<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 26, 1996
REGISTRATION NO. 333-01911
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- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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FOODBRANDS AMERICA, INC.*
(Exact name of registrant as specified in its charter)
DELAWARE 13-2535513
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
1601 NORTHWEST EXPRESSWAY, SUITE 1700
OKLAHOMA CITY, OKLAHOMA 73118-1495
(405) 879-4100
(Address, including zip code and telephone number,
including area code, of registrants'
principal executive offices)
HORST O. SIEBEN
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
FOODBRANDS AMERICA, INC.
1601 NORTHWEST EXPRESSWAY, SUITE 1700
OKLAHOMA CITY, OKLAHOMA 73118-1495
(405) 879-4100
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
------------------------------
COPIES TO:
John M. Mee, Esq. Jonathan A. Schaffzin, Esq.
Brice E. Tarzwell, Esq. Cahill Gordon & Reindel
McAfee & Taft A Professional 80 Pine Street
Corporation New York, New York 10005
Two Leadership Square, Tenth Floor (212) 701-3000
Oklahoma City, Oklahoma 73102
(405) 235-9621
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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* Information regarding additional registrants is contained in the table of
Additional Registrants.
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ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
EXACT NAME OF SUBSIDIARY GUARANTOR
REGISTRANTS AS SPECIFIED IN THEIR I.R.S. EMPLOYER
RESPECTIVE CHARTERS AND JURISDICTION IDENTIFICATION
OF INCORPORATION OR ORGANIZATION NO.
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<S> <C>
Brennan Packing Co., Inc., a
Delaware corporation........................................................................... 36-6047048
Continental Deli Foods, Inc.,
a Delaware corporation......................................................................... 73-0955617
Doskocil Food Service Company, L.L.C.,
an Oklahoma limited liability company.......................................................... 48-1175514
Doskocil Specialty Brands Company,
a Delaware corporation......................................................................... 41-1564761
FBAI Investments Corporation, an
Oklahoma corporation........................................................................... 73-1484639
KPR Holdings, L.P., a Delaware
limited partnership............................................................................ 75-2513990
National Service Center, Inc.,
a Delaware corporation......................................................................... 48-1121753
RKR-GP, Inc., a Delaware corporation............................................................ 75-2513987
</TABLE>
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED APRIL 26, 1996
P_R_O_S_P_E_C_T_U_S
$120,000,000
FOODBRANDS AMERICA, INC.
% SENIOR SUBORDINATED NOTES DUE 2006
----------------
Interest on the % Senior Subordinated Notes due 2006 (the "Notes") of
Foodbrands America, Inc. ("Foodbrands America" and, collectively with its
subsidiaries, the "Company") offered hereby (the "Offering") is payable
semi-annually in arrears on and of each year, commencing
, 1996. The Notes may be redeemed by Foodbrands America, in whole or in
part, at any time on or after , 2001 at the redemption prices set forth
herein, together with accrued and unpaid interest to the date of redemption. In
addition, on or prior to , 1999, Foodbrands America may redeem up to 25%
of the originally issued Notes, at a price of % of the principal amount
thereof, together with accrued and unpaid interest to the redemption date, with
the net proceeds of a Public Equity Offering (as defined herein) for gross
proceeds of $50.0 million or more; PROVIDED, not less than $75.0 million in
principal amount of Notes is outstanding thereafter. Upon a Change of Control
(as defined herein), (i) Foodbrands America will have the option to redeem the
Notes, in whole or in part, at a redemption price equal to the principal amount
thereof, together with accrued and unpaid interest to the date of redemption
plus the Applicable Premium (as defined herein) and (ii) subject to certain
conditions, each holder of Notes will have the right to require Foodbrands
America to purchase such holder's Notes at a purchase price equal to 101% of the
principal amount thereof, together with accrued and unpaid interest to the date
of purchase.
The Notes will be unconditionally guaranteed upon issuance, jointly and
severally, by substantially all of the direct and indirect subsidiaries of
Foodbrands America (the "Subsidiary Guarantors"). The Notes and the guarantees
of the Notes by the Subsidiary Guarantors (the "Note Guarantees") will be
unsecured and subordinated in right of payment to all existing and future Senior
Indebtedness (as defined herein) of Foodbrands America and Guarantor Senior
Indebtedness (as defined herein) of each Subsidiary Guarantor, respectively, and
will be senior in right of payment to all existing and future Subordinated
Indebtedness (as defined herein) of Foodbrands America and the Subsidiary
Guarantors. Under certain limited circumstances, the Note Guarantees may be
unconditionally released. As of March 30, 1996, after giving PRO FORMA effect to
the issuance of the Notes and the application of the estimated net proceeds
therefrom to purchase all of Foodbrands America's 9 3/4% Senior Subordinated
Redeemable Notes due 2000 (the "9 3/4% Notes") pursuant to the tender offer
referred to below, total consolidated debt of Foodbrands America and its
subsidiaries would have been $334.4 million, of which $214.4 million would have
been Senior Indebtedness or Guarantor Senior Indebtedness.
On March 29, 1996, Foodbrands America commenced a tender offer to purchase
up to all of its outstanding 9 3/4% Notes and a related consent solicitation to
amend or remove certain covenants of the indenture pursuant to which the 9 3/4%
Notes were issued (the "9 3/4% Indenture"). On April 24, 1996, Foodbrands
America extended the tender offer and increased the purchase price to 105 3/8%
(which includes the related consent fee) of the principal amount thereof,
together with accrued and unpaid interest to the date of purchase. Such tender
offer and related consent solicitation are collectively referred to herein as
the "Tender Offer." The net proceeds of this Offering will be used to consummate
the Tender Offer, and if any net proceeds remain after consummation of the
Tender Offer, to reduce Foodbrands America's outstanding indebtedness under its
bank credit agreement (the "Credit Agreement"). See "Use of Proceeds." The
Tender Offer is conditioned upon, among other things, Foodbrands America
receiving valid tenders and consents from holders of at least a majority in
aggregate principal amount of the 9 3/4% Notes. As of the close of business on
April 25, 1996, the Company had received tenders in excess of a majority of the
aggregate principal amount of the 9 3/4% Notes. This Offering is conditioned
upon consummation of the Tender Offer.
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN EVALUATING AN INVESTMENT
IN THE NOTES.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) FOODBRANDS AMERICA(3)
<S> <C> <C> <C>
Per Note................................ % % %
Total................................... $ $ $
</TABLE>
(1) Plus accrued interest, if any, from , 1996.
(2) Foodbrands America and the Subsidiary Guarantors have agreed, jointly and
severally, to indemnify the several Underwriters (as defined herein) against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(3) Before deducting expenses payable by Foodbrands America estimated at
$ .
------------------------
The Notes are offered by the Underwriters, subject to prior sale, when, as
and if issued to and accepted by them, subject to approval of certain legal
matters by counsel for the Underwriters and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the Notes
will be made in New York, New York on or about May , 1996.
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MERRILL LYNCH & CO.
CHASE SECURITIES INC.
DILLON, READ & CO. INC.
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The date of this Prospectus is , 1996.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices at 7 World Trade Center, 13th Floor, New York, New York 10048 and Suite
1400, Northwestern Atrium Center, 14th Floor, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can be obtained by mail from the Public
Reference Section of the Commission at prescribed rates at the principal office
of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. In addition, such reports, proxy statements and information concerning
the Company can be inspected and copied at the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005.
Foodbrands America and the Subsidiary Guarantors have filed with the
Commission a registration statement on Form S-3 (herein, together with all
amendments and exhibits thereto, referred to as the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"). This
Prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is hereby made
to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Foodbrands America's Annual Report on Form 10-K for the fiscal year ended
December 30, 1995, Amendment One thereto on Form 10-K/A (filed February 28,
1996), Amendments One, Two and Three on Form 8-K/A (filed on February 26 and 28,
and April 25, 1996, respectively) to Foodbrands America's Current Report on Form
8-K (which relates to Foodbrands America's acquisitions of KPR Holdings, L.P.
and TNT Crust, Inc.) dated December 11, 1995, and Foodbrands America's Current
Report on Form 8-K dated April 23, 1996, filed under the Exchange Act (File No.
1-11621) are hereby incorporated in this Prospectus by reference. All documents
filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of this Offering shall be deemed to be incorporated in this
Prospectus and to be a part hereof from the date of the filing of such document.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for all purposes to the extent that a statement contained herein or in any other
subsequently filed document which is also incorporated or deemed to be
incorporated by reference modifies or supersedes such statement. Any statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of the Registration Statement or this
Prospectus.
Foodbrands America will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy
(without exhibits unless such exhibits are specifically incorporated by
reference into such document) of any or all documents incorporated by reference
in this Prospectus. Written request for such copies should be directed to Bryant
P. Bynum, Foodbrands America, Inc., Vice President -- Finance, Treasurer and
Secretary, at the Company's principal executive offices, 1601 Northwest
Expressway, Suite 1700, Oklahoma City, Oklahoma 73118-1495, or by telephone at
(405) 879-4100.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL
STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN, OR INCORPORATED
BY REFERENCE INTO, THIS PROSPECTUS. REFERENCE IS MADE TO "DESCRIPTION OF THE
NOTES -- CERTAIN DEFINITIONS" FOR THE DEFINITIONS OF CERTAIN CAPITALIZED TERMS.
THE COMPANY
The Company is a leading producer, marketer and distributor of frozen and
refrigerated processed food products to the foodservice industry (which
encompasses all aspects of away-from-home food preparation). It targets many of
its products to segments of the foodservice industry which it believes will grow
at rates greater than, and provide profit margins higher than, those of the
foodservice industry in general. The Company believes it is one of the nation's
leading foodservice suppliers of meat-based pizza toppings, partially baked and
self-rising pizza crusts, burritos, frozen stuffed pastas, breaded appetizers,
soups, sauces and side dishes, and processed meat products. The Company's
customers include wholesale foodservice distributors, multi-unit restaurant
chains, food processors, grocery store delicatessens and warehouse clubs, many
of which are market leaders within their industry sectors. The Company's brand
names are well recognized in the foodservice industry and include
DOSKOCIL-Registered Trademark- pizza toppings, WILSON'S CONTINENTAL
DELI-Registered Trademark- and AMERICAN FAVORITE-TM- deli meats,
POSADA-Registered Trademark-, LITTLE JUAN-Registered Trademark-, BUTCHER
BOY-Registered Trademark- and MARQUEZ-Registered Trademark- burritos,
ROTANELLI'S-Registered Trademark- frozen pastas and FRED'S-Registered Trademark-
breaded cheese and vegetable appetizers. The Company differentiates its products
through development, formulation, processing, packaging and distribution.
In response to consumer demand and demographic trends, certain segments of
the foodservice industry, such as "ethnic foods" and convenience foods, have
grown at a faster rate than the foodservice industry in general. The Company has
targeted these segments of the foodservice industry which it believes will be
profitable, under-served and growing. The Company seeks to achieve long-term
growth in revenues and profitability by capitalizing on certain long-standing,
as well as emerging, trends in U.S. eating and dining habits:
- According to industry research, U.S. consumers are increasingly purchasing
food prepared outside the home. The Company has shifted its focus from
fresh meat and other commodity-based products and has become a provider of
a wide variety of specialty processed products to the foodservice
industry.
- Pizza accounted for one in four entrees ordered from foodservice
establishments in 1994. The Company is one of the leading suppliers to the
growing pizza industry with a strong position in the meat topping and
partially-baked and self-rising pizza crust markets. Its customer base
includes many of the largest pizza producers in the U.S.
- "Ethnic foods," such as Mexican style foods and Italian pasta dishes, are
becoming increasingly popular. The Company has a strong market presence
with these products and will seek additional avenues in the ethnic food
market for further growth.
- The Company believes that restaurants and other foodservice providers are
seeking to out-source more of the food preparation process to ensure
product quality and consistency, to reduce preparation costs, and to
increase food safety. The Company, including its recently acquired
subsidiaries, has a strong record of developing innovative products and
product formulations that meet customers' specific needs and reduce
foodservice providers' "back-of-the-house" preparation requirements.
In the past two years, the Company has repositioned itself moving from a
supplier of primarily meat-based products, such as commodity and fresh pork
products, to a leading, high-quality manufacturer and marketer of value-added
frozen and refrigerated food products. As a result, during 1995, on a PRO FORMA
basis after giving effect to the Acquisitions (as defined herein), over
one-third of the Company's sales were of specialty, non-meat products, while
commodity products accounted for only 13% of sales. The Company has achieved
this transformation by successfully completing several initiatives.
In 1994, the Company acquired the frozen specialty foods division of
International Multifoods Corporation (now operated as the Specialty Brands
Division), which broadened the Company's product line to include appetizers and
ethnic foods, and appointed R. Randolph Devening, who has extensive experience
in
3
<PAGE>
food processing, foodservice and distribution, as Chairman, President and Chief
Executive Officer. In 1995, the Company divested itself of its Retail Division,
thereby exiting the volatile retail meat-case business. It also acquired KPR
Holdings, L.P. ("KPR"), a producer of pizza toppings, pepperoni, soups, sauces
and side dishes, and TNT Crust, Inc. ("TNT"), a manufacturer of partially baked
and self-rising pizza crusts (collectively, the "Acquisitions").
In pursuit of its overall business strategy in the future the Company will
seek to:
- expand its market penetration in its existing foodservice markets;
- leverage its leadership position in the pizza toppings and partially baked
pizza crust business;
- further emphasize the development and sale of higher-margin processed
specialty products;
- invest in its manufacturing and distribution operations with the objective
of further improving its status as a low-cost producer; and
- exploit growth opportunities through selective acquisitions of well
positioned premium producers of value-added processed food products
serving niche markets in the foodservice industry.
The Company has increased annual sales from continuing operations from $366
million in 1992 to $751 million on a PRO FORMA basis after giving effect to the
Acquisitions in 1995. Income from continuing operations increased from $0.6
million in 1992 to $9.5 million in 1995 on the same PRO FORMA basis. Cash flow
from operating activities increased from $1.1 million in 1992 to $13.5 million
in 1995 on an historical basis. The Company also increased Adjusted EBITDA (as
defined herein) from continuing operations from $20.4 million in 1992 to $73.1
million in 1995 on the same PRO FORMA basis, resulting in an increase in its
Adjusted EBITDA margin from 5.6% of sales in 1992 to 9.7% in 1995.
On April 23, 1996, the Company announced net income for the quarter ended
March 30, 1996 of $2.1 million compared to income from continuing operations in
the first quarter of 1995 of $1.8 million and net loss from the prior year
quarter of $0.6 million. See "Management's Discussion and Analysis -- Recent
Developments."
TENDER OFFER
Foodbrands America issued $110 million of 9 3/4% Notes in April 1993
pursuant to the 9 3/4% Indenture between Foodbrands America and First Fidelity
Bank, N.A., as trustee, all of which was outstanding at April 22, 1996. The
Company's obligations under the 9 3/4% Indenture have also been guaranteed by
the Subsidiary Guarantors. On March 29, 1996, Foodbrands America commenced a
Tender Offer (which was extended on April 24, 1996) to purchase for cash up to
all of the outstanding 9 3/4% Notes and to solicit consents from holders thereof
to amend or remove certain covenants contained in the 9 3/4% Indenture. The
purchase price to be paid in respect of validly tendered 9 3/4% Notes and the
related consents is 105 3/8% of their principal amount, plus accrued interest to
the date of purchase. The Tender Offer is conditioned upon, among other things,
Foodbrands America receiving valid tenders and related consents from holders of
at least a majority in aggregate principal amount of the 9 3/4% Notes. As of the
close of business on April 25, 1996 approximately $60 million in principal
amount of the 9 3/4% Notes had been tendered pursuant to the Tender Offer. This
Offering is conditioned upon the consummation of the Tender Offer. See "Use of
Proceeds" and "Description of Other Indebtedness."
To finance the Acquisitions, refinance certain existing debt and provide
future working capital, Foodbrands America entered into a $320 million credit
facility with a group of financial institutions (the "Lenders") led by Chemical
Bank. To secure the obligations created under the Credit Agreement, Foodbrands
America and its subsidiaries pledged substantially all of their respective
assets and the Subsidiary Guarantors also guaranteed Foodbrands America's
obligations under the Credit Agreement. At April 22, 1996, $212.6 million was
outstanding under the Credit Agreement. Any net proceeds from this Offering
which are not used to purchase 9 3/4% Notes will be applied to reduce Foodbrands
America's term and acquisition revolving credit facilities under the Credit
Agreement. See "Use of Proceeds." A condition of the Tender Offer is an
amendment to the Credit Agreement which, among other things, extends the
amortization and maturity of certain of Foodbrands America's obligations
thereunder. By extending the average life of its indebtedness, the Company
expects to achieve greater financial flexability in pursuing its business
strategy. See "Description of Other Indebtedness -- The Credit Agreement."
4
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THE OFFERING
<TABLE>
<S> <C>
Notes Offered..................... $120,000,000 principal amount of % Senior Subordinated
Notes due 2006.
Maturity Date..................... , 2006.
Interest Payment Dates............ and of each year, commencing ,
1996.
Mandatory Redemption.............. None.
Optional Redemption............... The Notes may be redeemed at the option of Foodbrands
America, in whole or in part, at any time on or after
, 2001, at the redemption prices set forth
herein, together with accrued and unpaid interest to the
date of redemption. In addition, on or prior to
, 1999, Foodbrands America may redeem up to
25% of the originally issued Notes with the net proceeds
of a Public Equity Offering for gross proceeds of $50.0
million or more at a price of % of the principal
amount thereof, together with accrued and unpaid
interest to the redemption date; PROVIDED not less than
$75.0 million in principal amount of Notes is
outstanding thereafter.
Change of Control................. Upon a Change of Control, (i) Foodbrands America will
have the option to redeem the Notes, in whole or in
part, at a redemption price equal to the principal
amount thereof, together with accrued and unpaid
interest to the date of redemption, plus the Applicable
Premium and (ii) subject to certain conditions, each
holder of Notes will have the right to require
Foodbrands America to purchase such holder's Notes at a
purchase price equal to 101% of the principal amount
thereof, together with accrued and unpaid interest to
the date of purchase.
Note Guarantees................... Upon issuance, the Notes will be unconditionally
guaranteed, jointly and severally, on a senior
subordinated basis by the Subsidiary Guarantors. Under
certain limited circumstances, the Note Guarantees may
be unconditionally released.
Ranking of the Notes and Note
Guarantees....................... The Notes and the Note Guarantees represent unsecured
senior subordinated obligations of Foodbrands America
and the Subsidiary Guarantors, respectively. The Notes
and the Note Guarantees will be unsecured and
subordinated in right of payment to all existing and
future Senior Indebtedness of Foodbrands America and
Guarantor Senior Indebtedness of the Subsidiary
Guarantors, respectively, and will be senior in right of
payment to all existing and future Subordinated
Indebtedness of Foodbrands America and the Subsidiary
Guarantors. As of March 30, 1996, after giving PRO FORMA
effect to this Offering and the use of the net proceeds
therefrom to purchase all of Foodbrands America's 9 3/4%
Notes pursuant to the Tender Offer, the total
consolidated indebtedness of Foodbrands America and its
subsidiaries would have been $334.4 million, of which
$214.4 million would have been Senior Indebtedness or
Guarantor Senior Indebtedness. In the event of any
default in the
</TABLE>
5
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<TABLE>
<S> <C>
payment in respect of any Senior Indebtedness, no
payment with respect to the Notes may be made by
Foodbrands America unless and until such default has
been cured or waived. In addition, upon the occurrence
of any default entitling the holders of Designated
Senior Indebtedness to accelerate the maturity thereof
and the receipt by the Trustee under the Indenture of
written notice of such occurrence from such holders, no
payment in respect of the Notes or the Note Guarantees
may be made by Foodbrands America or the Note
Guarantors, as applicable, for a maximum period of 179
days.
Covenants......................... The indenture governing the Notes (the "Indenture") will
contain certain covenants that, among other things,
restrict the incurrence of additional indebtedness by
Foodbrands America and its Restricted Subsidiaries (as
defined herein), restrict the payment of dividends on
and redemptions of capital stock of Foodbrands America,
restrict the making of certain investments, limit
transactions with affiliates, restrict the issuance of
preferred stock by Restricted Subsidiaries, provide for
the application of the proceeds of certain asset sales,
restrict the incurrence of liens, limit guarantees by
Restricted Subsidiaries, require compliance with
Exchange Act reporting requirements, and govern the
ability of the Company to engage in certain mergers or
consolidations or to transfer all or substantially all
of its assets to another person.
Use of Proceeds................... To consummate the Tender Offer and, if any net proceeds
remain after consummation of the Tender Offer, to reduce
the outstanding indebtedness under the term and
acquisition revolving credit facilities under the Credit
Agreement. See "Use of Proceeds."
</TABLE>
For additional information regarding the Notes, see "Description of the
Notes."
RISK FACTORS
Prospective purchasers of the Notes should consider all of the information
contained in this Prospectus before making an investment in the Notes. In
particular, prospective purchasers should consider the factors set forth under
"Risk Factors."
6
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SUMMARY FINANCIAL INFORMATION
Set forth below is summary historical and PRO FORMA consolidated financial
information for the Company. The Company's consolidated financial statements are
prepared on the basis of a 52 or 53 week year, ending on the Saturday nearest
December 31. The Company's 1995 fiscal year was 52 weeks and its fiscal quarters
each contained 13 weeks. The Retail Division was sold in 1995 and has been
reported as a discontinued operation. Accordingly, the historical financial data
has been restated. The unaudited PRO FORMA consolidated financial information
for the Company set forth below has been derived from the unaudited PRO FORMA
consolidated financial information included elsewhere in this Prospectus and
gives effect to (i) the Acquisitions and the financing thereof and (ii) the
Offering and the use of proceeds therefrom to purchase all of the 9 3/4% Notes,
as if each such transaction had occurred on January 1, 1995. The unaudited PRO
FORMA consolidated financial information does not necessarily represent what the
Company's results of operations would have been if the Acquisitions and the
financing thereof and this Offering and the use of proceeds therefrom had
actually been completed on that date, and are not intended to project the
Company's results of operations for any future period. The table should be read
in conjunction with "Pro Forma Consolidated Financial Information," "Selected
Consolidated Financial Information," "Management's Discussion and Analysis" and
the consolidated financial statements of the Company and related notes thereto,
and the financial statements of KPR and TNT and related notes thereto included
in, or incorporated by reference into, this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED JAN. ENDED DEC. ENDED DEC. ENDED DEC.
1, 1994 31, 1994 30, 1995 30, 1995
----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Net sales...................................................... $ 393,270 $ 512,352 $ 634,700 $ 751,008
Gross profit................................................... 57,482 102,234 134,715 162,352
Provisions for restructuring and integration and plant
closing....................................................... 500 10,586 -- --
Operating income............................................... 3,428 11,209 35,103 50,418
Income (loss) from continuing operations....................... (4,374) (5,195) 9,601 9,532
Net income (loss).............................................. (32,019)(2) (16,198)(3) (34,095)(4)
Earnings (loss) per share--primary and fully diluted:
Income (loss) from continuing operations..................... $ (0.59) $ (0.59) $ 0.77 $ 0.77
Net income (loss)............................................ (4.32) (1.85) (2.73)
BALANCE SHEET DATA:
Working capital................................................ $ 34,682 $ 50,657 $ 20,430
Total assets................................................... 298,806 442,267 521,763
Long-term debt................................................. 122,377 224,260 305,407
Total debt..................................................... 123,830 225,914 323,748
OTHER DATA:
Net cash provided by operating activities...................... $ 18,138 $ 27,381 $ 13,502
Adjusted EBITDA (5)............................................ 16,714 36,592 50,861 $ 73,061
Adjusted EBITDA margin (5)..................................... 4.3% 7.1% 8.0% 9.7%
Interest expense (6)........................................... $ 9,078 $ 14,175 $ 16,567 $ 31,058
Capital expenditures........................................... 8,934 10,063 24,255 30,855
Ratio of Adjusted EBITDA to interest expense (5)............... 1.8x 2.6x 3.1x 2.4x
Ratio of total debt to Adjusted EBITDA (5)..................... 7.4x 6.2x 6.4x 4.6x
Ratio of earnings to fixed charges (7)......................... -- -- 1.8x 1.5x
</TABLE>
- ------------------------------
(1) Net income (loss) includes the income (loss), net of applicable income
taxes, from operations of the discontinued Retail Division of $6.8 million,
$(8.5) million and $(4.1) million for each of the fiscal years 1993 through
1995, respectively.
(2) Includes the cumulative effect on years prior to the fiscal year ended
January 1, 1994 for a change in accounting for postretirement benefits other
than pensions of a non-cash charge against earnings of $34.4 million.
(3) Includes an extraordinary loss of $2.5 million associated with the early
extinguishment of debt.
(4) Includes the loss on disposal of the Retail Division of $38.5 million and an
extraordinary loss on early extinguishment of debt of $1.0 million.
7
<PAGE>
(5) Adjusted EBITDA represents income (loss) from continuing operations before
income taxes, interest and financing costs, restructuring/integration and
plant closing provisions, depreciation, amortization and other non-cash
expenses. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage
of net sales. The Company has included information concerning Adjusted
EBITDA as it understands that such information is used by certain investors
as one measure of an issuer's historical ability to service its debt.
Adjusted EBITDA should not be considered as an alternative to, or more
meaningful than, operating income or cash flow determined by generally
accepted accounting principles as an indication of the Company's operating
performance. Adjusted EBITDA is not presented here as an alternative measure
of operating results or cash flow, but rather to provide additional
information related to debt service capability.
(6) Interest expense does not include amortization of financing costs or fees
paid to banks and others which are included in "Interest and Financing
Costs" in the Company's Consolidated Statement of Operations.
(7) For purposes of computing this ratio, earnings consist of income (loss) from
continuing operations before income taxes and fixed charges. Fixed charges
consist of interest on indebtedness, amortization of debt issuance costs and
a portion of operating lease expense which is representative of the interest
factor attributable to interest expense. Such earnings were insufficient to
cover fixed charges by $5.7 million and $4.7 million in the fiscal year
ended January 1, 1994 and the fiscal year ended December 31, 1994,
respectively.
8
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should consider carefully the following factors before
purchasing the Notes offered hereby.
LEVERAGE AND DEBT SERVICE
The Company incurred substantial indebtedness in connection with the
financing of the acquisitions of Specialty Brands, KPR and TNT and will remain
highly leveraged following this Offering. As of March 30, 1996, on a PRO FORMA
basis after giving effect to this Offering and the use of proceeds therefrom to
purchase all of the 9 3/4% Notes, the Company would have had total consolidated
indebtedness (including capitalized lease obligations) of approximately $334.4
million and on such date its ratio of consolidated debt to stockholder's equity
would have been 7.4 to 1. In addition, the Company would have had the ability to
borrow additional indebtedness of up to $108.5 million under the Credit
Agreement, of which up to $98.5 million would have been available to finance
acquisitions. The Company expects to pursue acquisitions in the future on a
selective basis in furtherance of its business strategy and may incur additional
indebtedness outside of the Credit Agreement. See "Capitalization" and "Business
- -- Business Strategy."
The degree to which the Company is leveraged could have important
consequences to the holders of the Notes, including: (i) the Company's ability
to obtain additional financing for working capital or other purposes in the
future may be limited; (ii) a substantial portion of the Company's cash flow
from operations will be dedicated to the payment of the principal of and
interest on its indebtedness, thereby reducing funds available for operations;
(iii) certain of the Company's borrowings, including the borrowings under the
Credit Agreement, will be at variable rates of interest which could cause the
Company to be vulnerable to increases in interest rates (as of April 22, 1996,
total indebtedness of the Company subject to floating interest rates was $212.6
million); (iv) the Company may be more vulnerable to economic downturns and be
limited in its ability to withstand competitive pressures; and (v) substantially
all of the Company's indebtedness will become due prior to the maturity of the
Notes (see "Description of Other Indebtedness -- The Credit Agreement" and "--
The 9 3/4% Notes"). The Company's ability to make scheduled payments of the
principal of, or interest on, or to refinance, its indebtedness will depend on
its future operating performance and cash flow, which are subject to prevailing
economic conditions, prevailing interest rate levels, and financial,
competitive, business and other factors, many of which are beyond its control.
If the Company cannot generate sufficient cash flow from operations to meet its
principal and interest service obligations, the Company might be required to
refinance its indebtedness. There can be no assurance that a refinancing could
be effected on satisfactory terms or would be permitted by the terms of its debt
instruments. See "Management's Discussion and Analysis."
SUBORDINATION AND IMPACT OF POTENTIAL RELEASE OF NOTE GUARANTEES
The payment of principal of, and premium, if any, and interest on the Notes
will be expressly subordinated in right of payment to the prior payment in full
of all Senior Indebtedness of Foodbrands America, whether outstanding at the
date of the Indenture or incurred thereafter. Upon any payment or distribution
of Foodbrands America's assets to creditors upon any dissolution, winding-up,
liquidation, reorganization, bankruptcy, insolvency, receivership or other
proceedings relating to Foodbrands America, whether voluntary or involuntary,
holders of the Senior Indebtedness will be entitled first to receive payment in
full of all amounts due thereon before the holders of the Notes will be entitled
to receive any payment with respect to the Notes. In the event of any default in
the payment in respect of any Senior Indebtedness, no payment with respect to
the Notes may be made by Foodbrands America unless and until such default has
been cured or waived. In addition, upon the occurrence of any other default
entitling the holders of Designated Senior Indebtedness to accelerate the
maturity thereof and receipt by the Trustee under the Indenture of written
notice of such occurrence from such holders, no payment in respect of the Notes
may be made by Foodbrands America or the Note Guarantors, as applicable, for a
maximum period of 179 days. The Indenture contains subordination provisions
similar to the foregoing with respect to the Note Guarantees and the Subsidiary
Guarantors. By reason of the subordination of the Notes and the Note Guarantees
to all existing
9
<PAGE>
and future Senior Indebtedness of Foodbrands America and Guarantor Senior
Indebtedness of the Subsidiary Guarantors, holders of the Notes may recover less
ratably than holders of Senior Indebtedness or Guarantor Senior Indebtedness or
may recover nothing.
The Note Guarantees are also subject to release under certain circumstances.
Foodbrands America's operations are conducted through its wholly-owned
subsidiaries, where all of the Company's operating assets are located.
Accordingly, Foodbrands America is dependent upon cash flow from its
subsidiaries to meet its debt obligations, which will depend upon the future
performance of these subsidiaries. The release of the Note Guarantees would
increase the structural subordination of holder's claims and accordingly could
have a material adverse impact on holders, through the trading price of the
Notes or otherwise. If no Default exists or would exist under the Indenture,
concurrently with any sale or disposition (by merger or otherwise) of any
Subsidiary Guarantor (other than a transaction subject to the provisions
described under "Description of the Notes -- Consolidation, Merger, Sale of
Assets, Etc.") by Foodbrands America or a Restricted Subsidiary to any person
that is not an affiliate of Foodbrands America or any of the Restricted
Subsidiaries, such Subsidiary Guarantor will be automatically and
unconditionally released from all obligations under its Note Guarantee. In
addition, if no Default exists or would exist under the Indenture, at the
request of Foodbrands America, a Note Guarantor that is not a Leveraged
Subsidiary (as defined herein) will be released from all obligations under its
Note Guarantee if the Note Guarantor has been unconditionally released from its
obligations under the Credit Agreement and the 9 3/4% Indenture. The Credit
Agreement provides that a Note Guarantor's obligations, as guarantor thereunder,
will terminate when all obligations under the Credit Agreement have been
indefeasibly paid in full in cash and the Lenders have no further commitments
thereunder, obligation to issue letters of credit thereunder or exposure
pursuant to letters of credit issued thereunder. The Note Guarantors'
obligations under the 9 3/4% Indenture will be released, upon the request of
Foodbrands America, in the event that the Note Guarantors are released from
guarantees of indebtedness under the Credit Agreement and the Note Guarantees.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the holders of Notes would be
entitled to require that the Company offer to purchase the Notes at a purchase
price of 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of purchase. Events causing a Change of Control would
constitute a Default under the Credit Agreement entitling the Lenders to declare
the Company's obligations thereunder to be immediately due and payable or to
block payments in respect of the Notes for up to 179 days. In addition, the
9 3/4% Indenture contains provisions similar to the Notes applicable upon the
occurrence of a Change of Control. Generally, the acquisition by any person or
group (other than Joseph Littlejohn & Levy Associates, L.P. ("JLL") and its
affiliates or any group comprised of JLL and the Airlie Group L.P. ("Airlie"))
of beneficial ownership of capital stock of the Company having a majority of the
combined voting power of the Company's capital stock or the replacement of a
majority of the board of directors, or a majority of the directors not elected
pursuant to an agreement with JLL and Airlie, over a two year period would
constitute a Change of Control.
As of March 30, 1996, the Company would have had total consolidated
indebtedness of $321.0 subject to mandatory redemption obligations of the
Company or an event of default upon the occurrence of a Change of Control. There
can be no assurance that in the event of a Change of Control the Company would
have the ability to satisfy any or all of its mandatory redemption or payment
obligations in connection therewith and the ability of Foodbrands America or the
Note Guarantors to satisfy such redemption obligations would be subject to the
subordination provisions applicable to the Notes and the Credit Agreement.
RESTRICTIVE COVENANTS AND ASSET ENCUMBRANCES
The Credit Agreement and the Indenture contain numerous restrictive
covenants which limit the discretion of the Company's management with respect to
certain business matters. These covenants place significant restrictions on,
among other things, the ability of Foodbrands America and the Restricted
Subsidiaries to incur additional indebtedness, to create liens or other
encumbrances, to make certain payments, investments, loans and guarantees and to
sell or otherwise dispose of a substantial portion of assets to, or merge or
consolidate with, another entity which is not controlled by the Company. The
Credit
10
<PAGE>
Agreement also contains a number of financial covenants which require the
Company to meet certain financial ratios and tests and provide that a "change of
control" will constitute an event of default. See "Description of Other
Indebtedness -- The Credit Agreement" and "Description of the Notes -- Certain
Covenants" and "-- Consolidation, Merger, Sale of Assets, Etc." A failure to
comply with the obligations contained in the Credit Agreement or the Indenture,
if not cured or waived, could permit acceleration of the related indebtedness
and acceleration of indebtedness under other instruments which contain
cross-acceleration or cross-default provisions. In addition, the obligations of
the Company under the Credit Agreement are secured by substantially all of the
Company's assets. In the event of an event of default under the Credit
Agreement, the lenders under the Credit Agreement would be entitled to exercise
the remedies available to a secured lender under applicable law. Therefore, in
addition to being entitled to the benefits of the subordination provisions
contained in the Indenture, the secured lenders will have a prior claim on those
assets of the Company securing their indebtedness. If the Company were obligated
to repay all or a significant portion of its indebtedness, there can be no
assurance that the Company would have sufficient cash to do so or that the
Company could successfully refinance such indebtedness. Other indebtedness of
the Company and its subsidiaries that may be incurred in the future may contain
financial or other covenants more restrictive than those applicable to the
Credit Agreement or the Notes.
ABSENCE OF PROFITABLE OPERATIONS
Since emerging from bankruptcy in 1991 through fiscal year 1995, the Company
reported a series of net losses. The Company reported a $26.8 million net loss
in fiscal 1992 as a result of the $32.0 million provision for plant closings
recognized in that year, a $32.0 million net loss in fiscal 1993 as a result of
a one-time charge to earnings of $34.4 million in connection with certain
retiree medical benefit expenses in accordance with Statement of Financial
Accounting Standards No. 106, a $16.2 million net loss in fiscal 1994 and a
$34.1 million net loss in fiscal 1995 as a result of the loss upon disposition
of approximately $38.5 million recorded in connection with the sale of the
Retail Division which includes a write-off of $64.3 million of intangible
assets. See "Management's Discussion and Analysis." Additionally, the Company's
Tender Offer will result in an extraordinary loss for early debt retirement of
approximately $5.1 million (if all outstanding 9 3/4% Notes are tendered). There
can be no assurance of profitable operations in fiscal 1996 or otherwise.
FRAUDULENT CONVEYANCE CONSIDERATIONS
Each Subsidiary Guarantor's guarantee of the obligations of Foodbrands
America under the Notes may be subject to review under relevant federal and
state fraudulent conveyance statutes (the "fraudulent conveyance statutes") in a
bankruptcy, reorganization or rehabilitation case or similar proceeding or a
lawsuit by or on behalf of unpaid creditors of such Subsidiary Guarantors. If a
court were to find under relevant fraudulent conveyance statutes that, at the
time the Notes were issued, (a) a Subsidiary Guarantor guaranteed the Notes with
the intent of hindering, delaying or defrauding current or future creditors or
(b)(i) a Subsidiary Guarantor received less than reasonably equivalent value or
fair consideration for guaranteeing the Notes and (ii)(A) was insolvent or was
rendered insolvent by reason of such Note Guarantee, (B) was engaged, or about
to engage, in a business or transaction for which its assets constituted
unreasonably small capital, (C) intended to incur, or believed that it would
incur, obligations beyond its ability to pay as such obligations matured (as all
of the foregoing terms are defined in or interpreted under such fraudulent
conveyance statutes) or (D) was a defendant in an action for money damages, or
had a judgment for money damages docketed against it (if, in either case, after
final judgment, the judgment is unsatisfied), such court could avoid or
subordinate such Note Guarantee to presently existing and future indebtedness of
such Subsidiary Guarantor and take other action detrimental to the holders of
the Notes, including, under certain circumstances, invalidating such Note
Guarantee.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the federal or state law that is being applied in any such
proceeding. Generally, however, a Subsidiary Guarantor would be considered
insolvent if, at the time it incurs the obligations constituting a Note
Guarantee, either (i) the fair market value (or fair saleable value) of its
assets is less than the amount required to pay the probable liability on its
total existing indebtedness and liabilities (including contingent liabilities)
as they become absolute and mature or (ii) it is incurring obligations beyond
its ability to pay as such obligations mature or become due.
11
<PAGE>
The Boards of Directors and management of Foodbrands America and each
Subsidiary Guarantor believe that at the time of issuance of the Notes and the
Note Guarantees, each Subsidiary Guarantor (i) will be (a) neither insolvent nor
rendered insolvent thereby, (b) in possession of sufficient capital to meet its
obligations as the same mature or become due and to operate its business
effectively and (c) incurring obligations within its ability to pay as the same
mature or become due and (ii) will have sufficient assets to satisfy any
probable money judgment against it in any pending action. There can be no
assurance, however, that such beliefs will prove to be correct or that a court
passing on such questions would reach the same conclusions.
COMPETITION
The Company competes in highly competitive markets with a significant number
of companies of varying sizes, including divisions or subsidiaries of larger
companies. A number of these competitors have multiple product lines as well as
substantially greater financial and other resources available to them, and there
can be no assurance that the Company can compete successfully with such other
companies. Competitive pressures or other factors could cause the Company's
products to lose market share or result in significant price erosion, which
would have a material adverse effect on the Company's results of operations.
GENERAL RISKS OF FOOD INDUSTRY
The industry in which the Company competes is subject to the risk of adverse
changes in general economic conditions; adverse changes in local markets, which,
in the case of excess supply in the market, may be further increased by the
limited shelf life of food products; evolving consumer preference and
nutritional and health-related concerns; federal, state and local food
processing controls; consumer product liability claims; risks of product
tampering; and the availability and expense of liability insurance.
GOVERNMENTAL REGULATION
The Company's production facilities and products are subject to numerous
federal, state and local laws and regulations concerning, among other things,
health and safety matters, food manufacture, product labeling, advertising and
the environment. Compliance with existing federal, state and local laws and
regulations is not expected to have a material adverse effect upon the earnings
or competitive position of the Company. However, the Company cannot predict the
effect, if any, of laws and regulations that may be enacted in the future, or of
changes in the enforcement of existing laws and regulations that are subject to
extensive regulatory discretion.
RAW MATERIALS
Fresh and frozen meat, flour, vegetables, cheese and dairy products, sugar,
other agricultural products, vegetable oils and plastic and paper for packaging
materials constitute significant components of the Company's cost of goods sold.
There can be no assurance that the Company will be able to pass the effects of
raw material price increases on to its customers for any extended period of
time, if at all. Commodity raw materials are subject to fluctuations in price
and such fluctuations could have an adverse effect on the financial performance
of the Company. Occasionally and where possible, the Company makes advance
purchases of products significant to its business in order to lock in what is
perceived to be favorable pricing. In some cases, the Company also seeks to
protect itself from basic market price fluctuations of products through hedging
transactions. See "Management Discussion and Analysis -- Financial Condition and
Liquidity."
POTENTIAL LOSS OF NET OPERATING LOSS CARRYFORWARDS
Due to the lack of direct legal authority with respect to the tax rules
governing the limitations on and reductions of net operating loss carryforwards
("NOLs") in post-bankruptcy circumstances, both the amount of the Company's NOLs
as well as the limitations on their availability are subject to significant
uncertainties. Accordingly, there can be no assurance that the estimated $108.5
million of NOLs believed available by the Company as of December 30, 1995 to
significantly reduce its cash income tax liability will not be either
significantly limited or substantially reduced. See "Managements Discussion and
Analysis -- General -- Income Taxes."
12
<PAGE>
Certain restrictions on transferability (the "Transfer Restrictions") of the
Company's Common Stock are contained in the Company's Amended and Restated
Certificate of Incorporation. The Transfer Restrictions are intended to reduce
the risk of loss of the Company's NOLs. However, it is possible that, either in
a transaction consented to by the Board of Directors or, in the event of a sale
or purchase of Common Stock by a holder of five percent or more of the Company's
Common Stock, a sufficient change in stock ownership may occur such that the
NOLs presently available to the Company could be substantially reduced or
eliminated. The reduction or elimination of the NOLs would adversely impact cash
flow but would not materially impact net income.
ABSENCE OF A PUBLIC MARKET FOR THE NOTES
There is no public trading market for the Notes, and the Company does not
intend to apply for listing of the Notes on any securities exchange or quotation
of the Notes on any inter-dealer quotation system. The Company has been advised
by each of the Underwriters that, following the completion of the initial
offering of the Notes, such Underwriters presently intend to make a market in
the Notes, although none of the Underwriters are under any obligation to do so
and may discontinue any market-making for the Notes without notice at any time.
There can be no assurance as to the liquidity of the trading market for the
Notes or that an active trading market for the Notes will develop. If an active
public trading market for the Notes does not develop, the market price and
liquidity of the Notes may be adversely affected.
13
<PAGE>
USE OF PROCEEDS
The net proceeds to Foodbrands America from the sale of the Notes are
estimated to be approximately $116 million, net of the Underwriters' discount
and fees and expenses relating to this Offering. Foodbrands America intends to
apply the net proceeds from the sale of the Notes, together with cash on hand
(if necessary), to purchase any and all 9 3/4% Notes validly tendered to it
pursuant to the Tender Offer; however, no such Notes will be purchased unless at
least a majority in aggregate principal amount of 9 3/4% Notes are validly
tendered and related consents received. As of the close of business on April 25,
1996, the Company had received tenders in excess of a majority of the aggregate
principal amount of the 9 3/4% Notes. If all 9 3/4% Notes are tendered, the
aggregate cash required to purchase the 9 3/4% Notes (exclusive of related fees
and expenses) would equal approximately $119.5 million. Any portion of the net
proceeds not so utilized will be used to repay a portion of Foodbrands America's
term and acquisition revolving credit facilities under the Credit Agreement.
Amounts applied to the acquisition revolving credit facility may thereafter be
reborrowed until December 11, 1996. Proceeds received from the term and
acquisition revolving credit facilities were used to refinance existing
indebtedness and to finance the Acquisitions. The 9 3/4% Notes bear interest at
a rate of 9 3/4% per annum and borrowings under the Credit Agreement bear
interest at an average rate of 7.97% per annum. This Offering and the Tender
Offer are intended to replace the 9 3/4% Notes with the Notes, which may bear
interest at a higher rate than the 9 3/4% Notes and have a longer maturity. A
condition to the Tender Offer is an amendment to the Credit Agreement which
will, among other things, extend the maturity and amortization of certain of the
Company's obligations thereunder. See "Prospectus Summary -- Tender Offer,"
"Management's Discussion and Analysis -- Liquidity and Capital Resources" and
"Description of Other Indebtedness."
14
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 30, 1995 and as adjusted to give PRO FORMA effect to the Offering and
the use of the net proceeds therefrom to purchase all of the 9 3/4% Notes, as if
such transaction had occurred on December 30, 1995. A condition of the Tender
Offer is an amendment to Credit Agreement which, among other things, extends the
amortization and maturity of certain of the Company's obligations thereunder.
The following table gives effect to such amendment. See "Use of Proceeds" and
the Company's consolidated financial statements and the related notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 30, 1995
----------------------------
ACTUAL AS ADJUSTED
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Current maturities of long-term debt........................................................... $ 18,341 $ 6,703
------------- ------------
------------- ------------
Long-term debt, excluding current maturities:
Credit Agreement............................................................................. $ 193,625(1) $ 205,263
Notes offered hereby......................................................................... -- 120,000
9 3/4% Notes, net of unamortized discount.................................................... 109,741 --
Long-term obligations under capital leases................................................... 2,041 2,041
------------- ------------
Total long-term debt....................................................................... 305,407 327,304
------------- ------------
Stockholders' equity:
Preferred stock, 4,000,000 shares authorized, none issued and outstanding.................... -- --
Common stock, $.01 par value 20,000,000 shares authorized; 12,467,738 shares issued and
outstanding................................................................................. 125 125
Capital in excess of par value............................................................... 151,248 151,248
Retained earnings (deficit).................................................................. (105,203) (105,203)(2)
Minimum pension liability adjustment......................................................... (2,941) (2,941)
------------- ------------
Total stockholders' equity................................................................. 43,229 43,229(2)
------------- ------------
Total capitalization........................................................................... $ 348,636 $ 370,533
------------- ------------
------------- ------------
</TABLE>
- ------------------------
(1) Includes the $50 million promissory note issued to the sellers of KPR (the
"KPR Note") which was outstanding at December 30, 1995 and secured by a
letter of credit issued under the Credit Agreement and subsequently repaid
with the proceeds of borrowings under the Credit Agreement.
(2) Does not include $5.1 million extraordinary loss, net of income tax benefit,
resulting from the early extinguishment of the 9 3/4% Notes.
15
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The unaudited PRO FORMA consolidated financial information set forth below
for the fiscal year ended December 30, 1995 is presented as if the Acquisitions
and the financing thereof, and this Offering and the use of proceeds therefrom
to purchase all of the 9 3/4% Notes had each occurred on January 1, 1995. The
unaudited PRO FORMA consolidated financial information has been prepared on the
basis of assumptions described in the notes thereto and includes assumptions
relating to the allocation of the consideration paid for the acquisition of KPR
and TNT to the respective assets and liabilities of KPR and TNT based on
preliminary estimates of fair values or, with respect to real property assets,
based on preliminary appraisals. The actual allocation of such consideration may
differ from that reflected in the PRO FORMA consolidated financial statements
after valuation and other studies are completed. The Acquisitions have been
accounted for using the purchase method of accounting. The unaudited PRO FORMA
consolidated financial information does not necessarily represent what the
Company's results of operations would have been if the Acquisitions and the
financing thereof and the Offering and the use of proceeds therefrom had
actually been completed as of January 1, 1995, and is not intended to project
the Company's results of operations for any future period. The unaudited PRO
FORMA consolidated financial information should be read in conjunction with the
consolidated financial statements of the Company, and the related notes thereto,
and the financial statements of KPR and TNT and the related notes thereto, and
information included in, or incorporated by reference into, this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 30, 1995
------------------------------------------------------------------
ACQUISITION PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA FOR THE
-------------------------- INCREASE FOR THE OFFERING
COMPANY ACQUISITIONS (A) (DECREASE) ACQUISITIONS (H)
---------- -------------- ------------ ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales................................................. $ 634,700 $ 123,978 $ (7,670)(b) $ 751,008 $ 751,008
Cost of sales............................................. 499,985 94,727 (6,056)(b) 588,656 588,656
---------- -------------- ----------- -----------
Gross profit.............................................. 134,715 29,251 162,352 162,352
Operating expenses:
Selling, general & administrative....................... 95,117 10,131 (466)(b) 104,782 104,782
Amortization of intangible assets......................... 4,495 1,698 (177)(b) 7,152 7,152
1,136(c)
---------- -------------- ----------- -----------
Total................................................. 99,612 11,829 111,934 111,934
---------- -------------- ----------- -----------
Operating income.......................................... 35,103 17,422 50,418 50,418
Other income (expense):
Interest and financing costs............................ (17,268) (3,767) 9,525(d) (30,560) (31,936)
Other, net.............................................. (1,193) (18) (1,211) (1,211)
---------- -------------- ----------- -----------
Total................................................. (18,461) (3,785) (31,771) (33,147)
---------- -------------- ----------- -----------
Income from continuing operations before income taxes..... 16,642 13,637 18,647 17,271
Provision for income taxes................................ 7,041 1,069 (8,110)(e) 8,262 7,739
8,262(f)
---------- -------------- ----------- -----------
Income from continuing operations......................... $ 9,601 $ 12,568 $ 10,385 $ 9,532
---------- -------------- ----------- -----------
---------- -------------- ----------- -----------
Earnings per share:
Income from continuing operations....................... $ 0.77 $ 0.83(g) $ 0.77
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
- ------------------------
(a) The "Acquisitions" financial information does not reflect special bonuses of
$12.3 million declared and paid by KPR upon sale to Foodbrands America which
are reflected in the historical financial statements of KPR on file with the
Commission for the period ended December 10, 1995.
16
<PAGE>
(b) Reflects the elimination of those results of KPR and TNT for 1995 already
included in the Company's financial statements since December 11, 1995 and
December 18, 1995, the respective dates of the Acquisitions.
(c) Reflects the net change in amortization expense related to the Acquisitions
based on the amortization of goodwill over a period of 40 years and the
elimination of the amortization of the historical intangible assets of KPR
and TNT.
(d) Reflects interest attributable to financing the Acquisitions at a rate of
8.25% on bank borrowings of $157.5 million, amortization of debt issuance
costs associated with the Credit Agreement of approximately $1.3 million,
offset by the elimination of historical interest expense of the Acquisitions
and elimination of historical 1995 amortization of debt issue costs of
approximately $1.0 million related to debt extinguished with proceeds from
the Credit Agreement.
(e) Reflects the elimination of historical income tax expense.
(f) Records income tax expense at the statutory rate (federal and state). The
PRO FORMA tax provision and effective tax rate is not necessarily indicative
of the actual amounts and rates.
(g) The weighted average number of common and common equivalent shares used in
the PRO FORMA earnings per share computation was 12,453,000.
(h) The PRO FORMA consolidated financial information does not reflect the
extraordinary loss arising from the extinguishment of the 9 3/4% Notes
estimated at $5.1 million, net of income tax benefit, assuming all Notes are
purchased pursuant to the Tender Offer.
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following is certain selected financial information relating to the
Company. The Retail Division was sold in 1995 and has been reported as a
discontinued operation. Accordingly, the historical financial data has been
restated. As a result of the adoption of Fresh Start Reporting, historical
financial data for the period ended September 28, 1991 is that of a different
reporting entity and is not prepared on a basis comparable to financial data for
periods ending after that date. The information presented below, for and as of
the end of, the nine months ended September 28, 1991, the three months ended
December 28, 1991 and each of the fiscal years in the four-year period ended
December 30, 1995, is derived from audited consolidated financial statements of
the Company. The unaudited PRO FORMA consolidated financial information for the
Company set forth below gives effect to (i) the Acquisitions and the financing
thereof and (ii) the Offering and the use of proceeds therefrom to purchase all
of the 9 3/4% Notes, as if each such transaction had occurred on January 1,
1995. The unaudited PRO FORMA consolidated financial information does not
necessarily represent what the Company's results of operations would have been
if the Acquisitions and the financing thereof and this Offering and the use of
proceeds therefrom had actually been completed on that date, and are not
intended to project the Company's results of operations for any future period.
The table should be read in conjunction with the "Pro Forma Consolidated
Financial Information" and "Management's Discussion and Analysis" and the
consolidated financial statements of the Company and related notes thereto, and
the financial statements of KPR and TNT and the related notes thereto, included
in, or incorporated by reference into, this Prospectus.
<TABLE>
<CAPTION>
POST-CONFIRMATION
PRE- -------------------------------------------------------------
CONFIRMATION THREE
------------- MONTHS PRO FORMA
NINE MONTHS ENDED FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED SEPT. DEC. 28, ENDED JAN. ENDED JAN. ENDED DEC. ENDED DEC. ENDED DEC.
28, 1991 1991 2, 1993 1, 1994 31, 1994 30, 1995 30, 1995
------------- --------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Net sales.......................... $ 277,902 $ 86,843 $ 365,950 $ 393,270 $ 512,352 $ 634,700 $ 751,008
Gross profit....................... 42,513 14,743 58,104 57,482 102,234 134,715 162,352
Provision for restructuring and
integration and plant closing..... -- -- -- 500 10,586 -- --
Operating income................... 8,036 2,449 9,016 3,428 11,209 35,103 50,418
Income (loss) from continuing
operations........................ (46,683)(2) (1,756) 644 (4,374) (5,195) 9,601 9,532
Net income (loss).................. 65,370(3) 3,943 (26,834)(5) (32,019)(6) (16,198)(7) (34,095)(8)
Earnings (loss) per share - primary
and fully diluted:
Income (loss) from continuing
operations...................... $ (9.12)(4) $ (0.30) $ 0.11 $ (0.59) $ (0.59) $ 0.77 $ 0.77
Net income (loss)................ 12.78(4) 0.68 (4.63) (4.32) (1.85) (2.73)
BALANCE SHEET DATA:
Working capital.................... $ 16,938 $ 15,852 $ 14,428 $ 34,682 $ 50,657 $ 20,430
Total assets....................... 303,309 268,759 249,162 298,806 442,267 521,763
Long-term debt..................... 148,160 135,627 134,409 122,377 224,260 305,407
Total debt......................... 154,718 140,206 143,354 123,830 225,914 323,748
OTHER DATA:
Net cash provided (used) by
operating activities.............. $ (3) $ 14,599 $ 1,088 $ 18,138 $ 27,381 $ 13,502
Adjusted EBITDA (9)................ 25,581 5,355 20,370 16,714 36,592 50,861 $ 73,061
Adjusted EBITDA margin (9)......... 9.2% 6.2% 5.6% 4.3% 7.1% 8.0% 9.7%
Interest expense (10).............. $ 10,999 $ 2,992 $ 6,599 $ 9,078 $ 14,175 $ 16,567 $ 31,058
Capital expenditures............... 2,669 551 3,421 8,934 10,063 24,255 30,855
Ratio of Adjusted EBITDA to
interest expense (9).............. 2.3x 1.8x 3.1x 1.8x 2.6x 3.1x 2.4x
Ratio of total debt to Adjusted
EBITDA (9)........................ 6.0x 26.2x 7.0x 7.4x 6.2x 6.4x 4.6x
Ratio of earnings to fixed charges
(11).............................. -- -- 1.4x -- -- 1.8x 1.5x
</TABLE>
- ------------------------------
(1) Net income (loss) includes the income (loss), net of applicable income
taxes, from operations of the discontinued Retail Division of $(1.7)
million, $5.7 million, $(27.5) million, $6.8 million, $(8.5) million and
$(4.1) million for the nine months ended September 28, 1991, the three
months ended December 28, 1991 and each of the fiscal years 1992 through
1995, respectively.
(2) Includes reorganization expenses of $41.0 million for the nine months ended
September 28, 1991.
18
<PAGE>
(3) Includes an extraordinary gain of $113.8 million for the forgiveness of debt
as part of the Chapter 11 reorganization of the Company which became
effective on October 31, 1991.
(4) The per share amounts for the period ended September 28, 1991 do not provide
meaningful comparisons due to the Company's Chapter 11 reorganization.
(5) Includes a $32.0 million provision from a Retail Division plant closing.
(6) Includes the cumulative effect on years prior to the fiscal year ended
January 1, 1994 for a change in accounting for postretirement benefits other
than pensions of a noncash charge against earnings of $34.4 million.
(7) Includes an extraordinary loss of $2.5 million associated with the early
extinguishment of debt.
(8) Includes the loss on disposal of the Retail Division of $38.5 million and an
extraordinary loss on early extinguishment of debt of $1.0 million.
(9) Adjusted EBITDA represents income (loss) from continuing operations before
income taxes, reorganization items, interest and financing costs,
restructuring/integration and plant closing provisions, depreciation,
amortization and other non-cash expenses. Adjusted EBITDA margin represents
Adjusted EBITDA as a percentage of net sales. The Company has included
information concerning Adjusted EBITDA as it understands that such
information is used by certain investors as one measure of an issuer's
historical ability to service its debt. Adjusted EBITDA should not be
considered as an alternative to, or more meaningful than, operating income
or cash flow determined by generally accepted accounting principles as an
indication of the Company's operating performance. Adjusted EBITDA is not
presented here as an alternative measure of operating results or cash flow,
but rather to provide additional information related to debt service
capability.
(10) Interest expense does not include amortization of financing costs, fees
paid to banks and others or imputed interest relating to the retiree medical
benefits obligation (nine months ended September 28, 1991), which are
included in "Interest and Financing Costs" in the Company's Consolidated
Statement of Operations.
(11) For purposes of computing this ratio, earnings consist of income (loss)
from continuing operations before income taxes and fixed charges. Fixed
charges consist of interest on indebtedness, amortization of debt issuance
costs and a portion of operating lease expense which is representative of
the interest factor attributable to interest expense. Such earnings were
insufficient to cover fixed charges by $46.7 million, $0.7 million, $5.7
million and $4.7 million in the nine months ended September 28, 1991, the
three months ended December 28, 1991, the fiscal year ended January 1, 1994
and the fiscal year ended December 31, 1994, respectively.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
The financial results of the Company's operations in recent years have been
significantly affected by certain events and accounting changes. In addition to
the items noted in the notes to "Selected Consolidated Financial Information,"
the following is a general discussion of the impact of certain factors on the
Company's financial statements.
ACQUISITIONS. On June 1, 1994, the Company purchased all of the outstanding
stock of International Multifoods Foodservice Corp., a division of International
Multifoods Corporation, for approximately $137.7 million, including
transaction-related costs of the acquisition. The business, which is operated as
the Specialty Brands Division of the Company, manufactures frozen food products,
including ethnic foods in the Mexican and Italian categories, as well as
appetizers, entrees and portioned meats. The acquisition has been accounted for
by the purchase method of accounting. The excess of the aggregate purchase price
over fair value of net assets acquired of approximately $68.3 million and
trademarks at a fair value of $9.7 million were recognized as intangible assets
and are being amortized over 40 and 25 years, respectively.
On December 11, 1995, the Company purchased KPR for approximately $101.9
million, including transaction-related costs of the acquisition. In addition,
the Company has agreed to certain contingent payments, payable in Common Stock
based on a value of $13.125 per share or cash, at the option of the sellers,
aggregating up to approximately $15.0 million over the next three years based on
the attainment of specified earnings levels. These payments, if made, will
increase goodwill. KPR produces and markets custom prepared foods and prepared
meat items for multi-unit restaurant chains. The acquisition has been accounted
for by the purchase method of accounting based on preliminary estimates. Final
adjustments are not expected to be material. The excess of the total purchase
price over fair value of net assets acquired of approximately $65.8 million has
been recognized as goodwill and is being amortized over 40 years.
On December 18, 1995, the Company purchased all the outstanding stock of TNT
for approximately $56.4 million, including transaction-related costs of the
acquisition. In addition, the Company has agreed to a contingent earnout,
payable in Common Stock based on a value of $11.54 per share or cash, at the
option of the sellers, not to exceed $6.5 million based on sales growth to
certain customers. These payments, if made, will increase goodwill. The business
operates as a segment of the Food Service Division. TNT produces and markets
partially baked and frozen self-rising crusts for use by pizza chains,
restaurants and frozen pizza manufacturers. The acquisition has been accounted
for by the purchase method of accounting based on preliminary estimates. Final
adjustments are not expected to be material. The excess of the total purchase
price over fair value of net assets acquired of approximately $47.5 million has
been recognized as goodwill and is being amortized over 40 years.
DISCONTINUED OPERATIONS. On May 30, 1995, the Company sold the assets of
its Retail Division to Thorn Apple Valley, Inc. The sales price approximated
$65.8 million in cash payments plus the assumption of long-term debt of
approximately $6.0 million and certain current liabilities related to the
division of approximately $4.5 million. In connection with the sale the Company
wrote off approximately $64.3 million of intangible assets and recorded a net
loss on disposition of approximately $38.5 million. The results of operations
and cash flows of the Retail Division have been reported as discontinued
operations and prior years have been restated to reflect this treatment.
Accordingly, the results of continuing operations do not include the operations
of the Retail Division.
INTEGRATION AND COST REDUCTION. In December 1994, the Company announced a
restructuring program that resulted in a $10.6 million charge against operating
income in 1994. The restructuring program identified specific manufacturing
facilities and operations that related to excess capacity, as well as
duplication of activities after the acquisition of Specialty Brands.
As of December 30, 1995, the Company had consolidated production operations,
closed two production facilities and two distribution facilities and
discontinued a production operation. In connection with these actions, the
Company paid $3.5 million in 1995, which was charged against the reserve, and
charged an additional $2.1 million against the reserve for property, plant and
equipment. Of the total amount paid in
20
<PAGE>
1995, $0.8 million was for employee termination benefits for 35 employees
terminated during the year. The balance of the restructuring reserve remaining
at December 30, 1995 was comprised of accrued liabilities of $1.2 million and a
reserve against property, plant and equipment of $2.2 million. Management
believes that the remainder of the reserve is adequate to complete the
restructuring and integration program and plans to complete the program by the
end of 1996.
CHAPTER 11 REORGANIZATION. Foodbrands America's predecessor was founded
under the name Doskocil Companies Incorporated ("Doskocil") in 1964 as a
breakfast sausage producer. In the late 1960's, the Company became the first
commercial producer of pre-cooked pizza toppings. In 1985, the Company expanded
its product lines by acquiring a leading pepperoni manufacturer, Stoppenbach,
Inc. In 1988, Doskocil acquired Wilson Foods Corporation ("Wilson Foods").
Wilson Foods provided the Company with a broad line of meat products and
additional channels of distribution in the foodservice and delicatessen markets.
The Wilson Foods acquisition was predicated on the planned divestiture of
the Retail Division and the inability of the Company to complete such a sale on
a timely basis led to a liquidity crisis. As a result, Doskocil filed for
voluntary protection under Chapter 11 of the United States Bankruptcy Code, as
amended ("Chapter 11"), on March 5, 1990. Doskocil successfully completed its
financial reorganization under Chapter 11 on October 31, 1991, pursuant to a
plan of reorganization which allowed Doskocil to significantly improve its
financial condition by restructuring its bank and other indebtedness and
reducing its current and future obligations for retiree medical expenses.
INCOME TAXES. After considering utilization restrictions, the Company had
approximately $108.5 million of NOLs as of December 30, 1995, which will be
available as follows: $76.3 million in 1996, $13.3 million in each of the years
1997 and 1998, $5.0 million in 1999 and $0.6 million in 2000. NOLs not utilized
in the first year that they are available may be carried over and utilized to
reduce taxable income earned in subsequent years, subject to their expiration
provisions. These carryforwards expire as follows: $10.9 million in 1996, $21.7
million in 1998, $6.0 million in 1999, $0.9 million in 2000 and $69.0 million
during the years 2001 through 2009. As a result, management anticipates that the
Company's cash income tax liability for the next four to five years will not be
material.
The amount of the Company's NOLs and the limitation of their availability
are subject to significant uncertainties. In addition, a future change in stock
ownership could result in the Company's NOLs being substantially reduced. The
Company has implemented certain stock transfer restrictions which reduce this
risk of loss. In accordance with Fresh Start Reporting as prescribed by
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code," issued by the American Institute of Certified Public
Accountants, the Company will not reflect the realized income tax benefit of
pre-reorganization NOLs and deductible temporary differences in its statement of
operations. Instead, such benefit is reflected first as a reduction in the
"Reorganization Value in Excess of Amounts Allocable to Identifiable Assets"
("Reorganization Value") and then as a reduction in other intangible assets
arising from bankruptcy, thus reducing future intangible amortization expense.
Due to the non-deductibility of amortization of certain intangible assets, the
annual effective tax rate in future years is expected to be in excess of the
statutory income tax rate.
In 1993, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". Implementing the
standard resulted in the Company recording a deferred tax benefit of
approximately $31.0 million for deductible temporary differences. The Company
provided a valuation allowance for the remaining net deductible temporary
differences and NOLs. In determining the valuation allowance, the Company
considers projected taxable income during the next four years. The projected
taxable income before NOLs is expected to be higher than the financial pre-tax
income due to the non-deductible amortization of the intangible assets related
to Reorganization Value and other non-deductible intangible assets and the fact
that the tax basis of the assets was not increased as a result of the
reorganization in September 1991. Accordingly, the Company expects to realize
the net deferred tax asset from future operations, which contemplates annual
increases in sales consistent with industry projections,
21
<PAGE>
and historical operating margins but does not anticipate any material asset
sales or other unusual transactions. The acquisitions of KPR and TNT are
expected to increase the likelihood that the net deferred tax asset will be
realized. This analysis is performed on a quarterly basis. The Company will
adjust the valuation allowance when it becomes more likely than not that the net
deferred tax benefits will be realized in the future. The Company anticipates
that this analysis will support the elimination of a significant portion of the
valuation allowance in 1996. Because a majority of the deferred tax assets and
NOLs are attributable to pre-reorganization temporary differences, the majority
of the adjustment will be recorded as a reduction of Reorganization Value and
other intangible assets arising from bankruptcy and the remainder will be
recorded as a reduction of income tax expense.
RESULTS OF OPERATIONS
COMPARABILITY OF PERIODS. For the year ended December 30, 1995, the
operating results attributable to KPR and TNT since their acquisitions in
December 1995 are sales of $7.7 million, gross profit of $1.6 million and
operating income of $1.0 million. Because of the acquisition of Specialty Brands
on June 1, 1994, the financial statements for the year ended December 31, 1994
reflect the operating results attributable to Specialty Brands for the months of
June through December 1994 only. The operating results attributable to Specialty
Brands for the first five months of 1995 include net sales of $74.6 million,
gross profit of $22.9 million and operating income of $6.0 million.
The Fiscal Year Ended December 30, 1995 ("Fiscal 1995") Compared to the
Fiscal Year Ended December 31, 1994 ("Fiscal 1994"). Net sales for Fiscal 1995
of $634.7 million increased over net sales for Fiscal 1994 of $512.4 million by
$122.3 million, or 24%. The increase is due to (i) $82.3 million of increased
sales related to the addition of Specialty Brands, KPR and TNT and (ii)
increased sales volumes in the Food Service and Deli Divisions.
Gross profit for Fiscal 1995 of $134.7 million increased over gross profit
for 1994 of $102.2 million by $32.5 million, or 32%. Of this total increase,
$24.5 million resulted from the acquisitions. The remaining $8.0 million
increase resulted from improved manufacturing throughput, manufacturing cost
reductions, including those anticipated under the restructuring/integration
program announced in 1994 and changes in sales mix. Gross profit as a percentage
of sales for Fiscal 1995 and Fiscal 1994 is 21% and 20%, respectively.
Selling expenses for Fiscal 1995 of $69.5 million increased 33%, or $17.3
million, over Fiscal 1994 selling expenses of $52.2 million. The addition of
Specialty Brands, KPR and TNT accounts for $14.8 million of the increase. The
remaining increase of $2.5 million relates to increased costs associated with
the increased volumes noted above as well as higher marketing costs in response
to increased competition.
General and administrative expenses increased 6%, or $1.4 million, from
$24.2 million in Fiscal 1994 to $25.6 million in Fiscal 1995. The increase
resulting from the acquisitions noted above was $1.7 million. The offsetting
$0.3 million reduction is attributable to overhead reduction efforts.
Amortization of intangibles, a noncash element of operating expense,
increased $0.4 million due to the amortization of intangibles related to the
acquisitions of Specialty Brands, KPR and TNT partially offset by the reduction
of amortization of intangibles created by the utilization of net operating
losses which reduced the intangible asset "Reorganization Value in Excess of
Amounts Allocable to Identifiable Assets."
Interest and financing costs increased $2.2 million because of the debt
associated with the acquisitions partially offset by the reduction in debt
associated with the sale of the Retail Division. Amortization of debt issue
costs and debt discount included in interest expense for Fiscal 1995 and Fiscal
1994 was $1.2 million and $1.3 million, respectively.
Income tax expense for Fiscal 1995 of $7.0 million is based on the statutory
(federal and state) tax rate applied to income from continuing operations after
adding back expenses with no future tax deductibility. Income tax expense for
Fiscal 1994 of $0.6 million consisted solely of state income taxes.
Fiscal 1994 Compared to the Fiscal Year Ended January 1, 1994 ("Fiscal
1993"). The Company's net sales for Fiscal 1994 increased $119.1 million, or
30%, over Fiscal 1993 sales of $393.3 million. Net sales for
22
<PAGE>
Fiscal 1994 of $512.4 million includes sales volume increases in the Food
Service and Deli Divisions along with the addition of the sales of the Specialty
Brands Division of $112.8 million. These increases were partially offset by
decreases in raw material costs which resulted in decreases in sales dollars per
pound.
Gross profit for Fiscal 1994 increased 78%, or $44.7 million, over Fiscal
1993 gross profit of $57.5 million. Fiscal 1994 gross profit of $102.2 million
includes the Specialty Brands Division gross profit contribution of $34.2
million. Increases also were provided by increased sales volumes and improved
product mix and production efficiencies in the Food Service and Deli Divisions.
Gross profit as a percentage of sales for Fiscal 1994 and Fiscal 1993 is 20% and
15%, respectively.
Selling expenses of $52.2 million in Fiscal 1994 increased 80%, or $23.2
million, over Fiscal 1993 selling expenses of $29.0 million. The primary
component of the increase is the addition of the Specialty Brands Division with
$21.6 million of selling expenses. The remainder of the increase is due to
increased marketing and brokerage costs in the other divisions. The increases in
the Food Service and Deli Divisions are due to improved sales volume.
General and administrative expenses in Fiscal 1994 increased $2.5 million
over Fiscal 1993 expenses of $21.7 million, an increase of 12%. Included in the
Fiscal 1994 total of $24.2 million are general and administrative expenses
relating to the Specialty Brands Division of $2.6 million. The reduction in
general and administrative expenses in other divisions is due primarily to the
effect of cost reduction programs instituted in 1993 and 1994.
Amortization of intangible assets increased approximately $1.3 million in
Fiscal 1994 over Fiscal 1993 due to the Specialty Brands acquisition.
Interest and financing costs for Fiscal 1994 of $15.1 million increased $5.9
million, or 64%, over Fiscal 1993 costs of $9.2 million. The increase is due to
increased interest costs of $5.0 million as a result of increased borrowings,
generally higher interest rates and increased amortization of debt issue costs
of $0.9 million. Amortization of debt issue costs and debt discount included in
interest expense for Fiscal 1994 and Fiscal 1993 was $1.3 million and $0.4
million, respectively.
Income tax benefit for Fiscal 1993 of $1.2 million represents the tax
benefit of losses from continuing operations offsetting income from discontinued
operations.
DISCONTINUED OPERATIONS
Discontinued operations includes the net sales and related expenses
associated with the Retail Division's operations. Net sales for Fiscal 1995,
1994 and 1993 were $72.4 million, $238.3 million and $254.9 million,
respectively. Gross profit was $9.1 million, $44.2 million and $53.2 million,
respectively. Operating income (loss) was $(4.8) million, $(3.5) million and
$13.1 million for each year, respectively. Corporate interest expense allocated
to the Retail Division based on net assets was $2.0 million, $4.4 million and
$4.6 million for each fiscal year, respectively. Net income (loss) attributable
to the Retail Division after allocated interest expense was $(4.1) million,
$(8.5) million and $6.8 million. The loss for Fiscal 1995 was net of income tax
benefit of $2.9 million and income for Fiscal 1993 was net of income tax expense
of $1.6 million. No income tax benefit or expense was recognized in Fiscal 1994.
Amortization of intangible assets included in operating expense of the
Retail Division was $1.6 million, $3.2 million and $3.3 million for Fiscal 1995,
1994 and 1993, respectively.
EXTRAORDINARY LOSSES
During Fiscal 1995 and Fiscal 1994, the Company incurred an extraordinary
loss on early extinguishment of debt of $1.0 million and $2.5 million,
respectively. These losses related to the write-off of remaining unamortized
deferred loan costs associated with debt extinguished when the Company
consummated new bank financing in connection with the acquisitions of KPR and
TNT in 1995 and Specialty Brands in 1994. The loss in Fiscal 1994 included the
termination of a related interest rate swap agreement. The Fiscal 1995 loss is
net of income tax benefit of $0.7 million.
23
<PAGE>
CASH FLOWS AND CAPITAL EXPENDITURES
Fiscal 1995. Net cash provided by continuing operations activities was
$25.8 million for Fiscal 1995 compared to $26.8 million in Fiscal 1994. The
operations of the discontinued Retail Division used $12.3 million of cash in
Fiscal 1995. Cash of $33.9 million was provided by the results of continuing
operations after adding back noncash items. Increases of cash were also provided
by increases in accounts payable and accrued liabilities and noncurrent
liabilities. Decreases in cash were due to increases in accounts receivable,
inventories and other assets as well as payments under the Fiscal 1994
restructuring/integration program.
The KPR acquisition costs of $101.9 million included net accounts receivable
of $6.8 million, inventory of $6.9 million, investment in foreign joint venture
of $2.0 million, intangible assets of $65.8 million and property, plant and
equipment of $23.9 million. The Company also assumed liabilities of $3.5
million.
The TNT acquisition costs of $56.4 million included net accounts receivable
of $1.7 million, inventory of $0.3 million, other assets of $0.1 million,
intangible assets of $47.5 million and property, plant and equipment of $8.5
million. The Company also assumed liabilities of $1.7 million.
Assets sold with the disposal of the Retail Division included net accounts
receivable of $10.8 million, inventories of $8.6 million, other current assets
of $0.7 million, other assets of $0.2 million and property, plant and equipment
of $22.2 million. The purchaser also assumed liabilities of $10.5 million. Net
cash proceeds to the Company were $65.8 million. The Company reduced its debt
under its term loan by $58.0 million and used the remainder to pay expenses
related to the sale.
Expenditures for additions to property, plant and equipment were $24.3
million for continuing operations and $0.8 for discontinued operations.
Approximately $6.9 million of these expenditures related to increased capacity
in production, $6.2 million related to new equipment and fixtures to accommodate
the transfer of production to other facilities resulting from the integration
and restructuring program and the sale of the Retail Division and the remainder
was for replacements and modifications of existing facilities. The source of the
funds for these expenditures was from cash provided by operations.
Fiscal 1994. Operating activities provided net cash of $27.4 million in
Fiscal 1994 compared to $18.1 million in Fiscal 1993. The Specialty Brands
Division provided $10.6 million of the total for Fiscal 1994. The operations of
the discontinued Retail Division provided $0.6 million of cash flow in Fiscal
1994. The cash provided by the results of continuing operations after adding
back noncash items of depreciation and amortization, postretirement medical
benefits, provisions for restructuring, integration and plant closings was $21.0
million in Fiscal 1994, of which $11.8 million was provided by the Specialty
Brands Division. Additional increases in cash from operating activities resulted
primarily from decreases in accounts receivable, inventories, deferred charges
and other assets and increases in accounts payable and accrued liabilities
offset partially by increases in other current assets.
The Company's Specialty Brands acquisition costs of $137.7 million included
net accounts receivable of $9.2 million, inventory of $21.8 million, other
current assets of $0.4 million, intangible assets of $77.3 million and plant,
property and equipment of $39.5 million. The Company also assumed liabilities of
$10.5 million.
Capital expenditures for additions to property, plant and equipment were
approximately $10.1 million for continuing operations and $4.5 million for
discontinued operations during Fiscal 1994. Of this total, approximately $5.3
million of these expenditures were primarily attributable to construction of
additional capacity in ham and sausage production and the remainder for
replacements and modifications to existing facilities. The source of the funds
for these expenditures was from cash generated from operations, the receipt of
escrowed funds related to construction in progress and borrowings under existing
credit facilities.
In October 1994, the Company announced the completion of a stock rights
offering. The rights offering provided current stockholders the ability to
purchase 0.68 shares for each share currently owned. The offering also provided
an over-subscription privilege for those who exercised more rights. As a result
of the offering, 4,511,867 rights were exercised at $9.00 per share for gross
proceeds of $40.6 million. Net proceeds,
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after expenses, were $38.6 million. The Company used $35.0 million of the
proceeds to reduce bank debt. As a result of the offering, affiliates of JLL, a
New York investment firm and the Company's largest shareholder, increased their
ownership of the Company to approximately 44.3% from 27.4% at January 1, 1994.
Fiscal 1993. Operating activities provided net cash of $18.1 million in
Fiscal 1993. Operations of the discontinued Retail Division provided $10.5
million of cash flow in Fiscal 1993. Investments in property, plant and
equipment totaled $8.9 million for continuing operations and $10.8 million for
discontinued operations during Fiscal 1993. These expenditures included
construction of the new facility at Forrest City, Arkansas, construction of
additional drying room at the Company's South Hutchinson, Kansas production
facility to support growth in the Food Service Division and $7.0 million of
modifications and replacements at existing facilities. The Company sold certain
assets which had been classified as Assets Held for Sale resulting in net
proceeds of $14.9 million offset by $16.9 million of net cash used by Assets
Held for Sale, all of which are included in net investment activities of
discontinued operations.
The Company reduced its net borrowings by $26.8 million during Fiscal 1993.
The Company issued $110.0 million of 9 3/4% Notes and entered into a new
revolving working capital facility (the "1993 Credit Agreement"). Proceeds were
used to retire the previous bank credit agreement.
On March 22, 1993, an affiliate of JLL purchased from the Company two
million newly-issued shares of Common Stock at $15.00 per share pursuant to a
stock purchase agreement. The Company used the net proceeds from the sale, $26.7
million, to repay indebtedness. As a result of this purchase, JLL affiliates
owned approximately 25% of the Common Stock.
FINANCIAL CONDITION AND LIQUIDITY
On December 11, 1995, Foodbrands America entered into a Credit Agreement
providing for (i) a term loan for $145.0 million ($95.0 million was outstanding
and $50.0 million was utilized to support the KPR Note with a letter of credit
on December 30, 1995, and $144.7 million was outstanding on April 22, 1996),
(ii) a revolving credit facility available, subject to certain approvals and
conditions, to fund acquisitions in an amount not to exceed $100.0 million
($56.5 million was outstanding as of December 30, 1995, and $56.4 million was
outstanding on April 22, 1996) and (iii) a working capital revolving credit
facility available in an amount not to exceed $75.0 million, of which $55.0
million can be used to fund acquisitions ($9.0 million was outstanding as of
December 30, 1995, and $11.5 million was outstanding on April 22, 1996). The
proceeds received in December 1995 were net of $3.9 million of debt issuance
costs and were used to repay the existing bank debt outstanding and to finance
the Acquisitions. The total debt outstanding under all facilities (excluding the
letter of credit supporting the KPR Note) at December 30, 1995, was $160.5
million. In January 1996, $50.0 million under the term loan was used to retire
the KPR Note and the letter of credit supporting it was terminated. The Credit
Agreement includes a subfacility for standby and commercial letters of credit
not to exceed $7.0 million. The term loan requires quarterly payments beginning
May 1996. The acquisition revolving facility requires quarterly payments
beginning May 1997. To the extent not previously paid, all borrowings under the
Credit Agreement are due and payable on January 15, 2000. Payments totaling
$16.9 million will be required in 1996. At December 30, 1995, $50.9 million was
available for borrowing at that date based on the Company's inventory and
accounts receivable borrowing base and the Company also had the ability to
borrow an additional $43.5 million under the acquisition revolving facility in
1996 to fund future qualified acquisitions. If the Tender Offer is consummated,
the Credit Agreement will be amended to, among other things, extend the
maturities and scheduled amortization thereunder. See "Description of Other
Indebtedness -- The Credit Agreement."
