10-K
1
FORM 10-K
1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
----- THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
_ THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______.
Commission file number 0-14190
DREYER'S GRAND ICE CREAM, INC.
(Exact name of registrant as specified in its charter)
Delaware No. 94-2967523
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5929 College Avenue, Oakland, California 94618
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 652-8187
Securities registered pursuant to Section 12(b) of the Act: None
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ---------------------
Not applicable Not applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 Par Value
Preferred Stock Purchase Rights
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
As of March 24, 1995, the latest practicable date, 13,928,947 shares of
Common Stock were outstanding. The aggregate market value (based on the
average of the high and low sales prices on March 24, 1995, as reported by
NASDAQ) of the Common Stock held by nonaffiliates was approximately
$286,024,183. (Such amount excludes the aggregate market value of shares
beneficially owned by the executive officers and members of the Board of
Directors of the registrant.)
_______________________________________________________________________
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Dreyer's Grand Ice Cream, Inc. 1994 Annual Report to
Stockholders (Exhibit 13 hereto) are incorporated by reference into Parts II
and IV of this Annual Report on Form 10-K. With the exception of those
portions which are specifically incorporated by reference in this Annual Report
on Form 10-K, the Dreyer's Grand Ice Cream, Inc. 1994 Annual Report to
Stockholders is not to be deemed filed as part of this Report.
Portions of the Dreyer's Grand Ice Cream, Inc. Proxy Statement for the 1995
Annual Meeting of Stockholders to be filed with the Commission on or before
April 28, 1995 are incorporated by reference into Part III of this Annual
Report on Form 10-K. With the exception of those portions which are
specifically incorporated by reference in this Annual Report on Form 10-K, the
Dreyer's Grand Ice Cream, Inc. Proxy Statement for the 1995 Annual Meeting of
Stockholders is not to be deemed filed as part of this Report.
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PART I
ITEM 1. BUSINESS
GENERAL
Dreyer's Grand Ice Cream, Inc. and its consolidated subsidiaries are,
unless the context otherwise requires, sometimes referred to herein as
"Dreyer's" or the "Company." The Company, successor to the original Dreyer's
Grand Ice Cream business, was originally incorporated in California on February
23, 1977 and reincorporated in Delaware on December 28, 1985.
Dreyer's manufactures and distributes premium ice cream and other frozen
dairy products. Since 1977, Dreyer's Grand Ice Cream has developed from a
specialty ice cream sold principally in selected San Francisco Bay Area grocery
and ice cream stores to a broad line of frozen dairy desserts sold under the
Dreyer's and Edy's brand names in retail outlets serving more than 70% of the
households in the United States. The Dreyer's line of products is available
in the thirteen western states, parts of Texas and certain markets in the Far
East. The Company's products are sold under the Edy's brand name throughout
the Eastern, Midwestern and Southeastern regions of the United States. The
Dreyer's and Edy's line of products are distributed through a
direct-store-delivery system. The Company also distributes and, in certain
instances, manufactures branded ice cream and frozen dairy dessert products,
and other selected novelty products of other companies. The Dreyer's and Edy's
line of ice cream and related products is relatively expensive and is sold by
the Company and its independent distributors to grocery stores, convenience
stores, club stores, ice cream parlors, restaurants, hotels and certain other
accounts. The Dreyer's and Edy's brands enjoy strong consumer recognition and
loyalty.
MARKETS
Ice cream was traditionally supplied by dairies as an adjunct to their
basic milk business. Accordingly, ice cream was marketed like milk, as a
fungible commodity, and manufacturers competed primarily on the basis of price.
This price competition motivated ice cream producers to seek economies in their
formulations. The resulting trend to lower quality ice cream created an
opportunity for the Company and other producers of premium ice creams, whose
products can be differentiated on the basis of quality and brand image rather
than price. Moreover, the market for all packaged ice creams was influenced by
the steady increase in market share of "private label" ice cream products owned
by the major grocery chains and the purchase or construction by the chains of
their own milk and ice cream plants. The resulting reduction in the market for
milk and the "regular" ice cream brands produced by the independent dairies has
caused many such dairies to withdraw from the market. Manufacturing and
formulation complexities, broader flavor requirements, consumer preference and
brand identity, however, make it more difficult for the chains' private label
brands to compete effectively in the premium market segment. As a result,
independent premium brands such as the Company's are normally stocked by major
grocery chains.
While many foodservice operators, including hotels, schools, hospitals and
other institutions, buy ice cream primarily on the basis of price, there are
also those in the foodservice industry who purchase ice cream based on its
quality. Operators of ice cream shops wanting to feature a quality brand,
restaurants that include an ice cream brand on their menu and clubs or chefs
concerned with the quality of their fare are often willing to pay for Dreyer's
quality, image and brand identity.
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PRODUCTS
The Company and its predecessors have always been innovators of flavor and
package development. William A. Dreyer, the creator of Dreyer's Grand Ice
Cream, is credited with inventing many popular flavors including Rocky Road,
Toasted Almond and Candy Mint. In addition, Dreyer's was among the first ice
creams in the West packaged in round containers with window lids that allow
consumers to see the actual product they are buying.
The Company uses only the highest quality ingredients in its products. The
Company's management philosophy is to resist changes in its formulations or
production processes that compromise quality for cost even though the industry
in general may adopt such new formulation or process compromises. For example,
Dreyer's still uses an old-fashioned method of "vat pasteurization" which
imparts a distinctive taste to the ice cream mix, even though a less expensive
pasteurization method is available. Similarly, the Company insists on using a
substantially more expensive 100% pure vanilla formulation even though most
other ice cream manufacturers use a blend of real and imitation vanilla.
Dreyer's and Edy's Grand Ice Cream is the Company's flagship product.
These brands of ice cream utilize traditional formulations with all natural
flavorings and are characterized by premium quality taste and texture, and
diverse flavor selection. The flagship product is complimented by the
Company's successful reduced fat, low cholesterol products such as Frozen
Yogurt, Grand Light(R) ice cream, No Sugar Added ice cream and Fat Free ice
cream. The Company believes these products are well positioned in the segments
of the market where products are characterized by lower levels of fat, sugar
and cholesterol than those of regular ice cream. The Company's product line now
includes over eighty flavors that are selected both on the basis of general
popularity and on the intensity of consumer response. Some flavors are
seasonal and are produced only as a featured flavor during a particular month.
The Company operates a continuous flavor development and evaluation program.
Dreyer's and Edy's Frozen Yogurt and Fat Free Frozen Yogurt, which
incorporate proprietary technology, are premium frozen yogurt products with all
natural flavorings that are packaged in convenient half gallon and quart sizes.
Frozen Yogurt, with less than 4 grams of fat per serving, and Fat Free Frozen
Yogurt, which contains no fat and no cholesterol, retain both the creaminess
and texture of ice cream while offering the nutritional benefits of yogurt.
Dreyer's and Edy's Frozen Yogurt and Fat Free Frozen Yogurt represent a
significant portion of the Company's sales.
Dreyer's and Edy's Grand Light(R) developed by the Company incorporating a
technology and formulation similar to that used for Frozen Yogurt is
manufactured with all natural flavorings, has half the fat of regular ice cream
and contains as little as 100 calories per serving. While light products in
other food categories had enjoyed enormous success for many years, Grand
Light(R) was the ice cream category's first premium branded light product when
it was introduced in 1987. Dreyer's and Edy's Grand Light(R) represents a
significant portion of the Company's sales.
Dreyer's and Edy's No Sugar Added ice cream is sweetened with NutraSweet(R)
and has only half the fat of regular ice cream. No Sugar Added represents a
rapidly growing portion of the Company's sales.
Dreyer's and Edy's Fat Free ice cream was developed and introduced to
target the fat and cholesterol conscious consumer. Dreyer's and Edy's Fat Free
is a fat free, cholesterol-free ice cream.
Dreyer's and Edy's Grand Soft(TM), a new and improved soft serve product
using new technology, is available as ice cream or frozen yogurt.
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In 1994 the Company introduced Dreyer's and Edy's Grand Cones to complement
its existing novelty line featuring Dreyer's and Edy's Grand Ice Cream Bars and
Tropical Fruit Bars, which were both introduced in 1993. The Dreyer's and
Edy's Grand Ice Cream Bars and Grand Cones incorporate proprietary technology
which allows the Company to offer flavors that are not available in any other
bar or cone. The Dreyer's and Edy's Tropical Fruit Bars, made with real fruit,
target the health conscious consumer.
In late 1992, the Company acquired certain assets from Calip Dairies, Inc.
(Calip), including the T&W(R) premium ice cream brand and Calip's supermarket
direct-store-distribution assets in the New York metropolitan area. The
Company now manufactures the T&W products which are distributed by the Company
in parts of New Jersey, Connecticut and New York, as well as in the New York
metropolitan area.
The Company also distributes and, in some instances, manufactures selected
branded frozen dessert products of other companies, including Ben & Jerry's
Homemade(R) superpremium ice cream, Healthy Choice(R) low fat ice cream
from ConAgra, Inc. and Mocha Mix(R) from Presto Food Products, Inc. The
Company distributes ice cream novelties manufactured by or for Nestle Ice Cream
Company; ice cream novelties manufactured by Dove International, a division of
Mars, Incorporated; Dolly Madison(R) ice cream and frozen dairy dessert
products; Steve's Homemade Ice Cream Inc.'s products; and various other
frozen dessert novelty products which vary from market to market.
The Company holds registered trademarks on many of its products. The
Company believes that consumers associate the Company's trademarks, distinctive
packaging and trade dress with the Company's high quality products. The
Company does not own any patents that are material to its business.
Historically, research and development expenses have not been significant.
MARKETING, SALES AND DISTRIBUTION
The Company's marketing strategy is based upon management's belief that a
significant number of people prefer a quality product and quality image in ice
cream just as they do in other product categories. A quality image is
communicated in many ways - taste, packaging, flavor selection, price and
often through advertising and promotion. If consistency in the product's
quality and image are strictly maintained, a brand can develop a clearly
defined and loyal consumer franchise. It is the Company's goal to develop such
a consumer franchise in each major market in which it does business.
During the second quarter of 1994, the Company embarked on a five year plan
to accelerate the sales of its Company brands by greatly increasing its
consumer marketing efforts and expanding its distribution system into
additional markets (the Strategic Plan). Under the Strategic Plan, the Company
increased the amount of its spending for advertising and consumer promotion
from $11,486,000 in 1993 to $40,287,000 in 1994, and plans to spend
approximately $50,000,000 annually on these marketing activities from 1995
through 1998. In 1994, the Company began selling its products in the Texas and
the New England markets as well as in several cities in the southern United
States. The Company anticipates that the Strategic Plan will continue to
materially reduce earnings during the next twelve to eighteen month period
below levels that would have been attained under the former business plan. The
potential benefits of the new strategy are increased market share and future
earnings above those levels that would be attained in the absence of the
strategy. The Company believes that these benefits are not likely to impact
its results until 1996 at the earliest, and no assurance can be given that the
anticipated benefits of the strategy will be achieved. The success of the
strategy will depend upon, among other things, consumer responsiveness to the
increased marketing expenditures, competitors' activities and general economic
conditions.
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Unlike many other ice cream manufacturers, the Company uses a
direct-store-delivery system which allows distribution of the Company's
products directly to the retail ice cream cabinet by either the Company's own
personnel or independent distributors who primarily distribute the Company's
products. This store level distribution allows service to be tailored to the
needs of each store. Dreyer's believes this service ensures proper product
handling, quality control, flavor selection and retail display. The
implementation of this strategy has resulted in an ice cream distribution
network capable of providing frequent direct service to grocery stores in every
market where the Company's products are sold. The distribution system
currently serves more grocery accounts than any other direct-store-delivery
system for ice cream products operating in the United States.
Each distributor, whether company-owned or independent, is primarily
responsible for sales of all products within its respective market area.
However, the Company provides sales and marketing support to its independent
distributors, including training seminars, sales aids of many kinds, point of
purchase materials, assistance with promotions and other sales support.
The distribution network in the West now includes ten distribution centers
operated by the Company in large metropolitan areas such as Los Angeles, the
San Francisco Bay Area, Phoenix, San Diego and Denver. The Company also owns
49% of M-K-D Distributors, Inc. (M-K-D), which is a distributor in Seattle,
Portland, Alaska and Salt Lake City. The remaining metropolitan areas
throughout the thirteen western states, Texas and the Far East are served
through independent distributors.
Distribution in the Eastern, Midwestern and Southeastern regions of the
United States is under the Edy's brand name. Most of the distribution of the
Company's products in these regions is through eighteen Company-owned
distribution centers, including centers in New York, Chicago, Washington, D.C.,
Tampa and Milwaukee. The Company also has independent distributors serving the
Detroit, New England and Southeastern areas of the United States.
Taken together, independent distributors, including M-K-D, accounted for
approximately 20% of consolidated net sales in 1994. The Company's agreements
with its independent distributors are generally terminable upon 30 days notice
by either party.
For fiscal 1994, no customer accounted for more than 10% of consolidated
net sales of the Company. The Company's export sales were about 1% of 1994
consolidated net sales.
The Company experiences a seasonal fluctuation in sales, with more demand
for its products during the spring and summer than during the fall and winter.
On January 4, 1994, the Company entered into a long-term distribution
agreement with Sunbelt Distributors, Inc. (Sunbelt), the leading independent
direct-store-delivery ice cream distributor in Texas. Under the agreement, the
Company paid Sunbelt $10,970,000 in cash to secure the long-term exclusive
right to have its products distributed by Sunbelt in Texas and certain parts of
Louisiana and Arkansas. In conjunction with this transaction, the Company
recorded $11,321,000 in distribution rights, including $351,000 in transaction
costs.
On November 20, 1992, the Company purchased from Calip certain assets for
$21,840,000 in cash in a transaction accounted for as a purchase. The assets
acquired include the T&W premium ice cream brand and Calip's supermarket
direct-store distribution assets in the greater New York metropolitan area. In
conjunction with the purchase, the Company recorded $18,341,000 in goodwill and
distribution rights. In 1993, the Company paid $3,000,000 in cash to satisfy a
contingent payment required under the purchase agreement.
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MANUFACTURING
The Company manufactures its products at its plants in Union City,
California; City of Commerce, California; and Ft. Wayne, Indiana. In order to
serve high altitude markets, the Company has manufacturing agreements with two
ice cream manufacturers to produce Dreyer's line of products in accordance with
specifications and quality control provided by Dreyer's. Of the approximately
56.0 million gallons of the Company's products sold in 1994, approximately 3.1
million gallons were manufactured under these arrangements. The Company also
has manufacturing agreements with two different facilities to produce a portion
of its novelty products. During 1994, these facilities produced 2.4 million
cases of Dreyer's and Edy's Ice Cream Bars and Tropical Fruit Bars. The
Company also has agreements to produce products for other manufacturers. In
1994, the Company manufactured approximately 10.9 million gallons of product
under agreements of this type.
The primary factor in the Company's product costs is the price of basic
dairy ingredients (cream, milk and skim milk) and sugar. The minimum prices
paid for dairy ingredients are established by the market under the Federal Milk
Price Support Program.
In order to ensure consistency of flavor, each of the Company's
manufacturing plants purchases, to the extent practicable, all of its required
dairy ingredients from one local supplier. These dairy products and most other
ingredients or their equivalents are available from multiple sources.
COMPETITION
The Company's manufactured products compete on the basis of brand image,
quality and breadth of flavor selection. The ice cream industry is highly
competitive and most ice cream manufacturers, including full line dairies, the
major grocery chains and the other independent ice cream processors, are
capable of manufacturing and marketing high quality ice creams. Furthermore,
there are relatively few barriers to new entrants in the ice cream business.
Much of the Company's competition comes from the "private label" brands
produced by or for the major supermarket chains and which generally sell at
prices below those charged by the Company for its products. Because these
brands are owned by the retailer, they often receive preferential treatment
when the retailers allocate available freezer space. The Company's competition
also includes premium ice creams produced by other ice cream manufacturers,
some of whom are owned by parent companies much larger than Dreyer's.
EMPLOYEES
On December 31, 1994, the Company had 2,062 employees. The Company's Union
City manufacturing and distribution employees are represented by the Milk
Drivers & Dairy Employees Union, Local 302 and the International Union of
Operating Engineers, Stationary Local No. 39 whose contracts with the Company
expire in December 1995 and August 1996, respectively. The Sacramento
distribution employees are represented by the Chauffeurs, Teamsters and Helpers
Union, Local 150 whose contract with the Company expires in August 1995. The
St. Louis distribution employees are represented by the United Food &
Commercial Workers Union, Local 655 whose contract with the Company expires in
December 1995. The Company has never experienced a strike by any of its
employees.
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ITEM 2. PROPERTIES
The Company's headquarters are located at 5929 College Avenue in Oakland,
California. The headquarters buildings include 54,000 square feet of office
space utilized by the Company and 10,000 square feet of retail space leased to
third parties.
The Company owns a manufacturing and distribution facility in Union City,
California. This facility has approximately 60,000 square feet of
manufacturing and dry storage space, 40,000 square feet of cold storage
warehouse space and 15,000 square feet of office space. The plant has the
current production capacity of 28.0 million gallons per year. During 1994, the
facility produced approximately 17.7 million gallons of ice cream and related
products.
The Company leases an ice cream manufacturing plant with an adjoining cold
storage warehouse located in the City of Commerce, California. This facility
has approximately 76,000 square feet of manufacturing and storage space and
7,000 square feet of office space. The lease on this property, including
renewal options, expires in 2011. The plant has the current production
capacity of 20.0 million gallons per year. During 1994, the facility produced
approximately 15.8 million gallons of ice cream and related products. In 1994,
the Company completed construction of a cold storage warehouse facility located
on property acquired in the City of Industry, California. This facility
includes 52,000 square feet of cold and dry storage warehouse space and 13,000
square feet of office space. This facility supplements the cold storage
warehouse space leased in the City of Commerce.
The Company also owns a manufacturing plant with an adjoining cold storage
warehouse in Fort Wayne, Indiana. This facility has approximately 116,000
square feet of manufacturing and storage space and 6,000 square feet of office
space. In addition, the Company leases approximately 55,000 square feet of
cold storage and 8,000 square feet of office space near the Fort Wayne
facility. The plant has the current production capacity of 50.0 million
gallons per year. During 1994, the facility produced approximately 32.6
million gallons of ice cream and related products. The Company's original
purchase and development of the Fort Wayne facility was financed by industrial
development bonds and the property is pledged as collateral to secure payment
of the Company's obligations to the issuer of the irrevocable letter of credit
established for the benefit of the bondholders.
The Company intentionally designs and constructs its manufacturing and
distribution facilities with a capacity greater than current needs require.
This is done to facilitate growth and expansion and minimize future capital
outlays. The cost of carrying this excess capacity is not significant.
The Company also leases or rents various local distribution and office
facilities with leases expiring through the year 2011 (including options to
renew).
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The Company's executive officers and their ages are as follows:
Name Position Age
---- -------- ---
T. Gary Rogers Chairman of the Board and 52
Chief Executive Officer
William F. Cronk, III President 52
Edmund R. Manwell Secretary 52
Thomas M. Delaplane Vice President - Sales 50
Robert P. Johnson Vice President - Marketing 51
William R. Oldenburg Vice President - Operations 48
Paul R. Woodland Vice President - Finance and 44
Administration, Chief Financial
Officer & Assistant Secretary
All officers hold office at the pleasure of the Board of Directors. There
is no family relationship among the above officers.
Mr. Rogers has served as Dreyer's Chairman of the Board and Chief Executive
Officer since its incorporation in February 1977.
Mr. Cronk has served as a director of the Company since its incorporation
in February 1977 and has been the Company's President since April 1981.
Mr. Manwell has served as Secretary of the Company since its incorporation
and as a director of the Company since April 1981. Since March 1982, Mr.
Manwell has been a partner in the law firm of Manwell & Milton, general counsel
to the Company.
Mr. Delaplane has served as Vice President - Sales of the Company since May
1987.
Mr. Johnson has served as Vice President - Marketing of the Company since
May 1990. From February 1989 to May 1990, he served as President of Skin
Science Resources, Inc., a private start-up venture which marketed dermatologic
products. From 1982 through February 1989, Mr. Johnson served as Marketing
Director of the Household Products Division of The Clorox Company.
Mr. Oldenburg has served as Vice President - Operations of the Company
since September 1986.
Mr. Woodland has served as Vice President - Finance and Administration and
Chief Financial Officer of the Company since September 1981 and as Assistant
Secretary since December 1985.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information set forth in Note 14 under the caption "Price Range
(NASDAQ)" which appears on page 28 of the Company's 1994 Annual Report to
Stockholders is incorporated herein by reference. The bid and asked quotations
for the Company's Common Stock are as reported by NASDAQ.
On March 24, 1995, the number of holders of record of the Company's common
stock was 3,669.
The Company paid a regular quarterly dividend of $.06 per share of common
stock for each quarter of 1994. On March 7, 1995, the Board of Directors,
subject to compliance with law, contractual restrictions and future review of
the condition of the Company, declared its intention to issue regular quarterly
dividends of $.06 per share of common stock for each quarter of 1995. Also on
March 7, 1995, the Board of Directors declared a dividend of $.06 per share of
common stock for the first quarter of 1995 for stockholders of record on March
31, 1995.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth under the caption "Five Year Summary of
Significant Financial Data" which appears on page 29 of the Company's 1994
Annual Report to Stockholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information set forth under the caption "Management's Discussion and
Analysis" which appears on pages 30-32 of the Company's 1994 Annual Report to
Stockholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, together with the report thereon of
Price Waterhouse dated February 13, 1995, appearing on pages 18-28 of the
Company's 1994 Annual Report to Stockholders are incorporated herein by
reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the captions "Matters Submitted to the Vote
of Stockholders - Election of Directors" and "Compliance With Section 16(a) of
the Securities Exchange Act of 1934" in the Company's Proxy Statement for the
1995 Annual Meeting of Stockholders to be filed with the Commission on or
before April 28, 1995, and the information contained in Part I of this Annual
Report on Form 10-K under the caption "Executive Officers of the Registrant,"
is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Executive Compensation" in the
Company's Proxy Statement for the 1995 Annual Meeting of Stockholders to be
filed with the Commission on or before April 28, 1995 is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Company's Proxy Statement for the 1995
Annual Meeting of Stockholders to be filed with the Commission on or before
April 28, 1995 is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the captions "Compensation Committee
Interlocks and Insider Participation" and "Certain Transactions" in the
Company's Proxy Statement for the 1995 Annual Meeting of Stockholders to be
filed with the Commission on or before April 28, 1995 is incorporated herein by
reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules:
The following documents are filed as part of this report:
Page in
Annual
Report*
-------
1. Financial Statements:
Report of Independent Accountants 18
Consolidated Statement of Income for the
three years ended December 31, 1994 18
Consolidated Balance Sheet at
December 31, 1994 and December 25, 1993 19
Consolidated Statement of Changes in
Stockholders' Equity for the three years
ended December 31, 1994 20
Consolidated Statement of Cash Flows for
the three years ended December 31, 1994 21
Notes to Consolidated Financial Statements 22-28
Page
----
2. Financial Statement Schedules:
Report of Independent Accountants on Financial
Statement Schedule 18
For the three years ended December 31, 1994
II. Valuation and Qualifying Accounts 19
All other schedules are omitted because they are
not applicable or the required information is
shown in the financial statements or notes
thereto.
Financial statements of any 50% or less owned
company has been omitted because the Registrant's
proportionate share of the income from continuing
operations before income taxes is less than 20% of
the respective consolidated amounts, and the
investment in and advances to any such company is
less than 20% of consolidated total assets.
_______
* Incorporated by reference to the indicated pages of the Company's 1994
Annual Report to Stockholders.
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3. List of Management Compensation Agreements
(i) Dreyer's Grand Ice Cream, Inc. Incentive
Stock Option Plan (1982) referenced in Exhibit
10.3 herein.
(ii) Indemnification Agreements by and between
Dreyer's Grand Ice Cream, Inc. and each of its
directors, executive officers and certain other
officers referenced in Exhibit 10.11 herein.
(iii) Dreyer's Grand Ice Cream, Inc. Stock
Option Plan (1992) referenced in Exhibit 10.19
herein.
(iv) Dreyer's Grand Ice Cream, Inc. Incentive
Bonus Plan referenced in Exhibit 10.22 herein.
(v) Dreyer's Grand Ice Cream, Inc. Stock
Option Plan (1993) referenced in Exhibit 10.23
herein.
(vi) Dreyer's Grand Ice Cream, Inc. Income
Swap Plan referenced in Exhibit 10.24 herein.
(b) Reports on Form 8-K
Not applicable.
(c) Exhibits
EXHIBIT
NUMBER DESCRIPTION
------ -----------
2.1 Asset Purchase Agreement dated as of November 20, 1992 by and between Edy's Grand Ice Cream and Calip Dairies, Inc.
(Exhibit 2.1(11)).
2.2 Securities Purchase Agreement dated June 24, 1993 by and among Dreyer's Grand Ice Cream, Inc., Trustees of General
Electric Pension Trust, GE Investment Private Placement Partners, I and General Electric Capital Corporation (Exhibit
2.1(13)).
2.3 Amendment to Securities Purchase Agreement dated May 6, 1994 by and among Dreyer's Grand Ice Cream, Inc., Trustees of
General Electric Pension Trust, GE Investment Private Placement Partners, I and General Electric Capital Corporation,
amending Exhibit 2.2 (Exhibit 2.1(16)).
2.4 Stock and Warrant Purchase Agreement dated as of May 6, 1994 by and between Dreyer's Grand Ice Cream, Inc. and Nestle
Holdings, Inc. (Exhibit 2.1(17)).
2.5 First Amendment to Stock and Warrant Purchase Agreement dated as of June 14, 1994 by and between Dreyer's Grand Ice
Cream, Inc. and Nestle Holdings, Inc., amending Exhibit 2.4 (Exhibit 2.1(18)).
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3.1 Certificate of Incorporation of Dreyer's Grand Ice Cream, Inc., as amended, including the Certificate of Designation of
Series A Convertible Preferred Stock, as amended, setting forth the Powers, Preferences, Rights, Qualifications,
Limitations and Restrictions of such series of Preferred Stock and the Certificate of Designation of Series B
Convertible Preferred Stock, as amended, setting forth the Powers, Preferences, Rights, Qualifications, Limitations and
Restrictions of such series of Preferred Stock (Exhibit 3.1(18)).
3.2 Certificate of Designation, Preferences and Rights of Series A Participating Preference Stock.
3.3 By-laws of Dreyer's Grand Ice Cream, Inc., as last amended May 2, 1994 (Exhibit 3.2(18)).
4.1 Amended and Restated Rights Agreement dated March 4, 1991 between Dreyer's Grand Ice Cream, Inc. and Bank of America,
NT & SA (Exhibit 10.1(6)).
4.2 Registration Rights Agreement dated as of June 30, 1993 among Dreyer's Grand Ice Cream, Inc., General Electric Capital
Corporation, Trustees of General Electric Pension Trust, and GE Investment Private Placement Partners, I (Exhibit
4.1(14)).
4.3 Amendment to Registration Rights Agreement dated May 6, 1994 by and among Dreyer's Grand Ice Cream, Inc., Trustees of
General Electric Pension Trust, GE Investment Private Placement Partners, I and General Electric Capital Corporation,
amending Exhibit 4.2 (Exhibit 4.1(16)).
4.4 First Amendment to Amended and Restated Rights Agreement dated as of June 14, 1994 between Dreyer's
Grand Ice Cream, Inc. and First Interstate Bank of California (as successor Rights Agent to Bank of America NT & SA),
amending Exhibit 4.1 (Exhibit 4.1(18)).
4.5 Registration Rights Agreement dated as of June 14, 1994 between Dreyer's Grand Ice Cream, Inc. and Nestle Holdings,
Inc. (Exhibit 4.2(18)).
4.6 Warrant Agreement dated as of June 14, 1994 between Dreyer's Grand Ice Cream, Inc. and Nestle Holdings, Inc. (Exhibit
4.3(18)).
10.1 Agreement dated September 18, 1978 between Dreyer's Grand Ice Cream, Inc. and Kraft, Inc. (Exhibit 10.8(1)).
10.2 Agreement and Lease dated as of January 1, 1982 between Jack and Tillie Marantz and Dreyer's Grand Ice Cream, Inc.,
as amended.
10.3 Dreyer's Grand Ice Cream, Inc. Incentive Stock Option Plan (1982), as amended (Exhibit 10.6(15)).
10.4 Loan Agreement between Edy's Grand Ice Cream and City of Fort Wayne, Indiana dated September 1, 1985 and related
Letter of Credit Letter of Credit Agreement, Mortgage, Security Agreement, Pledge and Security Agreement and General
Continuing Guaranty of Dreyer's Grand Ice Cream, Inc. (Exhibit 10.33(2)).
10.5 Distribution Agreement between Dreyer's Grand Ice Cream, Inc. and Ben & Jerry's Homemade, Inc. dated January 6, 1987
(Exhibit 10.1(3)).
12
15
10.6 Amendment and Waiver dated July 17, 1987 between Dreyer's Grand Ice Cream, Inc. and Security Pacific National Bank,
amending the General Continuing Guaranty referenced in Exhibit 10.4 (Exhibit 10.44(7)).
10.7 Amendment and Waiver dated December 24, 1987 between Dreyer's Grand Ice Cream, Inc. and Security Pacific National Bank,
amending the General Continuing Guaranty referenced in Exhibit 10.4 (Exhibit 10.45(7)).
10.8 Master Lease dated September 28, 1988 between Dreyer's Grand Ice Cream, Inc. and Security Pacific Equipment Leasing,
Inc., as amended (Exhibit 10.53(7)).
10.9 Agreement for Amendments to Distribution Agreement dated as of January 20, 1989 among Dreyer's Grand Ice Cream, Inc.,
Edy's Grand Ice Cream, Edy's of New York, Inc., and Ben & Jerry's Homemade, Inc., amending Exhibit 10.5 (Exhibit 10.46
(4)).
10.10 Amendment to the Distribution Agreement dated as of April 11, 1989 by and among Dreyer's Grand Ice Cream, Inc., Edy's
Grand Ice Cream, Edy's of New York, Inc., and Ben & Jerry's Homemade, Inc., amending Exhibit 10.5 (Exhibit 10.46(5)).
10.11 Form of Indemnification Agreement between Dreyer's Grand Ice Cream, Inc. and each officer and director of Dreyer's
Grand Ice Cream, Inc. (Exhibit 10.47(4)).
10.12 Assignment of Lease dated as of March 31, 1989 among Dreyer's Grand Ice Cream, Inc., Smithway Associates, Inc. and
Wilsey Foods, Inc. (Exhibit 10.52(5)).
10.13 Amendment of Lease dated as of March 31, 1989 between Dreyer's Grand Ice Cream, Inc. and Smithway Associates, Inc., as
amended by letter dated April 17, 1989 between Dreyer's Grand Ice Cream, Inc. and Wilsey Foods, Inc., amending Exhibit
10.12 (Exhibit 10.53(5)).
10.14 Manufacturing and Warehouse Agreement dated as of April 5, 1989 by and between Edy's Grand Ice Cream and Ben & Jerry's
Homemade, Inc. and Agreement for First Amendment to Manufacturing and Warehouse Agreement dated as of January 3, 1990
(Exhibit 10.45(5)).
10.15 Third Amendment to General Continuing Guaranty and Waiver dated January 29, 1991 between Dreyer's Grand Ice Cream, Inc.
and Security Pacific National Bank, amending the General Continuing Guaranty referenced in Exhibit 10.4 (Exhibit
10.46(7)).
10.16 $25,000,000 9.3% Senior Notes: Form of Note Agreement dated as of March 15, 1991, and executed on April 12, 1991
between Dreyer's Grand Ice Cream, Inc. and each of Massachusetts Mutual Life Insurance Company, Massachusetts Mutual
Life Pension Insurance Company, Connecticut Mutual Life Insurance Company, The Equitable Life Assurance Society of the
United States, and TransAmerica Occidental Life Insurance Company (Exhibit 19.1(8)).
10.17 Second Amendment to Distribution Agreement dated as of August 31, 1992, amending Exhibit 10.5 (Exhibit 19.6(10)).
10.18 Letter Agreement dated February 4, 1992 between Dreyer's Grand Ice Cream, Inc. and Ben & Jerry's Homemade, Inc.,
amending Exhibit 10.14 (Exhibit 10.61(9)).
13
16
10.19 Dreyer's Grand Ice Cream, Inc. Stock Option Plan (1992) (Exhibit 10.35(15)).
10.20 Agreement of Amendment and Waiver, dated as of September 30, 1992, between Dreyer's Grand Ice Cream, Inc. and each of
Massachusetts Mutual Life Insurance Company, MML Pension Insurance Company, the Connecticut Mutual Life Insurance
Company, the Equitable Life Assurance Society of the United States, and TransAmerica Occidental Life Insurance Company
(together, the "Lenders") regarding the Note Agreements dated as of March 15, 1991 between Dreyer's Grand Ice Cream,
Inc. and the Lenders, which Note Agreements are referenced in Exhibit 10.16 (Exhibit 19.5(10)).
10.21 Second Amendment to Note Agreements dated as of September 30, 1992, between Dreyer's Grand Ice Cream, Inc. and each of
Massachusetts Mutual Life Insurance Company, MML Pension Insurance Company, the Connecticut Mutual Life Insurance
Company, the Equitable Life Assurance Society of the United States, and TransAmerica Occidental Life Insurance Company
(together, the "Lenders") regarding the Note Agreements dated as of March 15, 1991 between Dreyer's Grand Ice Cream,
Inc. and the Lenders, which Note Agreements are referenced in Exhibit 10.16 (Exhibit 10.58(12)).
10.22 Description of Dreyer's Grand Ice Cream, Inc. Incentive Bonus Plan (Exhibit 10.57(12)).
10.23 Dreyer's Grand Ice Cream, Inc. Stock Option Plan (1993) (Exhibit 10.9(15)).
10.24 Dreyer's Grand Ice Cream, Inc. Income Swap Plan (Exhibit 10.38 (15)).
10.25 Distribution and Customer Base Agreement dated January 4, 1994 by and between Dreyer's Grand Ice Cream, Inc. and
Sunbelt Distributors, Inc. (Exhibit 10.37(15)).
10.26 Amendment to Distribution Agreement dated April 18, 1994, and Letter Agreement modifying such Amendment to Distribution
Agreement dated April 18, 1994 between Dreyer's Grand Ice Cream, Inc. and Ben & Jerry's Homemade, Inc., amending Exhibit
10.5 (Exhibit 10.3(16)).
10.27 Amendment to Distribution Agreement dated December 12, 1994 between Dreyer's Grand Ice Cream, Inc. and Ben & Jerry's
Homemade, Inc., amending Exhibit 10.5.
10.28 Amended and Restated Credit Agreement dated as of December 13, 1994 among Dreyer's Grand Ice Cream, Inc., Bank of
America NT & SA (as a Bank and as Agent), and ABN-AMRO Bank N.V. (as a Bank and as Co-Agent).
11 Computation of Net Income Per Share.
13 Those portions of Dreyer's Grand Ice Cream, Inc. 1994 Annual Report to Stockholders which are incorporated by reference
into this Annual Report on Form 10-K.
21 Subsidiaries of Registrant.
23 Consent of Independent Accountants.
27 Financial Data Schedule.
14
17
_______________
(1) Incorporated by reference to designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Registration Statement on Form S-1 and Amendment No. 1
thereto, filed under Commission File No. 2-71841 on April 16, 1981 and
June 11, 1981, respectively.
(2) Incorporated by reference to the designated exhibit to Dreyer's Grand
Ice Cream, Inc.'s Annual Report on Form 10-K and Amendment No. 1
thereto for the fiscal year ended December 28, 1985 filed under
Commission File No. 0-10259 on March 28, 1986 and April 14, 1986,
respectively.
(3) Incorporated by reference to the designated exhibit to Dreyer's Grand
Ice Cream, Inc.'s Current Report on Form 8-K filed under Commission
File No. 0-10259 on January 23, 1987.
(4) Incorporated by reference to the designated exhibit to Dreyer's Grand
Ice Cream, Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1988 filed under Commission File No. 0-10259 on March 31,
1989.
(5) Incorporated by reference to the designated exhibit to Dreyer's Grand
Ice Cream, Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 30, 1989 filed under Commission File No. 0-10259 on March 30,
1990.
(6) Incorporated by reference to the designated exhibit to Dreyer's Grand
Ice Cream, Inc.'s Current Report on Form 8-K filed under Commission
File No. 0-10259 on March 20, 1991.
(7) Incorporated by reference to the designated exhibit to Dreyer's Grand
Ice Cream, Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 29, 1990 filed under Commission File No. 0-10259 on March 29,
1991.
(8) Incorporated by reference to the designated exhibit to Dreyer's Grand
Ice Cream, Inc.'s Quarterly Report on Form 10-Q for the quarterly
period ended on June 29, 1991 filed under Commission File No. 0-10259
on August 13, 1991.
(9) Incorporated by reference to the designated exhibit to Dreyer's Grand
Ice Cream, Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 28, 1991 filed under Commission File No. 0-10259 on March 27,
1992.
(10) Incorporated by reference to the designated exhibit to Dreyer's Grand
Ice Cream, Inc.'s Quarterly Report on Form 10-Q for the quarterly
period ended on September 26, 1992 filed under Commission File No.
0-10259 on November 10, 1992.
(11) Incorporated by reference to the designated exhibit to Dreyer's Grand
Ice Cream, Inc.'s Current Report on Form 8-K filed under Commission
File No. 0-10259 on December 4, 1992.
(12) Incorporated by reference to the designated exhibit to Dreyer's Grand
Ice Cream, Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 26, 1992 filed under Commission File No. 0-10259 on March 26,
1993.
(13) Incorporated by reference to designated exhibit to Dreyer's Grand
Ice Cream, Inc.'s Current Report on Form 8-K filed under Commission
File No. 0-10259 on June 25, 1993.
15
18
(14) Incorporated by reference to the designated exhibit to Dreyer's
Grand Ice Cream, Inc.'s Quarterly Report on Form 10-Q for the
quarterly period ended on June 26, 1993 filed under Commission File
No. 0-10259 on August 10, 1993.
(15) Incorporated by reference to the designated exhibit to Dreyer's
Grand Ice Cream, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 25, 1993 filed under Commission File No.
0-14190 on March 25, 1994.
(16) Incorporated by reference to designated exhibit to Dreyer's Grand
Ice Cream, Inc.'s Quarterly Report on Form 10-Q for the quarterly
period ended March 26, 1994 filed under Commission File No. 0-14190
on May 10, 1994.
(17) Incorporated by reference to the designated exhibit to Dreyer's
Grand Ice Cream, Inc.'s Current Report on Form 8-K filed under
Commission File No. 0-14190 on May 9, 1994.
(18) Incorporated by reference to designated exhibit to
Dreyer's Grand Ice Cream, Inc.'s Quarterly Report on Form
10-Q for the quarterly period ended June 25, 1994 filed
under Commission File No. 0-14190 on August 9, 1994.
16
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: March 24, 1995 DREYER'S GRAND ICE CREAM, INC.
By: /s/ PAUL R. WOODLAND
----------------------------
(Paul R. Woodland)
Vice President - Finance and Administration,
Chief Financial Officer and Assistant Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ T. GARY ROGERS Chairman of the Board and March 24, 1995
-------------------------- Chief Executive Officer
(T. Gary Rogers) and Director (Principal
Executive Officer)
/s/ WILLIAM F. CRONK, III President and Director March 24, 1995
--------------------------
(William F. Cronk, III)
/s/ EDMUND R. MANWELL Secretary and Director March 24, 1995
--------------------------
(Edmund R. Manwell)
/s/ PAUL R. WOODLAND Vice President - Finance March 24, 1995
-------------------------- and Administration,
(Paul R. Woodland) Chief Financial Officer
and Assistant Secretary
(Principal Financial Officer)
/s/ JEFFREY P. PORTER Corporate Controller March 24, 1995
-------------------------- (Principal Accounting Officer)
(Jeffrey P. Porter)
/s/ MERRIL M. HALPERN Director March 24, 1995
--------------------------
(Merril M. Halpern)
/s/ JEROME L. KATZ Director March 24, 1995
--------------------------
(Jerome L. Katz)
/s/ JOHN W. LARSON Director March 24, 1995
--------------------------
(John W. Larson)
/s/ JACK O. PEIFFER Director March 24, 1995
--------------------------
(Jack O. Peiffer)
/s/ ANTHONY J. MARTINO Director March 24, 1995
--------------------------
(Anthony J. Martino)
/s/ TIMM F. CRULL Director March 24, 1995
--------------------------
(Timm F. Crull)
Supplemental information to be furnished with reports filed pursuant to
Section 15(d) of the Act by registrants which have not registered securities
pursuant to Section 12 of the Act:
Not applicable.
17
20
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Dreyer's Grand Ice Cream, Inc.
Our audits of the consolidated financial statements referred to in our
report dated February 13, 1995 appearing on page 18 of the 1994 Annual Report
to Stockholders of Dreyer's Grand Ice Cream, Inc. (which report and
consolidated financial statements are incorporated by reference in this Annual
Report on Form 10-K) also included an audit of the Financial Statement Schedule
listed in Item 14(a)2 of this Form 10-K. In our opinion, this Financial
Statement Schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.
PRICE WATERHOUSE LLP
San Francisco, California
February 13, 1995
18
21
SCHEDULE II
DREYER'S GRAND ICE CREAM, INC.
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END
CLASSIFICATIONS OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
------------------------------------------------------ ----------- ---------- ---------- ---------
Fiscal year ended December 26, 1992:
Allowance for doubtful accounts..................... $ 587 $ 703 $ 777 (1) $ 513
Amortization of goodwill and distribution rights 3,705 1,563 -- 5,268
Amortization of other assets........................ 1,788 908 166 (2) 2,530
------- ------ ------ -------
$ 6,080 $3,174 $ 943 $ 8,311
======= ====== ====== =======
Fiscal year ended December 25, 1993:
Allowance for doubtful accounts..................... $ 513 $1,397 $1,375 (1) $ 535
Amortization of goodwill and distribution rights 5,268 2,304 -- 7,572
Amortization of other assets........................ 2,530 979 -- 3,509
------- ------ ------ -------
$ 8,311 $4,680 $1,375 $11,616
======= ====== ====== =======
Fiscal year ended December 31, 1994:
Allowance for doubtful accounts..................... $ 535 $1,672 $1,572 (1) $ 635
Amortization of goodwill and distribution rights 7,572 2,871 -- 10,443
Amortization of other assets........................ 3,509 2,921 208 (2) 6,222
------- ------ ------ -------
$11,616 $7,464 $1,780 $17,300
======= ====== ====== =======
(1) Write-off of receivables considered uncollectible.
(2) Removal of fully-amortized assets.
19
22
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.2 Certificate of Designation, Preferences and Rights of Series A Participating Preference Stock.
10.2 Agreement and Lease dated as of January 1, 1982 between Jack and Tillie Marantz and Dreyer's Grand Ice Cream, Inc.,
as amended.
10.27 Amendment to Distribution Agreement dated December 12, 1994 between Dreyer's Grand Ice Cream, Inc. and Ben & Jerry's
Homemade, Inc., amending Exhibit 10.5.
10.28 Amended and Restated Credit Agreement dated as of December 13, 1994 among Dreyer's Grand Ice Cream, Inc., Bank of
America NT & SA (as a Bank and as Agent), and ABN-AMRO Bank N.V. (as a Bank and as Co-Agent).
11 Computation of Net Income Per Share.
13 Those portions of Dreyer's Grand Ice Cream, Inc. 1994 Annual Report to Stockholders which are incorporated by reference
into this Annual Report on Form 10-K.
21 Subsidiaries of Registrant.
23 Consent of Independent Accountants.
27 Financial Data Schedule.
20
EX-3.2
2
CERTIFICATE OF DESIGNATION
1
Exhibit 3.2
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A
PARTICIPATING PREFERENCE STOCK
OF
DREYER'S GRAND ICE CREAM, INC.
Pursuant to Section 151 of the General Corporation Law of the State of Delaware
We, T. Gary Rogers, Chairman of the Board and Chief Executive Officer,
and Edmund R. Manwell, Secretary, of Dreyer's Grand Ice Cream, Inc., a
corporation organized and existing under the General Corporation Law of the
State of Delaware, in accordance with the provisions of Section 103 thereof, DO
HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
by the Certificate of Incorporation of the said Corporation, the said Board of
Directors, on May 6, 1987, adopted the following resolution creating a series
of one hundred and fifty thousand (150,000) shares of Preference Stock
designated as Series A Participating Preference Stock.
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its
Certificate of Incorporation, a series of Preference Stock of the Corporation
be and it hereby is created, and that the designation and amount thereof and
the voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
SECTION 1. Designation and Amount.
-----------------------
The shares of such series shall be designated as "Series A
Participating Preference Stock" and the number of shares constituting such
series shall be one hundred and fifty thousand (150,000).
SECTION 2. Dividends and Distributions.
----------------------------
The holders of shares of Series A Participating Preference Stock
shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, dividends or
distributions payable in like kind and on the same date(s) each year as
dividends or distributions declared on the Common Stock, par value $1.00 per
share, of the Corporation (the "Common Stock") (each such date being referred
to herein as a "Dividend Payment Date"), commencing on the first Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Participating Preference Stock, in an amount per share (rounded to the
nearest cent) equal to (subject to the provision for adjustment hereinafter set
forth) 100 times the aggregate per share amount of all cash dividends, and 100
times the aggregate per share amount
1
2
(payable in kind) of all non-cash dividends or other distributions other than a
dividend payable in shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock. In the event the Corporation shall at any time
after May 6, 1987 (the "Rights Declaration Date") (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount to which holders of shares
of Series A Participating Preference Stock were entitled immediately prior to
such event under the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
SECTION 3. Voting Rights.
-------------
The holders of shares of Series A Participating Preference Stock
shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter
set forth, each one one-hundredth of a share of Series A Participating
Preference Stock shall entitle the holder thereof to one vote on all matters
submitted to a vote of the stockholders of the Corporation. In the event the
Corporation shall at any time after the Rights Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the number of votes per share
to which holders of shares of Series A Participating Preference Stock were
entitled immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number of share of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) Except as otherwise provided herein or by law, the
holders of Series A Participating Preference Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
(C) Holders of Series A Participating Preference Stock
shall have all of the same voting rights and their consent shall be required
for taking any corporate action to the same extent as the holders of Common
Stock.
SECTION 4. Reacquired Shares.
-----------------
Any shares of Series A Participating Preference Stock purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of
Preference Stock and may be reissued as part of a new series of
2
3
Preference Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
SECTION 5. Liquidation, Dissolution or Winding Up.
--------------------------------------
(A) Upon any voluntary liquidation, dissolution or
winding up of the Corporation, distribution shall be made to the holders of
shares of the Series A Participating Preference Stock at the same time as, and
with equal priority to the holders of shares of Common Stock. Holders of
Series A Participating Preferred Stock and holders of shares of Common Stock
shall receive their ratable and proportionate share of the assets to be
distributed in the ratio of 100 (as appropriately adjusted as set forth in
subparagraph B below to reflect such events as stock splits, stock dividends
and recapitalizations with respect to the Common Stock (such number, the
"Adjustment Number")) to 1 with respect to such Preference Stock and Common
Stock, on a per share basis.
(B) In the event the Corporation shall at any time after
the Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event, and the denominator of which is the number of
share of Common Stock that were outstanding immediately prior to such event.
SECTION 6. Consolidation, Merger, etc.
--------------------------
In case the Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case the shares of Series A Participating
Preference Stock shall at the same time be similarly exchanged or changed in
an amount per share (subject to the provision for adjustment hereinafter set
forth) equal to 100 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be, into which
or for which each share of Common Stock is changed or exchanged. In the
event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Participating Preference Stock shall be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
3
4
SECTION 7. No Redemption.
-------------
The shares of Series A Participating Preference Stock shall not be
redeemable.
SECTION 8. Amendment.
---------
The Certificate of Incorporation of the Corporation shall not be
further amended in any manner which would effect a change in the rights of the
holders of Series A Participating Preference Stock, but which would not effect
a corresponding and proportionate change in the rights of the holders of
Common Stock, without the affirmative vote of the holders of a majority or
more of the outstanding shares of Series A Participating Preference Stock,
voting separately as a class. It is the intent of this Section 8 that the
rights of a holder of one one-hundredth of a share of Series A Participating
Preference Stock set forth herein shall be and remain identical to the rights
of a holder of one share of Common Stock.
SECTION 9. Fractional Shares.
-----------------
Series A Participating Preference Stock may be issued in fractions of
a share which shall entitle the holder, in proportion to such holder's
fractional shares, to exercise voting rights, receive dividends, participate
in distributions and to have the benefit of all other rights of holders of
Series A Participating Preference Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate
and do affirm the foregoing as true under the penalties of perjury this 5th day
of June [1987].
T. GARY ROGERS
/s/ T. Gary Rogers
-------------------------
T. Gary Rogers
Chairman of the Board and
Chief Executive Officer
ATTEST:
EDMUND R. MANWELL
/s/ Edmund R. Manwell
---------------------
Edmund R. Manwell
Secretary
4
EX-10.2
3
AGREEMENT AND LEASE
1
Exhibit 10.2
AGREEMENT AND LEASE
THIS AGREEMENT AND LEASE is made effective as of January 1, 1982
between JACK and TILLIE MARANTZ, ("Lessor") and DREYER'S GRAND ICE CREAM, INC.,
a California corporation, ("Lessee") with reference to the following facts:
A. Lessor owns a certain milk and dairy products processing and
distribution plant located at 5729 East Smithway Street in the
City of Commerce, California ("Commerce Plant").
B. Lessee is engaged in business within the State of California
and elsewhere as, among other things, a processor and
distributor of ice cream and dairy products.
C. By this Agreement and Lease, Lessor is leasing to Lessee and
Lessee is hiring from Lessor a certain portion of the Commerce
Plant, together with certain ice cream processing equipment.
NOW, THEREFORE, IT IS AGREED, as follows:
I
DESCRIPTION OF PREMISES
-----------------------
1.01 Lessor leases to Lessee, and Lessee leases from Lessor certain
portions of the Commerce Plant as follows:
(a) For Lessee's exclusive use and occupancy certain areas
within the Commerce Plant outlined on the Exhibits
hereto annexed (hereinafter "Leased Premises")
consisting of the following of which Lessee will have
the right to quiet possession during the term hereof:
(1) Ice cream hardening and storage areas, all as
outlined in blue on Exhibit "I" consisting of
approximately 18,688 square feet, including
dock and loading area.
(2) Eighteen (18) truck parking spaces and hookups
as outlined in red on Exhibit "2" hereto
annexed and made a part hereof consisting of
approximately 9,720 square feet.
(3) Truck parking (delivery trucks) area as
outlined in brown on Exhibit "3" hereto annexed
and made a part hereof, consisting of
approximately 9,344 square feet, with
reasonable right to pedestrian ingress and
egress for all Commerce Plant tenants through
such area.
(4) Office space in the office area on the second
floor of the Commerce Plant, as outlined in
blue on Exhibit "4" hereto
-1-
2
annexed and made a part hereof consisting of
approximately 6,800 square feet (as is,
excepting illumination and repairs of original
fixtures).
(5) Dry storage area, consisting of approximately
5,850 square feet, located on the main floor of
said Commerce Plant, as outlined in red on
Exhibit "5" hereto annexed and made a part
hereof.
(6) Lower floor area (basement) as outlined in red
on Exhibit "6" hereto annexed and made a part
hereof consisting of approximately 4,219 square
feet and stairwells connecting such area with
the main floor area of the Leased Premises.
(7) Twenty (20) parking spaces in the employee
parking lot north of the main building,
consisting of approximately 4,000 square feet,
as outlined in green on Exhibit "7" hereto
annexed and made a part hereof, together with
five executive parking spaces in the front or
side parking areas as designated by Lessor,
consisting of approximately 1,000 square feet;
provided, that Lessee may, if available, from
time to time require the addition of up to a
total of twenty (20) additional random employee
parking spaces for an additional rental
starting at Twenty Dollars ($20) per month per
space, subject to the percentage period
increase as contained in Paragraph 3.05.
(8) Locker, parts storage and plant office areas as
outlined in red on Exhibit "8", consisting of
approximately 788 square feet.
(9) Milk and ice cream products receiving, bulk
storage, pasteurizing and filling areas located
on the first floor of said Commerce Plant, as
outlined in red of Exhibit "9" consisting of
approximately 9,728 square feet.
