EXHIBIT 2.1
AGREEMENT AND PLAN OF
REORGANIZATION AND MERGER
By and Between
AURORA FOODS INC.
and
CRUNCH EQUITY HOLDING, LLC
Dated as of November 25, 2003
TABLE OF CONTENTS
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ARTICLE I RESTRUCTURING.......................................................................................... 2
Section 1.1 Restructuring............................................................ 2
ARTICLE II ALLOCATION OF EQUITY AMONG THE BONDHOLDERS............................................................ 4
Section 2.1 Equity Election Procedure................................................ 4
Section 2.2 Subscription Rights...................................................... 5
ARTICLE III THE MERGER........................................................................................... 7
Section 3.1 Merger; Surviving Corporation............................................ 7
Section 3.2 Effective Time........................................................... 7
Section 3.3 Effects of the Merger.................................................... 7
Section 3.4 Certificate of Incorporation and Bylaws.................................. 8
Section 3.5 Directors and Officers................................................... 8
Section 3.6 Definitions Relating to the Merger and Adjustments....................... 8
Section 3.7 Rights in Respect of Sub Debt and Class A Units.......................... 12
Section 3.8 Payment.................................................................. 12
Section 3.9 Exchange of Certificates................................................. 14
Section 3.10 Tax Effects of Reorganization Transactions............................... 14
ARTICLE IV POST-CLOSING ADJUSTMENTS.............................................................................. 15
Section 4.1 Adjustment to Merger Consideration....................................... 15
Section 4.2 Post-Closing Adjustment.................................................. 16
ARTICLE V THE CLOSING 17
Section 5.1 The Closing.............................................................. 17
Section 5.2 Deliveries............................................................... 17
Section 5.3 Initial EBITDA Calculation............................................... 18
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................................... 19
Section 6.1 Organization; Subsidiaries............................................... 20
Section 6.2 Due Authorization........................................................ 21
Section 6.3 Capitalization........................................................... 21
Section 6.4 SEC Reports.............................................................. 22
Section 6.5 Financial Statements..................................................... 22
Section 6.6 Absence of Certain Changes............................................... 22
Section 6.7 Litigation............................................................... 23
Section 6.8 Consents and Approvals................................................... 23
Section 6.9 Noncontravention......................................................... 24
Section 6.10 Compliance with Laws..................................................... 24
Section 6.11 Company Material Contracts............................................... 24
Section 6.12 Financial Advisory, Legal and Other Fees................................. 26
Section 6.13 ERISA Compliance......................................................... 26
Section 6.14 Intellectual Property.................................................... 27
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Section 6.15 Taxes.................................................................... 28
Section 6.16 Properties............................................................... 30
Section 6.17 Environmental Matters.................................................... 31
Section 6.18 Affiliate Transactions................................................... 31
Section 6.19 Labor Relations.......................................................... 32
Section 6.20 Certain Business Practices............................................... 32
Section 6.21 Insurance................................................................ 32
Section 6.22 State Takeover Statutes.................................................. 32
Section 6.23 Product Recalls.......................................................... 33
ARTICLE VII REPRESENTATIONS AND WARRANTIES REGARDING PINNACLE.................................................... 33
Section 7.1 Organization............................................................. 33
Section 7.2 Capitalization; Subsidiaries............................................. 34
Section 7.3 Financial Statements..................................................... 34
Section 7.4 Absence of Certain Changes............................................... 35
Section 7.5 Litigation............................................................... 35
Section 7.6 Consents and Approvals................................................... 35
Section 7.7 Noncontravention......................................................... 36
Section 7.8 Compliance with Laws..................................................... 36
Section 7.9 Pinnacle Material Contracts.............................................. 36
Section 7.10 ERISA Compliance; Labor.................................................. 38
Section 7.11 Intellectual Property.................................................... 39
Section 7.12 Taxes.................................................................... 40
Section 7.13 Properties............................................................... 42
Section 7.14 Environmental Matters.................................................... 43
Section 7.15 Affiliate Transactions................................................... 43
Section 7.16 Insurance................................................................ 43
Section 7.17 Product Recalls.......................................................... 44
ARTICLE VIII REPRESENTATIONS AND WARRANTIES OF CEH LLC........................................................... 44
Section 8.1 Organization............................................................. 44
Section 8.2 Due Authorization........................................................ 44
Section 8.3 Non-Contravention........................................................ 44
Section 8.4 Litigation............................................................... 45
Section 8.5 Consents and Approvals................................................... 45
Section 8.6 Financing................................................................ 46
Section 8.7 Ownership of Holding and Pinnacle........................................ 46
Section 8.8 Financial Advisory, Legal and Other Fees................................. 46
Section 8.9 Beneficial Ownership..................................................... 46
Section 8.10 Capitalization; Subsidiaries............................................. 46
Section 8.11 No Preemptive Rights..................................................... 47
Section 8.12 No Activity.............................................................. 47
ARTICLE IX COVENANTS OF THE COMPANY.............................................................................. 47
Section 9.1 Conduct of Business Pending Closing...................................... 47
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Section 9.2 Directors' and Officers' Indemnification and Insurance................... 50
Section 9.3 No Solicitation of Alternative Proposals................................. 51
Section 9.4 Access to Information.................................................... 52
Section 9.5 Consents................................................................. 53
Section 9.6 Agreements with Five Percent Holders..................................... 53
Section 9.7 Releases................................................................. 53
Section 9.8 Notification of Certain Matters.......................................... 53
Section 9.9 Assistance with the Financing............................................ 53
Section 9.10 Closing Fee; Expenses.................................................... 53
Section 9.11 Invoices for Professional Services....................................... 54
Section 9.12 Pinnacle-Aurora Merger Agreement......................................... 54
Section 9.13 Voting Agent; Exchange Agent............................................. 54
ARTICLE X COVENANTS OF CEH LLC................................................................................... 54
Section 10.1 Conduct of Business Pending Closing...................................... 54
Section 10.2 Consents................................................................. 55
Section 10.3 Debt Commitment Letter................................................... 55
Section 10.4 Access to Information.................................................... 55
Section 10.5 Approval of Bankruptcy Plan.............................................. 56
Section 10.6 Notification of Certain Matters.......................................... 56
Section 10.7 Pinnacle-Aurora Merger Agreement......................................... 57
Section 10.8 Equity Contribution...................................................... 57
Section 10.9 Financial Reports........................................................ 57
Section 10.10 No Activity.............................................................. 57
ARTICLE XI CONDITIONS............................................................................................ 57
Section 11.1 Conditions to Each Party's Obligations................................... 57
Section 11.2 Conditions to the Obligations of CEH LLC................................. 58
Section 11.3 Conditions to the Obligations of the Company............................. 59
ARTICLE XII TERMINATION.......................................................................................... 60
Section 12.1 Termination.............................................................. 60
Section 12.2 Fees and Expenses........................................................ 61
ARTICLE XIII NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND CERTAIN COVENANTS; NATURE OF REMEDIES............. 62
ARTICLE XIV CERTAIN DEFINITIONS.................................................................................. 63
Section 14.1 Certain Definitions...................................................... 63
ARTICLE XV MISCELLANEOUS......................................................................................... 80
Section 15.1 Governing Law............................................................ 80
Section 15.2 Jurisdiction; Forum; Service of Process; Waiver of Jury.................. 80
Section 15.3 Successors and Assigns................................................... 81
Section 15.4 Entire Agreement; Amendment.............................................. 81
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Section 15.5 Notices.................................................................. 81
Section 15.6 Delays or Omissions...................................................... 84
Section 15.7 Counterparts............................................................. 84
Section 15.8 Severability............................................................. 84
Section 15.9 Titles and Subtitles..................................................... 84
Section 15.10 Acknowledgment........................................................... 84
Section 15.11 No Public Announcement................................................... 85
Section 15.12 Further Actions; Reasonable Best Efforts................................. 85
Section 15.13 Interpretation........................................................... 86
Section 15.14 Satisfaction with Bondholder Trust....................................... 86
Section 15.15 Conditions Precedent to Effectiveness of This Agreement.................. 86
Section 15.16 Notice Regarding Pinnacle Lenders........................................ 87
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EXHIBIT INDEX
Exhibit A -- Break-Up Payment Order
Exhibit B -- DIP Financing Commitment Letters
Exhibit C -- Break-Up Payment Claim Order
Exhibit D -- Certificate of Incorporation and Bylaws
Exhibit E -- Debt Commitment Letters
Exhibit F -- Equity Commitment Letter
Exhibit G -- Agreement Effectiveness Notice
Exhibit H -- CEH LLC Members Agreement
Exhibit I -- CEH LLC Operating Agreement
Exhibit J -- Indemnity Agreement
Exhibit K -- Pinnacle-Aurora Merger Agreement
Exhibit L -- Termination Agreement
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AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
THIS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER (this
"Agreement"), dated as of November 25, 2003, is made by and between Aurora Foods
Inc., a Delaware corporation (the "Company" or "Aurora"), and Crunch Equity
Holding, LLC, a Delaware limited liability company ("CEH LLC"). Capitalized
terms used but not otherwise defined herein shall have the meanings assigned to
them in Section 3.6 and Article XIV hereof.
WHEREAS, the Company and ▇.▇. Childs Equity Partners III, L.P.
("JWC") are party to that certain Stock Purchase Agreement (the "Original SPA"),
dated as of July 11, 2003, pursuant to which the Company and JWC agreed to
effect a series of transactions that would constitute a capital restructuring of
the Company, subject to the terms and conditions contained therein;
WHEREAS, Crunch Holding Corp., a Delaware corporation ("Holding"),
is party to that certain Agreement and Plan of Merger (the "Pinnacle Merger
Agreement"), dated as of August 8, 2003, among Pinnacle Foods Holding
Corporation ("Pinnacle"), Holding and Crunch Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of Holding ("Acquisition"), pursuant to
which Acquisition will merge with and into Pinnacle (the "Pinnacle Merger") and
Pinnacle will become a wholly-owned subsidiary of Holding, subject to the terms
and conditions contained therein;
WHEREAS, on October 13, 2003, the Company, ▇.▇. ▇▇▇▇▇▇ Partners, LLC
("JPMP"), JWC, C. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ and Co. ("CDM") and the Informal Bondholder
Committee of Aurora (the "Informal Committee") entered into a Letter of Intent
(the "Letter of Intent") with regard to the capital restructuring of the
Company, pursuant to which the parties agreed to negotiate in good faith with a
view towards (i) amending and restating the Original SPA by entering into this
Agreement and (ii) providing for a combination of the businesses of Pinnacle and
Aurora;
WHEREAS, (a) CEH LLC was formed by JWC, JPMP and CDM for purposes of
making their respective investments in Pinnacle and Aurora, (b) Holding is a
wholly-owned subsidiary of CEH LLC, and (c) upon consummation of the Pinnacle
Merger, Pinnacle will be a wholly-owned subsidiary of Holding;
WHEREAS, as contemplated by the Letter of Intent, CEH LLC desires to
cause its indirect wholly-owned subsidiary Pinnacle to merge with and into
Aurora (the "Merger") and to make a cash investment in the Company via the
Merger, on the terms and conditions set forth herein;
WHEREAS, the parties desire to effectuate the capital restructuring
and investment contemplated herein in the context of a voluntary case commenced
by Aurora pursuant to Chapter 11 of the Bankruptcy Code, and pursuant to the
Bankruptcy Plan and the Disclosure Statement (as each term is defined below)
relating thereto; and
WHEREAS, the Company desires to effectuate its capital restructuring
on the terms and conditions contained in this Agreement and pursuant to the
Bankruptcy Plan.
NOW, THEREFORE, subject to Section 15.15 of this Agreement, in
consideration of the mutual covenants, agreements, representations and
warranties contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound hereby, hereby agree as follows:
ARTICLE I
RESTRUCTURING
Section 1.1 Restructuring.
(a) The Company, Sea Coast and CEH LLC shall use their
reasonable best efforts to effectuate the Restructuring. In furtherance of and
without limiting the generality of the foregoing, the Company and Sea Coast
shall contemporaneously with the Agreement Effective Date commence a Bankruptcy
Case and propose and file with the Bankruptcy Court the following:
(i) a plan of reorganization under Chapter 11 of the
Bankruptcy Code in a form reasonably acceptable to CEH LLC and the
Designated Representative (the "Bankruptcy Plan");
(ii) a disclosure statement in a form reasonably
acceptable to CEH LLC and the Designated Representative (the "Disclosure
Statement");
(iii) a motion (the "Break-Up Payment Motion") for
approval of the Break-Up Payment as an Administrative Claim in the
Bankruptcy Case together with all necessary supporting papers and the
proposed order substantially in the form attached hereto as Exhibit A (the
"Break-Up Payment Order"); and
(iv) first day orders in a form reasonably acceptable to
CEH LLC and the Designated Representative, which shall include an interim
order approving the DIP Facility (the "First Day Orders" and together with
the Break-Up Payment Order, the "Orders").
Upon commencement of the Bankruptcy Case, the Company and Sea Coast shall
promptly seek to obtain the Confirmation Order with respect to the Bankruptcy
Plan, the Other First Day Orders and the Break-Up Payment Order.
(b) Intent of the Restructuring. Subject to the specific terms
and conditions of the Bankruptcy Plan, the parties hereto agree that the intent
of the Restructuring is as follows:
(i) the Existing Credit Facility shall be paid in full,
including the Bank Fees and any Paid Default Interest;
(ii) the Lenders shall have waived any right to the
Asset Sale Fee and Excess Leverage Fee (each as defined in the Existing
Credit Facility) payable
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under the Existing Credit Facility in excess of $15 million (such $15
million, the "Bank Fees") and any default interest under the Existing
Credit Facility other than Paid Default Interest, subject to consummation
of the Restructuring on or prior to March 31, 2004, in accordance with the
terms of the Existing Credit Facility, as amended on October 9, 2003;
(iii) the Receivables Facility shall be terminated in
accordance with its terms;
(iv) the holders of the Senior Notes shall be repaid in
full (less the original issue discount from the par value of such Senior
Notes in the amount of $1.9 million);
(v) the debtor-in-possession facility (the "DIP
Facility") described in the commitment letters attached hereto as Exhibit
B shall be paid in full;
(vi) in exchange for its rights in the Sub Debt and
other claims, each of the Bondholders shall be entitled to:
(A) the Cash Election which will be valued at
$0.50 per each dollar of principal face amount of Sub Debt, or
(B) (i) the Equity Election, which will be valued
at approximately $0.53 per each dollar of principal face amount of
Sub Debt, subject to adjustment, (ii) the Cash-Out Subscription
Right and (iii) the Make-Up Subscription Right.
Each Bondholder shall receive the Sub Debt Cash Consideration unless such
Bondholder validly elects to receive Bondholder Trust Interests pursuant
to an Equity Election in accordance with Section 2.1; provided, however,
that pursuant to Section 2.1(d) hereof, no more than 50% of the aggregate
principal face amount of the Sub Debt may be subject to Cash Elections;
(vii) all other claims against the Company shall be
unimpaired (provided that, the Company shall reject the St. Louis Leases
and, to the extent CEH LLC, the Company and the Designated Representative
agree, the Bankruptcy Plan may impair Litigation claims);
(viii) all of the outstanding shares of Common Stock and
Series A Preferred, together with all rights relating to the purchase and
sale thereof (including any options or warrants) will be cancelled with no
further rights or obligations relating thereto; and
(ix) to the extent that the Company has cash balances in
excess of $25 million after all distributions have been made and reserves,
if any, funded pursuant to the Bankruptcy Plan (excluding any amounts
received from Make-Up Subscription Amount, which shall be applied only
towards the payment of the Bank Fees and Paid
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Default Interest), the Company shall use the amount of such excess to
further reduce the principal amount of the Pinnacle Senior Credit
Facility.
(c) Prior to the consummation of the Merger, CEH LLC intends
to cause Holding to adopt a management stock option plan (the "Holding Option
Plan") providing for the issuance of up to 5% of the fully diluted equity of
Holding, which shall be a time-based and/or performance-based management
incentive plan upon customary terms and conditions.
(d) The Merger will be part of and will be consummated
contemporaneously with the effectiveness of the Bankruptcy Plan.
(e) If this Agreement has been terminated prior to the
commencement of the Bankruptcy Case under circumstances in which CEH LLC is
entitled to the Break-Up Payment, a motion (the "Break-Up Payment Claim Motion")
shall be filed by the Company seeking allowance as an Administrative Claim in
the Bankruptcy Case of CEH LLC's claim for payment of the Break-Up Payment (the
"Allowed Break-Up Payment Claim"), together with all necessary supporting papers
and a proposed order in substantially the form attached hereto as Exhibit C (the
"Break-Up Payment Claim Order") within three (3) Business Days after the
commencement of the Bankruptcy Case. The Company shall take all action
reasonably necessary, including filing any motion, proposed order and supporting
documents, to seek approval from the Bankruptcy Court of the Company's
obligation to pay the Break-Up Payment to CEH LLC as an Administrative Claim in
the Bankruptcy Case.
NOTHING CONTAINED IN THIS AGREEMENT SHALL BE DEEMED TO BE A TENDER OFFER FOR ANY
SECURITIES, A SOLICITATION OF PROXIES OR A SOLICITATION OR OFFER TO SELL OR
EXCHANGE SECURITIES TO ANY PERSON OTHER THAN CEH LLC.
ARTICLE II
ALLOCATION OF EQUITY AMONG THE BONDHOLDERS
Section 2.1 Equity Election Procedure.
(a) Each Bondholder who is, either directly or through a
nominee, trustee or other Person acting in a representative capacity (a "Holder
Representative"), a record holder of Sub Debt (a "Record Date Bondholder") on
the record date (the "Record Date") established pursuant to Rule 3017(d) of the
Federal Rules of Bankruptcy Procedure and any applicable local rules of the
Delaware bankruptcy court, shall receive the Sub Debt Cash Consideration (a
"Cash Election") unless such holder makes an irrevocable election to receive the
Sub Debt Equity Consideration (an "Equity Election") with respect to all of the
Sub Debt then held by such Bondholder on the basis hereinafter set forth.
(b) The Company shall enclose an Election Form and a Trust
Accession Instrument together with the Disclosure Statement and other
solicitation materials distributed to the Record Date Bondholders or their
Holder Representatives. The Election Form shall permit each Bondholder, or such
Bondholder's Holder Representative acting on such Bondholder's behalf, to make
an Equity Election. Except pursuant to Section 2.1(d), an Equity
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Election will be properly made only if the Voting Agent shall have received at
its designated office, by 5:00 p.m. New York City time on the Plan Voting Date,
a properly completed and signed Election Form and Trust Accession Instrument. A
Holder Representative may submit a separate Election Form for each Record Date
Bondholder for whom such Holder Representative acts as a nominee, trustee or in
another representative capacity. Once made, an Equity Election shall be binding
upon such Bondholder and all successors, transferees and assignees thereof, and
may not be revoked, rescinded, amended or superceded by any Person.
(c) The determination of the Company, in its sole discretion,
which it may delegate in whole or in part to the Voting Agent, shall be
conclusive and binding as to whether or not Equity Elections have been timely
and properly made pursuant to this Section 2.1. The Company may, in its sole
discretion, which it may delegate in whole or in part to the Voting Agent,
disregard immaterial defects in any Election Form. The decision of the Company
or Voting Agent in such matters shall be conclusive and binding so long as it
has acted in good faith. Neither the Company nor the Voting Agent shall be under
any obligation to notify any person of any defect in any Election Form submitted
to the Voting Agent.
(d) Notwithstanding the foregoing provisions of this Section
2.1, to the extent that the sum of (x) the aggregate principal face amount of
Sub Debt for which Equity Elections are validly made pursuant to Section 2.1(b)
plus (y) an amount equal to the aggregate amount of Cash-Out Class A Units
validly subscribed for by the Eligible Bondholders divided by the Sub Debt
Cash-Out Value, is less than $200 million (the amount of such difference, an
"Equity Election Shortfall"), each Bondholder who validly made or is deemed to
have made a Cash Election shall be deemed (for all purposes of this Agreement)
to have made (i) an Equity Election with respect to a principal face amount of
such Bondholder's Sub Debt equal to the product of (A) the Equity Election
Shortfall and (B) the quotient of (I) the aggregate principal face amount of Sub
Debt held of record as of the Record Date by such Bondholder (either directly or
through such Bondholder's Holder Representative) over (II) the aggregate
principal face amount of Sub Debt held of record as of the Record Date by all
Bondholders (either directly or through their Holder Representatives) who
validly made or have been deemed to have made Cash Elections and (ii) a Cash
Election with respect to a principal face amount of Sub Debt equal to the
aggregate principal face amount of Sub Debt held of record as of the Record Date
by such Bondholder (either directly or through such Bondholder's Holder
Representative) less the amount in (i).
Section 2.2 Subscription Rights. (a) Each Record Date Bondholder
that validly makes an Equity Election, either directly or through such
Bondholder's Holder Representative (an "Eligible Bondholder"), shall have the
right to subscribe for Bondholder Class A Units (expressed throughout this
Agreement in dollar values) pursuant to a Cash-Out Subscription Right and a
Make-Up Subscription Right, in each case on the terms and conditions set forth
in this Section 2.2
(b) The Company shall enclose a Subscription Election Form
together with the Disclosure Statement and other solicitation materials
distributed to the Record Date Bondholders or their Holder Representatives,
which form shall include: (i) instructions (including examples) for calculating
an Eligible Bondholder's Applicable Percentage; (ii) a good faith estimate of
the amount of the Equity Deficiency; (iii) rights for each Eligible Bondholder
to
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subscribe for (A) an amount of Cash-Out Class A Units equal to the product of
(I) such Eligible Bondholder's Applicable Percentage, (II) the aggregate
principal face amount of the Cashed-Out Sub Debt and (III) the Sub Debt Cash-Out
Value (a "Cash-Out Subscription Right"), and (B) up to an aggregate amount of
Make-Up Class A Units equal to the Equity Deficiency (a "Make-Up Subscription
Right"). All subscriptions described in this Section 2.2(b) will be made
simultaneously with the Closing. The foregoing rights shall by their terms
remain open and exercisable until 5:00 p.m., New York City time, on the Plan
Voting Date (the "Subscription Right Period").
(c) To the extent that the aggregate amount of the Make-Up
Class A Units subscribed for by the Eligible Bondholders pursuant to the Make-Up
Subscription Right exceeds the amount of the Equity Deficiency, each such
Eligible Bondholder's subscription amount pursuant to the Make-Up Subscription
Right shall be equal (for all purposes of this Agreement) to the product of (i)
the amount of the Equity Deficiency and (ii) the quotient of (A) the aggregate
amount of Sub Debt held of record by such Bondholder, either directly or through
such Bondholder's Holder Representative, as of the Record Date, over (B) the
aggregate amount of Sub Debt held by Eligible Bondholders, either directly or
through their Holder Representatives, as of the Record Date who elect to
exercise the Make-Up Subscription Right.
(d) Each Eligible Bondholder shall have the option to exercise
the Cash-Out Subscription Right and Make-Up Subscription Right by delivering an
appropriately completed and signed Subscription Election Form to the Voting
Agent prior to the expiration of the Subscription Right Period. A Holder
Representative may submit a separate Subscription Election Form for each
Eligible Bondholder for whom such holder acts as a nominee, trustee or in
another representative capacity.
(e) The Company shall, by no later than fifteen (15) Business
Days prior to the Closing Date (or such shorter period as may be agreed by the
Company and the Designated Representative), mail a notice (a "Subscription
Payment Notice") to each Eligible Bondholder, or such Bondholder's Holder
Representative, from whom the Company has received a completed and signed
Subscription Election Form setting forth: (i) the anticipated Closing Date; (ii)
a statement of the amount of Cash-Out Class A Units subscribed for by such
Bondholder pursuant to the Cash-Out Subscription Right; and (iii) a statement of
(A) the amount of the Equity Deficiency and (B) the amount of Make-Up Class A
Units subscribed for by such Bondholder pursuant to the Make-Up Subscription
Right. Each applicable Eligible Bondholder shall, by no later than three (3)
Business Days prior to the Closing Date (the "Subscription Payment Deadline"),
(x) with respect to any exercised Make-Up Subscription Right, pay to the
Exchange Agent an amount equal to the amount of the Make-Up Class A Units
specified in the Subscription Payment Notice, and (y) with respect to an
exercised Cash-Out Subscription Right, pay to the Exchange Agent an amount equal
to the amount of the Cash-Out Class A Units specified in the Subscription
Payment Notice. In the event that an Eligible Bondholder's subscription payments
shall not have been received by the Exchange Agent prior to the Subscription
Payment Deadline, such Bondholder's Subscription Acceptance Notice shall be
deemed to have been revoked for all purposes of this Agreement.
(f) To the extent that less than all of the Bondholder Class A
Units subject to subscription pursuant to this Section 2.2 are subscribed for by
the Eligible
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Bondholders, the Pinnacle Equity Sponsors shall subscribe for the remainder of
such Bondholder Class A Units, which subscription shall be made simultaneously
with the Closing and shall otherwise be on the same terms as the subscription
rights provided to the Eligible Bondholders under this Section 2.2, except for
the time of payment. At Closing, the Pinnacle Equity Sponsors shall, if
applicable, (i) with respect to the amount by which the Equity Deficiency
exceeds payments received by the Exchange Agent in respect of the Make-Up Class
A Units pursuant to Section 2.2(e), invest the amount of such excess in Pinnacle
(by way of CEH LLC and Holding), (ii) with respect to the amount by which the
product of (A) the aggregate principal face amount of the Cashed Out Sub Debt
and (B) the Sub Debt Cash-Out Value exceeds payments received by the Exchange
Agent in respect of Cash-Out Class A Units pursuant to Section 2.2(e), invest
the amount of such excess in Pinnacle (by way of CEH LLC and Holding) and (iii)
execute and deliver to the Exchange Agent a Trust Accession Instrument with
respect to such subscription.
ARTICLE III
THE MERGER
Section 3.1 Merger; Surviving Corporation. Upon the terms and
subject to the conditions set forth in this Agreement, at the Effective Time,
CEH LLC shall cause Pinnacle to be merged with and into the Company in
accordance with the terms of, and subject to the conditions set forth in, this
Agreement, the Pinnacle-Aurora Merger Agreement and the DGCL. Following the
Merger, the Company shall continue as the surviving corporation in the Merger
(sometimes hereinafter referred to as the "Reorganized Company") and shall
continue its corporate existence under the laws of the State of Delaware, and
the separate corporate existence of Pinnacle shall cease. Notwithstanding the
foregoing, CEH LLC may, upon written notice to the Company, request, which
request shall be reasonably considered by the Company, that the Merger shall be
accomplished via the merger of the Company with and into Pinnacle or Holding,
and the Company and CEH LLC shall negotiate in good faith to amend this
Agreement to the extent necessary to give effect to any agreed changes.
Section 3.2 Effective Time. As a part of the Closing, the Company
and CEH LLC shall cause the Certificate of Merger to be properly executed and
filed with the Secretary of State of the State of Delaware in accordance with
the terms and conditions of the DGCL and shall take all such other and further
actions as may be required by applicable Law to make the Merger effective as
promptly as practicable. The Merger shall become effective at the time that the
Certificate of Merger is filed with the Secretary of State of the State of
Delaware in accordance with the DGCL or at such later date and time as is
specified in the Certificate of Merger (such time and date being referred to
herein as the "Effective Time").
Section 3.3 Effects of the Merger. The Merger shall have the effects
set forth in this Agreement, the Pinnacle-Aurora Merger Agreement, the
Certificate of Merger and the applicable provisions of the DGCL. Without
limiting the generality of the foregoing and subject thereto, by virtue of the
Merger and without further act or deed and subject to the Bankruptcy Plan, at
the Effective Time:
(a) the separate existence of Pinnacle shall cease and
Pinnacle shall be merged with and into the Company, which shall be the
Reorganized Company;
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(b) each share of common stock of Pinnacle issued and
outstanding immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of newly
issued common stock of the Reorganized Company;
(c) all shares of capital stock of the Company, together with
all rights relating to the purchase and sale thereof (including any options and
warrants) shall be canceled and retired with no further rights or obligations
relating thereto and shall cease to exist, and no consideration shall be
delivered in exchange therefor; and
(d) all the property, rights, privileges, immunities, powers
and franchises of the Company and Pinnacle shall vest in the Reorganized
Company, and all debts, liabilities, obligations and duties of the Company and
Pinnacle shall become the debts, liabilities, obligations and duties of the
Reorganized Company.
Section 3.4 Certificate of Incorporation and Bylaws. The certificate
of incorporation and bylaws of the Company shall be amended and restated as of
the Effective Time to be substantially in the form attached as Exhibit D hereto,
giving effect to any amendments included in the Certificate of Merger, and shall
be the certificate of incorporation and bylaws of the Reorganized Company as of
the Effective Time, until altered, amended or repealed as provided therein or by
applicable Laws.
