<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 26, 1997
REGISTRATION NO. 333-29959
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
AUTHENTIC SPECIALTY FOODS, INC.
(Name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
TEXAS 5141 75-1782453
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
</TABLE>
1313 AVENUE R
GRAND PRAIRIE, TEXAS 75050
(972) 933-4100
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
SAMUEL E. HILLIN, JR.
CHIEF FINANCIAL OFFICER
1313 AVENUE R
GRAND PRAIRIE, TEXAS 75050
(972) 933-4100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
<TABLE>
<S> <C>
J. MARK METTS, ESQ. KATHERINE M. SEABORN, ESQ.
VINSON & ELKINS L.L.P. GARDERE & WYNNE, L.L.P.
2300 FIRST CITY TOWER 3000 THANKSGIVING TOWER
1001 FANNIN 1601 ELM STREET
HOUSTON, TEXAS 77002 DALLAS, TEXAS 75201
(713) 758-2222 (214) 999-3000
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities registered on this Form are being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following
box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $1.00 4,715,000 shares $11.00 $51,865,000 $15,717(3)
==================================================================================================================
</TABLE>
(1) Includes 615,000 shares of Common Stock subject to the Underwriters'
over-allotment option.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 under the Securities Act of 1933, as amended.
(3) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses of the offering are estimated to be as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 15,717
NASD filing fee............................................. 5,687
NASDAQ listing fee.......................................... 32,000
Legal fees and expenses..................................... 200,000
Accounting fees and expenses................................ 150,000
Blue Sky fees and expenses (including legal fees)........... 5,000
Printing expenses........................................... 200,000
Transfer Agent fees......................................... 10,000
Advisory Fee to Shansby Partners, L.L.C. ................... 250,000
Miscellaneous............................................... 33,096
--------
TOTAL............................................. $900,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Bylaws of the Company provide that the Company shall indemnify (i) its
directors, (ii) its directors serving at its request as a director, officer,
partner, venturer, proprietor, trustee, employee, agent or similar functionary
of another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise and (iii) its
officers, against reasonable expenses incurred by them in connection with the
defense of any threatened, pending, or completed action, suit or proceeding,
whether civil, criminal, administrative, arbitrative, or investigative, any
appeal in such an action, suit, or proceeding, and any inquiry or investigation
that could lead to such an action, suit, or proceeding, where the person who
was, is, or is threatened to be made a named defendant or respondent in a
proceeding was named because the person is or was a director or an officer of
the Company. The foregoing indemnification is conditioned upon a determination
(i) by a majority vote of a quorum consisting of directors who at the time of
the vote are not named defendants or respondents in the proceeding, (ii) if such
a quorum cannot be obtained, by a majority vote of a committee of the Board of
Directors, designated to act in the matter by a majority vote of all directors
who at the time of the vote are not named defendants or respondents in the
proceeding, (iii) by special legal counsel selected by the Board of Directors or
a committee of the Board by vote as set forth in subsection (i) or (ii), or, if
such a quorum cannot be obtained and such a committee cannot be established, by
a majority vote of all directors, or (iv) by the shareholders in a vote that
excludes the shares held by directors who are named defendants or respondents in
the proceeding, that such person (1) conducted himself in good faith, (2)
reasonably believed, in the case of conduct in his official capacity as a
director or officer of the Company, that his conduct was in the Company's best
interest, and in all other cases, that his conduct was at least not opposed to
the Company's best interest, and (3) in the case of any criminal proceeding, had
no reasonable cause to believe his conduct was unlawful. Notwithstanding the
foregoing, the Company shall indemnify each director and officer against
reasonable expenses incurred by him in connection with a proceeding in which he
is a party because he is a director or officer if he has been wholly successful,
on the merits or otherwise, in the defense of the proceeding. A director or
officer, found liable on the basis that personal benefit was improperly received
by him, or found liable to the Company, may be indemnified but the
indemnification is limited to reasonable expenses actually incurred by the
person in connection with the proceeding and shall not be made in respect of any
proceeding in which the person shall have been found liable for willful or
intentional misconduct in the performance of his duty to the Company.
The Company's Bylaws also provide that reasonable expenses incurred by a
director or officer who was, is or is threatened to be named a defendant or
respondent in a proceeding may be paid or reimbursed by the Company in advance
of the final disposition of the proceeding after (i) the Company receives a
written
II-1
<PAGE> 3
affirmation by the director or officer of his good faith belief that he has met
the standard of conduct necessary for indemnification under the Company's Bylaws
and a written undertaking by or on behalf of the director or officer to repay
the amount paid or reimbursed if it is ultimately determined that he has not met
that standard or if it is ultimately determined that indemnification of the
director against expenses incurred by him in connection with that proceeding is
prohibited by law and (ii) a determination is made that the facts then known to
those making the determination would not preclude indemnification under the
Company's Bylaws. The Bylaws of the Company also provide that the Company may
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Company or who is or was serving at
the Company's request as a director, officer, partner, venturer, proprietor,
trustee, employee or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise, in accordance with Article 2.02-1 of the Texas
Business Corporation Act.
In addition, the Company's Restated Articles of Incorporation provide that
a director of the Company will not be liable to the Company or its shareholders
for monetary damages for an act or omission in the director's capacity as a
director, except in the case of (i) a breach of the director's duty of loyalty
to the Company or its shareholders, (ii) an act or omission not in good faith
that constitutes a breach of duty of the director to the Company or an act or
omission that involves intentional misconduct or a knowing violation of the law,
(iii) a transaction from which the director received an improper benefit,
whether or not the benefit resulted from an action taken within the scope of the
director's office, or (iv) an act or omission for which the liability of a
director is expressly provided by an applicable statute. The Restated Articles
of Incorporation also excuse a director from liability to the fullest extent
permitted by any provisions of the statutes of Texas enacted in the future that
further limit the liability of a director.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In 1994, Mr. Graffunder and Mr. Hillin received grants of 85,000 and 51,000
shares of Common Stock, respectively. These grants were made in connection with
the commencement of employment with the Company by Mr. Graffunder and Mr.
Hillin, and were subject to forfeiture restrictions lapsing over a four-year
period. No cash consideration was received by the Company in connection with
these grants, which were exempt from registration under the Securities Act
because no sale of securities was involved within the meaning of the Securities
Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<S> <S>
1.1 -- Form of Underwriting Agreement
**2.1 -- Contribution and Exchange Agreement between the Company,
Robert C. Tanklage, TSG2 L.P., TSG2 Management, L.L.C.
and Keith Lively, dated June 20, 1997
**2.2 -- Form of First Amendment to Contribution and Exchange
Agreement, dated August , 1997
**3.1 -- Restated Articles of Incorporation of the Company
**3.2 -- Bylaws of the Company
4.1 -- Specimen Common Stock certificate
**4.2 -- Consulting Agreement between Calidad Foods, Inc. and
Joseph Patoskie, dated November 22, 1995
**4.3 -- Consulting Agreement between Calidad Foods, Inc. and
Richard Patoskie, dated November 22, 1995
**4.4 -- Secured Promissory Note, dated April 10, 1997 in favor of
Carolyn M. Johnson, Trustee
4.5 -- Term Loan Agreement between Union Bank of California,
N.A. and La Victoria Foods, Inc., dated November 3, 1993,
including Fourth Amendment thereto, dated June 20, 1997
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
4.6 -- Business Loan Agreement between Union Bank of California,
N.A. and La Victoria Foods, Inc., dated October 24, 1995,
including First Amendment thereto, dated May 22, 1997,
and Second Amendment thereto, dated June 20, 1997
**5.1 -- Opinion of Vinson & Elkins L.L.P.
**10.1 -- Employment Agreement between Herman L. Graffunder and
Calidad Foods, Inc., dated June 23, 1997
**10.2 -- Employment Agreement between Samuel E. Hillin, Jr. and
Calidad Foods, Inc., dated June 23, 1997
**10.3 -- Authentic Specialty Foods, Inc. 1997 Stock Plan
**10.4 -- Sublease Agreement between A-1 Freeman Relocation System,
Inc. and Calidad Foods, Inc., dated August 1, 1995
**10.5 -- Lease and Agreement between Tanklage Investments Ltd. and
La Victoria Foods, Inc., dated February 1, 1993
**10.6 -- Lease and Agreement between Robert C. Tanklage, Carolyn
M. Johnson and Frank Barclay, Trustees, and La Victoria
Foods, Inc., dated August 1, 1985
**10.7 -- Lease and Agreement between Henry C. Tanklage, Erika A.
Tanklage and Louis N. Mantalica, Trustees, and La
Victoria Foods, Inc., dated November 28, 1974
10.8 -- Form of Warrant Agreement between the Company and Shansby
Partners, L.L.C., dated September , 1997
10.9 -- Form of Registration Rights Agreement between the Company
and Robert C. Tanklage, dated September , 1997
10.10 -- Form of Advisory Agreement between the Company and
Shansby Partners, L.L.C., dated September , 1997
**10.11 -- Employment Agreement between Robert C. Tanklage and La
Victoria Foods, Inc., dated May 31, 1997
10.12 -- Form of Registration Rights Agreement between the
Company, TSG2 L.P., Shansby Partners, L.L.C. and Keith R.
Lively, dated September , 1997
**16.1 -- Letter from Rylander, Clay & Opitz, L.L.P., dated August
6, 1997, regarding change in certifying accountant
23.1 -- Consent of McGladrey & Pullen, LLP
23.2 -- Consent of Rylander, Clay & Opitz, L.L.P.
**23.3 -- Consent of Vinson & Elkins L.L.P. (contained in Exhibit
5.1 hereto)
**23.4 -- Consent of Robert K. Swanson as a person to be named to
serve as a director
**23.5 -- Consent of Charles A. Lynch as a person to be named to
serve as a director
**23.6 -- Consent of Tim G. Bruer as a person to be named to serve
as a director
24.1 -- Power of Attorney (included on the signature page to this
Registration Statement)
**27.1 -- Financial Data Schedule
</TABLE>
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* To be filed by amendment.
** Previously filed.
(b) Consolidated Financial Statement Schedules
All schedules are omitted because the required information is inapplicable
or the information is presented in the Financial Statements or related notes.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
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<PAGE> 5
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes to provide at the closing
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
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<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this amendment to Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Grand Prairie, State of Texas, on the 26th day of August, 1997.
AUTHENTIC SPECIALTY FOODS, INC.
By /s/ SAMUEL E. HILLIN, JR.
-----------------------------------
Samuel E. Hillin, Jr.
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amendment to Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
KEITH R. LIVELY* Chief Executive Officer, August 26, 1997
- ----------------------------------------------------- Chairman of the Board and
Keith R. Lively Director (Principal Executive
Officer)
HERMAN L. GRAFFUNDER* President and Director August 26, 1997
- -----------------------------------------------------
Herman L. Graffunder
/s/ SAMUEL E. HILLIN, JR. Chief Financial Officer August 26, 1997
- ----------------------------------------------------- (Principal Financial and
Samuel E. Hillin, Jr. Accounting Officer)
J. GARY SHANSBY* Director August 26, 1997
- -----------------------------------------------------
J. Gary Shansby
CHARLES H. ESSERMAN* Director August 26, 1997
- -----------------------------------------------------
Charles H. Esserman
*By /s/ SAMUEL E. HILLIN, JR.
--------------------------------------------------
Samuel E. Hillin, Jr.
Attorney-in-Fact
</TABLE>
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<PAGE> 7
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
1.1 -- Form of Underwriting Agreement
**2.1 -- Contribution and Exchange Agreement between the Company,
Robert C. Tanklage, TSG2 L.P., TSG2 Management, L.L.C.
and Keith Lively, dated June 20, 1997
**2.2 -- Form of First Amendment to Contribution and Exchange
Agreement, dated August , 1997
**3.1 -- Restated Articles of Incorporation of the Company
**3.2 -- Bylaws of the Company
4.1 -- Specimen Common Stock certificate
**4.2 -- Consulting Agreement between Calidad Foods, Inc. and
Joseph Patoskie, dated November 22, 1995
**4.3 -- Consulting Agreement between Calidad Foods, Inc. and
Richard Patoskie, dated November 22, 1995
**4.4 -- Secured Promissory Note, dated April 10, 1997 in favor of
Carolyn M. Johnson, Trustee
4.5 -- Term Loan Agreement between Union Bank of California,
N.A. and La Victoria Foods, Inc., dated November 3, 1993,
including Fourth Amendment thereto, dated June 20, 1997
4.6 -- Business Loan Agreement between Union Bank of California,
N.A. and La Victoria Foods, Inc., dated October 24, 1995,
including First Amendment thereto, dated May 22, 1997,
and Second Amendment thereto, dated June 20, 1997
**5.1 -- Opinion of Vinson & Elkins L.L.P.
**10.1 -- Employment Agreement between Herman L. Graffunder and
Calidad Foods, Inc., dated June 23, 1997
**10.2 -- Employment Agreement between Samuel E. Hillin, Jr. and
Calidad Foods, Inc., dated June 23, 1997
**10.3 -- Authentic Specialty Foods, Inc. 1997 Stock Plan
**10.4 -- Sublease Agreement between A-1 Freeman Relocation System,
Inc. and Calidad Foods, Inc., dated August 1, 1995
**10.5 -- Lease and Agreement between Tanklage Investments Ltd. and
La Victoria Foods, Inc., dated February 1, 1993
**10.6 -- Lease and Agreement between Robert C. Tanklage, Carolyn
M. Johnson and Frank Barclay, Trustees, and La Victoria
Foods, Inc., dated August 1, 1985
**10.7 -- Lease and Agreement between Henry C. Tanklage, Erika A.
Tanklage and Louis N. Mantalica, Trustees, and La
Victoria Foods, Inc., dated November 28, 1974
10.8 -- Form of Warrant Agreement between the Company and Shansby
Partners, L.L.C., dated September , 1997
10.9 -- Form of Registration Rights Agreement between the Company
and Robert C. Tanklage, dated September , 1997
10.10 -- Form of Advisory Agreement between the Company and
Shansby Partners, L.L.C., dated September , 1997
**10.11 -- Employment Agreement between Robert C. Tanklage and La
Victoria Foods, Inc., dated May 31, 1997
10.12 -- Form of Registration Rights Agreement between the
Company, TSG2 L.P., Shansby Partners, L.L.C. and Keith R.
Lively, dated September , 1997
**16.1 -- Letter from Rylander, Clay & Opitz, L.L.P., dated August
6, 1997, regarding change in certifying accountant
23.1 -- Consent of McGladrey & Pullen, LLP
23.2 -- Consent of Rylander, Clay & Opitz, L.L.P.
**23.3 -- Consent of Vinson & Elkins L.L.P. (contained in Exhibit
5.1 hereto)
**23.4 -- Consent of Robert K. Swanson as a person to be named to
serve as a director
**23.5 -- Consent of Charles A. Lynch as a person to be named to
serve as a director
**23.6 -- Consent of Tim G. Bruer as a person to be named to serve
as a director
24.1 -- Power of Attorney (included on the signature page to this
Registration Statement)
**27.1 -- Financial Data Schedule
</TABLE>
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* To be filed by amendment.
** Previously filed.
<PAGE> 1
DRAFT: 08/25/97
AUTHENTIC SPECIALTY FOODS, INC.
COMMON STOCK
(PAR VALUE $1.00 PER SHARE)
--------------------
UNDERWRITING AGREEMENT
--------------------
August ___, 1997
CRUTTENDEN ROTH INCORPORATED
SUTRO & CO. INCORPORATED
WEDBUSH MORGAN SECURITIES INC.
As Representatives of the several
Underwriters named in Schedule I hereto,
c/o Cruttenden Roth Incorporated
18301 Von Karman
Irvine, CA 92612
Dear Ladies and Gentlemen:
Authentic Specialty Foods, Inc., a corporation organized under the
laws of the State of Texas (the "Company"), proposes to issue and sell to the
several Underwriters named in Schedule I hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 6) 4,100,000 shares (the "Firm Shares") of
Common Stock, $1.00 par value per share (the "Common Stock"), of the Company,
all of which are to be issued and sold by the Company (the "Firm Shares"), and,
in addition to the Firm Shares, for the sole purpose of covering
over-allotments in connection with the sale of the Firm Shares, the Company
proposes to grant to the Underwriters an option to purchase up to an additional
615,000 shares (the "Option Shares"). The Firm Shares and any Option Shares
purchased pursuant to this Agreement are hereinafter called the "Shares."
This is to confirm the agreement concerning the sale and the purchase
of the Shares from the Company by the Underwriters. The Company understands
that the Underwriters propose to make a public offering of the Shares as soon
as you deem advisable after the Registration Statement (as defined below)
becomes effective.
1. Representations, Warranties and Agreements of the Company. The
Company represents and warrants to, and agrees with, each Underwriter that:
<PAGE> 2
(a) A registration statement on Form S-1 (File No.
333-29959) relating to the Shares has been prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Rules and Regulations (as defined below) of the
Securities and Exchange Commission (the "Commission") thereunder and has been
filed with the Commission. Copies of such registration statement and any
amendments, and all forms of the related prospectuses contained therein,
previously filed by the Company with the Commission have been delivered to you
and the Company has consented to the Underwriter's use of such copies for the
purposes permitted by the Securities Act. Such registration statement,
including the prospectus, Part II and all exhibits thereto, as amended at the
time when it shall become effective, is herein referred to as the "Registration
Statement," and the prospectus included as part of the Registration Statement
on file with the Commission that discloses all the information that was omitted
from the prospectus on the effective date pursuant to Rule 430A of the Rules
and Regulations with any changes contained in any prospectus filed with the
Commission by the Company with your consent after the effective date of the
Registration Statement, is herein referred to as the "Final Prospectus." Such
amendments to such Registration Statement as may have been required prior to
the date hereof have been filed with the Commission; and the Company will file
such additional amendments to such Registration Statement and such amended
prospectuses as may hereafter be required. If the Registration Statement has
been declared effective under the Securities Act by the Commission, the Company
has prepared and will promptly file with the Commission the information omitted
from the Registration Statement pursuant to Rule 430A(a) of the Rules and
Regulations as part of an amendment or supplement to the prospectus pursuant to
subparagraph (1) or (4) of Rule 424(b) of the Rules and Regulations or as part
of a post-effective amendment to the Registration Statement (including an
amended prospectus); otherwise the Company has prepared and will promptly file
an amendment to the Registration Statement (including an amended prospectus).
The prospectus included as part of the Registration Statement on the date when
the Registration Statement became effective is referred to herein as the
"Effective Prospectus"; any prospectus included in the Registration Statement
of the Company and in any amendments thereto prior to the effective date of the
Registration Statement is referred to herein as a "Pre-Effective Prospectus."
For purposes of this Agreement, "Rules and Regulations" mean the rules and
regulations adopted by the Commission under either the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
applicable, and "affiliate" shall have the definition specified in Rule 405 of
the Rules and Regulations.
(b) No stop order or other order preventing or suspending
the use of any Pre-Effective Prospectus has been issued by the Commission nor
any "Blue Sky" or securities authority of any jurisdiction and each
Pre-Effective Prospectus, at the time of filing thereof, conformed in all
material respects with the requirements of the Securities Act and the Rules and
Regulations, did not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; except that the foregoing shall not apply to statements
in or omissions from any Pre-Effective Prospectus in reliance upon, and in
conformity with, written information furnished to the Company by you, or by any
Underwriter through you, specifically for use in the preparation thereof.
(c) As of the Closing Date (as defined herein), the
Registration Statement will have been declared effective under the Securities
Act, and no post-effective amendment to the
2
<PAGE> 3
Registration Statement will have been filed as of the Closing Date or Option
Closing Date (as defined herein), as the case may be, without the
Representatives' approval as provided in Section 3(a) hereof. When the
Registration Statement becomes effective and at all times subsequent thereto,
the Registration Statement, any post-effective amendment thereto and the
Effective Prospectus and the Final Prospectus as amended or supplemented shall
comply in all material respects with the requirements of the Securities Act and
the Rules and Regulations. No such document shall contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that the
foregoing shall not apply to statements in, or omissions from, any such
document, in reliance upon, and in conformity with, written information
furnished to the Company by you, or by any Underwriter through you,
specifically for use in the preparation thereof. There is no contract or
document required to be described in the Registration Statement or Effective
Prospectus or Final Prospectus or to be filed as an exhibit to the Registration
Statement which is not in all material respects accurately described in the
Effective Prospectus or Final Prospectus and filed as an exhibit to the
Registration Statement or Final Prospectus, or both, as the case may be. As of
the Closing Date or Option Closing Date, as the case may be, no stop order or
other order suspending the effectiveness of the Registration Statement or
preventing or suspending the use of the Effective Prospectus or the Final
Prospectus or any amendment or supplement thereto, has been issued by the
Commission or any "Blue Sky" or securities authority of any jurisdiction.
(d) McGladrey & Pullen, LLP, whose reports appear in the
Registration Statement, the Pre-Effective Prospectus, the Effective Prospectus
and the Final Prospectus, are independent auditors as required by the
Securities Act and the Rules and Regulations.
(e) Rylander, Clay & Opitz, L.L.P., whose report appears
in the Registration Statement, the Pre- Effective Prospectus, the Effective
Prospectus and the Final Prospectus, are independent auditors as required by
the Securities Act and the Rules and Regulations.
(f) The financial statements (including the related
schedules and notes) of the Company and La Victoria Foods, Inc., a California
corporation ("La Victoria"), included in the Registration Statement and/or
Final Prospectus, together with the unaudited financial information of the
Company and La Victoria forming part of the Registration Statement and/or Final
Prospectus, present fairly the financial condition, the results of the
operations and changes in cash flows and equity of the entities purported to be
shown thereby at the dates and for the periods indicated and have been prepared
in conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated. The selected and summary
financial data included in the Registration Statement, the Effective
Prospectus, and the Final Prospectus present fairly the information shown
therein and have been compiled on a basis substantially consistent with the
financial statements presented in the Registration Statement, the Effective
Prospectus, and the Final Prospectus.
(g) The pro forma financial information included in the
Registration Statement and/or Final Prospectus presents fairly the information
shown therein, has been prepared in accordance with generally accepted
accounting principles and the Rules and Regulations with respect to pro forma
information, has been properly compiled on the pro forma basis described
therein and,
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in the opinion of the Company, the assumptions used in the preparation thereof
are reasonable and the adjustments used therein are appropriate under the
circumstances.
(h) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Texas, with full corporate power and corporate authority to own, lease and
operate its properties and conduct its business as described in the
Registration Statement and Final Prospectus, and is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the character of the business conducted by it or the location of the
properties owned or leased by it makes such qualification necessary, except for
those failures to be so qualified or in good standing which will not in the
aggregate have a material adverse effect on the financial condition, results of
operations, business or prospects of the Company and La Victoria, taken as a
whole; and the Company holds all licenses, certificates, permits, consents,
orders, approvals and other authorizations from governmental authorities
necessary or appropriate for the conduct of its business and to own or lease,
as the case may be, and to operate its properties as described in the
Registration Statement and Final Prospectus. The expiration or revocation of
any such licenses, certificates, permits, consents, orders, approvals or other
governmental authorizations would not materially affect the operations of the
Company. None of the activities or businesses of the Company is in violation
of, or could reasonably be expected to cause the Company to violate, any law,
rule, regulation or order of the United States, any state, county, city or
locality, or of any agency or body of the United States or of any state,
county, city or locality of any foreign jurisdiction, which violation could
reasonably be expected to have a material adverse effect on the financial
condition, results of operations, business or prospects of the Company and La
Victoria, taken as a whole.
(i) La Victoria has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
California, with full corporate power and corporate authority to own, lease and
operate its properties and conduct its business as described in the
Registration Statement and Final Prospectus, and is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the character of the business conducted by it or the location of the
properties owned or leased by it makes such qualification necessary except for
those failures to be so qualified or in good standing which will not in the
aggregate have a material adverse effect on the financial condition, results of
operations, business or prospects of the Company and La Victoria, taken as a
whole; and La Victoria holds all licenses, certificates, permits, consents,
orders, approvals and other authorizations from governmental authorities
necessary or appropriate for the conduct of its business and to own or lease,
as the case may be, and to operate its properties as described in the
Registration Statement and Final Prospectus. The expiration or revocation of
any such licenses, certificates, permits, consents, orders, approvals or other
governmental authorizations would not materially affect the operations of La
Victoria. None of the activities or businesses of La Victoria is in violation
of, or could reasonably be expected to cause La Victoria to violate, any law,
rule, regulation or order of the United States, any state, county, city or
locality, or of any agency or body of the United States or of any state,
county, city or locality of any foreign jurisdiction, which violation could
reasonably be expected to have a material adverse effect on the financial
condition, results of operations, business or prospects of the Company and La
Victoria, taken as a whole.
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(j) The Contribution and Exchange Agreement, by and among
the Company, Robert C. Tanklage ("Tanklage"), TSG2 L.P., a Delaware limited
partnership ("TSG2"), TSG2 Management, L.L.C., a Delaware limited liability
company ("TSG2 Management"), and Keith Lively ("Lively"), and Lively comprising
all of the members of LV Foods, L.L.C., a Delaware limited liability company
("LV Foods"), (TSG2, TSG2 Management and Lively collectively, the "Members"),
entered into as of June 20, 1997 (the "Contribution Agreement"), pursuant to
which (A) the Company shall acquire all of the membership interests in and to
LV Foods (the "LV Foods Purchase"), (B) the Company shall acquire 106 shares of
the outstanding common stock, $100.00 par value, of La Victoria (the "Tanklage
Purchase"), and the transactions contemplated therein, have been duly and
validly authorized by the Company and the Members, and the Contribution
Agreement has been duly and validly executed and delivered by the Company and
the Members and is enforceable against the Company and the Members in
accordance with its terms, except insofar as indemnification and contribution
provisions may be limited by Federal or state securities laws or equitable
principles, and except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting creditors' rights
generally.
(k) Upon the consummation of the transactions
contemplated in the Contribution Agreement, which shall occur immediately
following the closing of the purchase of the Firm Shares, the Company will own
directly 50% of the outstanding capital stock of La Victoria and will own
indirectly, through its ownership of 100% of the beneficial interests of LV
Foods, the remaining 50% of the outstanding capital stock of La Victoria, free
and clear of all liens, encumbrances, equities or claims except as set forth in
Final Prospectus. The Company does not own any interest in or control any
other corporation association or entity.
(l) The Pro-Forma and As Adjusted capitalization of the
Company as of June 30, 1997 is as set forth under the caption "Capitalization"
in the Registration Statement and Final Prospectus, and the Common Stock
conforms to the description thereof contained under the caption "Description of
Capital Stock" in the Registration Statement and Final Prospectus; the
outstanding shares of Common Stock (including the Shareholder Shares) have been
and are, and the Shares to be sold by the Company, upon issuance and delivery
and payment therefor in the manner herein described, will be, duly authorized,
validly issued, fully paid and nonassessable and are not subject to any
preemptive or similar rights. Except as described in the Registration Statement
and Final Prospectus, there are no preemptive rights or other rights to
subscribe for or to purchase, or any restriction upon the voting or transfer
of, any shares of Common Stock pursuant to the Company's Articles of
Incorporation, Bylaws or other governing documents or any agreement, contract
or other instrument to which the Company is a party or by which it may be
bound. Neither the filing of the Registration Statement nor the offering or
sale of the Shares as contemplated by this Agreement gives rise to any rights,
other than those which have been waived or satisfied, for or relating to the
registration of any shares of Common Stock; and any such waivers, to the best
of the Company's knowledge, were duly and validly given. The description of
the Company's outstanding stock options and other stock plans or arrangements
and the options or other rights granted and exercised thereunder set forth in
the Registration Statement and/or Final Prospectus accurately and fairly
presents in all material respects the information required to be shown with
respect to such options, plans, arrangements, and rights.
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<PAGE> 6
(m) The redemption by the Company of the shares of its
Common Stock held by The Shansby Group ("Shansby") and TSG International
("TSGI") has been duly and validly authorized by the Company, Shansby and TSGI,
and the consummation of the redemption will not result in a violation of, or
constitute a default under, the Articles of Incorporation, Bylaws or other
governing documents of the Company, or any contract, indenture, mortgage, deed
of trust, loan or credit agreement, bond debenture, note, lease or other
agreement or instrument to which the Company, Shansby or TSGI is a party or by
which any of them is bound, or to which any of their properties is subject, nor
will the redemption violate any law, rule, administrative regulation, judgment,
order, writ or decree of any court, or any governmental agency or body having
jurisdiction over the Company, Shansby or TSGI or any of their property, or
result in the creation or imposition of any lien, charge, claim or encumbrance
upon any property or asset of the Company, Shansby or TSGI; provided, however,
that no representation is given in this paragraph with respect to any of the
foregoing that will be fully repaid contemporaneously with the purchase of the
Firm Shares pursuant hereto.
(n) All offers and sales of (i) the Common Stock by the
Company (other than the Shares); and (ii) the capital stock of La Victoria were
at all relevant times exempt from the registration requirements of the
Securities Act and were the subject of an available exemption from the
registration requirements of applicable state securities or Blue Sky laws.
(o) When duly countersigned by the Company's transfer
agent and registrar and delivered to the Underwriters in accordance with the
provisions of this Agreement, good and marketable title to the unissued Shares
to be issued and sold by the Company to the Underwriters hereunder will pass to
the Underwriters free and clear of any liens, security interests, adverse
claims, equities or other encumbrances of any kind or character, except as may
be created by any Underwriter.
(p) Except as described in or contemplated by the
Registration Statement and Final Prospectus, (i) there has not been any
material adverse change in, or any adverse development which materially
affects, the business, properties, financial condition, results of operations
or prospects of any of the Company and La Victoria, taken as a whole, whether
or not arising in the ordinary course of business, from the date as of which
information is given; (ii) none of the Company, LV Foods or La Victoria has,
directly or indirectly, incurred any liabilities or obligations, direct or
contingent, not in the ordinary course of business, or which is material in
amount whether or not in the ordinary course of business, or entered into any
transactions not in the ordinary course of business, or which is material to
the business of the Company and La Victoria, taken as a whole, whether or not
in the ordinary course of business; (iii) the agreements to which the Company,
LV Foods or La Victoria is a party, described in the Registration Statement and
Final Prospectus, are valid and enforceable by the Company, LV Foods or La
Victoria and, to the knowledge of the Company, the other party or parties
thereto are not in material breach or default under any such agreement; (iv)
there has not been any change in the capital stock of or any incurrence of
long-term debt by, the Company, LV Foods or La Victoria, or any issuance or
grant of options, warrants or rights to purchase the capital stock of the
Company, LV Foods or La Victoria, or any security convertible into, exercisable
for, or exchangeable for capital stock of the Company, LV Foods or La Victoria,
or any declaration or payment of any dividend or other distribution on any
class of the capital stock of the Company, LV
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<PAGE> 7
Foods or La Victoria from the date as of which information is given in the
Registration Statement and Final Prospectus; (v) there is outstanding no
security or other instrument which by its terms is convertible into or
exchangeable for capital stock of the Company, LV Foods or La Victoria; and
(vi) there is no commitment, plan or arrangement to change or alter the rights,
preferences or privileges of any outstanding class or series of the capital
stock of the Company, LV Foods or La Victoria.