The Company expects capital expenditures for 1996 to equal approximately
$30.0 million for general expansion, modification and maintenance of the
Company's facilities, and will be financed by the Company's cash flow, capital
leases and advances under the Credit Agreement.
Management believes that cash flow from operations combined with the
borrowing capacity available under the Company's Credit Agreement will be
sufficient to meet the Company's existing operating and debt interest service
cash requirements for the foreseeable future. Management also believes the
reduction of debt as a result of the sale of the Retail Division along with the
reduced working capital requirements has
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benefited the Company's overall liquidity and capital resources and is allowing
the Company to more rapidly execute its strategy to acquire higher margin food
businesses, such as the recently completed acquisitions of KPR and TNT.
The Company's primary raw materials are fresh and frozen meat, flour, cheese
and other dairy products, vegetables, sugar and vegetable oil. Severe price
swings in such raw materials, and the resultant impact on the price the Company
charges for its products, at times have had, and may in the future have,
material adverse effects on the demand for the Company's products and its
profits. The Company utilizes several techniques for reducing the risk of future
raw materials price increases. These techniques include purchasing and freezing
raw materials during seasonally low cost periods of the year, negotiating
certain minimum purchase commitments at set prices and periodically entering
into futures contracts. Such techniques are generally employed prior to an
expected seasonal price increase and in connection with fixed price sales
agreements to hedge the cost of raw materials for both firm and forecasted sales
commitments that will occur during a seasonal sales peak.
Futures contracts as described above are accounted for as hedges.
Accordingly, resulting gains or losses are deferred and recognized as part of
the product cost. The maximum absolute dollar value of hedging contracts
outstanding during each of the fiscal years 1995, 1994 and 1993 was $3.1
million, $11.8 million and $5.2 million, respectively, representing 0.6%, 2.9%
and 1.6% of total cost of sales for each year. Total realized loss for fiscal
year 1995 from futures trading was $0.3 million, total realized loss for fiscal
year 1994 from futures trading was $1.7 million and total realized profit for
fiscal year 1993 was $0.4 million. The Company's fiscal year end is typically a
seasonal low point in hedging activities and deferred losses as of the end of
Fiscal 1995, 1994 and 1993 were each less than $0.1 million.
OTHER
KPR is a defendant in a lawsuit filed prior to its acquisition by the
Company. The plaintiff alleges liability based upon patent infringement,
misappropriation of proprietary information, unfair business practices and
breach of contract. Although the pleadings do not specify any amount of damages,
liability for patent infringement may include disgorgement of profits which the
Company believes could be material. KPR has denied these allegations and
contends that the plaintiff's patents are invalid and that, even if valid, the
process and equipment used by the subsidiary does not infringe the patents. See
"Business -- Legal Proceedings."
The litigation is complex and the ultimate outcome can not be presently
determined. Although the Company will vigorously defend its interests, no
assurance can be given that a material adverse effect will not result from the
litigation.
IMPACT OF CHANGING PRICES AND INFLATION
As previously discussed, the impact of changing prices on the Company's
operations is primarily a function of the Company's raw material commodity
prices. These prices are subject to many forces including those of the
marketplace and inflation. The impact of changing prices on raw materials has
decreased since the Company exited the volatile retail refrigerated processed
meat case business. The Company does not believe that inflation played a major
role in either the cost of raw materials or labor, or the selling price of its
products during Fiscal 1995, Fiscal 1994 or Fiscal 1993. Like many food
processors, the Company periodically adjusts selling prices of its products,
subject to competitive constraints and costs of raw materials.
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RECENT DEVELOPMENTS
Sales in the first quarter of 1996 were $186.0 million, an increase of 33%
from sales of $139.4 million reported in the first quarter of last year. Of the
$46.6 million increase in sales for the quarter, $35.3 million was the result of
the Acquisitions, both completed in the fourth quarter of fiscal 1995. The
remaining increase was attributable to an 8.1% growth in sales for the Company's
existing business.
Operating income for the quarter was $11.4 million compared to $7.8 million
in the previous year. The increase resulted from the Acquisitions as well as
overall increases in the Company's business. These increases were partially
offset by higher amortization of intangible assets associated with the
Acquisitions and increased administrative expenses, including non-cash expenses
for employee stock options not occurring in the prior year quarter. Total
depreciation and amortization for the quarter was $6.1 million compared to $3.8
million for the same quarter last year.
Net income for the quarter ended March 30, 1996 was $2.1 million, or $0.17
per share compared to income from continuing operations in the first quarter of
1995 of $1.8 million, or $0.14 per share and net loss from the prior year
quarter of $0.6 million, or ($0.05) per share. The net loss in the prior year
quarter was the result of losses on discontinued operations pertaining to the
Company's Retail Division, which was sold in May 1995.
As of March 30, 1996, the Company had expended $5.0 million for additions to
property, plant and equipment out of an anticipated capital expenditure budget
for 1996 of $30 million. Approximately $0.7 million of these expenditures were
used for expansion of production facilities and the remainder were used for cost
savings programs and for replacements and modification to the existing
facilities. The source of funds for these expenditures was cash provided by
operations.
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BUSINESS
The Company produces, markets and distributes frozen and refrigerated
processed food products to the foodservice industry including pepperoni, beef
and pork pizza toppings, partially baked and self-rising pizza crusts,
appetizers, Mexican and Italian foods, sauces, soups and side dishes and
processed meat products. The Company's products are marketed principally in the
United States under proprietary brand names that include WILSON'S CONTINENTAL
DELI-REGISTERED TRADEMARK-, AMERICAN FAVORITE-TM-, DOSKOCIL FOODS-TM-, JEFFERSON
MEATS-TM-, FRED'S-REGISTERED TRADEMARK-, ROTANELLI'S-REGISTERED TRADEMARK-,
POSADA-REGISTERED TRADEMARK- AND BUTCHER BOY-REGISTERED TRADEMARK-. The Company
currently operates twelve production facilities and distributes the majority of
its products from two distribution centers to wholesale foodservice
distributors, multi-unit restaurant chains, food processors, grocery store
delicatessens and warehouse clubs.
INDUSTRY OVERVIEW
Purchases of food prepared outside of the home have grown and currently
represent over 50% of total food purchases. Demand has risen due to various
demographic changes, including increases in personal disposable income, the
increasing number of single-parent households and the rising number of
two-income families as more women enter the work force. The foodservice industry
itself has undergone significant consolidation, and at the same time, in
response to these consumer and demographic trends, segmentation of the
foodservice industry has occurred, with certain segments such as "ethnic foods"
and convenience foods growing at a faster rate than the foodservice industry in
general. The Company believes that it is well-positioned to continue to identify
and capitalize on these profitable, under-served and growing segments of the
foodservice industry.
It is estimated that over $20 billion of pizza is consumed in the U.S.
annually. Pizza accounted for one in four entrees ordered from foodservice
establishments in 1994. This growth has resulted in the penetration of pizza
sales into a number of non-traditional pizza outlets including quick service
restaurants, convenience stores and grocery store delicatessens. Additionally,
pepperoni, a product in which the Company holds a leading market position, is
the most popular pizza topping, included on approximately 50% of all pizzas sold
in America.
The ethnic food category has grown rapidly in the last few years and is
expected to continue to experience sustained growth in the near future,
supported by the growing ethnic diversity of the U.S. population. Among the most
popular foods in the ethnic segment are Mexican, Italian, and Oriental.
The appetizer market increased at a rate of approximately 5% in 1994. The
Company expects this trend to continue as restaurants use appetizers to increase
profit margins, and as customers view appetizers as a lower-cost alternative to
full meals when dining out.
The Company believes that restaurants and other foodservice providers are
seeking to outsource more of the "back-of-the-house" food preparation process in
order to ensure product quality and consistency, reduce preparation costs and
increase food safety. According to industry sources, restaurant sales continue
to grow at a more rapid pace than overall grocery store sales. Management
believes the growth in the foodservice industry, combined with the trend of
outsourcing food preparation will enhance the growth of food processors serving
this niche.
Grocery store delicatessen sales are estimated by SUPERMARKET BUSINESS, an
industry trade publication, to have been approximately $20.0 billion in 1995 and
to have grown by approximately 6.7% in 1995 over 1994. This category has seen
rapid growth over the past five years as supermarkets, seeking to profit from
the general growth in foodservice sales, have added in-store specialty
delicatessen departments and increased foodservice offerings to meet changing
consumer demands.
BUSINESS STRATEGY
The Company's mission is to be a leading high-quality manufacturer and
marketer of value-added frozen and refrigerated products targeted to segments of
the foodservice industry which the Company believes will experience faster
growth and provide higher margins than the foodservice industry as a whole. The
Company has undertaken several initiatives during the prior two years to
implement its strategy.
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ADDITIONS TO MANAGEMENT. The Company has strengthened its management team
with the additions of key officers, many of which have extensive experience in
the food and beverage industry. R. Randolph Devening was named Chairman,
President and Chief Executive Officer of Foodbrands America in August 1994;
Horst O. Sieben was named Senior Vice President and Chief Financial Officer in
October 1994; and Patrick O'Ray joined Foodbrands America as Senior Vice
President and President of the Company's Specialty Brands Division in September
1995. The Company has also retained the experienced management teams of the
recently acquired KPR and TNT. See "Management."
DIVESTITURE. In May 1995, the Company sold the assets of its Retail
Division to Thorn Apple Valley, Inc., for approximately $65.8 million in cash
and the assumption of approximately $6.0 million of debt. The divestiture
represented the Company's exit from the volatile retail commodity meat case
business, permitting management to focus on its business strategy.
ACQUISITIONS. In June 1994, the Company acquired the frozen specialty foods
division of International Multifoods Corporation which provided the Company with
its first significant value-added specialty product lines. The business, which
is operated as the Specialty Brands Division of the Company, manufactures frozen
food products, including ethnic foods in the Mexican and Italian categories, as
well as appetizers, entrees and portioned meats.
In December 1995, the Company acquired KPR, which enhanced the Company's
position in the pizza industry and increased its presence in specialty non-meat
based foods. KPR produces and markets meat-based pizza toppings (pepperoni,
Italian sausage, ham, and beef and pork pizza toppings) and kettle-cooked
products (soups, sauces and side dishes) marketed to multi-unit restaurant
chains. KPR provides the Company with a number of opportunities including access
to a leading pizza restaurant chain not previously served by the Company,
enhancement of the Company's leading market share in pizza toppings, an
expanding international joint venture with manufacturing facilities in Ireland,
and a new product line of soups, sauces and side dishes.
In December 1995, the Company acquired TNT, which produces and markets pizza
crusts (both partially baked and self-rising) for foodservice operators and
industrial accounts (including manufacturers of frozen pizza). Partially baked
pizza crusts are expected to gain market share as more and more operators move
away from preparing crusts in-house toward outsourcing in order to increase
consistency and reduce operating costs. The Company believes TNT to be the
nation's largest producer of partially baked and self-rising pizza crusts.
INTEGRATION AND COST REDUCTIONS. The Company has substantially completed
the restructuring and integration program it announced following its acquisition
of Specialty Brands in 1994. As of December 30, 1995, the Company had
consolidated production operations, closed two production facilities and two
distribution facilities and discontinued a production operation.
EQUITY ISSUANCES. In March 1993, Foodbrands America sold two million shares
of Common Stock at $15.00 per share to an affiliate of JLL. In October 1994, the
Company completed an equity rights offering with net proceeds of $38.6 million,
of which $35.0 million was used to reduce bank debt. As a result of the rights
offering (and certain open market purchases), JLL affiliates increased their
percentage ownership of the Common Stock to approximately 44.3%.
In recognition of its overall business strategy, the Company reincorporated
in Delaware in 1995 and changed its name from Doskocil Companies Incorporated to
Foodbrands America, Inc. to communicate the mission and future direction of the
Company more clearly. Recently, the Company's Common Stock began trading on the
New York Stock Exchange under the symbol "FDB."
In pursuit of its overall business strategy in the future, the Company will
seek to:
- expand market penetration in its existing foodservice markets;
- leverage its leadership position in the pizza toppings and partially baked
pizza crust business;
- further emphasize the development and sale of higher-margin processed
specialty products;
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- invest in its manufacturing and distribution operations with the objective
of further improving its status as a low-cost producer; and
- exploit growth opportunities through selective acquisitions of well
positioned premium producers of value-added processed food products
serving niche markets in the foodservice industry.
In the past two years, the Company has repositioned itself moving from a
supplier of primarily meat-based products, such as commodity and fresh pork
products, to a leading, high quality manufacturer and marketer of value-added
frozen and refrigerated food products. As a result, during 1995, on a PRO FORMA
basis after giving effect to the Acquisitions, over one-third of the Company's
sales were of specialty, non-meat products, while commodity products accounted
for only 13% of sales.
The Company has increased sales from continuing operations from $366.0
million in 1992 to $751.0 million on a PRO FORMA basis after giving effect to
the Acquisitions in 1995. Income from continuing operations increased from $0.6
million in 1992 to $9.5 million in 1995 on the same PRO FORMA basis. Cash flow
from operating activities increased from $1.1 million in 1992 to $13.5 million
in 1995 on an historical basis. The Company also increased Adjusted EBITDA from
continuing operations from $20.4 million in 1992 to $73.1 million in 1995, on
the same PRO FORMA basis, resulting in an increase in its Adjusted EBITDA margin
from 5.6% of sales in 1992 to 9.7%.
PRODUCTS AND CHANNELS OF DISTRIBUTION
The Company's products are marketed and distributed through separate sales
and marketing organizations associated with each of its four operational
divisions. Each division is structured to focus on different purchasing groups
within the foodservice industry. Recognizing the unique requirements of its
separate buying sectors, the Company offers each sector a complete product line
designed to meet its specific needs through a specially trained sales
organization. The Company markets the products of each division as an integrated
line, offering products at several price points to each buying sector and the
convenience of consolidated delivery of a broad range of products through its
centralized distribution system. The Company believes this focused approach
gives it a competitive advantage with its customers, many of whom are limiting
the number of suppliers from whom they purchase. No single customer represented
10% or more of the Company's net sales in 1995.
- FOOD SERVICE DIVISION. The Food Service Division provides 600 products
under the brand names of DOSKOCIL FOODS-TM- and WILSON
FOODSERVICE-Registered Trademark-, as well as private labels. The division
is a leader in processed meats, pepperoni, beef and pork pizza toppings,
and partially baked and self-rising pizza crusts in the United States. The
Company has four production plants in Kansas and Wisconsin. The Division
markets products through a broker network and direct sales force to
customers who re-market the products for "food-away-from-home" preparation
and consumption. Customers include national and regional restaurant
chains, institutional foodservice customers, foodservice distributors
(such as Alliant-TM-Foodservice, Inc. ("Alliant") and Sysco Corporation
("Sysco")), buying group associations (such as ComSource Independent
Foodservice Companies, Inc.), warehouse clubs (such as Sam's Club, a
division of Wal-mart Stores, Inc. ("Wal-mart")) and large food processors
(such as Tombstone Pizza Corporation and the manufacturer of Tony's
Pizza). The Food Service Division accounted for 41.7% of the Company's
sales in 1995, on a PRO FORMA basis after giving effect to the
Acquisitions.
- KPR FOODS DIVISION. KPR is a producer and marketer of meat-based pizza
toppings and soups, sauces and side dishes to a limited number of large,
multi-unit restaurant chains (such as TGI Friday's and chains owned by
Brinker International) through a direct sales force. The Division's
kettle-cooked products include soups such as Southwestern chicken chili,
chicken noodle, baked potato, tortilla and others; sauces such as alfredo
and marinara; and side dishes such as creamed spinach, macaroni and
cheese, Mexican rice, broccoli au gratin and cinnamon apples. The Division
operates two production facilities in Texas and is currently involved in a
50/50 joint venture to manufacture pepperoni and beef and pork pizza
toppings in Ireland for sale to pizza operators in Europe, the Middle
East, Northern Africa and Asia. Products are marketed directly to a select
group of large chain customers with
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centralized buying and specialized product requirements. As a result, the
Division's product development group is heavily involved in new and
existing customer sales by developing specific products for each customer.
The KPR Foods Division accounted for 13.4% of the Company's sales in 1995,
on a PRO FORMA basis after giving effect to the Acquisitions.
- SPECIALTY BRANDS DIVISION. The Specialty Brands Division holds major
market positions in the ethnic prepared-food and appetizer categories.
Ethnic product offerings include premium and price/value burritos,
chimichangas, taquitos and other Mexican food items, frozen stuffed pastas
and other Italian entrees, and egg rolls, "pot-stickers" and other
Oriental foods. The Division's appetizer offerings include breaded and
fried vegetables and mozzarella sticks, cheese-stuffed jalapenos, as well
as ethnic-based appetizers. Products are offered under trademarks that
include FRED'S-Registered Trademark-, ROTANELLI'S-Registered Trademark-,
POSADA-Registered Trademark- and DELIFEST-TM- Gourmet Salads. The Company
has five production plants in California, New Mexico, Missouri and New
York. Specialty Brands' brokered sales force sells to major foodservice
distributors (such as Alliant and Sysco), to buying group associations
(such as Emco Food Service Systems, Inc.) and to smaller distributors.
These distributors resell products to restaurants, hotels and school
systems. Consumer products are sold primarily through food brokers to
grocery stores, warehouse clubs and military stores. The Division's
in-house sales force sells to vending operators and convenience stores
(such as VSA, Inc, a subsidiary of International Multifoods Corporation,
McLane Company, Inc. -- a subsidiary of Wal-Mart and National Convenience
Stores). Major national and regional restaurant chains (such as
Applebee's, Steak-N'-Shake, Inc., a subsidiary of Consolidated Products,
Inc. and Shoney's, Inc.) and foodservice management firms (such as
Marriott International) purchase products through the Division's direct
sales force and through brokers. The Specialty Brands Division accounted
for 25.4% of the Company's sales in 1995, on a PRO FORMA basis after
giving effect to the Acquisitions.
- DELI DIVISION. The Deli Division, a leading provider of deli meats,
produces 130 products primarily at its facility in Iowa, and offers
products such as premium and flavored ham products, dry sausages, cold
cuts, poultry and other value-added meat and non-meat prepared foods under
the WILSON'S CONTINENTAL DELI-Registered Trademark-, AMERICAN FAVORITE-TM-
and FRESH CUTS-TM- labels. The Deli Division is a leading provider to
grocery store delicatessens with a customer base consisting of national
grocery chains (such as Albertson's, Inc.), national and regional
wholesale distributors (such as SuperValu Stores, Inc., Fleming Companies,
Inc. and Associated Wholesale Grocers Inc.), regional grocery chains (such
as Hy-Vee Food Stores, Inc.) and independent distributors to grocery
stores (such as CCS Distributors, Inc.). The Division markets its products
primarily through a food broker network. The Deli Division accounted for
19.5% of the Company's sales in 1995, on a PRO FORMA basis after giving
effect to the Acquisitions.
The Company's products are transported by independent carriers from its
distribution/customer service centers in Edwardsville, Kansas and Rialto,
California or are shipped directly from the production facility with a view
toward achieving an efficient, cost-effective method of distribution. Customer
requirements vary from the need for large quantities of a limited number of
products to small quantities of a number of items, each requiring a different
distribution method. From the distribution centers, orders can be filled and
delivered in a single shipment regardless of the variety of products ordered or
the location of the manufacturing facility at which they are produced. The
Company also can combine the orders of many smaller customers in the same
geographic region. Management believes this flexible distribution system allows
the Company to provide superior service to its customers by reducing the time
between the placement of customer orders and delivery of the Company's products
and, by lowering customer shipping costs through the elimination of higher-cost,
fragmented deliveries.
PRODUCT INNOVATION
The Company has a strong history of innovation in the development,
production and market introduction of commercially successful product lines. For
example, the Company became the first commercial producer of pre-cooked pizza
toppings in the 1960's by developing a continuous production system for
manufacturing pre-cooked pork and beef pizza toppings. Recently, the Company
opened its new Technology
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Center in South Hutchinson, Kansas, which houses state-of-the-art test kitchens
and a fully-equipped pilot plant for customer project work. The Company also
maintains product development groups at Riverside, California and Ft. Worth,
Texas whose primary focus is the development of new products for customers of
the Specialty Brands and KPR Foods Divisions, respectively. Product development
employees work directly with customers in finding ways to meet numerous taste,
texture, quality and cost requirements.
COMPETITION
The Company competes in highly competitive markets with a significant number
of companies of various sizes, including divisions or subsidiaries of larger
companies. The principal competitive factors in its market are service,
innovative products, quality and cost. The Company maintains leading market
positions even though many of its competitors are considerably larger with
greater financial resources.
The Company competes with H&M Foods and Hormel Foods Corporation ("Hormel")
in the pizza topping business. Crest Star Foods and Rich's Products are the
Company's primary competitors in the partially baked and self-rising pizza crust
industry.
The appetizer business is dominated by three key providers: Anchor Food
Products, Inc., Ore-Ida Foods Inc., a subsidiary of H.J. Heinz, and Specialty
Brands.
The Company's principal competitor in Mexican burrito and taquito programs
is Fernando's Foods Corporation. Other suppliers of frozen Mexican products,
such as Ruiz Food Products, ConAgra, Inc. ("ConAgra") and Camino Real Foods, are
more focused on the retail market than is the Company.
The main competitors of the Company's Deli Division and processed meat
operations are ConAgra and Sara Lee Corporation as well as various regional
competitors. Key factors which will continue to affect the grocery store
delicatessen business are the changing formats of the supermarket, consolidation
of customers and competitors, growing importance of carry-out, ready-to-eat
foods, self-service, and shortages of high-quality, cost-effective labor at
grocery store delicatessens.
The markets for the Company's kettle-cooked products (soups, sauces and side
dishes) are very fragmented. Although national manufacturers such as Campbell's
Soup, Nestle and Heinz offer canned, dry and frozen soups to the restaurant
trade, the kettle-cooked products compete primarily with regional food
processors.
GOVERNMENT REGULATION
The Company is subject to various laws and regulations of federal, state and
government entities, including the United States Department of Agriculture
("USDA"), the Food and Drug Administration ("FDA") and the Occupational Safety
and Health Administration. All of the Company's food processing plants are
inspected by the USDA or the FDA. The USDA-inspected plants are required to have
inspectors present during some or all of their daily operations. Management
believes that the Company is currently in compliance in all material respects
with all applicable health and safety laws and regulations and management does
not believe that the costs of continued compliance with existing laws and
regulations will have a material adverse effect on the Company's financial
condition.
As with similar companies, the Company's operations and properties are also
subject to a wide variety of increasingly complex and stringent federal, state
and local laws and regulations, including those governing the use, storage,
handling, generation, treatment, emission, release, discharge and disposal of
certain materials, substances and wastes, the remediation of contaminated soil
and groundwater, and the health and safety of employees. As such, the nature of
the Company's operations exposes it to the risk of claims with respect to
environmental matters. Based upon its experience to date, the Company believes
that the future cost of compliance with existing environmental laws and
regulations, and liability for known environmental claims, will not have a
material adverse effect on the Company's business or financial position.
However, future events, such as changes in existing laws and regulations or
their interpretation, and more vigorous enforcement policies of regulatory
agencies, may give rise to additional expenditures or liabilities that could be
material.
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SEASONALITY
While net sales of the Company's products historically have been higher in
the fourth quarter than in any other quarter of the year, the Company believes
that the divestiture of the Retail Division and the Acquisitions will reduce
seasonality of the Company's business. Consequently, the Company believes that
it is not subject to material seasonality of sales.
EMPLOYEES
At December 30, 1995, the Company employed approximately 3,200 persons,
approximately 40% of whom are covered by collective bargaining agreements which
extend through various dates from May, 1997 to March, 1999. Substantially all of
the Company's employees covered by collective bargaining agreements are members
of the United Food and Commercial Workers Union. The Company believes it has
satisfactory relations with its employees and all representative unions.
INTELLECTUAL PROPERTY
The Company owns or has the right to use 94 trademarks and 7 patents. The
Company's products are marketed under numerous Company-owned registered and
unregistered trademarks, symbols, emblems, logos and designs, including the
following trademarks: BUTCHER BOY-REGISTERED TRADEMARK-, CONTINENTAL DELI
LITE-TM-, DOSKOCIL-REGISTERED TRADEMARK-, FRED'S-REGISTERED TRADEMARK-,
JEFFERSON MEATS-TM-, LITTLE JUAN-REGISTERED TRADEMARK-, MARQUEZ-REGISTERED
TRADEMARK-, MR. NUCCIO-TM-, PIZZA TOPPER-REGISTERED TRADEMARK-,
PIZZANO-REGISTERED TRADEMARK-, POCO POSADA-REGISTERED TRADEMARK-,
POSADA-REGISTERED TRADEMARK-, ROTANELLI'S-REGISTERED TRADEMARK-, WILSON'S
CONTINENTAL DELI-REGISTERED TRADEMARK-, WILSON FOODSERVICE-REGISTERED TRADEMARK-
AND AMERICAN FAVORITE-TM-. In addition, certain products are prepared according
to customer specifications and packaged under customer trademarks and labels.
RAW MATERIALS
The Company's primary raw materials are frozen and fresh meat, flour,
vegetables, cheese and other dairy products, sugar, other agricultural products
and vegetable oils. These raw materials are obtained from external sources.
Other processing materials, such as seasonings, smoking and curing agents,
sausage casings and packaging materials, are purchased from a number of
readily-available sources. Severe price swings in such raw materials, and the
resulting impact on the prices the Company charges for its products and the
margins it receives, at times have had, and may in the future have, material
adverse effects on the demand for the Company's products and its profits. The
Company utilizes several techniques for reducing the risk of future raw
materials price increases. These techniques include purchasing and freezing raw
materials during seasonally low periods of the year, negotiating minimum
purchase commitments at set prices and entering into futures contracts.
LEGAL PROCEEDINGS
C&F PACKING COMPANY, INC. V. KPR, INC., D/B/A ROSANI FOODS, AND PIZZA HUT,
INC., United States District Court for the Northern District of Texas, Ft. Worth
Division, Case No. 4:93-CV-525-Y, filed April 13, 1993:
Prior to Foodbrands America acquiring KPR, C&F Packing Company, Inc. ("C&F")
asserted claims against KPR alleging that KPR, using equipment and a process to
make Italian sausage, infringed the C&F patents. C&F has requested damages
including disgorgement of profits, which the Company believes could be material.
KPR has denied these allegations and contends that C&F's patents are invalid and
that, even if valid, the process and equipment used by KPR do not infringe the
C&F patents. C&F has also alleged misappropriation of trade secrets and
proprietary information and other claims, all of which KPR denies.
In 1988 and 1989, C&F filed actions against Doskocil, (the Company's
predessor) alleging patent infringement and misappropriation of trade secrets
and proprietary information. In 1991, as part of Doskocil's bankruptcy
reorganization, and in settlement of the litigation, Doskocil entered into a
license agreement and two consent decrees with C&F. Because of these consent
decrees, prior to acquiring KPR, Foodbrands America, and KPR, instituted a joint
declaratory judgment action against C&F on November 15, 1995 in United States
District Court for the Northern District of Texas, Ft. Worth Division. The
action sought a ruling that the equipment and process used by KPR do not violate
the C&F patents and that, in any event, it is not a violation of the consent
decrees for KPR to continue to use the equipment and
33
<PAGE>
process which was being utilized by KPR prior to its acquisition by Foodbrands
America. C&F responded to the declaratory judgment action with a motion to
dismiss, which was granted on April 10, 1996, on the grounds that the case
discussed above would be dispositive of the declaratory judgement issues.
KPR intends to vigorously defend the suit by C&F. The litigation is complex
and the ultimate outcome can not be presently determined. Although the Company
will vigorously defend its interests, no assurance can be given that a material
adverse effect will not result from the litigation. See "Management Discussion
and Analysis -- Other."
UNITED REFRIGERATED SERVICES, INC. V. WILSON FOODS CORPORATION, ET AL.,
Circuit Court of Saline, Missouri, Division Four, Case No. CO492-235, filed
September 11, 1992; CONAGRA, INC. V. WILSON FOODS CORPORATION, ET AL., Circuit
Court of Saline, Missouri, Division Four, Case No. CO493-282, filed October 28,
1993:
United Refrigerated Services, Inc. ("URS") filed suit against Wilson Foods,
a wholly-owned subsidiary of the Company, and unaffiliated parties Normac Foods,
Inc. ("Normac") and Thompson Builders of Marshall, Inc. ("Thompson") claiming
property damage as a result of a fire in a warehouse owned by URS in Marshall,
Missouri, in which Wilson was leasing space. The URS lawsuit is in discovery.
URS claims damages of approximately $9.8 million, and has requested trebling of
the real property damage which is included in such amount, for total claims in
the aggregate up to as much as $13.8 million.
ConAgra also filed suit against Wilson Foods, Normac and Thompson in Saline
County, Missouri. ConAgra seeks damages in the amount of $9.4 million from the
named defendants for frozen food that was also stored in the Marshall warehouse
at the time of the fire and allegedly damaged. The ConAgra case also is in
discovery.
In its answer, Wilson Foods filed a counterclaim against URS and a
cross-claim against other co-defendants for indemnity and/or contribution. The
fire occurred in a part of the URS warehouse being leased by Wilson Foods in
which Wilson had produced sausage patties under contract for Normac until the
contract terminated in September 1991. Normac's contractor, Thompson, was
removing Normac's equipment with a torch when fire broke out and destroyed a
large section of the URS warehouse and its contents.
The Company's insurer has retained counsel to defend the Company in these
matters. Wilson Foods has substantial defenses to these pending and threatened
claims and while there can be no assurances, the Company believes it is not
likely that Wilson Foods will ultimately incur a loss in excess of its insurance
coverage.
In addition to the foregoing, the Company is a party to ordinary, routine
litigation, none of which is expected, individually or in the aggregate, to have
a material adverse effect on the Company.
34
<PAGE>
MANAGEMENT
The following sets forth certain information with respect to the Company's
senior management:
<TABLE>
<CAPTION>
NAME AGE TITLE
- -------------------------- --- ----------------------------------------------------------------------
<S> <C> <C>
R. Randolph Devening 54 Chairman, President and Chief Executive Officer
Horst O. Sieben 57 Senior Vice President and Chief Financial Officer
Thomas G. McCarley 50 Senior Vice President and President, Food Service
Patrick A. O'Ray 43 Senior Vice President and President, Specialty Brands
William E. Rosenthal 45 Senior Vice President and President, KPR Foods
Raymond J. Haefele 45 Vice President and President, Deli
William L. Brady 48 Vice President and Controller
Bryant P. Bynum 33 Vice President-Finance, Treasurer and Secretary
David J. Clapp 51 Vice President-Operating Systems
Howard S. Katz 45 Vice President and President, Kettle Cooked Foods
Roger D. LeBreck 49 Vice President and President, TNT Crust
Howard C. Madsen 52 Vice President-Procurement
Tony L. Prater 47 Vice President
</TABLE>
R. RANDOLPH DEVENING has been Chairman, President and Chief Executive
Officer and a director of the Company since August 1994. From May 1993 to July
1994, Mr. Devening was Vice Chairman and Chief Financial Officer of Fleming
Companies, Inc. ("Fleming"), one of the largest food marketing and distribution
companies in the United States, and one of the Company's largest customers. From
June 1989 to April 1993, Mr. Devening was Executive Vice President and Chief
Financial Officer of, and from February 1990 to July 1994 was a director of,
Fleming. Mr. Devening currently serves as a director for Arkwright Mutual
Insurance Company, Del Monte Corporation, Hancock Fabrics, Inc. and Autocraft
Industries, Inc.
HORST O. SIEBEN has been Senior Vice President and Chief Financial Officer
since October, 1994. For the six years prior to joining Foodbrands America, Mr.
Sieben was the CFO for various companies operated by Lancer Industries, Inc., a
private industrial holding company affiliated with the Company's largest
shareholder. Mr. Sieben has also acted as a consultant to Foodbrands America
during its 1994 acquisition of the Specialty Brands Division. He previously
worked at two public companies, at Nashua Corporation in various controllership
positions and at Gradco Systems, Inc. as Chief Financial Officer. He is
responsible for all corporate finance functions.
THOMAS G. MCCARLEY has been Senior Vice President of the Company and
President of the Food Service Division since September 1994. Prior to that he
was Senior Vice President-General Manager of the Division since October 1991,
and Senior Vice President-Sales and Marketing of the Company from January 1989
to October 1991. Mr. McCarley was Senior Vice President of Sara Lee Bakery F.S.
Division, a diversified food company, and of Chef Pierre, a division of Sara Lee
Corporation, from January 1988 to December 1988 and Vice President-Marketing and
Research and Development for Sara Lee Bakery F.S. Division prior thereto.
PATRICK A. O'RAY has been Senior Vice President of the Company and President
of the Specialty Brands Division since October 1995. Prior to joining the
Company, Mr. O'Ray was Vice President of the Foodservice America Division of
American Home Food Products from 1988 to 1995 with the added responsibility of
General Manager of the Foodservice America and International Divisions since
1993. Previously, he was National Sales Manager-Foodservice America Division of
McCormick & Company.
WILLIAM E. ROSENTHAL has been Senior Vice President and President of the KPR
Foods Division since December 1995. From 1990 to 1995, Mr. Rosenthal was
President of KPR Holdings, L.P. Mr. Rosenthal was President of Standard Meat
Company, a division of Sara Lee Corporation, prior thereto.
RAYMOND J. HAEFELE has been Vice President and President of the Deli
Division, since September 1994. Prior to that he was Vice President-General
Manager, Deli Division since January 1993. Mr. Haefele was
35
<PAGE>
Vice President-Retail Sales of the Company from October 1991 to January 1993 and
Vice President of Sales of Wilson Brands from October 1989 to October 1991.
Prior to that time, Mr. Haefele was Director and National Sales Manager-Deli of
Wilson Foods.
WILLIAM L. BRADY has been Vice President of the Company since January 1990
and Controller of the Company since May 1990. Mr. Brady served as Vice President
and Controller of Wilson Foods prior thereto.
BRYANT P. BYNUM has been Vice President-Finance since February 1993 and
Treasurer since January 1994 and Corporate Secretary since July 1995. Mr. Bynum
was Director-Corporate Planning and Development from November 1989 to February
1993. Prior thereto Mr. Bynum was a management consultant at the accounting firm
of Coopers & Lybrand.
DAVID J. CLAPP has been Vice President-Operating Services of the Company
since October 1991. Mr. Clapp was Vice President of Operations of Wilson Brands
from October 1989 to September 1991 and was Corporate Director of Engineering of
Wilson Foods prior thereto.
HOWARD S. KATZ has been Vice President of the Company since December 1995.
From 1989 to December 1995, Mr. Katz was President of Kettle Cooked Foods, a
division of KPR Holdings, L.P. Prior thereto, he was Vice President of Sales of
Standard Meat Company, a division of Sara Lee Corporation.
ROGER D. LEBRECK has been Vice President of the Company since December 1995.
From September 1990 to December 1995, Mr. LeBreck was President of TNT Crust,
Inc. Mr. LeBreck was Vice President of Operations of Frigo Cheese Corporation
prior thereto.
HOWARD C. MADSEN has been Vice President-Procurement of the Company since
February 1994. Dr. Madsen, a Ph.D. in agricultural economics, was Vice President
of Purchasing at Sara Lee Meat Group from December 1989 to February 1994.
TONY L. PRATER has been Vice President of the Company since December 1995.
From 1989 to December 1995, Mr. Prater was a Vice President of KPR Holdings,
L.P. Prior thereto, Mr. Prater held various positions in sales and planning and
was Operations Manager and Vice President of Technical Services at Standard Meat
Company, a division of Sara Lee Corporation.
36
<PAGE>
DESCRIPTION OF OTHER INDEBTEDNESS
THE CREDIT AGREEMENT
On December 11, 1995, Foodbrands America executed the Credit Agreement with
Chemical Bank, as managing agent and lender ("Administrative Agent") and other
domestic and foreign financial institutions, as lenders (collectively,
"Lenders"). The Credit Agreement provides three facilities: (i) a $145 million
term loan facility (the "Term Loan Facility"), (ii) a $75 million revolving loan
facility (the "Revolving Loan Facility") and (iii) a $100 million loan facility
designated for acquisitions (the "Acquisition Loan Facility"). The following
discussion of the material provisions of the Credit Agreement is not intended to
be exhaustive and is qualified by the provisions of the Credit Agreement
included as an Exhibit to the Company's Annual Report on 10-K for the fiscal
year ended December 30, 1995 (the "Annual Report"), which is incorporated in
this Prospectus by reference.
AVAILABILITY: Borrowings under the Term Loan Facility cannot be reborrowed
following repayment. Borrowings under the Acquisition Loan Facility cannot
exceed an aggregate of $100 million at any time outstanding and may be
reborrowed following repayment until December 11, 1996, after which the
revolving feature of the Acquisition Loan Facility terminates and repayments of
loans under the Acquisition Loan Facility can no longer be reborrowed.
Borrowings under the Revolving Loan Facility cannot exceed the lesser of $75
million or the "Borrowing Base," calculated as 75% of the Company's eligible
accounts receivable PLUS 50% of the value of the Company's eligible inventory
(calculated at the lesser of cost or market value). The Revolving Loan Facility
contains a $7 million subfacility in respect of letters of credit.
Borrowings under each of the Acquisition Loan Facility and the Revolving
Loan Facility are subject to customary conditions. Borrowings under the
Acquisition Loan Facility may only be used for a qualified acquisition, which is
subject to the additional conditions that the acquired entity have positive cash
flow in its four most recent fiscal quarters, the acquired entity be in the same
line of business as the Company, the Company is in compliance with certain
financial covenants after giving PRO FORMA effect to the proposed acquisition,
and the requisite lenders approve the acquisition.
GUARANTEES: Foodbrands America's obligations under the Credit Agreement are
unconditionally guaranteed, on a joint and several basis, by substantially all
of its direct and indirect subsidiaries (the "Bank Guarantors").
COLLATERAL: Borrowings under the Credit Agreement (and obligations under
certain letters of credit) are secured by a perfected pledge of substantially
all of the assets of Foodbrands America and the Bank Guarantors.
MANDATORY PAYMENTS: The following table reflects the current amortization
schedule of loans under the Term Loan Facility:
<TABLE>
<CAPTION>
DATE AMOUNT
- ------------------------------------------------------------------------------- -------------
<S> <C>
May 31, 1996................................................................... $ 5,625,000
August 31, 1996................................................................ $ 5,625,000
November 30, 1996.............................................................. $ 5,625,000
February 28, 1997.............................................................. $ 5,625,000
May 31, 1997................................................................... $ 7,750,000
August 31, 1997................................................................ $ 7,750,000
November 30, 1997.............................................................. $ 7,750,000
February 28, 1998.............................................................. $ 7,750,000
May 31, 1998................................................................... $ 10,937,500
August 31, 1998................................................................ $ 10,937,500
November 30, 1998.............................................................. $ 10,937,500
February 28, 1999.............................................................. $ 10,937,500
May 31, 1999................................................................... $ 11,937,500
August 31, 1999................................................................ $ 11,937,500
November 30, 1999.............................................................. $ 11,937,500
January 15, 2000............................................................... $ 11,937,500
</TABLE>
37
<PAGE>
Pursuant to the proposed amendment to the Credit Agreement, which will become
effective only if the Tender Offer is consummated in accordance with its terms,
the amortization schedule will be amended as follows (assuming all 9 3/4% Notes
are tendered and accepted):
<TABLE>
<CAPTION>
AMOUNT OF AMOUNT OF
INITIAL TERM SUPPLEMENTAL TERM
DATE LOANS LOANS
- ------------------------------------------------------- ----------------- ------------------
<S> <C> <C>
May 31, 1996........................................... $ 1,734,735 $ --
August 31, 1996........................................ 1,734,735 --
November 30, 1996...................................... 1,734,735 --
February 28, 1997...................................... 1,734,735 --
May 31, 1997........................................... 2,390,080 1,250,000
August 31, 1997........................................ 2,390,080 1,250,000
November 30, 1997...................................... 2,390,080 1,250,000
February 28, 1998...................................... 2,390,080 1,250,000
May 31, 1998........................................... 3,373,096 1,250,000
August 31, 1998........................................ 3,373,096 1,250,000
November 30, 1998...................................... 3,373,096 1,250,000
February 28, 1999...................................... 3,373,096 1,250,000
May 31, 1999........................................... 3,681,494 1,250,000
August 31, 1999........................................ 3,681,494 1,250,000
November 30, 1999...................................... 3,681,494 1,250,000
January 15, 2000....................................... 3,681,494 --
February 28, 2000...................................... -- 1,250,000
May 31, 2000........................................... -- 6,250,000
August 31, 2000........................................ -- 6,250,000
November 30, 2000...................................... -- 6,250,000
February 28, 2001...................................... -- 6,250,000
May 31, 2001........................................... -- 7,500,000
August 31, 2001........................................ -- 7,500,000
November 30, 2001...................................... -- 7,500,000
February 28, 2002...................................... -- 7,500,000
May 31, 2002........................................... -- 7,500,000
August 31, 2002........................................ -- 7,500,000
November 30, 2002...................................... -- 7,500,000
February 28, 2003...................................... -- 7,500,000
</TABLE>
Additionally, Foodbrands America will repay on May 31, 1997 and thereafter
on each term loan repayment date until and including January 15, 2000, a
principal amount equal to one-twelfth (1/12) of the outstanding aggregate
principal amount of loans under Acquisition Loan Facility on December 12, 1996.
In addition, mandatory prepayment obligations apply to borrowings in excess
of the Borrowing Base under the Revolving Loan Facility, certain asset sales and
sale-leaseback transactions, and the incurrence of certain indebtedness.
Seventy-five percent of excess cash flow (generally defined as the amount of
cash flow in excess of fixed charges PLUS $1 million) must also be used to
prepay loans under the Credit Agreement.
INTEREST RATE: Under the Credit Agreement, the interest rate for any loan
may be based on LIBOR or an Alternative Base Rate (defined as the highest of
Chemical Bank's prime rate, the secondary market rate for certificates of
deposit, plus 1%, and the federal funds rate, plus 0.5%), as selected by
Foodbrands America from time to time, plus the applicable margin established in
accordance with a pricing grid determined with reference to Foodbrands America's
EBITDA (as defined therein) for the four prior fiscal quarters. The applicable
margin for LIBOR loans ranges from 175 basis points corresponding to a total
debt to EBITDA ratio of less than 4.0x, to 250 basis points corresponding to a
ratio greater than 4.75x. The applicable margin for Alternative Base Rate loans
ranges from 75 basis points corresponding to a total debt to EBITDA ratio of
less than 4.0x, to 150 basis points corresponding to a ratio greater than 4.75x.
38
<PAGE>
COVENANTS: The Credit Agreement contains customary covenants associated
with similar facilities, including, without limitation maintenance of a
specified ratio of total debt to EBITDA, maintenance of a specified ratio of
EBITDA minus capital expenditures to interest expense, a prohibition on payment
of dividends and limitations on company stock repurchases, a prohibition against
certain liens, restrictions on certain acquisitions, mergers, consolidations and
sales of assets, restrictions on the incurrence of debt and additional
guarantees, limitations on sale and leaseback transactions, limitations on
leases, limitations on transactions with affiliates, limitations on investments,
loans and advances and limitations on debt prepayments.
EVENTS OF DEFAULT. The Credit Agreement contains events of default,
including, but not limited to, failure to pay principal or interest, failure to
comply with covenants, if any representations or warranties are false in any
material respect, a cross default to other indebtedness of Foodbrands America
and a change of control of Foodbrands America.
BANK WARRANTS. On October 31, 1991, Doskocil entered into a Warrant
Agreement (the "Warrant Agreement") with Chemical Bank as agent and other
domestic and foreign financial institutions who were also lenders under the
Company's credit agreement in effect at that time. The warrants, which may be
exercised through December 31, 1998, entitle the holder to purchase an aggregate
of approximately 290,300 shares of Foodbrands America's Common Stock, as of
March 30, 1996, at an exercise price of 125% of the reorganization value per
share (approximately $17.53). Upon a change of control, the holders of warrants
may require Foodbrands America to repurchase the warrants at a price equal to
the amount by which the Current Market Price (as defined in the Warrant
Agreement) exceeds $17.53 per share. The Warrant Agreement also grants to
holders of warrants certain rights regarding registration of warrant shares
under the Securities Act. The preceding discussion is not intended to be
exhaustive and is qualified in its entirety by reference to the provisions of
the Warrant Agreement included as an Exhibit to the Annual Report, which is
incorporated in this Prospectus by reference. The warrants issued to and
currently held by Chemical Bank pursuant to the Warrant Agreement entitle it to
purchase an aggregate of approximately 58,000 shares of Foodbrands America's
Common Stock. Chemical Bank is an affiliate of Chase Securities Inc. which is
one of the Underwriters of the offering of the Notes.
THE 9 3/4% NOTES
On April 28, 1993, Foodbrands America entered into an Indenture with First
Fidelity Bank, National Association, New York, as Trustee, regarding $110
million of 9 3/4% Senior Subordinated Redeemable Notes due July 15, 2000. The
following discussion of the material provisions of the 9 3/4% Notes is not
intended to be exhaustive and is qualified by the provisions of the 9 3/4%
Indenture included as an Exhibit to the Annual Report.
GUARANTEES: Foodbrands America's obligations under the 9 3/4% Indenture are
guaranteed, on a senior subordinated joint and several basis, by substantially
all of Foodbrands America's direct and indirect subsidiaries.
COLLATERAL: The 9 3/4% Notes are unsecured.
MANDATORY PREPAYMENTS: None.
SUBORDINATION: Foodbrands America's payment obligations under the 9 3/4%
Indenture are subordinated to the payment in full in cash of all existing and
future "Senior Indebtedness" of Foodbrands America as defined in the 9 3/4%
Indenture. The guarantors' obligations are similarly subordinated. The
obligations of Foodbrands America and the guarantors under the Indenture will
rank PARI PASSU with their respective obligations under the 9 3/4% Indenture.
COVENANTS AND EVENTS OF DEFAULT. The 9 3/4% Indenture currently contains
covenants and events of default similar to the covenants described herein under
"Description of the Notes," including a change of control provision which
obligates Foodbrands America to make an offer to repurchase the 9 3/4% Notes
upon a change of control at a purchase price equal to 101% of the principal
amount, plus accrued and unpaid interest, if any. Upon the consummation of the
Tender Offer, the 9 3/4% Indenture will be amended to eliminate substantially
all financial covenants.
39
<PAGE>
DESCRIPTION OF THE NOTES
The Notes will be issued under the Indenture to be dated as of ,
1996, between Foodbrands America, the Subsidiary Guarantors and The Liberty Bank
and Trust Company of Oklahoma City, National Association, as trustee (the
"Trustee"). The following summary of the material provisions of the Indenture
does not purport to be complete and is subject to, and qualified by, reference
to the provisions of the Indenture, including the definitions of certain terms
contained therein and those terms made part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended, as in effect on the date of the
Indenture. The definitions of certain capitalized terms used in the following
summary are set forth below under "-- Certain Definitions."
GENERAL
The Notes will be unsecured senior subordinated obligations of Foodbrands
America limited to $120,000,000 aggregate principal amount. The Notes will be
issued only in registered form without coupons, in denominations of $1,000 and
integral multiples thereof. Principal of, premium, if any, and interest on the
Notes will be payable, and the Notes will be transferable, at the corporate
trust office or agency of the Trustee in The City of New York maintained for
such purposes at 55 Water Street, First Floor, Jeanette Park Entrance, New York,
New York 10005. In addition, interest may be paid at the option of Foodbrands
America by check mailed to the person entitled thereto as shown on the security
register. No service charge will be made for any transfer, exchange or
redemption of Notes, except in certain circumstances for any tax or other
governmental charge that may be imposed in connection therewith.
MATURITY, INTEREST AND PRINCIPAL
The Notes will mature on , 2006. Interest on the Notes will
accrue at the rate of % per annum and will be payable semi-annually on each
and , commencing , 1996, to the holders of
record of the Notes at the close of business on the and
immediately preceding such interest payment date. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the original date of issuance of the Notes (the
"Issue Date"). Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
The Notes are not subject to the benefit of any mandatory sinking fund.
However, upon the occurrence of certain Asset Sales or a Change of Control,
holders of Notes will have the right to require Foodbrands America to purchase
their Notes, as more fully described under "-- Certain Covenants -- Disposition
of Proceeds of Asset Sales" and "-- Change of Control," respectively.
REDEMPTION
OPTIONAL REDEMPTION. The Notes will be redeemable at the option of
Foodbrands America, in whole or in part, at any time on or after ,
2001, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest to the redemption date, if
redeemed during the 12-month period beginning of the years indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---------------------------------------------------------------------------- -----------------
<S> <C>
2001........................................................................ %
2002........................................................................ %
2003........................................................................ %
2004 and thereafter......................................................... 100%
</TABLE>
OPTIONAL REDEMPTION UPON CHANGE OF CONTROL. Upon the occurrence of a Change
of Control, the Notes will be redeemable, in whole but not in part, at the
option of Foodbrands America, upon not less than 30 nor more than 60 days' prior
notice to each holder of Notes to be redeemed, at a redemption price equal to
the sum of (i) the then outstanding principal amount thereof, PLUS (ii) accrued
and unpaid interest, if any, to the redemption date PLUS (iii) the Applicable
Premium.
OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERING. On or prior to
, 1999, Foodbrands America may, at its option, use the net proceeds
of a Public Equity Offering (as defined below) which yields
40
<PAGE>
gross proceeds (before discounts, commissions and expenses) of $50.0 million or
more to redeem up to an aggregate of 25% of the principal amount of Notes
originally issued from the holders of Notes, on a PRO RATA basis (or as nearly
PRO RATA as practicable), at a redemption price equal to % of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
redemption; PROVIDED that not less than $75.0 million in aggregate principal
amount of Notes is outstanding following such redemption. In order to effect the
foregoing redemption with the net proceeds of a Public Equity Offering,
Foodbrands America shall send the redemption notice not later than 60 days after
the consummation of the Public Equity Offering.
As used in the preceding paragraph, a "Public Equity Offering" means an
underwritten public offering of Capital Stock (other than Disqualified Capital
Stock) of Foodbrands America made on a primary basis by Foodbrands America
pursuant to a registration statement filed with and declared effective by the
Commission in accordance with the Securities Act.
SELECTION AND NOTICE. In the event that less than all of the Notes are to
be redeemed at any time, selection of such Notes for redemption will be made by
the Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed or, if the Notes are
not then listed on a national securities exchange (or if the Notes are so listed
but the exchange does not impose requirements with respect to the selection of
debt securities for redemption), on a PRO RATA basis, by lot or by such method
as the Trustee shall deem fair and appropriate; PROVIDED that no Notes of a
principal amount of $1,000 or less shall be redeemed in part; PROVIDED, FURTHER,
that any such redemption pursuant to the provisions relating to a Public Equity
Offering shall be made on a PRO RATA basis or on as nearly a PRO RATA basis as
practicable (subject to the procedures of The Depository Trust Company or any
other depositary). Notice of redemption shall be mailed by first-class mail at
least 30 but not more than 60 days before the redemption date to each holder of
Notes to be redeemed at its registered address. If any Note is to be redeemed in
part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Note in a
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon surrender for cancellation of the original Note.
On and after the redemption date, interest will cease to accrue on Notes or
portions thereof called for redemption unless Foodbrands America defaults in the
payment of the redemption price.
THE NOTE GUARANTEES
Upon issuance, each of the Subsidiary Guarantors will fully and
unconditionally guarantee (each, a "Note Guarantee") on a joint and several
basis all of Foodbrands America's obligations under the Notes and the Indenture,
including its obligations to pay principal, premium, if any, and interest with
respect to the Notes. Except as provided in "-- Certain Covenants" below,
Foodbrands America is not restricted from selling or otherwise disposing of any
of the Subsidiary Guarantors.
Pursuant to the Note Guarantees, if Foodbrands America defaults in payment
of any amount owing in respect of any Notes, each Subsidiary Guarantor will be
obligated to duly and punctually pay the same. Pursuant to the terms of the
Indenture, each of the Subsidiary Guarantors has agreed that its obligations
under its Note Guarantee will be unconditional, irrespective of the validity,
regularity or enforceability of the Notes or the Indenture, the absence of any
action to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor.
If no Default exists or would exist under the Indenture, concurrently with
any sale or disposition (by merger or otherwise) of any Subsidiary Guarantor
(other than a transaction subject to the provisions described under "--
Consolidation, Merger, Sale of Assets, Etc.") by Foodbrands America or a
Restricted Subsidiary to any person that is not an Affiliate of Foodbrands
America or any of the Restricted Subsidiaries which is in compliance with the
terms of the Indenture, such Subsidiary Guarantor and each Wholly-Owned
Subsidiary of such Subsidiary Guarantor that is also a Subsidiary Guarantor will
automatically and unconditionally be released from all obligations under its
Note Guarantee; PROVIDED that (i) no Indebtedness under the Credit Agreement or
the 9 3/4% Notes is being assumed by the person to whom such sale or disposition
is made and (ii) each such Subsidiary Guarantor is sold or disposed of in
accordance with the "Disposition of Proceeds of Asset Sales" covenant described
under "-- Certain Covenants"; PROVIDED, FURTHER, that the
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foregoing proviso shall not apply to the sale or disposition of a Subsidiary
Guarantor in a foreclosure to the extent that such proviso would be inconsistent
with the requirements of the Uniform Commercial Code. In addition, if no Default
exists or would exist under the Indenture, at the request of Foodbrands America,
a Subsidiary Guarantor that is not a Leveraged Subsidiary will be released from
all obligations under its Note Guarantee if the Subsidiary Guarantors have been
unconditionally released from their obligations under the Credit Agreement and
the 9 3/4% Indenture.
SUBORDINATION OF NOTES AND NOTE GUARANTEES
The payment of the Senior Subordinated Note Obligations will be
subordinated, to the extent set forth in the Indenture, in right of payment to
the prior payment in full in cash or cash equivalents of all existing and future
Senior Indebtedness of Foodbrands America or Guarantor Senior Indebtedness of
any Subsidiary Guarantor, as the case may be. The Notes and the Note Guarantees
will be senior subordinated indebtedness of Foodbrands America or the Subsidiary
Guarantors, as the case may be, ranking PARI PASSU with all other future senior
subordinated indebtedness of Foodbrands America or Guarantor Senior Indebtedness
of the applicable Subsidiary Guarantor, as the case may be, and senior to all
future Subordinated Indebtedness of Foodbrands America or the applicable
Subsidiary Guarantor, as the case may be. There is currently no indebtedness of
Foodbrands America or the Subsidiary Guarantors which is Subordinated
Indebtedness. The Senior Subordinated Note Obligations will be effectively
subordinate to the claims of general creditors of Foodbrands America's
subsidiaries that are not Subsidiary Guarantors. See "Risk Factors --
Subordination and Potential Release of Note Guarantees."
The Indenture will provide that in the event of any insolvency or bankruptcy
case or proceeding, or any receivership, liquidation, reorganization or other
similar case or proceeding in connection therewith, relating to Foodbrands
America or any Subsidiary Guarantor (individually an "Obligor" and,
collectively, the "Obligors") or its assets, or any liquidation, dissolution or
other winding-up of any Obligor, whether voluntary or involuntary, or any
assignment for the benefit of creditors or other marshalling of assets or
liabilities of any Obligor, all Senior Indebtedness or Guarantor Senior
Indebtedness, as applicable, of such Obligor (including, in the case of Credit
Agreement Obligations, Other Designated Senior Indebtedness Obligations and
Related Currency and Interest Rate Protection Obligations of Foodbrands America,
any interest accruing subsequent to the filing of a petition for bankruptcy
whether or not such interest is an allowed claim in such bankruptcy proceeding)
must be paid in full in cash or cash equivalents before any payment or
distribution, whether in cash, property or securities (excluding certain
permitted equity or subordinated debt securities of an Obligor), is made on
account of the Senior Subordinated Note Obligations.
During the continuance of any default in the payment when due (whether at
stated maturity, by acceleration or otherwise) of principal, premium, if any, or
interest on, or of unreimbursed amounts under drawn letters of credit or fees
relating to letters of credit constituting, any Senior Indebtedness or Guarantor
Senior Indebtedness, as applicable of an Obligor, (in either case, a "Payment
Default"), no direct or indirect payment by or on behalf of such Obligor of any
kind or character shall be made on account of the Senior Subordinated Note
Obligations of such Obligor unless and until such default has been cured or
waived or has ceased to exist or such Senior Indebtedness or Guarantor Senior
Indebtedness, as applicable, shall have been discharged or paid in full in cash
or cash equivalents.
In addition, during the continuance of any other default with respect to any
Designated Senior Indebtedness of an Obligor pursuant to which the maturity
thereof may be accelerated (a "Non-Payment Default"), after receipt by the
Trustee from a representative of holders of such Designated Senior Indebtedness
of a written notice of such Non-payment Default specifying, among other things,
the applicable Designated Senior Indebtedness and Obligor to which such
Non-Payment Default relates, no payment of any kind or character may be made by
such Obligor on account of the Senior Subordinated Note Obligations for the
period specified below (the "Payment Blockage Period").
The Payment Blockage Period shall commence upon the receipt of notice of a
Non-payment Default by the Trustee from a representative of holders of
Designated Senior Indebtedness stating that such notice is a payment blockage
notice pursuant to the Indenture and shall end on the earliest to occur of the
following
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events: (i) 179 days shall have elapsed since the receipt of such notice; (ii)
the date on which such default is cured or waived or ceases to exist (provided
that no other Payment Default or Non-payment Default has occurred or is then
continuing after giving effect to such cure or waiver); (iii) the date on which
such Designated Senior Indebtedness is discharged or paid in full in cash or
cash equivalents; or (iv) the date on which such Payment Blockage Period shall
have been terminated by written notice to Foodbrands America and/or the
applicable Subsidiary Guarantors, as the case may be, or the Trustee from the
representative of holders of Designated Senior Indebtedness initiating such
Payment Blockage Period, after which Foodbrands America and the Subsidiary
Guarantors, subject to the existence of another Payment Default, shall promptly
resume making any and all required payments in respect of the Notes and the Note
Guarantees, as applicable, including any missed payments. Only one Payment
Blockage Period, whether with respect to the Notes, any Note Guarantee or the
Notes and Note Guarantees collectively, may be commenced within any 360
consecutive day period. No Non-payment Default with respect to Designated Senior
Indebtedness that existed or was continuing on the date of the commencement of
any Payment Blockage Period with respect to the Designated Senior Indebtedness
initiating such Payment Blockage Period will be, or can be, made the basis for
the commencement of a second Payment Blockage Period, whether or not within a
period of 360 consecutive days, unless such default has been cured or waived for
a period of not less than 90 consecutive days (it being acknowledged that any
subsequent action, or any breach of any financial covenant for a period
commencing after the date of commencement of such Payment Blockage Period, that,
in either case, would give rise to a Non-payment Default pursuant to any
provision under which a Non-payment Default previously existed or was continuing
shall constitute a new Non-payment Default for this purpose; PROVIDED that, in
the case of a breach of a particular financial covenant, the applicable Obligor
shall have been in compliance for at least one full period commencing after the
date of commencement of such Payment Blockage Period). In no event will a
Payment Blockage Period extend beyond 179 days from the date of the receipt by
the Trustee of the notice and there must be a 181 consecutive day period in any
360 day period during which no Payment Blockage Period is in effect.
If Foodbrands America fails to make any payment on the Notes when due or
within any applicable grace period, whether or not on account of the payment
blockage provisions referred to above, such failure would constitute an Event of
Default under the Indenture and would enable the holders of the Notes to
accelerate the maturity thereof. See "-- Events of Default."
By reason of such subordination, in the event of liquidation, receivership,
reorganization or insolvency, creditors of an Obligor who are holders of Senior
Indebtedness or Guarantor Senior Indebtedness may recover more, ratably, than
the holders of the Notes, and funds which would be otherwise payable to the
holders of the Notes will be paid to the holders of the Senior Indebtedness to
the extent necessary to pay the Senior Indebtedness in full, and Foodbrands
America may be unable to meet its obligations in full with respect to the Notes.
In addition, as described above, the Senior Subordinated Note Obligations will
be effectively subordinate to the claims of creditors of Foodbrands America's
subsidiaries (other than subsidiaries that are or hereafter become Subsidiary
Guarantors).
As of December 30, 1995, on a pro forma basis after giving effect to the
issuance of the Notes and the application of the net proceeds therefrom to
purchase all of the 9 3/4% Notes pursuant to the Tender Offer, the aggregate
amount of outstanding Senior Indebtedness and Guarantor Senior Indebtedness of
Foodbrands America and the Subsidiary Guarantors would have been approximately
$334.0 million. See "Description of Other Indebtedness -- the Credit Agreement."
The Indenture will limit, but not prohibit, the incurrence by Foodbrands America
and the Subsidiary Guarantors of additional Indebtedness, which may be senior or
PARI PASSU in right of payment to the Notes and the Note Guarantees, and will
prohibit the incurrence by Foodbrands America and the Subsidiary Guarantors of
Indebtedness which is contractually subordinated in right of payment to any
Senior Indebtedness of Foodbrands America or Guarantor Senior Indebtedness and
senior in right of payment to the Notes or the Note Guarantees, as applicable.
After giving effect to the issuance of the Notes and the application of the net
proceeds therefrom, there will be no indebtedness of any Obligor which is
subordinated in right of payment to the Notes.
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CERTAIN COVENANTS
The Indenture will contain the following covenants, among others:
LIMITATION ON INDEBTEDNESS. The Indenture will provide that Foodbrands
America will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or in any other
manner become liable, contingently or otherwise (in each case, to "incur"), for
the payment of any Indebtedness (including any Acquired Indebtedness); PROVIDED
that (i) Foodbrands America or any Subsidiary Guarantor will be permitted to
incur Indebtedness (including Acquired Indebtedness) and (ii) a Restricted
Subsidiary will be permitted to incur Acquired Indebtedness if, immediately
after giving PRO FORMA effect thereto, the Consolidated Fixed Charge Coverage
Ratio of Foodbrands America would be equal to or greater than (a) 2.00:1.0 if
such Indebtedness is incurred on or prior to December 31, 1998 and (b) 2.25 :1.0
if such Indebtedness is incurred after December 31, 1998.
Notwithstanding the foregoing, Foodbrands America and, to the extent
specifically set forth below, the Restricted Subsidiaries may incur each and all
of the following:
(1) Indebtedness of Foodbrands America or any Subsidiary Guarantor under
the Credit Agreement in an aggregate principal amount at any time
outstanding not to exceed $320,000,000; PROVIDED that (a) term and revolving
acquisition loans under the Credit Agreement shall not exceed $245,000,000
in aggregate principal amount at any time outstanding, less the sum of,
without duplication, (i) the amount of any scheduled amortization payments
and mandatory prepayments of principal amount of such loans, whether or not
actually made, and (ii) the amount of any other repayments of such loans
actually made (other than, in the case of this clause (ii), repayments of
the net cash proceeds of the issuance and sale of Capital Stock (other than
Redeemable Capital Stock) to the extent the commitments in respect of such
loans are not reduced thereby and (b) revolving credit loans and the undrawn
portion of unpaid reimbursement obligations in respect of letters of credit
under the Credit Agreement shall not exceed the sum of 60% of the book value
of inventory and 90% of the book value of accounts receivable of Foodbrands
America and the Restricted Subsidiaries, determined on a consolidated basis
in accordance with GAAP as of the date of the determination of such
borrowing base under the Credit Agreement for the particular incurrence of
Indebtedness;
(2) Indebtedness of Foodbrands America or any Subsidiary Guarantor
evidenced by the Notes or any Note Guarantee;
(3) (a) Interest Rate Protection Obligations of Foodbrands America or
any guarantee thereof by a Restricted Subsidiary covering Indebtedness of
Foodbrands America or any Restricted Subsidiary of Foodbrands America and
(b) Interest Rate Protection Obligations of any Restricted Subsidiary of
Foodbrands America covering Indebtedness of such Restricted Subsidiary;
PROVIDED that, in the case of either clause (a) or (b), the aggregate
notional principal amount of any such Interest Rate Protection Obligations
does not exceed the principal amount of the Indebtedness to which such
Interest Rate Protection Obligations relate;
(4) Indebtedness of Foodbrands America owed to a Restricted Subsidiary
and Indebtedness of a Restricted Subsidiary owed to Foodbrands America or a
Restricted Subsidiary; PROVIDED that (a) any subsequent issuance or transfer
of Capital Stock or any Designation that results in such Restricted
Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer
or assignment of such Indebtedness (other than to Foodbrands America or a
Restricted Subsidiary) will be deemed to constitute the incurrence of such
Indebtedness by Foodbrands America or such Restricted Subsidiary, as the
case may be, and (b) any such Indebtedness of Foodbrands America owed to a
Restricted Subsidiary that is not a Subsidiary Guarantor and any such
Indebtedness of a Restricted Subsidiary that is a Subsidiary Guarantor owed
to a Restricted Subsidiary that is not a Subsidiary Guarantor must be
subordinated in right of payment to the prior payment in full and
performance of Foodbrands America's or the Subsidiary Guarantor's
obligations under the Indenture, the Notes and the Note Guarantees, as the
case may be;
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(5) Indebtedness of Foodbrands America or any Restricted Subsidiary
incurred in respect of performance bonds, surety bonds and bankers'
acceptances provided in the ordinary course of business;
(6) Indebtedness of Foodbrands America or any Restricted Subsidiary in
respect of the undrawn portion of the face amount of or unpaid reimbursement
obligations in respect of letters of credit issued in the ordinary course of
business for the account of Foodbrands America or any of the Restricted
Subsidiaries in an amount outstanding at any time not to exceed the
difference between (a) $10,000,000 and (b) the amount of Indebtedness in
respect of the undrawn portion or unpaid reimbursement obligations in
respect of letters of credit outstanding under subclause (b) of the proviso
to clause (1) above;
(7) (a) Indebtedness in respect of Purchase Money Obligations for
property acquired in the ordinary course of business (and not, in any event,
in connection with an Asset Acquisition or a Capitalized Lease Obligation)
and (b) Indebtedness of Foodbrands America or any Restricted Subsidiary
representing any Capitalized Lease Obligations if, in the case of this
clause (b) only after giving pro forma effect to such incurrence of
Indebtedness, (i) the aggregate principal amount of Capitalized Lease
Obligations incurred in any fiscal year pursuant to this clause (7) would
not exceed $15,000,000 and (ii) the aggregate principal amount of
Capitalized Lease Obligations pursuant to this clause (7) after the Issue
Date would not exceed $45,000,000 in the aggregate;
(8) Indebtedness of Foodbrands America or any Restricted Subsidiary
arising from the honoring by a bank or other financial institution of a
check, draft or similar instrument inadvertently (except in the case of
daylight overdrafts) drawn against insufficient funds in the ordinary course
of business; PROVIDED that such Indebtedness is extinguished within 30 days
of incurrence;
(9) (a) Indebtedness of Foodbrands America or any Subsidiary Guarantor
to the extent the proceeds thereof are used to refinance (whether by
amendment, renewal, extension or refunding) Indebtedness of Foodbrands
America or any Subsidiary Guarantor (including all or a portion of the
Notes) or any Restricted Subsidiary and (b) Indebtedness of any Restricted
Subsidiary that is not a Subsidiary Guarantor to the extent the proceeds
thereof are used to refinance (whether by amendment, renewal, extension or
refunding) Indebtedness of any Restricted Subsidiary that is not a
Subsidiary Guarantor, in each case other than the Indebtedness to be
refinanced, redeemed or retired as described under "Use of Proceeds" herein
and Indebtedness incurred under clauses (1), (3), (4), (5), (7)(b) or (8);
PROVIDED that the principal amount of Indebtedness incurred pursuant to this
clause (9) (or, if such Indebtedness provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration of the maturity thereof, the original issue price of such
Indebtedness) shall not exceed the sum of the principal amount of
Indebtedness so refinanced (or, if such Indebtedness provides for an amount
less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof, the original issue
price of such Indebtedness PLUS any accreted value attributable thereto
since the original issuance of such Indebtedness) plus the amount of any
premium required to be paid in connection with such refinancing pursuant to
the terms of such Indebtedness or the amount of any premium reasonably
determined by Foodbrands America or a Restricted Subsidiary, as applicable,
as necessary to accomplish such refinancing by means of a tender offer or
privately negotiated purchase, plus the amount of expenses in connection
therewith; and
(10) additional Indebtedness of Foodbrands America or any Restricted
Subsidiary (including, without limitation, Indebtedness under the Credit
Agreement in excess of the amounts permitted under clause (1) above) not to
exceed $20,000,000 in aggregate principal amount at any time outstanding.
LIMITATION ON RESTRICTED PAYMENTS. The Indenture will provide that
Foodbrands America will not, and will not permit any of the Restricted
Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any other distribution or
payment on or in respect of Capital Stock of Foodbrands America or any
payment made to the direct or indirect holders (in their
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capacities as such) of Capital Stock of Foodbrands America (other than
dividends or distributions payable solely in rights to purchase Capital
Stock of Foodbrands America (other than Redeemable Capital Stock)); or
(ii) purchase, redeem, defease or otherwise acquire or retire for value
any Capital Stock of Foodbrands America (other than any such Capital Stock
owned by a Restricted Subsidiary); or
(iii) make any principal payment on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund payment or other
Stated Maturity, any Subordinated Indebtedness (other than any such
Subordinated Indebtedness owed to a Restricted Subsidiary); or
(iv) make any Investment (other than any Permitted Investment) in any
person
(such payments or Investments described in the preceding clauses (i), (ii),
(iii) and (iv) are collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to the proposed Restricted
Payment (the amount of any such Restricted Payment, if other than in cash,
shall be the fair market value of the asset(s) proposed to be transferred by
Foodbrands America or such Restricted Subsidiary, as the case may be,
pursuant to such Restricted Payment), (A) no Default shall have occurred and
be continuing, (B) the aggregate amount of all Restricted Payments declared
or made from and after the Issue Date would not exceed the sum of (1) 50% of
the aggregate Consolidated Net Income of Foodbrands America accrued on a
cumulative basis during the period (treated as one accounting period)
beginning on April 1, 1996 and ending on the last day of the fiscal quarter
of Foodbrands America immediately preceding the date of such proposed
Restricted Payment (or, if such aggregate cumulative Consolidated Net Income
of Foodbrands America for such period shall be a deficit, minus 100% of such
deficit) PLUS (2) the aggregate net cash proceeds received by Foodbrands
America either (x) as capital contributions in the form of common equity to
Foodbrands America after the Issue Date or (y) from the issuance or sale of
Capital Stock (excluding Redeemable Capital Stock but including Capital
Stock issued upon the conversion of convertible Indebtedness, in exchange
for outstanding Indebtedness or from the exercise of options, warrants or
rights to purchase Capital Stock (other than Redeemable Capital Stock)) of
Foodbrands America to any person (other than to a Subsidiary of Foodbrands
America) after the Issue Date PLUS (3) in the case of the disposition or
repayment of any Investment constituting a Restricted Payment made after the
Issue Date (excluding any Investment made pursuant to clause (iv) of the
following paragraph), an amount equal to the lesser of the return of capital
with respect to such Investment and the initial amount of such Investment,
in either case, less the cost of the disposition of such Investment and (C)
Foodbrands America could incur $1.00 of additional Indebtedness under the
first paragraph of the "Limitation on Indebtedness" covenant described
above. For purposes of the preceding clause (B)(2), upon the issuance of
Capital Stock either from the conversion of convertible Indebtedness or in
exchange for outstanding Indebtedness or upon the exercise of options,
warrants or rights, the amount counted as net cash proceeds received will be
the cash amount received by Foodbrands America at the original issuance of
the Indebtedness that is so converted or exchanged or from the issuance of
options, warrants or rights, as the case may be, plus the incremental amount
of cash received by Foodbrands America, if any, upon the conversion,
exchange or exercise thereof.
None of the foregoing provisions will prohibit (i) the payment of any
dividend within 60 days after the date of its declaration, if at the date of
declaration such payment would be permitted by the foregoing paragraph; (ii) the
redemption, repurchase or other acquisition or retirement of any shares of any
class of Capital Stock of Foodbrands America or any Restricted Subsidiary in
exchange for, or out of the net cash proceeds of, a substantially concurrent
issue and sale of other shares of Capital Stock (other than Redeemable Capital
Stock) of Foodbrands America to any person (other than to a Subsidiary of
Foodbrands America); PROVIDED that such net cash proceeds are excluded from
clause (B)(2)(y) of the preceding paragraph; (iii) so long as no Default shall
have occurred and be continuing, any redemption, repurchase or other acquisition
or retirement of Subordinated Indebtedness by exchange for, or out of the net
cash proceeds of, a substantially concurrent issue and sale of (1) Capital Stock
(other than Redeemable Capital
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Stock) of Foodbrands America; PROVIDED that any such net cash proceeds are
excluded from clause (B)(2)(y) of the preceding paragraph; or (2) Indebtedness
of Foodbrands America so long as such Indebtedness (x) is subordinated to the
Notes in the same manner and at least to the same extent as the Subordinated
Indebtedness being redeemed, repurchased, acquired or retired and (y) has no
Stated Maturity earlier than the 91st day after the Stated Maturity for the
final scheduled principal payment of the Notes; (iv) so long as no Default shall
have occurred and be continuing, the making of Investments constituting
Restricted Payments (valued at their initial amount) not to exceed $20,000,000
at any time outstanding; (v) the repurchase of the Bank Warrants in accordance
with their terms as in effect on the Issue Date; (vi) Investments constituting
Restricted Payments made as a result of the receipt of non-cash consideration
from any Asset Sale made pursuant to and in compliance with the covenant "--
Disposition of Proceeds of Asset Sales"; or (vii) so long as no Default shall
have occurred and be continuing, the purchase of "odd lot" shares of Common
Stock of Foodbrands America in an amount not to exceed $500,000 in the
aggregate. In computing the amount of Restricted Payments previously made for
purposes of clause (B) of the preceding paragraph, Restricted Payments made
under the immediately preceding clauses (i), (iv), (v), (vi) and (vii) shall be
included.
LIMITATION ON LIENS. The Indenture will provide that Foodbrands America
will not, and will not permit any Restricted Subsidiary to, create, incur,
assume or suffer to exist any Liens of any kind against or upon any of its
property or assets, or any proceeds therefrom, which secure either (i)
Subordinated Indebtedness unless the Notes and the Note Guarantees, as
applicable, are secured by a Lien on such property, assets or proceeds that is
senior in priority to the Liens securing such Subordinated Indebtedness or (ii)
Pari Passu Indebtedness unless the Notes and the Note Guarantees, as applicable,
are equally and ratably secured with the Liens securing such Pari Passu
Indebtedness.
CHANGE OF CONTROL. Upon the occurrence of a Change of Control, Foodbrands
America shall be obligated to make an offer to purchase (a "Change of Control
Offer") and shall, subject to the provisions described below, purchase, on a
business day (the "Change of Control Purchase Date") not more than 60 nor less
than 30 days following the occurrence of the Change of Control, all of the then
outstanding Notes at a purchase price (the "Change of Control Purchase Price")
equal to 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the Change of Control Purchase Date. Foodbrands America shall,
subject to the provisions described below, be required to purchase all Notes
properly tendered into the Change of Control Offer and not withdrawn. Prior to
the mailing of the notice to holders provided for below, Foodbrands America
shall have (x) terminated all commitments and repaid in full all Indebtedness
under the Credit Agreement, or offered to terminate such commitments and repay
in full such Indebtedness and have in fact terminated the commitments of and
repaid all Indebtedness of any lender under the Credit Agreement Obligations who
accepts such offer, or (y) obtained the requisite consents under the Credit
Agreement Obligations to permit the purchase of the Notes as provided for under
this covenant. If a notice has been mailed when such condition precedent has not
been satisfied, Foodbrands America shall have no obligation to (and shall not)
effect the purchase of Notes until such time as such condition precedent is
satisfied. Failure to mail the notice on the date specified below or to have
satisfied the foregoing condition precedent by the date that the notice is
required to be mailed shall in any event constitute a covenant Default under
clause (iv) of "-- Events of Default" herein. The Change of Control Offer is
required to remain open for at least 20 business days and until the close of
business on the Change of Control Purchase Date.
In order to effect such Change of Control Offer, Foodbrands America shall,
not later than the 30th day after the Change of Control, mail to each holder of
Notes notice of the Change of Control Offer, which notice shall govern the terms
of the Change of Control Offer and shall state, among other things, the
procedures that holders of Notes must follow to accept the Change of Control
Offer.
If a Change of Control Offer is made, there can be no assurance that
Foodbrands America will have available funds sufficient to pay the Change of
Control Purchase Price for all of the Notes that might be delivered by holders
of Notes seeking to accept the Change of Control Offer. Foodbrands America shall
not be required to make a Change of Control Offer upon a Change of Control if a
third party makes the Change
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of Control Offer in the manner, at the times and otherwise in compliance with
the requirements applicable to a Change of Control Offer made by Foodbrands
America and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
The occurrence of the events constituting a Change of Control under the
Indenture will result in an event of default under the Credit Agreement and,
thereafter, the lenders will have the right to require repayment of the
borrowings thereunder in full. Foodbrands America's obligations under the Credit
Agreement represent obligations senior in right of payment to the Notes and the
Credit Agreement will not permit the purchase of the Notes absent consent of the
lenders thereunder in the event of a Change of Control (although the failure by
Foodbrands America to comply with its obligations in the event of a Change of
Control would constitute a Default under the Notes).
Foodbrands America will comply with Section 14(e) and Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable, in the event that a Change of
Control occurs and Foodbrands America is required to purchase Notes as described
above. The existence of a holder's right to require, subject to certain
conditions, Foodbrands America to repurchase its Notes upon a Change of Control
may deter a third party from acquiring Foodbrands America in a transaction which
constitutes a Change of Control.
DISPOSITION OF PROCEEDS OF ASSET SALES. The Indenture will provide that
Foodbrands America will not, and will not permit any of the Restricted
Subsidiaries to, make any Asset Sale unless (i) Foodbrands America or such
Restricted Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the fair market value, as determined in good
faith by the Board of Directors of Foodbrands America, of the shares or assets
sold or otherwise disposed of and (ii) at least 75% of such consideration
consists of cash and/or Cash Equivalents and/or readily marketable securities
which Foodbrands America in good faith expects to liquidate promptly following
such Asset Sale (with Indebtedness of Foodbrands America or any Restricted
Subsidiary being counted as cash for such purposes if Foodbrands America or the
Restricted Subsidiary is unconditionally released from any liability therefor).
