<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 11, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
RICHMONT
MARKETING SPECIALISTS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
-------------------------
<TABLE>
<S> <C> <C>
DELAWARE 5141 75-2728359
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
17855 North Dallas Parkway
Suite 200
Dallas, TX 75287
(972) 349-6200
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
-------------------------
Nancy K. Jagielski, Esq.
Richmont Marketing Specialists Inc.
17855 North Dallas Parkway
Suite 200
Dallas, TX 75287
(972) 349-6200
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent For Service)
-------------------------
Copy to:
Eileen Nugent Simon, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
(212) 735-3000
-------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this registration statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, 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, 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: [ ]
- ---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED MAXIMUM AMOUNT OF
TITLE OF CLASS OF SECURITIES AMOUNT TO MAXIMUM OFFERING AGGREGATE REGISTRATION
TO BE REGISTERED BE REGISTERED PRICE PER SECURITY(1) OFFERING PRICE(1) FEE(1)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 1/8% Series B Senior Subordinated Notes due
2007.......................................... $100,000,000 100% $100,000,000 $27,800
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f) promulgated under the Securities Act of 1933, as
amended.
-------------------------
THE REGISTRANT HEREBY AMEND 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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PROSPECTUS
SUBJECT TO COMPLETION -- DATED MARCH , 1999
RICHMONT MARKETING LOGO
EXCHANGE OFFER FOR
$100,000,000
10 1/8% SENIOR SUBORDINATED NOTES DUE 2007
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1999, UNLESS EXTENDED.
TERMS OF THE EXCHANGE OFFER:
- - We will exchange all outstanding notes that are validly tendered and not
withdrawn prior to the expiration of the Exchange Offer.
- - You may withdraw tendered outstanding notes at any time prior to the
expiration of the Exchange Offer.
- - We believe that the exchange of outstanding notes will not be a taxable
exchange for United States federal income tax purposes, but you should see the
section entitled "Certain Federal Income Tax Considerations" on page 83 for
more information.
- - The terms of the notes to be issued are substantially identical to the terms
of the outstanding notes, except for certain transfer restrictions and
registration rights relating to the outstanding notes.
- - We will not receive any proceeds from the Exchange Offer.
- - There is no existing market for the notes to be issued, and we do not intend
to apply for their listing on any securities exchange.
See the "Description of Notes" section on page 48 for more information
about the notes to be issued in the Exchange Offer.
THIS INVESTMENT INVOLVES RISKS. SEE THE SECTION ENTITLED "RISK FACTORS" THAT
BEGINS ON PAGE 9 FOR A DISCUSSION OF THE RISKS THAT YOU SHOULD CONSIDER PRIOR TO
TENDERING YOUR OUTSTANDING NOTES FOR EXCHANGE.
* * *
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES AND
EXCHANGE COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ADEQUACY OR THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 3
Summary Historical Financial Data........................... 8
Risk Factors................................................ 9
The Transactions............................................ 15
Use of Proceeds............................................. 16
Capitalization.............................................. 17
The Exchange Offer.......................................... 18
Selected Historical Financial Data.......................... 26
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 27
The Business................................................ 32
Where You Can Find More Information......................... 40
Management.................................................. 40
Beneficial Ownership of Stock............................... 45
Relationships and Related Transactions...................... 46
Description of Notes........................................ 48
Description of Other Debt................................... 79
Plan of Distribution........................................ 82
Certain Federal Income Tax Considerations................... 82
Book Entry.................................................. 85
Legal Matters............................................... 86
Experts..................................................... 87
Index to Historical Financial Statements.................... F-1
</TABLE>
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary highlights selected information from this prospectus
and may not contain all of the information that is important to you. This
prospectus includes the basic terms of the notes we are offering, as well as
information regarding our business and detailed financial data. We encourage you
to read this prospectus in its entirety.
References in this prospectus to "RMSI," "we," "us" or "our" refer to
Richmont Marketing Specialists Inc. and, for any period before October 1997, to
Marketing Specialists Sales Company, the predecessor of RMSI.
References in this prospectus to our market position and to industry trends
are based on estimates compiled by the Association of Sales and Marketing
Companies, PROGRESSIVE GROCER magazine, Cannondale Associates, Information
Resources Inc. and SUPERMARKET NEWS.
ABOUT RMSI
RMSI is one of the largest food brokers in the country. We represent over
1700 manufacturers of consumer goods and products, called "principals,"
primarily across the western, southeastern, south central and mid-Atlantic
regions. We sell and market our principals' products to retailers and
wholesalers, called "customers." We provide a full array of sales, marketing,
merchandising and order management services to our principals and customers.
We are well-positioned to take advantage of the consolidations occurring in
the food distribution industry because of our wide geographic coverage of the
country. We have expanded our coverage significantly through 13 strategic
acquisitions that we have completed since the beginning of 1996. We intend to
continue to grow and expand our presence through further acquisitions in 1999.
Our strong market position is also due to our innovative use of information
technology and our dedicated client support. Our account service and business
development personnel work closely with our principals to develop sales and
promotional strategies. Our retail representatives collect local market data and
store-specific information used by our account service and business development
personnel to customize these strategies. This client support and specialized
market data allows our principals and customers to maximize sales volume.
Our executive offices are located at 17855 North Dallas Parkway, Suite 200,
Dallas, Texas 75287. Our telephone number is (972) 349-6200. RMSI is a Delaware
corporation.
3
<PAGE> 5
ABOUT THIS TRANSACTION
On December 19, 1997, we privately placed $100 million of 10 1/8% Senior
Subordinated Notes due 2007. These notes are guaranteed by all of our
wholly-owned operating subsidiaries.
Simultaneously with the private placement, we entered into an exchange and
registration rights agreement with the initial purchasers of the outstanding
notes, in which we agreed to deliver this prospectus to you and to complete this
Exchange Offer on or before June 19, 1999. If we do not complete this exchange
before June 19, 1999, we must pay liquidated damages until the Exchange Offer is
completed. In this Exchange Offer, you may exchange your outstanding notes for
new notes which have substantially the same terms. You should read the
discussion under the heading "The Exchange Offer" and "Description of Notes" for
further information regarding the notes to be issued in the Exchange Offer.
We issued the outstanding notes primarily to help finance our acquisition
of Atlas Marketing Company, Inc. for a purchase price of approximately $45.7
million. Atlas is a food broker operating in markets throughout the southeastern
and mid-Atlantic regions of the country. We have used a portion of the remaining
proceeds from the sale of the outstanding notes for working capital and general
corporate purposes. We may also use those proceeds to finance future
acquisitions. At December 31, 1998, approximately $25 million of the proceeds
remain available for use.
ABOUT THE EXCHANGE OFFER
Securities Offered......... $100 million in principal amount of new 10 1/8%
Senior Subordinated Notes due 2007, which have been
registered under the Securities Act of 1933. The
terms of the notes offered in the Exchange Offer
are substantially identical to those of the
outstanding notes, except that certain transfer
restrictions, registration rights and liquidated
damages provisions relating to the outstanding
notes do not apply to the new registered notes.
The Exchange Offer......... We are offering to issue registered notes in
exchange for a like principal amount of our
outstanding notes. We are offering to issue these
registered notes to satisfy our obligations under
an exchange and registration rights agreement that
we entered into with the initial purchaser of the
outstanding notes when we sold them in a
transaction exempt from the registration
requirements of the Securities Act. You may tender
your outstanding notes for exchange by following
the procedures described under the heading "The
Exchange Offer."
Tenders; Expiration Date;
Withdrawal............... The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1999, unless we
extend it. If you decide to exchange your
outstanding notes for new notes, you must
acknowledge that you are not engaging in, and do
not intend to engage in, a distribution of the new
notes. You may withdraw any notes that you tender
for exchange at any time prior to ,
1999. If we decide for any reason not to accept any
notes you have tendered for exchange, those notes
will be returned to you without cost promptly after
the expiration or termination of the Exchange
Offer. See "The Exchange Offer -- Terms of the
Exchange Offer."
United States Federal
Income Tax
Considerations........... Your exchange of outstanding notes for notes to be
issued in the Exchange Offer will not result in any
gain or loss to you for federal income tax
purposes. See "Certain Federal Income Tax
Considerations."
4
<PAGE> 6
Use of Proceeds............ We will not receive any cash proceeds from the
Exchange Offer.
Exchange Agent............. Chase Bank of Texas, National Association.
CONSEQUENCES OF EXCHANGING YOUR OUTSTANDING NOTES
If you do not exchange your outstanding notes in the Exchange Offer, they
will continue to be subject to the restrictions on transfer that are described
in the legend on the notes. In general, you may offer or sell your outstanding
notes only if they are registered under, or offered or sold under an exemption
from, the Securities Act and applicable state securities laws. We do not
currently intend to register the outstanding notes under the Securities Act.
Based on interpretations of the staff of the Securities and Exchange
Commission, we believe that you may offer for resale, resell or otherwise
transfer the notes that we issue in the Exchange Offer without complying with
the registration and prospectus delivery requirements of the Securities Act if:
- you acquire the notes issued in the Exchange Offer in the ordinary course
of your business;
- you are not participating, do not intend to participate, and have no
arrangement or undertaking with anyone to participate, in the
distribution of the notes issued to you in the Exchange Offer; and
- you are not an "affiliate" of RMSI, as defined in Rule 405 of the
Securities Act.
If any of these conditions are not satisfied and you transfer any notes issued
to you in the Exchange Offer without delivering a proper prospectus or without
qualifying for a registration exemption, you may incur liability under the
Securities Act. We will not be responsible for or indemnify you against any
liability you may incur.
Any broker-dealer that acquires notes in the Exchange Offer for its own
account in exchange for outstanding notes, which it acquired through
market-making or other trading activities, must acknowledge that it will deliver
a prospectus when it resells or transfers any notes issued in the Exchange
Offer. See "Plan of Distribution."
5
<PAGE> 7
ABOUT THE NOTES
The terms of the notes we are issuing in this Exchange Offer and the
outstanding notes are identical in all material respects, except:
(1) the notes issued in the Exchange Offer will have been registered
under the Securities Act;
(2) the notes issued in the Exchange Offer will not contain transfer
restrictions and registration rights that relate to the outstanding notes;
and
(3) the notes issued in the Exchange Offer will not contain provisions
relating to the payment of liquidated damages to be made to the holders of
the outstanding notes under circumstances related to the timing of the
Exchange Offer.
A brief description of the material terms of the notes follows:
Securities Offered......... $100 million in principal amount of 10 1/8% Senior
Subordinated Notes due 2007, registered under the
Securities Act.
Maturity................... December 15, 2007.
Interest Payment Dates..... June 15 and December 15 of each year, beginning on
June 15, 1998.
Guarantor Subsidiaries..... The notes issued in the Exchange Offer will be
fully and unconditionally guaranteed by the
guarantor subsidiaries, which constitute all of our
principal operating subsidiaries. If we cannot make
payments on the notes when they are due, the
guarantor subsidiaries must make them instead.
Ranking.................... The notes being issued in the Exchange Offer and
the subsidiary guarantees are unsecured senior
subordinated obligations of RMSI.
They rank junior in right of payment to our and our
guarantor subsidiaries' current and future senior
indebtedness, except indebtedness that expressly
provides that it is not senior to the notes and the
guarantees.
As of December 31, 1998, these notes and the
subsidiary guarantees:
- were subordinated to a letter of credit in the
amount of $1,371,777 of senior debt;
- ranked equally with $57,254,165 of other senior
subordinated debt and deferred obligations; and
- ranked senior to $11,988,245 of junior debt and
deferred obligations.
As of December 31, 1998, we also had trade payables
outstanding in the amount of $5,085,651, and
accrued expenses in the amount of $8,980,959.
Optional Redemption........ On or after December 15, 2002, we may redeem some
or all of the notes being issued in the Exchange
Offer at any time at the redemption prices listed
in the section "Description of Notes" under the
heading "Optional Redemption."
Before December 15, 2000, we may redeem up to $35
million of the notes with the proceeds of public
offerings of equity in our company at the prices
listed in the section "Description of Notes" under
the heading "Optional Redemption."
6
<PAGE> 8
Mandatory Redemption....... If we sell assets or RMSI experiences specific
kinds of changes in control of it by its
stockholders, we must offer to repurchase the notes
being issued in the Exchange Offer at the prices
listed in the section "Description of Notes" under
the heading "Repurchase at the Option of Holders."
Basic Covenants of
Indenture.................. We will issue the notes being offered in the
Exchange Offer under an indenture with Chase Bank
of Texas, National Association (formerly known as
Texas Commerce Bank National Association), as
Trustee. This is the same indenture under which the
outstanding notes were issued. The indenture, among
other things, restricts our ability and the ability
of our subsidiaries to:
- borrow money;
- pay dividends on stock or purchase stock;
- make investments;
- use assets as security in other transactions; and
- sell certain assets or merge with or into other
companies.
See the section "Description of Notes" under the
heading "Covenants."
Use of Proceeds............ We will not receive any proceeds from the Exchange
Offer. We used a portion of the proceeds from the
offering of the outstanding notes in December 1997
to finance the acquisition of Atlas Marketing
Company, Inc. See the section entitled "Use of
Proceeds."
7
<PAGE> 9
SUMMARY HISTORICAL FINANCIAL DATA
In the table below we provide you with summary historical financial data
for RMSI and its subsidiaries. The statement of operations data presented for
each of the years in the 3 years ended December 31, 1998 and the balance sheet
data as of December 31, 1998, 1997 and 1996 have been derived from our audited
financial statements for those periods.
These audited financial statements are included in this prospectus. We
encourage you to review the audited financial statements and the accompanying
notes, as well as the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" which is also contained in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1998 1997 1996
-------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(a):
Revenue................................................... $218,294 $155,932 $73,447
Operating expenses........................................ 235,051 159,995 74,969
-------- -------- -------
Operating loss............................................ (16,757) (4,063) (1,522)
OTHER FINANCIAL DATA:
EBITDA(b)................................................. $ 17,814 $ 11,168 $ 4,540
Depreciation and amortization............................. 32,735 14,355 5,554
Capital expenditures...................................... 6,843 2,784 1,489
BALANCE SHEET DATA (END OF PERIOD)(c):
Cash and cash equivalents................................. 26,634 41,395 --
Total assets.............................................. 174,762 211,530 84,655
Long-term obligations, including current maturities....... 171,230 177,916 51,661
Shareholders' equity (deficit)............................ (23,028) 9,309 11,736
</TABLE>
(a) The statement of operations data includes the operating results of Bromar,
Inc. since its acquisition on October 31, 1996, Tower Marketing, Inc. since
its acquisition on May 31, 1997 and Atlas since its acquisition on December
19, 1997. RMSI has accounted for the Atlas acquisition effective December
31, 1997 for financial reporting purposes. The results of operations of
Atlas during the period December 19, 1997 through December 31, 1997 were
not material.
(b) EBITDA is defined as net income (loss) before interest, income taxes
(benefit), depreciation and amortization expense. EBITDA is presented
because it is commonly used by certain investors and analysts to analyze
and compare operating performance and to determine a company's ability to
service and incur debt. EBITDA should not be considered in isolation from
or as a substitute for net income (loss), cash flows from operating
activities or other statements of operations or cash flows data prepared in
accordance with generally accepted accounting principles, or as a measure
of profitability or liquidity. EBITDA may not be comparable to similarly
titled measures reported by other companies.
(c) The balance sheet data at December 31, 1998 and 1997 reflects the October
31, 1996 acquisition of Bromar, the May 31, 1997 acquisition of Tower and
the December 19, 1997 acquisition of Atlas. RMSI has accounted for the
Atlas acquisition effective December 31, 1997 for financial reporting
purposes. The results of operations of Atlas during the period December 19,
1997 through December 31, 1997 were not material. The balance sheet data at
December 31, 1996 reflects the October 31, 1996 acquisition of Bromar. The
balance sheet data at December 31, 1998 and 1997 also reflects the proceeds
of our $100 million notes issued on December 19, 1997.
RISK FACTORS
You should consider carefully all of the information set forth in this
prospectus and, in particular, the specific factors set forth under the "Risk
Factors" section beginning on page 9 before deciding to tender your outstanding
notes in the Exchange Offer.
8
<PAGE> 10
RISK FACTORS
This prospectus contains forward-looking statements, particularly those
relating to our plans, strategies and prospects. While we believe that our
plans, intentions and expectations reflected in the forward-looking statements
are reasonable, we can give no assurances that these plans, intentions or
expectations will be achieved. The risk factors listed below could cause our
results to differ materially from the forward-looking statements.
You should consider carefully the following risks and all of the
information set forth in this prospectus before tendering your notes for
exchange in the Exchange Offer. The risk factors set forth below, other than
those which discuss the consequences of failing to exchange your outstanding
notes in the Exchange Offer, are generally applicable to both the outstanding
notes and the notes issued in the Exchange Offer. The risks described below are
not the only risks that could affect us or our notes.
FAILURE TO EXCHANGE -- YOU MAY HAVE DIFFICULTY SELLING THE NOTES WHICH YOU DO
NOT EXCHANGE.
If you do not exchange your outstanding notes for the notes offered in this
Exchange Offer, you will continue to be subject to the restrictions on the
transfer of your notes. Those transfer restrictions are described in the
indenture and in the legend contained on the outstanding notes, and arose
because we originally issued the outstanding notes under exemptions from, and in
transactions not subject to, the registration requirements of the Securities Act
of 1933.
In general, you may offer or sell your outstanding notes only if they are
registered under the Securities Act and applicable state securities laws, or if
they are offered and sold pursuant to an exemption from those requirements. We
do not intend to register the outstanding notes under the Securities Act.
If a large number of outstanding notes are exchanged for notes issued in
the Exchange Offer, it may be more difficult for you to sell your outstanding
notes. In addition, if you do not exchange your outstanding notes in the
Exchange Offer, you will no longer be entitled to have those notes registered
under the Securities Act.
See "The Exchange Offer -- Consequences of Failure to Exchange Outstanding
Notes."
SUBSTANTIAL LEVERAGE -- OUR SUBSTANTIAL INDEBTEDNESS COULD HAVE AN ADVERSE
IMPACT ON OUR FINANCIAL HEALTH AND PREVENT US FROM FULFILLING OUR OBLIGATIONS
UNDER THESE NOTES.
We have now and, after the Exchange Offer, will continue to have a
significant amount of indebtedness. While the Exchange Offer will not increase
the amount of our outstanding debt, there are significant risks associated with
these high levels of indebtedness.
The following chart shows certain important credit statistics for RMSI as
of the dates or periods indicated:
<TABLE>
<CAPTION>
AT DECEMBER 31,
1998
---------------
<S> <C>
Total Indebtedness................................... $171,230,266
Stockholders' Deficit................................ $(23,027,838)
Debt to Equity Ratio................................. --
</TABLE>
Presentation of a Debt to Equity Ratio is not meaningful because of
the existence of a stockholders' deficit.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Ratio of Earnings to Fixed Charges.................. -- --
</TABLE>
Earnings were insufficient to cover fixed charges by $32.4 million
and $8.6 million for the years ended December 31, 1998 and 1997,
respectively.
9
<PAGE> 11
Our substantial indebtedness and the restrictions it imposes could have
important consequences for you. For example, it could:
- make it more difficult for us to satisfy our obligations with respect to
the outstanding notes and the notes issued in the Exchange Offer;
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our ability to obtain additional financing to fund future working
capital, capital expenditures, acquisitions or other general corporate
needs or to satisfy our contractual commitments, including those under
the stockholders agreement;
- require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow for other purposes;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;
- place us at a competitive disadvantage compared to our competitors that
have less debt; and
- limit, along with the financial and other restrictive covenants in our
indebtedness, among other things, our ability to borrow additional funds.
See "Description of Notes -- Repurchase at Option of Holder -- Change of
Control" and "Description of Other Debt -- Revolving Credit Facility."
ABILITY TO SERVICE DEBT -- TO SERVICE OUR DEBT, WE WILL REQUIRE A SIGNIFICANT
AMOUNT OF CASH. WE DEPEND ON THE CASH FLOW OF OUR SUBSIDIARIES TO MEET OUR
NEEDS.
RMSI is a holding company that conducts all its business through its direct
and indirect subsidiaries. We hold no significant assets other than our
investments in, and advances to, our subsidiaries. We depend on receipt of funds
from our subsidiaries to meet our own obligations, including payments on these
notes. Our ability to access the cash flow of our subsidiaries will depend on
the operating performance and financial results of those subsidiaries, which may
be subject to factors beyond their control, such as prevailing economic and
industry conditions, as well as the level of indebtedness of those subsidiaries.
Based upon our current level of operations and the operations of our
subsidiaries, we believe that the cash flow from our subsidiaries, our available
cash and available borrowings under our senior credit facility will be adequate
to meet our future liquidity needs for the foreseeable future.
We cannot assure you, however, that our business and the business of our
subsidiaries will generate sufficient cash flow from operations to cover our
fixed charges. We also are unable to assure you that future borrowings will be
available to us under our senior credit facility that will allow us to service
our debt. We may need to refinance all or a portion of our indebtedness,
including the notes, on or before maturity. We cannot assure you that we will be
able to refinance any of our debt to meet these needs.
SUBORDINATION -- YOUR RIGHT TO RECEIVE PAYMENTS ON THESE NOTES IS JUNIOR TO OUR
EXISTING SENIOR INDEBTEDNESS. FURTHER, THE GUARANTEES OF THESE NOTES ARE JUNIOR
TO THE SENIOR INDEBTEDNESS OF EACH GUARANTOR.
These notes and the subsidiary guarantees rank behind all of our existing
and future senior debt and all of the existing and future senior debt of the
guarantors. As a result, if we declare bankruptcy, liquidate or reorganize, we
must repay all senior debt before we will be able to make any payments on these
notes. Similarly, if any guarantor declares bankruptcy, liquidates or
reorganizes, that guarantor must repay all of its senior debt before it may make
any payment under its guarantee.
In addition, all payments on the notes and the guarantees, including
interest payments, will be blocked in the event of a payment default on any
senior debt, and may be blocked for up to 179 of 360 consecutive days in the
event of non-payment defaults on senior debt.
10
<PAGE> 12
As of December 31, 1998, we had $1,371,777 in an outstanding letter of
credit issued under our senior credit facility that ranked senior to the notes,
and the guarantors collectively had no senior debt outstanding that ranked
senior to the guarantees. As of December 31, 1998, we also had trade payables
outstanding in the amount of $5,085,651, and accrued expenses in the amount of
$8,980,959.
Our obligations under our senior credit facility are secured by our assets
and the stock in our subsidiaries. Our subsidiaries have also guaranteed our
senior credit facility and pledged their assets to secure those guarantees. The
notes and the guarantees are not secured and do not have the benefit of any
collateral. In any insolvency or liquidation affecting us or any guarantor, the
lenders under our senior credit facility will be entitled to payment in full
from any proceeds from the collateral before any payment is made on these notes
or the guarantees. The collateral may be insufficient to satisfy all of our
creditors, including you as a holder of these notes.
See "Description of Notes" and "Description of Other Debt."
ADDITIONAL BORROWINGS AVAILABLE -- DESPITE OUR CURRENT LEVELS OF INDEBTEDNESS,
WE MAY STILL BE ABLE TO INCUR ADDITIONAL DEBT. THIS COULD FURTHER INCREASE THE
RISKS DESCRIBED ABOVE.
We and our subsidiaries are permitted to incur substantial additional
indebtedness in the future. While the terms of the indenture and our senior
credit facility limit our ability to incur additional debt, they do not
completely prohibit us from doing so in all circumstances. In addition, some of
the additional debt that we incur may rank senior to the notes. As of December
31, 1998, we had approximately $12.1 million available for borrowing as
additional senior debt under our credit facility. If new debt is added to our
current debt levels, or to the debt levels of our subsidiaries, the related
risks that we and they now face could intensify.
See "Description of Notes -- Repurchase at Option of Holders -- Change of
Control" and "Description of Other Debt -- Revolving Credit Facility."
PAYMENT RESTRICTIONS IMPOSED BY OTHER INDEBTEDNESS -- OUR SENIOR CREDIT FACILITY
CONTAINS RESTRICTIONS THAT ARE MORE STRINGENT THAN THOSE CONTAINED IN THE
INDENTURE.
In many cases, the restrictions contained in the senior credit facility are
more restrictive than similar covenants contained in the indenture. In addition,
our credit facility requires us to maintain debt service and interest coverage
ratios. If we fail to maintain those ratios, our lenders under the senior credit
facility may prohibit us from making any payments on these notes, or may declare
the amounts loaned under the senior credit facility immediately due and payable.
If we are unable to pay the amounts due, the senior lenders could proceed
against the collateral that secures that debt.
See "Description of Other Debt -- Revolving Credit Facility."
CHANGE OF CONTROL OFFER -- WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS
NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURE.
Upon the occurrence of specific kinds of change of control events, we will
be required to offer to repurchase all notes that are outstanding at that time
at a price which may be higher than the then-current market value of the notes.
However, it is possible that we will not have sufficient funds at the time of
the change of control to make the required repurchase of notes or that
restrictions in our senior credit facility will not allow such repurchases. In
addition, certain important corporate events, such as leveraged
recapitalizations that would increase the level of our indebtedness, would not
constitute a "Change of Control" under the indenture.
See "Description of Notes -- Repurchase at the Option of Holders."
FINANCIAL IMPACT OF ACQUISITIONS -- OUR GROWTH STRATEGY IS BASED ON
ACQUISITIONS, WHICH MAY NOT PROVIDE THE DESIRED ECONOMIC BENEFITS AND MAY IMPAIR
OUR FINANCIAL CONDITION.
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<PAGE> 13
We plan to grow by pursuing acquisitions in the food brokerage business.
However, we cannot guarantee that we will be able to consummate any acquisitions
on favorable terms. If we do complete any acquisitions, we cannot be certain
that we will realize any anticipated benefits from those acquisitions.
In addition, acquisitions may require significant financial resources. We
are not certain that we will be able to obtain the necessary financing or that
any additional financing will be permitted by our senior credit facility or by
the indenture. The incurrence of additional debt and other expenses related to
any acquisitions could materially adversely affect our financial condition and
operating results.
INCREASING SIZE -- OUR FUTURE OPERATIONS MAY BE IMPAIRED BY OUR RAPID GROWTH.
We have grown rapidly since the beginning of 1996, expanding our operations
from coast to coast. Our growth has been primarily as a result of the 13
acquisitions we have completed in that time period. Our future operations and
financial strength depend largely upon our ability to successfully manage this
growing business. We believe that we have the management team and resources to
accomplish this goal, but cannot guarantee to you that our growth will lead to
profitability.
INTEGRATION OF ACQUIRED COMPANIES -- WE MAY NOT BE ABLE TO SUCCESSFULLY COMBINE
THE OPERATIONS OF THE COMPANIES WE ACQUIRE WITH OUR CURRENT OPERATIONS.
While we believe there are significant opportunities for cost savings and
efficiencies as a result of acquisitions, we cannot be sure that we will
recognize any cost-savings or desired economic benefits from our acquisitions.
Our ability to realize any cost-savings or other economic benefits may be
limited by the following factors:
- loss of principals due to conflicts;
- turnover of personnel due to change of control; and
- unexpected costs and expenses incurred by us as we combine the operations
of the acquired company.
Consequently, we cannot be sure that our acquisitions will result in the
economic benefits that we expect on a timely basis or at all.
OPERATING LOSSES -- WE HAVE A RECENT HISTORY OF OPERATING LOSSES.
RMSI and its predecessors have reported operating losses in each of the
last 4 years. Our ability to be profitable in the future will be dependent upon
a number of factors, including:
- our ability to increase revenues by attracting and retaining national
principals and customers;
- our ability to realize cost-savings by successfully integrating companies
that we acquire; and
- various other factors beyond our control, including economic, financial
and competitive conditions, including the ongoing consolidation occurring
within the food distribution industry.
We cannot guarantee that we will achieve profitability in the future or be
able to generate cash flow sufficient to meet our payment obligations on the
notes.
See "-- Substantial Leverage" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
PRINCIPAL CONFLICTS -- MOST OF OUR PRINCIPALS DO NOT ALLOW US TO REPRESENT THEIR
COMPETITORS IN THE SAME TERRITORY.
Most of our principals do not allow us to market and sell their
competitors' products in our assigned territories. Some principals can be highly
subjective in their definition of a conflict, and may contend that products with
a varying degree of similarity are competing products. In addition, some of our
principals object to our representing another principal which produces a similar
product for sale in a region where we
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<PAGE> 14
do not represent that principal. In some cases where we are unable to resolve a
conflict with a principal, we must terminate our relationship with the competing
principal.
DURATION OF PRINCIPAL CONTRACTS -- MOST OF OUR CONTRACTS WITH PRINCIPALS ARE
SHORT-TERM AGREEMENTS.
Almost all of the contracts with our principals have 30 day terms. As a
result, our principals can transfer their business to another food broker upon
short notice. While we have enjoyed long-term relationships with many of our
principals, we could lose relationships with these principals due to
consolidations within the industry or our inability to meet their sales and
performance objectives.
PREPARATION FOR YEAR 2000 -- COMPUTER PROBLEMS RELATED TO THE YEAR 2000 MAY
CAUSE OPERATING PROBLEMS.
Some of our computer systems and telephone equipment have embedded chips or
processors which use only 2 digits to represent the year. As a result, they may
be unable to accurately process data before, during and after the year 2000.
We have developed a year 2000 compliance plan for our systems and software.
This plan includes evaluations of our principals and customers year 2000
compliance plans. Based on the results of the tests conducted as part of our
plan, we believe that our systems and software will be year 2000 compliant by
September 30, 1999. However, we can provide no assurance that our plans, or the
plans of our customers and principals, particularly the smaller ones, have
eliminated the risk of systems failures which could have an adverse impact on
our business and operations.
CONTROLLING SHAREHOLDER -- ONE SHAREHOLDER HAS EFFECTIVE CONTROL OF RMSI.
Currently, 60% of our common stock is owned by MS Acquisition Limited, a
Texas limited partnership. Pursuant to a stockholders' agreement, this
shareholder has the right to elect 4 of RMSI's 7 directors. Consequently, since
MS Acquisition Limited has exercised its right to elect 4 directors, it controls
our board of directors and may control our affairs in a manner contrary to your
interests.
See "Relationships and Related Transactions -- Stockholders Agreement."
KEY PERSONNEL -- WE DEPEND ON CERTAIN KEY PERSONNEL IN THE CONDUCT OF OUR
BUSINESS.
Our business depends upon our retention of employees who maintain key
relationships with our larger customers and principals. The loss of any of these
employees to a competitor could have a significant adverse impact on our
business if any of our major principals follow these employees.
See "Ownership and Management" and "The Business -- Description of
Services."
FRAUDULENT CONVEYANCE MATTERS -- FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER
SPECIFIC CIRCUMSTANCES, TO VOID GUARANTEES AND REQUIRE NOTEHOLDERS TO RETURN
PAYMENTS RECEIVED FROM GUARANTORS.
Under the federal bankruptcy laws and comparable provisions of state
fraudulent transfer laws, a guarantee could be voided, or claims in respect of a
guarantee could be subordinated to all other debts of that guarantor if, among
other things, the guarantor, at the time it incurred the indebtedness evidenced
by its guarantee:
- received less than reasonably equivalent value or fair consideration for
the incurrence of such guarantee; and
- was insolvent or rendered insolvent by reason of the incurrence of such
guarantee; or
- was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
- intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
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<PAGE> 15
In addition, any payment by that guarantor pursuant to its guarantee could
be voided and required to be returned to the guarantor, or to a fund for the
benefit of the creditors of the guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a guarantor would be
considered insolvent if:
- the sum of its debts, including contingent liabilities, were greater than
the fair saleable value of all of its assets;
- if the present fair saleable value of its assets were less than the
amount that would be required to pay its probable liability on its
existing debts, including contingent liabilities, as they become absolute
and mature; or
- it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, we believe that each guarantor, after giving effect to its
guarantee of these notes, will not be insolvent, will not have unreasonably
small capital for the business in which it is engaged and will not have incurred
debts beyond its ability to pay such debts as they mature. There can be no
assurance, however, as to what standard a court would apply in making such
determinations or that a court would agree with our conclusions in this regard.
Therefore, the indenture limits the liability of each guarantor under the
guarantees so as not to result in a fraudulent conveyance or transfer. This
limitation may reduce the amount guaranteed by any guarantor below the amount
owed under the notes. Because of this limitation, we cannot assure you that the
total amount of all the guarantees will be enough to pay all amounts due under
the notes.
NO PRIOR MARKET FOR NOTES -- YOU CANNOT BE SURE THAT AN ACTIVE TRADING MARKET
WILL DEVELOP FOR THE NOTES ISSUED IN THIS EXCHANGE OFFER.
While the outstanding notes are currently eligible for trading in the
PORTAL market of the NASD by qualified institutional buyers, there is no public
market for the notes to be issued in the Exchange Offer. Chase Securities, Inc.,
the initial purchaser of the outstanding notes, has informed us that it also
intends to make a market in the notes to be offered in the Exchange Offer, but
it may cease its market-making at any time.
We do not intend to apply for a listing of any of the notes on any
securities exchange. We do not know if an active public market will develop for
the notes or, if developed, will continue. If an active market is not developed
or maintained, the market price and the liquidity of the notes may be adversely
affected.
In addition, the liquidity and the market price of the notes to be offered
in the Exchange Offer may be adversely affected by changes in the overall market
for high yield securities and by changes in our financial performance or
prospects, or in the prospects for companies in our industry. As a result, you
cannot be sure that an active trading market will develop for these notes.
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<PAGE> 16
THE TRANSACTIONS
On December 19, 1997, we completed the offering of $100 million of the
outstanding notes. Simultaneously with this offering, RMSI completed the
acquisition of Atlas Marketing Company, Inc. ("Atlas"). We used a portion of the
proceeds from the offering of the notes to complete the Atlas acquisition and
pay related expenses.
The Atlas Acquisition
Pursuant to the terms of 2 stock purchase agreements, each dated as of
November 6, 1997, by and among RMSI, Atlas and certain stockholders and
affiliates of Atlas, we acquired all of the outstanding capital stock of Atlas
through our wholly-owned subsidiary, MSSC Carolina, Inc. We paid a total of
$45.7 million for Atlas, including approximately $31.9 million in cash and notes
payable to acquire all of the outstanding stock of Atlas, and approximately
$13.8 million to repay the outstanding indebtedness of Atlas.
Approximately $12.1 million of the purchase price was paid in the form of
promissory notes issued to Atlas shareholders. These Atlas notes were issued in
two series, each bearing interest at a rate of 10% per annum and each amortizing
in equal monthly installments over 5 years. Payments of principal and interest
on the first series of Atlas notes, issued in an aggregate principal amount of
$11.4 million, began in September, 1998. Approximately $11.1 million principal
amount was outstanding on the first series of notes at December 31, 1998. The
second series of Atlas notes, in aggregate principal amount of $0.7 million,
began amortization on April 15, 1998. Approximately $0.6 million principal
amount was outstanding on the second series of notes at December 31, 1998.
Payments on the Atlas notes are expressly subordinate to payment on the notes
offered by this prospectus.
Approximately $0.8 million of the Atlas purchase price was paid in the form
of deferred obligations payable to certain Atlas employees. Approximately $0.3
million of these deferred obligations remained payable at December 31, 1998.
Payments of the deferred obligations are expressly subordinate to payment on the
notes offered by this prospectus.
Except for the integration of computer systems related to order management,
which we expect to complete by June 30, 1999, we have completed the integration
of the operations and business of Atlas as of December 31, 1998.
The Financing
In addition to the cash paid in connection with the Atlas acquisition, we
used approximately $9.5 million of the proceeds from the offering of the
outstanding notes to repay borrowings under our senior credit facility.
Concurrently with the repayment of these amounts, the agreement governing the
facility was amended to provide for, among other things, an increase in
commitments up to $25 million.
Other Recent Transactions
PeopleSoft Conversion. In 1998, RMSI made a substantial investment in
upgrading its financial and human resources systems. RMSI purchased application
software from PeopleSoft and hired a consulting firm to assist in the
implementation of these new systems. We used approximately $3.1 million of the
proceeds from the outstanding notes to purchase the software license and for
installation in connection with this upgrade.
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<PAGE> 17
USE OF PROCEEDS
We will not receive any proceeds from the Exchange Offer. In consideration
for issuing the notes issued in the Exchange Offer, we will receive outstanding
notes in the same principal amount. All outstanding notes that are tendered in
the Exchange Offer will be retired and cancelled. Accordingly, the issuance of
the notes in the Exchange Offer will not result in any proceeds to us.
The proceeds that we received from the issuance of the outstanding notes in
December 1997 were used as follows:
- approximately $33.6 million was used to fund the Atlas acquisition,
including $19.8 million to purchase Atlas stock and $13.8 million to
retire Atlas debt;
- approximately $9.5 million was used to repay borrowings under our senior
credit facility;
- approximately $6 million was used to repay our other borrowings;
- approximately $5.3 million was used to pay fees and expenses relating to
the offering;
- approximately $3.1 million was used to purchase and install software for
accounting and human resource applications;
- the remaining $42.5 million was used to provide working capital and for
general corporate purposes, and will be used to fund future acquisitions.
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<PAGE> 18
CAPITALIZATION
The following table sets forth the capitalization of RMSI as of December
31, 1998. This table should be read in conjunction with the historical financial
statements of RMSI and the related notes which are included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1998
-----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............... $ 26,633,832
============
Long-term obligations (including current
maturities):
Senior credit facility(1)............. $ --
Notes payable......................... 24,124,405
Capital lease obligations............. 1,987,856
Deferred obligations(2)............... 45,118,005
Outstanding notes..................... 100,000,000
------------
Total long-term obligations... $171,230,266
Shareholders' deficit................... (23,027,838)
------------
Total capitalization.......... $148,202,428
============
</TABLE>
- ---------------
(1) The senior credit facility is a revolving credit facility under which RMSI
had borrowing availability of approximately $12.1 million at December 31,
1998, net of an outstanding letter of credit in the amount of $1.4 million.
(2) Represents covenants not to compete and deferred payment and compensation
plans of approximately $26.9 million and $18.2 million, respectively. See
"Financial Statements."
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<PAGE> 19
THE EXCHANGE OFFER
Purpose of the Exchange Offer
When we sold the outstanding notes in December 1997, we entered into an
exchange and registration rights agreement with the initial purchasers of those
notes. Under the exchange and registration rights agreement, we agreed to file a
registration statement regarding the exchange of the outstanding notes for notes
which are registered under the Securities Act of 1933. We also agreed to use our
reasonable best efforts to cause the registration statement to become effective
with the Securities and Exchange Commission, and to conduct this Exchange Offer
after the registration statement is declared effective. The exchange and
registration rights agreement provides that we will be required to pay
liquidated damages to the holders of the outstanding notes if:
(1) the registration statement is not filed by April 19, 1999;
(2) the registration statement is not declared effective by May 19,
1999; or
(3) the Exchange Offer has not been completed by June 19, 1999.
A copy of the exchange and registration rights agreement is filed as an exhibit
to the Registration Statement to which this prospectus is a part.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal (which together constitute the
Exchange Offer), we will accept for exchange outstanding notes which are
properly tendered on or before the Expiration Date and are not withdrawn as
permitted below. As used in this prospectus, "Expiration Date" means 5:00 p.m.,
New York City time, on , 1999, or such later date and time to which
we, in our sole discretion, extend the Exchange Offer.
The form and terms of the notes being issued in the Exchange Offer are the
same as the form and terms of the outstanding notes, except that:
(1) the notes being issued in the Exchange Offer will have been
registered under the Securities Act;
(2) the notes issued in the Exchange Offer will not bear the
restrictive legends restricting their transfer under the Securities Act;
and
(3) the notes being issued in the Exchange Offer will not contain the
registration rights and liquidated damages provisions contained in the
outstanding notes.
Notes tendered in the Exchange Offer must be in denominations of the
principal amount of $1,000 and any integral multiple thereof.
We expressly reserve the right, in our sole discretion:
(1) to extend the Expiration Date;
(2) to delay accepting any outstanding notes;
(3) if any of the conditions set forth below under " -- Conditions to
the Exchange Offer" have not been satisfied, to terminate the Exchange
Offer and not accept any notes for exchange; or
(4) to amend the Exchange Offer in any manner.
We will give oral or written notice of any extension, delay,
non-acceptance, termination or amendment as promptly as practicable by a public
announcement, and in the case of an extension, no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date.
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<PAGE> 20
We will also file a post-effective amendment with the SEC upon the occurrence of
any amendment to the terms of the Exchange Offer.
During an extension, all outstanding notes previously tendered will remain
subject to the Exchange Offer and may be accepted for exchange by us. Any
outstanding notes not accepted for exchange for any reason will be returned
without cost to the holder that tendered them as promptly as practicable after
the expiration or termination of the Exchange Offer.
How to Tender Notes for Exchange
When the holder of outstanding notes tenders, and we accept, notes for
exchange, a binding agreement between us and the tendering holder is created,
subject to the terms and conditions set forth in this prospectus and the
accompanying letter of transmittal. Except as set forth below, a holder of
outstanding notes who wishes to tender notes for exchange must do so on or prior
to the Expiration Date:
(1) transmit a properly completed and duly executed letter of
transmittal, including all other documents required by such letter of
transmittal, to Chase Bank of Texas, National Association (the "Exchange
Agent") at the address set forth below under the heading "Exchange Agent";
or
(2) if notes are tendered pursuant to the book-entry procedures set
forth below, the tendering holder must transmit an agent's message to the
Exchange Agent at the address set forth below under the heading "Exchange
Agent."
In addition, either:
(1) the Exchange Agent must receive the certificates for the
outstanding notes and the letter of transmittal;
(2) the Exchange Agent must receive, prior to the Expiration Date, a
timely confirmation of the book-entry transfer of the notes being tendered
into the Exchange Agent's account at the Depository Trust Company (the
"DTC"), along with the letter of transmittal or an agent's message; or
(3) the holder must comply with the guaranteed delivery procedures
described below.
The term "agent's message" means a message, transmitted to the DTC and received
by the Exchange Agent and forming a part of a book-entry transfer (a "book-entry
confirmation"), which states that the DTC has received an express acknowledgment
that the tendering holder agrees to be bound by the letter of transmittal and
that we may enforce the letter of transmittal against such holder.
THE METHOD OF DELIVERY OF THE OUTSTANDING NOTES, THE LETTERS OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF
SUCH DELIVERY IS BY MAIL, WE RECOMMEND REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO
ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR NOTES SHOULD BE SENT
DIRECTLY TO US.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the notes surrendered for exchange are
tendered:
(1) by a holder of outstanding notes who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions"
on the letter of transmittal; or
(2) for the account of an eligible institution.
An "eligible institution" is a firm which is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
If signatures on a letter of transmittal or notice of withdrawal are
required to be guaranteed, the guarantor must be an eligible institution. If
notes are registered in the name of a person other than the signer of the letter
of transmittal, the notes surrendered for exchange must be endorsed by, or
accompanied by a written instrument or instruments of transfer or exchange, in
satisfactory form as
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<PAGE> 21
determined by us in our sole discretion, duly executed by the registered holder
with the holder's signature guaranteed by an eligible institution.
We will determine all questions as to the validity, form, eligibility
(including time of receipt) and acceptance of notes tendered for exchange in our
sole discretion. Our determination will be final and binding. We reserve the
absolute right to:
(1) reject any and all tenders of any note improperly tendered;
(2) refuse to accept any note if, in our judgment or the judgment of
our counsel, acceptance of the note may be deemed unlawful; and
(3) waive any defects or irregularities or conditions of the Exchange
Offer as to any particular note either before or after the Expiration Date,
including the right to waive the ineligibility of any holder who seeks to
tender notes in the Exchange Offer.
Our interpretation of the terms and conditions of the Exchange Offer as to any
particular notes either before or after the Expiration Date, including the
letter of transmittal and the instructions to it, will be final and binding on
all parties. Holders must cure any defects and irregularities in connection with
tenders of notes for exchange within such reasonable period of time as we will
determine, unless we waive such defects or irregularities. Neither we, the
Exchange Agent nor any other person shall be under any duty to give notification
of any defect or irregularity with respect to any tender of notes for exchange,
nor shall any of us incur any liability for failure to give such notification.
If a person or persons other than the registered holder or holders of the
outstanding notes tendered for exchange signs the letter of transmittal, the
tendered notes must be endorsed or accompanied by appropriate powers of
attorney, in either case signed exactly as the name or names of the registered
holder or holders that appear on the outstanding notes.
If trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity sign the letter of transmittal or any notes or any power of attorney,
such persons should so indicate when signing, and you must submit proper
evidence satisfactory to us of such person's authority to so act unless we waive
this requirement.
By tendering, each holder will represent to us that, among other things,
that the person acquiring notes in the Exchange Offer is obtaining them in the
ordinary course of its business, whether or not such person is the holder, and
that neither the holder nor such other person has any arrangement or
understanding with any person to participate in the distribution of the notes
issued in the Exchange Offer. If any holder or any such other person is an
"affiliate," as defined under Rule 405 of the Securities Act, of RMSI, or is
engaged in or intends to engage in or has an arrangement or understanding with
any person to participate in a distribution of such notes to be acquired in the
Exchange Offer, such holder or any such other person:
(1) may not rely on the applicable interpretations of the staff of the
SEC; and
(2) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale
transaction.
Each broker-dealer who acquired its outstanding notes as a result of
market-making activities or other trading activities and thereafter receives
notes issued for its own account in the Exchange Offer, must acknowledge that it
will deliver a prospectus in connection with any resale of such notes issued in
the Exchange Offer. See "Plan of Distribution." The letter of transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
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Acceptance of Outstanding Notes for Exchange; Delivery of Notes Issued in the
Exchange Offer
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
we will accept, promptly after the Expiration Date, all outstanding notes
properly tendered and will issue notes registered under the Exchange Act. See
"-- Conditions to the Exchange Offer." For purposes of the Exchange Offer, we
shall be deemed to have accepted properly tendered outstanding notes for
exchange when, as and if we have given oral or written notice to the Exchange
Agent, with written confirmation of any oral notice to be given promptly
thereafter.
For each outstanding note accepted for exchange, the holder will receive a
note registered under the Securities Act having a principal amount equal to that
of the surrendered outstanding note. Accordingly, registered holders of notes
issued in the Exchange Offer on the relevant record date for the first interest
payment date following the consummation of the Exchange Offer will receive
interest accruing from the most recent date to which interest has been paid or,
if no interest has been paid on the outstanding notes, from December 19, 1997.
Outstanding notes that we accept for exchange will cease to accrue interest from
and after the date of consummation of the Exchange Offer. Under the exchange and
registration rights agreement, we may be required to make additional payments in
the form of liquidated damages to the holders of the outstanding notes under
circumstances relating to the timing of the Exchange Offer.
In all cases, we will issue notes in the Exchange Offer for outstanding
notes that are accepted for exchange only after the Exchange Agent timely
receives:
(1) certificates for such outstanding notes or a timely book-entry
confirmation of such outstanding notes into the Exchange Agent's account at
the DTC;
(2) a properly completed and duly executed letter of transmittal or an
agent's message; and
(3) all other required documents.
If for any reason set forth in the terms and conditions of the Exchange
Offer we do not accept any tendered outstanding notes, or if a holder submits
outstanding notes for a greater principal amount than the holder desires to
exchange, we will return such unaccepted or non-exchanged notes without cost to
the tendering holder. In the case of notes tendered by book-entry transfer into
the Exchange Agent's account at the DTC, such non-exchanged notes will be
credited to an account maintained with the DTC. We will return the notes or have
them credited to the DTC account as promptly as practicable after the expiration
or termination of the Exchange Offer.
Book Entry Transfers
The Exchange Agent will make a request to establish an account with respect
to the outstanding notes at the DTC for purposes of the Exchange Offer within 2
business days after the date of this prospectus. Any financial institution that
is a participant in the DTC's systems must make book-entry delivery of
outstanding notes by causing the DTC to transfer such outstanding notes into the
Exchange Agent's account at the DTC in accordance with the DTC's procedures for
transfer. Such participant should transmit its acceptance to the DTC on or prior
to the Expiration Date or comply with the guaranteed delivery procedures
described below. DTC will verify such acceptance, execute a book-entry transfer
of the tendered outstanding notes into the Exchange Agent's account at DTC and
then send to the Exchange Agent confirmation of such book-entry transfer. The
confirmation of such book-entry transfer will include an agent's message
confirming that DTC has received an express acknowledgment from such participant
that such participant has received and agrees to be bound by the letter of
transmittal and that we may enforce the letter of transmittal against such
participant. Delivery of notes issued in the Exchange Offer may be effected
through book-entry transfer at DTC. However, the letter of transmittal or
facsimile thereof or an agent's message, with any required signature guarantees
and any other required documents, must:
(1) be transmitted to and received by the Exchange Agent at the
address set forth below under "-- Exchange Agent" on or prior to the
Expiration Date; or
(2) comply with the guaranteed delivery procedures described below.
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Guaranteed Delivery Procedures
If a holder of outstanding notes desires to tender such notes and the
holder's notes are not immediately available, or time will not permit such
holder's notes or other required documents to reach the Exchange Agent before
the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if:
(1) the holder tenders the notes through an eligible institution;
(2) prior to the Expiration Date, the Exchange Agent receives from
such eligible institution a properly completed and duly executed notice of
guaranteed delivery, substantially in the form we have provided, by
telegram, telex, facsimile transmission, mail or hand delivery, setting
forth the name and address of the holder of the notes being tendered and
the amount of the notes being tendered. The notice of guaranteed delivery
shall state that the tender is being made and guarantee that within 3 New
York Stock Exchange ("NYSE") trading days after the date of execution of
the notice of guaranteed delivery, the certificates for all physically
tendered notes, in proper form for transfer, or a book-entry confirmation,
as the case may be, together with a properly completed and duly executed
letter of transmittal or agent's message with any required signature
guarantees and any other documents required by the letter of transmittal
will be deposited by the eligible institution with the Exchange Agent; and
(3) the Exchange Agent receives the certificates for all physically
tendered outstanding notes, in proper form for transfer, or a book-entry
confirmation, as the case may be, together with a properly completed and
duly executed letter of transmittal or agent's message with any required
signature guarantees and any other documents required by the letter of
transmittal, within 3 New York Stock Exchange trading days after the date
of execution of the notice of guaranteed delivery.
Withdrawal Rights
You may withdraw tenders of your outstanding notes at any time prior to
5:00 p.m., New York City time, on the Expiration Date.
For a withdrawal to be effective, you must send a written notice of
withdrawal to the Exchange Agent at one of the addresses set forth below under
"-- Exchange Agent." Any such notice of withdrawal must:
(1) specify the name of the person having tendered the outstanding
notes to be withdrawn;
(2) identify the outstanding notes to be withdrawn, including the
principal amount of such outstanding notes; and
(3) where certificates for outstanding notes are transmitted, specify
the name in which outstanding notes are registered, if different from that
of the withdrawing holder.
If certificates for outstanding notes have been delivered or otherwise
identified to the Exchange Agent, then, prior to the release of such
certificates the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and signed notice of withdrawal with
signatures guaranteed by an eligible institution unless such holder is an
eligible institution. If notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at the DTC to be credited with the withdrawn
notes and otherwise comply with the procedures of such facility. We will
determine all questions as to the validity, form and eligibility (including time
of receipt) of such notices and our determination will be final and binding on
all parties. Any tendered notes so withdrawn will be deemed not to have been
validly tendered for exchange for purposes of the Exchange Offer. Any notes
which have been tendered for exchange but which are not exchanged for any reason
will be returned to the holder thereof without cost to such holder. In the case
of notes tendered by book-entry transfer into the Exchange Agent's account at
the DTC, the notes withdrawn will be credited to an account maintained with the
DTC for the outstanding notes. The notes will be returned or credited to the DTC
account as soon as practicable after withdrawal, rejection of tender or
22
<PAGE> 24
termination of the Exchange Offer. Properly withdrawn notes may be re-tendered
by following one of the procedures described under "-- How to Tender Notes for
Exchange" above at anytime on or prior to 5:00 p.m., New York City time, on the
Expiration Date.
Conditions to the Exchange Offer
We are not required to accept for exchange, or to issue notes in the
Exchange Offer for any outstanding notes. We may terminate or amend the Exchange
Offer, if at any time before the acceptance of such outstanding notes for
exchange:
(1) any federal law, statute, rule or regulation shall have been
adopted or enacted which, in our judgment, would reasonably be expected to
impair our ability to proceed with the Exchange Offer;
(2) any stop order shall be threatened or in effect with respect to
the Registration Statement of which this prospectus constitutes a part or
the qualification of the Indenture under the Trust Indenture Act of 1939,
as amended; or
(3) there shall occur a change in the current interpretation by SEC
staff which permits the notes issued in the Exchange Offer in exchange for
the outstanding notes to be offered for resale, resold and otherwise
transferred by such holders (other than broker-dealers and any such holder
which is an "affiliate" of RMSI within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such notes
acquired in the Exchange Offer are acquired in the ordinary course of such
holder's business and such holder has no arrangement or understanding with
any person to participate in the distribution of such notes issued in the
Exchange Offer.
The preceding conditions are for our sole benefit and we may assert them
regardless of the circumstances giving rise to any such condition. We may waive
the preceding conditions in whole or in part at any time and from time to time
in our sole discretion. If we do so, the Exchange Offer will remain open for at
least 3 business days following any waiver of the preceding conditions. Our
failure at any time to exercise the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed an ongoing right
which we may assert at any time and from time to time.
The Exchange Agent
Chase Bank of Texas, National Association has been appointed as our
Exchange Agent for the Exchange Offer. All executed letters of transmittal
should be directed to our Exchange Agent at the address set forth below.
Questions and requests for assistance, requests for additional copies of this
prospectus or of the letter of transmittal and requests for notices of
guaranteed delivery should be directed to the Exchange Agent addressed as
follows:
Main Delivery To:
Chase Bank of Texas, National Association, as Exchange Agent
<TABLE>
<S> <C>
By mail, hand or overnight courier to: By Facsimile (for eligible institutions
only):
Chase Bank of Texas, National Association (214) 965-3577
2200 Ross Avenue, 5th Floor
Dallas, TX 75201 Confirm by telephone:
Att: Michael A. Scrivner (214) 965-3531
</TABLE>
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF SUCH LETTER OF TRANSMITTAL VIA FACSIMILE OTHER THAN AS
SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF
TRANSMITTAL.
23
<PAGE> 25
Fees and Expenses
We will not make any payment to brokers, dealers, or others soliciting
acceptance of the Exchange Offer except for reimbursement of mailing expenses.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by us and are estimated in the aggregate to be approximately
$[ ].
Transfer Taxes
Holders who tender their outstanding notes for exchange will not be
obligated to pay any transfer taxes in connection with the exchange. If,
however, notes issued in the Exchange Offer are to be delivered to, or are to be
issued in the name of, any person other than the holder of the notes tendered,
or if a transfer tax is imposed for any reason other than the exchange of
outstanding notes in connection with the Exchange Offer, then the holder must
pay any such transfer taxes, whether imposed on the registered holder or on any
other person. If satisfactory evidence of payment of, or exemption from, such
taxes is not submitted with the letter of transmittal, the amount of such
transfer taxes will be billed directly to the tendering holder.
Consequences of Failure to Exchange Outstanding Notes
Holders who desire to tender their outstanding notes in exchange for notes
registered under the Securities Act should allow sufficient time to ensure
timely delivery. Neither the Exchange Agent nor RMSI is under any duty to give
notification of defects or irregularities with respect to the tenders of notes
for exchange.
Outstanding notes that are not tendered or are tendered but not accepted
will, following the consummation of the Exchange Offer, continue to be subject
to the provisions in the Indenture regarding the transfer and exchange of the
outstanding notes and the existing restrictions on transfer set forth in the
legend on the outstanding notes and in the offering circular dated December 19,
1997, relating to the outstanding notes. Except in limited circumstances with
respect to specific types of holders of outstanding notes, we will have no
further obligation to provide for the registration under the Securities Act of
such outstanding notes. See "Description of Notes -- Exchange Offer;
Registration Rights." In general, outstanding notes, unless registered under the
Securities Act, may not be offered or sold except pursuant to an exemption from,
or in a transaction not subject to, the Securities Act and applicable state
securities laws. We do not currently anticipate that we will take any action to
register the outstanding notes under the Securities Act or under any state
securities laws.
If outstanding notes are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered outstanding notes could be adversely
affected.
Upon completion of the Exchange Offer, holders of the outstanding notes
will not be entitled to any further registration rights under the exchange and
registration rights agreement, except under limited circumstances. See
"Description of Notes -- Exchange Offer; Registration Rights."
Holders of the notes issued in the Exchange Offer and any outstanding notes
which remain outstanding after consummation of the Exchange Offer will vote
together as a single class for purposes of determining whether holders of the
requisite percentage of the class have taken certain actions or exercised
certain rights under the Indenture.
Consequences of Exchanging Outstanding Notes
Based on interpretations of the staff of the SEC, as set forth in no-action
letters to third parties, we believe that the notes issued in the Exchange Offer
may be offered for resale, resold or otherwise transferred by holders of such
notes, other than by any holder which is an "affiliate" of RMSI within the
meaning of Rule 405 under the Securities Act. Such notes may be offered for
resale, resold or otherwise
24
<PAGE> 26
transferred without compliance with the registration and prospectus delivery
provisions of the Securities Act, if:
(1) such notes issued in the Exchange Offer are acquired in the
ordinary course of such holder's business; and
(2) such holder, other than broker-dealers, has no arrangement or
understanding with any person to participate in the distribution of such
notes issued in the Exchange Offer.
However, the SEC has not considered the Exchange Offer in the context of a
no-action letter and we cannot guarantee that the staff of the SEC would make a
similar determination with respect to the Exchange Offer as in such other
circumstances.
Each holder, other than a broker-dealer, must furnish a written
representation, at our request, that:
(1) it is not an affiliate of RMSI;
(2) it is not engaged in, and does not intend to engage in, a
distribution of the notes issued in the Exchange Offer and has no
arrangement or understanding to participate in a distribution of notes
issued in the Exchange Offer; and
(3) it is acquiring the notes issued in the Exchange Offer in the
ordinary course of its business.
Each broker-dealer that receives notes issued in the Exchange Offer for its
own account in exchange for outstanding notes must acknowledge that such
outstanding notes were acquired by such broker-dealer as a result of
market-making or other trading activities and that it will deliver a prospectus
in connection with any resale of such notes issued in the Exchange Offer. See
"Plan of Distribution."
In addition, to comply with state securities laws of certain jurisdictions,
the notes issued in the Exchange Offer may not be offered or sold in any state
unless they have been registered or qualified for sale in such state or an
exemption from registration or qualification is available and complied with by
the holders selling the notes. We have agreed in the exchange and registration
rights agreement that, prior to any public offering of transfer restricted
securities, we will register or qualify the transfer restricted securities for
offer or sale under the securities laws of any jurisdiction requested by a
holder. Unless a holder requests, we currently do not intend to register or
qualify the sale of the notes issued in the Exchange Offer in any state where an
exemption from registration or qualification is required and not available.
"Transfer restricted securities" means each note until:
(1) the date on which such note has been exchanged by a person other
than a broker-dealer for a note in the Exchange Offer;
(2) following the exchange by a broker-dealer in the Exchange Offer of
a note for a note issued in the Exchange Offer, the date on which the note
issued in the Exchange Offer is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of this
prospectus;
(3) the date on which such note has been effectively registered under
the Securities Act and disposed of in accordance with a shelf registration
statement that we file in accordance with the exchange and registration
rights agreement; or
(4) the date on which such note is distributed to the public in a
transaction under Rule 144 of the Securities Act.
25
<PAGE> 27
SELECTED HISTORICAL FINANCIAL DATA
In the table below, we provide you with selected historical financial data
for RMSI. We have prepared this information using the consolidated financial
statements of RMSI or its predecessor Marketing Specialists Sales Company
("MSSC") for the five years ended December 31, 1998. The statement of operations
data for the 4 years ended December 31, 1998 and the balance sheet data at
December 31, 1998, 1997, 1996 and 1995 has been derived from our audited
financial statements for those periods. The information for the year ended
December 31, 1994 and the balance sheet data at December 31, 1994 is unaudited.
When you read this historical financial data, it is important that you read
along with it the historical financial statements and related notes, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," all of which are included in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------
% OF % OF % OF % OF % OF
1998 REV 1997 REV 1996 REV 1995 REV 1994 REV
-------- ----- -------- ----- ------- ----- ------- ----- ------- -----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(A):
Revenue........................... $218,294 100% $155,932 100% $73,447 100% $49,612 100% $46,359 100%
Operating expenses:
Salaries, fringe benefits
and bonuses................... 135,934 62.3% 98,036 62.9% 46,486 63.3% 31,805 64.1% 30,722 66.3%
Automobiles and
related expenses.............. 18,989 8.7% 14,477 9.3% 6,944 9.4% 4,369 8.8% 4,223 9.1%
Sales and marketing
expense....................... 13,866 6.4% 11,122 7.1% 5,181 7.1% 3,718 7.5% 1,880 4.1%
Lease restructure charge........ 1,700 0.8% -- --% -- --% -- --% -- --%
General and administrative
expense....................... 31,827 14.5% 22,005 14.1% 10,804 14.7% 7,582 15.3% 6,265 13.5%
Depreciation and amortization... 32,735 15.0% 14,355 9.2% 5,554 7.6% 2,786 5.6% 2,551 5.5%
-------- -------- ------- ------- -------
Total expenses............ 235,051 107.7% 159,995 102.6% 74,969 102.1% 50,260 101.3% 45,641 98.5%
-------- -------- ------- ------- -------
Operating (loss) income........... (16,757) (7.7)% (4,063) (2.6)% (1,522) (2.1)% (648) (1.3)% 718 1.5%
Interest expense.................. 17,489 8.0% 5,409 3.5% 2,671 3.6% 1,998 4.0% 1,742 3.7%
Other income (expense)............ 1,836 0.8% 876 0.6% 509 0.7% 505 1.0% (9) 0.0%
-------- -------- ------- ------- -------
Loss before taxes................. (32,410) (14.9)% (8,596) (5.5)% (3,684) (5.0)% (2,141) (4.3)% (1,033) (2.2)%
Income tax expense (benefit)...... (74) 0.0% (1,169) (0.7)% (552) (0.7)% 138 0.3% 60 0.1%
-------- -------- ------- ------- -------
Net loss.......................... $(32,337) (14.9)% $ (7,427) (4.8)% $(3,132) (4.3)% $(2,279) (4.6)% (1,093) (2.3)%
======== ======== ======= ======= =======
Net loss per share................ (234.95) (53.96) (34.80) (23.43) (8.27)
======== ======== ======= ======= =======
BALANCE SHEET DATA(B) (END OF
PERIOD):
Total assets...................... $174,764 $211,530 $84,655 $23,893 $21,719
Long-term obligations, including
current maturities.............. 171,230 177,916 51,661 26,923 21,505
Shareholders' equity (deficit).... (23,028) 9,309 11,736 (8,838) (4,820)
OTHER FINANCIAL DATA:
Ratio of earnings to fixed
charges(c)...................... -- -- -- -- --
</TABLE>
- ---------------
(a) The statement of operations data includes the operating results of Bromar
since its acquisition on October 31, 1996, Tower since its acquisition on
May 31, 1997 and Atlas since its acquisition on December 19, 1997. RMSI has
accounted for the Atlas acquisition effective December 31, 1997 for
financial reporting purposes. The results of operations of Atlas during the
period December 19, 1997 through December 31, 1997 were not material.
(b) The balance sheet data at December 31, 1998 and 1997 reflects the October
31, 1996 acquisition of Bromar, the May 31, 1997 acquisition of Tower and
the December 19, 1997 acquisition of Atlas. RMSI has accounted for the Atlas
acquisition effective December 31, 1997 for financial reporting purposes.
The results of operations of Atlas during the period December 19, 1997
through December 31, 1997 were not material. The balance sheet data at
December 31, 1996 reflects the October 31, 1996 acquisition of Bromar. The
balance sheet data at December 31, 1998 and 1997 also reflects the proceeds
of our $100 million notes issued on December 19, 1997.
(c) For purposes of this calculation, "earnings" consist of income (loss) before
income taxes (benefit) and fixed charges. "Fixed charges" consist of
interest expense, amortization of deferred financing fees and the component
of rental expense believed by management to be representative of the
interest factor thereon (deemed to be one-third of rental expense). Earnings
were insufficient to cover fixed charges by $32.4 million, $8.6 million,
$3.7 million, $2.1 million, and $1 million for the years ended December 31,
1998, 1997, 1996, 1995 and 1994, respectively.
26
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis includes the historical results of
our operations and financial condition. RMSI, which has no independent
operations, was formed for the purpose of serving as the holding company for
MSSC and its subsidiaries and Atlas and its subsidiaries. RMSI is the primary
obligor with respect to certain debt obligations, including the notes described
in this prospectus. This discussion and analysis should be read in conjunction
with RMSI's historical financial statements and accompanying footnote
disclosures.
HISTORICAL RESULTS OF OPERATIONS
General
RMSI is one of the largest food brokers in the United States, with
operations covering the western, southeastern, south central, and mid-Atlantic
regions of the United States. RMSI provides a comprehensive array of sales,
marketing, merchandising, and order management services to over 1700
manufacturers, known as "Principals," of consumer goods and products. RMSI
markets the products of these Principals to leading retailers and wholesalers,
known as "Customers," operating in a variety of trade channels, including
grocery stores, mass merchandisers, membership warehouses, drug stores and
convenience stores. RMSI is generally paid a percentage of product sales made by
Principals to Customers. This percentage is normally a commission of 3-5% for
Principal accounts for which it renders full services. RMSI does not assume
ownership of the products it markets for Principals.
As part of its growth strategy, RMSI has been a leader in pursuing
consolidation opportunities within the food brokerage industry. Since the
beginning of 1996, RMSI has completed 13 acquisitions of local and regional food
brokerage companies, including the acquisitions of Bromar, Tower, and Atlas.
RMSI acquired Bromar in October 1996 for total consideration of approximately
$29.8 million and assumed approximately $16.5 million in long-term debt and
operating lines of credit. RMSI acquired Tower in May 1997 for total
consideration of approximately $14.4 million and assumed approximately $8.9
million in long-term debt. RMSI acquired Atlas in December 1997 for total
consideration of approximately $45.7 million and assumed approximately $1.7
million in long-term debt. The food brokerage companies that RMSI has acquired
have generally had operating cost structures which include large salaries and
fringe benefits paid to the owners and other senior managers of these companies
and operating expenses relating to facilities and order management, sales and
other administrative functions redundant to those performed by RMSI.
On a historical basis, RMSI's revenue has been fairly consistent throughout
the year, with some seasonal increase realized during the fourth quarter of each
year due to increased sales during the holiday season.
27
<PAGE> 29
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Revenue increased to $218.3 million for the year ended December 31, 1998,
as compared to $155.9 million for the year ended December 31, 1997. RMSI's
revenue for the year ended December 31, 1998, include $49.4 million attributable
to Atlas. Revenue excluding Atlas for the year ended December 31, 1998,
increased $13 million (8.3%) from revenue for the year ended December 31, 1997
primarily as a result of the acquisition of Tower in May, 1997. Revenue for 1998
and 1997 included revenue attributable to Tower of $26.2 million and $15.2
million, respectively.
Total operating expenses increased to $235.1 million for the year ended
December 31, 1998, as compared to $160 million for the year ended December 31,
1997. The increase was due primarily to the inclusion of the Tower and Atlas
operating expenses for the year ended December 31, 1998. Operating expenses
(excluding amortization, depreciation, and the lease restructure charge), as a
percentage of revenues, declined to 91.9% for the year ended December 31, 1998,
as compared to 93.4% for the year ended December 31, 1997. This decrease was
primarily attributable to the integration of acquired businesses and elimination
of duplicative personnel and facilities resulting in a reduction of salaries,
associated fringe benefits, automobiles, and sales and marketing expense.
Depreciation and amortization increased to $32.7 million (15% of revenue) in
1998 from $14.4 million (9.2% of revenue) in 1997. Approximately $8.9 million of
the increase is due to the amortization of intangible assets resulting from the
Tower and Atlas acquisitions and approximately $9.4 million of the increase is
due to the reduction of the estimated useful lives of goodwill and trained
workforce. The 1998 results also include a nonrecurring lease restructure charge
of $1.7 million (see "Accounting and Financial Disclosure" below). As a result
of these factors, our operating loss increased to $16.8 million for the year
ended December 31, 1998, as compared to an operating loss of $4.1 million for
the year ended December 31, 1997.
Operating income before depreciation, amortization, and the lease
restructure charge increased to $17.7 million for the year ended December 31,
1998, as compared to $10.3 million for the year ended December 31, 1997, as a
result of the factors noted above.
Interest expense increased to $17.5 million in the year ended December 31,
1998, as compared to $5.4 million for the year ended December 31, 1997,
primarily due to the issuance of the notes and increases in outstanding debt
associated with acquisitions.
Net loss increased to $32.3 million in the year ended December 31, 1998, as
compared to a net loss of $7.4 million in the year ended December 31, 1997, as a
result of the factors noted above.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Revenue increased to $155.9 million for the year ended December 31, 1997,
as compared to $73.4 million for the year ended December 31, 1996. The increase
was primarily attributable to the operations of Bromar and Tower, which were
acquired by RMSI in October 1996 and May 1997, respectively. Revenue for the
year ended December 31, 1997 included $71.2 million attributable to Bromar and
approximately $15.2 million attributable to Tower. RMSI's revenue for 1996
included Bromar revenue of $11.3 million for the two months ended December 31,
1996. Revenue (excluding Bromar and Tower) for the year ended December 31, 1997
increased 11.9% from the year ended December 31, 1996, as the result of several
smaller acquisitions.
Total operating expenses increased to $160 million for the year ended
December 31, 1997, as compared to $75 million for the year ended December 31,
1996. The increase was due primarily to the addition of Bromar's operating
expenses for the entire year and Tower's operating expenses from June 1, 1997.
Operating expenses (excluding amortization and depreciation), as a percentage of
revenues, did not change significantly from the previous year, decreasing to
93.4% for 1997, from 94.5% for 1996.
Operating income before depreciation and amortization increased to $10.3
million in 1997, as compared to $4 million in 1996, primarily attributable to
the inclusion of a full year of Bromar operating activity and seven months of
Tower operating activity. Operating loss increased to $4.1 million for the year
ended December 31, 1997, as compared to an operating loss of $1.5 million for
the year ended
28
<PAGE> 30
December 31, 1996, due to additional amortization expenses associated with the
Bromar and Tower acquisitions.
Interest expense increased to $5.4 million in 1997, as compared to $2.7
million in 1996, primarily due to increases in outstanding debt associated with
acquisitions completed during the year, increases in operating lines of credit,
and the issuance of the notes.
Net loss increased to $7.4 million in 1997, as compared to a net loss of
$3.1 million in 1996, as a result of the factors noted above.
LIQUIDITY AND CAPITAL RESOURCES
On December 19, 1997, RMSI completed a $100 million offering of notes. The
proceeds were used to acquire the common stock of Atlas for $19.8 million in
cash, repay approximately $13.8 million of existing Atlas indebtedness, repay
approximately $15.5 million of existing RMSI indebtedness, pay various debt
issue costs of approximately $5.3 million, and purchase and install software for
accounting and human resource applications totaling $3.1 million. RMSI intends
to use the remaining proceeds primarily for anticipated future acquisitions,
working capital, and general corporate purposes.
Net cash provided by operating activities was $1.7 million for the year
ended December 31, 1998, as compared to net cash provided by operating
activities of $0.2 million for the same period in 1997. Results for 1998 include
semi-annual interest payments aggregating $10 million during the year related to
the notes.
Net cash used in investing activities was $4.6 million for the year ended
December 31, 1998, as compared to $35.9 million for the year ended December 31,
1997. The decrease was due primarily to the cash paid toward the purchase of
Atlas ($33.6 million) in 1997. Total capital expenditures for the year ended
December 31, 1998 were $6.8 million as compared to $2.8 million for the year
ended December 31, 1997. This increase was due to RMSI's continued effort to
significantly improve computers, software and communications infrastructure.
Net cash used in financing activities was $11.8 million for the year ended
December 31, 1998, as compared to net cash provided by financing activities of
$77 million for the year ended December 31, 1997. In the year ended December 31,
1998, RMSI received no proceeds from borrowings or contributed capital, as
compared to net borrowings of $91.8 million and a capital contribution of $2.4
million for the year ended December 31, 1997. In the year ended December 31,
1997, we paid various debt issue costs of approximately $2 million compared to
$0.3 million for the year ended December 31, 1998. In the years ended December
31, 1998 and 1997, RMSI made principal payments on debt, deferred payment
agreements and capital lease obligations of $11.5 million and $15.1 million,
respectively. Payments in 1997 include a non-recurring payment of approximately
$1.2 million for an acquisition-related note assumed by RMSI.
RMSI's long-term obligations totaled $161.8 million as of December 31,
1998, as compared to $167.2 million as of December 31, 1997.
Effective with the issuance of the notes, RMSI's commitment (subject to
borrowing base provisions) under its senior credit facility was increased to $25
million. As of December 31, 1998, no borrowings were outstanding under this
facility. The amount available under the facility, as amended, was approximately
$12.1 million, net of an outstanding letter of credit in the amount of $1.4
million.
RMSI believes that cash flows provided by our operations, together with our
existing cash and amounts available under the senior credit facility, should be
sufficient to fund our debt service requirements, working capital needs, capital
expenditures, and other operating expenses in the foreseeable future. RMSI's
future operating performance and ability to service or refinance the notes will
be subject to future economic conditions and to financial, business, and other
factors, many of which are beyond our control.
29
<PAGE> 31
The year 2000 issue exists because many computer systems and applications
currently use two-digit date fields to designate a year. As the century date
change occurs, date sensitive systems recognize the year 2000 as 1900 or not at
all. The inability to recognize or properly respond to the year 2000 issue may
cause information technology (IT) systems and non-IT systems to incorrectly
process data resulting in among other things, a temporary inability to process
transactions or otherwise engage in normal business activities. Non-IT systems
include climate control, copy machines, telephone systems and other comparable
systems.
We completed our assessment of both our IT and non-IT systems for potential
exposure to problems associated with year 2000 issues. Our assessment and
evaluation efforts have included testing systems, inquiries with third parties
and other research.
Primarily as a result of the implementation of upgrades of the order
management system and the migration to PeopleSoft financial systems in 1998, we
believe that we have substantially reduced our potential exposure to operational
disruptions resulting from year 2000 issues as both the order management system
and PeopleSoft are year 2000 compliant. The conversion to PeopleSoft was part of
our overall plan to integrate the operations of recently acquired businesses.
Substantially all of the costs incurred by RMSI relating to the improvement of
our order management system were incurred in connection with planned upgrading
activities rather than in response to the results of our year 2000 compliance
evaluation.
We intend to replace several telephone systems before September 30, 1999
because they are not year 2000 compliant. The estimated cost of the new
telephone systems is $200,000. Additionally, we plan to replace personal
computers which cannot be upgraded valued at approximately $200,000 before
September 30, 1999.
RMSI is vulnerable to the failure by principals, customers and third-party
vendors to identify and remedy their own year 2000 issues. Although we have
initiated efforts to communicate with such parties regarding their year 2000
compliance efforts, there can be no assurance that any one or more of these
parties will not experience year 2000 problems or that such problems will not
have a material adverse effect on RMSI.
RMSI has developed a contingency plan to transmit data that is ordinarily
transmitted on the EDI system to principals, customers and third-party vendors
that are not year 2000 compliant. Other than with respect to the transmission of
such data, RMSI has not developed a contingency plan in the event that we have
not achieved year 2000 compliance on or prior to December 31, 1999. The results
of our assessment and evaluation efforts to date have not yet identified a need
for such contingency planning. We intend to continue to assess our year 2000
compliance, to implement our year 2000 compliance plans and to communicate with
material third parties regarding their year 2000 compliance efforts. In the
event that we develop information indicating that contingency planning would be
prudent, we intend to undertake such planning and to implement appropriate
measures accordingly.
ACCOUNTING AND FINANCIAL DISCLOSURE
Effective January 1, 1998, RMSI reduced the amortization period of goodwill
from ten years to five years to more accurately reflect the current estimated
useful life of the recorded intangibles.
During the second quarter of 1998, we completed an assessment of our
facilities requirements in an effort to streamline our operations and improve
our cost structure. In connection with this assessment, we recorded a charge of
$1.7 million for lease restructuring costs.
LEGAL PROCEEDINGS
In the ordinary course of business, various suits and claims are filed
against RMSI. We are not a party to any legal proceedings that will, in the
opinion of our management, have a material adverse effect on our business or
financial condition.
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NOTE REGARDING "FORWARD LOOKING STATEMENTS"
The information set forth herein includes "forward looking statements"
within the meaning of the securities laws. All statements regarding RMSI's
expected financial position, business, and financing plans are forward looking
statements. Although we believe that the expectations reflected in such forward
looking statements are reasonable, we can give no assurance that such
expectations will prove to have been correct. Important factors that could cause
actual results to differ materially from such expectations ("cautionary
statements") are disclosed in this document and should be considered in
conjunction with the forward looking statements included in this document. All
subsequent written and oral forward looking statements attributable to RMSI, or
persons acting on our behalf, are expressly qualified in their entirety by the
cautionary statements.
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THE BUSINESS
OVERVIEW
RMSI is one of the largest food brokers in the United States. We represent
over 1700 manufacturers of consumer goods and products. These manufacturers are
known in the food brokerage industry as "Principals." We sell and market our
Principals' products to retailers and wholesalers known in the industry as
"Customers." These Customers include grocery stores, mass merchandisers (such as
Wal-Mart), membership warehouses (such as Sam's Club), drug stores and
convenience stores. We provide a comprehensive array of sales, marketing,
merchandising and order management services to our Principals and Customers. Our
goal is to maximize the sales volume of our Principals' products through the
various services and technology we provide.
RMSI has long-term relationships with a large number of major Principals
and Customers. Del Monte, Great Spring Waters of America (Perrier), Nestle, Kal
Kan, and Ocean Spray are some of our largest Principals. Safeway, Albertsons,
Food Lion, Winn Dixie and Publix are some of our largest Customers. We employ
over 1000 account service and business development personnel. These employees
work closely with Principals developing and planning sales programs. We also
have over 2300 retail and merchandising employees who implement these sales
programs at the Customers' retail stores, by providing display, shelf
management, schematic design, pricing and promotional services. We believe that
we have built and maintained long-term Principal and Customer relationships by:
- providing superior sales, marketing, retail and order management
services;
- utilizing information technology to collect and analyze local market data
to optimize sales; and
- providing wide geographic coverage of the country.
BUSINESS STRENGTHS
Our management believes that RMSI benefits from the following competitive
advantages:
An Industry Leader. RMSI is one of the largest food brokers in the United
States with operations primarily in the western, southeastern, south central and
mid-Atlantic regions. We have gained our strong national position through a
combination of strategic acquisitions and internal growth. Our size and market
penetration enable us to effectively develop and execute product sales plans
across multiple geographic regions for our Principals and Customers. Our
knowledge of local and regional markets allows us to customize these plans for
our Principals and Customers based on local conditions.
Dedicated Client Support of Principals and Customers. RMSI's reputation for
quality and service, as well as our broad geographic presence, has enabled us to
establish and strengthen our long-term relationships with our Principals and
Customers. We have over 1700 Principal relationships. Our top 5 Principals are
Del Monte, Great Springs Water of America (Perrier), Nestle, Kal Kan and Ocean
Spray. These 5 Principals represent collectively less than 15% of our revenue.
We also enjoy strong relationships with our Customers, including Safeway,
Albertsons, Food Lion, Winn Dixie and Publix. Senior account executives maintain
primary relationships with Principals and Customers and work with them to
develop sales programs. We employ over 2300 retail representatives to support
our Principals' merchandising efforts in the retail stores. These employees gain
a working knowledge of their Principals' accounts and develop a close working
relationship with store managers. This dedicated client support to Principals
and Customers gives us a competitive advantage over competitors that provide
similar services through temporary workers less knowledgeable about the local
markets.
Innovative Marketing Through Use of Technology and Market Information. RMSI
has access to extensive local market data which tracks the sales performance of
our Principals' products. We use both retail information that we collect and
data that we receive from national marketing research companies, including
Nielsen and Information Resources Inc. We developed an information technology
system that collects and downloads individual store sales data into a central
reporting system. We use store-specific
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product information, local demographic information and information about store
conditions to understand consumer buying habits in local markets. From this
knowledge, we develop and execute targeted consumer promotions for our
Principals' products and strategic marketing plans for Principals and Customers.
Category analysts work inside many major grocery stores to assist the retailers
with shelf schematics, category layouts and total store space plans. We maximize
the efficiency of our communications with Principals and Customers through local
and wide area networks. We also utilize an Electronic Data Interchange system
(commonly referred to as "EDI") to process Customer orders. This system allows
us to process orders in a more timely and efficient manner. We believe that our
Customer relationships are strengthened by providing these services, which also
serves to attract new Principals.
BUSINESS STRATEGY
RMSI was an early leader in pursuing consolidation opportunities within the
food brokerage industry. We have completed 13 acquisitions of local and regional
food brokerage companies since the beginning of 1996. We plan to provide a local
presence in each location where Customers purchase products (referred to within
the industry as "procurement points") and retail coverage for our Principals'
products. We expect to maintain our high level of service to Principals and
Customers while we continue our growth strategy. We intend to achieve our
strategy through the following measures:
Pursue Consolidation Strategy. RMSI intends to continue to acquire local
and regional food brokerage companies. We have identified several potential
companies which operate in areas in which we currently do not have a strong
presence. We also intend to acquire food brokers in our existing markets to
enhance our current operations. Potential target companies must have strong
account service relationships, complementary product lines and compatible
financial strengths. We have been engaged in negotiations and have recently
entered into letters of intent with two regional food brokerage companies, each
with branch offices located throughout the midwest. We intend to finance these
acquisitions with combinations of cash and deferred payment obligations. These
acquisitions are currently scheduled to be consummated by the end of April 1999,
and are discussed further under the heading "Recent Developments" below.
National Principals generally prefer to deal with fewer brokers with an
ability to cover a large region of the country. RMSI therefore believes that
additional strategic acquisitions will allow us to better service our existing
Principals and attract new Principals seeking nationwide coverage. Our 1997
acquisition of Atlas Marketing Company, Inc. ("Atlas") allowed us to expand our
coverage into the southeast and mid-Atlantic regions of the United States. We
now anticipate expanding our coverage into the midwest region with the
consummation of the two pending acquisitions.
Develop Principal Relationships and Increase Customer Coverage. RMSI
expects to expand our Principal base through acquisitions. We also believe we
can attract new Principals which recognize our ability to provide superior
marketing services on both a national and local basis at a cost much lower than
what a Principal could provide through its own sales force. Additionally, we
believe that 30 retailers and wholesalers will represent approximately 80% of
grocery store revenue within 3 to 5 years. Our presence in as many geographic
areas as possible will allow us to both maintain our current Customer
relationships and develop new ones during these anticipated retailer
consolidations.
RMSI's Channel Marketing division represents Principals that sell their
products in non-grocery classes of trade. This division will continue developing
relationships with mass merchandisers and membership warehouses and expand
existing Principals' products into these non-grocery outlets. Our current
relationships include Wal-Mart, Sam's Club, Kmart and Target. This division
currently provides retail services to non-grocery customers located in every
state.
Increase Hybrid Service Agreements with Principals. RMSI generally provides
Customers with a full range of account, retail, marketing and sales services and
order management on behalf of its Principals. We receive commissions from
Principals based on a percentage of product sales. In the last several years, we
also have entered into agreements with Principals to provide only specified
retail services (referred to as "hybrid" agreements). We are compensated by a
percentage of sales, by a flat fee per service provided, or a combination of
both. We believe that manufacturers with sales personnel that previously did not
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utilize brokers are beginning to outsource retail services to eliminate the
expense of maintaining their own retail representatives. We believe we are well
positioned to take advantage of this trend due to our broad geographic coverage
and knowledge of local markets. Hybrid agreements currently represent nearly 8%
of RMSI's revenue. We anticipate that hybrid agreements will, in the future,
generate significant revenue and attract new Principals.
COMPANY HISTORY
RMSI's predecessor was a food brokerage business formed in 1947. Our
business, until the beginning of 1996, was primarily limited to Texas, Florida
and Georgia. Since that time, we have expanded our operations through several
strategic acquisitions. We now conduct business primarily in the western,
southeastern, south central and mid-Atlantic regions of the United States.
ACQUISITION ACTIVITIES
RMSI has been a leader in pursuing consolidation opportunities within the
food brokerage industry. Our strategy is to make future acquisitions in areas
where we do not currently operate, including the midwest and northeast regions,
to better service our Principals and Customers.
Since the beginning of 1996, we have completed 13 acquisitions of local and
regional food brokerage companies. These acquisitions have enabled us to
increase the number of leading national Principals and Customers we serve and
expand our operations onto the east and west coasts. We have been able to
improve the operations of the acquired companies through:
(1) the end of high compensation to owners and senior management in some of
the companies;
(2) the reduction of personnel performing redundant job functions; and
(3) the consolidation of local offices and computer support facilities.
Our two largest acquisitions since the beginning of 1997 were the
acquisitions of Tower and Atlas, for total consideration of $14.4 million and
approximately $45.7 million, respectively. Tower served Principals and Customers
primarily in Texas. Atlas was based in Charlotte, North Carolina and served
Principals and Customers in the southeast and mid-Atlantic regions of the United
States.
RMSI did not make any acquisitions in 1998, but we have identified
potential target companies for acquisition in 1999. We have been engaged in
negotiations and have recently entered into letters of intent with 2 regional
food brokerage companies. Each company has a strong presence in the midwest. We
intend to finance these acquisitions through combinations of cash and notes. The
acquisitions are currently scheduled to be consummated by the end of April 1999.
Historically, we have purchased local and regional food brokers for a
combination of cash and deferred obligations. Deferred obligations consist of
covenants not to compete and deferred payment and compensation plans. As of
December 31, 1998, RMSI had outstanding $26.9 million in covenants not to
compete and $18.2 million in total deferred payment and compensation plans.
FOOD BROKERAGE INDUSTRY
Overview
Food brokers offer sales, marketing, merchandising and order management
services to Principals and Customers. They are generally paid by Principals
based on a percentage of product sales made to Customers. Sales are primarily
made to grocery stores operated by Customers. The grocery store industry is
characterized by stable growth based on modest price and population increases.
According to Progressive Grocer magazine, grocery store revenue has grown from
$210 billion in 1985 to $423 billion in 1998. Industry sources report that,
during that same period, the percentage of total grocery store revenue generated
from the sale of products placed by food brokers rose from 45% to 60%. The 1998
total revenue for the food brokerage industry was approximately $240 billion.
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The services provided by food brokers can generally be divided into 4
functions:
- Account Service and Business Development: an overall sales planning
function involving the coordination of all food broker services provided
to Principals and Customers;
- Retail Services: executing sales and merchandising plans at the store
level;
- Marketing Services: providing marketing recommendations targeted to local
market conditions based on retail data management and analysis; and
- Order Management: receiving orders from Customers, reconciling Principal
invoices with Customer orders, and processing promotional allowances and
other credits for Customers.
Principals use food brokers as a cost-effective alternative to a direct
sales force. Principals rely on food brokers to provide local market
penetration, integrated brand and category management and access to local
merchandising data. The services provided by food brokers enable Customers to
efficiently source products from multiple Principals, reduce in-store personnel
and benefit from food brokers' merchandising and promotional expertise and
knowledge of local market conditions.
Trends
The food brokerage industry has historically been comprised of many small
food brokers serving local markets and a few large food brokers serving multiple
regions of the country. There are 2 major trends in the food brokerage industry:
(1) consolidation within the industry, including among Principals and
Customers; and
(2) increasing demands for the application of technology.
The entire food distribution chain has been consolidating over the past 10
years. During that period, the number of food brokers has decreased from
approximately 2500 to approximately 650. We believe that the consolidation of
food brokers is primarily the result of a desire by Principals and Customers to
manage their businesses throughout the United States on a more efficient basis.
As a result of the consolidations, many national Principals are favoring food
brokers which have strong relationships with major Customers and wide-ranging
geographic coverage. The consolidation among Principals and Customers has
further been driven by the need to achieve economies of scale, and thus reduce
costs, in an increasingly competitive marketplace.
The increasing need for information technology to gather store information
regarding the performance of Principals' products and local market conditions is
another trend in the food brokerage industry. Because of the increasing need for
information at the retail level, Principals and Customers are selecting food
brokers that have the technology, personnel and resources to deliver this
information across multiple geographic markets. Technology currently allows food
brokers to generate reports analyzing demographics and revenues by brand and
product group to allow Principals and Customers to respond to the different
needs of consumers in local markets. The costs of equipment, software and
personnel necessary to meet these technology requirements are beyond the means
of many small food brokers.
DESCRIPTION OF SERVICES PROVIDED BY RMSI
The services provided by RMSI can be divided into 4 categories:
(1) account service and business development;
(2) retail services;
(3) marketing services; and
(4) order management.
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Traditionally, we have provided Principals with a full array of these
services and we have been paid by Principals based on a percentage of products
sold. This percentage is typically a commission of 3-5%. In recent years, we
have entered into hybrid agreements under which we provide only specified retail
services. These arrangements are in response to Principals that have started
outsourcing retail services. These services primarily include initial retail
shelf set-ups and follow-up shelf management. In hybrid agreements, we are
compensated for providing services either as a percentage of product sales, a
flat fee, or a combination of both. We believe that offering hybrid services
will attract new Principals and may result in sales of additional services to
Principals. For the end of 1998, approximately 92% and 8% of our revenue was
derived from full services and hybrid services, respectively.
Account Service and Business Development. RMSI's Brand Development Managers
("BDMs") and Customer Development Managers ("CDMs") are senior executives who
act as the primary interface between our largest Principals and Customers. The
BDMs are dedicated to and work closely with Principals to develop strategic
sales plans for particular products. They also assist Principals in achieving
their merchandising goals, including those related to product distribution and
shelf placement. CDMs serve specific Customers at the headquarters level. They
work with Customers in the development of category management initiatives and
shelf schematics. Category management involves the strategic grouping and
positioning of a Principal's product among other similar type products. The
sales plans developed by BDMs and CDMs are executed through the account
executive service teams. These teams coordinate and implement the specific sales
initiatives on a local basis. For smaller Principals and Customers, these
services are performed on a local level by account executives. RMSI currently
employs approximately 1000 account service personnel.
Retail Services. RMSI's retail and merchandising service personnel provide
Principals and Customers with an in-store presence in order to assess product
performance and merchandising conditions. Retail representatives develop
relationships with store managers and assist account executives in developing
sales plans for Principals' products. Our Retail Sales Organization executes
sales plans at the store level by providing merchandising, shelf management,
display, schematic design, pricing and promotional program services. It is also
responsible for collecting and reporting in-store conditions. Additionally, we
assist Customers with quality assurance and product damage control. RMSI
currently employs over 2300 retail and merchandising service personnel.
Marketing Services. RMSI's marketing services group uses current retail
information it collects, together with data received from national marketing
research companies to analyze local market conditions and develop marketing
strategies for our Principals. Retail data is used to determine how products
should be priced and placed, the optimal mix of current and new products, and
the types of promotions desirable to increase sales. Our marketing services
group includes approximately 90 people, both at the corporate, regional and
local levels. The group also initiates and promotes local market events, which
often involve sponsorship by Principals and Customers of charity promotions, to
build brand equity for products.
Order Management. RMSI performs all major order management functions to
facilitate the movement of goods from our Principals to Customers. All ordering
responsibility begins at the local market. RMSI has a centralized order
management system responsible for the receipt and transmission of electronic
orders through EDI. We are able to verify quantities, prices, pack sizes and
promotions through the use of this system. Our order management system also
reconciles Principal invoices with Customer purchase orders and processes
promotional allowances and other credits for Customers. Approximately 30
employees work in the order management group at the corporate level. We also
employ account administrators and customer service representatives who perform
order management functions in the local markets.
MARKETS
RMSI provides full-service brokerage services to markets in 33 states
throughout the western, southeastern, south central and mid-Atlantic regions of
the United States representing 29.5%, 17.6%, 22.2%, and 22.3% respectively, of
our revenue for the year ended December 31, 1998. Within these
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regions, California, Florida, Texas and North Carolina represent the states in
which we generate the largest revenue. We serve these markets through 57 local
offices, which provide both Principal and Customer headquarters' services and
in-store retail and merchandising services.
NEW BUSINESS DEVELOPMENT
RMSI's sales and marketing efforts are designed to develop new business in
national, regional and local markets. Our BDMs and CDMs are primarily
responsible for new business development through existing Principals and
Customers. Through their established relationships with Principals and
Customers, the BDMs and CDMs have an understanding of the needs and objectives
of these clients. From this information, we are able to develop sales plans
specifically designed to meet the new business needs and objectives of both
Principals and Customers. In addition, our senior management takes an active
leadership role in new business development both in pursuing new relationships
and fostering existing ones. Management believes that its long-term
relationships with senior management of leading national Principals and
Customers and its ability to create customized sales plans provide RMSI with a
competitive advantage in winning new business within its existing client base.
PRINCIPALS
RMSI provides a comprehensive array of marketing, retailing, merchandising
and order management services to over 1700 manufacturers of consumer goods and
products. We believe that we have been able to establish numerous long-term
relationships with some of the leading Principals in the United States due to
our strong reputation, quality of service and market coverage. Our top five
principals include Del Monte, Great Springs Water of America (Perrier), Nestle,
Kal Kan and Ocean Spray. These Principals represent less than 15% of our
revenue. Our Principals provide a diverse and stable base of revenue for RMSI
across geographic markets. We believe our ability to develop strong
relationships with leading national Principals has been advanced by the
establishment of relationships with management and personnel at various levels
within the Principals' organizations.
While we enjoy long-term relationships with many of our Principals, the
typical brokerage contract in the industry provides for a 30 day termination
clause. The Principal and Customer turnover that we have experienced has been
largely due to consolidations among Principals and Customers. Our broad
geographic coverage serves to reduce the risk of loss of Principals and
Customers resulting from the relocation of the post-consolidation headquarters.
CUSTOMERS
RMSI markets and sells its Principals' products to grocery stores, mass
merchandisers, membership warehouses, drug stores and convenience stores across
the country. After a Customer has decided to sell a Principal's product, we
provide detailed sales planning and full in-store retail and merchandising
support.
We believe that the strength of our Customer relationships has been driven
by our ability to provide superior sales, marketing and merchandising services,
technologically advanced order management and innovative promotional planning.
Our relationships with Customers are also based upon our ability to satisfy a
Customer's geographic needs for services. Recent consolidations among retailers
have resulted in fewer, but larger Customers that operate in a greater number of
geographic markets. These consolidations have resulted in the geographic
relocation of some Customer procurement points.
Our 5 largest Customers include Albertsons, Publix, Winn Dixie, Safeway and
Food Lion. These Customers collectively represented approximately 34% of our
third and fourth quarter revenues in 1998. The remaining revenue is generated
from sales to wholesalers, mass merchandisers and membership warehouses, and
drugstore chains.
We believe that consumers' purchase points for food and other products,
traditionally grocery stores, now include non-grocery outlets such as
mass-merchandisers and membership warehouses. Our Channel Marketing Division
markets and sells our Principals' products through these alternative retail
outlets. This
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division is structured to provide services through teams dedicated to a
particular non-grocery Customer. Our broad geographic presence and technological
capabilities have attracted large, national chains, such as Wal-Mart, Kmart,
Target and Sam's Club. We are a preferred provider to Wal-Mart. Sales to
alternative channel Customers represented approximately 5.5% of our 1998
revenue.
MANAGEMENT INFORMATION SYSTEMS
A trend in the food brokerage industry has been the development of
technological advances. RMSI has invested in the application of current retail
technology to provide Principals and Customers with the most efficient and
useful information available.
EDI. The EDI system streamlines order communications between food brokers,
Customers and Principals. Orders sent by EDI are transmitted on-line from the
Customer to us. We then place the order with the Principal via EDI. The EDI
system significantly reduces order input errors and other inefficiencies.
Currently, the majority of our larger Principals and Customers utilize EDI and
nearly 80% of all sales are made through EDI orders.
Retail Information. RMSI utilizes an advanced retail reporting system
called RW3 Enterprise to provide Principals with current in-store data regarding
their products. Retail representatives record in-store merchandising conditions
using small, hand-held computers. This information is then downloaded to our
retail reporting system. This system allows our retail employees to access data
from Customers' retail outlets to effectively respond to changing conditions.
PeopleSoft Conversion. In 1998, RMSI made a substantial investment to
upgrade its financial and human resources systems. RMSI purchased application
software from PeopleSoft and hired a consulting firm to assist in the
implementation of these new systems. We used approximately $3.1 million of the
proceeds from the outstanding notes to purchase the software license and for
installation in connection with this upgrade.
COMPETITION
The food brokerage market is large and fragmented, with many small brokers
serving numerous local markets and a few large brokers serving multiple regions
in the United States.
The entire food distribution chain has been consolidating over the past 10
years. As a result, large brokers that can provide services across geographic
markets have a competitive advantage.
RMSI is one of the largest food brokers in the United States. We compete
with other food brokers for product lines based primarily on breadth of
geographic coverage and the level of services provided. Our chief competitors
are Kelly Clark/Acosta/PMI, Merkert American, Cross Mark and Advantage Sales and
Marketing. We also compete with third party merchandising companies, such as PIA
Merchandising Services, Inc. for retail services only.
FACILITIES
RMSI owns administrative facilities in Orange County, California, Phoenix,
Arizona and Charlotte, North Carolina. In August 1998, we relocated our
headquarters from Irving, Texas to Dallas. Our lease obligations continue on the
Irving space. The Irving building is owned by a limited partnership, of which
RMSI's chief executive officer, Ron Pederson, is the general partner. The
partnership has recently signed a purchase agreement with a prospective
purchaser for the sale of the building. The sale is currently expected to close,
subject to the purchaser's right to conduct due diligence, at the end of April
1999. If the purchase is consummated, we expect to be released from further
liability under this lease.
Our headquarters are now located in a new office building in Dallas, Texas.
The headquarters are leased and consist of approximately 40,700 square feet. We
also lease office space in 54 other locations in 27 states. As we complete
acquisitions, we intend to systematically reduce the number of leased
facilities.
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EMPLOYEES
As of December 31, 1998, RMSI had a total of 3869 employees, including 2958
full-time employees and 911 part-time employees. As a result of internal growth
and strategic acquisitions, we expect to have 4500 employees by the end of 1999.
None of our employees are union members.
LEGAL PROCEEDINGS
Various suits and claims are filed against RMSI in the ordinary course of
business. We are not party to any legal proceeding which, in the opinion of our
management, will have a material adverse effect on our business or financial
condition.
RECENT DEVELOPMENTS
Planned Acquisitions. We have been engaged in negotiations and have
recently entered into letters of intent with 2 regional food brokerage
companies. Each company has a strong presence in the midwest. The purchase price
for all of the outstanding capital stock of the larger of the 2 companies is not
to exceed $11 million. The purchase price for all of the outstanding capital
stock of the other target company is $4.2 million. We intend to finance these
acquisitions through combinations of cash and notes. In addition to the payment
of the purchase prices stated above, we will be assuming all of the outstanding
liabilities of these 2 companies as of the date of closing. The acquisitions are
currently scheduled to be completed by the end of April 1999.
Southeastern Food Service Operations. RMSI is in the process of terminating
and winding down its food service operations in Florida, Georgia and Tennessee.
Our food service division primarily sells products and related services to
restaurants and institutions such as hospitals and schools. At this time, we are
maintaining our food service operations in other areas of the country.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-4 (the "Registration Statement") under the Securities Act
with respect to the notes offered in this prospectus. This prospectus, which
forms part of the Registration Statement, does not contain all of the
information that is included in the Registration Statement. You will find
additional information about RMSI and the notes in the Registration Statement.
Any statements made in this prospectus concerning the provisions of legal
documents are not necessarily complete and you should read the documents that
are filed as exhibits to the Registration Statement for a more complete
understanding of the document or matter.
These documents are available without charge upon request from Nancy K.
Jagielski, General Counsel, 17855 N. Dallas Parkway, Suite 200, Dallas, Texas
75287, (972) 349-6200. To ensure the timely delivery of documents, any request
should be made by , 1999.
After the Registration Statement becomes effective, we will be subject to
the informational requirements of the Exchange Act, and will file periodic
reports, registration statements and other information with the SEC. You may
read and copy the Registration Statement and any of the other documents we file
with the SEC at the public reference facilities maintained by the SEC at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
SEC's regional offices located at 7 World Trade Center, New York, New York 10048
and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Please call the SEC at 1-800-SEC-0300 for more information on the public
reference rooms. In addition, reports and other filings are available to the
public on the SEC's web site at http://www.sec.gov.
If for any reason we are not subject to the reporting requirements of the
Securities Exchange Act of 1934 in the future, we will still be required under
the indenture governing the notes to furnish the holders of the notes with
certain financial and reporting information. See "Description of
Notes -- Covenants -- Reports" for a description of the information we are
required to provide.
MANAGEMENT
<TABLE>
<CAPTION>
NAME AGE TITLE(1)
- ---- --- --------
<S> <C> <C>
John P. Rochon....................................... 47 Chairman of the Board of
Directors
Ronald D. Pedersen................................... 59 President, Chief Executive
Officer and Director
Nick G. Bouras....................................... 46 Vice President, Assistant
Secretary and Director
Timothy M. Byrd...................................... 44 Chief Administrative Officer,
Assistant Treasurer and Director
Bruce A. Butler...................................... 50 Executive Vice President and
Director
Jeffrey B. Hill...................................... 44 Executive Vice President and
Director
Thomas J. Reynolds................................... 51 Director
M. Brian Healy....................................... 55 Executive Vice President, Chief
Financial Officer and Assistant
Treasurer
Richard Silvers...................................... 58 Executive Vice President and
Chief Information Officer
Carrine K. Reilly.................................... 43 Vice President, Treasurer and
Assistant Secretary
Nancy K. Jagielski................................... 37 Secretary and General Counsel
</TABLE>
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- ---------------
(1) RMSI does not have any employees, and none of the directors or officers of
RMSI receive compensation from RMSI for their services.
John P. Rochon is the Chairman of the Board of Directors of RMSI. Mr.
Rochon has served on MSSC's Board of Directors since 1996, and is currently
Chairman of the Board of Directors of Richmont Corporation, a merchant banking,
investment holding and trading company, and Chief Executive Officer of Mary Kay
Holding Corporation, a role he has had since 1991. Formerly, Mr. Rochon held
several executive positions with Mary Kay, Inc., including Vice Chairman, Chief
Financial Officer, Corporate Controller and Director of Manufacturing. Mr.
Rochon currently serves on the Board of Directors of Nu-kote Holding, Inc. and
Royal Appliance Company.
Ronald D. Pedersen is President, Chief Executive Officer and a Director of
RMSI and President, Chief Executive Officer and a Director of MSSC. Mr. Pedersen
has been in the food industry for over 30 years, including three years with
Anderson Clayton foods and 7 years with Colgate Palmolive. He is a past Chairman
and current member of the Board of the Association of Sales and Marketing
Companies.
Nick G. Bouras is Vice President, Assistant Secretary and a Director of
RMSI and Vice President, Assistant Secretary and a Director of MSSC. Mr. Bouras
has been President and Chief Executive Officer of Richmont Corporation since
1989. Prior to his role at Richmont, Mr. Bouras was Vice President, Investments
of Mary Kay, Inc. Mr. Bouras also spent several years as a tax accountant with
Ernst & Whinney and Touche Ross & Company.
Timothy M. Byrd is the Chief Administrative Officer, Assistant Treasurer
and a Director of RMSI and has served as the Chief Administrative Officer of
MSSC since September 1998 and as a Director of MSSC since 1996. Since 1990, Mr.
Byrd has been the Chief Financial Officer of Mary Kay Holding Corporation as
well as the Chief Financial Officer of Richmont Corporation. From 1980 to 1990,
Mr. Byrd served in various accounting and finance positions at Mary Kay, Inc.,
including Chief Financial Officer and Vice President and Controller. He is also
a member of the Office of the Chairman of Mary Kay Holding Corporation.
Thomas J. Reynolds is a Managing Director of Richmont Corporation, a
Director of RMSI and has served on MSSC's Board of Directors since 1996. Prior
to joining Richmont in 1986, Mr. Reynolds provided marketing, advertising and
sales promotion expertise to clients including S.C. Johnson & Son, Inc.,
Frito-Lay, Inc., Miller Brewing Company, General Motors Corp., Ocean Spray
Cranberries, Inc., Federal Express Corp., AT&T Corp., International Business
Machines Corp. and Coca-Cola Enterprises Inc. and its subsidiaries. Mr. Reynolds
is also a Professor Emeritus of Marketing and former Director of the Morris Hite
Center for Product Development and Marketing Science at the University of Texas
at Dallas.
Bruce A. Butler is Executive Vice President and a Director of RMSI. Mr.
Butler has held several positions since 1991 (including Vice President -- Branch
Manager, Tampa Operations and Director of Confection) and currently serves as
MSSC's Executive Vice President. Mr. Butler is responsible for all operating
units in MSSC and is a member of the Board of Directors of MSSC. Mr. Butler
began his career with MSSC when his former employer, the Trigg Company, Inc.,
was acquired by MSSC in 1991. Prior to that time, Mr. Butler held management
positions with the Kroger Company and Paul Inman Associates, Inc., a Detroit
based food broker.
Jeffrey B. Hill is Executive Vice President and a Director of RMSI. With
MSSC, Mr. Hill has served as Executive Vice President and President of the
Western Division. Mr. Hill held various management positions with Bromar (a
company acquired by MSSC), including CEO. He has also held management positions
with Combe, Inc. and Johnson & Johnson.
M. Brian Healy is Executive Vice President, Chief Financial Officer and
Assistant Treasurer of RMSI, a position he has held since May 1998. Mr. Healy
has been the senior financial and administrative officer of several NASDAQ, AMEX
and NYSE listed companies. He joined RMSI from Computer
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<PAGE> 43
Language Research, Inc., whose Fast-Tax division is the country's leading
provider of income tax software to accounting, corporate and banking sectors.
Richard A. Silvers is Executive Vice President and Chief Information
Officer of RMSI, a position he has held since January 1998. Mr. Silvers has more
than 25 years of technology-related experience, working with leading retailers
to provide technology solutions. He is the former CIO of Tandy Corporation; Vice
President, Management Information Systems (MIS) for H.E. Butt; Vice President,
MIS of Von's Grocery Company; and Vice President, MIS for Associated Grocers of
Arizona. He also held various MIS positions with J. Weingarten and
Harris-Teeter.
Carrine K. Reilly is Vice President and Treasurer of RMSI. Prior to joining
MSSC in October 1998, she was Vice President & Controller of a real estate
investment trust. Her previous experience includes business and tax consulting
with American Express and Arthur Andersen LLP. Ms. Reilly is a certified public
accountant.
Nancy K. Jagielski is Secretary and General Counsel of RMSI. She joined
MSSC in August 1998 as Corporate Counsel and was quickly promoted to General
Counsel to manage the legal department. Mrs. Jagielski has over 12 years of
legal experience and has worked in the corporate sections of large law firms
including Strasburger & Price L.L.P. and Akin, Gump, Strauss, Hauer, & Feld,
L.L.P. and in house as Executive Vice President and General Counsel for a
privately held healthcare business services company located in Dallas, Texas.
COMPENSATION OF NAMED EXECUTIVE OFFICERS
The Summary Compensation Table sets forth information concerning
compensation paid in the fiscal year ended 1998 to RMSI's Chief Executive
Officer and RMSI's 5 other most highly compensated executive officers (the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------ ------------------------
VARIABLE OTHER SECURITIES
COMPEN- ANNUAL UNDERLYING ALL OTHER
SATION COMPEN- OPTIONS/SARS COMPEN-
SALARY BONUS SATION(1) GRANTED SATION(2)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- --------------------------- ---- ------- -------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Ronald D. Pedersen................. 1998 451,000 -- -- 4,632
President, CEO and Director
Bruce A. Butler.................... 1998 317,153 27,500 249,883 -- 5,618
Executive Vice President and
Director
Jeffrey B. Hill.................... 1998 310,000 -- 41,491 888 5,632
Executive Vice President and
Director
Richard Silvers.................... 1998 183,192 -- 43,708 533 2,660
Executive Vice President and
Chief Information Officer
(commenced employment January 26,
1998)
M. Brian Healy..................... 1998 123,077 -- 355 81
Executive Vice President, Chief
Financial Officer and Assistant
Treasurer (commenced employment
on May 18, 1998)
Gary Guffey........................ 1998 186,722 -- -- 4,230
Executive Vice President and
Director (resigned on June 15,
1998)
</TABLE>
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<PAGE> 44
- ---------------
(1) Other Annual Compensation includes reimbursement of $243,113, $43,708 and
$33,696 in moving expenses for Messrs. Butler, Silvers and Hill,
respectively.
(2) MSSC's matching contributions to the 401(k) Plan in 1998 for the Named
Executive Officers were as follows: Mr. Pedersen, $4,500; Mr. Butler,
$5,486; Mr. Hill, $5,493; Mr. Silvers, $2,538; Mr. Healy, $0; and Mr.
Guffey, $4,153.80. MSSC paid for life insurance in 1998 for the Named
Executive Officers in the amounts as follows: Mr. Pedersen, $132; Mr.
Butler, $132; Mr. Hill, $132; Mr. Silvers, $122; Mr. Healy, $84; and Mr.
Guffey, $76.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Pursuant to RMSI's Incentive Plan, we have awarded senior management
appreciation rights ("SARs") to 36 key employees. Each SAR entitles the employee
to realize the appreciation in value of RMSI common stock over a 5 year period.
The following table sets forth information regarding SARs granted to the
Named Executive Officers during fiscal 1998.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL SAR GRANTS (1)(2) POTENTIAL REALIZABLE
----------------------------------------------- VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBER OF TOTAL SARS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR SAR
UNDERLYING EMPLOYEES EXERCISE TERM(3)
SARS IN FISCAL PRICE EXPIRATION ---------------------
NAME GRANTED(#) YEAR ($/SH) DATE 5%($) 10%($)
- ---- ---------- ---------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Ronald D. Pedersen................... -- -- -- -- -- --
Bruce M. Butler...................... -- -- -- -- -- --
Jeffrey B. Hill...................... 888 9.3% 518 12/31/07 289,790 731,375
Richard Silvers...................... 533 5.6% 518 12/31/07 173,939 438,989
M. Brian Healy....................... 355 3.7% 518 12/31/07 115,851 292,385
Gary Guffey.......................... -- -- -- -- -- --
</TABLE>
- ---------------
(1) SARs vest 5 years after the date of their grant and terminate 10 years from
the date of their grant, unless sooner exercised or cancelled. Once vested,
20% of the SARs become immediately exercisable and an additional 20% becomes
exercisable each year thereafter for 4 years.
(2) Upon a "change of control" (as such term is defined in the plan pursuant to
which the SARs are granted), all holders of outstanding SARs (whether vested
or unvested) are deemed to have exercised such SARs immediately upon the
occurrence of a change of control and cash is immediately due and payable in
respect of such SARs.
(3) The figures presented are based on the assumption that the stock price
underlying the SARs will appreciate at rates of 5% and 10% per year,
respectively, compounded over the full 10 year term of the SARs. However,
the holding terms of the SARs and actual appreciation in the value of the
underlying stock, if any, may vary substantially from these assumptions.
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<PAGE> 45
AGGREGATED SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END SAR VALUES
The following table provides information on the number of SARs held by the
Named Executive Officers at fiscal year-end 1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED SARS AT IN-THE-MONEY SARS AT
ACQUIRED ON VALUE FISCAL YEAR END(#) FISCAL YEAR END($)
EXERCISE REALIZED --------------------------- ------------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE(1)
- ---- ----------- -------- ----------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Ronald D. Pedersen..... 0 -- 0 0 0 --
Bruce M. Butler........ 0 -- 0 0 0 --
Jeffrey B. Hill........ 0 -- 0 888 0 --
Richard Silvers........ 0 -- 0 533 0 --
M. Brian Healy......... 0 -- 0 355 0 --
Gary Guffey............ 0 -- 0 0 0 --
</TABLE>
- ---------------
(1) Because all outstanding SARs have been issued for less than five years, none
of the outstanding SARs have vested or possess current value.
DEFERRED COMPENSATION
RMSI has entered into deferred compensation plans with each of Messrs.
Pedersen, Butler and Guffey pursuant to which Messrs. Pedersen, Butler and
Guffey will receive monthly payments upon the termination of their employment
from RMSI. The amount that each such Named Executive Officer is entitled to
receive upon termination of employment is as follows: Mr. Pedersen, $2,750,000;
Mr. Butler, $1,250,000; and Mr. Guffey, $950,000. Payments are to be made in
monthly installments over a period not to exceed 120 months. See "Management
Deferred Compensation Plans."
EMPLOYMENT AGREEMENTS
On April 2, 1996, RMSI entered into employment agreements with Ronald D.
Pedersen and Bruce A. Butler (individually, "Executive" and collectively, the
"Executives"). Under the employment agreements, the Executives are employed in
such executive capacity or capacities as determined by RMSI's board of
directors. Mr. Pedersen receives an annual base salary of $372,000, subject to
annual adjustment. Mr. Butler receives an annual base salary of $330,000,
subject to annual adjustment. In addition to the base salary, each Executive is
eligible to receive a bonus, pursuant to the company's bonus policy and subject
to the sole and exclusive discretion of the compensation committee of the board
of directors.
Mr. Butler's employment agreement provides for a 3 year term, expiring on
April 2, 1999. Mr. Pederson's employment agreement provides for a 5 year term
expiring on April 2, 2001. Each of the employment agreements is automatically
renewed for a 1 year period on its expiration date, and on each anniversary
thereof, unless the board of directors delivers to the Executive notice of
termination at least 1 year plus 120 days prior to the then-current expiration
date. If RMSI terminates an Executive without cause, such Executive will receive
all compensation and benefits entitled him under his employment agreement
through the expiration date. Following the expiration date, the Executives may
not compete with RMSI for a period of 1 year; however, an Executive terminated
for cause may not compete with RMSI for a period of 2 years following the
expiration date.
Bromar entered into an employment agreement (the "Hill Agreement") with
Jeffrey B. Hill effective as of October 18, 1996. Under the terms of the Hill
Agreement, Mr. Hill will serve as the President of Bromar, or in any other
capacity designated by the chief executive officer or the board. In addition,
under the Hill Agreement, Mr. Hill was appointed to the executive committee and
board of directors of Bromar. The minimum salary awarded to Mr. Hill will be the
greater of (1) $330,000 or (2) the salary level determined by the board of
Bromar, subject to annual review by the board of Bromar. Mr. Hill may not
44
<PAGE> 46
compete with Bromar during his employment and, for a period of 2 years following
the termination of Mr. Hill's employment with Bromar, he may not solicit the
services of any Bromar employee. Mr. Hill's employment under the Hill Agreement
commenced on October 18, 1996, and will continue through September 30, 2000. On
October 1 of each year, Mr. Hill's employment period is automatically extended
for 2 years, unless, at least 60 days before the next expiration date, either
party notifies the other in writing of his or its intention not to extend the
period of employment. If the Hill Agreement is terminated for cause, Mr. Hill
will not have the right to receive his salary or other benefits under the Hill
Agreement; however, RMSI, at its option, may continue to enforce Mr. Hill's
covenant not to compete for 2 years following Mr. Hill's termination. In such
event, Mr. Hill will receive 2 years' salary.
BENEFICIAL OWNERSHIP OF STOCK
The following table sets forth the beneficial ownership of the common stock
of RMSI by:
- each person who is known by RMSI to own beneficially more than 5% of the
common stock of RMSI;
- each of RMSI's directors and executive officers who are shareholders; and
- all directors and executive officers of RMSI as a group.
<TABLE>
<CAPTION>
NUMBER PERCENTAGE
OF SHARES OF SHARES
--------- ----------
<S> <C> <C>
5% STOCKHOLDERS
MS Acquisition Limited...................................... 82,581 60.0%
4300 Westgrove Drive
Dallas, Texas 75248
Jeffrey A. Watt............................................. 16,826 12.2%
OFFICERS AND DIRECTORS
John P. Rochon(1)........................................... -- --
Ronald D. Pedersen.......................................... 25,842 18.8%
Timothy M. Byrd(1).......................................... -- --
Nick G. Bouras(1)........................................... -- --
Bruce A. Butler............................................. 6,193 4.5%
Thomas J. Reynolds(1)....................................... -- --
All directors and executive officers of RMSI as a group..... 32,035 23.3%
</TABLE>
- ---------------
(1) Messrs. Rochon, Bouras, Byrd and Reynolds may be deemed to share beneficial
ownership of the 82,581 shares of common stock owned by MS Acquisition
Limited, a Texas limited partnership ("MS Acquisition"), by virtue of their
status as partners in the partnership which is the managing general partner
of Richmont Capital Partners I, L.P., which controls MS Acquisition. Messrs.
Rochon, Bouras, Byrd and Reynolds disclaim beneficial ownership of such
shares.
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<PAGE> 47
RELATIONSHIPS AND RELATED TRANSACTIONS
STOCKHOLDERS AGREEMENT
On October 7, 1997, RMSI entered into a stockholders agreement with MS
Acquisition, and Ronald D. Pederson, Bruce A. Butler, Gary R. Guffey and Jeffrey
A. Watt (collectively, the "Minority Stockholders"). These parties constitute
all of RMSI's common stockholders. Among other things, the stockholders
agreement:
(1) places significant restrictions on the ability of a Minority
Stockholder to transfer, pledge or otherwise dispose of his shares of RMSI
common stock prior to the initial public offering of RMSI common stock;
(2) grants "tag-along" rights (i.e., rights to participate in a sale
of RMSI common stock on a pro rata basis) to each Minority Stockholder in
connection with the sale by MS Acquisition of more than 5% of its common
stock of RMSI;
(3) places on the Minority Stockholders "come along" obligations
(i.e., MS Acquisition has the right to require Minority Stockholders to
participate in a sale of all RMSI common stock) with respect to all RMSI
common stock held by the Minority Stockholders, in connection with a sale
by MS Acquisition of all of its RMSI common stock to a non-affiliated third
party;
(4) grants to MS Acquisition, first, RMSI, second and other Minority
Stockholders, third, a right of first refusal in the event that a Minority
Stockholder or his transferee desires to transfer any RMSI common stock;
(5) grants, at any time during the first 15 days of each fiscal
quarter occurring between January 1, 2001 and December 31, 2003, to each
Minority Stockholder who is no longer an employee an option to sell, and
requires RMSI to purchase, his RMSI common stock, at a per share price
generally based on a negotiated multiple of RMSI's EBITDA less funded debt,
and payable in cash, notes, or a combination of both;
(6) grants, at any time during the first 15 days of the second full
fiscal quarter occurring after the death or disability of a Minority
Stockholder, to the legal guardian or representative of such deceased or
disabled Minority Stockholder, an option to sell, and requires RMSI to
purchase, the RMSI common stock owned by such deceased or disabled Minority
Stockholder, at a per share price generally based on a negotiated multiple
of RMSI's EBITDA less funded debt, and payable in cash, notes, or a
combination of both; and
(7) grants to RMSI an option to repurchase, at a purchase price
described in the Stockholders Agreement, all or any of the RMSI common
stock owned by any Minority Stockholder who has been terminated for cause
by RMSI or MSSC, has become disabled, or has transferred shares of RMSI
common stock to a third party by operation of law pursuant to or otherwise
in connection with any Minority Stockholder's divorce, bankruptcy or death.
The terms of our senior credit facility and the notes currently restrict
the amount of funds we may use, or our ability to incur additional indebtedness,
each of which may be necessary to satisfy our commitments under the stockholders
agreement.
In addition, the stockholders agreement contains a voting agreement, under
which 3 members of RMSI's Board of Directors will be nominated by Ronald D.
Pedersen and 4 members will be nominated by MS Acquisition. The stockholders
agreement will terminate upon the occurrence of specific events, including an
initial public offering of the RMSI common stock.
As of December 31, 1998, 2 of the 4 Minority Stockholders, owning an
aggregate of 16.7% of RMSI common stock, were no longer employed by RMSI.
46
<PAGE> 48
REGISTRATION RIGHTS AGREEMENT
Under a registration rights agreement between RMSI and MS Acquisition dated
as of October 7, 1997, RMSI granted demand registration rights and incidental
registration rights to MS Acquisition with respect to the sale of RMSI common
stock held by it. The registration rights agreement contains customary cutback
priority provisions relating to underwritten offerings.
EQUITY CONTRIBUTION AGREEMENT
In connection with RMSI's becoming the holding company of MSSC, on October
7, 1997, all of the stockholders of MSSC exchanged their MSSC common stock for
an equivalent number of shares of RMSI common stock.
GATEWAY LEASE AGREEMENT
On May 1, 1991, RMSI's predecessor entered into a 10 year lease (the
"Gateway Lease") with ABP Partners Ltd., a Texas partnership, relating to a
23,000 square foot building known as 2324 Gateway Drive in Irving, Texas. Ronald
D. Pedersen is a general partner of ABP Partners Ltd.
The Gateway Lease contains customary covenants and provisions. Under the
terms of the Gateway Lease, RMSI pays monthly rent of $20,700. In August 1998,
RMSI relocated its corporate headquarters and therefore, no longer occupies this
lease space. ABP Partners Ltd. recently entered into a purchase agreement with a
prospective purchaser for the sale of the building. Subject to the prospective
purchaser's right to conduct due diligence, the sale is expected to close at the
end of April 1999. If the building is sold, RMSI expects to be released from
further obligations under the Gateway Lease.
MANAGEMENT DEFERRED COMPENSATION PLANS
RMSI has entered into deferred compensation plans with the Minority
Stockholders (the "Management Deferred Compensation Plans") pursuant to which
the Minority Stockholders will receive payments upon termination of active
employment with RMSI. Payments of deferred compensation under the Management
Deferred Compensation Plans are to be made in monthly installments over a period
not to exceed 120 months. Pursuant to amendments to each of the Management
Deferred Compensation Plans, dated November 20, 1995, the Minority Stockholders
became fully vested in the Management Deferred Compensation Plans. The Minority
Stockholders are to receive aggregate deferred compensation of $6.9 million.
THE DEBT AGREEMENT
Pursuant to an agreement among MS Acquisition, the Minority Stockholders
and MSSC, dated as of September 12, 1997 (the "Debt Agreement"), certain
promissory notes held by MS Acquisition and the Minority Stockholders in the
amounts of $1.5 million and $2 million, respectively, were cancelled and
contributed to the capital of RMSI. In addition, MS Acquisition contributed $1.5
million in cash. Following the consummation of the transaction contemplated by
the Debt Agreement, the stock ownership of MSSC did not change.
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<PAGE> 49
DESCRIPTION OF NOTES
The outstanding notes were, and the notes to be issued in the Exchange
Offer will be, issued under an indenture dated as of December 19, 1997 (the
"Indenture") between RMSI, the Guarantor Subsidiaries and Chase Bank of Texas,
National Association (formerly known as Texas Commerce Bank National
Association), as Trustee (the "Trustee"). A copy of the Indenture is filed as an
exhibit to the Registration Statement which includes this prospectus and is
available to you upon request.