(q) Except as described in the Registration Statement
and/or Final Prospectus, none of the Company, LV Foods or La Victoria is, or
with the giving of notice or lapse of time or both would be, in violation of or
in default under, or will the execution or delivery of this Agreement or the
Contribution Agreement or consummation of the transactions contemplated hereby
or thereby result in a violation of, or constitute a default under, the
Articles of Incorporation, Bylaws or other governing documents of the Company,
or any contract, indenture, mortgage, deed of trust, loan or credit agreement,
bond, debenture, note, lease or other agreement or instrument, to which any of
the Company, LV Foods or La Victoria is a party or by which any of them is
bound, or to which any of their properties is subject, nor will the performance
by the Company of its obligations under this Agreement or under the
Contribution Agreement violate any law, rule, administrative regulation,
judgment, order, writ or decree of any court, or any governmental agency or
body having jurisdiction over the Company or any of its properties, or result
in the creation or imposition of any lien, charge, claim or encumbrance upon
any property or asset of the Company. Except for permits and similar
authorizations or notifications required under the Securities Act, the
securities or "Blue Sky" laws of certain jurisdictions, the necessary approvals
under the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as amended,
and for such permits, authorizations and notifications which have been
obtained, no consent, approval, authorization or order of any court,
governmental agency or body, financial institution or other person or entity is
required in connection with the consummation of the transactions contemplated
by this Agreement or the Contribution Agreement, including, without limitation,
the valid sale and delivery of the Shares.
(r) The Company has all requisite corporate power and
corporate authority to execute, deliver and perform its obligations under this
Agreement and the Contribution Agreement, and this Agreement and the
Contribution Agreement have been duly authorized, executed and delivered by the
Company and constitute legal, valid and binding agreements of the Company and
are enforceable against the Company in accordance with their respective terms
except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights generally.
(s) The Company, LV Foods and La Victoria have good and
marketable title in fee simple to all items of real property and good and
marketable title to all personal property owned by them, in each case free and
clear of all liens, charges, claims, encumbrances and defects except such as
are described or referred to in the Registration Statement and Final Prospectus
or such as do not materially affect the value of such property and do not
interfere with the use made or proposed to be made of such property by the
Company, LV Foods or La Victoria, and any real property and buildings held
under lease by the Company, LV Foods or La Victoria are held by them under
valid, existing and enforceable leases with such exceptions as are not material
and do not interfere with the use made or proposed to be made of such property
and buildings by the Company, LV Foods or La
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<PAGE> 8
Victoria and except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights generally.
(t) Except as described in the Registration Statement
and/or Final Prospectus, there is no litigation or governmental proceeding to
which the Company, LV Foods or La Victoria is a party or to which any of their
property is subject or which is pending or, to the Company's knowledge,
threatened against or affecting the Company, LV Foods or La Victoria, which
could reasonably be expected to result in any material adverse change in the
financial condition, results of operations, business or prospects of the
Company and La Victoria, taken as a whole, which is required to be disclosed in
the Registration Statement and Final Prospectus or which could reasonably be
expected to have a material adverse effect on the consummation of the
transactions contemplated by this Agreement, nor are there any actions, suits
or proceedings related to environmental matters or related to discrimination on
the basis of age, sex, religion, race, or physical or mental disability, and no
labor disturbance by the employees of the Company, LV Foods or La Victoria
exists or is imminent which could be expected to affect adversely the financial
condition, results of operations, business or prospects of the Company and La
Victoria, taken as a whole, or which is required to be disclosed in the
Registration Statement and Final Prospectus.
(u) None of the Company, LV Foods or La Victoria is in
violation of any law, ordinance, governmental rule or regulation or court
decree to which any of them may be subject, which violation could reasonably be
expected to have a material adverse effect on the financial condition, results
of operations, business or prospects of the Company and La Victoria, taken as a
whole.
(v) Except as described in the Registration Statement
and/or Final Prospectus, the Company and La Victoria comply in all material
respects with all Environmental Laws (as defined below), except to the extent
that failure to comply with such Environmental Laws would not have a material
adverse effect on the financial condition, results of operation, business or
prospects of the Company and La Victoria, taken as a whole. Except as
described in the Registration Statement and/or Final Prospectus, the Company
and La Victoria (i) are not the subject of any pending or, to the knowledge of
the Company, threatened federal, state or local investigation evaluating
whether any remedial action by the Company or La Victoria is needed to respond
to a release of any Hazardous Materials (as defined below) into the
environment, resulting from the Company's or La Victoria's business operations
or ownership or possession of any of their properties or assets, or (ii) is not
in contravention of any Environmental Law that could reasonably be expected to
have a material adverse effect on the financial condition, results of
operation, business or prospects of the Company and La Victoria, taken as a
whole. Except as described in the Registration Statement and/or Final
Prospectus, neither the Company nor La Victoria has received any notice or
claim, nor are there pending or, to the knowledge of the Company, threatened
lawsuits against them, with respect to violations of an Environmental Law or in
connection with any release of Hazardous Materials into the environment that,
in the aggregate, if the subject of any unfavorable decision, ruling or
finding, could reasonably be expected to have a material adverse effect on the
financial condition, results of operation, business or prospects of the Company
and La Victoria, taken as a whole. As used herein, "Environmental Laws" means
any federal, state, city or local law or regulation applicable to the Company's
or La Victoria's business operations or ownership or possession of any of their
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<PAGE> 9
properties or assets relating to environmental matters, and "Hazardous
Materials" means those substances that are regulated by or form the basis of
liability under any Environmental Laws.
(w) The Company has not taken and shall not take,
directly or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Common Stock to
facilitate the sale or resale of the Shares.
(x) The Company, LV Foods and La Victoria have timely
(giving effect to permitted extensions) filed and properly prepared all
necessary federal, state, local and foreign income, franchise and any other
required tax returns and have paid all taxes shown as due thereon, and the
Company has no knowledge of any tax deficiency which has been or might be
asserted against the Company, LV Foods or La Victoria which could reasonably be
expected to have a material adverse effect on the financial condition, results
of operations, business or prospects of the Company and La Victoria, taken as a
whole.
(y) Neither the Company, La Victoria nor any officers,
directors, employees or agents or any other persons associated with or acting
on behalf of the Company or La Victoria has at any time (i) made any
contributions to any candidate for political office in violation of law, or
failed to disclose fully any contributions to any candidate for political
office in accordance with any applicable statute, rule, regulation or ordinance
requiring such disclosure, (ii) made any payment to any local, state, federal
or foreign governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments required or allowed
by applicable law, (iii) violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, (iv) made any payment outside the ordinary
course of business to any purchasing or selling agent or person charged with
similar duties of any entity to which the Company or La Victoria sells or from
which the Company or La Victoria buys products for the purpose of influencing
such agent or person to buy products from or sell products to the Company or La
Victoria, (v) made any other bribe, rebate, payoff, influence payment, kickback
or other unlawful payment or (vi) engaged in any transaction, maintained any
bank account or used any corporate funds except for transactions, bank accounts
and funds which have been and are reflected in the normally maintained books
and records of the Company or La Victoria.
(z) Except for the several Underwriters and the
Representatives or as disclosed in the Registration Statement and/or Final
Prospectus, there are no claims for services in the nature of and no person has
any right to receive a finder's fee, brokerage fee or similar fee with respect
to this Agreement, the Contribution Agreement, the transactions contemplated
hereby or thereby or the acquisition by LV Foods of its interest in La
Victoria, for which the Company or any of the several Underwriters may be
responsible.
(aa) The Company and La Victoria have their properties
adequately insured against loss or damage by fire and maintain such other
insurance as is prudent or customarily maintained by companies in the same or
similar business and in the same or similar locality.
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(bb) The Company and La Victoria own or possess rights to
use all material patents, patent rights, inventions, proprietary software
(whether represented by source code, object code or in any other manner),
trademarks, service marks, trade names and copyrights (collectively, the
"Intangibles") necessary for the conduct of their respective businesses as
described in the Registration Statement and Final Prospectus and have taken all
reasonable security measures to protect the secrecy, confidentiality and value
of their trade secrets and know-how that are valid and protectable and are not
part of the public knowledge or literature. All of the Intangibles that the
Company or La Victoria own or have pending, or under which they are licensed,
are in good standing and uncontested. Any of the Company's or La Victoria's
employees and any other person who, either alone or in concert with others,
developed, invented, discovered, derived, programmed or designed these secrets,
or who have knowledge of or access to information relating to them, have been
put on notice that these secrets are proprietary to the Company or La Victoria,
as the case may be, and are not to be divulged or misused. Neither the Company
nor La Victoria has received any notice of infringement of or conflict with,
and to the best of the Company's knowledge, neither the Company nor La Victoria
is infringing or in conflict with, asserted rights of others with respect to
any Intangibles which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, could reasonably be expected to have a
material adverse effect on the financial condition, results of operations,
business or prospects of the Company and La Victoria, taken as a whole. To the
knowledge of the Company, there is no infringement by others of Intangibles of
the Company or La Victoria.
(cc) There are no outstanding loans or advances or
guarantees of indebtedness by the Company, LV Foods or La Victoria to or for
the benefit of any affiliate of the Company, LV Foods or La Victoria, any of
the officers or directors of the Company, LV Foods or La Victoria, or any of
the members of the families of any of them, or any other business relationships
or related-party transaction of the nature described in Item 404 of Regulation
S-K involving the Company, LV Foods or La Victoria and any other persons
referred to in said Item 404, which are required by the Rules and Regulations
to be described in the Registration Statement and Final Prospectus except such
that are so described.
(dd) The Company is eligible to use Form S-1 for the
registration of the Shares.
(ee) Application for quotation of the Common Stock on the
National Association of Securities Dealers Automated Quotations (herein called
Nasdaq) National Market has been approved, subject to notice of issuance.
(ff) The Company and La Victoria have each complied with
all provisions of Section 517.075, Florida Statutes (Chapter 92-198, Laws of
Florida), relating to doing business with the Government of Cuba or any person
or affiliate located in Cuba.
(gg) The Company and La Victoria each maintains a system
of internal accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary in order to
permit preparation of financial statements in accordance with generally
accepted accounting principles and to maintain accountability for assets;
(iii) access to assets is permitted only in
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<PAGE> 11
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(hh) The Company is not, and upon the consummation of the
transactions contemplated hereby will not be, an "investment company" or a
company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
2. Purchase, Sale and Delivery of Shares.
(a) On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell the Firm Shares to the several Underwriters,
and each Underwriter agrees, severally and not jointly, to purchase from the
Company, at a purchase price of $______ per share, the respective number of
Firm Shares set forth opposite their names on Schedule I hereto (subject to
adjustment as provided in Section 6 hereof).
(b) Subject to the terms and conditions and in reliance
upon the representations and warranties and agreements set forth herein, the
Company hereby grants an option to the several Underwriters to purchase,
severally and not jointly, up to 615,000 Option Shares, at the same purchase
price per share as the Underwriters shall pay for the Firm Shares. Said option
may be exercised only to cover over-allotments in the sale of the Firm Shares
by the Underwriters. Said option may be exercised in whole or in part at any
time (but not more than once) on or before the 30th day after the date of the
Effective Prospectus upon written or telegraphic notice by the Underwriters to
the Company setting forth the number of Option Shares as to which the several
Underwriters are exercising the option and the settlement date, which shall not
be earlier than the Closing Date (as defined below). Delivery of certificates
for the Option Shares by the Company and payment therefor shall be made as
provided in Section 2(c) hereof. The number of Option Shares to be purchased by
each Underwriter shall be the same percentage of the total number of Option
Shares to be purchased by the several Underwriters as such Underwriter is
purchasing of the Firm Shares, subject in each case to such adjustments as the
Underwriters in their absolute discretion shall make to eliminate any
fractional shares.
(c) Delivery of definitive certificates for the Firm
Shares and the Option Shares (if the option provided for in Section 2(b) hereof
shall have been exercised on or before the second business day prior to the
Closing Date) shall be made to you for the respective accounts of the
Underwriters against payment to the Company of the purchase price therefor by
wire transfer in immediately available funds. Payment of the purchase price
for, and delivery of certificates for, the Firm Shares shall be made at the
offices of Vinson & Elkins L.L.P., 2300 First City Tower, 1001 Fannin, Houston,
Texas 77002 (or at such other place as may be agreed upon between you and the
Company) at 9:00 a.m. Houston, Texas, time, on the fourth full business day
following the date of this Agreement or at such other time and date not later
than seven full business days thereafter as you and the Company may determine,
such time and date of payment and delivery being herein called the "Closing
Date." The certificates for the Shares will be registered in such name or names
and denominations as you request in writing at least two full business days
prior to the Closing Date.
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<PAGE> 12
The Company will permit you to examine and package such certificates for
delivery at least three full business days prior to the Closing Date.
It is understood that each Underwriter has authorized you,
individually and not as Representatives of the several Underwriters, to accept
delivery and receipt of, for its account, the Shares that it has agreed to
purchase, and each Underwriter has further authorized you (but not obligated
you) to make payment of the purchase price on behalf of any Underwriter or
Underwriters whose check or checks shall not have been received by you prior to
the Closing Date or Option Closing Date, as the case may be, for the Shares to
be purchased by such Underwriter or Underwriters. Any such payment by you shall
not relieve any such Underwriter or Underwriters of any of its or their
obligations hereunder or under any other underwriting arrangement relating to
the Shares, including, without limitation, the Agreement Among Underwriters.
If the option provided for in Section 2(b) hereof is exercised after
the second business day prior to the Closing Date, the Company will deliver (at
the expense of the Company) to the Underwriters, at Irvine, California, on the
date specified by the Underwriters (which shall be no earlier than the second
business day and no later than the third business day after the exercise of
said option), certificates for the Option Shares in such names and
denominations as the Underwriters shall have requested against payment to the
Company of the purchase price thereof by wire transfer in immediately available
funds. If settlement for the Option Shares occurs after the Closing Date, the
Company will deliver to the Underwriters on the settlement date for the Option
Shares (such date and time of delivery and payment for the Option Shares being
herein called the "Option Closing Date" and, together with the Closing Date,
the "Closing Dates"), and the obligation of the Underwriters to purchase the
Option Shares shall be conditioned on receipt of supplemental opinions,
certificates and letters confirming as of such date the opinions, certificates
and letters delivered on the Closing Date pursuant to Section 4 hereof.
3. Covenants. The Company covenants and agrees with each
Underwriter that:
(a) The Company shall use its reasonable best efforts to
cause the Registration Statement to become effective and, if the procedure in
Rule 430A of the Rules and Regulations is utilized, to comply with the
provisions of, and make all requisite filings with the Commission pursuant to,
Rule 430A of the Rules and Regulations and to notify you promptly (in writing,
if requested) of all such filings. The Company shall notify you promptly of the
receipt of any comments from the Commission and any request by the Commission
for any amendment of or supplement to the Registration Statement or the
Effective Prospectus or the Final Prospectus or for additional information.
The Company shall prepare and file with the Commission, promptly upon your
request, any amendments of or supplements to the Registration Statement or the
Effective Prospectus or the Final Prospectus which, in your opinion, may be
necessary or advisable in connection with the distribution of the Shares. The
Company shall not file any amendment of or supplement to the Registration
Statement or the Effective Prospectus or the Final Prospectus (including any
post-effective amendment), which is not approved by you after reasonable notice
thereof, such approval not to be unreasonably withheld or delayed. The Company
shall advise you promptly of the issuance by the Commission or any State or
other regulatory body of any stop order or other order suspending the
effectiveness of the Registration Statement, suspending or preventing the use
of any Pre- Effective
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<PAGE> 13
Prospectus, Effective Prospectus or Final Prospectus or suspending the
qualification of the Shares for offering or sale in any jurisdiction, or of the
institution of any proceedings for any such purpose. The Company shall use its
reasonable best efforts to prevent the issuance of any stop order or other such
order and, should a stop order or other such order be issued, to obtain as soon
as possible the lifting thereof.
(b) If the Company has elected to rely upon Rule 430A, it
will take such steps as it deems necessary to ascertain promptly whether the
form of prospectus transmitted for filing under Rule 424(b) was received for
filing by the Commission and, in the event that it was not, it will promptly
file such prospectus.
(c) The Company shall furnish to the Underwriters, from
time to time and without charge, a reasonable number of copies of the
Registration Statement and of each amendment and supplement thereto, of which
two of each such Registration Statement and each amendment and supplement
thereto for the Representatives and one for counsel for the Underwriters
("Underwriters' Counsel") shall be originally signed and shall include
exhibits. During the period in which a prospectus is required to be delivered
under the Securities Act and the Rules and Regulations, the Company shall
furnish to each Underwriter, from time to time and without charge, such number
of copies of the Pre-Effective Prospectus, Effective Prospectus and Final
Prospectus as such Underwriter may reasonably request and the Company hereby
consents to the use of such copies for purposes permitted by the Securities
Act.
(d) Within the time during which a Final Prospectus
relating to the Shares is to be delivered under the Securities Act, the Company
shall comply with all requirements imposed upon it by the Securities Act, as
now and hereafter amended, and by the Rules and Regulations, as from time to
time in force, so far as is necessary to permit the continuance of sales of or
dealings in the Shares as contemplated by the provisions hereof and the Final
Prospectus. If during such period any event occurs or condition exists as a
result of which in the opinion of Underwriters' Counsel or counsel for the
Company, the Final Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances then existing,
not misleading, or if during such period it is necessary in the opinion of
Underwriters' Counsel or counsel for the Company, to amend the Registration
Statement or supplement the Final Prospectus to comply with the Securities Act,
the Company shall promptly notify you and shall amend the Registration
Statement or supplement the Final Prospectus (at the expense of the Company),
subject to Section 3(a), so as to correct such statement or omission or effect
such compliance, provided that the Company shall determine the final terms of
any such amendment or supplement only after considering such changes in any
such documents as the Underwriters may reasonably request.
(e) The Company shall take or cause to be taken all
necessary actions and furnish to whomever you may direct such information as
may be required for sale of the Shares under the laws of such jurisdictions
which you shall designate; except that in no event shall the Company be
obligated in connection therewith to qualify as a foreign corporation or to
execute a general consent to service of process.
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<PAGE> 14
(f) The Company shall make generally available to its
security holders, in the manner contemplated by Rule 158(b) under the
Securities Act, as soon as practicable but in any event not later than 45 days
after the end of its fiscal quarter in which the first anniversary date of the
effective date of the Registration Statement occurs, an earnings statement
satisfying the requirements of Section 11(a) of the Securities Act covering a
period of at least twelve (12) consecutive months beginning after the effective
date of the Registration Statement.
(g) For a period of 180 days following the date of the
Effective Prospectus (the "Lock-Up Period"), the Company will not, without the
prior written consent of Cruttenden Roth Incorporated, offer, issue, sell,
transfer, grant options to purchase or otherwise dispose of, for value or
otherwise, directly or indirectly, any shares of Common Stock or other equity
securities of the Company except (A) the Shares, (B) pursuant to the exercise
of options or warrants of the Company outstanding immediately prior to the
Closing Date, as described in the Final Prospectus, (C) the exercise or grant
of options currently outstanding or authorized pursuant to the Company's
existing employee benefit plans, as described in the Final Prospectus, up to a
total of 350,000 shares of Common Stock, (D) shares of Common Stock currently
authorized to any existing 401(k) benefit plan of the Company, as described in
the Final Prospectus, or (E) in connection with a merger of another corporation
into, or an acquisition of all or substantially all of the assets or stock of
another entity by, the Company where the Company or a subsidiary is the
surviving entity; provided, the recipient of such shares of Common Stock or
equity securities of the Company agrees in writing to also abide by the
restrictions set forth in this Section 3(g) for the duration of the Lock-Up
Period.
(h) The Company shall take all actions, necessary or
appropriate, to validly consummate the LV Foods Purchase and the Tanklage
Purchase immediately following the closing of the sale of the Firm Shares.
(i) The Company shall apply the net proceeds of the sale
of the Shares as set forth under the caption "Use of Proceeds" in the Final
Prospectus.
(j) The Company shall file such reports with the
Commission with respect to the sale of the Shares and the application of the
proceeds therefrom as may be required in accordance with Rule 463 under the
Securities Act.
(k) The Company will furnish to you as early as
practicable prior to the Closing Date and Option Closing Date, as the case may
be, but not less than two full business days prior thereto, a copy of its
latest available unaudited interim financial statements that have been read by
the Company's independent certified public accountants, as stated in their
letters to be furnished pursuant to Section 4(g).
(l) The Company will comply with all provisions of all
undertakings contained in the Registration Statement.
(m) The Company shall pay or cause to be paid (A) all
expenses (including any capital duties, stamp duties and stock transfer taxes)
incurred in connection with the delivery to the several Underwriters of the
Shares, (B) all fees and expenses (including, without limitation, fees and
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<PAGE> 15
expenses of the Company's accountants and counsel) in connection with the
preparation printing, filing, delivery and shipping of the Registration
Statement (including the financial statements therein and all amendments and
exhibits thereto), each Pre-Effective Prospectus, the Effective Prospectus and
the Final Prospectus as amended or supplemented and the printing, delivery and
shipping of this Agreement and other underwriting documents, including
Underwriters' Questionnaires, Underwriters' Powers of Attorney, Blue Sky
Memoranda, Agreements Among Underwriters and Selected Dealer Agreements and any
letters transmitting the offering material to Underwriters or selling group
members (including costs of mailing and shipment) and the cost of furnishing
copies thereof to the Underwriters, (C) all legal fees, filing fees and fees
and disbursements of Underwriters' Counsel incurred in connection with the
qualification of the Shares under state securities laws as provided hereof and
in the review of the offering by the NASD, (D) the filing fee of the NASD, (E)
any applicable listing fees, including the fee for including the Company's
Common Stock for quotation on the Nasdaq National Market, (F) the cost of
printing certificates representing the Shares, (G) the cost and charges of any
transfer agent or registrar, (H) the costs of preparing, promoting and
distributing bound volumes for the Representatives and their counsel, and (I)
all other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise provided for in this section; provided,
however, that except as expressly provided in clause (C) above, all legal fees
and disbursements of Underwriters' Counsel shall be the sole responsibility of
the Underwriters. If the sale of the Shares provided for herein is not
consummated prior to December 31, 1997 and (i) the failure to complete the
offering is due to a reason other than the failure of the Underwriters to
satisfy all of their obligations under this Agreement, (ii) there is a material
adverse change in the business, financial conditions, results of operations or
prospects of the Company or La Victoria or (iii) the Underwriters discover in
the course of their due diligence, including during the marketing of the
Offering, material facts or circumstances relating to the Company which render
the contemplated Offering impracticable, the Company shall pay for all
reasonable out-of-pocket expenses (including fees and disbursements of
Underwriters' Counsel) incurred by the Underwriters in connection with the
investigation, preparing to market and marketing the Shares or in contemplation
of performing their obligations hereunder, all "Blue Sky" filing fees and
expenses, legal fees incurred in qualifying the Shares under State Securities
or "Blue Sky" laws and in the review of the offering by the NASD, and any
expenses incurred by the Company including printing expenses and its accounting
and legal fees. The Company shall not in any event be liable to any of the
Underwriters for loss of anticipated profits from the transactions covered by
this Agreement.
(n) The Company, at its expense, will furnish to its
shareholders an annual report (including financial statements prepared in
accordance with generally accepted accounting principles audited by independent
certified public accountants), and, as soon as practicable after the end of
each of the first three quarters of each fiscal year, a statement of operations
of the Company for such quarter (which may be in summary form), all in
reasonable detail, and during the five year period after the date hereof, at
its expense, will furnish you, with copies for each of the several
Underwriters, (i) as soon as practicable after the end of each fiscal year, a
balance sheet of the Company and any subsidiaries as at the end of such fiscal
year, together with statements of income or operations, shareholders' equity
and changes in cash flows of the Company and any consolidated subsidiaries, and
of any non-consolidated significant subsidiary, for such fiscal year, all in
reasonable detail and accompanied by a copy of the certificate or report
thereon of independent certified public accountants, (ii) as soon as they are
available, a copy of all reports (financial or other) mailed to
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<PAGE> 16
security holders, (iii) as soon as they are available, a copy of all reports
and financial statements furnished to or filed with the Commission, and (iv)
such other information as you may from time to time reasonably request. In
addition, during such five-year period the Company will furnish you, with
copies for each of the several Underwriters, every material press release and
every material news item or article in respect of the Company or its affairs
that is released or prepared by the Company.
(o) If the Company has an active subsidiary or
subsidiaries, the financial Statements provided for in Section 3(n) will be on
a consolidated basis to the extent the accounts of the Company and its
subsidiary or subsidiaries are consolidated in reports furnished to its
shareholders generally. Separate financial statements shall be furnished for
all subsidiaries whose accounts are not consolidated but which at the time are
significant subsidiaries as defined in the Rules and Regulations.
(p) At or before the Closing Date, you shall receive from
the Company's officers, directors and affiliates, officers and directors of any
significant subsidiary of the Company and certain other current and prospective
holders of the Company's Common Stock and other equity securities, in each case
as reasonably requested by you, including without limitation Tanklage and the
Members ("Insiders"), a written agreement (i) to not, during the Lock-Up
Period, directly or indirectly, offer, sell, contract to sell, transfer,
pledge, or otherwise dispose of any Common Stock (or other securities
substantially similar to the Common Stock or securities convertible or
exchangeable into or exercisable for, or any rights to purchase or acquire,
Common Stock or substantially similar securities) now owned or to be owned in
the future (beneficially or of record) without the prior written consent of
Cruttenden Roth Incorporated, which consent will not be unreasonably withheld,
except that an Insider may pledge his Common Stock to a commercial financial
institution in the ordinary course of business and may exercise any stock
options granted to him pursuant to and in accordance with the Authentic
Specialty Foods, Inc. 1997 Stock Plan, provided, that the sale, transfer, or
other disposition of the Common Stock acquired as a result thereof shall be
restricted in accordance with this section (i); (ii) waive all preemptive
rights, rights of first refusal and similar rights (to the extent the Insider
has any) under any agreement or arrangement with respect to the offering and
sale of the Shares and agreeing that, during the Lock-Up Period, the Insider
will not exercise any such rights or require that any Common Stock or other
securities be included in the Offering or registered under the Securities Act,
either in connection with the Offering or otherwise; and (iii) representing
that the Insider has not taken and will not take, directly or indirectly, any
action which constitutes, or is intended or might reasonably be expected to
result in, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares, or which constitutes a
bid for a purchase of, or an attempt to induce any person to purchase, the
Shares or any related security that is prohibited by Regulation M under the
Exchange Act.
(q) The Company shall continue to maintain a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary in order to
permit preparation of financial statements in accordance with generally
accepted accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
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<PAGE> 17
(r) The Company shall comply with all registration,
filing and reporting requirements of the Exchange Act which may from time to
time be applicable to the Company. Without limiting the generality of the
foregoing, within 30 days following the Closing Date, the Company will file a
registration statement for the Common Stock under Section 12(g) of the Exchange
Act, will use its best efforts to cause such registration statement to become
effective and will supply copies of the Form 8-A and any amendments or
supplements thereto, to the Representatives and their counsel, together with
copies for each of the several Underwriters within five days of its filings
with the Commission.
(s) The Company shall make all filings required,
including registration under the Exchange Act, to obtain and maintain the
inclusion of the Common Stock on the Nasdaq National Market concurrently with
the effective date of the Registration Statement (with Nasdaq Symbols mutually
acceptable to the Company and the Representatives).
(t) The Company will file timely with the Commission and
the NASD, if required, a report on Form SR in accordance with the Rules and
Regulations of the Commission under the Securities Act.
(u) Prior to the first day of trading, the Company shall
obtain a CUSIP number for the Common Stock.
(v) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
(which may be the same entity as the transfer agent) for its Common Stock.
(w) The Company shall, for at least one year after the
date hereof, purchase and maintain directors and officers liability insurance
in a coverage amount and with such deductible as deemed adequate in the good
faith judgment of the Board of Directors of the Company.
(x) If any time during the 25-day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Final Prospectus), the Company
will, after written notice from you advising the Company to the effect set
forth above, forthwith prepare, consult with you concerning the substance of,
and disseminate a press release or other public statement, reasonably
satisfactory to you, responding to or commenting on such rumor, publication or
event.
(y) Prior to the Closing Date and during the period for
which a prospectus is required to be delivered pursuant to the Rules and
Regulations under the Securities Act, the Company shall not issue any press
release or other publicity about the Company, except to the extent required by
law or applicable rules of the Nasdaq National Market, without the prior
approval of the Representatives and Underwriters' Counsel, which consent shall
not be unreasonably withheld.
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<PAGE> 18
4. Conditions of Underwriters' Obligations. The obligations of
the several underwriters hereunder are subject to the accuracy, as of the date
hereof and on each Closing Date and Option Closing Date, as if made on the
dates thereof, of the representations and warranties of the Company contained
herein, to the performance by the Company of its obligations hereunder and to
the following additional conditions:
(a) The Registration Statement and all post-effective
amendments thereto shall have become effective and all filings required by Rule
424 and Rule 430A of the Rules and Regulations shall have been made; at each
Closing Date, no stop order or other order suspending the effectiveness of the
Registration Statement or any amendment or supplement thereto shall have been
issued; no proceedings for the issuance of such an order shall have been
initiated or threatened; and any request of the Commission for additional
information (to be included in the Registration Statement or the Final
Prospectus or otherwise) shall have been disclosed to you and complied with to
the reasonable satisfaction of you and your counsel.
(b) No Underwriter shall have advised the Company that
the Registration Statement or Effective Prospectus or Final Prospectus, or any
amendment or supplement thereto, contains an untrue statement of fact which, in
your opinion, is material, or omits to state a fact which, in your opinion, is
material and is required to be stated therein or is necessary to make the
statements therein not misleading.
(c) On or prior to each Closing Date, you shall have
received from Gardere & Wynne, L.L.P., Underwriters' Counsel, such opinion or
opinions with respect to the sufficiency of all corporate proceedings and other
legal matters relating to this Agreement and the transactions contemplated
hereby as you reasonably may require and Underwriters' Counsel shall have
received such papers and information as they request to enable them to pass
upon such matters. In rendering such opinion, Underwriters' Counsel may rely
upon the opinion to be delivered to the Underwriters by the counsel for the
Company pursuant to Section 4(d) herein.