Net Cash Proceeds of any Asset Sale may be applied, to the extent required by
the terms of any Specified Indebtedness, to repay Specified Indebtedness (but
only if the commitments or amounts available to be borrowed under such Specified
Indebtedness are permanently reduced by the amount of such payment). To the
extent that such Net Cash Proceeds are not applied as provided in the preceding
sentence, Foodbrands America or a Restricted Subsidiary, as the case may be, may
apply the Net Cash Proceeds from such Asset Sale, within 360 days of such Asset
Sale, to an investment in properties and assets that were the subject of such
Asset Sale or in properties and assets that will be used in the business of
Foodbrands America and the Restricted Subsidiaries existing on the Issue Date or
in businesses reasonably related thereto ("Replacement Assets") so long as
Foodbrands America or such Restricted Subsidiary has notified the Trustee in
writing within 270 days of such Asset Sale, that it has determined to apply the
Net Cash Proceeds from such Asset Sale to an investment in such Replacement
Assets. Any Net Cash Proceeds from any Asset Sale not applied as provided in the
preceding two sentences, within 360 days of such Asset Sale, constitute "Excess
Proceeds" subject to disposition as provided below.
When the aggregate amount of Excess Proceeds exceeds $10,000,000, Foodbrands
America shall make an offer to purchase, from all holders of the Notes, an
aggregate principal amount of Notes equal to such Excess Proceeds, at a price in
cash equal to 100% of the outstanding principal amount thereof plus accrued and
unpaid interest, if any, to the purchase date. To the extent that the aggregate
principal amount of Notes tendered pursuant to an offer to purchase is less than
the Excess Proceeds, Foodbrands America may use such deficiency for general
corporate purposes. If the aggregate principal amount of Notes validly tendered
and not withdrawn by holders thereof exceeds the Excess Proceeds, Notes to be
purchased will be selected on a PRO RATA basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset to zero.
Foodbrands America will comply with Section 14(e) and Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable, in the event that an Asset Sale
occurs and Foodbrands America is required to purchase Notes as described above.
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LIMITATION ON ISSUANCE AND SALE OF PREFERRED STOCK BY RESTRICTED
SUBSIDIARIES. The Indenture will provide that Foodbrands America (i) will not
permit any of the Restricted Subsidiaries to issue any Preferred Stock (other
than to Foodbrands America or a Wholly-Owned Restricted Subsidiary) and (ii)
will not permit any person (other than Foodbrands America or a Wholly-Owned
Restricted Subsidiary) to own any Preferred Stock of any Restricted Subsidiary.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Indenture will provide that
Foodbrands America will not, and will not permit any of the Restricted
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, transfer, disposition, purchase, exchange or lease of assets, property
or services) with, or for the benefit of, any Affiliate of Foodbrands America
(other than a Restricted Subsidiary of Foodbrands America so long as no
Affiliate or beneficial holder of 10% or more of any class of Capital Stock of
Foodbrands America shall beneficially own any Capital Stock in such Restricted
Subsidiary) or any beneficial holder of 10% or more of any class of Capital
Stock of Foodbrands America, except (i) on terms that are no less favorable to
Foodbrands America, or the Restricted Subsidiary, as the case may be, than those
which could have been obtained in a comparable transaction at such time from
persons who do not have such a relationship with Foodbrands America, (ii) with
respect to a transaction or series of transactions involving aggregate payments
or value equal to or greater than $10,000,000, Foodbrands America has obtained a
written opinion from a nationally recognized investment banking firm stating
that the terms of such transactions or series of transactions are fair to
Foodbrands America or the Restricted Subsidiary, as the case may be, from a
financial point of view, and (iii) with respect to any transaction or series of
transactions involving aggregate payments or value equal to or greater than
$1,000,000, Foodbrands America shall have delivered an officer's certificate to
the Trustee certifying that such transaction or series of transactions comply
with the preceding clause (i) and, if applicable, certifying that the opinion
referred to in the preceding clause (ii) is correct and that such transaction or
series of transactions have been approved by a majority of the Board of
Directors of Foodbrands America, including a majority of the disinterested
directors of the Board of Directors of Foodbrands America. This covenant will
not restrict Foodbrands America from (a) making dividends permitted by the
covenant "-- Limitation on Restricted Payments," (b) paying reasonable and
customary regular fees to directors of Foodbrands America who are not employees
of Foodbrands America and (c) making loans or advances to officers of Foodbrands
America and the Restricted Subsidiaries for bona fide business purposes of
Foodbrands America.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. The Indenture will provide that Foodbrands America will not, and
will not permit any of the Restricted Subsidiaries to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective any encumbrance
or restriction on the ability of any Restricted Subsidiary to (a) pay dividends,
in cash or otherwise, or make any other distributions on or in respect of its
Capital Stock or any other interest or participation in, or measured by, its
profits, (b) pay any Indebtedness owed to Foodbrands America or any other
Restricted Subsidiary, (c) make loans or advances to Foodbrands America or any
other Restricted Subsidiary, (d) transfer any of its properties or assets to
Foodbrands America or any other Restricted Subsidiary (other than any customary
restriction on transfers of property subject to a Lien permitted under the
Indenture (other than a Lien on cash not constituting proceeds of non-cash
property subject to a Lien) which would not materially adversely affect
Foodbrands America's ability to satisfy its obligations hereunder), or (e)
guarantee any Indebtedness of Foodbrands America or any other Restricted
Subsidiary, except for such encumbrances or restrictions existing under or by
reason of (i) applicable law, (ii) customary non-assignment provisions of any
contract or any licensing agreement entered into by Foodbrands America or any of
the Restricted Subsidiaries in the ordinary course of business or any lease
governing a leasehold interest of Foodbrands America or any Restricted
Subsidiary, (iii) any agreement or other instrument of a person acquired by
Foodbrands America or any Restricted Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance or
restriction is not applicable to any person, or the properties or assets of any
person, other than the person, or the property or assets of the person, so
acquired, (iv) any encumbrance or restriction in the Credit Agreement as in
effect on the Issue Date and (v) any encumbrance or restriction
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pursuant to any agreement that extends, refinances, renews or replaces any
agreement described in clause (iii) above, which is not materially more
restrictive or less favorable to the holders of Notes and Note Guarantees than
those existing under the agreement being extended, refinanced, renewed or
replaced.
LIMITATION ON GUARANTEES BY RESTRICTED SUBSIDIARIES. The Indenture will
provide that no Restricted Subsidiary that is not a Subsidiary Guarantor may at
any time guarantee any Debt Securities of Foodbrands America or any Subsidiary
Guarantor or issue any Debt Securities, unless, at the time of such guarantee or
issue either (A) such Debt Securities constitute Acquired Indebtedness permitted
to be incurred pursuant to the first paragraph of the covenant "Limitation on
Indebtedness" or Indebtedness incurred by such Restricted Subsidiary pursuant to
clause (10) of the second paragraph of such covenant or (B) such Restricted
Subsidiary becomes an Subsidiary Guarantor as contemplated by the following
sentence. The Indenture will further provide that Foodbrands America may, at any
time, cause a Restricted Subsidiary to become a Subsidiary Guarantor by
executing and delivering a supplemental indenture providing for the guarantee of
payment of the Notes by such Restricted Subsidiary on the basis provided in the
Indenture.
LIMITATION ON OTHER SENIOR SUBORDINATED INDEBTEDNESS. The Indenture will
provide that neither Foodbrands America nor any Subsidiary Guarantor will incur,
directly or indirectly, any Indebtedness which is subordinate or junior in right
of payment in any respect to Senior Indebtedness or Guarantor Senior
Indebtedness, as applicable, unless such Indebtedness ranks PARI PASSU in right
of payment with the Notes or the Note Guarantees, as applicable, or is expressly
subordinated in right of payment to the Notes or the Note Guarantees, as
applicable.
LIMITATION ON DESIGNATIONS OF UNRESTRICTED SUBSIDIARIES. The Indenture will
provide that Foodbrands America may designate any Subsidiary of Foodbrands
America (other than a Subsidiary Guarantor) as an "Unrestricted Subsidiary"
under the Indenture (a "Designation") only if:
(a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation;
(b) Foodbrands America would be permitted under the Indenture to make an
Investment at the time of Designation (assuming the effectiveness of such
Designation) in an amount (the "Designation Amount") equal to the Fair
Market Value of the Capital Stock of such Subsidiary on such date; and
(c) Foodbrands America would be permitted under the Indenture to incur
$1.00 of additional Indebtedness pursuant to the first paragraph of the
covenant described under "-- Limitation on Indebtedness" at the time of
Designation (assuming the effectiveness of such Designation).
In the event of any such Designation, Foodbrands America shall be deemed to
have made an Investment constituting a Restricted Payment pursuant to the
covenant "-- Limitation on Restricted Payments" for all purposes of the
Indenture in the Designation Amount. The Indenture will further provide that (i)
Foodbrands America shall not and shall not permit any Restricted Subsidiary to,
at any time (x) provide credit support for, or a guarantee of, any Indebtedness
of any Unrestricted Subsidiary (including any undertaking, agreement or
instrument evidencing such Indebtedness), (y) be directly or indirectly liable
for any Indebtedness of any Unrestricted Subsidiary or (z) be directly or
indirectly liable for any Indebtedness which provides that the holder thereof
may (upon notice, lapse of time or both) declare a default thereon or cause the
payment thereof to be accelerated or payable prior to its final scheduled
maturity upon the occurrence of a default with respect to any Indebtedness of
any Unrestricted Subsidiary (including any right to take enforcement action
against such Unrestricted Subsidiary), except in the case of clause (x) or (y)
to the extent permitted under the covenant described under "-- Limitation on
Restricted Payments," and (ii) no Unrestricted Subsidiary shall at any time
guarantee or otherwise provide credit support for any obligation of Foodbrands
America or any Restricted Subsidiary.
The Indenture will further provide that Foodbrands America may revoke any
Designation of a Subsidiary as an Unrestricted Subsidiary (a "Revocation") if:
(a) no Default shall have occurred and be continuing at the time of and
after giving effect to such Revocation; and
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(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at such
time, have been permitted to be incurred for all purposes of the Indenture;
All Designations and Revocations must be evidenced by Board Resolutions of
Foodbrands America delivered to the Trustee certifying compliance with the
foregoing provisions.
REPORTING REQUIREMENTS. The Indenture will require that Foodbrands America
file with the Commission the annual reports, quarterly reports and other
documents required to be filed with the Commission pursuant to Sections 13 and
15 of the Exchange Act, whether or not Foodbrands America has a class of
securities registered under the Exchange Act. Foodbrands America will be
required to file with the Trustee within 15 days after it files them with the
Commission copies of such reports and documents.
CONSOLIDATION, MERGER, SALE OF ASSETS, ETC.
The Indenture will provide that Foodbrands America will not, in any
transaction or series of related transactions, merge or consolidate with or
into, or sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets as an entirety to, any person or
persons, and that Foodbrands America will not permit any of the Restricted
Subsidiaries to enter into any such transaction or series of related
transactions if such transaction or series of related transactions, in the
aggregate, would result in a sale, assignment, conveyance, transfer, lease or
other disposition of all or substantially all of the properties and assets of
Foodbrands America or of Foodbrands America and the Restricted Subsidiaries,
taken as a whole, to any other person or persons, unless at the time and after
giving effect thereto (i) either (A)(1) if the transaction or transactions is a
merger or consolidation involving Foodbrands America, Foodbrands America shall
be the surviving person of such merger or consolidation or (2) if the
transaction or transactions is a merger or consolidation involving a Restricted
Subsidiary, such Restricted Subsidiary shall be the surviving person of such
merger or consolidation and such surviving person shall be a Restricted
Subsidiary, or (B)(1) the person formed by such consolidation or into which
Foodbrands America or such Restricted Subsidiary is merged or to which the
properties and assets of Foodbrands America or such Restricted Subsidiary, as
the case may be, substantially as an entirety, are transferred (any such
surviving person or transferee person being the "Surviving Entity") shall be a
corporation organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia and (2)(x) in the case of
a transaction involving Foodbrands America, the Surviving Entity shall expressly
assume by a supplemental indenture executed and delivered to the Trustee, in
form satisfactory to the Trustee, all the obligations of Foodbrands America
under the Notes and the Indenture, and in each case, the Indenture shall remain
in full force and effect, or (y) in the case of a transaction involving a
Restricted Subsidiary that is a Subsidiary Guarantor, the Surviving Entity shall
expressly assume by a supplemental indenture executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of such
Restricted Subsidiary under its Note Guarantee and related supplemental
indenture, and in each case, such Note Guarantee and supplemental indenture
shall remain in full force and effect; and (ii) immediately after giving effect
to such transaction or series of related transactions on a PRO FORMA basis
(including, without limitation, any Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction or series of
transactions), no Default shall have occurred and be continuing and Foodbrands
America, or the Surviving Entity, as the case may be, after giving effect to
such transaction or series of transactions on a PRO FORMA basis, could incur
$1.00 of additional Indebtedness under the first paragraph of the "-- Limitation
on Indebtedness" covenant described above.
In connection with any consolidation, merger, transfer, lease or other
disposition contemplated hereby, Foodbrands America shall deliver, or cause to
be delivered, to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an officers' certificate and an opinion of counsel, each stating
that such consolidation, merger, transfer, lease or other disposition and the
supplemental indenture in respect thereof comply with the requirements under the
Indenture. In addition, each Subsidiary Guarantor, unless it is the other party
to the transaction or unless its Note Guarantee will be released and discharged
in accordance with its terms as a result of the transaction, will be required to
confirm, by supplemental indenture, that its Note Guarantee will apply to the
obligations of Foodbrands America or the Surviving Entity under the Indenture.
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Upon any consolidation or merger or any transfer of all or substantially all
of the assets of Foodbrands America in accordance with the foregoing, in which
Foodbrands America or a Restricted Subsidiary, as applicable, is not the
continuing corporation, the successor corporation formed by such a consolidation
or into which Foodbrands America or such Restricted Subsidiary, as the case may
be, is merged or to which such transfer is made, shall succeed to, and be
substituted for, and may exercise every right and power of, Foodbrands America
under the Indenture with the same effect as if such successor corporation had
been named as Foodbrands America therein; PROVIDED that, solely for purposes of
computing cumulative Consolidated Net Income for purposes of clause (B) of the
first paragraph of the covenant "Limitation on Restricted Payments" above, the
cumulative Consolidated Net Income of any persons other than Foodbrands America
and the Restricted Subsidiaries shall only be included for periods subsequent to
the effective time of such merger, consolidation, combination or transfer of
assets.
The Indenture will provide that for all purposes of the Indenture and the
Notes (including the provision of this covenant and the covenants described in
"-- Limitation on Indebtedness," "-- Limitation on Restricted Payments" and "--
Limitation on Liens"), Subsidiaries of any Surviving Entity will, upon such
transaction or series of related transactions, become Restricted Subsidiaries or
Unrestricted Subsidiaries as provided pursuant to the covenant described under
"-- Limitation on Designations of Unrestricted Subsidiaries" and all
Indebtedness, and all Liens on property or assets, of Foodbrands America and the
Restricted Subsidiaries immediately prior to such transaction or series of
related transactions will be deemed to have been incurred upon such transaction
or series of related transactions.
EVENT OF DEFAULT
The following will be "Events of Default" under the Indenture:
(i) default in the payment of the principal of, or premium, if any, when
due and payable, on any of the Notes (at its Stated Maturity, upon optional
redemption, required purchase, or otherwise); or
(ii) default in the payment of an installment of interest on any of the
Notes, when due and payable, for 30 days; or
(iii) the failure by Foodbrands America to comply with its obligations
under "Consolidation, Merger, Sale of Assets, Etc." above; or
(iv) the failure by Foodbrands America to perform or observe any other
term, covenant or agreement contained in the Notes or the Indenture (other
than a default specified in clause (i), (ii) or (iii) above) for a period of
45 days after written notice of such failure requiring Foodbrands America to
remedy the same shall have been given (x) to Foodbrands America by the
Trustee or (y) to Foodbrands America and the Trustee by the holders of at
least 25% in aggregate principal amount of the Notes then outstanding; or
(v) any default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness (a "Debt
Instrument") under which Foodbrands America or one or more Restricted
Subsidiaries or Foodbrands America and one or more Restricted Subsidiaries
then have outstanding Indebtedness in excess of $15,000,000, individually or
in the aggregate, and either (x) such Indebtedness is already due and
payable in full or (y) such default or defaults have resulted in the
acceleration of the maturity of such Indebtedness; or
(vi) one or more judgments, orders or decrees of any court or regulatory
or administrative agency of competent jurisdiction for the payment of money
in excess of $15,000,000, either individually or in the aggregate, shall be
entered against Foodbrands America or any Restricted Subsidiary or any of
their respective properties and shall not be discharged or fully bonded and
there shall have been a period of 60 days after the date on which any period
for appeal has expired and during which a stay of enforcement of such
judgment, order or decree shall not be in effect; or
(vii) either (i) the collateral agent under the Credit Agreement or (ii)
any holder of at least $15,000,000 in aggregate principal amount of
Indebtedness of Foodbrands America or any of the Restricted Subsidiaries
shall commence (or have commenced on its behalf) judicial proceedings to
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foreclose upon assets of Foodbrands America or any of the Restricted
Subsidiaries having an aggregate Fair Market Value, individually or in the
aggregate, in excess of $15,000,000 over (a) the coverage under applicable
binding insurance policies issued by a solvent insurer which has accepted
such coverage and (b) the extent to which the Company or any such Restricted
Subsidiary shall be entitled pursuant to the terms of any agreement then in
effect, to reimbursement, indemnity or contribution from any person (other
than the Company or any of its Subsidiaries) that is solvent for amounts as
to which the Company or such Restricted Subsidiary may become liable and has
accepted such liability, or shall have exercised any right under applicable
law or applicable security documents to take ownership of any such assets in
lieu of foreclosure; or
(viii) any Note Guarantee ceases to be in full force and effect (other
than as expressly provided for under the Indenture) or is declared null and
void, or any Subsidiary Guarantor denies that it has any further liability
under any Note Guarantee, or gives notice to such effect (other than by
reason of the termination of the Indenture or the release of any such Note
Guarantee in accordance with the Indenture); or
(ix) certain events of bankruptcy, insolvency or reorganization with
respect to Foodbrands America, any Subsidiary Guarantor or any Significant
Subsidiary of Foodbrands America shall have occurred.
If an Event of Default (other than as specified in clause (ix) above with
respect to Foodbrands America or any Subsidiary Guarantor) shall occur and be
continuing, the Trustee, by notice to Foodbrands America, or the holders of at
least 25% in aggregate principal amount of the Notes then outstanding, by notice
to the Trustee and Foodbrands America, may declare the principal of, premium, if
any, and accrued interest on all of the outstanding Notes to be due and payable
immediately, upon which declaration, all amounts payable in respect of the Notes
shall become and be immediately due and payable; PROVIDED that so long as the
Credit Agreement shall be in full force and effect, if an Event of Default shall
have occurred and be continuing (other than an Event of Default under clause
(ix) with respect to Foodbrands America or any Subsidiary Guarantor), any such
acceleration shall not be effective until the earlier to occur of (x) five
business days following delivery of a notice of such acceleration to the agent
under the Credit Agreement and (y) the acceleration of any Indebtedness under
the Credit Agreement. If an Event of Default specified in clause (ix) above with
respect to Foodbrands America or any Subsidiary Guarantor occurs and is
continuing, then the principal of, premium, if any, and accrued interest on all
of the outstanding Notes shall IPSO FACTO become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
holder of Notes.
Notwithstanding the foregoing, in the event of a declaration of acceleration
in respect of the Notes because an Event of Default specified in clause (v)
above shall have occurred and be continuing, such declaration of acceleration
shall be automatically annulled if the Indebtedness that is the subject of such
Event of Default has been discharged or paid or such Event of Default shall have
been cured or waived by the holders of such Indebtedness and written notice of
such discharge, cure or waiver, as the case may be, shall have been given to the
Trustee by Foodbrands America or by the requisite holders of such Indebtedness
or a trustee, fiduciary or agent for such holders, within 60 days after such
declaration of acceleration in respect of the Notes and no other Event of
Default shall have occurred which has not been cured or waived during such
60-day period.
After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of money due has been obtained by the Trustee,
the holders of a majority in aggregate principal amount of the outstanding
Notes, by written notice to Foodbrands America and the Trustee, may rescind such
declaration and its consequences if: (a) Foodbrands America has paid or
deposited with the Trustee a sum sufficient to pay (i) all sums paid or advanced
by the Trustee under the Indenture and the reasonable compensation, expenses,
disbursements, and advances of the Trustee, its agents and counsel, (ii) all
overdue interest on all Notes, (iii) the principal of and premium, if any, on
any Notes which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Notes, and (iv) to
the extent that payment of such interest is lawful, interest upon overdue
interest and overdue principal at the rate
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borne by the Notes which has become due otherwise than by such declaration of
acceleration; (b) the rescission would not conflict with any judgment or decree
of a court of competent jurisdiction; and (c) all Events of Default, other than
the non-payment of principal of, premium, if any, and interest on the Notes that
has become due solely by such declaration of acceleration, have been cured or
waived.
The holders of not less than a majority in aggregate principal amount of the
outstanding Notes may on behalf of the holders of all the Notes waive any past
defaults under the Indenture except a default in the payment of the principal
of, premium, if any, or interest on any Note, or in respect of a covenant or
provision which under the Indenture cannot be modified or amended without the
consent of the holder of each Note outstanding.
No holder of any of the Notes has any right to institute any proceeding with
respect to the Indenture or any remedy thereunder, unless the holders of at
least 25% in aggregate principal amount of the outstanding Notes have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding within 60 days after receipt of such notice and the Trustee,
within such 60-day period, has not received directions inconsistent with such
written request by holders of a majority in aggregate principal amount of the
outstanding Notes. Such limitations do not apply, however, to a suit instituted
by a holder of a Note for the enforcement of the payment of the principal of,
premium, if any, or interest on, such Note on or after the respective due dates
expressed in such Note.
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, whether or not an Event of Default shall occur and be continuing, the
Trustee under the Indenture is not under any obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
holders of the Notes unless such holders shall have offered to the Trustee
reasonable security or indemnity. Subject to certain provisions concerning the
rights of the Trustee, the holders of a majority in aggregate principal amount
of the outstanding Notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee under the Indenture.
If a Default or an Event of Default occurs and is continuing and is known to
the Trustee, the Trustee shall mail to each holder of the Notes notice of the
Default or Event of Default within 30 days after obtaining knowledge thereof;
PROVIDED that, except in the case of a Default or an Event of Default in payment
of principal of, premium, if any, or interest on any Notes, the Trustee may
withhold the notice to the holders of such Notes if a committee of its trust
officers in good faith determines that withholding the notice is in the interest
of the Noteholders.
Foodbrands America is required to furnish to the Trustee annual and
quarterly statements as to the performance by Foodbrands America of its
obligations under the Indenture and as to any default in such performance.
Foodbrands America is also required to notify the Trustee within ten days of any
event which is, or after notice or lapse of time or both would become, an Event
of Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
Foodbrands America may, at its option and at any time, terminate the
obligations of Foodbrands America and the Subsidiary Guarantors with respect to
the outstanding Notes and Note Guarantees ("defeasance"). Such defeasance means
that Foodbrands America shall be deemed to have paid and discharged the entire
Indebtedness represented by the then outstanding Notes, except for (i) the
rights of holders of outstanding Notes to receive payment in respect of the
principal of, premium, if any, and interest on such Notes when such payments are
due, (ii) Foodbrands America's obligations to issue temporary Notes, register
the transfer or exchange of any Notes, replace mutilated, destroyed, lost or
stolen Notes and maintain an office or agency for receipt of payments in respect
of the Notes, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, (iv) the defeasance provisions of the Indenture and (v) the Note
Guarantees to the extent they relate to the foregoing. In addition, Foodbrands
America may, at its option
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and at any time, elect to terminate its and the Subsidiary Guarantors'
obligations with respect to certain covenants that are set forth in the
Indenture, some of which are described under "-- Certain Covenants" above, and
any subsequent failure to comply with such obligations shall not constitute a
Default or an Event of Default with respect to the Notes ("covenant
defeasance").
In order to exercise either defeasance or covenant defeasance, (i)
Foodbrands America must irrevocably deposit with the Trustee, in trust for the
benefit of the holders of the Notes, cash in United States dollars, U.S.
Government Obligations (as defined in the Indenture), or a combination thereof,
in such amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium, if
any, and interest on the outstanding Notes to redemption or maturity, (ii)
Foodbrands America shall have delivered to the Trustee an opinion of counsel to
the effect that the holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such defeasance or
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such defeasance or covenant defeasance had not occurred (in the case of
defeasance, such opinion must refer to and be based upon a ruling of the
Internal Revenue Service or a change in applicable federal income tax laws),
(iii) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit, (iv) such defeasance or covenant defeasance shall not
cause the Trustee to have a conflicting interest with respect to any securities
of Foodbrands America, (v) such defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a default under, any material
agreement or instrument to which Foodbrands America is a party or by which
Foodbrands is bound, (vi) Foodbrands America shall have delivered to the trustee
an opinion of counsel to the effect that (A) the trust funds will not be subject
to any rights of holders of Senior Indebtedness, including, without limitation,
those arising under the Indenture and (B) after the 91st day following the
deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, and (vii) Foodbrands America shall have delivered to the
Trustee an officers' certificate and an opinion of counsel, each stating that
all conditions precedent under the Indenture to either defeasance or covenant
defeasance, as the case may be, have been complied with and that no violations
under agreements governing any other outstanding Indebtedness would result.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) to all outstanding Notes when
(i) either (a) all the Notes theretofore authenticated and delivered (except
lost, stolen or destroyed Notes which have been replaced or paid and Notes for
which payment money has theretofore been deposited in trust or segregated and
held in trust by Foodbrands America and thereafter repaid to Foodbrands America
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and Foodbrands America has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from Foodbrands America directing the Trustee to apply
such funds to the payment thereof at maturity or redemption, as the case may be,
(ii) Foodbrands America has paid all other sums payable under the Indenture by
Foodbrands America, and (iii) Foodbrands America has delivered to the Trustee an
officers' certificate and an opinion counsel stating that all conditions
precedent under the Indenture relating to the satisfaction and discharge of the
Indenture have been complied with.
AMENDMENTS AND WAIVERS
From time to time, Foodbrands America and the Subsidiary Guarantors, when
authorized by a resolution of their respective Boards of Directors, and the
Trustee may, without the consent of the holders of any outstanding Notes, amend,
waive or supplement the Indenture or the Notes for certain specified purposes,
including, among other things, curing ambiguities, defects or inconsistencies,
qualifying, or maintaining the qualification of, the Indenture under the Trust
Indenture Act of 1939, adding any Subsidiary of Foodbrands America as a
Subsidiary Guarantor or making any change that does not adversely affect the
rights of any
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holder; PROVIDED that Foodbrands America has delivered to the Trustee an opinion
of counsel stating that such change does not adversely affect the rights of any
holder of the Notes. Other amendments and modifications of the Indenture or the
Notes may be made by Foodbrands America and the Trustee with the consent of the
holders of not less than a majority of the aggregate principal amount of the
outstanding Notes; PROVIDED that no such modification or amendment may, without
the consent of the holder of each outstanding Note affected thereby, (i) reduce
the principal amount of, extend the fixed maturity of or alter the redemption
provisions of, the Notes, (ii) change the currency in which the Notes or any
premium or the interest thereon is payable, (iii) reduce the percentage in
principal amount of outstanding Notes that must consent to an amendment,
supplement or waiver or consent to take any action under the Indenture, the
Notes or any Note Guarantee, (iv) impair the right to institute suit for the
enforcement of any payment on or with respect to the Notes or the Note
Guarantees, (v) waive a default in payment with respect to the Notes, (vi)
following the occurrence of a Change of Control or an Asset Sale, amend, change
or modify the obligation of Foodbrands America to make and consummate a Change
of Control Offer in the event of a Change of Control or make and consummate the
offer with respect to any Asset Sale or modify any of the provisions or
definitions with respect thereto, (vii) reduce or change the rate or time for
payment of interest on the Notes, (viii) modify or change any provision of the
Indenture affecting the subordination of the Notes or any Note Guarantee in a
manner adverse to the holders of the Notes and the Note Guarantees, or (ix)
release any Subsidiary Guarantor from any of its obligations under its Note
Guarantee or the Indenture other than in compliance with other provisions of the
Indenture permitting such release.
THE TRUSTEE
Liberty Bank and Trust Company of Oklahoma City, National Association is to
be the Trustee under the Indenture and has been appointed by Foodbrands America
as Registrar and Paying Agent with regard to the Notes.
GOVERNING LAW
The Indenture, the Notes and the Note Guarantees will be governed by the
laws of the State of New York, without regard to the principles of conflicts of
law.
CERTAIN DEFINITIONS
"ACQUIRED INDEBTEDNESS" means Indebtedness of a person (a) assumed in
connection with an Asset Acquisition from such person or (b) existing at the
time such person becomes a Subsidiary of any other person, but not including
Indebtedness incurred in connection with, or in anticipation of, such person
becoming a Subsidiary.
"AFFILIATE" means, with respect to any specified person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person.
"AIRLIE AGREEMENT" means the Stockholders Agreement by and between
Foodbrands America and The Airlie Group, L.P. dated March 22, 1993.
"APPLICABLE PREMIUM" means with respect to a Note, the greater of (i) 1.0%
of the then outstanding principal amount of such Note or (ii) the excess of (A)
the present value of the required interest and principal payments due on such
Note, computed using a discount rate equal to the Treasury Rate plus 100 basis
points, over (B) the then outstanding principal amount of such Note; PROVIDED
that in no event will the Applicable Premium exceed the amount of the applicable
redemption price upon an optional redemption less 100%, at any time on or after
, 2001.
"ASSET ACQUISITION" means (a) an Investment by Foodbrands America or any
Subsidiary of Foodbrands America in any other person pursuant to which such
person shall become a Restricted Subsidiary, or shall be merged with or into
Foodbrands America or any Restricted Subsidiary, or (b) the acquisition by
Foodbrands America or any Restricted Subsidiary of the assets of any person
which constitute all or substantially all of the assets of such person or any
division, operating unit or line of business of such person.
"ASSET SALE" means any sale, issuance, conveyance, transfer, lease or other
disposition by Foodbrands America or any Restricted Subsidiary to any person
other than Foodbrands America or a Restricted
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Subsidiary, in one or a series of related transactions, of: (a) any Capital
Stock of any Subsidiary of Foodbrands America; (b) all or substantially all of
the properties and assets of any division or line of business of Foodbrands
America or any Restricted Subsidiary; or (c) any other properties or assets of
Foodbrands America or a Restricted Subsidiary (including proprietary brand
names, whether registered or otherwise) other than in the ordinary course of
business. For the purposes of this definition, the term "Asset Sale" shall not
include (i) any sale, issuance, conveyance, transfer, lease or other disposition
of properties or assets that is governed by the provisions described under "--
Merger, Sale of Assets, Etc.," (ii) sales of obsolete equipment or of real
property no longer used or useful in the Company's business, (iii) any direct or
indirect sale of inventory or accounts receivable to the extent the proceeds
thereof are required to repay a lender or lenders that are owed Indebtedness of
Foodbrands America or any Restricted Subsidiary that is secured by such
inventory and accounts receivable; and (iv) any sale, issuance, conveyance,
transfer, lease or other disposition of properties or assets, whether in one
transaction or a series of related transactions, involving assets with a fair
market value, as determined by Foodbrands America, not in excess of $1,000,000.
"AVERAGE LIFE TO STATED MATURITY" means, with respect to any Indebtedness,
as at any date of determination, the quotient obtained by dividing (a) the sum
of the products of (i) the number of years from such date to the date or dates
of each successive scheduled principal payment (including, without limitation,
any sinking fund requirements) of such Indebtedness multiplied by (ii) the
amount of each such principal payment by (b) the sum of all such principal
payments.
"BANK WARRANTS" means the warrants evidencing the right to purchase shares
of Common Stock pursuant to the Warrant Agreement dated as of October 31, 1991,
between Foodbrands America and the banks named therein as in effect on the date
of the Indenture.
"BANKRUPTCY LAW" means Title 11 of the United States Code or any similar
federal, state or foreign law for the relief of debtors.
"CAPITAL STOCK" means, with respect to any person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
"CAPITALIZED LEASE OBLIGATION" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real, personal
or mixed) that is required to be classified and accounted for as a capital lease
obligation under GAAP, and, for the purpose of the Indenture, the amount of such
obligation at any date shall be the capitalized amount thereof at such date,
determined in accordance with GAAP consistently applied.
"CASH EQUIVALENTS" means, at any time: (i) any evidence of Indebtedness with
a maturity of 365 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality thereof
(PROVIDED that the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or acceptances with a
maturity of 365 days or less of any financial institution that is a member of
the Federal Reserve System having combined capital and surplus and undivided
profits of not less than $500,000,000; (iii) commercial paper with a maturity of
365 days or less issued by a corporation that is not an Affiliate of Foodbrands
America organized under the laws of any state of the United States or the
District of Columbia and rated at least A-1 by S&P or at least P-1 by Moody's or
at least an equivalent rating category of another nationally recognized
securities rating agency; (iv) repurchase agreements and reverse repurchase
agreements relating to marketable direct obligations issued or unconditionally
guaranteed by the government of the United States of America or issued by any
agency thereof and backed by the full faith and credit of the United States of
America, in each case maturing within 365 days from the date of acquisition;
PROVIDED that the terms of such agreements comply with the guidelines set forth
in the Federal Financial Agreements of Depository Institutions With Securities
Dealers and Others, as adopted by the Comptroller of the Currency on October 31,
1985; and (v) money market funds organized under the laws of the United States
of America or any state thereof that invest substantially all of their assets in
any of the types of investments described in clause (i), (ii) or (iii) above.
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"CHANGE OF CONTROL" means the occurrence of any of the following events: (a)
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act), excluding Permitted Holders, is or becomes the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50% of the total Voting Stock of Foodbrands America; (b) Foodbrands America
consolidates with, or merges with or into, another person or sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
its assets to any person, or any person consolidates with, or merges with or
into, Foodbrands America, in any such event pursuant to a transaction in which
the outstanding Voting Stock of Foodbrands America is converted into or
exchanged for cash, securities or other property, other than any such
transaction where (i) the outstanding Voting Stock of Foodbrands America is
converted into or exchanged for (1) Voting Stock (other than Redeemable Capital
Stock) of the surviving or transferee corporation or (2) cash, securities and
other property in an amount which could be paid by Foodbrands America as a
Restricted Payment under the Indenture and (ii) immediately after such
transaction, no "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), excluding Permitted Holders, is the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50% of the total Voting Stock of the surviving or transferee corporation;
(c) during any consecutive two-year period, individuals who at the beginning of
such period constituted the Board of Directors of Foodbrands America (together
with any new directors whose election by such Board of Directors or whose
nomination for election by the stockholders of Foodbrands America was approved
by a vote of 66 2/3% of the directors then still in office who (i) are entitled
to vote to elect such new director or who are entitled to nominate such director
pursuant to Foodbrands America's bylaws, the JLL Agreement, or the Airlie
Agreement and (ii) were either directors at the beginning of such period or
persons whose election as directors or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of Foodbrands America then in office; (d) during any consecutive
two-year period individuals who were Non Investor Directors (as defined below)
at the beginning of such period (together with any new Non Investor Directors
whose election by the Board of Directors of Foodbrands America or whose
nomination for election by the stockholders of Foodbrands America was approved
by a vote of 66 2/3% of the Non Investor Directors then still in office who were
either Non Investor Directors at the beginning of such period or whose election
or nomination for election as directors was so approved) cease for any reason to
constitute a majority of the Non Investor Directors then in office or (e) JLL
assigns any of its rights under Section 4.6 of the JLL Agreement, or any
successor provision, to nominate directors of Foodbrands America and at any time
thereafter a majority of the directors of Foodbrands America designated pursuant
to the JLL Agreement are persons who were not directors 60 days prior to the
date of such assignment or persons whose election or nomination for election was
approved by 66 2/3% of the Non Investor Directors. For purposes of the
foregoing, a "Non Investor Director" means a director of Foodbrands America
other than a director nominated, designated or elected pursuant to the JLL
Agreement or the Airlie Agreement.
"COMMON STOCK" means, with respect to any person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or nonvoting) of, such person's common stock, whether
outstanding at the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"CONSOLIDATED EBITDA" means, with respect to Foodbrands America for any
period, (i) the sum of, without duplication, the amount for such period, taken
as a single accounting period, of (a) Consolidated Net Income, (b) Consolidated
Non-cash Charges, (c) Consolidated Interest Expense and (d) Consolidated Income
Tax Expense, LESS (ii) non-cash items increasing Consolidated Net Income for
such period.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to Foodbrands
America, the ratio of the aggregate amount of Consolidated EBITDA of Foodbrands
America for the four full fiscal quarters for which financial information in
respect thereof is available immediately preceding the date of the transaction
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(the "Transaction Date") giving rise to the need to calculate the Consolidated
Fixed Charge Coverage Ratio (such four full fiscal quarter period being referred
to herein as the "Four Quarter Period") to the aggregate amount of Consolidated
Fixed Charges of Foodbrands America for the Four Quarter Period. In addition to
and without limitation of the foregoing, for purposes of this definition
"Consolidated EBITDA" and "Consolidated Fixed Charges" shall be calculated after
giving effect on a PRO FORMA basis for the period of such calculation to,
without duplication, (a) the incurrence of any Indebtedness of Foodbrands
America or any of the Restricted Subsidiaries during the period commencing on
the first day of the Four Quarter Period to and including the Transaction Date
(the "Reference Period"), including, without limitation, the incurrence of the
Indebtedness giving rise to the need to make such calculation (and the
application of the net proceeds thereof), as if such incurrence (and
application) occurred on the first day of the Reference Period, (b) an
adjustment to eliminate or include, as the case may be, the Consolidated EBITDA
and Consolidated Fixed Charges of such person directly or indirectly
attributable to assets which are the subject of any Asset Sale or Asset
Acquisition (including, without limitation, any Asset Acquisition giving rise to
the need to make such calculation as a result of Foodbrands America or one of
the Restricted Subsidiaries (including any person who becomes a Restricted
Subsidiary as a result of the Asset Acquisition) incurring, assuming or
otherwise being liable for Acquired Indebtedness) occurring during the Reference
Period, as if such Asset Sale (after giving effect to any Designation of
Unrestricted Subsidiaries) or Asset Acquisition occurred on the first day of the
Reference Period and (c) the retirement of Indebtedness during the Reference
Period which cannot thereafter be reborrowed occurring as if retired on the
first day of the Reference Period. For purposes of calculating "Consolidated
Fixed Charges" for this "Consolidated Fixed Charge Coverage Ratio," interest on
Indebtedness incurred during the Four Quarter Period under any revolving credit
facility which can be borrowed and repaid without reducing the commitments
thereunder shall be the actual interest during the Four Quarter Period.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio," (i) interest on outstanding Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate PER ANNUM
equal to the rate of interest on such Indebtedness in effect on the Transaction
Date, (ii) if interest on any Indebtedness actually incurred on the Transaction
Date may optionally be determined at an interest rate based upon a factor of a
prime or similar rate, a eurocurrency interbank offered rate, or other rates,
then the interest rate in effect on the Transaction Date will be deemed to have
been in effect during the Reference Period; and (iii) notwithstanding clauses
(i) and (ii) above, interest on Indebtedness determined on a fluctuating basis,
to the extent such interest is covered by agreements relating to Interest Rate
Protection Obligations, shall be deemed to have accrued at the rate PER ANNUM
resulting after giving effect to the operation of such agreements. If Foodbrands
America or any of the Restricted Subsidiaries directly or indirectly guaranteed
Indebtedness of a third person, the above clauses shall give effect to the
incurrence of such guaranteed Indebtedness as if Foodbrands America or such
Restricted Subsidiary had directly incurred or otherwise assumed such guaranteed
Indebtedness.
"CONSOLIDATED FIXED CHARGES" means, with respect to Foodbrands America for
any period, the sum of, without duplication, the amounts for such period of (i)
Consolidated Interest Expense and (ii) the aggregate amount of dividends and
other distributions paid or accrued during such period in respect of Redeemable
Capital Stock of Foodbrands America and the Restricted Subsidiaries on a
consolidated basis.
"CONSOLIDATED INCOME TAX EXPENSE" means, with respect to Foodbrands America
for any period, the provision for federal, state, local and foreign income taxes
of such person and the Restricted Subsidiaries for such period as determined on
a consolidated basis in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to Foodbrands America
for any period, without duplication, the sum of (i) the interest expense of
Foodbrands America and the Restricted Subsidiaries for such period as determined
on a consolidated basis in accordance with GAAP, excluding the amortization of
fees related to the issuance of the Notes and fees (other than letter of credit
fees) related to the initial execution and delivery of the Credit Agreement, but
including, without limitation, (a) any amortization of debt discount, (b) the
net cost under Interest Rate Protection Obligations (including any amortization
of discounts), (c) the interest portion of any deferred payment obligation which
in accordance with GAAP is
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required to be reflected on an income statement, (d) all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing, and (e) all accrued interest and (ii) the interest
component of Capitalized Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by Foodbrands America and the Restricted Subsidiaries during
such period as determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to Foodbrands America, for any
period, the consolidated net income (or loss) of Foodbrands America and the
Restricted Subsidiaries for such period as determined in accordance with GAAP
consistently applied adjusted, to the extent included in calculating such net
income, by excluding, without duplication, (i) all extraordinary gains or losses
(net of fees and expenses relating to the transaction giving rise thereto) and
the non-recurring cumulative effect of accounting charges, (ii) the portion of
net income (or loss) of Foodbrands America and the Restricted Subsidiaries
allocable to minority interests in unconsolidated persons to the extent that
cash dividends or distributions have not actually been received by Foodbrands
America or one of the Restricted Subsidiaries, (iii) net income (or loss) of any
person combined with Foodbrands America or one of the Restricted Subsidiaries on
a "pooling of interests" basis attributable to any period prior to the date of
combination, (iv) any gain or loss realized upon the termination of any employee
pension benefit plan, on an after-tax basis, (v) gains or losses in respect of
any Asset Sales by Foodbrands America or one of the Restricted Subsidiaries (net
of fees and expenses relating to the transaction giving rise thereto), on an
after-tax basis, (vi) reduction of reorganization value in excess of amounts
allocable to tangible assets resulting from the utilization of net operating
losses, and (vii) the net income of any Restricted Subsidiary of Foodbrands
America to the extent that the declaration of dividends or similar distributions
by that Restricted Subsidiary of that income is not at the time permitted,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulations applicable to that Restricted Subsidiary or its stockholders.
"CONSOLIDATED NET TANGIBLE ASSETS" means, with respect to Foodbrands America
at any date, the total assets shown on the consolidated balance sheet of
Foodbrands America and the Restricted Subsidiaries prepared in accordance with
GAAP as of the last day of the immediately preceding fiscal quarter less the sum
of (a) all current liabilities plus (b) goodwill and other intangibles shown on
such balance sheet.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to Foodbrands America
for any period, the aggregate depreciation, amortization and other non-cash
expenses (including, without limitation, non-cash reserves and non-cash charges)
of Foodbrands America and the Restricted Subsidiaries reducing Consolidated Net
Income of Foodbrands America and the Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP.
"CREDIT AGREEMENT" means the Credit and Security Agreement dated as of
December 11, 1995, among Foodbrands America, as borrower, Chemical Bank, as
agent, and the lenders which are to become parties from time to time thereto,
together with the related documents thereto (including, without limitation, any
guarantee agreements permitted under the Indenture and security documents), in
each case as such agreement may be amended (including any agreement extending
the maturity of, refinancing, replacing or otherwise restructuring (including,
subject to the covenants of the Indenture, adding Subsidiary Guarantors as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement) or any successor or replacement agreement
permitted under the Indenture.
"CREDIT AGREEMENT OBLIGATIONS" means all monetary obligations of every
nature of Foodbrands America or a Restricted Subsidiary, including without
limitation, obligations to pay principal and interest, reimbursement obligations
under letters of credit, fees, expenses and indemnities, from time to time owed
to the lenders, the agent, the co-agents or any collateral agent under or in
respect of the Credit Agreement.
"DEBT SECURITIES" means any debt securities (including any guarantee of such
securities) issued by Foodbrands America and/or any Subsidiary Guarantor,
whether in a public offering or a private placement.
"DEFAULT" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
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"DESIGNATED SENIOR INDEBTEDNESS" means (i) all Senior Indebtedness and
Guarantor Senior Indebtedness under the Credit Agreement Obligations and (ii)
any other Senior Indebtedness (or for certain purposes more fully described in
the Indenture, Guarantor Senior Indebtedness) which (a) at the time of
incurrence exceeds $25,000,000 in aggregate principal amount and (b) is
specifically designated by Foodbrands America (or, in the case of Guarantor
Senior Indebtedness, by the relevant Subsidiary Guarantor) in the instrument
evidencing such Senior Indebtedness or Guarantor Senior Indebtedness as
"Designated Senior Indebtedness."
"DESIGNATION" has the meaning set forth under "-- Certain Covenants --
Limitation on Designations of Unrestricted Subsidiaries."
"DESIGNATION AMOUNT" has the meaning set forth under "-- Certain Covenants
- -- Limitation on Designations of Unrestricted Subsidiaries."
"EVENT OF DEFAULT" has the meaning set forth under "-- Events of Default"
herein.
"FAIR MARKET VALUE" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Market Value shall be
determined by the Board of Directors of Foodbrands America acting in good faith
and shall be envidenced by a Board Resolution of Foodbrands America delivered to
the Trustee.
"GAAP" means generally accepted accounting principles in the United States
set forth in the Statements of Financial Accounting Standards and the
Interpretations, Accounting Principles Board Opinions and AICPA Accounting
Research Bulletins which are applicable as of the Issue Date and consistently
applied.
"GUARANTEE" means, as applied to any obligation, (i) a guarantee (other than
by endorsement of negotiable instruments for collection in the ordinary course
of business), direct or indirect, in any manner, of any part or all of such
obligation and (ii) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which is to assure in any way the payment or performance
(or payment of damages in the event of non-performance) of all or any part of
such obligation, including, without limiting the foregoing, the payment of
amounts drawn down by letters of credit.
"GUARANTOR SENIOR INDEBTEDNESS" means, with respect to any Subsidiary
Guarantor, the principal of, premium, if any, and interest on any Indebtedness
of such Subsidiary Guarantor, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Note Guarantee of such Subsidiary
Guarantor. Without limiting the generality of the foregoing, "GUARANTOR SENIOR
INDEBTEDNESS" shall also include the principal of, premium, if any, and interest
(including interest accruing after the filing of a petition initiating any
proceeding under any Bankruptcy Law whether or not such interest is an allowable
claim in such proceeding) on, and all other amounts owing in respect of (i) all
Credit Agreement Obligations and Other Designated Guarantor Senior Indebtedness
Obligations, if any, of such Subsidiary Guarantor and (ii) all Related Currency
and Interest Rate Protection Obligations, if any, of such Subsidiary Guarantor.
Notwithstanding the foregoing, "Guarantor Senior Indebtedness" shall not include
(a) Indebtedness evidenced by the Note Guarantee of such Subsidiary Guarantor,
(b) Indebtedness that is expressly subordinate or junior in right of payment to
any Guarantor Senior Indebtedness of such Subsidiary Guarantor, (c) Indebtedness
which, when incurred and without respect to any election under Section 1111(b)
of Title 11, United States Code, is by its terms without recourse to such
Subsidiary Guarantor, (d) any repurchase, redemption or other obligation in
respect of Redeemable Capital Stock of such Subsidiary Guarantor, (e) to the
extent it might constitute Indebtedness, amounts owing for goods, materials or
services purchased in the ordinary course of business or consisting of trade
payables or other current liabilities (other than any current liabilities owing
under the Credit Agreement Obligations or the current portion of any long-term
Indebtedness which would constitute Guarantor Senior Indebtedness but for the
operation of this clause (e)), (f) to the extent it might constitute
Indebtedness, amounts owed by such Subsidiary Guarantor for compensation
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to employees or for services rendered to such Subsidiary Guarantor, (g) to the
extent it might constitute Indebtedness, any liability for federal, state, local
or other taxes owed or owing by such Subsidiary Guarantor, (h) Indebtedness of
such Subsidiary Guarantor to a Subsidiary of Foodbrands America or any other
Affiliate of Foodbrands America or any of such Affiliate's Subsidiaries, and (i)
that portion of any Indebtedness of such Subsidiary Guarantor which at the time
of issuance is issued in violation of the Indenture (but, as to any such
Indebtedness, no such violation shall be deemed to exist for purposes of this
clause (i) if the holder(s) of such Indebtedness or their representative or such
Subsidiary Guarantor shall have furnished to the Trustee an opinion of
independent legal counsel, unqualified in all material respects, addressed to
the Trustee (which legal counsel may, as to matters of fact, rely upon a
certificate of such Subsidiary Guarantor) to the effect that the incurrence of
such Indebtedness does not violate the provisions of such Indenture).
"INDEBTEDNESS" means, with respect to any person, without duplication, (a)
all liabilities of such person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities incurred in the ordinary course of business, but including,
without limitation, all obligations, contingent or otherwise, of such person in
connection with any letters of credit, banker's acceptance or other similar
credit transaction, (b) all obligations of such person evidenced by bonds,
notes, debentures or other similar instruments, (c) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such person (even if the rights and remedies of
the seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade accounts payable
arising in the ordinary course of business, (d) all Capitalized Lease
Obligations of such person, (e) all Indebtedness referred to in the preceding
clauses of other persons and all dividends of other persons, the payment of
which is secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon
property (including, without limitation, accounts and contract rights) owned by
such person, even though such person has not assumed or become liable for the
payment of such Indebtedness (the amount of such obligations being deemed to be
the lesser of the value of such property or asset or the amount of the
obligation so secured), (f) all guarantees of Indebtedness referred to in this
definition by such person, (g) all Redeemable Capital Stock valued at the
greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued dividends, (h) all obligations under or in respect of currency exchange
contracts and Interest Rate Protection Obligations of such person and (i) any
amendment, supplement, modification, deferral, renewal, extension or refunding
of any liability of the types referred to in clauses (a) through (h) above. For
purposes hereof, (x) the "maximum fixed repurchase price" of any Redeemable
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Redeemable Capital Stock as if such
Redeemable Capital Stock were purchased on any date on which Indebtedness shall
be required to be determined pursuant to the Indenture, and if such price is
based upon, or measured by, the fair market value of such Redeemable Capital
Stock, such fair market value shall be determined in good faith by the board of
directors of the issuer of such Redeemable Capital Stock, and (y) Indebtedness
is deemed to be incurred pursuant to a revolving credit facility each time an
advance is made thereunder. For purposes of the covenant "Limitation on
Indebtedness," in determining the principal amount of any Indebtedness to be
incurred by Foodbrands America or a Restricted Subsidiary or which is
outstanding at any date, the principal amount of any Indebtedness which provides
that an amount less than the principal amount thereof shall be due upon any
declaration of acceleration thereof shall be the accreted value thereof at the
date of determination. When any person becomes a Restricted Subsidiary, there
shall be deemed to have been an incurrence by such Restricted Subsidiary of all
Indebtedness for which it is liable at the time it becomes a Restricted
Subsidiary. If Foodbrands America or any of the Restricted Subsidiaries,
directly or indirectly, guarantees Indebtedness of a third person, there shall
be deemed to be an incurrence of such guaranteed Indebtedness as if Foodbrands
America or such Restricted Subsidiary had directly incurred or otherwise assumed
such guaranteed Indebtedness.
"INTEREST RATE PROTECTION OBLIGATIONS" means the obligations of any person
pursuant to any arrangement with any other person whereby, directly or
indirectly, such person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional
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<PAGE>
amount in exchange for periodic payments made by such person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"INVESTMENT" means, with respect to any person, any direct or indirect loan
or other extension of credit, guarantee or capital contribution to (by means of
any transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by, any other person. "Investments" shall
exclude extensions of trade credit by any person in the ordinary course of
business in accordance with normal trade practices of such person. In addition
to the foregoing, any foreign exchange contract, currency swap or similar
agreement shall constitute an Investment hereunder.
"JLL" means Joseph Littlejohn & Levy Associates, L.P.
"LEVERAGED SUBSIDIARY" means any Restricted Subsidiary that has incurred
Indebtedness (other than Acquired Indebtedness pursuant to the first paragraph
of the covenant "Limitation on Indebtedness" and Indebtedness described in
clauses (3) through (8) and (10) of the second paragraph of the covenant
"Limitation on Indebtedness," and any permitted refinancings or replacements
thereof incurred under clause (9) of the second paragraph of the covenant
"Limitation on Indebtedness") pursuant to the covenant "Limitation on
Indebtedness" for so long as such Indebtedness, or any refinancings thereof, is
outstanding.
"LIEN" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or preference
or priority or other encumbrance upon or with respect to any property of any
kind. A person shall be deemed to own subject to a Lien any property which such
person 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.
"MOODY'S" means Moody's Investors Services, Inc. and its successors.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents or marketable securities (valued
at their market value on the date of receipt), including, without limitation,
payments in respect of deferred payment obligations when received in the form of
cash or Cash Equivalents (except to the extent that such obligations are
financed or sold with recourse to Foodbrands America or any Restricted
Subsidiary) net of (i) brokerage commissions and other fees and expenses
(including, without limitation, fees and expenses of legal counsel and
investment bankers) related to such Asset Sale, (ii) provisions for all taxes
payable as a result of such Asset Sale, (iii) amounts required to be paid and
which have been paid, or amounts required to be pledged and which are pledged,
to secure Indebtedness owed, to any person (other than Foodbrands America or any
Restricted Subsidiary) owning a beneficial interest in the assets subject to the
Asset Sale (which, in the case of a Lien, is being pledged to permanently reduce
Indebtedness secured by such Lien) and (iv) appropriate amounts to be provided
by Foodbrands America or any Restricted Subsidiary, as the case may be, as a
reserve required in accordance with GAAP against any liabilities associated with
such Asset Sale and retained by Foodbrands America or any Restricted Subsidiary,
as the case may be, after such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as reflected in an officers' certificate
delivered to the Trustee.
"OTHER DESIGNATED SENIOR INDEBTEDNESS OBLIGATIONS" means all monetary
obligations of every nature of Foodbrands America or a Subsidiary Guarantor, as
applicable, including, without limitation, obligations to pay principal and
interest, reimbursement obligations under letters of credit, fees, expenses and
indemnities, from time to time owed (by reason of a guarantee or otherwise) to
any holder of Designated Senior Indebtedness in respect of Designated Senior
Indebtedness.
"PARI PASSU INDEBTEDNESS" means any Indebtedness of Foodbrands America or
any Subsidiary Guarantor ranking PARI PASSU in right of payment with the Notes
or the Note Guarantees, as applicable.
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<PAGE>
"PERMITTED HOLDERS" means (i) JLL and its Affiliates and (ii) any "group"
(as such term is used in Sections 13(d) and 14(d) of the Exchange Act) comprised
solely of JLL and its Affiliates and The Airlie Group, L.P. and its Affiliates
(it being understood that a "group" that includes any other person shall not be
a Permitted Holder).
"PERMITTED INVESTMENT" means any of the following: (a) Investments in any
Restricted Subsidiary (including any person that pursuant to such Investment
becomes a Restricted Subsidiary) and any person that is merged or consolidated
with or into, or transfers or conveys all or substantially all of its assets to,
Foodbrands America or any Restricted Subsidiary at the time such Investment is
made; (b) Investments in Cash Equivalents; (c) Investments in deposits with
respect to leases or utilities provided to third parties in the ordinary course
of business; (d) Investments in the Notes; (e) Investments in Interest Rate
Protection Agreements and currency exchange contracts permitted by the covenant
"-- Limitation on Indebtedness" and Related Currency and Interest Rate
Protection Obligations; (f) loans or advances to officers, employees or
consultants of Foodbrands America and its Restricted Subsidiaries in the
ordinary course of business for bona fide business purposes of Foodbrands
America and the Restricted Subsidiaries (including travel and moving expenses)
not in excess of $1,000,000 in the aggregate at any one time outstanding; (g)
loans to any 401(k) plan qualified under the Internal Revenue Code and
maintained for the benefit of employees of Foodbrands America and the Restricted
Subsidiaries; and (h) Investments in evidences of Indebtedness, securities or
other property received from another person by Foodbrands America or any of the
Restricted Subsidiaries in connection with any bankruptcy proceeding or by
reason of a composition or readjustment of debt or a reorganization of such
person or as a result of foreclosure, perfection or enforcement of any Lien in
exchange for evidences of Indebtedness, securities or other property of such
person held by Foodbrands America or any of the Restricted Subsidiaries, or for
other liabilities or obligations of such other person to Foodbrands America or
any of the Restricted Subsidiaries that were created in accordance with the
terms of the Indenture.
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"PREFERRED STOCK" means, with respect to any person, any and all shares,
interests, participations or other equivalents (however designated) of such
person's preferred or preference stock whether now outstanding or issued after
the Issue Date, and including, without limitation, all classes and series of
preferred or preference stock of such person.
"PURCHASE MONEY OBLIGATION" means any Indebtedness secured by a Lien on
assets related to the business of Foodbrands America or the Restricted
Subsidiaries, and any additions and accessions thereto, which are purchased or
constructed by Foodbrands America or any Restricted Subsidiary at any time after
the Issue Date; PROVIDED that (i) any security agreement or conditional sales or
other title retention contract pursuant to which the Lien on such assets is
created (collectively a "Security Agreement") shall be entered into within 90
days after the purchase or substantial completion of the construction of such
assets and shall at all times be confined solely to the assets so purchased or
acquired, any additions and accessions thereto and any proceeds therefrom, (ii)
at no time shall the aggregate principal amount of the outstanding Indebtedness
secured thereby be increased, except in connection with the purchase of
additions and accessions thereto and except in respect of fees and other
obligations in respect of such Indebtedness and (iii) (A) the aggregate
outstanding principal amount of Indebtedness secured thereby (determined on a
per asset basis in the case of any additions and accessions) shall not at the
time such Security Agreement is entered into exceed 100% of the purchase price
to Foodbrands America or any Restricted Subsidiary of the assets subject thereto
or (B) the Indebtedness secured thereby shall be with recourse solely to the
assets so purchased or acquired, any additions and accessions thereto and any
proceeds therefrom.
"REDEEMABLE CAPITAL STOCK" means any class or series of Capital Stock that,
either by its terms, by the terms of any security into which it is convertible
or exchangeable or by contract or otherwise, is, or upon the happening of an
event or passage of time would be, required to be redeemed prior to any Stated
Maturity of the Notes or is redeemable at the option of the holder thereof at
any time prior to any Stated Maturity of the
64
<PAGE>
Notes, or, at the option of the holder thereof, is convertible into or
exchangeable for debt securities at any time prior to any Stated Maturity of the
Notes. Notwithstanding the foregoing, Redeemable Capital Stock shall not include
the Bank Warrants.
"RELATED CURRENCY AND INTEREST RATE PROTECTION OBLIGATIONS" means all
monetary obligations of every nature of Foodbrands America or a Subsidiary
Guarantor under or in respect of currency exchange contracts and Interest Rate
Protection Obligations of Foodbrands America or such Guarantor either (a) to the
extent such monetary obligations relate to Credit Agreement Obligations or Other
Designated Senior Indebtedness Obligations or (b) to the extent such monetary
obligations are secured by collateral securing Credit Agreement Obligations or
Other Designated Senior Indebtedness Obligations (in either case, as
conclusively evidenced by an officers' certificate of Foodbrands America or such
Guarantor delivered to the Trustee at the time such obligations are initially
incurred by Foodbrands America or such Restricted Subsidiary).
"RESTRICTED PAYMENT" has the meaning set forth under "-- Limitation on
Restricted Payments" covenant above.
"RESTRICTED SUBSIDIARY" means any Subsidiary of Foodbrands America that has
not been designated by the Board of Directors of Foodbrands America, by a Board
Resolution of Foodbrands America delivered to the Trustee, as an Unrestricted
Subsidiary pursuant to and in compliance with the covenant described under "--
Certain Covenants -- Limitation on Designations of Unrestricted Subsidiaries."
Any such designation may be revoked by a Board Resolution of Foodbrands America
delivered to the Trustee, subject to the provisions of such covenant.
"REVOCATION" has the meaning ascribed to that term under "-- Certain
Covenants -- Limitation on Designations of Unrestricted Subsidiaries."
"S&P" means Standard & Poor's Corporation and its successors.
"SENIOR INDEBTEDNESS" means the principal of, premium, if any, and interest
on any Indebtedness of Foodbrands America, whether outstanding on the Issue Date
or thereafter created, incurred or assumed, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes. Without
limiting the generality of the foregoing, "Senior Indebtedness" shall also
include the principal of, premium, if any, and interest (including interest
accruing after the filing of a petition initiating any proceeding under any
Bankruptcy Law whether or not such interest is an allowable claim in such
proceeding) on, and all other amounts owing in respect of (i) all Credit
Agreement Obligations and Other Designated Senior Indebtedness Obligations of
Foodbrands America and (ii) all Related Currency and Interest Rate Protection
Obligations of Foodbrands America. Notwithstanding the foregoing, "Senior
Indebtedness" shall not include (a) Indebtedness evidenced by the Notes, (b)
Indebtedness that is expressly subordinate or junior in right of payment to any
Senior Indebtedness of Foodbrands America, (c) Indebtedness which, when incurred
and without respect to any election under Section 1111(b) of Title 11, United
States Code, is by its terms without recourse to Foodbrands America, (d) any
repurchase, redemption or other obligation in respect of Redeemable Capital
Stock of Foodbrands America, (e) to the extent it might constitute Indebtedness,
amounts owing for goods, materials or services purchased in the ordinary course
of business or consisting of trade payables or other current liabilities (other
than any current liabilities owing under the Credit Agreement Obligations or the
current portion of any long-term Indebtedness which would constitute Senior
Indebtedness but for the operation of this clause (e)), (f) to the extent it
might constitute Indebtedness, amounts owed by Foodbrands America for
compensation to employees or for services rendered to Foodbrands America, (g) to
the extent it might constitute Indebtedness, any liability for federal, state,
local or other taxes owed or owing by Foodbrands America, (h) Indebtedness of
Foodbrands America to a Subsidiary of Foodbrands America or any other Affiliate
of Foodbrands America or any of such Affiliate's Subsidiaries, and (i) that
portion of any Indebtedness of Foodbrands America which at the time of issuance
is issued in violation of the Indenture (but, as to any such Indebtedness, no
such violation shall be deemed to exist for purposes of this clause (i) if the
holder(s) of such Indebtedness or their representative or Foodbrands America
shall have furnished to the Trustee an opinion of independent legal
65
<PAGE>
counsel, unqualified in all material respects, addressed to the Trustee (which
legal counsel may, as to matters of fact, rely upon a certificate of Foodbrands
America) to the effect that the incurrence of such Indebtedness does not violate
the provisions of such Indenture).
"SENIOR SUBORDINATED NOTE OBLIGATIONS" means (i) any principal of, premium,
if any, and interest on, and any other amounts owing in respect of, the Notes
payable pursuant to the terms of the Notes or the Indenture or upon acceleration
of the Notes, including, without limitation, amounts received upon the exercise
of rights of rescission or other rights of action (including claims for damages)
or otherwise, to the extent relating to the purchase price of the Notes or
amounts corresponding to such principal of, premium, if any, interest, or other
amounts owing with respect to, the Notes and (ii) in the case of any Subsidiary
Guarantor, any obligations with respect to the foregoing or otherwise under its
Note Guarantee.
"SIGNIFICANT SUBSIDIARY" shall have the same meaning as in Rule 1.02(v) of
Regulation S-X under the Securities Act, provided that (i) each Subsidiary
Guarantor shall in all events be deemed a Significant Subsidiary and (ii) no
Unrestricted Subsidiary shall be deemed a Significant Subsidiary.
"SPECIFIED INDEBTEDNESS" means (i) any Senior Indebtedness, (ii) any
Guarantor Senior Indebtedness and (iii) any Indebtedness of any Restricted
Subsidiary (other than a Subsidiary Guarantor) which is not subordinated to any
other Indebtedness of such Restricted Subsidiary.
"STATED MATURITY" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which any principal of such Note or such installment of interest is due
and payable, and when used with respect to any other Indebtedness or any
installments of interest thereon, means any date specified in the instrument
governing such Indebtedness as the fixed date on which the principal of such
Indebtedness, or such installment of interest thereon, is due and payable.
"SUBORDINATED INDEBTEDNESS" means, with respect to Foodbrands America,
Indebtedness of Foodbrands America which is expressly subordinated in right of
payment to the Notes or, with respect to any Subsidiary Guarantor, Indebtedness
of such Subsidiary Guarantor which is expressly subordinated in right of payment
to the Note Guarantee of such Subsidiary Guarantor.
"SUBSIDIARY" means, with respect to any person, (i) a corporation a majority
of whose Voting Stock is at the time, directly or indirectly, owned by such
person, by one or more Subsidiaries of such person or by such person and one or
more Subsidiaries of such person and (ii) any other person (other than a
corporation), including, without limitation, a joint venture, in which such
person or one or more Subsidiaries of such person, directly or indirectly, at
the date of determination thereof, has at least a majority ownership interest
entitled to vote in the election of directors, managers or trustees thereof (or
other person performing similar functions). For purposes of this definition, any
directors' qualifying shares or investments by foreign nationals mandated by
applicable law shall be disregarded in determining the ownership of a
Subsidiary.
"TREASURY RATE" means, the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two business days prior to the date
fixed for redemption of the Notes following a Change of Control (or, if such
Statistical Release is no longer published, any publicly available source of
similar market data)) most nearly equal to the then remaining Average Life to
Stated Maturity of the Notes; PROVIDED that if the Average Life to Stated
Maturity of the Notes is not equal to the constant Maturity of a United States
Treasury security for which a weekly average yield is given, the Treasury Rate
shall be obtained by linear interpolation (calculated to the nearest one-twelfth
of a year) from the weekly average yields of United States Treasury securities
for which such yields are given, except that if the Average Life to Stated
Maturity of the Notes is less than one year, the weekly average yield on
actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
"UNRESTRICTED SUBSIDIARY" means a Subsidiary of Foodbrands America (other
than a Subsidiary Guarantor) designated as such pursuant to and in compliance
with the covenant described under "-- Certain Covenants -- Limitation on
Designations of Unrestricted Subsidiaries." Any such designation may be revoked
by a Board Resolution of Foodbrands America delivered to the Trustee, subject to
the provisions of such covenant.
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<PAGE>
"VOTING STOCK" means any class or classes of Capital Stock pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect at least a majority of the board of directors, managers or trustees of
any person (irrespective of whether or not, at the time, stock of any other
class or classes shall have, or might have, voting power by reason of the
happening of any contingency).
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" means any Restricted Subsidiary of
which 100% of the outstanding Capital Stock is owned by Foodbrands America
and/or another Wholly-Owned Restricted Subsidiary. For purposes of this
definition, any directors' qualifying shares or investments by foreign nationals
mandated by applicable law shall be disregarded in determining the ownership of
a Restricted Subsidiary.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement among
Foodbrands America, the Subsidiary Guarantors and Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("Merrill Lynch"), Chase Securities Inc. ("Chase
Securities") and Dillon, Read & Co. Inc. (collectively, the "Underwriters"),
Foodbrands America has agreed to sell to the Underwriters, and the Underwriters
have severally agreed to purchase, the respective principal amounts of the Notes
set forth after their names below. The Purchase Agreement provides that the
obligations of the Underwriters are subject to certain conditions precedent and
that the Underwriters will be obligated to purchase the entire principal amount
of the Notes, if any Notes are purchased.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
- -------------------------------------------------------------------------------------- ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................................ $
Chase Securities Inc..................................................................
Dillon, Read & Co. Inc................................................................
----------------
Total....................................................................... $ 120,000,000
----------------
----------------
</TABLE>
The Underwriters have advised the Company that they propose initially to
offer the Notes to the public at the public offering price set forth on the
cover page of this Prospectus, and to certain dealers at such price less a
concession not in excess of % of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of % of the principal amount of the Notes to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
There is no public trading market for the Notes, and Foodbrands America does
not intend to apply for listing of the Notes on any securities exchange. The
Company has been advised by the Underwriters that, following the completion of
the initial offering of the Notes, the Underwriters presently intend to make a
market in the Notes, although the Underwriters are under no obligation to do so
and may discontinue any market making at any time without notice. No assurances,
however, can be given as to the liquidity of the trading market for the Notes or
that an active market for the Notes will develop. If an active public trading
market for the Notes does not develop, the market price and liquidity of the
Notes may be adversely affected.
Foodbrands America and the Subsidiary Guarantors have agreed, jointly and
severally, to indemnify the Underwriters against certain liabilities, including
civil liabilities under the Securities Act, or to contribute to payments which
the Underwriters may be required to make in respect thereof.
The Underwriters have from time to time provided and may in the future
provide investment banking and financial advisory services to Foodbrands
America, and have received and may in the future receive customary fees for such
services.
Chase Securities is an affiliate of Chemical Bank which is the lead agent
bank and a lender to the Company under the Credit Agreement. Chemical Bank will
receive its proportionate share of any repayment by the Company of amounts
outstanding under the Credit Agreement from the proceeds of the offering of the
Notes. In addition, Chemical Bank, or its affiliates, participates on a regular
basis in various general financing and banking transactions for the Company. See
"Description of Other Indebtedness" for information concerning certain warrants
to purchase Common Stock of Foodbrands America that have been issued to Chemical
Bank.
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<PAGE>
LEGAL MATTERS
The validity of the Notes offered hereby and the Note Guarantees will be
passed upon for the Company by McAfee & Taft A Professional Corporation, Tenth
Floor, Two Leadership Square, Oklahoma City, Oklahoma 73102, and certain legal
matters will be passed upon for the Underwriters by Cahill Gordon & Reindel (a
partnership including a professional corporation), 80 Pine Street, New York, New
York 10005.
EXPERTS
The consolidated balance sheets of the Company as of December 30, 1995 and
December 31, 1994 and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended December 30, 1995,
December 31, 1994, and January 1, 1994, included in the Prospectus, have been
included in reliance on the report, which includes an explanatory paragraph
relating to the Company's adoption of new methods of accounting for income taxes
and postretirement benefits other than pensions, of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The financial statements of TNT Crust, Inc. for the fiscal year ended August
31, 1995 incorporated by reference in this Prospectus have been audited by
Arthur Andersen LLP, independent auditors, as stated in their report therein,
and are incorporated herein in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing. The balance sheets of TNT
Crust, Inc. as of August 31, 1994 and 1993 and the related statements of
operations, changes in shareholder's equity, and cash flows for the years then
ended, incorporated by reference in this Prospectus, have been incorporated
herein in reliance on the report of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
The financial statements of KPR Holdings, L.P. for the period ended December
10, 1995 and for each of the fiscal years ended December 31, 1994 and January 1,
1994 incorporated by reference in this Prospectus have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their report therein, and are
incorporated herein in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
69
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Report of Independent Accountants.................................................... F-2
<S> <C>
Consolidated Balance Sheet at December 31, 1994 and December 30, 1995................ F-3
Consolidated Statement of Operations For the Years Ended January 1, 1994, December
31, 1994 and December 30, 1995...................................................... F-4
Consolidated Statement of Stockholders' Equity For the Years Ended January 1, 1994,
December 31, 1994 and December 30, 1995............................................. F-5
Consolidated Statement of Cash Flows For the Years Ended January 1, 1994, December
31, 1994 and December 30, 1995...................................................... F-6
Notes to Consolidated Financial Statements........................................... F-8
Quarterly Results of Operations (Unaudited).......................................... F-23
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Foodbrands America, Inc.
We have audited the consolidated balance sheets of Foodbrands America, Inc.
and subsidiaries as of December 31, 1994 and December 30, 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended January 1, 1994, December 31, 1994 and December 30, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Foodbrands
America, Inc. and subsidiaries as of December 31, 1994 and December 30, 1995,
and the consolidated results of their operations and their cash flows for the
years ended January 1, 1994, December 31, 1994 and December 30, 1995 in
conformity with generally accepted accounting principles.
As discussed in Note 11 to the consolidated financial statements, effective
January 3, 1993, the Company changed its method of accounting for income taxes
and its method of accounting for postretirement benefits other than pensions.
COOPERS & LYBRAND L.L.P.
Oklahoma City, Oklahoma
February 12, 1996
F-2
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PAR VALUE)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................................................... $ 17,376 $ 7,398
Receivables........................................................................ 29,472 46,166
Inventories........................................................................ 48,488 58,523
Other current assets............................................................... 2,365 3,130
Net current assets of discontinued operations...................................... 12,145 --
------------ ------------
Total current assets............................................................. 109,846 115,217
Property, plant and equipment -- net of accumulated depreciation and amortization of
$31,685 in 1994 and $38,188 in 1995................................................. 92,902 139,926
Intangible assets, net of accumulated amortization of $2,654 in 1994 and $5,375 in
1995................................................................................ 83,687 195,025
Deferred charges and other assets.................................................... 43,419 46,284
Reorganization value in excess of amounts allocable to identifiable assets, net of
accumulated amortization of $7,867 in 1994 and $9,641 in 1995....................... 39,204 25,311
Net noncurrent assets of discontinued operations..................................... 73,209 --
------------ ------------
$ 442,267 $ 521,763
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt............................................... $ 1,654 $ 18,341
Accounts payable................................................................... 13,353 26,152
Accrued liabilities................................................................ 44,182 50,294
------------ ------------
Total current liabilities........................................................ 59,189 94,787
Long-term debt....................................................................... 224,260 305,407
Other long-term liabilities.......................................................... 80,331 78,340
Commitments and contingencies (Note 12)
Stockholders' equity:
Preferred stock, 4,000,0000 shares authorized, none issued and outstanding......... -- --
Common stock, $.01 par value, 20,000,000 shares authorized, 12,447,914 and
12,467,738 shares issued and outstanding, respectively............................ 124 125
Capital in excess of par value..................................................... 151,046 151,248
Retained earnings (deficit)........................................................ (71,108) (105,203)
Minimum pension liability adjustment............................................... (1,575) (2,941)
------------ ------------
Total stockholders' equity....................................................... 78,487 43,229
------------ ------------
$ 442,267 $ 521,763
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------
JAN. 1, DEC. 31, DEC. 30,
1994 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.................................................................... $ 393,270 $ 512,352 $ 634,700
Cost of sales................................................................ 335,788 410,118 499,985
---------- ---------- ----------
Gross profit................................................................. 57,482 102,234 134,715
Operating expenses:
Selling.................................................................... 28,979 52,165 69,483
General and administrative................................................. 21,732 24,151 25,634
Amortization of intangible assets.......................................... 2,843 4,123 4,495
Provision for restructuring and integration (Note 4)....................... -- 10,586 --
Provision for plant closings (Note 6)...................................... 500 -- --
---------- ---------- ----------
Total.................................................................... 54,054 91,025 99,612
---------- ---------- ----------
Operating income............................................................. 3,428 11,209 35,103
Other income (expense):
Interest and financing costs............................................... (9,240) (15,102) (17,268)
Other, net................................................................. 226 (702) (1,193)
---------- ---------- ----------
Total.................................................................... (9,014) (15,804) (18,461)
---------- ---------- ----------
Income (loss) from continuing operations before income taxes................. (5,586) (4,595) 16,642
Income tax provision (benefit)............................................... (1,212) 600 7,041
---------- ---------- ----------
Income (loss) from continuing operations..................................... (4,374) (5,195) 9,601
Discontinued operations (Notes 3 and 10):
Income (loss) from operations of the Retail Division, net of income tax.... 6,781 (8,522) (4,121)
Loss on disposal of the Retail Division (plus applicable income tax expense
of $10,300)............................................................... -- -- (38,526)
Extraordinary loss on early extinguishment of debt (less income tax benefit
of $673 in 1995) (Note 8)................................................... -- (2,481) (1,049)
Cumulative effect on prior years (to January 2, 1993) of change in accounting
for postretirement benefits other than pensions
(Note 11)................................................................... (34,426) -- --
---------- ---------- ----------
Net income (loss)............................................................ $ (32,019) $ (16,198) $ (34,095)
---------- ---------- ----------
---------- ---------- ----------
Earnings (loss) per share -- primary and fully diluted:
Income (loss) from continuing operations................................... $ (0.59) $ (0.59) $ 0.77
Income (loss) from discontinued operations................................. 0.91 (0.98) (0.33)
Loss on disposal of discontinued operations................................ -- -- (3.09)
Extraordinary loss on early extinguishment of debt......................... -- (0.28) (0.08)
Cumulative effect of a change in accounting for post-retirement benefits
other than pensions....................................................... (4.64) -- --
---------- ---------- ----------
Net income (loss).......................................................... $ (4.32) $ (1.85) $ (2.73)
---------- ---------- ----------
---------- ---------- ----------
Weighted average number of common and common equivalent shares outstanding --
primary and fully diluted................................................... 7,419 8,727 12,453
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
MINIMUM
COMMON STOCK CAPITAL IN RETAINED PENSION UNEARNED
---------------------- EXCESS OF EARNINGS LIABILITY COMPEN-
SHARES AMOUNT PAR VALUE (DEFICIT) ADJUSTMENT SATION
--------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 2, 1993.................... 5,888 $ 59 $ 85,267 $ (22,891) $ -- $ (796)
Net Loss.................................... -- -- -- (32,019) -- --
Issuance of new shares...................... 2,000 20 26,702 -- -- --
Minimum pension liability adjustment........ -- -- -- -- (1,575) --
Net activity under Stock Incentive Plan..... 30 -- 346 -- -- 456
--------- ----- ---------- ----------- ----------- -----
Balance, January 1, 1994.................... 7,918 79 112,315 (54,910) (1,575) (340)
Net Loss.................................... -- -- -- (16,198) -- --
Issuance of new shares...................... 4,512 45 38,581 -- -- --
Net activity under Stock Incentive Plan..... 18 -- 150 -- -- 340
--------- ----- ---------- ----------- ----------- -----
Balance, December 31, 1994.................. 12,448 124 151,046 (71,108) (1,575) --
Net Loss.................................... -- -- -- (34,095) -- --
Issuance of new shares...................... 20 1 202 -- -- --
Minimum pension liability adjustment, net of
deferred tax............................... -- -- -- -- (1,366) --
--------- ----- ---------- ----------- ----------- -----
Balance, December 30, 1995.................. 12,468 $ 125 $ 151,248 $ (105,203) $ (2,941) $ --
--------- ----- ---------- ----------- ----------- -----
--------- ----- ---------- ----------- ----------- -----
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------
JAN. 1, DEC. 31, DEC. 30,
1994 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations................................. $ (4,374) $ (5,195) $ 9,601
Adjustments to reconcile income (loss) from continuing operations to net
cash provided (used) by continuing operating activities:
Depreciation and amortization.......................................... 7,806 10,508 11,509
Amortization of intangible assets...................................... 2,843 4,123 4,495
Provision for restructuring and integration............................ -- 10,586 --
Postretirement medical benefits........................................ 1,090 670 487
Provision for plant sale............................................... 500 -- --
Deferred compensation.................................................. -- -- 460
Amortization included in interest expense.............................. 416 1,279 1,195
Deferred income taxes.................................................. (1,631) -- 6,138
Payments for restructuring/integration................................. -- (1,020) (3,240)
Changes in:
Receivables.......................................................... (2,181) 430 (8,413)
Inventories.......................................................... (6,126) 1,713 (2,844)
Other current assets................................................. 1,450 (354) (587)
Deferred charges and other assets.................................... (609) 357 (219)
Accounts payable and accrued liabilities............................. 8,643 3,635 5,015
Noncurrent liabilities............................................... (159) -- 2,250
Other.................................................................. (18) 22 (51)
----------- ----------- -----------
Net cash provided by continuing operations........................... 7,650 26,754 25,796
Net cash provided (used) by discontinued operations including changes
in working capital.................................................... 10,488 627 (12,294)
----------- ----------- -----------
Net cash provided (used) by operating activities........................... 18,138 27,381 13,502
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment................................ (8,934) (10,063) (24,255)
Acquisition of KPR Holdings, L.P......................................... -- -- (51,935)
Acquisition of TNT Crust, Inc............................................ -- -- (56,379)
Acquisition of International Multifoods Foodservice Corp................. -- (137,684) --
Payments received on notes receivable.................................... 517 672 358
Proceeds from sale of property, plant and equipment...................... -- 436 130
Proceeds from sale of Retail Division.................................... -- -- 65,786
Net investing activities of discontinued operations...................... (12,770) (4,557) (838)
----------- ----------- -----------
Net cash used by investing activities.................................... (21,187) (151,196) (67,133)
----------- ----------- -----------
(CONTINUED)
</TABLE>
F-6
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------
JAN. 1, DEC. 31, DEC. 30,
1994 1994 1995
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
<S> <C> <C> <C>
Proceeds from debt obligations, net of issuance costs.................... 105,953 141,154 147,636
Borrowings under revolving working capital facility...................... 99,233 195,500 30,000
Payments on revolving working capital facility........................... (157,011) (203,500) (21,000)
Payments on capital lease and debt obligations........................... (74,437) (36,720) (112,629)
Payment on early extinguishment of debt.................................. -- (1,088) --
Issuance of common stock................................................. 26,722 38,626 195
Net financing activities of discontinued operations...................... (520) 1,016 (549)
----------- ----------- -----------
Net cash provided (used) by financing activities......................... (60) 134,988 43,653
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........................... (3,109) 11,173 (9,978)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........................... 9,312 6,203 17,376
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................................. $ 6,203 $ 17,376 $ 7,398
----------- ----------- -----------
----------- ----------- -----------
SUPPLEMENTAL DISCLOSURE OF NONCASH OPERATING ACTIVITIES:
Loss on early extinguishment of debt, net of income taxes................ $ -- $ (2,419) $ (1,049)
Cumulative effect on prior years of change in accounting for
post-retirement benefits other than pensions............................ (34,426) -- --
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Promissory note issued upon acquisition.................................. $ -- $ -- $ 50,000
Capital lease obligations-
Continuing operations.................................................. 1,285 550 22
Discontinued operations................................................ 331 2,853 --
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest............................................................... $ 8,406 $ 19,441 $ 19,944
Income taxes........................................................... 815 442 727
Reorganization professional and financing fees......................... 319 -- --
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. DESCRIPTION OF BUSINESS:
The Company produces, markets and distributes frozen and refrigerated
products targeted to growth segments of the foodservice industry, which
encompasses all aspects of away-from-home food preparation. The Company's
products include pepperoni, beef and pork toppings, as well as partially baked
pizza crusts, marketed to the pizza industry, appetizers, Mexican and Italian
foods, sauces, soups and side dishes and branded and processed meat products.