Section 3.5 Directors and Officers. The initial directors of the
Reorganized Company shall be identical to those of CEH LLC at the Effective Time
(as provided in the CEH LLC Members Agreement), each to hold such office in
accordance with the certificate of incorporation and by-laws of the Reorganized
Company, in each case until their death, resignation, removal or their
respective successors are duly elected and qualified. The initial officers of
the Reorganized Company shall consist of the officers of Pinnacle at the
Effective Time, each to hold such office in accordance with the certificate of
incorporation and by-laws of the Reorganized Company, in each case until their
death, resignation, removal or their respective successors are duly elected and
qualified. The initial officers and directors shall be set forth in a notice
filed with the Bankruptcy Court no later than fifteen (15) days prior to the
first date set by the Bankruptcy Court for the hearing on confirmation of the
Bankruptcy Plan.
Section 3.6 Definitions Relating to the Merger and Adjustments. For
purposes of this Agreement, the following terms relating to the Merger and
adjustments shall have the meanings specified in this Section 3.6:
"Actual Aurora Adjusted Net Debt" equals (i) Actual Aurora Net Debt
plus (ii) the lesser of (A) fifty percent (50%) of the difference of (I) the
Actual Employee Expense Amount (up to a maximum of $25 million), minus (II) the
Bonus Accrual Items reflected on the Final Aurora Balance Sheet, minus (III) any
amounts paid prior to the Closing Date which were included in the Actual
Employee Expense Amount, or (B) $10.25 million, minus (iii) Actual Aurora
Working Capital.
"Actual Employee Expense Amount" has the meaning set forth in
Section 4.1(c).
8
"Actual Cash-Out LLC Units" means with respect to any Person, a
number of Class A Units equal to the quotient of (a) the product of (i) the
amount of such Person's Cash-Out Class A Units and (ii) the quotient of (A) the
Actual Sub Debt Equity Value Per Dollar over (B) the Sub Debt Cash-Out Value
over (b) the Class A Per Unit Value.
"Actual LLC Units" means with respect to any Person, such Person's
Actual Cash-Out LLC Units and Actual Sub Debt LLC Units.
"Actual Sub Debt Equity Value" equals (a) $225 million, minus (b)
the Equity Deficiency, and (c):
(i) if Actual Aurora Adjusted Net Debt is greater than $609.9
million, minus the amount by which Actual Aurora Adjusted Net
Debt exceeds $609.9 million; or
(ii) if Actual Aurora Adjusted Net Debt is less than $595.9
million, plus the amount by which $595.9 million exceeds
Actual Aurora Adjusted Net Debt.
"Actual Sub Debt Equity Value Per Dollar" equals the quotient of (a)
Actual Sub Debt Equity Value over (b) $400 million.
"Actual Sub Debt LLC Units" means with respect to any Bondholder, a
number of Class A Units equal to the quotient of (a) the product of (i) the
principal face amount of Sub Debt held by such Person (either directly or
through such Bondholder's Holder Representative) for which an Equity Election
has been made and (ii) and the Actual Sub Debt Equity Value Per Dollar over (b)
the Class A Per Unit Value.
"Aurora Net Debt" means, as of any day, the total Indebtedness of
the Company and Sea Coast on such day, net of cash on hand on such day, in each
case, as would be shown on a consolidated balance sheet of the Company and Sea
Coast as of such day prepared in accordance with GAAP; provided, that for
purposes of calculating the Aurora Net Debt the Excluded Aurora Expenses shall
be excluded.
"Aurora Working Capital" means (a) the sum of (i) net accounts
receivable plus (ii) total inventories net of reserves plus (iii) prepaid
expenses (other than in respect of premiums paid to maintain or procure the
directors' and officers' insurance pursuant to Section 9.2(a) hereof), minus (b)
the sum of (i) accounts payable plus (ii) accrued expenses excluding accrued
interest, accrued dividends and plant shutdown reserves, in each case, of the
Company and Sea Coast on a consolidated basis; provided, that Aurora Working
Capital shall exclude the Excluded Aurora Expenses (for the avoidance of doubt,
it is intended that Bonus Accrual Items will be included in the calculation of
Aurora Working Capital (as a result of their exclusion from clause (ii) of the
definition of "Excluded Aurora Expenses")).
"Bonus Accrual Items" means accruals made in respect of (i) any
amount payable in respect of the Company's bonus plan as set forth as Items 3,
6, 8, and 9 of Section 6.13(a) of the Company Disclosure Schedule; (ii) any
bonuses payable to the individuals set forth in Items 39-54 (without
duplication) of Section 6.13(a) of the Company Disclosure Schedule, and (iii)
9
any increases in bonuses payable due to overtime pursuant to the Company's bonus
plan set forth as Items 3 and 8 of Section 6.13(a) of the Company Disclosure
Schedule. For informational purposes only, as of November 11, 2003, the Bonus
Accrual Items were estimated to amount to approximately $3.6 million as of
December 31, 2003, it being acknowledged that the actual amount of such accruals
may be different as of such date or as of any other date.
"Bondholder Class A Units" means the Cash-Out Class A Units and the
Make-Up Class A Units.
"Cash-Out Class A Units" means the Class A Units distributed to
Bondholder Trust for such Person's account in respect of the cash invested at
Closing, in the case of any Eligible Bondholder, in the Company, and in the case
of the Pinnacle Equity Sponsors, in Pinnacle (by way of CEH LLC and Holding),
upon exercise of a Cash-Out Subscription Right pursuant to Section 2.2.
"Cashed-Out Sub Debt" means any Sub Debt for which no Equity
Elections shall have been made or deemed to have been made in accordance with
Section 2.1 of this Agreement.
"Cash-Out Subscription Right" has the meaning set forth in Section
2.2(b).
"Class A Per Unit Value" means $1,000.
"Employee Expense Amount" means the aggregate amount of any
retention, stay-bonus, severance, bonus, termination or similar payments to
officers, consultants, or employees of the Company for the period commencing on
November 15, 2003 and ending on the Measurement Date (but without giving effect
to any bonus amounts in respect of 2004) under any Plan or program or
employment, severance or change in control agreement, which are paid by the
Company or the Reorganized Company or which would be accrued on a balance sheet
of the Reorganized Company in accordance with GAAP as of the Measurement Date.
"Equity Deficiency" means an amount equal to (a) $12.1 million plus
the Paid Default Interest paid or payable on or prior to October 31, 2003, minus
(b) the Equity Deficiency Reduction Amount.
"Equity Deficiency Reduction Amount" equals the sum of (a) the
amount, if any, by which the MBLY Amount exceeds the amount payable to ▇▇▇▇▇▇
Buckfire ▇▇▇▇▇ ▇▇▇▇ & Co. under the MBLY Agreement as set forth in the
Confirmation Order plus (b) the amount, if any, by which the Senior Note Amount
exceeds the amount to be paid to the holders of the Senior Notes as set forth in
the Confirmation Order.
"Estimated Aurora Adjusted Net Debt" equals (i) Estimated Aurora Net
Debt plus (ii) the lesser of (A) fifty percent (50%) of the difference of (I)
the Estimated Employee Expense Amount (up to a maximum of $25 million), minus
(II) the Bonus Accrual Items reflected on the Estimated Aurora Balance Sheet,
minus (III) any amounts paid prior to the Closing Date which were included in
the Estimated Employee Expense Amount, or (B) $10.25 million, minus (iii)
Estimated Aurora Working Capital.
10
"Estimated Cash-Out LLC Units" means with respect to any Person, a
number of Class A Units equal to the quotient of (a) the product of (i) the
amount of such Person's Cash-Out Class A Units and (ii) the quotient of (A) the
Estimated Sub Debt Equity Value Per Dollar over (B) the Sub Debt Cash-Out Value
over (b) the Class A Per Unit Value.
"Estimated Employee Expense Amount" has the meaning set forth in
Section 4.1(b).
"Estimated LLC Units" means with respect to any Person, such
Person's Estimated Cash-Out LLC Units and Estimated Sub Debt LLC Units.
"Estimated Sub Debt Equity Value" equals (a) $225 million, minus (b)
the Equity Deficiency, and (c):
(i) if Estimated Aurora Adjusted Net Debt is greater than $609.9
million, minus the amount by which Estimated Aurora Adjusted
Net Debt exceeds $609.9 million; or
(ii) if Estimated Aurora Adjusted Net Debt is less than $595.9
million, plus the amount by which $595.9 million exceeds
Estimated Aurora Adjusted Net Debt.
"Estimated Sub Debt Equity Value Per Dollar" equals the quotient of
(a) Estimated Sub Debt Equity Value over (b) $400 million.
"Estimated Sub Debt LLC Units" means, with respect to any
Bondholder, a number of Class A Units equal to the quotient of (a) the product
of (i) the principal face amount of Sub Debt held by such Person (either
directly or through such Bondholder's Holder Representative) for which an Equity
Election has been made (or deemed to have been made) and (ii) and the Estimated
Sub Debt Equity Value Per Dollar over (b) the Class A Per Unit Value.
"Excluded Aurora Expenses" means (i) any amounts paid or payable to
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. pursuant to that certain Letter Agreement, dated June 11,
2002, between the Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., (ii) any amount included
within the Employee Expense Amount, other than the Bonus Accrual Items reflected
on the Estimated Aurora Balance Sheet or the Final Aurora Balance Sheet (as
applicable), (iii) the Derivative Amount, (iv) the Rejection Amount, (v)
premiums paid to maintain and/or procure directors' and officers' insurance
pursuant to Section 9.2(a) hereof up to a maximum of $2.7 million, (vi) the Bank
Fees, (vii) the Paid Default Interest accruing after October 31, 2003, (viii)
the Settlement Amount, (ix) amounts paid under the Management Retention Plan and
(x) the fee payable to the Pinnacle Equity Sponsors and the fees and expenses
payable to the Pinnacle Equity Investors pursuant to Section 9.10.
"Make-Up Class A Units" means the Class A Units distributed to
Bondholder Trust for a Person's account in respect of the cash invested, in the
case of any Eligible Bondholder, in the Company, and in the case of CEH LLC, in
Pinnacle (by way of CEH LLC and Holding), upon exercise of a Make-Up
Subscription Right pursuant to Section 2.2.
11
"Make-Up LLC Units" means with respect to any Person, a number of
Class A Units Equal to the quotient of (a) the amount of such Person's Make-Up
Class A Units and (b) the Class A Per Unit Value.
"Make-Up Subscription Right" has the meaning set forth in Section
2.2(b).
"Measurement Date" means the date which is ten (10) days prior to
the date upon which the Reorganized Company delivers the Final Aurora Balance
Sheet pursuant to Section 4.1(c).
"Sub-Debt Cash-Out Value" equals $0.50.
"Sub Debt Cash Consideration" means, with respect to any Bondholder,
the product of (a) the principal face amount of Sub Debt held by such Bondholder
(either directly or through such Bondholder's Holder Representative) for which
no Equity Election has been made (or deemed to have been made) and (b) the Sub
Debt Cash-Out Value
"Sub Debt Equity Consideration" means, with respect to any Person ,
such Person's Actual Cash-Out LLC Units, Make-Up LLC Units and Actual Sub-Debt
LLC Units.
Section 3.7 Rights in Respect of Sub Debt and Bondholder Class A
Units. Subject to Section 3.8 and Article IV hereof, at the Effective Time, by
virtue of the Merger and without any action on the part of CEH LLC, Holding or
the Company or the holders of any of the following securities, the following
shall occur:
(a) in accordance with Section 2.1, the Sub Debt in respect of
which Cash Elections have been made (or deemed to have been made) shall
automatically be converted into and represent solely the right to receive, the
Sub Debt Cash Consideration; and
(b) the Sub Debt in respect of which Equity Elections have
been made (or deemed to have been made) shall be automatically converted into
and represent solely the right to receive a number of Class A Units equal to the
Sub Debt Equity Consideration and the Bondholders, prior to the exchange
contemplated by Section 3.8, shall not be entitled to vote with respect to the
Class A Units included in that consideration or any interest in Bondholder
Trust.
Section 3.8 Payment.
(a) At the Closing, CEH LLC shall cause the Reorganized
Company and the Exchange Agent to:
(i) with respect to each Bondholder holding Sub Debt in
respect of which a Cash Election was made (or deemed to have been made),
upon receipt by the Exchange Agent of a completed and duly executed Letter
of Transmittal, pay to such Bondholder an amount equal to such
Bondholder's Sub Debt Cash Consideration; and
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(ii) with respect to each Bondholder holding Sub Debt in
respect of which an Equity Election was validly made (or deemed to have
been made) and who has delivered to the Voting Agent (pursuant to Section
2.1(b)) or the Exchange Agent a duly executed Trust Accession Instrument,
issue to Bondholder Trust, on behalf of such Bondholder, upon receipt by
the Exchange Agent of a completed and duly executed Letter of Transmittal,
a number of Class A Units equal to such Bondholder's Estimated Sub Debt
LLC Units (and promptly thereafter Bondholder Trust will issue a like
number of units of beneficial interest in Bondholder Trust to such
Bondholder); and
(iii) with respect to each Person who has validly
subscribed for Cash-Out Class A Units and/or Make-Up Class A Units and who
has delivered to the Voting Agent (pursuant to Section 2.1(b)) or the
Exchange Agent a duly executed Trust Accession Instrument, issue to
Bondholder Trust, on behalf of such Person a number of Class A Units equal
to such Person's Estimated Cash-Out LLC Units and Make-Up LLC Units (and
promptly thereafter Bondholder Trust will issue a like number of units of
beneficial interest in Bondholder Trust to such Person).
(b) Promptly after the Closing, CEH LLC shall cause the
Reorganized Company and the Exchange Agent to give notice of the Closing to the
Bondholders (either directly or through their respective Holder
Representatives). Such notice, which shall include a Letter of Transmittal,
shall (i) inform the Bondholders that they may receive the consideration due to
them with respect to the Equity Election or Cash Election previously made by
them by delivering to the Exchange Agent (x) a completed and duly executed
Letter of Transmittal together with any certificates representing Sub Debt held
by such Bondholder (to the extent any certificates representing Sub Debt have
been issued) and (y) a Trust Accession Instrument (if not already provided to
the Voting Agent or the Exchange Agent) with respect to any Equity Election or
deemed Equity Election under Section 2.1(d) and (ii) in the event of a deemed
Equity Election under Section 2.1(d), inform Bondholders making a Cash Election
of the amount of Sub Debt with respect to which they have been deemed to have
made an Equity Election and that in order to obtain the consideration due to
them with respect to such deemed Equity Election they must deliver to the
Exchange Agent a duly executed Trust Accession Instrument.
(c) With respect to dividends or other distributions declared
by CEH LLC on Class A Units, the record date for which is at or after the
Closing (an "Applicable Dividend"), all Class A Units to be issued pursuant to
this Section 3.8 shall be deemed issued and outstanding as of the Closing and
whenever such a dividend or other distribution is declared by CEH LLC, that
declaration shall include dividends or other distributions in respect of Class A
Units issuable pursuant to this Section 3.8; provided, that dividends or other
distributions declared or made in respect of Class A Units issuable pursuant to
this Section 3.8 shall not be paid to Bondholder Trust until such units have
been issued to Bondholder Trust as specified in Section 3.8(a). With respect to
any Applicable Dividend declared in respect of any Class A Units which are
issued pursuant to Section 3.8 subsequent to the declared distribution date for
such Applicable Dividend, CEH LLC shall pay such Applicable Dividend to
Bondholder Trust on behalf of the Person for whose account such Class A Units
were issued promptly following such issuance.
13
(d) Each of the Reorganized Company and CEH LLC shall be
entitled to deduct and withhold from the cash consideration otherwise payable to
any Bondholder pursuant to this Article III any amounts as they are required to
deduct and withhold with respect to payment under any provision of federal,
state or local income Tax law. If the Reorganized Company or CEH LLC, as the
case may be, so withholds amounts, such amounts shall be treated for all
purposes of this Agreement as having been paid to the Bondholders in respect of
which the Reorganized Company or CEH LLC, as the case may be, made such
deduction or withholding. No interest shall accrue or be paid on any cash
payable in respect of the Sub Debt.
(e) The Exchange Agent shall, within five Business Days after
the date that is one year after the Closing Date, return to the Reorganized
Company any portion of the cash and/or LLC Units remaining to be paid or
distributed to Bondholders who have not yet delivered Letters of Transmittal to
the Exchange Agent. Any Bondholders will thereafter be entitled to look only to
the Reorganized Company for satisfaction of their claims for the consideration
set forth in this Section 3.8, without interest.
Section 3.9 Exchange of Certificates. As soon as reasonably
practicable after the Effective Time, CEH LLC shall surrender Pinnacle's stock
certificates in exchange for certificates representing the Reorganized Company's
common stock. Upon surrender of a Pinnacle stock certificate to the Exchange
Agent for exchange (1) CEH LLC shall be entitled to receive in exchange therefor
a certificate of the Reorganized Company's common stock representing the number
of shares that gives effect to an exchange on a one-to-one basis and (2) the
Pinnacle stock certificate so surrendered shall be canceled. Until surrendered
as contemplated by this Section 3.9, each Pinnacle stock certificate shall be
deemed, from and after the Effective Time, to represent only the right to
receive shares of the Reorganized Company's common stock as contemplated
pursuant to this Section 3.9 and by the Pinnacle-Aurora Merger Agreement.
Section 3.10 Tax Effects of Reorganization Transactions.
(a) The Merger is intended to qualify as a tax-free
reorganization under Section 368(a)(1)(D) of the Code.
(b) The exchange by the electing Bondholders of their Sub Debt
for equity of the Company is intended to qualify as a tax-free reorganization
under Section 368(a)(1)(E) of the Code. The Bondholders who elect to receive
equity interests in the Reorganized Company shall be deemed to have exchanged
their Sub Debt for common stock of the Reorganized Company and then shall be
deemed to have contributed such stock to the Bondholder Trust. Bondholder Trust
shall be deemed to have then contributed such stock to CEH LLC and CEH LLC shall
be deemed to have then contributed such stock to Holding.
(c) The parties hereto agree to treat the transactions
contemplated hereby consistent with the tax treatment specified in subsections
(a) and (b) above.
14
ARTICLE IV
POST-CLOSING ADJUSTMENTS
Section 4.1 Adjustment to Merger Consideration.
(a) On the fifth (5th) Business Day preceding the Closing
Date, the Company shall deliver to CEH LLC and the Designated Representative (i)
an estimated balance sheet of the Company and Sea Coast (the "Estimated Aurora
Balance Sheet") as of 11:59 p.m. on the day immediately prior to the Closing
Date, (ii) a certificate which shall set forth (A) a good faith estimate of (I)
the amount of Aurora Net Debt as of such time (the "Estimated Aurora Net Debt")
and (II) Aurora Working Capital as of such time (the "Estimated Aurora Working
Capital"), in each case prior to payment of Aurora Closing Expenses and (B) a
good faith estimate of the Employee Expense Amount. The Estimated Aurora Balance
Sheet shall be prepared by Aurora in accordance with GAAP consistently applied.
(b) On the second Business Day prior to the Closing Date, CEH
LLC shall deliver to the Company and the Designated Representative a certificate
which shall set forth a good faith estimate of the Employee Expense Amount (the
"Estimated Employee Expense Amount").
(c) As soon as practicable, but no later than ninety (90) days
after the Closing Date, the Reorganized Company shall prepare and deliver to CEH
LLC and the Designated Representative a balance sheet of the Company and Sea
Coast as of 11:59 p.m. on the date immediately prior to the Closing Date which
shall be audited by Ernst & Young LLP, together with the related audit report of
such firm (the "Final Aurora Balance Sheet"). The Reorganized Company shall also
deliver a certificate setting forth (i) its calculation of (A) the amount of
Aurora Net Debt as of such time (the "Actual Aurora Net Debt") and (B) the
amount of Aurora Working Capital as of such time (the "Actual Aurora Working
Capital"), in each case prior to payment of Aurora Closing Expenses and (ii) its
calculation of the Employee Expense Amount (the "Actual Employment Expense
Amount"). The Final Aurora Balance Sheet shall be prepared in accordance with
this Agreement and GAAP consistently applied.
(d) If either CEH LLC or the Designated Representative has any
objections to the Final Aurora Balance Sheet, or any calculations derived from
the Final Aurora Balance Sheet or the Actual Employee Expense Amount, it shall
deliver a written statement describing its objections in reasonable detail to
the other not later than thirty (30) Business Days after its receipt thereof.
CEH LLC and the Designated Representative shall use reasonable best efforts to
resolve any such objections themselves. If a final resolution of such objections
is not made within ten (10) Business Days after receipt by the other party of
the objecting party's written objections, CEH LLC and the Designated
Representative shall submit the issue to an auditor (the "Referee") for
resolution. The Referee shall be the New York office of Deloitte & Touche;
provided, that if, for any reason, at the time of such submission, Deloitte &
Touche is unavailable to serve as the Referee or if Deloitte & Touche is not in
a neutral and impartial position in relation to the parties as determined by
Deloitte & Touche, CEH LLC and the Designated Representative shall have ten (10)
Business Days from the time of such submission to agree on a substitute Referee.
Failing timely agreement, on the request of either CEH LLC or
15
the Designated Representative, the American Arbitration Association shall
designate a national accounting firm to serve as the Referee. If issues in
dispute are submitted to the Referee for resolution, CEH LLC and the Designated
Representative shall furnish to the Referee such work papers and other documents
and information relating to the disputed issues as the Referee may request, and
shall be afforded the opportunity to present to the Referee any material
relating to the resolution of the disputed items and to discuss the resolution
of the disputed items with the Referee. The Referee shall be instructed in
performing the review that CEH LLC and the Designated Representative shall each
be provided with copies of any and all correspondence and drafts exchanged
between either of them and the Referee. CEH LLC and the Designated
Representative shall be granted reasonable access to information contained in
the documents made available to the Referee by the other, provided that any
information contained in the documents shall be kept confidential by the
recipient party.
(e) The Referee shall determine (and written notice thereof
shall be given to CEH LLC and the Designated Representative) as promptly as
practicable, but in any event within fifteen (15) Business Days of the date on
which such dispute is referred to the Referee, based solely on presentations of
CEH LLC and the Designated Representative and not by independent review, (i)
whether the Final Aurora Balance Sheet (or any component thereof) and/or the
Actual Employee Expense Amount was prepared in accordance with the terms of this
Agreement and (ii) (only with respect to the disputed items submitted to the
Referee) whether and to what extent (if any) the Actual Aurora Net Debt, Actual
Aurora Working Capital or the Actual Employee Expense Amount requires
adjustment. The Company shall bear the fees and expenses of the Referee. The
determination of the Referee shall be final, conclusive and binding on the
parties, and the Referee's determination of the Actual Aurora Net Debt, Actual
Aurora Working Capital or the Actual Employee Expense Amount shall then be
deemed to be the Actual Aurora Net Debt, Actual Aurora Working Capital and the
Actual Employee Expense Amount for purposes of this Section 4.1.
(f) CEH LLC will cause the Reorganized Company to make the
work papers and back-up materials used in preparing the Final Aurora Balance
Sheet and in determining the Actual Employee Expense Amount, and the relevant
books, records, and the financial staff of the Reorganized Company available to
the Designated Representative and its Advisors during normal business hours and
upon reasonable notice during (i) the review by the Designated Representative of
the Final Aurora Balance Sheet and the determination of the Actual Employee
Expense Amount and (ii) the resolution by the parties of any objections thereto.
Section 4.2 Post-Closing Adjustment.
(a) Following the determination of the Actual Sub Debt Equity
Value Per Dollar, with respect to each Person holding Sub Debt in respect of
which an Equity Election was made (or deemed to have been made), and, if
applicable, who subscribed for Cash-Out Class A Units and/or Make-Up Class A
Units:
(i) if such Person's Actual LLC Units are greater than
such Person's Estimated LLC Units and if Bondholder Trust has previously
received such Person's Estimated LLC Units in accordance with Section
3.8(a)(ii), CEH LLC shall
16
deliver to Bondholder Trust on behalf of such Person, a number of Class A
Units equal to such Person's Actual LLC Units less such Person's Estimated
LLC Units; or
(ii) if such Person's Estimated LLC Units are greater
than such Person's Actual LLC Units and if Bondholder Trust has previously
received such Person's Estimated LLC Units in accordance with Section
3.8(a)(ii), CEH shall cancel a number of Class A Units held by Bondholder
Trust on the account of such Person equal to such Person's Estimated LLC
Units less such Person's Actual LLC Units.
ARTICLE V
THE CLOSING
Section 5.1 The Closing. The closing of the Merger and the other
transactions contemplated hereby (the "Closing") shall take place at the offices
of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ at 10:00 a.m., local time, after the later of (i) five (5) Business Days
after the date upon which all conditions set forth in Article XI hereof have
been satisfied or waived (other than those conditions which by their nature are
to be satisfied at the Closing, but subject to the satisfaction or waiver of
those conditions) and (ii) in the event of timely objections to the Initial
EBITDA Calculation, two (2) Business Days after the date upon which the Initial
EBITDA Calculation is finalized pursuant to Sections 5.3(b) and (c) hereof,
unless another date or place is agreed in writing by each of the parties hereto.
The date on which the Closing occurs is referred to in this Agreement as the
"Closing Date".
Section 5.2 Deliveries.
(a) At the Closing, the Company shall deliver to CEH LLC:
(i) the officer's certificate contemplated in Section
11.2(h) hereof;
(ii) the Governmental Requirements;
(iii) the Third Party Consents;
(iv) a certified copy of the Confirmation Order;
(v) the resignations of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ as Interim
Chief Executive Officer of the Company and of each of the directors of the
Company who is not appointed as a director of the Reorganized Company in
accordance with Section 3.5;
(vi) the opinion of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇
LLP, contemplated in Section 11.2(k) hereof;
(vii) the Pinnacle-Aurora Merger Agreement executed by
the Company;
17
(viii) the Certificate of Merger executed by the
Company;
(ix) the CEH LLC Members Agreement and the CEH LLC
Operating Agreement, executed by Bondholder Trust; and
(x) such other instruments as are necessary to
effectuate the transactions contemplated hereby.
(b) At the Closing, CEH LLC shall deliver to the Company:
(i) the officer's certificate contemplated in Section
11.3(e) hereof;
(ii) the Pinnacle-Aurora Merger Agreement executed by
Pinnacle;
(iii) the Certificate of Merger executed by Pinnacle;
and
(iv) the CEH LLC Members Agreement and the CEH LLC
Operating Agreement, executed by the Pinnacle Equity Investors;
(v) such other instruments as are necessary to
effectuate the transactions contemplated hereby.
(c) At the Closing, CEH LLC, Bondholder Trust and the
Reorganized Company shall enter into the Indemnity Agreement.
Section 5.3 Initial EBITDA Calculation.
(a) No later than two (2) Business Days after the Condition
Satisfaction Date, the Company shall prepare and deliver to CEH LLC a schedule
setting forth in reasonable detail the calculation of EBITDA and Adjusted EBITDA
for the EBITDA Period (collectively, the "Initial EBITDA Calculation").
(b) If CEH LLC has any objections to the Initial EBITDA
Calculation (or any component thereof), it shall deliver a written statement
describing its objections in reasonable detail to the Company not later than two
(2) Business Days after its receipt of the Initial EBITDA Calculation. The
Company and CEH LLC shall use reasonable best efforts to resolve any such
objections themselves. If a final resolution of such objections is not made
within five (5) Business Days after receipt by the Company of CEH LLC's written
objections, CEH LLC and the Company shall submit the issue to an auditor (the
"Auditor") for resolution. The Auditor shall be the New York office of Deloitte
& Touche; provided, that if, for any reason, at the time of such submission,
Deloitte & Touche is unavailable to serve as the Auditor or if Deloitte & Touche
is not in a neutral and impartial position in relation to the parties as
determined by Deloitte & Touche, the parties shall have ten (10) Business Days
from the time of such submission to agree on a substitute Auditor. Failing
timely agreement, on the request of either party, the American Arbitration
Association shall designate a national accounting firm to serve as the Auditor.
If issues in dispute are submitted to the Auditor for resolution, each party
18
shall furnish to the Auditor such work papers and other documents and
information relating to the disputed issues as the Auditor may request, and
shall be afforded the opportunity to present to the Auditor any material
relating to the resolution of the disputed items and to discuss the resolution
of the disputed items with the Auditor. The Auditor shall be instructed in
performing the review that CEH LLC and the Company shall each be provided with
copies of any and all correspondence and drafts exchanged between any party and
the Auditor. CEH LLC and the Company shall be granted reasonable access to
information contained in the documents made available to the Auditor by the
other party, provided that any information contained in the documents shall be
subject to the terms of the Confidentiality Agreement.