The terms of the outstanding notes and the notes to be issued in the
Exchange Offer include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). You can find the definitions of terms used in this
description under the subheading "Definitions" below.
The terms of the notes to be issued in the Exchange Offer are identical in
all material respects to the terms of the outstanding notes, except for transfer
restrictions relating to the outstanding notes. Any outstanding notes that
remain outstanding after the Exchange Offer, together with the notes issued in
the Exchange Offer, will be treated as a single class of securities under the
Indenture for voting purposes. When we refer to the term "Note" or "Notes" in
this "Description of Notes" section, we are referring to both the outstanding
notes and the notes to be issued in the Exchange Offer.
The Indenture also contains provisions which would allow us to issue up to
$50 million of additional notes (the "additional notes") having the same terms
as the Notes described in this section if we comply with the requirements
contained in the Indenture. If any additional notes are issued, they will be
considered part of the same issue as the Notes, and will vote on all matters
with these Notes. For purposes of this "Description of Notes" section, however,
reference to the "Notes" does not include the "additional notes."
The following description is a summary of the material provisions of the
Indenture. It does not restate the Indenture in its entirety. We urge you to
read the Indenture because it, and not this description, defines your rights as
holders of these Notes.
BRIEF DESCRIPTION OF THE NOTES AND THE SUBSIDIARY GUARANTEES
The Notes
The Notes:
- are general, unsecured obligations of RMSI;
- are subordinated in right of payment to all existing and future Senior
Indebtedness of RMSI;
- are senior in right of payment to all existing and future Subordinated
Obligations of RMSI; and
- are unconditionally guaranteed by the Subsidiary Guarantors.
The Subsidiary Guarantees
The Notes are guaranteed by the following Subsidiaries of RMSI, each of
which is referred to as a "Guarantor Subsidiary":
- Marketing Specialists Sales Company
- Bromar, Inc.
- Brokerage Services, Inc.
- Atlas Marketing Company, Inc.
- Century Food Brokers of Hickory, Inc.
- East Coast Food Brokerage, Inc.
48
<PAGE> 50
- Ultimate Food Sales, Inc.
- Cumberland Food Brokers, Inc.
- Meatmaster Brokerage, Inc.
Future Subsidiaries of RMSI will also be required to guarantee the Notes
under the circumstances described below under the heading
"Covenants -- Additional Guarantor Subsidiaries."
The Subsidiary Guarantees:
- are general, unsecured obligations of each Guarantor Subsidiary;
- are subordinated in right of payment to all existing and future Senior
Indebtedness of each Guarantor Subsidiary; and
- are senior in right of payment to all existing and future Subordinated
Obligations of each Guarantor Subsidiary.
As of December 31, 1998, RMSI and the Guarantor Subsidiaries had an
outstanding letter of credit issued under the Credit Agreement in the amount of
$1,371,777. As indicated above and discussed in detail under the heading
"Subordination" below, payments on the Notes and under the Subsidiary Guarantees
will be subordinated to the payment of Senior Indebtedness, including the letter
of credit. The Indenture also permits RMSI and the Subsidiary Guarantors to
incur additional Senior Indebtedness.
As of the date of this prospectus, all of our Subsidiaries are "Restricted
Subsidiaries." However, under the circumstances described below under the
heading "Covenants -- Designation of Restricted and Unrestricted Subsidiaries,"
we will be permitted to designate certain of our Subsidiaries as "Unrestricted
Subsidiaries." Unrestricted Subsidiaries will not be subject to many of the
covenants contained in the Indenture. Unrestricted Subsidiaries will not
guarantee these Notes.
PRINCIPAL, MATURITY AND INTEREST
We have issued outstanding notes in the aggregate principal amount of
$100,000,000. The notes issued in the Exchange Offer will be treated as a
continuation of the outstanding notes. The Notes mature on December 15, 2007.
The Notes bear interest at a rate equal to 10 1/8% per annum, payable
semi-annually in arrears on June 15 and December 15 of each year. We will make
each interest payment to the Holders of record of these Notes on the immediately
preceding June 1 or December 1.
Interest on the Notes is computed on the basis of a 360 day year comprised
of twelve 30 day months.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
Principal and interest payments on the Notes will be made at the corporate
trust office of the Trustee, at 2200 Ross Avenue, 5th Floor, Dallas, Texas 75201
unless we elect to make interest payments by check mailed to the Holders at
their registered addresses.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The Trustee has also been appointed to act as Paying Agent and Registrar.
We may change the Paying Agent and Registrar without prior notice to the Holders
of the Notes, and RMSI or any of our wholly-owned subsidiaries may act as Paying
Agent or Registrar.
TRANSFER AND EXCHANGE
Any Holder of these Notes may transfer and exchange Notes in accordance
with the Indenture. The Registrar and the Trustee may require a Holder, among
other things, to furnish appropriate endorsements
49
<PAGE> 51
and transfer documents, and we may require a Holder to pay any taxes and fees
required by law or permitted under the Indenture. We are not required to
transfer or exchange any Note that has been selected for redemption. Also, we
are not required to transfer or exchange any Note for a period of 15 days before
a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner for all
purposes.
SUBORDINATION
The payment of principal, premium and interest, if any, on the Notes:
- is subordinate in right of payment to all of RMSI's existing and future
Senior Indebtedness;
- ranks equal in right of payment with all of RMSI's existing and future
Senior Subordinated Indebtedness and all Deferred Obligations that
existed on or before December 19, 1997; and
- is senior in right of payment to all of RMSI's existing and future
Subordinated Obligations and any Deferred Obligations incurred after
December 19, 1997.
The Notes are also effectively subordinated to any of RMSI's Secured
Indebtedness to the extent of the value of the assets securing the Secured
Indebtedness. However, payment on the Notes made from the trust described under
the heading "Defeasance" below is not subordinated to any Senior Indebtedness or
subject to the payment restrictions described below.
Holders of RMSI's Senior Indebtedness will be entitled to receive payment
in full of all obligations due in respect of the Senior Indebtedness before the
Holders of the Notes will be entitled to receive any payment on the Notes in the
event of any distribution to our creditors:
(1) in any liquidation or dissolution of RMSI; or
(2) in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding affecting RMSI or its property.
In addition, we may not make any payment on the Notes, including any
defeasance or optional redemption of the Notes, if:
(1) with respect to any of our Senior Indebtedness:
(a) a payment default occurs and is continuing beyond the
applicable grace period; or
(b) any other default occurs which causes the maturity of the
Senior Indebtedness to be accelerated in accordance with its terms; or
(2) with respect to any of Designated Senior Indebtedness, any default
occurs and is continuing that permits holders of the Designated Senior
Indebtedness to accelerate its maturity, and the Trustee receives a notice
of the default (a "Payment Blockage Notice") from a representative of the
holders of the Designated Senior Indebtedness.
Payments on the Notes shall be resumed:
(1) in the case of a payment default or a default under which the
maturity of the Senior Indebtedness is automatically accelerated, on the
date on which such default is cured or waived; or
(2) in the case of a nonpayment default, on the earlier of the date on
which such nonpayment default is cured or waived or 179 days after the date
on which the applicable Payment Blockage Notice is received, unless the
maturity of the Designated Senior Indebtedness has been accelerated.
No new Payment Blockage Notice may be delivered unless and until 360 days
have elapsed since the effectiveness of the immediately prior Payment Blockage
Notice, provided that holders of Bank
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Indebtedness have the right to deliver a Payment Blockage Notice at least once
during every 360 day period.
No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee may be the basis for a
subsequent Payment Blockage Notice unless that nonpayment default has been cured
or waived for a period of not less than 90 consecutive days.
We must promptly notify the holders of Designated Senior Indebtedness if
payment on the Notes is accelerated because of an Event of Default. We may not
pay the Notes until 5 business days after the holders of the Designated Senior
Indebtedness receive that notice and, thereafter, we may pay the Notes only if
the subordination provisions of the Indenture otherwise permit payment at that
time.
As a result of the subordination provisions described in this section, in
the event of a bankruptcy, liquidation or reorganization of RMSI, Holders of the
Notes may recover less ratably than holders of our Senior Indebtedness. See
"Risk Factors -- Subordination."
Although the Indenture contains limitations on the amount of additional
Indebtedness that we and the Subsidiary Guarantors may incur in the future, the
amount of additional Indebtedness could be substantial. In any case, such
Indebtedness may be Senior Indebtedness that ranks senior in right of payment to
payments on the Notes or the Subsidiary Guarantees. See
"Covenants -- Limitations on Indebtedness" below.
SUBSIDIARY GUARANTEES
The Guarantor Subsidiaries have jointly and severally guaranteed our
obligations under the Notes and the Indenture. The Guarantor Subsidiaries have
also agreed to pay the expenses incurred by the Trustee or the Holders in
enforcing any rights under the Subsidiary Guarantees.
Payment under each Subsidiary Guarantee:
- is subordinate in right of payment to all existing and future Senior
Indebtedness of that Guarantor Subsidiary;
- ranks equal in right of payment with the existing and future Senior
Subordinated Indebtedness of that Guarantor Subsidiary and all Deferred
Obligations of that Guarantor Subsidiary existing on December 19, 1997;
and
- is senior in right of payment to all existing and future Subordinated
Obligations of that Guarantor Subsidiary and all Deferred Obligations of
that Guarantor Subsidiary incurred after December 19, 1997.
Each Subsidiary Guarantee will also be effectively subordinated to any
Secured Indebtedness of that Guarantor Subsidiary to the extent of the value of
the assets securing such Secured Indebtedness.
Each Subsidiary Guarantee is limited in amount so as not to constitute a
fraudulent conveyance or fraudulent transfer under applicable law. See "Risk
Factors -- Fraudulent Conveyance Matters" for further information.
Future subsidiaries of RMSI will also be required to guarantee the Notes if
that subsidiary incurs any Indebtedness. See "Covenants -- Future Guarantor
Subsidiaries" below.
The Subsidiary Guarantee of a Guarantor Subsidiary will be released:
(1) upon payment in full of all of the guaranteed obligations;
(2) upon any merger or consolidation of the Guarantor Subsidiary with
or into any Person other than RMSI or a Subsidiary of RMSI if the Guarantor
Subsidiary is not the surviving entity; or
(3) upon the sale by RMSI or any of its Subsidiaries of the Capital
Stock of the Guarantor Subsidiary, resulting in the Guarantor Subsidiary no
longer being a Subsidiary of RMSI;
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provided, in the case of any merger, consolidation or sale described in items
(2) or (3) above, any proceeds received by RMSI are applied in accordance with
the covenant described below under the subheading "Repurchase at the Option of
Holders -- Asset Sales and Sales of Subsidiary Stock."
OPTIONAL REDEMPTION
At any time prior to December 15, 2000, RMSI may on one or more occasions
redeem up to 35% of the Notes originally issued under the Indenture at a
redemption price of 110.125% of the principal amount of the Notes redeemed, plus
accrued and unpaid interest to the redemption date, with the Net Cash Proceeds
of one or more Public Equity Offerings; provided that at least $65 million in
aggregate principal amount of the Notes remains outstanding after each
redemption.
Except pursuant to the preceding paragraph, we will not have the option of
redeeming the Notes prior to December 15, 2002.
On and after December 15, 2002, we may redeem all or a part of the Notes
upon not less than 30 nor more than 60 days' notice to the Holders of the Notes,
at the redemption prices (expressed as percentages of the principal amount) set
forth below, plus accrued and unpaid interest thereon, if any, to the applicable
redemption date, if redeemed during the 12 month period beginning on December 15
of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2002........................................................ 105.063%
2003........................................................ 103.375%
2004........................................................ 101.688%
2005 and thereafter......................................... 100.000%
</TABLE>
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
If a Change of Control occurs, each Holder will have the right to require
RMSI to repurchase all or any part of the Holder's Notes. The purchase price
will equal 101% of the principal amount of the Notes redeemed, plus accrued and
unpaid interest, if any, to the date of purchase. Each of the following events
constitutes a "Change of Control":
(1) prior to the first public offering of Voting Stock of RMSI, the
Permitted Holders either:
(A) cease to be the "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act), directly or indirectly, of at least
35% of the aggregate total voting power of the Voting Stock of RMSI,
whether as a result of any issuance of securities of RMSI, any merger,
consolidation, liquidation or dissolution of RMSI, any direct or
indirect transfer of securities by any Permitted Holder or otherwise; or
(B) do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the Board of
Directors.
For purposes of this item (1), the Permitted Holders shall be deemed to
"beneficially own" any Voting Stock of an entity held by any other entity
(the "parent entity") so long as the Permitted Holders beneficially own,
directly or indirectly, a majority of the voting power of the Voting Stock
of the parent entity;
(2) (A) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than one or more Permitted Holders, is or
becomes the beneficial owner (as defined in item (1) above, except that
such person shall be deemed to have "beneficial ownership" of all shares
that any such person has the right to acquire, whether such right is
exercisable immediately or only
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after the passage of time), directly or indirectly, of more than 35% of the
total voting power of the Voting Stock of RMSI; and
(B) the Permitted Holders "beneficially own" (as defined in item (1)
above), directly or indirectly, in the aggregate a lesser percentage of the
total voting power of the Voting Stock of RMSI than the person referred to
in clause (A), and the Permitted Holders do not have the right or ability
by voting power, contract or otherwise to elect or designate for election a
majority of the Board of Directors.
For the purposes of this item (2), such other person shall be deemed to
beneficially own any Voting Stock of a specified corporation held by a
parent corporation, if such other person "beneficially owns" (as defined in
this item (2)), directly or indirectly, more than 35% of the voting power
of the Voting Stock of such parent corporation and the Permitted Holders
"beneficially own" (as defined in item (1) above), directly or indirectly,
in the aggregate a lesser percentage of the voting power of the Voting
Stock of such parent corporation and do not have the right or ability by
voting power, contract or otherwise to elect or designate for election a
majority of the board of directors of such parent corporation); or
(3) during any period of 2 consecutive years, individuals who at the
beginning of the 2 year period constituted the Board of Directors of RMSI
cease for any reason to constitute a majority of the Board of Directors
then in office. For purposes of this item (3), the Board of Directors at
the beginning of the 2 year period shall be deemed to include any new
directors whose election by the Board of Directors or whose nomination for
election by the RMSI's shareholders was approved by a vote of a majority of
the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved.
Within 30 days following any Change of Control, unless we have previously
mailed a redemption notice with respect to all then-outstanding Notes, we will
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase the Notes on a
specified repurchase date pursuant to the procedures required by the Indenture
and described in that notice. We will comply with the requirements of Rule 14e-1
under the Exchange Act, and any other securities laws and regulations to the
extent such laws and regulations are applicable, in connection with the
repurchase of Notes made as a result of a Change of Control.
On the repurchase date, we will purchase all the Notes that have been
tendered in accordance with the procedures set forth in the notice delivered to
the Holders. We will pay each Holder that has tendered Notes the purchase price
plus any accrued interest up to the date of the repurchase.
Prior to complying with any of the provisions described in this "Change of
Control" section, but in any event within 30 days following the Change of
Control, RMSI will (1) repay or offer to repay all Bank Indebtedness or (2)
obtain the requisite consent under the agreement governing the Bank Indebtedness
to permit the repurchase of the Notes required by this covenant.
The provisions described above require us to make an offer to repurchase
Notes in the event of a Change of Control regardless of whether or not any other
provisions of the Indenture are applicable. Except as described above with
respect to a Change of Control, the Indenture does not require us to repurchase
or redeem the Notes in the event of a takeover, recapitalization or similar
transaction.
The Credit Agreement currently prohibits us from purchasing any Notes, and
also provides that certain Change of Control events with respect to us would
constitute a default under the Credit Agreement. Any future agreements governing
Senior Indebtedness may also contain similar restrictions. In the event a Change
of Control occurs at a time when we are prohibited from purchasing Notes, we may
seek the consent of our senior lenders to purchase the Notes or attempt to
refinance the borrowings that prohibit the purchase. If we do not obtain such a
consent or repay those borrowings, we will remain prohibited from purchasing the
Notes. In that case, our failure to repurchase the Notes would constitute an
Event of Default which would, in turn, constitute a default under the agreements
governing our Senior
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Indebtedness. In those circumstances, the subordination provisions of the
Indenture would restrict payments to the Holders of the Notes.
The Change of Control purchase feature is a result of negotiations between
us and the initial purchaser of the outstanding notes. We have no present
intention of engaging in a transaction involving a Change of Control, although
it is possible that we may decide to do so in the future. Subject to the
limitations contained in the Indenture, we could, in the future, enter into
certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control, but that could
increase the amount of Indebtedness outstanding at that time or otherwise affect
our capital structure or credit ratings.
RMSI will not be required to make an offer to repurchase the Notes upon a
Change of Control if a third party makes the offer in the manner in compliance
with the terms of the Indenture, and that third party purchases all Notes
validly tendered and not withdrawn pursuant to the offer.
Asset Sales and Sales of Subsidiary Stock
We will not, and will not permit any of our Restricted Subsidiaries to,
make any Asset Disposition unless:
(1) RMSI (or its Restricted Subsidiary, as the case may be) receives
consideration at the time of the Asset Disposition at least equal to the
fair market value of the assets or shares sold or disposed of; and
(2) at least 85%, or 100% in the case of lease payments, of the
consideration received by RMSI or the Restricted Subsidiary is in the form
of cash. For purposes of this provision, each of the following are deemed
to be cash:
(a) any Indebtedness of RMSI, other than Disqualified Stock, or any
Restricted Subsidiary that is assumed by the transferee of the assets
pursuant to a customary novation agreement that releases RMSI or the
Restricted Subsidiary from further liability; and
(b) any securities received by RMSI or any Restricted Subsidiary
from the transferee that are promptly converted by RMSI or such
Restricted Subsidiary into cash.
In any year in which the aggregate amount of Net Available Cash from Asset
Dispositions exceeds $5 million, we will apply 100% of that excess as follows:
(1) first, within 60 days of the receipt of the Net Available Cash, to
repay Senior Indebtedness or other Indebtedness of any Wholly Owned
Subsidiary that requires repayment by its terms, other than Preferred
Stock; and
(2) second, within 270 days of the receipt of the Net Available Cash,
to reinvest in Additional Assets.
If there is at least $10 million in Net Available Cash from any Asset
Disposition that is not applied or invested as provided in the preceding
paragraph, we will make an offer to the Holders of the Notes and, if we so elect
or are required, to the holders of any other Indebtedness that ranks equal in
right of payment with the Notes, to ratably purchase the Notes and that other
Indebtedness. The offer price for the Notes will be equal to 100% of the
principal amount of the Notes plus any accrued but unpaid interest.
In the event there is insufficient Net Available Cash to repurchase all the
Notes and other pari passu Indebtedness tendered, we will select the Notes and
the other Indebtedness for redemption on a pro rata basis. If any Net Available
Cash remains after the Notes and other Indebtedness are tendered and repurchased
in accordance with the preceding paragraph, we will repay our other Indebtedness
or Indebtedness of our Restricted Subsidiaries.
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RMSI will comply with the requirements of Rule 14e-1 under the Exchange
Act, and any other securities laws and regulations to the extent such laws and
regulations are applicable, in connection with the repurchase of Notes made in
connection with an Asset Disposition.
SELECTION AND NOTICE
If RMSI redeems less than all of the Notes at any time, the Trustee will
select the Notes for redemption on a pro rata basis, by lot or by such other
method as the Trustee in its sole discretion deems to be fair and appropriate.
RMSI will not redeem Notes in denominations of $1,000 or less in part.
Notices of redemption shall be mailed by first class mail at least 30 but not
more than 60 days before the redemption date to each Holder of the Notes to be
redeemed at its registered address.
If any Note is to be redeemed in part only, the notice of redemption
relating to such Note will state the portion of the principal amount of the Note
to be redeemed. A new Note in principal amount equal to the unredeemed portion
will be issued in the name of the Holder upon cancellation of the original Note.
Notes called for redemption become due on the date fixed for redemption. On and
after the redemption date, interest ceases to accrue on Notes or portions of
Notes called for redemption.
COVENANTS
Limitations on Indebtedness
RMSI will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingent or otherwise, with respect to
(collectively, "incur") any Indebtedness, including Indebtedness deemed incurred
by reason of any person becoming a Restricted Subsidiary, unless:
(1) if such Indebtedness is incurred on or prior to December 31, 1999,
the Consolidated Coverage Ratio would be greater than 2.00:1.00; or
(2) if such Indebtedness is incurred after December 31, 1999, the
Consolidated Coverage Ratio would be greater than 2.25:1.00.
The restrictions set forth in the preceding paragraph do not apply to any
of the following types of Indebtedness:
(1) Bank Indebtedness or Indebtedness incurred pursuant to any other
revolving credit, term loan or working capital financings; provided that
the aggregate principal amount of such Indebtedness at any time outstanding
does not exceed (x) the greater of $25 million and the Borrowing Base in
effect from time to time, less (y) the aggregate amount of all repayments
of principal on the Indebtedness that have been made with the Net Available
Cash from Asset Dispositions;
(2) Indebtedness between or among RMSI and any of its Wholly-Owned
Restricted Subsidiaries; provided, however, that the following will be
deemed to constitute the incurrence of Indebtedness:
(a) any subsequent issuance or transfer of any Capital Stock that
results in any Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary, or any other event having the same result; and
(b) any subsequent sale or transfer of any such Indebtedness,
except to RMSI or a Wholly-Owned Subsidiary;
(3) Indebtedness of RMSI or its Restricted Subsidiaries represented by
the Notes or the Subsidiary Guarantees;
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(4) Indebtedness of RMSI or its Restricted Subsidiaries outstanding on
December 19, 1997 (other than Indebtedness described in items (1) and (2)
above);
(5) Indebtedness of a Restricted Subsidiary incurred and outstanding
on or prior to the date on which such Restricted Subsidiary was acquired by
RMSI, other than Indebtedness incurred as consideration in, in
contemplation of, or to provide all or any portion of the funds or credit
support utilized to consummate the transaction or series of related
transactions pursuant to which the Restricted Subsidiary became a
Subsidiary; provided, however, that at the time the Restricted Subsidiary
is acquired, and after giving effect to the Incurrence of such
Indebtedness, RMSI would have been able to incur $1.00 of additional
Indebtedness pursuant to the Consolidated Coverage Ratio test in the first
paragraph of this covenant;
(6) Indebtedness in respect of performance bonds, bankers'
acceptances, letters of credit, surety or appeal bonds or guarantees
resulting from the endorsement of negotiable instruments provided by RMSI
and its Restricted Subsidiaries in the ordinary course of business and
which do not secure other Indebtedness;
(7) Indebtedness under Currency Agreements and Interest Rate
Agreements, in each case entered into for bona fide hedging purposes in the
ordinary course of business; provided that the Currency Agreements and
Interest Rate Agreements do not increase the Indebtedness outstanding at
any time other than as a result of fluctuations in foreign currency
exchange rates or interest rates or by reason of fees, indemnities and
compensation payable;
(8) Indebtedness of RMSI or any Restricted Subsidiary consisting of
obligations for purchase price adjustments in connection with the
acquisition or disposition of assets by RMSI or any Restricted Subsidiary
permitted under the Indenture, provided that the principal amount of all
Indebtedness incurred pursuant to this item (8), when taken together with
all other outstanding Indebtedness incurred pursuant to this item (8),
shall not exceed $3 million;
(9) Indebtedness of RMSI or a Restricted Subsidiary owed to any Person
in connection with workers' compensation insurance provided by such Person
to RMSI or the Restricted Subsidiary or pursuant to reimbursement or
indemnification obligations to such Person, in each case incurred in the
ordinary course of business;
(10) Purchase Money Indebtedness, Attributable Debt and Capitalized
Lease Obligations in an aggregate principal amount not to exceed $2 million
at any time outstanding;
(11) Refinancing Indebtedness incurred in respect of any Indebtedness
described in items (3) through (10) above or in the first paragraph of this
covenant; and
(12) Indebtedness not otherwise permitted to be incurred by the first
paragraph of this covenant or by items (1) through (11) above, in an
aggregate principal amount at any time outstanding not in excess of $15
million.
Notwithstanding the preceding paragraph, neither RMSI nor its Restricted
Subsidiaries may incur Indebtedness qualifying under items (1) through (12)
above if the proceeds are used, directly or indirectly, to repay or refinance
any Subordinated Obligations unless that Indebtedness will be subordinated to
the Notes to at least the same extent as the Subordinated Obligations.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the types of
Indebtedness described in items (1) through (12) above, or is entitled to be
incurred pursuant to the first paragraph of this covenant, we will be permitted
to classify that item of Indebtedness in any manner that complies with this
covenant.
The maximum amount of Indebtedness that RMSI or any Restricted Subsidiary
may incur pursuant to this covenant shall not be deemed to be exceeded solely as
a result of fluctuations in the exchange rates of currencies.
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No Senior Subordinated Indebtedness
RMSI may not incur any Indebtedness that is subordinate or junior in any
respect to any Senior Indebtedness and senior in right of payment to the Notes.
RMSI also may not become liable with respect to any Deferred Obligations unless
they are expressly subordinated in right of payment to the Notes.
No Guarantor Subsidiary may incur any Indebtedness that is subordinate or
junior in any respect to any of that Guarantor Subsidiary's Senior Indebtedness
and senior in right of payment to the Subsidiary Guarantees. No Guarantor
Subsidiary may become liable with respect to any Deferred Obligations unless
they are expressly subordinated in right of payment to the Subsidiary
Guarantees.
Restrictions on Secured Indebtedness
RMSI and the Guarantor Subsidiaries may not incur any Secured Indebtedness
that is not Senior Indebtedness, unless, at the time the Secured Indebtedness is
incurred:
- in the case of Secured Indebtedness that ranks equal in right of payment
to the Notes or the Subsidiary Guarantees, the Notes and the Subsidiary
Guarantees are secured equally and ratably with the Secured Indebtedness
for so long as the Secured Indebtedness is secured by a Lien; or
- in the case of Secured Indebtedness that is subordinated in right of
payment to the Notes or the Subsidiary Guarantees, the Notes and the
Subsidiary Guarantees are secured on a senior basis for so long as the
Secured Indebtedness is secured by a Lien.
Restricted Payments
RMSI will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on or in respect of its Capital Stock, including, without
limitation, any payment in connection with any merger or consolidation
involving RMSI or any of its Restricted Subsidiaries, except for:
(a) dividends or distributions payable solely in Capital Stock,
other than Disqualified Stock; and
(b) dividends or distributions payable to RMSI or to another
Restricted Subsidiary;
(2) purchase, redeem, retire or otherwise acquire for value any
Capital Stock of RMSI or its Restricted Subsidiaries held by any party
other than RMSI or one of its Restricted Subsidiaries;
(3) purchase, redeem, defease, retire or otherwise acquire for value
any Subordinated Obligations prior to any scheduled maturity, repayment or
sinking fund payment, other than:
(a) purchases made in anticipation of satisfying a sinking fund
obligation, installment payment or final maturity payment, in each case
due within 1 year of the date of acquisition; and
(b) reductions of Subordinated Obligations consisting of purchase
price adjustments in connection with the acquisition or disposition of
assets by RMSI or one of its Restricted Subsidiaries; and
(4) make any Investment other than a Permitted Investment (all such
payments and other actions set forth in clauses (1) through (4) above being
collectively referred to as "Restricted Payments"),
unless, at the time the Restricted Payment is made:
(1) no Default has occurred and is continuing, or would occur as a
consequence of the Restricted Payment;
(2) RMSI could, at the time such Restricted Payment is made and after
giving effect to the Restricted Payment, incur at least $1.00 of additional
Indebtedness under the Consolidated Coverage
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Ratio test set forth in the first paragraph of the covenant described above
under the caption "-- Limitations on Indebtedness"; or
(3) the Restricted Payment, together with the aggregate amount of all
other Restricted Payments declared or made after December 19, 1997, is less
than the sum of:
(a) 50% of the Consolidated Net Income accrued during the period
from December 19, 1997 to the end of the most recent fiscal quarter
ending prior to the date of the Restricted Payment for which financial
statements are then available, or, if the Consolidated Net Income for
that period is a deficit, minus 100% of such deficit;
(b) 100% of the aggregate Net Cash Proceeds received by RMSI from
the issuance or sale of its Capital Stock (other than Disqualified
Stock) subsequent to December 19, 1997, other than Net Cash Proceeds
received from the issuance or sale of its Capital Stock to any of its
Subsidiaries or to an employee stock ownership plan or other trust
established by RMSI or any of its Subsidiaries;
(c) 100% of the aggregate Net Cash Proceeds received by RMSI from
the issuance or sale of its Capital Stock (other than Disqualified
Stock) to an employee stock ownership plan or other trust subsequent to
December 19, 1997; provided, however, that if the plan or trust incurs
any Indebtedness owing to, or guaranteed by, RMSI or any Restricted
Subsidiary to finance the acquisition of the Capital Stock, the
aggregate amount under this subsection (c) shall be limited to:
(1) the Net Cash Proceeds received by RMSI from the issuance of
its Capital Stock, less
(2) the Indebtedness incurred to or guaranteed by RMSI or any
Restricted Subsidiary, less
(3) any increase in RMSI's Consolidated Net Worth resulting from
principal repayments made by the plan or trust with respect to the
Indebtedness incurred to finance the Capital Stock;
(d) the amount by which the Indebtedness of RMSI or its Restricted
Subsidiaries is reduced on RMSI's balance sheet upon the conversion or
exchange of any Indebtedness of RMSI or its Restricted Subsidiaries
issued after December 19, 1997 into RMSI's Capital Stock, less the
amount of any cash or other property distributed by RMSI or any
Restricted Subsidiary upon such conversion or exchange; and
(e) the amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from any of the following:
(1) payments of dividends, repayments of the principal of loans
or advances or other transfers of assets to RMSI or any Restricted
Subsidiary from Unrestricted Subsidiaries;
(2) the redesignation of Unrestricted Subsidiaries as Restricted
Subsidiaries; provided the amount of the net reduction in Investments
resulting from a redesignation described in this section is limited
to the amount of Investments previously made by RMSI or any
Restricted Subsidiary in that Unrestricted Subsidiary, which amount
was included in the calculation of the amount of Restricted Payments;
or
(3) the sale, liquidation or repayment of any Investment in
Unrestricted Subsidiaries, in an amount not to exceed lesser of (x)
the net cash proceeds received by RMSI or any Restricted Subsidiary
in connection with that sale, liquidation or repayment and (y) the
initial amount of that Investment, which amount was included in the
calculation of the amount of Restricted Payments.
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The preceding provisions do not prohibit:
(1) the purchase or redemption of RMSI's Capital Stock or Subordinated
Obligations in exchange for, or out of the proceeds of the substantially
concurrent sale of, RMSI's Capital Stock, other than Disqualified Stock and
Capital Stock issued or sold to a Subsidiary or an employee stock ownership
plan or other trust established by RMSI or any of its Subsidiaries;
provided, however, that the amount of any Net Cash Proceeds from the sale
that are utilized for the purchase or redemption will be excluded from
clause (3)(b) or 3(c)of the preceding paragraph; and provided further that
the amount of any purchase or redemption will be excluded in the
calculation of the amount of Restricted Payments;
(2) the purchase or redemption of RMSI's Subordinated Obligations in
exchange for, or out of the proceeds of the substantially concurrent sale
of, any Indebtedness which is permitted to be incurred pursuant to items
(1) through (12) of the second paragraph of the covenant described under
"-- Limitations on Indebtedness"; provided, however, that such a purchase
or redemption will be excluded in the calculation of the amount of
Restricted Payments;
(3) the purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted by the covenant described under the
heading "Repurchase at the Option of the Holders -- Asset Sales and Sales
of Subsidiary Stock"; provided, however, that such a purchase or redemption
will be excluded in the calculation of the amount of Restricted Payments;
(4) the payment of any dividend within 60 days after the date of
declaration thereof, if at the date of declaration the dividend would have
complied with the provisions of this covenant; provided, however, that such
dividend will be included in the calculation of the amount of Restricted
Payments;
(5) the repurchase of shares of, or options to purchase shares of,
common stock of RMSI or any of its Subsidiaries from any of their
employees, former employees, directors or former directors, or permitted
transferees of such employees, former employees, directors or former
directors, pursuant to the terms of agreements or plans approved by the
Board of Directors under which such individuals purchase or sell, or are
granted the option to purchase or sell, shares of such common stock;
provided, however, that the aggregate amount of these repurchases (other
than repurchases made with respect to a deceased person that are funded
using the proceeds of a life insurance policy relating to such person of
which RMSI or a Restricted Subsidiary is the beneficiary) shall not exceed
$5 million in any calendar year; provided further, however, that these
repurchases shall be included in the calculation of the amount of
Restricted Payments;
(6) the purchase for total consideration not in excess of $10 million
of any of RMSI's common stock held by members of its senior management who
were not members of the Board of Directors on December 19, 1997, so long as
no Default has occurred or is continuing or would result from the purchase;
provided, however, that such purchase will be included in the calculation
of the amount of Restricted Payments;
(7) dividends, distributions or other payments made on or with respect
to Capital Stock to the extent payable in shares of Capital Stock of such
person, other than Disqualified Stock; or
(8) other Restricted Payments in an aggregate amount not to exceed $3
million.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
RMSI will not, and will not permit any Restricted Subsidiary to, create or
otherwise cause or permit to exist or become effective any restriction on the
ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock
or pay any Indebtedness owed to RMSI;
(2) make any loans or advances to RMSI; or
(3) transfer any of its property or assets to RMSI.
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However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) any agreement in effect or entered into on December 19, 1997;
(2) any agreement governing Indebtedness of a Restricted Subsidiary in
effect on the date on which that Restricted Subsidiary was acquired by
RMSI, except to the extent such Indebtedness was incurred in connection
with or in contemplation of that acquisition;
(3) Refinancing Indebtedness, provided that the encumbrances and
restrictions contained in any refinancing agreement or amendment, taken as
a whole, are no less favorable to the Noteholders than the encumbrances and
restrictions contained in the original agreements;
(4) customary non-assignment provisions in any lease, license or
similar contract;
(5) any agreement to transfer, option or other right with respect to,
or any Lien on, any property or assets of RMSI or any Restricted
Subsidiary, to the extent such agreement or Lien is permitted by the
Indenture;
(6) any security agreement or mortgage securing Indebtedness of a
Restricted Subsidiary to the extent the encumbrance or restriction
restricts the transfer of the property subject to the security agreement or
mortgage; and
(7) any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by that Restricted Subsidiary
pending its sale or other disposition.
Merger and Consolidation
RMSI may not consolidate or merge with or into another Person, or convey,
transfer or lease all or substantially all its assets to any Person, unless:
(1) either (a) RMSI is the surviving corporation or (b) the Person
formed by or surviving the consolidation or merger, or the Person to which
the conveyance or transfer of assets has been made, is a corporation,
limited liability company, limited partnership or business trust organized
and existing under the laws of the United States of America, any state
thereof or the District of Columbia;
(2) the Person formed by or surviving the consolidation or merger or
the Person to which the conveyance, transfer of assets has been made
expressly assumes all of RMSI's obligations under the Notes and the
Indenture under agreements reasonably satisfactory to the Trustee;
(3) immediately after giving effect to such transaction, no Default
has occurred and is continuing;
(4) the Person formed by or surviving the consolidation or merger, if
other than RMSI:
(a) will have Consolidated Net Worth immediately after the
transaction equal to or greater than RMSI's Consolidated Net Worth
immediately prior to the transaction; and
(b) will, on the date of the transaction and after giving effect to
the transaction and any related financing transactions, be permitted to
incur an additional $1.00 of Indebtedness under the Consolidated
Coverage Ratio test set forth in the first paragraph of the covenant
described above under the caption "-- Limitations on Indebtedness"; and
(5) RMSI has delivered to the Trustee an officers' certificate and an
opinion of its counsel, each stating that the consolidation, merger or
transfer and the documents delivered under item (2) above comply with the
terms of the Indenture.
This "Merger and Consolidation" covenant does not apply to (a) any
consolidation, merger, conveyance, transfer or lease between or among RMSI and
its Restricted Subsidiaries and (b) any merger of RMSI with an Affiliate
incorporated solely for the purpose of reincorporating RMSI in another
jurisdiction to realize tax or other benefits.
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Transactions with Affiliates
RMSI will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, enter into or conduct any transaction with any Affiliate
(an "Affiliate Transaction"), unless:
(1) the Affiliate Transaction is on terms that are no less favorable
to RMSI or the relevant Restricted Subsidiary than those that could be
obtained in a comparable transaction by RMSI or the Restricted Subsidiary
with an unrelated party;
(2) RMSI delivers to the Trustee:
(a) with respect to any Affiliate Transaction involving
consideration in excess of $1 million, a resolution of the Board of
Directors set forth in an officer's certificate certifying that the
Affiliate Transaction complies with this covenant and that the Affiliate
Transaction has been approved by a majority of the disinterested members
of the Board of Directors; and
(b) with respect to any Affiliate Transaction involving
consideration in excess of $5 million, an opinion as to the fairness or
reasonableness of the Affiliate Transaction from a financial point of
view issued by a nationally recognized accounting, appraisal or
investment banking firm.
The following items shall not be deemed to be Affiliate Transactions and
are therefore not subject to the provisions of the preceding paragraph:
(1) Restricted Payments permitted by the covenant described under the
heading "-- Restricted Payments" above;
(2) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by the Board
of Directors or the board of directors of the relevant Restricted
Subsidiary;
(3) loans or advances to employees made in the ordinary course of
business in accordance with the past practices up to $500,000 in the
aggregate outstanding at any one time;
(4) the payment of reasonable directors fees to persons who are not
otherwise Affiliates of RMSI or its Restricted Subsidiaries;
(5) transactions between or among RMSI and/or its Wholly Owned
Subsidiaries;
(6) indemnification or insurance provided to officers or directors of
RMSI and its Restricted Subsidiaries approved in good faith by the relevant
Board of Directors;
(7) payments under, or amendments or extensions of, the lease
agreement between Marketing Specialists Sales Company, a subsidiary of
RMSI, and ABP Partners Ltd. relating to the Irving, Texas facility,
provided that any amendments or extensions are on commercially reasonable
terms as certified by a recognized commercial real estate firm that is not
an Affiliate of RMSI;
(8) leases of real property from any Permitted Holder, provided that
the leases are on commercially reasonable terms as certified by a
recognized commercial real estate firm that is not an Affiliate of RMSI;
(9) fees paid to Permitted Holders other than any Management
Stockholder for management services in an aggregate amount not to exceed
$500,000 per year, plus related out-of-pocket expenses; and
(10) sales of RMSI's Capital Stock to Affiliates.
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Limitation on Sales and Issuances of Capital Stock of Restricted Subsidiaries
RMSI will not sell any shares of Capital Stock of a Restricted Subsidiary,
and will not permit any Restricted Subsidiary, directly or indirectly, to issue
or sell any shares of its Capital Stock or the Capital Stock of another
Restricted Subsidiary, unless:
(1) the issuance or sale is to RMSI or a Wholly Owned Subsidiary;
(2) immediately after giving effect to the issuance or sale, the
Restricted Subsidiary whose stock is sold or issued is no longer a
Restricted Subsidiary; and
(3) the shares of Capital Stock issued or sold are directors'
qualifying shares.
The proceeds of any sale of Capital Stock permitted by this section will be
treated as Net Available Cash from an Asset Disposition and must be applied in
accordance with the terms of the covenant described under the subheading
"Repurchase at the Option of Holders -- Asset Sales and Sales of Subsidiary
Stock."
Reports
Whether or not required by the Commission, so long as any Notes are
outstanding, RMSI will furnish to the Holders of the Notes, within the time
periods specified in the Commission's rules and regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if RMSI were required to file such reports, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and, with respect to the annual information only, a report on the annual
financial statements by RMSI's certified independent accountants;
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if RMSI were required to file such reports; and
(3) after any initial public offering of Capital Stock of RMSI, a copy
of the annual report that is furnished to shareholders.
RMSI will also comply with the other provisions of Section 314(a) of the
Trust Indenture Act.
Additional Guarantor Subsidiaries
Any Restricted Subsidiary which incurs Indebtedness must become a Guarantor
Subsidiary and execute and deliver to the Trustee a supplemental indenture under
which it guarantees payment of the Notes, unless that Restricted Subsidiary is
already a party to the Indenture.
Each additional Subsidiary Guarantee will also be limited in amount so as
not to constitute a fraudulent conveyance or fraudulent transfer under
applicable law. See "Risk Factors -- Fraudulent Transfer Considerations" for
further information.
Designation of Restricted and Unrestricted Subsidiaries
The Board of Directors may designate any of RMSI's Subsidiaries to be an
Unrestricted Subsidiary unless that Subsidiary, or any of its Subsidiaries, owns
any Capital Stock or Indebtedness of, or owns or holds any Lien on any property
of, RMSI or any other Restricted Subsidiary of RMSI; provided, however, that
either:
(1) the Subsidiary to be designated as an Unrestricted Subsidiary has
total Consolidated assets of $1,000 or less; or
(2) if the Subsidiary to be designated as an Unrestricted Subsidiary
has total Consolidated assets greater than $1,000, the designation would be
permitted under the covenant described under the subheading "-- Restricted
Payments."
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The Board of Directors may also designate any Unrestricted Subsidiary to be
a Restricted Subsidiary; provided, however, that immediately after giving effect
to such designation:
(1) RMSI could incur $1.00 of additional Indebtedness under the
Consolidated Coverage Ratio test described under "-- Covenants
-- Limitations on Indebtedness"; and
(2) no Default shall have occurred and be continuing.
Business Activities
RMSI will not, and will not permit any Restricted Subsidiary to, engage in
any business other than businesses related, ancillary or complementary to the
businesses conducted on December 19, 1997.
Sale and Leaseback Transactions
RMSI will not, and will not permit any Restricted Subsidiary to, enter into
any sale and leaseback transaction relating to any property unless:
(1) RMSI or that Restricted Subsidiary could:
(a) incur Indebtedness in an amount equal to the Attributable Debt
relating to that sale and leaseback transaction under the Consolidated
Coverage Ratio test set forth in the first paragraph of the covenant
described above under the subheading "-- Limitations on Indebtedness";
and
(b) create a Lien on the property securing the Attributable Debt
without equally and ratably securing the Notes under the covenant
described above under the subheading "-- Limitations on Indebtedness";
(2) the net cash proceeds received by RMSI or the Restricted
Subsidiary in connection with the sale and leaseback transaction is at
least equal to the fair value, as determined in good faith by the Board of
Directors, of the property that is the subject of the sale and leaseback
transaction; and
(3) the transfer of the property that is the subject of the sale and
leaseback transaction is permitted by, and RMSI applies the proceeds of the
sale and leaseback transaction in compliance with, the covenant described
above under the heading "Repurchase at the Option of Holders -- Asset Sales
and Sales of Subsidiary Stock."
EVENTS OF DEFAULT
Each of the following is an Event of Default:
(1) a default for 30 days in the payment when due of interest on the
Notes, whether or not prohibited by the subordination provisions in the
Indenture;
(2) a default in payment when due of the principal of or premium, if
any, on the Notes, whether or not prohibited by the subordination
provisions in the Indenture;
(3) the failure by RMSI to comply with its obligations under the
covenant described under the caption "Covenants -- Merger and
Consolidation" above;
(4) the failure by RMSI for 30 days after notice to comply with its
obligations described under the captions "Repurchase at the Option of
Holders -- Change of Control" or "Covenants" above, other that failures to
pay on the Notes;
(5) the failure by RMSI for 60 days after notice to comply with any of
the other agreements contained in the Notes or the Indenture,
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(6) a default under any agreement governing Indebtedness of RMSI or
any of its Restricted Subsidiaries, if that default:
(a) is caused by a failure to pay principal or interest on the
Indebtedness prior to the expiration of the applicable grace period
provided in such Indebtedness on the date of such default; or
(b) results in the acceleration of the Indebtedness prior to its
express maturity;
and, in each case, the total amount of the Indebtedness unpaid or
accelerated exceeds $5 million;
(7) certain events of bankruptcy, insolvency or reorganization with
respect to RMSI or a Significant Subsidiary;
(8) failure by RMSI or any Restricted Subsidiary to pay final
judgments or decrees in excess of $5 million, which judgments are not paid,
discharged or stayed for a period of 60 days; and
(9) any Subsidiary Guarantee ceases to be in full force and effect,
except as contemplated by its terms, or any Guarantor Subsidiary denies or
disaffirm its obligations under the Indenture or its Subsidiary Guarantee,
and this Default continues for 10 days.
In the case of an Event of Default arising from certain events of
bankruptcy, insolvency or reorganization with respect to RMSI or any Significant
Subsidiary, the principal and interest on the Notes will become immediately due
and payable without further action or notice. If any other Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the outstanding Notes may declare the principal and interest
on the Notes to be immediately due and payable.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default, other than Defaults
or Events of Default relating to the payment of principal or interest, if the
Trustee determines that withholding notice is in the interest of those Holders.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense.
RMSI is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture. Within 30 days of becoming aware of any Default
or Event of Default, RMSI is also required to deliver to the Trustee a statement
describing the Default and explaining the action RMSI is taking with respect to
the Default.
AMENDMENTS AND WAIVERS
Without the consent of each Holder of an outstanding Note affected, an
amendment or waiver may not
(1) reduce the principal amount of Notes whose Holders must consent to
an amendment or waiver;
(2) reduce the rate of or extend the time for payment of interest on
any Note;
(3) reduce the principal of or change the fixed maturity of any Note;
(4) reduce the premium payable upon the redemption of any Note or
change the time at which any Note may be redeemed as described under the
caption "Optional Redemption" above;
(5) make any Note payable in money other than as stated on the Notes;
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(6) make any change to the subordination provisions of the Indenture
that adversely affects the rights of any Holder;
(7) impair the right of any Holder to (a) receive payments of
principal and interest on the Notes or (b) institute a suit for the
enforcement of any payment on the Notes;
(8) modify the Subsidiary Guarantees in any manner adverse to the
Holders; or
(9) make any change in the preceding amendment and waiver provisions.
Notwithstanding the preceding, without the consent of any Holder of Notes,
RMSI and the Trustee may amend or supplement the Indenture or the Notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for the assumption of RMSI's obligations by a successor
corporation;
(3) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(4) to make any change that would provide any additional rights or
benefits to the Holders of Notes or that does not adversely affect the
legal rights under the Indenture of any the Holders; or
(5) to comply with requirements of the Commission in order to effect
or maintain the qualification of the Indenture under the Trust Indenture
Act.
However, no amendment may be made to the subordination provisions of the
Indenture if the amendment adversely affects the rights of any holder of
outstanding Senior Indebtedness unless the holders of the affected Senior
Indebtedness consent to such change.
The consent of the Noteholders is not necessary under the Indenture to
approve the particular form of any proposed amendment. It is sufficient if the
consent approves the substance of the proposed amendment.
DEFEASANCE
RMSI may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes and all of the
obligations of the Guarantor Subsidiaries discharged with respect to their
Subsidiary Guarantees ("legal defeasance"), except for:
(1) obligations relating to the issuance of temporary Notes and the
replacement of lost, stolen, destroyed or mutilated Notes;
(2) obligations to maintain a registrar and paying agent for the
Notes;
(3) obligations related to the rights, powers, trusts, duties and
immunities of the Trustee; and
(4) obligations relating to the defeasance provisions described in
this section.
In addition, RMSI may, at its option and at any time, elect to have its
obligations and the obligations of the Guarantor Subsidiaries released with
respect to certain covenants described in the Indenture ("covenant defeasance").
In the event covenant defeasance occurs, failure to comply with those covenants
will not constitute an Event of Default with respect to the Notes. In addition,
if covenant defeasance occurs, certain events described under the heading
"Events of Default" (not including payment defaults or defaults resulting from
bankruptcy proceedings) will no longer constitute Events of Default with respect
to the Notes.
In order to exercise either the legal defeasance option or the covenant
defeasance option:
(1) RMSI must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders of the Notes, money or U.S. Government Obligations
in an amount that will be sufficient, in the opinion
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of a nationally-recognized firm of independent accountants, for the payment
of principal, premium (if any) and interest on the Notes to redemption or
maturity, as the case may be;
(2) no Default or Event of Default from bankruptcy or insolvency
events shall have occurred and be continuing at any time in the period
ending on the 123rd day after the date of deposit;
(3) the defeasance will not result in a breach or violation of, or
constitute a default under, any other agreement or instrument to which RMSI
is a party or is bound;
(4) RMSI must deliver to the Trustee an opinion of counsel to the
effect that the defeasance trust created does not qualify as an "investment
company" under the Investment Company Act of 1940;
(5) in the case of legal defeasance, RMSI must deliver to the Trustee
an opinion of counsel reasonably acceptable to the Trustee confirming that
(a) RMSI has received from, or there has been published by, the Internal
Revenue Service a ruling, or (b) since the date of the Indenture, there has
been a change in the applicable federal income tax law, in either case to
the effect that, the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of the
legal defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at me same times as would have been the
case if the legal defeasance had not occurred;
(6) in the case of covenant defeasance, RMSI must deliver to the
Trustee an opinion of counsel reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of the
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such covenant defeasance had not occurred; and
(7) RMSI must deliver to the Trustee an officer's certificate and an
opinion of counsel, each stating that all conditions precedent relating to
the defeasance have been complied with by RMSI.
CONCERNING THE TRUSTEE
Chase Bank of Texas, National Association (formerly known as Texas Commerce
Bank National Association) is Trustee under the Indenture and has been appointed
by RMSI as Registrar and Paying Agent for the Notes.
The Holders of a majority in principal amount of the outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee. The Indenture provides,
however, that in case an Event of Default, the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to this standard, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York, without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required.
DEFINITIONS
Set forth below are some of the defined terms used in the Indenture. We
urge you to read the Indenture for full disclosure of all these terms.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such specified Person. For the purposes of this
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definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of the provisions described under "Repurchase at the
Option of Holders -- Asset Sales and Sales of Subsidiary Stock" and
"Covenants -- Affiliate Transactions" only, "Affiliate" shall also mean any
beneficial owner of shares representing 5% or more of the total voting power of
the Voting Stock (on a fully diluted basis) of RMSI or of rights or warrants to
purchase such Voting Stock (whether or not currently exercisable) and any Person
who would be an Affiliate of any such beneficial owner pursuant to the first
sentence of this definition.
"Asset Disposition" means any sale, lease, transfer or other disposition by
RMSI or any of its Restricted Subsidiaries of shares of Capital Stock of a
Restricted Subsidiary, other than directors' qualifying shares, or of property
or other assets (each referred to as a "disposition" for purposes of this
definition).
Notwithstanding the preceding paragraph, the following are not Asset
Dispositions:
(1) any disposition between or among RMSI and its Restricted
Subsidiaries, or by a Restricted Subsidiary to a Wholly Owned Subsidiary;
(2) any disposition of inventory in the ordinary course of business
consistent with past practices of RMSI and its Subsidiaries;
(3) for purposes of the provisions described under "Repurchase at the
Option of Holders -- Asset Sales and Sales of Subsidiary Stock" only, a
disposition subject to or permitted by the covenant described under
"Covenants -- Restricted Payments";
(4) any settlement, surrender, waiver or release of contract rights or
contract, tort or other claims;
(5) any grant of licenses of intellectual property including patent,
trademark and know-how;
(6) a sale of obsolete or outdated equipment no longer used or useful
in the business of RMSI or its Restricted Subsidiaries in an aggregate
amount not to exceed $1 million in any fiscal year;
(7) leases and subleases (and licenses and sublicenses) of assets that
are not treated as capitalized leases on the books and records of RMSI or
its Restricted Subsidiaries; and
(8) any foreclosure upon a Lien that was not prohibited by the
Indenture and that secures any obligation of RMSI or its Subsidiaries.
"Attributable Debt" in respect of a sale and leaseback transaction means,
as at the time of determination, the present value (discounted at the interest
rate borne by the Notes, compounded annually) of the total obligations of the
lessee for rental payments during the remaining term of the lease included in
the sale and leaseback transaction, including payments made or to be made in any
period for which such lease has been extended.
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (1) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (2) the sum of all such payments.
"Bank Indebtedness" means the principal and premium, if any, payable under
or in respect of the Credit Agreement and the other documents and security
agreements related thereto, and any Refinancing Indebtedness with respect
thereto, as amended from time to time.
"Board of Directors" means the Board of Directors of RMSI or any committee
thereof duly authorized to act on behalf of it.
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"Borrowing Base" means, as of the date of determination, an amount equal to
the sum, without duplication, of (1) 80% of the net book value of RMSI's
accounts receivable at the date of determination and (2) 50% of the net book
value of RMSI's inventories at the date of determination. Net book value shall
be determined in accordance with GAAP and shall be that reflected on the most
recent available balance sheet, it being understood that the accounts receivable
and inventories of an acquired business may be included if the acquisition has
been completed on or prior to the date of determination.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligation" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP. The amount of Indebtedness represented by a
Capitalized Lease Obligation shall be the capitalized amount of the obligation
determined in accordance with GAAP, and the Stated Maturity of any Indebtedness
represented by a Capitalized Lease Obligation shall be the date of the last
payment of rent or any other amount due under such lease.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (a) the aggregate amount of EBITDA for the period of the most recent 4
consecutive fiscal quarters ending prior to the date of determination for which
financial statements are available to (b) Consolidated Interest Expense for the
same 4 fiscal quarters; provided, however, that:
(1) if RMSI or any Restricted Subsidiary has incurred any Indebtedness
since the beginning of such period that remains outstanding on the date of
determination, or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an incurrence of Indebtedness, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving effect on a pro forma basis to such Indebtedness as if (a) the
Indebtedness had been incurred on the first day of such period and (b) the
discharge of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness had
occurred on the first day of such period;
(2) if since the beginning of such period RMSI or any Restricted
Subsidiary shall have made any Asset Disposition, the EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets which are the subject of such Asset
Disposition for such period or increased by an amount equal to the EBITDA
(if negative) directly attributable thereto for such period, and
Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of RMSI or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to RMSI and its continuing
Restricted Subsidiaries in connection with such Asset Disposition for such
period, or, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent RMSI and its
continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale;
(3) if since the beginning of such period RMSI or any Restricted
Subsidiary, by merger or otherwise, shall have made an Investment in any
Restricted Subsidiary, or any Person which becomes a Restricted Subsidiary,
or an acquisition of assets, including any acquisition of assets occurring
in connection with a transaction causing a calculation to be made
hereunder, which constitutes all or substantially all an operating unit of
a business, EBITDA and Consolidated Interest Expense for such period shall
be calculated after giving pro forma effect thereto (as described below),
including the Incurrence of any Indebtedness in connection therewith as if
such Investment or acquisition occurred on the first day of such period;
and
(4) if since the beginning of such period any Person that subsequently
became a Restricted Subsidiary or was merged with or into RMSI or any
Restricted Subsidiary since the beginning of such
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period shall have made any Asset Disposition, Investment or acquisition of
assets that would have required an adjustment pursuant to clause (2) or (3)
above if made by RMSI or a Restricted Subsidiary during such period, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto, as if such Asset Disposition, Investment
or acquisition of assets occurred on the first day of such period.
For purposes of this definition of "Consolidated Coverage Ratio", whenever
pro forma effect is to be given to an acquisition of assets, the amount of
income or earnings relating such acquisition and the amount of Consolidated
Interest Expense associated with any Indebtedness incurred in connection with
such acquisition, the pro forma calculations shall be determined in good faith
by a responsible financial or accounting officer of RMSI. If any Indebtedness
bears a floating rate of interest and is being given pro forma effect, the
interest expense on such Indebtedness shall be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period, taking into account any Interest Rate Agreement applicable to such
Indebtedness if such Interest Rate Agreement has a remaining term as at the date
of determination in excess of 12 months.
"Consolidated Interest Expense" means, for any period, the total
consolidated interest expense of RMSI and its Restricted Subsidiaries for such
period, plus the following, to the extent incurred by RMSI and its Restricted
Subsidiaries in such period but not included in the calculation of interest
expense:
(1) interest expense attributable to Capitalized Lease Obligations and
Attributable Debt;
(2) amortization of debt discount and debt issuance cost;
(3) capitalized interest;
(4) noncash interest expense;
(5) commissions, discounts and other fees and charges with respect to
letters of credit and bankers' acceptance financing;
(6) interest accruing on any Indebtedness of any other Person to the
extent such Indebtedness is guaranteed by RMSI or any Restricted
Subsidiary, provided that payments of such amounts by RMSI or any
Restricted Subsidiary is being made to, or is sought by, the holders of
such Indebtedness pursuant to such guarantee;
(7) net costs associated with Hedging Obligations, including
amortization of fees;
(8) interest paid or accrued in respect of any agreement classified as
a long-term obligation on the consolidated balance sheet of RMSI;
(9) Preferred Stock dividends in respect of all Preferred Stock of
Subsidiaries of RMSI and Disqualified Stock of RMSI held by Persons other
than RMSI or a Wholly Owned Subsidiary; and
(10) the cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by such plan or
trust to pay interest or fees to any Person (other than RMSI) in connection
with Indebtedness incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the consolidated net
income (loss) of RMSI and its Subsidiaries for such period; provided, however,
that the following shall not be included in such Consolidated Net Income:
(1) any net income (loss) of any Person if such Person is not a
Restricted Subsidiary, except that:
(a) subject to the limitations contained in clause (4) below,
RMSI's equity in the net income of any such Person for such period shall
be included in such Consolidated Net Income up to the aggregate amount
of cash actually distributed by such Person during such period to RMSI
or a Restricted Subsidiary as a dividend or other distribution subject,
in the case of a
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dividend or other distribution to a Restricted Subsidiary, to the
limitations contained in clause (3) below; and
(b) RMSI's equity in a net loss of any such Person other than an
Unrestricted Subsidiary for such period, but only to the extent of the
aggregate Investment of RMSI and any Restricted Subsidiary in such
Person, shall be included in determining such Consolidated Net Income;
(2) any net income (loss) of any person acquired by RMSI or a
Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(3) any net income (loss) of any Restricted Subsidiary if such
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to RMSI, except that:
(a) subject to the limitations contained in (4) below, RMSI's
equity in the net income of any such Restricted Subsidiary for such
period shall be included in such Consolidated Net Income up to the
aggregate amount of cash that could have been distributed by such
Restricted Subsidiary during such period to RMSI or another Restricted
Subsidiary as a dividend subject, in the case of a dividend that could
have been made to another Restricted Subsidiary, to the limitation
contained in this clause; and
(b) RMSI's equity in a net loss of any such Restricted Subsidiary
for such period shall be included in determining such Consolidated Net
Income;
(4) any gain or loss realized upon the sale or other disposition of
any asset of RMSI or its consolidated Subsidiaries (including pursuant to
any Sale/Leaseback Transaction) which is not sold or otherwise disposed of
in the ordinary course of business and any gain or loss realized upon the
sale or other disposition of any Capital Stock of any Person;
(5) any extraordinary gain or loss; and
(6) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purpose of the covenant described under
"Covenants -- Restricted Payments" only, there shall be excluded from
Consolidated Net Income any dividends, repayments of loans or advances or other
transfers of assets from Unrestricted Subsidiaries to RMSI or a Restricted
Subsidiary to the extent such dividends, repayments or transfers increase the
amount of Restricted Payments permitted under item (3)(d) of the second
paragraph of such covenant.
"Consolidated Net Worth" means, with respect to RMSI and its Restricted
Subsidiaries as of the end of RMSI's most recent fiscal quarter ending at least
45 days prior to the taking of any action for the purpose of which the
determination is being made, the sum of the following amounts shown on the
balance sheet of RMSI and the Restricted Subsidiaries, determined on a
consolidated basis:
(1) the par or stated value of all outstanding Capital Stock of RMSI
other than Disqualified Stock; plus
(2) paid-in capital or capital surplus relating to such Capital Stock;
plus
(3) any retained earnings or earned surplus less any accumulated
deficit.
"Consolidation" means the consolidation of the accounts of each of the
Restricted Subsidiaries with those of RMSI in accordance with GAAP consistently
applied; provided, however, that "Consolidation" will not include consolidation
of the accounts of any Unrestricted Subsidiary, but the interest of RMSI or any
Restricted Subsidiary in an Unrestricted Subsidiary will be accounted for as an
investment. The term "Consolidated" has a correlative meaning.
"Credit Agreement" means the credit agreement dated as of October 14, 1997,
as amended, restated, waived or otherwise modified from time to time, among RMSI
and The Chase Manhattan Bank, as agent,
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except to the extent that any such amendment, waiver or other modification
thereto would be prohibited by the terms of the Indenture, unless otherwise
agreed to by the Holders of at least a majority in aggregate principal amount of
Notes at the time outstanding.
"Currency Agreement" means, with respect to any Person, any foreign
exchange contract, currency swap agreement or other similar agreement or
arrangement as to which such Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Deferred Obligations" means any Indebtedness issued to the employees of,
stockholders of, or the holders of an equivalent equity interest in, any entity
acquired by RMSI or any Restricted Subsidiary in connection with such
acquisition.
"Designated Senior Indebtedness" means (1) the Bank Indebtedness and (2)
any other Senior Indebtedness that, at the date of determination, has an
aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof, are committed to lend up to, at least $10
million and is specifically designated by RMSI in the instrument evidencing or
governing such Senior Indebtedness as "Designated Senior Indebtedness" for
purposes of the Indenture. "Designated Senior Indebtedness" of a Guarantor
Subsidiary shall have a correlative meaning.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable or exercisable) or upon the happening of any
event:
(1) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise;
(2) is convertible or exchangeable for Indebtedness or Disqualified
Stock; or
(3) is redeemable at the option of the holder thereof, in whole or in
part;
in each case, on or prior to the first anniversary of the Stated Maturity of the
Notes.
"EBITDA" for any period means the Consolidated Net Income for such period
(adjusted to exclude any noncash items attributable to purchase accounting for
any acquisition transactions consummated subsequent to the Issue Date), plus the
following for such period to the extent deducted in calculating such
Consolidated Net Income:
(1) income tax expense;
(2) Consolidated Interest Expense;
(3) depreciation expense;
(4) amortization expense; and
(5) all other non-cash charges, excluding all such charges, for
purposes of this clause (5), to the extent they represent future cash
disbursements reasonably expected to materialize prior to the Stated
Maturity of the Notes.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization of, a Subsidiary of RMSI shall
be added to Consolidated Net Income to compute EBITDA only to the extent, and in
the same proportion, that the net income (loss) of such Subsidiary was included
in calculating Consolidated Net Income and only if a corresponding amount would
be permitted at the date of determination to be dividended to RMSI by such
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Subsidiary or its stockholders.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, including those set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants, in statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession.
All ratios and computations based on GAAP contained in the Indenture shall be
computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any Person,
directly or indirectly, guaranteeing any Indebtedness or other obligation of any
other Person and any obligation, direct or indirect, contingent or otherwise, of
such Person:
(1) to purchase or pay, or advance or supply funds for the purchase or
payment of, such Indebtedness or other obligation of such other Person,
whether arising by virtue of partnership arrangements, or by agreement to
keep well, to purchase assets, goods, securities or services, to take-
or-pay, or to maintain financial statement conditions or otherwise; or
(2) entered into for purposes of assuring in any other manner the
obligee of such Indebtedness or other obligation of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in
part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guarantor Subsidiary" means any Person that has issued a Subsidiary
Guarantee.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Person at the time it becomes a Subsidiary; provided further, however, that
increases in the balance sheet carrying value of items described in clauses (4)
and (10) of the definition of the term "Indebtedness" resulting solely from
non-cash accruals shall not constitute the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination, without duplication:
(1) the principal of and premium, if any, in respect of indebtedness
of such Person for borrowed money;
(2) the principal of and premium, if any, in respect of obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments;
(3) all obligations of such Person in respect of letters of credit or
other similar instruments, including reimbursement obligations with respect
thereto;
(4) all obligations of such Person to pay the deferred and unpaid
purchase price of property, including stock or the assets of an ongoing
business, or services, other than Trade Payables, which purchase price is
due more than six months after the date of placing such property in service
or taking delivery and title thereto or the completion of such services, to
the extent not included in clause (10) below;
(5) all Capitalized Lease Obligations and all Attributable Debt of
such Person;
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(6) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of RMSI, any Preferred Stock, but excluding,
in each case, any accrued dividends;
(7) all Indebtedness of other Persons secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person;
provided, however, that the amount of Indebtedness of such Person shall be
the lesser of:
(a) the fair market value of such asset at such date of
determination; and
(b) the amount of such Indebtedness of such other Persons;
(8) all Indebtedness of other Persons to the extent Guaranteed by such
Person;
(9) to the extent not otherwise included in this definition, Hedging
Obligations of such Person; and
(10) with respect to RMSI and its Restricted Subsidiaries, covenants
not to compete, deferred payment agreements and deferred compensation
liabilities, in each case to the extent reflected on the consolidated
balance sheet of RMSI as long-term obligations.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date, except with respect to
the items set forth in clauses (4) and (10) of this definition, in which case
the amount of such Indebtedness at any date shall be the amount recorded in
accordance with GAAP on such Person's balance sheet for the most recent fiscal
period for which financial statements are available.
"Interest Rate Agreement" means, with respect to any Person, any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance or loan,
other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such Person, or other
extension of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person.
For purposes of the definition of "Unrestricted Subsidiary" and the
covenant described under "Covenants -- Restricted Payments":
(1) "Investment" shall include the portion (proportionate to RMSI's
equity interest in such Subsidiary) of the fair market value of the net
assets of any Subsidiary of RMSI at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, RMSI shall be
deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary in an amount, if positive, equal to:
(x) RMSI's "Investment" in such Subsidiary at the time of such
redesignation less
(y) the portion (proportionate to RMSI's equity interest in such
Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and
(2) any property transferred to or from an Unrestricted Subsidiary
shall be valued at its fair market value at the time of such transfer, in
each case as determined in good faith by the Board of Directors.
"Issue Date" means December 19, 1997, the date on which the Notes were
originally issued.
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"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind, including any conditional sale or other title retention
agreement or lease in the nature thereof.
"Management Stockholders" means Ronald D. Pederson, Gary R. Guffey and
Bruce A. Butler.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Disposition or
received in any other non-cash form) therefrom, in each case net of:
(1) all legal, title and recording expenses, commissions and other
fees and expenses incurred, and all Federal, state, provincial, foreign and
local taxes required to be paid or accrued as a liability under GAAP, as a
consequence of such Asset Disposition;
(2) all payments made on any Indebtedness which is secured by any
assets subject to such Asset Disposition, in accordance with the terms of
any Lien upon such assets, or which must by its terms, or in order to
obtain a necessary consent to such Asset Disposition or by applicable law,
be repaid out of the proceeds from such Asset Disposition;
(3) all distributions and other payments required to be made to
minority interest holders in Subsidiaries or joint ventures as a result of
such Asset Disposition; and
(4) appropriate amounts to be provided by the party or parties making
such Asset Disposition as a reserve, in accordance with GAAP, against any
liabilities associated with the assets disposed of in such Asset
Disposition and retained by RMSI or any Restricted Subsidiary after such
Asset Disposition.
"Net Cash Proceeds" with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Permitted Holders" means:
(1) RMSI Enterprises LLC, a Delaware limited liability company
controlled by certain Affiliates of RMSI;
(2) JR Investment Corp., a Delaware corporation, including John P.
Rochon and the other current stockholders of JR Investment Corp.;
(3) MS Acquisition Limited, a Texas limited partnership;
(4) the Management Stockholders; and
(5) any Affiliates of the Person listed in items (1) through (4),
including any Person owned or controlled by any such Person, any member of
any such Person's family, any trust for the benefit of any such Person or a
member of his family, or any Person owned or controlled by any of the
foregoing and any Person acting in the capacity of an underwriter in
connection with a public or private offering of RMSI's Capital Stock.
"Permitted Investment" means an Investment by RMSI or any Restricted
Subsidiary in:
(1) a Restricted Subsidiary or a Person which will, upon the making of
such Investment, become a Restricted Subsidiary; provided, however, that
the primary business of such Restricted Subsidiary is a Related Business;
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(2) another Person if as a result of such Investment such other Person
is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, RMSI or a Restricted Subsidiary; provided,
however, that such Person's primary business is a Related Business;
(3) Temporary Cash Investments;
(4) receivables owing to RMSI or any Restricted Subsidiary, if created
or acquired in the ordinary course of business consistent with past
practices of RMSI or such Restricted Subsidiary and payable or
dischargeable in accordance with customary trade terms; provided, however,
that such trade terms may include such concessionary trade terms as RMSI or
any such Restricted Subsidiary deems reasonable under the circumstances;
(5) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of
business;
(6) loans or advances to employees made in the ordinary course of
business consistent with past practices of RMSI or such Restricted
Subsidiary and not exceeding $500,000 in the aggregate outstanding at any
one time;
(7) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to RMSI or any
Restricted Subsidiary or in satisfaction of judgments;
(8) a Person engaged in a Related Business; provided, however, that no
Permitted Investments may be made pursuant to this clause (8) to the extent
the amount thereof would, when taken together with all other Permitted
Investments made pursuant to this clause (8), exceed $5 million in the
aggregate outstanding at any time, other than Permitted Investments in
Persons which become Restricted Subsidiaries;
(9) any Person to the extent of such Investment represents the
non-cash portion of the consideration received for an Asset Disposition
permitted pursuant to the covenant described under "Repurchase at the
Option of Holders -- Asset Sales and Sales of Subsidiary Stock"; and
(10) Notes repurchased pursuant to an offer described under
"Repurchase at the Option of Holders -- Change of Control" or "Repurchase
at the Option of Holders -- Asset Sales and Sales of Subsidiary Stock" or
otherwise purchased by RMSI.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock" as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes, however designated, which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"Public Equity Offering" means an underwritten public offering of common
stock of RMSI pursuant to an effective registration statement under the
Securities Act.
"Purchase Money Indebtedness" means Indebtedness:
(1) consisting of the deferred purchase price of tangible property,
conditional sale obligations, obligation under any title retention
agreement and other purchase money obligations, in each case where the
maturity of such Indebtedness does not exceed the anticipated useful life
of the asset being financed; and
(2) incurred to finance the acquisition by RMSI of such asset,
including additions and improvements; provided, however, that any Lien
arising in connection with any such Indebtedness shall be limited to the
specified asset being financed or, in the case of real property or
fixtures,
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including additions and improvements, the real property on which such asset
is attached; and provided further, that such Indebtedness is incurred
within 180 days after such acquisition by RMSI of such asset.
"Refinancing Indebtedness" means Indebtedness that is incurred to refund,
refinance, replace, renew, repay or extend, including pursuant to any defeasance
or discharge mechanism, any Indebtedness existing on the Issue Date or incurred
in compliance with the Indenture, including Indebtedness of RMSI that refinances
Indebtedness of any Restricted Subsidiary (to the extent permitted in the
Indenture) and Indebtedness of any Restricted Subsidiary that refinances
Indebtedness of another Restricted Subsidiary, and including Indebtedness that
refinances Refinancing Indebtedness; provided, however, that:
(1) the Refinancing Indebtedness has a Stated Maturity no earlier than
the Stated Maturity of the Indebtedness being refinanced;
(2) the Refinancing Indebtedness has an Average Life at the time such
Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being refinanced;
(3) the Refinancing Indebtedness is incurred in an aggregate principal
amount (or, if issued with original issue discount, an aggregate issue
price) that is equal to or less than the aggregate principal amount (or, if
issued with original issue discount, the aggregate accreted value) then
outstanding of the Indebtedness being refinanced; and
(4) if the Indebtedness being refinanced is subordinated in right of
payment to the Notes, such Refinancing Indebtedness is subordinated in
right of payment to the Notes to the extent of the Indebtedness being
refinanced;
and provided further, however, that Refinancing Indebtedness shall not include:
(1) Indebtedness of a Restricted Subsidiary that refinances
Indebtedness of RMSI; or
(2) Indebtedness of RMSI or a Restricted Subsidiary that refinances
Indebtedness of an Unrestricted Subsidiary.
"Restricted Subsidiary" means any Subsidiary of RMSI other than an
Unrestricted Subsidiary.
"Secured Indebtedness" means any Indebtedness of RMSI secured by a Lien.
"Secured Indebtedness" of any Guarantor Subsidiary has a correlative meaning.
"Senior Indebtedness" of RMSI means the principal of, premium (if any) and
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization of RMSI, regardless of whether or not a claim
for post filing interest is allowed in such proceedings) on, and fees and other
amounts owing in respect of, Bank Indebtedness of RMSI and all other
Indebtedness of RMSI, whether outstanding on the Issue Date or thereafter
incurred, unless in the instrument creating or evidencing the same or pursuant
to which the same is outstanding it is provided that such obligations are not
superior in right of payment to the Notes; provided, however, that Senior
Indebtedness does not include:
(1) any obligation of RMSI to any Subsidiary;
(2) any liability for federal, state, local or other taxes owed or
owing by RMSI;
(3) any accounts payable or other liability to trade creditors arising
in the ordinary course of business, including Guarantees thereof or
instruments evidencing such liabilities;
(4) any Indebtedness or obligation of RMSI that by its terms is
subordinate or junior in any respect to any other Indebtedness, Guarantee
or obligation of RMSI, including any Senior Subordinated Indebtedness and
any Subordinated Obligations;
(5) any obligations with respect to any Capital Stock;
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(6) any Indebtedness Incurred in violation of the Indenture;
(7) any Indebtedness issued to the shareholders of Atlas in connection
with the Atlas Acquisition; or
(8) any Deferred Obligation of RMSI.
If any Senior Indebtedness is disallowed, avoided or subordinated pursuant to
the provisions of Section 548 of Title 11 of the United States Code or any
applicable state fraudulent conveyance law, such Senior Indebtedness
nevertheless will constitute Senior Indebtedness. "Senior Indebtedness" of any
Guarantor Subsidiary has a correlative meaning.
"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of RMSI that specifically provides that such Indebtedness is to
rank pari passu with the Notes and is not subordinated by its terms to any
Indebtedness or other obligation of RMSI which is not Senior Indebtedness.
"Senior Subordinated Indebtedness" of a Guarantor Subsidiary has a correlative
meaning.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of RMSI within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision, but excluding any provision providing for the purchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred.
"Subordinated Obligation" means any Indebtedness of RMSI, whether
outstanding on the Issue Date or thereafter incurred, which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement.
"Subordinated Obligation" of any Guarantor Subsidiary shall have a correlative
meaning.
"Subsidiary" of any Person means any corporation, association, partnership,
limited liability company or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers, trustees or members
of any other governing body thereof is at the time owned or controlled, directly
or indirectly, by (1) such Person or (2) one or more Subsidiaries of such
Person.
"Subsidiary Guarantee" means any Guarantee of the Notes which may from time
to time be executed and delivered pursuant to the terms of the Indenture. Each
such Subsidiary Guarantee will have subordination provisions equivalent to those
contained in the Indenture and will be substantially in the form prescribed in
the Indenture.
"Temporary Cash Investments" means any of the following:
(1) any investment in direct obligations of the United States of
America or any agency thereof or obligations Guaranteed by the United
States of America or any agency thereof;
(2) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws
of the United States of America, any state thereof or any foreign country
recognized by the United States of America having capital, surplus and
undivided profits aggregating in excess of $250 million (or the foreign
currency equivalent thereof) and whose long-term debt is rated "A" (or such
similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the
Securities Act);
(3) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1) above entered
into with a bank meeting the qualifications described in clause (2) above;
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(4) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation, other than an
Affiliate of RMSI, organized and in existence under the laws of the United
States of America or any foreign country recognized by the United States of
America with a rating at the time as of which any investment therein is
made of "P-1" or higher according to Moody's or "A-1" or higher according
to Standard & Poors; and
(5) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A"
by Standard & Poors or "A" by Moody's.
"Trade Payables" means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
"Trustee" means the party named as such in the Indenture until a successor
replaces it and, thereafter, means the successor.
"Unrestricted Subsidiary" means:
(1) any Subsidiary of RMSI that at the time of determination shall be
designated an Unrestricted Subsidiary by the Board of Directors in the
manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary of RMSI (including any
newly acquired or newly formed Subsidiary of RMSI) to be an Unrestricted
Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital
Stock or Indebtedness of, or owns or holds any Lien on any property of, RMSI or
any other Restricted Subsidiary of RMSI that is not a Subsidiary of the
Subsidiary to be so designated; provided, however, that either:
(1) the Subsidiary to be so designated has total Consolidated assets
of $1,000 or less; or
(2) if such Subsidiary has Consolidated assets greater than $1,000,
then such designation would be permitted under the covenant described under
the heading "Covenants -- Restricted Payments."
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided, however, that immediately after giving effect
to such designation:
(1) RMSI could Incur $1.00 of additional Indebtedness under the
Consolidated Coverage Ratio test described under "Covenants -- Limitations
on Indebtedness" and
(2) no Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the resolution of the Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock of such
Person then outstanding that normally entitle the holders of such interests to
participate in the management or to elect those participating in the management
of such Person.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of RMSI all the
Capital Stock of which (other than directors' qualifying shares) is owned by
RMSI or another Wholly Owned Subsidiary.
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DESCRIPTION OF OTHER DEBT
SENIOR CREDIT FACILITY
RMSI has available to it a revolving credit facility which provides for
borrowings in an amount not to exceed the lesser of $25,000,000 and a borrowing
base comprised of certain percentages of eligible accounts receivable. The
senior credit facility has been established under an Amended and Restated Credit
Agreement, dated as of December 18, 1997, (as amended, the "Credit Agreement"),
among RMSI, the lenders party thereto and The Chase Manhattan Bank, as agent. As
of December 31, 1998, RMSI's borrowing base under the Credit Agreement would
have been approximately $12.1 million, net of an outstanding letter of credit in
the amount of $1.4 million. RMSI had no outstanding borrowings under the Credit
Agreement as of December 31, 1998. The senior credit facility will terminate on
October 14, 2002. Borrowings under the senior credit facility are used to
provide working capital for RMSI and its subsidiaries, to finance certain
permitted acquisitions and for other general corporate purposes.
Interest on indebtedness outstanding under the Credit Agreement will be
payable at a rate per annum, selected at the option of RMSI, equal to the Base
Rate (as defined below) plus a margin of between 0.00% and 0.75%, or the
adjusted LIBOR Rate (as defined below) plus a margin of between 1.00% and 2.50%,
which margins, in each case, will be determined by reference to an Interest
Coverage Ratio defined in the Credit Agreement. The senior credit facility also
provides that a commitment fee of between 0.25% and 0.5625% per annum, depending
on the Interest Coverage Ratio, will be payable on the undrawn amount available
for borrowing under the facility.
"Base Rate" means the higher of:
(a) the rate which Chase announces from time to time as its prime
lending rate;
(b) 0.50% in excess of the Federal Funds Rate; and
(c) 1.00% in excess of the secondary market rate for 3 month
certificates of deposit, as adjusted for assessments and statutory
reserves.
"Adjusted LIBOR Rate" means the London Interbank Offered Rate, adjusted for
statutory reserves at all times.
Interest based on the Base Rate and the Adjusted LIBOR Rate shall be
determined based on the number of days elapsed over a 360 day year. Interest
based on the Base Rate is payable monthly, and interest based on the Adjusted
LIBOR Rate is payable at the end of each month as well as at the end of the
applicable interest period.
The obligations under the Credit Agreement are unconditionally guaranteed
by each of the existing subsidiaries of RMSI and are to be guaranteed by each
newly acquired or organized subsidiary of RMSI.
The obligations of RMSI under the Credit Agreement and the obligations of
the guarantors under their guarantees will be secured by a security interest in
substantially all of their respective assets and by a pledge of all the capital
stock of each subsidiary of RMSI.
The senior credit facility may be prepaid at any time, in whole or in part,
at the option of RMSI. Voluntary permanent reductions of the unutilized portion
of the senior credit facility will be permitted at any time.
The Credit Agreement contains representations and warranties, negative,
affirmative and financial covenants, and conditions and events of default, all
of which are customarily required for similar financings, in addition to other
representations, warranties, covenants, conditions and events of default
appropriate for the specific transactions contemplated by RMSI.
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The covenants contained in the Credit Agreement include restrictions and
limitations on the following, subject in each case to specified exceptions:
<TABLE>
<S> <C>
- - dividends - capital expenditures
- - redemptions and repurchases of capital - the issuance of stock
stock - transactions with affiliates
- - the incurrence of debt - the making of loans
- - liens - investments and certain payments
- - leases - mergers and asset sales
- - sale-leaseback transactions
</TABLE>
In addition, RMSI is required to maintain compliance with financial
covenants, such as minimum levels of operating cash flow to fixed charges and
operating cash flow to cash interest.
The Credit Agreement also permits RMSI to make additional acquisitions if:
(1) the purchase price for any individual acquisition does not exceed
$40 million;
(2) the aggregate purchase of all permitted acquisitions does not
exceed $65 million;
(3) RMSI would be in pro forma compliance with the Debt Service
Coverage Ratio set forth in the Credit Agreement after giving effect to
such acquisition;
(4) the purchase price for any acquisition does not exceed 5.5x the
Adjusted EBITDA (as defined in the Credit Agreement) of the company to be
acquired; and
(5) the company to be acquired is in the same line of business as
RMSI.
Events of default under the Credit Agreement include the following, subject
in some cases to agreed-upon grace periods:
(1) the failure to pay principal, interest, fees or other amounts when
due;
(2) violation of covenants;
(3) the failure of any representation or warranty made by RMSI to be
true in all material aspects;
(4) cross-default and cross-acceleration with other indebtedness;
(5) change of control;
(6) specified events of bankruptcy;
(7) material judgments being entered against RMSI;
(8) specified ERISA events;
(9) the invalidity of the guarantees of the indebtedness under the
Credit Agreement or of the security interests granted to the Lenders; and
(10) material adverse change in the business or financial condition of
RMSI and its subsidiaries, taken as a whole.
OTHER INDEBTEDNESS
In conjunction with the acquisition of other food brokerage companies, RMSI
has incurred deferred payment obligations to certain of the former owners and
key employees of the acquired companies as consideration for future consulting
services and covenants not to compete. The obligations are evidenced by
promissory notes or contracts. As of December 31, 1998, RMSI has $18.2 million
in debt relating to deferred payment and compensation plans, $26.9 million
relating to covenants not to compete and $24.1 million in promissory notes
payable. Under these various debt instruments, RMSI's subsidiaries have
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agreed to pay to these individuals specified amounts upon the termination of
their employment with RMSI (including retirement) or, in the event of their
death, to their designated beneficiary. Although the terms vary, most payments
are monthly and continue for a period of up to 10 years. The amounts to be paid
under most of these agreements are not based upon length of service, but are
fixed amounts, although some may be adjusted based on the performance of RMSI.
In addition, RMSI's subsidiaries have entered into commission split
agreements with the owners of some acquired businesses. Under these contracts,
RMSI is to pay a percentage of commissions on the revenues of certain principal
lines for a period of up to 10 years. For the year ended December 31, 1998, RMSI
made payments of approximately $1.5 million in connection with these commission
split agreements.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives notes for its own account in the Exchange
Offer must acknowledge that it will deliver a prospectus in connection with any
resale of those notes. This prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer in connection with resales of
notes received in the Exchange Offer where the outstanding notes were acquired
as a result of market-making activities or other trading activities. We have
agreed that, for a period of 180 days after the consummation of the Exchange
Offer, we will make this prospectus, as amended and supplemented, available to
any broker-dealer for use in connection with any such resale. In addition, until
, 1999, all dealers effecting transactions in the notes issued in
the Exchange Offer may be required to deliver a prospectus.
Neither RMSI nor any of the guarantor subsidiaries will receive any
proceeds from any sale of notes by broker-dealers. Notes received by
broker-dealers for their own account in the Exchange Offer may be sold from time
to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or at negotiated
prices. Any such resale may be made directly to purchasers or to or though
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such notes. Any
broker-dealer that resells notes that were received by it for its own account in
the Exchange Offer and any broker or dealer that participates in a distribution
of such notes may be deemed to be an "underwriter" within the meaning of the
Securities Act, and profit on any such resale of notes issued in the exchange
and any commission or concessions received by any such persons maybe deemed to
be underwriting compensation under the Securities Act. The letter of transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the consummation of the Exchange Offer, RMSI
will promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the letter of transmittal. RMSI has agreed to pay all expenses incident to
the Exchange Offer, including the expenses of one counsel for the holders of the
notes, other than the commissions or concessions of any broker-dealers and will
indemnify the holders of the notes, including any broker-dealers, against
certain liabilities, including liabilities under the Securities Act.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain United States federal income
tax consequences associated with the exchange of outstanding notes for the notes
to be issued in the Exchange Offer and the ownership and disposition of those
new notes to holders who acquired the outstanding notes at the initial offering
from the initial purchaser of the outstanding notes for the original offering
price and who acquire new notes in the Exchange Offer. The summary is based upon
current laws, regulations, rulings and judicial decisions all of which are
subject to change possibly with retroactive effect. The discussion below does
not address all aspects of United States federal income taxation that may be
relevant to holders in light of their particular circumstances, or to holders
subject to special treatment under United States federal income tax law
(including, without limitation, certain financial institutions, insurance
companies, tax-exempt entities, dealers in securities, persons who hold
outstanding notes or notes issued in the Exchange Offer as part of a straddle,
hedge, conversion transaction or other integrated investment or persons whose
functional currency is not the United States dollar). In addition, the
discussion does not address any aspect of state, local or foreign taxation.
WE URGE HOLDERS OF THE OUTSTANDING NOTES WHO ARE EXCHANGING THEIR NOTES,
AND PROSPECTIVE PURCHASERS OF THE NOTES TO BE ISSUED IN THE EXCHANGE OFFER, TO
CONSULT THEIR TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF ACQUIRING, OWNING, AND DISPOSING OF THE NOTES TO BE ISSUED IN
THE EXCHANGE OFFER, AS WELL AS THE APPLICATION OF STATE, LOCAL AND FOREIGN
INCOME AND OTHER TAX LAWS.
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THE EXCHANGE OFFER
The exchange of outstanding notes for the notes issued in the Exchange
Offer will not be treated as an "exchange" for United States federal income tax
purposes because the notes issued in the Exchange Offer will not differ
materially in kind or extent from the outstanding notes. Rather, the notes
received by a holder in the Exchange Offer will be treated as a continuation of
the outstanding notes in the hands of the exchanging holder. As a result, there
should be no federal income tax consequences to holders exchanging their
outstanding notes for notes issued in the Exchange Offer. In addition, any
exchanging holder of outstanding notes will have the same adjusted tax basis and
holding period in the notes issued in the Exchange Offer as such holder had in
the outstanding notes immediately prior to the exchange.
U.S. HOLDERS
For purposes of this discussion, a "U.S. Holder" means a holder of notes
issued in the Exchange Offer that is:
(1) a citizen or resident of the United States for United States
federal income tax purposes;
(2) a corporation or partnership created or organized in the United
States or under the laws of the United States or any state thereof, or the
District of Columbia;
(3) an estate the income of which is subject to United States federal
income taxation regardless of its source; or
(4) a trust if a court within the United States is able to exercise
primary supervision over the administration of such trust and 1 or more
United States persons have the authority to control all substantial
decisions of such trust.
A "non-U.S. Holder" is any holder that is not a U.S. Holder.
TAX TREATMENT OF THE NEW NOTES
U.S. Holders
Stated interest payable on the notes issued in the Exchange Offer generally
will be includable in the gross income of a U.S. Holder as ordinary interest
income at the time accrued or received, in accordance with the holder's regular
method of tax accounting for United States federal income tax purposes. If a
note issued in the Exchange Offer is redeemed, sold, or otherwise disposed of
(collectively, a "disposition"), a U.S. Holder generally will recognize capital
gain or loss equal to the difference between the amount realized on the
disposition of the note (to the extent such amount does not represent accrued
but unpaid interest) and the holder's adjusted tax basis in the note. A U.S.
Holder's adjusted tax basis in a note issued in the Exchange Offer generally
will equal the U.S. Holder's purchase price for the outstanding note (net of
accrued interest) less any principal payments received by the U.S. Holder. The
capital gain or loss will be long-term capital gain or loss, provided that the
holder has held the note for more than 1 year at the time of the disposition.
The deduction of capital losses may be subject to certain limitations.
Non-U.S. Holders
An investment in the notes issued in the Exchange Offer by a non-U.S.
Holder generally will not give rise to any United States federal income tax
consequences, if the interest received or any gain recognized on the disposition
of the notes by such holder is not effectively connected with the conduct of a
trade or business in the United States, provided that
(1) in the case of payments of interest:
(a) the non-U.S. Holder satisfies and complies with certain
certification and reporting requirements;
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(b) the non-U.S. Holder does not actually or constructively own 10%
or more of the total combined voting power of all classes of stock of
RMSI entitled to vote; and
(c) the non-U.S. Holder is not a controlled foreign corporation
that is related to RMSI actually or constructively through stock
ownership; or
(2) in the case of gain, the non-U.S. Holder holds the New Notes as a
capital asset, and the non-U.S. Holder is not present in the United States
for 183 days or more in the taxable year of the disposition and certain
other conditions are satisfied.
A non-U.S. Holder that does not qualify for an exemption from withholding
under the preceding paragraph generally will be subject to withholding of United
States federal income tax at the rate of 30%, or a lower rate if a treaty
applies, on payments of interest on the notes issued in the Exchange Offer.
If a non-U.S. Holder is engaged in a trade or business in the United States
and interest or other payments with respect to the notes issued in the Exchange
Offer are effectively connected with the conduct of such trade or business, the
non-U.S. Holder will generally be subject to United States federal income tax on
such amounts on a net income basis in the same manner as if the non-U.S. Holder
were a U.S. Holder. In addition, if such holder is a foreign corporation, it may
be subject to a branch profits tax at a 30% rate or, if applicable, a lower rate
specified by a treaty.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Non-corporate U.S. Holders may be subject to backup withholding at a rate
of 31% on payments of principal and interest on, and the proceeds from the
disposition of, the notes issued in the Exchange Offer. In general, backup
withholding will be imposed only if a U.S. Holder:
(1) fails to furnish a correct taxpayer identification number ("TIN"),
which, for an individual, would be his or her social security number;
(2) furnishes an incorrect TIN;
(3) is notified by the IRS that it has failed to report interest or
dividend income; or
(4) fails to certify that such holder has provided a correct TIN and
that the U.S. Holder is not subject to backup withholding.
In addition, payments of principal and interest to U.S. Holders generally
will be subject to information reporting. Non-U.S. Holders may be required to
comply with applicable certification procedures to establish that they are not
U.S. Holders in order to avoid withholding. In addition, each non-U.S. Holder
will be required to provide an IRS Form W-8 to certify its status as a non-U.S.
person.
Backup withholding generally will not apply to payments made to a non-U.S.
Holder that provides the certification described above or otherwise establishes
an exemption from backup withholding. Payments by a United States office of a
broker of the proceeds from a disposition of the notes generally will be subject
to backup withholding at a rate of 31% unless the non-U.S. Holder certifies it
is a non-U.S. Holder under penalties of perjury or otherwise establishes an
exemption.
Any amount withheld from a payment to a holder under the backup withholding
rules is allowable as a credit against such holder's United States federal
income tax liability, or if withholding results in an overpayment of taxes, a
refund may be obtained, provided that the required information is furnished to
the IRS. Certain holders, including, among others, corporations and foreign
individuals who comply with certain certification requirements, are not subject
to backup withholding. U.S. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS AS TO
THEIR QUALIFICATION FOR EXEMPTION FROM BACKUP WITHHOLDING AND THE PROCEDURE FOR
OBTAINING SUCH AN EXEMPTION.
The United States Treasury Department issued final Treasury regulations
governing information reporting and the certification procedures regarding
withholding and backup withholding on certain
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amounts paid to non-U.S. Holders after December 31, 1999. The Treasury
regulations generally would not alter the treatment of non-U.S. Holders
described above. The Treasury regulations would, however, alter the procedures
for claiming the benefits of an income tax treaty and may change the
certification procedures relating to the receipt by intermediaries of payments
on behalf of a beneficial owner of a note issued in the Exchange Offer.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS CONCERNING THE EFFECT,
IF ANY, OF SUCH TREASURY REGULATIONS ON AN INVESTMENT IN THE NOTES OFFERED IN
THE EXCHANGE OFFER.
BOOK ENTRY
Except as set forth below, the notes issued in the Exchange Offer will
initially be issued in the form of one or more registered notes in global form
without coupons (each a "Global Note"). Each Global Note will be deposited with,
or on behalf of, the Depository Trust Company ("DTC") and registered in the name
of Cede & Co., as nominee of DTC, or will remain in the custody of the Trustee
pursuant to the FAST Balance Certificate Agreement between DTC and the Trustee.
DTC has advised us that it is (1) a limited purpose trust company organized
under the laws of the State of New York, (2) a member of the Federal Reserve
System, (3) a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended, and (4) a "Clearing Agency" registered pursuant to
Section 17A of the Exchange Act. DTC was created to hold securities for its
participating organizations (collectively, the "Participants") and facilitates
the clearance and settlement of securities transactions between Participants
through electronic book-entry changes to the accounts of its Participants,
thereby eliminating the need for physical transfer and delivery of certificates.
DTC's Participants include securities brokers and dealers (including the initial
purchaser of the outstanding notes), banks and trust companies, clearing
corporations, and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
(collectively, the "Indirect Participants") that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly.
Holders who are not Participants may beneficially own securities held by or on
behalf of DTC only through Participants or Indirect Participants.
We expect, pursuant to procedures established by DTC, that (1) upon deposit
of the Global Notes, DTC will credit the accounts of Participants designated by
the Initial Purchasers with an interest in the Global Note and (2) ownership of
the Notes will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to the interest
of Participants), the Participants and the Indirect Participants. The laws of
some states require that certain persons take physical delivery in definitive
form of securities that they own and that security interest in negotiable
instruments can only be perfected by delivery of certificates representing the
instruments. Consequently, the ability to transfer notes or to pledge the notes
as collateral will be limited to such extent.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or such nominee, as the case may be, will be considered the sole owner or holder
of the Notes represented by the Global Note for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in a Global
Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of certificated notes (the "Certificated Notes"), and will not be
considered the owners or holders thereof under the Indenture for any purpose,
including with respect to giving of any directions, instruction or approval to
the Trustee thereunder. As a result, the ability of a person having a beneficial
interest in notes represented by a Global Note to pledge or transfer such
interest to persons or entities that do not participate in DTC's system or to
otherwise take action with respect to such interest, may be affected the lack of
a physical certificate evidencing such interest.
Accordingly, each holder owning a beneficial interest in a Global Note must
rely on the procedures of DTC and, if such holder is not a Participant or an
Indirect Participant, on the procedures of the Participant through which such
holder owns its interest, to exercise any rights of a holder of notes under the
Indenture or such Global Note. We understand that under existing industry
practice, in the event we request any action of holders of notes or a holder
that is an owner of a beneficial interest in a Global Note desires to take any
action that DTC, as the holder of such Global Note, is entitled to take, DTC
would
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authorize the Participants to take such action and the Participant would
authorize holders owning through such Participants to take such action or would
otherwise act upon the instruction of such holders. Neither RMSI nor the Trustee
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of notes by DTC, or for maintaining, supervising
or reviewing any records of DTC relating to such notes.
Payments with respect to the principal of, premium, if any, and interest on
any notes represented by a Global Note registered in the name of DTC or its
nominee on the applicable record date will be payable by the Trustee to or at
the direction of DTC or its nominee in its capacity as the registered holder of
the Global Note representing such notes under the Indenture. Under the terms of
the Indenture, RMSI and the Trustee may treat the persons in whose names the
notes, including the Global Notes, are registered as the owners thereof for the
purpose of receiving such payment and for any and all other purposes whatsoever.
Consequently, neither RMSI nor the Trustee has or will have any responsibility
or liability for the payment of such amounts to beneficial owners of interest in
the Global Note (including principal, premium, if any, and interest). Payments
by the Participants and the Indirect Participants to the beneficial owners of
interests in the Global Note will be governed by standing instructions and
customary practice and will be the responsibility of the Participants or the
Indirect Participants and DTC.
CERTIFICATED NOTES
If:
(1) RMSI notifies the Trustee in writing that DTC is no longer willing
or able to act as a depositary, or DTC ceases to be registered as a
clearing agency under the Exchange Act and a successor depositary is not
appointed within 90 days of this notice or cessation;
(2) RMSI, at its option, notifies the Trustee in writing that it
elects to cause the issuance of Notes in definitive form under the
Indenture; or
(3) upon the occurrence of other events described in the Indenture,
then, upon surrender by DTC of the Global Notes, certificated notes will be
issued to each person that DTC identifies as the beneficial owner of the notes
represented by the Global Notes. Upon any issuance of certificated notes, the
Trustee will be required to register the certificated notes in the name of the
beneficial owner indicated by the DTC, or the nominee of such person, and cause
the certificates to be delivered to that person.
Neither RMSI nor the Trustee will be liable for any delay by DTC or any
Participant or Indirect Participant in identifying the beneficial owners of the
related notes. Each of RMSI and the Trustee may conclusively rely on, and will
be protected in relying on, instructions from DTC for all purposes, including
with respect to the registration and delivery, and the respective principal
amounts, of the notes to be issued.
LEGAL MATTERS
The validity of the notes offered by this prospectus will be passed upon by
Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, counsel for RMSI.
Skadden, Arps, Slate, Meagher & Flom LLP has also represented Chase Securities
Inc., the initial purchaser of the outstanding notes, and may represent current
holders of the outstanding notes, each in connection with certain legal matters
unrelated to the offering of the outstanding notes or this Exchange Offer.
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EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1998 and 1997, and for each of the 3 years
in the period ended December 31, 1998, as set forth in their report. We have
included our financial statements in this Prospectus in reliance on Ernst &
Young LLP's report, given on their authority as experts in accounting and
auditing.
Ernst & Young LLP, independent auditors, have audited the financial
statements of Atlas for each of the 2 years in the period ended December 31,
1997, as set forth in their report. We have included these financial statements
in this Prospectus in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.
Ernst & Young LLP, independent auditors, have audited the financial
statements of Bromar for the 10 month period ended October 31, 1996, as set
forth in their report. We have included these financial statements in this
Prospectus in reliance on Ernst & Young LLP's report, given on their authority
as experts in accounting and auditing.
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INDEX TO HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<S> <C>
HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF RICHMONT
MARKETING SPECIALISTS INC.
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets at December 31, 1998 and 1997... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996.......................... F-4
Consolidated Statements of Shareholders' Equity (Deficit)
for the Years Ended December 31, 1998, 1997 and 1996...... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996.......................... F-6
Notes to the Consolidated Financial Statements.............. F-7
HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF ATLAS
MARKETING COMPANY, INC. AND SUBSIDIARIES
Report of Independent Auditors.............................. F-21
Consolidated Statements of Operations for the years ended
December 31, 1997 and 1996................................ F-22
Consolidated Statements of Cash Flows for the years ended
December 31, 1997 and 1996................................ F-23
Notes to the Consolidated Financial Statements.............. F-24
HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF BROMAR, INC.
AND SUBSIDIARIES
Report of Independent Auditors.............................. F-29
Consolidated Statement of Income for the Ten Months Ended
October 31, 1996.......................................... F-30
Consolidated Statement of Cash Flows for the Ten Months
Ended October 31, 1996.................................... F-31
Notes to the Consolidated Financial Statements.............. F-32
</TABLE>
F-1
<PAGE> 90
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Richmont Marketing Specialists Inc.
We have audited the accompanying consolidated balance sheets of Richmont
Marketing Specialists Inc. (the "Company") as of December 31, 1998 and 1997, and
the related consolidated statements of operations, shareholders' equity
(deficit) and cash flows for each of the three years in the period ended
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Richmont
Marketing Specialists Inc. at December 31, 1998 and 1997, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Dallas, Texas
February 26, 1999
F-2
<PAGE> 91
RICHMONT MARKETING SPECIALISTS INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 26,633,832 $ 41,394,614
Accounts receivable, net of allowance for doubtful
accounts of $4,325,079 and $3,161,148 as of December
31, 1998 and 1997, respectively........................ 28,295,152 26,193,450
Current portion of notes receivable....................... 110,438 119,689
Deferred taxes............................................ 1,932,286... 1,702,362
Prepaid expenses and other current assets................. 967,164 949,200
------------ ------------
Total current assets.............................. 57,938,872 70,358,315
Other assets................................................ 7,047,070 8,964,954
Property and equipment, net................................. 23,019,089 22,168,367
Intangible assets........................................... 86,756,991 110,037,865
------------ ------------
Total assets...................................... $174,762,022 $211,529,501
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 5,085,651 $ 4,377,949
Accrued expenses.......................................... 8,980,959 7,309,829
Income taxes payable...................................... -- 750,629
Promotional advances...................................... 1,566,308 1,695,319
Current portion of long-term obligations.................. 9,434,064 10,736,870
------------ ------------
Total current liabilities......................... 25,066,982 24,870,596
Deferred taxes.............................................. 10,025,601 10,170,702
Long-term obligations less current portion:
Notes payable............................................. 119,500,145 124,042,842
Covenants not to compete.................................. 24,362,129 22,369,855
Deferred compensation liabilities and payment
agreements............................................. 16,512,319 18,756,664
Capital lease obligations................................. 1,421,609 2,010,013
------------ ------------
Total long-term obligations....................... 161,796,202 167,179,374
Other liabilities........................................... 901,075 --
Commitments and contingencies (Note 7)
Shareholders' equity (deficit):
Common stock, $.01 stated value:
Authorized shares -- 10,000,000
Issued and outstanding shares -- 197,474 as of December
31, 1998 and 1997...................................... 1,975 1,975
Additional paid-in capital................................ 31,305,469 31,305,469
Retained deficit.......................................... (52,829,915) (20,493,248)
Treasury stock at cost -- 59,839 shares as of December 31,
1998 and 1997.......................................... (1,505,367) (1,505,367)
------------ ------------
Total shareholders' equity (deficit).............. (23,027,838) 9,308,829
------------ ------------
Total liabilities and shareholders' equity........ $174,762,022 $211,529,501
============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE> 92
RICHMONT MARKETING SPECIALISTS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1998 1997 1996
------------ ------------ -----------
<S> <C> <C> <C>
Revenue............................................. $218,294,383 $155,932,228 $73,447,480
Expenses:
Salaries.......................................... 117,358,921 90,075,054 42,305,511
Fringe benefits................................... 18,575,818 7,960,622 4,180,124
Automobiles and related expenses.................. 18,989,156 14,476,865 6,944,402
Sales and marketing............................... 13,866,026 11,122,139 5,181,416
Lease restructure charge.......................... 1,700,000 -- --
General and administrative........................ 31,827,238 22,005,526 10,804,094
Depreciation and amortization..................... 32,734,666 14,355,384 5,553,999
------------ ------------ -----------
Total expenses............................ 235,051,825 159,995,590 74,969,546
------------ ------------ -----------
Operating loss...................................... (16,757,442) (4,063,362) (1,522,066)
Other income (expense):
Interest expense.................................. (17,488,710) (5,408,717) (2,670,656)
Other income...................................... 1,835,829 876,201 508,518
------------ ------------ -----------
Loss before income taxes............................ (32,410,323) (8,595,878) (3,684,204)
Income tax benefit.................................. (73,656) (1,168,861) (551,638)
------------ ------------ -----------
Net loss............................................ $(32,336,667) $ (7,427,017) $(3,132,566)
============ ============ ===========
Net loss per share.................................. $ (234.95) $ (53.96) $ (34.80)
============ ============ ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 93
RICHMONT MARKETING SPECIALISTS INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
---------------- PAID-IN RETAINED TREASURY
SHARES AMOUNT CAPITAL DEFICIT STOCK TOTAL
------- ------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995....... 141,645 $1,416 $ 599,636 $ (7,933,719) $(1,505,367) $ (8,838,034)
Proceeds from sale of shares..... 61,311 613 25,705,833 -- -- 25,706,446
Shares repurchased and
canceled...................... (5,482) (54) -- (1,999,946) -- (2,000,000)
Net loss......................... -- -- -- (3,132,566) -- (3,132,566)
------- ------ ----------- ------------ ----------- ------------
Balance at December 31, 1996....... 197,474 1,975 26,305,469 (13,066,231) (1,505,367) 11,735,846
Contribution to capital.......... -- -- 5,000,000 -- -- 5,000,000
Net loss......................... -- -- -- (7,427,017) -- (7,427,017)
------- ------ ----------- ------------ ----------- ------------
Balance at December 31, 1997....... 197,474 1,975 31,305,469 (20,493,248) (1,505,367) 9,308,829
Net loss......................... -- -- -- (32,336,667) (32,336,667)
------- ------ ----------- ------------ ----------- ------------
Balance at December 31, 1998....... 197,474 $1,975 $31,305,469 $(52,829,915) $(1,505,367) $(23,027,838)
======= ====== =========== ============ =========== ============
</TABLE>
See accompanying notes.
F-5
<PAGE> 94
RICHMONT MARKETING SPECIALISTS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................. $(32,336,667) $ (7,427,017) $ (3,132,566)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Provision for losses on accounts receivable............... 11,404,800 6,271,190 2,569,294
Compensation expense for stock appreciation rights........ 223,614 -- --
Compensation expense related to deferred compensation
plans................................................... 270,768 117,722 117,722
Restructure expense related to lease obligations.......... 1,700,000 -- --
Amortization of intangible assets......................... 27,349,844 10,483,724 3,163,227
Depreciation.............................................. 5,384,822 3,871,660 2,390,772
Imputed interest expense on deferred compensation and
deferred payment agreements and covenants not to
compete................................................. 1,949,205 2,086,578 1,327,639
Amortization of debt issue costs.......................... 531,271 -- --
(Gain) loss on disposal of property and equipment......... 112,907 (216,980) 105,816
Deferred income taxes..................................... (171,394) (1,389,252) (827,249)
Changes in operating assets and liabilities:
Accounts and notes receivable........................... (13,079,969) (9,320,470) (1,327,134)
Prepaid expenses and other current assets............... (36,219) 420,861 (429,510)
Other assets............................................ (79,451) (712,627) (921,735)
Accounts payable and accrued expenses................... (570,798) (3,533,561) 1,884,878
Income taxes payable.................................... (871,508) (354,855) (158,288)
Promotional advances.................................... (129,011) (78,037) (99,843)
------------ ------------ ------------
Net cash provided by operating activities.......... 1,652,214 218,936 4,663,023
INVESTING ACTIVITIES
Purchases of property and equipment....................... (6,843,238) (2,784,156) (1,489,485)
Proceeds from sale of equipment........................... 2,265,006 840,976 --
Cash paid in purchases of businesses, net of cash
acquired................................................ -- (33,919,031) (26,059,659)
------------ ------------ ------------
Net cash used in investing activities.............. (4,578,232) (35,862,211) (27,549,144)
FINANCING ACTIVITIES
Net change in line of credit.............................. -- (5,195,894) 280,000
Proceeds from debt issuance to stockholders............... -- -- 1,050,000
Principal payments on debt and capital lease
obligations............................................. (5,631,368) (8,997,574) (2,265,882)
Proceeds from debt offering, net of underwriting
commission.............................................. -- 97,000,000 --
Payments on covenants not to compete, and deferred payment
agreements.............................................. (5,891,829) (6,131,030) (1,906,938)
Payment of professional fees related to issuance of senior
subordinated notes...................................... (310,567) (2,038,613) --
Issuance of common stock.................................. -- -- 25,706,446
Cash contribution to capital.............................. -- 2,400,000 --
------------ ------------ ------------
Net cash provided by (used in) financing
activities....................................... (11,833,764) 77,036,889 22,863,626
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents........ (14,759,782) 41,393,614 (22,495)
Cash and cash equivalents at beginning of period............ 41,393,614 -- 22,495
------------ ------------ ------------
Cash and cash equivalents at end of period.................. $ 26,633,832 $ 41,393,614 $ --
============ ============ ============
Supplemental Disclosures of Non-Cash Activities
Conversion of notes payable to shareholders to equity..... -- 2,600,000 --
Capital leases entered into during the period............. -- -- 375,583
Issuance of notes payable for repurchase of common
stock................................................... -- -- 2,000,000
</TABLE>
See accompanying notes.
F-6
<PAGE> 95
RICHMONT MARKETING SPECIALISTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
In October 1997, the shareholders of Marketing Specialists Sales Company
(MSSC) exchanged all of their common stock for an equal number of shares of
common stock of Richmont Marketing Specialists Inc. (RMSI). Accordingly, RMSI
became the holding company of MSSC. References in these Notes to Consolidated
Financial Statements to the "Company" refer to RMSI and, for any period before
October 1997, to MSSC.
The Company is one of the largest food brokers in the United States, with
extensive operations covering the west, southwest, and southeast regions of the
country and expanding operations in the midwest. The Company provides a
comprehensive array of sales, marketing, merchandising, and order management
services to over 1700 manufacturers, known as principals, of consumer-packaged
goods and markets the products of these principals to leading retailers and
wholesalers, known as customers, operating in a variety of trade channels,
including grocery stores, mass merchandisers, membership warehouses, drug
stores, and convenience stores.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Revenue Recognition
Revenue is earned from commissions on sales of food products on behalf of
manufacturers and producers (principals). Commission revenue is recorded as
income when product shipment has occurred and notification of such shipment is
received from the principals.
Fair Value of Financial Instruments
The fair values of cash and cash equivalents, accounts receivable, trade
payables and short-term debt approximate carrying value at December 31, 1998 due
to the short period of time to maturity. Management estimates the fair value of
long-term debt to approximate the carrying value at December 31, 1998 based upon
current market interest rates in relation to the imputed interest rate of each
instrument and the relative liquidity of each instrument.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Net Loss Per Share
The net loss per share is computed based upon the weighted average number
of shares outstanding of 137,635, 137,635 and 90,006 for the years ended
December 31, 1998, 1997 and 1996, respectively. The weighted average number of
shares outstanding for the year ended December 31, 1996 includes the effect of
the 61,311 shares issued November 7, 1996.
F-7
<PAGE> 96
RICHMONT MARKETING SPECIALISTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Statement of Cash Flows
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to a
concentration of credit risk principally consist of accounts and notes
receivable. As of December 31, 1998 and 1997, no individual principal represents
a significant concentration of accounts receivable. The Company generally does
not require collateral on accounts and notes receivable as the Company's
customers are generally large, well-established companies. The Company
periodically performs credit evaluations of its principals and maintains
reserves for potential losses. The established reserves and the credit losses
have historically been within Company estimates. The Company wrote off accounts
receivable of approximately $10,698,000, $6,632,000, and $1,072,000 for the
years ended December 31, 1998, 1997 and 1996, respectively.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
are computed using accelerated methods over the estimated useful lives.
Intangible Assets
Intangible assets include goodwill, covenants not to compete, principal
relationships, and trained workforce. Goodwill represents the excess of the
purchase price over the fair value of net assets of various businesses acquired.
Effective January 1, 1998, the Company revised the estimated useful life of its
goodwill related to prior acquisitions from ten to five years. Acquisitions
prior to January 1, 1993 with unamortized goodwill at January 1, 1998 were
written off in the first quarter. The net loss for the year of 1998 would have
decreased by $9.4 million without this change. In addition, the net loss per
share for the year ended December 31, 1998 would have decreased $68.30 without
this change.
Covenants not to compete are recorded at fair value based on independent
appraisal and are being amortized over the term of the related agreement,
generally three to ten years. Principal relationships and trained workforce are
recorded at fair value based on independent appraisals and are amortized over
periods ranging from one to seven years.
Periodically, the carrying value of intangible assets is reviewed if the
facts and circumstances suggest that they may be impaired. If the review
indicates that the intangible assets will not be recoverable, as determined by
the undiscounted cash flow method, the asset will be reduced to its estimated
recoverable value. At December 31, 1998, the Company does not believe that an
impairment of assets has occurred.
Promotional Advances
Promotional advances represent amounts received from principals for the
future promotion of their products. Such amounts are recorded as liabilities
until they are spent on behalf of and under the direction of the principals.
Prior Year Reclassification
Certain prior year balances have been reclassified to conform to current
year presentation.
F-8
<PAGE> 97
RICHMONT MARKETING SPECIALISTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- USEFUL LIVES
1998 1997 (YEARS)
------------ ------------ ------------
<S> <C> <C> <C>
Land........................................ $ 4,152,316 $ 3,789,058 --
Buildings and leasehold improvements........ 9,495,972 8,427,954 40
Furniture, fixtures and equipment........... 16,515,027 15,713,850 5-7
Purchased software.......................... 2,904,115 -- 3
Assets under capital leases................. 5,481,986 5,481,986 Lease term
------------ ------------
38,549,416 33,412,848
------------ ------------
Less accumulated depreciation and
amortization.............................. (15,530,327) (11,244,481)
------------ ------------
$ 23,019,089 $ 22,168,367
============ ============
</TABLE>
3. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
Goodwill................................................. $ 66,003,306 $ 63,016,815
Covenants not to compete................................. 30,881,946 30,216,051
Principal relationships.................................. 29,106,749 29,106,749
Trained workforce........................................ 5,251,000 5,251,000
Other.................................................... 433,679 433,679
------------ ------------
131,676,680 128,024,294
Less accumulated amortization............................ (44,919,689) (17,986,429)
------------ ------------
$ 86,756,991 $110,037,865
============ ============
</TABLE>
Amortization expense related to intangible assets for the years ended
December 31, 1998, 1997 and 1996 was, $27,349,844, $10,483,724 and $3,163,227
respectively.
4. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
Salaries, bonus, taxes and benefits......................... $3,343,593 $4,753,174
Insurance................................................... 1,065,400 969,788
Software maintenance........................................ 1,091,700 --
Tax reserve................................................. 1,000,000 --
Lease restructure, current portion.......................... 723,000 --
Interest.................................................... 505,159 375,314
Other....................................................... 1,252,107 1,211,553
---------- ----------
$8,980,959 $7,309,829
========== ==========
</TABLE>
F-9
<PAGE> 98
RICHMONT MARKETING SPECIALISTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LINES OF CREDIT
On October 14, 1997, the Company entered into a bank credit facility. On
December 18, 1997, this facility was amended and restated and further amended on
August 12, 1998 effective June 30, 1998 and on March 5, 1999 effective October
1, 1998 (collectively, the "Credit Agreement"). The Credit Agreement provides
for borrowings not to exceed the lesser of $25,000,000 or a maximum borrowing
base calculated on certain percentages of eligible accounts receivable. The
available borrowings will be reduced for any outstanding letters of credit.
Borrowings under the facility will be used to provide working capital for the
Company, to finance certain permitted acquisitions, and to facilitate other
general corporate purposes. Borrowings under the Credit Agreement bear interest
at the prime rate plus a margin of between 0.00% and 0.75% or the LIBOR rate
plus a margin of between 1.00% and 2.50%, based upon defined calculations, at
the option of the Company. The Company is required to pay commitment fees under
the facility at a rate range from .25% to .5625%, based upon defined
calculations. The facility will mature on October 14, 2002. The facility also
places restrictions and limitations on dividends, redemptions, and repurchases
of capital stock, additional indebtedness, capital expenditures, mergers and
asset sales of the Company.
The Credit Agreement requires the Company to maintain certain financial
ratios and meet certain indebtedness tests. Amounts outstanding under this
facility are collateralized by substantially all of the Company's assets.
On December 31, 1998, there were no borrowings under the facility; however,
a $1.4 million letter of credit was outstanding. The amount available under the
facility as amended was approximately $12.1 million.
F-10
<PAGE> 99
RICHMONT MARKETING SPECIALISTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LONG-TERM OBLIGATIONS
Debt
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
Senior Subordinated Notes, unsecured, bearing interest at
10 1/8% payable semi-annually and principal due
December 15, 2007...................................... $100,000,000 $100,000,000
Unsecured notes payable to other entities, bearing
interest at rates ranging from 5.6% to 12%, principal
and interest payable under various arrangements over
terms ranging from one to fourteen years............... 6,953,790 8,364,915
Unsecured notes payable to related parties, bearing
interest at rates ranging from 7.5% to 8.5%, principal
and interest payable on demand......................... -- 661,310
Unsecured notes payable to former owners of Atlas,
bearing interest at 10%, principal and interest payable
monthly in the amount of $262,500 over terms ranging
from one to five years................................. 11,655,660 12,109,121
Unsecured notes payable to related parties, bearing
interest at rates ranging from 6.5% to 8.5%, principal
and interest payable under various arrangements over
terms ranging from one to ten years.................... 5,514,955 8,312,358
------------ ------------
124,124,405 129,447,704
Less current portion..................................... (4,624,260) (5,404,862)
------------ ------------
$119,500,145 $124,042,842
============ ============
</TABLE>
The combined aggregate maturities of debt at December 31, 1998, are as
follows:
<TABLE>
<S> <C>
1999........................................................ $ 4,624,260
2000........................................................ 4,708,231
2001........................................................ 4,454,929
2002........................................................ 3,994,225
2003........................................................ 1,003,016
Thereafter.................................................. 105,339,744
------------
$124,124,405
============
</TABLE>
On December 19, 1997, the Company issued $100,000,000 of 10 1/8% Senior
Subordinated Notes due 2007 (the Notes). The proceeds, net of a $3,000,000
underwriting commission, were $97,000,000. In connection with the issuance of
the Notes, the Company incurred approximately $5,300,000 in deferred financing
fees, which amount includes the underwriting commission. These fees are
capitalized and are being amortized over the term of the Notes.
Interest on the Notes is payable semiannually on June 15 and December 15 of
each year, commencing June 15, 1998. The principal on the Notes is payable on
December 15, 2007, the maturity date. Except as described below, the Company may
not redeem the Notes prior to December 15, 2002. On or after such date, the
Company may redeem the Notes, in whole or in part, at the following redemption
prices: 2002 -- 105.063%; 2003 -- 103.375%; 2004 -- 101.688%; 2005 or
thereafter -- 100.000%, together with accrued and unpaid interest, if any, to
the date of redemption. In addition, at any time and from time
F-11
<PAGE> 100
RICHMONT MARKETING SPECIALISTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
to time on or prior to December 15, 2000, the Company may, subject to certain
requirements, redeem up to 35% of the original aggregate principal amount of the
Notes with the net cash proceeds of one or more public equity offerings by the
Company, at redemption price equal to 110.125% of the principal amount of the
Notes to be redeemed, together with accrued and unpaid interest, if any, to the
date of redemption, provided that at least 65% of the original aggregate
principal amount of the Notes remains outstanding immediately after each such
redemption. The Notes are not subject to any sinking fund requirement. Upon a
change of control, each holder of the Notes will have the right to require the
Company to make an offer to repurchase such holder's Notes at a price equal to
101% of the principal amount thereof, together with accrued and unpaid interest,
if any, to the date of repurchase.
The Notes are unsecured and will be subordinated in right of payment to all
existing and future senior indebtedness of the Company. The Notes are fully and
unconditionally guaranteed on an unsecured, senior subordinated basis by each of
the Company's principal operating subsidiaries, all of which are wholly owned.
Audited financial statements of the guarantor subsidiaries have been omitted
from these financial statements because the indebtedness is guaranteed by all
direct subsidiaries of the parent which has no operations or assets separate
from its investments in its subsidiaries.
Additionally, the terms on the Notes subject the Company to certain
limitations and restrictions primarily related to obtaining additional
indebtedness, payments of dividends, and sales of assets and subsidiary stock.
The Notes are also subject to an Exchange and Registration Rights Agreement
whereby the Company must file a registration statement with the Securities and
Exchange Commission within 16 months of the original date of issuance of the
Notes. The registered notes must be identical in all material respects to the
Notes, except for transfer restrictions relating to the Notes.
Covenants Not to Compete
The Company is obligated to make payments under agreements with former
owners of acquired companies and various other individuals for future consulting
services and covenants not to compete. The costs associated with such agreements
are recognized on a straight-line basis over the period in which the services
are to be rendered, which typically ranges from seven to ten years.
Future payments under these agreements at December 31, 1998 are as follows:
<TABLE>
<S> <C>
1999........................................................ $ 4,581,568
2000........................................................ 4,749,400
2001........................................................ 4,829,411
2002........................................................ 4,425,221
2003........................................................ 4,335,236
Thereafter.................................................. 15,110,642
------------
Total payments.................................... 38,031,478
Amount representing interest................................ (11,112,365)
------------
26,919,113
Less current portion........................................ (2,556,984)
------------
$ 24,362,129
============
</TABLE>
Deferred Payment and Compensation Plans
In conjunction with acquisitions of other brokerage companies, deferred
payment agreements are generally executed or assumed with the former owners and
certain key employees of the acquired
F-12
<PAGE> 101
RICHMONT MARKETING SPECIALISTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
companies. Under these agreements, the Company agrees to pay them certain
amounts upon either termination or retirement of such executive or, in the event
of their death, to their designated beneficiary. Terms vary; however, most
payments are monthly and continue for a period of up to ten years. The amounts
to be paid under most of these agreements are not based upon length of service
but are a fixed amount. The present value of these payments, discounted at rates
varying from 8% to 10%, was capitalized as an intangible asset at the date of
the acquisition as a component of the purchase price.
Beginning in 1991, the Company also initiated deferred compensation
agreements for certain key employees whereby the Company has agreed to pay them
a certain sum monthly for ten years upon the earlier of their retirement,
termination, or death. Compensation and interest expense is accrued ratably over
the employees' expected service period such that the accrual, at the anticipated
vesting date, equals the then present value of the future benefits. These
deferred compensation liabilities have been recorded at their net present value
using inputed interest rates ranging from 8% to 10%. Deferred compensation
expense was $270,768, $117,722 and $117,722 for the years ended December 31,
1998, 1997 and 1996, respectively.
The future aggregate minimum payments for the deferred payment and
compensation agreements at December 31, 1998 are as follows:
<TABLE>
<S> <C>
1999........................................................ $ 3,194,520
2000........................................................ 2,815,298
2001........................................................ 2,776,391
2002........................................................ 2,766,013
2003........................................................ 2,641,218
Thereafter.................................................. 15,880,381
------------
Total payments.................................... 30,073,821
Amount representing interest................................ (11,874,929)
------------
18,198,892
Less current portion........................................ (1,686,573)
------------
$ 16,512,319
============
</TABLE>
Leases
The Company leases its office facilities and certain office equipment under
long-term capital and operating lease agreements, which expire in various years
through 2007. Some of the Company's leases provide for escalating minimum rent.
Rent expense is recognized on a straight-line basis over the life of such
leases. During the second quarter of 1998, the Company completed an assessment
of its facilities requirements in an effort to streamline its operations and
improve its cost structure. In connection with this assessment, the Company
recorded a charge of $1.7 million for lease restructuring costs for facilities
no longer in use. At December 31, 1998, this reserve for future payments totals
$1.4 million.