Customers include large multi-unit food chains, major foodservice distributors,
warehouse clubs and grocery store delicatessens, principally in the United
States.
The Company's annual reporting period ends on the Saturday nearest December
31. Accordingly, the annual reporting periods ended January 1, 1994, December
31, 1994 and December 30, 1995 contained 52 weeks.
B. PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of Foodbrands
America, Inc. ("Foodbrands America") and all of its subsidiaries. Prior year
balances have been restated to conform to the current year's presentation for
discontinued operations (See Note 3).
C. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Significant estimates made by the Company include accrued pension costs,
including a minimum pension liability adjustment, accrued postretirement medical
benefits and a valuation allowance for deferred tax assets. Accrued pension
costs and postretirement benefits involve the use of actuarial assumptions,
including selection of discount rates (See Note 11). Determination of the
valuation allowance for deferred tax assets considers estimates of projected
taxable income (See Note 10). It is reasonably possible that the Company's
estimates for such items could change in the near term.
D. CASH AND CASH EQUIVALENTS:
The Company considers cash equivalents to include all investments with a
maturity at date of purchase of 90 days or less. Cash equivalents of $18.8
million and $10.1 million at December 31, 1994 and December 30, 1995 represent
investments primarily in Commercial Paper and U.S. Government Securities,
carried at cost, which approximates market.
E. CONCENTRATIONS OF CREDIT RISK:
The concentrations of credit risk with respect to trade receivables are, in
management's opinion, considered minimal due to the Company's diverse customer
base. Credit evaluations of its customers' financial conditions are performed
periodically, and the Company generally does not require collateral from its
customers. As of December 31, 1994, the Company had concentrations of cash in
bank balances totaling approximately $4.7 million located in 9 banks. As of
December 30, 1995, the Company had concentrations of cash in bank balances
totaling approximately $4.2 million located at 6 banks which exposes the Company
to concentrations of credit risk.
F. INVENTORIES:
Inventories are valued at the lower of cost (first-in, first-out) or market.
The Company periodically enters into futures contracts as deemed appropriate to
reduce the risk of future price increases. These
F-8
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 -- DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
futures contracts are accounted for as hedges. Accordingly, resulting gains or
losses are deferred and recognized as part of the product cost and included in
cash flows from operating activities in the Consolidated Statement of Cash
Flows.
G. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are stated at cost if acquired after September
28, 1991, the date the Company implemented Fresh Start Reporting as set forth in
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code" ("SOP 90-7"), issued by the American Institute of
Certified Public Accountants. When assets are sold or retired, the costs of the
assets and the related accumulated depreciation are removed from the accounts
and the resulting gains or losses are recognized.
Depreciation and amortization are provided using the straight-line method
over either the estimated useful lives of the related assets (3 to 40 years) or,
for capital leases, the terms of the related leases.
H. INTANGIBLE ASSETS AND REORGANIZATION VALUE:
The excess of the aggregate purchase price over fair value of net assets
acquired ("Goodwill") is being amortized over 40 years. Trademarks and
tradenames are amortized on the straight-line method over 20 to 25 years.
Based on the allocation of reorganization value in conformity with the
procedures specified by SOP 90-7, the portion of the reorganization value which
cannot be attributed to specific tangible or identifiable intangible assets of
the reorganized Company has been reported as "Reorganization Value in Excess of
Amounts Allocable to Identifiable Assets" ("Reorganization Value") and is
amortized using the straight-line method over 20 years.
The Company continually re-evaluates the carrying amount of the
Reorganization Value and other intangibles as well as the amortization period to
determine whether current events and circumstances warrant adjustments to the
carrying value and/or revised estimates of useful lives. The specific
methodology of future pre-interest cash flows (with assets grouped by division
which is the lowest level for which there are identifiable cash flows) is used
for this evaluation. At this time, the Company believes that no impairment of
the Reorganization Value and other intangibles has occurred and that no
reduction of the estimated useful lives is warranted.
I. DEFERRED CHARGES AND OTHER ASSETS:
Included in deferred charges and other assets are net deferred tax assets of
$32.7 million. Deferred loan costs associated with various debt instruments are
being amortized over the terms of the related debt using the interest method. At
December 31, 1994 and December 30, 1995, $7.0 million and $6.1 million,
respectively, remained to be amortized over future periods. Amortization expense
for these loans included in interest expense for fiscal 1993, 1994 and 1995 was
approximately $0.3 million, $1.2 million and $1.1 million, respectively.
Deferred loan costs of $2.5 million and $1.7 million were written off in Fiscal
1994 and 1995, respectively, due to early extinguishment of debt.
J. INCOME TAXES:
The Company utilizes the asset and liability approach for financial
accounting and reporting for income taxes as set forth in Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." SFAS
109 utilizes the liability method and deferred income taxes are recorded to
reflect the expected tax consequences in future years of differences between the
tax basis of assets and liabilities and their financial reporting amounts and
net operating loss carryforwards ("NOLs") at each year-end.
F-9
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 -- DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. This analysis is performed
quarterly based on the best information available. The Company will make
adjustments as necessary to the valuation allowance when it becomes more likely
than not that the net deferred tax benefits will be realized in the future.
K. EARNINGS (LOSS) PER COMMON SHARE:
Primary and fully diluted earnings (loss) per share are computed by dividing
net income (loss) by the weighted average number of common and common equivalent
shares outstanding during each period. Options and warrants which have a
dilutive effect are considered in the per share computations.
L. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
IMPAIRMENT OF LONG-LIVED ASSETS. Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of," requires that long-lived assets
and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Impairment is
evaluated by comparing future cash flows (undiscounted and without interest
charges) expected to result from the use of the asset and its eventual
disposition to the carrying amount of the asset. This new accounting
principle is effective for the Company's fiscal year ending December 28,
1996. The Company believes that adoption will not have a material impact on
its financial position.
STOCK-BASED COMPENSATION. Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation," encourages, but does not
require, companies to recognize compensation expense for grants of stock,
stock options and other equity instruments to employees based on new fair
value accounting rules. Although expense recognition for employee stock
based compensation is not mandatory, SFAS 123 requires companies that choose
not to adopt the new fair value accounting to disclose pro-forma net income
and earnings per share under the new method. This new accounting principle
is effective for the Company's fiscal year ending December 28, 1996. The
Company believes that adoption will not have a material impact on its
financial condition as the Company will not adopt the fair value accounting,
but will instead comply with the disclosure requirements.
NOTE 2 -- ACQUISITIONS
On December 11, 1995, the Company purchased KPR Holdings, L.P. ("KPR") for
approximately $101.9 million, including transaction related costs of the
acquisition. In addition, the Company has agreed to certain contingent payments
payable in Common Stock of the Company or cash, at the option of the sellers,
aggregating up to approximately $15.0 million, over the next three years based
on the attainment of specified earnings levels. These payments, if made, will
increase goodwill. KPR produces and markets custom prepared foods and prepared
meat items for multi-unit restaurant chains. The acquisition has been accounted
for by the purchase method of accounting based on preliminary estimates. Final
adjustments are not expected to be material. The excess of the total purchase
price over fair value of net assets acquired of approximately $65.8 million has
been recognized as goodwill and is being amortized over 40 years.
On December 18, 1995, the Company purchased all the outstanding stock of TNT
Crust, Inc. ("TNT") for approximately $56.4 million, including transaction
related costs of the acquisition. In addition, the Company has agreed to a
contingent earnout payment payable in Common Stock of the Company or cash, at
the option of the sellers, not to exceed $6.5 million, based on sales growth to
certain customers. These payments, if made, will increase goodwill. The business
operates as a segment of the Food Service Division. TNT produces and markets
partially baked and frozen self-rising crusts for use by pizza chains,
restaurants and frozen pizza manufacturers. The acquisition has been accounted
for by the purchase method of
F-10
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- ACQUISITIONS (CONTINUED)
accounting based on preliminary estimates. Final adjustments are not expected to
be material. The excess of the total purchase price over fair value of net
assets acquired of approximately $47.5 million has been recognized as goodwill
and is being amortized over 40 years.
On June 1, 1994, the Company purchased all of the outstanding stock of
International Multifoods Foodservice Corp., a division of International
Multifoods Corporation, for approximately $137.7 million, including transaction
related costs of the acquisition. The business, which has been renamed Doskocil
Specialty Brands Company, manufactures frozen food products, including ethnic
foods in the Mexican and Italian categories, as well as appetizers, entrees and
portioned meats. The acquisition has been accounted for by the purchase method
of accounting. The excess of the aggregate purchase price over fair value of net
assets acquired of approximately $68.3 million and trademarks at a fair value of
$9.7 million were recognized as intangible assets and are being amortized over
40 and 25 years, respectively.
The operating results of the acquisitions are included in the Company's
consolidated results of operations from the dates of acquisition. The following
unaudited PRO FORMA consolidated financial information assumes the acquisitions
of KPR and TNT occurred at the beginning of 1994 and the acquisition of
Specialty Brands occurred at the beginning of 1993. These results have been
prepared for comparative purposes only and do not purport to be indicative of
what would have occurred had the acquisition been made at the beginning of the
periods presented, or of the results which may occur in the future.
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------
JAN. 1, DEC. 31, DEC. 30,
1994 1994 1995
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE)
<S> <C> <C> <C>
Net sales.......................................................... $ 576,600 $ 689,577 $ 751,008
Operating income................................................... 17,188 28,457 50,418
Income (loss) from continuing operations........................... (703) (5,349) 10,385
Net income (loss).................................................. (28,348) (16,352) (33,311)
Earnings (loss) per share -primary and fully diluted:
Income (loss) from continuing operations......................... $ (0.09) $ (0.61) $ 0.83
Net income (loss)................................................ (3.82) (1.87) (2.67)
</TABLE>
NOTE 3 -- DISCONTINUED OPERATIONS
On May 30, 1995, the Company sold the assets of its Retail Division to Thorn
Apple Valley, Inc. The sales price approximated $65.8 million in cash payments
plus the assumption of long-term debt of approximately $6.0 million and certain
current liabilities related to the division of approximately $4.5 million. In
connection with this sale the Company wrote off approximately $64.3 million of
post-bankruptcy intangible assets and recorded a net loss on disposition of
approximately $38.5 million. The agreement also includes potential consideration
of an additional $10 million based upon an increase in the market value of the
purchaser's common stock. Proceeds of the sale were used to reduce the Company's
debt under its term loan by $58 million. The remainder of the proceeds have been
or will be used to pay expenses related to the sale. The results of operations
and cash flows attributable to the Retail Division are reported as discontinued
operations and accordingly the balance sheet at December 31, 1994 and the
results of operations for years prior to fiscal 1995 have been restated.
Corporate interest expense was allocated to the Retail Division based on its net
assets in proportion to the Company's consolidated net assets.
F-11
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 -- DISCONTINUED OPERATIONS (CONTINUED)
The results of discontinued operations are (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------
JAN. 1, DEC. 31, DEC. 30,
1994 1994 1995
---------- ---------- ---------
<S> <C> <C> <C>
Net sales............................................................ $ 254,937 $ 238,308 $ 72,357
---------- ---------- ---------
---------- ---------- ---------
Income (loss) before taxes........................................... $ 8,412 $ (8,522) $ (7,020)
Tax expense (benefit)................................................ 1,631 -- (2,899)
---------- ---------- ---------
Net income (loss).................................................... $ 6,781 $ (8,522) $ (4,121)
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
The assets and liabilities of discontinued operations included in the
December 31, 1994 balance sheet are (in thousands):
<TABLE>
<S> <C>
Working capital............................................................ $ 12,145
Net property, plant and equipment.......................................... 22,822
Intangible and other assets................................................ 57,013
Long-term debt............................................................. 6,626
</TABLE>
Included in accounts payable and accrued liabilities at December 30, 1995,
are certain amounts, totalling $2.1 million, relating to the sale of the Retail
Division. The payments associated with these accruals will be reflected in
future consolidated statements of cash flows as net cash flows used by
discontinued operations.
The assets included in the sale of the Retail Division had significantly
different financial and tax basis. Therefore, for income tax purposes this
transaction generated taxable income of approximately $25.1 million requiring
the utilization of net operating loss carryforwards. The tax affect of this
utilization is approximately $9.6 million. As a direct result of the sale and
the related tax affect, the Company reduced the Reorganization Value and other
post-bankruptcy intangible assets by $64.3 million, which will in turn reduce
the amortization of that asset in the future, in accordance with Fresh Start
Reporting.
NOTE 4 -- RESTRUCTURING AND INTEGRATION
In December 1994, the Company announced a restructuring program that
resulted in a $10.6 million charge against operating income in 1994. The
restructuring program identified specific manufacturing facilities and
operations. The charge also included costs incurred prior to year-end associated
with the corporate legal restructuring to preserve the Company's income tax NOLs
and to change the Company's name to Foodbrands America, Inc.
As of December 30, 1995, the Company had consolidated production operations,
closed two production facilities and two distribution facilities and
discontinued a production operation. In connection with these actions, the
Company paid $3.5 million in 1995 that was charged against the reserve and
charged an additional $2.1 million against the reserve for property, plant and
equipment. Of the total amount paid in 1995, $0.8 million was for employee
termination benefits for 35 employees terminated during the year. The
restructuring reserve remaining at December 30, 1995 was comprised of accrued
liabilities of $1.2 million and a reserve against property, plant and equipment
of $2.2 million. Management believes that the remainder of the reserve is
adequate to complete the restructuring and integration program and plans to
complete the program by the end of 1996.
F-12
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 -- INVENTORIES
Inventories at December 31, 1994 and December 30, 1995 are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Raw materials and supplies........................................................ $ 16,077 $ 20,147
Work in process................................................................... 4,310 7,365
Finished goods.................................................................... 28,101 31,011
--------- ---------
$ 48,488 $ 58,523
--------- ---------
--------- ---------
</TABLE>
NOTE 6 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1994 and December 30, 1995 is
summarized as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Land............................................................................ $ 2,283 $ 3,053
Buildings and improvements...................................................... 47,971 68,461
Machinery and equipment......................................................... 66,347 97,705
Construction in progress........................................................ 4,663 5,621
---------- ----------
121,264 174,840
Less accumulated depreciation and amortization.................................. 31,685 38,188
---------- ----------
89,579 136,652
Assets to be disposed of, net................................................... 3,323 3,274
---------- ----------
$ 92,902 $ 139,926
---------- ----------
---------- ----------
</TABLE>
In January 1994, the Company sold all the assets of its processed food
equipment manufacturing division at South Hutchinson, Kansas. A provision for
loss was recorded in 1993 for $0.5 million in connection with the decision to
sell the unit.
NOTE 7 -- ACCRUED LIABILITIES
Accrued liabilities at December 31, 1994 and December 30, 1995 are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Interest.......................................................................... $ 6,368 $ 5,883
Salaries, wages and payroll taxes................................................. 7,966 9,285
Employee medical benefits......................................................... 8,890 11,361
Workers' compensation benefits.................................................... 1,374 2,404
Pension and retirement benefits................................................... 1,797 2,098
Marketing expenses................................................................ 5,301 5,360
Provisions for facility restructuring and integration............................. 4,500 1,240
Provisions for discontinued operations, closed and sold facilities................ 506 2,968
Other............................................................................. 7,480 9,695
--------- ---------
$ 44,182 $ 50,294
--------- ---------
--------- ---------
</TABLE>
F-13
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 -- LONG-TERM DEBT
Long-term debt, more fully described below, at December 31, 1994 and
December 30, 1995 consisted of the following (in thousands):
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Notes payable to banks.......................................................... $ 111,000 $ 160,500
Promissory note................................................................. -- 50,000
Industrial revenue bonds and mortgage notes..................................... 280 --
9 3/4% Senior Subordinated Redeemable Notes due 2000,
net of discount................................................................ 109,684 109,741
Capital lease obligations....................................................... 4,950 3,507
---------- ----------
225,914 323,748
Less current maturities......................................................... 1,654 18,341
---------- ----------
$ 224,260 $ 305,407
---------- ----------
---------- ----------
</TABLE>
Based on the borrowing rates currently available to the Company for bank
borrowings with similar terms and average maturities, the Company believes that
the carrying amount of these borrowings at December 30, 1995, approximates face
value. The fair value of the $110.0 million of 9 3/4% Senior Subordinated
Redeemable Notes due 2000 (the "Senior Subordinated Notes"), based on the quoted
market price at December 30, 1995, approximates the carrying amount of $109.7
million.
The aggregate amounts of long-term obligations, excluding obligations under
capitalized leases, which become due during each of the next five fiscal years
are as follows (in millions): $16.9 in 1996, $43.0 in 1997, $59.3 in 1998, $65.5
in 1999 and $135.5 in 2000.
NOTES PAYABLE TO BANKS
On December 11, 1995, the Company consummated a credit agreement consisting
of (i) a term loan for $145.0 million, (ii) an acquisition revolving facility
not to exceed $100.0 million and (iii) a working capital revolving facility not
to exceed $75.0 million ("the Credit Agreement"). The proceeds received on that
date were net of $3.9 million of debt issuance costs and were used to repay the
existing bank debt outstanding under the previous bank term loan totaling $53.0
million and to fund the acquisition of KPR. The acquisition revolving facility
was subsequently drawn down to finance the acquisition of TNT. The Credit
Agreement includes a subfacility for standby and commercial letters of credit
not to exceed $7.0 million. The Credit Agreement ranks senior to all existing
indebtedness and is collateralized by essentially all the assets of the Company
including accounts receivable, inventory, general intangibles and mortgaged
properties.
Borrowings under the Credit Agreement bear interest at an annual rate equal
to, at the Company's option, either the Eurodollar Rate, as defined by the
agreement, plus 1.75% (subject to adjustment based on the Company's Total Debt
Ratio, as defined) or an Alternate Base Rate, as defined in the agreement, which
is based on Chemical Bank's prime rate, plus 0.75% (subject to adjustment based
on the Company's Total Debt Ratio, as defined). On December 30, 1995 the
weighted average interest rate on the borrowings was 7.97%. Interest on the
borrowings is payable quarterly in arrears. The term loan requires quarterly
payments beginning May 1996. The acquisition revolving facility requires
quarterly payments beginning May 1997. To the extent not previously paid, all
borrowings under the Credit Agreement are due and payable January 15, 2000.
Payments totaling $16.9 million will be required in 1996. At December 30, 1995,
borrowings under the working capital revolving facility were $9.0 million and
$50.9 million was available for borrowing at that date based on accounts
receivable and inventory. The Company also has the ability to borrow an
additional $43.5 million under the acquisition revolving facility in 1996 to
fund future acquisitions.
In connection with the extinguishment of debt discussed above, the Company
incurred an extraordinary loss of $1.0 million, net of $0.7 million income tax
benefit.
F-14
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 -- LONG-TERM DEBT (CONTINUED)
In connection with the early extinguishment of debt in 1994 and termination
of a related interest rate swap agreement, the Company incurred an extraordinary
loss in the amount of $2.5 million.
The Credit Agreement and the Senior Subordinated Notes described below
contain certain restrictive covenants and conditions among which are limitations
on further indebtedness, restrictions on dispositions and acquisitions of
assets, limitations on dividends and compliance with certain financial
covenants, including but not limited to a maximum total debt ratio and minimum
interest expense coverage.
PROMISSORY NOTE
Upon the acquisition of KPR, the Company executed a promissory note to the
sellers for $50.0 million. The note was payable on January 15, 1996, and bore
interest at the rate of 6%. The note was retired using funds previously not
drawn down under the term loan facility of the Credit Agreement. The note has
been classified as long term based on the classification of the Credit
Agreement.
SENIOR SUBORDINATED NOTES
The Senior Subordinated Notes mature on July 15, 2000. Interest is payable
on January 15 and July 15 of each year. The Senior Subordinated Notes are
redeemable at the option of the Company, in whole or in part, at any time on or
after July 15, 1998. If the Senior Subordinated Notes are redeemed during the
12-month period beginning July 15, 1998, the redemption price (expressed as a
percentage of principal amount) will be 103.0%, and if they are redeemed during
the 12-month period beginning July 15, 1999, the redemption price will be
101.5%. The Senior Subordinated Notes are unsecured and subordinated to all
existing and future senior indebtedness of the Company, including borrowings
under the Credit Agreement.
The Senior Subordinated Notes are guaranteed by all direct and indirect
subsidiaries of the Company, all of which are wholly owned. The guarantees are
joint and several, full, complete and unconditional. There are currently no
restrictions on the ability of the subsidiary guarantors to transfer funds to
the Company in the form of cash dividends, loans or advances. Combined financial
statements for the subsidiary guarantors are not presented herein because the
Company is a holding company with no operations or operating assets, the
combined financial statements of the subsidiaries are the same as those of the
Company with only immaterial differences and management has determined that
separate financial statements of the subsidiary guarantors would not be material
to investors.
LEASES
The Company leases certain facilities, equipment and vehicles under
agreements which are classified as capital leases. The building leases have
original terms ranging from 20 to 25 years and have renewal options for varying
periods ranging from three years to 60 years. Most equipment leases have
purchase options at the end of the original lease term. Leased capital assets
included in property, plant and equipment at December 31, 1994 and December 30,
1995 are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Buildings............................................................................ $ 2,666 $ 2,666
Machinery and equipment.............................................................. 6,479 6,079
--------- ---------
9,145 8,745
Accumulated amortization............................................................. 3,413 4,207
--------- ---------
$ 5,732 $ 4,538
--------- ---------
--------- ---------
</TABLE>
F-15
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 -- LONG-TERM DEBT (CONTINUED)
Future minimum payments, by year and in the aggregate, under noncancellable
capital leases and operating leases with initial or remaining terms of one year
or more consist of the following at December 30, 1995 (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- -----------
<S> <C> <C>
1996............................................................................... $ 1,717 $ 4,413
1997............................................................................... 981 3,949
1998............................................................................... 396 3,838
1999............................................................................... 250 3,792
2000............................................................................... 142 3,754
Future years....................................................................... 673 4,235
--------- -----------
Total minimum lease payments....................................................... 4,159 $ 23,981
-----------
-----------
Amounts representing interest...................................................... 652
---------
Present value of net minimum payments.............................................. 3,507
Current portion.................................................................... 1,466
---------
$ 2,041
---------
---------
</TABLE>
The Company's rental expense for operating leases was (in millions) $4.0,
$4.5 and $5.3 for the fiscal years ended January 1, 1994, December 31, 1994 and
December 30, 1995.
In connection with the KPR acquisition, the Company entered into a ten-year
operating lease for a production facility. The base rent is $0.8 million per
year and is payable to a corporation related to the former owners and current
management of KPR. Rent expense for 1995 was less than $0.1 million.
NOTE 9 -- STOCKHOLDERS' EQUITY
In October 1994, the Company completed a stock rights offering. The rights
offering provided stockholders the ability to purchase 0.68 shares for each
share owned. As a result of the offering, 4,511,867 rights were exercised at
$9.00 per share for gross proceeds of $40.6 million. Net proceeds, after
expenses, were $38.6 million. The Company used $35.0 million of the proceeds to
reduce bank debt.
At December 30, 1995, the Company has warrants outstanding to purchase
282,036 shares. The warrant agreement provides the holders an irrevocable put
option, which obligates the Company to repurchase the warrants at a price per
warrant equal to the excess of (i) the then-current market price per share of
Common Stock, over (ii) $17.53, which may be exercised by each of the holders of
the warrants only upon a Change of Control, as defined in the current warrant
agreement. The warrants may be exercised through December 31, 1998.
NOTE 10 -- INCOME TAXES
Deferred tax assets primarily result from net operating loss carryforwards
and certain accrued liabilities not currently deductible, and deferred tax
liabilities result from the recognition of depreciation and amortization in
different periods for financial reporting and income tax purposes. Income tax
expense results from the income tax payable for the year and the change during
the year in deferred tax assets and liabilities including the realization of
prereorganization net operating losses.
F-16
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 -- INCOME TAXES (CONTINUED)
The provision (benefit) for income taxes in continuing operations consists
of the following components (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------
JAN. 1, DEC. 31, DEC. 30,
1994 1994 1995
--------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal................................................................. $ 44 $ -- $ 103
State................................................................... 375 600 800
--------- ----- -----------
419 600 903
--------- ----- -----------
Deferred:
Federal................................................................. (1,370) -- 5,168
State................................................................... (261) -- 970
--------- ----- -----------
(1,631) -- 6,138
--------- ----- -----------
Total................................................................. $ (1,212) $ 600 $ 7,041
--------- ----- -----------
--------- ----- -----------
</TABLE>
The income tax provision (benefit) applicable to the net losses from
discontinued operations associated with the Retail Division are (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------
JAN. 1, DEC. 31, DEC. 30,
1994 1994 1995
--------- ----------- ---------
<S> <C> <C> <C>
Operations of the Retail Division
Deferred expense (benefit).............................................. $ 1,631 $ -- $ (2,899)
--------- ----- ---------
--------- ----- ---------
Disposal of the Retail Division:
Current expense:
Federal............................................................... $ -- $ -- $ 278
State................................................................. -- -- 469
Deferred expense........................................................ -- -- 9,553
--------- ----- ---------
$ -- $ -- $ 10,300
--------- ----- ---------
--------- ----- ---------
</TABLE>
The effective tax rate on income (loss) from continuing operations differs from
the statutory rate as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------
JAN. 1, DEC. 31, DEC. 30,
1994 1994 1995
----------- ----------- -----------
(LIABILITY METHOD)
<S> <C> <C> <C>
Statutory rate....................................................... (34.0)% (34.0)% 35.0%
Tax effect of:
Amortization of intangible assets................................. 15.2 18.4 4.0
State taxes, net of federal benefit............................... (1.3) 8.6 3.1
Limitation on recognition of tax benefit.......................... -- 20.1 --
Benefit of net deductible temporary differences................... -- -- --
Other............................................................. (1.6) -- 0.2
----- ----- -----
(21.7)% 13.1% 42.3%
----- ----- -----
----- ----- -----
</TABLE>
F-17
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 10 -- INCOME TAXES (CONTINUED)
At December 31, 1994 and December 30, 1995, the deferred tax assets and
deferred tax liabilities were as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Deferred tax assets:
Retiree medical benefit plan accruals......................................... $ 26,805 $ 26,962
Pension plan accruals......................................................... 5,373 5,487
Plant closing accruals........................................................ 2,524 2,036
Employee compensation and benefits accruals................................... 7,111 5,531
Other accrued expenses........................................................ 1,227 978
Net operating loss carryforwards.............................................. 53,360 43,385
---------- ----------
Total deferred tax assets................................................... 96,400 84,379
---------- ----------
Deferred tax liabilities:
Capitalized leases............................................................ (265) (420)
Accumulated depreciation...................................................... (1,496) (3,046)
Intangible assets............................................................. (9,059) (4,787)
Other......................................................................... (78) (72)
---------- ----------
Total deferred tax liabilities.............................................. (10,898) (8,325)
---------- ----------
Net deferred tax assets......................................................... 85,502 76,054
Valuation allowance............................................................. (54,564) (43,314)
---------- ----------
Net deferred tax assets......................................................... $ 30,938 $ 32,740
---------- ----------
---------- ----------
</TABLE>
In accordance with Fresh Start Reporting as prescribed by Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code" issued by the American Institute of Certified Public
Accountants, the tax benefit realized from utilizing the pre-reorganization net
operating loss carryforwards should be recorded as a reduction of the
Reorganization Value rather than be realized as a benefit in the statement of
operations. In 1995, the Company reduced the Reorganization Value by $12.1
million.
At December 30, 1995, after considering utilization restrictions, the
Company's tax loss carryforwards approximated $108.5 million. The net operating
loss carryforwards are subject to utilization limitations due to ownership
changes. The net operating loss carryforwards may be utilized to offset future
taxable income as follows: $76.3 million in 1996, $13.3 million in each of years
1997 and 1998, $5.0 million in 1999 and $0.6 million in 2000. Loss carryforwards
not utilized in the first year that they are available may be carried over and
utilized in subsequent years, subject to their expiration provisions. These
carryforwards expire as follows: $10.9 million in 1996, $21.7 million in 1998,
$6.0 million in 1999, $.9 million in 2000 and $69.0 million during the years
2001 through 2009.
NOTE 11 -- EMPLOYEE BENEFIT PLANS
The Company and certain subsidiaries maintain employee benefit plans
covering most employees. All full-time employees of the Company and its
subsidiaries who have obtained the age of 21, have completed one year of
employment and are not subject to a collective bargaining agreement are
permitted to contribute up to 15% of their salary, not to exceed the limit set
by the Internal Revenue Service, to a 401(k) plan. The Company makes
contributions on behalf of each participant of a matching amount not to exceed
the employee's contribution or 3% of such employee's salary.
F-18
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 -- EMPLOYEE BENEFIT PLANS (CONTINUED)
Substantially all of the hourly employees at the Cherokee, Iowa, Jefferson,
Wisconsin and Riverside, California facilities participate in defined benefit
pension plans. Information presented below also includes benefits and Company
obligations associated with participants of closed and sold operations. The
funded status of the defined benefit plans at December 31, 1994 and December 30,
1995 is as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation....................................................... $ 59,992 $ 65,972
--------- ---------
--------- ---------
Accumulated benefit obligation.................................................. $ 61,516 $ 68,229
--------- ---------
--------- ---------
Projected benefit obligation.................................................... $ 61,516 $ 68,229
Plan assets at fair value......................................................... 48,722 55,170
--------- ---------
Projected benefit obligation in excess of plan assets............................. 12,794 13,059
Unrecognized net actuarial loss -- difference in assumptions and actual
experience....................................................................... (1,637) (5,010)
Adjustment required to recognize additional minimum liability..................... 1,575 4,743
--------- ---------
Accrued pension cost.............................................................. $ 12,732 $ 12,792
--------- ---------
--------- ---------
</TABLE>
Plan assets are comprised of cash and cash equivalents and mutual funds
investing primarily in interest bearing and equity securities. The funding
policy for the plan at the Cherokee facility is to contribute amounts sufficient
to meet the minimum funding requirements of the Employee Retirement Income
Security Act of 1974 (ERISA), and the plans at the Jefferson and Riverside
facilities are funded based upon a recommendation from the Company's actuary.
Such contributions for the plan at the Jefferson facility have, in prior years,
exceeded the minimum funding requirements.
Pension costs of the defined benefit plans for fiscal 1993, 1994 and 1995
are composed of the following components, based on expected long-term rates of
return of 9.0%, 8.5% and 9.0% and discount rates of 7.5%, 8.75% and 7.5% for the
plan at the Jefferson facility, expected long-term rates of return of 8.5%, 8.5%
and 8.5% and discount rates of 7.5%, 8.75% and 7.5% for the plan at the Cherokee
facility and expected long-term rate of return of 9.0% and discount rate of 7.5%
for fiscal 1995 for the plan at the Riverside facility which became effective in
1995 (in thousands):
<TABLE>
<CAPTION>
JANUARY 1, DECEMBER 31, DECEMBER 30,
1994 1994 1995
----------- ------------- -------------
<S> <C> <C> <C>
Service cost for benefits earned during the year............... $ 304 $ 370 $ 465
Interest cost on projected benefit obligation.................. 5,104 4,991 5,121
Return on plan assets.......................................... (3,667) (4,330) (4,094)
Amortization of transition obligation and unrecognized prior
service cost.................................................. 41 -- 11
----------- ------ ------
Total pension cost............................................. $ 1,782 $ 1,031 $ 1,503
----------- ------ ------
----------- ------ ------
</TABLE>
Expenses for all of the Company's retirement plans for fiscal years 1993,
1994 and 1995 were (in millions) $3.0, $2.1 and $2.6, respectively.
The Company provides life insurance and medical benefits ("Postretirement
Medical Benefits") for substantially all retired hourly and salaried employees
of one of its subsidiaries under various defined benefit plans. Contributions
are made by certain retired participants toward their Postretirement Medical
Benefits.
In 1993, the Company adopted Statement of Financial Accounting Standards No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions"
("FAS 106"). Upon adoption of the new
F-19
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 -- EMPLOYEE BENEFIT PLANS (CONTINUED)
standard, the Company recorded, in the first quarter of 1993, a one-time,
noncash charge for the cumulative effect of the change in accounting principle
of $34.4 million, a deferred tax benefit of approximately $31.0 million and a
liability of $65.4 million for Postretirement Medical Benefits. The obligation
as of the beginning of fiscal 1993 represents the discounted present value of
accumulated retiree benefits, other than pensions, attributed to employees'
service rendered prior to that date. The effect of adopting FAS 106 for the year
ended January 1, 1994 was to increase net periodic postretirement benefit cost
and decrease earnings before cumulative effect of accounting change by $1.1
million ($0.15 per share) and increase net loss by $35.5 million ($4.79 per
share).
The components of net periodic postretirement benefit cost for the years
ended December 31, 1994 and December 30, 1995 were as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Service cost....................................................................... $ 241 $ 231
Interest on accumulated benefit obligation......................................... 5,372 5,399
Other.............................................................................. (21) (61)
--------- ---------
Net periodic postretirement benefit cost........................................... $ 5,592 $ 5,569
--------- ---------
--------- ---------
</TABLE>
The actuarial and recorded liabilities for these Postretirement Medical
Benefits at December 31, 1994 and December 30, 1995 were as follows (in
thousands):
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees and dependents......................................................... $ 58,421 $ 68,095
Actives not fully eligible...................................................... 5,535 6,203
Actives fully eligible.......................................................... 341 226
--------- ---------
64,297 74,524
Assets at fair value............................................................ (641) (1,056)
--------- ---------
Accumulated postretirement benefit obligation in excess of plan assets............ 63,656 73,468
Unrecognized net gain (loss).................................................... 2,965 (6,443)
Unrecognized prior service cost................................................. 391 379
--------- ---------
Liability recognized on the balance sheet......................................... 67,012 67,404
Less current portion.............................................................. 5,076 7,854
--------- ---------
Noncurrent liability for postretirement medical benefits.......................... $ 61,936 $ 59,550
--------- ---------
--------- ---------
</TABLE>
For measuring the accumulated postretirement medical benefit obligation, a
10.5% annual rate of increase in the per capita claims cost was assumed for
1996. This rate was assumed to decrease gradually to 8.9% by 2000, 7.7% by 2005,
and 6.5% by 2010 and remain at that level thereafter. The weighted average
discount rate used in determining the accumulated obligation was 8.75% and 7.5%
for fiscal 1994 and 1995, respectively. The expected long-term rate of return on
plan assets was 6.0% for both fiscal years 1994 and 1995.
If the health care cost trend rate were increased 1.0%, the accumulated
benefit obligation as of December 30, 1995 would have increased by $1.4 million.
The effect of this change on the aggregate of service and interest cost for the
year ended December 30, 1995 would be an increase of $0.3 million.
The 1992 Stock Incentive Plan, as amended, (the "Plan") authorizes the
Company to grant stock options and/or Common Stock aggregating 1,900,000 shares
to directors, officers and other key employees. In February 1992, the Company
granted 105,000 restricted shares (11,666 shares subsequently lapsed), one-
F-20
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 -- EMPLOYEE BENEFIT PLANS (CONTINUED)
third of which vested annually, beginning January 1, 1993. On January 1, 1995,
the remaining restricted shares vested. The Company also granted 105,000
performance shares (53,330 shares subsequently lapsed) which vested annually
over three years based upon the attainment of targeted earnings. The number of
performance shares that were issued and vested is 51,670 (which includes 35,416
shares issued under employee separation agreements). As of December 30, 1995,
the Company had also granted under the Plan 1,426,547 Common Stock options at
option prices ranging from $9.00 to $15.25 per share. The options are
exercisable over a three to five year period. At December 30, 1995, 328,443
Common Stock options were available for future issuance.
Stock option transactions are as follows:
<TABLE>
<CAPTION>
OPTIONS PRICE RANGE
---------- ----------------
<S> <C> <C>
Outstanding, January 2, 1993............................................. 249,500 $ 14.00 - 14.38
Granted................................................................ 27,166 $ 9.88 - 16.00
Canceled and forfeited................................................. (35,000)
----------
Outstanding, January 1, 1994............................................. 241,666 $ 9.88 - 16.00
Granted................................................................ 913,528 $ 9.00 - 11.00
Canceled and forfeited................................................. (34,000)
----------
Outstanding, December 31, 1994........................................... 1,121,194 $ 9.00 - 16.00
Granted................................................................ 475,128 $ 7.88 - 13.18
Exercised.............................................................. (19,686) $ 9.00 - 10.75
Canceled and forfeited................................................. (169,775)
----------
Outstanding, December 30, 1995........................................... 1,406,861 $ 9.00 - 15.25
----------
----------
</TABLE>
The Company has issued 25,000 Common Stock options to members of the Board
of Directors under an option plan covering nonemployee directors. The options
vested upon granting at an exercise price of $7.875.
Statement of Financial Accounting Standards No. 112 "Employer's Accounting
for Postemployment Benefits" became effective for fiscal year 1994. The Company
generally does not provide postemployment benefits, other than workers
compensation and long-term disability, the costs of which are estimated and
accrued as the events occur. Accordingly, implementation of this statement has
not had a material effect on the Company's financial condition or results of
operations.
NOTE 12 -- COMMITMENTS AND CONTINGENCIES
The Company has committed to minimum purchases of raw materials, supplies
and equipment for delivery at various times in 1996. The total of such
commitments at December 30, 1995, is approximately $17.5 million.
The Company is involved in two related actions alleging infringement of two
patents held by C&F Packing Company, Inc. ("C&F"). Prior to Foodbrands America
acquiring KPR, C&F had instituted a civil action against KPR alleging that KPR,
using equipment and a process to make Italian sausage, infringed the C&F
patents. KPR has denied these allegations and contends that C&F's patents are
invalid and that, even if valid, the process and equipment used by KPR does not
infringe the patents. C&F has also alleged misappropriation of trade secrets and
proprietary information, as well as other claims, all of which KPR denies.
F-21
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
In 1988 and 1989, C&F filed actions against Doskocil Companies Incorporated
(Foodbrands America's predecessor) alleging patent infringement and
misappropriation of trade secrets and proprietary information. In 1991, as part
of Doskocil's bankruptcy reorganization, and in settlement of the litigation,
Doskocil entered into a license agreement with C&F and two consent decrees were
entered.
Prior to acquiring KPR, Foodbrands America instituted a declaratory judgment
action against C&F, joined by KPR. The action seeks a ruling that the equipment
and process used by KPR do not violate the C&F patents and that, in any event,
it is not a violation of the consent decrees for KPR to continue to use the
equipment and process being utilized by KPR prior to Foodbrands America
acquiring KPR. C&F has responded to the declaratory judgment action with a
Motion to Dismiss or to Transfer the actions to the Court that entered the
consent decrees. These motions are pending and have not been ruled upon.
Although the plaintiff has not specified any amount of damages, liability for
patent infringement may include disgorgement of profits which the Company
believes could be material. The litigation is complex and the ultimate outcome
can not be presently determined. The Company and KPR intend to vigorously
prosecute the declaratory judgment action against C&F and KPR intends to
vigorously defend the suit by C&F.
In September 1992, United Refrigerated Services, Inc. ("URS") filed suit
against Wilson Foods Corporation ("Wilson Foods"), a wholly-owned subsidiary of
Foodbrands America, and unaffiliated parties Normac Foods, Inc. ("Normac") and
Thompson Builders of Marshall, Inc. ("Thompson") in the Circuit Court of Saline
County, Missouri. The URS lawsuit involves claims for property damage as a
result of a fire in a warehouse owned by URS in Marshall, Missouri, in which
Wilson Foods was leasing space. The URS lawsuit is in discovery. URS claims real
and personal property damage of approximately $9.8 million and has requested
trebling of the real property damage which is included in such amount, for total
claims in the aggregate up to as much as $13.8 million.
In its answer, Wilson Foods filed a counterclaim against URS and a
cross-claim against other codefendants for indemnity and/or contribution. The
fire occurred in a part of the URS warehouse being leased by Wilson Foods in
which Wilson Foods had produced sausage patties under contract for Normac until
the contract terminated in September 1991. Normac's contractor, Thompson, was
removing Normac's equipment with a torch when fire broke out and destroyed a
large section of the URS warehouse and its contents.
In 1993, ConAgra also filed suit against Wilson Foods, Normac and Thompson
in Saline County, Missouri. ConAgra seeks damages in the amount of $9.4 million
from the named defendants for frozen food that was stored in another part of the
Marshall warehouse at the time of the fire and allegedly damaged. The ConAgra
case also is in discovery.
The Company's insurer has retained counsel to defend the Company in these
matters. Wilson Foods has substantial defenses to these pending and threatened
claims and while there can be no assurances, the Company believes it is not
likely that Wilson Foods will ultimately incur a loss in excess of its insurance
coverage.
In the opinion of management, the Company's exposure to loss, if any, under
various claims and legal actions that have arisen in the normal course of
business, that are not covered by insurance, will not be material.
F-22
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of operations
for the years ended December 31, 1994 and December 30, 1995 (amounts are in
thousands except per share data).
<TABLE>
<CAPTION>
QUARTER
-----------------------------------------------
YEAR ENDED DECEMBER 31, 1994 (1)(2) FIRST SECOND (3) THIRD (4) FOURTH (5)
- ----------------------------------------------------------------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales........................................................ $ 94,347 $ 111,556 $ 152,189 $ 154,260
Gross profit..................................................... 14,614 19,936 32,858 34,826
Income (loss) from continuing operations......................... (448) (396) 1,255 (5,606)
Net income (loss)................................................ (478) (1,767) (3,526) (10,427)
Earnings (loss) per share, primary and fully diluted:
Income (loss) from continuing operations....................... $ (0.06) $ (0.05 ) $ 0.16 $ (0.50)
Net income (loss).............................................. (0.06) (0.22 ) (0.44) (0.93)
<CAPTION>
QUARTER
-----------------------------------------------
YEAR ENDED DECEMBER 30, 1995 FIRST (6) SECOND (7) THIRD FOURTH (8)
- ----------------------------------------------------------------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales........................................................ $ 139,412 $ 146,582 $ 169,223 $ 179,483
Gross profit..................................................... 31,165 32,587 34,463 36,500
Income (loss) from continuing operations......................... 1,792 1,932 2,503 3,374
Net income (loss)................................................ (563) (38,360) 2,503 2,325
Earnings (loss) per share, primary and fully diluted:
Income (loss) from continuing operations....................... $ 0.14 $ 0.16 $ 0.20 $ 0.27
Net income (loss).............................................. (0.05) (3.07) 0.20 0.19
</TABLE>
- ------------------------
(1) Includes the results of operations of the Specialty Brands Division acquired
June 1, 1994.
(2) Net income includes net losses from operations of the discontinued Retail
Division of breakeven, $0.4 million, $3.3 million and $4.8 million for the
first, second, third and fourth quarters, respectively.
(3) Net income for the second quarter of the year ended December 31, 1994,
included an extraordinary loss on early extinguishment of debt, net of
income tax benefit, of $1.0 million.
(4) Net income for the third quarter of the year ended December 31, 1994,
included a charge to the extraordinary loss of $1.4 million for the reversal
of an income tax benefit.
(5) Net income for the fourth quarter of the year ended December 31, 1994,
included a charge of $10.6 million for restructuring and integration.
(6) Net income includes net loss from operating activities of the discontinued
Retail Division of $2.3 million.
(7) Net income includes net loss from operating activities of the discontinued
Retail Division of $1.8 million and loss on disposal of the division of
$38.5 million.
(8) Net income includes extraordinary loss on early extinguishment of debt of
$1.0 million, net of income tax benefit of $0.7 million.
F-23
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE NOTES OFFERED HEREBY IN
ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference..................................... 2
Prospectus Summary............................. 3
Risk Factors................................... 9
Use of Proceeds................................ 14
Capitalization................................. 15
Pro Forma Consolidated Financial Information... 16
Selected Consolidated Financial Information.... 18
Management's Discussion and Analysis........... 20
Business....................................... 28
Management..................................... 35
Description of Other Indebtedness.............. 37
Description of the Notes....................... 40
Underwriting................................... 68
Legal Matters.................................. 69
Experts........................................ 69
Index to Financial Statements.................. F-1
</TABLE>
ABCD
$120,000,000
FOODBRANDS AMERICA, INC.
% SENIOR SUBORDINATED NOTES DUE 2006
---------------------
PROSPECTUS
---------------------
MERRILL LYNCH & CO.
CHASE SECURITIES INC.
DILLON, READ & CO. INC.
, 1996
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
SEC Registration Fee....................................................... $ 41,380
NASD Fee................................................................... 12,500
Trustee's Fees and Expenses................................................
Printing and Engraving Expenses............................................
Accountant's Fees and Expenses.............................................
Legal Fees and Expenses....................................................
Rating Agencies' Fees......................................................
Blue Sky Fees and Expenses................................................. 35,000
Miscellaneous..............................................................
---------
Total.................................................................... $
---------
---------
</TABLE>
Except for the SEC registration fee and the NASD fee, all expenses are
estimated. All of the above expenses will be borne by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) The Delaware General Corporation Act, the jurisdiction in which the
Company is incorporated, provides, under certain circumstances, for
indemnification of the directors or officers of a Delaware corporation for
expenses in connection with the defense of any action, suit or proceeding, in
relation to certain matters, brought against them as such directors and
officers. In addition, the Company maintains insurance policies which insure its
officers and directors against certain liabilities.
The Purchase Agreement, filed as Exhibit 1 to this Registration Statement
and incorporated herein by reference, contains certain indemnifications made by
the Underwriters with respect to the accuracy and completeness of this
Registration Statement and with respect to certain civil liabilities, including
liabilities under the Securities Act of 1933.
(b) Article Ninth of the By-Laws of Foodbrands America, Inc. provides
indemnification of directors, officers and agents under certain circumstances.
These provisions may be sufficiently broad to indemnify such persons for
liabilities under the Securities Act of 1933.
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
*1 Purchase Agreement between the Company and the Underwriters
*4 Form of Indenture between the Company and The Liberty Bank and Trust Company
of Oklahoma City, National Association, as Trustee
**5 Opinion of McAfee & Taft A Professional Corporation, including consent
12 Computation of Ratio of Earnings to Fixed Charges
*23.1 Consent of Coopers & Lybrand, L.L.P.
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Deloitte & Touche LLP
**23.4 Consent of McAfee & Taft A Professional Corporation (included in Exhibit 5
hereto)
*24.1 Power of Attorney of the Registrant
*24.2 Powers of Attorney of the Additional Registrants
*25 Form T-1 Statement of Eligibility of Trustee under the Trust Indenture Act
of 1939
</TABLE>
- ------------------------
*Filed herewith.
**To be filed by amendment.
II-1
<PAGE>
ITEM 17. UNDERTAKINGS.
Each of the undersigned registrants hereby undertakes:
(1) For purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference to the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(2) For the purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of the registration statement in reliance upon Rule 430A and contained
in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of the
registration statement at the time it was declared effective.
(3) For the purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
under Item 15 above, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted
against the registrant by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by its is against the public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(5) The undersigned registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to
be presented by Article 3 of Regulation S-X are not set forth in the
prospectus, to deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such
interim financial information.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Oklahoma City, State of Oklahoma, on the 25th
day of April, 1996.
FOODBRANDS AMERICA, INC.
By /s/ R. RANDOLPH DEVENING*
------------------------------------
R. Randolph Devening,
CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
/s/ R. RANDOLPH DEVENING* Chairman, President, Chief Executive
------------------------------------------- Officer and Director (Principal
R. Randolph Devening Executive Officer)
/s/ HORST O. SIEBEN* Senior Vice President and Chief
------------------------------------------- Financial Officer (Principal Financial
Horst O. Sieben Officer)
/s/ WILLIAM L. BRADY* Vice President and Controller
------------------------------------------- (Principal Accounting Officer)
William L. Brady
/s/ THEODORE AMMON* Director
-------------------------------------------
Theodore Ammon
/s/ RICHARD T. BERG* Director
-------------------------------------------
Richard T. Berg
/s/ DORT A. CAMERON III* Director April 25, 1996
-------------------------------------------
Dort A. Cameron III
/s/ TERRY M. GRIMM* Director
-------------------------------------------
Terry M. Grimm
/s/ PAUL S. LEVY* Director
-------------------------------------------
Paul S. Levy
/s/ PETER A. JOSEPH* Director
-------------------------------------------
Peter A. Joseph
/s/ ANGUS C. LITTLEJOHN, JR.* Director
-------------------------------------------
Angus C. Littlejohn, Jr.
/s/ PAUL W. MARSHALL* Director
-------------------------------------------
Paul W. Marshall
*By /s/ BRYANT P. BYNUM
-------------------------------------------
Bryant P. Bynum
ATTORNEY-IN-FACT
</TABLE>
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Oklahoma City, State of Oklahoma, on the 25th
day of April, 1996.
BRENNAN PACKING CO., INC., a Delaware
corporation
By /s/ R. RANDOLPH DEVENING*
------------------------------------
R. Randolph Devening,
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
/s/ R. RANDOLPH DEVENING* President and Director
------------------------------------------- (Principal Executive Officer)
R. Randolph Devening
/s/ WILLIAM L. BRADY* Vice President, Controller and April 25, 1996
------------------------------------------- Director
William L. Brady (Principal Accounting Officer)
/s/ BRYANT P. BYNUM Vice President, Treasurer and
------------------------------------------- Secretary
Bryant P. Bynum (Principal Financial Officer)
/s/ HORST O. SIEBEN* Director
-------------------------------------------
Horst O. Sieben
*By /s/ BRYANT P. BYNUM
-------------------------------------------
Bryant P. Bynum
ATTORNEY-IN-FACT
</TABLE>
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Oklahoma City, State of Oklahoma, on the 25th
day of April, 1996.
CONTINENTAL DELI FOODS, INC.,
a Delaware corporation
By /s/ RAYMOND J. HAEFELE*
------------------------------------
Raymond J. Haefele,
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
/s/ RAYMOND J. HAEFELE* President
------------------------------------------- (Principal Executive Officer)
Raymond J. Haefele
/s/ WILLIAM L. BRADY* Vice President, Assistant Controller
------------------------------------------- and Director
William L. Brady
/s/ BRYANT P. BYNUM Vice President, Treasurer and April 25, 1996
------------------------------------------- Secretary
Bryant P. Bynum (Principal Financial Officer)
/s/ DIANE EMRICK* Controller
------------------------------------------- (Principal Accounting Officer)
Diane Emrick
/s/ HORST O. SIEBEN* Director
-------------------------------------------
Horst O. Sieben
/s/ R. RANDOLPH DEVENING* Director
-------------------------------------------
R. Randolph Devening
*By /s/ BRYANT P. BYNUM
-------------------------------------------
Bryant P. Bynum
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Oklahoma City, State of Oklahoma, on the 25th
day of April, 1996.
DOSKOCIL FOOD SERVICE COMPANY, L.L.C.,
an Oklahoma limited liability company
By Continental Deli Foods, Inc., a
Delaware corporation, Member-Manager
By /s/ RAYMOND J. HAEFELE*
---------------------------------
Raymond J. Haefele,
PRESIDENT
By RKR-GP, Inc., a Delaware
corporation, Member-Manager
By /s/ WILLIAM E. ROSENTHAL*
---------------------------------
William E. Rosenthal,
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
CONTINENTAL DELI FOODS, INC.:
/s/ RAYMOND J. HAEFELE* President
------------------------------------------- (Principal Executive Officer)
Raymond J. Haefele
/s/ WILLIAM L. BRADY* Vice President, Assistant Controller
------------------------------------------- and Director
William L. Brady
/s/ BRYANT P. BYNUM Vice President, Treasurer and April 25, 1996
------------------------------------------- Secretary
Bryant P. Bynum (Principal Financial Officer)
/s/ DIANE EMRICK* Controller
------------------------------------------- (Principal Accounting Officer)
Diane Emrick
/s/ HORST O. SIEBEN* Director
-------------------------------------------
Horst O. Sieben
/s/ R. RANDOLPH DEVENING* Director
-------------------------------------------
R. Randolph Devening
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
RKR-GP, INC.:
<C> <S> <C>
/s/ WILLIAM E. ROSENTHAL* President and Director
------------------------------------------- (Principal Executive Officer)
William E. Rosenthal
/s/ TONY L. PRATER* Vice President and Director
-------------------------------------------
Tony L. Prater
/s/ JOSEPH C. PENSHORN* Treasurer and Director
-------------------------------------------
Joseph C. Penshorn
/s/ HOWARD S. KATZ* Vice President and Director April 25, 1996
-------------------------------------------
Howard S. Katz
/s/ BRYANT P. BYNUM Vice President, Assistant Secretary
------------------------------------------- and Assistant Treasurer
Bryant P. Bynum (Principal Financial Officer)
/s/ WILLIAM L. BRADY* Vice President and Assistant Secretary
------------------------------------------- (Principal Accounting Officer)
William L. Brady
/s/ R. RANDOLPH DEVENING* Director
-------------------------------------------
R. Randolph Devening
*By /s/ BRYANT P. BYNUM
-------------------------------------------
Bryant P. Bynum
ATTORNEY-IN-FACT
</TABLE>
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Oklahoma City, State of Oklahoma, on the 25th
day of April, 1996.
DOSKOCIL SPECIALTY BRANDS COMPANY,
a Delaware corporation
By /s/ PATRICK A. O'RAY*
------------------------------------
Patrick A. O'Ray,
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
/s/ PATRICK A. O'RAY* President
------------------------------------------- (Principal Executive Officer)
Patrick A. O'Ray
/s/ WILLIAM L. BRADY* Vice President, Assistant Controller
------------------------------------------- and Director
William L. Brady
/s/ BRYANT P. BYNUM Vice President, Treasurer April 25, 1996
------------------------------------------- and Secretary
Bryant P. Bynum (Principal Financial Officer)
/s/ ROBIN BHAT* Controller
------------------------------------------- (Principal Accounting Officer)
Robin Bhat
/s/ HORST O. SIEBEN* Director
-------------------------------------------
Horst O. Sieben
/s/ R. RANDOLPH DEVENING* Director
-------------------------------------------
R. Randolph Devening
*By /s/ BRYANT P. BYNUM
-------------------------------------------
Bryant P. Bynum
ATTORNEY-IN-FACT
</TABLE>
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Oklahoma City, State of Oklahoma, on the 25th
day of April, 1996.
FBAI INVESTMENTS CORPORATION, an
Oklahoma corporation
By /s/ R. RANDOLPH DEVENING*
------------------------------------
R. Randolph Devening,
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
/s/ R. RANDOLPH DEVENING* President and Director
------------------------------------------- (Principal Executive Officer)
R. Randolph Devening
/s/ WILLIAM L. BRADY* Vice President, Controller April 25, 1996
------------------------------------------- and Director
William L. Brady (Principal Accounting Officer)
/s/ BRYANT P. BYNUM Vice President, Treasurer
------------------------------------------- and Secretary
Bryant P. Bynum (Principal Financial Officer)
/s/ HORST O. SIEBEN* Director
-------------------------------------------
Horst O. Sieben
*By /s/ BRYANT P. BYNUM
-------------------------------------------
Bryant P. Bynum
ATTORNEY-IN-FACT
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Oklahoma City, State of Oklahoma, on the 25th
day of April, 1996.
KPR HOLDINGS, L.P., a Delaware limited
partnership
By RKR-GP, Inc., a Delaware
corporation,
General Partner
By /s/ WILLIAM E. ROSENTHAL*
------------------------------------
William E. Rosenthal,
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
RKR-GP, INC.:
/s/ WILLIAM E. ROSENTHAL* President and Director
------------------------------------------- (Principal Executive Officer)
William E. Rosenthal
/s/ WILLIAM L. BRADY* Vice President and Assistant Secretary
------------------------------------------- (Principal Accounting Officer)
William L. Brady
/s/ BRYANT P. BYNUM Vice President, Assistant Secretary April 25, 1996
------------------------------------------- and Assistant Treasurer
Bryant P. Bynum (Principal Financial Officer)
/s/ TONY L. PRATER* Vice President and Director
-------------------------------------------
Tony L. Prater
/s/ JOSEPH C. PENSHORN* Treasurer and Director
-------------------------------------------
Joseph C. Penshorn
/s/ HOWARD S. KATZ* Vice President and Director
-------------------------------------------
Howard S. Katz
/s/ R. RANDOLPH DEVENING* Director
-------------------------------------------
R. Randolph Devening
*By /s/ BRYANT P. BYNUM
-------------------------------------------
Bryant P. Bynum
ATTORNEY-IN-FACT
</TABLE>
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Oklahoma City, State of Oklahoma, on the 25th
day of April, 1996.
NATIONAL SERVICE CENTER, INC.,
a Delaware corporation
By /s/ R. RANDOLPH DEVENING*
------------------------------------
R. Randolph Devening,
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, Amendment No. 1
to the this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
/s/ R. RANDOLPH DEVENING* President and Director
------------------------------------------- (Principal Executive Officer)
R. Randolph Devening
/s/ WILLIAM L. BRADY* Vice President, Controller April 25, 1996
------------------------------------------- and Director
William L. Brady (Principal Accounting Officer)
/s/ BRYANT P. BYNUM Vice President, Treasurer
------------------------------------------- and Secretary
Bryant P. Bynum (Principal Financial Officer)
/s/ HORST O. SIEBEN* Director
-------------------------------------------
Horst O. Sieben
*By /s/ BRYANT P. BYNUM
-------------------------------------------
Bryant P. Bynum
ATTORNEY-IN-FACT
</TABLE>
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Oklahoma City, State of Oklahoma, on the 25th
day of April, 1996.
RKR-GP, INC., a Delaware corporation
By /s/ WILLIAM E. ROSENTHAL*
------------------------------------
William E. Rosenthal,
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
/s/ WILLIAM E. ROSENTHAL* President and Director
------------------------------------------- (Principal Executive Officer)
William E. Rosenthal
/s/ WILLIAM L. BRADY* Vice President and Assistant Secretary
------------------------------------------- (Principal Accounting Officer)
William L. Brady
/s/ BRYANT P. BYNUM Vice President, Assistant Secretary April 25, 1996
------------------------------------------- and Assistant Treasurer
Bryant P. Bynum (Principal Financial Officer)
/s/ TONY L. PRATER* Vice President and Director
-------------------------------------------
Tony L. Prater
/s/ JOSEPH C. PENSHORN* Treasurer and Director
-------------------------------------------
Joseph C. Penshorn
/s/ HOWARD S. KATZ* Vice President and Director
-------------------------------------------
Howard S. Katz
/s/ R. RANDOLPH DEVENING* Director
-------------------------------------------
R. Randolph Devening
*By /s/ BRYANT P. BYNUM
-------------------------------------------
Bryant P. Bynum
ATTORNEY-IN-FACT
</TABLE>
II-12
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION NUMBERED PAGE
- ----------- ---------------------------------------------------------------------------------------- ---------------
<C> <S> <C>
*1 Purchase Agreement between the Company and the Underwriters
*4 Form of Indenture between the Company and The Liberty Bank and Trust Company of Oklahoma
City, National Association, as Trustee
**5 Opinion of McAfee & Taft A Professional Corporation, including consent
12 Computation of Ratio of Earnings to Fixed Charges
*23.1 Consent of Coopers & Lybrand, L.L.P.
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Deloitte & Touche LLP
**23.4 Consent of McAfee & Taft A Professional Corporation (included in Exhibit 5 hereto)
*24.1 Power of Attorney of the Registrant
*24.2 Powers of Attorney of the Additional Registrants
*25 Form T-1 Statement of Eligibility of Trustee under the Trust Indenture Act of 1939
</TABLE>
- ------------------------
*Filed herewith.
**To be filed by amendment.
<PAGE>
FOODBRANDS AMERICA, INC.
$120,000,000
% Senior Subordinated Notes due 2006
PURCHASE AGREEMENT
, 1996
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
CHASE SECURITIES INC.
DILLON, READ & CO. INC.
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1305
Ladies and Gentlemen:
Foodbrands America, Inc., a Delaware corporation (the
"Issuer"), confirms its agreement with Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch"), Chase Securities
Inc. and Dillon, Read & Co. Inc. (collectively, the
"Underwriters," which term shall also include any Underwriter
substituted as hereinafter provided in Section 10) with respect
to the sale by the Issuer and the purchase by the several
Underwriters of $120,000,000 aggregate principal amount of the
Issuer's % Senior Subordinated Notes due 2006 (the
"Notes"), in the respective amounts set forth in Schedule A
hereto, except as
<PAGE>
-2-
may otherwise be provided in the Pricing Agreement. The
Notes are to be issued (the "Offering") pursuant to an
indenture dated as of , 1996 (the "Indenture")
among the Issuer, Brennan Packing Co., Inc., a Delaware
corporation, Continental Deli Foods, Inc., a Delaware
corporation, Doskocil Food Service Company, L.L.C., an
Oklahoma limited liability company, Doskocil Specialty
Brands Company, a Delaware corporation, FBAI Investments
Corporation, an Oklahoma corporation, KPR Holdings, L.P.,
a Delaware limited partnership, National Service Center,
Inc., a Delaware corporation, and RKR-GP, Inc., a
Delaware corporation, as guarantors (each a "Guarantor,"
and collectively, the "Guarantors"), and Liberty Bank and
Trust Company of Oklahoma, National Association, as
trustee (the "Trustee").
Concurrently with the Offering, pursuant to an Offer
to Purchase and Consent Solicitation Statement dated March 29,
1996, the Issuer is offering to purchase all, but not less than
a majority, of the Issuer's outstanding 9 3/4% Senior
Subordinated Redeemable Notes due 2000 (the "9 3/4% Notes") and
is soliciting consents to amend or remove certain covenants of
the indenture pursuant to which the 9 3/4% Notes were issued.
Such tender offer and related consent solicitation are
collectively referred to herein as the "Tender Offer." The net
proceeds of the Offering will be used to consummate the Tender
Offer.
Prior to the purchase and public offering of the
Notes by the Underwriters, the Issuer, the Guarantors and the
Underwriters shall enter into an agreement substantially in the
form of Exhibit A hereto (the "Pricing Agreement" and the time
and date of execution of the Pricing Agreement being herein
called the "Representation Date"). The Pricing Agreement may
take the form of an exchange of any standard form of written
telecommunication between the Issuer, the Guarantors and the
Underwriters, and shall specify such applicable information as
is indicated in Exhibit A hereto. The offering of the Notes
will be governed by this Agreement, as supplemented by the
Pricing Agreement. From and after the date of execution and
delivery of the Pricing Agreement, this Agreement shall be
deemed to incorporate the Pricing Agreement.
The Issuer and the Guarantors (the "Registrants")
have prepared and filed with the Securities and Exchange
Commission (the "SEC") a registration statement on Form S-3
(File No. 333-01911) and a related preliminary prospectus for
the registration of the Notes under the Securities Act of 1933,
as amended (the "1933 Act"), have filed such amendments
thereto,
<PAGE>
-3-
if any, and such amended preliminary prospectuses as
may have been required to the date hereof, and will file such
additional amendments thereto and such amended prospectuses as
may hereafter be required. Such registration statement (as
amended) and the prospectus constituting a part thereof
(including in each case all documents deemed to be incorporated
by reference therein and the information, if any, deemed to be
part thereof pursuant to Rule 430A(b) or Rule 434 of the rules
and regulations of the SEC under the 1933 Act (the "1933 Act
Regulations"), as from time to time amended or supplemented
pursuant to the 1933 Act, the Securities Exchange Act of 1934,
as amended (the "1934 Act"), or otherwise) are hereinafter
referred to as the "Registration Statement" and the
"Prospectus," respectively, except that if any revised
prospectus shall be provided to the Underwriters by the
Registrants for use in connection with the offering of the
Notes which differs from the Prospectus on file at the SEC at
the time the Registration Statement becomes effective (whether
or not such revised prospectus is required to be filed by the
Registrants pursuant to Rule 424(b) of the 1933 Act
Regulations), the term "Prospectus" shall refer to such revised
prospectus from and after the time it is first provided to the
Underwriters for such use. If the Registrants elect to rely on
Rule 434 of the 1933 Act Regulations, all references to the
Prospectus shall be deemed to include, without limitation, the
form of Prospectus and the term sheet, taken together, provided
to the Underwriters by the Registrants in reliance on Rule 434
of the 1933 Act Regulations (the "Rule 434 Prospectus"). If
the Registrants file a registration statement to register a
portion of the Notes and rely on Rule 462(b) of the 1933 Act
Regulations for such registration statement to become effective
upon filing with the SEC (the "Rule 462 Registration
Statement"), then any reference to the Registration Statement
herein shall be deemed to refer to both the registration
statement referred to above and the Rule 462 Registration
Statement, as each such registration statement may be amended
pursuant to the 1933 Act.
The Registrants understand that the Underwriters
propose to make a public offering of the Notes as soon as the
Underwriters deem advisable after the Registration Statement
becomes effective, the Pricing Agreement has been executed and
delivered and the Indenture has been qualified under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act").
SECTION 1. REPRESENTATIONS AND WARRANTIES. (a)
Each of the Registrants, jointly and severally, represents and
<PAGE>
-4-
warrants to each Underwriter as of the date hereof, as of the
Representation Date and as of Closing Time as follows:
(i) The Registrants meet the requirements for use of
Form S-3 under the 1933 Act and at the time the
Registration Statement becomes effective and any post-
effective amendments thereto become effective and at the
Representation Date, the Registration Statement will
comply in all material respects with the requirements of
the 1933 Act and the 1933 Act Regulations and the Trust
Indenture Act and the rules and regulations of the SEC
thereunder and will not contain an untrue statement of a
material fact or omit to state a material fact required to
be stated therein or necessary to make the statements
therein not misleading. The Prospectus, at the
Representation Date (unless the term "Prospectus" refers
to a prospectus which has been provided to the
Underwriters by the Registrants for use in connection with
the offering of the Notes which differs from the
Prospectus on file at the SEC at the time the Registration
Statement becomes effective, in which case at the time it
is first provided to the Underwriters for such use) and at
Closing Time (as defined in Section 2 hereof), will not
include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the
statements therein, in the light of the circumstances
under which they were made, not misleading; PROVIDED that
the representations and warranties in this subsection
shall not apply to statements in or omissions from the
Registration Statement or Prospectus contained under the
caption "Underwriting" in the Prospectus made in reliance
upon and in conformity with information furnished to the
Registrants in writing by the Underwriters expressly for
use in the Registration Statement or Prospectus. For
purposes of this Section 1(a), all references to the
Registration Statement, any post-effective amendments
thereto and the Prospectus shall be deemed to include,
without limitation, any electronically transmitted copies
thereof, including, without limitation, any copy filed
with the SEC pursuant to its Electronic Data Gathering,
Analysis, and Retrieval system ("EDGAR").
(ii) Each of (A) Coopers & Lybrand L.L.P., the
accountants who certified the consolidated financial
statements and supporting schedules with respect to the
Issuer included in or incorporated by the reference into
the Registration Statement, (B) Arthur Andersen LLP, the
accountants who certified the financial statements and
<PAGE>
-5-
supporting schedules with respect to TNT Crust, Inc.
included in or incorporated by reference into the
Registration Statement, and (C) Deloitte & Touche LLP, the
accountants who certified the financial statements and
supporting schedules of KPR Holdings, L.P. included in or
incorporated by reference into the Registration Statement,
are each independent public accountants as required by the
1933 Act and the 1933 Act Regulations.
(iii) The financial statements included in the
Registration Statement and the Prospectus or incorporated
by reference therein present fairly the financial position
of each of (A) the Issuer and its consolidated
subsidiaries, (B) TNT Crust, Inc. and (C) KPR Holdings,
L.P., in each case as at the dates indicated, and the
results of their operations for the periods specified;
except as otherwise stated in the Registration Statement,
said financial statements have been prepared in conformity
with generally accepted accounting principles applied on a
consistent basis; the supporting schedules included in the
Registration Statement present fairly the information
required to be stated therein; and the pro forma financial
data included in the Registration Statement and the
Prospectus or incorporated by reference therein have been
prepared in accordance with the requirements of Section
11-02 of Regulation S-X under the 1933 Act and all
adjustments to historical data made by the Issuer in
preparing the pro forma data were reasonable.
(iv) Since the respective dates as of which
information is given in the Registration Statement and the
Prospectus, except as otherwise stated therein, (A) there
has been no material adverse change in the condition
(financial or otherwise), assets, earnings, liabilities
(contingent or otherwise) or prospects of the Registrants
and their respective subsidiaries considered as one
enterprise, whether or not arising in the ordinary course
of business, (B) there have been no transactions entered
into by the Registrants or any of their respective
subsidiaries, other than those in the ordinary course of
business, which are material with respect to the
Registrants and their respective subsidiaries considered
as one enterprise, (C) there has been no dividend or
distribution of any kind declared, paid or made by the
Issuer on any class of its capital stock and (D) there are
no liabilities or obligations of the Registrants or their
respective subsidiaries, direct or indirect, contingent or
matured, which
<PAGE>
-6-
are material to the Registrants and their respective
subsidiaries considered as one enterprise, other than
those reflected in the Registration Statement or
Prospectus.
(v) Each Registrant has been duly incorporated,
organized or formed, as the case may be, and is validly
existing as a corporation, limited liability company or
limited partnership, as the case may be, in good standing
under the laws of its respective jurisdiction of
incorporation, organization or formation and has
corporate, organizational or partnership power and
authority, as the case may be, to own, lease and operate
its properties and to conduct its business as described in
the Prospectus and to enter into and perform its
obligations under this Agreement and the Pricing
Agreement; and each Registrant is duly qualified as a
foreign corporation, limited liability company or limited
partnership, as the case may be, to transact business and
is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the
ownership or leasing of property or the conduct of
business, except where the failure to so qualify would not
have a material adverse effect on the condition (financial
or otherwise), assets, earnings, liabilities (contingent
or otherwise) or prospects of the Registrants and their
respective subsidiaries considered as one enterprise.
(vi) Each subsidiary of the Registrants has been duly
organized and is validly existing as a corporation,
limited liability company or limited partnership, as the
case may be, in good standing under the laws of its
respective jurisdiction of incorporation, organization or
formation, has corporate, organizational or partnership
power and authority, as the case may be, to own, lease and
operate its properties and to conduct its business as
described in the Prospectus and is duly qualified to
transact business and is in good standing in each
jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property
or the conduct of business, except where the failure to so
qualify would not have a material adverse effect on the
condition (financial or otherwise), assets, earnings,
liabilities (contingent or otherwise) or prospects of the
Registrants and their respective subsidiaries considered
as one enterprise; except as described in the Registration
Statement and Prospectus, all of the issued and
outstanding capital stock or ownership interests of each
subsidiary of the
<PAGE>
-7-
Registrants has been duly authorized and validly issued,
is fully paid and nonassessable and is owned by the
Issuer, directly or through subsidiaries, free and
clear of any security interest, lien, option, claim
or other encumbrance.
(vii) The authorized, issued and outstanding
capitalization of the Issuer is as set forth in the
Prospectus under "Capitalization" in the column "Actual"
and in the column "As Adjusted" after giving effect to the
issuance of the Notes pursuant to this Agreement.
(viii) None of the Registrants or any of the
Registrants' subsidiaries is (A) in violation of its
organizational documents, (B) in default in the
performance or observance of any material obligation,
agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease
or other instrument to which any such Registrant or any
such Registrant's subsidiaries is a party or by which it
or any of them may be bound, or to which any of their
property or assets is subject, or (C) in violation of any
applicable law, rule or regulation, or any judgment, order
or decree of any court with jurisdiction over any such
Registrant or any subsidiary of such Registrant, or other
governmental or regulatory authority with jurisdiction
over such Registrant or any of its subsidiaries; and the
execution, delivery and performance of this Agreement and
the Pricing Agreement and the consummation of the
transactions contemplated herein and therein and
compliance by the Registrants with their obligations
hereunder and thereunder have been duly authorized by all
necessary corporate action and will not conflict with or
constitute a breach of, or a default under, or result in
the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Registrants
or any of their respective subsidiaries pursuant to, any
contract, indenture, mortgage, loan agreement, note, lease
or other instrument to which any Registrant or any of its
subsidiaries is a party or by which it or any of them may
be bound, or to which any of their property or assets is
subject, nor will such action result in any violation of
or conflict with the provisions of the certificate of
incorporation or by laws, certificate of formation or
operating agreement or certificate of limited partnership
or partnership agreement of any Registrant or any
applicable law, rule or regulation, or
<PAGE>
-8-
any judgment, order or decree of any court with
jurisdiction over any Registrant or any subsidiary of
any such Registrant, or other governmental or regulatory
authority with jurisdiction over the Registrants or any
of their subsidiaries.
(ix) No labor dispute with the employees of the
Registrants or any of their respective subsidiaries exists
or, to the knowledge of any Registrant, is imminent; and
the Registrants are not aware of any existing or imminent
labor disturbance by the employees of any of their
principal suppliers, manufacturers or contractors which
might be expected to result in any material adverse change
in the condition (financial or otherwise), assets,
earnings, liabilities (contingent or otherwise) or
prospects of the Registrants and their respective
subsidiaries considered as one enterprise.
(x) There is no action, suit or proceeding before or
by any court or governmental agency or body, domestic or
foreign, now pending or, to the knowledge of the
Registrants, threatened against or affecting any
Registrant or any of the Registrants' respective
subsidiaries which is required to be disclosed in the
Registration Statement (other than as disclosed therein),
or which might otherwise, if adversely determined, result
in any material adverse change in the condition (financial
or otherwise), assets, earnings, liabilities (contingent
or otherwise) or prospects of the Registrants or their
respective subsidiaries considered as one enterprise, or
which might materially and adversely affect the properties
or assets thereof or which might materially and adversely
affect the consummation of the transactions contemplated
by this Agreement; and there are no contracts or documents
of any Registrant or any of the Registrants' respective
subsidiaries which are required to be filed as exhibits to
the Registration Statement or the documents incorporated
by reference therein by the 1933 Act, the 1933 Act
Regulations, the 1934 Act or the rules and regulations of
the SEC under the 1934 Act (the "1934 Act Regulations")
which have not been so filed.
(xi) The Registrants and their respective
subsidiaries own or possess, or can acquire on reasonable
terms, the material patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures),
trademarks, service
<PAGE>
-9-
marks and trade names (collectively, "patent and proprietary
rights") presently employed by them in connection with the
business now operated by them, and none of the Registrants
or any of their respective subsidiaries has received any
notice or is otherwise aware of any infringement of or conflict
with asserted rights of others with respect to any patent or
proprietary rights, or of any facts which would render any
patent and proprietary rights invalid or inadequate to protect
the interest of any such Registrant or any of its subsidiaries
therein.
(xii) No authorization, approval or consent of any
court or governmental authority or agency is necessary in
connection with the offering, issuance or sale of the
Notes hereunder and the issuance of the guarantees (the
"Guarantees") thereof by the Guarantors, except such as
may be required under the 1933 Act or the 1933 Act
Regulations or state securities laws and the qualification
of the Indenture under the Trust Indenture Act.
(xiii) The Registrants and their respective
subsidiaries possess such certificates, authorities or
permits issued by the appropriate state, federal or
foreign regulatory agencies or bodies necessary to conduct
the business now operated by them, and none of the
Registrants or any of their respective subsidiaries has
received any notice of proceedings relating to the
revocation or modification of any such certificate,
authority or permit.
(xiv) This Agreement has been, and at the
Representation Date, the Pricing Agreement will have been,
duly authorized, executed and delivered by each of the
Registrants.
(xv) The Indenture has been duly authorized by each
of the Registrants and, at Closing Time, will have been
duly qualified under the Trust Indenture Act and duly
executed and delivered by each of the Registrants and will
constitute a valid and binding agreement of each of the
Registrants, enforceable against them in accordance with
its terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable
principles.