(c) The Auditor shall determine (and written notice thereof
shall be given to the Company and CEH LLC) as promptly as practicable, but in
any event within ten (10) Business Days of the date on which such dispute is
referred to the Auditor, based solely on presentations of CEH LLC and the
Company and not by independent review, (i) whether the Initial EBITDA
Calculation (or any component thereof) was prepared in accordance with the terms
of this Agreement and (ii) (only with respect to the disputed items submitted to
the Auditor) whether and to what extent (if any) the Initial EBITDA Calculation
(or any component thereof) requires adjustment. The parties shall share equally
the fees and expenses of the Auditor. The determination of the Auditor shall be
final, conclusive and binding on the parties, and the Auditor's determination of
the amount of the Initial EBITDA Calculation (or any component thereof) shall
then be deemed to be the Initial EBITDA Calculation (or the applicable component
thereof) for purposes of this Section 5.3.
(d) The Company shall make the work papers and back-up
materials used in preparing the Initial EBITDA Calculation, and the relevant
books, records, and the financial staff of the Company available to CEH LLC and
its Advisors during normal business hours and upon reasonable notice during (i)
the review by CEH LLC of the Initial EBITDA Calculation and (ii) the resolution
by the parties of any objections thereto.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered by the
Company (the "Company Disclosure Schedule") to CEH LLC simultaneously with the
execution and delivery hereof or in the SEC Reports, the Company represents and
warrants to CEH LLC as set forth below as of the date hereof. Disclosure of an
item in response to one Section of this Agreement shall constitute disclosure in
response to such other Sections of this Agreement as is reasonably apparent on
the face of the disclosure notwithstanding the fact that no express
cross-reference is made. Disclosure of any items not otherwise required to be
disclosed shall not create any inference of materiality. In the event of any
inconsistency between statements in the body of this Agreement and statements in
the Company Disclosure Schedule (excluding exceptions expressly set forth in the
Company Disclosure Schedule with respect to a specifically identified
representation or warranty), the statements in the body of this Agreement shall
control.
EXCEPT FOR THE LIMITED REPRESENTATIONS AND WARRANTIES EXPRESSLY SET
FORTH IN THIS ARTICLE VI AND CEH LLC'S RELIANCE THEREON:
19
(A) THE COMPANY HEREBY SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY,
ORAL OR WRITTEN, INCLUDING, BUT NOT LIMITED TO THOSE CONCERNING (i) THE NATURE
AND CONDITION OF ANY ASSETS AND THE SUITABILITY OF ANY ASSETS FOR ANY AND ALL
ACTIVITIES AND USES, (ii) THE MANNER, CONSTRUCTION, CONDITION AND STATE OF
REPAIR OR LACK OF REPAIR OF ANY IMPROVEMENTS LOCATED ON ANY ASSETS, AND (iii)
THE COMPLIANCE OF ANY ASSET OR ITS OPERATION WITH ANY LAWS, RULES, ORDINANCES,
OR REGULATIONS OF ANY GOVERNMENT OR OTHER BODY; (B) THE COMPANY MAKES NO
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW,
INCLUDING, BUT IN NO WAY LIMITED TO, ANY WARRANTY OF QUANTITY, QUALITY,
CONDITION, HABITABILITY, MERCHANTABILITY, SUITABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF THE COMPANY OR ANY OF ITS ASSETS; (C) CEH LLC IS ENTERING
INTO THIS AGREEMENT BASED SOLELY ON ITS OWN INDEPENDENT INVESTIGATIONS AND
FINDINGS; AND (D) THE COMPANY MAKES NO REPRESENTATION OR WARRANTY AS TO THE
ACCURACY OR RELIABILITY OF ANY FORECASTS OR PROJECTIONS OF REVENUES, SALES,
EXPENSES OR PROFITS.
Section 6.1 Organization; Subsidiaries.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite corporate power and corporate authority to carry on its business
as it is now being conducted. Except as set forth in Section 6.1 of the Company
Disclosure Schedule, the Company is, and as of the Closing Date will be, duly
qualified to do business as a foreign corporation and in good standing in each
jurisdiction where the character of its assets owned or held under lease or the
nature of its business makes such qualification necessary, except in those
jurisdictions where the failure to be so qualified and in good standing would
not, individually or in the aggregate, have a Company Material Adverse Effect.
(b) Sea Coast is a Washington corporation and a direct
wholly-owned subsidiary of the Company. The Company owns all of the capital
stock of Sea Coast free and clear of all Liens, other than Permitted Liens, and
there are no outstanding subscription rights, options, warrants, convertible or
exchangeable securities or other rights of any character whatsoever relating to
issued or unissued capital stock of Sea Coast, or any Contracts to which the
Company is a party relating to issued or unissued capital stock of Sea Coast or
pursuant to which Sea Coast is or may become bound to issue or grant additional
shares of its capital stock or other equity interests or related subscription
rights, options, warrants, convertible or exchangeable securities or other
rights, or to grant preemptive rights. The Company does not own any direct or
indirect equity interest in any entity other than Sea Coast.
(c) Sea Coast is a corporation duly organized, validly
existing and in good standing under the laws of the State of Washington and has
the requisite corporate power and corporate authority to carry on its business
as it is now being conducted. Except as set forth in Section 6.1 of the Company
Disclosure Schedule, Sea Coast is, and, as of the Closing Date will be, duly
qualified to do business as a foreign corporation and in good standing in each
jurisdiction where the character of its assets owned or held under lease or the
nature of its
20
business makes such qualification necessary, except in those jurisdictions where
the failure to be so qualified and in good standing would not, individually or
in the aggregate, have a Company Material Adverse Effect.
Section 6.2 Due Authorization. The Company has all necessary
corporate power and authority to enter into this Agreement and each of the other
Transaction Documents to which it is a party and, subject to approval of the
Bankruptcy Court, to consummate the transactions contemplated hereby and
thereby. The execution and delivery by the Company of this Agreement and each of
the other Transaction Documents to which it is a party is, and consummation of
the Merger and the compliance by the Company with this Agreement and each of the
other Transaction Documents to which it is a party, upon the approval of the
Bankruptcy Court, will have been duly authorized by all requisite corporate
action of the Company. This Agreement has been, and each of the other
Transaction Documents to which the Company is a party when executed and
delivered by the Company will be, duly and validly executed and delivered by the
Company, and (assuming due authorization, execution and delivery by the other
parties hereto or thereto) this Agreement constitutes, and each of such other
Transaction Documents when executed and delivered by the Company will
constitute, a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as such enforcement is limited
by bankruptcy, reorganization, insolvency and other similar laws affecting the
enforcement of creditors' rights generally and limitations imposed by general
principles of equity.
Section 6.3 Capitalization.
(a) The authorized capital stock of the Company consists of
250,000,000 shares of common stock, par value $0.01 per share ("Common Stock"),
and 25,000,000 shares of preferred stock, par value $.01 per share ("Preferred
Stock"). As of June 30, 2003, there were (i) 77,155,022 shares of Common Stock
issued and outstanding, (ii) no shares of Common Stock held in the Company's
treasury, (iii) 9,639,031 shares of Common Stock reserved for issuance upon the
exercise of outstanding options to purchase shares of Common Stock ("Options"),
(iv) 2,400,000 shares of Common Stock reserved for issuance upon the exercise of
outstanding warrants to purchase shares of Common Stock ("Warrants"), (v)
5,758,176 shares of Common Stock were issuable upon conversion of Preferred
Stock, and (vi) 3,750,000 shares of Series A Cumulative Convertible Preferred
Stock, par value $0.01 per share, of the Company ("Series A Preferred") issued
and outstanding. All issued and outstanding shares of Common Stock and Series A
Preferred are, and all shares of Common Stock issuable upon exercise of options
or conversion of the Series A Preferred, in accordance with the terms of the
instruments governing such exercise or conversion, shall be, when issued in
accordance with the respective terms thereof, duly authorized and validly
issued, fully paid and nonassessable, and free of preemptive rights.
(b) Subject to the Exceptions, except as disclosed in Section
6.3(a) and except as set forth in Section 6.3(b) of the Company Disclosure
Schedule, there are no outstanding subscription rights, options, warrants,
convertible or exchangeable securities or other rights of any character
whatsoever to which the Company is a party relating to issued or unissued
capital stock of the Company, or any Contracts of any character whatsoever
relating to issued or unissued capital stock of the Company or pursuant to which
the Company or Sea Coast is or may
21
become bound to issue or grant additional shares of their capital stock or
related subscription rights, options, warrants, convertible or exchangeable
securities or other rights, or to grant preemptive rights.
(c) Subject to the Exceptions, and except as set forth in
Section 6.3(c) of the Company Disclosure Schedule, (i) neither the Company nor
Sea Coast has agreed to register any securities under the Securities Act or
under any state securities law or granted registration rights to any Person and
(ii) there are no voting trusts, stockholder agreements, proxies or other
Contracts or understandings in effect to which the Company or Sea Coast is a
party with respect to the voting or transfer of any of the outstanding shares of
their capital stock. The Company has no "poison pill" rights plan pertaining to
its capital stock.
(d) All outstanding shares of the Company's and Sea Coast's
capital stock, and all outstanding options, warrants and other securities of the
Company and Sea Coast, have been issued and granted in compliance in all
material respects with all applicable federal securities laws.
Section 6.4 SEC Reports. Unless not required during the pendency of
the Bankruptcy Case, and except as set forth in Section 6.4 of the Company
Disclosure Schedule, since December 31, 2001, the Company has timely filed with
the SEC all registration statements, proxy statements, reports, forms,
certifications, schedules and other documents required to be filed by it under
applicable federal securities laws. Except as set forth in Section 6.4 of the
Company Disclosure Schedule, each SEC Report, on the date of its filing or as
subsequently amended, complied as to form in all material respects with the
applicable requirements of such laws and did not, on the date of filing or as
subsequently amended, contain any untrue statement of material facts or omit to
state material facts required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
Section 6.5 Financial Statements. The consolidated financial
statements of the Company (including notes thereto) included in the SEC Reports,
as subsequently amended, comply in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, and have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") consistently applied
throughout the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects in accordance with GAAP the
consolidated financial condition, results of operations, cash flows and changes
in stockholders' equity of the Company and Sea Coast as of the respective dates
thereof and for the respective periods then ended (subject to normal year-end
adjustments and the absence of notes in the case of any unaudited interim
financial statements).
Section 6.6 Absence of Certain Changes. Subject to the Exceptions,
and except as set forth in Section 6.6 of the Company Disclosure Schedule, since
December 31, 2002:
(a) the Company and Sea Coast have in all material respects
conducted their respective business in the Ordinary Course of Business;
22
(b) neither the Company nor Sea Coast has taken any actions,
and no events have occurred that, individually or in the aggregate, have had or
would have a Company Material Adverse Effect; and
(c) neither the Company nor Sea Coast has taken any action
that, if taken after the date of this Agreement without CEH LLC's consent, would
constitute a breach of any of the covenants set forth in Section 9.1 hereof.
Section 6.7 Litigation.
(a) Subject to the Exceptions, and except as set forth in
Section 6.7(a) of the Company Disclosure Schedule, there is no claim, action,
suit, investigation or proceeding ("Litigation") pending or, to the Knowledge of
the Company, threatened in writing against the Company or Sea Coast or involving
any of their respective properties or assets by or before any court, arbitrator
or other Governmental Entity which (i) is reasonably likely to prevent or
materially delay consummation of the transactions contemplated by this Agreement
or any of the other Transaction Documents or (ii) if resolved adversely to the
Company or Sea Coast would have a Company Material Adverse Effect.
(b) Subject to the Exceptions, and except as set forth in
Section 6.7(b) of the Company Disclosure Schedule, neither the Company nor Sea
Coast is (i) in default under or in breach of any order, judgment or decree of
any court, arbitrator or other Governmental Entity, or (ii) a party or subject
to any order, judgment or decree of any court, arbitrator or other Governmental
Entity, except, in each case, where such default or breach, or such order,
judgment or decree, would not have a Company Material Adverse Effect.
Section 6.8 Consents and Approvals. Except for (a) any required
filings under (i) the HSR Act, (ii) the Exchange Act, (iii) any applicable state
securities and blue sky laws and (iv) the DGCL (including, without limitation,
the filing of Certificate of Merger with the Secretary of State with State of
Delaware), (b) the Regulatory Approvals set forth in Section 6.8 of the Company
Disclosure Schedule, (c) the Confirmation Order and the Disclosure Statement
Order, (d) the Break-Up Payment Order or Allowed Break-Up Payment Claim, as the
case may be, (e) the Creditor Consents set forth in Section 6.8 of the Company
Disclosure Schedule, (f) the Contract Consents set forth in Section 6.8 of the
Company Disclosure Schedule, and (g) the License Consents, no consent, approval,
authorization of, declaration, filing, or registration with, any Governmental
Entity or any third party is required to be made or obtained by the Company or
Sea Coast in connection with the execution, delivery, and performance by the
Company of this Agreement or any of the other Transaction Documents to which the
Company is a party, except for such consents, approvals, authorizations,
declarations, filings, or registrations (x) which purport to be required to be
made or obtained upon the occurrence of the Bankruptcy Case (other than in
respect of Material Licenses) or (y) the failure of which to so file or obtain
would not (A) materially impair the Company's ability to conduct its business
after the Closing substantially as it was conducted immediately prior to the
Closing or (B) materially adversely affect the ability of the Company to perform
its obligations under this Agreement or any of the Transaction Documents to
which it is a party.
23
Section 6.9 Noncontravention. Assuming that the Governmental
Requirements, the Third Party Consents and the License Consents will be
satisfied, made or obtained and will remain in full force and effect and the
conditions set forth in Article XI hereof will be satisfied, neither the
execution, delivery or performance by the Company of this Agreement or any of
the other Transaction Documents to which the Company is a party nor the
consummation of the Transactions contemplated hereby or thereby will: (a)
conflict with or result in any breach of the Fundamental Documents of the
Company or the Fundamental Documents of Sea Coast, (b) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default under, or give rise to any right of termination, cancellation,
suspension, modification or acceleration of any obligation under, or result in
the creation of a Lien (other than Permitted Liens) under, or otherwise require
the consent or waiver of, or notice to, any other party under, any Company
Material Contract, or (c) violate any Law applicable to the Company, Sea Coast
or any of their respective properties or assets, except in the case of clause
(b) or (c), for violations, breaches, defaults, rights or Liens (other than
Permitted Liens) which (i) purport to become effective upon the occurrence of
the Bankruptcy Case, or (ii) individually or in the aggregate, would not (x)
materially adversely affect the ability of the Company to perform its
obligations under this Agreement or any of the other Transaction Documents to
which it is a party or (y) materially impair the Company's ability to conduct
its business after the Closing substantially as it was conducted immediately
prior to the Closing.
Section 6.10 Compliance with Laws. Subject to the Exceptions, and
except as set forth in Section 6.10 of the Company Disclosure Schedule, the
Company and Sea Coast are in compliance in all material respects with all Laws
applicable to their business, and neither the Company nor Sea Coast has received
any written notice of any alleged material violation of Law, except where such
non-compliance or violation (i) purports to become effective upon the occurrence
of the Bankruptcy Case, or (ii) individually or in the aggregate, would not (x)
materially adversely affect the ability of the Company to perform its
obligations under this Agreement or any of the other Transaction Documents to
which it is a party or (y) have a Company Material Adverse Effect. The Company
holds all licenses, permits, consents, registrations, certificates,
authorizations or approvals ("Permits"), required for the ownership of the
assets and operation of the businesses of the Company and Sea Coast and, all
such Permits are in full force and effect, except where the failure to hold or
be in full force and effect (i) purports to become effective upon the occurrence
of the Bankruptcy Case, or (ii) individually or in the aggregate, would not (x)
materially adversely affect the ability of the Company to perform its
obligations under this Agreement or any of the other Transaction Documents to
which it is a party or (y) have a Company Material Adverse Effect.
Section 6.11 Company Material Contracts. Except for Contracts filed
as exhibits to the Company's Annual Report on Form 10-K for the year ended
December 31, 2002 (the "Current 10-K"), Section 6.11(a) of the Company
Disclosure Schedule lists as of the date hereof each Contract of the following
types to which the Company or Sea Coast is a party or by or to which the Company
or Sea Coast or any of their properties may be bound or subject:
(i) Contracts containing covenants purporting to limit
the freedom of the Company or Sea Coast to compete in any line of business
in any geographic area or to hire any individual or group of individuals;
24
(ii) other than purchase orders entered into in the
Ordinary Course of Business, Contracts which require payments to or by the
Company or Sea Coast of at least $2.5 million annually and which, in
either case, cannot be canceled by the Company without penalty on notice
of ninety (90) days or less;
(iii) Contracts constituting indentures, mortgages,
promissory notes, loan agreements, bonds, guarantees, letters of credit or
other financing agreements or instruments of the Company or Sea Coast
evidencing indebtedness in amounts in excess of $2.5 million;
(iv) Contracts providing for the acquisition or
disposition of any business or the capital stock of any Person in each
case having a purchase price in excess of $2.5 million that has not been
consummated;
(v) Contracts in respect of any joint venture,
partnership or other similar arrangement, in each case involving a
contribution of future capital (whether such future capital is contributed
in cash, goods or services) in excess of $2.5 million on the part of the
Company or Sea Coast;
(vi) Contracts constituting manufacturer's
representative, sales agency, supply, co-packaging, distribution or
marketing Contracts (A) having a remaining term of one-year or more (from
the date hereof) and which are not terminable by the Company or Sea Coast
without penalty on notice of ninety (90) days or less and (B) which are
material to the business, results of operations, condition (financial or
otherwise) of the Company and Sea Coast, taken as a whole;
(vii) other than capital expenditures reflected in the
Company Plan, Contracts under which the Company or Sea Coast is committed
for aggregate capital expenditures in excess of $2.5 million;
(viii) Contracts (other than Contracts which are Plans)
providing for future payments in excess of $1 million individually that
are conditioned, in whole or in part, on a change in control of the
Company; and
(ix) each amendment, supplement, and modification in
respect of any of the foregoing.
(b) "Company Material Contract" means (i) the Contracts filed
as exhibits to the Current 10-K, (ii) the Contracts disclosed in Section 6.11(a)
of the Company Disclosure Schedule, (iii) the Company Leases, and (iv) the Plans
which are Contracts. Subject to the Exceptions, and except as set forth in
Section 6.11(b) of the Company Disclosure Schedule, (x) each Company Material
Contract is a valid and binding obligation of the Company, and is in full force
and effect, (y) neither the Company nor Sea Coast, nor, to the Knowledge of the
Company, any other Person, is in breach of or default under any Company Material
Contract and (z) neither the Company nor Sea Coast has received any written
notice of a breach or default (which has not been cured) under any Company
Material Contract, except where the failure to be so valid and binding and in
full force and effect or such breach or default, would not, individually or in
the aggregate, have a Company Material Adverse Effect.
25
Section 6.12 Financial Advisory, Legal and Other Fees. No agent,
broker, accounting firm, investment bank, other financial advisor, commercial
bank, other financial institution, law firm, public relations firm or any other
Person is or will be entitled to any fee, commission, expense or other amount
from the Company or Sea Coast in connection with any of the transactions
contemplated by this Agreement or the other Transaction Documents except for (a)
the advisors identified in Section 6.12 of the Company Disclosure Schedule, (b)
other Persons whose fees, commissions, expenses and other amounts accrued
through the date hereof and paid or payable do not in the aggregate total more
than $1 million (taking into account any amount saved if any of the
aforementioned advisors are replaced) and (c) other Persons hired by the Company
after the date of this Agreement in connection with the Bankruptcy Case or
required to be paid by the Company by the Bankruptcy Code or rules relating
thereto or by an order of the Bankruptcy Court.
Section 6.13 ERISA Compliance.
(a) Section 6.13(a) of the Company Disclosure Schedule
contains a complete and correct list of each Plan. With respect to each Plan,
the Company has heretofore delivered or made available to CEH LLC true and
correct copies of the Plan and any amendments thereto (or if the Plan is not a
written Plan, a description thereof) and the most recent determination letter
received from the Internal Revenue Service with respect to each Plan intended to
qualify under Section 401 of the Code. There has been no amendment to, written
interpretation of or announcement (whether or not written) by the Company or Sea
Coast relating to, or change in employee participation or coverage under, any
Plan that would increase materially the expense of maintaining such Plan above
the level or expense incurred in respect thereof for the most recent fiscal year
ended prior to the date hereof.
(b) Each Plan has been administered in all material respects
in accordance with its terms, and each of the Plans (and any related trust) has
been operated and is in material compliance with the applicable provisions of
ERISA, the Code and all other applicable Laws. Each Plan which is intended to be
qualified under Section 401(a) of the Code is so qualified and has been
determined by the IRS to be so qualified or an application for such
qualification has been submitted to the IRS, and, to the Knowledge of the
Company, nothing has occurred since the date of such determination that could
reasonably be expected to adversely affect such qualified status. No Plan is
primarily subject to the laws of a jurisdiction outside of the United States.
(c) None of the Company, Sea Coast nor any ERISA Affiliate has
incurred any unsatisfied liability under Title IV of ERISA or Section 302 of
ERISA in connection with any Plan and no condition exists that presents a
material risk to the Company, Sea Coast or any ERISA Affiliate of incurring any
such liability, other than liability for premiums due the Pension Benefit
Guaranty Corporation (which premiums have been paid when due).
(d) No Plan (i) is subject to Title IV of ERISA; (ii) is a
"multiemployer plan" within the meaning of Section 3(37) of ERISA; (iii) is a
"multiple employer plan" within the meaning of Section 413(c) of the Code; or
(iv) is or at any time was funded through a "welfare benefit fund" within the
meaning of Section 419(e) of the Code and
26
no benefits under a Plan are or at any time have been provided through a
voluntary employees' beneficiary association within the meaning of Section
501(c)(9) of the Code.
(e) Except as set forth in Schedule 6.13(e) of the Company
Disclosure Schedule, no Plan provides medical, surgical, hospitalization, death
or similar benefits (whether or not insured) with respect to current or former
employees for periods extending after retirement or other termination of service
(other than (i) coverage mandated by statute or (ii) benefits the full cost of
which is borne by the current or former employee (or his or her beneficiary)).
(f) Except as set forth on Schedule 6.13(f) of the Company
Disclosure Schedule, the consummation of the transactions contemplated by this
Agreement and the other Transaction Documents shall not, either alone or in
combination with another event, (i) entitle any current or former employee,
agent, independent contractor or officer of the Company or Sea Coast to
severance pay, (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due any such employee, agent, independent contractor or
officer, (iii) constitute a "change in control" causing an increase or
acceleration of benefits under any Plan, or (iv) result in any payment or
benefit that will be characterized as an "excess parachute payment" within the
meaning of Section 280G(b)(1) of the Code.
(g) To the Knowledge of the Company, there is no pending,
threatened or anticipated assessment, complaint, proceeding, or investigation of
any kind in any court or government agency with respect to any Plan (other than
routine claims for benefits).
(h) There are no unpaid contributions due prior to the date
hereof to any Plan that are required to have been made under the terms of the
Plan or any applicable Laws.
(i) Neither the Company nor any other "disqualified person" or
"party in interest" as defined in Section 4975 of the Code and Section 3(14) of
ERISA, respectively, has engaged in a non-exempt "prohibited transaction" as
defined in Section 4975 of the Code or Section 406 of ERISA with respect to any
Plan.
Section 6.14 Intellectual Property.
(a) Set forth on Section 6.14(a) of the Company Disclosure
Schedule is a complete list of the material trademarks owned or used by the
Company or Sea Coast in connection with the Company's branded consumer products,
in each case identifying which are owned and which are licensed. Subject to the
Exceptions, and except as set forth in Section 6.14(a) of the Company Disclosure
Schedule, with respect to each item of material Intellectual Property owned by
the Company or Sea Coast: (i) the Company or Sea Coast is the sole owner and
possesses all right, title, and interest in and to the item, free and clear of
all Liens other than Permitted Liens; (ii) the item is not subject to any
outstanding injunction, judgment, order, decree, ruling, or charge of any
Governmental Entity; and (iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
Knowledge of the Company, is threatened that challenges the legality, validity,
enforceability, registrations, use, or ownership of the item, which, in the case
of subsection (iii) above, if resolved adversely to the Company or Sea Coast
would have a Company Material Adverse Effect.
27
(b) Subject to the Exceptions, and except as set forth in
Section 6.14(b) of the Company Disclosure Schedule, with respect to each item of
material Intellectual Property which is used but not owned by the Company or Sea
Coast: (i) the Company or Sea Coast has a valid right to use such items of
Intellectual Property; and (ii) except as would not have a Company Material
Adverse Effect, neither the Company nor Sea Coast is in material breach of any
license or sublicense with respect to such Intellectual Property (including the
Material Licenses), and no event has occurred that with notice or lapse of time
would constitute a material breach by the Company or Sea Coast thereunder.
(c) The Company and Sea Coast own or have the right to use,
without payments to any other Person except pursuant to a license, settlement or
similar agreement, all material Intellectual Property either (i) necessary for,
or (ii) actually used in, the operation of the business (including, without
limitation, in connection with the manufacture, marketing, sale or distribution
of any of the Company's products) of the Company and Sea Coast as and where
their business is currently conducted.
(d) Subject to the Exceptions, and except as would not have a
Company Material Adverse Effect and except as set forth in Section 6.14(d) of
the Company Disclosure Schedule: (i) neither the Company nor Sea Coast has
interfered with, infringed upon, misappropriated, or otherwise violated any
intellectual property rights of third parties; (ii) neither the Company nor Sea
Coast has received any charge, complaint, claim, demand, or notice during the
past two (2) years, (or earlier, if not resolved) alleging any such
interference, infringement, misappropriation, or violation (including any claim
that the Company or Sea Coast must license or refrain from using any
intellectual property rights of any third party); and (iii) to the Knowledge of
the Company, no third party has interfered with, infringed upon,
misappropriated, or otherwise violated any material Intellectual Property rights
of the Company or Sea Coast during the past two (2) years (or earlier if not
resolved).
(e) Except as would not have a Company Material Adverse
Effect, the Intellectual Property owned by the Company and/or Sea Coast and for
which confidentiality is required has been maintained in confidence in
accordance with protection procedures believed by the Company and Sea Coast to
be adequate for protection, and in accordance with procedures customarily used
in the industry to protect rights of like importance.
Section 6.15 Taxes. Subject to the Exceptions, and except as set
forth in Section 6.15 of the Company Disclosure Schedule:
(a) The Company and Sea Coast have timely filed all Tax
Returns required to be filed by them under applicable law, and all such Tax
Returns were and are true, complete and correct in all material respects. Except
to the extent adequately reserved for and reflected on the most recent balance
sheets of the Company contained in the SEC Reports, all Taxes due and payable by
the Company for all periods or portions thereof ending on or before the Closing
Date have been timely paid or provided for.
(b) The Company and Sea Coast have complied with the
provisions of the Code relating to the withholding of Taxes, as well as similar
provisions under any other
28
Laws, and have, within the time and in the manner prescribed by Law, withheld,
collected and paid over to the proper governmental authorities all amounts
required.
(c) No audits or other administrative proceedings or court
proceedings are presently pending with regard to any Taxes or Tax Returns of the
Company or Sea Coast, except for any audits or other proceedings (i) that will
not result in additional material Taxes, or (ii) with respect to which the
Company has established adequate reserves for any resultant Taxes, which
reserves are reflected on the most recent balance sheets of the Company
contained in the SEC Reports.
(d) Neither the Company nor Sea Coast has requested any
extension of time within which to file any Tax Return, which Tax Return has not
prior to the expiration of the extension period been filed.
(e) Neither the Company nor Sea Coast has agreed to, nor is it
required to make, any adjustment pursuant to Section 481(a) of the Code (or any
predecessor provision) by reason of any change in any accounting method of the
Company or Sea Coast that could affect any period or portion thereof beginning
on or after the Closing Date, and there is no application pending with any
taxing authority requesting permission for any changes in any accounting method
of the Company or Sea Coast.
(f) The Company does not have any material liability for Taxes
of any Person other than Sea Coast (i) under Treasury Reg. Section 1.1502-6 (or
any similar provision of state, local or foreign law), (ii) by contract, or
(iii) otherwise.
(g) No material deficiencies for any Taxes have been proposed,
asserted or assessed in writing against the Company which have not been paid,
except for any deficiencies with respect to which the Company has established
adequate reserves, which reserves are reflected on the most recent balance
sheets of the Company contained in the SEC Reports, and there is no outstanding
waiver of the statute of limitations with respect to any Taxes or Tax Returns of
the Company or Sea Coast.
(h) Sea Coast does not have any liability for Taxes of any
Person other than the Company (i) under Treasury Reg. Section 1.1502-6 (or any
similar provision of state, local or foreign law) (ii) by contract, or (iii)
otherwise.
