-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IXVBK9NPScSPVKcByr1UAjRmLQGoL8qeT3AQ40eR2RoUQQbAp7oHVU+rpETHEy3z SEkwQYqPDlgBJWJxmZDrfQ== 0000922907-01-500141.txt : 20010814 0000922907-01-500141.hdr.sgml : 20010814 ACCESSION NUMBER: 0000922907-01-500141 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20010629 FILED AS OF DATE: 20010813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN ITALIAN PASTA CO CENTRAL INDEX KEY: 0000849667 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FOOD PREPARATIONS & KINDRED PRODUCTS [2090] IRS NUMBER: 841032638 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13403 FILM NUMBER: 1707592 BUSINESS ADDRESS: STREET 1: 4100 N MULBERRY DRIVE SUITE 200 CITY: KANSAS CITY STATE: MO ZIP: 64116 BUSINESS PHONE: 8165026000 MAIL ADDRESS: STREET 1: 4100 N MULBERRY DRIVE SUITE 200 CITY: KANSS CITY STATE: MO ZIP: 64116 10-Q 1 form10q_081301.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended: June 29, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-13403 American Italian Pasta Company (Exact name of Registrant as specified in its charter) Delaware 84-1032638 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4100 N. Mulberry Drive, Suite 200, Kansas City, Missouri 64116 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (816) 584-5000 - ------------------------------------------------------------------------------ (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the Registrant has (1) filed all documents and 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 [ ] The number of shares outstanding as of August 13, 2001 of the Registrant's Class A Convertible Common Stock was 17,548,312 and there were no shares outstanding of the Class B Common Stock. American Italian Pasta Company Form 10-Q Quarter Ended June 30, 2001 Table of Contents Part I - Financial Information Page Item 1. Financial Statements (unaudited) Consolidated Balance Sheets at June 30, 2001 and September 30, 2000. Consolidated Statements of Income for the three months ended June 30, 2001 and 2000. Consolidated Statements of Income for the nine months ended June 30, 2001 and 2000. Consolidated Statement of Stockholders' Equity for the nine months ended June 30, 2001. Consolidated Statements of Cash Flows for the nine months ended June 30, 2001 and 2000. Notes to Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Part II - Other Information Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K Signature Page AMERICAN ITALIAN PASTA COMPANY Consolidated Balance Sheets
June 30, September 30, 2001 2000 ---- ---- (In thousands) Assets (Unaudited) Current assets: Cash and temporary investments $10,281 $6,677 Trade and other receivables 33,601 27,479 Prepaid expenses and deposits 8,023 4,424 Inventory 35,165 28,390 Deferred income taxes 2,241 2,989 -------- -------- Total current assets 89,311 69,959 Property, plant and equipment: Land and improvements 8,123 7,159 Buildings 92,833 85,157 Plant and mill equipment 263,450 230,383 Furniture, fixtures and equipment 10,912 10,011 -------- -------- 375,318 332,710 Accumulated depreciation (75,887) (64,769) -------- -------- 299,431 267,941 Construction in progress 24,231 43,727 ------- -------- Total property, plant and equipment 323,662 311,668 Goodwill and other intangibles, net 47,042 -- Other assets 2,837 2,144 ------- ------- Total assets $462,852 $383,771 ========= ======== Liabilities and stockholders' equity Current liabilities: Accounts payable $ 18,829 $ 12,261 Accrued expenses 12,713 8,352 Income tax payable 874 841 Current maturities of long-term debt 1,552 1,564 -------- --------- Total current liabilities 33,968 23,018 Long-term debt 158,028 138,502 Deferred income taxes 33,101 23,847 Commitments and contingencies Stockholders' equity: Preferred stock, $.001 par value: Authorized shares - 10,000,000 -- -- Issued and outstanding shares - none Class A common stock, $.001 par value: Authorized shares - 75,000,000 19 18 Issued and outstanding shares - 19,154,076 and 17,499,095 at June 30, 2001 and 18,362,639 and 16,862,507 at September 30, 2000 Class B common stock, $.001 par value: Authorized shares - 25,000,000 -- -- Issued and outstanding shares - none Additional paid-in capital 200,888 177,725 Treasury stock (34,394) (31,362) Notes receivable from officers (61) (61) Retained earnings 75,662 54,233 Accumulated other comprehensive income (loss) (4,359) (2,149) -------- -------- Total stockholders' equity 237,755 198,404 ------- ------- Total liabilities and stockholders' equity $462,852 $383,771 ======== ========
See accompanying notes to consolidated financial statements. AMERICAN ITALIAN PASTA COMPANY Consolidated Statements of Income Three Months Ended June 30, 2001 2000 ---- ---- (In thousands) (Unaudited) Revenues $ 77,300 $ 60,622 Cost of goods sold 52,018 42,909 ------- ------- Gross profit 25,282 17,713 Selling and marketing expense 7,638 3,836 General and administrative expense 2,510 1,475 ------- ------- Operating profit 15,134 12,402 Interest expense, net 2,161 1,146 ------- ------- Income before income tax expense 12,973 11,256 Income tax expense 4,482 3,996 ------- ------- Net income $8,491 $7,260 ====== ====== Earnings Per Common Share: Net income per common share $ .49 $ .40 ===== ===== Weighted-average common shares outstanding 17,498 17,933 ======== ======== Earnings Per Common Share - Assuming Dilution: Net income per common share assuming dilution $ .46 $ .40 ===== ===== Weighted-average common shares outstanding 18,353 18,323 ========= ======== See accompanying notes to consolidated financial statements. AMERICAN ITALIAN PASTA COMPANY Consolidated Statements of Income Nine Months Ended June 30, 2001 2000 ---- ---- (In thousands) (Unaudited) Revenues $ 218,734 $ 183,728 Cost of goods sold 150,974 131,895 ------- ------- Gross profit 67,760 51,833 Selling and marketing expense 20,700 12,101 General and administrative expense 6,755 4,647 Provision for acquisition expenses 1,827 -- ------- ------- Operating profit 38,478 35,085 Interest expense, net 5,762 3,475 ------- ------- Income before income tax expense 32,716 31,610 Income tax expense 11,287 11,425 ------- ------- Net income $21,429 $20,185 ======= ======= Earnings Per Common Share: Net income per common share $ 1.23 $ 1.11 ====== ====== Weighted-average common shares outstanding 17,360 18,166 ========= ========= Earnings Per Common Share - Assuming Dilution: Net income per common share assuming dilution $ 1.19 $ 1.08 ====== ====== Weighted-average common shares outstanding 18,050 18,623 ========= ======== See accompanying notes to consolidated financial statements. AMERICAN ITALIAN PASTA COMPANY Consolidated Statement of Stockholders' Equity
Nine months ended June 30, 2001 -------------------- (In thousands) (unaudited) Class A Common Shares Balance, beginning of period 18,363 Issuance of shares of Class A Common stock to option holders & other issuances 791 -------- Balance, end of period 19,154 ======== Class A Common Stock Balance, beginning of period $ 18 Issuance of shares of Class A Common stock to option holders & other issuances 1 -------- Balance, end of period $ 19 ===== Additional Paid-in Capital Balance, beginning of period $ 177,725 Issuance of shares of Class A Common stock to option holders & other issuances 23,163 --------- Balance, end of period $ 200,888 ========= Treasury Stock Balance, beginning of period $ (31,362) Purchase of treasury stock (3,032) --------- Balance, end of period $ (34,394) ========== Notes Receivable from Officers Balance, beginning of period $ (61) Paydown of notes receivable from officers - --------- Balance, end of period $ (61) ========== Accumulated Other Comprehensive Income (Loss) Balance, beginning of period $(2,149) Foreign currency translation adjustment (940) Interest rate swaps fair value adjustment (1,270) ---------- Balance, end of period $(4,359) ======== Retained Earnings Balance, beginning of period $54,233 Net income 21,429 --------- Balance, end of period 75,662 --------- Total Stockholders' Equity $ 237,755 =========
See accompanying notes to consolidated financial statements. AMERICAN ITALIAN PASTA COMPANY Consolidated Statements of Cash Flows
Nine Months Ended June 30, 2001 2000 ---- ---- (In thousands) (Unaudited) Operating activities: Net income $21,429 $20,185 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 12,530 11,762 Deferred income tax 9,254 6,103 Changes in operating assets and liabilities, net of Mueller's Brand Acquisition: Trade and other receivables (5,566) (2,260) Prepaid expenses and deposits (3,604) (896) Inventory (2,946) (5,314) Accounts payable and accrued expenses 4,791 (4,979) Income tax payable 719 1,576 Other (1,445) (1,657) -------- -------- Net cash provided by operating activities 35,162 24,520 Investing activities: Purchase of Mueller's brand pasta business (23,816) -- Additions to property, plant and equipment (25,284) (46,907) -------- -------- Net cash used in investing activities (49,100) (46,907) Financing activities: Additions to deferred debt issuance costs -- (718) Proceeds from issuance of debt 24,000 37,578 Principal payments on debt and capital lease obligations (3,114) (1,080) Proceeds from issuance of common stock, net of issuance costs 1,809 1,291 Purchases of Treasury Stock (3,032) (16,428) Other -- 9 -------- -------- Net cash provided by financing activities 19,663 20,652 Effect of exchange rate changes on cash (2,121) -- -------- -------- Net increase (decrease) in cash and temporary investments 3,604 (1,731) Cash and temporary investments at beginning of period 6,677 3,088 -------- -------- Cash and temporary investments at end of period $10,281 $1,357 ======= ======
See accompanying notes to consolidated financial statements. AMERICAN ITALIAN PASTA COMPANY Notes to Consolidated Financial Statements June 30, 2001 1. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine-month periods ended June 30, 2001 are not necessarily indicative of the results that may be expected for the year ended September 30, 2001. These financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto and management's discussion and analysis thereof included in the Company's Annual Report on Form 10-K for the year ended September 29, 2000 and management's discussion and analysis included in Item 2 hereof. American Italian Pasta Company (the "Company" or "AIPC") uses a 52/53 week financial reporting cycle with a fiscal year which ends on the last Friday of September or the first Friday of October. The Company's first three fiscal quarters end on the Friday last preceding December 31, March 31, and June 30 or the first Friday of the following month. For purposes of this Form 10-Q, the third fiscal quarter of fiscal years 2001 and 2000 both included thirteen weeks of activity and are described as the three month periods ended June 30, 2001 and 2000. 2. Earnings Per Share Dilutive securities, consisting of options to purchase the Company's Class A common stock, included in the calculation of diluted weighted average common shares were 855,000 and 690,000 shares for the three-month and nine-month periods ended June 30, 2001, respectively, and 390,000 and 457,000 shares for the three-month and nine-month periods ended June 30, 2000, respectively. A summary of the Company's stock option activity: Number of Shares Outstanding at September 30, 2000 2,588,524 Exercised (83,276) Granted 76,650 Canceled/Expired (21,676) --------- Outstanding at June 30, 2001 2,560,222 ========= 3. 2000 Equity Incentive Plan In December 2000, the Board of Directors adopted the 2000 Equity Incentive Plan for all employees. The Plan was subsequently approved by shareholders at the February 2001 Shareholder Meeting. Under the Plan, the Board or a committee designated by the Board is authorized to grant nonqualified stock options, incentive stock options, stock appreciation rights, shares of restricted Common Stock, performance shares, performance units, and shares of Common Stock awarded as a bonus. There are 1,000,000 shares of Common Stock reserved for issuance under the Plan. 4. Derivatives and Hedging Activities In June 1998, the Financial Accounting Standards Board issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, and its amendments Statements 137 and 138, in June 1999 and June 2000, respectively. The Statement requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change in fair value of assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. No such amount was recorded for the nine months ended June 30, 2001. The adoption of Statement No. 133, as amended, on October 1, 2000, resulted in a charge of $1,270,000 to other comprehensive income (loss). 5. Stock Repurchase During the nine months ended June 30, 2001, the Company purchased 154,849 shares of its common stock for $3,032,000. Total shares held in treasury as of June 30, 2001 were 1,654,981 and 722,432, respectively. 6. Purchase of Mueller's Brand Pasta Business On November 13, 2000, the Company purchased the Mueller's brand pasta business from Bestfoods. Mueller's is one of the largest pasta brands in the United States, with particularly strong distribution in the eastern part of the country. The acquisition encompassed the trademarks and goodwill associated with the brand, the customer accounts and relationships, and certain tangible assets, primarily inventory. Total consideration for the purchased assets, excluding approximately $5.2 million paid for tangible assets, was approximately $38.2 million, consisting of $17.6 million in cash and 686,666 shares of common stock valued at $30 per share. The acquisition has been accounted for as a purchase. The proforma financial results are not materially different than the reported results. 7. Subsequent Events On July 16, 2001 the Company purchased seven pasta brands from Borden Foods for $67.5 million, plus inventory, in a cash transaction. The Company acquired the Anthony's(R), Globe/A-1(R), Luxury(R), Mrs. Grass(R), Pennsylvania Dutch(R), R&F(R), and Ronco(R) brands, in addition to certain tangible assets. No manufacturing assets were included in the transaction. To assure the Borden pasta brands business value is protected and successfully transitioned to AIPC, Borden's has agreed, for up to 60 days after closing, to provide the Company certain transition services. The Company has agreed to honor Borden's marketing commitments through December, 2001; therefore, any major strategic changes to the business will not occur until the second quarter of the Company's fiscal year 2002. The acquisition has been accounted for as a purchase, and, accordingly, the purchase price was allocated to the net tangible and intangible assets acquired based on estimated fair values at the acquisition date. In conjunction with the acquisition, The Company secured a new five-year, $300 million revolving credit facility to replace the Company's previous $190 million facility. The revolver includes $100 million of dual currency availability in Euros or U.S. dollars to finance the Company's international business in Italy. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The discussion set forth below, as well as other portions of this Quarterly Report, contains statements concerning potential future events. Such forward-looking statements are based upon assumptions by the Company's management, as of the date of this Quarterly Report, including assumptions about risks and uncertainties faced by AIPC. Readers can identify these forward-looking statements by their use of such verbs as expects, anticipates, believes or similar verbs or conjugations of such verbs. If any management assumptions prove incorrect or should unanticipated circumstances arise, our actual results could materially differ from those anticipated by such forward-looking statements. The differences could be caused by a number of factors, included but not limited to our dependence on a limited number of customers for a substantial portion of our revenue, our ability to manage rapid growth, our ability to obtain necessary raw materials and minimize fluctuations in raw material prices, the impact of the highly competitive environment in which we operate, reliance exclusively on a single product category, increased branded retail pasta business where we have relatively little experience, our limited personnel, our ability to cost-effectively transport our products and the significant risks inherent in our recent international expansion. For additional discussion of the principal factors that could cause actual results to be materially different, refer to our Annual Report on Form 10-K dated December 22, 2000, filed by the Company with the Securities and Exchange Commission, any amendments thereto and other matters disclosed in the Company's other public filings. This report has been filed with the Securities and Exchange Commission (the "SEC" or the "Commission") in Washington, D.C. and can be obtained by contacting the SEC's public reference operations or obtaining it through the SEC's web site on the World Wide Web at http://www.sec.gov. Readers are strongly encouraged to consider those factors when evaluating any such forward-looking statement. We will not update any forward-looking statements in this Quarterly Report to reflect future events or developments. Results of Operations Third quarter fiscal 2001 compared to third quarter fiscal 2000. Revenues. Total revenues increased $16.7 million, or 27.5%, to $77.3 million for the three-month period ended June 30, 2001, from $60.6 million for the three-month period ended June 30, 2000. The increase for the three-month period ended June 30, 2001 was primarily due to higher volumes and higher per unit selling prices associated with the Mueller's brand pasta business acquisition (Mueller's acquisition). Volumes were up 21.0% over the prior year. Volume growth was led by private label (+31.0%) and ingredient (+66.3%). For the remainder of the 2001 year, in addition to volume growth, average prices will be higher due to the Mueller's acquisition and higher durum prices resulting in cost pass-throughs. Volume associated with the Mueller's brand was down 14.4% from the year ago quarter. The Mueller's brand went through a significant transition in the quarter - we introduced new packaging, new prices, and a new line of "Made in Italy" products. The impact of the Mueller's volume decline on revenue and profits was not significant as evidenced by the financial results during the quarter. We expect volume trends to improve in the remainder of fiscal year 2001 as a result of our re-launch and increased trade marketing activity. Excluding the Mueller's brand, volumes were 34.7% higher than the third quarter of last year. Revenues for the Retail market increased $10.5 million, or 23.5%, to $55.0 million in the current period, compared to $44.5 million for the three-month period ended June 30, 2000. The increase primarily reflects volume growth of 10.6% and higher per unit selling prices, primarily due to the Mueller's acquisition. Year over year, excluding Mueller's, our volume was up 27.5%. Revenues for the Institutional market increased $6.2 million, or 38.6%, to $22.3 million for the three-month period ended June 30, 2001, from $16.1 million for the three-month period ended June 30, 2000. This increase was primarily a result of ingredient volume growth of 66.3%, along with 9.4% volume growth in our foodservice business partially offset by lower contract volumes. Gross Profit. Gross profit increased $7.6 million, or 42.7%, to $25.3 million for the three-month period ended June 30, 2001, from $17.7 million for the three-month period ended June 30, 2000. This increase was primarily attributable to revenue growth associated with increased volumes and the higher per unit selling prices of Mueller's products. These increases were partially offset by higher raw material and packaging costs. Gross profit as a percentage of revenues increased to 32.7% for the three-month period ended June 30, 2001, from 29.2% for the three-month period ended June 30, 2000. The increase in gross profit as a percentage of revenues relates to incremental gross profit on Mueller's products subsequent to the acquisition. For the remainder of the 2001 year, we expect increases in gross profit and gross profit percentage to continue as a result of the factors listed above. Selling and Marketing Expense. Selling and marketing expense increased $3.8 million, or 99.1%, to $7.6 million for the three-month period ended June 30, 2001, from $3.8 million for the three-month period ended June 30, 2000. Selling and marketing expense as a percentage of revenues increased to 9.9% for the three-month period ended June 30, 2001, from 6.3% for the comparable prior year period. This increase was primarily due to higher marketing costs associated with higher retail revenues, as well as the incremental marketing and personnel costs associated with the Mueller's acquisition. Going forward, we expect selling and marketing expenses to exceed 10% of net revenues due to the additional promotional expenses associated with the branded retail business. General and Administrative Expense. General and administrative expense increased $1.0 million, or 70.2%, to $2.5 million for the three-month period ended June 30, 2001, from $1.5 million for the comparable prior year period. General and administrative expense as a percentage of revenues increased to 3.2% from 2.4%. The majority of the increase relates to personnel and goodwill amortization costs associated with the Mueller's acquisition. Operating Profit. Operating profit for the three-month period ended June 30, 2001, was $15.1 million, an increase of $2.7 million or 22.0% over the $12.4 million reported for the three-month period ended June 30, 2000, and decreased as a percentage of revenues to 19.6% for the three-month period ended June 30, 2001, from 20.5% for the three-month period ended June 30, 2000, as a result of the factors discussed above. Interest Expense. Interest expense for the three-month period ended June 30, 2001, was $2.2 million, increasing $1.0 million from the $1.1 million reported for the three-month period ended June 30, 2000. The increase related to borrowings associated with the Mueller's acquisition, the stock repurchase program completed in the first quarter, and capital expenditures. These activities were partially funded by cash flow from operations. Income Tax. Income tax expense for the three-month period ended June 30, 2001, was $4.5 million, increasing $0.5 million from the $4.0 million reported for the three-month period ended June 30, 2000, and reflects an effective income tax rate of approximately 34.5% and 35.5%, respectively. Net Income. Net income for the three-month period ended June 30, 2001, was $8.5 million, increasing $1.2 million or 17.0% from the $7.3 million reported for the three-month period ended June 30, 2000. Net income as a percentage of revenues was 11.0% compared with 12.0% for the same period of 2000. Diluted earnings per share were $0.46 per share for the three-month period ended June 30, 2001 compared to $0.40 per share in the comparable prior year period, representing an increase of 15.0%. Nine months fiscal 2001 compared to nine months fiscal 2000. Revenues. Revenues increased $35.0 million, or 19.1%, to $218.7 million for the nine-month period ended June 30, 2001, from $183.7 million for the nine-month period ended June 30, 2000. The increase for the nine-month period ended June 30, 2001 was primarily due to higher volumes and higher per unit selling prices associated with the Mueller's acquisition. Volumes were up 12.0% over the prior year period, but were up 23.6% when excluding Mueller's. Volume growth was led by private label (+28.1%) and ingredient (+36.9%). Revenues for the Retail market increased $23.6 million, or 17.9%, to $155.5 million for the nine-month period ended June 30, 2001, from $131.9 million for the nine-month period ended June 30, 2000. The increase primarily reflects volume growth of 4.4% and higher per unit selling prices, primarily due to the Mueller's acquisition. Revenues for the Institutional market increased $11.4 million, or 22.0%, to $63.3 million for the nine-month period ended June 30, 2001, from $51.9 million for the nine-month period ended June 30, 2000. This increase was primarily due to volume growth in the ingredient market of 36.9%, offset by lower contract volumes. Gross Profit. Gross profit increased $15.9 million, or 30.7%, to $67.8 million for the nine-month period ended June 30, 2001, from $51.8 million for the nine-month period ended June 30, 2000. This increase was primarily attributable to revenue growth associated with increased volumes and the higher per unit selling prices of Mueller's products. These increases were partially offset by higher raw material and packaging costs. Gross profit as a percentage of revenues increased to 31.0% for the nine-month period ended June 30, 2001 from 28.2% for the nine-month period ended June 30, 2000. The increase in gross profit as a percentage of revenues relates primarily to incremental gross profit on Mueller's products subsequent to the acquisition. Selling and Marketing Expense. Selling and marketing expense increased $8.6 million, or 71.1%, to $20.7 million for the nine-month period ended June 30, 2001, from $12.1 million for the nine-month period ended June 30, 2000. Selling and marketing expense as a percentage of revenues was 9.5% for the nine-month period ended June 30, 2001, up from 6.6% for the comparable prior year period. This increase was primarily due to higher marketing costs associated with higher retail revenues as well as incremental marketing and personnel costs associated with the Mueller's acquisition. General and Administrative Expense. General and administrative expense increased $2.1 million, or 45.4%, to $6.8 million for the nine-month period ended June 30, 2001, from $4.6 million for the comparable prior year period. General and administrative expense as a percentage of revenues was 3.1% for the nine-month period ended June 30, 2001, up from 2.5% for the comparable prior year period. The majority of the increase relates to personnel and good will amortization costs associated with the Mueller's acquisition. Provision for Acquisition Related Expenses. The provision for acquisition related expense of $1.8 million for the nine-month period ended June 30, 2001 consisted of one-time costs associated with the Mueller's acquisition. Operating Profit. Operating profit for the nine-month period ended June 30, 2001, was $38.5 million, an increase of $3.4 million or 9.7% over the $35.1 million reported for the nine-month period ended June 30, 2000, and decreased as a percentage of revenues to 17.6% for the nine-month period ended June 30, 2001, from 19.1% for the nine-month period ended June 30, 2000 as a result of the factors discussed above. Interest Expense. Interest expense for the nine-month period ended June 30, 2001, was $5.8 million, increasing $2.3 million from the $3.5 million reported for the nine-month period ended June 30, 2000. The increase is related to borrowings associated with the Mueller's acquisition, the stock repurchase program, and capital expenditures. These activities were partially funded by cash flow from operations. Income Tax. Income tax expense for the nine-month period ended June 30, 2001, was $11.3 million, decreasing $0.1 million from the $11.4 million reported for the nine-month period ended June 30, 2000, and reflects an effective income tax rate of approximately 34.5% and 36.1%, respectively. Net Income. Net income for the nine-month period ended June 30, 2001, was $21.4 million, increasing $1.2 million or 6.2% from the $20.2 million reported for the nine-month period ended June 30, 2000. Diluted earnings per common share were $1.19 per share for the nine-month period ended June 30, 2001 compared to $1.08 per share for the nine-month period ended June 30, 2000. Financial Condition and Liquidity Our primary sources of liquidity are cash provided by operations and borrowings under our credit facility. Cash and temporary investments totaled $10.3 million, and net working capital totaled $55.3 million at June 30, 2001. Our net cash provided by operating activities totaled $35.2 million for the nine-month period ended June 30, 2001 compared to $24.5 million for the nine-month period ended June 30, 2000. The increase in the net cash provided by operations was due to lower working capital requirements and final payments under the Bestfoods Supply Agreement. Cash used in investing activities principally relates to the purchase of the Mueller's brand pasta business and our investments in manufacturing, distribution and milling assets. Capital expenditures were $25.3 million for the nine-month period ended June 30, 2001 compared to $46.9 million in the comparable prior fiscal year period. The primary decrease in such spending for the nine-month period ended June 30, 2001 was related to significant capital expenditures a year ago for our new Italian manufacturing facility. Additionally, we plan to spend approximately $15.0 million in the remainder of fiscal year 2001, primarily for cost saving projects, maintenance projects, and capacity expansion projects. We anticipate completion of these projects during the year ending September 30, 2001. Net cash provided by financing activities was $19.7 million for the nine-month period ended June 30, 2001 compared to net cash provided of $20.7 million for the nine-month period ended June 30, 2000. The $19.7 million in 2001 is the result of borrowings to fund the Mueller's acquisition and capital expansion programs. We currently use cash to fund capital expenditures, repayments of debt, and working capital requirements. We expect that future cash requirements will continue to be principally for capital expenditures, repayments of indebtedness, and working capital requirements. We have current commitments for $15.2 million in raw material purchases for fiscal year 2001 and 2002. Additionally, we have approximately $15.0 million in expenditures remaining under the previously referenced capital programs. We expect to fund these commitments from operations and borrowings under our credit facility. The credit facility currently has available a credit of approximately $80 million. At this time, the current and projected borrowings under the credit facility do not exceed the facility's available commitment. On July 16, 2001, we secured a new five-year, $300 million revolving credit facility to replace the previous $190 million facility. The revolver includes $100 million of dual currency availability in Euros or U.S. dollars to finance our international business in Italy. We believe that net cash provided by operating and financing activities will be sufficient to meet our expected capital and liquidity needs for the foreseeable future. Recently Issued Accounting Pronouncements In June 2001, the Financial Accounting Standards Board (FASB) issued Statement No. 141, "Business Combinations", and Statement No. 142, "Goodwill and Other Intangible Assets". Statement No. 141 supercedes the Accounting Principles Board (APB) Opinion No. 16, "Business Combinations", and FASB Statement No. 38, "Accounting for Pre-acquisition Contingencies of Purchased Enterprises". This statement states that all business combinations are to be accounted for using one method-the purchase method. This statement is effective for all business combinations initiated after June 30, 2001 and is not expected to have a material impact on the Company's consolidated financial statements. Statement No. 142 supercedes APB Opinion No. 17, "Intangible Assets" and addresses how intangible assets that are acquired outside of a business combination should be accounted for upon their acquisition. The statement also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. The main impact of this statement to the Company is that goodwill will no longer be amortized. It will be subject to periodic impairment testing and will be adjusted to fair value. This statement is effective for fiscal years beginning after December 15, 2001. The Company is currently in the process of the initial impairment tests under the guidelines of this statement and expects to complete this analysis by the first quarter 2002. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our principal exposure to market risk associated with financial instruments relates to interest rate risk associated with variable rate borrowings and foreign currency exchange rate risk associated with borrowings denominated in foreign currency. We occasionally utilize simple derivative instruments such as interest rate swaps to manage our mix of fixed and floating rate debt. We had various fixed interest rate swap agreements with notional amounts of $34 million and 40 million Euros outstanding at June 30, 2001. The estimated fair value of the interest rate swap agreements of $(1,270,000) is the amount we would be required to pay to terminate the swap agreements at June 30, 2001. We hedge our net investment in our foreign subsidiaries with euro borrowings under our credit facility. Changes in the U.S. dollar equivalent of euro-based borrowings is recorded as a component of the net translation adjustment in the consolidated statement of stockholder's equity. The functional currency for our Italy operation is the Euro. At June 30, 2001, long-term debt includes obligations of 62.7 million Euros ($57.4 million) under a credit facility which bears interest at a variable rate based upon the Euribor rate. PART II - OTHER INFORMATION Item 1. Legal Proceedings - ------------------------------- Not applicable Item 2. Changes in Securities - ------------------------------- Not applicable Item 3. Defaults Upon Senior Securities - ------------------------------- Not applicable Item 4. Submission of Matters to a Vote of Security Holders - ------------------------------- Not applicable Item 5. Other Information - ------------------------------- Not applicable Item 6. Exhibits and Reports on Form 8-K - ------------------------------- (a) Exhibits. 1. Employment Agreement between Willard Matthew Duffield, Jr. and American Italian Pasta Company, effective February 12, 2001. 2. Asset Purchase Agreement dated June 1, 2001, by and among Borden Foods Corporation, BFC Investments, L.P., BF Foods International Corporation and American Italian Pasta Company. 3. Amendment No. 1, dated July 13, 2001 to Asset Purchase Agreement, dated June 1, 2001. 4. Credit Agreement, dated July 16, 2001, among American Italian Pasta Company, various Financial Institutions, Firststar Bank, N.A., as Syndication Agent, Bank One, NA, as Documentation Agent, Credit Agricole Indosuez, Fleet National Bank, Keybank National Association, Cooperative Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New York Branch, Wachovia Bank, N.A., and Wells Fargo Bank, N.A., as Co-Agents, and Bank of America N.A., as Administrative Agent, Bank of America Securities LLC, Sole Lead Arranger and Sole Book Manager. 5. American Italian Pasta Company 2000 Equity Incentive Plan, as amended. (b) Reports on Form 8-K. We filed a Form 8-K on June 5, 2001 announcing that we entered into a Definitive Agreement to acquire seven regional pasta brands from Borden Foods. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. American Italian Pasta Company August 13, 2001 /S/ Timothy S. Webster - ---------------------------- ------------------------------ Date Timothy S. Webster President and Chief Executive Officer (Principal Executive Officer) August 13, 2001 /S/ Warren B. Schmidgall - ------------------------- ------------------------------------ Date Warren B. Schmidgall Executive Vice President and Chief Financial Officer EXHIBIT INDEX Exhibit No. Description - ----------- ------------------------------------ 10.1 Employment Agreement between Willard Matthew Duffield, Jr. and American Italian Pasta Company, effective February 12, 2001. 10.2 Asset Purchase Agreement dated June 1, 2001, by and among Borden Foods Corporation, BFC Investments, L.P., BF Foods International Corporation and American Italian Pasta Company. 10.3 Amendment No. 1, dated July 13, 2001 to Asset Purchase Agreement, dated June 1, 2001. 10.4 Credit Agreement, dated July 16, 2001, among American Italian Pasta Company, various Financial Institutions, Firststar Bank, N.A., as Syndication Agent, Bank One, NA, as Documentation Agent, Credit Agricole Indosuez, Fleet National Bank, Keybank National Association, Cooperative Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New York Branch, Wachovia Bank, N.A., and Wells Fargo Bank, N.A., as Co-Agents, and Bank of America N.A., as Administrative Agent, Bank of America Securities LLC, Sole Lead Arranger and Sole Book Manager. 10.5 American Italian Pasta Company 2000 Equity Incentive Plan, as amended. EX-10.1 3 exh101_081301.txt EXHIBIT 10.1 W. MATTHEW DUFFIELD, JR. EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement"), effective February 12, 2001, is by and between AMERICAN ITALIAN PASTA COMPANY, a Delaware corporation ("Employer"), and WILLARD MATTHEW DUFFIELD, JR., an individual ("Employee") (collectively "the parties") and supersedes any and all prior oral or written agreements between the parties with respect to the subject matter hereof. WITNESSETH: WHEREAS, Employer is engaged in the business of durum wheat milling and pasta production/marketing; and WHEREAS, in connection with such business, Employer desires to employ Employee in the capacity of Senior Vice President (AIPC), International Operations and Managing Director (IAPC), and that Employee serve as a member of the Italian American Pasta Company Board of Directors; and WHEREAS, Employee desires to be employed by Employer in the aforesaid capacities. NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows: 1. Term of Employment. Subject to the provisions of Section 7 hereof, the term of Employee's employment under this Agreement (the "Initial Employment Term") will commence as of the date hereof (the "Effective Date") and terminate on the third anniversary of the Effective Date of this Agreement, provided, however, that the term of Employee's employment shall be extended automatically for successive one-year periods unless, not later than six months prior to such automatic extension, Employer shall have given written notice to the contrary (each an "Additional Term"). The period of time between the Effective Date and the termination of the Initial Employment Term or the last Additional Term, if any, is referred to herein as the "Employment Term." 2. Duties of Employee. 2.1 In accepting such employment, Employee shall undertake and assume the responsibility of performing for and on behalf of Employer such duties as shall be assigned to Employee by Employer at any time and from time to time. It is understood and agreed that Employee's principal duties on behalf of Employer at the date of execution hereof are and shall be overall responsibility for Employer's International Operations and it is further understood and agreed that any modification in or expansion of Employee's duties hereunder shall not, unless specifically agreed to by Employee and Employer in a duly-executed amendment of this Agreement in accordance with Section 10.6 hereof, result in any modification in Employee's compensation referred to in Section 3 hereof. 2.2 Employee will to the reasonable satisfaction of Employer at all times faithfully, industriously, and to the best of his ability, experience, and talents perform all of the duties that may be required of and from Employee pursuant to the express and implicit terms hereof. 2.3 Employee shall devote substantially all of his professional time, attention, knowledge, and skills solely to the business and interests of Employer; provided, however, that Employee shall be entitled annually to three (3) weeks vacation, and Employer shall be entitled to all of the benefits, profits, and other issues arising from or incident to all professional work, services, and advice of Employee. 3. Compensation. Employer shall pay Employee, and Employee shall accept from Employer, in payment for Employee's services rendered to Employer hereunder an annual base salary ("Base Salary") equal to One Hundred Forty Thousand Dollars ($140,000.00). Such Base Salary shall be paid in equal bi-weekly installments and shall be subject to annual merit increase reviews each January. If Employee's assignment to Italy extends beyond the Initial Employment Term into an Additional Term and if Employee's performance is rated by Employer as Two (2) or better, then Employer agrees to adjust Employee's annual base salary to not less than the salary range midpoint appropriate at the time of such extension. 3.1 Bonuses. During the term of this Agreement, Employee will be eligible to participate in and bonuses may be awarded to Employee at the discretion of the Board of Directors in accordance with the terms of Employer's 1998 Salaried Bonus Plan (the "Bonus Plan") attached hereto as Exhibit A, as the same may be amended, modified, or terminated from time to time. Under that Bonus Plan, Employee's Normal Bonus will be fifty-percent (50%) of his Base Salary. 3.2 Car Allowances. In addition to Employee's Base Salary, Employer shall (i) provide Employee a company car in Italy and (ii) lease a car for Employee's spouse during his assignment to Italy at Six Thousand Three Hundred Sixty Dollars ($6,360.00) per year. The cost of (ii) shall be deducted from Employee's annual Base Salary described in Section 3 hereof, thus reducing Employee's Base Salary to be paid out in equal bi-weekly installments during his assignment to Italy to One Hundred Thirty Three Thousand Six Hundred Forty Dollars ($133,640.00). 3.3 Housing Allowance. During Employee's assignment to Italy, Employer shall provide Employee with housing, for which housing Employee shall reimburse Employer Sixteen Thousand Two Hundred Dollar ($16,200) annually, which reimbursement shall be deducted from Employee's annual Base Salary described in Section 3 hereof, thus reducing--in conjunction with Section 3.2 hereof--Employee's Base Salary to be paid out in equal bi-weekly installments during his assignment to Italy to One Hundred Seventeen Thousand Four Hundred Forty Dollars ($117,440.00). 3.4 Cost Of Living Adjustment. During Employee's assignment to Italy, Employer shall provide Employee with an expense adjustment based on an agreed expense level of Sixty Thousand Dollars ($60,000.00) per year multiplied by a cost of living adjustment of Twenty Eight Percent (28%), which shall increase the amount to be paid out to Employee in equal bi-weekly installments during his assignment to Italy to One Hundred Thirty Four Thousand Two Hundred Forty Dollars ($134,240.00). Employer further agrees to review the Twenty Eight Percent (28%) cost of living adjustment every six months using Organization Resource Counselor's, Inc.'s recommendations and to adjust Employee's equal bi-weekly installments upward accordingly, if necessary. 3.5 Reimbursement of Business Expenses. Employer agrees to reimburse Employee for reasonable travel, entertainment, and other business expenses incurred in the performance of Employee's duties hereunder in accordance with Employer's policies on terms no less favorable than those policies in effect immediately prior to the date hereof. 3.6 Reimbursement of Moving Expenses. Employer agrees to reimburse Employee for reasonable expenses incurred in relocating Employee's and Employee's family's personal belongings to Italy and to reimburse Employee for reasonable expenses incurred in relocating Employee's and Employee's family's personal belongings to the United States upon the end of Employee's assignment to Italy or in the event Employee terminates Employee's employment with Employer under Section 7.1 hereof. 3.7 Benefits. Employer agrees to provide Employee with full benefits commensurate with Employee's Base Salary and to maintain family medical coverage in the United States while Employee is assigned to Italy to provide for emergencies, for long term illness, or for preference for care in the United States. Further, Employee shall be entitled to participate in an equitable manner with other senior executive employees of Employer in all welfare benefit, incentive compensation, or other plans or arrangements authorized, adopted, and maintained from time to time by Employer, including, without limitation, the following: profit sharing plan, medical reimbursement plan, group life insurance plan, medical and dental insurance plan, and long-term disability income plan, if in effect with Employer. 3.8 Travel. Employer agrees to reimburse Employee for two return visits annually to the United States for Employee and his family at business class rates consistent with Employer's travel policy. 3.9 Taxes. Employer agrees to be responsible for any adverse income tax impact related exclusively to Employee's assignment to Italy. 4. Non-Competition. 4.1 Employee acknowledges and recognizes the highly competitive nature of the business of Employer and its affiliates and accordingly agrees as follows: during the Employment Term and until the date that is eighteen (18) months after the date that Employee ceases employment with Employer (such period hereinafter referred to as the "Noncompetition Period"), Employee will not, in any area in the world where Employer conducts business, directly or indirectly own, manage, operate, control, be employed by, consult with, or be connected in any manner with the ownership (other than passive investments of not more than one percent of the outstanding shares of, or any other equity interest in, any company or entity listed or traded on a national securities exchange or in an over-the-counter securities market), management, operation, or control of any business engaged in the production and/or marketing of dry pasta for human consumption. Notwithstanding any provision of this Agreement to the contrary, if Employee is employed by Employer, then any breach of the provisions of this Section 4.1 shall permit Employer to terminate the employment of Employee for Cause (as defined below), and, whether or not Employee is employed by Employer, from and after any breach by Employee of the provisions of this Section 4.1, then Employer shall cease to have any obligations to make payments to Employee under this Agreement. 4.2 During the Noncompetition Period, Employee will not directly or indirectly induce or attempt to induce any employee of Employer or any of its affiliates to engage in any activity in which Employee is prohibited from engaging by Section 4.1 hereof or to terminate his or her employment with Employer or any of its affiliates, will not directly or indirectly assist or attempt to assist others in engaging in any of the activities in which Employee is prohibited from engaging by Section 4.1 hereof, and will not directly or indirectly employ or offer employment to any person who was employed by Employer or any of its affiliates unless such person shall have ceased to be employed by Employer or any of its affiliates for a period of at least 12 months. 4.3 In addition to any payments Employer is required to make pursuant to Section 7 hereof, Employer and Employee hereby agree that Employer may, in its sole discretion, continue to pay Employee all or a portion of his Base Salary during the Noncompetition Period. During such period of continued payment, if any, Employee agrees to be available, consistent with the portion of the Base Salary continued to be paid and other responsibilities that he may then have, to answer questions and provide advice to Employer. 5. Confidentiality. Employee acknowledges that, in and as a result of his employment by Employer, he has been and will be making use of, acquiring, and/or adding to confidential information of a special and unique nature and value relating to such matters as Employer's trade secrets, systems, procedures, manuals, confidential reports, and lists of customers and/or other services rendered by Employer, the equipment and methods used and preferred by Employer's customers, and the prices paid by such customers. As a material inducement to Employer to enter into this Agreement, and to pay to Employee the compensation referred to in Section 3 hereof, Employee covenants and agrees he shall not, at any time during or after the Employment Term, directly or indirectly disclose, divulge, or use for his own benefit or purposes or the benefit or purposes of any other person, firm, partnership, joint venture, association, corporation, or other business organization, entity, or enterprise other than Employer and any of its subsidiaries or affiliates any trade secrets, information, data, or other confidential information relating to customers, development programs, costs, prices, marketing, trading, investment, sales activities, promotion, credit and financial data, manufacturing processes, financing methods, plans, or the business and affairs of Employer generally or of any subsidiary or affiliate of Employer, provided, however, that the foregoing shall not apply to information that is not unique to Employer or that is generally known to the industry or the public other than as a result of breach of this covenant. Employee agrees that, upon termination of his employment with Employer for any reason, he will return to Employer immediately all memoranda, books, manuals, training materials, records, computer software, papers, plans, contracts, agreements, information, letters, and other data, and all copies thereof or therefrom, in any way relating to the business of Employer and its affiliates, except that he may retain personal notes, notebooks, and diaries. Employee further agrees that he will not retain or use for his account at any time any trade names, trademark, or other proprietary business designation used or owned in connection with the business of Employer or its affiliates. 6. Specific Performance. Employee acknowledges and agrees that Employer's remedies at law for a breach or threatened breach of any of the provisions of Section 4 hereof or Section 5 hereof would be inadequate and, in recognition of this fact, Employee agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, Employer, without posting any bond, shall be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction, or any other equitable remedy that may then be available. 7. Termination of Employment 7.1 Termination without Cause; Resignation for Good Reason. 7.1.1 General. Subject to the provisions of Sections 7.1.2 and 7.1.3 hereof, if Employee's employment is terminated by Employer without Cause, as defined in Section 7.3, or if Employee resigns from his employment for Good Reason, as defined in Section 7.4, then Employer shall pay Employee his accrued unpaid Base Salary to the date of termination or resignation and any bonus earned but not paid as of that date, and shall continue to pay Employee his annual Base Salary, as adjusted under Section 3, as of the date of termination or resignation plus his bonus, if any, for the year in which such termination or resignation occurs (calculated as if the Normal Bonus for that year is earned) for a period of one (1) year following the date of termination or resignation (such period, as applicable, being referred to hereinafter as the "Severance Period"). The Base Salary shall be payable in equal bi-weekly installments during the Severance Period, and any bonus shall be payable at the conclusion of the Severance Period. During the Severance Period and for a period of six (6) months thereafter, Employee shall also be eligible to participate on the same terms and conditions as in effect immediately prior to such termination or resignation in all health, medical, supplemental medical, and life insurance plans or programs provided to Employee by Employer pursuant to Section 3.7 hereof ("Employee Welfare Plans") at the time of such termination or resignation and which are provided by Employer to its employees following the date of such termination or resignation; provided, however, that Employee's eligibility to participate in these Employee Welfare Plans shall end at such time as Employee becomes eligible to receive coverage under comparable programs of a subsequent employer and further provided that if Employee participates in the Employee Welfare Plans for a period of eighteen (18) months from the date of termination or resignation, then Employee's COBRA rights shall commence at the end of such eighteen (18) month period. If, during the Severance Period, Employee is precluded from participating in any Employee Welfare Plan by its terms or applicable law, then Employer will provide Employee with benefits that are reasonably equivalent to those Employee would have received under such plan had Employee been eligible to participate therein. Anything to the contrary herein notwithstanding, Employer shall have no obligation to continue to maintain any Employee Welfare Plan during the Severance Period solely as a result of this Agreement. As an example and solely for purposes of illustration: If Employer were to terminate its dental insurance plan prior to or during the Severance Period, then Employer would have no obligation to maintain such plan or provide to Employee individual dental insurance to satisfy its obligations under this Section 7.1.1. 7.1.2 Mitigation. Employee will not be required to mitigate the amount of any payment provided for in Section 7.1.1 hereof by seeking other employment, and the amount of any such payment will not be reduced by any compensation earned by Employee as the result of his employment by another employer subsequent to termination of Employee's employment with Employer. 7.1.3 Death During Severance Period. If Employee dies during the Severance Period, then the Severance Period shall immediately cease, Employer shall not be obligated to make any further payments pursuant to this Section 7, and the provisions of Section 8.1 hereof shall apply as though Employee's death had occurred immediately prior to termination of Employee's employment hereunder. 7.1.4 Date of Termination. The date of termination of employment without Cause shall be the date specified in a written notice of termination to Employee which in no case shall be more than 30 days following the date of notice. The date of resignation for Good Reason shall be the date specified in the written notice of resignation from Employee to Employer which in no case shall be more than 30 days following the date of notice. 7.2 Termination for Cause; Resignation Without Good Reason. 7.2.1 General. If Employee's employment hereunder is terminated by Employer for Cause, or if Employee resigns from his employment hereunder other than for Good Reason (a "Voluntary Termination"), then Employee shall be entitled only to payment of his Base Salary, as adjusted under Section 3, earned through and including the date of termination or resignation. Employee shall have no further right to receive any other compensation or to participate in any other plan, arrangement, or benefit, after such termination for Cause or Voluntary Termination. 7.2.2 Date of Termination. Subject to Section 7.3 hereof, the date of termination for Cause shall be the date of receipt by Employee of notice such termination. The date of Voluntary Termination shall be the date specified in the notice of resignation from Employee to Employer, or if no date is specified therein, then at any time selected by Employer within 10 business days after receipt by Employer of written notice or resignation from Employee. 7.3 Cause. Termination for "Cause" means termination of Employee's employment because, in Employer's good faith belief, (i) Employee willfully and continually failed substantially to perform his duties under the Agreement (other than as a result of Permanent Disability, as defined below), (ii) Employee failed to comply with any of the material term(s) of this Agreement, including, but not limited to, Section 4 hereof, (iii) Employee committed an act or acts that constituted a misdemeanor (other than a minor traffic violation) or a felony under the laws of the United States (including any subdivision thereof) or any country to which Employee is assigned (including any subdivision thereof), including, but not limited to, Employee's conviction for or plea of guilty or no contest ("nolo contendre") to any such misdemeanor or felony, (iv) Employee committed an act or acts in violation of Employer's policies and/or practices applicable to employees at the level of Employee within Employer's organization, (v) Employee willfully acted, or willfully failed to act, in a manner that was injurious to the financial condition or business reputation of Employer or any of its subsidiaries or affiliates, or (vi) Employee acted or failed to act in a manner that is unbecoming of his position with Employer, regardless of whether such action or inaction occurs in the course of the performance of Employee's duties with Employer. 