(xvi) The Notes have been duly authorized by the
Issuer and the Guarantees have been duly authorized by
<PAGE>
-10-
each of the Guarantors and, at Closing Time, the Notes
will have been duly executed by the Issuer and the
Guarantees will have been duly executed by each of the
Guarantors and, when authenticated in the manner provided
for in the Indenture and delivered against payment of the
purchase price therefor specified in the Pricing
Agreement, the Notes will constitute valid and binding
obligations of the Issuer and the Guarantees will
constitute, legal, valid and binding obligations of each
of the Guarantors, in each case enforceable in accordance
with their terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable
principles, and the Notes and the Guarantees will be in
the form contemplated by and entitled to the benefits of
the Indenture.
(xvii) The Notes, the Guarantees and the Indenture
conform in all material respects to the respective
statements relating thereto contained in the Prospectus
and will be in substantially the respective forms filed or
incorporated by reference, as the case may be, as exhibits
to the Registration Statement.
(xviii) Except as set forth in the Prospectus, the
Registrants and their respective subsidiaries are in
compliance in all material respects with all applicable
laws, statutes, ordinances, rules or regulations the
enforcement of which, individually or in the aggregate,
would be reasonably expected to have a material adverse
effect on the condition (financial or otherwise), assets,
earnings, liabilities (contingent or otherwise) or
prospects of the Registrants and their respective
subsidiaries considered as one enterprise.
(xix) The Registrants and their respective
subsidiaries have good and marketable title to all
properties (real and personal) owned by them, free and
clear of all mortgages, pledges, liens, security
interests, claims, restrictions or encumbrances of any
kind except such as (a) are described in the Prospectus or
(b) do not, singly or in the aggregate, materially affect
the value of such property and do not interfere with the
use made and proposed to be made of such property by them;
and all properties held under lease by the Registrants and
their respective subsidiaries are held under valid,
subsisting and enforceable leases.
<PAGE>
-11-
(xx) None of the Registrants is, or upon the issuance
and sale of the Notes and issuance of the Guarantees as
herein contemplated and the application of the net
proceeds therefrom as described in the Prospectus under
the caption "Use of Proceeds" will be, an "investment
company" or an entity "controlled" by an "investment
company" as such terms are defined in the Investment
Company Act of 1940, as amended (the "1940 Act").
(xxi) The documents incorporated or deemed to be
incorporated by reference in the Prospectus, at the time
they were or hereafter are filed with the SEC, complied
and will comply in all material respects with the
requirements of the 1934 Act and the 1934 Act Regulations
and, when read together with the other information in the
Prospectus, at the time the Registration Statement and any
post-effective amendments thereto become effective and at
Closing Time, will not contain an untrue statement of a
material fact or omit to state a material fact required to
be stated therein or necessary to make the statements
therein, in the light of the circumstances under which
they were made, not misleading.
(xxii) Except as disclosed in the Registration
Statement and the Prospectus, and except as would not
individually or in the aggregate have a material adverse
effect upon the condition (financial or otherwise),
assets, earnings, liabilities (contingent or otherwise) or
prospects of the Registrants and their respective
subsidiaries considered as one enterprise, (A) each of the
Registrants and their respective subsidiaries is in
compliance with all applicable Environmental Laws,
(B) each of the Registrants and their respective
subsidiaries has all permits, authorizations and approvals
required under any applicable Environmental Laws and is in
compliance with their requirements, (C) there are no
pending or, to the knowledge of the Registrants,
threatened Environmental Claims against the Registrants or
any of their respective subsidiaries, and (D) the
Registrants have no knowledge of any circumstances with
respect to any property or operations of the Registrants
or any of their respective subsidiaries that could
reasonably be anticipated to form the basis of any
Environmental Claim against the Registrants or any of
their respective subsidiaries.
For purposes of this Agreement, the following terms
shall have the following meanings: "Environmental Law"
<PAGE>
-12-
means any foreign, federal, state, local or municipal
statute, law, rule, regulation, ordinance, code, policy or
rule of common law and any published judicial or
administrative interpretation thereof including any
judicial or administrative order, consent decree or
judgment binding on the Registrants or any of their
respective subsidiaries, relating to the environment,
health, safety or any chemical, material or substance,
exposure to which is prohibited, limited or regulated by
any such governmental authority. "Environmental Claims"
means any and all administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations or
proceedings relating in any way to any Environmental Law.
(xxiii) Each of the Registrants and each of their
respective subsidiaries have filed all foreign, federal or
state income and franchise tax returns required to be
filed and have paid all taxes shown thereon as due, and
there is no material tax deficiency which has been or is
reasonably likely to be asserted against any of them; all
material tax liabilities of each Registrant and its
subsidiaries are adequately provided for on the books
thereof.
(xxiv) No person holds any right to include any
securities in the Registration Statement.
(xxv) None of the Registrants or any agent thereof
acting on behalf of any of them has taken, and none of
them will take, any action that might cause this Agreement
or the issuance or sale of the Notes or the issuance of
the Guarantees to violate Regulation G (12 C.F.R. Part
207), Regulation T (12 C.F.R. Part 220), Regulation U (12
C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of
the Board of Governors of the Federal Reserve System, in
each case as in effect now or as the same may hereafter be
in effect at the Closing Time.
(b) Any representation contained in any certificate
signed by any officer of any Registrant and delivered to the
Underwriters or to counsel for the Underwriters pursuant to the
terms of this Agreement shall be deemed a representation and
warranty by the Registrants, jointly and severally, to the
Underwriters as to the matters covered thereby.
<PAGE>
-13-
SECTION 2. SALE AND DELIVERY TO THE UNDERWRITERS;
CLOSING. (a) On the basis of the representations and
warranties herein contained and subject to the terms and
conditions herein set forth, the Issuer agrees to sell to each
Underwriter, severally and not jointly, and each Underwriter,
severally and not jointly, agrees to purchase from the Issuer,
at the purchase price set forth in the Pricing Agreement, the
entire aggregate principal amount of Notes set forth in
Schedule A opposite the name of such Underwriter (except as
otherwise provided in the Pricing Agreement), plus any
additional principal amount of Notes which such Underwriter may
become obligated to purchase pursuant to the provisions of
Section 10 hereof.
(b) Payment of the purchase price for, and delivery
of, the Notes to be purchased by the Underwriters shall be made
at the offices of [ ] or
at such other place as shall be agreed upon by the Underwriters
and the Issuer, at [ ] A.M. on the third (fourth, if the
pricing shall occur after 4:30 P.M.) business day following the
date hereof, or such other time not later than ten business
days after such date as shall be agreed upon by the
Underwriters and the Issuer (such time and date of payment and
delivery being herein called "Closing Time").
Payment shall be made to the Issuer by certified or
official bank check or checks drawn in New York Clearing House
funds or similar next day funds payable to the order of the
Issuer, against delivery to the Underwriters of the Notes.
(c) Certificates for the Notes shall be in such
denominations ($1,000 or integral multiples thereof) and
registered in such names as the Underwriters may request in
writing at least one full business day before Closing Time.
The certificates for the Notes will be made available for
examination and packaging by the Underwriters in The City of
New York not later than 10:00 A.M. on the business day prior to
Closing Time.
SECTION 3. COVENANTS OF THE REGISTRANTS. The
Registrants covenant with each of the Underwriters as follows:
(a) The Registrants will use their best efforts to
cause the Registration Statement to become effective (as
and when requested by the Underwriters) and, if the
Registrants elect to rely upon Rule 430A of the 1933 Act
Regulations and subject to Section 3(b), will comply with the
<PAGE>
-14-
requirements of Rule 430A of the 1933 Act Regulations
and will notify the Underwriters immediately, and confirm
the notice in writing, (i) of the effectiveness of the
Registration Statement and any amendment thereto
(including any post-effective amendment), (ii) of the
receipt of any comments from the SEC, (iii) of any request
by the SEC for any amendment to the Registration Statement
or any amendment or supplement to the Prospectus or for
additional information, and (iv) of the issuance by the
SEC of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any
proceedings for that purpose. The Registrants will make
every reasonable effort to prevent the issuance of any
stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment. If the
Registrants elect to rely on Rule 434 of the 1933 Act
Regulations, the Registrants will prepare a term sheet
that complies with the requirements of Rule 434 of the
1933 Act Regulations. If the Registrants elect not to
rely on Rule 434 of the 1933 Act Regulations, the
Registrants will provide the Underwriters with copies of
the form of Prospectus, in such number as the Underwriters
may reasonably request, and file with the SEC such
Prospectus in accordance with Rule 424(b) of the 1933 Act
Regulations by the close of business in New York on the
business day immediately succeeding the date of the
Pricing Agreement. If the Registrants elect to rely on
Rule 434 of the 1933 Act Regulations, the Registrants will
provide the Underwriters with copies of the Rule 434
Prospectus in such number as the Underwriters may
reasonably request by the close of business in New York on
the business day immediately succeeding the date of the
Pricing Agreement.
(b) The Registrants will give the Underwriters
notice of their intention to file or prepare any amendment
to the Registration Statement (including any post-
effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the
Registrants propose for use by the Underwriters in
connection with the offering of the Notes which differs
from the Prospectus on file at the SEC at the time the
Registration Statement becomes effective, whether or not
such revised prospectus is required to be filed pursuant
to Rule 424(b) of the 1933 Act Regulations in any term
sheet prepared in reliance on Rule 434 of the 1933 Act
Regulations), will furnish the Underwriters with copies of
any such amendment or supplement a reasonable amount of
time prior to such
<PAGE>
-15-
proposed filing or use, as the case may
be, and will not file any such amendment or supplement or
use any such prospectus to which the Underwriters or
counsel for the Underwriters shall object.
(c) The Registrants will deliver to the Underwriters
two signed copies of the Registration Statement as
originally filed and of each amendment thereto (including
exhibits filed therewith or incorporated by reference
therein) and will also deliver to the Underwriters as many
conformed copies of the Registration Statement as
originally filed and of each amendment thereto as the
Underwriters may reasonably request.
(d) The Registrants will deliver to the
Underwriters, without charge, from time to time until the
effective date of the Registration Statement (or, if the
Registrants have elected to rely upon Rule 430A of the
1933 Act Regulations, until such time as the Pricing
Agreement is executed and delivered) as many copies of
each preliminary prospectus as the Underwriters may
reasonably request, and the Registrants hereby consent to
the use of said copies for purposes permitted by the 1933
Act. The Registrants will furnish to the Underwriters,
from time to time during the period when the Prospectus is
required to be delivered under the 1933 Act or the 1934
Act, such number of copies of the Prospectus (as amended
or supplemented) as the Underwriters may reasonably
request for the purposes contemplated by the 1933 Act, the
1934 Act, the 1933 Act Regulations or the 1934 Act
Regulations.
(e) If any event shall occur as a result of which it
is necessary, in the opinion of counsel for the
Underwriters, to amend or supplement the Prospectus in
order to make the Prospectus not misleading in the light
of the circumstances existing at the time it is delivered
to a purchaser, the Registrants will forthwith amend or
supplement the Prospectus (in form and substance
satisfactory to counsel for the Underwriters) so that, as
so amended or supplemented, the Prospectus will not
include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the
statements therein, in the light of the circumstances
existing at the time it it is delivered to a purchaser,
not misleading, and the Registrants will furnish to the
Underwriters a reasonable number of copies of such
amendment or supplement.
<PAGE>
-16-
(f) The Registrants will endeavor, in cooperation
with the Underwriters, to qualify the Notes for offering
and sale under the applicable securities laws of such
states and other jurisdictions of the United States as the
Underwriters may designate; PROVIDED, that none of the
Registrants shall be obligated to qualify as a foreign
corporation in any jurisdiction in which it is not so
qualified. In each jurisdiction in which the Notes have
been so qualified, the Registrants will file such
statements and reports as may be required by the laws of
such jurisdiction to continue such qualification in effect
for a period of not less than one year from the effective
date of the Registration Statement.
(g) The Issuer will make generally available to its
security holders as soon as practicable, but not later
than 45 days after the close of the period covered
thereby, an earnings statement (in form complying with the
provisions of Rule 158 of the 1933 Act Regulations)
covering a twelve month period beginning not later than
the first day of the Issuer's fiscal quarter next
following the "effective date" (as defined in said Rule
158) of the Registration Statement.
(h) The Issuer will use the net proceeds received by
it from the sale of the Notes in the manner specified in
the Prospectus under "Use of Proceeds."
(i) If, at the time that the Registration Statement
becomes effective, any information shall have been omitted
therefrom in reliance upon Rule 430A of the 1933 Act
Regulations, then immediately following the execution of
the Pricing Agreement, the Registrants will prepare, and
file or transmit for filing with the SEC in accordance
with such Rule 430A and Rule 424(b) of the 1933 Act
Regulations, copies of an amended Prospectus, or, if
required by such Rule 430A, a post-effective amendment to
the Registration Statement (including an amended
Prospectus), containing all information so omitted.
(j) For a period of [90] days from the date of this
Agreement, the Issuer will not, and will not permit any of
its subsidiaries to, without the prior written consent of
the Underwriters, directly or indirectly, offer, sell or
grant any option to purchase or otherwise dispose of any
debt securities of the Issuer or any of its subsidiaries
<PAGE>
-17-
which are registered for sale to the public under the
securities laws of any jurisdiction.
(k) The Registrants, during the period when the
Prospectus is required to be delivered under the 1933 Act
or the 1934 Act, will file all documents required to be
filed with the SEC pursuant to the 1934 Act within the
time periods required by the 1934 Act and the 1934 Act
Regulations.
SECTION 4. PAYMENT OF EXPENSES. (a) Each of the
Registrants agrees, jointly and severally, to pay all expenses
incident to the performance of its obligations under this
Agreement, including (i) the preparation, printing and filing
of the Registration Statement (including financial statements
and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the
Underwriters of this Agreement, the Pricing Agreement, the
Indenture and such other documents as may be required in
connection with the offering, purchase, sale and delivery of
the Notes, (iii) the preparation, printing, issuance and
delivery of the certificates for the Notes to the Underwriters,
including any transfer taxes or duties payable upon the sale of
the Notes to the Underwriters, (iv) the fees and disbursements
of counsel for the Registrants, accountants and any other
advisors, (v) the qualification of the Notes under state
securities laws in accordance with the provisions of Section
3(f) hereof, including filing fees and the reasonable fees and
disbursements of counsel for the Underwriters in connection
therewith and in connection with the preparation of the Blue
Sky Survey, any supplement thereto and any Legal Investment
Survey, (vi) the printing and delivery to the Underwriters of
copies of each preliminary prospectus and of the Prospectus and
any amendments or supplements thereto, including any term sheet
delivered by the Registrants pursuant to Rule 434 of the 1933
Act Regulations, (vii) the preparation, printing and delivery
to the Underwriters of copies of the Blue Sky Survey, any
supplement thereto and any Legal Investment Survey, (viii) the
filing fees incident to, and the fees and disbursements of
counsel to the Underwriters in connection with, review by the
National Association of Securities Dealers, Inc. (the "NASD")
of the terms of the sale of the Notes, (ix) any fees payable in
connection with the rating of the Notes and (x) the fees and
expenses of the Trustee, including the fees and disbursements
of counsel for the Trustee in connection with the Indenture and
the Notes.
<PAGE>
-18-
(b) If this Agreement is terminated by the
Underwriters in accordance with the provisions of Section 5 or
Section 9(a)(i) hereof, each of the Registrants agrees, jointly
and severally, to reimburse the Underwriters for all of their
out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the Underwriters.
SECTION 5. CONDITIONS OF THE UNDERWRITERS'
OBLIGATIONS. The obligations of the Underwriters to purchase
and pay for the Notes are subject to the continued accuracy in
all material respects of the representations and warranties of
the Registrants herein contained (including those contained in
the Pricing Agreement), to the accuracy of the statements of
the Registrants made in any certificate pursuant to the
provisions hereof, to the performance by the Registrants of
their obligations hereunder, and to the following further
conditions:
(a) The Registration Statement shall have become
effective not later than 5:30 P.M. on the date hereof, or
with the consent of the Underwriters, at a later time and
date, not later, however, than 5:30 P.M. on the first
business day following the date hereof, or at such later
time and date as may be approved by the Underwriters; and
at Closing Time no stop order suspending the effectiveness
of the Registration Statement shall have been issued under
the 1933 Act or proceedings therefor initiated or
threatened by the SEC. If the Registrants have elected to
rely upon Rule 430A of the 1933 Act Regulations, the price
of the Notes and any price-related information previously
omitted from the effective Registration Statement pursuant
to such Rule 430A shall have been transmitted to the SEC
for filing pursuant to Rule 424(b) of the 1933 Act
Regulations within the prescribed time period and prior to
Closing Time the Registrants shall have provided evidence
satisfactory to the Underwriters of such timely filing, or
a post-effective amendment providing such information
shall have been promptly filed and declared effective in
accordance with the requirements of Rule 430A of the 1933
Act Regulations.
(b) The Registrants shall have furnished to the
Underwriters the opinion of McAfee & Taft A Professional
Corporation, counsel for the Registrants, dated as of
Closing Time, in form and substance satisfactory to
counsel for the Underwriters to the effect that:
<PAGE>
-19-
(i) Each Registrant has been duly incorporated,
organized or formed, as the case may be, and is
validly existing as a corporation, limited liability
company or limited partnership, as the case may be,
in good standing under the laws of its respective
jurisdiction of incorporation, organization or
formation.
(ii) Each Registrant has the requisite power and
authority to own and lease its properties and to
operate and conduct its business as described in the
Registration Statement.
(iii) To the best of such counsel's knowledge and
information, each Registrant is duly qualified to
transact business as a foreign corporation, limited
liability company, or limited partnership, as the
case may be, and is in good standing in each
jurisdiction in which such qualification is required,
except where the failure to qualify would not have a
material adverse effect on the condition (financial
or otherwise), assets, earnings, liabilities
(contingent or otherwise) or prospects of the
Registrants and their respective subsidiaries
considered as one enterprise.
(iv) The authorized, issued and outstanding
capital stock of the Issuer is as set forth in the
Prospectus under "Capitalization," and the shares of
issued and outstanding Common Stock have been duly
authorized and validly issued and are fully paid and
non-assessable.
(v) The Notes have been duly authorized by the
Issuer and the Guarantees have been duly authorized
by the respective Guarantors and when executed by the
Issuer and the Guarantors, respectively, and
authenticated by the Trustee in the manner provided
in the Indenture (assuming the due authorization,
execution and delivery of the Indenture by the
Trustee) and delivered against payment of the
purchase price therefor specified in the Pricing
Agreement, the Notes will constitute valid and
binding obligations of the Issuer and the Guarantees
will constitute valid and binding obligations of the
respective Guarantors, in each case enforceable in
accordance with their terms and entitled to the
benefits of the
<PAGE>
-20-
Indenture, except as the enforcement thereof may be
subject to (1) bankruptcy, insolvency, receivership,
reorganization, moratorium, fraudulent conveyance
and transfer or other similar laws now or
hereafter in effect relating to or affecting
creditors' rights generally and (2) general equitable
principles (regardless of whether such enforcement
may sought in a proceeding at law or in equity).
(vi) The Notes and the Guarantees conform in all
material respects to the descriptions thereof
contained in the Prospectus.
(vii) The Indenture has (A) been duly and validly
authorized, executed and delivered by the Issuer and
each of the Guarantors and (B) is duly qualified
under the 1939 Act, and (assuming the due
authorization, execution and delivery by the Trustee)
constitutes the valid and binding agreement of the
Issuer and each of the Guarantors, enforceable in
accordance with its terms, except as the enforcement
thereof may be subject to (1) bankruptcy, insolvency,
receivership, reorganization, moratorium, fraudulent
conveyance and transfer or other similar laws now or
hereafter in effect relating to creditors' rights
generally and (2) general equitable principles
(regardless of whether such enforcement may be sought
in a proceeding at law or in equity).
(viii) Each subsidiary of each of the Registrants
has been duly incorporated, organized or formed, as
the case may be, and is validly existing as a
corporation, limited liability company or limited
partnership, as the case may be, in good standing
under the laws of the jurisdiction of its
incorporation, organization or formation, as the case
may be, has power and authority to own, lease and
operate its properties and to conduct its business as
described in the Registration Statement and, to the
best of such cousel's knowledge and information, is
duly qualified to transact business as a foreign
corporation, limited liability company or limited
partnership and is in good standing in each
jurisdiction in which such qualification is required,
except where the failure to qualify would not have a
material adverse effect on the condition (financial
or otherwise), assets, earnings, liabilities
(contingent or otherwise) or
<PAGE>
-21-
prospects of the Registrants and their respective
subsidiaries considered as one enterprise; all of the
issued and outstanding capital stock of each such
subsidiary has been duly authorized and validly issued,
is fully paid and non-assessable and, to the best of such
counsel's knowledge and information, is owned by the
Issuer, directly or through subsidiaries, free and
clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity.
(ix) The Purchase Agreement and the Pricing
Agreement have been duly authorized, executed and
delivered by the Registrants.
(x) The Registration Statement is effective
under the 1933 Act and, to the best of such counsel's
knowledge and information, no stop order suspending
the effectiveness of the Registration Statement has
been issued under the 1933 Act or proceedings
therefor initiated or threatened by the SEC.
(xi) At the Representation Date, the
Registration Statement (other than the Statement of
Eligibility and Qualification of the Trustee on Form
T-1 and the financial statements, including the Notes
thereto, supporting schedules or any financial or
statistical data set forth therein found in or
derivable from the financial or internal records of
the Registrants and their respective subsidiaries or
any forward looking or projected financial or
statistical data relating to the Registrants and
their respective subsidiaries, as to which no opinion
need be rendered) complied as to form in all material
respects with the requirements of the 1933 Act and
the 1933 Act Regulations.
(xii) To the best of such counsel's knowledge and
information, (A) there are no legal or governmental
actions, suits or proceedings of any nature pending
or threatened which are required to be disclosed in
the Registration Statement other than those disclosed
therein and (B) all pending legal or governmental
actions, suits or proceedings of any nature to which
any Registrant or any of the Registrants'
subsidiaries is a party or to which any of their
property or assets is subject which are not described
in the Registration Statement, including ordinary
routine
<PAGE>
-22-
litigation incidental to the business, are,
considered in the aggregate, not material to the
Registrants and their respective subsidiaries
considered as one enterprise.
(xiii) The information in the Prospectus under
"Business--Legal Proceedings," to the extent that
such information constitutes matters of law,
summaries of legal matters, documents or proceedings
or legal conclusions, has been reviewed by such
counsel and is correct in all material respects. The
information in the Prospectus under "Description of
the Notes," to the extent that such information
constitutes matters of law, summaries of legal
matters, documents or proceedings or legal
conclusions, has been reviewed by such counsel and is
an accurate summary of all material terms of the
Notes and the Guarantees.
(xiv) To the best of such counsel's knowledge and
information, (A) there are no contracts, indentures,
mortgages, loan agreements, notes, leases or other
arrangements or documents required to be described or
referred to in the Registration Statement or to be
filed as exhibits thereto other than those described
or referred to therein or filed or incorporated by
reference as exhibits thereto and (B) no default
exists in the due performance or observance of any
material obligation thereunder; the descriptions
thereof or references thereto in the Registration
Statement are materially correct.
(xv) To the best of such counsel's knowledge and
information, (A) no default with respect to any
Senior Indebtedness (as defined in the Indenture)
entitling the holders thereof to accelerate the
maturity thereof exists or will exist as a result of
the execution and delivery of the Purchase Agreement
or the consummation of the transactions contemplated
thereby or by the Tender Offer and (B) none of the
Registrants is in default of the performance or
observation of any material obligations, agreements,
covenants or conditions contained in any contract,
indenture, mortgage, agreement or instrument relating
to any Senior Indebtedness that, in the case of
either (A) or (B) above, would have a material
adverse effect on the condition (financial or
<PAGE>
-23-
otherwise), assets, earnings, liabilities (contingent
or otherwise) or prospects of the Registrants and
their respective subsidiaries considered as one
enterprise.
(xvi) No authorization, approval, consent or
order of any court or governmental agency is required
in connection with the sale of the Notes to the
Underwriters or the issuance of the Guarantees
thereon, except such as may be required under the
1933 Act or the 1933 Act Regulations or state
securities laws and the qualification of the
Indenture under the Trust Indenture Act; and, to the
best of such counsel's knowledge and information, the
execution and delivery of the Purchase Agreement, the
Pricing Agreement, the Indenture and the Notes
together with the Guarantees thereon and the
consummation of the transactions contemplated therein
will not conflict with or constitute a breach of, or
default (or event which, with notice or lapse of time
or both, would constitute a default) under, or result
in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the
Registrants or any of their respective subsidiaries
pursuant to, any material contract, indenture,
mortgage, loan agreement, note, lease or other
instrument listed in the Registration Statement to
which any of the Registrants or any of their
respective subsidiaries is a party or by which it or
any of them is bound, or to which any of the property
or assets of any of the Registrants or any of their
respective subsidiaries is subject, nor will such
action result in any violation of the provisions of
the certificate of incorporation or bylaws,
certificate of formation or operating agreement or
certificate of limited partnership or partnership
agreement, as the case may be, of any Registrant, or
any applicable law, administrative regulation or
administrative or court decree.
(xvii) The Notes and the Guarantees rank on a
parity with all Pari Passu Indebtedness (as defined
in the Indenture) of the Issuer and the Guarantors,
respectively, that is outstanding at Closing Time and
senior to all Subordinated Indebtedness (as defined
in the Indenture) of the Issuer and the Guarantors,
respectively that is outstanding at Closing Time.
<PAGE>
-24-
In addition such counsel shall state that such
counsel has participated in conferences with officers and
other representatives of the Registrants, counsel for the
Registrants, representatives of the Underwriters and
representatives of the independent auditors for the
Registrants at which the contents of the Registration
Statement and the Prospectus and related matters were
discussed and, although such counsel does not pass upon,
and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in
the Registration Statement or the Prospectus (except to
the extent set forth in clauses (iv), (vi), (xiii) and the
last part of clause (xiv)(B) above), such counsel advises
the Underwriters that, on the basis of the foregoing
(relying as to materiality to a large extent upon the
opinions of officers and other representatives of the
Registrants), no facts have come to the attention of such
counsel which lead such counsel to believe that the
Registration Statement, when such Registration Statement
became effective or as of the Representation Date, or the
Prospectus (unless the term "Prospectus" refers to a
prospectus which has been provided to the Underwriters by
the Registrants for use in connection with the offering of
the Notes which differs from the Prospectus on file at the
SEC at the Representation Date, in which case at the time
it is first provided to the Underwriters for such use) as
of the Representation Date or as of Closing Time,
contained or contains an untrue statement of a material
fact or omitted or omits to state a material fact required
to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in light of the
circumstances under which they are being made) not
misleading (it being understood that such counsel has not
been requested to and does not make any comment with
respect to the Trustee's Statement of Eligibility on Form
T-1, the financial statements, and the notes thereto and
related schedules, and other financial or statistical data
found in or derivable from the financial or internal
records of the Registrants and their respective
subsidiaries and any forward-looking or projected
financial or statistical data relating to the Registrants
and their respective subsidiaries included in the
Registration Statement or the Prospectus).
In rendering such opinions, such counsel (A) need not
express any opinion with regard to the application of laws
of any jurisdiction other than the federal law of the
United States, the laws of the State of Oklahoma and the
<PAGE>
-25-
General Corporation Law of the State of Delaware and
(B) may rely, as to matters of fact, to the extent they
deem proper, on representations or certificates of
responsible officers of Registrants and their respective
subsidiaries and certificates of public officials;
PROVIDED that such certificates have been delivered to the
Underwriters. References to the Prospectus in this
subsection (b) include any supplements thereto at or prior
to Closing Time.
(c) The Underwriters shall have received the
favorable opinion, dated as of Closing Time, of Cahill
Gordon & Reindel, counsel for the Underwriters, with
respect to the matters set forth in clauses (v) (assuming
due authorization of the Notes and the Guarantees by the
Issuer and the Guarantors, respectively), (vi), (vii)(B),
(x) and (xi) of subsection (b) of this Section.
In giving its opinion required by this subsection (c)
of this Section 5, Cahill Gordon & Reindel shall
additionally state that such counsel has participated in
conferences with officers and other representatives of the
Registrants, counsel for the Registrants, representatives
of the Underwriters and representatives of the independent
auditors for the Registrants at which the contents of the
Registration Statement and the Prospectus and related
matters were discussed and, although such counsel does not
pass upon, and does not assume any responsibility for the
accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus,
such counsel advises the Underwriters that, on the basis
of the foregoing (relying as to materiality to a large
extent upon the opinions of officers and other
representatives of the Registrants), no facts have come to
the attention of such counsel which lead such counsel to
believe that the Registration Statement, when such
Registration Statement became effective or as of the
Representation Date, or the Prospectus (unless the term
"Prospectus" refers to a prospectus which has been
provided to the Underwriters by the Registrants for use in
connection with the offering of the Notes which differs
from the Prospectus on file at the SEC at the
Representation Date, in which case at the time it is first
provided to the Underwriters for such use) as of the
Representation Date, contained an untrue statement of a
material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements
therein (in the case of
<PAGE>
-26-
the Prospectus, in light of the circumstances under which
they are being made) not misleading (it being understood
that such counsel has not been requested to and does not
make any comment with respect to the Trustee's Statement
of Eligibility on Form T-1, the financial statements, and
the notes thereto and related schedules, and other financial
or statistical data found in or derivable from the financial
or internal records of the Registrants and their respective
subsidiaries and any forward-looking or projected
financial or statistical data relating to the Registrants
and their respective subsidiaries included in the
Registration Statement or the Prospectus).
(d) At Closing Time there shall not have been, since
the date hereof or since the respective dates as of which
information is given in the Prospectus, any material
adverse change in the condition (financial or otherwise),
assets, earnings, liabilities (contingent or otherwise) or
prospects of the Registrants and their respective
subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, and the
Underwriters shall have received a certificate of the
President or a Vice President of the Issuer and of the
chief financial or chief accounting officer of the Issuer,
dated as of Closing Time, to the effect that (i) there has
been no such material adverse change, (ii) the
representations and warranties in Section 1 hereof are
true and correct with the same force and effect as though
expressly made at and as of Closing Time, (iii) the
Registrants have complied with all agreements and
satisfied all conditions on their part to be performed or
satisfied at or prior to Closing Time, and (iv) no stop
order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that
purpose have been initiated or threatened by the SEC. As
used in this Section 5(d), the term "Prospectus" means the
Prospectus in the form first used to confirm sales of the
Notes.
(e) (i) At the time of the execution of this
Agreement, the Underwriters shall have received from
Coopers & Lybrand L.L.P. a letter dated such date, in form
and substance satisfactory to the Underwriters containing
statements and information of the type ordinarily included
in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial
information contained in or incorporated by reference in
the Registration Statement and the Prospectus.
<PAGE>
-27-
(ii) At the time of the execution of this Agreement,
the Underwriters shall have received from Arthur Andersen
L.L.P. a letter dated such date, in form and substance
satisfactory to the Underwriters, containing statements
and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with
respect to certain financial information contained in or
incorporated by reference in the Registration Statement
and the Prospectus.
(iii) At the time of the execution of this Agreement,
the Underwriters shall have received from Deloitte &
Touche, L.L.P. a letter dated such date, in form and
substance satisfactory to the Underwriters containing
statements and information of the type ordinarily included
in accountants' "comfort letters" to underwriters with
respect to certain financial information contained in or
incorporated by reference in the Registration Statement
and the Prospectus.
(f) At Closing Time the Underwriter shall have
received from each of Coopers & Lybrand L.L.P, Arthur
Andersen L.L.P. and Deloitte & Touche, L.L.P. a letter,
dated as of Closing Time, to the effect that they reaffirm
the statements made in the letters furnished pursuant to
subsection (e) of this Section, except that the specified
date referred to shall be a date not more than three days
prior to Closing Time.
(g) At Closing Time the Notes shall be rated at
least [ ] by Moody's Investors Service Inc. and [ ]
by Standard & Poor's Corporation, and since the date of
this Agreement (i) no downgrading shall have occurred in
the rating accorded any of the securities of the Issuer or
any of its subsidiaries by any "nationally recognized
statistical rating organization," as that term is defined
by the SEC for purposes of Rule 436(g)(2) of the 1933 Act
Regulations, and (ii) no such organization shall have
publicly announced that it has under surveillance or
review, with possible negative implications, its rating of
the securities of the Issuer or any of the subsidiaries.
(h) At Closing Time, counsel for the Underwriters
shall have been furnished with such information,
certificates and documents as they may reasonably require
for the purpose of enabling them to pass upon the issuance
and sale of the Notes as contemplated herein and related
<PAGE>
-28-
proceedings, or in order to evidence the accuracy of any
of the representations or warranties, or the fulfillment
of any of the conditions, herein contained; and all
opinions and certificates mentioned above or elsewhere in
this Agreement shall be reasonably satisfactory in form
and substance to the Underwriters and counsel for the
Underwriters.
(i) All of the conditions to the Tender Offer to
have occurred on or prior to the Closing Time shall have
been satisfied or waived.
If any condition specified in this Section 5 shall
not have been fulfilled in all material respects when and as
required to be fulfilled, this Agreement may be terminated by
the Underwriters by notice to the Issuer, and such termination
shall be without liability of any party to any other party
except as provided in Section 4. Notwithstanding any such
termination, the provisions of Sections 6, 7 and 8 shall remain
in effect.
SECTION 6. INDEMNIFICATION. (a) The Registrants,
jointly and severally, agree to indemnify and hold harmless
each Underwriter and each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, arising out of
any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or
any amendment thereto), including the information deemed
to be part of the Registration Statement pursuant to Rule
430A or Rule 434 of the 1933 Act Regulations, if
applicable, or the omission or alleged omission therefrom
of a material fact required to be stated therein or
necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue
statement of a material fact contained in any preliminary
prospectus or the Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent
of the aggregate amount paid in settlement of any litigation,
<PAGE>
-29-
or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue
statement or omission; PROVIDED that (subject to
Section 6(d) below) any such settlement is effected with
the written consent of the Registrants; and
(iii) against any and all expense whatsoever, as
incurred (including the fees and disbursements of counsel
chosen by Merrill Lynch), reasonably incurred in
investigating, preparing or defending against any
litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or
any claim whatsoever based upon any such untrue statement
or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid
under (i) or (ii) above;
PROVIDED that this indemnity agreement shall not apply to any
loss, liability, claim, damage or expense to the extent arising
out of any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity
with written information furnished to the Registrants by the
Underwriters expressly for use in the Registration Statement
(or any amendment thereto), including the information deemed to
be part of the Registration Statement pursuant to Rule 430A or
Rule 434 of the 1933 Act Regulations, or any preliminary
prospectus or the Prospectus (or any amendment or supplement
thereto).
(b) Each Underwriter severally but not jointly
agrees to indemnify and hold harmless each of the Registrants,
their directors, each of their officers who signed the
Registration Statement, and each person, if any, who controls a
Registrant within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained
in subsection (a) of this Section, as incurred, but only with
respect to untrue statements or omissions, or alleged untrue
statements or omissions, made in the Registration Statement (or
any amendment thereto), including the information deemed to be
part of the Registration Statement pursuant to Rule 430A or
Rule 434 of the 1933 Act Regulations, or any preliminary
prospectus or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written
information furnished to the Registrants by such Underwriter
through Merrill Lynch expressly for use in the "Underwriting"
section
<PAGE>
-30-
of the Registration Statement (or any amendment thereto)
or such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(c) Each indemnified party shall give notice as
promptly as reasonably practicable to each indemnifying party
of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party
from any liability hereunder to the extent it is not materially
prejudiced as a result thereof and in any event shall not
relieve it from any liability which it may have otherwise than
on account of this indemnity agreement. In the case of parties
indemnified pursuant to Section 6(a) above, counsel to the
indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above,
counsel to the indemnified parties shall be selected by the
Issuer. An indemnifying party may participate at its own
expense in the defense of any such action; PROVIDED that
counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties
be liable for fees and expenses of more than one counsel (in
addition to any local counsel) separate from their own counsel
for all indemnified parties in connection with any one action
or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or
circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect
to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any
claim whatsoever in respect of which indemnification or
contribution could be sought under this Section 6 or Section 7
hereof (whether or not the indemnified parties are actual or
potential parties thereto), unless such settlement, compromise
or consent (i) includes an unconditional release of each
indemnified party from all liability arising out of such
litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault,
culpability or a failure to the act by or on behalf of any
indemnified party.
(d) If at any time an indemnified party shall have
requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature
contemplated by Section 6(a)(ii) effected without its written
<PAGE>
-31-
consent if (i) such settlement is entered into more than 45
days after receipt by such indemnifying party of the aforesaid
request, (ii) such indemnifying party shall have received
notice of the terms of such settlement at least 30 days prior
to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified
party in accordance with such request prior to the date of such
settlement.
SECTION 7. CONTRIBUTION. If the indemnification
provided for in Section 6 hereof is for any reason unavailable
to or insufficient to hold harmless an indemnified party in
respect of any losses, liabilities, claims, damages or expenses
referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities,
claims, damages and expenses incurred by such indemnified
party, as incurred, (i) in such proportion as is appropriate to
reflect the relative benefits received by the Registrants on
the one hand and the Underwriters on the other hand from the
offering of the Notes pursuant to this Agreement or (ii) if the
allocation provided by clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above
but also the relative fault of the Registrants on the one hand
and of the Underwriters on the other hand in connection with
the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.
The relative benefits received by the Registrants on
the one hand and the Underwriters on the other hand in
connection with the offering of the Notes pursuant to this
Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the
Notes pursuant to this Agreement (before deducting expenses)
received by the Registrants and the total underwriting discount
received by the Underwriters, in each case as set forth on the
cover of the Prospectus or, if Rule 434 of the 1933 Act
Regulations is used, the corresponding location on the term
sheet delivered by the Registrants pursuant to such rule bear
to the aggregate initial public offering price of the Notes as
set forth on such cover.
The relative fault of the Registrants on the one hand
and the Underwriters on the other hand shall be determined by
reference to, among other things, whether any such untrue or
alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to
<PAGE>
-32-
information supplied by the Registrants or by the Underwriters
and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such
statement or omission.
The Registrants and the Underwriters agree that it
would not be just and equitable if contribution pursuant to
this Section 7 were determined by PRO RATA allocation or by any
other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7.
The aggregate amount of losses, liabilities, claims, damages
and expenses incurred by an indemnified party and referred to
above in this Section 7 shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in
investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based
upon any such untrue or alleged untrue statement or omission or
alleged omission.
Notwithstanding the provisions of Section 7, no
Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the
Notes underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason
of any such untrue or alleged untrue statement or omission or
alleged omission.
No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any,
who controls an Underwriter within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act shall have the same
rights to contribution as the Underwriter, and each director of
a Registrant, each officer of a Registrant who signed the
Registration Statement, and each person, if any, who controls a
Registrant within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to
contribution as the respective Registrant.
SECTION 8. REPRESENTATIONS, WARRANTIES AND
AGREEMENTS TO SURVIVE DELIVERY. All representations,
warranties, and agreements contained in this Agreement and the
Pricing
<PAGE>
-33-
Agreement, or contained in certificates of officers of
the Registrants submitted pursuant hereto, shall remain
operative and in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or any
controlling person, or by or on behalf of the Registrants, and
shall survive delivery of and payment for the Notes hereunder.
SECTION 9. TERMINATION OF AGREEMENT. (a) The
Underwriters may terminate this Agreement by notice to the
Issuer, at any time prior to Closing Time, (i) if there has
been, since the time of execution of this Agreement or since
the respective dates as of which information is given in the
Prospectus, any material adverse change in the condition
(financial or otherwise), assets, earnings, liabilities
(contingent or otherwise) or prospects of the Registrants and
their respective subsidiaries considered as one enterprise, or
(ii) if there has occurred any material adverse change in the
financial markets in the United States, any outbreak of
hostilities or escalation thereof or other calamity or crisis
or any change or development involving a prospective change in
national or international political, financial or economic
conditions, in each case the effect of which is such as to make
it, in the judgment of the Underwriters, impracticable to
market the Notes or to enforce contracts for the sale of the
Notes, (iii) if trading in any of the securities of the Issuer
has been suspended or limited by the SEC or the New York Stock
Exchange, or if trading generally on the American Stock
Exchange or the New York Stock Exchange or in the Nasdaq
National Market has been suspended or limited, or minimum or
maximum prices for trading have been fixed, or maximum ranges
for prices have been required, by any of said exchanges or by
such system or by order of the SEC, the NASD or any other
governmental authority, or (iv) if a banking moratorium has
been declared by either United States or New York authorities.
As used in this Section 9(a), the term "Prospectus" means the
Prospectus in the form first used to confirm sales of the
Notes.
(b) If this Agreement is terminated pursuant to this
Section 9, such termination shall be without liability of any
party to any other party except as provided in Section 4
hereof, and provided further that Sections 6, 7 and 8 shall
survive such termination and remain in full force and effect.
SECTION 10. DEFAULT BY ONE OR MORE OF THE
UNDERWRITERS. If one or more of the Underwriters shall fail at
Closing Time to purchase the Notes which it or they are
obligated to purchase under this Agreement and the Pricing
<PAGE>
-34-
Agreement (the "Defaulted Notes"), the Underwriters shall have
the right, within 24 hours thereafter, to make arrangements for
one or more of the non-defaulting Underwriters, or any other
underwriters, to purchase all, but not less than all, of the
Defaulted Notes in such amounts as may be agreed upon and upon
the terms herein set forth; if, however, the Underwriters shall
not have completed such arrangements within such 24-hour
period, then:
(a) if the aggregate principal amount of Defaulted
Notes does not exceed 10% of the aggregate principal
amount of the Notes, each of the non-defaulting
Underwriters shall be obligated, severally and not
jointly, to purchase the full amount thereof in the
proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or
(b) if the aggregate principal amount of Defaulted
Notes exceeds 10% of the aggregate principal amount of the
Notes, this Agreement shall terminate without liability on
the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall
relieve any defaulting Underwriter from liability in respect of
its default.
In the event of any such default which does not
result in a termination of this Agreement, either the
Underwriters or the Issuer shall have the right to postpone
Closing Time for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or
Prospectus or in any other documents or arrangements. As used
herein, the term "Underwriter" includes any person substituted
for an Underwriter under this Section 10.
SECTION 11. NOTICES. All notices and other
communications hereunder shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any
standard form of telecommunication. Notices to the
Underwriters shall be directed to the Underwriters at Merrill
Lynch World Headquarters, North Tower, World Financial Center,
New York, New York 10281-1305, attention of
[ ]; notices to the Registrants shall be
directed to the Issuer at 1601 Northwest Expressway, Suite
1700, Oklahoma City, Oklahoma 73118-1495, attention of
[ ].
<PAGE>
-35-
SECTION 12. PARTIES. This Agreement and the Pricing
Agreement shall each inure to the benefit of and be binding
upon the Underwriters, the Registrants and their respective
successors, heirs and legal representatives. Nothing expressed
or mentioned in this Agreement or the Pricing Agreement is
intended or shall be construed to give any person, firm or
corporation, other than the Underwriters and the Registrants
and their respective successors, heirs and legal
representatives and the controlling persons and officers and
directors referred to in Sections 6 and 7 and their heirs and
legal representatives, any legal or equitable right, remedy or
claim under or in respect of this Agreement or the Pricing
Agreement or any provision herein or therein contained. This
Agreement and the Pricing Agreement and all conditions and
provisions hereof and thereof are intended to be for the sole
and exclusive benefit of the Underwriters and the Registrants
and their respective successors, heirs and legal
representatives, and said controlling persons and officers and
directors and their heirs and legal representatives, and for
the benefit of no other person, firm or corporation. No
purchaser of Notes from any Underwriter shall be deemed to be a
successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. This Agreement
and the Pricing Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to
agreements made and to be performed in said State. Specified
times of day refer to New York City time unless otherwise
indicated.
SECTION 14. EFFECT OF HEADINGS. The Article and
Section headings herein are for convenience only and shall not
affect the construction hereof.
SECTION 15. COUNTERPARTS. This Agreement may be
executed in one or more counterparts and, when a counterpart
has been executed by each party, all such counterparts taken
together shall constitute one and the same agreement.
<PAGE>
-36-
If the foregoing is in accordance with your
understanding of our agreement, please sign and return to the
Issuer a counterpart hereof, whereupon this instrument, along
with all counterparts, will become a binding agreement among
the Underwriters and the Registrants in accordance with its
terms.
Very truly yours,
FOODBRANDS AMERICA, INC.
By:
-------------------------
Title:
BRENNAN PACKING CO., INC.
By:
-------------------------
Name:
Title:
CONTINENTAL DELI FOODS, INC.
By:
-------------------------
Name:
Title:
DOSKOCIL FOOD SERVICE COMPANY,
L.L.C.
By:
-------------------------
Name:
Title:
DOSKOCIL SPECIALTY BRANDS
COMPANY
By:
-------------------------
Name:
Title:
<PAGE>
-37-
FBAI INVESTMENTS CORPORATION
By:
-------------------------
Name:
Title:
KPR HOLDINGS, L.P.
By:
-------------------------
Name:
Title:
NATIONAL SERVICE CENTER, INC.
By:
-------------------------
Name:
Title:
RKR-GP, INC.
By:
-------------------------
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
CHASE SECURITIES INC.
DILLON, READ & CO. INC.
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By:
-------------------------
Title:
<PAGE>
SCHEDULE A
PRINCIPAL AMOUNT
NAME OF UNDERWRITER OF SECURITIES
- ------------------- -------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................
Chase Securities Inc....................
Dillon, Read & Co. Inc..................
Total..............................
-------------
-------------
<PAGE>
EXHIBIT A
FOODBRANDS AMERICA, INC.
$120,000,000
% Senior Subordinated Notes due 2006
PRICING AGREEMENT
, 1996
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
CHASE SECURITIES INC.
DILLON, READ & CO. INC.
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1305
Ladies and Gentlemen:
Reference is made to the Purchase Agreement dated
, 1996 (the "Purchase Agreement") among Foodbrands
America, Inc., a Delaware corporation (the "Issuer"), Brennan
Packing Co., Inc., a Delaware corporation, Continental Deli
Foods, Inc., a Delaware corporation, Doskocil Food Service
Company, L.L.C., an Oklahoma limited liability company,
Doskocil Specialty Brands Company, a Delaware corporation, FBAI
Investments Corporation, an Oklahoma corporation, KPR Holdings,
L.P., a Delaware limited partnership, National Service Center,
Inc., a Delaware corporation, RKR-GP, Inc., a Delaware
corporation (collectively with the Issuer, the "Registrants"),
and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Chase
Securities Inc. and Dillon, Read & Co. Inc. (collectively, the
"Underwriters") relating to the purchase by you from the
Issuer, subject to the terms and conditions set forth therein,
of $120,000,000 aggregate principal amount of % Senior
Subordinated Notes due 2006 (the "Notes") of the Issuer. This
Agreement is the Pricing Agreement referred to in the Purchase
Agreement and
<PAGE>
-2-
capitalized terms used herein without definition
shall have the meanings assigned to them in the Purchase
Agreement.
Pursuant to Section 2 of the Purchase Agreement, the
Issuer agrees with you as follows:
1. The initial public offering price of the Notes,
determined as provided in said Section 2, shall be % of
the principal amount thereof, plus accrued interest, if any,
from , 1996.
2. The purchase price of the Notes to be paid by the
Underwriters shall be % of the principal amount thereof.
3. The interest rate to be borne by the Notes shall
be % per annum.
4. The Notes will mature on , 2006.
5. The Notes will be redeemable at the election of
the Issuer at % of principal amount at any time on or
after , 2001 and prior to , 2002, at
% of principal amount on or after , 2002 and
prior to , 2003, at % of principal amount on
or after , 2003 and prior to , 2004,
and at 100% of principal amount at any time on or after ,
2004, in each case plus accrued and unpaid interest, if any.
6. The redemption price of the Notes upon a Public
Equity Offering (as defined in the Registration Statement)
shall be % of the principal amount thereof.
7. The interest payment dates shall be and
, commencing, 1996.
Each of the Registrants, jointly and severally,
represents and warrants to the Underwriters that the
representations and warranties of the Registrants set forth in
Section 1 of the Purchase Agreement are accurate in all
material respects as though expressly made at and as of the
date hereof.
This Pricing Agreement shall be governed by the
internal laws of the State of New York.
<PAGE>
-3-
If the foregoing is in accordance with your
understanding of our agreement, please sign and return to us a
counterpart hereof, whereupon this instrument, along with all
counterparts and together with the Purchase Agreement, will be
a binding agreement among the Registrants and the Underwriters
in accordance with its terms and the terms of the Purchase
Agreement.
Very truly yours,
FOODBRANDS AMERICA, INC.
By:
--------------------------
Title:
BRENNAN PACKING CO., INC.
By:
--------------------------
Name:
Title:
CONTINENTAL DELI FOODS, INC.
By:
--------------------------
Name:
Title:
DOSKOCIL FOOD SERVICE COMPANY,
L.L.C.
By:
--------------------------
Name:
Title:
<PAGE>
-4-
DOSKOCIL SPECIALTY BRANDS
COMPANY
By:
--------------------------
Name:
Title:
FBAI INVESTMENTS CORPORATION
By:
--------------------------
Name:
Title:
KPR HOLDINGS, L.P.
By:
--------------------------
Name:
Title:
NATIONAL SERVICE CENTER, INC.
By:
--------------------------
Name:
Title:
RKR-GP, INC.
By:
--------------------------
Name:
Title:
<PAGE>
-5-
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
CHASE SECURITIES INC.
DILLON, READ & CO. INC.
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By:
------------------------------
Title:
<PAGE>
_______________________________________________________________
_______________________________________________________________
____________________
Foodbrands America, Inc., as Issuer
and
the Guarantors, as identified herein
and
Liberty Bank and Trust Company of Oklahoma City,
National Association, as Trustee
____________________
INDENTURE
Dated as of , 1996
____________________
$120,000,000
% Senior Subordinated Notes due 2006
_______________________________________________________________
_______________________________________________________________
<PAGE>
Reconciliation and tie between Trust Indenture Act of 1939
and Indenture, dated as of , 1996
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
----------- -------
Section 310(a)(1) ..................................... 7.11
(a)(2) ..................................... 7.11
(a)(3) ..................................... N.A.
(a)(4) ..................................... N.A.
(a)(5) ..................................... 7.11
(b) ..................................... 7.09; 7.11; 12.02
(c) ..................................... N.A.
Section 311(a) ..................................... 7.12
(b) ..................................... 7.12
(c) ..................................... N.A.
Section 312(a) ..................................... 2.05
(b) ..................................... 12.03
(c) ..................................... 12.03
Section 313(a) ..................................... 7.07
(b) ..................................... 7.07
(c) ..................................... 7.07; 12.02
(d) ..................................... 7.07
Section 314(a) ..................................... 4.07; 12.02
(b) ..................................... N.A.
(c)(1) ..................................... 12.04
(c)(2) ..................................... 12.04
(c)(3) ..................................... N.A.
(d) ..................................... N.A.
(e) ..................................... 12.05
(f) ..................................... N.A.
Section 315(a) ..................................... 7.01(b)
(b) ..................................... 7.05; 12.02
(c) ..................................... 7.01(a)
(d) ..................................... 7.01(c)
(e) ..................................... 6.11
Section 316(a) (last
sentence) ..................................... 2.09
(a)(1)(A) ..................................... 6.05
(a)(1)(B) ..................................... 6.04
(a)(2) ..................................... N.A.
(b) ..................................... 6.07
Section 317(a)(1) ..................................... 6.08
(a)(2) ..................................... 6.09
(b) ..................................... 2.04
Section 318(a) ..................................... 12.01
________________________
Note: This reconciliation and tie shall not, for any purpose,
be deemed to be a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF
GENERAL APPLICATION
Section 1.01. Definitions ....................................
Section 1.02. Incorporation by Reference of Trust
Indenture Act ................................
Section 1.03. Rules of Construction ..........................
ARTICLE TWO
THE NOTES
Section 2.01. Forms and Dating ...............................
Section 2.02. Execution and Authentication ...................
Section 2.03. Registrar and Paying Agent .....................
Section 2.04. Paying Agent To Hold Money in
Trust ........................................
Section 2.05. Noteholder Lists ...............................
Section 2.06. Transfer and Exchange ..........................
Section 2.07. Replacement Notes ..............................
Section 2.08. Outstanding Notes ..............................
Section 2.09. Treasury Notes .................................
Section 2.10. Temporary Notes ................................
Section 2.11. Cancellation ...................................
Section 2.12. Defaulted Interest .............................
Section 2.13. CUSIP Number ...................................
Section 2.14. Deposit of Moneys ..............................
ARTICLE THREE
REDEMPTION OF NOTES
Section 3.01. Notices to the Trustee .........................
Section 3.02. Selection of Notes To Be Redeemed ..............
Section 3.03. Notice of Redemption ...........................
Section 3.04. Effect of Notice of Redemption .................
Section 3.05. Deposit of Redemption Price ....................
_______________
Note: This table of contents shall not, for any purpose,
be deemed to be a part of the Indenture.
-i-
<PAGE>
PAGE
----
Section 3.06. Notes Redeemed or Purchased in
Part .........................................
ARTICLE FOUR
COVENANTS
Section 4.01. Payment of Notes ...............................
Section 4.02. Maintenance of Office or Agency ................
Section 4.03. Corporate Existence ............................
Section 4.04. Payment of Taxes and Other Claims ..............
Section 4.05. Maintenance of Properties; Insur-
ance; Books and Records; Compli-
ance with Law ................................
Section 4.06. Compliance Certificate .........................
Section 4.07. Reporting Requirements .........................
Section 4.08. Limitation on Indebtedness .....................
Section 4.09. Limitation on Restricted Payments ..............
Section 4.10. Limitation on Issuance and Sale of
Preferred Stock by Restricted
Subsidiaries .................................
Section 4.11. Limitation on Liens ............................
Section 4.12. Change of Control ..............................
Section 4.13. Disposition of Proceeds of Asset
Sales ........................................
Section 4.14. Limitation on Transactions with
Affiliates ...................................
Section 4.15. Limitation on Dividends and Other
Payment Restrictions Affecting
Restricted Subsidiaries ......................
Section 4.16. Limitation on Other Senior Subordi-
nated Indebtedness ...........................
Section 4.17. Limitation on Designations of Unre-
stricted Subsidiaries ........................
Section 4.18. Limitation on Guarantees by
Restricted Subsidiaries ......................
Section 4.19. Waiver of Stay, Extension or Usury
Laws .........................................
_______________
Note: This table of contents shall not, for any purpose,
be deemed to be a part of the Indenture.
-ii-
<PAGE>
PAGE
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ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.01. When Company May Merge, etc. ...................
Section 5.02. Successor Substituted ..........................
ARTICLE SIX
REMEDIES
Section 6.01. Events of Default ..............................
Section 6.02. Acceleration ...................................
Section 6.03. Other Remedies .................................
Section 6.04. Waiver of Past Defaults ........................
Section 6.05. Control by Majority ............................
Section 6.06. Limitation on Suits ............................
Section 6.07. Right of Holders To Receive
Payment ......................................
Section 6.08. Collection Suit by Trustee .....................
Section 6.09. Trustee May File Proofs of Claim ...............
Section 6.10. Priorities .....................................
Section 6.11. Undertaking for Costs ..........................
Section 6.12. Restoration of Rights and Remedies .............
ARTICLE SEVEN
TRUSTEE
Section 7.01. Duties .........................................
Section 7.02. Rights of Trustee ..............................
Section 7.03. Individual Rights of Trustee ...................
Section 7.04. Trustee's Disclaimer ...........................
Section 7.05. Notice of Default ..............................
Section 7.06. Money Held in Trust ............................
Section 7.07. Reports by Trustee to Holders ..................
Section 7.08. Compensation and Indemnity .....................
Section 7.09. Replacement of Trustee .........................
Section 7.10. Successor Trustee by Merger, etc. ..............
Section 7.11. Eligibility; Disqualification ..................
Section 7.12. Preferential Collection of Claims
Against Company ..............................
_______________
Note: This table of contents shall not, for any purpose,
be deemed to be a part of the Indenture.
-iii-
<PAGE>
PAGE
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ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
Section 8.01. Termination of the Company's
Obligations ..................................
Section 8.02. Legal Defeasance and Covenant
Defeasance ...................................
Section 8.03. Application of Trust Money .....................
Section 8.04. Repayment to Company or Guarantors .............
Section 8.05. Reinstatement ..................................
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01. Without Consent of Holders .....................
Section 9.02. With Consent of Holders ........................
Section 9.03. Compliance with Trust Indenture
Act ..........................................
Section 9.04. Revocation and Effect of Consents ..............
Section 9.05. Notation on or Exchange of Notes ...............
Section 9.06. Trustee May Sign Amendments, etc. ..............
ARTICLE TEN
GUARANTEE OF NOTES
Section 10.01. Guarantee ......................................
Section 10.02. Execution and Delivery of
Guarantee ....................................
Section 10.03. Additional Guarantors ..........................
Section 10.04. Guarantee Obligations Subordinated
to Guarantor Senior Indebtedness .............
Section 10.05. Payment Over of Proceeds upon Dis-
solution, etc., of a Guarantor ...............
Section 10.06. Suspension of Guarantee Obligations
When Guarantor Senior Indebted-
ness in Default ..............................
Section 10.07. Release of a Guarantor .........................
Section 10.08. Waiver of Subrogation ..........................
_______________
Note: This table of contents shall not, for any purpose,
be deemed to be a part of the Indenture.
-iv-
<PAGE>
PAGE
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Section 10.09. Guarantee Provisions Solely to
Define Relative Rights .......................
Section 10.10. Trustee To Effectuate Subordination
of Guarantee Obligations .....................
Section 10.11. No Waiver of Guarantee Subordina-
tion Provisions ..............................
Section 10.12. Guarantors To Give Notice to
Trustee ......................................
Section 10.13. Reliance on Judicial Order or Cer-
tificate of Liquidating Agent
Regarding Dissolution, etc., of
Guarantors ...................................
Section 10.14. Rights of Trustee as a Holder of
Guarantor Senior Indebtedness;
Preservation of Trustee's Rights .............
Section 10.15. Article Ten Applicable to Paying
Agents .......................................
Section 10.16. No Suspension of Remedies Subject
to Rights of Holders of Guarantor
Senior Indebtedness .........................
Section 10.17. Trustee's Relation to Guarantor
Senior Indebtedness ..........................
Section 10.18. Subrogation ....................................
ARTICLE ELEVEN
SUBORDINATION OF NOTES
Section 11.01. Notes Subordinate to Senior Indebt-
edness .......................................
Section 11.02. Payment Over of Proceeds upon Dis-
solution, etc. ...............................
Section 11.03. Suspension of Payment When Senior
Indebtedness in Default ......................
Section 11.04. Trustee's Relation to Senior
Indebtedness .................................
Section 11.05. Subrogation to Rights of Holders of
Senior Indebtedness ..........................
Section 11.06. Provisions Solely To Define Rela-
tive Rights ..................................
Section 11.07. Trustee To Effectuate
Subordination ................................
Section 11.08. No Waiver of Subordination Provi-
sions ........................................
_______________
Note: This table of contents shall not, for any purpose,
be deemed to be a part of the Indenture.
-v-
<PAGE>
PAGE
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Section 11.09. Notice to Trustee ..............................
Section 11.10. Reliance on Judicial Order or Cer-
tificate of Liquidating Agent ................
Section 11.11. Rights of Trustee as a Holder of
Senior Indebtedness; Preservation
of Trustee's Rights ..........................
Section 11.12. Article Applicable to Paying
Agents .......................................
Section 11.13. No Suspension of Remedies ......................
ARTICLE TWELVE
MISCELLANEOUS
Section 12.01. Trust Indenture Act of 1939 ....................
Section 12.02. Notices ........................................
Section 12.03. Communication by Holders with Other
Holders ......................................
Section 12.04. Certificate and Opinion as to Con-
ditions Precedent ............................
Section 12.05. Statements Required in Certificate
or Opinion ...................................
Section 12.06. Rules by Trustee, Paying Agent,
Registrar ....................................
Section 12.07. Governing Law ..................................
Section 12.08. No Interpretation of Other Agree-
ments ........................................
Section 12.09. No Recourse Against Others .....................
Section 12.10. Successors .....................................
Section 12.11. Duplicate Originals ............................
Section 12.12. Separability ...................................
Section 12.13. Table of Contents, Headings, etc. ..............
Section 12.14. Benefits of Indenture ..........................
SIGNATURES ........................................................
EXHIBIT A Form of Note
EXHIBIT B Form of Guarantee
_______________
Note: This table of contents shall not, for any purpose,
be deemed to be a part of the Indenture.
-vi-
<PAGE>
INDENTURE, dated as of , 1996, between
Foodbrands America, Inc., a corporation incorporated under the
laws of the State of Delaware (the "Company"), as issuer,
Brennan Packing Co., Inc., a Delaware corporation, Continental
Deli Foods, Inc., a Delaware corporation, Doskocil Food Service
Company, L.L.C., an Oklahoma limited liability company,
Doskocil Specialty Brands Company, a Delaware corporation, FBAI
Investments Corporation, an Oklahoma corporation, KPR Holdings,
L.P., a Delaware limited partnership, National Service Center,
Inc., a Delaware corporation, and RKR-GP, Inc., a Delaware cor-
poration, as guarantors (each a "Guarantor," and collectively,
the "Guarantors") and Liberty Bank and Trust Company of Okla-
homa City, National Association, as trustee (the "Trustee").
Each party hereto agrees as follows for the benefit
of each other party and for the equal and ratable benefit of
the Holders of the Company's % Senior Subordinated Notes
due 2006.
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions.
"9-3/4% Indenture" means the Indenture dated as of
April 28, 1993 between the Company as successor to Doskocil
Companies Incorporated, and First Fidelity Bank, National Asso-
ciation, New York, as trustee, as amended.
"9-3/4 Notes" means the 9-3/4% Senior Subordinated
Redeemable Securities due 2000 of the Company issued pursuant
to the 9-3/4% Indenture.
"Acquired Indebtedness" means Indebtedness of a per-
son (a) assumed in connection with an Asset Acquisition from
such person or (b) existing at the time such person becomes a
Subsidiary of any other person, but not including Indebtedness
incurred in connection with, or in anticipation of such person
becoming a Subsidiary.
"Affiliate" means, with respect to any specified per-
son, any other person directly or indirectly controlling or
controlled by or under direct or indirect common control with
such specified person.
<PAGE>
-2-
"Agent" means any Registrar or Paying Agent of the
Notes.
"Applicable Premium" means, with respect to a Note,
the greater of (i) 1.0% of the then outstanding principal
amount of such Note or (ii) the excess of (A) the present value
of the required interest and principal payments due on such
Note, computed using a discount rate equal to the Treasury Rate
plus 100 basis points, over (B) the then outstanding principal
amount of such Note; PROVIDED that in no event will the Appli-
cable Premium exceed the amount of the applicable redemption
price upon an optional redemption less 100%, at any time on or
after , 2001.
"Asset Acquisition" means (a) an Investment by the
Company or any Subsidiary of the Company in any other person
pursuant to which such person shall become a Restricted Subsid-
iary, or shall be merged with or into the Company or any
Restricted Subsidiary, or (b) the acquisition by the Company or
any Restricted Subsidiary of the assets of any person which
constitute all or substantially all of the assets of such per-
son or any division, operating unit or line of business of such
person.
"Asset Sale" means any sale, issuance, conveyance,
transfer, lease or other disposition by the Company or any
Restricted Subsidiary to any person other than the Company or a
Restricted Subsidiary, in one or a series of related transac-
tions, of: (a) any Capital Stock of any Subsidiary of the Com-
pany; (b) all or substantially all of the properties and assets
of any division or line of business of the Company or any
Restricted Subsidiary; or (c) any other properties or assets of
the Company or a Restricted Subsidiary (including proprietary
brand names, whether registered or otherwise) other than in the
ordinary course of business. For the purposes of this defini-
tion, the term "Asset Sale" shall not include (i) any sale,
issuance, conveyance, transfer, lease or other disposition of
properties or assets that is governed by the provisions
described under Article Five hereof, (ii) sales of obsolete
equipment or of real property no longer used or useful in the
Company's business, (iii) any direct or indirect sale of inven-
tory or accounts receivable to the extent the proceeds thereof
are required to repay a lender or lenders that are owed Indebt-
edness of the Company or any Restricted Subsidiary that is
secured by such inventory and accounts receivable and (iv) any
sale, issuance, conveyance, transfer, lease or other disposi-
tion of properties or assets, whether in one transaction or a
<PAGE>
-3-
series of related transactions, involving assets with a fair
market value, as determined by the Company, not in excess of
$1,000,000.
"Asset Sale Offer" shall have the meaning set forth
in Section 4.13(b).
"Asset Sale Offer Price" shall have the meaning set
forth in Section 4.13(b).
"Asset Sale Purchase Date" shall have the meaning set
forth in Section 4.13(b).
"Average Life to Stated Maturity" means, with respect
to any Indebtedness, as at any date of determination, the quo-
tient obtained by dividing (a) the sum of the products of
(i) the number of years from such date to the date or dates of
each successive scheduled principal payment (including, without
limitation, any sinking fund requirements) of such Indebtedness
multiplied by (ii) the amount of each such principal payment by
(b) the sum of all such principal payments.
"Bank Agent" means Chemical Bank or any successor or
replacement agent under the Credit Agreement.
"Bank Warrants" means the warrants evidencing the
right to purchase shares of Common Stock pursuant to the War-
rant Agreement dated as of October 31, 1991, between the Com-
pany and the banks named therein as in effect on the date
hereof.
"Bankruptcy Law" means Title 11 of the United States
Code or any similar federal, state or foreign law for the
relief of debtors.
"Board of Directors" means the board of directors of
the Company or any Guarantor, as the case may be, or any duly
authorized committee of such board.
"Board Resolution" means a copy of a resolution duly
adopted by the Board of Directors of the Company or any Guaran-
tor, as the case may be, certified by the Secretary or an
Assistant Secretary of the Company or the applicable Guarantor,
as the case may be, and in full force and effect on the date of
such certification.
<PAGE>
-4-
"Business Day" means each day which is not a day on
which banking institutions in The City of New York, State of
New York, or the city in which the Trustee has its Corporate
Trust Office, are authorized or obligated by law, regulation or
executive order to close.
"Capital Stock" means, with respect to any person,
any and all shares, interests, participations, rights in or
other equivalents (however designated) of such person's capital
stock, and any rights (other than debt securities convertible
into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation
under a lease of (or other agreement conveying the right to
use) any property (whether real, personal or mixed) that is
required to be classified and accounted for as a capital lease
obligation under GAAP, and, for the purpose of this Indenture,
the amount of such obligation at any date shall be the capital-
ized amount thereof at such date, determined in accordance with
GAAP consistently applied.
"Cash Equivalents" means, at any time: (i) any evi-
dence of Indebtedness with a maturity of 365 days or less
issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality
thereof (PROVIDED that the full faith and credit of the United
States of America is pledged in support thereof);
(ii) certificates of deposit or acceptances with a maturity of
365 days or less of any financial institution that is a member
of the Federal Reserve System having combined capital and sur-
plus and undivided profits of not less than $500,000,000;
(iii) commercial paper with a maturity of 365 days or less
issued by a corporation that is not an Affiliate of the Company
organized under the laws of any state of the United States or
the District of Columbia and rated at least A-1 by S&P or at
least P-1 by Moody's or at least an equivalent rating category
of another nationally recognized securities rating agency;
(iv) repurchase agreements and reverse repurchase agreements
relating to marketable direct obligations issued or uncondi-
tionally guaranteed by the government of the United States of
America or issued by any agency thereof and backed by the full
faith and credit of the United States of America, in each case
maturing within 365 days from the date of acquisition; PROVIDED
that the terms of such agreements comply with the guidelines
set forth in the Federal Financial Agreements of Depository
Institutions With Securities Dealers and Others, as adopted by
<PAGE>
-5-
the Comptroller of the Currency on October 31, 1985; and
(v) money market funds organized under the laws of the United
States of America or any state thereof that invest substan-
tially all of their assets in any types of investments
described in clause (i), (ii) or (iii) above.
"Change of Control" means the occurrence of any of
the following events: (a) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Securities
Exchange Act), excluding Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Securities Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total Voting
Stock of the Company; (b) the Company consolidates with, or
merges with or into, another person or sells, assigns, conveys,
transfers, leases or otherwise disposes of all or substantially
all of its assets to any person, or any person consolidates
with, or merges with or into, the Company in any such event
pursuant to a transaction in which the outstanding Voting Stock
of the Company is converted into or exchanged for cash, securi-
ties or other property, other than any such transaction where
(i) the outstanding Voting Stock of the Company is converted
into or exchanged for (1) Voting Stock (other than Redeemable
Capital Stock) of the surviving or transferee corporation or
(2) cash, securities and other property in an amount which
could be paid by the Company as a Restricted Payment under this
Indenture and (ii) immediately after such transaction, no "per-
son" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Securities Exchange Act), excluding Permitted
Holders, is the "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Securities Exchange Act, except that a per-
son shall be deemed to have "beneficial ownership" of all secu-
rities that such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 50% of the total
Voting Stock of the surviving or transferee corporation;
(c) during any consecutive two-year period, individuals who at
the beginning of such period constituted the Board of Directors
of the Company (together with any new directors whose election
by such Board of Directors or whose nomination for election by
the stockholders of the Company was approved by a vote of
66-2/3% of the directors then still in office who (i) are enti-
tled to vote to elect such new director or who are entitled to
nominate such director pursuant to the Company's bylaws, the
<PAGE>
-6-
JLL Agreement, or the Airlie Agreement and (ii) were either
directors at the beginning of such period or persons whose
election as directors or nomination for election was previously
so approved) cease for any reason to constitute a majority of
the Board of Directors of the Company then in office;
(d) during any consecutive two-year period individuals who were
Non Investor Directors (as defined below) at the beginning of
such period (together with any new Non Investor Directors whose
election by the Board of Directors of the Company or whose
nomination for election by the stockholder of the Company was
approved by a vote of 66-2/3% of the Non Investor Directors
then still in office who were either Non Investor Directors at
the beginning of such period or whose election or nomination
for election as directors was so approved) cease for any reason
to constitute a majority of the Non Investor Directors then in
office or (e) JLL assigns any of its rights under Section 4.6
of the JLL Agreement, or any successor provisions, to nominate
directors of the Company and at any time thereafter a majority
of the directors of the Company designated pursuant to the JLL
Agreement are persons who were not directors 60 days prior to
the date of such assignment or persons whose election or nomi-
nation for election was approved by 66-2/3% of the Non Investor
Directors. For purposes of the foregoing, a "Non Investor
Director" means a director of the Company other than a director
nominated, designated or elected pursuant to the JLL Agreement
or the Airlie Agreement.
"Change of Control Date" shall have the meaning set
forth in Section 4.12.
"Change of Control Offer" shall have the meaning set
forth in Section 4.12.
"Change of Control Purchase Date" shall have the
meaning set forth in Section 4.12.
"Change of Control Purchase Price" shall have the
meaning set forth in Section 4.12.
"Common Stock" means, with respect to any person, any
and all shares, interests or other participations in, and other
equivalents (however designated and whether voting or nonvot-
ing) of, such person's common stock, whether outstanding at the
Issue Date or issued after the Issue Date, and includes, with-
out limitation, all series and classes of such common stock.
<PAGE>
-7-
"Company" means the party named as such in this
Indenture until a successor replaces it (or any previous suc-
cessor) pursuant to this Indenture, and thereafter means such
successor.
"Consolidated EBITDA" means, with respect to the Com-
pany for any period, (i) the sum of, without duplication, the
amount for such period, taken as a single accounting period, of
(a) Consolidated Net Income, (b) Consolidated Non-cash Charges,
(c) Consolidated Interest Expense and (d) Consolidated Income
Tax Expense, LESS (ii) non-cash items increasing Consolidated
Net Income for such period.
"Consolidated Fixed Charge Coverage Ratio" means,
with respect to the Company, the ratio of the aggregate amount
of Consolidated EBITDA of the Company for the four full fiscal
quarters for which financial information in respect thereof is
available immediately preceding the date of the transaction
(the "Transaction Date") giving rise to the need to calculate
the Consolidated Fixed Charge Coverage Ratio (such four full
fiscal quarter period being referred to herein as the "Four
Quarter Period") to the aggregate amount of Consolidated Fixed
Charges of the Company for the Four Quarter Period. In addi-
tion to and without limitation of the foregoing, for purposes
of this definition, "Consolidated EBITDA" and "Consolidated
Fixed Charges" shall be calculated after giving effect on a PRO
FORMA basis for the period of such calculation to, without
duplication, (a) the incurrence of any Indebtedness of the Com-
pany or any of the Restricted Subsidiaries during the period
commencing on the first day of the Four Quarter Period to and
including the Transaction Date (the "Reference Period"),
including, without limitation, the incurrence of the Indebted-
ness giving rise to the need to make such calculation (and the
application of the net proceeds thereof), as if such incurrence
(and application) occurred on the first day of the Reference
Period, (b) an adjustment to eliminate or include, as the case
may be, the Consolidated EBITDA and Consolidated Fixed Charges
of such person directly or indirectly attributable to assets
which are the subject of any Asset Sale or Asset Acquisition
(including, without limitation, any Asset Acquisition giving
rise to the need to make such calculation as a result of the
Company or one of the Restricted Subsidiaries (including any
person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being lia-
ble for Acquired Indebtedness) occurring during the Reference
Period, as if such Asset Sale (after giving effect to any Des-
ignation of Unrestricted Subsidiaries) or Asset Acquisition
<PAGE>
-8-
occurred on the first day of the Reference Period and (c) the
retirement of Indebtedness during the Reference Period which
cannot thereafter be reborrowed occurring as if retired on the
first day of the Reference Period. For purposes of calculating
"Consolidated Fixed Charges" for this "Consolidated Fixed
Charge Coverage Ratio," interest on Indebtedness incurred dur-
ing the Four Quarter Period under any revolving credit facility
which can be borrowed and repaid without reducing the commit-
ments thereunder shall be the actual interest during the Four
Quarter Period. Furthermore, in calculating "Consolidated
Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage
Ratio," (i) interest on outstanding Indebtedness determined on
a fluctuating basis as of the Transaction Date and which will
continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate PER ANNUM equal to the rate of interest
on such Indebtedness in effect on the Transaction Date, (ii) if
interest on any Indebtedness actually incurred on the Transac-
tion Date may optionally be determined at an interest rate
based upon a factor of a prime or similar rate, a eurocurrency
interbank offered rate, or other rates, then the interest rate
in effect on the Transaction Date will be deemed to have been
in effect during the Reference Period; and (iii) notwithstand-
ing clauses (i) and (ii) above, interest on Indebtedness deter-
mined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Rate Protection
Obligations, shall be deemed to have accrued at the rate PER
ANNUM resulting after giving effect to the operation of such
agreements. If the Company or any of the Restricted Subsidiar-
ies directly or indirectly guaranteed Indebtedness of a third
person, the above clauses shall give effect to the incurrence
of such guaranteed Indebtedness as if the Company or such
Restricted Subsidiary had directly incurred or otherwise
assumed such guaranteed Indebtedness.
"Consolidated Fixed Charges" means, with respect to
the Company for any period, the sum of, without duplication,
the amounts for such period of (i) Consolidated Interest
Expense and (ii) the aggregate amount of dividends and other
distributions paid or accrued during such period in respect of
Redeemable Capital Stock of the Company and the Restricted Sub-
sidiaries on a consolidated basis.
"Consolidated Income Tax Expense" means, with respect
to the Company for any period, the provision for federal,
state, local and foreign income taxes of the Company and the
<PAGE>
-9-
Restricted Subsidiaries for such period as determined on a con-
solidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect
to the Company for any period, without duplication, the sum of
(i) the interest expense of the Company and the Restricted Sub-
sidiaries for such period as determined on a consolidated basis
in accordance with GAAP, excluding the amortization of fees
related to the issuance of the Notes and fees (other than let-
ter of credit fees) related to the initial execution and deliv-
ery of the Credit Agreement, but including, without limitation,
(a) any amortization of debt discount, (b) the net cost under
Interest Rate Protection Obligations (including any amortiza-
tion of discounts), (c) the interest portion of any deferred
payment obligation which in accordance with GAAP is required to
be reflected on an income statement, (d) all commissions, dis-
counts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing and (e) all accrued
interest and (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or
accrued by the Company and the Restricted Subsidiaries during
such period as determined on a consolidated basis in accordance
with GAAP.
"Consolidated Net Income" means, with respect to the
Company, for any period, the consolidated net income (or loss)
of the Company and the Restricted Subsidiaries for such period
as determined in accordance with GAAP consistently applied
adjusted, to the extent included in calculating such net
income, by excluding, without duplication, (i) all extraordi-
nary gains or losses (net of fees and expenses relating to the
transaction giving rise thereto) and the non-recurring cumula-
tive effect of accounting changes, (ii) the portion of net
income (or loss) of the Company and the Restricted Subsidiaries
allocable to minority interests in unconsolidated persons to
the extent that cash dividends or distributions have not actu-
ally been received by the Company or one of the Restricted Sub-
sidiaries, (iii) net income (or loss) of any person combined
with the Company or one of the Restricted Subsidiaries on a
"pooling of interests" basis attributable to any period prior
to the date of combination, (iv) any gain or loss realized upon
the termination of any employee pension benefit plan, on an
after-tax basis, (v) gains or losses in respect of any Asset
Sales by the Company or one of the Restricted Subsidiaries (net
of fees and expenses relating to the transaction giving rise
thereto), on an after-tax basis, (vi) reduction of reorganiza-
tion value in excess of amounts allocable to tangible assets
<PAGE>
-10-
resulting from the utilization of net operating losses, and
(vii) the net income of any Restricted Subsidiary of the Com-
pany to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is
not at the time permitted, directly or indirectly, by operation
of the terms of its charter or any agreement, instrument, judg-
ment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders.
"Consolidated Net Tangible Assets" means, with
respect to the Company at any date, the total assets shown on
the consolidated balance sheet of the Company and the
Restricted Subsidiaries prepared in accordance with GAAP as of
the last day of the immediately preceding fiscal quarter less
the sum of (a) all current liabilities plus (b) goodwill and
other intangibles shown on such balance sheet.
"Consolidated Non-cash Charges" means, with respect
to the Company for any period, the aggregate depreciation,
amortization and other non-cash expenses (including, without
limitation, non-cash reserves and non-cash charges) of the Com-
pany and the Restricted Subsidiaries reducing Consolidated Net
Income of the Company and the Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with
GAAP.
"control" means, with respect to any person, the
power to direct the management and policies of such person,
directly or indirectly, whether through the ownership of Voting
Stock, by contract or otherwise; and the terms "controlling"
and "controlled" have meanings correlative to the foregoing.
"Corporate Trust Office" means the corporate trust
office of the Trustee at which at any particular time its cor-
porate trust business shall be principally administered, which
on the date hereof is 100 North Broadway, Oklahoma City, Okla-
homa 73102, Attention: [Corporate Trust Administration
Department].