(i) Section 6.15 of the Company Disclosure Schedule describes
all material adjustments to Tax Returns filed by, or on behalf of, the Company
or Sea Coast, or any affiliated group of corporations of which the Company or
Sea Coast is or was a member, for all taxable years since 1998, that have been
proposed in writing by any representative of any Governmental Entity, and the
resulting Taxes, if any, proposed to be assessed.
(j) There are no material liens with respect to Taxes upon any
of the properties or assets, real or personal, tangible or intangible, of the
Company or Sea Coast (except for Taxes not yet due).
(k) No property owned by the Company or Sea Coast is property
that CEH LLC, the Company or Sea Coast is or will be required to treat as being
owned by another
29
person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended and in effect immediately before the enactment of the
Tax Reform Act of 1986, or is "tax-exempt use property" within the meaning of
Section 168(h) of the Code.
(l) Neither the Company nor Sea Coast, owns an interest in any
(i) domestic international sales corporation, (ii) foreign sales corporation,
(iii) controlled foreign corporation, or (iv) passive foreign investment
company.
(m) The Company is not a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code.
(n) To the Knowledge of the Company, neither the Company nor
Sea Coast is a party (other than as an investor) to any industrial development
bond.
(o) To the Knowledge of the Company, neither the Company nor
Sea Coast was a party to any deferred intercompany transaction that will be
restored (pursuant to the Section 1502 regulations) and will result in income or
loss to the Company or Sea Coast due to the contemplated transaction.
(p) To the Knowledge of the Company, during the previous two
years neither the Company nor Sea Coast has engaged in any exchange under which
the gain realized on such exchange was not recognized due to Section 1031 of the
Code.
(q) To the Knowledge of the Company, none of the property
owned or used by the Company or Sea Coast is subject to a lease other than a
"true" lease for federal income tax purposes.
Section 6.16 Properties.
(a) Section 6.16(a) of the Company Disclosure Schedule sets
forth a complete list of (i) all real property owned in fee by the Company or
Sea Coast (the "Company Owned Real Property") and (ii) all material real
property leases and subleases (including the corresponding overleases) to which
the Company or Sea Coast is a party (the "Company Leases").
(b) Subject to the Exceptions, and except as disclosed in
Section 6.16(b) of the Company Disclosure Schedule:
(i) the Company and Sea Coast have good, marketable
title to the Company Real Property free of all Liens including good, valid
and enforceable leasehold interests in and to the Company Leased Real
Property pursuant to the Company Leases, in each case subject to the
Permitted Liens;
(ii) there are no outstanding consents which have not
yet been obtained by the Company or Sea Coast, as applicable, in
connection with the leasing of any of the Company Leased Real Property,
except for consents the failure to obtain would not result in a Company
Material Adverse Effect;
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(iii) except for outstanding Third Party Consents, (x)
the use and operation of the Company Real Property in the conduct of the
business of the Company and Sea Coast does not violate any instrument of
record or agreement affecting the Company Real Property and (y) there are
no outstanding notices of default under any of the Company Leases which
individually, or in the aggregate, would materially adversely affect the
Company's or Sea Coast's use of the Company Leased Real Property;
(iv) valid policies or commitments of title insurance
have been issued insuring the Company's or, if applicable, Sea Coast's fee
simple title to the Company Owned Real Property, subject only to the
matters set forth in such policies or commitments; and
(v) (x) each material certificate, permit or license
from any Governmental Entity having jurisdiction over any of the Company
Owned Real Property or any agreement, easement or other right which is
necessary to permit the lawful use and operation of the buildings and
improvements on any of the Company Owned Real Property or which is
necessary to permit the lawful use and operation of all driveways, roads
and other means of egress and ingress to and from any of the Company Owned
Real Property has been obtained and is in full force and effect, and (y)
no written notice of any violation of any federal, state or municipal law,
ordinance, order, regulation or requirement having a material adverse
effect on the use thereof or the business or operations of the Company or
Sea Coast has been issued by any Governmental Entity.
Section 6.17 Environmental Matters. Subject to the Exceptions, and
except as set forth in Section 6.17 of the Company Disclosure Schedule:
(a) the Company Real Property (the "Company Facilities") is in
compliance with all applicable Environmental Laws including, but not limited to,
the possession of all permits and other governmental authorizations required
under applicable Environmental Laws, where the failure to comply with such
Environmental Laws would result in a Company Material Adverse Effect;
(b) there is no pending or threatened claim, lawsuit or
administrative proceeding against the Company or Sea Coast under any
Environmental Law, which would have a Company Material Adverse Effect. The
Company has not received written notice from any person, including a
Governmental Entity, alleging that the Company or Sea Coast is in violation of
any applicable Environmental Law or otherwise may be liable under any applicable
Environmental Law, which violation or liability is unresolved and would result
in a Company Material Adverse Effect; and
(c) there have been no Releases, spills or discharges of
Hazardous Materials on or underneath any of the Company Real Property, that
would result in a Company Material Adverse Effect.
Section 6.18 Affiliate Transactions. Subject to the Exceptions, and
except as set forth in Section 6.18 of the Company Disclosure Schedule, none of
the executive officers or
31
directors (or immediate family members thereof) of the Company or Sea Coast nor
any Five Percent Holder is party to any Contract with the Company or Sea Coast
or has any material interest in any property, real, personal or mixed, tangible
or intangible, owned by or used in the business of the Company or Sea Coast.
Section 6.19 Labor Relations. Subject to the Exceptions, and except
as set forth in Section 6.19 of the Company Disclosure Schedule:
(a) the Company and Sea Coast are in compliance in all
material respects with all applicable Laws respecting employment, employment
practices, terms and conditions of employment and wages and hours, in each case,
with respect to employees, except where such non-compliance would not have a
Company Material Adverse Effect;
(b) neither the Company nor Sea Coast has received written
notice of any charge or complaint against either the Company or Sea Coast
pending before the Equal Employment Opportunity Commission, the National Labor
Relations Board, or any other Governmental Entity regarding any alleged unlawful
employment practice which, if resolved adversely to the Company or Sea Coast,
would have a Company Material Adverse Effect;
(c) neither the Company nor Sea Coast is a party to any
collective bargaining agreement and there is no work stoppage or labor strike
pending or threatened against the Company or Sea Coast; and
(d) neither the Company nor Sea Coast has received written
notice that any representation petition respecting the employees of the Company
or Sea Coast has been filed with the National Labor Relations Board.
Section 6.20 Certain Business Practices. Since January 1, 2002,
neither the Company nor Sea Coast nor, to the Knowledge of the Company, any
directors, officers, agents or employees of the Company and/or Sea Coast acting
on behalf of the Company or Sea Coast have (a) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
political activity, or (b) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended.
Section 6.21 Insurance. The Company and Sea Coast maintain policies
of insurance in amounts that the Company believes to be reasonably sufficient to
insure against risks usually insured against by Persons operating similar
businesses or properties of similar size in the localities where such businesses
or properties are located and have been issued by insurers of recognized
responsibility. The Company has received no written notice of default under any
such policies and no written notice of cancellation of any such coverage.
Section 6.22 State Takeover Statutes. The Company has opted out of
Section 203 of the DGCL and, as a result, Section 203 of the DGCL is inoperable
as to the Merger. To the Knowledge of the Company, no other state takeover
statute applies to this Agreement or any of the transactions contemplated
hereby.
32
Section 6.23 Product Recalls. Except as set forth in Section 6.23 of
the Company Disclosure Schedule, since January 1, 2002, the Company has not
instituted any material recalls or withdrawals of products produced or sold by
the Company or Sea Coast, and there has not been any similar action of any
Governmental Entity with respect to such products.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES REGARDING PINNACLE
Except as set forth in the disclosure schedule (the "Pinnacle
Disclosure Schedule") to be delivered by CEH LLC to the Company pursuant to this
Agreement as soon practicable, but no later than the tenth (10th) Business Day
after the Pinnacle Ownership Date, CEH LLC represents and warrants to the
Company as set forth below as of the Pinnacle Ownership Date (unless otherwise
explicitly indicated). Disclosure of an item in response to one Section of this
Agreement shall constitute disclosure in response to such other Sections of this
Agreement as is reasonably apparent on the face of the disclosure
notwithstanding the fact that no express cross-reference is made. Disclosure of
any items not otherwise required to be disclosed shall not create any inference
of materiality. In the event of any inconsistency between statements in the body
of this Agreement and statements in the Pinnacle Disclosure Schedule (excluding
exceptions expressly set forth in the Pinnacle Disclosure Schedule with respect
to a specifically identified representation or warranty), the statements in the
body of this Agreement shall control.
EXCEPT FOR THE LIMITED REPRESENTATIONS AND WARRANTIES EXPRESSLY SET
FORTH IN THIS ARTICLE VII AND THE COMPANY'S RELIANCE THEREON: (A) CEH LLC HEREBY
SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, ORAL OR WRITTEN,
INCLUDING, BUT NOT LIMITED TO THOSE CONCERNING (i) THE NATURE AND CONDITION OF
ANY ASSETS AND THE SUITABILITY OF ANY ASSETS FOR ANY AND ALL ACTIVITIES AND
USES, (ii) THE MANNER, CONSTRUCTION, CONDITION AND STATE OF REPAIR OR LACK OF
REPAIR OF ANY IMPROVEMENTS LOCATED ON ANY ASSETS, AND (iii) THE COMPLIANCE OF
ANY ASSET OR ITS OPERATION WITH ANY LAWS, RULES, ORDINANCES, OR REGULATIONS OF
ANY GOVERNMENT OR OTHER BODY; (B) CEH LLC MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW, INCLUDING, BUT IN NO WAY
LIMITED TO, ANY WARRANTY OF QUANTITY, QUALITY, CONDITION, HABITABILITY,
MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF PINNACLE OR
ANY OF ITS ASSETS; (C) THE COMPANY HAS CAUSED THE EFFECTIVENESS OF THIS
AGREEMENT BASED SOLELY ON ITS OWN INDEPENDENT INVESTIGATIONS; AND (D) CEH LLC
MAKES NO REPRESENTATION OR WARRANTY AS TO THE ACCURACY OR RELIABILITY OF ANY
FORECASTS OR PROJECTIONS OF REVENUES, SALES, EXPENSES OR PROFITS.
Section 7.1 Organization. Each of Pinnacle and its Subsidiaries is
duly organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation, organization or formation, and has all
requisite power and authority to carry on its business as it is now being
conducted. Each of Pinnacle and its Subsidiaries is duly qualified or
33
licensed to transact business as a foreign corporation and is in good standing
in each jurisdiction where the character of its assets owned or held under lease
or the nature of its business makes such qualification necessary, except in
those jurisdictions where the failure to be so qualified and in good standing
would not, individually or in the aggregate, have a Pinnacle Material Adverse
Effect.
Section 7.2 Capitalization; Subsidiaries.
(a) The authorized capital stock of Pinnacle consists solely
of common stock (the "Pinnacle Common Stock"), which is issued and outstanding
in such amounts as set forth on Schedule 7.2(a). All outstanding shares of
Pinnacle Common Stock are validly issued, fully paid and nonassessable, and were
not issued in violation of any preemptive or other similar rights.
(b) Each of Pinnacle's Subsidiaries is listed in Section
7.2(b) of the Pinnacle Disclosure Schedule. Except as set forth in Section
7.2(b) of the Pinnacle Disclosure Schedule, Pinnacle directly or indirectly is
the beneficial and record owner of all issued and outstanding capital stock of
each such Subsidiary and such ownership is free and clear of all Liens. Each
outstanding share of capital stock of each such Subsidiary has been duly and
validly authorized and issued and is fully paid and nonassessable.
(c) Except as set forth in Section 7.2(c) of the Pinnacle
Disclosure Schedule, there are no outstanding subscription rights, options,
warrants, convertible or exchangeable securities or other rights of any
character whatsoever to which Pinnacle or any of its Subsidiaries is a party
relating to issued or unissued capital stock of Pinnacle or any of its
Subsidiaries, or any Contract of any character whatsoever relating to issued or
unissued capital stock of Pinnacle or any of its Subsidiaries or pursuant to
which Pinnacle or any of its Subsidiaries is or may become bound to issue or
grant additional shares of their capital stock or related subscription rights,
options, warrants, convertible or exchangeable securities or other rights, or to
grant preemptive rights.
Section 7.3 Financial Statements.
Section 7.3(a) of the Pinnacle Disclosure Schedule contains true,
complete and correct copies of the audited consolidated balance sheets of
Pinnacle and its consolidated Subsidiaries as of July 31, 2003, July 31, 2002
and July 31, 2001, and the related audited consolidated statements of
operations, cash flows and shareholders' equity of Pinnacle and its consolidated
Subsidiaries for the fiscal year ended July 31, 2003 (the "Latest Pinnacle
Balance Sheet Date"), July 31, 2002 and for the period from March 29, 2001
(Pinnacle's date of incorporation) to July 31, 2001 (Pinnacle had no operations
until May 22, 2001, the date on which Pinnacle consummated the acquisition of
certain assets and the assumption of certain liabilities of Vlasic Foods
International Inc.'s North American business), and the related notes thereto
(such audited financial statements collectively being referred to herein as the
"Pinnacle Financial Statements"), accompanied by a true and correct copy of the
reports thereon of PricewaterhouseCoopers LLP, independent public accountants,
and all letters from such auditors concerning internal control commentary
resulting from the conducting of such audit. The Pinnacle Financial Statements,
together with the notes thereto, have been prepared in accordance
34
with GAAP applied on a consistent basis throughout the periods covered thereby
(except to the extent disclosed therein or required by changes in GAAP) and
fairly present in all material respects the consolidated financial condition and
results of operations of Pinnacle and its consolidated Subsidiaries as of the
respective dates thereof and for the respective periods covered thereby.
Section 7.4 Absence of Certain Changes. Except as set forth in
Section 7.4 of the Pinnacle Disclosure Schedule or as provided or contemplated
by the Transaction Documents, since the Latest Pinnacle Balance Sheet Date:
(i) Pinnacle and the Subsidiaries of Pinnacle have in
all material respects conducted their respective business in the ordinary
course of business consistent with past practice;
(ii) neither Pinnacle nor any Subsidiary of Pinnacle
have taken any actions, and no events have occurred that, individually or
in the aggregate, has had or would have a Pinnacle Material Adverse
Effect; and
(iii) neither Pinnacle nor any Subsidiary of Pinnacle
has taken any action that, if taken after the Pinnacle Ownership Date
without the Designated Representative's consent, would constitute a breach
of any of the covenants set forth in Section 10.1 hereof.
Section 7.5 Litigation.
(a) Except as set forth in Section 7.5(a) of the Pinnacle
Disclosure Schedule, there is no Litigation pending or, to the Knowledge of
Pinnacle, threatened in writing against Pinnacle or any of its Subsidiaries or
involving any of their respective properties or assets by or before any court,
arbitrator or other Governmental Entity which (i) is reasonably likely to
prevent or materially delay consummation of the transactions contemplated by
this Agreement or any of the other Transaction Documents or (ii) if resolved
adversely to Pinnacle or any of its Subsidiaries would have a Pinnacle Material
Adverse Effect.
(b) Except as set forth in Section 7.5(b) of the Pinnacle
Disclosure Schedule, neither Pinnacle nor any Subsidiary of Pinnacle is (i) in
default under or in breach of any order, judgment or decree of any court,
arbitrator or other Governmental Entity, or (ii) a party or subject to any
order, judgment or decree of any court, arbitrator or other Governmental Entity,
except, in each case, where such default or breach, or such order, judgment or
decree, would not have a Pinnacle Material Adverse Effect.
Section 7.6 Consents and Approvals. Except as set forth in Section
7.6 of the Pinnacle Disclosure Schedule, no consent, registration, declaration,
or filing with, any Governmental Entity is required by Pinnacle or any of its
Subsidiaries in connection with the execution, delivery and performance by CEH
LLC of this Agreement and the other Transaction Documents to which it is a party
or the consummation by CEH LLC of the transactions contemplated hereby or
thereby, except for (a) the filing of a pre-merger notification and report form
by CEH LLC under the HSR Act, and the expiration or termination of the
applicable waiting period thereunder, (b) the filing, if applicable or
advisable, of a request for an Advance
35
Ruling Certificate pursuant to Section 102 of the Competition Act (Canada)
and/or the filing of a pre-merger notification by CEH LLC in accordance with
Part IX of the Competition Act (Canada) and the expiration of the applicable
waiting period thereunder, (c) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, (d) such filings in connection with
any state or local tax that is attributable to the beneficial ownership of the
Pinnacle Real Property ("Gains and Transfer Taxes"), if any, (e) such other
filings and consents as may be required under any environmental, health or
safety law or regulation pertaining to any notification, disclosure or required
approval necessitated by the Merger or the other transactions contemplated in
this Agreement and the other Transaction Documents to which CEH LLC is a party
and (f) such other consents, approvals, orders, authorizations, registrations,
declarations, filings, notices or permits the failure of which to be obtained or
made would not, individually or in the aggregate, have a Pinnacle Material
Adverse Effect.
Section 7.7 Noncontravention. The execution, delivery and
performance by CEH LLC of the Transaction Documents to which it is a party do
not, and the consummation of the transactions contemplated herein and therein
will not, subject to obtaining the consents, approvals, authorizations and
permits and making the filings described in Section 7.6 or as set forth in
Section 7.7 of the Pinnacle Disclosure Schedule, (a) conflict with or result in
any breach of Pinnacle's or its Subsidiaries' respective Fundamental Documents;
(b) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default under, or give rise to any right of
termination, cancellation, suspension, modification or acceleration of any
obligation under, or result in the creation of a Lien (other than Pinnacle
Permitted Encumbrances), or otherwise require the consent or waiver of, or
notice to, any other party under, any Pinnacle Material Contract; or (c) violate
any material Law applicable to Pinnacle, any of its Subsidiaries or any of their
respective properties or assets except, with respect to each of clauses (b) and
(c), such violations, conflicts, breaches or defaults as would not, individually
or in the aggregate, have a Pinnacle Material Adverse Effect.
Section 7.8 Compliance with Laws. Except as set forth in Section 7.8
of the Pinnacle Disclosure Schedule, each of Pinnacle and its Subsidiaries (a)
is in compliance in all material respects with all Laws applicable to its
business, and neither Pinnacle nor any of its Subsidiaries has received any
written notice of any alleged material violation of Law, except to the extent
that any noncompliance or violation would not, individually or in the aggregate,
have a Pinnacle Material Adverse Effect, and (b) holds all Permits required for
the ownership of its assets and operation of its business except where the
failure to hold any such Permits would not, individually or in the aggregate,
have a Pinnacle Material Adverse Effect. All such Permits are in full force and
effect, except for those the failure of which to be in full force and effect
would not, individually or in the aggregate, have a Pinnacle Material Adverse
Effect. For purposes of this Section 7.8, the term "Laws" as used in clause (a)
above shall not include any Environmental Laws, any Laws relating to Taxes or
the subject matters of Sections 7.10, 7.11 and 7.12.
Section 7.9 Pinnacle Material Contracts. Section 7.9 of the Pinnacle
Disclosure Schedule lists as of the Pinnacle Ownership Date each Contract of the
following types to which Pinnacle or any of its Subsidiaries is a party or by or
to which Pinnacle or any of its Subsidiaries or any of their properties may be
bound or subject:
36
(a) Contracts containing covenants purporting to limit the
freedom of Pinnacle or any of its Subsidiaries to compete in any line of
business in any geographic area or to hire any individual or group of
individuals;
(b) Contracts which require payments to or by Pinnacle or any
of its Subsidiaries of at least $2.5 million annually and which, in either case,
cannot be canceled by Pinnacle or such Subsidiary without penalty on notice of
ninety (90) days or less;
(c) Contracts constituting indentures, mortgages, promissory
notes, loan agreements, bonds, guarantees, letters of credit or other financing
agreements or instruments of Pinnacle or any of its Subsidiaries evidencing
indebtedness in amounts in excess of $2.5 million;
(d) Contracts providing for the acquisition or disposition of
any business or the capital stock of any Person in each case having a purchase
price in excess of $2.5 million that has not been terminated or consummated;
(e) Contracts in respect of any joint venture, partnership or
other similar arrangement, in each case involving a contribution of future
capital (whether such future capital is contributed in cash, goods or services)
in excess of $2.5 million on the part of Pinnacle;
(f) Contracts constituting manufacturer's representative,
sales agency, supply, co-packaging, distribution or marketing Contracts (A)
having a remaining term of one-year or more (from the Pinnacle Ownership Date)
and which are not terminable by Pinnacle or a Subsidiary of Pinnacle without
penalty on notice of ninety (90) days or less and (B) which are material to the
business, results of operations, condition (financial or otherwise) of Pinnacle
and its Subsidiaries, taken as a whole; and
(g) each amendment, supplement, and modification in respect of
any of the foregoing.
"Pinnacle Material Contracts" means the Contracts disclosed in
Section 7.9 of the Pinnacle Disclosure Schedule; provided, that no event shall a
Pinnacle Material Contract include a Pinnacle Ordinary Course of Business
Contract. Neither Pinnacle nor any of its Subsidiaries is in default in any
material respect under any such Pinnacle Material Contract. Each such Pinnacle
Material Contract is (a) a valid and binding obligation of Pinnacle or its
Subsidiaries and, to the Knowledge of Pinnacle, a valid and binding obligation
of each other party thereto, and (b) is in full force and effect. To the
Knowledge of Pinnacle, each other party thereto, has performed in all material
respects all obligations required to be performed by it and is not in default
under or in breach of, nor in receipt of any claim of default or breach under,
any such Pinnacle Material Contract. There has not occurred any event or events
that, with the lapse of time or the giving of notice or both, would constitute a
default by Pinnacle or any Subsidiary, or to the Knowledge of Pinnacle, any of
the other parties to any such Pinnacle Material Contracts, except as set forth
in Section 7.9 of the Pinnacle Disclosure Schedule and except for those defaults
that would not have a Pinnacle Material Adverse Effect.
37
Section 7.10 ERISA Compliance; Labor.
(a) Section 7.10(a) of the Pinnacle Disclosure Schedule
contains a complete and correct list of each Pinnacle Plan. With respect to each
Pinnacle Plan, CEH LLC has heretofore delivered or made available to the Company
true and correct copies of the Pinnacle Plan and any amendments thereto (or if
the Pinnacle Plan is not a written plan, a description thereof) and the most
recent determination letter received from the Internal Revenue Service with
respect to each Pinnacle Plan intended to qualify under Section 401 of the Code.
There has been no amendment to, written interpretation of or announcement
(whether or not written) by Pinnacle or any of its Subsidiaries relating to, or
change in employee participation or coverage under, any Pinnacle Plan that would
increase materially the expense of maintaining such Pinnacle Plan above the
level or expense incurred in respect thereof for the most recent fiscal year
ended prior to the date hereof. Except as set forth in Section 7.10(a) of the
Pinnacle Disclosure Schedule, neither Pinnacle nor any other entity required to
be aggregated with Pinnacle under Section 414(b), 414(c) or 414(m) of the Code
(the "Pinnacle Aggregated Group") sponsors, and neither Pinnacle nor any member
of the Pinnacle Aggregated Group has sponsored since the inception of Pinnacle,
a "defined benefit plan" as such term is defined in Section 3(35) of ERISA (each
such defined benefit plan, a "Pinnacle Pension Plan"). Except as set forth in
Section 7.10(a) of the Pinnacle Disclosure Schedule, neither Pinnacle nor any
member of the Pinnacle Aggregated Group has contributed or been obligated to
contribute at any time to any "multi-employer plan" as such term is defined in
Section 3(37) or Section 4001(a)(3) of ERISA. Neither Pinnacle nor any member of
the Pinnacle Aggregated Group has any liability under Title IV of ERISA, except
for the payment of premiums to the Pension Benefit Guaranty Corporation (which
premiums have been paid when due).
(b) Each Pinnacle Plan has been administered in all material
respects in accordance with its terms, and each of the Pinnacle Plans (and its
related trust) has been operated in material compliance with applicable Laws.
Each Pinnacle Plan that is intended to be qualified under Section 401(a) of the
Code has been operated in material compliance with Section 401(a) of the Code
and ERISA. All contributions, premiums and other payments with respect to
Pinnacle Plans that are due on or before the Pinnacle Ownership Date have been
timely paid; and all contributions, premiums and payments with respect to each
Pinnacle Plan due prior to the date hereof to any Pinnacle Plan have been timely
paid. Except as set forth in Section 7.10(b) of the Pinnacle Disclosure
Schedule, there are no actions, suits or claims pending (other than routine
claims for benefits) or, to the Knowledge of Pinnacle, threatened against, or
with respect to, any of the Pinnacle Plans. To the Knowledge of Pinnacle, there
is no matter (including any audit, examination, investigation or other inquiry)
pending with respect to any of the Pinnacle Plans before the Internal Revenue
Service, the Department of Labor or any other Governmental Entity other than as
described in Section 7.10(b) of the Pinnacle Disclosure Schedule.
(c) Except as set forth in Section 7.10(c) of the Pinnacle
Disclosure Schedule, to the Knowledge of Pinnacle, there exists no condition
that would subject Pinnacle or any member of the Pinnacle Aggregated Group to
any material liability under the terms of the Pinnacle Plans or applicable Laws
other than (i) any payment of benefits in the normal course of plan operation
and (ii) the payment of contributions as required by the terms of such plan or
applicable Law.
38
(d) No "prohibited transaction," as such term is described in
Section 4975 of the Code or Section 406 of ERISA, has occurred with respect to
any of the Pinnacle Plans that would subject Pinnacle, any of its Subsidiaries,
any officer of Pinnacle or any of such plans or any trust to any Tax or penalty
on prohibited transactions imposed by Section 4975 of the Code or to any
liability under ERISA.
(e) Except as set forth in Section 7.10(e) of the Pinnacle
Disclosure Schedule, no employee or former employee of Pinnacle or any of its
Subsidiaries will be entitled to any additional payment or benefit, or to the
acceleration of any payment or benefit, by reason of the transactions
contemplated by this Agreement.
(f) Except as set forth in Section 7.10(f) of the Pinnacle
Disclosure Schedule, Pinnacle has the requisite power and authority under ERISA
and other applicable Laws to make all changes to retiree welfare benefits
(including increases in premiums and cost-sharing for former employees and their
dependents) that it has previously implemented and to make all changes to
retiree welfare benefits that it has announced but not yet implemented.
(g) Except as set forth in Section 7.10(g) of the Pinnacle
Disclosure Schedule, neither Pinnacle nor any of its Subsidiaries is a party to
any collective bargaining agreement. Except as set forth in Section 7.10(g) of
the Pinnacle Disclosure Schedule, (i) neither Pinnacle nor any of its
Subsidiaries is engaged in any unfair labor practices, has any unfair labor
practice charges or complaints before the National Labor Relations Board pending
or, to the Knowledge of Pinnacle, threatened against it, (ii) to the Knowledge
of Pinnacle, there are currently no union organizing activities among the
employees of Pinnacle or any of its Subsidiaries, (iii) neither Pinnacle nor any
of its Subsidiaries has closed any facility or implemented any new early
retirement, separation or window program, nor have any such actions or programs
been planned or announced for the future, (iv) there is no labor strike, walkout
or other material work stoppage pending, or to the Knowledge of Pinnacle,
threatened against Pinnacle or any of its Subsidiaries, and (v) no charges,
complaints or proceedings have been asserted against Pinnacle or any of its
Subsidiaries before the Equal Employment Opportunity Commission, Department of
Labor or any other Governmental Entity responsible for regulating employment
practices.
Section 7.11 Intellectual Property. Section 7.11 of the Pinnacle
Disclosure Schedule sets forth all of the statutorily registered or issued
Pinnacle Intellectual Property. Except as set forth in Section 7.11 of the
Pinnacle Disclosure Schedule, Pinnacle and its Subsidiaries own, or are licensed
or otherwise have the right or license to use inventions that are the subject of
the United States and foreign patents and applications thereto, registered
trademarks, trademarks, registered service marks, service marks, trade names,
copyrights, software and know-how currently used by Pinnacle and its
Subsidiaries in their respective businesses (the "Pinnacle Intellectual
Property") other than the trademarks ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ (such trademarks not to
include any other trademarks or terms used in association with the trademarks
▇▇▇▇▇▇▇ and Vlasic), except where the failure to so own, license or otherwise
have the right to use such Pinnacle Intellectual Property would not,
individually or in the aggregate, have a Pinnacle Material Adverse Effect.