(d) On each Closing Date there shall have been furnished
to you the opinion (addressed to the Underwriters) of Vinson & Elkins L.L.P.,
counsel for the Company, dated as of such Closing Date and in form and
substance satisfactory to Underwriters' Counsel and stating that it may be
relied upon by Underwriters' Counsel in giving their opinion, to the effect
that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its organization, with full corporate power and authority to
own, lease, license or use its properties and conduct its business as described
in the Registration Statement and Final Prospectus, and is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the character of the business conducted by it or the location of the
properties owned, leased licensed or used by it makes such qualification
necessary, except for jurisdictions in which the failure to so qualify would
not have a material adverse effect on the financial condition, results of
operations or business of the Company and La Victoria, taken as a whole.
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(ii) The authorized, issued and outstanding
capital stock of the Company as of June 30, 1997 is as set forth under the
caption "Capitalization" in the Final Prospectus and there have been no changes
in the authorized and outstanding capital stock of the Company since such date.
The Common Stock of the Company conforms to the description thereof contained
in the Final Prospectus. The outstanding shares of Common Stock have been and
are, and the Shares to be issued and sold by the Company, upon issuance and
delivery and payment therefor in the manner herein described (assuming the
certificates for such Shares have been duly and validly countersigned by the
Company's transfer agent) will be, duly authorized, validly issued, fully paid
and nonassessable and were not issued in violation of any statutory or to such
counsel's knowledge, any other preemptive rights or other rights to subscribe
for or purchase any securities. Except as described in the Final Prospectus,
there are no preemptive or other rights to subscribe for or to purchase, or any
restriction upon the voting or transfer of, any shares of Common Stock pursuant
to the Company's Articles of Incorporation, Bylaws other governing documents or
any agreement, contract or other instrument known to us to which the Company is
a party or by which it is bound; neither the filing of the Registration
Statement nor the offering or sale of the Shares as contemplated by this
Agreement gives rise to any rights, other than those which have been waived or
satisfied, for or relating to the registration of any shares of Common Stock;
and such waivers were duly and validly given.
(iii) Except as described in the Registration
Statement and/or the Final Prospectus, none of the Company, La Victoria or LV
Foods is nor with the giving of notice or lapse of time or both will any of
them be in violation of or in default under, nor will the execution or delivery
of this Agreement or the Contribution Agreement or consummation of the
transactions contemplated hereby or thereby result in a violation of, or
constitute a default under, the Articles of Incorporation, Bylaws or other
governing documents of the Company, La Victoria or LV Foods or any material
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan or credit agreement, bond, debenture,
note, lease or other agreement or instrument to which the Company, La Victoria
or LV Foods is a party or by which any of them is bound, or to which any of
their properties is subject, nor will the performance by the Company, La
Victoria or LV Foods of their obligations under this Agreement or the
Contribution Agreement violate any existing law, rule, administrative
regulation, judgment, order, writ or decree of any court or any governmental
agency or body having jurisdiction over the Company, La Victoria or LV Foods or
their properties, or result in the creation or imposition of any lien, charge,
claim or encumbrance upon any property or asset of the Company, La Victoria or
LV Foods, where such violation, default or lien would have a material adverse
effect on the financial condition, results of operations or business of the
Company and La Victoria, taken as a whole. Except for permits and similar
authorizations or notifications required under the Securities Act, the
Securities or "Blue Sky" laws of certain jurisdictions and from the NASD,
approvals under the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as
amended, and for such permits, authorizations and notifications which have been
obtained, no consent, approval, authorization or order of any court,
governmental agency or body or financial institution is required in connection
with the consummation of the transactions contemplated by this Agreement and
the Contribution Agreement, including, without limitation, the valid sale and
delivery of the Shares.
(iv) The redemption by the Company of the shares
of its Common Stock held by Shansby and TSGI has been duly and validly
authorized by the Company and, to the
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<PAGE> 20
knowledge of such counsel, Shansby and TSGI, and the consummation of the
redemption will not result in a violation of, or constitute a default under,
the Articles of Incorporation, Bylaws or other governing documents of the
Company and, to the knowledge of such counsel, Shansby or TSGI, or any material
contract, indenture, mortgage, deed of trust, loan or credit agreement, bond,
debenture, note, lease or other agreement or instrument to which, to the
knowledge of such counsel, the Company, Shansby or TSGI is a party or by which
any of them is bound, or to which any of their properties is subject, nor will
the redemption violate any law, rule, administrative regulation, judgment,
order, writ or decree of any court, or any governmental agency or body having
jurisdiction over the Company and, to the knowledge of such counsel, Shansby or
TSGI, or any of their property, or result in the creation or imposition of any
lien, charge, claim or encumbrance upon any property or asset of the Company
and, to the knowledge of such counsel, Shansby or TSGI.
(v) The descriptions in the Registration
Statement and Final Prospectus of the statutes, regulations, legal or
governmental proceedings, contracts and other documents therein described, to
the extent that such descriptions constitute summaries of matters of law,
documents or proceedings, or legal conclusions, have been reviewed by such
counsel and fairly present the information disclosed therein in all material
respects.
(vi) The Registration Statement and all
post-effective amendments thereto have become effective under the Securities
Act and no stop order or other order suspending the effectiveness of the
Registration Statement or preventing or suspending the use of any Pre-Effective
Prospectus, the Effective Prospectus, the Final Prospectus or any amendment or
supplement thereto has been issued and to such counsel's knowledge, no
proceedings for that purpose have been instituted or are pending before or
contemplated by the Commission or any "Blue Sky" or securities authority of any
jurisdiction and all filings required by Rule 424 and Rule 430A of the Rules
and Regulations have been (or will be) made within the required time period;
the Registration Statement and Final Prospectus and any amendment or supplement
thereto, as of their respective effective dates, comply in all material
respects with the requirements of the Securities Act and the Rules and
Regulations (except that counsel need express no opinion on the financial
statements or other financial or statistical data) and all amendments to the
Registration Statement required to be filed have been so filed.
(vii) To such counsel's knowledge and other than as
set forth in the Final Prospectus, there are no legal or governmental
proceedings pending to which the Company, LV Foods or La Victoria is a party or
of which any property of the Company, LV Foods or La Victoria is the subject
which, if determined adversely to the Company, LV Foods or La Victoria, would
individually or in the aggregate have a material adverse effect on the
financial condition, results of operation or business of the Company and La
Victoria, taken as a whole; to such counsel's knowledge, no such proceedings
are threatened by governmental authorities or threatened by others; and, to
such counsel's knowledge no pending or threatened litigation or governmental
action, suit or proceeding, statute or regulation required to be described in
the Final Prospectus is not so described.
(viii) To such counsel's knowledge, all descriptions
in the Final Prospectus of statutes, regulations, contracts and other documents
and trademarks, and the statements under the captions "Dividend Policy," "The
Shansby Group," "Management," "Certain Transactions,"
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<PAGE> 21
"Description of Capital Stock" and "Shares Eligible for Future Sale" are
accurate in all material respects and fairly present the information set forth
therein; and such counsel does not know of any contracts or documents of a
character required to be summarized or described in the Final Prospectus, or
required to be filed as exhibits to the Registration Statement, which are not
so summarized, described or filed.
(ix) Except as disclosed or described in the
Effective Prospectus and the Final Prospectus, there are no outstanding
options, warrants or other rights of the Company, La Victoria or LV Foods
calling for the issuance of, and no commitments or obligations to issue, any
shares of capital stock or membership interests of the Company, La Victoria or
LV Foods or any security convertible into or exchangeable for capital stock or
membership interests of the Company, La Victoria or LV Foods.
(x) The Company has the corporate power to enter
into and perform its obligations under this Agreement and the Contribution
Agreement and this Agreement and the Contribution Agreement have been duly
authorized, executed and delivered by the Company and constitute the valid and
binding agreements of the Company and are enforceable against the Company in
accordance with their terms, except insofar as indemnification and contribution
provisions may be limited by Federal or state securities laws, public policy or
equitable principles, and except as enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting
creditors' rights generally.
(xi) The Members have the power, in the case of
TSG2, partnership, and in the case of TSG2 Management, limited liability
company, to enter into and perform their obligations under the Contribution
Agreement and the Contribution Agreement has been duly authorized, executed and
delivered by Members and constitute the valid and binding agreements of the
Members and are enforceable against the Members in accordance with their terms,
except insofar as indemnification and contribution provisions may be limited by
Federal or state securities laws or equitable principles, and except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting creditors' rights generally.
(xii) Tanklage has the capacity to enter into and
perform his obligations under the Contribution Agreement and the Contribution
Agreement has been duly executed and delivered by Tanklage and constitutes the
valid and binding agreement of Tanklage and is enforceable against Tanklage in
accordance with its terms, except insofar as indemnification and contribution
provisions may be limited by Federal or state securities laws, public policy or
equitable principles, and except as enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting
creditors' rights generally.
(xiii) Except as described in the Registration
Statement, the Effective Prospectus and/or the Final Prospectus, Tanklage is
not nor with the giving of notice or lapse of time or both will he be in
violation of or in default under, nor will the execution or delivery of the
Contribution Agreement or consummation of the transactions contemplated thereby
result in a violation of, or constitute a default under, any material
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan or credit agreement, bond,
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<PAGE> 22
debenture, note, lease or other agreement or instrument to which Tanklage is a
party or by which he is bound, or to which any of his property is subject, nor
will the performance by Tanklage of his obligations under the Contribution
Agreement violate any existing law, rule, administrative regulation, judgment,
order, writ or decree of any court or any governmental agency or body having
jurisdiction over Tanklage or his property, or result in the creation or
imposition of any lien, charge, claim or encumbrance upon any property or asset
of Tanklage, where such violation, default or lien would have a material
adverse effect on the financial condition, results of operations or business of
the Company and La Victoria, taken as a whole.
(xiv) Upon the consummation of the transactions
contemplated in the Contribution Agreement, which shall occur immediately
following the closing of the purchase of the Firm Shares, the Company will own
directly 50% of the outstanding capital stock of La Victoria and will own
indirectly, through its ownership of 100% of the beneficial interests of LV
Foods, the remaining 50% of the outstanding capital stock of La Victoria, free
and clear of all liens, encumbrances, equities or claims except as set forth in
the Final Prospectus. The Company does not own any interest in or control any
other corporation, association or entity.
(xv) The offer and sale of all securities of the
Company made within the last three years as set forth in Part II, Item 15 of
the Registration Statement were exempt from the registration requirements of
the Securities Act and from the registration or qualification requirements of
all relevant state securities laws.
(xvi) The Company is not an "investment company" or
a company controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
In rendering such opinion, such counsel may rely (A)
as to matters involving the application of laws other than the laws of the
United States and jurisdictions in which they are admitted, to the extent such
counsel deems proper and to the extent specified in such opinion, if at all,
upon an opinion or opinions (in form and substance reasonably satisfactory to
Underwriters' Counsel) of other counsel reasonably acceptable to Underwriters'
Counsel, familiar with the applicable laws, provided that copies of any such
opinions shall be delivered to Underwriters' Counsel; and (B) as to matters of
fact, to the extent they deem proper, on certificates of responsible officers
of the Company, La Victoria, LV Foods and the Members and certificates or other
written statements of officers of departments of various jurisdictions having
custody of documents respecting the corporate existence or good standing of the
Company, La Victoria, LV Foods and the Members, provided that copies of any
such statements or certificates shall be delivered to Underwriters' Counsel.
The opinion of such counsel for the Company shall state that the opinion of any
such other counsel is in form satisfactory to such counsel for the Company and,
in their opinion, you and they are entitled in relying thereon.
Because the primary purpose of such counsel's engagement was not to
establish or confirm factual matters or financial, accounting or statistical
matters and because of the wholly or partially non-legal character of many of
the statements contained in the Registration Statement and Final
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<PAGE> 23
Prospectus, such counsel shall not be required to pass upon and shall not
assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or Final Prospectus (except
to the extent expressly set forth in section viii above), and such counsel
shall not be required to independently verify the accuracy, completeness or
fairness of such statements (except as aforesaid). Without limiting the
foregoing, such counsel shall assume no responsibility for and shall not be
required to independently verify the accuracy, completeness or fairness of the
financial statements and schedules, and other financial and statistical data
included in the Registration Statement and Final Prospectus and such counsel
shall not be required to examine the accounting, financial or statistical
records from which such statements and data are derived. Although certain
portions of the Registration Statement and Final Prospectus have been included
therein on the authority of "experts" within the meaning of the Securities Act,
such counsel shall not be deemed experts with respect to any portion of the
Registration Statement or Final Prospectus. However, such counsel shall state
in its opinion that it has participated in conferences with officers, legal
counsel and other representatives of the Company, representatives of the
independent accountants of the Company, and with representatives of, and legal
counsel for, the Underwriters, at which the contents of the Registration
Statement and Final Prospectus and related matters were discussed. Such
counsel shall state that it has reviewed all documents referred to in the
Registration Statement and the Final Prospectus or annexed as an exhibit to the
Registration Statement. Such counsel shall also state that it has reviewed
certain other corporate documents furnished to them by the Company. Based on
such participation and review, and subject to the limitations described above,
such counsel shall advise you that no facts have come to their attention that
cause them to believe that the Registration Statement, at the time it became
effective, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Final Prospectus, as of its date
or as of the date hereof, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.
(e) On each Closing Date there shall have been furnished
to you the opinion addressed to the Underwriters) of Weissmann, Wolff,
Bergman, Coleman & Silverman, dated as of such Closing Date and in the form and
substance satisfactory to Underwriters' Counsel in giving their opinion, to the
effect that:
(i) La Victoria has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the State
of California, with full corporate power and authority to own, lease, license
or use its properties and, to such counsel's knowledge, conduct its business as
described in the Registration Statement and Final Prospectus, and is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the character of the business conducted by it or the
location of the properties owned, leased, licensed or used by it makes such
qualification necessary, except for jurisdictions in which the failure to so
qualify would not have a material adverse effect on the financial condition,
results of operations or business of the Company and LaVictoria, taken as a
whole.
(ii) LV Foods has been duly formed and is validly
existing as a limited liability company under the laws of the State of
Delaware, with full power and authority to own, lease, license or use its
properties and conduct its business as described in the Registration Statement
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and Final Prospectus, and is duly qualified to do business as a foreign limited
liability company and, to such counsel's knowledge, is in good standing in each
jurisdiction in which the character of the business conducted by it or the
location of the properties owned, leased, licensed or used by it makes such
qualification necessary, except for jurisdictions in which the failure to so
qualify would not have a material adverse effect on the financial condition,
results of operations or business of the Company and LaVictoria, taken as a
whole.
(iii) The authorized, issued and outstanding
capital stock of the La Victoria as of June 30, 1997 is as set forth within the
Financial Statements of La Victoria in the Final Prospectus and there have been
no changes in the authorized and outstanding capital stock of La Victoria since
such date. The outstanding shares of capital stock of La Victoria are duly
authorized, validly issued, fully paid and nonassessable and were not issued in
violation of any statutory or, to such counsel's knowledge, any other
preemptive rights or other rights to subscribe for or purchase any securities.
Except as described in the Final Prospectus, there are no preemptive or other
rights to subscribe for or to purchase, or any restriction upon the voting or
transfer of, any shares of capital stock of La Victoria pursuant to La
Victoria's Articles of Incorporation, Bylaws, other governing documents or any
agreement, contract or other instrument known to us to which La Victoria is a
party or by which it is bound.
(iv) All of the authorized, issued and outstanding
membership interests of LV Foods are beneficially owned by the Members and
there have been no changes in the authorized and, to such counsel's knowledge,
outstanding membership interests of LV Foods since its formation, other than
the assignments of certain interests in LV Foods from TSG2 to Lively. The
outstanding membership interests of LV Foods are duly authorized, validly
issued, fully paid and nonassessable and were not issued in violation of any
statutory or, to such counsel's knowledge, other preemptive rights or other
rights to subscribe for or purchase any securities. Except as described in the
Final Prospectus or the Limited Liability Company Operating Agreement of LV
Foods, there are no preemptive or other rights to subscribe for or to purchase,
or any restriction upon the voting or transfer of, any of the membership
interests pursuant to LV Foods' Certificate of Formation or other governing
documents or any agreement, contract or other instrument known to us to which
LV Foods is a party or by which it is bound.
(f) There shall have been furnished to you on the Closing
Date and on the Option Closing Date, if any, a certificate, dated such Closing
Date and addressed to you, signed by the President and by the Chief Financial
Officer of the Company to the effect that: (i) the representations and
warranties of the Company in this Agreement are true and correct in all
material respects, as if made on and as of such Closing Date, and the Company
has complied with all the agreements and satisfied all the conditions on its
part to be performed or satisfied at or prior to such Closing Date; (ii) no
stop order or other order suspending the effectiveness of the Registration
Statement or preventing or suspending the use of any Pre-Effective Prospectus,
the Effective Prospectus or Final Prospectus or any amendment or supplement
thereto has been issued by the Commission or any "Blue Sky" or securities
authority of any jurisdiction, and no proceedings for that purpose has been
initiated or threatened; (iii) all filings required by Rule 424 and Rule 430A
of the Rules and Regulations have been made; (iv) the signers of said
certificate have carefully examined the Registration Statement and the
Effective Prospectus and the Final Prospectus, and any amendments or
supplements thereto, and
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<PAGE> 25
such documents contain all statements and information required to be included
therein, and do not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading; (v) there has been no material adverse
change in the general affairs, business key personnel, earnings,
capitalization, financial position or net worth of the Company since the
effective date of the Registration Statement; and (vi) since the effective date
of the Registration Statement, there has occurred no event required to be set
forth in an amendment or supplement to the Registration Statement or the
Effective Prospectus and the Final Prospectus which has not been so set forth.
(g) Since the effective date of the Registration
Statement, none of the Company, LV Foods or La Victoria shall have sustained
any loss or interference with its business from flood, accident or other
calamity (whether or not covered by insurance) or from any labor dispute or
court or governmental action, order or decree, nor shall the Company, LV Foods
or La Victoria have become a party to or the subject of any litigation, nor
shall there have been a change in the general affairs, business, key personnel,
earnings, capitalization, financial position or net worth of the Company, LV
Foods or La Victoria, whether or not arising in the ordinary course of
business, which loss, litigation or change is so material and adverse to the
Company that, in your judgment, shall render it inadvisable to proceed with the
delivery of the Shares.
(h) On the date of this Agreement and on each Closing
Date you shall have received letters of each of McGladrey & Pullen, LLP, and
Rylander, Clay & Optiz, L.L.P., dated such date and each Closing Date,
addressed to you as Representatives, containing statements and information of
the type ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial information
contained in the Registration Statement and the Effective Prospectus and Final
Prospectus, in such form and substance satisfactory to you, including without
limitation the statements set forth in Annex I and Annex II hereto.
(i) At or prior to the Closing Date, you shall have
received the written agreements described in Section 3(p) hereof.
(j) All proceedings taken in connection with the
issuance, sale, transfer and delivery of the Shares shall be satisfactory in
form and substance to you and to Underwriters' Counsel, and you shall have been
furnished such additional documents and certificates as you may reasonably
request.
(k) You shall have been furnished evidence in usual
written or telegraphic form from the appropriate authorities of the several
jurisdictions, or other evidence satisfactory to you, of the qualification
referred to in Section 3(e) above.
(l) Prior to the Closing Date, the Shares shall have been
duly authorized for quotation on the Nasdaq National Market upon official
notice of issuance.
(m) The NASD, upon review of the terms of the public
offering of the Shares, shall not have objected to your participation in such
offering.
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<PAGE> 26
(n) On or after the date hereof there shall not have
occurred any of the following: (i) a suspension or material limitation in
trading in securities generally on the New York Stock Exchange, American Stock
Exchange or Nasdaq; (ii) a general moratorium on commercial banking activities
declared by either federal or California authorities; or (iii) a material
adverse change in the financial markets in the United States or internationally
or any outbreak or escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war, if the effect
of any such outbreak or escalation of hostilities specified in this Clause
(iii) in your judgment makes it impracticable or inadvisable to proceed with
the delivery of the Shares.
All such opinions, certificates, letters and documents shall
be in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to you and the Underwriters' Counsel. Any
certificate or document signed by any officer of the Company and delivered to
you or the Underwriters' Counsel shall be deemed a representation and warranty
by such officer individually and by the Company hereunder to the Underwriters
as to the statements made therein. The Company shall furnish you with such
number of conformed copies of such opinions, certificates, letters and other
documents as you shall reasonably request. If any of the conditions specified
in this Section 4 shall not have been fulfilled when and as required by this
Agreement, this Agreement and all obligations of the Underwriters hereunder may
be cancelled at, or at any time prior to, each Closing Date, by you. Any such
cancellation shall be without liability of the Underwriters to the Company.
Notice of such cancellation shall be given to the Company in writing, or by
telegraph or telephone and confirmed in writing.
5. Indemnification and Contribution.
(a) Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless the Underwriters, any member of
the selling group, and each of such entities' officers, directors, partners,
employees, agents, and counsel, and each person, if any, who controls any one
of the Underwriters or selling group members within the meaning of Section 15
of the Securities Act or Section 20(a) of the Exchange Act (each an
"Indemnified Underwriter") against any and all loss, claim, damage, expense or
liability, joint or several, to which such Indemnified Underwriter may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, expense or liability (or action in respect thereof) arises out of or is
based upon (i) the inaccuracy of any of the representations or warranties made
by the Company in Section 1 thereof or otherwise, or (ii) any untrue statement
or alleged untrue statement of a material fact contained (A) in the
Registration Statement, any Pre-Effective Prospectus, the Effective Prospectus
or the Final Prospectus or any amendment or supplement thereto, or (B) in any
application or other document or communication (in this Section 5, collectively
called an "Application") executed by or on behalf of the Company or based upon
written information furnished by or on behalf of the Company in any
jurisdiction in order to qualify the Shares under the "Blue Sky" or securities
laws thereof or filed with the Commission or any securities exchange or
national market system, such as the Nasdaq National Market, or (iii) the
omission or alleged omission to state, in the Registration Statement, any
Pre-Effective Prospectus, the Effective Prospectus or Final Prospectus or any
amendment or supplement thereto or in any Application, a material fact required
to be stated therein or necessary to make the statements therein not
misleading, or (iv) any breach of any representation, warranty, covenant or
agreement of the Company contained in this Agreement; and shall pay each
Indemnified Underwriter
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<PAGE> 27
for any and all costs and expenses, including reasonable attorneys' fees, as
and when incurred by such Indemnified Underwriter in connection with
investigating or defending against or appearing as a third-party witness in
connection with any litigation, commenced or threatened, and any and all
amounts paid in settlement of any claim or litigation of any such loss, claim,
damage, liability or action whatsoever, notwithstanding the possibility that
payments for such expenses might later held to be improper; except that the
Company shall not be liable in any such case to the extent, but only to the
extent, that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company through you by or on behalf of any
Underwriter specifically for use in the preparation of the Registration
Statement, any Pre-Effective Prospectus, the Effective Prospectus or Final
Prospectus or any amendment or supplement thereto, or any Application, nor
shall the Company be liable to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission in any Pre-Effective Prospectus which
is corrected in the Final Prospectus if a sufficient number of copies of such
Final Prospectus were provided to the party seeking indemnification and such
party failed to send or deliver a copy and such Final Prospectus to the person
asserting any such loss, claim, damage or liability at or prior to the written
confirmation of the sale of such shares to such person, if such delivery was
required by law. In addition to its other obligations under this Section 5(a),
the Company agrees that, as an interim measure during the pendency of any
claim, action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or omission, or
any inaccuracy in the representations and warranties of the Company herein or
the failure to perform its obligations hereunder, it will pay each Indemnified
Underwriter on a monthly basis for all costs and expenses, including reasonable
attorneys' fees, incurred in connection with investigating or defending any
such claim, action, investigation, inquiry or other proceeding, notwithstanding
the absence of a judicial determination as to the propriety and enforceability
of the Company's obligation to indemnify hereunder or to pay each Indemnified
Underwriter for such expenses and the possibility that such payments might
later be held to have been improper by a court of competent jurisdiction. To
the extent that any such interim payment is so held to have been improper, each
Indemnified Underwriter shall promptly return it to the Company, together with
interest compounded daily, determined on the basis of the prime rate (or other
commercial lending rate for borrowers of the highest credit standing) announced
from time to time by Bank of America NT&SA, San Francisco, California (the
"Prime Rate"). Any such interim payment which is not made to an Indemnified
Underwriter within 30 days of a request for payment, shall bear interest at the
Prime Rate from the date of such request. The foregoing agreement to indemnify
shall be in addition to any liability which the Company may otherwise have,
including liabilities arising under this Agreement.
(b) Each Underwriter severally, but not jointly, shall
indemnify and hold harmless the Company, each director of the Company, each
officer of the Company who has signed the Registration Statement and any person
who controls the Company within the meaning of the Securities Act against any
loss, claim, damage or liability to which the Company may become subject, under
the Securities Act or otherwise, insofar as such loss, claim, damage or
liability (or action in respect thereof) arises out of or is based upon (i) any
untrue statement or alleged untrue statement of a material fact contained (A)
in the Registration Statement, any Pre-Effective Prospectus, the Effective
Prospectus or Final Prospectus or any amendment or supplement thereto, or (B)
in any
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<PAGE> 28
Application, or (ii) the omission or alleged omission to state in the
Registration Statement, any Pre-Effective Prospectus, the Effective Prospectus
or Final Prospectus or any amendment or supplement thereto or in any
Application a material fact required to be stated therein or necessary to make
the statements therein not misleading; except that such indemnification shall
be available in each such case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to the Company through you by or on behalf of such Underwriter specifically for
use in the preparation thereof; and shall pay the Company for any and all costs
and expenses, including reasonable attorneys' fees, as and when incurred by it
in connection with investigating or against or appearing as a third-party
witness in connection with any such loss, claim, damage, liability or action.
This indemnity agreement shall be in addition to any liability which any
Underwriter may otherwise have. The Company acknowledges that the statements
set forth in the last paragraph of the cover page (insofar as such information
relates to the Underwriters), the paragraph on page 2 with respect to
stabilization and under the heading "Underwriting" in any Pre-Effective
Prospectus, Effective Prospectus and/or the Final Prospectus constitute the
only information furnished in by or on behalf of the several Underwriters, for
inclusion in any such Prospectus, and you, as the Underwriters, confirm that
such statements are correct.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) of notice of any claim or the commencement of any action,
the indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the indemnifying
party in writing of the claim or the commencement of that action; the failure
to notify the indemnifying party shall not relieve it from any liability which
it may have to an indemnified party. If any such claim or action shall be
brought against an indemnified party, and it shall notify the indemnifying
party thereof, the indemnifying party shall be entitled to participate therein
and, to the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel reasonably
satisfactory the indemnified party. After notice from the indemnifying party
to the indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under such subsection for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof other than
reasonable costs of investigation; except that you shall have the right to
employ counsel to represent you and other Indemnified Underwriters who may be
subject to liability arising out of any claim in respect of which indemnity may
be sought by the Indemnified Underwriters against the Company under such
subsection if, in your reasonable judgment, it is advisable for you and those
Indemnified Underwriters to be represented by separate counsel, and in that
event the fees and expenses of such separate counsel shall be paid by the
Company. The Company agrees promptly to notify the Underwriters and the
Representatives of the commencement of any litigation or proceedings against
the Company, respectively, or against any of their officers or directors in
connection with the sale of the Shares, the Registration Statement, any
Pre-Effective Prospectus, the Effective Prospectus or the Final Prospectus or
any amendment or supplement thereto, or any Application. To the extent any
provision of this Section 5 entitles the indemnified party to reimbursement of
fees and expenses, such obligations may be billed by the indemnified party
monthly and shall be due and payable within ten (10) days of the date thereof.
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(d) If the indemnification provided for in this Section 5
is unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand, and the Underwriters on the other, from the
offering of the Shares or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company on the one hand, and the Underwriters on the
other, in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand,
and the Underwriters on the other, shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Shares (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the
table on the cover page of the Final Prospectus. Relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
Company and the Underwriters agree that it would not be just and equitable if
contributions pursuant to this subsection (d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to in the first sentence of this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities referred to in the first sentence
of this subsection (d) shall be deemed to include any and all costs and
expenses, including reasonable attorneys' fees, incurred by such indemnified
party in connection with investigating or defending against any action or claim
which is the subject of this subsection (d). Notwithstanding the provisions of
this subsection (d), no Underwriter shall be required to contribute any amount
in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint. Each party entitled to contribution agrees that
upon the service of a summons or other initial legal process upon it in any
action instituted against it in respect of which contribution may be sought, it
shall promptly give written notice of such service to the party or parties from
whom contribution may be sought, but the omission so to notify such party or
parties of any such service shall not relieve the party from whom contribution
may be sought from any obligation it may have hereunder or otherwise. For
purposes of this Section 5(d), each person, if any, who controls an Underwriter
within the meaning of the Securities Act shall have the same rights to
contribution as such Underwriter, and each director of the Company, each
officer of the Company who signed the Registration Statement, and each person,
if any, who controls the Company within the meaning of the Securities Act,
shall have the same rights to contribution as the company.
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This Section 5(d) is intended to supersede any right to contribution under the
Securities Act, the Exchange Act, or otherwise.
(e) It is agreed that any controversy arising out of the
operation of the interim payment arrangements set forth in Section 5(a) hereof,
including the amounts of any requested payments and method of determining such
amounts, shall be settled by arbitration conducted under the provisions of the
Constitution and Rules of the Board of Governors of the New York Stock
Exchange, Inc. or pursuant to the Code of Arbitration Procedure of the National
Association of Securities Dealers, Inc. Any such arbitration shall be commenced
by service of a written demand for arbitration or written notice of intention
to arbitrate, therein electing the arbitration tribunal. In the event the
party demanding arbitration does not make such designation of an arbitration
tribunal in such demand or notice, then the party responding to said demand or
notice is authorized to do so. Such an arbitration shall be limited to the
operation of the interim payment provisions contained in Section 5(a) hereof
and shall not resolve the ultimate propriety or enforceability of the
obligation to indemnify or pay expenses which is created by the provisions of
such Section 5(a) hereof.