"covenant defeasance" shall have the meaning set
forth in Section 8.02.
"Credit Agreement" means the Credit and Security
Agreement dated as of December , 1995, among the Company, as
borrower, Chemical Bank, as agent, and the lenders which are to
become parties from time to time thereto, together with the
related documents thereto (including, without limitation, any
<PAGE>
-11-
guarantee agreements permitted under this Indenture and secu-
rity documents), in each case as such agreement may be amended
(including any agreement extending the maturity of, refinanc-
ing, replacing or otherwise restructuring (including, subject
to the covenants of this Indenture, adding Guarantors as addi-
tional borrowers or guarantors thereunder) all or any portion
of the Indebtedness under such agreement) or any successor or
replacement agreement permitted under this Indenture.
"Credit Agreement Obligations" means all monetary
obligations of every nature of the Company or a Restricted Sub-
sidiary, including, without limitation, obligations to pay
principal and interest, reimbursement obligations under letters
of credit, fees, expenses and indemnities, from time to time
owed to the lenders, the agent, the co-agents or any collateral
agent under or in respect of the Credit Agreement.
"Custodian" means any receiver, trustee, assignee,
liquidator, sequestrator or similar official under any Bank-
ruptcy Law.
"Debt Securities" means any debt securities (includ-
ing any guarantee of such securities) issued by the Company
and/or any Guarantor, whether in a public offering or a private
placement.
"Default" means any event that is, or after notice or
passage of time or both would be, an Event of Default.
"Depository" shall mean The Depository Trust Company,
New York, New York, or any successor thereto registered under
the Securities Exchange Act or other applicable statute or
regulation.
"Designation" has the meaning set forth in Section
4.17.
"Designation Amount" has the meaning set forth in
Section 4.17.
"Designated Senior Indebtedness" means (i) all Senior
Indebtedness and Guarantor Senior Indebtedness under the Credit
Agreement Obligations and (ii) any other Senior Indebtedness
(or for certain purposes more fully described in this Inden-
ture, Guarantor Senior Indebtedness) which (a) at the time of
incurrence exceeds $25,000,000 in aggregate principal amount
and (b) is specifically designated by the Company (or, in the
<PAGE>
-12-
case of Guarantor Senior Indebtedness, by the relevant Guaran-
tor) in the instrument evidencing such Senior Indebtedness or
Guarantor Senior Indebtedness as "Designated Senior
Indebtedness".
"Event of Default" has the meaning set forth in Sec-
tion 6.01.
"Excess Proceeds" shall have the meaning set forth in
Section 4.13.
"Fair Market Value" means, with respect to any asset
or property, the price which could be negotiated in an arm's-
length free market transaction, for cash, between a willing
seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Mar-
ket Value shall be determined by the Board of Directors of the
Company acting in good faith and shall be evidenced by a Board
Resolution of the Company delivered to the Trustee.
"GAAP" means generally accepted accounting principles
in the United States set forth in the Statements of Financial
Accounting Standards and the Interpretation, Accounting Prin-
ciples Board Opinions and AICPA Accounting Research Bulletins
which are applicable as of the Issue Date and consistently
applied.
"guarantee" means, as applied to any obligation,
(i) a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business),
direct or indirect, in any manner, of any part or all of such
obligation and (ii) an agreement, direct or indirect, contin-
gent or otherwise, the practical effect of which is to assure
in any way the payment or performance (or payment of damages in
the event of non-performance) of all or any part of such obli-
gation, including, without limiting the foregoing, the payment
of amounts drawn down by letters of credit.
"Guarantee" means the guarantee of the Notes by each Guarantor
pursuant to the provisions contained herein.
"Guarantor" means each person who delivers a Guaran-
tee and shall include any additional person delivering a Guar-
antee pursuant to Section 4.19 and shall further include any
successor to any such person pursuant to this Indenture, and
thereafter means such successor.
<PAGE>
-13-
"Guarantor Senior Indebtedness" means, with respect
to any Guarantor, the principal of and interest on any Indebt-
edness of such Guarantor, whether outstanding on the Issue Date
or thereafter created, incurred or assumed, unless, in the case
of any particular Indebtedness, the instrument creating or evi-
dencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior
in right of payment to the Guarantee of such Guarantor. With-
out limiting the generality of the foregoing, "Guarantor Senior
Indebtedness" shall also include the principal of and interest
(including interest accruing after the filing of a petition
initiating any proceeding under any Bankruptcy Law whether or
not such interest is an allowable claim in such proceeding) on,
and all other amounts owing in respect of (i) all Credit Agree-
ment Obligations and Other Designated Guarantor Senior Indebt-
edness Obligations, if any, of such Guarantor and (ii) all
Related Currency and Interest Rate Protection Obligations, if
any, of such Guarantor. Notwithstanding the foregoing, "Guar-
antor Senior Indebtedness" shall not include (a) Indebtedness
evidenced by the Guarantee of such Guarantor, (b) Indebtedness
that is expressly subordinate or junior in right of payment to
any Guarantor Senior Indebtedness of such Guarantor,
(c) Indebtedness which, when incurred and without respect to
any election under Section 1111(b) of Title 11, United States
Code, is by its terms without recourse to such Guarantor,
(d) any repurchase, redemption or other obligation in respect
of Redeemable Capital Stock of such Guarantor, (e) to the
extent it might constitute Indebtedness, amounts owing for
goods, materials or services purchased in the ordinary course
of business or consisting of trade payables or other current
liabilities (other than any current liabilities owing under the
Credit Agreement Obligations or the current portion of any
long-term Indebtedness which would constitute Guarantor Senior
Indebtedness but for the operation of this clause (e)), (f) to
the extent it might constitute Indebtedness, amounts owed by
such Guarantor for compensation to employees or for services
rendered to such Guarantor, (g) to the extent it might consti-
tute Indebtedness, any liability for federal, state, local or
other taxes owed or owing by such Guarantor, (h) Indebtedness
of such Guarantor to a Subsidiary of the Company or any other
Affiliate of the Company or any of such Affiliate's Subsidiar-
ies, and (i) that portion of any Indebtedness of such Guarantor
which at the time of issuance is issued in violation of this
Indenture (but, as to any such Indebtedness, no such violation
shall be deemed to exist for purposes of this clause (i) if the
holder(s) of such Indebtedness or their representative or such
Guarantor shall have furnished to the Trustee an opinion of
<PAGE>
-14-
independent legal counsel, unqualified in all material
respects, addressed to the Trustee (which legal counsel may, as
to matters of fact, rely upon a certificate of such Guarantor)
to the effect that the incurrence of such Indebtedness does not
violate the provisions of this Indenture).
"Holder" or "Noteholder" means the person in whose
name a Note is registered on the Registrar's books. Each
Holder of a Note shall also be deemed to hold a Guarantee of
each Guarantor as provided in Article Ten hereof.
"Indebtedness" means, with respect to any person,
without duplication, (a) all liabilities of such person for
borrowed money or for the deferred purchase price of property
or services, excluding any trade payables and other accrued
current liabilities incurred in the ordinary course of busi-
ness, but including, without limitation, all obligations, con-
tingent or otherwise, of such person in connection with any
letter of credit, banker's acceptance or other similar credit
transaction, (b) all obligations of such person evidenced by
bonds, notes, debentures or other similar instruments, (c) all
Indebtedness created or arising under any conditional sale or
other title retention agreement with respect to property
acquired by such person (even if the rights and remedies of the
seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), but
excluding trade accounts payable arising in the ordinary course
of business, (d) all Capitalized Lease Obligations of such per-
son, (e) all Indebtedness referred to in the preceding clauses
of other persons and all dividends of other persons, the pay-
ment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien upon property (including, without limi-
tation, accounts and contract rights) owned by such person,
even though such person has not assumed or become liable for
the payment of such Indebtedness (the amount of such obligation
being deemed to be the lesser of the value of such property or
asset or the amount of the obligation so secured), (f) all
guarantees of Indebtedness referred to in this definition by
such person, (g) all Redeemable Capital Stock valued at the
greater of its voluntary or involuntary maximum fixed repur-
chase price plus accrued dividends, (h) all obligations under
or in respect of currency exchange contracts and Interest Rate
Protection Obligations of such person and (i) any amendment,
supplement, modification, deferral, renewal, extension or
refunding of any liability of the types referred to in clauses
(a) through (h) above. For purposes hereof, (x) the "maximum
<PAGE>
-15-
fixed repurchase price" of any Redeemable Capital Stock which
does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Redeemable Capital Stock as
if such Redeemable Capital Stock were purchased on any date on
which Indebtedness shall be required to be determined pursuant
to this Indenture, and if such price is based upon, or measured
by, the Fair Market Value of such Redeemable Capital Stock,
such Fair Market Value shall be determined in good faith by the
board of directors of the issuer of such Redeemable Capital
Stock and (y) Indebtedness is deemed to be incurred pursuant to
a revolving credit facility each time an advance is made there-
under. For purposes of Section 4.08, in determining the prin-
cipal amount of any Indebtedness to be incurred by the Company
or a Restricted Subsidiary or which is outstanding at any date,
the principal amount of any Indebtedness which provides that an
amount less than the principal amount thereof shall be due upon
any declaration of acceleration thereof shall be the accreted
value thereof at the date of determination. When any person
becomes a Restricted Subsidiary, there shall be deemed to have
been an incurrence by such Restricted Subsidiary of all Indebt-
edness for which it is liable at the time it becomes a
Restricted Subsidiary. If the Company or any of the Restricted
Subsidiaries, directly or indirectly, guarantees Indebtedness
of a third person, there shall be deemed to be an incurrence of
such guaranteed Indebtedness as if the Company or such
Restricted Subsidiary had directly incurred or otherwise
assumed such guaranteed Indebtedness.
"Indenture" means this Indenture, as amended, modi-
fied or supplemented from time to time.
"interest" means, with respect to any Note, the
amount of all interest accruing on such Note, including all
interest accruing subsequent to the occurrence of any events
specified in Sections 6.01(j) and (k) or which would have
accrued but for any such event, whether or not such claims are
allowable under applicable law.
"Interest Payment Date" means the Stated Maturity of
an installment of interest on the Notes, as set forth therein.
"Interest Rate Protection Obligations" means the
obligations of any person pursuant to any arrangement with any
other person whereby, directly or indirectly, such person is
entitled to receive from time to time periodic payments calcu-
lated by applying either a floating or a fixed rate of interest
on a stated notional amount in exchange for periodic payments
<PAGE>
-16-
made by such person calculated by applying a fixed or a float-
ing rate of interest on the same notional amount and shall
include, without limitation, interest rate swaps, caps, floors,
collars and similar agreements.
"Investment" means, with respect to any person, any
direct or indirect loan or other extension of credit, guarantee
or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or ser-
vices for the account or use of others), or any purchase or
acquisition by such person of any Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness
issued by, any other person. "Investments" shall exclude
extensions of trade credit by any person in the ordinary course
of business in accordance with normal trade practices of such
person. In addition to the foregoing, any foreign exchange
contract, currency swap or similar agreement shall constitute
an Investment hereunder.
"Issue Date" means [ ], 1996.
"JLL" means Joseph Littlejohn & Levy Associates, L.P.
"legal defeasance" shall have the meaning set forth
in Section 8.02.
"Leveraged Subsidiary" means any Restricted Subsid-
iary that has incurred Indebtedness (other than Acquired
Indebtedness pursuant to the first paragraph of Section 4.08
and Indebtedness described in clauses (3) through (8) and (10)
of the second paragraph of Section 4.08 and any permitted
refinancings or replacements thereof incurred under clause (9)
of the second paragraph of Section 4.08) pursuant to
Section 4.08 for so long as such Indebtedness, or any refinanc-
ing thereof, is outstanding.
"Lien" means any mortgage, charge, pledge, lien
(statutory or other), security interest, hypothecation, assign-
ment for security, claim, or preference or priority or other
encumbrance upon or with respect to any property of any kind.
A person shall be deemed to own subject to a Lien any property
which such person 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.
"Maturity Date" means, with respect to any Note, the
date on which any principal of such Note becomes due and
<PAGE>
-17-
payable as therein or herein provided, whether at the Stated
Maturity with respect to such principal or by declaration of
acceleration, call for redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and
its successors.
"Net Cash Proceeds" means, with respect to any Asset
Sale, the proceeds thereof in the form of cash or Cash Equiva-
lents or marketable securities (valued at their market value on
the date of receipt), including, without limitation, payments
in respect of deferred payment obligations when received in the
form of cash or Cash Equivalents (except to the extent that
such obligations are financed or sold with recourse to the Com-
pany or any Restricted Subsidiary) net of (i) brokerage commis-
sions and other fees and expenses (including, without limita-
tion, fees and expenses of legal counsel and investment bank-
ers) related to such Asset Sale, (ii) provisions for all taxes
payable as a result of such Asset Sale, (iii) amounts required
to be paid and which have been paid, or amounts required to be
pledged and which are pledged, to secure Indebtedness owed, to
any person (other than the Company or any Restricted Subsid-
iary) owning a beneficial interest in the assets subject to the
Asset Sale (which, in the case of a Lien, is being pledged to
permanently reduce Indebtedness secured by such Lien) and
(iv) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve
required in accordance with GAAP against any liabilities asso-
ciated with such Asset Sale and retained by the Company or any
Restricted Subsidiary, as the case may be, after such Asset
Sale, including, without limitation, pension and other post-
employment benefit liabilities, liabilities related to environ-
mental matters and liabilities under any indemnification obli-
gations associated with such Asset Sale, all as reflected in an
Officers' Certificate delivered to the Trustee.
"Non-payment Default" means, for purposes of Article
Eleven hereof, any default (other than a Payment Default) with
respect to any Designated Senior Indebtedness of the Company or
any Guarantor pursuant to which the maturity thereof may be
accelerated.
"Notes" means the notes that are issued under this
Indenture, as amended or supplemented from time to time pursu-
ant to this Indenture.
<PAGE>
-18-
"Officer" means the Chairman, the President, the
Chief Executive Officer, any Senior Vice President, any Vice
President or the Secretary of the Company or a Guarantor, as
the case may be.
"Officers' Certificate" means a certificate signed by
two Officers or by an Officer and an Assistant Treasurer or
Assistant Secretary of the Company or a Guarantor, as the case
may be.
"Opinion of Counsel" means a written opinion from
legal counsel who is reasonably acceptable to the Trustee.
Subject to any express provision hereof, the counsel may be an
employee of or counsel to the Company.
"Other Designated Senior Indebtedness Obligations"
means all monetary obligations of every nature of the Company
or a Guarantor, as applicable, including, without limitation,
obligations to pay principal and interest, reimbursement obli-
gations under letters of credit, fees, expenses and indemni-
ties, from time to time owed (by reason of a guarantee or
otherwise) to any holder of Designated Senior Indebtedness in
respect of Designated Senior Indebtedness.
"Pari Passu Indebtedness" means any Indebtedness of
the Company or any Guarantor ranking PARI PASSU in right of
payment with the Notes or the Guarantees, as applicable.
"Paying Agent" has the meaning set forth in Section
2.03, except that, for the purposes of Sections 4.12 and 4.13
and Articles Three and Eight, the Paying Agent shall not be the
Company or a Subsidiary of the Company or any of their respec-
tive Affiliates.
"Payment Blockage Period" shall have the meaning set
forth in Section 10.03.
"Payment Default" means any default in the payment
when due (whether at Stated Maturity, by acceleration or other-
wise) of principal or interest on, or of unreimbursed amounts
under drawn letters of credit or fees relating to letters of
credit constituting, any Senior Indebtedness or Guarantor
Senior Indebtedness, as applicable of the Company or any
Guarantor.
"Permitted Holders" means (i) JLL and its Affiliates
and (ii) any "group" (as such term is used in Sections 13(d)
<PAGE>
-19-
and 14(d) of the Securities Exchange Act) comprised solely of
JLL and its Affiliates and The Airlie Group, L.P. and its
Affiliates (it being understood that a "group" that includes
any other person shall not be a Permitted Holder).
"Permitted Investment" means any of the following:
(a) Investments in any Restricted Subsidiary (including any
person that pursuant to such Investment becomes a Restricted
Subsidiary) and any person that is merged or consolidated with
or into, or transfers or conveys all or substantially all of
its assets to, the Company or any Restricted Subsidiary at the
time such Investment is made; (b) Investments in Cash Equiva-
lents; (c) Investments in deposits with respect to leases or
utilities provided to third parties in the ordinary course of
business; (d) Investments in the Notes; (e) Investments in
Interest Rate Protection Agreements and currency exchange con-
tracts permitted by Section 4.08 and Related Currency and
Interest Rate Protection Obligations; (f) loans or advances to
officers, employees or consultants of the Company and its
Restricted Subsidiaries in the ordinary course of business for
bona fide business purposes of the Company and the Restricted
Subsidiaries (including travel and moving expenses) not in
excess of $1,000,000 in the aggregate at any one time outstand-
ing; (g) loans to any 401(k) plan qualified under the Internal
Revenue Code and maintained for the benefit of employees of the
Company and the Restricted Subsidiaries; and (h) Investments in
evidences of Indebtedness, securities or other property
received from another person by the Company or any of the
Restricted Subsidiaries in connection with any bankruptcy pro-
ceeding or by reason of a composition or readjustment of debt
or a reorganization of such person or as a result of foreclo-
sure, perfection or enforcement of any Lien in exchange for
evidences of Indebtedness, securities or other property of such
person held by the Company or any of the Restricted Subsidiar-
ies, or for other liabilities or obligations of such other per-
son to the Company or any of the Restricted Subsidiaries that
were created in accordance with the terms of this Indenture.
"Permitted Junior Securities" means, (i) for purposes
of Article Eleven (so long as the effect of any exclusion
employing this definition is not to cause the Notes to be
treated in any case or proceeding or similar event described in
clauses (a), (b) or (c) of Section 11.02 as part of the same
class of claims as the Senior Indebtedness or any class of
claims PARI PASSU with, or senior to, the Senior Indebtedness
for purposes of any payment or distribution) debt or equity
securities of the Company or any successor corporation provided
<PAGE>
-20-
for by a plan of reorganization or readjustment that are subor-
dinated at least to the same extent that the Notes are subordi-
nated to the payment of all Senior Indebtedness; PROVIDED that
(a) if a new corporation results from such reorganization or
readjustment, such corporation assumes any Senior Indebtedness
not paid in full in cash or Cash Equivalents in connection with
such reorganization or readjustment and (b) the rights of the
holders of such Senior Indebtedness are not, without the con-
sent of such holders, altered or impaired by such reorganiza-
tion or readjustment, and (ii) for purposes of Article Ten, any
guarantee by a Guarantor of a Permitted Junior Security of the
Company described in clause (i) above; PROVIDED that such guar-
antee is subordinated to the payment of all Guarantor Senior
Indebtedness at least to the same extent that the Guarantees
are subordinated to the payment of all Guarantor Senior Indebt-
edness, and such guarantee is subject to provisions substan-
tially similar to those set forth in Section 10.07.
"person" means any individual, corporation, limited
liability company, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Predecessor Note" means, with respect to any par-
ticular Note, every previous Note evidencing all or a portion
of the same debt as that evidenced by such particular Note;
and, for the purposes of this definition, any Note authenti-
cated and delivered under Section 2.07 hereof in exchange for a
mutilated Note or in lieu of a lost, destroyed or stolen Note
shall be deemed to evidence the same debt as the mutilated,
lost, destroyed or stolen Note.
"Preferred Stock" means, with respect to any person,
any and all shares, interests, participations or other equiva-
lents (however designated) of such person's preferred or pref-
erence stock whether now outstanding or issued after the Issue
Date, including, without limitation, all classes and series of
preferred or preference stock of such person.
"principal" means, with respect to any debt security,
the principal of the security plus, with respect to the Notes
only, the premium, if any, on the security and any interest on
overdue principal.
"Public Equity Offering" means an underwritten public
offering of Capital Stock (other than Disqualified Capital
Stock) of the Company made on a primary basis by the Company
<PAGE>
-21-
pursuant to a registration statement filed with and declared
effective by the SEC in accordance with the Securities Act.
"Purchase Money Obligation" means any Indebtedness
secured by a Lien on assets related to the business of the Com-
pany or the Restricted Subsidiaries, and any additions and
accessions thereto, which are purchased or constructed by the
Company or any Restricted Subsidiary at any time after the
Issue Date; PROVIDED that (i) any security agreement or condi-
tional sales or other title retention contract pursuant to
which the Lien on such assets is created (collectively a "Secu-
rity Agreement") shall be entered into within 90 days after the
purchase or substantial completion of the construction of such
assets and shall at all times be confined solely to the assets
so purchased or acquired, any additions and accessions thereto
and any proceeds therefrom, (ii) at no time shall the aggregate
principal amount of the outstanding Indebtedness secured
thereby be increased, except in connection with the purchase of
additions and accessions thereto and except in respect of fees
and other obligations in respect of such Indebtedness and (iii)
(A) the aggregate outstanding principal amount of Indebtedness
secured thereby (determined on a per asset basis in the case of
any additions and accessions) shall not at the time such Secu-
rity Agreement is entered into exceed 100% of the purchase
price to the Company or any Restricted Subsidiary of the assets
subject thereto or (B) the Indebtedness secured thereby shall
be with recourse solely to the assets so purchased or acquired,
any additions and accessions thereto and any proceeds
therefrom.
"Redeemable Capital Stock" means any class or series
of Capital Stock that, either by its terms, by the terms of any
security into which it is convertible or exchangeable or by
contract or otherwise, is, or upon the happening of an event or
passage of time would be, required to be redeemed prior to any
Stated Maturity of the Notes or is redeemable at the option of
the holder thereof at any time prior to any Stated Maturity of
the Notes, or, at the option of the holder thereof, is convert-
ible into or exchangeable for debt securities at any time prior
to any Stated Maturity of the Notes. Notwithstanding the fore-
going, Redeemable Capital Stock shall not include the Bank
Warrants.
"Redemption Date" means, with respect to any Note to
be redeemed, the date fixed by the Company for such redemption
pursuant to this Indenture and the Notes.
<PAGE>
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"Redemption Price" means, with respect to any Note to
be redeemed, the price fixed for such redemption pursuant to
the terms of this Indenture and the Notes.
"Registrar" shall have the meaning set forth in
Section 2.03.
"Related Currency and Interest Rate Protection Obli-
gations" means all monetary obligations of every nature of the
Company or a Guarantor under or in respect of currency exchange
contracts and Interest Rate Protection Obligations of the Com-
pany or such Guarantor either (a) to the extent such monetary
obligations relate to Credit Agreement Obligations or Other
Designated Senior Indebtedness Obligations or (b) to the extent
such monetary obligations are secured by collateral securing
Credit Agreement Obligations or Other Designated Senior Indebt-
edness Obligations (in either case, as conclusively evidenced
by an Officers' Certificate of the Company or such Guarantor
delivered to the Trustee at the time such obligations are ini-
tially incurred by the Company or such Guarantor).
"Replacement Assets" shall have the meaning set forth
in Section 4.13(a).
"Restricted Payment" shall have the meaning set forth
in Section 4.09.
"Restricted Subsidiary" means any Subsidiary of the
Company that has not been designated by the Board of Directors
of the Company, by a Board Resolution of the Company delivered
to the Trustee, as an Unrestricted Subsidiary pursuant to and
in compliance with Section 4.17 of this Indenture. Any such
designation may be revoked by a Board Resolution of the Company
delivered to the Trustee, subject to the provisions of Section
4.17 hereof.
"Revocation" has the meaning ascribed to that term
under Section 4.17.
"S&P" means Standard & Poor's Corporation and its
successors.
"SEC" means the Securities and Exchange Commission,
as from time to time constituted, or if at any time after the
execution of this Indenture such Commission is not existing and
performing the applicable duties now assigned to it, then the
body or bodies performing such duties at such time.
<PAGE>
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"Securities Act" means the Securities Act of 1933, as
amended from time to time.
"Securities Exchange Act" means the Securities
Exchange Act of 1934, as amended from time to time.
"Senior Indebtedness" means the principal of, pre-
mium, if any, and interest on any Indebtedness of the Company,
whether outstanding on the Issue Date or thereafter created,
incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides
that such Indebtedness shall not be senior in right of payment
to the Notes. Without limiting the generality of the fore-
going, "Senior Indebtedness" shall also include the principal
of, premium, if any, and interest (including interest accruing
after the filing of a petition initiating any proceeding under
any Bankruptcy Law whether or not such interest is an allowable
claim in such proceeding) on, and all other amounts owing in
respect of (i) all Credit Agreement Obligations and Other Des-
ignated Senior Indebtedness Obligations of the Company and (ii)
all Related Currency and Interest Rate Protection Obligations
of the Company. Notwithstanding the foregoing, "Senior Indebt-
edness" shall not include (a) Indebtedness evidenced by the
Notes, (b) Indebtedness that is expressly subordinate or junior
in right of payment to any Senior Indebtedness of the Company,
(c) Indebtedness which, when incurred and without respect to
any election under Section 1111(b) of Title 11, United States
Code, is by its terms without recourse to the Company, (d) any
repurchase, redemption or other obligation in respect of
Redeemable Capital Stock of the Company, (e) to the extent it
might constitute Indebtedness, amounts owing for goods, materi-
als or services purchased in the ordinary course of business or
consisting of trade payables or other current liabilities
(other than any current liabilities owing under the Credit
Agreement Obligations or the current portion of any long-term
Indebtedness which would constitute Senior Indebtedness but for
the operation of this clause (e)), (f) to the extent it might
constitute Indebtedness, amounts owed by the Company for com-
pensation to employees or for services rendered to the Company,
(g) to the extent it might constitute Indebtedness, any lia-
bility for federal, state, local or other taxes owed or owing
by the Company, (h) Indebtedness of the Company to a Subsidiary
of the Company or any other Affiliate of the Company or any of
such Affiliate's Subsidiaries, and (i) that portion of any
Indebtedness of the Company which at the time of issuance is
issued in violation of this Indenture (but, as to any such
<PAGE>
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Indebtedness, no such violation shall be deemed to exist for
purposes of this clause (i) if the holder(s) of such Indebted-
ness or their representative or the Company shall have fur-
nished to the Trustee an opinion of independent legal counsel,
unqualified in all material respects, addressed to the Trustee
(which legal counsel may, as to matters of fact, rely upon a
certificate of the Company) to the effect that the incurrence
of such Indebtedness does not violate the provisions of this
Indenture).
"Senior Representative" means the Bank Agent or any
other representatives designated in writing to the Trustee of
the holders of any class or issue of Designated Senior Indebt-
edness; PROVIDED that, in the absence of a representative of
the type described above, any holder or holders of a majority
of the principal amount outstanding of any class or issue of
Designated Senior Indebtedness may collectively act as Senior
Representative for such class or issue.
"Senior Subordinated Note Obligations" means (i) any
principal of and interest on, and any other amounts owing in
respect of, the Notes payable pursuant to the terms of the
Notes or this Indenture or upon acceleration of the Notes,
including, without limitation, amounts received upon the exer-
cise of rights of rescission or other rights of action (includ-
ing claims for damages) or otherwise, to the extent relating to
the purchase price of the Notes or amounts corresponding to
such principal of, interest on, or other amounts owing with
respect to, the Notes and (ii) in the case of any Guarantor,
any obligations with respect to the foregoing or otherwise
under its Guarantee.
"Significant Subsidiary" shall have the same meaning
as in Rule 1.02(v) of Regulation S-X under the Securities Act,
provided that (i) each Guarantor shall in all events be deemed
a Significant Subsidiary and (ii) no Unrestricted Subsidiary
shall be deemed a Significant Subsidiary.
"Specified Indebtedness" means (i) any Senior Indebt-
edness, (ii) any Guarantor Senior Indebtedness and (iii) any
Indebtedness of any Restricted Subsidiary (other than a Guaran-
tor) which is not subordinated to any other Indebtedness of
such Restricted Subsidiary.
"Stated Maturity" means, when used with respect to
any Note or any installment of interest thereon, the date spec-
ified in such Note as the fixed date on which any principal of
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such Note or such installment of interest is due and payable,
and when used with respect to any other Indebtedness or any
installments of interest thereon, means any date specified in
the instrument governing such Indebtedness as the fixed date on
which the principal of such Indebtedness, or such installment
of interest thereon, is due and payable.
"Subordinated Indebtedness" means, with respect to
the Company, Indebtedness of the Company which is expressly
subordinated in right of payment to the Notes or, with respect
to any Guarantor, Indebtedness of such Guarantor which is
expressly subordinated in right of payment to the Guarantee of
such Guarantor.
"Subsidiary" means, with respect to any person, (i) a
corporation a majority of whose Voting Stock is at the time,
directly or indirectly, owned by such person, by one or more
Subsidiaries of such person or by such person and one or more
Subsidiaries of such person and (ii) any other person (other
than a corporation), including, without limitation, a joint
venture, in which such person or one or more Subsidiaries of
such person, directly or indirectly, at the date of determina-
tion thereof, has at least a majority ownership interest enti-
tled to vote in the election of directors, managers or trustees
thereof (or other person performing similar functions). For
purposes of this definition, any directors' qualifying shares
or investments by foreign nationals mandated by applicable law
shall be disregarded in determining the ownership of a
Subsidiary.
"Surviving Entity" shall have the meaning set forth
in Section 5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.
Code Sections 77aaa-77bbbb) as in effect on the date of this
Indenture.
"Treasury Rate" means, the yield to maturity at the
time of computation of United States Treasury securities with a
constant maturity (as compiled and published in the most recent
Federal Reserve Statistical Release H.15 (519) which has become
publicly available at least two business days prior to the date
fixed for redemption of the Notes following a Change of Control
(or, if such Statistical Release is no longer published, any
publicly available source of similar market data)) most nearly
equal to the then remaining Average Life to Stated Maturity of
the Notes; PROVIDED that if the Average Life to Stated Maturity
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of the Notes is not equal to the constant Maturity of a United
States Treasury security for which a weekly average yield is
given, the Treasury Rate shall be obtained by linear interpola-
tion (calculated to the nearest one-twelfth of a year) from the
weekly average yields of United States Treasury securities for
which such yields are given, except that if the Average Life to
Stated Maturity of the Notes is less than one year, the weekly
average yield on actually traded United States Treasury securi-
ties adjusted to a constant maturity of one year shall be used.
"Trustee" means the party named as such in this
Indenture until a successor replaces such party (or any pre-
vious successor) in accordance with the provisions of this
Indenture, and thereafter means such successor.
"Trust Officer" means any officer in the [Corporate
Trust Administration Department] of the Trustee or any other
officer of the Trustee customarily performing functions similar
to those performed by any of the above-designated officers and
also means, with respect to a particular corporate trust mat-
ter, any other officer to whom such matter is referred because
of his knowledge of and familiarity with the particular
subject.
"Unrestricted Subsidiary" means a Subsidiary of the
Company (other than a Guarantor) designated as such pursuant to
and in compliance with Section 4.17 of this Indenture. Any
such designation may be revoked by a Board Resolution of the
Company delivered to the Trustee, subject to the provisions of
Section 4.17 hereof.
"U.S. Government Obligations" shall have the meaning
set forth in Section 8.02.
"Voting Stock" means any class or classes of Capital
Stock pursuant to which the holders thereof have the general
voting power under ordinary circumstances to elect at least a
majority of the board of directors, managers or trustees of any
person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting
power by reason of the happening of any contingency).
"Wholly-Owned Restricted Subsidiary" means any
Restricted Subsidiary of which 100% of the outstanding Capital
Stock is owned by the Company and/or another Wholly-Owned
Restricted Subsidiary. For purposes of this definition, any
directors' qualifying shares or investments by foreign
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nationals mandated by applicable law shall be disregarded in
determining the ownership of a Restricted Subsidiary.
Section 1.02. INCORPORATION BY REFERENCE OF TRUST
INDENTURE ACT.
Whenever this Indenture refers to a provision of the
TIA, the provision is incorporated by reference in and made a
part of this Indenture. The following TIA terms used in this
Indenture have the following meanings:
"COMMISSION" means the SEC;
"INDENTURE NOTES" means the Notes and the Guarantees;
"INDENTURE NOTEHOLDER" means a Noteholder or Holder;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means
the Trustee; and
"OBLIGOR" on the indenture notes means the Company,
the Guarantors or any other obligor on the Notes.
All other TIA terms used in this Indenture that are
defined by the TIA, defined by TIA reference to another statute
or defined by SEC rule and not otherwise defined herein have
the meanings assigned to them therein.
Section 1.03. RULES OF CONSTRUCTION.
For all purposes of this Indenture, except as other-
wise expressly provided or unless the context otherwise
requires:
(a) a term has the meaning assigned to it
(b) words in the singular include the plural, and
words in the plural include the singular.
(c) "or" is not exclusive;
(d) provisions apply to successive events and
transactions;
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(e) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance
with generally accepted accounting principles, as in
effect from time to time; PROVIDED that for the purposes
of Sections 4.08 through 4.19 and Article Five hereof such
terms shall have the meanings assigned to them in accor-
dance with GAAP;
(f) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Indenture as a
whole and not to any particular Article, Section or other
subdivision; and
(g) all references to $ or dollars shall refer to
the lawful currency of the United States of America.
ARTICLE TWO
THE NOTES
Section 2.01. FORMS AND DATING.
The Notes and the Trustee's certificate of authenti-
cation thereon shall be in substantially the form of Exhibit A
hereto, with such appropriate insertions, omissions, substitu-
tions and other variations as are required or permitted by this
Indenture and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon
as may be required to comply with any applicable law or with
the rules of any securities exchange or as may, consistently
herewith, be determined by the Officers executing such Notes,
as evidenced by their execution thereof. The Notes shall be
issuable only in registered form without coupons and only in
denominations of $1,000 and integral multiples thereof.
The definitive Notes and the Guarantees shall be
printed, typewritten, lithographed or engraved or produced by
any combination of these methods or may be produced in any
other manner permitted by the rules of any securities exchange
on which the Notes may be listed, all as determined by the
officers executing such Notes, as evidenced by their execution
of such Notes. Each Note shall be dated the date of its
authentication.
The terms and provisions contained in the form of the
Notes, annexed hereto as Exhibit A shall constitute, and are
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hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execu-
tion and delivery of this Indenture, expressly agree to such
terms and provisions and to be bound thereby.
Section 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall execute the Notes on behalf of the
Company by either manual or facsimile signature. The Company's
seal shall be impressed, affixed, imprinted or reproduced on
the Notes.
If an Officer whose signature is on a Note no longer
holds that office at the time the Trustee authenticates the
Note or at any time thereafter, the Note shall be valid
nevertheless.
A Note shall not be valid until an authorized signa-
tory of the Trustee manually signs the certificate of authenti-
cation on the Note. Such signature shall be conclusive evi-
dence that the Note has been authenticated under this
Indenture.
The Trustee shall authenticate Notes for original
issue in an aggregate principal amount not to exceed
$120,000,000 upon receipt of an Officers' Certificate signed by
two Officers of the Company directing the Trustee to authenti-
cate the Notes and certifying that all conditions precedent to
the issuance of the Notes contained herein have been complied
with. The aggregate principal amount of Notes outstanding at
any time may not exceed $120,000,000, except as provided in
Section 2.07.
With the approval of the Company, the Trustee may
appoint an authenticating agent acceptable to the Company to
authenticate Notes. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Inden-
ture to authentication by the Trustee includes authentication
by such agent. Such authenticating agent shall have the same
rights as the Trustee in any dealings hereunder with the Com-
pany or with any of the Company's Affiliates.
Section 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where
Notes may be presented for registration of transfer or for
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exchange (the "Registrar"), an office or agency where Notes may
be presented for payment (the "Paying Agent") and an office or
agency where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The
Registrar shall keep a register of the Notes and of their
transfer and exchange. The Company may have one or more co-
Registrars and one or more additional paying agents. The term
"Paying Agent" includes any additional paying agent. Except as
otherwise expressly provided in this Indenture, the Company or
any Affiliate thereof may act as Paying Agent.
The Company shall enter into an appropriate agency
agreement with any Agent not a party to this Indenture, which
shall incorporate the provisions of the TIA. The agreement
shall implement the provisions of this Indenture that relate to
such Agent. The Company shall notify the Trustee of the name
and address of any such Agent. If the Company fails to main-
tain a Registrar, Paying Agent or agent for service of notices
and demands, or fails to give the foregoing notice, the Trustee
shall act as such and shall be entitled to appropriate compen-
sation in accordance with Section 7.08.
The Company initially appoints the Trustee as Regis-
trar, Paying Agent and agent for service of notices and demands
in connection with the Notes.
Section 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
Each Paying Agent shall hold in trust for the benefit
of Holders or the Trustee all money held by the Paying Agent
for the payment of principal of, or interest on, the Notes
(whether such money has been distributed to it by the Company
or any other obligor on the Notes), and the Company and the
Paying Agent shall notify the Trustee of any default by the
Company (or any other obligor on the Notes) in making any such
payment. If the Company or a Subsidiary acts as Paying Agent,
it shall segregate the money and hold it as a separate trust
fund. The Company at any time may require a Paying Agent to
distribute all money held by it to the Trustee and account for
any funds disbursed and the Trustee may at any time during the
continuance of any Payment Default with respect to the Notes,
upon written request to a Paying Agent, require such Paying
Agent to pay all money held by it to the Trustee and to account
for any funds distributed. Upon doing so, the Paying Agent
(other than an obligor under the Notes or any Guarantees) shall
have no further liability for the money so paid over to the
Trustee.
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Section 2.05. NOTEHOLDER LISTS.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of
the names and addresses of Holders and shall otherwise comply
with TIA Section 312(a). If the Trustee is not the Registrar,
the Company shall furnish to the Trustee at least ten Business
Days before each Interest Payment Date and at such other times
as the Trustee may request in writing a list in such form and
as of such date as the Trustee may reasonably require of the
names and addresses of Holders, which list may be conclusively
relied upon by the Trustee.
Section 2.06. TRANSFER AND EXCHANGE.
When Notes are presented to the Registrar or a co-
Registrar with a request to register the transfer of such Notes
or to exchange such Notes for an equal principal amount of
Notes of other authorized denominations, the Registrar shall
register the transfer or make the exchange as requested if its
requirements for such transaction are met; PROVIDED that the
Notes surrendered for transfer or exchange shall be duly
endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Registrar, duly exe-
cuted by the Holder thereof or his attorney duly authorized in
writing. To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate
Notes at the Registrar's request. No service charge shall be
made for any registration of transfer or exchange, but the Com-
pany may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connec-
tion therewith (other than any such transfer taxes or similar
governmental charge payable upon exchanges or transfers pursu-
ant to Sections 2.02, 2.07, 2.10, 3.06, 4.12, 4.13 or 9.05).
The Registrar shall not be required to register the transfer of
or exchange of any Note (i) during a period beginning at the
opening of business 15 days before the mailing of a notice of
redemption of Notes and ending at the close of business on the
day of such mailing and (ii) selected for redemption in whole
or in part pursuant to Article Three, except the unredeemed
portion of any Note being redeemed in part.
Section 2.07. REPLACEMENT NOTES.
If a mutilated Note is surrendered to the Trustee or
if the Holder of a Note claims that the Note has been lost,
destroyed or wrongfully taken, the Company shall issue and the
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Trustee shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Com-
pany, such Holder must provide an indemnity bond or other
indemnity, sufficient in the judgment of both the Company and
the Trustee, to protect the Company, the Trustee or any Agent
from any loss which any of them may suffer if a Note is
replaced. The Company may charge such Holder for its reason-
able, out-of-pocket expenses in replacing a Note, including
reasonable fees and expenses of counsel. Every replacement
Note is an additional obligation of the Company.
Section 2.08. OUTSTANDING NOTES.
Notes outstanding at any time are all the Notes that
have been authenticated by the Trustee except those cancelled
by it, those delivered to it for cancellation and those
described in this Section as not outstanding. A Note does not
cease to be outstanding because the Company or any of their
respective Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other
than a mutilated Note surrendered for replacement), it ceases
to be outstanding unless the Trustee receives proof satisfac-
tory to it that the replaced Note is held by a BONA FIDE pur-
chaser. A mutilated Note ceases to be outstanding upon surren-
der of such Note and replacement thereof pursuant to Section
2.07.
If on a Redemption Date or a Maturity Date the Paying
Agent (other than the Company or an Affiliate of the Company)
holds cash or U.S. Government Obligations sufficient to pay all
of the principal and interest due on the Notes payable on that
date, and is not prohibited from paying such cash or U.S.
Government Obligations to the Holders of such Notes pursuant to
the terms of this Indenture, then on and after that date such
Notes cease to be outstanding and interest on them shall cease
to accrue.
Section 2.09. TREASURY NOTES.
In determining whether the Holders of the required
principal amount of Notes have concurred in any direction,
waiver or consent, Notes owned by the Company or any of their
respective Affiliates shall be disregarded, except that, for
the purposes of determining whether the Trustee shall be pro-
tected in relying on any such direction, waiver or consent,
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only Notes that the Trustee knows or has reason to know are so
owned shall be disregarded.
Section 2.10. TEMPORARY NOTES.
Until definitive Notes are prepared and ready for
delivery, the Company may prepare and the Trustee shall authen-
ticate temporary Notes. Temporary Notes shall be substantially
in the form of definitive Notes but may have variations that
the Company considers appropriate for temporary Notes. Without
unreasonable delay, the Company shall prepare and the Trustee
shall authenticate definitive Notes in exchange for temporary
Notes. Until such exchange, temporary Notes shall be entitled
to the same rights, benefits and privileges as definitive
Notes.
Section 2.11. CANCELLATION.
The Company at any time may deliver Notes to the
Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Notes surrendered to them for
transfer, exchange or payment. The Trustee, or at the direc-
tion of the Trustee, the Registrar or the Paying Agent (other
than the Company or an Affiliate of the Company), and no one
else, shall cancel and, at the written direction of the Com-
pany, shall dispose of all Notes surrendered for transfer,
exchange, payment or cancellation. Subject to Section 2.07,
the Company may not issue new Notes to replace Notes that it
has paid or delivered to the Trustee for cancellation. If the
Company shall acquire any of the Notes, such acquisition shall
not operate as a redemption or satisfaction of the Indebtedness
represented by such Notes unless and until the same are surren-
dered to the Trustee for cancellation pursuant to this Section
2.11.
Section 2.12. DEFAULTED INTEREST.
If the Company defaults on a payment of interest on
the Notes, it shall pay the defaulted interest, plus (to the
extent permitted by law) any interest payable on the defaulted
interest, in accordance with the terms hereof, to the persons
who are Noteholders on a subsequent special record date, which
date shall be at least five Business Days prior to the payment
date. The Company shall fix such special record date and pay-
ment date in a manner satisfactory to the Trustee. At least 15
days before such special record date, the Company shall mail to
each Noteholder a notice that states the special record date,
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the payment date and the amount of defaulted interest, and
interest payable on such defaulted interest, if any, to be
paid.
Section 2.13. CUSIP NUMBER.
The Company in issuing the Notes may use a "CUSIP"
number (if then generally in use), and if so, the Trustee may
use the CUSIP numbers in notices of redemption or exchange as a
convenience to Holders; PROVIDED that any such notice may state
that no representation is made as to the correctness or accu-
racy of the CUSIP number printed in the notice or on the Notes,
and that reliance may be placed only on the other identifica-
tion numbers printed on the Notes. The Company will promptly
notify the Trustee of any change in the CUSIP number.
Section 2.14. DEPOSIT OF MONEYS.
On or before each Interest Payment Date and Maturity
Date, the Company shall deposit with the Trustee or Paying
Agent in immediately available funds money sufficient to make
cash payments, if any, due on such Interest Payment Date or
Maturity Date, as the case may be, in a timely manner which
permits the Paying Agent to remit payment to the Holders on
such Interest Payment Date or Maturity Date, as the case may
be; PROVIDED that the Company may make any such deposit in next
day funds on or before the Business Day before each Interest
Payment Date and Maturity Date.
ARTICLE THREE
REDEMPTION OF NOTES
Section 3.01. NOTICES TO THE TRUSTEE.
If the Company elects to redeem Notes pursuant to
Paragraphs 4(a), (b) or (c) of the Notes, it shall notify the
Trustee of the Redemption Date and principal amount of Notes to
be redeemed.
The Company shall notify the Trustee by an Officers'
Certificate, stating that such redemption will comply with the
provisions hereof and of the Notes, of any redemption at least
45 days before the Redemption Date.
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Section 3.02. SELECTION OF NOTES TO BE
REDEEMED.
In the event that less than all of the Notes are to
be redeemed at any time, selection of such Notes for redemption
will be made by the Trustee in compliance with the requirements
of the principal national securities exchange, if any, on which
the Notes are listed or, if the Notes are not then listed on a
national securities exchange (or if the Notes are so listed but
the exchange does not impose requirements with respect to the
selection of debt securities for redemption), on a PRO RATA
basis, by lot or by such method as the Trustee shall deem fair
and appropriate; PROVIDED that no Notes of a principal amount
of $1,000 or less shall be redeemed in part; PROVIDED, FURTHER,
that any such redemption pursuant to the provisions relating to
a Public Equity Offering shall be made on a PRO RATA basis or
on as nearly a PRO RATA basis as practicable (subject to the
procedures of any applicable Depository).
The Trustee shall promptly notify the Company and the
Registrar in writing of the Notes selected for redemption and,
in the case of any Notes selected for partial redemption, the
principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the con-
text otherwise requires, all provisions relating to redemption
of Notes shall relate, in the case of any Note redeemed or to
be redeemed only in part, to the portion of the principal
amount of such Note which has been or is to be redeemed.
Section 3.03. NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class
mail, postage prepaid, mailed not less than 30 nor more than 60
days prior to the Redemption Date to each Holder of Notes to be
redeemed, at the address of such Holder appearing in the Note
register maintained by the Registrar.
All notices of redemption shall identify the Notes to
be redeemed and shall state:
(a) the Redemption Date;
(b) the Redemption Price and the amount of accrued
interest, if any, to be paid;
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(c) that, unless the Company defaults in making the
redemption payment, interest on Notes called for redemp-
tion ceases to accrue on and after the Redemption Date,
and the only remaining right of the Holders of such Notes
is to receive payment of the Redemption Price upon surren-
der to the Paying Agent of the Notes redeemed;
(d) if any Note is to be redeemed in part only, the
portion of the principal amount (equal to $1,000 or any
integral multiple thereof) of such Note to be redeemed and
that on and after the Redemption Date, upon surrender for
cancellation of such Note to the Paying Agent, a new Note
or Notes in the aggregate principal amount equal to the
unredeemed portion thereof will be issued without charge
to the Noteholder;
(e) that Notes called for redemption must be surren-
dered to the Paying Agent to collect the Redemption Price
and the name and address of the Paying Agent;
(f) the CUSIP number, if any, relating to such
Notes; and
(g) the paragraph of the Notes pursuant to which the
Notes are being redeemed.
Notice of redemption of Notes to be redeemed at the
election of the Company shall be given by the Company or, at
the Company's written request, by the Trustee in the name and
at the expense of the Company.
Section 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Notes called for
redemption become due and payable on the Redemption Date and at
the Redemption Price. Upon surrender to the Paying Agent, such
Notes called for redemption shall be paid at the Redemption
Price plus accrued interest to the Redemption Date, but inter-
est installments whose maturity is on or prior to such Redemp-
tion Date will be payable on the relevant Interest Payment
Dates to the Holders of record at the close of business on the
relevant record dates referred to in the Notes.
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Section 3.05. DEPOSIT OF REDEMPTION PRICE.
On or prior to any Redemption Date, the Company shall
deposit with the Paying Agent an amount of money in same day
funds sufficient to pay the Redemption Price of, and
accrued interest on, all the Notes or portions thereof which
are to be redeemed on that date, other than Notes or portions
thereof called for redemption on that date which have been
delivered by the Company to the Trustee for cancellation.
If the Company complies with the preceding paragraph,
then, unless the Company defaults in the payment of such
Redemption Price, interest on the Notes to be redeemed will
cease to accrue on and after the applicable Redemption Date,
whether or not such Notes are presented for payment. If any
Note called for redemption shall not be so paid upon surrender
thereof for redemption, the principal of and, to the extent
lawful, accrued interest thereon shall, until paid, bear inter-
est from the Redemption Date at the rate provided in the Notes.
Section 3.06. NOTES REDEEMED OR PURCHASED IN
PART.
Upon surrender to the Paying Agent of a Note which is
to be redeemed in part, the Company shall execute, each Guaran-
tor shall guarantee and the Trustee shall authenticate and
deliver to the Holder of such Note without service charge, a
new Note or Notes (accompanied by a notation of Guarantee, duly
endorsed by each Guarantor), of any authorized denomination as
requested by such Holder in aggregate principal amount equal
to, and in exchange for, the unredeemed portion of the princi-
pal of the Note so surrendered that is not redeemed.
ARTICLE FOUR
COVENANTS
Section 4.01. PAYMENT OF NOTES.
The Company will pay, or cause to be paid, the prin-
cipal of and interest on the Notes on the dates and in the man-
ner provided in the Notes and this Indenture. An installment
of principal or interest shall be considered paid on the date
due if the Trustee or Paying Agent (other than the Company, a
Subsidiary of the Company or any Affiliate of any thereof)
holds on that date money designated for and sufficient to pay
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the installment and is not prohibited from paying such money to
the Holders of the Notes pursuant to the terms of this
Indenture.
The Company will pay interest on overdue principal at
the rate and in the manner provided in the Notes; it shall pay
interest on overdue installments of interest at the same rate
and in the same manner, to the extent lawful.
Section 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in the Borough of Manhat-
tan, The City of New York, an office or agency where Notes and
the Guarantees may be surrendered for registration of transfer
or exchange or for presentation for payment and where notices
and demands to or upon the Company or any Guarantor in respect
of the Notes, the Guarantees and this Indenture may be served.
The Company will give prompt written notice to the Trustee of
the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surren-
ders, notices and demands may be made or served at the address
of the Trustee as set forth in Section 11.02.
The Company may also from time to time designate one
or more other offices or agencies where the Notes and the Guar-
antees may be presented or surrendered for any or all such pur-
poses and may from time to time rescind such designations; PRO-
VIDED that no such designation or rescission shall in any man-
ner relieve the Company of its obligation to maintain an office
or agency in the Borough of Manhattan, The City of New York,
for such purposes. The Company will give prompt written notice
to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby initially designates the office of
the Trustee maintained at 55 Water Street, First Floor,
Jeanette Park Enterence, New York, New York 10005, as such
office of the Company in accordance with this Section 4.02.
Section 4.03. CORPORATE EXISTENCE.
Subject to Article Five, each of the Company and each
Guarantor shall do or cause to be done all things necessary to
and will cause each of its Subsidiaries to, preserve and keep
in full force and effect the corporate, partnership or limited
<PAGE>
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liability company existence and rights (charter and statutory),
licenses and/or franchises of such person and each of its Sub-
sidiaries; PROVIDED that any such person or any of its Subsid-
iaries shall not be required to preserve any such existence (in
the case of Subsidiaries), rights, licenses or franchises if
(x) the Board of Directors of the Company shall reasonably
determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company, the Guarantors
and their respective Subsidiaries taken as a whole or (y) the
loss thereof is not materially adverse to either the Company,
the Guarantors and their respective Subsidiaries taken as a
whole or to the ability of each of the Company and each Guaran-
tor to otherwise satisfy its obligations hereunder.
Section 4.04. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company and each Guarantor will pay or discharge
or cause to be paid or discharged, before any penalty accrues
from the failure to so pay or discharge, (a) all material
taxes, assessments and governmental charges levied or imposed
upon such person or any of its Subsidiaries or upon the income,
profits or property of such person or any of its Subsidiaries,
and (b) all material lawful claims for labor, materials and
supplies which, if unpaid, might by law become a Lien upon the
property of such person or any Subsidiary of such person; PRO-
VIDED that neither the Company nor any Guarantor shall be
required to pay or discharge or cause to be paid or discharged
any such tax, assessment, charge or claim the amount, applica-
bility or validity of which is being contested in good faith by
appropriate proceedings and for which adequate provision has
been made or where the failure to effect such payment or dis-
charge is not adverse in any material respect to the Holders.
Section 4.05. MAINTENANCE OF PROPERTIES; INSURANCE;
BOOKS AND RECORDS; COMPLIANCE WITH
LAW.
(a) The Company and each Guarantor shall, and shall
cause each of their respective Subsidiaries to, cause all prop-
erties and assets to be maintained and kept in good condition,
repair and working order (reasonable wear and tear excepted)
and supplied with all necessary equipment, and shall cause to
be made all necessary repairs, renewals, replacements, addi-
tions, betterments and improvements thereto, as shall be rea-
sonably necessary for the proper conduct of its business; PRO-
VIDED that nothing in this Section 4.05(a) shall prevent the
Company, any Guarantor or any of their respective Subsidiaries
<PAGE>
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from discontinuing the operation and maintenance of any of its
properties (x) if such discontinuance is, in the judgment of
the Board of Directors or the board of directors of such Guar-
antor or Subsidiary, desirable in the conduct of its business
or (y) if such discontinuance or disposal is not materially
adverse to either the Company, the Guarantors and their respec-
tive Subsidiaries taken as a whole or the ability of the Com-
pany and each Guarantor to otherwise satisfy its obligations
hereunder.
(b) The Company shall, and shall cause each of its
Subsidiaries to, maintain such insurance as may be required by
law (other than with respect to any environmental impairment
liability insurance not commercially available) and such other
insurance to such extent and against such hazards and liabili-
ties, as is customarily maintained by companies similarly situ-
ated (which may include self-insurance in the same form as is
customarily maintained by companies similarly situated).
(c) The Company and each Guarantor shall, and shall
cause each of their respective Subsidiaries to, keep proper
books of record and account, in which full and correct entries
shall be made of all business and financial transactions of
such person and each Subsidiary of such person and reflect on
its financial statements adequate accruals and appropriations
to reserves, all in accordance with generally accepted account-
ing principles, as in effect from time to time, consistently
applied to such person and its Subsidiaries taken as a whole.
(d) The Company shall and shall cause each of its
respective Subsidiaries to comply with all statutes, laws,
ordinances, or government rules and regulations to which it is
subject, non-compliance with which would materially adversely
affect the business, earnings, properties, assets or condition
(financial or otherwise) of the Company and its Subsidiaries
taken as a whole.
Section 4.06. COMPLIANCE CERTIFICATE.
(a) The Company will deliver to the Trustee within
45 days after the end of each of the first three quarters of
the Company's fiscal year and within 90 days after the end of
such fiscal year an Officers' Certificate stating whether or
not the signers know of any Default or Event of Default under
this Indenture by the Company or any of the Guarantors that
occurred during such fiscal period. If they do know of such a
Default or Event of Default, the certificate shall describe any
<PAGE>
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such Default or Event of Default and its status. The first
certificate to be delivered pursuant to this Section 4.06(a)
shall be for the first fiscal quarter of the Company beginning
after the Issue Date. The Company shall also deliver a cer-
tificate to the Trustee at least annually from its principal
executive, financial or accounting officer as to his or her
knowledge of the Company's and each Guarantor's compliance with
all conditions and covenants under this Indenture, such compli-
ance to be determined without regard to any period of grace or
requirement of notice provided herein.
(b) the Company shall deliver to the Trustee within
90 days after the end of each fiscal year a written statement
by the Company's independent certified public accountants stat-
ing (A) that their audit examination has included a review of
the terms of this Indenture, the Notes and the Guarantees as
they relate to accounting matters, and (B) whether, in connec-
tion with their audit examination, any Default or Event of
Default under this Indenture has come to their attention and,
if such a Default or Event of Default has come to their atten-
tion, specifying the nature and period of existence thereof;
PROVIDED that, without any restriction as to the scope of the
audit examination, such independent certified public accoun-
tants shall not be liable by reason of any failure to obtain
knowledge of any such Default or Event of Default that would
not be disclosed in the course of an audit examination con-
ducted in accordance with generally accepted accounting princi-
ples, as in effect from time to time.
(c) The Company will deliver to the Trustee as soon
as possible, and in any event within 10 days after the Company
becomes aware or should reasonably have become aware of the
occurrence of any Default or Event of Default, an Officers'
Certificate specifying such Default or Event of Default and
what action the Company or the applicable Guarantor, as the
case may be, is taking or proposes to take with respect
thereto.
Section 4.07. REPORTING REQUIREMENTS.
The Company and each of the Guarantors shall file
with the SEC the annual reports, quarterly reports and other
documents required to be filed with the SEC pursuant to
Sections 13 and 15(d) of the Securities Exchange Act, to the
extent such filings are accepted by the SEC and whether or not
the Company or any such Guarantor has a class of securities
registered under the Securities Exchange Act. In accordance
<PAGE>
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with the provisions of TIA Section 314(a), the Company and each
Guarantor shall file with the Trustee, within 15 days after it
files them with the SEC, copies of such reports and documents.
The Company and each Guarantor also shall comply with the other
provisions of TIA Section 314(a). In addition, the Company
shall cause its and each Guarantor's, if applicable, annual
report to stockholders and any quarterly or other financial
reports furnished to stockholders generally to be filed with
the Trustee and mailed, no later than the date such materials
are mailed or made available to stockholders, to the Holders at
their addresses as set forth in the register of Notes main-
tained by the Registrar.
Section 4.08. LIMITATION ON INDEBTEDNESS.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create,
incur, issue, assume, guarantee or in any other manner become
liable, contingently or otherwise (in each case, to "incur"),
for the payment of any Indebtedness (including any Acquired
Indebtedness); PROVIDED that (i) the Company or any Guarantor
will be permitted to incur Indebtedness (including Acquired
Indebtedness) and (ii) a Restricted Subsidiary will be permit-
ted to incur Acquired Indebtedness if, immediately after giving
PRO FORMA effect thereto, the Consolidated Fixed Charge Cover-
age Ratio of the Company would be equal to or greater than
(a) 2.00:1.0 if such Indebtedness is incurred on or prior to
December 31, 1998 and (b) 2.25:1.0 if such Indebtedness is
incurred after December 31, 1998.
Notwithstanding the foregoing, the Company and, to
the extent specifically set forth below, the Restricted Subsid-
iaries may incur each and all of the following:
(1) Indebtedness of the Company or any Guarantor
under the Credit Agreement in an aggregate principal
amount at any time outstanding not to exceed $320,000,000;
PROVIDED that (a) term and revolving acquisition loans
under the Credit Agreement shall not exceed $245,000,000
in aggregate principal amount at any time outstanding,
less the sum of, without duplication, (i) the amount of
any scheduled amortization payments and mandatory prepay-
ments of principal amount of such loans, whether or not
actually made, and (ii) the amount of any other repayments
of such loans actually made; and (b) revolving credit
loans and the undrawn portion of unpaid reimbursement
obligations in respect of letters of credit under the
<PAGE>
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Credit Agreement shall not exceed the sum of 60% of the
book value of inventory and 90% of the book value of
accounts receivable of the Company and the Restricted Sub-
sidiaries, determined on a consolidated basis in accor-
dance with GAAP as of the date of the determination of
such borrowing base under the Credit Agreement for the
particular incurrence of Indebtedness;
(2) Indebtedness of the Company or any Guarantor
evidenced by the Notes or any Guarantee;
(3) (a) Interest Rate Protection Obligations of the
Company or any guarantee thereof by a Restricted Subsid-
iary covering Indebtedness of the Company or any
Restricted Subsidiary of the Company and (b) Interest Rate
Protection Obligations of any Restricted Subsidiary of the
Company covering Indebtedness of such Restricted Subsid-
iary; PROVIDED that, in the case of either clause (a) or
(b), the aggregate notional principal amount of any such
Interest Rate Protection Obligations does not exceed the
principal amount of the Indebtedness to which such Inter-
est Rate Protection Obligations relate;
(4) Indebtedness of the Company owed to a Restricted
Subsidiary and Indebtedness of a Restricted Subsidiary
owed to the Company or a Restricted Subsidiary; PROVIDED
that (a) any subsequent issuance or transfer of Capital
Stock or any Designation that results in such Restricted
Subsidiary ceasing to be a Restricted Subsidiary or any
subsequent transfer or assignment of such Indebtedness
(other than to the Company or a Restricted Subsidiary)
will be deemed to constitute the incurrence of such
Indebtedness by the Company or such Restricted Subsidiary,
as the case may be, and (b) any such Indebtedness of the
Company owed to a Restricted Subsidiary that is not a
Guarantor and any such Indebtedness of a Restricted Sub-
sidiary that is a Guarantor owed to a Restricted Subsid-
iary that is not a Guarantor must be subordinated in right
of payment to the prior payment in full and performance of
the Company's or the Guarantor's obligations under this
Indenture, the Notes and the Guarantees, as the case may
be;
(5) Indebtedness of the Company or any Restricted
Subsidiary incurred in respect of performance bonds,
surety bonds and bankers' acceptances provided in the
ordinary course of business;
<PAGE>
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(6) Indebtedness of the Company or any Restricted
Subsidiary in respect of the undrawn portion of the face
amount of or unpaid reimbursement obligations in respect
of letters of credit issued in the ordinary course of
business for the account of the Company or any of the
Restricted Subsidiaries in an amount outstanding at any
time not to exceed the difference between (a) $10,000,000
and (b) the amount of Indebtedness in respect of the
undrawn portion or unpaid reimbursement obligations in
respect of letters of credit outstanding under
subclause (b) of the proviso to clause (1) above;
(7) (a) Indebtedness in respect of Purchase Money
Obligations for property acquired in the ordinary course
of business (and not, in any event, in connection with an
Asset Acquisition or a Capitalized Lease Obligation) and
(b) Indebtedness of the Company or any Restricted Subsid-
iary representing any Capitalized Lease Obligations if, in
the case of this clause (b) only after giving pro forma
effect to such incurrence of Indebtedness, (i) the aggre-
gate principal amount of Capitalized Lease Obligations
incurred in any fiscal year pursuant to this clause (7)
would not exceed $15,000,000 and (ii) the aggregate prin-
cipal amount of Capitalized Lease Obligations pursuant to
this clause (7) after the Issue Date would not exceed
$45,000,000 in the aggregate;
(8) Indebtedness of the Company or any Restricted
Subsidiary arising from the honoring by a bank or other
financial institution of a check, draft or similar instru-
ment inadvertently (except in the case of daylight over-
drafts) drawn against insufficient funds in the ordinary
course of business; PROVIDED that such Indebtedness is
extinguished within 30 days of incurrence;
(9) (a) Indebtedness of the Company or any Guarantor
to the extent the proceeds thereof are used to refinance
(whether by amendment, renewal, extension or refunding)
Indebtedness of the Company or any Guarantor (including
all or a portion of the Notes) or any Restricted Subsid-
iary and (b) Indebtedness of any Restricted Subsidiary
that is not a Guarantor to the extent the proceeds thereof
are used to refinance (whether by amendment, renewal,
extension or refunding) Indebtedness of any Restricted
Subsidiary that is not a Guarantor, in each case other
than the Indebtedness to be refinanced, redeemed or
retired as described under "Use of Proceeds" herein and
<PAGE>
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Indebtedness incurred under clauses (1), (3), (4), (5),
(7)(b) or (8) of this Section 4.08; PROVIDED that the
principal amount of Indebtedness incurred pursuant to this
clause (9) (or, if such Indebtedness provides for an
amount less than the principal amount thereof to be due
and payable upon a declaration of acceleration of the
maturity thereof, the original issue price of such Indebt-
edness) shall not exceed the sum of the principal amount
of Indebtedness so refinanced (or, if such Indebtedness
provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of accel-
eration of the maturity thereof, the original issue price
of such Indebtedness plus any accreted value attributable
thereto since the original issuance of such Indebtedness)
plus the amount of any premium required to be paid in con-
nection with such refinancing pursuant to the terms of
such Indebtedness or the amount of any premium reasonably
determined by the Company or a Restricted Subsidiary, as
applicable, as necessary to accomplish such refinancing by
means of a tender offer or privately negotiated purchase,
plus the amount of expenses in connection therewith; and
(10) Additional Indebtedness of the Company or any
Restricted Subsidiary (including, without limitation,
Indebtedness under the Credit Agreement in excess of the
amounts permitted under clause (1) above) not to exceed
$20,000,000 in aggregate principal amount at any time out-
standing.
Section 4.09. LIMITATION ON RESTRICTED PAYMENTS.
The Company will not, and will not permit any of the
Restricted Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any other dis-
tribution or payment on or in respect of Capital Stock of
the Company or any payment made to the direct or indirect
holders (in their capacities as such) of Capital Stock of
the Company (other than dividends or distributions payable
solely in rights to purchase Capital Stock of the Company
(other than Redeemable Capital Stock));
(ii) purchase, redeem, defease or otherwise acquire or
retire for value any Capital Stock of the Company (other
than any such Capital Stock owned by a Restricted
Subsidiary);
<PAGE>
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(iii) make any principal payment on, or purchase,
defease, repurchase, redeem or otherwise acquire or retire
for value, prior to any scheduled maturity, scheduled
repayment, scheduled sinking fund payment or other Stated
Maturity, any Subordinated Indebtedness (other than any
such Subordinated Indebtedness owed to a Restricted Sub-
sidiary); or
(iv) make any Investment (other than any Permitted
Investment) in any person
(such payments or Investments described in the preceding
clauses (i), (ii), (iii) and (iv) are collectively referred to
as "Restricted Payments"), unless, at the time of and after
giving effect to the proposed Restricted Payment (the amount of
any such Restricted Payment, if other than in cash, shall be
the Fair Market Value of the asset(s) proposed to be trans-
ferred by the Company or such Restricted Subsidiary, as the
case may be, pursuant to such Restricted Payment), (A) no
Default shall have occurred and be continuing, (B) the aggre-
gate amount of all Restricted Payments declared or made from
and after the Issue Date would not exceed the sum of (1) 50% of
the aggregate Consolidated Net Income of the Company accrued on
a cumulative basis during the period (treated as one accounting
period) beginning on April 1, 1996 and ending on the last day
of the fiscal quarter of the Company immediately preceding the
date of such proposed Restricted Payment (or, if such aggregate
cumulative Consolidated Net Income of the Company for such
period shall be a deficit, minus 100% of such deficit) PLUS (2)
the aggregate net cash proceeds received by the Company either
(x) as capital contributions in the form of common equity to
the Company after the Issue Date or (y) from the issuance or
sale of Capital Stock (excluding Redeemable Capital Stock but
including Capital Stock issued upon the conversion of convert-
ible Indebtedness, in exchange for outstanding Indebtedness or
from the exercise of options, warrants or rights to purchase
Capital Stock (other than Redeemable Capital Stock)) of the
Company to any person (other than to a Subsidiary of the Com-
pany) after the Issue Date PLUS (3) in the case of the disposi-
tion or repayment of any Investment constituting a Restricted
Payment made after the Issue Date (excluding any Investment
made pursuant to clause (iv) of the following paragraph), an
amount equal to the lesser of the return of capital with
respect to such Investment and the initial amount of such
Investment, in either case, less the cost of the disposition of
such Investment and (C) the Company could incur $1.00 of addi-
tional Indebtedness under the first paragraph of Section 4.08.
<PAGE>
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For purposes of the preceding clause (B)(2), upon the issuance
of Capital Stock either from the conversion of convertible
Indebtedness or in exchange for outstanding Indebtedness or
upon the exercise of options, warrants or rights, the amount
counted as net cash proceeds received will be the cash amount
received by the Company at the original issuance of the Indebt-
edness that is so converted or exchanged or from the issuance
of options, warrants or rights, as the case may be, plus the
incremental amount of cash received by the Company, if any,
upon the conversion, exchange or exercise thereof.
None of the foregoing provisions will prohibit
(i) the payment of any dividend within 60 days after the date
of its declaration, if at the date of declaration such payment
would be permitted by the foregoing paragraph; (ii) the redemp-
tion, repurchase or other acquisition or retirement of any
shares of any class of Capital Stock of the Company or any
Restricted Subsidiary in exchange for, or out of the net cash
proceeds of, a substantially concurrent issue and sale of other
shares of Capital Stock (other than Redeemable Capital Stock)
of the Company to any person (other than to a Subsidiary of the
Company); PROVIDED that such net cash proceeds are excluded
from clause (B)(2)(y) of the preceding paragraph; (iii) so long
as no Default shall have occurred and be continuing, any
redemption, repurchase or other acquisition or retirement of
Subordinated Indebtedness by exchange for, or out of the net
cash proceeds of, a substantially concurrent issue and sale of
(1) Capital Stock (other than Redeemable Capital Stock) of the
Company; PROVIDED that any such net cash proceeds are excluded
from clause (B)(2)(y) of the preceding paragraph; or
(2) Indebtedness of the Company so long as such Indebtedness
(x) is subordinated to the Notes in the same manner and at
least to the same extent as the Subordinated Indebtedness being
redeemed, repurchased, acquired or retired and (y) has no
Stated Maturity earlier than the 91st day after the Stated
Maturity for the final scheduled principal payment of the
Notes; (iv) so long as no Default shall have occurred and be
continuing, the making of Investments constituting Restricted
Payments (valued at their initial amount) not to exceed
$20,000,000 at any time outstanding; (v) the repurchase of the
Bank Warrants in accordance with their terms as in effect on
the Issue Date; (vi) Investments constituting Restricted Pay-
ments made as a result of the receipt of non-cash consideration
from any Asset Sale made pursuant to and in compliance with the
Section 4.13; or (vii) so long as no Default shall have
occurred and be continuing, the purchase of "odd lot" shares of
Common Stock of the Company in an amount not to exceed $500,000
<PAGE>
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in the aggregate. In computing the amount of Restricted Pay-
ments previously made for purposes of clause (B) of the preced-
ing paragraph, Restricted Payments made under the immediately
preceding clauses (i), (iv), (v), (vi) and (vii) shall be
included.
Section 4.10. LIMITATION ON ISSUANCE AND SALE
OF PREFERRED STOCK BY RESTRICTED
SUBSIDIARIES.
The Company (i) will not permit any of the Restricted
Subsidiaries to issue any Preferred Stock (other than to the
Company or a Wholly-Owned Restricted Subsidiary) and (ii) will
not permit any person (other than the Company or a Wholly-Owned
Restricted Subsidiary) to own any Preferred Stock of any
Restricted Subsidiary.
Section 4.11. LIMITATION ON LIENS.
The Company will not, and will not permit any
Restricted Subsidiary to, create, incur, assume or suffer to
exist any Liens of any kind against or upon any of its property
or assets, or any proceeds therefrom, which secure either
(i) Subordinated Indebtedness unless the Notes and the Guaran-
tees, as applicable, are secured by a Lien on such property,
assets or proceeds that is senior in priority to the Liens
securing such Subordinated Indebtedness or (ii) Pari Passu
Indebtedness unless the Notes and the Guarantees, as appli-
cable, are equally and ratably secured with the Liens securing
such Pari Passu Indebtedness.
Section 4.12. CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, the Com-
pany shall be obligated to make an offer to purchase (a "Change
of Control Offer") and shall, subject to the provisions
described below, purchase, on a business day (the "Change of
Control Purchase Date") not more than 60 nor less than 30 days
following the occurrence of the Change of Control, all of the
then outstanding Notes at a purchase price (the "Change of Con-
trol Purchase Price") equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the Change
of Control Purchase Date. The Company shall, subject to the
provisions described below, be required to purchase all Notes
properly tendered into the Change of Control Offer and not
withdrawn. Prior to the mailing of the notice to Holders pro-
vided for below, the Company shall have (x) terminated all
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commitments and repaid in full all Indebtedness under the
Credit Agreement, or offered to terminate such commitments and
repay in full such Indebtedness and have in fact terminated the
commitments of and repaid all Indebtedness of any lender under
the Credit Agreement Obligations who accepts such offer, or
(y) obtained the requisite consents under the Credit Agreement
Obligations to permit the purchase of the Notes as provided for
under this Section 4.12. If a notice has been mailed when such
condition precedent has not been satisfied, the Company shall
have no obligation to (and shall not) effect the purchase of
Notes until such time as such condition precedent is satisfied.
Failure to mail the notice on the date specified below or to
have satisfied the foregoing condition precedent by the date
that the notice is required to be mailed shall in any event
constitute a Default under Section 6.1(c).
Notice of a Change of Control Offer shall be mailed
by the Company not later than the 30th day after the Change of
Control Date to the Holders of Notes at their last registered
addresses with a copy to the Trustee and the Paying Agent. The
Change of Control Offer shall remain open from the time of
mailing for at least 20 Business Days and until 5:00 p.m., New
York City time, on the Change of Control Purchase Date. The
notice, which shall govern the terms of the Change of Control
Offer, shall include such disclosures as are required by law
and shall state:
(a) that the Change of Control Offer is being made
pursuant to this Section 4.12 and that all Notes validly
tendered into the Change of Control Offer and not with-
drawn will be accepted for payment;
(b) the purchase price (including the amount of
accrued interest, if any) for each Note, the Change of
Control Purchase Date and the date on which the Change of
Control Offer expires;
(c) that any Note not tendered for payment will con-
tinue to accrue interest in accordance with the terms
thereof;
(d) that, unless the Company shall default in the
payment of the purchase price, any Note accepted for pay-
ment pursuant to the Change of Control Offer shall cease
to accrue interest after the Change of Control Purchase
Date;
<PAGE>
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(e) that Holders electing to have Notes purchased
pursuant to a Change of Control Offer will be required to
surrender their Notes to the Paying Agent at the address
specified in the notice prior to 5:00 p.m., New York City
time, on the Change of Control Purchase Date and must com-
plete any form letter of transmittal proposed by the Com-
pany and acceptable to the Trustee and the Paying Agent;
(f) that Holders of Notes will be entitled to with-
draw their election if the Paying Agent receives, not
later than 5:00 p.m., New York City time, on the Change of
Control Purchase Date, a tested telex, facsimile transmis-
sion or letter setting forth the name of the Holder, the
principal amount of Notes the Holder delivered for pur-
chase, the Note certificate number (if any) and a state-
ment that such Holder is withdrawing its election to have
such Notes purchased;
(g) that Holders whose Notes are purchased only in
part will be issued Notes equal in principal amount to the
unpurchased portion of the Notes surrendered;
(h) the instructions that Holders must follow in
order to tender their Notes; and
(i) information concerning the business of the Com-
pany, the most recent annual and quarterly reports of the
Company filed with the SEC pursuant to the Securities
Exchange Act (or,if the Company is not then required to
file any such reports with the SEC, the comparable reports
prepared pursuant to Section 4.07), a description of mate-
rial developments in the Company's business, information
with respect to PRO FORMA historical financial information
after giving effect to such Change of Control and such
other information concerning the circumstances and rele-
vant facts regarding such Change of Control and Change of
Control Offer as would be material to a Holder of Notes in
connection with the decision of such Holder as to whether
or not it should tender Notes pursuant to the Change of
Control Offer, including information regarding the persons
acquiring control and such persons' business plans going
forward.
On the Change of Control Purchase Date, the Company
shall (i) accept for payment Notes or portions thereof validly
tendered pursuant to the Change of Control Offer, (ii) deposit
with the Paying Agent money, in immediately available funds,
<PAGE>
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sufficient to pay the purchase price of all Notes or portions
thereof so tendered and accepted and (iii) deliver to the Trus-
tee the Notes so accepted together with an Officers' Certifi-
cate setting forth the Notes or portions thereof tendered to
and accepted for payment by the Company. The Paying Agent
shall promptly mail or deliver to the Holders of Notes so
accepted payment in an amount equal to the purchase price, and
the Trustee shall promptly authenticate and mail or deliver to
such Holders a new Note equal in principal amount to any
unpurchased portion of the Note surrendered. Any Notes not so
accepted shall be promptly mailed or delivered by the Company
to the Holder thereof. The Company will publicly announce the
results of the Change of Control Offer not later than the first
Business Day following the Change of Control Purchase Date.
The Company shall not be required to make a Change of
Control Offer upon a Change of Control if a third party makes
the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements applicable to a
Change of Control Offer made by the Company and purchases all
Notes validly tendered and not withdrawn under such Change of
Control Offer.
The Company will comply with Section 14(e) and Rule
14e-1 under the Securities Exchange Act and any other securi-
ties laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repur-
chase of Notes pursuant to a Change of Control Offer.
Section 4.13. DISPOSITION OF PROCEEDS OF ASSET
SALES.
(a) The Company will not, and will not permit any of
the Restricted Subsidiaries to, make any Asset Sale unless
(i) the Company or such Restricted Subsidiary, as the case may
be, receives consideration at the time of such Asset Sale at
least equal to the fair market value, as determined in good
faith by the Board of Directors of the Company, of the shares
or assets sold or otherwise disposed of and (ii) at least 75%
of such consideration consists of cash and/or Cash Equivalents
and/or readily marketable securities which the Company in good
faith expects to liquidate promptly following such Asset Sale
(with Indebtedness of the Company or any Restricted Subsidiary
being counted as cash for such purposes if the Company or the
Restricted Subsidiary is unconditionally released from any lia-
bility therefor). Net Cash Proceeds of any Asset Sale may be
applied, to the extent required by the terms of any Specified
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Indebtedness, to repay Specified Indebtedness (but only if the
commitments or amounts available to be borrowed under such
Specified Indebtedness are permanently reduced by the amount of
such payment). To the extent that such Net Cash Proceeds are
not applied as provided in the preceding sentence, the Company
or a Restricted Subsidiary, as the case may be, may apply the
Net Cash Proceeds from such Asset Sale, within 360 days of such
Asset Sale, to an investment in properties and assets that were
the subject of such Asset Sale or in properties and assets that
will be used in the business of the Company and the Restricted
Subsidiaries existing on the Issue Date or in businesses rea-
sonably related thereto ("Replacement Assets") so long as the
Company or such Restricted Subsidiary has notified the Trustee
in writing within 270 days of such Asset Sale, that it has
determined to apply the Net Cash Proceeds from such Asset Sale
to an investment in such Replacement Assets. Any Net Cash Pro-
ceeds from any Asset Sale not applied as provided in the pre-
ceding two sentences, within 360 days of such Asset Sale, con-
stitute "Excess Proceeds" subject to disposition as provided
below.
(b) When the aggregate amount of Excess Proceeds
exceeds $10,000,000, the Company shall make an offer (an "Asset
Sale Offer") to purchase from all Holders, on a day not more
than 40 Business Days thereafter (the "Asset Sale Purchase
Date"), the maximum principal amount (expressed as a multiple
of $1,000) of Notes that may be purchased with the aggregate
Excess Proceeds at a price, payable in cash, equal to 100% of
the principal amount of the Notes plus accrued and unpaid
interest, if any, to the Asset Sale Purchase Date (the "Asset
Sale Offer Price").