Pinnacle and its Subsidiaries, own, or are licensed or otherwise have the right
or license to use, the trademarks ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ (such trademarks not to
include any other trademarks or terms used in association with the trademarks
▇▇▇▇▇▇▇
39
and Vlasic) as currently used by Pinnacle and its Subsidiaries in their
respective businesses. Except as set forth in Section 7.11 of the Pinnacle
Disclosure Schedule, (a) to the Knowledge of Pinnacle, the use of the Pinnacle
Intellectual Property by Pinnacle and its Subsidiaries does not interfere with,
infringe upon, misappropriate or otherwise come into conflict with any
intellectual property rights of any other person and Pinnacle has not received
any written demand, claim or notice from any person with respect to the Pinnacle
Intellectual Property which challenges the validity of any Pinnacle Intellectual
Property; (b) to the Knowledge of Pinnacle, no other person is interfering with,
infringing upon, misappropriating or otherwise coming into conflict with any
Pinnacle Intellectual Property; (c) no trademark or service ▇▇▇▇ owned, or to
the Knowledge of Pinnacle licensed, by Pinnacle or its Subsidiaries is involved
in the United States or Canada in any opposition, cancellation or equivalent
proceeding, and to the Knowledge of Pinnacle, no such action has been
threatened; (d) no patent owned by Pinnacle is involved in the United States or
Canada in any interference, reissue, reexamination or equivalent proceeding; and
(e) Pinnacle has not granted a license to any person to use any Pinnacle
Intellectual Property other than licenses granted in the ordinary course of
business or under any agreement set forth in Section 7.11 of the Pinnacle
Disclosure Schedule.
Section 7.12 Taxes.
(a) Pinnacle and its Subsidiaries have timely filed all Tax
Returns required to be filed by them under applicable Law, and all such Tax
Returns were and are true, complete and correct in all material respects. All
Taxes due and payable by Pinnacle for all periods or portions thereof ending on
or before the Closing Date have been timely paid or provided for.
(b) Pinnacle and its Subsidiaries have complied with the
provisions of the Code relating to the withholding of Taxes, as well as similar
provisions under any other Laws, and have, within the time and in the manner
prescribed by Law, withheld, collected and paid over to the proper governmental
authorities all amounts required.
(c) No audits or other administrative proceedings or court
proceedings are presently pending with regard to any Taxes or Tax Returns of
Pinnacle or its Subsidiaries, except for any audits or other proceedings (i)
that will not result in additional material Taxes, or (ii) with respect to which
Pinnacle has established adequate reserves for any resultant Taxes, which
reserves are reflected on the most recent audited balance sheets of Pinnacle.
(d) Neither Pinnacle nor its Subsidiaries has requested any
extension of time within which to file any Tax Return, which Tax Return has not
prior to the expiration of the extension period been filed.
(e) Neither Pinnacle nor its Subsidiaries has agreed to, nor
is it required to make, any adjustment pursuant to Section 481(a) of the Code
(or any predecessor provision) by reason of any change in any accounting method
of Pinnacle or its Subsidiaries that could affect any period or portion thereof
beginning on or after the Closing Date, and there is no application pending with
any taxing authority requesting permission for any changes in any accounting
method of Pinnacle or its Subsidiaries.
40
(f) Pinnacle does not have any material liability for Taxes of
any Person other than its Subsidiaries (i) under Treasury Reg. Section 1.1502-6
(or any similar provision of state, local or foreign law), (ii) by contract, or
(iii) otherwise.
(g) No material deficiencies for any Taxes have been proposed,
asserted or assessed in writing against Pinnacle which have not been paid,
except for any deficiencies with respect to which Pinnacle has established
adequate reserves, which reserves are reflected on the most recent audited
balance sheet of Pinnacle, and there is no outstanding waiver of the statute of
limitations with respect to any Taxes or Tax Returns of Pinnacle or its
Subsidiaries.
(h) Pinnacle's Subsidiaries do not have any liability for
Taxes of any Person other than Pinnacle (i) under Treasury Reg. Section 1.1502-6
(or any similar provision of state, local or foreign law) (ii) by contract, or
(iii) otherwise.
(i) Section 7.12 of the Pinnacle Disclosure Schedule describes
all material adjustments to Tax Returns filed by, or on behalf of, Pinnacle or
its Subsidiaries, or any affiliated group of corporations of which Pinnacle or
its Subsidiaries is or was a member, for all taxable years since March 29, 2001,
that have been proposed in writing by any representative of any Governmental
Entity, and the resulting Taxes, if any, proposed to be assessed.
(j) There are no material liens with respect to Taxes upon any
of the properties or assets, real or personal, tangible or intangible, Pinnacle
or its Subsidiaries (except for Taxes not yet due).
(k) No property owned by Pinnacle or its Subsidiaries is
property that CEH LLC, Pinnacle or its Subsidiaries is or will be required to
treat as being owned by another person pursuant to the provisions of Section
168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately before the enactment of the Tax Reform Act of 1986, or is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(l) Neither Pinnacle nor its Subsidiaries, owns an interest in
any (i) domestic international sales corporation, (ii) foreign sales
corporation, (iii) controlled foreign corporation, or (iv) passive foreign
investment company.
(m) Pinnacle is not a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code.
(n) To the Knowledge of Pinnacle, neither Pinnacle nor its
Subsidiaries is a party (other than as an investor) to any industrial
development bond.
(o) To the Knowledge of Pinnacle, neither Pinnacle nor its
Subsidiaries was a party to any deferred intercompany transaction that will be
restored (pursuant to the Section 1502 regulations) and will result in income or
loss to Pinnacle or its Subsidiaries due to the contemplated transaction.
41
(p) To the Knowledge of Pinnacle, during the previous two
years neither Pinnacle nor its Subsidiaries has engaged in any exchange under
which the gain realized on such exchange was not recognized due to Section 1031
of the Code.
(q) To the Knowledge of Pinnacle, none of the property owned
or used by Pinnacle or its Subsidiaries is subject to a lease other than a
"true" lease for federal income tax purposes.
Section 7.13 Properties.
(a) Owned Real Property. Section 7.13(a) of the Pinnacle
Disclosure Schedule sets forth a complete list of all Pinnacle Owned Real
Property. Except as set forth in Section 7.13(a) of the Pinnacle Disclosure
Schedule and in the real estate title reports for real estate owned by Pinnacle
and its Subsidiaries, Pinnacle or a Subsidiary of Pinnacle has good, marketable
title to the Pinnacle Owned Real Property, free and clear of all Liens other
than Pinnacle Permitted Encumbrances. Pinnacle or a Subsidiary of Pinnacle has
sufficient title to such easements, rights of way and other rights appurtenant
to each of the Pinnacle Owned Real Properties as are necessary to permit ingress
and egress to and from the Pinnacle Owned Real Property to a public way, except
where the failure to have such title would not have a Pinnacle Material Adverse
Effect. The material improvements on the Pinnacle Owned Real Property have
access to such sewer, water, gas, electric, telephone and other utilities as are
necessary to allow the business of Pinnacle and each of its Subsidiaries
operated thereon to be operated in the ordinary course as currently operated,
except where the failure to have such access would not have a Pinnacle Material
Adverse Effect. Except as set forth in Section 7.13(a) of the Pinnacle
Disclosure Schedule, the material improvements located on the Pinnacle Owned
Real Property are in sufficiently good condition (except for ordinary wear and
tear) to allow the business of Pinnacle and its Subsidiaries to be operated in
the ordinary course as currently operated. The current use of the Pinnacle Owned
Real Property by Pinnacle and its Subsidiaries does not violate in any material
respect any restrictive covenants of record affecting any of the Pinnacle Owned
Real Property.
(b) Leased Real Property. Section 7.13(b) of the Pinnacle
Disclosure Schedule sets forth a list of all material real property leases to
which Pinnacle or any of its Subsidiaries is a party. Each lease set forth in
Section 7.13(b) of the Pinnacle Disclosure Schedule is a valid and binding
obligation of Pinnacle or a Subsidiary of Pinnacle and (subject to any of such
leases being terminated in the ordinary course of business and in accordance
with the terms thereof) is in full force and effect. With respect to each
Pinnacle Leased Real Property, except as otherwise set forth in Section 7.13(b)
of the Pinnacle Disclosure Schedule, neither Pinnacle nor any of its
Subsidiaries, and to the Knowledge of Pinnacle, no other party, is in default in
any material respect under any lease set forth in Section 7.13(b) of the
Pinnacle Disclosure Schedule.
(c) Tangible Property. Pinnacle or its Subsidiaries have good
title to, or hold pursuant to valid and enforceable leases, all the tangible
properties and assets of Pinnacle and its Subsidiaries (excluding Pinnacle Real
Property) that are material to the conduct of the businesses of Pinnacle and its
Subsidiaries, with only such exceptions as constitute Pinnacle Permitted
Encumbrances. Except as set forth in Section 7.13(c) of the Pinnacle Disclosure
42
Schedule, such tangible properties and assets of Pinnacle and its Subsidiaries
are sufficient for the continued conduct of Pinnacle's businesses in
substantially the same manner as previously conducted, except where the failure
would not have a Pinnacle Material Adverse Effect.
(d) Liens and Encumbrances. All of the material assets of
Pinnacle and each of its Subsidiaries are free and clear of all Liens, except
Pinnacle Permitted Encumbrances and as set forth in Section 7.13(d) of the
Pinnacle Disclosure Schedule.
Section 7.14 Environmental Matters. Except as set forth in Section
7.14 of the Pinnacle Disclosure Schedule:
(a) the Pinnacle Real Property is in compliance with all
applicable Environmental Laws including, but not limited to, the possession of
all permits and other governmental authorizations required under applicable
Environmental Laws, where the failure to comply with such Environmental Laws
would not result in a Pinnacle Material Adverse Effect;
(b) there is no pending or threatened claim, lawsuit or
administrative proceeding against Pinnacle or any Subsidiary of Pinnacle under
any Environmental Law, which would have a Pinnacle Material Adverse Effect.
Pinnacle has not received written notice from any person, including a
Governmental Entity, alleging that Pinnacle or any Subsidiary of Pinnacle is in
violation of any applicable Environmental Law or otherwise may be liable under
any applicable Environmental Law, which violation or liability is unresolved and
would result in a Pinnacle Material Adverse Effect; and
(c) there have been no Releases, spills or discharges of
Hazardous Materials on or underneath any of the Pinnacle Real Property, that
would result in a Pinnacle Material Adverse Effect.
Section 7.15 Affiliate Transactions. Except as set forth in Section
7.15 of the Pinnacle Disclosure Schedule and except for compensation and payment
of reimbursable expenses incurred in the ordinary course of business to regular
employees of Pinnacle and its Subsidiaries, no current or former Affiliate of
Pinnacle or any of its Subsidiaries, is presently, or since the Pinnacle
Ownership Date has been, (i) a party to any transaction or Pinnacle Material
Contract with Pinnacle or any of its Subsidiaries or (ii) the direct or indirect
owner of an interest in any person which is a present or potential competitor,
supplier or customer of Pinnacle or any of its Subsidiaries (other than
non-affiliated holdings in publicly held companies). Except as set forth in
Section 7.15 of the Pinnacle Disclosure Schedule, no current or former Affiliate
of Pinnacle or any of its Subsidiaries is a guarantor or otherwise liable for
any actual or potential liability or obligation, whether direct or indirect, of
Pinnacle or any of its Subsidiaries
Section 7.16 Insurance. Pinnacle and its Subsidiaries maintain
policies of insurance in amounts that Pinnacle believes to be reasonably
sufficient to insure against risks usually insured against by Persons operating
similar businesses or properties of similar size in the localities where such
businesses or properties are located and have been issued by insurers of
recognized responsibility. Pinnacle has received no written notice of default
under any such policies and no written notice of cancellation of any such
coverage.
43
Section 7.17 Product Recalls. Except as set forth in Section 7.17 of
the Pinnacle Disclosure Schedule, since May 22, 2001, Pinnacle has not
instituted any material recalls or withdrawals of products produced or sold by
Pinnacle or any of its Subsidiaries, and there has not been any similar action
of any Governmental Entity with respect to such products.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF CEH LLC
Except as set forth in the disclosure schedule delivered by CEH LLC
(the "CEH LLC Disclosure Schedule") to the Company simultaneously with the
execution and delivery hereof, CEH LLC hereby represents and warrants to the
Company as set forth below as of the date hereof (unless otherwise explicitly
indicated). Disclosure of an item in response to one Section of this Agreement
shall constitute disclosure in response to such other Sections of this Agreement
as is reasonably apparent on the face of the disclosure notwithstanding the fact
that no express cross-reference is made. Disclosure of any items not otherwise
required to be disclosed shall not create any inference of materiality. In the
event of any inconsistency between statements in the body of this Agreement and
statements in the CEH LLC Disclosure Schedule (excluding exceptions expressly
set forth in the CEH LLC Disclosure Schedule with respect to a specifically
identified representation or warranty), the statements in the body of this
Agreement shall control.
Section 8.1 Organization. CEH LLC is a limited liability company
duly formed, validly existing and in good standing under the laws of the State
of Delaware and has all requisite power and authority to carry on its business
as it is now being conducted.
Section 8.2 Due Authorization. CEH LLC has all necessary power and
authority to enter into this Agreement and each of the other Transaction
Documents to which it is a party and, subject to the approval of the Bankruptcy
Court, to consummate the transactions contemplated hereby and thereby. The
execution and delivery by CEH LLC of this Agreement and each of the other
Transaction Documents to which it is a party is, and the compliance by CEH LLC
with this Agreement and each of the other Transaction Documents to which it is a
party, upon the approval of the Bankruptcy Court, will have been duly authorized
by all requisite action of CEH LLC. This Agreement has been, and each of the
other Transaction Documents to which CEH LLC is a party when executed and
delivered by CEH LLC will be, duly and validly executed and delivered by CEH
LLC, and (assuming due authorization, execution and delivery by the other
parties hereto or thereto) this Agreement constitutes, and each of such other
Transaction Documents when executed and delivered by CEH LLC will constitute, a
valid and binding obligation of CEH LLC, enforceable against CEH LLC in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, reorganization, insolvency and other similar laws affecting the
enforcement of creditors' rights generally and limitations imposed by general
principles of equity.
Section 8.3 Non-Contravention. The execution, delivery and
performance by CEH LLC of the Transaction Documents to which it is a party do
not, and the consummation of the transactions contemplated herein and therein
will not, subject to obtaining the consents, approvals, authorizations and
permits and making the filings described in Section 8.5 hereof or
44
as set forth in Section 8.5 of the CEH Disclosure Schedule: (a) conflict with or
result in any breach of CEH LLC's Fundamental Documents; (b) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default under, or give rise to any right of termination,
cancellation, suspension, modification or acceleration of any obligation under,
or result in the creation of a material Lien, or otherwise require the consent
or waiver of, or notice to, any other party under, any material Contract to
which CEH LLC is a party; or (c) violate any Law applicable to CEH LLC or any of
its properties or assets except (in the case of clause (b) or (c)), for
violations, breaches, defaults, rights or Liens which (i) purport to become
effective upon the occurrence of the Bankruptcy Case, (ii) individually or in
the aggregate, would not materially adversely affect the ability of CEH LLC to
perform its obligations under this Agreement or any of the Transaction Documents
to which it is a party or (iii) would not have a Material Adverse Effect.
Section 8.4 Litigation.
(a) Except as set forth in Section 8.4 of the CEH LLC
Disclosure Schedule, there is no Litigation pending or, to the Knowledge of CEH
LLC, threatened in writing against CEH LLC or involving any of its properties or
assets by or before any court, arbitrator or other Governmental Entity which (i)
is reasonably likely to prevent or materially delay consummation of the
transactions contemplated by this Agreement or any of the other Transaction
Documents, or (ii) if resolved adversely to CEH LLC would have a Material
Adverse Effect.
(b) Except as set forth in Section 8.4 of the CEH LLC
Disclosure Schedule, CEH LLC is not (i) in default under or in breach of any
order, judgment or decree of any court, arbitrator or other Governmental Entity,
or (ii) a party or subject to any order, judgment or decree of any court,
arbitrator or other Governmental Entity, except, in each case, where such
default, or breach, or such order, judgment or decree, would not (x) prevent or
materially delay consummation of the transactions contemplated by this Agreement
or any of the other Transaction Documents, or (y) have a Material Adverse
Effect.
Section 8.5 Consents and Approvals. Except as set forth in Section
8.5 of the CEH LLC Disclosure Schedule, no consent, registration, declaration,
or filing with, any Governmental Entity is required by CEH LLC in connection
with the execution, delivery and performance by CEH LLC of this Agreement and
the other Transaction Documents to which it is a party or the consummation by
CEH LLC of the transactions contemplated hereby or thereby, except for (a) the
filing of a pre-merger notification and report form by CEH LLC under the HSR
Act, and the expiration or termination of the applicable waiting period
thereunder, (b) the filing, if applicable or advisable, of a request for an
Advance Ruling Certificate pursuant to Section 102 of the Competition Act
(Canada) and/or the filing of a pre-merger notification by CEH LLC in accordance
with Part IX of the Competition Act (Canada) and the expiration of the
applicable waiting period thereunder, (c) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, (d) such filings in
connection with any Gains and Transfer Taxes, if any, (e) such other filings and
consents as may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required approval
necessitated by the Merger or the other transactions contemplated in this
Agreement and the other Transaction Documents to which CEH LLC is a party and
(f) such other consents,
45
approvals, orders, authorizations, registrations, declarations, filings, notices
or permits the failure of which to be obtained or made would not, individually
or in the aggregate, have a Material Adverse Effect.
Section 8.6 Financing. A complete and correct copy of the Debt
Commitment Letter is attached hereto as Exhibit E and complete and correct
copies of the commitment letters relating to the provision of equity financing
by the Pinnacle Equity Investors are attached hereto as Exhibit F (the "Equity
Commitment Letters"). Assuming the successful consummation of the Pinnacle
Merger and the issuance of up to $225 million of senior subordinated notes of
the Reorganized Company at the Closing Date (the "High Yield Offering"), the
funding commitments under the facilities described in the Debt Commitment Letter
and the equity commitments described in the Equity Commitment Letters, taken
together, are in amounts sufficient to enable CEH LLC and Pinnacle to consummate
the transactions contemplated by this Agreement. Each of the Equity Commitment
Letters is valid, binding and in full force and effect.
Section 8.7 Ownership of Holding and Pinnacle. CEH LLC is on the
date hereof, and will be as of the Pinnacle Ownership Date, the Agreement
Effective Date and the Closing Date, the lawful record and beneficial owner of
all of the outstanding equity securities of Holding other than equity securities
issued under the Holding Option Plan. As of the Pinnacle Ownership Date, the
Agreement Effective Date and the Closing Date, Holding will be the lawful record
and beneficial owner of all of the outstanding equity securities of Pinnacle.
Section 8.8 Financial Advisory, Legal and Other Fees. No agent,
broker, accounting firm, investment bank, other financial advisor, commercial
bank, other financial institution, law firm, public relations firm or any other
Person is or will be entitled to any fee, commission, expense or other amount
from CEH LLC in connection with any of the transactions contemplated by this
Agreement or the other Transaction Documents except for (a) the advisors
identified in Section 8.8 of the CEH LLC Disclosure Schedule and (b) other
Persons whose fees, commissions, expenses and other amounts accrued through the
date hereof and paid or payable do not in the aggregate total more than $1
million (taking into account any amount saved if any of the aforementioned
advisors are replaced).
Section 8.9 Beneficial Ownership. As of the date of this Agreement,
CEH LLC has no record or beneficial ownership of, and does not hold investment
authority over, any securities of the Company.
Section 8.10 Capitalization; Subsidiaries.
(a) The capitalization of CEH LLC shall be as set forth in
Section 7.2 of the Pinnacle Disclosure Schedule as of the Pinnacle Ownership
Date.
(b) Each of CEH LLC's Subsidiaries is listed in Section 8.10
of the CEH LLC Disclosure Schedule. Except as set forth in Section 8.10 of the
CEH LLC Disclosure Schedule, CEH LLC directly or indirectly is the beneficial
and record owner of all issued and outstanding capital stock of each such
Subsidiary and such ownership is free and clear of all
46
Liens. Each outstanding share of capital stock of each such Subsidiary has been
duly and validly authorized and issued and is fully paid and nonassessable.
Section 8.11 No Preemptive Rights. None of the Class A Units or the
Bondholder Trust Interests to be outstanding or subject to issuance upon
completion of the Restructuring will be issued in violation of, or subject to,
any preemptive rights or other rights to subscribe for or purchase securities
other than as set forth in the CEH LLC Members Agreement.
Section 8.12 No Activity. Holding was incorporated on July 28, 2003.
Since its inception, Holding has not engaged in any activity, other than such
actions in connection with (i) its organization, (ii) the purchase of all of the
outstanding capital stock of Acquisition and (iii) the preparation, negotiation
and execution of the Pinnacle Merger Agreement and the transaction documents
under and relating to the Pinnacle Merger Agreement, this Agreement and the
other Transaction Documents and the transactions contemplated thereby and
hereby. Holding does not have any operations, has not generated any revenues and
does not have any liabilities other than those incurred (a) in connection with
the foregoing, (b) in association with the Pinnacle Merger as provided by the
Pinnacle Merger Agreement and (c) in connection with the financing under the
Pinnacle Senior Credit Facility and the Debt Commitment Letter.
ARTICLE IX
COVENANTS OF THE COMPANY
Section 9.1 Conduct of Business Pending Closing. Subject to the
Exceptions, and except as set forth in Section 9.1 of the Company Disclosure
Schedule, or as consented to by CEH LLC (which consent shall not be unreasonably
withheld), during the period from the date of this Agreement through and
including the Closing Date, the Company shall not, and shall not permit Sea
Coast to:
(a) conduct its business other than in the Ordinary Course of
Business;
(b) other than dividends and distributions by Sea Coast to the
Company, (i) declare, set aside or pay any dividends (payable in cash, stock,
property or otherwise) on, or make any other distributions in respect of its
capital stock, (ii) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, or (iii) purchase, redeem
or otherwise acquire any capital stock in the Company or Sea Coast or any other
securities thereof or any rights, warrants or options to acquire any such shares
or other securities;
(c) issue, deliver, sell, pledge or otherwise encumber or
subject to any Lien any of its shares of capital stock or any other voting
securities or any securities convertible into, exercisable for or exchangeable
with, or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities, except for the issuance of shares of
Common Stock pursuant to (i) the exercise of Options and Warrants outstanding on
the date hereof, (ii) any mandatory provisions of any Plan and (iii) the
conversion of Series A Preferred outstanding on the date hereof;
47
(d) amend its Fundamental Documents other than in accordance
with this Agreement;
(e) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any "business" as defined in Rule
3-05(a)(2) of Regulation S-X;
(f) other than with respect to Permitted Liens, sell,
exchange, lease, sublease or otherwise dispose of any of the Company Real
Property or other assets of the Company or Sea Coast (other than Intellectual
Property), except for dispositions in the Ordinary Course of Business of (x)
inventory, (y) receivables pursuant to the Receivables Facility or (z) other
property or assets that are not material to the operation of the business of the
Company and Sea Coast taken as a whole;
(g) other than (x) with respect to Permitted Liens and (y)
licenses in the Ordinary Course of Business, (i) sell, pledge, dispose of,
transfer, license, encumber, abandon or fail to maintain, or (ii) authorize the
sale, pledge, disposition, transfer, encumbrance, abandonment or failure to
maintain of, any rights to items of material Intellectual Property;
(h) other than the Existing Credit Facility, the DIP Facility,
the Financing, incur any indebtedness for borrowed money or issue any debt
securities or options, warrants, calls or other rights to acquire any debt
securities of the Company, or assume, guarantee or endorse, or otherwise become
responsible for, the obligations of any Person, in each case in excess of $1
million and up to an aggregate of $2.5 million, except under the Receivables
Facility and for surety bonds issued in the Ordinary Course of Business;
(i) authorize or make aggregate commitments with respect to
capital expenditures in excess of $2.5 million above the aggregate capital
expenditures reflected in the Company Plan;
(j) increase the compensation payable or to become payable or
the benefits provided to, or pay any bonus (other than a bonus paid or options
required to be paid or issued pursuant to a Plan in effect as of the date
hereof) to, any director, officer or employee of the Company or Sea Coast, or
grant any severance or termination pay to, or enter into or modify any
employment or severance agreement with, any director, officer or other employee
of the Company or of Sea Coast, or establish, adopt, enter into or amend, except
as required to comply with applicable law, any collective bargaining, bonus,
profit-sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
Plan, agreement, trust, fund, policy or arrangement for the benefit of any
director, officer, consultant or employee, other than (i) pursuant to the Key
Employee Retention Plan, (ii) the Management Retention Plan, (iii) for payments
to non-executive employees pursuant to existing Plans and policies of the
Company or (iv) suspension of the Company's 1998 Employee Stock Purchase Plan;
(k) terminate the employment of any executive officer (other
than by accepting the resignations of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇) of the
Company other than for cause;
48
(l) pay, loan or advance any amount to, or sell, transfer or
lease any properties or assets (real, personal or mixed, tangible or intangible)
to, or purchase any properties or assets from, or enter into any Contract with,
any Five Percent Holder, or any of the Company's or Sea Coast's executive
officers or directors (or immediate family members thereof), other than payment
of compensation and benefits in the Ordinary Course of Business or as permitted
under Section 9.1(j) hereof;
(m) other than (x) in the Ordinary Course of Business and (y)
as required under the terms of any existing Contract or any other Contract
entered into in accordance with this Section 9.1, pay, discharge or satisfy any
claim, liability or obligation (absolute, accrued, contingent or otherwise) (not
otherwise subject to clause (o) below) in excess of $1 million;
(n) other than any Contract entered into with respect to the
Financing or the DIP Facility, enter into any Contract that (i) is outside the
Ordinary Course of Business and (ii) (x) presents a material risk of delaying
the Closing, (y) requires the Company to make payments in excess of $1 million,
or (z) subjects the Company or Sea Coast to any material non-compete or other
similar material restriction on the conduct of their businesses that would be
binding following the Closing;
(o) other than pursuant to the Bankruptcy Plan, effect any
settlement or compromise of any pending or threatened Litigation in respect of
which the Company or Sea Coast is or could have been a party, unless such
individual settlement (i) includes an unconditional written release of the
Company and Sea Coast, in form and substance reasonably satisfactory to the
Company and CEH LLC, from all liability on claims that are the subject matter of
such proceeding, (ii) does not include any statement as to any admission of
fault, culpability or failure to act by or on behalf of the Company and Sea
Coast and (iii) involves the payment by the Company of less than $2 million (in
excess of any payments made pursuant to or by insurance policies) individually
and, when taken together with all other such individual settlements, involved
payment by the Company of less than $5 million in the aggregate (in excess of
any payments made pursuant to or by insurance policies);
(p) change its methods of accounting, except as required by
changes in GAAP or SEC accounting; make or change any Tax election, change any
annual Tax accounting period, adopt or change any method of Tax accounting, file
any amended Tax Return, enter into any closing agreement, settle any Tax claim
or assessment, surrender any right to claim a Tax refund, consent to the
extension or waiver of the limitations period applicable to any Tax claim or
assessment, or take or omit to take any other action if such action or omission
would have the effect of materially increasing the Tax liability of the Company
or Sea Coast, except as required by Law;
(q) modify, amend or otherwise alter the Bankruptcy Plan in a
manner that is adverse to CEH LLC (other than in accordance with the terms of
this Agreement);
(r) make any voluntary pre-payments or other voluntary
distributions on or in respect of the Senior Notes or the Sub Debt; or
49
(s) agree to take any of the foregoing actions.
Section 9.2 Directors' and Officers' Indemnification and Insurance.
(a) On or prior to the Closing Date, the Company shall put in
place and, thereafter, the Company shall maintain in effect for not less than
six years after the Closing Date, the Company's current directors' and officers'
insurance policies, if such insurance is obtainable (or policies equivalent in
all material respects to those maintained by or on behalf of the Company and Sea
Coast on the date hereof, and having at least the same coverage and containing
terms and conditions no less advantageous to the current and all former
directors and officers of the Company) with respect to acts or failures to act
prior to the Closing Date; provided, however, that in order to maintain or
procure such coverage, the Company shall not be required to maintain or obtain
policies providing such coverage except to the extent such coverage can be
provided at an annual cost of no greater than three (3) times the most recent
premium paid by the Company for such coverage for the period from June 25, 2003
through June 25, 2004 (the "Cap"); provided, further, that if equivalent
coverage cannot be obtained, or can be obtained only by paying an annual premium
in excess of the Cap, the Company shall be required to only obtain as much
coverage as can be obtained by paying an annual premium equal to the Cap.