6. Substitution of Underwriters. If any Underwriter defaults in
its obligation to purchase the number of Shares which it has agreed to purchase
under this Agreement, the non-defaulting Underwriters shall be obligated to
purchase (in the respective proportions which the number of Shares set forth
opposite the name of each non-defaulting Underwriter in Schedule I hereto bears
to the total number of Shares set forth opposite the names of all the non-
defaulting Underwriters in Schedule I hereto) the Shares which the defaulting
Underwriter agreed but failed to purchase; except that the non-defaulting
Underwriters shall not be obligated to purchase any of the Shares if the total
number of Shares which the defaulting Underwriter or Underwriters agreed but
failed to purchase exceeds 9.09% of the total number of Shares, and any
non-defaulting Underwriter shall not be obligated to purchase more than 110% of
the number of Shares set forth opposite its name in Schedule I hereto plus the
total number of Option Shares purchasable by it pursuant to the terms of
Section 2(b); provided, further, that the non-defaulting Underwriters shall not
be obligated to purchase any Shares if such additional purchase would cause any
non-defaulting Underwriter to be in violation of the net capital rule of the
Commission or other applicable law. If the foregoing maximums are exceeded,
(i) the non-defaulting Underwriters, and any other underwriters satisfactory to
you who so agree, shall have the right, but shall not be obligated, to purchase
(in such proportions as may be agreed upon among them) all the Shares which the
defaulting Underwriter agreed but failed to purchase. If the non-defaulting
Underwriters or the other underwriters satisfactory to you do not elect to
purchase the Shares which the defaulting Underwriter or Underwriters agreed but
failed to purchase, this Agreement shall terminate without liability on the
part of any non-defaulting Underwriter or the Company except for the payment of
expenses to be borne by the Company and the Underwriters as provided in Section
3(m) and the indemnity and contribution agreements of the Company and the
Underwriters contained in Section 5 hereof.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have for damages caused by its default. If the other
underwriters satisfactory to you are obligated or agree to purchase the Shares
of a defaulting Underwriter, either you or the Company may postpone the Closing
Date for up to seven full Business Days in order to effect any changes that may
be necessary in the Registration Statement, the Effective Prospectus or the
Final Prospectus or in any other
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<PAGE> 31
document or agreement, and to file promptly any amendments or any supplements
to the Registration Statement or the Effective Prospectus or the Final
Prospectus which in your opinion may thereby be made necessary. As used herein,
the term "Underwriter" includes any person substituted for an Underwriter under
this Section 6.
7. Effective Date and Termination.
(a) This Agreement shall become effective at whichever of
the following times first occur: (i) at 8:00 A.M., Los Angeles time, on the
first full Business Day following the day upon which the Registration Statement
becomes effective, or (ii) the time after the Registration Statement becomes
effective as you, in your discretion, shall first release the Shares for sale
to the public. For purposes of this Section 7, the Shares shall be deemed to
have been released for sale to the public upon release by you for publication
of a newspaper advertisement relating to the Shares or upon release by you of
communications offering the Shares for sale to securities dealers, whichever
shall first occur. Until this Agreement is effective, it may be terminated by
the Company by giving notice as hereinafter provided to you or by you by giving
notice as hereinafter provided to the Company, except that the provisions of
Section 3(m) and Section 5 shall at all times be effective.
(b) Until the Closing Date, this Agreement may be
terminated by you by giving notice as hereinafter provided to the Company, if
(i) the Company shall have, in any material respect, failed, refused or been
unable, at or prior to the Closing Date, to perform any agreement on its part
to be performed hereunder; (ii) any other condition of the obligations of the
Underwriters hereunder is not fulfilled; (iii) if there has been since the date
as of which the information is given in the Final Prospectus, any material
adverse change, or any development involving a prospective material adverse
change, in the financial condition, results of operation, business or prospects
of the Company or La Victoria; (iv) trading in the Shares has been suspended by
the Commission or trading in securities generally on either the New York Stock
Exchange, American Stock Exchange or Nasdaq shall have been suspended or a
material limitation on trading shall have been established; (v) a general
moratorium on commercial banking activities shall have been declared by Federal
or California authorities; or (vi) if there has occurred any material adverse
change in the financial markets in the United States or internationally or any
outbreak of hostilities or escalation of existing hostilities involving the
United States or the declaration by the United States of a national emergency
or war or other calamity or crisis that, in your reasonable judgment, is
material and adverse. Any termination of this Agreement pursuant to this
Section 7 shall be without liability on the part of the Company or any
Underwriter, except as otherwise provided in Sections 3(m) and 5 hereof.
Any notice referred to above may be given at the address
specified in Section 9 hereof in writing or by telegraph or telephone, and if
by telegraph or telephone, shall be immediately confirmed in writing.
8. Survival of Indemnities, Contribution, Warranties and
Representations. The indemnity and contribution agreements contained in
Section 5 and the representations, warranties and agreements of the Company in
Sections 1 and 3 shall survive the delivery of the Shares to the Underwriters
hereunder and shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement or any investigation made by or
on behalf of any indemnified party.
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9. Notices. Except as otherwise provided in this Agreement, (a)
whenever notice is required by the provisions of this Agreement to be given to
the Company such notice shall be in writing (and may be telecopied if confirmed
by letter) addressed to the Company at 1313 Avenue R, Grand Prairie, Texas
75050, telecopier number (972) 933- 4120, Attention: President, with a copy to
be addressed to The Shansby Group, 250 Montgomery Street, San Francisco,
California 94104, telecopier number (415) 421-5120, Attention: Charles H.
Esserman; and (b) whenever notice is required by the provisions of this
Agreement to be given to the several Underwriters, such notice shall be in
writing addressed to the Underwriters in care of Cruttenden Roth Incorporated,
13301 Von Karman, Suite 100, Irvine, California 92715, telecopier number (714)
852-9603, Attention: President.
10. Information Furnished by Underwriters. The statements set
forth in the last paragraph on the cover page, the paragraph on page 2 with
respect to stabilization, and under the caption "Underwriting" in any
Pre-Effective Prospectus and in the Effective Prospectus and the Final
Prospectus, constitute the written information furnished by or on behalf of any
Underwriter referred to in paragraph (b) and (c) of Section 1 hereof and in
paragraph (b) of Section 5 hereof.
11. Parties. This Agreement is made solely for the benefit of the
several Underwriters, the Company, any officer, director or controlling person
referred to in Section 5 hereof. The term "successors and assigns," as used in
this Agreement, shall not include any purchaser of any of the Shares from any
of the Underwriters merely by reason of such purchase.
12. Definition of "Business Day." The purposes of this Agreement,
"Business Day" means any other than Saturday, Sunday, a federal holiday or a
day on which the New York Stock Exchange is closed.
13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
GIVING EFFECT TO THE CHOICE OF LAW OR CONFLICT OF LAWS PRINCIPLES THEREOF.
14. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.
[THE NEXT PAGE IS THE SIGNATURE PAGE.]
32
<PAGE> 33
If the foregoing is in accordance with your understanding, please sign
and return to us seven counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement among each of the Underwriters and
the Company. It is understood that your acceptance of this letter on behalf of
each of the Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters, the form of which shall be submitted to the
Company for examination, upon request, but without warranty on your part as to
the authority of the signers thereof.
Very truly yours,
AUTHENTIC SPECIALTY FOODS, INC.
By:
-----------------------------
Name:
Title: Chief Executive Officer
Accepted as of the date hereof:
CRUTTENDEN ROTH INCORPORATED
SUTRO & CO. INCORPORATED
WEDBUSH MORGAN SECURITIES INC.
By:
--------------------------------------
(Cruttenden Roth Incorporated)
On behalf of each of the Underwriters
<PAGE> 34
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF
OPTIONAL
TOTAL SHARES TO BE
NUMBER OF PURCHASED IF
FIRM MAXIMUM
SHARES TO BE OPTION
UNDERWRITER PURCHASED EXERCISED
----------- --------- ---------
<S> <C> <C>
Cruttenden Roth Incorporated. . . . . . . . . . . . . . . .
Sutro & Co. Incorporated . . . . . . . . . . . . . . . . .
Wedbush Morgan Securities Inc. . . . . . . . . . . . . . .
Total 4,100,000 615,000
========= =======
</TABLE>
I-1
<PAGE> 35
ANNEX I
Pursuant to Section 4(g) of the Underwriting Agreement, McGladrey &
Pullen, LLP shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants
with respect to the Company and La Victoria within the meaning of the
Securities Act and the applicable published Rules and Regulations;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules of the Company and
La Victoria audited (and, if applicable, prospective financial
statements and/or pro forma financial information examined) by them
and included in the Prospectus or the Registration Statement comply as
to form in all material respects with the applicable accounting
requirements of the Securities Act and the related published Rules and
Regulations; and, if applicable, they have made a review in accordance
with standards established by the American Institute of Certified
Public Accountants of the unaudited consolidated interim financial
statements, selected financial data, pro forma financial information,
prospective financial statements and/or condensed financial statements
derived from audited financial statements of the Company and La
Victoria for the periods specified in such letter, as indicated in
their reports thereon, copies of which have been furnished to the
representatives of the Underwriters (the "Representatives");
(iii) On the basis of limited procedures, not constituting
an audit in accordance with generally accepted auditing standards,
consisting of, in the case of the Company and La Victoria, a reading
of the unaudited financial statements and other information referred
to below, a reading of the latest available interim financial
statements of the Company and La Victoria, inspection of the minute
books of the Company and La Victoria since the date of the latest
audited financial statements included in the Prospectus, inquiries of
officials of the Company and La Victoria responsible for financial and
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused
them to believe that:
(A) any unaudited consolidated statements of
income, consolidated balance sheets and consolidated
statements of cash flows as of dates or for periods beginning,
in the case of the Company, after June 30, 1997 and, in the
case of La Victoria, May 31, 1997, included in the Prospectus
do not comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and
the related published Rules and Regulations, or are not in
conformity with generally accepted accounting principles
applied on a basis substantially consistent basis for the
audited consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows
included in the Prospectus;
(B) any other unaudited income statement data and
balance sheet items for the periods or as of the dates
referred to in Clause (A) above included in the
II-1
<PAGE> 36
Prospectus do not agree with the corresponding items in the
unaudited consolidated financial statements from which such
data and items were derived, and any such unaudited data and
items were not determined on a basis substantially consistent
with the basis for the corresponding amounts in the audited
consolidated financial statements included in the Prospectus;
(C) the unaudited financial statements which were
not included in the Prospectus but from which were derived any
unaudited condensed financial statements as of dates or for
periods beginning, in the case of the Company, after June 30,
1997 and, in the case of La Victoria, May 31, 1997, and any
unaudited income statement data and balance sheet items
included in the Prospectus and referred to in Clause (B) were
not determined on a basis substantially consistent with the
basis for the audited consolidated financial statements
included in the Prospectus;
(D) any unaudited pro forma consolidated
condensed financial statements included in the Prospectus do
not comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and
the published Rules and Regulations or the pro forma
adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five
days prior to the date of such letter, there have been any
changes in the consolidated capital stock (other than
issuances of capital stock upon exercise of options and stock
appreciation rights, upon earn-outs of performance shares and
upon conversions of convertible securities, in each case which
were outstanding on the date of the latest financial
statements included in the Prospectus) or any increase in the
consolidated long-term debt of the Company or La Victoria, or
any decreases in consolidated net current assets or net assets
or other items specified by the Representatives or any
increases in any items specified by the Representatives, in
each case as compared with amounts shown in the latest balance
sheet included in the Prospectus; except in each case for
changes, increases or decreases which the Prospectus discloses
have occurred or may occur or which are described in such
letter; and
(F) for the period from the date of the latest
financial statements included in the Prospectus to the
specified date referred to in Clause (E) there were any
decreases in consolidated net revenues or operating profit or
the total or per share amounts of consolidated net income or
other items specified by the Representatives, or any increases
in any items specified by the Representatives, in each case as
compared with the comparable period of the preceding year and
with any other period of corresponding length specified by the
Representatives, except in each case for decreases or
increases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
II-2
<PAGE> 37
(iv) In addition to the audit referred to in their
report(s) included in the Prospectus and the limited
procedures, inspection of minute books, inquiries and other
procedures referred to in paragraph (iii) above, they have
carried out certain specified procedures, not constituting an
audit in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and
financial information specified by the Representatives, which
are derived from the general accounting records of the Company
and La Victoria, which appear in the Prospectus, or in Part II
of, or in exhibits and schedules to, the Registration
Statement specified by the Representatives, and have compared
certain of such amounts, percentages and financial information
with the accounting records of the Company and La Victoria and
have found them to be in agreement.
II-3
<PAGE> 38
ANNEX II
Pursuant to Section 4(g) of the Underwriting Agreement, Rylander, Clay
& Optiz, L.L.P., shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants
with respect to the Company and its subsidiaries within the meaning of
the Securities Act and the applicable published Rules and Regulations;
and
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules of the Company
audited (and, if applicable, prospective financial statements and/or
pro forma financial information examined) by them and included in the
Prospectus or the Registration Statement comply as to form in all
material respects with the applicable accounting requirements of the
Securities Act and the related published Rules and Regulations; and,
if applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited consolidated interim financial statements, selected
financial data, pro forma financial information, prospective financial
statements and/or condensed financial statements derived from audited
financial statements of the Company for the periods specified in such
letter, as indicated in their reports thereon, copies of which have
been furnished to the representatives of the Underwriters (the
"Representatives").
<PAGE> 1
AUTHENTIC SPECIALTY FOODS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF TEXAS
COMMON STOCK CUSIP 05266E 10 7
PAR VALUE $1.00 PER SHARE SEE REVERSE FOR CERTAIN DEFINITIONS
AND RESTRICTIONS ON TRANSFERS
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
AUTHENTIC SPECIALTY FOODS, INC.
(hereinafter called the Corporation) transferable on the books of the
Corporation by the holder hereof in person or by duly authorized Attorney upon
surrender of this Certificate properly endorsed. This Certificate and the
shares represented hereby are issued and shall be subject to all the provisions
of the Restated Articles of Incorporation of the Corporation, as now or
hereafter amended, to all of which the holder hereof by acceptance hereof
assents. This Certificate is not valid until countersigned and registered by
the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
[SEAL]
/s/ HERMAN L. GRAFFUNDER /s/ CHARLES H. ESSERMAN
President Vice President and Secretary
Countersigned and Registered:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
Transfer Agent and Registrar
By
Authorized Signature
<PAGE> 2
AUTHENTIC SPECIALTY FOODS, INC.
Reference is made to Article Four of the Restated Articles of
Incorporation of the Corporation, and all amendments thereto, now or hereafter
on file with the Secretary of State of the State of Texas, for a statement of
the designations, preferences, limitations and relative rights of the shares of
each class of stock authorized to be issued by the Corporation and the denial
of pre-emptive rights of shareholders.
Copies of such Restated Articles of Incorporation, as amended, are also
on file with each Transfer Agent, and copies thereof may be obtained by any
shareholder, without charge, from the Corporation or from any such Transfer
Agent.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- .......... Custodian ..........
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act........................
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the
above list.
For Value Received, ______________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_________________________________________
| |
_________________________________________
_______________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP
CODE, OF ASSIGNEE)
_______________________________________________________________________
_______________________________________________________________________
________________________________________________________________ Shares
of the capital stock represented by the within Certificate, and do
hereby irrevocably constitute and appoint
_____________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated ______________________________________________________
______________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN
EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATSOEVER.
SIGNATURE GUARANTEED: _________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 4.5
/s/ UNION BANK
- -------------------
Union Bank
TERM LOAN AGREEMENT
This Term Loan Agreement ("Agreement") is entered into as of November 3,
1993 between Union Bank ("Bank") and LA VICTORIA FOODS, INC. ("Borrower") with
respect to the following:
1. The Loan ("Loan")
1.1 Amount $5,500,000.00
1.2 Availability period: funding through 11/29/98.
1.3 Interest rate: The interest rate shall be calculated at that rate set
forth in the promissory note ("Note") required under Article 3.
1.4 Principal and interest payments: At the times set forth in the Note
required under Article 3.
1.5 Loan fee: Five thousand Dollars ($5,000.00) payable on funding.
1.6 Other fee: N/A
1.7 Balances: Borrower shall maintain all of its major accounts with Bank
during the term of the Loan, including any compensating balances as
set forth in Article 5.4.
1.8 Any prepayment fee and the calculation therefor shall be set forth in
the Note.
1.9 Borrower shall borrow the entire amount of the Loan within ten (10)
days of the date of this Agreement.
2. COLLATERAL
Security for the payment and performance of all sums and all other
obligations under this Agreement shall be evidenced by the documents
executed by Borrower and/or accommodation pledgor in connection with this
Loan.
3. CONDITIONS TO AVAILABILITY OF THE LOAN
Before Bank is obligated to disburse the Loan, Bank must receive all of
the following, each of which must be in form and substance satisfactory to
Bank:
3.1 The original, executed Note evidencing the Loan;
3.2 Original, executed security agreement(s) and deed(s) of trust covering
the collateral referenced in Article 2;
3.3 All collateral referenced in Article 2 in which Bank wishes to have a
possessory security interest;
3.4 Financing statement(s) executed by Borrower;
3.5 Evidence that the security interests and liens in favor of Bank are
valid, enforceable, and prior to the rights and interests of others
except those consented to in writing by Bank;
3.6 Continuing guaranty(ies) in favor of Bank, executed by: N/A;
Borrower shall cause each Guarantor to submit not later than _____
days after the end of each _____ year the Guarantor's financial
statement, confirmed as to its correctness by Guarantor's signature,
either on Bank's form therefor or prepared by an independent
certified public accountant as of the end of each _____ year, and a
copy of the federal income tax return for such previous _____ year;
3.7 Subordination agreement(s) in favor of Bank on its standard form
executed by: N/A;
3.8 Evidence that the execution, delivery, and performance by Borrower of
this Agreement and the execution, delivery, and performance by
Borrower and any corporate guarantor or corporate subordinating
creditor of any instrument or agreement required under this
Agreement, as appropriate, have been duly authorized.
4. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants (and the request for the Loan shall be
deemed a representation and warranty made on the date of such request)
that:
4.1 Borrower is a California Corporation duly organized and existing
under the laws of the state of its organization and the execution,
delivery and performance of this Agreement are within Borrower's
powers, have been duly authorized, and are not in conflict with the
terms of any charter, bylaw, or other organization papers of
Borrower;
4.2 The execution, delivery, and performance of this Agreement are not in
conflict with any law or any indenture, agreement, or undertaking to
which Borrower is a party or by which Borrower is bound or affected;
4.3 All financial information submitted by Borrower to Bank, whether
previously or in the future, is and will be true and correct in all
material respects upon submission and is and will be complete upon
submission insofar as may be necessary to give Bank a true and
accurate knowledge of the subject matter thereof;
4.4 Borrower is properly licensed and in good standing in each state in
which Borrower is doing business, and Borrower has qualified under,
and complied with, where required, the fictitious name statute of
each state in which Borrower is doing business;
<PAGE> 2
4.5 There is no event which is, or with notice or lapse of time or both
would be, an Event of Default (as defined in Article 6) under this
Agreement;
4.6 Borrower is not engaged in the business of extending credit for the
purpose of, and no part of the Loan will be used for, purchasing or
carrying margin stock within the meaning of the Federal Reserve Board
Regulation U; and
4.7 All defined benefit pension plans as defined in the Employees
Retirement Income Security Act of 1974, as amended ("ERISA"), of
Borrower meet, as of the date hereof, the minimum funding standards
of Section 302 of ERISA, and no Reportable Event or Prohibited
Transaction as defined in ERISA has occurred with respect to any such
plan.
5. COVENANTS
Borrower agrees, so long as credit granted under this Agreement is
available and until full and final payment of all sums outstanding under
this Agreement and the Note, Borrower will:
5.1 At all times maintain:
(a) A ratio of current assets to current liabilities of at least:
N/A;
Current assets are defined as cash and other assets reasonably
expected to be realized in cash, sold, or consumed within one
year, or during the operating cycle of the business of the
Borrower, whichever is longer. Current liabilities are defined
as those obligations whose liquidation is reasonably expected
to require the use of existing resources classified as current
assets, or the creation of other current liabilities.
(b) A quick ratio of cash, accounts receivable and marketable
securities to current liabilities of at least: N/A;
(c) Net working capital equal to at least $ N/A (Net working capital
shall mean the excess of current assets over current
liabilities);
(d) A minimum tangible net worth of $17,400,000 (Tangible net worth
shall mean net worth after deducting patents, trademarks,
goodwill and other similar intangible assets);
(e) A ratio of total liabilities to tangible net worth of not
greater than .65:1.0; and
(f) A net cash flow equal to at least 125% of debt service, to be
measured as of the end of each fiscal year for the twelve-month
period immediately preceding the date of calculation. (Debt
service shall mean that portion of long-term liabilities and
leases coming due within twelve months of the date of
calculation. Cash flow shall mean net profit after taxes,
exclusive of nonrecurring income, to which depreciation,
amortization and other non-cash expenses are added for the
twelve-month period immediately preceding the date of
calculation.)
5.2 Give written notice to Bank within fifteen (15) days of:
(a) All litigation affecting Borrower where the amount is N/A
Dollars ($______) or more;
(b) Any substantial dispute which may exist between Borrower and any
governmental regulatory body or law enforcement authority;
(c) Any Event of Default under this Agreement or any event which,
upon notice or a lapse of time or both, would become an Event of
Default;
(d) Any other matter which has resulted or might result in a
material adverse change in Borrower's financial condition or
operations; and
(e) Any change in Borrower's name or principal place of business.
5.3 Furnish to Bank:
(a) Within 30 days after the close of each of the first three fiscal
quarters, its financial statement as of the close of that
quarter prepared in accordance with generally accepted
accounting principles by [X] Borrower's chief financial officer;
[ ] a(n) __________ (independent/certified/public or applicable
combination thereof) accountant selected by Borrower and
reasonably satisfactory to Bank;
(b) Within 90 days after the close of each fiscal year, a copy of
its financial statement prepared on a(n) review (internal,
compilation, review, audited) basis in accordance with generally
accepted accounting principles applied on a basis consistent
with the previous year by [ ] Borrower's chief financial
officer; [X] a(n) certified public (independent/certified/public
or applicable combination thereof) accountant selected by
Borrower and reasonably satisfactory to Bank.
5.4 Maintain on deposit with Bank average daily collected demand deposit
balances equal to at least N/A % of the average daily outstanding
balance of the Loan and _____% of the committed amount of the Loan.
Balances shall be calculated by Bank in its sole discretion after
reduction for (a) uncollected funds, (b) reserve requirements of the
Federal Reserve Board, and (c) balances necessary to compensate Bank
for account activity charges and cost of all services provided by
Bank to the Borrower and not paid under a separate agreement. These
balances shall be computed __________ as of the last day of each
__________. Borrower shall be charged a fee for any deficiency for
such _____ equal to _____ of the per annum rate of ___% plus the
average Union Bank Reference Rate for the __________ multiplied by
the amount of average daily balances which Borrower would have had to
maintain on deposit with Bank to make up the deficiency. This fee
shall be due and payable ten (10) days after Bank notified Borrower
of the amount due and owing. Failure to maintain required balances
shall not be a default hereunder unless and until Borrower shall fail
to pay the fee when due.
5.5 Pay or reimburse Bank for any out-of-pocket expenses incurred by it
in connection with this Agreement or on any agreements or financing
statements or other instruments delivered under this Agreement.
5.6 Maintain and preserve all rights, privileges and franchises now
enjoyed, conduct Borrower's business in an orderly, efficient and
customary manner, keep all Borrower's properties in good working
order and condition, and from time to time make all needed repairs,
renewals or replacements so that the efficiency of Borrower's
properties shall be fully maintained and preserved.
5.7 Maintain and keep in force in adequate amounts such insurance as is
usual in the business carried on by Borrower.
<PAGE> 3
5.8 Maintain adequate books, accounts and records and prepare all financial
statements required hereunder in accordance with generally accepted
accounting principles and practices consistently applied, and in
compliance with the regulations of any governmental regulatory body
having jurisdiction over Borrower or Borrower's business and permit
employees or agents of Bank at any reasonable time to inspect Borrower's
properties, and to examine or audit Borrower's books, accounts and
records and make copies and memoranda thereof.
5.9 At all times meet, for all Borrower's defined benefit pension plans as
defined in the Employees Retirement Income Security Act of 1974, as
amended ("ERISA"), the minimum funding standards of Section 302 of
ERISA, and no Reportable Event or Prohibited Transaction as defined in
ERISA will occur with respect to any such plan.
5.10 At all times comply with, or cause to be complied with, all laws,
statutes, rules, regulations, orders and directions of any governmental
authority having jurisdiction over Borrower or Borrower's business.
5.11 Except as provided in this Agreement, or in the ordinary course of
business as currently conducted, not make any loans or advances, become
a guarantor or surety, pledge its credit or properties in any manner,
extend credit.
5.12 Not purchase the debt or equity of another person or entity except for
savings accounts and certificates of deposit of Bank, direct U.S.
Government obligations and commercial paper issued by corporations with
top ratings of Moody's or Standard & Poor's, provided all such permitted
investments shall mature within one year of purchase.
5.13 Not create, assume or suffer to exist any mortgage, encumbrance,
security interest, pledge, or other lien (including the lien of an
attachment, judgment, or execution), securing a charge or obligation,
on or in any of Borrower's property, real or personal, whether now owned
or hereafter acquired, except to Bank and as set forth in Articles 5.17
and 5.18.
5.14 Not sell or discount any receivables or evidence of indebtedness,
except to Bank, borrow any money, incur directly or indirectly, any
liabilities for borrowed money, except pursuant to agreements made with
the Bank.
5.15 Neither liquidate, dissolve, enter into any consolidation, merger,
partnership, or other combination; nor convey, sell or lease all or the
greater part of its assets or business; nor purchase or lease all or the
greater part of the assets or business of another.
5.16 Not engage in any business activities or operations substantially
different from or unrelated to present business activities and
operations.
5.17 Not, in any single fiscal year of Borrower, expend or incur obligations
of more than N/A Dollars ($_______) for the acquisition of fixed
or capital assets.
5.18 Not, in any single fiscal year of Borrower, enter into the lease of any
personal property which would cause Borrower's aggregate annual
obligations under all such leases to exceed N/A Dollars ($_______).
6. EVENTS OF DEFAULT
The occurrence of any of the following events ("Events of Default")
shall terminate any obligation on the part of Bank to make or continue
the Loan and, at the option of Bank, shall make all sums of interest
and principal outstanding under the Loan immediately due and payable,
without notice of default, presentment or demand for payment, protest
or notice of nonpayment or dishonor, or other notices or demands of any
kind or character:
6.1 Borrower shall default in the due and punctual payment of the principal
of or the interest on the Note or any renewal thereof, and such default
shall not be cured within ten (10) business days after the occurrence
thereof; or
6.2 Any representation or warranty made by Borrower herein or in any
certificate or financial or other statement heretofore or hereafter
furnished by Borrower or its officers or any Guarantor shall prove to be
in any material respect false and misleading; or
6.3 Default shall be made by Borrower in the due performance or observance
of any covenant or condition of this Agreement and such default shall
not, within ten (10) days after Borrower has knowledge thereof, have
been cured; or
6.4 The filing by Borrower of any petition under the bankruptcy,
reorganization, arrangement, insolvency, or other debtor's relief laws,
or the filing against Borrower of any such petition or the appointment
of a receiver, trustee or liquidator of all or a substantial part of
Borrower's assets if the filing against Borrower is not dismissed within
thirty (30) days thereafter; or
6.5 The making by Borrower of an assignment for the benefit of creditors; or
6.6 The voluntary suspension of business by Borrower; or
6.7 Any guarantee or subordination agreement required hereunder is breached
or becomes ineffective, or any Guarantor, or subordinating creditor
disavows or attempts to terminate such guarantee or subordination
agreement; or
6.8 If, in the opinion of Bank, there is a materially adverse change in the
financial condition of Borrower or any Guarantor, or for any reason Bank
believes that the prospect of payment or performance pursuant to the
Note, any other indebtedness of Borrower to Bank, this Agreement or any
other agreement or instrument required by Bank in connection with the
Loan has been impaired; or
6.9 Borrower shall commit or do, or fail to commit or do, any act or thing
which would constitute an event of default under any of the terms of any
other agreement, document, or instrument executed, or to be executed by
it and concerning this obligation to pay money. Notwithstanding the
foregoing, Bank shall have no duty to make any advance to Borrower
during any cure period provided for in Sections 6.1, 6.3 and/or 6.4.
7. MISCELLANEOUS
7.1 This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, provided, however, that
Borrower shall not assign this Agreement or any of the rights, duties or
obligations of Borrower hereunder without the prior written consent of
the Bank.
7.2 No consent or waiver under this Agreement shall be effective unless in
writing and signed by an officer of the Bank. No waiver of any breach
or default shall be deemed a waiver of any breach or default thereafter
occurring.
7.3 All documents executed in connection with this Agreement shall be Bank's
standard form or a form acceptable to Bank.
7.4 This Agreement, and any instrument or agreement required under this
Agreement, shall be governed by and construed under the laws of the
State of California.
7.5 The obligations of the parties signing this Agreement as Borrower are
joint and several.
<PAGE> 4
7.5 Litigation and Attorneys' Fees. Borrower will pay promptly to Bank, without
demand, reasonable attorneys' fees (including but not limited to the
reasonable estimate of the allocated costs and expenses of in-house
legal counsel and legal staff) and all costs and other expenses paid or
incurred by Bank in collecting or compromising the Loan or in enforcing
or exercising its rights and remedies created by, connected with or
provided in this Agreement or any other agreement or instrument required
by Bank in connection with the Loan, whether or not suit is filed. If
suit is filed, only the prevailing party shall be entitled to attorneys'
fees and court costs.
7.6 Borrower agrees that at all times it shall have positive net profits
after tax on a year-to-date basis.
7.7 Borrower shall not make any dividend payments in any one fiscal year
exceeding $500,000.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
<TABLE>
<S> <C>
BORROWER
UNION BANK, a California banking corporation LA VICTORIA FOODS, INC.
--------------------------------
By: /s/ JON STRAYER By: /s/ ROBERT C. TANKLAGE
---------------------------------------- ----------------------------
Title Vice President Title President
---------------------------------------- ---------------------------
By: /s/ CHARLES W. FETCH By:
---------------------------------------- ----------------------------
Title A.V.P. Title
---------------------------------------- ---------------------------
ADDRESS WHERE NOTICES TO BANK ARE TO BE SENT ADDRESS WHERE NOTICES TO BORROWER
ARE TO BE SENT
17800 Castleton Street 240 S. 6th Avenue
- --------------------------------------------- --------------------------------
City of Industry, CA 91748 City of Industry, CA 91746
- --------------------------------------------- --------------------------------
</TABLE>
<PAGE> 5
FOURTH AMENDMENT TO
TERM LOAN AGREEMENT
This Fourth Amendment to Term Loan Agreement (this "Fourth Amendment") dated as
of June 20, 1997, is made and entered into by and between La Victoria Foods,
Inc. ("Borrower"), and Union Bank of California, N.A. ("Bank").
RECITALS:
A. Borrower and Bank are parties to that certain Term Loan Agreement dated
November 3, 1993 ("Agreement"), pursuant to which Bank agreed to extend credit
to Borrower.
B. Borrower and Bank desire to amend the Agreement subject to the terms and
conditions of this Fourth Amendment.
AGREEMENT:
In consideration of the above recitals and of the mutual covenants and
conditions contained herein, Borrower and Bank agree as follows:
1. Defined Terms. Initially capitalized terms used herein which are not
otherwise defined shall have the meanings assigned thereto in the Agreement.
2. Amendments to the Agreement.
(a) Section 5.1(d) Tangible Net Worth, line one of the Agreement is hereby
amended by sustituting the amount $11,500,000 for the amount $15,400,000.