F-13
<PAGE> 102
RICHMONT MARKETING SPECIALISTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The annual future minimum lease payments under all noncancelable capital
leases, including leases for facilities which are no longer in use, at December
31, 1998 are as follows:
<TABLE>
<CAPTION>
CAPITAL
LEASES
----------
<S> <C>
1999........................................................ $ 704,208
2000........................................................ 650,878
2001........................................................ 465,497
2002........................................................ 255,995
2003........................................................ 105,396
Thereafter.................................................. 142,169
----------
Total minimum lease payments...................... 2,324,143
Amounts representing interest............................... (336,287)
----------
Present value of minimum lease payments..................... 1,987,856
Less current portion........................................ (566,247)
----------
$1,421,609
==========
</TABLE>
The annual future minimum lease payments under all noncancelable operating
leases, including leases for facilities no longer in use, at December 31, 1998
are as follows:
<TABLE>
<CAPTION>
RELATED
PARTIES OTHERS TOTAL
---------- ----------- -----------
<S> <C> <C> <C>
1999......................................... $1,082,940 $ 5,832,248 $ 6,915,188
2000......................................... 1,082,940 4,431,145 5,514,085
2001......................................... 883,388 3,621,560 4,504,948
2002......................................... 771,054 2,588,457 3,359,511
2003......................................... 269,993 1,587,918 1,857,911
Thereafter................................... 192,000 1,504,996 1,696,996
---------- ----------- -----------
Total.............................. $4,282,315 $19,566,324 $23,848,639
========== =========== ===========
</TABLE>
Included under property and equipment are amounts that have been
capitalized of $5,481,986 with accumulated amortization of $3,918,702 and
$3,316,692 in 1998 and 1997, respectively. Amortization of leased assets is
included in depreciation expense.
Rent expense for the years ended December 31, 1998, 1997 and 1996 was
$8,732,996, $6,223,182 and $2,636,246, respectively, of which $686,284, $763,020
and $743,340, respectively, was paid to related parties. Payments under capital
lease obligations to related parties was $353,400, $346,895 and $346,895 for the
years ended December 31, 1998, 1997 and 1996, respectively.
The Company paid interest of approximately $14,243,142, $1,510,646,
$811,506, in 1998, 1997 and 1996, respectively.
F-14
<PAGE> 103
RICHMONT MARKETING SPECIALISTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
The Company utilizes the liability method of accounting for income taxes
whereby deferred taxes are determined based on the difference between the
financial statement and tax basis of assets and liabilities using enacted tax
rates.
Significant components of the (benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1998 1997 1996
--------- ----------- ---------
<S> <C> <C> <C>
Current:
Federal........................................ $ -- $ 177,828 $ 372,665
State.......................................... 97,738 42,563 (97,054)
--------- ----------- ---------
97,738 220,391 275,611
Deferred:
Federal........................................ (32,700) (1,170,631) (651,590)
State.......................................... (138,694) (218,621) (175,659)
--------- ----------- ---------
(171,394) (1,389,252) (827,249)
--------- ----------- ---------
Total tax expense (benefit)............ $ (73,656) $(1,168,861) $(551,638)
========= =========== =========
</TABLE>
The Company's provision (benefit) for income taxes reconciles to the amount
computed by applying the federal statutory income tax rate to income before
income taxes as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
Benefit at U.S. statutory rates.............. $(11,019,509) $(2,922,599) $(1,252,629)
State income tax, net of federal tax
benefit.................................... (75,213) (116,198) (179,991)
Nondeductible amortization of intangibles.... 2,982,376 777,293 246,111
Nondeductible amortization of expenses....... 451,338 358,873 221,627
Cancellation of indebtedness income.......... -- 680,000 --
Change in valuation allowance on deferred tax
assets..................................... 7,587,352 492,957
Other........................................ -- 53,770 (79,713)
------------ ----------- -----------
Income tax expense (benefit)................. $ (73,656) $(1,168,861) $ (551,638)
============ =========== ===========
</TABLE>
F-15
<PAGE> 104
RICHMONT MARKETING SPECIALISTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax reporting purposes. Significant
components of the Company's deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------
1998 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
Deferred tax liabilities:
Identified intangibles..................... $8,278,681... $ 9,949,858 $ 6,544,033
Book over tax depreciation................. -- -- 631,100
Revenue and expense recognition............ -- 515,367 --
Other...................................... 1,746,920 1,733,367 --
------------ ----------- -----------
Total deferred tax liabilities..... 10,025,601 12,198,592 7,175,133
Deferred tax assets:
Net operating loss......................... 549,359 -- --
Deferred compensation agreements........... 1,714,657 2,148,016 1,047,049
Allowance for doubtful accounts............ 2,619,927 788,269 756,516
Book over tax depreciation................. 411,956 290,227 --
Intangible assets.......................... 6,346,473 2,779,991 2,790,184
Self insurance reserve..................... 1,319,189 392,672 191,101
Deferred state taxes....................... -- 114,461 84,981
Other...................................... 100,259 758,798 222,878
------------ ----------- -----------
13,061,820 7,272,434 5,092,709
Valuation allowance for deferred tax
assets..................................... (11,129,534) (3,542,182) (3,542,182)
------------ ----------- -----------
Total deferred tax assets, net of
valuation allowance.............. 1,932,286 3,730,252 1,550,527
------------ ----------- -----------
Net deferred tax (liability)................. $ (8,093,315) $(8,468,340) $(5,624,606)
============ =========== ===========
</TABLE>
The valuation allowance for deferred tax assets was not changed during 1997
and was increased by $7,587,352, and $492,957 during 1998 and 1996,
respectively. The Company paid income taxes of $752,286, $586,782 and $658,668
during 1998, 1997 and 1996, respectively.
At December 31, 1998, the Company had $1,615,761 of net operating loss
carryforwards available to offset future taxable income for years 1999 through
2018.
8. COMMITMENTS AND CONTINGENCIES
The Internal Revenue Service ("IRS") has asserted deficiencies in federal
corporate income taxes for Atlas for tax years 1993 through 1995. The proposed
adjustments relate to the deductibility of certain compensation and benefit
expenses, and may result in additional federal and state tax liabilities as of
December 31, 1998. Under the purchase agreement with Atlas, the Company's
exposure for contingent obligations, including the matter discussed herein, is
limited to $1,000,000. As a result, as of December 31, 1998, the Company has
recorded a reserve of $1,000,000 to cover potential IRS claims associated with
this matter with a corresponding increase to goodwill related to the Atlas
acquisition.
The Company has guaranteed approximately $1,000,000 of long-term
obligations related to a building it currently occupies that is leased from a
previous owner of an acquired company.
F-16
<PAGE> 105
RICHMONT MARKETING SPECIALISTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company is subject to certain claims arising in the normal course of
business. In management's opinion, any such contingencies would not materially
affect the Company's consolidated financial position or consolidated operating
results.
9. BENEFIT PLANS
401(k) Savings Plan
The Company sponsors a 401(k) savings plan for all employees who have been
employed by the Company at least one year. The Company matches employee
contributions up to 3% of the employee's salary. The Company made contributions
totaling $2,015,903, $1,248,398 and $571,265 in 1998, 1997 and 1996,
respectively.
Incentive Plan
In 1998, the Company adopted an incentive plan ("Incentive Plan"), which
allows the granting of senior management appreciation rights ("SMARTs") to
employees of the Company. Total SMARTs authorized for awards are 20,566 and
9,520 were granted and outstanding as of December 31, 1998.
The SMARTs are exercisable in 20% annual increments for five consecutive
years commencing on the fifth anniversary of the Grant Date, as defined under
the Incentive Plan. If the recipient's employment with the Company terminates
for any reason prior to 100% vesting, all potential value of the SMARTs are
forfeited. Any SMARTs that remain unexercised in the fifth year following full
vesting will be paid to the holder in five equal annual installments. The
Company has the right to defer the exercisability of the SMARTs if payment on
exercised amounts would cause a conflict with or a violation of any agreement or
instrument to which the Company is a party. The value of each SMARTs unit will
fluctuate in accordance with the value of the Company's equity, which will be
determined annually. Future increases and decreases in the appraised value of
the Company will result in recognition of an increase or decrease in
compensation expense.
Upon termination of employment of any holder of SMARTs, the SMARTs that
have been vested will be exchanged for the right to receive deferred
compensation pursuant to a SMART Deferred Compensation Agreement. The amount of
deferred compensation payable pursuant to such agreements will depend on the
date of such termination, the reasons therefore, as well as the Company's
financial performance.
The SMARTs and Deferred Compensation Agreements represent unfunded and
unsecured obligations of the Company. Outstanding amounts under the SMARTs and
Deferred Compensation Agreements are due in full upon certain provisions of the
respective agreements, including a change in control.
Non-cash compensation expense of $223,614 was recognized by the Company for
the year ended December 31, 1998 relating to the granting of SMARTs and is
included in long term obligations.
10. ACQUISITIONS
On October 31, 1996, the Company purchased all of the issued and
outstanding stock of Bromar, Inc., a California based food broker corporation,
in exchange for $26,005,000 cash paid at closing. The Company received the
following assets and liabilities from Bromar, Inc in the acquisition: $9.5
million of accounts receivable, $6.2 million of intangible assets, $11.6 million
of fixed assets, $2.9 million of other assets, $4.1 million of accounts payable,
and $16.5 million of assumed debt. The purchase price was allocated based on
estimated fair values at the date of acquisition.
F-17
<PAGE> 106
RICHMONT MARKETING SPECIALISTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On January 1, 1997, the Company acquired substantially all of the assets
and liabilities of Westexico Sales Co., Inc., a Texas-based food broker
corporation, in exchange for a 6.31% note payable totaling $2,000,000 with a
present value of $1,606,198.
On March 1, 1997, the Company purchased all of the issued and outstanding
stock of Gene Sanford & Associates, Inc., an Arizona-based food broker
corporation, in exchange for $80,000 cash, two 6.2% notes payable totaling
$143,987, and covenants not to compete with certain key employees totaling
$2,604,000.
On May 31, 1997, the Company purchased all of the issued and outstanding
stock of Tower Marketing, Inc., a Texas-based food broker corporation, in
exchange for 9.5% notes payable to Tower shareholders with a present value of
$3,258,285 and covenants not to compete with certain key employees with a
present value of approximately $11,110,000. In addition, liabilities of
$10,605,000 were assumed in the acquisition. Of the total purchase price, for
financial reporting purposes, approximately $8,170,000 has been allocated to
principal relationships, $4,880,000 to covenants not to compete, $1,020,000 to
trained workforce, $5,093,000 to assets, $3,615,000 to current liabilities, and
$6,990,000 to long-term obligations, with the remaining amount allocated to
goodwill. The purchase price was allocated based on estimated fair values at the
date of acquisition. During 1998, the Company recorded additional goodwill
relating to the Tower acquisition of approximately $2 million related to revised
estimates of the timing of the payments of deferred obligations.
On July 1, 1997, the Company acquired substantially all of the principal
contracts, agreements, and commitments of Pioneer Food Sales, Inc., a
Washington-based food broker corporation, in exchange for a note payable
totaling $340,000 with a present value of $250,749 (9.5% interest rate imputed)
and covenants not to compete with certain key employees with a present value of
$376,123.
On July 1, 1997, the Company acquired substantially all of the assets and
liabilities of L'Amoreaux & Associates, a California-based food broker
corporation, in exchange for various notes payable totaling $1,865,000 with a
present value of $1,250,494 (9.5% interest rate imputed) and covenants not to
compete with certain key employees with a present value of $402,304.
On December 31, 1997, the Company purchased all of the issued and
outstanding stock of Atlas, a North Carolina-based food broker corporation, for
total consideration of approximately $45,700,000, which includes approximately
$19,800,000 in cash, $12,100,000 in promissory notes to be issued to certain
Atlas stockholders, and $13,800,000 to repay substantially all of the
indebtedness of Atlas. In addition, liabilities of $6,373,000 were assumed in
the acquisition. Of the total purchase price, for financial reporting purposes,
approximately $10,750,000 has been allocated to principal relationships,
$6,490,000 to covenants not to compete, $2,460,000 to trained workforce,
$19,899,000 to assets, $6,228,000 to current liabilities, and $1,700,000 to
long-term obligations, with the remaining amount allocated to goodwill. The
purchase price was allocated based on estimated fair values.
All of the acquisitions were accounted for under the purchase method. The
operating results of the acquired companies have been included in the
consolidated results of operations since the date of acquisition.
F-18
<PAGE> 107
RICHMONT MARKETING SPECIALISTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following represents the unaudited pro forma results of operations of
the Company as if the acquisitions of Bromar, Tower and Atlas had occurred on
January 1, 1996 after giving effect to certain adjustments, including interest
expense directly associated with the acquisitions and the proceeds of the Senior
Subordinated Notes and amortization of intangibles:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
(IN THOUSANDS EXCEPT PER
SHARE DATA)
<S> <C> <C>
Revenue..................................................... $216,068 $211,022
Net loss.................................................... $(27,878) $(26,463)
Loss per share.............................................. $(202.55) $(294.01)
</TABLE>
The above pro forma information assumes goodwill would be amortized over 10
years. As discussed previously in Note 1, effective January 1, 1998, the Company
revised the estimated useful life of its goodwill from 10 to 5 years. The net
loss for 1997 and 1996 would be $(30,781,000) and $(31,067,000), respectively if
goodwill was amortized over 5 years or a loss per share of $(223.64) and
$(345.17), respectively.
Pro forma results presented are not necessarily indicative of what actually
would have occurred if the acquisitions had been consummated on January 1, 1996.
11. SHAREHOLDERS' EQUITY
During 1996, a series of transactions occurred through which an investor
acquired 82,581 shares of the Company's common stock (21,270 shares from
existing shareholders (Minority Shareholders) in April and 61,311 newly issued
shares in November) and the Company became a majority-owned subsidiary of this
privately held company. Net proceeds to the Company were $25,706,446. In
connection with the November transaction, the Minority Shareholders sold back to
the Company 5,482 shares of its common stock for $2,000,000 in notes payable.
These shares were then canceled by the Company. As a result of these
transactions, the new investor has 60% ownership and the Minority Shareholders
have 40% ownership of the Company.
On October 7, 1997, the majority shareholder, the Minority Shareholders and
the Company entered into an agreement (Shareholders Agreement) which provides
for the buyback of the Minority Shareholders' shares under various
circumstances. If, prior to the termination of the Shareholders Agreement, any
Minority Shareholder desires to sell any of his shares to an independent third
party, such selling Minority Shareholder must offer those shares on the same
terms and conditions: first, to the majority shareholder; second, to the
Company; and finally, to the other Minority Shareholders before completing the
sale to the third party.
During the first 15 days of each fiscal quarter of the Company occurring
after December 31, 2000, but prior to December 31, 2003, each of the Minority
Shareholders who is not an employee at such time shall have the option to sell
to the Company, and the Company shall have the obligation to purchase, his
shares for cash, promissory notes, or a combination of both, at a per share
price based on a negotiated multiple (reflecting prevailing market and industry
conditions) of earnings before interest, taxes, depreciation, amortization and
extraordinary, non-recurring and discretionary expenses (EBITDA), less funded
debt. As of December 31, 1998, Minority Shareholders owning an aggregate of
16.7% of the Company's common stock were no longer employed by the Company.
Further, in the event of death or disability of a Minority Shareholder, a
representative of the deceased or disabled Minority Shareholder can, at any time
during the first 15 days of the second full fiscal quarter occurring after the
death or disability, require the Company to purchase the shares at the formula
price described in the preceding paragraph.
F-19
<PAGE> 108
RICHMONT MARKETING SPECIALISTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In addition, the Company shall have the option to repurchase the shares of
a Minority Shareholder in the event of the termination for cause, divorce,
bankruptcy, disability or death of such Minority Shareholder, at a 5.25 multiple
of EBITDA less funded debt. In the event any Minority Shareholder voluntarily
ceases employment with the Company, the Minority Shareholder shall retain
certain rights as set forth in the Shareholders Agreement, including the right
to sell his shares under the terms of the Shareholders Agreement.
Notwithstanding the provisions described above, the Shareholders Agreement
will automatically terminate on the earliest to occur of: (1) the effective date
of an initial public offering of the Company's capital stock, (2) a merger or
consolidation in which a change of control occurs, (3) a sale of substantially
all of the Company's assets or capital stock, (4) the mutual consent of the
parties or (5) April 2, 2021.
F-20
<PAGE> 109
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Atlas Marketing Company, Inc. and Subsidiaries
We have audited the accompanying consolidated statements of operations and
cash flows of Atlas Marketing Company, Inc. and Subsidiaries for the years ended
December 31, 1997 and 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated results of operations and cash flows
of Atlas Marketing Company, Inc. and Subsidiaries for the years ended December
31, 1997 and 1996 in conformity with generally accepted accounting principles.
ERNST
& YOUNG LLP
Charlotte, North Carolina
March 25, 1998
F-21
<PAGE> 110
ATLAS MARKETING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Revenue..................................................... $46,971,606 $49,647,608
Expenses:
Salaries.................................................. 31,746,998 28,964,531
Fringe benefits........................................... 1,095,806 1,091,517
Automobile and related expenses........................... 2,517,489 1,618,823
Sales and marketing....................................... 3,159,831 2,506,793
General and administrative................................ 6,453,640 5,451,216
Depreciation.............................................. 1,760,625 2,227,335
Amortization.............................................. 999,450 1,108,171
Bonus compensation........................................ 1,568,308 4,372,714
----------- -----------
Total expenses.................................... 49,302,147 47,341,100
----------- -----------
Operating income (loss)..................................... (2,330,541) 2,306,508
Other income (expense):
Interest expense.......................................... (1,008,364) (1,122,325)
Other income.............................................. (465,572) 157,228
----------- -----------
Income (loss) before taxes.................................. (3,804,477) 1,341,411
Income tax expense (benefit)................................ (1,005,000) 1,460,100
----------- -----------
Net (loss).................................................. $(2,799,477) $ (118,689)
=========== ===========
</TABLE>
See accompanying notes.
F-22
<PAGE> 111
ATLAS MARKETING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ (2,799,477) $ (118,689)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Equity in income of affiliate.......................... (3,947) (16,075)
Depreciation........................................... 1,760,625 2,227,335
Amortization........................................... 999,450 1,108,171
Deferred taxes......................................... (1,116,000) (98,800)
Stock bonuses.......................................... 378,125 1,191,663
Allowance for doubtful accounts........................ 600,000 --
Gain on sale of property and equipment................. (89,478) (106,542)
Changes in assets and liabilities:
Accounts receivable.................................. 300,410 (293,872)
Other current assets................................. 371,291 (19,734)
Due to employees..................................... 267,223 --
Accounts payable..................................... 463,497 258,920
Accrued expenses..................................... 363,572 1,268,520
Income taxes payable................................. (733,310) 526,459
Market development funds payable..................... 41,704 11,958
------------ -----------
Cash provided by operating activities....................... 803,685 5,939,314
INVESTING ACTIVITIES
Proceeds from sale of property and equipment.............. 616,495 462,658
Purchase of property and equipment........................ (620,830) (2,117,630)
Cash paid in business acquisitions........................ -- (31,027)
Cash paid for non-compete agreement....................... (20,000) --
Cash paid for investment in affiliate..................... (375,000) (90,000)
------------ -----------
Cash used by investing activities........................... (399,335) (1,775,999)
FINANCING ACTIVITIES
Payments on notes payable................................. (618,022) (760,853)
Principal payments on long-term borrowings................ (14,832,228) (3,123,737)
Proceeds from borrowings from MSSC........................ 16,043,658 --
Purchase and retirement of common stock................... -- (271,684)
------------ -----------
Cash provided by (used in) financing activities............. 593,408 (4,156,274)
------------ -----------
Net increase (decrease) in cash............................. 997,758 7,041
Cash at beginning of period................................. 53,333 46,292
------------ -----------
Cash at end of period....................................... $ 1,051,091 $ 53,333
============ ===========
</TABLE>
See accompanying notes.
F-23
<PAGE> 112
ATLAS MARKETING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
MERGER AGREEMENT
The Company was acquired by Marketing Specialists Sales Company ("MSSC") on
December 19, 1997 for approximately $45.7 million. The accompanying consolidated
financial statements reflect operations through December 31, 1997 and do not
reflect the effects of purchase accounting pursuant to Accounting Principles
Board Opinion No. 16, "Accounting for Business Combinations" ("APB16") as a
result of the acquisition by MSSC.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of the Business
Atlas Marketing Company, Inc. (the "Company") provides food brokerage
services to various principals in the food supply industry through its operating
offices in North Carolina, South Carolina, Georgia, Virginia and West Virginia,
with representatives in North Carolina, South Carolina, Virginia, West Virginia,
Maryland, Delaware, Tennessee, Florida, Louisiana, Alabama, Texas, Oklahoma,
Kentucky, Ohio and Pennsylvania.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
The Company had a 50% ownership investment in Meatmaster Brokerage, Inc.,
which was accounted for under the equity method up through December 19, 1997 at
which point the Company acquired the remaining interest.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
Revenue is earned from commissions or sales of products on behalf of
manufactures and producers (principals). Commission revenue is recognized as
income when product shipment has occurred and/or notification of such shipment
is received from the principal.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to a
concentration of credit risk principally consist of accounts and notes
receivable. As of December 31, 1997 and 1996 and no individual principal
represents a significant concentration of accounts receivable. The Company
generally does not require collateral on accounts and notes receivable as the
Company's customers are generally large, well established companies within the
food supply industry. The Company periodically performs credit evaluations of
its principals and maintains reserves for potential losses.
F-24
<PAGE> 113
ATLAS MARKETING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property and Equipment
Depreciation on property and equipment is provided using accelerated
methods over the following estimated useful lives:
<TABLE>
<S> <C>
Building.................................................... 19 years
Leasehold improvements...................................... 5 years
Equipment................................................... 5 - 7 years
Data processing equipment................................... 5 years
Furniture and fixtures...................................... 5 - 7 years
Vehicles.................................................... 5 years
</TABLE>
Intangible Assets
Intangible assets include goodwill, principal lists and covenants not to
compete. Goodwill and principal lists represent the excess of the purchase price
over the value of net tangible assets of various businesses acquired. These
amounts are being amortized over a period of ten years based on the straight-
line method. Covenants not to compete are recorded at the net present value of
the payments to be made under the agreements and are being amortized over the
term of the related agreement, generally three to five years. The carrying
values of intangibles are reviewed if the facts and circumstances indicate
impairment of their carrying value. Any impairment in the carrying value of such
intangibles is recorded when identified.
Marketing Development Funds Payable
Marketing development funds payable represent amounts received from
principals for the future promotion/marketing of their products. Such amounts
are recorded as liabilities until they are spent on behalf and/or under the
direction of the principals.
Income Taxes
The Company utilizes the liability method of accounting for income taxes
whereby deferred taxes are determined based on the difference between the
financial statement and tax basis of assets and liabilities using enacted tax
rates.
Stock Based Compensation
The Company accounts for stock options in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"). Under APB 25, no compensation expense is recognized for stock or
stock options issued at fair value. For stock options granted at exercise prices
below the estimated fair value, the Company records compensation expense over
the vesting period for the difference between the exercise price of the share
and the estimated fair value. Compensation expense is recognized upon grant if
the options vest immediately.
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation" (SFAS 123). SFAS 123 provides for a fair value based method of
accounting for employee stock options and similar equity instruments. However,
for companies that elect to continue to account for stock based compensation
arrangements under APB 25, SFAS 123 requires disclosure of the pro forma effect
on net income as if the fair value based method proscribed by SFAS 123 had been
applied. The Company continued to account for stock based compensation
arrangements under APB No. 25. The SFAS 123 pro forma net income would not be
materially different from the reported net loss.
F-25
<PAGE> 114
ATLAS MARKETING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. INTANGIBLE ASSETS
Amortization expense charged against income was $999,450 and $1,108,171 for
1997 and 1996, respectively.
3. EMPLOYEE STOCK OWNERSHIP PLAN
The Company maintains the Atlas Marketing Company, Inc. Employee Stock
Ownership Plan covering all full-time employees with one year of service.
Contributions are determined at the discretion of the Board of Directors. No
contributions were made or accrued for in 1996 or 1997. The plan was terminated
effective January 1, 1998 in connection with the purchase of the Company by
MSSC.
4. EMPLOYEE BENEFIT PLANS
During 1995, the Company established the Atlas Marketing Company, Inc.
Employees 401(k) Plan and Trust covering all full-time employees with one year
of service. Employer matching contributions are determined annually, in advance,
at the discretion of the Board of Directors. For 1997 and 1996, the Board of
Directors determined that employee contributions would be matched on a dollar
for dollar basis up to a maximum of 6% of eligible compensation. The Company
recorded $1,088,566 and $1,066,484 of benefit plan expense in 1997 and 1996,
respectively.
The Company also maintains the Atlas Marketing Company, Inc. Employee
Benefit Plan and Trust, a self-insured medical benefits plan covering all
full-time employees, with optional coverages available for part-time personnel.
The Company contributes an amount necessary to meet plan expenses, net of
employee contributions for optional benefits. The Company medical benefit plan
contributions, included in general and administrative expenses, was $2,323,647
and $1,848,216 for 1997 and 1996, respectively.
5. INCOME TAXES
Significant components of the provision (benefit) for income taxes are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996
----------- ----------
<S> <C> <C>
Current:
Federal..................................................... $ 96,000 $1,274,700
State....................................................... 15,000 284,200
----------- ----------
111,000 1,558,900
Deferred:
Federal..................................................... (973,000) (86,100)
State....................................................... (143,000) (12,700)
----------- ----------
(1,116,000) (98,800)
----------- ----------
Total tax expense (benefit)....................... $(1,005,000) $1,460,100
=========== ==========
</TABLE>
F-26
<PAGE> 115
ATLAS MARKETING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Federal and state income tax expense as a percentage of income before
income taxes was different than the statutory income tax rates for both years.
The reasons for the differences between the actual tax expense and the
"expected" tax expense for those years (computed by applying the federal
corporate rate of 34%) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997 1996
----------- ----------
<S> <C> <C>
Computed "expected" tax expense............................ $(1,293,500) $ 456,100
State income taxes, net of federal benefit................. (133,000) 175,700
Amortization of intangibles................................ 229,500 223,200
Non-deductible expenses.................................... 192,000 605,100
----------- ----------
$(1,005,000) $1,460,100
=========== ==========
</TABLE>
The Company has received notices from the Internal Revenue Service (IRS)
asserting deficiencies in federal corporate income taxes for the Company's
taxable years 1993 through 1995. The proposed adjustments, relating to the
deductibility of certain compensation and benefit expenses, may result in
additional federal and state tax liabilities as of December 31, 1997 of
approximately $5.8 million plus interest. The Company has analyzed these matters
with tax counsel and believes that it has meritorious defenses and has filed a
response protesting the proposed adjustments. No amount has been recorded in the
financial statements relating to adjustments proposed by the IRS.
6. RELATED-PARTY TRANSACTIONS
In 1996, the Company issued 240,740 shares to officers and directors for
payment of compensation which had a value of $2.5 million. The Company
repurchased and retired 18,106 shares from officers and directors in 1996 at a
cost of $187,000.
Following is a summary of related-party balances at December 31, 1997 and
1996:
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Receivables from officers and directors..................... $ 1,792 $ 5,739
=========== ==========
Due to MSSC................................................. $16,330,583 --
Accrued compensation payable to officers.................... -- 1,784,070
Notes due to officers....................................... -- 400,000
----------- ----------
$16,330,583 $2,184,070
=========== ==========
</TABLE>
Additionally, the Company has entered into several lease agreements for
office facilities in which individuals who were officers and directors in 1997
and 1996 (prior to the purchase of the Company by MSSC) have an ownership
interest. Lease payments made to these individuals in 1997 and 1996 totaled
$123,812 and $158,027, respectively.
F-27
<PAGE> 116
ATLAS MARKETING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. LEASES
The Company has entered into various operating lease agreements primarily
for the lease of vehicles, office and warehouse space. Annual future minimum
lease payments required by noncancelable lease agreements at December 31, 1997
are as follows:
<TABLE>
<CAPTION>
RELATED
PARTIES OTHERS TOTAL
---------- ---------- ----------
<S> <C> <C> <C>
1998............................................. $ 367,648 $ 828,455 $1,196,103
1999............................................. 431,004 395,679 826,683
2000............................................. 431,004 95,946 526,950
2001............................................. 431,004 -- 431,004
2002............................................. 365,754 -- 365,754
Thereafter....................................... 114,668 -- 114,668
---------- ---------- ----------
$2,141,082 $1,320,080 $3,461,162
========== ========== ==========
</TABLE>
Rent expense under noncancellable lease agreements was $680,728 and
$586,624 for 1997 and 1996, respectively.
The Company has subleased certain office and warehouse facilities. The
total minimum rentals to be received under the sublease is $29,360 in 1998.
8. CONTINGENCIES
The Company is subject to legal actions from time to time which have arisen
in the ordinary course of business. The Company intends to vigorously contest
all such claims and, in the opinion of management, the resolution of such claims
will not materially affect the financial position of the Company.
9. SUPPLEMENTAL CASH FLOW DISCLOSURES
Supplemental disclosures of cash flow information is provided below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996
---------- ----------
<S> <C> <C>
Cash paid during the year for:
Interest................................................ $1,118,328 $1,115,281
Income taxes............................................ 838,356 1,065,299
Noncash investing and financing activities:
Business acquisition through issuance of notes
payable.............................................. -- 503,951
Purchase of stock through issuance of notes payable..... 881,358 239,147
Business acquisition through increase in due to MSSC.... 286,925 --
Issuance of stock through receipt of notes.............. 325,000 --
Covenant not to compete through issuance of note
payable.............................................. 188,940 --
</TABLE>
F-28
<PAGE> 117
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Bromar, Inc. and Subsidiaries
We have audited the accompanying consolidated statement of income and cash
flows of Bromar Inc. and Subsidiaries for the ten months ended October 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated results of operations and cash flows
of Bromar Inc. and Subsidiaries for the ten months ended October 31, 1996, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Irvine, California
March 7, 1997
F-29
<PAGE> 118
BROMAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
TEN MONTHS
ENDED
OCTOBER 31, 1996
----------------
<S> <C>
Total revenue............................................... $56,048,862
Expenses:
Operating expenses:
Salaries.................................................. 30,364,770
Fringe benefits........................................... 5,138,957
Automobiles and related expenses.......................... 4,846,270
General and administrative................................ 6,163,433
Occupancy and related expenses............................ 3,002,364
Sales and marketing....................................... 2,481,575
Depreciation and amortization............................. 2,371,262
Interest expense.......................................... 700,030
Bonus to employees........................................ 346,000
-----------
Total operating expenses.......................... 55,414,661
-----------
Income before income taxes................................ 634,201
Income taxes.............................................. 407,000
-----------
Net income................................................ $ 227,201
===========
</TABLE>
See accompanying notes.
F-30
<PAGE> 119
BROMAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
TEN MONTHS
ENDED
OCTOBER 31, 1996
----------------
<S> <C>
OPERATING ACTIVITIES
Net income................................................ $ 227,201
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 2,371,262
Gain on disposal of property and equipment............. (431,107)
Provision for doubtful accounts........................ 40,000
Deferred income taxes.................................. (90,438)
Changes in operating assets and liabilities:
Accounts and notes receivable.......................... (141,497)
Prepaid expenses and other current assets.............. (312,093)
Accounts payable and accrued liabilities............... (652,725)
Other assets........................................... 92,525
-----------
Net cash provided by operating activities................... 1,103,128
INVESTING ACTIVITIES
Purchases of property and equipment....................... (1,174,436)
Proceeds from sale of equipment........................... 1,019,844
Payments on purchase agreements........................... (1,265,657)
-----------
Net cash used in investing activities....................... (1,420,249)
FINANCING ACTIVITIES
Net change in line of credit.............................. 1,762,410
Proceeds from long-term debt.............................. 422,243
Principal payments on long-term debt and capital lease
obligations............................................ (1,312,045)
Principal payments on retirement agreements............... (55,028)
Repurchase of common stock................................ (630,001)
Repayments on notes for common stock...................... 132,754
-----------
Net cash provided by financing activities................... 320,333
-----------
Increase in cash and cash equivalents....................... 3,212
Cash and cash equivalents at beginning of period............ 26,480
-----------
Cash and cash equivalents at end of period.................. $ 29,692
===========
</TABLE>
See accompanying notes.
F-31
<PAGE> 120
BROMAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
MERGER AGREEMENT
Shareholders of record at October 15, 1996 of the Company entered into a
merger agreement effective October 31, 1996 with MSSC California, Inc. (MSSC), a
wholly owned subsidiary of Marketing Specialists Sales Company. Upon
consummation of the respective parties' obligations in accordance with terms of
the agreement, 529,879 shares of common stock outstanding at October 31, 1996
will be converted into the right to receive an aggregate amount of $26,005,000
in cash whereupon the Company will become a wholly owned subsidiary of Marketing
Specialists. As a result of this merger, Bromar's operations will be
consolidated with those of Marketing Specialists in future periods.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Description
Bromar Inc. (the "Company") is a broker and wholesaler of food and related
products to grocery retailers and food service outlets primarily in the western
United States. The Company's wholly owned subsidiaries include Brokerage
Services, Inc., a food brokerage, and Service Assets Corporation, which leases
vehicles to the Company.
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
revenues and expenses. Actual results could differ from those estimates.
Revenue Recognition
Substantially all of the Company's revenue is in the form of commissions
earned from the food manufacturers and processors that it represents.
Commissions are recognized as revenue when an order is placed with the
manufacturers and processors as the earning process is substantially complete
and the order is filled shortly thereafter by the manufacturer with no
additional effort required on the part of the Company.
Property and Equipment
Depreciation and amortization are computed using the straight-line method
over the assets' useful lives, which range from three to forty years, or over
the term of the lease, whichever is shorter.
Goodwill
Goodwill represents the excess of the purchase price over the value of net
tangible assets of various businesses acquired. Goodwill is amortized on the
straight-line method over a period of five to ten years. Amortization expense
for goodwill was approximately $176,000 for the ten months ended October 31,
1996.
F-32
<PAGE> 121
BROMAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Statements of Cash Flows
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
During the ten months ended October 31, 1996 the Company purchased four
brokerage companies for an aggregate purchase price of $2,722,500. These
purchases were financed by the Company and, accordingly, represent noncash
transactions.
2. PROPERTY AND EQUIPMENT
Depreciation and amortization expense related to property and equipment was
$1,128,672 for the ten months ended October 31, 1996. Amortization of assets
purchased under capitalized lease agreements was included in depreciation and
amortization expense.
3. FINANCING ARRANGEMENTS
Long-Term Debt
The Company paid interest of approximately $700,000 for the ten months
ended October 31, 1996.
4. INCOME TAXES
The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred taxes are determined based on the
difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates.
Significant components of the provision (benefit) for income taxes are as
follows:
<TABLE>
<CAPTION>
TEN MONTHS ENDED
OCTOBER 31, 1996
----------------
<S> <C>
Current:
Federal.................................................. $411,000
State.................................................... 87,000
--------
498,000
Deferred:
Federal.................................................. (86,000)
State.................................................... (5,000)
--------
(91,000)
--------
$407,000
========
</TABLE>
The Company's income tax provision varies from the statutory rate primarily
because of the nondeductibility of certain portions of meal and entertainment
expenses and state income taxes imposed by the various states on the Company's
operations.
The Company paid income taxes of $802,000 for the ten months ended October
31, 1996.
The Company is currently under examination by the Internal Revenue Service
for the 1993 tax year.
5. DEFERRED COMPENSATION AND RETIREMENT PLANS
Profit Sharing and Stock Plans
The Company has a profit sharing plan and a stock plan covering
substantially all employees with one year or more of service. Total annual
contributions to these plans is at management's discretion subject to
F-33
<PAGE> 122
BROMAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
certain limitations. No contributions were made to either the profit sharing
plan or the stock plan for the ten months ended October 31, 1996.
Retirement Agreements
The Company is committed, through unfunded retirement agreements with three
former officers of the Company, to provide retirement benefits in an amount
equal to five times the average annual salary of the ten years preceding the
retirement of each officer. Payments under such agreements are to be made in 240
equal semimonthly installments and are to begin the month following retirement.
In the event of their death, any unpaid benefits are paid to the officer's
beneficiary.
Under the agreement, payments are allocated between retirement benefits and
consulting services. Charges to expense under the retirement portion of the
agreements were recorded during the period of active employment and were
calculated to result in an accrued amount at the officers' retirement date equal
to the then present value of one-half of the estimated payments. Future
obligations under the retirement portion of the agreement are as follows at
October 31, 1996:
<TABLE>
<S> <C>
1997........................................................ $ 66,492
1998........................................................ 79,096
1999........................................................ 69,198
2000........................................................ 75,272
2001........................................................ 81,880
Thereafter.................................................. 164,132
--------
$536,070
========
</TABLE>
Under the agreements, the officers and their surviving spouses are
obligated to render consulting and other services at the Company's request and,
therefore, the remaining one-half of the payments are considered to be
applicable to such services to be performed by the officer and his surviving
spouse after retirement and will be charged to expense in the year of payment.
If an officer and his surviving spouse die before all payments are received by
them, the Company will accrue the amount equal to the then present value of the
remaining payments to be made to such officer's designated beneficiary or
estate. Compensation expense incurred relating to the consulting portion of the
agreement was approximately $175,000 for the ten months ended October 31, 1996.
6. EMPLOYEE STOCK PLANS
The Company has adopted a stock option plan under which certain key
employees may be offered the opportunity to purchase varying amounts of the
Company's capital stock. There were 150,000 shares reserved for grant under this
plan. All options granted under this plan have been granted at the fair market
value of the Company's common stock at the date of grant. The Company had no
shares of common stock available for future grant under the stock option plan
during the ten month period ended October 31, 1996.
F-34
<PAGE> 123
BROMAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES
Leases
The Company occupies certain buildings and uses certain office equipment
under long-term operating lease agreements, which expire in various years
through 2001. The annual future minimum lease payments for such leases (with
initial or remaining terms in excess of one year) are as follows:
<TABLE>
<S> <C>
1997........................................................ $3,130,939
1998........................................................ 1,689,546
1999........................................................ 1,067,830
2000........................................................ 297,308
----------
$6,185,623
==========
</TABLE>
Rent expense was $2,475,019 for the ten months ended October 31, 1996.
Covenants Not to Compete
The Company is contingently obligated to make payments under agreements
with various individuals for future consulting services when such services are
performed and upon compliance with covenants not to compete. The costs
associated with such agreements are recognized on the straight-line basis over
the period in which the services are to be rendered, which typically ranges from
seven to ten years. The timing of payments due under these agreements are
specifically defined in each agreement and as such, the payment stream does not
necessarily correspond with the amortization period. Estimated future payments
under these agreements and the estimated related cost to be charged to
operations are as follows at October 31, 1996, actual payments and costs may
differ based on future events:
<TABLE>
<CAPTION>
PAYMENTS DUE
ON AGREEMENTS
-------------
<S> <C>
1997........................................................ $1,017,933
1998........................................................ 819,386
1999........................................................ 801,948
2000........................................................ 771,689
2001........................................................ 628,698
Thereafter.................................................. 2,243,181
----------
$6,282,835
==========
</TABLE>
Contingencies
The Company is subject to certain claims arising in the normal course of
business. In management's opinion, any such contingencies would not materially
affect the Company's consolidated financial position, consolidated operating
results or cash flows.
F-35
<PAGE> 124
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY RICHMONT MARKETING SPECIALISTS,
INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES,
NOR DOES IT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF RICHMONT MARKETING SPECIALISTS, INC. SINCE THE
DATE HEREOF OR THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
UNTIL , ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$100,000,000
RICHMONT MARKETING
SPECIALISTS, INC.
10 1/8% SERIES B SENIOR
SUBORDINATED NOTES
DUE 2007
-----------------
PROSPECTUS
-----------------
, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 125
PART II
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
As authorized by Section 145 of the General Corporation Law of the State of
Delaware, each director and officer of the registrant may be indemnified by the
registrant against expenses (including attorney's fees, judgments, fines and
amounts paid in settlement) actually and reasonably incurred in connection with
the defense or settlement of any threatened, pending or completed legal
proceedings in which he is involved by reason of the fact that he is or was a
director or officer of the registrant if he acted in good faith and in a manner
that he reasonably believed to be in or not opposed to the best interests of the
registrant and, with respect to any criminal action or proceeding, if he had no
reasonable cause to believe that his conduct was unlawful. If the legal
proceeding, however, is by or in the right of the registrant, the director or
officer may not be indemnified in respect of any claim, issue or matter as to
which he shall have been adjudged to be liable for negligence or misconduct in
the performance of his duty to the registrant unless a court determines
otherwise. The registrant's certificate of incorporation, which is filed as an
exhibit to this registration statement, contains provisions authorizing such
indemnity.
Article VII of the registrant's by-laws, which are filed as an exhibit to
this registration statement, authorize the registrant to indemnify its present
and former directors and to pay or reimburse these individuals for fees and
expenses in advance of a final disposition of a proceeding upon receipt of an
undertaking by or on behalf of such individuals to repay such amounts if so
required.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
- -------
<S> <C>
1.1 Purchase Agreement, dated as of December 16, 1997, among
Richmont Marketing Specialists Inc. and Chase Securities
Inc.
2.1 Stock Purchase Agreement, dated as of November 6, 1997, by
and among Atlas Marketing Company, Inc., Quincy Cummings and
Gynn Eller and MSSC Carolina, Inc. and Richmont Marketing
Specialists Inc.
2.2 Stock Purchase Agreement, dated as of November 6, 1997, by
and among Richmont Marketing Specialists Inc., MSSC
Carolina, Inc., Atlas Marketing Company, Inc. Employee Stock
Ownership Plan and Clark Brinkley, Barney Deal, Doug Heyel,
Joel Lineberger, Fred Manning, Donald Olin and Gary Propst
2.3 Agreement and Plan of Merger, dated as of April 21, 1997, by
and among Tower Marketing, Inc., MSSC Texas, Inc. and
Marketing Specialists Sales Company
2.4 Agreement and Plan of Merger, dated as of October 18, 1996,
by and among Bromar, Inc., MSSC California, Inc. and
Marketing Specialists Sales Company
3.1 Certificate of Incorporation of Richmont Marketing
Specialists Inc.
3.2 By-laws of Richmont Marketing Specialists Inc.
4.1 Indenture, dated as of December 19, 1997, among Richmont
Marketing Specialists Inc. and Texas Commerce Bank National
Association, as Trustee
4.2 Form of certificate of 10 1/8% Senior Subordinated Note
(included as Exhibit B to Exhibit 4.1)
4.3 Exchange and Registration Rights Agreement, dated as of
December 19, 1997, by and among Richmont Marketing
Specialists Inc. and Chase Securities Inc.
5.1 Opinion and consent of Skadden, Arps, Slate, Meagher & Flom
LLP as to the legality of the notes to be issued by Richmont
Marketing Specialists Inc. in the Exchange Offer.*
10.1 Amended and Restated Credit Agreement, dated as of December
19, 1997, by and among Richmont Marketing Specialists Inc.,
the lenders named therein and The Chase Manhattan Bank, as
Agent.
10.2 First Amendment to the Amended and Restated Credit
Agreement, dated as of June 30, 1998.
</TABLE>
II-1
<PAGE> 126
<TABLE>
<CAPTION>
EXHIBIT
- -------
<S> <C>
10.3 Second Amendment to the Amended and Restated Credit
Agreement, dated as of February 26, 1999.
10.4 Equity Contribution Agreement, dated as of October 7, 1997,
among MS Acquisition Limited, certain Stockholders named
therein, Marketing Specialists Sales Company and Richmont
Marketing Specialists Inc.
10.5 Company and Stockholders Agreement, dated as of October 7,
1997, by and among MS Acquisition Limited, Richmont
Marketing Specialists Inc., Ronald D. Pedersen, Jeffrey A.
Watt, Bruce A. Butler and Gary R. Guffey
10.6 Registration Rights Agreement, dated as of October 7, 1997,
by and among Richmont Marketing Specialists Inc. and MS
Acquisition Limited.
10.7 Amended and Restated Warrant Agreement, dated as of October
7, 1997, by and between Ronald D. Pedersen, Jeffrey A. Watt,
Bruce A. Butler and Gary R. Guffey and William B. Robinson
10.8 Employment Agreement, dated April 2, 1996, between Marketing
Specialists Sales Company and Ronald D. Pedersen
10.9 Employment Agreement, dated April 2, 1996, between Marketing
Specialists Sales Company and Bruce A. Butler
10.10 Employment Agreement, dated October 18, 1996, between
Bromar, Inc. and Jeffrey B. Hill.
10.11 Office Lease between BSDAL I Limited Partnership and
Marketing Specialists Sales Company, dated April 27, 1998
10.12 Amendment No. 1 to Office Lease, dated June 26, 1998
10.13 Amendment No. 2 to Office Lease, dated July 24, 1998
10.14 Richmont Marketing Specialists Inc. Incentive Plan, dated as
of January 1, 1998
12.1 Statement re: Computation of Ratio of Earnings to Fixed
Charges
21.1 Subsidiaries of Richmont Marketing Specialists Inc.
23.1 Consent of Ernst & Young LLP
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1)*
25.1 Form T-1 Statement of Eligibility of Chase Bank of Texas,
National Association to act as Trustee under the Indenture
27.1 Financial Data Schedule (for SEC use only)
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Letter to Brokers
99.4 Letter to Clients
</TABLE>
- ---------------
* To be filed by amendment
ITEM 22. UNDERTAKINGS
The Undersigned registrants hereby undertake:
(1) To file any period in which offers to sale are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities would not exceed that which was registered) and any deviation
from the low
II-2
<PAGE> 127
or high end of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
(iii) to include any material information with respect to the plan of
distribution previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liabilities under the
Securities Act of 1933, each post-effective amendment 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.
(3) To remove from the registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of the receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE> 128
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Dallas, State of Texas,
on the eleventh day of March, 1999.
RICHMONT MARKETING
SPECIALISTS INC.
By: /s/ RONALD D. PEDERSEN
------------------------------------
Name: Ronald D. Pedersen
Title: President, Chief Executive
Officer & Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
By: /s/ M. BRIAN HEALY
------------------------------------
Name: M. Brian Healy
Title: Executive Vice President &
Chief Financial Officer
By: /s/ BRIAN BARNES
------------------------------------
Name: Brian Barnes
Title: Controller
By: /s/ NICK G. BOURAS
------------------------------------
Name: Nick G. Bouras
Title: Director
By: /s/ TIMOTHY M. BYRD
------------------------------------
Name: Timothy M. Byrd
Title: Director
By: /s/ BRUCE A. BUTLER
------------------------------------
Name: Bruce A. Butler
Title: Director
By: /s/ THOMAS J. REYNOLDS
------------------------------------
Name: Thomas J. Reynolds
Title: Director
II-4
<PAGE> 129
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
1.1 Purchase Agreement, dated as of December 16, 1997, among
Richmont Marketing Specialists Inc. and Chase Securities
Inc.
2.1 Stock Purchase Agreement, dated as of November 6, 1997, by
and among Atlas Marketing Company, Inc., Quincy Cummings and
Gynn Eller and MSSC Carolina, Inc. and Richmont Marketing
Specialists Inc.
2.2 Stock Purchase Agreement, dated as of November 6, 1997, by
and among Richmont Marketing Specialists Inc., MSSC
Carolina, Inc., Atlas Marketing Company, Inc. Employee Stock
Ownership Plan and Clark Brinkley, Barney Deal, Doug Heyel,
Joel Lineberger, Fred Manning, Donald Olin and Gary Propst
2.3 Agreement and Plan of Merger, dated as of April 21, 1997, by
and among Tower Marketing, Inc., MSSC Texas, Inc. and
Marketing Specialists Sales Company
2.4 Agreement and Plan of Merger, dated as of October 18, 1996,
by and among Bromar, Inc., MSSC California, Inc. and
Marketing Specialists Sales Company
3.1 Certificate of Incorporation of Richmont Marketing
Specialists Inc.
3.2 By-laws of Richmont Marketing Specialists Inc.
4.1 Indenture, dated as of December 19, 1997, among Richmont
Marketing Specialists Inc. and Texas Commerce Bank National
Association, as Trustee
4.2 Form of certificate of 10 1/8% Senior Subordinated Note
(included as Exhibit B to Exhibit 4.1)
4.3 Exchange and Registration Rights Agreement, dated as of
December 19, 1997, by and among Richmont Marketing
Specialists Inc. and Chase Securities Inc.
5.1 Opinion and consent of Skadden, Arps, Slate, Meagher & Flom
LLP as to the legality of the notes to be issued by Richmont
Marketing Specialists Inc. in the Exchange Offer.*
10.1 Amended and Restated Credit Agreement, dated as of December
19, 1997, by and among Richmont Marketing Specialists Inc.,
the lenders named therein and The Chase Manhattan Bank, as
Agent.
10.2 First Amendment to the Amended and Restated Credit
Agreement, dated as of June 30, 1998.
10.3 Second Amendment to the Amended and Restated Credit
Agreement, dated as of February 26, 1999.
10.4 Equity Contribution Agreement, dated as of October 7, 1997,
among MS Acquisition Limited, certain Stockholders named
therein, Marketing Specialists Sales Company and Richmont
Marketing Specialists Inc.
10.5 Company and Stockholders Agreement, dated as of October 7,
1997, by and among MS Acquisition Limited, Richmont
Marketing Specialists Inc., Ronald D. Pedersen, Jeffrey A.
Watt, Bruce A. Butler and Gary R. Guffey
10.6 Registration Rights Agreement, dated as of October 7, 1997,
by and among Richmont Marketing Specialists Inc. and MS
Acquisition Limited.
10.7 Amended and Restated Warrant Agreement, dated as of October
7, 1997, by and between Ronald D. Pedersen, Jeffrey A. Watt,
Bruce A. Butler and Gary R. Guffey and William B. Robinson
10.8 Employment Agreement, dated April 2, 1996, between Marketing
Specialists Sales Company and Ronald D. Pedersen
10.9 Employment Agreement, dated April 2, 1996, between Marketing
Specialists Sales Company and Bruce A. Butler
10.10 Employment Agreement, dated October 18, 1996, between
Bromar, Inc. and Jeffrey B. Hill.
10.11 Office Lease between BSDAL I Limited Partnership and
Marketing Specialists Sales Company, dated April 27, 1998
10.12 Amendment No. 1 to Office Lease, dated June 26, 1998
10.13 Amendment No. 2 to Office Lease, dated July 24, 1998
</TABLE>
<PAGE> 130
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
10.14 Richmont Marketing Specialists Inc. Incentive Plan, dated as
of January 1, 1998
12.1 Statement re: Computation of Ratio of Earnings to Fixed
Charges
21.1 Subsidiaries of Richmont Marketing Specialists Inc.
23.1 Consent of Ernst & Young LLP
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1)*
25.1 Form T-1 Statement of Eligibility of Chase Bank of Texas,
National Association to act as Trustee under the Indenture
27.1 Financial Data Schedule (for SEC use only)
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Letter to Brokers
99.4 Letter to Clients
</TABLE>
- ---------------
* To be filed by amendment
<PAGE> 1
EXHIBIT 1.1
RICHMONT MARKETING SPECIALISTS INC.
$100,000,000
10 1/8% Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
December 16, 1997
CHASE SECURITIES INC.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
Richmont Marketing Specialists Inc., a Delaware corporation (the
"Company"), proposes to issue and sell $100,000,000 aggregate principal amount
of its 10 1/8% Senior Subordinated Notes due 2007 (the "Securities"). The
Securities will be issued pursuant to an Indenture to be dated as of December
19, 1997 (the "Indenture") among the Company, the Company's subsidiaries listed
on the signature pages hereto (the "Guarantor Subsidiaries"), Atlas Marketing
Company, Inc., a North Carolina corporation ("Atlas"), Century Food Brokers of
Hickory, Inc., a North Carolina corporation ("Century"), East Coast Food
Brokerage, Inc., a North Carolina corporation ("ECFB"), Ultimate Food Sales,
Inc., a North Carolina corporation ("Ultimate"), Cumberland Food Brokers, Inc.,
a North Carolina corporation ("Cumberland"), Meatmaster Brokerage, Inc., a North
Carolina corporation ("Meatmaster" and, together with Century, ECFB, Ultimate
and Cumberland, the "Atlas Subsidiaries"), and Texas Commerce Bank National
Association, as trustee (the "Trustee") and will be guaranteed on an unsecured,
senior subordinated basis by the Guarantor Subsidiaries. Pursuant to the Stock
Purchase Agreement among the Company, MSSC Carolina, Inc., a Delaware
corporation and a wholly owned subsidiary of the Company ("MSSC Carolina"),
Atlas and certain stockholders of Atlas (the "Atlas Stockholders") dated as of
November 8, 1997 (the "Cummings/Eller Stock Purchase Agreement"), and the Stock
Purchase Agreement among the Company, MSSC Carolina, the Atlas Employee Stock
Ownership Plan (the "ESOP") and seven management stockholders dated as of
November 8, 1997 (the "ESOP Stock Purchase Agreement" and, together with the
Cummings/Eller Stock Purchase Agreement, the "Stock Purchase Agreements"), MSSC
Carolina will acquire (the "Atlas Acquisition") all the outstanding stock of
Atlas and Atlas will become a wholly owned subsidiary of the Company. The Atlas
Acquisition will take place substantially simultaneously with the issuance of
the Securities and, upon consummation of the Atlas Acquisition, Atlas will
become a signatory to the Indenture as a Guarantor Subsidiary,
<PAGE> 2
2
guaranteeing payment of the Securities on an unsecured, senior subordinated
basis with the other Guarantor Subsidiaries. The Company hereby confirms its
agreement with Chase Securities Inc. (the "Initial Purchaser") concerning the
purchase of the Securities from the Company by the Initial Purchaser.
The Securities will be offered and sold to the Initial Purchaser
without being registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon an exemption therefrom. The Company has
prepared a preliminary offering memorandum dated December 2, 1997 (the
"Preliminary Offering Memorandum"), and will prepare an offering memorandum
dated the date hereof (the "Offering Memorandum") setting forth information
concerning the Company, the Company's subsidiaries, Atlas, the Atlas
Subsidiaries and the Securities. Copies of the Preliminary Offering Memorandum
have been, and copies of the Offering Memorandum will be, delivered by the
Company to the Initial Purchaser pursuant to the terms of this Agreement. Any
references herein to the Preliminary Offering Memorandum and the Offering
Memorandum shall be deemed to include all amendments and supplements thereto,
unless otherwise noted. The Company hereby confirms that it has authorized the
use of the Preliminary Offering Memorandum and the Offering Memorandum in
connection with the offering and resale of the Securities by the Initial
Purchaser in accordance with Section 2.
Holders of the Securities (including the Initial Purchaser and its
direct and indirect transferees) ("Holders") will be entitled to the benefits of
an Exchange and Registration Rights Agreement, substantially in the form
attached hereto as Annex A (the "Registration Rights Agreement"), pursuant to
which the Company will agree to file with the Securities and Exchange Commission
(the "Commission") (i) a registration statement under the Securities Act (the
"Exchange Offer Registration Statement") registering an issue of senior
subordinated notes of the Company (the "Exchange Securities") that are identical
in all material respects to the Securities (except that the Exchange Securities
will not contain terms with respect to transfer restrictions) and (ii) under
certain circumstances, a shelf registration statement pursuant to Rule 415 under
the Securities Act (the "Shelf Registration Statement").
Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Offering Memorandum.
1. Representations, Warranties and Agreements of the Company and the
Guarantor Subsidiaries. The Company and each of the Guarantor Subsidiaries
represents and warrants to, and agrees with, the Initial Purchaser on and as of
the date hereof and the Closing Date (as defined in Section 3) that:
(a) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its respective date, did not, and on the Closing Date
the Offering Memorandum will not, contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided
that the Company makes no representation or warranty as to information
contained in or omitted from the Preliminary Offering Memorandum or the
Offering
<PAGE> 3
3
Memorandum in reliance upon and in conformity with written information
relating to the Initial Purchaser furnished to the Company by or on behalf
of the Initial Purchaser specifically for use therein (the "Initial
Purchaser's Information").
(b) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its respective date, contains all of the information
that, if requested by a prospective purchaser of the Securities, would be
required to be provided to such prospective purchaser pursuant to Rule
144A(d)(4) under the Securities Act.
(c) Assuming the accuracy of the representations and warranties of
the Initial Purchaser contained in Section 2 and its compliance with the
agreements set forth therein, it is not necessary, in connection with the
issuance and sale of the Securities to the Initial Purchaser and the
offer, resale and delivery of the Securities by the Initial Purchaser in
the manner contemplated by this Agreement and the Offering Memorandum, to
register the Securities under the Securities Act or to qualify the
Indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act").
(d) The Company, Atlas, each of the Atlas Subsidiaries and each of
the Company's subsidiaries have been duly incorporated and are validly
existing as corporations in good standing under the laws of their
respective jurisdictions of incorporation, are duly qualified to do
business and are in good standing as foreign corporations in each
jurisdiction in which their respective ownership or lease of property or
the conduct of their respective businesses requires such qualification,
and have all power and authority necessary to own or hold their respective
properties and to conduct the businesses in which they are engaged, except
where the failure so to qualify or have such power or authority would not,
singularly or in the aggregate, have a material adverse effect on the
condition (financial or otherwise), results of operations, business or
prospects of the Company, Atlas, the Atlas Subsidiaries and the Company's
subsidiaries taken as a whole (a "Material Adverse Effect").
(e) The Company has an authorized capitalization as set forth in the
Offering Memorandum under the heading "Capitalization"; all of the
outstanding shares of capital stock of the Company have been duly and
validly authorized and issued and are fully paid and non-assessable; and
the capital stock of the Company conforms in all material respects to the
description thereof contained in the Offering Memorandum. All of the
outstanding shares of capital stock of each subsidiary of the Company have
been duly and validly authorized and issued, are fully paid and
non-assessable and are owned directly or indirectly by the Company, free
and clear of any lien, charge, encumbrance, security interest, restriction
upon voting or transfer or any other claim of any third party, other than
liens in connection with the Revolving Credit Facility and those other
existing liens listed in Schedule 1 attached hereto.
(f) The Company, Atlas, each of the Atlas Subsidiaries and each of
the Guarantor Subsidiaries has full right, power and authority to execute
and deliver each of this Agreement, the Indenture, the Registration Rights
Agreement, the Securities, the Stock
<PAGE> 4
4
Purchase Agreements and the amendment to the Credit Agreement described in
the Offering Memorandum (collectively, the "Transaction Documents", which
term shall include the Atlas Letter Agreement (as defined in Section 5(r)
hereof) upon its execution and delivery by Atlas and the Atlas
Subsidiaries) to which each is party and to perform its obligations
hereunder and thereunder; and all corporate action required to be taken
for the due and proper authorization, execution and delivery of each of
the Transaction Documents and the consummation of the transactions
contemplated thereby have been duly and validly taken.
(g) This Agreement has been duly authorized, executed and delivered
by the Company and each of the Guarantor Subsidiaries and constitutes a
valid and legally binding agreement of the Company and each of the
Guarantor Subsidiaries (and has been or will be duly authorized by Atlas
and the Atlas Subsidiaries and will be the valid and legally binding
agreement of Atlas and the Atlas Subsidiaries upon the execution and
delivery of the Atlas Letter Agreement).
(h) The Registration Rights Agreement has been duly authorized by
the Company and each of the Guarantor Subsidiaries and, when duly executed
and delivered in accordance with its terms by each of the parties thereto,
will constitute a valid and legally binding agreement of the Company and
each of the Guarantor Subsidiaries enforceable against the Company and
each of the Guarantor Subsidiaries in accordance with its terms (and has
been or will be duly authorized by Atlas and the Atlas Subsidiaries and
will be the valid and legally binding agreement of Atlas and the Atlas
Subsidiaries, enforceable against Atlas in accordance with its terms after
the consummation of the Atlas Acquisition), except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law) and that the
rights to indemnification thereunder may be limited by public policy.
(i) The Indenture has been duly authorized by the Company and each
of the Guarantor Subsidiaries and, when duly executed and delivered in
accordance with its terms by each of the parties thereto, will constitute
a valid and legally binding agreement of the Company and each of the
Guarantor Subsidiaries enforceable against the Company and each of the
Guarantor Subsidiaries in accordance with its terms (and has been or will
be duly authorized by Atlas and the Atlas Subsidiaries and will be the
valid and legally binding agreement of Atlas and the Atlas Subsidiaries,
enforceable against Atlas and the Atlas Subsidiaries in accordance with
its terms after the consummation of the Atlas Acquisition), except to the
extent that such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws affecting creditors' rights generally and by general
equitable principles (whether considered in a proceeding in equity or at
law). On the Closing Date, the Indenture will conform in all material
respects to the requirements of the Trust Indenture Act and the rules and
regulations of the Commission applicable to an indenture that is qualified
thereunder.
<PAGE> 5
5
(j) The Securities have been duly authorized by the Company and,
when duly executed, authenticated, issued and delivered as provided in the
Indenture and paid for as provided herein, will be duly and validly issued
and outstanding and will constitute valid and legally binding obligations
of the Company, as issuer, and each of the Guarantor Subsidiaries
(including Atlas and the Atlas Subsidiaries after the consummation of the
Atlas Acquisition), as guarantors, entitled to the benefits of the
Indenture and enforceable against the Company, as issuer, and each of the
Guarantor Subsidiaries (including Atlas and the Atlas Subsidiaries after
the consummation of the Atlas Acquisition), as guarantors, in accordance
with their terms, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and by general equitable principles (whether considered
in a proceeding in equity or at law).
(k) The Atlas Letter Agreement has been or will be duly authorized
by Atlas and the Atlas Subsidiaries and when duly executed and delivered
in accordance with the terms thereof, will constitute the valid and
legally binding agreement of Atlas and the Atlas Subsidiaries, enforceable
against Atlas and the Atlas Subsidiaries in accordance with its terms,
except to the extent that such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws affecting creditors' rights generally and by
general equitable principles (whether considered in a proceeding in equity
or at law) and that the rights to indemnification thereunder may be
limited by public policy.
(l) The Stock Purchase Agreements have been duly authorized,
executed and delivered by the Company, MSSC Carolina, Atlas, the Atlas
Stockholders, the ESOP and the eight management stockholders and
constitute valid and legally binding agreements of the Company, MSSC
Carolina, Atlas, the Atlas Stockholders, the ESOP and the eight management
stockholders, enforceable against the Company, MSSC Carolina, Atlas, the
Atlas Stockholders, the ESOP and the eight management stockholders in
accordance with their terms, except to the extent that such enforceability
may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws affecting
creditors' rights generally and by general equitable principles (whether
considered in a proceeding in equity or at law).
(m) The amendment to the Credit Agreement described in the Offering
Memorandum has been duly authorized by the Company and, when duly executed
and delivered in accordance with its terms by each of the parties thereto,
will constitute a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except to
the extent that such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws affecting creditors' rights generally and by
general equitable principles (whether considered in a proceeding in equity
or at law).
<PAGE> 6
6
(n) Each Transaction Document conforms in all material respects to
the description thereof contained in the Offering Memorandum.
(o) The execution, delivery and performance by each of the Company,
Atlas, the Atlas Subsidiaries and the Guarantor Subsidiaries of each of
the Transaction Documents to which each is a party, the issuance,
authentication, sale and delivery of the Securities by the Company and the
compliance by each of the Company, Atlas and the Guarantor Subsidiaries
with the terms thereof and the consummation of the transactions
contemplated by the Transaction Documents will not conflict with or result
in a breach or violation of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company,
Atlas, any of the Atlas Subsidiaries or any of the Company's subsidiaries
pursuant to any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Company, Atlas, the Atlas
Subsidiaries or any of the Company's subsidiaries is a party or by which
the Company, Atlas, any of the Atlas Subsidiaries or any of the Company's
subsidiaries is bound or to which any of the property or assets of the
Company, Atlas, any of the Atlas Subsidiaries or any of the Company's
subsidiaries is subject (except for such violations that would not have a
Material Adverse Effect), nor will such actions result in any violation of
the provisions of the charter or by-laws of the Company, Atlas, any of the
Atlas Subsidiaries or any of the Company's subsidiaries or any statute or
any judgment, order, decree, rule or regulation of any court or arbitrator
or governmental agency or body in the United States having jurisdiction
over the Company, Atlas, any of the Atlas Subsidiaries or any of the
Company's subsidiaries or any of their properties or assets (except for
such violations (other than violations of the charter or by-laws of the
Company, Atlas, any of the Atlas Subsidiaries or any of the Company's
subsidiaries) that would not have Material Adverse Effect or a material
adverse effect on the ability of the Company, Atlas, the Atlas
Subsidiaries or the Company's subsidiaries to perform its obligations
under the Transaction Documents); and no consent, approval, authorization
or order of, or filing or registration with, any such court or arbitrator
or governmental agency or body under any such domestic statute, judgment,
order, decree, rule or regulation is required for the execution, delivery
and performance by each of the Company, Atlas, the Atlas Subsidiaries and
the Guarantor Subsidiaries of each of the Transaction Documents to which
each is a party, the issuance, authentication, sale and delivery of the
Securities and compliance by each of the Company, Atlas, the Atlas
Subsidiaries and the Guarantor Subsidiaries with the terms thereof and the
consummation of the transactions contemplated by the Transaction
Documents, except for such consents, approvals, authorizations, filings,
registrations or qualifications (i) that shall have been obtained or made
prior to the Closing Date, (ii) as may be required to be obtained or made
under the Securities Act and applicable state securities laws as provided
in the Registration Rights Agreement or (iii) the failure of which to
obtain would not reasonably be likely to restrain, prevent or impose
burdensome conditions on the transactions contemplated by the Transaction
Documents.
(p) Ernst & Young LLP ("E&Y") are independent certified public
accountants with respect to the Company, Atlas, the Atlas Subsidiaries and
the Company's subsidiaries
<PAGE> 7
7
within the meaning of Rule 101 of the Code of Professional Conduct of the
American Institute of Certified Public Accountants ("AICPA") and its
interpretations and rulings thereunder. The historical financial
statements (including the related notes) contained in the Offering
Memorandum have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods covered
thereby and fairly present the financial position of the entities
purported to be covered thereby at the respective dates indicated and the
results of their operations and their cash flows for the respective
periods indicated; and the financial information contained in the Offering
Memorandum under the headings "Capitalization", "Selected Historical
Financial Data--Marketing Specialists Sales Company", "Selected Historical
Financial Data--Atlas Marketing Company, Inc.", "Selected Historical
Financial Data--Bromar, Inc.", "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Management--Executive
Compensation" are derived from the accounting records of the Company,
Atlas and the Company's subsidiaries and fairly present the information
purported to be shown thereby. The pro forma financial information
contained in the Offering Memorandum has been prepared on a basis
consistent with the historical financial statements contained in the
Offering Memorandum (except for the pro forma adjustments specified
therein), gives effect to assumptions made on a reasonable basis and
fairly presents the historical and proposed transactions contemplated by
the Offering
(q) Memorandum and the Transaction Documents. The other historical
financial and statistical information and data included in the Offering
Memorandum are, in all material respects, fairly presented.
(r) There are no legal or governmental proceedings pending to which
the Company, Atlas or any of the Company's subsidiaries is a party or of
which any property or assets of the Company, Atlas, any of the Atlas
Subsidiaries or any of the Company's subsidiaries is the subject that,
singularly or in the aggregate, if determined adversely to the Company,
Atlas or any of the Company's subsidiaries, could reasonably be expected
to have a Material Adverse Effect; and to the best knowledge of the
Company, Atlas, each of the Atlas Subsidiaries and each of the Guarantor
Subsidiaries, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.
(s) No action has been taken and no statute, rule, regulation or
order has been enacted, adopted or issued by any governmental agency or
body that prevents the issuance of the Securities or suspends the sale of
the Securities in any jurisdiction; no injunction, restraining order or
order of any nature by any federal or state court of competent
jurisdiction has been issued with respect to the Company, Atlas, any of
the Atlas Subsidiaries or any of the Company's subsidiaries that would
prevent or suspend the issuance or sale of the Securities or the use of
the Preliminary Offering Memorandum or the Offering Memorandum in any
jurisdiction; no action, suit or proceeding is pending against or, to the
best knowledge of the Company, Atlas, each of the Atlas Subsidiaries and
each of the Guarantor Subsidiaries, threatened against or affecting the
Company, Atlas, any of the Atlas Subsidiaries or any of the Company's
subsidiaries before any court or arbitrator or any governmental agency,
body or official, domestic or foreign, that could reasonably be
<PAGE> 8
8
expected to interfere with or adversely affect the issuance of the
Securities or in any manner draw into question the validity or
enforceability of any of the Transaction Documents or any action taken or
to be taken pursuant thereto; and the Company and Atlas have complied with
any and all requests by any securities authority in any jurisdiction for
additional information to be included in the Preliminary Offering
Memorandum and the Offering Memorandum.
(t) None of the Company, Atlas, any of the Atlas Subsidiaries or any
of the Company's subsidiaries is (i) in violation of its charter or
by-laws, (ii) in default, and no event has occurred that, with notice or
lapse of time or both, would constitute a default, in the due performance
or observance of any term, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which it is a party or by which it is bound or to which any
of its property or assets is subject (except for such defaults or
violations that would not have a Material Adverse Effect) or (iii) in
violation of any law, ordinance, governmental rule, regulation or court
decree to which it or its property or assets may be subject (except for
any applicable foreign securities laws, regulations or restrictions in
connection with the offering of the Securities outside the United States,
as to which the Company and the Guarantor Subsidiaries make no
representation).
(u) Each of the Company, Atlas, the Atlas Subsidiaries and the
Company's subsidiaries possess all material licenses, certificates,
authorizations and permits issued by, and have made all declarations and
filings with, the appropriate federal, state or foreign regulatory
agencies or bodies that are necessary or desirable for the ownership of
their respective properties or the conduct of their respective businesses
as described in the Offering Memorandum, except where the failure to
possess or make the same would not, singularly or in the aggregate, have a
Material Adverse Effect, and none of the Company, Atlas, any of the Atlas
Subsidiaries or any of the Company's subsidiaries has received
notification of any revocation or modification of any such license,
certificate, authorization or permit or has any reason to believe that any
such license, certificate, authorization or permit will not be renewed in
the ordinary course except, in either case, where the failure to have any
such license, certificate, authorization or permit would not have a
Material Adverse Effect.
(v) Each of the Company, Atlas, the Atlas Subsidiaries and the
Company's subsidiaries has timely filed or caused to be filed all federal,
state, local and foreign income, franchise and other material tax returns
and reports required to have been filed and has paid or caused to be paid
all taxes required to have been paid by it (except where the failure to
made such filings or to pay such taxes would not have a Material Adverse
Effect) and no tax deficiency has been determined adversely to the
Company, Atlas, any of the Atlas Subsidiaries or any of the Company's
subsidiaries that has had (nor does the Company, Atlas, any of the Atlas
Subsidiaries or any of the Company's subsidiaries have any knowledge of
any tax deficiency that, if determined adversely to the Company or any of
its subsidiaries, could reasonably be expected to have, except for those
deficiencies that
<PAGE> 9
9
are subject to rights to indemnification as described in the Offering
memorandum) a Material Adverse Effect.
(w) None of the Company, Atlas, the Atlas Subsidiaries or the
Company's subsidiaries is (i) an "investment company" or a company
"controlled by" an investment company within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company Act"), and the
rules and regulations of the Commission thereunder or (ii) a "holding
company" or a "subsidiary company" of a holding company or an "affiliate"
thereof within the meaning of the Public Utility Holding Company Act of
1935, as amended.
(x) Each of the Company, Atlas, the Atlas Subsidiaries and the
Company's subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (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 the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(y) Each of the Company, Atlas, the Atlas Subsidiaries and the
Company's subsidiaries have insurance covering its properties, operations,
personnel and businesses, which insurance is in amounts and insures
against such losses and risks as are adequate to protect it and its
businesses. None of the Company, Atlas, the Atlas Subsidiaries or the
Company's subsidiaries has received notice from any insurer or agent of
such insurer that capital improvements or other expenditures are required
or necessary to be made in order to continue such insurance.
(z) Each of the Company, Atlas, the Atlas Subsidiaries and the
Company's subsidiaries owns or possesses adequate rights to use all
material patents, patent applications, trademarks, service marks, trade
names, trademark registrations, service mark registrations, copyrights,
licenses and know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures) necessary for the conduct of its businesses; and the conduct
of their respective businesses will not conflict in any material respect
with, and the Company, Atlas, the Atlas Subsidiaries and the Company's
subsidiaries have not received any notice of any claim of conflict with,
any such rights of others.
(aa) Each of the Company, Atlas, the Atlas Subsidiaries and the
Company's subsidiaries have good and marketable title in fee simple to, or
have valid rights to lease or otherwise use, all items of real and
personal property that are material to the business of the Company, Atlas,
the Atlas Subsidiaries and the Company's subsidiaries, in each case free
and clear of all liens, encumbrances, claims and defects and imperfections
of title except such that (i) do not materially interfere with the use
made and proposed to be made
<PAGE> 10
10
of such property by the Company, Atlas, the Atlas Subsidiaries and the
Company's subsidiaries, (ii) could not reasonably be expected to have a
Material Adverse Effect, (iii) arise in connection with the Credit
Agreement or (iv) are listed in Schedule 2 attached hereto.
(bb) No labor disturbance by or dispute with the employees of the
Company, Atlas, any of the Atlas Subsidiaries or any of the Company's
subsidiaries exists or, to the best knowledge of the Company, Atlas, any
of the Atlas Subsidiaries or any of the Company's subsidiaries, is
contemplated or threatened.
(cc) No "prohibited transaction" (as defined in Section 406 of the
Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"), or Section
4975 of the Internal Revenue Code of 1986, as amended from time to time
(the "Code")) or "accumulated funding deficiency" (as defined in Section
302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA
(other than events with respect to which the 30-day notice requirement
under Section 4043 of ERISA has been waived) has occurred with respect to
any employee benefit plan of the Company, Atlas, any of the Atlas
Subsidiaries or any of the Company's subsidiaries that could reasonably be
expected to have a Material Adverse Effect; each of the Company, Atlas,
the Atlas Subsidiaries and the Company's subsidiaries have not incurred
and do not expect to incur liability under Title IV of ERISA with respect
to the termination of, or withdrawal from, any pension plan for which the
Company, Atlas, any of the Atlas Subsidiaries or any of the Company's
subsidiaries would have any liability; and none of the Company, Atlas, the
Atlas Subsidiaries or the Company's subsidiaries would have liability for
any failure of any employee benefit plan to comply with any applicable
law, including ERISA or the Code, that could reasonably be expected to
result in a Material Adverse Effect.
(dd) There has been no storage, generation, transportation,
handling, treatment, disposal, discharge, emission or other release of any
kind of toxic or other wastes or other hazardous substances by, due to or
caused by the Company, Atlas, any of the Atlas Subsidiaries or any of the
Company's subsidiaries (or, to the best knowledge of the Company, any
other entity (including any predecessor) for whose acts or omissions the
Company, Atlas, any of the Atlas Subsidiaries or any of the Company's
subsidiaries is or could reasonably be expected to be liable) upon any of
the property now or previously owned or leased by the Company, Atlas, any
of the Atlas Subsidiaries or any of the Company's subsidiaries, or upon
any other property, in violation of any statute or any ordinance, rule,
regulation, order, judgment, decree or permit or that would, under any
statute or any ordinance, rule (including rule of common law), regulation,
order, judgment, decree or permit, give rise to any liability, except for
any violation or liability that could not reasonably be expected to have,
singularly or in the aggregate with all such violations and liabilities, a
Material Adverse Effect; and there has been no disposal, discharge,
emission or other release of any kind onto such property or into the
environment surrounding such property of any toxic or other wastes or
other hazardous substances with respect to which the Company has
knowledge, except for any such
<PAGE> 11
11
disposal, discharge, emission or other release of any kind that could not
reasonably be expected to have, singularly or in the aggregate with all
such discharges and other releases, a Material Adverse Effect.
(ee) None of the Company, Atlas, the Atlas Subsidiaries or the
Company's subsidiaries, to the best knowledge of each of the Company,
Atlas, the Atlas Subsidiaries and the Company's or subsidiaries, any
director, officer, agent, employee or other person associated with or
acting on behalf of the Company, Atlas, any of the Atlas Subsidiaries or
any of the Company's subsidiaries has (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977; or (iv) made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment.
(ff) Immediately after the consummation of the transactions to occur
on the Closing Date (a) the fair value of the assets of each of the
Company, Atlas, the Atlas Subsidiaries and the Guarantor Subsidiaries, at
fair valuation, will exceed its debts and liabilities, subordinated,
contingent or otherwise; (b) the present fair saleable value of the
property of each of the Company, Atlas, the Atlas Subsidiaries and the
Guarantor Subsidiaries will be greater than the amount that will be
required to pay the probable liability of its debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured; (c) each of the Company, Atlas, the Atlas
Subsidiaries and the Guarantor Subsidiaries will be able to pay its debts
and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (d) each of the Company,
Atlas, the Atlas Subsidiaries and the Guarantor Subsidiaries will not have
unreasonably small capital with which to conduct the business in which it
is engaged as such business is now conducted and is proposed to be
conducted following the Closing Date.
(gg) There are no outstanding subscriptions, rights, warrants, calls
or options issued by the Company to acquire, or instruments convertible
into or exchangeable for, or agreements or understandings with respect to
the sale or issuance of, any shares of capital stock of or other equity or
other ownership interest in the Company, Atlas, any of the Atlas
Subsidiaries or any of the Company's subsidiaries, in each case other than
as described in the Offering Memorandum.
(hh) None of the Company, Atlas, any of the Atlas Subsidiaries or
any of the Company's subsidiaries owns any "margin securities" as that
term is defined in Regulations G and U of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"), and none of the
proceeds of the sale of the Securities will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security,
for the purpose of reducing or retiring any indebtedness that was
originally incurred to purchase or carry any margin security or for any
other purpose that might cause any of the Securities to be
<PAGE> 12
12
considered a "purpose credit" within the meanings of Regulation G, T, U or
X of the Federal Reserve Board.
(ii) None of the Company, Atlas, the Atlas Subsidiaries or the
Company's subsidiaries is a party to any contract, agreement or
understanding with any person (other than the Initial Purchaser) that
would give rise to a valid claim against the Company, Atlas, any of the
Atlas Subsidiaries or any of the Company's subsidiaries or the Initial
Purchaser for a brokerage commission, finder's fee or like payment in
connection with the offering and sale of the Securities.
(jj) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
(kk) Assuming the accuracy of the representations and warranties of
the Initial Purchaser in Section 2 hereof and due performance and
compliance by the Initial Purchaser of its obligations under this
Agreement and the Offering Memorandum, none of the Company, Atlas, any of
their respective affiliates or any person acting on its or their behalf
has engaged or will engage in any directed selling efforts (as such term
is defined in Regulation S under the Securities Act ("Regulation S")), and
all such persons have complied and will comply with the offering
restrictions requirement of Regulation S.
(ll) Assuming the accuracy of the representations and warranties of
the Initial Purchaser in Section 2 hereof and due performance and
compliance by the Initial Purchaser of its obligations under this
Agreement and the Offering Memorandum, none of the Company, Atlas or any
of their respective affiliates has, directly or through any agent, sold,
offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any security (as such term is defined in the Securities Act),
which is or will be integrated with the sale of the Securities in a manner
that would require registration of the Securities under the Securities
Act.
(mm) None of the Company, Atlas, any of their respective affiliates
or any other person acting on its or their behalf has engaged, in
connection with the offering of the Securities, in any form of general
solicitation or general advertising in the United States within the
meaning of Rule 502(c) under the Securities Act.
(nn) There are no securities of the Company, Atlas, any of the Atlas
Subsidiaries or any of the Company's subsidiaries registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
listed on a national securities exchange or quoted in a U.S. automated
inter-dealer quotation system.
(oo) None of the Company, Atlas, the Atlas Subsidiaries or the
Company's subsidiaries have taken and none of the Company, Atlas, the
Atlas Subsidiaries or the Company's subsidiaries will take, directly or
indirectly, any action prohibited by Regulation M under the Exchange Act
in connection with the offering of the Securities.
<PAGE> 13
13
(pp) No forward-looking statement (within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act) contained in
the Preliminary Offering Memorandum or the Offering Memorandum has been
made or reaffirmed without a reasonable basis or has been disclosed other
than in good faith.
(qq) None of the Company, Atlas, the Atlas Subsidiaries or the
Company's subsidiaries does business with the government of Cuba or with
any person or affiliate located in Cuba within the meaning of Florida
Statutes Section 517.075.
(rr) Since the date as of which information is given in the Offering
Memorandum, except as otherwise stated therein, (i) there has been no
material adverse change or any development involving a prospective
material adverse change in the condition, financial or otherwise, or in
the earnings, business affairs, management or business prospects of the
Company, Atlas, the Atlas Subsidiaries and the Company's subsidiaries,
taken as a whole, whether or not arising in the ordinary course of
business, (ii) none of the Company, Atlas or any of the Company's
subsidiaries has incurred any material liability or obligation, direct or
contingent, other than in the ordinary course of business, (iii) none of
the Company, Atlas, the Atlas Subsidiaries or the Company's subsidiaries
has entered into any material transaction other than in the ordinary
course of business and (iv) there has not been any change in the capital
stock or long-term debt of the Company, Atlas, any of the Atlas
Subsidiaries or any of the Company's subsidiaries, or any dividend or
distribution of any kind declared, paid or made by the Company or Atlas on
any class of their capital stock.
2. Purchase and Resale of the Securities. (a) On the basis of the
representations, warranties and agreements contained herein, and subject to the
terms and conditions set forth herein, the Company agrees to issue and sell to
the Initial Purchaser, and the Initial Purchaser agrees to purchase from the
Company, $100,000,000 principal amount of Securities at a purchase price equal
to 3.0% of the principal amount thereof. The Company shall not be obligated to
deliver any of the Securities except upon payment for all of the Securities to
be purchased as provided herein.
(b) The Initial Purchaser has advised the Company that it proposes
to offer the Securities for resale upon the terms and subject to the conditions
set forth herein and in the Offering Memorandum. The Initial Purchaser
represents, warrants and agrees that (i) it is purchasing the Securities
pursuant to a private sale exempt from registration under the Securities Act,
(ii) it has not solicited offers for, or offered or sold, and will not solicit
offers for, or offer or sell, the Securities by means of any form of general
solicitation or general advertising within the meaning of Rule 502(c) of
Regulation D under the Securities Act ("Regulation D") or in any manner
involving a public offering within the meaning of Section 4(2) of the Securities
Act and (iii) it has solicited and will solicit offers for the Securities only
from, and has offered or sold and will offer, sell or deliver the Securities, as
part of its initial offering, only (A) within the United States to persons whom
it reasonably believes to be qualified institutional buyers ("Qualified
Institutional Buyers"), as defined in Rule 144A under the Securities Act ("Rule
144A"), or if any such person is buying for one or more institutional accounts
for which such person is acting as fiduciary or agent, only when such person has
represented to it that each such account is a
<PAGE> 14
14
Qualified Institutional Buyer to whom notice has been given that such sale or
delivery is being made in reliance on Rule 144A and in each case, in
transactions in accordance with Rule 144A and (B) outside the United States to
persons other than U.S. persons in reliance on Regulations S under the
Securities Act ("Regulation S").
(c) In connection with the offer and sale of Securities in reliance
on Regulation S, the Initial Purchaser represents, warrants and agrees that:
(i) the Securities have not been registered under the
Securities Act and may not be offered or sold within the United States or
to, or for the account or benefit of, U.S. persons except pursuant to an
exemption from, or in transactions not subject to, the registration
requirements of the Securities Act;
(ii) it has offered and sold the Securities, and will offer
and sell the Securities, (A) as part of its distribution at any time and
(B) otherwise until 40 days after the later of the commencement of the
offering of the Securities and the Closing Date, only in accordance with
Regulation S or Rule 144A or any other available exemption from
registration under the Securities Act;
(iii) none of the Initial Purchaser, any of its affiliates or
any other person acting on its or their behalf has engaged or will engage
in any directed selling efforts with respect to the Securities, and all
such persons have complied and will comply with the offering restrictions
requirement of Regulation S;
(iv) at or prior to the confirmation of sale of any Securities
sold in reliance on Regulation S, it will have sent to each distributor,
dealer or other person receiving a selling concession, fee or other
remuneration that purchases Securities from it during the restricted
period a confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the
U.S. Securities Act of 1933, as amended (the "Securities Act"), and
may not be offered or sold within the United States or to, or for
the account or benefit of, a U.S. person (i) as part of their
distribution at any time or (ii) otherwise until 40 days after the
later of the commencement of the offering of the Securities and the
date of original issuance of the Securities, except in accordance
with Regulation S or Rule 144A or any other available exemption from
registration under the Securities Act. Terms used above have the
meanings given to them by Regulation S;"
(v) it has not and will not enter into any contractual
arrangement with any distributor with respect to the distribution of the
Securities, except with its affiliates or with the prior written consent
of the Company.
Terms used in this Section 2(c) have the meanings given to them by
Regulation S.
<PAGE> 15
15
(d) The Initial Purchaser represents, warrants and agrees that (i)
it has not offered or sold and prior to the date six months after the Closing
Date will not offer or sell any Securities to persons in the United Kingdom
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances that have not resulted and will
not result in an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations 1995; (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 and the
Public Offers of Securities Regulations 1995 with respect to anything done by it
in relation to the Securities in, from or otherwise involving the United
Kingdom; and (iii) it has only issued or passed on and will only issue or pass
on in the United Kingdom any document received by it in connection with the
issue of the Securities to a person who is of a kind described in Article 11(3)
of the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1996 or is a person to whom such document may otherwise lawfully be issued
or passed on.
(e) The Initial Purchaser agrees that, prior to or simultaneously
with the confirmation of sale by the Initial Purchaser to any purchaser of any
of the Securities purchased by the Initial Purchaser from the Company pursuant
hereto, the Initial Purchaser shall furnish to that purchaser a copy of the
Offering Memorandum (and any amendment or supplement thereto that the Company
shall have furnished to the Initial Purchaser prior to the date of such
confirmation of sale). In addition to the foregoing, the Initial Purchaser
acknowledges and agrees that the Company and, for purposes of the opinions to be
delivered to the Initial Purchaser pursuant to Section 5(d) and (e), counsel for
the Company and for the Initial Purchaser, respectively, may rely upon the
accuracy of the representations and warranties of the Initial Purchaser and its
compliance with its agreements contained in this Section 2, and the Initial
Purchaser hereby consents to such reliance.
(f) The Company acknowledges and agrees that the Initial Purchaser
may sell Securities to any affiliate of the Initial Purchaser and that any such
affiliate may sell Securities purchased by it to the Initial Purchaser.
(g) The Initial Purchaser represents and agrees that (i) it has not
solicited, and will not solicit, offers to purchase any of the Securities from,
(ii) it has not sold, and will not sell, any of the Securities to, and (iii) it
has not distributed, and will not distribute, the Offering Document to, any
person or entity in any jurisdiction outside of the United States except, in
each case in compliance in all material respects with all applicable laws. For
the purpose of this Agreement, "United States" means the United States of
America, its territories, its possessions and other areas subject to its
jurisdiction.
3. Delivery of and Payment for the Securities. (a) Delivery of and
payment for the Securities shall be made at the offices of Cravath, Swaine &
Moore ("CS&M"), New York, New York, or at such other place as shall be agreed
upon by the Initial Purchaser and the Company, at 10:00 A.M., New York City
time, on December 19, 1997, or at such other time or date, not later than seven
full business days thereafter, as shall be agreed upon by the Initial
<PAGE> 16
16
Purchaser and the Company (such date and time of payment and delivery being
referred to herein as the "Closing Date").
(b) On the Closing Date, payment of the purchase price for the
Securities shall be made to the Company by wire or book-entry transfer of
same-day funds to such account or accounts as the Company shall specify prior to
the Closing Date or by such other means as the parties hereto shall agree prior
to the Closing Date against delivery to the Initial Purchaser of the
certificates evidencing the Securities. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a further
condition of the obligations of the Initial Purchaser hereunder. Upon delivery,
the Securities shall be in global form, registered in such names and in such
denominations as the Initial Purchaser shall have requested in writing not less
than two full business days prior to the Closing Date. The Company agrees to
make one or more global certificates evidencing the Securities available for
inspection by the Initial Purchaser in New York, New York at least 24 hours
prior to the Closing Date.
4. Further Agreements of the Company and the Guarantor Subsidiaries.
The Company and each of the Guarantor Subsidiaries agrees with the Initial
Purchaser:
(a) to advise the Initial Purchaser promptly and, if requested,
confirm such advice in writing, of the happening of any event that makes
any statement of a material fact made in the Offering Memorandum untrue or
that requires the making of any additions to or changes in the Offering
Memorandum (as amended or supplemented from time to time) in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; to advise the Initial Purchaser promptly of any
order preventing or suspending the use of the Preliminary Offering
Memorandum or the Offering Memorandum, of any suspension of the
qualification of the Securities for offering or sale in any jurisdiction
and of the initiation or threatening of any proceeding for any such
purpose; and to use its best efforts to prevent the issuance of any such
order preventing or suspending the use of the Preliminary Offering
Memorandum or the Offering Memorandum or suspending any such qualification
and, if any such suspension is issued, to obtain the lifting thereof at
the earliest possible time;
(b) to furnish promptly to the Initial Purchaser and counsel for the
Initial Purchaser, without charge, as many copies of the Preliminary
Offering Memorandum and the Offering Memorandum (and any amendments or
supplements thereto) as may be reasonably requested;
(c) prior to making any amendment or supplement to the Offering
Memorandum, to furnish a copy thereof to the Initial Purchaser and counsel
for the Initial Purchaser and not to effect any such amendment or
supplement to which the Initial Purchaser shall reasonably object by
notice to the Company after a reasonable period to review;
(d) if, at any time prior to completion of the resale of the
Securities by the Initial Purchaser, any event shall occur or condition
exist as a result of which it is necessary, in the opinion of counsel for
the Initial Purchaser or counsel for the Company, to amend or
<PAGE> 17
17
supplement the Offering Memorandum in order that the Offering Memorandum
will not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances existing at the time it is delivered to a
purchaser, not misleading, or if it is necessary to amend or supplement
the Offering Memorandum to comply with applicable law, to promptly prepare
such amendment or supplement as may be necessary to correct such untrue
statement or omission or so that the Offering Memorandum, as so amended or
supplemented, will comply with applicable law;
(e) for so long as the Securities are outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, to furnish to holders of the Securities and prospective
purchasers of the Securities designated by such holders, upon request of
such holders or such prospective purchasers, the information required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act, unless
the Company is then subject to and in compliance with Section 13 or 15(d)
of the Exchange Act (the foregoing agreement being for the benefit of the
holders from time to time of the Securities and prospective purchasers of
the Securities designated by such holders);
(f) for so long as the Securities are outstanding, to furnish to the
Initial Purchaser copies of any annual reports, quarterly reports and
current reports filed by the Company with the Commission on Forms 10-K,
10-Q and 8-K, or such other similar forms as may be designated by the
Commission, and such other documents, reports and information as shall be
furnished by the Company to the Trustee or to the holders of the
Securities pursuant to the Indenture or the Exchange Act or any rule or
regulation of the Commission thereunder;
(g) to promptly take from time to time such actions as the Initial
Purchaser may reasonably request to qualify the Securities for offering
and sale under the securities or Blue Sky laws of such jurisdictions as
the Initial Purchaser may designate and to continue such qualifications in
effect for so long as required for the resale of the Securities; and to
arrange for the determination of the eligibility for investment of the
Securities under the laws of such jurisdictions as the Initial Purchaser
may reasonably request; provided that the Company and its subsidiaries
shall not be obligated to qualify as foreign corporations in any
jurisdiction in which they are not so qualified or to file a general
consent to service of process in any jurisdiction;
(h) to assist the Initial Purchaser in arranging for the Securities
to be designated Private Offerings, Resales and Trading through Automated
Linkages ("PORTAL") Market securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers,
Inc. ("NASD") relating to trading in the PORTAL Market and for the
Securities to be eligible for clearance and settlement through The
Depository Trust Company ("DTC");
(i) not to, and to cause their affiliates not to, sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any
security (as such term is defined in the
<PAGE> 18
18
Securities Act) which could be integrated with the sale of the Securities
in a manner which would require registration of the Securities under the
Securities Act;
(j) except following the effectiveness of the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case
may be, not to, and to cause their affiliates not to, and not to authorize
or knowingly permit any person acting on their behalf to, solicit any
offer to buy or offer to sell the Securities by means of any form of
general solicitation or general advertising within the meaning of
Regulation D or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act; and not to offer, sell,
contract to sell or otherwise dispose of, directly or indirectly, any
securities under circumstances where such offer, sale, contract or
disposition would cause the exemption afforded by Section 4(2) of the
Securities Act or by Regulation S to cease to be applicable to the
offering and sale of the Securities as contemplated by this Agreement and
the Offering Memorandum;
(k) for a period of 90 days from the date of the Offering
Memorandum, not to offer for sale, sell, contract to sell or otherwise
dispose of, directly or indirectly, or file a registration statement for,
or announce any offer, sale, contract for sale of or other disposition of
any debt securities issued or guaranteed by the Company or any of its
subsidiaries (other than the Securities) without the prior written consent
of the Initial Purchaser;
(l) during the period from the Closing Date until two years after
the Closing Date, without the prior written consent of the Initial
Purchaser, not to, and not permit any of their affiliates (as defined in
Rule 144 under the Securities Act) to, resell any of the Securities that
have been reacquired by them, except for Securities purchased by the
Company or any of its affiliates and resold in a transaction registered
under the Securities Act;
(m) not to, for so long as the Securities are outstanding, be or
become, or be or become owned by, an open-end investment company, unit
investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the Investment Company Act, and to
not be or become, or be or become owned by, a closed-end investment
company required to be registered, but not registered thereunder;
(n) in connection with the offering of the Securities, until the
Initial Purchaser has notified the Company of the completion of the resale
of the Securities, not to, and to cause its affiliated purchasers (as
defined in Regulation M under the Exchange Act) not to, either alone or
with one or more other persons, bid for or purchase, for any account in
which it or any of its affiliated purchasers has a beneficial interest,
any Securities, or attempt to induce any person to purchase any
Securities; and not to, and to cause its affiliated purchasers not to,
make bids or purchase for the purpose of creating actual, or apparent,
active trading in or of raising the price of the Securities;
<PAGE> 19
19
(o) in connection with the offering of the Securities, to make its
officers, employees, independent accountants and legal counsel reasonably
available upon request by the Initial Purchaser;
(p) to furnish to the Initial Purchaser on the date hereof a copy of
the independent accountants' report included in the Offering Memorandum
signed by the accountants rendering such report;
(q) to do and perform all things required to be done and performed
by it under this Agreement that are within its control prior to or after
the Closing Date, and to use its best efforts to satisfy all conditions
precedent on its part to the delivery of the Securities;
(r) to not take any action prior to the execution and delivery of
the Indenture that, if taken after such execution and delivery, would have
violated any of the covenants contained in the Indenture;
(s) to not take any action prior to the Closing Date that would
require the Offering Memorandum to be amended or supplemented pursuant to
Section 4(d);
(t) prior to the Closing Date, not to issue any press release or
other communication directly or indirectly or hold any press conference
with respect to the Company, its condition, financial or otherwise, or
earnings, business affairs or business prospects (except for routine oral
marketing communications in the ordinary course of business and consistent
with the past practices of the Company and of which the Initial Purchaser
is notified), without the prior written consent of the Initial Purchaser,
unless in the judgment of the Company and its counsel, and after
notification to the Initial Purchaser, such press release or communication
is required by law; and
(u) to apply the net proceeds from the sale of the Securities as set
forth in the Offering Memorandum under the heading "Use of Proceeds".
5. Conditions of Initial Purchaser's Obligations. The obligations of
the Initial Purchaser hereunder are subject to the accuracy, on and as of the
date hereof and the Closing Date, of the representations and warranties of the
Company and each of the Guarantor Subsidiaries contained herein and of Atlas and
the Atlas Subsidiaries contained in the Atlas Letter Agreement, to the accuracy
of the statements of the Company, Atlas, each of the Atlas Subsidiaries and each
of the Guarantor Subsidiaries and their respective officers made in any
certificates delivered pursuant hereto, to the performance by the Company and
each of the Guarantor Subsidiaries of their respective obligations hereunder,
and to each of the following additional terms and conditions:
(a) The Offering Memorandum (and any amendments or supplements
thereto) shall have been printed and copies distributed to the Initial
Purchaser as promptly as practicable on or following the date of this
Agreement or at such other date and time as to which the Initial Purchaser
may agree; and no stop order suspending the sale of the Secu-
<PAGE> 20
20
rities in any jurisdiction shall have been issued and no proceeding for
that purpose shall have been commenced or shall be pending or threatened.
(b) The Initial Purchaser shall not have discovered and disclosed to
the Company on or prior to the Closing Date that the Offering Memorandum
or any amendment or supplement thereto contains an untrue statement of a
fact that, in the opinion of counsel for the Initial Purchaser, is
material or omits to state any fact that, in the opinion of such counsel,
is material and is required to be stated therein or is necessary to make
the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident to
the authorization, form and validity of each of the Transaction Documents
and the Offering Memorandum, and all other legal matters relating to the
Transaction Documents and the transactions contemplated thereby, shall be
satisfactory in all material respects to the Initial Purchaser, and the
Company and Atlas shall have furnished to the Initial Purchaser all
documents and information that it or its counsel may reasonably request to
enable them to pass upon such matters.
(d) Skadden, Arps, Slate, Meagher & Flom LLP, Andrews & Kurth L.L.P,
Hunton & Williams and Simon & Frerick, P.A. shall have furnished to the
Initial Purchaser their written opinions, as counsel to the Company,
addressed to the Initial Purchaser and dated the Closing Date, in form and
substance reasonably satisfactory to the Initial Purchaser, substantially
to the effect set forth in Annex B-1, B-2, B-3 and B-4 hereto,
respectively.
(e) The Initial Purchaser shall have received from Cravath, Swaine &
Moore, counsel for the Initial Purchaser, such opinion or opinions, dated
the Closing Date, with respect to such matters as the Initial Purchaser
may reasonably require, and the Company shall have furnished to such
counsel such documents and information as they request for the purpose of
enabling them to pass upon such matters.
(f) The Company shall have furnished to the Initial Purchaser a
letter (the "Initial Letter") of E&Y, addressed to the Initial Purchaser
and dated the date hereof, in form and substance satisfactory to the
Initial Purchaser, substantially to the effect set forth in Annex C
hereto.
(g) The Company shall have furnished to the Initial Purchaser a
letter (the "Bring-Down Letter") of E&Y, addressed to the Initial
Purchaser and dated the Closing Date (i) confirming that they are
independent public accountants with respect to the Company, Atlas, the
Atlas Subsidiaries and the Company's subsidiaries within the meaning of
Rule 101 of the Code of Professional Conduct of the AICPA and its
interpretations and rulings thereunder, (ii) stating, as of the date of
the Bring-Down Letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Offering Memorandum, as of a date not more
than three business days prior to the date of the Bring-Down Letter), that
the conclusions and
<PAGE> 21
21
findings of such accountants with respect to the financial information and
other matters covered by the Initial Letter are accurate and (iii)
confirming in all material respects the conclusions and findings set forth
in the Initial Letter.
(h) The Company, Atlas, each of the Atlas Subsidiaries and each of
the Guarantor Subsidiaries shall have furnished to the Initial Purchaser a
certificate, dated the Closing Date, of their respective chief executive
officers and their respective chief financial officers stating that (A)
such officers have carefully examined the Offering Memorandum, (B) in
their opinion, the Offering Memorandum, as of its date, did not include
any untrue statement of a material fact and did not omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading, and since the date of the Offering Memorandum,
no event has occurred that should have been set forth in a supplement or
amendment to the Offering Memorandum so that the Offering Memorandum (as
so amended or supplemented) would not include any untrue statement of a
material fact and would not omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading
and (C) as of the Closing Date, the representations and warranties of the
Company, Atlas, the Atlas Subsidiaries and the Guarantor Subsidiaries in
this Agreement are true and correct in all material respects, the Company,
Atlas, the Atlas Subsidiaries and the Guarantor Subsidiaries have complied
with all agreements and satisfied all conditions on their part to be
performed or satisfied hereunder on or prior to the Closing Date, and
subsequent to the date of the most recent financial statements contained
in the Offering Memorandum, there has been no material adverse change in
the financial position or results of operation of the Company, Atlas, any
of the Atlas Subsidiaries or any of the Company's subsidiaries, or any
change, or any development including a prospective change, in or affecting
the condition (financial or otherwise), results of operations, business or
prospects of the Company, Atlas, the Atlas Subsidiaries and the Company's
subsidiaries taken as a whole.
(i) The Initial Purchaser shall have received a counterpart of the
Registration Rights Agreement which shall have been executed and delivered
by a duly authorized officer of the Company, Atlas, each of the Atlas
Subsidiaries and each of the Guarantor Subsidiaries.
(j) The Indenture shall have been duly executed and delivered by the
Company, Atlas, the Atlas Subsidiaries, the Guarantor Subsidiaries and the
Trustee, and the Securities shall have been duly executed and delivered by
the Company and duly authenticated by the Trustee.
(k) The Securities shall have been approved by the NASD for trading
in the PORTAL Market.
(l) If any event shall have occurred that requires the Company under
Section 4(d) to prepare an amendment or supplement to the Offering
Memorandum, such amendment
<PAGE> 22
22
or supplement shall have been prepared, the Initial Purchaser shall have
been given a reasonable opportunity to comment thereon, and copies thereof
shall have been delivered to the Initial Purchaser reasonably in advance
of the Closing Date.
(m) There shall not have occurred any invalidation of Rule 144A or
Regulation S under the Securities Act by any court or any withdrawal or
proposed withdrawal of any rule or regulation under the Securities Act or
the Exchange Act by the Commission or any amendment or proposed amendment
thereof by the Commission that in the judgment of the Initial Purchaser
would materially impair the ability of the Initial Purchaser to purchase,
hold or effect resales of the Securities as contemplated hereby.
(n) Subsequent to the execution and delivery of this Agreement or,
if earlier, the dates as of which information is given in the Offering
Memorandum (exclusive of any amendment or supplement thereto), there shall
not have been any change in the capital stock or long-term debt or any
change, or any development involving a prospective change, in or affecting
the condition (financial or otherwise), results of operations, business or
prospects of the Company, Atlas, the Atlas Subsidiaries and the Company's
subsidiaries taken as a whole, the effect of which, in any such case
described above, is, in the judgment of the Initial Purchaser, so material
and adverse as to make it impracticable or inadvisable to proceed with the
sale or delivery of the Securities on the terms and in the manner
contemplated by this Agreement and the Offering Memorandum (exclusive of
any amendment or supplement thereto).
(o) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental
agency or body that would, as of the Closing Date, prevent the issuance or
sale of the Securities; and no injunction, restraining order or order of
any other nature by any federal or state court of competent jurisdiction
shall have been issued as of the Closing Date that would prevent the
issuance or sale of the Securities.
(p) Subsequent to the execution and delivery of this Agreement (i)
no downgrading shall have occurred in the rating accorded the Securities
or any of the Company's other debt securities or preferred stock by any
"nationally recognized statistical rating organization", as such term is
defined by the Commission for purposes of Rule 436(g)(2) of the rules and
regulations of the Commission under the Securities Act and (ii) no such
organization shall have publicly announced that it has under surveillance
or review (other than an announcement with positive implications of a
possible upgrading) its rating of the Securities or any of the Company's
other debt securities or preferred stock.
(q) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or
the over-the-counter market shall have been suspended or limited, or
minimum prices shall have been established on any such exchange or market
by the Commission, by any such exchange or by any other regulatory body or
governmental authority having jurisdiction, or trading in any securities
of the
<PAGE> 23
23
Company on any exchange or in the over-the-counter market shall have been
suspended or (ii) any moratorium on commercial banking activities shall
have been declared by federal or New York state authorities or (iii) an
outbreak or escalation of hostilities or a declaration by the United
States of a national emergency or war or (iv) a material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States
shall be such) the effect of which, in the case of this clause (iv), is,
in the judgment of the Initial Purchaser, so material and adverse as to
make it impracticable or inadvisable to proceed with the sale or the
delivery of the Securities on the terms and in the manner contemplated by
this Agreement and in the Offering Memorandum (exclusive of any amendment
or supplement thereto).
(r) Substantially simultaneously with the sale of the Securities
hereunder (i) the Atlas Acquisition shall have been consummated on the
terms described in the Offering Memorandum, (ii) the existing indebtedness
under the Revolving Credit Facility and certain other indebtedness of the
Company shall have been repaid, as described in the Offering Memorandum,
(iii) the Initial Purchaser shall have received a counterpart of an
agreement in the form of Annex D hereto (the "Atlas Letter Agreement")
that shall have been executed and delivered by a duly authorized officer
of each of Atlas, Century, ECFB, Ultimate, Cumberland and Meatmaster,
whereby, among other things, Atlas, Century, ECFB, Ultimate, Cumberland
and Meatmaster will become parties to this Agreement and be subject to the
obligations of the Company under this Agreement, including, but not
limited to, the obligations under Sections 4, 8, 9, 10, 11 and 12 hereof.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Initial Purchaser.
6. Termination. The obligations of the Initial Purchaser hereunder
may be terminated by the Initial Purchaser, in its absolute discretion, by
notice given to and received by the Company prior to delivery of and payment for
the Securities if, prior to that time, any of the events described in Section
5(m), (n), (o), (p) or (q) shall have occurred and be continuing.
7. Reimbursement of Initial Purchaser's Expenses. If (a) this
Agreement shall have been terminated pursuant to Section 6, (b) the Company
shall fail to tender the Securities for delivery to the Initial Purchaser for
any reason permitted under this Agreement or (c) the Initial Purchaser shall
decline to purchase the Securities for any reason permitted under this
Agreement, the Company shall reimburse the Initial Purchaser for such
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
as shall have been reasonably incurred by the Initial Purchaser in connection
with this Agreement and the proposed purchase and resale of the Securities.
8. Indemnification. (a) The Company and each of the Guarantor
Subsidiaries shall jointly and severally indemnify and hold harmless the Initial
Purchaser, its affiliates, its officers, directors, employees, representatives
and agents, and each person, if any, who controls the Initial Purchaser within
the meaning of the Securities Act or the Exchange Act (collectively
<PAGE> 24
24
referred to for purposes of this Section 8(a) and Section 9 as the Initial
Purchaser), from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof (including, without limitation, any
loss, claim, damage, liability or action relating to purchases and sales of the
Securities), to which the Initial Purchaser may become subject, whether
commenced or threatened, under the Securities Act, the Exchange Act, any other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in the Preliminary Offering Memorandum or the Offering Memorandum
or in any amendment or supplement thereto or in any information provided by the
Company pursuant to Section 4(e) or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, and shall reimburse the Initial Purchaser
promptly upon demand for any legal or other expenses reasonably incurred by the
Initial Purchaser in connection with investigating or defending or preparing to
defend against or appearing as a third party witness in connection with any such
loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of, or
is based upon, an untrue statement or alleged untrue statement in or omission or
alleged omission from any of such documents in reliance upon and in conformity
with the Initial Purchaser's Information; and provided, further, that with
respect to any such untrue statement in or omission from the Preliminary
Offering Memorandum, the indemnity agreement contained in this Section 8(a)
shall not inure to the benefit of the Initial Purchaser to the extent that the
sale to the person asserting any such loss, claim, damage, liability or action
was an initial resale by the Initial Purchaser and any such loss, claim, damage,
liability or action of or with respect to the Initial Purchaser results from the
fact that both (A) to the extent required by applicable law, a copy of the
Offering Memorandum was not sent or given to such person at or prior to the
written confirmation of the sale of such Securities to such person and (B) the
untrue statement in or omission from the Preliminary Offering Memorandum was
corrected in the Offering Memorandum unless, in either case, such failure to
deliver the Offering Memorandum was a result of non-compliance by the Company
with Section 4(b).
(b) The Initial Purchaser shall indemnify and hold harmless the
Company, its affiliates, their respective officers, directors, employees,
representatives and agents, and each person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act (collectively
referred to for purposes of this Section 8(b) and Section 9 as the Company),
from and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which the Company may become subject, whether
commenced or threatened, under the Securities Act, the Exchange Act, any other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in the Preliminary Offering Memorandum or the Offering Memorandum
or in any amendment or supplement thereto or (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in
<PAGE> 25
25
reliance upon and in conformity with the Initial Purchaser's Information, and
shall reimburse the Company for any legal or other expenses reasonably incurred
by the Company in connection with investigating or defending or preparing to
defend against or appearing as a third party witness in connection with any such
loss, claim, damage, liability or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this
Section 8 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 pursuant to Section 8(a) or 8(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability that it may have under this Section 8 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and, provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability that it
may have to an indemnified party otherwise than under this Section 8. 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 to 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 this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that an
indemnified party shall have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there may
be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party and
which would be material to the defense of the indemnified party and adverse to
the indemnifying party, (3) a conflict or potential conflict exists (based upon
advice of counsel to the indemnified party) between the indemnified party and
the indemnifying party (in which case the indemnifying party will not have the
right to direct the defense of such action on behalf of the indemnified party)
or (4) the indemnifying party has not in fact employed counsel reasonably
satisfactory to the indemnified party to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or parties.
It is understood that the indemnifying party or parties shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees, disbursements and other charges of more than one
separate firm of attorneys (in addition to any local counsel) at any one time
for all such indemnified party or parties. Each indemnified party, as a
condition of the indemnity agreements contained in Sections 8(a) and 8(b), shall
use all reasonable efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No indemnifying party shall be liable for
any settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment for the plaintiff in any such action,
the indemnifying
<PAGE> 26
26
party agrees to indemnify and hold harmless any indemnified party from and
against any loss or liability by reason of such settlement or judgment. No
indemnifying party shall, without the prior written consent of the indemnified
party (which consent shall not be unreasonably withheld), effect any settlement
of any pending or threatened proceeding in respect of which any indemnified
party is or could have been a party and indemnity could have been sought
hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
The obligations of the Company, the Guarantor Subsidiaries and the
Initial Purchaser in this Section 8 and in Section 9 are in addition to any
other liability that the Company, the Guarantor Subsidiaries or the Initial
Purchaser, as the case may be, may otherwise have, including in respect of any
breaches of representations, warranties and agreements made herein by any such
party.
9. Contribution. If the indemnification provided for in Section 8 is
unavailable or insufficient to hold harmless an indemnified party under Section
8(a) or 8(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company and the Guarantor Subsidiaries on the one hand
and the Initial Purchaser on the other from the offering of the Securities 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 and the Guarantor Subsidiaries on the one hand and the Initial
Purchaser on the other with respect to the statements or omissions that resulted
in such loss, claim, damage or liability, or action in respect thereof, as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Guarantor Subsidiaries on the one hand and the Initial
Purchaser on the other with respect to such offering shall be deemed to be in
the same proportion as the total net proceeds from the offering of the
Securities purchased under this Agreement (before deducting expenses) received
by or on behalf of the Company and the Guarantor Subsidiaries, on the one hand,
and the total discounts and commissions received by the Initial Purchaser with
respect to the Securities purchased under this Agreement, on the other, bear to
the total gross proceeds from the sale of the Securities under this Agreement,
in each case as set forth in the table on the cover page of the Offering
Memorandum. The 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 the Company or
information supplied by the Company on the one hand or to the Initial
Purchaser's Information on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Company, the Guarantor Subsidiaries and
the Initial Purchaser agree that it would not be just and equitable if
contributions pursuant to this Section 9 were to be determined by pro rata
allocation (even if the Initial Purchaser were treated as one entity for such
purpose) or by any other method of allocation that does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 9 shall be deemed
to include, for purposes of this
<PAGE> 27
27
Section 9, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending or preparing to defend any
such action or claim. Notwithstanding the provisions of this Section 9, the
Initial Purchaser shall not be required to contribute any amount in excess of
the amount by which the total discounts and commissions received by the Initial
Purchaser with respect to the Securities purchased by it under this Agreement
exceeds the amount of any damages that the Initial Purchaser has otherwise paid
or become liable to pay by reason of any 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.
10. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Initial Purchaser, the Company,
the Guarantor Subsidiaries (including, upon delivery of the Atlas Letter
Agreement, Atlas and the Atlas Subsidiaries) and their respective successors.
This Agreement and the terms and provisions hereof are for the sole benefit of
only those persons, except as provided in Sections 8 and 9 with respect to
affiliates, officers, directors, employees, representatives, agents and
controlling persons of the Company, the Guarantor Subsidiaries (including, upon
delivery of the Atlas Letter Agreement, Atlas and the Atlas Subsidiaries) and
the Initial Purchaser and in Section 4(e) with respect to holders and
prospective purchasers of the Securities. Nothing in this Agreement is intended
or shall be construed to give any person, other than the persons referred to in
this Section 10, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
11. Expenses. The Company and each of the Guarantor Subsidiaries
agrees with the Initial Purchaser to pay (a) the costs incident to the
authorization, issuance, sale, preparation and delivery of the Securities and
any taxes payable in that connection; (b) the costs incident to the preparation,
printing and distribution of the Preliminary Offering Memorandum, the Offering
Memorandum and any amendments or supplements thereto; (c) the costs of
reproducing and distributing each of the Transaction Documents; (d) the costs
incident to the preparation, printing and delivery of the certificates
evidencing the Securities, including stamp duties and transfer taxes, if any,
payable upon issuance of the Securities; (e) the fees and expenses of the
Company's counsel and independent accountants; (f) the fees and expenses of
qualifying the Securities under the securities laws of the several jurisdictions
as provided in Section 4(g) and of preparing, printing and distributing Blue Sky
Memoranda (including related fees and expenses of counsel for the Initial
Purchaser); (g) any fees charged by rating agencies for rating the Securities;
(h) the fees and expenses of the Trustee and any paying agent (including related
fees and expenses of any counsel to such parties); (i) all expenses and
application fees incurred in connection with the application for the inclusion
of the Securities on the PORTAL Market and the approval of the Securities for
book-entry transfer by DTC; and (j) all other costs and expenses incident to the
performance of the obligations of the Company under this Agreement which are not
otherwise specifically provided for in this Section 11; provided, however, that
except as provided in this Section 11 and Section 7, the Initial Purchaser shall
pay its own costs and expenses.
<PAGE> 28
28
12. Survival. The respective indemnities, rights of contribution,
representations, warranties and agreements of the Company, Atlas, the Atlas
Subsidiaries, the Guarantor Subsidiaries and the Initial Purchaser contained in
this Agreement or made by or on behalf of the Company, Atlas, the Atlas
Subsidiaries, the Guarantor Subsidiaries or the Initial Purchaser pursuant to
this Agreement or any certificate delivered pursuant hereto shall survive the
delivery of and payment for the Securities and shall remain in full force and
effect, regardless of any termination or cancelation of this Agreement or any
investigation made by or on behalf of any of them or any of their respective
affiliates, officers, directors, employees, representatives, agents or
controlling persons.
13. Notices, etc.. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Initial Purchaser, shall be delivered or sent by mail
or telecopy transmission to Chase Securities Inc., 270 Park Avenue, New
York, New York 10017, Attention: Lawrence Landry (telecopier no.: (212)
270-0994); or
(b) if to the Company, shall be delivered or sent by mail or
telecopy transmission to the address of the Company set forth in the
Offering Memorandum, Attention: Ronald D. Pedersen (telecopier no.: (972)
550-1986);
provided that any notice to the Initial Purchaser pursuant to
Section 8(c) shall also be delivered or sent by mail to the Initial Purchaser at
its address set forth on the signature page hereof. Any such statements,
requests, notices or agreements shall take effect at the time of receipt
thereof.
14. Definition of Terms. For purposes of this Agreement, (a) the
term "business day" means any day on which the New York Stock Exchange, Inc. is
open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act and (c) except where otherwise expressly provided,
the term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.
15. Initial Purchaser's Information. The parties hereto acknowledge
and agree that, for all purposes of this Agreement, the Initial Purchaser's
Information consists solely of the following information in the Preliminary
Offering Memorandum and the Offering Memorandum: (i) the last paragraph on the
front cover page concerning the terms of the offering by the Initial Purchaser;
(ii) the legend on the inside front cover page concerning over-allotment and
trading activities by the Initial Purchaser; and (iii) the statements concerning
the Initial Purchaser contained in the third, fourth, fifth, seventh, ninth,
twelfth and thirteenth paragraphs under the heading "Plan of Distribution".
16. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 29
29
17. Counterparts. This Agreement may be executed in one or more
counterparts (which may include counterparts delivered by telecopier) and, if
executed in more than one counterpart, the executed counterparts shall each be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
18. Amendments. No amendment or waiver of any provision of this
Agreement, nor any consent or approval to any departure therefrom, shall in any
event be effective unless the same shall be in writing and signed by the parties
hereto.
19. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
<PAGE> 30
30
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement between the Company, the Guarantor
Subsidiaries and the Initial Purchaser in accordance with its terms.
Very truly yours,
RICHMONT MARKETING SPECIALISTS INC.,
By: /s/ Timothy M. Byrd
--------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
MARKETING SPECIALISTS SALES COMPANY,
By: /s/ Timothy M. Byrd
--------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
MSSC CAROLINA, INC.,
By: /s/ Timothy M. Byrd
--------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
FERRO & ASSOCIATES, INC.,
By: /s/ Timothy M. Byrd
--------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
BROMAR, INC.,
By: /s/ Timothy M. Byrd
--------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
<PAGE> 31
31
GENE SANFORD & ASSOCIATES, INC.,
By: /s/ Timothy M. Byrd
--------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
SERVICE ASSETS CORP.,
By: /s/ Timothy M. Byrd
--------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
BROKERAGE SERVICES, INC.,
By: /s/ Timothy M. Byrd
--------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
BATESTAS & CO.,
By: /s/ Timothy M. Byrd
--------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
TOWER MARKETING, INC.,
By: /s/ Timothy M. Byrd
--------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
<PAGE> 32
32
T-BAR BROKERAGE,
By: /s/ Timothy M. Byrd
--------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
T'NT NATIONAL CONVENIENCE STORE BROKERS,
INC.,
By: /s/ Timothy M. Byrd
--------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
<PAGE> 33
33
Accepted:
CHASE SECURITIES INC.,
By: /s/ Joseph C. Purcell
---------------------------
Authorized Signatory
Address for notices pursuant to Section 8(c):
1 Chase Plaza, 25th floor
New York, New York 10081
Attention: Legal Department
<PAGE> 1
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
By and Among
ATLAS MARKETING COMPANY, INC.,
QUINCY CUMMINGS and GYNN ELLER
and
MSSC CAROLINA, INC.,
and
RICHMONT MARKETING SPECIALISTS INC.
for the limited purposes set forth herein
Dated as of November 6, 1997
<PAGE> 2
TABLE OF CONTENTS
INTRODUCTORY STATEMENTS........................................................1
ARTICLE I - THE STOCK PURCHASE.................................................2
SECTION 1.01 Purchase and Sale of Shares...................................2
SECTION 1.02 Date and Time of Closing......................................2
SECTION 1.03 Delivery of Certificates......................................2
SECTION 1.04 Allocation and Payment of Total Purchase Price................2
SECTION 1.05 Agreement of Marketing Specialists Regarding Immediately
Available Funds...............................................2
SECTION 1.06 Deliveries by Atlas and the Executive Shareholders............3
SECTION 1.07 Deliveries by the Executive Shareholders......................3
SECTION 1.08 Deliveries by MSSC Carolina and Marketing Specialists.........3
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE EXECUTIVE
SHAREHOLDERS......................................................4
SECTION 2.01 Ownership of the Shares.......................................4
SECTION 2.02 Enforceability; No Conflicts; Required Filings and Consents...4
SECTION 2.03 Accredited Investor...........................................5
SECTION 2.04 Absence of Market.............................................5
SECTION 2.05 Investment Purposes...........................................5
SECTION 2.06 Restricted Securities.........................................5
SECTION 2.07 Accuracy of Disclosure........................................6
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF ATLAS AND THE
EXECUTIVE SHAREHOLDERS ..........................................6
SECTION 3.01 Organization and Qualification of Atlas.......................6
SECTION 3.02 Power and Capacity; Charter Documents of Atlas................6
SECTION 3.03 Subsidiaries..................................................7
SECTION 3.04 Capitalization and Ownership of Atlas.........................8
SECTION 3.05 No Conflicts..................................................8
SECTION 3.06 Consents and Approvals........................................8
SECTION 3.07 Financial and Operating Statements............................9
SECTION 3.08 No Undisclosed or Contingent Liabilities.....................10
SECTION 3.09 Assets of the Company........................................10
SECTION 3.10 Absence of Certain Changes...................................11
SECTION 3.11 Real Property................................................13
SECTION 3.12 Company Equipment............................................14
SECTION 3.13 Contracts and Commitments....................................15
SECTION 3.14 Intellectual Property........................................16
SECTION 3.15 Inventory....................................................17
SECTION 3.16 Accounts Receivable..........................................17
SECTION 3.17 Pension and Other Employee Plans and Agreements..............18
SECTION 3.18 Litigation...................................................19
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<PAGE> 3
SECTION 3.19 Insurance....................................................20
SECTION 3.20 Collective Bargaining Agreements; Compensation;
Employee Agreements..........................................20
SECTION 3.21 Labor Matters................................................20
SECTION 3.22 Compliance with Law..........................................21
SECTION 3.23 Permits......................................................21
SECTION 3.24 Environmental Matters........................................22
SECTION 3.25 Tax Matters..................................................23
SECTION 3.26 Service Liability............................................25
SECTION 3.27 Title to Assets..............................................25
SECTION 3.28 Bank Accounts and MDFs.......................................25
SECTION 3.29 Redemptions of Capital Stock by Atlas........................25
SECTION 3.30 ESOP Matters.................................................25
SECTION 3.31 Accuracy of Disclosure.......................................25
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF MSSC CAROLINA AND
MARKETING SPECIALISTS............................................26
SECTION 4.01 Organization and Qualification - MSSC Carolina...............26
SECTION 4.02 Organization and Qualification - Marketing Specialists.......26
SECTION 4.03 Power and Capacity; Charter Documents of MSSC Carolina.......26
SECTION 4.04 Significant Subsidiaries.....................................27
SECTION 4.05 Power and Capacity; Charter Documents of Marketing
Specialists..................................................27
SECTION 4.06 No Conflicts.................................................27
SECTION 4.07 Consents and Approvals.......................................28
SECTION 4.08 Accredited Investor..........................................28
SECTION 4.09 Absence of Market............................................28
SECTION 4.10 Investment Purposes..........................................29
SECTION 4.11 Restricted Securities........................................29
SECTION 4.12 Financial and Operating Statements...........................29
SECTION 4.13 Marketing Specialists Mid-Year Financial Statements..........29
ARTICLE V - OTHER OBLIGATIONS OF THE PARTIES..................................29
SECTION 5.01 Conduct of Company Business..................................29
SECTION 5.02 Access to Books and Records..................................32
SECTION 5.03 Consents.....................................................32
SECTION 5.04 Other Transactions...........................................32
SECTION 5.05 Supplemental Disclosure......................................32
SECTION 5.06 Governmental Filings.........................................33
SECTION 5.07 Covenant to Satisfy Conditions...............................33
SECTION 5.08 Confidentiality..............................................33
SECTION 5.09 Employees....................................................33
SECTION 5.10 Damage or Destruction........................................34
SECTION 5.11 Resignation of Officers and Directors; Releases..............34
SECTION 5.12 Transactions Regarding the ESOP..............................34
SECTION 5.13 Meatmaster Transactions......................................34
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<PAGE> 4
SECTION 5.14 Employment Agreements/Consulting Agreements..................35
SECTION 5.15 Clearance of Encumbrances on Company Assets..................35
SECTION 5.16 Provision of Monthly Financial Statements;
Accounts Receivable..........................................35
SECTION 5.17 Provision of Annual Audited Financial Statements of
Marketing Specialists........................................35
SECTION 5.18 Settlement of Pitts Litigation...............................35
SECTION 5.19 Payment of Certain Expenses..................................36
SECTION 5.20 ESOP Elections...............................................36
SECTION 5.21 Nine-Month Financial Statements..............................36
SECTION 5.22 Provision of Marketing Specialists' Nine-Month Financial
Statements...................................................36
SECTION 5.23 Notice of Default by Senior Debt Trustee.....................36
SECTION 5.24 Financial Reporting .........................................36
ARTICLE VI - CONDITIONS PRECEDENT.............................................37
SECTION 6.01 Conditions Precedent to Obligations of MSSC Carolina
and Marketing Specialists....................................37
SECTION 6.02 Conditions Precedent to Obligations of the Executive
Shareholders and Atlas.......................................39
ARTICLE VII - INDEMNIFICATION.................................................40
SECTION 7.01 Survival of Representations and Warranties...................40
SECTION 7.02 Indemnification by the Executive Shareholders................41
SECTION 7.03 Indemnification by Marketing Specialists.....................42
SECTION 7.04 Limitations Regarding Indemnification Obligations of the
Executive Shareholders.......................................42
SECTION 7.05 Limitations Regarding Indemnification Obligations of
Marketing Specialists........................................43
SECTION 7.06 Conditions of Indemnification................................44
SECTION 7.07 Payment/Setoff of Indemnification Claims Against
the Executive Shareholders...................................44
SECTION 7.08 Claim Disputes...............................................45
SECTION 7.09 Remedies Cumulative..........................................45
ARTICLE VIII - RESTRICTIONS REGARDING UNFAIR COMPETITION......................46
SECTION 8.01 Restriction of Unfair Competition............................46
SECTION 8.02 Certain Definitions..........................................46
SECTION 8.03 General Provisions Regarding the Restrictive Covenants.......47
SECTION 8.04 Damages......................................................48
ARTICLE IX - TERMINATION OF AGREEMENT.........................................49
SECTION 9.01 Termination of Agreement.....................................49
SECTION 9.02 Procedure Upon Termination...................................49
ARTICLE X - MISCELLANEOUS.....................................................50
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<PAGE> 5
SECTION 10.01 Commissions.................................................50
SECTION 10.02 Definition of Knowledge.....................................50
SECTION 10.03 Definition of Material Adverse Effect and
Material Adverse Change.....................................50
SECTION 10.04 Expenses, Taxes, Etc........................................51
SECTION 10.05 Successors and Assigns......................................51
SECTION 10.06 No Third-Party Benefit......................................51
SECTION 10.07 Entire Agreement; Amendment.................................51
SECTION 10.08 Reformation and Severability................................51
SECTION 10.09 Notices.....................................................51
SECTION 10.10 GOVERNING LAW...............................................52
SECTION 10.11 Counterparts................................................53
EXHIBIT "A" - Share Ownership and Total Purchase Price Allocation
EXHIBIT "B" - Form of Promissory Notes
EXHIBIT "C" - Form of Employment Agreements
EXHIBIT "D-1" - Form of Quincy Cummings' Consulting Agreement
EXHIBIT "D-2" - Form of Gynn Eller's Consulting Agreement
EXHIBIT "E" - Form of Smith and Feerick, P.A. Opinion
EXHIBIT "F" - Form of Tuggle Duggins & Meschan, P.A. Opinion
EXHIBIT "G" - Form of Promissory Note Adjustment Agreement
EXHIBIT "H" - Form of Andrews & Kurth L.L.P. Opinion
EXHIBIT "I" - Restrictive Covenants and Events of Default
APPENDIX I - Year End Financial Statements
APPENDIX II - Mid-Year Financial Statements
APPENDIX III - 1997 Financial Statements
APPENDIX IV - Marketing Specialists Financial Statements
APPENDIX V - Marketing Specialists Mid-Year Financial Statements
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<PAGE> 6
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of November 6,
1997, is by and among Atlas Marketing Company, Inc., a North Carolina
corporation ("Atlas"), Quincy Cummings, an individual residing in Rowan County,
North Carolina ("Cummings"), Gynn Eller, an individual residing in Mecklenburg
County, North Carolina ("Eller" and, together with Cummings, the "Executive
Shareholders"), Richmont Marketing Specialists Inc., a Delaware corporation
("Marketing Specialists"), and MSSC Carolina, Inc., a Delaware corporation and a
wholly owned subsidiary of Marketing Specialists ("MSSC Carolina").