(b) From and after the Closing Date, the Company shall
indemnify and hold harmless to the fullest extent permitted under applicable Law
(including by any Governmental Entity), each person who is, or has been at any
time prior to the date hereof or who becomes prior to the Closing Date, an
officer or director of the Company or Sea Coast (each, an "Indemnified Party")
against all losses, claims, damages, liabilities, costs or expenses (including
attorneys fees), judgments, fines, penalties and amounts paid in settlement in
connection with any Litigation arising out of or pertaining to acts or
omissions, or alleged acts or omissions, by them in their capacities as such,
which acts or omissions occurred prior to the Closing Date, whether asserted or
claimed prior to, at or after the Closing Date.
(c) The Company shall keep in effect for a period of not less
than six years from the Closing Date (or, in the case of matters occurring prior
to the Closing Date which have not been resolved prior to the sixth anniversary
of the Closing Date, until such matters are finally resolved) all provisions in
the Company's certificate of incorporation and bylaws that provide for
exculpation of director and officer liability and indemnification (and
advancement of expenses related thereto) of the past and present officers and
directors of the Company to the fullest extent permitted by the DGCL and other
applicable Laws (including by any Governmental Entity), and such provisions
shall not be amended except as either required by applicable Law or to make
changes permitted by Law that would enhance the rights of past or present
officers and directors to indemnification or advancement of expenses.
(d) If the Company or any of its successors or assigns (i)
shall consolidate with or merge into any other corporation or other entity and
shall not be the surviving entity of the consolidation or merger or (ii) shall
transfer all or substantially all of its properties and assets to any
individual, corporation or other entity, then and in each such case, proper
provisions shall be made so that the successors and assigns of the Company shall
assume all of the obligations set forth in this Section 9.2.
50
(e) The provisions of this Section 9.2 are intended to be for
the benefit of, and shall be enforceable by, each of the Indemnified Parties,
their heirs and their representatives.
Section 9.3 No Solicitation of Alternative Proposals.
(a) Except as set forth in this Section 9.3, neither the
Company nor Sea Coast shall, directly or indirectly through any of its officers,
directors, employees, financial advisors, investment bankers, attorneys,
accountants or other representatives or agents (collectively,
"Representatives"), or otherwise, (i) solicit, initiate, facilitate (including
by way of furnishing information), seek, assist or encourage the submission of
any Alternative Proposal, or (ii) except as determined by the Board of Directors
in good faith to be necessary to satisfy the fiduciary duties of the Board of
Directors under applicable law, after consultation with outside legal counsel
and financial advisors, in response to any bona fide written Alternative
Proposal which did not result from a breach of Section 9.3(a)(i), participate in
any discussions or negotiations regarding, or furnish to any Person, any
information (provided that, prior to furnishing such information, the Company
enters into a customary confidentiality agreement on terms no less favorable to
the Company than those contained in the Confidentiality Agreement) with respect
to, or otherwise cooperate in any way with respect to, any bona fide written
Alternative Proposal; provided, however, that pursuant to the Termination
Agreement, following the Agreement Effective Date the Company may terminate
various "standstill" agreements to which is has bound other parties, but may not
otherwise take any of the actions prohibited by this Section 9.3 in respect of
such Persons. The Company shall, and shall direct or cause its Representatives
to, immediately cease and cause to be terminated any discussions or negotiations
with any parties that may be ongoing with respect to any Alternative Proposal.
(b) Except as set forth in this Section 9.3(b), the Board of
Directors shall not (i) prior to commencement of the Bankruptcy Case, withhold,
withdraw, amend, change or modify, or publicly propose to withhold, withdraw,
amend, change or modify, in a manner adverse to CEH LLC, the approval or
recommendation by the Board of Directors of this Agreement, (ii) prior to
commencement of the Bankruptcy Case, approve or recommend, or publicly propose
to approve or recommend, any Alternative Proposal or (iii) cause or permit the
Company to enter into any letter of intent or any agreement, contract or
commitment with respect to any Alternative Proposal ("Alternative Agreement") or
seek Bankruptcy Court approval of an Alternative Agreement or Alternative
Proposal. Notwithstanding the foregoing, the Board of Directors may take any of
the actions referred to above in this Section 9.3(b) with regard to a Superior
Proposal in the event that the Board of Directors determines in good faith that
such action is necessary to satisfy its fiduciary duties under applicable law,
after consultation with outside legal counsel and financial advisors; provided
that, prior to or contemporaneous with taking any action referred to in clause
(iii) above with regard to an Alternative Proposal, the Company has provided the
notice required by the last sentence of subparagraph (c) below and the Board of
Directors shall cause the Company to terminate this Agreement pursuant to
Section 12.1(f) hereof.
(c) The Company shall, within 24 hours of receipt thereof,
advise CEH LLC of (i) any Alternative Proposal or written request for
information with respect to any Alternative Proposal the material terms and
conditions of such Alternative Proposal or request
51
and the identity of the Person making such Alternative Proposal or request and
(ii) any changes in any such Alternative Proposal or request. The Company shall
provide CEH LLC with at least two (2) Business Days written notice prior to
entering into any Alternative Agreement.
As used herein, (i) "Alternative Proposal" shall mean any
proposal or offer from any Person other than CEH LLC or any Affiliate of CEH LLC
relating to an Acquisition Transaction and (ii) "Superior Proposal" shall mean
an Alternative Proposal with terms that the Board of Directors determines in
good faith (after receiving advice of the Company's outside financial adviser),
taking into account all relevant aspects of the proposal and the Person making
the proposal, would, if consummated, result in a transaction that is (x) more
favorable to the Company's stakeholders than the transactions contemplated by
this Agreement, and (y) reasonably capable of being completed.
Section 9.4 Access to Information.
(a) From the date hereof until the earlier of the Closing Date
or the termination of this Agreement in accordance with its terms, the Company
shall (i) afford to the officers, employees, accountants, counsel, financing
sources and other representatives (collectively, "Advisors") of CEH LLC,
reasonable access during normal business hours to the Company's and Sea Coast's
properties (including access to existing real property appraisals and existing
Phase I environmental reports), books, contracts, commitments and records; (ii)
furnish CEH LLC and its Advisors with copies of all such contracts, books and
records and other existing documents and data as CEH LLC and/or its Advisors may
reasonably request; (iii) make available during normal business hours to the
Advisors the appropriate individuals (including management personnel, attorneys,
accountants and other professionals) for discussion of the Company's and Sea
Coast's business, properties, prospects and personnel as CEH LLC may reasonably
request; and (iv) furnish CEH LLC and its Advisors with such additional
financial, operating and other data and information concerning the Company and
Sea Coast as CEH LLC and/or its Advisors may reasonably request and as may be
reasonably available to the Company; provided, however, that nothing in this
Section 9.4(a) or otherwise shall require the Company to furnish to CEH LLC or
its Advisors any materials prepared by the Company's financial advisors or legal
advisors.
(b) CEH LLC shall enter into a confidentiality agreement with
terms substantially in the form of the Confidentiality Agreement and shall keep
all information disclosed to the Persons identified in clause (a) above pursuant
to this Agreement confidential in accordance with such terms. Notwithstanding
anything to the contrary contained herein or in the Confidentiality Agreement,
the parties hereto and each of their respective employees, representatives or
other agents, are permitted to disclose to any and all Persons, without
limitations of any kind, the tax treatment and tax structure of the transactions
contemplated hereby and all materials of any kind (including opinions or other
tax analyses) that are or have been provided to such parties related to such tax
treatment and tax structure; provided, however, that the foregoing permission to
disclose the tax treatment and tax structure does not permit the disclosure of
any information that is not relevant to understanding the tax treatment or tax
structure of the transactions contemplated hereby (including the identity of any
party and the amounts paid in connection with the transactions); provided,
further, however, that the
52
tax treatment and tax structure shall be kept confidential to the extent
necessary to comply with federal or state securities laws.
Section 9.5 Consents. The Company shall cooperate with CEH LLC and,
following the Pinnacle Ownership Date, Pinnacle and use its reasonable best
efforts to (a) solicit and obtain all of the Governmental Requirements, all
Third Party Consents and all License Consents as well as any other consents,
waivers, approvals, authorizations or orders required for the consummation of
transactions contemplated by this Agreement and the other Transaction Documents
and (b) timely make all necessary filings under the HSR Act and seek to obtain
early termination of the waiting period under the HSR Act. Without limiting the
foregoing, within ten (10) Business Days after the date hereof, the Company and
CEH LLC shall submit all necessary filings under the HSR Act with the United
States Department of Justice and any other Governmental Entity to which such
filings are required to be submitted under the HSR Act and shall deliver to each
other draft copies of all such reports prior to the filing thereof.
Section 9.6 Agreements with Five Percent Holders. The Company shall
use reasonable best efforts to seek to obtain the consents referred to in
Section 11.2(l) hereof.
Section 9.7 Releases. The Company shall use its reasonable best
efforts to ensure that the Confirmation Order shall provide, among other things,
that the directors, officers, advisors, attorneys, investment bankers and agents
of the Company and CEH LLC and their respective affiliates, members, managers,
shareholders, partners, representatives, employees, attorneys and agents are
released, to the extent permitted by applicable Laws (including by any
Governmental Entity), from any and all Litigation related to the Restructuring
or the Restructuring Transaction.
Section 9.8 Notification of Certain Matters. From the date hereof
through the Closing, the Company shall give prompt notice to CEH LLC and the
Designated Representative of the occurrence, or failure to occur, of any event
the occurrence or failure of which caused any of the Company's respective
representations or warranties contained in this Agreement to be untrue or
inaccurate in any material respect; provided, however, that no such notification
shall be deemed for any purpose under this Agreement to permit the Company to
limit, alter or amend its representations and warranties contained herein.
Section 9.9 Assistance with the Financing. The Company and Sea Coast
shall use their reasonable best efforts to assist CEH LLC in effecting the
Financing, which assistance shall include providing CEH LLC with such
information regarding the Company as may be requested by the lenders
participating in the financing contemplated by the Debt Commitment Letter or as
may be necessary or appropriate for conducting the High Yield Offering;
provided, however, the use of any such information in an offering memorandum or
any similar financing document shall be subject to the review and reasonable
consent of the Company.
Section 9.10 Closing Fee; Expenses.
(a) At the Closing, the Company shall pay to the Pinnacle
Equity Sponsors a fee of $2 million. The Company shall pay any and all
reasonable fees and expenses incurred by it, and shall pay to the Pinnacle
Equity Investors, the Informal Committee and
53
Bondholder Trust any and all reasonable fees and expenses incurred by them (to
the extent such fees and expenses have not been paid by the Company, Pinnacle or
CEH LLC in advance of Closing), in connection with the transactions contemplated
by this Agreement and the Other Transaction Documents; provided, that the Aurora
Closing Expenses shall be paid at Closing to the extent provided by an order of
the Bankruptcy Court.
(b) From and after the Closing, the Reorganized Company shall
reimburse Bondholder Trust for all reasonable fees and expenses incurred by it
and each trustee thereof in connection with the maintenance and operations of
Bondholder Trust, and shall pay such expenses on behalf of Bondholder Trust upon
presentment to the Reorganized Company of invoices relating thereto; provided,
however, that the Reorganized Company shall not be required to reimburse
Bondholder Trust for (i) fees or expenses which would typically be borne by a
securityholder of an entity, including, but not limited to, fees or expenses
typically borne by a securityholder in respect of a transfer of securities (such
as underwriters' discounts or commissions) or fees or expenses (such as transfer
taxes) arising from any such transfers, (ii) any other fees related to transfers
(except for fees and expenses of the trustee and other similar administrative
fees and expenses), or (iii) any fees or expenses arising from activities which
are not related to the Bondholder Trust's primary function as an interim holding
entity for Class A Units for the benefit of the Bondholders.
Section 9.11 Invoices for Professional Services. The Company and Sea
Coast shall request each of their respective Representatives to submit invoices
to them no earlier than three (3) Business Days prior to the Closing Date in
respect of any amounts payable by the Company and/or Sea Coast to such
Representatives as of the date of such invoice. Such invoices shall include a
reasonable estimate of the expected fees payable to such Representatives for the
period from the date of such invoice through the Closing Date.
Section 9.12 Pinnacle-Aurora Merger Agreement. The Company shall
enter into the Pinnacle-Aurora Merger Agreement.
Section 9.13 Voting Agent; Exchange Agent. The Company shall appoint
a Voting Agent and an Exchange Agent within a reasonable period after the
Agreement Effective Date.
ARTICLE X
COVENANTS OF CEH LLC
Section 10.1 Conduct of Business Pending Closing. Subject to any
action, event, item, matter or circumstance that is required or permitted by
this Agreement, any other Transaction Document or the Restructuring Transaction
or that is required or contemplated by the Pinnacle Merger Agreement and the
related financing and other Transaction Documents (as defined in the Pinnacle
Merger Agreement), and except as set forth in Section 10.1 of the Pinnacle
Disclosure Schedule, or as consented to by the Company and the Designated
Representative (in each case, which consent shall not be unreasonably withheld),
during the
54
period from the Pinnacle Ownership Date through and including the Closing Date,
CEH LLC will cause Pinnacle and its Subsidiaries not to:
(a) conduct its business other than in the Ordinary Course of
Business; and
(b) declare, set aside or pay any dividends (payable in cash,
stock, property or otherwise) on, or make any other distributions in respect of
its capital stock.
Section 10.2 Consents. CEH LLC shall cooperate with the Company and
use its reasonable best efforts to (a) obtain all of the Governmental
Requirements, all Third Party Consents and all License Consents, as well as any
other consents, waivers, approvals, authorizations or orders required for the
consummation of transactions contemplated by this Agreement and the other
Transaction Documents, and (b) timely make all necessary filings under the HSR
Act and obtain early termination of the waiting period under the HSR Act.
Without limiting the foregoing, within ten (10) Business Days after the date
hereof, the Company and CEH LLC shall submit all necessary filings under the HSR
Act with the United States Department of Justice and any other Governmental
Entity to which such filings are required to be submitted under the HSR Act and
shall deliver to each other draft copies of all such reports prior to the filing
thereof.
Section 10.3 Debt Commitment Letter. CEH LLC shall (a) use
reasonable best efforts to perform and comply with its obligations and actions
required of it to satisfy the obligations and conditions under the Debt
Commitment Letter until the consummation of the Pinnacle Merger; (b) use
reasonable best efforts to perform and comply with its obligations and actions
required of it to satisfy the obligations and conditions under the Pinnacle
Senior Credit Facility from and after the consummation of the Pinnacle Merger
until and as of the Closing; (c) deliver to the Company and the Designated
Representative, a copy of the Pinnacle Senior Credit Facility upon consummation
of the Pinnacle Merger; and (d) use its reasonable best efforts to effectuate
the High Yield Offering prior to, at or as of the Closing.
Section 10.4 Access to Information.
(a) From and after the consummation of the Pinnacle Merger
until the earlier of the Closing or the termination of this Agreement in
accordance with its terms, CEH LLC shall cause Pinnacle to (i) afford to the
Company, the Designated Representative and their respective Advisors, reasonable
access during normal business hours to Pinnacle's properties (including access
to existing real property appraisals and existing Phase I environmental
reports), books, contracts, commitments and records; (ii) furnish the Company,
the Designated Representative and their respective Advisors with copies of all
such contracts, books and records and other existing documents and data as the
Company, the Designated Representative and/or their respective Advisors may
reasonably request; (iii) make available during normal business hours to their
respective Advisors the appropriate individuals (including management personnel,
attorneys, accountants and other professionals) for discussion of Pinnacle's
business, properties, prospects and personnel as the Company or the Designated
Representative may reasonably request; and (iv) furnish the Company, the
Designated Representative and their respective Advisors with such additional
financial, operating and other
55
data and information concerning Pinnacle and its Subsidiaries as the Company,
the Designated Representative and/or their respective Advisors may reasonably
request and as may be reasonably available to Pinnacle; provided, however, that
except as provided in Section 15.15, nothing in this Section 10.4(a) or
otherwise shall require CEH LLC or Pinnacle to furnish to the Company or their
respective Advisors any materials prepared by Pinnacle's or CEH LLC's financial
advisors or legal advisors.
(b) The Company shall keep all information disclosed to the
Persons identified in clause (a) above pursuant to this Agreement confidential
in accordance with the terms of the Confidentiality Agreement. Notwithstanding
anything to the contrary contained herein or in the Confidentiality Agreement,
the parties hereto and each of their respective employees, representatives or
other agents, are permitted to disclose to any and all Persons, without
limitations of any kind, the tax treatment and tax structure of the transactions
contemplated hereby and all materials of any kind (including opinions or other
tax analyses) that are or have been provided to such parties related to such tax
treatment and tax structure; provided, however, that the foregoing permission to
disclose the tax treatment and tax structure does not permit the disclosure of
any information that is not relevant to understanding the tax treatment or tax
structure of the transactions contemplated hereby (including the identity of any
party and the amounts paid in connection with the transactions); provided,
further, however, that the tax treatment and tax structure shall be kept
confidential to the extent necessary to comply with federal or state securities
laws.
Section 10.5 Approval of Bankruptcy Plan. As long as this Agreement
is in effect, CEH LLC agrees, on its behalf and on behalf of the Pinnacle Equity
Investors, with respect to all of the Sub Debt, Common Stock, Preferred Stock
and any other securities of the Company it may hold, if any, (a) to vote, or
cause to be voted, timely in favor of the Bankruptcy Plan, (b) not to revoke or
withdraw such vote, or permit such vote to be revoked or withdrawn, and (c) to
forbear, or cause to be forborne, exercising its remedies under the indentures
governing the Sub Debt. CEH LLC shall furnish such information as the Company
may reasonably request in connection with any Bankruptcy Case and will otherwise
reasonably support the Company's preparation and presentation of any motion,
filing, disclosure statement or other pleading in the Bankruptcy Case consistent
with the terms of this Agreement.
Section 10.6 Notification of Certain Matters.
(a) With respect to CEH LLC's representations and warranties
set forth in Article VIII, from the date hereof through the Closing, CEH LLC
shall give prompt notice to the Company of the occurrence, or failure to occur,
of any event the occurrence or failure of which caused any of the
representations or warranties set forth in Article VIII to be untrue or
inaccurate in any material respect; provided, however, that no such notification
shall be deemed for any purpose under this Agreement to permit CEH LLC to limit,
alter or amend its representations and warranties set forth in Article VIII.
(b) With respect to CEH LLC's representations and warranties
regarding Pinnacle set forth in Article VII, from the Pinnacle Ownership Date
through the Closing, CEH LLC shall give prompt notice to the Company of the
occurrence, or failure to occur, of any event the occurrence or failure of which
caused any of the representations or
56
warranties set forth in Article VII to be untrue or inaccurate in any material
respect; provided, however, that no such notification shall be deemed for any
purpose under this Agreement to permit CEH LLC to limit, alter or amend its
representations and warranties set forth in Article VII.
Section 10.7 Pinnacle-Aurora Merger Agreement. After the Pinnacle
Ownership Date and prior to the Closing Date, CEH LLC shall cause Pinnacle to
enter into the Pinnacle-Aurora Merger Agreement.
Section 10.8 Equity Contribution. On or prior to the Closing Date,
CEH LLC shall contribute the amounts received by it pursuant to the investments
contemplated by the Equity Commitment Letters to Holding and shall cause Holding
to contribute such amounts to Pinnacle and cause Pinnacle to retain such amounts
through the Closing.
Section 10.9 Financial Reports. Following the Pinnacle Ownership
Date and prior to the Closing Date, CEH LLC shall cause Pinnacle to provide the
Company with copies of any periodic financial reports which are required to be
provided by Pinnacle to the lenders under the Pinnacle Senior Credit Facility
contemporaneously with or promptly following the delivery of such reports to
such lenders.
Section 10.10 No Activity. From and after the date hereof, Holding
shall not conduct any operations, or incur any liabilities or obligations other
than those described in Section 8.12 hereof.
ARTICLE XI
CONDITIONS
Section 11.1 Conditions to Each Party's Obligations. The respective
obligations of each party to consummate the Merger and the other transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions:
(a) HSR Approval. The applicable waiting period (and any
extension thereof) under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended (the "HSR Act"), relating to the transactions contemplated by
the Transaction Documents shall have been terminated or shall have expired.
(b) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
Governmental Entity (collectively, "Restraints") preventing consummation of any
of the transactions contemplated by the Transaction Documents shall be in
effect. No Law shall be in effect which prohibits the transactions contemplated
by the Transaction Documents.
(c) Bankruptcy Case. The Bankruptcy Plan shall have been
approved by the Bankruptcy Court pursuant to the Confirmation Order, and the
Confirmation Order shall be in form and substance reasonably satisfactory to the
Company and CEH LLC and shall be final and non-appealable.
57
(d) Governmental Requirements. The Governmental Requirements
shall have been satisfied, made or obtained and be in effect on the Closing
Date.
(e) Pinnacle Merger. The Pinnacle Merger shall have been
consummated.
Section 11.2 Conditions to the Obligations of CEH LLC. The
obligations of CEH LLC to consummate the Merger and the other transactions
contemplated by this Agreement shall be subject to the satisfaction, at or prior
to the Closing, of each of the following conditions unless waived, in whole or
in part, by CEH LLC:
(a) Representations and Warranties. As of the date of this
Agreement and as of the Closing Date, the representations and warranties of the
Company set forth in this Agreement (without giving effect to any materiality or
Company Material Adverse Effect qualifications contained therein) shall be true
and correct, except where the failure of such representations and warranties to
be so true and correct shall not, individually or in the aggregate, result in a
Company Material Adverse Effect.
(b) Performance of Obligations. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing.
(c) Company Material Adverse Effect. Since the date of this
Agreement, there shall not have occurred any Company Material Adverse Effect.
(d) Intellectual Property Licenses. Either (i) the
Confirmation Order shall expressly provide that each Material License be (x) in
full force and effect following the Closing, (y) free and clear of any Liens
other than any Liens granted in connection with the Financing and (z) if
applicable, assumed by the Company or Sea Coast (as appropriate) pursuant to
Section 365 of the Bankruptcy Code or (ii) the License Consents shall have been
obtained and shall be in effect on the Closing Date.
(e) Third Party Consents. The Company's Third Party Consents
shall have been obtained and be in effect on the Closing Date, except where the
failure to obtain such consents does not, individually or in the aggregate,
constitute a Company Material Adverse Effect.
(f) Bankruptcy Order Regarding Class A Units and Bondholder
Trust Interests. The Bankruptcy Court shall have entered an order to the effect
that all Class A Units and Bondholder Trust Interests to be outstanding or
subject to issuance upon completion of the Restructuring shall at the time of
their issuance be duly authorized and validly issued and outstanding, free and
clear of any Liens, issued in compliance with all federal and state securities
laws and not issued in violation of, or subject to, any preemptive rights or
other rights to subscribe for or purchase securities other than as set forth in
the CEH LLC Members Agreement.
(g) Minimum EBITDA. Cumulative Actual EBITDA shall not have
been less than the EBITDA Threshold.
58
(h) Officer's Certificate. The Company shall have furnished
CEH LLC with a certificate, dated as of the Closing Date, and signed on behalf
of it by a duly authorized officer to the effect that, to such officer's
knowledge, the conditions set forth in Sections 11.2(a), 11.2(b), 11.2(c) and
11.2(e) hereof have been satisfied.
(i) Financing. CEH LLC shall have received the Financing in
such amount and substantially upon the terms and conditions set forth therein.
(j) Personnel. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall have resigned as Interim
Chief Executive Officer of the Company effective at or prior to the Effective
Time.
(k) Opinion. CEH LLC shall have received the opinion of
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, addressed to CEH LLC and dated as of
the Closing Date, that based solely upon its review of the docket in the
Bankruptcy Case, the Confirmation Order is non-appealable.
(l) Five Percent Holder Agreements. Each of Fenway Partners,
Inc., MDC Management Company III, L.P. and their respective Affiliates (other
than portfolio companies) shall have consented to the termination of each
agreement between them and the Company or Sea Coast, other than any securities
of the Company, or such agreements shall otherwise be of no force and effect
following the Closing.
Section 11.3 Conditions to the Obligations of the Company. The
obligation of the Company to consummate the Merger and the other transactions
contemplated in this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions unless waived, in whole or in
part, by the Company:
(a) Representations and Warranties of CEH LLC. As of the date
of this Agreement and as of the Closing Date, the representations and warranties
of CEH LLC set forth in this Agreement (without giving effect to any materiality
or material adverse effect qualifiers contained therein) shall be true and
correct except where the failures of such representations and warranties to be
true and correct shall not, individually or in the aggregate, result in a
material adverse effect on their ability to fulfill their obligations under this
Agreement and the other Transaction Documents.
(b) Representations and Warranties Regarding Pinnacle. As of
the Pinnacle Ownership Date and as of the Closing Date, the representations and
warranties made by CEH LLC regarding Pinnacle set forth in this Agreement
(without giving effect to any materiality or Pinnacle Material Adverse Effect
qualifiers contained therein) shall be true and correct except where the
failures of such representations and warranties to be true and correct shall
not, individually or in the aggregate, have a Pinnacle Material Adverse Effect.
(c) Performance of Obligations. CEH LLC shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing.
(d) Pinnacle Material Adverse Effect. Since the Pinnacle
Ownership Date, there shall not have occurred any Pinnacle Material Adverse
Effect.
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(e) Third Party Consents. Pinnacle's Third Party Consents
shall have been obtained and be in effect on the Closing Date, except where the
failure to obtain such consents does not, individually or in the aggregate,
constitute a Pinnacle Material Adverse Effect.
(f) CEH LLC Officer's Certificate. CEH LLC shall have
furnished the Company with a certificate, dated as of the Closing Date, and
signed on behalf of it by a duly authorized officer to the effect that, to the
best of such officer's knowledge, the conditions set forth in Sections 11.3(a),
11.3(b), 11.3(c), 11.3(d) and 11.3(e) hereof have been satisfied.
ARTICLE XII
TERMINATION
Section 12.1 Termination. This Agreement may be terminated and the
transactions contemplated in this Agreement may be abandoned at any time prior
to the Closing Date notwithstanding the fact that any requisite authorization
and approval of the transactions contemplated in this Agreement shall have been
received and no party hereto shall have any liability to any other party hereto
(provided that any such termination shall not relieve any party from liability
for any breach hereof prior to such termination nor shall it terminate the
Company's obligations under Section 9.3(c) hereof or this Article XII):
(a) by the mutual written consent of CEH LLC and the Company;
(b) by CEH LLC or the Company, if the Closing has not occurred
by March 31, 2004 (the "Expiration Date"); provided, that (i) the right to
terminate this Agreement under this Section 12.1(b) shall not be available to
any party whose failure to fulfill any obligation under this Agreement shall
have been the cause of, or shall have resulted in, the failure of the Closing to
occur by such date and (ii) in the event that, after commencement of the
Bankruptcy Case, the Board of Directors withdraws or changes its recommendation
of this Agreement in a manner materially adverse to CEH LLC (or recommends an
Alternative Proposal) then the Company may not so terminate until September 30,
2004;
(c) by CEH LLC or the Company, if there shall be any Law that
makes consummation of the Merger illegal or otherwise prohibited or if any
Governmental Entity shall have issued an order, decree, ruling or taken any
other action restraining, enjoining or otherwise prohibiting the consummation of
the Merger and such order, decree, ruling or other action shall have become
final and non-appealable;
(d) by CEH LLC, if (i) the Board of Directors withdraws or
changes its recommendation of this Agreement in a manner materially adverse to
CEH LLC prior to commencement of the Bankruptcy Case, (ii) the Board of
Directors recommends an Alternative Proposal prior to commencement of the
Bankruptcy Case, or (iii) the Company enters into an Alternative Agreement prior
to commencement of the Bankruptcy Case, or (iv) the Company enters into an
Alternative Agreement after commencement of the Bankruptcy Case and such
Alternative Agreement is approved by the Bankruptcy Court;
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(e) (i) by CEH LLC, if any of the conditions to the
obligations of CEH LLC set forth in Section 11.1 hereof or Section 11.2 hereof
are not satisfied at or prior to the Closing, and such failure cannot be or has
not been cured within thirty days after the giving of written notice to the
Company; and (ii) by the Company, if any of the conditions to the obligations of
the Company set forth in Section 11.1 hereof or Section 11.3 hereof are not
satisfied at or prior to the Closing, and such failure cannot be or has not been
cured within thirty days after the giving of written notice to CEH LLC;
provided, that the right to terminate this Agreement pursuant to this Section
12.1(e) shall not be available to any party who at such time is in material
breach of any of its obligations hereunder;
(f) by the Company, if (i) the Board of Directors determines
in good faith, after consultation with outside legal counsel and financial
advisors, that entering into an Alternative Agreement with regard to a Superior
Proposal is necessary to satisfy the fiduciary duties of the Board of Directors
under applicable law; provided that the Company shall have the right to
terminate this Agreement pursuant to this subparagraph (f) only if it has
complied with the provisions of Section 9.3 hereof, and shall comply with the
requirements of Section 12.2 hereof relating to any required payment (including
the timing of any payment) of the Break-Up Payment or Allowed Break-Up Payment
Claim, as the case may be, prior to termination of this Agreement pursuant to
this Section 12.1(f);
(g) by CEH LLC, in the event that (i) the payment of the full
amount of the Break-Up Payment as an Administrative Claim in the Bankruptcy Case
is not approved by entry of an order (the "Payment Order") by the Bankruptcy
Court on or prior to the date on which the Bankruptcy Court enters an order
approving the Disclosure Statement, or (ii) the Payment Order is thereafter
reversed, amended or modified in a manner adverse to CEH LLC, or the
effectiveness thereof is stayed pending appeal.