7.4 Good Reason. For purposes of this Agreement, "Good Reason" means any of the following actions taken by Employer without Employee's prior written consent: (i) the continued failure of Employer to pay compensation due to Employee under this Agreement, which failure is uncorrected for a period of 15 days following receipt by Employer of written notice thereof from Employee; (ii) a material diminution in Employee's position, authority, duties, or responsibilities, excluding for this purpose an isolated, insubstantial, or inadvertent action not taken in bad faith and that is remedied by Employer promptly after receipt of written notice thereof given by Employee; provided, however, that a mere change of Employee's title shall not constitute Good Reason so long as Employee continues to perform duties, functions, and responsibilities substantially equivalent to those performed by him prior to such change of title; (iii) Employer's material failure or refusal to comply with the provisions of this Agreement, which failure or refusal to comply is uncorrected for a period of 15 days following receipt by Employer of written notice thereof from Employee. It is expressly understood and agreed by the parties hereto that Employer's failure to deliver a notification extending the Initial Employment Term as referred to in Section 1 hereof shall not constitute a termination without Cause. 7.5 Stock Options. Employer has awarded to Employee Thirty Five Thousand (35,000) options to acquire shares of Employer's Class A Convertible Common Stock, par value $.001 per share (the "Common Stock"), under a stock option agreement by and between Employer and Employee dated August 29, 2000 (the "Option Agreement") under the American Italian Pasta Company 1997 Equity Incentive Plan (the "1997 Plan"). 8. Death or Permanent Disability. 8.1 Death. If Employee's employment hereunder is terminated by death, then Employer shall, within 90 days of the date of death, make a lump sum payment to Employee's estate (or other beneficiary designated by him in writing) equal to all Base Salary and bonuses, if any, earned and accrued through the date of death. Thereafter, Employer shall have no further obligation to Employee under the Agreement. 8.2 Permanent Disability. If Employee becomes physically or mentally disabled while employed by Employer under this Agreement so that Employee is--with or without reasonable accommodation--unable to render the services provided for by this Agreement for a period of six consecutive months or for shorter periods aggregating six months during any 24-month period, or so that Employee has a Disability (as defined under Employer's then-current disability policy), then Employer may, at any time after the last day of the six consecutive months of disability, the day on which the shorter periods of disability equal an aggregate of six months, or the day on which Employee is determined to have a Disability, terminate Employee's employment hereunder for "Permanent Disability" by written notice to Employee. Following such termination, Employee shall be entitled to receive from Employer (i) all Base Salary and bonuses, if any, accrued through the date of termination and (ii) any other benefits payable under Employer's then-current disability policy, but all other rights of Employee hereunder shall terminate as of the date of Employee's termination. 9. Change of Control. 9.1 Notwithstanding anything to the contrary contained herein, if Employer terminates Employee without Cause upon or within six months following a Change of Control (as defined below), then Employer shall pay Employee his accrued unpaid Base Salary to the date of termination and any bonus earned but not paid and shall continue to pay Employee his annual Base Salary as of the date such termination occurs (calculated as if the Normal Bonus for that year is earned) for a period of one (1) year following the date of termination as severance pay (such period, as applicable, being referred to hereinafter as the "Change of Control Severance Period"). Any severance payable pursuant to this Section 9.1 will be in substitution for and not in addition to any severance that might be payable pursuant to Section 7 hereof. To the extent Employer makes payments pursuant to this Section 9.1, it will have no additional obligations under Section 7 hereof. The Base Salary shall be payable in bi-weekly payments during the Change of Control Severance Period, and the bonus shall be paid at the conclusion of the Change of Control Severance Period. 9.2 For purposes of this Agreement, "Change of Control" means any one of the following: (a) any person or group (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) acquiring beneficial ownership of more than 50% of Employer's then outstanding Common Stock or 51 % or more of the combined voting power of Employer's then outstanding securities entitled generally to vote for the election of Employer's Directors; (b) the consummation of the merger or consolidation of Employer with any other corporation, other than a merger with a wholly-owned subsidiary, the sale of substantially all of the assets of Employer, or the liquidation or dissolution of Employer, unless, in the case of a merger or consolidation, (x) the Directors in office immediately prior to such merger or consolidation will constitute at least majority of the Board of Directors of the surviving corporation of such merger or consolidation and any parent (as such term is defined in Rule 12b-2 under the Exchange Act) of such corporation, or (y) the voting securities of Employer outstanding immediately prior thereto represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 66 2/3% of the combined voting power of the voting securities of Employer or such surviving entity and are owned by all or substantially all of the persons who were the holders of the voting securities of Employer immediately prior to the transaction in substantially the same proportions as such holders owned such voting securities immediately prior to the transaction; or (c) Continuing Directors (as defined below) no longer constitute at least a majority of the Board or a similar body of any successor to Employer. For purposes of this Agreement, "Continuing Directors" means any individual who either (i) is a member of Employer's Board of Directors on the Effective Date, (ii) who becomes a director after the Effective Date whose election or nomination for election by Employer's shareholders, was approved by a vote of at least a majority of the Continuing Directors (either by a specific vote or by approval of the proxy statement of Employer in which such person is named as nominee for director, without objection to such nomination), or (iii) is designated by any party pursuant to its rights under Section 2.1 of Employer's Amended and Restated Shareholders' Agreement dated as of October 4, 1997, as amended. 9.3 Excess Parachute Payments. If any payment or the receipt of any benefit under this Agreement shall be deemed to constitute an "excess parachute payment" as such term is described in Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), so as to result in the loss of a deduction to Employer under Code Section 280G or in the imposition of an excise tax on the Employee under Code Section 4999, or any successor sections thereto, then the amounts payable or the benefits provided under this Agreement shall be reduced to the minimum extent necessary so that no such deduction will be lost by Employer and no such excise tax will be imposed on the Employee. Employer, in its sole discretion, shall determine whether or not an "excess parachute payment" would otherwise occur and shall determine the amount and method of the foregoing reduction. 10. Miscellaneous. 10.1 Assignment of Employee Benefits. Absent the prior written consent of Employer, and subject to will and the laws of descent and distribution, Employee shall have no right to exchange, convert, encumber, or dispose of the rights of Employee to receive benefits and payments under this Agreement, which payments, benefits, and rights thereto are non-assignable and non-transferable. 10.2 Burden and Benefit. This Agreement shall be binding upon, and shall inure to the benefit of, Employer and Employee, their respective heirs, personal, and legal representatives, successors, and assigns. 10.3 Governing Law. In view of the fact that the principal office of Employer is located in the State of Missouri, the parties understand and agree that the construction and interpretation of this Agreement shall at all times and in all respects be governed by the laws of the State of Missouri. 10.4 Severability. It is expressly understood and agreed that although Employee and Employer consider the restrictions contained in this Agreement to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Employee, then the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, then such finding shall not affect the enforceability of any of the other restrictions contained herein. 10.5 Headings. The headings of the Sections of this Agreement are for reference only and not to limit, expand, or otherwise affect the contents of this Agreement. 10.6 Entire Agreement; Modification. Except as to Employer's Stock Option Plans, any instrument relating to an Option granted thereunder and written agreements signed by both of the parties hereto from time to time after the date hereof, this Agreement contains the entire agreement and understanding by and between Employer and Employee with respect to the subject matter hereof, and any representations, promises, agreements, or understandings, written or oral, not herein contained shall be of no force or effect. No change, waiver, or modification of any provision of this Agreement shall be valid or binding unless the same is in writing and duly executed by both parties and no evidence of any waiver or modification shall be offered or received in evidence of any proceeding, arbitration, or litigation between the parties hereto arising out of or affecting this Agreement, or the rights or obligations of the parties hereunder, unless such waiver or modification is in writing, duly executed as aforesaid, and the parties further agree that the provisions of this Section 10.6 may not be waived except as set forth herein. 10.7 Waiver of Breach. The waiver by Employer of a breach of any provision of this Agreement by Employee shall not operate or be construed as a waiver of any subsequent breach by Employee. 10.8 Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the execution page of this Agreement, provided, however, that all notices to Employer shall be directed to the attention of the Board of Directors of Employer with a copy to the Secretary of Employer, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 10.9 Withholding Taxes. Employer may withhold from any amounts payable under this Agreement such federal, state, and local taxes as may be required to be withheld pursuant to any applicable law or regulation. 10.10 Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement as of the day and year first hereof written. EMPLOYER: AMERICAN ITALIAN PASTA COMPANY, a Delaware Corporation 4100 North Mulberry Drive, Suite 200 Kansas City, MO 64116-0696 By: /s/ Timothy S. Webster ----------------------------- Timothy S. Webster, President and Chief Executive Officer EMPLOYEE: /s/ Willard Matthew Duffield, Jr. ------------------------------------ Willard Matthew Duffield, Jr. Address: EX-10.2 4 exh102_081301.txt EXHIBIT 10.2 ASSET PURCHASE AGREEMENT By and among BORDEN FOODS CORPORATION BFC INVESTMENTS, L.P. BF FOODS INTERNATIONAL CORPORATION and AMERICAN ITALIAN PASTA COMPANY Dated as of June 1, 2001 TABLE OF CONTENTS Page ARTICLE I SALE OF ASSETS AND ASSUMPTION OF LIABILITIES.......................1 1.1. Sale of Assets..................................................1 1.2. Assets..........................................................2 1.3. Excluded Assets.................................................3 1.4. Assumed Liabilities.............................................3 1.5. Excluded Liabilities............................................4 ARTICLE II PURCHASE PRICE....................................................4 2.1. Purchase Price..................................................4 ARTICLE III REPRESENTATIONS AND WARRANTIES OF BFC............................7 3.1. Due Organization................................................7 3.2. Authorization and Validity of Agreement.........................7 3.3. No Conflicts....................................................7 3.4. Legal Proceedings...............................................8 3.5. Trademark Rights................................................8 3.6. No Other Material Intellectual Property.........................8 3.7. Books and Records...............................................8 3.8. Finders; Brokers................................................9 3.9. Closing Date Inventory..........................................9 3.10. No Liens on Assets.............................................9 3.11. Customers......................................................9 3.12. Preparation of 2001 Annual Business Plan.......................9 3.13. Contracts......................................................9 3.14. Securities Act Matters........................................10 3.15. No Other Representations or Warranties........................10 3.16. Survival of Representations and Warranties....................10 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER..........................10 4.1. Due Organization and Power of Buyer............................10 4.2. Authorization and Validity of Agreement........................11 4.3. No Conflict....................................................11 4.4. Finders; Brokers...............................................11 4.5. Financial Capacity.............................................11 4.6. Capitalization.................................................11 4.7. Buyer Common Stock.............................................12 4.8. SEC Reports....................................................12 4.9. No Other Representations or Warranties.........................12 4.10. Survival of Representations and Warranties....................12 ARTICLE V COVENANTS.........................................................13 5.1. Access; Information and Records; Confidentiality...............13 5.2. Conduct of the Business Prior to the Closing Date..............13 5.3. Transition Arrangements........................................14 5.4. Direct Trade Promotions........................................14 5.5. Antitrust Laws.................................................15 5.6. Non-Solicitation...............................................15 5.7. Further Actions................................................16 5.8. Trademark License Agreements...................................16 5.9. Access to Records and Personnel................................16 5.10. Inventory.....................................................17 5.11. Post-Closing Identification...................................18 5.12. "As Is" Condition.............................................18 5.13. Misapplied Deductions.........................................18 5.14. Services Agreement............................................19 5.15. No Sale Negotiations..........................................19 5.16. Reporting Requirements........................................19 5.17. Financing.....................................................19 ARTICLE VI CONDITIONS.......................................................19 6.1. Conditions Precedent to Obligations of Buyer and the Sellers.......................................................19 6.2. Conditions Precedent to Obligation of the Sellers..............20 6.3. Conditions Precedent to Obligation of Buyer....................21 ARTICLE VII CLOSING.........................................................22 7.1. Closing Date...................................................22 7.2. Buyer Deliveries...............................................22 7.3. Seller Deliveries..............................................22 ARTICLE VIII INDEMNIFICATION................................................22 8.1. Indemnification by the Sellers.................................22 8.2. Indemnification by Buyer.......................................23 8.3. Indemnification Calculations...................................24 ARTICLE IX TERMINATION......................................................25 9.1. Termination Events.............................................25 9.2. Effect of Termination..........................................25 ARTICLE X ALTERNATIVE DISPUTE RESOLUTION....................................26 10.1. Alternative Dispute Resolution................................26 ARTICLE XI MISCELLANEOUS AGREEMENTS OF THE PARTIES..........................26 11.1. Notices.......................................................26 11.2. Bulk Transfers................................................27 11.3. Transaction Taxes.............................................27 11.4. Further Assurances; Asset Returns.............................27 11.5. Other Covenants...............................................28 11.6. Expenses......................................................28 11.7. Entire Agreement..............................................28 11.8. No Third Party Beneficiaries..................................28 11.9. Possible Adjustment to Purchase Price.........................28 11.10. Assignability................................................29 11.11. Amendment and Modification; Waiver...........................29 11.12. Public Announcements.........................................29 11.13. Schedules and Exhibits.......................................30 11.14. Section Headings; Table of Contents..........................30 11.15. Severability.................................................30 11.16. Counterparts.................................................30 11.17. Enforcement..................................................30 11.18. Governing Law................................................30 11.19. Certain Definitions..........................................30 Exhibits EXHIBIT A ......- Cost of Inventory EXHIBIT B ......- Terms and Provisions Relating to Stock Consideration EXHIBIT C-1 ......- Form of Borden Trademark License Agreement EXHIBIT C-2 ......- Form of R&F Trademark License Agreement EXHIBIT C-3 ......- Form of Mrs. Grass Trademark License Agreement EXHIBIT C-4 ......- Form of Ancillary Trademark License Agreement EXHIBIT D-1 ......- Form of Contract Packaging Agreement EXHIBIT D-2 ......- Form of Whole Wheat Packaging Agreement EXHIBIT E ......- Form of Services Agreement EXHIBIT F ......- Form of Assumption Agreement EXHIBIT G ......- Form of Bill of Sale Agreement EXHIBIT H ......- Form of Intangible Property Assignment SCHEDULES Schedule 1.2(a)(i)(A) Books and Records Schedule 1.2(a)(ii)(A) Brand Contracts Schedule 1.2(a)(ii)(B) General Contracts Schedule 1.2(b) BFC Investments Assets Schedule 1.2(c) BFIC Assets Schedule 1.4(iii) Open Purchase Orders Schedule 1.4(iv) Trade Promotion Obligations and Liabilities Schedule 2.1(c)(ii) List of Warehouses Schedule 2.1(e) Allocation of Purchase Price Schedule 3.3 Exceptions to No Conflicts Schedule 3.4 Legal Proceedings Schedule 3.5(a)(i) Trademark Rights Schedule 3.5(a)(ii) Exceptions to Trademark Rights Schedule 3.7 DCPDA Statement for Each Brand and Inventory Statement Schedule 3.11 Customers Schedule 5.2 Conduct of Business Schedule 11.19 Pasta Pounds Index of Defined Terms 1060 Forms.........................7 affiliate.........................33 Agreement..........................1 Ancillary Trademark License Agreement........................18 Antitrust Division................16 Antitrust Improvements Act.........8 Assets.............................2 Assumed Liabilities................3 Assumption Agreement..............22 Average Buyer Price................7 BFC................................1 BFC Assets.........................1 BFC Investments....................1 BFC Investments Assets.............2 BFC Investments Purchase Price.....4 BFC Investments Trademark Rights...3 BFC Purchase Price.................4 BFIC...............................1 BFIC Assets........................2 BFIC Purchase Price................4 BFIC Trademark Rights..............3 Books and Records..................2 Borden............................17 Borden Mark.......................33 Borden Trademark License Agreement17 Brand Contracts....................2 Brands.............................1 Business...........................1 Buyer..............................1 Buyer Losses......................24 Buyer's Inventory Estimate.........5 Closing...........................24 Closing Date......................24 Closing Date Inventory.............2 Closing Date Inventory Estimate....5 Code...............................7 Common Stock......................12 Contract Packaging Agreement......19 Contracts..........................2 Covered Product Recalls...........33 Customer Lists....................34 DPCDA.............................34 DPCDA Statement....................9 Excluded Assets....................3 Excluded Liabilities...............4 Facilities.........................5 Final Closing Date Inventory.......6 Final Closing Date Promotion Liability.........................6 Finished Goods Inventory...........2 FTC...............................16 General Contracts..................2 Governmental Authority............34 Indemnity Claim...................26 Inventory..........................2 Inventory Cutoff...................5 Inventory Statement................9 Losses............................25 Material Adverse Change...........13 Material Adverse Effect............8 Materially Reduced................10 Misapplied Deductions.............34 Mrs. Grass Trademark License Agreement........................18 Neutral Auditor....................6 NYSE...............................7 Permitted Liens...................34 person............................34 Potential Transaction.............20 Purchase...........................1 Purchase Price.....................5 R&F Trademark License Agreement...17 Relevant Transferee...............34 Required Consents.................21 SEC...............................12 SEC Reports.......................13 Sellers............................1 Sellers Losses....................25 Sellers' Inventory Estimate........5 Services Agreement................20 Shares.............................7 Stock Consideration................7 subsidiary or subsidiaries........34 Tax Benefit.......................27 the best knowledge of.............34 the knowledge of..................34 Trademark License Agreements......18 Trademark Rights...................3 Whole Wheat Packaging Agreement...19 ASSET PURCHASE AGREEMENT ASSET PURCHASE AGREEMENT, dated as of June __, 2001 (this "Agreement"), by and among BORDEN FOODS CORPORATION, a Delaware corporation ("BFC"), BFC INVESTMENTS, L.P., a Delaware limited partnership ("BFC Investments"), BF FOODS INTERNATIONAL CORPORATION, a Delaware corporation ("BFIC") and AMERICAN ITALIAN PASTA COMPANY, a Delaware corporation ("Buyer"). W I T N E S S E T H: WHEREAS, The Sellers are engaged, in part, in the business (hereinafter referred to as the "Business") of developing, manufacturing, marketing, distributing and selling pasta and noodles under the names set forth in Schedule 1.2(b) (hereinafter referred to as the "Brands"); and WHEREAS, Buyer desires to purchase from BFC, BFC Investments and BFIC (collectively, the "Sellers") and Sellers desire to sell to Buyer, on the terms and subject to the conditions of this Agreement, certain of the assets (subject to certain liabilities) of the Sellers related to the Business (the "Purchase"). NOW, THEREFORE, in consideration of the premises and the mutual promises contained herein, the parties hereto hereby agree as follows: ARTICLE I SALE OF ASSETS AND ASSUMPTION OF LIABILITIES 1.1 Sale of Assets. (a) Sale of BFC Assets. Subject to the satisfaction or waiver of the conditions set forth in this Agreement, at the Closing and as of the Closing Date, the Sellers (other than BFC Investments and BFIC) shall sell, assign, transfer, convey and deliver to Buyer free and clear of all liens and encumbrances (other than Permitted Liens), and Buyer shall purchase or assume, as the case may be, all of the assets, rights, properties, claims and contracts described in Section 1.2(a) hereof (collectively, the "BFC Assets"). As of the Closing, risk of loss as to the BFC Assets shall pass from such Sellers to Buyer. (b) Sale of BFC Investments Assets. Subject to the satisfaction or waiver of the conditions set forth in this Agreement, at the Closing and as of the Closing Date, BFC Investments shall sell, assign, transfer, convey and deliver to Buyer free and clear of all liens and encumbrances (other than Permitted Liens), and Buyer shall purchase or assume, as the case may be, the assets, rights, properties, claims, and contracts set forth in Section 1.2(b) (the "BFC Investments Assets"). As of the Closing, risk of loss as to the BFC Investments Assets shall pass from BFC Investments to Buyer. (c) Sale of BFIC Assets. Subject to the satisfaction or waiver of the conditions set forth in this Agreement, at the Closing and as of the Closing Date, BFIC shall sell, assign, transfer, convey and deliver to Buyer, free and clear of all liens and encumbrances (other than Permitted Liens) and Buyer shall purchase or assume, as the case may be, the assets, rights, properties, claims and contracts set forth in Section 1.2(c) (the "BFIC Assets"; and together with the BFC Assets and the BFC Investments Assets, the "Assets"). As of the Closing, risk of loss as to the BFIC Assets shall pass from BFIC to Buyer. 1.2. Assets. (a) BFC Assets. The BFC Assets to be purchased by Buyer at the Closing shall include only the following: (i) Intangible Property. (A) Business Information. Subject to Section 5.9 and the terms of the Services Agreement (as defined in Section 5.14), financial books and records created since January 1, 2000 and currently used by the Sellers to the extent related to the Brands and, to the extent related to the Brands, those other books, records and additional business information currently used by the Sellers listed on Schedule 1.2(a)(i)(A), including Customer Lists (collectively, "Books and Records"); provided, however, that BFC shall be permitted to retain copies of any Books and Records delivered to Buyer and BFC shall be permitted to transfer such Books and Records to the Relevant Transferee (as defined in Section 11.18) and thereafter, each of the Buyer and the Relevant Transferee shall have a non-exclusive property right with respect to such Books and Records. (B) UPC Codes. All UPC Codes exclusively related to the Brands. (ii) Selected Contracts and Purchase Orders. (A) All agreements, contracts, contract rights, understandings, commitments and arrangements whether written or oral exclusively related to the Brands listed on Schedule 1.2(a)(ii)(A) (collectively, the "Brand Contracts"); (B) all agreements, contracts, contract rights, understandings, commitments and arrangements set forth on Schedule 1.2(a)(ii)(B) (collectively, the "General Contracts"; together with the Brand Contracts, the "Contracts") to the extent that the rights thereunder relate to the Brands and (C) any and all open purchase orders described in Section 1.4(iii). (iii) Inventories. The finished products (other than finished products that have been billed and are being held for customers' accounts) exclusively related to the Brands (collectively, the "Finished Goods Inventory") and all Brand-specific packaging used in connection therewith (together with the Finished Goods Inventory, the "Inventory") owned by the Sellers on the Closing Date (such Inventory, the "Closing Date Inventory") (b) BFC Investments Assets. The BFC Investments Assets to be purchased by Buyer at the Closing are all of BFC Investments' right, title and interest in (i) the Brands (other than "Globe & Design") and all related trademarks, trademark registrations, trademark applications (including all documents or files pertaining thereto), trade names and trade dress, domain names and all related renewals and similar legal rights relating thereto (except to the extent containing any Borden Marks) and (ii) any and all licenses or other rights to use trademarks owned by others, in each case used exclusively in connection with the Brands and described on Schedule 1.2(b) hereto solely in the territories set forth on such Schedule (the "BFC Investments Trademark Rights"); (c) BFIC Assets. The BFIC Assets to be purchased by Buyer at the Closing are all of BFIC's right, title and interest in (i) "Globe & Design" and all related trademarks, trademark registrations, trademark applications (including all documents or files pertaining thereto), trade names and trade dress, domain names and all related renewals and similar legal rights relating thereto (except to the extent containing any Borden Marks) and (ii) any and all licenses or other rights to use trademarks owned by others, in each case used exclusively in connection with "Globe & Design" and described on Schedule 1.2(c) hereto solely in the territories set forth on such Schedule (the "BFIC Trademark Rights"; together with the BFC Investments Trademark Rights, the "Trademark Rights"). (d) Rights to Action. Buyer has the right to bring all actions at law or in equity after the Closing Date arising out of the infringement or violation of the BFC Investments Assets or the BFIC Assets prior to the Closing Date and to retain all damages and proceeds therefrom. 1.3. Excluded Assets. It is expressly agreed that the Sellers will retain and Buyer will not acquire any assets other than the Assets (the "Excluded Assets"). 1.4. Assumed Liabilities. On the Closing Date and as of the Closing, Buyer assumes and agrees to pay, perform and discharge when due, the following debts, liabilities and obligations related to the Brands, arising out of or pertaining to the following (collectively, the "Assumed Liabilities"): (i) all debts, obligations and liabilities of or relating to the Brands or the other Assets incurred by Buyer on or after the Closing Date or which arise on account of Buyer's use of the Brands and the other Assets, and/or sale of any products manufactured and/or sold by Buyer on and after the Closing Date, including, without limitation, (x) all liabilities and obligations for commissions, fees or other payments, including expenses, due to brokers and agents for sales and orders for products relating to the Brands shipped on and after the Closing Date or any such agreements entered into after the date of this Agreement in the ordinary course of business, (y) all liabilities and obligations for non-coupon consumer promotions (including, without limitation, sweepstakes) and other consumer marketing programs related to the Brands implemented by Buyer on and after the Closing Date and (z) all liabilities and obligations for consumer coupons for products relating to the Brands issued or "dropped" by Buyer on and after the Closing Date; (ii) all obligations and liabilities of the Sellers under the Brand Contracts and, to the extent related to the Brands, under the General Contracts; (iii) all obligations and liabilities of the Sellers under the open purchase orders related to the Brands and in the amounts that are set forth on Schedule 1.4(iii) and that have not been fulfilled as of the Closing Date and all obligations and liabilities of the Sellers on all other open purchase orders related to the Brands that are (x) of the same general type as those listed on Schedule 1.4(iii) and (y) entered into in the ordinary course of business (whether before or after the date of this Agreement) that have not been fulfilled as of the Closing Date; (iv) all obligations and liabilities for Sellers' trade promotion programs (including, without limitation, slotting allowances, retailer ads, store display allowances and similar items) related to the Brands that are set forth in Schedule 1.4(iv) and all obligations and liabilities of the Sellers on all other trade promotion programs related to the Brands that are (x) of the same general type as those listed on Schedule 1.4(iv) and (y) entered into in the ordinary course of business (whether before or after the date of this Agreement); and (v) all obligations and liabilities for all consumer complaints, trade complaints, written product guarantees set forth on the packaging therefor and damaged or unsalable merchandise returned or received. 1.5. Excluded Liabilities. It is expressly agreed that the Sellers will retain and Buyer shall not assume any liabilities of the Business other than the Assumed Liabilities (the "Excluded Liabilities"). ARTICLE II PURCHASE PRICE 2.1. Purchase Price. (a) The purchase price (less the price allocated to BFC) for the BFC Investments Assets shall be $61,995,000 (the "BFC Investments Purchase Price") and the purchase price for the BFIC Assets shall be $5,000 (the "BFIC Purchase Price"). (b) (i) The aggregate purchase price (the "BFC Purchase Price") for the BFC Assets other than the Closing Date Inventory purchased from BFC shall be $3,500,000, less the amount of the Closing Date Promotion Liability (as defined below). (ii) The "Closing Date Promotion Liability" shall be the amount of the liabilities represented by the trade promotion programs that Buyer is assuming pursuant to Section 1.4(iv) hereunder, such liability to be established in accordance with the same methods and practices used by Sellers in preparing the Trade Promotion Statement. The parties shall agree on the amount of the Closing Date Promotion Liability no later than five (5) days prior to Closing. In the event Sellers and Buyer cannot agree on the amount of such liability, the Closing Date Promotion Liability shall, subject to later adjustment pursuant to Section 2.1(d), be an amount equal to the mathematical midpoint (the "Closing Date Promotion Liability Estimate") of the amount which Sellers have reasonably proposed for the Closing Date Promotion Liability and the amount which Buyer has reasonably proposed for the Closing Date Promotion Liability, and such midpoint amount shall be used as the "Closing Date Promotion Liability" for the purposes of the Closing. (c) (i) The aggregate purchase price for the Closing Date Inventory shall be the Cost (as determined in accordance with Exhibit A) of the Closing Date Inventory, except for Finished Goods Inventory items which are unsalable or have an expiration date less than 180 days from the Closing Date. The Cost of the Closing Date Inventory together with the BFC Purchase Price, the BFC Investments Purchase Price and the BFIC Purchase Price shall hereinafter be referred to as the "Purchase Price". (ii) During the weekend prior to Closing, representatives of Sellers and Buyer shall conduct a physical counting of the Inventory at the BFC production facilities in St. Louis, Missouri; Montreal, Quebec, Canada; Lethbridge, Alberta, Canada; and Albadoro, Italy (collectively, the "Facilities") and at the warehouses listed on Schedule 2.1(c)(ii) in an agreed-upon manner consistent with Sellers' past practices (the "Inventory Cutoff"). The quantities and valuation of Inventories observed and counted during such physical counting, upon being agreed to, shall constitute the Closing Date Inventory and shall be final and binding upon the parties. The Closing Date Inventory shall be established in accordance with the same methods and practices used by Sellers in preparing the Inventory Statement. The valuation of Inventories will be determined in accordance with the definition of "Cost". Buyer will date finished products produced after the Inventory Cutoff so as to allow the parties to easily identify and distinguish products made prior to and after the Inventory Cutoff. (iii) In the event Sellers and Buyer cannot agree during the weekend prior to the Closing upon the amount of Inventory constituting the Closing Date Inventory, the Closing Date Inventory shall, subject to later adjustment, if and to the extent required, pursuant to Section 2.1(d), be an amount equal to the mathematical midpoint (the "Closing Date Inventory Estimate") of the amount which Sellers have reasonably proposed for the Closing Date Inventory ("Sellers' Inventory Estimate") and the amount which Buyer has reasonably proposed for the Closing Date Inventory ("Buyer's Inventory Estimate") and such midpoint amount shall be used as the "Closing Date Inventory" for the purposes of the Closing. (d) (i) Subject to the last sentence of this paragraph, if Sellers and Buyer have not agreed upon either or both of the amount of the Closing Date Inventory or the amount of the Closing Date Promotion Liability, within five (5) days after the Closing, the determination of the actual amount of the Closing Date Inventory and/or Closing Date Promotion Liability shall be referred by BFC and Buyer to Arthur Andersen LLP or such other national independent accounting firm mutually acceptable to Buyer and BFC (the "Neutral Auditor" ). The Neutral Auditor will deliver to Buyer and BFC a written determination of the amount of the Closing Date Inventory and/or the Closing Date Promotion Liability (the "Final Closing Date Inventory" and "Final Closing Date Promotion Liability", respectively) within thirty (30) days of receipt of such referral, which determination will be final, binding and conclusive. The Final Closing Date Inventory and the Final Closing Date Promotion Liability shall be established in accordance with the same methods and practices used by Sellers in preparing the Inventory Statement and the Trade Promotion Statement, respectively. If the Final Closing Date Inventory is greater than the Closing Date Inventory Estimate, then the Purchase Price will be increased by an amount equal to the difference between the Final Closing Date Inventory and the Closing Date Inventory Estimate, and Buyer shall pay to Sellers an amount of Purchase Price equal to such difference. If the Final Closing Date Inventory is less than the Closing Date Inventory Estimate, then the Purchase Price will be decreased by an amount equal to the difference between the Final Closing Date Inventory and the Closing Date Inventory Estimate, and Sellers shall pay to Buyer an amount in cash equal to such difference. If the Final Closing Date Promotion Liability is greater than the Closing Date Promotion Liability Estimate, then the Purchase Price will be decreased by an amount equal to the difference between the Final Closing Date Promotion Liability and the Closing Date Promotion Liability Estimate, and Sellers shall pay to Buyer an amount in cash equal to such decrease. If the Final Closing Date Promotion Liability is less than the Closing Date Promotion Liability Estimate, then the Purchase Price will be increased by an amount equal to the difference between the Final Closing Date Promotion Liability and the Closing Date Promotion Liability Estimate, and Buyer shall pay to Sellers an amount in Purchase Price equal to such increase. Notwithstanding the foregoing, if the Buyers' Inventory Estimate is greater than the product of 0.98 times the Sellers' Inventory Estimate, this Section shall not apply to the determination of the Finished Goods Inventory and no adjustment shall be made. (ii) All payments to be made pursuant to this Section will be made on the second business day following the date on which the Neutral Auditor determines the Final Closing Date Inventory and/or Final Closing Date Promotion Liability. Any payment required to be made by Sellers or Buyer pursuant to this Section shall bear interest from the Closing Date through the date of payment at a rate of interest equal to the prime rate per annum publicly announced from time to time by Citibank, N.A. at its principal office in New York City, and shall be payable by wire transfer of immediately available funds to an account or accounts designated by the party entitled to receive such funds prior to the date when such payment is due. (iii) All fees and expenses relating to the work to be performed by the Neutral Auditor shall be paid by the party required to pay the other party the greater amount under this Section; provided, that if no party is required to pay the other party, the fees and expenses of the Neutral Auditor shall be paid one-half by Buyer and one-half by Sellers. (e) Buyer and the Sellers agree to allocate the Purchase Price in accordance with the rules under Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code") and the Treasury Regulations promulgated thereunder. Such allocation is to be agreed upon by the Buyer and Sellers within ninety (90) days after the Closing. Any such allocation shall be subject to the general allocation of the Purchase Price set forth in Sections 2.1(a) and 2.1(b) of this Agreement. Buyer and the Sellers recognize that the Purchase Price does not include Buyer's acquisition expenses and that Buyer will allocate such expenses appropriately. BFC and Buyer agree to act in accordance with the computations and allocations contained in Schedule 2.1(e) (including any modifications thereto reflecting any post-closing adjustments) in any relevant tax returns or filings, including any forms or reports required to be filed pursuant to Section 1060 of the Code, the Treasury Regulations promulgated thereunder or any provisions of local, state and foreign law ("1060 Forms"), and to cooperate in the preparation of any 1060 Forms and to file such 1060 Forms in the manner required by applicable law. (f) The Purchase Price shall be payable in immediately available federal funds to such bank accounts, in the United States, as shall be designated by BFC prior to Closing; provided, that if Buyer does not have funds on hand sufficient to pay the Purchase Price, up to an amount equal to the Purchase Price minus $30 million may be payable in the form of shares Convertible Class A Common Stock, par value $.001 per share (the "Shares"), of Buyer (the "Stock Consideration"). The Stock Consideration shall be issued by Buyer to the Sellers at the Closing and shall be subject to the terms and provisions described on Exhibit B attached hereto. Each of the parties hereto agrees to execute and deliver all documents that may reasonably be necessary or desireable to give effect to the terms and provisions described in Exhibit B. The aggregate number of Shares that Buyer shall issue and deliver to the Sellers shall be equal to (x) the Purchase Price minus the amount of cash delivered by Buyer to the Sellers as part of the Purchase Price divided by (y) the Average Buyer Price. The "Average Buyer Price" means the average of the daily closing prices of the Shares as reported on the NYSE Composite Transactions Reporting System (as reported in The Wall Street Journal or, if not reported therein, in another authoritative source) for the twenty consecutive New York Stock Exchange (the "NYSE") full trading days (in which such shares are traded on the NYSE) ending at the close of trading on the second trading day prior to the date hereof. ARTICLE III REPRESENTATIONS AND WARRANTIES OF BFC BFC represents and warrants on behalf of itself and on behalf of the other Sellers to Buyer as follows: 3.1. Due Organization. Each of the Sellers (other than BFC Investments) is duly organized, validly existing and in good standing under the laws of the jurisdiction of their incorporation, and BFC Investments is a limited partnership duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. Each of the Sellers has all requisite power and authority to own the Assets and enter into this Agreement and to perform its obligations hereunder. 3.2. Authorization and Validity of Agreement. The execution, delivery and performance by BFC and the other Sellers of this Agreement and the consummation by the Sellers of the transactions contemplated hereby have been duly authorized by all necessary action on the part of BFC and the other Sellers, and no other action on the part of the Sellers is necessary for the execution, delivery and performance by BFC and the other Sellers of this Agreement and the consummation by the Sellers of the transactions contemplated hereby. This Agreement has been duly executed and delivered by BFC and the other Sellers and is a legal, valid and binding obligation of BFC and the other Sellers, enforceable against BFC and the other Sellers in accordance with its terms, except to the extent that its enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting creditors' rights generally and by general equity principles. 3.3. No Conflicts. (a) Except as set forth on Schedule 3.3 hereto, except as specifically contemplated in this Agreement and except as would not have a material adverse effect on the value of the Brands (a "Material Adverse Effect"), the execution, delivery and performance by the Sellers of this Agreement and the consummation by the Sellers of the transactions contemplated hereby: (i) will not violate any provision of law, rule or regulation, order, judgment or decree applicable to the Sellers; (ii) will not require any permit from or any consent or approval of, or filing with or notice to, any Governmental Authority (as defined below) under any provision of law applicable to the Sellers, except for the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "Antitrust Improvements Act"), and except for any consent, approval, filing or notice requirements that become applicable solely as a result of the specific regulatory status of Buyer; (iii) will not violate any provision of the organizational documents of the Sellers; and (iv) will not require any consent or approval under, and will not conflict with, or result in the breach or termination of, or constitute a default under, or result in the acceleration of the performance by the Sellers under, any indenture, mortgage, deed of trust, lease, license, franchise, contract, agreement or other instrument to which any such Seller is a party or by which it, or any of its assets are bound. No permit from any Governmental Authority is required for Sellers to sell the pasta and noodles under the Brands in a manner consistent with Sellers' past practice 3.4. Legal Proceedings. Except as set forth on Schedule 3.4 and except as would not, individually or in the aggregate, have a Material Adverse Effect: (a) there are no actions, suits, claims, demands, investigations, complaints, proceedings or orders pending or (to the knowledge of Sellers) threatened against or affecting any of the Sellers at law or in equity, or before or by any Governmental Authority; and (b) none of the Sellers is subject to any order, writ, injunction, judgment, garnishment, levy or decree of any court or any Governmental Authority relating to the Brands. 3.5. Trademark Rights. Schedule 3.5(a)(i) lists all material Trademark Rights. Except as set forth in Schedule 3.5(a)(ii) and except as would not, individually or in the aggregate, have a Material Adverse Effect, (i) the Sellers own, are licensed or have the right to use the Trademark Rights described in Schedule 3.5(a)(i) free and clear of all liens and encumbrances; (ii) there are no pending actions or proceedings challenging the validity or ownership of such Trademark Rights or the Sellers' right to use such Trademark Rights; (iii) the Trademark Rights described in Schedule 3.5(a)(i) constitute the material Trademark Rights owned by the Sellers or used by the Sellers in connection with the current operation of the Business; (iv) none of the issued trademark registrations under such Trademark Rights has expired or been canceled and, to the knowledge of Sellers', none is being materially infringed by others; (v) there are no written licenses or sublicense agreements now in effect regarding the Sellers' use of such Trademark Rights; and (vi) to the knowledge of the Sellers, the Sellers are not materially infringing any U.S. or foreign trademark owned by third parties in the current operation of the Business. 3.6. No Other Material Intellectual Property. The Assets, together with the rights made available in the Trademark License Agreements, constitute all of the material patents (if any), copyrights (if any) and trademarks and other intellectual property rights used exclusively in connection with the Brands in all material respects. 3.7. Books and Records. The Books and Records have been maintained in all material respects in accordance with BFC's internal practices and policies and good business practices. Schedule 3.7 hereto contains (i) the Brands' DPCDA statement (the "DPCDA Statement") and related notes for the fiscal year ended December 31, 2000; (ii) a statement setting forth the Inventory (the "Inventory Statement ") and related notes for April 28, 2001; and (iii) a statement setting forth the liability relating to Sellers' trade promotion programs (including, without limitation, slotting allowances, retailer ads, store display allowances and similar items) related to the Brands and related notes at April 28, 2001 (the "Trade Promotion Statement"). The DPCDA Statement, the Inventory Statement and the Trade Promotion Statement have been prepared from the Books and Records related to the Brands and the DPCDA Statement contains all transactions of the Brands consistent with BFC's internal accounting practices. 3.8. Finders; Brokers. With the exception of fees and expenses payable to Goldman, Sachs & Co., which shall be BFC's sole responsibility, BFC is not a party to any agreement with any finder or broker, or in any way obligated to any finder or broker for any commissions, fees or expenses in connection with the origin, negotiation, execution or performance of this Agreement. 3.9. Closing Date Inventory. The Finished Goods Inventory included in the Closing Date Inventory, except for Finished Goods Inventory items which are unsalable or have an expiration date less than one hundred and eighty (180) days from the Closing Date, will be merchantable, usable and salable at customary prices and discounts in the ordinary course of business on the Closing Date. 3.10. No Liens on Assets. The Assets are free and clear of all liens other than Permitted Liens. 3.11. Customers. Schedule 3.11 lists certain major customers of the Business and the cumulative sales of the products of the Business to said customers for the periods described thereon. Since January 1, 2001 none of the customers listed on Schedule 3.11 has ceased to do business with BFC and since January 1, 2001 BFC has not received any written notice that any customer listed on Schedule 3.11 intends to terminate its business with BFC. In addition, none of the customers listed on Schedule 3.11 has Materially Reduced (as defined below) its business with BFC. For purposes of this Section 3.11, "Materially Reduced" shall mean that the sales attributed to such customer have decreased in the twelve (12) months ended December 31, 2000 compared to the twelve (12) months ended December 31, 1999 by more than 20%. 3.12. Preparation of 2001 Annual Business Plan. The 2001 Annual Business Plan delivered to Buyer is based on assumptions that when made were made in good faith by the Sellers. No other express or implied representation is made as to the 2001 Annual Business Plan, including, without limitation, any express or implied representation that the assumptions underlying the 2001 Annual Business Plan are still valid, and under no circumstances shall the failure to achieve the targets set forth in the 2001 Annual Business Plan be considered a breach of this representation. 3.13. Contracts. Except as would not reasonably be expected to have a Material Adverse Effect, (a) each Contract is valid, binding and enforceable against the applicable Seller; (b) each of the Sellers has performed all obligations under the Contracts required to be performed by it and none of the Sellers has received any claim of default under any Contract; and (c) BFC does not have knowledge of any breach or anticipated breach by any other party to any Contract. There are no oral contracts or agreements relating to the Brands involving receivables or payments in excess of $100,000. 3.14. Securities Act Matters. Each of BFC, BFC Investments and BFIC is an "accredited investor" as defined under the Securities Act of 1933, as amended (the "Securities Act"). Each of BFC, BFC Investments and BFIC is acquiring the Shares hereunder solely for investment purposes for its own account and not with a view to resale or distribution except pursuant to an effective registration statement filed under the Securities Act or an applicable exemption from such registration. Each of BFC, BFC Investments and BFIC agrees that it will not directly or indirectly offer, transfer, sell, pledge, hypothecate or otherwise dispose of any of the Shares (or solicit any offer to buy, purchase or otherwise acquire, or to take a pledge of, any such shares) except in compliance with the Securities Act and applicable state securities laws and regulations. 3.15. No Other Representations or Warranties. Except for the representations and warranties contained in this Agreement, neither BFC, nor any other person makes any other express or implied representation or warranty on behalf of BFC, including, without limitation, as to the probable success or profitability of the ownership, use or operation of the Assets by Buyer after the Closing. 3.16. Survival of Representations and Warranties. The representations and warranties of BFC contained in this Agreement shall survive until the date which is eighteen (18) months after the Closing Date; provided that the representation contained in Section 3.12 shall survive only until January 31, 2001 and the representations and warranties contained Sections 3.1, 3.2 and 3.15 shall survive indefinitely. The Buyer shall be entitled to rely on the representations and warranties contained in this Agreement notwithstanding any due diligence investigation by the Buyer. Any claims made with specificity and in writing by a party under Section 8.1(a)(ii) in accordance with the terms of Article VIII prior to the expiration of the survival period with respect to an applicable representation or warranty shall survive the expiration of the representations and warranties until finally and conclusively resolved pursuant to Article VIII. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER Buyer represents and warrants that: 4.1. Due Organization and Power of Buyer. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite corporate power and authority to enter into this Agreement and perform its obligations hereunder. 4.2. Authorization and Validity of Agreement. The execution, delivery and performance by Buyer of this Agreement and the consummation by Buyer of the transactions contemplated hereby have been duly authorized by all necessary action on the part of Buyer, and no other action on the part of Buyer is or will be necessary for the execution, delivery and performance by Buyer of this Agreement and the consummation by Buyer of the transactions contemplated hereby. This Agreement has been duly executed and delivered by Buyer and is a legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting creditors' rights generally and by general equity principles. 4.3. No Conflict. Except for any consent, approval, filing or notice that would not, if not given or made, or any violation, conflict, breach, termination, default or acceleration which does not materially impair the ability of Buyer to consummate the transactions contemplated hereby, the execution, delivery and performance by Buyer of this Agreement and the consummation by Buyer of the transactions contemplated hereby: (i) will not violate any provision of law, rule or regulation, order, judgment or decree applicable to Buyer; (ii) will not require any consent or approval of, or filing or notice to, any Governmental Authority under any provision of law applicable to Buyer, except for the requirements of the Antitrust Improvements Act, and except for any consent, approval, filing or notice requirements which become applicable solely as a result of the specific regulatory status of BFC or which BFC or any of its affiliates are otherwise required to obtain; (iii) will not violate any provision of the Certificate of Incorporation or Bylaws of Buyer; and (iv) will not require any consent or approval under, and will not conflict with, or result in the breach or termination of, or constitute a default under, or result in the acceleration of the performance by Buyer under, any indenture, mortgage, deed of trust, lease, license, franchise, contract, agreement or other instrument to which Buyer is a party or by which it or any of its assets is bound or encumbered. 