(c) Notice of an Asset Sale Offer shall be mailed by
the Company to all Holders of Notes not less than 20 Business
Days nor more than 40 Business Days before the Asset Sale Pur-
chase Date at their last registered address with a copy to the
Trustee and the Paying Agent. The Asset Sale Offer shall
remain open from the time of mailing for at least 20 Business
Days and until at least 5:00 p.m., New York City time, on the
Asset Sale Purchase Date. The notice, which shall govern the
terms of the Asset Sale Offer, shall include such disclosures
as are required by law and shall state:
(1) that the Asset Sale Offer is being made pursuant
to this Section 4.13;
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(2) the Asset Sale Offer Price (including the amount
of accrued interest, if any) for each Note, the Asset Sale
Purchase Date and the date on which the Asset Sale Offer
expires;
(3) that any Note not tendered or accepted for pay-
ment will continue to accrue interest in accordance with
the terms thereof;
(4) that, unless the Company shall default in the
payment of the Asset Sale Offer Price, any Note accepted
for payment pursuant to the Asset Sale Offer shall cease
to accrue interest after the Asset Sale Purchase Date;
(5) that Holders electing to have Notes purchased
pursuant to an Asset Sale Offer will be required to sur-
render their Notes to the Paying Agent at the address
specified in the notice prior to 5:00 p.m., New York City
time, on the Asset Sale Purchase Date and must complete
any form letter of transmittal proposed by the Company and
acceptable to the Trustee and the Paying Agent;
(6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00
p.m., New York City time, on the Asset Sale Purchase Date,
a tested telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of
Notes the Holder delivered for purchase, the Note certifi-
cate number (if any) and a statement that such Holder is
withdrawing its election to have such Notes purchased;
(7) that if Notes in a principal amount in excess of
the Holder's PRO RATA share of the amount of Excess Pro-
ceeds are tendered pursuant to the Asset Sale Offer, the
Company shall purchase Notes on a PRO RATA basis among the
Notes tendered (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denomina-
tions of $1,000 or integral multiples of $1,000 shall be
acquired);
(8) that Holders whose Notes are purchased only in
part will be issued new Notes equal in principal amount to
the unpurchased portion of the Notes surrendered;
(9) the instructions that Holders must follow in
order to tender their Notes; and
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(10) information concerning the business of the Com-
pany, the most recent annual and quarterly reports of the
Company filed with the SEC pursuant to the Securities
Exchange Act (or, if the Company is not required to file
any such reports with the Commission, the comparable
reports prepared pursuant to Section 4.07), a description
of material developments in the Company's business, infor-
mation with respect to PRO FORMA historical financial
information after giving effect to such Asset Sale and
Asset Sale Offer and in connection with the decision of
such Holder as to whether or not it should tender Notes
pursuant to the Asset Sale Offer.
(d) On the Asset Sale Purchase Date, the Company
shall (i) accept for payment, on a PRO RATA basis, Notes or
portions thereof tendered pursuant to the Asset Sale Offer,
(ii) deposit with the Paying Agent money, in immediately avail-
able funds, in an amount sufficient to pay the Asset Sale Offer
Price of all Notes or portions thereof so tendered and accepted
and (iii) deliver to the Trustee the Notes so accepted together
with an Officers' Certificate setting forth the Notes or por-
tions thereof tendered to and accepted for payment by the Com-
pany. The Paying Agent shall promptly mail or deliver to Hold-
ers of Notes so accepted payment in an amount equal to the
Asset Sale Offer Price, and the Trustee shall promptly authen-
ticate and mail or deliver to such Holders a new Note equal in
principal amount to any unpurchased portion of the Note surren-
dered. Any Notes not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company
will publicly announce the results of the Asset Sale Offer not
later than the first Business Day following the Asset Sale Pur-
chase Date. To the extent that the aggregate principal amount
of Notes tendered pursuant to an offer to purchase is less than
the Excess Proceeds, the Company may use such deficiency for
general corporate purposes. Upon completion of such an offer
to purchase, the amount of Excess Proceeds shall be reset to
zero. For purposes of this Section 4.13, the Trustee shall act
as Paying Agent.
(e) The Company shall comply, to the extent appli-
cable, with the requirements of Section 14(e) of the Securities
Exchange Act and any other securities laws or regulations in
connection with the repurchase of Notes pursuant to the Asset
Sale Offer.
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Section 4.14. LIMITATION ON TRANSACTIONS
WITH AFFILIATES.
The Company will not, and will not permit any of the
Restricted Subsidiaries to, directly or indirectly, enter into
or suffer to exist any transaction or series of related trans-
actions (including, without limitation, the sale, transfer,
disposition, purchase, exchange or lease of assets, property or
services) with, or for the benefit of, any Affiliate of the
Company (other than a Restricted Subsidiary of the Company so
long as no Affiliate or beneficial holder of 10% or more of any
class of Capital Stock of the Company shall beneficially own
any Capital Stock in such Restricted Subsidiary) or any benefi-
cial holder of 10% or more of any class of Capital Stock of the
Company, except (i) on terms that are no less favorable to the
Company, or the Restricted Subsidiary, as the case may be, than
those which could have been obtained in a comparable transac-
tion at such time from persons who do not have such a relation-
ship with the Company, (ii) with respect to a transaction or
series of transactions involving aggregate payments or value
equal to or greater than $10,000,000, the Company has obtained
a written opinion from a nationally recognized investment bank-
ing firm stating that the terms of such transactions or series
of transactions are fair to the Company or the Restricted Sub-
sidiary, as the case may be, from a financial point of view,
and (iii) with respect to any transaction or series of transac-
tions involving aggregate payments or value equal to or greater
than $1,000,000, the Company shall have delivered an officer's
certificate to the Trustee certifying that such transaction or
series of transactions comply with the preceding clause (i)
and, if applicable, certifying that the opinion referred to in
the preceding clause (ii) is correct and that such transaction
or series of transactions have been approved by a majority of
the Board of Directors of the Company, including a majority of
the disinterested directors of the Board of Directors of the
Company. This Section 4.14 will not restrict the Company from
(a) making dividends permitted by Section 4.09, (b) paying rea-
sonable and customary regular fees to directors of the Company
who are not employees of the Company and (c) making loans or
advances to officers of the Company and the Restricted Subsid-
iaries for bona fide business purposes of the Company.
<PAGE>
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Section 4.15. LIMITATION ON DIVIDENDS AND OTHER
PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES.
The Company will not, and will not permit any of the
Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any
encumbrance or restriction of any kind on the ability of any
Restricted Subsidiary to (a) pay dividends, in cash or other-
wise, or make any other distributions on or in respect of its
Capital Stock or any other interest or participation in, or
measured by, its profits, (b) pay any Indebtedness owed to the
Company or any other Restricted Subsidiary, (c) make loans or
advances to the Company or any other Restricted Subsidiary, (d)
transfer any of its properties or assets to the Company or any
other Restricted Subsidiary (other than any customary restric-
tion on transfers of property subject to a Lien permitted
hereunder (other than a Lien on cash not constituting proceeds
of non-cash property subject to a Lien permitted hereunder)
which would not materially adversely affect the Company's abil-
ity to satisfy its obligations hereunder), or (e) guarantee any
Indebtedness of the Company or any other Restricted Subsidiary,
except for such encumbrances or restrictions existing under or
by reason of (i) applicable law, (ii) customary non-assignment
provisions of any contract or any licensing agreement entered
into by the Company or any of the Restricted Subsidiaries in
the ordinary course of business or any lease governing a lease-
hold interest of the Company or any Restricted Subsidiary,
(iii) any agreement or other instrument of a person acquired by
the Company or any Restricted Subsidiary in existence at the
time of such acquisition (but not created in contemplation
thereof), which encumbrance or restriction is not applicable to
any person, or the properties or assets of any person, other
than the person, or the property or assets of the person, so
acquired, (iv) any encumbrance or restriction in the Credit
Agreement as in effect on the Issue Date and (v) any encum-
brance or restriction pursuant to any agreement that extends,
refinances, renews or replaces any agreement described in
clause (iii) above, which is not materially more restrictive or
less favorable to the Holders of Notes and Guarantees than
those existing under the agreement being extended, refinanced,
renewed or replaced.
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Section 4.16. LIMITATION ON OTHER SENIOR
SUBORDINATED INDEBTEDNESS.
Neither the Company nor any Guarantor will incur,
directly or indirectly, any Indebtedness which is subordinate
or junior in right of payment in any respect to Senior Indebt-
edness or Guarantor Senior Indebtedness, as applicable, unless
such Indebtedness ranks PARI PASSU in right of payment with the
Notes or the Guarantees, as applicable, or is expressly subor-
dinated in right of payment to the Notes or the Guarantees, as
applicable.
Section 4.17. LIMITATION ON DESIGNATIONS OF
UNRESTRICTED SUBSIDIARIES.
(a) The Company may designate any Subsidiary of the
Company (other than a Guarantor) as an "Unrestricted Subsid-
iary" under this Indenture (a "Designation") only if (i) no
Default shall have occurred and be continuing at the time of or
after giving effect to such Designation; (ii) the Company would
be permitted under this Indenture to make an Investment at the
time of Designation (assuming the effectiveness of such Desig-
nation) in an amount (the "Designation Amount") equal to the
Fair Market Value of the Capital Stock of such Subsidiary on
such date; and (iii) the Company would be permitted under this
Indenture to incur $1.00 of additional Indebtedness pursuant to
the first paragraph of Section 4.08 at the time of Designation
(assuming the effectiveness of such Designation).
In the event of any such Designation, the Company
shall be deemed to have made an Investment constituting a
Restricted Payment pursuant to Section 4.09 for all purposes of
this Indenture in the Designation Amount. The Company shall
not and shall not permit any Restricted Subsidiary to, at any
time (x) provide credit support for, or a guarantee of, any
Indebtedness of any Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebted-
ness), (y) be directly or indirectly liable for any Indebted-
ness of any Unrestricted Subsidiary or (z) be directly or indi-
rectly liable for any Indebtedness which provides that the
holder thereof may (upon notice, lapse of time or both) declare
a default thereon or cause the payment thereof to be acceler-
ated or payable prior to its final scheduled maturity upon the
occurrence of a default with respect to any Indebtedness of any
Unrestricted Subsidiary (including any right to take enforce-
ment action against such Unrestricted Subsidiary), except in
the case of clause (x) or (y) to the extent permitted under
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Section 4.09. No Unrestricted Subsidiary shall at any time
guarantee or otherwise provide credit support for any obliga-
tion of the Company or any Restricted Subsidiary.
(b) The Company may revoke any Designation of a Sub-
sidiary as an Unrestricted Subsidiary (a "Revocation") if (i)
no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation; and (ii) all Liens
and Indebtedness of such Unrestricted Subsidiary outstanding
immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes
of this Indenture.
All Designations and Revocations pursuant to this
Section 4.17 must be evidenced by Board Resolutions delivered
to the Trustee certifying compliance with the foregoing
provisions.
Section 4.18. LIMITATION ON GUARANTEES
BY RESTRICTED SUBSIDIARIES.
No Restricted Subsidiary that is not a Guarantor may
at any time guarantee any Debt Securities of the Company or any
Guarantor or issue any Debt Securities, unless, at the time of
such guarantee or issue either (A) such Debt Securities consti-
tute Acquired Indebtedness permitted to be incurred pursuant to
the first paragraph of Section 4.08 or Indebtedness incurred by
such Restricted Subsidiary pursuant to clause (10) of the sec-
ond paragraph of Section 4.08 or (B) such Restricted Subsidiary
becomes a Guarantor. The Company may, at any time, cause a
Restricted Subsidiary to become a Guarantor by executing and
delivering a supplemental indenture providing for the guarantee
of payment of the Notes by such Restricted Subsidiary pursuant
to Article Ten hereof. In connection with the execution and
delivery of such supplemental indenture, such Restricted Sub-
sidiary shall execute and deliver to the Trustee a Guarantee
substantially in the form of Exhibit B hereto.
Section 4.19. WAIVER OF STAY, EXTENSION OR USURY
LAWS.
The Company and each of the Guarantors covenants (to
the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law
or any usury law or other law which would prohibit or forgive
the Company or any Guarantor, as the case may be, from paying
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all or any portion of the principal of or interest on the Notes
as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may
lawfully do so) the Company and each of the Guarantors hereby
expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execu-
tion of any power herein granted to the Trustee, but will suf-
fer and permit the execution of every such power as though no
such law had been enacted.
ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.01. WHEN COMPANY MAY MERGE, ETC.
The Company will not, in any transaction or series of
related transactions, merge or consolidate with or into, or
sell, assign, convey, transfer, lease or otherwise dispose of
all or substantially all of its properties and assets as an
entirety to, any person or persons, and the Company will not
permit any of the Restricted Subsidiaries to enter into any
such transaction or series of related transactions if such
transaction or series of related transactions, in the aggregate
would result in a sale, assignment, conveyance, transfer, lease
or other disposition of all or substantially all of the proper-
ties and assets of the Company or of the Company and the
Restricted Subsidiaries, taken as a whole, to any other person
or persons, unless at the time and after giving effect thereto
(i) either (A)(1) if the transaction or transactions is a
merger or consolidation involving the Company, the Company
shall be the surviving person of such merger or consolidation
or (2) if the transaction or transactions is a merger or con-
solidation involving a Restricted Subsidiary, such Restricted
Subsidiary shall be the surviving person of such merger or con-
solidation and such surviving person shall be a Restricted Sub-
sidiary, or (B)(1) the person formed by such consolidation or
into which the Company or such Restricted Subsidiary is merged
or to which the properties and assets of the Company or such
Restricted Subsidiary, as the case may be, substantially as an
entirety, are transferred (any such surviving person or trans-
feree person being the "Surviving Entity") shall be a corpora-
tion organized and existing under the laws of the United States
of America, any State thereof or the District of Columbia and
(2)(x) in the case of a transaction involving the Company, the
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Surviving Entity shall expressly assume by a supplemental
indenture executed and delivered to the Trustee, in form satis-
factory to the Trustee, all the obligations of the Company
under the Notes and this Indenture, and in each case, this
Indenture shall remain in full force and effect, or (y) in the
case of a transaction involving a Restricted Subsidiary that is
a Guarantor, the Surviving Entity shall expressly assume by a
supplemental indenture executed and delivered to the Trustee,
in form satisfactory to the Trustee, all the obligations of
such Restricted Subsidiary under its Guarantee and related sup-
plemental indenture, and in each case, such Guarantee and sup-
plemental indenture shall remain in full force and effect; and
(ii) immediately after giving effect to such transaction or
series of related transactions on a PRO FORMA basis (including,
without limitation, any Indebtedness incurred or anticipated to
be incurred in connection with or in respect of such transac-
tion or series of transactions), no Default shall have occurred
and be continuing and the Company, or the Surviving Entity, as
the case may be, after giving effect to such transaction or
series of transactions on a PRO FORMA basis, could incur $1.00
of additional Indebtedness under the first paragraph of
Section 4.08.
In connection with any consolidation, merger, trans-
fer, lease or other disposition contemplated hereby, the Com-
pany shall deliver, or cause to be delivered, to the Trustee,
in form and substance reasonably satisfactory to the Trustee,
an officers' certificate and an opinion of counsel, each stat-
ing that such consolidation, merger, transfer, lease or other
disposition and the supplemental indenture in respect hereof
comply with the requirements under this Indenture.
In addition, each Guarantor, unless it is the other
party to the transaction or unless its Guarantee will be
released and discharged in accordance with its terms as a
result of the transaction, will be required to confirm, by sup-
plemental indenture, that its Guarantee will apply to the obli-
gations of the Company or the Surviving Entity under this
Indenture.
Section 5.02. SUCCESSOR SUBSTITUTED.
Upon consolidation or merger or any transfer of all
or substantially all of the assets of the Company in accordance
with Section 5.01 hereof, in which the Company or a Restricted
Subsidiary, as applicable, is not the continuing corporation,
the successor corporation formed by such a consolidation or
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into which the Company or such Restricted Subsidiary, as the
case may be, is merged or to which such transfer is made, shall
succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the
same effect as if such successor corporation had been named as
the Company therein; PROVIDED that, solely for purposes of com-
puting cumulative Consolidated Net Income for purposes of
clause (B) of the first paragraph of Section 4.09, the cumula-
tive Consolidated Net Income of any persons other than the Com-
pany and the Restricted Subsidiaries shall only be included for
periods subsequent to the effective time of such merger, con-
solidation, combination or transfer of assets.
For all purposes of this Indenture and the Notes
(including the provision of this Section and Sections 4.08,
4.09 and 4.11), Subsidiaries of any Surviving Entity will, upon
such transaction or series of related transactions, become
Restricted Subsidiaries or Unrestricted Subsidiaries as pro-
vided pursuant to Section 4.17 and all Indebtedness, and all
Liens on property or assets, of the Company and the Restricted
Subsidiaries immediately prior to such transaction or series of
related transactions will be deemed to have been incurred upon
such transaction or series of related transactions.
ARTICLE SIX
REMEDIES
Section 6.01. EVENTS OF DEFAULT.
An "Event of Default" means any of the following
events:
(a) default in the payment of the principal when due
and payable on any of the Notes (at its Stated Maturity,
upon optional redemption, required purchase, or other-
wise); or
(b) default in the payment of an installment of
interest on any of the Notes when due and payable, for 30
days; or
(c) the failure of the Company to comply with its
obligations under Section 5.01; or
(d) the failure of the Company to perform or observe
any other term, covenant or agreement contained in the
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Notes or this Indenture (other than a default specified in
clause (a), (b) or (c) above), for a period of 45 days
after written notice of such failure requiring the Company
to remedy the same shall have been given (i) to the Com-
pany by the Trustee or (ii) to the Company and the Trustee
by the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding; or
(e) any default or defaults under one or more agree-
ments, instruments, mortgages, bonds, debentures or other
evidences of Indebtedness (a "Debt Instrument") under
which the Company or one or more Restricted Subsidiaries
or the Company and one or more Restricted Subsidiaries
then have outstanding Indebtedness in excess of
$15,000,000, individually or in the aggregate, and either
(i) such Indebtedness is already due and payable in full
or (ii) such default or defaults have resulted in the
acceleration of the maturity of such Indebtedness; or
(f) one or more judgments, orders or decrees of any
court or regulatory or administrative agency of competent
jurisdiction for the payment of money in excess of
$15,000,000, either individually or in the aggregate, over
(a) the coverage under applicable binding insurance poli-
cies issued by a solvent insurer which has accepted such
coverage and (b) the extent to which the Company or any
such Restricted Subsidiary shall be entitled pursuant to
the terms of any agreement then in effect, to reimburse-
ment, indemnity or contribution from any person (other
than the Company or any of its Subsidiaries) that is sol-
vent for amounts as to which the Company or such
Restricted Subsidiary may become liable and has accepted
such liability, shall be entered against the Company or
any Restricted Subsidiary or any of their respective prop-
erties and shall not be discharged or fully bonded and
there shall have been a period of 60 days after the date
on which any period for appeal has expired and during
which a stay of enforcement of such judgment, order or
decree shall not be in effect; or
(g) either (i) the collateral agent under the Credit
Agreement or (ii) any holder of at least $15,000,000 in
aggregate principal amount of Indebtedness of the Company
or any of the Restricted Subsidiaries shall commence (or
have commenced on its behalf) judicial proceedings to
foreclose upon assets of the Company or any of the
Restricted Subsidiaries having an aggregate Fair Market
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Value, individually or in the aggregate, in excess of
$15,000,000 or shall have exercised any right under appli-
cable law or applicable security documents to take owner-
ship of any such assets in lieu of foreclosure; or
(h) any Guarantee ceases to be in full force and
effect (other than as expressly provided for under this
Indenture) or is declared null and void, or any Guarantor
denies that it has any further liability under any Guaran-
tee, or gives notice to such effect (other than by reason
of the termination of this Indenture or the release of any
such Guarantee in accordance with this Indenture); or
(i) The Company, any Guarantor or any Significant
Subsidiary of the Company pursuant to or under or within
the meaning of any Bankruptcy Law:
(i) commences a voluntary case or proceeding;
(ii) consents to the entry of an order for
relief against it in an involuntary case or
proceeding;
(iii) consents to the appointment of a Custodian
of it or for all or substantially all of its prop-
erty; or
(iv) makes a general assignment for the benefit
of its creditors; or
(j) a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that:
(i) is for relief against the Company, any
Guarantor or any Significant Subsidiary of the Com-
pany in an involuntary case or proceeding,
(ii) appoints a Custodian of the Company, any
Guarantor or any Significant Subsidiary of the Com-
pany for all or substantially all of its properties,
or
(iii) orders the liquidation of the Company, any
Guarantor or any Significant Subsidiary of the
Company.
<PAGE>
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Subject to the provisions of Sections 7.01 and 7.02,
the Trustee shall not be charged with knowledge of any Default
or Event of Default (other than those set forth in Section
6.01(a) or (b)) unless written notice thereof shall have been
given to a Trust Officer at the Corporate Trust Office of the
Trustee by the Company, the Paying Agent, any Holder, any
holder of Senior Indebtedness or Guarantor Senior Indebtedness
or any of their respective agents.
Section 6.02. ACCELERATION.
If an Event of Default (other than an Event of
Default specified in Section 6.01(i) or (j) with respect to the
Company or any Guarantor) shall occur and be continuing, the
Trustee, by written notice to the Company, or the Holders of at
least 25% in aggregate principal amount of the Notes then out-
standing, by written notice to the Trustee and the Company, may
declare the principal of and accrued interest on all of the
outstanding Notes to be due and payable immediately, upon which
declaration, all amounts payable in respect of the Notes shall
become and be immediately due and payable; PROVIDED that so
long as the Credit Agreement shall be in full force and effect,
if an Event of Default shall have occurred and be continuing
(other than an Event of Default in Section 6.01(i) or (j) with
respect to the Company or any Guarantor), any such acceleration
shall not be effective until the earlier to occur of (x) five
business days following delivery of a notice of such accelera-
tion to the agent under the Credit Agreement and (y) the accel-
eration of any Indebtedness under the Credit Agreement. If an
Event of Default specified in Section 6.1(i) or (j) with
respect to the Company or any Guarantor occurs and is continu-
ing, then the principal of and accrued interest on all of the
outstanding Notes shall IPSO FACTO become and be immediately
due and payable without any declaration or other act on the
part of the Trustee or any Holder of Notes.
Notwithstanding the foregoing, in the event of a dec-
laration of acceleration in respect of the Notes because an
Event of Default specified in Section 6.01(e) shall have
occurred and be continuing, such declaration of acceleration
shall be automatically annulled if the Indebtedness that is the
subject of such Event of Default has been discharged or paid or
such Event of Default shall have been cured or waived by the
holders of such Indebtedness and written notice of such dis-
charge, cure or waiver, as the case may be, shall have been
given to the Trustee by the Company or by the requisite holders
of such Indebtedness or a trustee, fiduciary or agent for such
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holders, within 60 days after such declaration of acceleration
in respect of the Notes and no other Event of Default shall
have occurred which has not been cured or waived during such
60-day period.
At any time after such declaration of acceleration
has been made and before a judgment or decree for payment of
the money due has been obtained by the Trustee, Holders of a
majority in aggregate principal amount of the Notes outstand-
ing, by written notice to the Company and the Trustee, may
rescind such declaration and its consequences if:
(a) The Company has paid or deposited with the Trus-
tee a sum sufficient to pay
(i) all sums paid or advanced by the Trustee
under this Indenture and the reasonable compensation,
expenses, disbursements and advances of the Trustee,
its agents and counsel,
(ii) all overdue interest on all Notes,
(iii) the principal of any Notes which have become
due otherwise than by such declaration of accelera-
tion and interest thereon at the rate borne by the
Notes, and
(iv) to the extent that payment of such interest
is lawful, interest upon overdue interest and overdue
principal at the rate borne by the Notes which has
become due otherwise than by such declaration of
acceleration;
(b) such rescission would not conflict with any
judgment or decree of a court of competent jurisdiction;
and
(c) all Events of Default, other than the non-pay-
ment of principal of and interest on the Notes which has
become due solely by such declaration of acceleration,
have been cured or waived as provided in Section 6.04.
No such rescission shall affect any subsequent
Default or Event of Default or impair any right consequent
thereon.
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Section 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the
Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of principal of or interest on
the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
All rights of action and claims under this Indenture
or the Notes may be enforced by the Trustee even if it does not
possess any of the Notes or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Note-
holder in exercising any right or remedy accruing upon an Event
of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy
is exclusive of any other remedy. All available remedies are
cumulative to the extent permitted by law.
Section 6.04. WAIVER OF PAST DEFAULTS.
Subject to the provisions of Sections 6.07 and 9.02,
the Holders of not less than a majority in aggregate principal
amount of the outstanding Notes by notice to the Trustee may,
on behalf of the Holders of all the Notes, waive any past
Defaults and their consequences, except a Default or Event of
Default specified in Section 6.01(a) or (b) or in respect of
any provision hereof which cannot be modified or amended with-
out the consent of the Holder so affected pursuant to Section
9.02. When a Default or Event of Default is so waived, it
shall be deemed cured and shall cease to exist.
Section 6.05. CONTROL BY MAJORITY.
The Holders of at least a majority in aggregate prin-
cipal amount of the outstanding Notes shall have the right to
direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any
trust or power conferred on the Trustee, PROVIDED that the
Trustee may refuse to follow any direction (a) that conflicts
with any rule of law or this Indenture, (b) that the Trustee
determines may be unduly prejudicial to the rights of another
Noteholder, or (c) that may expose the Trustee to personal lia-
bility unless the Trustee has indemnification satisfactory to
it in its sole discretion against any loss or expense caused by
its following such direction; and PROVIDED, FURTHER, that the
Trustee may take any other action deemed proper by the Trustee
that is not inconsistent with such direction.
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Section 6.06. LIMITATION ON SUITS.
No Holder of any Notes shall have any right to insti-
tute any proceeding or pursue any remedy with respect to this
Indenture or the Notes unless:
(a) the Holder gives written notice to the Trustee
of a continuing Event of Default;
(b) the Holders of at least 25% in aggregate princi-
pal amount of the outstanding Notes make a written request
to the Trustee to pursue the remedy within 60 days of the
receipt of such notice;
(c) such Holder or Holders offer and, if requested,
provide to the Trustee reasonable indemnity satisfactory
to the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request
within 60 days after receipt of the request and the offer
and, if requested, provision of indemnity; and
(e) during such 60-day period the Holders of a
majority in aggregate principal amount of the outstanding
Notes do not give the Trustee a direction which is incon-
sistent with the request;
The foregoing limitations shall not apply to a suit
instituted by a Holder for the enforcement of the payment of
principal of or accrued interest on, such Note held by such
Holder on or after the respective due dates set forth in such
Note.
A Holder may not use this Indenture to prejudice the
rights of any other Holders or to obtain priority or preference
over such other Holders.
Section 6.07. RIGHT OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision in this Inden-
ture, the right of any Holder of Notes to receive payment of
the principal of and interest on such Note, on or after the
respective Stated Maturities expressed in such Note, or to
bring suit for the enforcement of any such payment on or after
the respective Stated Maturities, is absolute and unconditional
and shall not be impaired or affected without the consent of
the Holder.
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Section 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in clause (a) or (b)
of Section 6.01 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express
trust against the Company, each Guarantor or any other obligor
on the Notes for the whole amount of principal of and accrued
interest remaining unpaid, together with interest on overdue
principal and, to the extent that payment of such interest is
lawful, interest on overdue installments of interest, in each
case at the rate per annum borne by the Notes and such further
amount as shall be sufficient to cover the costs and expenses
of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel.
Section 6.09. TRUSTEE MAY FILE PROOFS OF CLAIMS.
The Trustee may file such proofs of claim and other
papers or documents as may be necessary or advisable in order
to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel) and the Holders allowed
in any judicial proceedings relative to the Company or the
Guarantors of the Company (or any other obligor upon the
Notes), their creditors or their property and shall be entitled
and empowered to collect and receive any monies or other prop-
erty payable or deliverable on any such claims and to distrib-
ute the same, and any Custodian in any such judicial proceed-
ings is hereby authorized by each Holder to make such payments
to the Trustee and, in the event that the Trustee shall consent
to the making of such payments directly to the Holders, to pay
to the Trustee any amount due to it for the reasonable compen-
sation, expenses, disbursements and advances of the Trustee,
its agent and counsel, and any other amounts due the Trustee
under Section 7.08. Nothing herein contained shall be deemed
to authorize the Trustee to authorize or consent to or accept
or adopt on behalf of any Holder any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee
to vote in respect of the claim of any Holder in any such
proceeding.
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Section 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this
Article Six, it shall pay out such money in the following
order:
First: to the Trustee for amounts due under Section
7.08;
Second: subject to Article Eleven, to Holders for
interest accrued on the Notes, ratably, without preference
or priority of any kind, according to the amounts due and
payable on the Notes for interest;
Third: subject to Article Eleven, to Holders for
principal amounts owing under the Notes, ratably, without
preference or priority of any kind, according to the
amounts due and payable on the Notes for principal; and
Fourth: the balance, if any, to the Company or, to
the extent the Trustee collects any amount from any Guar-
antor, to such Guarantor.
The Trustee, upon prior written notice to the Com-
pany, may fix a record date and payment date for any payment to
Noteholders pursuant to this Section 6.10.
Section 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or rem-
edy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court may in
its discretion require the filing by any party litigant in the
suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section
6.11 does not apply to any suit by the Trustee, any suit by a
Holder pursuant to Section 6.07, or a suit by Holders of more
than 10% in aggregate principal amount of the outstanding
Notes.
Section 6.12. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any pro-
ceeding to enforce any right or remedy under this Indenture,
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any Note or any Guarantee and such proceeding has been discon-
tinued or abandoned for any reason, or has been determined
adversely to the Trustee or to such Holder, then and in every
such case the Company, each Guarantor, the Trustee and the
Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former posi-
tions hereunder, and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such pro-
ceeding had been instituted.
ARTICLE SEVEN
TRUSTEE
Section 7.01. DUTIES.
(a) In case an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree
of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such
person's own affairs.
(b) Except during the continuance of an Event of
Default,
(1) the Trustee need perform only such duties as are
specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, and upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this
Indenture; but in the case of any such certificates or
opinions which by provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether
or not they conform to the requirements of this Indenture.
(c) No provision of this Indenture shall be con-
strued to relieve the Trustee from liability for its own negli-
gent action, its own negligent failure to act, or its own will-
ful misconduct, except that
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(1) this paragraph does not limit the effect
of paragraph (b) of this Section 7.01;
(2) the Trustee shall not be liable for any
error of judgment made in good faith by a Trust
Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with
respect to any action it takes or omits to take in
good faith in accordance with a direction received
by it pursuant to Section 6.05;
(d) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers if
it shall have reasonable grounds for believing that repayment
of such funds or adequate indemnity against such risk or lia-
bility is not reasonably assured to it.
(e) Every provision of this Indenture that in any
way relates to the Trustee is subject to paragraphs (a), (b),
(c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on
any assets received by it except as the Trustee may agree with
the Company. Assets held in trust by the Trustee need not be
segregated from other assets except to the extent required by
law.
Section 7.02. RIGHTS OF TRUSTEE.
Subject to Section 7.01 hereof and the provisions of
TIA Section 315:
(a) the Trustee may rely on any document believed by
it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any
fact or matter stated in the document.
(b) before the Trustee acts or refrains from acting,
it may consult with counsel and may require an Officers'
Certificate or an Opinion of Counsel, which shall conform
to Sections 12.04 and 12.05. The Trustee shall not be
liable for any action it takes or omits to take in good
faith in reliance on such certificate or opinion.
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(c) the Trustee may act through its attorneys and
agents and shall not be responsible for the misconduct or
negligence of any agent appointed with due care.
(d) the Trustee shall not be liable for any action
taken or omitted by it in good faith and believed by it to
be authorized or within the discretion, rights or powers
conferred upon it by this Indenture other than any liabil-
ities arising out of its own negligence;
(e) the Trustee may consult with counsel of its own
choosing and the advice or opinion of such counsel as to
matters of law shall be full and complete authorization
and protection in respect of any action taken, omitted or
suffered by it hereunder in good faith and in accordance
with the advice or opinion of such counsel.
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any res-
olution, certificate, statement, instrument, opinion,
notice, request, direction, consent, order, bond, deben-
ture, or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit.
(g) the Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Indenture at the request, order or direction of any of the
Holders pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee rea-
sonable security or indemnity against the costs, expenses
and liabilities which may be incurred therein or thereby.
Section 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee, any Paying Agent, Registrar or any other
agent of the Company, in its individual or any other capacity,
may become the owner or pledgee of Notes and, subject to Sec-
tions 7.11 and 7.12 and TIA Sections 310 and 311, may otherwise
deal with the Company and its Subsidiaries with the same rights
it would have if it were not the Trustee, Paying Agent, Regis-
trar or such other agent.
Section 7.04. TRUSTEE'S DISCLAIMER.
The Trustee makes no representations as to the valid-
ity or sufficiency of this Indenture, the Notes or of any
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Guarantee, it shall not be accountable for the Company's use or
application of the proceeds from the Notes, it shall not be
responsible for the use or application of any money received by
any Paying Agent other than the Trustee and it shall not be
responsible for any statement in the Notes other than the
Trustee's certificate of authentication.
Section 7.05. NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall
mail to each Holder notice of the Default or Event of Default
within 30 days after obtaining knowledge thereof; PROVIDED
that, except in the case of a Default or Event of Default in
the payment of the principal of or interest on any Note, the
Trustee may withhold such notice if a committee of its trust
officers in good faith determines that withholding such notice
is in the interest of the Holders.
Section 7.06. MONEY HELD IN TRUST.
All moneys received by the Trustee shall, until used
or applied as herein provided, be held in trust for the pur-
poses for which they were received, but need not be segregated
from other funds except to the extent required herein or by
law. The Trustee shall not be under any liability for interest
on any moneys received by it hereunder.
Section 7.07. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each [ ] beginning with the
[ ] following the date of this Indenture, the Trustee
shall, to the extent that any of the events described in TIA
Section 313(a) occurred within the previous twelve months, but
not otherwise, mail to each Holder a brief report dated as of
such [ ] that complies with TIA Section 313(a). The
Trustee also shall comply with TIA Sections 313(b) and 313(c).
A copy of each report at the time of its mailing to
Holders shall be mailed to the Company and filed with the SEC
and each securities exchange, if any, on which the Notes are
listed.
The Company shall notify the Trustee in writing if
the Notes become listed on any securities exchange.
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Section 7.08. COMPENSATION AND INDEMNITY.
The Company and the Guarantors covenant and agree to
pay the Trustee from time to time reasonable compensation for
its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust.
The Company and the Guarantors shall reimburse the Trustee upon
request for all reasonable disbursements, expenses and advances
incurred or made by it. Such expenses shall include the rea-
sonable compensation, disbursements and expenses of the Trust-
ee's agents and counsel.
The Company and the Guarantors shall indemnify the
Trustee for, and hold it harmless against, any loss or lia-
bility incurred by it arising out of or in connection with the
administration of this trust and its rights or duties hereun-
der, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder. The
Trustee shall notify the Company and the Guarantors promptly of
any claim asserted against the Trustee for which it may seek
indemnity. The Company and the Guarantors shall defend the
claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company and the Guar-
antors shall pay the reasonable fees and expenses of such coun-
sel. The Company and the Guarantors need not pay for any
settlement made without its written consent. The Company and
the Guarantors need not reimburse any expense or indemnify
against any loss or liability to the extent incurred by the
Trustee through its negligence, bad faith or willful
misconduct.
To secure the Company's and the Guarantors' payment
obligations in this Section 7.08, the Trustee shall have a Lien
prior to the Notes on all assets held or collected by the Trus-
tee, in its capacity as Trustee, except assets held in trust to
pay principal of or interest on particular Notes.
When the Trustee incurs expenses or renders services
in connection with an Event of Default specified in Section
6.01(i) or (j) with respect to the Company or a Guarantor, the
expenses and the compensation for the services are intended to
constitute expenses of administration under any Bankruptcy Law.
The Company's obligations under this Section 7.08 and
any Lien arising hereunder shall survive the resignation or
removal of any trustee, the discharge of the Company's or any
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Guarantor's obligations pursuant to Article Eight and/or the
termination of this Indenture.
Section 7.09. REPLACEMENT OF TRUSTEE.
The Trustee may resign by so notifying the Company
and the Guarantors. The Holders of a majority in principal
amount of the outstanding Notes may remove the Trustee by so
notifying the Company and the Trustee and may appoint a succes-
sor trustee with the Company's consent. The Company may remove
the Trustee if:
(a) the Trustee fails to comply with Section 7.11;
(b) the Trustee is adjudged a bankrupt or an insol-
vent or an order for relief is entered with respect to the
Trustee under any Bankruptcy Law;
(c) a receiver or other public officer takes charge
of the Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy
exists in the office of Trustee for any reason, the Company and
the Guarantors shall notify each Holder of such event and shall
promptly appoint a successor Trustee. The Trustee shall be
entitled to payment of its fees and reimbursement of its
expenses while acting as Trustee, and to the extent such
amounts remain unpaid, the Trustee that has resigned or has
been removed shall retain the Lien afforded by Section 7.08.
Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the outstanding
Notes may appoint a successor Trustee to replace the successor
Trustee appointed by the Company.
A successor Trustee shall deliver a written accep-
tance of its appointment to the retiring Trustee and to the
Company. Immediately after that, the retiring Trustee shall
transfer all property held by it as Trustee to the successor
Trustee, subject to the Lien provided in Section 7.08, the res-
ignation or removal of the retiring Trustee shall become effec-
tive, and the successor Trustee shall have all the rights, pow-
ers and duties of the Trustee under this Indenture. A succes-
sor Trustee shall mail notice of its succession to each
Noteholder.
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If a successor Trustee does not take office within 60
days after the retiring Trustee resigns or is removed, the
retiring Trustee, the Company or the Holders of at least 25% in
principal amount of the outstanding Notes may petition any
court of competent jurisdiction for the appointment of a suc-
cessor Trustee.
If the Trustee fails to comply with Section 7.11, any
Holder may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor
Trustee.
Notwithstanding replacement of the Trustee pursuant
to this Section 7.09, the Company's and the Guarantors' obliga-
tions under Section 7.08 shall continue for the benefit of the
retiring Trustee.
Section 7.10. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts
into, or transfers all or substantially all of its corporate
trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation
or national banking association without any further act shall,
if such resulting, surviving or transferee corporation or
national banking association is otherwise eligible hereunder,
be the successor Trustee.
Section 7.11. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder which
shall be eligible to act as Trustee under TIA
Sections 310(a)(1) and 310(a)(5) and which shall have a com-
bined capital and surplus of at least $[ ]. If such
corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of federal, state, ter-
ritorial or District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined
capital and surplus of such corporation shall be deemed to be
its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the
Trustee shall cease to be eligible in accordance with the pro-
visions of this Section, the Trustee shall resign immediately
in the manner and with the effect hereinafter specified in this
Article.
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Section 7.12. PREFERENTIAL COLLECTION OF CLAIMS
AGAINST COMPANY.
The Trustee shall comply with TIA Section 311(a),
excluding any creditor relationship listed in TIA
Section 311(b). If the present or any future Trustee shall
resign or be removed, it shall be subject to TIA Section 311(a)
to the extent provided therein.
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
Section 8.01. TERMINATION OF THE COMPANY'S
OBLIGATIONS.
The Company may terminate its obligations under the
Notes and this Indenture, and the obligations of the Guarantors
shall terminate, except those obligations referred to in the
penultimate paragraph of this Section 8.01, if all Notes previ-
ously authenticated and delivered (other than destroyed, lost
or stolen Notes which have been replaced or paid or Notes for
whose payment money has theretofore been deposited with the
Trustee or the Paying Agent in trust or segregated and held in
trust by the Company and thereafter repaid to the Company, as
provided in Section 8.04) have been delivered to the Trustee
for cancellation and the Company has paid all sums payable by
it hereunder, or if:
(a) either (i) pursuant to Article Three, the Com-
pany shall have given notice to the Trustee and mailed a
notice of redemption to each Holder of the redemption of
all of the Notes under arrangements satisfactory to the
Trustee for the giving of such notice or (ii) all Notes
have otherwise become due and payable hereunder;
(b) The Company shall have irrevocably deposited or
caused to be deposited with the Trustee or a trustee sat-
isfactory to the Trustee, under the terms of an irrevo-
cable trust agreement in form and substance satisfactory
to the Trustee, as trust funds in trust solely for the
benefit of the Holders for that purpose, money in such
amount as is sufficient without consideration of reinvest-
ment of such interest, to pay principal of and interest on
the outstanding Notes to maturity or redemption; PROVIDED
that the Trustee shall have been irrevocably instructed to
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apply such money to the payment of said principal and
interest with respect to the Notes and, PROVIDED, FURTHER,
that from and after the time of deposit, the money depos-
ited shall not be subject to the rights of holders of
Senior Indebtedness pursuant to the provisions of Article
Ten;
(c) no Default or Event of Default with respect to
this Indenture or the Notes shall have occurred and be
continuing on the date of such deposit or shall occur as a
result of such deposit and such deposit will not result in
a breach or violation of, or constitute a default under,
any other instrument to which the Company is a party or by
which it is bound;
(d) The Company shall have paid all other sums pay-
able by it hereunder;
(e) The Company shall have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, which,
taken together, state that all conditions precedent pro-
viding for the termination of the Company's and each Guar-
antor's obligation under the Notes and this Indenture have
been complied with. Such Opinion of Counsel shall also
state that such satisfaction and discharge does not result
in a default under the Credit Agreement (if then in
effect) or any other agreement or instrument then known to
such counsel that binds or affects the Company.
Notwithstanding the foregoing paragraph, the Compa-
ny's obligations in Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02
and 7.08 and the Guarantors' obligations in respect thereof
shall survive until the Notes are no longer outstanding pursu-
ant to the last paragraph of Section 2.08. After the Notes are
no longer outstanding, the Company's obligations in Sections
7.08, 8.04 and 8.05 and the Guarantors' obligations in respect
thereof shall survive.
After such delivery or irrevocable deposit the Trus-
tee upon request shall acknowledge in writing the discharge of
the Company's and the Guarantors' obligations under the Notes
and this Indenture except for those surviving obligations spec-
ified above.
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Section 8.02. LEGAL DEFEASANCE AND COVENANT
DEFEASANCE.
(a) The Company may, at its option by Board Resolu-
tion of the Board of Directors which shall be delivered to the
Trustee, at any time, with respect to the outstanding Notes and
the Guarantees, elect to have either paragraph (b) or
paragraph (c) below be applied to the outstanding Notes and the
Guarantees upon compliance with the conditions set forth in
paragraph (d).
(b) Upon the Company's exercise under paragraph (a)
of the option applicable to this paragraph (b), each of the
Company and the Guarantors shall be deemed to have been
released and discharged from its respective obligations with
respect to the outstanding Notes and the Guarantees on the date
the conditions set forth below are satisfied (hereinafter,
"legal defeasance"). For this purpose, such legal defeasance
means that the Company shall be deemed to have paid and dis-
charged the entire indebtedness represented by the then out-
standing Notes, which shall thereafter be deemed to be "out-
standing" only for the purposes of paragraph (e) below and the
other Sections of and matters under this Indenture referred to
in (i) and (ii) below, and to have satisfied all its other
obligations under such Notes and this Indenture insofar as such
Notes are concerned (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the
same), and Holders of the Notes and the Guarantees and any
amounts deposited under paragraph (d) below shall cease to be
subject to any obligations to, or the rights of, any holder of
Senior Indebtedness or Guarantor Senior Indebtedness under
Articles Ten, Eleven or otherwise, except for the following
which shall survive until otherwise terminated or discharged
hereunder: (i) the rights of Holders of outstanding Notes to
receive solely from the trust fund described in paragraph (d)
below and as more fully set forth in such paragraph, payments
in respect of the principal of and interest on such Notes when
such payments are due, (ii) the Company's obligations with
respect to such Notes under Sections 2.06, 2.07 and 4.02, and,
with respect to the Trustee, under Section 7.08 and the Guaran-
tor's obligations in respect thereof, (iii) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and (iv)
this Section 8.02 and Section 8.05. Subject to compliance with
this Section 8.02, the Company may exercise its option under
this paragraph (b) notwithstanding the prior exercise of its
option under paragraph (c) below with respect to the Notes
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(c) Upon the Company's exercise under paragraph (a)
of the option applicable to this paragraph (c), the Company
shall be released and discharged from its obligations under any
covenant contained in Articles Five and Eleven and in Sections
4.05 through 4.18 with respect to the outstanding Notes on and
after the date the conditions set forth below are satisfied
(hereinafter, "covenant defeasance"), and the Notes shall
thereafter be deemed to be not "outstanding" for the purpose of
any direction, waiver, consent or declaration or act of Holders
(and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for
all other purposes hereunder and Holders of the Notes and the
Guarantees and any amounts deposited under paragraph (d) below
shall cease to be subject to any obligations to, or the rights
of, any holder of Senior Indebtedness or Guarantor Senior
Indebtedness under Articles Ten, Eleven or otherwise. For this
purpose, such covenant defeasance means that, with respect to
the outstanding Notes, the Company and any Guarantor may omit
to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any ref-
erence in any such covenant to any other provision herein or in
any other document and such omission to comply shall not con-
stitute a Default or an Event of Default under Section 6.01(c),
but, except as specified above, the remainder of this Indenture
and such Notes shall be unaffected thereby.
(d) The following shall be the conditions to appli-
cation of either paragraph (b) or paragraph (c) above to the
outstanding Notes:
(i) The Company shall irrevocably have deposited or
caused to be deposited with the Trustee (or another trus-
tee satisfying the requirements of Section 7.11 who shall
agree to comply with the provisions of this Section 8.02
applicable to it) as trust funds in trust for the purpose
of making the following payments, specifically pledged as
security for, and dedicated solely to, the benefit of the
Holders of such Notes, (x) cash in United States dollars
or (y) direct non-callable obligations of, or non-callable
obligations guaranteed by, the United States of America
for the payment of which guarantee or obligation the full
faith and credit of the United States is pledged ("U.S.
Government Obligations") maturing as to principal, pre-
mium, if any, and interest in such amounts of money and at
such times as are sufficient without consideration of any
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reinvestment of such interest, to pay principal of and
interest on the outstanding Notes not later than one day
before the due date of any payment, or (z) a combination
thereof, sufficient, in the opinion of a nationally recog-
nized firm of independent public accountants expressed in
a written certification thereof delivered to the Trustee,
to pay and discharge and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge
principal of and interest on the outstanding Notes on the
Maturity Date or otherwise in accordance with the terms of
this Indenture and of such Notes; PROVIDED that the Trus-
tee (or other qualifying trustee) shall have received an
irrevocable written order from the Company instructing the
Trustee (or other qualifying trustee) to apply such money
or the proceeds of such U.S. Government Obligations to
said payments with respect to the Notes;
(ii) no Default or Event of Default or event which
with notice or lapse of time or both would become a
Default or an Event of Default with respect to the Notes
shall have occurred and be continuing on the date of such
deposit or, insofar as Section 6.01(a) is concerned, at
any time during the period ending on the 91st day after
the date of such deposit (it being understood that this
condition shall not be deemed satisfied until the expira-
tion of such period);
(iii) such legal defeasance or covenant defeasance
shall not cause the Trustee to have a conflicting interest
with respect to any Notes of the Company or any Guarantee;
(iv) such legal defeasance or covenant defeasance
shall not result in a breach or violation of, or consti-
tute a Default or Event of Default under, this Indenture
or any other agreement or instrument to which the Company
or any Guarantor is a party or by which it is bound;
(v) in the case of an election under paragraph (b)
above, the Company shall have delivered to the Trustee an
Opinion of Counsel stating that (x) the Company has
received from, or there has been published by, the Inter-
nal Revenue Service a ruling or (y) since the date of this
Indenture, there has been a change in the applicable Fed-
eral income tax law, in either case to the effect that,
and based thereon such opinion shall confirm that, the
Holders of the outstanding Notes will not recognize
income, gain or loss for Federal income tax purposes as a
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result of such legal defeasance and will be subject to
Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such
legal defeasance had not occurred;
(vi) in the case of an election under paragraph (c)
above, the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that the Holders of the
outstanding Notes will not recognize income, gain or loss
for Federal income tax purposes as a result of such cove-
nant defeasance and will be subject to Federal income tax
on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defea-
sance had not occurred;
(vii) The Company shall have delivered to the trustee
an opinion of counsel to the effect that (A) the trust
funds will not be subject to any rights of holders of
Senior Indebtedness, including, without limitation, those
arising under this Indenture and (B) after the 91st day
following the deposit, the trust funds will not be subject
to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights
generally;
(viii) The Company shall have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, each
stating that (x) all conditions precedent provided for
relating to either the legal defeasance under
paragraph (b) above or the covenant defeasance under
paragraph (c) above, as the case may be, have been com-
plied with and (y) if any other Indebtedness of the Com-
pany shall then be outstanding or committed, such legal
defeasance or covenant defeasance will not violate the
provisions of the agreements or instruments evidencing
such Indebtedness.
(e) All money and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this
paragraph (e), the "Trustee") pursuant to paragraph (d) above
in respect of the outstanding Notes shall be held in trust and
applied by the Trustee, in accordance with the provisions of
such Notes and this Indenture, to the payment, either directly
or through any Paying Agent (other than the Company or any
Affiliate of the Company) as the Trustee may determine, to the
Holders of such Notes of all sums due and to become due thereon
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in respect of principal and interest, but such money need not
be segregated from other funds except to the extent required by
law.
The Company shall pay and indemnify the Trustee
against any tax, fee or other charge imposed on or assessed
against the U.S. Government Obligations deposited pursuant to
paragraph (d) above or the principal, premium, if any, and
interest received in respect thereof other than any such tax,
fee or other charge which by law is for the account of the
Holders of the outstanding Notes.
Anything in this Section 8.02 to the contrary not-
withstanding, the Trustee shall deliver or pay to the Company
from time to time upon the request, in writing, by the Company
any money or U.S. Government Obligations held by it as provided
in paragraph (d) above which, in the opinion of a nationally
recognized firm of independent public accountants expressed in
a written certification thereof delivered to the Trustee, are
in excess of the amount thereof which would then be required to
be deposited to effect an equivalent legal defeasance or cove-
nant defeasance.
Section 8.03. APPLICATION OF TRUST MONEY.
The Trustee shall hold in trust money or U.S. Govern-
ment Obligations deposited with it pursuant to Sections 8.01
and 8.02, and shall apply the deposited money and the money
from U.S. Government Obligations in accordance with this Inden-
ture to the payment of principal of and interest on the Notes.
Section 8.04. REPAYMENT TO COMPANY OR GUARANTORS.
Subject to Sections 7.08, 8.01 and 8.02, the Trustee
shall promptly pay to the Company, or if deposited with the
Trustee by any Guarantor, to such Guarantor, upon receipt by
the Trustee of an Officers' Certificate, any excess money,
determined in accordance with Section 8.02, held by it at any
time. The Trustee and the Paying Agent shall pay to the Com-
pany or any Guarantor, as the case may be, upon receipt by the
Trustee or the Paying Agent, as the case may be, of an Offic-
ers' Certificate, any money held by it for the payment of prin-
cipal or interest that remains unclaimed for two years; pro-
vided that the Trustee and the Paying Agent before being
required to make any payment may, but need not, at the expense
of the Company cause to be published once in a newspaper of
general circulation in The City of New York or mail to each
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Holder entitled to such money notice that such money remains
unclaimed and that after a date specified therein, which shall
be at least 30 days from the date of such publication or mail-
ing, any unclaimed balance of such money then remaining will be
repaid to the Company. After payment to the Company or any
Guarantor, as the case may be, Noteholders entitled to money
must look solely to the Company for payment as general credi-
tors unless an applicable abandoned property law designates
another Person, and all liability of the Trustee or Paying
Agent with respect to such money shall thereupon cease.
Section 8.05. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any
money or U.S. Government Obligations in accordance with this
Indenture by reason of any legal proceeding or by reason of any
order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such applica-
tion, then and only then the Company's and each Guarantors'
obligations under this Indenture and the Notes shall be revived
and reinstated as though no deposit had been made pursuant to
this Indenture until such time as the Trustee is permitted to
apply all such money or U.S. Government Obligations in accor-
dance with this Indenture; PROVIDED that if the Company or any
Guarantor has made any payment of principal of or interest on
any Notes because of the reinstatement of its obligations, the
Company or any such Guarantor, as the case may be, shall be
subrogated to the rights of the Holders of such Notes to
receive such payment from the money or U.S. Government Obliga-
tions held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01. WITHOUT CONSENT OF HOLDERS.
The Company and the Guarantors, when authorized by a
Board Resolution of their respective Boards of Directors, and
the Trustee may amend, waive or supplement this Indenture or
the Notes without notice to or consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency;
PROVIDED that such amendment or supplement does not
adversely affect the rights of any Holder;
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(b) to comply with Article Five;
(c) to provide for uncertificated Notes in addition
to certificated Notes;
(d) to comply with any requirements of the SEC in
order to effect or maintain the qualification of this
Indenture under the TIA;
(e) to add any Subsidiary of the Company as a Guar-
antor pursuant to the terms of Article Ten; PROVIDED that
the terms of Section 10.01 and 10.08 may be modified in
the manner described in the last paragraphs thereof with-
out the consent of the Holders;
(f) to make any change that would provide any addi-
tional benefit or rights to the Holders or that does not
adversely affect the rights of any Holder.
Notwithstanding the above, the Trustee, the Company
and the Guarantors may not make any change that adversely
affects the legal rights of any Holders hereunder. The Company
shall be required to deliver to the Trustee an opinion of coun-
sel stating that any such change under this Section 9.01 or the
preceding sentence does not adversely affect the rights of any
Holder.
Section 9.02. WITH CONSENT OF HOLDERS.
Subject to Section 6.04, the Company and the Guaran-
tors when authorized by Board Resolutions of their respective
Boards of Directors, and the Trustee may amend or modify this
Indenture or the Notes with the written consent of the Holders
of not less than a majority in aggregate principal amount of
the Notes then outstanding, and the Holders of not less than a
majority in aggregate principal amount of the Notes then out-
standing by written notice to the Trustee, may waive future
compliance by the Company or any Guarantor with any provision
of this Indenture, the Notes or the Guarantees except a default
in the payment of principal of or interest on the Notes.
Notwithstanding the provisions of this Section 9.02,
without the consent of each Holder affected, an amendment, mod-
ification or waiver, including a waiver pursuant to
Section 6.04, may not:
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(a) reduce the percentage in outstanding aggregate
principal amount of Notes the Holders of which must con-
sent to an amendment, supplement or waiver of any provi-
sion of this Indenture, the Notes or any Guarantee;
(b) reduce or change the rate or time for payment of
interest on any Note;
(c) reduce the principal amount outstanding of or
extend the fixed maturity of any Note or alter the redemp-
tion provisions with respect thereto;
(d) waive a default in the payment of the principal
of or interest on, or redemption or an offer to purchase
required hereunder with respect to, any Note;
(e) make the principal of or interest on any Note
payable in money other than that stated in the Note;
(f) modify this Section 9.02 or Section 6.04 or Sec-
tion 6.07;
(g) amend, change or modify the obligation of the
Company to make and consummate a Change of Control Offer
in the event of a Change of Control or make and consummate
the offer with respect to any Asset Sale or modify any of
the provisions or definitions with respect thereto;
(h) release any Guarantor from any of its obliga-
tions under its Guarantee or this Indenture other than in
compliance with Section 10.07 hereof;
(i) modify or change any provision of this Indenture
affecting the subordination of the Notes or the Guarantees
in a manner adverse to the Holders; or
(j) impair the right to institute suit for the
enforcement of any payment on or with respect to the
Notes.
Notwithstanding the foregoing, no amendment shall
modify any provision of this Indenture so as to affect
adversely the rights of any holder of Designated Senior Indebt-
edness or any holder of Guarantor Senior Indebtedness repre-
senting Credit Agreement Obligations at the time outstanding
which are entitled to the benefits of subordination under this
Indenture without the consent of such holder.
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It shall not be necessary for the consent of the
Holders under this Section 9.02 to approve the particular form
of any proposed amendment, supplement or waiver, but it shall
be sufficient if such consent approves the substance thereof.
After an amendment, supplement or waiver under this
Section 9.02 becomes effective, the Company shall mail to the
Holders of each Note affected thereby, with a copy to the Trus-
tee, a notice briefly describing the amendment, supplement or
waiver. Any failure of the Company to mail such notice, or any
defect therein, shall not, however, in any way impair or affect
the validity of any supplemental indenture.
Section 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment of or supplement to this Indenture,
the Notes or the Guarantees shall comply with the TIA as then
in effect.
Section 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes
effective, a consent to it by a Holder is a continuing consent
by such Holder and every subsequent Holder of that Note or por-
tion of that Note that evidences the same debt as the consent-
ing Holder's Note, even if notation of the consent is not made
on any Note. However, any such Holder or subsequent Holder may
revoke the consent as to his Note or portion of a Note prior to
such amendment, supplement or waiver becoming effective. Such
revocation shall be effective only if the Trustee receives the
notice of revocation before the date the amendment, supplement
or waiver becomes effective. Notwithstanding the above, noth-
ing in this paragraph shall impair the right of any Holder
under Section 316(b) of the TIA.
The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Holders entitled
to consent to any amendment, supplement or waiver. If a record
date is fixed, then notwithstanding the second and third sen-
tences of the immediately preceding paragraph, those persons
who were Holders at such record date (or their duly designated
proxies), and only those persons, shall be entitled to consent
to such amendment, supplement or waiver or to revoke any con-
sent previously given, whether or not such persons continue to
be Holders after such record date. Such consent shall be
effective only for actions taken within 90 days after such
record date.
<PAGE>
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After an amendment, supplement or waiver becomes
effective, it shall bind every Holder; unless it makes a change
described in any of clauses (a) through (j) of Section 9.02; if
it makes such a change, the amendment, supplement or waiver
shall bind every subsequent Holder of a Note or portion of a
Note that evidences the same debt as the consenting Holder's
Note.
Section 9.05. NOTATION ON OR EXCHANGE OF NOTES.
If an amendment, supplement or waiver changes the
terms of a Note, the Trustee shall (in accordance with the spe-
cific direction of the Company) request the Holder of the Note
to deliver it to the Trustee. The Trustee shall (in accordance
with the specific direction of the Company) place an appropri-
ate notation on the Note about the changed terms and return it
to the Holder. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Note shall issue
and the Trustee shall authenticate a new Note that reflects the
changed terms. Failure to make the appropriate notation or
issue a new Note shall not affect the validity and effect of
such amendment, supplement or waiver.
Section 9.06. TRUSTEE MAY SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment, supplement or
waiver authorized pursuant to this Article Nine if the amend-
ment, supplement or waiver does not adversely affect the
rights, duties, liabilities or immunities of the Trustee. If
it does, the Trustee may, but need not, sign it. In signing or
refusing to sign such amendment, supplement or waiver, the
Trustee shall be entitled to receive, and shall be fully pro-
tected in relying upon, an Officers' Certificate and an Opinion
of Counsel stating that the execution of any amendment, supple-
ment or waiver is authorized or permitted by this Indenture,
that it is not inconsistent herewith and that it will be valid
and binding upon the Company in accordance with its terms.
ARTICLE TEN
GUARANTEE OF NOTES
Section 10.01. GUARANTEE.
Subject to the provisions of this Article Ten, each
Guarantor hereby jointly and severally unconditionally
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guarantees to each Holder of a Note authenticated and delivered
by the Trustee and to the Trustee and its successors and
assigns, irrespective of the validity and enforceability of
this Indenture, the Notes or the obligations of the Company or
any other Guarantors to the Holders or the Trustee hereunder or
thereunder, that: (a) the principal of and interest on the
Notes will be duly and punctually paid in full when due,
whether at maturity, by acceleration or otherwise, and interest
on the overdue principal and (to the extent permitted by law)
interest, if any, on the Notes and all other obligations of the
Company or the Guarantors to the Holders or the Trustee hereun-
der or thereunder (including fees, expenses or other) and all
other Senior Subordinated Note Obligations will be promptly
paid in full or performed, all in accordance with the terms
hereof and thereof; and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other Senior
Subordinated Note Obligations, the same will be promptly paid
in full when due or performed in accordance with the terms of
the extension or renewal, whether at Stated Maturity, by accel-
eration or otherwise. Failing payment when due of any amount
so guaranteed, or failing performance of any other obligation
of the Company to the Holders, for whatever reason, each Guar-
antor will be obligated to pay, or to perform or cause the per-
formance of, the same immediately. An Event of Default under
this Indenture or the Notes shall constitute an event of
default under this Guarantee, and shall entitle the Holders of
Notes to accelerate the obligations of the Guarantors hereunder
in the same manner and to the same extent as the obligations of
the Company.
Each of the Guarantors hereby agrees that its obliga-
tions hereunder shall be unconditional, irrespective of the
validity, regularity or enforceability of the Notes or this
Indenture, the absence of any action to enforce the same, any
waiver or consent by any holder of the Notes with respect to
any provisions hereof or thereof, any release of any other
Guarantor, the recovery of any judgment against the Company,
any action to enforce the same, whether or not a Guarantee is
affixed to any particular Note, or any other circumstance which
might otherwise constitute a legal or equitable discharge or
defense of a guarantor. Each of the Guarantors hereby waives
the benefit of diligence, presentment, demand of payment, fil-
ing of claims with a court in the event of insolvency or bank-
ruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever
and covenants that its Guarantee will not be discharged except
by complete performance of the obligations contained in the
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Notes, this Indenture and this Guarantee. If any Holder or the
Trustee is required by any court or otherwise to return to the
Company or to any Guarantor, or any custodian, trustee, liqui-
dator or other similar official acting in relation to the Com-
pany or such Guarantor, any amount paid by the Company or such
Guarantor to the Trustee or such Holder, this Guarantee, to the
extent theretofore discharged, shall be reinstated in full
force and effect. Each Guarantor further agrees that, as
between it, on the one hand, and the Holders of Notes and the
Trustee, on the other hand, (a) subject to this Article Ten,
the maturity of the obligations guaranteed hereby may be accel-
erated as provided in Article Six hereof for the purposes of
this Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (b) in the event of any
acceleration of such obligations as provided in Article Six
hereof, such obligations (whether or not due and payable) shall
forthwith become due and payable by the Guarantors for the pur-
pose of this Guarantee.
This Guarantee shall remain in full force and effect
and continue to be effective should any petition be filed by or
against the Company for liquidation or reorganization, should
the Company become insolvent or make an assignment for the
benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of the Company's
assets, and shall, to the fullest extent permitted by law, con-
tinue to be effective or be reinstated, as the case may be, if
at any time payment and performance of the Notes are, pursuant
to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee on the Notes,
whether as a "voidable preference," "fraudulent transfer" or
otherwise, all as though such payment or performance had not
been made. In the event that any payment, or any part thereof,
is rescinded, reduced, restored or returned, the Notes shall,
to the fullest extent permitted by law, be reinstated and
deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.
No stockholder, officer, director, employer or incor-
porator, past, present or future, or any Guarantor, as such,
shall have any personal liability under this Guarantee by rea-
son of his, her or its status as such stockholder, officer,
director, employer or incorporator.
The Guarantors shall have the right to seek contribu-
tion from any non-paying Guarantor so long as the exercise of
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such right does not impair the rights of the Holders under this
Guarantee.
The Guarantee of any Guarantor shall be subject to
such fraudulent conveyance savings provisions, net worth or
maximum amount limitations as to recourse or similar provisions
as are set forth in, and after giving effect to, any guarantee
of such Guarantor issued under the Credit Agreement at the date
hereof and shall thereafter be required to be modified in the
same manner as such guarantee under the Credit Agreement is
thereafter amended or modified; PROVIDED that no such amendment
or modification to thereafter conform to the Credit Agreement
shall be in a manner which is adverse to the Holders in any
respect. No modification or amendment referred to in the pre-
ceding sentence shall be permitted if it would disadvantage the
Holders relative to the holders of Credit Agreement Obligations
of such Guarantor other than by operation of the subordination
provisions of this Article Ten and any Liens permitted hereun-
der. Subject to the foregoing if a guarantee under the Credit
Agreement shall no longer be in effect, then the applicable
provisions of the last guarantee in effect under the Credit
Agreement shall apply for the purposes of this paragraph.
Section 10.02. EXECUTION AND DELIVERY OF GUARANTEE.
To further evidence the Guarantee set forth in Sec-
tion 10.01, each Guarantor hereby agrees that a notation of
such Guarantee, substantially in the form included in Exhibit C
hereto, shall be endorsed on each Note authenticated and deliv-
ered by the Trustee after such Guarantee is executed and exe-
cuted by either manual or facsimile signature of an Officer of
each Guarantor. The validity and enforceability of any Guaran-
tee shall not be affected by the fact that it is not affixed to
any particular Note.
Each of the Guarantors hereby agrees that its Guaran-
tee set forth in Section 10.01 shall remain in full force and
effect notwithstanding any failure to endorse on each Note a
notation of such Guarantee.
If an Officer of a Guarantor whose signature is on
this Indenture or a Note no longer holds that office at the
time the Trustee authenticates such Note or at any time there-
after, such Guarantor's Guarantee of such Note shall be valid
nevertheless.
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The delivery of any Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery
of any Guarantee set forth in this Indenture on behalf of the
Guarantor.
Section 10.03. ADDITIONAL GUARANTORS.
Any person may become a Guarantor by executing and
delivering to the Trustee (a) a supplemental indenture in form
and substance satisfactory to the Trustee, which subjects such
person to the provisions of this Indenture as a Guarantor, and
(b) an Opinion of Counsel to the effect that such supplemental
indenture has been duly authorized and executed by such person
and constitutes the legal, valid, binding and enforceable obli-
gation of such person (subject to such customary exceptions
concerning fraudulent conveyance laws, creditors' rights and
equitable principles as may be acceptable to the Trustee in its
discretion).
Section 10.04. GUARANTEE OBLIGATIONS SUBORDINATED
TO GUARANTOR SENIOR INDEBTEDNESS.
Each Guarantor covenants and agrees, and each Holder
of a Note, by its acceptance thereof, likewise covenants and
agrees, that all payments pursuant to the Guarantee made by or
on behalf of such Guarantor are hereby expressly made subordi-
nate and subject in right of payment as provided in this
Article Ten to the prior payment in full in cash or cash equiv-
alents of all amounts payable under all existing and future
Guarantor Senior Indebtedness of such Guarantor.
This Section 10.04 and the following Sections 10.05
through 10.17 of this Article Ten shall constitute a continuing
offer to all persons who, in reliance upon such provisions,
become holders of, or continue to hold Guarantor Senior Indebt-
edness of any Guarantor and, to the extent set forth in Section
10.06(b), holders of Designated Senior Indebtedness; and such
provisions are made for the benefit of the holders of Guarantor
Senior Indebtedness of each Guarantor and, to the extent set
forth in Section 10.06(b), holders of Designated Senior Indebt-
edness; and such holders (to such extent) are made obligees
hereunder and they or each of them may enforce such provisions.
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Section 10.05. PAYMENT OVER OF PROCEEDS UPON
DISSOLUTION, ETC., OF A GUARANTOR.
In the event of (a) any insolvency or bankruptcy case
or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith,
relative to any Guarantor or to its creditors, as such, or to
its assets, or (b) any liquidation, dissolution or other
winding-up of any Guarantor, whether voluntary or involuntary
and whether or not involving insolvency or bankruptcy, or
(c) any assignment for the benefit of creditors or any other
marshalling of assets or liabilities of any Guarantor, then and
in any such event:
(1) the holders of all Guarantor Senior Indebtedness
of such Guarantor shall be entitled to receive payment in
full in cash or cash equivalents of all amounts due on or
in respect of all such Guarantor Senior Indebtedness
(including, in the case of Credit Agreement Obligations,
Other Designated Senior Indebtedness Obligations and
Related Currency and Interest Rate Protection Obligations
of such Guarantor, any interest accruing subsequent to the
filing of a petition for bankruptcy at the rate provided
for in the documentation governing such Credit Agreement
Obligations, Other Designated Senior Indebtedness Obliga-
tions or Related Currency and Interest Rate Protection
Obligations of such Guarantor, as the case may be, whether
or not such interest is an allowed claim under applicable
law), or provision shall be made for such payment, before
the Holders of the Notes are entitled to receive, pursuant
to this Guarantee, any payment or distribution of any kind
or character by or on behalf of such Guarantor (excluding
Permitted Junior Securities) on account of the Guarantor
Senior Subordinated Note Obligations; and
(2) any payment or distribution of assets of such
Guarantor of any kind or character, whether in cash, prop-
erty or securities (excluding Permitted Junior Securi-
ties), by set-off or otherwise, to which the Holders or
the Trustee would be entitled but for the subordination
provisions of this Article Ten shall be paid by the liqui-
dating trustee or agent or other person making such pay-
ment or distribution, whether a trustee in bankruptcy, a
receiver or liquidating trustee or otherwise, directly to
the holders of Guarantor Senior Indebtedness of such Guar-
antor or their representative or representatives or to the
trustee or trustees under any indenture under which any
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instruments evidencing any of such Guarantor Senior
Indebtedness may have been issued, ratably according to
the aggregate amounts remaining unpaid on account of such
Guarantor Senior Indebtedness held or represented by each,
to the extent necessary to make payment in full in cash or
cash equivalents of all such Guarantor Senior Indebtedness
remaining unpaid, after giving effect to any concurrent
payment or distribution to the holders of such Guarantor
Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing
provisions of this Section 10.05, the Trustee or the
Holder of any Note shall have received any payment or dis-
tribution of assets of such Guarantor of any kind or char-
acter, whether in cash, property or securities, in respect
of any Guarantor Senior Subordinated Note Obligations of
such Guarantor under this Guarantee before all Guarantor
Senior Indebtedness of such Guarantor is paid in full in
cash or cash equivalents or payment thereof provided for,
then and in such event such payment or distribution
(excluding Permitted Junior Securities) shall be paid over
or delivered forthwith to the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee, agent
or other person making payment or distribution of assets
of such Guarantor for application to the payment of all
such Guarantor Senior Indebtedness remaining unpaid, to
the extent necessary to pay all of such Guarantor Senior
Indebtedness in full in cash or cash equivalents, after
giving effect to any concurrent payment or distribution to
or for the holders of such Guarantor Senior Indebtedness.
Section 10.06. SUSPENSION OF GUARANTEE OBLIGATIONS
WHEN GUARANTOR SENIOR INDEBTEDNESS
IN DEFAULT.
(a) Unless Section 10.05 shall be applicable, after
the occurrence of a Payment Default no payment or distribution
of any assets of such Guarantor of any kind or character shall
be made by or on behalf of such Guarantor on account of the
Guarantor Senior Subordinated Note Obligations or on account of
the purchase, redemption, defeasance or other acquisition of
the Senior Subordinated Note Obligations or the Guarantor
Senior Subordinated Note Obligations or any of the obligations
of such Guarantor under this Guarantee unless and until such
Payment Default shall have been cured or waived or shall have
ceased to exist or the Senior Indebtedness as to which such
Payment Default relates shall have been discharged or paid in
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full in cash or cash equivalents, after which, subject to Sec-
tion 10.05 (if applicable), such Guarantor shall resume making
any and all required payments in respect of its obligations
under this Guarantee.
(b) Unless Section 10.05 shall be applicable, during
any Payment Blockage Period in respect of the Notes, no payment
or distribution of any assets of a Guarantor of any kind or
character shall be made by or on behalf of a Guarantor on
account of the Guarantor Senior Subordinated Note Obligations
or on account of the purchase, redemption, defeasance or other
acquisition of the Guarantor Senior Subordinated Note Obliga-
tions or on account of any of the other obligations of such
Guarantor under this Guarantee; PROVIDED that the foregoing
prohibition shall not apply unless such Payment Blockage Period
has been instituted under Section 11.03(b) by a Senior Repre-
sentative acting for holders of Designated Senior Indebtedness
which also constitutes Guarantor Senior Indebtedness. Upon the
termination of any Payment Blockage Period, subject to Section
10.05 (if applicable), such Guarantor shall resume making any
and all required payments in respect of its obligations under
this Guarantee.
(c) In the event that, notwithstanding the fore-
going, the Trustee or the Holder of any Note shall have
received any payment from a Guarantor prohibited by the fore-
going provisions of this Section 10.06, then and in such event
such payment shall be paid over and delivered forthwith to the
Senior Representative initiating the Payment Blockage Period,
in trust for distribution to the holders of Guarantor Senior
Indebtedness or, if no amounts are then due in respect of Guar-
antor Senior Indebtedness, prompt return to the Guarantor, or
as a court of competent jurisdiction shall direct.
Section 10.07. RELEASE OF A GUARANTOR.
(a) In the event that the Banks under the Credit
Agreement unconditionally release any Guarantor from its obli-
gations under the Credit Agreement and such Guarantor is uncon-
ditionally released from its obligations under the 9-3/4%
Indenture, such Guarantor at the request of the Company shall
be unconditionally released from all obligations under its
Guarantee if such Guarantor is not a Leveraged Subsidiary; PRO-
VIDED that a release of a Guarantor that is a Leveraged Subsid-
iary may only be obtained under the circumstances described in
this sentence if, after giving effect to the release, such
Guarantor would have been permitted to incur all of its then
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outstanding Indebtedness under Section 4.08 and an Officers'
Certificate to that effect has been delivered to the Trustee.
(b) In addition, except in the case where the prohi-
bition on transfer in Section 5.01(a) is applicable, upon the
sale or disposition of all of the Capital Stock of a Guarantor
by the Company or a Subsidiary of the Company, or upon the con-
solidation or merger of a Guarantor with or into any person (in
each case, other than to the Company or an Affiliate of the
Company), such Guarantor shall be deemed automatically and
unconditionally released and discharged from all obligations
under this Article Ten without any further action required on
the part of the Trustee or any Holder, and all obligations of
such Guarantor, if any, in respect of any Senior Indebtedness
shall also terminate upon such transaction; PROVIDED that
(i) no Indebtedness under the Credit Agreement or the 9-3/4%
Notes is being assumed by the person to whom such sale or dis-
position is made and (ii) each such Guarantor is sold or dis-
posed of in accordance with Section 4.13 hereof; PROVIDED, FUR-
THER, that the foregoing proviso shall not apply to the sale or
disposition of a Guarantor in a foreclosure to the extent that
such proviso would be inconsistent with the requirements of the
Uniform Commercial Code.
(c) The Trustee shall deliver an appropriate instru-
ment evidencing the release of a Guarantor upon receipt of a
request of the Company accompanied by an Officers' Certificate
certifying as to the compliance with this Section 10.07. Any
Guarantor not so released or the entity surviving such Guaran-
tor, as applicable, will remain or be liable under its Guaran-
tee as provided in this Article Ten.
The Trustee shall execute any documents reasonably
requested by the Company or a Guarantor in order to evidence
the release of such Guarantor from its obligations under its
Guarantee endorsed on the Notes and under this Article Ten.
Except as set forth in Articles Four and Five and
this Section 10.07, nothing contained in this Indenture or in
any of the Notes shall prevent any consolidation or merger of a
Guarantor with or into the Company or another Guarantor or
shall prevent any sale or conveyance of the property of a Guar-
antor as an entirety or substantially as an entirety to the
Company or another Guarantor.
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Section 10.08. WAIVER OF SUBROGATION.
Each Guarantor hereby irrevocably waives any claim or
other rights which it may now or hereafter acquire against the
Company that arise from the existence, payment, performance or
enforcement of such Guarantor's obligations under this Guaran-
tee and this Indenture, including, without limitation, any
right of subrogation, reimbursement, exoneration, indemnifica-
tion, and any right to participate in any claim or remedy of
any Holder of Notes against the Company, whether or not such
claim, remedy or right arises in equity, or under contract,
statute or common law, including, without limitation, the right
to take or receive from the Company, directly or indirectly, in
cash or other property or by set-off or in any other manner,
payment or security on account of such claim or other rights.
If any amount shall be paid to any Guarantor in violation of
the preceding sentence and the Notes shall not have been paid
in full, such amount shall have been deemed to have been paid
to such Guarantor for the benefit of, and held in trust for the
benefit of, the Holders of the Notes, and shall, subject to the
subordination provisions of this Article and to Article Eleven,
forthwith be paid to the Trustee for the benefit of such Hold-
ers to be credited and applied upon the Notes, whether matured
or unmatured, in accordance with the terms of this Indenture.
Each Guarantor acknowledges that it will receive direct and
indirect benefits from the financing arrangements contemplated
by this Indenture and that the waiver set forth in this Section
10.08 is knowingly made in contemplation of such benefits.
This Section 10.08 as applicable to any particular
Guarantor may be amended or modified, without the consent of
the Holders, in a manner to be consistent with the terms of any
waiver of subrogation language set forth in any guarantee of
such Guarantor issued under the Credit Agreement at the time
that the Guarantee hereunder is first issued and shall there-
after be required to be modified in the same manner as such
guarantee under the Credit Agreement is thereafter amended or
modified; PROVIDED that no such amendment or modification to
thereafter conform to the Credit Agreement shall be in a manner
which is adverse to the Holders in any respect. No modifica-
tion or amendment referred to in the preceding sentence shall
be permitted if it would disadvantage the Holders relative to
the holders of Credit Agreement Obligations of such Guarantor
other than by operation of the subordination provisions of this
Article Ten and any Liens permitted hereunder.
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Section 10.09. GUARANTEE PROVISIONS SOLELY TO
DEFINE RELATIVE RIGHTS.
The subordination provisions of this Article are and
are intended solely for the purpose of defining the relative
rights of the Holders of the Notes on the one hand and the
holders of Guarantor Senior Indebtedness of each Guarantor and,
to the extent set forth in Section 10.06, holders of Designated
Senior Indebtedness on the other hand. Nothing contained in
this Article Ten (other than a release pursuant to Section
10.07) or elsewhere in this Indenture or in the Notes is
intended to or shall (a) impair, as among each Guarantor, its
creditors other than holders of its Guarantor Senior Indebted-
ness and the Holders of the Notes, the obligation of such Guar-
antor, which is absolute and unconditional, to make payments to
the Holders in respect of its obligations under this Guarantee
as and when the same shall become due and payable in accordance
with their terms; or (b) affect the relative rights against
such Guarantor of the Holders of the Notes and creditors of
such Guarantor other than the holders of the Guarantor Senior
Indebtedness of such Guarantor; or (c) prevent the Trustee or
the Holder of any Note from exercising all remedies otherwise
permitted by applicable law upon Default or an Event of Default
under this Indenture, subject to the rights, if any, under the
subordination provisions of this Article Ten of the holders of
Guarantor Senior Indebtedness of the Guarantors hereunder and,
to the extent set forth in Section 10.06, holders of Designated
Senior Indebtedness (1) in any case, proceeding, dissolution,
liquidation or other winding-up, assignment for the benefit of
creditors or other marshaling of assets and liabilities of the
Guarantor referred to in Section 10.05, to receive, pursuant to
and in accordance with such Section, cash, property and securi-
ties otherwise payable or deliverable to the Trustee or such
Holder, or (2) under the conditions specified in Section 10.06,
to prevent any payment prohibited by such Section or enforce
their rights pursuant to Section 10.06(c).
The failure by any Guarantor to make a payment in
respect of its obligations under this Guarantee by reason of
any provision of this Article Ten shall not be construed as
preventing the occurrence of a Default or an Event of Default
hereunder.
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Section 10.10. TRUSTEE TO EFFECTUATE SUBORDINATION
OF GUARANTEE OBLIGATIONS.