(b) Section 5.1(e) A ratio of total liabilities to Tangible Net Worth,
line one of the Agreement is hereby amended by substituting the ratio 1.0 to
1.0 for the ratio .75 to 1.0.
(c) Section 7.7 is hereby deleted in its entirety.
<PAGE> 6
RATIFICATION:
Except as specifically amended hereinabove, the Agreement shall remain in full
force and effect and is hereby ratified and confirmed.
WITNESS the due execution hereof as of the date first above written.
LA VICTORIA FOODS, INC. UNION BANK OF CALIFORNIA, N.A.
By: By: /s/ JON STRAYER
----------------------------- -----------------------------
Title: Title: Vice President
-------------------------- --------------------------
-2-
<PAGE> 1
EXHIBIT 4.6
[UNION BANK LOGO]
BUSINESS LOAN AGREEMENT
This Business Loan Agreement (this "Agreement") is entered into as of the date
set forth below between Union Bank ("Bank") and the undersigned ("Borrower")
with respect to each and every extension of credit (whether one or more,
collectively referred to as the "Loan") from Bank to Borrower. In consideration
of the Loan, Bank and Borrower agree to the following terms and conditions:
1. THE LOAN.
1.1 THE NOTE. The Loan is evidenced by one or more promissory notes or
other evidences of indebtedness, including each amendment, extention,
renewal or replacement thereof, which are incorporated herein by this
reference (whether one or more, collectively referred to as the "Note").
* Wherever "N/A" appears in a blank in this Agreement, it means the
Subsection in which it appears is deemed deleted from this Agreement.
1.2 REVOLVING LOAN CLEAN-UP PERIOD. For any portion of the Loan which is a
revolving loan, at least 30 consecutive days during each 12 month period
the principal amount outstanding under such revolving loan must be zero.
1.3 TERM LOAN AVAILABILITY PERIOD. For any portion of the Loan which is a
term loan, loan proceeds shall be available for disbursement from N/A,
199_, through __________, 199_, only.
1.4 FEE. Borrower shall pay to Bank a fee of $1,000.00
1.5 COLLATERAL. The payment and performance of all obligations of Borrower
under the Loan Documents is and shall be during the term of the Loan by a
perfected security interest in such real or personal property collateral
as is required by Bank and each security interest shall rank in first
priority unless otherwise specified in writing by Bank.
1.6 GUARANTY. The payment and performance of all obligations of Borrower
under the Loan Documents are and shall be during the term of the Loan
guaranteed by: N/A
1.7 SUBORDINATION. Certain other obligations of Borrower are and shall be
during the term of the Loan subordinated, to the repayment of the Loan and
all other obligations of Borrower to Bank, pursuant to one or more
subordination agreement(s) in favor of Bank executed and delivered by: N/A
2. CONDITIONS TO AVAILABILITY OF THE LOAN. Before Bank is obligated to
disburse all or any portion of the Loan, the Bank must have received (a)
the Note and every other document required by Bank in connection with the
Loan, each of which must be in form and substance satisfactory to Bank
(together with this Agreement, referred to as the "Loan Documents"), (b)
payment of any fee required in connection with the Loan.
3. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants (and each
request for a disbursement of the proceeds of the Loan shall be deemed a
representation and warranty made on the date of such request) that:
3.1 Borrower is an individual or Borrower is duly organized and existing
under the laws of the state of its organization and is duly qualified to
conduct business in each jurisdiction in which its business is conducted;
3.2 The execution, delivery and performance of the Loan Documents executed
by Borrower are within Borrower's power, have been duly authorized, are
legal, valid and binding obligations of Borrower, and are not in conflict
with the terms of any charter, bylaw, or other
1
<PAGE> 2
organization papers of Borrower or with any law, indenture, agreement or
undertaking to which Borrower is a party or by which Borrower is bound or
affected;
3.3 All financial statements and other financial information submitted by
Borrower to Bank are true and correct in all material respects and there
has been no material adverse change in Borrower's financial condition since
the date of the latest of such financial statements;
3.4 Borrower is properly licensed and in good standing in each state in
which Borrower is doing business, and Borrower has complied with all laws
and regulations affecting Borrower, including without limitation, each
applicable fictitious business name statute;
3.5 There is no event which is, or with notice or lapse of time or both
would be, an Event of Default (as defined in Article 5);
3.6 Borrower is not engaged in the business of extending credit for the
purpose of, and no part of the Loan will be used, directly or indirectly,
for purchasing or carrying margin stock within the meaning of Federal
Reserve Board Regulation U; and
3.7 Borrower is not aware of any fact, occurrence or circumstance which
Borrower has not disclosed to Bank in writing which has, or could
reasonably be expected to have, a material adverse effect on Borrower's
ability to repay the Loan or perform its obligations under the Loan
Documents.
4. COVENANTS. Borrower agrees, so long as the Loan or any commitment to make any
advance under the Loan is outstanding and until full and final payment of all
sums outstanding under any Loan Document, that Borrower will:
4.1 MAINTAIN:
(a) Working Capital equal to at least $ N/A. As used herein, "Working
Capital" means the excess of current assets over current liabilities);
(b) A ratio of current assets to current liabilities of at least N/A:1.00;
(c) A quick ratio of cash, accounts receivable and marketable securities to
current liabilities of at least N/A:1.00;
(d) Tangible Net Worth of at least $15,000,000.00 (As used herein "Tangible
Net Worth" means net worth increased by indebtedness of Borrower
subordinated to Bank and decreased by patents, licenses, trademarks, trade
names, goodwill and other similar intangible assets, organizational
expenses, security deposits, prepaid costs and expenses and monies due from
affiliates including officers, shareholders and directors);
(e) A ratio of total liabilities to Tangible Net Worth of not greater than
.75:1.00 (as used herein "Tangible Net Worth" means net worth increased by
indebtedness of Borrower subordinated to Bank and decreased by patents,
licenses, trademarks, trade names, goodwill and other similar intangible
assets, organizational expenses, security deposits and monies due from
affiliates including officers, shareholders and directors);
(f) A profit after taxes of not less than $1.00, to be measured as of the
end of each fiscal year of Borrower.
(g) A ratio of Cash Flow to Debt Service of 1.25:1.00. Compliance with this
subsection to be measured as of the end of each fiscal year of Borrower.
(As used herein, "Debt Service" means that portion of long-term liabilities
and capital leases coming due within 12 months of the date of calculation,
and "Cash Flow" means net profit after taxes, to which depreciation,
amortization and other non-cash expenses are added for the 12 month period
immediately preceding the date of calculation); and
(h) N/A
All accounting terms used in this Agreement shall have the definitions given
them by generally accepted accounting principles, unless otherwise defined
herein.
4.2 Give written notice to Bank within 15 days of the following:
<PAGE> 3
(a) Any litigation or arbitration proceeding affecting Borrower where the
amount in controversy is $100,000.00 or more;
(b) Any material dispute which may exist between Borrower and any government
regulatory body or law enforcement body;
(c) Any Event of Default or any event which, upon notice, or lapse of time, or
both, would become an Event of Default;
(d) Any other matter which has resulted or is likely to result in a material
adverse change in Borrower's financial condition or operation; and
(e) Any change in Borrower's name or the location of Borrower's principal place
of business, or the location of any collateral for the Loan, or the
establishment of any new place of business or the discontinuance of any
existing place of business.
4.3 Furnish to Bank an income statement, balance sheet, and statement of
retained earnings, with supportive schedules ("Financial Statement"), and any
other financial information requested by Bank, prepared in accordance with
generally accepted accounting principles and in a form satisfactory to Bank as
follows:
(a) Within 45 days after the close of each fiscal quarter, Borrower's Financial
Statement as of the close of such period;
(b) Within 120 days after the close of each fiscal year, a copy of Borrower's
annual Financial Statement prepared by a certified public accountant on a(n)
reviewed basis. Any independent certified public accountant who prepares
Borrower's Financial Statement shall be selected by Borrower and reasonably
satisfactory to Bank;
(c) Within N/A days after the close of each fiscal year, a copy of each
guarantor's annual Financial Statement;
(d) If any portion of the Loan is a Borrowing Base Loan, within N/A days after
each calendar month end, a copy of Borrower's monthly accounts receivable and
accounts payable agings, and a certification of compliance with the borrowing
base described in Section 1.2 above, executed by Borrower, which certificate
shall accurately report Borrower's accounts receivable and Eligible Accounts;
and
(e) Promptly upon request, any other financial information requested by Bank.
4.4 Furnish to Bank, on Bank's request, a copy of Borrower's and each
guarantor's most recently filed federal income tax return with all accompanying
schedules.
4.5 Borrower will pay or reimburse Bank for all costs, expenses and fees
incurred by Bank in preparing and documenting this Agreement and the Loan, and
all amendments and modifications thereof, including but not limited to all
filing and recording fees, costs of appraisals, insurance and attorney's fees,
including the reasonable estimate of the allocated costs and expenses of
in-house legal counsel and staff.
4.6 Maintain and preserve Borrower's existence, present form of business and
all rights, privileges and franchises necessary or desirable in the normal
course of its business, and keep all of Borrower's properties in good working
order and condition.
4.7 Maintain and keep in force insurance with companies acceptable to Bank and
in such amounts and types, including without limitation fire and public
liability insurance, as is usual in the business carried on by Borrower, or as
Bank may reasonably request. Such insurance policies must be in form and
substance satisfactory to Bank.
4.8 Maintain adequate books, accounts and records and prepare all financial
statements required hereunder in accordance with generally accepted accounting
principles, and in compliance with the regulations of any governmental
regulatory body having jurisdiction over Borrower or Borrower's business and
permit employees or agents of Bank at any reasonable time to inspect Borrower's
assets and properties, and to examine or audit Borrower's books, accounts and
records and make copies and memoranda thereof.
4.9 At all times comply with, or cause to be complied with, all laws, statutes,
rules, regulations, orders and directions of any governmental authority having
jurisdiction over Borrower or Borrower's business, and all material agreements
to which Borrower is a party.
4.10 Except as provided in this Agreement, or in the ordinary course of its
business as currently conducted, not make any loans or advances, become a
guarantor or surety, pledge its credit or properties in any manner, or extend
credit.
4.11 Not purchase the debt or equity of another person or entity except for
savings accounts and certificates of deposit of Bank, direct U.S. Government
obligations and commercial paper issued by corporations with top ratings of
Moody's or Standard & Poor's, provided that all such permitted investments
shall mature within one year of purchase.
<PAGE> 4
4.12 Not create, assume or suffer to exist any mortgage, encumbrance,
security interest, pledge or lien ("Lien") on Borrower's real or personal
property, whether nor owned or hereafter acquired, or upon the income or
profits thereof except the following: (a) Liens in favor of Bank, (b) Liens
for taxes or other items not delinquent or contested in good faith, (c)
other Liens which do not exceed in the aggregate $ N/A at any one time.
4.13 Not sell or discount any account receivable or evidence of
indebtedness, except to Bank; not borrow any money, become contingently
liable for money borrowed, except pursuant to agreements made with Bank.
4.14 Neither liquidate, dissolve, enter into any consolidation, merger,
partnership, or other combination; nor convey, sell or lease all or the
greater part of its assets or business; nor purchase or lease all or the
greater part of the assets or business of another.
4.15 Not engage in any business activities or operations substantially
different from or unrelated to present business activities and operations.
4.16 Not, in any single fiscal year of Borrower, expend or incur
obligations of more than $ N/A for the acquisition of fixed or capital
assets.
4.17 Not, in any single fiscal year of Borrower, enter into any lease of
real or personal property which would cause Borrower's aggregate annual
obligations under all such real and personal property leases to exceed $
N/A.
4.18 Borrower will promptly, upon demand by Bank, take such further action
and execute all such additional documents and instruments in connection
with this Agreement as Bank in its reasonable discretion deems necessary,
and promptly supply Bank with such other information concerning its affairs
as Bank may request from time to time.
5. EVENTS OF DEFAULT. The occurrence of any of the following events ("Events of
Default") shall terminate any obligation on the part of Bank to make or
continue the Loan and automatically, unless otherwise provided under the Note,
shall make all sums of interest and principal and any other amounts owing under
the Loan immediately due and payable, without notice of default, presentment or
demand for payment, protest or notice of nonpayment or dishonor, or any
other notices or demands:
5.1 Borrower shall default in the due and punctual payment of the principal
of or the interest on the Note or any of the Loan Documents;
5.2 Any default shall occur under the Note;
5.3 Borrower shall default in the due performance or observance of any
covenant or condition of the Loan Documents;
5.4 Any guaranty or subordination agreement required hereunder is breached
or becomes ineffective, or any guarantor or subordinating creditor dies or
disavows or attempts to revoke or terminate such guaranty or subordination
agreement; or
5.5 There is a change in ownership or control of 10% or more of the issued
and outstanding stock of Borrower or any guarantor, or (in the case of a
partnership borrower) there is a change in ownership or control of any
general partner's interest.
6. MISCELLANEOUS.
6.1 The rights, powers and remedies given to Bank hereunder shall be
cumulative and not alternative and shall be in addition to all rights,
powers, and remedies given to Bank by law against Borrower or any other
person, including but not limited to Bank's rights or set off of banker's
lien.
6.2 Any forbearance or failure or delay by Bank in exercising any right,
power or remedy hereunder shall not be deemed a waiver thereof and any
single or partial exercise of any right, power or remedy shall not preclude
the further exercise thereof. No waiver shall be effective unless it is in
writing and signed by an officer of Bank.
6.3 The benefits of this Agreement shall inure to the successors and
assigns of Bank and the permitted successors and assignees of Borrower, and
any assignment by Borrower without Bank's consent shall be null and void.
6.4 This Agreement and all other agreements and instruments required by
Bank in connection therewith shall be governed by and construed according
to the laws of the State of California.
6.5 Should any one or more provisions of this Agreement be determined to be
illegal or unenforceable, all other provisions nevertheless shall be
effective.
<PAGE> 5
6.6 Except for documents and instruments specifically referenced herein,
this Agreement constitutes the entire agreement between Bank and Borrower
regarding the Loan and all prior communications, verbal or written,
between Borrower and Bank shall be of no further effect or evidentiary
value.
6.7 The section headings herein are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
6.8 This Agreement may be amended only in writing signed by all parties
hereto.
6.9 Borrower and Bank may execute one or more counterparts to this
Agreement, each of which shall be deemed an original.
6.10 Any notices or other communications provided for all allowed
hereunder shall be effective only when given by one of the following
methods and addressed to the respective party at its address given with
the signatures at the end of this Agreement and shall be considered to
have been validly given: (a) upon delivery, if delivered personally; (b)
upon receipt, if mailed, first class postage prepaid, with the United
States Postal Service; (c) on the next business day if sent by overnight
courier service of recognized standing; and (d) upon telephoned
confirmation of receipt, if telecopied.
7. ADDITIONAL PROVISIONS. The following additional provision, if any, are
hereby made part of this Agreement:
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
October 24, 1995.
UNION BANK ("BANK") ("BORROWER")
By: /s/ JON STRAYER LA VICTORIA FOODS, INC.
------------------------------- --------------------------------------
Title: Vice President
----------------------------
Printed Name: Jon Strayer
---------------------
By: By: /s/ ROBERT C. TANKLAGE
------------------------------- -----------------------------------
Title: Title: President
---------------------------- --------------------------------
Printed Name: Printed Name: Robert C. Tanklage
---------------------
By:
-----------------------------------
Title:
--------------------------------
Printed Name:
-------------------------
Address where notices to Address to where notices to
Bank are to be sent: Borrower are to be sent:
445 South Figueroa Street, 16th Floor 240 South Sixth Ave.
- ------------------------------------- --------------------------------------
Los Angeles, CA 90071 City of Industry, CA 91746
- ------------------------------------- --------------------------------------
- ------------------------------------- --------------------------------------
Fax Number: (213) 236-7638 Fax Number: (818) 968-7510
<PAGE> 6
FIRST AMENDMENT TO
BUSINESS LOAN AGREEMENT
This First Amendment to Business Loan Agreement (this "First Amendment") dated
as of May 22, 1997, is made and entered into by and between La Victoria Foods,
Inc. ("Borrower"), and Union Bank of California, N.A. ("Bank").
RECITALS:
A. Borrower and Bank are parties to that certain Business Loan Agreement
dated October 24, 1995 ("Agreement"), pursuant to which Bank agreed to extend
credit to Borrower.
B. Borrower and Bank desire to amend the Agreement subject to the terms and
conditions of this First Amendment.
AGREEMENT:
In consideration of the above recitals and of the mutual covenants and
conditions contained herein, Borrower and Bank agree as follows:
1. Defined Terms. Initially capitalized terms used herein which are not
otherwise defined shall have the meanings assigned thereto in the Agreement.
2. Amendments to the Agreement.
(a) Section 5.5, change in ownership or control of 10% or more, of the
Agreement is hereby deleted in its entirety.
RATIFICATION:
Except as specifically amended hereinabove, the Agreement shall remain in full
force and effect and is hereby ratified and confirmed.
WITNESS the due execution hereof as of the date first above written.
LA VICTORIA FOODS, INC. UNION BANK OF CALIFORNIA, N.A.
By: /s/ ROBERT C. TANKLAGE By: /s/ JON STRAYER
----------------------------- --------------------------
Title: President Title: Vice President
-------------------------- -----------------------
<PAGE> 7
SECOND AMENDMENT TO
BUSINESS LOAN AGREEMENT
This Second Amendment to Business Loan Agreement (this "Second Amendment")
dated as of June 20, 1997, is made and entered into by and between La Victoria
Foods, Inc. ("Borrower"), and Union Bank of California, N.A. ("Bank").
RECITALS:
A. Borrower and Bank are parties to that certain Business Loan Agreement dated
October 24, 1995 ("Agreement"), pursuant to which Bank agreed to extend credit
to Borrower.
B. Borrower and Bank desire to amend the Agreement subject to the term and
conditions of this Second Amendment.
AGREEMENT:
In consideration of the above recitals and of the mutual covenants and
conditions contained herein, Borrower and Bank agree as follows:
1. Defined Terms. Initially capitalized terms used herein which are not
otherwise defined shall have the meanings assigned thereto in the Agreement.
2. Amendments to the Agreement.
(a) Section 4.1(d) Tangible Net Worth, line one of the Agreement is hereby
amended by sustituting the amount $11,500,000 for the amount $15,000,000.
(b) Section 4.1(e) A ratio of total liabilities to Tangible Net Worth,
line one of the Agreement is hereby amended by substituting the ratio 1.0 to
1.0 for the ratio .75 to 1.0.
RATIFICATION:
Except as specifically amended hereinabove, the Agreement shall remain in full
force and effect and is hereby ratified and confirmed.
WITNESS the due execution hereof as of the date first above written.
LA VICTORIA FOODS, INC. UNION BANK OF CALIFORNIA, N.A.
By: By: /s/ JON STRAYER
----------------------------- -----------------------------
Title: Title: Vice President
-------------------------- --------------------------
<PAGE> 1
EXHIBIT 10.8
WARRANT AGREEMENT
BETWEEN
AUTHENTIC SPECIALTY FOODS, INC.
AND
SHANSBY PARTNERS, L.L.C.
Dated as of September __, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. ISSUANCE OF WARRANTS; FORM OF WARRANT . . . . . . . . . . . . 1
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY . . . 2
(A) EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . 2
(B) POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . 2
(C) RESERVATION, ISSUANCE AND DELIVERY OF COMMON STOCK . . 2
(D) EXECUTION AND DELIVERY . . . . . . . . . . . . . . . . 2
(E) VALID AND BINDING OBLIGATIONS . . . . . . . . . . . . . 2
(F) AUTHORIZATION AND CONSENTS . . . . . . . . . . . . . . 3
3. REGISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. EXCHANGE OF WARRANT CERTIFICATES . . . . . . . . . . . . . . . 3
5. TRANSFER OF WARRANTS . . . . . . . . . . . . . . . . . . . . . 3
6. TERM OF WARRANTS; EXERCISE OF WARRANTS . . . . . . . . . . . . 3
7. COMPLIANCE WITH GOVERNMENT REGULATIONS . . . . . . . . . . . . 4
8. PAYMENT OF TAXES . . . . . . . . . . . . . . . . . . . . . . . 5
9. MUTILATED OR MISSING WARRANTS . . . . . . . . . . . . . . . . 5
10. RESERVATION OF WARRANT SHARES; PURCHASE AND CANCELLATION OF
WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
11. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES . . 5
11.1. MECHANICAL ADJUSTMENTS . . . . . . . . . . . . . . . . 6
11.2. NOTICE OF ADJUSTMENT . . . . . . . . . . . . . . . . . 11
11.3. PRESERVATION OF PURCHASE RIGHTS UPON MERGER,
CONSOLIDATION, ETC . . . . . . . . . . . . . . . . . . 11
11.4. STATEMENT ON WARRANTS . . . . . . . . . . . . . . . . . 12
11.5. COMPANY TO PREVENT DILUTION . . . . . . . . . . . . . . 12
12. FRACTIONAL INTERESTS . . . . . . . . . . . . . . . . . . . . . 12
13. REGISTRATION UNDER THE SECURITIES ACT OF 1933 . . . . . . . . 12
14. CERTIFICATE TO BEAR LEGENDS . . . . . . . . . . . . . . . . . 12
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
15. NO RIGHTS AS STOCKHOLDERS; NOTICE TO WARRANT HOLDERS . . . . . 13
16. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
17. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
18. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 15
19. SUPPLEMENTS AND AMENDMENTS . . . . . . . . . . . . . . . . . . 15
20. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . 15
21. SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . . . . 15
22. MERGER OR CONSOLIDATION OF THE COMPANY . . . . . . . . . . . . 15
23. BENEFITS OF THIS WARRANT AGREEMENT . . . . . . . . . . . . . . 16
24. CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
25. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
ii
<PAGE> 4
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of September __, 1997, between Authentic
Specialty Foods, Inc., a Texas corporation (the "Company"), and Shansby
Partners, L.L.C., a Delaware limited liability company ("Shansby Partners").
WHEREAS, the Company currently contemplates undertaking an initial
public offering (the "Initial Public Offering") of shares of its Common Stock,
par value $1.00 per share ("Common Stock"); and
WHEREAS, in connection with the Initial Public Offering the Company
proposes to issue to Shansby Partners, common stock purchase warrants (the
"Warrants") to purchase up to 350,000 shares of Common Stock (the "Warrant
Shares"), each Warrant entitling the holder thereof to purchase one share of
Common Stock.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. ISSUANCE OF WARRANTS; FORM OF WARRANT. The Company will issue
and deliver the Warrants to Shansby Partners, or to an affiliate thereof
designated by Shansby Partners (together with successors of Shansby Partners,
the "Warrant Holder(s)"), upon the consummation of the Initial Public Offering.
The number of Warrants to be issued and delivered shall be 350,000. The text
of each Warrant, as well as the purchase form and each assignment form to be
printed on the reverse thereof shall be substantially as set forth in Exhibit A
attached hereto. The Warrants shall be executed on behalf of the Company by
the signature of the present or any future Chairman of the Board, President,
Treasurer or Vice President of the Company, under its corporate seal, affixed
or in facsimile, attested by the signature of the present or future Secretary
or an Assistant Secretary of the Company. A Warrant bearing the signature of
individuals who were at any time the proper officers of the Company shall bind
the Company notwithstanding that such individuals or any of them shall have
ceased to hold such offices prior to the delivery of such Warrant or did not
hold such offices on the date of this Warrant Agreement.
Warrants shall be dated as of the date of execution thereof by the
Company either upon initial issuance or upon division, exchange, substitution
or transfer.
The number of shares of Common Stock purchasable hereunder and the
Exercise Price (as defined in Section 6 hereof) payable therefor, are subject
to adjustment as hereinafter set forth.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The
Company hereby represents, warrants and covenants as follows:
(a) EXISTENCE. The Company is a corporation, duly organized
and validly existing under the laws of the State of Texas and is
authorized to do business and is in good standing as a foreign
corporation in every jurisdiction in which it owns or leases real
property
<PAGE> 5
or in which the nature of its business requires it to be so qualified,
except where the failure to so qualify, individually or in the
aggregate, could not reasonably be expected to have a material adverse
effect.
(b) POWER AND AUTHORITY. The Company has all requisite
corporate power and authority, and has taken all corporate action
necessary, to execute, deliver and perform this Warrant Agreement, to
grant, issue and deliver this Warrant and to authorize and reserve for
issuance and, upon payment from time to time of the Exercise Price, to
issue and deliver the shares of Common Stock or other securities
issuable upon exercise of the Warrant. This Warrant Agreement has been
duly executed and delivered by the Company.
(c) RESERVATION, ISSUANCE AND DELIVERY OF COMMON STOCK. There
have been reserved for issuance, and the Company shall at all times keep
reserved, out of the authorized and unissued shares of Common Stock, a
number of shares sufficient to provide for the exercise of the rights of
purchase represented by the Warrant, and such shares, when issued upon
receipt of payment therefor in accordance with the terms of the Warrant
and of this Warrant Agreement, will be legally and validly issued, fully
paid and nonassessable and will be free of any preemptive rights of
shareholders or any restrictions.
(d) EXECUTION AND DELIVERY. Neither the execution or delivery
of this Warrant Agreement nor the consummation of the transactions
herein contemplated does or will result in a breach or violation of any
of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company is a party or by which the Company is
bound or to which any o the property or assets of the Company is
subject, nor will such action result in any violation of any provision
of the Articles of Incorporation or Bylaws of the Company or any statute
or any order, rule or regulation or any court or governmental agency or
body having jurisdiction over the Company or any of its properties; and
no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
is required for the issuance and sale of the Warrant or the consummation
by the Company of the transactions contemplated by this Warrant
Agreement.
(e) VALID AND BINDING OBLIGATIONS. This Warrant Agreement and
all related documents, when duly executed and delivered, will be legal,
valid and binding obligations of the Company, enforceable in accordance
with their respective terms, subject to any applicable bankruptcy,
insolvency or other laws of general application affecting creditors'
rights and judicial decisions interpreting any of the foregoing.
(f) AUTHORIZATION AND CONSENTS. No authorization, consent,
approval, exemption, franchise, permit or license of, or filing with,
any governmental authority or other person is required to authorize, or
is otherwise required in connection with, the valid execution and
delivery by the Company of this Warrant Agreement and all related
documents and the performance by the Company of its obligations
hereunder.
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<PAGE> 6
3. REGISTRATION. The Warrants shall be numbered and shall be
registered on the books of the Company (the "Warrant Register") as they are
issued. The Warrants shall be registered initially in such names and such
denominations as Shansby Partners has specified to the Company.
4. EXCHANGE OF WARRANT CERTIFICATES. Subject to any restriction
upon transfer set forth in this Warrant Agreement, each Warrant certificate may
be exchanged at the option of the Warrant Holder thereof for another
certificate or certificates of different denominations entitling the Warrant
Holder thereof to purchase upon surrender to the Company or its duly authorized
agent a like aggregate number of Warrant Shares as the certificate or
certificates surrendered then entitle such Warrant Holder to purchase. Any
Warrant Holder desiring to exchange a Warrant certificate or certificates shall
make such request in writing delivered to the Company, and shall surrender,
properly endorsed, the certificate or certificates to be so exchanged.
Thereupon, the Company shall execute and deliver to the person entitled thereto
a new Warrant certificate or certificates, as the case may be, as so requested.
Any Warrant issued upon exchange, transfer or partial exercise of the Warrants
shall be the valid obligation of the Company, evidencing the same generic
rights and entitled to the same generic benefits under this Warrant Agreement
as the Warrants surrendered for such exchange, transfer or exercise.
5. TRANSFER OF WARRANTS. Subject to the provisions of Section 14
hereof, the Warrants shall be transferrable only on the Warrant Register upon
delivery to the Company of the Warrant certificate or certificates duly
endorsed by the Warrant Holder or by his duly authorized attorney-in-fact or
legal representative, or accompanied by proper evidence of succession,
assignment or authority to transfer. In all cases of transfer by an attorney-
in-fact, the original power of attorney, duly approved, or an official copy
thereof, duly certified, shall be deposited with the Company. In case of
transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited with the Company in its
discretion. Upon any registration of transfer, the Company shall deliver a new
Warrant or Warrants to the person entitled thereto.
6. TERM OF WARRANTS; EXERCISE OF WARRANTS.
(a) Each Warrant entitles the Warrant Holder thereof to
purchase one share of Common Stock at any time after September ___, 1998
until 5:00 P.M., Houston time, on September ___, 2003 (the "Expiration
Date") at a purchase price equal to the price to public of shares of
Common Stock received in the Initial Public Offering ($____ per share),
subject to adjustment in accordance with Section 11 hereof (the
"Exercise Price"). The Exercise Price and the number of shares issuable
upon exercise of Warrants are subject to adjustment upon the occurrence
of certain events, pursuant to the provisions of Section 11 of this
Warrant Agreement.
(b) Subject to the provisions of this Warrant Agreement, each
Warrant Holder shall have the right, which may be exercised as expressed
in such Warrants, to purchase from the Company (and the Company shall
issue and sell to such Warrant Holder) the number of
3
<PAGE> 7
fully paid and nonassessable shares of Common Stock specified in such
Warrants, upon surrender to the Company, or its duly authorized agent,
of such Warrants, with the purchase form on the reverse thereof duly
filled in and signed, and upon payment to the Company of the Exercise
Price, as adjusted in accordance with the provisions of Section 11 of
this Warrant Agreement or upon a net exercise as described below in
clause (ii), for the number of shares in respect of which such Warrants
are then exercised. The Warrant Holder may (i) pay the Exercise Price
in cash, by certified check, official bank check or wire transfer,
payable to the order of the Company, or by the surrender to the Company
of Common Stock of the Company having a Market Price equal to the
Exercise Price or (ii) exercise the Warrants for "Net Warrant Shares."
The number of Net Warrant Shares will be determined as described by the
following formula: Net Warrant Shares = [WS x (MP-EP)]/MP. "WS" is the
number of Warrant Shares issuable upon exercise of the Warrants or
portion of Warrants in question. "MP" is the Market Price of the Common
Stock on the last trading day preceding the date of the request to
exercise the Warrants. "Market Price" shall mean the then current
market price per share of Common Stock, as determined in paragraph
11.1(e). "EP" shall mean the Exercise Price.
Upon such surrender of Warrants, and payment of the Exercise
Price, with cash or securities, or upon a net exercise as aforesaid, the
Company at its expense shall issue and cause to be delivered with all
reasonable dispatch (but in any event within 5 business days) to or upon
the written order of the Warrant Holder and in such name or names as the
Warrant Holder may designate, a certificate or certificates for the
number of full shares of Common Stock so purchased upon the exercise of
such Warrants, together with cash, as provided in Section 12 of this
Warrant Agreement, in respect of any fraction of a share of such stock
otherwise issuable upon such surrender. Such certificate or
certificates shall be deemed to have been issued and any person so
designated to be named therein shall be deemed to have become a holder
of record of such shares as of the date of the surrender of such
Warrants and payment of the Exercise Price or receipt of shares by net
exercise as aforesaid. The rights of purchase represented by the
Warrants shall be exercisable, at the election of the Warrant Holders
thereof, either in full or from time to time in part (but not as to a
fractional share of Common Stock) and, in the event that any Warrant is
exercised in respect of less than all of the shares purchasable on such
exercise at any time prior to the Expiration Date, a new certificate
evidencing the remaining Warrant or Warrants will be issued.