4.4. Finders; Brokers. Buyer is not a party to any agreement with any finder or broker, or in any way obligated to any finder or broker for any commissions, fees or expenses, in connection with the origin, negotiation, execution or performance of this Agreement. 4.5. Financial Capacity. Buyer has at least $30,000,000 of funds on hand or available under committed bank facilities sufficient to contribute to the Purchase Price as contemplated by Article II. 4.6. Capitalization. Buyer's authorized capital stock consists of (i) 75,000,000 shares of Convertible Class A Common Stock, par value $.001 per share, of which, as of the date hereof, 17,497,699 shares were issued and outstanding, (ii) 25,000,000 shares of Class B Convertible Common Stock, par value $.001 per share (collectively, with the Class A Convertible Common Stock, the "Common Stock"), of which no shares are issued and outstanding and (iii) 10,000,000 shares of Preferred Stock, par value $.001 per share, of which no shares are issued and outstanding. All of the issued and outstanding shares of Common Stock have been duly authorized and are validly issued, fully paid and nonassessable and none have been issued in violation of any person's preemptive rights. Except as disclosed in Buyer's Form 10-Q filed with the Securities and Exchange Commission (the "SEC") on May 14, 2001 and for employee stock options issued in the ordinary course of business, there are no outstanding or authorized options, rights warrants, calls convertible securities, rights to subscribe, conversion rights or other agreements or commitments to which Buyer is a party or which are binding upon Buyer providing for the issuance or transfer by Buyer of additional shares of capital stock of Buyer. 4.7. Buyer Common Stock. Each Share, if any, to be issued as contemplated by this Agreement has been duly authorized and, when issued in accordance with this Agreement, will be validly issued, fully paid and nonassessable, free and clear of any and all liens and encumbrances, and the issuance of the shares of Stock Consideration will not be in violation of any persons' preemptive rights or any applicable law. 4.8. SEC Reports. Buyer's forms, reports and documents filed with the SEC (collectively, the "SEC Reports") have been prepared in accordance with the applicable requirements of the Securities Act and the Securities Exchange Act of 1934, as amended, and contain all material facts with respect to finances, operations and management of Buyer, as of their respective dates and as of the date hereof, and do not omit to state any material fact required to be stated therein or necessary to make the statement therein not misleading in light of the circumstances in which they were made. Other than as disclosed in Buyer's SEC Reports filed since December 22, 2000 and prior to the date hereof, since December 22, 2000, there has not been any fact, event, change, development, circumstance or effect that is materially adverse to the business, condition (financial or otherwise), results of operations, assets, liabilities, properties or prospects of the Buyer (a "Material Adverse Change") or any fact, event, change, development, circumstance or effect which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Change. 4.9. No Other Representations or Warranties. Except for the representations and warranties contained in this Agreement, neither Buyer nor any other person makes any other express or implied representation or warranty on behalf of Buyer. 4.10. Survival of Representations and Warranties. The representations and warranties of Buyer contained in this Agreement shall survive until the date which is eighteen (18) months after the Closing Date; provided that the representations and warranties contained in Sections 4.1, 4.2 and 4.9 shall survive indefinitely. The Sellers shall be entitled to rely on the representations and warranties contained in this Article IV notwithstanding any due diligence investigation by the Sellers. Any claims made with specificity and in writing by the Sellers under Section 8.2(a)(i) in accordance with the terms of Article VIII prior to the expiration of the survival period with respect to an applicable representation or warranty shall survive the expiration of the representations and warranties until finally and conclusively resolved pursuant to Article VIII. ARTICLE V COVENANTS 5.1. Access; Information and Records; Confidentiality. (a) During the period commencing on the date hereof and ending on the Closing Date, BFC shall and shall cause the other Sellers to, upon reasonable request and notice, afford to Buyer, its counsel, accountants and other authorized representatives reasonable access during normal business hours, in a manner not disruptive to the Business, to the properties, management and Books and Records of the Business in order that Buyer may have the opportunity to make such reasonable investigations as it shall desire to make of the Assets; provided that initial contacts with any member of management regarding agreed-upon issues shall be approved in advance by David Karachuk. For avoidance of doubt, any subsequent contacts by the Buyer with any member of management regarding issues which have been previously discussed with such member of management shall not require advance approval. BFC will cause its officers, employees, accountants and other agents to furnish to Buyer such additional financial and operating data and information with respect to the Brands as Buyer may from time to time reasonably request. (b) Buyer will hold, and will cause its respective directors, officers, employees, accountants, counsel, financial advisors and other representatives and affiliates to hold, any nonpublic information of the Sellers in confidence to the extent required by, and in accordance with, the provisions of the letter dated November 27, 2000, between Buyer and BFC. 5.2. Conduct of the Business Prior to the Closing Date. (a) Except as otherwise contemplated by this Agreement or as set forth in Schedule 5.2, BFC covenants that until the Closing it will, and it will cause the other Sellers to, use all reasonable efforts to continue, in a manner consistent with past practices, to maintain and preserve the value of the Brands and to maintain the ordinary and customary relationships relating to the Brands with its suppliers, customers and others having business relationships with it with a view toward preserving for Buyer to and after the Closing Date the value of the Brands, the Assets and the goodwill associated therewith; provided, however, that nothing contained herein shall prevent the sale of BFC or any of its subsidiaries, affiliates or assets (other than the Assets). (b) Without limiting the foregoing, except as otherwise contemplated by this Agreement or as set forth in Schedule 5.2 and except to the extent that Buyer consents in writing (which consent will not be unreasonably withheld or delayed), with respect to the Brands, BFC shall, in all material respects: (i) continue to conduct marketing, product pricing, promotional and advertising activities in the ordinary course of business consistent with historical practices; (ii) maintain its sales force in a manner sufficient to support the commercially reasonable requirements of the Business; (iii) continue to purchase and maintain inventories in such quantities and quality as necessary to operate the Business in the ordinary course of business in accordance with the Sellers' historical practice; (iv) refrain from shipping finished goods ahead of normally maintained schedules or shipping dates or otherwise accelerating sales in a manner not in the ordinary course of business; (v) continue to provide customer service and maintain shelf space and promotional displays in the ordinary course of business; (vi) continue to operate the Business in compliance with all applicable local, state and federal laws and regulations; (vii) notify Buyer within five (5) business days of any termination or material limitation of, or any materially adverse modification or change in, the business relationship of any Seller with any customer listed on Schedule 3.11; (viii) other than in the ordinary course of business, change in any material manner the ownership of the Assets; (ix) other than in the ordinary course of business, terminate or decrease the rate of compensation or benefits of, any salesperson responsible for the sale and/or distribution of products within the Business; (x) other than in the ordinary course of business, enter into or commit to enter into any material contract, agreement or commitment; or (xi) other than in the ordinary course of business, cancel, terminate or materially modify any performance under any material Contract, amend or otherwise modify any of the material terms or take any other action in connection with any material Contract that would materially impair the interests or rights of the Sellers to be transferred to Buyer hereunder. 5.3. Transition Arrangements. (a) Within fifteen (15) days of the date hereof Buyer will advise the Sellers of its plan to establish its own broker and agent arrangements and during the period commencing on the Closing Date and ending ninety (90) days after the Closing Date, Buyer and the Sellers shall cooperate in order to effectuate an orderly transition. (b) Buyer shall provide assistance to BFC to facilitate the collection of BFC's receivables relating to the Business in a manner consistent with Buyer's collection policies and practices. 5.4. Direct Trade Promotions. Buyer shall honor all obligations for trade promotion programs (including, without limitation, slotting allowances, retailer ads, store display allowances and similar items) in effect on the Closing Date applicable to the Brands in accordance with their respective terms. 5.5. Antitrust Laws. (a) Each party hereto shall (i) make the filings required of it or any of its affiliates under the Antitrust Improvements Act in connection with this Agreement and the transactions contemplated hereby as promptly as practicable following the date hereof, (ii) comply at the earliest practicable date and after consultation with the other party hereto with any request for additional information or documentary material received by it or any of its affiliates from the Federal Trade Commission (the "FTC"), the Antitrust Division of the Department of Justice (the "Antitrust Division") or any other Governmental Authority, (iii) cooperate with one another in connection with any filing under applicable Antitrust Improvements Act and in connection with resolving any investigation or other inquiry concerning the transactions contemplated by this Agreement initiated by the FTC, the Antitrust Division or any other Governmental Authority and (iv) cause the waiting periods under the Antitrust Improvements Act to terminate or expire at the earliest possible date. (b) Each party hereto shall promptly inform the other parties of any material communication made to, or received by such party from, the FTC, the Antitrust Division or any other Governmental Authority regarding any of the transactions contemplated hereby. 5.6. Non-Solicitation. (a) Except as set forth in Schedule 5.6, Buyer will not, from and after the date hereof and for a period of one (1) year following the earlier to occur of the Closing Date or any termination of this Agreement pursuant to Section 9.1, directly or indirectly, solicit, encourage, entice or induce any person who is an employee of BFC or any of the Sellers, to terminate his or her employment with BFC or any of the Sellers, as the case may be; provided that Buyer may take any action which would breach this Section 5.6(a) if Buyer obtains the prior written approval of BFC; and provided, further, that nothing contained herein shall prevent Buyer from employing any person who responds to a general media advertisement or non-directed search inquiry or who makes an unsolicited contact to Buyer for employment. Buyer agrees that any remedy at law for any breach by it of this Section 5.6(a) would be inadequate, and BFC would be entitled to injunctive relief in such a case. If it is ever held that the restriction placed on Buyer by this Section 5.6(a) is too broad to permit enforcement of such restriction to its fullest extent, Buyer agrees that a court of competent jurisdiction may enforce such restriction to the maximum extent permitted by law, and Buyer hereby consents and agrees that such scope may be judicially modified accordingly in any proceeding brought to enforce such restriction. (b) BFC and its subsidiaries will not, from and after the date hereof and for a period of one (1) year following the earlier to occur of the Closing Date or any termination of this Agreement pursuant to Section 9.1, without the prior written approval of Buyer, directly or indirectly, solicit, encourage, entice or induce any person who is an employee of Buyer or its affiliates to terminate his or her employment with Buyer or such affiliates; provided that BFC may take any action which would breach this Section 5.6(b) if BFC obtains the prior written approval of Buyer and provided, further that nothing contained herein shall prevent BFC from employing any person who responds to a general media advertisement or non-directed search inquiry or who makes an unsolicited contact to BFC for employment. BFC agrees that any remedy at law for any breach by it of this Section 5.6(b) would be inadequate, and Buyer would be entitled to injunctive relief in such a case. If it is ever held that the restriction placed on BFC by this Section 5.6(b) is too broad to permit enforcement of such restriction to its fullest extent, BFC agrees that a court of competent jurisdiction may enforce such restriction to the maximum extent permitted by law, and BFC hereby consents and agrees that such scope may be judicially modified accordingly in any proceeding brought to enforce such restriction. 5.7. Further Actions. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement, including using its reasonable best efforts: (i) to obtain, in addition to approvals discussed in Section 5.5 hereof, any licenses, permits, consents, approvals, authorizations, qualifications and orders of federal, state and local Governmental Authorities and parties to contracts with BFC or any of its subsidiaries as are required in connection with the consummation of the transactions contemplated hereby; (ii) to effect, in addition to filings discussed in Section 5.5 hereof, all registrations and filings that are necessary to be made by such party; (iii) to defend any lawsuits or other legal proceedings against such party, whether judicial or administrative, whether brought derivatively or on behalf of third parties (including Governmental Authorities or officials), challenging this Agreement or the other transactions contemplated hereby; and (iv) to furnish to each other such information and assistance and to consult with respect to the terms of any registration, filing, application or undertaking as reasonably may be requested in connection with the foregoing. 5.8. Trademark License Agreements. (a) (i) At the Closing, Borden, Inc. ("Borden" and/or BFC will enter into an agreement substantially in the form of Exhibit C-1 (the "Borden Trademark License Agreement") with Buyer. (ii) At the Closing, Buyer will enter into an agreement substantially in the form of Exhibit C-2 (the "R&F Trademark License Agreement") with BFC or the Relevant Transferee. (iii) At the Closing, Buyer will enter into an agreement substantially in the form of Exhibit C-3 (the "Mrs. Grass Trademark License Agreement") with BFC Investments or the Relevant Transferee. (iv) At the Closing, Buyer will enter into an agreement substantially in the form of Exhibit C-4 (the "Ancillary Trademark License Agreement"; together with the Borden Trademark License Agreement, the R&F Trademark License Agreement, the Mrs. Grass Trademark License Agreement and the Ancillary Trademark License Agreement, the "Trademark License Agreements") with BFC Investments or the Relevant Transferee. 5.9. Access to Records and Personnel. (a) The parties shall retain the Books and Records, documents, instruments, accounts, correspondence, writings, evidences of title and other papers relating to the Brands and the Assets in their possession for the period of time set forth in their respective records retention policies on the Closing Date or for such longer period as may be required by law or any applicable court order. (b) The parties will allow each other (and Buyer shall allow to Borden) reasonable access to such Books and Records and other documents, and to personnel having knowledge of the whereabouts and/or contents of such Books and Records and other documents, for legitimate business reasons, such as the preparation of financial statements, tax returns or the defense of litigation or tax audits. Each party shall be entitled to recover its out-of-pocket costs (including, without limitation, copying costs) incurred in providing such records and/or personnel to the other party. The requesting party will hold in confidence all confidential information identified as such by, and obtained from, the disclosing party, any of its officers, agents, representatives or employees, provided, however, that information which was (i) in the public domain; (ii) was in fact known to the requesting party prior to disclosure by the disclosing party, its officers, agents, representatives or employees; or (iii) becomes known to the requesting party from or through a third party not under an obligation of non-disclosure to the disclosing party, shall not be deemed to be confidential information. 5.10. Inventory. (a) (i) BFC or the Relevant Transferee shall use reasonable commercial efforts to cause the Closing Date Inventory (organized by UPC Code) to be at least equal to the amount of Inventory by UPC Code which it customarily would have in the ordinary course of business based on past practice and normal customer requirements. (ii) If Buyer shall request by written notice to BFC or the Relevant Transferee that Buyer wants to increase the Closing Date Inventory to levels above those customarily maintained in the ordinary course of business, BFC or the Relevant Transferee shall use its reasonable commercial efforts to produce such requested additional Inventory. Any such written notice shall indicate by UPC Code the level to which Buyer desires to increase the Closing Date Inventory. The requirement that BFC and the Relevant Transferee use its reasonable commercial efforts shall be subject to BFC's and the Relevant Transferee's capacity limitations and shall not obligate BFC or the Relevant Transferee to make any expenditure for equipment or to run any shifts for which labor union consent would be required. Buyer agrees, upon the presentation of written substantiation, promptly to reimburse BFC or the Relevant Transferee, as the case may be, for any incremental costs incurred to increase the levels of Closing Date Inventory, including, without limitation, any difference between basic hourly rates and overtime rates for labor and costs of co-packaged product relative to product produced in-house. (iii) In the event that this Agreement is terminated without the Closing having occurred other than due to a material breach of this Agreement by the Sellers, Buyer shall pay to BFC or the Relevant Transferee, as the case may be, all warehousing costs related to storing any Inventory that BFC or the Relevant Transferee has produced at the request of Buyer in excess of the amount of Inventory which would be normally available in the ordinary course of business from the date of production to the date of the disposition of such Inventory by BFC or the Relevant Transferee, as the case may be (up to a maximum of six (6) months). (iv) At the Closing, BFC or the Relevant Transferee will enter into an agreement substantially in the form of Exhibit D-1 (the "Contract Packaging Agreement") with Buyer providing for the manufacture of pasta products by BFC or the Relevant Transferee from the Facilities. (v) At the Closing BFC, together with one or more appropriate subsidiaries of BFC, or the Relevant Transferee will enter into an agreement substantially in the form of D-2 (the "Whole Wheat Packaging Agreement") with Buyer providing for the manufacture of whole wheat pasta products by BFC or the Relevant Transferee from the BFC facility located in Montreal, Quebec, Canada. 5.11. Post-Closing Identification. Buyer shall ensure that products produced after the Inventory Cutoff and any coupons and other promotional items issued after the Closing Date are distinguishable from products produced prior to the Inventory Cutoff and coupons and other promotional items issued or dropped prior to the Closing Date. 5.12. "As Is" Condition. Notwithstanding anything herein to the contrary, except as may be expressly represented or warranted herein, Buyer agrees that it shall accept all the Assets in an "As Is" "Where Is" condition at the Closing Date. BFC MAKES NO WARRANTY WITH RESPECT TO THE VALUE, CONDITION OR USE OF THE ASSETS, WHETHER EXPRESSED OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 5.13. Misapplied Deductions. (a) Until the nine-month anniversary of the Closing Date, in the event that customers of the Business bill Buyer or make deductions against Buyer's otherwise valid customer receivables for trade promotion programs (such as slotting allowances, retailer ads, store display allowances and similar items) or with respect to returns (such as for damaged or unsaleable goods) applicable to any of BFC's businesses other than the Business, Buyer will promptly forward such bill and such deductions, with commercially reasonable supporting documentation, to BFC which will, in turn promptly pay all valid claims supported by such documentation; provided, that BFC shall be permitted to assign its obligations under this Section 5.13(a), in whole or in part, to the Relevant Transferee and upon the assumption of the obligations of BFC under this Section 5.13(a) by the Relevant Transferee, BFC shall be relieved of all further obligations and liabilities under this Section. (b) Until the nine-month anniversary of the Closing Date, in the event customers of the Business bill BFC or any Relevant Transferee or make deductions against BFC's or any Relevant Transferee's otherwise valid customer receivables for trade promotion programs (such as slotting allowances, retailer ads, store display allowances and similar items) or with respect to returns (such as for damaged or unsaleable goods) applicable to the Business, BFC or such Relevant Transferee will promptly forward such bill and such deductions, with commercially reasonable supporting documentation, to Buyer which will, in turn, promptly pay all valid claims supported by such documentation. Without limiting the foregoing, Buyer hereby assumes the obligations of BFC to any Relevant Transferees with respect to Misapplied Deductions. BFC represents to Buyer that its obligations to Relevant Transferees with respect to Misapplied Deductions is or shall be consistent with its obligations to Buyer under this Section 5.13. (c) All payments required to be made under Section 5.13(a) or 5.13(b) shall be made as soon as practicable after the fifteenth day and the thirtieth day of each month. 5.14. Services Agreement. On the Closing Date, Buyer and BFC shall execute and deliver an agreement, substantially in the form attached hereto as Exhibit E (the "Services Agreement"). 5.15. No Sale Negotiations. Until the earlier of the Closing and the termination of this Agreement pursuant to its terms, BFC shall not, shall cause its subsidiaries, affiliates and each of its affiliates' directors, officers, employees not to and shall use its reasonable best efforts to cause its representatives not to, directly or indirectly, other than with Buyer, (i) initiate, solicit or knowingly encourage any inquiries, proposals or offers (whether initiated by BFC or otherwise) with respect to the acquisition of all or a material portion of the Brands and Assets (a "Potential Transaction") from any party or (ii) have any discussion with, enter into negotiations with respect to, or provide information to any other party in connection with a Potential Transaction. 5.16. Reporting Requirements. Each of the Sellers and Buyer shall notify and keep the other parties hereto advised as to (a) any litigation or administrative proceeding pending and known to such party that challenges this Agreement or the transactions contemplated hereby or seeks to prevent the consummation of any of the transactions contemplated by this Agreement and (b) any event or circumstance which such party believes would result in the failure to satisfy any of the conditions set forth in Section 6.1 and 6.2 (in the case of the Buyer) or Section 6.1 and 6.3 (in the case of the Sellers) or would materially interfere with or delay the consummation of any of the transactions contemplated hereby. 5.17. Financing. Buyer shall use its reasonable best efforts to obtain the debt financing necessary to pay the entire Purchase Price in cash. ARTICLE VI CONDITIONS 6.1. Conditions Precedent to Obligations of Buyer and the Sellers. The respective obligations of Buyer and the Sellers to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to the Closing Date of the following conditions: (a) No Injunction. At the Closing Date, there shall be no injunction, restraining order or decree of any nature of any court or governmental agency or body of competent jurisdiction that is in effect that restrains or prohibits the consummation of the Purchase or the transfer to Buyer by the Sellers of any Assets, except for the transfer of any Assets the failure of which to transfer would not, individually or in the aggregate, be material to the value of the Brands taken as a whole; provided, however, that the parties invoking this condition shall use their best efforts to have such injunction, order or decree vacated or denied. (b) Regulatory Authorizations. All consents, approvals, authorizations and orders of federal and state governmental and regulatory authorities as are necessary in connection with the transfer of the Assets to Buyer or which if not obtained would be reasonably likely to subject Buyer or any Seller, or any officer, director or agent of any such person to civil or criminal liability or could render such transfer void or voidable (the "Required Consents") shall have been obtained, except for Required Consents the failure of which to obtain, individually or in the aggregate, are not material to the value of the Brands taken as a whole and the failure of which to obtain would not subject Buyer or any Seller, or any officer, director, or agent of any such person to civil or criminal liability; provided that for purposes of this Section 6.1(b) applicable waiting periods specified under the Antitrust Improvements Act with respect to the transactions contemplated by this Agreement shall have lapsed or been terminated. (c) Expiration of the Antitrust Improvements Act Waiting Period. The waiting period (and any extension thereof) under the Antitrust Improvements Act shall have expired or shall have been terminated. (d) Pending Litigation. No action, suit or proceeding brought by any Governmental Authority or body of competent jurisdiction shall be pending before any court of competent jurisdiction wherein an unfavorable injunction, judgment, order, decree or ruling would (i) prevent the consummation of any of the transactions contemplated by this Agreement or (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation. 6.2. Conditions Precedent to Obligation of the Sellers. The obligation of the Sellers to consummate the transactions provided for in this Agreement is subject to fulfillment of each of the following conditions: (a) Accuracy of Buyer's Representations and Warranties; Covenants of Buyer. The representations and warranties of Buyer contained in this Agreement (except as affected by the transactions contemplated in this Agreement) that are qualified as to materiality shall be true and correct and the representations and warranties of Buyer set forth in this Agreement that are not so qualified shall be true and correct in all material respects, in each case on the date of this Agreement (except to the extent cured prior to the Closing Date) and on the Closing Date as though made on the Closing Date, except to the extent such representations and warranties speak as of an earlier date; Buyer shall have complied in all material respects with all covenants contained in this Agreement to be performed by it prior to Closing; and BFC shall have received a certificate signed by an officer of Buyer to such effect; provided, that this Section 6.2(a) shall not apply with respect to the representations and warranties set forth in Sections 4.6, 4.7 and 4.8 if no Stock Consideration is being issued as part of the Purchase Price; (b) Services Agreement. Buyer shall have executed and delivered to BFC the Services Agreement; (c) Assumption Agreement. Buyer shall have executed and delivered to BFC an undertaking (the "Assumption Agreement") substantially in the form of Exhibit F pursuant to which Buyer agrees to assume all Assumed Liabilities; (d) Contract Packaging Agreements. Buyer shall have executed and delivered to BFC or the Relevant Transferee, as applicable, the Contract Packaging Agreement and the Whole Wheat Packaging Agreement; (e) Exemption Certificates. Buyer shall have executed and delivered to BFC all certificates required by all relevant taxing authorities that are necessary to support any exemption from the imposition of any sales or similar tax on the transfer of the Assets; and (f) Trademark License Agreements. Buyer shall have executed and delivered to Borden, BFC or the Relevant Transferee, as the case may be, each of the applicable Trademark License Agreements. 6.3. Conditions Precedent to Obligation of Buyer. The obligation of Buyer to consummate the transactions provided for in this Agreement is subject to fulfillment of each of the following conditions: (a) Accuracy of Representations and Warranties of BFC; Covenants of BFC. The representations and warranties of BFC contained in this Agreement (except as affected by the transactions contemplated in this Agreement) that are qualified as to materiality shall be true and correct and the representations and warranties of BFC set forth in this Agreement that are not so qualified shall be true and correct in all material respects, in each case on the date of this Agreement (except to the extent cured prior to the Closing Date) and on the Closing Date as though made on the Closing Date, except to the extent such representations and warranties speak as of an earlier date; BFC shall have complied in all material respects with all covenants contained in this Agreement to be performed by it prior to Closing; and Buyer shall have received a certificate signed by an officer of BFC to such effect; (b) Services Agreement. BFC or the Relevant Transferee shall have executed and delivered to Buyer the Services Agreement; (c) Trademark License Agreements. Borden, BFC and/or the Relevant Transferee, as the case may be, shall have executed and delivered to Buyer each of the applicable Trademark License Agreements; (d) Bill of Sale and Assignment. BFC shall have executed and delivered to Buyer a bill of sale and assignment, substantially in the form of Exhibit G hereto; (e) Contract Packaging Agreements. BFC or the Relevant Transferee, as applicable, shall have executed and delivered to Buyer the Contract Packaging Agreement and the Whole Wheat Packaging Agreement; (f) Intangible Property Assignment. For recording purposes, BFC, BFC Investments and BFIC shall each have executed and delivered to Buyer an agreement, substantially in the form of Exhibit H hereto, assigning its respective rights to the intangible property set forth in Section 1.2; and (g) Material Adverse Effect. No Material Adverse Effect shall have occurred since the date of this Agreement. ARTICLE VII CLOSING 7.1. Closing Date. (a) Unless this Agreement shall have been terminated and the transactions herein shall have been abandoned pursuant to Article IX hereof, and subject to the satisfaction or waiver of the conditions set forth in Article VI, the closing of the transactions contemplated by this Agreement (the "Closing") shall take place at 10:00 a.m. on the fifth business day following the satisfaction or waiver of each of the conditions set forth in Article VI hereof (the "Closing Date") at the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, NY 10017, unless another date, time or place is agreed to in writing by the parties hereto. The Closing shall be deemed effective as of 12:01 a.m., New York City time, on the Closing Date. 7.2. Buyer Deliveries. At the Closing, Buyer shall deliver (i) the BFC Purchase Price, the BFC Investments and BFIC Purchase Price and the Cost of Closing Date Inventory as provided in Section 2.1, (ii) the documents described in Section 6.2 hereof and (iii) such other documents and instruments as counsel for Buyer and BFC mutually agree to be reasonably necessary to consummate the transactions described herein. 7.3. Seller Deliveries. At the Closing, the Sellers shall deliver or cause one or more of their respective affiliates to deliver (i) the documents described in Section 6.3 hereof and (ii) such other documents and instruments as counsel for Buyer and BFC mutually agree to be reasonably necessary to consummate the transactions described herein. ARTICLE VIII INDEMNIFICATION 8.1. Indemnification by the Sellers. (a) The Sellers shall defend, indemnify and hold Buyer and its present and future affiliates harmless from and against and in respect of any and all actual losses, liabilities, damages, judgments, settlements and expenses, including reasonable attorneys' fees but excluding lost profits, consequential, punitive, special or indirect damages, incurred directly by Buyer and its affiliates (hereinafter "Buyer Losses") (i) which arise out of the ownership, operation or use of any of the Excluded Assets or Excluded Liabilities or the satisfaction of any Permitted Liens, (ii) which are directly related to any Covered Product Recalls or (iii) subject to Section 3.16, any breach of the representations, warranties and covenants contained herein (reading such representations and warranties without regard to any materiality qualifiers (including "Material Adverse Effect") contained therein, but such representations and warranties shall not be read to exclude dollar thresholds contained therein). Buyer shall give the Sellers prompt written notice of any third party claim which may give rise to any indemnity obligation under this Article, together with the estimated amount of such claim for the representation, warranty and/or covenant that has been alleged to have been breached, and the Sellers shall have the right to assume the defense of any such claim through counsel of their own choosing, by so notifying Buyer within sixty (60) days of receipt of Buyer's written notice; provided, however, that the Sellers' counsel shall be reasonably satisfactory to Buyer. Failure to give prompt notice shall not affect the indemnification obligations hereunder in the absence of actual prejudice. If Buyer desires to participate in any such defense assumed by the Sellers, it may do so at its sole cost and expense. If the Sellers decline to assume any such defense, it shall be liable for all reasonable costs and expenses of defending such claim incurred by Buyer, including reasonable fees and disbursements of counsel. None of the Sellers, on one hand, or the Buyer, on the other hand, shall, without the prior written consent of the other, which shall not be unreasonably withheld, settle, compromise or offer to settle or compromise any such claim or demand on a basis which would result in the imposition of a consent order, injunction or decree which would restrict the future activity or conduct of the other party or any subsidiary or affiliate thereof or if such settlement or compromise does not include an unconditional release of the other party for any liability arising out of such claim or demand or any related claim or demand. (b) Other than with respect to losses described in Section 8.1(a)(ii), the Sellers shall not have any obligation under clause (iii) of Section 8.1(a) to indemnify Buyer and its affiliates from and against any Buyer Losses caused by the breach of any representation or warranty or covenant of the Sellers (i) unless the Buyer Losses suffered in respect of each single or related occurrence of a breach of any such representation or warranty for which Buyer seeks indemnity shall be equal to or greater than $25,000 and (ii) until Buyer and its affiliates have suffered Buyer Losses for which Buyer is entitled to be indemnified for the breach of any such representation and warranty, in excess of $600,000 in the aggregate (after which point the Sellers will only be obligated to indemnify Buyer and its affiliates for the amount of Buyer Losses in excess of the $600,000 deductible). Notwithstanding the foregoing, the liability of the Sellers to indemnify Buyer and its affiliates under clauses (ii) and (iii) of Section 8.1(a) shall not exceed 33% of the Purchase Price. (c) Following the Closing, the indemnity provided in this Section 8.1 shall be the sole and exclusive remedy of Buyer and its affiliates against the Sellers at law or equity for any breach of a representation or warranty (except in the case of fraud). 8.2. Indemnification by Buyer. (a) Buyer shall defend, indemnify and hold the Sellers and their respective present and future affiliates harmless from and against and in respect of any and all actual losses, liabilities, damages, judgments, settlements and expenses, including reasonable attorney fees but excluding lost profits, consequential, punitive, special or indirect damages, incurred directly by the Sellers and their respective affiliates (hereinafter "Sellers Losses"; together with Buyer Losses, "Losses") arising out of (i) subject to Section 4.9, any breach of any of the representations, warranties and covenants of Buyer contained herein (reading such representations and warranties (other than those representations and warranties set forth in Section 4.8) without regard to any materiality qualifiers contained therein), (ii) the ownership, operation or use of the Assets on or after the Closing Date or (iii) the Assumed Liabilities (other than Covered Product Recalls). The Sellers shall give Buyer prompt written notice of any third party claim which may give rise to any indemnity obligation under this Article, together with the estimated amount of such claim, and Buyer shall have the right to assume the defense of any such claim through counsel of its own choosing, by so notifying the Sellers within sixty (60) days of receipt of the Sellers' written notice; provided, however, that Buyer's counsel shall be reasonably satisfactory to the Sellers. Failure to give prompt notice shall not affect the indemnification obligations hereunder in the absence of actual prejudice. If the Sellers desires to participate in any such defense assumed by Buyer it may do so at its sole cost and expense. If Buyer declines to assume any such defense, it shall be liable for all costs and expenses of defending such claim incurred by the Sellers or their respective affiliates, including reasonable fees and disbursements of counsel. None of the Sellers, on one hand, nor the Buyer, on the other hand, shall, without the prior written consent of the other party, which shall not be unreasonably withheld, settle, compromise or offer to settle or compromise any such claim or demand on a basis which would result in the imposition of a consent order, injunction or decree which would restrict the future activity or conduct of the other party or any subsidiary or affiliate thereof or if such settlement or compromise does not include an unconditional release of the other party for any liability arising out of such claim or demand. (b)Buyer shall not have any obligation under clause (i) of Section 8.2(a) to indemnify the Sellers and their respective affiliates from and against any Sellers Losses caused by the breach of any representation, warranty or covenant of Buyer (i) unless the Sellers Losses suffered in respect of each single or related occurrence of a breach of any such representation or warranty for which Sellers seek indemnity shall be equal to or greater than $25,000 and (ii) until the Sellers and their respective affiliates have suffered Sellers Losses for which the Sellers are entitled to be indemnified for the breach of any such representation and warranty, in excess of $600,000 in the aggregate (after which point Buyer will only be obligated to indemnify the Sellers and their respective affiliates for the amount of Sellers Losses in excess of the $600,000 deductible). Notwithstanding the foregoing, the liability of Buyer to indemnify the Sellers and their respective affiliates under clause (i) of Section 8.2(a) shall not exceed 33% of the Purchase Price. (c) Following the Closing, the indemnity provided in this Section 8.2 shall be the sole and exclusive remedy of the Sellers and their respective affiliates against Buyer at law or equity for any breach of a representation or warranty (except in the case of fraud). 8.3. Indemnification Calculations. (a) The amount of any Sellers Losses or Buyer Losses for which indemnification is provided under this Article VIII shall be computed net of any insurance proceeds received by the indemnified party in connection with such Losses. If the amount with respect to which any claim is made under this Article VIII (an "Indemnity Claim") gives rise to a currently realizable Tax Benefit (as defined below) to the party making the claim, the indemnity payment shall be reduced by the amount of the Tax Benefit available to the party making the claim. To the extent such Indemnity Claim does not give rise to a currently realizable Tax Benefit, if the amount with respect to which any Indemnity Claim is made gives rise to a subsequently realized Tax Benefit to the party that made the claim, such party shall refund to the indemnifying party the amount of such Tax Benefit when, as and if realized. For the purposes of this Agreement, any subsequently realized Tax Benefit shall be treated as though it were a reduction in the amount of the initial Indemnity Claim, and the liabilities of the parties shall be redetermined as though both occurred at or prior to the time of the indemnity payment. For purposes of this Section 8.3, a "Tax Benefit" means an amount by which the tax liability of the party (or group of corporations including the party) is reduced (including, without limitation, by deduction, reduction of income by virtue of increased tax basis or otherwise, entitlement to refund, credit or otherwise) plus any related interest received from the relevant taxing authority and taking into account the extent, if any, to which the indemnification payment must under applicable law be treated other than as an adjustment to the Purchase Price. Where a party has other losses, deductions, credits or items available to it, the Tax Benefit from any losses, deductions, credits or items relating to the Indemnity Claim shall be deemed to be realized proportionately with any other losses, deductions, credits or items. For the purposes of this Section 8.3, a Tax Benefit is "currently realizable" to the extent it can be reasonably anticipated that such Tax Benefit will be realized in the current taxable period or year or in any tax return with respect thereto (including through a carryback to a prior taxable period) or in any taxable period or year prior to the date of the Indemnity Claim. In the event that there should be a determination disallowing the Tax Benefit, the indemnifying party shall be liable to refund to the indemnified party the amount of any related reduction previously allowed or payments previously made to the indemnifying party pursuant to this Section 8.3. The amount of the refunded reduction or payment shall be deemed a payment under this Section 8.3 and thus shall be paid subject to any applicable reductions under this Section 8.3. (b) The parties agree that any indemnification payments made pursuant to this Agreement shall be treated for tax purposes as an adjustment to the Purchase Price, unless otherwise required by applicable law. ARTICLE IX TERMINATION 9.1. Termination Events. Without prejudice to other remedies which may be available to the parties by law or this Agreement, this Agreement may be terminated and the transactions contemplated herein may be abandoned: (a) by mutual consent of the parties hereto; (b) by any party by notice to the other party if the Closing shall not have been consummated on or before September 30, 2001, unless extended by written agreement of the parties hereto, so long as the party terminating this Agreement shall not be in default or breach hereunder. 9.2. Effect of Termination. In the event of any termination of the Agreement as provided in Section 9.1 above, this Agreement shall forthwith become wholly void and of no further force and effect and there shall be no liability on the part of Buyer or the Sellers, except that (i) the obligations of Buyer and BFC under Sections 5.1, 5.6, 5.10(ii) and 11.6 of this Agreement shall remain in full force and effect and (ii) termination shall not preclude either party from suing the other party for breach of this Agreement. ARTICLE X ALTERNATIVE DISPUTE RESOLUTION 10.1. Alternative Dispute Resolution. The parties shall attempt in good faith to resolve any dispute arising out of or relating to this Agreement promptly by negotiations between executives who have authority to settle the controversy. Any party may give the other party(ies) written notice of any dispute not resolved in the normal course of business. Within twenty (20) days after delivery of said notice, executives of both parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to exchange relevant information and to attempt to resolve the dispute. If the matter has not been resolved within sixty (60) days of the disputing party's original notice, or if the parties fail to meet within twenty (20) days, either party may initiate legal proceedings to resolve the controversy or claim. If a party's negotiator intends to be accompanied at a meeting by an attorney, the other party's negotiator shall be given at least three (3) working days' notice of such intention and may also be accompanied by an attorney. All negotiations pursuant to this clause are confidential and shall be treated as compromise and settlement negotiations for purposes of the Federal Rules of Evidence and state rules of evidence. ARTICLE XI MISCELLANEOUS AGREEMENTS OF THE PARTIES 11.1. Notices. All notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if delivered personally or mailed, certified or registered mail with postage prepaid, or sent by telegram or telecopy, as follows: If to Buyer: American Italian Pasta Company 4100 North Mulberry, Suite 200 Kansas City, Missouri 64116 Attn: President and Chief Executive Officer Fax: 816-584-5302 and Attn: Chief Financial Officer Fax: 816-584-5736 With a copy to: Blackwell Sanders Peper Martin LLP 2300 Main Street, Suite 1000 Kansas City, Missouri 64108 Attn: James M. Ash Fax: 816-983-8080 If to BFC: Nancy G. Brown Vice President and General Counsel Borden Foods Corporation 180 East Broad Street Columbus, Ohio 43215 Fax: 614-225-4420 With a copy to: William F. Stoll, Jr., Esq. Senior Vice President and General Counsel Borden, Inc. 180 East Broad Street Columbus, OH 43215 Fax: 614-627-8374 and David J. Sorkin, Esq. Marni J. Lerner, Esq. Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY 10017 Telecopy: 212-455-2502 If to Borden: To it at the address set forth above, with a copy to Simpson Thacher & Bartlett at the address set forth above. or to such other person or address as a party shall specify by notice in writing to the other parties. All such notices, requests, demands, waivers and communications shall be deemed to have been received on the date of personal delivery or on the third business day after the mailing thereof or, in the case of notice by telecopier, when receipt thereof is confirmed by telephone. 11.2. Bulk Transfers. Buyer waives compliance with the provisions of all applicable laws relating to bulk transfers in connection with this sale of assets and the Sellers agree to indemnify Buyer for any costs incurred by Buyer related to noncompliance with any bulk transfer laws in respect of the contemplated transactions. 11.3. Transaction Taxes. Buyer shall be responsible for the payment of all sales and transfer taxes, if any, which may be payable with respect to the consummation of the transactions contemplated by this Agreement and to the extent any exemptions from such taxes are available Buyer and BFC shall cooperate to prepare any certificates or other documents necessary to claim such exemptions. 11.4. Further Assurances; Asset Returns. Upon request from time to time, BFC shall execute or cause the other Sellers to execute and deliver all documents, take all rightful oaths, and do all other acts that may be reasonably necessary or desirable, in the reasonable opinion of counsel for Buyer, to perfect or record the title of Buyer, or any successor of Buyer, to the Assets transferred or to be transferred under this Agreement, or to aid in the prosecution, defense, or other litigation of any rights arising from said transfer (provided that Buyer shall reimburse the Sellers for all out-of-pocket costs and expenses resulting from any such request). In the event that Buyer receives any assets of BFC that are not intended to be transferred pursuant to the terms of this Agreement, whether or not related to the Brands, Buyer agrees to promptly return such assets to BFC at BFC's expense. 11.5. Other Covenants. To the extent that any consents needed to assign to Buyer any of the Assets have not been obtained on or prior to the Closing Date this Agreement shall not constitute an assignment or attempted assignment thereof if such assignment or attempted assignment would constitute a breach thereof. If any such consent shall not be obtained on or prior to the Closing Date, then (i) BFC and Buyer shall use their reasonable efforts in good faith to obtain such consent as promptly as practicable thereafter and (ii) if in the reasonable judgment of Buyer such consent may not be obtained, the parties shall use reasonable efforts in good faith to cooperate, and to cause each of their respective affiliates to cooperate, in any lawful arrangement designed to provide for Buyer the benefits under any such Assets. 11.6. Expenses. Whether or not the transactions contemplated hereby are consummated, except as expressly provided herein, BFC and Buyer shall each pay their respective fees and expenses incident to the negotiation, preparation and execution of this Agreement, including attorneys', accountants' and other advisors' fees and the fees and expenses of any broker, finder or agent retained by such party in connection with the transactions contemplated by this Agreement. 11.7. Entire Agreement. This Agreement (including the Schedules and Exhibits hereto and the documents referred to herein) constitutes the entire agreement between the parties hereto and supersedes all prior agreements and understandings, oral and written, between the parties hereto with respect to the subject matter hereof. 11.8. No Third Party Beneficiaries. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. Nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto or their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except that the provisions of Sections 5.8, 5.10, 5.13, 11.8 and 11.18 shall inure to the benefit of the Relevant Transferee and any of its transferees. 11.9. Possible Adjustment to Purchase Price (a) If and only if it is required by the FTC or the Antitrust Division in order to permit the consummation of the Purchase by September 30, 2001, Buyer shall agree to purchase fewer Brands than otherwise contemplated by this Agreement; provided that neither party hereto shall be required to consummate the Purchase if more than 20.5 million Pasta Pounds are attributable to the Brands that Buyer may not purchase pursuant to a requirement of the FTC or the Antitrust Division. If fewer Brands are transferred to Buyer pursuant to this Section 11.9 than as otherwise initially contemplated by this Agreement, the Purchase Price shall be reduced by $5.60 per $1.00 of DPCDA attributable to the Brands not transferred for the year ended December 31, 2000; provided, that if the number of Pasta Pounds attributable to such Brands exceeds 14.9 million, the Purchase Price shall be reduced by $8.40 per $1.00 of DPCDA attributable to such Brands. Schedule 11.9 sets forth the number of Pasta Pounds and DPCDA attributable to each of the Brands. Each of the parties hereto agrees to execute and deliver all documents (including amendments to this Agreement and the other agreements contemplated hereby) and do all other acts that may be reasonably necessary or desirable to give effect to this adjustment of the Purchase Price and the transfer of the Brands in a manner consistent with the other agreements set forth herein. All Brands not transferred to Buyer pursuant to this Section 11.9 shall remain the sole property of the Sellers. (b) Notwithstanding anything in this Agreement to the contrary, the parties will use reasonable best efforts to satisfy the conditions set forth in Section 6.1(b) and Section 6.1(c) and to effect the actions required by Section 5.5 and Section 5.7 of this Agreement without taking the actions contemplated in Section 11.9(a) or, if the conditions set forth in Section 6.1(b) or Section 6.1(c) cannot be satisfied without taking the actions contemplated by Section 11.9(a), by minimizing the extent to which the actions contemplated by Section 11.9(a) must be taken. 11.10. Assignability. Except as expressly set forth in this Agreement, this Agreement shall not be assigned by any of the parties hereto without the prior written consent of the other parties hereto; provided that Buyer may, without the prior written consent of BFC, assign all of its rights to a direct or indirect wholly owned subsidiary of Buyer; provided that, notwithstanding any such assignment, Buyer shall remain liable to perform all of its obligations hereunder, including without limitation the obligations to fund the full amount of the Purchase Price. 11.11. Amendment and Modification; Waiver. Subject to applicable law, this Agreement may be amended, modified and supplemented by a written instrument authorized and executed on behalf of the parties hereto at any time prior to the Closing Date with respect to any of the terms contained herein. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and executed by the party so waiving. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants, or agreements contained herein, and in any documents delivered or to be delivered pursuant to this Agreement and in connection with the Closing hereunder. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other or subsequent breach. 11.12. Public Announcements. Unless otherwise required by law, prior to the Closing Date, no news release or other public announcement pertaining to the transactions contemplated by this Agreement will be made by or on behalf of any party. Prior to issuing a press release or other public announcement required by law with respect to the execution and delivery of or the transactions contemplated by this Agreement, Buyer and BFC shall consult with each other and each party shall have reasonable opportunity to comment on such press release and prior to issuing a press release or other public announcement with respect to the Closing, Buyer and BFC shall agree on the form of such press release or other public announcement. 