Section 12.2 Fees and Expenses.
(a) CEH LLC shall be entitled to receive from the Company a
payment in an aggregate amount equal to $10,000,000 (the "Termination Payment")
if at the time of termination of this Agreement CEH LLC is not in material
breach of any of its obligations hereunder, and:
(i) the Agreement is terminated by CEH LLC pursuant to
Section 12.1(b) hereof and the Company enters into an Alternative
Agreement in respect of a Superior Proposal within six months following
such termination,
(ii) the Agreement is terminated by CEH LLC pursuant to
Sections 12.1(d)(i) or 12.1(d)(ii) hereof and the Company enters into an
Alternative Agreement within nine months following such termination,
(iii) the Agreement is terminated by CEH LLC pursuant to
Sections 12.1(d)(iii) or 12.1(d)(iv) hereof, or
(iv) the Agreement is terminated by the Company pursuant
to Section 12.1(f) hereof.
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Any Termination Payment due and owing to CEH LLC (x) pursuant to Sections
12.2(a)(i), 12.2(a)(ii) or 12.2(a)(iii) hereof shall be paid upon consummation
of the transaction contemplated by the Alternative Agreement, and (y) pursuant
to Section 12.2(a)(iv) hereof shall be paid within five (5) Business Days after
the date of termination or such later date as the Bankruptcy Court may direct
(but in no event later than the earlier of the consummation of the transaction
contemplated by an Alternative Agreement and the effective date of a plan of
reorganization for the Company).
(b) CEH LLC shall be entitled to reimbursement by the Company
for all of CEH LLC's Reimbursable Expenses up to an aggregate of $7,500,000 if
CEH LLC is entitled to a Termination Payment. Any Reimbursable Expenses due and
owing to CEH LLC as a result of the termination of this Agreement (x) pursuant
to section 12.2(a)(i) or 12.2(a)(ii) or 12.2(a)(iii) hereof shall be paid upon
the earlier of the consummation of the transaction contemplated by an
Alternative Agreement and the effective date of a plan of reorganization for the
Company, and (y) pursuant to section 12.2(a)(iv) hereof shall be paid within
five (5) Business Days after the date of termination or such later date as the
Bankruptcy Court may direct (but in no event later than the earlier of the
consummation of the transaction contemplated by an Alternative Agreement and the
effective date of a plan of reorganization for the Company).
(c) If this Agreement is terminated and, prior to making any
payment due to CEH LLC pursuant to Section 12.2(a) or 12.2(b) hereof, and the
Company commences a case under chapter 11 of the Bankruptcy Code, the Company
shall file the Break-Up Payment Claim Motion within three (3) Business Days
after the commencement of such chapter 11 case seeking entry of the Break-Up
Payment Claim Order.
(d) The Company acknowledges and agrees that (i) the payment
of the Break-Up Payment or, if applicable, the allowance of the Allowed Break-Up
Payment Claim and the Company's agreement to request Administrative Claim status
therefore is an integral part of the transactions contemplated by this
Agreement, (ii) the Company is aware that prior to the date hereof CEH LLC
and/or its unitholders have incurred approximately $5 million of actual and
deferred financing fees and substantial legal and accounting fees in connection
with the transactions contemplated hereby and (iii) in the absence of the
Company's obligations to make this payment and agree to request such status, CEH
LLC would not have entered into this Agreement and (iv) time is of the essence
with respect to the payment of the Break-Up Payment.
(e) Except as set forth above in Section 9.10 and this Section
12.2, all fees and expenses incurred in connection with this Agreement and the
other Transaction Documents shall be paid by the party incurring such expenses,
whether or not the Restructuring is consummated.
ARTICLE XIII
NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND CERTAIN
COVENANTS; NATURE OF REMEDIES
None of the representations and warranties of the Company or CEH LLC
contained in Articles VI, VII and VIII hereof, including the Company Disclosure
Schedule, the
62
Pinnacle Disclosure Schedule and CEH LLC Disclosure Schedule, or any certificate
or instrument delivered in connection herewith at or prior to the Closing, and
none of the covenants contained in Articles IX and X hereof shall survive the
Closing. The parties' respective covenants and agreements set forth herein that
by their specific terms contemplate performance after Closing (including the
Company's obligations pursuant to Article XII hereof) shall survive the Closing
indefinitely unless otherwise set forth herein. CEH LLC's sole remedy for (x) a
breach of the Company's representations or warranties or (y) a failure of any of
the conditions to CEH LLC's obligation to consummate the transactions
contemplated in this Agreement to be satisfied other than by reason of fraud or
an intentional breach of an agreement of the Company contained in this Agreement
shall be to terminate this Agreement, subject to any rights it may have under
Section 12.2 hereof. The Company's sole remedy for (x) a breach of CEH LLC's
representations or warranties set forth in Articles VII and VIII or (y) a
failure of any of the conditions to the Company's obligation to consummate the
transactions contemplated in this Agreement to be satisfied other than by reason
of fraud or an intentional breach of an agreement of CEH LLC contained in this
Agreement shall be to terminate this Agreement.
ARTICLE XIV
CERTAIN DEFINITIONS
Section 14.1 Certain Definitions. For purposes of this Agreement,
the following terms shall have the meanings specified in this Section 14.1.
"Acquisition Transaction" means any (i) refinancing, restructuring,
or reorganization of the capital structure of the Company, (ii) acquisition of
all or a substantial part of the assets of the Company or a majority of the
voting securities of the Company, or (iii) merger, business combination,
recapitalization, restructuring, liquidation or dissolution involving the
Company, whether or not in the context of a case filed under the Bankruptcy
Code.
"Actual Aurora Net Debt" has the meaning set forth in Section
4.1(c).
"Actual Aurora Working Capital" has the meaning set forth in Section
4.1(c).
"Adjusted EBITDA" means (a) EBITDA of the Company for the relevant
period, as set forth in the Company Plan, less (b) amounts expended from July 1,
2003 through the end of the relevant period for marketing and other related
expenses in respect of the introduction by a competitor of the Company of new
products consistent with the marketing plan previously provided to CEH LLC which
are in excess of the amount of marketing and other related expenses set forth in
the Company Plan up to an aggregate amount of $2.9 million less (c) the
Settlement Amount.
"Administrative Claim" means a claim entitled to administrative
expense priority under Sections 503(b) and/or 507(a)(1) of the Bankruptcy Code.
"Advisors" has the meaning set forth in Section 9.4(a).
"Affiliate" has the meaning ascribed to such term in Rule 12b-2
promulgated under the Exchange Act.
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"Agreement" has the meaning set forth in the Preamble to this
Agreement.
"Agreement Effective Date" means the date on which this Agreement
becomes binding and effective against all of the parties hereto pursuant to
Section 15.15 hereof.
"Agreement Effectiveness Notice" shall mean the notice substantially
in the form of Exhibit G hereof.
"Allowed Break-Up Payment Claim" has the meaning set forth in
Section 1.1(e).
"Alternative Agreement" has the meaning set forth in Section 9.3(b).
"Alternative Proposal" has the meaning set forth in Section 9.3(d).
"Applicable Dividend" has the meaning set forth in Section 3.8(c).
"Applicable Percentage" equals, for any Eligible Bondholder, the
quotient, as expressed as a percentage, of (a) the aggregate amount of Sub Debt
held of record, either directly or through such Bondholder's Holder
Representative, by such Eligible Bondholder as of the Plan Voting Date over (b)
$400 million.
"Auditor" has the meaning set forth in Section 5.3(b).
"Aurora" has the meaning set forth in the Preamble to this
Agreement.
"Aurora Closing Expenses" means fees and expenses (including fees
payable upon the Closing): (i) payable to the lending parties to the Debt
Commitment Letter in connection with the Financing; (ii) payable to ▇▇▇▇▇▇
Buckfire ▇▇▇▇▇ ▇▇▇▇ & Co. pursuant to the MBLY Agreement; (iii) payable to
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ pursuant to the certain Letter Agreement, dated
July 1, 2003, among ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ Capital, Debevoise & ▇▇▇▇▇▇▇▇
and the Company; and (iv) incurred by the Informal Committee and any official
creditor's committee in each case in connection with the transactions
contemplated by this Agreement and the other Transaction Documents.
"Bank Fees" has the meaning set forth in Section 1.1(b)(ii).
"Bankruptcy Case" means all legal proceedings, including without
limitation a voluntary case under Chapter 11 of the Bankruptcy Code, instituted
in the Bankruptcy Court in connection with the Restructuring Transaction;
provided, that for all purposes relating to the approval or payment of the
Break-Up Payment to which CEH LLC becomes entitled prior to the commencement of
the Bankruptcy Case hereunder, "Bankruptcy Case" shall mean all legal
proceedings instituted in a United States Bankruptcy Court by the Company
subsequent to the date of such termination in connection with the Company's
restructuring of its financial circumstances and/or capitalization.
"Bankruptcy Code" means Title 11 of the United States Code, 11
U.S.C. Section 101, et seq., as now in effect or hereafter amended.
64
"Bankruptcy Court" means the United States Bankruptcy Court for the
District of Delaware, having jurisdiction over the Bankruptcy Case, or if such
Court ceases to exercise jurisdiction over the Bankruptcy Case, such other court
that exercises jurisdiction over the Bankruptcy Case.
"Bankruptcy Plan" has the meaning set forth in Section 1.1(a)(i).
"Board of Directors" means the Board of Directors of the Company.
"Bondholder" means any beneficial owner of the Sub Debt.
"Bondholder Trust" means a Delaware business trust to be formed to
hold the Class A Units received by the Bondholders and any such units that may
be subscribed for by the Pinnacle Equity Sponsors pursuant to this Agreement.
"Bondholder Trust Interests" means units of beneficial interest in
Bondholder Trust.
"Break-Up Payment" means, the Termination Payment and the
Reimbursable Expenses described in Section 12.2(b).
"Break-Up Payment Claim Motion" has the meaning set forth in Section
1.1(e).
"Break-Up Payment Motion" has the meaning set forth in Section
1.1(a)(iii).
"Break-Up Payment Claim Order" has the meaning set forth in Section
1.1(e).
"Break-Up Payment Order" has the meaning set forth in Section
1.1(a)(iii) hereto.
"Business Day" shall have the meaning provided in the Bankruptcy
Code.
"Cap" has the meaning set forth in Section 9.2(a).
"Cash Election" has the meaning set forth in Section 2.1(a).
"CDM" has the meaning set forth in the Recitals to this Agreement,
"CEH LLC" has the meaning set forth in the Preamble to this
Agreement.
"CEH LLC Disclosure Schedule" has the meaning set forth in Article
VIII.
"CEH LLC Members Agreement" means an amended and restated members'
agreement substantially in the form of Exhibit H hereto, with such changes as
may be agreed upon by the Pinnacle Equity Investors and Bondholder Trust.
"CEH LLC Operating Agreement" means an amended and restated
operating agreement substantially in the form of Exhibit I hereto, with such
changes as may be agreed upon by the Pinnacle Equity Investors and Bondholder
Trust.
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"Certificate of Merger" means a certificate of merger, in form and
substance acceptable to CEH LLC, the Company and the Designated Representative,
which (i) meets the requirements of Section 251 of the DGCL and (ii) effects any
amendments to the Company's certificate of incorporation required under Section
1123(a)(6) of the Bankruptcy Code and (iii) includes the amendments to
Pinnacle's certificate of incorporation set forth in Section 3.4 of the Pinnacle
Disclosure Schedule.
"Claim" has the meaning set forth in Section 101(5) of the
Bankruptcy Code, and includes, without limitation, any claim, demand, action,
suit, lawsuit, litigation, hearing, arbitration, proceeding or appeal, whether
civil or criminal, administrative or otherwise, by or before any Governmental
Authority or arbitrator.
"Class A Units" means the Class A Units of CEH LLC.
"Closing" has the meaning set forth in Section 5.1.
"Closing Date" has the meaning set forth in Section 5.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" has the meaning set forth in Section 6.3(a).
"Company" has the meaning set forth in the Preamble to this
Agreement.
"Company Disclosure Schedule" has the meaning set forth in Article
VI.
"Company Facilities" has the meaning set forth in Section 6.17(a).
"Company Leased Real Property" means all interests in real property
pursuant to the Company Leases.
"Company Leases" has the meaning set forth in Section 6.16(a).
"Company Material Adverse Effect" means any change, effect, event,
occurrence or development that is, or is reasonably likely to be, materially
adverse to the business, results of operations or condition (financial or
otherwise) of the Company and Sea Coast, taken as a whole, other than any
change, effect, event or occurrence relating to or arising out of (a) the
economy or securities markets generally, (b) this Agreement or the transactions
contemplated hereby or the announcement thereof, (c) the filing of the
Bankruptcy Case, (d) any actions taken, or announcements made, by CEH LLC or its
Affiliates or Representatives, or (e) war, armed conflicts, terrorist acts or
similar external events or the material escalation thereof.
"Company Material Contract" has the meaning set forth in Section
6.11(b).
"Company Owned Real Property" has the meaning set forth in Section
6.16(a).
"Company Plan" means the business plan of the Company, dated as of
June 13, 2003, previously provided to CEH LLC.
66
"Company Real Property" means, collectively, the Company Owned Real
Property and the Company Leased Real Property.
"Condition Satisfaction Date" means the date on which the conditions
set forth in Sections 11.1(a) - (e), 11.2(c) - (f), 11.2(l) and 11.3(d)-(e) have
been satisfied.
"Confidentiality Agreement" means the Confidentiality, Secrecy and
Non-Disclosure Agreement between ▇.▇. Childs Associates, L.P. and the Company
dated March 25, 2003.
"Confirmation Order" means the order entered by the Bankruptcy Court
in the Bankruptcy Case confirming the Bankruptcy Plan pursuant to Section 1129
of the Bankruptcy Code, in form and substance acceptable to CEH LLC and the
Designated Representative.
"Contract" means any agreement, contract or obligation (whether
written or oral) that is legally binding.
"Contract Consents" means the consents of third parties required
under Contracts to which the Company is a party or pursuant to which it or any
of its assets or properties is subject.
"Creditor Consents" means such consents or agreements of creditors
and security holders as shall be required to effectuate the Restructuring
Transaction.
"Cumulative Actual EBITDA" means EBITDA for the EBITDA Period, as
determined pursuant to Section 5.3 hereof.
"Cumulative Targeted EBITDA" means Adjusted EBITDA for the EBITDA
Period.
"Current 10-K" has the meaning set forth in Section 6.11(a).
"Debt Commitment Letter" means that certain Letter Agreement, dated
November 3, 2003, among JPMorgan Chase Bank, ▇.▇. ▇▇▇▇▇▇ Securities Inc.,
Deutsche Bank Trust Company Americas, Deutsche Bank AG Cayman Islands Branch,
Deutsche Bank Securities Inc., Citicorp North America, Inc., Citicorp Global
Markets Inc., General Electric Capital Corporation, Canadian Imperial Bank of
Commerce and CEH LLC.
"Derivative Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to hedge the Company or Sea Coast against
fluctuations in interest rates.
"Derivative Amount" means the sum of (a) any amounts paid at or
around the Closing by the Company under any Derivative Agreement in respect of
the settlement and/or termination thereof and (b) $1,018,536.46.
"Designated Representative" means, until such time as Bondholder
Trust has been formed, the designee of the Informal Committee, and thereafter
the voting trustee of Bondholder
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Trust as such voting trustee may be appointed from time to time in accordance
with the Fundamental Documents of Bondholder Trust.
"DGCL" means the Delaware General Corporation Law.
"DIP Facility" has the meaning set forth in Section 1.1(b)(v).
"Disclosure Statement" has the meaning set forth in Section
1.1(a)(ii).
"Disclosure Statement Order" means an order entered by the
Bankruptcy Court approving the Disclosure Statement.
"EBITDA" means, for any period, all as determined in accordance with
GAAP, the consolidated net income (or net loss) of the Company and Sea Coast for
such period adjusted (without duplication) as follows: plus (a) the sum of (i)
depreciation expense, (ii) amortization expense, (iii) non-cash expenses related
to writedowns of property, plant, equipment, intangible assets and other
non-current assets, (iv) net total federal, state and local income tax expense,
(v) gross interest expense for such period less gross interest income for such
period, (vi) extraordinary losses that would appear as such on an income
statement in accordance with GAAP, (vii) any non-recurring charge or
restructuring charge that has been deducted in the calculation of operating
income, (viii) the cumulative effect of any change in accounting principles, and
(ix) costs and expenses incurred by the Company or Sea Coast during such period
including any success fees which would be payable upon the Closing for the
financial advisors, investment bankers, attorneys, accountants or other
professionals retained by them in connection with the Restructuring, less (b)
extraordinary gains that would appear as such on an income statement in
accordance with GAAP.
"EBITDA Period" means the period from June 1, 2003 through December
31, 2003.
"EBITDA Threshold" means, with respect to the EBITDA Period, an
amount equal to the sum of (a) 75% of Adjusted EBITDA for the month of June,
2003 plus (b) 85% of Adjusted EBITDA for subsequent months.
"Effective Time" has the meaning set forth in Section 3.2.
"Election" means either a Cash Election or an Equity Election.
"Election Form" means a section of the plan ballot, to be
distributed to the Bondholders for purposes of making an Equity Election which
shall be in a form reasonably agreed upon by the Company, CEH LLC and the
Designated Representative.
"Eligible Bondholder" has the meaning set forth in Section 2.2(a).
"Employee Benefit Plan" means any "employee benefit plan" within the
meaning of Section 3(3) of ERISA and any bonus, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
vacation, severance, retention, disability, death benefit, hospitalization or
insurance plan, program or arrangement providing
68
benefits to any present or former employee or contractor of Pinnacle or any
member of the Pinnacle Aggregated Group maintained by any such entity.
"Environmental Laws" means all federal, state, local and foreign
laws and regulations relating to pollution or protection of human health or the
environment, including without limitation, laws relating to Releases or
threatened Releases of Hazardous Materials or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, Release,
disposal, transport or handling of Hazardous Materials and all laws and
regulations with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Materials.
"Equity Commitment Letter" has the meaning set forth in Section 8.6.
"Equity Election" has the meaning set forth in Section 2.1(a).
"Equity Election Shortfall" has the meaning set forth in Section
2.1(d).
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" means any trade or business, whether or not
incorporated, that together with the Company, would be deemed a "single
employer" within the meaning of Section 4001(b) of ERISA.
"Estimated Aurora Balance Sheet" has the meaning set forth in
Section 4.1(a).
"Estimated Aurora Net Debt" has the meaning set forth in Section
4.1(a).
"Estimated Aurora Working Capital" has the meaning set forth in
Section 4.1(a).
"Exceptions" means any action, event, item, matter or circumstance
that is (a) required or permitted by (i) this Agreement or any other Transaction
Document or (ii) the Restructuring Transaction or (b) disclosed in the SEC
Reports.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" means a bank or trust company of national
reputation designated by the Company and reasonably satisfactory to CEH LLC and
the Designated Representative.
"Existing Credit Facility" means the Fifth Amended And Restated
Credit Agreement among the Company, the lenders listed therein, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Bank (formerly known as The Chase Manhattan Bank), as Administrative Agent, and
certain other agents, dated as of November 1, 1999, as amended at any time, and
all documents (including without limitation any security agreements or
guarantees) related thereto.
"Expiration Date" has the meaning set forth in Section 12.1(b).
69
"FDA" means the U.S. Food and Drug Administration and any successor
Governmental Entity.
"Final Aurora Balance Sheet" has the meaning set forth in Section
4.1(c).
"Financing" means financing contemplated by the Debt Commitment
Letter and the High Yield Offering, collectively.
"First Day Orders" has the meaning set forth in Section 1.1(a)(iv).
"Five Percent Holder" means any Person who "beneficially owns" (as
defined in Rules 13d-3 and 13d-5 of the Exchange Act, except that a Person shall
be deemed to have "beneficial ownership" of all securities that any such Person
has the right to acquire, whether or not such right is exercisable immediately),
five percent (5%) or more of any class of the Company's capital stock, and shall
include the officers, directors, employees, and partners of such Person.
"Five Percent Holder Agreements" means (a) the Securityholders
Agreement, dated as of April 8, 1998, by and among Aurora/VDK LLC, MBW Investors
LLC, VDK Foods LLC and the other parties signatory thereto, (b) the Advisory
Agreement, dated as of April 8, 1998, between MDC Management Company III, L.P.
and Aurora/VDK LLC, Van ▇▇ ▇▇▇▇'▇, Inc., VDK Holdings, Inc., the Company and
Aurora Foods Holdings Inc. and (c) the Advisory Agreement, dated as of April 8,
1998, among Fenway Partners, Inc. and Aurora/VDK LLC, Van ▇▇ ▇▇▇▇'▇, Inc., VDK
Holdings, Inc., the Company and Aurora Foods Holdings Inc.
"Fundamental Documents" means the documents by which any Person
(other than an individual) establishes its legal existence or which govern its
internal affairs. For example, the "Fundamental Documents" of a corporation
would be its charter and by-laws and the "Fundamental Documents" of a limited
liability company would be its operating agreement, members' agreement and
by-laws.
"GAAP" has the meaning set forth in Section 6.5.
"Gains and Transfer Taxes" has the meaning set forth in Section 7.6.
"Governmental Entity" means any supernational, national, foreign,
federal, state or local judicial, legislative, executive, administrative or
regulatory body or authority.
"Governmental Requirements" means (a) with respect to the Company,
the items referred to in clauses (a) through (d) of Section 6.8 and (b) with
respect to Pinnacle, the items referred to in clauses (a) through (f) of Section
7.6.
"Hazardous Materials" means all substances defined as Hazardous
Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous
Substances Pollution Contingency Plan, 40 C.F.R. Section 300.5, or defined as
such by, or regulated as such under, any Environmental Law.
"High Yield Offering" has the meaning set forth in Section 8.6.
70
"Holder Representative" has the meaning set forth in Section 2.1(a).
"Holding" has the meaning set forth in the Recitals to this
Agreement.
"Holding Option Plan" has the meaning set forth in Section 1.1(c).
"HSR Act" has the meaning set forth in Section 11.1(a).
"Indebtedness" means, as applied to any Person, (a) all indebtedness
for borrowed money, (b) that portion of obligations with respect to capital
leases that is properly classified as a liability on a balance sheet in
conformity with GAAP, (c) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money
(other than accounts payable incurred in the ordinary course of business and
accrued expenses incurred in the ordinary course of business), (d) any
obligation owed for all or any part of the deferred purchase price of property
or services (excluding any such obligations incurred under ERISA), which
purchase price is (i) due more than six months from the date of incurrence of
the obligation in respect thereof or (ii) evidenced by a note or similar written
instrument, and (e) all indebtedness of the type described in clauses (a)
through (d) above secured by any Lien on any property or asset owned or held by
that Person regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is nonrecourse to the credit of that Person;
provided that obligations under the Derivative Agreements do not constitute
Indebtedness.
"Indemnified Party" has the meaning set forth in Section 9.2(b).
"Indemnity Agreement" means an indemnity agreement among the
Company, Bondholder Trust and CEH LLC, substantially in the form attached as
Exhibit J hereto.
"Informal Committee" has the meaning set forth in the Recitals to
this Agreement.
"Initial EBITDA Calculation" has the meaning set forth in Section
5.3(a).
"Intellectual Property" means all (a) patents and patent
applications; (b) trademarks, trade names, service marks, designs, logos,
slogans and general intangibles of like nature, and registrations and
applications therefor and the goodwill related thereto; (c) Internet domain
names (d) computer software programs (other than commercially available
"off-the-shelf" software programs); (e) copyrights and registrations and
applications therefor; and (f) trade secrets, know-how, inventions, processes,
confidential information, formulae, algorithms, models and methodologies; in
each case, owned by the Company or Sea Coast or used in their respective
businesses as currently conducted.
"IRS" means the Internal Revenue Service.
"JPMP" has the meaning set forth in the Recitals to this Agreement.
"JWC" has the meaning set forth in the Recitals to this Agreement.
71
"Key Employee Retention Plan" means the plan being implemented by
the Company to retain key employees providing for payments no greater than
$200,000 individually or $1 million in the aggregate as more fully described in
item 1 of Section 6.3(b) of the Company Disclosure Schedule.
"Knowledge of CEH LLC" means the actual knowledge of one or more of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇▇▇ ▇. Childs, ▇▇▇▇ ▇.
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇.
"Knowledge of Pinnacle" means the actual knowledge of one or more of
▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ Misericorda, M. ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇.
"Knowledge of the Company" means the actual knowledge of one or more
of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, and ▇▇▇▇ ▇. ▇▇▇▇▇▇.
"Latest Pinnacle Balance Sheet Date" has the meaning set forth in
Section 7.3.
"Laws" means all foreign, federal, state, and local laws, statutes,
ordinances, rules, regulations, orders, judgments, decrees and bodies of law.
"Lenders" means the lenders under the Existing Credit Facility.
"Letter of Intent" has the meaning set forth in the Recitals to this
Agreement.
"Letter of Transmittal" means a letter of transmittal which shall be
in a form reasonably agreed upon by the Company, CEH LLC and the Designated
Representative.
"License Consents" means the consents of the licensors under the
Material Licenses.
"Lien" means any mortgage, deed of trust, lien (statutory or other),
pledge, hypothecation, assignment, claim, charge, security interest, conditional
sale agreement, title, exception, or encumbrance, option, right of first offer
or refusal, easement, servitude, voting or transfer restriction, or any other
right of another to or adverse claim or any kind.
"Litigation" has the meaning set forth in Section 6.7(a).
"Management Retention Plan" means the Company's Management Retention
Plan described in item 4 of Section 9.1 of the Company Disclosure Schedule.
"Material Licenses" means the licenses granted pursuant to the
agreements set forth in items 27 and 72-79 of Section 6.11(a) of the Company
Disclosure Schedule.
"MBLY Agreement" means that certain Letter Agreement, dated April 2,
2003, between the Company and ▇▇▇▇▇▇ Buckfire ▇▇▇▇▇ ▇▇▇▇ & Co.
72
"MBLY Amount" means the amount payable to ▇▇▇▇▇▇ Buckfire ▇▇▇▇▇ ▇▇▇▇
& Co. upon the closing of the transactions contemplated by this Agreement in
accordance with the terms of the MBLY Agreement.
"Merger" has the meaning set forth in recitals to this Agreement.
"Non-U.S. Plan" has the meaning set forth in Section 6.13(b).
"Options" has the meaning set forth in Section 6.3(a).
"Orders" has the meaning set forth in Section 1.1(a)(iv).
"Ordinary Course of Business" means, with respect to any Person, the
ordinary course of business of such Person and such Person's Subsidiaries.
"Original SPA" has the meaning set forth in the Recitals to this
Agreement.
"Paid Default Interest" means the default interest paid or payable
by the Company in accordance with the terms of the Amendment and Forbearance,
dated as of October 9, 2003, to the Existing Credit Facility.
"Payment Order" has the meaning set forth in Section 12.1(g).
"Permits" has the meaning set forth in Section 6.10.
"Permitted Liens" means (a) any Lien permitted or required under the
Existing Credit Facility; (b) any Lien permitted or required under the New
Credit Facility; (c) any Lien approved by the Bankruptcy Court, including, Liens
granted pursuant to a cash collateral and/or debtor-in-possession financing
order and Liens granted as adequate protection; (d) any Lien granted pursuant to
any forbearance agreements, or amendments thereto, entered into with respect to
the Existing Credit Facility, including the Vendor Lien Program; (e) Liens for
Taxes not yet due and payable or which are being contested in good faith by
appropriate proceedings if adequate reserves with respect thereto are maintained
on the Company's financial statements in accordance with GAAP; (f) with respect
to Company Real Property, (i) any Liens or other title defects which are not in
a liquidated amount and which do not, individually or in the aggregate,
interfere materially with the current use or materially detract from the value
or marketability of such property (assuming its continued use in the manner in
which it is currently used) or (ii) Liens on Company Owned Real Property that
are identified on title commitments or title policies (x) which do not,
individually or in the aggregate, interfere materially with the current use or
materially detract from the value or marketability of such property (assuming
its continued use in the manner in which it is currently used) and (y) with
respect to which no material breach exists; and (g) inchoate materialmen's,
mechanics', carriers', workmen's, repairmen's and similar Liens arising in the
Ordinary Course of Business and not past due and payable or the payment of which
is being contested in good faith by appropriate proceedings.