7. COMPLIANCE WITH GOVERNMENT REGULATIONS. The Company covenants
that if any share of Common Stock required to be reserved for purposes of
exercise or conversion of Warrants require, under any federal or state law or
applicable governing rule or regulation of any national securities exchange,
registration with or approval of any governmental authority, or listing on any
such national securities exchange, before such shares may be issued upon
exercise, the Company will use its best efforts to cause such shares to be duly
registered, approved or listed on the relevant national securities exchange, as
the case may be.
4
<PAGE> 8
8. PAYMENT OF TAXES. The Company will pay all documentary stamp
taxes, if any, attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants and any securities issued pursuant to Section 11 hereof;
provided, however, that the Company shall not be required to pay any tax or
taxes that may be payable in respect of any transfer involved in the issuance
or delivery of any Warrants or certificates for Warrant Shares and any
securities issued pursuant to Section 11 hereof in a name other than that of
the Warrant Holder of such Warrants.
9. MUTILATED OR MISSING WARRANTS. In case any of the Warrants shall
be mutilated, lost, stolen or destroyed, the Company shall issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant,
or in lieu of and in substitution for the Warrant lost, stolen or destroyed, a
new Warrant of like tenor and representing an equivalent right or interest.
10. RESERVATION OF WARRANT SHARES; PURCHASE AND CANCELLATION OF
WARRANTS. The Company shall at all times reserve, out of the authorized and
unissued shares of Common Stock, a number of shares sufficient to provide for
the exercise of the rights of purchase represented by the Warrants and every
transfer agent for any shares of the Company's capital stock issuable upon the
exercise of any of the rights of purchase aforesaid are hereby irrevocably
authorized and directed at all times until the Expiration Date to reserve such
number of authorized and unissued shares as shall be requisite for such
purpose. The Company will keep a copy of this Warrant Agreement on file with
every transfer agent for any shares of the Company's capital stock issuable
upon the exercise of the rights of purchase represented by the Warrants. The
Company will supply any transfer agent with duly executed stock certificates
for such purpose and will itself provide or otherwise make available any cash
which may be issuable as provided by Section 12 of this Warrant Agreement. The
Company will furnish to the Transfer Agent and any such subsequent transfer
agent a copy of all notices of adjustments, and certificates related thereto,
transmitted to each Warrant Holder pursuant to Section 11.2 hereof. All
warrants surrendered in the exercise of the rights thereby evidenced shall be
canceled, and such canceled Warrants shall constitute sufficient evidence of
the number of shares of stock which have been issued upon the exercise of such
Warrants (subject to adjustment as herein provided). No shares of stock shall
be subject to reservation in respect of the Warrants subsequent to the
Expiration Date except to the extent necessary to comply with the terms of this
Warrant Agreement.
11. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The
number and kind of securities purchasable upon the exercise of each Warrant and
the Exercise Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as hereinafter defined.
11.1. MECHANICAL ADJUSTMENTS. The number of Warrant Shares
purchasable upon the exercise of each Warrant and the Warrant Price
shall be subject to adjustment as follows:
(a) In case the Company shall (i) pay a dividend in
shares of Common Stock or make a distribution in shares of Common
Stock, (ii) subdivide its outstanding shares of Common Stock into
a larger number of shares of Common Stock, (iii) combine its
outstanding shares of Common Stock into a smaller number
5
<PAGE> 9
of shares of Common Stock or (iv) issue by reclassification of
its shares of Common Stock other securities of the Company
(including any such reclassification in connection with a
consolidation or merger in which the Company is the surviving
corporation), the number of Warrant Shares purchasable upon
exercise of each Warrant immediately prior thereto shall be
adjusted so that the Warrant Holder shall be entitled to receive
the kind and number of Warrant Shares or other securities of the
Company which he would have owned or have been entitled to
receive after the happening of any of the events described above,
had such Warrant been exercised immediately prior to the
happening of such event or any record date with respect thereto
regardless of whether the Warrants are exercisable at the time of
the happening of such event or at the time of any record date
with respect thereto. An adjustment made pursuant to this
paragraph (a) shall become effective immediately after the
effective date of such event retroactive to the record date, if
any, for such event.
(b) In case the Company shall issue rights, options or
warrants to holders of its outstanding Common Stock, without any
charge to such holders, entitling them to subscribe for or
purchase shares of Common Stock at a price per share that is
lower at the record date mentioned below than the greater of (a)
the Exercise Price or (b) the then current Market Price per share
of Common Stock (as determined in accordance with paragraph (e)
below) (the "Greater Price"), then in each such case the number
of Warrant Shares thereafter purchasable upon the exercise of
each Warrant shall be determined by multiplying the number of
Warrant Shares theretofore purchasable upon exercise of each
Warrant by a fraction, of which the numerator shall be the number
of shares of Common Stock outstanding on the date of issuance of
such rights, options or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase, and
of which the denominator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights, options
or warrants plus the number of shares that the aggregate offering
price of the total number of shares of Common Stock offered for
subscription or purchase would purchase at the Greater Price.
Such adjustment shall be made whenever such rights, options or
warrants are issued, and shall become effective immediately after
the record date for the determination of stockholders entitled to
receive such rights, options or warrants.
(c) In case the Company shall distribute to holders of
its shares of Common Stock evidences of its indebtedness or
assets (including cash dividends or other cash distributions) or
rights, options or warrants, or convertible or exchangeable
securities containing the right to subscribe for or purchase
shares of Common Stock (excluding those referred to in paragraph
(b) above), then in each case the number of Warrant Shares
thereafter purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of Warrant Shares
theretofore purchasable upon the exercise of each Warrant by a
fraction, of which the
6
<PAGE> 10
numerator shall be the then current Market Price per share of
Common Stock (as determined in accordance with paragraph (e)
below) on the date of such distribution, and of which the
denominator shall be the then current Market Price per share of
Common Stock, less the then fair value (as determined in good
faith by the Board of Directors of the Company, whose
determination shall be conclusive) of the portion of the assets
or evidences of indebtedness so distributed or of such
subscription rights, options or warrants, or of such convertible
or exchangeable securities applicable to one share of Common
Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date of
distribution retroactive to the record date for the determination
of stockholders entitled to receive such distribution.
In the event of a distribution by the Company to holders
of its shares of Common Stock of stock of a subsidiary or
securities convertible into or exercisable for such stock, then
in lieu of an adjustment in the number of Warrant Shares
purchasable upon the exercise of each Warrant, the Warrant
Holder, upon the exercise thereof at any time after such
distribution, shall be entitled to receive from the Company, such
subsidiary or both, as the Company shall determine, the stock or
other securities to which such Warrant Holder would have been
entitled if such Warrant Holder had exercised such Warrant
immediately prior thereto regardless of whether the Warrants are
exercisable at such time, all subject to further adjustment as
provided in this subsection 11.1; provided, however, that no
adjustment in respect of dividends or interest on such stock or
other securities shall be made during the term of a Warrant or
upon the exercise of a Warrant.
(d) In case the Company shall sell and issue shares of
Common Stock (other than pursuant to rights, options, warrants,
or convertible securities initially issued before the date of
this Warrant Agreement) or rights, options, warrants or
convertible securities containing the right to subscribe for or
purchase shares of Common Stock (excluding shares, rights,
options, warrants or convertible securities issued in any of the
transactions described in paragraphs (a), (b) or (c) above) at a
price per share of Common Stock (determined, in the case of such
rights, options, warrants or convertible securities, by dividing
(w) the total of the amount received or receivable by the Company
(determined as provided below) in consideration of the sale and
issuance of such rights, options, warrants or convertible
securities, by (x) the total number of shares of Common Stock
covered by such rights, options, warrants or convertible
securities) lower than the Greater Price in effect immediately
prior to such sale and issuance, then the number of Warrant
Shares thereafter purchasable upon the exercise of the Warrants
shall be determined by multiplying the number of Warrant Shares
theretofore purchasable upon exercise by a fraction, of which the
numerator shall be the number of shares of Common Stock
outstanding on the date of issuance of such shares, rights,
options, warrants or convertible securities plus the number of
additional shares of Common Stock sold or subject to issuance
pursuant
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<PAGE> 11
to such rights, options, warrants or convertible securities, and
of which the denominator shall be the number of shares of Common
Stock outstanding on the date of issuance of such shares, rights,
options, warrants or convertible securities plus the number of
shares of Common Stock which the aggregate consideration received
or receivable (determined as provided below) for such sale or
issuance would purchase at the Greater Price. Such adjustment
shall be made successively whenever such an issuance is made.
For the purposes of such adjustments, the consideration received
or receivable by the Company for rights, options, warrants or
convertible securities shall be deemed to be the consideration
received by the Company for such rights, options, warrants or
convertible securities, plus the consideration or premiums stated
in such rights, options, warrants or convertible securities to be
paid for the shares of Common Stock covered thereby. In case the
Company shall sell and issue shares of Common Stock, or rights,
options, warrants or convertible securities containing the right
to subscribe for or purchase shares of Common Stock, for a
consideration consisting, in whole or in part, of property other
than cash or its equivalent, then in determining the "price per
share of Common Stock" and the "consideration received or
receivable by the Company" for purposes of the first sentence of
this paragraph (d), the Board of Directors shall determine, in
its discretion, the fair value of said property, and such
determination, if made in good faith, shall be binding upon all
Holders.
(e) The "Market Price" on any day shall mean the
average of the daily market prices of Common Stock over a period
of 20 consecutive business days prior to the day as of which
"Market Price" is being determined. The Market Price for each
such business day shall be the average of the closing prices on
such day of the Common Stock on all domestic exchanges on which
the Common Stock is then listed, or, if there shall have been no
sales on any such exchange on such day, the average of the
highest bid and lowest asked prices on all such exchanges at the
end of such day, or, if the Common Stock shall not be so listed,
the average of the representative bid and asked prices quoted in
the NASDAQ National Market System ("NASDAQ System") as of 3:30
P.M., New York time, on such day, or if the Common Stock shall
not be quoted in the NASDAQ System, the average of the high and
low bid and asked prices on such day in the domestic over-
the-counter market as reported by the National Quotation Bureau
Incorporated, or any similar successor organization. If the
Common Stock is listed on any domestic exchange the term
"business days" as used in this sentence shall mean business days
on which such exchange is open for trading. If at any time the
Common Stock is not listed on any domestic exchange or quoted in
the NASDAQ System or the domestic over-the-courter market, the
"Market Price" shall be deemed to be the highest of (i) the book
value thereof, as determined by any firm of independent public
accountants of recognized standing selected by the Board of
Directors of the Company, as at the last day of any month ending
within 60 days preceding the date as of which the determination
is to be made, (ii) the fair value thereof, which shall be
reasonably
8
<PAGE> 12
determined by the Board of Directors of the Company as of a date
which is within 15 days of the date as of which the determination
is to be made, or (iii) the Exercise Price in effect immediately
prior to the determination of Market Price. Notwithstanding the
foregoing, for the purpose of any calculation under paragraph (d)
above (A) with respect to any issuance of options under the
Company's employee or director compensation stock option plans as
in effect or as adopted by the Board of Directors of the Company
on the date hereof, the term "current market price", in such
instances shall mean the fair market price on the date of the
issuance of any such option determined in accordance with the
Company's employee compensation stock option plans as in effect
or adopted by the Board of Directors of the Company on the date
hereof; and (B) with respect to any issuances of Common Stock (or
rights, options, warrants or convertible securities containing
the right to subscribe for or purchase shares of Common Stock) in
connection with bona fide corporate transactions (other than
issuances in such transactions for cash or similar
consideration), the term "fair market price" shall mean the fair
market price per share as determined in arm's-length negotiations
by the Company and such other parties (other than affiliates or
subsidiaries of the Company) to such transactions as reflected in
the definitive documentation with respect thereto, unless such
determination is not reasonably related to the closing market
price on the date of such determination.
(f) In any case in which this Section 11.1 shall require
that any adjustment in the number of Warrant Shares be made
effective as of immediately after a record date for a specified
event, the Company may elect to defer until the occurrence of the
event the issuing to the holder of any Warrant exercised after
that record date the shares of Common Stock and other securities
of the Company, if any, issuable upon the exercise of any Warrant
over and above the shares of Common Stock and other securities of
the Company, if any, issuable upon the exercise of any Warrant
prior to such adjustment; provided, however, that the Company
shall deliver to such Warrant Holder a due bill or other
appropriate instrument evidencing the holder's right to receive
such additional shares or securities upon the occurrence of the
event requiring such adjustment.
(g) No adjustment in the number of Warrant Shares
purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one percent
(1%) in the number of Warrant Shares purchasable upon the
exercise of each Warrant; provided, however, that any adjustments
which by reason of this paragraph (g) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest one-
thousandth of a share.
(h) Whenever the number of Warrant Shares purchasable
upon the exercise of each Warrant is adjusted, as herein
provided, the Warrant Price payable upon the exercise of each
Warrant shall be adjusted by multiplying such Warrant Price
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<PAGE> 13
immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Warrant Shares purchasable upon
the exercise of such Warrant immediately prior to such
adjustment, and of which the denominator shall be the number of
Warrant Shares purchasable immediately thereafter.
(i) No adjustment in the number of Warrant Shares
purchasable upon the exercise of each Warrant need be made under
paragraphs (b), (c) and (d) if the Company issues or distributes
to each Warrant Holder the rights, options, warrants, or
convertible or exchangeable securities, or evidences of
indebtedness or assets referred to in those paragraphs which each
Warrant Holder would have been entitled to receive had the
Warrants been exercised prior to the happening of such event or
the record date with respect thereto regardless of whether the
Warrants are exercisable at the time of the happening of such
event or at the time of any record date with respect thereto. No
adjustment need be made for a change in the par value of the
Warrant Shares.
(j) No adjustment need be made for rights to purchase
Warrant Shares pursuant to an employee or director benefit plan
approved by the Company's Board of Directors.
(k) For the purpose of this Section 11.1, the term
"shares of Common Stock" shall mean (i) the class of stock
designated as the Common Stock of the Company at the date of this
Warrant Agreement, or (ii) any other class of stock resulting
from successive changes or reclassifications of such shares
consisting solely of changes in par value, or from par value to
no par value, or from no par value to par value. In the event
that at any time, as a result of an adjustment made pursuant to
paragraph (a) above, the Warrant Holders shall become entitled to
purchase any securities of the Company other than shares of
Common Stock, thereafter the number of such other securities so
purchasable upon exercise of each Warrant and the Exercise Price
of such securities shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to the Warrant Shares contained in
paragraphs (a) through (i), inclusive, above, and the provisions
of Section 6 and Sections 11.2 through 11.4, inclusive, with
respect to the Warrant Shares, shall apply on like terms to any
such other securities. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or
held by or for the account of the Company, and the disposition of
any such shares shall be considered an issue or sale of Common
Stock for the purposes of this Section 11.
(l) Upon the expiration of any rights, options, warrants
or conversion or exchange privileges, if any thereof shall not
have been exercised, the Warrant Price and the number of shares
of Common Stock purchasable upon the exercise of each Warrant
shall, upon such expiration, be readjusted and shall thereafter
be such as it
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<PAGE> 14
would have been had it been originally adjusted (or had the
original adjustment not been required, as the case may be) as if
(A) the only shares of Common Stock so issued were the shares of
Common Stock, if any, actually issued or sold upon the exercise
of such rights, options, warrants or conversion or exchange
rights and (B) such shares of Common Stock, if any, were issued
or sold for the consideration actually received by the Company
upon such exercise plus the aggregate consideration, if any,
actually received by the Company for the issuance, sale or grant
of all such rights, options, warrants or conversion or exchange
rights whether or not exercised; provided, however, that no such
readjustment shall have the effect of increasing the Warrant
Price or decreasing the number of Warrant Shares by an amount in
excess of the amount of the adjustment initially made with
respect to the issuance, sale or grant of such rights, options,
warrants or conversion or exchange rights.
11.2. NOTICE OF ADJUSTMENT. When the number of Warrant Shares
purchasable upon the exercise of each Warrant or the Exercise Price of
such Warrant Shares is adjusted, as herein provided, the Company shall
promptly mail by first class, postage prepaid, to each Warrant Holder
notice of such adjustment or adjustments and a certificate of a firm of
independent public accountants selected by the Board of Directors of the
Company (who may be the regular accountants employed by the Company)
setting forth the number of Warrant Shares purchasable upon the exercise
of each Warrant and the Exercise Price of such Warrant Shares after such
adjustment and setting forth a brief statement of the facts requiring
such adjustment and setting forth the computation by which such
adjustment was made. Such certificate, absent manifest error, shall be
conclusive evidence of the correctness of such adjustment.
11.3. PRESERVATION OF PURCHASE RIGHTS UPON MERGER,
CONSOLIDATION, ETC. In case of any consolidation of the Company with or
merger of the Company into another person, or in case of any sale,
transfer or lease to another person of all or substantially all of the
assets of the Company or in the case of any share exchange involving the
Common Stock of the Company, the Company or such successor or purchaser,
as the case may be, shall execute with each Warrant Holder an agreement
that each Warrant Holder shall have the right thereafter upon payment of
the Exercise Price in effect immediately prior to such action to
purchase upon exercise of each Warrant the kind and amount of shares and
other securities and property which the Warrant Holder would have owned
or have been entitled to receive after the happening of such
consolidation, merger, share exchange, sale, transfer or lease had such
Warrant been exercised immediately prior to such action regardless of
whether the Warrants are exercisable at the time of such action. Such
agreement shall provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 11. The provisions of this Section 11.3 shall similarly apply
to successive consolidations, mergers, share exchanges, sales, transfers
or leases.
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<PAGE> 15
11.4. STATEMENT ON WARRANTS. Even though Warrants heretofore or
hereafter issued may continue to express the same price and number and
kind of shares as are stated in the Warrants initially issuable pursuant
to this Warrant Agreement; the parties understand and agree that such
Warrants will represent rights consistent with any adjustments in the
Exercise Price or the number or kind of shares purchasable upon the
exercise of the Warrants.
11.5. COMPANY TO PREVENT DILUTION. If any event or condition
occurs as to which other provisions of this Section 11 are not strictly
applicable or, if strictly applicable, would not fairly protect the
exercise or purchase rights of this Warrant in accordance with the
essential intent and principles of such provisions, or which might
materially and adversely affect the exercise or purchase rights of the
Warrant Holders under any provision of the Warrants, then the Company
shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect
such exercise and purchase rights as aforesaid, and any adjustment
necessary with respect to the Exercise Price and the number of Warrant
Shares purchasable hereunder so as to preserve without dilution the
rights of the holders of Warrants. In no event shall any such
adjustment have the effect of increasing the Exercise Price as otherwise
determined pursuant to this Section 11.
12. FRACTIONAL INTERESTS. The Company shall not be required to issue
fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
Warrant Holder, the number of full Warrant Shares that shall be issuable upon
the exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section
12, be issuable on the exercise of any Warrant (or specified portion, thereof),
the Company shall pay an amount in cash equal to the Market Price for one share
of the Common Stock on the trading day immediately preceding the date the
Warrant is presented for exercise, multiplied by such fraction.
13. REGISTRATION UNDER THE SECURITIES ACT OF 1933. Shansby Partners
represents and warrants to the Company that it will not dispose of the Warrant
or Warrant Shares except pursuant to (i) an effective registration statement,
or (ii) an applicable exemption from registration under the Securities Act of
1933, as amended (the "Act"). In connection with any sale by Shansby Partners
pursuant to clause (ii) of the preceding sentence, it shall furnish to the
Company an opinion of counsel reasonably satisfactory to the Company, at
Shansby Partners expense, to the effect that such exemption from registration
is available in connection with such sale.
14. CERTIFICATE TO BEAR LEGENDS. The Warrants shall be subject to a
stop-transfer order and the certificate or certificates therefor shall bear the
following legend by which each Warrant Holder shall be bound:
"THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF
COMMON STOCK OR OTHER SECURITIES ISSUABLE
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<PAGE> 16
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO (i) AN EFFECTIVE REGISTRATION STATEMENT, OR (ii) AN APPLICABLE
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. ANY SALE PURSUANT TO CLAUSE (ii) OF THE PRECEDING
SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH EXEMPTION
FROM REGISTRATION IS AVAILABLE IN CONNECTION WITH SUCH SALE."
The Warrant Shares or other securities issued upon exercise of the
Warrants shall, unless issued pursuant to an effective registration statement,
be subject to a stop-transfer order and the certificate or certificates
evidencing any such Warrant Shares or securities shall bear the following
legend by which the Warrant Holder thereof shall be bound:
"THE SHARES OR OTHER SECURITIES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT, OR (i) AN APPLICABLE EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED. ANY
SALE PURSUANT TO CLAUSE (ii) OF THE PRECEDING SENTENCE MUST BE
ACCOMPANIED BY AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH
EXEMPTION FROM REGISTRATION IS AVAILABLE IN CONNECTION WITH SUCH
SALE."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon
completion of a public distribution under a registration statement of the
securities represented thereby) shall also bear such legend unless in the
opinion of counsel satisfactory to the Company, the securities represented
thereby need no longer be subject to the restrictions contained herein. The
provisions of this Section 14 shall be binding upon all subsequent holders of
certificates bearing the above legend and shall also be applicable to all
subsequent holders of any Warrants.
15. NO RIGHTS AS STOCKHOLDERS; NOTICE TO WARRANT HOLDERS. Nothing
contained in this Warrant Agreement or in any of the Warrants shall be
construed as conferring upon the Warrant Holders or their transferees the right
to vote or to receive dividends or to consent or to receive notice as
stockholders in respect of any meeting of stockholders for the election of
directors of the Company or any other matter, or any rights whatsoever as
stockholders of the Company. If, however, at any time prior to the expiration
of the Warrants and prior to their exercise, any of the following events shall
occur:
(a) the Company shall declare any dividend payable in any
securities upon its shares of Common Stock or make any distribution
(other than a cash dividend) to the holders of its shares of Common
Stock; or
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<PAGE> 17
(b) the Company shall offer to the holders of its shares of
Common Stock any additional shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock or any right
to subscribe to or purchase any thereof; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, sale, transfer
or lease of all or substantially all of its property, assets, and
business as an entirety) shall be proposed,
then in any one or more of said events the Company shall (a) give notice in
writing of such event to the Warrant Holders as provided in Section 17 hereof
and (b) if there are more than 100 Warrant Holders, cause notice of such event
to be published once in The Wall Street Journal (national edition), such giving
of notice and publication to be completed at least 15 days prior to the date
fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to such dividend, distribution, or
subscription rights, or for the determination of stockholders entitled to vote
on such proposed dissolution, liquidation or winding up. Such notice shall
specify such record date or the date of closing the transfer books, as the case
may be. Failure to publish, mail or receive such notice or any defect therein
or in the publication or mailing thereof shall not affect the validity of any
action taken in connection with such dividend, distribution or subscription
rights, or such proposed dissolution, liquidation or winding up.
16. EXPENSES. The Company shall pay all legal and other reasonable
out-of-pocket expenses of the Warrant Holders and of their counsel. The
Company agrees to reimburse Shansby Partners upon demand for its reasonable
out-of-pocket costs and expenses incurred in connection with the preparation,
review, negotiation, execution and delivery of this Warrant Agreement and all
other related documents. Notwithstanding the foregoing provisions of this
Section 16, Shansby Partners shall pay, and shall not be reimbursed for, any
expenses incurred by Shansby Partners in connection with any legal opinion
regarding the transferability of the Warrant or the Warrant Shares required
pursuant to Section 13.
17. NOTICES. Any notice pursuant to this Warrant Agreement to be
given or made by the holder of any Warrant or Warrant Shares to or on the
Company shall be sufficiently given (i) when made, if by hand delivery, (ii)
upon confirmation, if made by telecopier, or (iii) one business day after being
deposited with a reputable next-day courier, postage prepaid, addressed as
follows:
Authentic Specialty Foods, Inc.
1313 Avenue R
Grand Prairie, Texas 75050
Attn: Samuel E. Hillin, Jr.
Facsimile: (972) 933-4100
Notices or demands authorized by this Warrant Agreement to be given or made to
or on the Warrant Holder of any Warrant or Warrant Shares shall be sufficiently
given or made (except as otherwise provided in this Warrant Agreement) if sent
by registered mail, return receipt requested, postage
14
<PAGE> 18
prepaid, addressed to such Warrant Holder at the address of such Warrant Holder
as shown on the Warrant Register or the Common Stock Register, as the case may
be.
18. GOVERNING LAW. THIS WARRANT AGREEMENT, THE WARRANTS AND ALL
RELATED DOCUMENTS SHALL BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
19. SUPPLEMENTS AND AMENDMENTS. The Company and the Warrant Holders
may from time to time supplement or amend this Warrant Agreement in order to
cure any ambiguity or to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provision herein, or to
make any other provisions in regard to matters or questions arising hereunder
which the Company and the Warrant Holder may deem necessary or desirable and
which shall not be inconsistent with the provisions of the Warrants and which
shall not adversely affect the interests of the Warrant Holders. Any amendment
to this Warrant Agreement may be effected with the consent of Warrant Holders
of at least a majority of the total then outstanding Warrants (for this purpose
Warrant Shares shall be deemed to be Warrants in the proportion that Warrant
Shares are then issuable upon the exercise of Warrants); provided that, any
amendment which shall have the effect of materially adversely affecting the
interests of any Warrant Holder shall not be effective with respect to such
Warrant Holder if such Warrant Holder shall not have consented thereto.
20. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties of the Company and all covenants and agreements
made herein shall survive the execution and delivery of this Warrant Agreement
and the Warrants and shall remain in force and effect until the Expiration
Date.
21. SUCCESSORS. All representations and warranties of the Company
and all covenants and agreements of this Warrant Agreement by or for the
benefit of the Company or the Warrant Holders shall bind and inure to the
benefit of their respective successors and assigns hereunder.
22. MERGER OR CONSOLIDATION OF THE COMPANY. So long as this Warrant
Agreement remains in effect, the Company will not merge or consolidate with or
into, or sell, transfer or lease all or substantially all of its property to,
or exchange shares with any other corporation unless the successor or
purchasing corporation, as the case may be (if not the Company), shall
expressly assume, by supplemental agreement executed and delivered to the
Warrant Holders, the due and punctual performance and observance of each and
every covenant and condition of this Warrant Agreement to be performed and
observed by the Company.
23. BENEFITS OF THIS WARRANT AGREEMENT. Nothing in this Warrant
Agreement shall be construed to give to any person or corporation other than
the Company and the Warrant Holders, any legal or equitable right, remedy or
claim under this Warrant Agreement, but this Warrant Agreement
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<PAGE> 19
shall be for the sole and exclusive benefit of the Company and the holders of
the Warrants and Warrant Shares.
24. CAPTIONS. The captions of the sections and subsections of this
Warrant Agreement have been inserted for convenience and shall have no
substantive effect.
25. COUNTERPARTS. This Warrant Agreement may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original; but such counterparts together shall constitute but one and the same
instrument.
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<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed on the day, month and year first above written.
AUTHENTIC SPECIALTY FOODS, INC.
By:
--------------------------
Name:
Title:
17
<PAGE> 1
EXHIBIT 10.9
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of
September ___, 1997, is between AUTHENTIC SPECIALTY FOODS, INC., a Texas
corporation (the "Company"), and ROBERT C. TANKLAGE ("Holder").
W I T N E S S E T H:
WHEREAS, the Company, Holder, TSG2 L.P., TSG2 Management, L.L.C. and
Keith R. Lively have entered into a Contribution and Exchange Agreement dated
June 20, 1997 (the "Contribution and Exchange Agreement"), pursuant to which,
among other things, the Company has agreed to issue a number of shares of its
Common Stock, par value $1.00 per share ("Common Stock"), determined in the
manner set forth in the Contribution and Exchange Agreement and subject to the
terms and conditions set forth therein; and
WHEREAS, the parties have agreed to enter into this Agreement in order
to satisfy one of the conditions to obligations of the parties to consummate
the transactions contemplated by the Contribution and Exchange Agreement; and
WHEREAS, the Company is prepared to consummate its initial public
offering (the "Initial Public Offering") of shares of Common Stock; and
WHEREAS, the consummation of the Initial Public Offering is a
condition to the obligations of the parties to consummate the transactions
contemplated by the Contribution and Exchange Agreement; and
WHEREAS, after the Initial Public Offering, each Holder will own a
substantial number of shares of Common Stock; and
WHEREAS, the Common Stock will be registered under Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); and
WHEREAS, under the provisions of the Securities Act of 1933, as
amended (the "Securities Act") and the General Rules and Regulations
promulgated by the Securities and Exchange Commission (the "SEC") thereunder,
Holder is or may be limited in the manner of selling the shares of Common Stock
owned by Holder, absent registration under the Securities Act of the sale of
such shares or the availability of another exemption from the registration
requirements of the Securities Act.