11.13. Schedules and Exhibits. All exhibits and schedules hereto are hereby incorporated by reference and made a part of this Agreement. Any fact or item which is clearly disclosed on any Schedule or Exhibit to this Agreement in such a way as to make its relevance to a representation or representations made elsewhere in this Agreement or to the information called for by another Schedule or other Schedules (or Exhibit or other Exhibits) to this Agreement readily apparent shall be deemed to be an exception to such representation or representations or to be disclosed on such other Schedule or Schedules (or Exhibit or Exhibits), as the case may be, notwithstanding the omission of a reference or cross-reference thereto. Any fact or item disclosed on any Schedule or Exhibit hereto shall not by reason only of such inclusion be deemed to be material and shall not be employed as a point of reference in determining any standard of materiality under this Agreement. 11.14. Section Headings; Table of Contents. The section headings contained in this Agreement and the Table of Contents to this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 11.15. Severability. If any provision of this Agreement shall be declared by any court of competent jurisdiction to be illegal, void or unenforceable, all other provisions of this Agreement shall not be affected and shall remain in full force and effect. 11.16. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. 11.17. Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States located in the State of New York, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (i) consents to submit itself to the personal jurisdiction of the United States District Court for the Southern District of New York or any court of the State of New York located in such district in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction or venue by motion or other request for leave from any such court and (iii) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than such courts sitting in the State of New York. 11.18. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of New York. 11.19. Certain Definitions. For purposes of this Agreement, the term: (i) "affiliate" of a person means a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first mentioned person; (ii) "Borden Marks" means any trademarks, service marks, trade names, logos, brand names, trade dress, domain names or other source indicators of BFC, BFC Investments or BFIC and their respective affiliates incorporating the word "Borden" or "Elsie" or the cow head design or used in the continuing business of Borden and any translations, adaptations, derivations or combinations thereof or any goodwill associated therewith. (iii) "Covered Product Recalls" means a recall of products manufactured by the Sellers prior to the Closing Date that is made by order of a Governmental Authority or at the request of a customer that is made as a result of such products being adulterated or infested by vermin or because of a reasonable concern for the health and safety of the public that occurs within twelve (12) months after the Closing Date and that results in Buyer Losses with respect to the Brands of $500,000 or greater. (iv) "Customer Lists" means all lists of current and past customers of the Business, including those set forth on Schedule 1.2(a)(i)(A) which lists all "bill-to" and "ship-to" purchasers for the period January 1, 2000 to May 1, 2001, and copies and, if available, electronic versions of all related files and data; (v) "DPCDA" means, with respect to any Brands, revenues attributable to such Brands less, to the extent they are attributable to such assets, the following: discounts and allowances, plant-level cost of goods sold (excluding depreciation), transportation and warehousing, trade promotions, advertising and consumer promotions, sales commissions, brand management expenses and other direct Brand costs, in certain cases allocated to such assets consistent with BFC's internal reporting policies. (vi) "Governmental Authority" means any federal, state, local or foreign governmental or regulatory or administrative department, court, commission, board, bureau, agency, authority, or instrumentality; (vii) "Misapplied Deductions" means bills or deductions made against a Relevant Transferee's otherwise valid customer receivables for trade promotion programs (such as slotting allowances, retailer ads, store display allowances and similar items) or with respect to returns (such as for damaged or unsaleable goods) applicable to the Business and submitted to Buyer by a Relevant Transferee for payment or reimbursement; (viii) "Permitted Liens" means the following: (A) mechanics', workmen's, repairmen's, warehousemen's, carriers' or other like liens arising or incurred in the ordinary course of business if the underlying obligations are not past due; and (B) other liens, charges or other encumbrances which would not be reasonably likely to have, individually or in the aggregate, a Material Adverse Effect; (ix) "person" means an individual, corporation, partnership, association, trust, incorporated organization, other entity or group (as defined in Section 13(d)(3) of the Exchange Act); (x) "Relevant Transferee" means, with respect to any rights or obligations under this Agreement, the person (or persons) who has (or have) purchased the assets or assumed the liabilities related to such rights or obligations from BFC, BFC Investments or BFIC, as the case may be; (xi) "subsidiary" or "subsidiaries" of Buyer, BFC or any other person means any corporation, partnership, joint venture or other legal entity of which Buyer, BFC or such other person, as the case may be (either alone or through or together with any other subsidiary), owns, directly or indirectly, 50% or more of the stock or other equity interests the holder of which is generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity; and (xii) "the knowledge of" or "the best knowledge of" a party hereto when modifying any representation and warranty shall mean that such party has no knowledge that such representation and warranty is not true and correct to the same extent as provided in the applicable representation and warranty, and that: (A) such party has made appropriate investigations and inquiries of its officers and responsible employees; and (B) nothing has come to its attention in the course of such investigation and inquiries or otherwise which would cause such party, in the exercise of due diligence, to believe that such representation and warranty is not true and correct in all material respects. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. BORDEN FOODS CORPORATION By: /s/ Peter M. Dunn ----------------------------------- Name: Peter M. Dunn Title: BFC INVESTMENTS, L.P. By: /s/ Alyssa A. Anton ----------------------------------- Name: Alyssa A. Anton Title: BF FOODS INTERNATIONAL CORPORATION By: /s/ Alyssa A. Anton ----------------------------------- Name: Alyssa A. Anton Title: AMERICAN ITALIAN PASTA COMPANY By: /s/ David E. Watson ----------------------------------- Name: David E. Watson Title: Exhibit A Cost of Inventory Cost of Finished Goods "Cost" is defined as the sum for all Finished Goods Inventory of the result for each product of (i) the quantity of such product multiplied by (ii) the Product Cost of such product. "Product Cost" is defined as (i) BFC's standard cost of a product including, without limitation, raw materials, packaging materials, inbound freight, co-packer tolling charges, direct labor, and variable and fixed manufacturing costs; and (ii) a per-pound amount representing an allocation for primary freight, defined as the cost of moving product from a plant to a distribution warehouse, and purchasing and manufacturing variances other than variances based on volume pursuant to the subsequent paragraph (the "Freight & Variance Amount"). The Freight & Variance Amount will be calculated by dividing (x) the sum of primary-freight expense and purchasing and manufacturing-related variances (other than volume variances) incurred over the inventory turn period ending on the last day of the latest fiscal month prior to the Closing Date for which such information is available (the "Measurement Date") by (y) pounds of finished goods inventory for BFC's entire pasta and noodles business as of the Measurement Date. Consistent with current practice, inventory turns are calculated as the average month-end inventory in pounds of the prior thirteen (13) months divided by the average of monthly sales volume in pounds for the prior twelve (12) months. Cost and Product Cost shall be determined in accordance with generally accepted accounting principles and practices (except as to the above-noted exclusion of variances based on volume) and the methods used in the preparing the Inventory Statement, consistently applied. Cost of Packaging Materials "Cost" is defined as the carrying costs for Inventory of packaging materials as determined in accordance with generally accepted accounting principles and practices and the methods used in preparing the Inventory Statement, consistently applied. Exhibit B Terms and Conditions Related to Stock Consideration 1. Sale upon Registration. Buyer, within twenty (20) days after Closing, shall register all (but not less than all) of the Shares by filing and having declared effective a Form S-3 registration statement (or successor registration form adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Buyer with the SEC) and shall immediately provide evidence of the same to Sellers. Sellers shall cooperate with Buyer in making such a registration and all reasonable qualifications and compliance requested by Buyer as would permit or facilitate the sale and distribution of the Shares. Buyer shall bear all expenses incurred by Buyer or Sellers in making such registration, including, without limitation, all SEC and NYSE registration and filing fees, printing expenses, fees and disbursements of counsel for Buyer, and blue sky fees and expenses. In addition, Buyer and Sellers agree to enter into such further agreements as are reasonable and customary to effect the provisions of this Exhibit B. 2. Put Rights. For a period of six (6) months from and after the Closing Date or, if later, six (6) months after the effective date of the registration statement discussed above, Sellers may sell the Shares at market price ("Sold Shares"). On the six-month anniversary of the Closing Date, Sellers may put all Shares then remaining in its ownership, if any, ("Put Shares") to the Buyer. Buyer shall, within ten (10) days thereafter, pay to BFC against delivery of the Shares an amount equal to the Average Buyer Price times 1.0275 for each Put Share. 3. Adjustment of Prices. The stock prices relevant to either party's options or rights in this Schedule shall be adjusted as appropriate to account for any recapitalization of the Buyer, including stock splits, reverse stock splits, and stock dividends, to preserve the parties contemplated economic rights. EX-10.3 5 exh103_081301.txt EXHIBIT 10.3 AMENDMENT NO. 1, dated as of July 13, 2001 (this "Agreement"), to the Asset Purchase Agreement, dated as of June 1, 2001, (the "Purchase Agreement"), by and among BORDEN FOODS CORPORATION, a Delaware corporation ("BFC"), BFC INVESTMENTS, L.P., a Delaware limited partnership ("BFC Investments"), BF FOODS INTERNATIONAL CORPORATION, a Delaware corporation ("BFIC") and AMERICAN ITALIAN PASTA COMPANY, a Delaware corporation ("Buyer"). All capitalized terms used herein and not otherwise defined shall have the meanings given them in the Purchase Agreement. RECITALS BFC, BFC Investments, BFIC and the Buyer hereby agree to certain amendments to the Purchase Agreement, on the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: Section 1. Amendments to the Purchase Agreement. 1.1. Section 5.13(a) of the Purchase Agreement is hereby amended by replacing the words "Until the nine-month anniversary of the Closing Date," with the words "Until January 31, 2002,". 1.2 Section 5.13(b) of the Purchase Agreement is hereby amended by replacing the words "Until the nine-month anniversary of the Closing Date," with the words "Until January 31, 2002,". Section 2. General Provisions. 2.1. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. 2.2 Except as expressly modified by this Agreement, all of the representations, warranties, terms, covenants, conditions and other provisions of the Purchase Agreement shall remain in full force and effect in accordance with their respective terms. 2.3 This Agreement shall be governed and construed in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. BORDEN FOODS CORPORATION By: /s/ Peter M. Dann ---------------------- Name: Peter M. Dann Title: President BFC INVESTMENTS, L.P. By: /s/Alyssa A. Anton ------------------------ Name: Alyssa A. Anton Title: Secretary BF FOODS INTERNATIONAL CORPORATION By: /s/ Alyssa A. Anton ------------------------- Name: Alyssa A. Anton Title: Secretary AMERICAN ITALIAN PASTA COMPANY By: /s/ David E. Watson ----------------------------------- Name: David E. Watson Title: EX-10.4 6 exh104_081301.txt EXHIBIT 10.4 CREDIT AGREEMENT dated as of July 16, 2001 among AMERICAN ITALIAN PASTA COMPANY, VARIOUS FINANCIAL INSTITUTIONS, FIRSTAR BANK, N.A., as Syndication Agent, BANK ONE, NA, as Documentation Agent, CREDIT AGRICOLE INDOSUEZ, FLEET NATIONAL BANK, KEYBANK NATIONAL ASSOCIATION, COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH, WACHOVIA BANK, N.A., and WELLS FARGO BANK, N.A., as Co-Agents, and BANK OF AMERICA, N.A., AS ADMINISTRATIVE AGENT BANC OF AMERICA SECURITIES LLC Sole Lead Arranger and Sole Book Manager TABLE OF CONTENTS Page SECTION 1 DEFINITIONS; OTHER INTERPRETIVE PROVISIONS; ACCOUNTING PRINCIPLES...................................................................8 1.1 DEFINITIONS...........................................................8 1.2 OTHER INTERPRETIVE PROVISIONS........................................24 1.3 ACCOUNTING PRINCIPLES................................................24 SECTION 2 COMMITMENTS OF THE LENDERS; BORROWING PROCEDURES; LETTER OF CREDIT PROCEDURES...........................................................25 2.1 COMMITMENTS..........................................................25 2.1.1 Revolving Loans...................................................25 2.1.2 Letter of Credit Commitment.......................................25 2.1.3 Commitment Limits.................................................25 2.1.4 Valuation of Certain Eurocurrency Loans and Certain Letters of Credit...............................................................25 2.2 REVOLVING LOAN PROCEDURES............................................25 2.2.1 Various Types of Revolving Loans..................................25 2.2.2 Borrowing Procedures..............................................26 2.2.3 Conversion and Continuation Procedures............................26 2.3 LETTER OF CREDIT PROCEDURES.........................................27 2.3.1 Issuance of Letters of Credit.....................................27 2.3.2 Participations in Letters of Credit...............................28 2.3.3 Reimbursement Obligations.........................................28 2.3.4 Limitation on the Issuer's Obligations............................29 2.3.5 Funding by Lenders to the Issuer..................................29 2.4 SWING LINE LOANS.....................................................29 2.4.1 Swing Line Loans..................................................30 2.4.2 Swing Line Loan Procedures........................................30 2.4.3 Refunding of, or Funding of Participations in, Swing Line Loans...................................................................30 2.4.4 Repayment of Participations.......................................31 2.5 PARTICIPATION OBLIGATIONS UNCONDITIONAL..............................31 2.6 WARRANTY.............................................................31 2.7 CONDITIONS...........................................................32 2.8 COMMITMENTS SEVERAL.................................................32 SECTION 3 LOAN ACCOUNTS AND NOTES..........................................32 3.1 LOAN ACCOUNT.........................................................32 3.2 NOTES................................................................32 SECTION 4 INTEREST.........................................................32 4.1 INTEREST RATES.......................................................32 4.2 INTEREST PAYMENT DATES...............................................33 4.3 SETTING AND NOTICE OF CERTAIN RATES..................................33 4.4 COMPUTATION OF INTEREST..............................................33 SECTION 5 FEES.............................................................33 5.1 NON-USE FEES.........................................................33 5.2 LETTER OF CREDIT FEES................................................34 5.3 ADMINISTRATIVE AGENT'S AND ARRANGER'S FEES...........................34 SECTION 6 REDUCTION OR TERMINATION OF THE COMMITMENTS;......................35 6.1 REDUCTION OR TERMINATION OF THE COMMITMENTS..........................35 6.1.1 Scheduled Mandatory Reductions of the Aggregate Commitment Amount..................................................................35 6.1.2 Mandatory Reductions of the Aggregate Commitment..................35 6.1.3 Voluntary Reduction of Commitments................................35 6.1.4 All Reductions Pro Rata...........................................35 6.2 PREPAYMENTS..........................................................35 6.2.1 Mandatory Prepayments Resulting from Commitment Reductions........36 6.2.2 Mandatory Prepayments Resulting from Currency Fluctuations........36 6.2.3 Voluntary Prepayments.............................................36 6.2.4 All Prepayments...................................................36 SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES..................36 7.1 MAKING OF PAYMENTS...................................................36 7.2 APPLICATION OF CERTAIN PAYMENTS......................................37 7.3 DUE DATE EXTENSION...................................................37 7.4 SETOFF...............................................................37 7.5 PRORATION OF PAYMENTS................................................37 7.6 TAXES WITH RESPECT TO PAYMENTS BY THE COMPANY........................38 SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EUROCURRENCY LOANS.......39 8.1 INCREASED COSTS......................................................39 8.2 BASIS FOR DETERMINING EUROCURRENCY INTEREST RATE INADEQUATE OR UNFAIR...................................................................40 8.3 CHANGES IN LAW RENDERING EUROCURRENCY LOANS UNLAWFUL.................41 8.4 FUNDING LOSSES.......................................................42 8.5 RIGHT OF LENDERS TO FUND THROUGH OTHER OFFICES.......................42 8.6 DISCRETION OF LENDERS AS TO MANNER OF FUNDING........................42 8.7 MITIGATION OF CIRCUMSTANCES; REPLACEMENT OF AFFECTED LENDER..........42 8.8 CONCLUSIVENESS OF STATEMENTS; SURVIVAL OF PROVISIONS.................43 SECTION 9 WARRANTIES.......................................................43 9.1 ORGANIZATION, ETC....................................................44 9.2 AUTHORIZATION; NO CONFLICT...........................................44 9.3 VALIDITY AND BINDING NATURE..........................................44 9.4 FINANCIAL INFORMATION................................................44 9.5 NO MATERIAL ADVERSE CHANGE...........................................45 9.6 LITIGATION AND CONTINGENT LIABILITIES................................45 9.7 OWNERSHIP OF PROPERTIES; LIENS.......................................45 9.8 SUBSIDIARIES.........................................................45 9.9 ERISA COMPLIANCE.....................................................45 9.10 INVESTMENT COMPANY ACT..............................................46 9.11 PUBLIC UTILITY HOLDING COMPANY ACT..................................46 9.12 REGULATION U........................................................46 9.13 TAXES...............................................................46 9.14 ENVIRONMENTAL COMPLIANCE............................................46 9.15 INFORMATION.........................................................47 9.16 BORDEN BRANDS ACQUISITION...........................................47 SECTION 10 COVENANTS.......................................................47 10.1 REPORTS, CERTIFICATES AND OTHER INFORMATION.........................47 10.1.1 Audit Report.....................................................47 10.1.2 Quarterly Reports................................................48 10.1.3 Compliance Certificates..........................................48 10.1.4 Reports to SEC...................................................48 10.1.5 Notice of Default, Litigation and ERISA Matters..................48 10.1.6 Subsidiaries.....................................................49 10.1.7 Management Reports...............................................49 10.1.8 Projections......................................................49 10.1.9 Other Information................................................49 10.2 BOOKS, RECORDS AND INSPECTIONS......................................49 10.3 INSURANCE...........................................................49 10.4 COMPLIANCE WITH LAWS; PAYMENT OF TAXES..............................50 10.5 MAINTENANCE OF EXISTENCE, ETC.......................................50 10.6 FINANCIAL COVENANTS.................................................50 10.6.1 Minimum Fixed Charge Coverage Ratio..............................50 10.6.2 Maximum Leverage Ratio...........................................50 10.6.3 Minimum Consolidated Net Worth...................................51 10.6.4 Minimum Consolidated EBITDA......................................51 10.7 LIMITATIONS ON DEBT.................................................51 10.8 LIENS...............................................................51 10.9 BUSINESS............................................................52 10.10 RESTRICTED PAYMENTS................................................52 10.11 INVESTMENTS........................................................53 10.12 MERGERS, CONSOLIDATIONS, SALES.....................................53 10.13 USE OF PROCEEDS....................................................53 10.14 INCONSISTENT AGREEMENTS............................................53 10.15 TRANSACTIONS WITH AFFILIATES.......................................54 10.16 EMPLOYEE BENEFIT PLANS.............................................54 10.17 ENVIRONMENTAL LAWS.................................................54 10.18 UNCONDITIONAL PURCHASE OBLIGATIONS.................................54 10.19 FURTHER ASSURANCES.................................................54 10.20 TRANSFERS TO FOREIGN SUBSIDIARIES..................................55 SECTION 11 CONDITIONS PRECEDENT............................................55 11.1 INITIAL CREDIT EXTENSION............................................55 11.1.1 Agreement and Notes..............................................55 11.1.2 Resolutions......................................................55 11.1.3 Incumbency and Signature Certificates............................56 11.1.4 Opinion of Counsel for the Company...............................56 11.1.5 Guaranty.........................................................56 11.1.6 Pledge Agreement................................................56 11.1.7 Collateral Partnership Assignment...............................56 11.1.8 Membership Interest Pledge Agreement.............................56 11.1.9 Financing Statements.............................................56 11.1.10 Borden Brands Acquisition Documents............................56 11.1.11 Other..........................................................56 11.2 ALL CREDIT EXTENSIONS...............................................56 11.2.1 No Default......................................................56 11.2.2 Confirmatory Certificate........................................57 11.3 Certain Loans......................................................57 SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT..............................57 12.1 EVENTS OF DEFAULT...................................................57 12.1.1 Non-Payment of the Loans, etc...................................57 12.1.2 Non-Payment of Other Debt.......................................57 12.1.3..................................................................57 Bankruptcy, Insolvency, etc.............................................57 12.1.4 Non-Compliance with Provisions of This Agreement................58 12.1.5 Warranties......................................................58 12.1.6 ERISA...........................................................58 12.1.7 Judgments.......................................................58 12.1.8 Change in Control...............................................58 12.1.9 Invalidity of Loan Documents....................................58 12.2 EFFECT OF EVENT OF DEFAULT..........................................59 SECTION 13 THE ADMINISTRATIVE AGENT........................................59 13.1 APPOINTMENT AND AUTHORIZATION.......................................59 13.2 DELEGATION OF DUTIES................................................60 13.3 LIABILITY OF ADMINISTRATIVE AGENT...................................60 13.4 RELIANCE BY ADMINISTRATIVE AGENT....................................61 13.5 NOTICE OF DEFAULT...................................................61 13.6 CREDIT DECISION.....................................................62 13.7 INDEMNIFICATION.....................................................62 13.8 ADMINISTRATIVE AGENT IN INDIVIDUAL CAPACITY.........................63 13.9 SUCCESSOR ADMINISTRATIVE AGENT......................................63 13.10 OTHER AGENTS.......................................................63 13.11 NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT...................64 SECTION 14 GENERAL.........................................................64 14.1 WAIVER; AMENDMENTS..................................................64 14.2 NOTICES.............................................................65 14.3 PAYMENTS SET ASIDE..................................................66 14.4 COSTS, EXPENSES AND TAXES...........................................66 14.5 SUCCESSORS AND ASSIGNS..............................................67 14.6 ASSIGNMENTS; PARTICIPATIONS.........................................67 14.6.1 Assignments.....................................................67 14.6.2 Participations..................................................68 14.6.3 Designation of SPVs.............................................69 14.7 GOVERNING LAW.......................................................70 14.8 COUNTERPARTS........................................................70 14.9 JUDGMENT............................................................70 14.10 INDEMNIFICATION BY THE COMPANY; EXCULPATION........................71 14.11 ECONOMIC AND MONETARY UNION IN THE EUROPEAN COMMUNITY..............71 14.12 CONFIDENTIALITY....................................................72 14.13 NO THIRD PARTIES BENEFITTED........................................72 14.14 FORUM SELECTION AND CONSENT TO JURISDICTION........................73 14.15 WAIVER OF JURY TRIAL...............................................73 14.16 MISSOURI STATUTORY NOTICE.........................................73 14.17 ENTIRE AGREEMENT...................................................74 SCHEDULES SCHEDULE 1.1(a) Lenders, Commitments and Percentages SCHEDULE 1.1(b) Pricing Schedule SCHEDULE 9.6 Litigation and Contingent Liabilities SCHEDULE 9.8 Subsidiaries SCHEDULE 10.7(f) Debt to be Repaid SCHEDULE 10.8 Liens SCHEDULE 10.11 Investments SCHEDULE 14.2 Addresses for Notices EXHIBITS EXHIBIT A Form of Note EXHIBIT B Form of Notice of Borrowing EXHIBIT C Form of Notice of Conversion/Continuation EXHIBIT D Form of Guaranty EXHIBIT E Form of Pledge Agreement EXHIBIT F Form of Compliance Certificate EXHIBIT G Form of Opinion of Blackwell Sanders Peper Martin LLP, counsel to the Company and the Guarantors EXHIBIT H Form of Assignment Agreement EXHIBIT I Form of Collateral Partnership Assignment EXHIBIT J Form of Membership Interest Pledge Agreement CREDIT AGREEMENT This CREDIT AGREEMENT dated as of July 16, 2001 (this "Agreement") is among AMERICAN ITALIAN PASTA COMPANY, a Delaware corporation (the "Company"), various financial institutions (together with their respective successors and assigns, collectively the "Lenders" and individually each a "Lender") and BANK OF AMERICA, N.A. ("Bank of America"), as letter of credit issuer and swing line lender and as administrative agent for the Lenders. WHEREAS, the Company has requested that the Lenders provide revolving credit facilities to the Company; and WHEREAS, the Lenders are willing to extend commitments to make loans to, and to issue or participate in letters of credit for the account of, the Company on the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the mutual agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1 DEFINITIONS; OTHER INTERPRETIVE PROVISIONS; ACCOUNTING PRINCIPLES. 1.1 Definitions. When used herein the following terms shall have the following meanings: Acquisition means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person, (b) the acquisition of in excess of 50% of the capital stock, partnership interests, membership interests or equity of any Person, or (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. Administrative Agent means Bank of America in its capacity as administrative agent for the Lenders hereunder and any successor thereto in such capacity. Affected Lender means any Lender that has given notice to the Company (which has not been rescinded) of (a) any obligation by the Company to pay any amount pursuant to Section 7.6 or 8.1 or (b) the occurrence of any circumstance of the nature described in Section 8.2 or 8.3. Affected Loan - see Section 8.3. Affiliate of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person. Agent-Related Persons means the Administrative Agent (including any successor administrative agent arising under Section 13.9), together with its Affiliates (including, in the case of Bank of America in its capacity as Administrative Agent, the Arranger), and the officers, directors, employees, agents and attorneys-in-fact of such Persons. Agent's Payment Office means, with respect to payments in any currency or notices with respect thereto, the applicable address of the Administrative Agent set forth on Schedule 14.2 or such other address or addresses as the Administrative Agent may from time to time specify in accordance with Section 14.2. Aggregate Commitment Amount means $300,000,000, as such amount may be reduced from time to time in accordance with this Agreement. Aggregate Outstandings means at any time the sum of (a) the aggregate Dollar Equivalent principal amount of all outstanding Revolving Loans and Swing Line Loans and (b) the Stated Amount of all Letters of Credit. Agreement - see the Preamble. Applicable Asset Sale Proceeds means the Net Cash Proceeds from any Asset Sale, excluding (i) Net Cash Proceeds from any sale of fixed assets so long as such Net Cash Proceeds are used within 90 days to purchase other fixed assets for use in the business of the Company or a Subsidiary and (ii) the first $5,000,000 (or the Dollar Equivalent thereof) of Net Cash Proceeds received from all other Asset Sales in any Fiscal Year. Applicable Base Rate Margin - see Schedule 1.1(b). Applicable Eurocurrency Margin - see Schedule 1.1(b). Arranger means Banc of America Securities LLC. Asset Sale means the sale, lease, assignment or other transfer for value by the Company or any Subsidiary to any Person (other than the Company or any Subsidiary) of any asset or right of the Company or such Subsidiary (including any sale or other transfer of stock of any Subsidiary, whether by merger, consolidation or otherwise, but excluding any sale of inventory in the ordinary course of business). Assignee - see Section 14.6.1. Assignment Agreement - see Section 14.6.1. Attorney Costs means and includes all reasonable fees and disbursements of any law firm or other external counsel, the allocated cost of internal legal services and all disbursements of internal counsel. Available Currency means Dollars, Euros, British Pounds Sterling, Italian Lire and any other currency that (i) in the opinion of the Administrative Agent is freely transferable and freely convertible into Dollars, (ii) is requested by the Company and (iii) is approved by each Lender. Bank of America - see the Preamble. Base Rate means at any time the greater of (a) the Federal Funds Rate plus 0.5% per annum and (b) the rate per annum then most recently publicly announced by Bank of America as its prime rate. (The "prime rate" is a rate set by Bank of America based upon various factors, including Bank of America'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 prime rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change. Base Rate Loan means any Revolving Loan which bears interest at or by reference to the Base Rate. Borden Brands Acquisition means the acquisition by the Company of certain assets pursuant to the Borden Brands Purchase Agreement. Borden Brands Purchase Agreement means the Asset Purchase Agreement dated as of June 1, 2001 among Borden Foods Corporation, BFC Investments, L.P., BF Foods International Corporation and the Company. Business Day means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the laws of, or are in fact closed in, the state where the Agent's Payment Office with respect to payments in Dollars is located and (i) in the case of a Business Day which relates to a Eurocurrency Loan denominated in a currency other than Euro or to a Letter of Credit denominated in a currency other than Dollars, a day on which dealings in deposits in such currency are carried on in the London interbank market and (ii) in the case of a Business Day which relates to a Eurocurrency Loan or a Letter of Credit denominated in Euro, a TARGET Day. Capital Lease means, with respect to any Person, any lease of (or other agreement conveying the right to use) any real or personal property by such Person which, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of such Person. Cash Equivalent Investment means, at any time, (a) any evidence of Debt, maturing not more than one year after such time, issued or guaranteed by the United States Government, (b) commercial paper, maturing not more than one year from the date of issue, which is issued by (i) a corporation (except the Company or an Affiliate of the Company) organized under the laws of any State of the United States of America or of the District of Columbia and rated at least A-1 by Standard & Poor's Ratings Services, Inc., a division of The McGraw Hill Companies, Inc., or P-1 by Moody's Investors Service, Inc., at the time of investment or (ii) any Lender (or its holding company), (c) any certificate of deposit or bankers' acceptance or Eurocurrency time deposit, maturing not more than one year after the date of issue, which is issued by either (i) a financial institution that is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $100,000,000 or (ii) any Lender, (d) any repurchase agreement with a term of one year or less which (i) is entered into with (A) any Lender, or (B) any other commercial banking institution of the stature referred to in clause (c)(i), (ii) is secured by a fully perfected Lien in any obligation of the type described in any of clauses (a) through (c) and (iii) has a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such Lender (or other commercial banking institution) thereunder or (e) investments in money market funds that invest solely in Cash Equivalent Investments of the types described in clauses (a) through (d). Change in Control means an event or series of events by which: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan maintained for employees of the Company and its Subsidiaries, or any Person acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a Person shall be deemed to have "beneficial ownership" of all securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 25% or more of the equity interests of the Company; or (b) during any period of 12 consecutive months, a majority of the members of the board of directors of the Company cease to be composed of individuals (i) who were members of such board on the first day of such period, (ii) whose election or nomination to such board was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of such board or (iii) whose election or nomination to such board was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of such board. Code means the Internal Revenue Code of 1986. Collateral Documents means the Pledge Agreement, the Membership Interest Pledge Agreement, each Collateral Partnership Assignment and any other agreement pursuant to which the Company or any Guarantor grants collateral to the Administrative Agent for the benefit of the Lenders. Collateral Partnership Assignment means a Collateral Assignment of Partnership Interests executed by the Company or a Subsidiary and the Administrative Agent, substantially in the form of Exhibit I. Commitment means, as to any Lender, (a) such Lender's commitment to make RevolIving Loans and to participate in Swing Line Loans and in Letters of Credit in an aggregate amount not exceeding the amount set forth for such Lender on Schedule 1.1(a), as adjusted from time to time in accordance with the terms hereof, or (b) such amount as so adjusted. Commitment Reduction Date - see Section 6.1.1. Company - see the Preamble. Computation Date means the last Business Day of each calendar month and (a) with respect to matters relating to Loans, each date on which (i) the Company borrows, converts or continues, as applicable, any Loan; (ii) the Dollar Equivalent amount of any Eurocurrency Loan of an Affected Lender is required to be determined under Section 8.3; or (iii) the Aggregate Commitment Amount is reduced pursuant to Section 6.1; and (b) with respect to matters relating to any Letter of Credit, each date on which (i) such Letter of Credit is issued or the amount available to be drawn thereunder changes or (ii) the Aggregate Commitment Amount is reduced pursuant to Section 6.1. Computation Period means any period of four consecutive Fiscal Quarters ending on the last day of a Fiscal Quarter. Consolidated EBITDA means, with respect to the Company and its Subsidiaries for any period, an amount equal to the sum of (a) Consolidated Net Income for such period plus (b) to the extent deducted in determining such Consolidated Net Income for such period, Interest Expense, income tax expense, depreciation and amortization; provided that, for purposes of determining Consolidated EBITDA, (i) the consolidated net income of any Person (or division or similar business unit) acquired by the Company or any Subsidiary during such period (plus, to the extent deducted in determining such consolidated net income, interest expense, income tax expense, depreciation and amortization of such Person (or division or business unit)) shall be included on a pro forma basis for such period (as if the consummation of each such acquisition and the incurrence or assumption of any Debt in connection therewith occurred on the first day of such period) and (ii) the consolidated net income of any Person (or division or similar business unit) disposed of by the Company or any Subsidiary during such period (plus, to the extent deducted in determining such consolidated net income, interest expense, income tax expense, depreciation and amortization of such Person (or division or business unit)) shall be excluded on a pro forma basis for such period (assuming the consummation of such disposition occurred on the first day of such period). Consolidated Net Income means, with respect to the Company and its Subsidiaries for any period, the net income (or loss) of the Company and its Subsidiaries for such period. Consolidated Net Worth means the Company's consolidated stockholders' equity. Credit Extension means the making of any Loan or the issuance of any Letter of Credit. Debt of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, whether or not evidenced by bonds, debentures, notes or similar instruments, (b) all obligations of such Person as lessee under Capital Leases which have been recorded as liabilities on a balance sheet of such Person, (c) all obligations of such Person to pay the deferred purchase price of property or services (other than prepaid interest and trade accounts payable in the ordinary course of business), (d) all indebtedness secured by a Lien on the property of such Person, whether or not such indebtedness shall have been assumed by such Person (it being understood that if such Person has not assumed or otherwise become personally liable for any such indebtedness, the amount of the Debt of such Person in connection therewith shall be limited to the lesser of the face amount of such indebtedness or the fair market value of all property of such Person securing such indebtedness), (e) all obligations, contingent or otherwise, with respect to the face amount of all letters of credit (whether or not drawn) and banker's acceptances issued for the account of such Person (including the Letters of Credit), (f) the net liabilities of such Person under all Hedging Agreements to which it is a party and (g) all Guaranty Obligations of such Person. Debt Issuance means any issuance of Debt by the Company which is not permitted by any provision of Section 10.7 other than clause (g). Debt to be Repaid means the Debt listed on Schedule 10.7(f). Dollar Equivalent means, at any time, (a) as to any amount denominated in Dollars, the amount thereof at such time, and (b) as to any amount denominated in any other Available Currency, the equivalent amount in Dollars as determined by the Administrative Agent at such time on the basis of the Spot Rate for the purchase of Dollars with such Available Currency on the most recent Computation Date or such other date as is specified herein. Dollars and $ mean lawful money of the United States of America. Effective Date - see Section 11.1. Environmental Laws means all laws relating to environmental, health, safety and land use matters applicable to any property. Equity Issuance means the issuance of equity securities or interests by the Company or any Subsidiary (other than issuances of equity securities or interests by any Subsidiary to the Company or any other Subsidiary). ERISA means the Employee Retirement Income Security Act of 1974 and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections. 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 that 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 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 Sections 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. Euro means the single currency of the participating member states of the European Union. Eurocurrency Loan means any Revolving Loan which bears interest at a rate determined by reference to the Eurocurrency Rate (Reserve Adjusted). Eurocurrency Office means, with respect to any Lender, the office or offices of such Lender which shall be making or maintaining the Eurocurrency Loans of such Lender hereunder or, if applicable, such other office or offices through which such Lender determines the Eurocurrency Rate. A Eurocurrency Office of any Lender may be, at the option of such Lender, either a domestic or foreign office. Eurocurrency Rate means, with respect to any Eurocurrency Loan for any Interest Period, (i) the rate per annum (rounded upward, if necessary, to the nearest 1/100 of 1%) equal to the rate determined by the Administrative Agent to be the offered rate which appears on the page of the Telerate Screen which displays an average British Bankers Association Interest Settlement Rate (such page currently being page number 3750) for deposits (for delivery two Business Days prior to the beginning of such Interest Period) in the applicable currency with a term equivalent to the applicable Interest Period, determined as of approximately 11:00 a.m., London time, on such date of determination, or (ii) if the rate referenced in the preceding clause (i) does not appear on such page or service or if such page or service shall cease to be available, the rate per annum (rounded upward, if necessary, to the nearest five decimal places) equal to the rate determined by the Administrative Agent to be the offered rate on such other page or other service which displays an average British Bankers Association Interest Settlement Rate for deposits (for delivery two Business Days prior to the beginning of such Interest Period) in the applicable currency with a term equivalent to such Interest Period determined as of approximately 11:00 a.m., London time, on such date of determination, or (iii) if the rates referenced in the preceding clauses (i) and (ii) are not available, the rate per annum equal to the offered quotation rate (rounded upward, if necessary, to the nearest five decimal places) to first class banks in the London interbank market by the Administrative Agent for deposits (for delivery two Business Days prior to the beginning of such Interest Period) of amounts in same day funds comparable to the principal amount of the Eurocurrency Loan of Bank of America included in the Eurocurrency borrowing for which the Eurocurrency Rate is then being determined with a maturity comparable to such Interest Period as of approximately 11:00 a.m., London time, on such date of determination. Eurocurrency Rate (Reserve Adjusted) means, with respect to any Eurocurrency Loan for any Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/10,000 of 1%) determined pursuant to the following formula: Eurocurrency Rate = Eurocurrency Rate (Reserve Adjusted) 1-Eurocurrency Reserve Percentage Eurocurrency Reserve Percentage means, with respect to any Eurocurrency Loan for any Interest Period, a percentage (expressed as a decimal) equal to the daily average during such Interest Period of the percentage in effect on each day of such Interest Period, as prescribed by the FRB, for determining the aggregate maximum reserve requirements applicable to "Eurocurrency Liabilities" pursuant to Regulation D of the FRB or any other then applicable regulation of the FRB which prescribes reserve requirements applicable to "Eurocurrency Liabilities" as presently defined in such Regulation D. Eurodollar Loan means a Eurocurrency Loan denominated in Dollars. Event of Default means any of the events described in Section 12.1. Existing Credit Facility means the Credit Agreement dated as of October 30, 1992, amended and restated as of July 1, 1994, as further amended and restated as of February 26, 1996, as further amended and restated as of April 11, 1997, as further amended and restated as of October 17, 1997 and as further amended and restated as of April 26, 2000 among the Company, various financial institutions and Bankers Trust Company, as agent. Existing Euro Loans - see Section 11.1. Existing Letter of Credit means letter of credit numbered S040375 issued for the account of the Company by Bank of America (as successor to Boatmen's First National Bank). Federal Funds Rate means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, "H.15(519)") on the preceding Business Day opposite the caption "Federal Funds (Effective)" or, if for any relevant day such rate is not so published on any such preceding Business Day, the rate for such day will be the arithmetic mean as determined by the Administrative Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Administrative Agent. Fiscal Quarter means a fiscal quarter of a Fiscal Year. Fiscal Year means the fiscal year of the Company and its Subsidiaries, which shall be a 52-week period ending on or about September 30 of each year. References to a Fiscal Year with a number corresponding to any calendar year (e.g., "Fiscal Year 2001") refer to the Fiscal Year ending on or about September 30 of such calendar year. Fixed Charge Coverage Ratio means, for any Computation Period, the ratio of (a) the result of (i) Consolidated EBITDA for such Computation Period less (ii) depreciation for such Computation Period less (iii) cash income tax expense for such Computation Period less (iv) cash dividends paid by the Company during such Computation Period to (b) the sum of (i) Interest Expense to the extent payable in cash during such Computation Period plus (ii) the amount of all reductions of the Aggregate Commitment Amount required to be made on any Commitment Reduction Date during such Computation Period plus (iii) the actual aggregate amount of all scheduled principal payments on Debt (other than Debt hereunder) required to be made (and actually made) by the Company and its Subsidiaries during such Computation Period; provided that in calculating Interest Expense for any Computation Period, any Debt incurred or assumed in connection with the acquisition of any Person (or division or similar business unit) shall be assumed to have been incurred or assumed on the first day of such period (with a corresponding increase in Interest Expense) and any Debt assumed by any Person (other than the Company or any Subsidiary) in connection with the disposition of any Person (or division or similar business unit) disposed of by the Company or any Subsidiary during such period shall be assumed to have been repaid on the first day of such period (with a corresponding decrease in Interest Expense). Foreign Subsidiary means any Subsidiary which (a) is organized under the laws of a jurisdiction other than the United States of America or any state or territory thereof and (b) does substantially all of its business (other than export sales to the United States) outside of the United States of America or any state or territory thereof. FRB means the Board of Governors of the Federal Reserve System and any successor thereto. Funded Debt means all Debt of the Company and its Subsidiaries determined on a consolidated basis, excluding (i) contingent obligations in respect of undrawn letters of credit and Guaranty Obligations (except, in each case, to the extent constituting Guaranty Obligations in respect of Debt of a Person other than the Company or any Subsidiary) and (ii) Hedging Obligations. GAAP means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board of 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. Group - see Section 2.2.1. Guarantor means each Subsidiary that is a party to the Guaranty. Guaranty means the Guaranty executed by certain Subsidiaries of the Company in favor of the Administrative Agent and the Lenders, substantially in the form of Exhibit D. Guaranty Obligation means, as to any Person, any obligation, contingent or otherwise, of such Person guarantying or having the economic effect of guarantying any Debt or other obligation payable or performable by another Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Debt or other obligation of the payment or performance of such Debt or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Debt or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligees in respect of such Debt or other obligation of the payment or performance thereof or to protect such obligees against loss in respect thereof (in whole or in part); provided that the term "Guaranty Obligation" shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guaranty Obligation shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guaranty Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guarantying Person in good faith. Hazardous Material means any hazardous, toxic or dangerous substance or material defined as such in (or for purposes of) the Comprehensive Environmental Response, Compensation and Liability Act, any so-called "Superfund" or "Superlien" law or any other Federal, state or local statute, law, ordinance, code, regulation or order, or any other requirement of any Governmental Authority regulating, relating to, or imposing liability for, or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance or material as now or any time hereafter in effect and applicable to any real property owned by or leased to the Company or any Subsidiary or on which the Company or any Subsidiary carries on any of its operations (provided that no such state or local statute, law, ordinance, code, regulation, order or other requirement shall be deemed to have extraterritorial application). Hedging Agreement means any interest rate, currency or commodity swap agreement, interest rate cap agreement, interest rate collar agreement, foreign exchange agreement, forward rate agreement or other agreement designed to protect a Person against fluctuations in interest rates, currency exchange rates or commodity prices. Hedging Obligations means, with respect to any Person, all liabilities of such Person under Hedging Agreements. Indemnified Liabilities - see Section 14.10. Indemnified Person - see Section 14.10. Interest Expense means for any period the consolidated interest expense of the Company and its Subsidiaries for such period. Interest Period means, as to any Eurocurrency Loan, the period commencing on the date such Loan is borrowed (or, in the case of a Eurodollar Loan, converted from a Base Rate Loan), or on the expiration of the immediately preceding Interest Period for such Loan, as applicable, and ending on the date one, two, three, six or, if available to all Lenders, twelve months thereafter as selected by the Company in its related notice of borrowing, conversion or continuation, as the case may be; provided that: (i) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the immediately following Business Day, unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day; (ii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; (iii) no Interest Period for any Loan shall extend beyond the scheduled Termination Date; and (iv) the Company may not select any Interest Period which would extend beyond any Commitment Reduction Date if, after giving effect to such selection, the aggregate principal amount of all Eurocurrency Loans having Interest Periods ending after such date plus the aggregate Stated Amount of all Letters of Credit scheduled to remain outstanding after such date (assuming no drawings are made thereunder) would exceed the Aggregate Commitment Amount scheduled to be in effect after giving effect to the reduction on such date. Investment means, with respect to any Person, (a) any loan or advance made by such Person to any other Person (excluding (i) advances to, and deposits with, contractors and suppliers and (ii) trade accounts payable, in each case in the ordinary course of business consistent with the past practice of the Company and its Subsidiaries) and (b) any ownership or similar interest held by such Person in any other Person. The amount of any Investment shall be the original principal or capital amount thereof less all returns of principal or equity thereon (and without adjustment by reason of the financial condition of such other Person) and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property. IRS means the United States Internal Revenue Service. Issuer means Bank of America in its capacity as issuer of one or more Letters of Credit hereunder, together with any replacement letter of credit issuer under Section 13.9. LC Fee Rate - see Schedule 1.1(b). Lender - see the Preamble. References to the "Lenders" shall include (a) the Issuer and (b) the Swing Line Lender; for purposes of clarification only, to the extent that Bank of America (or any successor Issuer or Swing Line Lender) may have rights or obligations in addition to those of the other Lenders due to its status as Issuer or Swing Line Lender, its status as such will be specifically referenced. Letter of Credit - see Section 2.1.2. Letter of Credit Application means a letter of credit application in the form then used by the Issuer for the type of letter of credit requested. Leverage Ratio means, for any Computation Period, the ratio of (a) Funded Debt as of the last day of such Computation Period to (b) Consolidated EBITDA for such Computation Period. Lien means, when used with respect to any Person, any interest granted by such Person in any real or personal property, asset or other right owned or being purchased or acquired by such Person which secures payment or performance of any obligation and shall include any mortgage, lien, encumbrance, charge, assignment by way of security or other security interest of any kind, whether arising by contract, as a matter of law, by judicial process or otherwise. Loan means a Revolving Loan or a Swing Line Loan. Loan Documents means this Agreement, the Guaranty, the Collateral Documents, the Notes and the Letter of Credit Applications. Margin Stock