;
(l) protective Uniform Commercial Code filings with respect to
personal Property leased by any Obligor; and
(m) any extension, renewal or replacement of the foregoing, PROVIDED,
however, that the Liens permitted hereunder shall not be spread to cover
any additional Indebtedness or Property.
CREDIT AGREEMENT 68
<PAGE>
8.07 INDEBTEDNESS. The Company will not, nor will it permit any of its
Subsidiaries to, create, incur or suffer to exist any Indebtedness except:
(a) Indebtedness to the Lenders hereunder, under the other Loan
Documents and under the Restated Supplemental Credit Agreement;
(b) Indebtedness outstanding on the date hereof and listed in Part A
of Schedule I hereto;
(c) Indebtedness of Subsidiaries of the Company to the Company or to
other Subsidiaries of the Company or of the Company to any of its
Subsidiaries to the extent permitted under Section 8.08(e) or (g) hereof;
(d) Indebtedness (including Capital Lease Obligations) incurred to
finance the purchase of equipment, and other Capital Lease Obligations, not
to exceed $10,000,000 in the aggregate outstanding at any time;
(e) Indebtedness in respect of an irrevocable letter of credit issued
by a financial institution located in the State of Nevada in favor of the
State of Nevada Department of Insurance for account of the Company or any
of its Subsidiaries, and any extensions or renewals thereof, in an
aggregate amount not exceeding $5,000,000 at any one time outstanding;
(f) Indebtedness incurred in connection with the acquisition of the
capital stock or assets of Pure Ice of the South, Inc. ("PURE ICE"), a
Florida corporation, and evidenced by promissory notes payable to the
shareholders of Pure Ice, in an aggregate amount not exceeding $1,175,000
at any one time outstanding; and
(g) additional Indebtedness of the Company and its Subsidiaries up to
but not exceeding $1,000,000 at any one time outstanding.
8.08 INVESTMENTS. The Company will not, nor will it permit any of its
Subsidiaries to, make or permit to remain outstanding any Investments except:
(a) Investments outstanding as of the Effective Date and identified
in Part B of Schedule III hereto (including, without limitation,
Indebtedness of any Subsidiary of the Company to the Company or any other
Subsidiary of the Company);
(b) operating deposit accounts with depository institutions;
(c) Permitted Investments;
(d) Interest Rate Protection Agreements entered into pursuant to
Section 8.15 hereof;
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(e) (i) Investments permitted under Section 8.05(b) hereof and
(ii) indemnities executed in connection with the sale of Investment Tax
Credits;
(f) Investments by the Company in the capital stock of its
Subsidiaries to the extent outstanding as of the Effective Date;
(g) Investments (other than of a type specified in clause (f) above
and other than the Investments permitted under clause (a) above and
Investments in Subsidiaries made in connection with Investments pursuant to
clause (e)(i) above) by the Company in its Subsidiaries or by any
Subsidiary of the Company in the Company or any other Subsidiary of the
Company made after the Effective Date not exceeding $10,000,000 at any time
outstanding (MINUS (without duplication) the aggregate principal amount of
Indebtedness outstanding under Section 8.07(c) hereof);
(h) Loans and advances to employees up to but not exceeding $750,000
in the aggregate;
(i) deposits to secure bids, tenders, utilities, vendors, leases,
statutory obligations, surety and appeal bonds and other deposits of like
nature arising in the ordinary course of business not exceeding $500,000 in
the aggregate;
(j) additional Investments up to but not exceeding $1,000,000 in the
aggregate; and
(k) any guarantees permitted under Section 8.07 hereof.
8.09 RESTRICTED PAYMENTS.
(a) DIVIDEND PAYMENTS. The Company will not, nor will it permit any
of its Subsidiaries to, declare or make any Dividend Payment at any time,
PROVIDED that the Company may redeem or retire shares of its common stock
from any of its officers in connection with his or her voluntary departure,
dismissal, retirement or death, PROVIDED that (i) at the time of such
redemption or retirement no Default shall have occurred and be continuing
and (ii) the aggregate amount of all cash paid in respect of all such
shares so redeemed or repurchased does not exceed $500,000 in any fiscal
year. Nothing herein shall be deemed to prohibit the payment of dividends
by any Subsidiary of the Company to the Company or any other Subsidiary of
the Company.
(b) MANAGEMENT FEES. The Company will not, nor will it permit any of
its Subsidiaries to, accrue or pay any Management Fees to any Person
(including, without limitation, any Affiliates), PROVIDED that, so long as
no Default shall have occurred and be continuing or would result therefrom,
the Company may make payments to Robert L. Kaminski not exceeding $150,000
in any fiscal year.
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8.10 LEVERAGE RATIO. The Company will not permit the Leverage Ratio to
exceed 3.50 to 1 at any time.
8.11 MINIMUM NET WORTH. The Company will not permit its Net Worth (i)
for the period from the date hereof to and including March 31, 1997 to be
less than $135,000,000 and (ii) for each fiscal quarter thereafter, to be
less than $135,000,000 plus 50% of net income for all preceding fiscal
quarters (without including the results of any fiscal quarter in respect of
which there was a net loss) commencing with the fiscal quarter beginning
April 1, 1997. The amounts of Net Worth set forth above shall be increased
by 75% of the amount by which the "total stockholders equity" of the Company
is increased as a result of any public or private offering of common stock of
the Company after March 1, 1997. Promptly upon consummation of each such
public or private offering, the Company shall notify the Agent in writing of
the amount of such increase in total stockholders equity.
8.12 FIXED CHARGES RATIO. The Company will not permit the Fixed Charges
Ratio to be less than 1.20 to 1 at any time.
8.13 INTEREST COVERAGE RATIO. The Company will not permit the Interest
Coverage Ratio to be less than 3.0 to 1 at any time.
8.14 CAPITAL EXPENDITURES. The Company will not permit the aggregate
amount of Capital Expenditures by the Company and its Subsidiaries to exceed
the following respective amounts for the following respective periods:
Period Amount
- ------------------------------------------ ------------------
From January 1, 1996 through and including $13,000,000
December 31, 1996
From January 1, 1997 through and including $21,000,000
December 31, 1997 and for each fiscal
year thereafter
If the aggregate amount of Capital Expenditures for any period set forth in
the schedule above shall be less than the amount set forth opposite such
period in the schedule above, then the shortfall shall be added to the amount
of Capital Expenditures permitted for the immediately succeeding period (but
not any other) period and, for the purposes hereof, the amount of Capital
Expenditures made during any period shall be deemed to have been made first
from the permitted amount for such period set forth in the schedule above and
last from the amount of any carryover from any previous period.
Notwithstanding the foregoing, in addition to the Capital Expenditures
permitted to be incurred as provided above, the Company may make the
following additional Capital Expenditures: (a) the acquisition of
replacement Property in respect of an Excluded Disposition; (b) the purchase
price paid by the Company or any of its Subsidiaries in
CREDIT AGREEMENT 71
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respect of any acquisition permitted under Section 8.05(b)(iv) hereof; and
(c) Capital Expenditures made with the proceeds of property or casualty
insurance for the purposes of repairing or replacing damaged or destroyed
fixed or capital assets.
8.15 INTEREST RATE PROTECTION AGREEMENTS. The Company shall maintain in
full force and effect the Interest Rate Protection Agreements existing as of
the Effective Date as described in Section 6.01(m) hereof until the stated
expiration date thereof. The Company further agrees to provide to the Agent
on or before September 30, 1997 evidence that it has in full force and effect
Interest Rate Protection Agreements in form and substance satisfactory to the
Agent that enable the Company to protect against floating interest rates as
to a notional principal amount at least equal to 50% of the maximum aggregate
principal amount of the Facility B Loans outstanding from time to time during
the period from September 30, 1997 to and including March 31, 2000.
8.16 LINES OF BUSINESS. Neither the Company nor any of its Subsidiaries
will engage to any substantial extent in any line or lines of business
activity other than operations involved in the manufacture, processing or
distribution of ice, ice-related products, coffee, dairy products or bottled
water which is similar to the water products that are currently processed,
bottled and distributed from the dairy facilities of the Company and/or its
Subsidiaries, or the lines of business conducted by the Company or any of its
Subsidiaries as of the Effective Date.
8.17 TRANSACTIONS WITH AFFILIATES. Except as expressly permitted by
this Agreement, the Company will not, nor will it permit any of its
Subsidiaries to, directly or indirectly: (a) make any Investment in an
Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any
Property to an Affiliate; (c) merge into or consolidate with or purchase or
acquire Property from an Affiliate; or (d) enter into any other transaction
directly or indirectly with or for the benefit of an Affiliate (including,
without limitation, Guarantees and assumptions of obligations of an
Affiliate); PROVIDED that (i) any Affiliate who is an individual may serve as
a director, officer or employee of the Company or any of its Subsidiaries and
receive reasonable compensation for his or her services in such capacity and
(ii) the Company and its Subsidiaries may enter into transactions (other than
extensions of credit by the Company or any of its Subsidiaries to an
Affiliate) if the monetary or business consideration arising therefrom would
be substantially as advantageous to the Company and its Subsidiaries as the
monetary or business consideration that would obtain in a comparable
transaction with a Person not an Affiliate.
8.18 USE OF PROCEEDS. The Company will use the proceeds of the Facility
A Loans and the Facility B Loans to be made at any time hereunder solely for
working capital or other general corporate purposes (including, without
limitation, to finance acquisitions permitted under Section 8.05(b)(iv)
hereof). The Company will use the proceeds of all Loans hereunder in
compliance with all applicable legal and regulatory requirements. Neither
the Agent nor any Lender shall have any responsibility as to the use of any
of such proceeds.
8.19 CERTAIN OBLIGATIONS RESPECTING SUBSIDIARIES; ADDITIONAL MORTGAGED
PROPERTIES.
(a) The Company will, and will cause each of its Subsidiaries to,
take such action from time to time as shall be necessary to ensure that
each of its Subsidiaries is a
CREDIT AGREEMENT 72
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Wholly Owned Subsidiary. In the event that any additional shares of stock
shall be issued by any Subsidiary, the respective Obligor agrees forthwith
to deliver to the Agent pursuant to the relevant Security Document the
certificates evidencing such shares of stock, accompanied by undated stock
powers executed in blank and to take such other action as the Agent shall
request to perfect the security interest created therein pursuant to such
Security Document.
(b) The Company will not permit any of its Subsidiaries to enter
into, after the date of this Agreement, any indenture, agreement,
instrument or other arrangement (other than the Garrido Negative Pledge
Agreement) that, directly or indirectly, prohibits or restrains, or has the
effect of prohibiting or restraining, or imposes materially adverse
conditions upon, the incurrence or payment of Indebtedness, the granting of
Liens, the declaration or payment of dividends, the making of loans,
advances or Investments or the sale, assignment, transfer or other
disposition of Property.
(c) The Company will take such action, and will cause each of its
Subsidiaries (other than Garrido and Guest Choice) to take such action,
from time to time as shall be necessary to ensure that all Subsidiaries of
the Company (other than Garrido and Guest Choice) are party to, as
obligors, the Existing Subsidiary Guarantee and Security Agreement or a
Supplemental Subsidiary Guarantee and Security Agreement. Without limiting
the generality of the foregoing, in the event that the Company or any of
its Subsidiaries shall form or acquire any new Subsidiary, the Company or
the respective Subsidiary will cause such new Subsidiary to (i) become a
party to the Existing Subsidiary Guarantee and Security Agreement or a
Supplemental Subsidiary Guarantee and Security Agreement pursuant to a
written instrument in form and substance satisfactory to the Agent, (ii) if
requested by the Majority Lenders, cause such new Subsidiary to execute and
deliver one or more Mortgages, in substantially the form of Exhibits B or C
hereto or Exhibits C or D of the Restated Supplemental Credit Agreement
(with such changes thereto as the Agent may reasonably request), covering
the real Property and/or fixtures of such Subsidiary, and (iii) to deliver
such proof of corporate action, incumbency of officers, opinions of counsel
and other documents relating to the foregoing as is consistent with those
delivered by each Obligor pursuant to Section 6.02 of the Restated
Supplemental Credit Agreement, or as any Lender or the Agent shall have
reasonably requested.
(d) Without affecting the obligations of the Company under any
provision prohibiting such action hereunder, in the event that the Company
or any of its Subsidiaries (other than Garrido) shall acquire any business
or Property after the Effective Date, the Company shall, or shall cause
such Subsidiary to (i) if requested by the Majority Lenders, execute and
deliver one or more Mortgages, substantially in the form of Exhibits B or C
hereto or Exhibit C or D of the Restated Supplemental Credit Agreement
(with such changes as the Agent may reasonably request), covering the real
property and/or fixtures so acquired, (ii) execute and deliver to the Agent
for filing, appropriately completed Uniform Commercial Code financing
statements or other filings or instruments as the Agent shall request in
order to perfect the security interest in favor
CREDIT AGREEMENT 73
<PAGE>
of the Agent for the benefit of the Lenders in such Property so acquired
and (iii) deliver such proof of corporate action, incumbency of officers,
opinions of counsel and other documents relating to the foregoing as is
consistent with those delivered by each Obligor pursuant to Section 6.02
of the Restated Supplemental Credit Agreement, or as any Lender or the
Agent shall have reasonably requested.
8.20 MODIFICATIONS OF CERTAIN DOCUMENTS. Except in connection with any
transaction expressly permitted hereunder, the Company will not, nor will it
permit any of its Subsidiaries to, consent to any modification, supplement or
waiver of any of the provisions of any agreement, instrument or other
document evidencing or relating to the charter or by-laws of the Company or
any of its Subsidiaries, in each case, without the prior consent of the Agent
(with the approval of the Majority Lenders). Without limiting the
requirement for consent as provided in the immediately preceding sentence,
the Company will furnish to the Agent a copy of each such modification,
supplement or waiver promptly upon the effectiveness thereof (and the Agent
will promptly furnish a copy thereof to each Lender).
8.21 FURTHER ASSURANCES. As and to the extent requested from time to
time by the Agent or the Majority Lenders, each Obligor operating in the
Commonwealth will grant to the Agent, for the benefit of the Lenders, a Lien
in respect of any Property acquired by such Obligor operating in the
Commonwealth after the Effective Date and not otherwise covered by the Puerto
Rico Security Documents (collectively, the "ADDITIONAL PUERTO RICO SECURITY
DOCUMENTS"). Such Lien shall be granted pursuant to documentation reasonably
satisfactory in form and substance to the Agent and shall constitute valid
and enforceable perfected liens superior to and prior to the rights of all
other Persons and subject to no other Liens except for the Liens permitted
pursuant to Section 8.06 hereof. The Additional Puerto Rico Security
Documents or other instruments related thereto shall be duly recorded or
filed in such manner and in such places as are required by law to establish,
perfect, preserve and protect the Liens in favor of the Agent for the benefit
of the Lenders required to be granted pursuant to the Additional Puerto Rico
Security Documents and all taxes, fees and other charges payable in
connection therewith shall be paid in full.
8.22 PUERTO RICO SECURITY DOCUMENTS. The Company shall, within 15 days
of the Effective Date, (i) execute such amendments to the Puerto Rico
Security Documents as reasonably requested by the Agent, (ii) duly file such
amendments with the appropriate filing offices in Puerto Rico and (iii) pay
all filing fees in connection therewith.
Section 9. EVENTS OF DEFAULT. If one or more of the following events
(herein called "EVENTS OF DEFAULT") shall occur and be continuing:
(a) The Company shall: (i) default in the payment of any principal
of any Loan when due (whether at stated maturity or at mandatory
prepayment); or (ii) default in the payment of any interest on any Loan or
Reimbursement Obligation, any fee or any other amount payable by it
hereunder or under any other Loan Document or under the Restated
Supplemental Credit Agreement when due and such default shall have
continued unremedied for three or more Business Days; or
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(b) The Company or any of its Subsidiaries shall default in the
payment when due of any principal of or interest on any of its other
Indebtedness aggregating $500,000 or more, or in the payment when due of
any amount under any Interest Rate Protection Agreement; or any event
specified in any note, agreement, indenture or other document evidencing or
relating to any such Indebtedness or any event specified in any Interest
Rate Protection Agreement shall occur if the effect of such event is to
cause, or (with the giving of any notice or the lapse of time or both) to
permit the holder or holders of such Indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause, such Indebtedness to become
due, or to be prepaid in full (whether by redemption, purchase, offer to
purchase or otherwise), prior to its stated maturity or to have the
interest rate thereon reset to a level so that securities evidencing such
Indebtedness trade at a level specified in relation to the par value
thereof or, in the case of an Interest Rate Protection Agreement, to permit
the payments owing under such Interest Rate Protection Agreement to be
liquidated or any Event of Default (as defined in the Restated Supplemental
Credit Agreement) shall occur and be continuing; or
(c) Any representation, warranty or certification made or deemed made
herein or in any other Loan Document (or in any modification or supplement
hereto or thereto) by any Obligor, or any certificate furnished to any
Lender or the Agent pursuant to the provisions hereof or thereof, shall
prove to have been false or misleading as of the time made or furnished in
any material respect; or
(d) The Company shall default in the performance of any of its
obligations under any of Sections 8.01(f), 8.05, 8.06, 8.07, 8.08, 8.09,
8.10, 8.11, 8.12, 8.13, 8.14, 8.15, 8.16, 8.17, 8.19, 8.21 or 8.22 hereof;
or the Company shall default in the performance of any of its other
obligations in this Agreement and such default shall continue unremedied
for a period of 30 or more days after notice thereof to the Company by the
Agent or any Lender (through the Agent); or
(e) The Company shall default in the performance of any of its
obligations under Section 4.02 of the Security Agreement; any Obligor party
to the Existing Subsidiary Guarantee and Security Agreement or any
Supplemental Subsidiary Guarantee and Security Agreement shall default in
the performance of any of its obligations under Section 2 or 5.02 thereof;
or any Obligor shall default in the performance of any of its other
obligations in any Loan Document (other than this Agreement) to which it is
party and such default shall continue unremedied for a period of 30 or more
days after notice thereof to the Company by the Agent or any Lender
(through the Agent); or
(f) The Company or any of its Subsidiaries shall admit in writing its
inability to, or be generally unable to, pay its debts as such debts become
due; or
(g) The Company or any of its Subsidiaries shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner or liquidator of itself or of all or a
substantial part of its Property, (ii) make a general
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assignment for the benefit of its creditors, (iii) commence a voluntary
case under the Bankruptcy Code, (iv) file a petition seeking to take
advantage of any other law relating to bankruptcy, insolvency,
reorganization, liquidation, dissolution, arrangement or winding-up, or
composition or readjustment of debts, (v) fail to controvert in a timely
and appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Bankruptcy Code (or such
similar laws) or (vi) take any corporate action for the purpose of
effecting any of the foregoing; or
(h) A proceeding or case shall be commenced, without the application
or consent of the Company or the relevant Subsidiary affected thereby, in
any court of competent jurisdiction, seeking (i) its reorganization,
liquidation, dissolution, arrangement or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of a receiver, custodian,
trustee, examiner, liquidator or the like of the Company or such
Subsidiary, as the case may be, or of all or any substantial part of its
Property, or (iii) similar relief in respect of such Company or such
Subsidiary, as the case may be, under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of
debts, and such proceeding or case shall continue undismissed, or an order,
judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of 60 or more
days; or an order for relief against the Company or any of its Subsidiaries
shall be entered in an involuntary case under the Bankruptcy Code; or
(i) A final judgment or judgments for the payment of money in excess
of $1,000,000 in the aggregate (exclusive of judgment amounts fully bonded
or covered by insurance where the surety or the insurer, as the case may
be, has admitted liability in respect of such judgment) shall be rendered
by one or more courts, administrative tribunals or other bodies having
jurisdiction against the Company or any of its Subsidiaries and the same
shall not be discharged (or provision shall not be made for such
discharge), or a stay of execution thereof shall not be procured, within 30
days from the date of entry thereof and the Company or any such Subsidiary,
as the case may be, shall not, within said period of 30 days, or such
longer period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal; or
(j) An event or condition specified in Section 8.01(e) hereof shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a
result of such event or condition, together with all other such events or
conditions, the Company or any ERISA Affiliate shall incur or shall be
reasonably likely to incur a liability to a Plan, a Multiemployer Plan or
PBGC (or any combination of the foregoing) that, in the determination of
the Majority Lenders, would (either individually or in the aggregate) have
a Material Adverse Effect; or
(k) A reasonable basis shall exist for the assertion against the
Company or any of its Subsidiaries, or any predecessor in interest of the
Company or any of its Subsidiaries, of (or there shall have been asserted
against the Company or any of its
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Subsidiaries) an Environmental Claim that, in the judgment of the Majority
Lenders, is reasonably likely to be determined adversely to the Company
or any of its Subsidiaries, and the amount thereof (either individually
or in the aggregate) is reasonably likely to have a Material Adverse
Effect (insofar as such amount is payable by the Company or any of its
Subsidiaries but after deducting any portion thereof that is reasonably
expected to be paid by other creditworthy Persons jointly and severally
liable therefor); or
(l) Mr. Gregg L. Engles ("ENGLES") shall at any time cease to perform
the duties of Chairman of the Board of Directors, or Chief Executive
Officer, of the Company; or any of the Subsidiaries of the Company shall
cease to be a Wholly Owned Subsidiary of the Company; or during any period
of 25 consecutive calendar months, a majority of the Board of Directors of
the Company shall no longer be composed of individuals (i) who were members
of said Board on the first day of such period or (ii) whose election or
nomination to said Board was approved by individuals referred to in
clause (i) above constituting at the time of such election or nomination at
least a majority of said Board; or any Person or group of Persons acting in
concert, other than Engles or any other shareholder of the Company as of
the Effective Date, shall at any time own or control, directly or
indirectly, 20% or more of such voting capital stock; or
(m) The Liens created by the Security Documents shall at any time not
constitute a valid and perfected Lien on any material portion of the
collateral intended to be covered thereby (to the extent perfection by
filing, registration, recordation or possession is required herein or
therein) in favor of the Agent, free and clear of all other Liens (other
than Liens permitted under Section 8.06 hereof or under the respective
Security Documents), or, except for expiration in accordance with its
terms, any of the Security Documents shall for whatever reason be
terminated or cease to be in full force and effect, or the enforceability
thereof shall be contested by any Obligor.
THEREUPON: (1) in the case of an Event of Default other than one referred
to in clause (g) or (h) of this Section 9 with respect to any Obligor, the
Agent may (and, if requested by the Majority Lenders shall), by notice to the
Company, terminate the Commitments and/or declare the principal amount then
outstanding of, and the accrued interest on, the Loans, the Reimbursement
Obligations and all other amounts payable by the Obligors hereunder, under
the other Loan Documents and under the Notes (including, without limitation,
any amounts payable under Section 5.05 or 5.08 hereof) to be forthwith due
and payable, whereupon such amounts shall be immediately due and payable
without presentment, demand, protest or other formalities of any kind, all of
which are hereby expressly waived by each Obligor; and (2) in the case of the
occurrence of an Event of Default referred to in clause (g) or (h) of this
Section 9 with respect to any Obligor, the Commitments shall automatically be
terminated and the principal amount then outstanding of, and the accrued
interest on, the Loans, the Reimbursement Obligations and all other amounts
payable by the Company hereunder and under the Notes (including, without
limitation, any amounts payable under Section 5.05 or 5.08 hereof) shall
automatically become immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by each Obligor.
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In addition, upon the occurrence and during the continuance of any Event
of Default (if the Agent has declared the principal amount then outstanding
of, and accrued interest on, the Loans, the Reimbursement Obligations and all
other amounts payable by the Company hereunder and under the Notes to be due
and payable), the Company agrees that it shall, if requested by the Agent or
the Majority Lenders through the Agent (and, in the case of any Event of
Default referred to in clause (g) or (h) of this Section 9 with respect to
the Company, forthwith, without any demand or the taking of any other action
by the Agent or such Lenders) provide cover for the Letter of Credit
Liabilities by paying to the Agent immediately available funds in an amount
equal to the then aggregate undrawn face amount of all Letters of Credit,
which funds shall be held by the Agent in the Collateral Account as
collateral security in the first instance for the Letter of Credit
Liabilities and be subject to withdrawal only as therein provided.
Section 10. THE AGENT.
10.01 APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby
irrevocably appoints and authorizes the Agent to act as its agent hereunder
and under the other Loan Documents with such powers as are specifically
delegated to the Agent by the terms of this Agreement and of the other Loan
Documents, together with such other powers as are reasonably incidental
thereto. The Agent (which term as used in this sentence and in Section 10.05
and the first sentence of Section 10.06 hereof shall include reference to its
affiliates and its own and its affiliates' officers, directors, employees and
agents): (a) shall have no duties or responsibilities except those expressly
set forth in this Agreement and in the other Loan Documents, and shall not by
reason of this Agreement or any other Loan Document be a trustee for any
Lender; (b) shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement or in
any other Loan Document, or in any certificate or other document referred to
or provided for in, or received by any of them under, this Agreement or any
other Loan Document, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, any Note or any other Loan
Document or any other document referred to or provided for herein or therein
or for any failure by the Company or any other Person to perform any of its
obligations hereunder or thereunder; (c) shall not be required to initiate or
conduct any litigation or collection proceedings hereunder or under any other
Loan Document; and (d) shall not be responsible for any action taken or
omitted to be taken by it hereunder or under any other Loan Document or under
any other document or instrument referred to or provided for herein or
therein or in connection herewith or therewith, except for its own gross
negligence or willful misconduct. The Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it in good
faith. The Agent may deem and treat the payee of any Note as the holder
thereof for all purposes hereof unless and until a notice of the assignment
or transfer thereof shall have been filed with the Agent.
10.02 RELIANCE BY AGENT. The Agent shall be entitled to rely upon
any certification, notice or other communication (including, without
limitation, any thereof by telephone, telecopy, telex, telegram or cable)
believed by it to be genuine and correct and to have been signed or sent by
or on behalf of the proper Person or Persons, and upon advice and statements
of legal counsel, independent accountants and other experts selected by the
Agent. As to any matters not
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expressly provided for by this Agreement or any other Loan Document, the
Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder or thereunder in accordance with instructions given by the
Majority Lenders or, if provided herein, in accordance with the instructions
given by all of the Lenders as is required in such circumstance, and such
instructions of such Lenders and any action taken or failure to act pursuant
thereto shall be binding on all of the Lenders.
10.03 DEFAULTS. The Agent shall not be deemed to have knowledge or
notice of the occurrence of a Default unless the Agent has received notice
from a Lender or any Obligor specifying such Default and stating that such
notice is a "Notice of Default". In the event that the Agent receives such a
notice of the occurrence of a Default, the Agent shall give prompt notice
thereof to the Lenders. The Agent shall (subject to Section 10.07 hereof)
take such action with respect to such Default as shall be directed by the
Majority Lenders, PROVIDED that, unless and until the Agent shall have
received such directions, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default
as it shall deem advisable in the best interest of the Lenders except to the
extent that this Agreement expressly requires that such action be taken, or
not be taken, only with the consent or upon the authorization of the Majority
Lenders, or all of the Lenders.
10.04 RIGHTS AS A LENDER. With respect to its Commitments and the
Loans made by it, First Union (and any successor acting as Agent) in its
capacity as a Lender hereunder shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
acting as the Agent, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include the Agent in its individual capacity.
First Union (and any successor acting as Agent) and its affiliates may
(without having to account therefor to any Lender) accept deposits from, lend
money to, make investments in and generally engage in any kind of banking,
trust or other business with the Obligors (and any of their Subsidiaries or
Affiliates) as if it were not acting as the Agent, and First Union and its
affiliates may accept fees and other consideration from the Obligors for
services in connection with this Agreement or otherwise without having to
account for the same to the Lenders.
10.05 INDEMNIFICATION. The Lenders agree to indemnify the Agent (to
the extent not reimbursed under Section 11.03 hereof, but without limiting
the obligations of the Company under said Section 11.03, and including in any
event any payments under any indemnity that the Agent is required to issue to
any bank referred to in Section 4.02 of the Security Agreement and Section
5.02 of each of the Existing Subsidiary Guarantee and Security Agreement and
each Supplemental Subsidiary Guarantee and Security Agreement to which
remittances in respect of Accounts, as defined in each such agreement, are to
be made) ratably in accordance with the aggregate principal amount of the
Loans and Reimbursement Obligations held by the Lenders (or, if no Loans or
Reimbursement Obligations are at the time outstanding, ratably in accordance
with their respective Commitments), for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever that may be imposed on,
incurred by or asserted against the Agent (including by any Lender) arising
out of or by reason of any investigation in or in any way relating to or
arising out of this Agreement or any other Loan Document or any other
documents contemplated by or
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referred to herein or therein or the transactions contemplated hereby or
thereby (including, without limitation, the costs and expenses that the
Company is obligated to pay under Section 11.03 hereof, and including also
any payments under any indemnity that the Agent is required to issue to any
bank referred to in Section 4.02 of the Security Agreement and Section 5.02
of each of the Existing Subsidiary Guarantee and Security Agreement and each
Supplemental Subsidiary Guarantee and Security Agreement to which remittances
in respect of Accounts, as defined in each such agreement, are to be made,
but excluding, unless a Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof or thereof or
of any such other documents, PROVIDED that no Lender shall be liable for any
of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the party to be indemnified.
10.06 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender agrees
that it has, independently and without reliance on the Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Company and its Subsidiaries
and decision to enter into this Agreement and that it will, independently and
without reliance upon the Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue
to make its own analysis and decisions in taking or not taking action under
this Agreement or under any other Loan Document. The Agent shall not be
required to keep itself informed as to the performance or observance by any
Obligor of this Agreement or any of the other Loan Documents or any other
document referred to or provided for herein or therein or to inspect the
Properties or books of the Company or any of its Subsidiaries. Except for
notices, reports and other documents and information expressly required to be
furnished to the Lenders by the Agent hereunder or under the Security
Documents, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the affairs, financial
condition or business of the Company or any of its Subsidiaries (or any of
their affiliates) that may come into the possession of the Agent or any of
its affiliates.
10.07 FAILURE TO ACT. Except for action expressly required of the
Agent hereunder and under the other Loan Documents, the Agent shall in all
cases be fully justified in failing or refusing to act hereunder and
thereunder unless it shall receive further assurances to its satisfaction
from the Lenders of their indemnification obligations under Section 10.05
hereof against any and all liability and expense that may be incurred by it
by reason of taking or continuing to take any such action.
10.08 RESIGNATION OR REMOVAL OF AGENT. Subject to the appointment
and acceptance of a successor Agent as provided below, the Agent may resign
at any time by giving notice thereof to the Lenders and the Company, and the
Agent may be removed at any time with or without cause by the Majority
Lenders. Upon any such resignation or removal, the Majority Lenders shall
have the right to appoint a successor Agent with the prior consent of the
Company (which consent shall not be unreasonably withheld); PROVIDED, that no
such consent of the Company shall be required if an Event of Default has
occurred and is continuing and the Commitments have been terminated and/or
the Loans and other amounts payable by the Obligors hereunder have been
declared forthwith due and payable. If no successor Agent shall have been so
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appointed by the Majority Lenders and shall have accepted such appointment
within 30 days after the retiring Agent's giving of notice of resignation or
the Majority Lenders' removal of the retiring Agent, then the retiring Agent
may, on behalf of the Lenders, appoint a successor Agent, that shall be a
bank with a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After
any retiring Agent's resignation or removal hereunder as Agent, the
provisions of this Section 11 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting
as the Agent.
10.09 AGENCY FEE. So long as the Commitments are in effect and until
payment in full of the principal of and interest on the Loans and all other
amounts payable by the Company hereunder, the Company will pay to the Agent
an agency fee in the amount agreed in writing between the Company and the
Agent, payable quarterly in arrears commencing on March 31, 1997 and on the
last day of each calendar quarter thereafter; PROVIDED that if the
Commitments shall have been terminated prior to such date, the agency fee
shall be payable on the date of such termination. Such fee, once paid, shall
be non-refundable.
10.10 CONSENTS UNDER OTHER LOAN DOCUMENTS. Except as otherwise
provided in Section 11.04 hereof with respect to this Agreement, the Agent
may, with the prior consent of the Majority Lenders (but not otherwise),
consent to any modification, supplement or waiver under any of the Loan
Documents, PROVIDED that, without the prior consent of each Lender, the Agent
shall not (except as provided herein or in the Security Documents) release
any guarantee or collateral or otherwise terminate any Lien under any Loan
Document providing for collateral security, or agree to additional
obligations being secured by such collateral security, except that no such
consent shall be required, and the Agent is hereby authorized, to release any
Lien covering Property that is the subject of a disposition of Property
permitted hereunder or to which the Majority Lenders have consented or to
release any guarantee of any Obligor that is the subject of a disposition to
which the Majority Lenders have consented.
10.11 SYNDICATION AGENT. The syndication Agent named on the cover page
of this Agreement shall have no duties, obligations or responsibilities
hereunder except in its capacity as Lender.
Section 11. MISCELLANEOUS.
11.01 WAIVER. No failure on the part of the Agent or any Lender to
exercise and no delay in exercising, and no course of dealing with respect
to, any right, power or privilege under this Agreement or any Note shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under this Agreement or any Note preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. The remedies provided herein are cumulative and not exclusive of
any remedies provided by law.
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11.02 NOTICES. All notices, requests and other communications provided
for herein and under the Security Documents (including, without limitation,
any modifications of, or waivers, requests or consents under, this Agreement)
shall be given or made in writing (including, without limitation, by telex or
telecopy) delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof; or, as to any party,
at such other address as shall be designated by such party in a notice to
each other party. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telex or telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
11.03 EXPENSES, ETC. The Company agrees to pay or reimburse each of
the Lenders and the Agent for: (a) all reasonable out-of-pocket costs and
expenses of the Agent (including, without limitation, the reasonable fees and
expenses of Milbank, Tweed, Hadley & McCloy, special New York counsel to
First Union, and Fiddler Gonzalez & Rodriguez, special Puerto Rico counsel to
First Union) in connection with (i) the negotiation, preparation, execution
and delivery of this Agreement and the other Loan Documents and the
extensions of credit hereunder and (ii) the negotiation or preparation of any
modification, supplement or waiver of any of the terms of this Agreement or
any of the other Loan Documents (whether or not consummated); (b) all
reasonable out-of-pocket costs or allocated costs and expenses of the Lenders
and the Agent (including, without limitation, the reasonable fees, allocated
costs and expenses of legal counsel, which may be employees of the Lenders or
the Agent) in connection with (i) any Default and any enforcement or
collection proceedings resulting therefrom, including, without limitation,
all manner of participation in or other involvement with (x) bankruptcy,
insolvency, receivership, foreclosure, winding up or liquidation proceedings,
(y) judicial or regulatory proceedings and (z) workout, restructuring or
other negotiations or proceedings (whether or not the workout, restructuring
or transaction contemplated thereby is consummated) and (ii) the enforcement
of this Section 11.03; (c) all transfer, stamp, documentary or other similar
taxes, assessments or charges levied by any governmental or revenue authority
in respect of this Agreement or any of the other Loan Documents or any other
document referred to herein or therein and all costs, expenses, taxes,
assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated
by any Loan Document or any other document referred to therein; and (d) all
costs, expenses and other charges in respect of title insurance procured with
respect to the Liens created pursuant to the Mortgages.
The Company hereby agrees to indemnify the Agent and each Lender and their
respective directors, officers, employees, attorneys and agents from, and hold
each of them harmless against, any and all losses, liabilities, claims, damages
or expenses incurred by any of them (including, without limitation, any and all
losses, liabilities, claims, damages or expenses incurred by the Agent to any
Lender, whether or not the Agent or any Lender is a party thereto) arising out
of or by reason of any investigation or litigation or other proceedings
(including any threatened investigation or litigation or other proceedings)
relating to the extensions of credit hereunder or any actual or proposed use by
the Company or any of its Subsidiaries of the proceeds of any of the extensions
of credit hereunder, including, without limitation, the reasonable fees and
disbursements of counsel incurred in connection with any such investigation
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or litigation or other proceedings (but excluding any such losses,
liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified). Without
limiting the generality of the foregoing, the Company will (x) indemnify the
Agent for any payments that the Agent is required to make under any indemnity
issued to any bank referred to in Section 4.02 of the Security Agreement and
Section 5.02 of each of the Existing Subsidiary Guarantee and Security
Agreement and each Supplemental Subsidiary Guarantee and Security Agreement
to which remittances in respect to Accounts, as defined in each such
agreement, are to be made and (y) indemnify the Agent and each Lender from,
and hold the Agent and each Lender harmless against, any losses, liabilities,
claims, damages or expenses described in the preceding sentence (including
any Lien filed against all or any part of the Property covered by the
Mortgages in favor of any governmental entity, but excluding, as provided in
the preceding sentence, any loss, liability, claim, damage or expense
incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified) arising under any Environmental Law as a result of
the past, present or future operations of the Company or any of its
Subsidiaries (or any predecessor in interest to the Company or any of its
Subsidiaries), or the past, present or future condition of any site or
facility owned, operated or leased at any time by the Company or any of its
Subsidiaries (or any such predecessor in interest), or any Release or
threatened Release of any Hazardous Materials at or from any such site or
facility, including any such Release or threatened Release that shall occur
during any period prior to the termination of the Commitments and the payment
in full of the Loans and other amounts owing hereunder and under the other
Loan Documents when the Agent or any Lender shall be in possession of any
such site or facility following the exercise by the Agent or any Lender of
any of its rights and remedies hereunder or under any of the Security
Documents to the extent such Release results from a continuation of
conditions previously in existence at, or practices theretofore employed in
connection with the operation of, such site or facility.
11.04 AMENDMENTS, ETC. Except as otherwise expressly provided in
this Agreement, any provision of this Agreement may be modified or
supplemented only by an instrument in writing signed by the Company, the
Agent and the Majority Lenders, or by the Company and the Agent acting with
the consent of the Majority Lenders, and any provision of this Agreement may
be waived by the Majority Lenders or by the Agent acting with the consent of
the Majority Lenders; PROVIDED that: (a) no modification, supplement or
waiver shall, unless by an instrument signed by all of the Lenders or by the
Agent acting with the consent of all of the Lenders: (i) increase, or extend
the term of any of the Commitments, or extend the time or waive any
requirement for the reduction or termination of any of the Commitments, (ii)
extend the date fixed for the payment of principal of or interest on any
Loan, the Reimbursement Obligations or any fee hereunder, (iii) reduce the
amount of any such payment of principal, (iv) reduce the rate at which
interest is payable thereon or any fee is payable hereunder, (v) alter the
rights or obligations of the Company to prepay Loans, (vi) alter the terms of
this Section 11.04, (vii) modify the definition of the term "Majority
Lenders", or modify in any other manner the number or percentage of the
Lenders required to make any determinations or waive any rights hereunder or
to modify any provision hereof or modify Section 11.06(b)(iii) hereof, (viii)
release any Subsidiary Guarantor or Supplemental Guarantor from any of its
guarantee obligations under the Existing Subsidiary Guarantee and Security
Agreement or any Supplemental Subsidiary Guarantee and Security Agreement or
release (or terminate any Lien on) all or substantially all of
CREDIT AGREEMENT 83
<PAGE>
the Collateral except as provided in the Security Documents with respect to
such Collateral in any of the Security Documents or (ix) waive any of the
conditions precedent set forth in Section 6.01 or 6.02 hereof; and (b) any
modification of any of the rights or obligations of the Agent or any Issuing
Bank shall require the consent of the Agent or the Issuing Bank, as the case
may be.
11.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
11.06 ASSIGNMENTS AND PARTICIPATIONS.
(a) The Company may not assign any of its rights or obligations
hereunder or under the Notes without the prior consent of all of the
Lenders and the Agent.
(b) Each Lender may assign any of its Loans, its Notes, its
Commitments, and, if such Lender is a Facility A Lender, its Letter of
Credit Interest with the consent of the Agent (which consent shall not be
unreasonably withheld), and in the case of the Facility A Commitment or
Letter of Credit Interest, the Issuing Bank pursuant to an Assignment and
Acceptance substantially in the form of Exhibit H hereto; PROVIDED that:
(i) no such consent by the Agent shall be required in the
case of any assignment to another Lender;
(ii) each assignment by a Lender of its Loans, Note or
Commitment of any Class or Letter of Credit Interest shall be made
in such a manner so that the same portion of such Loans, Note,
Commitment and (if applicable) Letter of Credit Interest is
assigned to the respective assignee;
(iii) each assignment by any Facility A Lender or Facility B
Lender of any of its Loans (and related Note and Commitment) of a
particular Class and (in the case of a Facility A Lender) its
Letter of Credit Interest shall be made in such a manner so that
(x) the same ratable portion of all of its Loans to the Company
under this Agreement of the other Class (and related Notes and
Commitments) and (if applicable) its Letter of Credit Interest is
assigned to the respective assignee and (y) the same ratable
portion of all of its Facility C Loans (and related Facility C Note
and Facility C Commitment) under and as defined in the Restated
Supplemental Credit Agreement is assigned to the respective
assignee; and
(iv) any such assignment of less than all of such Lender's
interests in the Facility A Loans, Facility B Loans and Facility C
Loans, Facility A Notes, Facility B Notes and Facility C Notes, and
Facility A Commitments, Facility B Commitments and Facility C
Commitments, as the case may be, shall be in an aggregate amount at
least equal to $5,000,000.
CREDIT AGREEMENT 84
<PAGE>
Upon execution and delivery by the assignor and assignee to the Company, the
Agent and, if applicable, the Issuing Bank of such Assignment and Acceptance
, and upon consent thereto by the Agent and Issuing Bank, to the extent
required above, the assignee shall have, to the extent of such assignment,
the obligations, rights and benefits of a Lender hereunder holding the
Commitment(s) and Loans and, if applicable, Letter of Credit Interests (or
portions thereof) assigned to it as specified in such Assignment and
Acceptance (in addition to the Commitment(s), Loans and/or Letter of Credit
Interests, if any, theretofore held by such assignee) and the assigning
Lender shall, to the extent of such assignment, be released from the
Commitment(s) (or portion(s) thereof) so assigned. Upon each such assignment
the assigning Lender shall pay the Agent an assignment fee of $3,000.
(c) A Lender may sell or agree to sell to one or more other Persons a
participation in all or any part of any Loans or Letter of Credit Interests
held by it, or in its Commitments, in which event each purchaser of a
participation (a "PARTICIPANT") shall be entitled to the rights and
benefits of the provisions of Section 8.01(i) hereof with respect to its
participation in such Loans, Letter of Credit Interests and Commitments as
if (and the Company shall be directly obligated to such Participant under
such provisions as if) such Participant were a "Lender" for purposes of
said Section, but, except as otherwise provided in Section 4.07(c) hereof,
shall not have any other rights or benefits under this Agreement or any
Note or any other Loan Document (the Participant's rights against such
Lender in respect of such participation to be those set forth in the
agreements executed by such Lender in favor of the Participant). All
amounts payable by the Company to any Lender under Section 5 hereof in
respect of Loans or Letter of Credit Interests held by it, and its
Commitments, shall be determined as if such Lender had not sold or agreed
to sell any participations in such Loans, Letter of Credit Interests and
Commitments, and as if such Lender were funding each of such Loans, Letter
of Credit Interests and Commitments in the same way that it is funding the
portion of such Loans, Letter of Credit Interests and Commitments in which
no participations have been sold. In no event shall a Lender that sells a
participation agree with the Participant to take or refrain from taking any
action hereunder or under any other Loan Document except that such Lender
may agree with the Participant that it will not, without the consent of the
Participant, agree to (i) increase or extend the term, or extend the time
or waive any requirement for the reduction or termination, of such Lender's
related Commitment, (ii) extend the date fixed for the payment of principal
of or interest on the related Loan or Loans, Reimbursement Obligations or
any portion of any fee hereunder payable to the Participant, (iii) reduce
the amount of any such payment of principal, (iv) reduce the rate at which
interest is payable thereon, or any fee hereunder payable to the
Participant, to a level below the rate at which the Participant is entitled
to receive such interest or fee, (v) alter the rights or obligations of the
Company to prepay the related Loans, (vi) consent to any modification,
supplement or waiver hereof or of any of the other Loan Documents to the
extent that the same, under Section 10.10 or 11.04 hereof, requires the
consent of each Lender or (vii) release any Subsidiary Guarantor or
Supplemental Guarantor from any of its guarantee obligations under the
Existing Subsidiary Guarantee and Security Agreement or any Supplemental
Subsidiary Guarantee and Security Agreement or release
CREDIT AGREEMENT 85
<PAGE>
(or terminate any Lien on) all or substantially all of the Collateral
except as provided in the Security Documents with respect to such
Collateral in any of the Security Documents.
(d) In addition to the assignments and participations permitted under
the foregoing provisions of this Section 11.06, any Lender may (without
notice to the Company, the Agent or any other Lender and without payment of
any fee) (i) assign and pledge all or any portion of its Loans, Notes
and/or Letter of Credit Interests to any Federal Reserve Bank as collateral
security pursuant to Regulation A and any Operating Circular issued by such
Federal Reserve Bank and (ii) assign all or any portion of its rights under
this Agreement and its Loans, Notes and Letter of Credit Interests to an
affiliate. No such assignment shall release the assigning Lender from its
obligations hereunder.