"Person" means any individual, firm, corporation, limited liability
company, partnership, company, trust or other entity, and shall include any
successor (by merger or otherwise) of such entity.
73
"Pinnacle" has the meaning set forth in the Recitals to this
Agreement.
"Pinnacle Aggregated Group" has the meaning set forth in Section
7.10(a).
"Pinnacle-Aurora Merger Agreement" means the Agreement and Plan of
Merger to be entered into between Pinnacle and the Company substantially in the
form of Exhibit K attached hereto.
"Pinnacle Common Stock" has the meaning set forth in Section 7.2(a).
"Pinnacle Covered Taxes" has the meaning set forth in Section
7.12(a).
"Pinnacle Disclosure Schedule" has the meaning set forth in Article
VII.
"Pinnacle Equity Investors" means the Pinnacle Equity Sponsors and
CDM.
"Pinnacle Equity Sponsors" means JPMP and JWC.
"Pinnacle Financial Statements" has the meaning set forth in Section
7.3.
"Pinnacle Information" shall mean: (i) any information relating to
Pinnacle provided to the Designated Representative or the Company pursuant to
Section 10.4; (ii) any items referred to on the Pinnacle Disclosure Schedules;
and (iii) any final due diligence memoranda or reports prepared by the Pinnacle
Equity Investors' Advisors and delivered to any Pinnacle Equity Investor
regarding Pinnacle.
"Pinnacle Intellectual Property" has the meaning set forth in
Section 7.11.
"Pinnacle Leased Real Property" means all of the real property
leased pursuant to the leases identified in Section 4.13(b) of the Pinnacle
Disclosure Schedule.
"Pinnacle Material Adverse Effect" means any change, effect, event,
occurrence or development that is, or is reasonably likely to be, materially
adverse to the business, results of operations or conditions (financial or
otherwise) of Pinnacle and its Subsidiaries, taken as a whole; provided,
however, that none of the following shall be deemed (either alone or in
combination) to constitute, and none of the following shall be taken into
account in determining whether there has been or may be, a Pinnacle Material
Adverse Effect: (a) a general deterioration in the United States or Canadian
economy or in the economic conditions prevalent in the industry in which
Pinnacle and its Subsidiaries operate; (b) the outbreak or escalation of
hostilities involving the United States, the declaration by the United States of
a national emergency or war or the occurrence of any other calamity or crisis,
including an act of terrorism; (c) matters relating to, or arising out of, this
Agreement or the transactions contemplated hereby or the announcement thereof;
(d) any change in applicable Laws or the interpretation thereof other than such
pending changes of which CEH LLC has Knowledge of on the date hereof or of which
Pinnacle has Knowledge as of the Pinnacle Ownership Date; (e) any actions taken,
or announcements made, by the Company or its Affiliates or Representatives; or
(f) compliance with the terms of or the taking of any action required by, this
Agreement.
74
"Pinnacle Material Contracts" has the meaning set forth in Section
7.9.
"Pinnacle Merger" has the meaning set forth in the Recitals to this
Agreement.
"Pinnacle Merger Agreement" has the meaning set forth in the
Recitals to this Agreement.
"Pinnacle Ordinary Course of Business Contract" means (a) contracts
or agreements for routine maintenance of the personal property or real property
of Pinnacle or any of its Subsidiaries (b) any trade discount or rebate program
implemented in the ordinary course of Pinnacle's or any of its Subsidiaries'
business, (c) normal and routine open purchase orders or agreements for (i) the
purchase of raw materials or supplies used in the manufacture of products of
Pinnacle or any of its Subsidiaries or (ii) services provided to Pinnacle or any
of its Subsidiaries with an outstanding balance of less than $2,500,000 as of
the Pinnacle Ownership Date and (d) agreements (on customer form documents),
including, vendor agreements, continuing product guarantees, policy letters,
promotional agreements, data access agreements and electronic data interchange
agreements, with customers that purchase products from Pinnacle, which
agreements were negotiated with and executed by the Pinnacle's predecessor
entities, Vlasic Foods International, Inc. and certain of its Subsidiaries, and
which, to the Knowledge of CEH LLC, Pinnacle does not have a copy thereof, but
as to which Pinnacle has continued its business relationship with such
customers.
"Pinnacle Owned Real Property" means those parcels of real property
owned in fee and used or held for use by Pinnacle or its Subsidiaries as
described in Section 7.13(a) of the Pinnacle Disclosure Schedule, and all
buildings, structures, improvements, and fixtures thereon, together with all
rights of way, easements, privileges and appurtenances pertaining or belonging
thereto, including any right, title and interest of Pinnacle or its Subsidiaries
in and to any street or other property adjoining any portion of such property.
"Pinnacle Ownership Date" means the date upon which CEH LLC is,
directly or indirectly, the beneficial owner of all of the capital stock of
Pinnacle.
"Pinnacle Pension Plan" has the meaning set forth in Section
7.10(a).
"Pinnacle Permitted Encumbrances" means (a) statutory Liens for
current Taxes not yet due and payable or being contested in good faith by
appropriate proceedings and for which there are adequate reserves on the books
of a person; (b) mechanics', carriers', workers', repairers' and other similar
liens imposed by law arising or incurred in the ordinary course of business for
obligations that are (i) not overdue or (ii) being contested in good faith by
appropriate proceedings and for which there are adequate reserves on the books
of a person; (c) in the case of leases of vehicles, rolling stock and other
personal property, encumbrances that do not materially impair the operation of
the business at the facility at which such leased equipment or other personal
property is located; (d) other immaterial Liens that were not incurred in
connection with the borrowing of money or the advance of credit and that do not
interfere with the conduct of the business conducted by Pinnacle and its
Subsidiaries; (e) Liens on leases of real property arising from the provisions
of such leases, including, in relation to Pinnacle Leased Real Property, any
agreements and/or conditions imposed on the issuance of
75
land use permits, zoning, business licenses, use permits or other entitlements
of various types issued by any Governmental Entity, necessary or beneficial to
the continued use and occupancy of such Pinnacle Leased Real Property or the
continuation of the business conducted by Pinnacle and its Subsidiaries; (f)
pledges or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security; (g) deposits to secure the performance of bids, contracts (other than
for borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business; (h) zoning regulations and restrictive covenants
and easements of record that do not detract in any material respect from the
value of the Pinnacle Real Property and do not materially and adversely affect,
impair or interfere with the use of any property affected thereby; (i) public
utility easements of record, in customary form, to serve the Pinnacle Real
Property; (j) Liens not otherwise included as Pinnacle Permitted Encumbrances
that are of record and disclosed in the following owner's policies of title
insurance, made available to the Company prior to the date hereof: Lawyers Title
Insurance Corporation Policy Number ▇▇▇-▇▇-▇▇▇▇▇▇ (Millsboro, Delaware), Lawyers
Title Insurance Corporation Policy Number ▇▇▇-▇▇-▇▇▇▇▇▇ (Omaha, Nebraska) (to
specifically include, notwithstanding anything to the contrary, the
encroachments listed in item 13 of Schedule B thereto), Commonwealth Land Title
Insurance Company Policy Number PHI-00-11310HSE (▇▇▇▇▇ City, Michigan), Lawyers
Title Insurance Corporation Policy Number A75-0301221 (Fayetteville, Arkansas)
(to specifically exclude, notwithstanding anything to the contrary, the payment
of 2000 real estate taxes listed in item 8 of Schedule B thereto); (k) Liens
securing all or any portion of Pinnacle's senior credit facility or any Liens in
connection with hedging and derivative agreements permitted thereunder; (l)
landlords' Liens in favor of landlords under the leases with respect to the
Pinnacle Leased Real Property; and (m) mortgages, deeds of trust and other
security instruments, and ground leases or underlying leases covering the title,
interest or estate of such landlords with respect to the Pinnacle Leased Real
Property and to which the leases with respect to the Pinnacle Leased Real
Property are subordinate.
"Pinnacle Real Property" means the Pinnacle Leased Real Property and
the Pinnacle Owned Real Property.
"Pinnacle Senior Credit Facility" means a senior credit facility to
be entered into by Pinnacle under the Debt Commitment Letter.
"Pinnacle Tax Group" has the meaning set forth in Section 7.12(a).
"Plan" means each deferred compensation and each bonus or other
incentive compensation, stock purchase, stock option and other equity
compensation plan, program, agreement or arrangement; each severance, retention
or termination pay, medical, surgical, hospitalization, life insurance and other
"welfare" plan, fund or program (within the meaning of Section 3(1) of ERISA);
each profit sharing, stock bonus or other "pension" plan, fund or program
(within the meaning of Section 3(2) of ERISA); each employment, termination,
retention or severance agreement; and each other employee benefit plan, fund,
program, agreement or arrangement, in each case, that is sponsored, maintained
or contributed to or required to be contributed to by the Company or any ERISA
Affiliate, or to which the Company or any ERISA Affiliate is party, whether
written or oral, for the benefit of any current employees, officers, independent
contractors, or directors of the Company or Sea Coast.
76
"Plan Voting Date" means the date established by the Bankruptcy
Court by which ballots must be submitted to accept or reject the Bankruptcy
Plan.
"Preferred Stock" has the meaning set forth in Section 6.3(a).
"Proceeding" has the meaning set forth in Section 16.2.
"Receivables Facility" means the Receivables Facility, dated as of
April 19, 2000 as amended, by and between the Company and ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Bank
(formerly known as The Chase Manhattan Bank) and all documents related thereto.
"Record Date" has the meaning set forth in Section 2.1.
"Record Date Bondholder" has the meaning set forth in Section
2.1(b).
"Referee" has the meaning set forth in Section 4.1(c).
"Regulatory Approvals" means all approvals, consents, waivers,
certificates, and other authorizations reasonably required to be obtained from,
or any filings required to be made with, the FDA or any other federal, state,
foreign or municipal regulatory agency having jurisdiction over the Company or
CEH LLC in order to consummate the transactions contemplated by this Agreement
and the other Transaction Documents.
"Reimbursable Expenses" means the reasonable legal, accounting,
consulting and other out-of-pocket fees and expenses, including financing
commitment fees and/or expenses, which fees and expenses are supported by
customary and appropriate documentation delivered to the Company, which
documentation relates to the amount of the expense and which fees and expenses
were incurred by CEH LLC or on its behalf in connection with any of the
transactions contemplated by this Agreement and that have not previously been
reimbursed.
"Rejection Amounts" means termination, settlement or other costs
relating to rejection of leases pursuant to Section 1.1(b)(vii).
"Release" means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, dispersal, leaching or migration into the
indoor or outdoor environment (including, without limitation, ambient air,
surface water, groundwater and surface or subsurface strata) or into or out of
any property, including the movement of Hazardous Materials through or in the
air, soil, surface water, groundwater or property.
"Reorganized Company" has the meaning set forth in Section 3.1.
"Reply Date" has the meaning set forth in Section 15.15.
"Representatives" has the meaning set forth in Section 9.3(a).
"Restraints" has the meaning set forth in Section 11.1(b).
77
"Restructuring" means the restructuring of the combined
capitalization of the Company and Sea Coast pursuant to the Bankruptcy Plan.
"Restructuring Transaction" means any or all of the following: (i)
deferral by the Company of payments due on the Sub Debt, (ii) initiation and
implementation of the Vendor Lien Program, (iii) discussions and negotiations
with the Company's creditors in order to reduce or refinance outstanding senior
and subordinated indebtedness of the Company, (iv) suspension of the Company's
1998 Employee Stock Purchase Plan, (v) negotiation and implementation of the DIP
Facility, (vi) negotiations and implementation of the Financing, (vii)
commencement of the Bankruptcy Case and adoption and implementation of the
Bankruptcy Plan, (viii) adoption and implementation of the Management Retention
Plan and (ix) any other transaction, filing, case, action or event, or other
series of transactions, filings, cases, actions or events (including, without
limitation, a consent solicitation, a prenegotiated plan or any other bankruptcy
case), whereby the completion of which, as evidenced by a final order, if
applicable, the Company, in all material respects, shall have effectuated the
Restructuring.
"Sea Coast" means Sea Coast Foods, Inc., a Washington corporation.
"SEC" means the United States Securities and Exchange Commission and
any successor Governmental Entity.
"SEC Reports" means all annual reports, quarterly reports, proxy
statements and other reports filed by the Company with the SEC under the
Exchange Act since December 31, 2001 and through the date of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Act shall include reference to the
comparable section, if any, of such successor federal statute.
"Selected Courts" has the meaning set forth in Section 15.2(a).
"Senior Note Amount" means the aggregate principal amount of the
Senior Notes, excluding the amount of the original discount from par value for
such Senior Notes.
"Senior Notes" means the 12% Senior Unsecured Notes of the Company,
dated June 27, 2002 and July 2, 2002, respectively, and due October 1, 2006, in
the aggregate principal amount of $25 million.
"Series A Preferred" has the meaning set forth in Section 6.3(a).
"Settlement Amount" means any amounts paid by the Company in
settlement of any pending Litigation.
"St. Louis Leases" means the (a) Office Lease Agreement, dated June
7, 2001 between the Company and Duke-Weeks Realty Limited Partnership for
property located at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ 200 and 300, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as amended April 24, 2002 and (b) Office Lease Agreement, dated
June 7, 2001 between the Company and
78
Duke-Weeks Realty Limited Partnership, by its general partner, Duk-Weeks Realty
Corporation for property located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇. ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
"Sub Debt" means the Company's 9 7/8% Senior Subordinated Notes due
2007, the Company's 9 7/8% Series C Senior Subordinated Notes due 2007, and the
Company's 8 3/4% Senior Subordinated Notes due 2008.
"Subscription Acceptance Notice" has the meaning set forth in
Section 2.2(c).
"Subscription Election Form" means a subscription election form and
related subscription documents which shall be in a form reasonably agreed upon
by the Company, CEH LLC and the Designated Representative.
"Subscription Right Period" has the meaning set forth in Section
2.2(b).
"Subscription Payment Deadline" has the meaning set forth in Section
2.2(d).
"Subsidiary" of any Person means another Person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its board of directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such Person.
"Superior Proposal" has the meaning set forth in Section 9.3(d).
"Tax Returns" means any return, report, statement, information
return or other document (including any related or supporting information) filed
or required to be filed with any Governmental Entity in connection with the
determination, assessment, collection or administration of any Taxes or the
administration of any laws, regulations or administrative requirements relating
to any Taxes.
"Taxes" means any federal, state, county, local or foreign taxes,
charges, fees, levies or other assessments, including all net income, gross
income, sales and use, ad valorem, transfer, gains, profits, excise, franchise,
real and personal property, gross receipt, capital stock, production, business
and occupation, disability, employment, payroll, license, estimated, stamp,
custom duties, severance, unemployment, social security, alternative minimum or
withholding taxes or charges imposed by any Governmental Entity, and includes
any interest and penalties (civil or criminal) on or additions to any such
taxes.
"Termination Agreement" shall mean the agreement between ▇.▇. Childs
Equity Partners III, L.P. and the Company in substantially the form attached
hereto as Exhibit L, which Termination Agreement provides that, upon the
effectiveness of this Agreement, (A) the Original SPA shall be terminated
pursuant to Section 8.1(a) of the Original SPA and the Original SPA shall be of
no further force or effect and (b) the Company shall be entitled to terminate
the various "standstill" agreements to which it has bound other Persons.
"Termination Payment" has the meaning set forth in Section 12.2(a).
79
"Third Party Consents" means (a) with respect to the Company, the
items referred to in clauses (e) through (f) of Section 6.8 hereof and (b) with
respect to Pinnacle, the consents of each person that is a party to the Pinnacle
Material Contracts identified in Section 7.2(c) of the Pinnacle Disclosure
Schedule.
"Transaction Documents" means this Agreement, the Debt Commitment
Letter, the Pinnacle Aurora Merger Agreement and the Termination Agreement.
"Trust Accession Instrument" means an instrument, in form reasonably
acceptable to the Designated Representative and the Pinnacle Equity Sponsors,
pursuant to which the Record Date Bondholders and the Pinnacle Equity Sponsors
shall, as a condition to receiving any Sub Debt Equity Consideration, agree (a)
to the deposit in Bondholder Trust of their Sub Debt Equity Consideration for
their respective accounts and (b) to be bound by the terms of the Fundamental
Documents of Bondholder Trust.
"Vendor Lien Program" means the program initiated by the Company in
connection with the Restructuring under which the Company is offering vendors
the ability to obtain a junior secured lien on substantially all of the assets
of the Company in return for making shipments after July 1, 2003 on customary
terms.
"Voting Agent" means the voting agent designated by the Company,
which is reasonably acceptable to CEH LLC and the Designated Representative.
"Warrants" has the meaning set forth in Section 6.3(a).
ARTICLE XV
MISCELLANEOUS
Section 15.1 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware without giving
effect to conflicts of law principles thereof.
Section 15.2 Jurisdiction; Forum; Service of Process; Waiver of
Jury. With respect to any suit, action or proceeding ("Proceeding") arising out
of or relating to this Agreement, each of the Company and CEH LLC hereby
irrevocably:
(a) submits to the exclusive jurisdiction of the courts of the
State of Delaware and of the United States of America, in each case located in
New Castle County, or any federal bankruptcy court where the Bankruptcy Case is
pending (the "Selected Courts"), for any Litigation arising out of or relating
to this Agreement or the other Transaction Documents and the transactions
contemplated hereby and thereby (and agrees not to commence any Litigation
relating hereto or thereto except in such courts) and waives any objection to
venue being laid in the Selected Courts whether based on the grounds of forum
non conveniens or otherwise;
(b) consents to service of process in any Proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, or
by recognized international
80
express carrier or delivery service, to the Company, the Reorganized Company or
CEH LLC at their respective addresses referred to in Section 15.5 hereof;
provided, however, that nothing herein shall affect the right of any party
hereto to serve process in any other manner permitted by law; and
(c) WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE
OTHER TRANSACTION DOCUMENTS.
Section 15.3 Successors and Assigns. Except as otherwise provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors by operation of law and permitted assigns of the parties
hereto. No assignment of this Agreement may be made by any party at any time,
whether or not by operation of law, without the other party's prior written
consent; provided, however, that CEH LLC may, without the consent of the other
parties hereto, assign any of its rights and interests under this Agreement (i)
as security to any lender or financial institution providing financing for the
transactions contemplated hereby or (ii) to an Affiliate of CEH LLC, which
assignment, in either case, will not relieve CEH LLC of any obligations
hereunder. Except as set forth in Section 9.2 and with respect to the Designated
Representative who will have rights on behalf of the Bondholders as a third
party beneficiary after the Closing solely with respect to Article III and any
covenant which by its terms is to be performed, or by its terms will apply to
periods after, the Closing, including without limitation Articles IV and XV and
Section 9.10 hereof, only the parties to this Agreement or their permitted
assigns shall have rights under this Agreement.
Section 15.4 Entire Agreement; Amendment. This Agreement and the
other Transaction Documents constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and supercede
all prior agreements relating to the subject matter hereof (specifically
excluding the Confidentiality Agreement which remains in effect in accordance
with its terms). Except as expressly provided herein, neither this Agreement nor
any term hereof may be amended, modified, supplemented, waived, discharged or
terminated other than by a written instrument signed by the Company and by CEH
LLC expressly stating that such instrument is intended to amend, modify,
supplement, waive, discharge or terminate this Agreement or such term hereof. No
waiver of any of the provisions of this Agreement shall be deemed to or shall
constitute a waiver of any other provision hereof (whether or not similar). No
delay on the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof.
Section 15.5 Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by telecopy (with
receipt confirmed), nationally recognized overnight courier or first class
registered or certified mail, return receipt requested, postage prepaid,
addressed to such party at the address set forth below or such other address as
may hereafter be designated in writing by such party to the other party:
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(i) if to the Company prior to the Closing Date, to:
Aurora Foods Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
(ii) if to the Reorganized Company, to:
Pinnacle Foods Holding Corporation
▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: C. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
and
O'Melveny & ▇▇▇▇▇ LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
82
(iii) if to CEH LLC, to
Crunch Equity Holding, LLC
c/o ▇.▇. Childs Equity Partners III, L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. Childs
▇▇▇▇ ▇. ▇▇▇▇▇▇
and
▇.▇. ▇▇▇▇▇▇ Partners, LLC
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Official Notices Clerk
FBO: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
and
O'Melveny & ▇▇▇▇▇ LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(iv) if to the Designated Representative, to:
c/o Oaktree Capital Management
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
83
with a copy to:
Debevoise & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices, requests, consents and other communications shall be deemed to
have been given or made if and when delivered personally or by overnight courier
to the parties at the above addresses or sent by electronic transmission, with
confirmation received, to the telecopy numbers specified above (or at such other
address or telecopy number for a party as shall be specified by like notice).
Section 15.6 Delays or Omissions. Except as expressly provided
herein, no delay or omission to exercise any right, power or remedy accruing to
the Company or CEH LLC upon any breach or default of any party under this
Agreement, shall impair any such right, power or remedy of the Company or CEH
LLC nor shall it be construed to be a waiver of any such breach or default, or
an acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of the
Company or CEH LLC of any breach or default under this Agreement, or any waiver
on the part of any such party of any provisions or conditions of this Agreement,
must be in writing and shall be effective only to the extent specifically set
forth in such writing. All remedies, either under this Agreement or by law, in
equity, or otherwise afforded to the Company or CEH LLC shall be cumulative and
not alternative.
Section 15.7 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
Section 15.8 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provisions; provided, that, no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party. Any provision held invalid or unenforceable only in part or degree will
remain in full force to the extent not held invalid or unenforceable.
Section 15.9 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 15.10 Acknowledgment. The Company acknowledges and agrees
that the Confidentiality Agreement, dated October 2, 2002, between JWC and
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., as Agent for the Company, has been terminated and is no
longer in force or effect.
84
Section 15.11 No Public Announcement. Neither the Company nor CEH
LLC shall make any press release, public announcement or filing with any
Governmental Entity concerning the transactions contemplated by the Transaction
Documents, except as and to the extent that any such party shall be obligated to
make any such disclosure by this Agreement or by law or rule of the New York
Stock Exchange, and then only after giving the other party hereto adequate time
to review such disclosure and considering in good faith the comments of the
other party hereto and consultation as to such comments with such party as to
the content of such disclosure. Notwithstanding anything to the contrary herein
or in the Confidentiality Agreement, the parties hereto and each of their
respective employees, representatives or other agents, are permitted to disclose
to any and all persons, without limitations of any kind, the tax treatment and
tax structure of the transactions and all materials of any kind (including
opinions or other tax analyses) that are or have been provided to such parties
related to such tax treatment and tax structure; provided, however, that the
foregoing permission to disclose the tax treatment and tax structure does not
permit the disclosure of any information that is not relevant to understanding
the tax treatment or tax structure of the transactions (including the identity
of any party and the amounts paid in connection with the transactions);
provided, further, however, that the tax treatment and tax structure shall be
kept confidential to the extent necessary to comply with federal or state
securities laws.
Section 15.12 Further Actions; Reasonable Best Efforts.
(a) Upon effectiveness of this Agreement pursuant to Section
15.15 hereof, without waving any right to terminate this Agreement under Section
12.1 hereof, upon the terms and subject to the conditions hereof, each of the
parties agrees to use its reasonable best efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, and to assist and cooperate with
the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by the Transaction Documents, including without
limitation (i) the obtaining of all necessary actions or nonactions, waivers,
consents and approvals from Governmental Entities and the making of all
necessary registrations and filings and the taking of all steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, (ii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging any of the Transaction Documents or the consummation of the
transactions contemplated thereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity or
any Restraint vacated or reversed, and (iv) the execution and delivery of any
additional instruments necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, the Transaction Documents.
(b) In connection with and without limiting the foregoing, the
parties shall use reasonable best efforts (i) to take all action necessary to
ensure that no state takeover statute or similar statute or regulation is or
becomes applicable to the Transaction Documents or any of the other transactions
contemplated hereby or thereby and (ii) if any state takeover statute or similar
statute or regulation becomes applicable to the Transaction Documents or any
other transaction contemplated thereby, to take all action necessary to ensure
that the transactions contemplated by the Transaction Documents may be
consummated as promptly as practicable on
85
the terms contemplated thereby and otherwise to minimize the effect of such
statute or regulation on the transactions contemplated by the Transaction
Documents.
Section 15.13 Interpretation.
(a) When a reference is made in this Agreement to an Article,
Section or Exhibit, such reference shall be to an Article or Section of, or an
Exhibit to, this Agreement unless otherwise indicated. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation". The words "hereof",
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement. All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein. The definitions contained in
this Agreement are applicable to the singular as well as the plural forms of
such terms and to the masculine as well as to the feminine and neuter genders of
such term. Any agreement, instrument or statute defined or referred to herein or
in any agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a Person are also to its permitted successors and assigns.
(b) The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement.
Section 15.14 Satisfaction with Bondholder Trust. The Designated
Representative shall provide the Pinnacle Equity Sponsors with an opportunity to
review and comment upon drafts of the Fundamental Documents of Bondholder Trust
prior to effectiveness or implementation thereof and shall reasonably consider
the Pinnacle Equity Sponsors' comments thereto. In the event that the Pinnacle
Equity Sponsors and the Designated Representative are unable to reach agreement
with respect to the Pinnacle Equity Sponsors' objection to any of the terms of
the Fundamental Documents of Bondholder Trust, then notwithstanding anything in
this Agreement to the contrary, the Class A Units to be distributed to the
Pinnacle Equity Sponsors pursuant to Sections 3.8 and 4.2 shall be distributed
to them directly (and shall not be distributed to Bondholder Trust on their
behalf); provided that in such case the Pinnacle Equity Sponsors and the
Designated Representative shall agree upon a mechanism whereby the Pinnacle
Equity Sponsors make suitable provision for any pro-rata obligations the
Pinnacle Equity Sponsors may have under the Indemnity Agreement.
Section 15.15 Conditions Precedent to Effectiveness of This
Agreement. Other than the terms and conditions of Sections 10.4 and 10.9 hereof
and this Article XV hereof, which shall be binding and enforceable as of the
date of this Agreement, no other provision of this Agreement shall be binding
upon any party hereto or any other Person until the Agreement Effectiveness
Notice is validly delivered by the Company and the Designated Representative to
86
CEH LLC as set forth below. As soon as practicable following the Pinnacle
Ownership Date, but in any case within ten (10) Business Days of the Pinnacle
Ownership Date, CEH LLC shall deliver to the Company and the Designated
Representative the Pinnacle Information and the Pinnacle Disclosure Schedule. On
or prior to later of (i) December 12, 2003 and (ii) the tenth Business Day
following receipt of the Pinnacle Information and the Pinnacle Disclosure
Schedules (such later date, the "Reply Date"), the Company and the Designated
Representative shall, acting reasonably and in good faith, determine whether the
Pinnacle Information and Pinnacle Disclosure Schedules are acceptable to the
Company and the Designated Representative, and if the Company and the Designated
Representative so determine, the Company and the Designated Representative shall
deliver to CEH LLC a signed copy of the Agreement Effectiveness Notice in
compliance with the terms of Section 15.5 hereof. This Agreement shall become
binding and effective against the parties hereto, only in the event that the
Agreement Effectiveness Notice has been validly delivered by the Company and the
Designated Representative on or prior to the Reply Date and if such Agreement
Effectiveness Notice is validly received on or prior to the Reply Date, the
Termination Agreement shall become binding and effective on the Reply Date. To
the extent that the Agreement Effectiveness Notice is not validly delivered by
the Company and the Designated Representative on or prior to the Reply Date,
then this Agreement and the Termination Agreement shall be treated as if each
had not been executed or delivered by any Person or for any purpose whatsoever.
Notwithstanding the foregoing, if the Pinnacle Ownership Date does not occur
within ten (10) Business Days of execution and delivery of this Agreement, then
this Agreement and the Termination Agreement shall be treated as if each had not
been executed or delivered by any Person or for any purpose whatsoever.
Section 15.16 Notice Regarding Pinnacle Lenders. CEH LLC agrees to
promptly deliver to the Company a notice following the review by the lenders
under the Pinnacle Senior Credit Facility of this Agreement (including the
Exhibits and Schedules hereto) indicating whether such lenders are satisfied
with the terms and conditions of this Agreement in satisfaction of the condition
to that effect in the Pinnacle Senior Credit Facility.
[SIGNATURE PAGES TO FOLLOW]
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IN WITNESS WHEREOF, each of the undersigned has caused this
Agreement to be executed as of the date first above written.
AURORA FOODS INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman and Interim
Chief Executive Officer
CRUNCH EQUITY HOLDING, LLC
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