means "margin stock" as defined in Regulation U of the FRB. Material Adverse Effect means, relative to any event or occurrence of whatever nature (including any adverse determination in any litigation, arbitration or governmental proceeding), a material adverse effect on (a) the business, assets, liabilities (actual or contingent), operations, condition (financial or otherwise) or prospects of the Company and its Subsidiaries taken as a whole or (b) the ability of the Company or any Guarantor to timely and fully perform any of its payment or other material obligations under this Agreement or any other Loan Document to which it is a party. Membership Interest Pledge Agreement means the Membership Interest Pledge Agreement among the Company, various Subsidiaries and the Administrative Agent, substantially in the form of Exhibit J. Multiemployer Plan means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding three calendar years, has made or been obligated to make contributions. Net Cash Proceeds means: (a) with respect to any Asset Sale, the aggregate cash proceeds (including cash proceeds received by way of deferred payment of principal pursuant to a note, installment receivable or otherwise, but only as and when received) received by the Company or any Subsidiary pursuant to such Asset Sale, net of (i) the direct costs relating to such Asset Sale (including sales commissions and legal, accounting and investment banking fees), (ii) taxes paid or payable as a result thereof (after taking into account any available tax credit or deduction and any tax sharing arrangement), (iii) amounts required to be applied to the repayment of any Debt secured by a Lien on the asset subject to such Asset Sale, (iv) in the case of the sale of the stock of any Subsidiary, any Debt of such Subsidiary which is required to be repaid as a result of or in connection with such sale (other than the Loans) and (v) any reserve for adjustment in respect of the sale price of such asset (until such amount is available to the Company or the applicable Subsidiary); and (b) with respect to any Debt Issuance or Equity Issuance, the aggregate cash proceeds received by the Company or any Subsidiary pursuant to such issuance, net of the direct costs relating to such issuance (including filing costs, sales and underwriter's commissions and legal, accounting and investment banking fees). Non-Use Fee Rate - see Schedule 1.1(b). Note - see Section 3.2. Overnight Rate means, for any day, the rate of interest per annum at which overnight deposits in the applicable currency, in an amount approximately equal to the amount with respect to which such rate is being determined, would be offered for such day by the relevant branch of Bank of America to major banks in the applicable London interbank market. The Overnight Rate for any day which is not a Business Day shall be the Overnight Rate for the preceding Business Day. Participant - see Section 14.6.2. PBGC means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. Pension Plan means any "employee pension benefit plan" (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Company or any ERISA Affiliate or to which the Company or any ERISA Affiliate contributes or has an obligation to contribute, 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 plan years. Percentage means, for any Lender, the percentage set forth opposite such Lender's name on Schedule 1.1(a), as adjusted by any assignment pursuant to Section 14.6.1; provided that if and so long as any Lender fails to fund its participation in any Letter of Credit or Swing Line Loan when required by Section 2.3.2 or 2.4.3, such Lender's Percentage shall be deemed for purposes of this definition to be reduced to the extent of the defaulted amount and the Percentage of the Issuer or the Swing Line Lender, as applicable, shall be deemed for purposes of this definition to be increased to such extent. Permitted Acquisition means any Acquisition by the Company or any Subsidiary with respect to which each of the following requirements shall have been satisfied: (a) the assets to be acquired are for use, or the Person to be acquired is, in the same or a similar line of business as the Company and its Subsidiaries; (b) in the case of the Acquisition of a Person, such Acquisition has been approved and recommended by the board of directors or other governing body of such Person; (c) no Event of Default or Unmatured Event of Default shall exist on the date of such Acquisition, either before and after giving effect to such Acquisition; (d) the Company is in pro forma compliance with all financial covenants set forth in Section 10.6 after giving effect to such Acquisition; (e) if the cash consideration for such Acquisition is more than $5,000,000, the Company shall have delivered to the Administrative Agent, not less than 10 Business Days prior to the closing of such Acquisition, a certificate demonstrating (i) compliance with clause (d) above and (ii) that the Leverage Ratio on a pro forma basis after giving effect to such Acquisition will be at least 0.25 to 1.0 less than the applicable level set forth in Section 10.6.2 for the Computation Period ending on the last day of the Fiscal Quarter in which such Acquisition occurs; (f) if the cash consideration for such Acquisition is more than $30,000,000, the Required Lenders shall have approved such Acquisition; and (g) if, after giving effect to such Acquisition, the cash consideration for all Acquisitions completed on or after the Effective Date (excluding the Borden Brands Acquisition) will for the first time exceed $75,000,000, the Required Lenders shall have approved such Acquisition. Permitted Restricted Payments - see Section 10.10. Person means any natural person, corporation, company, partnership, limited liability company, trust, association, governmental authority or unit, or any other entity, whether acting in an individual, fiduciary or other capacity. Plan means any "employee benefit plan" (as such term is defined in Section 3(3) of ERISA) established by the Company or any ERISA Affiliate. Pledge Agreement means the Pledge Agreement among the Company, various Subsidiaries and the Administrative Agent, substantially in the form of Exhibit E. Reportable Event means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived. Required Lenders means Lenders having Percentages aggregating 51% or more. Revolving Loan - see Section 2.1.1. SEC means the Securities and Exchange Commission. Signing Date means the date on which this Agreement has been executed and delivered by all of the initial parties hereto. Specified Proceeds means $25,000,000 of Net Cash Proceeds received from the first Debt Issuance of $75,000,000 or more after the date hereof which meets all of the requirements of Section 10.7(g). Spot Rate for a currency means the rate quoted by Bank of America as the spot rate for the purchase by Bank of America of such currency with another currency in accordance with its customary procedures at approximately 11:00 a.m., Chicago time, on the date two Business Days prior to the date as of which the foreign exchange computation is made. Stated Amount means, with respect to any Letter of Credit at any date of determination, the sum of the maximum Dollar Equivalent amount available to be drawn thereunder at any time during the remaining term of such Letter of Credit under any and all circumstances plus the aggregate Dollar Equivalent amount of all unreimbursed payments and disbursements previously made under such Letter of Credit. Subsidiary of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of stock or other equity interests having ordinary voting power for the election of the board of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly or indirectly, through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a "Subsidiary" shall refer to a Subsidiary of the Company. Swing Line Lender means Bank of America in its capacity as swing line lender hereunder, together with any replacement swing line lender arising under Section 13.9. Swing Line Loan - see Section 2.4.1. Taxes means any present or future income, excise or stamp taxes and any other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, excluding franchise taxes and taxes imposed on or measured by the gross or net income or receipts of the Administrative Agent or any Lender. TARGET Day means a day on which the Trans-European Automated Real-time Gross Settlement Express Transfer system (or any successor) is open for business. Termination Date means October 2, 2006 or such earlier date on which the Commitments terminate pursuant to Section 6 or 12. Type of Loan or Borrowing refers to the interest rate basis for a Revolving Loan or a borrowing of Revolving Loans. The "Types" of Revolving Loans or borrowings are Eurocurrency Loans or borrowings and Base Rate Loans or borrowings. Unfunded Pension Liability means the excess of a Pension Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension 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. Unmatured Event of Default means any event which if it continues uncured will, with lapse of time or notice or lapse of time and notice, constitute an Event of Default. Wholly-Owned Subsidiary means a Subsidiary of which the Company and/or its Subsidiaries own, directly or indirectly, all of the outstanding shares of capital stock (other than directors' qualifying shares) or other equity interests. 1.2 Other Interpretive Provisions. (a) The meanings of defined terms are equally applicable to the singular and plural forms of the terms defined. (b) (i) The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced. (ii) The term "including" is not limiting and means "including without limitation." (iii) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including", the words "to" and "until" each mean "to but excluding" and the word "through" means "to and including." (iv) For the purposes of calculating interest and non-use fees, the principal of a Loan shall be deemed to be outstanding on the date a Loan is made but not on the date paid so long as it is paid by the time required by Section 7.1 (and is not paid on the date it is made). (c) 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 such statute or regulation. (d) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. (e) 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. 1.3 Accounting Principles. 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; provided that if the Company notifies the Administrative Agent that the Company wishes to amend any covenant in Section 10.6 to eliminate the effect of any change in GAAP on the operation of such covenant (or if the Administrative Agent notifies the Company that the Required Lenders wish to amend any covenant in Section 10.6 for such purpose), then the Company's compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Company and the Required Lenders. SECTION 2 COMMITMENTS OF THE LENDERS; BORROWING PROCEDURES; LETTER OF CREDIT PROCEDURES. 2.1 Commitments. On and subject to the terms and conditions of this Agreement, each of the Lenders, severally and for itself alone, agrees to make loans to, and to issue or participate in letters of credit for the account of, the Company as follows: 2.1.1 Revolving Loans. Each Lender agrees to make loans to the Company on a revolving basis (collectively "Revolving Loans" and individually each a "Revolving Loan") from time to time before the Termination Date in such Lender's Percentage of such aggregate amounts as the Company may from time to time request from all Lenders. 2.1.2 Letter of Credit Commitment. (a) The Issuer will issue letters of credit, in each case containing such terms and conditions as are permitted by this Agreement and are otherwise reasonably satisfactory to the Issuer (collectively with the Existing Letter of Credit, the "Letters of Credit" and individually each a "Letter of Credit"), at the request of and for the account of the Company (or jointly for the account of the Company and a Subsidiary) from time to time before the Termination Date; and (b) as more fully set forth in Section 2.3, each Lender agrees to purchase a participation in each Letter of Credit. 2.1.3 Commitment Limits. Notwithstanding any other provision of this Agreement, (a) the Aggregate Outstandings shall not at any time exceed the Aggregate Commitment Amount, (b) the Stated Amount of all Letters of Credit shall not at any time exceed $20,000,000 and (c) the aggregate outstanding Dollar Equivalent principal amount of all Eurocurrency Loans denominated in a currency other than Dollars shall not exceed at any time $100,000,000. 2.1.4 Valuation of Certain Eurocurrency Loans and Certain Letters of Credit. The Administrative Agent will determine the Dollar Equivalent amount of each Eurocurrency Loan and each Letter of Credit denominated in a currency other than Dollars on each Computation Date, and such determination shall be conclusive absent demonstrable error. 2.2 Revolving Loan Procedures. 2.2.1 Various Types of Revolving Loans. Each Revolving Loan shall be either a Base Rate Loan or a Eurocurrency Loan, as the Company shall specify in the related notice of borrowing or conversion pursuant to Section 2.2.2 or 2.2.3. Eurocurrency Loans having the same Interest Period are sometimes called a "Group" or collectively "Groups". Base Rate Loans and Eurocurrency Loans may be outstanding at the same time; provided that (i) not more than 18 different Groups of Eurocurrency Loans shall be outstanding at any one time and (ii) the aggregate principal amount of each Group of Eurocurrency Loans shall at all times be a Dollar Equivalent of at least $500,000 and an integral multiple of 100,000 units of the applicable currency. All borrowings, conversions and repayments of Revolving Loans shall be effected so that each Lender will have a pro rata share (according to its Percentage) of all Types and Groups of Revolving Loans. 2.2.2 Borrowing Procedures. The Company shall give written or telephonic (followed promptly by written confirmation thereof) notice to the Administrative Agent of each proposed borrowing of Revolving Loans not later than 10:00 a.m., Chicago time, (a) in the case of a Base Rate borrowing, on the proposed date of such borrowing, (b) in the case of a Eurodollar borrowing, at least three Business Days prior to the proposed date of such borrowing, and (c) in the case of a Eurocurrency borrowing in a currency other than Dollars, at least four Business Days prior to the proposed date of such borrowing. Each such notice shall be effective upon receipt by the Administrative Agent, shall be irrevocable, and shall specify the date, amount and Type of borrowing and, in the case of a Eurocurrency borrowing, the initial Interest Period therefor and the applicable currency thereof. Promptly upon receipt of such notice, the Administrative Agent shall advise each Lender thereof. Not later than 1:00 p.m., Chicago time, on the date of a proposed borrowing, each Lender shall provide the Administrative Agent at the office specified by the Administrative Agent with (a) in the case of a Eurocurrency borrowing in a currency other than Dollars, the applicable currency in immediately available funds, or (b) in the case of a Base Rate borrowing or a Eurodollar borrowing, Dollars in immediately available funds, in each case in the amount equal to such Lender's Percentage of such borrowing and, so long as the Administrative Agent has not received written notice that the conditions precedent set forth in Section 11 with respect to such borrowing have not been satisfied, the Administrative Agent shall promptly pay over the requested amount to the Company. Each borrowing of Revolving Loans shall be on a Business Day. Each Base Rate borrowing shall be in an aggregate amount of $1,000,000 or an integral multiple thereof. Each other borrowing shall be in the applicable amount required for a Group pursuant to Section 2.2.1. 2.2.3 Conversion and Continuation Procedures. (a) Subject to the provisions of Section 2.2.1, the Company may, upon irrevocable written notice to the Administrative Agent in accordance with clause (b) below: (i) elect, as of any Business Day, to convert any outstanding Base Rate Loan into a Eurodollar Loan or any outstanding Eurodollar Loan into a Base Rate Loan; or (ii) elect, as of the last day of the applicable Interest Period, to continue any Group of Eurocurrency Loans having an Interest Period expiring on such day (or any part thereof in the applicable amount required for a Group pursuant to Section 2.2.1) for a new Interest Period in the same currency. (b) The Company shall give written or telephonic (followed promptly by written confirmation thereof) notice to the Administrative Agent of each proposed conversion or continuation not later than 10:00 a.m., Chicago time, (i) in the case of conversion of Eurodollar Loans into Base Rate Loans, on the proposed date of such conversion, (ii) in the case of a conversion of Base Rate Loans into or continuation of Eurodollar Loans, at least three Business Days prior to the proposed date of such conversion or continuation, and (iii) in the case of continuation of Eurocurrency Loans in a currency other than Dollars, at least four Business Days prior to the proposed date of such continuation, specifying in each case: (1) the proposed date of conversion or continuation; (2) the aggregate amount of the Revolving Loans to be converted or continued; (3) the Type of Revolving Loans resulting from the proposed conversion or continuation; and (4) in the case of a continuation of Eurocurrency Loans denominated in a currency other than Dollars or conversion into, or continuation of, Eurodollar Loans, the duration of the requested Interest Period therefor. (c) If upon expiration of any Interest Period applicable to Eurocurrency Loans, the Company has failed to select timely a new Interest Period to be applicable to such Eurocurrency Loans, the Company shall be deemed to have elected to continue such Eurocurrency Loans for a one-month Interest Period. (d) The Administrative Agent will promptly notify each Lender of its receipt of a notice of conversion or continuation pursuant to this Section 2.2.3 or, if no timely notice is provided by the Company, of the details of any automatic continuation or conversion. (e) Unless the Required Lenders otherwise consent, during the existence of any Event of Default or Unmatured Event of Default, the Company may not elect to have a Revolving Loan converted into or continued as a Eurodollar Loan. 2.3 Letter of Credit Procedures 2.3.1 Issuance of Letters of Credit. The Company shall give written notice to the Administrative Agent of the proposed issuance (which, for purposes of this Agreement shall, whenever appropriate, include any increase in the amount available to be drawn under or extension of the term of any Letter of Credit) of each Letter of Credit on a Business Day which is at least three Business Days (or such lesser period as the Issuer may agree) prior to the proposed date of issuance of such Letter of Credit; provided that the Company shall not be required to give written notice of the extension of the term of a Letter of Credit which has an "evergreen" or automatic renewal provision. Each such notice shall be accompanied by a Letter of Credit Application, duly executed by the Company and in all respects reasonably satisfactory to the Issuer, together with such other documentation as the Issuer may reasonably request in support thereof, it being understood that (a) each Letter of Credit Application shall specify, among other things, the date on which the proposed Letter of Credit is to be issued, the expiration date of such Letter of Credit (which shall not be later than 22 days prior to the scheduled Termination Date), the face amount of such Letter of Credit, the currency in which such Letter of Credit is to be denominated (which shall be an Available Currency), the name and address of the beneficiary of such Letter of Credit and whether such Letter of Credit is to be transferable in whole or in part; and (b) the Company shall not request, and the Issuer shall not issue, any Letter of Credit if the aggregate Stated Amount of all Letters of Credit having expiration dates after any Commitment Reduction Date plus the aggregate principal amount of all Eurocurrency Loans having Interest Periods ending after such date would exceed the Aggregate Commitment Amount scheduled to be in effect after giving effect to the reduction on such date. Subject to the satisfaction of the conditions precedent set forth in Section 11 with respect to the issuance of such Letter of Credit, the Issuer shall issue such Letter of Credit on the requested issuance date. With respect to any Letter of Credit which contains any "evergreen" or automatic renewal provision, each Lender shall be deemed to have consented to any such extension or renewal unless such Lender shall have provided to the Administrative Agent, not less than 30 days prior to the last date on which the Issuer can in accordance with the terms of the applicable Letter of Credit decline to extend or renew such Letter of Credit, written notice that it declines to consent to any extension or renewal. 2.3.2 Participations in Letters of Credit. Concurrently with the issuance of each Letter of Credit, the Issuer shall be deemed to have sold and transferred to each other Lender, and each other Lender shall be deemed irrevocably and unconditionally to have purchased and received from the Issuer without recourse or warranty, an undivided interest and participation, to the extent of such other Lender's Percentage, in such Letter of Credit and the Company's reimbursement obligations with respect thereto. For the purposes of this Agreement, the unparticipated portion of each Letter of Credit shall be deemed to be the Issuer's "participation" therein. The Administrative Agent hereby agrees, upon request of any Lender, to deliver to such Lender a list of all outstanding Letters of Credit, together with such information related thereto as such Lender may reasonably request. 2.3.3 Reimbursement Obligations. The Company unconditionally and irrevocably agrees to reimburse the Issuer for each payment or disbursement made by the Issuer under any Letter of Credit honoring any demand for payment made by the beneficiary thereunder, in each case on the date that such payment or disbursement is made and in the currency of such payment or disbursement. Any amount not reimbursed on the date of such payment or disbursement shall bear interest from and including the date of such payment or disbursement to but not including the date that the Issuer is reimbursed by the Company therefor, payable on demand, at a rate per annum equal to (x) in the case of any amount denominated in Dollars, the Base Rate from time to time in effect plus the Applicable Base Rate Margin plus the Applicable Eurocurrency Margin plus, beginning on the first Business Day after demand by the Issuer, 2%, or (y) in the case of any amount denominated in any other currency, at the Overnight Rate from time to time in effect plus the Applicable Eurocurrency Margin plus, beginning on the first Business Day after demand by the Issuer, 2%. The Issuer shall notify the Company whenever any demand for payment is made under any Letter of Credit by the beneficiary thereunder; provided that the failure of the Issuer to so notify the Company shall not affect the rights of the Issuer or the Lenders in any manner whatsoever. 2.3.4 Limitation on the Issuer's Obligations. In determining whether to pay under any Letter of Credit, the Issuer shall not have any obligation to the Company or any Lender other than to confirm that all documents required to be delivered under such Letter of Credit appear to have been delivered and appear to comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by the Issuer under or in connection with any Letter of Credit, if taken or omitted in the absence of gross negligence and willful misconduct, shall not impose upon the Issuer any liability to the Company or any Lender and shall not reduce or impair the Company's reimbursement obligations set forth in Section 2.3.3 or the obligations of the Lenders pursuant to Section 2.3.5. 2.3.5 Funding by Lenders to the Issuer. If the Issuer makes any payment or disbursement under any Letter of Credit and the Company has not reimbursed the Issuer in full for such payment or disbursement by 12:00 noon, Chicago time, on the date of such payment or disbursement, or if any reimbursement received by the Issuer from the Company is or must be returned or rescinded upon or during any bankruptcy or reorganization of the Company or otherwise, each other Lender shall be obligated to pay to the Issuer, in full or partial payment of the purchase price of its participation in such Letter of Credit, its pro rata share (according to its Percentage) of such payment or disbursement (but no such payment shall diminish the obligations of the Company under Section 2.3.3), and the Administrative Agent shall promptly notify each other Lender thereof. Each other Lender irrevocably and unconditionally agrees, severally and for itself alone, to so pay to the Administrative Agent in immediately available funds for the Issuer's account the amount of such other Lender's Percentage of such payment or disbursement. If and to the extent any Lender shall not have made the amount referred to above available to the Administrative Agent by 2:00 p.m., Chicago time, on the Business Day on which such Lender receives notice from the Administrative Agent of such payment or disbursement, such Lender agrees to pay interest on such amount to the Administrative Agent for the Issuer's account forthwith on demand for each day from and including the date such amount was to have been delivered to the Administrative Agent to but excluding the date such amount is paid, at a rate per annum equal to (a) in the case of any amount denominated in Dollars, (i) for the first three days after demand, the Federal Funds Rate from time to time in effect and (ii) thereafter, the Base Rate from time to time in effect and (b) in the case of any amount denominated in any other currency, the Overnight Rate from time to time in effect plus, beginning on the third day after demand, 2%. Any Lender's failure to make available to the Administrative Agent its Percentage of any such payment or disbursement shall not relieve any other Lender of its obligation hereunder to make available to the Administrative Agent such other Lender's Percentage of such payment, but no Lender shall be responsible for the failure of any other Lender to make available to the Administrative Agent such other Lender's Percentage of any such payment or disbursement. 2.4 Swing Line Loans. 2.4.1 Swing Line Loans. Subject to the terms and conditions of this Agreement, the Swing Line Lender may from time to time, in its discretion, make loans to the Company (collectively "Swing Line Loans" and individually each a "Swing Line Loan") in accordance with this Section 2.4 in an aggregate principal amount not at any time exceeding $20,000,000; provided that the Aggregate Outstandings shall not at any time exceed the Aggregate Commitment Amount. Amounts borrowed under this Section 2.4 may be borrowed, repaid and (subject to the agreement of the Swing Line Lender) reborrowed until the Termination Date. 2.4.2 Swing Line Loan Procedures. The Company shall give written or telephonic notice to the Administrative Agent (which shall promptly inform the Swing Line Lender) of each proposed Swing Line Loan not later than 12:00 noon, Chicago time, on the proposed date of such Swing Line Loan. Each such notice shall be effective upon receipt by the Administrative Agent and shall specify the date and amount of such Swing Line Loan, which shall be $500,000 or a higher integral multiple of $100,000. So long as the Swing Line Lender has not received written notice that the conditions precedent set forth in Section 11 with respect to the making of such Swing Line Loan have not been satisfied, the Swing Line Lender may make the requested Swing Line Loan. If the Swing Line Lender agrees to make the requested Swing Line Loan, the Swing Line Lender shall pay over the requested amount to the Company on the requested borrowing date. Concurrently with the making of any Swing Line Loan, the Swing Line Lender shall be deemed to have sold and transferred, and each other Lender shall be deemed to have purchased and received from the Swing Line Lender, an undivided interest and participation to the extent of such Lender's Percentage in such Swing Line Loan (but such participation shall remain unfunded until required to be funded pursuant to Section 2.4.3). 2.4.3 Refunding of, or Funding of Participations in, Swing Line Loans. The Swing Line Lender may at any time, in its sole discretion, on behalf of the Company (which hereby irrevocably authorizes the Swing Line Lender to act on its behalf for such purpose) deliver a notice to the Administrative Agent requesting that each Lender (including the Swing Line Lender in its individual capacity) make a Revolving Loan (which shall be a Base Rate Loan) in such Lender's Percentage of the aggregate amount of Swing Line Loans outstanding on such date for the purpose of repaying all Swing Line Loans (and, upon receipt of the proceeds of such Loans, the Administrative Agent shall apply such proceeds to repay Swing Line Loans); provided that if the conditions precedent to a borrowing of Loans are not then satisfied or for any other reason the Lenders may not then make Revolving Loans, then instead of making Revolving Loans each Lender (other than the Swing Line Lender) shall become immediately obligated to fund its participation in all outstanding Swing Line Loans and shall pay to the Administrative Agent for the account of the Swing Line Lender an amount equal to such Lender's Percentage of such Swing Line Loans. If and to the extent any Lender shall not have made such amount available to the Administrative Agent by 2:00 p.m., Chicago time, on the Business Day on which such Lender receives notice from the Administrative Agent of its obligation to fund its participation in Swing Line Loans, such Lender agrees to pay interest on such amount to the Administrative Agent for the Swing Line Lender's account forthwith on demand for each day from the date such amount was to have been delivered to the Administrative Agent to the date such amount is paid, at a rate per annum equal to (a) for the first three days after demand, the Federal Funds Rate from time to time in effect and (b) thereafter, the Base Rate from time to time in effect. Any Lender's failure to make available to the Administrative Agent its Percentage of the amount of all outstanding Swing Line Loans shall not relieve any other Lender of its obligation hereunder to make available to the Administrative Agent such other Lender's Percentage of such amount, but no Lender shall be responsible for the failure of any other Lender to make available to the Administrative Agent such other Lender's Percentage of any such amount. The Swing Line Lender shall promptly notify the Company of any notice given to the Administrative Agent pursuant to the first sentence of this Section 2.4.3, but any failure to so notify the Company shall not affect the effectiveness of such notice or impose any liability on the Swing Line Lender or any other Person. 2.4.4 Repayment of Participations. Upon (and only upon) receipt by the Administrative Agent for the account of the Swing Line Lender of immediately available funds from or on behalf of the Company (a) in reimbursement of any Swing Line Loan with respect to which a Lender has paid the Administrative Agent for the account of the Swing Line Lender the amount of such Lender's participation therein or (b) in payment of any interest on a Swing Line Loan (to the extent attributable to the period on or after the date such Lender funded its participation therein), the Administrative Agent will pay to such Lender its pro rata share (according to its Percentage) thereof (and the Swing Line Lender shall receive the amount otherwise payable to any Lender which did not so pay the Administrative Agent the amount of such Lender's participation in such Swing Line Loan). 2.5 Participation Obligations Unconditional. (a) Each Lender's obligation to make available to the Administrative Agent for the account of the Swing Line Lender the amount of its participation interest in any Swing Line Loan as provided in Section 2.4.3 shall be absolute and unconditional and shall not be affected by any circumstance, including (i) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender or any other Person, (ii) the occurrence or continuance of an Event of Default or Unmatured Event of Default, (iii) any adverse change in the condition (financial or otherwise) of the Company or any Subsidiary, (iv) any termination of the Commitments or (v) any other circumstance, happening or event whatsoever. (b) Notwithstanding the provisions of clause (a) above, no Lender shall be required to purchase a participation interest in any Swing Line Loan if, prior to the making by the Swing Line Lender of such Swing Line Loan, the Swing Line Lender received written notice from such Lender specifying that one or more of the conditions precedent to the making of such Swing Line Loan were not satisfied and, in fact, such conditions precedent were not satisfied at the time of the making of such Swing Line Loan. 2.6 Warranty. Each notice of borrowing pursuant to Section 2.2, each request for a Swing Line Loan pursuant to Section 2.4.2 and the delivery of each Letter of Credit Application pursuant to Section 2.3 shall automatically constitute a warranty by the Company to the Administrative Agent and each Lender to the effect that on the date of the requested borrowing or Swing Line Loan or the issuance of the requested Letter of Credit, as the case may be, (a) the warranties of the Company contained in Section 9 shall be true and correct in all material respects as of such requested date as though made on the date thereof (except to the extent that any warranty relates to an earlier date, in which case such warranty shall be true and correct as of such earlier date) and (b) no Event of Default or Unmatured Event of Default shall have then occurred and be continuing or will result therefrom. 2.7 Conditions. Notwithstanding any other provision of this Agreement, (a) no Lender shall be obligated to make any Loan, (b) no Lender shall be obligated to convert into, or permit the continuation at the end of the applicable Interest Period of, any Eurodollar Loan and (c) the Issuer shall not be obligated to issue any Letter of Credit if, in any such case, an Event of Default or Unmatured Event of Default exists or would result therefrom. 2.8 Commitments Several. The failure of any Lender to make a requested Revolving Loan on any date shall not relieve any other Lender of its obligation (if any) to make a Revolving Loan on such date, but no Lender shall be responsible for the failure of any other Lender to make any Revolving Loan to be made by such other Lender. SECTION 3 LOAN ACCOUNTS AND NOTES. 3.1 Loan Account. The Loans made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be rebuttable presumptive evidence of the amount of the Loans made by the Lenders to the Company, and the interest and payments thereon. Any failure so to record or any error in so recording shall not, however, limit or otherwise affect the obligation of the Company hereunder to pay all amounts owing with respect to each Loan. 3.2 Notes. Upon the request of any Lender made through the Administrative Agent (and, in the case of Eurocurrency Loans, so long as the issuance of such Note shall not result in the imposition of any stamp, withholding or other tax), the Loans made by such Lender to the Company may be evidenced by a promissory note (individually each a "Note" and collectively for all Lenders the "Notes") substantially in the form of Exhibit A instead of loan accounts. Each such Lender may record on the schedules annexed to the applicable Note the date and amount of each applicable Loan made by it and the amount of each payment of principal made by the Company with respect thereto, and such Lender's record shall be conclusive absent demonstrable error; provided that the failure of a Lender to make, or an error in making, a notation on any Note with respect to any Loan shall not limit or otherwise affect the obligation of the Company to repay each Loan together with interest thereon. SECTION 4 INTEREST. 4.1 Interest Rates. (a) The Company promises to pay interest on the unpaid principal amount of each Revolving Loan, for the period commencing on the date of such Revolving Loan until such Revolving Loan is paid in full, (i) at all times such Revolving Loan is a Base Rate Loan, at a rate per annum equal to the Base Rate from time to time in effect plus the Applicable Base Rate Margin; and (ii) at all times such Revolving Loan is a Eurocurrency Loan, at a rate per annum equal to the sum of the Eurocurrency Rate (Reserve Adjusted) applicable to each Interest Period for such Revolving Loan plus the Applicable Eurocurrency Margin from time to time in effect. (b) The Company promises to pay interest on the unpaid principal amount of each Swing Line Loan, for the period commencing on the date of such Swing Line Loan until such Swing Line Loan is paid in full, at a rate per annum equal to the Base Rate from time to time in effect plus the Applicable Base Rate Margin from time to time in effect. (c) Notwithstanding any other provision of this Agreement, at the request of the Required Lenders at any time an Event of Default exists, the interest rate applicable to each Loan shall be increased by 2% for so long as such Event of Default continues or, notwithstanding Section 14.1, until the Required Lenders otherwise notify the Administrative Agent in writing. 4.2 Interest Payment Dates. Accrued interest on each Base Rate Loan and Swing Line Loan shall be payable on the last day of each calendar quarter and at maturity. Accrued interest on each Eurocurrency Loan shall be payable on the last day of each Interest Period relating to such Revolving Loan (and, in the case of each Eurocurrency Loan with an Interest Period in excess of three months, on each three-month anniversary of the first day of such Interest Period) and at maturity. After maturity, accrued interest on all Loans shall be payable on demand. 4.3 Setting and Notice of Certain Rates. The applicable Eurocurrency Rate for each Interest Period shall be determined by the Administrative Agent in accordance with the terms of this Agreement, and notice thereof shall be given by the Administrative Agent promptly to the Company and each Lender. Each determination of the applicable Eurocurrency Rate by the Administrative Agent shall be conclusive and binding upon the parties hereto, in the absence of demonstrable error. The Administrative Agent shall, upon written request of the Company or any Lender, deliver to such Person a statement showing the computations used by the Administrative Agent in determining any applicable Eurocurrency Rate. 4.4 Computation of Interest. Interest on any Loan bearing interest based upon Bank of America's prime rate or denominated in British Pounds Sterling shall be computed for the actual number of days elapsed on the basis of a year of 365 or 366 days, as applicable. All other interest shall be computed for the actual number of days elapsed on the basis of a year of 360 days. SECTION 5 FEES. 5.1 Non-Use Fees. (a) The Company agrees to pay to the Administrative Agent for the account of each Lender a non-use fee for the period from the Signing Date to the Termination Date at a rate per annum equal to the Non-Use Fee Rate on the amount equal to (i) the Commitment of such Lender minus (ii) the sum of the Dollar Equivalent principal amount of the outstanding Revolving Loans of such Lender plus such Lender's Percentage of the Stated Amount of all outstanding Letters of Credit. (b) Non-use fees shall be payable in arrears on the last day of each calendar quarter and on the Termination Date for any period then ending for which such non-use fees shall not have been theretofore paid. Non-use fees shall be computed for the actual number of days elapsed on the basis of a year of 360 days. Solely for the purposes of calculating non-use fees, Swing Line Loans shall not constitute usage of the Commitment. 5.2 Letter of Credit Fees. (a) The Company agrees to pay to the Administrative Agent for the account of the Lenders pro rata according to their respective Percentages a letter of credit fee for each Letter of Credit at a rate per annum equal to the applicable LC Fee Rate (computed for the actual number of days elapsed on the basis of a year of 360 days) multiplied by the Dollar Equivalent amount available to be drawn under such Letter of Credit, payable in arrears on the last day of each calendar quarter and on the Termination Date (and, with respect to any Letter of Credit which remains outstanding after the Termination Date, thereafter on demand) for the period from the date of the issuance of such Letter of Credit to the date such payment is due or, if earlier, the date on which such Letter of Credit expired or was terminated. (b) In addition, with respect to each Letter of Credit, the Company agrees to pay to the Issuer (i) such fees and expenses as the Issuer customarily requires in connection with the issuance, negotiation, processing and/or administration of letters of credit in similar situations and (ii) a fronting fee in an amount separately agreed to by the Company and the Issuer. 5.3 Administrative Agent's and Arranger's Fees. The Company agrees to pay to the Administrative Agent and the Arranger such fees at such times and in such amounts as are mutually agreed upon by the Company and the Administrative Agent and the Arranger, respectively. SECTION 6 REDUCTION OR TERMINATION OF THE COMMITMENTS; PREPAYMENTS. 6.1 Reduction or Termination of the Commitments. 6.1.1 Scheduled Mandatory Reductions of the Aggregate Commitment Amount. The Aggregate Commitment Amount shall be reduced on each of the following dates (each a "Commitment Reduction Date") by the amount set forth opposite such Commitment Reduction Date: Commitment Reduction Date Amount of Reduction ------------------------- ------------------- First day of Fiscal Year 2003 $25,000,000 First day of Fiscal Year 2004 $25,000,000 First day of Fiscal Year 2005 $30,000,000 First day of Fiscal Year 2006 $30,000,000. 6.1.2 Mandatory Reductions of the Aggregate Commitment Amount. Concurrently with the receipt by the Company or any Subsidiary of any Applicable Asset Sale Proceeds or the Net Cash Proceeds from any Debt Issuance (excluding any Specified Proceeds), the Aggregate Commitment Amount shall be reduced by an amount equal to the excess of all Applicable Asset Sale Proceeds and all such Net Cash Proceeds received since the Signing Date over all reductions of the Aggregate Commitment Amount made pursuant to this Section 6.1.2 since the Signing Date (rounded down, if necessary, to an integral multiple of $500,000). No reduction of the Aggregate Commitment Amount pursuant to this Section 6.1.2 shall reduce the amount of any reduction of the Aggregate Commitment Amount scheduled to be made on any Commitment Reduction Date pursuant to Section 6.1.1. 6.1.3 Voluntary Reduction of Commitments. The Company may from time to time on at least five Business Days' prior written notice received by the Administrative Agent (which shall promptly advise each Lender thereof) permanently reduce the Aggregate Commitment Amount to an amount not less than the Aggregate Outstandings; provided that any such reduction shall be in the amount of $5,000,000 or an integral multiple thereof. The Company may at any time on like notice terminate the Commitments upon payment in full of all Loans and all other obligations of the Company hereunder and the cash collateralization in full, pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent and the Issuer, of all obligations arising with respect to the Letters of Credit. 6.1.4 All Reductions Pro Rata. All reductions of the Commitments shall be pro rata among the Lenders according to their respective Percentages. 6.2 Prepayments. 6.2.1 Mandatory Prepayments Resulting from Commitment Reductions. On each date on which the Aggregate Commitment Amount is reduced pursuant to Section 6.1.1, 6.1.2 or 6.1.3, the Company shall prepay Loans in the amount necessary (if any) so that the Aggregate Outstandings will not exceed the Aggregate Commitment Amount as reduced on such date. 6.2.2 Mandatory Prepayments Resulting from Currency Fluctuations. If on any Computation Date the Administrative Agent determines that the Aggregate Outstandings exceed the Aggregate Commitment Amount due to a change in applicable rates of exchange between Dollars and any applicable currency, then (i) the Administrative Agent shall promptly notify the Company and (ii) the Company shall promptly (subject to the notice requirements of Section 6.2.4) prepay Loans in an amount so that the Aggregate Outstandings are equal to or less than the Aggregate Commitment Amount; provided that no prepayment shall be required under this clause (ii) on any day which is a Computation Date solely because it is the last Business Day of a month unless the Aggregate Outstandings exceed the Commitment Amount by a Dollar Equivalent amount of $500,000 or more. 6.2.3 Voluntary Prepayments. Subject to Section 6.2.4, the Company may from time to time prepay Loans in whole or in part, without premium or penalty. 6.2.4 All Prepayments. The Company shall give the Administrative Agent (which shall promptly advise each Lender or, in the case of prepayment of Swing Line Loans, the Swing Line Lender) notice of each prepayment not later than (a) 10:00 a.m., Chicago time, on the date of a prepayment of Base Rate Loans, (b) 12:00 noon, Chicago time, on the date of a prepayment of a Swing Line Loan and (c) 3:00 p.m., Chicago time, on the third Business Day preceding the day of a prepayment of Eurocurrency Loans, in each case specifying the Loans to be prepaid and the day (which shall be a Business Day) and amount of such prepayment. Each partial prepayment of Revolving Loans pursuant to Section 6.2.3 shall be in a Dollar Equivalent principal amount of at least $500,000 and an integral multiple of 100,000 units of the applicable currency. Each partial prepayment of Swing Line Loans shall be in a principal amount of $500,000 or a higher integral multiple of $100,000. After giving effect to any partial prepayment, the aggregate principal amount of each Group of Eurocurrency Loans shall be in a Dollar Equivalent principal amount of at least $500,000 and an integral multiple of 100,000 units of the applicable currency. Any prepayment of a Eurocurrency Loan shall include accrued interest to the date of prepayment on the principal amount being repaid and, if made on a day other than the last day of an Interest Period therefor, shall be subject to Section 8.4. SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES. 7.1 Making of Payments. All payments of principal of or interest on the Notes, and of all non-use fees and Letter of Credit fees, shall be made by the Company to the Administrative Agent in immediately available funds and in the applicable currency at the Agent's Payment Office not later than 12:00 noon, Chicago time, on the date due, and funds received after that hour shall be deemed to have been received by the Administrative Agent on the next following Business Day. The Company hereby authorizes Bank of America to charge any demand deposit account maintained with Bank of America for the amount of any such payment to be made by the Company on the due date therefor and to pay such amount to the Administrative Agent, but Bank of America's failure to so charge any such account shall in no way affect the obligation of the Company to make any such payment. The Administrative Agent shall promptly remit to each Lender its share (if any) of all such payments received in collected funds by the Administrative Agent for the account of such Lender. All payments under Sections 8.1 and 8.4 shall be made by the Company to the Administrative Agent at the Agent's Payment Office for the account of the Lender entitled thereto. 7.2 Application of Certain Payments. Each payment of principal shall be applied to such Loans as the Company shall direct by notice to be received by the Administrative Agent on or before the date of such payment or, in the absence of such notice, as the Administrative Agent shall determine in its discretion. Concurrently with each remittance to any Lender of its share of any such payment, the Administrative Agent shall advise such Lender as to the application of such payment. 7.3 Due Date Extension. If any payment of principal or interest with respect to any of the Loans, or of non-use fees or Letter of Credit fees, falls due on a day which is not a Business Day, then such due date shall be extended to the next following Business Day (unless, in the case of a Eurocurrency Loan, such next following Business Day is the first Business Day of a calendar month, in which case such due date shall be the immediately preceding Business Day) and additional interest (in the case of principal) or fees, as the case may be, shall accrue and be payable for the period of any such extension. 7.4 Setoff. The Company agrees that the Administrative Agent and each Lender have all rights of set-off and bankers' lien provided by applicable law, and in addition thereto, the Company agrees that at any time any payment or other amount owing by the Company under this Agreement is then due to the Administrative Agent or any Lender, the Administrative Agent and each Lender may apply to the payment of such payment or other amount any and all balances, credits, deposits, accounts or moneys of the Company then or thereafter with the Administrative Agent or such Lender. 7.5 Proration of Payments. If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of offset or otherwise) on account of principal of or interest on any Loan (or on account of its participation in any Credit Extension) in excess of its pro rata share of payments and other recoveries obtained by all Lenders on account of principal of and interest on Loans (or such participations) then held by them (other than in respect of an Affected Loan or any payment to the Swing Line Lender in respect of a Swing Line Loan, or as a result of replacement of a Lender pursuant to Section 8.7), such Lender shall purchase from the other Lenders such participation in the Loans (or sub-participations in Credit Extensions) held by them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and the purchase price restored to the extent of such recovery. 7.6 Taxes with respect to Payments by the Company. (a) All payments by the Company hereunder to the Administrative Agent or any Lender shall be made free and clear of and without deduction for any present or future Taxes. If any deduction or withholding from any payment to be made by the Company hereunder is required in respect of any Taxes in respect of payments to the Administrative Agent or any Lender, then the Company will: (i) pay directly to the relevant authority the full amount required to be so withheld or deducted; (ii) promptly forward to the Administrative Agent an official receipt or other documentation satisfactory to the Administrative Agent evidencing such payment to such authority; and (iii) except to the extent that such deduction or withholding results from the breach by any Lender of its agreement contained in clause (b) below, or would not be required if such Person's representation and warranty contained in clause (c) below were true, pay such additional amounts as may be necessary in order that the net amount received by such Lender after such deduction or withholding (including any required deduction or withholding on such additional amounts) shall equal the amount such Person would have received had no such deduction or withholding been made. Moreover, if any Taxes are directly asserted against the Administrative Agent or any Lender with respect to any payment received by the Administrative Agent or such Lender from the Company hereunder, the Administrative Agent or such Lender may pay such Taxes and the Company will, within 10 days after demand by the Administrative Agent or such Lender (which demand shall be accompanied by a statement setting forth in reasonable detail the basis for and a calculation of the amount of such demand, a copy of which shall be furnished to the Administrative Agent), pay such additional amount (including any penalty, interest and expense) as is necessary in order that the net amount received by such Person after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount such Person would have received had such Taxes not been asserted (except to the extent that such Taxes (including any penalty, interest and expense and any Taxes on any such additional amount) result from such Person's gross negligence or willful misconduct or from the breach by such Person of its agreement contained in clause (b) below or would not be asserted if such Person's representation and warranty contained in clause (c) below were true). For purposes of this Section 7.6, a distribution hereunder by the Administrative Agent or any Lender to or for the account of any Lender of any amount received from the Company shall be deemed a payment by the Company. (b) Each Lender agrees (to the extent it is permitted to do so under applicable law) to execute and deliver to the Administrative Agent and the Company such documents as may be necessary or appropriate from time to time in order to properly claim any available exemption (whether partial or complete) from withholding and deduction of any Taxes which are levied or imposed by a Governmental Authority in respect of payments by the Company hereunder to (or for the benefit of) such Lender. (c) Each Lender represents and warrants to the Company and the Administrative Agent that, as of the date of this Agreement (or in the case of any Assignee which is a Lender, as of the effective date of the assignment to such Assignee, or in the case of any transfer of any rights under a Loan from a Lender to an Affiliate of such Lender or from one office to another of a Lender, as of the effective date of such transfer), it is entitled to receive payments hereunder from the Company without deduction or withholding for or on account of any Taxes which are levied or imposed by any Governmental Authority. (d) Notwithstanding the foregoing provisions of this Section 7.6, if any Lender fails to notify the Company of any event or circumstance which will entitle such Lender to compensation pursuant to this Section 7.6 within 120 days after such Lender obtains knowledge of such event or circumstance, then such Lender shall not be entitled to compensation from the Company for any amount arising prior to the date which is 120 days before the date on which such Lender notifies the Company of such event or circumstance. SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EUROCURRENCY LOANS. 