(e) A Lender may furnish any information concerning the Company or
any of its Subsidiaries in the possession of such Lender from time to time
to assignees and participants (including prospective assignees and
participants), subject, however, to the provisions of Section 11.12(b)
hereof.
(f) Anything in this Section 11.06 to the contrary notwithstanding,
no Lender may assign or participate any interest in any Loan or
Reimbursement Obligation held by it hereunder to the Company or any of its
Subsidiaries or Affiliates without the prior consent of each Lender.
(g) At the request of any Lender that is not a U.S. Person and is not
a "bank" within the meaning of Section 881(c)(3)(A) of the Code, the
Company shall maintain, or cause to be maintained, a register (the
"Register") that, at the request of the Company, shall be kept by the Agent
on behalf of the Company at no charge to the Company at the address to
which notices to the Agent are to be sent hereunder, on which it enters the
name of such Lender as the registered owner of each Registered Loan held by
such Lender. A Registered Loan (and the Registered Note, if any,
evidencing the same) may be assigned or otherwise transferred in whole or
in part by registration of such assignment or transfer on the Register (and
each Registered Note shall expressly so provide). Any assignment or
transfer of all or part of such Registered Loan (and the Registered Note,
if any, evidencing the same) may be effected by registration of such
assignment or transfer on the Register, together with the surrender of the
Registered Note, if any, evidencing the same duly endorsed by (or
accompanied by a written instrument of assignment or transfer duly executed
by) the holder of such Registered Note, whereupon, at the request of the
designated assignee(s) or transferee(s), one or more new Registered Notes
in the same aggregate principal amount shall be issued to the designated
assignee(s) or transferee(s). Prior to the registration of assignment or
transfer of any Registered Loan (and the Registered Note, if any,
evidencing the same), the Company shall treat the Person in whose name such
Loan (and the Registered Note, if any, evidencing the same) is registered
as the owner thereof for the purpose of receiving all payments thereon and
for all other purposes, notwithstanding notice to the contrary. The
Register shall be available
CREDIT AGREEMENT 86
<PAGE>
for inspection by the Company and any Lender that is a Registered Holder
at any reasonable time upon reasonable prior notice.
11.07 SURVIVAL. The obligations of the Company under Sections 5.01,
5.05, 5.06, 5.08 and 11.03 hereof, and the obligations of the Lenders under
Section 10.05 hereof, shall survive the repayment of the Loans and
Reimbursement Obligations and the termination of the Commitments. In
addition, each representation and warranty made, or deemed to be made by a
notice of any extension of credit (whether by means of a Loan or the issuance
of a Letter of Credit), herein or pursuant hereto shall survive the making of
such representation and warranty, and no Lender shall be deemed to have
waived, by reason of making any extension of credit hereunder (whether by
means of a Loan or the issuance of a Letter of Credit), any Default that may
arise by reason of such representation or warranty proving to have been false
or misleading, notwithstanding that such Lender or the Agent may have had
notice or knowledge or reason to believe that such representation or warranty
was false or misleading at the time such extension of credit was made.
11.08 CAPTIONS. The table of contents and captions and Section
headings appearing herein are included solely for convenience of reference
and are not intended to affect the interpretation of any provision of this
Agreement.
11.09 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
11.10 GOVERNING LAW; SUBMISSION TO JURISDICTION; SERVICE OF PROCESS
AND VENUE.
(a) This Agreement and the Notes shall be governed by, and construed
in accordance with, the law of the State of New York.
(b) The Company hereby agrees that any suit, action or proceeding
with respect to this Agreement, any Note or any other Loan Document to
which it is a party or any judgment entered by any court in respect thereof
may be brought in the United States District Court for the Southern
District of New York, in the Supreme Court of the State of New York sitting
in New York County (including its Appellate Division), or in any other
appellate court in the State of New York, as the party commencing such
suit, action or proceeding may elect in its sole discretion; and each party
hereto hereby irrevocably submits to the non-exclusive jurisdiction of such
court for the purpose of any such suit, action, proceeding or judgment.
Each party hereto further submits, for the purpose of any such suit,
action, proceeding or judgment brought or rendered against it, to the
appropriate courts of the jurisdiction of its domicile.
(c) The Company hereby agrees that service of all writs, process and
summonses in any suit, action or proceeding brought hereunder or under any
of the other Loan Documents to which the Company is a party may be made
upon The Prentice Hall Corporation System, Inc. presently located at 15
Columbus Circle, New York, New York
CREDIT AGREEMENT 87
<PAGE>
10023, U.S.A. (the "Process Agent"), and the Company hereby confirms and
agrees that the Process Agent has been duly and irrevocably appointed as
its agent and true and lawful attorney in fact in its name, place and
stead to accept such service of any and all such writs, process and
summonses, and agrees that the failure of the Process Agent to give any
notice of any such service of process to the Company shall not impair or
affect the validity of such service or of any judgment based thereon.
Without limiting the foregoing, the Company hereby irrevocably consents
to the service of process in any suit, action or proceeding in such
courts by the mailing thereof by the Agent or any Lender by registered
or certified mail, postage prepaid, at its address set forth beneath its
signature hereto. Nothing herein shall in any way be deemed to limit
the ability of the Agent or any Lender to serve any such writs, process
or summonses in any other manner permitted by applicable law or to
obtain jurisdiction over the Company in such other jurisdictions, and in
such manner, as may be permitted by applicable law.
(d) The Company hereby irrevocably waives any objection that it may
now or hereafter have to the laying of the venue of any suit, action or
proceeding arising out of or relating to this Agreement, the Notes or the
other Loan Documents brought in any such court and hereby further
irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
11.11 WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE AGENT AND THE
LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
11.12 TREATMENT OF CERTAIN INFORMATION; CONFIDENTIALITY.
(a) The Company acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided
to the Company or one or more of its Subsidiaries (in connection with this
Agreement or otherwise) by any Lender or by one or more subsidiaries or
affiliates of such Lender and the Company hereby authorizes each Lender to
share any information delivered to such Lender by the Company and its
Subsidiaries pursuant to this Agreement, or in connection with the decision
of such Lender to enter into this Agreement, to any such subsidiary or
affiliate, it being understood that any such subsidiary or affiliate
receiving such information shall be bound by the provisions of clause (b)
below as if it were a Lender hereunder. Such authorization shall survive
the repayment of the Loans and Reimbursement Obligations and the
termination of the Commitments.
(b) Each Lender and the Agent agree (on behalf of itself and each of
its affiliates, directors, officers, employees and representatives) to use
reasonable precautions to keep confidential, in accordance with their
customary procedures for handling confidential information of the same
nature and in accordance with safe and sound banking practices, any non-
public information supplied to it by any Obligor
CREDIT AGREEMENT 88
<PAGE>
pursuant to this Agreement that is identified by such Person as being
confidential at the time the same is delivered to the Lenders or the
Agent, PROVIDED that nothing herein shall limit the disclosure of any
such information (i) to the extent required by statute, rule, regulation
or judicial process, (ii) to counsel for any of the Lenders or the
Agent, (iii) to any Lender's examiners, auditors or accountants, (iv) to
the Agent or any other Lender, (v) in connection with any litigation to
which any one or more of the Lenders or the Agent is a party, (vi) to a
subsidiary or affiliate of such Lender as provided in clause (a) above
or (vii) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant (or prospective
assignee or participant) first executes and delivers to the respective
Lender a Confidentiality Agreement substantially in the form of Exhibit
H hereto; PROVIDED, further, that in no event shall any Lender or the
Agent be obligated or required to return any materials furnished by any
Obligor. The obligations of any assignee that has executed a
Confidentiality Agreement in the form of Exhibit H hereto shall be
superseded by this Section 11.12 upon the date upon which such assignee
becomes a Lender hereunder pursuant to Section 11.06 hereof.
11.13 INTENTION OF PARTIES. Notwithstanding anything contained
herein to the contrary, it is the intention of the parties hereto that this
Agreement and the Commitments and extensions of credit provided hereunder
represent a continuation, renewal and extension of, but not a novation or
discharge of, the credit facilities provided by the Existing Credit
Agreement; and the Company hereby represents and warrants to the Agent and
each Lender that after giving effect to the transactions contemplated hereby,
the security interests created by the Security Documents continue to
constitute valid, perfected and first priority security interests (subject
only to Liens permitted by Section 8.06 hereof) securing all obligations
purported to be secured thereby, and each of the Security Documents and the
security interests provided for therein continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amended
and Restated Credit Agreement to be duly executed and delivered as of the day
and year first above written.
COMPANY
SUIZA FOODS CORPORATION
By
----------------------------------
Title:
Address for Notices:
3811 Turtle Creek Boulevard
Suite 1300
Dallas, Texas 75219
Attention: Gregg L. Engles
CREDIT AGREEMENT 89
<PAGE>
Telecopier No.: (214) 528-9929
Telephone No.: (214) 528-9922
LENDERS
FACILITY A LENDERS AND FACILITY B
LENDERS
FACILITY A COMMITMENT THE FIRST NATIONAL BANK OF
$6,166,666.67 CHICAGO
FACILITY B COMMITMENT
$18,500,000.00 By
-------------------------------
Title:
Lending Office for Base Rate Loans and
Eurodollar Loans:
The First National Bank of Chicago
1 First National Plaza
Suite 0088, 14th Floor
Chicago, IL 60670
Address for Notices:
The First National Bank of Chicago
1 First National Plaza
Suite 0088, 14th Floor
Chicago, IL 60670
Attention: April Yebd
Telecopier No.: (312) 732-2715
(312) 732-6276
Telephone No.: (312) 732-4823
CREDIT AGREEMENT 90
<PAGE>
FACILITY A COMMITMENT FIRST UNION NATIONAL BANK OF
$6,166,666.67 NORTH CAROLINA
FACILITY B COMMITMENT
$18,500,000.00 By
----------------------------------
Title:
Lending Office for Base Rate Loans and
Eurodollar Loans:
First Union National Bank of
North Carolina
301 S. College Street
Charlotte, NC 28288-0737
Address for Notices:
First Union National Bank of
North Carolina
301 S. College Street
Charlotte, NC 28288-0737
Attention: Sana Alkoor - Suiza
Telecopier No.: (704) 383-6537
Telephone No.: (704) 374-9831
CREDIT AGREEMENT 91
<PAGE>
FACILITY A COMMITMENT HARRIS TRUST AND SAVINGS BANK
$4,833,333.33
FACILITY B COMMITMENT By
$14,500,000.00 ----------------------------------
Title:
Lending Office for Base Rate Loans and
Eurodollar Loans:
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, IL 60690
Address for Notices:
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, IL 60690
Attention: Jerry Karl/Marieky Estrada
Telecopier No.: (312) 765-8095
Telephone No.: (312) 461-3776/7664
CREDIT AGREEMENT 92
<PAGE>
FACILITY A COMMITMENT THE BANK OF NOVA SCOTIA
$5,666,666.67
FACILITY B COMMITMENT
$17,000,000.00 By
----------------------------------
Title:
Lending Office for Base Rate Loans and
Eurodollar Loans:
The Bank of Nova Scotia
Atlanta Agency
600 Peachtree Street N.E., Suite 2700
Atlanta, Georgia 30308
Address for Notices:
The Bank of Nova Scotia
Atlanta Agency
600 Peachtree Street N.E.
Suite 2700
Atlanta, Georgia 30308
Attention: F.C.H. Ashby
Senior Assistant Agent
Telecopier No.: (404) 888-8998
Telephone No.: (404) 877-1500
With a copy to:
The Bank of Nova Scotia
Houston Representative Office
1100 Louisiana
Suite 3000
Houston, Texas 77002
Attention: Rosine Matthews
Relationship Manager
Telecopier No.: (713) 752-2425
Telephone No.: (713) 759-3432
CREDIT AGREEMENT 93
<PAGE>
FACILITY A COMMITMENT BANCO POPULAR DE PUERTO RICO
$3,333,333.33
FACILITY B COMMITMENT
$10,000,000.00 By
----------------------------------
Title:
Lending Office for Base Rate Loans
and Eurodollar Loans:
Banco Popular de Puerto Rico
7 West 51st Street
New York, New York 10019
Address for Notices:
Banco Popular de Puerto Rico
7 West 51st Street
New York, New York 10019
Attention: John Cuneo
Telecopier No.: (212) 586-3537
Telephone No.: (212) 315-2800
CREDIT AGREEMENT 94
<PAGE>
FACILITY A COMMITMENT BANK OF AMERICA ILLINOIS
$3,333,333.33
FACILITY B COMMITMENT
$10,000,000.00 By
----------------------------------
Title:
Lending Office for Base Rate Loans
and Eurodollar Loans:
Bank of America Illinois
231 S. LaSalle
Chicago, Illinois 60697
Address for Notices:
Bank of America Illinois
231 S. LaSalle
Chicago, Illinois 60697
Attention: Paul Youmaura
Telecopier No.: (312) 974-9626
Telephone No.: (312) 828-6574
CREDIT AGREEMENT 95
<PAGE>
FACILITY A COMMITMENT BANQUE PARIBAS
$4,166,666.67
FACILITY B COMMITMENT
$12,500,000.00 By
----------------------------------
Title:
By
----------------------------------
Title:
Lending Office for Base Rate Loans
and Eurodollar Loans:
Banque Paribas
1200 Smith Street
Suite 3100
Houston, Texas 77002
Address for Notices:
Banque Paribas
1200 Smith Street
Suite 3100
Houston, Texas 77002
Attention: Chuck E. Irwin
Telecopier No.: (713) 659-4234
Telephone No.: (713) 659-4811
CREDIT AGREEMENT 96
<PAGE>
FACILITY A COMMITMENT CAISSE NATIONALE DE CREDIT
$4,833,333.33 AGRICOLE
FACILITY B COMMITMENT
$14,500,000.00 By
----------------------------------
Title:
Lending Office for Base Rate Loans
and Eurodollar Loans:
Caisse Nationale de Credit Agricole
55 E. Monroe
Suite 4700
Chicago, IL 60603
Address for Notices:
Caisse Nationale de Credit Agricole
55 E. Monroe
Suite 4700
Chicago, IL 60603
Attention: Laura Schmuck
Telecopier No.: (312) 372-4421
Telephone No.: (312) 917-7428
CREDIT AGREEMENT 97
<PAGE>
FACILITY A COMMITMENT THE FUJI BANK, LIMITED,
$4,833,333.33 HOUSTON AGENCY
FACILITY B COMMITMENT
$14,500,000.00 By
----------------------------------
Title:
Lending Office for Base Rate Loans and
Eurodollar Loans:
The Fuji Bank, Limited, Houston Agency
One Houston Center
1221 McKinney Street, Suite 4100
Houston, TX 77010
Telecopier No.: (713) 759-0048
Address for Notices:
The Fuji Bank, Limited, Houston Agency
One Houston Center
1221 McKinney Street, Suite 4100
Houston, TX 77010
Attention: Philip C. Lauinger III
Vice President and Joint Manager
or David L. Kelley
Senior Vice President
(713) 650-7850
Telecopier No.: (713) 759-0048
Telephone No.: (713) 650-7852
CREDIT AGREEMENT 98
<PAGE>
FACILITY A COMMITMENT THE LONG-TERM CREDIT BANK OF
$3,333,333.33 JAPAN, LIMITED, NEW YORK BRANCH
FACILITY B COMMITMENT
$10,000,000.00 By
----------------------------------
Title:
Lending Office for Base Rate Loans
and Eurodollar Loans:
The Long-Term Credit Bank of Japan,
Limited, New York Branch
165 Broadway
New York, NY 10006
Address for Notices:
The Long-Term Credit Bank of Japan,
Limited, New York Branch
165 Broadway
New York, NY 10006
Attention: Frank H. Madden, Jr.
Telecopier No.: (212) 608-2371
Telephone No.: (212) 335-4550
CREDIT AGREEMENT 99
<PAGE>
FACILITY A COMMITMENT CREDIT LYONNAIS NEW YORK BRANCH
$3,333,333.33
FACILITY B COMMITMENT
$10,000,000.00 By
----------------------------------
Title:
Lending Office for Base Rate Loans and
Eurodollar Loans:
Credit Lyonnais New York Branch
c/o Credit Lyonnais Dallas
2200 Ross Avenue
Suite 4400 West
Dallas, Texas 75201
Address for Notices:
Credit Lyonnais New York Branch
c/o Credit Lyonnais Dallas
2200 Ross Avenue
Suite 4400 West
Dallas, Texas 75201
Attention: Tim O'Connor
Telecopier No.: (214) 220-2323
Telephone No.: (214) 220-2300
CREDIT AGREEMENT 100
<PAGE>
AGENT
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Agent
By
----------------------------------
Title:
Address for Notices to the Agent:
First Union National Bank of North
Carolina
301 S. College Street TW-10
Charlotte, NC 28288-0608
Attention: Syndication Agency
Services
Telecopier No.: (704) 383-0288
Telephone No.: (704) 383-0281
CREDIT AGREEMENT 101
<PAGE>
CONSENT AND AGREEMENT
Each of the undersigned Subsidiary Guarantors hereby (1) consents to the terms
of the Restated Supplemental Credit Agreement and this Agreement, (2) agrees
that each reference to the "Credit Agreement" or the "Supplemental Credit
Agreement" (if any) in each Security Document to which such Subsidiary Guarantor
is a party shall be a reference to the this Agreement and the Restated
Supplemental Credit Agreement, respectively, and (3) confirms its obligations
under each Security Document to which it is a party after the Restated
Supplemental Credit Agreement and this Agreement become effective on the
Effective Date.
REDDY ICE CORPORATION SUIZA FRUIT CORPORATION
By By
---------------------------------- ----------------------------------
Title: Title:
VELDA FARMS, INC. NEVA PLASTICS MANUFACTURING CORP.
By By
---------------------------------- ----------------------------------
Title: Title:
MODEL DAIRY, INC.
SUIZA MANAGEMENT CORPORATION
By
----------------------------------
Title:
By
----------------------------------
Title:
SUIZA DAIRY CORPORATION SWISS DAIRY CORPORATION
BY By
---------------------------------- ----------------------------------
Title: Title:
CREDIT AGREEMENT 102
<PAGE>
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SUIZA FOODS CORPORATION
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AMENDED AND RESTATED
SUPPLEMENTAL CREDIT AGREEMENT
$100,000,000 of $300,000,000 Aggregate Credit Facility
Dated as of March 5, 1997
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FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Agent
THE FIRST NATIONAL BANK OF CHICAGO,
as Syndication Agent
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<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience of reference only.
Page
----
Section 1. Definitions and Accounting Matters . . . . . . . . 2
1.01 Certain Defined Terms. . . . . . . . . . . . . . . 2
1.02 Accounting Terms and Determinations. . . . . . . . 24
1.03 Types of Facility C Loans. . . . . . . . . . . . . 25
Section 2. Facility C Commitments, Facility C Loans,
Facility C Notes and Prepayments . . . . . . . . . 25
2.01 Facility C Loans . . . . . . . . . . . . . . . . . 25
2.02 Borrowings . . . . . . . . . . . . . . . . . . . . 26
2.03 Changes of Facility C Commitments. . . . . . . . . 26
2.04 Commitment Fee . . . . . . . . . . . . . . . . . . 26
2.05 Lending Offices. . . . . . . . . . . . . . . . . . 26
2.06 Several Obligations; Remedies Independent. . . . . 27
2.07 Facility C Notes . . . . . . . . . . . . . . . . . 27
2.08 Optional Prepayments and Conversions or
Continuations of Facility C Loans. . . . . . . . . 28
2.09 Mandatory Prepayments. . . . . . . . . . . . . . . 28
Section 3. Payments of Principal and Interest . . . . . . . . 31
3.01 Repayment of Facility C Loans. . . . . . . . . . . 31
3.02 Interest . . . . . . . . . . . . . . . . . . . . . 31
Section 4. Payments; Pro Rata Treatment; Computations; Etc. . 32
4.01 Payments . . . . . . . . . . . . . . . . . . . . . 32
4.02 Pro Rata Treatment . . . . . . . . . . . . . . . . 33
4.03 Computations . . . . . . . . . . . . . . . . . . . 34
4.04 Minimum Amounts. . . . . . . . . . . . . . . . . . 34
4.05 Certain Notices. . . . . . . . . . . . . . . . . . 34
4.06 Non-Receipt of Funds by the Agent. . . . . . . . . 35
4.07 Sharing of Payments, Etc.. . . . . . . . . . . . . 37
Section 5. Yield Protection, Etc. . . . . . . . . . . . . . . 38
5.01 Additional Costs . . . . . . . . . . . . . . . . . 38
5.02 Limitation on Types of Facility C Loans. . . . . . 41
5.03 Illegality . . . . . . . . . . . . . . . . . . . . 42
5.04 Treatment of Affected Facility C Loans . . . . . . 42
5.05 Compensation . . . . . . . . . . . . . . . . . . . 43
5.06 Net Payments; Taxes. . . . . . . . . . . . . . . . 44
(i)
<PAGE>
5.07 Replacement of Lenders . . . . . . . . . . . . . . 46
Section 6. Conditions Precedent . . . . . . . . . . . . . . . 47
6.01 Conditions to Effectiveness. . . . . . . . . . . . 47
6.02 Conditions Precedent to Lending for Permitted
Acquisitions . . . . . . . . . . . . . . . . . . . 50
6.03 Conditions to all . . . . . . . . . . . . . . . . 56
Section 7. Representations and Warranties . . . . . . . . . . 57
7.01 Corporate Existence. . . . . . . . . . . . . . . . 57
7.02 Financial Condition. . . . . . . . . . . . . . . . 57
7.03 Litigation . . . . . . . . . . . . . . . . . . . . 58
7.04 No Breach. . . . . . . . . . . . . . . . . . . . . 58
7.05 Action . . . . . . . . . . . . . . . . . . . . . . 58
7.06 Approvals. . . . . . . . . . . . . . . . . . . . . 59
7.07 Use of Credit. . . . . . . . . . . . . . . . . . . 59
7.08 ERISA. . . . . . . . . . . . . . . . . . . . . . . 59
7.09 Taxes. . . . . . . . . . . . . . . . . . . . . . . 60
7.10 Investment Company Act . . . . . . . . . . . . . . 60
7.11 Public Utility Holding Company Act . . . . . . . . 60
7.12 Material Agreements and Liens. . . . . . . . . . . 60
7.13 Environmental Matters. . . . . . . . . . . . . . . 61
7.14 Capitalization . . . . . . . . . . . . . . . . . . 63
7.15 Subsidiaries, Etc. . . . . . . . . . . . . . . . . 64
7.16 Title to Assets. . . . . . . . . . . . . . . . . . 65
7.17 True and Complete Disclosure . . . . . . . . . . . 65
7.18 Real Property. . . . . . . . . . . . . . . . . . . 66
7.19 Solvency . . . . . . . . . . . . . . . . . . . . . 66
7.20 Subordinated Note Purchase Agreement . . . . . . . 66
Section 8. Covenants of the Company . . . . . . . . . . . . . 66
8.01 Financial Statements, Etc. . . . . . . . . . . . . 67
8.02 Litigation . . . . . . . . . . . . . . . . . . . . 70
8.03 Existence, Etc.. . . . . . . . . . . . . . . . . . 71
8.04 Insurance. . . . . . . . . . . . . . . . . . . . . 72
8.05 Prohibition of Fundamental Changes . . . . . . . . 75
8.06 Limitation on Liens. . . . . . . . . . . . . . . . 76
8.07 Indebtedness . . . . . . . . . . . . . . . . . . . 78
8.08 Investments. . . . . . . . . . . . . . . . . . . . 79
8.09 Restricted Payments. . . . . . . . . . . . . . . . 80
8.10 Leverage Ratio . . . . . . . . . . . . . . . . . . 80
8.11 Minimum Net Worth. . . . . . . . . . . . . . . . . 80
8.12 Fixed Charges Ratio. . . . . . . . . . . . . . . . 80
8.13 Interest Coverage Ratio. . . . . . . . . . . . . . 81
8.14 Capital Expenditures . . . . . . . . . . . . . . . 81
8.15 Interest Rate Protection Agreements. . . . . . . . 81
(ii)
<PAGE>
8.16 Lines of Business. . . . . . . . . . . . . . . . . 82
8.17 Transactions with Affiliates . . . . . . . . . . . 82
8.18 Use of Proceeds. . . . . . . . . . . . . . . . . . 82
8.19 Certain Obligations Respecting Subsidiaries;
Additional Mortgaged Properties. . . . . . . . . . 83
8.20 Modifications of Certain Documents . . . . . . . . 84
8.21 Further Assurances . . . . . . . . . . . . . . . . 84
8.22 Puerto Rico Security Documents . . . . . . . . . . 85
Section 9. Events of Default. . . . . . . . . . . . . . . . . 85
Section 10. The Agent. . . . . . . . . . . . . . . . . . . . . 89
10.01 Appointment, Powers and Immunities . . . . . . . . 89
10.02 Reliance by Agent. . . . . . . . . . . . . . . . . 90
10.03 Defaults . . . . . . . . . . . . . . . . . . . . . 90
10.04 Rights as a Lender . . . . . . . . . . . . . . . . 91
10.05 Indemnification. . . . . . . . . . . . . . . . . . 91
10.06 Non-Reliance on Agent and Other Lenders. . . . . . 92
10.07 Failure to Act . . . . . . . . . . . . . . . . . . 92
10.08 Resignation or Removal of Agent. . . . . . . . . . 93
10.09 Agency Fee . . . . . . . . . . . . . . . . . . . . 93
10.10 Consents under Other Loan Documents. . . . . . . . 94
10.11 Syndication Agent. . . . . . . . . . . . . . . . . 94
Section 11. Miscellaneous. . . . . . . . . . . . . . . . . . . 94
11.01 Waiver . . . . . . . . . . . . . . . . . . . . . . 94
11.02 Notices. . . . . . . . . . . . . . . . . . . . . . 94
11.03 Expenses, Etc. . . . . . . . . . . . . . . . . . . 95
11.04 Amendments, Etc. . . . . . . . . . . . . . . . . . 97
11.05 Successors and Assigns . . . . . . . . . . . . . . 97
11.06 Assignments and Participations . . . . . . . . . . 97
11.07 Survival . . . . . . . . . . . . . . . . . . . . . 100
11.08 Captions . . . . . . . . . . . . . . . . . . . . . 100
11.09 Counterparts . . . . . . . . . . . . . . . . . . . 101
11.10 Governing Law; Submission to Jurisdiction;
Service of Process and Venue . . . . . . . . . . . 101
11.11 Waiver of Jury Trial . . . . . . . . . . . . . . . 102
11.12 Treatment of Certain Information; Confidentiality. 102
11.13 Intention of Parties . . . . . . . . . . . . . . . 103
SCHEDULE I - Existing Material Agreements and Liens
SCHEDULE II - Environmental Matters
SCHEDULE III - Subsidiaries and Investments
SCHEDULE IV - Real Property
SCHEDULE V - Litigation
SCHEDULE VI - Existing Puerto Rico Security Documents
(iii)
<PAGE>
SCHEDULE VII - Existing Mortgages
EXHIBIT A - Form of Note
EXHIBIT B - Form of Supplemental Subsidiary Guarantee and Security
Agreement
EXHIBIT C - Form of Mortgage
EXHIBIT D - Form of Deed of Trust
EXHIBIT E-1 - Form of Opinion of Counsel to the Obligors
EXHIBIT E-2 - Form of Opinion of Puerto Rico Counsel to the Obligors
EXHIBIT F - Form of Opinion of Local Counsel
EXHIBIT G - Form of Opinion of Special New York Counsel to First Union
EXHIBIT H - Form of Confidentiality Agreement
EXHIBIT I - Form of Assignment and Acceptance
(iv)
<PAGE>
AMENDED AND RESTATED SUPPLEMENTAL CREDIT AGREEMENT dated as of March
5, 1997 between: SUIZA FOODS CORPORATION, a corporation duly organized and
validly existing under the laws of the State of Delaware (the "COMPANY"); each
of the lenders that is a signatory hereto identified under the caption "LENDERS"
on the signature pages hereto or that, pursuant to Section 11.06(b) hereof,
shall become a "Lender" hereunder (individually, a "LENDER" and collectively,
the "LENDERS"); and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national
banking association, as agent for the Lenders (in such capacity, together with
its successors in such capacity, the "AGENT").
WHEREAS, the Company, the Lenders and the Agent are party to a Second
Amended and Restated Credit Agreement dated of even date herewith (as modified
and supplemented and in effect from time to time, the "EXISTING CREDIT
AGREEMENT"), providing, subject to the terms thereof, for extensions of credit
(by making of loans and issuing letters of credit) to be made by the Lenders
party thereto, to the Company in an aggregate principal or face amount not
exceeding $200,000,000.
WHEREAS, the Company, certain Lenders and the Agent are party to a
Supplemental Credit Agreement, dated as of September 6, 1996, as amended by
Amendment No. 1 dated as of December 2, 1996 (as heretofore modified and
supplemented and in effect immediately prior to the Effective Date referred to
below, the "EXISTING SUPPLEMENTAL CREDIT AGREEMENT") providing, subject to the
terms and conditions thereof, for a $90,000,000 revolving credit facility for
the purpose of providing financing for the acquisition by the Company or its
Subsidiaries from time to time of assets, business or capital stock of certain
Persons and related fees, commissions and expenses.
WHEREAS, the parties hereto now wish to amend and restate the Existing
Supplemental Credit Agreement by, among other things, increasing the aggregate
amount of the Facility C Loans available to the Company, extending the maturity
of the Facility C Loans and amending certain of the other provisions thereof
and, in that connection, wish to amend and restate the Existing Supplemental
Credit Agreement in its entirety.
WHEREAS, each of the Obligors (as hereinafter defined) expects to
derive benefit, directly or indirectly, from the loans so made to the Company,
both in its separate capacity and as a member of the integrated group, since the
successful operation of each of the Company and its Subsidiaries is dependent on
the continued successful performance of the functions of the integrated group as
a whole.
Accordingly, the parties hereto hereby agree that the Existing
Supplemental Credit Agreement shall, as of the Effective Date (the occurrence of
which is subject to the satisfaction of the conditions precedent specified in
Section 6.01 hereof), be amended and restated in its entirety as follows:
CREDIT AGREEMENT 1
<PAGE>
Section 1. DEFINITIONS AND ACCOUNTING MATTERS.
1.01 CERTAIN DEFINED TERMS. As used herein, the following terms shall
have the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa):
"ADDITIONAL PUERTO RICO SECURITY DOCUMENTS" shall have the meaning
assigned to such term in Section 8.21 hereof.
"AFFILIATE" shall mean any Person that directly or indirectly
controls, or is under common control with, or is controlled by, the Company and,
if such Person is an individual, any member of the immediate family (including
parents, spouse, children and siblings) of such individual and any trust whose
principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or trust.
As used in this definition, "control" (including, with its correlative meanings,
"controlled by" and "under common control with") shall mean possession, directly
or indirectly, of power to direct or cause the direction of management or
policies (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise), PROVIDED that, in any event, any
Person that owns directly or indirectly securities having 10% or more of the
voting power for the election of directors or other governing body of a
corporation or 10% or more of the partnership or other ownership interests of
any other Person (other than as a limited partner of such other Person) will be
deemed to control such corporation or other Person. Notwithstanding the
foregoing, (a) no individual shall be an Affiliate solely by reason of his or
her being a director, officer or employee of the Company or any of its
Subsidiaries and (b) none of the Wholly Owned Subsidiaries of the Company shall
be Affiliates.
"APPLICABLE COMMITMENT FEE RATE" shall mean 0.25% per annum; PROVIDED
that if the Leverage Ratio as at the last day of any fiscal quarter of the
Company ending on or after the Closing Date shall fall within any of the ranges
set forth below then, upon the delivery to the Agent of a certificate of a
Responsible Financial Officer of the Company (which shall accompany the
financial statements for such fiscal quarter delivered under Section 8.01(a)
hereof on which the calculation of such Leverage Ratio is based) demonstrating
such fact prior to the end of the next succeeding fiscal quarter, the
"Applicable Commitment Fee Rate" shall be adjusted upwards or downwards, as the
case may be, to the rate per annum set forth below opposite such range during
the period commencing on the third Business Day following the date of receipt of
such certificate to but not including the date the next such certificate to be
delivered under this definition is delivered or due, whichever is earlier
(except that, notwithstanding the foregoing, the Applicable Commitment Fee Rate
shall not as a consequence of this proviso be so reduced for any period during
which an Event of Default shall have occurred and be continuing):
CREDIT AGREEMENT 2
<PAGE>
Range of Leverage Ratio Applicable Commitment Fee Rate
----------------------- -------------------------------
Less than 2.0:1 0.20%
Equal to or greater than 2.0:1
but less than 2.50:1 0.25%
Equal to or greater than 2.50:1 0.375%
"APPLICABLE LENDING OFFICE" shall mean, for each Lender and for each
Type of Loan, the "Lending Office" of such Lender (or of an affiliate of such
Lender) designated for such Type of Loan on the signature pages hereof or such
other office of such Lender (or of an affiliate of such Lender) as such Lender
may from time to time specify to the Agent and the Company as the office by
which its Facility C Loans of such Type are to be made and maintained.
"APPLICABLE MARGIN" shall mean: with respect to Facility C Loans
that are Base Rate Loans, 0% and/or Eurodollar Loans, 1.0% per annum; PROVIDED
that if the Leverage Ratio as at the last day of any fiscal quarter of the
Company ending on or after the Closing Date shall fall within any of the ranges
set forth below then, upon the delivery to the Agent of a certificate of a
Responsible Financial Officer of the Company (which shall accompany the
financial statements for such fiscal quarter delivered under Section 8.01(a)
hereof on which the calculation of such Leverage Ratio is based) demonstrating
such fact prior to the end of the next succeeding fiscal quarter, the
"Applicable Margin" for each Facility C Loan shall be adjusted upwards or
downwards, as the case may be, to the rate per annum for the respective Type of
Facility C Loan set forth below opposite such range during the period commencing
on the third Business Day following the date of receipt of such certificate to
but not including the date the next succeeding such certificate to be delivered
hereunder is delivered or due, whichever is earlier (except that,
notwithstanding the foregoing, the Applicable Margin for any such Facility C
Loan shall not as a consequence of this proviso be so reduced for any period
during which an Event of Default shall have occurred and be continuing):
Applicable Margin (% p.a.)
--------------------------
Range of
Leverage Ratio Base Rate Loans Eurodollar Loans
-------------- --------------- ----------------
Less than 2.0:1 0% 0.75%
Equal to or greater
than 2.0:1 but less
than 2.50:1 0% 1.0%
Equal to or greater
than 2.50:1 but
less than 3.25:1 0% 1.25%
Equal to or greater
than 3.25:1 but
less than 3.50:1 0.25% 1.50%
CREDIT AGREEMENT 3
<PAGE>
"BANKRUPTCY CODE" shall mean the Federal Bankruptcy Code of 1978, as
amended from time to time.
"BASE RATE" shall mean, for any day, a rate per annum equal to the
higher of (a) the Federal Funds Rate for such day PLUS 1/2 of 1% and (b) the
Prime Rate for such day. Each change in any interest rate provided for herein
based upon the Base Rate resulting from a change in the Base Rate shall take
effect at the time of such change in the Base Rate.
"BASE RATE LOANS" shall mean Facility C Loans that bear interest at
rates based upon the Base Rate.
"BASIC DOCUMENTS" shall mean, collectively, the Loan Documents and,
except for purposes of the definitions of "Secured Obligations" and "Guaranteed
Obligations" in any of the Security Documents, the Purchase Agreements.
"BUSINESS DAY" shall mean (a) any day on which commercial banks are
not authorized or required to close in North Carolina and (b) if such day
relates to a borrowing of, a payment or prepayment of principal of or interest
on, a Conversion of or into, or an Interest Period for, a Eurodollar Loan or a
notice by the Company with respect to any such borrowing, payment, prepayment,
Conversion or Interest Period, any day on which dealings in Dollar deposits are
carried out in the London interbank market.
"CAPITAL EXPENDITURES" shall mean, for any period, expenditures
(including, without limitation, the aggregate amount of Capital Lease
Obligations incurred during such period) made by the Company or any of its
Subsidiaries to acquire or construct fixed assets, plant and equipment
(including renewals, improvements and replacements, but excluding repairs)
during such period computed in accordance with GAAP.
"CAPITAL LEASE OBLIGATIONS" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP, and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"CASUALTY EVENT" shall mean, with respect to any Property of any
Person, any loss of or damage to, or any condemnation or other taking of, such
Property for which such Person or any of its Subsidiaries receives insurance
proceeds, proceeds of a condemnation award or other compensation.
"CLOSING DATE" shall mean March 5, 1997.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
CREDIT AGREEMENT 4
<PAGE>
"COLLATERAL ACCOUNT" shall mean with respect to the Company and any of
its Subsidiaries, the Collateral Account as defined in the Security Agreement.
"COMMISSION" shall mean the Securities and Exchange Commission or any
governmental agency substituted therefor.
"COMMONWEALTH" shall mean the Commonwealth of Puerto Rico and its
political subdivisions, municipalities, agencies and instrumentalities.
"COMPANY" shall have the meaning assigned to such term in the preamble
of this Agreement.
"CONTINUE", "CONTINUATION" and "CONTINUED" shall refer to the
continuation pursuant to Section 2.08 hereof of a Eurodollar Loan from one
Interest Period to the next Interest Period.
"CONVERT", "CONVERSION" and "CONVERTED" shall refer to a conversion
pursuant to Section 2.08 hereof of one Type of Facility C Loans into another
Type of Facility C Loans, which may be accompanied by the transfer by a Lender
(at its sole discretion) of a Facility C Loan from one Applicable Lending Office
to another.
"DEBT SERVICE" shall mean, for any period, the sum, for the Company
and its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) all payments of principal of
Indebtedness (including, without limitation, the principal component of any
payments in respect of Capital Lease Obligations) scheduled to be made during
such period PLUS (b) all Interest Expense for such period, it being understood
that, if any installment of principal of the Facility C Loans or the Facility B
Loans shall have been prepaid during or prior to such period, the amount of
principal of the Facility C Loans and the Facility B Loans included in Debt
Service for such period shall be equal to the aggregate amount of principal of
the Facility C Loans and the Facility B Loans originally scheduled to be paid
hereunder and under the Existing Credit Agreement during such period.
"DEFAULT" shall mean an Event of Default or an event that with notice
or lapse of time or both would become an Event of Default.
"DISPOSITION" shall mean any sale, assignment, transfer or other
disposition of any Property (whether now owned or hereafter acquired) by the
Company or any of its Subsidiaries to any other Person, excluding any sale,
assignment, transfer or other disposition of any Property sold or disposed of in
the ordinary course of business and on ordinary business terms.
"DIVIDEND PAYMENT" shall mean dividends (in cash, Property or
obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any shares of any
class of stock of the Company or of any warrants, options or other rights to
acquire
CREDIT AGREEMENT 5
<PAGE>
the same (or to make any payments to any Person, such as "phantom stock"
payments, where the amount thereof is calculated with reference to the fair
market or equity value of the Company or any of its Subsidiaries), but
excluding dividends payable solely in shares of common stock of the Company.
"DOLLARS" and "$" shall mean lawful money of the United States.
"EBITDA" shall mean, for any period, the sum, for the Company and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) operating income (calculated
before income taxes, Interest Expense, extraordinary and unusual items and
income or loss attributable to equity in Affiliates) for such period PLUS
(b) depreciation and amortization (to the extent deducted in determining
operating income) for such period PLUS (c) other income not exceeding $2,000,000
for such period.
"EFFECTIVE DATE" shall mean the date on which all of the conditions to
effectiveness of this Agreement set forth in Section 6.01 hereof shall have been
satisfied or waived.
"ENVIRONMENTAL CLAIM" shall mean, with respect to any Person, any
written or oral notice, claim, demand or other communication (collectively, a
"claim") by any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, governmental response costs, damages to
natural resources or other Property, personal injuries, fines or penalties
arising out of, based on or resulting from (a) the presence, or Release into the
environment, of any Hazardous Material at any location, whether or not owned by
such Person, or (b) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law. The term "Environmental Claim" shall
include, without limitation, any claim by any governmental authority for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and any claim by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence of Hazardous Materials or arising
from alleged injury or threat of injury to health, safety or the environment.
"ENVIRONMENTAL LAWS" shall mean any and all present and future
Federal, state, local and foreign laws, rules or regulations, and any orders or
decrees, in each case as now or hereafter in effect, relating to the regulation
or protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes into the indoor or outdoor
environment, including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or toxic or
hazardous substances or wastes.
"EQUITY ISSUANCE" shall mean (a) any issuance or sale by the Company
or any of its Subsidiaries after the Closing Date of (i) any capital stock,
(ii) any warrants or options exercisable in respect of capital stock (other than
any warrants or options issued to directors,
CREDIT AGREEMENT 6
<PAGE>
officers or employees of the Company or any of its Subsidiaries, pursuant to
employee benefit plans established in the ordinary course of business and any
capital stock of the Company or any of its Subsidiaries issued upon the
exercise of such warrants or options) or (iii) any other security or
instrument representing an equity interest (or the right to obtain any equity
interest) in the Company or any of its Subsidiaries or (b) the receipt by the
Company or any of its Subsidiaries whether directly (or indirectly through
one or more of its Subsidiaries) after the Closing Date of any capital
contribution (whether or not evidenced by any equity security issued by the
recipient of such contribution); PROVIDED that Equity Issuance shall not
include (x) any such issuance or sale by any Subsidiary of the Company to the
Company or any Wholly Owned Subsidiary of the Company or (y) any capital
contribution by the Company or any Wholly Owned Subsidiary of the Company to
any Subsidiary of the Company.
"EQUITY RIGHTS" shall mean, with respect to any Person, any
subscriptions, options, warrants, commitments, preemptive rights or agreements
of any kind (including, without limitation, any stockholders' or voting trust
agreements) for the issuance, sale, registration or voting of, or securities
convertible into, any additional shares of capital stock of any class, or
partnership or other ownership interests of any type in, such Person.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA AFFILIATE" shall mean any corporation or trade or business that
is a member of any group of organizations (i) described in Section 414(b) or (c)
of the Code of which the Company is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which the Company
is a member.
"EURODOLLAR BASE RATE" shall mean, with respect to any Eurodollar Loan
for any Interest Period therefor, the rate per annum for deposits in Dollars for
a period comparable to such Interest Period which appears on the Telerate Page
3750 as of 11:00 a.m. London time two Business Days preceding the first day of
such Interest Period or, if Telerate Page 3750 is unavailable at such time, the
rate which appears on the Reuters Screen ISDA Page as of such date and time;
PROVIDED, however, that if the Agent determines that the relevant foregoing
source is unavailable for the relevant Interest Period, Eurodollar Base Rate
shall mean the rate of interest determined by the Agent to be the average
(rounded upward, if necessary, to the nearest 1/100th of 1%) of the rates per
annum at which deposits in Dollars in immediately available funds are offered to
the Agent or other money center banks two Business Days preceding the first day
of such Interest Period by leading banks in the London interbank market as of
11:00 a.m. London time for delivery on the first day of such Interest Period,
for the number of days comprised therein and in an amount comparable to the
amount of the relevant Eurodollar Loan.
"EURODOLLAR LOANS" shall mean Facility C Loans that bear interest at
rates based on rates referred to in the definition of "Eurodollar Base Rate" in
this Section 1.01.
CREDIT AGREEMENT 7
<PAGE>
"EURODOLLAR RATE" shall mean, for any Eurodollar Loan for any Interest
Period therefor, a rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) determined by the Agent to be equal to the Eurodollar Base Rate for
such Eurodollar Loan for such Interest Period divided by 1 MINUS the Reserve
Requirement (if any) for such Eurodollar Loan for such Interest Period.
"EVENT OF DEFAULT" shall have the meaning assigned to such term in
Section 9 hereof.
"EXCESS CASH FLOW" shall mean, for any period, the sum, determined
without duplication, for the Company and its Subsidiaries, of (a) EBITDA for
such period MINUS (b) Capital Expenditures made during such period (other than
Capital Expenditures made from the proceeds of Indebtedness permitted under
Section 8.07 hereof) MINUS (c) the aggregate amount of Debt Service for such
period PLUS (d) decreases (if any) (or MINUS increases (if any)) in Working
Capital for such period, MINUS (e) income taxes paid in cash for such period.
"EXCLUDED DISPOSITION" shall mean the Disposition of (i) an Investment
Tax Credit or (ii) any motor vehicles or other equipment no longer used or
useful in the business of the Company or any of its Subsidiaries to the extent
the proceeds thereof are used to acquire similar replacement Property within a
period of 30 days after the end of the fiscal quarter in which such Disposition
was made.