Each Holder of a Note by his acceptance thereof
authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the
subordination provided in this Article Ten and appoints the
Trustee his attorney-in-fact for any and all such purposes,
including, in the event of any dissolution, winding-up, liqui-
dation or reorganization of any Guarantor whether in bank-
ruptcy, insolvency, receivership proceedings, or otherwise, the
timely filing of a claim for the unpaid balance of the indebt-
edness of such Guarantor owing to such Holder in the form
required in such proceedings and the causing of such claim to
be approved. If the Trustee does not file such a claim prior
to 30 days before the expiration of the time to file such a
claim, the holders of Guarantor Senior Indebtedness, or any
Senior Representative, may file such a claim on behalf of Hold-
ers of the Notes.
Section 10.11. NO WAIVER OF GUARANTEE SUBORDINATION
PROVISIONS.
(a) No right of any present or future holder of any
Guarantor Senior Indebtedness of any Guarantor or Designated
Senior Indebtedness to enforce subordination as herein provided
shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or any Guaran-
tor or by any act or failure to act, in good faith, by any such
holder, or by any non-compliance by the Company or any Guaran-
tor with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or
be otherwise charged with.
(b) Without limiting the generality of subsection
(a) of this Section 10.11, the holders of Guarantor Senior
Indebtedness of any Guarantor may, at any time and from time to
time, without the consent of or notice to the Trustee or the
Holders of the Notes, without incurring responsibility to the
Holders of the Notes and without impairing or releasing the
subordination provided in this Article Ten or the obligations
hereunder of the Holders of the Notes to the holders of such
Guarantor Senior Indebtedness, do any one or more of the fol-
lowing: (1) change the manner, place or terms of payment or
extend the time of payment of, or renew or alter, such Guaran-
tor Senior Indebtedness or any Senior Indebtedness as to which
such Guarantor Senior Indebtedness relates or any instrument
<PAGE>
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evidencing the same or any agreement under which such Guarantor
Senior Indebtedness or such Senior Indebtedness is outstanding;
(2) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing such Guarantor Senior
Indebtedness or any Senior Indebtedness as to which such Guar-
antor Senior Indebtedness relates; (3) release any person lia-
ble in any manner for the collection or payment of such Guaran-
tor Senior Indebtedness or any Senior Indebtedness as to which
such Guarantor Senior Indebtedness relates; and (4) exercise or
refrain from exercising any rights against such Guarantor and
any other person; PROVIDED that in no event shall any such
actions limit the right of the Holders of the Notes to take any
action to accelerate the maturity of the Notes pursuant to
Article Six hereof or to pursue any rights or remedies hereun-
der or under applicable laws if the taking of such action does
not otherwise violate the terms of this Indenture.
Section 10.12. GUARANTORS TO GIVE NOTICE TO TRUSTEE.
(a) The Company and each Guarantor shall give prompt
written notice to the Trustee of any fact known to such Guaran-
tor which would prohibit the making of any payment to or by the
Trustee in respect of the Notes. Notwithstanding the subordi-
nation provisions of this Article or any other provision of
this Indenture, the Trustee shall not be charged with knowledge
of the existence of any facts which would prohibit the making
of any payment to or by the Trustee in respect of the Notes,
unless and until the Trustee shall have received written notice
thereof at its Corporate Trust Office from the Company, such
Guarantor or a holder of its Guarantor Senior Indebtedness or
from any trustee, fiduciary or agent therefor; and, prior to
the receipt of any such written notice, the Trustee, subject to
the provisions of this Section 10.12, shall be entitled in all
respects to assume that no such facts exist; PROVIDED that if
the Trustee shall not have received the notice provided for in
this Section 10.12 at least two Business Days prior to the date
upon which by the terms hereof any money may become payable for
any purpose under this Indenture (including, without limita-
tion, the payment of the principal of or interest on any Note),
then, anything herein contained to the contrary notwithstanding
but without limiting the rights and remedies of the holders of
such Guarantor Senior Indebtedness or any trustee, fiduciary or
agent thereof, the Trustee shall have full power and authority
to receive such money and to apply the same to the purpose for
which such money was received and shall not be affected by any
notice to the contrary which may be received by it within two
Business Days prior to such date; nor shall the Trustee be
<PAGE>
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charged with knowledge of the curing of any such default or the
elimination of the act or condition preventing any such payment
unless and until the Trustee shall have received an Officers'
Certificate from such Guarantor to such effect.
(b) Subject to the provisions of Section 7.01, the
Trustee shall be entitled to rely on the delivery to it of a
written notice to the Trustee, by a person representing himself
to be a holder of Guarantor Senior Indebtedness of any Guaran-
tor (or a trustee, fiduciary or agent therefor). In the event
that the Trustee determines in good faith that further evidence
is required with respect to the right of any person as a holder
of Guarantor Senior Indebtedness of any Guarantor to partici-
pate in any payment or distribution pursuant to this Article
Ten, the Trustee may request such person to furnish evidence to
the reasonable satisfaction of the Trustee as to the amount of
Guarantor Senior Indebtedness of each Guarantor held by such
person, the extent to which such person is entitled to partici-
pate in such payment or distribution and any other facts perti-
nent to the rights of such person under this Article Ten, and
if such evidence is not furnished, the Trustee may defer any
payment to such person pending judicial determination as to the
right of such person to receive such payment.
Section 10.13. RELIANCE ON JUDICIAL ORDER OR
CERTIFICATE OF LIQUIDATING AGENT
REGARDING DISSOLUTION, ETC., OF
GUARANTORS.
Upon any payment or distribution of assets of any
Guarantor referred to in this Article Ten, the Trustee, subject
to the provisions of Section 7.01, and the Holders shall be
entitled to rely upon any order or decree entered by any court
of competent jurisdiction in which such insolvency, bankruptcy,
receivership, liquidation, reorganization, dissolution,
winding-up or similar case or proceeding is pending, or a cer-
tificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors,
agent or other person making such payment or distribution,
delivered to the Trustee or to the Holders, for the purpose of
ascertaining the persons entitled to participate in such pay-
ment or distribution, the holders of Guarantor Senior Indebted-
ness of such Guarantor and other Indebtedness of such Guaran-
tor, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts perti-
nent thereto or to this Article Ten; PROVIDED that the
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foregoing shall apply only if such court has been fully
apprised of the provisions of this Article Ten.
Section 10.14. RIGHTS OF TRUSTEE AS A HOLDER OF
GUARANTOR SENIOR INDEBTEDNESS;
PRESERVATION OF TRUSTEE'S RIGHTS.
The Trustee in its individual capacity shall be enti-
tled to all the rights set forth in this Article Ten with
respect to any Guarantor Senior Indebtedness of any Guarantor
which may at any time be held by the Trustee, to the same
extent as any other holder of such Guarantor Senior Indebted-
ness, and nothing in this Indenture shall deprive the Trustee
of any of its rights as such holder. Nothing in this Article
Ten shall apply to claims of, or payments to, the Trustee under
or pursuant to Section 7.08.
Section 10.15. ARTICLE TEN APPLICABLE TO PAYING
AGENTS.
In case at any time any Paying Agent other than the
Trustee shall have been appointed by the Company and be then
acting hereunder, the term "Trustee" as used in this Article
Ten shall in such case (unless the context otherwise requires)
be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if
such Paying Agent were named in this Article Ten in addition to
or in place of the Trustee; PROVIDED that Section 10.14 shall
not apply to the Company or any Affiliate of the Company if it
or such Affiliate acts as Paying Agent.
Section 10.16. NO SUSPENSION OF REMEDIES SUBJECT
TO RIGHTS OF HOLDERS OF GUARANTOR
SENIOR INDEBTEDNESS.
Nothing contained in this Article Ten shall limit the
right of the Trustee or the Holders of Notes to take any action
to accelerate the maturity of the Notes pursuant to Article Six
or to pursue any rights or remedies hereunder or under appli-
cable law, subject to the rights, if any, under this Article
Ten of the holders, from time to time, of Guarantor Senior
Indebtedness of the Guarantors.
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Section 10.17. TRUSTEE'S RELATION TO GUARANTOR
SENIOR INDEBTEDNESS.
With respect to the holders of Guarantor Senior
Indebtedness of any Guarantor, the Trustee undertakes to per-
form or to observe only such of its covenants and obligations
as are specifically set forth in this Article Ten (and in
Article Eleven with respect to Senior Indebtedness), and no
implied covenants or obligations with respect to the holders of
Guarantor Senior Indebtedness of any Guarantor shall be read
into this Indenture against the Trustee. The Trustee shall not
be deemed to owe any fiduciary duty to the holders of Guarantor
Senior Indebtedness of any Guarantor and the Trustee shall not
be liable to any holder of Guarantor Senior Indebtedness of any
Guarantor if it shall mistakenly pay over or deliver to Hold-
ers, the Company or any other person moneys or assets to which
any holder of Guarantor Senior Indebtedness of any Guarantor
shall be entitled by virtue of this Article Ten or otherwise.
Section 10.18. SUBROGATION.
Upon the payment in full in cash or cash equivalents
of all amounts payable under or in respect of Guarantor Senior
Indebtedness of the Guarantors and of all Senior Indebtedness
of the Company, the Holders shall be subrogated to the rights
of the holders of such Guarantor Senior Indebtedness of the
Guarantors to receive payments or distributions of assets of
any Guarantor made on such Guarantor Senior Indebtedness of the
Guarantors until all amounts due under the Guarantee shall be
paid in full; and for the purposes of such subrogation, no pay-
ments or distributions to holders of such Guarantor Senior
Indebtedness of the Guarantors of any cash, property or securi-
ties to which Holders of the Notes would be entitled except for
the provisions of this Article Ten, and no payment pursuant to
the provisions of this Article Ten to holders of such Guarantor
Senior Indebtedness of the Guarantors by the Holders, shall, as
between each Guarantor, its creditors other than holders of
such Guarantor Senior Indebtedness of the Guarantors and the
Holders, be deemed to be a payment by such Guarantor to or on
account of such Guarantor Senior Indebtedness of the Guaran-
tors, its being understood that the provisions of this Article
Ten are solely for the purpose of defining the relative rights
of the holders of such Guarantor Senior Indebtedness of the
Guarantors, on the one hand, and the Holders, on the other
hand.
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If any payment or distribution to which the Holders
would otherwise have been entitled but for the provisions of
this Article Ten shall have been applied, pursuant to the pro-
visions of this Article Ten, to the payment of all amounts pay-
able under the Guarantor Senior Indebtedness of the Guarantors,
then and in such case, the Holders shall be entitled to to
receive from the holders of such Guarantor Senior Indebtedness
of the Guarantors at the time outstanding any payments or dis-
tributions received by such holders of Guarantor Senior Indebt-
edness of the Guarantors in excess of the amount sufficient to
pay all amounts payable under or in respect of such Guarantor
Senior Indebtedness of the Guarantors in full.
ARTICLE ELEVEN
SUBORDINATION OF NOTES
Section 11.01. NOTES SUBORDINATE TO SENIOR
INDEBTEDNESS.
The Company covenants and agrees, and each Holder of
a Note, by his acceptance thereof, likewise covenants and
agrees, that, to the extent and in the manner hereinafter set
forth in this Article Eleven, the Indebtedness represented by
the Notes and the payment of the Senior Subordinated Note Obli-
gations are hereby expressly made subordinate and subject in
right of payment as provided in this Article to the prior pay-
ment in full in cash or cash equivalents of all amounts payable
under all existing and future Senior Indebtedness.
This Article Eleven shall constitute a continuing
offer to all persons who, in reliance upon such provisions,
become holders of, or continue to hold Senior Indebtedness; and
such provisions are made for the benefit of the holders of
Senior Indebtedness; and such holders are made obligees hereun-
der and they or each of them may enforce such provisions.
Section 11.02. PAYMENT OVER OF PROCEEDS UPON
DISSOLUTION, ETC.
In the event of (a) any insolvency or bankruptcy case
or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith,
relating to the Company or to its assets, or (b) any liquida-
tion, dissolution or other winding-up of the Company, whether
voluntary or involuntary and whether or not involving
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insolvency or bankruptcy, or (c) any assignment for the benefit
of creditors or any other marshalling of assets or liabilities
of the Company (including, in the case of Credit Agreement
Obligations, Other Designated Senior Indebtedness Obligations
and Related Currency and Interest Rate Protection Obligations
of the Company, any interest accruing subsequent to the filing
of a petition for bankruptcy whether or not such interest is an
allowed claim in such bankruptcy proceeding), then and in any
such event:
(1) the holders of all Senior Indebtedness shall be
entitled to receive payment in full in cash or cash equiv-
alents of all Senior Indebtedness before the Holders of
the Notes are entitled to receive any payment or distribu-
tion of any kind or character (excluding Permitted Junior
Securities) on account of Senior Subordinated Note Obliga-
tions; and
(2) any payment or distribution of assets of the
Company of any kind or character, whether in cash, prop-
erty or securities (excluding Permitted Junior Securi-
ties), by set-off or otherwise, to which the Holders or
the Trustee would be entitled but for the provisions of
this Article shall be paid by the liquidating trustee or
agent or other person making such payment or distribution,
whether a trustee in bankruptcy, a receiver or liquidating
trustee or otherwise, directly to the holders of Senior
Indebtedness or their representative or representatives or
to the trustee or trustees under any indenture under which
any instruments evidencing any of such Senior Indebtedness
may have been issued, ratably according to the aggregate
amounts remaining unpaid on account of the Senior Indebt-
edness held or represented by each, to the extent neces-
sary to make payment in full in cash or cash equivalents
of all Senior Indebtedness remaining unpaid, after giving
effect to any concurrent payment or distribution to the
holders of such Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing
provisions of this Section 11.02, the Trustee or the
Holder of any Note shall have received any payment or dis-
tribution of properties or assets of the Company of any
kind or character, whether in cash, property or securi-
ties, by set off or otherwise in respect of any Senior
Subordinated Note Obligations before all Senior Indebted-
ness is paid or provided for in full in cash or cash
equivalents, then and in such event such payment or
<PAGE>
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distribution (excluding Permitted Junior Securities) shall
be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian,
assignee, agent or other person making payment or distri-
bution of assets of the Company for application to the
payment of all Senior Indebtedness remaining unpaid, to
the extent necessary to pay all Senior Indebtedness in
full in cash or cash equivalents, after giving effect to
any concurrent payment or distribution to or for the hold-
ers of Senior Indebtedness.
The consolidation of the Company with, or the merger
of the Company with or into, another person or the liquidation
or dissolution of the Company following the conveyance, trans-
fer or lease of its properties and assets substantially as an
entirety to another person upon the terms and conditions set
forth in Article Five hereof shall not be deemed a dissolution,
winding-up, liquidation, reorganization, assignment for the
benefit of creditors or marshalling of assets and liabilities
of the Company for the purposes of this Article if the person
formed by such consolidation or the surviving entity of such
merger or the person which acquires by conveyance, transfer or
lease such properties and assets substantially as an entirety,
as the case may be, shall, as a part of such consolidation,
merger, conveyance, transfer or lease, comply with the condi-
tions set forth in such Article Five.
Section 11.03. SUSPENSION OF PAYMENT WHEN SENIOR
INDEBTEDNESS IN DEFAULT.
(a) Unless Section 11.02 shall be applicable, upon
the occurrence of a Payment Default, no direct or indirect pay-
ment or distribution of any assets of the Company of any kind
or character shall be made by or on behalf of the Company on
account of the Senior Subordinated Note Obligations or on
account of the purchase or redemption or other acquisition of
any Senior Subordinated Note Obligations unless and until such
Payment Default shall have been cured or waived or shall have
ceased to exist or such Senior Indebtedness shall have been
discharged or paid in full in cash in cash equivalents, after
which, subject to Section 11.02 (if applicable), the Company
shall resume making any and all required payments in respect of
the Notes and the other Senior Subordinated Note Obligations,
including any missed payments.
(b) Unless Section 11.02 shall be applicable, upon
(1) the occurrence of a Non-payment Default and (2) receipt by
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the Trustee from a Senior Representative of written notice of
such occurrence stating that such notice is a Payment Blockage
Notice pursuant to Section 11.03(b) of this Indenture, no pay-
ment or distribution of any assets of the Company of any kind
or character shall be made by or on behalf of the Company on
account of any Senior Subordinated Note Obligations or on
account of the purchase or redemption or other acquisition of
Senior Subordinated Note Obligations for a period ("Payment
Blockage Period") commencing on the date of receipt by the
Trustee of such notice unless and until the earlier to occur of
the following events (subject to any blockage of payments that
may then be in effect under Section 11.02 or subsection (a) of
this Section 11.03) (w) 179 days shall have elapsed since
receipt of such written notice by the Trustee, (x) such Non-
payment Default shall have been cured or waived or shall have
ceased to exist (provided that no other Payment Default or Non-
payment Default has occurred and is then continuing after giv-
ing effect to such cure or waiver), (y) all Designated Senior
Indebtedness shall have been discharged or paid in full in cash
or cash equivalents or (z) such Payment Blockage Period shall
have been terminated by written notice to the Company or the
Trustee from the Senior Representative initiating such Payment
Blockage Period, after which, subject to Section 10.02 (if
applicable), the Company shall promptly resume making any and
all required payments in respect of the Senior Subordinated
Note Obligations, including any missed payments. Notwithstand-
ing any other provision of this Indenture, only one Payment
Blockage Period whether with respect to the Notes, the Guaran-
tees or the Notes and the Guarantees collectively, may be com-
menced within any consecutive 360-day period. No Non-payment
Default with respect to Designated Senior Indebtedness that
existed or was continuing on the date of the commencement of
any Payment Blockage Period with respect to the Designated
Senior Indebtedness initiating such Payment Blockage Period
shall be, or can be made, the basis for the commencement of a
second Payment Blockage Period, whether or not within a period
of 360 consecutive days, unless such default shall have been
cured or waived for a period of not less than 90 consecutive
days (it being acknowledged that any subsequent action, or any
breach of any financial covenant for a period commencing after
the date of commencement of such Payment Blockage Period, that,
in either case, would give rise to a Non-payment Default pursu-
ant to any provision under which a Non-payment Default previ-
ously existed or was continuing shall constitute a new Non-pay-
ment Default for this purpose; PROVIDED that, in the case of a
breach of a particular financial covenant, the Company shall
have been in compliance for at least one full period commencing
<PAGE>
-108-
after the date of commencement of such Payment Blockage
Period). In no event shall a Payment Blockage Period extend
beyond 179 days from the date of the receipt of the notice
referred to in clause (2) hereof and there must be a 181 con-
secutive day period in any 360 consecutive day period during
which no Payment Blockage Period is in effect pursuant to this
Section 11.03(b).
(c) In the event that, notwithstanding the fore-
going, the Trustee or the Holder of any Note shall have
received any payment or distribution prohibited by the fore-
going provisions of this Section 11.03, then and in such event
such payment or distribution shall be paid over and delivered
forthwith to the Senior Representatives or as a court of compe-
tent jurisdiction shall direct for application to the payment
of any due and unpaid Senior Indebtedness, to the extent neces-
sary to pay all such due and unpaid Senior Indebtedness in cash
or cash equivalents, after giving effect to any concurrent pay-
ment to or for the holders of Senior Indebtedness.
Section 11.04. TRUSTEE'S RELATION TO SENIOR
INDEBTEDNESS.
With respect to the holders of Senior Indebtedness,
the Trustee undertakes to perform or to observe only such of
its covenants and obligations as are specifically set forth in
this Article Eleven (and in Article Ten with respect to any
Guarantor Senior Indebtedness), and no implied covenants or
obligations with respect to the holders of Senior Indebtedness
shall be read into this Indenture against the Trustee. The
Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and the Trustee shall not be
liable to any holder of Senior Indebtedness if it shall mistak-
enly pay over or deliver to Holders, the Company, the Guaran-
tors or any other person moneys or assets to which any holder
of Senior Indebtedness shall be entitled by virtue of this
Article Eleven or otherwise.
Section 11.05. SUBROGATION TO RIGHTS OF HOLDERS
OF SENIOR INDEBTEDNESS.
Upon the payment in full in cash or cash equivalents
of all Senior Indebtedness, the Holders of the Notes shall be
subrogated to the rights of the holders of such Senior Indebt-
edness to receive payments and distributions of cash, property
and securities applicable to the Senior Indebtedness until the
principal of and interest on the Notes shall be paid in full in
<PAGE>
-109-
cash or cash equivalents. For purposes of such subrogation, no
payments or distributions to the holders of Senior Indebtedness
of any cash, property or securities to which the Holders of the
Notes or the Trustee would be entitled except for the provi-
sions of this Article, and no payments over pursuant to the
provisions of this Article to the holders of Senior Indebted-
ness by Holders of the Notes or the Trustee shall, as among the
Company, its creditors other than holders of Senior Indebted-
ness, and the Holders of the Notes, be deemed to be a payment
or distribution by the Company to or on account of the Senior
Indebtedness.
If any payment or distribution to which the Holders
would otherwise have been entitled but for the provisions of
this Article Eleven shall have been applied, pursuant to the
provisions of this Article Eleven, to the payment of all
amounts payable under the Senior Indebtedness of the Company,
then and in such case the Holders shall be entitled to receive
from the holders of such Senior Indebtedness at the time out-
standing any payments or distributions received by such holders
of such Senior Indebtedness in excess of the amount sufficient
to pay all amounts payable under or in respect of such Senior
Indebtedness in full in cash or cash equivalents.
Section 11.06. PROVISIONS SOLELY TO DEFINE RELATIVE
RIGHTS.
The provisions of this Article Eleven are and are
intended solely for the purpose of defining the relative rights
of the Holders of the Notes on the one hand and the holders of
Senior Indebtedness on the other hand. Nothing contained in
this Article Eleven or elsewhere in this Indenture or in the
Notes is intended to or shall (a) impair, as among the Company,
its creditors other than holders of Senior Indebtedness and the
Holders of the Notes, the obligation of the Company, which is
absolute and unconditional, to pay to the Holders of the Notes
the principal of, premium, if any, and interest on the Notes as
and when the same shall become due and payable in accordance
with their terms; or (b) affect the relative rights against the
Company of the Holders of the Notes and creditors of the Com-
pany other than the holders of Senior Indebtedness; or
(c) prevent the Trustee or the Holder of any Note from exer-
cising all remedies otherwise permitted by applicable law upon
a Default or an Event of Default under this Indenture, subject
to the rights, if any, under this Article Eleven of the holders
of Senior Indebtedness (1) in any case, proceeding, dissolu-
tion, liquidation or other winding up, assignment for the
<PAGE>
-110-
benefit of creditors or other marshalling of assets and liabil-
ities of the Company referred to in Section 11.02, to receive,
pursuant to and in accordance with such Section, cash, property
and securities otherwise payable or deliverable to the Trustee
or such Holder, or (2) under the conditions specified in
Section 11.03, to prevent any payment prohibited by such
Section or enforce their rights pursuant to Section 11.03(c).
The failure to make a payment on account of any
Senior Subordinated Note Obligations by reason of any provision
of this Article Eleven shall not be construed as preventing the
occurrence of a Default or an Event of Default hereunder.
Section 11.07. TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Holder of a Note by his acceptance thereof
authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the
subordination provided in this Article Eleven and appoints the
Trustee his attorney-in-fact for any and all such purposes,
including, in the event of any dissolution, winding-up, liqui-
dation or reorganization of the Company whether in bankruptcy,
insolvency, receivership proceedings, or otherwise, the timely
filing of a claim for the unpaid balance of the Indebtedness of
the Company owing to such Holder in the form required in such
proceedings and the causing of such claim to be approved. If
the Trustee does not file such a claim prior to 30 days before
the expiration of the time to file such a claim, the holders of
Senior Indebtedness, or any Senior Representative, may file
such a claim on behalf of Holders of the Notes.
Section 11.08. NO WAIVER OF SUBORDINATION
PROVISIONS.
(a) No right of any present or future holder of any
Senior Indebtedness to enforce subordination as herein provided
shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any
non-compliance by the Company with the terms, provisions and
covenants of this Indenture, regardless of any knowledge
thereof any such holder may have or be otherwise charged with.
(b) Without limiting the generality of subsection
(a) of this Section 11.08, the holders of Senior Indebtedness
may, at any time and from time to time, without the consent of
or notice to the Trustee or the Holders of the Notes, without
<PAGE>
-111-
incurring responsibility to the Holders of the Notes and with-
out impairing or releasing the subordination provided in this
Article Eleven or the obligations hereunder of the Holders of
the Notes to the holders of Senior Indebtedness, do any one or
more of the following: (1) change the manner, place or terms
of payment or extend the time of payment of, or renew or alter,
Senior Indebtedness or any instrument evidencing the same or
any agreement under which Senior Indebtedness is outstanding;
(2) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Indebtedness;
(3) release any person liable in any manner for the collection
or payment of Senior Indebtedness; and (4) exercise or refrain
from exercising any rights against the Company and any other
person; PROVIDED that in no event shall any such actions limit
the right of the Holders of the Notes to take any action to
accelerate the maturity of the Notes pursuant to Article Six
hereof or to pursue any rights or remedies hereunder or under
applicable laws if the taking of such action does not otherwise
violate the terms of this Indenture.
Section 11.09. NOTICE TO TRUSTEE.
(a) The Company shall give prompt written notice to
the Trustee of any fact known to the Company which would pro-
hibit the making of any payment to or by the Trustee in respect
of the Notes. Notwithstanding the provisions of this Article
Eleven or any other provision of this Indenture, the Trustee
shall not be charged with knowledge of the existence of any
facts which would prohibit the making of any payment to or by
the Trustee in respect of the Notes, unless and until the Trus-
tee shall have received written notice thereof from the Company
or a holder of Senior Indebtedness or from any trustee, fidu-
ciary or agent therefor; and, prior to the receipt of any such
written notice, the Trustee, subject to the provisions of this
Section 11.09, shall be entitled in all respects to assume that
no such facts exist; PROVIDED that if the Trustee shall not
have received the notice provided for in this Section 11.09 at
least two Business Days prior to the date upon which by the
terms hereof any money may become payable for any purpose under
this Indenture (including, without limitation, the payment of
the principal of or interest on any Note), then, anything
herein contained to the contrary notwithstanding but without
limiting the rights and remedies of the holders of Senior
Indebtedness or any trustee, fiduciary or agent thereof, the
Trustee shall have full power and authority to receive such
money and to apply the same to the purpose for which such money
was received and shall not be affected by any notice to the
<PAGE>
-112-
contrary which may be received by it within two Business Days
prior to such date; nor shall the Trustee be charged with
knowledge of the curing of any such default or the elimination
of the act or condition preventing any such payment unless and
until the Trustee shall have received an Officers' Certificate
to such effect.
(b) Subject to the provisions of Section 7.01, the
Trustee shall be entitled to rely on the delivery to it of a
written notice to the Trustee by a person representing himself
to be a holder of Senior Indebtedness (or a trustee, fiduciary
or agent therefor) to establish that such notice has been given
by a holder of Senior Indebtedness (or a trustee, fiduciary or
agent therefor). In the event that the Trustee determines in
good faith that further evidence is required with respect to
the right of any person as a holder of Senior Indebtedness to
participate in any payment or distribution pursuant to this
Article Eleven, the Trustee may request such person to furnish
evidence to the reasonable satisfaction of the Trustee as to
the amount of Senior Indebtedness held by such person, the
extent to which such person is entitled to participate in such
payment or distribution and any other facts pertinent to the
rights of such person under this Article Eleven, and if such
evidence is not furnished, the Trustee may defer any payment to
such person pending judicial determination as to the right of
such person to receive such payment.
Section 11.10. RELIANCE ON JUDICIAL ORDER OR
CERTIFICATE OF LIQUIDATING AGENT.
Upon any payment or distribution of assets of the
Company referred to in this Article Eleven, the Trustee, sub-
ject to the provisions of Section 7.01, and the Holders, shall
be entitled to rely upon any order or decree entered by any
court of competent jurisdiction in which such insolvency, bank-
ruptcy, receivership, liquidation, reorganization, dissolution,
winding-up or similar case or proceeding is pending, or a cer-
tificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors,
agent or other person making such payment or distribution,
delivered to the Trustee or to the Holders, for the purpose of
ascertaining the persons entitled to participate in such pay-
ment or distribution, the holders of Senior Indebtedness and
other Indebtedness of the Company, the amount thereof or pay-
able thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article;
<PAGE>
-113-
PROVIDED that the foregoing shall apply only if such court has
been fully apprised of the provisions of this Article Eleven.
Section 11.11. RIGHTS OF TRUSTEE AS A HOLDER OF
SENIOR INDEBTEDNESS; PRESERVATION
OF TRUSTEE'S RIGHTS.
The Trustee in its individual capacity shall be enti-
tled to all the rights set forth in this Article Eleven with
respect to any Senior Indebtedness which may at any time be
held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the
Trustee of any of its rights as such holder. Nothing in this
Article Eleven shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 7.08.
Section 11.12. ARTICLE APPLICABLE TO PAYING AGENTS.
In case at any time any Paying Agent other than the
Trustee shall have been appointed by the Company and be then
acting hereunder, the term "Trustee" as used in this Article
shall in such case (unless the context otherwise requires) be
construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if
such Paying Agent were named in this Article Eleven in addition
to or in place of the Trustee; PROVIDED that Section 11.11
shall not apply to the Company or any Affiliate of the Company
if it or such Affiliate acts as Paying Agent.
Section 11.13. NO SUSPENSION OF REMEDIES.
Nothing contained in this Article Eleven shall limit
the right of the Trustee or the Holders of Notes to take any
action to accelerate the maturity of the Notes pursuant to
Article Six or to pursue any rights or remedies hereunder or
under applicable law, subject to the rights, if any, under this
Article Eleven of the holders, from time to time, of Senior
Indebtedness.
<PAGE>
-114-
ARTICLE TWELVE
MISCELLANEOUS
Section 12.01. TRUST INDENTURE ACT OF 1939.
This Indenture is subject to the provisions of the
TIA that are required to be a part of this Indenture, and
shall, to the extent applicable, be governed by such
provisions.
If any provision of this Indenture modifies or
excludes any provision of the Trust Indenture Act that may be
so modified or excluded, the latter provision shall be deemed
to apply to this Indenture as so modified or excluded, as the
case may be.
Section 12.02. NOTICES.
Any notice or communication shall be sufficiently
given if in writing and delivered in person or mailed by first
class mail, postage prepaid, addressed as follows:
If to the Company or any Guarantor to:
Foodbrands America, Inc.
1601 Northwest Expressway
Suite 1700
Oklahoma City, OK 73118-1495
Attention: [ ]
With a copy to:
McAfee & Taft
A Professional Corporation
Two Leadership Square, Tenth Floor
Oklahoma City, OK 73102
Attention: [Brice E. Tarzwell, Esq.]
If to the Trustee to:
Liberty Bank and Trust Company of
Oklahoma City, National Association
100 North Broadway
Oklahoma City, Oklahoma 73102
Attention: [Corporate Trust Administration
Department]
<PAGE>
-115-
The parties hereto by notice to the other parties may
designate additional or different addresses for subsequent
notices or communications.
Any notice or communication mailed, postage prepaid,
to a Holder, including any notice delivered in connection with
TIA Section 310(b), TIA Section 313(c), TIA Section 314(a) and
TIA Section 315(b), shall be mailed by first class mail to such
Holder at the address of such Holder as it appears on the Notes
register maintained by the Registrar and shall be sufficiently
given to such Holder if so mailed within the time prescribed.
Copies of any such communication or notice to a Holder shall
also be mailed to the Trustee.
Failure to mail a notice or communication to a Note-
holder or any defect in it shall not affect its sufficiency
with respect to other Holders. Except for a notice to the
Trustee, which is deemed given only when received, if a notice
or communication is mailed in the manner provided above, it is
duly given, whether or not the addressee receives it.
Section 12.03. COMMUNICATION BY HOLDERS WITH
OTHER HOLDERS.
Holders may communicate pursuant to TIA
Section 312(b) with other Holders with respect to their rights
under this Indenture or the Notes. The obligors, the Trustee,
the Registrar and any other person shall have the protection of
TIA Section 312(c).
Section 12.04. CERTIFICATE AND OPINION AS TO
CONDITIONS PRECEDENT.
Upon any request or application by the Company or any
Guarantor to the Trustee to take any action under this Inden-
ture, such obligor shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the
opinion of the signers, all conditions precedent, if any,
provided for in this Indenture relating to the proposed
action have been complied with; and
(2) an Opinion of Counsel stating that, in the opin-
ion of such counsel, all such conditions precedent have
been complied with.
<PAGE>
-116-
Section 12.05. STATEMENTS REQUIRED IN CERTIFICATE
OR OPINION.
Each certificate or opinion with respect to compli-
ance with a condition or covenant provided for in this Inden-
ture shall include:
(1) a statement that the person making such certifi-
cate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statement
or opinions contained in such certificate or opinion are
based;
(3) a statement that, in the opinion of such person,
he has made such examination or investigation as is neces-
sary to enable him to express an opinion as to whether or
not such covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion
of such person, such condition or covenant has been com-
plied with; PROVIDED that with respect to matters of fact
an Opinion of Counsel may rely on an Officers' Certificate
or certificates of public officials.
Section 12.06. RULES BY TRUSTEE, PAYING AGENT,
REGISTRAR.
The Trustee may make reasonable rules for action by
or at a meeting of Noteholders. The Paying Agent or Registrar
may make reasonable rules for its functions.
Section 12.07. GOVERNING LAW.
The laws of the State of New York shall govern this
Indenture, the Notes and the Guarantees without regard to prin-
ciples of conflicts of law. The Trustee, the Company, the
Guarantors and the Holders agree to submit to the jurisdiction
of the courts of the State of New York in any action or pro-
ceeding arising out of or relating to this Indenture, the Notes
and the Guarantees.
<PAGE>
-117-
Section 12.08. NO INTERPRETATION OF OTHER
AGREEMENTS.
This Indenture may not be used to interpret another
indenture, loan or debt agreement of the Company, the Guaran-
tors or any of their respective Subsidiaries. Any such inden-
ture, loan or debt agreement may not be used to interpret this
Indenture.
Section 12.09. NO RECOURSE AGAINST OTHERS.
A director, officer, employee, stockholder or Affili-
ate, as such, of the Company or the Guarantors shall not have
any liability for any obligations of the Company under the
Notes or this Indenture or of a Guarantor under any Guarantee
or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Holder by accepting a Note
waives and releases all such liability.
Section 12.10. SUCCESSORS.
All agreements of the Company and any Guarantors in
this Indenture, the Notes and the Guarantees shall bind their
successors. All agreements of the Trustee in this Indenture
shall bind its successors.
Section 12.11. DUPLICATE ORIGINALS.
The parties may sign any number of copies of this
Indenture. Each signed copy shall be an original, but all such
executed copies together represent the same agreement.
Section 12.12. SEPARABILITY.
In case any provision in this Indenture, the Notes or
any Guarantee shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provi-
sions shall not in any way be affected or impaired thereby, and
a Holder shall have no claim therefor against any party hereto.
Section 12.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and
headings of the Articles and Sections of this Indenture have
been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.
<PAGE>
-118-
Section 12.14. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Notes, express or
implied, shall give to any person, other than the parties
hereto and their successors hereunder, and the Holders, any
benefit or any legal or equitable right, remedy or claim under
this Indenture.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Indenture to be duly executed, and their respective corpo-
rate seals to be hereunto affixed and attested, all as of the
day and year first above written.
FOODBRANDS AMERICA, INC.
By:
---------------------------
Name:
Title:
LIBERTY BANK AND TRUST COMPANY
OF OKLAHOMA CITY, NATIONAL
ASSOCIATION, as Trustee
By:
---------------------------
Name:
Title:
BRENNAN PACKING CO., INC.,
as Guarantor
By:
---------------------------
Name:
Title:
CONTINENTAL DELI FOODS, INC.,
as Guarantor
By:
---------------------------
Name:
Title:
<PAGE>
DOSKOCIL FOOD SERVICE COMPANY,
L.L.C., as Guarantor
By:
---------------------------
Name:
Title:
DOSKOCIL SPECIALTY BRANDS
COMPANY, as Guarantor
By:
---------------------------
Name:
Title:
FBAI INVESTMENTS CORPORATION,
as Guarantor
By:
---------------------------
Name:
Title:
KPR HOLDINGS, L.P.,
as Guarantor
By:
---------------------------
Name:
Title:
NATIONAL SERVICE CENTER, INC.,
as Guarantor
By:
---------------------------
Name:
Title:
<PAGE>
RKR-GP, INC., as Guarantor
By:
---------------------------
Name:
Title:
<PAGE>
EXHIBIT A
FOODBRANDS AMERICA, INC.
% SENIOR SUBORDINATED NOTE DUE 2006
No. $120,000,000
FOODBRANDS AMERICA, INC., a corporation incorporated
under the laws of the State of Delaware (herein called the
"Company", which term includes any successor corporation under
the Indenture hereinafter referred to), for value received,
hereby promises to pay to _______________ or registered
assigns, the principal sum of $120,000,000 Dollars on
, 2006, at the office or agency of the Company
referred to below, and to pay interest thereon on and
, in each year, commencing on , 1996, accru-
ing from , 1996 or from the most recent Interest
Payment Date to which interest has been paid or duly provided
for, at the rate of % per annum, until the principal
hereof is paid or duly provided for. Interest shall be com-
puted on the basis of a 360-day year comprised of twelve 30-day
months.
The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in
the Indenture referred to on the reverse hereof, be paid to the
person in whose name this Note (or one or more Predecessor
Notes) is registered at the close of business on the Regular
Record Date for such interest, which shall be or
(whether or not a Business Day), as the case may
be, next preceding such Interest Payment Date (each a "Regular
Record Date"); PROVIDED that the record date with respect to
the first interest payment shall be the close of business on
the original date of issuance of this Note. Any such interest
not so punctually paid, or duly provided for, and interest on
such defaulted interest at the rate borne by the Notes, to the
extent lawful, shall forthwith cease to be payable to the
Holder on such Regular Record Date, and may be paid to the per-
son in whose name this Note (or one or more Predecessor Notes)
is registered at the close of business on a special record date
for the payment of such defaulted interest to be fixed by the
Trustee, notice of which shall be given to Holders of Notes not
less than 10 days prior to such special record date, or may be
paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the
A-1
<PAGE>
Notes may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in such Indenture.
Payment of the principal of and interest on this Note
will be made at the office or agency of the Company maintained
for that purpose in the Borough of Manhattan in The City of New
York, or at such other office or agency of the Company as may
be maintained for such purpose, in such coin or currency of the
United States of America as at the time of payment is legal
tender for payment of public and private debts; PROVIDED that
payment of interest may be made at the option of the Company by
check mailed to the address of the person entitled thereto as
such address shall appear on the Note register maintained by
the Registrar.
Reference is hereby made to the further provisions of
this Note set forth on the reverse hereof.
Unless the certificate of authentication hereon has
been duly executed by the Trustee referred to on the reverse
hereof by manual signature, and a seal has been affixed hereon,
this Note shall not be entitled to any benefit under the Inden-
ture, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed under its corporate seal.
Dated: , 1996 FOODBRANDS AMERICA, INC.
By:________________________________
Name:
Title:
[SEAL]
A-2
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Notes referred to in the within-
mentioned Indenture.
LIBERTY BANK AND TRUST COMPANY
OF OKLAHOMA CITY, NATIONAL
ASSOCIATION, as Trustee
By________________________________
Authorized Signatory
A-3
<PAGE>
(Reverse of Note)
1. INDENTURE. This Note is one of a duly authorized
issue of Notes of the Company designated as its % Senior
Subordinated Notes due 2006, limited (except as otherwise pro-
vided in the Indenture referred to below) in aggregate princi-
pal amount to $ , which may be issued under an inden-
ture (herein called the "Indenture") dated as of ,
1996, between Foodbrands America, Inc., a Delaware corporation,
as issuer (the "Company"), as issuer, Brennan Packing Co.,
Inc., a Delaware corporation, Continental Deli Foods, Inc., a
Delaware corporation, Doskocil Food Service Company, L.L.C., an
Oklahoma limited liability company, Doskocil Specialty Brands
Company, a Delaware corporation, FBAI Investments Corporation,
an Oklahoma corporation, KPR Holdings, L.P., a Delaware limited
partnership, National Service Center, Inc., a Delaware corpora-
tion, and RKR-GP, Inc., a Delaware corporation, as guarantors
(each a "Guarantor," and collectively, the "Guarantors") and
Liberty Bank and Trust Company of Oklahoma City, National Asso-
ciation, as trustee (the "Trustee," which term includes any
successor Trustee under the Indenture), to which Indenture and
all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of
rights, duties, obligations and immunities thereunder of the
Company, the Guarantors, the Trustee and the Holders of the
Notes, and of the terms upon which the Notes are, and are to
be, authenticated and delivered.
All terms used in this Note which are defined in the
Indenture and not otherwise defined herein shall have the mean-
ings assigned to them in the Indenture.
No reference herein to the Indenture and no provi-
sions of this Note or of the Indenture shall alter or impair
the absolute or unconditional obligation of the Company and
each of the Guarantors to pay the principal of and interest on
this Note at the times, place, and rate, and in the coin or
currency, herein prescribed.
2. GUARANTEES. This Note is entitled to certain
senior subordinated Guarantees made for the benefit of the
Holders. Reference is hereby made to Section 4.18 and Article
Ten of the Indenture for terms relating to the Guarantees.
3. SUBORDINATION. The Indebtedness evidenced by the
Notes is, to the extent and in the manner provided in the
A-4
<PAGE>
Indenture, subordinate and subject in right of payment to the
prior payment in full in cash or cash equivalents of all Senior
Indebtedness and Guarantor Senior Indebtedness as defined in
the Indenture, and this Note is issued subject to such provi-
sions. Each Holder of this Note, by accepting the same, (a)
agrees to and shall be bound by such provisions, (b) authorizes
and directs the Trustee, on behalf of such Holder, to take such
action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the
Trustee attorney-in-fact of such Holder for such purpose; PRO-
VIDED that the Indebtedness evidenced by this Note shall cease
to be so subordinate and subject in right of payment upon any
defeasance of this Note referred to in Paragraph 8 below.
4. REDEMPTION.
(a) OPTIONAL REDEMPTION. The Notes are subject to
redemption, at the option of the Company, as a whole or in
part, in principal amounts of $1,000 or any integral multiple
of $1,000, at any time on or after , 2001 upon not
less than 30 nor more than 60 days' prior notice at the follow-
ing Redemption Prices (expressed as percentages of the princi-
pal amount) if redeemed during the 12-month period beginning
of the years indicated below:
REDEMPTION
YEAR PRICE
---- ----------
2001 %
2002 %
2003 %
2004 and thereafter 100%
plus accrued and unpaid interest, if any, to the Redemption
Date, all as provided in the Indenture.
(b) OPTIONAL REDEMPTION UPON CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, the Notes will be
redeemable, in whole but not in part, at the option of the Com-
pany, upon not less than 30 nor more than 60 days' prior notice
to each holder of Notes to be redeemed, at a redemption price
equal to the sum of (i) the then outstanding principal amount
thereof, PLUS (ii) accrued and unpaid interest, if any, to the
redemption date PLUS (iii) the Applicable Premium.
(c) OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERING.
On or prior to , 1999, the Company may, at its
A-5
<PAGE>
option, use the net proceeds of a Public Equity Offering which
yields gross proceeds (before discounts, commissions and
expenses) of $50.0 million or more to redeem up to an aggregate
of 25% of the principal amount of Notes originally issued from
the Holders of Notes, on a PRO RATA basis (or as nearly PRO
RATA as practicable), at a redemption price equal to % of
the principal amount thereof plus accrued and unpaid interest,
if any, to the date of redemption; PROVIDED that not less than
$75.0 million in aggregate principal amount of Notes is out-
standing following such redemption. In order to effect the
foregoing redemption with the net proceeds of a Public Equity
Offering, the Company shall send the redemption notice not
later than 60 days after the consummation of the Public Equity
Offering.
(d) INTEREST PAYMENTS. In the case of any redemp-
tion of Notes, interest installments whose Stated Maturity is
on or prior to the Redemption Date will be payable to the Hold-
ers of such Notes, or one or more Predecessor Notes, of record
at the close of business on the relevant Record Date referred
to on the face hereof. Notes (or portions thereof) for whose
redemption and payment provision is made in accordance with the
Indenture shall cease to bear interest from and after the
Redemption Date.
(e) PARTIAL REDEMPTION. In the event of redemption
of this Note in part only, a new Note or Notes for the
unredeemed portion hereof shall be issued in the name of the
Holder hereof upon the cancellation hereof.
5. OFFERS TO PURCHASE. Sections 4.12 and 4.13 of
the Indenture provide that upon the occurrence of a Change of
Control and following any Asset Sale, and subject to further
limitations contained therein, the Company shall make an offer
to purchase certain amounts of the Notes in accordance with the
procedures set forth in the Indenture.
6. DEFAULTS AND REMEDIES. If an Event of Default
shall occur and be continuing, the principal of all of the out-
standing Notes, plus all accrued and unpaid interest, if any,
to and including the date the Notes are paid, may be declared
due and payable in the manner and with the effect provided in
the Indenture.
7. DEFEASANCE. The Indenture contains provisions
(which provisions apply to this Note) for defeasance at any
time of (a) the entire indebtedness of the Company and the
A-6
<PAGE>
Guarantors on this Note and (b) certain restrictive covenants
and related Defaults and Events of Default, in each case upon
compliance by the Company with certain conditions set forth
therein.
8. AMENDMENTS AND WAIVERS. The Indenture permits,
with certain exceptions as therein provided, the amendment
thereof and the modification of the rights and obligations of
the Company, the Guarantors and the rights of the Holders under
the Indenture at any time by the Company, the Guarantors and
the Trustee with the consent of the Holders of not less than a
majority in aggregate principal amount of the Notes at the time
outstanding. The Indenture also contains provisions permitting
the Holders of specified percentages in aggregate principal
amount of the Notes at the time outstanding, on behalf of the
Holders of all the Notes, to waive compliance by the Company
and the Guarantors with certain provisions of the Indenture and
certain past Defaults under the Indenture and this Note and
their consequences. Any such consent or waiver by or on behalf
of the Holder of this Note shall be conclusive and binding upon
such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of
such consent or waiver is made upon this Note.
9. DENOMINATIONS, TRANSFER AND EXCHANGE. The Notes
are issuable only in registered form without coupons in denomi-
nations of $1,000 and any integral multiple thereof. As pro-
vided in the Indenture and subject to certain limitations
therein set forth, the Notes are exchangeable for a like aggre-
gate principal amount of Notes of a different authorized
denomination, as requested by the Holder surrendering the same.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Note is
registrable on the Note register of the Company, upon surrender
of this Note for registration of transfer at the office or
agency of the Company maintained for such purpose in the Bor-
ough of Manhattan in The City of New York or at such other
office or agency of the Company as may be maintained for such
purpose, duly endorsed by, or accompanied by a written instru-
ment of transfer in form satisfactory to the Company and the
Registrar duly executed by, the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new
Notes, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee
or transferees.
A-7
<PAGE>
No service charge shall be made for any registration
of transfer or exchange or redemption of Notes, but the Company
may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.
10. PERSONS DEEMED OWNERS. Prior to and at the time
of due presentment of this Note for registration of transfer,
the Company, the Trustee and any agent of the Company or the
Trustee may treat the person in whose name this Note is regis-
tered as the owner hereof for all purposes, whether or not this
Note shall be overdue, and neither the Company, the Trustee nor
any agent shall be affected by notice to the contrary.
11. GOVERNING LAW. This Note and the Guarantees
hereon shall be governed by and construed in accordance with
the laws of the State of New York, without regard to conflicts
of law principles.
12. SELECTION AND NOTICE. In the event that less
than all of the Notes are to be redeemed at any time, selection
of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed or,
if the Notes are not then listed on a national securities
exchange, on a PRO RATA basis, by lot or by such method as the
Trustee shall deem fair and appropriate; PROVIDED that no Notes
of a principal amount of $1,000 or less shall be redeemed in
part; PROVIDED, FURTHER, that any such redemption pursuant to
the provisions relating to a Public Equity Offering shall be
made on a PRO RATA basis or on as nearly a PRO RATA basis as
practicable (subject to the procedures of any applicable Depos-
itory). Notice of redemption shall be mailed by first-class
mail at least 30 but not more than 60 days before the redemp-
tion date to each Holder of Notes to be redeemed at its regis-
tered address. If any Note is to be redeemed in part only, the
notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. A new
Note in a principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon
surrender for cancellation of the original Note. On and after
the redemption date, interest will cease to accrue on Notes or
portions thereof called for redemption unless the Company
defaults in the payment of the redemption price.
A-8
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Com-
pany pursuant to Section 4.12 or 4.13 of the Indenture, check
the appropriate box:
Section 4.12 [ ]
Section 4.13 [ ]
If you wish to have a portion of this Note purchased
by the Company pursuant to Section 4.12 or 4.13 of the Inden-
ture, state the amount:
$______________
Date: __________________ Your Signature: ______________________
(Sign exactly as your
name appears on the
other side of this
Note)
Signature Guarantee: ______________________
A-9
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Note to
___________________________________________________________________________
(Insert assignee's social security or tax ID number)_______________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
(Print or type assignee's name, address and zip code) and irre-
vocably appoint
___________________________________________________________________________
agent to transfer this Note on the books of the Company. The
agent may substitute another to act for him.
___________________________________________________________________________
Date: _____________ Your signature:________________________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:_______________________________________________________
<PAGE>
EXHIBIT B
SENIOR SUBORDINATED GUARANTEE
For value received, the undersigned hereby uncondi-
tionally guarantees to the Holder of this Note the payments of
principal of, premium, if any, and interest on this Note in the
amounts and at the time when due and interest on the overdue
principal, premium, if any, and interest, if any, of this Note,
if lawful, and the payment or performance of all other obliga-
tions of the Company under the Indenture or the Notes, to the
Holder of this Note and the Trustee, all in accordance with and
subject to the terms and limitations of this Note, Article Ten
of the Indenture and this Guarantee. This Guarantee will
become effective in accordance with Article Ten of the Inden-
ture and its terms shall be evidenced therein. The validity
and enforceability of any Guarantee shall not be affected by
the fact that it is not affixed to any particular Note.
The obligations of the undersigned to the Holders of
Notes and to the Trustee pursuant to the Guarantee and the
Indenture are expressly set forth in Article Ten of the Inden-
ture and reference is hereby made to the Indenture for the pre-
cise terms of the Guarantee and all of the other provisions of
the Indenture to which this Guarantee relates. The Indebted-
ness evidenced by this Guarantee is, to the extent and in the
manner provided in the Indenture, subordinate and subject in
right of payment to the prior payment in full in cash or cash
equivalents of all Guarantor Senior Indebtedness as defined in
the Indenture, and this Guarantee is issued subject to such
provisions. Each Holder of a Note, by accepting the same, (a)
agrees to and shall be bound by such provisions, (b) authorizes
and directs the Trustee, on behalf of such Holder, to take such
action as may be necessary to appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the
Trustee attorney-in-fact of such Holder for such purpose; PRO-
VIDED that such subordination provisions shall cease to affect
amounts deposited in accordance with the defeasance provisions
of the Indenture upon the terms and conditions set forth
therein.
B-1
<PAGE>
This Guarantee is subject to release upon the terms
set forth in the Indenture.
BRENNAN PACKING CO., INC.,
CONTINENTAL DELI FOODS, INC.,
DOSKOCIL FOOD SERVICE COMPANY,
L.L.C.,
DOSKOCIL SPECIALTY BRANDS
COMPANY,
FBAI INVESTMENTS CORPORATION,
KPR HOLDINGS, L.P.,
NATIONAL SERVICE CENTER, INC.,
RKR-GP, INC.
By:_______________________________
Name:
Title:
B-2
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Amendment No. 1 to Registration
Statement on Form S-3 (File No. 333-01911) of our report, which includes an
explanatory paragraph relating to the Company's adoption of new methods of
accounting for income taxes and postretirement benefits other than pensions,
dated February 12, 1996, on our audits of the consolidated financial statements
of Foodbrands America, Inc. as of December 30, 1995 and December 31, 1994, and
for the years ended December 30, 1995, December 31, 1994 and January 1, 1994. We
also consent to the incorporation by reference in this registration statement of
our report dated September 23, 1994, on our audits of the financial statements
of TNT Crust, Inc. as of August 31, 1994 and 1993, and for the years then ended,
which report is included in Foodbrands America, Inc.'s Amendments One and Two on
Form 8-K/A (filed on February 26 and 28, 1996, respectively) to the Current
Report on Form 8-K dated December 11, 1995, which Forms 8-K/A and 8-K are
incorporated by reference in this registration statement. We also consent to the
reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Oklahoma City, Oklahoma
April 25, 1996
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
We, the undersigned officers and directors of Foodbrands America, Inc. (the
"Company") hereby severally constitute and appoint R. Randolph Devening, Horst
O. Sieben, William L. Brady and Bryant P. Bynum and each of them, severally, our
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for each of us and in our name, place and stead, in any and
all capacities, to sign the foregoing Registration Statement and any and all
amendments (including post-effective amendments) to this Registration Statement
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as we might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them or their or his substitute to substitutes, may lawfully do or cause to be
done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<S> <C> <C>
/s/ R. RANDOLPH DEVENING Chairman, President, Chief Executive
------------------------------------------- Officer and Director
R. Randolph Devening (Principal Executive Officer)
/s/ HORST O. SIEBEN Senior Vice President and Chief
------------------------------------------- Financial Officer
Horst O. Sieben (Principal Financial Officer)
/s/ WILLIAM L. BRADY Vice President and Controller
------------------------------------------- (Principal Accounting Officer)
William L. Brady
/s/ THEODORE AMMON Director
-------------------------------------------
Theodore Ammon
/s/ RICHARD T. BERG Director
-------------------------------------------
Richard T. Berg
/s/ DORT A. CAMERON III Director March 21, 1996
-------------------------------------------
Dort A. Cameron III
/s/ TERRY M. GRIMM Director
-------------------------------------------
Terry M. Grimm
/s/ PAUL S. LEVY Director
-------------------------------------------
Paul S. Levy
/s/ PETER A. JOSEPH Director
-------------------------------------------
Peter A. Joseph
/s/ ANGUS C. LITTLEJOHN, JR. Director
-------------------------------------------
Angus C. Littlejohn, Jr.
/s/ PAUL W. MARSHALL Director
-------------------------------------------
Paul W. Marshall
</TABLE>
<PAGE>
EXHIBIT 24.2
POWER OF ATTORNEY
We, the undersigned officers and directors of Brennan Packing Co., Inc. (the
"Company") hereby severally constitute and appoint R. Randolph Devening, Horst
O. Sieben, William L. Brady and Bryant P. Bynum and each of them, severally, our
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for each of us and in our name, place and stead, in any and
all capacities, to sign the foregoing Registration Statement and any and all
amendments (including post-effective amendments) to this Registration Statement
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as we might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them or their or his substitute to substitutes, may lawfully do or cause to be
done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
/s/ R. RANDOLPH DEVENING President and Director
------------------------------------------- (Principal Executive Officer)
R. Randolph Devening
/s/ WILLIAM L. BRADY Vice President, Controller and March 21, 1996
------------------------------------------- Director
William L. Brady (Principal Accounting Officer)
/s/ BRYANT P. BYNUM Vice President, Treasurer and
------------------------------------------- Secretary
Bryant P. Bynum (Principal Financial Officer)
/s/ HORST O. SIEBEN Director
-------------------------------------------
Horst O. Sieben
</TABLE>
<PAGE>
EXHIBIT 24.2
POWER OF ATTORNEY
We, the undersigned officers and directors of Continental Deli Foods, Inc.
(the "Company") hereby severally constitute and appoint R. Randolph Devening,
Horst O. Sieben, William L. Brady and Bryant P. Bynum and each of them,
severally, our true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for each of us and in our name, place and
stead, in any and all capacities, to sign the foregoing Registration Statement
and any and all amendments (including post-effective amendments) to this
Registration Statement and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as we might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them or their or his substitute to substitutes, may
lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
/s/ RAYMOND J. HAEFELE President
------------------------------------------- (Principal Executive Officer)
Raymond J. Haefele
/s/ WILLIAM L. BRADY Vice President, Assistant Controller
------------------------------------------- and Director
William L. Brady
/s/ BRYANT P. BYNUM Vice President, Treasurer and March 21, 1996
------------------------------------------- Secretary
Bryant P. Bynum (Principal Financial Officer)
/s/ DIANE EMRICK Controller
------------------------------------------- (Principal Accounting Officer)
Diane Emrick
/s/ HORST O. SIEBEN Director
-------------------------------------------
Horst O. Sieben
/s/ R. RANDOLPH DEVENING Director
-------------------------------------------
R. Randolph Devening
</TABLE>
<PAGE>
EXHIBIT 24.2
POWER OF ATTORNEY
We, the undersigned officers and directors of Doskocil Food Service Company,
L.L.C. (the "Company") hereby severally constitute and appoint R. Randolph
Devening, Horst O. Sieben, William L. Brady and Bryant P. Bynum and each of
them, severally, our true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for each of us and in our name, place
and stead, in any and all capacities, to sign the foregoing Registration
Statement and any and all amendments (including post-effective amendments) to
this Registration Statement and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as we
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them or their or his substitute to
substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
CONTINENTAL DELI FOODS, INC.:
/s/ RAYMOND J. HAEFELE President
------------------------------------------- (Principal Executive Officer)
Raymond J. Haefele
/s/ WILLIAM L. BRADY Vice President, Assistant Controller
------------------------------------------- and Director
William L. Brady
/s/ BRYANT P. BYNUM Vice President, Treasurer and March 21, 1996
------------------------------------------- Secretary
Bryant P. Bynum (Principal Financial Officer)
/s/ DIANE EMRICK Controller
------------------------------------------- (Principal Accounting Officer)
Diane Emrick
/s/ HORST O. SIEBEN Director
-------------------------------------------
Horst O. Sieben
/s/ R. RANDOLPH DEVENING Director
-------------------------------------------
R. Randolph Devening
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
RKR-GP, INC.:
<C> <S> <C>
/s/ WILLIAM E. ROSENTHAL President and Director
------------------------------------------- (Principal Executive Officer)
William E. Rosenthal
/s/ TONY L. PRATER Vice President and Director
-------------------------------------------
Tony L. Prater
/s/ JOSEPH C. PENSHORN Treasurer and Director
-------------------------------------------
Joseph C. Penshorn
/s/ HOWARD S. KATZ Vice President and Director March 21, 1996
-------------------------------------------
Howard S. Katz
/s/ BRYANT P. BYNUM Vice President, Assistant Secretary
------------------------------------------- and Assistant Treasurer
Bryant P. Bynum (Principal Financial Officer)
/s/ WILLIAM L. BRADY Vice President and Assistant Secretary
------------------------------------------- (Principal Accounting Officer)
William L. Brady
/s/ R. RANDOLPH DEVENING Director
-------------------------------------------
R. Randolph Devening
</TABLE>
<PAGE>
EXHIBIT 24.2
POWER OF ATTORNEY
We, the undersigned officers and directors of Doskocil Specialty Brands
Company (the "Company") hereby severally constitute and appoint R. Randolph
Devening, Horst O. Sieben, William L. Brady and Bryant P. Bynum and each of
them, severally, our true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for each of us and in our name, place
and stead, in any and all capacities, to sign the foregoing Registration
Statement and any and all amendments (including post-effective amendments) to
this Registration Statement and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as we
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them or their or his substitute to
substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
/s/ PATRICK A. O'RAY President
------------------------------------------- (Principal Executive Officer)
Patrick A. O'Ray
/s/ WILLIAM L. BRADY Vice President, Assistant Controller
------------------------------------------- and Director
William L. Brady
/s/ BRYANT P. BYNUM Vice President, Treasurer and March 21, 1996
------------------------------------------- Secretary
Bryant P. Bynum (Principal Financial Officer)
/s/ ROBIN BHAT Controller
------------------------------------------- (Principal Accounting Officer)
Robin Bhat
/s/ HORST O. SIEBEN Director
-------------------------------------------
Horst O. Sieben
/s/ R. RANDOLPH DEVENING Director
-------------------------------------------
R. Randolph Devening
</TABLE>
<PAGE>
EXHIBIT 24.2
POWER OF ATTORNEY
We, the undersigned officers and directors of FBAI Investments Corporation
(the "Company") hereby severally constitute and appoint R. Randolph Devening,
Horst O. Sieben, William L. Brady and Bryant P. Bynum and each of them,
severally, our true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for each of us and in our name, place and
stead, in any and all capacities, to sign the foregoing Registration Statement
and any and all amendments (including post-effective amendments) to this
Registration Statement and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as we might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them or their or his substitute to substitutes, may
lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
/s/ R. RANDOLPH DEVENING President and Director
------------------------------------------- (Principal Executive Officer)
R. Randolph Devening
/s/ WILLIAM L. BRADY Vice President, Controller and March 21, 1996
------------------------------------------- Director
William L. Brady (Principal Accounting Officer)
/s/ BRYANT P. BYNUM Vice President, Treasurer and
------------------------------------------- Secretary
Bryant P. Bynum (Principal Financial Officer)
/s/ HORST O. SIEBEN Director
-------------------------------------------
Horst O. Sieben
</TABLE>
<PAGE>
EXHIBIT 24.2
POWER OF ATTORNEY
We, the undersigned officers and directors of KPR Holdings, L.P. (the
"Company") hereby severally constitute and appoint R. Randolph Devening, Horst
O. Sieben, William L. Brady and Bryant P. Bynum and each of them, severally, our
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for each of us and in our name, place and stead, in any and
all capacities, to sign the foregoing Registration Statement and any and all
amendments (including post-effective amendments) to this Registration Statement
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as we might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them or their or his substitute to substitutes, may lawfully do or cause to be
done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
RKR-GP, INC.:
/s/ WILLIAM E. ROSENTHAL President and Director
------------------------------------------- (Principal Executive Officer)
William E. Rosenthal
/s/ TONY L. PRATER Vice President and Director
-------------------------------------------
Tony L. Prater
/s/ JOSEPH C. PENSHORN Treasurer and Director
-------------------------------------------
Joseph C. Penshorn
/s/ HOWARD S. KATZ Vice President and Director March 21, 1996
-------------------------------------------
Howard S. Katz
/s/ BRYANT P. BYNUM Vice President, Assistant Secretary
------------------------------------------- and Assistant Treasurer
Bryant P. Bynum (Principal Financial Officer)
/s/ WILLIAM L. BRADY Vice President and Assistant Secretary
------------------------------------------- (Principal Accounting Officer)
William L. Brady
/s/ R. RANDOLPH DEVENING Director
-------------------------------------------
R. Randolph Devening
</TABLE>
<PAGE>
EXHIBIT 24.2
POWER OF ATTORNEY
We, the undersigned officers and directors of National Service Center, Inc.
(the "Company") hereby severally constitute and appoint R. Randolph Devening,
Horst O. Sieben, William L. Brady and Bryant P. Bynum and each of them,
severally, our true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for each of us and in our name, place and
stead, in any and all capacities, to sign the foregoing Registration Statement
and any and all amendments (including post-effective amendments) to this
Registration Statement and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as we might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them or their or his substitute to substitutes, may
lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
/s/ R. RANDOLPH DEVENING President and Director
------------------------------------------- (Principal Executive Officer)
R. Randolph Devening
/s/ WILLIAM L. BRADY Vice President, Controller and March 21, 1996
------------------------------------------- Director
William L. Brady (Principal Accounting Officer)
/s/ BRYANT P. BYNUM Vice President, Treasurer and
------------------------------------------- Secretary
Bryant P. Bynum (Principal Financial Officer)
/s/ HORST O. SIEBEN Director
-------------------------------------------
Horst O. Sieben
</TABLE>
<PAGE>
EXHIBIT 24.2
POWER OF ATTORNEY
We, the undersigned officers and directors of Pafco Importing Company, Inc.
(the "Company") hereby severally constitute and appoint R. Randolph Devening,
Horst O. Sieben, William L. Brady and Bryant P. Bynum and each of them,
severally, our true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for each of us and in our name, place and
stead, in any and all capacities, to sign the foregoing Registration Statement
and any and all amendments (including post-effective amendments) to this
Registration Statement and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as we might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them or their or his substitute to substitutes, may
lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
/s/ R. RANDOLPH DEVENING President and Director
------------------------------------------- (Principal Executive Officer)
R. Randolph Devening
/s/ WILLIAM L. BRADY Vice President, Controller and March 21, 1996
------------------------------------------- Director
William L. Brady (Principal Accounting Officer)
/s/ BRYANT P. BYNUM Vice President, Treasurer and
------------------------------------------- Secretary
Bryant P. Bynum (Principal Financial Officer)
/s/ HORST O. SIEBEN Director
-------------------------------------------
Horst O. Sieben
</TABLE>
<PAGE>
EXHIBIT 24.2
POWER OF ATTORNEY
We, the undersigned officers and directors of RKR-GP, Inc. (the "Company")
hereby severally constitute and appoint R. Randolph Devening, Horst O. Sieben,
William L. Brady and Bryant P. Bynum and each of them, severally, our true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for each of us and in our name, place and stead, in any and all
capacities, to sign the foregoing Registration Statement and any and all
amendments (including post-effective amendments) to this Registration Statement
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as we might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them or their or his substitute to substitutes, may lawfully do or cause to be
done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
/s/ WILLIAM E. ROSENTHAL President and Director
------------------------------------------- (Principal Executive Officer)
William E. Rosenthal
/s/ TONY L. PRATER Vice President and Director
-------------------------------------------
Tony L. Prater
/s/ JOSEPH C. PENSHORN Treasurer and Director
-------------------------------------------
Joseph C. Penshorn
/s/ HOWARD S. KATZ Vice President and Director March 21, 1996
-------------------------------------------
Howard S. Katz
/s/ BRYANT P. BYNUM Vice President, Assistant Secretary
------------------------------------------- and Assistant Treasurer
Bryant P. Bynum (Principal Financial Officer)
/s/ WILLIAM L. BRADY Vice President and Assistant Secretary
------------------------------------------- (Principal Accounting Officer)
William L. Brady
/s/ R. RANDOLPH DEVENING Director
-------------------------------------------
R. Randolph Devening
</TABLE>
<PAGE>
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2)______
LIBERTY BANK AND TRUST COMPANY
OF OKLAHOMA CITY, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
NOT APPLICABLE 73-0777610
(Jurisdiction of incorporation (I.R.S. Employer
or organization if not a Identification No.)
U.S. national bank)
100 North Broadway 73102
Oklahoma City, Oklahoma (Zip Code)
(Address of principal executive offices)
Jake L. Riley
Liberty Bank and Trust Company of Oklahoma City,
National Association
100 North Broadway
Oklahoma City, Oklahoma 73102
(405) 231-6000
(Name, address and telephone number of agent for service)
FOODBRANDS AMERICA, INC.
(Exact name of obligor as specified in its charter)
Delaware 13-2535513
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1601 N.W. Expressway, Suite 1700 73118-1495
Oklahoma City, Oklahoma (Zip Code)
(Address of principal executive offices)
% SENIOR SUBORDINATED NOTES DUE 2006
(Title of the indenture securities)
<PAGE>
Item 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
NAME ADDRESS
---- -------
Comptroller of the Currency Washington, D.C. 20219
Federal Deposit Insurance Washington, D.C. 20429
Corporation
Board of Governors of Washington, D.C. 20551
Federal Reserve System
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
Item 3. VOTING SECURITIES OF THE TRUSTEE.
Furnish the following information as to each class of voting
securities of the trustee:
As of December 31, 1995
COL. A COL. B
------ ------
TITLE OF CLASS AMOUNT OUTSTANDING
-------------- ------------------
Common Stock 3,425,750 Shares
$10 Par Value
Preferred Stock 22,500 Shares
$10 Par Value
2
<PAGE>
Item 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, furnish the following information:
(a) Title of the securities outstanding under each such other
indenture.
None.
(b) A brief statement of the facts relied upon as a basis for the
claim that no conflicting interest within the meaning of
Section 310(b)(1) of the Act arises as a result of the
trusteeship under any such other indenture, including a
statement as to how the indenture securities will rank as
compared with the securities issued under such other
indenture.
Not applicable.
Item 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS
WITH THE OBLIGOR OR UNDERWRITERS.
If the trustee or any of the directors or executive officers of the
trustee is a director, officer, partner, employee, appointee, or
representative of the obligor or of any underwriter for the obligor, identify
each such person having any such connection and state the nature of each such
connection.
None.
Item 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS
OFFICIALS.
Furnish the following information as to the voting securities of the
trustee owned beneficially by the obligor and each director, partner, and
executive officer of the obligor:
3
<PAGE>
As of December 31, 1995
COL. A COL. B COL. C COL. D
------ ------ ------ ------
PERCENTAGE OF
VOTING SECURITIES
NAME OF TITLE OF AMOUNT OWNED REPRESENTED BY AMOUNT
OWNER CLASS BENEFICIALLY GIVEN IN COL. C
----- ----- ------------ ---------------
None.
All shares of voting securities of the trustee, other than
directors' qualifying shares, are owned by Liberty Bancorp, Inc. From an
examination of its records and from information received from the obligor,
the trustee is advised that as of December, 31, 1995, the amount of voting
securities of Liberty Bancorp, Inc. owned beneficially by the obligor and its
directors and executive officers, taken as a group, did not exceed one
percent of the outstanding voting securities of Liberty Bancorp, Inc.
Item 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR
THEIR OFFICIALS.
Furnish the following information as to the voting securities of the
trustee owned beneficially by each underwriter for the obligor and each
director, partner, and executive officer of each such underwriter.
As of December 31, 1995
COL. A COL. B COL. C COL. D
------ ------ ------ ------
PERCENTAGE OF
VOTING SECURITIES
NAME OF TITLE OF AMOUNT OWNED REPRESENTED BY AMOUNT
OWNER CLASS BENEFICIALLY GIVEN IN COL. C
----- ----- ------------ ---------------
None.
All shares of voting securities of the trustee, other than
directors' qualifying shares, are owned by Liberty Bancorp, Inc. From an
examination of its records and from information received from the
underwriter, the trustee is advised that as of December 31, 1995, the amount
of voting securities of Liberty Bancorp, Inc. owned beneficially by each
underwriter for the obligor and each director, partner and executive officer
of each such underwriter taken as a group, did not exceed
4
<PAGE>
one percent of the outstanding voting securities of Liberty Bancorp, Inc.
Item 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
Furnish the following information as to securities of the obligor
owned beneficially or held as collateral security for obligations in default
by the trustee:
As of December 31, 1995
COL. A COL. B COL. C COL. D
------ ------ ------ ------
AMOUNT OWNED
BENEFICIALLY
WHETHER THE OR HELD AS
SECURITIES COLLATERAL PERCENT OF CLASS
ARE VOTING OR SECURITY FOR REPRESENTED BY
TITLE OF NON-VOTING OBLIGATIONS AMOUNT GIVEN
CLASS SECURITIES IN DEFAULT IN COL. C
----- ---------- ---------- ---------
None.
Item 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of an underwriter for the obligor,
furnish the following information as to each class of securities of such
underwriter any of which are so owned or held by the trustee.
As of December 31, 1995
COL. A COL. B COL. C COL. D
------ ------ ------ ------
AMOUNT OWNED
BENEFICIALLY PERCENT OF
OR HELD AS CLASS
NAME AND COLLATERAL REPRESENTED
ISSUER SECURITY FOR BY AMOUNT
AND TITLE AMOUNT OBLIGATIONS IN GIVEN IN
OF CLASS OUTSTANDING DEFAULT BY TRUSTEE COL. C
-------- ----------- ------------------ ------
None.
5
<PAGE>
Item 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF
CERTAIN AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
If the trustee owns beneficially or holds as collateral security for
obligations in default voting securities of a person who, to the knowledge of
the trustee (1) owns 10 percent or more of the voting securities of the
obligor or (2) is an affiliate, other than a subsidiary, of the obligor,
furnish the following information as to the voting securities of such person.
As of December 31, 1995
COL. A COL. B COL. C COL. D
------ ------ ------ ------
AMOUNT OWNED
BENEFICIALLY PERCENT OF
OR HELD AS CLASS
NAME AND COLLATERAL REPRESENTED
ISSUER SECURITY FOR BY AMOUNT
AND TITLE AMOUNT OBLIGATIONS IN GIVEN IN
OF CLASS OUTSTANDING DEFAULT BY TRUSTEE COL. C
-------- ----------- ------------------ ------
None.
Item 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A
PERSON OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF
THE OBLIGOR.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of a person who, to the knowledge of
the trustee, owns 50 percent or more of the voting securities of the
obligor, furnish the following information as to each class of securities of
such person any of which are so owned or held by the trustee.
As of December 31, 1995
COL. A COL. B COL. C COL. D
------ ------ ------ ------
AMOUNT OWNED
BENEFICIALLY PERCENT OF
OR HELD AS CLASS
NAME AND COLLATERAL REPRESENTED
ISSUER SECURITY FOR BY AMOUNT
AND TITLE AMOUNT OBLIGATIONS IN GIVEN IN
OF CLASS OUTSTANDING DEFAULT BY TRUSTEE COL. C
-------- ----------- ------------------ ------
None.
6
<PAGE>
Item 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
Except as noted in the instructions, if the obligor is indebted to
the trustee, furnish the following information:
COL. A COL. B COL. C
NATURE OF INDEBTEDNESS AMOUNT OUTSTANDING DATE DUE
---------------------- ------------------ --------
Term Loan $2,043,918.92 1-15-2000
Revolving Facility 1,266,891.89 1-15-2000
Acquisition Facility 1,689,189.19 1-15-2000
Item 13. DEFAULTS BY THE OBLIGOR
(a) State whether there is or has been a default with respect to
the securities under this indenture. Explain the nature of any such default.
None.
(b) If the trustee is a trustee under another indenture under which
any other securities, or certificates of interest or participation in any
other securities, of the obligor are outstanding, or is trustee for more than
one outstanding series of securities under the indenture, state whether there
has been a default under any such indenture or series, identify the indenture
or series affected, and explain the nature of any such default.
None.
Item 14. AFFILIATIONS WITH THE UNDERWRITERS.
If any underwriter is an affiliate of the trustee, describe each
such affiliation.
None.
Item 15. FOREIGN TRUSTEE.
Identify the order or rule pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified or to be
qualified under the Act.
Not applicable.
7
<PAGE>
Item 16. LIST OF EXHIBITS.
List below all exhibits filed as a part of this statement of
eligibility and qualification.
<TABLE>
<S> <C>
Exhibit 1. A copy of the articles of association of the trustee as
now in effect (incorporated by reference to Exhibit 1 to
the Statement of Eligibility under the Trust Indenture Act
of 1939 of a Corporation Designated to Act as Trustee on
Form T-1 filed by Liberty Bank and Trust Company of Oklahoma
City, National Association, on January 17, 1995, File
No. 33-88220).
Exhibit 2. A copy of the certificate of authority of the trustee to
commence business (incorporated by reference to Exhibit 2
to the Statement of Eligibility under the Trust Indenture
Act of 1939 of a Corporation Designated to Act as Trustee
on Form T-1 filed by Liberty Bank and Trust Company of
Oklahoma City, National Association, on January 17, 1995,
File No. 33-88220).
Exhibit 3. A copy of the authorization of the trustee to exercise
corporate trust powers (incorporated by reference to
Exhibit 3 to the Statement of Eligibility under
the Trust Indenture Act of 1939 of a Corporation Designated
to Act as Trustee on Form T-1 filed by Liberty Bank and
Trust Company of Oklahoma City, National Association, on
January 17, 1995, File No. 33-88220).
Exhibit 4. A copy of the existing bylaws of the trustee, or instruments
corresponding thereto (incorporated by reference to
Exhibit 4 to the Statement of Eligibility under the Trust
Indenture Act of 1939 of a Corporation Designated to Act as
Trustee on Form T-1 filed by Liberty Bank and Trust Company
of Oklahoma City, National Association, on January 17, 1995,
File No. 33-88220).
*Exhibit 5. The consents of the United States institutional trustees
required by Section 321(b) of the Act.
**Exhibit 6. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
</TABLE>
DISCLAIMER: Pursuant to Rule 7a-22 of the General Rules and
Regulations under the Trust Indenture Act of 1939, the trustee disclaims
responsibility for the accuracy or completeness of information obtained from
persons other than its affiliates.
____________
*Filed herewith.
**To be provided manually.
8
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
trustee, Liberty Bank and Trust Company of Oklahoma City, National
Association, a national banking association organized and existing under the
laws of the United States of America, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Oklahoma City, and the State of
Oklahoma, on the 25th day of April, 1996.
LIBERTY BANK AND TRUST COMPANY OF
OKLAHOMA CITY, NATIONAL ASSOCIATION,
TRUSTEE
By: /s/ Jake L. Riley
-------------------------------------
Jake L. Riley, Senior Vice President
9
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION OF DOCUMENT PAGE
--- ----------------------- ----
<S> <C> <C>
Exhibit 1. A copy of the articles of association of the trustee as
now in effect (incorporated by reference to Exhibit 1 to
the Statement of Eligibility under the Trust Indenture Act
of 1939 of a Corporation Designated to Act as Trustee on
Form T-1 filed by Liberty Bank and Trust Company of Oklahoma
City, National Association, on January 17, 1995, File
No. 33-88220).
Exhibit 2. A copy of the certificate of authority of the trustee to
commence business (incorporated by reference to Exhibit 2
to the Statement of Eligibility under the Trust Indenture
Act of 1939 of a Corporation Designated to Act as Trustee
on Form T-1 filed by Liberty Bank and Trust Company of
Oklahoma City, National Association, on January 17, 1995,
File No. 33-88220).
Exhibit 3. A copy of the authorization of the trustee to exercise
corporate trust powers (incorporated by reference to
Exhibit 3 to the Statement of Eligibility under
the Trust Indenture Act of 1939 of a Corporation Designated
to Act as Trustee on Form T-1 filed by Liberty Bank and
Trust Company of Oklahoma City, National Association, on
January 17, 1995, File No. 33-88220).
Exhibit 4. A copy of the existing bylaws of the trustee, or instruments
corresponding thereto (incorporated by reference to
Exhibit 4 to the Statement of Eligibility under the Trust
Indenture Act of 1939 of a Corporation Designated to Act as
Trustee on Form T-1 filed by Liberty Bank and Trust Company
of Oklahoma City, National Association, on January 17, 1995,
File No. 33-88220).
*Exhibit 5. The consents of the United States institutional trustees
required by Section 321(b) of the Act.
**Exhibit 6. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
</TABLE>
DISCLAIMER: Pursuant to Rule 7a-22 of the General Rules and
Regulations under the Trust Indenture Act of 1939, the trustee disclaims
responsibility for the accuracy or completeness of information obtained from
persons other than its affiliates.
____________
*Filed herewith.
**To be provided manually.
<PAGE>
EXHIBIT 5
Liberty Bank and Trust Company of Oklahoma City, National
Association, as a condition to qualification under the Trust Indenture Act
of 1939, consents that reports of examination by federal, state, territorial,
or district authorities may be furnished by such authorities to the
Securities and Exchange Commission of the United States upon request of the
Commission for such reports, as provided in Section 321 of the Trust
Indenture Act of 1939.
LIBERTY BANK AND TRUST COMPANY OF
OKLAHOMA CITY, NATIONAL ASSOCIATION,
TRUSTEE
By: /s/ Jake L. Riley
------------------------------------
Jake L. Riley, Senior Vice President
Date: April 25, 1996