(b) The right and license to use in connection with other
tenants and with Lessor those portions of the Commerce
Plant outlined in green in Exhibits "1" through "9"
("Common Areas") and generally described as follows:
(1) Except as provided in paragraphs 1.02 and
1.03(2), the right of ingress and egress to,
from and through entrances, exits, elevators,
parking lots and loading docks, passageways,
corridors, roadways and hallways within the
Commerce Plant leading to and from the Leased
Premises.
(2) Common Areas and restrooms at various locations
within the Commerce Plant which are provided
for common use by Lessor and Lessor's other
tenants, employees and invitees.
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(3) Use by plant employees of Lessee, the
two lunchrooms located on the first and second
floors of the Commerce Plant.
(4) Reasonable use by business invitees of Lessee
of the visitors' parking area on the premises
of the Commerce Plant. There will be a minimum
of five (5) visitors' parking spaces available.
(5) Common yard area to the east of the northeast
corner of the said Commerce Plant.
(6) Common receiving and unloading area on the
north side of the Commerce Plant, directly
across from the garage, near the railroad
spur containing approximately 4,320 square feet.
(7) The railroad spur paralleling the dock on the
north side of the Commerce Plant adjacent to
the dock paralleling the butter storage area.
(8) Conveyors for use by Lessee in transporting
ice cream, fluid milk and other dairy
products from processing areas and other
receiving areas to refrigerated rooms and from
refrigerated rooms to the loading docks used
by Lessee.
(9) Reasonable ingress and egress rights to the
basement maintenance shop and storage area,
north dock and aisle-ways in warehouse,
lobbies, entrances and exits.
1.02 Lessor, from time to time, shall have the right to redesignate
and/or make changes in the Common Areas where necessary or
appropriate to do so; provided, however, that Lessee shall have
full and unimpaired use of and access to the Leased Premises
at all times, that the benefits of the Common Areas as changed
shall be substantially identical to those prior to any change
and that no such redesignation of Common Areas shall materially
interfere with or impair the conduct of Lessee's business
operations.
1.03 Lessor shall with respect to the Common Areas have the right to:
(1) For the benefit of all lessees, Lessor shall
establish and enforce reasonable rules and
regulations applicable to all tenants
concerning the maintenance, management, use and
operation of Common Areas.
(2) Close temporarily any of the Common Areas for
maintenance purposes, provided that Lessor to
the extent practical, shall give reasonable
notice thereof to Lessee and shall endeavor to
schedule such closure so as not to unreasonably
interfere with Lessee's business operations.
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(3) Select a person or persons to maintain and
operate any of the Common Areas if at any time
Lessor determines that the best interests of the
Commerce Plant will be served by having any of
the Common Areas maintained and operated by
that person. Lessor shall have the right to
negotiate and enter into a contract with that
person on such terms and conditions and for
such period of time as Lessor deems reasonable
and proper, both as to service and as to cost.
1.04 Lessee shall pay as additional rent 18.76% of the reasonable
cost and expenses of upkeep, maintenance and repair of the
Common Area.
II
LEASED MACHINERY AND EQUIPMENT
------------------------------
2.01 In connection with this lease of a portion of the Commerce
Plant, Lessor hereby leases to Lessee and Lessee leases from
Lessor, the plant machinery and equipment ("Leased Equipment")
scheduled on Exhibit "10" hereto annexed and made a part hereof.
2.02 Lessee will keep and maintain the Leased Equipment in good
condition and repair at its sole cost and expense and will bear
all setup costs of putting the Leased Equipment into operation.
Lessee accepts the Leased Equipment where is and as is.
2.03 All of the Leased Equipment is physically located at or
installed in those areas of the Commerce Plant which comprise
a portion of the Leased Premises.
2.04 The Leased Equipment is leased to Lessee for its exclusive use
in the carrying on of its ice cream processing operations and
conduct by it of its business on the Leased Premises. Lessee
agrees that without the written consent of Lessor none of the
Leased Equipment will be moved by it from the Leased Premises.
The cost of moving the Leased Equipment from place to place
within the Leased Premises shall be borne exclusively by
Lessee.
2.05 In the event Lessee desires to replace any of the Leased
Equipment during the term hereof, it shall notify Lessor in
writing of the Leased Equipment to be replaced, whereupon
Lessee shall have sixty (60) days in which to remove the
replaced equipment from the Leased Premises. Such Leased
Equipment will be returned to Lessor in the same condition as
leased, subject to normal wear and tear. The cost of removal of
the replaced equipment from the building which is a part of the
Commerce Plant shall be borne exclusively by Lessee and all
other costs of removal from the Leased Premises shall be borne
by Lessor. The cost of any replacement of equipment including,
without limitation, the cost of acquiring the new equipment and
the cost of altering the Leased Premises to accommodate the
new equipment and to allow for its installation or replacement
and/or removal shall be borne exclusively by Lessee. Any new
equipment so installed shall remain the property of Lessee, and
Lessee may remove the same at
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any time during the term hereof and upon termination or
expiration hereof.
2.06 In conjunction with the lease of the Leased Equipment for and
during the term hereof, Lessor hereby grants to Lessee the
right to use all plant machinery and equipment of Lessor the
use of which by Lessee is incidental to its use and operation
of the Leased Equipment (the "Licensed Equipment").
2.07 All of the Leased Equipment is physically located on areas of
the Commerce Plant.
2.08 Lessor will have no obligation for repair or maintenance of the
Leased or Licensed Equipment and Lessee will reimburse Lessor
in the amount of all direct expenses incurred by Lessor in
effecting any repairs or replacements of Leased or Licensed
Equipment damaged or destroyed as the result of the failure on
the part of Lessee to exercise ordinary care in its use thereof.
2.09 Lessor will incur no liability of any kind or nature to Lessee
in the event of breakdown or failure of any of the Leased
Equipment or Licensed Equipment occurring other than by reason
of intentional acts or lack of ordinary care on the part of
Lessor.
2.10 Lessee shall have no right to assign this Agreement and Lease
or any interest in the Leased Equipment except as a part of the
assignment or transfer of its entire interest under this
Agreement and Lease as governed by the provisions of paragraph
14.01 hereof.
2.11 Lessee shall indemnify and hold Lessor harmless from any
liability for damages, for personal injury or death or damage
to personal property arising out of or in connection with the
negligent or improper use by Lessee of the Leased Premises, the
Leased Equipment and the Licensed Equipment.
2.12 Upon the expiration or sooner termination of this Agreement and
Lease, Lessee shall surrender to Lessor the possession of all
of the Leased Equipment and all right of use by Lessee of all
of the Leased Equipment and Licensed Equipment thereupon shall
cease and terminate.
III
TERM
----
3.01 The primary term of this Agreement and Lease shall be five (5)
years commencing on the date hereof and ending upon the
expiration of five (5) years from such date.
3.02 Lessee shall have the right to renew this Agreement and Lease
for five (5) additional successive terms of five (5) years
each, by giving Lessor written notice of such election on or
before six months prior to expiration of the primary term and
each succeeding renewal term.
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3.03 This Agreement and Lease may be terminated by Lessee if despite
its best reasonable efforts it is unable to obtain all
necessary governmental permits and approvals for its
contemplated operations in the Leased Premises.
3.04 This Agreement and Lease may be terminated by Lessee at any time
during the primary term or any renewal term hereof by its
giving Lessor not less than six (6) months advance written
notice thereof, if and only in the event that Lessee or its
agents should cease and discontinue its business of selling
and distributing ice cream in the Los Angeles area; provided
in Article IV, V and VI hereof for and during the remaining
balance of the primary term of this Agreement and Lease in case
such termination should occur prior to the expiration of the
primary term, and notwithstanding such termination, this
Agreement and Lease shall continue in effect until the
expiration of the primary term hereof as to all provisions
hereof which pertain to the payment of rental and other sums
hereinabove referred to.
3.05 If this Agreement and Lease is renewed as provided in paragraph
3.02, then each such renewal shall be upon each and all of the
terms, covenants and conditions, other than term, provided in
this Agreement and Lease; provided, however, that the rental
for each renewal term which is payable by Lessee to Lessor
covering the Leased Premises and Leased Equipment and Licensed
Equipment shall be computed as follows:
(a) Monthly minimum rental rate of subject leased property
and Leased Equipment shall be as follows:
First five (5) year option period
$39,375/month
Second five (5) year option period
$47,250/month
Third five (5) year option period
$55,125/month
Fourth five (5) year option period
$63,000/month
Fifth five (5) year option period
$70,875/month
Rent/Lease charges are payable in advance, monthly, and
all of the provisions of Article 5, save and except
the amounts specified in paragraphs 5.01 and 5.04
shall be applicable during all renewal terms. All Rent
shall be prorated for any partial months.
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3.06 Notwithstanding that Notice of Election to Renew this Agreement
and Lease for any renewal term has been given as hereinabove
provided, it shall not be so renewable if this Agreement and
Lease has been cancelled or terminated for any cause prior to
the time of commencement of such proposed renewal term or if,
as of the date of commencement of such proposed renewal term,
Lessee shall then be in default in any material respect in the
performance of any of the terms, covenants or conditions on its
part to be performed hereunder and has failed to commence all
necessary and proper action required to cure such default.
3.07 This Agreement and Lease shall be subject to renewal only in
its entirety.
3.08 Upon the expiration or any sooner termination of this Agreement
and Lease, Lessee shall surrender possession to Lessor all real
property and personal property leased to it hereunder, and all
rights, licenses and privileges granted to it hereunder
thereupon shall cease and terminate. A full and final
settlement of all accounts between the parties, whether arising
under this Agreement and Lease or otherwise, shall be made as
soon as practicable but in no event later than three (3) months
following the date of termination or expiration hereof.
IV
ACCEPTANCE OF PREMISES
----------------------
4.01 Lessee's taking possession of the Leased Premises and the
Leased Equipment on the commencement of the term shall
constitute Lessee's acknowledgment that the Leased Premises
and Leased Equipment are in good condition, except the matters
to be corrected as described hereinafter and the repair of the
ceiling in the storage box, the cost of which will be paid by
Lessor; provided, however, that, notwithstanding any other
provision hereof, Lessee shall not be obliged to accept and
shall not be deemed to have accepted the Leased Premises until
correction of all matters noted in the attached letter of John
Thomason dated January 6, 1982.
V
RENT AND SECURITY DEPOSIT
-------------------------
5.01 Lessee shall pay to Lessor rental for the Leased Premises and
Leased Equipment a minimum monthly rent for the Leased Premises
in the amount of Thirty-one Thousand Five Hundred Dollars
($31,500) per month commencing upon acceptance of the Leased
Premises, prorated for any partial months.
5.02 The rental amount specified in paragraph 5.01 shall be paid by
Lessee to Lessor in advance on the first day of each calendar
month during the term.
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5.03 Commencing as of February 1, 1982, in addition to the amount
specified in paragraph 5.01, Lessee shall pay to Lessor as
additional rental those amounts specified in Article VII
(Taxes), X (Utilities and Services), XI (Insurance) and
Article I, paragraph 1.04 (proportionate Common Area charges).
5.04 Upon the execution of this Agreement and Lease by Lessee,
Lessee shall deliver to Lessor the sum of Sixty-Three Thousand
Dollars ($63,000) as and for a security deposit to secure its
performance of the obligation specified herein. Said deposit
may be utilized by Lessor in whatever manner it deems fit,
including without limitation the co-mingling of said deposit
with other funds of Lessor or its expenditure in any manner
whatsoever by Lessor and shall not bear interest. Said security
deposit shall be applied to the minimum monthly rent for the
last months of the first five years of the term hereof, unless
there is damage over normal wear and tear that has not been
repaired. In that event the monies shall be used first to
repair the damages and the balance will be applied to rent.
VI
LIMITATIONS AND RESTRICTIONS ON USE
-----------------------------------
6.01 The Leased Premises and Leased Equipment are leased to Lessee
for use by it in the manufacturing of ice cream and ice cream
novelties and in the conduct of its dairy products and ice
cream distribution business and for related purposes. Lessee
agrees to restrict the use of the Leased Premises and Leased
Equipment to said purpose. Lessor will not use or permit the
use of the Commerce Plant for any purpose which is incompatible
with Lessee's activity conducted on the Premises in pursuance
of this Agreement.
6.02 Lessee will not use the Leased Premises, Leased Equipment or
permit anything to be done in or about the Leased Premises,
Leased Equipment or Common Areas, which will conflict with
any law, statute, zoning restrictions, ordinance or
governmental rule or regulation or requirements of duly
constituted public authorities now in force or which may
hereafter be in force. Lessee will do no act which will cause
a violation of any law relating to the use or occupancy
of the Leased Premises and Leased Equipment during the terms.
6.03 Lessee shall not use the Leased Premises, Leased Equipment or
Common Areas in any manner that will constitute waste,
nuisance or unreasonable annoyance to other tenants in the
building in which the Leased Premises, Leased Equipment and
Common Areas are located.
6.04 Lessee agrees to and shall, during the entire lease term and
any extensions thereof, diligently conduct and carry on the
business of ice cream and ice cream novelties manufacturing
and distributing on the Leased Premises, keep the Leased
Premises open for the purpose of carrying on such business
during usual hours as is customary in ice cream and ice cream
novelties manufacturing and distribution plant
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facilities in the State of California, and devote its best
efforts to the successful prosecution of said business.
6.05 Lessee at its own expense shall obtain all licenses and comply
with all laws applicable to the conduct of its business on the
Leased Property.
VII
TAXES; ASSESSMENTS
------------------
7.01 The respective party hereinafter set forth, as the case may be,
shall pay its proportionate share before delinquency all taxes,
assessments, license fees and other charges ("taxes") levied
and assessed against the Leased Premises, the Leased Equipment,
Lessee's personal property installed or located on the Leased
Premises, or otherwise related to the Leased Premises as
follows:
(a) Lessee's Personal Property:
--------------------------
Lessee shall pay all taxes assessed against its
personal property installed or located on the Leased
Premises. If any taxes on Lessee's personal property
are levied against Lessor or Lessor's property, and if
Lessor pays the taxes on any of these items, Lessee on
demand, shall immediately reimburse Lessor for the sum
of the taxes levied against Lessor or the proportion of
the taxes resulting from the increases in Lessor's
assessment. Lessee shall have the right to seek a
reduction in the assessed valuation of its personal
property or to contest the taxes based thereon. If
Lessee diligently seeks such reduction or contests such
taxes, the failure on Lessee's part to pay the personal
property taxes shall not constitute a default
hereunder, so long as Lessee has given to Lessor
adequate bond or surety to indemnify Lessor against
losses by reason of such failure.
(b) Taxes on the Leased Premises:
----------------------------
(i) Lessee shall pay, in addition to the rent, a
monthly deposit of Six Hundred Twenty-Three
Dollars and 78/100 ($623.78) against payment of
Lessee's proportionate share of the real
property taxes and general and special
assessments. Said monthly deposit has been
calculated using as a base year the real
property taxes and assessments for the year
1980-1981.
(ii) Lessee's proportionate share of real property
taxes will fluctuate as the result of general
and special assessments levied on the Commerce
Plant.
(iii) Lessee shall pay its proportionate share of
real property taxes and assessments on the
Commerce Plant as and when such taxes are paid
by Lessor. Lessor shall apply the monthly
deposit against Lessee's proportionate share
and Lessee shall be billed for any additional
taxes due to
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assessment increases over the 1980-81 base
year, or Lessee shall receive a refund due to
any assessment decrease from the 1980-81 base
year.
(iv) Lessee's current proportionate shares are: Land
10.5% and Improvements 18.76%.
(c) Lessee shall not be liable for any portion of any such
increase comprised of penalty or interest charges not
caused by an act or omission of Lessee.
If any general or special assessment is levied and
assessed against the building, other improvements, or
land of which the Leased Premises are a part, Lessor
can elect to either pay the assessment in full or allow
the assessment to go to bond. If Lessor pays the
assessment in full, Lessee shall pay to Lessor, each
time a payment of real property taxes is made, a sum
equal to that which would have been payable (as both
principal and interest) had Lessor allowed the
assessment to go to bond.
In addition to the foregoing, Lessee shall be obligated
to reimburse Lessor for the portion of the increase in
the real property taxes caused by a particular
improvement or modification by Lessee of the building
in which the Leased Premises are located or hereafter
caused by improvements constructed by or for the
exclusive benefit of Lessee. Lessee shall not be
liable for increases in real property taxes (whether
the increase results from increased rate and/or
valuation) attributable to additional improvements to
the Commerce Plant in which the Leased Premises are
located that are constructed after the base tax year,
where such additional improvements are constructed for
the benefit of tenants other than Lessee.
(d) Lessee, at its cost shall have the right at any time
to seek a reduction in the assessed valuation of the
building, other improvements, and land of which the
Leased Premises are a part or to contest any real
property taxes that are to be paid by Lessee. If
Lessee seeks a reduction or contests the real property
taxes, the failure on Lessee's part to pay its share
of any real property taxes shall not constitute a
default as long as Lessee complies with the provisions
of this paragraph.
Lessor shall not be required to join in any proceeding
or contest brought by Lessee unless the provisions of
any law require that the proceeding or contest be
brought by or in the name of Lessor or any owner of
the premises. In that case Lessor shall join in the
proceeding or contest or permit it to be brought in
Lessor's name, as long as Lessor is not required to
bear any cost or expense thereof including, without
limitation, any legal fees or cost arising thereby and,
in said case, Lessee agrees to indemnify Lessor and
hold it harmless from any such cost or expense.
Lessee, on final determination of the proceeding or
contest, shall immediately pay or discharge its share
of any real
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property taxes determined by any decision or judgment
rendered, together with all costs, charges, interest
and penalties incidental to the decision or judgment.
If Lessee does not pay its proportionate share of the
real property taxes when due, and Lessee seeks a
reduction or contests them as provided in this
paragraph before the commencement of the proceeding or
contest, Lessee shall furnish to Lessor a surety bond
issued by an insurance company qualified to do business
in California. The amount of the bond shall equal one
hundred twenty-five percent (125%) of the total amount
of real property taxes in dispute. The bond shall hold
Lessor and the building, other improvements, and land
of which the Leased Premises are a part harmless from
any damage arising out of the proceeding or contest and
shall insure the payment of any judgment that may be
rendered.
(e) Taxes on the Leased Equipment:
------------------------------
Lessee shall pay to Lessor upon demand the amount of
any and all taxes assessed against the Leased Equipment
for and during the term of the Agreement and Lease.
Lessor shall furnish to Lessee with such demand a copy
of the tax bill upon which it is based, the underlying
declarations with respect thereto, and the method by
which Lessee's portion is calculated.
VIII
BUILDING MAINTENANCE
--------------------
8.01 Except as provided in paragraph 8.03, Lessor at its own cost
shall maintain in good condition the following:
(a) Structural parts of the building and other improvements
in which the Leased Premises are located which
structural parts include only the foundations, bearing
and exterior walls (excluding the glass doors and
windows) subflooring, roof (excluding skylights), and
the main utilities distribution systems within the
common areas only, as shown in green on Exhibits 1-9,
including all metering systems;
(b) The unexposed electrical, plumbing, sewage systems,
including, without limitation, those portions of the
system lying outside the Leased Premises; and
(c) Heating, ventilating, air conditioning, air
conditioning compressor and distribution system outside
the Leased Premises, but servicing the same. Lessor may
engage a maintenance firm to service the heating,
ventilating and air conditioning system servicing the
Leased Premises.
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8.02 Lessee shall, except as herein expressly provided otherwise, at
Lessee's cost and expense fully maintain and keep in good
condition and repair the Leased Premises, Leased Equipment or
Common Areas to the extent the need for repairs results from
the acts or omissions of Lessee, its agents, employees or its
authorized representatives.
8.03 Maintenance of manufacturing equipment and services:
(a) It is Lessor's responsibility to make available to
Lessee utilities both original and converted,
refrigerated and unrefrigerated and services as
provided in paragraph 10.01 (A through D) together with
services requested to operate Lessee's ice cream plant
and to maintain the Common Area. Lessee, through its
own engineer, may inspect all parts of the systems
providing these utilities and services.
(b) Lessee will pay for these utilities and services the
cost attributable to Lessee's use thereof, against
reasonable evidence thereof, subject to its right to
audit all invoices therefor.
(c) The foregoing responsibility is limited to ten million
(10,000,000) gallons per year ice cream and ice cream
sandwiches produced.
(d) Except where caused by force majeure, any failure to
provide refrigeration needed by Lessee in its
operations to the Leased Premises shall entitle Lessee
to a total abatement of all rental for the period of
such failure. In addition, Lessee shall have the
immediate right to make all necessary repairs or
replacements to correct such failure and may withhold
the cost of such repairs or replacements from rental
thereafter due hereunder.
IX
ALTERATIONS AND FIXTURES
------------------------
9.01 Lessee shall not make any alterations, whether structural or
exterior or otherwise to the Leased Premises without Lessor's
prior written consent which consent shall not be unreasonably
withheld. Lessee at its cost, shall have the right to make,
without Lessor's consent, nonstructural alterations to the
interior of the Leased Premises that Lessee requires in order
to conduct its business on the Leased Premises. In making any
alterations that Lessee has a right to make, Lessee shall
comply with the following:
(a) Lessee shall submit reasonable detailed final plans and
specifications and working drawings of the proposed
alterations and the name of its contractor, at least
thirty (30) days before the date it intends to
commence the alterations.
(b) The alterations shall not be commenced until two (2)
days after Lessor has received notice from Lessee
stating the date of installation of the alterations
is to commence so that Lessor can post and record an
appropriate notice of nonresponsibility.
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(c) The alterations shall be approved by all appropriate
government agencies and all applicable permits and
authorizations shall be obtained by Lessee before
commencement of the alterations.
(d) All alterations shall be completed by Lessee with
due diligence in compliance with the plans and
specifications and working drawings and all applicable
laws.
(e) Before commencing the alterations and at all times
during construction, Lessee's contractor shall maintain
insurance of an amount and type as provided in the
first paragraph of paragraph 11.03.
(f) If the estimated cost of the alterations exceeds Twenty
Five Thousand Dollars ($25,000) before the commencement
of the alterations, Lessee at its cost shall furnish to
Lessor a performance and completion bond issued by an
insurance company qualified to do business in
California in a sum equal to the cost of the
alterations (as determined by the construction contract
between Lessee and its contractor) guaranteeing the
completion of the alterations free and clear of all
liens and other charges and in accordance with the
plans and specifications.
(g) The alterations shall be performed in a manner that
will not interfere with the quiet enjoyment of the
other tenants in the Commerce Plant in which the
Leased Premises are located.
Any alterations made shall, at Lessee's option, either remain
on and be surrendered with the Leased Premises on the
expiration or termination of the term or be removed within a
reasonable time thereafter. Lessee at its cost shall repair
the Leased Premises caused by such removal.
9.02 Lessee shall pay all costs for construction done by it or
caused to be done by it on the Leased Premises as permitted
by this Agreement and Lease. Lessee shall keep the Commerce
Plant, Leased Premises, Common Areas and the land on which
these premises are a part, free and clear of all mechanic's
liens resulting from construction done by or for Lessee.
Lessee shall have the right to contest the correctness of the
validity of any such lien, if immediately on demand by Lessor,
Lessee procures and records a lien release bond issued by a
corporation authorized to issue such surety bonds in
California, in an amount equal to 1-1/2 times the amount of
the claim of lien. The bond shall meet the requirements of
Civil Code Section 3143, and shall provide for the payment of
any sum that the claimant may recover on the claim (together
with costs of suit if it recovers in the action).
X
UTILITIES AND SERVICES FURNISHED TO LESSEE
------------------------------------------
10.01 Lessor will furnish Lessee and Lessee will pay for the
following services and utilities required by Lessee:
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A. All electric lighting, electric power, gas,
refrigeration, compressed air, space heating and
air conditioning, water (including chilled water and
glycol), sewage disposal and testing and steam
required by Lessee in respect to its occupancy and use
of the processing area constituting a part of the
Leased Property as shown on Exhibit "g" hereto annexed.
B. Electric lighting, electric power, water and
refrigeration for the ice cream cold rooms; electric
lighting, electric power and refrigeration for the
Greer hardening unit and additional hardening systems
required for ten million (10,000,000) gallons of ice
cream and ice cream sandwiches; electric lighting,
electric power, refrigeration and water for the dry
storage area dock and truck loading and parking areas
adjacent thereto and electric lighting and electric
power for the truck parking spaces in the yard area.
All of the areas referred to in this subparagraph "B"
constitute a part of the Leased Property as shown on
Exhibits "1", "2", "3", "5", "6", "8" and "9" hereto
annexed.
C. All electric power and other utilities required in
connection with the use and operation of the Leased
Equipment which is Leased by lessor to Lessee under
the provisions of Article III and V thereof, and all
equipment owned by Lessee.
D. All electric lighting, electric power, gas, water,
compressed air, heating and air conditioning,
refrigeration, conveyor lubrication, oils, greases,
janitorial services and other utilities and services
required in connection with the joint use by Lessor
and Lessee of the portions of the Commerce Plant and
appurtenances described in paragraph 1.01(b) hereof.
E. The parties agree that included in the billing for
utilities and services required and used by Lessee
are all of the ingredients and items necessary for
maintenance, operation, repair, production and
manufacture of said utilities and services. These
ingredients and items are, without limitation as
follows: labor; oil; electric power in common areas
for manufacture and production of utilities and
services; steam; depreciation; insurance and any
and all such costs incurred by Lessor. All the
foregoing ingredients and items shall be included
in the billing to Lessee for utilities and services,
and not separately billed.
10.02 Lessee will pay to Lessor withing fifteen (15) days after
billing the prescribed compensation for all services and
utilities (refrigerated or unrefrigerated) originating in
the Common Areas for the use of Lessee; this also includes
its proportionate share of services in and around the
Commerce Plant and the actual expense of such utilities
and services plus its share of Common Area utilities and
services as provided in paragraph 1.04. Concurrently with
each such payment, Lessor shall furnish Lessee with a
statement showing the amount of all such usage of utilities
and services during the preceeding month and the computation
of the amount of such payment.
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10.03 Lessee will pay to Lessor, monthly, within fifteen (15)
days after billing, as and for compensation to Lessor for
utilities and services rendered by Lessor to Lessee under
paragraph 10.01, the cost thereof. Lessor shall make
available for Lessee's inspection, its books and records
pertaining to charges on each invoice or statement.
10.04 The following utilities and services are the responsibility
of Lessee and the expense shall be born by Lessee. Lessee
shall pay any increases.
A. All space heating, air conditioning required by it in
the connection with the occupancy and use by Lessee
of the office areas which constitute a portion of the
Leased Premises as shown on Exhibit "4" hereto annexed.
XI
INDEMNITY AND EXCULPATION: INSURANCE
------------------------------------
11.01 Lessor shall not be liable to Lessee for any damage to Lessee
or Lessee's property from any cause, and Lessee waives all
claims against Lessor for damages to person or property arising
for any reason, except that Lessor shall be liable to Lessee
for actual damages (and not for consequential damages)
resulting from the intentional or negligent acts or omissions
of Lessor or its authorized representative.
11.02 Lessee shall hold Lessor harmless from all damages arising out
of any damage to any person or property occurring in, on or
about the Leased Premises, and/or Leased Equipment, and (to
the extent Lessee is involved with respect thereto), Common
Areas and the Commerce Plant in which the Leased Premises
and Leased Equipment are located, except that Lessor shall be
liable to Lessee for damage resulting from the intentional
or negligent acts or omissions of Lessor or its authorized
representatives and Lessor shall hold Lessee harmless from all
liability arising out of any such damage. The parties'
obligations under this paragraph to indemnify and hold the
other party harmless shall be limited to the sum that exceeds
the amount of insurance proceeds, if any, received by the
party being indemnified. The rights and obligations of the
parties under this section shall survive the termination of
this Agreement and Lease.
11.03 Lessee at its cost shall maintain public liability and property
damage insurance with liability limits of not less than Five
Hundred Thousand Dollars ($500,000) and One Million Dollars
($1,000,000) per occurrence and property damage limits of not
less than Five Hundred Thousand Dollars ($500,000) per
occurrence with an aggregate coverage of Two Million Dollars
($2,000,000) insuring against all liability of Lessee and its
authorized representatives arising out of and in connection
with Lessee's use or occupancy of the Leased Premises, Leased
Equipment and Common Areas.
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All public liability insurance and property damage insurance
shall insure performance by Lessee of the indemnity provisions
of paragraph 11.01 and paragraph 11.02 hereof. Both Lessee and
Lessor shall be named as co-insureds and the policy shall
contain cross-liability endorsements.
Not more frequently than each three (3) years, if in the
opinion of Lessor's lender, the amount of public liability and
property damage insurance coverage at the time is not adequate,
Lessee shall increase the insurance coverage as reasonably
required by Lessor's lender.
11.04 Lessor shall maintain on the Commerce Plant in which the Leased
Premises and Leased Equipment are located, a policy of
standard fire and extended coverage insurance with vandalism
and malicious mischief endorsement, to the extent of at least
ninety percent (90%) of the full replacement value thereof and
including boiler and machinery and business interruption
coverage, including coverage for ammonia contamination,
covering the entire value of Lessee's ice cream in process or
stored in or around the Leased Premises. The insurance policy
shall be issued in the name of Lessee, Lessor and Lessor's
lender, as their interests appear. The insurance policies
shall provide that any proceeds shall be made payable to the
appropriate insured. Lessor shall pay the premium for
maintaining said insurance policy. A certificate of such
insurance shall be delivered to Lessee upon reasonable request.
Lessee shall reimburse Lessor for the cost of maintaining such
insurance as follows:
(1) The amount of Six Thousand Three Dollars ($6,003) which
is 18.76% of the current annual premium of such policy;
and
(2) An amount equal to 18.76% of any increase in the annual
premium of such insurance policy over and above the
1980-1981 policy year.
Such reimbursement shall be made by Lessee to Lessor each year
within ten (10) days after Lessee receives a copy of the
premium notice, together with workpapers showing the
calculations of Lessee's portion thereof. Lessee shall not be
obligated to reimburse Lessor for any portion of any increase
in the insurance premium caused by particular use or activity
of any other tenant in the building in which the Leased
Premises are located or caused by improvements constructed by
or for the exclusive benefit of any other tenant.
11.05 During the term of this Agreement and Lease, Lessor shall
maintain on the Leased Equipment, fire and extended coverage
insurance (either by separate policy or in connection with the
insurance carried under paragraph 11.04 hereof) in an amount of
the full cash value of all of the Leased Equipment and shall
cause all items of the Leased Equipment to be so insured from
the dates on which the same are first installed on the Leased
Premises, which dates in each and all instances shall be or
have been in advance of the date of the commencement of the
term hereof. Such policy of insurance shall be
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issued in the name of Lessor, Lessee and Lessor's lender.
Lessee shall reimburse Lessor in the full amount of its
reasonable premium cost for all such insurance as and when
statements therefor are presented by Lessor to Lessee.
11.06 The parties release each other and their respective authorized
representatives from any claims for damage to any person or to
the Leased Premises, Leased Equipment, Common Areas and
Commerce Plant and to the fixtures, personal property, Lessee's
improvements, and alterations of either Lessor or Lessee in or
on the Commerce Plant that are caused by or result from risks
insured against under any insurance policies carried by the
parties and in force at the time of such damage.
11.07 Each party shall cause each insurance policy obtained by it to
provide that the insurance company waives all right of
recovery by way of subrogation against either party in
connection with the damage covered by any policy. Neither
party shall be liable to the other for any damage caused by
fire or any other risk insured against under any insurance
policy required by this Agreement and Lease. If any insurance
policy cannot be obtained with a waiver of subrogation, or is
obtainable only by the payment of an additional premium charge
above that charged by insurance companies issuing policies
without waiver of subrogation, the party undertaking to obtain
the insurance shall notify the other party of this fact. The
other party shall have a period of ten (10) days after
receiving the notice, either to place the insurance with a
company that is reasonably satisfactory to the other party and
that will carry the insurance with a waiver of subrogation, or
agree to pay the additional premium if such policy is
obtainable at additional cost. If the insurance cannot be
obtained or the party in whose favor waiver of subrogation is
desired refuses to pay the additional premium charged, the
other party is relieved of the obligation to obtain a waiver
of subrogation with respect to the particular insurance
involved.
11.08 All of the insurance required under this Agreement and Lease
shall:
(a) Contain an endorsement requiring thirty (30) days of
written notice from the insurance company to both
parties and Lessor's lender for cancellation or change
in the coverage, scope or amount of any policy.
(b) Each policy or a certificate of the policy, together
with the evidence of payment of premiums, shall be
deposited with the other party at the commencement of
the term and on renewal of the policy not less than
twenty (20) days before expiration of the term of the
policy.
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XII
DESTRUCTION OF LEASED PREMISES OR LEASED EQUIPMENT
--------------------------------------------------
12.01 If during the term the Leased Premises, Leased Equipment, or the
Commerce Plant in which they are located is totally or partially
destroyed from a risk covered by insurance described in paragraphs
11.04 and 11.05 rendering the Leased Premises or Leased Equipment
totally or partially inaccessible or unusuable, Lessor shall
utilize the insurance proceeds to restore the Leased premises or
Leased Equipment or the Commerce Plant in which they are located to
substantially the same condition as they were immediately before
destruction, and shall use the best efforts to do so within a
reasonable period of time; provided, however, that if the
destruction is to the Commerce Plant in which the Leased Premises
are located and such destruction exceeds thirty-three and
one-third percent (33-1/3%) of the net replacement value of said
Commerce Plant (exclusive of the land), Lessor can elect to
terminate this Agreement and Lease, whether or not the Leased
Premises are destroyed, as long as Lessor terminates the leases
of all other tenants in the Commerce Plant. Otherwise, such
destruction shall not terminate this Agreement and Lease unless
existing laws do not permit restoration, in which case either
party can terminate this Agreement and Lease immediately upon the
giving of notice to the other.
12.02 If the cost of restoration exceeds the amount of the proceeds of
the insurance required under paragraph 11.04 and 11.05, Lessor can
also elect to terminate this Agreement and Lease by giving notice
to Lessee within thirty (30) days after determining that the
restoration costs will exceed the insurance proceeds. In the case
of destruction to the Leased Premises only, if Lessor elects to
terminate this Agreement and Lease, Lessee within thirty (30)
days after receiving Lessor's notice to terminate can elect to
pay to Lessor and its lender at the time Lessor notifies Lessee
of its election, the difference between the amount of the
insurance proceeds and the cost of restoration, in which case
Lessor shall restore the Leased Premises and shall be entitled to
utilize insurance proceeds, together with Lessee's contribution
to do so. Lessor shall give Lessee satisfactory evidence that all
sums contributed by Lessee as provided in this paragraph have
been expended by Lessor in paying the cost of restoration. In the
event Lessor elects not to restore as herein provided and Lessee
elects not to pay the difference between the insurance proceeds
and the costs of such repair, this Agreement and Lease shall
terminate.
12.03 If during the term hereof the Leased Premises, Leased Equipment,
Common Areas or the Commerce Plant in which they are located are
damaged or destroyed by a risk not covered by insurance described
in paragraphs 11.04 and 11.05, Lessor shall have at its election
the right to restore or to terminate this Agreement and Lease as
follows:
(a) In the event of such an uninsured loss which totally or
substantially interferes with Lessee's use of the Leased
Premises or Leased Equipment; and
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(b) In the event of such an uninsured loss in which there is a
partial interference with Lessee's use, either directly or
indirectly and pursuant to which Lessor would but for the
provisions of this paragraph be required by law or the terms of
this Agreement and Lease to repair or restore such damage.
In the event that Lessor shall elect to terminate hereunder, it
shall give Lessee not less than sixty (60) days advance written notice
whereupon within fifteen (15) days of receipt of said notice, Lessee
shall be entitled at its election to prevent such termination by
agreeing to pay to Lessor the actual cost of such restoration, in which
case Lessor shall immediately commence restoration of the Leased
Premises, Leased Equipment, Common Areas or the Commerce Plant as the
case may be and shall furnish evidence satisfactory to Lessee that all
sums contributed by Lessee as provided in this paragraph have been
expended by Lessor in paying the cost of such restoration.
If Lessor elects to restore and so notifies Lessee within sixty
(60) days of the event of destruction, this Agreement and Lease shall
not terminate, unless existing laws do not permit restoration, in which
event either party may terminate this Agreement and Lease immediately
upon giving notice to the other. If Lessor elects to terminate as
herein provided and Lessee does not elect to pay the cost of
restoration then this Agreement and Lease shall terminate.
12.04 If the Leased Premises and Leased Equipment are partially
destroyed or damaged other than by reason of the fault or neglect of
Lessee and Lessor restores and repairs it pursuant to this Agreement
and Lease, that portion of the rent payable hereunder for the Leased
Premises or Leased Equipment for the period in which the damage and
repair continues shall be abated in proportion to the extent to which
Lessee's use of the Leased Premises is impaired.
12.05 Lessee waives the provisions of Civil Code Section 1932(2) and Civil
Code Section 1933(4) with respect to any destruction of the Leased
Premises.
12.06 In the event of any termination under the provisions of this
Article, which termination occurs other than at the end of a calendar
month, the rent for the month in which the termination occurs shall be
prorated and Lessee shall receive from Lessor a refund of the unused
amount thereof.
XIII
CONDEMNATION
------------
13.01 If all of the Leased Premises, Common Areas or Commerce Plant is
taken by condemnation, this Agreement and Lease shall terminate on the
date of the taking and the rent shall be apportioned as of said date.
Lessor shall be entitled to the entire proceeds of any award granted by
reason of such condemnation. If any part of the Leased
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Premises or Common Area is acquired or taken for public
or quasi-public use as a result of negotiations or condemnation
proceedings, this Agreement and Lease shall remain in effect,
except that Lessee may elect to terminate this Agreement and
Lease if the Leased Premises are rendered unsuitable for
Lessee's continued use as a result of such taking of a portion
of the Leased Premises or Common Area. If Lessee elects to
terminate this Agreement and Lease, Lessee shall exercise its
right to terminate pursuant to this paragraph by giving notice
to Lessor within thirty (30) days after the nature and extent
of the taking have been fully determined. If Lessee elects to
terminate this Agreement and Lease, as provided in this
paragraph, Lessee shall notify Lessor of the effective date of
termination, which date shall not be earlier than thirty (30)
days, nor later than ninety (90) days after Lessee has notified
Lessor of its election to terminate, except that this Agreement
and Lease shall terminate on the date of taking, if the date of
taking falls on a date before the date of termination as
designated by Lessee. If Lessee does not terminate this
Agreement and Lease within the thirty (30) day period, this
Agreement and Lease shall continue in full force and effect,
except that monthly rent shall be reduced to the extent to
which or for the period during which Lessor's restoration
interferes with Lessee's use of the Leased Premises. In any
such partial taking in which the Agreement and Lease remains in
full force and effect pursuant to this paragraph, Lessor, at
its cost, shall accomplish all necessary restoration and shall
do so with reasonable dispatch.
13.02 The taking of the Leased Premises or any part of the Leased
Premises by military or other public authority shall
constitute a taking of the Leased Premises by condemnation only
when the use and occupancy by the taking authority has
continued for longer than 180 consecutive days. During the 180
day period, all the provisions of this Agreement and Lease
shall remain in full force and effect, except that rent shall
be abated or reduced during such period of taking based on the
extent to which the taking interferes with Lessee's use of the
premises, and Lessor shall be entitled to whatever award may be
paid for the use and occupation of the Leased Premises for the
period involved.
XIV
ASSIGNMENT AND SUBLETTING
-------------------------
14.01 Lessee shall not assign, transfer or sublease or attempt to
assign, transfer or sublease the Leased Premises or Leased
Equipment in whole or in part and shall not execute any
sublease or sublicense hereunder without the express written
consent of Lessor first had and obtained; provided, however
that no such consent to an assignment or sublease of all of the
Leased Premises and Leased Equipment shall be unreasonably
withheld.
14.02 No interest of Lessee in this Agreement and Lease shall be
assignable by operation of law. Each of the following acts
shall be considered an involuntary assignment:
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(a) Bankruptcy or insolvency of Lessee or assignment by
Lessee for the benefit of its creditors or institution
of a proceeding under the Bankruptcy Act in which
Lessee is the debtor;
(b) If a writ of attachment or execution is levied on this
Agreement and Lease;
(c) If in any proceeding or action in which Lessee is a
party other than solely by reason of its tenancy here-
under, a receiver or trustee is appointed with
authority to take possession of the Leased Premises
and/or Leased Equipment.
An involuntary assignment shall constitute a default by Lessee
and Lessor shall have the right to elect to terminate this
Agreement and Lease in which case this Agreement and Lease
shall not be treated as an asset of Lessee; provided, however,
that if a writ of attachment or execution is levied on this
Agreement and Lease, Lessee shall have fifteen (15) days in
which to cause the attachment or execution to be removed, and
provided further that if any involuntary proceeding in
bankruptcy is brought against Lessee or if a receiver is
appointed, Lessee shall have sixty (60) days in which to have
the involuntary proceeding dismissed or the receiver removed.
XV
DEFAULT
-------
15.01 The occurrence of any of the following shall constitute a
default by Lessee.
(a) The failure to pay rent when due, if such failure
continues for fifteen (15) days after notice has been
given to Lessee.
(b) The failure to peform any other provisions of this
Agreement and Lease, if a failure to perform is not
cured within thirty (30) days after notice has been
given to Lessee. If the default cannot reasonably be
cured within thirty (30) days, Lessee shall not be in
default of this Agreement and Lease, if Lessee
commences to cure the default within the thirty (30)
day period and diligently and in good faith
continues to cure the default.
Notices given under this paragraph shall specify the
alleged default and the applicable Agreement and Lease
provisions, and shall demand that Lessee perform the
provisions of this Agreement and Lease or pay the rent
that is in arrears, as the case may be, within the
applicable period of time, or quit the Leased Premises.
No such notice shall be deemed a forfeiture or
termination of this Agreement and Lease under Lessor so
elects in the notice.
15.02 Lessor shall have the following remedies if Lessee commits a
default. These remedies are not exclusive; they are cumulative
in addition to any remedies now or later allowed by law.
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(a) Lessor can continue this Agreement and Lease in full
force and effect, and the Agreement and Lease shall
continue in effect as long as Lessor does not
terminate Lessee's right of possession, and Lessor
shall have the right to collect rent when due. During
the period Lessee is in default, Lessor can enter the
Leased Premises and relet them or any part of them to
third parties for Lessee's account. Lessee shall be
liable immediately to Lessor for all costs Lessor
incurs in reletting the Leased Premises, including,
without limitation, broker's commissions, expenses of
remodeling the Leased Premises required by the
reletting, and like costs. Reletting may be for a
period shorter or longer than the remaining term
of this Agreement and Lease. Lessee shall pay to
Lessor the rent due under this Agreement and Lease on
the dates the rent due under this Agreement and Lease on
the dates the rent is due, less the rent Lessor
receives for reletting. No act by Lessor allowed by
this paragraph shall terminate this Agreement and Lease,
unless Lessor notifies Lessee that Lessor elects to
terminate this Agreement and Lease. After Lessee's
default and for as long as Lessor does not terminate
Lessee's right to possession of the Leased Premises, if
Lessee obtains Lessor's consent, Lessee shall have the
right to assign or sublet its interest in this
Agreement and Lease, but Lessee shall not be released
from liability. Lessor's consent to a proposed
assignment or subletting shall not be unreasonably
withheld.
(b) Lessor can terminate Lessee's right of possession
of the Leased Premises at any time. No act of
Lessor other than giving notice to Lessee shall
terminate this Agreement and Lease. Acts of
maintenance, efforts to relet the Leased Premises, or
the appointment of a receiver on Lessor initiative to
protect Lessor's interest under this Agreement and
Lease shall not constitute a termination of Lessee
right of posession. On termination, Lessor has the
right to recover from Lessee:
(i) The worth, at the time of the award, of the
unpaid rent that had been earned at the time
of the termination of this Agreement and Lease;
(ii) The worth, at the time of the award, of the
amount by which the unpaid rent that would
have been earned after the date of
termination of this Agreement and Lease until
the time of award exceeds the amount of loss
of rent that Lessee proves could have been
reasonably avoided;
(iii) The worth, at the time of the award, of the
amount by which the unpaid rent for the
balance of the term and after the time
of the award exceeds the amount of the loss
of rent that Lessee proves could have been
reasonably avoided; and
(iv) Any other amount and court costs, necessary
to compensate Lessor for all detriment
proximately caused by Lessee's default,
including, without limitation, reasonable
attorneys' fees.
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(c) The "worth at the time of the award" as used in (i) and
(ii) of this paragraph is to be computed by allowing
interest at the rate of ten percent (10%) per annum.
The "worth at the time of the award" as referred to in
(iii) of this paragraph is to be computed by
discounting the amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of
the award, plus one percent (1%).
(d) If Lessee is in default of this Agreement and Lease,
Lessor shall have the right to have a Receiver
appointed to collect rent and conduct Lessee's
business on the Leased Premises. Neither the filing of
a petition for the appointment of a receiver, nor the
appointment itself shall constitute an election by
Lessor to terminate this Agreement and Lease.
(e) Lessor at any time after Lessee receives notice of
default and does not cure the same within the allowed
period of time, may cure the default at Lessee's cost.
If Lessor, at any time, by reason of Lessee's default,
pays any sum or does any act that requires the payment
of any sum, the sum paid by Lessor shall be due
immediately from Lessee to Lessor at the time the sum is
paid, and if paid at a later date, shall bear interest
at the rate of ten percent (10%) per annum from the
date the sum is paid by Lessor until Lessor is
reimbursed by Lessee. The sum, together with the
interest on it, shall be additional rent.
(f) Rent not paid when due shall bear interest at the rate
of ten percent (10%) per annum from the date due until
paid.
15.03 Lessor shall be in default of this Agreement and Lease if
it fails or refuses to perform any provision of this Agreement
and Lease that it is obligated to perform, if failure to perform
is not cured within forty-five (45) days after notice of the
default has been given by Lessee to Lessor and Lessor's lender.
If the default cannot reasonably be cured within forty-five (45)
days, Lessor shall not be in default of the Agreement and
Lease if it commences to cure the default within the
forty-five (45) day period and diligently and in good faith
continues to cure the default.
Notwithstanding anything in this Agreement and Lease to the
contrary, should Lessor fail, other than by reason of
destruction of the Leased Premises or condemnation, to provide
the services set forth in paragraph 10.01 A., B., C. and D. as a
result of which the business operations of Lessee on the Leased
Premises are materially interfered with, and Lessor shall not
have commenced steps necessary to restore such services as soon
as practical after notice thereof has been given by Lessee to
Lessor, Lessee may cure said failure at Lessor's cost, but
without prejudice to any other rights of Lessee at law or under
this Agreement and Lease. If Lessee at any time, by reason of
its right to cure hereunder, pays any sum or does any act that
requires payment in any form, the sum paid by Lessee shall be
due immediately from Lessor at the time paid by Lessee, and if
paid
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at a later date, shall bear interest at the rate of ten
percent (10%) per annum from the date said sum is paid by
Lessee until Lessee is reimbursed by Lessor.
XVI
SIGNS AND ADVERTISING
---------------------
16.01 Lessee will not permit, allow, or cause to be erected,
installed, maintained, painted or displayed on, in or at said
Leased Premises, or any part thereof, any exterior or interior
sign, lettering, announcement, or advertising material of any
kind whatsoever visible from the front exterior of the Leased
Premises without the prior written consent of Lessor;
provided, however, that Lessor will not arbitrarily withhold
its consent in respect to Lessee's erecting suitable
directional signs which are in keeping with the exterior
decoration of the Leased Premises, and provided further that
Lessee shall, for the purpose of identifying its presence in
the building, be entitled to erect and maintain a sign on the
common yard area near the street side of said building (in a
location acceptable to Lessor). Said sign shall be in good
taste and of a size not larger than the Challenge sign which
now exists in front of said Commercial Plant.
16.02 Lessor shall have the right to use, for its signs, the
exterior walls of the building in which the Leased Premises
are located.
XVII
LESSOR'S ENTRY ON THE PREMISES
------------------------------
17.01 Lessor and its authorized representative shall have the right
to enter the Leased Premises at all reasonable times for any
of the following purposes:
(a) To determine whether the Leased Premises are in good
condition and whether Lessee is complying with its
obligations under this Agreement and Lease;
(b) To do any necessary maintenance and to make any
restoration to the Leased Premises or the building and
other improvements in which the Leased Premises are
located that Lessor has the right or obligation to
perform;
(c) To serve, post, or keep posted any notices required or
allowed under the provisions of this Agreement and
Lease;
(d) To post "for sale" signs at any time during the term, to
post "for rent" or "for lease" signs during the last
three months of the term, or during any period while
Lessee is in default;
(e) To show the Leased Premises to prospective brokers,
agents, buyers, tenants, or persons interested in an
exchange, at any time during the term;
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(f) Shore the foundations, footings, and walls of the
Leased Premises or the building and surrounding area
in which the Leased Premises are located, and to erect
scaffolding and protective barricades around and about
the Leased Premises, but not so as to prevent entry
to the Leased Premises, and do any other act or thing
necessary for the safety or preservation of the Leased
Premises or the building or other improvements in which
the Leased Premises are located, if any excavation or
other construction is undertaken, or about to be
undertaken, on any adjacent property or nearby street.
Lessor's right under this provision extends to the
owner of the adjacent property on which the excavation
or construction is to take place and the adjacent
property owner's authorized representatives.
Lessor shall not be liable for any inconvenience,
disturbance, loss of business, nuisance, or other
damage arising out of Lessor's entry on the Leased
Premises as provided in this paragraph.
Lessee shall not be entitled to an abatement or
reduction of rent if Lessor exercises any rights
reserved in this paragraph.
Lessor shall conduct its activities on the Leased
Premises as allowed in this paragraph in a manner
that will cause the least possible inconvenience,
annoyance, or disturbance to Lessee.
XVIII
SUBORDINATION; ESTOPPEL
-----------------------
18.01 This Agreement and Lease is subordinate to the existing
encumbrances of the Leased Premises, and, at the option of any
subsequent lender, this Agreement and Lease shall be
subordinated to any mortgage or deed of trust that may
hereafter encumber the Commerce Plant, of which the Leased
Premises is a part, and to any and all advances made thereunder
and to interest thereunder and to all renewals, replacements
and extensions thereof; provided, however, that so long as
Lessee is not in default under paragraph 15.01 hereof, nothing
shall disturb its right to quiet possession hereunder and, upon
any foreclosure of Lessee's mortgage or deed of trust referred
to herein, Lessee shall attorn to the purchaser.
Such subordination is effective without any further act of
Lessee. Lessee shall, from time to time, on request of Lessor,
execute and deliver any documents or instruments that may be
required by a lender to effectuate any subordination.
If Lessee fails to execute and deliver any such subordination
or instruments, Lessee irrevocably constitutes and appoints
Lessor as Lessee's special attorney in fact to execute and
deliver any such documents or instruments.
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18.02 Each party, within ten (10) days notice from the other
party, shall execute and deliver to the other party, in
recordable form, a certificate stating that this
Agreement and Lease is unmodified and in full force and effect,
or in full force and effect as modified, and stating the
modifications. The Certificate also shall state the amount of
minimum monthly rent, the dates to which the rent has been paid
in advance, and the amount of any security deposit or prepaid
rent. Failure to deliver the Certificate within ten (10) days
shall be conclusive upon the party failing to deliver the
Certificate for the benefit of the party requesting the
Certificate and any successor to the party requesting the
Certificate, that this Agreement and Lease is in full force and
effect and has not been modified except as may be represented
by the party requesting the Certificate.
If a party fails to deliver the Certificate within ten (10)
days, the party failing to deliver the Certificate irrevocably
constitutes and appoints the other party as its special
attorney in fact to execute and deliver the Certificate to any
third party.
XIX
NOTICE
------
19.01 Any notice, demand, request, consent, approval or
communication that either party desires or is required to
give to the other party or any other person, shall be in
writing and either served personally or sent by prepaid, first
class mail. Any notice, demand, request, consent, approval, or
communication that either party desires or is required to give
the other party shall be addressed to the other party at the
addresses hereinafter set forth. Either party may change its
address by notifying the other party of the change of address.
Notice shall be deemed communicated within forty-eight (48)
hours from the time of mailing if mail is provided in this
paragraph.
If to Lessor:
Jack and Tillie Marantz
5743 East Smithway Street
Commerce, California 90040
If to Lessee:
Dreyer's Grand Ice Cream Inc.
5929 College Avenue
Oakland, California 94618
XX
WAIVER
------
20.01 No delay or omission in the exercise of any right or remedy
of Lessor on any default by Lessee shall impair such a right
or remedy or be construed as a waiver.
-26-
27
The receipt and acceptance by Lessor of delinquent rent shall
not constitute a waiver of any other default; it shall
constitute only a waiver of timely payment for the particular
rent payment involved. No act or conduct of Lessor, including,
without limitation, the acceptance of the keys to the Leased
Premises, shall constitute an acceptance of a surrender of the
Leased Premises by Lessee before the expiration of the term.