"EXISTING SUBSIDIARY GUARANTEE AND SECURITY AGREEMENT" shall mean the
Subsidiary Guarantee and Security Agreement dated as of March 31, 1995 between
each Subsidiary of the Company party thereto and the Agent, as the same shall be
modified and supplemented and in effect from time to time.
"FACILITY A COMMITMENT" shall have the meaning assigned thereto in the
Existing Credit Agreement.
"FACILITY A COMMITMENT PERCENTAGE" shall have the meaning assigned
thereto in the Existing Credit Agreement.
"FACILITY A LENDER" shall have the meaning assigned thereto in the
Existing Credit Agreement.
"FACILITY A LOAN" shall have the meaning assigned thereto in the
Existing Credit Agreement.
"FACILITY B COMMITMENT" shall have the meaning assigned thereto in the
Existing Credit Agreement.
"FACILITY B COMMITMENT PERCENTAGE" shall have the meaning assigned
thereto in the Existing Credit Agreement.
CREDIT AGREEMENT 8
<PAGE>
"FACILITY B LENDER" shall have the meaning assigned thereto in the
Existing Credit Agreement.
"FACILITY B LOAN" shall have the meaning assigned thereto in the
Existing Credit Agreement.
"FACILITY C COMMITMENT" shall mean, for each Lender, the obligation
of such Lender to make Facility C Loans to the Company in an aggregate amount
at any one time outstanding up to but not exceeding the amount set forth
opposite the name of such Lender on the signature pages hereof under the
caption "Facility C Commitment" (as the same may be reduced from time to time
pursuant to Section 2.03 hereof). The original aggregate principal amount of
the Facility C Commitments is $100,000,000.
"FACILITY C COMMITMENT PERCENTAGE" shall mean, with respect to any
Facility C Lender, the ratio of (a) the amount of the Facility C Commitment
of such Lender to (b) the aggregate amount of the Facility C Commitments of
all of the Facility C Lenders.
"FACILITY C COMMITMENT TERMINATION DATE" shall mean the Quarterly
Date falling on or nearest to March 31, 1999.
"FACILITY C LENDERS" shall mean the Lenders having Facility C
Commitments and/or holding Facility C Loans from time to time.
"FACILITY C LOANS" shall mean the loans provided for by Section
2.01(a) hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"FACILITY C NOTES" shall mean the promissory notes provided for by
Section 2.07(a) hereof and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and
supplemented and in effect from time to time.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the
Business Day next succeeding such day, PROVIDED that (a) if the day for which
such rate is to be determined is not a Business Day, the Federal Funds Rate
for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day and (b) if
such rate is not so published for any Business Day, the Federal Funds Rate
for such Business Day shall be the average rate charged to First Union on
such Business Day on such transactions as determined by the Agent.
"FIRST UNION" shall mean First Union National Bank of North
Carolina.
"FIXED CHARGES" shall mean, for any period, the sum, for the
Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP),
CREDIT AGREEMENT 9
<PAGE>
of the following: (a) the aggregate amount of Debt Service for such period,
PLUS (b) the aggregate amount of taxes paid in respect of the income or
profit of the Company and its Subsidiaries for such period, PLUS (c) Capital
Expenditures made during such period, PLUS (d) any Dividend Payments made for
such period PLUS (e) Management Fees for such period (but only to the extent
such Management Fees are not included in the calculation of EBITDA); provided
that Capital Expenditures shall not include Capital Expenditures permitted to
be incurred pursuant to the last sentence of Section 8.14 hereof.
"FIXED CHARGES RATIO" shall mean, as at any date, the ratio of (a)
EBITDA for the period of four consecutive fiscal quarters ending on or most
recently ended prior to such date to (b) Fixed Charges for such period.
"GAAP" shall mean generally accepted accounting principles applied
on a basis consistent with those that, in accordance with the last sentence
of Section 1.02(a) hereof, are to be used in making the calculations for
purposes of determining compliance with this Agreement.
"GARRIDO" shall mean Garrido y Compa a, Inc., a Puerto Rico
corporation.
"GARRIDO NEGATIVE PLEDGE AGREEMENT" shall have the meaning assigned
to such term in the Existing Credit Agreement.
"GUARANTEE" shall mean a guarantee, an endorsement, a contingent
agreement to purchase or to furnish funds for the payment or maintenance of,
or otherwise to be or become contingently liable under or with respect to,
the Indebtedness, other obligations, net worth, working capital or earnings
of any Person, or a guarantee of the payment of dividends or other
distributions upon the stock or equity interests of any Person, or an
agreement to purchase, sell or lease (as lessee or lessor) Property,
products, materials, supplies or services primarily for the purpose of
enabling a debtor to make payment of such debtor's obligations or an
agreement to assure a creditor against loss, and including, without
limitation, causing a bank or other financial institution to issue a letter
of credit or other similar instrument for the benefit of another Person, but
excluding endorsements for collection or deposit in the ordinary course of
business. The terms "GUARANTEE" and "GUARANTEED" used as a verb shall have a
correlative meaning.
"GUARANTEE AGREEMENT" shall mean the Guarantee Agreement dated as
of September 6, 1996 between Suiza Dairy, Suiza Fruit, Neva Plastics, Reddy
Ice Corporation, Velda Farms, Inc., Suiza Management Corporation and the
Agent, as the same shall be modified and supplemented and in effect from time
to time.
"HAZARDOUS MATERIAL" shall mean, collectively, (a) any petroleum or
petroleum products, flammable materials, explosives, radioactive materials,
asbestos, urea formaldehyde foam insulation, and transformers or other
equipment that contain polychlorinated biphenyls ("PCB'S"), (b) any chemicals
or other materials or substances that are now or hereafter become defined as
or included in the definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "extremely hazardous wastes", "restricted hazardous
wastes", "toxic substances", "toxic pollutants", "contaminants", "pollutants"
or words of similar import under
CREDIT AGREEMENT 10
<PAGE>
any Environmental Law and (c) any other chemical or other material or
substance, exposure to which is now or hereafter prohibited, limited or
regulated under any Environmental Law.
"INDEBTEDNESS" shall mean, for any Person: (a) obligations
created, issued or incurred by such Person for borrowed money (whether by
loan, the issuance and sale of debt securities or the sale of Property to
another Person subject to an understanding or agreement, contingent or
otherwise, to repurchase such Property from such Person); (b) obligations of
such Person to pay the deferred purchase or acquisition price of Property or
services, other than trade accounts payable (other than for borrowed money)
arising, and accrued expenses incurred, in the ordinary course of business so
long as such trade accounts payable are payable within 120 days of the date
the respective goods are delivered or the respective services are rendered;
(c) Indebtedness of others secured by a Lien on the Property of such Person,
whether or not the respective indebtedness so secured has been assumed by
such Person; (d) obligations of such Person in respect of letters of credit
or similar instruments issued or accepted by banks and other financial
institutions for account of such Person; (e) Capital Lease Obligations of
such Person; and (f) Indebtedness of others Guaranteed by such Person.
"INTEREST COVERAGE RATIO" shall mean, as at any date, the ratio of
(a) EBITDA for a period of four consecutive fiscal quarters ending on, or
most recently ended prior to, such date to (b) Interest Expense for such
period.
"INTEREST EXPENSE" shall mean, for any period, the sum, for the
Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) all interest in
respect of Indebtedness (including, without limitation, the interest
component of any payments in respect of Capital Lease Obligations, but
excluding amortization of any deferred loan costs incurred in connection with
the transactions contemplated hereby or by the Existing Credit Agreement)
capitalized or expensed during such period (whether or not actually paid
during such period), but excluding any non-cash interest, PLUS (b) the net
amount payable (or MINUS the net amount receivable) under Interest Rate
Protection Agreements during such period (whether or not actually paid or
received during such period) MINUS (c) all interest income for such period.
"INTEREST PERIOD" shall mean with respect to any Eurodollar Loan,
each period commencing on the date such Eurodollar Loan is made or Converted
from a Base Rate Loan or the last day of the next preceding Interest Period
for such Eurodollar Loan and ending on the numerically corresponding day in
the first, second, third or sixth calendar month thereafter, as the Company
may select as provided in Section 4.05 hereof, except that each Interest
Period for a Eurodollar Loan that commences on the last Business Day of a
calendar month (or on any day for which there is no numerically corresponding
day in the appropriate subsequent calendar month) shall end on the last
Business Day of the appropriate subsequent calendar month. Notwithstanding
the foregoing: (i) no Interest Period for any Eurodollar Loan may commence
before and end after any Principal Payment Date for the Facility C Loans
unless, after giving effect thereto, the aggregate principal amount of the
Facility C Loans having Interest Periods that end after such Principal
Payment Date shall be equal to or less than the aggregate principal amount of
the Facility C Loans scheduled to be outstanding after giving effect to the
payments of
CREDIT AGREEMENT 11
<PAGE>
principal required to be made on such Principal Payment Date; (ii) each
Interest Period that would otherwise end on a day that is not a Business Day
shall end on the next succeeding Business Day (or, if such next succeeding
Business Day falls in the next succeeding calendar month, on the next
preceding Business Day); and (iii) notwithstanding clauses (i) and (ii)
above, no Interest Period shall have a duration of less than one month for
any Facility C Loan and, if the Interest Period for any such Facility C Loan
would otherwise be a shorter period, such Facility C Loan shall not be
available as a Eurodollar Loan hereunder for such period.
"INTEREST RATE PROTECTION AGREEMENT" shall mean, for any Person, an
interest rate swap, cap or collar agreement or similar arrangement between
such Person and one or more financial institutions providing for the transfer
or mitigation of interest risks either generally or under specific
contingencies.
"INTEREST RATE PROTECTION OBLIGATIONS" shall mean the obligations
of any Obligor in respect of Interest Rate Protection Agreements permitted
under Section 8.08(d) hereof.
"INVESTMENT" shall mean, for any Person: (a) the acquisition
(whether for cash, Property, services or securities or otherwise) of capital
stock, bonds, notes, debentures, partnership or other ownership interests or
other securities of any other Person or any agreement to make any such
acquisition (including, without limitation, any "short sale" or any sale of
any securities at a time when such securities are not owned by the Person
entering into such sale); (b) the making of any deposit with, or advance,
loan or other extension of credit to, any other Person (including the
purchase of Property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such Property to such Person),
but excluding any such advance, loan or extension of credit having a term not
exceeding 90 days representing the purchase price of inventory or supplies
sold by such Person in the ordinary course of business); (c) the entering
into of any Guarantee of, or other contingent obligation with respect to,
Indebtedness or other liability of any other Person and (without duplication)
any amount committed to be advanced, lent or extended to such Person; or (d)
the entering into of any Interest Rate Protection Agreement.
"INVESTMENT TAX CREDIT" shall mean an investment tax credit to
which the Company or any of its Subsidiaries may be entitled pursuant to the
Puerto Rico Agricultural Tax Incentives Act of 1995.
"LEVERAGE RATIO" shall mean, as at any date, the ratio of (a) the
aggregate outstanding principal amount of Indebtedness at such date to (b)
EBITDA for the period of four consecutive fiscal quarters ending on, or most
recently ended prior to, such date; provided that if the Company or any of
its Subsidiaries shall have acquired any business, Property or Person during
such period (whether before, on or after the date hereof), EBITDA shall, to
the extent the Company shall have delivered audited financial statements (or,
if audited financial statements are not available to the Company, unaudited
financial statements (i) reviewed by independent certified accountants of
recognized national standing and acceptable to the Agent and (ii) in form
satisfactory to the Agent) for the acquired business, Property or Person for
such period, be
CREDIT AGREEMENT 12
<PAGE>
adjusted to reflect on a pro forma basis EBITDA for such business, Property
or Person as if such business, Property or Person had been acquired at the
beginning of such period.
"LIEN" shall mean, with respect to any Property, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in respect
of such Property. For purposes of this Agreement and the other Loan
Documents, a Person shall be deemed to own, subject to a Lien, any Property
that it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement (other than an operating lease) relating to such Property.
"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the
Existing Credit Agreement, the Facility C Notes, the Facility A Notes, the
Facility B Notes and the Security Documents.
"MAJORITY LENDERS" shall mean, as at any time, Lenders having at
least a majority of the sum of (a) the aggregate unused amount, if any, of
the Facility C Commitments as at such time PLUS (b) the aggregate outstanding
principal amount of the Facility C Loans at such time.
"MANAGEMENT FEES" shall mean, for any period, any amounts paid or
incurred by the Company or any of its Subsidiaries to any Person on account
of fees, salaries and other compensation in respect of services rendered in
connection with the management or supervision of the Company and/or any of
its Subsidiaries (but excluding customary and reasonable compensation and
other benefits paid or provided to officers, employees and directors for
services rendered to the Company or any of its Subsidiaries in such
capacities or any such amounts by any Subsidiary of the Company to the
Company or any other Subsidiary of the Company).
"MARGIN STOCK" shall mean "margin stock" within the meaning of
Regulations U and X.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
(a) the Property, business, operations, financial condition, prospects,
liabilities or capitalization of the Company and its Subsidiaries taken as a
whole, (b) the ability of any Obligor to perform its obligations under any of
the Loan Documents to which it is a party, (c) the validity or enforceability
of any of the Loan Documents, (d) the rights and remedies of the Lenders and
the Agent under any of the Loan Documents or (e) the timely payment of the
principal of or interest on the Facility C Loans or other amounts payable in
connection therewith or under the Loan Documents.
"MODEL DAIRY" shall mean Model Dairy, Inc., a Delaware corporation.
"MORTGAGES" shall mean, collectively, (a) the mortgages or deeds of
trust identified in Schedule VII hereto and (b) one or more mortgages or
deeds of trust, in the respective forms of Exhibits C and D hereto or of
Exhibits B and C to the Existing Credit Agreement (with such modifications
thereto requested by the Agent as may be appropriate to
CREDIT AGREEMENT 13
<PAGE>
effect a lien on real property in the state where the respective property to
be covered by such instrument is located), executed by the respective
Obligors who own or lease such property in favor of the Agent (or, in the
case of a deed of trust, in favor of the trustee for the benefit of the Agent
and the Lenders and/or the lenders under the Existing Credit Agreement, as
the case may be) pursuant to Sections 8.19(c) or 8.19(d) hereof or of the
Existing Credit Agreement covering the respective Properties and/or leasehold
interests identified in Schedule IV hereto or subject to the requirements of
said Sections 8.19(c) or 8.19(d), in each case as the same shall be modified
and supplemented and in effect from time to time.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan defined as
such in Section 3(37) of ERISA to which contributions have been made by the
Company or any ERISA Affiliate and that is covered by Title IV of ERISA.
"NET AVAILABLE PROCEEDS" shall mean:
(a) in the case of any Disposition, the amount of Net Cash Payments
received in connection with such Disposition;
(b) in the case of any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation received
by the Company and its Subsidiaries in respect of such Casualty Event net
of (i) reasonable expenses incurred by the Company and its Subsidiaries
in connection therewith and (ii) contractually required repayments of
Indebtedness to the extent secured by a Lien on such Property and any
income and transfer taxes payable by the Company or any of its Subsidiaries
in respect of such Casualty Event; and
(c) in the case of any Equity Issuance, the aggregate amount of
all cash received by the Company and its Subsidiaries in respect of such
Equity Issuance net of reasonable expenses incurred by the Company and
its Subsidiaries in connection therewith.
"NET CASH PAYMENTS" shall mean, with respect to any Disposition,
the aggregate amount of all cash payments, and the fair market value of any
non-cash consideration, received by the Company and its Subsidiaries directly
or indirectly in connection with such Disposition; PROVIDED that (a) Net Cash
Payments shall be net of (i) the amount of any legal, title and recording tax
expenses, commissions and other fees and expenses paid by the Company and its
Subsidiaries in connection with such Disposition and (ii) any Federal, state
and local income or other taxes estimated to be payable by the Company and
its Subsidiaries as a result of such Disposition (but only to the extent that
such estimated taxes are in fact paid to the relevant Federal, state or local
governmental authority within six months of the date of such Disposition) and
(b) Net Cash Payments shall be net of any repayments by the Company or any of
its Subsidiaries of Indebtedness to the extent that (i) such Indebtedness is
secured by a Lien on the Property that is the subject of such Disposition and
(ii) the transferee of (or holder of a Lien on) such Property requires that
such Indebtedness be repaid as a condition to the Disposition thereof.
CREDIT AGREEMENT 14
<PAGE>
"NET PURCHASE PRICE" shall mean 100% of the purchase price
(including noncash compensation) paid by the Company or any of its
Subsidiaries for any business, Property or Person in connection with a
Permitted Acquisition MINUS any cash on the balance sheet of the Person or
included in the business or Property being acquired pursuant to such
Permitted Acquisition.
"NET WORTH" shall mean, as at any date, the sum for the Company and
its Subsidiaries (determined on a consolidated basis without duplication) of
(a) the amount of capital stock PLUS (b) the amount of additional paid-in
capital plus (c) the amount of retained earnings (or, in the case of any
retained earnings deficit, MINUS the amount of such deficit).
"NEVA PLASTICS" shall mean Neva Plastics Manufacturing Corp., a
Delaware corporation.
"OBLIGOR" shall mean the Company and each Subsidiary of the Company
party to any Security Document.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PERMITTED ACQUISITION" shall mean any acquisition by the Company
or any of its Subsidiaries of any business or Property from, or capital stock
of, any Person, PROVIDED that, unless otherwise consented to in writing by
the Majority Lenders (i) the Net Purchase Price of such acquisition shall not
exceed $30,000,000, (ii) if the subject of such acquisition is a Person, the
Company and/or its Subsidiaries shall not acquire less than 90% of the issued
and outstanding ownership interests (including, without limitation, warrants,
options or other securities convertible into ownership interests) in such
Person, (iii) prior to such acquisition, the Company shall have delivered to
the Agent for further distribution to the Lenders copies of the proposed
acquisition agreement relating to such acquisition, all material documents
related thereto and at the reasonable request of the Agent, such other
material information respecting such business, Property or Person, as the
case may be, obtained by the Company in the exercise of its due diligence,
(iv) at the time of such acquisition, the Company or its Subsidiary, as the
case may be, shall grant a security interest in such business or Property or
pledge such ownership interests to the Agent for the benefit of the Lenders,
except that no such security interest shall be granted in any parcel of real
property or leasehold interest having a current market value of less than
$1,500,000, as demonstrated in a manner reasonably satisfactory to the Agent,
at the time of acquisition thereof, (v) such business, Property or Persons
shall be in the same line or lines of business currently engaged in by the
Company or any of its Subsidiaries and (vi) on a pro forma basis, after
giving effect to such acquisition, the Company shall be in compliance with
Sections 8.10, 8.11, 8.12, 8.13 and 8.14 hereof.
"PERMITTED INVESTMENTS" shall mean: (a) direct obligations of the
United States, or of any agency thereof, or obligations guaranteed as to
principal and interest by the United States, or of any agency thereof, in
either case maturing not more than one year from the date of acquisition
thereof; (b) direct obligations issued by any state of the United States or
any political
CREDIT AGREEMENT 15
<PAGE>
subdivision of any such state or any public instrumentality thereof maturing
within one year from the date of acquisition thereof and, at the time of such
acquisition, having the highest rating obtainable from either Standard &
Poor's Ratings Group, a division of McGraw-Hill, Inc. ("S&P") or Moody's
Investors Services, Inc. ("MOODY'S"); (c) certificates of deposit issued by
any bank or trust company organized under the laws of the United States or
any state thereof or the Commonwealth and having capital, surplus and
undivided profits of at least $500,000,000, maturing not more than six months
from the date of acquisition thereof; (d) commercial paper rated A-1 or
better or P-1 by S&P or Moody's, respectively, maturing not more than six
months from the date of acquisition thereof; and (e) Eurodollar time deposits
having a maturity of less than six months purchased directly from any such
bank (whether such deposit is with such bank or any other such bank).
"PERSON" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization
or government (or any agency, instrumentality or political subdivision
thereof).
"PLAN" shall mean an employee benefit or other plan established or
maintained by the Company or any ERISA Affiliate and that is covered by Title
IV of ERISA, other than a Multiemployer Plan.
"POST-DEFAULT RATE" shall mean, in respect of any principal of any
Facility C Loan or any other amount under this Agreement, any Facility C Note
or any other Loan Document that is not paid when due (whether at stated
maturity, by acceleration, by mandatory prepayment or otherwise), and in
respect of any principal of any Facility C Loan during any period commencing
upon the occurrence of any Event of Default and thereafter for so long as any
Event of Default shall be continuing, a rate per annum during the period from
and including the due date to but excluding the earlier of the date on which
such amount is paid in full or such Event of Default ceases to be continuing
equal to 2% PLUS the Base Rate as in effect from time to time PLUS the
Applicable Margin for Base Rate Loans (PROVIDED that, if the amount so in
default is principal of a Eurodollar Loan and the due date thereof is a day
other than the last day of the Interest Period therefor, the "Post-Default
Rate" for such principal shall be, for the period from and including such due
date to but excluding the last day of such Interest Period, 2% PLUS the
interest rate for such Eurodollar Loan as provided in Section 3.02(b) hereof
and, thereafter, the rate provided for above in this definition).
"PRIME RATE" shall mean the rate of interest from time to time
announced by First Union at its principal office as its prime commercial
lending rate.
"PRINCIPAL PAYMENT DATES" shall mean the Quarterly Dates falling on
or nearest to March 31, June 30, September 30 and December 31 of each year,
commencing with June 30, 1999, through and including March 31, 2003.
"PROCESS AGENT" shall have the meaning assigned to such term in
Section 11.10(c) hereof.
CREDIT AGREEMENT 16
<PAGE>
"PROPERTY" shall mean any right or interest in or to property of
any kind whatsoever, whether real, personal (including, without limitation,
cash) or mixed and whether tangible or intangible.
"PUERTO RICO SECURITY DOCUMENTS" shall mean each of the agreements
listed in Schedule VI hereto, and each of the Additional Puerto Rico Security
Documents, in each case as any such agreement shall be modified and
supplemented and in effect from time to time.
"PURCHASE AGREEMENTS" shall mean, collectively, each Purchase
Agreement between the Company or any of its Subsidiaries and the seller of
the business, Property or Person purchased by the Company or such Subsidiary
pursuant to a Permitted Acquisition financed under this Agreement.
"QUARTERLY DATES" shall mean the last Business Day of March, June,
September and December in each year, the first of which shall be March 31,
1997.
"REGULATIONS A, D, U AND X" shall mean, respectively, Regulations
A, D, U and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be modified and supplemented and in effect from
time to time.
"REGULATORY CHANGE" shall mean, with respect to any Lender, any
change after the date of this Agreement in United States, Federal, state or
foreign law or regulations or in the law or regulations of the Commonwealth
(including, without limitation, Regulation D) or the adoption or making after
such date of any interpretation, directive or request applying to a class of
banks including such Lender of or under any Federal, state or foreign law or
regulations or in the law or regulations of the Commonwealth (whether or not
having the force of law and whether or not failure to comply therewith would
be unlawful) by any court or governmental or monetary authority charged with
the interpretation or administration thereof.
"RELEASE" shall mean any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment, including, without
limitation, the movement of Hazardous Materials through ambient air, soil,
surface water, ground water, wetlands, land or subsurface strata.
"RESERVE REQUIREMENT" shall mean, for any Interest Period for any
Eurodollar Loan, the average maximum rate at which reserves (including,
without limitation, any marginal, supplemental or emergency reserves) are
required to be maintained during such Interest Period under Regulation D by
member banks of the Federal Reserve System in New York City with deposits
exceeding one billion Dollars against "Eurocurrency liabilities" (as such
term is used in Regulation D). Without limiting the effect of the foregoing,
the Reserve Requirement shall include any other reserves required to be
maintained by such member banks by reason of any Regulatory Change with
respect to (i) any category of liabilities that includes deposits by
reference to which the Eurodollar Base Rate is to be determined as provided
in the definition of "Eurodollar Base Rate" in this Section 1.01 or (ii) any
category of extensions of credit or other assets that includes Eurodollar
Loans.
CREDIT AGREEMENT 17
<PAGE>
"RESPONSIBLE FINANCIAL OFFICER" shall mean, with respect to any
Person, the Chairman of the Board of Directors, the President, the Chief
Executive Officer, the Chief Financial Officer or the Treasurer of such
Person.
"SECURITY AGREEMENT" shall mean the Security Agreement dated as of
March 31, 1995 between the Company and the Agent, as amended by the Amendment
to Security Agreement dated as of July 17, 1996 between the Company and the
Agent and as amended by Amendment No. 2 to the Security Agreement between the
Company and the Agent dated as of September 6, 1996, and Amendment No. 3 to
the Security Agreement, dated as of December 2, 1996 between the Company and
the Agent, and as further modified and supplemented and in effect from time
to time.
"SECURITY DOCUMENTS" shall mean, collectively, the Security
Agreement, the Mortgages, each Supplemental Subsidiary Guarantee and Security
Agreement, the Existing Subsidiary Guarantee and Security Agreement, the
Guarantee Agreement, the Puerto Rico Security Documents and all Uniform
Commercial Code financing statements and/or other filings required hereby or
thereby to be filed with respect to the security interests in personal
Property and fixtures created pursuant hereto or thereto.
"SUBORDINATED NOTE PURCHASE AGREEMENT" shall mean the Note Purchase
Agreement dated as of March 31, 1995, as amended by and among the Company,
John Hancock Mutual Life Insurance Company, John Hancock Life Insurance
Company of America, Pacific Mutual Life Insurance Company and PM Group Life
Insurance Co.
"SUBSIDIARY" shall mean, with respect to any Person, any
corporation, partnership or other entity of which at least a majority of the
securities or other ownership interests having by the terms thereof ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions of such corporation, partnership or other entity
(irrespective of whether or not at the time securities or other ownership
interests of any other class or classes of such corporation, partnership or
other entity shall have or might have voting power by reason of the happening
of any contingency) is at the time directly or indirectly owned or controlled
by such Person or one or more Subsidiaries of such Person or by such Person
and one or more Subsidiaries of such Person.
"SUBSIDIARY GUARANTORS" shall mean Suiza Dairy, Suiza Fruit, Model
Dairy, Neva Plastics, Reddy Ice Corporation, Swiss Dairy, Velda Farms, Inc.
and Suiza Management Corporation, each a Delaware corporation, and each
Supplemental Guarantor.
"SUIZA DAIRY" shall mean Suiza Dairy Corporation, a Delaware
corporation.
"SUIZA FRUIT" shall mean Suiza Fruit Corporation, a Delaware
corporation.
"SUPPLEMENTAL GUARANTOR" shall mean each Subsidiary of the Company
party to a Supplemental Subsidiary Guaranty and Security Agreement.
CREDIT AGREEMENT 18
<PAGE>
"SUPPLEMENTAL SUBSIDIARY GUARANTEE AND SECURITY AGREEMENT" shall
mean, collectively, (i) the Supplemental Subsidiary Guarantee and Security
Agreement dated as of September 6, 1996 between the Agent and Swiss Dairy,
(ii) the Supplemental Guarantee and Security Agreement dated as of December
2, 1996 between the Agent and Model Dairy and (iii) each Supplemental
Subsidiary Guarantee and Security Agreement substantially in the form of
Exhibit B hereto, as the same shall be modified and supplemented and in
effect from time to time.
"SWISS DAIRY" shall mean Swiss Dairy Corporation, a Delaware
corporation and a Wholly Owned Subsidiary of the Company.
"TAXES" shall have the meaning assigned to such term in Section
5.06(a) hereof.
"TYPE" shall have the meaning assigned to such term in Section 1.03
hereof.
"UNITED STATES" shall mean the United States of America.
"U.S. TAXES" shall have the meaning assigned to such term in
Section 5.06(b) hereof.
"WHOLLY OWNED SUBSIDIARY" shall mean, with respect to any Person,
any corporation, partnership or other entity of which all of the equity
securities or other ownership interests (other than, in the case of a
corporation, directors' qualifying shares) are directly or indirectly owned
or controlled by such Person or one or more Wholly Owned Subsidiaries of such
Person or by such Person and one or more Wholly Owned Subsidiaries of such
Person.
"WORKING CAPITAL" shall mean, for any period, the excess of (a) the
aggregate amount of inventory, accounts receivable and prepaid expenses of
the Company and its Subsidiaries over (b) the aggregate amount of accounts
payable and current accrued expenses of the Company and its Subsidiaries.
1.02 ACCOUNTING TERMS AND DETERMINATIONS.
(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to
the Lenders hereunder shall (unless otherwise disclosed to the Lenders in
writing at the time of delivery thereof in the manner described in subsection
(b) below) be prepared, in accordance with generally accepted accounting
principles applied on a basis consistent with those used in the preparation
of the latest financial statements furnished to the Lenders hereunder. All
calculations made for the purposes of determining compliance with this
Agreement shall (except as otherwise expressly provided herein) be made by
application of generally accepted accounting principles applied on a basis
consistent with those used in the preparation of the latest annual or
quarterly financial statements furnished to the Lenders pursuant to Section
8.01 hereof unless (i) the Company shall have objected to determining such
CREDIT AGREEMENT 19
<PAGE>
compliance on such basis at the time of delivery of such financial statements
or (ii) the Majority Lenders shall so object in writing within 30 days after
delivery of such financial statements, in either of which events such
calculations shall be made on a basis consistent with those used in the
preparation of the latest financial statements as to which such objection
shall not have been made.
(b) The Company shall deliver to the Lenders at the same time as
the delivery of any annual or quarterly financial statement under Section
8.01 hereof (i) a description in reasonable detail of any material variation
between the application of accounting principles employed in the preparation
of such statement and the application of accounting principles employed in
the preparation of the next preceding annual or quarterly financial
statements as to which no objection has been made in accordance with the last
sentence of subsection (a) above and (ii) reasonable estimates of the
difference between such statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of compliance
with the covenants set forth in Section 8 hereof, the Company will not,
without the prior consent of the Majority Lenders, change the last day of its
fiscal year from December 31 of each year, or the last days of the first
three fiscal quarters in each of its fiscal years from March 31, June 30 and
September 30 of each year, respectively.
1.03 TYPES OF FACILITY C LOANS. Facility C Loans hereunder are
distinguished by "Type". The "Type" of a Facility C Loan refers to whether
such Facility C Loan is a Base Rate Loan or a Eurodollar Loan, each of which
constitutes a Type.
Section 2. FACILITY C COMMITMENTS, FACILITY C LOANS, FACILITY C
NOTES AND PREPAYMENTS.
2.01 FACILITY C LOANS.
(a) FACILITY C LOANS. Each Lender severally agrees, on the terms
and conditions of this Agreement, to make loans to the Company in Dollars
during the period from and including the date hereof to but not including the
Facility C Commitment Termination Date in an aggregate principal amount at
any one time outstanding up to but not exceeding the amount of the Facility C
Commitment of such Lender as in effect from time to time. Subject to the
terms and conditions of this Agreement, during such period the Company may
borrow, repay and reborrow the amount of the Facility C Commitments by means
of Base Rate Loans and/or Eurodollar Loans and prior to the final maturity
date of the Facility C Loans may Convert Facility C Loans of one Type into
Facility C Loans of another Type (as provided in Section 2.08 hereof) or
Continue Facility C Loans of one Type as Facility C Loans of the same Type
(as provided in Section 2.08 hereof).
(b) LIMIT ON CERTAIN FACILITY C LOANS. No more than four separate
Interest Periods in respect of Eurodollar Loans from each Lender may be
outstanding at any one time.
CREDIT AGREEMENT 20
<PAGE>
2.02 BORROWINGS.
(a) The Company shall give the Agent notice of each borrowing
hereunder as provided in Section 4.05 hereof.
(b) With respect to each borrowing, not later than 3:30 p.m.
Charlotte, North Carolina time on the date specified for such borrowing, each
Lender shall make available the amount of the Facility C Loan or Facility C
Loans to be made by it to the Company on such date to the Agent at any account
designated by the Agent, in immediately available funds, for account of the
Company. The amount so received by the Agent shall, subject to the terms and
conditions of this Agreement, be made available to the Company by depositing the
same, in immediately available funds, in an account designated by the Company or
otherwise upon its instructions.
2.03 CHANGES OF FACILITY C COMMITMENTS.
(a) The Company shall have the right at any time or from time to time
(i) so long as no Facility C Loans are outstanding, to terminate the Facility C
Commitments, and (ii) to reduce the aggregate unused amount of any of the
Facility C Commitments; PROVIDED that (x) the Company shall give notice of each
such termination or reduction as provided in Section 4.05 hereof and (y) each
such partial reduction shall be in an aggregate amount at least equal to
$2,000,000 (or a larger multiple of $1,000,000).
(b) The Facility C Commitments once terminated or reduced may not be
reinstated.
2.04 COMMITMENT FEE. The Company shall pay to the Agent for account
of each Lender a commitment fee on the daily average unused amount of such
Lender's Facility C Commitment, for the period from and including the date
hereof to but not including the earlier of the date such Facility C Commitment
is terminated and the Facility C Commitment Termination Date, at a rate per
annum equal to the Applicable Commitment Fee Rate. Accrued commitment fees
shall be payable on each Quarterly Date and on the earlier of (i) the date the
relevant Facility C Commitments are terminated and (ii) the Facility C
Commitment Termination Date.
2.05 LENDING OFFICES. The Facility C Loans of each Type made by each
Lender shall be made and maintained at such Lender's Applicable Lending Office
for Facility C Loans of such Type.
2.06 SEVERAL OBLIGATIONS; REMEDIES INDEPENDENT. The failure of any
Lender to make any Facility C Loan to be made by it on the date specified
therefor shall not relieve any other Lender of its obligation to make its
Facility C Loan on such date, but neither any Lender nor the Agent shall be
responsible for the failure of any other Lender to make a Facility C Loan to be
made by such other Lender, and no Lender shall have any obligation to the Agent
or any other Lender for the failure by such Lender to make any Facility C Loan
required to be made by such Lender. The amounts payable by the Company at any
time hereunder and under the Facility C Notes to each Lender shall be a separate
and independent debt and each Lender shall be
CREDIT AGREEMENT 21
<PAGE>
entitled, subject to the prior written consent of the Majority Lenders, to
protect and enforce its rights arising out of this Agreement and the Facility
C Notes, and it shall not be necessary for any other Lender or the Agent to
be joined as an additional party in, any proceedings for such purposes.
2.07 FACILITY C NOTES.
(a) The Facility C Loans made by each Lender shall be evidenced by a
single promissory note of the Company substantially in the form of Exhibit A
hereto, dated the Effective Date hereof, payable to such Lender in a principal
amount equal to the amount of its Facility C Commitment as originally in effect
and otherwise duly completed.
(b) The date, amount, Type, interest rate and duration of Interest
Period (if applicable) of each Facility C Loan made by each Lender, and each
payment made on account of the principal thereof, shall be recorded by such
Lender on its books and, prior to any transfer of the Facility C Note evidencing
the Facility C Loans held by it, endorsed by such Lender on the schedule
attached to such Facility C Note or any continuation thereof; PROVIDED that the
failure of such Lender to make any such recordation or endorsement shall not
affect the obligations of the Company to make a payment when due of any amount
owing hereunder or under such Facility C Note in respect of the Facility C Loans
to be evidenced by such Facility C Note.
(c) No Lender shall be entitled to have its Facility C Note
subdivided, by exchange for promissory notes of lesser denominations or
otherwise, except in connection with a permitted assignment of all or any
portion of such Lender's relevant Facility C Commitment, Facility C Loans and
Facility C Note pursuant to Section 11.06(b) hereof.
2.08 OPTIONAL PREPAYMENTS AND CONVERSIONS OR CONTINUATIONS OF
FACILITY C LOANS. Subject to Section 4.04 hereof, the Company shall have the
right to prepay Facility C Loans, or to Convert Facility C Loans of one Type
into Facility C Loans of another Type or Continue Facility C Loans of one
Type as Facility C Loans of the same Type, at any time or from time to time,
PROVIDED that:
(a) the Company shall give the Agent notice of each such prepayment,
Conversion or Continuation as provided in Section 4.05 hereof (and, upon the
date specified in any such notice of prepayment, the amount to be prepaid shall
become due and payable hereunder);
(b) Eurodollar Loans may be prepaid or Converted on any day, PROVIDED
that, if such prepayment or Conversion falls on a day other than the last day of
an Interest Period for such Facility C Loans, the Company shall pay any and all
amounts required by Section 5.05 hereof as a result thereof; and
(c) prepayments of the Facility C Loans under this Section 2.08 shall
be applied (i) if such prepayment is made prior to the Facility C Commitment
Termination Date, ratably as among the Facility C Loans then outstanding, and
(ii) if such prepayment is made on
CREDIT AGREEMENT 22
<PAGE>
or after the Facility C Commitment Termination Date, ratably as among the
remaining installments of the Facility C Loans.
Notwithstanding the foregoing, and without limiting the rights and remedies of
the Lenders under Section 9 hereof, in the event that any Event of Default shall
have occurred and be continuing, the Agent may (and at the request of the
Majority Lenders shall) suspend the right of the Company to borrow any Facility
C Loan as a Eurodollar Loan or to Convert any Facility C Loan into a Eurodollar
Loan, or to Continue any Facility C Loan as a Eurodollar Loan, in which event
all Eurodollar Loans outstanding shall be automatically Converted (on the last
day(s) of the respective Interest Periods therefor) to or all Base Rate Loans
shall be Continued, as the case may be, as Base Rate Loans.
2.09 MANDATORY PREPAYMENTS.
(a) CASUALTY EVENTS. Not later than 60 days following the receipt
by the Company or any of its Subsidiaries of the proceeds of insurance,
condemnation award or other compensation in respect of any Casualty Event
affecting any Property of any Supplemental Guarantor or acquired with the
proceeds of Facility C Loans hereunder (or upon such earlier date as the
Person owning such Property shall have determined not to repair or replace
the Property affected by such Casualty Event), the Company shall prepay the
Facility C Loans, in an aggregate amount, if any, equal to 100% of the Net
Available Proceeds of such Casualty Event not theretofore applied to the
repair or replacement of such Property, such prepayments to be effected in
each such case in the manner and to the extent specified in paragraphs (e)(i)
and (e)(ii) below. In the event that such Net Available Proceeds exceed the
outstanding amount of the Facility C Loans, such excess shall be applied to
the prepayment of the Facility B Loans in accordance with the terms of the
Existing Credit Agreement. Nothing in this paragraph (a) shall be deemed to
limit any obligation of the Company or any of its Subsidiaries pursuant to
any of the Security Documents to remit to a collateral or similar account
(including, without limitation, the Collateral Account) maintained by the
Agent pursuant to any of the Security Documents the proceeds of insurance,
condemnation award or other compensation received in respect of any Casualty
Event. Notwithstanding the foregoing, in the event that a Casualty Event
shall occur with respect to Property of a Supplemental Guarantor or acquired
with the proceeds of Facility C Loans hereunder and covered by any Mortgage,
the Company shall prepay the Facility C Loans on the dates and in the amounts
specified in such Mortgage. In the event of a Casualty Event involving
Property not covered by this Section 2.09(a), the Net Available Proceeds of
such Casualty Event shall be applied in accordance with the terms of the
Existing Credit Agreement.
(b) SALE OF ASSETS. Without limiting the obligation of the
Company to obtain the consent of the Majority Lenders pursuant to Section
8.05(c) hereof to any Disposition not otherwise permitted hereunder, in the
event that the Net Available Proceeds of any Disposition of Property of any
Supplemental Guarantor or Property acquired with the proceeds of Facility C
Loans hereunder other than an Excluded Disposition (herein, the "CURRENT
DISPOSITION"), and of all prior Dispositions of Property of any Supplemental
Guarantor or Property acquired with the proceeds of Facility C Loans
hereunder as to which a prepayment has not yet been made under this Section
2.09(b), shall exceed $500,000 then, no later than 5 Business Days prior to
the
CREDIT AGREEMENT 23
<PAGE>
occurrence of the Current Disposition, the Company will deliver to the
Lenders a statement, certified by a Responsible Financial Officer of the
Company, in form and detail satisfactory to the Agent, of the amount of the
Net Available Proceeds of the Current Disposition and of all such prior
Dispositions and the Company will prepay the Facility C Loans (or cause the
Facility C Loans to be prepaid), in an aggregate amount equal to 100% of the
Net Available Proceeds of the Current Disposition and such prior
Dispositions, such prepayment to be effected in each case in the manner and
to the extent specified in paragraphs (e)(i) and (e)(ii) below. In the event
that such Net Available Proceeds exceed the outstanding amount of the
Facility C Loans, such excess shall be applied to the prepayment of the
Facility B Loans in accordance with the terms of the Existing Credit
Agreement. In the case of all Dispositions of Property other than those
referred to in this paragraph (b), the Company will make (or cause to be
made) prepayments of the Facility A Loans and the Facility B Loans as
required by the Existing Credit Agreement.
(c) EQUITY ISSUANCE; INVESTMENT TAX CREDITS. Upon any Equity
Issuance or the issuance of any Indebtedness (other than Indebtedness
permitted under Section 8.07 hereof) or the Disposition of any Investment Tax
Credit after the Closing Date, the Company shall (i) prepay the Facility C
Loans or the Facility B Loans in an aggregate amount equal to 100% of the Net
Available Proceeds thereof or (ii) in connection with a Disposition of any
Investment Tax Credit, apply any part of the Net Available Proceeds thereof,
within six months of receipt, to the purchase price of a Permitted
Acquisition, if any, and use the balance of such Net Available Proceeds to
prepay the Facility C Loans or the Facility B Loans as contemplated in clause
(i) above. Promptly after each such Equity Issuance the Company shall advise
the Agent in writing of its designated application of such Net Available
Proceeds thereof. Any such prepayments of the Facility C Loans shall be
effected in the manner specified in paragraphs (e)(i) and (e)(ii) below.
(d) EXCESS CASH FLOW. Not later than 90 days after the end of
each fiscal year of the Company, commencing with the fiscal year ending
December 31, 1997, the Company shall prepay the Facility C Loans and the
Facility B Loans in an aggregate amount equal to the excess of (A) 50% of
Excess Cash Flow for such fiscal year (or, if the Leverage Ratio is less than
2.50 to 1, 25% of such Excess Cash Flow) over (B) the aggregate amount of
prepayments of Facility B Loans and Facility C Loans made during such fiscal
year pursuant to Section 2.08 hereof and Section 2.08 of the Existing Credit
Agreement. Mandatory prepayments arising from Excess Cash Flow required
prior to the Facility C Commitment Termination Date shall be applied to the
Facility B Loans in accordance with the terms of the Existing Credit
Agreement. Mandatory prepayments arising from Excess Cash Flow required on
or after the Facility C Commitment Termination Date shall be applied to the
Facility B Loans and the Facility C Loans pro rata based on the aggregate
principal amounts thereof then outstanding. Prepayments of Facility C Loans
under this paragraph (d) shall be effected in each case in the manner and to
the extent specified in paragraph (e)(ii) below.
(e) APPLICATION. Prepayments of Facility C Loans described in
paragraphs (a) through (d) above shall be effected as follows:
CREDIT AGREEMENT 24
<PAGE>
(i) if such prepayment is required to be made prior to the Facility C
Commitment Termination Date, the amount of the prepayment specified in the
respective paragraph shall be applied ratably to the Facility C Loans then
outstanding.
(ii) if such prepayment is required to be made on or after the
Facility C Commitment Termination Date, the amount of the prepayment
specified in the respective paragraph shall be applied to the Facility C
Loans then outstanding, 50% of which amount shall be applied in the inverse
order of the maturities of the installments thereof and (after taking into
account such application) the remainder thereof shall be applied ratably to
then remaining installments of principal of the Facility C Loans.
Section 3. PAYMENTS OF PRINCIPAL AND INTEREST.
3.01 REPAYMENT OF FACILITY C LOANS. The Company hereby promises to
pay to the Agent for account of each Lender the unpaid principal of each
Facility C Loan made by such Lender and outstanding on the Facility C
Commitment Termination Date in 16 installments payable on each Principal
Payment Date, the first fourteen installments to be in an amount equal to
1 1/4% of the principal amount of such Facility C Loan, the fifteenth
installment to be in an amount equal to 2 1/2% of the principal amount of
such Facility C Loan and the final installment to be in an amount equal to
80% of the principal amount of such Facility C Loan.
3.02 INTEREST. The Company hereby promises to pay to the Agent for
account of each Lender interest on the unpaid principal amount of each Facility
C Loan for the period from and including the date of such Facility C Loan to but
excluding the date such Facility C Loan shall be paid in full, at the following
rates per annum:
(a) during such periods as such Facility C Loan is a Base Rate Loan,
the Base Rate (as in effect from time to time) PLUS the Applicable Margin,
and
(b) during such periods as such Facility C Loan is a Eurodollar Loan,
for each Interest Period relating thereto, the Eurodollar Rate for such
Facility C Loan for such Interest Period PLUS the Applicable Margin.