INTRODUCTORY STATEMENTS
MSSC Carolina and Marketing Specialists desire to have MSSC Carolina
purchase all of the outstanding shares of Atlas' capital stock pursuant to the
terms of this Agreement and the terms of that certain Stock Purchase Agreement
dated as of even date herewith among Marketing Specialists, MSSC Carolina, Atlas
Marketing Company, Inc. Employee Stock Ownership Plan (the "ESOP") and all
individual shareholders of Atlas other than the Executive Shareholders (the
"ESOP/Management Stock Purchase Agreement").
Cummings owns 549,182 shares of the Common Stock, par value $.01 per
share, of Atlas (the "Common Stock"), and Eller owns 717,870 shares of the
Common Stock. (The shares of Common Stock owned by Cummings and Eller shall be
termed collectively the "Shares".)
The Executive Shareholders desire to sell the Shares to MSSC Carolina
pursuant to the terms of this Agreement. As an inducement to MSSC Carolina to
purchase the Shares, each of the Executive Shareholders are agreeing to certain
non-compete provisions hereunder.
Atlas desires to facilitate (i) the purchase of the Shares under the terms
of this Agreement and (ii) the purchase of the ESOP's and the remaining
shareholders' shares of Common Stock under the terms of the ESOP/Management
Stock Purchase Agreement.
Accordingly, for and in consideration of the foregoing and the mutual
agreements, representations, warranties, covenants and conditions herein set
forth, and other good, valid and binding consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
ARTICLE I
THE STOCK PURCHASE
<PAGE> 7
SECTION 1.01 Purchase and Sale of Shares. On and subject to the terms and
conditions of this Agreement, each of the Executive Shareholders covenants and
agrees that he will sell, assign and transfer to MSSC Carolina, and MSSC
Carolina covenants and agrees that it will purchase from such Executive
Shareholder, that number of Shares set forth opposite such Executive
Shareholder's name on Exhibit "A" attached hereto. The amount of consideration
to be paid to each Executive Shareholder shall be the amount set forth opposite
such Executive Shareholder's name on Exhibit "A" (such amounts, in the
aggregate, being termed the "Total Purchase Price"). The Total Purchase Price
shall be paid by MSSC Carolina to the Executive Shareholders in the manner set
forth in Section 1.4 hereof.
SECTION 1.02 Date and Time of Closing. The sale and purchase of the Shares
provided for by this Article I shall be consummated, provided that each of the
conditions set forth in Article VI hereto shall have been satisfied or waived,
at the offices of Andrews & Kurth L.L.P., 425 Lexington Avenue, New York, New
York 10017, at 10 a.m. on December 12, 1997, or such other time and place as may
be mutually agreed upon by the parties to this Agreement (the "Closing"). The
date on which the Closing actually occurs is referred to herein as the "Closing
Date".
SECTION 1.03 Delivery of Certificates. At the Closing, the Executive
Shareholders shall deliver to MSSC Carolina certificates representing the Shares
duly endorsed in blank for transfer (or accompanied by duly executed stock
powers) and will cause the transfer of such Shares to be duly and properly
recorded in the name of MSSC Carolina.
SECTION 1.04 Allocation and Payment of Total Purchase Price. The Total
Purchase Price shall be $19,247,308, and shall be allocated among the Executive
Shareholders in the amounts set forth opposite each Executive Shareholder's name
on Exhibit "A", which amounts shall be paid to the respective Executive
Shareholders (i) by wire transfer in immediately available funds with respect to
the wire transfer amount set forth beside such Executive Shareholder's name on
Exhibit "A" and (ii) by delivery of a promissory note from Marketing Specialists
in the form of Exhibit "B" in the principal amount set forth beside such
Executive Shareholder's name on Exhibit "A" (the promissory notes to be
delivered to the Executive Shareholders being termed, jointly, the "Promissory
Notes").
SECTION 1.05 Agreement of Marketing Specialists Regarding Immediately
Available Funds. Marketing Specialists hereby agrees to cause MSSC Carolina at
the Closing to have immediately available funds in an amount sufficient to allow
MSSC Carolina to meet its payment obligations regarding the wire transfers
contemplated under Section 1.04 hereof.
SECTION 1.06 Deliveries by Atlas and the Executive Shareholders. At the
Closing, Atlas and the Executive Shareholders shall deliver, or cause to be
delivered, to MSSC Carolina and Marketing Specialists (unless delivered
previously) the following:
(a) the Officers' Certificate referred to in Section 6.01(e) hereof;
(b) the Certificate of the Secretary of Atlas referred to in Section
6.01(f) hereof;
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<PAGE> 8
(c) the opinions of counsel referred to in Section 6.01(g) hereof;
(d) executed counterparts of any consents required to be obtained by Atlas
and the Executive Shareholders pursuant to Section 5.03 hereof; and
(e) all other previously undelivered documents, instruments and writings
required to be delivered by Atlas to MSSC Carolina or Marketing Specialists at
or prior to the Closing pursuant to this Agreement or otherwise required in
connection herewith.
SECTION 1.07 Deliveries by the Executive Shareholders. At the Closing, the
Executive Shareholders shall deliver to MSSC Carolina and Marketing Specialists
(unless delivered previously) the following:
(a) the certificates of the Executive Shareholders referred to in Section
6.01(e) hereof;
(b) the certificate regarding non-foreign status referred to in Section
6.01(k) hereof;
(c) certificates for the Shares duly endorsed in blank for transfer (or
accompanied by duly executed stock powers); and
(d) all other previously undelivered documents, instruments and writings
required to be delivered by the Executive Shareholders to MSSC Carolina or
Marketing Specialists at or prior to the Closing pursuant to this Agreement or
otherwise required in connection herewith.
SECTION 1.08 Deliveries by MSSC Carolina and Marketing Specialists. At the
Closing, MSSC Carolina and Marketing Specialists shall deliver, or cause to be
delivered, to Atlas (unless delivered previously) the following:
(a) the Officers' Certificates referred to in Section 6.02(e) hereof;
(b) the Secretary's Certificates referred to in Section 6.02(f) hereof,
(c) the opinion of counsel referred to in Section 6.02(g) hereof;
(d) all other previously undelivered documents, instruments and writings
required to be delivered by MSSC Carolina or Marketing Specialists to Atlas at
or prior to the Closing pursuant to this Agreement or otherwise required in
connection herewith.
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<PAGE> 9
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE EXECUTIVE SHAREHOLDERS
Each Executive Shareholder severally represents and warrants to MSSC
Carolina and Marketing Specialists as follows, except as otherwise set forth in
the relevant section of the Disclosure Schedule:
SECTION 2.01 Ownership of the Shares. Such Executive Shareholder has valid
and marketable title to and is the sole owner of the Shares set forth beside
such Executive Shareholder's name on Exhibit "A" hereto, free and clear of any
and all restrictions on transfer, claims, taxes, security interests, liens,
pledges, hypothecations, options, warrants, rights, contracts, calls,
commitments, equities, demands or other encumbrances of any kind whatsoever
(collectively, "Stock Encumbrances"). Such Executive Shareholder is not subject
to any option, warrant, right, contract, call, put, or other agreement or
commitment providing for the disposition or acquisition of any share in the
capital of Atlas (other than this Agreement). Upon transfer of such Executive
Shareholder's Shares hereunder, MSSC Carolina will acquire valid and marketable
title to such Shares, free and clear of Stock Encumbrances thereon imposed by,
through or under such Executive Shareholder.
SECTION 2.02 Enforceability; No Conflicts; Required Filings and Consents.
(a) Such Executive Shareholder has all requisite power and authority and
legal capacity to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. This Agreement has been duly executed and
delivered by such Executive Shareholder. This Agreement constitutes a valid and
binding obligation of such Executive Shareholder, enforceable against such
Executive Shareholder in accordance with its terms, except to the extent that
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally or by general equitable principles.
(b) The execution and delivery by such Executive Shareholder of this
Agreement do not and will not (i) result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default (or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of any material benefit) under any of the terms, conditions or
provisions of any contract or other agreement to which such Executive
Shareholder is a party or by which such Executive Shareholder or any of his
properties or assets may be bound, or (ii) conflict with or violate any permit,
license, judgment, order, statute, ordinance, rule or regulation applicable to
such Executive Shareholder or any of his properties or assets. None of the
Shares being sold hereunder by such Executive Shareholder are subject to the
community property rights of any person other than such Executive Shareholder.
(c) No consent or approval of any court, administrative agency or
commission or other federal, state, local, foreign or other governmental
authority or instrumentality ("Governmental Entity") is required by or with
respect to such Executive Shareholder in connection with the
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<PAGE> 10
execution and delivery of this Agreement or the consummation of the transactions
contemplated by this Agreement.
SECTION 2.03 Accredited Investor. Such Executive Shareholder is an
"Accredited Investor" as such term is defined in Rule 501(a) promulgated under
the Securities Act of 1933 as amended (the "Securities Act"). Such Executive
Shareholder represents and warrants that he has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of his investment in the Promissory Note being issued to him pursuant to
Section 1.04 hereof. He has had the opportunity, personally or through
representatives, to obtain from Marketing Specialists all information, to the
extent possessed by Marketing Specialists or reasonably obtainable by Marketing
Specialists, necessary to evaluate the merits and risks of an investment in such
Promissory Note, and has concluded, based on such information and other
information previously known to him, to invest in such Promissory Note pursuant
to the terms of this Agreement.
SECTION 2.04 Absence of Market. Such Executive Shareholder acknowledges
that his Promissory Note lacks liquidity as compared with other investments
since there is not, and there is not expected to be, any market therefor, and
that the sale or transfer of such Promissory Note must comply with the
provisions of the Promissory Note and applicable federal and state securities
laws. Such Executive Shareholder acknowledges that he must bear the economic
risk of his investment in such Promissory Note for an indefinite period of time
since none of the Promissory Notes has been registered under the Securities Act
and therefore cannot be sold unless such Promissory Notes are subsequently
registered or an exemption from registration is available.
SECTION 2.05 Investment Purposes. Such Executive Shareholder hereby
represents and warrants that he is acquiring his Promissory Note for investment
purposes only, for his own account, and not as nominee or agent for any other
person or entity, and not with a view to, or for resale in connection with, any
distribution thereof within the meaning of the Securities Act. He has no
agreement or other arrangement with any person or entity to sell, transfer or
pledge any part of such Promissory Note and has no plans to enter into any such
agreement or arrangement.
SECTION 2.06 Restricted Securities. Such Executive Shareholder
acknowledges that Marketing Specialists is issuing the Promissory Notes to the
Executive Shareholders without registration under the Securities Act. He further
acknowledges that representatives of Marketing Specialists have advised him that
no state or federal agency or instrumentality has made any finding or
determination as to the investment in such Promissory Notes, nor has any state
or federal agency or instrumentality made any recommendation with respect to any
purchase or investment in such Promissory Notes.
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<PAGE> 11
SECTION 2.07 Accuracy of Disclosure. There is no information contained in
this Agreement (whether in this Article II, any other portion of this Agreement,
the Appendices, the Exhibits or any other documents or certificates delivered
pursuant to this Agreement) pertaining to such Executive Shareholder that, to
the best knowledge of such Executive Shareholder, contains an untrue statement
of material fact or omits to state any material fact required to be stated in
order to make the statements made herein and therein not materially misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF ATLAS AND THE EXECUTIVE SHAREHOLDERS
Atlas and the Executive Shareholders hereby jointly and severally
represent and warrant to MSSC Carolina and Marketing Specialists as follows,
except as otherwise set forth in the relevant section of the Disclosure
Schedule:
SECTION 3.01 Organization and Qualification of Atlas. Atlas is (a) a
corporation duly organized, validly existing and in good standing under the laws
of the State of North Carolina and (b) duly qualified to do business as a
foreign corporation and in good standing in each jurisdiction in which the
character of the properties and assets now owned or leased by it or the nature
of the business transacted by it requires it to be so qualified, except where
the failure to be so qualified, individually or in the aggregate, would not have
a Material Adverse Effect (as defined herein) upon the Company (as defined
herein) or the consummation of the transactions contemplated hereby. Each
jurisdiction in which Atlas is qualified to do business is listed on Section
3.01 of the Disclosure Schedule. No jurisdiction in which Atlas is not qualified
or licensed has claimed, in writing or otherwise, that Atlas is required to
qualify or be licensed therein.
SECTION 3.02 Power and Capacity; Charter Documents of Atlas.
(a) Atlas has all requisite power and authority (corporate and otherwise)
to enter into, execute and deliver this Agreement and perform its obligations
hereunder. Atlas has the corporate power and authority to carry on its business
as now being conducted and to own and lease its properties. This Agreement has
been duly executed and delivered by Atlas and is a valid and binding obligation
of Atlas, enforceable in accordance with its terms.
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby by Atlas will not result in
a violation or breach of or constitute a default under any term or provision of
the Articles of Incorporation or Bylaws of Atlas. Atlas has delivered to MSSC
Carolina true and complete copies of the Articles of Incorporation and the
Bylaws of Atlas, as in effect on the date hereof, and the minute books and stock
transfer books of Atlas and the Subsidiaries (as defined herein) for the last
five years. Such minute books and stock transfer books are accurate and complete
and contain the minutes of all meetings (and written consents in lieu thereof)
of the shareholders and the board of directors (and all committees thereof) of
Atlas and the Subsidiaries held during the five years immediately preceding
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<PAGE> 12
the date of this Agreement and record all issuances and transfers of record of
the capital stock of Atlas and the Subsidiaries during such five years. All
actions taken at such meetings were appropriately passed or ratified.
SECTION 3.03 Subsidiaries.
(a) Section 3.03(a) of the Disclosure Schedule sets forth for each
subsidiary, direct or indirect, of Atlas (each a "Subsidiary") its capital
structure, its place of organization and the other jurisdictions in which it is
qualified to do business. Each of the Subsidiaries has been duly organized and
is validly existing and in good standing under the laws of its respective state
of incorporation, has all requisite corporate power and authority to own or
lease and operate its properties and conduct its business as now conducted and
is duly qualified or licensed to do business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of the business conducted
by it or the character or location of the properties owned or leased by it makes
such qualification or licensing necessary, except where the failure to be so
qualified or licensed, individually or in the aggregate, would not have a
Material Adverse Effect on the Company or the consummation of the transactions
contemplated hereby. No jurisdiction in which any Subsidiary is not qualified or
licensed has claimed, in writing or otherwise, that such Subsidiary is required
to qualify or be licensed therein.
(b) Atlas owns, free and clear of all Stock Encumbrances, and has the
unrestricted power to dispose of and vote, all of the outstanding capital stock
of each of the Subsidiaries. There are no outstanding or authorized options,
warrants, subscriptions, calls, conversions or other rights, contracts,
agreements, commitments or understandings of any kind obligating any Subsidiary
to issue, sell, purchase, return or redeem any shares of its capital stock or
any other securities convertible into, exchangeable for or evidencing the right
to subscribe for any shares of capital stock of, or other ownership interest in,
any Subsidiary. All of the outstanding shares of the capital stock of each class
of each Subsidiary have been duly authorized and validly issued, are fully paid
and nonassessable and were not issued in violation of any preemptive rights or
any applicable Law (as defined herein).
(c) Except for its interest in any Subsidiary, Atlas does not (i) own,
beneficially or of record, any shares of any other corporation or entity or any
interests in any partnerships or limited liability companies or (ii) participate
in any manner in any joint ventures, corporate alliance agreements or corporate
partnering agreements. Except for Atlas's interest in any Subsidiary, neither
Atlas nor any Subsidiary has an interest in, or is subject to, any agreement,
obligation or commitment to make any equity investment in or loan or advance to,
any other Person (as defined herein).
(d) For purposes of this Agreement, Atlas and the Subsidiaries shall
collectively be termed the "Company"; when such collective term is used in
connection with financial issues, it shall refer to Atlas and the Subsidiaries
as a consolidated whole. For example, when references are made to officers,
directors and employees of the Company, it shall mean all officers, directors
and shareholders of Atlas and the Subsidiaries.
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SECTION 3.04 Capitalization and Ownership of Atlas. Section 3.04 of the
Disclosure Schedule lists, for Atlas, its authorized capitalization, the number
of shares of its capital stock (or other equity interests) issued and
outstanding, and the number of shares of its capital stock (or other equity
interests) owned of record by each shareholder. All of the outstanding shares of
the capital stock of Atlas are validly issued, fully paid and non-assessable.
All such shares are owned free and clear of any Stock Encumbrance imposed by
Atlas. There are no outstanding options, warrants or other rights to acquire any
share of capital stock of Atlas, there are no outstanding securities authorized,
granted or issued by Atlas that are convertible into or exchangeable for shares
of its capital stock and there are no phantom stock rights, stock appreciation
rights or similar rights regarding Atlas or any Subsidiary.
SECTION 3.05 No Conflicts. The execution, delivery and performance of this
Agreement by Atlas and the consummation of the transactions contemplated hereby
will not:
(a) result in the creation or imposition of any security interest, lien,
charge or other encumbrance against the Company Assets (as defined herein), with
or without the giving of notice and/or the passage of time, or
(b) violate, conflict with, affect acceleration of, or result in
termination, cancellation or modification of, or constitute a default under (i)
any contract, agreement or other instrument to which the Company is a party or
by which the Company or its assets is bound or (ii) any note, bond, mortgage,
indenture, deed of trust, license, lease, contract, commitment, understanding,
arrangement, agreement or restriction of any kind or character to which the
Company is a party or by which the Company may be bound or affected, or to which
any of the Company Assets may be subject, or
(c) violate any statute or Law or any judgment, decree, order, writ,
injunction, regulation or rule of any court or any local, state or federal
governmental or regulatory authority, which violation, conflict, acceleration,
requirement, termination, modification or default described in (a), (b), or (c)
above could result in a Material Adverse Effect on the Company or the
transactions contemplated by this Agreement.
SECTION 3.06 Consents and Approvals. The Company is not required to
obtain, transfer or cause to be transferred any consent, approval, license,
permit or authorization of, or make any declaration, filing or registration
with, any third party or any public body or authority in connection with (a) the
execution and delivery by Atlas of this Agreement, or (b) the consummation of
the transactions contemplated hereby or (c) the future conduct by the Company of
the business of the Company (the "Company Business") other than those that may
be required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), or that may be required solely by reason of MSSC
Carolina's or Marketing Specialists' participation in the transactions
contemplated hereby.
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SECTION 3.07 Financial and Operating Statements.
(a) Year End Financial Statements. Attached hereto as Appendix I is a true
and complete copy of audited consolidated financial statements of the Company
for the years ended December 31, 1996 and 1995 (the "Year End Financial
Statements"). The Year End Financial Statements include audited balance sheets
of the Company as of December 31, 1996 and 1995 (such 1996 balance sheet being
termed the "1996 Balance Sheet"), together with related statements of
operations, equity and cash flow of the Company (and notes thereto) for each of
such periods. The Year End Financial Statements are accurate and correct in all
material respects and fairly present the consolidated financial position and the
results of operations of the Company for the period therein identified in
conformity with generally accepted accounting principles ("GAAP") consistently
applied.
(b) Mid-Year Financial Statements. Attached hereto as Appendix II is a
true and complete copy of consolidated financial statements of the Company for
the six months ended June 30, 1997 and 1996, each as reviewed by Ernst & Young
LLP (the "Mid-Year Financial Statements"). The Mid-Year Financial Statements
include a balance sheet of the Company as of June 30, 1997 and 1996, each as
reviewed by Ernst & Young LLP (such 1997 balance sheet being termed the "1997
Mid-Year Balance Sheet"), together with related statements of operations, equity
and cash flow of the Company (and notes thereto) for each of such periods. The
Mid-Year Financial Statements are accurate and correct in all material respects
and fairly present the consolidated financial position and the results of
operations of the Company for the period therein identified in conformity with
GAAP consistently applied (except that the Mid-Year Financial Statements do not
include notes or normal year-end adjustments).
(c) 1997 Financial Statements. Attached hereto as Appendix III is a true
and complete copy of cash basis combined financial statements of the Company for
the eight months ended August 31, 1997 (the "1997 Financial Statements"). The
1997 Financial Statements include an unaudited balance sheet of the Company as
of August 31, 1997 (such balance sheet being termed herein the "1997 Balance
Sheet"). The 1997 Financial Statements are accurate and correct in all material
respects and fairly present the financial position and results of operations of
the Company for the period therein identified.
(d) Accounting Records. The Company (i) keeps books, records and accounts
that, in reasonable detail, accurately and fairly reflect the transactions,
dispositions and assets of the Company and (ii) maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (A)
transactions are executed in accordance with the management's general or
specific authorization, and (B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
accountability for assets and (C) access to such books, records and accounts is
permitted only in accordance with management's general or specific
authorizations or as required by Law (as defined herein in Section 3.22).
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SECTION 3.08 No Undisclosed or Contingent Liabilities. Except for (a)
liabilities or obligations incurred by the Company in the ordinary course of
business and not required by GAAP applied on a consistent basis to be set forth
on the 1997 Mid-Year Balance Sheet (all of which such items are described in
Section 3.08 of the Disclosure Schedule), and (b) liabilities and obligations
incurred by the Company in the ordinary course of business since the date of the
1997 Mid-Year Balance Sheet (none of which could reasonably be expected to cause
a Material Adverse Effect on the Company), there is no basis for the assertion
against the Company of any liability or obligation of any nature whatsoever
(whether absolute, accrued, contingent or otherwise) that may encumber or affect
the Company or the transactions contemplated hereby individually in an amount of
$50,000 or more or collectively in an aggregate amount of $100,000 or more which
is not fully reflected or reserved against on the 1997 Mid-Year Balance Sheet,
and, to the best knowledge of the Company, there is no basis for the assertion
against the Company of any liability or obligation of any nature whatsoever
(whether absolute, accrued, contingent or otherwise) that may encumber or affect
the Company or the transactions contemplated hereby which is not fully reflected
or reserved against on the 1997 Mid-Year Balance Sheet.
SECTION 3.09 Assets of the Company. The assets of the Company
(collectively, the "Company Assets") include the assets referenced below:
(a) Intellectual Property. All patents, trade or service names and marks,
assumed names and copyrights and all applications therefor relating in which the
Company has an interest (collectively, "Intellectual Property"), including
without limitation those listed on Section 3.09(a) of the Disclosure Schedule;
(b) Receivables. All accounts receivable, bills and notes receivable,
commercial paper and acceptances or any other evidences of indebtedness to the
Company, including without limitation those listed on Section 3.09(b) of the
Disclosure Schedule;
(c) Company Equipment. All furniture, fixtures and equipment of the
Company (the "Company Equipment"), including without limitation those items
listed on Section 3.09(c) of the Disclosure Schedule, whether or not such items
are in any way attached or affixed to real property;
(d) Vehicles. All automobiles, trucks, trailers and other vehicles owned
or leased by the Company, including without limitation those listed on Section
3.09(d) of the Disclosure Schedule;
(e) Inventory. All inventory of the Company (the "Inventory"), including,
without limitation, all raw materials, work-in-process, finished products, goods
in transit, office, manufacturing, lab and advertising supplies, containers and
packaging and shipping materials and all inventory in the hands of suppliers for
which the Company is committed as of the date hereof or the Closing Date,
including without limitation those listed on Section 3.09(e) of the Disclosure
Schedule;
(f) Contracts. All leases, contracts, agreements, arrangements,
commitments and understandings (whether written or oral), including without
limitation all deferred compensation
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<PAGE> 16
agreements, agreements with principals, leases, security deposits and options
under leases, acquisition agreements and confidentiality agreements, to which
the Company is a party, including without limitation all such contracts listed
or referred to on Section 3.09(f) of the Disclosure Schedule;
(g) Insurance. All insurance policies covering the Company and its
directors, officers, employees and agents (and all rights and claims thereunder
for damage to, or otherwise relating to, the Company Assets), including without
limitation those listed on Section 3.09(g) of the Disclosure Schedule; and
(h) Permits. All licenses, permits and authorizations issued by any
federal, state, local or foreign governmental authority (the "Permits") relating
to the Company, the Company Assets or the conduct of the Company Business,
including without limitation those listed on Section 3.09(h) of the Disclosure
Schedule.
SECTION 3.10 Absence of Certain Changes. Since June 30, 1997, the Company
has not:
(a) suffered any Material Adverse Effect and there has not been any event
(whether occurring before or after June 30, 1997) that could reasonably be
expected to have a Material Adverse Effect on the Company; or
(b) experienced any material decrease in the book value of the Company
Assets from the amounts reflected on the Mid-Year Balance Sheet, other than
decreases resulting from depreciation in accordance with accounting practices in
effect at all times since January 1, 1996; or
(c) incurred any liabilities or obligations of any nature (whether
absolute, accrued, contingent or otherwise and whether due or to become due),
except (i) liabilities or obligations for rent under the Leases (as defined
herein) and (ii) liabilities or obligations for other items incurred in the
ordinary course of business of the Company and consistent with past practice,
none of which other items exceeds $50,000 (considering liabilities or
obligations arising from one transaction or a series of similar transactions,
and all periodic installments or payments under any lease (other than the
Leases) or other agreement providing for periodic installments or payments, as a
single obligation or liability); or
(d) increased (other than increases resulting from the calculation of
reserves in the ordinary course of business and in a manner consistent with past
practice), or experienced any change in any assumptions underlying or methods of
calculating, any bad debt, contingency or other reserves; or
(e) paid, discharged or satisfied any claims, encumbrances, liabilities or
obligations (whether absolute, accrued, contingent or otherwise and whether due
or to become due) other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of liabilities and
obligations reflected or reserved against in the Mid-Year Balance Sheet or
incurred in the ordinary course of business and consistent with past practice
since the date thereof; or
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<PAGE> 17
(f) permitted, allowed or suffered any of the Company Assets, including,
without limitation, real property, personal property or any leasehold interest,
to be subjected to any mortgage, pledge, lien, encumbrance, restriction or
charge of any kind (except for liens for Taxes (as defined herein) not yet
owing); or
(g) determined as collectible any notes or accounts receivable or any
portion thereof which were previously considered uncollectible, or written off
as uncollectible any notes or accounts receivable or any portion thereof, except
for write-downs in the ordinary course of business, consistent with past
practice, in accordance with GAAP consistently applied; or
(h) canceled any material amount of indebtedness or waived any material
claims or rights; or
(i) sold, transferred or otherwise disposed of any Company Assets except
in the ordinary course of business and consistent with past practice; or
(j) disposed of or permitted to lapse any right to the use of any patent,
trademark, assumed name, service mark, trade name, copyright, license or
application therefor or disposed of or disclosed to any corporation,
association, partnership, organization, business, individual, government or
political subdivision thereof or government agency (each, a "Person") other than
representatives of MSSC Carolina and Marketing Specialists any trade secret,
formula, process or know-how not theretofore a matter of public knowledge; or
(k) granted any increase in the salary, compensation, rate of
compensation, commissions or bonuses payable to or to become payable by the
Company to any officer or director of the Company (including, without
limitation, any increase or change pursuant to any bonus, pension,
profit-sharing, retirement or other plan or commitment); or
(l) granted any increase in the salary, compensation, rate of
compensation, commissions of bonuses payable to or to become payable by the
Company to any employee of the Company (including, without limitation, any
increase or change pursuant to any bonus, pension, profit-sharing, retirement or
other plan or commitment), except in the ordinary course of business and
consistent with past practice; or
(m) paid, loaned or advanced any amount to any officer, director, employee
or shareholder of the Company except for amounts advanced to employees of the
Company in the ordinary course of business consistent with past practice (none
of which advances were loans for personal purposes), or sold, transferred or
leased any Company Assets to, or entered into any agreement (other than this
Agreement) or arrangement with, any officer, director, employee or shareholder
of the Company (except for agreements or arrangements made in the ordinary
course of business and consistent with past practice); or
(n) entered into any collective bargaining or labor agreement, or
experienced any labor dispute or difficulty; or
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<PAGE> 18
(o) made any single capital expenditure or commitment in excess of $10,000
for additions to property, plant, equipment or for any other purpose or made
aggregate capital expenditures or commitments in excess of $25,000 for additions
to property, plant, equipment or for any other purpose or purchased more than
$10,000 in aggregate of computer software (whether such purchase was capitalized
or expensed); or
(p) made any change in any method of accounting or accounting practice or
policy; or
(q) suffered any casualty loss in excess of $10,000 (whether or not
insured against) or suffered aggregate casualty losses in excess of $25,000
(whether or not insured against); or
(r) issued any additional shares of capital stock of Atlas or the
Subsidiaries or any option, warrant, right or other security exercisable for,
convertible into or exchangeable for shares of capital stock of Atlas or the
Subsidiaries; or
(s) paid dividends on or made other distributions or payments in respect
of the capital stock of Atlas or the Subsidiaries; or
(t) paid its suppliers and other vendors in a manner and time not
consistent with past practice; or
(u) taken any other action not either in the ordinary course of business
and consistent with past practice or provided for in this Agreement; or
(v) entered into or agreed to any transaction not in the ordinary course
of business; or
(w) agreed, whether in writing or otherwise, to take any of the actions
set forth in this Section 3.10.
SECTION 3.11 Real Property.
(a) Set forth in Section 3.11 of the Disclosure Schedule is a complete
list of all real property that the Company currently owns or has owned in the
past ten years. The Company has good and marketable title in fee simple to such
currently owned real property and to all plants, buildings and improvements
thereon, free and clear of any mortgages, liens, claims, charges, pledges,
security interests or other encumbrances of any nature whatsoever (collectively,
"Encumbrances").
(b) With respect to any deeds, title insurance policies, surveys,
mortgages, agreements and other documents granting to the Company title to or an
interest in or otherwise affecting any such real property, (i) no breach or
event of default on the part of the Company, (ii) no material breach or event of
default, to the best knowledge of the Company, on the part of any other party
thereto, and (iii) no event that, with the giving of notice or lapse of time or
both, would constitute such breach or event of default on the part of the
Company or, to the best knowledge of the Company, on the part of any other party
thereto, has occurred and is continuing.
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<PAGE> 19
(c) Section 3.11 of the Disclosure Schedule contains a complete and
accurate list of all real property leases to which the Company is a party in any
capacity (including all amendments thereof and modifications thereto) (the
"Leases"), including the address of each property, a summary description of the
property leased and its uses, the name and address of each landlord or tenant,
if applicable, the expiration date of each Lease, whether an option to renew or
an option to purchase has been exercised, and whether the obligations of the
Company thereunder have been guaranteed by any Person. The Company's interests
in and to all Leases listed on Section 3.11 of the Disclosure Schedule are free
and clear of all Encumbrances including without limitation subleases, chattel
mortgages, mechanics' and materialmen's liens, conditional sales contracts,
collateral security arrangements and other interest retention arrangements. The
Company has not received notice of any default by the Company under any of the
Leases, and there are no facts or conditions that would, with notice or lapse of
time or both, constitute a default by the Company under any of the Leases. None
of the landlords under any of the Leases is in default. Any Lease or proposed
Lease for which any Executive Shareholder or affiliate thereof or related party
thereto is landlord are on terms that are no more burdensome to the Company than
terms for third party leases in the same geographic area for similarly-situated
properties.
(d) The buildings and improvements owned or leased by the Company on any
real property owned by the Company and on any Lease, and the operation and
maintenance thereof as operated and maintained, do not (i) contravene any zoning
or building Law or ordinance or other administrative regulation or (ii) violate
any restrictive covenant or any applicable Law. To the best knowledge of the
Company, all of the plants, buildings and structures located on any real
property owned by the Company or on any Lease are in a state of good maintenance
and repair (normal wear and tear excepted) suitable in all respects for the
operation of the Company Business.
(e) There is no pending or threatened condemnation, eminent domain or
similar proceeding with respect to, or that could affect, any real property
owned by the Company or any Lease.
SECTION 3.12 Company Equipment. The Company has good and marketable title
to each piece of the Company Equipment, free and clear of any Encumbrances. To
the best knowledge of the Company, each piece of the Company Equipment is in
good and normal operating condition and repair and adequate for the uses to
which it is being put by the Company. The Company has not received any
notification from any governmental or regulatory authority within the last five
years that the Company is in violation of any health, sanitation, fire, safety,
zoning, building or other Law (other than Environmental Laws, which are
addressed in Section 3.24), ordinance or regulation in respect of the Company
Equipment or operations, which violation has not been appropriately and
completely resolved. The Company has provided MSSC Carolina and Marketing
Specialists with access to, or copies of, all guarantees, service contracts,
maintenance agreements, management agreements, instruction manuals, and any and
all other documents and papers that are in the possession or control of the
Company and that in any manner pertain to each material piece of the Company
Equipment.
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SECTION 3.13 Contracts and Commitments.
(a) The Company is not a party to or bound by any agreements, contracts or
commitments which individually or when aggregated with all related agreements,
contracts or commitments, are material to the business, operations, condition
(financial or otherwise), liabilities, assets, earnings or working capital of
the Company or that provide for the grant of any preferential rights to purchase
or lease any of the Company Assets;
(b) The enforceability of the agreements, contracts and commitments
referred to in this Section 3.13 will not be affected in any respect by the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby;
(c) No purchase contracts or commitments of the Company are in excess of
the normal, ordinary and usual requirements of the Company, or to the best
knowledge of the Company, were entered into at prices materially in excess of
those available in the industry in arm's length transactions on the respective
dates thereof;
(d) The Company is not a party to or bound by any outstanding agreements,
arrangements or contracts with any of its directors, officers, shareholders,
employees, agents, consultants, advisors, salesmen or sales representatives (or
any of the affiliates of any of such Persons) that (A) are not cancelable by it
on notice of not longer than 30 days and without the imposition of any
liability, penalty or premium, (B) require non-cancelable payment by the Company
of over $10,000, or (C) provide for any bonus or other payment based on the sale
of the Company or any portion thereof;
(e) The Company is not a party to or bound by any employment agreement,
consulting agreement or any other agreements that contains any provision for
severance or termination pay liabilities or obligations;
(f) The Company is not a party to or bound by:
(i) any mortgage, indenture, note, installment obligation or other
instrument, agreement or arrangement for or relating to any borrowing of
money by the Company;
(ii) any guaranty, direct or indirect, by the Company of any
obligation for borrowings or otherwise, excluding endorsements made for
collection in the ordinary course of business;
(iii) any obligation to make payments, contingent or otherwise, of
over $10,000 arising out of any prior acquisition of the business, assets
or stock of other persons;
(iv) any collective bargaining agreement with any labor union;
(v) any lease or similar arrangement for the use by the Company of
personal property requiring payments by the Company, on an annual basis,
of over $10,000;
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<PAGE> 21
(vi) any agreement containing noncompetition or other limitations
restricting the conduct of the business of the Company; and
(vii) any partnership, joint venture or similar agreement.
(g) Neither the Company nor any of its officers, directors, shareholders
or affiliates is a party to or bound by any agreement (other than this
Agreement) or arrangement for the sale of any of the assets or capital stock of
Atlas or the Subsidiaries or for the grant of any preferential rights to
purchase any of the assets or capital stock of Atlas or the Subsidiaries; and
(h) The Company is not bound by any agreement to redeem shares of Common
Stock held by any shareholder, which agreement will not be effectively and
properly terminated by the consummation of the transactions contemplated hereby.
(i) With respect to each contract and agreement listed in Section 3.13 of
the Disclosure Schedule, except as set forth therein, (i) each of such contracts
and agreements is valid, binding and in full force and effect and is enforceable
by the Company in accordance with its terms, subject to bankruptcy, insolvency,
reorganization and other Laws and judicial decisions of general applicability
relating to or affecting creditors' rights and to general principles of equity;
(ii) there have been no cancellations or threatened cancellations thereof nor
are there any outstanding disputes thereunder; (iii) neither the Company, nor
any other party is in breach of any material provision thereof; and (iv) there
does not exist any default under, or any event or condition which with the
giving of notice or passage of time or both would become a breach or default
under, the terms of any such contract or agreement on the part of the Company or
on the part of any other party thereto.
(j) The Company has delivered or made available to MSSC Carolina or
Marketing Specialists true and complete copies of each written contract or
agreement listed in Section 3.13 of the Disclosure Schedule and true and
accurate summaries of any oral agreement listed thereon.
SECTION 3.14 Intellectual Property. Section 3.14 of the Disclosure
Schedule contains an accurate and complete list of (a) all patents, trademarks
(registered or unregistered), trade names, assumed names, copyrights, and all
applications therefor, owned or filed by the Company and used in or necessary
for the conduct of the Company Business and, with respect to registered
trademarks, contains a list of all jurisdictions in which such trademarks are
registered and all registration numbers; (b) all licenses, permits and other
agreements relating thereto; and (c) all agreements relating to technology,
know-how or processes used in or necessary for the conduct of the business of
the Company Business which the Company is licensed or authorized to use by
others (including, without limitation, licenses for the use of software of all
types). Such patents, trademarks (registered or unregistered), copyrights,
licenses and permits are (i) valid, subsisting and enforceable, and (ii) duly
recorded in the names of the Persons set forth in Section 3.14 of the Disclosure
Schedule. The Persons set forth in Section 3.14 of the Disclosure Schedule have
the sole and exclusive right, free from any liens, mortgages, security
interests, charges or encumbrances, to use the patents, trademarks (registered
or unregistered), copyrights and applications therefor set forth beside their
names, and the Company has the full right to use the trade names, assumed names,
technology, know-how, inventions, works and processes referred to in such lists
and all trade secrets
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required for or incident to the conduct of the Company Business in the
jurisdictions in which the Company Business is conducted, and the consummation
of the transactions contemplated hereby will not alter or impair any such
rights. No claims have been asserted by any Person against the Company with
respect to the ownership, validity, enforceability, misappropriation or use of
any product or service of the Company Business or such patents, trademarks
(registered or unregistered, or of any confusingly similar or dilative
trademarks), trade names, assumed names, copyrights, applications therefor,
technology, know-how, processes or trade secrets or challenging or questioning
the validity or effectiveness of any such license, permits or agreement and
there is no valid basis for any such claim, and the use or other exploitation of
any such product or service of the Company Business or patents, trademarks
(registered or unregistered), trade names, assumed names, copyrights,
applications therefor, technology, know-how, processes and trade secrets by the
Company does not infringe on or dilute the rights of any Person; and, to the
best knowledge of the Company, no other Person is infringing the rights of the
Company with respect to such patents, trademarks (registered or unregistered),
trade names, assumed names, copyrights, and applications therefor, technology,
know-how, inventions, works, processes or trade secrets.
SECTION 3.15 Inventory. The Company has no Inventory, other than with
respect to office supplies that are stored in amounts necessary for the
reasonably foreseeable use of the Company.
SECTION 3.16 Accounts Receivable. Set forth in Section 3.16 of the
Disclosure Schedule is a true and complete listing of the aging status of each
of the accounts receivable of the Company as of the most recent practicable
date. All accounts receivable of the Company, whether reflected in the 1997
Mid-Year Balance Sheet or accrued since the date thereof, represent revenue
generated in the ordinary course of business and are collectible net of any
reserves shown on the 1997 Mid-Year Balance Sheet or reserves for accounts
receivable accrued since the date thereof (which reserves are adequate and were
calculated in accordance with GAAP). Subject to the reserves established on the
1997 Mid-Year Balance Sheet or accrued since the date thereof, each of the
accounts receivable either has been collected in full or will be collected in
full, without any set-off, in a period of time consistent with the historical
collection results of the Company during 1994 through 1997, but in no event in
excess of 120 days after the day on which each such account receivable became
due and payable. A list of any promissory note held by the Company that has been
accepted by the Company as payment of accounts receivable of the Company is set
forth in Section 3.16 of the Disclosure Schedule.
SECTION 3.17 Pension and Other Employee Plans and Agreements.
(a) Section 3.17 of the Disclosure Schedule sets forth, as of the date of
this Agreement, all of the pension, profit sharing, stock option, stock
purchase, stock bonus, employee stock ownership, incentive, bonus, life, health,
disability or accident plans, deferred compensation plans, and other employee
compensation or benefit plans, agreements, practices, policies, customs,
contracts, arrangements or commitments, including, without limitation, changes
in control or severance agreements, holiday, vacation or other similar plans,
programs or arrangements, employee benefit plans (within the meaning of section
3(3) of ERISA), and labor union agreements under or with respect to which the
Company or any Person ("ERISA Affiliate") who would be treated as being a
"single employer" with the Company under section 414 of the Internal Revenue
Code of
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<PAGE> 23
1986, as amended (the "Code"), has any liability or obligation, whether current,
contingent, secondary or otherwise (collectively, the "Plans" and individually,
a "Plan"), and the Company has furnished to MSSC Carolina and Marketing
Specialists complete copies of all of the foregoing as amended and in effect on
the date hereof, including, where applicable, any trust agreements, insurance
contracts or other funding mediums related to any Plan and Summary Plan
Descriptions. The Company has heretofore delivered to MSSC Carolina and
Marketing Specialists the most recent liability valuation report with respect to
each Plan for which a report or estimate has been prepared, the most recent
assets valuation report provided to the Company with respect to each Plan for
which such report must be filed, and the most recent favorable IRS determination
letter received with respect to each Plan that is intended to be qualified under
section 401(a) of the Code or trust intended to be exempt under section 501(a)
or section 501(c)(9) of the Code. Section 3.17 of the Disclosure Schedule also
sets forth any other plans or arrangements which would be required to be listed
pursuant to the preceding provisions of this section but for the fact that they
were terminated within three years of the date of this Agreement (collectively,
"Terminated Plan").
(b) With respect to each Plan and each Terminated Plan, the Company and
its ERISA Affiliates have complied in all material respects with, and each Plan
and each Terminated Plan conforms in all material respects to and has from its
inception been operated in all material respects with, all applicable laws and
regulations, including but not limited to ERISA and the Code, and each Plan and
each Terminated Plan has been administered in all material respects in
accordance with its terms. Each Plan and each Terminated Plan intended to be
qualified under section 401(a) of the Code or trust intended to be exempt under
section 501(a) or section 501(c)(9) of the Code is, or with respect to a
Terminated Plan was at the time it terminated, and for each prior year for which
any applicable statute of limitations has not expired, was, qualified or exempt,
as the case may be, and each such Plan and Terminated Plan is (or was) a single
plan, as defined in section 414(1) of the Code and the regulations thereunder,
in which the Company is the sole employer. Neither the Company nor any ERISA
Affiliate has ever had an obligation or liability, to or with respect to, a
multiemployer plan, as defined in section 4001(a)(3) of ERISA. Neither the
Company nor any ERISA Affiliate has any commitment and has not taken any action
to adopt or establish any additional Plans or to materially increase the
benefits under any Plan; no event or condition has occurred or exists with
respect to any Plan or Terminated Plan, whether or not terminated prior to the
date of this Agreement and whether or not maintained or contributed to by the
Company or any ERISA Affiliate, which individually or collectively could result
in a material liability to the Company or any ERISA Affiliate; all contributions
required to any Plan and each Terminated Plan and all premiums for insurance
coverage for each fiscal year of each Plan and each Terminated Plan ended before
the date of this Agreement and for any portion of a fiscal year ending on the
Closing Date have been timely paid and payments to be made but not yet due
properly accrued and recorded in the Mid-Year Financial Statements and 1997
Financial Statements through their relevant dates; no Plan or Terminated Plan
has incurred any "accumulated funding deficiency" (as defined in section 302 of
ERISA and section 412 of the Code), whether or not waived; there is no pending
or, to the best knowledge of the Company, threatened or anticipated litigation,
arbitration, proceeding, claim (other than an undisputed claim for payment of
benefits in accordance with the terms thereof or a pending or final qualified
domestic relations order), demand, grievance, or allegation of unfair labor
practice (or any basis therefor) involving any of the Plans or Terminated Plans
or any investigation, proceeding, administrative review or other administrative
agency process which could result in imposition on the
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Company or any ERISA Affiliate or any penalty, assessment or liability in
connection with any of the Plans or Terminated Plans, individually or
collectively; no Plan or Terminated Plan has engaged or is about to engage in a
prohibited transaction as defined in section 406 of ERISA or section 4975 of the
Code; and no "reportable event," as defined in section 4043 of ERISA, has
occurred or, to the best knowledge of the Company, is about to incur that could
result in a liability to the Company or any ERISA Affiliate.
(c) No Plan provides (or has any commitment to provide) health benefits
with respect to any current or former employees or independent contractors (or
beneficiary thereof) of the Company or any ERISA Affiliate beyond their
retirement or other termination of service (other than coverage mandated by
COBRA). Each Plan can be unilaterally terminated at any time by the Company
without material liability other than incurred but not reported benefit claims
and any obligation under COBRA to provide continuation coverage. The parties
acknowledge that the Atlas Marketing Company, Inc. Employees 401(k) Plan and
Trust cannot be terminated in connection with this transaction.
SECTION 3.18 Litigation. There are no open and unresolved claims, actions,
suits, proceedings, investigations or inquiries that have been made or served
against the Company or, to the best knowledge of the Company, that are pending
against (without having been so served), threatened by or against, or otherwise
affecting or that would adversely affect, the Company or the transactions
contemplated hereby at law or in equity or before or by any federal, state,
local, foreign or other governmental department, commission, board, agency, or
authority; and no other such claim, action, suit, proceeding, inquiry or
investigation could be brought against the Company for which valid defenses are
not available. No claim, action, suit, proceeding, inquiry or investigation set
forth in Section 3.18 of the Disclosure Schedule would, if adversely decided,
have a Material Adverse Effect on the Company or the transactions contemplated
hereby (except as otherwise disclosed in the Disclosure Schedule). The Company
is not a party to or a recipient of service of process regarding (and has not
otherwise been named and noticed in) any judgment, order or decree entered in
any lawsuit or proceeding which has had or may have a Material Adverse Effect on
the Company or on its ability to acquire any property or conduct its business in
any way.
SECTION 3.19 Insurance. (a) All policies of fire, liability, product
liability, workmen's compensation, health and other forms of insurance relating
to the Company Business are in full force and effect, (b) all billed premiums
with respect thereto covering all periods up to and including the Closing Date
have been paid or will be paid prior to the Closing Date, and (c) no notice of
cancellation or termination has been received with respect to any such policy.
Such policies are sufficient for compliance with all requirements of Law and of
all agreements with respect to the operation of the Company Business, are valid,
outstanding and enforceable policies (subject to bankruptcy, insolvency,
reorganization and other Laws and judicial decisions of general applicability
relating to or affecting creditors' rights and to general principles of equity).
The coverage provided by such policies, with respect to any insured act or event
occurring on or prior to the Closing Date, will not in any way be affected by or
terminate or lapse by reason of the transactions contemplated hereby.
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SECTION 3.20 Collective Bargaining Agreements; Compensation; Employee
Agreements. The Company does not have in effect any collective bargaining
agreement. Section 3.20 of the Disclosure Schedule sets forth a complete and
accurate list showing the names, the rate of compensation (and the portions
thereof attributable to salary and bonuses, respectively) and location of all
officers of the Company and of all employees of or consultants to the Company
that received annual base salary and cash bonus totaling in excess of $100,000
for the fiscal year ended December 31, 1996. There are no covenants, agreements
or restrictions to which the Company is a party, including but not limited to
employee noncompete agreements, prohibiting, limiting or in any way restricting
any employee listed on Section 3.20 of the Disclosure Schedule from engaging in
any type of business activity in any location. The Company is not currently
engaged in any bargaining with any labor union. To the best knowledge of the
Company, no petition is on file with the National Labor Relations Board
submitted by a labor union seeking to represent any of the employees of the
Company and the Company is not aware of any attempts to organize the employees
of the Company by any labor union.
SECTION 3.21 Labor Matters. (a) The Company has complied and is presently
complying with all applicable Laws respecting employment and employment
practices, terms and conditions of employment, and wages and hours, and is not
engaged in any unfair labor practice or unlawful employment practice which has
had, or could reasonably be expected to produce, a Material Adverse Effect on
the Company; (b) (i) there is no open and unresolved unfair labor practice
charge or complaint against the Company for which the Company has received
service of process or other appropriate notice or, to the best knowledge of the
Company, pending (without having been so served or noticed) being considered or
threatened before the National Labor Relations Board, (ii) there is no open and
unresolved grievance or any open and unresolved arbitration proceeding arising
out of or under collective bargaining agreements for which the Company has
received service of process or other appropriate notice and, to the best
knowledge of the Company, no such grievance or arbitration proceeding is pending
(without having been so served or noticed) or is being considered or threatened,
and (iii) there is no basis for any such charge, complaint or grievance; (c)
there is no labor strike, slowdown or work stoppage for which the Company has
received service of process or other appropriate notice or, to the best
knowledge of the Company, pending (without having been so served or noticed) or
threatened against the Company; (d) the Company has not experienced any
significant work stoppages or been a party within the past two years to any
proceedings before the National Labor Relations Board, and is not a party to any
arbitration proceeding arising out of or under collective bargaining agreements;
and (e) there is no open and unresolved charge or complaint for which the
Company has received service of process or other appropriate notice or, to the
best knowledge of the Company, which is being considered or threatened against
the Company before the Equal Employment Opportunity Commission or any state,
local, federal or foreign agency responsible for the prevention of unlawful
employment practices. The Company has not received notice of the intent of any
federal, state, local or foreign agency responsible for the enforcement of labor
or employment laws to conduct an investigation of or relating to the Company,
and, to the best knowledge of the Company, no such investigation is in progress.
The employees of the Company are not represented by any labor union and there
are no any collective bargaining agreements otherwise in effect with respect to
such employees. There are no citations against the Company from the Occupational
Safety and Health Administration for which the Company has been provided service
of process or other appropriate notice, and, to the best knowledge of the
Company, no such citations are pending. There are no current Affirmative Action
Plans to which the Company is a party affecting
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the Company Business and, to the best knowledge of the Company, there are no
current or pending audits contemplated against the Company by the Office of
Federal Compliance Programs pursuant to Executive Order 11246.
SECTION 3.22 Compliance with Law. The Company is in compliance with all
federal, state, foreign and local laws (whether statutory or otherwise),
ordinances, rules, regulations, orders, judgments, decrees, writs and
injunctions of any governmental authority (collectively, "Laws") applicable to
the Company Business (although no representation and warranty is made in this
Section 3.22 regarding Laws relating to the matters discussed in Sections 3.17,
3.24 and 3.25, since such Laws are more particularly addressed in Sections 3.17,
3.24 and 3.25, respectively). The Company has not received written notification
from any governmental or regulatory authority within the past five years of any
asserted present or past failure to so comply, which failure has not been
appropriately and completely resolved. The Company has not been notified by any
governmental or regulatory authority that the Company is in violation or alleged
violation of any Law applicable to the Company Business which violation has not
been appropriately and completely resolved, or that any governmental or
regulatory authority contemplates any investigation or proceeding with respect
to any such violation or alleged violation which has not been appropriately and
completely resolved which, in either case, could reasonably be expected to have
a Material Adverse Effect.
SECTION 3.23 Permits. The Company has all Permits necessary for the
ownership or leasing of its properties and the conduct of the Company Business
as now being conducted. All such Permits are in full force and effect. No
violations exist or, to the best knowledge of the Company, have been reported in
respect of such Permits. No notice of any proceeding has been served or
otherwise given to the Company or, to the best knowledge of the Company, is
pending (without service or other notice) or threatened seeking the revocation
or limitation of any of such Permits.
SECTION 3.24 Environmental Matters.
(a) All Permits that are required for the current operation of the Company
Business under all Environmental Laws have been obtained. No notice to, approval
of, authorization or consent from any Person is necessary for the transfer of
any such Permit, and the consummation of the transactions contemplated by this
Agreement will not violate, alter, impair or invalidate, in any respect, such
Permits.
(b) All sites to which Hazardous Material (as defined herein) from the
Company has been or is being treated or disposed of, and all transporters of
such Hazardous Material, have valid permits for the treatment, disposal or
transportation of such Hazardous Materials and were, at the time of treatment,
disposal or transport, or are currently in compliance with such permits. Section
3.24 of the Disclosure Schedule contains a complete and accurate list (including
street addresses) of any sites to which the Company has sent Hazardous
Materials.
(c) The Company is in substantial compliance with all terms and conditions
of the required Permits, and is also in substantial compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in all applicable Environmental
Laws. Further, the Company is in substantial compliance with all
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applicable covenants running with any leases that relate to the protection of
health or the environment. The Company has not received any communication
(written or oral) from any Person that alleges that the Company is not in
compliance with the required Permits or with any applicable Environmental Law
which allegation has not been appropriately and completely resolved.
(d) There is no Environmental Claim pending, threatened or, to the best
knowledge of the Company, likely to be threatened (i) against the Company; (ii)
against any Person whose liability for any Environmental Claim the Company may
have retained or assumed either contractually or by operation of Law; or (iii)
against any real or personal property or operations that are or have been
previously owned, leased, operated or managed, in whole or in part, by the
Company.
(e) There are no events, conditions, circumstances, activities, practices,
incidents, actions or plans that may interfere with or prevent compliance or
continued compliance with Environmental Laws with respect to the operation of
the Company or that may otherwise form the basis of an Environmental Claim
against the Company.
(f) The Company has not prepared or caused the preparation of any
environmental reports, audits, investigations or assessments of the Company or
any real or personal property or operations which are now, or have been
previously owned, leased, operated or managed, in whole or in part, by the
Company (collectively, "Environmental Reports"). No Environmental Reports exist.
(g) The Company has disclosed to MSSC Carolina and Marketing Specialists
all relevant facts with respect to potential or actual environmental liabilities
of the Company which could have a Material Adverse Effect.
(h) For purposes of this Agreement, the following terms shall be given the
following meanings:
(i) "Environmental Claim" shall mean any judicial, administrative or
regulatory action, civil or criminal suit, demand, demand letter,
directive, claim, lien, superlien, investigation, proceeding or notice of
violation (written or oral) by any Person alleging potential liability
(including, without limitation, potential liability for enforcement,
investigatory costs, cleanup costs, governmental response costs, removal
costs, remedial costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from
(a) the presence or Release or threatened Release into the environment, of
any Hazardous Materials at any location, whether owned, operated, leased
or managed by the Company; or (b) circumstances forming the basis of any
violation or alleged violation, of any Environmental Law; or (c) any and
all claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from the presence or Release of any Hazardous Materials.
(ii) "Environmental Laws" shall mean any Law relating to or
applicable to the regulation or protection of human health, safety or the
environment (including, without
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limitation, ambient air, soil, surface water, groundwater, wetlands, land
or subsurface), including without limitation, Laws and regulations
relating to the Release or threatened Release of Hazardous Material, or
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, recycling or handling of Hazardous Material.
(iii) "Hazardous Material" shall mean (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could
become friable, and compressors or other equipment that contain
polychlorinated biphenyls; and (b) any chemicals, materials or substances
which are now defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "pollutants," "contaminants" or words of similar
import, under any Environmental Law; and (c) any other chemical, material,
substance or waste, exposure to which is now prohibited, limited or
regulated under any Environmental Law.
(iv) "Release" shall mean any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the atmosphere, soil, surface water, groundwater or property.
SECTION 3.25 Tax Matters.
(a) All Tax Returns required to be filed on or before the Closing Date by
the Company have been or will be filed within the time prescribed by Law
(including extensions of time approved by the appropriate taxing authority).
"Tax Return" means any report, statement, form, return or other document or
information required to be supplied to a taxing authority in connection with
Taxes. "Tax" or "Taxes" means any United States or foreign federal, state, or
local tax, including without limitation income tax, ad valorem tax, excise tax,
sales tax, use tax, franchise tax, gross receipts tax, withholding tax, social
security tax, occupation tax, service tax, license tax, payroll tax, transfer
and recording tax, severance tax, customs tax, import tax, export tax,
employment tax, or any similar or other tax, assessment, duty, fee, levy or
other governmental charge, together with and including, without limitation, any
and all interest, fines, penalties, assessments and additions to tax resulting
from, relating to, or incurred in connection with any such tax or any contest or
dispute thereof.
(b) The Tax Returns so filed are complete, correct and accurate
representations of the Tax liabilities of the Company and such Tax Returns
accurately set forth or will accurately set forth all items to the extent
required to be reflected or included in such returns.
(c) The Company has timely paid or has made adequate provision in the 1997
Balance Sheet for the payment of all Taxes due on such Tax Returns that have
been filed or will be filed for periods ending on or before the date of the 1997
Balance Sheet.
(d) There is no action, suit, investigation, proceeding, audit or claim
that has been served against or otherwise properly noticed to the Company, or,
to the best knowledge of the Company, pending or proposed against or with
respect to the Company in respect of any Tax. There are no material liens for
Taxes upon any of the Company Assets.
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(e) The Company has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other Person.
(f) The Company has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(g) The Company does not have in effect a consent under Section 341(f) of
the Code concerning collapsible corporations.
(h) The Company has not made any payment, and is not obligated to make any
payment, and is not a party to any agreement that could obligate it to make any
payment that will not be deductible under section 280G of the Code or will be
subject to Tax under section 4999 of the Code.
(i) There has never been a Tax sharing or allocation agreement in place
between the Company and any other Person other than those, if any, with respect
to which the applicable statute of limitations has run.
(j) The Company is not liable for a Tax incurred by any other corporation
that was a member of a consolidated group of corporations (within the meaning of
Treasury regulation section 1.1502) that included the Company.
(k) The Company has delivered or made available to MSSC Carolina and
Marketing Specialists correct and complete copies of all Tax Returns filed by
the Company for 1993, 1994, 1995 and 1996, all examination reports, and any
statements of deficiencies assessed against or agreed to by the Company.
SECTION 3.26 Service Liability. There is no state of facts or the
occurrence of any event forming the basis of any present claim against the
Company for personal injury or property damage alleged to be caused by products
shipped or services rendered by the Company in connection with the Company
Business (or seafood purchased by the Company in connection with its Meatmaster
arbitrage activities), which is not fully covered by insurance, except for
deductibles (the amount of which deductibles is set forth on Section 3.26 of the
Disclosure Schedule), and except for claims that would not, individually or in
the aggregate, have a Material Adverse Effect on the Company or the consummation
of the transactions contemplated hereby.
SECTION 3.27 Title to Assets. The Company has good, valid and marketable
title to the Company Assets, including without limitation those assets set forth
on the 1997 Balance Sheet. At the Closing the Company Assets will be free and
clear of all mortgages, liens, claims, charges, pledges, security interests or
encumbrances of any nature whatsoever.
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SECTION 3.28 Bank Accounts and MDFs. Section 3.28 of the Disclosure
Schedule sets forth (i) the names and locations of all banks, trust companies,
savings and loan associations, stock brokerages and other financial institutions
at which the Company maintains accounts of any nature and the names of all
persons authorized to draw thereon or make withdrawals therefrom, and (ii) the
amount of all marketing development funds ("MDFs") held (and not yet used) by
the Company, specifying the amount of such MDFs by name of principal. Other than
with respect to the amounts stated in Section 3.28 of the Disclosure Schedule,
the Company is not obligated to any party regarding MDFs. The Company and its
employees are in compliance with all applicable Laws and all policies of its
principals regarding MDFs, and there is no basis for any claim that the past
actions of the Company and/or its employees regarding MDFs were not in such
compliance.
SECTION 3.29 Redemptions of Capital Stock by Atlas. All redemptions of its
capital stock by Atlas, other than redemptions from the ESOP (which are covered
in Section 3.17 hereof), in the past ten years have been effected in accordance
with all applicable federal and state securities (and other) Laws and agreements
between the Company and its shareholders. There exists no continuing claim by
any former or current shareholder, for money or otherwise, against the Company
regarding any such redemptions, and no basis for any such claim exists.
SECTION 3.30 ESOP Matters. Each of the representations and warranties made
by the ESOP (or its trustee(s)) in or pursuant to the ESOP/Management Stock
Purchase Agreement (an executed copy of which has been reviewed by the Company
and each of the Executive Shareholders) is true, complete and correct.
SECTION 3.31 Accuracy of Disclosure. There is no information contained in
this Agreement (whether in this Article III, any other portion of this
Agreement, the Disclosure Schedule, the Appendices, the Exhibits or any other
documents or certificates delivered pursuant to this Agreement) pertaining to
the Company that, to the best knowledge of the Company and the Executive
Shareholders, contains an untrue statement of material fact or omits to state
any material fact required to be stated in order to make the statements made
herein and therein not materially misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
MSSC CAROLINA AND MARKETING SPECIALISTS
MSSC Carolina and Marketing Specialists hereby jointly represent and
warrant to Atlas and the Executive Shareholders as follows, except as otherwise
set forth in the relevant section of the Disclosure Schedule:
SECTION 4.01 Organization and Qualification - MSSC Carolina. MSSC Carolina
is (a) a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and (b) duly qualified to do business as a
foreign corporation and in good standing in each jurisdiction in which the
character of the properties and assets now owned or leased by it or the nature
of the business transacted by it requires it to be so qualified, except where
the failure to be so
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<PAGE> 31
qualified, individually or in the aggregate, would not have a Material Adverse
Effect on MSSC Carolina or the consummation of the transactions contemplated
hereby. Each jurisdiction in which MSSC Carolina is qualified to do business is
listed on Section 4.01 of the Disclosure Schedule.
SECTION 4.02 Organization and Qualification - Marketing Specialists.
Marketing Specialists is (a) a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and (b) duly qualified
to do business as a foreign corporation and in good standing in each
jurisdiction in which the character of the properties and assets now owned or
leased by it or the nature of the business transacted by it requires it to be so
qualified, except where the failure to be so qualified, individually or in the
aggregate, would not have a Material Adverse Effect on Marketing Specialists or
the consummation of the transactions contemplated hereby. Each jurisdiction in
which Marketing Specialists is qualified to do business is listed on Section
4.02 of the Disclosure Schedule. Marketing Specialists was organized as of
October 7, 1997 to, among other things, own all of the capital stock of MSSC.
SECTION 4.03 Power and Capacity; Charter Documents of MSSC Carolina.
(a) MSSC Carolina has all requisite power and authority (corporate and
otherwise) to enter into, execute and deliver this Agreement and perform its
obligations hereunder. MSSC Carolina has the corporate power and authority to
carry on its business as now being conducted and to own and lease its
properties. This Agreement has been duly executed and delivered by MSSC Carolina
and is a valid and binding obligation of MSSC Carolina, enforceable in
accordance with its terms.
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby by MSSC Carolina will not
result in a violation or breach of or constitute a default under any term or
provision of the Certificate of Incorporation or Bylaws of MSSC Carolina. MSSC
Carolina has delivered to Atlas true and complete copies of the Certificate of
Incorporation and the Bylaws of MSSC Carolina, as in effect on the date hereof.
SECTION 4.04 Significant Subsidiaries. The following direct and indirect
wholly-owned subsidiaries of Marketing Specialists are the only such
subsidiaries that accounted for more than 10% of Marketing Specialists'
consolidated revenues, as set forth in the Marketing Specialists Mid-Year
Financial Statements (as defined herein): Marketing Specialists Sales Company, a
Texas corporation ("MSSC"), and Bromar, Inc., a California corporation
("Bromar"). MSSC is a direct wholly-owned subsidiary of Marketing Specialists,
and Bromar and Tower Marketing Company, Inc., a Texas corporation ("Tower"), are
direct wholly-owned subsidiaries of MSSC. MSSC and Bromar, together with Tower,
are termed herein the "Key Subsidiaries". Each of the Key Subsidiaries is (a) a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation and (b) duly qualified to do business as a
foreign corporation and in good standing in each jurisdiction in which the
character of the properties and assets now owned or leased by it or the nature
of the business transacted by it requires it to be so qualified, except where
the failure to be so qualified, individually or in the aggregate, would not have
a Material Adverse Effect on Marketing Specialists or the consummation of the
transactions contemplated hereby. Each Key Subsidiary has the corporate power
and authority to carry on its business as now being conducted and to own and
lease its properties.
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SECTION 4.05 Power and Capacity; Charter Documents of Marketing
Specialists.
(a) Marketing Specialists has all requisite power and authority (corporate
and otherwise) to enter into, execute and deliver this Agreement and perform its
obligations hereunder. Marketing Specialists has the corporate power and
authority to carry on its business as now being conducted and to own and lease
its properties. This Agreement has been duly executed and delivered by Marketing
Specialists and is a valid and binding obligation of Marketing Specialists,
enforceable in accordance with its terms.
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby by Marketing Specialists
will not result in a violation or breach of or constitute a default under any
term or provision of the Certificate of Incorporation or Bylaws of Marketing
Specialists. Marketing Specialists has delivered to Atlas true and complete
copies of the Certificate of Incorporation and the Bylaws of Marketing
Specialists, as in effect on the date hereof.
SECTION 4.06 No Conflicts. The execution, delivery and performance of this
Agreement by MSSC Carolina and Marketing Specialists and the consummation of the
transactions contemplated hereby will not:
(a) result in the creation or imposition of any security interest, lien,
charge or other encumbrance against MSSC Carolina's assets or Marketing
Specialists' assets, with or without the giving of notice and/or the passage of
time, or
(b) violate, conflict with, affect acceleration of, or result in
termination, cancellation or modification of, or constitute a default under (i)
any contract, agreement or other instrument to which MSSC Carolina or Marketing
Specialists is a party or by which MSSC Carolina or Marketing Specialists or
their respective assets is bound or (ii) any note, bond, mortgage, indenture,
deed of trust, license, lease, contract, commitment, understanding, arrangement,
agreement or restriction of any kind or character to which MSSC Carolina or
Marketing Specialists is a party or by which MSSC Carolina or Marketing
Specialists may be bound or affected or to which any of their respective assets
may be subject, or
(c) violate any statute or law or any judgment, decree, order, writ,
injunction, regulation or rule of any court or any local, state or federal
governmental or regulatory authority, which violation, conflict, acceleration,
requirement, termination, modification or default described in (a), (b), or (c)
above could result in a Material Adverse Effect on Marketing Specialists or the
transactions contemplated by this Agreement.
SECTION 4.07 Consents and Approvals. Neither MSSC Carolina nor Marketing
Specialists is required to obtain, transfer or cause to be transferred any
consent, approval, license, permit or authorization of, or make any declaration,
filing or registration with, any third party or any public body or authority in
connection with (a) the execution and delivery by MSSC Carolina and Marketing
Specialists of this Agreement, or (b) the consummation of the transactions
contemplated hereby or (c) the future conduct by the Company of the Company
Business, other than those that may be
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required under the HSR Act or applicable North Carolina "blue sky" securities
laws or that may be required solely by reason of Atlas's (as opposed to any
other third party's) participation in the transactions contemplated hereby.
SECTION 4.08 Accredited Investor. MSSC Carolina is an "Accredited
Investor" as such term is defined in Rule 501(a) promulgated under the
Securities Act of 1933 as amended (the "Securities Act"). MSSC Carolina
represents and warrants that it has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of its
investment in the Shares. MSSC Carolina has had the opportunity to obtain from
the Executive Shareholders and the Company all information, to the extent
possessed by the Executive Shareholders and the Company or reasonably obtainable
by them, necessary to evaluate the merits and risks of an investment in the
Shares, and has concluded, based on such information and other information
previously known to it, to invest in such securities pursuant to the terms of
this Agreement.
SECTION 4.09 Absence of Market. MSSC Carolina acknowledges that the Shares
lack liquidity as compared with other securities investments since there is not,
and there is not expected to be, any market therefor, and that the sale or
transfer of the Shares must comply with the provisions of applicable federal and
state securities laws. MSSC Carolina acknowledges that it must bear the economic
risk of its investment in the Shares for an indefinite period of time since none
of such securities has been registered under the Securities Act and therefore
cannot be sold unless such securities are subsequently registered or an
exemption from registration is available.
SECTION 4.10 Investment Purposes. MSSC Carolina hereby represents and
warrants that it is acquiring the Shares for investment purposes only, and not
with a view to, or for resale in connection with, any distribution thereof
within the meaning of the Securities Act. MSSC Carolina has no agreement or
other arrangement with any person to sell, transfer or pledge any part of the
Shares and has no plans to enter into any such agreement or arrangement.
SECTION 4.11 Restricted Securities. MSSC Carolina acknowledges that the
Executive Shareholders are transferring the Shares to it without registration
under the Securities Act. MSSC Carolina further acknowledges that the Executive
Shareholders and representatives of the Company have advised MSSC Carolina that
no state or federal agency or instrumentality has made any finding or
determination as to the investment in such securities, nor has any state or
federal agency or instrumentality made any recommendation with respect to any
purchase or investment in such securities.
SECTION 4.12 Financial and Operating Statements. Attached hereto as
Appendix IV is a true and complete copy of the audited consolidated balance
sheets of MSSC as of December 31, 1996 and 1995, together with the related
consolidated statement of operations, shareholders' equity (deficit) and cash
flow for the year ended (collectively, the "Marketing Specialists Financial
Statements"). The Marketing Specialists Financial Statements are accurate and
correct in all material respects and fairly present the consolidated financial
position and the results of operations of MSSC for the year then ended in
conformity with GAAP consistently applied.
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SECTION 4.13 Marketing Specialists Mid-Year Financial Statements. Attached
hereto as Appendix V is a true and complete copy of the consolidated balance
sheets of MSSC as of June 30, 1997 and 1996, together with the related
consolidated statement of operations, shareholders' equity (deficit) and cash
flow for the six months then ended, as reviewed by Ernst & Young LLP
(collectively, the "Marketing Specialists Mid-Year Financial Statements"). The
Marketing Specialists Mid-Year Financial Statements are accurate and correct in
all material respects and fairly present the consolidated financial position and
the results of operations of MSSC for the six months then ended in conformity
with GAAP consistently applied (except that the Marketing Specialists Mid- Year
Financial Statements do not include notes or normal year-end adjustments). MSSC
has suffered no net Material Adverse Effect in its financial condition since
June 30, 1997.
ARTICLE V
OTHER OBLIGATIONS OF THE PARTIES
SECTION 5.01 Conduct of Company Business. From the date hereof to the
Closing, except as otherwise expressly set forth in this Agreement, the Company
shall conduct the business, operations, activities and practices of the Company
only in the ordinary course, in accordance with prudent practice and consistent
with past practice. Without limiting the generality of the foregoing, from the
date hereof to the Closing, without the prior written consent of MSSC Carolina
or Marketing Specialists, Atlas shall not (and shall cause the Subsidiaries to
not):
(a) incur any liabilities or obligations of any nature whatsoever (whether
absolute, accrued, contingent or otherwise and whether due or to become due),
except for liabilities or obligations for (i) rent under the Leases (provided,
that the Company shall enter into no new, modified or extended leases for real
property without the consent of Marketing Specialists) and (ii) other items
incurred in the ordinary course of business and consistent with past practice,
none of which other items shall exceed $20,000 (considering liabilities or
obligations arising from one transaction or a series of similar transactions,
and all periodic installments or payments under any lease (other than the
Leases) or other agreement providing for periodic installments or payments, as a
single obligation or liability);
(b) increase (other than an increase resulting from the calculation of
reserves in the ordinary course of business and in a manner consistent with past
practice) or change any assumptions underlying, or methods of calculating, any
bad debt, contingency or other reserves;
(c) pay, discharge or satisfy any claim, encumbrance, liability or
obligation (whether absolute, accrued, contingent or otherwise and whether due
or to become due), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of liabilities and
obligations which are reflected or reserved against in the 1997 Balance Sheet or
which have been incurred since the date thereof in the ordinary course of
business and consistent with past practice, or prepay any liability or
obligation having a fixed maturity of more than 90 days from the date such
liability or obligation was issued or incurred;
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(d) permit, allow or suffer any of the Company Assets to be subjected to
any new or additional mortgage, pledge, lien, encumbrance, restriction or charge
of any kind (except for liens arising as a result of Taxes not yet owing) except
for capital equipment leases not to exceed $20,000 in the aggregate;
(e) determine as collectible any notes or accounts receivable or any
portion thereof which was previously considered uncollectible or write off as
uncollectible any notes or accounts receivable or any portion thereof other than
in the ordinary course of business, but in no event to exceed $20,000 in the
aggregate,
(f) cancel any amount of indebtedness in excess of $10,000 or waive any
claims or rights of value in excess of $10,000 except for periodic repayments of
the United Carolina Bank credit line in place as of the date hereof (solely as
required by the current terms of such credit line);
(g) sell, transfer or otherwise dispose of any of the Company Assets with
an aggregate value of more than $10,000;
(h) dispose of or permit to lapse any right to use any patent, trademark,
assumed name, service mark, trade name, copyright, license or application
therefor or dispose of or disclose to any Person other than representatives of
MSSC Carolina or Marketing Specialists any trade secret, formula, process or
know-how not theretofore a matter of public knowledge (other than disclosures in
the ordinary course of business and consistent with past practice that would not
materially diminish the value of such trade secrets, formulae, processes or
know-how to the Company);
(i) grant any increase in the compensation payable to or to become payable
to those individuals identified in Section 3.20 of the Disclosure Schedule,
grant, other than in the ordinary course of business, any increase in the
compensation payable to or to become payable to any other employees (of whatever
nature) of the Company (including, without limitation, any increase or change
pursuant to any bonus, pension, profit-sharing, retirement or other plan or
commitment), grant any general increase in the compensation payable to or to
become payable to employees of the Company or, except in the ordinary course of
business and consistent with past practice, grant any increase in the
compensation payable or to become payable to individual employees;
(j) pay, loan or advance any amount (except for advances in the ordinary
course of business and consistent with past practice that do not in the
aggregate exceed $10,000 and are not made as advances for personal loans) to, or
sell, transfer or lease any of the Company Assets to, or enter into any
agreement or arrangements with, any of the officers, directors, shareholders or
employees of any Company or any of their respective affiliates (including,
without limitation, payments to Quincy Cummings or Gynn Eller under presently
outstanding promissory notes);
(k) enter into any collective bargaining or labor agreement;
(l) make any single capital expenditure or commitment in excess of $10,000
for additions to property, plant, equipment or intangible capital assets or for
any other purpose or make aggregate capital expenditures or commitments in
excess of $25,000 for additions to property, plant, equipment
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or for any other purpose or purchase more than $10,000 in aggregate of computer
software (whether such purchase is to be capitalized or expensed);
(m) make any change in any method of accounting or accounting practice or
policy;
(n) enter into any agreement or contract or commitment of the type
required to be disclosed pursuant to Section 3.10 hereof or outside the ordinary
course of business;
(o) terminate or amend in any material respect any material contract,
lease, license, or other agreement to which the Company is a party;
(p) permit any option to renew any Lease or any option to purchase any
property to expire or exercise any such option;
(q) issue any additional shares of capital stock of the Company or
options, warrants, rights (including, without limitation, stock appreciation
rights and phantom stock rights) or other securities exercisable for,
convertible into or exchangeable for shares of capital stock of the Company, or
pay any dividend (or make any other distribution) to the holders of the capital
stock of Atlas;
(r) omit to do any act, or permit any act or omission to act, which may
cause a breach of any contract, commitment or obligation of the Company, or any
breach of any representation, warranty, covenant or agreement made by the
Company herein;
(s) borrow any amounts from Quincy Cummings or Gynn Eller or any related
party thereto;
(t) pay its suppliers and other vendors in a manner and time not
consistent with past practice;
(u) take any other action not in the ordinary course of business and
consistent with past practice and prudent business practice or provided for in
this Agreement; or
(v) agree, whether in writing or otherwise, to do any of the foregoing.
SECTION 5.02 Access to Books and Records. In order that MSSC Carolina and
Marketing Specialists may have full opportunity to make investigations of the
Company in connection with the actions contemplated by this Agreement, Atlas
shall permit MSSC Carolina and Marketing Specialists and their counsel,
accountants, auditors, lenders, environmental consultants and other
representatives reasonable access, upon reasonable notice during normal business
hours, to all of the plants, offices, properties, Books and Records, contracts
and commitments of the Company from the date hereof through the Closing Date.
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SECTION 5.03 Consents. Atlas agrees to use its reasonable efforts to
obtain prior to the Closing all consents necessary, in the reasonable
determination of MSSC Carolina and Marketing Specialists, to consummate the
transactions contemplated hereby, including without limitation each of the
consents, approvals, licenses, permits and authorizations (and the declarations,
filings and registrations) listed or referred to in Section 3.06 of the
Disclosure Schedule. All such consents shall be in writing and in form and
substance reasonably satisfactory to MSSC Carolina and Marketing Specialists,
and executed counterparts thereof shall be delivered to MSSC Carolina and
Marketing Specialists promptly after receipt thereof by Atlas but in no event
later than the Closing.
SECTION 5.04 Other Transactions. Prior to the Closing, the Executive
Shareholders and Atlas shall not, and shall not permit any of Atlas' (and the
Subsidiaries') officers, directors, employees or other representatives to,
directly or indirectly, encourage, solicit, initiate or participate in
negotiations with, or provide any information or assistance to, any Person
(other than MSSC Carolina and Marketing Specialists and their representatives)
concerning any merger, sale of securities, sale of the Company Assets or similar
transaction involving the Company or any of the Company Assets (other than the
transactions contemplated between the parties by this Agreement and the
ESOP/Management Stock Purchase Agreement).
SECTION 5.05 Supplemental Disclosure. The Disclosure Schedule shall be
considered to be part of the representations and warranties of Atlas and the
Executive Shareholders. Until the Closing, Atlas and the Executive Shareholders
shall have the continuing obligation to promptly supplement or amend the
Disclosure Schedule with respect to any matter hereafter arising or discovered
which, if existing or known at the date of this Agreement, would have been
required to be set forth or described in the Disclosure Schedule ("Supplemental
Disclosures"); provided, however, that MSSC Carolina and Marketing Specialists
shall be entitled to treat any such supplementation or amendment as a breach of
the appropriate representation or warranty, whether or not the event or
condition giving rise to such supplementation or amendment occurred on or prior
to the date hereof except to the extent that such supplementation or amendment
is a result of any of the activities permitted by Section 5.01, which
supplementation or amendment shall not be deemed a breach by Atlas and the
Executive Shareholders of any obligation hereunder or be deemed the non-
fulfillment of a condition hereunder. Atlas and the Executive Shareholders
acknowledge that the Disclosure Schedule is an important and integral part of
this Agreement and that MSSC Carolina and Marketing Specialists have relied upon
the information contained therein in entering into this Agreement.
SECTION 5.06 Governmental Filings. As soon as practicable, the Company,
the Executive Shareholders, MSSC Carolina and Marketing Specialists shall make
any and all filings and submissions to any governmental agency that are required
to be made in connection with the transactions contemplated hereby (including,
without limitation, additional filings under the HSR Act). The Company and the
Executive Shareholders shall furnish to MSSC Carolina and Marketing Specialists,
and MSSC Carolina and Marketing Specialists shall furnish to the Company and the
Executive Shareholders, such information and assistance as the other party or
parties may reasonably request in connection with the preparation of any such
filings or submissions.
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SECTION 5.07 Covenant to Satisfy Conditions. The Company, the Executive
Shareholders, MSSC Carolina and Marketing Specialists shall each use their
reasonable efforts to insure that the conditions set forth in Article VI hereof
are satisfied, insofar as such matters are within their respective control. The
Executive Shareholders agree to cause Atlas to fulfill its obligations under
this Section 5.07.
SECTION 5.08 Confidentiality. The parties acknowledge and affirm their
obligations regarding confidentiality set forth in their mutual confidentiality
letters dated June 19, 1996 (with respect to the Company and its management) and
October 17, 1997 (with respect to the Executive Shareholders individually). No
party shall release any information regarding this Agreement or the transactions
contemplated hereby without the prior written consent of each other party
hereto. Nothing within this Section 5.08 shall be construed to prevent the
Trustee of the ESOP to make such disclosures to governmental agencies or
participants and beneficiaries which it deems necessary to fulfill its fiduciary
obligations under applicable Law.
SECTION 5.09 Employees. From the date hereof Atlas shall use its
reasonable efforts to retain as employees of the Company through the Closing
Date the active employment of the Company's current employees. Atlas and the
Executive Shareholders agree in this regard to cooperate with MSSC Carolina and
Marketing Specialists by permitting MSSC Carolina and Marketing Specialists
throughout the period prior to the Closing Date to meet with the employees of
the Company at such times as shall be approved by a representative of Atlas
(which approval shall not be unreasonably withheld).
SECTION 5.10 Damage or Destruction. If any of the offices of the Company
shall be damaged so as to be unusable for more than one week or destroyed prior
to Closing, then Atlas shall immediately notify MSSC Carolina and Marketing
Specialists and furnish to MSSC Carolina and Marketing Specialists a written
statement of the amount of insurance, if any, payable on account thereof. In the
event of such damage or destruction, MSSC Carolina or Marketing Specialists may
elect to require that Atlas restore or replace the affected offices (and any
Company Assets therein) to their condition on the date of this Agreement. In the
event that such damage to any Company Asset or office of the Company (taking
into account the insurance amounts due to the Company as a result of such
damage) would reasonably be determined to result in a Material Adverse Effect to
the Company of $125,000 or more, then MSSC Carolina or Marketing Specialists may
terminate, without liability to Atlas, MSSC Carolina or Marketing Specialists,
the transactions contemplated hereby.
SECTION 5.11 Resignation of Officers and Directors; Releases. On or prior
to the Closing, Atlas shall deliver, or cause to be delivered, to MSSC Carolina
and Marketing Specialists the resignation of each officer and director of Atlas
and the Subsidiaries, effective at the Effective Time (unless agreed otherwise
in writing by MSSC Carolina and Marketing Specialists). At the Closing each such
officer and director shall release Atlas and the Subsidiaries, and Atlas and the
Subsidiaries shall release each such officer and director from all past matters
(other than matters of fraud and matters arising under this Agreement or the
ESOP/Management Stock Purchase Agreement) in a form acceptable to Marketing
Specialists and the parties to such releases.
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SECTION 5.12 Transactions Regarding the ESOP. On or prior to the date of
this Agreement, Cummings and Eller shall have caused the ESOP to send a written
notice to all participants of the ESOP informing them of the pendency of the
transactions contemplated hereby and informing them that the ESOP will be
terminated at the time of the Closing. Such written notice will require the
participants in the ESOP to make all elections required by Law with respect to
their ESOP accounts, and will otherwise comply in all respects with ERISA and
other applicable Law. Distributions to all participants will be made by the ESOP
trustees in accordance with ERISA and applicable Law prior to or as soon as
practicable following the Closing. Cummings and Eller shall promptly inform
Marketing Specialists if any Person elects to receive Common Stock as part of a
distribution from the ESOP. Atlas shall not, and Quincy Cummings (as a trustee
of the ESOP) shall cause the ESOP to not, take any material action regarding the
ESOP without obtaining Marketing Specialists' prior written consent thereto.
SECTION 5.13 Meatmaster Transactions. On or prior to the Closing, Atlas
shall enter into an amendment of that certain Agreement and Plan of Merger dated
as of January 12, 1996 among Atlas, Meatmaster, James F. Wyatt and Hugh G.
Green, which amendment shall terminate any party's right to receive capital
stock of Atlas and shall be on terms reasonably satisfactory to Marketing
Specialists, with provisions for payment to Hugh Green of no more than $750,000
over a term of five years. Prior to entering into such amendment, Atlas shall
submit the amendment to Marketing Specialists for its prior written approval.
SECTION 5.14 Employment Agreements/Consulting Agreements. On or prior to
the Closing, Atlas and Marketing Specialists shall enter into (i) Employment
Agreements with each of Gary Propst, Don Olin, Doug Heyel and Gary Moore, which
agreements shall be substantially in the form of Exhibit "C" attached hereto and
(ii) Consulting Agreements with Quincy Cummings and Gynn Eller, which agreements
shall be substantially in the forms of Exhibit "D-1" and Exhibit "D-2",
respectively, attached hereto.
SECTION 5.15 Clearance of Encumbrances on Company Assets. On or prior to
the Closing, the Company shall cause the release of all Encumbrances on the
Company Assets (and all Encumbrances on Common Stock held in treasury) on terms
that have been previously submitted to Marketing Specialists in writing and
approved in writing by Marketing Specialists in its sole discretion.
SECTION 5.16 Provision of Monthly Financial Statements; Accounts
Receivable. Until the Closing, within fifteen business days of the end of each
calendar month, Atlas shall deliver to MSSC Carolina and Marketing Specialists a
true and complete copy of unaudited cash basis combined financial statements of
the Company for the period beginning January 1, 1997 and ending on the last day
of such calendar month, which have been prepared by the Chief Financial Officer
of Atlas (the "Updated 1997 Financial Statements"). Each of the Updated 1997
Financial Statements shall include an unaudited balance sheet of the Company as
of the end of such calendar month and shall be accompanied by a certificate of
the Chief Financial Officer that states that: "The Updated 1997 Financial
Statements are accurate and correct in all material respects and fairly present
the financial position and results of operations of the Company for the period
therein identified." Atlas shall deliver to MSSC Carolina and Marketing
Specialists a true and complete listing of the aging status
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of each of the accounts receivable of the Company as of September 30, 1997,
within one day of the completion of such listing in accordance with the normal
procedures of Atlas.
SECTION 5.17 Provision of Annual Audited Financial Statements of Marketing
Specialists. Until all amounts required to be paid under the Promissory Notes
have been paid in full, Marketing Specialists shall provide each of the
Executive Shareholders with a copy of its audited consolidated financial
statements for the fiscal year most recently ended, as soon as practicable upon
such annual audited financials' preparation and release. Furthermore, at any
time during such fiscal year, upon ten days' prior written request, each of the
Executive Shareholders shall have the right to review Marketing Specialists'
most recent unaudited year-to-date financial statements at the offices of
Marketing Specialists (and at a date and time to be reasonably acceptable to
Marketing Specialists).
SECTION 5.18 Settlement of Pitts Litigation. On or prior to the Closing,
Atlas shall have settled the case styled Luther Pitts v. Atlas Marketing
Company, Inc. (Mecklenburg County Superior Court, 97-CVS-13197) on terms that
are reasonably satisfactory to Marketing Specialists. Atlas shall first submit
any settlement proposal to Marketing Specialists for its review and comment
(which comment will be delivered as soon as practicable) prior to submission of
such settlement proposal to Mr. Pitts and his attorneys.
SECTION 5.19 Payment of Certain Expenses. At the Closing, Marketing
Specialists shall cause Atlas to pay, or reimburse, the Executive Shareholders
for up to $60,000 of any legal fees and disbursements of Atlas and/or the
Executive Shareholders incurred in connection with the transactions contemplated
hereby; provided, that Marketing Specialists shall first be provided with
reasonably acceptable documentation of such expenses and disbursements (which
documentation shall not be required to reveal privileged information); provided,
further, that the Executive Shareholders shall pay any amounts above $60,000 for
legal fees and disbursements incurred by Atlas or them in connection with the
transactions contemplated hereby.
SECTION 5.20 ESOP Elections. Neither of the Executive Shareholders shall
at any time elect to receive any stock of Atlas in connection with the
distribution or rollover of their ESOP account balance.
SECTION 5.21 Nine-Month Financial Statements. Atlas shall cooperate with
Marketing Specialists by allowing Ernst & Young, LLP to review, as soon as
reasonably practicable, the consolidated financial statements of the Company for
the nine months ended September 30, 1997 and 1996 (the "Nine-Month Financial
Statements"). The Nine-Month Financial Statements shall include a balance sheet
of the Company as of September 30, 1997 and 1996, together with related
statements of operations, equity and cash flow of the Company (and notes
thereto) for each of such periods. The Nine-Month Financial Statements shall be
accurate and correct in all material respects and fairly present the
consolidated financial position and the results of operations of the Company for
the period therein identified in conformity with GAAP consistently applied
(except that the Nine- Month Financial Statements shall not include notes or
normal year-end adjustments).
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SECTION 5.22 Provision of Marketing Specialists' Nine-Month Financial
Statements. As soon as reasonably practicable, Marketing Specialists shall
provide the Executive Shareholders with consolidated financial statements of
MSSC for the nine months ended September 30, 1997 and 1996 (the "MSSC Nine-Month
Financial Statements"). The MSSC Nine-Month Financial Statements shall include a
balance sheet of MSSC as of September 30, 1997 and 1996, together with related
statements of operations, equity and cash flow of MSSC (and notes thereto) for
each of such periods. The MSSC Nine-Month Financial Statements shall be accurate
and correct in all material respects and fairly present the consolidated
financial position and the results of operations of MSSC for the period therein
identified in conformity with GAAP consistently applied (except that the MSSC
Nine-Month Financial Statements shall not include notes or normal year-end
adjustments).
SECTION 5.23 Notice of Default by Senior Debt Trustee. Marketing
Specialists shall deliver written notice to the Executive Shareholders as soon
as practicable after, but in no event more than five business days after,
receipt of any Notice of Default from the trustee under the indenture governing
the senior subordinated notes to be issued by Marketing Specialists on the
Closing Date.
SECTION 5.24 Financial Reporting. Marketing Specialists shall deliver to
Joel Lineberger, on behalf of the Executive Shareholders and the selling
shareholders under the ESOP/Management Stock Purchase Agreement, a copy of the
information required to be delivered to the banks under Sections 8.1(c) and
8.1(d) of attached Exhibit "I" (as such requirements may be modified by the
financing consummated on the Closing Date) at or about the same time such
information is delivered to the banks. Mr. Lineberger may make no copies of such
information, but shall share it on an eyes- only basis with any Executive
Shareholder or selling shareholder who signs a confidentiality agreement
reasonably acceptable to Marketing Specialists and (except for the Executive
Shareholders) who remains an employee of Atlas.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01 Conditions Precedent to Obligations of MSSC Carolina and
Marketing Specialists. The obligations of MSSC Carolina and Marketing
Specialists under this Agreement are subject to the satisfaction or, unless
prohibited by law, the waiver by MSSC Carolina and Marketing Specialists, at or
before the Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and warranties of
Atlas and the Executive Shareholders contained herein shall be true, complete
and accurate as of the date when made and at and as of the Closing Date as
though such representations, warranties and statements were made at and as of
such date.
(b) Performance. Atlas and the Executive Shareholders shall have performed
and complied with all agreements, obligations and conditions required by this
Agreement to be so performed or complied with by it or them at or prior to the
Closing.
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(c) No Injunction. On the Closing Date, there shall be no effective
injunction, writ, preliminary restraining order or any order of any nature
issued by a court of competent jurisdiction restraining or prohibiting the
consummation of the transactions contemplated hereby.
(d) No Litigation. There shall not be threatened, instituted or pending
any suit, action, investigation, inquiry or other proceeding by or before any
court or governmental or other regulatory or administrative agency or commission
requesting or looking toward an order, judgment or decree that (i) restrains or
prohibits the consummation of the transactions contemplated hereby, (ii) would
adversely effect Marketing Specialists' ability to exercise control over the
Company after the Closing, or (iii) would have a Material Adverse Effect on the
business, operations, condition (financial or otherwise), liabilities, Company
Assets or earnings of the Company.
(e) Compliance Certificates. Atlas shall have delivered to MSSC Carolina
and Marketing Specialists a certificate, dated the Closing Date, executed by its
Chief Executive Officer and Chief Financial Officer certifying the fulfillment
of the conditions specified in Section 6.01(a) and (b) hereof with respect to
its representations, warranties, agreements, obligations and conditions
hereunder. Each of the Executive Shareholders shall have executed and delivered
to MSSC Carolina and Marketing Specialists a certificate, dated the Closing
Date, certifying the fulfillment of the conditions specified in Section 6.01(a)
and (b) hereof with respect to his representations, warranties, agreements,
obligations and conditions hereunder.
(f) Secretary's Certificate. Atlas shall have delivered to MSSC Carolina
and Marketing Specialists a certificate, dated the Closing Date, executed by its
Secretary or Assistant Secretary and certifying as to Atlas' articles of
incorporation, bylaws, enabling resolutions, incumbency of officers and other
reasonably related matters (including, without limitation, the articles of
incorporation and bylaws of any Subsidiary).
(g) Opinions of Atlas' Counsel. MSSC Carolina and Marketing Specialists
shall have received opinions of Smith and Ferrick, P.A. and Tuggle Duggins &
Meschan, P.A., counsel to the Company, in the respective forms attached hereto
as Exhibit "E" and Exhibit "F".
(h) Consents and Approvals. All licenses, permits, consents, approvals and
authorizations of all third parties and governmental bodies and agencies shall
have been obtained which are necessary, in the reasonable determination of
counsel to MSSC Carolina and Marketing Specialists, in connection with (a) the
execution and delivery by each of the parties, as appropriate, of this
Agreement, (b) the consummation by each of the parties of the transactions
contemplated hereby or thereby or (c) the conduct by the Company of the Company
Business substantially as conducted on the date hereof.
(i) HSR Waiting Period. Any applicable waiting period under the HSR Act
shall have expired, or a notice of early termination shall have been granted,
regarding the transactions contemplated hereby.
(j) No Material Adverse Change. Except as specifically disclosed herein or
in the Disclosure Schedule, the events occurring since June 30, 1997, and the
conditions arising since such date shall not, in the aggregate, have resulted
in, or with the passage of time or otherwise, reasonably
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be expected to result in, a net adverse change (direct or indirect) on the
business, operations, properties (including tangible and intangible properties),
condition (financial or otherwise), assets, prospects, obligations or
liabilities (whether absolute, contingent or otherwise and whether due or to
become due) of the Company.
(k) Non-Foreign Status. At or prior to Closing, each of the Executive
Shareholders shall have delivered to MSSC Carolina and Marketing Specialists a
statement certifying that he is not a foreign person, which statement shall
comply with the requirements of Treasury regulation Section 1.1445-2(b).
(l) ESOP. The ESOP shall have been terminated in accordance with
applicable Law, all ESOP participants shall have returned distribution election
forms and no ESOP participant shall have elected to receive from the ESOP shares
of capital stock of Atlas.
(m) Promissory Note Adjustment Agreement. Marketing Specialists and each
of the Executive Shareholders shall have entered into an agreement regarding
certain adjustments (tied to the financial performance of the Company) to the
Promissory Notes and certain other promissory notes, in the form attached hereto
as Exhibit "G".
(n) Financing. Marketing Specialists shall have received adequate
financing for the transactions contemplated by this Agreement and the
ESOP/Management Stock Purchase Agreement on terms that are satisfactory to
Marketing Specialists.
(o) Purchase of Remaining Shares. All conditions to MSSC Carolina's and
Marketing Specialists' obligations to consummate the transactions contemplated
by the ESOP/Management Stock Purchase Agreement shall have been fulfilled.
(p) Documents. All documents to be delivered by the Company and/or the
Executive Shareholders to MSSC Carolina and Marketing Specialists at the Closing
shall be duly executed and in form and substance reasonably satisfactory to MSSC
Carolina and Marketing Specialists.
(q) Other. MSSC Carolina and Marketing Specialists shall have received
such other documents or certificates as MSSC Carolina and Marketing Specialists
may reasonably have requested, including, without limitation, certificates of
good standing with respect to each of Atlas and the Subsidiaries from the
appropriate authority in its jurisdiction of incorporation and certificates of
good standing with respect to each of Atlas and the Subsidiaries from the
appropriate authority in each jurisdiction in which it is qualified to do
business.
SECTION 6.02 Conditions Precedent to Obligations of the Executive
Shareholders and Atlas. The obligations of the Executive Shareholders and Atlas
under this Agreement are subject to the satisfaction or, unless prohibited by
law, the waiver by the Executive Shareholders and Atlas at or before the
Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and warranties of
MSSC Carolina and Marketing Specialists contained herein shall be true, complete
and accurate as of the
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date when made and at and as of the Closing Date as though such representations
and warranties were made at and as of such date.
(b) Performance. MSSC Carolina and Marketing Specialists shall have
performed and complied with all agreements, obligations and conditions required
by this Agreement to be so performed or complied with by them at or prior to the
Closing.
(c) No Injunction. On the Closing Date, there shall be no effective
injunction, writ, preliminary restraining order or any order of any nature
issued by a court of competent jurisdiction restraining or prohibiting
consummation of the transactions contemplated hereby.
(d) No Proceeding or Litigation. There shall not be threatened, instituted
or pending any suit, action, investigation, inquiry or other proceeding by or
before any court or governmental or other regulatory or administrative agency or
commission requesting or looking toward an order, judgment or decree that
restrains or prohibits the consummation of the transactions contemplated hereby.
(e) Officers' Certificates. Each of MSSC Carolina and Marketing
Specialists shall have delivered to the Executive Shareholders and Atlas a
certificate, dated the Closing Date and executed by its respective Chief
Executive Officer and Chief Financial Officer certifying the fulfillment of the
conditions specified in Sections 6.02(a) and (b) hereof.
(f) Secretary's Certificates. MSSC Carolina and Marketing Specialists
shall have delivered to the Executive Shareholders and Atlas a certificate,
dated the Closing Date, executed by its respective Secretary or Assistant
Secretary and certifying as to its organizational documents, enabling
resolutions, incumbency of officers and other related matters.
(g) Opinion of MSSC Carolina's and Marketing Specialists' Counsel. The
Executive Shareholders shall have received an opinion, dated the Closing Date,
from Andrews & Kurth L.L.P., counsel to MSSC Carolina and Marketing Specialists,
in the form attached hereto as Exhibit "H".
(h) No Material Adverse Effect. Except as specifically disclosed herein or
in the Disclosure Schedule, the events occurring since June 30, 1997, and the
conditions arising since such date shall not, in the aggregate, have resulted
in, or with the passage of time or otherwise, reasonably be expected to result
in, a Material Adverse Effect on Marketing Specialists' business, operations,
properties (including tangible and intangible properties), condition (financial
or otherwise), assets, prospects, obligations or liabilities (whether absolute,
contingent or otherwise and whether due or to become due).
(i) Restrictive Covenants of Senior Debt. The restrictive covenants and
events of default under the lending documents that are senior to the Promissory
Notes shall, taken as a whole, not be materially more restrictive to Marketing
Specialists than those covenants and events of default set forth on Exhibit "I"
hereto.
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(j) HSR Waiting Period. Any applicable waiting period under the HSR Act
shall have expired, or a notice of early termination shall have been granted,
regarding the transactions contemplated hereby.
(k) Documents. All documents to be delivered by each of MSSC Carolina and
Marketing Specialists to Atlas at the Closing shall be duly executed and in form
and substance reasonably satisfactory to Atlas.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01 Survival of Representations and Warranties. All
representations and warranties made hereunder shall survive any investigation
made by or on behalf of any party hereto and shall survive for a period of two
years following the Closing; provided, however, that the representations and
warranties (a) contained in this Agreement relating to Taxes or made pursuant to
Sections 3.17 and 3.30 hereof shall survive until 90 days following the
expiration of the period of limitations for any matter relating thereto, plus
any extended period applicable thereto by reason of any waiver of the period of
limitations; (b) made pursuant to Article II or Sections 3.01 through 3.06
hereof shall survive forever; and (c) made pursuant to Section 3.29 hereof shall
survive for a period of five years after Closing, and, provided further, that
the representations and warranties made herein shall be qualified, to the extent
that the party to whom such representation and warranty is made has received and
accepted written documentation (other than the Disclosure Schedule, which is
covered elsewhere herein) of a fact or facts, as of the Closing Date, which
contradicts or is materially inconsistent with any representation, statement, or
averment upon which that party claims reliance to his or her detriment. Each
covenant and agreement (but not representations and warranties, since they are
covered elsewhere above) of the parties hereunder shall survive any
investigation made by or on behalf of any party hereto and shall survive the
Closing hereunder.
SECTION 7.02 Indemnification by the Executive Shareholders. Subject to the
other terms and conditions of this Agreement, the Executive Shareholders jointly
and severally agree to indemnify, defend and hold harmless Marketing Specialists
and MSSC Carolina and any of their respective stockholders, officers, directors,
employees, representatives, affiliates, subsidiaries, successors and assigns
(collectively, the "Marketing Specialists Group"), at any time after the
Closing, from and against all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs and expenses including, without
limitation, interest, penalties and reasonable attorneys' fees and expenses,
after deducting any insurance proceeds received by the Marketing Specialists
Group in connection therewith, (collectively "Marketing Specialists Group
Damages") asserted against, resulting to, imposed upon or incurred by the
Marketing Specialists Group or any member thereof, directly or indirectly, by
reason of or resulting from:
(a) a breach of any representation, warranty or agreement of Atlas
contained in or made pursuant to this Agreement or any facts or circumstances
constituting such a breach;
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(b) a breach of any representation, warranty or agreement of the Executive
Shareholders contained in or made pursuant to this Agreement (including, without
limitation, the provisions set forth in Article VIII hereof) or any facts or
circumstances constituting such a breach (provided, however, that with respect
to this clause (b), the indemnification obligations of Eller and Cummings shall
be several, and not joint, regarding any of their respective breaches of such
items);
(c) any actual or alleged pollution or threat to the environment relating
to Atlas, the Company Business or any of the Company Assets or properties to the
extent that such actual or alleged pollution or threat to the environment
results in any way from facts, conditions or circumstances that occurred or
existed at or prior to the Closing; or
(d) any claims (i) by the Internal Revenue Service or any other state or
local taxing authority regarding (A) the reasonableness of compensation paid to
Eller and/or Cummings ("Reasonable Compensation Tax Claims") in any year or (B)
any Tax of the Company relating to but not paid for any period ending on or
prior to December 31, 1996 ("Other Selected Tax Claims") or (ii) by any Person
regarding unauthorized use by Atlas of software prior to the Closing (or any
amounts required to correct deficiencies in the number of licenses for presently
used software) ("Software Claims"); provided, however, that Marketing
Specialists shall cause Atlas to pay up to $1,000,000, in aggregate, of any
Other Selected Tax Claims, Software Claims, and any taxes, penalties and
interest finally determined to be due and owing by Atlas in connection with
Reasonable Compensation Tax Claims for the 1993, 1994, 1995, 1996 and 1997 tax
years (provided, further, that with respect to this clause (d), the
indemnification obligations of Eller and Cummings shall be several, and not
joint, regarding any taxes, penalties and interest specifically allocated by the
IRS or other taxing authority to the compensation of Eller and Cummings,
respectively, in the final resolution of Reasonable Compensation Tax Claims).
All of the items in the foregoing clauses (a) through (d) are hereinafter
collectively referred to as the "Marketing Specialists Claims".
SECTION 7.03 Indemnification by Marketing Specialists. Subject to the
other terms and conditions of this Agreement, Marketing Specialists agrees to
indemnify, defend and hold harmless the Executive Shareholders and any of their
respective heirs and personal representatives (collectively, the "Executive
Shareholders Group"), at any time after the Closing, from and against all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses including, without limitation, interest,
penalties and reasonable attorneys' fees and expenses, after deducting any
insurance proceeds received by the Executive Shareholders Group in connection
therewith, (collectively "Executive Shareholders Group Damages") asserted
against, resulting to, imposed upon or incurred by the Executive Shareholders
Group or any member thereof, directly or indirectly, by reason of or resulting
from a breach of any representation, warranty or agreement of Marketing
Specialists or MSSC Carolina contained in or made pursuant to this Agreement or
any facts or circumstances constituting such a breach (collectively, the
"Executive Shareholders Claims"; the Marketing Specialists Claims and the
Executive Shareholders Claims are hereinafter collectively referred to as the
"Claims").
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SECTION 7.04 Limitations Regarding Indemnification Obligations of the
Executive Shareholders. Notwithstanding any other provision in this Agreement,
the liability of the Executive Shareholders to indemnify the Marketing
Specialists Group pursuant to Section 7.02 hereof against any Marketing
Specialists Group Damages sustained by reason of any Marketing Specialists Claim
shall be limited to Marketing Specialists Claims as to which any member of the
Marketing Specialists Group has given to the Executive Shareholders written
notice thereof within two years following the Closing, whether or not any
Marketing Specialists Group Damages have then actually been sustained; provided,
however, that, notwithstanding the foregoing, the liability of the Executive
Shareholders to indemnify the Marketing Specialists Group against any Marketing
Specialists Group Damages sustained by reason of any Marketing Specialists Claim
relating to a breach of any of the representations, warranties or agreements (a)
relating to Taxes or made pursuant to Sections 3.17, 3.30, 5.12 and 7.02(d) of
this Agreement shall be limited to Marketing Specialists Claims as to which a
member of the Marketing Specialists Group has given to the Executive
Shareholders written notice thereof at or prior to 90 days following the
expiration of the period of limitations applicable to the event giving rise to
such Marketing Specialists Claim, plus any extended period applicable thereto by
reason of any waiver of the period of limitations; (b) made pursuant to Article
II hereof or Sections 3.01 through 3.06 hereof shall not be limited by the time
in which such Marketing Specialists Claim is made; and (c) made pursuant to
Section 3.29 or 7.02(c) hereof shall be limited to Marketing Specialists Claims
as to which a member of the Marketing Specialists Group has given to the
Executive Shareholders written notice thereof within five years following the
Closing; and, provided, further, the provisions for indemnity contained in this
Agreement (except for Marketing Specialists Claims arising under Section 7.02(d)
hereof, for which no limit or Executive Shareholder's Basket Amount (as defined
below) shall apply) shall be effective against Eller or Cummings individually
only after the aggregate amount of all Marketing Specialists Claims for which
such individual is liable hereunder (on a joint or several basis) equals or
exceeds the amount (the "Executive Shareholder's Basket Amount") obtained by
multiplying $150,000 by a fraction, the numerator of which is equal to (i) in
the case of Eller, all amounts payable to Eller for his Shares pursuant to the
provisions of Section 1.04 hereof, as such consideration may be adjusted by the
Promissory Note Adjustment Agreement (the "Eller Share Consideration"), and (ii)
in the case of Cummings, all amounts payable to Cummings for his Shares pursuant
to the provisions of Section 1.04(d) hereof, as such consideration may be
adjusted by the Promissory Note Adjustment Agreement (the "Cummings Share
Consideration"), and the denominator of which is equal to the sum of the Eller
Share Consideration and the Cummings Share Consideration, and then only to the
extent that such indemnity exceeds such Executive Shareholder's Basket Amount,
but in no event in excess of the Eller Share Consideration or the Cummings Share
Consideration, as applicable. Marketing Specialists, on behalf of the Marketing
Specialists Group, hereby agrees to use all reasonable efforts (not including
the expenditure of more than a de minimis amount of funds or the filing of a
lawsuit) to pursue redress against Persons other than the Executive Shareholders
(including, without limitation, seeking recovery of applicable insurance
proceeds) prior to seeking indemnification hereunder against the Executive
Shareholders, if in the reasonable opinion of Marketing Specialists such other
Persons are primarily responsible for the Marketing Specialists Claims in
question; provided that, if Marketing Specialists is in any way unsuccessful in
such efforts, it shall notify the Executive Shareholders as promptly as
practicable so that the Executive Shareholders may fulfill their indemnification
obligations hereunder (and Marketing Specialists shall share with the Executive
Shareholders any information gained by Marketing Specialists from such other
Persons regarding the
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Marketing Specialists Claims in question, and, upon payment in full (or
completion of arrangements for payment satisfactory to Marketing Specialists) by
the Executive Shareholders of the Marketing Specialists Group Damages regarding
the Marketing Specialists Claims in question, Marketing Specialists shall assign
to the Executive Shareholders any rights of Marketing Specialists against such
Persons (including insurance companies) and shall provide reasonable cooperation
to the Executive Shareholders in pursuing such claim as long as the Executive
Shareholders pay all expenses of Marketing Specialists reasonably incurred in
connection with such cooperation). The sum of the Executive Shareholder's Basket
Amount for Cummings and the Executive Shareholder's Basket Amount for Eller
shall be increased (a "Basket Increase") in the event, and to the extent, that
the Executive Shareholders can prove to Marketing Specialists with reasonable
certainty that the amount of allowances for uncollectible brokerage accounts
receivable of the Company set forth in the September 30, 1997 balance sheet
included in the Nine-Month Financial Statements was overstated; that is, the
Basket Increase (if any) will be equal in amount to (i) the amount of all actual
collections of brokerage accounts receivable included in such balance sheet less
(ii) the net amount of brokerage accounts receivable (i.e., net of allowance)
included in such balance sheet. Any Basket Increase shall be applied one-half to
the Executive Shareholder's Basket Amount for Cummings and one-half to the
Executive Shareholder's Basket Amount for Eller, unless Marketing Specialists
receives joint written instructions from the Executive Shareholders regarding a
different allocation.
SECTION 7.05 Limitations Regarding Indemnification Obligations of
Marketing Specialists. Notwithstanding any other provision in this Agreement,
the liability of Marketing Specialists to indemnify the Executive Shareholders
Group pursuant to Section 7.03 hereof against any Executive Shareholders Group
Damages sustained by reason of any Executive Shareholders Claim shall be limited
to Executive Shareholders Claims as to which any member of the Executive
Shareholders Group has given to Marketing Specialists written notice thereof
within two years following the Closing, whether or not any Executive
Shareholders Group Damages have then actually been sustained; provided, however,
that, notwithstanding the foregoing, the liability of Marketing Specialists to
indemnify the Executive Shareholders Group against any Executive Shareholders
Group Damages sustained by reason of any Executive Shareholders Claim relating
to a breach of any of the representations and warranties made pursuant to
Sections 4.01 through 4.07 hereof shall not be limited by the time in which such
Executive Shareholders Claim is made; and provided, further, that the provisions
for indemnity contained in this Agreement shall be effective against Marketing
Specialists only if, and to the extent that, the aggregate amount of all
Executive Shareholders Claims for which Marketing Specialists is liable
hereunder equals or exceeds $150,000 (the "Marketing Specialists Basket
Amount"), and then only to the extent that such indemnity exceeds the Marketing
Specialists Basket Amount, but in no event in excess of the sum of the Eller
Share Consideration and the Cummings Share Consideration.
SECTION 7.06 Conditions of Indemnification. The obligations and
liabilities of the parties with respect to Claims shall be subject to the
following terms and conditions:
(a) The indemnified party shall give the indemnifying party prompt notice
of any such Claim, and the indemnifying party shall have the right to undertake
the defense thereof by representatives chosen by it;
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(b) If the indemnifying party fails to defend the indemnified party
against such Claim within a reasonable time after being notified of the Claim,
then the indemnified party shall (upon further notice to the indemnifying party)
have the right to defend, compromise or settle such Claim on behalf of and for
the account and risk of the indemnifying party subject to the right of the
indemnifying party to assume the defense of such Claim at any time prior to
settlement, compromise or final determination thereof; provided, that the
indemnified party shall provide the indemnifying party with notice of any
proposed settlement or compromise of such Claim (as far in advance of the actual
settlement or compromise of the Claim as is reasonably practicable); and
(c) Anything in this Agreement to the contrary notwithstanding, (i) if
there is a reasonable probability that a Claim may materially and adversely
affect the indemnified party other than as a result of money damages or other
money payments, the indemnified party shall have the right, at the cost and
expense of the indemnifying party, to manage the defense, compromise or
settlement of such Claim; provided, however, that if such Claim is settled
without the indemnifying party's consent (which consent shall not be
unreasonably withheld), the indemnified party shall be deemed to have waived all
rights hereunder against the indemnifying party for money damages arising out of
such Claim; and (ii) the indemnifying party shall not, without the written
consent of the indemnified party, settle or compromise any Claim or consent to
the entry of any judgment which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the indemnified party a
release from all liability in respect to such Claim.
SECTION 7.07 Payment/Setoff of Indemnification Claims Against the
Executive Shareholders. Any payment obligation of the Executive Shareholders
regarding the indemnities hereunder shall be satisfied (in any proportion
between Eller and Cummings as selected by Marketing Specialists), subject to the
second proviso of this sentence in the following manner and order: (a) first, as
against Eller, by Marketing Specialists reducing the outstanding amount of
accrued but unpaid interest (and then outstanding principal) under the terms of
the Promissory Note received by Eller from Marketing Specialists at the Closing
and/or, as against Cummings, by Marketing Specialists reducing the outstanding
amount of accrued but unpaid interest (and then outstanding principal) under the
terms of the Promissory Note received by Cummings from Marketing Specialists at
the Closing, then (b) second, by the prompt payment of immediately available
funds by wire transfer to Marketing Specialists by Eller and/or Cummings for any
amounts owed by them, respectively, under this Agreement that have not been
satisfied by the other means set forth in this Section 7.07; provided, however,
that Eller and/or Cummings may choose in any event to satisfy their payment
obligations under this Section 7.07 by means of payment pursuant to clause (b)
above; provided, further, that Marketing Specialists may only seek payment from
one Executive Shareholder for Marketing Specialists Claims that are the joint
and several responsibility of both Executive Shareholders if Marketing
Specialists has first exhausted the Executive Shareholder's Basket Amount for
both Executive Shareholders.
SECTION 7.08 Claim Disputes.
(a) Within 30 days of its receipt of written notice from Marketing
Specialists under Section 7.06 above regarding a Marketing Specialists Claim and
the amount of Marketing Specialists Group Damages related thereto (and the
proposed method of payment under Section 7.07 above), the Executive Shareholders
shall deliver to Marketing Specialists written notice containing specific
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objections (prepared in good faith) to the nature of the Marketing Specialists
Claim or the amount of Marketing Specialists Group Damages specified in the
original notice. In such event, Marketing Specialists and the Executive
Shareholders shall work in good faith during the next 30 days toward resolving
any such objections. If a resolution is reached within such 30 days, the
Marketing Specialists Group shall be indemnified for the amount so agreed upon
in accordance with the other terms and conditions of this Agreement.
(b) Within 30 days of its receipt of written notice from either Executive
Shareholder under Section 7.06 above regarding a Executive Shareholders Claim
and the amount of Executive Shareholders Group Damages related thereto,
Marketing Specialists shall deliver to such Executive Shareholder written notice
containing specific objections (prepared in good faith) to the nature of the
Executive Shareholders Claim or the amount of Executive Shareholders Group
Damages specified in the original notice. In such event, Marketing Specialists
and such Executive Shareholder shall work in good faith during the next 30 days
toward resolving any such objections. If a resolution is reached within such 30
days, the Executive Shareholder Group shall be indemnified for the amount so
agreed upon in accordance with the other terms and conditions of this Agreement.
(c) In the event no mutually agreeable resolution of an indemnification
matter is reached under the foregoing clauses (a) or (b) within such 30 day
period, such dispute shall be submitted to three arbitrators in accordance with
the Rules of Commercial Arbitration of the American Arbitration Association. If
there is a dispute as to whether all or any part of a Claim arose after the
Closing, this issue (as well as the resulting allocation of damages) may,
without limitation as to other matters, be among the matters addressed by the
arbitrators. The arbitrators shall be governed by and shall apply the
substantive law of the State of Texas in making their determination, and their
ruling shall be binding and conclusive upon Marketing Specialists and the
Executive Shareholders.
SECTION 7.09 Remedies Cumulative. The remedies provided to the parties in
this Agreement shall be cumulative and shall not preclude assertion by them of
any other rights or the seeking of any other remedies against any other party
hereto; provided, however, that the indemnification remedy provided to Marketing
Specialists under this Article VII for matters arising under Section 7.02(d)
hereof shall be the sole and exclusive remedy for Marketing Specialists and
Atlas against the Executive Shareholders for any claim by any Person against the
Executive Shareholders for allegedly excessive compensation previously paid to
them by Atlas.
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ARTICLE VIII
RESTRICTIONS REGARDING UNFAIR COMPETITION
SECTION 8.01 Restriction of Unfair Competition. Each of the Executive
Shareholders acknowledges (i) that he has significant information regarding the
Company Business and (ii) that he has had access, through the course of
preparation and negotiation of this Agreement, to significant information
regarding the business of Marketing Specialists. After the Closing, each of the
Executive Shareholders will restrict his activities so that Marketing
Specialists' reasonable expectations with respect to the goodwill, business
reputation, employee relations and prospects connected with the Principals (as
defined in Section 8.02 hereof) will not be materially impaired. In furtherance
but not in limitation of this general obligation, each of the Executive
Shareholders covenants and agrees as follows:
(a) During the Noncompete Period (as defined in Section 8.02 hereof), he
shall not, for himself or herself or on behalf of any other Person (other than
Marketing Specialists and its subsidiaries) take, solicit, handle, represent,
interfere with, infringe upon or otherwise divert any of the Company Business or
Marketing Specialists' business with respect to the Principals to any competitor
of Marketing Specialists now or hereafter operating or located within the
Counties (as defined in Section 8.02 hereof).
(b) During the first five years following the Closing, he or she shall not
take employment, directly or indirectly, from or with any Person or engage in
any work for any Person, directly or indirectly, who has received or accepted or
receives or accepts within the prior six months (i.e., six months prior to the
commencement of employment with such Person by an Executive Shareholder) the
handling or representation of any of the Company Principals in the Counties.
(c) During the Noncompete Period, he or she will not, directly or
indirectly, solicit, contact, call on, divert or attempt to divert to any
competitor of Marketing Specialists and its subsidiaries any of the Principals
in the Counties without the prior written approval and permission of Marketing
Specialists.
(d) During the full seven-year Noncompete Period, he or she shall not
solicit, directly or indirectly, nor provide any other Person any information to
use in soliciting, any employees to leave Atlas or any successor thereof (and
join any Person with which such Executive Shareholder is associated, directly or
indirectly).
SECTION 8.02 Certain Definitions. As used in this Article VIII, the term
(a) "Noncompete Period" means (i) a period of seven years following the Closing
with respect to the Company Principals (as defined below) or any actions of
Executive Shareholders concerning or affecting the Company Principals, and (ii)
a period of two years following the Closing with respect to the Marketing
Specialists Principals (as defined below) or any actions of Executive
Shareholders concerning or affecting the Marketing Specialists Principals; (b)
"Counties" means (i) for the first
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two years following the Closing, all counties in which Marketing Specialists (or
its subsidiaries) does business and (ii) for the next five years following the
Closing, all counties in which the Company (or any successor thereof) does
business with any or all of its 250 largest principals; (c) "Company Principals"
shall mean the principals whose products, product lines and/or lines of business
are represented by the Company on the Closing Date or for which, in the prior
three months, active solicitation of such principal by Atlas had occurred; (d)
"Marketing Specialists Principals" shall mean any principal whose products,
product lines and/or lines of business are represented by Marketing Specialists
(or its subsidiaries) on the Closing Date or for which, in the prior three
months, active solicitation of such principal by Marketing Specialists (or its
subsidiaries) had occurred; and (e) "Principals" means, collectively, the
Company Principals and the Marketing Specialists Principals.
SECTION 8.03 General Provisions Regarding the Restrictive Covenants.
(a) The separate (and not joint) covenants on the part of the Executive
Shareholders set forth in this Article VIII (the "Restrictive Covenants") are
given and made by the Executive Shareholders to induce Marketing Specialists to
purchase the Shares, and the Executive Shareholders hereby acknowledge the
sufficiency of the consideration for such Restrictive Covenants.
(b) Each of the Executive Shareholders acknowledges and agrees that these
Restrictive Covenants are reasonable and necessary and are supported by the
valid business interests of Marketing Specialists, and the restrictions during
the Noncompete Period are essential to the full protection of those valid
business interests.