Only a notice from Lessor to Lessee shall constitute acceptance
of the surrender of the Leased Premises and accomplish a
termination of the Agreement and Lease. Lessor's consent to or
approval of any act by Lessee requiring Lessor's consent or
approval shall not be deemed a waiver or render unnecessary
Lessor's consent or approval of any subsequent act by Lessee.
Any waiver by Lessor of any default must be in writing and
shall not be a waiver of any other default concerning the same
or any other provision of the Agreement and Lease.
XXI
RECORDATION
-----------
21.01 This Agreement and Lease shall not be recorded, except that
if either party requests the other party to do so, the party
shall execute a Memorandum of Lease in recordable form. Lessee
shall execute and deliver to Lessor on the expiration or
termination of this Agreement and Lease, immediately on
Lessor's request, a Quitclaim Deed to the Leased Premises, in
recordable form, designating Lessor as transferee.
XXII
SALE OR TRANSFER OF THE PREMISES
--------------------------------
22.01 If Lessor sells or transfers all or a portion of the building,
other improvements, and land of which the Leased Premises are
a part, Lessor, on consummation of the sale or transfer, shall
be released from any liability occurring thereafter under
this Agreement and Lease pertaining to the portion of the
building, other improvements or land so sold. This Agreement
and Lease shall not be affected by any such sale and Lessee
agrees to attorn to the purchaser provided, and only if, all
of Lessor's obligations hereunder are assumed in writing
by the purchaser.
XXIII
MISCELLANEOUS PROVISIONS
------------------------
23.01 If either party becomes a party to any litigation concerning
this Agreement and Lease, the Leased Premises, the Leased
Equipment, the building or other improvements in which the
Leased Premises are located, by reason of any act or omission
of the other party or its authorized representatives, and
not by any act or omission of that party that becomes a party
to that litigation, or any act or omission of its authorized
representatives, the party that causes the other
-27-
28
party to become involved in litigation shall be liable to that
party for reasonable attorneys' fees and court costs incurred
by it in the litigation. If either party commences action
against the other party arising out of or in connection with
this Agreement and Lease, the prevailing party shall be
entitled to have and recover from the losing party reasonable
attorneys' fees and costs of suit.
23.02 Upon expiration or sooner termination of the term, Lessee shall
surrender to Lessor the Leased Premises and Leased Equipment
and all of Lessee's improvements and alterations in good
condition (except for ordinary wear and tear occurring after
the last necessary maintenance made by Lessee and destruction
to the Leased Premises and Leased Equipment covered by
paragraphs 12.01 and 12.02), except for alterations Lessee
has a right to remove or is obligated to remove under the
provisions of paragraph 9.01. Lessee shall remove all of its
personal property and trade fixtures within the above stated
time. If Lessee, with Lessor's consent, remains in possession
of the Leased Premises after expiration or termination of the
term, other than by virtue of the exercise of its option to
renew, or after the date of any notice given by Lessor to
Lessee terminating this Agreement and Lease, such possession by
Lessee shall be deemed to be a month-to-month tenancy terminable
on thirty (30) days notice given at any time by either party.
23.03 Time is of the essence of each provision of this Agreement
and Lease.
23.04 Whenever consent or approval of either party is required, that
party shall not unreasonably withhold such consent or approval.
23.05 This Agreement and Lease shall be binding upon and inure to the
benefit of the parties and their respective successors and
assigns, except as provided in paragraph 14.01. To this end,
whenever in this Agreement and Lease the words "Lessor" or
"Lessee" are used, they shall be deemed to refer to the Lessor
and Lessee, respectively, and to their respective successors and
assigns.
23.06 The unenforceability, invalidity, or illegality of any
provision hereof shall not render the other provisions
unenforceable, invalid, or illegal.
23.07 A Joint Operating Committee and a Joint Policy Committee shall
be created, as follows:
(a) Said Joint Operating Committee shall be composed of the
Chief Plant Engineer of said Commerce Plant, and the
Plant Superintendents of Lessor and Lessee. Said Joint
Operating Committee shall have authority over all
matter of the property, and the common use of
facilities and shall coordinate all dealings with each
other.
(b) Said Joint Policy Committee shall be composed of
four (4) members, two (2) from each of the parties
hereto. One of Lessee's members shall be its California
Production Manager.
-28-
29
Such members shall be empowered to make decisions which
bind their respective companies. The Committee is
charged with interpretation of the intent of this
Agreement and Lease and, where otherwise specified
in this Agreement and Lease, the review of procedures
and amounts payable hereunder. In addition, all matters
which cannot be agreed upon by the Operating Committee
shall be referred to and, if possible, decided by this
Committee.
23.08 In the event of any disputes, claims or questions regarding
the rights and obligations of the parties hereto under the
terms of this Agreement and Lease which have not or cannot be
` settled by the Operating Committee or the Policy Committee
or otherwise between the parties, all such disputes, claims or
questions regarding the rights and obligations of the parties
hereto under the terms of this Agreement and Lease shall be
settled by arbitration at the option of either party, in
accordance with the Arbitration Rules of the American
Arbitration Association, but nevertheless, subject to the
following provisions:
(a) In the event of any such disputes, either party may
make a demand for arbitration by filing such demand
in writing with the other party. The demand shall be
made within thirty (30) days after a dispute first
arises, or within thirty (30) days after notice is
given under this paragraph, whichever is the latter.
(b) If the parties agree on his election, there shall be
one arbitrator. If no agreement is reached within
fourteen (14) days after demand for arbitration, the
arbitrator shall be selected by the American
Arbitration Association. The decision of the
arbitrator shall be binding upon the parties. No one
shall act as an arbitrator who is in any way
financially interested in this Agreement and Lease or
in the business affairs of either of the parties or
their subsidiaries.
(c) Should either party refuse or neglect to furnish the
arbitrator with any necessary papers or information,
the arbitrator is empowered by both parties to proceed
ex parte. The decision of the arbitrator shall be a
condition precedent to any right of legal action that
either party may have against the other.
(d) The arbitrator is authorized to award to the party
whose contention is upheld such sums as he deems proper
for the time, expense, and trouble incident to the
appeal, and, if the appeal was taken without reasonable
cause, damages for delay. The arbitrator shall fix his
own compensation, unless otherwise agreed on, and shall
assess the cost and charges of the arbitration on
either or both parties.
(e) The business conducted under this Agreement and Lease
shall not be interrupted or delayed during any
arbitration proceeding, except on written agreement
by both parties.
-29-
30
23.09 The parties recognize that either of them may be involved in
labor disputes which could have an adverse effect on the
business operations of the other. In order to minimize this
risk, each party shall keep the other fully and continuously
informed in a timely manner of any facts or events which could
lead to a labor dispute which might interfere with the business
operations of the other. Without limitation upon the generality
of the foregoing, each party shall give the other written
notice of any grievance proceeding under any applicable
collective bargaining agreement involving any matter which
might adversely affect the other party; the party receiving the
notice shall have the right to participate directly in any such
grievance proceeding to the extent reasonably necessary to
protect its own interest.
23.10 In the event that Lessee's operations are interfered with in
any substantial manner as a result of a labor dispute of
Lessor's which does not involve Lessee in any significant way,
Lessee's rent shall be abated for such period of time and in
such amount as will fairly reflect the decreased use by Lessee
of the Leased Premises and Leased Equipment as a result of such
interference.
23.11 In the event that Lessee's operations are interfered with in
any substantial manner as a result of a labor dispute of Lessee
which does not involve Lessor in any significant way, Lessee's
rent shall not abate.
23.12 It is the mutual intent and purpose of the parties that in case
Lessee should desire any services or accommodations not provided
for herein which are reasonably necessary in connection with
the operations conducted by Lessee on the Leased Premises,
Lessor will negotiate with Lessee in good faith in respect to
the same being furnished on the basis of a reasonable charge
being made therefor.
23.13 Lessee may designate independent public accountants who shall
have right of access to such records and accounts of Lessor as
may be necessary to enable such accountants to audit related
expenses of Lessor and to verify the correctness of charges
made to Lessee based upon such expenses, so far as the same
relate to any provision of this Agreement and Lease under which
charges are to be made by Lessor to Lessee according to costs
and expenses of Lessor. In the event of any such audit, said
independent public accountants shall not make any disclosures
to Lessee as to information obtained from the examination of
Lessor's accounts and records, save and except disclosures
relating directly to the verification of the correctness of
charges made by Lessor to Lessee hereunder, and said
accountants shall not disclose to any third persons any of the
information obtained by them from the examination of such
accounts and records of Lessor.
23.14 The Rules and Regulations in regard to the Commerce Plant,
hereto annexed as Exhibit "H", shall be considered a part of
this Agreement and Lease. Said Rules and Regulations shall be
subject to modification from time to time by action of the
Policy Committee. Lessee
-30-
31
covenants and agrees that said Rules and Regulations, as
amended from time to time by the Policy Committee, shall be
faithfully observed by it and its agents, servants, employees
and invitees.
23.15 This Agreement and Lease has been entered into and will be
performed within the County of Los Angeles, State of
California, and shall be construed and enforced under the laws
of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
and Lease to be executed as of the day and year hereinabove first written.
"Lessor"
JACK AND TILLIE MARANTZ
/s/ JACK MARANTZ
--------------------------
JACK MARANTZ
/s/ TILLIE MARANTZ
---------------------------
TILLIE MARANTZ
"Lessee"
DREYER'S GRAND ICE CREAM, INC.
By /s/ THOMAS GARY ROGERS, CHAIRMAN
----------------------------------
By /s/ EDMUND JOHN THOMASON
----------------------------------
(Individual)
STATE OF CALIFORNIA )
) SS.
COUNTY OF LOS ANGELES )
-----------
On January 27, 1982 before me, the undersigned, a Notary Public in and for
-------------------
said State, personally appeared Jack Marantz, Tillie Marantz,
---------------------------------------------
Thomas Gary Rogers and Edmund John Thomason
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
known to me
------------------------------------------------------------------
to be the person s whose name s are subscribed
---- ------------
in the within instrument and acknowledged that they
-------
executed the same.
-------------------------------------
WITNESS my hand and official seal. OFFICIAL SEAL
M. M. MORRIS
Signature M. M. MORRIS [SEAL] NOTARY PUBLIC CALIFORNIA
------------------------------
M. M. Morris LOS ANGELES COUNTY
--------------------------------------- My comm. expires MAY 4, 1982
Name (Typed or Printed) ------------------------------------
-31-
32
INDEX TO EXHIBITS - MARANTZ/DREYER LEASE
Exhibit "1" -- Plan of Freezer Storage and Loading Dock Area
Exhibit "2" -- Truck Parking with Hookups and Parking/Loading
Exhibit "3" -- Truck Parking (Delivery Trucks)
Exhibit "4" -- Office Space Second Floor Areas
Exhibit "5" -- Dry Storage/Warehousing Areas
Exhibit "6" -- Basement Areas
Exhibit "7" -- Employee Parking Areas
Exhibit "8" -- Locker, Parts Storage and Plant Offices
Exhibit "9" -- Manufacturing/Processing Areas
Exhibit "10" -- (Leased) Equipment and Machinery
Exhibit "11" -- Rules and Regulations
33
AGREEMENT AND LEASE
EXHIBIT 1
[Floor Plan]
34
AGREEMENT AND LEASE
EXHIBIT "2"
[Floor Plan]
35
AGREEMENT AND LEASE
EXHIBIT "3"
[Floor Plan]
36
AGREEMENT AND LEASE
EXHIBIT "4"
[Floor Plan]
37
AGREEMENT AND LEASE
EXHIBIT "5"
[Floor Plan]
38
[FLOOR PLAN]
39
COMMON BASEMENT AREA
EXHIBIT "6"
[Floor Plan]
40
AGREEMENT AND LEASE
EXHIBIT "7"
EMPLOYEES PARKING AREA
CITY OF COMMERCE CAL.
20 OF 327 SPACES UNASSIGNED
[Diagram]
41
AGREEMENT AND LEASE
EXHIBIT "8"
[Floor Plan]
42
AGREEMENT AND LEASE
EXHIBIT "9"
[Floor Plan]
43
LIST OF EQUIPMENT IN ICE CREAM DEPARTMENT
(EXCLUDING EQUIPMENT IN THE CULTURE ROOM)
THE GREER FREEZING TUNNEL
2 - Cherry Burrell 3 compartment mix tanks. Model number & serial number
unknown
8 - Tri Clover 2 HP 3495 RPM pumps.
5 - Strahman wall mount hose stations.
1 - Cherry Burrell VAM5375R 3 compartment mix tank.
1 - Straham floor mount hose station.
17 - Assorted stainless steel parts tables.
21 - Folding ice cream carts.
2 - Groen kettles mfg. number 14763 with lighting mixers.
1 - Crepaco fruit feeder. s/n 1685.
1 - Cherry Burrell ice cream freezer. s/n 5092.
1 - Lanco 50 gallon vat s/n unknown.
1 - Cherry Burrell Model 403 ice cream freezer #4757.
(Dasher and assembly missing)
1 - Tri Clover pump #5194.
1 - Tri Clover pump #5335 - CIP pump.
1 - Tri Clover pump s/n C5193.
1 - Stainless steel four compartment tank, 600 gallons per compartment.
1 - Howard 3500 gallon tank. s/n unknown. Marked #48 Plate missing.
1 - Tri Clover CIP system with control panel.
1 - Lot - Stainless steel pipe, fittings & valves as located throughout plant.
1 - Lot - Electrical controls for above mentioned equipment.
1 - Lot - Instruction manuals for above mentioned equipment.
1 - Lot - Spare parts for above mentioned equipment.
1 - Lot - Tools & changeover parts for above mentioned equipment.
"WHERE IS, AS IS" ESTIMATED VALUE $
44
[LETTERHEAD]
January 6, 1982
Mr. Jack Marantz
T. J. Investments
5743 E. Smithway Street
City of Commerce, CA 90040
Dear Jack:
We have received your draft lease and will respond with out comments shortly.
We are also proceeding very well with our engineering study for our ice cream
operation in the Smithway facility. Listed below are our requirements for
refrigeration, air and steam which the landlord is responsible to supply from
the central service center. If you or your engineers want to review our
requirements for these services, please call Dreyer's Chief Engineer, Mr. Bob
Towle at 415/655-8187.
Ammonia Refrigeration
---------------------
400 Tons lowside
575 Tons highside @ 15" suction
Tower Water
----------
110 Gallons per minute
90 Degrees F Water in 80 Degrees F water out @ 68 Degrees wet bulb
Air Requirement
---------------
440 CFM @ 100 PSI
Steam Requirement
-----------------
30 HP @ 15 PSI
Electrical
----------
Three - 800 amp 460 volt services
This is available in the motor control center for the ice cream plant.
The above information should provide you with the necessary information to plan
what equipment has to be installed, modified or made serviceable to supply the
requirements for our ice cream plant.
45
Mr. Jack Marantz
Page Two
January 6, 1982
We understand that your processing equipment is provided on an "as is" basis.
However, listed below are items related to the building that will require
maintenance, repairs and/or replacement by the landlord prior to acceptance of
facility by us under the lease.
PRODUCTION ROOM
1. Approximately 50 percent of the fluorescent light fixtures appear to be
inoperable and many of the plastic covers on the light fixtures are
discolored or broken. All of the light fixtures are to be made
operational and to have approved plastic coverings as required by the
State and Federal agencies.
2. Several of the special hose stations have had parts removed and are
inoperable. All hose stations are to be made operational.
3. The forced air system was not working and the condition of the system
could not be determined during our plant inspection. The system is to be
serviced and made operational.
TANK AND CIP ROOM
1. Lights in this area are to be serviced as covered above.
2. There are several ammonia lines in this room that are badly rusted and
are a potential danger. Replacement of these lines is required.
FACTORY KITCHEN ROOM
1. The stainless steel sink is leaking and causing the tile floor to be
stained and there is deterioration of the grout. Repairs are required
for the sink and the floor.
FREEZER AND LOADOUT AREA
There are major problems with the main storage freezer.
1. The anteroom from the production room to the freezer has large areas of
wall with exposed chicken wire as a result of the plaster breaking up
and coming off the walls. The anteroom will require new plaster or
other suitable wall covering. The light in the anteroom was not
working.
2. The main storage freezer room will require extensive work to replace
and/or repair approximately 20 percent of the ceiling insulation that
has either fallen down or is sagging. The ceiling area parallel to the
production
46
Mr. Jack Marantz
Page Three
January 6, 1982
room is currently being held up with storage racks and 2" X 12"'s. The
ceiling areas in front of several blowers have exposed insulation and
sections that are hanging down. The insulation shows evidence of being
loaded with ice. The amount of ice in the ceiling area would indicate
that there has been severe deterioration of the vapor barrier. It will
be necessary to make all the necessary repairs to the insulation in the
freezer.
3. The four (4) freezer doors between the main freezer room and the
loading dock are either missing or non-operational. Two (2) doorways
should be closed permanently and two (2) new electric doors should be
installed on the outside wall of the freezer (on the loading dock
side).
4. The four (4) loadout doors all will require new door seals.
5. The existing electric door from the loading dock to the outside dock is
not equipped with a safety assembly and cannot be legally operated.
This door has to be corrected or replaced with an acceptable door.
6. The storage racks in the freezer are in fair condition. There is
forklift damage to many upright supports and in several areas the bolts
that hold the support legs to the floor have been sheared off.
YARD, TRUCK PARKING AND DRIVEWAY
1. The common area driveway is in bad condition and in need of major work.
This area should be paved with black top.
DRY STORAGE AREA
1. The dry storage area was represented to use as having a common work
area (aisle) between the storage area and the Foremost storage area.
The elimination of the common aisle would greatly reduce the effective
use of the dry storage area and is unacceptable.
OFFICE AREA
1. No time was spent on surveying the proposed office area.
BASEMENT AREA
1. The basement area under the ice cream production room is in sound
condition except for the leaking sanitary sewer and storm drain. The
odors from the sewers can be detected
47
Mr. Jack Marantz
Page Four
January 6, 1982
in the production room. Corrective work will have to be taken on the sewer
lines to correct this unsanitary condition.
2. The 300 ton amonia cycle center is in very poor condition. The insulation
is either missing or ineffective. This unit should be completely
reinsulated. Some of the ammonia lines are badly rusted and pitted and
should be replaced. The condition of the tanks could not be determined at
this time.
The above covers the major aeas of work that the landlord is responsible to
provide prior to our accepting the leased facility.
Should there be any questions on the above, plese give me a call.
Sincerely,
DREYER'S GRAND ICE CREAM, INC.
JOHN THOMASON
Vice President
JT:cck
cc: Gary Rogers
Bob Towle
48
EXHIBIT "11"
RULES AND REGULATIONS
---------------------
1. The entrances, corridors, stairways and elevators shall
not be used by Tenant, its agents, servants, employees, or invitees
for purposes other than ingress and egress to the premises leased
by Tenant.
2. Tenant shall cause its agents, servants, employees, or
invitees to wear, at all times during their presence on the leased
premises or the building or improvements in which they are located in
the common areas adjacent thereto, security badges of the type and
style currently utilized by Landlord with respect to its agents,
servants, employees, or invitees on the premises.
3. Tenant shall cause its agents, servants, employees, or
invitees to comply with the reasonable requests of security personnel
furnished by Landlord pursuant to the provisions of paragraph 11.03 of
the Agreement and Lease.
49
AMENDMENT TO AGREEMENT AND LEASE
THIS AMENDMENT TO AGREEMENT AND LEASE is made effective as of January
27, 1982, between JACK and TILLIE MARANTZ ("Lessor"), and DREYER'S GRAND ICE
CREAM, INC. ("Lessee"), in reference to the following facts:
(A) The parties hereto have heretofore executed an Agreement and
Lease dated as of January 1, 1982 (the "Agreement") under which Lessor has
leased to Lessee certain portions of the Commerce Plant.
(B) The parties hereto now desire to amend the Agreement in the
particulars hereinafter set forth, effective on January 27, 1982.
NOW, THEREFORE, IT IS AGREED:
1. A New Article XXIV is hereby added to the Agreement as follows:
"24.01 Lessee subleases, but without warranty or recourse of any
kind, to Lessor on a month-to-month basis the following
portions of the leased premises:
1. 12,000 square feet of the ice cream freezer box
constituting the entire freezer box and loading areas
as outlined in blue on Exhibit "1" hereto annexed
and made a part hereof;
2. 8,000 square feet of the loading yard area in front of
the holding box (but not to inhibit Lessee's loading
and unloading operation in the event they produce ice
cream novelties) as outlined in blue on Exhibit "1"
hereto annexed and made a part hereof; and
3. 18 truck parking hookups as outlined in red on Exhibit
"3" hereto annexed and made a part hereof.
24.02 Lessee shall give Lessor sixty (60) days advanced
notice in writing to vacate any portion of the subleased
premises.
24.03 The sublease provided for by paragraph 24.01 shall
terminate when the minimum monthly rental paid by Lessee to
Lessor pursuant to paragraph 5.01 shall reach $31,500."
2. A new paragraph 5.05 is hereby added to the Agreement as
follows:
"5.05 Notwithstanding the provisions of paragraph 5.01, until
such time as, pursuant to the provisions of this paragraph,
the minimum monthly rental payable by Lessee
50
to Lessor shall be $31,500 or more, Lessee shall pay to
Lessor rental for the Leased Premises and Leased Equipment as
follows:
(a) For the period to December 31, 1982, no rent shall
be paid other than those amounts specified as
additional rent in paragraph 5.03, and the Articles of
the Agreement and Lease referred to in said paragraph;
provided, however, that:
(1) In the event Lessee produces ice cream
novelties only prior to December 31, 1982, it
will have the use of the small holding storage
box in the main production floor or like square
feet in the 12,000 square foot holding box and
ingress and egress to the loading dock as
outlined in red on Exhibit "1". This will not
trigger any higher rent. However, if extra ice
cream novelties are stored in the main storage
freezer, a charge of $.90 a square foot per
month will be made for any space so utilized
over the smaller holding box.
(2) In the event Lessee during said period
commences its packaged ice cream production
operation excluding ice cream novelties or in
the event Lessee transfers its Los Angeles
distribution operations to the Commerce Plant,
whichever occurs first, Lessee shall pay to
Lessor the sum of $11,680 per month and Lessor
shall release to Lessee all of the portions of
the Commerce Plant subleased pursuant to
Article XXIV to Lessor save and except 6,000
square feet of the ice cream freezer box and
loading area and one butter loading and
unloading bay in the loading area as outlined
in blue on Exhibit "1" hereto.
(b) For the period of the second through fifth years of
the term hereof, Lessee shall pay to Lessor the sum of
$20,180 per month; provided, however that in the event
Lessee requests the use of the remaining 6,000 square
feet of the holding storage box portion of the Commerce
Plant subleased to Lessor pursuant to the provisions of
Article XXIV, Lessor shall release said remaining
portions to Lessee and Lessee shall pay Lessor the sum
of $31,500 per month as minimum rent."
3. A new paragraph 5.06 is hereby added to the Agreement as
follows:
"5.06 At such time as the minimum monthly rental payable by
Lessee to Lessor shall first be equal to or greater than
$31,500 or upon renewal of the lease term
-2-
51
pursuant to paragraph 5.02, the provisions of paragraph
5.05 shall become null and void and the monthly rental payable
by Lessee to Lessor shall thereafter be governed by the
provisions of paragraph 5.01."
4. A new paragraph 5.07 is hereby added to the Agreement as
follows:
"5.07 Until December 31, 1982 or until the Los Angeles
distribution operation is transferred or packaged production
commences in the ice cream department, the following applies
during the ice cream novelty production: Were the Lessee to
request use of the Lessor's space for employees parking, office,
executive parking, truck hook-up and parking, it will be
available at the following monthly rent. Offices at $750.00,
executive parking at $30.00 per car, employee parking at $20.00
per car, truck hook-up and parking at $60.00 including power
per truck."
5. A new paragraph 23.16 is hereby added to the Agreement as
follows:
"23.16 Lessor will cooperate with Lessee to provide at a
reasonable cost or additional rent the following alterations
which must conform with the existing lease and options:
A. Gas and diesel tanks and pumps;
B. Separate changing and break room facilities for
Lessee employees;
C. A truck repair garage;
D. Raw material receiving facilities; and
E. Water cooling tower."
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to Agreement and Lease to be executed as of the day and year
hereinabove first written.
"Lessor"
JACK AND TILLIE MARANTZ
JACK MARANTZ
----------------------------------
JACK MARANTZ
TILLIE MARANTZ
----------------------------------
TILLIE MARANTZ
"Lessee"
DREYER'S GRAND ICE CREAM, INC.
By THOMAS GARY ROGERS, CHAIRMAN
--------------------------------
By EDMUND JOHN THOMASON
--------------------------------
-3-
52
AMENDMENT TO AGREEMENT AND LEASE
EXHIBIT "1"
[FLOOR PLAN]
53
SECOND AMENDMENT TO AGREEMENT AND LEASE
This Second Amendment to Agreement and Lease is executed as of July 16,
1982, between Jack and Tillie Marantz ("Lessor") and Dreyer's Grand Ice
Cream, Inc., a California corporation ("Lessee").
1. Recitals of Fact. Lessor and Lessee are parties to an Agreement
----------------
and Lease dated as of January 1, 1982 and an Amendment to Agreement and Lease
dated as of January 27, 1982 (together, the "Lease") relating to certain
premises (the "Leased Premises") in Commerce, California.
2. Amendments. In consideration of the agreements of the parties
----------
herein, the Lease is amended as follows:
a. Description of Leased Premises. The description of the
------------------------------
Leased Premises is amended to add the space outlined in blue and designated
"Mezzanine Area" and "Dressing Room" on Exhibit 21, attached hereto and by this
reference incorporated herein.
b. Rent. In addition to all other rental payable under
----
the Lease, Lessee shall pay $2,500 per month with respect to the Mezzanine Area
and $66.00 per month with respect to the Dressing Room commencing July 1, 1982.
c. Special Termination Right. In addition to any other
-------------------------
rights which Lessee may have under the Lease, Lessee shall have the right, at
any time upon six months notice to Lessor, to terminate the Lease, as it
relates to the Mezzanine Area. Upon such termination, rental payable under the
Lease shall be reduced by $2,500 per month, with appropriate prorations for any
partial months.
54
d. Leasehold Improvements. Lessee shall be responsible, at
----------------------
its cost, for the design and installation of any leasehold improvements deemed
by it necessary or desirable for its use of the Mezzanine Area and the Dressing
Room.
e. Screw Compressor. Lessor agrees to install in the basement
----------------
of the building in which the Leased Premises are located a screw compressor
meeting (and approved by Lessee as meeting prior to installation) Lessee's
specifications set forth in Exhibit 22 attached hereto and by this reference
incorporated herein. Such screw compressor shall be exclusively dedicated to
use by or for the benefit of Lessee. Upon installation of such a screw
compressor, Lessee agrees to loan Lessor the lesser of $100,000 or the actual
cost of purchase and installation. Such loan shall be evidenced by a
promissory note in substantially the form of Exhibit 23, attached hereto and by
this reference incorporated herein, and shall be secured under a Security
Agreement in substantially the form of Exhibit 24, attached hereto and by this
reference incorporated herein. The parties understand and agree that Lessee
shall be entitled to offset all sums owing but unpaid to it under the Note and
Security Agreement against any sums owing to Lessor under the Lease, as amended
hereby.
3. Miscellaneous. Except as expressly set forth herein, the Lease
-------------
shall remain in full force and effect without modification.
Executed the day and year first above written at Commerce, California.
/s/ JACK MARANTZ
-------------------------------------
Jack Marantz
/s/ TILLIE MARANTZ
-------------------------------------
Tillie Marantz
DREYER'S GRAND ICE CREAM, INC.
By /s/ PAUL R. WOODLAND
----------------------------------
55
INSTALLMENT NOTE
July 16th, 1982 Commerce, California
For value received, Jack Marantz and Tillie Marantz ("Maker"), promise
to pay to the order of Dreyer's Grand Ice Cream, Inc. at 5929 College Avenue,
Oakland, California 94618, its successors and assigns, herein referred to as
holder ("Holder"), the sum of One Hundred Thousand Dollars ($100,000), together
with interest at twelve percent (12%) per annum, in installments as follows:
The sum of Two Thousand Five Hundred Dollars ($2,500) per month,
principal and interest included, payable on the first day of each calendar
month beginning July 1, 1982, until the entire sum of principal and interest
owing hereunder is paid.
1. Incorporation of Terms of Security Agreement. This Note is
--------------------------------------------
secured by a continuing security interest in the Collateral described in a
Security Agreement of even date herewith ("Security Agreement") executed by
Maker in favor of Holder. The terms of that Security Agreement are hereby
incorporated by reference herein. On default under the Security Agreement or
under this Note, Holder may exercise any of the remedies granted by the
Security Agreement or given to a secured party under the California Uniform
Commercial Code.
2. Acceleration of Maturity. In the event of any default in the
------------------------
payment of any sum when due hereunder or upon the occurrence of any Event of
Default under the Security Agreement, Holder may without notice or demand
declare the entire principal sum and interest accrued then unpaid immediately
due and payble.
3. Attorneys' Fees. If suit is commenced on this Note, Maker
---------------
shall pay to Holder a reasonable attorneys' fee.
56
4. Waiver of Rights by Maker. Maker hereby waives (1)
-------------------------
presentment, demand, protest, notice of dishonor and/or protest and notice of
non-payment; (2) the right, if any, to the benefit of, or to direct the
application of, any security hypothecated to Holder until all indebtedness of
Maker to Holder, however arising shall have been paid; and (3) the right to
require the Holder to proceed against any other party to this Note, if
additional parties have been added hereto, or to pursue any other remedy in
Holder's power. Holder may proceed against Maker directly and independently of
any other party to this Note, and the cessation of the liability of any other
party for any reason other than full payment, or any revision, renewal,
extension, forebearance, change of rate of interest, or acceptance, release or
substitution of security or impairment or suspension of Holder's remedies or
rights against any such other party, shall not in anywise affect the liability
of Maker.
/s/ JACK MARANTZ
------------------------------
Jack Marantz
/s/ TILLIE MARANTZ
------------------------------
Tillie Marantz
57
SECURITY AGREEMENT
Jack Marantz and Tille Marantz ("Debtor") and Dreyer's Grand Ice Cream,
Inc. ("Secured Party") agree as follows:
1. In consideration of the loan in the amount of $100,000 ("Loan")
made by Secured Party to Debtor, as evidenced by an Installment Note of even
date herewith (the "Note") and to secure the payment of the Loan and
performance of the Note, Debtor hereby pledges and grants to Secured Party
a security interest in the following described property ("Collateral"): One
screw compressor more particularly described in Exhibit A attached hereto; and
all additions and accessions to, and any property used in place of or in
substitution for any of the property described above.
Debtor is the absolute owner of the Collateral and has authority to
pledge, transfer, and deliver any interest therein. The Collateral is free of
any encumbrance or claim except the security interest herein granted to Secured
Party, and Debtor, at his own expense, will keep it free of any other
encumbrance or claim and defend it against all claims and demands of any person
at any time claiming any interest in it adverse to Secured Party.
On demand, Debtor will execute and deliver to Secured Party such
financing statements and other papers, and do all acts, as in the judgment of
Secured Party may be necessary or appropriate to establish and maintain a valid
and prior security interest in the Collateral. On Debtor's failure to do so,
Secured Party may sign any financing statement or other document on behalf of
Debtor. Debtor will pay all costs of any filings of financing statements or
other papers.
58
Debtor will provide Secured Party with such information concerning the
Collateral as Secured Party may request.
Secured Party will not be responsible for depreciation in value of the
Collateral or have any duty to take steps to preserve rights against prior
parties, Secured Party's sole duty being to use reasonable care in the custody
and physical preservation of any Collateral at any time in Secured Party's
possession.
Debtor will pay when due all taxes and assessments and will discharge
any liens on the collateral or its use. If Debtor fails to do so, Secured Party
may at its option pay or discharge the same, and Debtor will reimburse Secured
Party on demand for any payment with interest at the rate of thirteen percent
(13%) per annum from date of payment.
Debtor waives demand, notice, protest and all demands and notices of
any action taken by Secured Party under this Agreement or in connection with
the Collateral except as otherwise required by this Agreement, and Debtor
consents to any indulgence granted by Secured Party to others, if any, and to
any substitution for, exchange of, addition to, or release of the Collateral, in
whole or in part, or release of any other party, if any, liable on the
Collateral. Debtor releases Secured Party from any and all claims for
depreciation, loss or damage to the Collateral caused by any act or omission
(except wilful misconduct) on the part of Secured Party, its officers, agents,
and employees.
2. Debtor will be in default on the happening of any of the
following events or conditions (hereafter called an "Event of Default"):
a. Failure to make payment when due under the Note, or
failure to perform any of the agreements or provisions contained or referred to
in this Agreement, in any other agreement executed with reference to this
Security Agreement, or any instrument evidencing any of Debtor's obligations to
Secured Party, except where Secured Party is in default of second amendment to
Agreement and Lease.
59
b. Filing of suit in connection with any levy on or
seizure or attachment of the Collateral.
c. Debtor's insolvency, the calling of any meetings of or
the assignment for the benefit of creditors by Debtor, or the commencement of
any proceedings under any bankruptcy or insolvency laws by or against Debtor.
3. On occurrence of an Event of Default, Secured Party shall have
the following remedies:
a. After deducting all costs and expenses of every kind
incurred in, or incidental to, the retaking, holding, advertising, preparing
for sale, or the selling, leasing, or otherwise disposing of the Collateral,
including, without limitation attorneys' fees, legal expenses and cost of any
repair considered necessary by Secured Party, all of which costs and expenses
Debtor agrees to pay, Secured Party may apply the net proceeds of any sale,
lease, or other disposition of the Collateral to payment of the sums secured
hereunder. Only after full payment of the loan and any other payments Secured
Party may be required by law to make, need Secured Party account to Debtor for
any surplus.
b. Whenever an attorney is employed to collect any
obligation or to enforce any right of Secured Party against Debtor under this
Agreement, whether by suit or other means, Debtor agrees to pay reasonable
attorneys' fees in connection therewith. Debtor also agrees to pay reasonable
attorneys' fees for the enforcing against third parties of any other rights of
Secured Party pertaining hereto, including collection of the Collateral and
defending against any claim pertaining to the Collateral.
60
4. No act, delay, omission, or course of dealing between Debtor
and Secured Party shall be a waiver of any of Secured Party's rights or
remedies under this Agreement, and no waiver, change, modification, or
discharge in whole or in part of this Agreement or of any obligation will be
effective unless in writing signed by Secured Party. A waiver by Secured Party
of any rights or remedies under the terms of this Agreement or with respect to
any obligation on any occasion will not be a bar to the exercise of any right
or remedy on any subsequent occasion. All rights and remedies of Secured Party
hereunder are cumulative any may be exercised singly or concurrently, and the
exercise of any one or more of them will not be a waiver of any other.
5. Secured Party shall give Debtor notice of the time and place of
public sale of the Collateral or of the time after which any private sale or
other intended disposition is to be made by sending notice, as provided below,
at least five (5) days before the sale or disposition.
6. Any notice to Secured Party will be effective only on its
receipt by Secured Party. Any requirement for the giving of notice to Debtor
will be satisfied by mailing the notice, postage prepaid, to Debtor's last
known address appearing on Secured Party's records.
7. All rights and remedies of Secured Party shall inure to the
benefit of its successors and assigns, and Debtor may not assert against any
assignee any claims or defenses which he may have against Secured Party, except
those granted by this Agreement.
8. As used in this Agreement, "Debtor" includes Debtor's heirs,
executors, administrators, representatives and trustees.
61
9. If any provision of this Agreement is invalid or unenforceable
under any law, such provision is and will be totally ineffective to that
extent, but the remaining provisions will be unaffected.
10. This Agreement shall be interpreted in accordance with the laws of
the State of California in force at the date of this Agreement.
11. This Agreement will become effective when signed by Debtor.
Executed this 16th day of July, 1982.
/s/ JACK MARANTZ
-------------------------------------
Jack Marantz
/s/ TILLIE MARANTZ
-------------------------------------
Tillie Marantz
DREYER'S GRAND ICE CREAM, INC.
By /s/ PAUL R. WOODLAND
----------------------------------
62
THIRD AMENDMENT TO AGREEMENT AND LEASE
This Third Amendment to an Agrement and Lease is made effective as of January
1, 1985, between Mrs. Tillie Marantz, DBA T. J. Investments, hereinafter
referred to as Lessor, and Dreyer's Grand Ice Cream Inc., a California
Corporation, hereinafter referred to as Lessee.
Lessor and Lessee are parties to the Agreement and Lease dated January 1, 1982
with amendments thereto dated January 27, 1982 and July 16, 1982 (collectively
"Agreement and Lease") relating to certain portions of Lessor's Commerce Plant
located at 5743 East Smithway Street, City of Commerce, California. The
portions of the Commerce Plant leased to Lessee by Lessor and described in the
Agreement and Lease are hereinafter referred to as the Leased Premises.
The parties hereto now desire to make specific additions and revisions to the
Agreement and Lease effective January 1, 1985.
NOW THEREFORE, IT IS AGREED:
1- Add to Article I, DESCRIPTION OF PREMISES, Paragraph 1.01 (a),
the Additional Leased Premises as follows:
"10- Land area of approximately 3974 sq. ft. located on the
south-west corner of the Lessor's property as outlined
in red and marked areas 1 & 2 on Exhibit '29' which is
hereto annexed and made a part hereof; and
11- Land area of approximately 12,298 sq. ft. located on the
south-east corner of the Lessor's property as outlined
in red and marked areas 3, 4 & 5 on exhibit '29'; and
12- Land area made up of the former parking area for 32
automobiles of approximately 15,642 sq. ft. located
directly in front of Lessor's main building. This area
as outlined in red and marked areas 6 & 7 on Exhibit
'29'; and
13- Office and hallway area of approximately 1,305 sq. ft.
located on the second floor of Lessor's main building
as outlined in red on Exhibit '30' hereto annexed and
made a part hereof; and
14- Area of approximately 220 sq. ft. located in Lessor's
battery charger room, as outlined in red on Exhibit
'31' hereto annexed and made a part hereof; and
1
63
15- Dry storage area of approximately 2,212 sq. ft.
located in Lessor's warehouse, as outlined in red
on Exhibit '32' hereto annexed and made a part hereof;
and
16- Storage area of approximately 1792 sq. ft.
located on the north mezzanine of Lessor's main
building as outlined in red on Exhibit '33' hereto
annexed and made a part hereof; and
17- Parking for 28 automobiles in Lessor's employee
parking lot as outlined in red on Exhibit '7' of the
Agreement and Lease."
2- Article V, RENT AND SECURITY DEPOSIT, Paragraph 5.01 shall
be amended to read in its entirety as follows:
"5.01 (a) Lessee shall pay to Lessor for the Leased
Premises and the Leased Equipment a minimum
rent in the amount of Thirty-one Thousand Five
Hundred Dollars ($31,500) per month, and
(b) Lessee shall pay Lessor for the Additional
Leased Premises additional monthly as follows:
i- Land area as described on Exhibit
'29' of approximately 31914 sq. ft.,
including 19,022 sq. ft. @ $.125 per
sq. ft. and 12,892 sq. ft. @ $.0776 per
sq. ft., for a total of Three Thousand
Three Hundred Seventy-eight Dollars
($3,378) per month.
ii- Office, lobby and hallway area
described on Exhibit '30' of
approximately 1305 sq. ft. @ $.69 per
sq. ft. for a total of Nine Hundred
Dollars ($900) per month.
iii- Area in battery charger room as
described on Exhibit '31' of
approximately 220 sq. ft. @ $.45 per
sq. ft. for a total of Ninety-nine
Dollars ($99) per month.
iv- Dry storage area in the warehouse
as described on Exhibit '32' of
approximately 2212 sq. ft. @ $.25 per
sq. ft. for a total of Five Hundred
Fifty-three Dollars ($553) per month.
v- Storage area in north mezzanine as
described on Exhibit '33' of
approximately 1792 sq. ft. @ $.25 per
sq. ft. for a total of Four Hundred
Fifty Dollars ($450) per month.
2
64
vi- Parking for 28 cars as described on
Exhibit '7' @ $20.00 per space for a
total of Five Hundred Sixty Dollars
($560) per month.
(c) All of the above rental payments for the
Additional Leased Premises are subject to the
terms of paragraph 3.05 of the Agreement and
Lease; that is the increases for the Additional
Leased Premises will occur as specified therein
and will be computed on the same percentage
ratio as specified in each lease option
period."
3- Maintenance Responsibilities: Lessee shall be responsible
for the maintenance and housekeeping of the Additional Leased
Premises.
4- Property Taxes and Insurance: The Additional Leased
Premises being added to the Lease, increase the percentage of
property taxes and insurance expenses payable by the Lessee. As
a result the portion of the real property taxes to be paid by
Lessee is increased from 10.5% to 16.29% for land assessments
and from 18.76% to 23.11% for improvements assessments. The
portion property insurance to be paid by Lessee increases from
18.76% to 23.11%. The Lessee continues to be solely responsible
for personal property taxes and insurance for property owned by
and used by the Lessee within the Leased Premises and
Additional Leased Premises.
5- Leased Equipment: The list of equipment, belonging to the
Lessor, which is being used by the Lessee, as provided for in
Article II of the Agreement and Lease, appearing in Exhibit
"10" of the Agreement and Lease, is hereby deleted and in place
thereof, equipment shown in Exhibit "34" is substituted.
6- Paragraph 10.04 shall be amended to read in its entirety as
follows:
"10.04 The following utilities and services are the
responsibility of Lessee and the expense shall be borne
by Lessee. Lessee shall pay any increases from the 1981
costs.
A- All electric lighting, space heating and
air conditioning required by it in the
connection with the occupancy and use by Lessee
of the office areas which constitutes a portion
of the Leased Premises as shown on Exhibit '4'
hereto annexed."
3
65
7- Paragraph 11.04 shall be amended to read in its entirety as
follows:
"11.04 Lessor shall maintain on the Commerce Plant in which
the Leased Premises and Leased Equipment are located, a policy
of standard fire and extended coverage insurance with vandalism
and malicious mischief endorsement, to the extent of at least
ninety percent (90%) of the full replacement value thereof,
including boiler and machinery and business interruption
coverage. The insurance policy shall be issued in the name of
Lessee, Lessor and Lessor's lender, as their interests appear.
The insurance policies shall provide that any proceeds shall be
made payable to the appropriate insured. Lessor shall pay the
premium for maintaining said insurance policy. A certificate of
such insurance shall be delivered to Lessee upon reasonable
request. Lessee shall reimburse Lessor for the cost of
maintaining such insurance as follows:
(1) The amount of $2,814.00, and
(2) An amount equal to 23.11% of any increase in the annual
premium of such insurance policy over and above the
1984-1985 policy year. Such reimbursement shall be
made by Lessee to Lessor each year within ten (10) days
after Lessee receives a copy of the premium notice,
together with work-papers showing the calculations of
Lessee's portion thereof. Lessee shall be obligated to
reimburse Lessor for the entire portion of any increase
caused by the particular use or activity of Lessee and
by improvements constructed by or for the exclusive use
or benefit of Lessee. Lessee shall not be obligated to
reimburse Lessor for any portion of any increase in the
insurance premium caused by particular use or activity
of any other tenant in the building in which the Leased
Premises are located or caused by improvements
constructed by or for the exclusive benefit of any
other tenant."
8- Lessee and Lessor have entered into a separate agreement dated
January 18, 1985 under which Lessor has among other things
granted to Lessee the right to construct a storage freezer,
refrigeration system, electrical system, and industrial waste
system upon the areas added in this Third Amendment. This
agreement sets down certain terms and conditions that are to be
followed during the term hereof. Except that section 11
relating to increased rent, has been covered in this
amendment, and is hereby deleted. These terms and
4
66
conditions are paramount in their application and will prevail in the
event of a conflict with the Agreement and Lease and this Third
Amendment. This agreement is marked as Exhibit "35" and hereto annexed
and made a part of this amendment.
9- The Additional Leased Premises and the Lessee's new freezer and
refrigeration facility shall be subject to the other terms and
provisions of the Agreement and Lease.
10- Miscellaneous: Except as expressly set forth herein, the Agreement and
Lease with applicable amendments shall remain in full force and
effect.
/s/ TILLIE MARANTZ
-------------------------------
Tillie Marantz
Lessor
By /s/ PAUL R. WOODLAND
-------------------------------
Dreyer's Grand Ice Cream Inc.
Lessee
67
AGREEMENT AND LEASE
EXHIBIT "7"
EMPLOYEES PARKING AREA
CITY OF COMMERCE CAL.
20 OF 327 SPACES UNASSIGNED
[Diagram]
68
EXHIBIT 29
[Diagram]
69
EXHIBIT 30
[Floor Plan]
70
EXHIBIT 31
[Floor Plan]
71
EXHIBIT 32
[Warehouse Floor Plan]
72
[Rear Mezzanine Floor Plan]
73
EXHIBIT #34
EQUIPMENT IN DREYER'S LEASED AREA, OWNED BY LESSOR AND LEASED BY DREYER'S
5 - Strahman wall mount hose stations.
1 - Strahman floor mount hose station.
4 - Assorted stainless steel parts tables.
2 - Groen kettles # 14763 with lighting mixers.
1 - Crepaco fruit feeder s/n 1685.
1 - Cherry Burrell ice cream freezer s/n 5092.
1 - Howard 3500 gallon tank #48.
1 - Greer hardening tunnel.
1 - Lot stainless steel pipes, fittings and valves
located throughout leased area.
74
AGREEMENT
This Agreement is executed as of this 31 day of May, 1988 between
TILLIE MARANTZ, as trustee of the Tillie Marantz Revocable Trust, doing
business at T.J. Investments ("Lessor") and DREYER'S GRAND ICE CREAM, INC., a
Delaware corporation ("Lessee").
1. Recitals of Fact. Lessor is the successor to Jack and Tillie
Marantz, as Lessor, and Lessee is the successor to Dreyer's Grand Ice Cream,
Inc., a California corporation, as Lessee, under an Agreement and Lease dated
as of January 1, 1982, as heretofore amended (the "Lease"), relating to
certain portions (the "Leased Premises") of a milk and dairy products
processing and distribution plant located at 5743 East Smithway Street in the
City of Commerce, California (the "Property").
2. Agreement.
(a) Leased Premises. The parties hereto agree as follows:
The following portions of the Leased Premises are relocated as
indicated on the following Exhibits to this Agreement and Lessee shall pay to
Lessor, as additional monthly minimum rental, the following sums:
Additional Monthly
Relocation of Existing Space Exhibit Minimum Rental
---------------------------- ------- ------------------
Dry goods receiving A1 $.00
(common area)
Garbage compactor A2 $.00
The following portions of the Property are added to the Leased Premises
as indicated on the following Exhibits to this Agreement and Lessee shall pay
to Lessor, as additional monthly minimum rental, the following sums in
consideration therefor:
Page 1 - AGREEMENT
75
Additional Monthly
Additional Space Exhibit Minimum Rental
---------------- ------- ------------------
As many executive auto
spaces as are reasonably
required by Lessee and
reasonably acceptable to
Lessor N/A $ 40.00 (per space)
Mezzanine Exhibit C $ .15 per sq. ft.
Approx. 1600 sq. ft. $ 240.00
(160' x 10')
Dry storage:
Approx. 2165 sq. ft.,
21' high space Exhibit A3 $ .32 per sq. ft.
$ 692.80
2937 sq. ft. (currently
month-to-month rental) Exhibit A4 $ .28 per sq. ft.
$ 822.36
Challenge offices Exhibit A5 $ .75 per sq. ft.
960 sq. ft. $ 720.00
Production space: Exhibit B $ .50 per sq. ft.
6512 sq. ft. (A6) $3,256.00
(See subsection (e)
for partial
abatement)
6 Truck Parking Spaces Exhibit A7 $ 50.00 (per space)
(10 feet wide) $ 300.00
(previously Challenge
spaces adjacent to
Dreyer's existing parking)
2 Truck Parking Spaces Exhibit A8 $ 0.00 (per space)
(10 feet wide)
Up to 24 additional truck N/A $ 70.00 (per space)
parking spaces when Dreyer's (no space to
constructs warehouse as exceed 13
reasonably agreed between feet by 35
Lessor and Lessee feet per
space)
New rent for the dry storage area and executive parking space shall
begin on the date of occupancy. New rent for the Challenge offices shall
commence as of April 1, 1988. New rent for the six Challenge truck parking
spaces shall commence as of May 1, 1988. New rent for the mezzanine space will
commence upon execution of this Agreement. Lessor and Lessee shall execute a
Page 2 - AGREEMENT
76
memorandum acknowledging the commencement date(s) of the new rent. Lessor
agrees to remove the existing concrete curb in the Mezzanine space as soon as
reasonably possible following execution of this Agreement.
(b) Lessor's Use of Compactor. Lessee agrees that Lessor may use
the above-mentioned garbage compactor to dispose of trash from Lessor's
existing office in the Property, provided that Lessor shall assume full
responsibility for, and shall indemnify Lessee against, any losses, claims or
damage arising from Lessor's use of such compactor.
(c) Approval of Construction. Subject to Lessee's compliance with
applicable law, Lessor hereby approves Lessee's construction of a warehouse
area within the Leased Premises (Exhibit A9) and renovation of certain portions
of the Leased Premises (in accordance with plans for approximately 18,000
square feet previously submitted by Lessee to Lessor and pre-approved by
Lessor). Lessee shall indemnify Lessor and hold Lessor harmless from any
damage to the Property resulting from the construction on, and renovation of,
the certain portions of the Leased Premises. Lessee shall bear any and all
costs associated with such construction and renovation, including any and all
governmental permits and licenses, and Lessee shall pay all increases in
expenses associated with such construction and renovation (inclusive of any tax
reassessments). That is, to the extent the construction or renovation causes
increased taxes or increased insurance premiums to Lessor with respect to the
Property or increased costs of services referred to in paragraphs 1.04 or 10.02
of the Lease, Lessee shall pay such increased taxes or costs. Lessee shall
similarly bear the cost of any and all new landscaping required for Lessee's
improvements including any and all landscaping required by governmental
agencies. The aforesaid improvements, upon termination of the Lease, shall
become part of the Property and shall thereafter be treated as realty of
Lessor, not personally of Lessee. There shall be no adjustments in the
minimum monthly rent associated with the relocation or temporary reduction of
Common Areas resulting from such construction or renovation. Lessee, at its
own expense, shall maintain all insurance required to properly cover all risks
of Lessee and Lessor associated with the new construction and the renovation,
including public liability and property damage insurance, including product
inventory and Lessor shall be named as an additional insured on all such
insurance policies.
(d) Renewal. The Lessee hereby exercises its option to renew the
Lease for the second option period commencing January 1, 1992 and ending on
December 31, 1996.
(e) Production Space. Lessee agrees to lease from Lessor
approximately 6512 square feet of production space, as marked in Exhibit B
("production space") commencing May 15, 1988. The monthly minimum rental shall
be $.50 per each actual square
Page 3 - AGREEMENT
77
foot. However, Lessor grants Lessee an abatement in the amount of additional
monthly minimum rent of $1,256.00 for the first twelve months following May 15,
1988, or until the date Lessee uses the production space (or any portion
thereof) for production rather than warehouse space, whichever date is earlier.
If lessee uses the production space for other than production, Lessee's right
to such use or uses is subject to prior approval of the space for such use by
the Fire Marshall. The rent payment for this production space shall commence
May 15, 1988. Lessor agrees to replace or repair floor tiles in the production
space as needed and to paint or repaint wall surfaces in the production space
as needed in compliance with applicable dairy codes within a reasonable time
after this Agreement is executed. Anytime after April 15, 1989 Lessee may
terminate the lease for the production space upon Ninety (90) days prior to
written notice to Lessor. Upon any such termination the terms of subsection
(g) below shall apply to the production space except that the time within which
Lessee shall agree to lease the production space shall be reduced from
forty-five (45) to fourteen (14) days. Lessee agrees to pay any and all costs
of tenant improvements to the production space, and except as provided in this
subsection (e), the production space shall be subject to all terms of and
become a part of the Lease.
(f) Maintenance Building/Dock/Refueling Facility Option Space.
Lessor grants Lessee the option, during the five (5) years following mutual
execution of this Agreement, to rent approximately 4,000 square feet of the
Maintenance Building (as marked in Exhibit "A10"), including the fuel dock
space ("maintenance building/dock space"). This option includes the southeast
(front) portion of the building, including the restroom facilities.