Notwithstanding the foregoing, the Company hereby promises to pay to the Agent
for account of each Lender interest at the applicable Post-Default Rate as
follows:
(i) on any principal of any Facility C Loan made by such Lender and
on any other amount payable by the Company hereunder or under the Facility
C Note held by such Lender to or for account of such Lender that shall not
be paid in full when due (whether at stated maturity, by acceleration, by
mandatory prepayment or otherwise), for the period from and including the
due date thereof to but excluding the date the same is paid in full; and
CREDIT AGREEMENT 25
<PAGE>
(ii) on the principal of each Facility C Loan made by such Lender
commencing upon the occurrence of any Event of Default, and thereafter for
so long as any Event of Default shall be continuing.
Accrued interest on each Facility C Loan shall be payable (i) in the case of a
Base Rate Loan, quarterly on the Quarterly Dates, (ii) in the case of a
Eurodollar Loan, on the last day of each Interest Period therefor and, if such
Interest Period is longer than three months, at three-month intervals following
the first day of such Interest Period, and (iii) at the option of the Agent, in
the case of any Facility C Loan, upon the payment or prepayment thereof or the
Conversion of such Loan to a Loan of another Type (but only on the principal
amount so paid, prepaid or Converted) except that interest payable at the Post-
Default Rate shall be payable from time to time on demand. Promptly after the
determination of any interest rate provided for herein or any change therein,
the Agent shall give notice thereof to the Lenders to which such interest is
payable and to the Company.
Section 4. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
4.01 PAYMENTS.
(a) Except to the extent otherwise provided herein, all payments
of principal, interest, commitment fee and other amounts to be made by the
Company under this Agreement and the Facility C Notes of the Company, and,
except to the extent otherwise provided therein, all payments to be made by
the Obligors under any other Loan Document, shall be made in Dollars, in
immediately available funds, to the Agent at any account designated by the
Agent not later than 2:00 p.m. Charlotte, North Carolina time on the date on
which such payment shall become due (each such payment made after such time
on such due date to be deemed to have been made on the next succeeding
Business Day).
(b) Any Lender for whose account any such payment is to be made
may (but shall not be obligated to) debit the amount of any such payment that
is not made by such time to any ordinary deposit account of the Company with
such Lender (with notice to the Company and the Agent).
(c) The Company shall, at the time of making each payment under
this Agreement or any Facility C Note for account of any Lender, specify to
the Agent (which shall so notify the intended recipient(s) thereof) the
Facility C Loans or other amounts payable hereunder to which such payment is
to be applied (and in the event that the Company fails to so specify, or if
an Event of Default has occurred and is continuing, the Agent may distribute
such payment to the Lenders for application in such manner as it or the
Majority Lenders, subject to Section 4.02 hereof, may determine to be
appropriate).
(d) Each payment received by the Agent under this Agreement or any
Facility C Note for account of any Lender shall be paid by the Agent promptly
to such Lender, in immediately available funds, for account of such Lender's
Applicable Lending Office for the Facility C Loan or other obligation in
respect of which such payment is made.
CREDIT AGREEMENT 26
<PAGE>
(e) If the due date of any payment under this Agreement or any
Facility C Note would otherwise fall on a day that is not a Business Day, such
date shall be extended to the next succeeding Business Day, and interest shall
be payable for any principal so extended for the period of such extension.
4.02 PRO RATA TREATMENT. Except to the extent otherwise provided
herein: (a) each borrowing of Facility C Loans from the Lenders under
Section 2.01 hereof shall be made from the Lenders, each payment of commitment
fee under Section 2.04 hereof in respect of Facility C Commitments shall be made
for account of the Lenders, and each termination or reduction of the amount of
the Facility C Commitments under Section 2.03 hereof shall be applied to the
Facility C Commitments of the Lenders pro rata according to the amounts of their
Facility C Commitments; (b) the making, Conversion and Continuation of Facility
C Loans of a particular Type (other than Conversions provided for by
Section 5.04 hereof) shall be made pro rata among the Lenders according to the
amounts of their Facility C Commitments (in the case of making of Facility C
Loans) or their Facility C Loans (in the case of Conversions and Continuations
of Facility C Loans); (c) each payment or prepayment of principal of Facility C
Loans by the Company shall be made for account of the Lenders pro rata in
accordance with the respective unpaid principal amounts of the Facility C Loans
held by them; and (d) each payment of interest on any Facility C Loans by the
Company shall be made for account of the relevant Lenders pro rata in accordance
with the amounts of interest on such Facility C Loans then due and payable to
the Lenders.
4.03 COMPUTATIONS. Interest on Eurodollar Loans and commitment fees
shall be computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day) occurring in the period for
which payable and interest on Base Rate Loans shall be computed on the basis of
a year of 365 or 366 days, as the case may be, and actual days elapsed
(including the first day but excluding the last day) occurring in the period for
which payable.
4.04 MINIMUM AMOUNTS. Except for mandatory prepayments made pursuant
to Section 2.09 hereof and Conversions or prepayments made pursuant to
Section 5.04 hereof, (a) each borrowing and Conversion of principal of Base Rate
Loans shall be in an aggregate amount at least equal to $500,000 or a larger
multiple of $100,000, (b) each borrowing and Conversion of Eurodollar Loans
shall be in an aggregate amount at least equal to $2,000,000 or a larger
multiple of $1,000,000, (c) each partial prepayment of principal of Eurodollar
Loans shall be in an aggregate amount at least equal to $2,000,000 or a larger
multiple of $1,000,000 and each partial prepayment of principal of Base Rate
Loans shall be in an aggregate amount at least equal to $500,000 or a larger
multiple of $100,000 (borrowings, Conversions or prepayments of or into Facility
C Loans of different Types or, in the case of Eurodollar Loans, having different
Interest Periods at the same time hereunder to be deemed separate borrowings,
Conversions and prepayments for purposes of the foregoing, one for each Type or
Interest Period).
4.05 CERTAIN NOTICES. Notices by the Company to the Agent of
terminations or reductions of the Facility C Commitments, of Borrowings,
Conversions, Continuations and
CREDIT AGREEMENT 27
<PAGE>
optional prepayments of Facility C Loans, of Types of Facility C Loans and of
the duration of Interest Periods shall be irrevocable (other than with
respect to notices of optional prepayments, which shall be revocable,
PROVIDED that upon any such revocation the Company shall be obligated to pay
the Lenders any amounts payable under Section 5.05 hereof as a consequence of
such revocation) and shall be effective only if received by the Agent not
later than 1:30 p.m. Charlotte, North Carolina time on the number of Business
Days prior to the date of the relevant termination, reduction, borrowing,
Conversion, Continuation or prepayment or the first day of such Interest
Period specified below:
Number of
Notice Business Days Prior
------ -------------------
Termination or reduction
of Facility C Commitments 3
Borrowing or prepayment
of, or Conversions into,
Base Rate Loans Same Day
Borrowing or prepayment
of, Conversions into,
Continuations as, or
duration of Interest
Period for, Eurodollar
Loans 3
Each such notice of termination or reduction shall specify the amount of the
Facility C Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation or optional prepayment shall specify the
Type of each Facility C Loan to be borrowed, Converted, Continued or prepaid
and the date of borrowing, Conversion, Continuation or optional prepayment
(which shall be a Business Day). Each such notice of the duration of an
Interest Period shall specify the Facility C Loans to which such Interest
Period is to relate. The Agent shall promptly notify the Lenders of the
contents of each such notice. In the event that the Company fails to select
the Type of Facility C Loan, or the duration of any Interest Period for any
Eurodollar Loan, within the time period and otherwise as provided in this
Section 4.05, such Facility C Loan (if outstanding as a Eurodollar Loan) will
be automatically Converted into a Base Rate Loan on the last day of the then
current Interest Period for such Facility C Loan or (if outstanding as a Base
Rate Loan) will remain as, or (if not then outstanding) will be made as, a
Base Rate Loan.
4.06 NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Agent shall have
been notified by a Lender or the Company (the "PAYOR") prior to the date on
which the Payor is to make payment to the Agent of (in the case of a Lender) the
proceeds of a Facility C Loan to be made by such Lender hereunder or (in the
case of the Company) a payment to the Agent for account of one or more of the
Lenders hereunder (such payment being herein called the "REQUIRED PAYMENT"),
which notice shall be effective upon receipt, that the Payor does not intend to
make the Required Payment to the Agent, the Agent may assume that the Required
Payment has been made and may, in reliance upon such assumption (but shall not
be required to), make the amount thereof available to the intended recipient(s)
on such date; and, if the Payor has not in
CREDIT AGREEMENT 28
<PAGE>
fact made the Required Payment to the Agent, the recipient(s) of such payment
shall, on demand, repay to the Agent the amount so made available together
with interest thereon in respect of each day during the period commencing on
the date (the "ADVANCE DATE") such amount was so made available by the Agent
until the date the Agent recovers such amount at a rate per annum equal to
the Federal Funds Rate for such day and, if such recipient(s) shall fail
promptly to make such payment, the Agent shall be entitled to recover such
amount, on demand, from the Payor, together with interest as aforesaid,
PROVIDED that if neither the recipient(s) nor the Payor shall return the
Required Payment to the Agent within three Business Days of the Advance Date,
then, retroactively to the Advance Date, the Payor and the recipient(s) shall
each be obligated to pay interest on the Required Payment as follows:
(i) if the Required Payment shall represent a payment to be made by
the Company to the Lenders, the Company and the recipient(s) shall each be
obligated retroactively to the Advance Date to pay interest in respect of
the Required Payment at the Post-Default Rate (and, in case the
recipient(s) shall return the Required Payment to the Agent, without
limiting the obligation of the Company under Section 3.02 hereof to pay
interest to such recipient(s) at the Post-Default Rate in respect of the
Required Payment) and
(ii) if the Required Payment shall represent proceeds of a Facility C
Loan to be made by the Lenders to the Company, the Payor and the Company
shall each be obligated retroactively to the Advance Date to pay interest
in respect of the Required Payment at the rate of interest provided for
such Required Payment pursuant to Section 3.02 hereof (and, in case the
Company shall return the Required Payment to the Agent, without limiting
any claim the Company may have against the Payor in respect of the Required
Payment).
4.07 SHARING OF PAYMENTS, ETC.
(a) The Company agrees that, in addition to (and without limitation
of) any right of set-off, banker's lien or counterclaim a Lender may otherwise
have, each Lender shall be entitled, at its option but with the prior written
consent of the Majority Lenders, to offset balances held by it for account of
the Company at any of its offices, in Dollars or in any other currency, against
any principal of or interest on any of such Lender's Facility C Loans or any
other amount payable to such Lender hereunder, that is not paid when due
(regardless of whether such balances are then due to the Company), in which case
it shall promptly notify the Company and the Agent thereof, PROVIDED that such
Lender's failure to give such notice shall not affect the validity thereof.
(b) If any Lender shall obtain from any Obligor payment of any
principal of or interest on any Facility C Loan owing to it or payment of any
other amount under this Agreement or any other Loan Document through the
exercise of any right of set-off, Lender's lien or counterclaim or similar right
or otherwise (other than from the Agent as provided herein), and, as a result of
such payment, such Lender shall have received a greater percentage of the
principal of or interest on the Facility C Loans or such other amounts then due
hereunder or thereunder by
CREDIT AGREEMENT 29
<PAGE>
such Obligor to such Lender than the percentage received by any other Lender,
it shall promptly purchase from such other Lenders participations in (or, if
and to the extent specified by such Lender, direct interests in) the Facility
C Loans or such other amounts, respectively, owing to such other Lenders (or
in interest due thereon, as the case may be) in such amounts, and make such
other adjustments from time to time as shall be equitable, to the end that
all the Lenders shall share the benefit of such excess payment (net of any
expenses that may be incurred by such Lender in obtaining or preserving such
excess payment) pro rata in accordance with the unpaid principal of and/or
interest on the Facility C Loans or such other amounts, respectively, owing
to each of the Lenders. To such end all the Lenders shall make appropriate
adjustments among themselves (by the resale of participations sold or
otherwise) if such payment is rescinded or must otherwise be restored.
(c) The Company agrees that any Lender so purchasing such a
participation (or direct interest) may exercise all rights of set-off, banker's
lien, counterclaim or similar rights with respect to such participation as fully
as if such Lender were a direct holder of Facility C Loans or other amounts (as
the case may be) owing to such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of any Obligor. If, under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a set-off to
which this Section 4.07 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders entitled under this Section 4.07 to share in the
benefits of any recovery on such secured claim.
Section 5. YIELD PROTECTION, ETC.
5.01 ADDITIONAL COSTS.
(a) The Company shall pay directly to each Lender from time to time
such amounts as such Lender may determine to be necessary to compensate such
Lender for any costs that such Lender determines are attributable to its making
or maintaining of any Eurodollar Loans or its obligation to make any Eurodollar
Loans hereunder or any reduction in any amount receivable by such Lender
hereunder in respect of any of such Eurodollar Loans or such obligation (such
increases in costs and reductions in amounts receivable being herein called
"ADDITIONAL COSTS"), resulting from any Regulatory Change that:
(i) shall subject any Lender (or its Applicable Lending Office for
any of such Eurodollar Loans) to any tax, duty or other charge in respect
of such Eurodollar Loans or its Facility C Note or changes the basis of
taxation of any amounts payable to such Lender under this Agreement or its
Facility C Note in respect of any of such Eurodollar Loans (excluding
changes in the rate of tax on the overall net income of such Lender or of
its Applicable Lending Office by the jurisdiction in which such Lender is
organized or
CREDIT AGREEMENT 30
<PAGE>
has its principal office or in which its Applicable Lending Office is
organized or located or, in each case, any political subdivision or taxing
authority thereof or therein); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement utilized in the
determination of the Eurodollar Rate for such Eurodollar Loan) relating to
any extensions of credit or other assets of, or any deposits with or other
liabilities of, such Lender (including, without limitation, any of such
Eurodollar Loans or any deposits referred to in the definitions of
"Eurodollar Base Rate" in Section 1.01 hereof), or any commitment of such
Lender (including, without limitation, the Facility C Commitment of such
Lender hereunder); or
(iii) imposes any other condition affecting this Agreement or
its Facility C Note (or any of such extensions of credit or liabilities) or
its Facility C Commitment.
If any Lender requests compensation from the Company under this Section
5.01(a), the Company may, by notice to such Lender (with a copy to the
Agent), suspend the obligation of such Lender thereafter to make or Continue
Eurodollar Loans, to Convert Facility C Loans of another Type into Eurodollar
Loans or to Convert Eurodollar Loans into Facility C Loans of another Type
until the Regulatory Change giving rise to such request ceases to be in
effect (in which case the provisions of Section 5.04 hereof shall be
applicable), PROVIDED that such suspension shall not affect the right of such
Lender to receive the compensation so requested.
(b) Without limiting the effect of the provisions of paragraph (a)
of this Section 5.01, in the event that, by reason of any Regulatory Change,
any Lender (i) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits or other
liabilities of such Lender that includes deposits by reference to which the
interest rate on Eurodollar Loans is determined as provided in this Agreement
or a category of extensions of credit or other assets of such Lender that
includes Eurodollar Loans or (ii) becomes subject to restrictions on the
amount of such a category of liabilities or assets that it may hold then, if
such Lender so elects by notice to the Company (with a copy to the Agent),
the obligation of such Lender to make or Continue, or to Convert Facility C
Loans of another type into, Eurodollar Loans, hereunder (as the case may be)
shall be suspended until any such Regulatory Change ceases to be in effect
(in which case the provisions of Section 5.04 hereof shall be applicable).
(c) Without limiting the effect of the foregoing provisions of
this Section 5.01 (but without duplication), the Company shall pay directly
to each Lender from time to time on request such amounts as such Lender may
determine to be necessary to compensate such Lender (or, without duplication,
the bank holding company of which such Lender is a subsidiary) for any costs
that it determines are attributable to the maintenance by such Lender (or any
Applicable Lending Office or such bank holding company), pursuant to any law
or regulation or any interpretation, directive or request (whether or not
having the force of law and whether or not failure to comply therewith would
be unlawful) of any court or governmental or monetary authority (i) following
any Regulatory Change or (ii) hereafter implementing any risk-based
CREDIT AGREEMENT 31
<PAGE>
capital guideline or other requirement (whether or not having the force of
law and whether or not the failure to comply therewith would be unlawful)
heretofore or hereafter issued by any government or governmental or
supervisory authority implementing at the national level the Basle Accord
(including, without limitation, the Final Risk-Based Capital Guidelines of
the Board of Governors of the Federal Reserve System (12 C.F.R. Part 208,
Appendix A; 12 C.F.R. Part 225, Appendix A) and the Final Risk-Based Capital
Guidelines of the Office of the Comptroller of the Currency (12 C.F.R. Part
3, Appendix A)), of capital in respect of its Facility C Commitments or
Facility C Loans (such compensation to include, without limitation, an amount
equal to any reduction of the rate of return on assets or equity of such
Lender (or any Applicable Lending Office or such bank holding company) to a
level below that which such Lender (or any Applicable Lending Office or such
bank holding company) could have achieved but for such law, regulation,
interpretation, directive or request). For purposes of this Section 5.01(c)
and Section 5.08 hereof, "BASLE ACCORD" shall mean the proposals for
risk-based capital framework described by the Basle Committee on Banking
Regulations and Supervisory Practices in its paper entitled "International
Convergence of Capital Measurement and Capital Standards" dated July 1988, as
amended, modified and supplemented and in effect from time to time or any
replacement thereof.
(d) Each Lender shall notify the Company of any event occurring
after the date of this Agreement entitling such Lender to compensation under
paragraph (a) or (c) of this Section 5.01 as promptly as practicable, but in
any event within 45 days, after such Lender obtains actual knowledge thereof;
PROVIDED that (i) if any Lender fails to give such notice within 45 days
after it obtains actual knowledge of such an event, such Lender shall, with
respect to compensation payable pursuant to this Section 5.01 in respect of
any costs resulting from such event, only be entitled to payment under this
Section 5.01 for costs incurred from and after the date 45 days prior to the
date that such Lender does give such notice and (ii) each Lender will
designate a different Applicable Lending Office for the Facility C Loans of
such Lender affected by such event if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the sole
opinion of such Lender, be disadvantageous to such Lender, except that such
Lender shall have no obligation to designate an Applicable Lending Office
located in the United States. Each Lender will furnish to the Company a
certificate setting forth the basis and amount of each request by such Lender
for compensation under paragraph (a) or (c) of this Section 5.01.
Determinations and allocations by any Lender for purposes of this Section
5.01 of the effect of any Regulatory Change pursuant to paragraph (a) or (b)
of this Section 5.01, or of the effect of capital maintained pursuant to
paragraph (c) of this Section 5.01, on its costs or rate of return of
maintaining Facility C Loans or its obligation to make Facility C Loans, or
on amounts receivable by it in respect of Facility C Loans, and of the
amounts required to compensate such Lender under this Section 5.01, shall be
conclusive in the absence of manifest error, PROVIDED that such
determinations and allocations are made on a reasonable basis.
5.02 LIMITATION ON TYPES OF FACILITY C LOANS. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any Eurodollar
Base Rate for any Interest Period:
CREDIT AGREEMENT 32
<PAGE>
(a) the Agent determines, which determination shall be conclusive,
that quotations of interest rates for the relevant deposits referred to in
the definition of "Eurodollar Base Rate" in Section 1.01 hereof are not
being provided in the relevant amounts or for the relevant maturities for
purposes of determining rates of interest for Eurodollar Loans as provided
herein; or
(b) The Majority Lenders determine, which determination shall be
conclusive, and notify the Agent that the relevant rates of interest
referred to in the definitions of "Eurodollar Base Rate" in Section 1.01
hereof upon the basis of which the rate of interest for Eurodollar Loans
for such Interest Period is to be determined are not likely adequately to
cover the cost to such Lenders of making or maintaining Eurodollar Loans
for such Interest Period;
then the Agent shall give the Company and each Lender prompt notice thereof
(describing the circumstances giving rise to such event) and, so long as such
condition remains in effect, the Lenders shall be under no obligation to make
additional Eurodollar Loans, to Continue Eurodollar Loans, to Convert Facility C
Loans of another Type into Eurodollar Loans and the Company shall, on the last
day(s) of the then current Interest Period(s) for the outstanding Eurodollar
Loans either prepay such Eurodollar Loans or Convert such Eurodollar Loans into
Facility C Loans of another Type in accordance with Section 2.08 hereof.
5.03 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain Eurodollar
Loans hereunder, then such Lender shall promptly notify the Company thereof
(with a copy to the Agent) and such Lender's obligation to make or Continue, or
to Convert Facility C Loans of any other Type into, Eurodollar Loans shall be
suspended until such time as such Lender may again make and maintain Eurodollar
Loans (in which case the provisions of Section 5.04 hereof shall be applicable).
5.04 TREATMENT OF AFFECTED FACILITY C LOANS. If the obligation of any
Lender to make Eurodollar Loans ("AFFECTED FACILITY C LOANS"), or to Continue,
or to Convert Facility C Loans of another Type into Affected Facility C Loans
shall be suspended pursuant to Section 5.01 or 5.03 hereof, such Lender's
Affected Facility C Loans shall be automatically Converted into Base Rate Loans
on the last day(s) of the then current Interest Period(s) therefor (or, in the
case of a Conversion required by Section 5.01(b), 5.01(c) or 5.03 hereof, on
such earlier date as such Lender may specify to the Company with a copy to the
Agent) and, unless and until such Lender gives notice as provided below that the
circumstances specified in Section 5.01 or 5.03 hereof that gave rise to such
Conversion no longer exist:
(a) to the extent that such Lender's Affected Facility C Loans have
been so Converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's Affected Facility C Loans shall be
applied instead to its Base Rate Loans; and
CREDIT AGREEMENT 33
<PAGE>
(b) all Facility C Loans that would otherwise be made or Continued by
such Lender as Affected Facility C Loans shall be made or Continued instead
as Base Rate Loans, and all Base Rate Loans of such Lender that would
otherwise be Converted into Affected Facility C Loans (as the case may be)
shall remain as Base Rate Loans.
If such Lender gives notice to the Company with a copy to the Agent that the
circumstances specified in Section 5.01 or 5.03 hereof that gave rise to the
Conversion of such Lender's Affected Facility C Loans pursuant to this
Section 5.04 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Affected Facility C Loans made by
other Lenders are outstanding, such Lender's Base Rate Loans shall be
automatically Converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding Affected Facility C Loans, to the extent
necessary so that, after giving effect thereto, all Facility C Loans held by the
Lenders holding Affected Facility C Loans and by such Lender are held pro rata
(as to principal amounts, Types and Interest Periods) in accordance with their
respective Facility C Commitments.
5.05 COMPENSATION. The Company shall pay to the Agent for account of
each Lender, upon the request of such Lender through the Agent, such amount or
amounts as shall be sufficient (in the reasonable opinion of such Lender) to
compensate it for any loss, cost or expense that such Lender determines is
attributable to:
(a) any payment, mandatory or optional prepayment or Conversion of a
Eurodollar Loan made by the Company for any reason (including, without
limitation, the acceleration of the Facility C Loans pursuant to Section 9
hereof) on a date other than the last day of the Interest Period for such
Eurodollar Loan; or
(b) any failure by the Company for any reason (including, without
limitation, the failure of any of the conditions precedent specified in
Section 6 hereof to be satisfied) to borrow a Eurodollar Loan from such
Lender on the date for such borrowing specified in the relevant notice of
borrowing given pursuant to Section 2.02 hereof or in the notice from the
Agent given pursuant to Section 2.01(c);
(c) any failure for any reason (including, without limitation, as
provided in Section 5.02 or 5.03 hereof) of a Facility C Loan of such
Lender to be Continued as or Converted into a Eurodollar Loan on the date
for such Continuation or Conversion specified in the relevant notice given
under Section 4.05 hereof; or
(d) the revocation of any notice of optional prepayment or any
failure for any reason to make any optional prepayment on the date
specified therefor in the relevant notice of prepayment given pursuant to
Section 4.05 hereof.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid, prepaid,
Converted or not borrowed or prepaid for the period from the date of such
payment, prepayment, Conversion or failure to borrow or prepay to the last day
of
CREDIT AGREEMENT 34
<PAGE>
the then current Interest Period for such Eurodollar Loan (or, in the case of
a failure to borrow, the Interest Period for such Eurodollar Loan that would
have commenced on the date specified for such borrowing) at the applicable
rate of interest for such Eurodollar Loan (MINUS the Applicable Margin)
provided for herein over (ii) the amount of interest that otherwise would
have accrued on such principal amount at a rate per annum equal to the
interest component of the amount such Lender would have bid on the date of
such payment, prepayment, conversion or failure to borrow or prepay in the
London interbank market for Dollar deposits of leading banks in amounts
comparable to such principal amount and with maturities comparable to such
period (as reasonably determined by such Lender).
5.06 NET PAYMENTS; TAXES.
(a) All payments to be made hereunder and under the Facility C
Notes and any other Loan Documents by the Company shall be made without
setoff, counterclaim or other defense. Subject to Section 5.06(b) hereof
with respect to U.S. Taxes, all such payments shall be made free and clear of
and without deduction for or on account of, any present or future income,
stamp or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any governmental authority (other than taxes imposed on the
Agent, any Lender or its Applicable Lending Office by the jurisdiction in
which the Agent or such Lender is organized or has its principal office or in
which its Applicable Lending Office is organized or located or, in each case,
any political subdivision or taxing authority thereof or therein)
(collectively, "TAXES"). If any Taxes are imposed and required to be
withheld from any amount payable by the Company hereunder or under the
Facility C Notes, the Company shall be obligated to (i) pay such additional
amount so that the Agent and the Lenders will receive a net amount (after
giving effect to the payment of such additional amount and to the deduction
of all Taxes) equal to the amount due hereunder, (ii) pay such Taxes to the
appropriate taxing authority for the account of the Agent, for the benefit of
the Lenders and (iii) as promptly as possible thereafter, sending the Agent a
certified copy of any original official receipt showing payment thereof,
together with such additional documentary evidence as the Agent may from time
to time reasonably require. If the Company fails to pay any Taxes when due
to the appropriate taxing authority or fails to remit to the Agent the
required receipts or other required documentary evidence, the Company shall
be obligated to indemnify the Agent and each Lender for any incremental
taxes, interest or penalties that may become payable by the Agent or such
Lender as a result of such failure. The obligations of the Company under
this Section 5.06(a) shall survive the repayment of the Facility C Loans and
the termination of the Facility C Commitments.
(b) The Company agrees to pay to each Lender that is not a U.S.
Person such additional amounts as are necessary in order that the net payment
of any amount due to and received by such non-U.S. Person hereunder after
deduction for or withholding in respect of any U.S. Taxes imposed with
respect to such payment (or in lieu thereof, payment of such U.S. Taxes by
such non-U.S. Person), will not be less than the amount stated herein to be
then due and payable, PROVIDED that the foregoing obligation to pay such
additional amounts shall not apply:
CREDIT AGREEMENT 35
<PAGE>
(i) to any payment to a Lender (other than in respect of a Registered
Loan) hereunder unless such Lender is, on the date hereof (or on the date
it becomes a Lender as provided in Section 11.06(b) hereof) and on the date
of any change in the Applicable Lending Office of such Lender, either
entitled to submit a Form 1001 (relating to such Lender and entitling it to
a complete exemption from withholding on all interest to be received by it
hereunder in respect of the Facility C Loans) or Form 4224 (relating to all
interest to be received by such Lender hereunder in respect of the Facility
C Loans), or
(ii) to any payment to any Lender hereunder in respect of a Registered
Loan (a "REGISTERED HOLDER"), unless such Registered Holder (or, if such
Registered Holder is not the beneficial owner of such Registered Loan, the
beneficial owner thereof) is, on the date hereof (or on the date such
Registered Holder becomes a Lender as provided in Section 11.06(b) hereof)
and on the date of any change in the Applicable Lending Office of such
Lender, entitled to submit a Form W-8, together with an annual certificate
stating that (x) such Registered Holder (or beneficial owner, as the case
may be) is not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code, and (y) such Registered Holder (or beneficial owner, as the case may
be) shall promptly notify the Company if at any time, such Registered
Holder (or beneficial owner, as the case may be) determines that it is no
longer in a position to provide such certificate to the Company (or any
other form of certification adopted by the relevant taxing authorities of
the United States for such purposes), or
(iii) to any U.S. Taxes imposed solely by reason of the failure by
such non-U.S. Person (or, if such non-U.S. Person is not the beneficial
owner of the relevant Facility C Loan, such beneficial owner) to comply
with applicable certification, information, documentation or other
reporting requirements concerning the nationality, residence, identity or
connections with the United States of such non-U.S. Person (or such
beneficial owner, as the case may be) if such compliance is required by
statute or regulation of the United States as a precondition to relief or
exemption from such U.S. Taxes.
For the purposes of this Section 5.06(b), (w) "FORM 1001" shall mean Form 1001
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States, (w) "FORM 4224" shall mean Form 4224 (Exemption
from Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States) of the Department of the Treasury of the
United States, (x) "FORM W-8" shall mean Form W-8 (Certificate of Foreign Status
of the Department of Treasury of the United States of America) (or in relation
to any of such Forms such successor and related forms as may from time to time
be adopted by the relevant taxing authorities of the United States to document a
claim to which such Form relates), (y) "U.S. PERSON" shall mean a citizen,
national or resident of the United States, a corporation, partnership or other
entity created or organized in or under any laws of the United States, or any
estate or trust that is subject to Federal income taxation regardless of the
source of its income and (z) "U.S. TAXES" shall mean any present or future tax,
assessment or other charge or levy imposed by or on behalf of the United States
or any taxing authority thereof or therein.
CREDIT AGREEMENT 36
<PAGE>
Within 30 days after paying any amount to the Agent or any Lender
from which it is required by law to make any deduction or withholding, and
within 30 days after it is required by law to remit such deduction or
withholding to any relevant taxing or other authority, the Company shall
deliver to the Agent for delivery to such non-U.S. Person evidence
satisfactory to such Person of such deduction, withholding or payment (as the
case may be).
5.07 REPLACEMENT OF LENDERS. If any Lender requests compensation
pursuant to Section 5.01 or 5.06 hereof, or any Lender's obligation to make
or Continue, or to Convert Facility C Loans of any Type into, any other Type
of Facility C Loan shall be suspended pursuant to Section 5.01 or 5.03 hereof
(any such Lender so requesting compensation, or whose obligations are so
suspended being herein called a "RELEVANT LENDER"), the Company upon three
Business Days notice, may require that such Relevant Lender transfer all of
its right, title and interest under this Agreement and such Relevant Lender's
Facility C Note to any bank or other financial institution identified by the
Company that is reasonably satisfactory to the Agent (i) if such bank or
other financial institution (a "PROPOSED LENDER") agrees to assume all of the
obligations of such Relevant Lender hereunder, and to purchase all of such
Relevant Lender's Facility C Loans hereunder for consideration equal to the
aggregate outstanding principal amount of such Relevant Lender's Facility C
Loans, together with accrued, but unpaid interest thereon to the date of such
purchase, and satisfactory arrangements are made for payment to such Relevant
Lender of all other amounts payable hereunder to such Relevant Lender on or
prior to the date of such transfer (including any fees accrued hereunder and
any amounts that would be payable under Section 5.05 hereof as if all of such
Relevant Lender's Facility C Loans were being prepaid in full on such date)
and (ii) if such Relevant Lender has requested compensation pursuant to
Section 5.01 or 5.06 hereof, such Proposed Lender's aggregate requested
compensation, if any, pursuant to said Section 5.01 or 5.06 with respect to
such Relevant Lender's Facility C Loans is lower than that of the Relevant
Lender. Subject to compliance with the provisions of Section 11.06(b)
hereof, such Proposed Lender shall be a "Lender" for all purposes hereunder.
Without prejudice to the survival of any other agreement of the Company
hereunder, the agreements of the Company contained in Sections 5.01, 5.06 and
11.03 hereof (without duplication of any payments made to such Relevant
Lender by the Company or the Proposed Lender) shall survive for the benefit
of such Relevant Lender under this Section 5.07 with respect to the time
prior to such replacement.
Section 6. CONDITIONS PRECEDENT.
6.01 CONDITIONS TO EFFECTIVENESS. The effectiveness of this
Agreement (and the amendment and restatement of the Existing Supplemental
Credit Agreement to be effected hereby) and the obligation of any Lender to
extend credit hereunder, are subject to (i) the condition precedent that the
Effective Date shall occur on or before March 31, 1997 and (ii) the receipt
by the Agent of the following documents, each of which shall be satisfactory
to the Agent (and to the extent specified below, to each Lender or the
Majority Lenders, as the case may be) in form and substance:
(a) CORPORATE DOCUMENTS. Certified copies of the charter and by-laws
(or equivalent documents) of each Obligor and of all corporate authority
for each Obligor
CREDIT AGREEMENT 37
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(including, without limitation, board of director resolutions and
evidence of the incumbency of officers, together with specimen
signatures of each such officer) with respect to the execution,
delivery and performance of such of the Basic Documents to which such
Obligor is intended to be a party and each other document to be
delivered by such Obligor from time to time in connection herewith and
the extensions of credit hereunder (and the Agent and each Lender may
conclusively rely on such certificate until it receives notice in
writing from such Obligor to the contrary).
(b) OFFICER'S CERTIFICATE. A certificate of a Responsible Financial
Officer of the Company, dated the date hereof, to the effect set forth in
the first sentence of Section 6.03 hereof.
(c) OPINION OF COUNSEL TO THE OBLIGORS. Opinions, each dated the
date hereof, of Hughes & Luce, counsel to the Obligors, substantially in
the form of Exhibit E-1 hereto, and of Axtmayer Adsuar Mu iz & Goyco,
special Puerto Rico counsel to the Subsidiary Guarantors operating in the
Commonwealth, substantially in the form of Exhibit E-2 hereto and, in each
case, covering such other matters as the Agent or any Lender may reasonably
request (and each Obligor hereby instructs such counsel to deliver such
opinion to the Lenders and the Agent).
(d) OPINION OF COUNSEL TO FIRST UNION. An opinion, dated the date
hereof, of Milbank, Tweed, Hadley & McCloy, special New York counsel to
First Union, substantially in the form of Exhibit G hereto (and First Union
hereby instructs such counsel to deliver such opinion to the Lenders).
(e) FACILITY C NOTES. The Facility C Notes, duly completed and
executed.
(f) INSURANCE. Certificates of insurance evidencing the existence of
all insurance required to be maintained by the Company and its Subsidiaries
pursuant to Section 8.04 hereof and the designation of the Agent as the
loss payee or additional named insured, as the case may be, thereunder. In
addition, the Company shall have delivered a certificate of a Responsible
Financial Officer of the Company setting forth the insurance obtained by it
in accordance with the requirements of Section 8.04 and stating that such
insurance is in full force and effect and that all premiums then due and
payable thereon have been paid.
(g) FINANCIAL INFORMATION. (i) Copies of the pro forma projections
of the Company and its Subsidiaries for the period ended December 31, 1997
and (ii) unaudited consolidating financial statements of the Company and
its Subsidiaries for the twelve-month period ended on December 31, 1996.
(h) PAYMENT OF FEES AND EXPENSES, ETC. Evidence that the Company
shall have paid such fees and expenses as the Company shall have agreed to
pay to the Agent in connection herewith, including, without limitation, the
reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special
New York counsel to First Union, and
CREDIT AGREEMENT 38
<PAGE>
Fiddler Gonzalez & Rodriguez, special Puerto Rico counsel to First
Union, in connection with the negotiation, preparation, execution and
delivery of this Agreement and the Facility C Notes and the other Loan
Documents and the making of the Facility C Loans hereunder (to the
extent that statements for such fees and expenses have been delivered
to the Company three days prior to the Closing Date).
(i) INTEREST RATE PROTECTION AGREEMENTS. Evidence that the Company
and/or the Obligors shall have entered into one or more Interest Rate
Protection Agreements as to the notional principal amount at least equal
to (i) $14,000,000 for a period ending on May 13, 1997 and (ii) $55,000,000
for a period ending on June 30, 1998.
(j) EXISTING CREDIT AGREEMENT. Existing Credit Agreement, duly
executed by each of the parties thereto, together with evidence that all
conditions precedent set forth in Section 6 of the Existing Credit
Agreement shall have been satisfied or waived.
(k) PROCESS AGENT ACCEPTANCE. A letter from the Process Agent, in
form and substance satisfactory to the Agent, accepting the appointment of
the Process Agent by the Company.
(l) EVIDENCE OF LENDER ALLOCATIONS. Evidence from the Agent that on
the date of this Agreement (after giving effect to the transactions
contemplated hereby) the Lenders under this Agreement shall hold the same
pro rata portion of Facility C Loans (and if no Facility C Loans are
outstanding, Facility C Commitments) under this Agreement, as they hold of
Facility A Loans and Facility B Loans (or Facility A Commitments and
Facility B Commitments) under the Existing Credit Agreement.
(m) ACCRUED INTEREST. Evidence that (i) all interest accrued on the
outstanding Facility A Loans, Facility B Loans and Facility C Loans to the
Effective Date and (ii) all amounts payable by the Company (if any) under
Sections 2.01(a)(i), 2.01(b)(i) and 2.01(c) of the Existing Credit
Agreement have been paid in full.
(n) OTHER DOCUMENTS. Such other documents as the Agent or any Lender
or special New York counsel to First Union may reasonably request.
6.02 CONDITIONS PRECEDENT TO LENDING FOR PERMITTED ACQUISITIONS. The
obligation of any Lender to make Facility C Loans hereunder to finance any
Permitted Acquisition is subject to the receipt by the Agent of the following
documents, each of which shall be satisfactory to the Agent (and to the extent
specified below, to each Lender or the Majority Lenders, as the case may be) in
form and substance:
(a) In connection with each Permitted Acquisition involving the
purchase of the capital stock or other ownership interests of a Person
(unless such Person is merged contemporaneously into the Company or an
existing Subsidiary of the Company) or the formation of a corporation or
other entity for the purpose of such Permitted Acquisition:
CREDIT AGREEMENT 39
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(i) CORPORATE DOCUMENTS. Certified copies of the charter and
by-laws (or equivalent documents) of the relevant Person and of all
corporate authority for such Person (including, without limitation,
board of director resolutions and evidence of the incumbency of
officers, together with specimen signatures of each such officer) with
respect to the execution, delivery and performance of such of the
Basic Documents to which such Person is intended to be a party and
each other document to be delivered by such Person from time to time
in connection herewith and therewith (and the Agent and each Lender
may conclusively rely on such certificate until it receives notice in
writing from such Person to the contrary).
(ii) SUPPLEMENTAL SUBSIDIARY GUARANTEE AND SECURITY AGREEMENT. A
Supplemental Subsidiary Guarantee and Security Agreement,
substantially in the form of Exhibit B hereto and duly executed by the
Agent and the relevant Supplemental Guarantor, pursuant to which such
Supplemental Guarantor shall create a first priority security interest
in all of its personal Property in favor of the Agent for the benefit
of the Lenders and the Facility A Lenders and the Facility B Lenders,
except as otherwise provided herein or therein. In addition, the
Company shall have taken such other action (including, without
limitation, delivering to the Agent, (i) Uniform Commercial Code
searches for such Supplemental Guarantor for each jurisdiction in
which such Supplemental Guarantor conducts its business or in which
any of its Properties are located (or otherwise as the Agent may
reasonably request) and (ii) for filing, appropriately completed and
duly executed copies of Uniform Commercial Code financing statements,
as the Agent shall have requested in order to perfect the security
interest created pursuant to such Supplemental Subsidiary Guarantee
and Security Agreement.
(iii) OPINION OF COUNSEL TO THE SUPPLEMENTAL GUARANTOR.
Opinions, appropriately dated, of counsel to the relevant Supplemental
Guarantor covering such matters as the Agent or any Lender may
reasonably request.
(iv) OPINION OF COUNSEL TO FIRST UNION. An opinion,
appropriately dated, of Milbank, Tweed, Hadley & McCloy, special New
York counsel to First Union, substantially in the form of Exhibit G
hereto but as to the relevant Supplemental Guarantee and Security
Agreement (and First Union hereby instructs such counsel to deliver
such opinion to the Lenders).
(v) AMENDMENT TO SECURITY AGREEMENT; FILINGS. An amendment to
the Security Agreement (or, if applicable, the Existing Subsidiary
Guaranty and Security Agreement), duly executed and delivered by the
Company (or the appropriate Subsidiary) and the Agent and the
certificates identified in Annex 1 thereto, accompanied by undated
stock powers executed in blank. In addition, the Company shall have
taken such other action (including, without limitation, delivering to
the Agent, (i) Uniform Commercial Code searches for each
CREDIT AGREEMENT 40
<PAGE>
Supplemental Guarantor for each jurisdiction in which such
Supplemental Guarantor conducts its respective business or in
which any of its respective Properties are located (or otherwise
as the Agent may reasonably request) and (ii) for filing,
appropriately completed and duly executed copies of Uniform
Commercial Code financing statements) as the Agent shall have
requested in order to perfect the security interests created
pursuant to such amendment to the Security Agreement and/or the
relevant Supplemental Subsidiary Guarantee and Security
Agreement.
(vi) INSURANCE. Certificates of insurance evidencing the
existence of all insurance required to be maintained by the relevant
Supplemental Guarantor pursuant to Section 8.04 hereof and the
designation of the Agent as the loss payee or additional named
insured, as the case may be, thereunder. In addition, the Company or
the relevant Supplemental Guarantor shall have delivered a certificate
of a Responsible Financial Officer of the Company or such Supplemental
Guarantor setting forth the insurance obtained by the Company or such
Supplemental Guarantor in accordance with the requirements of
Section 8.04 and stating that such insurance is in full force and
effect and that all premiums then due and payable thereon have been
paid.
(b) In connection with all Permitted Acquisitions (as appropriate):
(i) CONSUMMATION OF PERMITTED ACQUISITION. Evidence that the
relevant Permitted Acquisition shall have been consummated in all
material respects in accordance with the terms of the relevant
Purchase Agreement, and the Agent shall have received a certificate of
a Responsible Financial Officer of the Company to that effect (and
attaching thereto a true and complete copy of the relevant Purchase
Agreement).
(ii) ENVIRONMENTAL MATTERS. To the extent that a Permitted
Acquisition involves the direct or indirect acquisition of real
Property, upon the request of the Agent, environmental surveys and
assessments prepared by one or more firms of licensed engineers
(familiar with the identification of toxic and hazardous substances)
in form and substance satisfactory to each Lender, such environmental
survey and assessment to be based upon physical on-site inspections by
such firm of each of the existing sites and facilities to be owned,
operated or leased by the Company or the relevant Supplemental
Guarantor or any of its Subsidiaries pursuant to such Permitted
Acquisition as well as an historical review of the uses of such sites
and facilities and of the business and operations of such Supplemental
Guarantor or any of its Subsidiaries (including any former
Subsidiaries or divisions thereof or any of its Subsidiaries that have
been disposed of prior to the date of such survey and assessment and
with respect to which such Supplemental Guarantor or any of its
Subsidiaries may have retained liability for Environmental Claims),
and if requested by the Agent, the Company shall have
CREDIT AGREEMENT 41
<PAGE>
agreed to take other reasonable steps after the date of such
Permitted Acquisition with respect to such matters as shall be agreed
in writing with the Agent.
(iii) SOLVENCY ANALYSIS. A certificate from a Responsible
Financial Officer of the Company to the effect that, as of the date of
the respective Permitted Acquisition and after giving effect to the
Facility C Loans in connection with the relevant Permitted Acquisition
hereunder and to the other transactions contemplated hereby in
connection with such Permitted Acquisition, (i) the aggregate value of
all Properties of the Company and its Subsidiaries at their present
fair saleable value (i.e., the amount that may be realized within a
reasonable time, considered to be six months to one year, either
through collection or sale at the regular market value, conceiving the
latter as the amount that could be obtained for the Property in
question within such period by a capable and diligent businessman from
an interested buyer who is willing to purchase under ordinary selling
conditions), exceeds the amount of all the debts and liabilities
(including contingent, subordinated, unmatured and unliquidated
liabilities) of the Company and its Subsidiaries, (ii) the Company and
its Subsidiaries will not, on a consolidated basis, have unreasonably
small capital with which to conduct their business operations as
theretofore conducted and (iii) the Company and its Subsidiaries will
have, on a consolidated basis, sufficient cash flow to enable them to
pay their debts as they mature. The Agent shall have also received
(x) a certificate from a Responsible Financial Officer of the Company
certifying that the financial projections and underlying assumptions
contained in such analyses were at the time made, and on the date
thereof are, fair and reasonable and accurately computed and (y)
appropriate factual information supporting the conclusions of the
solvency analyses and the financial condition certificate required to
be delivered as provided above.