8.1 Increased Costs. (a) If, after the date hereof, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration of any applicable law, rule or regulation by any Governmental Authority charged with the interpretation or administration thereof, or compliance by any Lender (or any Eurocurrency Office of such Lender) with any request or directive (whether or not having the force of law) of any such Governmental Authority: (i) shall subject any Lender (or any Eurocurrency Office of such Lender) to any tax, duty or other charge with respect to its Eurocurrency Loans, its Note or its obligation to make Eurocurrency Loans, or shall change the basis of taxation of payments to any Lender of the principal of or interest on its Eurocurrency Loans or any other amount due under this Agreement in respect of its Eurocurrency Loans or its obligation to make Eurocurrency Loans (except for (x) franchise taxes and taxes imposed on or measured by the gross or net income or receipts of such Lender or its applicable Eurocurrency Office, (y) any Taxes referred to in Section 7.6 and (z) any tax, duty or other charge to the extent resulting from such Lender's gross negligence or willful misconduct); or (ii) shall impose, modify or deem applicable any reserve (including any reserve imposed by the FRB, but excluding any reserve included in the determination of interest rates pursuant to Section 4), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by any Lender (or any Eurocurrency Office of such Lender); or (iii) shall impose on any Lender (or its applicable Eurocurrency Office) any other condition affecting its Eurocurrency Loans, its Note or its obligation to make Eurocurrency Loans; and the result of any of the foregoing is to increase the cost to (or in the case of Regulation D of the FRB, to impose a cost on) such Lender (or any Eurocurrency Office of such Lender) of making or maintaining any Eurocurrency Loan, or to reduce the amount of any sum received or receivable by such Lender (or its applicable Eurocurrency Office) under this Agreement or under its Note with respect thereto, then within 10 days after demand by such Lender (which demand shall be accompanied by a statement setting forth in reasonable detail the basis for and a calculation of the amount of such demand, a copy of which shall be furnished to the Administrative Agent), the Company shall pay directly to such Lender such additional amount or amounts as will compensate such Lender for such increased cost or such reduction. (b) If any Lender shall reasonably determine that any change in, or the adoption or phase-in of, any applicable law, rule or regulation regarding capital adequacy, or any change in the interpretation or administration of any such law, rule or regulation by any Governmental Authority charged with the interpretation or administration thereof, or compliance by any Lender (or any Eurocurrency Office of such Lender) or any Person controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, has or would have the effect of reducing the rate of return on such Lender's or such controlling Person's capital as a consequence of such Lender's obligations hereunder (including such Lender's Commitment) to a level below that which such Lender or such controlling Person could have achieved but for such change, adoption, phase-in or compliance (taking into consideration such Lender's or such controlling Person's policies with respect to capital adequacy) by an amount deemed by such Lender or such controlling Person to be material, then from time to time, within 10 days after demand by such Lender (which demand shall be accompanied by a statement setting forth in reasonable detail the basis for and a calculation of the amount of such demand, a copy of which shall be furnished to the Administrative Agent), the Company shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling Person for such reduction. (c) Notwithstanding the foregoing provisions of this Section 8.1, if any Lender fails to notify the Company of any event or circumstance which will entitle such Lender to compensation pursuant to this Section 8.1 within 120 days after such Lender obtains knowledge of such event or circumstance, then such Lender shall not be entitled to compensation from the Company for any amount arising prior to the date which is 120 days before the date on which such Lender notifies the Company of such event or circumstance. 8.2 Basis for Determining Eurocurrency Interest Rate Inadequate or Unfair. If with respect to any Interest Period: (a) the Administrative Agent reasonably determines (which determination shall be binding and conclusive on the Company) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the applicable Eurocurrency Rate; or (b) Lenders having an aggregate Percentage of 40% or more advise the Administrative Agent that the Eurocurrency Rate (Reserve Adjusted) as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Lenders of maintaining or funding the applicable Loans for such Interest Period (taking into account any amount to which such Lenders may be entitled under Section 8.1), or that the making or funding of Eurocurrency Loans has become impracticable as a result of an event occurring after the date of this Agreement which in the opinion of such Lenders materially affects such Loans, then the Administrative Agent shall promptly notify the other parties thereof and, so long as such circumstances shall continue, (i) no Lender shall be under any obligation to make, continue or convert into Eurocurrency Loans in the currency so affected, (ii) if the Loans so affected are Eurodollar Loans, on the last day of the current Interest Period therefor, such Loans shall, unless then repaid in full, automatically convert to Base Rate Loans, and (iii) if the Loans so affected are Eurocurrency Loans denominated in a currency other than Dollars, on the last day of the current Interest Period for each Eurocurrency Loan in such currency, such Loan shall be repaid in full. 8.3 Changes in Law Rendering Eurocurrency Loans Unlawful. If any change in (including the adoption of any new) applicable laws or regulations, or any change in the interpretation of applicable laws or regulations by any Governmental Authority or other regulatory body charged with the administration thereof, should make it (or in the good faith judgment of any Lender cause a substantial question as to whether it is) unlawful for any Lender to make, maintain or fund Eurocurrency Loans in any currency, then such Lender shall promptly notify each of the other parties hereto and, so long as such circumstances shall continue, (a) in the case of Eurodollar Loans, (i) such Lender shall have no obligation to make, continue or convert into Eurodollar Loans (but shall make Base Rate Loans concurrently with the making or continuation of or conversion into Eurodollar Loans by the applicable Lenders which are not so affected, in each case in an amount equal to such Lender's Percentage of all Eurodollar Loans which would be made, continued or converted into at such time in the absence of such circumstances), and (ii) on the last day of the current Interest Period for each Eurodollar Loan of such Lender (or, in any event, if such Lender so requests, on such earlier date as may be required by the relevant law, regulation or interpretation), such Eurodollar Loan shall, unless then repaid in full, automatically convert to a Base Rate Loan; and (b) in the case of Eurocurrency Loans denominated in a currency other than Dollars, (i) such Lender shall have no obligation to make or continue such Eurocurrency Loans in the currency so affected (but, if permitted by applicable law, shall make Eurodollar Loans concurrently with the making or continuation of Eurocurrency Loans in the applicable currency affected by the Lenders which are not so affected, in each case in an amount equal to such Lender's Percentage of the Dollar Equivalent amount of the Eurocurrency Loans in the currency so affected which would be made or continued at such time in the absence of such circumstances) and (ii) on the last day of the current Interest Period for each Eurocurrency Loan by such Lender in the currency so affected (or, in any event, if such Lender so requests, on such earlier date as may be required by the relevant law, regulation or interpretation), such Eurocurrency Loan shall be repaid in full (subject to the Company's right to borrow Eurocurrency Loans in other currencies in accordance with, and upon satisfaction of the conditions of, this Agreement). Each Base Rate Loan made by a Lender which, but for the circumstances described in the foregoing sentence, would be a Eurocurrency Loan, and each Eurodollar Loan which, but for the circumstances described in the foregoing sentence, would be a Eurocurrency Loan in another currency (any such Base Rate Loan or Eurocurrency Loan, an "Affected Loan"), shall, notwithstanding any other provision of this Agreement, remain outstanding for the same period (and be continued for such Interest Periods) as the Group of Eurocurrency Loans of which such Affected Loan would be a part absent such circumstances. 8.4 Funding Losses. The Company hereby agrees that, upon demand by any Lender (which demand shall be accompanied by a statement setting forth the basis for the calculations of the amount being claimed, a copy of which shall be furnished to the Administrative Agent), the Company will indemnify such Lender against any net loss or expense which such Lender may sustain or incur (including any net loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund or maintain any Eurocurrency Loan), as reasonably determined by such Lender, as a result of (a) any payment or prepayment or conversion of any Eurocurrency Loan of such Lender on a date other than the last day of an Interest Period for such Loan (including any conversion pursuant to Section 8.3) or (b) any failure of the Company to borrow, convert or continue any Loan on a date specified therefor in a notice of borrowing, conversion or continuation pursuant to this Agreement. For this purpose, all notices to the Administrative Agent pursuant to this Agreement shall be deemed to be irrevocable. 8.5 Right of Lenders to Fund through Other Offices. Each Lender may, if it so elects, fulfill its commitment as to any Eurocurrency Loan by causing a foreign branch or affiliate of such Lender to make such Loan; provided that in such event for the purposes of this Agreement such Loan shall be deemed to have been made by such Lender and the obligation of the Company to repay such Loan shall nevertheless be to such Lender and shall be deemed held by it, to the extent of such Loan, for the account of such branch or affiliate. 8.6 Discretion of Lenders as to Manner of Funding. Notwithstanding any provision of this Agreement to the contrary, each Lender shall be entitled to fund and maintain its funding of all or any part of its Loans in any manner it sees fit, it being understood, however, that for the purposes of Section 8.4 all determinations hereunder shall be made as if such Lender had actually funded and maintained each Eurocurrency Loan during each Interest Period for such Loan through the purchase of deposits having a maturity corresponding to such Interest Period and bearing an interest rate equal to the Eurocurrency Rate for such Interest Period. 8.7 Mitigation of Circumstances; Replacement of Affected Lender. (a) Each Lender shall promptly notify the Company and the Administrative Agent of any event of which it has knowledge which will result in, and will use reasonable commercial efforts available to it (and not, in such Lender's good faith judgment, otherwise disadvantageous to such Lender) to mitigate or avoid, (i) any obligation by the Company to pay any amount pursuant to Section 7.6 or 8.1 or (ii) the occurrence of any circumstances of the nature described in Section 8.2 or 8.3 (and, if any Lender has given notice of any such event described in clause (i) or (ii) above and thereafter such event ceases to exist, such Lender shall promptly so notify the Company and the Administrative Agent). Without limiting the foregoing, each Lender will designate a different Eurocurrency Office if such designation will avoid (or reduce the cost to the Company of) any event described in clause (i) or (ii) of the preceding sentence and such designation will not, in such Lender's judgment, be otherwise disadvantageous to such Lender. (b) At any time any Lender is an Affected Lender, the Company may replace such Affected Lender (and any affiliate thereof) as a party to this Agreement with one or more other banks or financial institutions reasonably satisfactory to the Administrative Agent, such banks or financial institutions to have Commitments in an aggregate amount equal to the amount previously held by the Affected Lender (provided that the amount of the Commitment held by each such bank or financial institution shall be reasonably satisfactory to the Administrative Agent); and upon notice from the Company, such Affected Lender (and any affiliate thereof) shall assign pursuant to an Assignment Agreement, and without recourse or warranty, its Commitment, its Revolving Loans, its Notes, its participation in Letters of Credit and Swing Line Loans and all of its other rights and obligations hereunder to such replacement banks or other financial institutions for a purchase price equal to the sum of the principal amount of the Revolving Loans so assigned, all accrued and unpaid interest thereon, its ratable share of all accrued and unpaid non-use fees and Letter of Credit fees and all other obligations owed to such Affected Lender (or any affiliate thereof) hereunder and, concurrently therewith, the Company shall pay to such Affected Lender any amount payable under Section 8.4 as a result of such Affected Lender (or any affiliate thereof) receiving payment of any Eurocurrency Loan prior to the end of an Interest Period therefor. 8.8 Conclusiveness of Statements; Survival of Provisions. Determinations and statements of any Lender pursuant to Section 7.6, 8.1, 8.2, 8.3 or 8.4 shall be conclusive absent demonstrable error. Lenders may use reasonable averaging and attribution methods in determining compensation under Sections 8.1 and 8.4, and the provisions of such Sections shall survive the expiration or termination of the Commitments, the repayment of the Loans and all other obligations of the Company hereunder, the expiration or termination of the Letters of Credit and the termination of this Agreement. SECTION 9 WARRANTIES. To induce the Administrative Agent and the Lenders to enter into this Agreement and to induce the Lenders to make Credit Extensions hereunder, the Company warrants to the Administrative Agent and the Lenders that: 9.1 Organization, etc. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, each Subsidiary is duly organized, validly existing and, to the extent such concept is applicable, in good standing under the jurisdiction of its organization, each of the Company and each Subsidiary is duly qualified to do business in each jurisdiction where the nature of its business makes such qualification necessary, except where the failure to be so qualified would not have a Material Adverse Effect, and each of the Company and each Subsidiary has full power and authority to own its property and conduct its business as presently conducted by it. 9.2 Authorization; No Conflict. The execution and delivery by the Company of this Agreement and each other Loan Document to which it is a party, the borrowings hereunder, the execution and delivery by each Guarantor of each Loan Document to which it is a party and the performance by each of the Company and each Guarantor of its obligations under each Loan Document to which it is a party are within the powers of the Company and each Guarantor, have been duly authorized by all necessary action on the part of the Company and each Guarantor (including any necessary shareholder action), have received all necessary governmental approval (if any shall be required), and do not and will not (a) violate any provision of law or any order, decree or judgment of any court or other Governmental Authority which is binding on the Company or any Guarantor, (b) contravene or conflict with, or result in a breach of, any provision of the articles or certificate of incorporation, bylaws or other organizational documents of the Company or any Guarantor or of any agreement, indenture, instrument or other document which is binding on the Company, any Guarantor or any other Subsidiary or (c) result in, or require, the creation or imposition of any Lien on any property of the Company, any Guarantor or any other Subsidiary. 9.3 Validity and Binding Nature. Each of this Agreement and each other Loan Document to which the Company is a party is, or upon the execution and delivery thereof will be, the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in equity or at law); and each Loan Document to which any Guarantor is a party is, or upon the execution and delivery thereof will be, the legal, valid and binding obligation of such Guarantor, enforceable against such Guarantor in accordance with its terms, except that enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in equity or at law). 9.4 Financial Information. The audited consolidated financial statements of the Company and its Subsidiaries for Fiscal Years 1999 and 2000, the unaudited consolidated financial statements of the Company and its Subsidiaries for the Fiscal Quarters ended December 29, 2000 and March 31, 2001 and the preliminary unaudited consolidated financial statements of the Company and its Subsidiaries for the Fiscal Quarter ended June 29, 2001, copies of which have been delivered to each Lender, have been prepared in accordance with GAAP in all material respects and present fairly the consolidated financial condition of the Company and its Subsidiaries taken as a whole as at such date and the results of their operations for the periods then ended (subject, in the case of unaudited statements, for the absence of footnotes and to normal year-end audit adjustments). 9.5 No Material Adverse Change. Since September 29, 2000, no events have occurred which, individually or in the aggregate, have had or are reasonably likely to have a Material Adverse Effect. 9.6 Litigation and Contingent Liabilities. No litigation (including derivative actions), arbitration proceeding or governmental proceeding is pending or, to the Company's knowledge, threatened against the Company or any Subsidiary which is reasonably likely to have a Material Adverse Effect except as set forth in Schedule 9.6. Other than any liability incident to such litigation or proceedings, neither the Company nor any Subsidiary has any material contingent liabilities which are not provided for or disclosed in the financial statements referred to in Section 9.4 or listed in Schedule 9.6. 9.7 Ownership of Properties; Liens. The Company and its Subsidiaries own good and marketable title to, or a valid leasehold interest in, all of their respective properties and assets, real and personal, tangible and intangible, of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights), free and clear of all Liens, charges and claims (including infringement claims with respect to patents, trademarks, copyrights and the like) except as permitted pursuant to Section 10.8. 9.8 Subsidiaries. The Company has no Subsidiaries except those listed in Schedule 9.8. 9.9 ERISA Compliance. (a) Each Plan is in compliance in all material respects with all applicable provisions of ERISA, the Code and other Federal or state laws. Each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the knowledge of the Company, nothing has occurred which would prevent, or cause the loss of, such qualification. Each of the Company and each ERISA Affiliate has made all required contributions to each 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 knowledge of the Company, threatened claims, actions or lawsuits, or actions by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that 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 Sections 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 Sections 4069 or 4212(c) of ERISA. 9.10 Investment Company Act. Neither the Company nor any Subsidiary is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940. 9.11 Public Utility Holding Company Act. Neither the Company nor any Subsidiary is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935. 9.12 Regulation U. The Company is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock. 9.13 Taxes. Each of the Company and each Subsidiary has filed all U.S. federal tax returns and all other material tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be owing, except for any such taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. 9.14 Environmental Compliance. (a) The Company and each of its Subsidiaries are in compliance in all material respects with all applicable Environmental Laws. There are no material past, pending or, to the best knowledge of the Company, threatened claims under any Environmental Law against the Company or any of its Subsidiaries or any real property at any time owned, leased or operated by the Company or any of its Subsidiaries. There are no facts, circumstances, conditions or occurrences with respect to any real property at any time owned, leased or operated by the Company or any of its Subsidiaries that could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (b) No Hazardous Materials have at any time been generated, released on or from, used, treated or stored on, or transported to or from any real property at any time owned, leased or operated by the Company or any of its Subsidiaries except in material compliance with Environmental Laws. 9.15 Information. All written information heretofore or contemporaneously herewith furnished by the Company or any Subsidiary to the Administrative Agent or any Lender for purposes of or in connection with this Agreement and the transactions contemplated hereby is, and all written information hereafter furnished by or on behalf of the Company or any Subsidiary to the Administrative Agent or any Lender pursuant hereto or in connection herewith will be, true and accurate in every material respect on the date as of which such information is dated or certified, and none of such information is or will be incomplete by omitting to state any material fact necessary to make such information not misleading. 9.16 Borden Brands Acquisition. (a) The Borden Brands Acquisition complies in all material respects with all applicable legal requirements, and all necessary governmental, regulatory, shareholder and other consents and approvals required for the consummation of the Borden Brands Acquisition have been, or prior to the consummation thereof will be, duly obtained and in full force and effect. (b) The consummation by the Company of the Borden Brands Acquisition will not violate any statute or regulation of the United States or any other applicable jurisdiction, or any order, judgment or decree of any court or other Governmental Authority, or result in a breach of, or constitute a default under, any material agreement, indenture, instrument or other document, or any judgment, order or decree, affecting the Company or any of its Subsidiaries (including any entity which will be a Subsidiary after giving effect to the Borden Brands Acquisition). SECTION 10 COVENANTS. Until the expiration or termination of the Commitments and thereafter until all obligations of the Company hereunder and under the other Loan Documents are paid in full and all Letters of Credit have been terminated, the Company agrees that, unless at any time the Required Lenders shall otherwise expressly consent in writing, it will: 10.1 Reports, Certificates and Other Information. Furnish to the Administrative Agent and each Lender: 10.1.1 Audit Report. Promptly when available and in any event within 90 days after the close of each Fiscal Year, a copy of the annual audit report of the Company and its Subsidiaries for such Fiscal Year, including therein consolidated balance sheets of the Company and its Subsidiaries as of the end of such Fiscal Year and consolidated statements of earnings and cash flow of the Company and its Subsidiaries for such Fiscal Year, which audit report shall be without qualification as to going concern or scope and shall be prepared by Ernst & Young LLP or other independent auditors of recognized standing selected by the Company and reasonably acceptable to the Required Lenders, together with (a) a written statement from such auditors to the effect that in making the audit necessary for the signing of such audit report by such accountants, they have not become aware of any Event of Default or Unmatured Event of Default that has occurred and is continuing under Section 10.6, 10.7, 10.10, 10.11 or 10.12, insofar as such Sections relate to accounting matters or require computations to be made which are ordinarily made by accountants or, if they have become aware of any such event, describing it in reasonable detail and (b) a certificate of the chief financial officer or the chief executive officer of the Company certifying that such financial statements fairly present the financial condition and results of operations of the Company and its Subsidiaries as of the dates and periods indicated. 10.1.2 Quarterly Reports. Promptly when available and in any event within 45 days after the end of each Fiscal Quarter (except the last Fiscal Quarter) of each Fiscal Year, consolidated balance sheets of the Company and its Subsidiaries as of the end of such Fiscal Quarter and consolidated statements of earnings and consolidated statements of cash flow for such Fiscal Quarter and for the period beginning with the first day of such Fiscal Year and ending on the last day of such Fiscal Quarter, together with a certificate of the chief financial officer or the chief executive officer of the Company certifying that such financial statements fairly present the financial condition and results of operations of the Company and its Subsidiaries as of the dates and periods indicated, subject to the absence of footnotes and to normal year-end audit adjustments. 10.1.3 Compliance Certificates. Contemporaneously with the furnishing of a copy of each annual audit report pursuant to Section 10.1.1 and of each set of quarterly statements pursuant to Section 10.1.2, a duly completed certificate in the form of Exhibit F, with appropriate insertions, dated the date of such annual report or such quarterly statement and signed by the chief financial officer or the chief executive officer of the Company, containing a computation of each of the financial ratios and restrictions set forth in this Section 10 and to the effect that such officer has not become aware of any Event of Default or Unmatured Event of Default that has occurred and is continuing or, if there is any such event, describing it and the steps, if any, being taken to cure it. 10.1.4 Reports to SEC and to Shareholders. Within five days of the filing or sending thereof, a copy of any annual, periodic or special report or registration statement (inclusive of exhibits thereto) filed with the SEC or any securities exchange and any report, proxy statement or other communication to the Company's shareholders generally. 10.1.5 Notice of Default, Litigation and ERISA Matters. Promptly upon becoming aware of any of the following, written notice describing the same and the steps being taken by the Company or the Subsidiary affected thereby with respect thereto: (a) the occurrence of an Event of Default or an Unmatured Event of Default; (b) any litigation, arbitration or governmental investigation or proceeding not previously disclosed by the Company to the Administrative Agent and the Lenders which has been instituted or, to the knowledge of the Company, is threatened against the Company or any Subsidiary or to which any of the properties of any thereof is subject which has had or is reasonably likely to have a Material Adverse Effect; (c) any material adverse development which occurs in any litigation, arbitration or governmental investigation or proceeding previously disclosed pursuant to clause (b); (d) any ERISA Event; and (e) the occurrence of any other event or circumstance (including any violation of any Environmental Law) and which has had or is reasonably likely to have a Material Adverse Effect. 10.1.6 Subsidiaries. Promptly upon the occurrence thereof, a written report of any change in the list of its Subsidiaries. 10.1.7 Management Reports. Promptly upon the request of the Administrative Agent or any Lender, copies of all detailed financial and management reports submitted to the Company by independent auditors in connection with each annual or interim audit made by such auditors of the books of the Company. 10.1.8 Projections. As soon as practicable and in any event within 90 days after the commencement of each Fiscal Year, a consolidated plan and financial forecast for such Fiscal Year, including (a) a forecasted consolidated balance sheet and a consolidated statement of cash flow of the Company for such Fiscal Year and (b) forecasted consolidated statements of income and cash flows of the Company for each month of such Fiscal Year. 10.1.9 Other Information. From time to time such other information concerning the Company and its Subsidiaries as any Lender or the Administrative Agent may reasonably request. 10.2 Books, Records and Inspections. (i) Keep, and cause each Subsidiary to keep, its books and records in accordance with sound business practices sufficient to allow the Company to prepare its financial statements in accordance with GAAP; (ii) permit, and cause each Subsidiary to permit, on reasonable notice and at reasonable times and intervals (or at any time without notice during the existence of an Event of Default), any Lender or the Administrative Agent or any representative thereof to inspect the properties and operations of the Company and of such Subsidiary; and (iii) permit, and cause each Subsidiary to permit, on reasonable notice and at reasonable times and intervals (or at any time without notice during the existence of an Event of Default), any Lender or the Administrative Agent or any representative thereof to visit any or all of its offices, to discuss its financial matters with its officers and its independent auditors (and the Company hereby authorizes such independent auditors to discuss such financial matters with any Lender or the Administrative Agent or any representative thereof), and to examine (and, photocopy extracts from) any of its books or other corporate records. The Company agrees to pay the fees and out-of-pocket expenses of the Company's auditors incurred in connection with any reasonable exercise of the rights of the Administrative Agent and the Lenders pursuant to this Section. 10.3 Insurance. Maintain, and cause each Subsidiary to maintain, with reputable, financially sound insurance companies, insurance to such extent and against such hazards and liabilities as is customarily maintained by companies similarly situated (and, in any event, such insurance as may be required by any law or governmental regulation or any court order or decree) and, upon request of the Administrative Agent or any Lender, furnish to the Administrative Agent or such Lender a certificate setting forth in reasonable detail the nature and extent of all insurance maintained by the Company and its Subsidiaries. 10.4 Compliance with Laws; Payment of Taxes. (a) Comply, and cause each Subsidiary to comply, in all material respects with all material applicable laws (including ERISA and Environmental Laws), rules, regulations, decrees, orders, judgments, licenses and permits; and (b) pay, and cause each Subsidiary to pay, prior to delinquency all taxes and other governmental charges against it or any of its property; provided that the foregoing shall not require the Company or any Subsidiary to pay any such tax or charge so long as it shall contest the validity thereof in good faith by appropriate proceedings and shall set aside on its books adequate reserves with respect thereto. 10.5 Maintenance of Existence, etc. Maintain and preserve, and (subject to Section 10.12) cause each Subsidiary to maintain and preserve, (a) its existence and, to the extent applicable, good standing in the jurisdiction of its organization and (b) its qualification and, to the extent applicable, good standing as a foreign entity in each jurisdiction where the nature of its business makes such qualification necessary (except in those instances in which the failure to be qualified or in good standing would not (i) if cured, foreclose access to the courts of such jurisdiction in respect of events occurring prior to such cure or (ii) be reasonably likely to result in a Material Adverse Effect). 10.6 Financial Covenants. 10.6.1 Minimum Fixed Charge Coverage Ratio. Not permit the Fixed Charge Coverage Ratio for any Computation Period to be less than the applicable ratio set forth below for such Computation Period: Computation Period Ending Minimum Fixed Charge Coverage Ratio --------------------------- ----------------------------------- Last day of Fiscal Year 2001 through 1.10 to 1 last day of Fiscal Year 2003 During Fiscal Year 2004 1.15 to 1 During Fiscal Year 2005 1.20 to 1 Thereafter 1.25 to 1. 10.6.2 Maximum Leverage Ratio. Not permit the Leverage Ratio for any Computation Period to exceed the applicable ratio set forth below for such Computation Period: Computation Period Ending Maximum Leverage Ratio ------------------------- ---------------------- Last day of Fiscal Year 2001 through last 3.25 to 1 day of third Fiscal Quarter of Fiscal Year 2002 Last day of Fiscal Year 2002 through last 3.00 to 1 day of third Fiscal Quarter of Fiscal Year 2003 Last day of Fiscal Year 2003 through last 2.75 to 1 day of third Fiscal Quarter of Fiscal Year 2004 Last day of Fiscal Year 2004 through last 2.50 to 1 day of third Fiscal Quarter of Fiscal Year 2005 Thereafter 2.25 to 1. 10.6.3 Minimum Consolidated Net Worth. Not at any time permit Consolidated Net Worth to be less than the result of (a) $225,000,000 plus (b) 75% of Consolidated Net Income earned in each Fiscal Quarter ending after July 1, 2001 (with no deduction for a net loss in any such Fiscal Quarter) plus (c) 75% of the Net Cash Proceeds of any Equity Issuance after the Effective Date minus (d) 100% of the aggregate amount of Permitted Restricted Payments made by the Company and its Subsidiaries since the Effective Date. 10.6.4 Minimum Consolidated EBITDA. Not permit Consolidated EBITDA for any Computation Period to be less than (a) for any Computation Period ending on or before the last day of Fiscal Year 2002, $70,000,000 and (b) for any Computation Period ending thereafter, the greater of (i) the amount of Consolidated EBITDA required by this Section 10.6.4 for the Computation Period ending on the last day of the Fiscal Year immediately preceding the last day of such Computation Period (the "Preceding Fiscal Year End") or (ii) 80% of actual Consolidated EBITDA for the Fiscal Year ending on the Preceding Fiscal Year End. 10.7 Limitations on Debt. Not, and not permit any Subsidiary to, create, incur, assume or suffer to exist any Debt, except (a) obligations arising under the Loan Documents; (b) Debt in respect of Capital Leases or hereafter incurred in connection with Liens permitted by Section 10.8(e); provided that the aggregate amount of all such Debt shall not at any time exceed a Dollar Equivalent amount of $30,000,000; (c) Debt of Subsidiaries to the Company or to other Subsidiaries; (d) Hedging Obligations incurred by the Company or any Subsidiary to hedge bona fide business risks (and not for speculation); (e) Guaranty Obligations in respect of any obligation of the Company or any Subsidiary not prohibited under this Agreement; (f) Debt to be Repaid; provided that all Debt to be Repaid shall be repaid on or before the Effective Date; (g) Debt of the Company which has no scheduled amortization prior to the 91st day after the scheduled Termination Date; provided that (i) to the extent the holders of such Debt have the benefit of the guaranty of, or the pledge of stock of, any Subsidiary, such holders shall have entered into intercreditor arrangements with the Administrative Agent pursuant to documentation reasonably satisfactory to the Required Lenders and (ii) the Net Cash Proceeds of the issuance of any such Debt shall be applied to reduce the Aggregate Commitment Amount to the extent required herein; and (h) other Debt not at any time exceeding a Dollar Equivalent amount of $15,000,000. 10.8 Liens. Not, and not permit any Subsidiary to, create or permit to exist any Lien on any of its real or personal properties, assets or rights of whatsoever nature (whether now owned or hereafter acquired), except (a) Liens for taxes or other governmental charges not at the time delinquent or thereafter payable without penalty or being contested in good faith by appropriate proceedings and, in each case, for which it maintains adequate reserves; (b) Liens arising in the ordinary course of business (such as (i) Liens of carriers, warehousemen, mechanics, landlords and materialmen and similar Liens and (ii) Liens incurred in connection with worker's compensation, unemployment compensation and other types of social security (excluding Liens arising under ERISA) or in connection with surety bonds (other than bonds relating to litigation), bids, performance bonds and similar obligations) for sums not overdue or being contested in good faith by appropriate proceedings and not involving any deposits or advances or borrowed money or the deferred purchase price of property or services, and, in each case, for which it maintains adequate reserves; (c) Liens identified on Schedule 10.8; provided that the Company causes the release of all Liens identified in the footnotes on such Schedule 10.8 within the applicable time period specified thereon; (d) Liens arising under Capital Leases on the property leased to the extent permitted by Section 10.7(b); (e) purchase money security interests on any property securing Debt incurred for the purpose of financing all or any part of the cost of acquiring such property; provided that any such Lien attaches to such property within 60 days of the acquisition thereof and such Lien attaches solely to the property so acquired or, in the case of a Lien in favor of a vendor, all property purchased by the Company or the applicable Subsidiary from such vendor; (f) attachments, judgments and other similar Liens, for sums not exceeding a Dollar Equivalent amount of $2,500,000 arising in connection with court proceedings; provided that the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings; (g) easements, rights of way, restrictions, minor defects or irregularities in title and other similar Liens not interfering in any material respect with the ordinary conduct of the business of the Company and its Subsidiaries taken as a whole; (h) Liens securing obligations of a Subsidiary to the Company or to a Wholly-Owned Subsidiary; (i) leases or subleases granted by the Company or any Subsidiary in the ordinary course of its business; (j) extensions, renewals or replacements of any Lien permitted by the foregoing provisions of this Section 10.8, but only if the principal amount of any Debt secured thereby immediately prior to such extension, renewal or replacement is not increased and such Lien is not extended to any other property; (k) Liens arising under the Collateral Documents; and (l) other Liens, in addition to Liens permitted by clauses (a) through (k), securing obligations not at any time exceeding a Dollar Equivalent amount of $5,000,000. 10.9 Business. Not, and not permit any Subsidiary to, enter into any material business other than the businesses in which the Company and its Subsidiaries are engaged on the date of this Agreement and reasonable extensions thereof. 10.10 Restricted Payments. Not, and not permit any Subsidiary to, (a) declare or pay any dividend or distribution on any of its capital stock, (b) purchase or redeem any capital stock of the Company or any Subsidiary (or any warrants, options or other rights in respect thereof), (c) make any other distribution to shareholders of the Company or any Subsidiary, (d) pay any management fees or similar fees to any of its shareholders (other than payments for the fair market value of services rendered), (e) prepay, purchase, defease or redeem any subordinated Debt or (f) set aside funds for any of the foregoing; provided that (i) any Subsidiary may declare and pay dividends, or make other distributions, to the Company or to a Wholly-Owned Subsidiary, (ii) the Company may declare and pay dividends, or make other distributions, payable solely in the Company's common stock, and (iii) so long as no Event of Default or Unmatured Event of Default exists or would result therefrom, the Company may purchase, redeem or otherwise acquire shares of its capital stock or warrants or options to acquire any such shares, or pay cash dividends on its capital stock, in each case so long as the aggregate amount of all purchases, redemptions, other acquisitions and cash dividends made pursuant to this clause (iii) (collectively "Permitted Restricted Payments") during the term of this Agreement shall not exceed $40,000,000. 10.11 Investments. Not, and not permit any Subsidiary to, make, incur, assume or suffer to exist any Investment in any other Person, except (a) Investments existing on the Effective Date and identified in Schedule 10.11; (b) Cash Equivalent Investments; (c) Investments by the Company in its Subsidiaries or by any Subsidiary in any other Subsidiary in the form of contributions to capital or loans or advances; (d) loans or advances or capital contributions made by any Subsidiary to the Company; (e) advances made to employees for travel and similar expenses in the normal course of business; (f) the Borden Brands Acquisition; (g) Investments made to consummate Permitted Acquisitions; (h) Investments arising in connection with Hedging Agreements entered into to hedge bona fide business risks (and not for speculation); and (i) other Investments not to exceed at any time $5,000,000 in the aggregate. 10.12 Mergers, Consolidations, Sales. Not, and not permit any Subsidiary to, be a party to any merger or consolidation, or purchase or otherwise acquire all or substantially all of the assets or any stock of any class of, or any partnership, limited liability company or joint venture interest in, any other Person, or, except in the ordinary course of its business, sell, transfer, convey or lease any of its assets, or sell or assign with or without recourse any receivables, except for (i) any such merger or consolidation, sale, transfer, conveyance, lease or assignment of or by any Wholly-Owned Subsidiary into the Company or into, with or to any Wholly-Owned Subsidiary; (ii) any such purchase or other acquisition by the Company or any Wholly-Owned Subsidiary of the assets or stock of any Wholly-Owned Subsidiary; (iii) any merger or consolidation to effect, or any acquisition which constitutes, an Investment permitted by Section 10.11; and (iv) the sale or disposal of assets by the Company and its Subsidiaries so long as the aggregate book value of such assets sold during any Fiscal Year does not exceed $5,000,000. 10.13 Use of Proceeds. Use the proceeds of the Loans to refinance existing Debt, for working capital, for capital expenditures and for other general corporate purposes (including the Borden Brands Acquisition and other Permitted Acquisitions); and not use or permit any proceeds of any Loan to be used, either directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of "purchasing or carrying" any Margin Stock. 10.14 Inconsistent Agreements. Not, and not permit any Subsidiary to, enter into any agreement containing any provision which would be violated or breached by any borrowing, or the obtaining of any Letter of Credit, by the Company hereunder or by the performance by the Company or any Subsidiary of any of its obligations hereunder or under any other Loan Document. 10.15 Transactions with Affiliates. Not, and not permit any Subsidiary to, enter into or permit to exist any transaction, arrangement or contract with any of its Affiliates (other than the Company and its Subsidiaries) which is on terms which are less favorable than are obtainable from a Person which is not one of its Affiliates other than transactions, arrangements or contracts providing for (a) the payment by the Company of reasonable and customary fees to and expenses of members of its Board of Directors, (b) the payment by the Company or any Subsidiary of Permitted Restricted Payments or (c) the making of Investments by the Company or any Subsidiary permitted by this Agreement. 10.16 Employee Benefit Plans. Maintain, and cause each Subsidiary to maintain, each Plan in compliance with all applicable requirements of law and regulations. 10.17 Environmental Laws. (a) Comply, and cause each Subsidiary to comply, in a reasonable and cost-effective manner, with any valid judicial or administrative order requiring the performance at any real property owned, operated or leased by the Company or any Subsidiary of activities in response to the release or threatened release of a Hazardous Material except for the period of time that the Company or such Subsidiary is diligently in good faith contesting such order, (b) notify the Administrative Agent within 30 days after the receipt of any written claim, demand, proceeding, action or notice of liability by any Person arising out of or relating to the release or threatened release of a Hazardous Material and (c) notify the Administrative Agent within 30 days after any release, threatened release or disposal of Hazardous Material reported to any Governmental Authority at any real property owned, operated or leased by the Company or any Subsidiary. 10.18 Unconditional Purchase Obligations. Not, and not permit any Subsidiary to, enter into or be a party to any contract for the purchase of materials, supplies or other property or services if such contract requires that payment be made by it regardless of whether or not delivery is ever made of such materials, supplies or other property or services. 10.19 Further Assurances. Take, and cause each Subsidiary to take, such actions as are necessary, or as the Administrative Agent (or the Required Lenders acting through the Administrative Agent) may reasonably request, from time to time (including the execution and delivery of guaranties, pledge agreements, financing statements, and other documents, the filing of any of the foregoing, the delivery of stock certificates and other collateral with respect to which perfection is obtained by possession and stock powers or other documents related thereto, and the delivery of opinions of counsel with respect to any of such documents) to ensure that (i) the obligations of the Company hereunder and under the other Loan Documents and any Hedging Obligations of the Company owing to any Lender or any Affiliate of any Lender are guaranteed by all Subsidiaries (other than Foreign Subsidiaries) of the Company and secured by pledge of the stock or other equity interests of all Subsidiaries of the Company; provided that (a) neither the Company nor any domestic Subsidiary shall be required to pledge more than 65% of the stock of any Foreign Subsidiary; (b) AIPC Sales Co. will not be required to complete the pledge of its equity interest in IAPC CV until September 14, 2001 and (c) no Foreign Subsidiary shall be required to pledge the stock of any other Foreign Subsidiary. 10.20 Transfers to Foreign Subsidiaries. Not, and not permit any Guarantor to, sell, transfer, or convey balance sheet assets (other than cash) with an aggregate net book value in excess of $3,000,000 to Foreign Subsidiaries after the Signing Date. SECTION 11 CONDITIONS PRECEDENT. The obligation of each Lender to make any Credit Extension is subject to the following conditions precedent: 11.1 Initial Credit Extension. The obligation of each Lender to make its initial Loan or of the Issuer to issue the initial Letter of Credit hereunder (whichever first occurs) is subject to the conditions precedent that (a) each of the conditions precedent specified in Section 11.2 and, if applicable, 11.3 shall have been satisfied, (b) the Administrative Agent shall have received all amounts which are then due and payable pursuant to Section 5, and (c) the Administrative Agent shall have received (i) evidence that the Company has terminated the commitments under the Existing Credit Facility, that all obligations under the Existing Credit Facility (other than (x) the Existing Letter of Credit and (y) loans which are denominated in Euros ("Existing Euro Loans") and which, in the aggregate, do not exceed a Dollar Equivalent amount of $70,000,000), that arrangements have been made to pay all Existing Euro Loans not later than the Business Day following the Effective Date and that all collateral securing the Existing Credit Facility has been (or concurrently with the payment of the Existing Euro Loans will be) released, (ii) evidence that the Borden Brands Acquisition will be completed concurrently with the initial Credit Extension on the terms set forth in the Borden Brands Purchase Agreement (without giving effect to any material amendment or other modification thereto after June 1, 2001 unless such amendment or modification has been approved in writing by the Administrative Agent) and (iii) all of the following, each duly executed and dated the date of the initial Credit Extension (or such earlier date as shall be satisfactory to the Administrative Agent), in form and substance satisfactory to the Administrative Agent, and each (except for the Notes, of which only the originals shall be signed) in sufficient number of signed counterparts to provide one for the Administrative Agent and each Lender (the date on which all of the conditions precedent shall have been satisfied, the "Effective Date"): 11.1.1 Agreement and Notes. Counterparts of this Agreement executed by each of the parties hereto (it being understood that the Administrative Agent may rely on a facsimile copy of the applicable signature page of this Agreement in determining whether any party hereto has executed and delivered a counterpart hereof) and a Note for each Lender which has requested a Note. 11.1.2 Resolutions. Certified copies of resolutions of the Board of Directors of the Company and each Guarantor authorizing or ratifying the execution, delivery and performance by such Person of the Loan Documents to which such Person is a party. 11.1.3 Incumbency and Signature Certificates. A certificate of the Secretary or an Assistant Secretary (or other appropriate officer) of the Company and each Guarantor certifying the names of the officer or officers of such Person authorized to sign the Loan Documents to which such Person is a party, together with a sample of the true signature of each such officer (it being understood that the Administrative Agent and each Lender may conclusively rely on each such certificate until formally advised by a like certificate of any changes therein). 11.1.4 Opinion of Counsel for the Company. The opinion of Blackwell Sanders Peper Martin LLP, counsel to the Company and the Guarantors, substantially in the form of Exhibit G. 11.1.5 Guaranty. The Guaranty executed by each Subsidiary that is not a Foreign Subsidiary. 11.1.6 Pledge Agreement. The Pledge Agreement executed by the Company and each applicable Subsidiary, together with all stock certificates and other documents required to be delivered pursuant thereto. 11.1.7 Collateral Partnership Assignment. Collateral Assignments of Partnership Interests executed by the Company and AIPC Sales Co. 11.1.8 Membership Interest Pledge Agreement. The Membership Interest Pledge Agreement executed by the Company and AIPC Finance, Inc. 11.1.9 Financing Statements. Uniform Commercial Code financing statements executed by the Company, AIPC Sales Co. and AIPC Finance, Inc. with respect to the collateral pledged pursuant to the Pledge Agreement, the Membership Interest Pledge Agreement and/or the Collateral Partnership Assignment, as applicable. 11.1.10 Borden Brands Acquisition Documents. A certified copy of the Borden Brands Purchase Agreement and all material documents related thereto. 11.1.11 Other. Such other documents as the Administrative Agent or any Lender may reasonably request. 11.2 All Credit Extensions. The obligation of each Lender to make any Credit Extension is subject to the following further conditions precedent that: 11.2.1 No Default. (a) No Event of Default or Unmatured Event of Default has occurred and is continuing or will result from the making of such Credit Extension and (b) the warranties of the Company contained in Section 9 (excluding, except in the case of the initial Credit Extension, (i) the second sentence of Section 9.6 and (ii) Section 9.8) are true and correct in all material respects as of the date of the making of such requested Credit Extension, with the same effect as though made on such date (except to the extent that any warranty relates to an earlier date, in which case such warranty shall be true and correct as of such earlier date). 11.2.2 Confirmatory Certificate. If requested by the Administrative Agent or any Lender, the Administrative Agent shall have received (in sufficient counterparts to provide one to each Lender) a certificate dated the date of the making of such Credit Extension and signed by a duly authorized representative of the Company as to the matters set out in Section 11.2.1 (it being understood that each request by the Company for the making of a Credit Extension shall be deemed to constitute a representation and warranty that the conditions precedent set forth in Section 11.2.1 will be satisfied at the time of the making of such Credit Extension), together with such other documents as the Administrative Agent may reasonably request in support thereof. 11.3 Certain Loans. The obligation of each Lender to make the first Credit Extension which would result in the Aggregate Outstandings exceeding a Dollar Equivalent amount of $170,000,000 is subject to the condition precedent that all Existing Euro Loans shall have been (or upon application of the proceeds of such Credit Extension will be) paid in full. SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT. 12.1 Events of Default. Each of the following shall constitute an Event of Default under this Agreement: 12.1.1 Non-Payment of the Loans, etc. Default in the payment when due of the principal of any Loan; or default, and continuance thereof for five days, in the payment when due of any interest, fee, reimbursement obligation with respect to any Letter of Credit or other amount payable by the Company hereunder or under any other Loan Document. 12.1.2 Non-Payment of Other Debt. Any default shall occur under the terms applicable to any Debt of the Company or any Subsidiary in an aggregate Dollar Equivalent amount (for all Debt so affected) exceeding $2,500,000 and such default shall (a) consist of the failure to pay such Debt when due (subject to any applicable grace period), whether by acceleration or otherwise, or (b) accelerate the maturity of such Debt or permit the holder or holders thereof, or any trustee or agent for such holder or holders, to cause such Debt to become due and payable prior to its expressed maturity. 12.1.3 Bankruptcy, Insolvency, etc. The Company or any Subsidiary becomes insolvent or generally fails to pay, or admits in writing its inability or refusal to pay, debts as they become due; the Company or any Subsidiary applies for, consents to, or acquiesces in the appointment of a trustee, receiver, receiver and manager, administrator, liquidator, provisional liquidator or other custodian for the Company or such Subsidiary or any property thereof, or makes a general assignment for the benefit of creditors or, in the absence of such application, consent or acquiescence, a trustee, receiver, receiver and manager, administrator, liquidator, provisional liquidator or other custodian is appointed for the Company or any Subsidiary or for a substantial part of the property of any thereof and is not discharged within 60 days; any bankruptcy, reorganization, debt arrangement, or other case or proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding (except the voluntary dissolution, not under any bankruptcy or insolvency law, of a Subsidiary), is commenced in respect of the Company or any Subsidiary, and if such case or proceeding is not commenced by the Company or such Subsidiary, it is consented to or acquiesced in by the Company or such Subsidiary, or remains for 60 days undismissed; or the Company or any Subsidiary takes any corporate action to authorize, or in furtherance of, any of the foregoing. 12.1.4 Non-Compliance with Provisions of This Agreement. Failure by the Company to comply with or to perform any covenant set forth in Section 10.1.5, Sections 10.6 through 10.8 or Sections 10.10 through 10.14; or failure by the Company to comply with or to perform any other provision of this Agreement (and not constituting an Event of Default under any of the other provisions of this Section 12) and continuance of such failure for 30 days after notice thereof to the Company from the Administrative Agent or any Lender. 12.1.5 Warranties. Any warranty made by the Company herein is false or misleading in any material respect, or any schedule, certificate, financial statement, report, notice or other writing furnished by the Company to the Administrative Agent or any Lender is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified. 12.1.6 ERISA. (i) An ERISA Event occurs 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 $1,000,000, or (ii) the Company or any ERISA Affiliate fails 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 $1,000,000. 12.1.7 Judgments. Final judgments which exceed an aggregate Dollar Equivalent amount of $2,500,000 shall be rendered against the Company or any Subsidiary and shall not have been discharged or vacated or had execution thereof stayed pending appeal within 30 days after entry or filing of such judgments. 