During the same (5) year period, and provided the maintenance
building/dock space option has been or is contemporaneously exercised, Lessee
shall have the option to erect/operate a refueling facility adjacent to the
South entrance of the relocated truck maintenance facility and the driveway (22
feet by 27 feet, as noted on Exhibit "A11"). Such refueling facility must meet
all applicable building/safety/environmental codes. Lessee agrees that Lessor
may lease the maintenance building/dock space and/or the refueling facility
area to a tenant other than Lessee, or may construct or allow construction of
the refueling facility during the period of this option. Lessee further agrees
that if any interim lease is in effect at the time Lessee desires to exercise
either of these options, Lessee will give Lessor at least six (6) months prior
written notice of exercise. If there is no interim lease at the time Lessee
exercises either option, Lessee shall give Lessor thirty (30) days prior
written notice of exercise. Lessee agrees that in the event Lessor or another
tenant constructs the refueling facility, if Lessee grants prior written
approval of the plans, specifications and costs of such construction (which
approval shall not be unreasonably withheld) Lessee shall, upon exercise
Page 4 - AGREEMENT
78
of these options, purchase the refueling facility from the Lessor or other
lessee with the cost determined by the original construction cost less
depreciation. For purposes of this section, it will be assumed that the
refueling facility will depreciate on a straight line basis over a 15 year
period from the date of first operation. After Lessee has purchased the
refueling facility Lessee shall not be obligated to share the facility with
Lessor or other tenant of Lessor.
If Lessee constructs or becomes the owner of the refueling facility
Lessee agrees to indemnify, reimburse, defend and hold harmless Lessor, its
successors and assigns, from and against any and all liabilities, claims,
damages, penalties, losses or charges (including but not limited to costs of
investigation, monitoring, legal fees, remedial response, removal, restoration
or permanent acquisition) which may be suffered, paid, assessed or incurred as
a result of the construction, use and operation of the refueling facility
during the term of Lessee's lease of the refueling facility, and including but
not limited to any contamination that may be created above, under or around the
refueling facility, together with any investigation, monitoring, clean-up,
removal, restoration, remedial response or other work undertaken on behalf of
Lessor, its successors or assigns.
Lessee shall have the option of segregating the portion of the
Maintenance Building it occupies (approximately 4,000 square feet) and denying
access to same by all other tenants. Lessor agrees not to let the balance of
the Maintenance Building for uses incompatible with Lessee's use. Lessee shall
pay Lessor one-half the then existing rate per square foot (currently $0.50)
charged for production space under this Agreement for the area it occupies
within the Maintenance Building (initially $0.25 per square foot), and $0.13
per square foot for the external fuel dock area.
Lessee may alter, modify or renovate the Maintenance Building/
Dock space to best fit its use as a truck maintenance and parts storage
facility. The cost of said renovation, alteration and modification shall be
borne by the Lessee. Upon exercise of this option, this space shall be subject
to all terms of and become a part of the Lease.
(g) Vacant Space. At such time as Lessor becomes aware that any
premises in the Property are or will become available for lease, it shall
notify Lessee, specifying the date of availability and size and location of
such premises. Lessee shall have forty-five (45) days following receipt of such
notice to agree to lease all of the premises included in such notice, except,
in the event the available space is warehouse space (dry storage), Lessee may,
subject to Lessor's approval, agree to lease any portion thereof so long as the
remaining unleased space is reasonably rentable at market rates. Upon such
agreement, such premises shall be included in the Leased Premises beginning
with the date of availability specified in the notice. Monthly
Page 5 - AGREEMENT
79
minimum rental shall be increased with respect to this addition to the Leased
Premises by the then current fair market value of comparable space. The new
space will be subject to all of the terms, covenants and conditions provided in
the Agreement and the Lease including the terms of all future renewal periods.
(h) Other Uses of Property. Lessor agrees to use best efforts to
ensure that the use of the Property by other tenants will be reasonably
compatible with tenants in the dairy industry business, viz, no business or use
which unreasonably interferes with a dairy processing business. In this
regard,during the term of the Lease or any extension thereof, Lessor shall give
Lessee notice of any prospective tenant for any substantial portion of the
Property who is not in a dairy industry or compatible food-oriented business.
The notice shall include the name and business of the prospective tenant and
the intended use of the portion of the Property by the prospective tenant.
(i) Lessor's Capital Expenditures. Lessor agrees that all capital
expenditures in excess of $1,000 which will result in any billing to Lessee
under the Lease must have the prior written approval of the Lessee, which
approval will not be unreasonably withheld.
(j) Option Period. Because of the foregoing changes in the Leased
Premises, the fifth through twelfth lines of paragraph 3.05(a) of the Lease
(beginning "Second five (5) year option period" and ending "$70,875/month")
are amended to read:
"Second five (5) year option period
120% of monthly minimum rental applicable in December 1991
Third five (5) year option period
116.67% of monthly minimum rental applicable in December 1996
Fourth five (5) year option period
114.286% of monthly minimum rental applicable in December 2001
Fifth five (5) year option period
112.5% of monthly minimum rental applicable in December 2006"
(k) Paragraph 10.02 of the Lease. The parties understand and agree
that paragraph 10.02 of the Lease is unclear and desire to clarify it as
follows: All services and utilities referred to therein as "for the use of
Lessee" which can reasonably be separately metered or otherwise segregated to
reflect Lessee's actual consumption thereof shall be so metered or
segregated and Lessee shall pay such sums as reflect Lessee's actual
consumption thereof. Lessee shall pay its proportionate share, calculated by
the total rentable area of the Property, of all other such services and
utilities referred to in paragraph 10.02.
PAGE 6 - AGREEMENT
80
(l) Condition Precedent. Without affecting any other provision of
this Agreement, the obligations of Lessee and Lessor under the portions of
subparagraph 2(a) relating to Garbage Compactor and subparagraph 2(b) of this
Agreement (collectively "Conditional Obligations") are subject to Lessee's
receipt of all necessary permits, variances and other government approvals
necessary for it to complete the construction and renovation referred to
herein. Lessee is not obligated to seek such approvals except at such time as
it chooses in its discretion. If, however, Lessee does not diligently seek such
approvals within five (5) years of the date hereof and does not use its best
efforts to obtain such approvals and commence construction within twelve (12)
months of the date of approval, this condition precedent shall be deemed to
have failed and the Conditional Obligations shall not be a part of this
Agreement.
(m) Expansion of Engine Room. Subject to Lessee's compliance with
applicable law and regulations, Lessor approves Lessee's expansion of Lessee's
engine room within the Leased Premises. Expansion will be allowed to extend
into the parking spaces south of existing engine room. Such expansion will
include required air space for equipment or piping. All costs of expansion
including any and all costs of governmental permits and licenses and tax
reassessments, shall be borne by Lessee. The indemnification, tax increase and
insurance provisions of Paragraph 2(c) of this Agreement are incorporated as if
fully set forth herein. Except as set forth in such provisions, such expansion
shall not increase the rent payable under the Lease.
(n) Truck Parking Spaces. The construction and options
contemplated by this Agreement may require Lessee to lease from Lessor new
spaces for Lessee's existing truck parking spaces, presently located as shown
in Exhibit A. Subject to any existing leases and to compliance with applicable
law, Lessee shall have the right, at its sole option, to locate any new truck
parking spaces along the northwest driveway (A12), then, as necessary, along the
common dock directly opposite the relocated truck maintenance facility and
finally along the north perimeter fence (as set forth in Exhibit "A13"). Lessor
shall be responsible for the relocation of any interim users that may occupy
any of the aforementioned areas as necessary to accommodate Lessee's new truck
parking spaces. Subject to compliance with applicable law, Lessee may make such
physical improvements as are reasonably necessary to create up to twenty-four
(24) new truck parking spaces for its exclusive use, each to measure up to 13
feet wide by 35 feet deep, to have unhindered access to the driveway and to be
provided with 240V/30A/3-Phase electrical power hookup for truck refrigeration.
Lessee shall be responsible for all costs of providing any physical
improvements (including the electrical power hookups). Lessee shall pay Lessor
$70.00 additional monthly minimum rent for each new truck parking space. Upon
establishment of any such new truck parking spaces, such spaces shall be subject
to all terms of and become a part of the Lease.
Page 7 - AGREEMENT
81
3. Agreement to Execute Amendment to Lease. The parties agree
that upon their agreement as to the location and number of auto and truck
spaces to be provided to Lessee under Section 2 hereof, they will execute an
Amendment to the Lease, which Amendment shall contain all of the terms of
Section 2 of this Agreement and the location and number of auto and truck
spaces to be provided to Lessee as agreed by the parties hereto. The parties
agree that this Agreement is effective as of the date hereof and the obligations
of the parties hereunder are not contingent on the execution of said Amendment.
4. Agreement to Restate Lease. The parties agree that promptly
following the execution of this Agreement they shall remeasure the Leased
Premises and the Property; determine accurate allocations of net rentable
space; adjust, if necessary, the present percentage of net rentable space for
purposes of assessing common area expenses, taxes, insurance, etc.; and execute
a restated and amended lease in the form and substance of the American
Industrial Real Estate Association Standard Industrial Lease-Multi-Tenant form
(1981) with such amendments as may be consistent with and appropriate to retain
the substance of the Lease.
5. Parking. Lessee agrees that Lessor, at Lessor's expense, may
relocate all Lessee's auto parking spaces onto the main plant site and that
upon any relocation there will be 239 parking spaces for the entire Property as
required by the City of Commerce. Upon any such relocation, Lessor agrees to
use its best efforts to substantially comply with the revised parking plan
attached hereto as Exhibit D. Lessor grants Lessee an option for six (6)
additional executive parking spaces at such time as the relocation work is
complete.
6. Lessee Provision of Steam. Lessee shall have the right to
discontinue use of Lessor provided-and-billed steam utility services, and to
provide its own steam utility service. Lessee shall submit a plan to Lessor at
least two months prior to such discontinuation and such plan shall, at a
minimum, demonstrate that Lessee's proposal is compatible with the plant and
will not create a material adverse effect on other tenants of the Property
which use or otherwise consume the Lessor-provided steam utility service.
Lessee's plan may incorporate a steam utility service with sufficient capacity
to accommodate all the plant's steam needs and, upon Lessor's approval of said
plan, and upon approval of other affected lessees, Lessee may provide steam to
other lessees. The new steam room will occupy existing Leased Premises or such
other space, the location of which is mutually agreeable to Lessor and Lessee
(with no increase in the monthly minimum rental).
7. Compressor Location. Subject to availability of space and
noninterference with existing equipment and machinery, Lessor hereby approves
Lessee's installation of an additional compressor in that portion of the plant
that presently is designated and
Page 8 - AGREEMENT
82
used for Lessor compressors and like machinery and equipment. Lessee agrees
to give Lessor's plant engineer sixty (60) days prior written notice of its
plans for such installation. Lessor's approval of Lessee's plans shall not be
unreasonably withheld. Lessee will have option of installing its own
transformer and cooling towers (on the roof) for supply to these compressors.
Lessee will be responsible for any and all damages to and/or repairs necessary
to the roof that may occur as a result of installation or operation of the
transformer and/or cooling towers. The Lessee will incur no additional monthly
rent for such addition.
8. Lessor Approvals. Except as otherwise provided in Section 2(c)
herein, Lessee shall submit to Lessor written plans for any construction,
renovation, installation or other improvement (hereinafter the "improvements")
contemplated by Lessee and authorized by Lessor under the terms of this
Agreement. Such plans shall demonstrate compliance with applicable federal,
state and local laws and regulations, and shall not interfere with any lease or
other agreement between Lessor and another tenant of Lessor's plant. The plans
shall be submitted to Lessor within a reasonable time prior to Lessee's
commencement of work on the improvement, but in all cases Lessee shall give
Lessor at least thirty (30) days prior notice, for the approval and consent of
Lessor. Within a reasonable time, but not longer than fourteen (14) days, after
receipt of Lessor's plans Lessor shall notify Lessee of the Lessor approval and
consent or the Lessor non-approval or non-consent and any objections to the
plans, and the reasons therefor. Upon resolution of such objections, if any, to
the reasonable satisfaction of Lessor, Lessor shall approve of and consent to
the plans. Lessor's approval and consent under this section shall not be
unreasonably withheld.
9. Miscellaneous. Except as expressly set forth herein, the Lease
shall remain in full force and effect.
Page 9 - AGREEMENT
83
Executed the date above written in Los Angeles, California.
"Lessor"
/s/ TILLIE MARANTZ
-----------------------------------------
TILLIE MARANTZ, as Trustee of the
Tillie Marantz Revocable Trust,
doing business as T.J. Investments
"Lessee"
DREYER'S GRAND ICE CREAM, INC.
a Delaware corporation
By: /s/ WILLIAM R. OLDENBURG
--------------------------------------
Its: Vice President - Operations
------------------------------------
Page 10 - AGREEMENT
84
EXHIBIT A
[FLOOR PLAN]
85
EXHIBIT D
[FLOOR PLAN]
86
EXHIBIT B
[FLOOR PLAN]
87
EXHIBIT C
[FLOOR PLAN]
88
AMENDMENT OF LEASE
This Amendment of Lease is made this 31 day of March, 1989 between
Dreyer's Grand Ice Cream, Inc., a Delaware corporation ("Lesee") and Smithway
Associates, Inc. a California corporation ("Lessor").
1. Recitals of Fact. Smithway is the owner of certain premises at
5729 East Smithway Street, City of Commerce, California and the successor
Landlord with respect to "Leased Premises" defined under the original master
Agreement and Lease dated as of January 1, 1982, (the "Lease") between Tillie
Marantz, Jack Marantz and Dreyer's, as amended.
The Lease has heretofore been amended seven times, the most recent
amendment being that certain Agreement dated May 31, 1988 (the "Agreement").
The parties hereby amend the Lease as set forth hereinafter.
2. Amendments.
(a) Effective April 1, 1989, Lessee shall no longer occupy
that certain production space specified in Section 2(e) of the Agreement,
marked on Exhibit B, and marked as A6 on Exhibit A to the Agreement, of
approximately 6,512 sq. ft. (the "Production Space").
(b) Effective April 1, 1989, Lessee's option specified in
Section 2(f) of the Agreement, to lease approximately 4,000 sq. ft. of the
maintenance building and fuel dock space in the areas indicated as A10 and A11
on Exhibit A to the Agreement, is terminated.
(c) Effective April 1, 1989, Lessor releases Lessee from any
and all obligations pertaining to the Production Space, including, without
limitation, the obligation to pay rent on such space.
3. Miscellaneous. Except as expressly set forth herein the Lease
shall remain in full force and effect without amendment.
Lessor: Lessee:
SMITHWAY ASSOCIATES, INC. DREYER'S GRAND ICE CREAM, INC.
By: /s/ By: /s/ PAUL R. WOODLAND
--------------------------- ---------------------------
Its: President Its: Vice President
--------------------------- ---------------------------
89
SMITHWAY ASSOCIATES, INC.
-------------------------
October 31, 1990
Mr. John Ritchhard
Plant Manager
Dreyer's Grand Ice Cream
5743 E. Smithway St.
City of Commerce, CA 90040
Re: Nationwide and Wilsey space swap
Dear John,
This letter will constitute a letter of intent as to your taking over the
Nationwide space and the giving up of certain space in the Wilsey sub-lease
that you assumed in 1989 and the sales dry storage area that is not a part of
the Wilsey documents.
We agreed to the following:
Dreyer's will take over the Nationwide space, as shown on the attached Exhibit
A. We take back the production space, dry storage and offices and the sales dry
storage area all marked on Exhibit B. We will be allowed to lease what is shown
on Exhibit B as the whip room to Atomic Food Products and we will be able to
lease to Challenge Dairy the dock and yard space shown on Exhibit B and we will
be able to collect the money for such rental directly from Challenge Dairy and
Atomic. However, Dreyer's will have the right to take back said yard and dock
space with a 90-day notice at no additional cost if Dreyer's should need this
space for future expansion purposes.
We also requested that the next 5-year option be exercised on your Master
Lease. You agreed to enter into a new lease on the Nationwide space on the
Standard Industrial Lease Form which I have previously submitted to you. We
will be able to keep the storage racks that are currently in the Nationwide dry
storage area. We have also agreed, as we have in the past, to address the
existing lease with Dreyer's and try to put it on a basis that will be
understandable by both parties. I will be making a first attempt at this
re-draft in the near future.
________________________________________________________________________________
4400 COLDWATER CANYON AVE., SUITE 325, STUDIO CITY, CA 91604
(818) 769-7874 FAX (818) 769-7976
90
A summary of the rental payment would be as follows:
Per Month
---------
Wilsey Rent $15,336
9,504/S.F. @ $.85 8,078
-------
Difference 7,258
Nationwide Rent 9,876
-------
Rental Shortage 2,618
Applied as follows:
Atomic lease 648
Challenge dock and yard area 810
Sales Dry Storage area 998
-------
Sub-total 2,456
-------
Difference - Waived by 162
Smithway Associates, Inc. -------
The result of the above would be a push in the amount of rent, as you have
requested.
You have previously agreed to clean up and paint the Wilsey production space as
soon as possible. I have previously given you a draft of this new Nationwide
lease.
If the above meets with your general understanding of our meeting of October
25, please acknowledge by signing a copy of this letter where provided.
Yours truly,
/s/ JULES J. DOBKIN
Jules J. Dobkin
President
ACCEPTED AND AGREED IN PRINCIPAL: ___________________________________________
John Ritchhard
Plant Manager
JJD:sd
91
[LETTERHEAD]
October 4, 1990
Mr. John Ritchhard
Dreyer's Grand Ice Cream
5743 W. Smithway St.,
City of Commerce, CA 90040
Re: Right to First Refusal - Maintenance Room
Dear John,
This letter will serve as your Right of First Refusal to lease the maintenance
room of approximately 2,112 sq. ft. We are currently asking $.45/sq. ft. for
this space. This Right of Refusal is good for the next 12 months.
Yours truly,
/s/ JULES J. DOBKIN
Jules J. Dobkin
President
JJD:sd
92
MONTH-TO-MONTH AGREEMENT TO LEASE
This month-to-month Agreement to Lease is executed as of the 13 day of May,
1993 between Smithway Associates, Inc. (Lessor) and Dreyer's Grand Ice Cream,
Inc. (Lessee).
RECITALS
A. Lessor and Lessee are parties to the Agreement and Lease dated
January 27, 1982, July 16, 1982 and January 1, 1985 (collectively "Agreement
and Lease").
B. Dreyer's Grand Ice Cream desires to lease additional space in
the subject property on a month-to-month basis and Smithway agrees to lease the
same to Dreyer's Grand Ice Cream.
NOW, THEREFORE, the parties agree as follows:
1. Modification and Amendment of the Original Lease. The original
lease is modified and amended as specifically herein set forth. Unless
expressly modified or amended by a provision of the Agreement, all terms,
conditions and covenants of the original Agreement and Lease shall remain in
full force and effect.
2. Rental of Additional Space. Smithway hereby leases to Dreyer's
Grand Ice Cream, and Dreyer's Grand Ice Cream leases from Smithway, as
additional demised premises in the subject property, those areas which are
below identified and which are more particularly described on attached Exhibit
X, subject to the following rental rates:
Area Sq. Ft. Rate Montly Rental
---- ------- ---- -------------
X-1 Dry Storage 230 .35 $ 81.00
X-2 One (1) Truck Parking Space 70.00
X-3 Dry Storage 870 .35 305.00
The parties agree that the monthly rental rate above set forth is a negotiated
rate and in the event of any variation in the square footage of the demised
premises, if measured, there shall be no adjustment in the monthly rental rate.
3. Rent Commencement Date on Additional Space. Rent shall
commence on March 15, 1993 for Areas X-1 and X-2 for an additional monthly rent
of $151. Rent shall commence on May 15, 1993 for area X-3 for an additional
monthly rent of $305. The new rent total will be $86,962.68.
93
4. This Agreement shall continue on a month-to-month basis and may
be terminated by either party with thirty-day written notice.
5. Operating Expenses. The Additional Space is leased on a net
basis and Dreyer's Grand Ice Cream share of Operating Expenses will be 50.05%.
6. Full Understanding. This Agreement contains the full
understanding of the parties and any subsequent modifications or additions
shall expressly be made in writing.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above shown, at Los Angeles, California.
LESSOR: LESSEE:
SMITHWAY ASSOCIATES, INC. DREYER'S GRAND ICE CREAM, INC.
By /s/ AARON COHEN By /s/ MICHAEL GILLES
------------------------ -------------------------
Aaron Cohen Michael Gilles
President Plant Manager
EX-10.27
4
AMENDMENT TO DISTRIBUTION AGREEMENT
1
Exhibit 10.27
AMENDMENT TO DISTRIBUTION AGREEMENT
This Amendment to Distribution Agreement ("Amendment") is entered into
this 12th day of December, 1994 by and among Dreyer's Grand Ice Cream, Inc., a
Delaware corporation ("Dreyer's"), Edy's Grand Ice Cream, a California
corporation ("Edy's") and Ben & Jerry's Homemade, Inc., a Vermont corporation
("Manufacturer").
Recitals
WHEREAS, Dreyer's, Edy's and Manufacturer are parties to a Distribution
Agreement originally entered into on January 6, 1987, as heretofore amended (the
"Agreement");
WHEREAS, Edy's of New York, Inc., a New York corporation, was originally a party
to the Agreement but was merged with and into Edy's on July 1, 1993;
WHEREAS, Dreyer's, Edy's and Decatur Foods, Inc., an Ohio corporation
("Decatur"), are having discussions regarding the purchase by Edy's of all of
the distribution rights and certain other assets of Decatur, including the
rights to distribute products of Manufacturer in the Cleveland, Ohio
metropolitan area (the "Purchase"); and
WHEREAS, in the event the Purchase is consummated, Dreyer's, Edy's, and
Manufacturer desire to amend the Agreement to include the Cleveland, Ohio
metropolitan area as part of the "Territory" (as defined in the Agreement) under
the Agreement.
NOW, THEREFORE, in consideration of the mutual promises of the other, each of
the parties hereby agrees to further amend certain provisions of the Agreement,
as heretofore amended, as follows:
Agreement
1. Amendment to Agreement. The Agreement shall be amended effective immediately
upon the closing of the Purchase by amending the definition of "Territory" in
Section 2 of the Agreement to include the Cleveland, Ohio metropolitan area.
2. Miscellaneous.
a. Except as expressly set forth herein, the Agreement shall remain in full
force and effect without amendment.
b. All capitalized terms not otherwise defined herein shall have the
respective meanings assigned to them in the Agreement.
1
2
c. This Amendment may be executed in counterparts, each of which shall be
deemed an original, but together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
be executed and delivered by its duly authorized officer as the date first above
written.
BEN & JERRY'S HOMEMADE, INC. DREYER'S GRAND ICE CREAM, INC.,
By: /s/Frances Rathke By: /s/William C. Collett
-------------------------- ---------------------------
Name: Frances Rathke Name: William C. Collett
Title: Chief Financial Officer Title: Treasurer
EDY'S GRAND ICE CREAM
By: /s/William C. Collett
----------------------------
Name: William C. Collett
Title: Treasurer
2
EX-10.28
5
AMENDED AND RESTATED CREDIT AGREEMENT
1
Exhibit 10.28
===============================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF DECEMBER 13, 1994
AMONG
DREYER'S GRAND ICE CREAM, INC.
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
As Agent,
ABN AMRO BANK N.V.
as co-agent
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
===============================================================================
2
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS............................... 2
1.01 Certain Defined Terms.............................................. 2
1.02 Other Interpretive Provisions...................................... 18
1.03 Accounting Principles.............................................. 19
ARTICLE II
THE CREDITS.............................. 19
2.01 Amounts and Terms of Commitments................................... 19
(a) The Revolving Credit.......................................... 19
(b) The Same Day Rate Loans....................................... 19
2.02 Loan Accounts...................................................... 20
2.03 Procedure for Borrowing............................................ 20
2.04 Conversion and Continuation Elections.............................. 22
2.05 Voluntary Termination or Reduction of Commitments.................. 23
2.06 Optional Prepayments............................................... 23
2.07 Repayment.......................................................... 24
2.08 Interest........................................................... 24
2.09 Fees .............................................................. 25
(a) Arrangement, Agency Fees...................................... 25
(b) Closing Fees.................................................. 25
(c) Commitment Fees............................................... 25
2.10 Computation of Fees and Interest................................... 26
2.11 Payments by the Company............................................ 26
2.12 Payments by the Banks to the Agent................................. 27
2.13 Sharing of Payments, Etc........................................... 27
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY................. 28
3.01 Taxes.............................................................. 28
3.02 Illegality......................................................... 29
3.03 Increased Costs and Reduction of Return............................ 30
3.04 Funding Losses..................................................... 30
3.05 Inability to Determine Rates....................................... 31
3.06 Reserves on Offshore Rate Loans.................................... 32
3.07 Survival........................................................... 32
ARTICLE IV
CONDITIONS PRECEDENT.......................... 32
4.01 Conditions of Initial Loans Etc.................................... 32
(a) Agreement..................................................... 32
(b) Resolutions; Incumbency....................................... 32
(c) Legal Opinion................................................. 33
(d) Payment of Fees, Sums Due Under the Prior Credit
Agreement..................................................... 33
(e) Certificate................................................... 33
(f) Other Documents............................................... 33
i
3
Section Page
4.02 Conditions to All Borrowings.................................... 33
(a) Notice of Borrowing or Conversion/Continuation............. 33
(b) Continuation of Representations and Warranties............. 34
(c) No Existing Default........................................ 34
ARTICLE V
REPRESENTATIONS AND WARRANTIES.................. 34
5.01 Corporate Existence and Power................................... 34
5.02 Corporate Authorization; No Contravention....................... 34
5.03 Governmental Authorization...................................... 35
5.04 Binding Effect.................................................. 35
5.05 Litigation...................................................... 35
5.06 No Default...................................................... 35
5.07 ERISA Compliance................................................ 36
5.08 Use of Proceeds; Margin Regulations............................. 36
5.09 Title to Properties............................................. 36
5.10 Taxes........................................................... 36
5.11 Financial Condition............................................. 37
5.12 Environmental Matters........................................... 37
5.13 Regulated Entities.............................................. 37
5.14 No Burdensome Restrictions...................................... 37
5.15 Labor Relations................................................. 38
5.16 Copyrights, Patents, Trademarks and Licenses, etc............... 38
5.17 Subsidiaries.................................................... 38
5.18 Insurance....................................................... 38
5.19 Full Disclosure................................................. 38
5.20 Disclosure re Margin Stock...................................... 39
ARTICLE VI
AFFIRMATIVE COVENANTS........................ 39
6.01 Financial Statements............................................ 39
6.02 Certificates; Other Information................................. 39
6.03 Notices......................................................... 40
6.04 Preservation of Corporate Existence, Etc........................ 41
6.05 Maintenance of Property......................................... 41
6.06 Insurance....................................................... 41
6.07 Payment of Obligations.......................................... 41
6.08 Compliance with Laws............................................ 42
6.09 Compliance with ERISA........................................... 42
6.10 Inspection of Property and Books and Records.................... 42
6.11 Environmental Laws.............................................. 43
6.12 Use of Proceeds................................................. 43
6.13 Cooperation..................................................... 43
ARTICLE VII
NEGATIVE COVENANTS.......................... 43
7.01 Limitation on Liens............................................. 43
7.02 Disposition of Assets........................................... 45
7.03 Consolidations and Mergers...................................... 45
ii
4
Section Page
7.04 Loans and Investments........................................... 46
7.05 Limitation on Indebtedness...................................... 47
7.06 Transactions with Affiliates.................................... 47
7.07 Use of Proceeds................................................. 47
7.08 Contingent Obligations.......................................... 47
7.09 Joint Ventures.................................................. 48
7.10 Lease Obligations............................................... 48
7.11 Restricted Payments............................................. 49
7.12 ERISA........................................................... 50
7.13 Consolidated Net Worth.......................................... 50
7.14 Minimum Fixed Charge Coverage Ratio............................. 50
7.15 Funded Debt/EBITDA Ratio........................................ 51
7.16 Change in Business.............................................. 51
7.17 Accounting Changes.............................................. 51
7.18 Other Contracts................................................. 51
ARTICLE VIII
EVENTS OF DEFAULT....................... 51
8.01 Event of Default................................................ 51
(a) Non-Payment................................................ 51
(b) Representation or Warranty................................. 52
(c) Specific Defaults.......................................... 52
(d) Other Defaults............................................. 52
(e) Cross-Default.............................................. 52
(f) Insolvency; Voluntary Proceedings.......................... 53
(g) Involuntary Proceedings.................................... 53
(h) ERISA...................................................... 53
(i) Monetary Judgments......................................... 53
(j) Non-Monetary Judgments..................................... 53
(k) Change of Control.......................................... 54
(l) Loss of Licenses........................................... 54
(m) Adverse Change............................................. 54
(n) Invalidity of Subordination Provisions..................... 54
8.02 Remedies........................................................ 55
8.03 Rights Not Exclusive............................................ 55
ARTICLE IX
THE AGENT........................... 55
9.01 Appointment and Authorization................................... 55
9.02 Delegation of Duties............................................ 56
9.03 Liability of Agent.............................................. 56
9.04 Reliance by Agent............................................... 56
9.05 Notice of Default............................................... 57
9.06 Credit Decision................................................. 57
9.07 Indemnification of Agent........................................ 58
9.08 Agent in Individual Capacity.................................... 58
9.09 Successor Agent................................................. 58
9.10 Withholding Tax................................................. 59
9.11 Co-Agents....................................................... 60
iii
5
Section Page
ARTICLE X
MISCELLANEOUS............................. 60
10.01 Amendments and Waivers......................................... 60
10.02 Notices........................................................ 61
10.03 No Waiver; Cumulative Remedies................................. 62
10.04 Costs and Expenses............................................. 62
10.05 Company Indemnification........................................ 62
10.06 Payments Set Aside............................................. 63
10.07 Successors and Assigns......................................... 63
10.08 Assignments, Participations, Etc............................... 63
10.09 Confidentiality................................................ 65
10.10 Set-off........................................................ 66
10.11 Notification of Addresses, Lending Offices, Etc................ 66
10.12 Counterparts................................................... 66
10.13 Severability................................................... 66
10.14 No Third Parties Benefitted.................................... 66
10.15 Governing Law and Jurisdiction................................. 66
10.16 Waiver of Jury Trial........................................... 67
List of Exhibits and Schedules
Exhibits:
A - Compliance Certificate
B - Notice of Borrowing
C - Notice of Conversion/Continuation
D - Opinion of Counsel for Borrower
E - Assignment and Acceptance
Schedules:
2.01 - Commitments and Pro Rata Shares; Principal Amount of Loans
Outstanding as of the Closing Date and Pro Rata Shares
5.05 - Litigation
5.07 - ERISA
5.11 - Special Disclosures of Financial Conditions
5.12 - Environmental Matter
5.15 - Labor Relations
5.17 - Subsidiaries
5.20 - Margin Stock
7.01 - Existing Liens
7.04 - Investments
7.05 - Indebtedness
7.08 - Contingent Obligations
10.02 - Offshore and Domestic Lending Offices; Addresses for
Notices
iv
6
AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of December
13, 1994, among Dreyer's Grand Ice Cream, Inc., a Delaware corporation (the
"Company"), the several financial institutions from time to time party to this
Agreement (collectively, the "Banks"; individually, a "Bank"), ABN-AMRO Bank
N.V., San Francisco International Branch as Co-Agent, and Bank of America
National Trust and Savings Association, as agent for the Banks.
WHEREAS, the Company, the Banks, Bank of America Illinois (successor in
interest to Continental Bank N.A.) and the Agent entered into a Credit Agreement
dated as of April 30, 1993, as amended by a First Amendment to the Credit
Agreement dated as of May 24, 1993, as amended by a Second Amendment to the
Credit Agreement dated as of May 6, 1994, and as amended by a Third Amendment to
the Credit Agreement dated as of July 15, 1994 (as amended as of the date of
this Agreement, the "Prior Credit Agreement").
WHEREAS, BofA has acquired and assumed all of the rights and duties of
Bank of America Illinois under the Prior Credit Agreement;
WHEREAS, the Company, the Banks, and the Agent have agreed to increase
the amount of the facility available under the Prior Credit Agreement to
$125,000,000 subject to the terms set forth in this Agreement, to further amend
the Prior Credit Agreement, and to restate such amended Prior Credit Agreement
as set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements, provisions,
and covenants contained herein, the parties agree as follows:
1. The Prior Credit Agreement is amended and restated in its entirety as set
forth in this Agreement.
2. This Agreement is an amendment and restatement of the Prior Credit
Agreement, and not a novation.
3. All sums outstanding under the Prior Credit Agreement shall, from and after
the Closing Date, be deemed sums outstanding under this Agreement.
4. The parties further agree as follows:
1
7
ARTICLE I
DEFINITIONS
1.01 Certain Defined Terms. The following terms have the following
---------------------
meanings:
"Acquisition" means any transaction or series of related
-----------
transactions for the purpose of or resulting, directly or indirectly, in
(a) the acquisition of all or substantially all of the assets of a Person,
or of any business or division of a Person, (b) the acquisition of in
excess of 50% of the capital stock, partnership interests or equity of any
Person, or otherwise causing any Person to become a Subsidiary, or (c) a
merger or consolidation or any other combination with another Person (other
than a Person that is a Subsidiary) provided that the Company or the
Subsidiary is the surviving entity.
"Affiliate" means, as to any Person, any other Person which,
---------
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or indirectly,
the power to direct or cause the direction of the management and policies
of the other Person, whether through the ownership of voting securities, by
contract, or otherwise. Each of General Electric Capital Corporation, the
Trustees of General Electric Pension Trust, GE Investment Private Placement
Partners I, and Nestle Holdings, Inc. and its Affiliates shall not be
deemed an Affiliate of the Company by reason of such Person's equity
holdings in the Company as of the date of this Agreement.
"Agent" means BofA in its capacity as agent for the Banks hereunder,
-----
and any successor agent arising under Section 9.09.
"Agent-Related Persons" means BofA and any successor agent arising
---------------------
under Section 9.09, together with their respective Affiliates (including,
in the case of BofA, the Arranger), and the officers, directors, employees,
agents and attorneys-in-fact of such Persons and Affiliates.
"Agent's Payment Office" means the address for payments set forth on
----------------------
Schedule 10.02 in relation to the Agent, or such other address as the Agent
may from time to time specify.
"Agreement" means this Amended and Restated Credit Agreement as in
---------
effect from time to time.
"Applicable Margin" means:
-----------------
(a) For each Loan made, converted, or continued during the
period from the date of this Agreement through
2
8
the date which is two Business Days after the date on which the Agent first
receives a Compliance Certificate pursuant to Section 6.02(b):
0.750% if such Loan is an Offshore Rate Loan
0.875% if such Loan is a CD Rate Loan
0.000% if such Loan is a Base Rate Loan
0.750% if such Loan is a Same Date Rate Loan; and
(b) Thereafter:
====================================================================================================================================
For each period from the date which is three
Business Days after the date the Agent receives
a Compliance Certificate pursuant to Section
6.02(b) (the "Current Compliance Certificate")
through the date which is two Business Days
after the Agent receives the next such
Compliance Certificate, and for each Loan made,
converted, or continued during such period, if
the Current Compliance Certificate shows the
For Company's Funded Debt/EBITDA Ratio is:
each: ----------------------------------------------------------------------------------------------------
3.00 4.00 4.75 5.25
or or or or
above above above above
and and and and 5.75 or
Below below below below below above
3.00 4.00 4.75 5.25 5.75 5.75
------------------------------------------------------------------------------------------------------------------------------------
Offshore
Rate 0.500% 0.625% 0.750% 1.00% 1.50% 1.75%
Loan
------------------------------------------------------------------------------------------------------------------------------------
CD Rate
Loan 0.625% 0.750% 0.875% 1.125% 1.625% 1.875%
------------------------------------------------------------------------------------------------------------------------------------
Base
Rate 0.000% 0.000% 0.000% 0.000% 0.000% 0.000%
Loan
------------------------------------------------------------------------------------------------------------------------------------
Same Day
Rate 0.500% 0.625% 0.750% 1.000% 1.500% 1.750%
Loan
====================================================================================================================================
"Arranger" means BA Securities, Inc., a Delaware corporation.
--------
"Assignee" has the meaning specified in subsection 10.08(a).
--------
3
9
"Attorney Costs" means and includes all fees and disbursements of
--------------
any law firm or other external counsel, the allocated cost of internal
legal services and all disbursements of internal counsel.
"Bank" has the meaning specified in the introductory clause hereto.
----
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978
---------------
(11 U.S.C. ss.101, et seq.).
-------
"Base Rate" means, for any day, the higher of: (a) 0.50% per annum
---------
above the Federal Funds Rate for such day; and (b) the rate of interest in
effect for such day as publicly announced from time to time by BofA in San
Francisco, California, as its "Reference Rate." (The "Reference Rate" is a
rate set by BofA based upon various factors including BofA's costs and
desired return, general economic conditions and other factors, and is used
as a reference point for pricing some loans, which may be priced at, above,
or below such announced rate).
Any change in the Reference Rate announced by BofA shall take effect
at the opening of business on the day specified in the public announcement
of such change.
"Base Rate Loan" means a Loan that bears interest based on the Base
--------------
Rate.
"BofA" means Bank of America National Trust and Savings Association,
----
a national banking association.
"Borrowing" means a borrowing hereunder consisting of Loans of the
---------
same Type made to the Company on the same day under Article II and, other
than in the case of Base Rate Loans, having the same Interest Period.
"Borrowing Date" means any date on which a Borrowing occurs under
--------------
Section 2.03.
"Business Day" means any day other than a Saturday, Sunday or other
------------
day on which commercial banks in New York, New York, Chicago, Illinois, or
San Francisco, California are authorized or required by law to close and,
if the applicable Business Day relates to any Offshore Rate Loan, means
such a day on which dealings are carried on in the applicable offshore
dollar interbank market.
"Capital Adequacy Regulation" means any guideline, request or
---------------------------
directive of any central bank or other Governmental Authority, or any other
law, rule or regulation, whether or not having the force of law, in each
case, regarding capital adequacy of any bank or of any corporation
controlling a bank.
4
10
"Cash Equivalents" means:
----------------
(a) securities issued or fully guaranteed or insured by the United
States Government or any agency thereof and backed by the full faith and
credit of the United States having maturities of not more than six months
from the date of acquisition;
(b) certificates of deposit, time deposits, Eurodollar time
deposits, repurchase agreements, reverse repurchase agreements, or bankers'
acceptances, having in each case a tenor of not more than six months,
issued by any Bank, or by any U.S. commercial bank or any branch or agency
of a non-U.S. bank licensed to conduct business in the U.S. having combined
capital and surplus of not less than $100,000,000 whose short term
securities are rated at least A-1 by Standard & Poor's Corporation and P-1
by Moody's Investors Service, Inc.;
(c) commercial paper of an issuer rated at least A-1 by Standard &
Poor's Corporation or P-1 by Moody's Investors Service Inc. and in either
case having a tenor of not more than three months.
"CD Rate" means, for any Interest Period with respect to CD Rate
-------
Loans comprising part of the same Borrowing, the rate of interest (rounded
upward to the next 1/100th of 1%) determined as follows:
CD Rate = Certificate of Deposit Rate + Assessment Rate
---------------------------
1.00 - Reserve Percentage
Where:
"Assessment Rate" means, for any day of such Interest Period,
---------------
the rate determined by the Agent as equal to the annual assessment
rate in effect on such day payable to the FDIC by a member of the
Bank Insurance Fund that is classified as adequately capitalized and
within supervisory subgroup "A" (or a comparable successor
assessment risk classification within the meaning of 12 C.F.R.
ss.327.3) for insuring time deposits at offices of such member in
the United States; or, in the event that the FDIC shall at any time
hereafter cease to assess time deposits based upon such
classifications or successor classifications, equal to the maximum
annual assessment rate in effect on such day that is payable to the
FDIC by commercial banks (whether or not applicable to any
particular Bank) for insuring time deposits at offices of such banks
in the United States.
"Certificate of Deposit Rate" means the rate of interest per
---------------------------
annum determined by the Agent to be the arithmetic mean (rounded
upward to the next 1/100th of
5
11
1%) of the rates notified to the Agent as the rates of interest bid
by two or more certificate of deposit dealers of recognized standing
selected by the Agent for the purchase at face value of dollar
certificates of deposit issued by major United States banks, for a
maturity comparable to such Interest Period and in the approximate
amount of the CD Rate Loans to be made, at the time selected by the
Agent on the first day of such Interest Period.
"Reserve Percentage" means, for any day of such Interest
------------------
Period, the maximum reserve percentage (expressed as a decimal,
rounded upward to the next 1/100th of 1%), as determined by the
Agent, in effect on such day (including any ordinary, marginal,
emergency, supplemental, special and other reserve percentages),
prescribed by the FRB for determining the maximum reserves to be
maintained by member banks of the Federal Reserve System with
deposits exceeding $1,000,000,000 for new non-personal time deposits
for a period comparable to such Interest Period and in an amount of
$100,000 or more.
The CD Rate shall be adjusted, as to all CD Rate Loans then
outstanding, automatically as of the effective date of any change in the
Assessment Rate or the Reserve Percentage.
"CD Rate Loan" means a Loan that bears interest based on the CD
------------
Rate.
"Closing Date" means the date on which all conditions precedent set
------------
forth in Section 4.01 are satisfied or waived by all Banks (or, in the case
of subsection 4.01(d), waived by the Person entitled to receive such
payment), which date must occur before December 31, 1994.
"Code" means the Internal Revenue Code of 1986, and regulations
----
promulgated thereunder.
"Commitment", as to each Bank, has the meaning specified in Section
----------
2.01.
"Compliance Certificate" means a certificate substantially in the
----------------------
form of Exhibit A.
"Consolidated Net Worth" means stockholders' equity plus
----------------------
subordinated debt existing on the Closing Date plus subordinated debt
subsequently incurred which is acceptable to the Majority Banks, provided,
that each Bank agrees not to unreasonably refuse or withhold its consent
thereto, less any treasury stock.
"Contingent Obligation" means, as to any Person, any direct or
---------------------
indirect liability of that Person, whether or not contingent, with or
without recourse, (a) with respect to any indebtedness, lease, dividend,
letter of credit or other
6
12
obligation (the "primary obligations") of another Person (the "primary
obligor"), including any obligation of that Person (i) to purchase,
repurchase or otherwise acquire such primary obligations or any security
therefor, (ii) to advance or provide funds for the payment or discharge of
any such primary obligation, or to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial condition
of the primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation, or (iv) otherwise to assure or hold harmless the holder
of any such primary obligation against loss in respect thereof (each, a
"Guaranty Obligation"); (b) with respect to any Surety Instrument issued
-------------------
for the account of that Person or as to which that Person is otherwise
liable for reimbursement of drawings or payments; (c) to purchase any
materials, supplies or other property from, or to obtain the services of,
another Person if the relevant contract or other related document or
obligation requires that payment for such materials, supplies or other
property, or for such services, shall be made regardless of whether
delivery of such materials, supplies or other property is ever made or
tendered, or such services are ever performed or tendered, or (d) in
respect of any Swap Contract. The amount of any Contingent Obligation
shall, in the case of Guaranty Obligations, be deemed equal to the stated
or determinable amount of the primary obligation in respect of which such
Guaranty Obligation is made or, if not stated or if indeterminable, the
maximum reasonably anticipated liability in respect thereof, and in the
case of other Contingent Obligations, shall be equal to the maximum
reasonably anticipated liability in respect thereof.
"Contractual Obligation" means, as to any Person, any provision of
----------------------
any security issued by such Person or of any agreement, undertaking,
contract, indenture, mortgage, deed of trust or other instrument, document
or agreement to which such Person is a party or by which it or any of its
property is bound.
"Conversion/Continuation Date" means any date on which, under
----------------------------
Section 2.04, the Company (a) converts Loans of one Type to another Type,
or (b) continues as Loans of the same Type with a new Interest Period,
Loans of the same Type with Interest Periods expiring on such date.
"Default" means any event or circumstance which, with the giving of
-------
notice, the lapse of time, or both, would (if not cured or otherwise
remedied during such time) constitute an Event of Default.
"Dollars", "dollars" and "$" each mean lawful money of the United
------- ------- -
States.
7
13
"EBITDA" means earnings before interest, taxes, depreciation and
------
amortization, all determined on a consolidated basis and in accordance with
GAAP.
"Eligible Assignee" means (i) a commercial bank organized under the
-----------------
laws of the United States, or any state thereof, and having a combined
capital and surplus of at least $100,000,000; (ii) a commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (the "OECD"), or a
political subdivision of any such country, and having a combined capital
and surplus of at least $100,000,000, provided that such bank is acting
through a branch or agency located in the country in which it is organized
or another country which is also a member of the OECD; and (iii) a Person
that is primarily engaged in the business of commercial banking and that is
(A) a Subsidiary of a Bank, (B) a Subsidiary of a Person of which a Bank is
a Subsidiary, or (C) a Person of which a Bank is a Subsidiary.
"Environmental Claims" means all claims, however asserted, by any
--------------------
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or
injury to the environment.
"Environmental Laws" means all federal, state, local, or foreign
------------------
laws and regulations, relating to pollution or protection of human health
or the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata), including, without
limitation, laws and regulations relating to emissions, discharges,
releases or threatened releases of Materials of Environmental Concern, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of Materials of
Environmental Concern.
"ERISA" means the Employee Retirement Income Security Act of 1974,
-----
and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) under common control with the Company within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code
for purposes of provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a Pension
-----------
Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a Pension
Plan subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a
cessation of operations which is treated as such a withdrawal under Section
4062(e) of ERISA; (c) a complete or partial withdrawal by the Company or
any ERISA Affiliate from a Multiemployer Plan or notification that a
8
14
Multiemployer Plan is in reorganization; (d) the filing of a notice of
intent to terminate, the treatment of a Plan amendment as a termination
under Section 4041 or 4041A of ERISA, or the commencement of proceedings by
the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or
condition which might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the
imposition of any liability under Title IV of ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon the
Company or any ERISA Affiliate.
"Event of Default" means any of the events or circumstances
----------------
specified in Section 8.01.
"Exchange Act" means the Securities and Exchange Act of 1934, and
------------
regulations promulgated thereunder.
"FDIC" means the Federal Deposit Insurance Corporation, and any
----
Governmental Authority succeeding to any of its principal functions.
"Federal Funds Rate" means, for any day, the rate set forth in the
------------------
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including
any such successor, "H.15(519)") on the preceding Business Day opposite the
caption "Federal Funds (Effective)"; or, if for any relevant day such rate
is not so published on any such preceding Business Day, the rate for such
day will be the arithmetic mean as determined by the Agent of the rates for
the last transaction in overnight Federal funds arranged prior to 9:00 a.m.
(New York City time) on that day by each of three leading brokers of
Federal funds transactions in New York City selected by the Agent.
"Fee Letter" has the meaning specified in subsection 2.09(a).
----------
"FRB" means the Board of Governors of the Federal Reserve System,
---
and any Governmental Authority succeeding to any of its principal
functions.
"Funded Debt" of any Person means, without duplication, (a) all
-----------
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than
trade payables entered into in the ordinary course of business on ordinary
terms); (c) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses; and (d)
all indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case with
9
15
respect to property acquired by the Person (even though the rights and
remedies of the seller or bank under such agreement in the event of default
are limited to repossession or sale of such property). Obligations arising
from capital leases shall not be deemed Funded Debt.
"Funded Debt/EBITDA Ratio" of any Person means the ratio of such
------------------------
Person's Funded Debt to its EBITDA; with EBITDA calculated on a rolling
four quarter basis.
"GAAP" means generally accepted accounting principles set forth from
----
time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants
and statements and pronouncements of the Financial Accounting Standards
Board (or agencies with similar functions of comparable stature and
authority within the U.S. accounting profession), which are applicable to
the circumstances as of the date of determination.
"Governmental Authority" means any nation or government, any state
----------------------
or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"Guaranty Obligation" has the meaning specified in the definition of
-------------------
"Contingent Obligation."
"Indebtedness" of any Person means, without duplication, (a) all
------------
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than
trade payables entered into in the ordinary course of business on ordinary
terms); (c) all non-contingent reimbursement or payment obligations with
respect to Surety Instruments; (d) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets
or businesses; (e) all indebtedness created or arising under any
conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to property acquired by the Person
(even though the rights and remedies of the seller or bank under such
agreement in the event of default are limited to repossession or sale of
such property); (f) all obligations with respect to capital leases; (g) all
net obligations with respect to Swap Contracts; (h) all indebtedness
referred to in clauses (a) through (g) above secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien upon or in property (including accounts and
contracts rights) owned
10
16
by such Person, even though such Person has not assumed or become liable
for the payment of such Indebtedness; and (i) all Guaranty Obligations in
respect of indebtedness or obligations of others of the kinds referred to
in clauses (a) through (g) above.
"Indemnified Liabilities" has the meaning specified in Section
-----------------------
10.05.
"Indemnified Person" has the meaning specified in Section 10.05.
------------------
"Independent Auditor" has the meaning specified in subsection
-------------------
6.01(a).
"Insolvency Proceeding" means (a) any case, action or proceeding
---------------------
before any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the
benefit of creditors, composition, marshalling of assets for creditors, or
other, similar arrangement in respect of its creditors generally or any
substantial portion of its creditors; undertaken under U.S. Federal, state
or foreign law, including the Bankruptcy Code.
"Interest Payment Date" means, as to any Loan other than a Base Rate
---------------------
Loan, the last day of each Interest Period applicable to such Loan and, as
to any Base Rate Loan, the last Business Day of each calendar quarter and
each date such Loan is converted into another Type of Loan, provided,
however, that if any Interest Period for a CD Rate Loan or Offshore Rate
Loan exceeds 90 days or three months, respectively, the date that falls 90
days or three months (as the case may be) after the beginning of such
Interest Period and after each Interest Payment Date thereafter is also an
Interest Payment Date.
"Interest Period" means, (a) as to any Same Day Rate Loan, the
---------------
period commencing on the Borrowing Date of such Loan, or the date such Same
Day Rate Loan is continued as a Same Day Rate Loan through the date agreed
upon between the Company and BofA, (b) as to any Offshore Rate Loan, the
period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as an Offshore Rate Loan, and ending on the date one, two, three
or six months thereafter, as selected by the Company in its Notice of
Borrowing or Notice of Conversion/Continuation and (c) as to any CD Rate
Loan, the period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as a CD Rate Loan, and ending 30, 60, 90 or 180 days thereafter,
as selected by the Company in its Notice of Borrowing or Notice of
Conversion/Continuation;
11
17
provided that:
--------
(i) if any Interest Period would otherwise end on a day that
is not a Business Day, that Interest Period shall be extended to the
following Business Day unless, in the case of an Offshore Rate Loan,
the result of such extension would be to carry such Interest Period
into another calendar month, in which event such Interest Period
shall end on the preceding Business Day;
(ii) any Interest Period pertaining to an Offshore Rate Loan
that begins on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the
last Business Day of the calendar month at the end of such Interest
Period; and
(iii) no Interest Period for any Loan shall extend beyond
September 30, 1997.
"IRS" means the Internal Revenue Service, and any Governmental
---
Authority succeeding to any of its principal functions under the Code.
"Joint Venture" means a single-purpose corporation, partnership,
-------------
joint venture or other similar legal arrangement (whether created by
contract or conducted through a separate legal entity) now or hereafter
formed by the Company or any of its Subsidiaries with another Person in
order to conduct a common venture or enterprise with such Person.
"Lending Office" means, as to any Bank, the office or offices of
--------------
such Bank specified as its "Lending Office" or "Domestic Lending Office" or
"Offshore Lending Office", as the case may be, on Schedule 10.02, or such
other office or offices as such Bank may from time to time notify the
Company and the Agent.
"Lien" means any security interest, mortgage, deed of trust, pledge,
----
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or other) or preferential arrangement of any kind or nature
whatsoever in respect of any property (including those created by, arising
under or evidenced by any conditional sale or other title retention
agreement, the interest of a lessor under a capital lease, any financing
lease having substantially the same economic effect as any of the
foregoing, or the filing of any financing statement naming the owner of the
asset to which such lien relates as debtor, under the Uniform Commercial
Code or any comparable law) and any contingent or other agreement to
provide any of the foregoing, but not including the interest of a lessor
under an operating lease.
12
18
"Loan" means an extension of credit by a Bank to the Company under
----
Article II, and may be a Base Rate Loan, CD Rate Loan, an Offshore Rate
Loan, or a Same Day Rate Loan (each, a "Type" of Loan).
"Loan Documents" means this Agreement, the Fee Letter, and all other
--------------
documents delivered to the Agent or any Bank in connection herewith.