(iv) MORTGAGES. With respect to each parcel of real property or
leasehold interest with a current fair market value in excess of
$1,500,000, as demonstrated in a manner reasonably satisfactory to the
Agent, at the time of acquisition thereof, the following documents
each of which shall be executed (and, where appropriate, acknowledged)
by Persons satisfactory to the Agent:
(A) one or more Mortgages covering the parcels of real
Property of the relevant Supplemental Guarantor or acquired by
the Company or any Subsidiary thereof pursuant to a Permitted
Acquisition financed hereunder (collectively, the "SUPPLEMENTAL
MORTGAGES"), in each case duly executed and delivered by the
Company or the relevant Subsidiary or Supplemental Guarantor, as
applicable, in recordable form and, to the extent necessary under
applicable law, for filing in the appropriate county land
offices, Uniform Commercial Code financing statements covering
fixtures, in each case appropriately completed and duly executed;
CREDIT AGREEMENT 42
<PAGE>
(B) one or more mortgagee policies of title insurance on
forms of and issued by one or more title companies satisfactory
to the Agent ("TITLE COMPANIES"), insuring the validity and
priority of the Liens created under the Supplemental Mortgages
for and in amounts satisfactory to the Agent, subject only to
such exceptions as are satisfactory to the Majority Lenders;
(C) current as-built surveys of each of the parcels to be
covered by the Supplemental Mortgages and, in the case of certain
surveys (as agreed by the Company and the Agent), accompanied by
a certificate of an appropriate officer or employee of the
Company, which surveys shall be in form and content acceptable to
the Agent and shall have been prepared by a registered surveyor
acceptable to the Agent;
(D) upon request of the Agent, certified copies of
permanent and unconditional certificates of occupancy (or, if it
is not the practice to issue certificates of occupancy in the
jurisdiction in which the parcels to be covered by the
Supplemental Mortgages are located, then such other evidence
reasonably satisfactory to each Lender) permitting the fully
functioning operation and occupancy of each such facility and of
such other permits necessary for the use and operation of each
such facility issued by the respective governmental authorities
having jurisdiction over each such facility;
(E) upon request of the Agent, in the case of Supplemental
Mortgages covering leasehold interests, such estoppel, consents
and other agreements from the lessor, the holder of a fee
mortgage or a sublessee, as the Agent may reasonably request;
(F) upon request of the Agent, appraisals of each of the
facilities located on the Properties covered by the Supplemental
Mortgages prepared by a Person, and using a methodology,
satisfactory to the Agent; and
(G) contemporaneously dated opinions of local counsel in
the respective jurisdictions in which the properties covered by
the Supplemental Mortgages are located, substantially in the form
of Exhibit F hereto (with such changes thereto as the Agent shall
approve), and in each case, covering such other matters as the
Agent may reasonably request (and the Company, each relevant
Subsidiary of the Company and each Supplemental Guarantor hereby
instructs such counsel to deliver such opinion to the Lenders and
the Agent).
In addition, the Company shall have paid to the Title Companies all
expenses and premiums of the Title Companies in connection with the
issuance of such policies
CREDIT AGREEMENT 43
<PAGE>
and in addition shall have paid to the Title Companies an amount equal
to the recording and stamp taxes payable in connection with recording
the Supplemental Mortgages in the appropriate jurisdictions.
(v) FINANCIAL INFORMATION. (A) a certificate of a Responsible
Financial Officer of the Company to the effect that on a pro forma
basis after giving effect to the relevant Permitted Acquisition, the
Company shall remain in compliance with Sections 8.10, 8.11, 8.12,
8.13 and 8.14 hereof and (B) the most recent audited consolidated
balance sheet of the Person (if any) to be acquired and its
Subsidiaries and the related statement of income, retained earnings
and cash flow for the fiscal year ended on said date, with opinions
thereon of the auditors of such Person(or, if audited financial
statements are not available to the Company, unaudited financial
statements (i) reviewed by independent certified accountants of
recognized national standing and acceptable to the Agent and (ii) in
form satisfactory to the Agent), and the most recent unaudited
consolidated balance sheet of such Person and its Subsidiaries and the
related statements of income and retained earnings for the period
ended on the date of such unaudited statements.
(vi) PAYMENT OF FEES AND EXPENSES, ETC. Evidence that the
Company shall have paid such fees and expenses as the Company shall
have agreed to pay to the Agent in connection herewith, including,
without limitation, the reasonable fees and expenses of Milbank,
Tweed, Hadley & McCloy, special New York counsel to First Union, and
Fiddler Gonzalez & Rodriguez, special Puerto Rico counsel to First
Union, in connection with the satisfaction of the conditions in this
Section 6.02 and the making of the Facility C Loans hereunder in
connection with the relevant Permitted Acquisition (to the extent that
statements for such fees and expenses have been delivered to the
Company).
(vii) OTHER DOCUMENTS. Such other documents as the Agent or
any Lender or special New York counsel to First Union may reasonably
request.
6.03 CONDITIONS TO ALL EXTENSIONS OF CREDIT. The obligation of the
Lenders to make any Facility C Loan or otherwise extend any credit to the
Company upon the occasion of each borrowing hereunder (including any borrowing
on the date hereof) are subject to the further conditions precedent that, both
immediately prior to the making of such Facility C Loan and also after giving
effect thereto and to the intended use thereof:
(i) no Default shall have occurred and be continuing; and
(ii) the representations and warranties made by the Company in
Section 7 hereof, and by each Obligor in each of the other Loan Documents
to which it is a party, shall be true and complete on and as of the date of
the making of such Facility C Loan with the same force and effect as if
made on and as of such date (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, as of such
specific date).
CREDIT AGREEMENT 44
<PAGE>
Each notice of borrowing by the Company hereunder shall constitute a
certification by the Company to the effect set forth in the first sentence of
this Section 6.03 (both as of the date of such notice and, unless the Company
otherwise notifies the Agent prior to the date of such borrowing, as of the date
of such borrowing).
Section 7. REPRESENTATIONS AND WARRANTIES. The Company
represents and warrants to the Agent and the Lenders that (with respect
to matters pertaining to itself and each of its Subsidiaries):
7.01 CORPORATE EXISTENCE. Each of the Company and its Subsidiaries:
(a) is a corporation, partnership or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization; (b) has all requisite corporate or other power, and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business as now being or as proposed to be
conducted; and (c) is qualified to do business and is in good standing in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify could (either
individually or in the aggregate) have a Material Adverse Effect.
7.02 FINANCIAL CONDITION. The Company has heretofore furnished to
each of the Lenders the following:
(a) unaudited consolidating balance sheets of the Company and its
Subsidiaries as at December 31, 1996 and the related consolidating
statements of income and operating cash flow for the twelve-month period
ended on said date; and
(b) an audited consolidated balance sheet of the Company and its
Subsidiaries as at December 31, 1996 and the related consolidated
statements of income, retained earnings and cash flow of the Company and
its Subsidiaries for the fiscal period ended on said date, with the opinion
thereon of Deloitte & Touche LLP.
All such financial statements fairly present the respective financial condition
of the respective entities as at the respective dates, and the respective
results of operations for the respective periods ended on said respective dates,
all in accordance with generally accepted accounting principles and practices
applied on a consistent basis. None of such respective entities has on the date
hereof any material contingent liabilities, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for in
the respective balance sheets referred to above. Since December 31, 1996 (with
respect to the Company and each of its Subsidiaries), there has been no material
adverse change in the respective financial condition, operations, business or
prospects of each such entity from that set forth in the respective financial
statements as at such date.
7.03 LITIGATION. Except as disclosed in Schedule V hereto, there are
no legal or arbitral proceedings, or any proceedings by or before any
governmental or regulatory authority or agency, now pending or (to the knowledge
of the Company) threatened against the Company or
CREDIT AGREEMENT 45
<PAGE>
any of its Subsidiaries that, if adversely determined could (either
individually or in the aggregate) have a Material Adverse Effect.
7.04 NO BREACH. None of the execution and delivery of this Agreement
and the Facility C Notes and the other Basic Documents, the consummation of the
transactions herein and therein contemplated or compliance with the terms and
provisions hereof and thereof will conflict with or result in a breach of, or
require any consent under, the charter or by-laws of any Obligor, or any
applicable law or regulation, or any order, writ, injunction or decree of any
court or governmental authority or agency, or any material agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which any of them or any of their Property is bound or to which any of them is
subject, or constitute a default under any such agreement or instrument, or
(except for the Liens created pursuant to the Security Documents) result in the
creation or imposition of any Lien upon any Property of the Company or any of
its Subsidiaries pursuant to the terms of any such agreement or instrument.
7.05 ACTION. Each Obligor has all necessary corporate power,
authority and legal right to execute, deliver and perform its obligations under
each of the Basic Documents to which it is a party; the execution, delivery and
performance by each Obligor of each of the Basic Documents to which it is a
party have been duly authorized by all necessary corporate action on its part
(including, without limitation, any required shareholder approvals); and this
Agreement has been duly and validly executed and delivered by the Company and
constitutes, and each of the Facility C Notes and the other Basic Documents to
which it is a party when executed and delivered by the respective Obligor (in
the case of the Facility C Notes, for value) will constitute, its legal, valid
and binding obligation, enforceable against such Obligor in accordance with its
terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or similar laws of general applicability
affecting the enforcement of creditors' rights and (b) the application of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). Each Security Document
providing collateral security, directly or indirectly, for the Facility C Loans
is effective to create in favor of the Agent for the benefit of the Lenders a
legal, valid and enforceable first priority Lien upon all right, title and
interest of the Obligor or Obligors party thereto in the Property described
therein and such Lien has been perfected, except as otherwise permitted under
Section 8.06 hereof or in such Security Document.
7.06 APPROVALS. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the execution, delivery or
performance by any Obligor of the Basic Documents to which it is a party or for
the legality, validity or enforceability hereof or thereof, except for filings
and recordings in respect of the Liens created pursuant to the Security
Documents.
7.07 USE OF CREDIT. None of the Company nor any of its Subsidiaries
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose, whether immediate, incidental or ultimate,
of buying or carrying Margin Stock, and
CREDIT AGREEMENT 46
<PAGE>
no part of the proceeds of the Facility C Loans hereunder will be used to buy
or carry any Margin Stock.
7.08 ERISA. Each Plan, and, to the knowledge of the Company, each
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law, and no event
or condition has occurred and is continuing as to which the Company would be
under an obligation to furnish a report to the Lenders under Section 8.01(e)
hereof.
7.09 TAXES. The Company and its Subsidiaries (other than the Obligors
operating in the Commonwealth and Garrido) are members of an affiliated group of
corporations filing consolidated returns for Federal income tax purposes, of
which the Company is the "common parent" (within the meaning of Section 1504 of
the Code) of such group. The Company and its Subsidiaries have filed all
Federal income tax returns and all other material tax returns that are required
to be filed by them and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by the Company or any of its Subsidiaries.
The charges, accruals and reserves on the books of the Company and its
Subsidiaries in respect of taxes and other governmental charges are, in the
opinion of the Company, adequate. The Company has not given or been requested
to give a waiver of the statute of limitations relating to the payment of
Federal, state, local and foreign taxes or other impositions. Neva Plastics and
Suiza Fruit each hold industrial tax exemption grants entitling each of them to
a 90% exemption from income and property taxes and a 60% exemption from
municipal license taxes. The grant held by Neva Plastics will expire on August
31, 2000 for income tax purposes, on June 30, 2001 for municipal tax purposes
and on January 1, 2000 for property tax purposes. The grant held by Suiza Fruit
will expire on October 12, 2002 for income and property tax purposes and on June
30, 2003 for municipal license tax purposes.
7.10 INVESTMENT COMPANY ACT. Neither the Company nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
7.11 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Company nor any
of its Subsidiaries is a "holding company", or an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company", within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
7.12 MATERIAL AGREEMENTS AND LIENS.
(a) Part A of Schedule I hereto is a complete and correct list, as of
the date hereof, and after giving effect to the transactions contemplated
hereunder to occur on such date, of each credit agreement, loan agreement,
indenture, purchase agreement, guarantee, letter of credit or other arrangement
providing for or otherwise relating to any Indebtedness or any extension of
credit (or commitment for any extension of credit) to, or guarantee by, the
Company or any of its Subsidiaries, and the aggregate principal or face amount
outstanding or that may
CREDIT AGREEMENT 47
<PAGE>
become outstanding under each such arrangement is correctly described in Part
A of said Schedule I.
(b) Part B of Schedule I hereto is a complete and correct list, as of
the date hereof (and after giving effect to the transactions contemplated
hereunder to occur on such date), of each Lien securing Indebtedness of any
Person and covering any Property of the Company or any of its Subsidiaries that
will continue after the date hereof, and the aggregate Indebtedness secured (or
that may be secured) by each such Lien and the Property covered by each such
Lien is correctly described in Part B of said Schedule I.
7.13 ENVIRONMENTAL MATTERS. Each of the Company and its
Subsidiaries has obtained all environmental, health and safety permits,
licenses and other authorizations required under all Environmental Laws to
carry on its business as now being or as proposed to be conducted, except to
the extent failure to have any such permit, license or authorization would
not (either individually or in the aggregate) have a Material Adverse Effect.
Each of such permits, licenses and authorizations is in full force and
effect and each of the Company and its Subsidiaries is in compliance with the
terms and conditions thereof, and is also in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any applicable
Environmental Law or in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, except to the extent failure to comply therewith would not
(either individually or in the aggregate) have a Material Adverse Effect.
In addition, except as to matters with respect to which the Company
and its Subsidiaries could not reasonably be expected to incur liabilities in
excess of $250,000 in the aggregate:
(a) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened by any governmental or other entity with respect to any alleged
failure by the Company or any of its Subsidiaries to have any
environmental, health or safety permit, license or other authorization
required under any Environmental Law in connection with the conduct of the
business of the Company or any of its Subsidiaries or with respect to any
generation, treatment, storage, recycling, transportation, discharge or
disposal, or any Release of any Hazardous Materials generated by the
Company or any of its Subsidiaries.
(b) Neither the Company nor any of its Subsidiaries owns, operates or
leases a treatment, storage or disposal facility requiring a permit under
the Resource Conservation and Recovery Act of 1976, as amended, or under
any comparable state or local statute; and
(i) no polychlorinated biphenyls (PCB's) is or has been present
at any site or facility now or previously owned, operated or leased by
the Company or any of its Subsidiaries;
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(ii) no asbestos or asbestos-containing materials is or has been
present at any site or facility now or previously owned, operated or
leased by the Company or any of its Subsidiaries;
(iii) there are no underground storage tanks, other than
those disclosed in consultant reports provided to the Agent by the
Company or its Subsidiaries, or surface impoundments for Hazardous
Materials, active or abandoned, at any site or facility now or
previously owned, operated or leased by the Company or any of its
Subsidiaries;
(iv) no Hazardous Materials have been Released at, on or under
any site or facility now or previously owned, operated or leased by
the Company or any of its Subsidiaries in a reportable quantity
established by statute, ordinance, rule, regulation or order; and
(v) no Hazardous Materials have been otherwise Released at, on
or under any site or facility now or previously owned, operated or
leased by the Company or any of its Subsidiaries that would (either
individually or in the aggregate) have a Material Adverse Effect.
(c) Neither the Company nor any of its Subsidiaries has transported
or arranged for the transportation of any Hazardous Material to any
location that is listed on the National Priorities List ("NPL") under the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), listed for possible inclusion on the NPL by
the Environmental Protection Agency in the Comprehensive Environmental
Response and Liability Information System, as provided for by 40 C.F.R.
Section 300.5 ("CERCLIS"), or on any similar state or local list or that is
the subject of Federal, state or local enforcement actions or other
investigations that may lead to Environmental Claims against the Company or
any of its Subsidiaries.
(d) No Hazardous Material generated by the Company or any of its
Subsidiaries has been recycled, treated, stored, disposed of or Released by
the Company or any of its Subsidiaries at any location other than those
listed in Schedule II hereto.
(e) No oral or written notification of a Release of a Hazardous
Material has been filed by or on behalf of the Company or any of its
Subsidiaries and no site or facility now or previously owned, operated or
leased by the Company or any of its Subsidiaries is listed or proposed for
listing on the NPL, CERCLIS or any similar state list of sites requiring
investigation or clean-up.
(f) No Liens have arisen under or pursuant to any Environmental Laws
on any site or facility owned, operated or leased by the Company or any of
its Subsidiaries, and no government action has been taken or is in process
that could subject any such site or facility to such Liens and neither the
Company nor any of its Subsidiaries would be
CREDIT AGREEMENT 49
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required to place any notice or restriction relating to the presence of
Hazardous Materials at any site or facility owned by it in any deed to
the real property on which such site or facility is located.
(g) All environmental investigations, studies, audits, tests, reviews
or other analyses conducted by or that are in the possession of the Company
or any of its Subsidiaries in relation to facts, circumstances or
conditions at or affecting any site or facility now or previously owned,
operated or leased by the Company or any of its Subsidiaries and that could
result in a Material Adverse Effect have been made available to the
Lenders.
7.14 CAPITALIZATION. As of the date hereof,
(a) the authorized capital stock of the Company consists of
21,000,000 shares, consisting of 20,000,000 shares of common stock, par
value $0.01 per share, and 1,000,000 shares of preferred stock, par value
$0.01 per share;
(b) the Company has 15,020,229 shares of issued and outstanding
common stock, and all of such issued shares are duly and validly issued and
outstanding and are not held in treasury;
(c) the Company has no issued or outstanding preferred stock;
(d) except for (i) options to purchase 577,760 shares of common stock
granted under the Company's Exchange Stock Option and Restricted Stock
Plan, (ii) options to purchase up to 1,017,478 shares of common stock
granted (980,206) or available (37,272) for future grants under the
Company's 1995 Stock Option and Restricted Stock Plan, and (iii) options to
purchase up to 1,150,000 shares of common stock available for future grants
under the Company's 1997 Stock Option and Restricted Stock Plan, and (iv)
options to purchase up to 250,000 shares of common stock available for
future grants under the Company's 1997 Employee Stock Purchase Plan, there
are no outstanding Equity Rights with respect to the Company; and
(e) there are no outstanding obligations of the Company or any of its
Subsidiaries to repurchase, redeem, or otherwise acquire any shares of
capital stock of the Company or any of its Subsidiaries or to make payments
to any Person, such as "phantom stock" payments, where the amount thereof
is calculated with reference to the fair market value or equity value of
the Company or any of its Subsidiaries.
7.15 SUBSIDIARIES, ETC.
(a) Set forth in Part A of Schedule III hereto is a complete and
correct list, as of the date hereof, of all of the Subsidiaries of the Company,
together with, for each such Subsidiary, (i) the jurisdiction of organization of
such Subsidiary, (ii) each Person holding ownership interests in such Subsidiary
and (iii) the nature of the ownership interests held by each
CREDIT AGREEMENT 50
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such Person and the percentage of ownership of such Subsidiary represented by
such ownership interests. Except as disclosed in Part A of Schedule III
hereto, (x) each of the Company and its Subsidiaries owns, free and clear of
Liens (other than Liens created pursuant to the Security Documents), and has
the unencumbered right to vote, all outstanding ownership interests in each
Person shown to be held by it in Part A of Schedule III hereto, (y) all of
the issued and outstanding capital stock of each such Person organized as a
corporation is validly issued, fully paid and nonassessable and (z) there are
no outstanding Equity Rights with respect to such Person.
(b) Set forth in Part B of Schedule III hereto is a complete and
correct list, as of the date hereof, of all Investments (other than
Investments disclosed in Part A of said Schedule III hereto) held by the
Company or any of its Subsidiaries in any Person and, for each such
Investment, (x) the identity of the Person or Persons holding such Investment
and (y) the nature of such Investment. Except as disclosed in Part B of
Schedule III hereto, each of the Company and its Subsidiaries owns, free and
clear of all Liens (other than Liens created pursuant to the Security
Documents), all such Investments.
(c) None of the Subsidiaries of the Company is, on the date
hereof, subject to any indenture, agreement, instrument or other arrangement
of the type described in Section 8.19(b) hereof.
7.16 TITLE TO ASSETS. The Company owns and has on the date hereof,
and will own and have on the Closing Date, good and marketable title (subject
only to Liens permitted by Section 8.06 hereof) to the Properties shown to be
owned in the most recent financial statements referred to in Section 8.02
hereof (other than Properties disposed of in the ordinary course of business
or otherwise permitted to be disposed of pursuant to Section 8.05 hereof).
The Company owns and has on the date hereof, and will own and have on the
Closing Date, good and marketable title to, and enjoys on the date hereof,
and will enjoy on the Closing Date, peaceful and undisturbed possession of,
all Properties (subject only to Liens permitted by Section 8.06 hereof) that
are necessary for the operation and conduct of its businesses.
7.17 TRUE AND COMPLETE DISCLOSURE. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Obligors to the Agent or any Lender in connection with the
negotiation, preparation or delivery of this Agreement and the other Loan
Documents or included herein or therein or delivered pursuant hereto or
thereto, when taken as a whole do not contain any untrue statement of
material fact or omit to state any material fact necessary to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading. All written information furnished after the date
hereof by the Company and its Subsidiaries to the Agent and the Lenders in
connection with this Agreement and the other Loan Documents and the
transactions contemplated hereby and thereby will be true, complete and
accurate in every material respect, or (in the case of projections) based on
reasonable estimates, on the date as of which such information is stated or
certified. There is no fact known to the Company that could have a Material
Adverse Effect that has not been disclosed herein, in the other Loan
Documents or in a
CREDIT AGREEMENT 51
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report, financial statement, exhibit, schedule, disclosure letter or other
writing furnished to the Lenders for use in connection with the transactions
contemplated hereby or thereby.
7.18 REAL PROPERTY. Set forth on Schedule IV attached hereto is a
list, as of the date hereof of all of the real property interests held by the
Company and its Subsidiaries, indicating in each case whether the respective
Property is owned or leased, the identity of the owner or lessee and the
location of the respective Property.
7.19 SOLVENCY. As of the Closing Date and after giving effect to
the initial Facility C Loans hereunder and the other transactions
contemplated hereby, (a) the aggregate value of all Properties of the Company
and its Subsidiaries at their present fair saleable value (i.e., the amount
that may be realized within a reasonable time, considered to be six months to
one year, either through collection or sale at the regular market value,
conceiving the latter as the amount that could be obtained for the Property
in question within such period by a capable and diligent businessman from an
interested buyer who is willing to purchase under ordinary selling
conditions), exceeds the amount of all the debts and liabilities (including
contingent, subordinated, unmatured and unliquidated liabilities) of the
Company and its Subsidiaries, (b) the Company and its Subsidiaries will not,
on a consolidated basis, have unreasonably small capital with which to
conduct their business operations as heretofore conducted and (c) the Company
and its Subsidiaries will have, on a consolidated basis, sufficient cash flow
to enable them to pay their debts as they mature.
7.20 SUBORDINATED NOTE PURCHASE AGREEMENT. All Indebtedness and
other obligations under the Subordinated Note Purchase Agreement have been
paid in full and said Agreement has been terminated.
Section 8. COVENANTS OF THE COMPANY. The Company covenants and
agrees with the Lenders and the Agent that, so long as any Facility C
Commitment or Facility C Loan is outstanding and until payment in full of all
amounts payable by the Company hereunder:
8.01 FINANCIAL STATEMENTS, ETC. The Company shall deliver, or
shall cause to be delivered, to each of the Lenders:
(a) as soon as available and in any event within 45 days after the
end of each quarterly fiscal period of each fiscal year of the Company,
consolidated and consolidating statements of income, retained earnings and
cash flow of the Company and its Subsidiaries for such period and for the
period from the beginning of the respective fiscal year to the end of such
period, and the related consolidated and consolidating balance sheets of
the Company and its Subsidiaries as at the end of such period, setting
forth in each case in comparative form the corresponding consolidated and
consolidating figures for the corresponding periods in the preceding fiscal
year, accompanied by a certificate of a Responsible Financial Officer of
the Company, which certificate shall state that said consolidated financial
statements fairly present the consolidated financial condition and results
of operations of the Company and its Subsidiaries, and said consolidating
financial statements fairly present the respective individual
unconsolidated financial condition and
CREDIT AGREEMENT 52
<PAGE>
results of operations of the Company and of each of its Subsidiaries, in
each case in accordance with generally accepted accounting principles,
consistently applied, as at the end of, and for, such period (subject to
normal year-end audit adjustments);
(b) as soon as available and in any event within 90 days after the
end of each fiscal year of the Company, consolidated and consolidating
statements of income, retained earnings and cash flow of the Company and
its Subsidiaries for such fiscal year and the related consolidated and
consolidating balance sheets of the Company and its Subsidiaries as at the
end of such fiscal year, setting forth in each case in comparative form the
corresponding consolidated and consolidating figures for the preceding
fiscal year, and accompanied (i) in the case of said consolidated
statements and balance sheet of the Company, by an opinion thereon of
independent certified public accountants of recognized national standing,
which opinion shall state that said consolidated financial statements
fairly present the consolidated financial condition and results of
operations of the Company and its Subsidiaries as at the end of, and for,
such fiscal year in accordance with generally accepted accounting
principles, and a certificate of such accountants stating that, in making
the examination necessary for their opinion, they obtained no knowledge,
except as specifically stated, of any Default, and (ii) in the case of said
consolidating statements and balance sheets, by a certificate of a
Responsible Financial Officer of the Company, which certificate shall state
that said consolidating financial statements fairly present the respective
individual unconsolidated financial condition and results of operations of
the Company and of each of its Subsidiaries, in each case in accordance
with generally accepted accounting principles, consistently applied, as at
the end of, and for, such fiscal year;
(c) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, that the
Company shall have filed with the Commission or any national securities
exchange;
(d) promptly upon mailing thereof to the shareholders of the Company
generally, copies of all financial statements, reports and proxy statements
so mailed;
(e) as soon as possible, and in any event within ten days after the
Company knows or has reason to believe that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan has occurred
or exists, a statement signed by a Responsible Financial Officer of the
Company setting forth details respecting such event or condition and the
action, if any, that the Company or its ERISA Affiliate proposes to take
with respect thereto (and a copy of any report or notice required to be
filed with or given to PBGC by the Company or an ERISA Affiliate with
respect to such event or condition):
(i) any reportable event, as defined in Section 4043(b) of
ERISA and the regulations issued thereunder, with respect to a Plan,
as to which PBGC has not by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of the
occurrence of such event (PROVIDED that a failure to
CREDIT AGREEMENT 53
<PAGE>
meet the minimum funding standard of Section 412 of the Code or
Section 302 of ERISA, including, without limitation, the failure
to make on or before its due date a required installment under
Section 412(m) of the Code or Section 302(e) of ERISA, shall be
a reportable event regardless of the issuance of any waivers in
accordance with Section 412(d) of the Code); and any request for
a waiver under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice of
intent to terminate any Plan or any action taken by the Company or an
ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section 4042
of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Company or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer
Plan by the Company or any ERISA Affiliate that results in liability
under Section 4201 or 4204 of ERISA (including the obligation to
satisfy secondary liability as a result of a purchaser default) or
the receipt by the Company or any ERISA Affiliate of notice from a
Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA or that it intends to
terminate or has terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Company or any ERISA Affiliate
to enforce Section 515 of ERISA, which proceeding is not dismissed
within 30 days; and
(vi) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result
in the loss of tax-exempt status of the trust of which such Plan is a
part if the Company or an ERISA Affiliate fails to timely provide
security to the Plan in accordance with the provisions of said
Sections;
(f) [Intentionally left blank];
(g) promptly after the Company knows or has reason to believe that
any Default has occurred, a notice of such Default describing the same in
reasonable detail and, together with such notice or as soon thereafter as
possible, a description of the action that the Company has taken or
proposes to take with respect thereto;
(h) promptly upon receipt thereof, copies of all management letters
and other material reports which are submitted to the Board of Directors of
the Company or any of
CREDIT AGREEMENT 54
<PAGE>
its Subsidiaries by their independent certified public accountants
in connection with any annual audit of the Company and/or any such
Subsidiary by such accountants;
(i) as soon as available and in any event on or before December 31 of
each fiscal year, a budget for the next following fiscal year setting forth
for each Subsidiary of the Company and for the Company and its Subsidiaries
as a whole, anticipated income, expense and capital expenditure items for
each quarter during such fiscal year, together with pro forma unaudited
balance sheets of the Company and its Subsidiaries and the related pro
forma statements of retained earnings, and quarterly, concurrently with the
delivery of the financial statements for such fiscal year pursuant to
clause (a) above, a report setting forth a detailed comparison of actual
performance to the budget referred to above; and
(j) from time to time such other information regarding the financial
condition, operations, business or prospects of the Company or any of its
Subsidiaries (including, without limitation, any Plan or Multiemployer Plan
and any reports or other information required to be filed under ERISA) as
any Lender or the Agent may reasonably request.
The Company will furnish to each Lender, at the time it furnishes each set of
financial statements pursuant to clause (a) above, a certificate of a
Responsible Financial Officer of the Company (i) to the effect that no
Default has occurred and is continuing (or, if any Default has occurred and
is continuing, describing the same in reasonable detail and describing the
action that the Company has taken or proposes to take with respect thereto)
and (ii) setting forth in reasonable detail the computations necessary to
determine whether the Company is in compliance with Sections 8.10, 8.11,
8.12, 8.13 and 8.14 hereof as of the end of the respective quarterly fiscal
period or fiscal year.
8.02 LITIGATION. The Company will promptly give to each Lender
notice of all legal or arbitral proceedings, and of all proceedings by or
before any governmental or regulatory authority or agency, and any material
development in respect of such legal or other proceedings, affecting the
Company or any of its Subsidiaries, except proceedings that, if adversely
determined, would not (either individually or in the aggregate) have a
Material Adverse Effect. Without limiting the generality of the foregoing,
the Company will give to each Lender notice of the assertion of any
Environmental Claim by any Person against, or with respect to the activities
of, the Company or any of its Subsidiaries and notice of any alleged
violation of or non-compliance with any Environmental Laws or any permits,
licenses or authorizations, other than any Environmental Claim or alleged
violation that, if adversely determined, would not (either individually or in
the aggregate) have a Material Adverse Effect.
8.03 EXISTENCE, ETC. The Company will, and will cause each of its
Subsidiaries to:
(a) preserve and maintain its legal existence and all of its material
rights, privileges, licenses and franchises (PROVIDED that nothing in this
Section 8.03 shall prohibit any transaction expressly permitted under
Section 8.05 hereof);
CREDIT AGREEMENT 55
<PAGE>
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if failure
to comply with such requirements could (either individually or in the
aggregate) have a Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental charges
or levies imposed on it or on its income or profits or on any of its
Property prior to the date on which penalties attach thereto, except for
any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which
adequate reserves are being maintained;
(d) maintain all of its Properties used or useful in its business in
good working order and condition, ordinary wear and tear excepted;
(e) keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting
principles consistently applied; and
(f) permit representatives of any Lender or the Agent, during normal
business hours, to examine, copy and make extracts from its books and
records, to inspect any of its Properties, and to discuss its business and
affairs with its officers, all to the extent reasonably requested by such
Lender or the Agent (as the case may be).
8.04 INSURANCE. The Company will, and will cause each of its
Subsidiaries to, maintain insurance with financially sound and reputable
insurance companies, and with respect to Property and risks of a character
usually maintained by corporations engaged in the same or similar business
similarly situated, against loss, damage and liability of the kinds and in
the amounts customarily maintained by such corporations. The Company will in
any event maintain (with respect to itself and each of its Subsidiaries):
(1) Casualty Insurance -- insurance against loss or damage covering
all of the tangible real and personal Property and improvements of the
Company and each of its Subsidiaries by reason of any Peril (as defined
below) in such amounts (subject to such deductibles as shall be
satisfactory to the Majority Lenders) as shall be reasonable and customary
and sufficient to avoid the insured named therein from becoming a co-
insurer of any loss under such policy but in any event in an amount (i)
in the case of fixed assets and equipment (including, without limitation,
vehicles), at least equal to 100% of the actual replacement cost of such
assets (including, without limitation, foundation, footings and excavation
costs), subject to deductibles as aforesaid (PROVIDED that recovery limits
may be applicable to losses caused by flood or earthquake) and (ii) in the
case of inventory, not less than the fair market value thereof, subject to
deductibles as aforesaid.
(2) Automobile Liability Insurance for Bodily Injury and Property
Damage -- insurance against liability for bodily injury and property damage
in respect of all vehicles
CREDIT AGREEMENT 56
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(whether owned, hired or rented by the Company or any of its Subsidiaries)
at any time located at, or used in connection with, its Properties or
operations in such amounts as are then customary for vehicles used in
connection with similar Properties and businesses, but in any event to
the extent required by applicable law.
(3) Comprehensive General Liability Insurance -- insurance against
claims for bodily injury, death or Property damage occurring on, in or
about the Properties (and adjoining streets, sidewalks and waterways) of
the Company and its Subsidiaries, in such amounts as are then customary for
Property similar in use in the jurisdictions where such Properties are
located.
(4) Workers' Compensation Insurance -- workers' compensation
insurance (including, without limitation, Employers' Liability Insurance)
to the extent required by applicable law.
(5) Product Liability Insurance -- insurance against claims for
bodily injury, death or Property damage resulting from the use of products
sold by the Company or any of its Subsidiaries in such amounts as are then
customarily maintained by responsible persons engaged in businesses similar
to that of the Company and its Subsidiaries.
(6) Business Interruption Insurance -- insurance against loss of
operating income (up to an aggregate amount equal to $15,000,000 and
subject to a deductible, or self-insured amount, not in excess of $500,000)
by reason of any Peril.
(7) Other Insurance -- such other insurance, including, without
limitation, War-Risk Insurance when and to the extent obtainable from the
United States Government, in each case as generally carried by owners of
similar Properties in the jurisdictions where such Properties are located,
in such amounts and against such risks as are then customary for Property
similar in use.
Such insurance shall be written by financially responsible companies selected
by the Company and having an A. M. Best rating of "A-" or better and being in
a financial size category of VIII or larger, or by other companies acceptable
to the Majority Lenders, and (other than workers' compensation) shall name
the Agent as loss payee (to the extent covering risk of loss or damage to
tangible property) and as an additional named insured as its interests may
appear (to the extent covering any other risk). Each policy referred to in
this Section 8.04 shall provide that it will not be canceled or reduced, or
allowed to lapse without renewal, except after not less than 30 days' notice
to the Agent and shall also provide that the interests of the Agent and the
Lenders shall not be invalidated by any act or negligence of the Company or
any Person having an interest in any Property covered by the Mortgages which,
directly or indirectly, secure the Facility C Loans nor by occupancy or use
of any such Property for purposes more hazardous than permitted by such
policy nor by any foreclosure or other proceedings relating to such Property.
The Company will advise the Agent promptly of any policy cancellation,
reduction or amendment.
CREDIT AGREEMENT 57
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On or before the date hereof, the Company will deliver to the Agent
certificates of insurance satisfactory to the Agent evidencing the existence
of all insurance required to be maintained by the Company hereunder setting
forth the respective coverage, limits of liability, carrier, policy number
and period of coverage (and attaching original copies of any policies with
respect to casualty insurance). Thereafter, each year the Company will
deliver to the Agent certificates of insurance evidencing that all insurance
required to be maintained by the Company hereunder will be in effect through
the calendar year following the date of such certificates, subject only to
the payment of premiums as they become due. In addition, the Company will
not modify any of the provisions of any policy with respect to casualty
insurance without delivering the original copy of the endorsement reflecting
such modification to the Agent accompanied by (if requested by the Agent) a
written report of a firm of independent insurance brokers of nationally
recognized standing, stating that, in their opinion, such policy (as so
modified) adequately protects the interests of the Lenders and the Agent, is
in compliance with the provisions of this Section 8.04, and is comparable in
all respects with insurance carried by responsible owners and operators of
Properties similar to those covered by the Mortgages which, directly or
indirectly, secure the Facility C Loans. The Company will not obtain or
carry separate insurance concurrent in form or contributing in the event of
loss with that required by this Section 8.04 unless the Agent is the named
insured thereunder, with loss payable as provided herein. The Company will
immediately notify the Agent whenever any such separate insurance is obtained
and shall deliver to the Agent the certificates evidencing the same.
Without limiting the obligations of the Company under the foregoing
provisions of this Section 8.04, in the event the Company shall fail to
maintain in full force and effect insurance as required by the foregoing
provisions of this Section 8.04, then the Agent may, but shall have no
obligation so to do, procure insurance covering the interests of the Lenders
and the Agent in such amounts and against such risks as the Agent (or the
Majority Lenders) shall deem appropriate, and the Company shall reimburse the
Agent in respect of any premiums paid by the Agent in respect thereof.
For purposes hereof, the term "PERIL" shall mean, collectively,
fire, lightning, flood, windstorm, hail, earthquake, explosion, riot and
civil commotion, vandalism and malicious mischief, damage from aircraft,
vehicles and smoke and all other perils covered by the "all-risk" endorsement
then in use in the jurisdictions where the Properties of the Company and its
Subsidiaries are located.
8.05 PROHIBITION OF FUNDAMENTAL CHANGES. (a) The Company will
not, nor will it permit any of its Subsidiaries to, enter into any
transaction of merger or consolidation or amalgamation, or liquidate, wind up
or dissolve itself (or suffer any liquidation or dissolution).
(b) The Company will not, nor will it permit any of its
Subsidiaries to, acquire any business or Property from, or capital stock of,
or be a party to any acquisition of, any Person except:
(i) for purchases of inventory and other Property to be sold or
used in the ordinary course of business;
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(ii) Investments permitted under Section 8.08 hereof;
(iii) Capital Expenditures permitted under Section 8.14 hereof;
and
(iv) Permitted Acquisitions and acquisitions permitted under Section
8.05(b)(iv) of the Existing Credit Agreement.
(c) The Company will not, nor will it permit any of its
Subsidiaries to, convey, sell, lease, transfer or otherwise dispose of, in
one transaction or a series of transactions, any part of its business or
Property, whether now owned or hereafter acquired (including, without
limitation, receivables and leasehold interests), but excluding:
(i) any Excluded Disposition;
(ii) obsolete or worn-out Property, tools or equipment no
longer used or useful in its business (other than any Excluded Disposition)
or real Property no longer used or useful in its business so long as the
aggregate amount thereof sold in any single fiscal year by the Company and
its Subsidiaries shall not have a fair market value in excess of
$1,000,000; and
(iii) any inventory or other Property sold or disposed of in
the ordinary course of business and on ordinary business terms.
(d) Notwithstanding the foregoing provisions of this Section 8.05,
so long as no Default shall have occurred and be continuing and, after giving
effect to any of the succeeding transactions, no Default would exist
hereunder, and so long as the Liens created under the Security Documents
continue to be in effect:
(i) any Subsidiary of the Company may be merged or consolidated
with or into: (x) the Company if the Company shall be the continuing or
surviving corporation or (y) any other such Subsidiary; and
(ii) any Subsidiary of the Company may sell, lease, transfer or
otherwise dispose of any or all of its Property (upon voluntary liquidation
or otherwise) to the Company or a Subsidiary of the Company.
8.06 LIMITATION ON LIENS. The Company will not, nor will it
permit any of its Subsidiaries to, create, incur, assume or suffer to exist
any Lien upon any of its Property, whether now owned or hereafter acquired,
except:
(a) Liens created pursuant to the Security Documents;
(b) Liens in existence on the date hereof and listed in Part B of
Schedule I hereto;
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(c) Liens imposed by any governmental authority for taxes,
assessments or charges not yet delinquent or that are being contested in
good faith and by appropriate proceedings if, unless the amount thereof
is not material with respect to it or its financial condition, adequate
reserves with respect thereto are maintained on the books of the Company
or the affected Subsidiaries, as the case may be, in accordance with GAAP;
(d) carriers', warehousemen's, mechanics', materialmen's,
landlord's, repairmen's or other like Liens arising in the ordinary course
of business that are not overdue for a period of more than 30 days or that
are being contested in good faith and by appropriate proceedings;
(e) Liens securing judgments but only to the extent for an amount
and for a period not resulting in an Event of Default under Section 9(i)
hereof;
(f) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
(g) deposits or pledges to secure the performance of bids, trade
contracts (other than for Indebtedness), leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
(h) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on
the use of Property or minor imperfections in title thereto that, in the
aggregate, are not material in amount, and that do not in any case
materially detract from the value of the Property subject thereto or
interfere with the ordinary conduct of the business of the Company or any
of its Subsidiaries;
(i) Liens upon tangible personal Property acquired after the date
hereof (by purchase, construction or otherwise), or upon other property
acquired after the date hereof as a Capital Expenditure, by the Company or
any of its Subsidiaries, each of which Liens either (A) existed on such
Property before the time of its acquisition and was not created in
anticipation thereof or (B) was created solely for the purpose of securing
Indebtedness representing, or incurred to finance, refinance or refund, the
cost of such Property; PROVIDED that (i) no such Lien shall extend to or
cover any Property of the Company or such Subsidiary other than the
Property so acquired, (ii) the principal amount of Indebtedness secured by
any such Lien shall at no time exceed the fair market value (as determined
in good faith by a Responsible Financial Officer of the Company) of such
Property at the time it was acquired, and (iii) the principal amount of all
Indebtedness (other than Indebtedness permitted by Section 8.07(d) hereof)
secured by such Liens shall not exceed $500,000 in the aggregate;
CREDIT AGREEMENT 60
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(j) Liens upon real Property heretofore leased or leased after the
date hereof (under operating or capital leases) in the ordinary course of
business by the Company or any of its Subsidiaries in favor of the lessor
created at the inception of the lease transaction, securing obligations of
the Company or any of its Subsidiaries under or in respect of such lease
and extending to or covering only the Property subject to such lease and
improvements thereon;
(k) Liens of sellers or creditors of sellers of farm products
encumbering such farm products when sold to any of the Obligors pursuant to
the Food Security Act of 1985 or pursuant to similar state laws to the
extent such Liens may be deemed to extend to the assets of such Obligors;
(l) protective Uniform Commercial Code filings with respect to
personal Property leased by any Obligor; and
(m) any extension, renewal or replacement of the foregoing, PROVIDED,
however, that the Liens permitted hereunder shall not be spread to cover
any additional Indebtedness or Property.
8.07 INDEBTEDNESS. The Company will not, nor will it permit any of
its Subsidiaries to, create, incur or suffer to exist any Indebtedness except:
(a) Indebtedness to the Lenders hereunder, under the other Loan
Documents and under the Existing Credit Agreement;
(b) Indebtedness outstanding on the date hereof and listed in Part A
of Schedule I hereto;
(c) Indebtedness of Subsidiaries of the Company to the Company or to
other Subsidiaries of the Company or of the Company to any of its
Subsidiaries to the extent permitted under Section 8.08(e) or (g) hereof;
(d) Indebtedness (including Capital Lease Obligations) incurred to
finance the purchase of equipment, and other Capital Lease Obligations, not
to exceed $10,000,000 in the aggregate outstanding at any time; and
(e) Indebtedness in respect of an irrevocable letter of credit issued
by a financial institution located in the State of Nevada in favor of the
State of Nevada Department of Insurance for the account of the Company or
any of its Subsidiaries, and any extensions or renewals thereof, in an
aggregate amount not exceeding $5,000,000 at any one time outstanding;
(f) Indebtedness incurred in connection with the acquisition of the
capital stock or assets of Pure Ice of the South, Inc. ("PURE ICE"), a
Florida corporation, and
CREDIT AGREEMENT 61
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evidenced by promissory note(s) payable to the shareholders of Pure Ice,
in an aggregate amount not exceeding $1,175,000 at any one time
outstanding; and
(g) additional Indebtedness of the Company and its Subsidiaries up to
but not exceeding $1,000,000 at any one time outstanding.
8.08 INVESTMENTS. The Company will not, nor will it permit any of its
Subsidiaries to, make or permit to remain outstanding any Investments except:
(a) Investments outstanding as of the date hereof and identified in
Part B of Schedule III hereto (including, without limitation, Indebtedness
of any Subsidiary of the Company to the Company or any other Subsidiary of
the Company);
(b) operating deposit accounts with depository institutions;
(c) Permitted Investments;
(d) Interest Rate Protection Agreements entered into pursuant to
Section 8.15 hereof;
(e) (i) Investments permitted under Section 8.05(b) hereof and (ii)
indemnities executed in connection with the sale of Investment Tax Credits;
(f) Investments by the Company in the capital stock of its
Subsidiaries to the extent outstanding as of the date hereof;
(g) Investments (other than of a type specified in clause (f) above,
other than the Investments permitted under clause (a) above and Investments
in Subsidiaries made in connection with Investments pursuant to clause
(e)(i) above) by the Company in its Subsidiaries or by any Subsidiary of
the Company in the Company or any other Subsidiary of the Company made
after the date hereof not exceeding $10,000,000 at any time outstanding
(MINUS (without duplication) the aggregate principal amount of Indebtedness
outstanding under Section 8.07(c) hereof);
(h) loans and advances to employees up to but not exceeding $750,000
in the aggregate;
(i) deposits to secure bids, tenders, utilities, vendors, leases,
statutory obligations, surety and appeal bonds and other deposits of like
nature arising in the ordinary course of business not exceeding $500,000 in
the aggregate;
(j) additional Investments up to but not exceeding $1,000,000 in the
aggregate; and
(k) any guarantees permitted under Section 8.07 hereof.