(c) Except as otherwise set forth to the contrary in Article VII hereof,
these Restrictive Covenants shall be construed as agreements independent of any
other provision in this Agreement, and the existence of any claim or cause of
action of the Executive Shareholders against Marketing Specialists (other than a
claim arising as a result of Marketing Specialists' failure to pay amounts
properly due under the Promissory Notes, whether because of subordination
provisions therein or otherwise (a "Note Failure"), as discussed below), whether
predicated upon this Agreement or otherwise, shall not constitute a defense to
the enforcement by Marketing Specialists of any of these Restrictive Covenants;
provided, that if a Note Failure occurs within three years of Closing, these
Restrictive Covenants shall remain in full force and effect (the immediately
available funds portion of the Total Purchase Price being deemed to support such
enforcement); provided further, that if a Note Failure lasts for more than three
continuous months at any time after the third anniversary of the Closing, the
affected Executive Shareholder(s) shall not be bound by the Restrictive
Covenants during the continuation of such Note Failure.
(d) Marketing Specialists' failure to object to any conduct in violation
of the covenants set forth in Article VIII hereof shall not be deemed a waiver
by Marketing Specialists, but Marketing Specialists may, if it wishes,
specifically waive any part of all of those covenants to the extent that such
waiver is set forth in a writing duly executed by Marketing Specialists.
(e) If any portion of any Restrictive Covenant is held by a court of
competent jurisdiction to be unreasonable, arbitrary, or against public policy
for any reason, the Restrictive Covenant in
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question shall be considered divisible as to line of business, time, and
geographic area. If a court of competent jurisdiction should determine the
specified lines of business, the specified period, or the specified geographic
area to be unreasonable, arbitrary, or against public policy for any reason, a
narrower line of business, a lesser period of time, or a smaller geographic area
that is determined to be reasonable, non-arbitrary, and not against public
policy for any reason, may be enforced by Marketing Specialists against the
Executive Shareholders.
SECTION 8.04 Damages.
(a) The parties hereto acknowledge and stipulate that breach of the
Restrictive Covenants may irreparably harm Marketing Specialists and cause
significant damage and loss to Marketing Specialists and that, in such event,
Marketing Specialists may have no adequate remedy at law. The parties further
acknowledge that money damages for such breach are difficult, if not impossible,
to calculate and that the most appropriate relief in the event of breach would
be injunctive relief. In the event of a breach or threatened breach by a
Executive Shareholder of any of the provisions of the Restrictive Covenants,
Marketing Specialists shall be entitled to entry of a temporary or permanent
injunction, without bond of any kind, restraining such Executive Shareholder
from violation of the Restrictive Covenants. Should an action be brought by
Marketing Specialists against such Executive Shareholder to enforce any
Restrictive Covenant, the period of restriction shall be deemed to begin running
on the date of entry of an order granting the Company injunctive relief and
shall continue uninterrupted until the expiration of the applicable Noncompete
Period.
(b) Notwithstanding that Marketing Specialists does not have an adequate
remedy at law for a breach of the Restrictive Covenants, the parties hereto
stipulate and agree that in the event of breach of said Restrictive Covenants,
Marketing Specialists will suffer damages during the period of time in which the
breaching party competes or attempts to compete with Marketing Specialists.
Furthermore, the parties stipulate and agree that the precise amount of damages
incurred by Marketing Specialists in such circumstances would be difficult, if
not impossible, to calculate and, therefore, the parties hereby stipulate and
agree to imposition of liquidated damages for each Principal actually lost by
Marketing Specialists to such Executive Shareholder or any Person with which
such Executive Shareholder becomes associated (directly or indirectly), in an
amount (the "Damage Amount") equal to the greater of:
(i) the gross brokerage paid by such lost Principal to Marketing
Specialists for the twelve-month period (if the breach occurs within the
first two years after Closing) or the eight-month period (if the breach
occurs thereafter) immediately preceding such Executive Shareholder's
breach;
(ii) the gross brokerage paid by such lost Principal to such
Executive Shareholder or any Person with which such Executive Shareholder
becomes associated during the twelve month period (if the breach occurs
within the first two years after Closing) or the eight-month period (if
the breach occurs thereafter) immediately following such Executive
Shareholder's breach; or
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(iii) the gross brokerage paid by such lost Principal to Marketing
Specialists for the twelve-month period (if the breach occurs within the
first two years after Closing) or the eight-month period (if the breach
occurs thereafter) immediately prior to Marketing Specialists ceasing to
represent such Principal.
(c) All remedies given to Marketing Specialists by this Agreement shall be
construed as cumulative remedies and shall not be alternative or exclusive
remedies. In the event of breach or threatened breach by either of the Executive
Shareholders of this Restrictive Covenant, the breaching party agrees to pay to
Marketing Specialists the Damage Amount relative to said breach or threatened
breach. In addition and not limitation of any of the foregoing, Marketing
Specialists shall be entitled to immediately setoff further payments under the
appropriate Promissory Note to such breaching Executive Shareholder in the event
of such Executive Shareholder's breach of the Restrictive Covenants, to the
extent of the Damage Amount, in accordance with Section 7.07 hereof.
ARTICLE IX
TERMINATION OF AGREEMENT
SECTION 9.01 Termination of Agreement. This Agreement may be terminated at
any time prior to the Closing:
(a) by mutual agreement of Atlas, the Executive Shareholders, MSSC
Carolina and Marketing Specialists;
(b) by MSSC Carolina or Marketing Specialists, on or after February 28,
1998, if any of the conditions provided in Section 6.01 hereof of this Agreement
have not been met or, to the extent permitted by applicable law, have not been
waived in writing by MSSC Carolina or Marketing Specialists prior to such date;
or
(c) by Atlas and the Executive Shareholders, on or after February 28,
1998, if any of the conditions provided in Section 6.02 hereof have not been met
or, to the extent permitted by applicable law, have not been waived in writing
by Atlas and the Executive Shareholders prior to such date.
SECTION 9.02 Procedure Upon Termination. In the event of termination by
Atlas, the Executive Shareholders, MSSC Carolina or Marketing Specialists
pursuant to Section 7.01 hereof, written notice thereof shall promptly be given
to the other parties and the transactions contemplated by this Agreement shall
be terminated, without further action by any party. If the transactions
contemplated by this Agreement are terminated as provided herein:
(a) each of Atlas, the Executive Shareholders, MSSC Carolina and Marketing
Specialists shall return all documents, work papers and other material of any
other party relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the party furnishing the same;
and
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(b) all confidential information received by Atlas, the Executive
Shareholders, MSSC Carolina or Marketing Specialists with respect to the
business of any other party or its subsidiaries or affiliates shall be treated
confidentially in accordance with Section 5.08 hereof, and Section 5.08 hereof
shall remain in full force and effect notwithstanding the termination of this
Agreement.
ARTICLE X
MISCELLANEOUS
SECTION 10.01 Commissions. No party hereto has employed any investment
banker, broker, finder or similar agent in connection with any transaction
contemplated by this Agreement.
SECTION 10.02 Definition of Knowledge. For the purpose of this Agreement,
the Exhibits and Appendices to this Agreement and the Disclosure Schedule, the
phrases "to the best knowledge" of any party and "known" and words of like
effect shall mean to the knowledge of such party, which knowledge shall also
include information existing in the records and files of such party; provided,
when such party is the Company and/or the Executive Shareholders, such words
shall mean the actual knowledge (after review of their records and files) of the
Executive Shareholders, after receiving certifications from the individual
shareholders of Atlas who are parties to the ESOP/Management Stock Purchase
Agreement (which certifications shall be made to the Executive Shareholders as
well as to Marketing Specialists) as to such individuals' actual knowledge
regarding the pertinent matter (after review of their records and files) (the
"Company Standard"); and, provided further, that when such party is the Company
and the matters relate to items addressed in Section 3.17 hereof, such words
shall mean the Company Standard plus the non-written inquiry by the Executive
Shareholders regarding such matters with each trustee, administrator and primary
recordkeeper regarding any Plan (as well as inquiry of any legal counsel who has
responsibilities regarding any Plan).
SECTION 10.03 Definition of Material Adverse Effect and Material Adverse
Change. "Material Adverse Effect" or "Material Adverse Change" means, with
respect to any party, any change, occurrence or effect (direct or indirect) on
the business, operations, properties (including tangible properties), condition
(financial or otherwise), assets, prospects, obligations or liabilities (whether
absolute, contingent or otherwise and whether due or to become due) of such
party and its subsidiaries taken as a whole that reasonably could be expected to
exceed $20,000. "Material" or "materially" or words of like effect shall refer
to items capable of producing a monetary effect of at least $20,000 on the
business, operations, properties (including intangible properties), condition
(financial or otherwise), assets, prospects, obligations or liabilities (whether
absolute, contingent or otherwise and whether due or to become due) of the
relevant party and its subsidiaries taken as a whole; provided, however, that
the word "materially", as used in Section 6.02(i) hereof, shall have a threshold
of $500,000. Notwithstanding the foregoing, the term "Material Adverse Effect",
as used in Article IV and Section 6.02(h), shall have a dollar threshold of
$500,000 (and shall exclude the effects of the financing contemplated under
Section 6.01(n) hereof).
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<PAGE> 56
SECTION 10.04 Expenses, Taxes, Etc. Except as otherwise provided herein,
in the event of the termination of this Agreement prior to Closing, each of the
parties hereto shall pay all fees and expenses incurred by it or any of its
affiliates in connection with the transactions contemplated by this Agreement.
SECTION 10.05 Successors and Assigns. No party shall have the right to
assign all or any part of its interest in this Agreement without the prior
written consent of the other parties, and any attempted transfer without such
consent shall be null and void.
SECTION 10.06 No Third-Party Benefit. Nothing in this Agreement shall be
deemed to create any right or obligation in any Person not a party hereto and
this Agreement shall not be construed in any respect to be a contract or
agreement in whole or in part for the benefit of or binding upon any Person not
a party hereto.
SECTION 10.07 Entire Agreement; Amendment. This Agreement, the Exhibits,
the Appendices and the Disclosure Schedule hereto constitute the entire
agreement among the parties hereto with respect to the transactions contemplated
herein and supersede all prior oral and written agreements, memoranda,
understandings and undertakings between the parties hereto relating to the
subject matter hereof including, without limitation, the letter of intent
between Atlas and Marketing Specialists and the proposal of terms attached
thereto. This Agreement may not be modified, amended, altered or supplemented
except by a written instrument executed and delivered by each of the parties
hereto.
SECTION 10.08 Reformation and Severability. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under present or
future laws effective during the term hereof and such illegality, invalidity or
unenforceability does not result in a material failure of consideration, then;
(a) in lieu of such illegal, invalid or unenforceable provision, there
shall be added automatically as a part of this Agreement a provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible
and be legal, valid and enforceable; and
(b) the legality, validity and enforceability of the remaining provisions
hereof shall not in any way be affected or impaired thereby.
SECTION 10.09 Notices. All notices, claims, certificates, requests,
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally or telecopied or five
business days after being mailed (registered or certified mail, postage prepaid,
return receipt requested) as follows:
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<PAGE> 57
If to MSSC Carolina or Marketing Specialists:
Richmont Marketing Specialists Inc.
2324 Gateway Drive
Irving, Texas 75063
Attention: Gary R. Guffey
Telecopier: (972) 550-1896
with a copy to:
Andrews & Kurth L.L.P.
1717 Main Street
Suite 3700
Dallas, Texas 75201
Attention: J. Gregory Holloway, Esq.
Telecopier: (214) 659-4401
If to Atlas:
Atlas Marketing Company, Inc.
P.O. Box 29100
Charlotte, North Carolina 28229-9100
Attention: Quincy Cummings
with a copy to each of:
Smith & Feerick, P.A. Tuggle Duggins & Meschan, P.A.
Cameron Brown Bldg., Suite 911 228 West Market Street
301 South McDowell Street Greensboro, North Carolina 27401
Charlotte, North Carolina 28204 Attention: Richard J. Tuggle, Jr.
Attention: Norman A. Smith Telecopier: (910) 274-1148
Telecopier: (704) 372-9149
or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above,
provided that notice of a change of address shall be deemed given only upon
receipt.
SECTION 10.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS,
WITHOUT REGARD TO ITS CONFLICTS OF LAW RULES.
SECTION 10.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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<PAGE> 58
The remainder of this page is intentionally left blank.
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<PAGE> 59
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
parties hereto on the date first above written.
ATLAS MARKETING COMPANY, INC.
By: /s/ Joel Lineberger
---------------------------------
Name: Joel Lineberger
---------------------------------
Title: Vice President - Finance
---------------------------------
/s/ Quincy Cummings
---------------------------------------
Quincy Cummings
/s/ Gynn Eller
---------------------------------------
Gynn Eller
RICHMONT MARKETING SPECIALISTS INC.
By: /s/ Timothy M. Byrd
---------------------------------
Name: Timothy M. Byrd
---------------------------------
Title: Chief Financial Officer
---------------------------------
MSSC CAROLINA, INC.
By: /s/ Gary R. Guffey
---------------------------------
Name: Gary R. Guffey
---------------------------------
Title: Executive Vice President
---------------------------------
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<PAGE> 60
EXHIBIT "A"
Share Ownership and Total Purchase Price Allocation
<TABLE>
<CAPTION>
Name No. of Shares Wire Transfer Promissory Note
---- ------------- ------------- ---------------
<S> <C> <C> <C>
Quincy Cummings 549,182.2 $ 3,408,361 $ 4,547,302
Gynn Eller 717,870 $ 4,455,281 $ 6,879,912
</TABLE>
<PAGE> 1
EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
among
RICHMONT MARKETING SPECIALISTS INC.,
and
MSSC CAROLINA, INC.,
and
ATLAS MARKETING COMPANY, INC. EMPLOYEE STOCK OWNERSHIP PLAN,
and
CLARK BRINKLEY, BARNEY DEAL, DOUG HEYEL, JOEL LINEBERGER,
FRED MANNING, DONALD OLIN AND GARY PROPST
Dated as of November 6, 1997
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I - PURCHASE AND SALE OF SHARES........................................1
Section 1.1 Purchase and Sale of Shares..................................1
Section 1.2 Date and Time of Closing.....................................2
Section 1.3 Delivery of Certificates.....................................2
Section 1.4 Allocation and Payment of Total Purchase Price...............2
Section 1.5 Agreement of Marketing Specialists
Regarding Immediately Available Funds........................2
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF SELLERS.........................2
Section 2.1 Representations and Warranties of Sellers. .................2
Section 2.2 Disclosure...................................................4
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF BUYER
AND MARKETING SPECIALISTS.......................................4
Section 3.1 Representations and Warranties of Buyer......................4
Section 3.2 Representations and Warranties of Marketing
Specialists..................................................6
Section 3.3 Disclosure...................................................7
ARTICLE IV - NO PUBLICITY; CONFIDENTIALITY.....................................8
Section 4.1 No Publicity; Confidentiality................................8
ARTICLE V - COVENANTS OF PARTIES...............................................8
Section 5.1 Pre-Closing Covenants........................................8
Section 5.2 Transfer of Shares...........................................8
Section 5.3 Exclusivity..................................................9
Section 5.4 ESOP Elections...............................................9
ARTICLE VI - CONDITIONS TO CLOSING.............................................9
Section 6.1 Buyer's and Marketing Specialists's Conditions
to Closing...................................................9
Section 6.2 Sellers' Conditions to Closing..............................10
ARTICLE VII - TERMINATION.....................................................11
Section 7.1 Termination.................................................11
Section 7.2 Procedure Upon Termination..................................11
ARTICLE VIII - SURVIVAL OF REPRESENTATIONS AND WARRANTIES.....................12
Section 8.1 Survival of Representations and Warranties
of Sellers..................................................12
Section 8.2 Survival of Representations and Warranties
of Buyer and Marketing Specialists..........................12
ARTICLE IX - GENERAL PROVISIONS...............................................12
Section 9.1 Time of Essence.............................................12
Section 9.2 Notice......................................................12
-i-
<PAGE> 3
TABLE OF CONTENTS
Page
----
Section 9.3 Binding Upon Successors and Assigns........................13
Section 9.4 Counterparts...............................................14
Section 9.5 Entire Agreement...........................................14
Section 9.6 No Third-Party Beneficiaries...............................14
Section 9.7 Headings...................................................14
Section 9.8 Severability...............................................14
Section 9.9 Additional Documents.......................................14
Section 9.10 Amendments and Waivers.....................................14
Section 9.11 Expenses, Taxes, Etc.......................................15
Section 9.12 Governing Law..............................................15
Section 9.13 Commissions................................................15
Section 9.14 Definition of Knowledge....................................15
Section 9.15 Definition of Material Adverse Effect......................15
EXHIBIT A Sellers and Allocation of Shares and Total Purchase Price
EXHIBIT B Form of Promissory Note
EXHIBIT C Form of Sellers' Legal Opinion - Tuggle Duggans & Meschan, P.A.
EXHIBIT D Form of Sellers' Legal Opinion - Smith & Feerick, P.A.
EXHIBIT E Form of Buyer's and Marketing Specialists' Legal Opinion
-ii-
<PAGE> 4
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into as of
November 6, 1997, between Richmont Marketing Specialists Inc., a Delaware
corporation ("Marketing Specialists"), MSSC Carolina, Inc., a Delaware
corporation and a wholly owned subsidiary of Marketing Specialists (the
"Buyer"), Atlas Marketing Company, Inc. Employee Stock Ownership Plan (the
"ESOP"), and Clark Brinkley, Barney Deal, Doug Heyel, Joel Lineberger, Fred
Manning, Donald Olin and Gary Propst (collectively, the "Management
Shareholders" and, together with the ESOP, the "Sellers").
RECITALS
WHEREAS, the ESOP is the owner of 674,304 of the issued and outstanding
shares (the "ESOP Shares") of Common Stock, par value $.01 per share (the
"Common Stock") of Atlas Marketing Company, Inc., a corporation incorporated
under the laws of the State of North Carolina (the "Company"); and
WHEREAS, the Management Shareholders are the owners of 97,910 of the
issued and outstanding shares (the "Management Shares", and, collectively with
the ESOP Shares, the "Shares") of the Company's Common Stock; and
WHEREAS, the Sellers wish to sell, and the Buyer wishes to purchase, the
Shares on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the covenants,
agreements, warranties and representations set forth and provided for herein,
the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
Section 1.1 Purchase and Sale of Shares. On and subject to the terms and
conditions of this Agreement, each Seller covenants and agrees that such Seller
will sell, assign and transfer to Buyer, and Buyer covenants and agrees that it
will purchase from such Seller, that number of Shares set forth opposite such
Seller's name on Exhibit "A". The amount of consideration to be paid to each
Seller shall be the amount set forth opposite such Seller's name on Exhibit "A"
(such amounts, in the aggregate, the "Total Purchase Price"). The Total Purchase
Price shall be paid by Buyer to Sellers in the manner set forth in Section 1.4.
<PAGE> 5
Section 1.2 Date and Time of Closing. The sale and purchase of the Shares
provided for by this Article I shall be consummated, provided that each of the
conditions set forth in Article VI hereto shall have been satisfied or waived,
at the offices of Andrews & Kurth L.L.P., 425 Lexington Avenue, New York, New
York 10017, at 10 a.m. on December 12, 1997, or such other time and place as may
be mutually agreed upon by the parties to this Agreement (the "Closing").
Section 1.3 Delivery of Certificates. At the Closing, Sellers shall
deliver to Buyer certificates representing the Shares duly endorsed in blank for
transfer (or accompanied by duly executed stock powers) and will cause the
transfer of such Shares to be duly and properly recorded in the name of Buyer.
Section 1.4 Allocation and Payment of Total Purchase Price. The Total
Purchase Price shall be $12,646,880.97, and shall be allocated among Sellers in
the amounts set forth opposite each Seller's name on Exhibit "A", which amounts
shall be paid (i) to the ESOP by wire transfer in immediately available funds
and (ii) to each Management Shareholder by wire transfer in immediately
available funds (in the amount set forth beside such Management Shareholder's
name on Exhibit "A") and by delivery of a promissory note from Marketing
Specialists in the form of Exhibit "B" (in the principal amount set forth beside
such Management Shareholder's name on Exhibit "A") (collectively, the
"Promissory Notes").
Section 1.5 Agreement of Marketing Specialists Regarding Immediately
Available Funds. Marketing Specialists hereby agrees to cause MSSC Carolina at
the Closing to have immediately available funds in an amount sufficient to allow
MSSC Carolina to meet its payment obligations regarding the wire transfers
contemplated under Section 1.4 hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Section 2.1 Representations and Warranties of Sellers. Each Seller
severally represents and warrants to Buyer and Marketing Specialists that the
statements contained in this Section 2.1 regarding such Seller are true and
correct as of the date of this Agreement and will be true and correct as of the
Closing.
(a) Ownership of Stock. Such Seller has valid and marketable title
to and is the sole owner of the Shares set forth beside such Seller's name on
Exhibit "A" hereto, free and clear of any and all restrictions on transfer,
claims, taxes, security interests, liens, pledges, hypothecations, options,
warrants, rights, contracts, calls, commitments, equities, demands or other
encumbrances of any kind whatsoever (collectively, "Stock Encumbrances"). Such
Seller is not subject to any option, warrant, right, contract, call, put, or
other agreement or commitment providing for the disposition or acquisition of
any share in the capital of the Company (other than this Agreement). Upon
transfer of such Seller's Shares hereunder, Buyer will acquire valid and
marketable title to such Shares, free and clear of Stock Encumbrances thereon
imposed by, through or under such Seller.
-2-
<PAGE> 6
(b) Enforceability; No Conflicts; Required Filings and Consents.
(i) Such Seller has all requisite power and authority and
legal capacity to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. In addition, in the case of the ESOP, Quincy
Cummings, the trustee of the ESOP (the "Trustee") has all requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated by this Agreement on behalf of the ESOP. This Agreement has been
duly executed and delivered by such Seller. This Agreement constitutes a valid
and binding obligation of such Seller, enforceable against such Seller in
accordance with its terms, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors' rights generally or by general equitable
principles.
(ii) The execution and delivery by such Seller of this
Agreement do not and will not (A) result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default (or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of any material benefit) under any of the terms, conditions or
provisions of any contract or other agreement to which such Seller is a party or
by which such Seller or any of his or its properties or assets may be bound
(including, with respect to the ESOP, its applicable organizational documents),
or (B) conflict with or violate any permit, license, judgment, order, statute,
ordinance, rule or regulation applicable to such Seller or any of his or its
properties or assets. None of the Management Shares being sold hereunder by such
Management Shareholder are subject to the community property rights of any
person other than such Management Shareholder.
(iii) No consent or approval of any court, administrative
agency or commission or other federal, state, local, foreign or other
governmental authority or instrumentality ("Governmental Entity") is required by
or with respect to such Seller in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated by this
Agreement.
(c) Accredited Investor. Such Seller is an "Accredited Investor" as
such term is defined in Rule 501(a) promulgated under the Securities Act of 1933
as amended (the "Securities Act"). Such Seller represents and warrants that he
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of his investment in the Promissory
Note issued to him pursuant to Section 1.4 hereof. He has had the opportunity,
personally or through representatives, to obtain from Marketing Specialists all
information, to the extent possessed by Marketing Specialists or reasonably
obtainable by Marketing Specialists, necessary to evaluate the merits and risks
of an investment in such Promissory Note, and has concluded, based on such
information and other information previously known to him, to invest in such
Promissory Note pursuant to the terms of this Agreement.
(d) Absence of Market. Such Seller acknowledges that his Promissory
Note lacks liquidity as compared with other investments since there is not, and
there is not expected to be, any market therefor, and that the sale or transfer
of such Promissory Note must comply with the provisions of the Promissory Note
and applicable federal and state securities laws. Such Seller acknowledges that
he must bear the economic risk of his investment in such Promissory Note for an
indefinite period of time since none of the Promissory Notes has been registered
under the Securities
-3-
<PAGE> 7
Act and therefore cannot be sold unless such Promissory Notes are subsequently
registered or an exemption from registration is available.
(e) Investment Purposes. Such Seller hereby represents and warrants
that he is acquiring his Promissory Note for investment purposes only, for his
own account, and not as nominee or agent for any other person or entity, and not
with a view to, or for resale in connection with, any distribution thereof
within the meaning of the Securities Act. He has no agreement or other
arrangement with any person or entity to sell, transfer or pledge any part of
such Promissory Note and has no plans to enter into any such agreement or
arrangement.
(f) Restricted Securities. Such Seller acknowledges that Marketing
Specialists is issuing the Promissory Notes to the Sellers without registration
under the Securities Act. He further acknowledges that representatives of
Marketing Specialists have advised him that no state or federal agency or
instrumentality has made any finding or determination as to the investment in
such Promissory Note, nor has any state or federal agency or instrumentality
made any recommendation with respect to any purchase or investment in such
Promissory Note.
Section 2.2 Disclosure. Each Seller severally represents and warrants to
Buyer and Marketing Specialists that there is no information contained in this
Agreement (whether in this Article II, any other portion of this Agreement, the
Exhibits or any other documents or certificates delivered pursuant to this
Agreement) pertaining to such Seller that, to the best knowledge of such Seller,
contains an untrue statement of material fact or omits to state any material
fact required to be stated in order to make the statements made herein and
therein not materially misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF BUYER AND MARKETING SPECIALISTS
Section 3.1 Representations and Warranties of Buyer. Buyer represents and
warrants that the statements contained in this Section 3.1 will be true and
correct as of the Closing.
(a) Organization of Buyer. Buyer is a corporation duly organized and
in good standing under the laws of the State of Delaware.
(b) Authority; No Conflict; Required Filings and Consents.
(i) Buyer has all requisite power and authority to enter into
this Agreement and to perform its obligations under this Agreement. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of Buyer. This Agreement has been duly
executed and delivered by Buyer. This Agreement constitutes a valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms,
except to the extent that such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors' rights generally or by general equitable principles.
-4-
<PAGE> 8
(ii) The execution and delivery by Buyer of this Agreement and
the consummation of the transactions contemplated by this Agreement will not (A)
conflict with, or result in any violation or breach of any provision of the
Certificate of Incorporation or Bylaws of Buyer, (B) result in any violation or
breach of, or constitute (with or without notice or lapse of time, or both) a
default (or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any material benefit) under any of the terms,
conditions or provisions of any contract or other agreement to which Buyer is a
party or by which any of Buyer's properties or assets may be bound, or (C)
conflict with or violate any permit, license, judgment, order, statute,
ordinance, rule or regulation applicable to Buyer or Buyer's properties or
assets.
(iii) No consent or approval of any Governmental Entity is
required by or with respect to Buyer in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby or thereby, other than those that may be required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
and applicable North Carolina "blue sky" securities law.
(c) Accredited Investor. Buyer is an "Accredited Investor" as such
term is defined in Rule 501(a) promulgated under the Securities Act of 1933 as
amended (the "Securities Act"). Buyer represents and warrants that it has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of its investment in the Shares. Buyer has had
the opportunity to obtain from Sellers and the Company all information, to the
extent possessed by Sellers and the Company or reasonably obtainable by them,
necessary to evaluate the merits and risks of an investment in the Shares, and
has concluded, based on such information and other information previously known
to it, to invest in such securities pursuant to the terms of this Agreement.
(d) Absence of Market. Buyer acknowledges that the Shares lack
liquidity as compared with other securities investments since there is not, and
there is not expected to be, any market therefor, and that the sale or transfer
of the Shares must comply with the provisions of applicable federal and state
securities laws. Buyer acknowledges that it must bear the economic risk of its
investment in the Shares for an indefinite period of time since none of such
securities has been registered under the Securities Act and therefore cannot be
sold unless such securities are subsequently registered or an exemption from
registration is available.
(e) Investment Purposes. Buyer hereby represents and warrants that
it is acquiring the Shares for investment purposes only, and not with a view to,
or for resale in connection with, any distribution thereof within the meaning of
the Securities Act. Buyer has no agreement or other arrangement with any person
to sell, transfer or pledge any part of the Shares and has no plans to enter
into any such agreement or arrangement.
(f) Restricted Securities. Buyer acknowledges that Sellers are
transferring the Shares to it without registration under the Securities Act.
Buyer further acknowledges that Sellers and representatives of the Company have
advised Buyer that no state or federal agency or instrumentality has made any
finding or determination as to the investment in such securities, nor has any
state or federal agency or instrumentality made any recommendation with respect
to any purchase or investment in such securities.
-5-
<PAGE> 9
Section 3.2 Representations and Warranties of Marketing Specialists.
Marketing Specialists represents and warrants that the statements contained in
this Section 3.2 will be true and correct as of the Closing.
(a) Organization of Marketing Specialists. Marketing Specialists is
(i) a corporation duly organized and in good standing under the laws of the
State of Delaware and (ii) duly qualified to do business as a foreign
corporation and in good standing in each jurisdiction in which the character of
the properties and assets now owned or leased by it or the nature of the
business transacted by it requires it to be so qualified, except where the
failure to be so qualified, individually or in the aggregate, would not have a
Material Adverse Effect on Marketing Specialists or the consummation of the
transactions contemplated hereby. Marketing Specialists was organized as of
October 7, 1997 to, among other things, own all of the capital stock of MSSC.
(b) Significant Subsidiaries. The following direct and indirect
wholly-owned subsidiaries of Marketing Specialists are the only such
subsidiaries that accounted for more than 10% of Marketing Specialists'
consolidated revenues, as set forth in the Marketing Specialists Mid-Year
Financial Statements (as defined herein): Marketing Specialists Sales Company, a
Texas corporation ("MSSC"), and Bromar, Inc., a California corporation
("Bromar"). MSSC is a direct wholly-owned subsidiary of Marketing Specialists,
and Bromar and Tower Marketing Company, Inc., a Texas corporation ("Tower"), are
direct wholly-owned subsidiaries of MSSC. MSSC and Bromar, together with Tower,
are termed herein the "Key Subsidiaries". Each of the Key Subsidiaries is (a) a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation and (b) duly qualified to do business as a
foreign corporation and in good standing in each jurisdiction in which the
character of the properties and assets now owned or leased by it or the nature
of the business transacted by it requires it to be so qualified, except where
the failure to be so qualified, individually or in the aggregate, would not have
a Material Adverse Effect on Marketing Specialists or the consummation of the
transactions contemplated hereby. Each Key Subsidiary has the corporate power
and authority to carry on its business as now being conducted and to own and
lease its properties.
(c) Authority; No Conflict; Required Filings and Consents.
(i) Marketing Specialists has all requisite power and
authority to enter into this Agreement and to perform its obligations under this
Agreement. The execution and delivery of this Agreement and the consummation of
the transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of Marketing Specialists. This Agreement
has been duly executed and delivered by Marketing Specialists. This Agreement
constitutes a valid and binding obligation of Marketing Specialists, enforceable
against Marketing Specialists in accordance with its terms, except to the extent
that such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally or by general equitable principles.
(ii) The execution and delivery by Marketing Specialists of
this Agreement and the consummation of the transactions contemplated by this
Agreement will not (A) conflict with, or result in any violation or breach of
any provision of the Certificate of Incorporation or Bylaws of Marketing
Specialists, (B) result in any violation or breach of, or constitute (with or
without notice or lapse of time, or both) a default (or give rise to a right of
termination, cancellation or acceleration
-6-
<PAGE> 10
of any obligation or loss of any material benefit) under any of the terms,
conditions or provisions of any contract or other agreement to which Marketing
Specialists is a party or by which any of Marketing Specialists's properties or
assets may be bound, or (C) conflict with or violate any permit, license,
judgment, order, statute, ordinance, rule or regulation applicable to Marketing
Specialists or Marketing Specialists' properties or assets.
(iii) No consent or approval of any Governmental Entity is
required by or with respect to Marketing Specialists in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated by this Agreement, other than those that may be required under the
HSR Act and applicable North Carolina "blue sky" securities law.
(iv) Attached hereto as Appendix I is a true and complete copy
of the audited consolidated balance sheets of MSSC as of December 31, 1996 and
1995, together with the related consolidated statement of operations,
shareholders' equity (deficit) and cash flow for the year ended (collectively,
the "Marketing Specialists Financial Statements"). The Marketing Specialists
Financial Statements are accurate and correct in all material respects and
fairly present the consolidated financial position and the results of operations
of MSSC for the year then ended in conformity with generally accepted accounting
principles consistently applied.
(v) Attached hereto as Appendix II is a true and complete copy
of the consolidated balance sheets of MSSC as of June 30, 1997 and 1996,
together with the related consolidated statement of operations, shareholders'
equity (deficit) and cash flow for the six months then ended, as reviewed by
Ernst & Young LLP (collectively, the "Marketing Specialists Mid-Year Financial
Statements"). The Marketing Specialists Mid-Year Financial Statements are
accurate and correct in all material respects and fairly present the
consolidated financial position and the results of operations of MSSC for the
six months then ended in conformity with generally accepted accounting
principles consistently applied (except that the Marketing Specialists Mid-Year
Financial Statements do not include notes or normal year-end adjustments). MSSC
has suffered no net Material Adverse Effect in its financial condition since
June 30, 1997.
Section 3.3 Disclosure. Buyer and Marketing Specialists jointly represent
and warrant to Sellers that there is no information contained in this Agreement
(whether in this Article III, any other portion of this Agreement, the
Appendices, the Exhibits or any other documents or certificates delivered
pursuant to this Agreement) pertaining to Buyer or Marketing Specialists that,
to the best knowledge of Buyer and Marketing Specialists, contains an untrue
statement of material fact or omits to state any material fact required to be
stated in order to make the statements made herein and therein not materially
misleading.
-7-
<PAGE> 11
ARTICLE IV
NO PUBLICITY; CONFIDENTIALITY
Section 4.1 No Publicity; Confidentiality. Without the consent of the
other parties, which consent may be granted by Buyer on its own and on Marketing
Specialists's behalf, Joel Lineberger on behalf of the Management Shareholders,
and the Trustee on behalf of ESOP, none of the parties shall reveal the
existence of or contents of this Agreement or make any internal or public
announcements except to their respective professional advisors or as otherwise
required by applicable law. All confidential material or information delivered
as part of any due diligence performed by the parties shall be held in
accordance with the parties' mutual letters regarding confidentiality executed
in October 1997. Nothing within this Section 4.1 shall be construed to prevent
the Trustee of the ESOP to make such disclosures to governmental agencies or
participants and beneficiaries which it deems necessary to fulfill its fiduciary
obligations under applicable Law.
ARTICLE V
COVENANTS OF PARTIES
Section 5.1 Pre-Closing Covenants. From the date hereof until the
occurrence of the earlier of (i) the Closing or (ii) termination of this
Agreement pursuant to Article VII hereof, Sellers agree that they will, upon
obtaining knowledge of any of the following, promptly notify Buyer and Marketing
Specialists of:
(a) any notice or other communication from any person alleging that
the consent of such person is or may be required in connection with the
transactions contemplated under this Agreement;
(b) any notice or other communication from any Governmental Entity
in connection with the transactions contemplated under this Agreement; and
(c) any actions, suits, claims, investigations or other judicial
proceedings commenced or threatened against Sellers or the Company which, if
pending on the date of this Agreement, would have been required to have been
disclosed pursuant to Article II or which relate to the consummation of the
transactions contemplated under this Agreement.
Section 5.2 Transfer of Shares. Sellers will take all necessary steps and
proceedings as approved by counsel for Buyer and Marketing Specialists to permit
the Shares to be duly and properly transferred to Buyer in accordance with
Article I hereof. Sellers will pay any and all transfer taxes required in
connection therewith.
Section 5.3 Exclusivity. Sellers will not, directly or indirectly, (i)
take any action to solicit, initiate or encourage the making of any Acquisition
Proposal (as defined below) or (ii) engage in negotiations with, or disclose any
non-public information relating to the Company to, any person or entity that may
be considering making, or has made, an Acquisition Proposal. None of Sellers is
presently considering any Acquisition Proposal other than Buyer's. Sellers will
immediately notify Buyer and Marketing Specialists orally and in writing after
receipt of any Acquisition Proposal or any
-8-
<PAGE> 12
request for non-public information relating to the Company or for access to the
properties, books or records of the Company by any person or entity that may be
considering making, or has made, an Acquisition Proposal, and keep Buyer and
Marketing Specialists informed of any such Acquisition Proposal or request. As
used in this Agreement, the term "Acquisition Proposal" means any offer or
proposal for, or any indication of interest in, a merger or other business
combination involving the Company or the acquisition of a substantial equity
interest in, or a substantial portion of the assets of, the Company, other than
the transactions contemplated hereby.
Section 5.4 ESOP Elections. None of the individual Sellers shall at any
time elect to receive any stock of the Company in connection with the
distribution or rollover of their ESOP account balance.
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Buyer's and Marketing Specialists's Conditions to Closing. The
obligations of Buyer and Marketing Specialists hereunder are subject to
fulfillment or satisfaction, on and as of the Closing, of each of the following
conditions (any one or more of which may be waived by Buyer and Marketing
Specialists, but only in a writing signed by Buyer and Marketing Specialists):
(a) Accuracy of Representations and Warranties. The representations
and warranties of Sellers contained in Article II shall be true and accurate in
all respects on and as of the Closing with the same force and effect as if they
had been made on the Closing, and Sellers shall have provided Buyer and
Marketing Specialists with a certificate executed by Sellers, dated as of the
Closing, to such effect.
(b) Covenants. Sellers shall have performed and complied with all of
their covenants contained in Article V (and elsewhere in this Agreement) in all
respects on or before the Closing, and Buyer and Marketing Specialists shall
receive a certificate to such effect signed by Sellers.
(c) Consents. All written consents, approvals, assignments, waivers
or authorizations, including those from any Governmental Entity, that are
required as a result of the transactions contemplated by this Agreement shall
have been obtained.
(d) Transfer of Shares. All necessary steps and corporate
proceedings shall have been taken to permit the Shares to be duly and properly
transferred to Buyer or its respective nominee(s). All of the Shares shall have
been endorsed over to Buyer or be accompanied by stock powers that provide for
such transfer.
(e) Opinion of Sellers' Counsel. Sellers shall have delivered to
Buyer and Marketing Specialists at the Closing an opinion of Tuggle Duggans &
Meschan, P.A., and an opinion of Smith & Feerick, P.A., each in form reasonably
satisfactory to counsel for Buyer and Marketing Specialists, as to those matters
set forth in Exhibits "C" and "D", respectively, hereto.
-9-
<PAGE> 13
(f) Non-Foreign Status. At or prior to Closing, each Seller shall
have delivered to Buyer and Marketing Specialists a statement certifying that he
or it is not a foreign person, which statement shall comply with the
requirements of Treasury regulation Section 1.1445-2(b).
(g) Purchase of Remaining Company Shares. Buyer shall have
purchased, and Gynn Eller ("Eller") and Quincy Cummings ("Cummings") shall have
sold and transferred to Buyer, all shares of the Company's Common Stock (other
than the Shares purchased pursuant to the transactions contemplated in this
Agreement) pursuant to the terms and conditions of that certain Stock Purchase
Agreement dated as of the date hereof by and among Buyer, Marketing Specialists,
Eller, Cummings and the Company.
(h) Non-Compete Agreements. Each of the individual Sellers shall
have executed a Non-Compete Agreement (which shall include provisions for
continuation of medical benefits, at the cost of such Sellers, after termination
of employment) mutually acceptable to Sellers and Marketing Specialists.
(i) Other Matters. All actions required to be taken by Sellers in
connection with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form and
substance to counsel to Buyer and Marketing Specialists.
Section 6.2 Sellers' Conditions to Closing. The obligations of Sellers
hereunder are subject to fulfillment or satisfaction, on and as of the Closing,
of each of the following conditions (any one or more of which may be waived by
Sellers, but only in a writing signed by Sellers):
(a) Accuracy of Representations and Warranties. The representations
and warranties of Buyer and Marketing Specialists contained in Article III shall
be accurate in all respects on and as of the Closing with the same force and
effect as if they had been made on the Closing, and Buyer and Marketing
Specialists shall have provided Sellers with a certificate executed by Buyer and
Marketing Specialists, respectively, dated as of the Closing, to such effect.
(b) Covenants and Agreements. Buyer and Marketing Specialists shall
have performed and complied with each of their respective covenants hereunder in
all respects through the Closing, and Sellers shall receive a certificate to
such effect signed by the President of Buyer and the President of Marketing
Specialists, respectively.
(c) Opinion of Buyer's and Marketing Specialists's Counsel. Buyer
and Marketing Specialists shall have delivered to Seller at the Closing an
opinion of Buyer's counsel and Marketing Specialists's counsel, respectively, in
form reasonably satisfactory to counsel for Seller, as to those matters set
forth in Exhibit "D" hereto.
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<PAGE> 14
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual agreement of Sellers, Buyer and Marketing Specialists;
(b) by Buyer or Marketing Specialists, on or after February 28,
1998, if any of the conditions provided in Section 6.1 hereof of this Agreement
have not been met or, to the extent permitted by applicable law, have not been
waived in writing by Buyer or Marketing Specialists prior to such date; or
(c) by Sellers, on or after February 28, 1998, if any of the
conditions provided in Section 6.2 hereof have not been met or, to the extent
permitted by applicable law, have not been waived in writing by Sellers prior to
such date.
Section 7.2 Procedure Upon Termination. In the event of termination by
Sellers, Buyer or Marketing Specialists pursuant to Section 7.1 hereof, written
notice thereof shall promptly be given to the other parties and the transactions
contemplated by this Agreement shall be terminated, without further action by
any party. If the transactions contemplated by this Agreement are terminated as
provided herein:
(a) each of Sellers, Buyer and Marketing Specialists shall return
all documents, work papers and other material of any other party relating to the
transactions contemplated hereby, whether so obtained before or after the
execution hereof, to the party furnishing the same; and
(b) all confidential information received by Sellers, Buyer or
Marketing Specialists with respect to the business of any other party or its
subsidiaries or affiliates shall be treated in accordance with Section 4.1
hereof, and Section 4.1 hereof shall remain in full force and effect
notwithstanding the termination of this Agreement.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Section 8.1 Survival of Representations and Warranties of Sellers. The
representations, warranties, covenants and agreements of Sellers shall survive
the Closing without regard to any investigations made by Buyer and shall
continue in full force and effect forever.
Section 8.2 Survival of Representations and Warranties of Buyer and
Marketing Specialists. The representations, warranties, covenants and agreements
of Buyer and Marketing Specialists shall survive the Closing without regard to
any investigations made by Sellers and shall continue in full force and effect
forever (except for the representations and warranties set forth in Sections
3.2(c)(iv) and (v) hereof, which shall survive until the third anniversary of
the Closing).
-11-
<PAGE> 15
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Time of Essence. Time shall be of the essence under this
Agreement.
Section 9.2 Notice. Any notice, direction or other instrument required or
permitted to be given hereunder shall be in writing and may be given by mailing
the same, postage prepaid, or delivering the same addressed to the party or
parties to receive same at their respective addresses set forth immediately
below or at such other address as is duly notified in writing to each party
hereto in accordance with this Section 9.2. Any notice, direction or other
instrument aforesaid if delivered shall be deemed to have been given or made on
the date of which it was delivered, or if mailed shall be deemed to have been
given and received on the fifth business day following the date on which it was
mailed.
NOTIFICATION ADDRESSES:
if to Buyer or Marketing Specialists:
2324 Gateway Drive
Irving, Texas 75063
Attention: Gary R. Guffey
with a copy to:
J. Gregory Holloway
Andrews & Kurth L.L.P.
1717 Main Street, Suite 3700
Dallas, Texas 75201
Tel: (214) 659-4476
Fax: (214) 659-4401
if to Sellers:
[ ]
if to ESOP:
[ ]
with a copy to:
Norman A. Smith
Smith & Feerick, P.A.
Cameron Brown Building, Suite 911
301 South McDowell Street
-12-
<PAGE> 16
Charlotte, North Carolina 28204
Tel: (704) 342-1035
Fax: (704) 372-9149
and
Richard J. Tuggle, Jr.
Tuggle Duggans & Meschan, P.A.
228 W. Market Street
Greensboro, North Carolina 27401
Tel: (910) 378-1431
Fax: (910) 274-1148
Section 9.3 Binding Upon Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the respective parties hereto and
their respective heirs, executors, administrators, successors and/or assigns.
This Agreement may not be assigned by Sellers without the written consent of
Buyer and Marketing Specialists.
Section 9.4 Counterparts. This Agreement may be signed by the parties in
counterparts, each of which so signed shall be deemed to be an original, and
such counterparts together shall constitute one and the same instrument.
Section 9.5 Entire Agreement. Except as otherwise specifically set forth
herein, this Agreement, the Exhibits and the Appendix hereto constitute the
complete and exclusive agreement between Buyer, Marketing Specialists and
Sellers. This Agreement replaces and supersedes all prior agreements by and
between Buyer, Marketing Specialists and Sellers (other than the Employment
Agreements dated as of December __, 1997 between the Company and certain of the
Management Shareholders). This Agreement supersedes all prior written and oral
statements regarding the subject matter hereof.
Section 9.6 No Third-Party Beneficiaries. This Agreement is made solely
and specifically among and for the benefit of the parties hereto and their
respective successors and assigns. The provisions of this Agreement are intended
only for Sellers, Buyer and Marketing Specialists. This Agreement is not
intended for the benefit of any creditor and does not grant any rights to or
confer any benefits on any creditor or any other person.
Section 9.7 Headings. All headings herein are inserted only for
convenience and ease of reference and are not to be considered in the
construction or interpretation of any provision of this Agreement.
Section 9.8 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under the present and future laws effective
during the term of this Agreement, such provision will be fully severable; the
Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of the Agreement, and the
remaining provisions of the Agreement will remain in full force and effect and
will not be affected by the illegal, invalid, or unenforceable provision or by
its severance from the Agreement. Furthermore, in lieu of
-13-
<PAGE> 17
such illegal, invalid or unenforceable provision, there will be added
automatically as part of the Agreement a legal, valid, and enforceable provision
as similar as possible to the severed provision.
Section 9.9 Additional Documents. Sellers, Buyer and Marketing Specialists
agree to execute and deliver such additional documents and instruments and to
perform such additional acts as may be necessary or appropriate to effectuate,
carry out and perform all of the terms, provisions and conditions of this
Agreement and the transaction contemplated hereby.
Section 9.10 Amendments and Waivers. No amendment of any provisions of
this Agreement shall be valid unless the same shall be in writing and signed by
each party hereto. No waiver by any party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
Section 9.11 Expenses, Taxes, Etc. Each of the parties hereto shall pay
all fees and expenses incurred by it or any of its affiliates in connection with
the transactions contemplated by this Agreement.
Section 9.12 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS,
WITHOUT REGARD TO ITS CONFLICTS OF LAW RULES.
Section 9.13 Commissions. No party hereto has employed any investment
banker, broker, finder or similar agent in connection with any transaction
contemplated by this Agreement.
Section 9.14 Definition of Knowledge. For the purpose of this Agreement,
the Exhibits and Appendices to this Agreement and the Disclosure Schedule, the
phrases "to the best knowledge" of any party and "known" and words of like
effect shall mean to the knowledge of such party, which knowledge shall also
include information existing in the records and files of such party.
Section 9.15 Definition of Material Adverse Effect. "Material Adverse
Effect" means, with respect to any party, any change, occurrence or effect
(direct or indirect) on the business, operations, properties (including tangible
properties), condition (financial or otherwise), assets, prospects, obligations
or liabilities (whether absolute, contingent or otherwise and whether due or to
become due) of such party and its subsidiaries taken as a whole that reasonably
could be expected to exceed $20,000. "Material" or "materially" or words of like
effect shall refer to items capable of producing a monetary effect of at least
$20,000 on the business, operations, properties (including intangible
properties), condition (financial or otherwise), assets, prospects, obligations
or liabilities (whether absolute, contingent or otherwise and whether due or to
become due) of the relevant party and its subsidiaries taken as a whole.
Notwithstanding the foregoing, the term "Material Adverse Effect", as used in
Section 3.2(b) and Section 3.2(c)(v) hereof, shall have a dollar threshold of
$500,000 and shall exclude the effects of the financing consummated by Marketing
Specialsists on the date of the Closing hereof.
[Signature page follows.]
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<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have hereunto executed this
Agreement on the day and year first above written.
RICHMONT MARKETING SPECIALISTS INC.
By: /s/ Timothy M. Byrd
-------------------------------
Name: Timothy M. Byrd
----------------------------
Title: Chief Financial Officer
----------------------------
MSSC CAROLINA, INC.
By: /s/ Gary R. Guffey
-------------------------------
Name: Gary R. Guffey
----------------------------
Title: Executive Vice President
----------------------------
ATLAS MARKETING COMPANY, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
By: /s/ Quincy Cummings
-------------------------------
Name: Quincy Cummings
----------------------------
Title: Plan Trustee
----------------------------
/s/ Clark Brinkley
-------------------------------
CLARK BRINKLEY
/s/ Barney Deal
-------------------------------
BARNEY DEAL
/s/ Doug Heyel
-------------------------------
DOUG HEYEL
/s/ Joel Lineberger
-------------------------------
JOEL LINEBERGER
-15-
<PAGE> 19
/s/ Fred Manning
-------------------------------
FRED MANNING
/s/ Donald Olin
-------------------------------
DONALD OLIN
/s/ Gary Propst
-------------------------------
GARY PROPST
-16-
<PAGE> 20
Exhibit "A"
Sellers and Allocation of Shares and Total Purchase Price
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Number Payable Principal Amount of
Shareholder of Shares at Closing Note
----------- --------- ---------- ----
- --------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1. ESOP 674,304 11,159,731.20 N/A
- --------------------------------------------------------------------------------
2. Clark Brinkley 25,000 206,875.00 174,116.02
- --------------------------------------------------------------------------------
3. Gary Propst 9,217 76,270.68 64,193.26
- --------------------------------------------------------------------------------
4. Barney Deal 21,259 175,918.23 148,061.35
- --------------------------------------------------------------------------------
5. Donald Olin 4,100 33,927.50 28,554.82
- --------------------------------------------------------------------------------
6. Doug Heyel 834 6,901.35 5,808.29
- --------------------------------------------------------------------------------
7. Fred Manning 12,500 103,437.50 87,057.78
- --------------------------------------------------------------------------------
8. Joel Lineberger 25,000 206,875.00 174,116.02
------- -------------- -----------
- --------------------------------------------------------------------------------
TOTAL: 772,214 $11,969,936.46 $681,907.54
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
Exhibit 2.3
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TOWER MARKETING, INC.,
MSSC TEXAS, INC.,
AND
MARKETING SPECIALISTS SALES COMPANY
FOR THE LIMITED PURPOSES SET FORTH HEREIN
DATED AS OF APRIL 21, 1997
-1-
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I - THE MERGER............................................................................................1
SECTION 1.01. The Merger.............................................................................1
SECTION 1.02. Effective Time.........................................................................1
SECTION 1.03. Effect of the Merger...................................................................1
SECTION 1.04. Articles of Incorporation..............................................................2
SECTION 1.05. Bylaws.................................................................................2
SECTION 1.06. Additional Actions.....................................................................2
SECTION 1.07. Conversion of Securities...............................................................2
SECTION 1.08. Dissenting Shares......................................................................3
SECTION 1.09. Surrender of Shares, Stock Transfer Books..............................................4
ARTICLE II - CLOSING..............................................................................................5
SECTION 2.01. Closing................................................................................5
SECTION 2.02. Deliveries by Tower....................................................................5
SECTION 2.03. Deliveries by MSSC Texas and Marketing Specialists.....................................6
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF TOWER.............................................................6
SECTION 3.01. Organization and Qualification of Tower................................................6
SECTION 3.02. Power and Capacity; Charter Documents of Tower.........................................6
SECTION 3.03. Subsidiaries...........................................................................7
SECTION 3.04. Capitalization and Ownership of Tower..................................................8
SECTION 3.05. No Conflicts...........................................................................8
SECTION 3.06. Consents and Approvals.................................................................8
SECTION 3.07. Financial and Operating Statements.....................................................9
SECTION 3.08. No Undisclosed or Contingent Liabilities...............................................9
SECTION 3.09. Assets of the Company..................................................................9
SECTION 3.10. Absence of Certain Changes............................................................10
SECTION 3.11. Real Property.........................................................................12
SECTION 3.12. Company Equipment.....................................................................13
SECTION 3.13. Contracts and Commitments.............................................................14
SECTION 3.14. Intellectual Property. ..............................................................15
SECTION 3.15. Inventory.............................................................................16
SECTION 3.16. Accounts Receivable...................................................................16
SECTION 3.17. Pension and Other Employee Plans and Agreements.......................................17
SECTION 3.18. Litigation............................................................................18
SECTION 3.19. Insurance.............................................................................19
SECTION 3.20. Collective Bargaining Agreements; Compensation; Employee
Agreements........................................................................19
SECTION 3.21. Labor Matters.........................................................................20
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
SECTION 3.22. Compliance with Law...................................................................21
SECTION 3.23. Permits...............................................................................21
SECTION 3.24. Environmental Matters.................................................................22
SECTION 3.25. Tax Matters...........................................................................23
SECTION 3.26. Service Liability. ..................................................................25
SECTION 3.27. Title to Assets.......................................................................25
SECTION 3.28. Accuracy of Disclosure................................................................25
SECTION 3.29. Redemptions of Capital Stock by Tower. ..............................................25
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF MSSC TEXAS
AND MARKETING SPECIALISTS.....................................................................25
SECTION 4.01. Organization and Qualification - MSSC Texas...........................................26
SECTION 4.02. Organization and Qualification - Marketing Specialists................................26
SECTION 4.03. Power and Capacity; Charter Documents of MSSC Texas...................................26
SECTION 4.04. Power and Capacity; Charter Documents of Marketing Specialists........................26
SECTION 4.05. No Conflicts..........................................................................27
SECTION 4.06. Consents and Approvals. .............................................................27
SECTION 4.07. Financial and Operating Statements....................................................27
ARTICLE V - OTHER OBLIGATIONS OF THE PARTIES.....................................................................28
SECTION 5.01. Conduct of Company Business...........................................................28
SECTION 5.02. Access to Books and Records. ........................................................30
SECTION 5.03. Consents..............................................................................30
SECTION 5.04. Other Transactions. .................................................................31
SECTION 5.05. Supplemental Disclosure by Tower......................................................31
SECTION 5.06. Supplemental Disclosure by Marketing Specialists and MSSC
Texas.............................................................................31
SECTION 5.07. Governmental Filings..................................................................32
SECTION 5.08. Covenant to Satisfy Conditions........................................................32
SECTION 5.09. Confidentiality.......................................................................32
SECTION 5.10. Employees. ..........................................................................32
SECTION 5.11. Damage or Destruction.................................................................32
SECTION 5.12. Shareholder Meeting of Tower; Exchange of Shares......................................32
SECTION 5.13. Information Delivered to Shareholders.................................................33
SECTION 5.14. Resignation of Officers and Directors.................................................33
SECTION 5.15. Provision of Tower's Monthly Financial Statements and
Accounts Receivable...............................................................33
SECTION 5.16. Provision of Marketing Specialists Monthly Financial
Statements and Accounts Receivable................................................33
SECTION 5.17. Employment Agreements.................................................................34
SECTION 5.18. Redemption Payments...................................................................34
ARTICLE VI - CONDITIONS PRECEDENT................................................................................34
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
SECTION 6.01. Conditions Precedent to Obligations of MSSC Texas
and Marketing Specialists. ......................................................34
SECTION 6.02. Conditions Precedent to Obligations of Tower..........................................37
ARTICLE VII - TERMINATION OF AGREEMENT...........................................................................38
SECTION 7.01. Termination of Agreement..............................................................38
SECTION 7.02. Procedure Upon Termination............................................................38
ARTICLE VIII - MISCELLANEOUS.....................................................................................39
SECTION 8.01. Survival of Representations and Warranties............................................39
SECTION 8.02. Commissions...........................................................................39
SECTION 8.03. Definition of Knowledge. ............................................................39
SECTION 8.04. Definition of Material Adverse Effect and Material Adverse
Change............................................................................39
SECTION 8.05. Expenses, Taxes, Etc..................................................................39
SECTION 8.06. Successors and Assigns. .............................................................40
SECTION 8.07. No Third-Party Benefit................................................................40
SECTION 8.08. Entire Agreement; Amendment...........................................................40
SECTION 8.09. Reformation and Severability..........................................................40
SECTION 8.10. Notices...............................................................................40
SECTION 8.11. GOVERNING LAW.........................................................................41
SECTION 8.12. Counterparts..........................................................................41
</TABLE>
Exhibit "A" Form of Common Notes
Exhibit "B" Form of Preferred Notes
Exhibit "C" Agreed Employees
Exhibit "D" Intentionally Omitted
Exhibit "E" Form of Opinion of Seller's Counsel
Exhibit "F" Parties to Indemnification Agreement
Exhibit "G" Form of Indemnification Agreement
Exhibit "H" Form of Opinion of Marketing Specialists' and
MSSC Texas' Counsel
Appendix I Year End Financial Statements
Appendix II Marketing Specialists Financial Statements
Appendix III Bromar Financial Statements
-iii-
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of April
21, 1997, is by and among Tower Marketing, Inc., a Texas corporation ("TOWER"
and sometimes the "SURVIVING CORPORATION"), Marketing Specialists Sales Company,
a Texas corporation ("MARKETING SPECIALISTS"), and MSSC Texas, Inc., a Texas
corporation and a wholly owned subsidiary of Marketing Specialists ("MSSC
TEXAS").
INTRODUCTORY STATEMENTS
Tower, MSSC Texas and Marketing Specialists desire to effect the merger
of MSSC Texas with Tower, with Tower as the surviving corporation, pursuant to
the terms hereof (the "MERGER").
For purposes of this Agreement, Tower and its Subsidiaries (as defined
herein) shall collectively be termed the "COMPANY"; when such collective term is
used in connection with financial issues, it shall refer to Tower and its
Subsidiaries as a consolidated whole. For example, when references are made to
officers, directors and employees of the Company, it shall mean all officers,
directors and shareholders of Tower and its Subsidiaries.
Accordingly, for and in consideration of the foregoing and the mutual
agreements, representations, warranties, covenants and conditions herein set
forth, and other good, valid and binding consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the conditions
hereof, the Merger shall be consummated in accordance with the Texas Business
Corporation Act (the "TEXAS LAW") as soon as practicable following the
satisfaction or waiver of the conditions set forth in Article VI hereof. At the
Effective Time (as hereinafter defined) and subject to and upon the terms and
conditions of this Agreement, the Texas Law, MSSC Texas shall be merged with
Tower, the separate corporate existence of MSSC Texas shall cease, and Tower
shall continue as the Surviving Corporation.
SECTION 1.02. Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VI hereof, the
parties hereto shall cause the Merger to be consummated by filing articles of
merger with the Secretary of State of the State of Texas in such form as
required by, and executed in accordance with the relevant provisions of the
Texas Law. The Merger shall become effective upon the filing of such articles of
merger with the Secretary of State of the State of Texas (the "EFFECTIVE TIME").
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SECTION 1.03. Effect of the Merger. At the Effective Time, the effect
of the Merger in Texas shall be as provided in Article 5.06 of the Texas Law.
SECTION 1.04. Articles of Incorporation. At the Effective Time, the
Articles of Incorporation of Tower shall become the Articles of Incorporation of
the Surviving Corporation until thereafter amended as provided by Law (as
defined herein).
SECTION 1.05. Bylaws. The Bylaws of Tower, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation
until thereafter amended as provided by Law.
SECTION 1.06. Additional Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances, or any other actions or things are
necessary or desirable to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, properties or assets of Tower or MSSC Texas acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of Tower and MSSC Texas, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of
Tower and MSSC Texas or otherwise, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in, to and under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out this Agreement.
SECTION 1.07. Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Tower, Marketing
Specialists, MSSC Texas or the holder of any of the following securities:
(a) Assuming that at the Effective Time there will be no more than
2,904,581 Common Shares outstanding, each share (individually, a "COMMON SHARE"
and, collectively, the "COMMON SHARES") of Common Stock, par value $.01 per
share (the "COMMON STOCK"), of Tower issued and outstanding immediately prior to
the Effective Time, other than any Dissenting Shares (as defined herein), shall
be converted into the right to receive separate promissory notes (the "COMMON
NOTES") payable from Marketing Specialists to the holders of Common Shares of
Tower. The Common Notes shall provide for the payment, over the term set forth
therein, of principal and interest aggregating $0.9456 per Common Share (the
"COMMON SHARE AMOUNT"); provided, that such conversion shall be effected in
accordance with the provisions of this Article I upon surrender of the
certificate representing such Common Share. The Common Notes shall be
substantially in the form of Exhibit "A" hereto.
(b) Assuming that the Effective Time there will be no more than 522,550
Preferred Shares outstanding, each share (individually, a "PREFERRED SHARE" and,
collectively, the "PREFERRED SHARES") of Series A Preferred Stock, par value
$.01 per share (the "PREFERRED STOCK"), of Tower issued and
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outstanding immediately prior to the Effective Time shall be converted into the
right to receive the principal amount of $2.00 per Preferred Share (the
"PREFERRED SHARE AMOUNT") which shall be paid by means of promissory notes (the
"PREFERRED NOTES") payable from Marketing Specialists to holders of Preferred
Shares of Tower; provided, that such conversion shall be effected in accordance
with the provisions of this Article I upon surrender of the certificate
representing such Preferred Shares. The Preferred Notes shall be substantially
in the form of Exhibit "B" hereto.
(c) Each share of the Common Stock and Preferred Stock (collectively,
"EQUITY SECURITIES"), if any, held in the treasury of Tower shall be canceled
and extinguished and no payment or other consideration shall be made with
respect thereto.
(d) Each share of Common Stock, par value $.01 per share, of MSSC Texas
issued and outstanding immediately prior to the Effective Time shall be
converted into and thereafter represent one share, validly issued, fully paid
and nonassessable, of Common Stock of the Surviving Corporation. Immediately
following the Effective Time, the Common Stock of the Surviving Corporation held
by Marketing Specialists shall represent all of the issued and outstanding
capital stock of the Surviving Corporation.
(e) From and after the Effective Time, holders of certificates
evidencing Equity Securities that were issued prior to the Merger shall cease to
have any rights as shareholders of Tower or the Surviving Corporation, except as
provided otherwise by Law.
SECTION 1.08. Dissenting Shares.
(a) Any Common Shares or Preferred Shares held by a holder who has not
voted such shares in favor of the approval and adoption of this Agreement and
who has properly demanded and perfected such demand for appraisal of such shares
in accordance with Article 5.12 of the Texas Law and as of the Effective Time
has neither effectively withdrawn nor lost such right to such appraisal
("DISSENTING SHARES"), shall not be converted into or represent a right to
receive the Common Share Amount or the Preferred Share Amount, as applicable,
but the holder thereof shall only be entitled to such rights as are granted by
Article 5.11 of the Texas Law.
(b) Notwithstanding the provisions of subsection (a) of this Section,
if any holder of Common Shares or Preferred Shares who demands appraisal of such
shares under the Texas Law shall effectively withdraw or lose (through failure
to perfect or otherwise) such right to appraisal, then as of the Effective Time
or the occurrence of such event, whichever occurs later, such holder's shares
shall automatically be converted into and represent only the right to receive
the consideration as provided in Section 1.07 without interest thereon, upon
surrender of the certificate or certificates representing such shares and such
shares shall no longer be Dissenting Shares. Furthermore, upon the surrender of
Dissenting Shares in accordance with the provisions of Section 1.09 hereof, the
holder thereof shall be deemed to have waived his or her appraisal rights under
the Texas Law with respect to such Common Shares or Preferred Shares, as
applicable.
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(c) Tower shall give MSSC Texas and, after the Merger, the Surviving
Corporation shall give Marketing Specialists (i) prompt notice of any written
demands for appraisal or payment of the fair value of any Common Shares or
Preferred Shares, withdrawals of such demands, and any other instruments served
pursuant to the Texas Law received by Tower or the Surviving Corporation and
(ii) the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the Texas Law. Prior to the Merger, Tower shall not
voluntarily make any payment with respect to any demands for appraisal or,
except with the prior written consent of MSSC Texas, settle or offer to settle
any such demands.
SECTION 1.09. Surrender of Shares, Stock Transfer Books.
(a) Following the Effective Time, Marketing Specialists shall
distribute to the holders of the Equity Securities the Common Notes and
Preferred Notes (collectively, the "NOTES") to be paid to such holders under
Sections 1.07(a) and 1.07(b), respectively, upon the terms and conditions
specified in this Section 1.09.
(b) Each holder of a certificate or certificates representing any
Equity Securities canceled upon the Merger pursuant to Section 1.07 may
thereafter surrender such certificate or certificates to Marketing Specialists.
Marketing Specialists agrees that prior to the Effective Time it shall
distribute or shall cause to be distributed to each holder of record of Equity
Securities as of the Effective Time a form letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to such
certificates shall pass, only upon proper delivery thereof to Marketing
Specialists or its substitute) and instructions for use in effecting the
surrender of such certificates for payment therefor. (Any holders of Equity
Securities who have lost or destroyed the certificates representing their Equity
Securities shall be required to execute an affidavit regarding such matters in a
form to be distributed by the Marketing Specialists to indemnify the Surviving
Corporation and Marketing Specialists against any other claimants of such Equity
Securities, but no bond or other security shall be required for such indemnity.)
Upon surrender by such holder to Marketing Specialists of a certificate (or such
executed affidavit and indemnity), together with such letter of transmittal duly
executed, the holder of such certificate shall be entitled to receive in
exchange therefor Notes in an amount equal to the product of the number of
Equity Securities represented by such certificate and the Common Share Amount or
Preferred Share Amount, whichever is applicable, but less the outstanding
amount, if any, under any note or other financing arrangement entered into by
such holder and Tower in connection with the acquisition of the Common Shares or
Preferred Shares represented by such certificate, whether or not such note or
financing obligation has yet come due. Each certificate surrendered hereunder
shall forthwith be canceled. Notwithstanding anything in this Agreement to the
contrary, no Notes shall be released or distributed to any holder of Common
Shares or Preferred Shares until Marketing Specialists or the Surviving
Corporation has received written confirmation of the effectiveness of the Merger
under the Texas Law from the Secretary of State of the State of Texas. Any Notes
or amounts paid, released or distributed to any holder of Equity Securities
under this Agreement shall have deducted therefrom the amount of any withholding
taxes, if any, due thereon regarding such holder.
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(c) If payment in respect of Equity Securities is to be made to a
Person (as defined herein) other than the Person in whose name a surrendered
certificate or instrument is registered, it shall be a condition to such payment
that the certificate or instrument so surrendered shall be properly endorsed or
shall be otherwise in proper form for transfer and that the Person requesting
such payment shall have paid any transfer and other taxes required by reason of
such payment in a name other than that of the registered holder of the
certificate or instrument surrendered or shall have established to the
satisfaction of the Surviving Corporation or Marketing Specialists that such tax
either has been paid or is not payable. The registered holder of each
certificate surrendered in accordance with the preceding sentence shall
indemnify and hold Marketing Specialists and the other parties hereto harmless
against any claims by third parties (and any direct or indirect damages relating
thereto) as to the title of such certificate or the Equity Securities evidenced
thereby. Until surrendered in accordance with the provisions of this Section
1.09, each certificate (other than certificates representing Dissenting Shares
in respect of which appraisal rights are perfected, which shall be treated in
accordance with applicable provisions of the Texas Law) shall represent for all
purposes whatsoever only the right to receive the Common Share Amount or
Preferred Share Amount multiplied by the number of the applicable Common Shares
or Preferred Shares evidenced by such certificate, except as otherwise provided
in subsection (b) above.
(d) At the Effective Time, the stock transfer books of Tower shall be
closed and there shall be no further registration of transfers of Equity
Securities issued prior to the Merger on the records of Tower or the Surviving
Corporation. If, after the Effective Time, certificates for Equity Securities
are presented to the Surviving Corporation, they shall be entitled only to be
canceled and exchanged for the amounts provided for such shares in Sections 1.07
and 1.09 hereof.
ARTICLE II
CLOSING
SECTION 2.01. Closing. The Closing of the transactions contemplated
hereby (the "CLOSING") shall, subject to the provisions of Article VII hereof,
take place at the offices of Andrews & Kurth L.L.P., 4400 Thanksgiving Tower,
Dallas, Texas 75201 on the later to occur of April 25, 1997 and the date that is
two business days after each of the conditions set forth in Article VI has been
met or waived in writing or at such other date, time and place as Tower and MSSC
Texas mutually agree. The date on which the Closing actually occurs is referred
to herein as the "CLOSING DATE".
SECTION 2.02. Deliveries by Tower. At the Closing, Tower shall deliver,
or cause to be delivered, to MSSC Texas and Marketing Specialists (unless
delivered previously) the following:
(a) the Officers' Certificate referred to in Section 6.01(e) hereof;
(b) the Certificate of the Secretary of Tower referred to in Section
6.01(f) hereof;
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(c) the opinion of counsel referred to in Section 6.01(g) hereof;
(d) executed counterparts of any consents required to be obtained by
Tower pursuant to Section 5.03 hereof;
(e) the certificate regarding non-foreign status referred to in Section
6.01(k) hereof; and
(f) all other previously undelivered documents, instruments and
writings required to be delivered by Tower to MSSC Texas or Marketing
Specialists at or prior to the Closing pursuant to this Agreement or otherwise
required in connection herewith.
SECTION 2.03. Deliveries by MSSC Texas and Marketing Specialists. At
the Closing, MSSC Texas and Marketing Specialists shall deliver, or cause to be
delivered, to Tower (unless delivered previously) the following:
(a) the Officers' Certificates referred to in Section 6.02(e) hereof;
(b) the Secretary's Certificates referred to in Section 6.02(f) hereof,
(c) the opinion of counsel referred to in Section 6.02(g) hereof;
(d) all other previously undelivered documents, instruments and
writings required to be delivered by MSSC Texas or Marketing Specialists to
Tower at or prior to the Closing pursuant to this Agreement or otherwise
required in connection herewith.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF TOWER
Tower hereby represents and warrants to MSSC Texas and Marketing
Specialists as follows, except as otherwise set forth in the relevant section of
the Disclosure Schedule:
SECTION 3.01. Organization and Qualification of Tower. Tower is (a) a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas and (b) duly qualified to do business as a foreign
corporation and in good standing in each jurisdiction in which the character of
the properties and assets now owned or leased by it or the nature of the
business transacted by it requires it to be so qualified, except where the
failure to be so qualified, individually or in the aggregate, would not have a
Material Adverse Effect (as defined herein) upon the Company (as defined herein)
or the consummation of the transactions contemplated hereby. Each jurisdiction
in which Tower is qualified to do business is listed on Section 3.01 of the
Disclosure Schedule. No
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jurisdiction in which Tower is not qualified or licensed has claimed, in writing
or otherwise, that Tower is required to qualify or be licensed therein.
SECTION 3.02. Power and Capacity; Charter Documents of Tower.
(a) Subject to the approval of the shareholders of Tower in accordance
with the terms of Texas Law and this Agreement, Tower has all requisite power
and authority (corporate and otherwise) to enter into, execute and deliver this
Agreement and perform its obligations hereunder. Tower has the corporate power
and authority to carry on its business as now being conducted and to own and
lease its properties. This Agreement has been duly executed and delivered by
Tower and is a valid and binding obligation of Tower, enforceable in accordance
with its terms.
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby by Tower will not result in
a violation or breach of or constitute a default under any term or provision of
the Articles of Incorporation or Bylaws of Tower. Tower has delivered to MSSC
Texas true and complete copies of the Articles of Incorporation and the Bylaws
of Tower, as in effect on the date hereof, and the minute books and stock
transfer books of Tower and the Subsidiaries (as defined herein) for the last
five years. Such minute books and stock transfer books are accurate and complete
and contain the minutes of all meetings (and written consents in lieu thereof)
of the shareholders and the board of directors (and all committees thereof) of
Tower and the Subsidiaries held during the five years immediately preceding the
date of this Agreement and record all issuances and transfers of record of the
capital stock of Tower and the Subsidiaries during such five years. All actions
taken at such meetings were appropriately passed or ratified.
SECTION 3.03. Subsidiaries.
(a) Section 3.03(a) of the Disclosure Schedule sets forth for each
subsidiary, direct or indirect, of Tower (each a "SUBSIDIARY") its capital
structure, its place of organization and the other jurisdictions in which it is
qualified to do business. Each of the Subsidiaries has been duly organized and
is validly existing and in good standing under the laws of its respective state
of incorporation, has all requisite corporate power and authority to own or
lease and operate its properties and conduct its business as now conducted and
is duly qualified or licensed to do business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of the business conducted
by it or the character or location of the properties owned or leased by it makes
such qualification or licensing necessary, except where the failure to be so
qualified or licensed, individually or in the aggregate, would not have a
Material Adverse Effect on the Company or the consummation of the transactions
contemplated hereby. No jurisdiction in which any Subsidiary is not qualified or
licensed has claimed, in writing or otherwise, that such Subsidiary is required
to qualify or be licensed therein.
(b) Tower owns, free and clear of all liens, claims and encumbrances of
any type whatsoever, and has the unrestricted power to dispose of and vote, all
of the outstanding capital stock of each of the Subsidiaries. There are no
outstanding or authorized options, warrants, subscriptions,
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calls, conversions or other rights, contracts, agreements, commitments or
understandings of any kind obligating any Subsidiary to issue, sell, purchase,
return or redeem any shares of its capital stock or any other securities
convertible into, exchangeable for or evidencing the right to subscribe for any
shares of capital stock of, or other ownership interest in, any Subsidiary. All
of the outstanding shares of the capital stock of each class of each Subsidiary
have been duly authorized and validly issued, are fully paid and nonassessable
and were not issued in violation of any preemptive rights or any applicable Law
(as defined herein).
(c) Except for its interest in any Subsidiary, Tower does not (i) own,
beneficially or of record, any shares of any other corporation or entity or any
interests in any partnerships or limited liability companies or (ii) participate
in any manner in any joint ventures, corporate alliance agreements or corporate
partnering agreements. Except for Tower's interest in any Subsidiary, neither
Tower nor any Subsidiary has an interest in, or is subject to, any agreement,
obligation or commitment to make any equity investment in or loan or advance to,
any other Person (as defined herein).
SECTION 3.04. Capitalization and Ownership of Tower. Section 3.04 of
the Disclosure Schedule lists, for Tower, its authorized capitalization, the
number of shares of its capital stock (or other equity interests) issued and
outstanding, and the number of shares of its capital stock (or other equity
interests) owned of record by each shareholder. All of the outstanding shares of
the capital stock of Tower are validly issued, fully paid and non-assessable and
were not issued in violation of any preemptive rights or any applicable Law. All
such shares are owned free and clear of any lien, claim or encumbrance of any
type whatsoever imposed by Tower. There are no outstanding options, warrants or
other rights to acquire any share of capital stock of Tower, there are no
outstanding securities authorized, granted or issued by Tower that are
convertible into or exchangeable for shares of its capital stock and there are
no phantom stock rights, stock appreciation rights or similar rights regarding
Tower or any Subsidiary. There are no rights of any Person to have the Company
repurchase any capital stock of Tower or any subsidiary.
SECTION 3.05. No Conflicts. The execution, delivery and performance of
this Agreement by Tower and the consummation of the transactions contemplated
hereby will not:
(a) result in the creation or imposition of any security interest,
lien, charge or other encumbrance against the Company Assets (as defined
herein), with or without the giving of notice and/or the passage of time, or
(b) violate, conflict with, affect acceleration of, or result in
termination, cancellation or modification of, or constitute a default under (i)
any contract, agreement or other instrument to which the Company is a party or
by which the Company or its assets is bound or (ii) any note, bond, mortgage,
indenture, deed of trust, license, lease, contract, commitment, understanding,
arrangement, agreement or restriction of any kind or character to which the
Company is a party or by which the Company may be bound or affected, or to which
any of the Company Assets may be subject, or
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(c) violate any statute or Law or any judgment, decree, order, writ,
injunction, regulation or rule of any court or any local, state or federal
governmental or regulatory authority, which violation, conflict, acceleration,
requirement, termination, modification or default described in (a), (b), or
(c) above could result in a Material Adverse Effect on the Company or the
transactions contemplated by this Agreement.
SECTION 3.06. Consents and Approvals. The Company is not required to
obtain, transfer or cause to be transferred any consent, approval, license,
permit or authorization of, or make any declaration, filing or registration
with, any third party or any public body or authority in connection with (a) the
execution and delivery by Tower of this Agreement, or (b) the consummation of
the Merger and the other transactions contemplated hereby or (c) the future
conduct by the Surviving Corporation of the business of the Company (the
"COMPANY BUSINESS") other than those that may be required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), or that may be required solely by reason of MSSC Texas' or Marketing
Specialists' participation in the transactions contemplated hereby.
SECTION 3.07. Financial and Operating Statements.
(a) Year End Financial Statements. Attached hereto as Appendix I is a
true and complete copy of unaudited balance sheets of the Company as of December
31, 1995 and December 31, 1996 (such latter balance sheet being termed the "1996
BALANCE SHEET"), together with related statements of operations, equity and cash
flow of the Company for each of such periods (collectively, the "YEAR END
FINANCIAL STATEMENTS"). The Year End Financial Statements are accurate and
correct in all material respects and fairly present the consolidated financial
position and the results of operations of the Company for the periods therein
identified.
(b) Accounting Records. The Company (i) keeps books, records and
accounts that, in reasonable detail, accurately and fairly reflect the
transactions, dispositions and assets of the Company and (ii) maintains a system
of internal accounting controls sufficient to provide reasonable assurance that
(A) transactions are executed in accordance with the management's general or
specific authorization, and (B) transactions are recorded as necessary to permit
preparation of financial statements that are complete and accurate in all
material respects and to maintain accountability for assets and (C) access to
such books, records and accounts is permitted only in accordance with
management's general or specific authorizations.
SECTION 3.08. No Undisclosed or Contingent Liabilities. Except for
liabilities or obligations incurred by the Company in the ordinary course of
business since the date of the 1996 Balance Sheet (none of which could
reasonably be expected to cause a Material Adverse Effect on the Company), there
is no basis for the assertion against the Company of any liability or obligation
of any nature whatsoever (whether absolute, accrued, contingent or otherwise)
that may encumber or affect the Company or the transactions contemplated hereby
which is not fully reflected or reserved against on the 1996 Balance Sheet.
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SECTION 3.09. Assets of the Company. The assets of the Company
(collectively, the "COMPANY ASSETS") include the assets referenced below:
(a) Intellectual Property. All patents, trade or service names and
marks, assumed names and copyrights and all applications therefor relating in
which the Company has an interest (collectively, "INTELLECTUAL PROPERTY"),
including without limitation those listed on Section 3.09(a) of the Disclosure
Schedule;
(b) Receivables. All accounts receivable, bills and notes receivable,
commercial paper and acceptances or any other evidences of indebtedness to the
Company, including without limitation those listed on Section 3.09(b) of the
Disclosure Schedule;
(c) Company Equipment. All furniture, fixtures and equipment of the
Company (the "COMPANY EQUIPMENT"), including without limitation those items
listed on Section 3.09(c) of the Disclosure Schedule, whether or not such items
are in any way attached or affixed to real property;
(d) Vehicles. All automobiles, trucks, trailers and other vehicles
owned or leased by the Company, including without limitation those listed on
Section 3.09(d) of the Disclosure Schedule;
(e) Inventory. All inventory of the Company (the "INVENTORY"),
including, without limitation, all raw materials, work-in-process, finished
products, goods in transit, office, manufacturing, lab and advertising supplies,
containers and packaging and shipping materials and all inventory in the hands
of suppliers for which the Company is committed as of the date hereof or the
Closing Date, including without limitation those listed on Section 3.09(e) of
the Disclosure Schedule;
(f) Contracts. All leases, contracts, agreements, arrangements,
commitments and understandings (whether written or oral), including without
limitation all deferred compensation agreements, agreements with principals,
leases, security deposits and options under leases, acquisition agreements and
confidentiality agreements, to which the Company is a party, including without
limitation all such contracts listed or referred to on Section 3.09(f) of the
Disclosure Schedule;
(g) Insurance. All insurance policies covering the Company and its
directors, officers, employees and agents (and all rights and claims thereunder
for damage to, or otherwise relating to, the Company Assets), including without
limitation those listed on Section 3.09(g) of the Disclosure Schedule; and
(h) Permits. All licenses, permits and authorizations issued by any
federal, state, local or foreign governmental authority (the "PERMITS") relating
to the Company, the Company Assets or the conduct of the Company Business,
including without limitation those listed on Section 3.09(h) of the Disclosure
Schedule.
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SECTION 3.10. Absence of Certain Changes. Since December 31, 1996, the
Company has not:
(a) suffered any Material Adverse Effect and there has not been any
event, whether occurring before or after December 31, 1996, that could
reasonably be expected to have a Material Adverse Effect on the Company; or
(b) experienced any material decrease in the book value of the Company
Assets from the amounts reflected on the 1996 Balance Sheet, other than
decreases resulting from depreciation in accordance with accounting practices in
effect at all times since January 1, 1996; or
(c) incurred any liabilities or obligations of any nature, whether
absolute, accrued, contingent or otherwise and whether due or to become due,
except (i) liabilities or obligations for rent under the Leases (as defined
herein) and (ii) liabilities or obligations for other items incurred in the
ordinary course of business of the Company and consistent with past practice,
none of which other items exceeds $25,000, considering liabilities or
obligations arising from one transaction or a series of similar transactions,
and all periodic installments or payments under any lease (other than the
Leases) or other agreement providing for periodic installments or payments, as a
single obligation or liability; or
(d) increased (other than increases resulting from the calculation of
reserves in the ordinary course of business and in a manner consistent with past
practice), or experienced any change in any assumptions underlying or methods of
calculating, any bad debt, contingency or other reserves; or
(e) paid, discharged or satisfied any claims, encumbrances, liabilities
or obligations (whether absolute, accrued, contingent or otherwise and whether
due or to become due) other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of liabilities and
obligations reflected or reserved against in the 1996 Balance Sheet or incurred
in the ordinary course of business and consistent with past practice since the
date thereof; or
(f) permitted, allowed or suffered any of the Company Assets,
including, without limitation, real property, personal property or any leasehold
interest, to be subjected to any mortgage, pledge, lien, encumbrance,
restriction or charge of any kind, except for liens for Taxes (as defined
herein) not yet owing; or
(g) determined as collectible any notes or accounts receivable or any
portion thereof which were previously considered uncollectible, or written off
as uncollectible any notes or accounts receivable or any portion thereof, except
for write-downs in the ordinary course of business, consistent with past
practice; or
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(h) canceled any material amount of indebtedness or waived any material
claims or rights; or
(i) sold, transferred or otherwise disposed of any Company Assets
except in the ordinary course of business and consistent with past practice; or
(j) disposed of or permitted to lapse any right to the use of any
patent, trademark, assumed name, service mark, trade name, copyright, license or
application therefor or disposed of or disclosed to any corporation,
association, partnership, organization, business, individual, government or
political subdivision thereof or government agency (each, a "PERSON") other than
representatives of MSSC Texas and Marketing Specialists any trade secret,
formula, process or know-how not theretofore a matter of public knowledge; or
(k) granted any increase in the salary, compensation, rate of
compensation, commissions or bonuses payable to or to become payable by the
Company to any officer or director of the Company (including, without
limitation, any increase or change pursuant to any bonus, pension,
profit-sharing, retirement or other plan or commitment); or
(l) granted any increase in the salary, compensation, rate of
compensation, commissions of bonuses payable to or to become payable by the
Company to any employee of the Company (including, without limitation, any
increase or change pursuant to any bonus, pension, profit-sharing, retirement or
other plan or commitment), except in the ordinary course of business and
consistent with past practice; or
(m) paid, loaned or advanced any amount to any officer, director,
employee or shareholder of the Company except for amounts advanced to employees
of the Company in the ordinary course of business consistent with past practice
(none of which advances were loans for personal purposes), or sold, transferred
or leased any Company Assets to, or entered into any agreement (other than this
Agreement) or arrangement with, any officer, director, employee or shareholder
of the Company (except for agreements or arrangements made in the ordinary
course of business and consistent with past practice); or
(n) entered into any collective bargaining or labor agreement, or
experienced any labor dispute or difficulty; or
(o) made any single capital expenditure or commitment in excess of
$10,000 for additions to property, plant, equipment or for any other purpose or
made aggregate capital expenditures or commitments in excess of $25,000 for
additions to property, plant, equipment or for any other purpose; or
(p) made any change in any method of accounting or accounting practice
or policy; or
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(q) suffered any casualty loss in excess of $10,000 (whether or not
insured against) or suffered aggregate casualty losses in excess of $15,000
(whether or not insured against); or
(r) issued any additional shares of capital stock of Tower or the
Subsidiaries or any option, warrant, right or other security exercisable for,
convertible into or exchangeable for shares of capital stock of Tower or the
Subsidiaries; or
(s) paid dividends on or made other distributions or payments in
respect of the capital stock of Tower or the Subsidiaries; or
(t) taken any other action not either in the ordinary course of
business and consistent with past practice or provided for in this Agreement; or
(u) entered into or agreed to any transaction not in the ordinary
course of business; or
(v) agreed, whether in writing or otherwise, to take any of the actions
set forth in this Section 3.10.
SECTION 3.11. Real Property.
(a) Set forth in Section 3.11 of the Disclosure Schedule is a complete
list of all real property that the Company currently owns or has owned in the
past ten years. The Company has good and marketable title in fee simple to such
currently owned real property and to all plants, buildings and improvements
thereon, free and clear of any mortgages, liens, claims, charges, pledges,
security interests or other encumbrances of any nature whatsoever.
(b) With respect to any deeds, title insurance policies, surveys,
mortgages, agreements and other documents granting to the Company title to or an
interest in or otherwise affecting any such real property, (i) no breach or
event of default on the part of the Company, (ii) no material breach or event of
default, to the best knowledge of the Company, on the part of any other party
thereto, and (iii) no event that, with the giving of notice or lapse of time or
both, would constitute such breach or event of default on the part of the
Company or, to the best knowledge of the Company, on the part of any other party
thereto, has occurred and is continuing.
(c) Section 3.11 of the Disclosure Schedule contains a complete and
accurate list of all real property leases to which the Company is a party in any
capacity (including all amendments thereof and modifications thereto) (the
"LEASES"), including the address of each property, a summary description of the
property leased and its uses, the name and address of each landlord or tenant,
if applicable, the expiration date of each Lease, whether an option to renew or
an option to purchase has been exercised, and whether the obligations of the
Company thereunder have been guaranteed by any Person. The Company's interests
in and to all Leases listed on Section 3.11 of the Disclosure Schedule are free
and clear of all mortgages, liens, claims, charges, pledges, security interests
or other encumbrances of any nature whatsoever including without limitation
subleases, chattel mortgages,
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mechanics' and materialmen's liens, conditional sales contracts, collateral
security arrangements and other interest retention arrangements. The Company has
not received notice of any default by the Company under any of the Leases, and
there are no facts or conditions that would, with notice or lapse of time or
both, constitute a default by the Company under any of the Leases. None of the
landlords under any of the Leases is in default.
(d) The buildings and improvements owned or leased by the Company on
any real property owned by the Company and on any Lease, and the operation and
maintenance thereof as operated and maintained, do not (i) contravene any zoning
or building Law or ordinance or other administrative regulation or (ii) violate
any restrictive covenant or any applicable Law. All of the plants, buildings and
structures located on any real property owned by the Company or on any Lease are
in a state of good maintenance and repair (normal wear and tear excepted)
suitable in all respects for the operation of the Company Business.
(e) There is no pending or threatened condemnation, eminent domain or
similar proceeding with respect to, or that could affect, any real property
owned by the Company or any Lease.
SECTION 3.12. Company Equipment. The Company has good and marketable
title to each piece of the Company Equipment. Each piece of the Company
Equipment is in good and normal operating condition and repair and adequate for
the uses to which it is being put by the Company. The Company has not received
any notification from any governmental or regulatory authority within the last
five years that the Company is in violation of any health, sanitation, fire,
safety, zoning, building or other Law (other than Environmental Laws, which are
addressed in Section 3.25), ordinance or regulation in respect of the Company
Equipment or operations, which violation has not been appropriately and
completely resolved. The Company has provided MSSC Texas and Marketing
Specialists with access to, or copies of, all guarantees, service contracts,
maintenance agreements, management agreements, instruction manuals, and any and
all other documents and papers that in any manner pertain to each material piece
of the Company Equipment.
SECTION 3.13. Contracts and Commitments.
(a) All of the agreements, contracts and commitments to which the
Company is a party or is bound, whether individually or when aggregated with all
related agreements, contracts or commitments, are material to the business,
operations, condition (financial or otherwise), liabilities, assets, earnings or
working capital of the Company are described in Section 3.13(a) of the
Disclosure Schedule.
(b) The Company is not a party to or bound by any agreements, contracts
or commitments which individually or when aggregated with all related
agreements, contracts or commitments, provide for the grant of any preferential
rights to purchase or lease any of the Company Assets, except as described in
Section 3.13(b) of the Disclosure Schedule.
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(c) The Company has delivered or made available to MSSC Texas or
Marketing Specialists true and complete copies of each written agreement,
contract or commitment listed in Section 3.13(a) of the Disclosure Schedule, as
well as true and accurate summaries of any oral agreement listed thereon.
(d) The enforceability of the agreements, contracts and commitments
referred to in this Section 3.13 will not be affected in any respect by the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(e) No purchase contracts or commitments of the Company are in excess
of the normal, ordinary and usual requirements of the Company, or to the best
knowledge of the Company, were entered into at prices materially in excess of
those available in the industry in arm's length transactions on the respective
dates thereof.
(f) The Company is not a party to or bound by any outstanding
agreements, arrangements or contracts with any of its officers, employees,
agents, consultants, advisors, salesmen or sales representatives that (i) are
not cancelable by it on notice of not longer than 30 days and without the
imposition of any liability, penalty or premium, (ii) require non-cancelable
payment by the Company of over $5,000, or (iii) provide for any bonus or other
payment based on the sale of the Company or any portion thereof.
(g) The Company is not a party to or bound by any employment agreement,
consulting agreement or any other agreements that contains any provision for
severance or termination pay liabilities or obligations.
(h) The Company is not a party to or bound by:
(i) any mortgage, indenture, note, installment
obligation or other instrument, agreement or arrangement for
or relating to any borrowing of money by the Company;
(ii) any guaranty, direct or indirect, by the Company
of any obligation for borrowings or otherwise, excluding
endorsements made for collection in the ordinary course of
business;
(iii) any obligation to make payments, contingent or
otherwise, of over $5,000 arising out of any prior acquisition
of the business, assets or stock of other persons;
(iv) any collective bargaining agreement with any
labor union;
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<PAGE> 20
(v) any lease or similar arrangement for the use by
the Company of personal property requiring payments by the
Company, on an annual basis, of over $10,000;
(vi) any agreement containing noncompetition or other
limitations restricting the conduct of the business of the
Company; and
(vii) any partnership, joint venture or similar
agreement.
(i) Neither the Company nor any of its officers, directors,
shareholders or affiliates is a party to or bound by any agreement (other than
this Agreement) or arrangement for the sale of any of the assets or capital
stock of Tower or the Subsidiaries or for the grant of any preferential rights
to purchase any of the assets or capital stock of Tower or the Subsidiaries.
(j) The Company is not bound by any agreement to redeem the Tower
Common Shares held by any shareholder, which agreement will not be effectively
and properly terminated by the consummation of the Merger.
(k) With respect to each contract and agreement listed in Section 3.13
of the Disclosure Schedule, except as set forth therein, (i) each of such
contracts and agreements is valid, binding and in full force and effect and is
enforceable by the Company in accordance with its terms, subject to bankruptcy,
insolvency, reorganization and other Laws and judicial decisions of general
applicability relating to or affecting creditors' rights and to general
principles of equity; (ii) there have been no cancellations or threatened
cancellations thereof nor are there any outstanding disputes thereunder; (iii)
neither the Company, nor any other party is in breach of any material provision
thereof; and (iv) there does not exist any default under, or any event or
condition which with the giving of notice or passage of time or both would
become a breach or default under, the terms of any such contract or agreement on
the part of the Company or on the part of any other party thereto.
SECTION 3.14. Intellectual Property.
(a) Section 3.14 of the Disclosure Schedule contains an accurate and
complete list of (i) all patents, trademarks (registered or unregistered), trade
names, assumed names, copyrights, and all applications therefor, owned or filed
by the Company and used in or necessary for the conduct of the Company Business
and, with respect to registered trademarks, contains a list of all jurisdictions
in which such trademarks are registered and all registration numbers; (ii) all
licenses, permits and other agreements relating thereto; and (iii) all
agreements relating to technology, know-how or processes used in or necessary
for the conduct of the business of the Company Business which the Company is
licensed or authorized to use by others (including, without limitation, licenses
for the use of software of all types).
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<PAGE> 21
(b) Such patents, trademarks (registered or unregistered), copyrights,
licenses and permits are (i) valid, subsisting and enforceable, and (ii) duly
recorded in the names of the Persons set forth in Section 3.14 of the Disclosure
Schedule.
(c) The Persons set forth in Section 3.14 of the Disclosure Schedule
have the sole and exclusive right, free from any liens, mortgages, security
interests, charges or encumbrances, to use the patents, trademarks (registered
or unregistered), copyrights and applications therefor set forth beside their
names, and the Company has the full right to use the trade names, assumed names,
technology, know-how, inventions, works and processes referred to in such lists
and all trade secrets required for or incident to the conduct of the Company
Business in the jurisdictions in which the Company Business is conducted, and
the consummation of the transactions contemplated hereby will not alter or
impair any such rights.
(d) No claims have been asserted by any Person against the Company with
respect to the ownership, validity, enforceability, misappropriation or use of
any product or service of the Company Business or such patents, trademarks
(registered or unregistered, or of any confusingly similar or dilative
trademarks), trade names, assumed names, copyrights, applications therefor,
technology, know-how, processes or trade secrets or challenging or questioning
the validity or effectiveness of any such license, permits or agreement and
there is no valid basis for any such claim.
(e) The use or other exploitation of any product or service of the
Company Business or patents, trademarks (registered or unregistered), trade
names, assumed names, copyrights, applications therefor, technology, know-how,
processes and trade secrets by the Company does not infringe on or dilute the
rights of any Person.
(f) To the best knowledge of the Company, no other Person is infringing
the rights of the Company with respect to the patents, trademarks (registered or
unregistered), trade names, assumed names, copyrights, and applications
therefor, technology, know-how, inventions, works, processes or trade secrets
described in this section.
SECTION 3.15. Inventory. The Company has no Inventory, other than with
respect to office supplies that are stored in amounts necessary for the
reasonably foreseeable use of the Company.
SECTION 3.16. Accounts Receivable.
(a) Set forth in Section 3.16 of the Disclosure Schedule is a true and
complete listing of the aging status of each of the accounts receivable of the
Company as of the most recent practicable date.
(b) All accounts receivable of the Company, whether reflected in the
1996 Balance Sheet or accrued since the date thereof, represent revenue
generated in the ordinary course of business and
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are collectible net of any reserves shown on the 1996 Balance Sheet or reserves
for accounts receivable accrued since the date thereof, which reserves are
adequate.
(c) Subject to the reserves established on the 1996 Balance Sheet or
accrued since the date thereof, each of the accounts receivable either has been
collected in full or will be collected in full, without any set-off, in a period
of time consistent with the historical collection results of the Company during
1993 through 1996, but in no event in excess of 120 days after the day on which
each such account receivable became due and payable.
(d) A list of any promissory notes held by the Company that have been
accepted by the Company as payment of accounts receivable of the Company is set
forth in Section 3.16 of the Disclosure Schedule.
SECTION 3.17. Pension and Other Employee Plans and Agreements.
(a) Section 3.17 of the Disclosure Schedule sets forth, as of the date
of this Agreement, all of the pension, profit sharing, stock option, stock
purchase, stock bonus, employee stock ownership, incentive, bonus, life, health,
disability or accident plans, deferred compensation plans, and other employee
compensation or benefit plans, agreements, practices, policies, customs,
contracts, arrangements or commitments, including, without limitation, changes
in control or severance agreements, holiday, vacation or other similar plans,
programs or arrangements, employee benefit plans (within the meaning of section
3(3) of ERISA), and labor union agreements under or with respect to which the
Company or any Person ("ERISA AFFILIATE") who would be treated as being a
"single employer" with the Company under section 414 of the Internal Revenue
Code of 1986, as amended (the "CODE"), has any liability or obligation, whether
current, contingent, secondary or otherwise (collectively, the "PLANS" and
individually, a "PLAN"), and the Company has furnished to MSSC Texas and
Marketing Specialists complete copies of all of the foregoing as amended and in
effect on the date hereof, including, where applicable, any trust agreements,
insurance contracts or other funding mediums related to any Plan and Summary
Plan Descriptions. The Company has heretofore delivered to MSSC Texas and
Marketing Specialists the most recent liability valuation report with respect to
each Plan for which a report or estimate has been prepared, the most recent
assets valuation report provided to the Company with respect to each Plan for
which such report must be filed, and the most recent favorable IRS determination
letter received with respect to each Plan that is intended to be qualified under
section 401(a) of the Code or trust intended to be exempt under section 501(a)
or section 501(c)(9) of the Code. Section 3.17 of the Disclosure Schedule also
sets forth any other plans or arrangements which would be required to be listed
pursuant to the preceding provisions of this section but for the fact that they
were terminated within three years of the date of this Agreement (collectively,
"TERMINATED PLAN").
(b) With respect to each Plan and each Terminated Plan, the Company and
its ERISA Affiliates have complied in all respects with, and each Plan and each
Terminated Plan conforms in all respects to and has from its inception been
operated in all respects with, all applicable laws and regulations, including
but not limited to ERISA and the Code, and each Plan and each Terminated
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<PAGE> 23
Plan has been administered in all respects in accordance with its terms. Each
Plan and each Terminated Plan intended to be qualified under section 401(a) of
the Code or trust intended to be exempt under section 501(a) or section
501(c)(9) of the Code is, or with respect to a Terminated Plan was at the time
it terminated, and for each prior year for which any applicable statute of
limitations has not expired, was, qualified or exempt, as the case may be, and
each such Plan and Terminated Plan is (or was) a single plan, as defined in
section 414(1) of the Code and the regulations thereunder, in which the Company
is the sole employer. Neither the Company nor any ERISA Affiliate has ever had
an obligation or liability, to or with respect to, a multiemployer plan, as
defined in section 4001(a)(3) of ERISA. Neither the Company nor any ERISA
Affiliate has any commitment and has not taken any action to adopt or establish
any additional Plans or to materially increase the benefits under any Plan; no
event or condition has occurred or exists with respect to any Plan or Terminated
Plan, whether or not terminated prior to the date of this Agreement and whether
or not maintained or contributed to by the Company or any ERISA Affiliate, which
individually or collectively could result in a material liability to the Company
or any ERISA Affiliate; all contributions required to any Plan and each
Terminated Plan and all premiums for insurance coverage for each fiscal year of
each Plan and each Terminated Plan ended before the date of this Agreement and
for any portion of a fiscal year ending on the Closing Date have been timely
paid and payments to be made but not yet due properly accrued and recorded in
the Year End Financial Statements and 1997 Financial Statements through their
relevant dates; no Plan or Terminated Plan has incurred any "accumulated funding
deficiency" (as defined in section 302 of ERISA and section 412 of the Code),
whether or not waived; there is no pending or, to the best knowledge of the
Company, threatened or anticipated litigation, arbitration, proceeding, claim
(other than an undisputed claim for payment of benefits in accordance with the
terms thereof or a pending or final qualified domestic relations order), demand,
grievance, or allegation of unfair labor practice (or any basis therefor)
involving any of the Plans or Terminated Plans or any investigation, proceeding,
administrative review or other administrative agency process which could result
in imposition on the Company or any ERISA Affiliate or any penalty, assessment
or liability in connection with any of the Plans or Terminated Plans,
individually or collectively; no Plan or Terminated Plan has engaged or is about
to engage in a prohibited transaction as defined in section 406 of ERISA or
section 4975 of the Code; and no "reportable event," as defined in section 4043
of ERISA, has occurred or, to the best knowledge of the Company, is about to
incur that could result in a liability to the Company or any ERISA Affiliate.
(c) No Plan provides (or has any commitment to provide) health benefits
with respect to any current or former employees or independent contractors (or
beneficiary thereof) of the Company or any ERISA Affiliate beyond their
retirement or other termination of service (other than coverage mandated by
COBRA). Each Plan can be unilaterally terminated at any time by the Company
without material liability.
SECTION 3.18. Litigation. There are no open and unresolved claims,
actions, suits, proceedings, investigations or inquiries that have been made or
served against the Company or, to the best knowledge of the Company, that are
pending against (without having been so served), threatened by or against, or
otherwise affecting or that would adversely affect, the transactions
contemplated hereby at law or in equity or before or by any federal, state,
local, foreign or other
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governmental department, commission, board, agency, or authority; and no other
such claim, action, suit, proceeding, inquiry or investigation could be brought
against the Company for which valid defenses are not available. No claim,
action, suit, proceeding, inquiry or investigation set forth in Section 3.18 of
the Disclosure Schedule would, if adversely decided, have a Material Adverse
Effect on the Company or the transactions contemplated hereby. The Company is
not a party to or a recipient of service of process regarding (and has not
otherwise been named and noticed in) any judgment, order or decree entered in
any lawsuit or proceeding which has had or may have a Material Adverse Effect on
the Company or on its ability to acquire any property or conduct its business in
any way.
SECTION 3.19. Insurance.
(a) All policies of fire, liability, product liability, workmen's
compensation, health and other forms of insurance relating to the Company
Business (the "COMPANY INSURANCE POLICIES") are in full force and effect.
(b) All billed premiums with respect to the Company Insurance Policies
covering all periods up to and including the Closing Date have been paid or will
be paid prior to the Closing Date.
(c) No notice of cancellation or termination has been received with
respect to any of the Company Insurance Policies.
(d) The Company Insurance Policies are sufficient for compliance with
all requirements of Law and of all agreements with respect to the operation of
the Company Business, are valid, outstanding and enforceable policies (subject
to bankruptcy, insolvency, reorganization and other Laws and judicial decisions
of general applicability relating to or affecting creditors' rights and to
general principles of equity), and, to the best knowledge of the Company,
provide insurance coverage customary in the industry regarding the Company
Assets and the operations of the Company Business.
(e) The coverage provided by the Company Insurance Policies, with
respect to any insured act or event occurring on or prior to the Closing Date,
will not in any way be affected by or terminate or lapse by reason of the
transactions contemplated hereby.
SECTION 3.20. Collective Bargaining Agreements; Compensation; Employee
Agreements.
(a) The Company does not have in effect any collective bargaining
agreement and is not currently engaged in any bargaining with any labor union.
(b) To the best knowledge of the Company, no petition is on file with
the National Labor Relations Board submitted by a labor union seeking to
represent any of the employees of the Company and the Company is not aware of
any attempts to organize the employees of the Company by any labor union.
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<PAGE> 25
(c) Section 3.20 of the Disclosure Schedule sets forth a complete and
accurate list showing the names, the rate of compensation and the portions
thereof attributable to salary and bonuses, respectively, as well as the
location of all officers of the Company and of all employees of or consultants
to the Company that received annual base salary and cash bonus totaling in
excess of $100,000 for the fiscal year ended December 31, 1996.
(d) There are no covenants, agreements or restrictions to which the
Company is a party, including but not limited to employee noncompete agreements,
prohibiting, limiting or in any way restricting any employee listed on Section
3.20 of the Disclosure Schedule from engaging in any type of business activity
in any location.
SECTION 3.21. Labor Matters.
(a) The Company has complied and is presently complying with all
applicable Laws respecting employment and employment practices, terms and
conditions of employment, and wages and hours, and is not engaged in any unfair
labor practice or unlawful employment practice which has had, or could
reasonably be expected to produce, a Material Adverse Effect on the Company.
(b) There is no open and unresolved unfair labor practice charge or
complaint against the Company for which the Company has received service of
process or other appropriate notice or, to the best knowledge of the Company,
pending (without having been so served or noticed) being considered or
threatened before the National Labor Relations Board.
(c) There is no open and unresolved grievance or any open and
unresolved arbitration proceeding arising out of or under collective bargaining
agreements for which the Company has received service of process or other
appropriate notice and, to the best knowledge of the Company, no such grievance
or arbitration proceeding is pending (without having been so served or noticed)
or is being considered or threatened.
(d) There is no basis for any charge, complaint or grievance described
in this Section 3.21, and, to the best knowledge of the Company, none is being
considered or threatened.
(e) There is no labor strike, slowdown or work stoppage for which the
Company has received service of process or other appropriate notice or, to the
best knowledge of the Company, pending (without having been so served or
noticed) or threatened against the Company.
(f) The Company has not experienced any significant work stoppages or
been a party within the past two years to any proceedings before the National
Labor Relations Board, and is not a party to any arbitration proceeding arising
out of or under collective bargaining agreements.
(g) There is no open and unresolved charge or complaint for which the
Company has received service of process or other appropriate notice or, to the
best knowledge of the Company, which is being considered or threatened against
the Company before the Equal Employment
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Opportunity Commission or any state, local, federal or foreign agency
responsible for the prevention of unlawful employment practices.
(h) The Company has not received notice of the intent of any federal,
state, local or foreign agency responsible for the enforcement of labor or
employment laws to conduct an investigation of or relating to the Company, and,
to the best knowledge of the Company, no such investigation is in progress.
(i) The employees of the Company are not represented by any labor union
and there are no any collective bargaining agreements otherwise in effect with
respect to such employees.
(j) There are no citations against the Company from the Occupational
Safety and Health Administration for which the Company has been provided service
of process or other appropriate notice, and, to the best knowledge of the
Company, no such citations are pending.
(k) There are no current Affirmative Action Plans to which the Company
is a party affecting the Company Business and, to the best knowledge of the
Company, there are no current or pending audits contemplated against the Company
by the Office of Federal Compliance Programs pursuant to Executive Order 11246.
SECTION 3.22. Compliance with Law.
(a) The Company is in compliance with all federal, state, foreign and
local laws (whether statutory or otherwise), ordinances, rules, regulations,
orders, judgments, decrees, writs and injunctions of any governmental authority
(collectively, "LAWS") applicable to the Company Business, except for
noncompliance which in the aggregate will not result in a Material Adverse
Effect.
(b) The Company has not received written notification from any
governmental or regulatory authority within the past five years of any asserted
present or past failure to so comply, which failure has not been appropriately
and completely resolved.
(c) The Company has not been notified by any governmental or regulatory
authority that the Company is in violation or alleged violation of any Law
applicable to the Company Business which violation has not been appropriately
and completely resolved, or that any governmental or regulatory authority
contemplates any investigation or proceeding with respect to any such violation
or alleged violation which has not been appropriately and completely resolved
which, in either case, could reasonably be expected to have a Material Adverse
Effect.
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SECTION 3.23. Permits. The Company has all Permits necessary for the
ownership or leasing of its properties and the conduct of the Company Business
as now being conducted. All such Permits are in full force and effect. No
violations exist or, to the best knowledge of the Company, have been reported in
respect of such Permits. No notice of any proceeding has been served or
otherwise given to the Company or, to the best knowledge of the Company, is
pending (without service or other notice) or threatened seeking the revocation
or limitation of any of such Permits.
SECTION 3.24. Environmental Matters.
(a) All Permits that are required for the current operation of the
Company Business under all Environmental Laws have been obtained. No notice to,
approval of, authorization or consent from any Person is necessary for the
transfer of any such Permit, and the consummation of the transactions
contemplated by this Agreement will not violate, alter, impair or invalidate, in
any respect, such Permits.
(b) All sites to which Hazardous Material (as defined herein) from the
Company has been or is being treated or disposed of, and all transporters of
such Hazardous Material, have valid permits for the treatment, disposal or
transportation of such Hazardous Materials and were, at the time of treatment,
disposal or transport, or are currently in compliance with such permits. Section
3.24 of the Disclosure Schedule contains a complete and accurate list (including
street addresses) of any sites to which the Company has sent Hazardous
Materials.
(c) The Company is in substantial compliance with all terms and
conditions of the required Permits, and is also in substantial compliance with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in all applicable
Environmental Laws. Further, the Company is in substantial compliance with all
applicable covenants running with any leases that relate to the protection of
health or the environment. The Company has not received any communication
(written or oral) from any Person that alleges that the Company is not in
compliance with the required Permits or with any applicable Environmental Law
which allegation has not been appropriately and completely resolved.
(d) There is no Environmental Claim pending, threatened or likely to be
threatened (i) against the Company; (ii) against any Person whose liability for
any Environmental Claim the Company may have retained or assumed either
contractually or by operation of Law; or (iii) against any real or personal
property or operations that are or have been previously owned, leased, operated
or managed, in whole or in part, by the Company.
(e) There are no events, conditions, circumstances, activities,
practices, incidents, actions or plans that may interfere with or prevent
compliance or continued compliance with Environmental Laws with respect to the
operation of the Company or that may otherwise form the basis of an
Environmental Claim against the Company.
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(f) The Company has not prepared or caused the preparation of any
environmental reports, audits, investigations or assessments of the Company or
any real or personal property or operations which are now, or have been
previously owned, leased, operated or managed, in whole or in part, by the
Company (collectively, "ENVIRONMENTAL REPORTS"). No Environmental Reports exist.
(g) The Company has disclosed to MSSC Texas and Marketing Specialists
all relevant facts with respect to potential or actual environmental liabilities
of the Company which could have a Material Adverse Effect.
(h) For purposes of this Agreement, the following terms shall be given
the following meanings:
(i) "ENVIRONMENTAL CLAIM" shall mean any judicial,
administrative or regulatory action, civil or criminal suit,
demand, demand letter, directive, claim, lien, superlien,
investigation, proceeding or notice of violation (written or
oral) by any Person alleging potential liability (including,
without limitation, potential liability for enforcement,
investigatory costs, cleanup costs, governmental response
costs, removal costs, remedial costs, natural resources
damages, property damages, personal injuries or penalties)
arising out of, based on or resulting from (a) the presence or
Release or threatened Release into the environment, of any
Hazardous Materials at any location, whether owned, operated,
leased or managed by the Company; or (b) circumstances forming
the basis of any violation or alleged violation, of any
Environmental Law; or (c) any and all claims by any third
party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the
presence or Release of any Hazardous Materials.
(ii) "ENVIRONMENTAL LAWS" shall mean any Law relating
to or applicable to the regulation or protection of human
health, safety or the environment (including, without
limitation, ambient air, soil, surface water, groundwater,
wetlands, land or subsurface), including without limitation,
Laws and regulations relating to the Release or threatened
Release of Hazardous Material, or manufacture, processing,
distribution, use, treatment, storage, disposal, transport,
recycling or handling of Hazardous Material.
(iii) "HAZARDOUS MATERIAL" shall mean (a) any
petroleum or petroleum products, radioactive materials,
asbestos in any form that is or could become friable, and
compressors or other equipment that contain polychlorinated
biphenyls; and (b) any chemicals, materials or substances
which are now defined as or included in the definition of
"HAZARDOUS SUBSTANCES," "HAZARDOUS WASTES," "HAZARDOUS
MATERIALS," "EXTREMELY HAZARDOUS WASTES," "RESTRICTED
HAZARDOUS WASTES," "TOXIC SUBSTANCES," "TOXIC POLLUTANTS,"
"POLLUTANTS," "CONTAMINANTS" or words of similar import, under
any Environmental Law; and (c) any other chemical, material,
substance or waste,
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exposure to which is now prohibited, limited or regulated
under any Environmental Law.
(iv) "RELEASE" shall mean any release, spill,
emission, leaking, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the atmosphere, soil,
surface water, groundwater or property.
SECTION 3.25. Tax Matters.
(a) For purposes of this Agreement, (i) "TAX RETURN" means any report,
statement, form, return or other document or information required to be supplied
to a taxing authority in connection with Taxes and (ii) "TAX" or "TAXES" means
any United States or foreign federal, state, or local tax, including without
limitation income tax, ad valorem tax, excise tax, sales tax, use tax, franchise
tax, gross receipts tax, withholding tax, social security tax, occupation tax,
service tax, license tax, payroll tax, transfer and recording tax, severance
tax, customs tax, import tax, export tax, employment tax, or any similar or
other tax, assessment, duty, fee, levy or other governmental charge, together
with and including, without limitation, any and all interest, fines, penalties,
assessments and additions to tax resulting from, relating to, or incurred in
connection with any such tax or any contest or dispute thereof.
(b) All Tax Returns required to be filed on or before the Closing Date
by the Company have been or will be filed within the time prescribed by Law
(including extensions of time approved by the appropriate taxing authority). The
Tax Returns so filed are complete, correct and accurate representations of the
Tax liabilities of the Company and such Tax Returns accurately set forth or will
accurately set forth all items to the extent required to be reflected or
included in such returns.
(c) The Company has timely paid or has made adequate provision in the
1996 Balance Sheet for the payment of all Taxes due on such Tax Returns that
have been filed or will be filed for periods ending on or before the date of the
1996 Balance Sheet.
(d) There is no action, suit, investigation, proceeding, audit or claim
that has been served against or otherwise properly noticed to the Company, or,
to the best knowledge of the Company, pending or proposed against or with
respect to the Company in respect of any Tax. There are no material liens for
Taxes upon any of the Company Assets.
(e) The Company has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other Person.
(f) The Company has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
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(g) The Company does not have in effect a consent under Section 341(f)
of the Code concerning collapsible corporations.
(h) The Company has not made any payment, and is not obligated to make
any payment, and is not a party to any agreement that could obligate it to make
any payment that will not be deductible under section 280G of the Code or will
be subject to Tax under section 4999 of the Code.
(i) There has never been a Tax sharing or allocation agreement in place
between the Company and any other Person other than those, if any, with respect
to which the applicable statute of limitations has run.
(j) The Company is not liable for a Tax incurred by any other
corporation that was a member of a consolidated group of corporations (within
the meaning of Treasury regulation section 1.1502) that included the Company.
(k) The Company has delivered or made available to MSSC Texas and
Marketing Specialists correct and complete copies of all Tax Returns filed by
the Company for 1993, 1994 and 1995, all examination reports, and any statements
of deficiencies assessed against or agreed to by the Company.
SECTION 3.26. Service Liability. There is no state of facts or the
occurrence of any event forming the basis of any present claim against the
Company for personal injury or property damage alleged to be caused by products
shipped or services rendered by the Company in connection with the Company
Business, which is not fully covered by insurance, except for deductibles (the
amount of which deductibles is set forth on Section 3.26 of the Disclosure
Schedule), and except for claims that would not, individually or in the
aggregate, have a Material Adverse Effect on the Company or the consummation of
the transactions contemplated hereby.
SECTION 3.27. Title to Assets. The Company has good, valid and
marketable title to the Company Assets, including without limitation those
assets set forth on the 1996 Balance Sheet. At the Closing the Company Assets
will be free and clear of all mortgages, liens, claims, charges, pledges,
security interests or encumbrances of any nature whatsoever.
SECTION 3.28. Accuracy of Disclosure. There is no information contained
in this Agreement (whether in this Article III, any other portion of this
Agreement pertaining to the Company, the Disclosure Schedule, the Appendices,
the Exhibits or any other documents or certificates delivered pursuant to this
Agreement) that contains an untrue statement of material fact or omits to state
any material fact required to be stated in order to make the statements made
herein and therein not misleading.
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SECTION 3.29. Redemptions of Capital Stock by Tower. All redemptions of
its capital stock by Tower in the past ten years have been effected in
accordance with all applicable federal and state securities (and other) Laws and
agreements between the Company and its shareholders. There exists no continuing
claim by any former or current shareholder, for money or otherwise, against the
Company regarding any such redemptions, and no basis for any such claim exists.
Set forth in Section 3.29 of the Disclosure Schedule is a list of all holders of
Tower's capital stock who have had their capital stock redeemed since December
31, 1996 or who have at any time requested redemption of their capital stock
(which redemption has not yet occurred).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
MSSC TEXAS AND MARKETING SPECIALISTS
MSSC Texas and Marketing Specialists hereby jointly represent and
warrant to Tower as follows, except as otherwise set forth in the relevant
section of the Disclosure Schedule:
SECTION 4.01. Organization and Qualification - MSSC Texas. MSSC Texas
is (a) a corporation duly organized, validly existing and in good standing under
the laws of the State of Texas and (b) duly qualified to do business as a
foreign corporation and in good standing in each jurisdiction in which the
character of the properties and assets now owned or leased by it or the nature
of the business transacted by it requires it to be so qualified, except where
the failure to be so qualified, individually or in the aggregate, would not have
a Material Adverse Effect on MSSC Texas or the consummation of the transactions
contemplated hereby. Each jurisdiction in which MSSC Texas is qualified to do
business is listed on Section 4.01 of the Disclosure Schedule. No jurisdiction
in which MSSC Texas is not qualified or licensed has claimed, in writing or
otherwise, that MSSC Texas is required to qualify or be licensed therein.
SECTION 4.02. Organization and Qualification - Marketing Specialists.
Marketing Specialists is (a) a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas and (b) duly qualified to
do business as a foreign corporation and in good standing in each jurisdiction
in which the character of the properties and assets now owned or leased by it or
the nature of the business transacted by it requires it to be so qualified,
except where the failure to be so qualified, individually or in the aggregate,
would not have a Material Adverse Effect on Marketing Specialists or the
consummation of the transactions contemplated hereby. Each jurisdiction in which
Marketing Specialists is qualified to do business is listed on Section 4.02 of
the Disclosure Schedule. No jurisdiction in which Marketing Specialists is not
qualified or licensed has claimed, in writing or otherwise, that Marketing
Specialists is required to qualify or be licensed therein.
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SECTION 4.03. Power and Capacity; Charter Documents of MSSC Texas.
(a) MSSC Texas has all requisite power and authority (corporate and
otherwise) to enter into, execute and deliver this Agreement and perform its
obligations hereunder. MSSC Texas has the corporate power and authority to carry
on its business as now being conducted and to own and lease its properties. This
Agreement has been duly executed and delivered by MSSC Texas and is a valid and
binding obligation of MSSC Texas, enforceable in accordance with its terms.
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby by MSSC Texas will not
result in a violation or breach of or constitute a default under any term or
provision of the Articles of Incorporation or Bylaws of MSSC Texas. MSSC Texas
has delivered to Tower true and complete copies of the Articles of Incorporation
and the Bylaws of MSSC Texas, as in effect on the date hereof.
SECTION 4.04. Power and Capacity; Charter Documents of Marketing
Specialists.
(a) Marketing Specialists has all requisite power and authority
(corporate and otherwise) to enter into, execute and deliver this Agreement and
perform its obligations hereunder. Marketing Specialists has the corporate power
and authority to carry on its business as now being conducted and to own and
lease its properties. This Agreement has been duly executed and delivered by
Marketing Specialists and is a valid and binding obligation of Marketing
Specialists, enforceable in accordance with its terms.
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby by Marketing Specialists
will not result in a violation or breach of or constitute a default under any
term or provision of the Articles of Incorporation or Bylaws of Marketing
Specialists. Marketing Specialists has delivered to Tower true and complete
copies of the Articles of Incorporation and the Bylaws of Marketing Specialists,
as in effect on the date hereof.
SECTION 4.05. No Conflicts. The execution, delivery and performance of
this Agreement by MSSC Texas and Marketing Specialists and the consummation of
the transactions contemplated hereby will not:
(a) result in the creation or imposition of any security interest,
lien, charge or other encumbrance against MSSC Texas' assets or Marketing
Specialists' assets, with or without the giving of notice and/or the passage of
time, or
(b) violate, conflict with, affect acceleration of, or result in
termination, cancellation or modification of, or constitute a default under (i)
any contract, agreement or other instrument to which MSSC Texas or Marketing
Specialists is a party or by which MSSC Texas or Marketing Specialists or their
respective assets is bound or (ii) any note, bond, mortgage, indenture, deed of
trust, license, lease, contract, commitment, understanding, arrangement,
agreement or restriction of any kind or
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character to which MSSC Texas or Marketing Specialists is a party or by which
MSSC Texas or Marketing Specialists may be bound or affected or to which any of
their respective assets may be subject, or
(c) violate any statute or law or any judgment, decree, order, writ,
injunction, regulation or rule of any court or any local, state or federal
governmental or regulatory authority, which violation, conflict, acceleration,
requirement, termination, modification or default described in (a), (b), or (c)
above could result in a Material Adverse Effect on MSSC Texas or Marketing
Specialists or the transactions contemplated by this Agreement.
SECTION 4.06. Consents and Approvals. Neither MSSC Texas nor Marketing
Specialists is required to obtain, transfer or cause to be transferred any
consent, approval, license, permit or authorization of, or make any declaration,
filing or registration with, any third party or any public body or authority in
connection with (a) the execution and delivery by MSSC Texas and Marketing
Specialists of this Agreement, or (b) the consummation of the Merger and the
other transactions contemplated hereby or (c) the future conduct by the
Surviving Corporation of the Company Business, other than those that may be
required under the HSR Act or that may be required solely by reason of Tower's
(as opposed to any other third party's) participation in the transactions
contemplated hereby.
SECTION 4.07. Financial and Operating Statements.
(a) Year End Audited Financial Statements of Marketing Specialists.
Attached hereto as Appendix II is a true and complete copy of the audited
consolidated balance sheets of Marketing Specialists as of December 31, 1996 and
1995, together with the related consolidated statement of operations,
shareholders' equity (deficit) and cash flow for the year ended (collectively,
the "MARKETING SPECIALISTS FINANCIAL STATEMENTS"). The Marketing Specialists
Financial Statements are accurate and correct in all material respects and
fairly present the consolidated financial position and the results of operations
of Marketing Specialists for the year then ended in conformity with generally
accepted accounting principles ("GAAP") consistently applied.
(b) Year End Audited Financial Statements of Bromar and Subsidiary.
Attached hereto as Appendix III is a true and complete copy of the audited
consolidated balance sheets of Bromar Inc. and Subsidiary as of December 31,
1995 and 1994, together with related consolidated statements of operations,
shareholders' equity and cash flows for the years then ended (collectively, the
"BROMAR FINANCIAL STATEMENTS"). The Bromar Financial Statements are accurate and
correct in all material respects and fairly present the consolidated financial
position and the results of operations of Bromar Inc. and Subsidiary for the
years then ended in conformity with GAAP consistently applied.