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
1. Demand Registration.
(A) Request for Registration. Holder agrees to execute
on an expedited basis any lockup agreements reasonably requested by
the managing underwriter for the Initial Public Offering; provided,
however, that the lockup period shall not exceed 180 days after the
consummation of the Initial Public Offering. Without limiting the
generality of the foregoing, Holder agrees, for the benefit of the
Company and the underwriters for the Initial Public Offering, that no
Holder or any affiliate or family member thereof will directly or
indirectly sell, transfer or otherwise dispose of any shares of
Restricted Stock (as defined below) prior to the expiration of 180
days after the consummation of the Initial Public Offering (such
expiration date shall be referred to herein as the "Lockup Expiration
Date"). As used in this Agreement, "Restricted Stock" shall mean all
shares of Common Stock issued to Holder pursuant to the Contribution
and Exchange Agreement and owned by any Holder after the Initial
Public Offering, together with any securities issued or issuable with
respect to any such Common Stock by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization, or otherwise. As to
any particular shares of Restricted Stock, such securities shall cease
to be Restricted Stock when (a) a registration statement with respect
to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in
accordance with such registration statement, (b) such securities may
be distributed to the public pursuant to Rule 144 (or any successor
provision) under the Securities Act (even though not actually sold
pursuant thereto), (c) such securities shall have been otherwise
transferred, new certificates representing such securities not bearing
a legend restricting transfer shall have been delivered by the Company
and subsequent disposition of such securities (without any volume
limitations) shall not require registration or qualification of such
securities under the Securities Act or any similar state law then in
force, (d) such securities shall have ceased to be outstanding, or (e)
the Holder or Holders thereof shall agree in writing to terminate this
Agreement (each Holder and any permitted assignee of such Holder's
rights and duties hereunder are referred to herein as the "Holders" or
individually as a "Holder"). Subject to the conditions and
limitations set forth in Section 4 of this Agreement, at any time
after the Lockup Expiration Date, one or more Holders may make a
written request for registration under the Securities Act of all or
part of its or their Restricted Stock pursuant to this Section 1 (a
"Demand Registration"), provided that the Minimum Number (as
hereinafter defined) of shares of Restricted Stock shall be registered
in such offering. The term "Minimum Number" shall mean the lesser of
(i) 50% of the initial number of shares of Restricted Stock issued
pursuant to the Contribution and Exchange Agreement (as adjusted for
any stock splits, stock combinations, stock dividends or
recapitalizations that are effected after the Initial Public Offering)
or (ii) 100% of the number of shares of Restricted Stock then
beneficially owned by all of the Holders in the aggregate. The Holder
making such a request for a Demand Registration is sometimes herein
referred to as the "Designating Holder." Such request will specify
the aggregate number of shares of Restricted Stock proposed to be sold
and will also specify the intended method of
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<PAGE> 3
disposition thereof. The Holders shall have the right to two Demand
Registrations in the aggregate; provided, however, that the Holders
may not elect more than one Demand Registration in any 18 month
period. Within ten days after receipt of such request, the Company
will give written notice of such registration request to all other
Holders of Restricted Stock and include, subject to the provisions of
Section 1(B) hereof, in such registration all Restricted Stock with
regard to which the Company has received written requests for
inclusion therein within 15 business days after the receipt by the
applicable Holders of the Company's notice. Each such request will
also specify the aggregate number of shares of Restricted Stock to be
registered and the intended method of disposition thereof. The
Company may delay for a maximum of 90 days the filing of a
registration statement upon request from a Holder pursuant to this
Section 1 when, it its good faith judgment the Company reasonably
believes that the filing thereof at the time requested, or the
offering of securities pursuant thereto, would materially and
adversely affect a pending or proposed public offering of securities
of the Company, an acquisition, merger, recapitalization,
consolidation, reorganization or similar transaction relating to the
Company or negotiations, discussions or pending proposals with respect
thereto or require premature disclosure of information not otherwise
required to be disclosed to the potential detriment of the Company.
(B) Priority on Demand Registrations. If a registration
pursuant to this Section 1 involves an underwritten offering and the
managing underwriter shall advise the Company that, in its judgment,
the number of shares proposed to be included in such offering should
be limited due to market conditions, then the Company will promptly so
advise each Holder of Restricted Stock that has requested
registration, and the shares of the Company to be included in the
offering, if any, shall first be excluded from such offering to the
extent necessary to meet such limitation; and if further exclusions
are necessary to meet such limitation, the securities shall be
excluded pro rata, based on the respective numbers of shares of Common
Stock and/or Warrants as to which registration shall have been
requested by such Holders and any "Holder," (as defined in the
Registration Rights Agreement of even date herewith by and among the
Company and Shansby Partners, L.L.C., TSG2 L.P. and Keith R. Lively
(the "Shansby Registration Rights Agreement") and referred to herein
as a "Shansby Holder") that have elected to participate in such
registration. The term "Warrant" and "Warrant Shares" shall have the
respective meanings ascribed to such terms in the Shansby Registration
Rights Agreement. For purposes of this paragraph, each Warrant shall
be treated treated as representing the number of Warrant Shares for
which such Warrant is then exercisable.
(C) Selection of Underwriters and Counsel. The Board of
Directors of the Company will select and obtain the services of the
investment banker or investment bankers and manager or managers that
will administer the offering and the counsel to such investment
bankers and managers; provided that such investment bankers, managers
and counsel must be approved by the Holders of a majority in number of
the shares of Restricted Stock to be registered, which approval shall
not be unreasonably withheld. Moreover, if the registration of which
the Company gives notice does involve an underwriting, the right of
each Holder to registration pursuant to this Section 1 shall, unless
the Company otherwise agrees, be conditioned upon such Holder's
participation as a seller in such underwriting and
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<PAGE> 4
its execution of an underwriting agreement with the managing
underwriter or underwriters selected by the Company.
2. Piggyback Registration. If the Company proposes to file a
registration statement under the Securities Act with respect to an offering
(other than the Initial Public Offering) for the Company's own account of any
class of its equity securities (other than a registration statement on Form S-8
(or any successor form) or any other registration statement relating solely to
director and/or employee benefit plans or filed in connection with an exchange
offer, a transaction to which Rule 145 (or any successor rule) under the
Securities Act applies, a transaction relating solely to an exchange offering,
a transaction relating solely to an acquisition of assets or property for
securities or an offering of securities solely to the Company's existing
stockholders), then the Company shall in each case give written notice of such
proposed filing to the Holders of Restricted Stock as soon as practicable (but
no later than 15 business days) before the anticipated filing date, and such
notice shall offer such Holders the opportunity to register such number of
shares of Restricted Stock as each such Holder may request. Each Holder of
Restricted Stock desiring to have such Holder's Restricted Stock included in
such registration statement shall so advise the Company in writing within ten
business days after the date of the Company's notice, setting forth the amount
of such Holder's Restricted Stock for which registration is requested. If the
Company's offering is to be an underwritten offering, the Company shall,
subject to the further provisions of this Agreement, use its reasonable best
efforts to cause the managing underwriter or underwriters of a proposed
underwritten offering to permit the Holders of the Restricted Stock requested
to be included in the registration for such offering to include such securities
in such offering on the same terms and conditions as any similar securities of
the Company included therein. Moreover, if the registration of which the
Company gives notice does involve an underwriting, the right of each Holder to
registration pursuant to this Section 1 shall, unless the Company otherwise
agrees, be conditioned upon such Holder's participation as a seller in such
underwriting and its execution of an underwriting agreement with the managing
underwriter or underwriters selected by the Company. Notwithstanding the
foregoing, if the managing underwriter of such offering advises the Company
that the total number of securities that the Holders and the Shansby Holders,
other than the Company, intend to include in such offering will in the good
faith opinion of such managing underwriter adversely affect the terms or
pricing of such offering, then the number of securities to be offered for the
account of the Holders and the Shansby Holders shall be reduced on a pro rata
basis based on the number of shares of Common Stock and/or Warrants proposed to
be sold by the Holders and the Shansby Holders to the extent necessary to
reduce the total number of shares of Common Stock and/or Warrants to be
included in such offering for the Holders and the Shansby Holders other than
the Company to the number of shares of Common Stock and/or Warrants recommended
by such managing underwriter (with each Warrant being treated for such purposes
as representing the number of Warrant Shares for which such Warrant is then
exercisable). Any Restricted Stock excluded from an underwriting shall be
withdrawn from registration and shall not, without the consent of the Company
and the manager of the underwriting, be transferred in a public distribution
prior to the expiration of 180 days (or such other shorter period of time as
the manager of the underwriting may require) after the effective date of the
registration statement.
3. Registration Procedures. Whenever, pursuant to Section 1 or
2, any of the Holders of Restricted Stock has requested that any Restricted
Stock be registered, the Company will, subject
4
<PAGE> 5
to the provisions of Section 4, use all reasonable best efforts to effect the
registration and the sale of such Restricted Stock in accordance with the
intended method of disposition thereof as promptly as practicable, and in
connection with any such request, the Company will:
(A) in connection with a request pursuant to Section 1,
prepare and file with the SEC, not later than 60 days after receipt of
a request to file a registration statement with respect to Restricted
Stock, a registration statement on any form for which the Company then
qualifies and which counsel for the Company shall deem appropriate and
which form shall be available for the sale of such Restricted Stock in
accordance with the intended method of distribution thereof, and use
its reasonable best efforts to cause such registration statement to
become effective; provided (i) that, before filing a registration
statement or prospectus or any amendments or supplements thereto, the
Company will furnish to one counsel selected by the Holders of a
majority in number of shares of the Restricted Stock covered by such
registration statement copies of all such documents proposed to be
filed, which documents will be subject to the review of such counsel,
and (ii) that after the filing of the registration statement, the
Company will promptly notify each of the selling Holders of Restricted
Stock of any stop order issued or, to the knowledge of the Company,
threatened by the SEC and take all reasonable actions to prevent the
entry of such stop order or to remove it if entered;
(B) in connection with a registration pursuant to Section
1, prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective for a period of not less than 180 days or such shorter
period as shall terminate when all shares of Restricted Stock covered
by such registration statement have been sold, and comply with the
provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement during such
period in accordance with the intended methods of disposition by the
selling Holders thereof set forth in such registration statement;
(C) as soon as reasonably practicable, furnish to each of
the selling Holders, prior to filing a registration statement, copies
of such registration statement as proposed to be filed, and thereafter
furnish to such selling Holders such number of copies of such
registration statement, each amendment and supplement thereto (in each
case, if specified by such Holder, including all exhibits thereto),
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as a selling Holder
may reasonably request in order to facilitate the disposition of the
Restricted Stock owned by such selling Holder;
(D) with reasonable promptness, use its reasonable best
efforts to register or qualify (or cause to be registered or
qualified) such Restricted Stock under such other securities or blue
sky laws of such jurisdictions within the United States as any selling
Holder (or managing underwriter in the case of an underwritten
offering) reasonably (in light of such selling Holder's or managing
underwriter's intended plan of distribution) requests and do any and
all other acts and things that may be reasonably necessary or
advisable to enable such selling Holder to consummate the disposition
in such jurisdictions of the
5
<PAGE> 6
Restricted Stock owned by such selling Holder; provided that the
Company will not be required to (i) qualify generally to do business
in any jurisdiction where it would not otherwise be required to
qualify but for this subsection (D), (ii) subject itself to taxation
in any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction;
(E) with reasonable promptness, use reasonable best
efforts to cause the Restricted Stock covered by such registration
statement to be registered with or approved by such other governmental
agencies or authorities as may be necessary by virtue of the business
and operations of the Company to enable the selling Holder or Holders
thereof to consummate the disposition of such Restricted Stock;
(F) promptly notify each selling Holder of such
Restricted Stock, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the occurrence
of any event known to the Company requiring the preparation of a
supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Restricted Stock, such prospectus
will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading and promptly make available
to each selling Holder any such supplement or amendment;
(G) in connection with a request pursuant to Section 1,
enter into an underwriting agreement in customary form, the form and
substance of such underwriting agreement being subject to the
reasonable satisfaction of the Company; provided, however, that the
Holders will not be required to make any representation or warranty
with respect to the Company in connection with or as a part of such
underwriting agreement;
(H) in the event such sale is pursuant to an underwritten
offering, use its reasonable efforts to obtain a comfort letter or
letters from the Company's independent public accountants in customary
form and covering such matters of the type customarily covered by
comfort letters as the managing underwriter reasonably requests;
(I) otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the SEC, and make
available to its security holders, as soon as reasonably practicable,
an earnings statement covering a period of twelve months, beginning
within three months after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act; and
(J) with reasonable promptness, use its reasonable
efforts to cause all such Restricted Stock to be qualified for trading
on the NASDAQ National Market and/or listed on each securities
exchange on which the Common Stock of the Company is then listed,
provided that the applicable qualification or listing requirements are
satisfied.
Each selling Holder of Restricted Stock agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in subsection (F) hereof, such selling Holder will forthwith discontinue
disposition of Restricted Stock pursuant to the registration
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<PAGE> 7
statement covering such Restricted Stock until such selling Holder's receipt of
the copies of the supplemented or amended prospectus contemplated by subsection
(F) hereof, and, if so directed by the Company, such selling Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such selling Holder's possession, of the
prospectus covering such Restricted Stock current at the time of receipt of
such notice. In the event the Company shall give any such notice, the Company
shall extend the period during which such registration statement shall be
maintained effective pursuant to this Agreement (including the period referred
to in subsection (B)) by the number of days during the period from and
including the date of the giving of such notice pursuant to subsection (F)
hereof to and including the date when each selling Holder of Restricted Stock
covered by such registration statement shall have received the copies of the
supplemented or amended prospectus contemplated by subsection (F) hereof. Each
selling Holder also agrees to notify the Company if any event relating to such
selling Holder occurs that would require the preparation of a supplement or
amendment to the prospectus so that such prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.
4. Conditions and Limitations.
(A) The Company's obligations under Section 1 shall be
subject to the following limitations:
(i) the Company shall not be required to furnish
any audited financial statements other than those audited
statements customarily prepared at the end of its fiscal year,
or to furnish any unaudited financial information with respect
to any period other than its regularly reported interim
quarterly periods unless in the absence of such other
unaudited financial information the registration statement
would contain an untrue statement of material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
(ii) A registration statement will not count as a
Demand Registration until it has become effective and remains
continuously effective for the lesser of (i) the period during
which all Restricted Stock registered in the Demand
Registration is sold and (ii) 180 days; provided, however,
that a registration shall not constitute a Demand Registration
if (x) after such Demand Registration has become effective,
such registration or the related offer, sale or distribution
of Restricted Stock thereunder is interfered with by any stop
order, injunction or other order or requirement of the SEC or
other governmental agency or court for any reason not
attributable to the Holders and such interference is not
thereafter eliminated and (y) the conditions to closing
specified in the underwriting agreement, if any, entered into
in connection with such Demand Registration are not satisfied
or waived, other than by reason of a failure by the Holders;
and
(iii) the Company shall have received the
information and documents specified in Section 5 and each
selling Holder shall have observed or performed its other
covenants and conditions contained in such section.
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<PAGE> 8
(B) The Company's obligation under Section 2 shall be
subject to the limitations and conditions specified in such section
and in clauses (i), (ii) and (iii) of subsection (A) of this Section
4, and to the condition that the Company may at any time terminate its
proposal to register its shares and discontinue its efforts to cause a
registration statement to become or remain effective.
5. Information from and Certain Covenants of Holders of
Restricted Stock. The Holders for whom Restricted Stock is to be registered
pursuant to this Agreement shall provide to the Company such information
regarding the Restricted Stock to be so registered, the Holder and the intended
method of disposition of such Restricted Stock as shall reasonably be required
in connection with the action to be taken. Any Holder whose Restricted Stock
is included in a registration statement pursuant to this Agreement shall
execute all consents, powers of attorney, registration statements and other
documents reasonably required to be signed by it in order to cause such
registration statement to become effective. Each selling Holder covenants
that, in disposing of such Holder's shares, such Holder will comply with
Regulation M of the SEC adopted pursuant to the Exchange Act.
6. Registration Expenses. All Registration Expenses (as defined
herein) will be borne by the Company. Underwriting discounts and commissions
applicable to the sale of Restricted Stock shall be borne by each selling
Holder of the Restricted Stock to which such discount or commission relates,
and each selling Holder shall be responsible for the fees and expenses of any
counsel, accountants or other agents retained by such selling Holder and all
other out-of- pocket expenses incurred by such selling Holder in connection
with any registration under this Agreement other than fees and expenses of
counsel for the Holders which are treated as Registration Expenses as set forth
below.
As used herein, the term "Registration Expenses" means all expenses
incident to the Company's performance of or compliance with this Agreement
(whether or not the registration in connection with which such expenses are
incurred ultimately becomes effective), including without limitation all
registration and filing fees, fees and expenses of compliance with securities
or blue sky laws (including reasonable fees and disbursements of counsel in
connection with blue sky qualifications of the Restricted Stock), rating agency
fees, printing expenses, messenger and delivery expenses incurred by the
Company, internal expenses incurred by the Company (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the fees and expenses incurred in connection with
the listing of the securities to be registered on each securities exchange on
which similar securities issued by the Company are then listed, and fees and
disbursements of counsel for the Company (but shall not include the fees or
disbursements of counsel for the Holders) and the Company's independent
certified public accountants (including the expenses of any special audit or
comfort letters required by or incident to such performance), securities acts
liability insurance (if the Company elects to obtain such insurance), the
reasonable fees and expenses of any special experts retained by the Company and
the fees and expenses of other persons retained by the Company in connection
with such registration.
8
<PAGE> 9
7. Indemnification; Contribution.
(A) Indemnification by the Company. The Company agrees
to indemnify and hold harmless each selling Holder of Restricted
Stock, its officers, directors and agents and each person, if any, who
controls such selling Holder within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages, liabilities and expenses
(including reasonable attorneys' fees and costs of investigation)
arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any registration statement
or prospectus relating to the Restricted Stock or in any amendment or
supplement thereto or in any preliminary prospectus relating to the
Restricted Stock, or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages,
liabilities or expenses arise out of, or are based upon, any such
untrue statement or omission or allegation thereof based upon
information furnished in writing to the Company by such selling Holder
or on such selling Holder's behalf expressly for use therein and
provided further, that with respect to any untrue statement or
omission or alleged untrue statement or omission made in any
preliminary prospectus, the indemnity agreement contained in this
subsection shall not apply to the extent that any such loss, claim,
damage, liability or expense results from the fact that a copy of the
final prospectus was not sent or given to the person asserting any
such losses, claims, damages, liabilities or expenses at or prior to
the written confirmation of the sale of the Restricted Stock concerned
to such person if a final prospectus is made available by the Company
on a timely basis. The Company also agrees to include in any
underwriting agreement with any underwriters of the Restricted Stock
provisions indemnifying and providing for contribution to such
underwriters, their officers and directors and each person who
controls such underwriters on substantially the same basis as the
provisions of this Section 8 indemnifying and providing for
contribution to the selling Holders.
(B) Indemnification by Holders of Restricted Stock. Each
selling Holder agrees to indemnify and hold harmless the Company, its
officers, directors and agents and each person, if any, who controls
the Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages, liabilities and expenses (including
reasonable attorneys' fees and costs of investigation) arising out of
or based upon any untrue statement or alleged untrue statement of a
material fact contained in any registration statement or prospectus
relating to the Restricted Stock or in any amendment or supplement
thereto or in any preliminary prospectus relating to the Restricted
Stock, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
provided (i) that such losses, claims, damages, liabilities or
expenses arise out of, or are based upon, any such untrue statement or
omission or allegation thereof based upon information furnished in
writing to the Company by such selling Holder or on such selling
Holder's behalf expressly for use therein, (ii) that with respect to
any untrue statement or omission or alleged untrue statement or
omission made in any preliminary prospectus, the indemnity agreement
contained in this subsection shall not
9
<PAGE> 10
apply to the extent that any such loss, claim, damage, liability or
expense results from the fact that a copy of the final prospectus was
not sent or given to the person asserting any such losses, claims,
damages, liabilities or expenses at or prior to the written
confirmation of the sale of the Restricted Stock concerned to such
person, and (iii) that no selling Holder shall be liable for any
indemnification under this Section 8 in an aggregate amount that
exceeds the total net proceeds (before deducting expenses) received by
such selling Holder from the offering. Each selling Holder also
agrees to include in any underwriting agreement with underwriters of
the Restricted Stock provisions indemnifying and providing for
contribution to such underwriters, their officers and directors, and
each person who controls such underwriters, on substantially the same
basis as the provisions of this Section 7 indemnifying and providing
for contribution to the Company.
(C) Conduct of Indemnification Proceedings. If any
action or proceeding (including any governmental investigation) shall
be brought or asserted against any indemnified party hereunder in
respect of which indemnity may be sought from an indemnifying party,
the indemnifying party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such indemnified
party, and shall assume the payment of all expenses. Such indemnified
party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party has agreed to pay such fees
and expenses or (ii) the use of counsel chosen by the indemnifying
party to represent the indemnified party would, in the opinion of
counsel representing both parties, present such counsel with a
conflict of interest (in which case the indemnifying party shall not
have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and
expenses shall be borne by the indemnifying party and paid as
incurred, upon presentation of reasonable evidence of same; provided
that the indemnifying party shall only be responsible for the fees and
expenses of one counsel for the indemnified party or parties
hereunder. The indemnifying party shall not be liable for any
settlement of any such action or proceeding effected without its
written consent, but if settled with its written consent, or if there
is a final judgment for the plaintiff in any such action or
proceeding, the indemnifying party agrees to indemnify and hold
harmless such indemnified party from and against any loss or liability
(to the extent stated above) by reason of such settlement or judgment.
(D) Contribution. If the indemnification provided for in
this Section 7 is unavailable to the Company or the selling Holders in
respect of any losses, claims, damages, liabilities or judgments
referred to therein, then each such indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities and judgments, in such proportion as is
appropriate to reflect the relative fault of each such party in
connection with such statements or omissions, as well as any other
relevant equitable considerations. The relative fault of each such
party shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by such party, and the parties'
10
<PAGE> 11
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the Holders agree that it would not be just
and equitable if contribution pursuant to this Section 7(D) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages,
liabilities or judgments referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigation or defending any
such action or claim. Notwithstanding the provisions of this Section
7(D), no selling Holder shall be required to contribute any amount in
excess of the amount by which the total price at which the Restricted
Stock of such selling Holder were offered to the public exceeds the
amount of any damages which such selling Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement
or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
8. Amendments. This Agreement may be amended or modified upon
the written consent thereto of the Company and the Holders of not less than
66-2/3% of the Restricted Stock.
9. Assignments. This Agreement shall be binding on and inure to
the benefit of the respective successors and assigns of the parties hereto and
shall be expressly assignable by the Holders with respect to their respective
rights created under this Agreement, provided a Holder may only assign the
rights created under this Agreement in conjunction with the transfer of a
majority of such Holder's Restricted Stock and the rights of the transferor
under this Agreement shall terminate upon such assignment.
10. Entire Agreement; Governing Law. This Agreement constitutes
the entire agreement of the parties relating to the subject matter hereof and
all prior or contemporaneous written or oral agreements are merged herein.
This Agreement shall be governed by and construed in accordance with the
domestic laws of the State of Texas without giving effect to any choice or
conflict of law provision or rule (whether of the State of Texas or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Texas.
11. Notices. Any and all notices or other communications required
or permitted under this Agreement shall be given in writing and delivered in
person or sent by United States certified or registered mail, postage prepaid,
return receipt requested, or by overnight express mail, or by telex, facsimile
or telecopy to the address of such party set forth in the Contribution and
Exchange Agreement. Any such notice shall be effective upon receipt or three
days after placed in the mail, whichever is earlier. Any party may, by notice
so delivered, change its address for notice purposes hereunder.
11
<PAGE> 12
12. Severability. If any provision of this Agreement is invalid,
illegal or unenforceable, the balance of this Agreement shall remain in full
force and effect and this Agreement shall be construed in all respects as if
such invalid, illegal or unenforceable provision were omitted. If any
provision is inapplicable to any person or circumstance, it shall,
nevertheless, remain applicable to all other persons and circumstances.
13. Construction; Counterparts. Any section headings in this
Agreement are for convenience of reference only, and shall be given no effect
in the construction or interpretation of this Agreement or any provisions
thereof. No provision of this Agreement will be interpreted in favor of, or
against, any party by reason of the extent to which any such party or its
counsel participated in the drafting thereof or by reason of the extent to
which any such provision is inconsistent with any prior draft hereof or
thereof. This Agreement shall be deemed the mutual form of the parties hereto.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, and which together shall constitute but one and the same
instrument.
14. Termination. This Agreement shall be terminate and be of no
further force or effect if the Contribution and Exchange Agreement is
terminated in accordance with its terms without the consummation of the
transactions contemplated thereby.
12
<PAGE> 13
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement on the date first written above.
_________________________________
ROBERT C. TANKLAGE
AUTHENTIC SPECIALTY FOODS, INC.
By:______________________________
Name:__________________________
Title:_________________________
13
<PAGE> 1
EXHIBIT 10.10
ADVISORY AGREEMENT
THIS ADVISORY AGREEMENT (the "Agreement") is made and entered into
effective as of August 15, 1997, among Authentic Specialty Foods, Inc., a Texas
corporation (the "Company"), and Shansby Partners, L.L.C., a Delaware limited
liability company (together with its successors, "Shansby Partners").
1. Retention. The Company hereby acknowledges that it has
retained Shansby Partners, and Shansby Partners acknowledges that, subject to
reasonable advance notice in order to accommodate scheduling, Shansby Partners
will provide the Company with financial advisory services, including assistance
with respect to (a) the Initial Public Offering (as defined below) and (b)
identification of potential acquisition candidates and assistance in the
negotiation, implementation and financing of these acquisitions, during the
term of this Agreement. Notwithstanding the foregoing, neither Shansby Partners
nor any of its affiliates will be required to use their funds to provide any
financing (in connection with an acquisition or otherwise) on behalf of the
Company.
2. Term. The term of this Agreement shall expire on the third
anniversary of the consummation of the Company's initial public offering of
shares of its common stock pursuant to the Registration Statement on Form S-1
(Registration Number 333-29959) filed with the Securities and Exchange
Commission on June 25, 1997 under the Securities Act of 1933, as amended (the
"Initial Public Offering"), and the Agreement may be terminated by either party
for a material breach of the Agreement by the other party if the breach has not
been remedied within 60 days after notice of the breach is received by the
non-breaching party.
3. Compensation. (a) As compensation for the advisory
services rendered to the Company in connection with the Initial Public
Offering, the Company agrees to pay Shansby Partners a financial advisory fee
of $250,000, which financial advisory fee shall be payable subject to, and
simultaneously with, the consummation of the Initial Public Offering.
(b) In addition to the financial advisory fee described above, the
Company shall pay Shansby Partners financial advisory fees in connection with
acquisitions identified by the Company during the term of this Agreement. The
amount of such financial advisory fees shall be comparable to those customary
for investment banking firms rendering financial advisory services in
connection with acquisition transactions to the acquisition in question.
4. Reimbursement of Expenses. The Company agrees to pay or
reimburse Shansby Partners for all "Reimbursable Expenses," which shall consist
of all reasonable out-of-pocket expenses and disbursements (including without
limitation, costs of travel, postage, deliveries, communications, etc.)
incurred by Shansby Partners or its affiliates for the account of the Company
or in connection with the performance by Shansby Partners of the services
contemplated by Section 1 hereof, in each case upon presentation of evidence of
same; provided, however, that the parties agree
<PAGE> 2
that the amount of Reimbursable Expenses relating to the Initial Public
Offering with respect to which Shansby Partners shall be entitled to
reimbursement shall not exceed $50,000. Promptly (but not more than 10 days)
after request by or notice from Shansby Partners, the Company shall pay Shansby
Partners, by wire transfer of immediately available funds to such account as
Shansby Partners shall designate in writing, the Reimbursable Expenses for
which Shansby Partners has provided the Company invoices or reasonably detailed
descriptions. All past due payments in respect of the Reimbursable Expenses
shall bear interest at the lesser of the highest rate of interest which may be
charged under applicable law or the Prime Rate plus 5% from the Payment Date to
and including the date on which such Reimbursable Expenses plus accrued
interest thereon are fully paid to Shansby Partners.
5. Acquisition Opportunities. During the term of this Agreement,
Shansby Partners shall offer to the Company for its consideration any
acquisition opportunities for Mexican food companies that primarily produce
tortillas, tortilla chips, salsas or Mexican sauces and that are identified by
Shansby Partners or any affiliate thereof after the consummation of the Initial
Public Offering (each, an "Acquisition Opportunity").
If the Company declines to pursue any such Acquisition Opportunity,
then Shansby Partners or its affiliates can pursue such Acquisition Opportunity
without the involvement of the Company. Neither Shansby Partners nor any of its
affiliates will be required to use their funds to provide any financing (in
connection with an acquisition or otherwise) on behalf of the Company. If the
Company fails to notify Shansby Partners that the Company desires to pursue,
and has the financial capability to pursue, an Acquisition Opportunity within
30 days after Shansby Partners advises the Company of such Acquisition
Opportunity, then the Company shall be deemed to have declined such Acquisition
Opportunity. For purposes of this Agreement, the Company's "financial
capability" with respect to an Acquisition Opportunity shall mean the sum of,
without duplication: (i) the Company's cash on hand, (ii) the Company's
unutilized borrowing capacity under any existing revolving credit facility and
(iii) the amount that the Company could reasonably expect to borrow from third
parties in connection with the Acquisition Opportunity (including, without
limitation, through seller financing).
The Company shall use its reasonable best efforts to evaluate and
pursue in an expeditious manner any Acquisition Opportunities that it elects to
pursue, and if the Company determines that it does not wish to continue to
pursue such Acquisition Opportunity (or that it does not have the financial
capability to continue to pursue such Acquisition Opportunity), then the
Company will promptly notify Shansby Partners. Upon such notification, then
Shansby Partners or its affiliates can pursue such Acquisition Opportunity
without the involvement of the Company.
6. Indemnification. The Company jointly and severally shall
indemnify and hold harmless each of Shansby Partners, its affiliates, and their
respective directors, officers, controlling persons (within the meaning of
Section 15 of the Securities Act of 1933 or Section 20(a) of the Securities
Exchange Act of 1934, as amended), if any, agents and employees (Shansby
Partners, its affiliates, and such other specified persons being collectively
referred to as "Indemnified Persons," and individually as an "Indemnified
Person") from and against any and all claims, liabilities, losses, damages,
costs and expenses incurred by any Indemnified Person (including those arising
out of an Indemnified Person's negligence and reasonable fees and disbursements
of the respective
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<PAGE> 3
Indemnified Person's counsel) which (i) are related to or arise out of actions
taken or omitted to be taken (including any untrue statements made or any
statements omitted to be made) by the Company or (ii) are related to or arise
out of actions taken or omitted to be taken by an Indemnified Person with the
Company's consent or in conformity with the Company's instructions or the
Company's actions or omissions or (iii) are otherwise related to or arise out
of Shansby Partners' engagement, as they are incurred, upon presentation of
evidence of same, in connection with investigating, preparing for, defending,
or appealing any action, formal or informal claim, investigation, inquiry or
other proceeding, whether or not in connection with pending or threatened
litigation, caused by or arising out of or in connection with Shansby Partners
acting pursuant to Shansby Partners' engagement, whether or not any Indemnified
Person is named as a party thereto and whether or not any liability results
therefrom. The Company will, however, not be responsible for any claims,
liabilities, losses, damages or expenses (i) that have resulted primarily from
Shansby Partners' bad faith, gross negligence or willful misconduct or (ii)
that relate directly to the Initial Public Offering. The Company also agrees
that neither Shansby Partners nor any other Indemnified Person shall have any
liability to the Company for or in connection with such engagement except for
any such liability for claims, liabilities, losses, damages or expenses
incurred by the Company that have resulted primarily from Shansby Partners' bad
faith, gross negligence or willful misconduct. The Company further agrees that
it will not, without the prior written consent of Shansby Partners, which
consent shall not be unreasonably withheld, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder (where
an Indemnified Person is a party to such claim, action, suit or proceeding, or
could reasonably be expected to potentially be such a party) unless such
settlement, compromise or consent includes an unconditional release of Shansby
Partners and each such Indemnified Person from all liability arising out of
such claim, action, suit or proceeding. THE COMPANY HEREBY ACKNOWLEDGES THAT
THE FOREGOING INDEMNITY SHALL BE APPLICABLE TO ANY CLAIMS, LIABILITIES, LOSSES,
DAMAGES OR EXPENSES THAT HAVE RESULTED FROM OR ARE ALLEGED TO HAVE RESULTED
FROM THE ACTIVE OR PASSIVE OR THE SOLE, JOINT OR CONCURRENT ORDINARY NEGLIGENCE
OF SHANSBY PARTNERS OR ANY OTHER INDEMNIFIED PERSON.