CREDIT AGREEMENT 62
<PAGE>
8.09 RESTRICTED PAYMENTS.
(a) DIVIDEND PAYMENTS. The Company will not, nor will it permit any
of its Subsidiaries to, declare or make any Dividend Payment at any time,
PROVIDED that the Company may redeem or retire shares of its common stock from
any of its officers in connection with his or her voluntary departure,
dismissal, retirement or death, PROVIDED that (i) at the time of such redemption
or retirement no Default shall have occurred and be continuing and (ii) the
aggregate amount of all cash paid in respect of all such shares so redeemed or
repurchased does not exceed $500,000 in any fiscal year. Nothing herein shall
be deemed to prohibit the payment of dividends by any Subsidiary of the Company
to the Company or any other Subsidiary of the Company.
(b) MANAGEMENT FEES. The Company will not, nor will it permit any of
its Subsidiaries to, accrue or pay any Management Fees to any Person (including,
without limitation, any Affiliates), PROVIDED that, so long as no Default shall
have occurred and be continuing or would result therefrom, the Company may make
payments to Robert L. Kaminski not exceeding $150,000 in any fiscal year.
8.10 LEVERAGE RATIO. The Company will not permit the Leverage Ratio
to exceed 3.50 to 1 at any time.
8.11 MINIMUM NET WORTH. The Company will not permit its Net Worth (i)
for the period from the date hereof to and including March 31, 1997 to be less
than $135,000,000 and (ii) for each fiscal quarter thereafter, to be less than
$135,000,000 plus 50% of net income for all preceding fiscal quarters (without
including the results of any fiscal quarter in respect of which there was a net
loss) commencing with the fiscal quarter beginning April 1, 1997. The amounts
of Net Worth set forth above shall be increased by 75% of the amount by which
the "total stockholders equity" of the Company is increased as a result of any
public or private offering of common stock of the Company after March 1, 1997.
Promptly upon consummation of each such public or private offering, the Company
shall notify the Agent in writing of the amount of such increase in total
stockholders equity.
8.12 FIXED CHARGES RATIO. The Company will not permit the Fixed
Charges Ratio to be less than 1.20 to 1 at any time.
8.13 INTEREST COVERAGE RATIO. The Company will not permit the
Interest Coverage Ratio to be less than 3.00 to 1 at any time.
8.14 CAPITAL EXPENDITURES. The Company will not permit the aggregate
amount of Capital Expenditures by the Company and its Subsidiaries to exceed the
following respective amounts for the following respective periods:
CREDIT AGREEMENT 63
<PAGE>
Period Amount
------ ------
From January 1, 1996 through
and including December 31,
1996 $13,000,000
From January 1, 1997
through and including
December 31, 1997, and for
each fiscal year thereafter $21,000,000
If the aggregate amount of Capital Expenditures for any period set forth in the
schedule above shall be less than the amount set forth opposite such period in
the schedule above, then the shortfall shall be added to the amount of Capital
Expenditures permitted for the immediately succeeding period (but not any other)
period and, for the purposes hereof, the amount of Capital Expenditures made
during any period shall be deemed to have been made first from the permitted
amount for such period set forth in the schedule above and last from the amount
of any carryover from any previous period. Notwithstanding the foregoing, in
addition to the Capital Expenditures permitted to be incurred as provided above,
the Company may make the following additional Capital Expenditures: (a) the
acquisition of replacement Property in respect of an Excluded Disposition; (b)
the purchase price paid by the Company or any of its Subsidiaries in respect of
any acquisition permitted under Section 8.05(b)(iv) hereof; and (c) Capital
Expenditures made with the proceeds of property or casualty insurance for the
purposes of repairing or replacing damaged or destroyed fixed or capital assets.
8.15 INTEREST RATE PROTECTION AGREEMENTS. The Company shall maintain
in full force and effect the Interest Rate Protection Agreements existing as of
the date hereof as described in Section 6.01(k) hereof until the stated
expiration date thereof. The Company further agrees to provide to the Agent on
or before September 30, 1997 evidence that it has in full force and effect
Interest Rate Protection Agreements in form and substance satisfactory to the
Agent that enable the Company to protect against floating interest rates as to a
notional principal amount at least equal to 50% of the maximum aggregate
principal amount of the Facility B Loans outstanding from time to time during
the period from September 30, 1997 to and including March 31, 2000.
8.16 LINES OF BUSINESS. Neither the Company nor any of its
Subsidiaries will engage to any substantial extent in any line or lines of
business activity other than operations involved in the manufacture, processing
or distribution of ice, ice-related products, coffee, dairy products or bottled
water which is similar to the water products that are currently processed,
bottled and distributed from the dairy facilities of the Company and/or its
Subsidiaries, or the lines of business conducted by the Company or any of its
Subsidiaries as of the date hereof.
8.17 TRANSACTIONS WITH AFFILIATES. Except as expressly permitted by
this Agreement, the Company will not, nor will it permit any of its Subsidiaries
to, directly or indirectly: (a) make any Investment in an Affiliate;
(b) transfer, sell, lease, assign or otherwise dispose of any Property to an
Affiliate; (c) merge into or consolidate with or purchase or acquire Property
from an Affiliate; or (d) enter into any other transaction directly or
indirectly with or for
CREDIT AGREEMENT 64
<PAGE>
the benefit of an Affiliate (including, without limitation, Guarantees and
assumptions of obligations of an Affiliate); PROVIDED that (i) any Affiliate
who is an individual may serve as a director, officer or employee of the
Company or any of its Subsidiaries and receive reasonable compensation for
his or her services in such capacity and (ii) the Company and its
Subsidiaries may enter into transactions (other than extensions of credit by
the Company or any of its Subsidiaries to an Affiliate) if the monetary or
business consideration arising therefrom would be substantially as
advantageous to the Company and its Subsidiaries as the monetary or business
consideration that would obtain in a comparable transaction with a Person not
an Affiliate.
8.18 USE OF PROCEEDS. The Company will use the proceeds of the
Facility C Loans only to make Permitted Acquisitions. The Company will use the
proceeds of all Facility C Loans hereunder in compliance with all applicable
legal and regulatory requirements. Neither the Agent nor any Lender shall have
any responsibility as to the use of any of such proceeds.
8.19 CERTAIN OBLIGATIONS RESPECTING SUBSIDIARIES; ADDITIONAL MORTGAGED
PROPERTIES.
(a) The Company will, and will cause each of its Subsidiaries to,
take such action from time to time as shall be necessary to ensure that each of
its Subsidiaries is a Wholly Owned Subsidiary. In the event that any additional
shares of stock shall be issued by any Subsidiary, the respective Obligor agrees
forthwith to deliver to the Agent pursuant to the relevant Security Document the
certificates evidencing such shares of stock, accompanied by undated stock
powers executed in blank and to take such other action as the Agent shall
request to perfect the security interest created therein pursuant to such
Security Document.
(b) The Company will not permit any of its Subsidiaries to enter
into, after the date of this Agreement, any indenture, agreement, instrument or
other arrangement (other than the Garrido Negative Pledge Agreement) that,
directly or indirectly, prohibits or restrains, or has the effect of prohibiting
or restraining, or imposes materially adverse conditions upon, the incurrence or
payment of Indebtedness, the granting of Liens, the declaration or payment of
dividends, the making of loans, advances or Investments or the sale, assignment,
transfer or other disposition of Property.
(c) The Company will take such action, and will cause each of its
Subsidiaries (other than Garrido and Guest Choice) to take such action, from
time to time as shall be necessary to ensure that all Subsidiaries of the
Company (other than Garrido and Guest Choice) are party to, as obligors, the
Existing Subsidiary Guarantee and Security Agreement or a Supplemental
Subsidiary Guarantee and Security Agreement. Without limiting the generality of
the foregoing, in the event that the Company or any of its Subsidiaries shall
form or acquire any new Subsidiary, the Company or the respective Subsidiary
will cause such new Subsidiary to (i) become a party to the Existing Subsidiary
Guarantee and Security Agreement or a Supplemental Subsidiary Guarantee and
Security Agreement pursuant to a written instrument in form and substance
satisfactory to the Agent, (ii) if requested by the Majority Lenders, cause such
new Subsidiary to execute and deliver one or more Mortgages, in substantially
the form of Exhibits C or D hereto (with such changes thereto as the Agent may
reasonably request), covering the real
CREDIT AGREEMENT 65
<PAGE>
Property and/or fixtures of such Subsidiary, and (iii) to deliver such proof
of corporate action, incumbency of officers, opinions of counsel and other
documents relating to the foregoing as is consistent with those to be
delivered by each Supplemental Guarantor pursuant to Section 6.02 hereof or
delivered pursuant to Section 6.01 of the Existing Credit Agreement, as the
case may be, or as any Lender or the Agent shall have reasonably requested.
(d) Without affecting the obligations of the Company under any
provision prohibiting such action hereunder, in the event that the Company or
any of its Subsidiaries (other than Garrido) shall acquire any business or
Property after the date hereof, the Company shall, or shall cause such
Subsidiary to (i) if requested by the Majority Lenders, execute and deliver one
or more Mortgages, substantially in the form of Exhibits D-1 or D-2 hereto (with
such changes as the Agent may reasonably request), covering the real property
and/or fixtures so acquired, (ii) execute and deliver to the Agent for filing,
appropriately completed Uniform Commercial Code financing statements or other
filings or instruments as the Agent shall request in order to perfect the
security interest in favor of the Agent for the benefit of the Lenders in such
Property so acquired and (iii) deliver such proof of corporate action,
incumbency of officers, opinions of counsel and other documents relating to the
foregoing as is consistent with those to be delivered by each Supplemental
Guarantor pursuant to Section 6.02 hereof or delivered pursuant to Section 6.01
of the Existing Credit Agreement, as the case may be, or as any Lender or the
Agent shall have reasonably requested.
8.20 MODIFICATIONS OF CERTAIN DOCUMENTS. Except in connection with
any transaction expressly permitted hereunder, the Company will not, nor will it
permit any of its Subsidiaries to, consent to any modification, supplement or
waiver of any of the provisions of any agreement, instrument or other document
evidencing or relating to the charter or by-laws of the Company or any of its
Subsidiaries, in each case, without the prior consent of the Agent (with the
approval of the Majority Lenders). Without limiting the requirement for consent
as provided in the immediately preceding sentence, the Company will furnish to
the Agent a copy of each such modification, supplement or waiver promptly upon
the effectiveness thereof (and the Agent will promptly furnish a copy thereof to
each Lender).
8.21 FURTHER ASSURANCES. As and to the extent requested from time to
time by the Agent or the Majority Lenders, each Supplemental Guarantor operating
in the Commonwealth will grant to the Agent, for the benefit of the Lenders, a
Lien in respect of any Property owned by such Supplemental Guarantor operating
in the Commonwealth. Such Lien shall be granted pursuant to documentation
reasonably satisfactory in form and substance to the Agent (collectively, the
"ADDITIONAL PUERTO RICO SECURITY DOCUMENTS") and shall constitute valid and
enforceable perfected liens superior to and prior to the rights of all other
Persons and subject to no other Liens except for the Liens permitted pursuant to
Section 8.06 hereof. The Additional Puerto Rico Security Documents or other
instruments related thereto shall be duly recorded or filed in such manner and
in such places as are required by law to establish, perfect, preserve and
protect the Liens in favor of the Agent for the benefit of the Lenders required
to be granted pursuant to the Additional Puerto Rico Security Documents and all
taxes, fees and other charges payable in connection therewith shall be paid in
full.
CREDIT AGREEMENT 66
<PAGE>
8.22 PUERTO RICO SECURITY DOCUMENTS. The Company shall, within 15
days of the Effective Date, (i) execute such amendments to the Puerto Rico
Security Documents as reasonably requested by the Agent, (ii) duly file such
amendments with the appropriate filing offices in Puerto Rico and (iii) pay all
filing fees in connection therewith.
Section 9. EVENTS OF DEFAULT. If one or more of the following
events (herein called "EVENTS OF DEFAULT") shall occur and be continuing:
(a) The Company shall: (i) default in the payment of any principal
of any Facility C Loan when due (whether at stated maturity or at mandatory
prepayment); or (ii) default in the payment of any interest on any Facility
C Loan, any fee or any other amount payable by it hereunder or under any
other Loan Document when due and such default shall have continued
unremedied for three or more Business Days; or
(b) The Company or any of its Subsidiaries shall default in the
payment when due of any principal of or interest on any of its other
Indebtedness aggregating $500,000 or more, or in the payment when due of
any amount under any Interest Rate Protection Agreement; or any event
specified in any note, agreement, indenture or other document evidencing or
relating to any such Indebtedness or any event specified in any Interest
Rate Protection Agreement shall occur if the effect of such event is to
cause, or (with the giving of any notice or the lapse of time or both) to
permit the holder or holders of such Indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause, such Indebtedness to become
due, or to be prepaid in full (whether by redemption, purchase, offer to
purchase or otherwise), prior to its stated maturity or to have the
interest rate thereon reset to a level so that securities evidencing such
Indebtedness trade at a level specified in relation to the par value
thereof or, in the case of an Interest Rate Protection Agreement, to permit
the payments owing under such Interest Rate Protection Agreement to be
liquidated or any "Event of Default" (as defined in the Existing Credit
Agreement) shall occur and be continuing; or
(c) Any representation, warranty or certification made or deemed made
herein or in any other Loan Document (or in any modification or supplement
hereto or thereto) by any Obligor, or any certificate furnished to any
Lender or the Agent pursuant to the provisions hereof or thereof, shall
prove to have been false or misleading as of the time made or furnished in
any material respect; or
(d) The Company shall default in the performance of any of its
obligations under any of Sections 8.01(g), 8.05, 8.06, 8.07, 8.08, 8.09,
8.10, 8.11, 8.12, 8.13, 8.14, 8.15, 8.16, 8.17, 8.19, 8.21 or 8.22 hereof;
or the Company shall default in the performance of any of its other
obligations in this Agreement and such default shall continue unremedied
for a period of 30 or more days after notice thereof to the Company by the
Agent or any Lender (through the Agent); or
(e) The Company shall default in the performance of any of its
obligations under Section 4.02 of the Security Agreement; any Obligor party
to the Existing
CREDIT AGREEMENT 67
<PAGE>
Subsidiary Guarantee and Security Agreement or any Supplemental
Subsidiary Guarantee and Security Agreement shall default in the
performance of any of its obligations under Section 2 or 5.02 thereof;
or any Obligor shall default in the performance of any of its other
obligations in any Loan Document (other than this Agreement) to which it is
party and such default shall continue unremedied for a period of 30 or more
days after notice thereof to the Company by the Agent or any Lender
(through the Agent); or
(f) The Company or any of its Subsidiaries shall admit in writing its
inability to, or be generally unable to, pay its debts as such debts become
due; or
(g) The Company or any of its Subsidiaries shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner or liquidator of itself or of all or a
substantial part of its Property, (ii) make a general assignment for the
benefit of its creditors, (iii) commence a voluntary case under the
Bankruptcy Code, (iv) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, liquidation,
dissolution, arrangement or winding-up, or composition or readjustment of
debts, (v) fail to controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed against it in an involuntary
case under the Bankruptcy Code (or such similar laws) or (vi) take any
corporate action for the purpose of effecting any of the foregoing; or
(h) A proceeding or case shall be commenced, without the application
or consent of the Company or the relevant Subsidiary affected thereby, in
any court of competent jurisdiction, seeking (i) its reorganization,
liquidation, dissolution, arrangement or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of a receiver, custodian,
trustee, examiner, liquidator or the like of the Company or such
Subsidiary, as the case may be, or of all or any substantial part of its
Property, or (iii) similar relief in respect of such Company or such
Subsidiary, as the case may be, under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of
debts, and such proceeding or case shall continue undismissed, or an order,
judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of 60 or more
days; or an order for relief against the Company or any of its Subsidiaries
shall be entered in an involuntary case under the Bankruptcy Code; or
(i) A final judgment or judgments for the payment of money in excess
of $1,000,000 in the aggregate (exclusive of judgment amounts fully bonded
or covered by insurance where the surety or the insurer, as the case may
be, has admitted liability in respect of such judgment) shall be rendered
by one or more courts, administrative tribunals or other bodies having
jurisdiction against the Company or any of its Subsidiaries and the same
shall not be discharged (or provision shall not be made for such
discharge), or a stay of execution thereof shall not be procured, within 30
days from the date of entry thereof and the Company or any such Subsidiary,
as the case may be, shall not, within said period of 30 days, or such
longer period during which execution of the
CREDIT AGREEMENT 68
<PAGE>
same shall have been stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal; or
(j) An event or condition specified in Section 8.01(e) hereof shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a
result of such event or condition, together with all other such events or
conditions, the Company or any ERISA Affiliate shall incur or shall be
reasonably likely to incur a liability to a Plan, a Multiemployer Plan or
PBGC (or any combination of the foregoing) that, in the determination of
the Majority Lenders, would (either individually or in the aggregate) have
a Material Adverse Effect; or
(k) A reasonable basis shall exist for the assertion against the
Company or any of its Subsidiaries, or any predecessor in interest of the
Company or any of its Subsidiaries, of (or there shall have been asserted
against the Company or any of its Subsidiaries) an Environmental Claim
that, in the judgment of the Majority Lenders, is reasonably likely to be
determined adversely to the Company or any of its Subsidiaries, and the
amount thereof (either individually or in the aggregate) is reasonably
likely to have a Material Adverse Effect (insofar as such amount is payable
by the Company or any of its Subsidiaries but after deducting any portion
thereof that is reasonably expected to be paid by other creditworthy
Persons jointly and severally liable therefor); or
(l) Mr. Gregg L. Engles ("ENGLES") shall at any time cease to perform
the duties of the Chairman of the Board of Directors, or Chief Executive
Officer, of the Company; or any of the Subsidiaries of the Company shall
cease to be a Wholly Owned Subsidiary of the Company; or during any period
of 25 consecutive calendar months, a majority of the Board of Directors of
the Company shall no longer be composed of individuals (i) who were members
of said Board on the first day of such period or (ii) whose election or
nomination to said Board was approved by individuals referred to in clause
(i) above constituting at the time of such election or nomination at least
a majority of said Board; or any Person or group of Persons acting in
concert, other than Engles or any other shareholder of the Company as of
the date hereof, shall at any time own or control, directly or indirectly,
20% or more of such voting capital stock; or
(m) The Liens created by the Security Documents shall at any time not
constitute a valid and perfected Lien on any material portion of the
collateral intended to be covered thereby (to the extent perfection by
filing, registration, recordation or possession is required herein or
therein) in favor of the Agent, free and clear of all other Liens (other
than Liens permitted under Section 8.06 hereof or under the respective
Security Documents), or, except for expiration in accordance with its
terms, any of the Security Documents shall for whatever reason be
terminated or cease to be in full force and effect, or the enforceability
thereof shall be contested by any Obligor.
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (g) or (h) of this Section 9 with respect to any Obligor, the Agent may
(and, if requested by the Majority Lenders shall), by notice to the Company,
terminate the Facility C Commitments and/or
CREDIT AGREEMENT 69
<PAGE>
declare the principal amount then outstanding of, and the accrued interest
on, the Facility C Loans and all other amounts payable by the Obligors
hereunder, under the other Loan Documents and under the Facility C Notes
(including, without limitation, any amounts payable under Section 5.05 or
5.08 hereof) to be forthwith due and payable, whereupon such amounts shall be
immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by each
Obligor; and (2) in the case of the occurrence of an Event of Default
referred to in clause (g) or (h) of this Section 9 with respect to any
Obligor, the Facility C Commitments shall automatically be terminated and the
principal amount then outstanding of, and the accrued interest on, the
Facility C Loans and all other amounts payable by the Company hereunder and
under the Facility C Notes (including, without limitation, any amounts
payable under Section 5.05 or 5.08 hereof) shall automatically become
immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by each
Obligor.
Section 10. THE AGENT.
10.01 APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby
irrevocably appoints and authorizes the Agent to act as its agent hereunder and
under the other Loan Documents with such powers as are specifically delegated to
the Agent by the terms of this Agreement and of the other Loan Documents,
together with such other powers as are reasonably incidental thereto. The Agent
(which term as used in this sentence and in Section 10.05 and the first sentence
of Section 10.06 hereof shall include reference to its affiliates and its own
and its affiliates' officers, directors, employees and agents): (a) shall have
no duties or responsibilities except those expressly set forth in this Agreement
and in the other Loan Documents, and shall not by reason of this Agreement or
any other Loan Document be a trustee for any Lender; (b) shall not be
responsible to the Lenders for any recitals, statements, representations or
warranties contained in this Agreement or in any other Loan Document, or in any
certificate or other document referred to or provided for in, or received by any
of them under, this Agreement or any other Loan Document, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement, any Facility C Note or any other Loan Document or any other document
referred to or provided for herein or therein or for any failure by the Company
or any other Person to perform any of its obligations hereunder or thereunder;
(c) shall not be required to initiate or conduct any litigation or collection
proceedings hereunder or under any other Loan Document; and (d) shall not be
responsible for any action taken or omitted to be taken by it hereunder or under
any other Loan Document or under any other document or instrument referred to or
provided for herein or therein or in connection herewith or therewith, except
for its own gross negligence or willful misconduct. The Agent may employ agents
and attorneys-in-fact and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it in good faith.
The Agent may deem and treat the payee of any Facility C Note as the holder
thereof for all purposes hereof unless and until a notice of the assignment or
transfer thereof shall have been filed with the Agent.
10.02 RELIANCE BY AGENT. The Agent shall be entitled to rely upon
any certification, notice or other communication (including, without limitation,
any thereof by telephone, telecopy, telex, telegram or cable) believed by it to
be genuine and correct and to have
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been signed or sent by or on behalf of the proper Person or Persons, and upon
advice and statements of legal counsel, independent accountants and other
experts selected by the Agent. As to any matters not expressly provided for
by this Agreement or any other Loan Document, the Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder or
thereunder in accordance with instructions given by the Majority Lenders or,
if provided herein, in accordance with the instructions given by all of the
Lenders as is required in such circumstance, and such instructions of such
Lenders and any action taken or failure to act pursuant thereto shall be
binding on all of the Lenders.
10.03 DEFAULTS. The Agent shall not be deemed to have knowledge
or notice of the occurrence of a Default unless the Agent has received notice
from a Lender or any Obligor specifying such Default and stating that such
notice is a "Notice of Default". In the event that the Agent receives such a
notice of the occurrence of a Default, the Agent shall give prompt notice
thereof to the Lenders. The Agent shall (subject to Section 10.07 hereof)
take such action with respect to such Default as shall be directed by the
Majority Lenders, PROVIDED that, unless and until the Agent shall have
received such directions, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default
as it shall deem advisable in the best interest of the Lenders except to the
extent that this Agreement expressly requires that such action be taken, or
not be taken, only with the consent or upon the authorization of the Majority
Lenders, or all of the Lenders.
10.04 RIGHTS AS A LENDER. With respect to its Facility C
Commitment and the Facility C Loans made by it, First Union (and any
successor acting as Agent) in its capacity as a Lender hereunder shall have
the same rights and powers hereunder as any other Lender and may exercise the
same as though it were not acting as the Agent, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include the Agent in
its individual capacity. First Union (and any successor acting as Agent) and
its affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to, make investments in and generally engage in any
kind of banking, trust or other business with the Obligors (and any of their
Subsidiaries or Affiliates) as if it were not acting as the Agent, and First
Union and its affiliates may accept fees and other consideration from the
Obligors for services in connection with this Agreement or otherwise without
having to account for the same to the Lenders.
10.05 INDEMNIFICATION. The Lenders agree to indemnify the Agent
(to the extent not reimbursed under Section 11.03 hereof, but without
limiting the obligations of the Company under said Section 11.03, and
including in any event any payments under any indemnity that the Agent is
required to issue to any bank referred to in Section 4.02 of the Security
Agreement and Section 5.02 of each Supplemental Subsidiary Guarantee and
Security Agreement to which remittances in respect of Accounts, as defined in
each such agreement, are to be made) ratably in accordance with the aggregate
principal amount of the Facility C Loans held by the Lenders (or, if no
Facility C Loans are at the time outstanding, ratably in accordance with
their respective Facility C Commitments), for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever that may be
imposed on, incurred by or asserted against the Agent (including by any
Lender) arising out of or by reason of any investigation in or in any way
relating to or arising out of this
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Agreement or any other Loan Document or any other documents contemplated by
or referred to herein or therein or the transactions contemplated hereby or
thereby (including, without limitation, the costs and expenses that the
Company is obligated to pay under Section 11.03 hereof, and including also
any payments under any indemnity that the Agent is required to issue to any
bank referred to in Section 4.02 of the Security Agreement and Section 5.02
of each Supplemental Subsidiary Guarantee and Security Agreement to which
remittances in respect of Accounts, as defined in each such agreement, are to
be made, but excluding, unless a Default has occurred and is continuing,
normal administrative costs and expenses incident to the performance of its
agency duties hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, PROVIDED that no Lender shall be
liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the party to be indemnified.
10.06 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender agrees
that it has, independently and without reliance on the Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Company and its Subsidiaries
and decision to enter into this Agreement and that it will, independently and
without reliance upon the Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue
to make its own analysis and decisions in taking or not taking action under
this Agreement or under any other Loan Document. The Agent shall not be
required to keep itself informed as to the performance or observance by any
Obligor of this Agreement or any of the other Loan Documents or any other
document referred to or provided for herein or therein or to inspect the
Properties or books of the Company or any of its Subsidiaries. Except for
notices, reports and other documents and information expressly required to be
furnished to the Lenders by the Agent hereunder or under the Security
Documents, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the affairs, financial
condition or business of the Company or any of its Subsidiaries (or any of
their affiliates) that may come into the possession of the Agent or any of
its affiliates.
10.07 FAILURE TO ACT. Except for action expressly required of the
Agent hereunder and under the other Loan Documents, the Agent shall in all
cases be fully justified in failing or refusing to act hereunder and
thereunder unless it shall receive further assurances to its satisfaction
from the Lenders of their indemnification obligations under Section 10.05
hereof against any and all liability and expense that may be incurred by it
by reason of taking or continuing to take any such action.
10.08 RESIGNATION OR REMOVAL OF AGENT. Subject to the appointment
and acceptance of a successor Agent as provided below, the Agent may resign
at any time by giving notice thereof to the Lenders and the Company, and the
Agent may be removed at any time with or without cause by the Majority
Lenders. Upon any such resignation or removal, the Majority Lenders shall
have the right to appoint a successor Agent with the prior consent of the
Company (which consent shall not be unreasonably withheld); PROVIDED, that no
such consent of the Company shall be required if an Event of Default has
occurred and is continuing and the Facility C Commitments have been
terminated and/or the Facility C Loans and other amounts payable by the
Company hereunder have been declared to be forthwith due and payable. If no
successor
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Agent shall have been so appointed by the Majority Lenders and shall have
accepted such appointment within 30 days after the retiring Agent's giving of
notice of resignation or the Majority Lenders' removal of the retiring Agent,
then the retiring Agent may, on behalf of the Lenders, appoint a successor
Agent, that shall be a bank with a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation or removal
hereunder as Agent, the provisions of this Section 10 shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken
by it while it was acting as the Agent.
10.09 AGENCY FEE. So long as the Facility C Commitments are in
effect and until payment in full of the principal of and interest on the
Facility C Loans and all other amounts payable by the Company hereunder, the
Company will pay to the Agent an agency fee in the amount agreed in writing
between the Company and the Agent, payable quarterly in arrears commencing on
March 31, 1997 and on the last day of each calendar quarter thereafter;
PROVIDED that if the Facility C Commitments shall have been terminated prior
to such date, the agency fee shall be payable on the date of such
termination. Such fee, once paid, shall be non-refundable.
10.10 CONSENTS UNDER OTHER LOAN DOCUMENTS. Except as otherwise
provided in Section 11.04 hereof with respect to this Agreement, the Agent
may, with the prior consent of the Majority Lenders (but not otherwise),
consent to any modification, supplement or waiver under any of the Loan
Documents, PROVIDED that, without the prior consent of each Lender, the Agent
shall not (except as provided herein or in the Security Documents) release
any guarantee or collateral or otherwise terminate any Lien under any Loan
Document providing for collateral security, or agree to additional
obligations being secured by such collateral security, except that no such
consent shall be required, and the Agent is hereby authorized, to release any
Lien covering Property that is the subject of a disposition of Property
permitted hereunder or to which the Majority Lenders have consented or to
release any guarantee of any Obligor that is the subject of a disposition to
which the Majority Lenders have consented.
10.11 SYNDICATION AGENT. The Syndication Agent named on the cover
page of this Agreement shall have no duties, obligations or responsibilities
hereunder except in its capacity as Lender.
Section 11. MISCELLANEOUS.
11.01 WAIVER. No failure on the part of the Agent or any Lender
to exercise and no delay in exercising, and no course of dealing with respect
to, any right, power or privilege under this Agreement or any Facility C Note
shall operate as a waiver thereof, nor shall any single or partial exercise
of any right, power or
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privilege under this Agreement or any Facility C Note preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. The remedies provided herein are cumulative and not exclusive of
any remedies provided by law.
11.02 NOTICES. All notices, requests and other communications
provided for herein and under the Security Documents (including, without
limitation, any modifications of, or waivers, requests or consents under,
this Agreement) shall be given or made in writing (including, without
limitation, by telex or telecopy) delivered to the intended recipient at the
"Address for Notices" specified below its name on the signature pages hereof;
or, as to any party, at such other address as shall be designated by such
party in a notice to each other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given
when transmitted by telex or telecopier or personally delivered or, in the
case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
11.03 EXPENSES, ETC. The Company agrees to pay or reimburse each
of the Lenders and the Agent for: (a) all reasonable out-of-pocket costs and
expenses of the Agent (including, without limitation, the reasonable fees and
expenses of Milbank, Tweed, Hadley & McCloy, special New York counsel to
First Union, and Fiddler Gonzalez & Rodriguez, special Puerto Rico counsel to
First Union) in connection with (i) the negotiation, preparation, execution
and delivery of this Agreement and the other Loan Documents and the
extensions of credit hereunder and (ii) the negotiation or preparation of any
modification, supplement or waiver of any of the terms of this Agreement or
any of the other Loan Documents (whether or not consummated); (b) all
reasonable out-of-pocket costs or allocated costs and expenses of the Lenders
and the Agent (including, without limitation, the reasonable fees, allocated
costs and expenses of legal counsel, which may be employees of the Lenders or
the Agent) in connection with (i) any Default and any enforcement or
collection proceedings resulting therefrom, including, without limitation,
all manner of participation in or other involvement with (x) bankruptcy,
insolvency, receivership, foreclosure, winding up or liquidation proceedings,
(y) judicial or regulatory proceedings and (z) workout, restructuring or
other negotiations or proceedings (whether or not the workout, restructuring
or transaction contemplated thereby is consummated) and (ii) the enforcement
of this Section 11.03; (c) all transfer, stamp, documentary or other similar
taxes, assessments or charges levied by any governmental or revenue authority
in respect of this Agreement or any of the other Loan Documents or any other
document referred to herein or therein and all costs, expenses, taxes,
assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated
by any Loan Document or any other document referred to therein; and (d) all
costs, expenses and other charges in respect of title insurance procured with
respect to the Liens created pursuant to any Mortgages securing, directly or
indirectly, the Facility C Loans.
The Company hereby agrees to indemnify the Agent and each Lender
and their respective directors, officers, employees, attorneys and agents
from, and hold each of them harmless against, any and all losses,
liabilities, claims, damages or expenses incurred by any of them (including,
without limitation, any and all losses, liabilities, claims, damages or
expenses incurred by the Agent to any Lender, whether or not the Agent or any
Lender is a party thereto) arising out of or by reason of any investigation
or litigation or other proceedings (including any threatened investigation or
litigation or other proceedings) relating to the extensions of credit
hereunder or any actual or proposed use by the Company or any of its
Subsidiaries of the proceeds of any of the extensions of credit
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hereunder, including, without limitation, the reasonable fees and
disbursements of counsel incurred in connection with any such investigation
or litigation or other proceedings (but excluding any such losses,
liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified). Without
limiting the generality of the foregoing, the Company will (x) indemnify the
Agent for any payments that the Agent is required to make under any indemnity
issued to any bank referred to in Section 4.02 of the Security Agreement and
Section 5.02 of each Supplemental Subsidiary Guarantee and Security Agreement
to which remittances in respect to Accounts, as defined in each such
agreement, are to be made and (y) indemnify the Agent and each Lender from,
and hold the Agent and each Lender harmless against, any losses, liabilities,
claims, damages or expenses described in the preceding sentence (including
any Lien filed against all or any part of the Property covered by any
Mortgages (securing, directly or indirectly, the Facility C Loans) in favor
of any governmental entity, but excluding, as provided in the preceding
sentence, any loss, liability, claim, damage or expense incurred by reason of
the gross negligence or willful misconduct of the Person to be indemnified)
arising under any Environmental Law as a result of the past, present or
future operations of the Company or any of its Subsidiaries (or any
predecessor in interest to the Company or any of its Subsidiaries), or the
past, present or future condition of any site or facility owned, operated or
leased at any time by the Company or any of its Subsidiaries (or any such
predecessor in interest), or any Release or threatened Release of any
Hazardous Materials at or from any such site or facility, including any such
Release or threatened Release that shall occur during any period prior to the
termination of the Facility C Commitments and the payment in full of the
Facility C Loans and other amounts owing hereunder and under the other Loan
Documents when the Agent or any Lender shall be in possession of any such
site or facility following the exercise by the Agent or any Lender of any of
its rights and remedies hereunder or under any of the Security Documents to
the extent such Release results from a continuation of conditions previously
in existence at, or practices theretofore employed in connection with the
operation of, such site or facility.
11.04 AMENDMENTS, ETC. Except as otherwise expressly provided in
this Agreement, any provision of this Agreement may be modified or
supplemented only by an instrument in writing signed by the Company, the
Agent and the Majority Lenders, or by the Company and the Agent acting with
the consent of the Majority Lenders, and any provision of this Agreement may
be waived by the Majority Lenders or by the Agent acting with the consent of
the Majority Lenders; PROVIDED that: (a) no modification, supplement or
waiver shall, unless by an instrument signed by all of the Lenders or by the
Agent acting with the consent of all of the Lenders: (i) increase, or extend
the term of any of the Facility C Commitments, or extend the time or waive
any requirement for the reduction or termination of any of the Facility C
Commitments, (ii) extend the date fixed for the payment of principal of or
interest on any Facility C Loan or any fee hereunder, (iii) reduce the amount
of any such payment of principal, (iv) reduce the rate at which interest is
payable thereon or any fee is payable hereunder, (v) alter the rights or
obligations of the Company to prepay Facility C Loans, (vi) alter the terms
of this Section 11.04, (vii) modify the definition of the term "Majority
Lenders", or modify in any other manner the number or percentage of the
Lenders required to make any determinations or waive any rights hereunder or
to modify any provision hereof, or modify Section 11.06(b)(iii) hereof,
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(viii) release any Subsidiary Guarantor from any of its guarantee obligations
under the Existing Subsidiary Guarantee and Security Agreement or any
Supplemental Subsidiary Guarantee and Security Agreement or release (or
terminate any Lien on) all or substantially all of the Collateral except as
provided in the Security Documents with respect to such Collateral in any of
the Security Documents or (ix) waive any of the conditions precedent set
forth in Section 6.01 or 6.02 hereof; and (b) any modification of any of the
rights or obligations of the Agent shall require the consent of the Agent.
11.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
11.06 ASSIGNMENTS AND PARTICIPATIONS.
(a) The Company may not assign any of its rights or obligations
hereunder or under the Facility C Notes without the prior consent of all of
the Lenders and the Agent.
(b) Each Lender may assign any of its Facility C Loans, its
Facility C Note and its Facility C Commitment with the consent of the Agent
(which consent shall not be unreasonably withheld) pursuant to an Assignment
and Acceptance substantially in the form of Exhibit I hereto; PROVIDED that:
(i) no such consent by the Agent shall be required in the case
of any assignment to another Lender;
(ii) each assignment by a Lender of its Facility C Loans, Facility C
Note or Facility C Commitment shall be made in such a manner so that the
same portion of such Facility C Loans, Facility C Note and Facility C
Commitment is assigned to the respective assignee;
(iii) each assignment by any Facility C Lender, Facility A Lender
or Facility B Lender of any of its Facility C Loans, Facility A Loans or
Facility B Loans respectively (and related Facility C Note, Facility A
Note and Facility B Note and related Facility C Commitment, Facility A
Commitment and Facility B Commitment) shall be made in such a manner so
that the same portion of its Facility C Loans, Facility A Loans and
Facility B Loans to the Company (and related Facility C Note, Facility A
Note and Facility B Note and related Facility C Commitment, Facility A
Commitment and Facility B Commitment) is assigned to the respective
assignee; and
(iv) any such assignment of less than all of such Lender's interests
in the Facility A Loans, Facility B Loans and Facility C Loans, Facility A
Notes, Facility B Notes and Facility C Notes, and Facility A Commitments,
Facility B Commitments and Facility C Commitments, as the case may be,
shall be in an aggregate amount at least equal to $5,000,000.
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Upon execution and delivery by the assignor and assignee to the Agent of such
Assignment and Acceptance, and upon consent thereto by the Agent to the
extent required above, the assignee shall have, to the extent of such
assignment, the obligations, rights and benefits of a Lender hereunder
holding the Facility C Commitment and Facility C Loans (or portions thereof)
assigned to it as specified in such Assignment and Acceptance (in addition to
the Facility C Commitment and Facility C Loans theretofore held by such
assignee) and the assigning Lender shall, to the extent of such assignment,
be released from the Facility C Commitment (or portion thereof) so assigned.
Upon each such assignment the assigning Lender shall pay the Agent an
assignment fee of $3,000.
(c) A Lender may sell or agree to sell to one or more other
Persons a participation in all or any part of any Facility C Loans held by
it, or in its Facility C Commitment, in which event each purchaser of a
participation (a "PARTICIPANT") shall be entitled to the rights and benefits
of the provisions of Section 8.01(j) hereof with respect to its participation
in such Facility C Loans and Facility C Commitment as if (and the Company
shall be directly obligated to such Participant under such provisions as if)
such Participant were a "Lender" for purposes of said Section, but, except as
otherwise provided in Section 4.07(c) hereof, shall not have any other rights
or benefits under this Agreement or any Facility C Note or any other Loan
Document (the Participant's rights against such Lender in respect of such
participation to be those set forth in the agreements executed by such Lender
in favor of the Participant). All amounts payable by the Company to any
Lender under Section 5 hereof in respect of Facility C Loans held by it, and
its Facility C Commitment, shall be determined as if such Lender had not sold
or agreed to sell any participations in such Facility C Loans and Facility C
Commitment, and as if such Lender were funding each of such Facility C Loans
and Facility C Commitment in the same way that it is funding the portion of
such Facility C Loans and Facility C Commitment in which no participations
have been sold. In no event shall a Lender that sells a participation agree
with the Participant to take or refrain from taking any action hereunder or
under any other Loan Document except that such Lender may agree with the
Participant that it will not, without the consent of the Participant, agree
to (i) increase or extend the term, or extend the time or waive any
requirement for the reduction or termination, of such Lender's related
Facility C Commitment, (ii) extend the date fixed for the payment of
principal of or interest on the related Facility C Loan or Facility C Loans
or any portion of any fee hereunder payable to the Participant, (iii) reduce
the amount of any such payment of principal, (iv) reduce the rate at which
interest is payable thereon, or any fee hereunder payable to the Participant,
to a level below the rate at which the Participant is entitled to receive
such interest or fee, (v) alter the rights or obligations of the Company to
prepay the related Facility C Loans, (vi) consent to any modification,
supplement or waiver hereof or of any of the other Loan Documents to the
extent that the same, under Section 10.10 or 11.04 hereof, requires the
consent of each Lender or (vii) release any Subsidiary Guarantor from any of
its guarantee obligations under the Guarantee Agreement or any Supplemental
Subsidiary Guarantee and Security Agreement or release (or terminate any Lien
on) all or substantially all of the collateral directly or indirectly
securing the Facility C Loans except as provided in the Security Documents
with respect to such collateral in any of the Security Documents.
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(d) In addition to the assignments and participations permitted
under the foregoing provisions of this Section 11.06, any Lender may (without
notice to the Company, the Agent or any other Lender and without payment of
any fee) (i) assign and pledge all or any portion of its Facility C Loans and
its Facility C Note to any Federal Reserve Bank as collateral security
pursuant to Regulation A and any Operating Circular issued by such Federal
Reserve Bank and (ii) assign all or any portion of its rights under this
Agreement and its Facility C Loans and its Facility C Note to an affiliate.
No such assignment shall release the assigning Lender from its obligations
hereunder.
(e) A Lender may furnish any information concerning the Company
or any of its Subsidiaries in the possession of such Lender from time to time
to assignees and participants (including prospective assignees and
participants), subject, however, to the provisions of Section 11.12(b) hereof.
(f) Anything in this Section 11.06 to the contrary
notwithstanding, no Lender may assign or participate any interest in any
Facility C Loan held by it hereunder to the Company or any of its
Subsidiaries or Affiliates without the prior consent of each Lender.
11.07 SURVIVAL. The obligations of the Company under Sections
5.01, 5.05, 5.06, 5.08 and 11.03 hereof, and the obligations of the Lenders
under Section 10.05 hereof, shall survive the repayment of the Facility C
Loans and the termination of the Facility C Commitments. In addition, each
representation and warranty made, or deemed to be made by a notice of any
extension of credit (whether by means of a Facility C Loan), herein or
pursuant hereto shall survive the making of such representation and warranty,
and no Lender shall be deemed to have waived, by reason of making any
extension of credit hereunder (whether by means of a Facility C Loan), any
Default that may arise by reason of such representation or warranty proving
to have been false or misleading, notwithstanding that such Lender or the
Agent may have had notice or knowledge or reason to believe that such
representation or warranty was false or misleading at the time such extension
of credit was made.
11.08 CAPTIONS. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference
and are not intended to affect the interpretation of any provision of this
Agreement.
11.09 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
11.10 GOVERNING LAW; SUBMISSION TO JURISDICTION; SERVICE OF
PROCESS AND VENUE.
(a) This Agreement and the Facility C Notes shall be governed by,
and construed in accordance with, the law of the State of New York.
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(b) The Company hereby agrees that any suit, action or
proceeding with respect to this Agreement, any Facility C Note or any other
Loan Document to which it is a party or any judgment entered by any court in
respect thereof may be brought in the United States District Court for the
Southern District of New York, in the Supreme Court of the State of New York
sitting in New York County (including its Appellate Division), or in any
other appellate court in the State of New York, as the party commencing such
suit, action or proceeding may elect in its sole discretion; and each party
hereto hereby irrevocably submits to the non-exclusive jurisdiction of such
court for the purpose of any such suit, action, proceeding or judgment. Each
party hereto further submits, for the purpose of any such suit, action,
proceeding or judgment brought or rendered against it, to the appropriate
courts of the jurisdiction of its domicile.
(c) The Company hereby agrees that service of all writs, process
and summonses in any suit, action or proceeding brought hereunder or under
any of the other Loan Documents to which the Company is a party may be made
upon The Prentice Hall Corporation System, Inc. presently located at 15
Columbus Circle, New York, New York 10023, U.S.A. (the "PROCESS AGENT"), and
the Company hereby confirms and agrees that the Process Agent has been duly
and irrevocably appointed as its agent and true and lawful attorney in fact
in its name, place and stead to accept such service of any and all such
writs, process and summonses, and agrees that the failure of the Process
Agent to give any notice of any such service of process to the Company shall
not impair or affect the validity of such service or of any judgment based
thereon. Without limiting the foregoing, the Company hereby irrevocably
consents to the service of process in any suit, action or proceeding in such
courts by the mailing thereof by the Agent or any Lender by registered or
certified mail, postage prepaid, at its address set forth beneath its
signature hereto. Nothing herein shall in any way be deemed to limit the
ability of the Agent or any Lender to serve any such writs, process or
summonses in any other manner permitted by applicable law or to obtain
jurisdiction over the Company in such other jurisdictions, and in such
manner, as may be permitted by applicable law.
(d) The Company hereby irrevocably waives any objection that it
may now or hereafter have to the laying of the venue of any suit, action or
proceeding arising out of or relating to this Agreement, the Facility C Notes
or the other Loan Documents brought in any such court and hereby further
irrevocably waives any claim that any such suit, action or proceeding brought
in any such court has been brought in an inconvenient forum.