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ARTICLE V
OTHER OBLIGATIONS OF THE PARTIES
SECTION 5.01. Conduct of Company Business. From the date hereof to the
Closing, except as otherwise expressly set forth in this Agreement, the Company
shall conduct the business, operations, activities and practices of the Company
only in the ordinary course, in accordance with prudent practice and consistent
with past practice. Without limiting the generality of the foregoing, from the
date hereof to the Closing, without the prior written consent of MSSC Texas or
Marketing Specialists, Tower shall not (and shall cause the Subsidiaries to
not):
(a) incur any liabilities or obligations of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether due or to become
due), except for liabilities or obligations for (i) rent under the Leases and
(ii) other items incurred in the ordinary course of business and consistent with
past practice, none of which other items shall exceed $10,000 (considering
liabilities or obligations arising from one transaction or a series of similar
transactions, and all periodic installments or payments under any lease (other
than the Leases) or other agreement providing for periodic installments or
payments, as a single obligation or liability);
(b) increase (other than an increase resulting from the calculation of
reserves in the ordinary course of business and in a manner consistent with past
practice) or change any assumptions underlying, or methods of calculating, any
bad debt, contingency or other reserves;
(c) pay, discharge or satisfy any claim, encumbrance, liability or
obligation (whether absolute, accrued, contingent or otherwise and whether due
or to become due), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of liabilities and
obligations which are reflected or reserved against in the 1996 Balance Sheet or
which have been incurred since the date thereof in the ordinary course of
business and consistent with past practice, or prepay any liability or
obligation having a fixed maturity of more than 90 days from the date such
liability or obligation was issued or incurred;
(d) permit, allow or suffer any of the Company Assets to be subjected
to any new or additional mortgage, pledge, lien, encumbrance, restriction or
charge of any kind (except for liens arising as a result of Taxes not yet owing)
except for capital equipment leases not to exceed $15,000 in the aggregate;
(e) determine as collectible any notes or accounts receivable or any
portion thereof which was previously considered uncollectible or write off as
uncollectible any notes or accounts receivable or any portion thereof other than
in the ordinary course of business, but in no event to exceed $15,000 in the
aggregate;
(f) cancel any amount of indebtedness in excess of $5,000 or waive any
claims or rights of value in excess of $5,000;
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(g) sell, transfer or otherwise dispose of any of the Company Assets
with an aggregate value of more than $5,000;
(h) dispose of or permit to lapse any right to use any patent,
trademark, assumed name, service mark, trade name, copyright, license or
application therefor or dispose of or disclose to any Person other than
representatives of MSSC Texas or Marketing Specialists any trade secret,
formula, process or know-how not theretofore a matter of public knowledge (other
than disclosures in the ordinary course of business and consistent with past
practice that would not materially diminish the value of such trade secrets,
formulae, processes or know-how to the Company);
(i) grant any increase in the compensation payable to or to become
payable to those individuals identified in Section 3.21 of the Disclosure
Schedule, grant, other than in the ordinary course of business, any increase in
the compensation payable to or to become payable to any other employees (of
whatever nature) of the Company (including, without limitation, any increase or
change pursuant to any bonus, pension, profit-sharing, retirement or other plan
or commitment), grant any general increase in the compensation payable to or to
become payable to employees of the Company or, except in the ordinary course of
business and consistent with past practice, grant any increase in the
compensation payable or to become payable to individual employees;
(j) pay, loan or advance any amount (except for advances in the
ordinary course of business and consistent with past practice that do not in the
aggregate exceed $5,000 and are not made as advances for personal loans) to, or
sell, transfer or lease any of the Company Assets to, or enter into any
agreement or arrangements with, any of the officers, directors, shareholders or
employees of any Company or any of their respective affiliates;
(k) enter into any collective bargaining or labor agreement;
(l) make any single capital expenditure or commitment in excess of
$5,000 for additions to property, plant, equipment or intangible capital assets
or for any other purpose or make aggregate capital expenditures or commitments
in excess of $15,000 for additions to property, plant, equipment or for any
other purpose;
(m) make any change in any method of accounting or accounting practice
or policy;
(n) enter into any agreement or contract or commitment of the type
required to be disclosed pursuant to Section 3.10 hereof or outside the ordinary
course of business;
(o) terminate or amend in any material respect any material contract,
lease, license, or other agreement to which the Company is a party;
(p) permit any option to renew any Lease or any option to purchase any
property to expire or exercise any such option;
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(q) issue any additional shares of capital stock of the Company or
options, warrants, rights (including, without limitation, stock appreciation
rights and phantom stock rights) or other securities exercisable for,
convertible into or exchangeable for shares of capital stock of the Company;
(r) omit to do any act, or permit any act or omission to act, which may
cause a breach of any contract, commitment or obligation of the Company, or any
breach of any representation, warranty, covenant or agreement made by the
Company herein;
(s) pay its suppliers and other vendors in a manner and time not
consistent with past practice;
(t) take any other action not in the ordinary course of business and
consistent with past practice and prudent business practice or provided for in
this Agreement; or
(u) agree, whether in writing or otherwise, to do any of the foregoing.
SECTION 5.02. Access to Books and Records. In order that MSSC Texas and
Marketing Specialists may have full opportunity to make investigations of the
Company in connection with the actions contemplated by this Agreement, Tower
shall permit MSSC Texas and Marketing Specialists and their counsel,
accountants, auditors, lenders, environmental consultants and other
representatives reasonable access, upon reasonable notice during normal business
hours, to all of the plants, offices, properties, books and records, contracts
and commitments of the Company from the date hereof through the Closing Date.
SECTION 5.03. Consents. Tower agrees to use its reasonable efforts to
obtain prior to the Closing all consents necessary, in the reasonable
determination of MSSC Texas and Marketing Specialists, to consummate the
transactions contemplated hereby, including without limitation each of the
consents, approvals, licenses, permits and authorizations (and the declarations,
filings and registrations) listed or referred to in Section 3.06 of the
Disclosure Schedule. All such consents shall be in writing and in form and
substance reasonably satisfactory to MSSC Texas and Marketing Specialists, and
executed counterparts thereof shall be delivered to MSSC Texas and Marketing
Specialists promptly after receipt thereof by Tower but in no event later than
the Closing.
SECTION 5.04. Other Transactions. Prior to the Closing, Tower shall
not, and shall not permit any of its (and the Subsidiaries') officers,
directors, employees or other representatives to, directly or indirectly,
encourage, solicit, initiate or participate in negotiations with, or provide any
information or assistance to, any Person (other than MSSC Texas and Marketing
Specialists and their representatives) concerning any merger, sale of
securities, sale of the Company Assets or similar transaction involving the
Company or any of the Company Assets (other than the transactions contemplated
between the parties by this Agreement).
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SECTION 5.05. Supplemental Disclosure by Tower.
(a) The portion of the Disclosure Schedule prepared by Tower (Section
3.01 through Section 3.29) shall be considered to be part of the representations
and warranties of Tower.
(b) Until the Closing, Tower shall have the continuing obligation to
promptly supplement or amend the Disclosure Schedule with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in such
Sections of the Disclosure Schedule ("TOWER SUPPLEMENTAL DISCLOSURES").
(c) Tower acknowledges that the Disclosure Schedule is an important and
integral part of this Agreement and that MSSC Texas and Marketing Specialists
shall be entitled to treat any such supplementation or amendment as a breach of
the appropriate representation or warranty; whether or not the event or
condition giving rise to such supplementation or amendment occurred on or prior
to the date hereof except to the extent that such supplementation or amendment
is a result of any of the activities permitted by Section 5.01 ("SECTION 5.01
ITEMS"), which supplementation or amendment shall not be deemed a breach by
Tower of any obligation hereunder or be deemed the non-fulfillment of a
condition hereunder. Tower further acknowledges that MSSC Texas and Marketing
Specialists have relied upon the information contained therein in entering into
this Agreement.
SECTION 5.06. Supplemental Disclosure by Marketing Specialists and MSSC
Texas.
(a) The portion of the Disclosure Schedule prepared by Marketing
Specialists and MSSC Texas (Section 4.01 through Section 4.07) shall be
considered to be part of the representations and warranties of Marketing
Specialists and MSSC Texas.
(b) Until the Closing, Marketing Specialists and MSSC Texas shall have
the continuing obligation to promptly supplement or amend the Disclosure
Schedule with respect to any matter hereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been required to be
set forth or described in the Disclosure Schedule ("MSSC SUPPLEMENTAL
DISCLOSURES").
(c) Marketing Specialists and MSSC Texas acknowledges that the
Disclosure Schedule is an important and integral part of this Agreement and that
Tower shall be entitled to treat any such supplementation or amendment as a
breach of the appropriate representation or warranty; whether or not the event
or condition giving rise to such supplementation or amendment occurred on or
prior to the date hereof. Marketing Specialists and MSSC Texas further
acknowledge that Tower has relied upon the information contained therein in
entering into this Agreement.
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SECTION 5.07. Governmental Filings. As soon as practicable, the
Company, MSSC Texas and Marketing Specialists shall make any and all filings and
submissions to any governmental agency that are required to be made in
connection with the transactions contemplated hereby (including, without
limitation, filings under the HSR Act). The Company shall furnish to MSSC Texas
and Marketing Specialists, and MSSC Texas and Marketing Specialists shall
furnish to the Company, such information and assistance as the other party or
parties may reasonably request in connection with the preparation of any such
filings or submissions.
SECTION 5.08. Covenant to Satisfy Conditions. The Company, MSSC Texas
and Marketing Specialists shall each use their reasonable efforts to insure that
the conditions set forth in Article VI hereof are satisfied, insofar as such
matters are within their respective control.
SECTION 5.09. Confidentiality. The parties acknowledge and affirm their
obligations regarding confidentiality set forth in their mutual confidentiality
letters dated January 23, 1997. No party shall release any information regarding
this Agreement or the transactions contemplated hereby without the prior written
consent of each other party hereto.
SECTION 5.10. Employees. From the date hereof Tower shall use its
reasonable efforts to retain as employees of the Company through the Closing
Date the active employment of the Company's current employees, except as may be
otherwise agreed by the parties. Tower agrees in this regard to cooperate with
MSSC Texas and Marketing Specialists by permitting MSSC Texas and Marketing
Specialists throughout the period prior to the Closing Date to meet with the
employees of the Company at such times as shall be approved by a representative
of Tower (which approval shall not be unreasonably withheld).
SECTION 5.11. Damage or Destruction. If any of the offices of the
Company shall be damaged so as to be unusable for more than one week or
destroyed prior to Closing, then Tower shall immediately notify MSSC Texas and
Marketing Specialists and furnish to MSSC Texas and Marketing Specialists a
written statement of the amount of insurance, if any, payable on account
thereof. In the event of such damage or destruction, MSSC Texas or Marketing
Specialists may elect to require that Tower restore or replace the affected
offices (and any Company Assets therein) to their condition on the date of this
Agreement. In the event that such damage to any Company Asset or office of the
Company (taking into account the insurance amounts due to the Company as a
result of such damage) would reasonably be determined to result in a Material
Adverse Effect to the Company of $100,000 or more, then MSSC Texas or Marketing
Specialists may terminate, without liability to Tower, MSSC Texas or Marketing
Specialists, the transactions contemplated hereby.
SECTION 5.12. Shareholder Meeting of Tower; Exchange of Shares. Tower
shall, at a meeting of its shareholders duly called by its Board of Directors to
be held as soon as practicable following execution of this Agreement, submit
this Agreement and the consummation of the Merger to a vote of its shareholders
in accordance with the Texas Law.
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SECTION 5.13. Information Delivered to Shareholders. Tower shall submit
all shareholder notices, proxy solicitation material, written consents and other
information to MSSC Texas and Marketing Specialists for its written approval
(which approval shall not be unreasonably withheld) at least four days prior to
delivering such materials to Tower's shareholders. All such materials shall
comply with the Texas Law and all applicable state and federal securities Laws
(including, without limitation, the anti-fraud provisions thereof). MSSC Texas
and Marketing Specialists shall be provided with the opportunity to have one or
more representatives attend shareholder meetings, if any, of Tower.
SECTION 5.14. Resignation of Officers and Directors. On or prior to the
Closing, Tower shall deliver, or cause to be delivered, to MSSC Texas and
Marketing Specialists the resignation of each officer and director of Tower and
the Subsidiaries, effective at the Effective Time (unless agreed otherwise in
writing by MSSC Texas and Marketing Specialists).
SECTION 5.15. Provision of Tower's Monthly Financial Statements and
Accounts Receivable.
(a) Until the Closing, as soon as practicable after the end of each
calendar month, Tower shall deliver to MSSC Texas and Marketing Specialists a
true and complete copy of unaudited consolidated financial statements of the
Company for the period beginning January 1, 1997 and ending on the last day of
such calendar month, which have been prepared by the Chief Financial Officer of
Tower (the "UPDATED 1997 FINANCIAL STATEMENTS").
(b) Each of the Updated 1997 Financial Statements shall include an
unaudited balance sheet of the Company as of the end of such calendar month and
shall be accompanied by a certificate of the Chief Financial Officer that
states: "The Updated 1997 Financial Statements are accurate and correct in all
material respects and fairly present the financial position and results of
operations of the Company for the period therein identified (except that the
Updated 1997 Financial Statements do not include notes or normal year end
adjustments)."
SECTION 5.16. Provision of Marketing Specialists Monthly Financial
Statements and Accounts Receivable.
(a) Until the Closing, as soon as practicable after the end of each
calendar month, Marketing Specialists shall deliver to Tower a true and complete
copy of unaudited consolidated financial statements of Marketing Specialists for
the period beginning January 1, 1997 and ending on the last day of such calendar
month, which have been prepared by the Chief Financial Officer of Marketing
Specialists (the "UPDATED 1997 MARKETING SPECIALISTS FINANCIAL STATEMENTS").
(b) Each of the Updated 1997 Marketing Specialists Financial Statements
shall include an unaudited balance sheet of Marketing Specialists as of the end
of such calendar month and shall be accompanied by a certificate of the Chief
Financial Officer that states: "The Updated 1997 Marketing Specialists Financial
Statements are accurate and correct in all material respects and fairly
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present the financial position and results of operations of Marketing
Specialists for the period therein identified (except that the Updated 1997
Marketing Specialists Financial Statements do not include notes or normal year
end adjustments)."
SECTION 5.17. Employment Agreements. Upon the Closing Date, Tower shall
enter into employment agreements with each of the individuals listed on the
attached Exhibit "C" (the "AGREED EMPLOYEES") in a form mutually acceptable to
the parties.
SECTION 5.18. Redemption Payments. From the date hereof through the
Closing, except with regard to those holders who have already requested
redemption, neither Tower nor any Subsidiary shall agree to repurchase, or
redeem, any of Tower's capital stock without the prior written approval of
Marketing Specialists (which approval shall be withheld in Marketing
Specialists' sole discretion) ("NEW REDEMPTION REQUESTS"). Tower shall notify
Marketing Specialists of any request by a shareholder to have such shareholder's
stock redeemed.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. Conditions Precedent to Obligations of MSSC Texas and
Marketing Specialists. The obligations of MSSC Texas and Marketing Specialists
under this Agreement are subject to the satisfaction or, unless prohibited by
law, the waiver by MSSC Texas and Marketing Specialists, at or before the
Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Tower contained herein shall be true, complete and accurate as of the date
when made and at and as of the Closing Date as though such representations,
warranties and statements were made at and as of such date.
(b) Performance. Tower shall have performed and complied with all
agreements, obligations and conditions required by this Agreement to be so
performed or complied with by it at or prior to the Closing.
(c) No Injunction. On the Closing Date, there shall be no effective
injunction, writ, preliminary restraining order or any order of any nature
issued by a court of competent jurisdiction restraining or prohibiting the
consummation of the transactions contemplated hereby.
(d) No Litigation. There shall not be threatened, instituted or pending
any suit, action, investigation, inquiry or other proceeding by or before any
court or governmental or other regulatory or administrative agency or commission
requesting or looking toward an order, judgment or decree that (i) restrains or
prohibits the consummation of the transactions contemplated hereby, (ii) would
adversely effect Marketing Specialists' ability to exercise control over the
Surviving Corporation after
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the Closing, or (iii) would have a Material Adverse Effect on the business,
operations, condition (financial or otherwise), liabilities, Company Assets or
earnings of the Surviving Corporation.
(e) Officers' Certificate. Tower shall have delivered to MSSC Texas and
Marketing Specialists a certificate, dated the Closing Date, executed by its
Chief Executive Officer and Chief Financial Officer certifying the fulfillment
of the conditions specified in Section 6.01(a) and (b) hereof.
(f) Secretary's Certificate. Tower shall have delivered to MSSC Texas
and Marketing Specialists a certificate, dated the Closing Date, executed by its
Secretary or Assistant Secretary and certifying as to Tower's articles of
incorporation, bylaws, enabling resolutions, incumbency of officers and other
reasonably related matters (including, without limitation, the articles of
incorporation and bylaws of any Subsidiary).
(g) Opinion of Tower's Counsel. MSSC Texas and Marketing Specialists
shall have received an opinion from Hamilton & Hartsfield, P.C., counsel to the
Company, in the respective form attached hereto as Exhibit "E".
(h) Consents and Approvals. All licenses, permits, consents, approvals
and authorizations of all third parties and governmental bodies and agencies
(other than approvals from Tower's Board of Directors and shareholders, which
are provided for elsewhere in this Agreement) shall have been obtained which are
necessary, in the reasonable determination of counsel to MSSC Texas and
Marketing Specialists, in connection with (a) the execution and delivery by each
of the parties, as appropriate, of this Agreement, (b) the consummation by each
of the parties of the transactions contemplated hereby or thereby or (c) the
conduct by the Surviving Corporation of the Company Business substantially as
conducted on the date hereof.
(i) HSR Waiting Period. Any applicable waiting period under the HSR Act
shall have expired, or a notice of early termination shall have been granted,
regarding the transactions contemplated hereby.
(j) No Material Adverse Change. Except as specifically disclosed herein
or in the Disclosure Schedule, the events occurring since December 31, 1996, and
the conditions arising since such date shall not, in the aggregate, have
resulted in, or with the passage of time or otherwise, reasonably be expected to
result in, a net adverse change (direct or indirect) on the business,
operations, properties (including tangible and intangible properties), condition
(financial or otherwise), assets, prospects, obligations or liabilities (whether
absolute, contingent or otherwise and whether due or to become due) of the
Company.
(k) Non-Foreign Status. At or prior to Closing, the Company shall have
delivered to MSSC Texas and Marketing Specialists a statement certifying that it
is not a foreign person, which statement shall comply with the requirements of
Treasury regulation Section 1.1445-2(b).
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(l) Shareholder Approval. The shareholders of Tower shall have duly
approved the Merger and the other transactions contemplated hereby.
(m) Indemnification Agreement. Each Person set forth on Exhibit "F"
hereto shall have executed and delivered to Marketing Specialists an
Indemnification Agreement in the form attached hereto as Exhibit "G" (the
"INDEMNIFICATION AGREEMENT").
(n) Merger of Metropolitan Marketing, Inc. into Tower. Prior to the
Closing, Metropolitan Marketing, Inc. ("METROPOLITAN") shall have been merged
with and into Tower, and all shareholders of Metropolitan other than Tower shall
no longer have any rights as shareholders of any Subsidiary.
(o) Tower Supplemental Disclosures. There shall be no net adverse
effect of the Tower Supplemental Disclosures (other than Section 5.01 Items).
Any breach of Tower's representations and warranties that is specifically
disclosed in the Tower Supplemental Disclosures shall be deemed waived by MSSC
Texas and Marketing Specialists if the Closing occurs nonetheless.
(p) Employment of Certain Persons. There shall have been no termination
of employment of or by any Agreed Employee, which termination has resulted, or
will with the passage of time result in, a right to payment of deferred
compensation or other termination or severance amount.
(q) Termination of Shareholders' Agreement. The Shareholders'
Agreement, effective as of August 6, 1990, and as subsequently amended by
addenda, among Tower (formerly known as WKHTN&B Inc.) and its shareholders will
have been terminated.
(r) No New Requested Redemptions. There shall have been no New
Requested Redemptions from the date of this Agreement through Closing. All
shares of Tower's preferred stock for which Tower has received notices of
redemption but which redemption has not yet occurred (as described in Section
3.29 hereof), shall have been redeemed by Tower in accordance with the terms of
such notices, Tower's organizational documents, all applicable federal and state
securities (and other) Laws and agreements between the Company and its
shareholders.
(s) No Extraordinary Payments. Since the date of this Agreement, Tower
and the Subsidiaries shall not have made (or agreed or become obligated to make)
any extraordinary payments (over and above their regular monthly salary) to any
Agreed Employee, whether as a result of any prior agreement or otherwise.
(t) Transfer of Certain Shares. All certificates evidencing shares of
common stock of Tower repurchased from Robert D. Whitson pursuant to the terms
of the Stock Purchase Agreement dated as of January 1, 1994 between Tower and
Robert D. Whitson shall have been delivered to Tower, duly endorsed to Tower and
with any necessary instruments of transfer, and shall be held by Tower free and
clear of any lien, claim, charge, pledge or other encumbrance.
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(u) Release or Amendment of Lien. The lien held by Ford Motor Credit
Co. (No. 92- 203054) against Whitson-King, Inc. (a predecessor to Tower) shall
have been released or amended to exclude any lien not directly relating to the
owned or leased vehicles which were the subject of such filing (including,
without limitation, the exclusion of the general liens set forth in Item 3 of
such filing).
(v) Documents. All documents to be delivered by the Company to MSSC
Texas and Marketing Specialists at the Closing shall be duly executed and in
form and substance reasonably satisfactory to MSSC Texas and Marketing
Specialists.
(w) Other. MSSC Texas and Marketing Specialists shall have received
such other documents or certificates as MSSC Texas and Marketing Specialists may
reasonably have requested, including, without limitation, certificates of good
standing with respect to each of Tower and the Subsidiaries from the appropriate
authority in its jurisdiction of incorporation and certificates of good standing
with respect to each of Tower and the Subsidiaries from the appropriate
authority in each jurisdiction in which it is qualified to do business.
SECTION 6.02. Conditions Precedent to Obligations of Tower. The
obligations of Tower under this Agreement are subject to the satisfaction or,
unless prohibited by law, the waiver by Tower at or before the Closing, of each
of the following conditions:
(a) Representations and Warranties. The representations and warranties
of MSSC Texas and Marketing Specialists contained herein shall be true, complete
and accurate as of the date when made and at and as of the Closing Date as
though such representations and warranties were made at and as of such date.
(b) Performance. MSSC Texas and Marketing Specialists shall have
performed and complied with all agreements, obligations and conditions required
by this Agreement to be so performed or complied with by them at or prior to the
Closing.
(c) No Injunction. On the Closing Date, there shall be no effective
injunction, writ, preliminary restraining order or any order of any nature
issued by a court of competent jurisdiction restraining or prohibiting
consummation of the transactions contemplated hereby.
(d) No Proceeding or Litigation. There shall not be threatened,
instituted or pending any suit, action, investigation, inquiry or other
proceeding by or before any court or governmental or other regulatory or
administrative agency or commission requesting or looking toward an order,
judgment or decree that restrains or prohibits the consummation of the
transactions contemplated hereby.
(e) Officers' Certificates. Each of MSSC Texas and Marketing
Specialists shall have delivered to Tower a certificate, dated the Closing Date
and executed by its Chief Executive Officer
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and Chief Financial Officer certifying the fulfillment of the conditions
specified in Sections 6.02(a) and (b) hereof.
(f) Secretary's Certificates. MSSC Texas and Marketing Specialists
shall have delivered to Tower a certificate, dated the Closing Date, executed by
its Secretary or Assistant Secretary and certifying as to its organizational
documents, enabling resolutions, incumbency of officers and other related
matters.
(g) Opinion of MSSC Texas' and Marketing Specialists' Counsel. Tower
shall have received an opinion, dated the Closing Date, from Andrews & Kurth
L.L.P., counsel to MSSC Texas and Marketing Specialists, in the form attached
hereto as Exhibit "H".
(h) Shareholder Approval. The shareholders of Tower shall have duly
approved the Merger, the Charter Amendments and the other transactions
contemplated hereby.
(i) Documents. All documents to be delivered by each of MSSC Texas and
Marketing Specialists to Tower at the Closing shall be duly executed and in form
and substance reasonably satisfactory to Tower.
(j) HSR Waiting Period. Any applicable waiting period under the HSR Act
shall have expired, or a notice of early termination shall have been granted,
regarding the transactions contemplated hereby.
(k) No Material Adverse Change. Except as specifically disclosed herein
or in the Disclosure Schedule, the events occurring since December 31, 1996, and
the conditions arising since such date shall not, in the aggregate, have
resulted in, or with the passage of time or otherwise, reasonably be expected to
result in, a net adverse change (direct or indirect) on the business,
operations, properties (including tangible and intangible properties), condition
(financial or otherwise), assets, prospects, obligations or liabilities (whether
absolute, contingent or otherwise and whether due or to become due) of Marketing
Specialists.
(l) MSSC Supplemental Disclosures. There shall be no net adverse effect
of the MSSC Supplemental Disclosures. Any breach of MSSC Texas' or Marketing
Specialists' representations and warranties that is specifically disclosed in
the MSSC Supplemental Disclosures shall be deemed waived by Tower if the Closing
occurs nonetheless.
ARTICLE VII
TERMINATION OF AGREEMENT
SECTION 7.01. Termination of Agreement. This Agreement may be
terminated at any time prior to the Closing:
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(a) by mutual agreement of Tower, MSSC Texas and Marketing Specialists;
(b) by MSSC Texas or Marketing Specialists, on or after May 31, 1997,
if any of the conditions provided in Section 6.01 hereof of this Agreement have
not been met or, to the extent permitted by applicable law, have not been waived
in writing by MSSC Texas or Marketing Specialists prior to such date; or
(c) by Tower, on or after May 31, 1997, if any of the conditions
provided in Section 6.02 hereof have not been met or, to the extent permitted by
applicable law, have not been waived in writing by Tower prior to such date.
SECTION 7.02. Procedure Upon Termination. In the event of termination
by Tower, MSSC Texas or Marketing Specialists pursuant to Section 7.01 hereof,
written notice thereof shall promptly be given to the other parties and the
transactions contemplated by this Agreement shall be terminated, without further
action by any party. If the transactions contemplated by this Agreement are
terminated as provided herein:
(a) each of Tower, MSSC Texas and Marketing Specialists shall return
all documents, work papers and other material of any other party relating to the
transactions contemplated hereby, whether so obtained before or after the
execution hereof, to the party furnishing the same; and
(b) all confidential information received by Tower, MSSC Texas or
Marketing Specialists with respect to the business of any other party or its
subsidiaries or affiliates shall be treated in accordance with Section 5.09
hereof, and Section 5.09 hereof shall remain in full force and effect
notwithstanding the termination of this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Survival of Representations and Warranties. All
representations and warranties made hereunder shall survive any investigation
made by or on behalf of any party hereto and shall survive for a period of two
years following the Closing; provided, however, that the representations and
warranties contained in this Agreement relating to Taxes or made pursuant to
Section 3.17 hereof shall survive until 90 days following the expiration of the
period of limitations for any matter relating thereto, plus any extended period
applicable thereto by reason of any waiver of the period of limitations. Each
covenant and agreement of the parties hereunder shall survive any investigation
made by or on behalf of any party hereto and shall survive the Closing
hereunder.
SECTION 8.02. Commissions. No party hereto has employed any investment
banker, broker, finder or similar agent in connection with any transaction
contemplated by this Agreement.
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<PAGE> 46
SECTION 8.03. Definition of Knowledge. For the purpose of this
Agreement, the Exhibits and Appendices to this Agreement and the Disclosure
Schedule, the phrases "to the best knowledge" of any party and "known" and words
of like effect shall mean to the knowledge of such party and any officer,
director or manager of any such party, as such knowledge has been, or should
have been, obtained in the performance of their duties in the ordinary course of
business in a prudent and diligent manner, which knowledge shall also include
information existing in the records and files of such party.
SECTION 8.04. Definition of Material Adverse Effect and Material
Adverse Change. "MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" means,
with respect to any party, any change, occurrence or effect (direct or indirect)
on the business, operations, properties (including tangible properties),
condition (financial or otherwise), assets, prospects, obligations or
liabilities (whether absolute, contingent or otherwise and whether due or to
become due) of such party and its subsidiaries taken as a whole that reasonably
could be expected to exceed $20,000. "Material" or "materially" or words of like
effect shall refer to items capable of producing a monetary effect of at least
$20,000 on the business, operations, properties (including intangible
properties), condition (financial or otherwise), assets, prospects, obligations
or liabilities (whether absolute, contingent or otherwise and whether due or to
become due) of the relevant party and its subsidiaries taken as a whole.
SECTION 8.05. Expenses, Taxes, Etc. Except as otherwise provided
herein, (i) in the event of the termination of this Agreement prior to Closing,
each of the parties hereto shall pay all fees and expenses incurred by it or any
of its affiliates in connection with the transactions contemplated by this
Agreement, and (ii) in the event that the Merger is consummated in accordance
with the terms hereof, all fees and expenses in negotiating and preparing for
the execution of this Agreement and in consummating the transactions
contemplated hereby incurred by Tower and its shareholders (but, with respect to
such fees and expenses of such shareholders, only to the extent of any fees and
expenses of Hamilton and Hartsfield, P.C.) shall be paid by the Surviving
Corporation at the Effective Time.
SECTION 8.06. Successors and Assigns. No party shall have the right to
assign all or any part of its interest in this Agreement without the prior
written consent of the other parties, and any attempted transfer without such
consent shall be null and void.
SECTION 8.07. No Third-Party Benefit. Nothing in this Agreement shall
be deemed to create any right or obligation in any Person not a party hereto and
this Agreement shall not be construed in any respect to be a contract or
agreement in whole or in part for the benefit of or binding upon any Person not
a party hereto.
SECTION 8.08. Entire Agreement; Amendment. This Agreement, the
Exhibits, the Appendices and the Disclosure Schedule and the Indemnification
Agreement hereto constitute the entire agreement among the parties hereto with
respect to the transactions contemplated herein and supersede all prior oral and
written agreements, memoranda, understandings and undertakings
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<PAGE> 47
between the parties hereto relating to the subject matter hereof including,
without limitation, the letter of intent between Tower and Marketing
Specialists, as amended, and the term sheet attached thereto. This Agreement may
not be modified, amended, altered or supplemented except by a written instrument
executed and delivered by each of the parties hereto.
SECTION 8.09. Reformation and Severability. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under present or
future laws effective during the term hereof and such illegality, invalidity or
unenforceability does not result in a material failure of consideration, then;
(a) in lieu of such illegal, invalid or unenforceable provision, there
shall be added automatically as a part of this Agreement a provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible
and be legal, valid and enforceable; and
(b) the legality, validity and enforceability of the remaining
provisions hereof shall not in any way be affected or impaired thereby.
SECTION 8.10. Notices. All notices, claims, certificates, requests,
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally or mailed (registered or
certified mail, postage prepaid, return receipt requested) as follows:
If to MSSC Texas or Marketing Specialists:
Marketing Specialists Sales Company
2324 Gateway Drive
Irving, Texas 75063
Attention: Ronald D. Pedersen
with a copy to:
Andrews & Kurth L.L.P.
4400 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201
Attention: J. Gregory Holloway, Esq.
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If to Tower:
Tower Marketing, Inc.
3890 West Northwest Highway, #500
Dallas, Texas 75220
Attention: Chris C. Davis
with a copy to:
Hamilton & Hartsfield, P.C.
14651 Dallas Parkway, Suite 102
Dallas, Texas 75240
Attention: J. Richard Sanderson, Esq.
or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above,
provided that notice of a change of address shall be deemed given only upon
receipt.
SECTION 8.11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS,
WITHOUT REGARD TO ITS CONFLICTS OF LAW RULES.
SECTION 8.12. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by parties hereto on the date first above written.
TOWER MARKETING, INC.
By: /s/ CHRIS C. DAVIS
-------------------------
Name: Chris C. Davis
Title: Chairman
MARKETING SPECIALISTS SALES COMPANY
By: /s/ RONALD D. PEDERSEN
-------------------------
Name: Ronald D. Pedersen
Title: Chairman of the Board and CEO
MSSC TEXAS, INC.
By: /s/ RONALD D. PEDERSEN
-------------------------
Name: Ronald D. Pedersen
Title: Chairman of the Board and CEO
SIGNATURE PAGE
<PAGE> 1
EXHIBIT 2.4
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BROMAR, INC.,
AS THE SURVIVING CORPORATION,
MSSC CALIFORNIA, INC.,
AS THE NON-SURVIVING CORPORATION,
AND
MARKETING SPECIALISTS SALES COMPANY
FOR THE LIMITED PURPOSES SET FORTH HEREIN
DATED AS OF OCTOBER 18, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I - THE MERGER............................................................................................1
SECTION 1.01. The Merger.............................................................................1
SECTION 1.02. Effective Time.........................................................................1
SECTION 1.03. Effect of the Merger...................................................................2
SECTION 1.04. Certificate of Incorporation...........................................................2
SECTION 1.05. Bylaws.................................................................................2
SECTION 1.06. Additional Actions.....................................................................2
SECTION 1.07. Conversion of Securities...............................................................2
SECTION 1.08. Dissenting Shares......................................................................3
SECTION 1.09. Surrender of Shares, Stock Transfer Books..............................................3
SECTION 1.10. Deposit................................................................................5
ARTICLE II - CLOSING..............................................................................................6
SECTION 2.01. Closing................................................................................6
SECTION 2.02. Deliveries by Bromar...................................................................6
SECTION 2.03. Deliveries by MSSC California and Marketing Specialists................................7
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF BROMAR............................................................7
SECTION 3.01. Organization and Qualification of Bromar...............................................7
SECTION 3.02. Power and Capacity; Charter Documents of Bromar........................................7
SECTION 3.03. Subsidiaries...........................................................................8
SECTION 3.04. Capitalization and Ownership of Bromar.................................................9
SECTION 3.05. No Conflicts...........................................................................9
SECTION 3.06. Consents and Approvals................................................................10
SECTION 3.07. Financial and Operating Statements....................................................10
SECTION 3.08. No Undisclosed or Contingent Liabilities..............................................11
SECTION 3.09. Assets of the Company.................................................................11
SECTION 3.10. Absence of Certain Changes............................................................12
SECTION 3.11. Real Property.........................................................................14
SECTION 3.12. Company Equipment.....................................................................15
SECTION 3.13. Contracts and Commitments.............................................................16
SECTION 3.14. Intellectual Property.................................................................17
SECTION 3.15. Inventory.............................................................................18
SECTION 3.16. Commitments and Returns...............................................................18
SECTION 3.17. Accounts Receivable...................................................................18
SECTION 3.18. Pension and Other Employee Plans and Agreements.......................................19
SECTION 3.19. Litigation............................................................................20
SECTION 3.20. Insurance.............................................................................21
SECTION 3.21. Collective Bargaining Agreements; Compensation;
Employee Agreements...............................................................21
SECTION 3.22. Labor Matters.........................................................................21
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SECTION 3.23. Compliance with Law...................................................................22
SECTION 3.24. Permits...............................................................................22
SECTION 3.25. Environmental Matters.................................................................23
SECTION 3.26. Tax Matters...........................................................................24
SECTION 3.27. Product Liability.....................................................................26
SECTION 3.28. Title to Assets.......................................................................26
SECTION 3.29. Accuracy of Disclosure................................................................26
SECTION 3.30. Redemptions of Capital Stock by Bromar................................................26
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF
MSSC CALIFORNIA AND MARKETING SPECIALISTS....................................................26
SECTION 4.01. Organization and Qualification - MSSC California......................................26
SECTION 4.02. Organization and Qualification - Marketing Specialists................................27
SECTION 4.03. Power and Capacity; Charter Documents of MSSC California..............................27
SECTION 4.04. Power and Capacity; Charter Documents of Marketing Specialists........................27
SECTION 4.05. No Conflicts..........................................................................28
SECTION 4.06. Consents and Approvals................................................................28
SECTION 4.07. Accredited Investor...................................................................28
SECTION 4.08. Absence of Market.....................................................................29
SECTION 4.09. Investment Purposes...................................................................29
ARTICLE V - OTHER OBLIGATIONS OF THE PARTIES.....................................................................29
SECTION 5.01. Conduct of Company Business...........................................................29
SECTION 5.02. Access to Books and Records...........................................................32
SECTION 5.03. Consents..............................................................................32
SECTION 5.04. Other Transactions....................................................................32
SECTION 5.05. Supplemental Disclosure...............................................................32
SECTION 5.06. Governmental Filings..................................................................33
SECTION 5.07. Covenant to Satisfy Conditions........................................................33
SECTION 5.08. Confidentiality.......................................................................33
SECTION 5.09. Employees.............................................................................33
SECTION 5.10. Damage or Destruction.................................................................33
SECTION 5.11. Employment Agreements.................................................................34
SECTION 5.12. Management Support....................................................................34
SECTION 5.13. Shareholder Meeting of Bromar.........................................................34
SECTION 5.14. Information Delivered to Shareholders.................................................34
SECTION 5.15. Resignation of Officers and Directors.................................................34
SECTION 5.16. Use of Name...........................................................................34
SECTION 5.17. Payment of Certain Transactional Fees by Marketing Specialists........................34
SECTION 5.18. Provision of Monthly Financial Statements; Accounts Receivable........................35
SECTION 5.19. Funding...............................................................................35
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VI - CONDITIONS PRECEDENT................................................................................35
SECTION 6.01. Conditions Precedent to Obligations of MSSC
California and Marketing Specialists..............................................35
SECTION 6.02. Conditions Precedent to Obligations of Bromar.........................................38
ARTICLE VII - TERMINATION OF AGREEMENT...........................................................................39
SECTION 7.01. Termination of Agreement..............................................................39
SECTION 7.02. Procedure Upon Termination............................................................39
SECTION 7.03. Effect of Termination of Agreement in Certain Instances...............................40
SECTION 7.04. Limitation on Damages.................................................................40
ARTICLE VIII - MISCELLANEOUS.....................................................................................40
SECTION 8.01. Survival of Representations...........................................................40
SECTION 8.02. Limitation of Liability...............................................................41
SECTION 8.03. Commissions...........................................................................41
SECTION 8.04. Definition of Knowledge...............................................................41
SECTION 8.05. Definition of Material Adverse Effect and Material
Adverse Change....................................................................41
SECTION 8.06. Glossary..............................................................................41
SECTION 8.07. Expenses, Taxes, Etc..................................................................41
SECTION 8.08. Successors and Assigns................................................................41
SECTION 8.09. No Third-Party Benefit................................................................42
SECTION 8.10. Entire Agreement; Amendment...........................................................42
SECTION 8.11. Reformation and Severability..........................................................42
SECTION 8.12. Notices...............................................................................42
SECTION 8.13. GOVERNING LAW.........................................................................43
SECTION 8.14. Counterparts..........................................................................43
</TABLE>
<PAGE> 5
Exhibit "A" - Articles of Incorporation of Bromar
Exhibit "B" - Form of Release Regarding Bromar
Exhibit "C" - Form of Release Regarding Subsidiaries
Exhibit "D" - Management Support Agreement
Exhibit "E" - Opinion of Bromar's Counsel
Exhibit "F" - Opinion of MSSC California's and Marketing Specialists' Counsel
Appendix I - Year End Audited Financial Statements
Appendix II - 1996 Financial Statements
Appendix III - Glossary
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of
October 18, 1996, is by and among Bromar, Inc., a California corporation
("BROMAR" or, in certain cases, following the merger referenced herein, the
"SURVIVING CORPORATION"), Marketing Specialists Sales Company, a Texas
corporation ("MARKETING SPECIALISTS"), and MSSC California, Inc., a Delaware
corporation and a wholly owned subsidiary of Marketing Specialists ("MSSC
CALIFORNIA").
INTRODUCTORY STATEMENTS
Bromar, MSSC California and Marketing Specialists desire to effect the
merger of MSSC California with and into Bromar, with Bromar as the surviving
corporation, pursuant to the terms hereof (the "MERGER").
Accordingly, for and in consideration of the foregoing and the mutual
agreements, representations, warranties, covenants and conditions herein set
forth, and other good, valid and binding consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the conditions
hereof, the Merger shall be consummated in accordance with the General
Corporation Law of the State of California (the "CALIFORNIA LAW") and the
General Corporation Law of the State of Delaware (the "DELAWARE LAW") as soon as
practicable following the satisfaction or waiver of the conditions set forth in
Article VI hereof. At the Effective Time (as hereinafter defined) and subject to
and upon the terms and conditions of this Agreement, the Delaware Law and the
California Law, MSSC California shall be merged with and into Bromar, the
separate corporate existence of MSSC California shall cease, and Bromar shall
continue as the Surviving Corporation.
SECTION 1.02. Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VI hereof, the
parties hereto shall cause the Merger to be consummated by filing a certificate
of merger with the Secretary of State of the State of Delaware, in such form as
required by, and executed in accordance with, the relevant provisions of the
Delaware Law, and by filing an agreement of merger, with officers' certificates
of both Bromar and MSSC California attached thereto, with the Secretary of State
of the State of California in such form as is mutually acceptable to the parties
and as required by, and executed in accordance with, the relevant provisions of
the California Law. The Merger shall become effective upon the filing of such
agreement of merger with the Secretary of State of the State of California (the
"EFFECTIVE TIME").
<PAGE> 7
SECTION 1.03. Effect of the Merger. At the Effective Time, the effect
of the Merger in California shall be as provided in Section 1107 of the
California Law and the effect of the Merger in Delaware shall be as provided in
Section 252 of the Delaware Law.
SECTION 1.04. Certificate of Incorporation. At the Effective Time, the
Articles of Incorporation of Bromar shall be amended and restated to be in the
form of Exhibit "A" hereto and shall become the Articles of Incorporation of the
Surviving Corporation until thereafter amended as provided by Law (as defined
herein).
SECTION 1.05. Bylaws. The Bylaws of Bromar, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation
until thereafter amended as provided by Law.
SECTION 1.06. Additional Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances, or any other actions or things are
necessary or desirable to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, properties or assets of Bromar or MSSC California acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of Bromar and MSSC California, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of
Bromar and MSSC California or otherwise, all such other actions and things as
may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out this Agreement.
SECTION 1.07. Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Bromar, MSSC
California or the holder of any of the following securities:
(a) Each share (individually, a "COMMON SHARE" and, collectively, the
"COMMON SHARES") of common stock of Bromar (the "COMMON STOCK") issued and
outstanding immediately prior to the Effective Time, other than any shares of
Common Stock to be canceled pursuant to Section 1.07(b) and any Dissenting
Shares (as defined herein), shall be converted into the right to receive the
amount (the "PER COMMON SHARE AMOUNT") obtained by dividing (x) the aggregate
amount of $26,005,000 (such aggregate amount being termed the "AGGREGATE
EXCHANGE AMOUNT") by (y) the total number of Common Shares issued and
outstanding at the Effective Time; provided, that such conversion shall be
effected in accordance with the provisions of this Article I upon surrender of
the certificate representing such Common Share. Based upon 529,879 Common Shares
issued and outstanding at the Effective Time, the Per Common Share Amount would
be approximately $49.08.
(b) Each share of Common Stock, if any, held in the treasury of Bromar
shall be canceled and extinguished and no payment or other consideration shall
be made with respect thereto.
<PAGE> 8
(c) Each share of Common Stock, par value $.01 per share, of MSSC
California issued and outstanding immediately prior to the Effective Time shall
be converted into and thereafter represent one share, validly issued, fully paid
and nonassessable, of Common Stock of the Surviving Corporation. Immediately
following the Effective Time, the Common Stock of the Surviving Corporation held
by Marketing Specialists shall represent all of the issued and outstanding
capital stock of the Surviving Corporation.
(d) From and after the Effective Time, holders of certificates
evidencing Common Shares that were issued prior to the Merger shall cease to
have any rights as shareholders of Bromar or the Surviving Corporation, except
as provided otherwise by Law.
SECTION 1.08. Dissenting Shares.
(a) Any Common Shares held by a holder who has not voted such shares in
favor of the approval and adoption of this Agreement and who has properly
demanded and perfected such demand for appraisal of such shares in accordance
with Chapter 13 of the California Law and as of the Effective Time has neither
effectively withdrawn nor lost such right to such appraisal ("DISSENTING
SHARES"), shall not be converted into or represent a right to receive the Per
Common Share Amount, pursuant to Section 1.07 hereof, but the holder thereof
shall only be entitled to such rights as are granted by Chapter 13 of the
California Law.
(b) Notwithstanding the provisions of subsection (a) of this Section,
if any holder of Common Shares who demands appraisal of such shares under the
California Law shall effectively withdraw or lose (through failure to perfect or
otherwise) such right to appraisal, then as of the Effective Time or the
occurrence of such event, whichever occurs later, such holder's shares shall
automatically be converted into and represent only the right to receive the
consideration as provided in Section 1.07 without interest thereon, upon
surrender of the certificate or certificates representing such shares and such
shares shall no longer be Dissenting Shares. Furthermore, upon surrender of
Dissenting Shares in accordance with the provisions of Section 1.09 hereof, the
holder thereof shall be deemed to have waived his appraisal rights under the
California Law with respect to such Common Shares.
(c) Bromar shall give MSSC California and, after the Merger, the
Surviving Corporation shall give Marketing Specialists (i) prompt notice of any
written demands for appraisal or payment of the fair value of any Common Shares,
withdrawals of such demands, and any other instruments served pursuant to the
California Law received by Bromar or the Surviving Corporation and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under the California Law. Prior to the Merger, Bromar shall not
voluntarily make any payment with respect to any demands for appraisal or,
except with the prior written consent of MSSC California, settle or offer to
settle any such demands.
SECTION 1.09. Surrender of Shares, Stock Transfer Books.
(a) Prior to the Effective Time, Marketing Specialists shall designate
a bank or trust company to act as agent for the holders of Common Shares (the
"EXCHANGE AGENT") to receive the
<PAGE> 9
funds necessary to make the payments of the Per Common Share Amount contemplated
by Section 1.07 and this Section 1.09.
(b) At the Effective Time, MSSC California shall make available or
cause to be made available to the Exchange Agent for disbursement in accordance
with this Agreement an amount of cash (the "EXCHANGE FUND") equal to the amount
obtained by subtracting (x) the Shareholders' Note Amount (as defined herein)
from (y) the Aggregate Exchange Amount. The Exchange Agent shall, pursuant to
irrevocable instructions, make the payments provided for in Section 1.07 out of
the Exchange Fund. The Exchange Agent may invest all or portions of the Exchange
Fund, as the Surviving Corporation shall direct, in United States Treasury
Bills, each having a maturity of not more than 30 days. Any net profit resulting
from, or interest or income produced by, the investment of the Exchange Fund
shall be paid to the Surviving Corporation.
(c) Each holder of a certificate or certificates representing any
Common Shares canceled upon the Merger pursuant to Section 1.07 may thereafter
surrender such certificate or certificates to the Exchange Agent, as agent for
such holder, to effect the surrender of such certificate or certificates on such
holder's behalf for a period ending nine months after the Effective Time.
Marketing Specialists agrees that promptly after the Effective Time it shall
distribute or shall cause the Exchange Agent to distribute to each holder of
record of Common Shares as of the Effective Time a form letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to such certificates shall pass, only upon proper delivery thereof to the
Exchange Agent) and instructions for use in effecting the surrender of such
certificates for payment therefor. (Any holders of Common Shares who have lost
or destroyed the certificates representing their Common Shares shall be required
to execute an affidavit regarding such matters in a form to be distributed by
the Exchange Agent and to indemnify the Surviving Corporation and Marketing
Specialists against any other claimants of such Common Shares, but no bond or
other security shall be required for such indemnity.) Upon surrender by such
holder to the Exchange Agent of a certificate (or such executed affidavit and
indemnity), together with such letter of transmittal duly executed, the holder
of such certificate shall be entitled to receive in exchange therefor cash in an
amount equal to the product of the number of shares represented by such
certificate and the Per Common Share Amount less the outstanding amount, if any,
outstanding at the Effective Time under any note or other financing obligation
entered into by such holder and Bromar in connection with the acquisition of the
Common Shares represented by such certificate, whether or not such note or
financing obligation is due pursuant to its terms (which outstanding amount is
to be set off against the aggregate Per Common Share Amount otherwise due such
holder); provided that, notwithstanding anything in this Agreement to the
contrary, no amount of the Exchange Fund shall be released or distributed to any
holder of Common Shares until Marketing Specialists has received written
confirmation of the effectiveness of the Merger under the California Law from
the Secretary of State of the State of California; provided, further, that
Marketing Specialists shall provide the Exchange Agent with prompt written
notice of its receipt of such written confirmation. The aggregate amount of all
amounts outstanding at the Effective Time under any such notes or other
financing obligations shall be termed the "SHAREHOLDERS' NOTE AMOUNT". Each
certificate surrendered hereunder shall forthwith be canceled. Any amounts paid,
released or distributed to any holder of Common Shares under this Agreement
shall have deducted therefrom the amount of any withholding taxes due thereon
regarding such holder.
<PAGE> 10
(d) If payment in respect of Common Shares is to be made to a Person
(as defined herein) other than the Person in whose name a surrendered
certificate or instrument is registered, it shall be a condition to such payment
that the certificate or instrument so surrendered shall be properly endorsed or
shall be otherwise in proper form for transfer and that the Person requesting
such payment shall have paid any transfer and other taxes required by reason of
such payment in a name other than that of the registered holder of the
certificate or instrument surrendered or shall have established to the
satisfaction of Marketing Specialists or the Exchange Agent that such tax either
has been paid or is not payable. The registered holder of each certificate
surrendered in accordance with the preceding sentence shall indemnify and hold
the Exchange Agent and the parties hereto harmless from any claims by third
parties (and any direct or indirect damages relating thereto) as to the title of
such certificate or the Common Shares evidenced thereby. Until surrendered in
accordance with the provisions of this Section 1.09, each certificate (other
than certificates representing Dissenting Shares, which shall be treated in
accordance with applicable provisions of the California Law) shall represent for
all purposes whatsoever only the right to receive the Per Common Share Amount
multiplied by the number of shares evidenced by such certificate, except as
otherwise provided in subsection (c), above, without any interest thereon.
(e) At the Effective Time, the stock transfer books of Bromar shall be
closed and there shall be no further registration of transfers of shares of
Common Stock issued prior to the Merger on the records of Bromar or the
Surviving Corporation. If, after the Effective Time, such certificates for
Common Stock are presented to the Surviving Corporation, they shall be entitled
only to be canceled and exchanged for the Per Common Share Amount, as provided
in Sections 1.07 and this Section 1.09. No interest shall accrue or be paid on
any amount payable upon the surrender of a certificate or certificates which
immediately prior to the Effective Time represented outstanding Common Shares.
(f) Any portion of the Exchange Fund which remains unclaimed by the
shareholders of Bromar for nine months after the Effective Time shall be repaid
to the Surviving Corporation, and any shareholders of Bromar who have not
theretofore complied with the provisions of Section 1.09(c) shall thereafter
look only to the Surviving Corporation for payment of their claim for the Per
Common Share Amount for each Common Share, as provided in Section 1.07 and this
Section 1.09, without any interest thereon.
SECTION 1.10. Deposit. On the date hereof, MSSC California is
depositing into escrow, pursuant to the terms of the Escrow Agreement dated as
of August 29, 1996 among First Trust of California, National Association (the
"ESCROW AGENT"), Bromar and Marketing Specialists (the "ESCROW AGREEMENT"), the
amount of $1,000,000 to add to the amount already held in escrow under the
Escrow Agreement (such aggregate amount being termed the "DEPOSIT"). Subject to
Section 7.03, in the event that this Agreement shall not be consummated because
any of the conditions contained in Sections 6.02(a), (b), (e), (f), (g), (h) or
(j) hereof has not been satisfied on or prior to the Closing Date (as defined
herein), the Deposit (together with all interest earned thereon) shall be
delivered to Bromar. In the event that this Agreement shall not be consummated
for any other reason, then the Deposit (with all interest earned thereon) shall
be returned to MSSC California, subject to the provisions of Section 7.03. In
the event that the Closing occurs, the Deposit (together with all interest
earned thereon) shall be delivered to the Exchange Agent as part of the Exchange
Fund. The parties agree to execute an instruction letter giving effect to the
provisions of this
<PAGE> 11
Section 1.10 and deliver such letter to the Escrow Agent promptly after
occurrence of the appropriate event. If the Deposit is delivered to Bromar
pursuant to this Section 1.10 and if on or prior to August 16, 1997 Bromar
and/or its shareholders consummate a transaction (the "SECOND TRANSACTION") that
results in the transfer of ownership of all or substantially all of Bromar's
capital stock (or transaction of similar effect) at a price that is at least
$26,505,000, then Marketing Specialists shall be entitled to receive back the
lesser of (A) the amount of the Deposit and (B) the excess, if any, of (i) the
aggregate price received by Bromar and Bromar's shareholders in the Second
Transaction over (ii) the sum of (x) $26,505,000 and (y) the lesser of $500,000
and all of Bromar's direct out-of-pocket legal, accounting and financial advisor
costs reasonably incurred and documented relating to the transactions
contemplated hereby.
ARTICLE II
CLOSING
SECTION 2.01. Closing. The consummation of the transactions
contemplated hereby (the "CLOSING") shall, subject to the provisions of Article
VI hereof, take place on November 6, 1996 at the offices of Andrews & Kurth
L.L.P., 601 South Figueroa, Suite 4200, Los Angeles, California or at such other
date, time and place as Bromar and MSSC California mutually agree. The date on
which the Closing actually occurs is referred to herein as the "CLOSING DATE".
SECTION 2.02. Deliveries by Bromar. At the Closing, Bromar shall
deliver, or cause to be delivered, to MSSC California and Marketing Specialists
(unless delivered previously) the following:
(a) the Officers' Certificate referred to in Section 6.01(g) hereof;
(b) the Certificate of the Secretary of Bromar referred to in Section
6.01(h) hereof;
(c) a release by each director and executive officer of Bromar in the
form of the release attached hereto as Exhibit "B", a release by each director
of any subsidiary of Bromar in the form of the release attached hereto as
Exhibit "C" (collectively, the "O&D RELEASES") and the resignations required by
Section 5.15 hereof;
(d) the opinion of counsel referred to in Section 6.01(i) hereof;
(e) executed counterparts of any consents required to be obtained by
Bromar pursuant to Section 5.03 hereof;
(f) the certificate regarding non-foreign status referred to in Section
6.01(n) hereof; and
(g) all other previously undelivered documents, instruments and
writings required to be delivered by Bromar to MSSC California or Marketing
Specialists at or prior to the Closing pursuant to this Agreement or otherwise
required in connection herewith.
<PAGE> 12
SECTION 2.03. Deliveries by MSSC California and Marketing Specialists.
At the Closing, MSSC California and Marketing Specialists shall deliver, or
cause to be delivered, to Bromar (unless delivered previously) the following:
(a) the Officers' Certificates referred to in Section 6.02(e)
hereof;
(b) the Secretary's Certificates referred to in Section
6.02(f) hereof,
(c) the opinion of counsel referred to in Section 6.02(g)
hereof;
(d) the O&D Releases; and
(e) all other previously undelivered documents, instruments
and writings required to be delivered by MSSC California or Marketing
Specialists to Bromar at or prior to the Closing pursuant to this
Agreement or otherwise required in connection herewith.
Furthermore, MSSC California shall deliver, or cause to be delivered, the
Exchange Fund to the Exchange Agent by wire transfer in immediately available
funds.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BROMAR
Bromar hereby represents and warrants to MSSC California and Marketing
Specialists as follows, except as otherwise set forth in the relevant section of
the Disclosure Schedule:
SECTION 3.01. Organization and Qualification of Bromar. Bromar is (a) a
corporation duly organized, validly existing and in good standing under the laws
of the State of California and (b) duly qualified to do business as a foreign
corporation and in good standing in each jurisdiction in which the character of
the properties and assets now owned or leased by it or the nature of the
business transacted by it requires it to be so qualified, except where the
failure to be so qualified, individually or in the aggregate, would not have a
Material Adverse Effect (as defined herein) upon the Company (as defined herein)
or the consummation of the transactions contemplated hereby. Each jurisdiction
in which Bromar is qualified to do business is listed on Section 3.01 of the
Disclosure Schedule. No jurisdiction in which Bromar is not qualified or
licensed has claimed, in writing or otherwise, that Bromar is required to
qualify or be licensed therein.
SECTION 3.02. Power and Capacity; Charter Documents of Bromar.
(a) Subject to the approval of the shareholders of Bromar in accordance
with the terms of the California Law and this Agreement, Bromar has all
requisite power and authority (corporate and otherwise) to enter into, execute
and deliver this Agreement and perform its obligations hereunder. Bromar has the
corporate power and authority to carry on its business as now being conducted
and to own and lease its properties. This Agreement has been duly executed and
delivered by Bromar and is a valid and binding obligation of Bromar, enforceable
in accordance with its terms.
<PAGE> 13
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby by Bromar will not result
in a violation or breach of or constitute a default under any term or provision
of the Articles of Incorporation or Bylaws of Bromar. Bromar has delivered to
MSSC California true and complete copies of the Articles of Incorporation and
the Bylaws of Bromar, as in effect on the date hereof, and any existing minute
books and stock transfer books of Bromar and the Subsidiaries (as defined
herein) for the last three years. Such minute books and stock transfer books are
accurate and complete and contain the minutes of all meetings (and written
consents in lieu thereof) of the shareholders and the board of directors of
Bromar and the Subsidiaries held during the three years immediately preceding
the date of this Agreement and record all issuances and transfers of record of
the capital stock of Bromar and the Subsidiaries during such three years. All
actions taken at such meetings were duly passed or ratified, and any actions
taken by any committee of the board of directors of Bromar or the Subsidiaries
were duly ratified by the appropriate board of directors.
SECTION 3.03. Subsidiaries.
(a) Section 3.03(a) of the Disclosure Schedule sets forth for each
subsidiary, direct or indirect, of Bromar (each a "SUBSIDIARY"), its capital
structure, its place of organization and the other jurisdictions in which it is
qualified to do business. Each of the Subsidiaries has been duly organized and
is validly existing and in good standing under the laws of its respective state
of incorporation, has all requisite corporate power and authority to own or
lease and operate its properties and conduct its business as now conducted and
is duly qualified or licensed to do business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of the business conducted
by it or the character or location of the properties owned or leased by it makes
such qualification or licensing necessary, except where the failure to be so
qualified or licensed, individually or in the aggregate, would not have a
Material Adverse Effect on the Company or the consummation of the transactions
contemplated hereby. No jurisdiction in which any Subsidiary is not qualified or
licensed has claimed, in writing or otherwise, that such Subsidiary is required
to qualify or be licensed therein.
(b) Bromar owns, free and clear of all liens, claims and encumbrances
of any type ]whatsoever, and has the unrestricted power to dispose of and vote,
all of the outstanding capital stock of each of the Subsidiaries. There are no
outstanding or authorized options, warrants, subscriptions, calls, conversions
or other rights, contracts, agreements, commitments or understandings of any
kind obligating any Subsidiary to issue, sell, purchase, return or redeem any
shares of its capital stock or any other securities convertible into,
exchangeable for or evidencing the right to subscribe for any shares of capital
stock of, or other ownership interest in, any Subsidiary. All of the outstanding
shares of the capital stock of each class of each Subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable and were not
issued in violation of any preemptive rights or any applicable Law.
(c) Except for its interest in any Subsidiary, Bromar does not (i) own,
beneficially or of record, any shares of any other corporation or entity or any
interests in any partnerships or limited liability companies or (ii) participate
in any manner in any joint ventures, corporate alliance agreements or corporate
partnering agreements. Except for Bromar's interest in any Subsidiary, neither
Bromar nor any Subsidiary has an interest in, or is subject to, any agreement,
obligation or
<PAGE> 14
commitment to make any equity investment in or loan or advance to, any other
Person (as defined herein).
(d) For purposes of this Agreement, Bromar and the Subsidiaries shall
collectively be termed the "COMPANY"; when such collective term is used in
connection with financial issues, it shall refer to Bromar and the Subsidiaries
as a consolidated whole. For example, when references are made to officers,
directors and employees of the Company, it shall mean all officers, directors
and shareholders of Bromar and the Subsidiaries.
SECTION 3.04. Capitalization and Ownership of Bromar. Section 3.04 of
the Disclosure Schedule lists, for Bromar, its authorized capitalization, the
number of shares of its capital stock (or other equity interests) issued and
outstanding, and the number of shares of its capital stock (or other equity
interests) owned of record by each shareholder. All of the outstanding shares of
the capital stock of Bromar are validly issued, fully paid and non-assessable.
All such shares are owned free and clear of any lien, claim or encumbrance of
any type whatsoever imposed by Bromar. There are no outstanding options,
warrants or other rights to acquire any share of capital stock of Bromar, there
are no outstanding securities authorized, granted or issued by Bromar that are
convertible into or exchangeable for shares of its capital stock and there are
no phantom stock rights, stock appreciation rights or similar rights regarding
Bromar or any Subsidiary.
SECTION 3.05. No Conflicts. The execution, delivery and performance of
this Agreement by Bromar and the consummation of the transactions contemplated
hereby will not:
(a) result in the creation or imposition of any security interest,
lien, charge or other encumbrance against the Company Assets (as defined
herein), with or without the giving of notice and/or the passage of time, or
(b) violate, conflict with, affect acceleration of, or result in
termination, cancellation or modification of, or constitute a default under (i)
any contract, agreement or other instrument to which the Company is a party or
by which the Company or its assets is bound or (ii) any note, bond, mortgage,
indenture, deed of trust, license, lease, contract, commitment, understanding,
arrangement, agreement or restriction of any kind or character to which the
Company is a party or by which the Company may be bound or affected, or to which
any of the Company Assets may be subject, or
(c) violate any statute or Law or any judgment, decree, order, writ,
injunction, regulation or rule of any court or any local, state or federal
governmental or regulatory authority, which violation, conflict, acceleration,
requirement, termination, modification or default described in (a), (b), or (c)
above could result in a Material Adverse Effect on the Company or the
transactions contemplated by this Agreement.
SECTION 3.06. Consents and Approvals. The Company is not required to
obtain, transfer or cause to be transferred any consent, approval, license,
permit or authorization of, or make any declaration, filing or registration
with, any third party or any public body or authority in connection with (a) the
execution and delivery by Bromar of this Agreement, or (b) the consummation of
the Merger and the other transactions contemplated hereby or (c) the future
conduct by the Surviving
<PAGE> 15
Corporation of the business of the Company (the "COMPANY BUSINESS") including,
without limitation, the Company's Parowax operations (the "PAROWAX BUSINESS")
other than those that may be required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), or that may be required
solely by reason of MSSC California's or Marketing Specialists' participation in
the transactions contemplated hereby.
SECTION 3.07. Financial and Operating Statements.
(a) Year End Audited Financial Statements. Attached hereto as Appendix
I is a true and complete copy of the audited consolidated financial statements
of the Company for the fiscal years ended December 31, 1994 and December 31,
1995, accompanied by an unqualified audit opinion of Ernst & Young LLP prepared
in accordance with applicable Statement of Auditing Standards requirements (the
"YEAR END AUDITED FINANCIAL STATEMENTS"). The Year End Audited Financial
Statements include audited balance sheets of the Company as of December 31, 1994
and December 31, 1995 (such balance sheet being termed the "1995 AUDITED BALANCE
SHEET"), together with related statements of operations, equity and cash flow of
the Company (and notes thereto) for each of such periods. The Year End Audited
Financial Statements are accurate and correct in all material respects and
fairly present the combined financial position and the results of operations of
the Company for the periods therein identified in conformity with generally
accepted accounting principles ("GAAP") GAAP consistently applied.
(b) Year End Adjusted Financial Statements. Attached hereto as Appendix
II is a true and complete copy of unaudited consolidated financial statements of
the Company for the eight months ended August 31, 1996, which have been prepared
by the Chief Financial Officer of Bromar (the "1996 FINANCIAL STATEMENTS"). The
1996 Financial Statements include an unaudited balance sheet of the Company as
of August 31, 1996 (such balance sheet being termed herein the "1996 BALANCE
SHEET"). The 1996 Financial Statements are accurate and correct in all material
respects and fairly present the financial position and results of operations of
the Company for the period therein identified in conformity with GAAP
consistently applied (except that the 1996 Financial Statements do not include
notes or normal year end adjustments).
(c) Accounting Records. The Company (i) keeps books, records and
accounts that, in reasonable detail, accurately and fairly reflect the
transactions, dispositions and assets of the Company and (ii) maintains a system
of internal accounting controls sufficient to provide reasonable assurance that
(A) transactions are executed in accordance with the management's general or
specific authorization, and (B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
accountability for assets and (C) access to such books, records and accounts is
permitted only in accordance with management's general or specific
authorizations.
SECTION 3.08. No Undisclosed or Contingent Liabilities. Except for (a)
liabilities or obligations incurred by the Company in the ordinary course of
business and not required by GAAP applied on a consistent basis to be set forth
on the 1996 Balance Sheet (all of which such items are described in Section 3.08
of the Disclosure Schedule), and (b) liabilities and obligations incurred by the
Company in the ordinary course of business since the date of the 1996 Balance
Sheet (none of which could reasonably be expected to cause a Material Adverse
Effect on the Company), there is
<PAGE> 16
no basis for the assertion against the Company of any liability or obligation of
any nature whatsoever (whether absolute, accrued, contingent or otherwise) that
may encumber or affect the Company or the transactions contemplated hereby which
is not fully reflected or reserved against on the 1996 Balance Sheet.
SECTION 3.09. Assets of the Company. The assets of the Company
(collectively, the "COMPANY ASSETS") include the assets referenced below:
(a) Intellectual Property. All patents, trade or service names and
marks, assumed names and copyrights and all applications therefor relating in
which the Company has an interest (collectively, "INTELLECTUAL PROPERTY"),
including without limitation those listed on Section 3.09(a) of the Disclosure
Schedule;
(b) Receivables. All accounts receivable, bills and notes receivable,
commercial paper and acceptances or any other evidences of indebtedness to the
Company, including without limitation those listed on Section 3.09(b) of the
Disclosure Schedule;
(c) Company Equipment. All furniture, fixtures, machinery, molds,
tools, dies and equipment of the Company (the "COMPANY EQUIPMENT"), including
without limitation those listed on Section 3.09(c) of the Disclosure Schedule,
whether or not such items are in any way attached or affixed to real property;
(d) Vehicles. All automobiles, trucks, trailers and other vehicles
owned or leased by the Company, including without limitation those listed on
Section 3.09(d) of the Disclosure Schedule;
(e) Inventory. All inventory of the Company (the "INVENTORY"),
including, without limitation, all raw materials, work-in-process, finished
products, goods in transit, office, manufacturing, lab and advertising supplies,
containers and packaging and shipping materials and all inventory in the hands
of suppliers for which the Company is committed as of the date hereof or the
Closing Date, including without limitation those listed on Section 3.09(e) of
the Disclosure Schedule;
(f) Contracts. All leases, contracts, agreements, arrangements,
commitments and understandings (whether written or oral), including without
limitation all deferred compensation agreements, agreements with principals,
leases, security deposits and options under leases, acquisition agreements and
confidentiality agreements, to which the Company is a party, including without
limitation all such contracts listed or referred to on Section 3.09(f) of the
Disclosure Schedule;
(g) Insurance. All insurance policies covering the Company and its
directors, officers, employees and agents (and all rights and claims thereunder
for damage to, or otherwise relating to, the Company Assets), including without
limitation those listed on Section 3.09(g) of the Disclosure Schedule; and
(h) Permits. All licenses, permits and authorizations issued by any
federal, state, local or foreign governmental authority (the "PERMITS") relating
to the Company, the Company Assets or the conduct of the Company Business,
including without limitation those listed on Section 3.09(h) of the Disclosure
Schedule.
<PAGE> 17
SECTION 3.10. Absence of Certain Changes. Since December 31, 1995, the
Company has not:
(a) suffered any Material Adverse Effect and there has not been any
event (whether occurring before or after December 31, 1995) that could
reasonably be expected to have a Material Adverse Effect on the Company; or
(b) experienced any material decrease in the book value of the Company
Assets from the amounts reflected on the 1995 Audited Balance Sheet, other than
decreases resulting from depreciation in accordance with accounting practices in
effect at all times since January 1, 1995; or
(c) incurred any liabilities or obligations of any nature (whether
absolute, accrued, contingent or otherwise and whether due or to become due),
except (i) liabilities or obligations for raw materials purchased for use in the
ordinary course of business for the Parowax Business in accordance with
historical levels, taking into account such factors as the time of year and
projected sales for the following period, (ii) liabilities or obligations for
rent under the Leases (as defined herein) and (iii) liabilities or obligations
for other items incurred in the ordinary course of business of the Company and
consistent with past practice, none of which other items exceeds $40,000
(considering liabilities or obligations arising from one transaction or a series
of similar transactions, and all periodic installments or payments under any
lease (other than the Leases) or other agreement providing for periodic
installments or payments, as a single obligation or liability); or
(d) increased (other than increases resulting from the calculation of
reserves in the ordinary course of business and in a manner consistent with past
practice), or experienced any change in any assumptions underlying or methods of
calculating, any bad debt, contingency or other reserves; or
(e) paid, discharged or satisfied any claims, encumbrances, liabilities
or obligations (whether absolute, accrued, contingent or otherwise and whether
due or to become due) other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of liabilities and
obligations reflected or reserved against in the 1995 Audited Balance Sheet or
incurred in the ordinary course of business and consistent with past practice
since the date thereof; or
(f) permitted, allowed or suffered any of the Company Assets,
including, without limitation, real property, personal property or any leasehold
interest, to be subjected to any mortgage, pledge, lien, encumbrance,
restriction or charge of any kind (except for liens for Taxes (as defined
herein) not yet owing); or
(g) written down or written up the value of any Inventory (including
write-downs by reason of shrinkage or mark-downs), determined as collectible any
notes or accounts receivable or any portion thereof which were previously
considered uncollectible, or written off as uncollectible any notes or accounts
receivable or any portion thereof, except for write-downs in the ordinary course
of business, consistent with past practice, in accordance with GAAP consistently
applied; or
<PAGE> 18
(h) canceled any material amount of indebtedness or waived any material
claims or rights; or
(i) sold, transferred or otherwise disposed of any Company Assets
except in the ordinary course of business and consistent with past practice; or
(j) disposed of or permitted to lapse any right to the use of any
patent, trademark, assumed name, service mark, trade name, copyright, license or
application therefor or disposed of or disclosed to any corporation,
association, partnership, organization, business, individual, government or
political subdivision thereof or government agency (collectively, a "PERSON")
other than representatives of MSSC California and Marketing Specialists any
trade secret, formula, process or know-how not theretofore a matter of public
knowledge; or
(k) granted any increase in the salary, compensation, rate of
compensation, commissions or bonuses payable to or to become payable by the
Company to any officer or director of the Company (including, without
limitation, any increase or change pursuant to any bonus, pension,
profit-sharing, retirement or other plan or commitment); or
(l) granted any increase in the salary, compensation, rate of
compensation, commissions of bonuses payable to or to become payable by the
Company to any employee of the Company (including, without limitation, any
increase or change pursuant to any bonus, pension, profit-sharing, retirement or
other plan or commitment), except in the ordinary course of business and
consistent with past practice; or
(m) paid, loaned or advanced any amount to any officer, director,
employee or shareholder of the Company except for amounts advanced to employees
of the Company in the ordinary course of business consistent with past practice
(none of which advances were loans for personal purposes), or sold, transferred
or leased any Company Assets to, or entered into any agreement (other than this
Agreement) or arrangement with, any officer, director, employee or shareholder
of the Company (except for agreements or arrangements made in the ordinary
course of business and consistent with past practice); or
(n) entered into any new collective bargaining or labor agreement, or
experienced any labor dispute or difficulty; or
(o) made any single capital expenditure or commitment in excess of
$45,000 for additions to property, plant, equipment or for any other purpose or
made aggregate capital expenditures or commitments in excess of $80,000 for
additions to property, plant, equipment or for any other purpose; or
(p) made any change in any method of accounting or accounting practice
or policy; or
(q) suffered any casualty loss in excess of $30,000 (whether or not
insured against) or suffered aggregate casualty losses in excess of $60,000
(whether or not insured against); or
<PAGE> 19
(r) issued any additional shares of capital stock of Bromar or the
Subsidiaries or any option, warrant, right or other security exercisable for,
convertible into or exchangeable for shares of capital stock of Bromar or the
Subsidiaries; or
(s) paid dividends on or made other distributions or payments in
respect of the capital stock of Bromar or the Subsidiaries; or
(t) paid its suppliers in connection with the Parowax Business and
other vendors other than in a manner and time consistent with past practice; or
(u) taken any other action not either in the ordinary course of
business and consistent with past practice or provided for in this Agreement for
which the aggregate monetary effect of all such items is in excess of $45,000;
or
(v) entered into or agreed to any transaction not in the ordinary
course of business, for which the aggregate monetary effect of all such items is
in excess of $45,000; or
(w) agreed, whether in writing or otherwise, to take any of the actions
set forth in this Section 3.10.
SECTION 3.11. Real Property.
(a) Set forth in Section 3.11 of the Disclosure Schedule is a complete
list of all real property that the Company currently owns or has owned in the
past ten years. The Company has good and marketable title in fee simple to such
currently owned real property and to all plants, buildings and improvements
thereon, free and clear of any mortgages, liens, claims, charges, pledges,
security interests or other encumbrances of any nature whatsoever.
(b) With respect to any deeds, title insurance policies, surveys,
mortgages, agreements and other documents granting to the Company title to or an
interest in or otherwise affecting any such real property, (i) no breach or
event of default on the part of the Company, (ii) no material breach or event of
default, to the best knowledge of the Company, on the part of any other party
thereto, and (iii) no event that, with the giving of notice or lapse of time or
both, would constitute such breach or event of default on the part of the
Company or, to the best knowledge of the Company, on the part of any other party
thereto, has occurred and is continuing.
(c) Section 3.11 of the Disclosure Schedule contains a complete and
accurate list of all real property leases to which the Company is a party in any
capacity (including all amendments thereof and modifications thereto) (the
"LEASES"), including the address of each property, a summary description of the
property leased and its uses, the name and address of each landlord or tenant,
if applicable, the expiration date of each Lease, whether an option to renew or
an option to purchase has been exercised, and whether the obligations of the
Company thereunder have been guaranteed by any Person. The Company's interests
in and to all Leases listed on Section 3.11 of the Disclosure Schedule are free
and clear of all mortgages, liens, claims, charges, pledges, security interests
or other encumbrances of any nature whatsoever including without limitation
subleases, chattel mortgages, mechanics' and materialmen's liens, conditional
sales contracts, collateral security arrangements and
<PAGE> 20
other interest retention arrangements. The Company has not received notice of
any default by the Company under any of the Leases, and there are no facts or
conditions that would, with notice or lapse of time or both, constitute a
default by the Company under any of the Leases. None of the landlords under any
of the Leases is in default.
(d) The buildings and improvements owned or leased by the Company on
any real property owned by the Company and on any Lease, and the operation and
maintenance thereof as operated and maintained, do not (i) contravene any zoning
or building Law or ordinance or other administrative regulation or (ii) violate
any restrictive covenant or any applicable Law. All of the plants, buildings and
structures located on any real property owned by the Company or on any Lease are
in a state of good maintenance and repair (normal wear and tear excepted)
suitable in all respects for the operation of the Company Business.
(e) There is no pending or threatened condemnation, eminent domain or
similar proceeding with respect to, or that could affect, any real property
owned by the Company or any Lease.
SECTION 3.12. Company Equipment. The Company has good and marketable
title to each piece of the Company Equipment except for such pieces which, in
the aggregate, are not material. Each piece of the Company Equipment is in good
and normal operating condition and repair and adequate for the uses to which it
is being put by the Company, except for pieces which, in the aggregate, are not
material. No piece of the Company Equipment being used in the Parowax Business
is in need of maintenance or repairs except for ordinary routine maintenance.
The Company has not received any notification from any governmental or
regulatory authority within the last five years that the Company is in violation
of any health, sanitation, fire, safety, zoning, building or other Law (other
than Environmental Laws, which are addressed in Section 3.25), ordinance or
regulation in respect of the Company Equipment or operations, which violation
has not been appropriately and completely resolved. The Company has provided
MSSC California and Marketing Specialists with access to, or copies of, all
guarantees, service contracts, maintenance agreements, management agreements,
instruction manuals, and any and all other documents and papers that in any
manner pertain to each material piece of the Company Equipment.
SECTION 3.13. Contracts and Commitments.
(a) The Company is not a party to or bound by any agreements, contracts
or commitments which individually or when aggregated with all related
agreements, contracts or commitments, are material to the business, operations,
condition (financial or otherwise), liabilities, assets, earnings or working
capital of the Company or that provide for the grant of any preferential rights
to purchase or lease any of the Company Assets;
(b) The enforceability of the agreements, contracts and commitments
referred to in subsections (a-h) of this Section 3.13 will not be affected in
any respect by the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby;
(c) No purchase contracts or commitments of the Company regarding the
Parowax Business or otherwise are in excess of the normal, ordinary and usual
requirements of the Company,
<PAGE> 21
or to the best knowledge of the Company, were entered into at prices materially
in excess of those available in the industry in arm's length transactions on the
respective dates thereof;
(d) The Company is not a party to or bound by any outstanding
agreements, arrangements or contracts with any of its officers, employees,
agents, consultants, advisors, salesmen or sales representatives that (A) are
not cancelable by it on notice of not longer than 30 days and without the
imposition of any liability, penalty or premium, (B) require non-cancelable
payment by the Company of over $20,000, or (C) provide for any bonus or other
payment based on the sale of the Company or any portion thereof;
(e) The Company is not a party to or bound by any employment agreement,
consulting agreement or any other agreements that contains any provision for
severance or termination pay liabilities or obligations;
(f) The Company is not a party to or bound by:
(i) any mortgage, indenture, note, installment
obligation or other instrument, agreement or arrangement for or
relating to any borrowing of money by the Company;
(ii) any guaranty, direct or indirect, by the Company
of any obligation for borrowings or otherwise, excluding
endorsements made for collection in the ordinary course of
business;
(iii) any obligation to make payments, contingent or
otherwise, of over $20,000 arising out of any prior acquisition
of the business, assets or stock of other persons;
(iv) any collective bargaining agreement with any
labor union;
(v) any lease or similar arrangement for the use by
the Company of personal property requiring payments by the
Company, on an annual basis, of over $20,000;
(vi) any agreement containing noncompetition or other
limitations restricting the conduct of the business of the
Company; and
(vii) any partnership, joint venture or similar
agreement.
(g) Neither the Company nor any of its officers, directors,
shareholders or affiliates is a party to or bound by any agreement (other than
this Agreement) or arrangement for the sale of any of the assets (other than in
the ordinary course of business and consistent with past practice) or capital
stock of Bromar or the Subsidiaries or for the grant of any preferential rights
to purchase any of the assets or capital stock of Bromar or the Subsidiaries;
and
<PAGE> 22
(h) The Company is not bound by any agreement to redeem the Common
Shares held by any shareholder, which agreement will not be effectively and
properly terminated by the consummation of the Merger.
(i) With respect to each contract and agreement listed in Section 3.13
of the Disclosure Schedule, except as set forth therein, (i) each of such
contracts and agreements is valid, binding and in full force and effect and is
enforceable by the Company in accordance with its terms, subject to bankruptcy,
insolvency, reorganization and other Laws and judicial decisions of general
applicability relating to or affecting creditors' rights and to general
principles of equity; (ii) there have been no cancellations or threatened
cancellations thereof nor are there any outstanding material disputes
thereunder; (iii) neither the Company, nor any other party is in breach of any
material provision thereof; and (iv) there does not exist any default under, or
any event or condition which with the giving of notice or passage of time or
both would become a breach or default under, the terms of any such contract or
agreement on the part of the Company or on the part of any other party thereto.
(j) The Company has delivered or made available to MSSC California or
Marketing Specialists true and complete copies of each written contract or
agreement listed in Section 3.13 of the Disclosure Schedule and true and
accurate summaries of any oral agreement listed thereon.
SECTION 3.14. Intellectual Property. Section 3.14 of the Disclosure
Schedule contains an accurate and complete list of (a) all patents, trademarks
(registered or unregistered), trade names, assumed names, copyrights, and all
applications therefor, owned or filed by the Company and used in or necessary
for the conduct of the Company Business and, with respect to registered
trademarks, contains a list of all jurisdictions in which such trademarks are
registered and all registration numbers; (b) all licenses, permits and other
agreements relating thereto; and (c) all agreements relating to technology,
know-how or processes used in or necessary for the conduct of the business of
the Company Business which the Company is licensed or authorized to use by
others. Such patents, trademarks (registered or unregistered) and copyrights
(and applications therefor, where appropriate) are (i) valid, subsisting and
enforceable, and (ii) duly recorded in the names of the Persons set forth in
Section 3.14 of the Disclosure Schedule. The Persons set forth in Section 3.14
of the Disclosure Schedule have the sole and exclusive right, free from any
liens, mortgages, security interests, charges or encumbrances, to use the
patents, trademarks (registered or unregistered), copyrights and applications
therefor set forth beside their names, and the Company has the full right to use
the trade names, assumed names, technology, know-how, inventions, works and
processes referred to in such lists and all trade secrets required for or
incident to the conduct of the Company Business in the jurisdictions in which
the Company Business is conducted or where the products of the Parowax Business
are distributed, and the consummation. of the transactions contemplated hereby
will not alter or impair any such rights. No claims have been asserted by any
Person against the Company with respect to the ownership, validity,
enforceability, misappropriation or use of any product or service of the Company
Business or such patents, trademarks (registered or unregistered, or of any
confusingly similar or dilative trademarks), trade names, assumed names,
copyrights, applications therefor, technology, know-how, processes or trade
secrets or challenging or questioning the validity or effectiveness of any such
license, permits or agreement and there is no valid basis for any such claim,
and the use or other exploitation of any such product or service of the Company
Business or patents, trademarks (registered or unregistered), trade names,
assumed names, copyrights, applications therefor, technology, know-how,
processes and trade secrets by the Company does not
<PAGE> 23
infringe on or dilute the rights of any Person; and, to the best knowledge of
the Company, no other Person is infringing the rights of the Company with
respect to such patents, trademarks (registered or unregistered), trade names,
assumed names, copyrights, and applications therefor, technology, know-how,
inventions, works, processes or trade secrets.
SECTION 3.15. Inventory. All Inventory, whether reflected in the 1996
Balance Sheet or subsequently acquired, consists of a quality and quantity
reasonably expected to be usable and salable in the ordinary course of the
Parowax Business. The values at which all Inventory are carried on the 1996
Balance Sheet are the lower of cost or market, calculated in accordance with
GAAP. The quantities of all Inventory of the Company are reasonable and
warranted in the present and anticipated circumstances of the Parowax Business.
The Company has no Inventory (other than customary office supplies) that is not
related to the Parowax Business.
SECTION 3.16. Commitments and Returns. As of the date hereof, the
aggregate unfulfilled portion of all contracts or commitments by the Company for
the purchase of supplies does not exceed normal and customary levels and all of
such contracts and commitments were made in the ordinary course of business.
There are no current claims to return in excess of an aggregate of $20,000 of
products to the Company by reason of (i) alleged overshipments, defective or
otherwise, or any alleged defects in products (i.e., Parowax) produced by the
Company or (ii) products in the hands of customers under an understanding that
such product is or will be returnable.
SECTION 3.17. Accounts Receivable. The Company has delivered to
Marketing Specialists and MSSC California a true and complete listing of the
aging status of each of the accounts receivable of the Company dated September
30, 1996. All accounts receivable of the Company, whether reflected in the 1996
Balance Sheet or accrued since the date thereof, represent revenue generated in
the ordinary course of business and are collectible net of any reserves shown on
the 1996 Balance Sheet or reserves for accounts receivable accrued since the
date thereof (which reserves are adequate and were calculated in accordance with
GAAP). Subject to the reserves established on the 1996 Balance Sheet or accrued
since the date thereof, each of the accounts receivable either has been
collected in full or will be collected in full, without any set-off, in a period
of time consistent with the historical collection results of the Company during
1993 through 1996, but in no event in excess of 120 days after the day on which
each such account receivable became due and payable. A list of any promissory
note held by the Company that has been accepted by the Company as payment of
accounts receivable of the Company is set forth in Section 3.17 of the
Disclosure Schedule.
SECTION 3.18. Pension and Other Employee Plans and Agreements.
(a) Section 3.18(a) of the Disclosure Schedule sets forth, as of the
date of this Agreement, all of the pension, profit sharing, stock option, stock
purchase, stock bonus, incentive, bonus, life, health, disability or accident
plans, deferred compensation plans, and other employee compensation or benefit
plans, agreements, practices, policies, customs, contracts, arrangements or
commitments, including, without limitation, changes in control or severance
agreements, holiday, vacation or other similar plans, programs or arrangements,
employee benefit plans (within the meaning of section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), and labor union
agreements under or with respect to which the Company or any person ("ERISA
AFFILIATE") who would be treated as being a "single employer" with the Company
under section 414 of the Internal
<PAGE> 24
Revenue Code of 1986, as amended (the "CODE"), has any liability or obligation,
whether current, contingent, secondary or otherwise (collectively, the "PLANS"
and individually, a "PLAN"), and the Company has furnished to MSSC California or
Marketing Specialists complete copies of all of the foregoing as amended and in
effect on the date hereof, including, where applicable, any trust agreements,
insurance contracts or other funding mediums related to any Plan and summaries
of plan descriptions. The Company has heretofore delivered to MSSC California or
Marketing Specialists the most recent liability valuation report with respect to
each Plan for which a report or estimate has been prepared, the most recent
assets valuation report provided to the Company with respect to each Plan that
has assets, the two most recent annual reports (form 5500) filed with respect to
each Plan for which such report must be filed, and the most recent favorable
Internal Revenue Service ("IRS") determination letter received with respect to
each Plan that is intended to be qualified under section 401(a) of the Code or
trust intended to be exempt under section 501(a) or section 501(c)(9) of the
Code.
(b) With respect to each Plan, the Company and its ERISA Affiliates
have complied in all material respects with, and each Plan conforms in all
material respects to and has from its inception been operated in all material
respects with, all applicable Laws and regulations, including but not limited to
ERISA and the Code, and each Plan has been administered in all material respects
in accordance with its terms. Each Plan intended to be qualified under section
401(a) of the Code or trust intended to be exempt under section 501(a) or
section 501(c)(9) of the Code is, and for each prior year for which any
applicable statute of limitations has not expired, was, qualified or exempt, as
the case may be, and each such Plan is a single Plan, as defined in section
414(1) of the Code and the regulations thereunder, in which the Company is the
sole employer. Neither the Company nor any ERISA Affiliate has ever had an
obligation or liability, to or with respect to, a multiemployer plan, as defined
in section 4001(a)(3) of ERISA. Neither the Company nor any ERISA Affiliate has
any commitment and has not taken any action to adopt or establish any additional
Plans or to materially increase the benefits under any Plan; no event or
condition has occurred or exists with respect to any Plan or Plans, whether or
not terminated prior to the date of this Agreement and whether or not maintained
or contributed to by the Company or any ERISA Affiliate, which individually or
collectively could result in a material liability to the Company or any ERISA
Affiliate; all contributions required to any Plan and all premiums for insurance
coverage for each fiscal year of each Plan ended before the date of this
Agreement and for any portion of a fiscal year ending on the Closing Date have
been timely paid and payments to be made but not yet due properly accrued and
recorded in the Year End Audited Financial Statements and 1996 Financial
Statements through their relevant dates; no Plan has incurred any "accumulated
funding deficiency" (as defined in section 302 of ERISA and section 412 of the
Code), whether or not waived; there is no material pending or, to the best
knowledge of the Company, threatened or anticipated litigation, arbitration,
proceeding, claim (other than an undisputed claim for payment of benefits in
accordance with the terms thereof or a pending or final qualified domestic
relations order), demand, grievance, or allegation of unfair labor practice (or
any basis therefor) involving any of the Plans or any investigation, proceeding,
administrative review or other administrative agency process which could result
in imposition on the Company or any ERISA Affiliate of any penalty, assessment
or liability in connection with any of the Plans, individually or collectively;
no Plan has engaged or is about to engage in a prohibited transaction as defined
in section 406 of ERISA or section 4975 of the Code; and no "reportable
event,"as defined in section 4043 of ERISA, has occurred or, to the best
knowledge of the Company, is about to incur that could result in a liability to
the Company or any ERISA Affiliate.
<PAGE> 25
(c) No Plan provides (or has any commitment to provide) health benefits
with respect to any current or former employees or independent contractors (or
beneficiary thereof) of the Company or any ERISA Affiliate beyond their
retirement or other termination of service (other than coverage mandated by
COBRA). Each Plan can be unilaterally terminated at any time by the Company
without material liability.
SECTION 3.19. Litigation. There are no open and unresolved claims,
actions, suits, proceedings, investigations or inquiries that have been made or
served against the Company or, to the best knowledge of the Company, that are
pending against (without having been so served), threatened by or against, or
otherwise affecting or that would adversely affect, the transactions
contemplated hereby at law or in equity or before or by any federal, state,
local, foreign or other governmental department, commission, board, agency, or
authority; and no other such claim, action, suit, proceeding, inquiry or
investigation could be brought against the Company for which valid defenses are
not available. No claim, action, suit, proceeding, inquiry or investigation set
forth in Section 3.19 of the Disclosure Schedule would, if adversely decided,
have a Material Adverse Effect on the Company or the transactions contemplated
hereby. The Company is not a party to or a recipient of service of process
regarding (and has not otherwise been named and noticed in) any judgment, order
or decree entered in any lawsuit or proceeding which has had or may have a
Material Adverse Effect on the Company or on its ability to acquire any property
or conduct its business in any way.
SECTION 3.20. Insurance. (a) All policies of fire, liability, product
liability, workmen's compensation, health and other forms of insurance relating
to the Company Business are in full force and effect, (b) all billed premiums
with respect thereto covering all periods up to and including the Closing Date
have been paid or will be paid prior to the Closing Date, and (c) no notice of
cancellation or termination has been received with respect to any such policy.
Such policies are sufficient for compliance with all requirements of Law and of
all agreements with respect to the operation of the Company Business, are valid,
outstanding and enforceable policies (subject to bankruptcy, insolvency,
reorganization and other Laws and judicial decisions of general applicability
relating to or affecting creditors' rights and to general principles of equity),
and, to the best knowledge of the Company, provide insurance coverage customary
in the industry regarding the Company Assets and the operations of the Company
Business. The coverage provided by such policies, with respect to any insured
act or event occurring on or prior to the Closing Date, will not in any way be
affected by or terminate or lapse by reason of the transactions contemplated
hereby.
SECTION 3.21. Collective Bargaining Agreements; Compensation; Employee
Agreements. The Company does not have in effect any collective bargaining
agreement. Section 3.21 of the Disclosure Schedule sets forth a complete and
accurate list showing the names, the rate of compensation (and the portions
thereof attributable to salary and bonuses, respectively) and location of all
officers of the Company and of all employees of or consultants (except for
non-individual providers of professional services such as accounting and legal
services) to the Company that received annual base salary and cash bonus
totaling in excess of $100,000 for the fiscal year ended December 31, 1995 (such
officers, employees and consultants being, collectively termed, the "SENIOR
EMPLOYEES"). There are no covenants, agreements or restrictions to which the
Company is a party, including but not limited to employee noncompete agreements,
prohibiting, limiting or in any way
<PAGE> 26
restricting any employee listed on Section 3.21 of the Disclosure Schedule from
engaging in any type of business activity in any location. The Company is not
currently engaged in any bargaining with any labor union. To the best knowledge
of the Company, no petition is on file with the National Labor Relations Board
submitted by a labor union seeking to represent any of the employees of the
Company and the Company is not aware of any attempts to organize the employees
of the Company by any labor union.
SECTION 3.22. Labor Matters. (a) The Company has complied and is
presently complying with all applicable Laws respecting employment and
employment practices, terms and conditions of employment, and wages and hours,
and is not engaged in any unfair labor practice or unlawful employment practice
which has had, or could reasonably be expected to produce, a Material Adverse
Effect on the Company; (b) (i) there is no open and unresolved unfair labor
practice charge or complaint against the Company for which the Company has
received service of process or other appropriate notice or, to the best
knowledge of the Company, pending (without having been so served or noticed)
being considered or threatened before the National Labor Relations Board, (ii)
there is no open and unresolved grievance or any open and unresolved arbitration
proceeding arising out of or under collective bargaining agreements for which
the Company has received service of process or other appropriate notice and, to
the best knowledge of the Company, no such grievance or arbitration proceeding
is pending (without having been so served or noticed) or is being considered or
threatened, and (iii) there is no basis for any such charge, complaint or
grievance; (c) there is no labor strike, slowdown or work stoppage for which the
Company has received service of process or other appropriate notice or, to the
best knowledge of the Company, pending (without having been so served or
noticed) or threatened against the Company; (d) the Company has not experienced
any significant work stoppages or been a party within the past two years to any
proceedings before the National Labor Relations Board, and is not a party to any
arbitration proceeding arising out of or under collective bargaining agreements;
and (e) there is no open and unresolved charge or complaint for which the
Company has received service of process or other appropriate notice or, to the
best knowledge of the Company, which is being considered or threatened against
the Company before the Equal Employment Opportunity Commission or any state,
local, federal or foreign agency responsible for the prevention of unlawful
employment practices. The Company has not received notice of the intent of any
federal, state, local or foreign agency responsible for the enforcement of labor
or employment laws to conduct an investigation of or relating to the Company,
and, to the best knowledge of the Company, no such investigation is in progress.
The employees of the Company are not represented by any labor union and there
are no any collective bargaining agreements otherwise in effect with respect to
such employees. There are no citations against the Company from the Occupational
Safety and Health Administration for which the Company has been provided service
of process or other appropriate notice, and, to the best knowledge of the
Company, no such citations are pending. There are no current Affirmative Action
Plans to which the Company is a party affecting the Company Business and, to the
best knowledge of the Company, there are no current or pending audits
contemplated against the Company by the Office of Federal Compliance Programs
pursuant to Executive Order 11246.
SECTION 3.23. Compliance with Law. The Company is in substantial
compliance with all federal, state, foreign and local laws (whether statutory or
otherwise), ordinances, rules, regulations, orders, judgments, decrees, writs
and injunctions of any governmental authority (collectively, "LAWS") applicable
to the Company Business (except Environmental Laws which are addressed in
<PAGE> 27
Section 3.25) for which the failure to be in compliance (individually or in the
aggregate) would result in a Material Adverse Effect on the Company. The Company
has not received written notification from any governmental or regulatory
authority within the past five years of any asserted present or past failure to
so comply, which failure has not been appropriately and completely resolved. The
Company has not been notified by any governmental or regulatory authority that
the Company is in violation or alleged violation of any Law applicable to the
Company Business which violation has not been appropriately and completely
resolved, or that any governmental or regulatory authority contemplates any
investigation or proceeding with respect to any such violation or alleged
violation which has not been appropriately and completely resolved which, in
either case, has resulted in or could reasonably be expected to have a Material
Adverse Effect.
SECTION 3.24. Permits. The Company has all Permits (other than those
required by Environmental Laws, which are addressed in Section 3.25) necessary
for the ownership or leasing of its properties and the conduct of the Company
Business as now being conducted other than those the absence of which has not,
and is not reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company or the transactions contemplated hereby.
All such Permits are in full force and effect. No violations exist or, to the
best knowledge of the Company, have been reported in respect of such Permits. No
notice of any proceeding has been served or otherwise given to the Company or,
to the best knowledge of the Company, is pending (without service or other
notice) or threatened seeking the revocation or limitation of any of such
Permits.
SECTION 3.25. Environmental Matters.
(a) All Permits that are required for the current operation of the
Company Business under all Environmental Laws have been obtained. No notice to,
approval of, authorization or consent from any Person is necessary for the
transfer of any such Permit, and the consummation of the transactions
contemplated by this Agreement will not violate, alter, impair or invalidate, in
any respect, such Permits.
(b) The Company has neither disposed, nor caused the disposal of, any
waste or other items, except waste and other items which are customarily and
properly disposed of in normal municipal garbage sites and which have been
disposed of through normal municipal garbage collection.
(c) The Company is in substantial compliance with all terms and
conditions of the required Permits, and is also in substantial compliance with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in all applicable
Environmental Laws. Further, the Company is in substantial compliance with all
applicable covenants running with any current leases that relate to the
protection of health or the environment. The Company has not received any
communication (written or oral) from any Person that alleges that the Company is
not in compliance with the current required Permits or with any applicable
Environmental Law, which allegation has not been appropriately and completely
resolved.
(d) There is no Environmental Claim (as defined herein) pending,
threatened or likely to be threatened (i) against the Company; (ii) against any
Person whose liability for any Environmental Claim the Company may have retained
or assumed either contractually or by operation of Law; or
<PAGE> 28
(iii) against any real or personal property or operations that are or have been
previously owned, leased, operated or managed, in whole or in part, by the
Company, which, either individually or in the aggregate, has had or could have a
Material Adverse Effect on the Company.
(e) There are no events, conditions, circumstances, activities,
practices, incidents, actions or plans that may interfere with or prevent
compliance or continued compliance with Environmental Laws with respect to the
operation of the Company or that may otherwise form the basis of an
Environmental Claim against the Company, which, either individually or in the
aggregate, has had or could have a Material Adverse Effect on the Company.
(f) The Company has not prepared or caused the preparation of any
environmental reports, audits, investigations or assessments of the Company or
any real or personal property or operations which are now, or have been
previously owned, leased, operated or managed, in whole or in part, by the
Company (collectively, "ENVIRONMENTAL REPORTS"). No Environmental Reports exist.
(g) The Company has disclosed to MSSC California and Marketing
Specialists all relevant facts with respect to potential or actual environmental
liabilities of the Company which have had or could have a Material Adverse
Effect.
(h) For purposes of this Agreement, the following terms shall be given
the following meanings:
(i) "ENVIRONMENTAL CLAIM" shall mean any judicial,
administrative or regulatory action, civil or criminal suit, demand,
demand letter, directive, claim, lien, superlien, investigation,
proceeding or notice of violation (written or oral) by any Person
alleging potential liability (including, without limitation, potential
liability for enforcement, investigatory costs, cleanup costs,
governmental response costs, removal costs, remedial costs, natural
resources damages, property damages, personal injuries or penalties)
arising out of, based on or resulting from (a) the presence or Release
or threatened Release into the environment, of any Hazardous Materials
at any location, whether owned, operated, leased or managed by the
Company; or (b) circumstances forming the basis of any violation or
alleged violation, of any Environmental Law; or (c) any and all claims
by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence
or Release of any Hazardous Materials.
(ii) "ENVIRONMENTAL LAWS" shall mean any Law relating to or
applicable to the regulation or protection of human health, safety or
the environment (including, without limitation, ambient air, soil,
surface water, groundwater, wetlands, land or subsurface), including
without limitation, Laws and regulations relating to the Release or
threatened Release of Hazardous Material, or manufacture, processing,
distribution, use, treatment, storage, disposal, transport, recycling
or handling of Hazardous Material.
(iii) "HAZARDOUS MATERIAL" shall mean (a) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is
or could become friable, and compressors or other equipment that
contain polychlorinated biphenyls; and (b) any chemicals, materials or
substances which are now defined as or included in the definition of
"HAZARDOUS
<PAGE> 29
SUBSTANCES," "HAZARDOUS WASTES," "HAZARDOUS MATERIALS," "EXTREMELY
HAZARDOUS WASTES," "RESTRICTED HAZARDOUS WASTES," "TOXIC SUBSTANCES,"
"TOXIC POLLUTANTS," "POLLUTANTS," "CONTAMINANTS" or words of similar
import, under any Environmental Law; and (c) any other chemical,
material, substance or waste, exposure to which is now prohibited,
limited or regulated under any Environmental Law.
(iv) "RELEASE" shall mean any release, spill, emission,
leaking, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the atmosphere, soil, surface water, groundwater or
property.
SECTION 3.26. Tax Matters.
(a) All Tax Returns required to be filed on or before the Closing Date
by the Company have been or will be filed within the time prescribed by Law
(including extensions of time approved by the appropriate taxing authority).
"TAX RETURN" means any report, statement, form, return or other document or
information required to be supplied to a taxing authority in connection with
Taxes. "TAX" or "TAXES" means any United States or foreign federal, state, or
local tax, including without limitation income tax, ad valorem tax, excise tax,
sales tax, use tax, franchise tax, gross receipts tax, withholding tax, social
security tax, occupation tax, service tax, license tax, payroll tax, transfer
and recording tax, severance tax, customs tax, import tax, export tax,
employment tax, or any similar or other tax, assessment, duty, fee, levy or
other governmental charge, together with and including, without limitation, any
and all interest, fines, penalties, assessments and additions to tax resulting
from, relating to, or incurred in connection with any such tax or any contest or
dispute thereof.
(b) The Tax Returns so filed are complete, correct and accurate
representations of the Tax liabilities of the Company and such Tax Returns
accurately set forth or will accurately set forth all items to the extent
required to be reflected or included in such returns.
(c) The Company has timely paid or has made adequate provision in the
1996 Balance Sheet for the payment of all Taxes due on such Tax Returns that
have been filed or will be filed for periods ending on or before the date of the
1996 Balance Sheet.
(d) There is no action, suit, investigation, proceeding, audit or claim
that has been served against or otherwise properly noticed to the Company, or,
to the best knowledge of the Company, pending or proposed against or with
respect to the Company in respect of any Tax. There are no material liens for
Taxes upon any of the Company Assets.
(e) The Company has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other Person.
(f) The Company has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(g) The Company does not have in effect a consent under Section 341(f)
of the Code concerning collapsible corporations.
<PAGE> 30
(h) The Company has not made any payment, and is not obligated to make
any payment, and is not a party to any agreement that could obligate it to make
any payment that will not be deductible under section 280G of the Code or will
be subject to Tax under section 4999 of the Code.
(i) There has never been a Tax sharing or allocation agreement in place
between the Company and any other Person other than those, if any, regarding the
payment of Taxes for which the applicable statute of limitations has run.
(j) The Company is not liable for a Tax incurred by any other
corporation that was a member of a consolidated group of corporations (within
the meaning of Treasury regulation section 1.1502) that included the Company.
(k) The Company has delivered or made available to MSSC California and
Marketing Specialists correct and complete copies of all Tax Returns filed by
the Company for 1993, 1994 and 1995, all examination reports, and any statements
of deficiencies assessed against or agreed to by the Company.
SECTION 3.27. Product Liability. There is no state of facts or the
occurrence of any event forming the basis of any present claim against the
Company for personal injury or property damage alleged to be caused by products
shipped or services rendered by the Company in connection with the Company
Business, which is not fully covered by insurance, except for deductibles (the
amount of which deductibles is set forth on Section 3.27 of the Disclosure
Schedule), and except for claims that would not, individually or in the
aggregate, have a Material Adverse Effect on the Company or the consummation of
the transactions contemplated hereby.
SECTION 3.28. Title to Assets. The Company has good and valid title to
the Company Assets, including without limitation those assets set forth on the
1996 Balance Sheet. At the Closing the Company Assets will be free and clear of
all mortgages, liens, claims, charges, pledges, security interests or
encumbrances of any nature whatsoever.
SECTION 3.29. Accuracy of Disclosure. There is no information contained
in this Agreement (whether in this Article III, any other portion of this
Agreement pertaining to the Company, the Disclosure Schedule, the Appendices,
the Exhibits or any other documents or certificates delivered pursuant to this
Agreement) that contains an untrue statement of material fact or omits to state
any material fact required to be stated in order to make the statements made
herein and therein not misleading.
SECTION 3.30. Redemptions of Capital Stock by Bromar. All redemptions
of its capital stock by Bromar in the past ten years have been effected in
accordance with all applicable federal and state securities (and other) Laws and
agreements between the Company and its shareholders. There exists no continuing
claim by any former or current shareholder, for money or otherwise, against the
Company regarding any such redemptions, and no basis for any such claim exists.
<PAGE> 31
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
MSSC CALIFORNIA AND MARKETING SPECIALISTS
MSSC California and Marketing Specialists hereby jointly represent and
warrant to Bromar as follows, except as otherwise set forth in the relevant
section of the Disclosure Schedule:
SECTION 4.01. Organization and Qualification - MSSC California. MSSC
California is (a) a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and (b) duly qualified to do
business as a foreign corporation and in good standing in each jurisdiction in
which the character of the properties and assets now owned or leased by it or
the nature of the business transacted by it requires it to be so qualified,
except where the failure to be so qualified, individually or in the aggregate,
would not have a Material Adverse Effect on MSSC California or the consummation
of the transactions contemplated hereby. Each jurisdiction in which MSSC
California is qualified to do business is listed on Section 4.01 of the
Disclosure Schedule.
SECTION 4.02. Organization and Qualification - Marketing Specialists.
Marketing Specialists is (a) a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas and (b) duly qualified to
do business as a foreign corporation and in good standing in each jurisdiction
in which the character of the properties and assets now owned or leased by it or
the nature of the business transacted by it requires it to be so qualified,
except where the failure to be so qualified, individually or in the aggregate,
would not have a Material Adverse Effect on Marketing Specialists or the
consummation of the transactions contemplated hereby. Each jurisdiction in which
Marketing Specialists is qualified to do business is listed on Section 4.02 of
the Disclosure Schedule.
SECTION 4.03. Power and Capacity; Charter Documents of MSSC California.
(a) MSSC California has all requisite power and authority (corporate
and otherwise) to enter into, execute and deliver this Agreement and perform its
obligations hereunder. MSSC California has the corporate power and authority to
carry on its business as now being conducted and to own and lease its
properties. This Agreement has been duly executed and delivered by MSSC
California and is a valid and binding obligation of MSSC California, enforceable
in accordance with its terms.
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby by MSSC California will not
result in a violation or breach of or constitute a default under any term or
provision of the Certificate of Incorporation or Bylaws of MSSC California. MSSC
California has delivered to Bromar true and complete copies of the Certificate
of Incorporation and the Bylaws of MSSC California, as in effect on the date
hereof.
SECTION 4.04. Power and Capacity; Charter Documents of Marketing
Specialists.
(a) Marketing Specialists has all requisite power and authority
(corporate and otherwise) to enter into, execute and deliver this Agreement and
perform its obligations hereunder. Marketing
<PAGE> 32
Specialists has the corporate power and authority to carry on its business as
now being conducted and to own and lease its properties. This Agreement has been
duly executed and delivered by Marketing Specialists and is a valid and binding
obligation of Marketing Specialists, enforceable in accordance with its terms.
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby by Marketing Specialists
will not result in a violation or breach of or constitute a default under any
term or provision of the Articles of Incorporation or Bylaws of Marketing
Specialists. Marketing Specialists has delivered to Bromar true and complete
copies of the Articles of Incorporation and the Bylaws of Marketing Specialists,
as in effect on the date hereof.
SECTION 4.05. No Conflicts. The execution, delivery and performance of
this Agreement by MSSC California and Marketing Specialists and the consummation
of the transactions contemplated hereby will not:
(a) result in the creation or imposition of any security interest,
lien, charge or other encumbrance against MSSC California's assets or Marketing
Specialists' assets, with or without the giving of notice and/or the passage of
time, or
(b) violate, conflict with, affect acceleration of, or result in
termination, cancellation or modification of, or constitute a default under (i)
any contract, agreement or other instrument to which MSSC California or
Marketing Specialists is a party or by which MSSC California or Marketing
Specialists or their respective assets is bound or (ii) any note, bond,
mortgage, indenture, deed of trust, license, lease, contract, commitment,
understanding, arrangement, agreement or restriction of any kind or character to
which MSSC California or Marketing Specialists is a party or by which MSSC
California or Marketing Specialists may be bound or affected or to which any of
their respective assets may be subject, or
(c) violate any statute or Law or any judgment, decree, order, writ,
injunction, regulation or rule of any court or any local, state or federal
governmental or regulatory authority, which violation, conflict, acceleration,
requirement, termination, modification or default described in (a), (b), or (c)
above could result in a Material Adverse Effect on MSSC California or Marketing
Specialists or the transactions contemplated by this Agreement.
SECTION 4.06. Consents and Approvals. Neither MSSC California nor
Marketing Specialists is required to obtain, transfer or cause to be transferred
any consent, approval, license, permit or authorization of, or make any
declaration, filing or registration with, any third party or any public body or
authority in connection with (a) the execution and delivery by MSSC California
and Marketing Specialists of this Agreement, (b) the consummation of the Merger
and the other transactions contemplated hereby or (c) the future conduct by the
Surviving Corporation of the Company Business, other than those that may be
required under the HSR Act or that may be required solely by reason of Bromar's
(as opposed to any other third party's) participation in the transactions
contemplated hereby.
<PAGE> 33
SECTION 4.07. Accredited Investor. Marketing Specialists is an
"ACCREDITED INVESTOR" as such term is defined in Rule 501(a) promulgated under
the Securities Act of 1933 as amended (the "SECURITIES ACT"). Marketing
Specialists represents and warrants that it has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment in the Common Stock. Marketing Specialists has had the
opportunity, through representatives, to obtain from Bromar all information, to
the extent possessed by Bromar or obtainable by Bromar, necessary to evaluate
the merits and risks of an investment in the Common Stock and has concluded,
based on such information and other information previously known to it, to
invest in the Common Stock pursuant to the terms of this Agreement.
SECTION 4.08. Absence of Market. Marketing Specialists acknowledges
that the Common Stock lacks liquidity as compared with other securities
investments since there is not, and there is not expected to be, any market for
the Common Stock, and that the sale or transfer of the Common Stock must comply
with the provisions of applicable federal and state securities Laws. Marketing
Specialists acknowledges that it must bear the economic risk of its investment
in the Common Stock for an indefinite period of time since the Common Stock has
not been registered under the Securities Act and therefore cannot be sold unless
the Common Stock is subsequently registered or an exemption from registration is
available.
SECTION 4.09. Investment Purposes. Marketing Specialists hereby
represents and warrants that it is acquiring the Common Stock for investment
purposes only, for its own account, and not as nominee or agent for any other
Person, and not with a view to, or for resale in connection with, any
distribution thereof within the meaning of the Securities Act. Marketing
Specialists has no agreement or other arrangement with any Person to sell,
transfer or pledge any part of the Common Stock and has no plans to enter into
any such agreement or arrangement.
ARTICLE V
OTHER OBLIGATIONS OF THE PARTIES
SECTION 5.01. Conduct of Company Business. From the date hereof to the
Closing, except as otherwise expressly set forth in this Agreement or in Section
5.01 of the Disclosure Schedule, the Company shall conduct the business,
operations, activities and practices of the Company only in the ordinary course,
in accordance with prudent practice and consistent with past practice. Without
limiting the generality of the foregoing, from the date hereof to the Closing,
without the prior written consent of MSSC California or Marketing Specialists,
Bromar shall not (and shall cause the Subsidiaries to not):
(a) incur any liabilities or obligations of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether due or to become
due), except for liabilities or obligations for (i) purchases of raw material
for use in the ordinary course of the Parowax Business, (ii) rent under the
Leases, (iii) periodic drawdowns under the $3.5 million revolving credit line of
the Company with Wells Fargo (as in place on the date hereof), (iv) periodic
drawdowns under the $5.0 million revolving line of credit with Wells Fargo (as
in place on the date hereof) if, prior to each such drawdown, the Company
provides written notice to Marketing Specialists and MSSC California
<PAGE> 34
identifying the date such drawdown is to be made, the amount thereof and the
specific purpose or purposes therefor and (v) other items incurred in the
ordinary course of business and consistent with past practice, none of which
other items shall exceed $25,000 (considering liabilities or obligations arising
from one transaction or a series of similar transactions, and all periodic
installments or payments under any lease (other than the Leases) or other
agreement providing for periodic installments or payments, as a single
obligation or liability);
(b) increase (other than an increase resulting from the calculation of
reserves in the ordinary course of business and in a manner consistent with past
practice) or change any assumptions underlying, or methods of calculating, any
bad debt, contingency or other reserves;
(c) pay, discharge or satisfy any claim, encumbrance, liability or
obligation (whether absolute, accrued, contingent or otherwise and whether due
or to become due), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of liabilities and
obligations which are reflected or reserved against in the 1996 Balance Sheet or
which have been incurred since the date thereof in the ordinary course of
business and consistent with past practice, or prepay any liability or
obligation having a fixed maturity of more than 90 days from the date such
liability or obligation was issued or incurred;
(d) permit, allow or suffer any of the Company Assets to be subjected
to any new or additional mortgage, pledge, lien, encumbrance, restriction or
charge of any kind (except for liens arising as a result of Taxes not yet owing)
except for items subject to capital equipment leases not exceeding $10,000 in
the aggregate;
(e) write down or write up the value of any Inventory (including
write-downs by reason of shrinkage or mark-downs), determine as collectible any
notes or accounts receivable or any portion thereof which was previously
considered uncollectible or write off as uncollectible (except for the automatic
creation of a bad debt reserve for amounts due for more than 120 days) any notes
or accounts receivable or any portion thereof other than in the ordinary course
of business, but in no event to exceed $5,000 in the aggregate,
(f) cancel any amount of indebtedness in excess of $10,000 or waive any
claims or rights of value in excess of $10,000;
(g) sell, transfer or otherwise dispose of any of the Company Assets
with an aggregate value of more than $40,000, other than Inventory sold in the
ordinary course of business;
(h) dispose of or permit to lapse any right to use any patent,
trademark, assumed name, service mark, trade name, copyright, license or
application therefor or dispose of or disclose to any Person other than
representatives of MSSC California or Marketing Specialists any trade secret,
formula, process or know-how not theretofore a matter of public knowledge (other
than disclosures in the ordinary course of business and consistent with past
practice that would not materially diminish the value of such trade secrets,
formulae, processes or know-how to the Company);
(i) grant any increase in the compensation (including, without
limitation, any increase or change pursuant to any bonus, pension,
profit-sharing, retirement or other plan or commitment)
<PAGE> 35
payable to or to become payable to the Senior Employees, grant any general
increase in the compensation payable to or to become payable to employees of the
Company or, except in the ordinary course of business and consistent with past
practice, grant any increase in the compensation payable or to become payable to
individual employees;
(j) loan or advance any amount (except for advances in the ordinary
course of business and consistent with past practice that do not in the
aggregate exceed $20,000 and are not made as advances for personal loans) to, or
sell, transfer or lease any of the Company Assets to, or enter into any
agreement or arrangements with, any of the officers, directors, shareholders or
employees of any Company or any of their respective affiliates (which
affiliation is known to the Company);
(k) enter into any collective bargaining or labor agreement;
(l) make any single capital expenditure or commitment in excess of
$20,000 for additions to property, plant, equipment or intangible capital assets
or for any other purpose or make aggregate capital expenditures or commitments
in excess of $40,000 for additions to property, plant, equipment or for any
other purpose;
(m) make any change in any method of accounting or accounting practice
or policy;
(n) enter into any agreement or contract or commitment of the type
required to be disclosed pursuant to Section 3.10 hereof or outside the ordinary
course of business except as provided in Section 5.01(n) of the Disclosure
Schedule;
(o) terminate or amend in any material respect any material contract,
lease, license, or other agreement to which the Company is a party;
(p) permit any option to renew any Lease or any option to purchase any
property to expire or exercise any such option;
(q) issue any additional shares of capital stock of the Company or
options, warrants, rights (including, without limitation, stock appreciation
rights and phantom stock rights) or other securities exercisable for,
convertible into or exchangeable for shares of capital stock of the Company;
(r) omit to do any act, or permit any act or omission to act, which may
cause a breach of any contract, commitment or obligation of the Company, or any
breach of any representation, warranty, covenant or agreement made by the
Company herein;
(s) pay its suppliers and other vendors in a manner and time not
consistent with past practice;
(t) take any other action not in the ordinary course of business and
consistent with past practice and prudent business practice or provided for in
this Agreement; or
(u) agree, whether in writing or otherwise, to do any of the foregoing.
<PAGE> 36
SECTION 5.02. Access to Books and Records. In order that MSSC
California and Marketing Specialists may have full opportunity to make
investigations of the Company in connection with the actions contemplated by
this Agreement, Bromar shall permit MSSC California and Marketing Specialists
and their counsel, accountants, auditors, lenders, environmental consultants and
other representatives reasonable access, upon reasonable notice during normal
business hours, to all of the plants, offices, properties, contracts and
commitments of the Company from the date hereof through the Closing Date, and
all books and records (including all computerized records and other computerized
storage media and the software used in connection therewith) of Bromar and any
subsidiary thereof, including without limitation the corporate minute books,
capital stock books and tax returns of Bromar and any subsidiary thereof, all
books and records relating to employees of Bromar and any subsidiary thereof,
all books and records relating to the purchase of materials, supplies and
services for the Parowax Business and the dealings with distributors of the
Parowax Business and all post office lock box numbers.
SECTION 5.03. Consents. Bromar agrees to use its reasonable efforts to
obtain prior to the Closing all consents necessary, in the reasonable
determination of MSSC California and Marketing Specialists, to consummate the
transactions contemplated hereby, including without limitation each of the
consents, approvals, licenses, permits and authorizations (and the declarations,
filings and registrations) listed or referred to in Section 3.06 of the
Disclosure Schedule. All such consents shall be in writing and in form and
substance reasonably satisfactory to MSSC California and Marketing Specialists,
and executed counterparts thereof shall be delivered to MSSC California and
Marketing Specialists promptly after receipt thereof by Bromar but in no event
later than the Closing.
SECTION 5.04. Other Transactions. Prior to the Closing, Bromar shall
not, and shall not permit any of its (and the Subsidiaries') officers,
directors, employees or other representatives to, directly or indirectly,
encourage, solicit, initiate or participate in negotiations with, or provide any
information or assistance to, any Person (other than MSSC California and
Marketing Specialists and their representatives) concerning any merger, sale of
securities, sale of the Company Assets or similar transaction involving the
Company or any of the Company Assets (other than between the parties hereto
regarding the transactions contemplated herein).
SECTION 5.05. Supplemental Disclosure. Article III of the Disclosure
Schedule shall be considered to be part of the representations and warranties of
Bromar. Until the Closing, Bromar shall have the continuing obligation to
promptly supplement or amend the Disclosure Schedule with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Disclosure Schedule ("SUPPLEMENTAL DISCLOSURES"); provided, however, that MSSC
California and Marketing Specialists shall be entitled to treat any such
supplementation or amendment as a breach of the appropriate representation or
warranty, whether or not the event or condition giving rise to such
supplementation or amendment occurred on or prior to the date hereof except to
the extent that such supplementation or amendment is a result of any of the
activities permitted by Section 5.01 (whether by the language thereof or as a
result of the consent of Marketing Specialists or MSSC California), which
supplementation or amendment shall not be deemed a breach by Bromar of any
obligation hereunder or be deemed the non-fulfillment of a condition hereunder.
Bromar acknowledges that the Disclosure Schedule is an important and integral
part of this Agreement and that MSSC California and Marketing
<PAGE> 37
Specialists have relied upon the information contained therein in entering into
this Agreement and in establishing the Exchange Fund.
SECTION 5.06. Governmental Filings. As soon as practicable, the
Company, MSSC California and Marketing Specialists shall make any and all
filings and submissions to any governmental agency that are required to be made
in connection with the transactions contemplated hereby (including, without
limitation, filings under the HSR Act). The Company shall furnish to MSSC
California and Marketing Specialists, and MSSC California and Marketing
Specialists shall furnish to the Company, such information and assistance as the
other party or parties may reasonably request in connection with the preparation
of any such filings or submissions.
SECTION 5.07. Covenant to Satisfy Conditions. The Company, MSSC
California and Marketing Specialists shall each use their reasonable efforts to
insure that the conditions set forth in Article VI hereof are satisfied, insofar
as such matters are within their respective control.
SECTION 5.08. Confidentiality. Each party hereto shall hold, and cause
its respective officers, directors, employees, consultants and advisors
(collectively, "PARTY REPRESENTATIVES") to hold, in strict confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of Law, all documents and information concerning the other parties
furnished to it by any other party or its party representatives in connection
with the transactions contemplated by this Agreement (except to the extent that
such information can be shown to have been (i) previously known by the party to
which it was furnished, (ii) in the public domain through no fault of such party
or (iii) later lawfully acquired from other sources by the party to which it was
furnished), and neither party shall release or disclose to any other Person (or
otherwise use) such information except in connection with the transactions
contemplated hereby. No party shall release any information regarding this
Agreement or the transactions contemplated hereby without the prior written
consent of each other party hereto.
SECTION 5.09. Employees. From the date hereof Bromar shall use its
reasonable efforts to retain as employees of the Company through the Closing
Date the active employment of the Company's current employees. Bromar agrees in
this regard to cooperate with MSSC California and Marketing Specialists by
permitting MSSC California and Marketing Specialists throughout the period prior
to the Closing Date to meet with the employees of the Company at such times as
shall be approved by a representative of Bromar (which approval shall not be
unreasonably withheld).
SECTION 5.10. Damage or Destruction. If an amount in excess of $45,000
of the Company Assets shall be damaged or destroyed prior to the Closing, or if
any of the offices of the Company shall be damaged so as to be unusable for more
than one week or destroyed prior to Closing, then in either case Bromar shall
immediately notify MSSC California and Marketing Specialists and furnish to MSSC
California and Marketing Specialists a written statement of the amount of
insurance, if any, payable on account thereof. In the event of such damage or
destruction, MSSC California or Marketing Specialists may elect to require that
Bromar restore or replace the Company Assets or the affected offices of the
Company to their condition on the date of this Agreement. In the event that such
damage to any Company Asset or office of the Company (taking into account the
insurance amounts due to the Company as a result of such damage) would
reasonably be determined to result in a Material Adverse Effect to the Company
(for which the
<PAGE> 38
threshold is $250,000 rather than the $20,000 threshold provided elsewhere in
this Agreement), then MSSC California or Marketing Specialists may terminate,
without liability to Bromar, MSSC California or Marketing Specialists, the
transactions contemplated hereby.
SECTION 5.11. Employment Agreements. On the date hereof, Bromar has
entered into Employment Agreements with each of Jeffrey B. Hill and Russell
Landreth (jointly, the "MANAGEMENT EMPLOYMENT AGREEMENTS").
SECTION 5.12. Management Support. On the date hereof, members of the
management of Bromar have agreed (subject to certain conditions) to support the
Merger and the other transactions contemplated hereby, pursuant to the terms of
a letter agreement attached hereto as Exhibit "D".
SECTION 5.13. Shareholder Meeting of Bromar. Bromar shall, at a meeting
of its shareholders duly called by its Board of Directors to be held as soon as
practicable following execution of this Agreement, submit this Agreement and the
consummation of the Merger to a vote of its shareholders in accordance with the
California Law.
SECTION 5.14. Information Delivered to Shareholders. Bromar shall
submit all shareholder notices, proxy solicitation material, written consents
and other information to MSSC California and Marketing Specialists for its
written approval (which approval shall not be unreasonably withheld) at least
four days prior to delivering such materials to Bromar's shareholders. All such
materials shall comply with the California Law and all applicable state and
federal securities Laws. MSSC California and Marketing Specialists shall be
provided with the opportunity to have one or more representatives attend
shareholder meetings, if any, of Bromar.
SECTION 5.15. Resignation of Officers and Directors. On or prior to the
Closing, Bromar shall deliver, or cause to be delivered, to MSSC California and
Marketing Specialists the resignation of each officer and director of Bromar and
the Subsidiaries, effective at the Effective Time.
SECTION 5.16. Use of Name. Marketing Specialists shall continue to use
the name "Bromar" as part of the corporate name of the Surviving Corporation in
connection with the operation of the Company Business for at least two years
following the Effective Time.
SECTION 5.17. Payment of Certain Transactional Fees by Marketing
Specialists. Bromar acknowledges receipt of the amount of $100,000 from
Marketing Specialists pursuant to the terms of the letter from Bromar to
Marketing Specialists dated August 27, 1996. Bromar and Marketing Specialists
agree that such amount shall be treated as a loan from Marketing Specialists to
the Surviving Corporation in the event that the Merger is consummated. In the
event that the Merger is not consummated, the terms of such letter shall control
the disposition of such amount.