"Majority Banks" means (a) at any time when there are more than two
--------------
Banks, Banks then holding 51% or more of the then aggregate unpaid
principal amount of the Loans, or, if no such principal amount is then
outstanding, Banks then having 51% or more of the combined Commitments of
the Banks; or (b) at any time when there are only two Banks, both Banks.
"Margin Stock" means "margin stock" as such term is defined in
------------
Regulation G, T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse change in, or
-----------------------
a material adverse effect upon, the operations, business, properties,
condition (financial or otherwise) or prospects of the Company or the
Company and its Subsidiaries taken as a whole; (b) a material impairment of
the ability of the Company or any Subsidiary to perform under any Loan
Document and to avoid any Event of Default; or (c) a material adverse
effect upon the legality, validity, binding effect or enforceability
against the Company of any Loan Document.
"Material Subsidiary" means Edy's Grand Ice Cream and, at any time,
-------------------
any other Subsidiary of the Company having at such time either (i) total
(gross) revenues for the preceding four fiscal quarter period in excess of
10% of the total (gross) revenues of the Company on a consolidated basis,
or (ii) total assets, as of the last day of the preceding fiscal quarter,
having a net book value in excess of $50,000,000 in each case, based upon
the Company's most recent annual or quarterly financial statements
delivered to the Agent under Section 6.01.
"Materials of Environmental Concern" means chemicals, pollutants,
----------------------------------
contaminants, wastes, toxic substances, hazardous substances, petroleum,
and petroleum products.
"Multiemployer Plan" means a "multiemployer plan", within the
------------------
meaning of Section 4001(a)(3) of ERISA, to which the Company or any ERISA
Affiliate makes, is making, or is obligated to make contributions or,
during the preceding three calendar years, has made, or been obligated to
make, contributions.
"Nestle Agreement" means the Stock and Warrant Purchase Agreement by
----------------
and between the Company and Nestle Holdings, Inc. as the Purchaser dated
May 6, 1994 together with all of
13
19
its Exhibits and Schedules, in the form delivered to the Banks on May 6,
1994.
"Net Issuance Proceeds" means, in respect of any offering of equity
---------------------
or debt securities or debt instruments, cash proceeds and non-cash proceeds
received or receivable in connection therewith, net of reasonable
out-of-pocket costs and expenses paid or incurred in connection therewith
in favor of any Person not an Affiliate of the Company or in favor of
Manwell & Milton, such costs and expenses not to exceed 5% of the gross
proceeds of such issuance.
"Net Proceeds" means proceeds in cash, checks or other cash
------------
equivalent financial instruments (including Cash Equivalents) as and when
received by the Person making a disposition, net of: (a) the direct costs
relating to such disposition excluding amounts payable to the Company or
any Affiliate of the Company (other than Manwell & Milton), (b) sale, use
or other transaction taxes paid or payable as a result thereof, and (c)
amounts required to be applied to repay principal, interest and prepayment
premiums and penalties on Indebtedness secured by a Lien on the asset which
is the subject of such disposition. "Net Proceeds" shall also include
proceeds paid on account of any loss, destruction or damage of Property,
any pending or threatened institution of any proceedings for the
condemnation or seizure of Property or for the exercise of any right of
eminent domain, or any actual condemnation, seizure or taking, by exercise
of the power of eminent domain or otherwise, of Property, or confiscation
of Property or the requisition of the use of Property; and net of (i) all
money actually applied to repair or reconstruct the damaged Property or
Property affected by the condemnation or taking, (ii) all of the costs and
expenses reasonably incurred in connection with the collection of such
proceeds, award or other payments, and (iii) any amounts retained by or
paid to parties having superior rights to such proceeds, awards or other
payments.
"Notice of Borrowing" means a notice in substantially the form of
-------------------
Exhibit B.
"Notice of Conversion/Continuation" means a notice in substantially
---------------------------------
the form of Exhibit C.
"Obligations" means all advances, debts, liabilities, obligations,
-----------
covenants and duties arising under any Loan Document owing by the Company
to any Bank, the Agent, or any Indemnified Person, whether direct or
indirect (including those acquired by assignment), absolute or contingent,
due or to become due, now existing or hereafter arising.
"Offshore Rate" means, for any Interest Period, with respect to
-------------
Offshore Rate Loans comprising part of the same Borrowing, the rate of
interest per annum at which dollar deposits in the approximate amount of
BofA's Offshore Rate
14
20
Loan for such Interest Period would be offered by BofA's Grand Cayman
Branch, Grand Cayman, B.W.I. (or such other office as may be designated for
such purpose by BofA), to major banks in the offshore dollar interbank
market upon request of such banks at approximately 11:00 a.m. (New York
City time) two Business Days prior to the commencement of such Interest
Period.
"Offshore Rate Loan" means a Loan that bears interest based on the
------------------
Offshore Rate.
"Organization Documents" means, for any corporation, the certificate
----------------------
or articles of incorporation, the bylaws, any certificate of determination
or instrument relating to the rights of preferred shareholders of such
corporation, any shareholder rights agreement, and all applicable
resolutions of the board of directors (or any committee thereof) of such
corporation.
"Other Taxes" means any present or future stamp or documentary taxes
-----------
or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or any other
Loan Documents.
"Participant" has the meaning specified in subsection 10.08(d).
-----------
"PBGC" means the Pension Benefit Guaranty Corporation, or any
----
Governmental Authority succeeding to any of its principal functions under
ERISA.
"Pension Plan" means a pension plan (as defined in Section 3(2) of
------------
ERISA) subject to Title IV of ERISA which the Company sponsors, maintains,
or to which it makes, is making, or is obligated to make contributions, or
in the case of a multiple employer plan (as described in Section 4064(a) of
ERISA) has made contributions at any time during the immediately preceding
five (5) plan years.
"Permitted Liens" has the meaning specified in Section 7.01.
---------------
"Person" means an individual, partnership, corporation, business
------
trust, joint stock company, trust, unincorporated association, joint
venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
----
ERISA) which the Company sponsors or maintains or to which the Company
makes, is making, or is obligated to make contributions and includes any
Pension Plan.
"Polar Express" means Polar Express Systems International, Inc., a
-------------
Kentucky corporation.
15
21
"Polar Program" means (i) all sales by Polar Express of leases
-------------
covering machinery manufactured for or by Polar Express and (ii) all sales
and leasebacks by Polar Express of machinery manufactured for or by Polar
Express.
"Prior Credit Agreement" has the meaning ascribed in the first
----------------------
"WHEREAS" clause of this Agreement.
"Pro Rata Share" means, as to any Bank at any time, the percentage
--------------
equivalent (expressed as a decimal, rounded to the ninth decimal place) at
such time of such Bank's Commitment divided by the combined Commitments of
all Banks.
"Reportable Event" means, any of the events set forth in Section
----------------
4043(b) of ERISA or the regulations thereunder, other than any such event
for which the 30-day notice requirement under ERISA has been waived in
regulations issued by the PBGC.
"Requirement of Law" means, as to any Person, any law (statutory or
------------------
common), treaty, rule or regulation or determination of an arbitrator or of
a Governmental Authority, in each case applicable to or binding upon the
Person or any of its property or to which the Person or any of its property
is subject.
"Responsible Officer" means the chief executive officer or the
-------------------
president of the Company, or any other officer having substantially the
same authority and responsibility; or, with respect to compliance with
financial covenants and the Compliance Certificate, the chief financial
officer or the treasurer of the Company, or any other officer having
substantially the same authority and responsibility.
"Revolving Termination Date" means the earlier to occur of:
--------------------------
(a) September 30, 1997; and
(b) the date on which the Commitments terminate in
accordance with the provisions of this Agreement.
"Same Day Rate" means the rate specified by BofA to the Company
-------------
prior to the making of the Same Day Rate Loan to which such rate will apply
and agreed to by the Company.
"Same Day Rate Loan" means a Loan that bears interest at the Same
------------------
Day Rate.
"SEC" means the Securities and Exchange Commission, or any
---
Governmental Authority succeeding to any of its principal functions.
"Share Purchase Period" means the period commencing on May 16, 1994
---------------------
and ending on December 31, 1995.
16
22
"Subsidiary" of a Person means any corporation, association,
----------
partnership, joint venture or other business entity of which more than 50%
of the voting stock or other equity interests (in the case of Persons other
than corporations), is owned or controlled directly or indirectly by the
Person, or one or more of the Subsidiaries of the Person, or a combination
thereof. Unless the context otherwise clearly requires, references herein
to a "Subsidiary" refer to a Subsidiary of the Company.
"Surety Instruments" means all letters of credit (including standby
------------------
and commercial), banker's acceptances, bank guaranties, shipside bonds,
surety bonds and similar instruments.
"Swap Contract" means any agreement (including any master agreement
-------------
and any agreement, whether or not in writing, relating to any single
transaction) that is an interest rate swap agreement, basis swap, forward
rate agreement, commodity swap, commodity option, equity or equity index
swap or option, bond option, interest rate option, forward foreign exchange
agreement, rate cap, collar or floor agreement, currency swap agreement,
cross-currency rate swap agreement, swaption, currency option or any other,
similar agreement (including any option to enter into any of the
foregoing).
"Taxes" means any and all present or future taxes, levies, imposts,
-----
deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Bank and the Agent, such taxes
(including income taxes or franchise taxes) as are imposed on or measured
by each Bank's net income by the jurisdiction (or any political subdivision
thereof) under the laws of which such Bank or the Agent, as the case may
be, is organized or maintains a lending office.
"Truck Lease Program" means (i) the sale and leaseback by the
-------------------
Company or any of its Subsidiaries of trucks up to an aggregate sales price
of $20,000,000 and (ii) the lease of trucks by the Company or any of its
Subsidiaries for use in the ordinary course of business of the Company or
such Subsidiary, which trucks are not leased pursuant to a sale and
leaseback.
"Type" has the meaning specified in the definition of "Loan."
----
"Unfunded Pension Liability" means the excess of a Plan's benefit
--------------------------
liabilities under Section 4001(a)(16) of ERISA, over the current value of
that Plan's assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the
applicable plan year.
17
23
"United States" and "U.S." each means the United States of America.
------------- ----
"Wholly-Owned Subsidiary" means any corporation in which (other than
-----------------------
directors' qualifying shares required by law) 100% of the capital stock of
each class having ordinary voting power, and 100% of the capital stock of
every other class, in each case, at the time as of which any determination
is being made, is owned, beneficially and of record, by the Company, or by
one or more of the other Wholly-Owned Subsidiaries, or both.
1.02 Other Interpretive Provisions.
-----------------------------
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar words
refer to this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c) (1) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
(2) The term "including" is not limiting and means "including
without limitation."
(3) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and including";
the words "to" and "until" each mean "to but excluding", and the word
"through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments
shall be deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document, and
(ii) references to any statute or regulation are to be construed as
including all statutory and regulatory provisions consolidating, amending,
replacing, supplementing or interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for convenience
of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or
similar matters. All such limitations, tests and measurements are
cumulative and shall each be performed in accordance with their terms.
18
24
(g) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agent, the
Company and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Banks or the Agent
merely because of the Agent's or Banks' involvement in their preparation.
1.03 Accounting Principles.
---------------------
(a) Unless the context otherwise clearly requires, all accounting
terms not expressly defined herein shall be construed, and all financial
computations required under this Agreement shall be made, in accordance with
GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter" refer
to such fiscal periods of the Company.
ARTICLE II
THE CREDITS
2.01 Amounts and Terms of Commitments.
--------------------------------
(a) The Revolving Credit.
--------------------
(1) Each Bank severally agrees, on the terms and conditions
set forth herein, to make Loans to the Company from time to time on any
Business Day during the period from the Closing Date to the Revolving
Termination Date, in an aggregate amount not to exceed at any time
outstanding, the amount set forth opposite such Bank's name on Schedule
--------
2.01 under the heading "Commitment" (such amount, as the same may be
----
reduced under Section 2.05 or as a result of one or more assignments under
Section 10.08, the Bank's "Commitment"); provided, however, that, after
---------- -------- -------
giving effect to any Borrowing (including those of Same Day Rate Loans),
the aggregate principal amount of all outstanding Loans shall not at any
time exceed the combined Commitments. Within the limits of each Bank's
Commitment, and subject to the other terms and conditions hereof, the
Company may borrow under this subsection, prepay under Section 2.06 and
reborrow under this subsection.
(2) All sums outstanding under the Prior Credit Agreement as
of the Closing Date shall be deemed outstanding under this Agreement.
Schedule 2.01 sets forth the principal amounts outstanding under this
-------------
Agreement, after giving effect to the assignment by Bank of America
Illinois to BofA, referred to in the second WHEREAS clause of this
Agreement.
(b) The Same Day Rate Loans.
(1) The Revolving Credit provided for in subsection (a) of
this Section shall contain a facility providing for Same Day Rate Loans. If
the Company wishes to borrow under this facility, (a "Same Day Rate Loan"),
it shall so notify the Agent, with a copy to BofA, in its Notice of
19
25
Borrowing. "Same Day Rate Loans" shall be subject to the following:
(A) The aggregate principal amount of outstanding Same
Day Rate Loans shall not exceed $10,000,000 at any one time.
(B) Same Day Rate Loans shall be made by BofA on behalf
of all the Banks except that the other Banks shall not fund their
share of the Same Day Rate Loans except as specified in this
subsection.
(C) A Bank's Pro Rata Share of outstanding Same Day Rate
Loans (i) shall be subtracted from a Bank's Commitment when
computing the unused Commitment of such Bank, and (ii) so long as
such Pro Rata Share is unfunded, shall be deemed part of such Bank's
unused Commitment for purposes of computing the commitment fees due
such Bank.
(2) Each Bank hereby promises BofA that it shall, upon demand
by BofA, purchase from BofA such Bank's Pro Rata Share of all Same Day Rate
Loans outstanding at such time, regardless of whether at such time a
Default or an Event of Default has occurred. Each Bank agrees that its
commitment to BofA under the preceding sentence is irrevocable,
unconditional, and unqualified. Until such Bank purchases from BofA such
Bank's Pro Rata Share of Same Day Rate Loans, all principal and interest
payments on such Loans shall be for the sole account of BofA.
(3) BofA shall furnish Agent, weekly, with a report showing
the Same Day Rate Loan outstandings and payments made on each Business Day
of the week covered by such report.
2.02 Loan Accounts. The Loans made by each Bank shall be evidenced by one
-------------
or more loan accounts or records maintained by such Bank in the ordinary course
of business. The loan accounts or records maintained by the Agent and each Bank
shall be conclusive, absent manifest error, of the amount of the Loans made by
the Banks to the Company and the interest and payments thereon. Any failure so
to record or any error in doing so shall not, however, limit or otherwise affect
the obligation of the Company hereunder to pay any amount owing with respect to
the Loans.
2.03 Procedure for Borrowing.
-----------------------
(a) Each Borrowing shall be made upon the Company's irrevocable
written notice delivered to the Agent in accordance with Section 10.02 in the
form of a Notice of Borrowing (which notice must be received by the Agent prior
to:
20
26
(1) 9:00 a.m. (San Francisco, California time) three Business
Days prior to the requested Borrowing Date, in the case of Offshore Rate
Loans;
(2) 9:00 a.m. (San Francisco, California time) two Business
Days prior to the requested Borrowing Date, in the case of CD Rate Loans;
and
(3) 9:00 a.m. (San Francisco, California time) on the
requested Borrowing Date, in the case of Base Rate Loans or Same Day Rate
Loans, specifying:
(A) the amount of the Borrowing, which shall be in an aggregate
minimum principal amount of $3,000,000 or any multiple of $1,000,000 in
excess thereof; except that a Borrowing consisting of a Same Day Rate Loan
shall be in a minimum principal amount of $1,000,000 or any multiple of
$100,000 in excess thereof;
(B) the requested Borrowing Date, which shall be a Business Day;
(C) whether the Borrowing is to be comprised of Offshore Rate
Loans, CD Rate Loans, Base Rate Loans, or Same Day Rate Loans;
(D) the duration of the Interest Period applicable to such Loans
included in such notice. If the Notice of Borrowing shall fail to specify
the duration of the Interest Period for any Borrowing comprised of CD Rate
Loans or Offshore Rate Loans, such Interest Period shall be 90 days or
three months, respectively;
provided, however, that with respect to any Borrowing to be made on the Closing
-------- -------
Date, the Notice of Borrowing shall be delivered to the Agent not later than
9:00 a.m. (San Francisco, California time) one, two, or three Business Days
before the Closing Date if the Borrowing is to consist of Base Rate or Same Day
Rate Loans, CD Rate Loans, or Offshore Rate Loans, respectively.
(b) The Agent will promptly notify each Bank of its receipt of any
Notice of Borrowing and of the amount of such Bank's Pro Rata Share of that
Borrowing; except that if the Borrowing consists of Same Day Rate Loans, the
Agent need notify the Banks of such Borrowings only on the last Business Day of
each week, setting forth the amount of Same Day Rate Loans made and/or paid
during such week.
(c) Each Bank will make the amount of its Pro Rata Share of each
Borrowing (except for a Borrowing consisting of Same Day Rate Loans made by
BofA) available to the Agent for the account of the Company at the Agent's
Payment Office by 11:00 a.m. (San Francisco, California time) on the Borrowing
Date requested by the Company in funds immediately available to the Agent. The
proceeds of all such Loans will then be made available to the Company by the
Agent at such office by crediting
21
27
the account of the Company on the books of BofA with the aggregate of the
amounts made available to the Agent by the Banks and in like funds as received
by the Agent.
(d) Unless the Majority Banks shall otherwise agree, during the
existence of a Default or Event of Default, the Company may not elect to have a
Loan be made as, or converted into, or continued as, an Offshore Rate Loan or a
CD Rate Loan.
(e) After giving effect to any Borrowing, there may not be more
than six different Interest Periods in effect (excluding Interest Periods for
Same Day Rate Loans).
2.04 Conversion and Continuation Elections.
-------------------------------------
(a) The Company may, upon irrevocable written notice to the
Agent in accordance with subsection 2.04(b):
(1) elect, as of any Business Day, in the case of Base Rate
Loans, or as of the last day of the applicable Interest Period, in the case
of any other Type of Loans, to convert any such Loans (or any part thereof
in an amount not less than $3,000,000, or that is in an integral multiple
of $1,000,000 in excess thereof) into Loans of any other Type (except that
Same Day Rate Loans may not be converted); or
(2) elect, as of the last day of the applicable Interest
Period, to continue any Loans having Interest Periods expiring on such day
(or any part thereof in an amount not less than $3,000,000, or that is in
an integral multiple of $1,000,000 in excess thereof);
provided, that if at any time the aggregate amount of CD Rate Loans or Offshore
--------
Rate Loans in respect of any Borrowing is reduced, by payment, prepayment, or
conversion of part thereof to be less than $1,000,000, such CD Rate Loans or
Offshore Rate Loans shall automatically convert into Base Rate Loans, and on and
after such date the right of the Company to continue such Loans as, and convert
such Loans into, Offshore Rate Loans or CD Rate Loans, as the case may be, shall
terminate.
(b) The Company shall deliver a Notice of Conversion/ Continuation
to be received by the Agent not later than 9:00 a.m. San Francisco, California
time) at least (i) three Business Days in advance of the Conversion/Continuation
Date, if the Loans are to be converted into or continued as Offshore Rate Loans;
(ii) two Business Days in advance of the Conversion/Continuation Date, if the
Loans are to be converted into or continued as CD Rate Loans; and (iii) one
Business Day in advance of the Conversion/ Continuation Date, if the Loans are
to be converted into Base Rate Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Loans to be converted or
renewed;
22
28
(C) the Type of Loans resulting from the proposed
conversion or continuation; and
(D) other than in the case of conversions into Base Rate
Loans, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to CD
Rate Loans, Offshore Rate Loans or Same Day Rate Loans, the Company has failed
to select timely a new Interest Period to be applicable to such CD Rate Loans or
Offshore Rate Loans or has failed to agree with BofA on a new Same Day Rate and
Interest Period applicable to such Same Day Rate Loans, as the case may be, or
if any Default or Event of Default then exists, the Company shall be deemed to
have elected to convert (i) such CD Rate Loans, or Offshore Rate Loans into Base
Rate Loans, or (ii) such Same Day Rate Loans bearing interest at the Base Rate
plus the Applicable Margin, effective as of the expiration date of such Interest
Period.
(d) The Agent will promptly notify each Bank of its receipt of a
Notice of Conversion/Continuation, or, if no timely notice is provided by the
Company, the Agent will promptly notify each Bank of the details of any
automatic conversion. All conversions and continuations shall be made ratably
according to the respective outstanding principal amounts of the Loans with
respect to which the notice was given held by each Bank.
(e) Unless the Majority Banks otherwise agree, during the existence
of a Default or Event of Default, the Company may not elect to have a Loan
converted into or continued as an Offshore Rate Loan or a CD Rate Loan.
(f) After giving effect to any conversion or continuation of Loans,
there may not be more than six different Interest Periods in effect (excluding
Interest Periods for Same Day Rate Loans).
2.05 Voluntary Termination or Reduction of Commitments. The Company may,
-------------------------------------------------
upon not less than five Business Days' prior notice to the Agent, terminate the
Commitments, or permanently reduce the Commitments by an aggregate minimum
amount of $3,000,000 or any multiple of $1,000,000 in excess thereof; unless,
after giving effect thereto and to any prepayments of Loans made on the
effective date thereof, the then outstanding principal amount of the Loans would
exceed the amount of the combined Commitments then in effect. Once reduced in
accordance with this Section, the Commitments may not be increased. Any
reduction of the Commitments shall be applied to each Bank according to its Pro
Rata Share. All accrued commitment fees to, but not including the effective date
of any reduction or termination of Commitments, shall be paid on the effective
date of such reduction or termination.
2.06 Optional Prepayments. Subject to Section 3.04, the Company may at
--------------------
any time or from time to time ratably prepay Loans
23
29
in whole or in part in minimum amounts of $3,000,000 or any multiple of
$1,000,000 in excess thereof. Each prepayment shall be made upon not less than
three Business Days' irrevocable notice to the Agent with respect to CD Rate and
Offshore Rate Loans and not less than same day irrevocable notice of prepayment
with respect to Base Rate Loans and Same Day Rate Loans. Such notice of
prepayment shall specify the date and amount of such prepayment and the Type(s)
of Loans to be prepaid. The Agent will promptly notify each Bank of its receipt
of any such notice, and of such Bank's Pro Rata Share of such prepayment. If
such notice is given by the Company, the Company shall make such prepayment and
the payment amount specified in such notice shall be due and payable on the date
specified therein, together with accrued interest to each such date on the
amount prepaid and any amounts required pursuant to Section 3.04.
2.07 Repayment. The Company shall repay to the Banks on the Revolving
---------
Termination Date the aggregate principal amount of Loans outstanding on such
date.
2.08 Interest.
--------
(a) Each Loan shall bear interest on the outstanding principal
amount thereof from the applicable Borrowing Date at a rate per annum equal to
the CD Rate, the Offshore Rate, the Base Rate, or the Same Day Rate as the case
may be (and subject to the Company's right to convert to other Types of Loans
under Section 2.04), plus the Applicable Margin.
----
(b) Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest shall also be paid on the date of any prepayment of Loans
under Section 2.06 for the portion of the Loans so prepaid and upon payment
(including prepayment) in full thereof and, during the existence of any Event of
Default, interest shall be paid on demand of the Agent at the request or with
the consent of the Majority Banks.
(c) Notwithstanding subsection (a) of this Section, while any Event
of Default exists or after acceleration, the Company shall pay interest (after
as well as before entry of judgment thereon to the extent permitted by law) on
the principal amount of all outstanding Obligations, at a rate per annum which
is determined by adding 2% per annum to the Applicable Margin then in effect for
such Loans and, in the case of Obligations not subject to an Applicable Margin,
at a rate per annum equal to the Base Rate plus 2%; provided, however, that, on
-------- -------
and after the expiration of any Interest Period applicable to any Offshore Rate
Loan, CD Rate Loan, or Same Day Rate Loan outstanding on the date of occurrence
of such Event of Default or acceleration, the principal amount of such Loan
shall, during the continuation of such Event of Default or after acceleration,
bear interest at a rate per annum equal to the Base Rate plus 2%.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Company to any Bank hereunder shall be subject to the
limitation that payments of interest shall not be required for any period for
which interest is computed hereunder, to the extent (but only to the extent)
that contracting for or
24
30
receiving such payment by such Bank would be contrary to the provisions of any
law applicable to such Bank limiting the highest rate of interest that may be
lawfully contracted for, charged or received by such Bank, and in such event the
Company shall pay such Bank interest at the highest rate permitted by applicable
law.
2.09 Fees.
----
(a) Arrangement, Agency Fees. The Company shall pay an arrangement
------------------------
fee to the Arranger for the Arranger's own account, and shall pay an agency fee
to the Agent for the Agent's own account, as required by the letter agreement
("Fee Letter") between the Company, the Arranger, and Agent dated September 23,
------------
1994.
(b) Closing Fees. On the Closing Date, the Company shall pay to the
------------
Banks, through Agent, closing fees in the amount set forth in BofA's commitment
letter and term sheet dated September 23, 1994 and agreed to by the Company.
(c) Commitment Fees. The Company shall pay to the Agent for the
---------------
account of each Bank a commitment fee on the average daily unused portion of
such Bank's Commitment (subject to Section 2.01(b)(1)(C)), computed on a
quarterly basis in arrears on the last Business Day of each calendar quarter,
based upon the daily utilization for that quarter as calculated by the Agent,
equal to the rate per annum as follows:
(A) For the period from the date of this Agreement through the date
which is two Business Days after the date on which the Agent first receives
a Compliance Certificate pursuant to Section 6.02(b): 0.375% per annum;
(B) Thereafter and for each period commencing on the date which is
three Business Days after the date on which the Agent receives a Compliance
Certificate pursuant to Section 6.02(b) (the "Current Compliance
Certificate") through the date which is two Business Days after the Agent
receives the next such Compliance Certificate, if the Current Compliance
Certificate shows the Company's Funded Debt/EBITDA Ratio is:
Below 3.00 0.250% per annum
3.00 or above and
below 4.75 0.375% per annum
4.75 or above 0.500% per annum
(2) Such commitment fee shall accrue from the Closing Date to the
Revolving Termination Date and shall be due and payable quarterly in arrears on
the last Business Day of each calendar quarter commencing on December 30, 1994,
through the Revolving Termination Date, with the final payment to be made on the
Revolving Termination Date; provided that, in connection with any reduction or
termination of Commitments under Section 2.05, the accrued commitment fee
calculated for the period ending on
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such date shall also be paid on the date of such reduction or termination, with
the following quarterly payment being calculated on the basis of the period from
such reduction or termination date to such quarterly payment date.
(3) The commitment fees provided in this subsection shall
accrue at all times after the above-mentioned commencement date, including at
any time during which one or more conditions in Article IV are not met.
2.10 Computation of Fees and Interest.
--------------------------------
(a) All computations of interest for Base Rate Loans when the
Base Rate is determined by the Reference Rate shall be made on the basis of a
year of 365 or 366 days, as the case may be, and actual days elapsed. All
other computations of fees and interest shall be made on the basis of a 360-
day year and actual days elapsed (which results in more interest being paid
than if computed on the basis of a 365-day year). Interest and fees shall
accrue during each period during which interest or such fees are computed
from the first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent shall be
conclusive and binding on the Company and the Banks in the absence of manifest
error.
2.11 Payments by the Company.
-----------------------
(a) All payments (including prepayments) to be made by the Company
on account of principal, interest, fees, and other amounts required hereunder
shall be made without set-off, recoupment or counterclaim. Except as otherwise
expressly provided herein, all payments by the Company shall be made to the
Agent for the account of the Banks at the Agent's Payment Office, and shall be
made in dollars and in immediately available funds, no later than 10:00 a.m.
(San Francisco, California time) on the date specified herein. The Agent will
promptly distribute to each Bank its Pro Rata Share (or other applicable share
as expressly provided herein) of such payment in like funds as received. Any
payment received by the Agent later than 1:00 p.m. (San Francisco, California
time) shall be deemed to have been received on the following Business Day and
any applicable interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
(c) Unless the Agent receives notice from the Company prior to the
date on which any payment is due to the Banks that the Company will not make
such payment in full as and when required, the Agent may assume that the Company
has made such payment in full to the Agent on such date in immediately available
funds and the Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Bank on such due date an amount equal to the
amount then due such Bank. If
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and to the extent the Company has not made such payment in full to the Agent,
each Bank shall repay to the Agent on demand such amount distributed to such
Bank, together with interest thereon at the Federal Funds Rate for each day from
the date such amount is distributed to such Bank until the date repaid.
2.12 Payments by the Banks to the Agent.
----------------------------------
(a) Unless the Agent receives notice from a Bank on or prior to
the Closing Date or, with respect to any Borrowing after the Closing Date, at
least one Business Day prior to the date of such Borrowing, that such Bank
will not make available as and when required hereunder to the Agent for the
account of the Company the amount of that Bank's Pro Rata Share of the
Borrowing, the Agent may assume that each Bank has made such amount available
to the Agent in immediately available funds on the Borrowing Date and the
Agent may (but shall not be so required), in reliance upon such assumption,
make available to the Company on such date a corresponding amount. If and to the
extent any Bank shall not have made its full amount available to the Agent in
immediately available funds and the Agent in such circumstances has made
available to the Company such amount, that Bank shall on the Business Day
following such Borrowing Date make such amount available to the Agent, together
with interest at the Federal Funds Rate for each day during such period. A
notice of the Agent submitted to any Bank with respect to amounts owing under
this subsection shall be conclusive, absent manifest error. If such amount is so
made available, such payment to the Agent shall constitute such Bank's Loan on
the date of Borrowing for all purposes of this Agreement. If such amount is not
made available to the Agent on the Business Day following the Borrowing Date,
the Agent will notify the Company of such failure to fund and, upon demand by
the Agent, the Company shall pay such amount to the Agent for the Agent's
account, together with interest thereon for each day elapsed since the date of
such Borrowing, at a rate per annum equal to the interest rate applicable at the
time to the Loans comprising such Borrowing.
(b) The failure of any Bank to make any Loan on any Borrowing Date
shall not relieve any other Bank of any obligation hereunder to make a Loan on
such Borrowing Date, but no Bank shall be responsible for the failure of any
other Bank to make the Loan to be made by such other Bank on any Borrowing Date.
2.13 Sharing of Payments, Etc. If, other than as expressly provided
------------------------
elsewhere herein, any Bank shall obtain on account of the Loans made by it any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its Pro Rata Share, such Bank shall
immediately (a) notify the Agent of such fact, and (b) purchase from the other
Banks such participations in the Loans made by them as shall be necessary to
cause such purchasing Bank to share the excess payment pro rata with each of
them; provided, however, that if all or any portion of such excess payment is
thereafter recovered from the purchasing Bank, such purchase shall to that
extent be rescinded and each other Bank shall repay to the purchasing Bank the
purchase price paid therefor, together with an amount equal
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to such paying Bank's ratable share (according to the proportion of (i) the
amount of such paying Bank's required repayment to (ii) the total amount so
recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered. The
Company agrees that any Bank so purchasing a participation from another Bank
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off, but subject to Section 10.10) with respect to
such participation as fully as if such Bank were the direct creditor of the
Company in the amount of such participation. The Agent will keep records (which
shall be conclusive and binding in the absence of manifest error) of
participations purchased under this Section and will in each case notify the
Banks following any such purchases or repayments.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.01 Taxes.
-----
(a) Any and all payments by the Company to each Bank or the Agent
under this Agreement and any other Loan Document shall be made free and clear
of, and without deduction or withholding for any Taxes. In addition, the Company
shall pay all Other Taxes.
(b) The Company agrees to indemnify and hold harmless each Bank and
the Agent for the full amount of Taxes or Other Taxes (including any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section)
paid by the Bank or the Agent and any liability (including penalties, interest,
additions to tax and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
Payment under this indemnification shall be made within 30 days after the date
the Bank or the Agent makes written demand therefor.
(c) If the Company shall be required by law to deduct or withhold
any Taxes or Other Taxes from or in respect of any sum payable hereunder to any
Bank or the Agent, then:
(1) the sum payable shall be increased as necessary so that
after making all required deductions and withholdings (including deductions
and withholdings applicable to additional sums payable under this Section)
such Bank or the Agent, as the case may be, receives an amount equal to the
sum it would have received had no such deductions or withholdings been
made;
(2) the Company shall make such deductions and withholdings;
(3) the Company shall pay the full amount deducted or withheld
to the relevant taxing authority or other authority in accordance with
applicable law; and
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(4) the Company shall also pay to each Bank or the Agent for
the account of such Bank, at the time interest is paid, all additional
amounts which the respective Bank specifies as necessary to preserve the
after-tax yield the Bank would have received if such Taxes or Other Taxes
had not been imposed.
(d) Within 30 days after the date of any payment by the Company of
Taxes or Other Taxes, the Company shall furnish the Agent the original or a
certified copy of a receipt evidencing payment thereof, or other evidence of
payment satisfactory to the Agent.
(e) If the Company is required to pay additional amounts to any
Bank or the Agent pursuant to subsection (c) of this Section, then such Bank
shall use reasonable efforts (consistent with legal and regulatory restrictions)
to change the jurisdiction of its Lending Office so as to eliminate any such
additional payment by the Company which may thereafter accrue, if such change in
the judgment of such Bank is not otherwise disadvantageous to such Bank.
3.02 Illegality.
----------
(a) If any Bank determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for any Bank or its applicable Lending Office to make
Offshore Rate Loans, then, on notice thereof by the Bank to the Company through
the Agent, any obligation of that Bank to make Offshore Rate Loans shall be
suspended until the Bank notifies the Agent and the Company that the
circumstances giving rise to such determination no longer exist.
(b) If a Bank determines that it is unlawful to maintain any
Offshore Rate Loan, the Company shall, upon its receipt of notice of such fact
and demand from such Bank (with a copy to the Agent), prepay in full such
Offshore Rate Loans of that Bank then outstanding, together with interest
accrued thereon and amounts required under Section 3.04, either on the last day
of the Interest Period thereof, if the Bank may lawfully continue to maintain
such Offshore Rate Loans to such day, or immediately, if the Bank may not
lawfully continue to maintain such Offshore Rate Loan. If the Company is
required to so prepay any Offshore Rate Loan, then concurrently with such
prepayment, the Company shall borrow from the affected Bank, in the amount of
such repayment, a Base Rate Loan.
(c) If the obligation of any Bank to make or maintain Offshore Rate
Loans has been so terminated or suspended, the Company may elect, by giving
notice to the Bank through the Agent that all Loans which would otherwise be
made by the Bank as Offshore Rate Loans shall be instead Base Rate Loans.
(d) Before giving any notice to the Agent under this Section, the
affected Bank shall designate a different Lending
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Office with respect to its Offshore Rate Loans if such designation will avoid
the need for giving such notice or making such demand and will not, in the
judgment of the Bank, be illegal or otherwise disadvantageous to the Bank.
3.03 Increased Costs and Reduction of Return.
---------------------------------------
(a) If any Bank determines that, due to either (i) the
introduction of or any change (other than any change by way of imposition of
or increase in reserve requirements included in the calculation of the CD
Rate or the Offshore Rate or in respect of the assessment rate payable by
any Bank to the FDIC for insuring U.S. deposits) in or in the interpretation
of any law or regulation or (ii) the compliance by that Bank with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to such Bank of agreeing to make or making, funding or maintaining any
Offshore Rate Loans or CD Rate Loans, then the Company shall be liable for, and
shall from time to time, upon demand (with a copy of such demand to be sent to
the Agent), pay to the Agent for the account of such Bank, additional amounts as
are sufficient to compensate such Bank for such increased costs.
(b) If any Bank shall have determined that (i) the introduction of
any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy
Regulation, (iii) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or (iv) compliance by
the Bank (or its Lending Office) or any corporation controlling the Bank with
any Capital Adequacy Regulation, affects or would affect the amount of capital
required or expected to be maintained by the Bank or any corporation controlling
the Bank and (taking into consideration such Bank's or such corporation's
policies with respect to capital adequacy and such Bank's desired return on
capital) determines that the amount of such capital is increased as a
consequence of its Commitment, loans, credits or obligations under this
Agreement, then, upon demand of such Bank to the Company through the Agent, the
Company shall pay to the Bank, from time to time as specified by the Bank,
additional amounts sufficient to compensate the Bank for such increase.
3.04 Funding Losses. The Company shall reimburse each Bank and hold each
--------------
Bank harmless from any loss or expense which the Bank may sustain or incur as a
consequence of:
(a) the failure of the Company to make on a timely basis any
payment of principal of any Offshore Rate Loan, CD Rate Loan, or Same Day
Rate Loan;
(b) the failure of the Company to borrow, continue or convert a
Loan after the Company has given (or is deemed to have given) a Notice of
Borrowing or a Notice of Conversion/ Continuation;
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(c) the failure of the Company to make any prepayment in accordance
with any notice delivered under Section 2.06;
(d) the prepayment or other payment (including after acceleration
thereof) of an Offshore Rate Loan, a CD Rate Loan, or a Same Day Rate Loan on a
day that is not the last day of the relevant Interest Period; or
(e) the automatic conversion under Section 2.04 of any Offshore
Rate Loan, CD Rate Loan, or Same Day Rate Loan to a Base Rate Loan on a day that
is not the last day of the relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans, CD Rate Loans, or
Same Day Rate Loans or from fees payable to terminate the deposits from which
such funds were obtained. For purposes of calculating amounts payable by the
Company to the Banks under this Section and under subsection 3.03(a), (i) each
Offshore Rate Loan made by a Bank (and each related reserve, special deposit or
similar requirement) shall be conclusively deemed to have been funded at the
LIBOR used in determining the Offshore Rate for such Offshore Rate Loan by a
matching deposit or other borrowing in the interbank eurodollar market for a
comparable amount and for a comparable period, whether or not such Offshore Rate
Loan is in fact so funded, and (ii) each CD Rate Loan made by a Bank (and each
related reserve, special deposit or similar requirement) shall be conclusively
deemed to have been funded at the Certificate of Deposit Rate used in
determining the CD Rate for such CD Rate Loan by the issuance of its certificate
of deposit in a comparable amount and for a comparable period, whether or not
such CD Rate Loan is in fact so funded, and (iii) each Same Day Rate Loan (and
each related reserve, special deposit or similar requirement) shall be
conclusively deemed to have been funded at the rate used in determining the Same
Day Rate for such Same Day Rate Loan, whether or not such Same Day Rate Loan is
in fact so funded,
3.05 Inability to Determine Rates. If the Agent determines that for any
----------------------------
reason adequate and reasonable means do not exist for determining the Offshore
Rate or the CD Rate for any requested Interest Period with respect to a proposed
Offshore Rate Loan or CD Rate Loan, or that the Offshore Rate or the CD Rate
applicable for any requested Interest Period with respect to a proposed Offshore
Rate Loan or CD Rate Loan does not adequately and fairly reflect the cost to the
Banks of funding such Loan, the Agent will promptly so notify the Company and
each Bank. Thereafter, the obligation of the Banks to make or maintain CD Rate
Loans or Offshore Rate Loans, as the case may be, hereunder shall be suspended
until the Agent upon the instruction of the Majority Banks revokes such notice
in writing. Upon receipt of such notice, the Company may revoke any Notice of
Borrowing or Notice of Conversion/Continuation then submitted by it. If the
Company does not revoke such Notice, the Banks shall make, convert or continue
the Loans, as proposed by the Company, in the amount specified in the applicable
notice submitted by the
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Company, but such Loans shall be made, converted or continued as Base Rate Loans
instead of CD Rate Loans or Offshore Rate Loans, as the case may be.
3.06 Reserves on Offshore Rate Loans. The Company shall pay to each Bank,
-------------------------------
as long as such Bank shall be required under regulations of the FRB to maintain
reserves with respect to liabilities or assets consisting of or including
Eurocurrency funds or deposits (currently known as "Eurocurrency liabilities"),
additional costs on the unpaid principal amount of each Offshore Rate Loan equal
to the actual costs of such reserves allocated to such Loan by the Bank (as
determined by the Bank in good faith, which determination shall be conclusive),
payable on each date on which interest is payable on such Loan, provided the
Company shall have received at least 15 days' prior written notice (with a copy
to the Agent) of such additional interest from the Bank. If a Bank fails to give
notice 15 days prior to the relevant Interest Payment Date, such additional
interest shall be payable 15 days from receipt of such notice.
3.07 Survival. The agreements and obligations of the Company in this
--------
Article III shall survive the payment of all other Obligations.
ARTICLE IV
CONDITIONS PRECEDENT
--------------------
4.01 Conditions of Initial Loans Etc. The obligation of each Bank to make
-------------------------------
its initial Loan hereunder or to convert or continue any Loan outstanding on the
Closing Date is subject to the condition that the Agent have received on or
before the Closing Date all of the following, in form and substance satisfactory
to the Agent and each Bank, and in sufficient copies for each Bank:
(a) Agreement. This Agreement executed by each party thereto;
---------
(b) Resolutions; Incumbency.
-----------------------
(1) Copies of the resolutions of the board of directors of the
Company authorizing the transactions contemplated hereby, certified as of
the Closing Date by the Secretary or an Assistant Secretary of the Company;
and
(2) A certificate of the Secretary or Assistant Secretary of
the Company certifying the names and true signatures of the officers of the
Company authorized to execute, deliver and perform, as applicable, this
Agreement, and all other Loan Documents to be delivered by it hereunder;
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(c) Legal Opinion. An opinion of Manwell & Milton, counsel to the
-------------
Company and addressed to the Agent and the Banks, substantially in the form of
Exhibit D;
---------
(d) Payment of Fees, Sums Due Under the Prior Credit Agreement.
----------------------------------------------------------
Evidence of payment by the Company of:
(1) all accrued and unpaid fees, costs and expenses to the
extent then due and payable on the Closing Date, together with Attorney
Costs of BofA to the extent invoiced prior to or on the Closing Date, plus
such additional amounts of Attorney Costs as shall constitute BofA's
reasonable estimate of Attorney Costs incurred or to be incurred by it
through the closing proceedings (provided that such estimate shall not
thereafter preclude final settling of accounts between the Company and
BofA); including any such costs, fees and expenses arising under or
referenced in Sections 2.09 and 10.04; and
(2) all sums unpaid (including but not limited to commitment
fees through the Closing Date under the Prior Credit Agreement and interest
on the Loans) under the Prior Credit Agreement.
(e) Certificate. A certificate signed by a Responsible Officer,
-----------
dated as of the Closing Date, stating that:
(1) the representations and warranties contained in Article V
are true and correct on and as of such date, as though made on and as of
such date;
(2) no Default or Event of Default exists or would result from
execution and performance of this Agreement by the Company; and
(3) there has occurred since September 24, 1994, no event or
circumstance that has resulted or could reasonably be expected to result in
a Material Adverse Effect; and
(f) Other Documents. Such other approvals, opinions, documents or
---------------
materials as the Agent or any Bank may reasonably request.
4.02 Conditions to All Borrowings. The obligation of each Bank to make
----------------------------
any Loan to be made by it (including its initial Loan) or to continue or convert
any Loan under Section 2.04 (including continuations or conversions of Loans
outstanding on the Closing Date) is subject to the satisfaction of the following
conditions precedent on the relevant Borrowing Date or Conversion/Continuation
Date:
(a) Notice of Borrowing or Conversion/Continuation. The Agent shall
----------------------------------------------
have received a Notice of Borrowing or a Notice of Conversion/Continuation, as
applicable;
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(b) Continuation of Representations and Warranties. The
----------------------------------------------
representations and warranties in Article V shall be true and correct on and as
of such Borrowing Date or Conversion/ Continuation Date with the same effect as
if made on and as of such Borrowing Date or Conversion/Continuation Date (except
to the extent such representations and warranties expressly refer to an earlier
date, in which case they shall be true and correct as of such earlier date); and
(c) No Existing Default. No Default or Event of Default shall exist
-------------------
or shall result from such Borrowing or continuation or conversion.
Each Notice of Borrowing and Notice of Conversion/Continuation submitted by the
Company hereunder shall constitute a representation and warranty by the Company
hereunder, as of the date of each such notice and as of each Borrowing Date or
Conversion/Continuation Date, as applicable, that the conditions in Section 4.02
are satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company represents and warrants to the Agent and each Bank that:
5.01 Corporate Existence and Power. The Company and each of its
-----------------------------
Subsidiaries, other than Dreyer's International, Inc.:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, carry on its business
and to execute, deliver, and perform its obligations under the Loan Documents;
(c) is duly qualified as a foreign corporation and is licensed and
in good standing under the laws of each jurisdiction where its ownership, lease
or operation of property or the conduct of its business requires such
qualification or license; and
(d) is in compliance with all Requirements of Law.
5.02 Corporate Authorization; No Contravention. The execution, delivery
-----------------------------------------
and performance by the Company of this Agreement and each other Loan Document to
which the Company is party, have been duly authorized by all necessary corporate
action, and do not and will not:
(a) contravene the terms of any of the Company's Organization
Documents;
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(b) conflict with or result in any breach or contravention of, or
the creation of any Lien under, any document evidencing any Contractual
Obligation to which the Company is a party or any order, injunction, writ or
decree of any Governmental Authority to which the Company or its property is
subject; or
(c) violate any Requirement of Law.
5.03 Governmental Authorization. No approval, consent, exemption,
--------------------------
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company or
any of its Subsidiaries of the Agreement or any other Loan Document.
5.04 Binding Effect. This Agreement and each other Loan Document to which
--------------
the Company is a party constitute the legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with their respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors' rights
generally or by equitable principles relating to enforceability.
5.05 Litigation. Except as specifically disclosed in Schedule 5.05, there
---------- -------------
are no actions, suits, proceedings, claims or disputes pending, or to the best
knowledge of the Company, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, against the Company, or its
Subsidiaries or any of their respective properties which:
(a) purport to affect or pertain to this Agreement or any other
Loan Document, or any of the transactions contemplated hereby or thereby; or
(b) if determined adversely to the Company or its Subsidiaries,
would reasonably be expected to have a Material Adverse Effect. No injunction,
writ, temporary restraining order or any order of any nature has been issued by
any court or other Governmental Authority purporting to enjoin or restrain the
execution, delivery or performance of this Agreement or any other Loan Document,
or directing that the transactions provided for herein or therein not be
consummated as herein or therein provided.
5.06 No Default. No Default or Event of Default exists or would result
----------
from the incurring of any Obligations by the Company. As of the Closing Date,
neither the Company nor any Subsidiary is in default under or with respect to
any Contractual Obligation in any respect which, individually or together with
all such defaults, could reasonably be expected to have a Material Adverse
Effect, or that would, if such default had occurred after the Closing Date,
create an Event of Default under subsection 8.01(e).
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5.07 ERISA Compliance. Except as specifically disclosed in Schedule 5.07:
---------------- -------------
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law. Each
Plan which is intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the IRS and to the best knowledge of the
Company, nothing has occurred which would cause the loss of such qualification.
The Company and each ERISA Affiliate has made all required contributions to any
Plan subject to Section 412 of the Code, and no application for a funding waiver
or an extension of any amortization period pursuant to Section 412 of the Code
has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably be expected to result in a Material Adverse
Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither
the Company nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA); (iv)
neither the Company nor any ERISA Affiliate has incurred, or reasonably expects
to incur, any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v)
neither the Company nor any ERISA Affiliate has engaged in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA.
5.08 Use of Proceeds; Margin Regulations. The proceeds of the Loans are
-----------------------------------
to be used solely for the purposes set forth in and permitted by Section 6.12
and Section 7.07. Neither the Company nor any Subsidiary is generally engaged in
the business of purchasing or selling Margin Stock or extending credit for the
purpose of purchasing or carrying Margin Stock.
5.09 Title to Properties. The Company and each Subsidiary have good
-------------------
record and marketable title in fee simple to, or valid leasehold interests in,
all real property necessary or used in the ordinary conduct of their respective
businesses, except for such defects in title as could not, individually or in
the aggregate, have a Material Adverse Effect. As of the Closing Date, the
property of the Company and its Subsidiaries is subject to no Liens, other than
Permitted Liens.
5.10 Taxes. The Company and its Subsidiaries have filed all Federal and
-----
other material tax returns and reports required
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to be filed, and have paid all Federal and other material taxes, assessments,
fees and other governmental charges levied or imposed upon them or their
properties, income or assets otherwise due and payable, except those which are
being contested in good faith by appropriate proceedings and for which adequate
reserves have been provided in accordance with GAAP. There is no proposed tax
assessment against the Company or any Subsidiary that would, if made, have a
Material Adverse Effect.
5.11 Financial Condition. (a) The unaudited consolidated financial
-------------------
statements of the Company and its Subsidiaries dated September 24, 1994, and the
related consolidated statements of income or operations, shareholders' equity
and cash flows for the fiscal period ended on that date:
(1) were prepared in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly noted
therein, subject to ordinary, good faith year end audit adjustments;
(2) fairly present the financial condition of the Company and
its Subsidiaries as of the date thereof and results of operations for the period
covered thereby; and
(3) except as specifically disclosed in Schedule 5.11, show
-------------
all material indebtedness and other liabilities, direct or contingent, of the
Company and its consolidated Subsidiaries as of the date thereof, including
liabilities for taxes, material commitments and Contingent Obligations.
(b) Since September 24, 1994, there has been no Material Adverse
Effect.
5.12 Environmental Matters. Except where non-compliance is not reasonably
---------------------
likely to have a Material Adverse Effect, the Company and its Subsidiaries are
in compliance with all Environmental Laws. Except in cases or circumstances not
reasonably likely to have a Material Adverse Effect, there is no Environmental
Claim pending or, to the knowledge of the Company, threatened against the
Company or any Subsidiary.
5.13 Regulated Entities. None of the Company, any Person controlling the
------------------
Company, or any Subsidiary, is an "Investment Company" within the meaning of the
Investment Company Act of 1940. The Company is not subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code, or any other Federal
or state statute or regulation limiting its ability to incur Indebtedness.
5.14 No Burdensome Restrictions. Neither the Company nor any Subsidiary
--------------------------
is a party to or bound by any Contractual Obligation, or subject to any
restriction in any Organization Document, or any Requirement of Law, which could
reasonably be expected to have a Material Adverse Effect.
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5.15 Labor Relations. There are no strikes, lockouts or other labor
---------------
disputes against the Company or any of its Subsidiaries, or, to the best of the
Company's knowledge, threatened against or affecting the Company or any of its
Subsidiaries and, except as specifically disclosed in Schedule 5.15, no
significant unfair labor practice complaint is pending against the Company or
any of its Subsidiaries or, to the best knowledge of the Company, threatened
against any of them before any Governmental Authority.
5.16 Copyrights, Patents, Trademarks and Licenses, etc. The Company or
-------------------------------------------------
its Subsidiaries own or are licensed or otherwise have the right to use all of
the patents, trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other rights that are reasonably necessary for
the operation of their respective businesses, without conflict with the rights
of any other Person. To the best knowledge of the Company, no slogan or other
advertising device, product, process, method, substance, part or other material
now employed, or now contemplated to be employed, by the Company or any
Subsidiary infringes upon any rights held by any other Person. Except as
specifically disclosed in Schedule 5.05, no claim or litigation regarding any of
the foregoing is pending or threatened, and no patent, invention, device,
application, principle or any statute, law, rule, regulation, standard or code
is pending or, to the knowledge of the Company, proposed, which, in either case,
could reasonably be expected to have a Material Adverse Effect.
5.17 Subsidiaries. The Company has no Subsidiaries other than those
------------
specifically disclosed in part (a) of Schedule 5.17 hereto and has no equity
-------------
investments in any other corporation or entity other than those specifically
disclosed in part (b) of Schedule 5.17.
-------------
5.18 Insurance. The Company has a self-insurance program covering types
---------
of risks and/or properties in amounts consistent with the practices of other
companies in the same or similar business and of similar size. The properties of
the Company and its Subsidiaries are, consistent with its self-insurance
program, insured with financially sound and reputable insurance companies not
Affiliates of the Company, in such amounts, with such deductibles and covering
such risks as are customarily carried by companies engaged in similar businesses
and owning similar properties in localities where the Company or such Subsidiary
operates.
5.19 Full Disclosure. None of the representations or warranties made by
---------------
the Company or any Subsidiary in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of the Company or any Subsidiary in connection with the Loan
Documents contains any untrue statement of a material fact or omits any material
fact required to be stated therein or necessary to make the statements made
therein, in light of the
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circumstances under which they are made, not misleading as of the time when made
or delivered.
5.20 Disclosure re Margin Stock. On the Closing Date, the Company owns
--------------------------
the Margin Stock shown on Schedule 5.20.