11.11 WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE AGENT AND
THE LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
11.12 TREATMENT OF CERTAIN INFORMATION; CONFIDENTIALITY.
(a) The Company acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
the Company or one or more of its Subsidiaries (in connection with this
Agreement or otherwise) by any Lender or by
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one or more subsidiaries or affiliates of such Lender and the Company hereby
authorizes each Lender to share any information delivered to such Lender by
the Company and its Subsidiaries pursuant to this Agreement, or in connection
with the decision of such Lender to enter into this Agreement, to any such
subsidiary or affiliate, it being understood that any such subsidiary or
affiliate receiving such information shall be bound by the provisions of
clause (b) below as if it were a Lender hereunder. Such authorization shall
survive the repayment of the Facility C Loans and the termination of the
Facility C Commitments.
(b) Each Lender and the Agent agree (on behalf of itself and
each of its affiliates, directors, officers, employees and representatives)
to use reasonable precautions to keep confidential, in accordance with their
customary procedures for handling confidential information of the same nature
and in accordance with safe and sound banking practices, any non-public
information supplied to it by any Obligor pursuant to this Agreement that is
identified by such Person as being confidential at the time the same is
delivered to the Lenders or the Agent, PROVIDED that nothing herein shall
limit the disclosure of any such information (i) to the extent required by
statute, rule, regulation or judicial process, (ii) to counsel for any of the
Lenders or the Agent, (iii) to any Lender's examiners, auditors or
accountants, (iv) to the Agent, the Syndication Agent named on the cover page
of this Agreement or any other Lender, (v) in connection with any litigation
to which any one or more of the Lenders or the Agent is a party, (vi) to a
subsidiary or affiliate of such Lender as provided in clause (a) above or
(vii) to any assignee or participant (or prospective assignee or participant)
so long as such assignee or participant (or prospective assignee or
participant) first executes and delivers to the respective Lender a
Confidentiality Agreement substantially in the form of Exhibit H hereto;
PROVIDED, further, that in no event shall any Lender or the Agent be
obligated or required to return any materials furnished by any Obligor. The
obligations of any assignee that has executed a Confidentiality Agreement in
the form of Exhibit H hereto shall be superseded by this Section 11.12 upon
the date upon which such assignee becomes a Lender hereunder pursuant to
Section 11.06 hereof.
11.13 INTENTION OF PARTIES. Notwithstanding anything contained
herein to the contrary, it is the intention of the parties hereto that this
Agreement and the Facility C Commitments and extensions of credit provided
hereunder represent a supplement to, but not a novation or discharge of, the
credit facilities provided by the Existing Credit Agreement and the Existing
Supplemental Credit Agreement; and the Company hereby represents and warrants
to the Agent and each Lender that after giving effect to the transactions
contemplated hereby, the security interests (subject only to Liens permitted
by Section 8.06 hereof) created by the Security Documents continue to
constitute valid, perfected and first priority security interests securing
all obligations purported to be secured thereby.
CREDIT AGREEMENT 80
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Supplemental Credit Agreement to be duly executed and delivered as of
the day and year first above written.
COMPANY
SUIZA FOODS CORPORATION
By
-------------------------------------------
Title:
Address for Notices:
3811 Turtle Creek Boulevard
Suite 1300
Dallas, Texas 75219
Attention: Gregg L. Engles
Telecopier No.: (214) 528-9929
Telephone No.: (214) 528-9922
CREDIT AGREEMENT 81
<PAGE>
LENDERS
FACILITY C COMMITMENT FIRST UNION NATIONAL BANK OF
$12,333,333.33 NORTH CAROLINA
By
--------------------------------------
Title:
Lending Office for Base Rate Loans and
Eurodollar Loans:
First Union National Bank of North Carolina
301 S. College Street
Charlotte, NC 28288-0737
Address for Notices:
First Union National Bank of North Carolina
301 S. College Street
Charlotte, NC 28288-0737
Attention: Sana Alkoor - Suiza
Telecopier No.: (704) 383-6537
Telephone No.: (704) 374-9831
CREDIT AGREEMENT 82
<PAGE>
FACILITY C COMMITMENT THE FIRST NATIONAL BANK OF
$12,333,333.33 CHICAGO
By
------------------------------------------
Title:
Lending Office for Base Rate Loans and
Eurodollar Loans:
The First National Bank of Chicago
1 First National Plaza
Suite 0088, 14th Floor
Chicago, IL 60670
Address for Notices:
The First National Bank of Chicago
1 First National Plaza
Suite 0088, 14th Floor
Chicago, IL 60670
Attention: April Yebd
Telecopier No.: (312) 732-2715
(312) 732-6276
Telephone No.: (312) 732-4823
CREDIT AGREEMENT 83
<PAGE>
FACILITY C COMMITMENT HARRIS TRUST AND SAVINGS BANK
$9,666,666.67
By
------------------------------------------
Title:
Lending Office for Base Rate Loans and
Eurodollar Loans:
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, IL 60690
Address for Notices:
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, IL 60690
Attention: Jerry Karl/Marieky Estrada
Telecopier No.: (312) 765-8095
Telephone No.: (312) 461-3776/7664
CREDIT AGREEMENT 84
<PAGE>
FACILITY C COMMITMENT THE BANK OF NOVA SCOTIA
$11,333,333.33
By
------------------------------------------
Title:
Lending Office for Base Rate Loans and
Eurodollar Loans:
The Bank of Nova Scotia
Atlanta Agency
600 Peachtree Street N.E., Suite 2700
Atlanta, Georgia 30308
Address for Notices:
The Bank of Nova Scotia
Atlanta Agency
600 Peachtree Street N.E.
Suite 2700
Atlanta, Georgia 30308
Attention: F.C.H. Ashby
Senior Assistant Agent
Telecopier No.: (404) 888-8998
Telephone No.: (404) 877-1500
CREDIT AGREEMENT 85
<PAGE>
with a copy to:
The Bank of Nova Scotia
Houston Representative Office
1100 Louisiana
Suite 3000
Houston, Texas 77002
Attention: Rosine Matthews
Relationship Manager
Telecopier No.: (713) 752-2425
Telephone No.: (713) 759-3432
FACILITY C COMMITMENT BANCO POPULAR DE PUERTO RICO
$6,666,666.67
By
------------------------------------------
Title:
Lending Office for Base Rate Loans and
Eurodollar Loans:
Banco Popular de Puerto Rico
7 West 51st Street
New York, New York 10019
Address for Notices:
Banco Popular de Puerto Rico
7 West 51st Street
New York, New York 10019
Attention: John Cuneo
Telecopier No.: (212) 586-3537
Telephone No.: (212) 315-2800
CREDIT AGREEMENT 86
<PAGE>
FACILITY C COMMITMENT BANK OF AMERICA ILLINOIS
$6,666,666.67
By
------------------------------------------
Title: W. Thomas Barnett
Vice President
Lending Office for Base Rate Loans and
Eurodollar Loans:
Bank of America Illinois
231 S. LaSalle
Chicago, Illinois 60697
Address for Notices:
Bank of America Illinois
231 S. LaSalle
Chicago, Illinois 60697
Attention: Paul Youmaura
Telecopier No.: (312) 974-9626
Telephone No.: (312) 828-6574
CREDIT AGREEMENT 87
<PAGE>
FACILITY C COMMITMENT BANQUE PARIBAS
$8,333,333.33
By
------------------------------------------
Title:
By
------------------------------------------
Title:
Lending Office for Base Rate Loans and
Eurodollar Loans:
Banque Paribas
1200 Smith Street
Suite 3100
Houston, Texas 77002
Address for Notices:
Banque Paribas
1200 Smith Street
Suite 3100
Houston, Texas 77002
Attention: Chuck E. Irwin
Telecopier No.: (713) 659-5234
Telephone No.: (713) 659-4811
CREDIT AGREEMENT 88
<PAGE>
FACILITY C COMMITMENT CAISSE NATIONALE DE CREDIT
$9,666,666.67 AGRICOLE
By
------------------------------------------
Title:
Lending Office for Base Rate Loans and
Eurodollar Loans:
Caisse Nationale de Credit Agricole
55 E. Monroe
Suite 4700
Chicago, IL 60603
Address for Notices:
Caisse Nationale de Credit Agricole
55 E. Monroe
Suite 4700
Chicago, IL 60603
Attention: Laura Schmuck
Telecopier No.: (312) 372-4421
Telephone No.: (312) 917-7428
CREDIT AGREEMENT 89
<PAGE>
FACILITY C COMMITMENT THE FUJI BANK, LIMITED,
$9,666,666.67 HOUSTON AGENCY
By
------------------------------------------
Title:
Lending Office for Base Rate Loans and
Eurodollar Loans:
The Fuji Bank, Limited, Houston Agency
One Houston Center
1221 McKinney Street, Suite 4100
Houston, TX 77010
Telecopier No.: (713) 759-0048
Address for Notices:
The Fuji Bank, Limited, Houston Agency
One Houston Center
1221 McKinney Street, Suite 4100
Houston, TX 77010
Attention: Philip C. Lauinger III
Vice President and Joint
Manager or
David L. Kelley
Senior Vice President
(713) 650-7850
Telecopier No.: (713) 759-0048
Telephone No.: (713) 650-7852
CREDIT AGREEMENT 90
<PAGE>
FACILITY C COMMITMENT THE LONG-TERM CREDIT BANK OF
$6,666,666.67 JAPAN, LIMITED, NEW YORK BRANCH
By ------------------------------------------
Title:
Lending Office for Base Rate Loans and
Eurodollar Loans:
The Long-Term Credit Bank of Japan, Limited,
New York Branch
165 Broadway
New York, NY 10006
Address for Notices:
The Long-Term Credit Bank of Japan, Limited,
New York Branch
165 Broadway
New York, NY 10006
Attention: Frank H. Madden, Jr.
Telecopier No.: (212) 608-2371
Telephone No.: (212) 335-4550
CREDIT AGREEMENT 91
<PAGE>
FACILITY C COMMITMENT CREDIT LYONNAIS NEW YORK BRANCH
$6,666,666.67
By
------------------------------------------
Title:
Lending Office for Base Rate Loans and
Eurodollar Loans:
Credit Lyonnais New York Branch
c/o Credit Lyonnais Dallas
2200 Ross Avenue
Suite 4400 West
Dallas, Texas 75201
Address for Notices:
Credit Lyonnais New York Branch
c/o Credit Lyonnais Dallas
2200 Ross Avenue
Suite 4400 West
Dallas, Texas 75201
Attention: Tim O'Connor
Telecopier No.: (214) 220-2323
Telephone No.: (214) 220-2300
CREDIT AGREEMENT 92
<PAGE>
AGENT
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Agent
By
------------------------------------------
Title:
Address for Notices to the Agent:
First Union National Bank of North Carolina
301 S. College Street TW-10
Charlotte, NC 28288-0608
Attention: Syndication Agency Services
Telecopier No.: (704) 383-0288
Telephone No.: (704) 383-0281
Telex No.:
(Answerback: )
CONSENT AND AGREEMENT
Each of the undersigned Subsidiary Guarantors hereby (1) consents to the terms
of the Existing Credit Agreement and this Agreement, (2) agrees that each
reference to the "Credit Agreement" or the "Supplemental Credit Agreement" (if
any) in each Security Document to which such Subsidiary Guarantor is a party
shall be a reference to the Existing Credit Agreement and this Agreement,
respectively, and (3) confirms its obligations under each Security Document to
which it is a party after the Existing Credit Agreement and this Agreement
become effective on the Effective Date.
REDDY ICE CORPORATION SUIZA FRUIT CORPORATION
By By
------------------------------ ----------------------------------
Title: Title:
CREDIT AGREEMENT 93
<PAGE>
VELDA FARMS, INC. NEVA PLASTICS MANUFACTURING
CORP.
By By
-------------------------------- ---------------------------------------
Title: Title:
SUIZA MANAGEMENT CORPORATION MODEL DAIRY, INC.
By By
-------------------------------- ---------------------------------------
Title: Title:
SUIZA DAIRY CORPORATION SWISS DAIRY CORPORATION
By By
-------------------------------- ---------------------------------------
Title: Title:
CREDIT AGREEMENT 94
<PAGE>
SUIZA FOODS CORPORATION
EXHIBIT 11.1 - STATEMENT RE COMPUTATION OF PER SHARE EARNING
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994
------------- ------------ ------------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE
AMOUNTS)
Income (loss) before extraordinary items..................... $ 27,929 $ (1,576) $ 4,245
Extraordinary loss........................................... 2,215 8,462 197
------------- ------------ ------------
Net income (loss)............................................ $ 25,714 $ (10,038) $ 4,048
------------- ------------ ------------
------------- ------------ ------------
Calculation of primary earnings (loss) per share:
Weighted average shares outstanding........................ 9,184,381 6,109,398 5,273,256
Common stock equivalents (options & warrants).............. 737,441 * 883,131
------------- ------------ ------------
Total weighted average shares outstanding.................. 9,921,822 6,109,398 6,156,387
------------- ------------ ------------
------------- ------------ ------------
Income (loss) before extraordinary items................... $ 2.81 $ (0.26) $ 0.69
Extraordinary loss......................................... (0.22) (1.38) (0.03)
------------- ------------ ------------
Net income (loss).......................................... $ 2.59 $ (1.64) $ 0.66
------------- ------------ ------------
------------- ------------ ------------
Calculation of fully diluted earnings (loss) per share:
Weighted average shares outstanding........................ 9,184,381 6,109,398 5,273,256
Common stock equivalents (options & warrants).............. 880,239 * 935,778
------------- ------------ ------------
Total weighted average shares outstanding.................. 10,064,620 6,109,398 6,209,034
------------- ------------ ------------
------------- ------------ ------------
Income (loss) before extraordinary items................... $ 2.77 $ (0.26) $ 0.68
Extraordinary loss......................................... (0.21) (1.38) (0.03)
------------- ------------ ------------
Net income (loss).......................................... $ 2.56 $ (1.64) $ 0.65
------------- ------------ ------------
------------- ------------ ------------
</TABLE>
* Excluded as such amounts are anti-dilutive.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Suiza Foods is a leading manufacturer and distributor of fresh milk
products, refrigerated ready-to-serve fruit drinks and coffee in Puerto Rico,
fresh milk and related dairy products in Florida, California and Nevada, and
packaged ice in Florida and the southwestern United States. The markets in
which the Company operates tend to be relatively mature and do not offer
opportunities for rapid internal growth. As a result of these dynamics, the
Company's strategy has been to grow primarily through acquisitions and to
realize economies of scale and operating efficiencies by eliminating
duplicative manufacturing, distribution, purchasing and administrative
operations.
RESULTS OF OPERATIONS
On March 31, 1995, the Company was formed as a holding company for the
operations of Suiza-Puerto Rico, Velda Farms and Reddy Ice. This combination
(the "Merger") was accounted for using the pooling of interests method of
accounting. The results of operations of Velda Farms are included only from
April 10, 1994, the date which it was acquired in a purchase business
combination. These transactions and other subsequent consolidating
acquisitions made throughout the periods presented increased the Company's
combined net sales from $341.1 million for the year ended December 31, 1994
to $520.9 million for the year ended December 31, 1996.
The following table presents certain information concerning the
Company's results of operations, including information presented as a
percentage of net sales (dollars in thousands):
<TABLE>
Year Ended December 31,
--------------------------------------------------------------
1996 1995 1994
------------------ ------------------- -------------------
Dollars Percent Dollars Percent Dollars Percent
--------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET SALES
Dairy $ 468,132 $ 379,959 $ 293,407
Ice 52,784 50,507 47,701
--------- ----- --------- ------ --------- ------
Net sales 520,916 100.0% 430,466 100.0% 341,108 100.0%
Cost of sales 388,548 74.6 312,633 72.6 240,468 70.5
--------- ----- --------- ------ --------- ------
Gross profit 132,368 25.4 117,833 27.4 100,640 29.5
OPERATING EXPENSES
Selling and distribution 70,709 13.6 64,289 14.9 54,248 15.9
General and administrative 21,913 4.2 19,277 4.5 16,935 5.0
Amortization of intangibles 4,624 0.9 3,703 0.9 3,697 1.1
--------- ----- --------- ------ --------- ------
Total operating expenses 97,246 18.7 87,269 20.3 74,880 22.0
OPERATING INCOME
Dairy 27,769 23,285 17,122
Ice 11,022 10,116 8,638
Corporate office (3,669) (2,837) -
--------- ----- --------- ------ --------- ------
Operating income $ 35,122 6.7% $ 30,564 7.1% $ 25,760 7.6%
--------- ----- --------- ------ --------- ------
--------- ----- --------- ------ --------- ------
</TABLE>
18
<PAGE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
NET SALES. The Company's net sales increased 21.0% to $520.9 million in
1996 from $430.5 million in 1995. Net sales for the Company's dairy
operations increased by 23.2% to $468.1 million in 1996 when compared to
1995, primarily due to (i) the acquisition of Garrido in July 1996, Swiss
Dairy in September 1996 and Model Dairy in December 1996, which collectively
reported net sales of $61.1 million during 1996 for periods subsequent to
their respective acquisition dates and (ii) an increase in prices charged for
milk to recoup increases in raw milk costs in the U.S. dairy operations. Net
sales for the Company's ice operations increased by 4.5% to $52.8 million in
1996 when compared to 1995 due to the addition of new customers and the
acquisition of eleven small ice businesses during 1996.
COST OF SALES. The Company's cost of sales margin was 74.6% for 1996
compared to 72.6% for the same period in 1995. Cost of sales margins for the
Company's dairy operations increased primarily due to higher raw milk costs.
Cost of sales margins for the Company's ice operations decreased, reflecting
additional efficiencies realized from acquired businesses and increased
volumes when compared to the same periods over last year. The Company's
overall cost of sales margin increased due to a higher ratio of dairy
operations to the total.
OPERATING EXPENSES. The Company's operating expense ratio was 18.7% in
1996 compared to 20.3% in 1995. Operating expense increases were experienced
in both dairy and ice as the result of acquisitions. The operating expense
margin decreased in the year-to-year comparison because of (i) increased
dairy net sales due to higher milk costs (which had little impact on
operating expense levels) and (ii) the addition of Garrido, Swiss Dairy and
Model Dairy during 1996, which had lower operating expense margins than the
other operations.
OPERATING INCOME. The Company's operating income in 1996 was $35.1
million, an increase of 14.9% from operating income in 1995 of $30.6 million.
The Company's operating income margin decreased to 6.7% in 1996 from 7.1% in
1995 due primarily to the effect of higher milk costs and increased dairy
influence in the Company's mix of business. The Company's ice business has
higher operating income margins than the Company's dairy business.
OTHER (INCOME) EXPENSE. Interest expense declined to $17.5 million
during 1996 from $19.9 million during 1995. The reduction in interest expense
resulted from a decrease in interest rates from the repayment of certain
subordinated notes in April 1996 and lower average debt levels resulting
primarily from equity issuances during 1996. The Company incurred $8.8
million in non-recurring expenses on March 31, 1995 related to the Merger and
$1.4 million in non-recurring costs during the second quarter of 1995 related
to several uncompleted acquisitions and to an uncompleted debt offering
compared to $0.6 million in merger and other costs in 1996. Other income rose
to $4.0 million in 1996 from $0.5 million in 1995 primarily as a result of
$3.4 million realized during the third quarter of 1996 from the sale of tax
credits associated with the Company's Puerto Rico operations. See "--Tax
Benefits."
EXTRAORDINARY ITEM. During 1996, the Company incurred $2.2 million in
extraordinary costs (net of a $0.9 million tax benefit) as a result of the
early extinguishment of debt from the net cash proceeds of the Company's
initial public offering. These costs included $1.3 million for the write-off
of deferred financing costs and $1.8 million in prepayment penalties. During
1995, the Company incurred $8.5 million in extraordinary costs (net of $0.7
million tax benefit) to refinance the Company's debt in conjunction with the
Merger, which included the write-off of deferred financing costs and certain
prepayment penalties.
NET INCOME (LOSS). The Company reported net income of $25.7 million in
1996 compared to a loss of $10.0 million for 1995. The 1996 net income
improved due to: (i) improved results of operations resulting primarily from
several acquisitions consummated during 1996; (ii) one-time gains from the
recognition of tax credits in Puerto Rico; and (iii) reduced interest
expense. The 1995 loss resulted primarily from approximately $9.6 million in
one-time non-operating charges (net of related income tax benefits) as a
result of the Merger and uncompleted acquisitions and the $8.5 million
extraordinary loss on early extinguishment of debt mentioned above.
19
<PAGE>
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
NET SALES. The Company's net sales increased 26.2% to $430.5 million in
1995 from $341.1 million in 1994. Net sales for the Company's dairy
operations increased 29.5%, or $86.6 million, primarily due to (i) the
acquisition of Velda Farms in April 1994, (ii) the acquisition of Mayaguez
Dairy in June 1994, and (iii) the acquisition of Flav-O-Rich in November
1994. Net sales for the Company's ice operations increased 5.9%, or $2.8
million. Unit volumes of ice increased 5.2% from the addition of new
customers and from four small acquisitions made during 1995. During the
pre-acquisition periods during 1994, Velda Farms, Mayaguez Dairy and
Flav-O-Rich reported sales of $38.3 million, $8.5 million and $32.7 million,
respectively.
COST OF SALES. The cost of sales margin for the dairy business
substantially exceeds that of its ice business because of higher raw material
cost for dairy products compared to ice. The Company's cost of sales
increased $72.2 million, resulting in an increase in the cost of sales margin
to 72.6% in 1995 from 70.5% in 1994. The increase in cost of sales was due to
(i) the inclusion of the operating results of Velda Farms, Flav-O-Rich and
Mayaguez Dairy for the full year of 1995, (ii) an increase in dairy cost of
sales of $1.3 million due to higher plastic resin costs and $4.7 million in
higher milk costs, and (iii) an increase of $0.9 million in plastic bag costs
in the ice business. Velda Farms, Flav-O-Rich and Mayaguez Dairy reported an
aggregate of $62.7 million in cost of sales for their respective
pre-acquisition periods in 1994.
OPERATING EXPENSES. The Company's operating expenses increased $12.4
million in 1995, while the operating expense margin decreased to 20.3% in
1995 from 22.0% in 1994. The operating expense increase was due to the
inclusion of a full year of operating expenses of Velda Farms, Flav-O-Rich
and Mayaguez Dairy, which reported aggregate operating expenses of $16.3
million for their respective pre-acquisition periods in 1994. The operating
expense margin declined primarily because the ice business, which has higher
operating expense margins than the dairy business, became a smaller component
of the Company.
OPERATING INCOME. The Company's operating income increased 18.6% to
$30.6 million in 1995 from $25.8 million in 1994 primarily as a result of the
dairy acquisitions discussed above. The Company's operating income margin
decreased from 7.6% in 1994 to 7.1% in 1995 primarily due to an increased
proportion of net sales attributable to its dairy business.
OTHER (INCOME) EXPENSE. Interest expense rose to $19.9 million in 1995
from $19.3 million in 1994 primarily due to the additional indebtedness
incurred to finance the dairy acquisitions. The Company incurred $8.8 million
in non-recurring expenses in 1995 related to the Merger and $1.4 million
related to negotiation and due diligence in connection with uncompleted
acquisitions and an uncompleted debt offering. The Company incurred $1.7
million in non-recurring costs in 1994 related to the Merger and to an
uncompleted initial public offering.
EXTRAORDINARY ITEMS. The Company incurred $8.5 million in extraordinary
costs (net of a $0.7 million tax benefit) in 1995 to refinance the Company's
debt in conjunction with the Merger, which costs included the write-off of
deferred financing costs and certain prepayment penalties. The Company
incurred $0.2 million in extraordinary costs in 1994 for the early retirement
of debt related to its ice business.
NET INCOME (LOSS). The Company reported a net loss of $10.0 million in
1995 compared to net income of $4.0 million in 1994. The primary causes of
the 1995 net loss were $10.2 million in non-recurring merger and other costs
and $8.5 million in extraordinary losses from the early retirement of debt.
The Company incurred a $2.5 million income tax expense in 1995 on pre-tax
income of $0.9 million due to the non-deductibility of certain non-recurring
merger costs.
SEASONALITY
The Company's ice business is seasonal with peak demand for its products
occurring during the second and third calendar quarters. In 1995 and 1996,
the Company recorded an average of approximately 70% of its annual net sales
of ice during these two quarters. While this percentage for the second and
third quarters has remained relatively constant over recent years, the timing
of the hottest summer weather can impact the distribution of sales between
these two quarters. Because the Company's results of operations for its ice
business depend significantly on sales generated during its peak season,
adverse weather during this season (such as an unusually mild or rainy
period) could have a disproportionate impact on the Company's results of
operations for the full year. Management believes, however, that the
geographic diversity of its ice business helps mitigate the potential for a
significant impact from such adverse weather conditions.
The Company's dairy operations are not subject to large seasonal sales
fluctuations. The Company sells milk to schools, most of which are closed
during the summer months. Approximately 6.1% of the Company's dairy sales
were made to schools during 1996. In addition, the Company has traditionally
experienced slight shortages in its milk supply in Puerto Rico during the
months of September and October each year. Management estimates
20
<PAGE>
that these shortages reduce dairy sales by less than 2% during these months.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1996, the Company had total stockholders' equity of
$93.5 million and total indebtedness of $239.6 million (including long-term
debt and the current portion of long-term debt). The Company is currently in
compliance with all covenants and financial ratios contained in its debt
agreements.
CASH FLOW. The working capital needs of the Company historically have
been met with cash flow from operations along with borrowings under revolving
credit facilities. Net cash provided by operating activities was $23.6
million for 1996 and $23.0 million for 1995. Investing activities in 1996
included $14.0 million in capital expenditures, of which $10.3 million was
spent on the Company's dairy operations and $3.7 million was spent on its ice
operations. Investing activities also included net cash paid of $111.4
million for the acquisition of 13 small companies and the acquisitions of
Garrido, Swiss Dairy and Model Dairy. Financing activities for 1996 included
two equity offerings, the proceeds of which were used to repay existing debt,
and new borrowings to finance several acquisitions.
In April 1996, the Company completed an initial public offering (the
"IPO") of its Common Stock, $0.01 par value per share ("Common Stock"), which
provided net proceeds to the Company of $48.6 million. Of this amount, $4.6
million was used to repay amounts outstanding under the revolving credit
portion of the Senior Credit Facility (as defined herein), an aggregate of
$26.5 million was used to repay current and long-term maturities under the
term portion of the Senior Credit Facility, $15.7 million was used to repay
the Company's 15% Subordinated Notes and $1.8 million was used to pay
prepayment penalties related to the early extinguishment of the 15%
Subordinated Notes. In addition to the $1.8 million prepayment penalty, the
Company expensed approximately $1.3 million to write off previously incurred
deferred financing costs related to the indebtedness repaid. The expenses
were recognized as an extraordinary loss on the early extinguishment of debt,
which, net of income tax benefit, was approximately $2.2 million.
In July 1996, the Company purchased the stock of Garrido, a Puerto Rico
processor and distributor of coffee and coffee-related products, for
approximately $35.8 million, plus future performance-based payments of up to
an additional $5.5 million. Funding for this purchase was provided through an
amendment to the Company's existing Senior Credit Facility.
In August 1996, the Company completed the Private Placement of 625,000
shares of Common Stock for net proceeds of $9.7 million. The net proceeds
from this sale were used to retire outstanding indebtedness under the
revolving credit portion of the Senior Credit Facility.
In September 1996, the Company purchased the assets of Swiss Dairy, a
regional dairy based in Riverside, California, for approximately $55.1
million. Funding for this purchase was provided primarily from borrowings
under the Company's new $90.0 million acquisition facility of the Senior
Credit Facility.
In September 1996, the Company sold certain tax credits generated
pursuant to provisions of the Puerto Rico Agricultural Tax Incentives Act of
1995 for net proceeds of $3.4 million, before provision for income taxes.
Management used the net proceeds from this sale to repay amounts outstanding
under the acquisition facility of the Senior Credit Facility.
In December 1996, the Company acquired the assets of Model Dairy based
in Reno, Nevada, for approximately $27.0 million. The purchase price for this
acquisition was funded through additional borrowing under the acquisition
facility of the Senior Credit Facility.
FUTURE CAPITAL REQUIREMENTS
On January 28, 1997, the Company sold 4,270,000 shares of Common Stock,
$.01 par value per share, in a public offering at a price to the public of
$22.00 per share (the "Secondary Offering"). Following this offering, the
Company had 15,011,729 shares of common stock issued and outstanding. The
Secondary Offering provided net cash proceeds to the Company of approximately
$89.0 million. Of this amount, $36.0 million was used to repay the remaining
Subordinated Notes and $4.3 million was used to pay prepayment penalties
related to the early extinguishment of the Subordinated Notes. The remainder
of the net proceeds were used to repay a portion of the outstanding balance
of the acquisition facility of the Company's Senior Credit Facility. The
Company also will expense approximately $1.0 million to write off previously
incurred deferred financing costs related to the indebtedness repaid with the
proceeds of the Secondary Offering. The extraordinary loss net of applicable
tax benefit, to be recorded in the first quarter of 1997 will be $3.3 million.
Management expects that cash flow from operations along with additional
borrowings under existing and future credit facilities will be sufficient to
meet the Company's requirements for the remainder of 1997 and for the
foreseeable future. In the future, the Company intends to pursue additional
acquisitions in its existing regional markets and to seek acquisition
opportunities that are compatible with its core businesses. There can be no
assurance, however, that the Company will have sufficient available capital
resources to realize its acquisition and consolidation strategy.
CURRENT DEBT OBLIGATIONS. In March 1997, the Company amended its
existing $250 million credit facilities with a group of lenders, including
First Union National Bank of North Carolina, as agent, and The First National
Bank of Chicago, as syndication agent, which provide for an aggregate senior
credit facility (the "Senior Credit Facility") of
21
<PAGE>
$300.0 million comprised of: (i) a $150.0 million term loan; (ii) a $50.0
million revolving credit facility; and (iii) a $100.0 million acquisition
facility. Under the terms of the Senior Credit Facility, the term loan will be
amortized over six years beginning March 31, 1997 and the revolving credit
facility expires on March 31, 2001. Any amounts drawn under the acquisition
facility that are outstanding on March 31, 1999 will be amortized in sixteen
quarterly installments commencing June 30, 1999. Amounts outstanding under the
Senior Credit Facility will bear interest at a rate per annum equal to one of
the following rates, at the Company's option: (i) the sum of a base rate equal
to the higher of the Federal Funds rate plus 1/2% or First Union National Bank
of North Carolina's prime commercial lending rate, plus a margin that varies
from 0 to 25 basis points depending on the Company's ratio of defined
indebtedness to EBITDA (as defined in the Senior Credit Facility); or (ii) The
London Interbank Offering Rate ("LIBOR") plus a margin that varies from 75 to
150 basis points depending on the Company's ratio of defined indebtedness to
EBITDA. The Company will pay a commitment fee on unused amounts of the revolving
facility and the acquisition facility that ranges from 20 to 37.5 basis points,
based on the Company's ratio of defined indebtedness to EBITDA.
As of January 31, 1997, following the Secondary Offering, the Company
had approximately $157.4 million of indebtedness outstanding under the Senior
Credit Facility. The Company may prepay loans outstanding under the Senior
Credit Facility at any time in increments of $100,000 or, in the case of a
LIBOR loan, $1.0 million (subject to a $500,000 minimum or, in the case of a
LIBOR loan, a $2.0 million minimum), in whole or in part, without penalty. In
addition, the Senior Credit Facility requires mandatory prepayments, subject
to certain limitations, from the defined net proceeds of certain casualty
events, certain sales of assets, equity issuances and from excess cash flow.
The Company's Senior Credit Facility requires the Company to comply with
the following financial covenants at all times: (i) the leverage ratio
(defined as the ratio of aggregate debt to EBITDA) will not exceed 3.50 to 1;
(ii) net worth will not be less than $135.0 million after March 31, 1997,
plus 50% of net income for each quarter commencing on or after April 1, 1997,
plus certain additional amounts as a result of public or private offerings of
Common Stock by the Company; (iii) the fixed charges ratio will not be less
than 1.20 to 1; and (iv) the interest coverage ratio will not be less than
3.00 to 1.
Without lender consent, the Senior Credit Facility also: (i) prohibits
the payment of cash dividends; (ii) prohibits capital expenditures in excess
of specified amounts; (iii) prohibits acquisitions exceeding $30.0 million in
a single transaction and limits the use of the revolving credit facility to
fund acquisitions not exceeding $1.0 million in a single transaction or $5.0
million in the aggregate for any year; (iv) limits the incurrence of
additional debt; and (v) limits transactions with affiliates.
The Company has pledged all the capital stock of its subsidiaries
(except for 35% of the capital stock of Garrido) to secure the Senior Credit
Facility. Each of the Company's subsidiaries (other than Garrido) has
guaranteed, and pledged substantially all its assets and the proceeds
therefrom, to secure the indebtedness under the term loans, revolving
facility and/or the acquisition facility of the Senior Credit Facility. A
default with respect to any loan under the Senior Credit Facility is a
default with respect to all other loans under the Senior Credit Facility. The
Senior Credit Facility includes various events of default customary for
similar senior credit facilities, including defaults resulting from
nonpayment of principal when due, nonpayment of interest and fees, material
misrepresentations, default in the performance of any covenant and the
expiration of any applicable grace period, bankruptcy or insolvency, certain
judgments and a change in control of the Company (including certain changes
in the board of directors and certain acquisitions of Common Stock by third
parties).
The Company has five interest rate derivative agreements currently in
place, which have been designated as hedges against the Company's variable
interest rate exposure on its loans under the Senior Credit Facility. The
first agreement, which has a notional amount of $14.0 million, matures in May
1997 and caps interest on LIBOR loans at 7.5%, plus the applicable LIBOR
margin. The second and third agreements, which each have a notional amount of
$27.5 million and mature in June 1998, fix the interest rate on LIBOR loans
at 6.0%, plus the applicable LIBOR margin. The fourth and fifth agreements,
which each have a notional amount of $25.0 million and mature in December
1997, fix the interest rate on LIBOR loans at 6.01%, plus the applicable
LIBOR margin. These derivative agreements provide hedges for the term loans
and the acquisition facility under the Senior Credit Facility by limiting or
fixing the LIBOR loan rates on the amounts stated in the agreements until the
indicated expiration dates. The original costs and premiums of these
derivative agreements are being amortized on a straight-line basis as a
component of interest expense. There was no material income or expense
attributable to the amortization or periodic settlements of the derivative
agreements in 1995 or 1996.
TAX BENEFITS
Management believes that the Company's effective tax rate will range
from 25% to 35% for the next several years. The Company's effective tax rate
is significantly affected by various tax advantages applicable to the
Company's Puerto Rico based operations. Any additional acquisitions could
affect this effective tax rate.
The Company's Puerto Rico fruit drink and plastic bottle operations are
90% exempt from Puerto Rico income
22
<PAGE>
and property taxes. These operations are also 60% exempt from Puerto Rico
municipal taxes. These exemptions were granted through ten-year exemption
decrees issued pursuant to the Puerto Rico Tax Incentives Act. The decrees have
eight and six years remaining for the fruit drink and plastic bottle entities,
respectively. These types of grants are typically renewable beyond their initial
ten-year terms at reduced rates of exemption. The Company's Puerto Rico dairy
and coffee processing, sales and distribution operations are 90% exempt from
Puerto Rico income taxes and 100% exempt from property, municipal, certain
excise and other taxes and fees pursuant to the Puerto Rico Agricultural Tax
Incentives Act of 1995. Dividends to the Company from Suiza-Puerto Rico will
generally be subject to a 10 percent "tollgate" tax in Puerto Rico.
The Company currently is able to maintain the tax benefits from its
dairy, fruit drink and plastic bottle operations described above through U.S.
tax credits specified under Section 936 of the U.S. Internal Revenue Code of
1986, as amended. The Section 936 credit eliminates or reduces United States
income taxes for U.S. corporations on certain income derived from Puerto Rico
and is available to certain domestic corporations that earn 80% or more of
their gross income from sources within Puerto Rico and earn 75% or more of
their gross income from the active conduct of a trade or business in Puerto
Rico over a three-year period (or such shorter period as may be applicable).
Management believes that each of the operating subsidiaries based in Puerto
Rico (except Garrido) satisfy these conditions. In the Revenue Reconciliation
Act of 1993, Congress imposed certain limitations on the availability of the
Section 936 credit. Pursuant to these limitations, the Section 936 credit for
each eligible corporation generally cannot exceed the sum of 60% of certain
wage and fringe benefit expenses and a portion of depreciation allowances for
a taxable year or, if elected, a reduced credit computed without regard to
these economic activity limitations.
The Puerto Rico Agricultural Tax Incentives Act of 1995 provides a 50%
tax credit for certain "eligible investments" in qualified agricultural
businesses in Puerto Rico. These credits may be transferred to other
taxpaying entities. During 1996, the Company made investments in its Puerto
Rico dairy, fruit, plastics and coffee operations, all of which have been
certified as qualified agricultural businesses in Puerto Rico. The Company
believes that it has met the eligible investment criteria of this act related
to its investment in its Puerto Rico dairy operations. During 1996, the
Company recognized $15.75 million in tax credits related to this qualifying
investment. In September 1996, the Company sold $4.0 million of these tax
credits to third parties, resulting in net proceeds of $3.4 million before
provision for income taxes, and recognized a deferred tax asset for the
remainder of the tax credit in the amount of $11.75 million. The Company is
currently investigating whether its investment in its Puerto Rico fruit,
plastics and coffee operations will qualify for additional credits. If the
Company qualifies for such credits, there can be no assurances as to the
amounts or timing of any benefits that the Company may realize or whether
there will be opportunities for further sales of these credits to third
parties.
The Small Business Job Protection Act of 1996 (the "Job Protection Act")
eliminated the Section 936 credit for corporations other than "existing
credit claimants." As an existing credit claimant, the Company's Puerto
Rico-based dairy, fruit drink and plastic bottle operations will continue to
realize the benefits of Section 936 through December 31, 2005, the year in
which Section 936 will be eliminated. However, for tax years beginning after
December 31, 2001 and before January 1, 2006, the total amount of the
Company's Puerto Rico income that is eligible to be offset by the 936 credit
cannot exceed the "base period income" of the Company as determined under the
Job Protection Act. This limitation may reduce the amount of credits
otherwise available to the Company.
OUTLOOK AND UNCERTAINTIES
Certain information in this Annual Report may contain "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act
of 1934, as amended. All statements other than statements of historical fact
are "forward-looking statements" for purposes of these provisions, including
any projections of earnings, revenues or other financial items, any
statements of the plans and objectives of management for future operations,
any statments concerning proposed new products or services, any statements
regarding future economic conditions or performance, and any statement of
assumptions underlying any of the foregoing. Although the Company believes
that the expectations reflected in its forward-looking statements are
reasonable, it can give no assurance that such expectations or any of its
forward-looking statements will prove to be correct, and actual results could
differ materially from those projected or assumed in the Company's
forward-looking statements. The Company's future financial condition and
results, as well as any forward-looking statements, are subject to inherent
risks and uncertainties, including, without limitation, potential limitations
on the Company's ability to pursue its acquisition strategy, significant
competition, limitations arising from the Company's substantial indebtedness,
government regulation, seasonality and dependence on key management.
Additional information concerning these and other risk factors is contained
in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, a copy of which may be obtained from the Company upon
request.
23
<PAGE>
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS 1996 1995
--------- ---------
(In thousands)
CURRENT ASSETS:
Cash and cash equivalents $ 8,951 $ 3,177
Accounts receivable 50,608 31,045
Inventories 19,228 11,346
Prepaid expenses and other current assets 2,754 1,380
Refundable income taxes 2,312
Deferred income taxes 3,672 1,448
--------- ---------
Total current assets 87,525 48,396
PROPERTY, PLANT AND EQUIPMENT 123,260 92,715
DEFERRED INCOME TAXES 8,524
INTANGIBLE AND OTHER ASSETS 164,839 91,411
--------- ---------
TOTAL $ 384,148 $ 232,522
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 46,664 $ 31,957
Income taxes payable 1,105 2,415
Current portion of long-term debt 12,876 15,578
--------- ---------
Total current liabilities 60,645 49,950
LONG-TERM DEBT 226,693 171,745
DEFERRED INCOME TAXES 3,278 1,367
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock
Common stock, 10,741,729 and 6,313,479 shares
issued and outstanding 107 63
Additional paid-in capital 89,337 31,023
Retained earnings (deficit) 4,088 (21,626)
--------- ---------
Total stockholders' equity 93,532 9,460
--------- ---------
TOTAL $ 384,148 $ 232,522
--------- ---------
--------- ---------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
24
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
--------- --------- ---------
(DOLLARS IN THOUSANDS
EXCEPT SHARE DATA)
NET SALES $ 520,916 $ 430,466 $ 341,108
COST OF SALES 388,548 312,633 240,468
--------- --------- ---------
GROSS PROFIT 132,368 117,833 100,640
OPERATING COSTS AND EXPENSES:
Selling and distribution 70,709 64,289 54,248
General and administrative 21,913 19,277 16,935
Amortization of intangibles 4,624 3,703 3,697
--------- --------- ---------
Total operating costs and expenses 97,246 87,269 74,880
--------- --------- ---------
INCOME FROM OPERATIONS 35,122 30,564 25,760
OTHER (INCOME) EXPENSE:
Interest expense, net 17,470 19,921 19,279
Merger and other costs 571 10,238 1,660
Other income, net (4,012) (469) (268)
--------- --------- ---------
Total other (income) expense 14,029 29,690 20,671
--------- --------- ---------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY LOSS 21,093 874 5,089
INCOME TAXES (BENEFIT) (6,836) 2,450 844
--------- --------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY LOSS 27,929 (1,576) 4,245
EXTRAORDINARY LOSS FROM EARLY
EXTINGUISHMENT OF DEBT 2,215 8,462 197
--------- --------- ---------
NET INCOME (LOSS) $ 25,714 $(10,038) $ 4,048
--------- --------- ---------
--------- --------- ---------
NET EARNINGS (LOSS) PER SHARE:
Income (loss) before extraordinary loss $ 2.81 $ (0.26) $ 0.69
Extraordinary loss (0.22) (1.38) (0.03)
--------- --------- ---------
Net income (loss) $ 2.59 $ (1.64) $ 0.66
--------- --------- ---------
--------- --------- ---------
WEIGHTED AVERAGE SHARES OUTSTANDING 9,921,822 6,109,398 6,156,387
--------- --------- ---------
--------- --------- ---------
See notes to consolidated financial statements.
25
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
Additional Retained
Common Stock Paid-In Earnings
Shares Amount Capital Warrants (Deficit) Total
-----------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
JANUARY 1, 1994 67,708 $ 1 $15,217 $523 $(15,579) $ 162
Issuance of common stock 11,960 5,677 5,677
Increase in market
value of warrants 57 (57) -
Net income 4,048 4,048
-----------------------------------------------------------
BALANCE,
DECEMBER 31, 1994 79,668 1 20,894 580 (11,588) 9,887
Issuance of common stock 11,832 5,080 (580) 4,500
Capital contribution
(Note 11) 5,111 5,111
Net loss (10,038) (10,038)
69 for 1 stock split
(Note 11) 6,221,979 62 (62) -
-----------------------------------------------------------
BALANCE,
DECEMBER 31, 1995 6,313,479 63 31,023 - (21,626) 9,460
Issuance of common stock 4,428,250 44 58,314 58,358
Net income 25,714 25,714
-----------------------------------------------------------
BALANCE,
DECEMBER 31, 1996 10,741,729 $107 $89,337 $ - $ 4,088 $ 93,532
-----------------------------------------------------------
-----------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
26
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended DECEMBER 31, 1996, 1995 and 1994
<TABLE>
1996 1995 1994
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 25,714 $ (10,038) $ 4,048
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 9,930 9,258 8,244
Amortization of intangible assets, including
deferred financing costs 5,458 4,686 4,876
Gain on the sale of assets (21) (265) (177)
Extraordinary loss from early extinguishment of debt 2,215 8,462 197
Merger and other nonrecurring costs 571 10,238 1,660
Noncash and imputed interest 236 1,087 483
Minority interests 101 556
Deferred income taxes (8,895) (414) 333
Changes in operating assets and liabilities:
Accounts receivable (5,187) (1,881) (108)
Inventories (3,346) (599) (73)
Prepaid expenses and other assets (163) 1,007 (222)
Refundable income taxes (2,312)
Accounts payable and accrued expenses 967 716 4,862
Income tax payable (1,575) 649 254
--------- --------- ---------
Net cash provided by operating activities 23,592 23,007 24,933
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (14,022) (10,392) (4,784)
Proceeds from sale of property, plant and equipment 500 691 245
Purchases of investments and other assets (1,608)
Cash outflows for acquisitions (111,380) (2,425) (61,357)
--------- --------- ---------
Net cash used in investing activities (124,902) (12,126) (67,504)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of debt 110,550 154,505 67,585
Repayment of debt (58,304) (154,387) (30,906)
Payments of deferred financing, debt restructuring and merger costs (3,520) (8,972) (1,660)
Issuance of common stock, net of expenses 58,358 4,087 5,677
Purchase of subsidiary preferred stock and minority interests (8,332) (61)
--------- --------- ---------
Net cash provided by (used in) financing activities 107,084 (13,099) 40,635
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,774 (2,218) (1,936)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,177 5,395 7,331
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 8,951 $ 3,177 $ 5,395
--------- --------- ---------
--------- --------- ---------
</TABLE>
See notes to consolidated financial statements.