SECTION 5.18. Provision of Monthly Financial Statements; Accounts
Receivable. Until the Closing, within ten business days of the end of each
calendar month, Bromar shall deliver to MSSC California and Marketing
Specialists a true and complete copy of unaudited consolidated financial
statements of the Company for the period beginning January 1, 1996 and ending on
the last day of such calendar month, which have been prepared by the Chief
Financial Officer of Bromar (the
<PAGE> 39
"UPDATED 1996 FINANCIAL STATEMENTS"). Each of the Updated 1996 Financial
Statements shall include an unaudited balance sheet of the Company as of the end
of such calendar month and shall be accompanied by a certificate of the Chief
Financial Officer that states that: "The Updated 1996 Financial Statements are
accurate and correct in all material respects and fairly present the financial
position and results of operations of the Company for the period therein
identified in conformity with GAAP consistently applied (except that the 1996
Financial Statements do not include notes or normal year end adjustments)."
Bromar shall deliver to MSSC California and Marketing Specialists a true and
complete listing of the aging status of each of the accounts receivable of the
Company as of October 31, 1996, within one day of the completion of such listing
in accordance with the normal procedures of Bromar (in the event such listing is
completed at least one day prior to the Closing).
SECTION 5.19. Funding. On or prior to the Closing Date, Marketing
Specialists shall provide (or cause other Persons to provide) MSSC California
with all amounts necessary to fund the Exchange Fund. Marketing Specialists has
informed Bromar of the identity of the Person from whom Marketing Specialists is
obtaining funding for the Exchange Fund. Marketing Specialists shall inform
Bromar in a reasonably prompt manner if there is any change in the source of or
prospects for its funding for the Exchange Fund.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. Conditions Precedent to Obligations of MSSC California
and Marketing Specialists. The obligations of MSSC California and Marketing
Specialists under this Agreement are subject to the satisfaction or, unless
prohibited by Law, the waiver by MSSC California and Marketing Specialists, at
or before the Closing, of each of the following conditions:
(a) Representations and Warranties. Except with regard to breaches and
inaccuracies in the representations and warranties of Bromar contained herein
(collectively, "PRE-CLOSING BREACHES") for which the aggregate adverse effect
thereof on the business, operations, properties (including intangible
properties), condition (financial or otherwise), assets, prospects, obligations
or liabilities (whether absolute, contingent or otherwise and whether due or to
become due) of the Company or the transactions contemplated hereby has not been,
is not and/or is not reasonably expected over time to be equal to or in excess
of $500,000, the representations and warranties of Bromar contained herein shall
be true, complete and accurate as of the date when made and at and as of the
Closing Date as though such representations, warranties and statements were made
at and as of such date. Pre-Closing Breaches shall be automatically waived at
the Closing.
(b) Performance. Bromar shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement to be so performed or complied with by it at or prior to the
Closing.
(c) No Transaction Litigation Injunction. On the Closing Date, there
shall be no effective injunction, writ, preliminary restraining order or any
order of any nature issued by a court of competent jurisdiction restraining or
prohibiting the consummation of the transactions contemplated
<PAGE> 40
hereby arising out of any litigation brought by a former or current shareholder,
director, officer or employee of the Company or by any trustee of the any of the
Plans (such litigation collectively, "TRANSACTION LITIGATION").
(d) No Injunction. On the Closing Date, there shall be no effective
injunction, writ, preliminary restraining order or any order of any nature
issued by a court of competent jurisdiction restraining or prohibiting the
consummation of the transactions contemplated hereby arising as a result of any
event or litigation other than Transaction Litigation.
(e) No Transaction Litigation. There shall not be threatened,
instituted or pending any suit, action, investigation, inquiry or other
proceeding by or before any court or governmental or other regulatory or
administrative agency or commission requesting or looking toward an order,
judgment or decree that (i) restrains or prohibits the consummation of the
transactions contemplated hereby, (ii) would adversely effect Marketing
Specialists' ability to exercise control over the Surviving Corporation after
the Closing, or (iii) would have a Material Adverse Effect on the business,
operations, condition (financial or otherwise), liabilities, Company Assets or
earnings of the Surviving Corporation, which in the case of any of (i), (ii) or
(iii), arises out of or is related to Transaction Litigation.
(f) No Other Proceeding or Litigation. There shall not be threatened,
instituted or pending any suit, action, investigation, inquiry or other
proceeding by or before any court or governmental or other regulatory or
administrative agency or commission requesting or looking toward an order,
judgment or decree that (i) restrains or prohibits the consummation of the
transactions contemplated hereby, (ii) would adversely effect Marketing
Specialists' ability to exercise control over the Surviving Corporation after
the Closing, or (iii) except as otherwise set forth in Section 3.19 of the
Disclosure Schedule, would have a Material Adverse Effect on the business,
operations, condition (financial or otherwise), liabilities, Company Assets or
earnings of the Surviving Corporation, which in the case of any of (i), (ii), or
(iii), arises out of or is related to any event or litigation other than
Transaction Litigation.
(g) Officers' Certificate. Bromar shall have delivered to MSSC
California and Marketing Specialists a certificate, dated the Closing Date,
executed by its Chief Executive Officer and Chief Financial Officer in their
corporate capacity certifying the fulfillment of the conditions specified in
Section 6.01(a) and (b) hereof.
(h) Secretary's Certificate. Bromar shall have delivered to MSSC
California and Marketing Specialists a certificate, dated the Closing Date,
executed by its Secretary or Assistant Secretary and certifying as to Bromar's
articles of incorporation, bylaws, enabling resolutions, incumbency of officers
and other reasonably related matters (including, without limitation, the
articles of incorporation and bylaws of any Subsidiary).
(i) Opinion of Bromar's Counsel. MSSC California and Marketing
Specialists shall have received an opinion of Brobeck, Phleger & Harrison LLP,
counsel to the Company, in the form attached hereto as Exhibit "E".
<PAGE> 41
(j) Documents. All documents to be delivered by the Company to MSSC
California and Marketing Specialists at the Closing shall be duly executed and
in form and substance reasonably satisfactory to MSSC California and Marketing
Specialists.
(k) Consents and Approvals. All material licenses, permits, consents,
approvals and authorizations of all third parties and governmental bodies and
agencies (other than approvals from Bromar's Board of Directors and
shareholders, which are provided for elsewhere in this Agreement) shall have
been obtained which are necessary, in the reasonable determination of counsel to
MSSC California and Marketing Specialists, in connection with (a) the execution
and delivery by each of the parties, as appropriate, of this Agreement, (b) the
consummation by each of the parties of the transactions contemplated hereby or
thereby or (c) the conduct by the Surviving Corporation of the Company Business
substantially as conducted on the date hereof.
(l) HSR Waiting Period. Any applicable waiting period under the HSR Act
shall have expired, or a notice of early termination shall have been granted,
regarding the transactions contemplated hereby.
(m) No Material Adverse Change. Except as specifically disclosed herein
or in the Disclosure Schedule, the events occurring since December 31, 1995, and
the conditions arising since such date shall not, in the aggregate, have
resulted in, or with the passage of time or otherwise, reasonably be expected to
result in, an adverse change (direct or indirect) of $500,000 or more on the
business, operations, properties (including tangible and intangible properties),
condition (financial or otherwise), assets, prospects, obligations or
liabilities (whether absolute, contingent or otherwise and whether due or to
become due) of the Company.
(n) Non-Foreign Status. At or prior to Closing, the Company shall have
delivered to MSSC California and Marketing Specialists a statement certifying
that it is not a foreign person, which statement shall comply with the
requirements of Treasury regulation Section 1.1445-2(b).
(o) O&D Releases. MSSC California and Marketing Specialists shall have
received all of the O&D Releases, each duly executed by the appropriate officer
or director.
(p) Shareholder Approval. The shareholders of Bromar shall have duly
approved the Merger and the other transactions contemplated hereby.
(q) Other. MSSC California and Marketing Specialists shall have
received such other documents or certificates as MSSC California and Marketing
Specialists may reasonably have requested, including, without limitation,
certificates of good standing with respect to each of Bromar and the
Subsidiaries from the appropriate authority in its jurisdiction of incorporation
and certificates of good standing with respect to each of Bromar and the
Subsidiaries from the appropriate authority in each jurisdiction in which it is
qualified to do business.
SECTION 6.02. Conditions Precedent to Obligations of Bromar. The
obligations of the Company under this Agreement are subject to the satisfaction
or, unless prohibited by Law, the waiver by the Company at or before the
Closing, of each of the following conditions:
<PAGE> 42
(a) Representations and Warranties. The representations and warranties
of MSSC California and Marketing Specialists contained herein shall be true,
complete and accurate as of the date when made and at and as of the Closing Date
as though such representations and warranties were made at and as of such date.
(b) Performance. MSSC California and Marketing Specialists shall have
performed and complied with all agreements, obligations and conditions required
by this Agreement to be so performed or complied with by them at or prior to the
Closing.
(c) No Injunction. On the Closing Date, there shall be no effective
injunction, writ, preliminary restraining order or any order of any nature
issued by a court of competent jurisdiction restraining or prohibiting
consummation of the transactions contemplated hereby.
(d) No Proceeding or Litigation. There shall not be threatened,
instituted or pending any suit, action, investigation, inquiry or other
proceeding by or before any court or governmental or other regulatory or
administrative agency or commission requesting or looking toward an order,
judgment or decree that restrains or prohibits the consummation of the
transactions contemplated hereby.
(e) Officers' Certificates. Each of MSSC California and Marketing
Specialists shall have delivered to Bromar a certificate, dated the Closing Date
and executed by its Chief Executive Officer and Chief Financial Officer
certifying the fulfillment of the conditions specified in Sections 6.02(a) and
(b) hereof.
(f) Secretary's Certificates. MSSC California and Marketing Specialists
shall have delivered to Bromar a certificate, dated the Closing Date, executed
by its Secretary or any Assistant Secretary and certifying as to its
organizational documents, enabling resolutions, incumbency of officers and other
related matters.
(g) Opinion of MSSC California's and Marketing Specialists' Counsel.
Bromar shall have received an opinion, dated the Closing Date, from Andrews &
Kurth L.L.P., counsel to MSSC California and Marketing Specialists, in the form
attached hereto as Exhibit "F".
(h) Releases. The directors and officers of Bromar and the Subsidiaries
shall have received all of the O&D Releases, each duly executed on behalf of the
Surviving Corporation.
(i) Shareholder Approval. The shareholders of Bromar shall have duly
approved the Merger and the other transactions contemplated hereby.
(j) Documents. All documents to be delivered by each of MSSC California
and Marketing Specialists to Bromar at the Closing shall be duly executed and in
form and substance reasonably satisfactory to Bromar.
(k) HSR Waiting Period. Any applicable waiting period under the HSR Act
shall have expired, or a notice of early termination shall have been granted,
regarding the transactions contemplated hereby.
<PAGE> 43
ARTICLE VII
TERMINATION OF AGREEMENT
SECTION 7.01. Termination of Agreement. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual agreement of Bromar, MSSC California and Marketing
Specialists;
(b) by MSSC California or Marketing Specialists pursuant to Section
5.10 hereof;
(c) by MSSC California or Marketing Specialists, on or after December
4, 1996, if any of the conditions provided in Section 6.01 hereof of this
Agreement have not been met or, to the extent permitted by applicable Law, have
not been waived in writing by MSSC California or Marketing Specialists prior to
such date; or
(d) by Bromar, on or after December 4, 1996, if any of the conditions
provided in Section 6.02 hereof have not been met or, to the extent permitted by
applicable Law, have not been waived in writing by Bromar prior to such date.
SECTION 7.02. Procedure Upon Termination. In the event of termination
by Bromar, MSSC California or Marketing Specialists pursuant to Section 7.01
hereof, written notice thereof shall promptly be given to the other parties and
the transactions contemplated by this Agreement shall be terminated, without
further action by any party. If the transactions contemplated by this Agreement
are terminated as provided herein:
(a) each of Bromar, MSSC California and Marketing Specialists shall
return all documents, work papers and other material of any other party relating
to the transactions contemplated hereby, whether so obtained before or after the
execution hereof, to the party furnishing the same; and
(b) all confidential information received by Bromar, MSSC California or
Marketing Specialists with respect to the business of any other party or its
subsidiaries or affiliates shall be treated in accordance with Section 5.08
hereof, and Section 5.08 hereof shall remain in full force and effect
notwithstanding the termination of this Agreement.
SECTION 7.03. Effect of Termination of Agreement in Certain Instances.
In the event this Agreement is terminated by MSSC California or Marketing
Specialists in accordance with the provisions of Section 7.01(c), and such
termination occurs solely because of one of the conditions set forth in Sections
6.01(d), (f), (k) or (l) were not met as a result of conduct by Persons other
than the parties hereto, then the Deposit shall be returned to MSSC California
and MSSC California shall reimburse Bromar for all of its direct out-of-pocket
legal, accounting and financial advisor costs relating to this Agreement (as
reasonably incurred and documented) (such payable costs, collectively, the
"RECOVERABLE COSTS"); provided, however, that Bromar shall only be entitled to
payment by MSSC California or Marketing Specialists of the Recoverable Costs
following termination of this
<PAGE> 44
Agreement due to failure of the condition set forth in Section 6.01(l) if Bromar
was unwilling on December 4, 1996 to extend the deadline for fulfillment of the
condition set forth in Section 6.02(k) until February 4, 1997.
SECTION 7.04. Limitation on Damages. The parties agree that the damages
that might be realized by Bromar or its shareholders in the event that the
Closing hereunder does not occur due to the breach of this Agreement by MSSC
California and/or Marketing Specialists would be difficult to determine in
advance. The parties, nonetheless, desire to make a reasonable estimate herein.
Accordingly, in the event of certain breaches, Bromar and its shareholders shall
be entitled to retain the Deposit pursuant to Section 1.10 hereof as liquidated
damages and not as a penalty; provided, that such retention of the Deposit by
Bromar shall be the sole and exclusive remedy of Bromar for any breach hereunder
by MSSC California or Marketing Specialists (except in the case of MSSC
California's or Marketing Specialists' bad faith or willful misconduct, for
which Bromar may seek other damages).
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Survival of Representations. Solely for the purpose
referenced in Section 8.02 hereof, the representations, warranties and
agreements made by Bromar in Sections 3.04, 3.07, 3.08 (limited to known items
under this representation and warranty), 3.13, 3.18, 3.19, 3.22, 3.23, 3.25,
3.26, 5.01, and 5.14 (with respect to compliance with the California Law and
applicable state and federal securities laws, to the extent that such compliance
is dependent on information regarding the Company that is not disclosed in this
Agreement or the Disclosure Schedule) of this Agreement shall survive any
investigation made by or on behalf of MSSC California or Marketing Specialists
and shall survive the Closing hereunder. None of the other representations,
warranties or agreements of Bromar hereunder or any of the representations,
warranties or agreements of MSSC California or Marketing Specialists hereunder
shall survive the Closing.
SECTION 8.02. Limitation of Liability. No recourse shall be available
against Bromar, its officers, directors, shareholders, employees,
representatives and affiliates for any misrepresentations or breaches by Bromar
hereunder, except that recourse shall be available for claims regarding any
willful or bad faith misrepresentations or breaches of Bromar hereunder against
any Person who knowingly participated in such misrepresentation or breach.
SECTION 8.03. Commissions. No party hereto has employed any investment
banker, broker, finder or similar agent in connection with any transaction
contemplated by this Agreement.
SECTION 8.04. Definition of Knowledge. For the purpose of this
Agreement, the Exhibits and Appendices to this Agreement and the Disclosure
Schedule, the phrases "to the best knowledge" of any party and "known" and words
of like effect shall mean to the knowledge of such party and any officer,
director or manager of any such party, as such knowledge has been, or should
have been, obtained in the performance of their duties in the ordinary course of
business in a prudent and diligent manner, which knowledge shall also include
information existing in the records and files of such party.
<PAGE> 45
SECTION 8.05. Definition of Material Adverse Effect and Material
Adverse Change. "MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" means,
with respect to any party, any change, occurrence or effect (direct or indirect)
on the business, operations, properties (including tangible and intangible
properties), condition (financial or otherwise), assets, prospects, obligations
or liabilities (whether absolute, contingent or otherwise and whether due or to
become due) of such party and its subsidiaries taken as a whole that reasonably
could be expected to exceed $20,000. "Material" or "materially" or words of like
effect shall refer to items capable of producing a monetary effect of at least
$20,000 on the business, operations, properties (including intangible
properties), condition (financial or otherwise), assets, prospects, obligations
or liabilities (whether absolute, contingent or otherwise and whether due or to
become due) of the relevant party and its subsidiaries taken as a whole.
SECTION 8.06. Glossary. Set forth as Appendix III hereto is a glossary
of all defined terms used in this Agreement. The glossary is provided for the
convenience of the parties only. In the event any difference exists between any
definition set forth in the glossary and any definition set forth in this
Agreement, the definition set forth in this Agreement shall control.
SECTION 8.07. Expenses, Taxes, Etc. Except as otherwise provided
herein, in the event of the termination of this Agreement prior to Closing, each
of the parties hereto shall pay all fees and expenses incurred by it or any of
its affiliates in connection with the transactions contemplated by this
Agreement.
SECTION 8.08. Successors and Assigns. No party shall have the right to
assign all or any part of its interest in this Agreement without the prior
written consent of the other parties, and any attempted transfer without such
consent shall be null and void.
SECTION 8.09. No Third-Party Benefit. Nothing in this Agreement shall
be deemed to create any right or obligation in any Person not a party hereto and
this Agreement shall not be construed in any respect to be a contract or
agreement in whole or in part for the benefit of or binding upon any Person not
a party hereto.
SECTION 8.10. Entire Agreement; Amendment. This Agreement, the
Exhibits, the Appendices, the Escrow Agreement, the Disclosure Schedule, the
August 27, 1996 letter from Bromar to Marketing Specialists and the letter dated
the date hereof from Marketing Specialists and MSSC California to Bromar
constitute the entire agreement among the parties hereto with respect to the
transactions contemplated herein and supersede all prior oral and written
agreements, memoranda, understandings and undertakings between the parties
hereto relating to the subject matter hereof including, without limitation, the
letter of intent dated August 16, 1996 between Bromar and Marketing Specialists
and the term sheet attached thereto. This Agreement may not be modified,
amended, altered or supplemented except by a written instrument executed and
delivered by each of the parties hereto.
<PAGE> 46
SECTION 8.11. Reformation and Severability. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under present or
future laws effective during the term hereof and such illegality, invalidity or
unenforceability does not result in a material failure of consideration, then;
(a) in lieu of such illegal, invalid or unenforceable provision, there
shall be added automatically as a part of this Agreement a provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible
and be legal, valid and enforceable; and
(b) the legality, validity and enforceability of the remaining
provisions hereof shall not in any way be affected or impaired thereby.
SECTION 8.12. Notices. All notices, claims, certificates, requests,
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally or mailed (registered or
certified mail, postage prepaid, return receipt requested) as follows:
If to MSSC California or Marketing Specialists:
Marketing Specialists Sales Company
2324 Gateway Drive
Irving, Texas 75063
Attention: Ronald D. Pedersen
with a copy to:
Andrews & Kurth L.L.P.
4400 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201
Attention: J. Gregory Holloway, Esq.
If to Bromar:
Bromar, Inc.
15 Corporate Plaza
Newport Beach, California 92660
Attention: Jeffrey B. Hill
with a copy to:
Brobeck Phleger & Harrison L.L.P.
Spear Street Tower
One Market
San Francisco, California 94105
Attention: George A. Hisert, Esq.
<PAGE> 47
or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above,
provided that notice of a change of address shall be deemed given only upon
receipt.
SECTION 8.13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA,
WITHOUT REGARD TO ITS CONFLICTS OF LAW RULES.
SECTION 8.14. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
The remainder of this page is intentionally left blank.
<PAGE> 48
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the parties hereto as of the date first above written.
BROMAR, INC.
By: /s/ JEFFREY B. HILL
-----------------------------------------
Name: Jeffrey B. Hill
---------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
MARKETING SPECIALISTS SALES COMPANY
By: /s/ RONALD D. PEDERSEN
-----------------------------------------
Name: Ronald D. Pedersen
---------------------------------------
Title: Chairman & CEO
--------------------------------------
MSSC CALIFORNIA, INC.
By: /s/ RONALD D. PEDERSEN
-----------------------------------------
Name: Ronald D. Pedersen
---------------------------------------
Title: Chairman & CEO
--------------------------------------
SIGNATURE PAGE
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
RICHMONT MARKETING SPECIALISTS INC.
The undersigned person, acting as sole incorporator of the corporation
pursuant to the General Corporation Law of the State of Delaware, does hereby
make this Certificate of Incorporation for such corporation, declaring and
certifying that this is my act and deed and that the facts herein stated are
true:
ARTICLE I.
The name of the Corporation is Richmont Marketing Specialists Inc. (the
"Corporation").
ARTICLE II.
The address of the Corporation's registered office in the State of
Delaware is 9 East Loockerman Street, Dover, Delaware, 19901, County of Kent.
The name of the Corporation's registered agent at such address is National
Registered Agents, Inc.
ARTICLE III.
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV.
The Corporation shall have perpetual existence.
ARTICLE V.
The number of directors constituting the Board of Directors shall be
provided in the Bylaws of the Corporation, as the same may be amended from time
to time.
ARTICLE VI.
All of the powers of this Corporation, insofar as the same may be lawfully
vested by this Certificate of Incorporation in the Board of Directors, are
hereby conferred upon the Board of Directors of this Corporation. In furtherance
and not in limitation of this power, the Board of Directors of the Corporation
is expressly authorized to make, alter or repeal the Bylaws of the Corporation,
subject to the power of the stockholders of the Corporation to alter or repeal
any Bylaw whether adopted by them or otherwise.
ARTICLE VII.
<PAGE> 2
Election of directors need not be by written ballot, except and to the
extent provided in the Bylaws of the Corporation.
ARTICLE VIII.
The aggregate number of shares which the Corporation shall have authority
to issue is one million (1,000,000) shares of capital stock consisting of one
million (1,000,000) shares of Common Stock, $.01 par value per share.
ARTICLE IX.
The powers of the incorporator shall terminate upon the filing of this
Certificate of Incorporation, and the following person shall serve as the
initial director of the Corporation until the first annual meeting of the
stockholders or until his successors are duly elected and qualified:
NAME ADDRESS
Timothy M. Byrd 2324 Gateway Drive
Irving, Texas 75063
ARTICLE X.
At each election for directors of the Corporation, each stockholder
entitled to vote at such election shall have the right to vote, in person or by
proxy, only the number of shares owned by him for as many persons as there are
directors to be elected, and no stockholder shall ever have the right or be
permitted to cumulate his votes on any basis, any and all rights of cumulative
voting being hereby expressly denied.
ARTICLE XI.
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware, or (iv) for any transaction from which the director derived
an improper personal benefit. If the General Corporation Law of the State of
Delaware is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended. Any repeal or modification of this paragraph by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.
-2-
<PAGE> 3
ARTICLE XII.
The Corporation shall, to the fullest extent permitted by the General
Corporation Law of the State of Delaware (including, without limitation, Section
145 thereof), as amended from time to time, indemnify any officer or director
whom it shall have power to indemnify from and against any and all of the
expenses, liabilities or other losses of any nature. The indemnification
provided in this Article IX shall not be deemed exclusive of any other rights to
which those indemnified may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity, while holding
such office, and shall continue as to a person who has ceased to be an officer
or director and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE XIII.
The Corporation reserves the right at any time, and from time to time, to
amend, alter, change or repeal any provision contained in this Certificate of
Incorporation in the manner now or hereafter prescribed herein and by the laws
of the State of Delaware, and all rights conferred upon stockholders herein are
granted subject to this reservation.
ARTICLE XIV.
The name and address of the incorporator is:
NAME ADDRESS
J. Gregory Holloway 4400 Thanksgiving Tower
Dallas, Texas 75201
SIGNATURE PAGE FOLLOWS
-3-
<PAGE> 4
IN WITNESS WHEREOF, the undersigned incorporator has hereunto set his hand
this 31st day of December 1996.
/s/ J. Gregory Holloway
-----------------------
J. Gregory Holloway
Signature Page
-4-
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
RICHMONT MARKETING SPECIALISTS INC.
a Delaware corporation
(the "Corporation")
Adopted as of October 7, 1997
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BYLAWS OF
RICHMONT MARKETING SPECIALISTS INC.
I. OFFICES
1.1 Additional Offices. The Corporation may, in addition to its registered
office in the State of Delaware, have such other offices and places of business,
both within and without the State of Delaware, as the Board of Directors of the
Corporation (the "Board") may from time to time determine or as the business and
affairs of the Corporation may require.
II. STOCKHOLDERS' MEETINGS
2.1 Annual Meetings. Annual meetings of stockholders shall be held at a
place and time on any weekday which is not a holiday and which is not more than
120 days after the end of the fiscal year of the Corporation as shall be
designated by the Board and stated in the notice of the meeting, at which the
stockholders shall elect the directors of the Corporation and transact such
other business as may properly be brought before the meeting.
2.2 Special Meetings. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by law or by the certificate of
incorporation, may be called by the Chairman of the Board, the Chief Executive
Officer, the Board or the holders of not less than ten percent of all the shares
entitled to vote at the meetings. Such request of the Board or the stockholders
shall state the purpose or purposes of the proposed meeting and business
transacted at all special meetings shall be confined to the purposes stated in
such notice of the meeting.
2.3 Notices. Written notice of each stockholders meeting stating the
place, date and hour of the meeting shall be given to each stockholder entitled
to vote thereat by or at the direction of the Chairman of the Board, the Chief
Executive Officer, the Secretary or the officer or person calling such meeting
not less than ten nor more than 60 days before the date of the meeting, unless
otherwise provided by law, the certificate of incorporation, or these bylaws.
2.4 Quorum. The presence at a stockholders meeting of the holders, present
in person or represented by proxy, of capital stock of the Corporation
representing a majority of the votes of all capital stock of the Corporation
entitled to vote thereat shall constitute a quorum at such meeting for the
transaction of business except as otherwise provided by law, the certificate of
incorporation or these bylaws. If a quorum shall not be present or represented
at any meeting of the stockholders, a majority of the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such reconvened
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than 30 days, or if after the
adjournment a new record date is fixed for the reconvened meeting, a notice of
said meeting shall be given to each stockholder entitled to vote at said
meeting. The stockholders present at a duly convened meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
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2.5 Voting of Shares.
2.5.1 Voting Lists. The officer or agent who has charge of the stock
ledger of the Corporation shall prepare, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote thereat
arranged in alphabetical order and showing the address and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present. Upon the willful neglect or refusal
of the directors to produce such a list at any meeting for the election of
directors, they shall be ineligible for election to any office at such meeting.
The original stock transfer books shall be prima facie evidence as to who are
the stockholders entitled to examine such list or transfer books or to vote at
any meeting of stockholders. Failure to comply with the requirements of this
section shall not affect the validity of any action taken at said meeting.
2.5.2 Record Date; Closing Transfer Books. The Board may fix in
advance a record date for the purpose of determining stockholders entitled to
notice of or to vote at a meeting of the stockholders, the record date to be not
less than ten nor more than sixty days prior to the meeting; or the Board may
close the stock transfer books for such purpose for a period of not less than
ten nor more than sixty days prior to such meeting. In the absence of any action
by the Board, the date upon which the notice of the meeting is mailed shall be
the record date.
2.5.3 Method of Voting. Each outstanding share shall be entitled to
one vote on each matter submitted to a vote at a meeting of the stockholders. At
any meeting of the stockholders, every stockholder having the right to vote
shall be entitled to vote in person, or by proxy appointed by an instrument in
writing subscribed by such stockholder or by his duly authorized
attorney-in-fact. No proxy shall be valid after eleven months from the date of
its execution, unless otherwise provided in the proxy. Each proxy shall be
revocable unless expressly provided therein to be irrevocable and unless
otherwise made irrevocable by law. Each proxy shall be filed with the Secretary
of the Corporation prior to or at the time of the meeting. Any vote may be taken
by voice or by show of hands unless someone entitled to vote objects, in which
case written ballots shall be used.
2.5.4 Required Vote. When a quorum is present at any meeting, the
vote of the holders, present in person or represented by proxy, of capital stock
of the Corporation representing a majority of the votes of all capital stock of
the Corporation entitled to vote thereat shall decide any question brought
before such meeting, unless the question is one upon which, by express provision
of law or the certificate of incorporation or these bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
2.6 Consents in Lieu of Meeting. Any action required or permitted to be
taken at any meeting of stockholders may be taken without a meeting, without
prior notice and without a vote, if a consent or consents in writing, setting
forth the action so taken, shall be signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
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authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted. Prompt, written notice of the action taken by
means of any such consent which is other than unanimous shall be given to those
stockholders who have not consented in writing.
2.7 Conduct of Meetings. The Board may adopt by resolution such rules and
regulations for the conduct of the meeting of stockholders as it shall deem
appropriate. Except to the extent inconsistent with such rules and regulations
as adopted by the Board, the chairman of any meeting of stockholders shall have
the right and authority to prescribe such rules, regulations and procedures and
to do all such acts as, in the judgment of such chairman, are appropriate for
the proper conduct of the meeting.
2.8 Telephone Meeting. Subject to the provisions of applicable law and
these bylaws, stockholders may participate in and hold a meeting by means of
conference telephone or similar communications equipment by which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this section shall constitute presence in person at such meeting,
except where a person participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
III. DIRECTORS
3.1 Purpose. The business of the Corporation shall be managed by or under
the direction of the Board, which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by law, the
certificate of incorporation or these bylaws directed or required to be
exercised or done by the stockholders. Directors need not be stockholders or
residents of the State of Delaware.
3.2 Number and Qualifications. The Board shall consist of seven members,
none of whom need be a stockholder or resident of the State of Delaware. The
directors shall be elected at the annual meeting of the stockholders, except as
hereinafter provided, and shall hold office until their successors shall be
elected and shall qualify.
3.3 Election. Directors shall be elected by the stockholders by plurality
vote at an annual stockholders meeting as provided in the certificate of
incorporation, except as hereinafter provided, and each director shall hold
office until his successor has been duly elected and qualified. Cumulative
voting shall not be permitted.
3.4 Vacancies. If any vacancies occur in the Board by the death,
resignation, retirement, disqualification or removal from office of any
director, or otherwise than as a result of an increase in the number of
directors, a successor or successors may be chosen at the annual meeting of the
Board or stockholders or a special meeting of the Board or the stockholders
called for that purpose. A director elected to fill such a vacancy shall be
elected for the unexpired term of his predecessor in office. Any vacancy in the
Board to be filled by reason of an increase in the number of directors may, to
the extent allowed by statute, be filled by election at the annual meeting of
the Board or stockholders or at a special meeting of the Board or stockholders
called for that purpose.
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3.5 Removal. Unless otherwise restricted by law, the certificate of
incorporation, these bylaws or any existing agreement to the contrary among the
stockholders, any director or the entire Board may be removed, with or without
cause, by a majority vote of the shares entitled to vote at an election of
directors, if notice of the intention to act upon such matter shall have been
given in the notice calling such meeting.
3.6 Compensation. The Board shall, by majority vote, have authority to
determine from time to time the amount of compensation, if any, which shall be
paid to its members for their services as directors. The Board shall also have
power in its discretion to provide for and to pay to directors rendering
services to the Corporation not ordinarily rendered by directors as such,
special compensation appropriate to the value of such services as determined by
the Board from time to time. Nothing herein contained shall be construed to
preclude any directors from serving the Corporation in any other capacity and
receiving compensation therefor.
IV. BOARD MEETINGS
4.1 Annual Meetings. The Board shall meet as soon as practicable after the
adjournment of each annual stockholders meeting at the place of the stockholders
meeting. No notice to the directors shall be necessary to legally convene this
meeting, provided a quorum is present.
4.2 Regular Meetings. Regular meetings of the Board shall be held
quarterly at such time and place as may be fixed from time to time by
resolutions adopted by the Board and communicated to all directors. Except as
otherwise provided by statute, the certificate of incorporation or these bylaws,
neither the business to be transacted at, nor the purpose of, any regular
meeting need be specified in the notice or waiver of notice of such meeting.
4.3 Special Meetings. Special meetings of the Board (i) may be called by
the Chairman of the Board or the Chief Executive Officer and (ii) shall be
called by the President or Secretary on the written request of two directors.
Notice of each special meeting of the Board shall be given, either personally or
as hereinafter provided, to each director at least 24 hours before the meeting
if such notice is delivered personally or by means of telephone, telegram, telex
or facsimile transmission and delivery or by a recognized overnight delivery
service; two days before the meeting if such notice is delivered by a recognized
express delivery service; and three days before the meeting if such notice is
delivered through the United States mail. Any and all business may be transacted
at a special meeting which may be transacted at a regular meeting of the Board.
Except as may be otherwise expressly provided by law, the certificate of
incorporation or these bylaws, neither the business to be transacted at, nor the
purpose of, any special meeting need be specified in the notice or waiver of
notice of such meeting.
4.4 Quorum, Required Vote. A majority of the directors shall constitute a
quorum for the transaction of business at any meeting of the Board, and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board, except as may be otherwise specifically provided
by law, the certificate of incorporation or these bylaws. If a quorum shall not
be present at any meeting, a majority of the directors present may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present.
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4.5 Consent In Lieu of Meeting. Unless otherwise restricted by the
certificate of incorporation or these bylaws, any action required or permitted
to be taken at any meeting of the Board or any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may be,
consent thereto in writing, and the signed writing or the copy of such signed
writing are filed with the minutes of proceedings of the Board or committee.
4.6 Telephone Meetings. The members of the Board, any committee thereof or
the stockholders may hold a meeting by means of conference telephone or other
communications equipment by means of which all persons participating in the
meeting can effectively communicate with each other. Such participation in a
meeting shall constitute presence in person at the meeting, except where a
person participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
V. COMMITTEES OF DIRECTORS
5.1 Committees. The Board, by resolution adopted by a majority of the full
Board, may designate from among its members, one or more committees to consist
of one or more of the directors and may designate one or more of the directors
as alternate members of any committee, who may, subject to any limitations
imposed by the Board, replace absent or disqualified members at any meeting of
that committee. To the extent provided in said resolution, any such committee
shall have and may exercise all of the authority of the Board in the management
of the business and affairs of the Corporation, except where action by all
members of the Board is required by statute or by the certificate of
incorporation, and shall have power to authorize the seal of the Corporation to
be affixed to all papers which may require it. Any member of a committee may be
removed by the Board by the affirmative vote of a majority of the Board,
whenever in its judgment the best interests of the Corporation will be served
thereby. Each committee shall keep regular minutes of its proceedings and report
the same to the Board when required.
5.2 Available Powers. Any committee established pursuant to Section 5.1 of
these bylaws, but only to the extent provided in the resolution of the Board or
as limited by law, the certificate of incorporation or these bylaws, shall have
and may exercise all the powers and authority of the Board in the management of
the business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it.
5.3 Unavailable Powers. No committee of the Board shall have the power or
authority in reference to the following matters: (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by
law, the certificate of incorporation, or these bylaws to be submitted to
stockholders for approval or (ii) adopting, amending or repealing any bylaw of
the Corporation.
5.4 Alternate Members. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of such committee. In the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not such
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member or members constitute a quorum, may unanimously appoint another member of
the Board to act at the meeting in the place of any such absent or disqualified
member.
5.5 Procedures. Time, place and notice, if any, of meetings of a committee
shall be determined by such committee. At meetings of a committee, a majority of
the number of members designated by the Board shall constitute a quorum for the
transaction of business. The act of a majority of the members present at any
meeting at which a quorum is present shall be the act of the committee, except
as otherwise specifically provided by law, the certificate of incorporation or
these bylaws. If a quorum is not present at a meeting of a committee, the
members present may adjourn the meeting from time to time, without notice other
than an announcement at the meeting, until a quorum is present.
VI. OFFICERS
6.1 Elected Officers. The Board shall elect a Chairman of the Board, a
Chief Executive Officer, a President, a Chief Operating Officer, one or more
Vice Presidents, a Secretary, a Chief Financial Officer and Treasurer (none of
whom need be a member of the Board). No elected officer of the Corporation need
be a stockholder or a resident of the State of Delaware. These officers shall
have the respective duties enumerated below and may elect such other officers
having the titles and duties set forth below which are not reserved for the
above officers or such other titles and duties as the Board may by resolution
from time to time establish:
6.1.1 Chairman of the Board. The Chairman of the Board shall preside
at all meetings of the stockholders and the Board and shall have the power to
call special meetings of the Board and stockholders for any purpose or purposes.
Unless the Board shall otherwise delegate such duties, the Chairman of the Board
shall be ex-officio a member of all standing committees.
6.1.2 Chief Executive Officer. The Chief Executive Officer shall
have the general powers of oversight, supervision and management of the business
and affairs of the Corporation and shall perform such other duties as may be
prescribed by the Board. Unless the Board shall otherwise delegate such duties,
the Chief Executive Officer shall be ex-officio a member of all standing
committees.
6.1.3 Chief Operating Officer. The Chief Operating Officer of the
Corporation shall (under the direction of the Chief Executive Officer) have
general supervision of the affairs of the Corporation and shall have general and
active control of all its business. Subject to the supervision, approval and
review of his actions by the Board, he shall supervise and direct the President
and other subordinate officers of the Corporation.
6.1.4 President. The President of the Corporation shall (under the
direction of the Chief Executive Officer and Chief Operating Officer) have
authority to: cause the employment or appointment of and the discharge of
employees and agents of the Corporation, other than officers, and fix their
compensation; suspend for cause, pending final action by the authority which
shall have elected or appointed him, any officer subordinate to the President;
make and sign bonds, deeds, contracts and agreements in the name of and on
behalf of the Corporation and to affix the corporate
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seal thereto; sign stock certificates; and, in general, exercise all the powers
usually appertaining to the office of president of a corporation, except as
otherwise provided by statute, the certificate of incorporation, or these
bylaws. The President shall put into operation the business policies of the
Corporation as determined by the Board and as communicated to him by the Chief
Executive Officer and the Chief Operating Officer. In carrying out such business
policies, the President shall, subject to the supervision of the Board, the
Chief Executive Officer and the Chief Operating Officer, have general management
and control of the day-to-day business operations of the Corporation. He shall
see that the books, reports, statements and certificates required by statutes or
laws applicable to the Corporation are properly kept, made and filed according
to law. The President shall be subject only to the authority of the Board, the
Chief Executive Officer and the Chief Operating Officer in carrying out his
duties. In the absence of or disability of the President, his duties shall be
performed and his powers may be exercised by the Vice Presidents in order of
their seniority, unless otherwise determined by the President, the Board, the
Chief Executive Officer or the Chief Operating Officer.
6.1.5 Vice Presidents. The Vice Presidents shall generally assist
the President and shall have such powers and perform such duties and services as
shall from time to time be prescribed or delegated by the President, the Chief
Executive Officer, the Chief Operating Officer or the Board.
6.1.6 Secretary. The Secretary shall see that notice is given of all
meetings of the stockholders and special meetings of the Board and shall keep
and attest true records of all proceedings at all meetings of the stockholders
and the Board. He shall have charge of the corporation seal and have authority
to attest any and all instruments or writings to which the same may be affixed.
He shall keep and account for all books, documents, papers and records of the
Corporation except those for which some other officer or agent is properly
accountable. He shall have authority to sign stock certificates and shall
generally perform all the duties usually appertaining to the office of secretary
of a corporation. In the absence or disability of the Secretary, his duties
shall be performed and his powers may be exercised by the Assistant Secretaries
in the order of their seniority, unless otherwise determined by the Secretary,
the President, the Chief Executive Officer, the Chief Operating Officer or the
Board.
6.1.7 Assistant Secretaries. Each Assistant Secretary shall
generally assist the Secretary and shall have such powers and perform such
duties and services as such from time to time be prescribed or delegated to him
by the Secretary, the President, the Chief Executive Officer, the Chief
Operating Officer or the Board.
6.1.8 Chief Financial Officer. The Chief Financial Officer shall be
the chief accounting and financial officer pertaining to the accounts and
finances of the Corporation. He shall audit all payrolls and vouchers of the
Corporation and shall direct the manner of certifying the same; shall receive,
audit and consolidate all operating and financial statements of the Corporation
and its various departments; shall have supervision of the books of account of
the Corporation, their arrangement and classification; shall supervise the
accounting and auditing practices of the Corporation; and shall have charge of
all matters relating to taxation.
6.1.9 Treasurer. The Treasurer shall have the care and custody of
all monies, funds, and securities of the Corporation; shall deposit or cause to
be deposited all such funds in and with such depositaries as the Board shall
from time to time direct or as shall be selected in accordance with
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procedure established by the Board; shall advise upon all terms of credit
granted by the Corporation; and shall be responsible for the collection of all
its accounts and shall cause to be kept full and accurate accounts of all
receipts and disbursements of the Corporation. He shall have the powers to
endorse for deposit or collection or otherwise all checks, drafts, notes, bills
of exchange or other commercial papers payable to the Corporation and to give
proper receipts or discharges for all payments to the Corporation. The Treasurer
shall generally perform all the duties usually appertaining to the office of
treasurer of a corporation. In the absence or disability of the Treasurer his
duties shall be performed and his powers may be exercised by the Assistant
Treasurers in the order of their seniority, unless otherwise determined by the
Chief Financial Officer, the Treasurer, the President, the Chief Executive
Officer, the Chief Operating Officer or the Board.
6.1.10 Assistant Treasurers. Each Assistant Treasurer shall
generally assist the Treasurer and shall have such powers and perform such
duties and services as shall from time to time be prescribed or delegated to him
by the Chief Financial Officer, the Treasurer, the President, the Chief
Executive Officer, the Chief Operating Officer or the Board.
6.2 Election. All elected officers shall serve until their successors are
duly elected and qualified or until their earlier death, disqualification,
retirement, resignation or removal from office.
6.3 Appointed Officers. The Board may also appoint or delegate the power
to appoint such other officers, assistant officers and agents, and may also
remove such officers and agents or delegate the power to remove same, as it
shall from time to time deem necessary, and the titles and duties of such
appointed officers may be as described in Section 6.1 for elected officers.
6.4 Multiple Officeholders, Stockholder and Director Officers. Any number
of offices may be held by the same person, unless the certificate of
incorporation or these bylaws otherwise provide. Officers, such as the Chairman
of the Board, possessing authority over or responsibility for any function of
the Board must be directors.
6.5 Compensation. The compensation of all officers and agents of the
Corporation shall be fixed from time to time by the Board or a committee
thereof.
6.6 Term of Office; Removal; Filling of Vacancies. Unless otherwise
specified by the Board at the time of election or in an employment contract
approved by the Board, each elected officer's term shall end at the first
meeting of directors after the next annual meeting of stockholders. Each elected
officer of the Corporation shall hold office until his successor is chosen and
qualified in his stead or until his earlier death, resignation or removal from
office. Each appointive officer or agent shall hold office at the pleasure of
the Board without the necessity of periodic reappointment. Any officer or agent
elected or appointed by the Board may be removed at any time by the Board
whenever in its judgment the best interests of the Corporation will be served
thereby, but such removal shall be without prejudice to the contract rights, if
any, of the person so removed. If the office of any officer becomes vacant for
any reason, the vacancy may be filled by the Board.
6.7 Additional Powers and Duties. In addition to the foregoing especially
enumerated powers and duties, the several elected and appointed officers of the
Corporation shall perform such other duties and exercise such further powers as
may be provided by law, the certificate of
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incorporation or these bylaws or as the Board may from time to time determine or
as may be assigned to them by any competent committee or superior officer.
VII. STOCK AND TRANSFER OF STOCK
7.1 Certificates Representing Shares. Certificates in such form as may be
determined by the Board and as shall conform to the requirements of the
statutes, the certificate of incorporation and these bylaws shall be delivered
representing all shares to which stockholders are entitled. Such certificates
shall be consecutively numbered and shall be entered in the books of the
Corporation as they are issued. Each certificate shall state on the face thereof
that the Corporation is organized under the laws of the State of, the holder's
name, the number of such shares, the par value of such shares or a statement
that such shares are without par value and such other matters as may be required
by law. Each certificate shall be signed by (i) the Chairman of the Board, the
President or a Vice President and (ii) the Secretary or an Assistant Secretary
and may be sealed with the seal of the Corporation or a facsimile thereof. If
any certificate is countersigned by a transfer agent or registered by a
registrar, either of which is other than the Corporation or an employee of the
Corporation, the signature of any such officer may be a facsimile. In case any
officer who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to hold such office before such certificate is
issued, it may be issued by the Corporation with the same effect as if he held
such office on the date of issue.
7.2 Multiple Classes of Stock. If the Corporation shall be authorized to
issue more than one class of capital stock or more than one series of any class,
a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualification, limitations or restrictions of such preferences
and/or rights shall, unless the Board shall by resolution provide that such
class or series of stock shall be uncertificated, be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock; provided that, to the extent
allowed by law, in lieu of such statement, the face or back of such certificate
may state that the Corporation will furnish a copy of such statement without
charge to each requesting stockholder.
7.3 Issuance. Subject to the provisions of the law, the certificate of
incorporation or these bylaws, shares may be issued for such consideration and
to such persons as the Board may determine from time to time. Shares may not be
issued until the full amount of the consideration has been paid, unless upon the
face or back of each certificate issued to represent any partly paid shares of
capital stock there shall have been set forth the total amount of the
consideration to be paid therefor and the amount paid thereon up to and
including the time said certificate is issued.
7.4 Payment for Shares. The consideration for the issuance of shares shall
consist of money paid, labor done (including services actually performed for the
Corporation) or property (tangible or intangible) actually received. Neither
promissory notes nor the promise of future services shall constitute payment for
shares. In the absence of fraud in the transaction, the judgment of the Board as
to the value of consideration received shall be conclusive. When consideration,
fixed as provided by law, has been paid, the shares shall be deemed to have been
issued and shall be considered fully paid and nonassessable.
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7.5 Lost, Stolen or Destroyed Certificates. The Board, the Chief Executive
Officer, the Chief Operating Officer, the President, or such other officer or
officers of the Corporation as the Board may from time to time designate, in its
or his discretion may direct a new certificate or certificates representing
shares to be issued in place of any certificate or certificates theretofore
issued by the Corporation alleged to have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming the certificate
or certificates to be lost, stolen or destroyed. When authorizing such issue of
a new certificate or certificates, the Board, the Chief Executive Officer, the
Chief Operating Officer, the President, or any such other officer, in its or his
discretion and as a condition precedent to the issuance thereof, may require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it or he shall
require and/or give the Corporation a bond in such form, in such sum, and with
such surety or sureties as it or he may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate or
certificates alleged to have been lost, stolen or destroyed.
7.6 Transfer of Stock. Shares of stock shall be transferable only on the
books of the Corporation by the holder thereof in person or by his duly
authorized attorney. Upon surrender to the Corporation or the transfer agent of
the Corporation of a certificate or certificates representing shares, duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, with all required stock transfer tax stamps affixed
thereto and canceled or accompanied by sufficient funds to pay such taxes, it
shall be the duty of the Corporation or the transfer agent of the Corporation to
issue a new certificate or certificates to the person entitled thereto, cancel
the old certificate or certificates and record the transaction upon its books.
7.7 Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, vote and be held liable for calls and
assessments and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any person other than such
registered owner, whether or not it shall have express or other notice thereof,
except as otherwise provided by law.
VIII. INDEMNIFICATION
8.1 General. The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was a director or officer of the Corporation,
or is or was serving at the request of the Corporation as a director or officer
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys, fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in
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<PAGE> 12
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the Corporation, and, with respect to any criminal
action or proceeding, have reasonable cause to believe that his conduct was
unlawful.
8.2 Actions by or in the Right of the Corporation. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director or officer of another corporation,
partnership, joint venture or trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
8.3 Indemnification Against Expenses. To the extent that a director or
officer of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in sections 8.1 and 8.2 or
in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys, fees) actually and reasonably incurred by
him in connection therewith.
8.4 Board Determinations. Any indemnification under sections 8.1 and 8.2
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director
or officer is proper in the circumstances because he has met the applicable
standard of conduct set forth in sections 8.1 and 8.2. Such determination shall
be made (i) by a majority vote of the directors who are not parties to such
action, suit or proceeding, even though less than a quorum, or (ii) if there are
no such directors, or if such directors so direct, by independent legal counsel
in a written opinion, or (iii) by the stockholders.
8.5 Advancement of Expenses. Expenses incurred by an officer or director
in defending a civil or criminal action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized by law or in this
section VIII. Such expenses incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the Board deems appropriate.
8.6 Non-Exclusive. The indemnification and advancement of expenses
provided by, or granted pursuant to, this section VIII shall not be deemed
exclusive of any other rights to which any director, officer, employee or agent
of the Corporation seeking indemnification or advancement of expenses may be
entitled under any other bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity
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<PAGE> 13
while holding such office, and shall, unless otherwise provided when authorized
or ratified, continue as to a person who has ceased to be a director, officer,
employee or agent of the Corporation and shall inure to the benefit of the
heirs, executors and administrators of such a person.
8.7 Insurance. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of applicable law, the Certificate of
Incorporation or this section VIII.
8.8 Certain Definitions. For purposes of this section VIII, references to
"other enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director or officer of the Corporation which
imposes duties on, or involves services by, such director or officer with
respect to any employee benefit plan, its participants, or beneficiaries; and a
person who acted in good faith and in a manner he reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the Corporation" as referred to in this section VIII.
8.9 Change in Governing Law. In the event of any amendment or addition to
Section 145 of the General Corporation Law of the State of Delaware or the
addition of any other section to such law with regard to indemnification, the
Corporation shall indemnify to the fullest extent authorized or permitted by
such then existing General Corporation Law of the State of Delaware, as amended,
any person who was or in a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including an action by or in the
right of the corporation), by reason of the fact that he is or was a director or
officer of the Corporation or is or was serving at the request of the
Corporation as a director or officer of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding.
IX. INTERESTED DIRECTORS, OFFICERS AND STOCKHOLDERS
9.1 Validity. Any contract or other transaction between the Corporation
and any of its directors, officers or stockholders (or any corporation or firm
in which any of them are directors of officers or have a financial interest)
shall be valid for all purposes notwithstanding the presence of such director,
officer or stockholder at the meeting authorizing such contract or transaction,
or his participation or vote in such meeting or authorization.
9.2 Disclosure, Approval. The foregoing shall, however, apply only if:
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<PAGE> 14
(i) the material facts of the relationship or the interest of each
such director, officer or stockholder is known or disclosed to the Board
and it nevertheless in good faith authorizes or ratifies the contract or
transaction by a majority of the directors present, each such interested
director to be counted in determining whether a quorum is present but not
in calculating the majority necessary to carry the vote; or
(ii) the material facts of the relationship or the interest of each
such director, officer or stockholder is known or disclosed to the
stockholders entitled to vote thereon and they nevertheless authorize or
ratify the contract or transaction in good faith by a majority of the
shares present, each such interested person to be counted for quorum and
voting purposes; or
(iii) the contract or transaction is fair as to the Corporation as
of the time it is authorized, approved or ratified, by the Board,
committee, or the stockholders.
9.3 Non-Exclusive. This provision shall not be construed to invalidate any
contract or transaction which would be valid in the absence of this provision.
X. MISCELLANEOUS
10.1 Place of Meetings. All stockholders, directors and committee meetings
shall be held at such place or places, within or without the State of Delaware,
as shall be designated from time to time by the Board or such committee and
stated in the notices thereof. If no such place is so designated, said meetings
shall be held at the principal business office of the Corporation.
10.2 Means of Giving Notice. Whenever under law, the certificate of
incorporation or these bylaws, notice is required to be given to any director or
stockholder, such notice may be given in writing and delivered personally,
through the United States mail, by a nationally recognized express delivery
service or by means of telegram, telex or facsimile transmission, addressed to
such director or stockholder at his address or telex or facsimile transmission
number, as the case may be, appearing on the records of the Corporation, with
postage and fees thereon prepaid. Such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail or with an
express delivery service or when transmitted, as the case may be. Notice of any
meeting of the Board may be given to a director by telephone and shall be deemed
to be given when actually received by the director.
10.3 Waiver of Notice. Whenever any notice is required to be given under
law, the certificate of incorporation or these bylaws, a written waiver of such
notice, signed before or after the date of such meeting by the person or persons
entitled to said notice, shall be deemed equivalent to such required notice. All
such waivers shall be filed with the corporate records. Attendance at a meeting
shall constitute a waiver of notice of such meeting, except where a person
attends for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
-13-
<PAGE> 15
10.4 Dividends. Dividends on the outstanding shares of capital stock of
the Corporation may be declared by the Board at any annual, regular or special
meeting. Such dividends may be paid in cash, in property or in shares of capital
stock of the Corporation, or in any combination thereof.
The Board may fix in advance a record date for the purpose of determining
stockholders entitled to receive payment of any dividend, the record date to be
not less than ten nor more than 60 days prior to the payment date of such
dividend, or the Board may close the stock transfer books for such purpose for a
period of not less than ten nor more than sixty days prior to the payment date
of such dividend. In the absence of any action by the Board, the date upon which
the Board adopts the resolution declaring the dividend shall be the record date.
10.5 Reserves. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as the
Board from time to time, in its absolute discretion, think proper as a reserve
or reserves to meet contingencies, for equalizing dividends, for repairing or
maintaining any property of the Corporation, or for such other purpose as the
Board shall determine to be in the best interest of the Corporation; and the
Board may modify or abolish any such reserve in the manner in which it was
created.
10.6 Contracts and Negotiable Instruments. Except as otherwise provided by
law or these bylaws, any contract or other instrument relative to the business
of the Corporation may be executed and delivered in the name of the Corporation
and on its behalf by the Chairman of the Board or the President; and the Board
may authorize any other officer or agent of the Corporation to enter into any
contract or execute and deliver any contract in the name and on behalf of the
Corporation, and such authority may be general or confined to specific instances
as the Board may by resolution determine. All bills, notes, checks or other
instruments for the payment of money shall be signed or countersigned by such
officer, officers, agent or agents and in such manner as are permitted by these
bylaws and/or as, from time to time, may be prescribed by resolution (whether
general or special) of the Board. Unless authorized so to do by these bylaws or
by the Board, no officer, agent or employee shall have any power or authority to
bind the Corporation by any contract or engagement, or to pledge its credit, or
to render it liable pecuniarily for any purpose or to any amount.
10.7 Fiscal Year. The fiscal year of the Corporation shall end on December
31 of each year, unless the Board shall determine otherwise.
10.8 Seal. The seal of the Corporation shall be in such form as shall from
time to time be adopted by the Board. The seal may be used by causing it or a
facsimile thereof to be impressed, affixed or otherwise reproduced.
10.9 Books and Records. The Corporation shall keep correct and complete
books and records of account and shall keep minutes of the proceedings of its
stockholders, Board and committees and shall keep at its registered office or
principal place of business, or at the office of its transfer agent or
registrar, a record of its stockholders, giving the names and addresses of all
stockholders and the number and class of the shares held by each.
10.10 Resignation. Any director, committee member, officer or agent may
resign by giving written notice to the Chairman of the Board, the Chief
Executive Officer, the Chief Operation Officer,
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<PAGE> 16
the President or the Secretary. The resignation shall take effect at the time
specified therein, or immediately if no time is specified. Unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
10.11 Surety Bonds. Such officers and agents of the Corporation (if any)
as the Chief Executive Officer, the Chief Operating Officer, the President or
the Board may direct, from time to time, shall be bonded for the faithful
performance of their duties and for the restoration to the Corporation, in case
of their death, resignation, retirement, disqualification or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in their possession or under their control belonging to the Corporation, in
such amounts and by such surety companies as the President or the Board may
determine. The premiums on such bonds shall be paid by the Corporation, and the
bonds so furnished shall be in the custody of the Secretary.
10.12 Proxies in Respect of Securities of Other Corporations. The Chairman
of the Board, the Chief Executive Officer, the Chief Operation Officer, the
President or the Secretary may from time to time appoint an attorney or
attorneys or an agent or agents for the Corporation to exercise, in the name and
on behalf of the Corporation, the powers and rights which the Corporation may
have as the holder of stock or other securities in any other corporation to vote
or consent in respect of such stock or other securities, and the Chief Executive
Officer, the Chief Operation Officer, the President or the Secretary may
instruct the person or persons so appointed as to the manner of exercising such
powers and rights; and the Chairman of the Board, the Chief Executive Officer,
the Chief Operation Officer, the President or the Secretary may execute or cause
to be executed, in the name and on behalf of the Corporation and under its
corporate seal or otherwise, all such written proxies or other instruments as he
may deem necessary or proper in order that the Corporation may exercise such
powers and rights.
10.13 Amendments. These bylaws may be altered, amended, repealed or
replaced by the stockholders or by the Board, at any annual stockholders meeting
or annual or regular meeting of the Board, or at any special meeting of the
stockholders or of the Board if notice of such alteration, amendment, repeal or
replacement is contained in the notice of such special meeting. The power of the
stockholders to so adopt, amend, repeal or replace these bylaws shall not be
divested or limited by the fact that the power to so affect these bylaws is
conferred upon the Board by the certificate of incorporation.
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<PAGE> 1
EXHIBIT 4.1
================================================================================
RICHMONT MARKETING SPECIALISTS INC.
10 1/8% Senior Subordinated Notes due 2007
-----------------------------
INDENTURE
Dated as of December 19, 1997
-----------------------------
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
Trustee
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.....................................................1
SECTION 1.02. Other Definitions..............................................25
SECTION 1.03. Incorporation by Reference of Trust Indenture Act..............26
SECTION 1.04. Rules of Construction..........................................26
ARTICLE II
The Securities
SECTION 2.01. Form and Dating................................................27
SECTION 2.02. Execution and Authentication...................................28
SECTION 2.03. Registrar and Paying Agent.....................................29
SECTION 2.04. Paying Agent To Hold Money in Trust............................30
SECTION 2.05. Securityholder Lists...........................................31
SECTION 2.06. Transfer and Exchange..........................................31
SECTION 2.07. Replacement Securities.........................................32
SECTION 2.08. Outstanding Securities.........................................33
SECTION 2.09. Temporary Securities...........................................34
SECTION 2.10. Cancelation....................................................34
SECTION 2.11. Defaulted Interest.............................................34
SECTION 2.12. CUSIP Numbers..................................................35
SECTION 2.13. Book-Entry Provisions for Global Securities....................35
SECTION 2.14. Special Transfer Provisions....................................36
ARTICLE III
Redemption
SECTION 3.01. Notices to Trustee.............................................39
SECTION 3.02. Selection of Securities To Be Redeemed.........................39
SECTION 3.03. Notice of Redemption...........................................40
SECTION 3.04. Effect of Notice of Redemption.................................41
SECTION 3.05. Deposit of Redemption Price....................................41
SECTION 3.06. Securities Redeemed in Part....................................41
SECTION 3.07. Optional Redemption............................................41
<PAGE> 3
Page
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ARTICLE IV
Covenants
SECTION 4.01. Payment of Securities..........................................42
SECTION 4.02. SEC Reports....................................................42
SECTION 4.03. Limitation on Indebtedness.....................................43
SECTION 4.04. Limitation on Restricted Payments..............................47
SECTION 4.05. Limitation on Restrictions on Distributions from Restricted
Subsidiaries...................................................51
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock.............52
SECTION 4.07. Limitation on Transactions with Affiliates.....................56
SECTION 4.08. Change of Control..............................................57
SECTION 4.09. Compliance Certificate.........................................59
SECTION 4.10. Further Instruments and Acts...................................59
SECTION 4.11. Future Guarantor Subsidiaries..................................59
SECTION 4.12. Limitation on Lines of Business................................60
SECTION 4.13. Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries........................................60
SECTION 4.14. Limitation on Sale/Leaseback Transactions......................60
ARTICLE V
Successor Company
SECTION 5.01. When Company May Merge or Transfer Assets......................60
ARTICLE VI
Defaults and Remedies
SECTION 6.01. Events of Default..............................................62
SECTION 6.02. Acceleration...................................................64
SECTION 6.03. Other Remedies.................................................65
SECTION 6.04. Waiver of Past Defaults........................................65
SECTION 6.05. Control by Majority............................................65
SECTION 6.06. Limitation on Suits............................................66
SECTION 6.07. Rights of Holders To Receive Payment...........................66
SECTION 6.08. Collection Suit by Trustee.....................................66
SECTION 6.09. Trustee May File Proofs of Claim...............................66
SECTION 6.10. Priorities.....................................................67
SECTION 6.11. Undertaking for Costs..........................................67
<PAGE> 4
Page
----
SECTION 6.12. Waiver of Stay or Extension Laws...............................68
ARTICLE VII
Trustee
SECTION 7.01. Duties of Trustee..............................................68
SECTION 7.02. Rights of Trustee..............................................69
SECTION 7.03. Individual Rights of Trustee...................................70
SECTION 7.04. Trustee's Disclaimer...........................................70
SECTION 7.05. Notice of Defaults.............................................71
SECTION 7.06. Reports by Trustee to Holders..................................71
SECTION 7.07. Compensation and Indemnity.....................................71
SECTION 7.08. Replacement of Trustee.........................................72
SECTION 7.09. Successor Trustee by Merger....................................73
SECTION 7.10. Eligibility; Disqualification..................................74
SECTION 7.11. Preferential Collection of Claims Against Company..............74
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities; Defeasance...............74
SECTION 8.02. Conditions to Defeasance.......................................75
SECTION 8.03. Application of Trust Money.....................................77
SECTION 8.04. Repayment to Company...........................................77
SECTION 8.05. Indemnity for Government Obligations...........................77
SECTION 8.06. Reinstatement..................................................77
ARTICLE IX
Amendments
SECTION 9.01. Without Consent of Holders.....................................78
SECTION 9.02. With Consent of Holders........................................79
SECTION 9.03. Compliance with Trust Indenture Act............................80
SECTION 9.04. Revocation and Effect of Consents and Waivers..................80
SECTION 9.05. Notation on or Exchange of Securities..........................81
SECTION 9.06. Trustee To Sign Amendments.....................................81
SECTION 9.07. Payment for Consent............................................81
<PAGE> 5
Page
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ARTICLE X
Subordination
SECTION 10.01. Agreement To Subordinate......................................82
SECTION 10.02. Liquidation, Dissolution, Bankruptcy..........................82
SECTION 10.03. Default on Senior Indebtedness................................83
SECTION 10.04. Acceleration of Payment of Securities.........................84
SECTION 10.05. When Distribution Must Be Paid Over...........................84
SECTION 10.06. Subrogation...................................................84
SECTION 10.07. Relative Rights...............................................85
SECTION 10.08. Subordination May Not Be Impaired by Company..................85
SECTION 10.09. Rights of Trustee and Paying Agent............................85
SECTION 10.10. Distribution or Notice to Representative......................86
SECTION 10.11. Article X Not To Prevent Events of Default or Limit
Right To Accelerate...........................................86
SECTION 10.12. Trust Moneys Not Subordinated.................................86
SECTION 10.13. Trustee Entitled To Rely......................................86
SECTION 10.14. Trustee To Effectuate Subordination...........................87
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness......87
SECTION 10.16. Reliance by Holders of Senior Indebtedness on Subordination
Provisions....................................................87
SECTION 10.17. Trustee's Compensation Not Prejudiced.........................88
ARTICLE XI
Subsidiary Guarantees
SECTION 11.01. Subsidiary Guarantees.........................................88
SECTION 11.02. Limitation on Liability.......................................91
SECTION 11.03. Successors and Assigns........................................91
SECTION 11.04. No Waiver.....................................................91
SECTION 11.05. Modification..................................................92
SECTION 11.06. Execution of Supplemental Indenture for Future
Guarantor Subsidiaries........................................92
ARTICLE XII
Subordination of the Subsidiary Guarantees
SECTION 12.01. Agreement To Subordinate......................................92
SECTION 12.02. Liquidation, Dissolution, Bankruptcy..........................93
SECTION 12.03. Default on Senior Indebtedness of a Guarantor Subsidiary......93
<PAGE> 6
Page
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SECTION 12.04. Demand for Payment............................................94
SECTION 12.05. When Distribution Must Be Paid Over...........................95
SECTION 12.06. Subrogation...................................................95
SECTION 12.07. Relative Rights...............................................95
SECTION 12.08. Subordination May Not Be Impaired by a Guarantor Subsidiary...96
SECTION 12.09. Rights of Trustee and Paying Agent............................96
SECTION 12.10. Distribution or Notice to Representative......................96
SECTION 12.11. Article XII Not To Prevent Events of Default or Limit
Right To Accelerate...........................................97
SECTION 12.12. Trustee Entitled To Rely......................................97
SECTION 12.13. Trustee To Effectuate Subordination...........................97
SECTION 12.14. Trustee Not Fiduciary for Holders of Senior Indebtedness
of a Guarantor Subsidiary.....................................98
SECTION 12.15. Reliance by Holders of Senior Indebtedness of a Guarantor
Subsidiary on Subordination Provisions........................98
SECTION 12.16. Defeasance....................................................98
ARTICLE XIII
Miscellaneous
SECTION 13.01. Trust Indenture Act Controls..................................98
SECTION 13.02. Notices.......................................................99
SECTION 13.03. Communication by Holders with Other Holders...................99
SECTION 13.04. Certificate and Opinion as to Conditions Precedent............99
SECTION 13.05. Statements Required in Certificate or Opinion................100
SECTION 13.06. When Securities Disregarded..................................100
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar.................101
SECTION 13.08. Legal Holidays...............................................101
SECTION 13.09. Governing Law................................................101
SECTION 13.10. No Recourse Against Others...................................101
SECTION 13.11. Successors...................................................101
SECTION 13.12. Multiple Originals...........................................101
SECTION 13.13. Table of Contents; Headings..................................101
Exhibit A - Form of Initial Security
Exhibit B - Form of Exchange Security
Exhibit C - Form of Private Exchange Security
Exhibit D - Form of Transferee Letter of Representation
Exhibit E - Form of Supplemental Indenture
<PAGE> 7
Page
----
Exhibit F - Form of Certificate To Be Delivered in
Connection with Transfers Pursuant to
Rule 144A
Exhibit G - Form of Certificate to be Delivered in
Connection with Transfers Pursuant to
Regulation S
<PAGE> 8
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- -------
310(a)(1) ..................................... 7.10
(a)(2) ..................................... 7.10
(a)(3) ..................................... N.A.
(a)(4) ..................................... N.A.
(b) ..................................... 7.08; 7.10
(c) ..................................... N.A.
311(a) ..................................... 7.11
(b) ..................................... 7.11
(c) ..................................... N.A.
312(a) ..................................... 2.05
(b) ..................................... 13.03
(c) ..................................... 13.03
313(a) ..................................... 7.06
(b)(1) ..................................... N.A.
(b)(2) ..................................... 7.06
(c) ..................................... 13.02
(d) ..................................... 7.06
314(a) ..................................... 4.02; 4.09
(b) ..................................... N.A.
(c)(1) ..................................... 13.04
(c)(2) ..................................... 13.04
(c)(3) ..................................... 13.04
(d) ..................................... N.A.
(e) ..................................... 13.05
(f) ..................................... N.A.
315(a) ..................................... 7.01
(b) ..................................... 7.05; 13.02
(c) ..................................... 7.01
(d) ..................................... 7.01
(e) ..................................... 6.11
316(a)(last
sentence) ..................................... 13.06
(a)(1)(A) ..................................... 6.05
(a)(1)(B) ..................................... 6.04
(a)(2) ..................................... N.A.
(b) ..................................... 6.07
317(a)(1) ..................................... 6.08
(a)(2) ..................................... 6.09
(b) ..................................... 2.04
318(a) ..................................... 13.01
N.A. means Not Applicable.
- ---------------------
Note: This Cross-Reference Table shall not, for any purpose, be deemed
to be part of the Indenture.
<PAGE> 9
INDENTURE dated as of December 19, 1997, among RICHMONT
MARKETING SPECIALISTS INC., a Delaware corporation (the
"Company"), each Subsidiary of the Company listed on the
signature pages hereto (the "Guarantor Subsidiaries") and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking
association (the "Trustee").
Each party agrees as follows for the benefit of the other parties
and for the equal and ratable benefit of the Holders of (i) the Company's 10
1/8% Senior Subordinated Notes due 2007 issued on the Closing Date (the
"Original Securities"), (ii) any Additional Securities (as defined herein) that
may be issued on any other Issue Date (all such Securities in clauses (i) and
(ii) being referred to collectively as the "Initial Securities"), (iii) if and
when issued as provided in the Exchange and Registration Rights Agreement of
even date herewith, the Company's 10 1/8% Senior Subordinated Series A Notes due
2007 (the "Exchange Securities") and (iv) if and when issued as provided in the
Exchange and Registration Rights Agreement, the Private Exchange Securities
(together with the Exchange Securities and the Initial Securities, the
"Securities"). Except as otherwise provided herein, the Securities will be
limited to $150,000,000 in aggregate principal amount outstanding, of which
$100,000,000 in aggregate principal amount will be initially issued on the
Closing Date. Subject to the conditions set forth herein, the Company may issue
up to an additional $50,000,000 aggregate principal amount of Additional
Securities.
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Additional Assets" means (a) any tangible property or assets (other
than Indebtedness and Capital Stock) to be used by the Company or a Restricted
Subsidiary in a Related Business; (b) the Capital Stock of a Person that becomes
a Restricted Subsidiary as a result of the acquisition of such Capital Stock by
the Company or another Restricted Subsidiary; (c) Capital Stock constituting an
additional interest in any Person that at such time is a Restricted Subsidiary;
provided, however, that, in the case of clauses (b) and (c), such Restricted
Subsidiary is
<PAGE> 10
2
primarily engaged in a Related Business; or (d) Investments described in clause
(h) of the definition of the term "Permitted Investment."
"Additional Securities" shall mean up to $50,000,000 in aggregate
principal amount of the Company's 10 1/8% Senior Subordinated Notes due 2007
initially issued subsequent to the Closing Date pursuant to Article II and in
compliance with Section 4.03.
"Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of Sections 4.06 and 4.07 only, "Affiliate" shall also mean any
beneficial owner of shares representing 5% or more of the total voting power of
the Voting Stock (on a fully diluted basis) of the Company or of rights or
warrants to purchase such Voting Stock (whether or not currently exercisable)
and any Person who would be an Affiliate of any such beneficial owner pursuant
to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other
disposition of shares of Capital Stock of a Restricted Subsidiary (other than
directors' qualifying shares), property or other assets (each referred to for
the purposes of this definition as a "disposition") by the Company or any of its
Restricted Subsidiaries (including any disposition by means of a merger,
consolidation or similar transaction) other than (a) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Wholly Owned Subsidiary; (b) a disposition of inventory in the
ordinary course of business consistent with past practices of the Company and
its Subsidiaries; (c) for purposes of Section 4.06 only, a disposition subject
to or permitted by Section 4.04; (d) a settlement, surrender, waiver or release
of contract rights or contract, tort or other claims; (e) a grant of licenses of
intellectual property including patent, trademark and know-how; (f) a sale of
obsolete or outdated equipment no longer used or useful in the business of the
Company or its Restricted Subsidiaries in an aggregate amount not to exceed $1.0
million in any fiscal year; (g) leases and subleases (and licenses and
sublicenses) of assets that are not treated as capitalized leases on the books
and records of
<PAGE> 11
3
the Company or its Restricted Subsidiaries; and (h) the foreclosure upon a Lien
that was not prohibited by the Indenture and that secures any obligation of the
Company or its Subsidiaries.
"Attributable Debt" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Securities, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect
to any Indebtedness or Preferred Stock, the quotient obtained by dividing (x)
the sum of the products of the numbers of years from the date of determination
to the dates of each successive scheduled principal payment of such Indebtedness
or redemption or similar payment with respect to such Preferred Stock multiplied
by the amount of such payment by (y) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in
respect of the Credit Agreement, the other Senior Credit Documents and any
Refinancing Indebtedness with respect thereto, as amended from time to time.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Borrowing Base" means, as of the date of determination, an amount
equal to the sum, without duplication, of (a) 80% of the net book value of the
Company's accounts receivable at such date and (b) 50% of the net book value of
the Company's inventories at such date. Net book value shall be determined in
accordance with GAAP and shall be that reflected on the most recent available
balance sheet (it being understood that the accounts receivable and inventories
of an acquired business may be included if such acquisition has been completed
on or prior to the date of determination).
"Business Day" means a day other than a Saturday, Sunday or other
day on which banking institutions in New York State or Texas are authorized or
required by law to close.
<PAGE> 12
4
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required
to be classified and accounted for as a capitalized lease for financial
reporting purposes in accordance with GAAP. The amount of Indebtedness
represented by a Capitalized Lease Obligation shall be the capitalized amount of
such obligation determined in accordance with GAAP, and the Stated Maturity
thereof shall be the date of the last payment of rent or any other amount due
under such lease.
"Change of Control" means the occurrence of any of the following
events:
(a) prior to the first public offering of Voting Stock of the
Company, the Permitted Holders either (x) cease to be the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of at least 35% of the aggregate of the total
voting power of the Voting Stock of the Company, whether as a result of
issuance of securities of the Company, any merger, consolidation,
liquidation or dissolution of the Company, any direct or indirect transfer
of securities by any Permitted Holder or otherwise, or (y) do not have the
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors (for purposes
of this clause (a), the Permitted Holders shall be deemed to own
beneficially any Voting Stock of an entity (the "specified entity") held
by any other entity (the "parent entity") so long as the Permitted Holders
beneficially own (as so defined), directly or indirectly, in the aggregate
a majority of the voting power of the Voting Stock of the parent entity);
(b) (i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than one or more Permitted Holders, is
or becomes the beneficial owner (as defined in clause (a) above, except
that such person shall be deemed to have "beneficial ownership" of all
shares that any such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the
<PAGE> 13
5
total voting power of the Voting Stock of the Company and (ii) the
Permitted Holders "beneficially own" (as defined in clause (a) above),
directly or indirectly, in the aggregate a lesser percentage of the total
voting power of the Voting Stock of the Company than such other person and
do not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the Board of Directors (for
the purposes of this clause (b), such other Person shall be deemed to own
beneficially any Voting Stock of a specified corporation held by a parent
corporation, if such other person "beneficially owns" (as defined in this
clause (b)), directly or indirectly, more than 35% of the voting power of
the Voting Stock of such parent corporation and the Permitted Holders
"beneficially own" (as defined in clause (a) above), directly or
indirectly, in the aggregate a lesser percentage of the voting power of
the Voting Stock of such parent corporation and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the board of directors of such parent corporation);
or
(c) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors (together
with any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was approved by
a vote of a majority of the directors of the Company then still in office
who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors then in
office.
"Closing Date" means December 19, 1997.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the indenture securities.
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (a) the aggregate amount of EBITDA for the period of the most
recent four consecutive
<PAGE> 14
6
fiscal quarters ending prior to the date of such determination for which
financial statements are available to (b) Consolidated Interest Expense for such
four fiscal quarters; provided, however, that (i) if the Company or any
Restricted Subsidiary has Incurred any Indebtedness since the beginning of such
period that remains outstanding on such date of determination or if the
transaction giving rise to the need to calculate the Consolidated Coverage Ratio
is an Incurrence of Indebtedness, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day of such
period and the discharge of any other Indebtedness repaid, repurchased, defeased
or otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period, (ii) if since the
beginning of such period the Company or any Restricted Subsidiary shall have
made any Asset Disposition, the EBITDA for such period shall be reduced by an
amount equal to the EBITDA (if positive) directly attributable to the assets
that are the subject of such Asset Disposition for such period or increased by
an amount equal to the EBITDA (if negative) directly attributable thereto for
such period and Consolidated Interest Expense for such period shall be reduced
by an amount equal to the Consolidated Interest Expense directly attributable to
any Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the Company and
its continuing Restricted Subsidiaries in connection with such Asset Disposition
for such period (or, if the Capital Stock of any Restricted Subsidiary is sold,
the Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (iii) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an Investment in
any Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary)
or an acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a business, EBITDA
and Consolidated Interest Expense for such period shall be calculated, after
giving pro forma effect thereto (as described below), including the Incurrence
of any Indebtedness in connection therewith as if such Investment or acquisition
occurred on the first day of such period and (iv) if since the beginning of such
period any Person (that subsequently became a Restricted Subsidiary or was
merged with or into the Company
<PAGE> 15
7
or any Restricted Subsidiary since the beginning of such period) shall have made
any Asset Disposition or any Investment or acquisition of assets that would have
required an adjustment pursuant to clause (ii) or (iii) above if made by the
Company or a Restricted Subsidiary during such period, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto as if such Asset Disposition, Investment or acquisition of assets
occurred on the first day of such period. For purposes of this definition,
whenever pro forma effect is to be given to an acquisition of assets, the amount
of income or earnings relating thereto and the amount of Consolidated Interest
Expense associated with any Indebtedness Incurred in connection therewith, the
pro forma calculations shall be determined in good faith by a responsible
financial or accounting Officer of the Company. If any Indebtedness bears a
floating rate of interest and is being given pro forma effect, the interest
expense on such Indebtedness shall be calculated as if the rate in effect on the
date of determination had been the applicable rate for the entire period (taking
into account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term as at the date of determination in
excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total
consolidated interest expense of the Company and its Restricted Subsidiaries for
such period, plus, to the extent Incurred by the Company and its Restricted
Subsidiaries in such period but not included in such interest expense, (a)
interest expense attributable to Capitalized Lease Obligations and Attributable
Debt, (b) amortization of debt discount and debt issuance cost, (c) capitalized
interest, (d) noncash interest expense, (e) commissions, discounts and other
fees and charges with respect to letters of credit and bankers' acceptance
financing, (f) interest accruing on any Indebtedness of any other Person to the
extent such Indebtedness is Guaranteed by the Company or any Restricted
Subsidiary; provided that payments of such amounts by the Company or any
Restricted Subsidiary is being made to, or is sought by, the holders of such
Indebtedness pursuant to such Guarantee, (g) net costs associated with Hedging
Obligations (including amortization of fees), (h) interest paid or accrued in
respect of any agreement classified as a long-term obligation on the
consolidated balance sheet of the Company, (i) Preferred Stock dividends in
respect of all Preferred Stock of Subsidiaries of the Company and Disqualified
Stock of the Company held by Persons other than the Company or a Wholly Owned
Subsidiary, and (j) the cash contributions to any employee stock ownership plan
or similar trust to the extent
<PAGE> 16
8
such contributions are used by such plan or trust to pay interest or fees to any
Person (other than the Company) in connection with Indebtedness Incurred by such
plan or trust.
"Consolidated Net Income" means, for any period, the consolidated
net income (loss) of the Company and its Subsidiaries for such period; provided,
however, that there shall not be included in such Consolidated Net Income:
(a) any net income (loss) of any Person if such Person is not a
Restricted Subsidiary, except that (i) subject to the limitations
contained in clause (d) below, the Company's equity in the net income of
any such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Person during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or
other distribution to a Restricted Subsidiary, to the limitations
contained in clause (c) below) and (ii) the Company's equity in a net loss
of any such Person (other than an Unrestricted Subsidiary) for such period
but only to the extent of the aggregate Investment of the Company and any
Restricted Subsidiary in such Person shall be included in determining such
Consolidated Net Income;
(b) any net income (loss) of any person acquired by the Company or a
Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(c) any net income (loss) of any Restricted Subsidiary if such
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (i)
subject to the limitations contained in clause (d) below, the Company's
equity in the net income of any such Restricted Subsidiary for such period
shall be included in such Consolidated Net Income up to the aggregate
amount of cash that could have been distributed by such Restricted
Subsidiary during such period to the Company or another Restricted
Subsidiary as a dividend (subject, in the case of a dividend that could
have been made to another Restricted Subsidiary, to the limitation
contained in this clause) and (ii) the Company's equity in a net loss of
any such Restricted Subsidiary for such period shall be included in
determining such Consolidated Net Income;
<PAGE> 17
9
(d) any gain or loss realized upon the sale or other disposition of
any asset of the Company or its consolidated Subsidiaries (including
pursuant to any Sale/Leaseback Transaction) that is not sold or otherwise
disposed of in the ordinary course of business and any gain or loss
realized upon the sale or other disposition of any Capital Stock of any
Person;
(e) any extraordinary gain or loss; and
(f) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of Section 4.04 only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from Unrestricted Subsidiaries to
the Company or a Restricted Subsidiary to the extent such dividends, repayments
or transfers increase the amount of Restricted Payments permitted under such
section pursuant to clause (a)(iv)(C)(4) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and the Restricted Subsidiaries, determined on a
Consolidated basis, as of the end of the most recent fiscal quarter of the
Company ending at least 45 days prior to the taking of any action for the
purpose of which the determination is being made, as (a) the par or stated value
of all outstanding Capital Stock of the Company plus (b) paid-in capital or
capital surplus relating to such Capital Stock plus (c) any retained earnings or
earned surplus less (ii) any accumulated deficit and (B) any amounts
attributable to Disqualified Stock.
"Consolidation" means the consolidation of the accounts of each of
the Restricted Subsidiaries with those of the Company in accordance with GAAP
consistently applied; provided, however, that "Consolidation" shall not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of the Company or any Restricted Subsidiary in a Unrestricted Subsidiary shall
be accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"Credit Agreement" means the credit agreement dated as of October
14, 1997, as amended and restated as of the Closing Date and as further amended,
restated, waived or otherwise modified from time to time, among the Company and
The Chase Manhattan Bank, as agent (except to the extent that any such
amendment, waiver or other modification
<PAGE> 18
10
thereto would be prohibited by the terms of this Indenture, unless otherwise
agreed to by the Holders of at least a majority in aggregate principal amount of
Securities at the time outstanding).
"Currency Agreement" means, with respect to any Person, any foreign
exchange contract, currency swap agreement or other similar agreement or
arrangement as to which such Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"Deferred Obligations" means any Indebtedness issued to the
employees of, stockholders of, or the holders of an equivalent equity interest
in, any entity acquired by the Company or any Restricted Subsidiary in
connection with such acquisition.
"Definitive Securities" means Securities that are in the form of
Exhibit A, Exhibit B or Exhibit C attached hereto that do not include the Global
Securities Legend therein.
"Depositary" means, with respect to the Securities issuable or
issued in whole or in part in global form, the person specified in Section 2.03
as the Depositary with respect to the Securities, until a successor shall have
been appointed and become such pursuant to the applicable provisions of this
Indenture, and thereafter, "Depositary" shall mean or include such successor.
"Designated Senior Indebtedness" means (a) the Bank Indebtedness and
(b) any other Senior Indebtedness that, at the date of determination, has an
aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof, are committed to lend up to, at least $10.0
million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of this Indenture. "Designated Senior Indebtedness"
of a Guarantor Subsidiary shall have a correlative meaning.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable) or upon the
happening of any event (a) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or
<PAGE> 19
11
otherwise, (b) is convertible or exchangeable for Indebtedness or Disqualified
Stock or (c) is redeemable at the option of the holder thereof, in whole or in
part, in each case on or prior to the first anniversary of the Stated Maturity
of the Securities.
"EBITDA" for any period means the Consolidated Net Income for such
period (adjusted to exclude any noncash items attributable to purchase
accounting for any acquisition transactions consummated subsequent to the
Closing Date), plus the following to the extent deducted in calculating such
Consolidated Net Income: (a) income tax expense, (b) Consolidated Interest
Expense, (c) depreciation expense, (d) amortization expense and (e) all other
noncash charges (excluding all such charges, for purposes of this clause (e), to
the extent they represent future cash disbursements reasonably expected to
materialize prior to the Stated Maturity of the Securities), in each case for
such period. Notwithstanding the foregoing, the provision for taxes based on the
income or profits of, and the depreciation and amortization of, a Subsidiary of
the Company shall be added to Consolidated Net Income to compute EBITDA only to
the extent (and in the same proportion) that the net income (loss) of such
Subsidiary was included in calculating Consolidated Net Income and only if a
corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Subsidiary without prior approval (that has
not been obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to such Subsidiary or its stockholders.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange and Registration Rights Agreement" means (a) with respect
to the Original Securities, the Exchange and Registration Rights Agreement dated
December 19, 1997, among the Company, the Guarantor Subsidiaries signatory
thereto and the Initial Purchaser, as such agreement may be amended, modified,
or supplemented from time to time in accordance with the terms thereof and (b)
with respect to any Additional Securities, any registration rights agreement
entered into among the Company, any Guarantor Subsidiaries and the relevant
initial purchasers or underwriters, as the same may be amended, modified or
supplemented from time to time in accordance with the terms thereof.
<PAGE> 20
12
"Exchange Offer Registration Statement" means a registration
statement or shelf registration statement filed pursuant to any Exchange and
Registration Rights Agreement.
"Exchange Securities" means the 10 1/8% Senior Subordinated Series A
Notes due 2007 to be issued pursuant to this Indenture in connection with the
offer to exchange Securities for the Initial Securities that may be made by the
Company pursuant to an Exchange and Registration Rights Agreement.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, including those set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, in statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
this Indenture shall be computed in conformity with GAAP.
"Gateway Lease" means a lease agreement between Marketing Specialist
Sales Company and ABP Partners Ltd., a Texas partnership, relating to 2324
Gateway Drive, Irving, Texas.
"Global Security" means a Security that is in the form of Exhibit A,
Exhibit B or Exhibit C hereto that includes the Global Securities Legend
therein.
"Global Securities Legend" means the legend set forth in the first
paragraph of Exhibit A hereto.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and any obligation, direct or indirect, contingent or
otherwise, of such Person (a) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or other obligation of such other
Person (whether arising by virtue of partnership arrangements, or by agreement
to keep well, to purchase assets, goods, securities or services, to take-or-pay,
or to maintain financial statement conditions or otherwise) or (b) entered into
for purposes of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
<PAGE> 21
13
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Guarantor Subsidiary" means any Person that has issued a Subsidiary
Guarantee.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Person at the time it becomes a Subsidiary; provided further, however, that
increases in the balance sheet carrying value of items described in clauses (d)
and (j) of the definition of the term "Indebtedness" resulting solely from
noncash accruals shall not constitute the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(a) the principal of and premium (if any) in respect of indebtedness
of such Person for borrowed money;
(b) the principal of and premium (if any) in respect of obligations
of such Person evidenced by bonds, debentures, notes or other similar
instruments;
(c) all obligations of such Person in respect of letters of credit
or other similar instruments (including reimbursement obligations with
respect thereto);
(d) all obligations of such Person to pay the deferred and unpaid
purchase price of property (including stock or the assets of an ongoing
business) or services (except Trade Payables), which purchase price is due
more than six months after the date of placing such property in service or
taking delivery and title thereto or the completion of such services, to
the extent not included in clause (j) below;
<PAGE> 22
14
(e) all Capitalized Lease Obligations and all Attributable Debt of
such Person;
(f) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of the Company, any Preferred Stock (but
excluding, in each case, any accrued dividends);
(g) all Indebtedness of other Persons secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such
Person; provided, however, that the amount of Indebtedness of such Person
shall be the lesser of (i) the fair market value of such asset at such
date of determination and (ii) the amount of such Indebtedness of such
other Persons;
(h) all Indebtedness of other Persons to the extent Guaranteed by
such Person;
(i) to the extent not otherwise included in this definition, Hedging
Obligations of such Person; and
(j) with respect to the Company and its Restricted Subsidiaries,
covenants not to compete, deferred payment agreements and deferred
compensation liabilities, in each case to the extent reflected on the
consolidated balance sheet of the Company as long-term obligations.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date, except with respect to
the items set forth in clauses (d) and (j) of this definition, in which case the
amount of such Indebtedness at any date shall be the amount recorded in
accordance with GAAP on such Person's balance sheet for the most recent fiscal
period for which financial statements are available.
"Indenture" means this Indenture as amended or supplemented from
time to time.
"Initial Purchaser" means Chase Securities Inc.
"Interest Rate Agreement" means, with respect to any Person, any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement,
<PAGE> 23
15
interest rate collar agreement, interest rate hedge agreement or other similar
agreement or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance,
loan (other than advances to customers in the ordinary course of business that
are recorded as accounts receivable on the balance sheet of such Person) or
other extension of credit (including by way of Guarantee or similar arrangement)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary" and Section 4.04, (a) "Investment" shall include the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of any Subsidiary of the Company at the
time that such Subsidiary is designated an Unrestricted Subsidiary; provided,
however, that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Company shall be deemed to continue to have a permanent
"Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to
(x) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and (b) any property transferred
to or from an Unrestricted Subsidiary shall be valued at its fair market value
at the time of such transfer, in each case as determined in good faith by the
Board of Directors.
"Issue Date" means the date on which any Initial Securities are
originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Management Stockholders" means Ronald D. Pedersen, Gary R. Guffey
and Bruce A. Butler.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to
<PAGE> 24
16
a note or installment receivable or otherwise, but only as and when received,
but excluding any other consideration received in the form of assumption by the
acquiring person of Indebtedness or other obligations relating to the properties
or assets that are the subject of such Asset Disposition or received in any
other non-cash form) therefrom, in each case net of (a) all legal, title and
recording expenses, commissions and other fees and expenses incurred, and all
Federal, state, provincial, foreign and local taxes required to be paid or
accrued as a liability under GAAP, as a consequence of such Asset Disposition,
(b) all payments made on any Indebtedness which is secured by any assets subject
to such Asset Disposition, in accordance with the terms of any Lien upon such
assets, or which must by its terms, or in order to obtain a necessary consent to
such Asset Disposition or by applicable law, be repaid out of the proceeds from
such Asset Disposition, (c) all distributions and other payments required to be
made to minority interest holders in Subsidiaries or joint ventures as a result
of such Asset Disposition and (d) appropriate amounts to be provided by the
party or parties making such Asset Disposition as a reserve, in accordance with
GAAP, against any liabilities associated with the assets disposed of in such
Asset Disposition and retained by the Company or any Restricted Subsidiary after
such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the Chief Financial Officer, the President, any Vice President, the
Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers
or by one Officer and by an Assistant Treasurer or an Assistant Secretary.
"Opinion of Counsel" means a written opinion from legal counsel who
is acceptable to the Trustee. The counsel may be an employee of or counsel to
the Company or the Trustee.
"Permitted Holders" means Richmont Enterprises LLC, a Delaware
limited liability company controlled by
<PAGE> 25
17
certain Affiliates of Richmont Capital Partners I, L.P., a Delaware limited
partnership, JR Investment Corp., a Delaware corporation (including John P.
Rochon and the other current stockholders of JR Investment Corp.), MS
Acquisition Limited, a Delaware limited partnership, the Management Stockholders
and any of their respective Affiliates (including any Person owned or controlled
by any such Person, any member of any such Person's family, any trust for the
benefit of any such Person (or a member of his family) or any Person owned or
controlled by any of the foregoing) and any Person acting in the capacity of an
underwriter in connection with a public or private offering of the Company's
Capital Stock.
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in (a) a Restricted Subsidiary or a Person that will, upon
the making of such Investment, become a Restricted Subsidiary; provided,
however, that the primary business of such Restricted Subsidiary is a Related
Business; (b) another Person if as a result of such Investment such other Person
is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
(c) Temporary Cash Investments; (d) receivables owing to the Company or any
Restricted Subsidiary, if created or acquired in the ordinary course of business
consistent with past practices of the Company or such Restricted Subsidiary and
payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (e) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(f) loans or advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted Subsidiary and
not exceeding $500,000 in the aggregate outstanding at any time; (g) stock,
obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments; (h) a Person engaged in a Related
Business; provided, however, that no Permitted Investments may be made pursuant
to this clause (h) to the extent the amount thereof would, when taken together
with all other Permitted Investments made pursuant to this clause (h), exceed
$5.0 million in the aggregate outstanding at any time (other than Permitted
Investments in Persons which become
<PAGE> 26
18
Restricted Subsidiaries); (i) any Person to the extent such Investment
represents the noncash portion of the consideration from an Asset Disposition
permitted pursuant to and in compliance with Section 4.06; and (j) Securities
repurchased pursuant to an offer described in Section 4.08 or Section 4.06 or
otherwise purchased by the Company.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Principal" of a Security means the principal of the Security plus
the premium, if any, payable on the Security that is due or overdue or is to
become due at the relevant time.
"Private Exchange" shall have the meaning set forth in the Exchange
and Registration Rights Agreement.
"Private Exchange Securities" means Securities of the Company to be
delivered in a Private Exchange pursuant to the Exchange and Registration Rights
Agreement.
"Public Equity Offering" means an underwritten public offering of
common stock of the Company pursuant to an effective registration statement
under the Securities Act.
"Public Market" means any time after (a) a Public Equity Offering
has been consummated and (b) at least 15% of the total issued and outstanding
common stock of the Company has been distributed by means of an effective
registration statement under the Securities Act or sales under Rule 144 under
the Securities Act.
"Purchase Agreement" means (a) with respect to the Original
Securities, the Purchase Agreement dated December 19, 1997, for the purchase of
$100,000,000 principal amount of Original Securities among the Company, the
Guarantor Subsidiaries signatory thereto and the Initial Purchaser as such
agreement may be amended, modified, or
<PAGE> 27
19
supplemented from time to time in accordance with the terms thereof and (b) with
respect to any Additional Securities, any purchase or underwriting agreement
entered into by the Company, any Guarantor Subsidiaries and the initial
purchasers or underwriters with respect thereto, as such agreement may be
amended, modified or supplemented from time to time in accordance with the terms
thereof.
"Purchase Money Indebtedness" means Indebtedness (a) consisting of
the deferred purchase price of tangible property, conditional sale obligations,
obligations under any title retention agreement and other purchase money
obligations, in each case where the maturity of such Indebtedness does not
exceed the anticipated useful life of the asset being financed, and (b) incurred
to finance the acquisition by the Company of such asset, including additions and
improvements; provided, however, that any Lien arising in connection with any
such Indebtedness shall be limited to the specified asset being financed or, in
the case of real property or fixtures, including additions and improvements, the
real property on which such asset is attached; and provided further, that such
Indebtedness is incurred within 180 days after the acquisition by the Company of
such asset.
"Refinancing Indebtedness" means Indebtedness that is Incurred to
refund, refinance, replace, renew, repay or extend (including pursuant to any
defeasance or discharge mechanism) (collectively, "refinances" and "refinanced"
shall have a correlative meaning) any Indebtedness existing on the Closing Date
or Incurred in compliance with this Indenture (including Indebtedness of the
Company that refinances Indebtedness of any Restricted Subsidiary (to the extent
permitted in this Indenture) and Indebtedness of any Restricted Subsidiary that
refinances Indebtedness of another Restricted Subsidiary), including
Indebtedness that refinances Refinancing Indebtedness; provided, however, that
(a) the Refinancing Indebtedness has a Stated Maturity no earlier than the
Stated Maturity of the Indebtedness being refinanced, (b) the Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being refinanced, (c) such Refinancing Indebtedness is Incurred in an aggregate
principal amount (or, if issued with original issue discount, an aggregate issue
price) that is equal to or less than the aggregate principal amount (or, if
issued with original issue discount, the aggregate accreted value) then
outstanding of the Indebtedness being refinanced and (d) if the Indebtedness
being refinanced is subordinated in right of payment to the Securities, such
Refinancing Indebtedness is
<PAGE> 28
20
subordinated in right of payment to the Securities to the extent of the
Indebtedness being refinanced; provided further, however, that Refinancing
Indebtedness shall not include (i) Indebtedness of a Restricted Subsidiary that
refinances Indebtedness of the Company or (ii) Indebtedness of the Company or a
Restricted Subsidiary that refinances Indebtedness of an Unrestricted
Subsidiary.
"Registered Exchange Offer" shall mean an offer made by the Company
pursuant to an Exchange and Registration Rights Agreement and under an effective
registration statement under the Securities Act to exchange Exchange Securities
for outstanding Initial Securities substantially identical in all material
respects to such Initial Securities (except for the differences provided for
therein).
"Related Business" means any business related, ancillary or
complementary to the businesses of the Company and the Restricted Subsidiaries
on the Closing Date.
"Representative" means the trustee, agent or representative (if any)
for an issue of Senior Indebtedness.
"Restricted Securities Legend" means the legend set forth in the
second and third paragraphs of Exhibit A hereto.
"Restricted Subsidiary" means any Subsidiary of the Company other
than an Unrestricted Subsidiary.
"S&P" means Standard and Poor's Ratings Group, a division of
McGraw-Hill, Inc., and its successors.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired by the Company or a Restricted
Subsidiary whereby the Company or such Restricted Subsidiary transfers such
property to a Person and the Company or such Restricted Subsidiary leases it
from such Person, other than leases between the Company and a Wholly Owned
Subsidiary or between Wholly Owned Subsidiaries.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured
by a Lien. "Secured Indebtedness" of a Guarantor Subsidiary has a correlative
meaning.
<PAGE> 29
21
"Securities" means, collectively, the Initial Securities and, when
and if issued as provided in the Exchange and Registration Rights Agreement, the
Exchange Securities and when and if issued as provided in the Exchange and
Registration Rights Agreement, the Private Exchange Securities from and after
the issuance of any Additional Securities (but not for purposes of determining
whether such issuance is permitted hereunder), "Securities" shall include such
Additional Securities for purposes of this Indenture and all Exchange Securities
and Private Exchange Securities from time to time issued with respect to any
Initial Securities that constitute such Additional Securities. Such Securities,
including any such Additional Securities, shall vote together as one series of
Securities under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" or "Custodian" means the custodian with
respect to any Global Security (as appointed by the Depositary), or any
successor entity thereto covered in Section 2.03.
"Senior Credit Documents" means the collective reference to the
Credit Agreement, the notes issued pursuant thereto (if any) and the Guaranty
thereof, and the Borrower's Security Agreement and the Subsidiary Security
Agreement, each as defined in the Credit Agreement.
"Senior Indebtedness" of the Company means the principal of, premium
(if any) and interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization of the Company, regardless of
whether or not a claim for post-filing interest is allowed in such proceedings)
on, and fees and other amounts owing in respect of, Bank Indebtedness of the
Company and all other Indebtedness of the Company, whether outstanding on the
Closing Date or thereafter Incurred, unless in the instrument creating or
evidencing the same or pursuant to which the same is outstanding it is provided
that such obligations are not superior in right of payment to the Securities;
provided, however, that Senior Indebtedness shall not include (a) any obligation
of the Company to any Subsidiary, (b) any liability for federal, state, local or
other taxes owed or owing by the Company, (c) any accounts payable or other
liability of the Company to trade creditors arising in the ordinary course of
business (including Guarantees thereof or instruments evidencing such
liabilities), (d) any Indebtedness or obligation of the Company that by its
terms is subordinate or junior in any respect to
<PAGE> 30
22
any other Indebtedness, Guarantee or obligation of the Company, including any
Senior Subordinated Indebtedness and any Subordinated Obligations, (e) any
obligations of the Company with respect to any Capital Stock, (f) any
Indebtedness Incurred in violation of the Indenture, (g) any Indebtedness issued
to the shareholders of Atlas in connection with the Atlas Acquisition or (h) any
Deferred Obligation of the Company. If any Senior Indebtedness is disallowed,
avoided or subordinated pursuant to the provisions of Section 548 of Title 11 of
the United States Code or any applicable state fraudulent conveyance law, such
Senior Indebtedness nevertheless shall constitute Senior Indebtedness. "Senior
Indebtedness" of any Guarantor Subsidiary has a correlative meaning.
"Senior Subordinated Indebtedness" means the Securities and any
other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank pari passu with the Securities and is not subordinated
by its terms to any Indebtedness or other obligation of the Company which is not
Senior Indebtedness. "Senior Subordinated Indebtedness" of a Guarantor
Subsidiary has a correlative meaning.
"Significant Subsidiary" means any Restricted Subsidiary that would
be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02
under Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the Closing Date or thereafter Incurred) that is
subordinate or junior in right of payment to the Securities pursuant to a
written agreement. "Subordinated Obligation" of a Guarantor Subsidiary has a
correlative meaning.
"Subsidiary" of any Person means any corporation, association,
partnership, limited liability company or other business entity of which more
than 50% of the total voting power of shares of Capital Stock or other interests
(including partnership interests) entitled (without regard
<PAGE> 31
23
to the occurrence of any contingency) to vote in the election of directors,
managers, trustees, or members of any other governing body thereof is at the
time owned or controlled, directly or indirectly, by (a) such Person or (b) one
or more Subsidiaries of such Person.
"Subsidiary Guarantee" means any Guarantee of the Securities which
may from time to time be executed and delivered pursuant to the terms of this
Indenture. Each such Subsidiary Guarantee shall have subordination provisions
equivalent to those contained in this Indenture and shall be substantially in
the form of Exhibit E hereto.
"Temporary Cash Investments" means any of the following: (a) any
investment in direct obligations of the United States of America or any agency
thereof or obligations Guaranteed by the United States of America or any agency
thereof, (b) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company that is organized under the laws of
the United States of America, any state thereof or any foreign country
recognized by the United States of America having capital, surplus and undivided
profits aggregating in excess of $250.0 million (or the foreign currency
equivalent thereof) and whose long-term debt is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act), (c)
repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clause (a) above entered into with a bank
meeting the qualifications described in clause (b) above, (d) investments in
commercial paper, maturing not more than 90 days after the date of acquisition,
issued by a corporation (other than an Affiliate of the Company) organized and
in existence under the laws of the United States of America or any foreign
country recognized by the United States of America with a rating at the time as
of which any investment therein is made of "P-1" (or higher) according to
Moody's or "A-1" (or higher) according to S&P, and (e) investments in securities
with maturities of six months or less from the date of acquisition issued or
fully guaranteed by any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority thereof, and rated
at least "A" by S&P or "A" by Moody's.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date of this Indenture.
<PAGE> 32
24
"Trade Payables" means, with respect to any Person, any accounts
payable or any indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person arising in the ordinary course of business
in connection with the acquisition of goods or services.
"Transfer Restricted Securities" means Securities that bear or are
required to bear the Restricted Securities Legend.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or
any other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
"Unrestricted Subsidiary" means (a) any Subsidiary of the Company
that at the time of determination shall be designated an Unrestricted Subsidiary
by the Board of Directors in the manner provided below and (b) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
of the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any other Restricted Subsidiary of the
Company that is not a Subsidiary of the Subsidiary to be so designated;
provided, however, that either (i) the Subsidiary to be so designated has total
Consolidated assets of $1,000 or less or (ii) if such Subsidiary has
Consolidated assets greater than $1,000, then such designation would be
permitted under Section 4.04. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that
immediately after giving effect to such designation (x) the Company could Incur
$1.00 of additional Indebtedness under Section 4.03(a) and (y) no Default shall
have occurred and be continuing. Any such designation of a Subsidiary as a
Restricted Subsidiary or Unrestricted Subsidiary by the Board of Directors shall
be evidenced to the Trustee by promptly filing with the Trustee a copy of the
resolution of the Board of Directors giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
<PAGE> 33
25
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock of
such Person then outstanding that normally entitle the holders of such interests
to participate in the management or to elect those participating in the
management of such Person.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the
Company all the Capital Stock or other ownership interests of which (other than
directors' qualifying shares) is owned by the Company or another Wholly Owned
Subsidiary.
SECTION 1.02. Other Definitions.
Defined in
Term Section
---- -------
"Affiliate Transaction"....................................... 4.07
"Agent Members"............................................... 2.13
"Bankruptcy Law".............................................. 6.01
"Blockage Notice"............................................. 10.03
"covenant defeasance option".................................. 8.01(b)
"Custodian"................................................... 6.01
"Event of Default"............................................ 6.01
"IAIs"........................................................ 2.01(b)
"IAI Global Security"......................................... 2.01(b)
"Initial Securities".......................................... Preamble
"legal defeasance option"..................................... 8.01(b)
"Legal Holiday"............................................... 13.08
"Obligations"................................................. 11.01
"Offer"....................................................... 4.06(b)
"Offer Amount"................................................ 4.06(c)
"Offer Period"................................................ 4.06(c)
"Paying Agent"................................................ 2.03
"Payment Blockage Period"..................................... 10.03
"Physical Securities"......................................... 2.01(c)
"Purchase Date"............................................... 4.06(c)
"QIB Global Security"......................................... 2.01(b)
"QIBs"........................................................ 2.01(b)
"Registrar"................................................... 2.03
"Regulation S"................................................ 2.01(b)
"Regulation S Global Security"................................ 2.01(b)
"Restricted Payment".......................................... 4.04(a)
<PAGE> 34
26
"Successor Company"........................................... 5.01
"U.S. Global Securities"...................................... 2.01(b)
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
This Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities and the Subsidiary
Guarantees.
"indenture Securityholder" means a Holder or Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, the
Subsidiary Guarantees and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context otherwise
requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) "including" means including without limitation;
(e) words in the singular include the plural and words in the plural
include the singular;
(f) unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
<PAGE> 35
27
(g) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof that
would be shown on a balance sheet of the issuer dated such date prepared
in accordance with GAAP; but the accretion of principal on such security
shall not be deemed to be the Incurrence of Indebtedness; and
(h) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater.
ARTICLE II
The Securities
SECTION 2.01. Form and Dating. (a) The Original Securities and the
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A, which is hereby incorporated in and expressly made a part of this
Indenture, and as otherwise provided in this Article II. Any Exchange Securities
and the Trustee's certificate of authentication shall be substantially in the
form of Exhibit B, which is hereby incorporated in and expressly made a part of
this Indenture, and as otherwise provided in this Article II. Any Private
Exchange Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit C, which is hereby incorporated in and
expressly made a part of this Indenture, and as otherwise provided in this
Article II. Any Additional Securities shall be issued in the form of either (i)
Exhibit A, if such Security is a Transfer Restricted Security, or (ii) Exhibit
B, if such Security is not a Transfer Restricted Security. The Securities may
have notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company or any Guarantor Subsidiary is subject, if any,
or usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Company). Each Security shall be dated the date of its
authentication. The terms of the Securities set forth in Exhibit A, Exhibit B
and Exhibit C are part of the terms of this Indenture. The Securities shall be
issuable only in registered form without coupons and only in denominations of
$1,000 and integral multiples thereof.
(b) The Original Securities issued on the date hereof are being
offered and sold by the Company pursuant to the Purchase Agreement. The Original
Securities shall be
<PAGE> 36
28
offered and sold by the Initial Purchaser only (i) to "qualified institutional
buyers" (as defined in Rule 144A under the Securities Act ("Rule 144A"))
("QIBs") and (ii) in reliance on Regulation S under the Securities Act
("Regulation S"). The Additional Securities may be issued and sold as provided
in the related Purchase Agreement. After such initial offers and sales, Initial
Securities that are Transfer Restricted Securities may be transferred to, among
others, QIBS, in reliance on Regulation S and to institutional "Accredited
Investors" (within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) ("IAIs") in accordance with certain transfer restrictions.
Initial Securities that are Transfer Restricted Securities shall be issued
initially in the form of several permanent Global Securities (with separate
CUSIP numbers) substantially in the form set forth in Exhibit A deposited with
the Trustee, as Securities Custodian, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. One or more such Global
Securities shall represent the Initial Securities sold to QIBs (collectively,
the "QIB Global Security"). One or more such Global Securities shall represent
the Initial Securities sold pursuant to Regulation S (collectively, the
"Regulation S Global Security"). One or more such Global Securities shall
represent any Initial Securities issued or subsequently transferred to IAIs
(collectively, the "IAI Global Security" and, together with the QIB Global
Security, the "U.S. Global Securities"). The aggregate principal amount of each
Global Security may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as Securities Custodian. Transfers of
Initial Securities between QIBs and IAIs and to or by purchasers pursuant to
Regulation S shall be represented by appropriate increases and decreases to the
respective amounts of the appropriate Global Securities, as more fully provided
in Section 2.14.
(c) Except as otherwise provided in the related Purchase Agreement,
Initial Securities offered and sold other than as described in the preceding two
paragraphs, if any, shall be issued in the form of permanent certificated
Securities in registered form in substantially the form set forth in Exhibit A
attached hereto without the Global Securities Legend (the "Physical
Securities").
SECTION 2.02. Execution and Authentication. One or more Officers of
the Company shall sign the Securities by manual or facsimile signature.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee
<PAGE> 37
29
authenticates the Security, the Security shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate and make available for delivery upon
a written order of the Company signed by two of its Officers (a) Initial
Securities for original issue on the date hereof in an aggregate principal
amount of $100,000,000, (b) subject to Section 4.03, Additional Securities in an
aggregate principal amount of up to $50,000,000 and (c) (i) Exchange Securities
for issue only in a Registered Exchange Offer, and (ii) Private Exchange
Securities for issue only in a Private Exchange, in the case of each of clauses
(i) and (ii) pursuant to a Registration Rights Agreement and for Initial
Securities for a like principal amount of Initial Securities exchanged pursuant
thereto. Such order shall specify the amount of the Securities to be
authenticated, the date on which the original issue of Securities is to be
authenticated and whether the Securities are to be Initial Securities,
Additional Securities, Exchange Securities or Private Exchange Securities. The
aggregate principal amount of Securities outstanding at any time may not exceed
$150,000,000 except as provided in Section 2.07.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Securities. Any such appointment
shall be evidenced by an instrument signed by a Trust Officer of the Trustee, a
copy of which shall be furnished to the Company. Unless limited by the terms of
such appointment, an authenticating agent may authenticate Securities whenever
the Trustee may do so. After any such appointment, each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as any Registrar, Paying
Agent or agent for service of notices and demands.
SECTION 2.03. Registrar and Paying Agent. The Company shall maintain
an office or agency where Securities may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Company may have one or more co-registrars and one or more
<PAGE> 38
30
additional paying agents. The term "Paying Agent" includes any additional paying
agent.
The Company shall enter into an appropriate agency agreement with
any Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall notify
the Trustee of the name and address of any such agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.07. Either
the Company or any domestically organized Wholly Owned Subsidiary may act as
Paying Agent, Registrar, co-registrar or transfer agent.
The Company initially appoints the Trustee as Registrar and Paying
Agent in connection with the Securities.
The Company initially appoints The Depository Trust Company to act
as Depositary with respect to the Global Securities, and the Trustee shall
initially be the Securities Custodian with respect to the Global Securities.
The Company may remove any Registrar or Paying Agent upon written
notice to such Registrar or Paying Agent and to the Trustee, provided, however,
that no such removal shall become effective until (a) acceptance of an
appointment by a successor as evidenced by an appropriate agreement entered into
by the Company and such successor Registrar or Paying Agent, as the case may be,
and delivered to the Trustee or (b) notification to the Trustee that the Trustee
shall serve as Registrar or Paying Agent until the appointment of a successor in
accordance with clause (a) above. The Registrar or Paying Agent may resign at
any time upon not less than three Business Days' prior written notice to the
Company; provided, however, that the Trustee may resign as Paying Agent or
Registrar only if the Trustee also resigns as Trustee in accordance with Section
7.08.
SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due
date of the principal and interest on any Security, the Company shall deposit
with the Paying Agent (or if the Company or a Wholly Owned Subsidiary is acting
as Paying Agent, segregate and hold in trust for the benefit of the Persons
entitled thereto) a sum sufficient to pay such principal and interest when so
becoming due. The Company shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall
<PAGE> 39
31
hold in trust for the benefit of Securityholders or the Trustee all money held
by the Paying Agent for the payment of principal of or interest on the
Securities and shall notify the Trustee in writing of any default by the Company
in making any such payment within one Business Day thereof. If the Company or a
Wholly Owned Subsidiary acts as Paying Agent, it shall segregate the money held
by it as Paying Agent and hold it as a separate trust fund. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee and
to account for any funds disbursed by the Paying Agent. Upon complying with this
Section, the Paying Agent shall have no further liability for the money
delivered to the Trustee.
Any money deposited with any Paying Agent, or then held by the
Company or a Wholly Owned Subsidiary in trust for the payment of principal or
interest on any Security and remaining unclaimed for two years after such
principal and interest has become due and payable shall be paid to the Company
at its request, or, if then held by the Company or a Wholly Owned Subsidiary,
shall be discharged from such trust; and the Securityholders shall thereafter,
as general unsecured creditors, look only to the Company for payment thereof,
and all liability of the Paying Agent with respect to such money, and all
liability of the Company or such Wholly Owned Subsidiary as trustee thereof,
shall thereupon cease.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish, or cause the Registrar to furnish, to the
Trustee, in writing at least five Business Days before each interest payment
date and at such other times as the Trustee may request in writing, a list in
such form and as of such date as the Trustee may reasonably require of the names
and addresses of Securityholders.
SECTION 2.06. Transfer and Exchange. The Securities shall be issued
in registered form and shall be transferable only upon the surrender of a
Security for registration of transfer. When a Security is presented to the
Registrar or a co-registrar with a request to register a transfer, the Registrar
shall register the transfer as requested if the requirements of Section 8-401 of
the Uniform Commercial Code are met. When Securities are presented to the
Registrar or a co-registrar with a request to exchange them for an equal
principal amount of Securities of other denominations, the Registrar shall make
the
<PAGE> 40
32
exchange as requested if the same requirements are met. To permit registration
of transfers and exchanges, the Company shall execute and the Trustee shall
authenticate Securities at the Registrar's or co-registrar's request. The
Company may require payment of a sum sufficient to pay all taxes, assessments or
other governmental charges in connection with any transfer or exchange pursuant
to this Section. The Company shall not be required to make, and the Registrar
need not register, transfers or exchanges of Securities selected for redemption
(except, in the case of Securities to be redeemed in part, the portion thereof
not to be redeemed) or transfers or exchanges of any Securities for a period of
15 days before a selection of Securities to be redeemed.
Prior to the due presentation for registration of transfer of any
Security, the Company, the Guarantor Subsidiaries, the Trustee, the Paying
Agent, the Registrar or any co-registrar may deem and treat the Person in whose
name a Security is registered as the absolute owner of such Security for the
purpose of receiving payment of principal of and accrued and unpaid interest and
Liquidated Damages, if any, on such Security and for all other purposes
whatsoever, whether or not such Security is overdue, and none of the Company,
the Trustee, the Paying Agent, the Registrar or any co-registrar shall be
affected by notice to the contrary.
Any Holder of a Global Security shall, by acceptance of such Global
Security, agree that transfers of beneficial interests in such Global Security
may be effected only through a book-entry system maintained by (a) the Holder of
such Global Security (or its agent) or (b) any holder of such beneficial
interest, and that ownership of a beneficial interest in such Global Security
shall be required to be reflected in a book entry.
All Securities issued upon any transfer or exchange pursuant to this
Section 2.06 will evidence the same debt and will be entitled to the same
benefits under this Indenture as the Securities surrendered upon such transfer
or exchange.
SECTION 2.07. Replacement Securities. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met, such that the Holder (a)
satisfies the Company or the Trustee within a reasonable time after he has
notice of
<PAGE> 41
33
such loss, destruction or wrongful taking and the Registrar does not register a
transfer prior to receiving such notification, (b) makes such request to the
Company or the Trustee prior to the Security being acquired by a protected
purchaser as defined in Section 8-303 of the Uniform Commercial Code (a
"protected purchaser") and (c) satisfies any other reasonable requirements of
the Trustee and the Company including evidence of the destruction, loss or theft
of the Security. If required by the Trustee or the Company, such Holder shall
furnish an indemnity bond sufficient in the judgment of the Trustee to protect
the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar
from any loss that any of them may suffer if a Security is replaced. The Company
and the Trustee may charge the Holder for their expenses in replacing a Security
including the payment of a sum sufficient to cover any tax or other governmental
charge that may be required. In the event any such mutilated, lost, destroyed or
wrongfully taken Security has become or is about to become due and payable, the
Company in its discretion may pay such Security instead of issuing a new
Security in replacement thereof.
Every replacement Security is an additional obligation of the
Company.
The provisions of this Section 2.07 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, lost, destroyed or wrongfully taken
Securities.
SECTION 2.08. Outstanding Securities. Securities outstanding at any
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancelation and those described in this Section
as not outstanding. A Security does not cease to be outstanding because the
Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a protected purchaser.
If the Paying Agent segregates and holds in trust, in accordance
with this Indenture, on a redemption date or maturity date money sufficient to
pay all principal and interest payable on that date with respect to the
Securities (or portions thereof) to be redeemed or maturing, as the case may be,
and the Paying Agent is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture, then on
and after
<PAGE> 42
34
that date such Securities (or portions thereof) cease to be outstanding and
interest on them ceases to accrue.
SECTION 2.09. Temporary Securities. Until Definitive Securities and
Global Securities are ready for delivery, the Company may prepare and the
Trustee shall authenticate temporary Securities. Temporary Securities shall be
substantially in the form of Definitive Securities but may have variations that
the Company considers appropriate for temporary Securities. Without unreasonable
delay, the Company shall prepare and the Trustee shall authenticate Definitive
Securities and deliver them in exchange for temporary Securities upon surrender
of such temporary Securities at the office or agency of the Company, without
charge to the Holder.
SECTION 2.10. Cancelation. The Company at any time may deliver
Securities to the Trustee for cancelation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel all
Securities surrendered for registration of transfer, exchange, payment or
cancelation and deliver canceled Securities to the Company pursuant to written
direction by an Officer of the Company. The Company may not issue new Securities
to replace Securities it has redeemed, paid or delivered to the Trustee for
cancelation. The Trustee shall not authenticate Securities in place of canceled
Securities other than pursuant to the terms of this Indenture.
SECTION 2.11. Defaulted Interest. If the Company defaults in a
payment of interest on the Securities, the Company shall pay the defaulted
interest (plus interest on such defaulted interest to the extent lawful) in any
lawful manner. The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail or cause to be
mailed to each Securityholder a notice that states the special record date, the
payment date and the amount of defaulted interest to be paid.
The Company may make payment of any defaulted interest in any other
lawful manner not inconsistent with the requirements (if applicable) of any
securities exchange on which the Securities may be listed, and upon such notice
as may be required by such exchange, if, after notice given by the Company to
the Trustee of the proposed payment
<PAGE> 43
35
pursuant to this paragraph, such manner of payment shall be deemed practicable
by the Trustee.
SECTION 2.12. CUSIP Numbers. The Company in issuing the Securities
may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided, however, that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
SECTION 2.13. Book-Entry Provisions for Global Securities. (a) Each
Global Security initially shall (i) be registered in the name of the Depositary
for such Global Security or the nominee of such Depositary and (ii) be delivered
to the Trustee as the initial Securities Custodian for such Depositary.
Beneficial interests in Global Securities may be held indirectly through members
of or participants in ("Agent Members") the Depositary (including Cedel and
Euroclear in the case of the Regulation S Global Security).
Agent Members shall have no rights under this Indenture with respect
to any Global Security held on their behalf by the Depositary, or the Trustee as
Securities Custodian, or under such Global Security, and the Depositary may be
treated by the Company, the Trustee and any agent of the Company or the Trustee
as the absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or shall impair, as between the Depositary and its Agent Members, the operation
of customary practices governing the exercise of the rights of a Holder of any
Security.
(b) Transfers of a Global Security shall be limited to transfers of
such Global Security in whole, but not in part, to the Depositary, its
successors or their respective nominees. Interests of beneficial owners in a
Global Security may be transferred in accordance with the rules and procedures
of the Depositary (and Agent Member, if applicable) and the provisions of
Section 2.14. The Trustee shall register the transfer of Physical Securities to
all beneficial owners in exchange for their beneficial interests in a Global
Security if (i) the Depositary notifies the
<PAGE> 44
36
Company that it is unwilling or unable to continue as Depositary for such Global
Security or the Depositary ceases to be a clearing agency registered under the
Exchange Act, at a time when the Depositary is required to be so registered in
order to act as Depositary, and in each case a successor Depositary is not
appointed by the Company within 90 days of such notice, or (ii) the Company
executes and delivers to the Trustee and Registrar an Officers' Certificate
stating that such Global Security shall be so exchangeable or (iii) an Event of
Default has occurred and is continuing and the Registrar has received a request
from the Depositary to permit such transfers. Notwithstanding the previous
sentence, in no event shall Physical Securities be delivered to investors who
purchased Securities in reliance on Regulation S prior to the day that is 40
days after the Issue Date with respect to such Securities.
(c) The registered holder of a Global Security may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action that a Holder is
entitled to take under this Indenture or the Securities.
SECTION 2.14. Special Transfer Provisions. Unless and until a
Transfer Restricted Security is transferred or exchanged under an effective
registration statement under the Securities Act, the following provisions shall
apply:
(a) Transfers to Non-QIB IAIs. Unless otherwise specified in the
relevant Purchase Agreement, the minimum amount of Securities that may be
purchased by an IAI that is not a QIB is $250,000. The following
provisions shall apply with respect to the registration of any proposed
transfer of a Transfer Restricted Security to any IAI that is not a QIB
(other than pursuant to Regulation S):
(i) The Registrar shall register the transfer of any Transfer
Restricted Security by a Holder if (x) the requested transfer is (A)
at least two years after the later of (1) the Issue Date with
respect to such Transfer Restricted Security and (2) the date such
Transfer Restricted Security was acquired from an affiliate of the
Company and (B) at least three months after the last date such
Holder was an affiliate of the Company or (y) the proposed
transferee has delivered to the Registrar a letter substantially in
the form set forth in Exhibit D hereto.
<PAGE> 45
37
(ii) If the proposed transferee is an Agent Member and the
Transfer Restricted Security to be transferred consists of a
beneficial interest in the QIB Global Security or the Regulation S
Global Security, upon receipt by the Registrar of (x) the letter, if
any, required by paragraph (i) above and (y) instructions given in
accordance with the Depositary's and the Registrar's procedures
therefor, the Registrar shall reflect on its books and records the
date and an increase in the principal amount of the IAI Global
Security in an amount equal to the principal amount of the
beneficial interest in the QIB Global Security or the Regulation S
Global Security to be so transferred and the Registrar shall reflect
on its books and records the date and an appropriate decrease in the
principal amount of such QIB Global Security or Regulation S Global
Security.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Transfer
Restricted Security to a QIB (other than pursuant to Regulation S):
(i) The Registrar shall register the transfer of a Transfer
Restricted Security by a Holder if (x) the requested transfer is (A)
at least two years after the later of (1) the Issue Date with
respect to such Transfer Restricted Security and (2) the date such
Transfer Restricted Security was acquired from an affiliate of the
Company and (B) at least three months after the last date such
Holder was an affiliate of the Company or (y) such transfer is being
made by a proposed transferor who has provided the Registrar with a
letter substantially in the form set forth in Exhibit F hereto.
(ii) If the proposed transferee is an Agent Member and the
Transfer Restricted Security to be transferred consists of an
interest in the IAI Global Security or the Regulation S Global
Security, upon receipt by the Registrar of (x) the letter, if any,
required by paragraph (i) above and (y) instructions given in
accordance with the Depositary's and the Registrar's procedures
therefor, the Registrar shall reflect on its books and records the
date and an increase in the principal amount of the QIB Global
Security in an amount equal to the principal amount of the
beneficial interest in the IAI Global Security or
<PAGE> 46
38
the Regulation S Global Security to be so transferred, and the
Registrar shall reflect on its books and records the date and an
appropriate decrease in the principal amount of such IAI Global
Security or Regulation S Global Security.
(c) Transfers Pursuant to Regulation S. The following provisions
shall apply with respect to registration of any proposed transfer of a
Transfer Restricted Security pursuant to Regulation S:
(i) The Registrar shall register any proposed transfer of a
Transfer Restricted Security by a Holder if (x) the requested
transfer is at least two years after the Issue Date with respect to
such Transfer Restricted Security and at least three months after
the last date such Holder was an affiliate of the Company or (y)
upon receipt of a letter substantially in the form set forth in
Exhibit G hereto from the proposed transferor.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in a U.S. Global Security, upon receipt by the
Registrar of (x) the letter, if any, required by paragraph (i) above
and (y) instructions in accordance with the Depositary's and the
Registrar's procedures therefor, the Registrar shall reflect on its
books and records the date and an increase in the principal amount
of the Regulation S Global Security in an amount equal to the
principal amount of the beneficial interest in such U.S. Global
Security to be transferred, and the Registrar shall reflect on its
books and records the date and an appropriate decrease in the
principal amount of the applicable U.S. Global Security.