-------------
ARTICLE VI
AFFIRMATIVE COVENANTS
---------------------
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks
waive compliance in writing:
6.01 Financial Statements. The Company shall deliver to the Agent, in
--------------------
form and detail satisfactory to the Agent and the Majority Banks, with
sufficient copies for each Bank:
(a) as soon as available, but not later than 100 days after the end
of each fiscal year, a copy of the audited consolidated balance sheet of the
Company and its Subsidiaries as at the end of such year and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for such year, setting forth in each case in comparative form the figures
for the previous fiscal year, and accompanied by the opinion of Price Waterhouse
or another nationally-recognized independent public accounting firm
("Independent Auditor") which report shall state that such consolidated
-------------------
financial statements present fairly the financial position for the periods
indicated in conformity with GAAP applied on a basis consistent with prior
years. Such opinion shall not be qualified or limited because of a restricted or
limited examination by the Independent Auditor of any material portion of the
Company's or any Subsidiary's records;
(b) as soon as available, but not later than 60 days after the end
of each of the first three fiscal quarters of each fiscal year, a copy of the
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
the end of such quarter and the related consolidated statements of income,
shareholders' equity and cash flows for the period commencing on the first day
and ending on the last day of such quarter, and certified by a Responsible
Officer as fairly presenting, in accordance with GAAP (subject to ordinary, good
faith year-end audit adjustments), the financial position and the results of
operations of the Company and the Subsidiaries;
6.02 Certificates; Other Information. The Company shall furnish to the
-------------------------------
Agent, with sufficient copies for each Bank:
(a) concurrently with the delivery of the financial statements
referred to in subsection 6.01(a), a certificate of the Independent Auditor
stating that in making the examination necessary therefor no knowledge was
obtained of any Default or Event of Default, except as specified in such
certificate;
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(b) concurrently with the delivery of the financial statements
referred to in subsections 6.01(a) and (b), a Compliance Certificate executed by
a Responsible Officer;
(c) promptly, copies of all financial statements and reports that
the Company sends to its shareholders, and copies of all financial statements
and regular, periodical or special reports (including Forms 10-K, 10-Q and 8-K)
that the Company or any Subsidiary may make to, or file with, the SEC; and
(d) promptly, such additional information regarding the business,
financial or corporate affairs of the Company or any Subsidiary as the Agent, at
the request of any Bank, may from time to time request.
6.03 Notices. The Company shall promptly notify the Agent and each Bank:
-------
(a) of the occurrence of any Default or Event of Default, and of
the occurrence or existence of any event or circumstance that foreseeably will
become a Default or Event of Default;
(b) of any matter that has resulted or may result in a Material
Adverse Effect, including (i) breach or non-performance of, or any default
under, a Contractual Obligation of the Company or any Subsidiary; (ii) any
dispute, litigation, investigation, proceeding or suspension between the Company
or any Subsidiary and any Governmental Authority; or (iii) the commencement of,
or any material development in, any litigation or proceeding affecting the
Company or any Subsidiary; including pursuant to any applicable Environmental
Laws;
(c) of the occurrence of any of the following events affecting the
Company or any ERISA Affiliate (but in no event more than 10 days after such
event), and deliver to the Agent and each Bank a copy of any notice with respect
to such event that is filed with a Governmental Authority and any notice
delivered by a Governmental Authority to the Company or any ERISA Affiliate with
respect to such event:
(1) an ERISA Event;
(2) a material increase in the Unfunded Pension Liability of
any Pension Plan;
(3) the adoption of, or the commencement of contributions to,
any Plan subject to Section 412 of the Code by the Company or any ERISA
Affiliate; or
(4) the adoption of any amendment to a Plan subject to Section
412 of the Code, if such amendment results in a material increase in
contributions or Unfunded Pension Liability.
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(d) of any material change in accounting policies or financial
reporting practices by the Company or any of its consolidated Subsidiaries.
Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer setting forth details of the occurrence
referred to therein, and stating what action the Company or any affected
Subsidiary proposes to take with respect thereto and at what time. Each notice
under subsection 6.03(a) shall describe with particularity any and all clauses
or provisions of this Agreement or other Loan Document that have been (or
foreseeably will be) breached or violated.
6.04 Preservation of Corporate Existence, Etc. The Company shall, and
----------------------------------------
shall cause each Subsidiary to:
(a) preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its state or jurisdiction of
incorporation;
(b) preserve and maintain in full force and effect all governmental
rights, privileges, qualifications, permits, licenses and franchises necessary
or desirable in the normal conduct of its business except in connection with
transactions permitted by Section 7.03 and sales of assets permitted by Section
7.02;
(c) use reasonable efforts, in the ordinary course of business, to
preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents, trademarks,
trade names and service marks, the non-preservation of which could reasonably be
expected to have a Material Adverse Effect.
6.05 Maintenance of Property. The Company shall maintain, and shall cause
-----------------------
each Subsidiary to maintain, and preserve all its property which is used or
useful in its business in good working order and condition, ordinary wear and
tear excepted and make all necessary repairs thereto and renewals and
replacements thereof except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect.
6.06 Insurance. The Company shall maintain (in accordance with its
---------
self-insurance program), and shall cause each Subsidiary to maintain (in
accordance with the Company's self-insurance program), with financially sound
and reputable independent insurers, insurance with respect to its properties and
business against loss or damage of the kinds customarily insured against by
Persons engaged in the same or similar business, of such types and in such
amounts as are customarily carried under similar circumstances by such other
Persons.
6.07 Payment of Obligations. The Company shall, and shall cause each
----------------------
Subsidiary to, pay and discharge as the same shall
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become due and payable, all their respective obligations and liabilities,
including:
(a) interest, principal, fees, and all other sums outstanding under
or in respect of this Agreement, the Fee Letter, and any other instrument
required hereunder in accordance with the terms hereof and thereof;
(b) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same are being contested
in good faith by appropriate proceedings and adequate reserves in accordance
with GAAP are being maintained by the Company or such Subsidiary;
(c) all lawful claims which, if unpaid, would by law become a Lien
upon its property; and
(d) all indebtedness, as and when due and payable, but subject to
any subordination provisions contained in any instrument or agreement evidencing
such Indebtedness.
6.08 Compliance with Laws. The Company shall comply, and shall cause each
--------------------
Subsidiary to comply, in all material respects with all Requirements of Law of
any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act), except such as may be
contested in good faith or as to which a bona fide dispute may exist.
6.09 Compliance with ERISA. The Company shall, and shall cause each of
---------------------
its ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; and (c) make all required contributions to
any Plan subject to Section 412 of the Code.
6.10 Inspection of Property and Books and Records. The Company shall
--------------------------------------------
maintain and shall cause each Subsidiary to maintain proper books of record and
account, in which full, true and correct entries in conformity with GAAP
consistently applied shall be made of all financial transactions and matters
involving the assets and business of the Company and such Subsidiary. The
Company shall permit, and shall cause each Subsidiary to permit, representatives
and independent contractors of the Agent or any Bank to visit and inspect any of
their respective properties, to examine their respective corporate, financial
and operating records, and make copies thereof or abstracts therefrom, and to
discuss their respective affairs, finances and accounts with their respective
directors, officers, and independent public accountants, all at the expense of
the Company and at such reasonable times during normal business hours and as
often as may be reasonably desired, upon reasonable advance notice to the
Company; provided, however, when an Event of Default exists the Agent or any
Bank may do any of the foregoing at the expense of the Company at any time
during normal business hours and without advance notice.
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48
6.11 Environmental Laws. The Company shall, and shall cause each
------------------
Subsidiary to, conduct its operations and keep and maintain its property in
compliance with all Environmental Laws.
6.12 Use of Proceeds. (a) The Company shall use the proceeds of the Loans
---------------
for working capital and other general corporate purposes not in contravention of
any Requirement of Law or of any Loan Document.
(b) The Company shall not, directly or indirectly, use any portion
of the Loan proceeds (i) knowingly to purchase Ineligible Securities from the
Arranger during any period in which the Arranger makes a market in such
Ineligible Securities, (ii) knowingly to purchase during the underwriting or
placement period Ineligible Securities being underwritten or privately placed by
the Arranger, or (iii) to make payments of principal or interest on Ineligible
Securities underwritten or privately placed by the Arranger and issued by or for
the benefit of the Company or any Affiliate of the Company. The Arranger is a
registered broker-dealer and permitted to underwrite and deal in certain
Ineligible Securities; and "Ineligible Securities" means securities which may
---------------------
not be underwritten or dealt in by member banks of the Federal Reserve System
under Section 16 of the Banking Act of 1933 (12 U.S.C. ss. 24, Seventh), as
amended.
6.13 Cooperation. The Company shall perform, on request of the Agent or
-----------
the Majority Banks and at the Company's expense, such acts as may be necessary
or advisable to otherwise carry out the intent of this Agreement.
ARTICLE VII
NEGATIVE COVENANTS
------------------
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks
waive compliance in writing:
7.01 Limitation on Liens. The Company shall not, and shall not suffer or
-------------------
permit any Subsidiary to, directly or indirectly, make, create, incur, assume or
suffer to exist any Lien upon or with respect to any part of its property,
whether now owned or hereafter acquired, other than the following ("Permitted
---------
Liens"):
-----
(a) any Lien existing on property of the Company or any Subsidiary
on the Closing Date and set forth in Schedule 7.01 securing Indebtedness
-------------
outstanding on such date and any Lien associated with operating leases of the
Company and any Subsidiary existing as of the Closing Date;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental
charges which are not delinquent or remain payable without penalty, or to the
extent that non-payment thereof is
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permitted by Section 6.07, provided that no notice of lien has been filed or
recorded under the Code;
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary course
of business which are not delinquent or remain payable without penalty or which
are being contested in good faith and by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of the property
subject thereto;
(e) Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other social security
legislation;
(f) Liens on the property of the Company or its Subsidiary securing
(i) the non-delinquent performance of bids, trade contracts (other than for
borrowed money), leases, statutory obligations, (ii) contingent obligations on
surety and appeal bonds, and (iii) other non-delinquent obligations of a like
nature; in each case, incurred in the ordinary course of business, provided all
such Liens in the aggregate would not (even if enforced) cause a Material
Adverse Effect;
(g) Liens consisting of judgment or judicial attachment liens,
provided that the enforcement of such Liens is effectively stayed and all such
liens in the aggregate at any time outstanding for the Company and its
Subsidiaries do not exceed $5,000,000;
(h) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the businesses of the Company and its Subsidiaries;
(i) Liens on assets of corporations which become Subsidiaries after
the date of this Agreement, provided, however, that such Liens existed at the
-------- -------
time the respective corporations became Subsidiaries and were not created in
anticipation thereof and the principal amount of the obligations secured by such
Liens does not exceed $10,000,000;
(j) purchase money security interests on any property acquired or
held by the Company or its Subsidiaries in the ordinary course of business,
securing Indebtedness incurred or assumed for the purpose of financing all or
any part of the cost of acquiring such property; provided that (i) any such Lien
-------------
attaches to such property concurrently with or within 20 days after the
acquisition thereof, (ii) such Lien attaches solely to the property so acquired
in such transaction, (iii) the principal amount of the debt secured thereby does
not exceed 100% of the cost of such property, and (iv) the principal amount of
the
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Indebtedness secured by any and all such purchase money security interests shall
not at any time exceed $10,000,000;
(k) Liens securing obligations in respect of capital leases and
operating leases on assets subject to such leases, provided that such capital
leases and operating leases are otherwise permitted hereunder; and
(l) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
-------------
dedicated cash collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations promulgated by
the FRB, and (ii) such deposit account is not intended by the Company or any
Subsidiary to provide collateral to the depository institution.
7.02 Disposition of Assets. The Company shall not, and shall not suffer
---------------------
or permit any Subsidiary to, directly or indirectly, sell, assign, lease,
convey, transfer or otherwise dispose of (whether in one or a series of
transactions) any property (including accounts and notes receivable, with or
without recourse) or enter into any agreement to do any of the foregoing,
except:
(a) dispositions of inventory, or used, worn-out or surplus
equipment, all in the ordinary course of business;
(b) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to the
purchase price of such replacement equipment;
(c) the sale by Polar Express of leases and/or machinery pursuant
to the Polar Program;
(d) the sale by the Company or any Subsidiary of trucks pursuant to
the Truck Lease Program; and
(e) dispositions not otherwise permitted hereunder which are made
for fair market value; provided that (i) at the time of any disposition, no
-------------
Event of Default shall exist or shall result from such disposition, (ii) the
aggregate sales price from such disposition shall be paid in cash, and (iii) the
aggregate value of all assets so sold by the Company and its Subsidiaries,
together, shall not exceed in any fiscal year $5,000,000.
7.03 Consolidations and Mergers. The Company shall not, and shall not
--------------------------
suffer or permit any Subsidiary to, merge, consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
45
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owned or hereafter acquired) to or in favor of any Person, except:
(a) any Subsidiary may merge with the Company, provided that the
Company shall be the continuing or surviving corporation, or with any one or
more Subsidiaries, provided that if any transaction shall be between a
Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be
the continuing or surviving corporation; and
(b) any Subsidiary may sell all or substantially all of its assets
(upon voluntary liquidation or otherwise), to the Company or another
Wholly-Owned Subsidiary.
7.04 Loans and Investments. The Company shall not purchase or acquire, or
---------------------
suffer or permit any Subsidiary to purchase or acquire, or make any commitment
therefor, any capital stock, equity interest, or any obligations or other
securities of, or any interest in, any Person, or make or commit to make any
Acquisitions, or make or commit to make any advance, loan, extension of credit
or capital contribution to or any other investment in, any Person including any
Affiliate of the Company, except for:
(a) investments in Cash Equivalents;
(b) extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale or lease of goods or services in the
ordinary course of business;
(c) extensions of credit by the Company to any of its Wholly-Owned
Subsidiaries or by any of its Wholly-Owned Subsidiaries to another of its
Wholly-Owned Subsidiaries;
(d) investments (other than those permitted under subsections (a),
(b), (c), (e), and (f) of this Section) subject to the following additional
limitations:
(1) up to an aggregate amount of $45,000,000 may be invested
in Persons engaged in businesses substantially similar to the businesses
currently engaged in by the Company and/or any of its Subsidiaries;
(2) up to an aggregate amount of $10,000,000 may be invested
in Persons engaged in businesses not covered by clause (1) of this
subsection; and
(3) the aggregate amount of investments under clauses (1) and
(2) of this subsection may not exceed $45,000,000;
(e) investments acquired in exchange for stock of the Company; and
(f) investments existing as of the Closing Date as set forth in
Schedule 7.04.
-------------
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7.05 Limitation on Indebtedness. The Company shall not, and shall not
--------------------------
suffer or permit any Subsidiary to, create, incur, assume, suffer to exist, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
(b) accounts payable to trade creditors for goods and services and
current operating liabilities (not the result of the borrowing of money)
incurred in the Ordinary Course of Business of the Company or such Subsidiary in
accordance with customary terms and paid within the specified time, unless
contested in good faith by appropriate proceedings and reserved for in
accordance with GAAP;
(c) Indebtedness consisting of Contingent Obligations permitted
pursuant to Section 7.08;
(d) Indebtedness existing on the Closing Date and set forth in
Schedule 7.05;
-------------
(e) Indebtedness secured by Liens permitted by subsections 7.01(i)
and (j) in an aggregate amount outstanding not to exceed $20,000,000; and
(f) Indebtedness incurred in connection with leases permitted
pursuant to Section 7.10.
7.06 Transactions with Affiliates. The Company shall not, and shall not
----------------------------
suffer or permit any Subsidiary to, enter into any transaction with any
Affiliate of the Company, except upon fair and reasonable terms no less
favorable to the Company or such Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate of the Company or such
Subsidiary.
7.07 Use of Proceeds. The Company shall not, and shall not suffer or
---------------
permit any Subsidiary to, use any portion of the Loan proceeds, directly or
indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise
refinance indebtedness of the Company or others incurred to purchase or carry
Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying
any Margin Stock, or (iv) to acquire any security in any transaction that is
subject to Section 13 or 14 of the Exchange Act. During the period from the date
of this Agreement through the last day of the Share Purchase Period, the Company
may use the proceeds of the Loans to pay for purchases of the Company's common
stock for immediate retirement of such stock.
7.08 Contingent Obligations. The Company shall not, and shall not suffer
----------------------
or permit any Subsidiary to, create, incur, assume or suffer to exist any
Contingent Obligations except:
(a) endorsements for collection or deposit in the ordinary course
of business;
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(b) Contingent Obligations of the Company and its Subsidiaries
existing as of the Closing Date and listed in Schedule 7.08; and
-------------
(c) Guaranty Obligations in respect of Indebtedness of a Subsidiary
which is permitted under this Agreement;
(d) The Contingent Obligations of Polar Express with respect to
leases it sells or enters into pursuant to the Polar Program up to an aggregate
amount of $10,000,000; and the Company's Guaranty Obligations, if any, with
respect to such Contingent Obligations of Polar Express up to an aggregate
amount of $10,000,000; and
(e) In addition to that permitted under the preceding subsections,
Guaranty Obligations covering up to $5,000,000 principal of primary obligations.
7.09 Joint Ventures. Except for investments in a Joint Venture permitted
--------------
under Section 7.04, the Company shall not, and shall not suffer or permit any
Subsidiary to, enter into any Joint Venture, other than in the ordinary course
of business.
7.10 Lease Obligations. The Company shall not, and shall not suffer or
-----------------
permit any Subsidiary to, create or suffer to exist any obligations for the
payment of rent for any property under lease or agreement to lease, except for:
(a) leases of the Company and of Subsidiaries in existence on the
Closing Date and any renewal, extension or refinancing thereof;
(b) leases entered into by the Company or any of its Subsidiaries
pursuant to the Truck Lease Program;
(c) leases entered into by Polar Express pursuant to the Polar
Program;
(d) operating leases other than those permitted under other
subsections of this Section entered into by the Company or any of its
Subsidiaries after the Closing Date in the ordinary course of business as
conducted as of the Closing Date; provided that the aggregate amount of rent and
other charges to be paid under such leases (without discounting to present value
and without regard to any options to extend) does not exceed $10,000,000;
(e) leases other than those permitted under other subsections of
this Section entered into by the Company or any of its Subsidiaries after the
Closing Date, provided, that:
--------
(1) immediately prior to giving effect to such lease, the
Property subject to such lease was sold by the Company or any such
Subsidiary to the lessor pursuant to a transaction permitted under Section
7.02;
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(2) no Default or Event of Default exists or would occur as a
result of such sale and subsequent lease; and
(3) the aggregate amount of rent and other charges to be paid
under such leases (without discounting to present value and without regard
to any options to extend) does not exceed $5,000,000.
(f) capital leases other than those permitted under other
subsections of this Section, entered into by the Company or any of its
Subsidiaries after the Closing Date to finance the acquisition of equipment;
provided that the aggregate for all such capital leases included in the
--------
Company's most current consolidated balance sheet furnished to the Agent
pursuant to Section 6.01 to the Agent shall not exceed $15,000,000.
7.11 Restricted Payments. The Company shall not, and shall not suffer or
-------------------
permit any Subsidiary to, declare or make any dividend payment or other
distribution of assets, properties, cash, rights, obligations or securities on
account of any shares of any class of its capital stock, or purchase, redeem or
otherwise acquire for value any shares of its capital stock or any warrants,
rights or options to acquire such shares, now or hereafter outstanding; except
that the Company and any Wholly-Owned Subsidiary may:
(a) declare and make dividend payments or other distributions
payable in cash or in its common stock;
(b) purchase, redeem or otherwise acquire shares of its common
stock or warrants or options to acquire any such shares with the proceeds
received from the substantially concurrent issue of new shares of its common
stock;
(c) during the Share Purchase Period purchase its common stock for
immediate retirement up to an aggregate purchase price of $106,000,000;
(d) undertake or permit to be undertaken dividend payments or other
distributions or purchases, redemptions or acquisitions for value described in
the first paragraph of this Section, provided that the aggregate value of all
such payments, distributions, purchases, redemptions and acquisitions (other
than pursuant to subsections (a), (b) or (c) of this Section) does not exceed
$5,000,000; and
(e) purchase shares of its common stock pursuant to:
(1) the Company's "Employee Secured Stock Purchase Plan
(1990)" and the Company's "Section 423 Employee Stock Purchase Plan (1990)"
both as in effect on the Closing Date, and
(2) the Company's "Stock Option Plan (1992)", the Company's
"Incentive Stock Option Plan (1982)", and the
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Company's "Stock Option Plan (1993)", all as in effect on the Closing Date.
7.12 ERISA. The Company shall not, and shall not suffer or permit any of
-----
its ERISA Affiliates to: (a) engage in a prohibited transaction or violation of
the fiduciary responsibility rules with respect to any Plan which has resulted
or could reasonably be expected to result in liability of the Company in an
aggregate amount in excess of $10,000,000; or (b) engage in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA.
7.13 Consolidated Net Worth. The Company shall not permit its
----------------------
Consolidated Net Worth at any time during any fiscal quarter to be less than the
sum of (i) $312,000,000; plus (ii) 75% of the Company's net profit for each
fiscal quarter beginning with the first fiscal quarter of 1994 (with no
deduction for losses); plus (iii) 100% of Net Issuance Proceeds of any stock
offerings or subordinated debt incurred since September 24, 1994; less (iv) the
aggregate purchase price paid by the Company for the purchase of its common
stock permitted under Section 7.11(c).
7.14 Minimum Fixed Charge Coverage Ratio. The Company shall not permit
-----------------------------------
its Fixed Charge Coverage Ratio (a) prior to its first fiscal quarter of 1996 to
be less than 1.10 to 1.00, (b) for its first fiscal quarter of 1996 and
thereafter to be less than 1.75 to 1.00. For purposes of this Section, Fixed
Charge Coverage Ratio means the ratio of "A" to "B" where:
"A" means the sum of earnings before taxes plus current operating lease
expenses plus interest expense. The Company's write-off of up to
$800,000 as a result of the Company's investment in DSD Partnership,
a California general partnership shall be excluded in computing
earnings before taxes for purposes of this Section; and
"B" means interest expense plus current operating lease expense;
in all cases computed on a consolidated basis and measured as follows:
(1) as of the last day of the Company's third fiscal quarter
ending in 1994, for such quarter;
(2) as of the last day of the Company's fourth fiscal quarter
ending in 1994, for the combined period consisting of the Company's
third and fourth fiscal quarters of 1994;
(3) as of the last day of the Company's first fiscal quarter
ending in 1995, for the combined period consisting of Company's third
and fourth fiscal quarters of 1994 and the Company's first fiscal
quarter ending in 1995; and
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(4) as of the last day of each successive fiscal quarter of
the Company, on a rolling four quarter basis.
7.15 Funded Debt/EBITDA Ratio. (a) The Company shall not permit its
------------------------
Funded Debt/EBITDA Ratio to be greater than (i) 6.25 for the period from the
Closing Date through its second fiscal quarter in 1995; (ii) 5.25 for the period
consisting of its third and fourth fiscal quarters in 1995 and its first and
second quarters of 1996; (iii) 4.50 for the period consisting of its third and
fourth quarters in 1996; and (iv) 4.00 thereafter.
(b) In determining compliance with this Section, the Company's
Funded Debt at each quarterly measurement period shall be reduced by the amounts
shown in the following table to accommodate increases in the Company's seasonal
debt:
================================================================================
Fiscal
quarter 1995 1996 1997
ending in:
--------------------------------------------------------------------------------
March $10,000,000 $10,000,000 $10,000,000
--------------------------------------------------------------------------------
June $40,000,000 $45,000,000 $50,000,000
--------------------------------------------------------------------------------
September $30,000,000 $35,000,000 $40,000,000
================================================================================
7.16 Change in Business. The Company shall not, and shall not suffer or
------------------
permit any Subsidiary to, engage in any material line of business substantially
different from those lines of business carried on by the Company and its
Subsidiaries on the date hereof.
7.17 Accounting Changes. The Company shall not, and shall not suffer or
------------------
permit any Subsidiary to, make any significant change in accounting treatment or
reporting practices, except as required by GAAP, or change the fiscal year of
the Company or of any Subsidiary.
7.18 Other Contracts. The Company shall not enter into any employment
---------------
contracts or other employment or service-retention arrangements whose terms,
including salaries, benefits and other compensation, are not normal and
customary.
ARTICLE VIII
EVENTS OF DEFAULT
-----------------
8.01 Event of Default. Any of the following shall constitute an "Event
---------------- -----
of Default":
----------
(a) Non-Payment. The Company fails to pay, (i) when and as required
-----------
to be paid herein, any amount of principal of any Loan, or (ii) within five days
after the same becomes due, any
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interest, fee or any other amount payable hereunder or under any other Loan
Document; or
(b) Representation or Warranty. Any representation or warranty by
--------------------------
the Company or any Subsidiary made or deemed made herein, in any other Loan
Document, or which is contained in any certificate, document or financial or
other statement by the Company, any Subsidiary, or any Responsible Officer,
furnished at any time under this Agreement, or in or under any other Loan
Document, is incorrect in any material respect on or as of the date made or
deemed made; or
(c) Specific Defaults. The Company fails to perform or observe any
-----------------
term, covenant or agreement contained in any of Sections 6.03, or 6.10 or in
Article VII other than Sections 7.01, 7.05, 7.06, 7.12, 7.16, 7.17, or 7.18; or
(d) Other Defaults. The Company fails to perform or observe:
--------------
(1) any term, covenant or agreement contained in any of
Sections 6.01, 6.02, 7.01, or 7.05 and such default shall continue
unremedied for a period of five Business Days after notice from the Agent
or any Bank that such failure to comply constitutes an Event of Default; or
(2) any other term or covenant contained in this Agreement or
any other Loan Document, and such default shall continue unremedied for a
period of 30 days after its occurrence; or
(e) Cross-Default. The Company or any Subsidiary (i) fails to make
-------------
any payment in respect of any Indebtedness or Contingent Obligation having an
aggregate principal amount (including undrawn committed or available amounts and
including amounts owing to all creditors under any combined or syndicated credit
arrangement) of more than $1,000,000 when due (whether by scheduled maturity,
required prepayment, acceleration, demand, or otherwise) and such failure
continues after the applicable grace or notice period, if any, specified in the
document relating thereto on the date of such failure; or (ii) fails to perform
or observe any other condition or covenant, or any other event shall occur or
condition exist, under any agreement or instrument relating to any such
Indebtedness or Contingent Obligation, and such failure continues after the
applicable grace or notice period, if any, specified in the document relating
thereto on the date of such failure if the effect of such failure, event or
condition is to cause, or to permit the holder or holders of such Indebtedness
or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on
behalf of such holder or holders or beneficiary or beneficiaries) to cause such
Indebtedness to be declared to be due and payable prior to its stated maturity,
or such Contingent Obligation to become payable or cash collateral in respect
thereof to be demanded; or
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(f) Insolvency; Voluntary Proceedings. The Company or any Material
---------------------------------
Subsidiary (i) ceases or fails to be solvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, subject to
applicable grace periods, if any, whether at stated maturity or otherwise; (ii)
voluntarily ceases to conduct its business in the ordinary course; (iii)
commences any Insolvency Proceeding with respect to itself; or (iv) takes any
action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary Insolvency
-----------------------
Proceeding is commenced or filed against the Company or any Material Subsidiary,
or any writ, judgment, warrant of attachment, execution or similar process, is
issued or levied against a substantial part of the Company's or any Material
Subsidiary's properties, and any such proceeding or petition shall not be
dismissed, or such writ, judgment, warrant of attachment, execution or similar
process shall not be released, vacated or fully bonded within 60 days after
commencement, filing or levy; (ii) the Company or any Material Subsidiary admits
the material allegations of a petition against it in any Insolvency Proceeding,
or an order for relief (or similar order under non-U.S. law) is ordered in any
Insolvency Proceeding; or (iii) the Company or any Material Subsidiary
acquiesces in the appointment of a receiver, trustee, custodian, conservator,
liquidator, mortgagee in possession (or agent therefor), or other similar Person
for itself or a substantial portion of its property or business; or
(h) ERISA. (i) An ERISA Event shall occur with respect to a Pension
-----
Plan or Multiemployer Plan which has resulted or could reasonably be expected to
result in liability of the Company under Title IV of ERISA to the Pension Plan,
Multiemployer Plan or the PBGC in an aggregate amount in excess of $5,000,000;
(ii) the aggregate amount of Unfunded Pension Liability among all Pension Plans
at any time exceeds $5,000,000; or (iii) the Company or any ERISA Affiliate
shall fail to pay when due, after the expiration of any applicable grace period,
any installment payment with respect to its withdrawal liability under Section
4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of
$5,000,000; or
(i) Monetary Judgments. One or more non-interlocutory judgments,
------------------
non-interlocutory orders, decrees or arbitration awards is entered against the
Company or any Subsidiary involving in the aggregate a liability (to the extent
not covered by independent third-party insurance as to which the insurer does
not dispute coverage) as to any single or related series of transactions,
incidents or conditions, in an aggregate amount equal to 5% or more of the
Company's Consolidated Net Worth, and the same shall remain unsatisfied,
unvacated and unstayed pending appeal for a period of 30 days after the entry
thereof; or
(j) Non-Monetary Judgments. Any non-monetary judgment, order or
----------------------
decree is entered against the Company or any Subsidiary which does or would
reasonably be expected to have a
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Material Adverse Effect, and there shall be any period of 10 consecutive days
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or
(k) Change of Control. (i) Any person acquires beneficial ownership
-----------------
of 40% or more of the combined voting power of the Company's outstanding
securities immediately after such acquisition (which 40% shall be calculated
after including the dilutive effect of the conversion or exchange of any
outstanding securities of the Company convertible into or exchangeable for
voting securities), (ii) a change occurs in the composition of majority
membership of the Company's Board of Directors over any two year period, (iii) a
change of ownership of the Company such that the Company becomes subject to the
delisting of its common stock from the NASDAQ National Market System, (iv) the
Company's Board of Directors approves the sale of all or substantially all of
the assets of the Company, or (v) the Company's Board of Directors approves any
merger, consolidation, issuance of securities, or purchase of assets, the result
of which would be the occurrence of any event described in clause (i), (ii), or
(iii) of this subsection. Notwithstanding anything to the contrary in this
subsection, acquisitions by any person (or any group of which such a person is a
member) who as of 1994 is a member of the Board of Directors of the
--------
Company, of beneficial ownership of 40% or more of the combined voting power
of the Company's outstanding securities immediately after such acquisition
(calculation of such 40% being made as described above) shall not be deemed
subject to this subsection;
(l) Loss of Licenses. Any Governmental Authority revokes or fails
----------------
to renew any material license, permit or franchise of the Company or any
Subsidiary, or the Company or any Subsidiary for any reason loses any material
license, permit or franchise, or the Company or any Subsidiary suffers the
imposition of any restraining order, escrow, suspension or impound of funds in
connection with any proceeding (judicial or administrative) with respect to any
material license, permit or franchise; or
(m) Adverse Change. There occurs a Material Adverse Effect which,
--------------
in the opinion of Majority Banks, (1) will adversely affect the ability of the
Company to perform under any Loan Document or to avoid any Event of Default or
(2) will have a material adverse effect upon the legality, validity, binding
effect, or enforceability against the Company of any Loan Document; or
(n) Invalidity of Subordination Provisions. The subordination
--------------------------------------
provisions of any agreement or instrument governing any subordinated debt is for
any reason revoked or invalidated, or otherwise cease to be in full force and
effect, or any Person contests in any manner the validity or enforceability
thereof or denies that it has any further liability or obligation thereunder, or
the Indebtedness hereunder is for any reason
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subordinated or does not have the priority contemplated by this Agreement or
such subordination provisions.
8.02 Remedies. If any Event of Default occurs, the Agent shall, at the
--------
request of, or may, with the consent of, the Majority Banks,
(a) declare the commitment of each Bank to make Loans to be
terminated, whereupon such commitments shall be terminated;
(b) declare the unpaid principal amount of all outstanding Loans,
all interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Banks all rights and
remedies available to it and the Banks under the Loan Documents or applicable
law;
provided, however, that upon the occurrence of any event specified in subsection
-------- -------
(f) or (g) of Section 8.01 (in the case of clause (i) of subsection (g) upon the
expiration of the 60-day period mentioned therein), the obligation of each Bank
to make Loans shall automatically terminate and the unpaid principal amount of
all outstanding Loans and all interest and other amounts as aforesaid shall
automatically become due and payable without further act of the Agent or any
Bank.
8.03 Rights Not Exclusive. The rights provided for in this Agreement and
--------------------
the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
ARTICLE IX
THE AGENT
---------
9.01 Appointment and Authorization. Each Bank hereby irrevocably (subject
-----------------------------
to Section 9.09) appoints, designates and authorizes the Agent to take such
action on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to it by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto. Notwithstanding
any provision to the contrary contained elsewhere in this Agreement or in any
other Loan Document, the Agent shall not have any duties or responsibilities,
except those expressly set forth herein, nor shall the Agent have or be deemed
to have any fiduciary relationship with any Bank, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against the
Agent.
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61
9.02 Delegation of Duties. The Agent may execute any of its
--------------------
duties under this Agreement or any other Loan Document by or through
agents, employees or attorneys-in-fact and shall be entitled to advice
of counsel concerning all matters pertaining to such duties. The Agent
shall not be responsible for the negligence or misconduct of any agent
or attorney-in-fact that it selects with reasonable care.
9.03 Liability of Agent. None of the Agent-Related Persons
------------------
shall (i) be liable for any action taken or omitted to be taken by any
of them under or in connection with this Agreement or any other Loan
Document or the transactions contemplated hereby (except for its own
gross negligence or willful misconduct), or (ii) be responsible in any
manner to any of the Banks for any recital, statement, representation
or warranty made by the Company or any Subsidiary or Affiliate of the
Company, or any officer thereof, contained in this Agreement or in any
other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under
or in connection with, this Agreement or any other Loan Document, or
the validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or any other Loan Document, or for any failure of the
Company or any other party to any Loan Document to perform its
obligations hereunder or thereunder. No Agent-Related Person shall be
under any obligation to any Bank to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect
the properties, books or records of the Company or any of the Company's
Subsidiaries or Affiliates.
9.04 Reliance by Agent.
-----------------
(a) The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or
telephone message, statement or other document or conversation
believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person or Persons, and upon advice and statements
of legal counsel (including counsel to the Company), independent
accountants and other experts selected by the Agent. The Agent shall
be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Majority Banks as it deems appropriate
and, if it so requests, it shall first be indemnified to its
satisfaction by the Banks against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take
any such action. The Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement or any other
Loan Document in accordance with a request or consent of the Majority
Banks and such request and any action taken or failure to act pursuant
thereto shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 4.01, each Bank that has executed this Agreement
shall be deemed to have consented to, approved or
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62
accepted or to be satisfied with, each document or other matter either sent by
the Agent to such Bank for consent, approval, acceptance or satisfaction, or
required thereunder to be consented to or approved by or acceptable or
satisfactory to the Bank.
9.05 Notice of Default. The Agent shall not be deemed to have knowledge
-----------------
or notice of the occurrence of any Default or Event of Default, except with
respect to defaults in the payment of principal, interest and fees required to
be paid to the Agent for the account of the Banks, unless the Agent shall have
received written notice from a Bank or the Company referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default". The Agent will notify the Banks of its receipt of any such
notice. The Agent shall take such action with respect to such Default or Event
of Default as may be requested by the Majority Banks in accordance with Article
VIII; provided, however, that unless and until the Agent has received any such
-------- -------
request, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable or in the best interest of the Banks.
9.06 Credit Decision. Each Bank acknowledges that none of the Agent-
---------------
Related Persons has made any representation or warranty to it, and that no act
by the Agent hereinafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Bank. Each Bank represents to the
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Company and its Subsidiaries, and all applicable bank regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Company and its Subsidiaries
hereunder. Each Bank also represents that it will, independently and without
reliance upon any Agent- Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of the Company.
Except for notices, reports and other documents expressly herein required to be
furnished to the Banks by the Agent, the Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of the Company which may come into the possession
of any of the Agent-Related Persons.
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63
9.07 Indemnification of Agent. Whether or not the transactions
------------------------
contemplated hereby are consummated, the Banks shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Company and without limiting the obligation of the Company to do so), pro rata,
from and against any and all Indemnified Liabilities; provided, however, that no
-------- -------
Bank shall be liable for the payment to the Agent-Related Persons of any portion
of such Indemnified Liabilities resulting solely from such Person's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Bank shall reimburse the Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Agent is not
reimbursed for such expenses by or on behalf of the Company. The undertaking in
this Section shall survive the payment of all Obligations hereunder and the
resignation or replacement of the Agent.
9.08 Agent in Individual Capacity. BofA and its Affiliates may make
----------------------------
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent hereunder and
without notice to or consent of the Banks. The Banks acknowledge that, pursuant
to such activities, BofA or its Affiliates may receive information regarding the
Company or its Affiliates (including information that may be subject to
confidentiality obligations in favor of the Company or such Subsidiary) and
acknowledge that the Agent shall be under no obligation to provide such
information to them. With respect to its Loans, BofA shall have the same rights
and powers under this Agreement as any other Bank and may exercise the same as
though it were not the Agent, and the terms "Bank" and "Banks" include BofA in
its individual capacity.
9.09 Successor Agent. The Agent may, and at the request of the Majority
---------------
Banks shall, resign as Agent upon 30 days' notice to the Banks. If the Agent
resigns under this Agreement, the Majority Banks shall appoint from among the
Banks a successor agent for the Banks. If no successor agent is appointed prior
to the effective date of the resignation of the Agent, the Agent may appoint,
after consulting with the Banks and the Company, a successor agent from among
the Banks. Upon the acceptance of its appointment as successor agent hereunder,
such successor agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent and the
retiring Agent's appointment, powers and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Article and Sections 10.04 and 10.05 shall inure to its benefit as to any
actions
58
64
taken or omitted to be taken by it while it was Agent under this Agreement. If
no successor agent has accepted appointment as Agent by the date which is 30
days following a retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become effective and the Banks shall
perform all of the duties of the Agent hereunder until such time, if any, as the
Majority Banks appoint a successor agent as provided for above.
9.10 Withholding Tax. (a) If any Bank is a "foreign corporation,
---------------
partnership or trust" within the meaning of the Code and such Bank claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the Code, such Bank agrees with and in favor of the Agent, to deliver to
the Agent:
(1) if such Bank claims an exemption from, or a reduction
of, withholding tax under a United States tax treaty, properly completed
IRS Form 1001 before the payment of any interest in the first calendar
year and before the payment of any interest in each third succeeding
calendar year during which interest may be paid under this Agreement;
(2) if such Bank claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such Bank,
two properly completed and executed copies of IRS Form 4224 before the
payment of any interest is due in the first taxable year of such Bank and
in each succeeding taxable year of such Bank during which interest may be
paid under this Agreement; and
(3) such other form or forms as may be required under the
Code or other laws of the United States as a condition to exemption from,
or reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Agent of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
(b) If any Bank claims exemption from, or reduction of, withholding
tax under a United States tax treaty by providing IRS Form 1001 and such Bank
sells, assigns, grants a participation in, or otherwise transfers all or part of
the Obligations of the Company to such Bank, such Bank agrees to notify the
Agent of the percentage amount in which it is no longer the beneficial owner of
Obligations of the Company to such Bank. To the extent of such percentage
amount, the Agent will treat such Bank's IRS Form 1001 as no longer valid.
(c) If any Bank claiming exemption from United States withholding
tax by filing IRS Form 4224 with the Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of the
Company to such Bank, such Bank agrees to undertake sole responsibility for
complying with the
59
65
withholding tax requirements imposed by Sections 1441 and 1442 of the Code.
(d) If any Bank is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such Bank
an amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this Section are not delivered to the Agent, then the Agent may withhold from
any interest payment to such Bank not providing such forms or other
documentation an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Agent did not properly
withhold tax from amounts paid to or for the account of any Bank (because the
appropriate form was not delivered, was not properly executed, or because such
Bank failed to notify the Agent of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Bank shall indemnify the Agent fully for all amounts paid, directly
or indirectly, by the Agent as tax or otherwise, including penalties and
interest, and including any taxes imposed by any jurisdiction on the amounts
payable to the Agent under this Section, together with all costs and expenses
(including Attorney Costs). The obligation of the Banks under this subsection
shall survive the payment of all Obligations and the resignation or replacement
of the Agent.
9.11 Co-Agents. The Bank identified on the facing page or signature
---------
pages of this Agreement as a "co-agent" shall have no right, power, obligation,
liability, responsibility or duty under this Agreement other than those
applicable to all Banks as such. Without limiting the foregoing, the Bank so
identified as a "co-agent" shall not have or shall not be deemed to have any
fiduciary relationship with any Bank. Each Bank acknowledges that it has not
relied, and will not rely, on the Bank so identified in deciding to enter into
this Agreement or in taking or not taking action hereunder.
ARTICLE X
MISCELLANEOUS
-------------
10.01 Amendments and Waivers. No amendment or waiver of any provision of
----------------------
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company therefrom, shall be effective unless the same shall be
in writing and signed by the Majority Banks (or by the Agent at the written
request of the Majority Banks) and the Company and acknowledged by the Agent,
and then any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, however, that
-------- -------
no such waiver, amendment, or consent shall, unless in writing and signed by all
60
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the Banks and the Company and acknowledged by the Agent, do any of the
following:
(a) increase or extend the Commitment of any Bank (or reinstate any
Commitment terminated pursuant to Section 8.02);
(b) postpone or delay any date fixed by this Agreement or any other
Loan Document for any payment of principal, interest, fees or other amounts due
to the Banks (or any of them) hereunder or under any other Loan Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan, or (subject to clause (ii) below) any fees or other amounts
payable hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans which is required for the Banks or any of
them to take any action hereunder; or
(e) amend this Section, or Section 2.13, or any provision herein
providing for consent or other action by all Banks;
and, provided further, that (i) no amendment, waiver or consent shall, unless in
-------- -------
writing and signed by the Agent in addition to the Majority Banks or all the
Banks, as the case may be, affect the rights or duties of the Agent under this
Agreement or any other Loan Document, and (ii) the Fee Letter may be amended, or
rights or privileges thereunder waived, in a writing executed by the parties
thereto.
10.02 Notices. (a) All notices, requests and other communications shall
-------
be in writing (including, unless the context expressly otherwise provides, by
facsimile transmission, provided that any matter transmitted by the Company by
facsimile (i) shall be immediately confirmed by a telephone call to the
recipient at the number specified on Schedule 10.02, and (ii) shall be followed
--------------
promptly by delivery of a hard copy original thereof) and mailed, faxed or
delivered, to the address or facsimile number specified for notices on Schedule
--------
10.02; or, as directed to the Company or the Agent, to such other address as
-----
shall be designated by such party in a written notice to the other parties, and
as directed to any other party, at such other address as shall be designated by
such party in a written notice to the Company and the Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II or IX shall not be effective until actually
received by the Agent.
61
67
(c) Any agreement of the Agent and the Banks herein to receive
certain notices by telephone or facsimile is solely for the convenience and at
the request of the Company. The Agent and the Banks shall be entitled to rely
on the authority of any Person purporting to be a Person authorized by the
Company to give such notice and the Agent and the Banks shall not have any
liability to the Company or other Person on account of any action taken or not
taken by the Agent or the Banks in reliance upon such telephonic or facsimile
notice. The obligation of the Company to repay the Loans shall not be affected
in any way or to any extent by any failure by the Agent and the Banks to receive
written confirmation of any telephonic or facsimile notice or the receipt by the
Agent and the Banks of a confirmation which is at variance with the terms
understood by the Agent and the Banks to be contained in the telephonic or
facsimile notice.
10.03 No Waiver; Cumulative Remedies. No failure to exercise and no delay
------------------------------
in exercising, on the part of the Agent or any Bank, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege.
10.04 Costs and Expenses. The Company shall:
------------------
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BofA (including in its capacity as Agent) and the
Arranger within five Business Days after demand (subject to subsection 4.01(d))
for all costs and expenses incurred by BofA (including in its capacity as Agent)
and the Arranger in connection with the development, preparation, delivery,
administration and execution of, and any amendment, supplement, waiver or
modification to (in each case, whether or not consummated), this Agreement, any
Loan Document and any other documents prepared in connection herewith or
therewith (including assignments and delegations by any Bank or Banks of their
rights and obligations under this Agreement), and the consummation of the
transactions contemplated hereby and thereby, including reasonable Attorney
Costs incurred by BofA (including in its capacity as Agent) and the Arranger
with respect thereto; and
(b) pay or reimburse the Agent, the Arranger, and each Bank within
five Business Days after demand (subject to subsection 4.01(d)) for all costs
and expenses (including Attorney Costs) incurred by them in connection with the
enforcement, attempted enforcement, or preservation of any rights or remedies
under this Agreement or any other Loan Document during the existence of an Event
of Default or after acceleration of the Loans (including in connection with any
"workout" or restructuring regarding the Loans, and including in any Insolvency
Proceeding or appellate proceeding).
10.05 Company Indemnification. Whether or not the transactions
-----------------------
contemplated hereby are consummated, the Company shall indemnify and hold the
Agent-Related Persons, and each Bank
62
68
and each of its respective officers, directors, employees, counsel, agents and
attorneys-in-fact (each, an "Indemnified Person") harmless from and against any
------------------
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, charges, expenses and disbursements (including Attorney
Costs) of any kind or nature whatsoever which may at any time (including at any
time following repayment of the Loans and the termination, resignation or
replacement of the Agent or replacement of any Bank) be imposed on, incurred by
or asserted against any such Person in any way relating to or arising out of
this Agreement or any document contemplated by or referred to herein, or the
transactions contemplated hereby, or any action taken or omitted by any such
Person under or in connection with any of the foregoing, including with respect
to any investigation, litigation or proceeding (including any Insolvency
Proceeding or appellate proceeding) related to or arising out of this Agreement
or the Loans or the use of the proceeds thereof, whether or not any Indemnified
Person is a party thereto (all the foregoing, collectively, the "Indemnified
-----------
Liabilities"); provided, that the Company shall have no obligation hereunder to
-----------
any Indemnified Person with respect to Indemnified Liabilities resulting solely
from the gross negligence or willful misconduct of such Indemnified Person. The
agreements in this Section shall survive payment of all other Obligations.
10.06 Payments Set Aside. To the extent that the Company makes a payment
------------------
to the Agent or the Banks, or the Agent or the Banks exercise their right of
set-off, and such payment or the proceeds of such set-off or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required (including pursuant to any settlement entered into by the
Agent or such Bank in its discretion) to be repaid to a trustee, receiver or any
other party, in connection with any Insolvency Proceeding or otherwise, then (a)
to the extent of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such set-off had not occurred, and (b)
each Bank severally agrees to pay to the Agent upon demand its pro rata share of
any amount so recovered from or repaid by the Agent.
10.07 Successors and Assigns.
----------------------
(a) The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and assigns, except that the Company may not assign or transfer any of its
rights or obligations under this Agreement without the prior written
consent of the Agent and each Bank.
10.08 Assignments, Participations, etc.
--------------------------------
(a) Any Bank may, with the written consent of the Company
(which consent of the Company shall not be unreasonably withheld) at all
times other than during the existence of an Event of Default and the Agent
at any time, assign and delegate to one or more Eligible Assignees (provided
that no written consent of the Company or the Agent shall be required in
connection with any assignment and delegation by a Bank to an Eligible
Assignee that is an Affiliate
63
69
of such Bank) (each an "Assignee") all, or any ratable part of all, of the
----------
Loans, the Commitments and the other rights and obligations of such Bank
hereunder, in a minimum amount of $10,000,000; provided, however, that the
-------- -------
Company and the Agent may continue to deal solely and directly with such Bank in
connection with the interest so assigned to an Assignee until (i) written notice
of such assignment, together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given to the Company
and the Agent by such Bank and the Assignee; (ii) such Bank and its Assignee
shall have delivered to the Company and the Agent an Assignment and Acceptance
in the form of Exhibit E ("Assignment and Acceptance"); and (iii) the assignor
--------- ---------------------------
Bank or Assignee has paid to the Agent a processing fee in the amount of $5,000
(except as set forth in a separate agreement between the Agent and the
Co-Agent).
(b) From and after the date that the Agent notifies the assignor
Bank that it has received (and provided its consent with respect to) an executed
Assignment and Acceptance and payment of the above-referenced processing fee,
(i) the Assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, shall have the rights and obligations of a Bank under
the Loan Documents, and (ii) the assignor Bank shall, to the extent that rights
and obligations hereunder and under the other Loan Documents have been assigned
by it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Loan Documents.
(c) Immediately upon each Assignee's making its processing fee
payment under the Assignment and Acceptance, this Agreement shall be deemed to
be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Bank pro tanto.
--- -----
(d) Any Bank may at any time sell to one or more commercial banks
or other Persons not Affiliates of the Company (a "Participant") participating
-------------
interests in any Loans, the Commitment of that Bank and the other interests of
that Bank (the "originating Bank") hereunder and under the other Loan Documents;
provided, however, that (i) the originating Bank's obligations under this
-------- -------
Agreement shall remain unchanged, (ii) the originating Bank shall remain solely
responsible for the performance of such obligations, (iii) the Company and the
Agent shall continue to deal solely and directly with the originating Bank in
connection with the originating Bank's rights and obligations under this
Agreement and the other Loan Documents, and (iv) no Bank shall transfer or grant
any participating interest under which the Participant has rights to approve any
amendment to, or any consent or waiver with respect to, this Agreement or any
other Loan Document, except to the extent such amendment, consent or waiver
would require unanimous consent of the Banks as described
64
70
in the first proviso to Section 10.01. In the case of any such participation,
----- -------
the Participant shall be entitled to the benefit of Sections 3.01, 3.03 and
10.05 as though it were also a Bank hereunder, and shall not have any other
rights under this Agreement, or any of the other Loan Documents, and all amounts
payable by the Company hereunder shall be determined as if such Bank had not
sold such participation; except that, if amounts outstanding under this
Agreement are due and unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall be deemed to have the right of set-off in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as a Bank under
this Agreement.
Notwithstanding any other provision in this Agreement, any Bank may
at any time create a security interest in, or pledge, all or any portion of its
rights under and interest in this Agreement in favor of any Federal Reserve Bank
in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR
Section 203.14, and such Federal Reserve Bank may enforce such pledge or
security interest in any manner permitted under applicable law.
10.09 Confidentiality. Each Bank agrees to take and to cause its
---------------
Affiliates to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as "confidential" or
"secret" by the Company and provided to it by the Company or any Subsidiary, or
by the Agent on such Company's or Subsidiary's behalf, under this Agreement or
any other Loan Document, and neither it nor any of its Affiliates shall use any
such information other than in connection with or in enforcement of this
Agreement and the other Loan Documents or in connection with other business now
or hereafter existing or contemplated with the Company or any Subsidiary; except
to the extent such information (i) was or becomes generally available to the
public other than as a result of disclosure by the Bank, or (ii) was or becomes
available on a non-confidential basis from a source other than the Company,
provided that such source is not bound by a confidentiality agreement with the
Company known to the Bank; provided, however, that any Bank may disclose such
-------- -------
information (A) at the request or pursuant to any requirement of any
Governmental Authority to which the Bank is subject or in connection with an
examination of such Bank by any such authority; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which the Agent, any
Bank or their respective Affiliates may be party; (E) to the extent reasonably
required in connection with the exercise of any remedy hereunder or under any
other Loan Document; (F) to such Bank's independent auditors and other
professional advisors; (G) to any Participant or Assignee, actual or potential,
provided that such Person agrees in writing to keep such information
confidential to the same extent required of the Banks hereunder; (H) as to any
Bank or its Affiliate, as expressly permitted under the terms of any other
document or
65
71
agreement regarding confidentiality to which the Company or any Subsidiary is
party or is deemed party with such Bank or such Affiliate; and (I) to its
Affiliates.
10.10 Set-off. In addition to any rights and remedies of the Banks
-------
provided by law, if an Event of Default exists or the Loans have been
accelerated, each Bank is authorized at any time and from time to time, without
prior notice to the Company, any such notice being waived by the Company to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held by,
and other indebtedness at any time owing by, such Bank to or for the credit or
the account of the Company against any and all Obligations owing to such Bank,
now or hereafter existing, irrespective of whether or not the Agent or such Bank
shall have made demand under this Agreement or any Loan Document and although
such Obligations may be contingent or unmatured. Each Bank agrees promptly to
notify the Company and the Agent after any such set-off and application made by
such Bank; provided, however, that the failure to give such notice shall not
-------- -------
affect the validity of such set-off and application.
10.11 Notification of Addresses, Lending Offices, Etc. Each Bank shall
------------------------------------------------
notify the Agent in writing of any changes in the address to which notices to
the Bank should be directed, of addresses of any Lending Office, of payment
instructions in respect of all payments to be made to it hereunder and of such
other administrative information as the Agent shall reasonably request.