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS. Suiza Foods Corporation (the "Company" or "Suiza Foods") is a
manufacturer and distributor of fresh milk products, refrigerated
ready-to-serve fruit drinks and coffee in Puerto Rico; fresh milk and related
dairy products in Florida, California and Nevada; and packaged ice in Florida
and the southwestern United States.
On March 31, 1995, the Company became the holding company for the
operations of Suiza Holdings, L.P. and subsidiaries; Velda Holdings, L.P.;
Velda Holdings, Inc. and subsidiaries; and Reddy Ice Corporation
(collectively, the "Combined Entities") through the issuance of 6,313,479
shares of its common stock in exchange for all of the outstanding equity
interests of the Combined Entities. The Company accounted for this
combination using the pooling of interests method of accounting, whereby the
assets acquired and liabilities assumed are reflected in the consolidated
financial statements of the Company at the historical amounts of the Combined
Entities, which, in the case of Velda Farms, only includes the results of
operations from April 10, 1994, the date it was acquired in a purchase
business combination.
The Company and its subsidiaries provide credit terms to customers
generally ranging up to 30 days, perform ongoing credit evaluations of their
customers and maintain allowances for potential credit losses based on
historical experience. The preparation of financial statements requires the
use of significant estimates and assumptions by management; actual results
could differ from these estimates. Certain prior year amounts have been
reclassified to conform to current year presentation.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements
include the accounts of the Company; its U.S. operating subsidiaries, Velda
Farms, Inc. ("Velda Farms"), Swiss Dairy Corporation ("Swiss Dairy"), Model
Dairy, Inc. ("Model Dairy") and Reddy Ice Corporation ("Reddy Ice"); and its
Puerto Rico operating subsidiaries, Suiza Dairy Corporation ("Suiza Dairy"),
Suiza Fruit Corporation ("Suiza Fruit"), Neva Plastics Manufacturing Corp.
("Neva Plastics") and Garrido & Compania ("Garrido") (collectively,
"Suiza-Puerto Rico"). All significant intercompany balances and transactions
are eliminated in consolidation.
INVENTORIES. Pasteurized and raw milk inventories are stated at the
lower of average cost or market. Raw materials, spare parts and supplies, and
merchandise for resale inventories are stated at the lower of cost, using the
first-in, first-out ("FIFO") method, or market. Manufactured finished goods
inventories are stated at the lower of average production cost or market.
Production costs include raw materials, direct labor and indirect production
and overhead costs.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment are stated
at cost. Depreciation and amortization are provided using the straight-line
method over the estimated useful lives of the assets, as follows:
ASSET USEFUL LIFE
Buildings and improvements Ten to 40 years
Machinery and equipment Five to 20 years
Motor vehicles Five to 15 years
Furniture and fixtures Three to ten years
Capitalized lease assets are amortized over the shorter of their lease term or
their estimated useful lives. Expenditures for repairs and maintenance which do
not improve or extend the life of the assets are expensed as incurred.
INTANGIBLE ASSETS. Intangible assets include the following intangibles
which are amortized over their related useful lives:
<TABLE>
<S> <C>
INTANGIBLE ASSET USEFUL LIFE
Goodwill Straight-line method over 20 to 40 years
Identifiable intangible assets:
Customer list Straight-line method over seven to ten years
Trademarks/trade names Straight-line method over 30 years
Noncompetition agreements Straight-line method over the terms of the agreements
Deferred financing costs Interest method over the terms of the related debt (ranging from seven to 11 years)
Organization costs Straight-line method over five years
</TABLE>
28
<PAGE>
The Company periodically assesses the net realizable value of its
intangible assets, as well as all other assets, by comparing the expected
future net operating cash flows, undiscounted and without interest charges,
to the carrying amount of the underlying assets. The Company would evaluate a
potential impairment if the recorded value of these assets exceeded the
associated future net operating cash flows. Any potential impairment loss
would be measured as the amount by which the carrying value exceeds the fair
value of the asset. Fair value of assets would be measured by market value,
if an active market exists, or by a forecast of expected future net operating
cash flows, discounted at a rate commensurate with the risk involved.
INTEREST RATE AGREEMENTS. Interest rate swaps, caps and floors are
entered into as a hedge against interest exposure of variable rate debt.
Differences between amounts to be paid or received on these interest rate
agreements designated as hedges are included in interest expense as payments
are made or received. Gains or losses on other agreements not designated as
hedges are included in income as incurred. Amounts paid to acquire interest
rate caps and amounts received for interest rate floors are amortized as an
adjustment to interest expense over the life of the related agreement.
REVENUE. Revenue is recognized when the product is shipped to the customer.
INCOME TAXES. Since March 31, 1995, the Company's U.S. operating
subsidiaries have been included in the consolidated tax return of the
Company. The Company's Suiza Dairy, Suiza Fruit and Neva Plastics
subsidiaries are organized as Delaware companies and are required to file
separate U.S. and Puerto Rico income tax returns; however, since their
operations are in Puerto Rico, they are eligible for Section 936 tax credits
which may reduce or eliminate U.S. income taxes due. Garrido is organized
under the laws of the Commonwealth of Puerto Rico and is only required to
file a separate tax return in Puerto Rico.
Effective January 1, 1996, substantially all of the Company's Puerto
Rico operations are 90% exempt from Puerto Rico income taxes and 100% exempt
from property, municipal, certain excise and other taxes, and fees pursuant
to the Puerto Rico Agricultural Tax Incentives Act of 1995. Prior to this
date, only the Company's Suiza Fruit and Neva Plastics subsidiaries had
similar exemptions through separate tax grants in Puerto Rico. These
operations are, however, subject to a 10% withholding tax on distributions
from Puerto Rico to the United States.
Prior to March 31, 1995, the Combined Entities were separate taxpayers
and income taxes were provided for in the financial statements, where
applicable, based on each company's separate income tax return and tax
status. As a result, since certain of Suiza-Puerto Rico's operations were
organized as a partnership and Reddy Ice's operations were organized as a
small business corporation under Subchapter S, no income taxes were provided
in the financial statements. However, had these operations been subject to
corporate income taxes, available net operating losses would have been
sufficient to eliminate any corporate income taxes due.
Deferred income taxes are provided for temporary differences in the
financial statement and tax bases of assets and liabilities using current tax
rates. Deferred tax assets, including the benefit of net operating loss
carryforwards, are evaluated based on the guidelines for realization and may
be reduced by a valuation allowance.
CASH EQUIVALENTS. The Company considers all highly liquid investments
purchased with a remaining maturity of three months or less to be cash
equivalents.
EARNINGS (LOSS) PER SHARE. The Company computes earnings per
share based on the weighted average number of common shares outstanding
during the year, as adjusted for the stock split (Note 11), including common
equivalent shares, when dilutive.
2. ACQUISITIONS
In April 1994, the Company acquired all of the outstanding common stock
of Velda Farms, Inc., a wholly owned subsidiary of The Morningstar Group,
Inc. The total purchase price, including related acquisition and financing
costs, was approximately $54.8 million, which was funded with the net
proceeds from the issuance of common stock, the proceeds from the issuance of
subordinated notes, term loan and revolving credit facility advances, and
preferred stock issued to the seller. In connection with the refinancing of
debt at the date of the combination, the term loan, revolving credit facility
advances and preferred stock were repaid.
In June 1994, the Company acquired Mayaguez Dairy, Inc. for a total
purchase price, including costs and expenses, of approximately $7.6 million,
which was funded primarily by additional term loan borrowings of $7.0
million.
In November 1994, the Company acquired all of the net assets of the
Florida Division of Flav-O-Rich, Inc. The total purchase price, including
related acquisition and financing costs, was approximately $5.9 million,
which was funded with revolving credit agreement borrowings, along with a
subordinated note payable to the seller and an amount payable to the seller
upon the final purchase price settlement, which was paid subsequent to
year-end.
In July 1996, the Company acquired all of the outstanding common stock
of Garrido for approximately $35.8 million, including related acquisition and
financing costs, which was funded primarily by additional term loan
borrowings under the
29
<PAGE>
Senior Credit Facility. In connection with this acquisition, the purchase
agreement requires the payment of a contingent purchase price of up to $5.5
million based on the future performance of this operation, which will be
accounted for as an adjustment to the purchase price when this contingency is
resolved should a payment of all or a portion of this contingent purchase
price be required. In addition, as a result of the adoption of the Puerto
Rico Agricultural Tax Incentives Act of 1995, as discussed in more detail in
Note 10, the Company may be eligible for tax credits on a portion of its
investment in Garrido of between $6.2 million and $8.8 million, which are
dependent on the receipt of a favorable ruling on the availability of such
tax credits from the Treasury Department in Puerto Rico. Should a favorable
ruling on these tax credits be received, the Company will account for these
tax benefits as an adjustment of the purchase price, which would result in a
reduction of goodwill.
In September 1996, the Company acquired all of the net assets of Swiss
Dairy for approximately $55.1 million, including related acquisition costs,
which was funded primarily by borrowings under the revolving credit and
acquisition facilities of the Senior Credit Facility.
In December 1996, the Company acquired all of the net assets of Model
Dairy, along with certain assets held by affiliates of the seller, for
approximately $27.0 million, including related acquisition costs, which was
funded primarily by borrowings under the acquisition facility of the Senior
Credit Facility.
In addition to the above acquisitions, during 1996, 1995 and 1994, the
Company acquired certain net assets of and entered into noncompetition
arrangements with 18 separate ice companies and two dairies for cash,
including costs and expenses, of approximately $8.4 million in 1996, $2.4
million in 1995 and $.3 million in 1994, along with the issuance of notes
payable to the sellers of approximately $.2 million in 1996, $.1 million in
1995 and $.4 million in 1994, all of which were funded by Senior Credit
Facility borrowings.
The above acquisitions were accounted for using the purchase method of
accounting as of their respective acquisition dates, and accordingly, only
the results of operations of the acquired companies subsequent to their
respective acquisition dates are included in the consolidated financial
statements of the Company. At the acquisition date, the purchase price was
allocated to assets acquired, including identifiable intangibles, and
liabilities assumed based on their fair market values. The excess of the
total purchase prices over the fair values of the net assets acquired
represented goodwill. In connection with the acquisitions, assets were
acquired and liabilities were assumed as follows:
Year ended December 31,
-----------------------------------
1996 1995 1994
---- ---- ----
(In thousands)
Purchase prices:
Net cash paid $ 111,380 $ 2,425 $ 61,357
Subsidiary preferred stock issued 3,000
Notes and amounts payable to seller 173 91 4,495
Cash acquired in acquisitions 14,937 142
---------- -------- ---------
Total purchase prices 126,490 2,516 68,994
Fair values of net assets acquired:
Fair values of assets acquired 63,598 2,317 53,590
Liabilities assumed (14,076) (10,924)
---------- -------- ---------
Total net assets acquired 49,522 2,317 42,666
---------- -------- ---------
Goodwill $ 76,968 $ 199 $ 26,328
---------- -------- ---------
---------- -------- ---------
30
<PAGE>
The following table presents unaudited pro forma results of operations of the
Company for the years ended December 31, 1995 and 1996, as if the above 1996
acquisitions had occurred at the beginning of 1995.
Year ended December 31, 1996 1995
- -------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales $662,174 $634,186
Income before extraordinary loss 30,634 2,008
Net income (loss) 28,419 (6,454)
Earnings (loss) per share 2.86 (1.06)
The unaudited pro forma results of operations are not necessarily indicative of
what the actual results of operations of the Company would have been had the
acquisitions occurred at the beginning of 1995, nor do they purport to be
indicative of the future results of operations of the Company.
3. ACCOUNTS RECEIVABLE
December 31, 1996 1995
- -------------------------------------------------------------------------------
(IN THOUSANDS)
Trade customers, including
route receivables $ 47,785 $ 28,435
Milk industry and milk
price stabilization fund 168 1,839
Suppliers 715 604
Officers and employees 554 425
Other 2,594 1,090
-----------------------
51,816 32,393
Less allowance for
doubtful accounts (1,208) (1,348)
-----------------------
$ 50,608 $ 31,045
-----------------------
-----------------------
4. INVENTORIES
December 31, 1996 1995
- -------------------------------------------------------------------------------
(IN THOUSANDS)
Pasteurized and raw milk
and raw materials $ 7,693 $ 4,278
Parts and supplies 5,584 3,105
Finished goods 5,951 3,963
-----------------------
$ 19,228 $ 11,346
-----------------------
-----------------------
5. PROPERTY, PLANT AND EQUIPMENT
December 31, 1996 1995
- -------------------------------------------------------------------------------
(IN THOUSANDS)
Land $ 20,104 $ 15,582
Buildings and improvements 45,016 33,264
Machinery and equipment 63,614 47,119
Motor vehicles 13,173 9,994
Furniture and fixtures 22,360 18,219
-----------------------
164,267 124,178
Less accumulated depreciation (41,007) (31,463)
-----------------------
$123,260 $ 92,715
-----------------------
-----------------------
31
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6. INTANGIBLE AND OTHER ASSETS
December 31, 1996 1995
- -------------------------------------------------------------------------------
(IN THOUSANDS)
Goodwill $155,242 $ 78,503
Identifiable intangibles 14,652 13,374
Deferred financing costs 5,248 6,018
Deposits and other 724 994
-----------------------
175,866 98,889
Less accumulated
amortization (11,027) (7,478)
-----------------------
$164,839 $ 91,411
-----------------------
-----------------------
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
December 31, 1996 1995
- -------------------------------------------------------------------------------
(IN THOUSANDS)
Accounts payable $ 31,005 $ 21,689
Accrued payroll and benefits 7,294 5,033
Accrued interest 1,413 1,845
Accrued insurance 3,437 2,436
Other 3,515 954
-----------------------
$ 46,664 $ 31,957
-----------------------
-----------------------
8. LONG-TERM DEBT
December 31, 1996 1995
- -------------------------------------------------------------------------------
(IN THOUSANDS)
Senior Credit Facility:
Revolving loan facility $ 8,600 $ 10,900
Acquisition facility 69,100
Term loans 125,000 123,750
Subordinated notes 36,000 51,101
Capital lease obligations
and other 869 1,572
------------------------
239,569 187,323
Less current portion (12,876) (15,578)
------------------------
$226,693 $171,745
------------------------
------------------------
SENIOR CREDIT FACILITY. In September 1996, the Company amended its existing
credit facility and entered into a supplemental credit facility with a group of
lenders, including First Union National Bank of North Carolina, as agent, and
The First National Bank of Chicago, as syndication agent, which provide for an
aggregate senior credit facility (the "Senior Credit Facility") of
$250.0 million comprised of (i) a $130.0 million term loan facility; (ii) a
$30.0 million revolving credit facility and (iii) a $90.0 million acquisition
facility. Under the terms of the Senior Credit Facility, the term loan is
amortized over five and one-half years, and the revolving credit facility
expires on March 31, 2000. Any amounts drawn under the acquisition facility that
are outstanding on September 30, 1998, will be amortized in fifteen quarterly
installments. Amounts outstanding under the Senior Credit Facility bear interest
at a rate per annum equal to one of the following rates, at the Company's
option: (i) the sum of a base rate equal to the higher of the Federal Funds rate
plus 50 basis points or First Union National Bank of North Carolina's prime
commercial lending rate, plus a margin that varies from 0 to 75 basis points
depending on the Company's ratio of defined indebtedness to EBITDA (as defined
in the Senior Credit Facility); or (ii) The London Interbank Offering Rate
("LIBOR") plus a margin that varies from 75 to 200 basis points depending on the
Company's ratio of defined indebtedness to EBITDA. The Company pays a commitment
fee on unused amounts of the revolving facility and the acquisition
32
<PAGE>
facility that ranges from 20 basis points to 37.5 basis points, based on the
Company's ratio of defined indebtedness to EBITDA. The blended interest rate in
effect at December 31, 1996, on the Senior Credit Facility was 7.2%.
Interest is payable quarterly, and scheduled principal installments on
the term loan facilities are due in quarterly installments of approximately
$2.5 million through June 1997, increasing to $3.75 million on September 30,
1997, $5.0 million on September 30, 1998, $5.375 million on September 30,
1999, and $6.0 million on September 30, 2000, with the remaining unpaid
balance due on March 31, 2002. Loans under the Senior Credit Facility are
collateralized by substantially all assets.
SUBORDINATED NOTES. On March 31, 1995, the Company issued subordinated
notes, which carried interest rates ranging from 12% to 15%, to replace
certain of the existing subordinated notes of the Combined Entities. On April
22, 1996, the Company used $15.7 million of the net proceeds from its initial
public offering to repay all the outstanding principal balances of the 15%
subordinated notes. The remaining subordinated notes bear interest at rates
ranging from 12% to 13.5% (12.5% on a weighted average basis), payable on a
semiannual basis in March and September of each year, with semiannual
principal installments due in varying amounts commencing in 2001, with the
remaining unpaid principal balances due at maturity on March 31, 2004. The
notes are subordinated to the loans under the Senior Credit Facility. As is
discussed in Note 19, in January 1997, the Company repaid all of the
outstanding principal balances of these remaining subordinated notes with a
portion of the proceeds from the sale of common stock.
OTHER DEBT. Other debt includes various promissory notes for the purchase
of property, plant and equipment and capital lease obligations. The various
promissory notes payable provided for interest at rates ranging from 10% to
prime plus 1% and were payable in monthly installments of principal and
interest until maturity, when the remaining principal balance was due. Capital
lease obligations represent machinery and equipment financing obligations
which are payable in monthly installments of principal and interest and are
collateralized by the related assets financed.
INTEREST RATE AGREEMENTS. The Company has five interest rate derivative
agreements in place, which have been designated as hedges against the
Company's variable interest rate exposure on its loans under the Senior Credit
Facility. The first agreement, which has a notional amount of $14.0 million,
matures in May 1997 and caps interest on LIBOR loans at 7.5%, plus the
applicable LIBOR margin. The second and third agreements, each of which has a
notional amount of $27.5 million and mature in June 1998, fix the interest
rates on LIBOR loans at 6.0%, plus the applicable LIBOR margin. The fourth and
fifth agreements, which each have a notional amount of $25.0 million and
mature in December 1997, fix the interest rates on LIBOR loans at 6.01%, plus
the applicable LIBOR margin. These derivative agreements provide hedges for
the Senior Credit Facility loans by limiting or fixing the LIBOR interest
rates specified in the Senior Credit Facility (5.6% at December 31, 1996) at
the above rates until the indicated expiration dates of these
interest-rate-derivative agreements. The original costs and premiums of these
derivative agreements are being amortized on a straight-line basis as a
component of interest expense. The Company has designated these interest rate
agreements as hedges against its interest rate exposure on its variable rate
loans under the Senior Credit Facility.
The Company is exposed to market risk under these arrangements due to the
possibility of exchanging a lower interest rate for a higher interest rate.
The counterparties are major financial institutions, and the risk of incurring
losses related to credit risk is considered by the Company to be remote.
DEBT COVENANTS. The Company's Senior Credit Facility contains various
financial and other restrictive covenants and requirements that the Company
maintain certain financial ratios, including leverage (computed as the ratio
of the aggregate outstanding principal amount of defined indebtedness to
EBITDA, as defined), fixed charges (computed as the ratio of EBITDA to defined
fixed charges), interest coverage (computed as the ratio of EBITDA to defined
interest expense) and minimum net worth. The Senior Credit Facility also
contains limitations on capital expenditures, investments, the payment of
dividends and the incurrence of additional indebtedness and requires certain
mandatory prepayments from the proceeds of certain dispositions of property.
SCHEDULED MATURITIES. The scheduled maturities of long-term debt, which
include capitalized lease obligations, at December 31, 1996, were as follows
(in thousands):
1996 $ 12,876
1997 19,544
1998 24,348
1999 34,826
2000 29,206
Thereafter 118,769
--------
$239,569
--------
--------
33
<PAGE>
9. LEASES
The Company leases certain property, plant and equipment used in its
operations under both capital and operating lease agreements. Such leases,
which are primarily for machinery and equipment and vehicles, have lease terms
ranging from two to nine years. Certain of the operating lease agreements
require the payment of additional rentals for maintenance, along with
additional rentals, based on miles driven or units produced. Rent expense,
including additional rent, was $8.0 million, $6.3 million and $4.5 million for
the years ended December 31, 1996, 1995 and 1994, respectively.
The composition of capital leases which are reflected as property, plant
and equipment in the balance sheets is as follows:
December 31, 1996 1995
- --------------------------------------------------
(In thousands)
Machinery and equipment $ 812 $1,370
Less accumulated amortization (366) (415)
----------------
$ 446 $ 955
----------------
----------------
Future minimum payments at December 31, 1996, under noncancelable capital
and operating leases with terms in excess of one year are summarized below (in
thousands):
Capital Operating
Leases Leases
- --------------------------------------------------------------------------
1997 $185 $ 4,539
1998 152 4,006
1999 112 3,188
2000 2,692
2001 2,216
Thereafter 2,770
---------------------
Total minimum lease payments 449 $19,411
-------
-------
Less amount representing imputed interest (27)
----
Present value of capitalized lease obligations $422
----
----
10. INCOME TAXES
The provisions for income taxes (benefit), excluding the current tax
benefits of $0.9 million and $0.7 million applicable to the extraordinary
losses during 1996 and 1995, respectively, are as follows:
Year ended December 31, 1996 1995 1994
- --------------------------------------------------------
(In thousands)
Current taxes payable:
Federal $ 1,925 $2,763 $491
State 134 101 20
Deferred income taxes (8,895) (414) 333
---------------------------
$(6,836) $2,450 $844
---------------------------
---------------------------
34
<PAGE>
The following is a reconciliation of income taxes expense (benefit)
reported in the statements of operations:
Year ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------
(IN THOUSANDS)
Tax expense at statutory rates $ 7,383 $ 306 $ 1,959
Tax benefit from tax-exempt earnings (2,711) (1,532) (2,745)
Tax expense from losses not subject to
taxes at the corporate level 1,612
Puerto Rico tax credits (11,750)
Net operating loss carryforwards 188 1,344
Nondeductible expenses 1,841 202
Other 242 35 84
-------- ------- ------
$ (6,836) $ 2,450 $ 844
-------- ------- ------
-------- ------- ------
The tax effects of temporary differences giving rise to deferred income
tax assets and liabilities were:
December 31, 1996 1995
- --------------------------------------------------------------------------
(IN THOUSANDS)
Deferred income tax assets:
Asset valuation reserves $ 244 $ 326
Nondeductible accruals 1,785 1,122
Puerto Rico tax credits 10,076
Net operating loss carryforwards 91 1,989
Valuation allowance (1,989)
------- -------
12,196 1,448
Deferred income tax liabilities:
Depreciation (1,174) 312
Amortization of intangibles (2,177) (1,185)
Foreign distributions and other 73 (494)
------- -------
(3,278) (1,367)
------- -------
Net deferred income tax asset $ 8,918 $ 81
------- -------
------- -------
These net deferred income tax assets are classified in the consolidated
balance sheet as follows:
December 31, 1996 1995
- --------------------------------------------------------------------------
(IN THOUSANDS)
Current assets $ 3,672 $ 1,448
Noncurrent assets 8,524
Noncurrent liabilities (3,278) (1,367)
------- -------
$ 8,918 $ 81
------- -------
------- -------
The Company had established a valuation allowance for deferred tax
assets related to net operating loss carryforwards of the Company's Suiza
Dairy subsidiary in Puerto Rico, which under Puerto Rico law were only
available for utilization against future taxable income of this subsidiary.
Because of the continuing operating losses of this subsidiary, the Company
was unable to determine that it is more likely than not that the net deferred
tax assets of this subsidiary would be realized. During 1996, the deferred
tax asset related to these net operating loss carryforwards and the related
valuation allowance was substantially eliminated as a result of the reduction
in tax rates in Puerto Rico from the Puerto Rico Agricultural Tax Incentives
Act of 1995.
35
<PAGE>
In December 1995, the Commonwealth of Puerto Rico adopted the Puerto
Rico Agricultural Tax Incentives Act of 1995, which reduced the effective
income tax rate for qualified agricultural business from 39% to 3.9% and
provided for a 50% tax credit for certain "eligible investments" in qualified
agricultural businesses in Puerto Rico. During 1996, the Company made
investments in its Puerto Rico dairy, fruit, plastics and Garrido operations,
all of which were certified as qualified agricultural businesses in Puerto
Rico during 1996.
In connection with these investments, the Company believes that it has
met the eligible investment criteria of this act related to its investment in
its Puerto Rico dairy subsidiary. Accordingly, in 1996, the Company
recognized $15.75 million in tax credits related to this qualifying
investment. Of this amount, the Company (i) sold $4.0 million of tax credits
to third parties, resulting in a cash gain of $3.4 million (net of a discount
and related expenses), which is recorded in other income, and (ii) recognized
a deferred tax asset for the remainder of the tax credit in the amount of
$11.75 million, resulting in a corresponding credit to tax expense. These tax
credits can be used by the Company to eliminate both Puerto Rico income taxes
and the 10% Puerto Rico withholding tax on distributions from the Company's
Puerto Rico operations.
The Company is currently investigating whether its $43.0 million
investment in its fruit and plastics operations will qualify for tax credits
based on recent rulings by Puerto Rico tax authorities and has requested a
formal ruling on the allowability of such tax credits from the Treasury
Department in Puerto Rico. If a favorable ruling on the availability of these
additional tax credits is obtained, the Company will recognize substantial
additional tax benefits in the form of either a deferred tax asset or
proceeds from the sale of such credits.
11. STOCKHOLDERS' EQUITY
CAPITAL SHARES. Authorized capital shares of the Company include
1,000,000 shares of preferred stock with a par value of $.01 per share and
20,000,000 shares of common stock with a par value of $.01 per share. There
have been no shares of preferred stock issued by the Company. The rights and
preferences of preferred stock are established by the Company's Board of
Directors upon issuance. On March 31, 1995, the Company issued 6,313,479
shares of common stock in exchange for all of the outstanding equity
interests of the Combined Entities, including profits interests that were
granted to certain individuals as compensation for services in identifying,
structuring and negotiating certain acquisitions. Immediately prior to the
combination date, the existing investors fixed this profits interest by
mutual agreement and exchanged equity interests among investors and these
individuals. In connection with this exchange, the Company recorded a
compensation expense charge to merger expense of $5.1 million, which
approximated the fair value of these interests, and resulted in a capital
contribution in the same amount.
COMMON STOCK SPLIT. On February 28, 1996, the Company's Board of
Directors authorized a 69 for 1 stock split in the form of a common stock
dividend payable to stockholders of record on February 29, 1996. All
references in the consolidated financial statements to number of common
shares outstanding and per share amounts, and all references to common stock
issued, stock options and related prices in the notes to the consolidated
financial statements have been restated to reflect the split.
STOCK OFFERINGS. On April 22, 1996, the Company sold 3,795,000 shares
of common stock, $.01 par value per share, in an initial public offering at a
price to the public of $14.00 per share. Following this offering, the Company
had 10,108,479 shares of common stock issued and outstanding. The public
offering provided net cash proceeds to the Company of approximately $48.6
million. Of this amount, $31.1 million was used to repay senior debt, $15.7
million was used to repay the Company's 15% subordinated notes, and $1.8
million was used to pay prepayment penalties related to the early
extinguishment of the 15% subordinated notes. As a result of these
transactions, the Company recorded a $2.2 million extraordinary loss from
extinguishment of debt which included $1.8 million in prepayment penalties
and $1.3 million for the write-off of deferred financing costs related to the
repaid debt, net of a tax benefit of $0.9 million. In addition, on August 7,
1996, the Company sold 625,000 shares of its common stock at a price of
$16.00 per share in a private placement to a single investor. Following the
private sale, the Company had 10,739,729 shares of common stock issued and
outstanding. As is discussed in more detail in Note 19, in January 1997, the
Company completed the sale of additional shares of its common stock.
STOCK OPTION AND RESTRICTED STOCK PLANS. In connection with the
combination, the Company adopted an exchange option and restricted stock
plan, whereby the outstanding stock options granted by the Combined Entities
were converted into options to acquire 586,523 shares of common stock on
substantially the same terms as the prior options. These options are
exercisable at prices ranging from $.03 to $6.79 per share, which
approximated the fair market value of such shares at the date of original
grant. At December 31, 1996, 577,760 of such options were outstanding, of
which 480,450 were exercisable at prices ranging from $.03 to $6.79 per
share. The options vest ratably in five annual increments and may be
exercised, to the extent vested, over the ten-year period following the award
date.
36
<PAGE>
Effective March 31, 1995, the Company also adopted the Option and
Restricted Stock Plan (the "Plan"), which provides for grants of incentive
and nonqualified stock options and awards of restricted stock to directors
and key employees of the Company or its subsidiaries of up to 1,069,500
shares, provided that no more than 379,500 shares may be awarded as
restricted stock. Under the terms of the Plan, the options vest ratably over
a three-year period, except for options granted to outside directors, which
vest immediately. The Plan also provides that the exercise price of stock
options will not be less than the fair market value on the date of grant, and
in the case of an incentive stock option granted to an employee owning more
than 10% of the common stock of the Company on the date of grant, not less
than 110% of the fair market value. On March 31, 1995, the Company's Board of
Directors granted 474,375 options pursuant to the Plan at an exercise price
per share of $10.51. In addition, during the remainder of 1995, the Company
granted options for an additional 3,450 shares at the same exercise price per
share. At December 31, 1995, 477,825 options were outstanding at an exercise
price of $10.51 per share, of which 3,450 shares were exercisable.
In 1996, the Company granted options to purchase 398,153 shares at
exercise prices ranging from $12.32 to $17.50 per share. At December 31,
1996, 873,978 options were outstanding at exercise prices ranging from $10.51
to $17.50 per share, of which 739,035 shares were exercisable.
Effective January 1, 1997, the Board of Directors authorized the grant
of options for 141,500 shares at an exercise price of $20.25 per share.
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock option plans, and accordingly, no compensation has
been recognized since stock options granted under these plans were at
exercise prices which approximated market value at the grant date. Had
compensation expense been determined for current period stock option grants
using fair value methods provided for in SFAS 123, the Company's pro forma
net income (loss) and net earnings (loss) per common share would have been
the amounts indicated below:
Year ended December 31, 1996 1995
- --------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT SHARE DATA)
Compensation cost $ 1,697 $ 765
Net income (loss):
As reported $ 25,714 $(10,038)
Pro forma 24,611 (10,543)
Net earnings (loss) per share:
As reported $ 2.59 $ (1.64)
Pro forma 2.48 (1.73)
Stock option share data:
Stock options granted during period 398,153 477,825
Weighted average exercise price $ 14.87 $ 10.51
Average option compensation value (a) 8.86 6.41
(a) Calculated in accordance with the Black-Scholes option pricing model, using
the following assumptions: expected volatility of 30% to 35%; expected
dividend yield of 0%; expected option term of ten years and risk-free rate
of return as of the date of grant which ranged from 5.64% to 7.15% based on
the yield of ten-year U.S. treasury securities.
WARRANTS. Prior to March 31, 1995, each of the Combined Entities had
entered into various warrant agreements with their subordinated and junior
subordinated noteholders which granted such holders the right to purchase
equity interests in each of the companies. These warrants were exercisable,
in whole or in part, at various dates through December 31, 2005. Immediately
prior to the combination, all warrant holders exercised their warrants to
acquire equity interests in the Combined Entities in consideration for
aggregate proceeds of $4.1 million and received shares of the Company's
common stock in the combination.
37
<PAGE>
12. PENSION AND PROFIT SHARING PLANS
The Company's subsidiaries each sponsor an employees savings and profit
sharing plan. Non-union employees who have completed one or more years of
service and have met other requirements pursuant to the plans are eligible to
participate in the plans. The employees participating in the plans can
generally make contributions to the plans of between 6% and 8% of their
annual compensation, and each of the subsidiaries can elect to match such
contributions. During each of the years ended December 31, 1996, 1995 and
1994, the Company expensed contributions to the plans of approximately $0.8
million.
Certain of the Company's recently acquired subsidiaries participate in
various multiemployer union pension plans, which are administered jointly by
management and union representatives and which sponsor most full-time and
certain part-time union employees who are not covered by the Company's other
plans. The pension expense for these plans approximated $0.2 million during
1996. The Company could, under certain circumstances, be liable for unfunded
vested benefits or other expenses of jointly administered union/management
plans. At this time, the Company has not established any liabilities because
withdrawal from these plans is not probable or reasonably possible.
13. MERGER AND OTHER COSTS
MERGER AND OTHER COSTS. During 1995 and 1994, the Company incurred
merger and other costs of $10.2 million and $1.7 million, respectively, which
consisted of the costs associated with the negotiation of the merger and
preparation of related merger documents and agreements, financial consulting
costs and other costs related to the combination of $8.8 million and $1.4
million in 1995 and 1994, respectively; and other non-operating costs of $1.4
million and $0.3 million, respectively. During 1995, these other merger costs
included a one-time $0.5 million payment to cancel an existing management
consulting agreement; a one-time tax cost of $1.5 million to convert the
Company's Puerto Rico operating subsidiaries to United States corporations;
the write-off of $0.4 million in unamortized organization costs; and $5.1
million to recognize compensation expense related to the issuance of common
stock in exchange for a negotiated profits interest (Note 12), which resulted
in a capital contribution in the same amount. Other non-operating costs
included $0.3 million of bank fees in 1994 related to the funding of bridge
loans to repay certain indebtedness, and during 1995, $0.7 million of costs
associated with several uncompleted acquisitions and $0.7 million of costs
associated with an uncompleted debt offering.
During 1996, the Company expensed non-operating costs of $0.6 million in
connection with fees and expenses paid to amend its Senior Credit Facility.
EXTRAORDINARY LOSS. During 1996, 1995 and 1994, as a result of the
repayment of the outstanding indebtedness, the Company expensed approximately
$2.2 million (net of income tax benefit of $0.9 million), $8.5 million (net
of income tax benefit of $0.7 million) and $0.2 million, respectively, of
debt issuance, legal and other costs associated with extinguishment of prior
credit facilities. These amounts have been classified as an extraordinary
loss in accordance with the provisions of Statement of Financial Accounting
Standards No. 4, "Reporting Gains and Losses From the Extinguishment of Debt."
38
<PAGE>
14. SUPPLEMENTAL CASH FLOW INFORMATION
Year Ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------
(IN THOUSANDS)
Cash paid for interest $16,932 $ 17,226 $16,929
Cash paid for taxes 4,662 1,432 362
Noncash transactions:
Issuance of subsidiary preferred
stock in connection with acquisitions 3,000
Issuance of subordinated notes and
amounts payable to the seller in
connection with acquisitions 173 91 4,495
Dividends payable or paid in additional
preferred stock on subsidiary stock 197
Distribution of investment and related
debt in a bread bag manufacturer to
shareholders of Reddy Ice 1,534
Acquisition of minority interest common
stock and exercise of warrants 993
Compensation expense recorded as a
capital contribution 5,111
Subordinated notes issued in lieu
of interest 236 671 430
15. COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries are parties, in the ordinary course of
business, to certain claims and litigation. In management's opinion, the
settlement of such matters is not expected to have a material impact on the
consolidated financial statements.
In addition, the Company is a party to employment agreements with
certain officers which provided for minimum compensation levels and incentive
bonuses along with provisions for termination of benefits in certain
circumstances. The Company also entered into a consulting and noncompetition
arrangement with a former officer providing for monthly payments of $12,500
for services to be rendered in the future, which expires in March 1998.
16. RELATED PARTY TRANSACTIONS
Prior to March 31, 1995, the Company had consulting agreements with
certain stockholders and affiliates requiring the payment of monthly
consulting fees, plus expenses, in consideration for financial advisory and
oversight services provided to it by such stockholders. These consulting
agreements, which were cancelable only at the option of such stockholders
over their term, were canceled in the combination. During the years ended
December 31, 1995 and 1994, the Company expensed $0.2 million and $0.9
million, respectively, plus expenses under the provisions of these
agreements, which are included in general and administrative expenses. In
addition, the Company paid an affiliate of one of its stockholders investment
banking fees of $1.1 million, along with related expenses, during the year
ended December 31, 1994, for acquisition and financing services, which were
included as part of the costs and expenses of the acquisition.
39
<PAGE>
17. BUSINESS AND GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS
Information about the Company's operations in the Dairy and Ice businesses and
in different geographic areas for the three years ended December 31, 1996, is as
follows:
Year Ended December 31, 1996 1995 1994
- -------------------------------------------------------------------------------
(IN THOUSANDS)
Net sales to unaffiliated customers:
Dairy:
United States $252,826 $175,553 $102,073
Puerto Rico 215,306 204,406 191,334
---------------------------------
468,132 379,959 293,407
Ice -- United States 52,784 50,507 47,701
---------------------------------
Total $520,916 $430,466 $341,108
---------------------------------
---------------------------------
Operating income:
Dairy:
United States $ 11,339 $ 9,125 $ 4,848
Puerto Rico 16,430 14,160 12,274
---------------------------------
27,769 23,285 17,122
Ice -- United States 11,022 10,116 8,638
Corporate (3,669) (2,837)
---------------------------------
Total $ 35,122 $ 30,564 $ 25,760
---------------------------------
---------------------------------
Identifiable assets (at end of period):
Dairy:
United States $167,179 $ 68,852 $ 68,781
Puerto Rico 152,198 119,977 125,207
---------------------------------
319,377 188,829 193,988
Ice -- United States 47,096 40,519 44,964
Corporate 17,675 3,174
---------------------------------
Total $384,148 $232,522 $238,952
---------------------------------
---------------------------------
Capital expenditures:
Dairy $ 10,229 $ 6,676 $ 3,364
Ice 3,715 3,573 1,420
Corporate 78 143
---------------------------------
Total $ 14,022 $ 10,392 $ 4,784
---------------------------------
---------------------------------
Depreciation expense:
Dairy $ 6,786 $ 5,995 $ 4,943
Ice 3,115 3,263 3,301
Corporate 29
---------------------------------
Total $ 9,930 $ 9,258 $ 8,244
---------------------------------
---------------------------------
40
<PAGE>
18. FAIR VALUE OF FINANCIAL INSTRUMENTS
Pursuant to SFAS No. 107, "Disclosure About Fair Value of Financial
Instruments," the Company is required to disclose an estimate of the fair
value of the Company's financial instruments as of December 31, 1996 and
1995. Differences between the historical presentation and estimated fair
values can occur for many reasons, including taxes, commissions, prepayment
penalties, make-whole provisions and other restrictions as well as the
inherent limitations in any estimation technique.
Due to their near-term maturities, the carrying amounts of accounts
receivable and accounts payable are considered equivalent to fair value. In
addition, because the interest rates on the Company's revolving credit and
term loan facilities and certain other debt are variable, their fair values
approximate their carrying values.
Certain of the Company's long-term debt bears fixed interest rates and
is privately placed with unique terms and no active market. The fair value of
such long-term debt was determined by discounting future cash flows at
current market yields. In addition, the Company has entered into various
interest rate agreements to reduce the Company's sensitivity to changes in
interest rates on its variable rate debt. The fair values of these
instruments were determined based on current values for similar instruments
with similar terms. The following is a summary of the asset (liability)
values for both the carrying values and fair values of such instruments:
December 31, 1996 1995
- --------------------------------------------------------------------------------
Historical Historical
Carrying Fair Carrying Fair
Amount Value Amount Value
---------------------------------------------------
(IN THOUSANDS)
Fixed rate debt $(36,696) $(34,036) $(52,472) $(53,621)
Interest rate agreements (143) (1,220)
19. SUBSEQUENT EVENTS
On January 28, 1997, the Company sold 4,270,000 shares of common stock,
$.01 par value per share, in a public offering at a price to the public of
$22.00 per share. Following this offering, the Company had 15,011,729 shares
of common stock issued and outstanding. The public offering provided net cash
proceeds to the Company of approximately $89.0 million. Of this amount, $36
million was used to repay subordinated notes and $4.3 million was used to pay
prepayment penalties related to the early extinguishment of the subordinated
notes, which, along with the remaining balance of unamortized deferred loan
costs, will be reported as an extraordinary loss from the early
extinguishment of debt in 1997. The remainder of the net proceeds were used
to repay a portion of the outstanding balance of the acquisition facility of
the Company's Senior Credit Facility.
As discussed in Note 11, on April 22, 1996, and August 7, 1996, the
Company sold 3,795,000 shares and 625,000 shares, respectively, of its common
stock, which provided net cash proceeds to the Company of approximately $58.4
million, which was used to repay existing debt. In addition, as discussed
above, on January 28, 1997, the Company sold an additional 4,270,000 shares
of its common stock, which provided net cash proceeds to the Company of
approximately $89.0 million, which was used to repay debt. Had these sales of
common stock occurred on January 1, 1996, the supplemental pro forma net
earnings per share before extraordinary losses from the early extinguishment
of debt for the year ended December 31, 1996, would have decreased by $.47 to
$2.34.
41
<PAGE>
20. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of
operations for 1996 and 1995 (dollars in thousands, except per share data):
<TABLE>
Quarter
---------------------------------------------------------
1996 First Second Third Fourth Full Year
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $ 109,035 $ 116,272 $ 139,304 $ 156,305 $ 520,916
Gross profit 26,420 32,970 38,090 34,888 132,368
Income before extraordinary loss 383 4,553 18,937 4,056 27,929
Net income 383 2,338 18,937 4,056 25,714
Earnings per common share:
Income before extraordinary loss 0.06 0.46 1.68 0.35 2.81
Net income 0.06 0.24 1.68 0.35 2.59
1995 First Second Third Fourth Full Year
--------- --------- --------- --------- ---------
Net sales $ 104,876 $ 110,029 $ 110,549 $ 105,012 $ 430,466
Gross profit 26,207 31,046 33,439 27,141 117,833
Income (loss) before extraordinary loss (9,889) 2,332 4,711 1,270 (1,576)
Net income (loss) (18,351) 2,332 4,711 1,270 (10,038)
Earnings per common share:
Income (loss) before extraordinary loss (1.80) 0.37 0.75 0.20 (0.26)
Net income (loss) (3.34) 0.37 0.75 0.20 (1.64)
</TABLE>
Earnings per common share calculations for each of the quarters were
based on the weighted average number of shares outstanding for each period,
and the sum of the quarters may not necessarily be equal to the full year
earnings per common share amount.
The results for the first quarter of 1995 included $8.8 million of
merger costs related to the combination along with $8.5 million of
extraordinary losses from the early extinguishment of debt repaid at the
combination date.
The results for the second quarter of 1996 include $2.2 million of
extraordinary losses from the early extinguishment of debt repaid with the
proceeds of the Company's initial public offering.
The results for the third quarter of 1996 include a gain on the sale of
Puerto Rico tax credits of $3.4 million and a tax benefit related to the
recognition of the remaining amount of such credits of $11.8 million,
partially offset by $0.6 million in financing costs related to the amendment
of the Company's Senior Credit Facility.
42
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Suiza Foods Corporation
Dallas, Texas
We have audited the accompanying consolidated balance sheets of Suiza
Foods Corporation and subsidiaries (the "Company") as of December 31, 1996
and 1995, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the 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, such consolidated financial statements present fairly,
in all material respects, the consolidated financial position of Suiza Foods
Corporation and subsidiaries at December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Dallas, Texas
February 18, 1997
43
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
Suiza Foods Corporation:
We consent to the incorporation by reference in Registration Statement No.
333-11185, on Form S-8 of our report dated February 18, 1997, appearing in this
Annual Report on Form 10-K of Suiza Foods Corporation for the year ended
December 31, 1996.
DELOITTE & TOUCHE LLP
Dallas, Texas
March 28, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Condensed
Financial Statements for the 12 month period ended December 31, 1996 and is
qualified in its enitirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 8,951
<SECURITIES> 0
<RECEIVABLES> 50,608
<ALLOWANCES> 0
<INVENTORY> 19,228
<CURRENT-ASSETS> 87,525
<PP&E> 123,260
<DEPRECIATION> 0
<TOTAL-ASSETS> 384,148
<CURRENT-LIABILITIES> 60,645
<BONDS> 226,693
0
0
<COMMON> 107
<OTHER-SE> 93,425
<TOTAL-LIABILITY-AND-EQUITY> 384,148
<SALES> 520,916
<TOTAL-REVENUES> 520,916
<CGS> 388,548
<TOTAL-COSTS> 97,246
<OTHER-EXPENSES> (3,441)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,470
<INCOME-PRETAX> 21,093
<INCOME-TAX> (6,836)
<INCOME-CONTINUING> 27,929
<DISCONTINUED> 0
<EXTRAORDINARY> 2,215
<CHANGES> 0
<NET-INCOME> 25,714
<EPS-PRIMARY> 2.59
<EPS-DILUTED> 2.56
</TABLE>