12.1.8 Change in Control. A Change in Control shall occur. 12.1.9 Invalidity of Loan Documents. (a) The Guaranty shall cease to be in full force and effect with respect to any Guarantor (other than as a result of such Guarantor ceasing to be a Subsidiary of the Company as a result of a transaction permitted hereby), any Guarantor shall fail (subject to any applicable grace period) to comply with or to perform any applicable provision of the Guaranty, or any Guarantor (or any Person by, through or on behalf of such Guarantor) shall contest in any manner the validity, binding nature or enforceability of the Guaranty with respect to such Guarantor. (b) Any Collateral Document shall cease to be in full force and effect with respect to the Company or any Guarantor (other than as a result of such Guarantor ceasing to be a Subsidiary of the Company as a result of a transaction permitted hereby), the Company or any Guarantor shall fail (subject to any applicable grace period) to comply with or to perform any applicable provision of any Collateral Document to which such entity is a party, or the Company or any Guarantor (or any Person by, through or on behalf of the Company or such Guarantor) shall contest in any manner the validity, binding nature or enforceability of any Collateral Document. 12.2 Effect of Event of Default. If any Event of Default described in Section 12.1.3 shall occur, the Commitments (if they have not theretofore terminated) shall immediately terminate and the Notes and all other obligations hereunder shall become immediately due and payable and the Company shall become immediately obligated to deliver to the Administrative Agent cash collateral in a Dollar Equivalent amount equal to the outstanding face amount of all Letters of Credit, all without presentment, demand, protest or notice of any kind; and in the case of any other Event of Default, the Administrative Agent shall, upon written request of the Required Lenders, declare the Commitments (if they have not theretofore terminated) to be terminated and/or declare all Notes and all other obligations hereunder to be due and payable and/or demand that the Company immediately deliver to the Administrative Agent cash collateral in a Dollar Equivalent amount equal to the outstanding face amount of all Letters of Credit, whereupon the Commitments (if they have not theretofore terminated) shall immediately terminate and/or all Notes and all other obligations hereunder shall become immediately due and payable and/or the Company shall immediately become obligated to deliver to the Administrative Agent cash collateral in a Dollar Equivalent amount equal to the face amount of all Letters of Credit, all without presentment, demand, protest or notice of any kind. Notwithstanding the foregoing, the effect as an Event of Default of any event described in Section 12.1.1 or 12.1.3 may be waived by the written concurrence of all of the Lenders, and the effect as an Event of Default of any other event described in this Section 12 may be waived by the written concurrence of the Required Lenders. Any cash collateral delivered hereunder shall be held by the Administrative Agent and applied to obligations arising in connection with any drawing under a Letter of Credit. After the expiration or termination of all Letters of Credit, such cash collateral shall be applied by the Administrative Agent to any remaining obligations of the Company hereunder and any excess shall be delivered to the Company or as a court of competent jurisdiction may direct. SECTION 13 THE ADMINISTRATIVE AGENT. 13.1 Appointment and Authorization. (a) Each Lender hereby irrevocably (subject to Section 13.9) appoints, designates and authorizes the Administrative Agent to take such action on its behalf under the provisions of this Agreement, each other Loan Document and each other document executed by the Company in connection with this Agreement and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement, any other Loan Document or any other document executed by the Company in connection with this Agreement, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement, in any other Loan Document or any other document executed by the Company in connection with this Agreement, the Administrative Agent shall not have any duties or responsibilities except those expressly set forth herein, nor shall the Administrative Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement, any other Loan Document or any other document executed by the Company in connection with this Agreement or otherwise exist against the Administrative Agent. (b) The Issuer shall act on behalf of the Lenders with respect to all Letters of Credit and the documents associated therewith until such time and except for so long as the Administrative Agent may agree at the request of the Lenders to act for the Issuer with respect thereto; provided that the Issuer shall have all of the benefits and immunities (i) provided to the Administrative Agent in this Section 13 with respect to any acts taken or omissions suffered by the Issuer in connection with Letters of Credit issued or proposed to be issued by it and the Letter of Credit Applications and related documents as fully as if the term "Administrative Agent", as used in this Section 13, included the Issuer with respect to such acts or omissions and (ii) as additionally provided in this Agreement with respect to the Issuer. 13.2 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement, any other Loan Document or any other document executed by the Company in connection with this Agreement by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. 13.3 Liability of Administrative Agent. None of the Agent-Related Persons shall (i) be liable to any Lender for any action taken or omitted to be taken by any of them under or in connection with this Agreement, any other Loan Document or any other document executed by the Company in connection with this Agreement 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 Lenders for any recital, statement, representation or warranty made by the Company or any Subsidiary or Affiliate of the Company, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement, any other Loan Document or any other document executed by the Company or any Subsidiary or Affiliate of the Company in connection with this Agreement, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, any other Loan Document or any other document executed by the Company in connection with this Agreement, or for any failure of the Company or any other party to any such document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Company or any Affiliate thereof. No Agent-Related Person shall be under any obligation to any Lender or participant 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 Affiliate thereof. 13.4 Reliance by Administrative Agent. (a) The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Company), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement, any other Loan Document, or any other document executed by the Company in connection with this Agreement unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement, any other Loan Document or any other document executed by the Company in connection with this Agreement in accordance with a request or consent of the Required Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders. Where this Agreement expressly permits or prohibits an action unless the Required Lenders otherwise determine, the Agent shall, and in all other instances, the Agent may, but shall not be required to, initiate any solicitation for the consent or a vote of the Lenders. (b) For purposes of determining compliance with the conditions specified in Section 11, each Lender that has executed this Agreement shall be deemed (absent timely written notice from such Lender to the contrary) to have consented to, approved or accepted or to be satisfied with each document or other matter either sent by the Administrative Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to such Lender. 13.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Event of Default or Unmatured Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Administrative Agent for the account of the Lenders unless the Administrative Agent shall have received written notice from a Lender or the Company referring to this Agreement, describing such Event of Default or Unmatured Event of Default and stating that such notice is a "notice of default". The Administrative Agent will notify the Lenders of its receipt of any such notice. The Administrative Agent shall take such action with respect to such Event of Default or Unmatured Event of Default as may be requested by the Required Lenders in accordance with Section 12; provided that, unless and until the Administrative Agent has received any such request, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default or Unmatured Event of Default as it shall deem advisable or in the best interest of the Lenders. 13.6 Credit Decision. Each Lender acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Company and its Subsidiaries, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Company and its Subsidiaries, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Company hereunder. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, the other Loan Documents and any other documents executed by the Company in connection with this Agreement, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Company. Except for notices, reports and other documents expressly herein required to be furnished to the Lenders by the Administrative Agent, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the Company or any of its Subsidiaries which may come into the possession of any of the Agent-Related Persons. 13.7 Indemnification. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Company and without limiting the obligation of the Company to do so), pro rata according to their respective Percentages, from and against any and all Indemnified Liabilities; provided that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities resulting from such Person's bad faith, gross negligence or willful misconduct. Without limitation of the foregoing, each Lender shall reimburse the Administrative Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Administrative Agent in connection with the preparation, negotiation, execution, closing, delivery, ongoing 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, any other document executed by the Company in connection with this Agreement, or any document contemplated by or referred to herein, to the extent that the Administrative Agent is not reimbursed for such expenses by or on behalf of the Company. The undertaking in this Section shall survive the expiration or termination of the Commitments, the repayment of the Loans and all other obligations of the Company hereunder, the expiration or termination of the Letters of Credit, the termination of this Agreement and the resignation or replacement of the Administrative Agent. 13.8 Administrative Agent in Individual Capacity. The Administrative Agent 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 the Administrative Agent were not the Administrative Agent, the Issuer or the Swing Line Lender hereunder and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, the Administrative Agent or its Affiliates may receive information regarding the Company or its Subsidiaries or Affiliates (including information that may be subject to confidentiality obligations in favor of the Company or such Subsidiary or Affiliate) and acknowledge that the Administrative Agent shall be under no obligation to provide such information to them. With respect to their respective Loans (if any), the Administrative Agent and its Affiliates shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though Bank of America were not the Administrative Agent, the Issuer and the Swing Line Lender hereunder, and the terms "Lender" and "Lenders" include Bank of America (and any applicable Affiliate thereof) in such capacity, as applicable. 13.9 Successor Administrative Agent. The Administrative Agent may, and at the request of the Required Lenders shall, resign as Administrative Agent upon 30 days' notice to the Lenders and the Company. If the Administrative Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor administrative agent for the Lenders. If no successor administrative agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Lenders and the Company, a successor administrative agent from among the Lenders. Upon the acceptance of its appointment as successor administrative agent hereunder, such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term "Administrative Agent" shall mean such successor administrative agent and the retiring Administrative Agent's appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Section 13, Section 14.6 and Section 14.10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. If no successor administrative agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor administrative agent as provided for above. Notwithstanding the foregoing, however, Bank of America shall not be required to resign as the Administrative Agent at the request of the Required Lenders unless Bank of America shall also simultaneously be replaced as "Issuer" and as "Swing Line Lender" hereunder pursuant to documentation in form and substance reasonably satisfactory to Bank of America. 13.10 Other Agents. No Lender identified on the signature pages of this Agreement or any related document as the "Syndication Agent," "Documentation Agent" or "Co-Agent" shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, no Lender so identified as the "Syndication Agent," "Documentation Agent" or "Co-Agent" shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders so identified in deciding to enter into this Agreement or in taking or not taking action hereunder. 13.11 Non-Receipt of Funds by the Administrative Agent. Unless the Company or a Lender, as the case may be, notifies the Administrative Agent prior to the date on which it is scheduled to make payment to the Administrative Agent of (a) in the case of a Lender, the proceeds of a Loan or (b) in the case of the Company, a payment of principal, interest or fees for the account of any Lender, that it does not intend to make such payment, the Administrative Agent may assume that such payment has been made. The Administrative Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption. If such Lender or the Company, as the case may be, has not in fact made such payment to the Administrative Agent, the recipient of such payment shall, on demand by the Administrative Agent, repay to the Administrative Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Administrative Agent until the date the Administrative Agent recovers such amount at a rate per annum equal to (i) in the case of payment by a Lender, the Federal Funds Rate for such day for the first three days and, thereafter, the interest rate applicable to the relevant Loan or (ii) in the case of payment by the Company, the interest rate applicable to the relevant Loan (or, to the extent permitted by applicable law, (x) in the case of interest payable in Dollars and fees, the Base Rate plus the Applicable Base Rate Margin, and (y) in the case of interest payable in any other currency, the Overnight Rate plus the Applicable Eurocurrency Margin). SECTION 14 GENERAL. 14.1 Waiver; Amendments. No delay on the part of the Administrative Agent or any Lender in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise by any of them of any right, power or remedy preclude other or further exercise thereof, or the exercise of any other right, power or remedy. No amendment, modification or waiver of, or consent with respect to, any provision of this Agreement or the Notes shall in any event be effective unless the same shall be in writing and signed and delivered by the Administrative Agent and signed and delivered by Lenders having an aggregate Percentage of not less than the aggregate Percentage expressly designated herein with respect thereto or, in the absence of such designation as to any provision of this Agreement or the Notes, by the Required Lenders, and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No amendment, modification, waiver or consent shall (i) extend any Commitment Reduction Date or reduce the amount of the scheduled reduction on any such date or extend the date fixed for any scheduled payment of any principal of or interest on the Loans, any reimbursement obligation in respect of any Letter of Credit, any fees payable hereunder or any amount payable pursuant to Section 7.6 or Section 8, (ii) reduce the principal amount of any Loan, the rate of interest thereon, any fees payable hereunder or any amount payable pursuant to Section 7.6 or Section 8, (iii) release the Guaranty (other than with respect to a Guarantor which ceases to be a Subsidiary as a result of a transaction permitted hereunder) or all or substantially all of the collateral granted under the Collateral Documents, or (iv) change the aggregate Percentage required to effect an amendment, modification, waiver or consent without, in each case, the consent of each Lender affected thereby. No amendment, modification, waiver or consent shall extend the term of or increase the amount of any Commitment of any Lender without the consent of such Lender. No provision of Section 13 shall be amended, modified or waived without the consent of the Administrative Agent. No provision affecting the rights and duties of the Issuer under this Agreement or any Letter of Credit Application or relating to any Letter of Credit issued or to be issued by it shall be amended, modified or waived without the consent of the Issuer. No provision affecting the rights and duties of the Swing Line Lender under this Agreement shall be amended, modified or waived without the consent of the Swing Line Lender. 14.2 Notices. (a) General. Unless otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including by facsimile transmission) and mailed, faxed or delivered to the address, facsimile number or (subject to subsection (c) below) electronic mail address specified for notices on Schedule 14.2 or, in the case of the Company, the Administrative Agent, the Issuer or the Swing Line Lender, to such other address as shall be designated by such party in a notice to the other parties, and in the case of any other party, to such other address as shall be designated by such party in a notice to the Company, the Administrative Agent, the Issuer and the Swing Line Lender. All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt by the intended recipient and (ii) (A) if delivered by hand or by courier, when signed for by the intended recipient, (B) if delivered by mail, four Business Days after deposit in the mails, postage prepaid, (C) if delivered by facsimile, when sent and receipt has been confirmed by telephone, and (D) if delivered by electronic mail (which form of delivery is subject to the provisions of subsection (c) below), when delivered; provided that notices and other communications to the Administrative Agent, the Issuer and the Swing Line Lender pursuant to Sections 2 and 6 shall not be effective until actually received by such Person. Any notice or other communication permitted to be given, made or confirmed by telephone hereunder shall be given, made or confirmed by means of a telephone call to the intended recipient at the number specified on Schedule 14.2 or such other telephone number as shall have been specified pursuant to the procedures above, it being understood that a voicemail message shall not be effective as a notice, communication or confirmation hereunder. (b) Effectiveness of Facsimile Documents and Signatures. Loan Documents may be transmitted and/or signed by facsimile. The effectiveness of any such documents and signatures shall, subject to applicable law, have the same force and effect as manually-signed originals and shall be binding on the Company, the Administrative Agent and the Lenders. The Administrative Agent may also require that any such documents and signatures be confirmed by a manually-signed original thereof; provided that the failure to request or deliver the same shall not limit the effectiveness of any facsimile document or signature. (c) Limited Use of Electronic Mail. Electronic mail and internet and intranet websites may be used only to distribute routine communications, such as financial statements and other information, and to distribute Loan Documents for execution by the parties thereto, and shall not constitute effective notice for any other purpose. (d) Reliance by Administrative Agent and Lenders. The Administrative Agent and the Lenders shall be entitled to rely and act upon any notices (including telephonic notices of borrowing, conversion and continuation) purportedly given by or on behalf of the Company even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Company shall indemnify each Agent-Related Person and each Lender from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Company, except to the extent resulting from the gross negligence or willful misconduct of the applicable Indemnified Person. All telephonic notices to and other communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording. 14.3 Payments Set Aside. To the extent that the Company makes a payment to the Administrative Agent or the Lenders, or the Administrative Agent or the Lenders exercise their right of set-off, and such payment or the proceeds of such set-off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any insolvency proceeding or otherwise, then (a) to the extent of such recovery the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its pro rata share of any amount so recovered from or repaid by the Administrative Agent. 14.4 Costs, Expenses and Taxes. The Company agrees to pay on demand all reasonable out-of-pocket costs and expenses of the Administrative Agent and the Arranger (including Attorney Costs) in connection with the preparation, negotiation, execution, closing, delivery and ongoing administration of this Agreement, the other Loan Documents and all other documents provided for herein or delivered or to be delivered hereunder or in connection herewith (including any amendment, supplement or waiver to any Loan Document), and all reasonable out-of-pocket costs and expenses (including Attorney Costs) incurred by the Administrative Agent and each Lender after an Event of Default in connection with the enforcement of this Agreement, the other Loan Documents or any such other documents. In addition, the Company agrees to pay, and to save the Administrative Agent, the Arranger and the Lenders harmless from all liability for, any stamp or other taxes which may be payable in connection with the execution and delivery of this Agreement, the borrowings hereunder, the issuance of the Notes or the execution and delivery of any other Loan Document or any other document provided for herein or delivered or to be delivered hereunder or in connection herewith. All obligations provided for in this Section 14.4 shall survive the expiration or termination of the Commitments, the repayment of the Loans and all other obligations of the Company hereunder, the expiration or termination of the Letters of Credit and the termination of this Agreement. 14.5 Successors and Assigns. This Agreement shall be binding upon the Company, the Lenders and the Administrative Agent and their respective successors and assigns, and shall inure to the benefit of the Company, the Lenders and the Administrative Agent and the permitted successors and assigns of the Lenders and the Administrative Agent. 14.6 Assignments; Participations. 14.6.1 Assignments. Any Lender may, with the prior written consents of the Company (which consent shall not be unreasonably delayed or withheld and shall not be required if an Event of Default exists) and the Administrative Agent, at any time assign and delegate to one or more commercial banks or other Persons (any Person to whom such an assignment and delegation is to be made being herein called an "Assignee") all or any fraction of such Lender's Commitment and such Lender's Loans and other rights and obligations hereunder in respect thereof (which assignment and delegation shall be of a constant, and not a varying, percentage of the assigning Lender's Commitment and Loans and other rights and obligations), in each case in a minimum aggregate amount equal to the lesser of (a) the assigning Lender's remaining Commitment and (b) $1,000,000; provided that (i) no assignment and delegation may be made to any Person if, at the time of such assignment and delegation, the Company would be obligated to pay any greater amount under Section 7.6 or Section 8 to the Assignee than the Company is then obligated to pay to the assigning Lender under such Sections, (ii) the consent of the Company shall not be required in the case of an assignment from a Lender to an Affiliate of such Lender, and (iii) the Company and the Administrative Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned and delegated to an Assignee until the date when all of the following conditions shall have been met: (x) five Business Days (or such lesser period of time as the Administrative Agent and the assigning Lender shall agree) shall have passed after written notice of such assignment and delegation, together with payment instructions, addresses and related information with respect to such Assignee, shall have been given to the Company and the Administrative Agent by such assigning Lender and the Assignee; (y) the assigning Lender and the Assignee shall have executed and delivered to the Company and the Administrative Agent an assignment agreement substantially in the form of Exhibit H (an "Assignment Agreement"), together with any documents required to be delivered thereunder, which Assignment Agreement shall have been accepted by the Administrative Agent; and (z) the assigning Lender or the Assignee shall have paid the Administrative Agent a processing fee of $3,500. From and after the date on which the conditions described above have been met, (x) such Assignee shall have all rights and obligations hereunder in respect of the interests so assigned (and, if such Assignee was not previously a Lender hereunder, shall automatically become a party hereto), (y) the assigning Lender, to the extent that rights and obligations hereunder have been assigned and delegated by it pursuant to such Assignment Agreement, shall be released from its obligations hereunder and (z) upon the distribution by the Administrative Agent to the Company and the Lenders of a new Schedule 1.1(a) which reflects such assignment and delegation, Schedule 1.1(a) hereto shall be deemed to be automatically amended in the form of such new Schedule 1.1(a). Within five Business Days after the effectiveness of any assignment and delegation to an Assignee which was not previously a party hereto, the Company shall execute and deliver to the Administrative Agent (for delivery to such Assignee) a new Note dated the effective date of such assignment. If any assigning Lender assigns all of its rights and obligations hereunder, such assigning Lender shall mark its Note or Notes "canceled" and deliver such Note or Notes to the Company. Any attempted assignment and delegation not made in accordance with this Section 14.6.1 shall be null and void. Notwithstanding the foregoing provisions of this Section 14.6.1 or any other provision of this Agreement, any Lender may at any time assign all or any portion of its Loans and its Note to a Federal Reserve Bank (but no such assignment shall release any Lender from any of its obligations hereunder). 14.6.2 Participations. Any Lender may at any time sell to one or more commercial banks or other Persons participating interests in any Loan owing to such Lender, the Note held by such Lender, the Commitment of such Lender, the participation interest of such Lender in any Letter of Credit or any other interest of such Lender hereunder (any Person purchasing any such participating interest being called a "Participant"). In the event of a sale by a Lender of a participating interest to a Participant, (x) such Lender shall remain the holder of its Note for all purposes of this Agreement, (y) the Company and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations hereunder and (z) all amounts payable by the Company shall be determined as if such Lender had not sold such participation and shall be paid directly to such Lender. No Participant shall have any direct or indirect voting rights hereunder except with respect to any of the events described in the third sentence of Section 14.1. Each Lender agrees to incorporate the requirements of the preceding sentence into each participation agreement which such Lender enters into with any Participant. The Company agrees that if amounts outstanding under this Agreement and the Notes are due and payable (as a result of acceleration or otherwise), each Participant shall be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement and any Note and with respect to any Letter of Credit to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement or such Note; provided that such right of setoff shall be subject to the obligation of each Participant to share with the Lenders, and the Lenders agree to share with each Participant, as provided in Section 7.5. The Company also agrees that each Participant shall be entitled to the benefits of Section 7.6 and Section 8 as if it were a Lender (provided that no Participant shall receive any greater compensation pursuant to Section 7.6 or Section 8 than would have been paid to the participating Lender if no participation had been sold). 14.6.3 Designation of SPVs. (a) Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Lender") may grant to a special purpose funding vehicle (an "SPV", identified as such in writing from time to time by such Granting Lender to the Administrative Agent and the Company) the option to fund all or any part of any Loan that such Granting Lender would otherwise be obligated to fund pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPV to fund any Loan, (ii) if an SPV elects not to exercise such option or otherwise fails to fund all or any part of such Loan, the Granting Lender shall be obligated to fund such Loan pursuant to the terms hereof, (iii) no SPV shall exercise any voting rights pursuant to Section 14.1 (such voting rights to be exercised instead by such Granting Lender) and (iv) with respect to notices, payments and other matters hereunder, the Company, the Administrative Agent and the Lenders shall not be obligated to deal with an SPV, but may limit their communications and other dealings relevant to such SPV to the applicable Granting Lender. The funding of any Loan hereunder by an SPV hereunder shall utilize the Commitment of the Granting Lender to the same extent that, and as if, such Loan were funded by such Granting Lender. (b) As to any Loans or portion thereof made by it, each SPV shall have all the rights that its applicable Granting Lender making such Loan or portion thereof would have had under this Agreement; provided, however, that each SPV shall have granted to its Granting Lender an irrevocable power of attorney to deliver and receive all communications and notices under this Agreement (and any related documents) and to exercise on such SPV's behalf, all of such SPV's voting rights under this Agreement. No additional Note shall be required to evidence the Loan or portion thereof made by an SPV; and the related Granting Lender shall be deemed to hold its Note as agent for such SPV to the extent of the Loan or portion thereof funded by such SPV. In addition, any payments for the account of any SPV shall be paid to its Granting Lender as agent for such SPV. (c) Each party hereto hereby agrees that no SPV shall be liable for any indemnity or payment under this Agreement for which a Lender would otherwise be liable for so long as, and to the extent, the Granting Lender provides such indemnity or makes such payment. In furtherance of the foregoing, each party hereto hereby agrees (which agreements shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPV, it will not institute against, or join any other person in instituting against, such SPV any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any state thereof. (d) In addition, notwithstanding anything to the contrary contained in this Agreement, any SPV may (i) at any time and without paying any processing fee therefor, assign or participate all or a portion of its interest in any Loan to the Granting Lender or to any financial institutions providing liquidity and/or credit support to or for the account of such SPV to support the funding or maintenance of Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancements to such SPV. This Section 14.6.3 may not be amended without the written consent of any Granting Lender affected thereby. 14.7 Governing Law. This Agreement and each Note shall be a contract made under and governed by the laws of the State of Illinois applicable to contracts made and to be performed entirely within such State. Whenever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. All obligations of the Company and rights of the Administrative Agent and the Lenders expressed herein or in any other Loan Document shall be in addition to and not in limitation of those provided by applicable law. 14.8 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement. 14.9 Judgment Currency. If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder or under any other Loan Document in one currency into another currency, the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the first currency with such other currency on the Business Day preceding that on which final judgment is given. The obligation of the Company in respect of any such sum due from it to the Administrative Agent or any Lender hereunder or under any other Loan Document shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than that in which such sum is denominated in accordance with the applicable provisions of this Agreement (the "Agreement Currency"), be discharged only to the extent that on the Business Day following receipt by the Administrative Agent or such Lender of any sum adjudged to be so due in the Judgment Currency, the Administrative Agent or such Lender may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency. If the amount of the Agreement Currency so purchased is less than the sum originally due to the Administrative Agent or such Lender in the Agreement Currency, the Company agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Administrative Agent or such Lender against such loss. If the amount of the Agreement Currency so purchased is greater than the sum originally due to the Administrative Agent or such Lender in such currency, the Administrative Agent or such Lender agrees to return the amount of any excess to the Company (or to any other Person who may be entitled thereto under applicable law). 14.10 Indemnification by the Company; Exculpation. Whether or not the transactions contemplated hereby are consummated, the Company shall indemnify and hold the Agent-Related Persons and each Lender and each of their 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 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 thereby, 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 bankruptcy or insolvency proceeding or any appellate proceeding) related to or arising out of this Agreement or the Loans or Letters of Credit or the use of the proceeds thereof, or related to any transactions entered into in connection herewith, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); provided that the Company shall not have any obligation hereunder to any Indemnified Person with respect to (a) Indemnified Liabilities resulting from the bad faith, gross negligence or willful misconduct of such Indemnified Person or (b) any taxes for which the Company is not liable pursuant to the provisions of Section 7.6. The Company agrees that none of the Indemnified Persons shall be liable to the Company for any action taken or omitted to be taken by any of them under or in connection with this Agreement, any other Loan Document or any other document executed by the Company in connection with this Agreement or the transactions contemplated hereby (except to the extent resulting from its own gross negligence or willful misconduct or a breach of the express terms of this Agreement), and the Company further agrees that in no event shall any Indemnified Person be liable to the Company for any punitive or exemplary damages as a result of any such action taken or omitted. All obligations and agreements in this Section 14.10 shall survive the expiration or termination of the Commitments, the repayment of the Loans and all other obligations of the Company hereunder, the expiration or termination of the Letters of Credit, and the termination of this Agreement. 14.11 Economic and Monetary Union in the European Community. (a) If, as a result of the implementation of the European economic and monetary union ("EMU"), any currency available for borrowing under this Agreement (a "national currency") and the Euro are at the same time both recognized by the central bank or comparable Governmental Authority of the state issuing such currency as lawful currency of such state, then any amount borrowed hereunder by the Company in such national currency shall be payable in such national currency and any amount borrowed hereunder in the Euro shall be payable in the Euro. After the European Central Lender and/or the comparable Governmental Authority ceases to recognize any national currency, then the amount so payable shall be determined by redenominating or converting such national currency into the Euro at the exchange rate officially fixed by the European Central Lender for the purpose of implementing the EMU. Prior to the occurrence of the event or events described above, each amount payable hereunder in any such national currency will, except as otherwise provided herein, continue to be payable only in that national currency. (b) The Company shall from time to time, at the request of any Lender, pay to such Lender the amount of any losses, damages, liabilities, claims, reduction in yield, additional expense or increased cost incurred by, or of any reduction in any amount payable to or in the effective return on its capital to, or any decrease or delay in the payment of interest or other return foregone by, such Lender or any of its Affiliates as a result of any political, tax, liquidity, currency exchange or market risk resulting from the introduction of, changeover to or operation of the Euro in any applicable nation or Eurocurrency market. (c) In addition, this Agreement will be amended to the extent determined Administrative Agent (acting reasonably and in consultation with the Company) to be necessary to reflect such implementation of the EMU and change in currency and to put the Lenders and the Company in the same position, so far as possible, that they would have been in if such implementation and change in currency had not occurred. Except as provided in the foregoing provisions of this Section 14.11, no such implementation or change in currency nor any economic consequences resulting therefrom shall (i) give rise to any right to terminate prematurely, contest, cancel, rescind, alter, modify or renegotiate the provisions of this Agreement or (ii) discharge, excuse or otherwise affect the performance of any obligation of the Company under this Agreement or any Note. 14.12 Confidentiality. The Administrative Agent, the Issuer and the Lenders shall hold all non-public information obtained pursuant to the requirements of this Agreement in accordance with their customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices and, in any event, may make disclosure on the same confidential basis as provided for herein that is reasonably required by any actual or bona fide potential transferee or participant in connection with the contemplated transfer of any Loan or participation therein or in any Letter of Credit or as required or requested by any governmental agency or representative thereof or pursuant to legal process; provided that, unless specifically prohibited by applicable law or court order, each of the Administrative Agent and each Lender shall notify the Company of any request by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of the Administrative Agent or such Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information. 14.13 No Third Parties Benefitted. This Agreement is made and entered into for the sole protection and legal benefit of the Company, the Lenders, the Administrative Agent, the Agent-Related Persons and the Indemnified 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. 14.14 Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS; PROVIDED THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH PROPERTY MAY BE FOUND. EACH OF THE ADMINISTRATIVE AGENT, THE COMPANY AND EACH LENDER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. 14.15 Waiver of Jury Trial. EACH OF THE ADMINISTRATIVE AGENT, THE COMPANY, THE ISSUER AND EACH LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. 14.16 MISSOURI STATUTORY NOTICE. The Following notice is given to comply with Mo. Rev. Stat. Section 432.045: ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU (BORROWER(S)) AND US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT. 14.17 Entire Agreement. This Agreement, together with the other Loan Documents (and any fee letter between the Company and the Administrative Agent and/or the Arranger), embodies the entire agreement and understanding among the Company, the Lenders, the Issuer and the Administrative Agent, and supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof. [SIGNATURES BEGIN ON THE NEXT PAGE] Delivered as of the day and year first above written. AMERICAN ITALIAN PASTA COMPANY By: /s/ Warren Schmidgall --------------------- Title: Senior Vice President/ Chief Financial Officer BANK OF AMERICA, N.A., as Administrative Agent By: /s/ David A. Johanson --------------------- Title: Vice President BANK OF AMERICA, N.A., as a Lender By /s/Thomas R. Mahoney -------------------- Title: Senior Vice President BANK ONE, WISCONSIN, as Documentation Agent and as a Lender By /s/Cindy L. Wavrunck -------------------- Title: Vice President FIRSTAR BANK, N.A., as Syndication Agent and as a Lender By /s/ Bruce A. Easterly --------------------- Title: Vice President CREDIT AGRICOLE INDOSUEZ, as Co-Agent and as a Lender By /s/ Alan I. Schmelzer ---------------------- Title: Vice President, Senior Relationship Manager By /s/ Theodore D. Tice ---------------------- Title: Vice President, Senior Relationship Manager FLEET NATIONAL BANK, as Co-Agent and as a Lender By /s/Lori H. Jou -------------- Title: Vice President KEYBANK NATIONAL ASSOCIATION, as Co-Agent and as a Lender By /s/ Mary K. Young ----------------- Title: Vice President COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH, as Co-Agent and as a Lender By /s/ W. Jeffrey Vollack ---------------------- Title: Senior Credit Officer, Senior Vice President By /s/ Thomas F. Kelly ------------------- Title: Vice President WACHOVIA BANK, N.A., as Co-Agent and as a Lender By /s/ Andrew B. Deskins ----------------------- Title: Senior Vice President WELLS FARGO BANK, N.A., as Co-Agent and as a Lender By /s/ Peter Arendt -------------------- Title: Vice President BANCA NAZIONALE DEL LAVORO S.P.A. By /s/ Leonardo Valentini ---------------------- Title: First Vice President By /s/ Juan J. Cortes ------------------ Title: Vice President THE BANK OF NEW YORK By /s/ John-Paul Marotta --------------------- Title: Vice President COMERICA BANK By /s/Neran Shaya --------------- Title: Vice President COMMERCE BANK, N.A. By /s/Lance Holden --------------- Title: Vice President SUNTRUST BANK By /s/ Michael Pugsley ----------------------- Title: Vice President UNICREDITO ITALIANO By /s/ Christopher J. Eldin ------------------------- Title: First Vice President & Deputy Manager By /s/ Nicola Longo Dente ----------------------- Title: First Vice President UMB BANK, N.A. By /s/ David A. Proffitt --------------------- Title: Senior Vice President SCHEDULE 1.1(a) LENDERS, COMMITMENTS AND PERCENTAGES Amount of Name of Lender Commitment Percentage - -------------- ---------- ---------- Bank of America, N.A. $29,000,000 9.666666667% Bank One, Wisconsin $27,000,000 9.000000000% Firstar Bank, N.A. $27,000,000 9.000000000% Credit Agricole Indosuez $22,000,000 7.333333333% Fleet National Bank $22,000,000 7.333333333% KeyBank National Association $22,000,000 7.333333333% Cooperatieve Centrale $22,000,000 7.333333333% Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New York Branch Wachovia Bank, N.A. $22,000,000 7.333333333% Wells Fargo Bank, N.A. $22,000,000 7.333333333% Banca Nazionale Del Lavoro S.p.A. $15,000,000 5.000000000% The Bank of New York $15,000,000 5.000000000% Comerica Bank $10,000,000 3.333333333% Commerce Bank, N.A. $10,000,000 3.333333333% SunTrust Bank $15,000,000 5.000000000% UniCredito Italiano $10,000,000 3.333333333% UMB Bank, N.A. $10,000,000 3.333333333% ---------------------------------- TOTALS $300,000,000 100.00000000% SCHEDULE 1.1(b) PRICING SCHEDULE The Applicable Eurocurrency Margin, the Applicable Base Rate Margin, the Non-Use Fee Rate and the LC Fee Rate shall be determined based on the applicable Leverage Ratio as set forth below. Level Applicable Eurocurrency Applicable Base Non-Use Fee Rate - ----- Margin/LC Fee Rate for Rate Margin ---------------- Letters of Credit ------------- ------------------ Level I 0.625% 0.000% 0.150% Level II 0.750% 0.000% 0.175% Level III 0.875% 0.000% 0.200% Level IV 1.000% 0.000% 0.225% Level V 1.250% 0.000% 0.275% Level VI 1.625% 0.375% 0.350% Level I applies when the Leverage Ratio is less than or equal to 1.00 to 1. Level II applies when the Leverage Ratio is greater than 1.00 to 1 but less than or equal to 1.50 to 1. Level III applies when the Leverage Ratio is greater than 1.50 to 1 but less than or equal to 2.00 to 1. Level IV applies when the Leverage Ratio is greater than 2.00 to 1 but less than or equal to 2.50 to 1. Level V applies when the Leverage Ratio is greater than 2.50 to 1 but less than or equal to 3.00 to 1. Level VI applies when the Leverage Ratio is greater than 3.00 to 1. Initially, the applicable Level shall be Level V. Beginning with September 28, 2001, the applicable Level shall be adjusted, to the extent applicable, 45 days (or, in the case of the last Fiscal Quarter of any Fiscal Year, 90 days) after the end of each Fiscal Quarter based on the Leverage Ratio as of the last day of such Fiscal Quarter; provided that if the Company fails to deliver the financial statements required by Section 10.1.1 or 10.1.2, as applicable, by the due date therefor, Level VI shall apply from such due date until such financial statements are delivered. Any adjustment to a Level shall apply immediately for all outstanding Loans and Letters of Credit. SCHEDULE 14.2 ADDRESSES FOR NOTICES AMERICAN ITALIAN PASTA COMPANY 4100 North Mulberry Drive Suite 200 Kansas City, MO 64116 Attention: Chief Financial Officer Telephone: (816) 584-4636 Facsimile: (816) 584-5736 BANK OF AMERICA, N.A. For notices of borrowing and payments: 901 Main Street Dallas, TX Attention: Monica Barnes Telephone: (214) 209-9289 Facsimile: (314) 290-9442 For notices regarding Standby Letters of Credit: Trade Operations - Los Angeles 333 S. Beaudry Avenue, 23rd Floor Mail Code CA9-703-19-23 Los Angeles, CA 90017-1466 Attention: Ben Cortes Telephone: (213) 345-5230 Facsimile: (213) 345-6710 For notices regarding Commercial Letters of Credit: Trade Operations - Los Angeles 333 S. Beaudry Avenue, 23rd Floor Mail Code CA9-703-19-15 Los Angeles, CA 90017-1466 Attention: Frantz Bellevue Telephone: (213) 345-6616 Facsimile: (213) 345-9665 For all other administrative matters: 231 South LaSalle Street Chicago, IL 60697 Mail Code IL1-231-08-30 Attention: David A. Johanson Telephone: (312) 828-7933 Facsimile: (877) 207-0485 Email: David.Johanson@bankofamerica.com For all other notices: 1200 Main St. MO8-060-12-12 Kansas City, MO 64105-1702 Attention: Thomas R. Mahoney Telephone: (816) 979-7921 Facsimile: (861) 979-7561 Email: Tom.Mahoney@bankofamerica.com BANK ONE, WISCONSIN For notices of borrowing and payments: 401 W. Main Street Louisville, KY 40202 Attention: Jenny Fox Telephone: (502) 566-8373 Facsimile: (502) 566-8994 For all other notices: 111 E. Wisconsin Avenue P.O. Box 2033 Milwaukee, WI 53201 Attention: Cindy L. Wavrunck Telephone: (414) 765-2109 Facsimile: (414) 765-2176 Email: cindy_l_wavrunck@bankone.com FIRSTAR BANK, N.A. For notices of borrowing and payments: 1850 Osborn Avenue Oshkosh, WI 54902 Attention: Connie Sweeney Telephone: (920) 426-7604 Facsimile: (920) 426-7993 For all other notices: 1101 Walnut, 7th Floor Kansas City, MO 64106 Attention: Bruce Easterly Telephone: (816) 871-2174 Facsimile: (816) 871-2226 Email: bruce.a.easterly@firstar.com CREDIT AGRICOLE INDOSUEZ For notices of borrowing and payments: 55 East Monroe 47th Floor Chicago, IL 60603 Attention: Natalie Klotz Telephone: (312) 917-7498 Facsimile: (502) 372-4421 Email: nklotz@us.ca-indosuez.com For all other notices: 55 East Monroe 47th Floor Chicago, IL 60603 Attention: Alan Schmelzer Telephone: (312) 917-7455 Facsimile: (502) 372-3455 Email: aschmelz@us.ca-indosuez.com FLEET NATIONAL BANK For notices of borrowing and payments: 100 Federal Street Mail Code MA DE 10008H Boston, MA 02110 Attention: Michael Butler Telephone: (617) 434-5777 Facsimile: (617) 434-9933 Email: michael_c_butler@fleet.com For all other notices: 100 Federal Street Mail Code MA DE 10008H Boston, MA 02110 Attention: Lori H. Jou Telephone: (617) 434-3898 Facsimile: (617) 434-0637 Email: lori_h_jou@fleet.com KEYBANK NATIONAL ASSOCIATION For notices of borrowing and payments: 127 Public Square Cleveland, OH 44114 Attention: Kathy Koenig Telephone: (216) 689-4228 Facsimile: (216) 689-4981 For all other notices: 127 Public Square Cleveland, OH 44114 Attention: Mary K. Young Telephone: (216) 689-4443 Facsimile: (216) 689-4981 COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH For notices of borrowing and payments: 10 Exchange Place, 16th Floor Jersey City, NJ 07302 Attention: Clemencia Stewart Telephone: (201) 499-5245 Facsimile: (201) 499-5328 For all other notices: 300 S. Wacker Drive Suite 3500 Chicago, IL 60606 Attention: Tom Kelly Telephone: (312) 408-8222 Facsimile: (312) 408-8240 WACHOVIA BANK, N.A. For notices of borrowing and payments: 191 Peachtree Street Atlanta, GA 30303-1757 Attention: Yolanda Pearison Telephone: (404) 332-4295 Facsimile: (404) 332-6898 Email: Yolanda.pearison@wachovia.com For all other notices: 191 Peachtree Street Atlanta, GA 30303-1757 Attention: Andrew B. Deskins Telephone: (404) 332-1213 Facsimile: (404) 332-4136 Email: Andrew.deskins@wachovia.com WELLS FARGO BANK, N.A. For notices of borrowing and payments: 1740 Broadway Denver, CO 80274 Attention: James Carpinelli Telephone: (303) 863-5357 Facsimile: (303) 863-2729 Email: James.A.Carpinelli@wellsfargo.com For all other notices: 4100 N. Mulberry Suite 105 Kansas City, MO 64116 Attention: Peter Arendt Telephone: (816) 506-5334 Facsimile: (816) 587-9537 Email: arendtph@wellsfargo.com BANCA NAZIONALE DEL LAVORO S.P.A. For notices of borrowing and payments: 25 West 51st Street New York, NY 10019 Attention: Anna Hernandez Telephone: (212) 314-0679 Facsimile:(212) 765-2978 For all other notices: 25 West 51st Street New York, NY 10019 Attention: Juan J. Cortes Telephone: (212) 314-0295 Facsimile: (212) 765-2978 Email: Juan.Cortes@BNLMAIL.com THE BANK OF NEW YORK For notices of borrowing and payments: 1 Wall Street New York, NY 10286 Attention: Millie Hall Telephone: (212) 635-6687 Facsimile: (212) 635-7923 For all other notices: 1 Wall Street New York, NY 10286 Attention: John-Paul Marotta Telephone: (212) 635-8204 Facsimile: (212) 635-1208 COMERICA BANK For notices of borrowing and payments: 500 Woodward Avenue Detroit, MI 48226 Attention: Stepahnie Williams Telephone: (313) 222-3904 Facsimile: (312) 222-9516 Email: stepahnie_c_williams@comerica.com For all other notices: 500 Woodward Avenue Detroit, MI 48226 Attention: Neran Shaya Telephone: (313) 222-3070 Facsimile: (312) 222-9516 Email: neran_shaya@comerica.com COMMERCE BANK, N.A. For notices of borrowing and payments: 1000 Walnut Street BB17-3 Kansas City, MO 64106 Attention: Diane Jones Telephone: (816) 234-2702 Facsimile: (816) 234-7891 For all other notices: 1000 Walnut Street BB17-3 Kansas City, MO 64106 Attention: Lance Holden Telephone: (816) 234-21935 Facsimile: (816) 234-7290 Email: lance.holden@commercebank.com SUNTRUST BANK For notices of borrowing and payments: 303 Peachtree Street, NE 10th Floor MC 1941 Atlanta, GA 30308 Attention: Michelle Wood-Welch Telephone: (404) 588-8038 Facsimile: (404) 230-1940 Email: michelle.wood@suntrust.com For all other notices: 303 Peachtree Street, NE 3rd Floor, MC 1905 Atlanta, GA 30308 Attention: Michael Pugsley Telephone: (404) 724-3635 Facsimile: (404) 230-5305 Email: michael.pugsley@suntrust.com UNICREDITO ITALIANO GROUP For notices of borrowing and payments: 375 Park Avenue New York, NY 10152 Attention: Angie Blanco Telephone: (212) 546-9616/9615 Facsimile: (212) 546-9675 For all other notices: 375 Park Avenue New York, NY 10152 Attention: Christopher J. Eldin Telephone: (212) 546-9611 Facsimile: (212) 546-9665 Email: NewYorkBranch@Gruppocredit.it UMB BANK, N.A. For notices of borrowing and payments: 928 Grand Avenue Kansas City, MO 64106 Attention: Vaughnda Ritchie Telephone: (816) 860-7019 Facsimile: (816) 860-7796 Email: vaughnda.ritchie@umb.com For all other notices: 1010 Grand Avenue Kansas City, MO 64106 Attention: David Proffitt Telephone: (816) 860-7935 Facsimile: (816) 860-7143 Email: david.proffitt@umb.com EX-10.5 7 exh105_081301.txt Exhibit 10.5 AMERICAN ITALIAN PASTA COMPANY 2000 EQUITY INCENTIVE PLAN AS AMENDED FEBRUARY 2001 SECTION 1 PURPOSE AND DURATION 1.1 Establishment; Effective Date. American Italian Pasta Company hereby establishes an incentive compensation plan. This Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock, Performance Units and Performance Shares. This Plan shall be effective on the date of its adoption by the Company's Board of Directors, subject to approval of the Company's stockholders. 