10.12 Counterparts. This Agreement may be executed in any number of
------------
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
10.13 Severability. The illegality or unenforceability of any provision
------------
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
10.14 No Third Parties Benefitted. This Agreement is made and entered
---------------------------
into for the sole protection and legal benefit of the Company, the Banks, the
Agent and the Agent-Related Persons, and their permitted successors and assigns,
and no other Person shall be a direct or indirect legal beneficiary of, or have
any direct or indirect cause of action or claim in connection with, this
Agreement or any of the other Loan Documents.
10.15 Governing Law and Jurisdiction. (a) THIS AGREEMENT SHALL BE
------------------------------
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CALIFORNIA; PROVIDED THAT THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS
ARISING UNDER FEDERAL LAW.
66
72
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF
CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT AND
THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-
EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE AGENT AND THE
BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
--------------------
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE
AGENT AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW.
10.16 Waiver of Jury Trial. THE COMPANY, THE BANKS AND THE AGENT EACH
--------------------
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY,
IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY
OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON,
PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. THE COMPANY, THE BANKS AND THE AGENT EACH AGREE
THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE
THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH
SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR
THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in San Francisco,
67
73
California by their proper and duly authorized officers as of the day and year
first above written.
DREYER'S GRAND ICE CREAM, INC.
By: /s/ WILLIAM C. COLLETT
--------------------------
Name: William C. Collett
-------------------------
Title: Treasurer
------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By: /s/ KEVIN LEADER
--------------------------
Name: Kevin C. Leader
Title: Vice President
ABN AMRO BANK N.V., as Co-Agent
By: /s/ GINA M. BRUSATORI
--------------------------
Name: Gina M. Brusatori
------------------------
Title: Vice President
-----------------------
By: /s/ DIANNE D. WAGGONER
--------------------------
Name: Dianne D. Waggoner
-------------------------
Title: Vice President
------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a
Bank
By: /s/ MICHAEL J. DASHER
---------------------------
Name: Michael J. Dasher
Title: Vice President
74
ABN AMRO BANK N.V., as a Bank
By: /s/ GINA M. BRUSATORI
---------------------------
Name: Gina M. Brusatori
-------------------------
Title: Vice President
-----------------------
By: /s/ DIANNE D. WAGGONER
---------------------------
Name: Dianne D. Waggoner
-------------------------
Title: Vice President
------------------------
69
75
SCHEDULE 2.01
-------------
COMMITMENTS
AND PRO RATA SHARES
-------------------
Pro Rata
Bank Commitment Share
---- ---------- --------
Bank of America National
Trust and Savings
Association $ 65,000,000 52%
ABN AMRO Bank, N.V. 60,000,000 48%
TOTAL $125,000,000 100%
PRINCIPAL AMOUNT OF LOANS OUTSTANDING AS OF
CLOSE OF BUSINESS ON THE CLOSING DATE
AND PRO RATA SHARES
-------------------
LOANS OTHER THAN SAME DAY RATE LOANS;
------------------------------------
Principal Pro Rata
Bank Amount Share
---- --------- --------
Bank of America National
Trust and Savings
Association $4,160,000 52%
ABN AMRO Bank, N.V. 3,840,000 48%
TOTAL $8,000,000 100%
SAME DAY RATE LOANS;
-------------------
Principal Pro Rata
Bank Amount Share
---- --------- --------
Bank of America National
Trust and Savings
Association $9,200,000 100%
76
SCHEDULE 5.05
-------------
LITIGATION
----------
None.
77
SCHEDULE 5.07
-------------
ERISA
-----
The Company has been advised that the participation of the employees of
Dreyer's Grand Ice Cream Charitable Foundation and Edy's Grand Ice Cream
Charitable Foundation (the "Charitable Foundations") in the Dreyer's Grand Ice
Cream, Inc. Savings Plan (the "Savings Plan") may be construed as the Charitable
Foundations "maintaining" the Savings Plan contrary to Internal Revenue Code
Section 401(k)(4)(B). The Company has discontinued the Charitable Foundations
employees' active participation in the Savings Plan. The Company has also
prepared a Voluntary Compliance Resolution ("VCR") application to obtain a
compliance certificate from the Internal Revenue Service on the discontinuance
of participation by the Charitable Foundations employees and the disposition of
contributions and earnings related to that participation. The Company
anticipates filing the VCR application by December 31, 1994.
78
SCHEDULE 5.11
-------------
SPECIAL DISCLOSURES OF FINANCIAL CONDITION
------------------------------------------
None.
79
SCHEDULE 5.12
-------------
ENVIRONMENTAL MATTERS
---------------------
None.
80
SCHEDULE 5.15
LABOR RELATIONS
---------------
1. Edy's Grand Ice Cream and United Food and Commercial Workers
------------------------------------------------------------
Union Local 700, Ft. Wayne Indiana, NLRB Case No. 25-CA-23065; and 25-CA-23141.
------------------------------------------------------------------------------
In January of 1994, United Food and Commercial Workers Union Local 700
("UFCW") filed a representation petition seeking to represent all employees
working at Edy's Ft. Wayne Manufacturing Facility. An election was subsequently
held in March 1994 which was won by the employer. Subsequent to the election, a
number of employees were discharged. The UFCW, in turn, filed Unfair Labor
Practice Charges with Region 25 of the National Labor Relations Board ("NLRB")
alleging that these terminations were motivated by Edy's intent to retaliate
against these employees for having participated in union organizing activities.
Originally, two separate Charges were filed and subsequently
consolidated by order of the Regional Director. After investigation, the
Regional Director issued a Complaint against Edy's alleging that the following
individuals were terminated in violation of the National Labor Relations Act for
having engaged in union organizing activities:
Joe Troendly - Date of Termination: March 31, 1994
Steve Leatherman - Date of Termination: March 31, 1994
Robert Byanskie - Date of Termination: April 4, 1994
Lois Jones - Date of Termination: April 22, 1994
The Complaint in the matter also alleges that Edy's engaged in certain
other violations of the National Labor Relations Act, such as interrogating
employees about their union membership activities and issuing verbal warnings to
other employees. In addition, an Amended Complaint was issued in September 1994
alleging that Edy's had removed certain union supporters from employee
committees in retaliation for their having engaged in union organizing
activities.
Most recently, further allegations have been made by Amy
Wickenscheimer alleging that she was also terminated in retaliation for having
engaged in union organizing activities. Ms. Wickenscheimer was terminated on or
about October 10, 1994. At the present time, Edy's is taking steps to defend
Ms. Wickenscheimer's allegations and the NLRB is still in the process of
investigating her Charge.
-1-
81
If successful, the claimants in the present case would be entitled to
reinstatement, back pay and compensation for any and all lost benefits. At the
time of his termination, Mr. Troendly was earning approximately $50,000 a year.
The other claimants were earning approximately $30,000 to $35,000 per year. The
other, non-economic allegations would require the Company to reinstate certain
employees to the committees they were removed from and to post a notice agreeing
to refrain from interrogating employees and/or issuing warnings in retaliations
for their participation in union organizing activities.
Edy's believes it has significant defenses to each and every of these
claims. These defenses include the fact that certain of these individuals were
supervisors under Section 2(11) of the National Labor Relations Acts and,
accordingly, were prohibited from engaging in union organizing activities. In
addition, the record reflects that there were legitimate business reasons for
the termination of certain of these individuals related to their violation of
the Company's policies and/or for failure to adequately perform their job
duties.
Edy's intends to vigorously defend these claims. At the present time,
no trial of the matter has been set, although it is anticipated that the case
will proceed to trial in the spring of 1995.
-2-
82
SCHEDULE 5.17
-------------
SUBSIDIARIES
------------
(a) Subsidiaries
------------
Edy's Grand Ice Cream, a California corporation
Edy's of Illinois, Inc., an Illinois corporation
Dreyer's International, Inc. [FSC], a Virgin Islands corporation
Polar Express Systems International, Inc., a Kentucky corporation
(b) Ownership Interests
-------------------
M-K-D Distributors, Inc., a Texas corporation
DSD Partnership, a California general partnership
Kabushiki Kaisha Dreyer's Japan, a Japanese limited liability stock company
Yadon Enterprises, Inc., a California corporation (including guaranty of
$280,000 loan by Bank of San Francisco to Yadon Enterprises, Inc.)
83
SCHEDULE 5.20
MARGIN STOCK
None.
84
SCHEDULE 7.01
EXISTING LIENS
1. Security Agreement dated as of September 1, 1985 between Edy's Grand
Ice Cream ("Edy's") and Security Pacific National Bank ("Security Pacific")
pursuant to which Edy's granted Security Pacific a lien on certain fixtures and
equipment located at Edy's City of Fort Wayne, Indiana facility to secure Edy's
obligations to Security Pacific under a Letter of Credit Agreement dated
September 1, 1985. The obligations secured total $9,450,000, as reduced from
time to time as the outstanding principal balance of the $9,000,000 City of Ft.
Wayne, Indiana Industrial Revenue Bonds (Edy's Grand Ice Cream) 1985 Series is
reduced from time to time.
2. Mortgage in favor of Security Pacific dated August 22, 1985 on Edy's
City of Fort Wayne, Indiana real property given to secure Edy's obligations to
Security Pacific referred to in paragraph 1 above.
3. Combination Mortgage, Security Agreement and Fixture Financing
Statement in favor of the Northern Trust company dated December 31, 1985 on
Tivoli Distributing Company, Inc. real property (and the fixture located on such
real property) given to secure Tivoli's obligation to the Northern Trust
Company. A release of said mortgage is to be prepared in connection with the
obligation's satisfaction on December 1, 1994.
4. Those liens set forth on Exhibit A to this Schedule attached hereto and
incorporated herein by reference.
85
EXHIBIT A
TO
SCHEDULE 7.01
UCC-1 UCC-2 UCC-2
DATE OF SECURED DATE OF TYPE OF
STATE OF FILING FILING PARTY DEBTOR FILE NO. FILING FILING
--------------- ------- ------- ------ -------- ------- -------
ARIZONA (1) 05/01/91 HANDLING CERVELLI 662555
SYSTEMS, INC. DISTRIBUTORS,
INC.
(2) 6/18/86 IBM CREDIT CERVELLI 442068
CORPORATION DISTRIBUTORS,
INC.
CALIFORNIA (3) 07/17/78 CROCKER DREYER'S 78-112136 04/18/83 CONTINUATION
EQUIPMENT GRAND ICE 04/19/88 CONTINUATION
LEASING, INC. CREAM, INC. 10/18/88 RELEASE
(4) 10/03/88 CROWN DREYER'S 88-245423
CREDIT CO. GRAND ICE
CREAM, INC.
(5) 02/02/89 BELL ATLANTIC DREYER'S 89-029475
TRICON LEASING GRAND ICE
CORP. CREAM, INC.
(6) 12/31/85 CHANCELLOR DREYER'S 85-316802 05/19/86 ASSIGNMENT
CORP. GRAND ICE 11/20/90 CONTINUATION
CREAM, INC.
(7) 05/28/92 CROWN CREDIT DREYER'S 92-118060
CO. GRAND ICE
CREAM, INC.
(8) 11/17/88 SECURITY DREYER'S 88-288896
PACIFIC EQUIP. GRAND ICE
LEASING,INC. CREAM, INC.
(9) 12/05/88 WELLS FARGO DREYER'S 88-301804
LEASING CORP. GRAND ICE
CREAM, INC.
(10) 06/19/89 SECURITY DREYER'S 89-165683
PACIFIC EQUIP. GRAND ICE
LEASING, INC. CREAM, INC.
(11) 06/22/89 CROWN CREDIT DREYER'S 89-170433
CO. GRAND ICE
CREAM, INC.
(12) 07/10/89 CROWN CREDIT DREYER'S 89-185126
CO. GRAND ICE
CREAM, INC.
(13) 09/27/89 CROWN CREDIT DREYER'S 89-253881
CO. GRAND ICE
CREAM, INC.
(14) 11/13/89 SECURITY DREYER'S 89-292168
PACIFIC EQUIP. GRAND ICE
LEASING, INC. CREAM, INC.
1.
86
UCC-1 UCC-2 UCC-2
DATE OF SECURED DATE OF TYPE OF
STATE OF FILING FILING PARTY DEBTOR FILE NO. FILING FILING
--------------- ------- ------- ------ -------- ------- -------
CALIFORNIA (15) 11/13/89 SECURITY DREYER'S 89-293877
PACIFIC EQUIP. GRAND ICE
LEASING, INC. CREAM, INC.
(16) 02/13/90 LEASENU INC. DREYER'S 90-041016
GRAND ICE
CREAM, INC.
(17) 02/13/90 LEASENU INC. DREYER'S 90-041017
GRAND ICE
CREAM, INC.
(18) 06/11/90 SECURITY DREYER'S 90-147098 11/26/90 ASSIGNMENT
PACIFIC EQUIP. GRAND ICE
LEASING, INC. CREAM, INC.
(19) 7/12/90 1989-OAKLAND DREYER'S 90-170505
HOUSING PART- GRAND ICE
NERSHIP ASSO- CREAM, INC.
CIATES
(20) 01/17/91 BAY AREA OIL DREYER'S 91-010037
COMPANY GRAND ICE
CREAM, INC.
(21) 02/11/91 AMERICAN DREYER'S 91-029566
NATIONAL GRAND ICE
LEASING CORP. CREAM, INC.
(22) 03/18/91 SECURITY DREYER'S 91-059056
PACIFIC EQUIP. GRAND ICE
LEASING, INC. CREAM, INC.
(23) 04/11/91 JM LIFT DREYER'S 91-079844
TRUCKS INC. GRAND ICE
CREAM, INC.
(24) 05/24/91 SECURITY DREYER'S 91-113571
PACIFIC EQUIP. GRAND ICE
LEASING, INC. CREAM, INC.
(25) 03/05/92 CLARK RENTAL DREYER'S 92-044615
SYSTEM GRAND ICE
CREAM, INC.
(26) 04/06/92 1991-OAKLAND DREYER'S 92-062835
HOUSING PART- GRAND ICE
NERSHIP ASSO- CREAM, INC.
CIATES, A
CALIFORNIA LTD.
PARTNERSHIP
(27) 05/08/92 CLARK RENTAL DREYER'S 92-104147
SYSTEM GRAND ICE
CREAM, INC.
(28) 07/09/92 PITNEY DREYER'S 92-150874
BOWES CREDIT GRAND ICE
CORP. CREAM, INC.
(29) 01/10/90 SECURITY EDY'S GRAND 90-008059
PACIFIC EQUIP. ICE CREAM,
LEASING, INC.
2.
87
UCC-1 UCC-2 UCC-2
DATE OF SECURED DATE OF TYPE OF
STATE OF FILING FILING PARTY DEBTOR FILE NO. FILING FILING
--------------- ------- ------- ------ -------- ------- -------
CALIFORNIA (30) 10/23/87 SECURITY EDY'S GRAND 87-258452
PACIFIC EQUIP. ICE CREAM,
LEASING, INC.
(31) 07/14/88 SECURITY EDY'S GRAND 88-169938
PACIFIC EQUIP. ICE CREAM,
LEASING, INC.
(32) 09/30/85 SECURITY EDY'S GRAND 85-237915 06/01/90 CONTINUATION
PACIFIC EQUIP. ICE CREAM
LEASING, INC.
ILLINOIS (33) 05/05/92 PITNEY EDY'S GRAND 2982060
BOWES CREDIT ICE CREAM
INDIANA (34) 07/18/88 SECURITY EDY'S GRAND 1508312
PACIFIC EQUIP. ICE CREAM
LEASING, INC.
(35) 10/26/87 SECURITY EDY'S GRAND 1420961
PACIFIC EQUIP. ICE CREAM
LEASING,INC.
(36) 10/02/85 SECURITY EDY'S GRAND 1184458 06/29/90 CONTINUATION
PACIFIC EQUIP. ICE CREAM
LEASING, INC.
(37) 08/28/85 SECURITY EDY'S GRAND 1175113 08/28/90 CONTINUATION
PACIFIC ICE CREAM
NATIONAL BANK
MINNESOTA (38)* 01/31/86 THE NORTHERN TIVOLI 866154 10/12/90 CONTINUATION
TRUST COMPANY DISTRIBUTING
COMPANY, INC.
* UNDERLYING OBLIGATION HAS BEEN SATISFIED, TERMINATION STATEMENT TO BE PREPARED
AND FILED.
3.
88
SCHEDULE 7.04
-------------
INVESTMENTS
-----------
1. Promissory Note of Don Redican Distributing, Inc. dated December 15, 1993
in the principal amount of $70,436.35 payable to Dreyer's Grand Ice Cream,
Inc.
2. Promissory Note of Don Redican Distributing, Inc. dated March 5, 1994 in
the principal amount of $21,657.05 payable to Dreyer's Grand Ice Cream,
Inc.
3. Promissory Note of Don Redican Distributing, Inc. dated May 3, 1994 in the
principal amount of $4,203.30 payable to Dreyer's Grand Ice Cream, Inc.
4. Promissory Note of Don Redican Distributing, Inc. dated June 3, 1994 in
the principal amount of $22,005.20 payable to Dreyer's Grand Ice Cream,
Inc.
5. Promissory Note of Joseph Saker dated July 10, 1992 in the principal
amount of $300,000 due July 10, 1995.
6. Marketing Loan to Sunbelt Distributors, Inc. in the maximum principal
amount of $4,000,000.
7. Option to purchase outstanding stock of Sunbelt Distributors, Inc.
8. Earnout payment to the former shareholders of Polar Express Systems
International, Inc.
9. Purchase of certain assets of Decatur Foods, Inc. for $1,400,000 plus the
cost of inventory purchased.
89
SCHEDULE 7.05
-------------
INDEBTEDNESS
------------
That amount of indebtedness reflected on the attached balance sheet plus
any bank borrowings which may have occurred from September 25, 1994 to December
__, 1994 less the $8,000,000 payoff of the Union City, California Industrial
Revenue Bond on November 1, 1994 and the $550,000 payoff of the Tivoli
Distributing Company, Inc. ("Tivoli") Note to Northern Trust Company, which Note
was assumed by Edy's as a result of the merger of Tivoli into Edy's in 1992.
90
DREYER'S GRAND ICE CREAM, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 24, DECEMBER 25,
1994 1993
------------- ------------
(unaudited)
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities $ 42,589,000 $ 21,893,000
Accrued payroll and employee benefits 12,998,000 9,249,000
Current portion of long-term debt 4,775,000 1,685,000
------------ ------------
Total current liabilities 60,362,000 32,827,000
Long-term debt, less current portion 34,175,000 38,875,000
Convertible subordinated debentures 100,752,000 100,752,000
Deferred income 103,000 174,000
Deferred income taxes 27,901,000 26,613,000
------------ ------------
Total liabilities 223,293,000 199,241,000
------------ ------------
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $1 par value -
10,000,000 shares authorized; no shares
issued or outstanding in 1994 and 1993
Common stock, $1 par value -
30,000,000 shares authorized; 14,886,000
shares and 14,671,000 shares issued and
outstanding in 1994 and 1993, respectively 14,886,000 14,671,000
Capital in excess of par 95,016,000 59,145,000
Retained earnings 48,887,000 49,218,000
------------ ------------
Total stockholders' equity 158,709,000 123,034,000
------------ ------------
Total liabilities and stockholders' equity $382,082,000 $322,275,000
============ ============
See accompanying Notes to Consolidated Financial Statements
3
91
DREYER'S GRAND ICE CREAM, INC.
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DREYER'S GRAND ICE CREAM, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 24, DECEMBER 25,
1994 1993
------------- ------------
(unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 4,644,000 $ 2,532,000
Trade accounts receivable, net of
allowance for doubtful accounts of
$510,000 in 1994 and $635,000 in 1993 69,336,000 46,293,000
Other accounts receivable 7,238,000 5,326,000
Inventories 35,312,000 27,817,000
Prepaid expenses and other 5,675,000 8,256,000
------------ ------------
Total current assets 122,203,000 90,224,000
Property, plant and equipment, net 156,005,000 142,275,000
Goodwill and distribution rights, net of
accumulated amortization of $9,690,000
in 1994 and $7,572,000 in 1993 88,401,000 72,988,000
Other assets 17,453,000 16,788,000
------------ ------------
Total assets $382,062,000 $322,275,000
============ ============
See accompanying Notes to Consolidated Financial Statements
2
92
SCHEDULE 7.08
-------------
CONTINGENT OBLIGATIONS
----------------------
1. General Continuing Guaranty of Dreyer's Grand Ice Cream, Inc. dated
February 10, 1994 in favor of West One Bank, Idaho (guaranteeing the
obligations of Don Redican Distributing, Inc. in the principal amount of
$50,573.00).
2. General Continuing Guaranty of Dreyer's Grand Ice Cream, Inc. dated April
6, 1994 in favor of Seattle First National Bank (guaranteeing obligations
of Williams Inland Distributors, Inc. in the aggregate amount of
$850,000).
3. Guaranty by Dreyer's Grand Ice Cream, Inc. of certain loans of employees
in connection with their relocation in the aggregate amount of $286,500.
93
SCHEDULE 10.02
--------------
OFFSHORE AND DOMESTIC LENDING OFFICES,
-------------------------------------
ADDRESSES FOR NOTICES
---------------------
DREYER'S GRAND ICE CREAM, INC.
------------------------------
5929 College Avenue
Oakland, CA 94618
Attention: William C. Collett, Treasurer
Telephone: 510/601-4339
Facsimile: 510/450-4592
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent
Bank of America National Trust and Savings Association
Agency Management Services #5596
1455 Market Street, 12th Floor
San Francisco, California 94103
Attention: Kevin C. Leader
Vice President
Telephone: 415/953-0108
Facsimile: 415/622-4894
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank
-----------------------------------------------------------------
DOMESTIC AND OFFSHORE LENDING OFFICE:
Bank of America National Trust and Savings Association
1850 Gateway Boulevard, Fourth Floor
Concord, California 94520
Attention: Shireen Watson
Telephone: 510/675-7148
Facsimile: 510/675-7531
94
NOTICES (OTHER THAN NOTICES OF BORROWING AND NOTICES OF
CONVERSION/CONTINUATION):
Bank of America National Trust and Savings Association
Credit Products #3838
555 California Street - 41st Floor
San Francisco, CA 94137
Attention: Michael J. Dasher
Vice President
Telephone: 415/622-2126
Facsimile: 415/622-4584
ABN AMRO BANK N.V.
DOMESTIC AND OFFSHORE LENDING OFFICE:
ABN AMRO BANK N.V.
101 California Street - Suite 4550
San Francisco, CA 94111-5812
Attention: Gloria C. Lee
Telephone: 415/984-3720
Facsimile: 415/363-3524
NOTICES (OTHER THAN NOTICES OF BORROWING AND NOTICES OF
CONVERSION/CONTINUATION):
ABN AMRO BANK N.V.
101 California Street - Suite 4550
San Francisco, CA 94111-5812
Attention: Gina Brusatori
Vice President
Telephone: 415/984-3702
Facsimile: 415/363-3524
95
Date: ________________
For the fiscal quarter
ended ________________
Schedule 2
to the Compliance Certificate
Financial Covenant Analyses and Information
___________________________________________
"7.01 Limitation on Liens. The Company shall not, and shall not suffer or
permit any Subsidiary to, directly or indirectly, make, create, incur, assume or
suffer to exist any Lien upon or with respect to any part of its property,
whether now owned or hereafter acquired, other than the following ("Permitted
Liens"):
"(g) Liens consisting of judgment or judicial attachment liens,
provided that the enforcement of such Liens is effectively stayed and all such
liens in the aggregate at any time outstanding for the Company and its
Subsidiaries do not exceed $5,000,000;"
=============================================================================
ACTUAL PERMITTED
-----------------------------------------------------------------------------
AGGREGATE PRINCIPAL AMOUNT SECURED BY
JUDGMENT AND JUDICIAL ATTACHMENT LIENS $ $5,000,000
=============================================================================
"(i) Liens on assets of corporations which become Subsidiaries
after the date of this Agreement, provided, however, that such Liens existed at
the time the respective corporations became Subsidiaries and were not created in
anticipation thereof and the principal amount of the obligations secured by such
Liens does not exceed $10,000,000;"
================================================================================
ACTUAL PERMITTED
--------------------------------------------------------------------------------
AGGREGATE PRINCIPAL AMOUNT SECURED BY LIENS
ON ASSETS OF CORPORATIONS WHICH BECAME
SUBSIDIARIES AFTER THE DATE OF THE AGREEMENT $ $10,000,000
================================================================================
2-1
96
"(j) purchase money security interests on any property acquired or
held by the Company or its Subsidiaries in the ordinary course of business,
securing Indebtedness incurred or assumed for the purpose of financing all or
any part of the cost of acquiring such property; provided that (i) any such Lien
attaches to such property concurrently with or within 20 days after the
acquisition thereof, (ii) such Lien attaches solely to the property so acquired
in such transaction, (iii) the principal amount of the debt secured thereby does
not exceed 100% of the cost of such property, and (iv) the principal amount of
the Indebtedness secured by any and all such purchase money security interests
shall not at any time exceed $10,000,000;"
================================================================================
ACTUAL PERMITTED
--------------------------------------------------------------------------------
PRINCIPAL AMOUNT OF INDEBTEDNESS SECURED BY
PURCHASE MONEY SECURITY INTERESTS IN PROPERTY
HELD BY THE COMPANY AND ITS SUBSIDIARIES IN
THE ORDINARY COURSE OF BUSINESS $ $10,000,000
================================================================================
2-2
97
"7.02 Disposition of Assets. The Company shall not, and shall not suffer
or permit any Subsidiary to, directly or indirectly, sell, assign, lease,
convey, transfer or otherwise dispose of (whether in one or a series of
transactions) any property (including accounts and notes receivable, with or
without recourse) or enter into any agreement to do any of the foregoing,
except:
"(e) dispositions not otherwise permitted hereunder which are made
for fair market value; provided, that (i) at the time of any disposition, no
Event of Default shall exist or shall result from such disposition, (ii) the
aggregate sales price from such disposition shall be paid in cash, and (iii) the
aggregate value of all assets so sold by the Company and its Subsidiaries,
together, shall not exceed in any fiscal year $5,000,000."
=======================================================================================
ACTUAL PERMITTED
---------------------------------------------------------------------------------------
DISPOSITIONS COVERED BY SECTION 7.02(e), MADE DURING
THE FISCAL YEAR AND THROUGH THE LAST DAY OF THE
FISCAL QUARTER COVERED BY THIS COMPLIANCE
CERTIFICATE $ $5,000,000
=======================================================================================
2-3
98
"7.04 Loans and Investments. The Company shall not purchase or acquire,
or suffer or permit any Subsidiary to purchase or acquire, or make any
commitment therefor, any capital stock, equity interest, or any obligations or
other securities of, or any interest in, any Person, or make or commit to make
any Acquisitions, or make or commit to make any advance, loan, extension of
credit or capital contribution to or any other investment in, any Person
including any Affiliate of the Company, except for:"
"(d) investments (other than those permitted under subsections (a),
(b), (c), (e), and (f) of this Section) subject to the following additional
limitations:
"(1) up to an aggregate amount of $45,000,000 may be invested
in Persons engaged in businesses substantially similar to the businesses
currently engaged in by the Company and/or any of its Subsidiaries;
"(2) up to an aggregate amount of $10,000,000 may be invested
in Persons engaged in businesses not covered by clause (1) of this
subsection; and
"(3) the aggregate amount of investments under clauses (1)
and (2) of this subsection may not exceed $45,000,000;"
================================================================================================
FROM THE DATE OF THIS AGREEMENT THROUGH THE
LAST DAY OF THE FISCAL QUARTER COVERED BY THIS
COMPLIANCE CERTIFICATE:
ACTUAL PERMITTED
------------------------------------------------------------------------------------------------
(1) INVESTMENTS UNDER CLAUSE (1) OF SUBSECTION 7.04(d) $ $45,000,000
(2) INVESTMENTS UNDER CLAUSE (2) OF SUBSECTION 7.04(d) $ $10,000,000
SUM OF (1) PLUS (2) CANNOT EXCEED $45,000,000 $ $45,000,000
================================================================================================
2-4
99
"7.05 Limitation on Indebtedness. The Company shall not, and shall not
suffer or permit any Subsidiary to, create, incur, assume, suffer to exist, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
"(e) Indebtedness secured by Liens permitted by subsections 7.01(i)
and (j) in an aggregate amount outstanding not to exceed $20,000,000;"
=======================================================================================
ACTUAL PERMITTED
---------------------------------------------------------------------------------------
ACTUAL INDEBTEDNESS INCURRED SUBJECT TO
SUBSECTION 7.05(e) FROM THE DATE OF THE AGREEMENT
THROUGH THE LAST DAY OF THE FISCAL QUARTER COVERED
BY THIS COMPLIANCE CERTIFICATE $ $20,000,000
=======================================================================================
2-5
100
"7.08 Contingent Obligations. The Company shall not, and shall not suffer
or permit any Subsidiary to, create, incur, assume or suffer to exist any
Contingent Obligations except:
"(d) The Contingent Obligations of Polar Express with respect to
leases it sells or enters into pursuant to the Polar Program up to an aggregate
amount of $10,000,000; and the Company's Guaranty Obligations, if any, with
respect to such Contingent Obligations of Polar Express up to an aggregate
amount of $10,000,000; and"
=============================================================================================
ACTUAL PERMITTED
---------------------------------------------------------------------------------------------
(1) CONTINGENT OBLIGATIONS OF POLAR EXPRESS COVERED BY
SUBSECTION 7.08(d) $ $10,000,000
(2) COMPANY'S GUARANTY OBLIGATIONS COVERED BY SUBSECTION
7.8(d) $ $10,000,000
=============================================================================================
"(e) In addition to that permitted under the preceding subsections,
Guaranty Obligations covering up to $5,000,000 principal of primary
obligations."
=============================================================================================
ACTUAL PERMITTED
---------------------------------------------------------------------------------------------
GUARANTY OBLIGATIONS INCURRED COVERED BY
SECTION 7.08(e) AS OF THE LAST DAY OF THE
FISCAL QUARTER COVERED BY THIS COMPLIANCE
CERTIFICATE $ $5,000,000
=============================================================================================
2-6
101
"7.10 Lease Obligations. The Company shall not, and shall not suffer or
permit any Subsidiary to, create or suffer to exist any obligations for the
payment of rent for any property under lease or agreement to lease, except for:
"(d) operating leases other than those permitted under other
subsections of this Section entered into by the Company or any of its
Subsidiaries after the Closing Date in the ordinary course of business as
conducted as of the Closing Date; provided that the aggregate amount of rent and
other charges to be paid under such leases (without discounting to present value
and without regard to any options to extend) does not exceed $10,000,000;"
==================================================================================
ACTUAL PERMITTED
----------------------------------------------------------------------------------
AGGREGATE AMOUNT OF RENT AND OTHER CHARGES
COVERED BY SUBSECTION 7.10(d) ENTERED INTO
AFTER THE CLOSING DATE AND THROUGH THE LAST
DAY OF THE FISCAL QUARTER COVERED BY THIS
COMPLIANCE CERTIFICATE $ $10,000,000
===================================================================================
"(e) leases other than those permitted under other subsections of
this Section entered into by the Company or any of its Subsidiaries after the
Closing Date, provided, that:
"(1) immediately prior to giving effect to such lease, the
Property subject to such lease was sold by the Company or any such
Subsidiary to the lessor pursuant to a transaction permitted under Section
7.02;
"(2) no Default or Event of Default exists or would occur as
a result of such sale and subsequent lease; and
2-7
102
"(3) the aggregate amount of rent and other charges to be
paid under such leases (without discounting to present value and without
regard to any options to extend) does not exceed $5,000,000."
=====================================================================================
ACTUAL PERMITTED
-------------------------------------------------------------------------------------
AGGREGATE AMOUNT OF RENT AND OTHER CHARGES TO
BE PAID UNDER LEASES (WITHOUT DISCOUNTING TO
PRESENT VALUE AND WITHOUT REGARD TO ANY OPTIONS
TO EXTEND) COVERED BY SUBSECTION 7.10(e) ENTERED
INTO AFTER THE CLOSING DATE AND THROUGH THE LAST
DAY OF THE FISCAL QUARTER COVERED BY THIS
COMPLIANCE CERTIFICATE $ $5,000,000
======================================================================================
"(f) capital leases other than those permitted under other
subsections of this Section, entered into by the Company or any of its
Subsidiaries after the Closing Date to finance the acquisition of equipment;
provided that the aggregate for all such capital leases included in the
Company's most current consolidated balance sheet furnished to the Agent
pursuant to Section 6.01 to the Agent shall not exceed $15,000,000."
=======================================================================================
ACTUAL PERMITTED
---------------------------------------------------------------------------------------
AGGREGATE FOR CAPITAL LEASES COVERED BY
SUBSECTION 7.10(f) AS OF THE LAST DAY OF
THE FISCAL QUARTER COVERED BY THIS
COMPLIANCE CERTIFICATE $ $15,000,000
=======================================================================================
2-8
103
"7.11 Restricted Payments. The Company shall not, and shall not suffer or
permit any Subsidiary to, declare or make any dividend payment or other
distribution of assets, properties, cash, rights, obligations or securities on
account of any shares of any class of its capital stock, or purchase, redeem or
otherwise acquire for value any shares of its capital stock or any warrants,
rights or options to acquire such shares, now or hereafter outstanding; except
that the Company and any Wholly-Owned Subsidiary may:
"(c) during the Share Purchase Period purchase its common stock for
immediate retirement up to an aggregate purchase price of $106,000,000;"
AGGREGATE PURCHASE PRICE PAID BY THE COMPANY
FOR PURCHASE OF ITS COMMON STOCK DURING THE
SHARE PURCHASE PERIOD AND THROUGH THE DATE OF
THIS COMPLIANCE CERTIFICATE $ $106,000,000
======================================================================================
"(d) undertake or permit to be undertaken dividend payments or
other distributions or purchases, redemptions or acquisitions for value
described in the first paragraph of this Section, provided that the aggregate
value of all such payments, distributions, purchases, redemptions and
acquisitions (other than pursuant to subsections (a), (b) or (c) of this
Section) does not exceed $5,000,000;"
======================================================================================
ACTUAL PERMITTED
--------------------------------------------------------------------------------------
(1) AGGREGATE AMOUNT, FROM THE DATE OF THE
AGREEMENT THROUGH THE LAST DAY OF THE FISCAL
QUARTER COVERED BY THIS COMPLIANCE CERTIFICATE,
OF DIVIDEND PAYMENTS OR OTHER DISTRIBUTIONS OR
PURCHASES, REDEMPTIONS OR ACQUISITIONS FOR VALUE
DESCRIBED IN THE FIRST PARAGRAPH OF SECTION 7.11 $
--------------------------------------------------------------------------------------
(2) MINUS SUCH PAYMENTS, ETC. UNDER SUBSECTION
(a), (b), AND (c) OF SECTION 7.11 $
--------------------------------------------------------------------------------------
DIFFERENCE BETWEEN (1) AND (2) CANNOT EXCEED
$5,000,000 $ $5,000,000
======================================================================================
2-9
104
"7.13 Consolidated Net Worth. The Company shall not permit its
Consolidated Net Worth at any time during any fiscal quarter to be less than the
sum of (i) $312,000,000; plus (ii) 75% of the Company's net profit for each
fiscal quarter beginning with the first fiscal quarter of 1994 (with no
deduction for losses); plus (iii) 100% of Net Issuance Proceeds of any stock
offerings or subordinated debt incurred since September 24, 1994; less (iv) the
aggregate purchase price paid by the Company for the purchase of its common
stock permitted under Section 7.11(c).
=======================================================================================
1. (a) BASE AMOUNT $312,000,000
---------------------------------------------------------------------------------------
(b) 75% OF THE COMPANY'S NET PROFIT FOR EACH FISCAL QUARTER
BEGINNING WITH FIRST QUARTER 1994 (WITH NO DEDUCTION FOR LOSSES) $
---------------------------------------------------------------------------------------
(c) 100% OF NET ISSUANCE PROCEEDS OF ANY STOCK OFFERINGS SINCE
SEPTEMBER 24, 1994 $
---------------------------------------------------------------------------------------
(d) 100% OF NEW ISSUANCE PROCEEDS OF SUBORDINATED DEBT INCURRED
SINCE SEPTEMBER 24, 1994 $
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
2. SUM OF 1(a), (b), (c) AND (d) OR REQUIRED CONSOLIDATED NET WORTH $
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
3. ACTUAL CONSOLIDATED NET WORTH $
=======================================================================================
2-10
105
"7.14 Minimum Fixed Charge Coverage Ratio. The Company shall not permit
its Fixed Charge Coverage Ratio (a) prior to its first fiscal quarter of 1996 to
be less than 1.10 to 1.00, (b) for its first fiscal quarter of 1996 and
thereafter to be less than 1.75 to 1.00. For purposes of this Section, Fixed
Charge Coverage Ratio means the ratio of "A" to "B" where:
"'A' means the sum of earnings before taxes plus current operating
lease expenses plus interest expense. The Company's write-off of up
to $800,000 as a result of the Company's investment in DSD
Partnership, a California general partnership shall be excluded in
computing earnings before taxes for purposes of this Section; and
"'B' means interest expense plus current operating lease expense;
"in all cases computed on a consolidated basis and measured as follows:
"(1) as of the last day of the Company's third fiscal quarter
ending in 1994, for such quarter;
"(2) as of the last day of the Company's fourth fiscal quarter
ending in 1994, for the combined period consisting of the Company's
third and fourth fiscal quarters of 1994;
"(3) as of the last day of the Company's first fiscal quarter
ending in 1995, for the combined period consisting of Company's third
and fourth fiscal quarters of 1994 and the Company's first fiscal
quarter ending in 1995; and
"(4) as of the last day of each successive fiscal quarter of the
Company, on a rolling four quarter basis.
==================================================================================
A =
----------------------------------------------------------------------------------
1. EARNINGS BEFORE TAXES* $
----------------------------------------------------------------------------------
2. CURRENT OPERATING LEASE EXPENSES $
----------------------------------------------------------------------------------
3. INTEREST EXPENSE $
----------------------------------------------------------------------------------
A = 1 + 2 + 3 $
==================================================================================
*COMPANY'S WRITE-OFF OF UP TO $800,000 AS A RESULT OF THE COMPANY'S
INVESTMENT IN DSD PARTNERSHIP SHALL BE EXCLUDED IN COMPUTING EARNINGS
BEFORE TAXES.
2-11
106
2-12
107
===============================================================================
B =
-------------------------------------------------------------------------------
1. INTEREST EXPENSE $
-------------------------------------------------------------------------------
2. CURRENT OPERATING LEASE EXPENSES $
-------------------------------------------------------------------------------
B = 1 + 2 $
===============================================================================
RATIO OF A TO B = _____________
REQUIRED RATIO AS SET FORTH BELOW: NOT LESS THAN _____________
REQUIRED RATIOS:
PRIOR TO FIRST FISCAL QUARTER OF 1996: NOT LESS THAN 1.10 TO 1.00
FIRST FISCAL QUARTER OF 1996 AND THEREAFTER: NOT LESS THAN 1.75 TO
1.00
2-13
108
"7.15 Funded Debt/EBITDA Ratio. (a) The Company shall not permit its
Funded Debt/EBITDA Ratio to be greater than (i) 6.25 for the period from the
Closing Date through its second fiscal quarter in 1995; (ii) 5.25 for the period
consisting of its third and fourth fiscal quarters in 1995 and its first and
second quarters of 1996; (iii) 4.50 for the period consisting of its third and
fourth quarters in 1996; and (iv) 4.00 thereafter.
"(b) In determining compliance with this Section, the Company's
Funded Debt at each quarterly measurement period shall be reduced by the amounts
shown in the following table to accommodate increases in the Company's seasonal
debt:
===============================================================================
Fiscal
quarter
ending in: 1995 1996 1997
-------------------------------------------------------------------------------
March $10,000,000 $10,000,000 $10,000,000
-------------------------------------------------------------------------------
June $40,000,000 $45,000,000 $50,000,000
-------------------------------------------------------------------------------
September $30,000,000 $35,000,000 $40,000,000
===============================================================================
1. FUNDED DEBT $
2. MINUS AMOUNT AS DETERMINED ACCORDING TO THE
TABLE IN SECTION 7.15:
3. FUNDED DEBT FOR PURPOSES OF SECTION 7.15 (1 MINUS 2) $
4. EBITDA =
5. RATIO OF FUNDED DEBT TO EBITDA =
6. REQUIRED RATIOS AS SET FORTH IN TABLE BELOW: NOT LESS THAN
================================================================================
FOR THE PERIOD:
--------------------------------------------------------------------------------
FROM THE CLOSING DATE THROUGH THE SECOND FISCAL QUARTER IN 1995 6.25
--------------------------------------------------------------------------------
CONSISTING OF THE THIRD AND FOURTH FISCAL QUARTERS IN 1995 AND THE
FIRST AND SECOND FISCAL QUARTERS IN 1996 5.25
--------------------------------------------------------------------------------
CONSISTING OF THE THIRD AND FOURTH FISCAL QUARTERS IN 1996 4.50
--------------------------------------------------------------------------------
THEREAFTER 4.00
================================================================================
2-14
109
EXHIBIT A
DREYER'S GRAND ICE CREAM, INC.
COMPLIANCE CERTIFICATE
Financial
Statement Date:______________________, 199_
Reference is made to that certain Amended and Restated Credit Agreement
dated as of December 13, 1994, (as extended, renewed, amended or restated from
time to time, the "Agreement") among Dreyer's Grand Ice Cream, Inc., a Delaware
corporation (the "Company"), the several financial institutions from time to
time parties to this Agreement (the ">Banks>") and Bank of America National
Trust and Savings Association, as agent for the Banks (in such capacity, the
"Agent>"). Unless otherwise defined herein, capitalized terms used herein have
the respective meanings assigned to them in the Agreement.
The undersigned Responsible Officer of the Company, hereby certifies as of
the date hereof that he/she is the _______________ of the Company, and that, as
such, he/she is authorized to execute and deliver this Certificate to the Banks
and the Agent on the behalf of the Company and its consolidated Subsidiaries,
and that:
[Use the following paragraph if this Certificate is delivered in connection with
the financial statements required by subsection 6.01(a) of the Agreement.]
1. Attached as Schedule 1 hereto are (a) a true and correct copy of the
audited consolidated balance sheet of the Company and its consolidated
Subsidiaries as at the end of the fiscal year ended _______________, 199__ and
(b) the related consolidated statements of income or operations, shareholders'
equity and cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, reported on without a
"going concern" or like qualification or exception, or qualification arising out
of the scope of the audit and accompanied by the opinion of Price Waterhouse or
another nationally-recognized certified independent public accounting firm (the
"Independent Auditor") which report shall state that such consolidated financial
statements are complete and correct and have been prepared in accordance with
GAAP, and fairly present, in all material respects, the financial position of
the Company and its consolidated Subsidiaries for the periods indicated and on a
basis consistent with prior periods.
OR
[Use the following paragraph if this Certificate is delivered in
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110
connection with the financial statements required by subsection 6.01(b) of the
Agreement.]
1. Attached as Schedule 1 hereto are (a) a true and correct copy of the
unaudited consolidated balance sheet of the Company and its consolidated
Subsidiaries as of the end of the fiscal quarter ended __________, 199__, and
(b) the related unaudited consolidated statements of income, shareholders'
equity, and cash flows for the period commencing on the first day and ending on
the last day of such quarter, and certified by a Responsible Officer that such
financial statements were prepared in accordance with GAAP (subject only to
ordinary, good faith year-end audit adjustments and the absence of footnotes)
and fairly present, in all material respects, the financial position and the
results of operations of the Company and its consolidated Subsidiaries.
2. The undersigned has reviewed and is familiar with the terms of the
Agreement and has made, or has caused to be made under his/her supervision, a
detailed review of the transactions and conditions (financial or otherwise) of
the Company during the accounting period covered by the attached financial
statements.
3. To the best of the undersigned's knowledge, the Company, during such
period, has observed, performed or satisfied all of its covenants and other
agreements, and satisfied every condition in the Agreement to be observed,
performed or satisfied by the Company, and the undersigned has no knowledge of
any Default or Event of Default.
4. The following financial covenant analyses and information set forth on
Schedule 2 attached hereto are true and accurate on and as of the date of this
Certificate. All amounts and ratios refer to the financial statements attached
as Schedule 1 hereto and are determined in accordance with the specifications
set forth in the Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
________________________, 199_.
DREYER'S GRAND ICE CREAM, INC.
By:
-------------------------------------
Name:
Title:
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EXHIBIT B
NOTICE OF BORROWING
Date: ______________________, 199_
To: Bank of America National Trust and Savings Association as Agent for the
Banks parties to the Amended and Restated Credit Agreement] dated as of
December 13, 1994 (as extended, renewed, amended or restated from time to
time, the "Agreement") among Dreyer's Grand Ice Cream, Inc.,
certain financial institutions which are signatories thereto and Bank of
America National Trust and Savings Association, as Agent.
Ladies and Gentlemen:
The undersigned, Dreyer's Grand Ice Cream, Inc. (the "Company"), refers to
the Agreement, the terms defined therein being used herein as therein defined,
and hereby gives you notice irrevocably, pursuant to Section 2.03 of the
Agreement, of the Borrowing specified below:
1. The Business Day of the proposed Borrowing is _________________________
__________, 19_.
2. The aggregate amount of the proposed Borrowing is $__________.
3. The Borrowing is to be comprised of $__________ of [Base Rate] [CD Rate]
[Offshore Rate] [Same Day Rate] Loans.
4. The duration of the Interest Period for the [CD Rate Loans] [Offshore
Rate Loans] [Same Day Rate] included in the Borrowing shall be [_____ days]
[_____ months].
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the proposed Borrowing, before
and after giving effect thereto and to the application of the proceeds
therefrom:
(a) the representations and warranties of the Company contained in
Article V of the Agreement are true and correct as though made on and as of
such date (except to the extent such representations and warranties relate
to an earlier date, in which case they are true and correct as of such
date);
(b) no Default or Event of Default has occurred and is
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112
continuing, or would result from such proposed Borrowing; and
(c) The proposed Borrowing will not cause the aggregate principal amount
of all outstanding Loans to exceed the combined Commitments of the Banks.
DREYER'S GRAND ICE CREAM, INC.
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
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113
EXHIBIT C
NOTICE OF CONVERSION/CONTINUATION
Date:________________________, 199_
To: Bank of America National Trust and Savings Association, as Agent for the
financial institutions parties to the Amended and Restated Credit
Agreement] dated as of December 13, 1994 (as extended, renewed, amended or
restated from time to time, the "Agreement") among Dreyer's Grand Ice
Cream, Inc. certain Banks which are signatories thereto and Bank of America
National Trust and Savings Association, as Agent
Ladies and Gentlemen:
The undersigned, Dreyer's Grand Ice Cream, Inc. (the "Company"), refers to
the Agreement, the terms defined therein being used herein as therein defined,
and hereby gives you notice irrevocably, pursuant to Section 2.04 of the
Agreement, of the [conversion] [continuation] of the Loans specified herein,
that:
1. The Conversion/Continuation Date is _______________________, 19_
2. The aggregate amount of the Loans to be [converted] [continued] is
$__________.
3. The Loans are to be [converted into] [continued as] [CD Rate]
[Offshore Rate] [Base Rate] Loans.
4. [If applicable:] The duration of the Interest Period for the Loans
included in the [conversion] [continuation] shall be [_____________ days]
[____________ months].
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the proposed [conversion] [continuation],
before and after giving effect thereto and to the application of the proceeds
therefrom:
(a) the representations and warranties of the Company contained in
Article V of the Agreement are true and correct as though made on and as of
such date (except to the extent such representations and warranties relate
to an earlier date, in which case they are true and correct as of such
date);
(b) no Default or Event of Default has occurred and is continuing, or
would result from such proposed [conversion]
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114
[continuation][; and
(c) the proposed [conversion][continuation] will not cause the
aggregate principal amount of all outstanding Loans to exceed the combined
Commitments of the Banks].
DREYER'S GRAND ICE CREAM, INC.
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
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115
EXHIBIT E
ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and Acceptance")
dated as of __________, 199__ is made between ______________________________
(the "Assignor") and __________________________ (the "Assignee").
RECITALS
WHEREAS, the Assignor is party to that certain Amended and Restated Credit
Agreement (the "Agreement") dated as of December 13, 1994 (as amended, amended
and restated, modified, supplemented or renewed, the "Agreement>") among
Dreyer's Grand Ice Cream, Inc. a Delaware corporation (the "Company"), the
several financial institutions from time to time party thereto (including the
Assignor, the ">Banks>"), and Bank of America National Trust and Savings
Association, as agent for the Banks (the "Agent>"). Any terms defined in the
Agreement and not defined in this Assignment and Acceptance are used herein as
defined in the Agreement;
WHEREAS, as provided under the Agreement, the Assignor has committed to
making Loans (the "Loans>") to the Company in an aggregate amount not to exceed
$__________ (the "Commitment");
WHEREAS, [the Assignor has made Loans in the aggregate
principal amount of $__________ to the Company] [no Loans are outstanding under
the Agreement];
WHEREAS, the Assignor wishes to assign to the Assignee [part of the] [all]
rights and obligations of the Assignor under the Agreement in respect of its
Commitment, [together with a corresponding portion of each of its outstanding
Loans in an amount equal to $__________ (the "Assigned Amount") on the terms and
subject to the conditions set forth herein and the Assignee wishes to accept
assignment of such rights and to assume such obligations from the Assignor on
such terms and subject to such conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:
1. Assignment and Acceptance.
(a) Subject to the terms and conditions of this Assignment and
Acceptance, (i) the Assignor hereby sells,
E-1
116
transfers and assigns to the Assignee, and (ii) the Assignee hereby purchases,
assumes and undertakes from the Assignor, without recourse and without
representation or warranty (except as provided in this Assignment and
Acceptance) __% (the "Assignee's Percentage Share") of (A) the Commitment of the
Assignor and (B) all related rights, benefits, obligations, liabilities and
indemnities of the Assignor under and in connection with the Agreement and the
Loan Documents.
[If appropriate, add paragraph specifying payment to Assignor by
Assignee of outstanding principal of, accrued interest on, and fees with respect
to Loans.]
(b) With effect on and after the Effective Date (as defined in
Section 5 hereof), the Assignee shall be a party to the Agreement and succeed to
all of the rights and be obligated to perform all of the obligations of a Bank
under the Agreement, including the requirements concerning confidentiality and
the payment of indemnification, with a Commitment in an amount equal to the
Assigned Amount. The Assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of the Agreement are
required to be performed by it as a Bank. It is the intent of the parties hereto
that the Commitment of the Assignor shall, as of the Effective Date, be reduced
by an amount equal to the Assigned Amount and the Assignor shall relinquish its
rights and be released from its obligations under the Agreement to the extent
such obligations have been assumed by the Assignee; provided, however, the
Assignor shall not relinquish its rights under Sections __ and __ of the
Agreement to the extent such rights relate to the time prior to the Effective
Date.
(c) After giving effect to the assignment and assumption set forth
herein, on the Effective Date the Assignee's Commitment will be $__________.
(d) After giving effect to the assignment and assumption set forth
herein, on the Effective Date the Assignor's Commitment will be $__________.
2. Payments.
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the
Effective Date in immediately available funds an amount equal to $__________,
representing the Assignee's Pro Rata Share of the principal amount of all Loans.
(b) The [Assignor] [Assignee] further agrees to pay to the Agent a
processing fee in the amount specified in Section 10.08(a)(iii) of the
Agreement.
3. Reallocation of Payments.
Any interest, fees and other payments accrued to the
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Effective Date with respect to the Commitment[,] [and] Loans be for the account
of the Assignor. Any interest, fees and other payments accrued on and after the
Effective Date with respect to the Assigned Amount shall be for the account of
the Assignee. Each of the Assignor and the Assignee agrees that it will hold in
trust for the other party any interest, fees and other amounts which it may
receive to which the other party is entitled pursuant to the preceding sentence
and pay to the other party any such amounts which it may receive promptly upon
receipt.
4. Independent Credit Decision.
The Assignee (a) acknowledges that it has received a copy of the
Agreement and the Schedules and Exhibits thereto, together with copies of the
most recent financial statements referred to in Section 6.01 of the Agreement,
and such other documents and information as it has deemed appropriate to make
its own credit and legal analysis and decision to enter into this Assignment and
Acceptance; and (b) agrees that it will, independently and without reliance upon
the Assignor, the Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit and legal decisions in taking or not taking action under the Agreement.