The foregoing right to indemnity shall be in addition to any rights
that Shansby Partners and/or any other Indemnified Person may have at common
law or otherwise and shall remain in full force and effect following the
completion or any termination of the engagement. The Company hereby consents to
personal jurisdiction and to service and venue in any court in which any claim
which is subject to this Agreement is brought against Shansby Partners or any
other Indemnified Person.
7. Investments in and Advice to Other Companies. The Company
acknowledges that Shansby Partners and its affiliates render advice to, own and
invest in a broad range of businesses and projects, including businesses and
projects that may be similar to, or competitive with, the Company, and, subject
to the provisions of Section 5, nothing in this Agreement shall prohibit
Shansby Partners or its affiliates from engaging in any such activities.
8. Governing Law. This Agreement shall be construed, interpreted
and enforced in accordance with the laws of the State of Texas, without giving
effect to any conflicts-of-law provisions thereof.
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<PAGE> 4
9. Notices. Any and all notices or other communications required
or permitted under this Agreement shall be given in writing and delivered in
person or sent by United States certified or registered mail, postage prepaid,
return receipt requested, or by overnight express mail, or by telex, facsimile
or telecopy to the address of such party set forth below. Any such notice shall
be effective upon receipt or three days after placed in the mail, whichever is
earlier.
If to Shansby Partners:
c/o The Shansby Group
250 Montgomery Street, Suite 1100
San Francisco, California 94104
Attention: Charles H. Esserman
Telecopy Number: (415) 421-5120
If to the Company:
1313 Avenue R
Grand Prairie, Texas 75050
Attention: President
Telecopy Number: (972) 933-4120
Any party may, by notice so delivered, change its address for notice purposes
hereunder.
10. Assignment. This Agreement and all provisions contained herein
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned
(other than with respect to the rights and obligations of Shansby Partners,
which may be assigned to any one or more of its principals or affiliates) by
any of the parties without the prior written consent of the other parties.
11. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and the signature of any
party to any counterpart shall be deemed a signature to, and may be appended
to, any other counterpart.
12. Other Understandings. All discussions, understandings and
agreements heretofore made between any of the parties hereto with respect to
the subject matter hereof are merged in this Agreement, which alone fully and
completely expresses the Agreement of the parties hereto. All calculations of
financial advisory fees and Reimbursable Expenses shall be made by Shansby
Partners and, in the absence of mathematical error, shall be final and
conclusive.
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<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date and year first above written.
SHANSBY PARTNERS, L.L.C.
By:
---------------------------------------
Name:
Title:
AUTHENTIC SPECIALTY FOODS, INC.
By:
---------------------------------------
Name:
Title:
S-1
<PAGE> 1
EXHIBIT 10.12
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of
September ___, 1997, is by and among AUTHENTIC SPECIALTY FOODS, INC., a Texas
corporation (the "Company"), TSG2 L.P., a Delaware limited partnership
("TSG2"), Shansby Partners, L.L.C., a Delaware limited liability company
("Shansby Partners"), and Keith R. Lively ("Lively"). TSG2, Shansby Partners
and Lively and permitted assignees of their rights and duties hereunder are
each referred to herein as a "Holder" and are collectively referred to herein
as the "Holders."
W I T N E S S E T H:
WHEREAS, the Company, TSG2, Lively, Robert C. Tanklage and TSG2
Management, L.L.C. have entered into a Contribution and Exchange Agreement
dated June 20, 1997 (as amended, the "Contribution and Exchange Agreement"),
pursuant to which, among other things, the Company has agreed to issue a number
of shares of its Common Stock, par value $1.00 per share ("Common Stock"),
determined in the manner set forth in the Contribution and Exchange Agreement
and subject to the terms and conditions set forth therein; and
WHEREAS, the Company, TSG2 and Lively have agreed to enter into this
Agreement in order to satisfy one of the conditions to obligations of the
parties to consummate the transactions contemplated by the Contribution and
Exchange Agreement; and
WHEREAS, the Company is prepared to consummate its initial public
offering (the "Initial Public Offering") of shares of Common Stock; and
WHEREAS, the consummation of the Initial Public Offering is a
condition to the obligations of the Company, TSG2 and Lively to consummate the
transactions contemplated by the Contribution and Exchange Agreement; and
WHEREAS, in connection with the Initial Public Offering, the Company
and Shansby Partners have entered into a Warrant Agreement dated September ___,
1997, pursuant to which the Company has agreed to issue to Shansby Partners a
number of common stock purchase warrants (the "Warrants") to purchase shares
(the "Warrant Shares") of Common Stock, determined in the manner set forth in
the Warrant Agreement and subject to the terms and conditions set forth
therein; and
WHEREAS, after the Initial Public Offering, each Holder will own a
substantial number of shares of Common Stock; and
WHEREAS, the Common Stock will be registered under Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); and
<PAGE> 2
WHEREAS, under the provisions of the Securities Act of 1933, as
amended (the "Securities Act") and the General Rules and Regulations
promulgated by the Securities and Exchange Commission (the "SEC") thereunder,
Holder is or may be limited in the manner of selling the shares of Common Stock
owned by Holder, absent registration under the Securities Act of the sale of
such shares or the availability of another exemption from the registration
requirements of the Securities Act.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
1. Demand Registration.
(A) Request for Registration. Holders agree to execute
on an expedited basis any lockup agreements reasonably requested by
the managing underwriter for the Initial Public Offering; provided,
however, that the lockup period shall not exceed 180 days after the
consummation of the Initial Public Offering. Without limiting the
generality of the foregoing, the Holders agree, for the benefit of the
Company and the underwriters for the Initial Public Offering, that no
Holder or any affiliate or family member thereof will directly or
indirectly sell, transfer or otherwise dispose of any Restricted
Securities (as defined below) prior to the expiration of 180 days
after the consummation of the Initial Public Offering (such expiration
date shall be referred to herein as the "Lockup Expiration Date"). As
used in this Agreement, "Restricted Securities" shall mean (i) all
shares of Common Stock issued to TSG2 and Lively pursuant to the
Contribution and Exchange Agreement and owned by TSG2 and Lively after
the Initial Public Offering, together with any securities issued or
issuable with respect to any such Common Stock by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization, or
otherwise and (ii) the Warrants and the Warrant Shares (including any
securities received by Shansby Partners or its successors pursuant to
Section 12 of the Warrant Agreement). As to any particular Restricted
Securities, such securities shall cease to be Restricted Securities
when (a) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such
registration statement, (b) such securities may be distributed to the
public pursuant to Rule 144 (or any successor provision) under the
Securities Act (even though not actually sold pursuant thereto), (c)
such securities shall have been otherwise transferred, new
certificates representing such securities not bearing a legend
restricting transfer shall have been delivered by the Company and
subsequent disposition of such securities (without any volume
limitations) shall not require registration or qualification of such
securities under the Securities Act or any similar state law then in
force, (d) such securities shall have ceased to be outstanding, or (e)
the Holder or Holders thereof shall agree in writing to terminate this
Agreement. Subject to the conditions and limitations set forth in
Section 4 of this Agreement, at any time after the Lockup Expiration
Date, one or more Holders may make a written request for registration
under the Securities Act of all or part of its or their Restricted
Securities pursuant to this Section 1 (a "Demand Registration"),
provided that the Minimum Number (as hereinafter defined) of
Restricted Securities shall
2
<PAGE> 3
be registered in such offering. The term "Minimum Number" shall mean
the lesser of (i) 50% of the initial number of Restricted Securities
or (ii) 100% of the number of Restricted Securities then beneficially
owned by all of the Holders in the aggregate. The Holder making such
a request for a Demand Registration is sometimes herein referred to as
the "Designating Holder." Such request will specify the aggregate
number of Restricted Securities proposed to be sold and will also
specify the intended method of disposition thereof. The Holders shall
have the right to two Demand Registrations in the aggregate; provided,
however, that the Holders may not elect more than one Demand
Registration in any 18 month period. Within ten days after receipt of
such request, the Company will give written notice of such
registration request to all other Holders of Restricted Securities and
include, subject to the provisions of Section 1(B) hereof, in such
registration all Restricted Securities with regard to which the
Company has received written requests for inclusion therein within 15
business days after the receipt by the applicable Holders of the
Company's notice. Each such request will also specify the aggregate
number of Restricted Securities to be registered and the intended
method of disposition thereof. The Company may delay for a maximum of
90 days the filing of a registration statement upon request from a
Holder pursuant to this Section 1 when, it its good faith judgment the
Company reasonably believes that the filing thereof at the time
requested, or the offering of securities pursuant thereto, would
materially and adversely affect a pending or proposed public offering
of securities of the Company, an acquisition, merger,
recapitalization, consolidation, reorganization or similar transaction
relating to the Company or negotiations, discussions or pending
proposals with respect thereto or require premature disclosure of
information not otherwise required to be disclosed to the potential
detriment of the Company.
(B) Priority on Demand Registrations. If a registration
pursuant to this Section 1 involves an underwritten offering and the
managing underwriter shall advise the Company that, in its judgment,
the number of Restricted Securities proposed to be included in such
offering should be limited due to market conditions, then the Company
will promptly so advise each Holder of Restricted Securities that has
requested registration, and the securities of the Company to be
included in the offering, if any, shall first be excluded from such
offering to the extent necessary to meet such limitation; and if
further exclusions are necessary to meet such limitation, the
securities shall be excluded pro rata, based on the respective numbers
of shares of Common Stock and/or Warrants as to which registration
shall have been requested by such Holders (with each Warrant being
treated for such purposes as representing the number of Warrant Shares
for which such Warrant is then exercisable) and any "Holder," (as
defined in the Registration Rights Agreement of even date herewith
between the Company and Robert C. Tanklage (the "Tanklage Registration
Rights Agreement") and referred to herein as a "Tanklage Holder") that
have elected to participate in such registration.
(C) Selection of Underwriters and Counsel. The Board of
Directors of the Company will select and obtain the services of the
investment banker or investment bankers and manager or managers that
will administer the offering and the counsel to such investment
bankers and managers; provided that such investment bankers, managers
and counsel must be approved by the Holders of a majority in number of
the Restricted Securities
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<PAGE> 4
to be registered, which approval shall not be unreasonably withheld.
Moreover, if the registration of which the Company gives notice does
involve an underwriting, the right of each Holder to registration
pursuant to this Section 1 shall, unless the Company otherwise agrees,
be conditioned upon such Holder's participation as a seller in such
underwriting and its execution of an underwriting agreement with the
managing underwriter or underwriters selected by the Company.
2. Piggyback Registration. If the Company proposes to file a
registration statement under the Securities Act with respect to an offering
(other than the Initial Public Offering) for the Company's own account of any
class of its equity securities (other than a registration statement on Form S-8
(or any successor form) or any other registration statement relating solely to
director and/or employee benefit plans or filed in connection with an exchange
offer, a transaction to which Rule 145 (or any successor rule) under the
Securities Act applies, a transaction relating solely to an exchange offering,
a transaction relating solely to an acquisition of assets or property for
securities or an offering of securities solely to the Company's existing
stockholders), then the Company shall in each case give written notice of such
proposed filing to the Holders of Restricted Securities as soon as practicable
(but no later than 15 business days) before the anticipated filing date, and
such notice shall offer such Holders the opportunity to register such number of
Restricted Securities as each such Holder may request. Each Holder of
Restricted Securities desiring to have such Holder's Restricted Securities
included in such registration statement shall so advise the Company in writing
within ten business days after the date of the Company's notice, setting forth
the amount of such Holder's Restricted Securities for which registration is
requested. If the Company's offering is to be an underwritten offering, the
Company shall, subject to the further provisions of this Agreement, use its
reasonable best efforts to cause the managing underwriter or underwriters of a
proposed underwritten offering to permit the Holders of the Restricted
Securities requested to be included in the registration for such offering to
include such securities in such offering on the same terms and conditions as
any similar securities of the Company included therein. Moreover, if the
registration of which the Company gives notice does involve an underwriting,
the right of each Holder to registration pursuant to this Section 2 shall,
unless the Company otherwise agrees, be conditioned upon such Holder's
participation as a seller in such underwriting and its execution of an
underwriting agreement with the managing underwriter or underwriters selected
by the Company. Notwithstanding the foregoing, if the managing underwriter of
such offering advises the Company that the total number of Restricted
Securities that the Holders and the Tanklage Holders, other than the Company,
intend to include in such offering will in the good faith opinion of such
managing underwriter adversely affect the terms or pricing of such offering,
then the number of Securities to be offered for the account of the Holders and
the Tanklage Holders shall be reduced on a pro rata basis based on the number
of shares of Common Stock and/or Warrants proposed to be sold by the Holders
and the Tanklage Holders to the extent necessary to reduce the total number of
shares of Common Stock and/or Warrants to be included in such offering for the
Holders and the Tanklage Holders other than the Company to the number of shares
of Common Stock and/or Warrants recommended by such managing underwriter (with
each Warrant being treated for such purposes as representing the number of
Warrant Shares for which such Warrant is then exercisable). Any Restricted
Securities excluded from an underwriting shall be withdrawn from registration
and shall not, without the consent of the Company and the manager of the
underwriting, be transferred in a
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<PAGE> 5
public distribution prior to the expiration of 180 days (or such other shorter
period of time as the manager of the underwriting may require) after the
effective date of the registration statement.
3. Registration Procedures. Whenever, pursuant to Section 1 or
2, any of the Holders of Restricted Securities has requested that any
Restricted Securities be registered, the Company will, subject to the
provisions of Section 4, use all reasonable best efforts to effect the
registration and the sale of such Restricted Securities in accordance with the
intended method of disposition thereof as promptly as practicable, and in
connection with any such request, the Company will:
(A) in connection with a request pursuant to Section 1,
prepare and file with the SEC, not later than 60 days after receipt of
a request to file a registration statement with respect to Restricted
Securities, a registration statement on any form for which the Company
then qualifies and which counsel for the Company shall deem
appropriate and which form shall be available for the sale of such
Restricted Securities in accordance with the intended method of
distribution thereof, and use its reasonable best efforts to cause
such registration statement to become effective; provided (i) that,
before filing a registration statement or prospectus or any amendments
or supplements thereto, the Company will furnish to one counsel
selected by the Holders of a majority in number of the Restricted
Securities covered by such registration statement copies of all such
documents proposed to be filed, which documents will be subject to the
review of such counsel, and (ii) that after the filing of the
registration statement, the Company will promptly notify each of the
selling Holders of Restricted Securities of any stop order issued or,
to the knowledge of the Company, threatened by the SEC and take all
reasonable actions to prevent the entry of such stop order or to
remove it if entered;
(B) in connection with a registration pursuant to Section
1, prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective for a period of not less than 180 days or such shorter
period as shall terminate when all Restricted Securities covered by
such registration statement have been sold, and comply with the
provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement during such
period in accordance with the intended methods of disposition by the
selling Holders thereof set forth in such registration statement;
(C) as soon as reasonably practicable, furnish to each of
the selling Holders, prior to filing a registration statement, copies
of such registration statement as proposed to be filed, and thereafter
furnish to such selling Holders such number of copies of such
registration statement, each amendment and supplement thereto (in each
case, if specified by such Holder, including all exhibits thereto),
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as a selling Holder
may reasonably request in order to facilitate the disposition of the
Restricted Securities owned by such selling Holder;
(D) with reasonable promptness, use its reasonable best
efforts to register or qualify (or cause to be registered or
qualified) such Restricted Securities under such other
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<PAGE> 6
securities or blue sky laws of such jurisdictions within the United
States as any selling Holder (or managing underwriter in the case of
an underwritten offering) reasonably (in light of such selling
Holder's or managing underwriter's intended plan of distribution)
requests and do any and all other acts and things that may be
reasonably necessary or advisable to enable such selling Holder to
consummate the disposition in such jurisdictions of the Restricted
Securities owned by such selling Holder; provided that the Company
will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but
for this subsection (D), (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any
such jurisdiction;
(E) with reasonable promptness, use reasonable best
efforts to cause the Restricted Securities covered by such
registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of
the business and operations of the Company to enable the selling
Holder or Holders thereof to consummate the disposition of such
Restricted Securities;
(F) promptly notify each selling Holder of such
Restricted Securities, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the
occurrence of any event known to the Company requiring the preparation
of a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Restricted Securities, such
prospectus will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and promptly
make available to each selling Holder any such supplement or
amendment;
(G) in connection with a request pursuant to Section 1,
enter into an underwriting agreement in customary form, the form and
substance of such underwriting agreement being subject to the
reasonable satisfaction of the Company;
(H) in the event such sale is pursuant to an underwritten
offering, use its reasonable efforts to obtain a comfort letter or
letters from the Company's independent public accountants in customary
form and covering such matters of the type customarily covered by
comfort letters as the managing underwriter reasonably requests;
(I) otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the SEC, and make
available to its security holders, as soon as reasonably practicable,
an earnings statement covering a period of twelve months, beginning
within three months after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act; and
(J) with reasonable promptness, use its reasonable
efforts to cause all such Restricted Securities to be qualified for
trading on the NASDAQ National Market and/or listed on each securities
exchange on which the Common Stock of the Company is then listed,
provided that the applicable qualification or listing requirements are
satisfied.
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<PAGE> 7
Each selling Holder of Restricted Securities agrees that, upon receipt
of any notice from the Company of the happening of any event of the kind
described in subsection (F) hereof, such selling Holder will forthwith
discontinue disposition of Restricted Securities pursuant to the registration
statement covering such Restricted Securities until such selling Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
subsection (F) hereof, and, if so directed by the Company, such selling Holder
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such selling Holder's possession, of the
prospectus covering such Restricted Securities current at the time of receipt
of such notice. In the event the Company shall give any such notice, the
Company shall extend the period during which such registration statement shall
be maintained effective pursuant to this Agreement (including the period
referred to in subsection (B)) by the number of days during the period from and
including the date of the giving of such notice pursuant to subsection (F)
hereof to and including the date when each selling Holder of Restricted
Securities covered by such registration statement shall have received the
copies of the supplemented or amended prospectus contemplated by subsection (F)
hereof. Each selling Holder also agrees to notify the Company if any event
relating to such selling Holder occurs that would require the preparation of a
supplement or amendment to the prospectus so that such prospectus will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
4. Conditions and Limitations.
(A) The Company's obligations under Section 1 shall be
subject to the following limitations:
(i) the Company shall not be required to furnish
any audited financial statements other than those audited
statements customarily prepared at the end of its fiscal year,
or to furnish any unaudited financial information with respect
to any period other than its regularly reported interim
quarterly periods unless in the absence of such other
unaudited financial information the registration statement
would contain an untrue statement of material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
(ii) A registration statement will not count as a
Demand Registration until it has become effective and remains
continuously effective for the lesser of (i) the period during
which all Restricted Securities registered in the Demand
Registration is sold and (ii) 180 days; provided, however,
that a registration shall not constitute a Demand Registration
if (x) after such Demand Registration has become effective,
such registration or the related offer, sale or distribution
of Restricted Securities thereunder is interfered with by any
stop order, injunction or other order or requirement of the
SEC or other governmental agency or court for any reason not
attributable to the Holders and such interference is not
thereafter eliminated and (y) the conditions to closing
specified in the underwriting agreement, if any, entered into
in connection with such Demand Registration are not satisfied
or waived, other than by reason of a failure by the Holders;
and
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<PAGE> 8
(iii) the Company shall have received the
information and documents specified in Section 5 and each
selling Holder shall have observed or performed its other
covenants and conditions contained in such section.
(B) The Company's obligation under Section 2 shall be
subject to the limitations and conditions specified in such section
and in clauses (i), (ii) and (iv) of subsection (A) of this Section 4,
and to the condition that the Company may at any time terminate its
proposal to register its shares and discontinue its efforts to cause a
registration statement to become or remain effective.
5. Information from and Certain Covenants of Holders of
Restricted Securities. The Holders for whom Restricted Securities are to be
registered pursuant to this Agreement shall provide to the Company such
information regarding the Restricted Securities to be so registered, the Holder
and the intended method of disposition of such Restricted Securities as shall
reasonably be required in connection with the action to be taken. Any Holder
whose Restricted Securities are included in a registration statement pursuant
to this Agreement shall execute all consents, powers of attorney, registration
statements and other documents reasonably required to be signed by it in order
to cause such registration statement to become effective. Each selling Holder
covenants that, in disposing of such Holder's Restricted Securities, such
Holder will comply with Regulation M of the SEC adopted pursuant to the
Exchange Act.
6. Registration Expenses. All Registration Expenses (as defined
herein) will be borne by the Company. Underwriting discounts and commissions
applicable to the sale of Restricted Securities shall be borne by each selling
Holder of the Restricted Securities to which such discount or commission
relates, and each selling Holder shall be responsible for the fees and expenses
of any counsel, accountants or other agents retained by such selling Holder and
all other out-of-pocket expenses incurred by such selling Holder in connection
with any registration under this Agreement other than fees and expenses of
counsel for the Holders which are treated as Registration Expenses as set forth
below.
As used herein, the term "Registration Expenses" means all expenses
incident to the Company's performance of or compliance with this Agreement
(whether or not the registration in connection with which such expenses are
incurred ultimately becomes effective), including without limitation all
registration and filing fees, fees and expenses of compliance with securities
or blue sky laws (including reasonable fees and disbursements of counsel in
connection with blue sky qualifications of the Restricted Securities), rating
agency fees, printing expenses, messenger and delivery expenses incurred by the
Company, internal expenses incurred by the Company (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the fees and expenses incurred in connection with
the listing of the securities to be registered on each securities exchange on
which similar securities issued by the Company are then listed, and fees and
disbursements of counsel for the Company (but shall not include the fees or
disbursements of counsel for the Holders) and the Company's independent
certified public accountants (including the expenses of any special audit or
comfort letters required by or incident to such performance), securities acts
liability insurance (if the Company elects to obtain such
8
<PAGE> 9
insurance), the reasonable fees and expenses of any special experts retained by
the Company and the fees and expenses of other persons retained by the Company
in connection with such registration.
7. Indemnification; Contribution.
(A) Indemnification by the Company. The Company agrees
to indemnify and hold harmless each selling Holder of Restricted
Securities, its officers, directors and agents and each person, if
any, who controls such selling Holder within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, damages, liabilities and
expenses (including reasonable attorneys' fees and costs of
investigation) arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any
registration statement or prospectus relating to the Restricted
Securities or in any amendment or supplement thereto or in any
preliminary prospectus relating to the Restricted Securities, or
arising out of or based upon any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or expenses arise out of, or are
based upon, any such untrue statement or omission or allegation
thereof based upon information furnished in writing to the Company by
such selling Holder or on such selling Holder's behalf expressly for
use therein and provided further, that with respect to any untrue
statement or omission or alleged untrue statement or omission made in
any preliminary prospectus, the indemnity agreement contained in this
subsection shall not apply to the extent that any such loss, claim,
damage, liability or expense results from the fact that a copy of the
final prospectus was not sent or given to the person asserting any
such losses, claims, damages, liabilities or expenses at or prior to
the written confirmation of the sale of the Restricted Securities
concerned to such person if a final prospectus is made available by
the Company on a timely basis. The Company also agrees to include in
any underwriting agreement with any underwriters of the Restricted
Securities provisions indemnifying and providing for contribution to
such underwriters, their officers and directors and each person who
controls such underwriters on substantially the same basis as the
provisions of this Section 8 indemnifying and providing for
contribution to the selling Holders.
(B) Indemnification by Holders of Restricted Securities.
Each selling Holder agrees to indemnify and hold harmless the Company,
its officers, directors and agents and each person, if any, who
controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any
and all losses, claims, damages, liabilities and expenses (including
reasonable attorneys' fees and costs of investigation) arising out of
or based upon any untrue statement or alleged untrue statement of a
material fact contained in any registration statement or prospectus
relating to the Restricted Securities or in any amendment or
supplement thereto or in any preliminary prospectus relating to the
Restricted Securities, or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided (i) that such losses, claims, damages,
liabilities or expenses arise out of, or are based upon, any such
untrue statement or omission or allegation thereof based upon
information furnished in writing to the Company by such
9
<PAGE> 10
selling Holder or on such selling Holder's behalf expressly for use
therein, (ii) that with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary
prospectus, the indemnity agreement contained in this subsection shall
not apply to the extent that any such loss, claim, damage, liability
or expense results from the fact that a copy of the final prospectus
was not sent or given to the person asserting any such losses, claims,
damages, liabilities or expenses at or prior to the written
confirmation of the sale of the Restricted Securities concerned to
such person, and (iii) that no selling Holder shall be liable for any
indemnification under this Section 8 in an aggregate amount that
exceeds the total net proceeds (before deducting expenses) received by
such selling Holder from the offering. Each selling Holder also
agrees to include in any underwriting agreement with underwriters of
the Restricted Securities provisions indemnifying and providing for
contribution to such underwriters, their officers and directors, and
each person who controls such underwriters, on substantially the same
basis as the provisions of this Section 7 indemnifying and providing
for contribution to the Company.
(C) Conduct of Indemnification Proceedings. If any
action or proceeding (including any governmental investigation) shall
be brought or asserted against any indemnified party hereunder in
respect of which indemnity may be sought from an indemnifying party,
the indemnifying party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such indemnified
party, and shall assume the payment of all expenses. Such indemnified
party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party has agreed to pay such fees
and expenses or (ii) the use of counsel chosen by the indemnifying
party to represent the indemnified party would, in the opinion of
counsel representing both parties, present such counsel with a
conflict of interest (in which case the indemnifying party shall not
have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and
expenses shall be borne by the indemnifying party and paid as
incurred, upon presentation of reasonable evidence of same; provided
that the indemnifying party shall only be responsible for the fees and
expenses of one counsel for the indemnified party or parties
hereunder. The indemnifying party shall not be liable for any
settlement of any such action or proceeding effected without its
written consent, but if settled with its written consent, or if there
is a final judgment for the plaintiff in any such action or
proceeding, the indemnifying party agrees to indemnify and hold
harmless such indemnified party from and against any loss or liability
(to the extent stated above) by reason of such settlement or judgment.
(D) Contribution. If the indemnification provided for in
this Section 7 is unavailable to the Company or the selling Holders in
respect of any losses, claims, damages, liabilities or judgments
referred to therein, then each such indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities and judgments, in such proportion as is
appropriate to reflect the relative fault of each such party in
connection with such statements or omissions, as well as any other
relevant equitable considerations. The relative fault of each such
party shall be determined by reference to, among other things,
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<PAGE> 11
whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Holders agree that it would not be just
and equitable if contribution pursuant to this Section 7(D) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages,
liabilities or judgments referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigation or defending any
such action or claim. Notwithstanding the provisions of this Section
7(D), no selling Holder shall be required to contribute any amount in
excess of the amount by which the total price at which the Restricted
Securities of such selling Holder were offered to the public exceeds
the amount of any damages which such selling Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement
or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
8. Amendments. This Agreement may be amended or modified upon
the written consent thereto of the Company and the Holders of not less than
66-2/3% of the Restricted Securities.
9. Assignments. This Agreement shall be binding on and inure to
the benefit of the respective successors and assigns of the parties hereto and
shall be expressly assignable by the Holders with respect to their respective
rights created under this Agreement, provided a Holder may only assign the
rights created under this Agreement in conjunction with the transfer of a
majority of such Holder's Restricted Securities and the rights of the
transferor under this Agreement shall terminate upon such assignment.
10. Entire Agreement; Governing Law. This Agreement constitutes
the entire agreement of the parties relating to the subject matter hereof and
all prior or contemporaneous written or oral agreements are merged herein.
This Agreement shall be governed by and construed in accordance with the
domestic laws of the State of Texas without giving effect to any choice or
conflict of law provision or rule (whether of the State of Texas or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Texas.
11. Notices. Any and all notices or other communications required
or permitted under this Agreement shall be given in writing and delivered in
person or sent by United States certified or registered mail, postage prepaid,
return receipt requested, or by overnight express mail, or by telex, facsimile
or telecopy to the address of such party set forth in the Contribution and
Exchange Agreement or the Warrant Agreement. Any such notice shall be
effective upon receipt or three days
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<PAGE> 12
after placed in the mail, whichever is earlier. Any party may, by notice so
delivered, change its address for notice purposes hereunder.
12. Severability. If any provision of this Agreement is invalid,
illegal or unenforceable, the balance of this Agreement shall remain in full
force and effect and this Agreement shall be construed in all respects as if
such invalid, illegal or unenforceable provision were omitted. If any
provision is inapplicable to any person or circumstance, it shall,
nevertheless, remain applicable to all other persons and circumstances.
13. Construction; Counterparts. Any section headings in this
Agreement are for convenience of reference only, and shall be given no effect
in the construction or interpretation of this Agreement or any provisions
thereof. No provision of this Agreement will be interpreted in favor of, or
against, any party by reason of the extent to which any such party or its
counsel participated in the drafting thereof or by reason of the extent to
which any such provision is inconsistent with any prior draft hereof or
thereof. This Agreement shall be deemed the mutual form of the parties hereto.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, and which together shall constitute but one and the same
instrument.
14. Termination. This Agreement shall terminate and be of no
further force or effect if the Initial Public Offering is not consummated.
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<PAGE> 13
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement on the date first written above.
AUTHENTIC SPECIALTY FOODS, INC.
By:
-------------------------------------
Name:
----------------------------------
Title:
---------------------------------
TSG2 L.P.
By:
-------------------------------------
Name:
----------------------------------
Title:
---------------------------------
SHANSBY PARTNERS, L.L.C.
By:
-------------------------------------
Name:
----------------------------------
Title:
---------------------------------
----------------------------------------
Keith R. Lively
13
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement of Form S-1
of our report, dated April 25, 1997 except for Note 9 as to which the date is
June 20, 1997, relating to the financial statements of Authentic Specialty
Foods, Inc., and of our report dated June 26, 1997, relating to the financial
statements of La Victoria Foods, Inc. We also consent to the reference to our
Firm under the captions "Experts" and "Selected Financial Data" in the
Prospectus.
/s/ McGLADREY & PULLEN, LLP
----------------------------
McGLADREY & PULLEN, LLP
Minneapolis, Minnesota
August 25, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement of Form S-1 of our
report, dated March 15, 1996, relating to the financial statements of Authentic
Specialty Foods, Inc. (formerly Calidad Foods, Inc.). We also consent to the
reference to our Firm under the captions "Experts" and "Selected Financial
Data" in the Prospectus.
/s/ RYLANDER, CLAY & OPITZ, L.L.P.
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RYLANDER, CLAY & OPITZ, L.L.P.
Fort Worth, Texas
August 24, 1997