1.2 Purpose of this Plan. This Plan is intended to attract, motivate, and retain (a) employees of the Company and its Affiliates, (b) consultants who provide significant services to the Company and its Affiliates, and (c) members of the Board of Directors of the Company who are employees of neither the Company nor any Affiliate. This Plan also is designed to further the growth and financial success of the Company and its Affiliates by aligning the interests of the Participants, through the ownership of Shares and through other incentives, with the interests of the Company's stockholders. SECTION 2 DEFINITIONS The following words and phrases shall have the following meanings unless a different meaning is plainly required by the context: "1934 Act" means the Securities Exchange Act of 1934, as amended. Reference to a specific section of the 1934 Act or regulation thereunder shall include such section or regulation, any valid regulation promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation. "Affiliate" means any corporation or any other entity (including, but not limited to, partnerships and joint ventures) controlling, controlled by or under common control with the Company. "Affiliated SAR" means an SAR that is granted in connection with a related Option, and that automatically will be deemed to be exercised at the same time that the related Option is exercised. "Award" means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock, Performance Units or Performance Shares. "Award Agreement" means the written agreement setting forth the terms and provisions applicable to each Award granted under this Plan. "Board" or "Board of Directors" means the Board of Directors of the Company. "Board Member" means any individual who is a member of the Board of Directors of the Company. "Cause" means, unless otherwise defined in any employment agreement with the Participant or Award Agreement, any one or more of the following: (A) A Participant's plea of guilty or no contest to, or finding of guilty for, commission of a crime that, in the judgment of the Committee, may result in injury to the Company or a Subsidiary or to the reputation of the Company or a Subsidiary; (B) The material violation by the Participant of written policies or established practices of the Company or a Subsidiary including, but not limited to, anti-discrimination and anti-harassment policies and practices; (C) In the good faith belief of the Company, the habitual neglect by the Participant in the performance of his or her duties to the Company or a Subsidiary after notice by the Committee and thirty days to cure; (D) Action or inaction by the Participant in connection with his or her duties to the Company or a Subsidiary resulting, in the judgment of the Committee, in a material injury to the Company or a Subsidiary or to the reputation of the Company or a Subsidiary; (E) The rendering of services by the Participant for any organization or business engaging directly or indirectly in any business that is or becomes competitive with the Company or a Subsidiary or which organization or business, or the rendering of services to such organization or business, is or becomes otherwise prejudicial to or in conflict with the interests of the Company or a Subsidiary; (F) Any attempt by the Participant directly or indirectly to induce any employee of the Company or a Subsidiary to be employed or perform services elsewhere or any attempt directly or indirectly to solicit (other than for the account of the Company or a Subsidiary) the trade or business of any current or prospective customer, supplier, or partner of the Company or a Subsidiary; or (G) Any other conduct or act determined by the Committee to be injurious, detrimental, or prejudicial to any interest of the Company or a Subsidiary, including, but not limited to, the reputation of the Company or a Subsidiary. "Change in Control" shall have the meaning assigned to such term in Section 12.3. "Code" means the Internal Revenue Code of 1986, as amended. Reference to a specific section of the Code or regulation thereunder shall include such section or regulation, any valid regulation promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation. "Committee" means the committee appointed by the Board (pursuant to Section 3.1) to administer this Plan. "Common Stock" means the Class A Convertible Common Stock, $.001 par value, of the Company. "Company" means American Italian Pasta Company, a Delaware corporation, and any successor thereto. With respect to the definition of Performance Goals, the Committee in its sole discretion may determine that "Company" means American Italian Pasta Company, and/or any of its consolidated subsidiaries. "Consultant" means any consultant, independent contractor or other person who provides significant services to the Company or its Affiliates, but who is neither an Employee nor a Board Member. "Disability" means a permanent and total disability within the meaning of Code section 22(e)(3), provided that in the case of Awards other than Incentive Stock Options, the Committee in its sole discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Committee from time to time. "Employee" means any employee of the Company or of an Affiliate, whether such employee is so employed at the time this Plan is adopted or becomes so employed subsequent to the adoption of this Plan. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. Reference to a specific section of ERISA or regulation thereunder shall include such section or regulation, any valid regulation promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation. "Exercise Price" means the price at which a Share may be purchased by a Participant pursuant to the exercise of an Option. "Fair Market Value" means (A) with respect to any property other than Shares, the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee, and (B) with respect to Shares, unless otherwise determined in the good faith discretion of the Committee, as of any date, (i) the closing price on the date of determination on the New York Stock Exchange (or, if no sale of Shares was reported for such date, on the next preceding date on which a sale of Shares was reported), (ii) if the Shares are not listed on the New York Stock Exchange, the closing price of the Shares on such other national exchange on which the Shares are principally traded or as reported by the National Market System, or similar organization, or if no such quotations are available, the average of the high bid and low asked quotations in the over-the-counter market as reported by the National Quotation Bureau Incorporated or similar organizations; or (iii) in the event that there shall be no public market for the Shares, the fair market value of the Shares as determined (which determination shall be conclusive) in good faith by the Committee, based upon the value of the Company as a going concern, as if such Shares were publicly owned stock, but without any discount with respect to minority ownership. "Fiscal Year" means the fiscal year of the Company. "Freestanding SAR" means a SAR that is granted independently of any Option. "Grant Date" means, with respect to an Award, the date that the Award was granted. "Incentive Stock Option" means an Option to purchase Shares which is designated as an Incentive Stock Option and is intended to meet the requirements of section 422 of the Code. "Nonemployee Board Member" means a Board Member who is not an employee of the Company or of any Affiliate. "Nonqualified Stock Option" means an Option to purchase Shares which is not an Incentive Stock Option. "Option" means an Incentive Stock Option or a Nonqualified Stock Option. "Participant" means an Employee, Consultant or Nonemployee Board Member. "Performance Goals" means the goal(s) (or combined goal(s)) determined by the Committee (in its sole discretion) to be applicable to a Participant with respect to an Award. For Awards that are intended to qualify as "performance-based compensation" under section 162(m) of the Code, as determined by the Committee, the Performance Goals applicable to an Award may provide for a targeted level or levels of achievement using one or more of the following predetermined measurements: (a) earnings (either in the aggregate or on a per-share basis); (b) net income (before or after taxes); (c) operating income; (d) cash flow; (e) return measures (including return on assets, equity or sales); (f) earnings before or after taxes, and before or after depreciation and amortization; (g) gross revenues; (h) share price (including growth measures and total stockholder return or attainment by the Shares of a specified value for a specified period of time); (i) reductions in expense levels in each case where applicable determined either in a Company-wide basis or in respect of any one or more business units; (j) net economic value; or (k) market share. The Performance Goals may differ from Participant to Participant and from Award to Award. "Performance Period" shall have the meaning assigned to such term in Section 8.3. "Performance Share" means an Award granted to a Participant pursuant to Section 8. "Performance Unit" means an Award granted to a Participant pursuant to Section 8. "Period of Restriction" means the period during which the transfer of Shares of Restricted Stock are subject to restrictions and, therefore, the Shares are subject to a substantial risk of forfeiture. As provided in Section 7, such restrictions may be based on the passage of time, the achievement of target levels of performance or the occurrence of other events as determined by the Committee in its sole discretion. "Plan" means the American Italian Pasta Company 2000 Equity Incentive Plan, as set forth in this instrument and as hereafter amended from time to time. "Reload Option" shall have the meaning assigned in Section 5.9. "Restricted Stock" means an Award granted to a Participant pursuant to Section 7. "Retirement" means, in the case of an Employee, a Termination of Service by reason of the Employee's retirement pursuant to any retirement program instituted by the Company or any Affiliate employer or as otherwise agreed to by the Employer or the applicable Affiliate employer. With respect to a Consultant, no Termination of Service shall be deemed to be on account of "Retirement". With respect to a Nonemployee Board Member, "Retirement" means termination of service on the Board at or after age sixty-five (65). "Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act, and any future regulation amending, supplementing or superseding such regulation. "Section 16 Person" means a person who, with respect to the Shares, is subject to Section 16 of the 1934 Act. "Shares" means the shares of Common Stock of the Company. "Stock Appreciation Right" or "SAR" means an Award, granted alone or in connection with a related Option, that is designated as a SAR pursuant to Section 6. "Subsidiary" means any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. "Tandem SAR" means an SAR that is granted in connection with a related Option, the exercise of which shall require forfeiture of the right to purchase an equal number of Shares under the related Option (and when a Share is purchased under the Option, the SAR shall be canceled to the same extent). "Termination of Service" means (a) in the case of an Employee, a cessation of the employee-employer relationship between an employee and the Company or an Affiliate for any reason, including, but not limited to, a cessation by resignation, discharge, death, Disability, Retirement or the disaffiliation of an Affiliate, but excluding any such cessation where there is a simultaneous reemployment by the Company or an Affiliate, and (b) in the case of a Board Member or Consultant, a cessation of the service relationship between a Board Member or Consultant and the Company or an Affiliate for any reason, including, but not limited to, a cessation by resignation, discharge, death, Disability, Retirement (with respect to a Board Member) or the disaffiliation of an Affiliate, but excluding any such cessation where there is a simultaneous reengagement of the Board Member or Consultant by the Company or an Affiliate. SECTION 3 ADMINISTRATION 3.1 The Committee. Subject to Section 3.2, the Plan shall be administered by the Board, or a committee appointed by the Board to administer the Plan. Any references herein to "Committee" are references to the Board, or a committee established by the Board, as applicable. To the extent the Board considers it desirable to comply with or qualify under Rule 16b-3 or meet the performance-based exception under section 162(m) of the Code, the Committee shall consist of two or more directors of the Company, all of whom qualify as "outside directors" as defined for purposes of the regulations under Code section 162(m) and "non-employee directors" within the meaning of Rule 16b-3. The number of members of the Committee shall from time to time be increased or decreased, and shall be subject to such conditions, in each case as the Board deems appropriate to permit transactions in Shares pursuant to the Plan to satisfy such conditions of Rule 16b-3 and Code section 162(m) as then in effect. 3.2 Authority of the Committee. Subject to the express provisions of the Plan, the Committee has full and final authority and sole discretion as follows: (a) To determine when, to whom and in what types and amounts Awards should be granted and the terms and conditions applicable to each Award, and whether or not specific Awards shall be granted in connection with other specific Awards, and if so whether they shall be exercisable cumulatively with, or alternatively to, such other specific Awards; (b) To construe and interpret the Plan and to make all determinations necessary or advisable for the administration of the Plan; (c) To make, amend and rescind rules relating to the Plan, including rules with respect to the exercisability and nonforfeitability of Awards upon the Termination of Service of a Participant; (d) To determine the terms and conditions of all Award Agreements (which need not be identical) and, with the consent of the Participant, to amend any such Award Agreement at any time, provided that the consent of the Participant shall not be required for any amendment which (A) does not adversely affect the rights of the Participant, or (B) is necessary or advisable (as determined by the Committee) to carry out the purpose of the Award as a result of any new or change in existing applicable law; (e) To cancel, with the consent of the Participant, outstanding Awards and to grant new Awards in substitution therefor; (f) To accelerate the exercisability (including exercisability within a period of less than six months after the Grant Date) of, and to accelerate or waive any or all of the terms and conditions applicable to, any Award or any group of Awards for any reason and at any time, including in connection with a Termination of Service; (g) To make such adjustments or modifications to Awards to Participants working outside the United States as are advisable to fulfill the purposes of the Plan; (h) To impose such additional terms and conditions upon the grant, exercise or retention of Awards as the Committee may, before or concurrently with the grant thereof, deem appropriate, including limiting the percentage of Awards which may from time to time be exercised by a Participant; and (i) To take any other action with respect to any matters relating to the Plan for which it is responsible. 3.3 Delegation by the Committee. The Committee, in its sole discretion and on such terms and conditions as it may provide, may delegate all or any part of its authority and powers under this Plan to one or more Board Members or officers of the Company; provided, however, that the Committee may not delegate its authority and powers in any way which would jeopardize this Plan's or any Award's qualification under Rule 16b-3 or Code section 162(m). 3.4 Decisions Binding. All determinations and decisions made by the Committee, the Board and any delegate of the Committee pursuant to Section 3.3 shall be final, conclusive, and binding on all persons, and shall be given the maximum deference permitted by law. SECTION 4 SHARES SUBJECT TO THIS PLAN; GENERAL CONDITIONS 4.1 Number of Shares. The Shares for which Awards may be granted under the Plan shall be subject to the following: (a) The Shares with respect to which Awards may be made under the Plan shall be Shares currently authorized but unissued or currently held or subsequently acquired by the Company as treasury shares, including Shares purchased in the open market or in private transactions. (b) Subject to adjustment as provided in Sections 4.2 and 4.3 and to the following provisions of this Section 4.1, the maximum number of Shares that may be delivered to Participants and their beneficiaries under the Plan shall be equal to the sum of: (i) 1,000,000 Shares; and (ii) any Shares available for future awards under the Company's 1997 Equity Incentive Plan (the "Prior Plan") as of the effective date of this Plan, and any Shares that are represented by awards granted under the Prior Plan which are forfeited, expire or are canceled without delivery of Shares or which result in the forfeiture of Shares back to the Company. (c) If the Exercise Price of, or the tax withholding with respect to any Award granted under the Plan or the Prior Plan is satisfied by tendering Shares to the Company (by either actual delivery or by attestation), such Shares shall also be available for delivery under the Plan. (d) Notwithstanding anything to the contrary in this Section 4.1, in no event, shall grants of Incentive Stock Options exceed 1,000,000 Shares. 4.2 Lapsed Awards. If an Award is settled in cash, or is canceled, terminates, expires or lapses for any reason (with the exception of the termination of a Tandem SAR upon exercise of the related Option, or the termination of a related Option upon exercise of the corresponding Tandem SAR), any Shares subject to such Award thereafter shall be available to be the subject of another Award. With respect to an Award that is intended to qualify as "performance-based compensation" under section 162(m) of the Code, if an Award is cancelled, the Shares subject to the Award continue to count against the maximum number of Shares under an Award which may be granted to a Participant in any fiscal year. 4.3 Adjustments in Awards and Authorized Shares. In the event of any merger, reorganization, consolidation, _ recapitalization, _ separation, liquidation, stock dividend, stock split, Share combination, or other change in the corporate structure of the Company affecting the Shares, the Committee shall adjust the number and class of Shares which may be delivered under this Plan, the number, class and price of Shares subject to outstanding Awards, and the numerical limits of Sections 4.1, 5.1, 6.1, 7.1 and 8.1, or if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award, in such a manner as the Committee (in its sole discretion) shall determine to be advisable or appropriate to prevent the dilution or diminution of such Awards. In each case, with respect to Awards of Incentive Stock Options no such adjustment shall be authorized to the extent that such authority would cause the Plan to violate section 422(b)(1) of the Code or any successor provision thereto. Notwithstanding the preceding, the number of Shares subject to any Award always shall be a whole number. 4.4 Buy-Out Provision. The Committee may at any time offer on behalf of the Company to buy out, for a payment in cash or Shares, an Award previously granted, based on such terms and conditions as the Committee, in its sole discretion, shall establish and communicate to the applicable Participant at the time such offer is made. 4.5 Restrictions on Share Transferability. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Award as it may deem advisable or appropriate in its sole discretion, including, but not limited to, restrictions related to applicable Federal securities laws, the requirements of any national securities exchange or system upon which Shares are then listed or traded, and any blue sky or state securities laws. 4.6 Cancellation and Rescission of Awards. (a) Unless the Award Agreement specifies otherwise, the Committee may cancel, rescind, suspend, withhold or otherwise limit or restrict any unexercised Award at any time if the Participant is not in compliance with all applicable provisions of the Award Agreement and the Plan or if the Participant has a Termination of Service for Cause. (b) Upon exercise, payment or delivery pursuant to an Award, the Participant shall certify in a manner acceptable to the Company that he or she is in compliance with the terms and conditions of the Plan. In the event a Participant fails to comply with the provisions of this Section 4.6 prior to, or during the six months after, any exercise, payment or delivery pursuant to an Award, such exercise, payment or delivery may be rescinded by the Company within two years thereafter. In the event of any such rescission, the Participant shall pay to the Company the amount of any gain realized or payment received as a result of the rescinded exercise, payment or delivery in such manner and on such terms and conditions as may be required, and the Company shall be entitled to set-off against the amount of any such gain any amount owed to the Participant by the Company. 4.7 Loans and Guarantees. The Committee may in its discretion allow a Participant to defer payment to the Company of all or any portion of (i) the Exercise Price of an Option, (ii) the purchase price of Restricted Stock, if any, or (iii) subject to applicable law, any taxes associated with the exercise, nonforfeitability of, or payment of benefits in connection with, an Award, or cause the Company to guarantee a loan from a third party to the Participant, in an amount equal to all or any portion of such Exercise Price, or any related taxes. Any such payment deferral or guarantee by the Company shall be on such terms and conditions as the Committee may determine. SECTION 5 STOCK OPTIONS 5.1 Grant of Options. Subject to the terms and provisions of this Plan, Options may be granted to Participants at any time and from time to time as determined by the Committee in its sole discretion. The Committee, in its sole discretion, shall determine the number of Shares subject to each Option; provided, however, that during any Fiscal Year, no Participant shall be granted Options covering more than 500,000 Shares. The Committee may grant Incentive Stock Options, Nonqualified Stock Options, or any combination thereof. 5.2 Award Agreement. Each Option shall be evidenced by an Award Agreement that shall specify the Exercise Price, the expiration date of the Option, the number of Shares to which the Option pertains, any conditions to exercise of the Option and such other terms and conditions as the Committee, in its sole discretion, shall determine. The Award Agreement also shall specify whether the Option is intended to be an Incentive Stock Option or a Nonqualified Stock Option. 5.3 Exercise Price. Subject to the provisions of this Section 5.3, the Exercise Price for each Option shall be determined by the Committee in its sole discretion. 5.3.1 Non-Qualified Stock Options. In the case of a Nonqualified Stock Option, the Exercise Price may not be less than the Fair Market Value of a Share on the Grant Date; provided however, that the Committee may, where a Nonqualified Stock Option is issued in lieu of a Participant's salary or cash bonus, set the Exercise Price at no less than 85% of the Fair Market Value of a Share on the Grant Date. 5.3.2 Nonqualified Stock Options. In the case of a Nonqualified Stock Option, the Exercise Price may be less than the Fair Market Value of a Share on the Grant Date. 5.3.3 Incentive Stock Options. In the case of an Incentive Stock Option, the Exercise Price shall be not less than one hundred percent (100%) of the Fair Market Value of a Share on the Grant Date; provided, however, that if on the Grant Date, the Employee (together with persons whose stock ownership is attributed to the Employee pursuant to section 424(d) of the Code) owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries, the Exercise Price shall be not less than one hundred ten percent (110%) of the Fair Market Value of a Share on the Grant Date. 5.3.4 Substitute Options. Notwithstanding the provisions of Sections 5.3.1 and 5.3.2, in the event that the Company or an Affiliate consummates a transaction described in section 424(a) of the Code (e.g., the acquisition of property or stock from an unrelated corporation), persons who become Participants on account of such transaction may be granted Options in substitution for options granted by such former employer or recipient of services. If such substitute Options are granted, the Committee, in its sole discretion and consistent with section 424(a) of the Code, may determine that such substitute Options shall have an exercise price less than one hundred (100%) of the Fair Market Value of the Shares on the Grant Date. 5.4 Expiration of Options. 5.4.1 Expiration Dates. Except as provided in Section 5.8 regarding Incentive Stock Options, each Option shall terminate upon the earlier of the first to occur of the following events: (a) The date(s) for termination of the Option set forth in the Award Agreement; or (b) The expiration of ten (10) years from the Grant Date. 5.4.2 Committee Discretion. Subject to the limits of Section 5.4.1, the Committee, in its sole discretion, (a) shall provide in each Award Agreement when each Option expires and becomes unexercisable, and (b) may, after an Option is granted, extend the maximum term of the Option (subject to Section 5.8 regarding Incentive Stock Options). 5.5 Exercisability of Options. Options granted under this Plan shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall determine in its sole discretion. After an Option is granted, the Committee, in its sole discretion, may accelerate the exercisability of the Option. If the Committee provides that any Option is exercisable only in installments, the Committee may at any time waive such installment exercise provisions, in whole or in part, based on such factors as the Committee may determine. 5.6 Termination of Service. Each Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following Termination of Service. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement, need not be uniform among all Options granted under the Plan, and may reflect distinctions based on the reasons for Termination of Service. 5.7 Payment. Options shall be exercised by the Participant's delivery of a written notice of exercise to the Secretary of the Company (or its designee), setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares. Upon the exercise of any Option, the Exercise Price shall be payable to the Company in full in cash or its equivalent. The Committee, in its sole discretion, also may permit exercise (a) by tendering previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the total Exercise Price, or (b) by any other means which the Committee, in its sole discretion, determines (i) to provide legal consideration for the Shares, and (ii) to be consistent with the purposes of this Plan. As soon as practicable after receipt of a written notification of exercise and full payment for the Shares purchased, the Company shall deliver to the Participant (or the Participant's designated broker), Share certificates (which may be in book entry form) representing such Shares. 5.8 Certain Additional Provisions for Incentive Stock Options. 5.8.1 Exercisability. The aggregate Fair Market Value (determined on the Grant Date(s)) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by any Employee during any calendar year (under all plans of the Company and its Subsidiaries) shall not exceed $100,000. 5.8.2 Termination of Service. No Incentive Stock Option may be exercised more than three (3) months after the Participant's Termination of Service for any reason other than Disability or death, unless (a) the Participant dies during such three-month period, and (b) the Award Agreement or the Committee permits later exercise. No Incentive Stock Option may be exercised more than one (1) year after the Participant's termination of employment on account of Disability, unless (a) the Participant dies during such one-year period, and (b) the Award Agreement or the Committee permits later exercise. 5.8.3 Company and Subsidiaries Only. Incentive Stock Options may be granted only to persons who are employees of the Company or a Subsidiary on the Grant Date. 5.8.4 Expiration. No Incentive Stock Option may be exercised after the expiration of ten (10) years from the Grant Date; provided, however, that if the Option is granted to an Employee who, together with persons whose stock ownership is attributed to the Employee pursuant to section 424(d) of the Code, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries, the Option may not be exercised after the expiration of five (5) years from the Grant Date. 5.8.5 Nontransferable. Each Incentive Stock Option shall by its terms not be assignable or transferable other than by will or the laws of descent and distribution and may be exercised, during the Participant's lifetime, only by the Participant; provided, however, that the Participant may, to the extent provided in the Plan in any manner specified by the Committee, designate in writing a beneficiary to exercise his or her Incentive Stock Option after the Participant's death. 5.9 Repricing of Options. The Company may not reprice, replace or regrant an outstanding Option either in connection with the cancellation of such Option or by amending an Award Agreement to lower the Exercise Price of such Option. 5.10 Grant of Reload Options. The Committee may in connection with the grant of an Option, in the Award Agreement, provide that a Participant who (i) is a Participant when he or she exercises an Option (the "Exercised Option"), (ii) has not received a Reload Option (as defined below) within the six (6) months prior to such exercise, and (iii) satisfies the Exercise Price or any required tax withholding applicable thereto with Shares which have been held by the Participant for at least six (6) months, shall automatically be granted, subject to Section 3, an additional Option ("Reload Option") in an amount equal to the sum ("Reload Number") of the number of Shares tendered to exercise the Exercised Option plus, if so provided by the Committee, the number of Shares, if any, retained by the Company in connection with the exercise of the Exercised Option to satisfy any federal, state or local tax withholding requirements; provided that no Reload Option shall be granted in connection with the exercise of an Option that has been transferred by the initial Participant thereof. All Reload Options shall be Nonqualified Stock Options. 5.11 Conditions on Reload Options. Reload Options shall be subject to the following terms and conditions: (a) The Grant Date for each Reload Option shall be the date of exercise of the Exercised Option to which it relates. (b) Unless otherwise determined by the Committee, the Reload Option shall be fully vested and may be exercised at any time during the remaining term of the Exercised Option (subject to earlier termination thereof as provided in the Plan or in the applicable Award Agreement). (c) Unless otherwise determined by the Committee, the terms of the Reload Option shall be the same as the terms of the Exercised Option to which it relates, except that the Exercise Price for the Reload Option shall, in every case, be 100% of the Fair Market Value of a Share on the Grant Date of the Reload Option. (d) Each Award Agreement shall state whether the Committee has authorized Reload Options with respect to the underlying Stock Options. Upon the exercise of an Underlying Stock Option or other Reload Option, the Reload Option will be evidenced by an amendment to the underlying Award Agreement or a new Award Agreement. (e) No additional Reload Options shall be granted to Participants when Stock Options and/or Reload Options are exercised pursuant to the terms of this Plan following Termination of Service with the Company or a Subsidiary. SECTION 6 STOCK APPRECIATION RIGHTS 6.1 Grant of SARs. Subject to the terms and conditions of this Plan, an SAR may be granted to Participants at any time and from time to time as shall be determined by the Committee, in its sole discretion. The Committee may grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination thereof. 6.1.1 Number of Shares. The Committee shall have complete discretion to determine the number of SARs granted to any Participant, provided that during any Fiscal Year, no Participant shall be granted SARs covering more than 500,000 Shares. 6.1.2 Exercise Price and Other Terms. The Committee, subject to the provisions of this Plan, shall have complete discretion to determine the terms and conditions of SARs granted under this Plan; provided, however, that the exercise price of a Freestanding SAR shall be not less than one hundred percent (100%) of the Fair Market Value of a Share on the Grant Date. The exercise price of Tandem or Affiliated SARs shall equal the Exercise Price of the related Option. 6.2 Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable. With respect to a Tandem SAR granted in connection with an Incentive Stock Option: (a) the Tandem SAR shall expire no later than the expiration of the underlying Incentive Stock Option; (b) the value of the payout with respect to the Tandem SAR shall be for no more than one hundred percent (100%) of the difference between the Exercise Price of the underlying Incentive Stock Option and the Fair Market Value of the Shares subject to the underlying Incentive Stock Option at the time the Tandem SAR is exercised; and (c) the Tandem SAR shall be exercisable only when the Fair Market Value of the Shares subject to the Incentive Stock Option exceeds the Exercise Price of the Incentive Stock Option. 6.3 Exercise of Affiliated SARs. An Affiliated SAR shall be deemed to be exercised upon the exercise of the related Option. The deemed exercise of an Affiliated SAR shall not necessitate a reduction in the number of Shares subject to the related Option. 6.4 Exercise of Freestanding SARs. Freestanding SARs shall be exercisable on such terms and conditions as the Committee, in its sole discretion, shall determine. 6.5 SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement that shall specify the exercise price, the term of the SAR, the conditions of exercise, and such other terms and conditions as the Committee, in its sole discretion, shall determine. 6.6 Expiration of SARs. An SAR granted under this Plan shall expire upon the date determined by the Committee, in its sole discretion, as set forth in the Award Agreement. Notwithstanding the foregoing, the terms and provisions of Section 5.4 also shall apply to SARs. 6.7 Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying: (a) The positive difference between the Fair Market Value of a Share on the date of exercise over the exercise price; by (b) The number of Shares with respect to which the SAR is exercised. At the sole discretion of the Committee, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in any combination thereof. SECTION 7 RESTRICTED STOCK 7.1 Grant of Restricted Stock. Subject to the terms and provisions of this Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock to Participants in such amounts as the Committee, in its sole discretion, shall determine. The Committee, in its sole discretion, shall determine the number of Shares to be granted to each Participant; provided, however, that during any Fiscal Year, no Participant shall receive more than 500,000 Shares of Restricted Stock. The Committee shall determine the amount, if any, that a Participant shall pay for Restricted Stock, subject to applicable requirements of the Delaware General Corporation Law. Restricted Stock which is awarded to a Participant as an incentive for such Participant to remain employed by the Company shall have a minimum three year Period of Restriction. Restricted Stock awarded to a Participant as an incentive for such Participant's performance as an employee shall have a minimum one year Period of Restriction. 7.2 Restricted Stock Agreement. Each Award of Restricted Stock shall be evidenced by an Award Agreement that shall specify the Period of Restriction, the number of Shares granted, and such other terms and conditions as the Committee, in its sole discretion, shall determine. Unless the Committee, in its sole discretion, determines otherwise, Shares of Restricted Stock shall be held by the Company as escrow agent until the end of the applicable Period of Restriction. 7.3 Transferability. Except as otherwise determined by the Committee, in its sole discretion, Shares of Restricted Stock may not be sold, transferred, gifted, bequeathed, pledged, assigned, or otherwise alienated or hypothecated, voluntarily or involuntarily, until the end of the applicable Period of Restriction. 7.4 Other Restrictions. The Committee, in its sole discretion, may impose such other restrictions on Shares of Restricted Stock as it may deem advisable or appropriate in accordance with this Section 7.4. 7.4.1 General Restrictions. The Committee may set restrictions based upon (a) the achievement of specific performance objectives (Company-wide, divisional or individual), (b) applicable Federal or state securities laws, or (c) any other basis determined by the Committee in its sole discretion. 7.4.2 Section 162(m) Performance Restrictions. For purposes of qualifying grants of Restricted _ Stock as _ "performance-based compensation" under section 162(m) of the Code, the Committee, in its sole discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals shall be set by the Committee on or before the latest date permissible to enable the Restricted Stock to qualify as "performance-based compensation" under section 162(m) of the Code. In granting Restricted Stock that is intended to qualify under Code section 162(m), the Committee shall follow any procedures determined by it in its sole discretion from time to time to be necessary, advisable or appropriate to ensure qualification of the Restricted Stock under Code section 162(m) (e.g., in determining the Performance Goals). 7.4.3 Legend on Certificates. The Committee, in its sole discretion, may legend the certificates representing Restricted Stock to give appropriate notice of such restrictions. For example, the Committee may determine that some or all certificates representing Shares of Restricted Stock shall bear the following legend: "THE SALE OR OTHER TRANSFER OF THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE, WHETHER VOLUNTARY, INVOLUNTARY, OR BY OPERATION OF LAW, IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN THE AMERICAN ITALIAN PASTA COMPANY 2001 EQUITY INCENTIVE PLAN, AND IN A RESTRICTED STOCK AGREEMENT. A COPY OF THIS PLAN AND SUCH RESTRICTED STOCK AGREEMENT MAY BE OBTAINED FROM THE SECRETARY OF AMERICAN ITALIAN PASTA COMPANY." 7.5 Removal of Restrictions. Except as otherwise provided in this Section 7, Shares of Restricted Stock covered by each Restricted Stock grant made under this Plan shall be released from escrow as soon as practicable after the end of the applicable Period of Restriction. The Committee, in its sole discretion, may accelerate the time at which any restrictions shall lapse and remove any restrictions. After the end of the applicable Period of Restriction, the Participant shall be entitled to have any legend or legends under Section 7.4.3 removed from his or her Share certificate, and the Shares shall be freely transferable by the Participant. 7.6 Voting Rights. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the applicable Award Agreement provides otherwise. 7.7 Dividends and Other Distributions. During the Period of Restriction, Participants holding Shares of Restricted Stock shall be entitled to receive all dividends and other distributions paid with respect to such Shares unless otherwise provided in the applicable Award Agreement. If any such dividends or distributions are paid in Shares, the Shares shall be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid. 7.8 Return of Restricted Stock to Company. On the date set forth in the applicable Award Agreement, the Restricted Stock for which restrictions have not lapsed shall revert to the Company and thereafter shall be available for grant under this Plan. 7.9 Termination of Service. Each Restricted Stock Award Agreement shall set forth the extent to which the Participant shall have the right to receive unvested Restricted Stock following his or her Termination of Service. Such provision shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Restricted Stock issued pursuant to the Plan and may reflect distinctions based on the reasons for termination. SECTION 8 PERFORMANCE UNITS AND PERFORMANCE SHARES 8.1 Grant of Performance Units/Shares. Performance Units and Performance Shares may be granted to Participants at any time and from time to time, as shall be determined by the Committee, in its sole discretion. The Committee shall have complete discretion in determining the number of Performance Units and Performance Shares granted to each Participant; provided, however, that during any Fiscal Year, (a) no Participant shall receive Performance Units having an initial value greater than the value of 250,000 Shares, and (b) no Participant shall receive more than 250,000 Performance Shares. 8.2 Value of Performance Units/Shares. Each Performance Unit shall have an initial value that is established by the Committee on or before the Grant Date. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the Grant Date. 8.3 Performance Objectives and Other Terms. The Committee shall set performance objectives in its sole discretion which, depending on the extent to which they are met, will determine the number or value of Performance Units or Performance Shares, or both, that will be paid out to the Participants. The time period during which the performance objectives must be met shall be called the "Performance Period". Each Award of Performance Units or Performance Shares shall be evidenced by an Award Agreement that shall specify the Performance Period, and such other terms and conditions as the Committee, in its sole discretion, shall determine. A Performance Period may not be less than one year. 8.3.1 General Performance Objectives. The Committee may set performance objectives based upon (a) the achievement of Company-wide, divisional or individual goals, (b) applicable Federal or state securities laws, or (c) any other basis determined by the Committee in its discretion. 8.3.2 Section 162(m) Performance Objectives. For purposes of qualifying grants of Performance Units or Performance Shares as "performance-based compensation" under section 162(m) of the Code, the Committee, in its sole discretion, may determine that the performance objectives applicable to Performance Units or Performance Shares, as the case may be, shall be based on the achievement of Performance Goals. The Performance Goals shall be set by the Committee on or before the latest date permissible to enable the Performance Units or Performance Shares, as the case may be, to qualify as "performance-based compensation" under section 162(m) of the Code. In granting Performance Units or Performance Shares which are intended to qualify under Code section 162(m), the Committee shall follow any procedures determined by it from time to time to be necessary or appropriate in its sole discretion to ensure qualification of the Performance Units or Performance Shares, as the case may be, under Code section 162(m) (e.g., in determining the Performance Goals). 8.4 Earning of Performance Units/Shares. After the applicable Performance Period has ended, the holder of Performance Units or Performance Shares shall be entitled to receive a payout of the number of Performance Units or Performance Shares, as the case may be, earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance objectives have been achieved. After the grant of a Performance Unit or Performance Share, the Committee, in its sole discretion, may reduce or waive any performance objectives for such Performance Unit or Performance Share. 8.5 Form and Timing of Payment of Performance Units/Shares. Payment of earned Performance Units or Performance Shares shall be made as soon as practicable after the end of the applicable Performance Period. The Committee, in its sole discretion, may pay earned Performance Units or Performance Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Performance Units or Performance Shares, as the case may be, at the end of the applicable Performance Period), or in any combination thereof. 8.6 Cancellation of Performance Units/Shares. On the earlier of the date set forth in the Award Agreement or the Participant's Termination of Service (other than by death, Disability or, with respect to an Employee, Retirement), all unearned or unvested Performance Units or Performance Shares shall be forfeited to the Company, and thereafter shall be available for grant under this Plan. In the event of a Participant's death, Disability or, with respect to an Employee, Retirement, prior to the end of a Performance Period, the Committee shall reduce his or her Performance Units or Performance Shares proportionately based on the date of such Termination of Service. SECTION 9 MISCELLANEOUS 9.1 Deferrals. The Committee, in its sole discretion, may permit a Participant to defer receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant under an Award. Any such deferral election shall be subject to such rules and procedures as shall be determined by the Committee in its sole discretion. 9.2 No Effect on Employment or Service. Nothing in this Plan shall interfere with or limit in any way the right of the Company to terminate any Participant's employment or service at any time, with or without Cause. For purposes of this Plan, transfer of employment of a Participant between the Company and any of its Affiliates (or between Affiliates) shall not be deemed a Termination of Service. Employment or secure relationship with the Company and its Affiliates is on an at-will basis only, unless otherwise provided by an applicable written employment or service agreement between the Participant and the Company or its Affiliate, as the case may be. 9.3 Participation. No Participant shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award. 9.4 Indemnification. Each person who is or shall have been a member of the Committee, or of the Board, shall be indemnified and held harmless by the Company against and from (a) any loss, cost, liability or expense (including attorneys' fees) that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under this Plan or any Award Agreement, and (b) from any and all amounts paid by him or her in settlement thereof, with the Company's prior written approval, or paid by him or her in satisfaction of any judgment in any such claim, action, suit or proceeding against him or her; provided, however, that he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Certificate of Incorporation or Bylaws, by contract, as a matter of law or otherwise, or under any power that the Company may have to indemnify them or hold them harmless. 9.5 Successors. All obligations of the Company under this Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the business or assets of the Company. 9.6 Beneficiary Designations. If permitted by the Committee, a Participant under this Plan may name a beneficiary or beneficiaries to whom any vested but unpaid Award shall be paid in the event of the Participant's death. Each such designation shall revoke all prior designations by the Participant and shall be effective only if given in a form and manner acceptable to the Committee. In the absence of any such designation, any vested benefits remaining unpaid at the Participant's death shall be paid to the Participant's estate and, subject to the terms of this Plan and of the applicable Award Agreement, any unexercised vested Award may be exercised by the administrator or executor of the Participant's estate. 9.7 Transferability of Awards. Unless otherwise provided by the Committee in an Award Agreement, no Award granted under this Plan may be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will, by the laws of descent and distribution, or to the limited extent provided in Section 9.6. 9.8 No Rights as Stockholder. Except to the limited extent provided in Sections 7.6 and 7.7, no Participant (nor any beneficiary thereof) shall have any of the rights or privileges of a stockholder of the Company with respect to any Shares issuable pursuant to an Award (or the exercise thereof), unless and until certificates representing such Shares shall have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to the Participant (or his or her beneficiary). SECTION 10 AMENDMENT, TERMINATION AND DURATION 10.1 Amendment, Suspension, or Termination. The Board, in its sole discretion, may amend or terminate this Plan, or any part thereof, at any time and for any reason; provided, however, that the Board will obtain stockholder approval for any amendment which materially increases the number of Shares which may be delivered to Participants under this Plan, materially changes the categories of Participants who may participate in this Plan, and any other amendment which would require stockholder approval pursuant to the rules of the New York Stock Exchange, any other applicable national security exchange, or any applicable laws or regulations. 10.2 No Award may be granted during any period of suspension or after termination of this Plan. 10.3 Duration of this Plan. This Plan shall become effective on the date specified herein, and subject to Section 10.1 (regarding the Board's right to amend or terminate this Plan), shall remain in effect thereafter; provided, however, that without further stockholder approval, no Incentive Stock Option may be granted under this Plan after the tenth anniversary of the effective date of this Plan. SECTION 11 TAX WITHHOLDING 11.1 Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to an Award (or the exercise thereof), the Company shall have the power and the right to deduct or withhold from any amounts due to the Participant from the Company, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state and local taxes (including the Participant's FICA obligation) required to be withheld with respect to such Award (or the exercise thereof). 11.2 Withholding Arrangements. The Committee, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part, by (a) electing to have the Company withhold otherwise deliverable Shares, or (b) delivering to the Company Shares then owned by the Participant having a Fair Market Value equal to the amount required to be withheld. The amount of the withholding requirement shall be deemed to include any amount that the Committee agrees may be withheld at the time any such election is made, not to exceed the amount determined by using the maximum federal, state or local marginal income tax rates applicable to the Participant with respect to the Award on the date that the amount of tax to be withheld is to be determined. The Fair Market Value of the Shares to be withheld or delivered shall be determined as of the date that the taxes are required to be withheld. 11.3 Notification under Code section 83(b). If the Participant, in connection with the exercise of any Option, or the grant of Restricted Stock, makes the election permitted under section 83(b) of the Code to include in such Participant's gross income in the year of transfer the amounts specified in section 83(b) of the Code, then such Participant shall notify the Company of such election within 10 days after filing the notice of the election with the Internal Revenue Service, in addition to any filing and notification required pursuant to regulations issued under section 83(b) of the Code. The Committee may, in connection with the grant of an Award or at any time thereafter, prohibit a Participant from making the election described above. SECTION 12 CHANGE IN CONTROL 12.1 Change in Control. In the event of a Change in Control of the Company, all Awards granted under this Plan that then are outstanding and not then exercisable or are subject to restrictions, shall, except as provided in Section 12.2, or unless otherwise provided for in the Award Agreements applicable thereto, become immediately exercisable, and all restrictions shall be removed, as of the first date that the Change in Control has been deemed to have occurred, and shall remain as such for the remaining life of the Award as provided herein and within the provisions of the related Award Agreements. Notwithstanding the preceding sentence, in the event that the Committee is advised by the Company's independent auditors that the effect of the preceding sentence would be to preclude the ability of the Company to account for an acquisition or merger transaction as a pooling of interests, the Committee may declare the preceding sentence to be inoperable to such extent as the Committee, in its sole discretion, deems advisable. 12.2 Adjustments upon Merger or Asset Sale. In the event of a Change in Control under Section 12.3(c) or (d)(ii) (a "Section 12.2 Event") and the successor corporation does not either (i) assume each outstanding Award or (ii) substitute an equivalent award by the successor corporation or a Parent or Subsidiary of the successor corporation, then the Award shall fully vest and become immediately exercisable and the Committee shall notify the Participant that the Award shall be exercisable for a period of twenty-five (25) days from the date of such notice, and the Award shall terminate upon the expiration of such period unless exercised. For the purposes of this paragraph, the Award shall be considered assumed if, following the Section 10.2 Event, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Section 12.2 Event, equal consideration (whether stock, cash, or other securities or property) as received in the Section 12.2 Event by holders of each Share of common stock held on the effective date of the transaction (and if holders of Shares were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Section 12.2 Event was not solely common stock of the successor corporation or its Parent, the Committee may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Award, for each Share subject to the award, to be cash and/or other securities equal in fair market value to the per share consideration received by holders of common stock in the merger or sale of assets. 12.3 Definition. For purposes of this Section 12, a Change in Control of the Company shall be deemed to have occurred if the conditions set forth in any one or more of the following shall have been satisfied, unless such condition shall have received prior approval of a majority vote of the Continuing Directors, as defined below, indicating that this Section 12 shall not apply thereto: (a) any "person", as such term is used in Sections 13(d) and 14(d) of the 1934 Act (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "beneficial owner" (as defined in Rule 13(d)(3) under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the Company's then outstanding securities or 51% or more of the combined voting power of the Company's then outstanding securities; (b) during any period of two consecutive years (not including any period prior to the Effective Date of this Plan), individuals ("Existing Directors") who at the beginning of such period constitute the Board of Directors, and any new board member (an "Approved Director") (other than a board member designated by a person who has entered into an agreement with the Company to effect a transaction described in paragraph (a), (b) or (c) of this Section 12.3) whose election by the Board of Directors or nomination for election by the Company's shareholders was approved by a vote of a least two-thirds (2/3) of the board members then still in office who either were board members at the beginning of the period or whose election or nomination for election previously was so approved (Existing Directors together with Approved Directors constituting "Continuing Directors"), cease for any reason to constitute at least a majority of the Board of Directors; or (c) the consummation of the merger or consolidation of the Company with any other corporation, other than a merger with a wholly-owned subsidiary, the sale of substantially all of the assets of the Company, or the liquidation or dissolution of the Company, unless, in the case of a merger or consolidation, (x) the directors in office immediately prior to such merger or consolidation will constitute at least majority of the Board of the surviving corporation of such merger or consolidation and any parent (as such term is defined in Rule 12b-2 under the Exchange Act) of such corporation, or (y) the voting securities of the Company outstanding immediately prior thereto represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 66-2/3% of the combined voting power of the voting securities of the Company or such surviving entity and are owned by all or substantially all of the persons who were the holders of the voting securities of the Company immediately prior to the transaction in substantially the same proportions as such holders owned such voting securities immediately prior to the transaction; or (d) the stockholders of the Company approve (i) a plan of complete liquidation of the Company or (ii) an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets (or any transaction having a similar effect). SECTION 13 LEGAL CONSTRUCTION 13.1 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural. 13.2 Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included. 13.3 Requirements of Law. The grant of Awards and the issuance of Shares under this Plan shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required from time to time. 13.4 Securities Law Compliance. With respect to Section 16 Persons, Awards under this Plan are intended to comply with all applicable conditions of Rule 16b-3. To the extent any provision of this Plan, Award Agreement or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable or appropriate by the Committee in its sole discretion. 13.5 Governing Law. This Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the State of Delaware (excluding its conflict of laws provisions). 13.6 Captions. Captions are provided herein for convenience of reference only, and shall not serve as a basis for interpretation or construction of this Plan. Adopted December 12, 2000 -----END PRIVACY-ENHANCED MESSAGE-----