5. Effective Date; Notices.
(a) As between the Assignor and the Assignee, the effective date
for this Assignment and Acceptance shall be __________, 199__ (the "Effective
Date"); provided that the following conditions precedent have been satisfied on
or before the Effective Date:
(i) this Assignment and Acceptance shall be executed and
delivered by the Assignor and the Assignee;
(ii) the consent of the Company and the Agent required for an
effective assignment of the Assigned Amount by the Assignor to the Assignee
under Section 10.08(a) of the Agreement shall have been duly obtained and shall
be in full force and effect as of the Effective Date;
(iii) the Assignee shall pay to the Assignor all amounts due to
the Assignor under this Assignment and Acceptance;
[(iv) the Assignee shall have complied with Section [ ](__) of
the Agreement (if applicable);]
(v) the processing fee referred to in Section 2(b) hereof and
in Section 10.08(a)(iii) of the Agreement shall have been paid to the Agent; and
(vi) the Assignor shall have assigned and the Assignee shall
have assumed a percentage equal to the Assignee's
E-3
118
Percentage Share of the rights and obligations of the Assignor under the
Agreement (if such agreement exists).
(b) Promptly following the execution of this Assignment and
Acceptance, the Assignor shall deliver to the Company and the Agent for
acknowledgement by the Agent, a Notice of Assignment substantially in the form
attached hereto as Schedule 1.
[6. Agent. [INCLUDE ONLY IF ASSIGNOR IS AGENT]
(a) The Assignee hereby appoints and authorizes the Assignor to
take such action as agent on its behalf and to exercise such powers under the
Agreement as are delegated to the Agent by the Banks pursuant to the terms of
the Agreement.
(b) The Assignee shall assume no duties or obligations held by the
Assignor in its capacity as Agent under the Agreement.]
7. Withholding Tax.
The Assignee (a) represents and warrants to the Bank, the Agent and the
Company that under applicable law and treaties no tax will be required to be
withheld by the Bank with respect to any payments to be made to the Assignee
hereunder, (b) agrees to furnish (if it is organized under the laws of any
jurisdiction other than the United States or any State thereof) to the Agent and
the Company prior to the time that the Agent or Company is required to make any
payment of principal, interest or fees hereunder, duplicate executed originals
of either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue
Service Form 1001 (wherein the Assignee claims entitlement to the benefits of a
tax treaty that provides for a complete exemption from U.S. federal income
withholding tax on all payments hereunder) and agrees to provide new Forms 4224
or 1001 upon the expiration of any previously delivered form or comparable
statements in accordance with applicable U.S. law and regulations and amendments
thereto, duly executed and completed by the Assignee, and (c) agrees to comply
with all applicable U.S. laws and regulations with regard to such withholding
tax exemption.
8. Representations and Warranties.
(a) The Assignor represents and warrants that (i) it is the legal
and beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any Lien or other adverse claim; (ii) it is
duly organized and existing and it has the full power and authority to take, and
has taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance and to fulfill
its obligations hereunder; (iii) no notices to, or consents, authorizations or
approvals of, any Person are required (other than any already
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119
given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance, and apart from any agreements or undertakings or
filings required by the Agreement, no further action by, or notice to, or filing
with, any Person is required of it for such execution, delivery or performance;
and (iv) this Assignment and Acceptance has been duly executed and delivered by
it and constitutes the legal, valid and binding obligation of the Assignor,
enforceable against the Assignor in accordance with the terms hereof, subject,
as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and
other laws of general application relating to or affecting creditors' rights and
to general equitable principles.
(b) The Assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Agreement or
any other instrument or document furnished pursuant thereto. The Assignor makes
no representation or warranty in connection with, and assumes no responsibility
with respect to, the solvency, financial condition or statements of the Company,
or the performance or observance by the Company, of any of its respective
obligations under the Agreement or any other instrument or document furnished in
connection therewith.
(c) The Assignee represents and warrants that (i) it is duly
organized and existing and it has full power and authority to take, and has
taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance, and to
fulfill its obligations hereunder; (ii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any already
given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance; and apart from any agreements or undertakings or
filings required by the Agreement, no further action by, or notice to, or filing
with, any Person is required of it for such execution, delivery or performance;
(iii) this Assignment and Acceptance has been duly executed and delivered by it
and constitutes the legal, valid and binding obligation of the Assignee,
enforceable against the Assignee in accordance with the terms hereof, subject,
as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and
other laws of general application relating to or affecting creditors' rights and
to general equitable principles; and (iv) it is an Eligible Assignee.
9. Further Assurances.
The Assignor and the Assignee each hereby agree to execute and deliver
such other instruments, and take such other action, as either party may
reasonably request in connection with the transactions contemplated by this
Assignment and Acceptance, including the delivery of any notices or other
documents or
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120
instruments to the Company or the Agent, which may be required in connection
with the assignment and assumption contemplated hereby.
10. Miscellaneous.
(a) Any amendment or waiver of any provision of this Assignment and
Acceptance shall be in writing and signed by the parties hereto. No failure or
delay by either party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof and any waiver of any breach of the
provisions of this Assignment and Acceptance shall be without prejudice to any
rights with respect to any other or further breach thereof.
(b) All payments made hereunder shall be made without any set-off
or counterclaim.
(c) The Assignor and the Assignee shall each pay its own costs and
expenses incurred in connection with the negotiation, preparation, execution and
performance of this Assignment and Acceptance.
(d) This Assignment and Acceptance may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA. The Assignor
and the Assignee each irrevocably submits to the non-exclusive jurisdiction of
any State or Federal court sitting in California over any suit, action or
proceeding arising out of or relating to this Assignment and Acceptance and
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in such California State or Federal court. Each party to
this Assignment and Acceptance hereby irrevocably waives, to the fullest extent
it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding.
(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE AGREEMENT, ANY RELATED
DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR
STATEMENTS (WHETHER ORAL OR WRITTEN).
[Other provisions to be added as may be negotiated between the
Assignor and the Assignee, provided that such provisions are not inconsistent
with the Agreement.]
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and
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delivered by their duly authorized officers as of the date first above written.
[ASSIGNOR]
By:
Title:
By:
Title:
Address:
[ASSIGNEE]
By:
Title:
By:
Title:
Address:
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122
SCHEDULE 1
NOTICE OF ASSIGNMENT AND ACCEPTANCE
_______________, 19__
Bank of America National Trust
and Savings Association, as Agent
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attn: Agency Management Services #5596
Dreyer's Grand Ice Cream, Inc.
5929 College Ave.
Oakland, CA 94618
Attn: Treasurer
Ladies and Gentlemen:
We refer to the Amended and Restated Credit Agreement dated as of December
13, 1994 (as amended, amended and restated, modified, supplemented or renewed
from time to time the "Agreement") among Dreyer's Grand Ice Cream, Inc. (the
"Company"), the Banks referred to therein and Bank of America National Trust and
Savings Association as agent for the Banks (the "Agent"). Terms defined in the
Agreement are used herein as therein defined.
1. We hereby give you notice of, and request your consent to, the
assignment by __________________ (the "Assignor") to _______________ (the
"Assignee") of _____% of the right, title and interest of the Assignor in and to
the Agreement (including, without limitation, the right, title and interest of
the Assignor in and to the Commitments of the Assignor[,] [and] all outstanding
Loans made by the Assignor) pursuant to the Assignment and Acceptance Agreement
attached hereto (the "Assignment and Acceptance"). Before giving effect to such
assignment the Assignor's Commitment is $ ___________[,] [and] the aggregate
amount of its outstanding Loans is $_____________.
2. The Assignee agrees that, upon receiving the consent of the Agent[, the
Issuing Bank] and, if applicable, Dreyer's Grand Ice Cream, Inc.to such
assignment, the Assignee will be bound by the terms of the Agreement as fully
and to the same extent as if the Assignee were the Bank originally holding such
interest in the Agreement.
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3. The following administrative details apply to the Assignee:
(A) Notice Address:
Assignee name: __________________________
Address: _______________________________
_______________________________
_______________________________
Attention: _____________________________
Telephone: (___) _______________________
Telecopier: (___) ______________________
(B) Payment Instructions:
Account No.: ___________________________
Address: ___________________________
___________________________
___________________________
Reference: ___________________________
Attention: ___________________________
Telephone: (___) _______________________
Telecopier: (___) ______________________
(C) Domestic Lending Office:
Address: ___________________________
___________________________
___________________________
Attention: ___________________________
Telephone: (___) _______________________
Telecopier: (___) ______________________
(D) Offshore Lending Office:
Address: ___________________________
___________________________
___________________________
Attention: ___________________________
Telephone: (___) _______________________
Telecopier: (___) ______________________
4. You are entitled to rely upon the representations, warranties and
covenants of each of the Assignor and Assignee contained in the Assignment and
Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Notice
of Assignment and Acceptance to be executed by
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their respective duly authorized officials, officers or agents as of the date
first above mentioned.
Very truly yours,
[NAME OF ASSIGNOR]
By:
Name:
Title:
By:
Name:
Title:
[NAME OF ASSIGNEE]
By:
Name:
Title:
By:
Name:
Title:
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
DREYER'S GRAND ICE CREAM, INC.
By:
--------------------------
Name:
Title:
By:
--------------------------
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By:
--------------------------
Name:
Title: Vice President
E-10
EX-11
6
COMPUTATION OF NET INCOME PER COMMON STOCK
1
EXHIBIT 11
DREYER'S GRAND ICE CREAM, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
(in thousands, except per share amounts)
Year Ended
----------------------------------------------------------
Dec. 31, 1994 Dec. 25, 1993 Dec. 26, 1992
------------- ------------- -------------
PRIMARY
Net income $ 1,001 $16,789 $15,694
Weighted average number of shares of common
stock outstanding 14,731 14,624 14,944
------- ------- -------
Net income per share, as reported $ .07 $ 1.15 $ 1.05
======= ======= =======
Weighted average number of shares of common
stock outstanding 14,731 14,624 14,944
Common stock equivalent--assumed exercise of
common stock options 99 148 247
------- ------- -------
Weighted average number of shares of common
stock outstanding, including common stock
equivalents 14,830 14,772 15,191
======= ======= =======
Net income per share $ .07(1) $ 1.14(1) $ 1.03(1)
======= ======= =======
FULLY DILUTED
Net income $ 1,001 $16,789 $15,694
Add interest expense on convertible subordinated
debentures issued June 1993, due June 2006 and
amortization of related issuance costs, net of tax 4,103 1,993
------- ------- -------
Adjusted net income $ 5,104 $18,782 $15,694
======= ======= =======
Weighted average number of shares of common
stock outstanding 14,731 14,624 14,944
Common stock equivalent--assumed exercise of
common stock options 105 204 247
Assumed conversion of debentures 2,900 1,426
------- ------- -------
Adjusted shares 17,736 16,254 15,191
======= ======= =======
Net income per share $ .29(2) $ 1.16(2) $ 1.03(1)
======= ======= =======
(1) This calculation is submitted in accordance with Regulation S-K item 601 (b) (11) although it is not required by
footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3%.
(2) This calculation is submitted in accordance with Regulation S-K item 601 (b) (11) although it is contrary to APB
Opinion No. 15 because it produces an anti-dilutive effect.
EX-13
7
PORTIONS OF 1994 ANNUAL REPORT
1
Exhibit 13
PORTIONS OF DREYER'S GRAND ICE CREAM, INC.
1994 ANNUAL REPORT TO STOCKHOLDERS
CONSOLIDATED STATEMENT OF INCOME
Year Ended
---------------------------------------------
($ in thousands, except per share amounts) Dec. 31, 1994 Dec. 25, 1993 Dec. 26, 1992
--------------------------------------------------------------------------------------------------------------------
Revenues:
Net sales $564,372 $470,665 $407,045
Other income 2,230 1,125 901
--------------------------------------------------------------------------------------------------------------------
566,602 471,790 407,946
--------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of goods sold 428,779 356,237 314,762
Selling, general and administrative 126,945 79,779 65,450
Interest, net of interest capitalized 9,243 7,803 5,233
--------------------------------------------------------------------------------------------------------------------
564,967 443,819 385,445
--------------------------------------------------------------------------------------------------------------------
Income before income taxes and cumulative effect of
change in accounting principle 1,635 27,971 22,501
Income taxes 634 11,182 8,528
--------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of change in accounting principle 1,001 16,789 13,973
Cumulative effect of change in method of accounting for income taxes 1,721
--------------------------------------------------------------------------------------------------------------------
Net income $ 1,001 $ 16,789 $ 15,694
====================================================================================================================
Net income per share:
Income before cumulative effect of change in accounting principle $ .07 $ 1.15 $ .94
Cumulative effect of change in method of accounting for income taxes .11
--------------------------------------------------------------------------------------------------------------------
Net income $ .07 $ 1.15 $ 1.05
====================================================================================================================
See accompanying Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Dreyer's Grand Ice Cream, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Dreyer's Grand Ice Cream, Inc. and its subsidiaries at December 31, 1994 and
December 25, 1993, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 6 to the consolidated financial statements, the Company
changed its method of accounting for income taxes effective as of the beginning
of fiscal 1992.
PRICE WATERHOUSE LLP
San Francisco, California
February 13, 1995
DREYER'S GRAND ICE CREAM, INC.
18
2
CONSOLIDATED BALANCE SHEET
($ in thousands, except per share amounts) Dec. 31, 1994 Dec. 25, 1993
----------------------------------------------------------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 6,334 $ 2,532
Trade accounts receivable, net of allowance for doubtful accounts
of $635 in 1994 and $535 in 1993 47,519 46,293
Other accounts receivable 6,243 5,326
Inventories 29,081 27,817
Prepaid expenses and other 9,657 8,256
----------------------------------------------------------------------------------------------------------------------------
Total current assets 98,834 90,224
Property, plant and equipment, net 160,322 142,275
Goodwill and distribution rights, net of accumulated amortization
of $10,443 in 1994 and $7,572 in 1993 87,825 72,988
Other assets 15,045 16,788
----------------------------------------------------------------------------------------------------------------------------
Total assets $362,026 $322,275
============================================================================================================================
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities $ 30,130 $ 21,893
Accrued payroll and employee benefits 15,801 9,249
Current portion of long-term debt 4,500 1,685
----------------------------------------------------------------------------------------------------------------------------
Total current liabilities 50,431 32,827
Long-term debt, less current portion 46,100 38,875
Convertible subordinated debentures 100,752 100,752
Deferred income 174
Deferred income taxes 28,822 26,613
----------------------------------------------------------------------------------------------------------------------------
Total liabilities 226,105 199,241
----------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $1 par value - 10,000,000 shares authorized;
no shares issued or outstanding in 1994 and 1993
Common stock, $1 par value - 30,000,000 shares authorized;
14,064,000 shares and 14,671,000 shares issued and
outstanding in 1994 and 1993, respectively 14,064 14,671
Capital in excess of par 75,257 59,145
Retained earnings 46,600 49,218
----------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 135,921 123,034
----------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $362,026 $322,275
============================================================================================================================
See accompanying Notes to Consolidated Financial Statements
DREYER'S GRAND ICE CREAM, INC.
19
3
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Common Stock Capital
-------------------- in Excess Retained
(In thousands) Shares Amount of Par Earnings Total
-----------------------------------------------------------------------------------------------------------------
Balance at December 28, 1991 15,367 $15,367 $54,030 $43,732 $113,129
Net income for 1992 15,694 15,694
Cash dividends declared (3,572) (3,572)
Repurchases and retirements
of common stock (971) (971) (19,058) (20,029)
Employee stock plans and other 167 167 2,299 (119) 2,347
-----------------------------------------------------------------------------------------------------------------
Balance at December 26, 1992 14,563 14,563 56,329 36,677 107,569
Net income for 1993 16,789 16,789
Cash dividends declared (3,513) (3,513)
Common stock issued as contingent
payment in acquisition of Cervelli
Distributors, Inc. 18 18 501 519
Employee stock plans and other 90 90 2,315 (735) 1,670
-----------------------------------------------------------------------------------------------------------------
Balance at December 25, 1993 14,671 14,671 59,145 49,218 123,034
Net income for 1994 1,001 1,001
Cash dividends declared (3,619) (3,619)
Common stock and warrants
issued to an affiliate of
Nestle USA, Inc. 3,000 3,000 99,487 102,487
Repurchases and retirements
of common stock (3,753) (3,753) (85,608) (89,361)
Employee stock plans and other 146 146 2,233 2,379
-----------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 14,064 $14,064 $75,257 $46,600 $135,921
=================================================================================================================
See accompanying Notes to Consolidated Financial Statements
DREYER'S GRAND ICE CREAM, INC.
20
4
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended
-------------------------------------------------
($ in thousands) Dec. 31, 1994 Dec. 25, 1993 Dec. 26, 1992
---------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 1,001 $16,789 $15,694
Adjustments to reconcile net income to cash provided from operations:
Depreciation and amortization 18,986 14,592 11,974
Deferred income taxes (420) 3,485 1,958
Deferred income (174) (94) (104)
Cumulative effect of change in method of accounting for income taxes (1,721)
Changes in assets and liabilities, net of amounts acquired:
Trade accounts receivable (711) (3,587) (6,690)
Other accounts receivable (917) 1,283 (234)
Inventories (684) (1,810) (2,286)
Prepaid expenses and other 1,237 (1,272) (683)
Accounts payable and accrued liabilities 1,056 6,451 3,477
Accrued payroll and employee benefits 6,547 872 448
---------------------------------------------------------------------------------------------------------------------------------
25,921 36,709 21,833
---------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Acquisition of property, plant and equipment (31,568) (34,036) (26,279)
Retirement of property, plant and equipment 547 399 94
Sales and maturities of investments 399
Increase in goodwill and distribution rights (556) (5,228) (4,161)
Purchase of distribution rights of Sunbelt Distributors, Inc. (11,321)
Purchase of certain assets of Calip Dairies, Inc. (22,360)
Increase in other assets, net (1,128) (511) (6,184)
---------------------------------------------------------------------------------------------------------------------------------
(44,026) (39,376) (58,491)
---------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Decrease in short-term bank borrowings (29,000) (4,000)
Proceeds from long-term debt 20,200 51,800 67,200
Reductions in long-term debt (10,160) (117,123) (6,600)
Proceeds from convertible subordinated debentures 100,752
Net proceeds from issuance of common stock
to an affiliate of Nestle USA, Inc. 102,487
Issuance of common stock under employee stock plans 2,379 1,670 1,569
Repurchases of common stock (89,361) (20,029)
Cash dividends paid (3,638) (3,506) (3,466)
---------------------------------------------------------------------------------------------------------------------------------
21,907 4,593 34,674
---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 3,802 1,926 (1,984)
Cash and cash equivalents, beginning of year 2,532 606 2,590
---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 6,334 $ 2,532 $ 606
=================================================================================================================================
Supplemental Acquisition Information:
Fair value of assets acquired $22,400
Cash paid (21,840)
---------------------------------------------------------------------------------------------------------------------------------
Liabilities assumed $ 560
=================================================================================================================================
Supplemental Cash Flow Information - cash paid during the year for:
Interest (net of amounts capitalized) $10,810 $ 6,360 $ 5,247
Income taxes (net of refunds) (2,264) 6,581 7,515
See accompanying Notes to Consolidated Financial Statements
DREYER'S GRAND ICE CREAM, INC.
21
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 OPERATIONS
Dreyer's Grand Ice Cream, Inc. and its subsidiaries (the Company) is a single
segment industry company engaged in the business of manufacturing and
distributing premium ice cream and other frozen dairy products.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
-------------
The consolidated financial statements include the accounts of Dreyer's Grand Ice
Cream, Inc. and its subsidiaries. All material intercompany transactions have
been eliminated in consolidation.
Fiscal Year
-----------
The Company's fiscal year is a fifty-two or fifty-three week period ending on
the last Saturday in December. Fiscal year 1994 consisted of fifty-three weeks
and fiscal years 1993 and 1992 each consisted of fifty-two weeks.
Financial Statement Presentation
--------------------------------
Certain reclassifications have been made to prior years' financial statements in
order to conform to the 1994 presentation.
Cash Equivalents
----------------
The Company classifies financial instruments as cash equivalents if the original
maturity of such investments is three months or less.
Inventories
-----------
Inventories are stated at the lower of cost (determined by the first-in,
first-out method) or market. Cost includes materials, labor and manufacturing
overhead.
Property, Plant and Equipment
-----------------------------
The cost of additions and major improvements and repairs are capitalized, while
maintenance and minor repairs are charged to expense as incurred. Depreciation
of fixed assets is computed using the straight-line method over the assets'
estimated useful lives. Interest costs relating to capital assets under
construction are capitalized.
Goodwill and Distribution Rights
--------------------------------
Goodwill and distribution rights are amortized using the straight-line method
over thirty-six years. At the end of each quarter, the Company reviews the
recoverability of goodwill and distribution rights to determine if there has
been any permanent impairment. This assessment is performed for each business
acquired and is based on the estimated undiscounted future cash flows from
operating activities compared with the carrying value of goodwill and
distribution rights. If the undiscounted future cash flows of an acquired
business are less than the carrying value, a write-down would be recorded
measured by the amount of the difference.
Product Formulations
--------------------
The cost of product formulations purchased from others is amortized using the
straight-line method over the period of minimum expected benefit, approximately
twelve years.
Advertising Costs
-----------------
The Company defers production costs for media advertising and expenses these
costs in the period the advertisement is first run. All other advertising costs
are expensed in the period incurred. Advertising expense, including consumer
promotion spending, was $40,287,000, $11,486,000 and $10,107,000 in 1994, 1993
and 1992, respectively.
Long-Term Debt and Convertible Subordinated Debentures
------------------------------------------------------
As of December 31, 1994 and December 25, 1993, the fair value of the Company's
long-term debt was estimated to be the same as the carrying amount. The fair
value was based on quoted market prices for the same or similar issues or on the
current rates offered to the Company for a term equal to the same remaining
maturities. It is not practicable to estimate the fair value of the convertible
subordinated debentures due to the unique terms and conditions of these
securities. (See Note 9.)
Income Taxes
------------
Effective as of the beginning of fiscal 1992, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109), on a prospective basis. SFAS 109 required the Company to change its method
of accounting for income taxes from the deferred method to the liability method.
Under the liability method, deferred tax liabilities and assets are recognized
for the tax consequences of temporary differences between the financial
reporting and tax basis of assets and liabilities. (See Note 6.)
DREYER'S GRAND ICE CREAM, INC.
22
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net Income Per Share
--------------------
Net income per share is computed using the weighted average number of shares of
common stock outstanding during the period which were 14,731,000, 14,624,000 and
14,944,000 for 1994, 1993 and 1992, respectively. The potentially dilutive
effect of the Company's convertible subordinated debentures and other common
stock equivalents was anti-dilutive for fiscal 1994 and 1993. Accordingly, fully
diluted net income per share for fiscal 1994 and 1993 is not presented. In 1992,
no potentially dilutive securities were outstanding.
NOTE 3 INVENTORIES
Inventories at December 31, 1994 and December 25, 1993 consisted of the
following:
(In thousands) 1994 1993
-----------------------------------------------------
Raw materials $ 3,153 $ 2,050
Finished goods 25,928 25,767
-----------------------------------------------------
$29,081 $27,817
=====================================================
NOTE 4 PROPERTY, PLANT AND EQUIPMENT
The cost and accumulated depreciation of property, plant and equipment at
December 31, 1994 and December 25, 1993 were as follows:
(In thousands) 1994 1993
-----------------------------------------------------
Buildings and improvements $ 64,913 $ 59,423
Machinery and equipment 118,958 102,215
Office furniture and fixtures 5,399 4,838
-----------------------------------------------------
189,270 166,476
Accumulated depreciation (64,254) (52,815)
-----------------------------------------------------
125,016 113,661
Land 11,019 9,555
Construction in progress 24,287 19,059
-----------------------------------------------------
$160,322 $142,275
=====================================================
Interest which was capitalized and included in property, plant and equipment
was $1,788,000, $1,271,000 and $609,000 in 1994, 1993 and 1992, respectively.
Depreciation expense for property, plant and equipment was $13,194,000,
$11,309,000 and $9,503,000 in 1994, 1993 and 1992, respectively.
Construction in progress in 1994 and 1993 included $19,265,000 and
$13,092,000, respectively, of costs associated with the enhancement of
management information systems.
NOTE 5 GOODWILL AND DISTRIBUTION RIGHTS
Distribution Rights Agreement
-----------------------------
On January 4, 1994, the Company entered into a long-term distribution agreement
with Sunbelt Distributors, Inc. (Sunbelt), the leading independent
direct-store-delivery ice cream distributor in Texas. Under the agreement, the
Company paid Sunbelt $10,970,000 in cash to secure the long-term exclusive right
to have its products distributed by Sunbelt in Texas and certain parts of
Louisiana and Arkansas. In conjunction with this transaction, the Company
recorded $11,321,000 in distribution rights, including $351,000 in transaction
costs.
Acquisitions
------------
On November 20, 1992, the Company purchased from Calip Dairies, Inc. (Calip)
certain assets for $21,840,000 in cash in a transaction accounted for as a
purchase. The assets acquired include the T&W premium ice cream brand and
Calip's supermarket direct-store distribution assets in the greater New York
metropolitan area. In conjunction with the purchase, the Company recorded
$18,341,000 in goodwill and distribution rights. In 1993, the Company paid
$3,000,000 in cash to satisfy a contingent payment required under the purchase
agreement.
DREYER'S GRAND ICE CREAM, INC.
23
7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following presents the unaudited pro forma results of operations as
though the acquisition had occurred at the beginning of the Company's 1992
fiscal year.
(In thousands, except per share amount) 1992
-----------------------------------------------------
Net sales $434,989
Income before cumulative effect of
change in accounting principle 15,578
Income per share before cumulative
effect of change in accounting principle 1.04
The pro forma information includes the results of operations for the Company and
the acquired Calip business for fiscal year 1992, adjusted primarily for
interest on the acquisition borrowings. This information does not purport to be
indicative of the results that would actually have been attained if the
acquisition had occurred on the date indicated or that may be attained in the
future.
NOTE 6 INCOME TAXES
Effective as of the beginning of fiscal 1992, the Company changed its method of
accounting for income taxes by adopting Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109), which requires the
liability method for computing income taxes. The cumulative effect of this
accounting change on fiscal years prior to 1992 increased net income for 1992 by
$1,721,000, or $.11 per share of common stock. The cumulative effect resulted
primarily from a reduction of the deferred tax liability to reflect income tax
rates in effect at the time of adoption. There was no material effect on
operating results for fiscal 1992.
SFAS 109 requires deferred tax effects previously recorded in the fair value
of assets acquired in a purchase acquisition be reclassified to deferred income
taxes. Accordingly, the tax effects of intangible assets for certain purchase
acquisitions prior to 1992 of $10,089,000 were reclassified to the deferred
income tax liability.
A federal income tax law enacted in 1993 increased the federal statutory
income tax rate by 1% as of the beginning of fiscal 1993. As a result, the
Company increased its deferred income tax provision by $600,000 in order to
record the effect of this tax rate increase on the prior years' deferred income
tax liability.
The provisions (benefits) for federal and state income taxes consisted of the
following:
(In thousands) 1994 1993 1992
-----------------------------------------------------
Current:
Federal $ 890 $ 6,110 $5,094
State 164 1,587 1,476
-----------------------------------------------------
1,054 7,697 6,570
-----------------------------------------------------
Deferred:
Federal (422) 2,943 1,958
State 2 542
-----------------------------------------------------
(420) 3,485 1,958
-----------------------------------------------------
$ 634 $11,182 $8,528
=====================================================
The deferred income tax liability as of December 31, 1994 and December 25,
1993 consisted of the following:
(In thousands) 1994 1993
-----------------------------------------------------
Intangible assets and
related amortization $12,541 $12,430
Depreciation 13,187 12,064
Deferred costs 2,968 1,998
Other 126 121
-----------------------------------------------------
$28,822 $26,613
=====================================================
The federal statutory income tax rate is reconciled to the Company's
effective income tax rate as follows:
1994 1993 1992
-----------------------------------------------------
Federal statutory income
tax rate 35.0% 35.0% 34.0%
State income taxes, net
of federal tax benefit 6.6 5.0 5.3
Effect of tax rate increase
on prior years' deferred
income taxes 2.1
Reversal of income taxes
provided in prior periods (1.4) (1.6)
Other (2.8) (0.7) 0.2
-----------------------------------------------------
38.8% 40.0% 37.9%
=====================================================
DREYER'S GRAND ICE CREAM, INC.
24
8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 EMPLOYEE BENEFIT PLANS
The Company maintains a defined contribution retirement plan for employees not
covered by collective bargaining agreements. The plan provides retirement and
other benefits based upon the assets of the plan held by the trustee. The
Company contributes 7% of the eligible participants' annual compensation to the
plan. The Company also maintains a salary deferral plan under which it may make
a matching contribution of a percentage of each participant's deferred salary
amount.
Pension expense and matching contributions under these plans were
approximately $5,776,000, $4,035,000 and $3,755,000 in 1994, 1993 and 1992,
respectively. The Company's liability for accrued pension contributions and
salary deferrals was $5,996,000 and $4,066,000 at December 31, 1994 and December
25, 1993, respectively.
Pension expense for employees covered by multi-employer retirement plans
under collective bargaining agreements was $677,000, $586,000 and $522,000 in
1994, 1993 and 1992, respectively.
NOTE 8 DESCRIPTION OF LEASING ARRANGEMENTS
The Company conducts certain of its operations from leased facilities, which
include land, buildings and production equipment, and leases certain vehicles.
All of these leases are classified as operating leases and expire over a period
of fifteen years including renewal options. Certain of these leases include
non-bargain purchase price options.
At December 31, 1994, the minimum rental payments required under
non-cancelable operating leases are as follows: 1995-$5,670,000;
1996-$3,637,000; 1997-$1,063,000; 1998-$895,000; 1999-$737,000 and $529,000
thereafter.
Rental expense for operating leases was $11,474,000, $9,804,000 and
$9,042,000 in 1994, 1993 and 1992, respectively.
NOTE 9 LONG-TERM DEBT AND CONVERTIBLE
SUBORDINATED DEBENTURES
Long-Term Debt
--------------
Long-term debt at December 31, 1994 and December 25, 1993 consisted of the
following:
(In thousands) 1994 1993
-------------------------------------------------------
Senior notes with principal due
1995 through 2001 and interest
payable semiannually at 9.3% $25,000 $25,000
Revolving line of credit with banks
due 1997 with interest payable
at four different rate options 20,200
Industrial revenue bonds with
principal due through 2001
and interest payable quarterly
at a floating rate based upon
a tax-exempt note index 5,400 6,300
Industrial revenue bonds with
principal due through 2008
and interest payable monthly
at a floating rate based upon
a tax-exempt note index 8,100
Other 1,160
-------------------------------------------------------
50,600 40,560
Less - current portion 4,500 1,685
-------------------------------------------------------
Total long-term debt $46,100 $38,875
=======================================================
The aggregate maturities of long-term debt during the next five years are as
follows: 1995-$4,500,000; 1996-$3,600,000; 1997-$23,800,000; 1998-$3,600,000;
and 1999-$3,600,000.
The Company's liability for accrued interest was $605,000 and $2,172,000 at
December 31, 1994 and December 25, 1993, respectively.
During 1993, the Company combined and increased its existing credit lines
with certain banks into a $125,000,000 revolving line of credit. Effective upon
the issuance of the convertible subordinated debentures discussed below, the
Company reduced the amounts outstanding under the line with the net proceeds
from
DREYER'S GRAND ICE CREAM, INC.
25
9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the debenture issue. At the time of the repayment, the Company's total
available line of credit was reduced to $50,000,000. During 1994, the Company
amended and restated the credit agreement increasing the available line to
$125,000,000. The expiration date of this credit line was extended to September
30, 1997. This line is available at four interest rate options which are defined
as the banks' certificate of deposit rate; offshore rate; same day funding rate,
plus an applicable margin; or the banks' reference rate. At December 31, 1994,
there was $20,200,000 of borrowings outstanding under the line.
Convertible Subordinated Debentures
-----------------------------------
In June 1993, the Company issued in a private placement $100,752,000 of
convertible subordinated debentures which are due June 30, 2001. The debentures
bear interest at 6-1/4% per annum, which is payable quarterly. Under certain
conditions, the debentures are convertible into redeemable convertible preferred
stock, due June 30, 2001. Additionally, the debentures, or the convertible
preferred stock, are convertible at an initial conversion price of $34.74 into a
total of 2,900,000 shares of common stock. The debentures, or convertible
preferred stock, can be called for early redemption after December 15, 1997
subject to certain limitations. The debentures are subordinated in right of
payment to all existing and future senior indebtedness of the Company.
The Company is subject to the requirements of various financial covenants,
including dividend restrictions, under its long-term debt obligations and the
convertible subordinated debentures.
NOTE 10 COMMON STOCK
The Company paid a regular quarterly dividend of $.06 per share of common stock
for each quarter of 1994, 1993 and 1992.
During 1987, the Board of Directors declared a dividend of one Preferred
Stock Purchase Right for each outstanding share of common stock. Under certain
conditions, the Rights become exercisable for the purchase of the Company's
preferred or common stock.
Nestle Equity Issuance
----------------------
On June 14, 1994, the Company completed a transaction (the Nestle Agreement)
with an affiliate of Nestle USA, Inc. (Nestle), whereby Nestle purchased
3,000,000 newly issued shares of common stock of the Company for $32 per share
and warrants to purchase an additional 2,000,000 shares at an exercise price of
$32 per share. Warrants for 1,000,000 shares will expire on June 14, 1997 and
warrants for the other 1,000,000 shares will expire on June 14, 1999. Nestle
paid an aggregate of $10,000,000 for the 2,000,000 warrants. Total proceeds from
the issuance of the initial 3,000,000 shares and the 2,000,000 warrants was
$106,000,000. In connection with the Nestle Agreement, the Company incurred
transaction costs of $3,513,000 which were recorded as a charge against capital
in excess of par.
The Company has the right to cause Nestle to exercise the warrants at $24 per
share subject to certain conditions at any time before June 14, 1997. The
Company also has the right to cause Nestle to exercise the warrants at any time
through the warrant expiration dates at $32 per share if the average trading
price of the common stock exceeds $60 during the 130 trading day period
preceeding the exercise, subject to certain conditions. Furthermore, if the
average trading price of the common stock equals or exceeds $60 during any 130
trading day period before June 14, 1999, Nestle will be required to pay an
additional $2 for each share previously purchased and each share purchased upon
exercise of the warrants.
In connection with the Nestle Agreement, the Company entered into an
agreement with Nestle Ice Cream Company to distribute Nestle's frozen novelty
and ice cream products in certain markets.
Common Stock Repurchases
------------------------
During 1994, the Company repurchased and retired 3,709,000 shares of its common
stock at prices ranging from $21.38 to $25.75 per share under a newly authorized
plan to repurchase up to 5,000,000 shares through open market purchases and
negotiated transactions. In addition, the Company repurchased and retired 44,000
shares of its common stock at prices ranging from $22.00 to $28.69 per share
from employees who previously acquired shares under employee stock plans. In
connection with these repurchases, commencing with the beginning of fiscal 1994,
the Company charged the excess over par value for shares repurchased to capital
in excess of par rather than the previous practice of charging the excess to
retained earnings. During 1992, the Company repurchased and retired 971,000
shares of its common stock at prices ranging from $17.50 to $23.00 per share
under a previous stock repurchase plan.
DREYER'S GRAND ICE CREAM, INC.
26
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 SIGNIFICANT CUSTOMERS
For fiscal years 1994, 1993 and 1992, no customer accounted for more than 10% of
consolidated net sales.
NOTE 12 EMPLOYEE STOCK PLANS
The Company has three stock option plans under which options may be granted for
the purchase of the Company's common stock at a price not less than 100% of the
fair market value at the date of grant. The incentive stock option plan (the
1982 Plan) provides that options are not exercisable until after two years from
the date of grant and generally expire six years from the date of grant. The
non-qualified stock option plan (the 1992 Plan) provides that options are not
exercisable until after two years from the date of grant and expire upon death
or termination of employment. In 1994, the stockholders approved a new stock
option plan (the 1993 Plan) under which granted options may be either incentive
stock options or non-qualified stock options. This plan provides that options
expire no later than ten years from the date of grant. This plan also provides
that most of the terms of the options, such as vesting, are within the
discretion of the compensation committee, comprised of certain members of the
Board of Directors of the Company. Changes in stock options under all three
plans in the aggregate were as follows:
Options
Available Options Options Price
(In thousands, except per share amounts) for Grant Outstanding Per Share
------------------------------------------------------------------------------------------------------------------
Balance, December 28, 1991 255 527 $6.78 to 30.25
Authorized 100
Granted (142) 142 19.50 to 29.25
Exercised (156) 6.78 to 14.44
Canceled 11 (11)
------------------------------------------------------------------------------------------------------------------
Balance, December 26, 1992 224 502 $6.78 to 30.25
Authorized 200
Granted (358) 358 24.75 to 30.13
Exercised (82) 6.78 to 14.44
------------------------------------------------------------------------------------------------------------------
Balance, December 25, 1993 66 778 $7.19 to 30.25
Authorized 1,200
Granted (387) 387 21.75 to 29.38
Exercised (99) 7.19 to 19.50
Canceled 12 (12)
------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 891 1,054 $9.63 to 30.25
==================================================================================================================
At December 31, 1994, options to purchase 305,000 shares of the Company's
common stock were exercisable.
The Company has two plans under which employees may purchase shares of the
Company's common stock; the section 423 employee stock purchase plan (the 423
Plan), and the employee secured stock purchase plan (the Secured Plan). Under
the 423 Plan, employees may authorize payroll deductions up to 10% of their
compensation for the purpose of acquiring shares at 85% of the market price
determined at the beginning of a specified twelve month period. Under this plan,
employees purchased 20,000 shares at prices ranging from $20.61 to $23.16 per
share in 1994; 25,000 shares at prices ranging from $16.69 to $29.75 per share
in 1993; and 8,000 shares at prices ranging from $22.95 to $24.01 per share in
1992. Under the Secured Plan, on specified dates, employees may purchase shares
at fair market value by paying 20% of the purchase price in cash and the
remaining 80% of the purchase price in the form of a non-recourse promissory
note with a term of 30 years. Under this plan, employees purchased 27,000 shares
at prices ranging from $24.25 to $25.13 per share in 1994; 10,000 shares at
prices ranging from $22.50 to $27.25 per share in 1993; and 13,000 shares at
prices ranging from $20.25 to $35.50 per share in 1992.
DREYER'S GRAND ICE CREAM, INC.
27
11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 CONTINGENCIES
The Company is engaged in various legal actions as both plaintiff and defendant.
Management believes that the outcome of these actions, either individually or in
the aggregate, will not have a material adverse effect on the Company's
financial position or results of operations.
NOTE 14 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Per Share
-------------------------
Net Net
Net Gross Income Income Price Range
(In thousands, except per share amounts) Sales Profit (Loss) (Loss) (NASDAQ)
------------------------------------------------------------------------------------------------------------------
1994
1st Quarter $112,001 $ 23,249 $ 1,582 $ .11 $21.50 - 29.50
2nd Quarter 147,727 38,068 (1,435) (.10) 21.25 - 28.25
3rd Quarter 168,704 45,058 2,260 .15 21.75 - 26.00
4th Quarter 135,940 29,218 (1,406) (.09) 24.25 - 28.25
------------------------------------------------------------------------------------------------
$564,372 $135,593 $ 1,001 $ .07
================================================================================================
1993
1st Quarter $102,317 $ 21,026 $ 2,118 $ .15 $19.75 - 25.75
2nd Quarter 123,486 32,562 6,875 .47 20.25 - 30.50
3rd Quarter 140,066 37,500 6,607 .45 25.00 - 31.50
4th Quarter 104,796 23,340 1,189 .08 27.00 - 31.25
------------------------------------------------------------------------------------------------
$470,665 $114,428 $16,789 $1.15
================================================================================================
Fully diluted net income per share for each quarter of 1994 and 1993 is equivalent to primary net income per share
since the potentially dilutive effect of the convertible subordinated debentures and other common stock equivalents
was anti-dilutive, except for the third quarter of 1993 when fully diluted net income was $.43 per share.
DREYER'S GRAND ICE CREAM, INC.
28
12
FIVE YEAR SUMMARY OF SIGNIFICANT FINANCIAL DATA
Fiscal Year Ended December
----------------------------------------------------------------
(In thousands, except per share amounts) 1994 1993 1992 1991 1990
-----------------------------------------------------------------------------------------------------------------
Operations:
Net sales and other income $566,602 $471,790 $407,946 $355,779 $309,938
Income before cumulative effect of
change in accounting principle 1,001 16,789 13,973 15,850 11,817
Net income 1,001 16,789 15,694(2) 15,850 11,817
Per Share:
Net income per share - fully diluted:
Income before cumulative effect of
change in accounting principle .07 1.15 .94 1.05 .84
Net income .07(1) 1.15(1) 1.05(1)(2) 1.05(1) .84
Dividends declared .24 .24 .24 .20 .17
Balance Sheet:
Total assets 362,026 322,275 289,051 224,042 179,776
Working capital 48,403 57,397 25,768 19,412 13,932
Long-term debt, including convertible
subordinated debentures 146,852 139,627 102,160 44,289 21,322
Stockholders' equity 135,921 123,034 107,569 113,129 93,856
(1) Fully diluted net income per share for 1994, 1993, 1992 and 1991 is equivalent to primary net income per share. In
1994 and 1993, the potentially dilutive effect of the convertible subordinated debentures and other common stock equivalents
was anti-dilutive and, in 1992 and 1991, no potentially dilutive securities were outstanding.
(2) Includes the cumulative effect of change in method of accounting for income taxes of $1,721,000, or $.11 per share.
(See Note 6 of Notes to Consolidated Financial Statements.)
DREYER'S GRAND ICE CREAM, INC.
29
13
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Fiscal 1994 Compared with Fiscal 1993
-------------------------------------
During the second quarter of 1994, the Company embarked on a five year plan to
accelerate the sales of its Company brands by greatly increasing its consumer
marketing efforts and expanding its distribution system into additional markets
(the Strategic Plan). Under the Strategic Plan, the Company increased the
amount of its spending for advertising and consumer promotion from $11,486,000
in 1993 to $40,287,000 in 1994, and plans to spend approximately $50,000,000
annually on these marketing activities from 1995 through 1998. In 1994, the
Company began selling its products for the first time in the Texas and New
England markets as well as in several cities in the southern United States. The
Company anticipates that the Strategic Plan will continue to materially reduce
earnings during the next twelve to eighteen month period below levels that
would have been attained under the former business plan. The potential benefits
of the new strategy are increased market share and future earnings above those
levels that would be attained in the absence of the strategy. The Company
believes that these benefits are not likely to impact its results until 1996 at
the earliest, and no assurance can be given that the anticipated benefits of
the strategy will be achieved. The success of the strategy will depend upon,
among other things, consumer responsiveness to the increased marketing
expenditures, competitors' activities and general economic conditions.
Consolidated net sales for 1994 increased 20% to $564,372,000 compared with
$470,665,000 in 1993. Sales of the Company's brands increased 22%. The increase
related primarily to higher unit sales of the Company's established products in
all markets due in part to substantially higher advertising and consumer
promotion spending under the Company's Strategic Plan. The products that led
this increase were Dreyer's and Edy's Frozen Yogurt and Dreyer's and Edy's
Grand Ice Cream, and to a lesser extent, the Company's new products. The effect
of price increases for the Company's brands was not significant. Sales of
products purchased from other manufacturers (partner brands) increased 12%, led
by Healthy Choice(R) low fat ice cream from ConAgra, Inc. Sales of partner
brands represented 34% of consolidated net sales as compared with 36% in 1993.
The effect of price increases for partner brands was not significant.
Cost of goods sold increased $72,542,000, or 20%, over 1993, while the
overall gross margin decreased slightly from 24.3% to 24.0%.
Selling, general and administrative expenses were $47,166,000, or 59%, higher
than in 1993. This increase related primarily to an increase in overall
marketing expenses of $40,501,000. Interest expense was $1,440,000, or 18%,
higher than in 1993 due primarily to the issuance of convertible subordinated
debentures in the third quarter of 1993. (See Note 9 of Notes to Consolidated
Financial Statements.)
The Company's income tax provision is explained in Note 6 of Notes to
Consolidated Financial Statements and differs from the tax provision calculated
at the federal statutory tax rate primarily due to state income taxes.
Fiscal 1993 Compared with Fiscal 1992
-------------------------------------
Consolidated net sales for 1993 increased 16% to $470,665,000 compared with
$407,045,000 in 1992. Sales of the Company's brands increased 27%. The increase
related primarily to higher unit sales of the Company's established products in
all markets and Dreyer's and Edy's Ice Cream Bars and Tropical Fruit Bars, which
were introduced in 1993; and Dreyer's and Edy's No Sugar Added Ice Cream. The
effect of price increases for the Company's brands was not significant. Sales of
partner brands remained constant and represented 36% of consolidated net sales
as compared with 42% in 1992. The effect of price increases for partner brands
was not significant.
Cost of goods sold increased $41,475,000, or 13%, over 1992, while the
overall gross margin increased from 22.7% to 24.3%. The higher margin was
primarily the result of proportionately higher sales of the Company's own
branded products, which carry a higher margin than partner brands and, to a
lesser extent, lower costs of materials for the Company's brands, offset in part
by higher distribution expenses.
Selling, general and administrative expenses were $14,329,000, or 22%, higher
than in 1992. This increase related primarily to an increase in overall
marketing expenses incurred in an effort to enhance the Company's long-term
competitive position. Interest expense was $2,570,000, or 49%, higher than in
1992 due primarily to the issuance of convertible subordinated debentures in the
third quarter of 1993. (See Note 9 of Notes to Consolidated Financial
Statements.)
DREYER'S GRAND ICE CREAM, INC.
30
14
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company's income tax provision differs from the tax provision calculated
at the federal statutory tax rate primarily due to state income taxes and the
effect of the federal tax rate increase on the prior years' deferred income tax
liability.
Fiscal 1992 Compared with Fiscal 1991
-------------------------------------
Consolidated net sales for 1992 increased 15% to $407,045,000 compared with
$354,918,000 in 1991. Sales of the Company's brands increased 10%. The increase
related primarily to higher unit volume in new markets and the introduction of
Dreyer's and Edy's No Sugar Added Ice Cream. The effect of price increases for
the Company's brands was not significant. Sales of partner brands increased 22%,
and represented 42% of consolidated net sales as compared with 39% in 1991. The
increase related to higher unit sales resulting primarily from increased volume
in established markets and, to a lesser extent, broader geographic distribution.
The effect of price increases for partner brands was not significant.
Cost of goods sold increased $43,951,000, or 16%, over 1991, while the
overall gross margin decreased from 23.7% to 22.7%. The lower margin was the
result of higher distribution expenses and proportionately higher sales of
partner brands, offset in part by income associated with the manufacturing of
certain partner brands.
Selling, general and administrative expenses were $10,050,000, or 18%, higher
than in 1991. This increase related primarily to increased promotion expenses
incurred in an effort to offset competitive and recessionary economic conditions
experienced during the year. Interest expense was $1,756,000, or 51%, higher
than in 1991 due to increased average bank borrowings and long-term debt, offset
in part by lower interest rates on amounts outstanding under the credit lines.
The Company's income tax provision differs from the tax provision calculated
at the federal statutory tax rate primarily due to state income taxes.
Effective as of the beginning of fiscal 1992, the Company changed its method
of accounting for income taxes by adopting Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," which requires the liability
method for computing income taxes. The cumulative effect of this accounting
change increased net income by $1,721,000, or $.11 per share of common stock.
(See Note 6 of Notes to Consolidated Financial Statements.)
Seasonality
-----------
The Company experiences more demand for its products during the spring and
summer than during the fall and winter. (See Note 14 of Notes to Consolidated
Financial Statements.)
Effects of Inflation and Changing Prices
----------------------------------------
Management believes that the effects of inflation and changing prices are
successfully managed, with both margins and earnings being protected through a
combination of cost control programs and productivity gains. The largest
component of the Company's cost of production is raw materials, principally
dairy products and sugar. Historically, the Company has been able to compensate
for any increases in the price level of these commodities through manufacturing
and distribution productivity gains. Other cost increases such as labor and
general and administrative costs have also been offset by productivity gains and
other operating efficiencies.
The Company believes that through careful management of the monetary elements
of working capital and due to lower inflation levels in recent years, the
Company has not experienced a significant negative impact of inflation on its
financial position or results of operations.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at December 31, 1994 was $8,994,000 lower than at year-end 1993
due primarily to increases in accounts payable and accrued liabilities, and
accrued payroll and employee benefits.
Working capital at December 25, 1993 was $31,629,000 higher than at year-end
1992 due primarily to the decrease in short-term bank borrowings.
DREYER'S GRAND ICE CREAM, INC.
31
15
MANAGEMENT'S DISCUSSION AND ANALYSIS
Working capital at December 26, 1992 increased $6,356,000 over year-end 1991
largely due to growth in trade accounts receivable and inventories, and
decreases in short-term bank borrowings, offset in part by increases in accounts
payable and accrued liabilities, and the current portion of long-term debt.
Refer to the Consolidated Statement of Cash Flows for the components of
increases and decreases in cash and cash equivalents for the three year period
ended December 31, 1994.
The Company's inventory is maintained at the same general level relative to
sales throughout the year by changing production and purchasing schedules to
meet demand. The ratio of inventory to sales typically does not vary
significantly from year to year.
On June 14, 1994, the Company completed a transaction with an affiliate of
Nestle USA, Inc., whereby Nestle purchased 3,000,000 newly issued shares of
common stock of the Company for $32 per share and warrants to purchase an
additional 2,000,000 shares at an exercise price of $32 per share. Total
proceeds from the issuance of the initial 3,000,000 shares and the 2,000,000
warrants was $106,000,000. (See Note 10 of Notes to Consolidated Financial
Statements.)
During 1994, the Company repurchased and retired 3,709,000 shares of its
common stock at prices ranging from $21.38 to $25.75 per share under a newly
authorized plan to repurchase up to 5,000,000 shares through open market
purchases and negotiated transactions. (See Note 10 of Notes to Consolidated
Financial Statements.)
On January 4, 1994, the Company entered into a long-term distribution
agreement with Sunbelt Distributors, Inc., the leading independent
direct-store-delivery ice cream distributor in Texas. On November 20, 1992, the
Company acquired certain assets from Calip Dairies, Inc. in a transaction
accounted for as a purchase. The funds used for this agreement and acquisition
were obtained from available cash and long-term debt. (See Note 5 of Notes to
Consolidated Financial Statements.)
In June 1993, the Company issued $100,752,000 of convertible subordinated
debentures, the net proceeds of which were used to reduce the Company's
long-term bank borrowings. (See Note 9 of Notes to Consolidated Financial
Statements.)
Capital expenditures for property, plant and equipment in 1995 are estimated
to be approximately $42,000,000, primarily for distribution and manufacturing
facilities and the enhancement of management information systems. It is
anticipated that these additions will be largely financed through internally
generated funds and borrowings. As of year-end 1994, the Company had $6,334,000
in cash and cash equivalents, and an unused credit line of $104,800,000. The
Company believes that its credit line, along with its liquid resources,
internally generated cash and financing capacity, are adequate to meet
anticipated operating and capital requirements.
DREYER'S GRAND ICE CREAM, INC.
32
EX-21
8
LIST OF SUBSIDIARIES
1
EXHIBIT 21
SUBSIDIARIES OF DREYER'S GRAND ICE CREAM, INC.
NAME JURISDICTION
---- ------------
Edy's Grand Ice Cream California
*Edy's of Illinois, Inc. Illinois
Dreyer's International, Inc. U.S. Virgin Islands
Polar Express Systems International, Inc. Kentucky
also conducts business under the name:
Grand Finance Corporation
* Subsidiary of Edy's Grand Ice Cream
EX-23
9
CONSENT OF INDEPENDENT ACCOUNTANTS
1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 (Nos. 33-7350,
33-8418, 33-35561, 33-36092, 33-40275, 33-56417, 33-56411 and 33-56413) of
Dreyer's Grand Ice Cream, Inc. of our report dated February 13, 1995 appearing
on page 18 of the 1994 Annual Report to Stockholders which is incorporated in
this Annual Report on Form 10-K. We also consent to the incorporation by
reference of our report on the Financial Statement Schedule, which appears on
page 18 of this Form 10-K.
PRICE WATERHOUSE LLP
San Francisco, California
March 24, 1995
EX-27
10
FINANCIAL DATA SCHEDULE
5
YEAR
DEC-31-1994
DEC-31-1994
6,334
0
48,154
(635)
29,081
98,834
224,576
(64,254)
362,026
50,431
146,852
14,064
0
0
121,857
362,026
564,372
566,602
428,779
428,779
125,273
1,672
9,243
1,635
634
1,001
0
0
0
1,001
.07
.07