(d) Restricted Securities Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Restricted Securities Legend,
the Registrar shall deliver Securities that do not bear the Restricted
Securities Legend. Upon the transfer, exchange or replacement of
Securities bearing the Restricted Securities Legend, the Registrar shall
deliver only Securities that bear the Restricted Securities Legend unless
either (i) the circumstances contemplated by paragraph (a)(i)(x),
(b)(i)(x) or (c)(i)(x) of this Section exist, (ii) in the case of any
Initial Securities purchased in reliance upon
<PAGE> 47
39
Regulation S, (A) such transfer, exchange or replacement occurs at least
40 days after the Issue Date with respect to such Securities and (B) the
transferor has delivered a letter substantially in the form set forth in
Exhibit G hereto or (iii) there is delivered to the Registrar an Opinion
of Counsel reasonably satisfactory to the Company and the Trustee to the
effect that neither such legend nor the related restrictions on transfer
are required in order to maintain compliance with the provisions of the
Securities Act.
(e) General. By its acceptance of any Security bearing the
Restricted Securities Legend, each Holder of such a Security acknowledges
the restrictions on transfer of such Security set forth in this Indenture
and in the Restricted Securities Legend and agrees that it shall transfer
such Security only as provided in this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to this Section 2.14. The Company shall
have the right to inspect and make copies of all such letters, notices or other
written communications at any reasonable time upon the giving of reasonable
written notice to the Registrar.
ARTICLE III
Redemption
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
Securities pursuant to Section 3.07, it shall notify the Trustee in writing of
the redemption date, the principal amount of Securities to be redeemed and the
paragraph of the Securities pursuant to which the redemption will occur.
The Company shall give each notice to the Trustee provided for in
this Section at least 45 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Company to the effect that such
redemption will comply with the conditions herein. If fewer than all the
Securities are to be redeemed, the record date relating to such redemption shall
be selected by the Company and given to the Trustee, which record date shall be
not fewer than 15 days after the date of notice to the Trustee. Any such notice
may be canceled
<PAGE> 48
40
at any time prior to notice of such redemption being mailed to any Holder and
shall thereby be void and of no effect.
SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than
all of the Securities are to be redeemed at any time, the Trustee shall select
the Securities to be redeemed pro rata, by lot or by a method that complies with
applicable legal and securities exchange requirements, if any, and that the
Trustee considers fair and appropriate and in accordance with methods generally
used at the time of selection by fiduciaries in similar circumstances. The
Trustee shall make the selection from outstanding Securities not previously
called for redemption. The Trustee may select for redemption portions of the
principal of Securities that have denominations larger than $1,000. Securities
and portions of them the Trustee selects shall be in amounts of $1,000 or a
whole multiple of $1,000. Provisions of this Indenture that apply to Securities
called for redemption also apply to portions of Securities called for
redemption. The Trustee shall notify the Company promptly of the Securities or
portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not more
than 60 days before a date for redemption of Securities, the Company shall mail
a notice of redemption by first-class mail to each Holder of Securities to be
redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) the name and address of the Paying Agent;
(d) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(e) if fewer than all the outstanding Securities are to be redeemed,
the certificate numbers and principal amounts of the particular Securities
to be redeemed;
(f) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment
pursuant to the terms of this Indenture, interest on Securities (or a
portion
<PAGE> 49
41
thereof) called for redemption ceases to accrue on and after the
redemption date;
(g) the CUSIP number, if any, printed on the Securities being
redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest, if any, to the redemption
date; provided, however, that if the redemption date is after a regular record
date and on or prior to the interest payment date, the accrued interest shall be
payable to the Securityholder of the redeemed Securities registered on the
relevant record date. Failure to give notice or any defect in the notice to any
Holder shall not affect the validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to 10:00 a.m. on
the redemption date, the Company shall deposit with the Paying Agent (or, if the
Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust)
money sufficient to pay the redemption price of and accrued interest, if any, on
all Securities to be redeemed on that date other than Securities or portions of
Securities called for redemption that have been delivered by the Company to the
Trustee for cancelation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security surrendered.
SECTION 3.07. Optional Redemption. (a) Except as set forth in
Section 3.07(b), the Securities may not be redeemed prior to December 15, 2002.
Thereafter, the Securities will be subject to redemption at any time at the
<PAGE> 50
42
option of the Company, in whole or in part, at the following redemption prices
(expressed as percentages of principal amount), plus accrued and unpaid
interest, if any, to the applicable redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date) if redeemed during the 12-month period beginning
on or after December 15 of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Period Price
- ------ -----
<S> <C>
2002.............................................................. 105.063%
2003.............................................................. 103.375%
2004.............................................................. 101.688%
2005 and thereafter............................................... 100.000%
</TABLE>
(b) In addition, at any time and from time to time prior to December
15, 2000, the Company may redeem in the aggregate up to 35% of the original
aggregate principal amount of Securities at a redemption price of 110.125% of
the principal amount thereof, plus the accrued and unpaid interest, if any, to
the redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date), with
the net cash proceeds of one or more Public Equity Offerings following which
there is a Public Market; provided, however, that at least 65% of the original
aggregate principal amount of Initial Securities remains outstanding immediately
after the occurrence of such redemption.
ARTICLE IV
Covenants
SECTION 4.01. Payment of Securities. The Company shall promptly pay
the principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the date due if on such date the Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest then due and the Trustee or the Paying Agent, as the case
may be, is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it
<PAGE> 51
43
shall pay interest on overdue installments of interest at the same rate to the
extent lawful.
SECTION 4.02. SEC Reports. Prior to the effectiveness of the
Exchange Offer Registration Statement or if the Company is otherwise not
obligated to make the filings required by the following sentence, the Company
shall provide within a reasonable time (not to exceed 45 days following the end
of the first three quarters of any fiscal year and 90 days following the end of
such fiscal year) to the Trustee, the Securityholders and prospective
Securityholders (upon request) quarterly and annual financial statements
prepared in accordance with GAAP, together with management's discussion and
analysis of financial condition and results of operations and, in the case of
annual financial statements, a description of any changes in, or disagreements
with, accountants on accounting and financial disclosure, a brief description of
the Company's business, a discussion of any material legal proceedings in which
the Company is involved (other than routine legal proceedings incidental to the
conduct of the business) and a discussion of the compensation paid to, and any
material arrangements with, the Company's executive officers. Following the
effectiveness of the Exchange Offer Registration Statement, notwithstanding that
the Company may not be required to be or remain subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file
with the SEC and provide the Trustee and Securityholders and prospective
Securityholders (upon request) within 15 days after it files them with the SEC,
copies of its annual report and the information, documents and other reports
that are specified in Sections 13 and 15(d) of the Exchange Act, provided that
the requirements of this sentence relating to filings with the SEC shall not be
applicable to the extent that the SEC refuses to accept any such filing. In
addition, following a Public Equity Offering, the Company shall furnish to the
Trustee and the Securityholders, promptly upon their becoming available, copies
of the annual report to shareholders and any other information provided by the
Company to its public shareholders generally. The Company also shall comply with
the other provisions of Section 314(a) of the TIA.
SECTION 4.03. Limitation on Indebtedness. (a) The Company shall not,
and shall not permit any Restricted Subsidiary to, Incur any Indebtedness;
provided, however, that the Company and any of its Restricted Subsidiaries may
Incur Indebtedness if on the date thereof the Consolidated Coverage Ratio would
be greater than
<PAGE> 52
44
2.00:1.00 if such Indebtedness is Incurred on or prior to December 31, 1999 and
2.25:1.00 if such Indebtedness is Incurred thereafter.
(b) Notwithstanding Section 4.03(a), the Company and its Restricted
Subsidiaries may Incur the following Indebtedness:
(i) Bank Indebtedness or Indebtedness Incurred pursuant to any other
revolving credit, term loan or working capital financings in an aggregate
principal amount at any time outstanding not in excess of the greater of
$25.0 million and the Borrowing Base in effect from time to time (in each
case less the aggregate amount of all repayments of principal actually
made thereunder since the Closing Date with Net Available Cash from Asset
Dispositions pursuant to Section 4.06(a)(iii)(A));
(ii) Indebtedness of the Company owing to and held by any Wholly
Owned Subsidiary or Indebtedness of a Restricted Subsidiary owing to and
held by the Company or any Wholly Owned Subsidiary; provided, however,
that any subsequent issuance or transfer of any Capital Stock or any other
event that results in any such Wholly Owned Subsidiary ceasing to be a
Wholly Owned Subsidiary or any subsequent transfer of any such
Indebtedness (except to the Company or a Wholly Owned Subsidiary) shall be
deemed, in each case, to constitute the Incurrence of such Indebtedness by
the issuer thereof;
(iii) Indebtedness of the Company or its Restricted Subsidiaries (A)
represented by the Securities (other than Additional Securities) or the
Subsidiary Guarantees (other than Guarantees of Additional Securities),
(B) outstanding on the Closing Date (other than the Indebtedness described
in clauses (i) and (ii) above) or (C) consisting of Refinancing
Indebtedness Incurred in respect of any Indebtedness described in this
clause (iii), clauses (v), (vi) (vii), and (viii) of this paragraph (b) or
in Section 4.03(a);
(iv) (A) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on or prior to the date on which such Restricted Subsidiary
was acquired by the Company (other than Indebtedness Incurred as
consideration in, in contemplation of, or to provide all or any portion of
the funds or credit support utilized to consummate, the transaction or
series of related transactions pursuant to which such Restricted
<PAGE> 53
45
Subsidiary became a Subsidiary or was otherwise acquired by the Company);
provided, however, that at the time such Restricted Subsidiary is acquired
by the Company, the Company would have been able to Incur $1.00 of
additional Indebtedness pursuant to Section 4.03(a) after giving effect to
the Incurrence of such Indebtedness pursuant to this clause (iv) and (B)
Refinancing Indebtedness Incurred by a Restricted Subsidiary or the
Company in respect of Indebtedness Incurred by such Restricted Subsidiary
pursuant to this clause (iv);
(v) Indebtedness (A) in respect of performance bonds, bankers'
acceptances, letters of credit, surety or appeal bonds or guarantees
resulting from the endorsement of negotiable instruments provided by the
Company and its Restricted Subsidiaries in the ordinary course of their
business and which do not secure other Indebtedness, and (B) under
Currency Agreements and Interest Rate Agreements, in each case entered
into for bona fide hedging purposes of the Company in the ordinary course
of business; provided, however, that, in the case of Currency Agreements
and Interest Rate Agreements, such Currency Agreements and Interest Rate
Agreements do not increase the Indebtedness of the Company outstanding at
any time other than as a result of fluctuations in foreign currency
exchange rates or interest rates or by reason of fees, indemnities and
compensation payable thereunder;
(vi) Indebtedness of the Company or any Restricted Subsidiary
consisting of obligations in respect of purchase price adjustments in
connection with the acquisition or disposition of assets by the Company or
any Restricted Subsidiary permitted under the Indenture, provided that the
principal amount of all Indebtedness incurred pursuant to this clause
(vi), when taken together with all other Indebtedness Incurred pursuant to
this clause (vi) and then outstanding, shall not exceed $3.0 million;
(vii) Indebtedness of the Company or a Restricted Subsidiary owed to
(including in respect of letters of credit for the benefit of) any Person
in connection with workers' compensation insurance provided by such Person
to the Company or such Restricted Subsidiary, pursuant to reimbursement or
indemnification obligations to such Person, in each case Incurred in the
ordinary course of business;
<PAGE> 54
46
(viii) Purchase Money Indebtedness, Attributable Debt and
Capitalized Lease Obligations in an aggregate principal amount not in
excess of $2.0 million at any time outstanding; or
(ix) Indebtedness (other than Indebtedness permitted to be Incurred
pursuant to Section 4.03(a) or any other clause of this Section 4.03(b))
in an aggregate principal amount on the date of Incurrence that, when
added to all other Indebtedness Incurred pursuant to this clause (ix) and
then outstanding, shall not exceed $15.0 million.
(c) Notwithstanding the foregoing, the Company shall not Incur any
Indebtedness pursuant to paragraph (b) above if the proceeds thereof are used,
directly or indirectly, to repay, prepay, redeem, defease, retire, refund or
refinance any Subordinated Obligations unless such Indebtedness shall be
subordinated to the Securities to at least the same extent as such Subordinated
Obligations. The Company shall not Incur any Indebtedness pursuant to Section
4.03(a) or 4.03(b) if such Indebtedness is subordinate or junior in ranking in
any respect to any Senior Indebtedness unless such Indebtedness is Senior
Subordinated Indebtedness or is expressly subordinated in right of payment to
Senior Subordinated Indebtedness. The Company shall not Incur any Indebtedness
that constitutes Deferred Obligations after the Closing Date unless such
Indebtedness is expressly subordinated in right of payment to the Securities. In
addition, the Company shall not Incur any Secured Indebtedness that is not
Senior Indebtedness unless contemporaneously therewith effective provision is
made to secure the Securities equally and ratably with (or on a senior basis to,
in the case of Indebtedness Subordinated in right of payment to the Securities)
such Secured Indebtedness for so long as such Secured Indebtedness is secured by
a Lien. A Guarantor Subsidiary shall not Incur any Indebtedness if such
Indebtedness is by its terms expressly subordinate or junior in ranking in any
respect to any Senior Indebtedness of such Guarantor Subsidiary unless such
Indebtedness is Senior Subordinated Indebtedness of such Guarantor Subsidiary or
is expressly subordinated in right of payment to Senior Subordinated
Indebtedness of such Guarantor Subsidiary. A Guarantor Subsidiary shall not
Incur any Indebtedness that constitutes Deferred Obligations after the Closing
Date unless such Indebtedness is expressly subordinated in right of payment to
the Subsidiary Guarantees. In addition, a Guarantor Subsidiary may not Incur any
Secured Indebtedness that is not Senior Indebtedness of such Guarantor
Subsidiary unless contemporaneously therewith effective provision is made to
<PAGE> 55
47
secure the Subsidiary Guarantee of such Guarantor Subsidiary equally and ratably
with (or on a senior basis to, in the case of Indebtedness subordinated in right
of payment to such Subsidiary Guarantee) such Secured Indebtedness for as long
as such Secured Indebtedness is secured by a Lien.
(d) Notwithstanding any other provision of this Section 4.03, the
maximum amount of Indebtedness that the Company or any Restricted Subsidiary may
Incur pursuant to this Section shall not be deemed to be exceeded solely as a
result of fluctuations in the exchange rates of currencies. For purposes of
determining the outstanding principal amount of any particular Indebtedness
Incurred pursuant to this Section 4.03, (i) Indebtedness Incurred pursuant to
the Credit Agreement prior to or on the date of this Indenture shall be treated
as Incurred pursuant to Section 4.03(b)(i), (ii) Indebtedness permitted by this
Section 4.03 need not be permitted solely by reference to one provision
permitting such Indebtedness but may be permitted in part by one such provision
and in part by one or more other provisions of this Section permitting such
Indebtedness and (iii) in the event that Indebtedness or any portion thereof
meets the criteria of more than one of the types of Indebtedness described in
this Section 4.03, the Company, in its sole discretion, shall classify such
Indebtedness and only be required to include the amount of such Indebtedness in
one of such clauses.
SECTION 4.04. Limitation on Restricted Payments. (a) The Company
shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to (i) declare or pay any dividend or make any distribution on or in
respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving the Company) except dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and except
dividends or distributions payable to the Company or another Restricted
Subsidiary (and, if such Restricted Subsidiary has shareholders other than the
Company or other Restricted Subsidiaries, to its other shareholders on a pro
rata basis), (ii) purchase, redeem, retire or otherwise acquire for value any
Capital Stock of the Company or any Restricted Subsidiary held by Persons other
than the Company or another Restricted Subsidiary, (iii) purchase, repurchase,
redeem, defease or otherwise acquire or retire for value, prior to scheduled
maturity, scheduled repayment or scheduled sinking fund payment any Subordinated
Obligations (other than (A) the purchase, repurchase or other acquisition of
Subordinated Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due within one
year of the date of acquisition and (B) reductions of Subordinated
<PAGE> 56
48
Obligations consisting of purchase price adjustments in connection with the
acquisition or disposition of assets by the Company or a Restricted Subsidiary
permitted by the Indenture); or (iv) make any Investment (other than a Permitted
Investment) in any Person (any such dividend, distribution, purchase,
redemption, repurchase, defeasance, other acquisition, retirement or Investment
being herein referred to as a "Restricted Payment") if at the time the Company
or such Restricted Subsidiary makes such Restricted Payment:
(A) a Default shall have occurred and be continuing (or would result
therefrom);
(B) the Company could not Incur at least $1.00 of additional
Indebtedness under Section 4.03(a); or
(C) the aggregate amount of such Restricted Payment and all other
Restricted Payments (the amount so expended, if other than in cash, to be
determined in good faith by the Board of Directors, whose determination
shall be conclusive and evidenced by a resolution of the Board of
Directors) declared or made subsequent to the Closing Date would exceed
the sum of:
(1) 50% of the Consolidated Net Income accrued during the
period (treated as one accounting period) from the Closing Date to
the end of the most recent fiscal quarter ending prior to the date
of such Restricted Payment for which financial statements are then
available (or, in case such Consolidated Net Income shall be a
deficit, minus 100% of such deficit);
(2) the aggregate Net Cash Proceeds received by the Company
from the issue or sale of its Capital Stock (other than Disqualified
Stock) subsequent to the Closing Date (other than an issuance or
sale to a Subsidiary of the Company or an employee stock ownership
plan or other trust established by the Company or any of its
Subsidiaries);
(3) the aggregate Net Cash Proceeds received by the Company
from the issue or sale of its Capital Stock (other than Disqualified
Stock) to an employee stock ownership plan or other trust subsequent
to the Closing Date; provided, however, that if such plan or trust
Incurs any Indebtedness to, or Guaranteed by, the Company or any
Restricted Subsidiary to finance the acquisition
<PAGE> 57
49
of such Capital Stock, such aggregate amount shall be limited to
such Net Cash Proceeds less such Indebtedness Incurred to or
Guaranteed by the Company or any Restricted Subsidiary and any
increase in the Consolidated Net Worth of the Company resulting from
principal repayments made by such plan or trust with respect to
Indebtedness Incurred by it to finance the purchase of such Capital
Stock;
(4) the amount by which Indebtedness of the Company or its
Restricted Subsidiaries is reduced on the Company's balance sheet
upon the conversion or exchange (other than by a Subsidiary) of any
Indebtedness of the Company or its Restricted Subsidiaries issued
subsequent to the Closing Date and convertible or exchangeable for
Capital Stock (other than Disqualified Stock) of the Company (less
the amount of any cash or other property distributed by the Company
or any Restricted Subsidiary upon such conversion or exchange); and
(5) the amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from (aa) payments of dividends,
repayments of the principal of loans or advances or other transfers
of assets to the Company or any Restricted Subsidiary from
Unrestricted Subsidiaries or (bb) the redesignation of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in each case as
provided in the definition of "Investment") not to exceed, in the
case of any Unrestricted Subsidiary, the amount of Investments
previously made by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary, which amount was included in the
calculation of the amount of Restricted Payments or (cc) the sale,
liquidation or repayment of any such Investment in Unrestricted
Subsidiaries, in an amount not to exceed the lesser of (x) the net
cash proceeds received by the Company or any Restricted Subsidiary
in connection with such sale, liquidation or repayment and (y) the
initial amount of such Investment, which amount was included in the
calculation of the amount of Restricted Payments.
<PAGE> 58
50
(b) The provisions of Section 4.04(a) shall not prohibit:
<PAGE> 59
51
(i) any purchase or redemption of Capital Stock of the Company or
Subordinated Obligations of the Company made by exchange for, or out of
the proceeds of the substantially concurrent sale of, Capital Stock of the
Company (other than Disqualified Stock and other than Capital Stock issued
or sold to a Subsidiary or an employee stock ownership plan or other trust
established by the Company or any of its Subsidiaries); provided, however,
that (A) such purchase or redemption shall be excluded in the calculation
of the amount of Restricted Payments and (B) the Net Cash Proceeds from
such sale applied in the manner set forth in this clause (i) shall be
excluded from clause (C)(2) or (C)(3) of Section 4.04(a);
(ii) any purchase or redemption of Subordinated Obligations of the
Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Indebtedness of the Company which is permitted to be
Incurred pursuant to Section 4.03(b); provided, however, that such
purchase or redemption shall be excluded in the calculation of the amount
of Restricted Payments;
(iii) any purchase or redemption of Subordinated Obligations from
Net Available Cash to the extent permitted by Section 4.06; provided,
however, that such purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments;
(iv) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with Section 4.04(a); provided, however, that such dividend shall be
included in the calculation of the amount of Restricted Payments;
(v) the repurchase of shares of, or options to purchase shares of,
common stock of the Company or any of its Subsidiaries from employees,
former employees, directors or former directors of the Company or any of
its Subsidiaries (or permitted transferees of such employees, former
employees, directors or former directors), pursuant to the terms of the
agreements (including employment agreements) or plans (or amendments
thereto) approved by the Board of Directors under which such individuals
purchase or sell, or are granted the option to purchase or sell, shares of
such common stock; provided, however, that the aggregate amount of such
repurchases (other than repurchases made with respect to a deceased Person
that are funded using
<PAGE> 60
52
the proceeds of a life insurance policy relating to such Person of which
the Company or a Restricted Subsidiary is the beneficiary) shall not
exceed $5.0 million in any calendar year; provided further, however, that
such repurchases shall be included in the calculation of the amount of
Restricted Payments;
(vi) any purchase for total consideration not in excess of $10.0
million of any common stock of the Company then held by members of senior
management of the Company who are not members of the Board of Directors on
the Closing Date, so long as the condition specified in Section 4.04(a)(A)
is satisfied; provided, however, that such purchase shall be included in
the calculation of the amount of Restricted Payments;
(vii) dividends, distributions or other payments made on or with
respect to Capital Stock to the extent payable in shares of Capital Stock
of such Person (other than Disqualified Stock); or
(viii) other Restricted Payments in an aggregate amount not to
exceed $3.0 million.
SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Company shall not, and shall not permit any
Restricted Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) pay dividends or make any other distributions on
its Capital Stock or pay any Indebtedness or other obligations owed to the
Company, (b) make any loans or advances to the Company or (c) transfer any of
its property or assets to the Company, except:
(i) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Closing Date;
(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary prior to the date on which such Restricted
Subsidiary was acquired by the Company (other than Indebtedness Incurred
as consideration in, in contemplation of, or to provide all or any portion
of the funds or credit support utilized to consummate, the transaction or
series of related transactions pursuant to which such Restricted
Subsidiary became a
<PAGE> 61
53
Restricted Subsidiary or was otherwise acquired by the Company) and
outstanding on such date;
(iii) any encumbrance or restriction pursuant to an agreement
constituting Refinancing Indebtedness or Indebtedness Incurred pursuant to
an agreement referred to in clause (i) or (ii) of this Section 4.05 or
this clause (iii) or contained in any amendment to an agreement referred
to in clause (i) or (ii) of this Section 4.05 or this clause (iii);
provided, however, that the encumbrances and restrictions contained in any
such refinancing agreement or amendment, taken as a whole, are no less
favorable to the Securityholders than the encumbrances and restrictions
contained in such agreements as determined in good faith by the Board of
Directors;
(iv) in the case of clause (c), any encumbrance or restriction (A)
that restricts in a customary manner the subletting, assignment or
transfer of any property or asset that is subject to a lease, license or
similar contract, (B) by virtue of any transfer of, agreement to transfer,
option or right with respect to, or Lien on, any property or assets of the
Company or any Restricted Subsidiary not otherwise prohibited by this
Indenture or (C) contained in security agreements securing Indebtedness of
a Restricted Subsidiary to the extent such encumbrance or restrictions
restrict the transfer of the property subject to such security agreements
or mortgages; and
(v) with respect to a Restricted Subsidiary, any restriction imposed
pursuant to an agreement entered into for the sale or disposition of all
or substantially all the Capital Stock or assets of such Restricted
Subsidiary pending the closing of such sale or disposition.
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock.
(a) The Company shall not, and shall not permit any Restricted Subsidiary to,
make any Asset Disposition unless (i) the Company or such Restricted Subsidiary
receives consideration (including by way of relief from, or by any other Person
assuming sole responsibility for, any liabilities, contingent or otherwise) at
the time of such Asset Disposition at least equal to the fair market value of
the shares and assets subject to such Asset Disposition, (ii) at least 85% (or
100% in the case of lease payments) of the consideration thereof received by the
Company or such Restricted Subsidiary is in the form of cash, and (iii) an
amount equal
<PAGE> 62
54
to 100% of the Net Available Cash from such Asset Disposition is applied by the
Company (or such Restricted Subsidiary, as the case may be) (A) first, to the
extent the Company or such Restricted Subsidiary elects (or is required by the
terms of any Senior Indebtedness or Indebtedness (other than Preferred Stock) of
a Wholly Owned Subsidiary) to prepay, repay or purchase Senior Indebtedness or
such Indebtedness (in each case other than Indebtedness owed to the Company or
an Affiliate of the Company) within 60 days after the later of the date of such
Asset Disposition or the receipt of such Net Available Cash; (B) second, to the
extent of the balance of Net Available Cash after application in accordance with
clause (A), to the extent the Company or such Restricted Subsidiary elects, to
reinvest in Additional Assets (including by means of an Investment in Additional
Assets by a Restricted Subsidiary with Net Available Cash received by the
Company or another Restricted Subsidiary) within 270 days from the later of such
Asset Disposition or the receipt of such Net Available Cash; (C) third, to the
extent of the balance of such Net Available Cash after application in accordance
with clauses (A) and (B), to make an Offer (as defined below) to purchase
Securities pursuant to and subject to the conditions of Section 4.06(b),
provided that if the Company elects (or is required by the terms of any Senior
Subordinated Indebtedness), such Offer may be made ratably to purchase the
Securities and other Senior Subordinated Indebtedness, and (D) fourth, to the
extent of the balance of such Net Available Cash after application in accordance
with clauses (A), (B) and (C), to prepay, repay or purchase Indebtedness of the
Company (other than Indebtedness owed to an Affiliate of the Company and other
than Disqualified Stock of the Company) or Indebtedness of any Restricted
Subsidiary (other than Indebtedness owed to the Company or an Affiliate of the
Company), in each case described in this clause (D) within one year from the
receipt of such Net Available Cash or, if the Company has made an Offer pursuant
to clause (C) of this Section 4.06(a), six months from the date such Offer is
consummated; provided, however, that in connection with any prepayment,
repayment or purchase of Indebtedness pursuant to clause (A), (C) or (D) above,
the Company or such Restricted Subsidiary shall retire such Indebtedness and
shall cause the related loan commitment (if any) to be permanently reduced in an
amount equal to the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions of this Section 4.06, the Company and
the Restricted Subsidiaries shall not be required to apply any Net Available
Cash in accordance with this Section 4.06 except to the extent that the
aggregate Net Available Cash from all Asset Dispositions
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55
in any year that is not applied in accordance with this Section 4.06 exceeds
$5.0 million.
For the purposes of this Section 4.06, the following are deemed to
be cash: (x) the assumption of Indebtedness of the Company (other than
Disqualified Stock of the Company) or any Restricted Subsidiary and the release
of the Company or such Restricted Subsidiary from all liability on such
Indebtedness in connection with such Asset Disposition and (y) securities
received by the Company or any Restricted Subsidiary from the transferee that
are promptly converted by the Company or such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase
of Securities pursuant to Section 4.06(a)(iii)(C), the Company shall be required
to purchase Securities tendered pursuant to an offer by the Company for the
Securities (the "Offer") at a purchase price of 100% of their principal amount
plus accrued and unpaid interest, if any, to the date of purchase in accordance
with the procedures (including prorationing in the event of oversubscription)
set forth in Section 4.06(c). If the aggregate purchase price of Securities
tendered pursuant to the Offer is less than the Net Available Cash allotted to
the purchase of the Securities, the Company shall apply the remaining Net
Available Cash in accordance with Section 4.06(a)(iii)(D). The Company shall not
be required to make an Offer for Securities pursuant to this Section if the Net
Available Cash available therefor (after application of the proceeds as provided
in clauses (A) and (B) of Section 4.06(a)(iii)) is less than $10.0 million for
any particular Asset Disposition (which lesser amount shall be carried forward
for purposes of determining whether an Offer is required with respect to the Net
Available Cash from any subsequent Asset Disposition).
(c) (i) Promptly, and in any event within 10 days after the Company
becomes obligated to make an Offer, the Company shall be obligated to deliver to
the Trustee and send, by first-class mail to each Holder, a written notice
stating that the Holder may elect to have his Securities purchased by the
Company either in whole or in part (subject to prorationing as hereinafter
described in the event the Offer is oversubscribed) in integral multiples of
$1,000 of principal amount, at the applicable purchase price. The notice shall
specify a purchase date not less than 30 days nor more than 60 days after the
date of such notice (the "Purchase Date") and shall contain such information
concerning the business of the Company which the Company in good faith believes
will enable such Holders to make an
<PAGE> 64
56
informed decision (which at a minimum shall (A) include, if material,
appropriate pro forma financial information and (B) include or incorporate by
reference (and provide upon request) the information most recently provided in
accordance with Section 4.02) and all instructions and materials necessary to
tender Securities pursuant to the Offer, together with the address referred to
in clause (iii).
(ii) Not later than the date upon which written notice of an Offer
is delivered to the Trustee as provided above, the Company shall deliver to the
Trustee an Officers' Certificate as to (A) the amount of the Offer (the "Offer
Amount"), (B) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (C) the compliance
of such allocation with the provisions of Section 4.06(a). On such date, the
Company shall also irrevocably deposit with the Trustee or with a paying agent
(or, if the Company is acting as its own paying agent, segregate and hold in
trust) an amount equal to the Offer Amount to be invested in Temporary Cash
Investments and to be held for payment in accordance with the provisions of this
Section. Upon the expiration of the period for which the Offer remains open (the
"Offer Period"), the Company shall deliver to the Trustee for cancelation the
Securities or portions thereof that have been properly tendered to and are to be
accepted by the Company. The Trustee (or the Paying Agent, if not the Trustee)
shall, on the date of purchase, mail or deliver payment to each tendering Holder
in the amount of the purchase price. In the event that the aggregate purchase
price of the Securities delivered by the Company to the Trustee is less than the
Offer Amount applicable to the Securities, the Trustee shall deliver the excess
to the Company immediately after the expiration of the Offer Period for
application in accordance with this Section.
(iii) Holders electing to have a Security purchased shall be
required to surrender the Security, with an appropriate form duly completed, to
the Company at the address specified in the notice at least three Business Days
prior to the date of purchase. Holders shall be entitled to withdraw their
election if the Trustee or the Company receives, not later than one Business Day
prior to the Purchase Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Security which
was delivered by the Holder for purchase and a statement that such Holder is
withdrawing his election to have such Security purchased. If at the expiration
of the Offer Period the aggregate principal amount of Securities and any other
Senior Subordinated
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57
Indebtedness included in the Offer surrendered by holders thereof exceeds the
Offer Amount, the Company shall select the Securities and other Senior
Subordinated Indebtedness to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Company so that only Securities
and other Senior Subordinated Indebtedness in denominations of $1,000, or
integral multiples thereof, shall be purchased). Holders whose Securities are
purchased only in part shall be issued new Securities equal in principal amount
to the unpurchased portion of the Securities surrendered.
(iv) At the time the Company delivers Securities to the Trustee
which are to be accepted for purchase, the Company shall also deliver an
Officers' Certificate stating that such Securities are to be accepted by the
Company pursuant to and in accordance with the terms of this Section. A
Security shall be deemed to have been accepted for purchase at the time the
Trustee, directly or through an agent, mails or delivers payment therefor to the
surrendering Holder.
(v) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this Section, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section 4.06 by virtue thereof.
SECTION 4.07. Limitation on Transactions with Affiliates. (a) The
Company shall not, and shall not permit any Restricted Subsidiary to, directly
or indirectly, enter into or conduct any transaction (including, the purchase,
sale, lease or exchange of any property or the rendering of any service) with
any Affiliate of the Company (an "Affiliate Transaction") on terms (i) that are
less favorable to the Company or such Restricted Subsidiary, as the case may be,
than those that could be obtained at the time of such transaction in
arm's-length dealings with a Person who is not such an Affiliate and (ii) that,
in the event such Affiliate Transaction involves an aggregate amount in excess
of $1.0 million, are not in writing and have not been approved by a majority of
the members of the Board of Directors having no personal stake in such Affiliate
Transaction and who are not employed or otherwise associated with such
Affiliates. In addition, if such Affiliate Transaction involves an amount in
excess of
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58
$5.0 million, a fairness or reasonableness opinion must be obtained from a
nationally recognized appraisal, accounting or investment banking firm.
(b) The provisions of Section 4.07(a) shall not prohibit (i) any
payment or transaction permitted pursuant to Section 4.04, (ii) any issuance of
securities, or other payments, awards or grants in cash, securities or otherwise
pursuant to, or the funding of, employment arrangements, stock options and stock
ownership plans approved by the Board of Directors or the board of directors of
the relevant Restricted Subsidiary, (iii) loans or advances to employees in the
ordinary course of business in accordance with past practices of the Company,
but in any event not to exceed $500,000 in the aggregate outstanding at any one
time, (iv) the payment of reasonable fees to directors of the Company and its
Subsidiaries who are not employees of the Company or its Subsidiaries, (v) any
transaction between the Company and a Wholly Owned Subsidiary or between Wholly
Owned Subsidiaries, (vi) indemnification or insurance provided to officers or
directors of the Company and the Restricted Subsidiaries approved in good faith
by the Board of Directors or the board of directors of the relevant Restricted
Subsidiary, (vii) payments under, or amendments or extensions of, the Gateway
Lease; provided that any such amendments or extensions are on commercially
reasonable terms as certified by a recognized commercial real estate firm that
is not an Affiliate of the Company, (viii) leases of real property from any
Permitted Holder, provided that any such leases are on commercially reasonable
terms as certified by a recognized commercial real estate firm that is not an
Affiliate of the Company, (ix) any fee paid to Permitted Holders (other than any
Management Stockholder) in consideration of the provision of management services
in an aggregate amount not to exceed $500,000 per annum, plus out-of-pocket
expenses relating to the provision of such management services, and (x) sales of
Capital Stock of the Company to Affiliates.
SECTION 4.08. Change of Control. (a) Upon a Change of Control, each
Holder shall have the right to require that the Company repurchase all or any
part of such Holder's Securities at a purchase price in cash equal to 101% of
the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase (subject to the right of Holders on the relevant record date to
receive interest due on the relevant interest payment date), in accordance with
the terms contemplated in Section 4.08(b); provided, however, that
notwithstanding the occurrence of a Change in Control, the Company shall not be
obligated to purchase the Securities pursuant to this Section 4.08 in the
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event that it has exercised its right to redeem all the Securities under Section
3.07 or in the event that a third party makes or has made such an offer in
compliance with Section 3.07 and such third party purchases all Securities
validly tendered and not withdrawn pursuant to such offer. In the event that at
the time of such Change of Control the terms of the Bank Indebtedness restrict
or prohibit the repurchase of Securities pursuant to this Section 4.08, then
prior to the mailing of the notice to Holders provided for in Section 4.08(b)
below but in any event within 30 days following any Change of Control, the
Company shall (i) repay in full all Bank Indebtedness or offer to repay in full
all Bank Indebtedness and repay the Bank Indebtedness of each lender who has
accepted such offer or (ii) obtain the requisite consent under the agreements
governing the Bank Indebtedness to permit the repurchase of the Securities as
provided for in Section 4.08(b).
(b) Within 30 days following any Change of Control (except as
provided in the proviso to the first sentence of Section 4.08(a)), the Company
shall mail a notice to each Holder with a copy to the Trustee stating:
(i) that a Change of Control has occurred and that such Holder has
the right to require the Company to purchase such Holder's Securities at a
purchase price in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of repurchase, which
shall be the date the Company deposits the required cash with the Trustee
for such purpose (subject to the right of Holders of record on a record
date to receive interest due on the relevant interest payment date);
(ii) the circumstances and relevant facts and financial information
regarding such Change of Control;
(iii) the repurchase date (which shall be no earlier than 30 days
nor later than 60 days from the date such notice is mailed); and
(iv) the instructions determined by the Company, consistent with
this Section 4.08, that a Holder must follow in order to have its
Securities purchased.
(c) Holders electing to have a Security purchased shall be required
to surrender the Security, with an appropriate form duly completed, to the
Company at the address specified in the notice at least three Business Days
prior to the purchase date. Holders shall be entitled to withdraw their election
if the Trustee or the Company receives not
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later than one Business Day prior to the purchase date a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Security which was delivered for purchase by the Holder
and a statement that such Holder is withdrawing his election to have such
Security purchased.
(d) On the purchase date, all Securities purchased by the Company
under this Section shall be delivered to the Trustee for cancelation, and the
Company shall pay the purchase price plus accrued and unpaid interest, if any,
to the Holders entitled thereto.
(e) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this Section, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section by virtue thereof.
SECTION 4.09. Compliance Certificate. The Company shall deliver to
the Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have
knowledge of any Default and whether or not the signers know of any Default that
occurred during such period. If they do, the certificate shall describe the
Default, its status and what action the Company is taking or proposes to take
with respect thereto. The Company also shall comply with Section 314(a)(4) of
the TIA.
SECTION 4.10. Further Instruments and Acts. Upon request of the
Trustee, the Company shall execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.11. Future Guarantor Subsidiaries. The Company shall cause
each Restricted Subsidiary which Incurs Indebtedness to execute and deliver to
the Trustee a supplemental indenture pursuant to which such Subsidiary shall
Guarantee payment of the Securities; provided, however, that such Subsidiary
shall not be required to execute and deliver a supplemental indenture pursuant
to this Section in the event that such Subsidiary is a party to the Indenture at
the time of such Incurrence of
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Indebtedness. Each Subsidiary Guarantee shall be limited to an amount not to
exceed the maximum amount that can be Guaranteed by that Subsidiary without
rendering the Subsidiary Guarantee, as it relates to such Subsidiary, voidable
under applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally.
SECTION 4.12. Limitation on Lines of Business. The Company shall
not, and shall not permit any Restricted Subsidiary to, engage in any business,
other than a Related Business.
SECTION 4.13. Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries. The Company shall not sell any shares of Capital Stock
of a Restricted Subsidiary, and shall not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell any shares of its Capital Stock or the
Capital Stock of another Restricted Subsidiary, except (a) to the Company or a
Wholly Owned Subsidiary, (b) if, immediately after giving effect to such
issuance or sale, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary or (c) directors' qualifying shares. The proceeds of any
sale of such Capital Stock permitted hereby shall be treated as Net Available
Cash from an Asset Disposition and shall be applied in accordance with Section
4.06.
SECTION 4.14. Limitation on Sale/Leaseback Transactions. The Company
shall not, and shall not permit any Restricted Subsidiary to, enter into any
Sale/Leaseback Transaction with respect to any property unless (a) the Company
or such Subsidiary would be entitled to (i) Incur Indebtedness in an amount
equal to the Attributable Debt with respect to such Sale/Leaseback Transaction
pursuant to Section 4.03 and (ii) create a Lien on such property securing such
Attributable Debt without equally and ratably securing the Securities pursuant
to Section 4.03, (b) the net cash proceeds received by the Company or any
Restricted Subsidiary in connection with such Sale/Leaseback Transaction are at
least equal to the fair value (as determined in good faith by the Board of
Directors) of such property and (c) the transfer of such property is permitted
by, and the Company applies the proceeds of such transaction in compliance with,
Section 4.06.
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ARTICLE V
Successor Company
SECTION 5.01. When Company May Merge or Transfer Assets. The Company
shall not consolidate with or merge with or into, or convey, transfer or lease
all or substantially all its assets to, any Person, unless:
(a) the resulting, surviving or transferee Person (the "Successor
Company") shall be a corporation, limited liability company, limited
partnership or business trust organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia
and the Successor Company (if not the Company) shall expressly assume, by
an indenture supplemental hereto, executed and delivered to the Trustee,
in form satisfactory to the Trustee, all the obligations of the Company
under the Securities and this Indenture;
(b) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Restricted Subsidiary as a result of such transaction as
having been Incurred by the Successor Company or such Restricted
Subsidiary at the time of such transaction), no Default shall have
occurred and be continuing;
(c) immediately after giving effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a);
(d) immediately after giving effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount which is
not less than the Consolidated Net Worth of the Company immediately prior
to such transaction; and
(e) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture.
The Successor Company shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under this Indenture, but the
predecessor Company in the case of a conveyance, transfer or lease of
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all or substantially all its assets shall not be released from the obligation to
pay the principal of and interest on the Securities.
Notwithstanding the foregoing clauses (b), (c) and (d), (a) any
Restricted Subsidiary may consolidate with, merge with or into or transfer all
or part of its properties and assets to the Company and (b) the Company may
merge with an Affiliate incorporated solely for the purpose of reincorporating
the Company in another jurisdiction to realize tax or other benefits.
ARTICLE VI
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of Default" occurs if:
(a) the Company defaults in any payment of interest on any Security
when the same becomes due and payable, whether or not such payment shall
be prohibited by Article X, and such default continues for a period of 30
days;
(b) the Company (i) defaults in the payment of the principal of any
Security when the same becomes due and payable at its Stated Maturity,
upon optional redemption, upon required repurchase, upon declaration or
otherwise, whether or not such payment shall be prohibited by Article X or
(ii) fails to redeem or purchase Securities when required pursuant to this
Indenture or the Securities, whether or not such redemption or purchase
shall be prohibited by Article X;
(c) the Company fails to comply with Section 5.01;
(d) the Company fails to comply with Section 4.02, 4.03, 4.04, 4.05,
4.06, 4.07, 4.08, 4.11, 4.12, 4.13 or 4.14 (other than a failure to
purchase Securities when required under Section 4.06 or 4.08) and such
failure continues for 30 days after the notice specified below;
(e) the Company fails to comply with any of its agreements in the
Securities or this Indenture (other than those referred to in (a), (b),
(c) or (d) above) and such failure continues for 60 days after the notice
specified below;
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(f) Indebtedness of the Company or any Restricted Subsidiary is not
paid within any applicable grace period after final maturity or the
acceleration by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $5.0 million or
its foreign currency equivalent at the time;
(g) the Company or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(i) commences a voluntary case;
(ii) consents to the entry of an order for relief against it
in an involuntary case;
(iii) consents to the appointment of a Custodian of it or for
any substantial part of its property;
(iv) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(h) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(i) is for relief against the Company or any Significant
Subsidiary in an involuntary case;
(ii) appoints a Custodian of the Company or any
Significant Subsidiary or for any substantial part of its
property; or
(iii) orders the winding up or liquidation of the
Company or any Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days;
(i) any final and nonappealable judgment or decree for the payment
of money in excess of $5.0 million or its foreign currency equivalent at
the time is entered against the Company or any Restricted Subsidiary and
is not discharged, waived or stayed and either (A) an enforcement
proceeding has been commenced by any creditor upon such judgment or decree
or (B) there is a
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period of 60 days following the entry of such judgment or decree during
which such judgment or decree is not discharged, waived or the execution
thereof stayed; or
(j) any Subsidiary Guarantee shall cease to be in full force and
effect (except as contemplated by the terms thereof) or any Guarantor
Subsidiary or person acting by or on behalf of such Guarantor Subsidiary
shall deny or disaffirm its obligations under this Indenture or any
Subsidiary Guarantee and such Default continues for 10 days.
The foregoing shall constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
A Default under clause (d) or (e) is not an Event of Default until
the Trustee or the Holders of at least 25% in principal amount of the
outstanding Securities notify the Company of the Default and the Company does
not cure such Default within the time specified after receipt of such notice.
Such notice must specify the Default, demand that it be remedied and state that
such notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default and any event which with the giving of notice or the lapse
of time would become an Event of Default under clause (d), (e), (h) or (i), its
status and what action the Company is taking or proposes to take with respect
thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than an
Event of Default specified in Section 6.01(g) or (h) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in principal amount of the outstanding Securities by
notice to the Company, may declare the principal of and accrued but unpaid
interest on all the Securities to be due and payable. Upon such a declaration,
such principal and interest shall be due and payable
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immediately. If an Event of Default specified in Section 6.01(g) or (h) with
respect to the Company occurs, the principal of and interest on all the
Securities shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Securityholders.
The Holders of a majority in principal amount of the Securities by notice to the
Trustee may rescind an acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of acceleration. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Securityholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
principal amount of the Securities by notice to the Trustee may waive an
existing Default and its consequences except (a) a Default in the payment of the
principal of or interest on a Security or (b) a Default in respect of a
provision that under Section 9.02 cannot be amended without the consent of each
Securityholder affected. When a Default is waived, it is deemed cured, but no
such waiver shall extend to any subsequent or other Default or impair any
consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority in
principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may
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take any other action deemed proper by the Trustee that is not inconsistent with
such direction. Prior to taking any action hereunder, the Trustee shall be
entitled to indemnification satisfactory to it in its sole discretion against
all losses and expenses caused by taking or not taking such action.
SECTION 6.06. Limitation on Suits. A Securityholder may not pursue
any remedy with respect to this Indenture or the Securities unless:
(a) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(b) the Holders of at least 25% in principal amount of the
Securities make a written request to the Trustee to pursue the remedy;
(c) such Holder or Holders offer to the Trustee reasonable security
or indemnity against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of security or indemnity; and
(e) the Holders of a majority in principal amount of the Securities
do not give the Trustee a direction inconsistent with the request during
such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights
of another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and liquidated damages and interest on the Securities
held by such Holder, on or after the respective due dates expressed in the
Securities, or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default
specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together
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with interest on any unpaid interest to the extent lawful) and the amounts
provided for in Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, any Subsidiary or
Guarantor Subsidiary, their creditors or their property and, unless prohibited
by law or applicable regulations, may vote on behalf of the Holders in any
election of a trustee in bankruptcy or other Person performing similar
functions, and any Custodian in any such judicial proceeding is hereby
authorized by each Holder to make payments to the Trustee and, in the event that
the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article VI, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to holders of Senior Indebtedness to the extent required by
Article X;
THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, and any liquidated damages
without preference or priority of any kind, according to the amounts due
and payable on the Securities for principal, any liquidated damages and
interest, respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any payment
to Securityholders pursuant to this Section. At least 15 days before such record
date, the Trustee shall mail to each Securityholder and the Company a notice
that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken
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or omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in
principal amount of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. Neither the Company
nor any Guarantor Subsidiary (to the extent it may lawfully do so) shall at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, which may affect the covenants or the performance
of this Indenture; and the Company and each Guarantor Subsidiary (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law, and shall not hinder, delay or impede the execution of any power
herein granted to the Trustee, but shall suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE VII
Trustee
SECTION 7.01. Duties of Trustee. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the require-
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ments of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or indemnity satisfactory to it against such risk or liability is
not reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
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SECTION 7.02. Rights of Trustee. Subject to Section 7.01:
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute wilful
misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
debenture, note or other paper or document unless requested in writing to do so
by the Holders of not less than a majority in principal amount of the Securities
at the time outstanding, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent,
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Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in this Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within the earlier of 90 days after it
occurs (if practicable) or 30 days after it is known to a Trust Officer or
written notice of it is received by the Trustee. Except in the case of a Default
in payment of principal of or interest on any Security (including payments
pursuant to the mandatory redemption provisions of such Security, if any), the
Trustee may withhold the notice if and so long as a committee of its Trust
Officers in good faith determines that withholding the notice is in the
interests of Securityholders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as
practicable after each May 15 beginning with the May 15 following the date of
this Indenture, and in any event prior to July 15 in each year, the Trustee
shall mail to each Securityholder a brief report dated as of May 15 that
complies with Section 313(a) of the TIA. The Trustee shall also comply with
Section 313(b) of the TIA.
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall pay to
the Trustee from time to time reasonable compensation for its services including
extraordinary services such as default administration. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. When the Trustee incurs expenses or renders services after the
incurrence of any Event of Default specified in Article VI
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hereof, the expenses and the compensation for the services are intended to
constitute expenses of administration under any Bankruptcy Law. The Company
shall reimburse the Trustee upon request for all reasonable out-of-pocket
expenses incurred or made by it, including costs of collection, in addition to
the compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Trustee's agents,
counsel, accountants and experts. The Company and each Guarantor Subsidiary,
jointly and severally shall indemnify the Trustee against any and all loss,
liability or expense (including reasonable attorneys' fees) incurred by the
Trustee without negligence or bad faith on its part in connection with the
administration of this trust and the performance of its duties hereunder. The
Trustee shall notify the Company of any claim for which it may seek indemnity
promptly upon obtaining actual knowledge thereof; provided, however, that any
failure so to notify the Company shall not relieve the Company or any Guarantor
Subsidiary of its indemnity obligations hereunder. The Company shall defend the
claim and the indemnified party shall provide reasonable cooperation at the
Company's expense in the defense. Such indemnified parties may have separate
counsel and the Company shall pay the fees and expenses of such counsel;
provided, however, that the Company shall not be required to pay such fees and
expenses if it assumes such indemnified parties' defense and, in such
indemnified parties' reasonable judgment, there is no conflict of interest
between the Company and such parties in connection with such defense. The
Company need not reimburse any expense or indemnify against any loss, liability
or expense incurred by an indemnified party through such party's own wilful
misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest and any liquidated damages on particular Securities.
The Company's payment obligations pursuant to this Section shall
survive the satisfaction or discharge of this Indenture, any rejection or
termination of this Indenture under any bankruptcy law or the resignation or
removal of the Trustee. When the Trustee incurs expenses after the occurrence of
a Default specified in Section 6.01(g) or (h) with respect to the Company, the
expenses are intended to constitute expenses of administration under the
Bankruptcy Law.
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SECTION 7.08. Replacement of Trustee. The Trustee may resign at any
time by so notifying the Company. The Holders of a majority in principal amount
of the Securities may remove the Trustee by so notifying the Trustee and may
appoint a successor Trustee. The Company shall remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged bankrupt or insolvent;
(c) a receiver or other public officer takes charge of the Trustee
or its property; or
(d) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the Holders
of a majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
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SECTION 7.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
all times satisfy the requirements of TIA ss. 310(a). The Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with
TIA ss. 310(b); provided, however, that there shall be excluded from the
operation of TIAss. 310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
the Company are outstanding if the requirements for such exclusion set forth in
TIA ss. 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship
listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be
subject to TIA ss. 311(a) to the extent indicated.
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a)
When (i) the Company delivers to the Trustee all outstanding Securities (other
than Securities replaced pursuant to Section 2.07) for cancelation or (ii) all
outstanding Securities have become
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due and payable at maturity or a notice of redemption has been mailed pursuant
to Article III hereof and the Company irrevocably deposits with the Trustee
funds or U.S. Government Obligations on which payment of principal and interest
when due will be sufficient to pay at maturity or upon redemption all
outstanding Securities, including interest thereon to maturity or such
redemption date (other than Securities replaced pursuant to Section 2.07), and
if in either case the Company pays all other sums payable hereunder by the
Company, then this Indenture shall, subject to Section 8.01(c), cease to be of
further effect. The Trustee shall acknowledge satisfaction and discharge of this
Indenture on demand of the Company accompanied by an Officers' Certificate and
an Opinion of Counsel and at the cost and expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company at any time
may terminate (i) all of its obligations under the Securities and this Indenture
("legal defeasance option") or (ii) its obligations under Sections 4.02, 4.03,
4.04, 4.05, 4.06, 4.07, 4.08, 4.11, 4.12, 4.13, 4.14, 5.01(c) and 5.01(d) and
the operation of Section 6.01(d), 6.01(e), 6.01(f), 6.01(g) (with respect to
Subsidiaries of the Company only), 6.01(h) (with respect to Subsidiaries of the
Company only) and 6.01(i) ("covenant defeasance option"). The Company may
exercise its legal defeasance option notwithstanding its prior exercise of its
covenant defeasance option. In the event that the Company terminates all of its
obligations under the Securities and this Indenture by exercising either its
covenant defeasance option or its legal defeasance option, the obligations under
the Subsidiary Guarantees shall each be terminated simultaneously with the
termination of such obligations.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the Company
exercises its covenant defeasance option, payment of the Securities may not be
accelerated because of an Event of Default specified in Section 6.01(d),
6.01(e), 6.01(f), 6.01(g) (with respect to Subsidiaries of the Company only),
6.01(h) or 6.01(i) or because of the failure of the Company to comply with
clauses (c) and (d) of Section 5.01.
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05,
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2.06, 2.07, 7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until the Securities
have been paid in full. Thereafter, the Company's obligations in Sections 7.07,
8.04 and 8.05 shall survive.
SECTION 8.02. Conditions to Defeasance. The Company may exercise its
legal defeasance option or its covenant defeasance option only if:
(a) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations for the payment of principal, premium (if
any) and interest on the Securities to maturity or redemption, as the case
may be;
(b) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the pay ments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and in
such amounts as will be sufficient to pay principal and interest when due
on all the Securities to maturity or redemption, as the case may be;
(c) 123 days pass after the deposit is made and during the 123-day
period no Default specified in Section 6.01(g) or (h) with respect to the
Company occurs which is continuing at the end of the period;
(d) the deposit does not constitute a default under any other
agreement binding on the Company and is not prohibited by Article X;
(e) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or
is qualified as, a regulated investment company under the Investment
Company Act of 1940;
(f) in the case of the legal defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (i) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (ii) since the date of this Indenture there
has been a change in the applicable Federal income tax law, in either case
to the effect that, and based thereon such Opinion of Counsel shall
confirm that, the Securityholders will not recognize income, gain or loss
for Federal income
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tax purposes as a result of such defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same times
as would have been the case if such defeasance had not occurred;
(g) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Securityholders will not recognize income, gain or loss for Federal
income tax purposes as a result of such covenant defeasance and will be
subject to Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such covenant defeasance
had not occurred; and
(h) the Company delivers to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent to
the defeasance and discharge of the Securities as contemplated by this
Article VIII have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article III.
SECTION 8.03. Application of Trust Money. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to this
Article VIII. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Securities. Money
and securities so held in trust are not subject to Article X.
SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent
shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and
the Paying Agent shall pay to the Company upon written request any money held by
them for the payment of principal or interest that remains unclaimed for two
years, and, thereafter, Securityholders entitled to the money must look to the
Company for payment as general creditors.
SECTION 8.05. Indemnity for Government Obligations. The Company
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or
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assessed against deposited U.S. Government Obligations or the principal and
interest received on such U.S. Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article VIII by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article VIII until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article VIII; provided, however, that, if
the Company has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
money or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE IX
Amendments
SECTION 9.01. Without Consent of Holders. The Company and the
Trustee may amend this Indenture or the Securities without notice to or consent
of any Securityholder:
(a) to cure any ambiguity, omission, defect or inconsistency;
(b) to comply with Article V;
(c) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(d) to make any change in Article X or Article XII that would limit
or terminate the benefits available to any holder of Senior Indebtedness
(or Representatives therefor) under Article X or Article XII;
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(e) to add additional Guarantees with respect to the Securities or
to secure the Securities;
(f) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(g) to comply with any requirements of the SEC in connection with
qualifying this Indenture under the TIA;
(h) to make any change that does not adversely affect the rights of
any Securityholder; or
(i) to provide for the issuance of the Exchange Securities or
Private Exchange Securities, which shall have terms substantially
identical in all material respects to the Initial Securities (except that
the transfer restrictions contained in the Initial Securities shall be
modified or eliminated, as appropriate), and which shall be treated,
together with any outstanding Initial Securities, as a single issue of
securities.
An amendment under this Section may not make any change that
adversely affects the rights under Article X or Article XII of any holder of
Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness (or any group or representative thereof authorized to give a
consent) consent to such change.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
SECTION 9.02. With Consent of Holders. The Company, the Guarantor
Subsidiaries and the Trustee may amend this Indenture or the Securities with the
written consent of the Holders of at least a majority in principal amount of the
Securities. However, without the consent of each Securityholder affected, an
amendment may not:
(a) reduce the amount of Securities whose Holders must consent to an
amendment;
(b) reduce the rate of or extend the time for payment of interest or
any liquidated damages on any Security;
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(c) reduce the principal of or extend the Stated Maturity of any
Security;
(d) reduce the premium payable upon the redemption of any Security
or change the time at which any Security may be redeemed in accordance
with Article III;
(e) make any Security payable in money other than that stated in the
Security;
(f) make any change in Article X or Article XII that adversely
affects the rights of any Securityholder under Article X or Article XII;
(g) impair the right of any Holder to receive payment of principal
of and interest on such Holder's Notes on or after the due dates therefor
or to institute suit for the enforcement of any payment on or with respect
to such Holder's Notes;
(h) make any change in Section 6.04 or 6.07 or the second sentence
of this Section; or
(i) modify or affect in any manner adverse to the Holders the terms
and conditions of the obligation of any Guarantor Subsidiary for the due
and punctual payment of the principal of or any liquidated damages or
interest on Securities.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
An amendment under this Section may not make any change that
adversely affects the rights under Article X of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
any group or representative thereof authorized to give a consent) consent to
such change.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
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SECTION 9.03. Compliance with Trust Indenture Act. Every amendment
to this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any such
Holder or subsequent Holder may revoke the consent or waiver as to such
Holder's Security or portion of the Security if the Trustee receives the notice
of revocation before the date the amendment or waiver becomes effective. After
an amendment or waiver becomes effective, it shall bind every Securityholder.
An amendment or waiver becomes effective once the requisite number of consents
are received by the Company or the Trustee.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated proxies), and only
those Persons, shall be entitled to give such consent or to revoke any consent
previously given or to take any such action, whether or not such Persons
continue to be Holders after such record date. No such consent shall be valid or
effective for more than 120 days after such record date.
SECTION 9.05. Notation on or Exchange of Securities. If an amendment
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article IX if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In sign-
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ing such amendment the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 7.01) shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of Counsel
stating that such amendment is authorized or permitted by this Indenture that
such amendment is the legal, valid and binding obligation of the Company and the
Guarantor Subsidiaries enforceable against them in accordance with its terms,
subject to customary exceptions, and complies with the provisions hereof
(including Section 9.03).
SECTION 9.07. Payment for Consent. Neither the Company nor any
Affiliate of the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
ARTICLE X
Subordination
SECTION 10.01. Agreement To Subordinate. The Company agrees, and
each Securityholder by accepting a Security agrees, that the Indebtedness
evidenced by the Securities is subordinated in right of payment, to the extent
and in the manner provided in this Article X, to the prior payment in full of
all Senior Indebtedness of the Company and that the subordination is for the
benefit of and enforceable by the holders of such Senior Indebtedness. The
Securities shall in all respects rank pari passu in right of payment with all
other Senior Subordinated Indebtedness of the Company and all existing Deferred
Obligations of the Company and shall rank senior in right of payment to all
existing and future Subordinated Obligations of the Company and all Deferred
Obligations of the Company Incurred after the Closing Date; and only
Indebtedness of the Company that is Senior Indebtedness of the Company shall
rank senior to the Securities in accordance with the provisions set forth
herein. For purposes of these subordination provisions, the Indebtedness
evidenced by the Securities is deemed to include the liquidated damages payable
pursuant to the provisions set forth in the Securities and in the Exchange and
Registration Rights Agreement. All provisions of this Article X shall be subject
to Section 10.12.
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SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of the Company to creditors upon a total
or partial liquidation or a total or partial dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property:
(a) holders of Senior Indebtedness of the Company shall be entitled
to receive payment in full in cash of the Senior Indebtedness before
Securityholders shall be entitled to receive any payment of principal of
or interest on the Securities; and
(b) until the Senior Indebtedness of the Company is paid in full in
cash, any payment or distribution to which Securityholders would be
entitled but for this Article X shall be made to holders of Senior
Indebtedness of the Company as their interests may appear, except that
Securityholders may receive shares of stock and any debt securities that
are subordinated to Senior Indebtedness of the Company to at least the
same extent as the Securities.
SECTION 10.03. Default on Senior Indebtedness. The Company may not
pay the principal of, premium (if any) or interest on the Securities or make any
deposit pursuant to Section 8.01 and may not repurchase, redeem or otherwise
retire any Securities (collectively, "pay the Securities") if (a) any Senior
Indebtedness of the Company is not paid when due or (b) any other default on
such Senior Indebtedness occurs and the maturity of such Senior Indebtedness is
accelerated in accordance with its terms unless, in either case, (i) the default
has been cured or waived and any such acceleration has been rescinded or (ii)
such Senior Indebtedness has been paid in full; provided, however, that the
Company may pay the Securities without regard to the foregoing if the Company
and the Trustee receive written notice approving such payment from the
Representative of the Senior Indebtedness with respect to which either of the
events in clause (a) or (b) of this sentence has occurred and is continuing.
During the continuance of any default (other than a default described in clause
(a) or (b) of the preceding sentence) with respect to any Designated Senior
Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or without the expiration of any applicable grace
periods, the Company may not pay the Securities for a period (a "Payment
Blockage Period") commencing upon the receipt by the Trustee (with a copy to the
Company) of written notice (a "Blockage Notice") of such
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default from the Representative of such Designated Senior Indebtedness
specifying an election to effect a Payment Blockage Period and ending 179 days
thereafter (or earlier if such Payment Blockage Period is terminated (i) by
written notice to the Trustee and the Company from the Person or Persons who
gave such Blockage Notice, (ii) by repayment in full of such Designated Senior
Indebtedness or (iii) because the default giving rise to such Blockage Notice is
no longer continuing). Notwithstanding the provisions described in the
immediately preceding sentence (but subject to the provisions contained in the
first sentence of this Section), unless the holders of such Designated Senior
Indebtedness or the Representative of such holders shall have accelerated the
maturity of such Designated Senior Indebtedness, the Company may resume payments
on the Securities after such Payment Blockage Period, including any missed
payments. Not more than one Blockage Notice may be given in any consecutive
360-day period, irrespective of the number of defaults with respect to
Designated Senior Indebtedness during such period; provided, however, that if
any Blockage Notice within such 360-day period is given by or on behalf of any
holders of Designated Senior Indebtedness other than the Bank Indebtedness, the
Representative of the Bank Indebtedness may give another Blockage Notice within
such period; provided further, however, that in no event may the total number of
days during which any Payment Blockage Period or Periods is in effect exceed 179
days in the aggregate during any 360 consecutive day period. For purposes of
this Section, no default or event of default that existed or was continuing on
the date of the commencement of any Payment Blockage Period with respect to the
Designated Senior Indebtedness initiating such Payment Blockage Period shall be,
or be made, the basis of the commencement of a subsequent Payment Blockage
Period by the Representative of such Designated Senior Indebtedness, whether or
not within a period of 360 consecutive days, unless such default or event of
default shall have been cured or waived for a period of not less than 90
consecutive days.
SECTION 10.04. Acceleration of Payment of Securities. If payment of
the Securities is accelerated because of an Event of Default, the Company or the
Trustee shall promptly notify the holders of the Designated Senior Indebtedness
(or their Representative) of the acceleration. If any Designated Senior
Indebtedness is outstanding, the Company may not pay the Securities until five
Business Days after such holders or the Representative of the Designated Senior
Indebtedness receive notice of such acceleration and, thereafter, may pay the
Securities only if this Article X otherwise permits payment at that time.
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SECTION 10.05. When Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of this Article X should
not have been made to them, the Securityholders who receive the distribution
shall hold it in trust for holders of Senior Indebtedness of the Company and pay
it over to them as their interests may appear.
SECTION 10.06. Subrogation. After all Senior Indebtedness of the
Company is paid in full in cash and until the Securities are paid in full in
cash, Securityholders shall be subrogated to the rights of holders of Senior
Indebtedness of the Company to receive distributions applicable to Senior
Indebtedness. A distribution made under this Article X to holders of Senior
Indebtedness which otherwise would have been made to Securityholders is not, as
between the Company and Securityholders, a payment by the Company on Senior
Indebtedness.
SECTION 10.07. Relative Rights. This Article X defines the relative
rights of Securityholders and holders of Senior Indebtedness of the Company.
Nothing in this Indenture shall:
(a) impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on and liquidated damages in respect of, the
Securities in accordance with their terms; or
(b) prevent the Trustee or any Securityholder from exercising its
available remedies upon a Default, subject to the rights of holders of
Senior Indebtedness of the Company to receive distributions otherwise
payable to Securityholders.
SECTION 10.08. Subordination May Not Be Impaired by Company. No
right of any holder of Senior Indebtedness to enforce the subordination of the
Indebtedness evidenced by the Securities shall be impaired by any act or failure
to act by the Company or by its failure to comply with this Indenture.
SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding
Section 10.03, the Trustee or Paying Agent may continue to make payments on the
Securities and shall not be charged with knowledge of the existence of facts
that would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives notice
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satisfactory to it that payments may not be made under this Article X. The
Company, the Registrar or co-registrar, the Paying Agent, a Representative or a
holder of Senior Indebtedness of the Company may give the notice; provided,
however, that, if an issue of Senior Indebtedness of the Company has a
Representative, only the Representative may give the notice. The Trustee shall
be entitled to rely on the delivery to it of a written notice by a Person
representing himself or itself to be a holder of any Senior Indebtedness of the
Company (or a Representative of such holder) to establish that such notice has
been given by a holder of such Senior Indebtedness or Representative thereof.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. The
Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article X with respect to any Senior Indebtedness of the Company which may at
any time be held by it, to the same extent as any other holder of Senior
Indebtedness of the Company; and nothing in Article VII shall deprive the
Trustee of any of its rights as such holder. Nothing in this Article X shall
apply to claims of, or payments to, the Trustee under or pursuant to Section
7.07.
SECTION 10.10. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness
of the Company, the distribution may be made and the notice given to their
Representative (if any).
SECTION 10.11. Article X Not To Prevent Events of Default or Limit
Right To Accelerate. The failure to make a payment pursuant to the Securities by
reason of any provision in this Article X shall not be construed as preventing
the occurrence of a Default. Nothing in this Article X shall have any effect on
the right of the Securityholders or the Trustee to accelerate the maturity of
the Securities.
SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article VIII by the Trustee
for the payment of principal of and interest on the Securities shall not be
subordinated to the prior payment of any Senior Indebtedness of the Company or
subject to the restrictions set forth in this Article X, and none of the
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Securityholders shall be obligated to pay over any such amount to the Company or
any holder of Senior Indebtedness of the Company or any other creditor of the
Company.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article X, the Trustee and the Securityholders
shall be entitled to rely (a) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section
10.02 are pending, (b) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (c) upon the Representatives for the holders of Senior
Indebtedness of the Company for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of the Senior
Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article X. In the event that the Trustee
determines, in good faith, that evidence is required with respect to the right
of any Person as a holder of Senior Indebtedness of the Company to participate
in any payment or distribution pursuant to this Article 10, the Trustee may
request such Person to furnish evidence to the reasonable satisfaction of the
Trustee as to the amount of Senior Indebtedness of the Company held by such
Person, the extent to which such Person is entitled to participate in such
payment or distribution and other facts pertinent to the rights of such Person
under this Article 10, and, if such evidence is not furnished, the Trustee may
defer any payment to such Person pending judicial determination as to the right
of such Person to receive such payment. The provisions of Sections 7.01 and 7.02
shall be applicable to all actions or omissions of actions by the Trustee
pursuant to this Article X.
SECTION 10.14. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness of the Company as provided in this Article X and appoints
the Trustee as attorney-in-fact for any and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness of the Company and shall not be liable to any
such holders if it shall mistakenly pay over or distribute to
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Securityholders or the Company or any other Person, money or assets to which any
holders of Senior Indebtedness of the Company shall be entitled by virtue of
this Article X or otherwise.
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness of the Company, whether such Senior Indebtedness was created or
acquired before or after the issuance of the Securities, to acquire and continue
to hold, or to continue to hold, such Senior Indebtedness and such holder of
Senior Indebtedness shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold, or in continuing
to hold, such Senior Indebtedness.
SECTION 10.17. Trustee's Compensation Not Prejudiced. Nothing in
this Article shall apply to amounts due to the Trustee pursuant to other
sections of this Indenture.
ARTICLE XI
Subsidiary Guarantees
SECTION 11.01. Subsidiary Guarantees. Each Guarantor Subsidiary
hereby jointly and severally guarantees on an unsecured, senior subordinated
basis, as a primary obligor and not merely as a surety, to each Holder and to
the Trustee and its successors and assigns (a) the full and punctual payment of
principal of and interest on and liquidated damages in respect of the Securities
when due, whether at Stated Maturity, by acceleration, by redemption or
otherwise, and all other monetary obligations of the Company under this
Indenture (including obligations to the Trustee) and the Securities and (b) the
full and punctual performance within applicable grace periods of all other
obligations of the Company whether for expenses, indemnification or otherwise
under this Indenture and the Securities (all the foregoing being hereinafter
collectively called the "Obligations"). Each Guarantor Subsidiary further agrees
that the Obligations may be extended or renewed, in whole or in part, without
notice or further assent from each such Guarantor Subsidiary, and that each such
Guarantor Subsidiary shall remain bound under this Article XI notwithstanding
any extension or renewal of any Obligation.
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Each Guarantor Subsidiary waives presentation to, demand of, payment
from and protest to the Company of any of the Obligations and also waives notice
of protest for nonpayment. Each Guarantor Subsidiary waives the benefits of N.C.
Gen. Stat. ss. 26-7 through ss. 26-9. Each Guarantor Subsidiary waives notice of
any default under the Securities or the Obligations. The obligations of each
Guarantor Subsidiary hereunder shall not be affected by (a) the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any right or
remedy against the Company or any other Person under this Indenture, the
Securities or any other agreement or otherwise; (b) any extension or renewal of
any thereof; (c) any rescission, waiver, amendment or modification of any of the
terms or provisions of this Indenture, the Securities or any other agreement;
(d) the release of any security held by any Holder or the Trustee for the
Obligations or any of them; (e) the failure of any Holder or Trustee to exercise
any right or remedy against any other guarantor of the Obligations; or (f) any
change in the ownership of such Guarantor Subsidiary, except as provided in
Section 11.02(b).
Each Guarantor Subsidiary hereby waives any right to which it may be
entitled to have its obligations hereunder divided among the Guarantor
Subsidiaries, such that such Guarantor Subsidiary's obligations would be less
than the full amount claimed. Each Guarantor Subsidiary hereby waives any right
to which it may be entitled to have the assets of the Company first be used and
depleted as payment of the Company's or such Guarantor Subsidiary's obligations
hereunder prior to any amounts being claimed from or paid by such Guarantor
Subsidiary hereunder. Each Guarantor Subsidiary hereby waives any right to which
it may be entitled to require that the Company be sued prior to an action being
initiated against such Guarantor Subsidiary.
Each Guarantor Subsidiary further agrees that its Subsidiary
Guarantee herein constitutes a guarantee of payment, performance and compliance
when due (and not a guarantee of collection) and waives any right to require
that any resort be had by any Holder or the Trustee to any security held for
payment of the Obligations.
The Subsidiary Guarantee of each Guarantor Subsidiary is, to the
extent and in the manner set forth in Article XII, subordinated and subject in
right of payment to the prior payment in full in cash of the principal of and
premium, if any, and interest on all Senior Indebtedness of the relevant
Guarantor Subsidiary and is made subject to such provisions of this Indenture.
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The obligations of each Guarantor Subsidiary hereunder shall not be
subject to any reduction, limitation, impairment or termination for any reason,
including any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to any defense of setoff, counterclaim, recoupment or
termination whatsoever or by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Guarantor Subsidiary herein
shall not be discharged or impaired or otherwise affected by the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any remedy
under this Indenture, the Securities or any other agreement, by any waiver or
modification of any thereof, by any default, failure or delay, wilful or
otherwise, in the performance of the Obligations, or by any other act or thing
or omission or delay to do any other act or thing which may or might in any
manner or to any extent vary the risk of any Guarantor Subsidiary or would
otherwise operate as a discharge of any Guarantor Subsidiary as a matter of law
or equity.
Each Guarantor Subsidiary agrees that its Subsidiary Guarantee shall
remain in full force and effect until payment in full of all the Obligations.
Each Guarantor Subsidiary further agrees that its Subsidiary Guarantee herein
shall continue to be effective or be reinstated, as the case may be, if at any
time payment, or any part thereof, of principal of or interest on any Obligation
is rescinded or must otherwise be restored by any Holder or the Trustee upon the
bankruptcy or reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against any
Guarantor Subsidiary by virtue hereof, upon the failure of the Company to pay
the principal of or interest on any Obligation when and as the same shall become
due, whether at maturity, by acceleration, by redemption or otherwise, or to
perform or comply with any other Obligation, each Guarantor Subsidiary hereby
promises to and shall, upon receipt of written demand by the Trustee, forthwith
pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal
to the sum of (i) the unpaid principal amount of such Obligations, (ii) accrued
and unpaid interest on such Obligations (but only to the extent not prohibited
by law) and (iii) all other monetary Obligations of the Company to the Holders
and the Trustee.
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Each Guarantor Subsidiary agrees that it shall not be entitled to
any right of subrogation in relation to the Holders in respect of any
Obligations guaranteed hereby until payment in full of all Obligations. Each
Guarantor Subsidiary further agrees that, as between it, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
Obligations guaranteed hereby may be accelerated as provided in Article VI for
the purposes of any Subsidiary Guarantee herein, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
Obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such Obligations as provided in Article VI, such Obligations
(whether or not due and payable) shall forthwith become due and payable by such
Guarantor Subsidiary for the purposes of this Section.
Each Guarantor Subsidiary also agrees to pay any and all reasonable
costs and expenses (including reasonable attorneys' fees and expenses) incurred
by the Trustee or any Holder in enforcing any rights under this Section.
Upon request of the Trustee, each Guarantor Subsidiary shall execute
and deliver such further instruments and do such further acts as may be
reasonably necessary or proper to carry out more effectively the purpose of this
Indenture.
SECTION 11.02. Limitation on Liability. (a) Any term or provision of
this Indenture to the contrary notwithstanding, the maximum, aggregate amount of
the obligations guaranteed hereunder by any Guarantor Subsidiary shall not
exceed the maximum amount that can be hereby guaranteed without rendering this
Indenture, as it relates to any Guarantor Subsidiary, voidable under applicable
law relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally.
(b) This Subsidiary Guarantee as to any Guarantor Subsidiary shall
terminate and be of no further force or effect upon (i) the merger or
consolidation of such Guarantor Subsidiary with or into any Person other than
the Company or a Subsidiary of the Company where such Guarantor Subsidiary is
not the surviving entity of such consolidation or merger or (ii) the sale by the
Company or any Subsidiary of the Company (or any pledgee of the Company) of the
Capital Stock of such Guarantor Subsidiary, where, after such sale, such
Guarantor Subsidiary is no longer a Subsidiary of the Company; provided,
however, that each such merger, consolidation or sale (or, in the case of a sale
by
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such a pledgee, the disposition of the proceeds of such sale) shall comply with
Section 4.06.
SECTION 11.03. Successors and Assigns. This Article XII shall be
binding upon each Guarantor Subsidiary and its successors and assigns and shall
inure to the benefit of the successors and assigns of the Trustee and the
Holders and, in the event of any transfer or assignment of rights by any Holder
or the Trustee, the rights and privileges conferred upon that party in this
Indenture and in the Securities shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions of this
Indenture.
SECTION 11.04. No Waiver. Neither a failure nor a delay on the part
of either the Trustee or the Holders in exercising any right, power or privilege
under this Article XI shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article XI at law,
in equity, by statute or otherwise.
SECTION 11.05. Modification. No modification, amendment or waiver of
any provision of this Article XI, nor the consent to any departure by any
Guarantor Subsidiary therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Trustee, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any Guarantor Subsidiary in any case shall
entitle such Guarantor Subsidiary to any other or further notice or demand in
the same, similar or other circumstances.
SECTION 11.06. Execution of Supplemental Indenture for Future
Guarantor Subsidiaries. Each Subsidiary which is required to become a Guarantor
Subsidiary pursuant to Section 4.11 shall promptly execute and deliver to the
Trustee a supplemental indenture in the form of Exhibit E hereto pursuant to
which such Subsidiary shall become a Guarantor Subsidiary under this Article XI
and shall guarantee the Obligations. Concurrently with the execution and
delivery of such supplemental indenture, the Company shall deliver to the
Trustee an Opinion of Counsel and an Officers' Certificate to the effect that
such supplemental indenture has been duly authorized, executed and delivered by
such Subsidiary and that, subject to the
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application of bankruptcy, insolvency, moratorium, fraudulent conveyance or
transfer and other similar laws relating to creditors' rights generally and to
the principles of equity, whether considered in a proceeding at law or in
equity, the Subsidiary Guarantee of such Guarantor Subsidiary is a legal, valid
and binding obligation of such Guarantor Subsidiary, enforceable against such
Guarantor Subsidiary in accordance with its terms.
ARTICLE XII
Subordination of the Subsidiary Guarantees
SECTION 12.01. Agreement To Subordinate. Each Guarantor Subsidiary
agrees, and each Securityholder by accepting a Security agrees, that the
Obligations of a Guarantor Subsidiary are subordinated in right of payment, to
the extent and in the manner provided in this Article XII, to the prior payment
in full of all Senior Indebtedness of such Guarantor Subsidiary and that the
subordination is for the benefit of and enforceable by the holders of Senior
Indebtedness of such Guarantor Subsidiary. The Obligations with respect to a
Guarantor Subsidiary shall in all respects rank pari passu in right of payment
with all other Senior Subordinated Indebtedness of such Guarantor Subsidiary and
shall rank senior in right of payment to all existing and future Subordinated
Obligations of such Guarantor Subsidiary and all Deferred Obligations of such
Guarantor Subsidiary Incurred after the Closing Date; and only Indebtedness of
such Guarantor Subsidiary that is Senior Indebtedness of such Guarantor
Subsidiary shall rank senior to the Obligations of such Guarantor Subsidiary in
accordance with the provisions set forth herein.
SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of a Guarantor Subsidiary to creditors
upon a total or partial liquidation or a total or partial dissolution of such
Guarantor Subsidiary or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to such Guarantor Subsidiary and its
properties:
(a) holders of Senior Indebtedness of such Guarantor Subsidiary
shall be entitled to receive payment in full in cash of such Senior
Indebtedness before Securityholders shall be entitled to receive any
payment of any Obligations from such Guarantor Subsidiary; and
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(b) until the Senior Indebtedness of such Guarantor Subsidiary is
paid in full in cash, any payment or distribution to which Securityholders
would be entitled but for this Article XII shall be made to holders of
such Senior Indebtedness as their respective interests may appear.
SECTION 12.03. Default on Senior Indebtedness of a Guarantor
Subsidiary. A Guarantor Subsidiary may not make any payment pursuant to any of
the Obligations or repurchase, redeem or otherwise retire any Securities
(collectively, "pay its Guarantee") if (a) any amount due in respect of any
Senior Indebtedness of such Guarantor Subsidiary is not paid when due or (b) any
other default on Senior Indebtedness of such Guarantor Subsidiary occurs and the
maturity of such Senior Indebtedness is accelerated in accordance with its terms
unless, in either case, (x) the default has been cured or waived and any such
acceleration has been rescinded or (y) such Senior Indebtedness has been paid in
full; provided, however, that such Guarantor Subsidiary may pay its Guarantee
without regard to the foregoing if such Guarantor Subsidiary and the Trustee
receive written notice approving such payment from the Representative of the
holders of the Senior Indebtedness with respect to which either of the events in
clause (a) or (b) of this sentence has occurred and is continuing. During the
continuance of any default (other than a default described in clause (a) or (b)
of the preceding sentence) with respect to any Designated Senior Indebtedness of
a Guarantor Subsidiary pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or without the expiration of any applicable grace
periods, such Guarantor Subsidiary may not pay its Guarantee for a period (a
"Payment Blockage Period") commencing upon the receipt by the Trustee (with a
copy to such Guarantor Subsidiary and the Company) of written notice (a
"Blockage Notice") of such default from the Representative of the holders of the
Designated Senior Indebtedness of such Guarantor Subsidiary specifying an
election to effect a Payment Blockage Period and ending 179 days thereafter (or
earlier if such Payment Blockage Period is terminated (i) by written notice to
the Trustee (with a copy to such Guarantor Subsidiary and the Company) from the
Person or Persons who gave such Blockage Notice, (ii) because such Designated
Senior Indebtedness has been repaid in full or (iii) because the default giving
rise to such Blockage Notice is no longer continuing). Notwithstanding the
provisions described in the immediately preceding sentence (but subject to the
provisions contained in the first sentence of this Section), unless the holders
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of such Designated Senior Indebtedness or the Representative of such holders
shall have accelerated the maturity of such Designated Senior Indebtedness, such
Guarantor Subsidiary may resume to pay its Guarantee after such Payment Blockage
Period, including any missed payments. Not more than one Blockage Notice may be
given with respect to a Guarantor Subsidiary in any consecutive 360-day period,
irrespective of the number of defaults with respect to Designated Senior
Indebtedness of such Guarantor Subsidiary during such period.
SECTION 12.04. Demand for Payment. If payment of the Securities is
accelerated because of an Event of Default and a demand for payment is made on a
Guarantor Subsidiary pursuant to Article XI, the Trustee shall promptly notify
the holders of the Designated Senior Indebtedness of such Guarantor Subsidiary
(or the Representative of such holders) of such demand. If any Designated Senior
Indebtedness of such Guarantor Subsidiary is outstanding, such Guarantor
Subsidiary may not pay its Guarantee until five Business Days after such holders
or the Representative of the holders of the Designated Senior Indebtedness of
such Guarantor Subsidiary receive notice of such demand and, thereafter, may pay
its Guarantee only if this Article XII otherwise permits payment at that time.
SECTION 12.05. When Distribution Must Be Paid Over. If a payment or
distribution is made to Securityholders that because of this Article XII should
not have been made to them, the Securityholders who receive the payment or
distribution shall hold such payment or distribution in trust for holders of the
Senior Indebtedness of the relevant Guarantor Subsidiary and pay it over to them
as their respective interests may appear.
SECTION 12.06. Subrogation. After all Senior Indebtedness of a
Guarantor Subsidiary is paid in full in cash and until the Securities are paid
in full in cash, Securityholders shall be subrogated to the rights of holders of
Senior Indebtedness of such Guarantor Subsidiary to receive distributions
applicable to Senior Indebtedness of such Guarantor Subsidiary. A distribution
made under this Article XII to holders of Senior Indebtedness of such Guarantor
Subsidiary which otherwise would have been made to Securityholders is not, as
between such Guarantor Subsidiary and Securityholders, a payment by such
Guarantor Subsidiary on Senior Indebtedness of such Guarantor Subsidiary.
SECTION 12.07. Relative Rights. This Article XII defines the
relative rights of Securityholders and holders
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of Senior Indebtedness of a Guarantor Subsidiary. Nothing in this Indenture
shall:
(a) impair, as between a Guarantor Subsidiary and Securityholders,
the obligation of a Guarantor Subsidiary which is absolute and
unconditional, to pay its Obligations to the extent set forth in Article
XI; or
(b) prevent the Trustee or any Securityholder from exercising its
available remedies upon a default by a Guarantor Subsidiary under its
Obligations, subject to the rights of holders of Senior Indebtedness of
such Guarantor Subsidiary to receive distributions otherwise payable to
Securityholders.
SECTION 12.08. Subordination May Not Be Impaired by a Guarantor
Subsidiary. No right of any holder of Senior Indebtedness of a Guarantor
Subsidiary to enforce the subordination of the Obligations of such Guarantor
Subsidiary shall be impaired by any act or failure to act by such Guarantor
Subsidiary or by its failure to comply with this Indenture.
SECTION 12.09. Rights of Trustee and Paying Agent. Notwithstanding
Section 12.03, the Trustee or the Paying Agent may continue to make payments on
the Securities and shall not be charged with knowledge of the existence of facts
that would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives notice satisfactory to it that payments may not be made under this
Article XII. A Guarantor Subsidiary, the Registrar or co-registrar, the Paying
Agent, a Representative or a holder of Senior Indebtedness of a Guarantor
Subsidiary may give the notice; provided, however, that if an issue of Senior
Indebtedness of a Guarantor Subsidiary has a Representative, only the
Representative may give the notice. The Trustee shall be entitled to rely on the
delivery to it of a written notice by a Person representing himself or itself to
be a holder of any Senior Indebtedness of a Guarantor Subsidiary (or a
Representative of such holder) to establish that such notice has been given by a
holder of such Senior Indebtedness or Representative thereof.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness of a Guarantor Subsidiary with the same rights it would have if it
were not Trustee. The Registrar and co-registrar and the Paying Agent may do the
same with like rights. The Trustee shall be entitled to all the rights set forth
in this Article XII
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with respect to any Senior Indebtedness of a Guarantor Subsidiary which may at
any time be held by it, to the same extent as any other holder of Senior
Indebtedness of such Guarantor Subsidiary; and nothing in Article VII shall
deprive the Trustee of any of its rights as such holder. Nothing in this Article
XII shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 7.07.
SECTION 12.10. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Designated Senior
Indebtedness of a Guarantor Subsidiary, the distribution may be made and the
notice given to their Representative (if any).
SECTION 12.11. Article XII Not To Prevent Events of Default or Limit
Right To Accelerate. The failure of a Guarantor Subsidiary to make a payment on
any of its Obligations by reason of any provision in this Article XII shall not
be construed as preventing the occurrence of a default by such Guarantor
Subsidiary under its Obligations. Nothing in this Article XII shall have any
effect on the right of the Securityholders or the Trustee to make a demand for
payment on a Guarantor Subsidiary pursuant to Article XII.
SECTION 12.12. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article XII, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 12.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior
Indebtedness of a Guarantor Subsidiary for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
the Senior Indebtedness of a Guarantor Subsidiary and other Indebtedness of a
Guarantor Subsidiary, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto or to
this Article XII. In the event that the Trustee determines, in good faith, that
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness of a Guarantor Subsidiary to participate in any payment or
distribution pursuant to this Article XII, the Trustee may request such Person
to furnish evidence to the reasonable satisfaction of the Trustee as to the
amount of Senior Indebtedness of such Guarantor Subsidiary held by such Person,
the extent to which such Person is entitled to participate in such payment or
distribution and other facts
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pertinent to the rights of such Person under this Article XII, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all
actions or omissions of actions by the Trustee pursuant to this Article XII.
SECTION 12.13. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
or her behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination between the Securityholders and the
holders of Senior Indebtedness of each of the Guarantor Subsidiaries as provided
in this Article XII and appoints the Trustee as attorney-in-fact for any and all
such purposes.
SECTION 12.14. Trustee Not Fiduciary for Holders of Senior
Indebtedness of a Guarantor Subsidiary. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness of a Guarantor
Subsidiary and shall not be liable to any such holders if it shall mistakenly
pay over or distribute to Securityholders or the relevant Guarantor Subsidiary
or any other Person, money or assets to which any holders of Senior Indebtedness
of such Guarantor Subsidiary shall be entitled by virtue of this Article XII or
otherwise.
SECTION 12.15. Reliance by Holders of Senior Indebtedness of a
Guarantor Subsidiary on Subordination Provisions. Each Securityholder by
accepting a Security acknowledges and agrees that the foregoing subordination
provisions are, and are intended to be, an inducement and a consideration to
each holder of any Senior Indebtedness of a Guarantor Subsidiary, whether such
Senior Indebtedness was created or acquired before or after the issuance of the
Securities, to acquire and continue to hold, or to continue to hold, such Senior
Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively
to have relied on such subordination provisions in acquiring and continuing to
hold, or in continuing to hold, such Senior Indebtedness.
SECTION 12.16. Defeasance. The terms of this Article XII shall not
apply to payments from money or the proceeds of U.S. Government Obligations held
in trust by the Trustee for the payment of principal of and interest on the
Securities pursuant to the provisions described in Section 8.03.
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ARTICLE XIII
Miscellaneous
SECTION 13.01. Trust Indenture Act Controls. If any provision of
this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 13.02. Notices. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company:
Richmont Marketing Specialists Inc.
2324 Gateway Drive
Irving, Texas 75063
Attention of:
Chief Financial Officer
if to the Trustee:
Texas Commerce Bank National Association
2200 Ross Avenue, 5th Floor
Dallas, Texas 75201
Attention of:
Corporate Trust Department
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be
mailed to the Securityholder at the Securityholder's address as it appears on
the registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to
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TIA ss. 312(b) with other Securityholders with respect to their rights under
this Indenture or the Securities. The Company, the Trustee, the Registrar and
anyone else shall have the protection of TIA ss. 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take or refrain
from taking any action under this Indenture, the Company shall furnish to the
Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(a) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(d) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 13.06. When Securities Disregarded. In determining whether
the Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company, any Guarantor
Subsidiary or by any Person directly or indirectly
<PAGE> 110
102
controlling or controlled by or under direct or indirect common control with the
Company or any Guarantor Subsidiary shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which the Trustee knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Securities outstanding at the time shall be
considered in any such determination.
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar. The
Trustee may make reasonable rules for action by or a meeting of Securityholders.
The Registrar and the Paying Agent may make reasonable rules for their
functions.
SECTION 13.08. Legal Holidays. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions are not required to be open in
the State of New York. If a payment date is a Legal Holiday, payment shall be
made on the next succeeding day that is not a Legal Holiday, and no interest
shall accrue for the intervening period. If a regular record date is a Legal
Holiday, the record date shall not be affected.
SECTION 13.09. Governing Law. This Indenture and the Securities
shall be governed by, and construed in accordance with, the laws of the State of
New York but without giving effect to applicable principles of conflicts of law
to the extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 13.10. No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or this Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder shall waive and release
all such liability. The waiver and release shall be part of the consideration
for the issue of the Securities.
SECTION 13.11. Successors. All agreements of the Company and each
Guarantor Subsidiary in this Indenture and the Securities shall bind its
successors. All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 13.12. Multiple Originals. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
<PAGE> 111
103
SECTION 13.13. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
<PAGE> 112
104
IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed as of the date first written above.
RICHMONT MARKETING SPECIALISTS INC.,
By /s/ Timothy M. Byrd
--------------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
MARKETING SPECIALISTS SALES
COMPANY,
By /s/ Timothy M. Byrd
--------------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
MSSC CAROLINA, INC.,
By /s/ Timothy M. Byrd
--------------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
FERRO & ASSOCIATES, INC.,
By /s/ Timothy M. Byrd
--------------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
BROMAR, INC.,
By /s/ Timothy M. Byrd
--------------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
<PAGE> 113
105
GENE SANFORD & ASSOCIATES, INC.,
By /s/ Timothy M. Byrd
--------------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
SERVICE ASSETS CORP.,
By /s/ Timothy M. Byrd
--------------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
BROKERAGE SERVICES, INC.,
By /s/ Timothy M. Byrd
--------------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
BATESTAS & CO.,
By /s/ Timothy M. Byrd
--------------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
TOWER MARKETING, INC.,
By /s/ Timothy M. Byrd
--------------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
T-BAR BROKERAGE,
By /s/ Timothy M. Byrd
--------------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
<PAGE> 114
106
T'NT NATIONAL CONVENIENCE STORE BROKERS, INC.,
By /s/ Timothy M. Byrd
--------------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
ATLAS MARKETING COMPANY, INC.,
By /s/ Timothy M. Byrd
--------------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
CENTURY FOOD BROKERS OF HICKORY, INC.,
By /s/ Timothy M. Byrd
--------------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
EAST COAST FOOD BROKERAGE, INC.,
By /s/ Timothy M. Byrd
--------------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
ULTIMATE FOOD SALES, INC.,
By /s/ Timothy M. Byrd
--------------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
CUMBERLAND FOOD BROKERS, INC.,
By /s/ Timothy M. Byrd
--------------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
<PAGE> 115
107
MEATMASTER BROKERAGE, INC.,
By /s/ Timothy M. Byrd
--------------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
<PAGE> 116
108
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
as Trustee,
By /s/ Michael A. Scrivner
--------------------------------------
Name: Michael A. Scrivner
Title: Vice President
<PAGE> 117
EXHIBIT A
[FORM OF FACE OF INITIAL SECURITY]
[GLOBAL SECURITIES LEGEND]
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES
IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY
TO THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.(1)
[RESTRICTED SECURITIES LEGEND]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT
- --------
(1) This paragraph should only be added if the security is issued in global
form.
<PAGE> 118
2
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION
S UNDER THE SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING
OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN
INSTITUTIONAL INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM
PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND IN THE CASE OF ANY OF THE FOREGOING CLAUSES (A) THROUGH (F), A CERTIFICATE
OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY AND THE TRUSTEE. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
RICHMONT MARKETING SPECIALISTS INC.
10 1/8% SENIOR SUBORDINATED NOTE DUE 2007
No. ___ CUSIP No.
$________
RICHMONT MARKETING SPECIALISTS INC., a Delaware corporation (the
"Company"), promises to pay to _______________,or registered assigns, the
principal sum of _____________ on December 15, 2007.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
<PAGE> 119
3
Additional provisions of this Security are set forth on the other
side of this Security.
Dated: December 19, 1997
RICHMONT MARKETING SPECIALISTS INC.,
by
---------------------------------
Name:
Title:
by
---------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, as Trustee,
certifies that this is
one of the Securities [Seal]
referred to in the Indenture,
by
-----------------------------
Authorized Signatory
<PAGE> 120
4
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
10 1/8% Senior Subordinated Note due 2007
1. Interest
RICHMONT MARKETING SPECIALISTS INC., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above. Capitalized
terms used but not defined herein shall have the meanings set forth in the
Indenture.
The Company will pay interest and liquidated damages, if any,
semiannually on June 15 and December 15 of each year. Interest on the Securities
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the Issue Date with respect to this Security.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay interest on overdue principal at the rate borne by
the Securities, and it shall pay interest on overdue installments of interest at
the same rate to the extent lawful.
The Company and the Guarantor Subsidiaries will use their best
efforts to have the Exchange Offer Registration Statement or, if applicable, the
Shelf Registration Statement (each a "Registration Statement") declared
effective by the Commission as promptly as practicable after the filing thereof.
If (i) the Shelf Registration Statement or Exchange Offer Registration
Statement, as applicable under the Exchange and Registration Rights Agreement
dated the date hereof is not filed with the Commission within 16 months after
the Closing Date, (ii) the Exchange Offer Registration Statement or, as the case
may be, the Shelf Registration Statement, is not declared effective within 17
months after the Closing Date, (iii) the Exchange Offer is not consummated
within 18 months after the Closing Date, or (iv) the Shelf Registration
Statement if filed and declared effective within 17 months after the Closing
Date but shall thereafter cease to be effective (at any time that the Company is
obligated to maintain the effectiveness thereof) without being succeeded within
60 days by an additional Registration Statement filed and declared effective
(each such event referred to in clauses (i) through (iv), a "Registration
Default"), the Company will pay liquidated damages to each holder of Registrable
Securities, during the period of such Registration Default, in an amount equal
to $0.192 per week per $1,000 principal
<PAGE> 121
5
amount of the Securities constituting Registrable Securities held by such holder
until the applicable Registration Statement if filed or declared effective, the
Exchange Offer is consummated or the Shelf Registration Statement again becomes
effective, as the case may be. All accrued liquidated damages shall be paid to
holders in the same manner as interest payments on the Securities on semiannual
payment dates which correspond to interest payment dates for the Securities.
Following the cure of all Registration Defaults, the accrual of liquidated
damages will cease. The Trustee shall have no responsibility with respect to the
determination of the amount of any such liquidated damages. For purposes of the
foregoing, "Registrable Securities" means (i) each Initial Security until the
date on which such Initial Security has been exchanged for a freely transferable
Exchange Security in the Exchange Offer, (ii) each Initial Security or Private
Exchange Security until the date on which such Initial Security or Private
Exchange Security has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (iii) each
Initial Security or Private Exchange Security until the date on which such
Initial Security or Private Exchange Security is distributed to the public
pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule
144(k) under the Securities Act.
2. Method of Payment
The Company will pay interest (except defaulted interest) on the
Securities to the Persons who are registered holders of Securities at the close
of business on the June 1 or December 1 next preceding the interest payment date
even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. However, the Company may pay principal and interest by
check payable in such money or by wire transfer of federal funds.
3. Paying Agent and Registrar
Initially, TEXAS COMMERCE BANK NATIONAL ASSOCIATION (the "Trustee")
will act as Paying Agent and Registrar. The Company may appoint and change any
Paying Agent, Registrar or co-registrar. The Company or any
<PAGE> 122
6
domestically organized Wholly Owned Subsidiary may act as Paying Agent,
Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of
December 19, 1997 (the "Indenture"), among the Company, the Guarantor
Subsidiaries and the Trustee. The terms of the Securities include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date
of the Indenture (the "Act"). Terms defined in the Indenture and not defined
herein have the meanings ascribed thereto in the Indenture. The Securities are
subject to all such terms, and Securityholders are referred to the Indenture and
the Act for a statement of those terms.
The Securities are unsecured senior subordinated obligations of the
Company and are limited to $150,000,000 in aggregate principal amount
outstanding, of which $100,000,000 in aggregate principal amount will be
initially issued on the Closing Date. Subject to the conditions set forth in the
Indenture, the Company may issue up to an additional $50,000,000 aggregate
principal amount of Additional Securities. This Security is one of the Original
Securities referred to in the Indenture. The Securities include the Initial
Securities (consisting of the Original Securities and the Additional Securities)
and any Exchange Securities and Private Exchange Securities issued in exchange
for the Initial Securities pursuant to the Indenture. The Initial Securities,
the Exchange Securities and the Private Exchange Securities are treated as a
single class of securities under the Indenture. The Indenture imposes certain
limitations on the Incurrence of Indebtedness by the Company and its Restricted
Subsidiaries; the payment of dividends on, and redemption of, the Capital Stock
of the Company and its Restricted Subsidiaries and the redemption of certain
subordinated obligations of the Company and its Subsidiaries; other payments by
the Company and its Restricted Subsidiaries; Investments; sales and transfers of
assets and Capital Stock of the Restricted Subsidiaries; the issuance or sale of
Capital Stock of Restricted Subsidiaries; certain transactions with Affiliates
of the Company; the lines of business in which the Company and its Restricted
Subsidiaries may operate; Sale/Leaseback Transactions; and consolidations,
mergers and transfers of all or substantially all of the Company's or a
Guarantor Subsidiary's assets. In addition, the Indenture
<PAGE> 123
7
prohibits certain restrictions on distributions from Restricted Subsidiaries.
To secure the due and punctual payment of the principal and
liquidated damages and interest, if any, on the Securities and all other amounts
payable by the Company under the Indenture and the Securities when and as the
same shall be due and payable, whether at maturity, by acceleration or
otherwise, according to the terms of the Securities and the Indenture, the
Guarantor Subsidiaries have unconditionally guaranteed the Obligations on a
senior subordinated basis pursuant to the terms of the Indenture.
5. Optional Redemption
Except as set forth in the next paragraph, the Securities may not be
redeemed prior to December 15, 2002. Thereafter, the Securities will be subject
to redemption at any time at the option of the Company, in whole or in part, at
the following redemption prices (expressed as percentages of principal amount),
plus accrued and unpaid interest, if any, to the applicable redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date) if redeemed during
the 12-month period beginning on or after December 15 of the years set forth
below:
<TABLE>
<CAPTION>
Redemption
Period Price
- ------ -----
<S> <C>
2002............................................................... 105.063%
2003 ........................................................... 103.375%
2004............................................................... 101.688%
2005 and thereafter................................................ 100.000%
</TABLE>
In addition, at any time and from time to time prior to December 15,
2000, the Company may redeem in the aggregate up to 35% of the original
aggregate principal amount of Securities with the proceeds of one or more Public
Equity Offerings by the Company following which there is a Public Market at a
redemption price of 110.125% of the principal amount thereof, plus the accrued
and unpaid interest, if any, to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date); provided, however, that at least 65% of the
original aggregate principal amount of Initial Securities remains outstanding
immediately after the occurrence of such redemption.
<PAGE> 124
8
6. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at its registered address all in accordance with the
Indenture. If less than all of the Securities are to be redeemed at any time,
the Trustee shall select the Securities to be redeemed pro rata, by lot or by a
method that complies with applicable legal and securities exchange requirements,
if any, and that the Trustee considers fair and appropriate and in accordance
with methods generally used at the time of selection by fiduciaries in similar
circumstances; provided that Securities in denominations larger than $1,000 may
be redeemed in part but only in whole multiples of $1,000. If money sufficient
to pay the redemption price of and accrued interest (if any) on all Securities
(or portions thereof) to be redeemed on the redemption date is deposited with
the Paying Agent on or before the redemption date and certain other conditions
are satisfied, on and after such date interest ceases to accrue on such
Securities (or such portions thereof) called for redemption.
7. Repurchase at the Option of the Holder
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions set forth in the Indenture, to cause the
Company to repurchase all or any part of the Securities of such Holder at a
purchase price equal to 101% of the principal amount of the Securities to be
repurchased plus accrued and unpaid interest, if any, to the date of repurchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date) as provided in, and
subject to the terms of, the Indenture.
8. Subordination
The Securities are subordinated to Senior Indebtedness as defined in
the Indenture. To the extent provided in the Indenture, Senior Indebtedness must
be paid before the Securities may be paid. The Company and each Guarantor
Subsidiary agrees, and each Securityholder by accepting a Security agrees, to
the subordination provisions contained in the Indenture and authorizes the
Trustee to give it effect and appoints the Trustee as attorney-in-fact for such
purpose.
<PAGE> 125
9
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Securities in accordance with the Indenture. Upon any transfer or
exchange, the Registrar may require a Holder, among other things, to furnish
appropriate endorsements or transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not register
the transfer of or exchange any Securities selected for redemption (except, in
the case of a Security to be redeemed in part, the portion of the Security not
to be redeemed) or to transfer or exchange any Securities for a period of 15
days prior to a selection of Securities to be redeemed.
10. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner
of it for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
12. Discharge and Defeasance
Subject to certain conditions set forth in the Indenture, the
Company at any time may terminate some or all of its obligations under the
Securities and the Indenture if the Company deposits with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.
13. Amendment; Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least
<PAGE> 126
10
a majority in principal amount outstanding of the Securities and (ii) any past
default or noncompliance with any provision of the Indenture (other than
payment of principal and interest or default in respect of a provision that
under Section 9.02 of the Indenture cannot be amended without the consent of
each Securityholder affected) may be waived with the consent of the Holders of a
majority in principal amount then outstanding of the Securities. Subject to
certain exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company, the Guarantor Subsidiaries and the Trustee may
amend the Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency, or to comply with Article V of the Indenture, or to provide for
uncertificated Securities in addition to or in place of certificated Securities
(provided that the uncertificated Securities are issued in registered form for
purposes of Section 163(f) of the Code, or in a manner such that the
uncertificated Securities are described in Section 163(f)(2)(B) of the Code), to
make any change in Article X or Article XII that would limit or terminate the
benefits available to any holder of Senior Indebtedness under Article X or
Article XII, to add additional Guarantees with respect to the Securities or to
secure the Securities, to make any change that would provide any additional
rights or benefits to the Holders of Securities or that does not adversely
affect the rights under this Indenture of any such Holder, to surrender rights
and powers conferred on the Company, to comply with requirements of the SEC in
order to effect or maintain the qualification of the Indenture under the TIA or
to provide for the issuance and authorization of the Exchange Securities or
Private Exchange Securities.
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest on the Securities (whether or not such payment is
prohibited by Article X); (ii) default in payment of principal on the Securities
at maturity, upon redemption pursuant to paragraph 5 of the Securities, upon
acceleration or otherwise, or failure by the Company to redeem or purchase
(whether or not such payment is prohibited by Article X) Securities when
required; (iii) failure by the Company to comply with other covenants and
agreements in the Indenture or the Securities, in certain cases subject to
notice and lapse of time; (iv) certain accelerations (including failure to pay
within any grace period after final maturity) of other Indebtedness of the
Company or any Restricted Subsidiary if the amount accelerated (or so unpaid)
exceeds $5,000,000 or its foreign currency equivalent; (v) certain
<PAGE> 127
11
events of bankruptcy, insolvency or reorganization with respect to the Company
and any Restricted Subsidiary which is a Significant Subsidiary; (vi) certain
judgments or decrees for the payment of money in excess of $5,000,000 or its
foreign currency equivalent against the Company or any Restricted Subsidiary;
and (vii) certain failures of a Subsidiary Guarantee to remain in full force and
effect and certain denials or disaffirmations of obligations under the Indenture
or a Subsidiary Guarantee by a Guarantor Subsidiary. If an Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the Securities may declare all the Securities to be due and
payable immediately. Certain events of bankruptcy or insolvency are Events of
Default that will result in the Securities being due and payable immediately.
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives indemnity or security
satisfactory to it. Subject to certain limitations, Holders of a majority in
principal amount of the Securities may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Securityholders notice of any
continuing Default (except a Default in payment of principal or interest) if it
determines that withholding notice is in the interest of the Holders.
15. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may other wise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
16. No Personal Liability of Directors, Officers, Employees and Stockholders
A director, officer, employee, stockholder or Affiliate of the
Company, as such, shall not have any liability for any obligations of the
Company under the Securities or this Indenture or for any claim based on, in
respect of, or by reason of such obligations or their creation. No director,
officer, employee, stockholder or Affiliate of any of the Guarantor
Subsidiaries, as such,
<PAGE> 128
12
will have any liability for any obligations of the Guarantor Subsidiaries under
the Security Guarantees, the Indenture or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder of Securities
and Security Guarantees by accepting a Security and a Security Guarantee waives
and releases all such liabilities. The waiver and release are part of the
consideration for issuance of the Securities and the Security Guarantees.
17. Governing Law
THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
18. Authentication
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
19. Abbreviations
Customary abbreviations may be used in the name of a Securityholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
20. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
<PAGE> 129
13
The Company will furnish to any Securityholder upon written request
and without charge to the Securityholder a copy of the Indenture which has in
it the text of this Security in larger type. Requests may be made to:
RICHMONT MARKETING SPECIALISTS INC.
2324 Gateway Drive
Irving, Texas 75063
Attention of Secretary
<PAGE> 130
14
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint ____________________________________ agent to transfer
this Security on the books of the Company. The agent may substitute another to
act for him.
Date: ________________ Your Signature: _____________________
Signature Guarantee:____________________________________________________________
(Signature must be guaranteed by a participant in a
recognized signature guarantee medallion program)
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
<PAGE> 131
15
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER RESTRICTED SECURITIES
Reference is hereby made to that certain Indenture dated December 19, 1997 (the
"Indenture") among Richmont Marketing Specialists Inc., as Issuer (the
"Company"), the Guarantor Subsidiaries (as defined therein) and Texas Commerce
Bank National Association, as trustee (the "Trustee"). Capitalized terms used
but not defined herein shall have the meanings set forth in the Indenture.
This certificate relates to $_________ principal amount of Securities held in
(check applicable space) ____ book-entry or _____ definitive form by the
undersigned.
The undersigned (check one box below):
|_| has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Security held by the Depository a
Security or Securities in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial
interest in such Global Security (or the portion thereof indicated above);
|_| has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the periods referred to in Rule
144(k) under the Securities Act, the undersigned confirms that such Securities
are being transferred in accordance with its terms:
CHECK ONE BOX BELOW:
(1) |_| to the Company; or
(2) |_| pursuant to an effective registration statement under
the Securities Act of 1933; or
(3) |_| inside the United States to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act
of 1933) that purchases for its own account or for the
account of a qualified institutional buyer to whom
notice is given that such transfer is being made
<PAGE> 132
16
in reliance on Rule 144A under the Securities Act, in
each case pursuant to and in compliance with Rule 144A
under the Securities Act of 1933; or
(4) |_| outside the United States in an offshore transaction
within the meaning of Regulation S under the Securities
Act in compliance with Rule 904 under the Securities Act
of 1933; or
(5) |_| to an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act
of 1933) that has furnished to the Trustee a signed
letter containing certain representations and agreements
(the form of which letter is attached to the Indenture
as Exhibit D and which may be obtained from the
Trustee); or
(6) |_| pursuant to another available exemption from
registration provided by Rule 144 under the Securities
Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to
register any of the Securities evidenced by this certificate in the
name of any person other than the registered holder thereof;
provided, however, that if box (4), (5) or (6) is checked, the
Trustee may require, prior to registering any such transfer of the
Securities, such legal opinions, certifications and other
information as the Company has reasonably requested to confirm that
such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act of 1933, such as the exemption provided by Rule 144
under such Act.
____________________________
Signature
Signature Guarantee:____________________________________________________________
(Signature must be guaranteed by a participant in a
recognized signature guarantee medallion program)
<PAGE> 133
17
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933 ("Rule 144A"), and is aware that the sale to it is being made in reliance
on Rule 144A and acknowledges that it has received such information regarding
the Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated: ________________ ________________________________________
NOTICE: To be executed by an executive
officer
<PAGE> 134
18
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have
been made:
<TABLE>
<CAPTION>
Date of Amount of decrease Amount of increase Principal amount Signature of
Exchange in Principal in Principal of this Global authorized officer
Amount of this Amount of this Security following of Trustee or
Global Security Global Security such decrease or Securities
increase Custodian
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 135
19
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.06 or 4.08 of the Indenture, check the box:
|_| 4.06 Asset Sale |_| 4.08 Change of Control
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount:
$_______________.
Date: __________________ Your Signature: ____________________________________
(Sign exactly as your name appears
on the other side of the Security)
______________________
Tax I.D. number
Signature Guarantee:____________________________________________________________
(Signature must be guaranteed by a participant in a
recognized signature guarantee medallion program)
<PAGE> 136
EXHIBIT B
[FORM OF FACE OF EXCHANGE SECURITY]
[Global Securities Legend]
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES
IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY
TO THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN. (2)
RICHMONT MARKETING SPECIALISTS, INC.
10 1/8% SENIOR SUBORDINATED NOTE DUE 2007
No. _______ CUSIP No. _________
$
RICHMONT MARKETING SPECIALISTS INC., a Delaware corporation (the
"Company"), promises to pay to __________, or registered assigns, the principal
sum of $_________ on December 15, 2007.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
- --------
(2) This paragraph should only be added if the Security is issued in global
form.
<PAGE> 137
2
Additional provisions of this Security are set forth on the other
side of this Security.
Dated: _________________
RICHMONT MARKETING SPECIALISTS INC.,
by
---------------------------------
Name:
Title:
by
---------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION, as
Trustee, certifies that
this is one of the [Seal]
Securities referred to
in the Indenture,
by
------------------------------
Authorized Signatory
<PAGE> 138
3
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY]
10 1/8% Senior Subordinated Note due 2007
1. Interest
RICHMONT MARKETING SPECIALISTS INC., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company") promises to pay interest on the
principal amount of this Security at the rate per annum shown above. Capitalized
terms used but not defined herein shall have the meanings set forth in the
Indenture.
The Company will pay interest and liquidated damages, if any,
semiannually on June 15 and December 15 of each year. Interest on the Securities
will accrue from the most recent date to which interest has been paid on the
Initial Security for which this Exchange Security was issued or, if no interest
has been paid, from the Issue Date with respect to this Security. Interest will
be computed on the basis of a 360-day year of twelve 30-day months. The Company
shall pay interest on overdue principal at the rate borne by the Securities, and
it shall pay interest on overdue installments of interest at the same rate to
the extent lawful.
2. Method of Payment
The Company will pay interest (except defaulted interest) on the
Securities to the Persons who are registered holders of Securities at the close
of business on the June 1 or December 1 next preceding the interest payment date
even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. However, the Company may pay principal and interest by
check payable in such money or by wire transfer of federal funds.
3. Paying Agent and Registrar
Initially, TEXAS COMMERCE BANK NATIONAL ASSOCIATION (the "Trustee")
will act as Paying Agent and Registrar. The Company may appoint and change any
Paying
<PAGE> 139
4
Agent, Registrar or co-registrar. The Company or any domestically organized
Wholly Owned Subsidiary may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of
December 19, 1997 (the "Indenture"), among the Company, the Guarantor
Subsidiaries and the Trustee. The terms of the Securities include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date
of the Indenture (the "Act"). Terms defined in the Indenture and not defined
herein have the meanings ascribed thereto in the Indenture. The Securities are
subject to all such terms, and Securityholders are referred to the Indenture and
the Act for a statement of those terms.
The Securities are unsecured senior subordinated obligations of the
Company and are limited to $150,000,000 in aggregate principal amount
outstanding, of which $100,000,000 in aggregate principal amount will be
initially issued on the Closing Date. Subject to the conditions set forth in the
Indenture, the Company may issue up to an additional $50,000,000 aggregate
principal amount of Additional Securities. This Security is one of the Exchange
Securities referred to in the Indenture. The Securities include the Initial
Securities (consisting of the Original Securities and the Additional Securities)
and any Exchange Securities and Private Exchange Securities issued in exchange
for the Initial Securities pursuant to the Indenture. The Initial Securities,
the Exchange Securities and the Private Exchange Securities are treated as a
single class of securities under the Indenture. The Indenture imposes certain
limitations on the Incurrence of Indebtedness by the Company and its Restricted
Subsidiaries; the payment of dividends on, and redemption of, the Capital Stock
of the Company and its Restricted Subsidiaries and the redemption of certain
subordinated obligations of the Company and its Subsidiaries; other payments by
the Company and its Restricted Subsidiaries; Investments; sales and transfers of
assets and Capital Stock of the Restricted Subsidiaries; the issuance or sale of
Capital Stock of Restricted Subsidiaries; certain transactions with Affiliates
of the Company; the lines of business in which the Company and its Restricted
Subsidiaries may operate; Sale/Leaseback Transactions; and consolidations,
mergers and transfers of all or substantially all of the Company's or a
Guarantor Subsidiary's assets. In addition, the Indenture
<PAGE> 140
5
prohibits certain restrictions on distributions from Restricted Subsidiaries.
To secure the due and punctual payment of the principal and
liquidated damages and interest, if any, on the Securities and all other amounts
payable by the Company under the Indenture and the Securities when and as the
same shall be due and payable, whether at maturity, by acceleration or
otherwise, according to the terms of the Securities and the Indenture, the
Guarantor Subsidiaries have unconditionally guaranteed the Obligations on a
senior subordinated basis pursuant to the terms of the Indenture.
5. Optional Redemption
Except as set forth in the next paragraph, the Securities may not be
redeemed prior to December 15, 2002. Thereafter, the Securities will be subject
to redemption at any time at the option of the Company, in whole or in part, at
the following redemption prices (expressed as percentages of principal amount),
plus accrued and unpaid interest, if any, to the applicable redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date) if redeemed during
the 12-month period beginning on or after December 15 of the years set forth
below:
<TABLE>
<CAPTION>
Redemption
Period Price
- ------ -----
<S> <C>
2002............................................................... 105.063%
2003 ........................................................... 103.375%
2004............................................................... 101.688%
2005 and thereafter................................................ 100.000%
</TABLE>
In addition, at any time and from time to time prior to December 15,
2000, the Company may redeem in the aggregate up to 35% of the original
aggregate principal amount of Securities with the proceeds of one or more Public
Equity Offerings by the Company following which there is a Public Market at a
redemption price of 110.125% of the principal amount thereof, plus the accrued
and unpaid interest, if any, to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date); provided, however, that at least 65% of the
original aggregate principal amount of Initial Securities remains outstanding
immediately after the occurrence of such redemption.
<PAGE> 141
6
6. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at its registered address all in accordance with the
Indenture. If less than all of the Securities are to be redeemed at any time,
the Trustee shall select the Securities to be redeemed pro rata, by lot or by a
method that complies with applicable legal and securities exchange requirements,
if any, and that the Trustee considers fair and appropriate and in accordance
with methods generally used at the time of selection by fiduciaries in similar
circumstances; provided that Securities in denominations larger than $1,000 may
be redeemed in part but only in whole multiples of $1,000. If money sufficient
to pay the redemption price of and accrued interest (if any) on all Securities
(or portions thereof) to be redeemed on the redemption date is deposited with
the Paying Agent on or before the redemption date and certain other conditions
are satisfied, on and after such date interest ceases to accrue on such
Securities (or such portions thereof) called for redemption.
7. Repurchase at the Option of the Holder
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions set forth in the Indenture, to cause the
Company to repurchase all or any part of the Securities of such Holder at a
purchase price equal to 101% of the principal amount of the Securities to be
repurchased plus accrued and unpaid interest, if any, to the date of repurchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date) as provided in, and
subject to the terms of, the Indenture.
8. Subordination
The Securities are subordinated to Senior Indebtedness as defined in
the Indenture. To the extent provided in the Indenture, Senior Indebtedness must
be paid before the Securities may be paid. The Company and each Guarantor
Subsidiary agrees, and each Securityholder by accepting a Security agrees, to
the subordination provisions contained in the Indenture and authorizes the
Trustee to give it effect and appoints the Trustee as attorney-in-fact for such
purpose.
<PAGE> 142
7
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Securities in accordance with the Indenture. Upon any transfer or
exchange, the Registrar may require a Holder, among other things, to furnish
appropriate endorsements or transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not register
the transfer of or exchange any Securities selected for redemption (except, in
the case of a Security to be redeemed in part, the portion of the Security not
to be redeemed) or to transfer or exchange any Securities for a period of 15
days prior to a selection of Securities to be redeemed.
10. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner
of it for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
12. Discharge and Defeasance
Subject to certain conditions set forth in the Indenture, the
Company at any time may terminate some or all of its obligations under the
Securities and the Indenture if the Company deposits with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.
13. Amendment; Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
<PAGE> 143
8
and (ii) any past default or noncompliance with any provision of the Indenture
(other than payment of principal and interest or default in respect of a
provision that under Section 9.02 of the Indenture cannot be amended without the
consent of each Securityholder affected) may be waived with the consent of the
Holders of a majority in principal amount then outstanding of the Securities.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Securityholder, the Company, the Guarantor Subsidiaries and the Trustee may
amend the Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency, or to comply with Article V of the Indenture, or to provide for
uncertificated Securities in addition to or in place of certificated Securities
(provided that the uncertificated Securities are issued in registered form for
purposes of Section 163(f) of the Code, or in a manner such that the
uncertificated Securities are described in Section 163(f)(2)(B) of the Code), to
make any change in Article X or Article XII that would limit or terminate the
benefits available to any holder of Senior Indebtedness under Article X or
Article XII, to add additional Guarantees with respect to the Securities or to
secure the Securities, to make any change that would provide any additional
rights or benefits to the Holders of Securities or that does not adversely
affect the rights under this Indenture of any such Holder, to surrender rights
and powers conferred on the Company, to comply with requirements of the SEC in
order to effect or maintain the qualification of the Indenture under the TIA or
to provide for the issuance and authorization of the Exchange Securities or
Private Exchange Securities.
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest on the Securities (whether or not such payment is
prohibited by Article X); (ii) default in payment of principal on the Securities
at maturity, upon redemption pursuant to paragraph 5 of the Securities, upon
acceleration or otherwise, or failure by the Company to redeem or purchase
(whether or not such payment is prohibited by Article X) Securities when
required; (iii) failure by the Company to comply with other covenants and
agreements in the Indenture or the Securities, in certain cases subject to
notice and lapse of time; (iv) certain accelerations (including failure to pay
within any grace period after final maturity) of other Indebtedness of the
Company or any Restricted Subsidiary if the amount accelerated (or so unpaid)
exceeds $5,000,000 or its foreign currency equivalent; (v) certain events of
bankruptcy, insolvency or reorganization with
<PAGE> 144
9
respect to the Company and any Restricted Subsidiary which is a Significant
Subsidiary; (vi) certain judgments or decrees for the payment of money in excess
of $5,000,000 or its foreign currency equivalent against the Company or any
Restricted Subsidiary; and (vii) certain failures of a Subsidiary Guarantee to
remain in full force and effect and certain denials or disaffirmations of
obligations under the Indenture or a Subsidiary Guarantee by a Guarantor
Subsidiary. If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Securities may declare all
the Securities to be due and payable immediately. Certain events of bankruptcy
or insolvency are Events of Default that will result in the Securities being due
and payable immediately.
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives indemnity or security
satisfactory to it. Subject to certain limitations, Holders of a majority in
principal amount of the Securities may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Securityholders notice of any
continuing Default (except a Default in payment of principal or interest) if it
determines that withholding notice is in the interest of the Holders.
15. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may other wise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
16. No Personal Liability of Directors, Officers, Employees and Stockholders
A director, officer, employee, stockholder or Affiliate of the
Company, as such, shall not have any liability for any obligations of the
Company under the Securities or this Indenture or for any claim based on, in
respect of, or by reason of such obligations or their creation. No director,
officer, employee, stockholder or Affiliate of any of the Guarantor
Subsidiaries, as such, will have any liability for any obligations of the
Guarantor
<PAGE> 145
10
Subsidiaries under the Security Guarantees, the Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of Securities and Security Guarantees by accepting a Security and a
Security Guarantee waives and releases all such liabilities. The waiver and
release are part of the consideration for issuance of the Securities and the
Security Guarantees.
17. Governing Law
THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
18. Authentication
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
19. Abbreviations
Customary abbreviations may be used in the name of a Securityholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
20. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
<PAGE> 146
11
The Company will furnish to any Securityholder upon written request
and without charge to the Securityholder a copy of the Indenture which has in
it the text of this Security in larger type. Requests may be made to:
RICHMONT MARKETING SPECIALISTS, INC.
2324 Gateway Drive
Irving, Texas 75063
Attention of Secretary
<PAGE> 147
12
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint ____________________________________ agent to transfer
this Security on the books of the Company. The agent may substitute another to
act for him.
Date: ________________ Your Signature: _____________________
Signature Guarantee:____________________________________________________________
(Signature must be guaranteed by a participant in a
recognized signature guarantee medallion program)
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
<PAGE> 148
13
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been
made:
<TABLE>
<CAPTION>
Date of Amount of decrease Amount of increase Principal amount Signature of
Exchange in Principal in Principal of this Global authorized officer
Amount of this Amount of this Security following of Trustee or
Global Security Global Security such decrease or Securities
increase Custodian
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 149
14
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.06 or 4.08 of the Indenture, check the box:
|_| 4.06 Asset Sale |_| 4.08 Change of Control
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount:
$_______________.
Date: __________________ Your Signature: ____________________________________
(Sign exactly as your name appears
on the other side of the Security)
Signature Guarantee:____________________________________________________________
(Signature must be guaranteed by a participant in a
recognized signature guarantee medallion program)
<PAGE> 150
EXHIBIT C
[FORM OF FACE OF PRIVATE EXCHANGE SECURITY]
[GLOBAL SECURITIES LEGEND]
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES
IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY
TO THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.(3)
[RESTRICTED SECURITIES LEGEND]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A
- --------
(3) This paragraph should only be added if the security is issued in global
form.
<PAGE> 151
2
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL
INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT
OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR
FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE
(D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN THE CASE OF ANY OF
THE FOREGOING CLAUSES (A) THROUGH (F), A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE COMPANY AND THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
RICHMONT MARKETING SPECIALISTS INC.
10 1/8% SENIOR SUBORDINATED NOTE DUE 2007
No. ___ CUSIP No.
$________
RICHMONT MARKETING SPECIALISTS INC., a Delaware corporation (the
"Company"), promises to pay to ______________ ,or registered assigns, the
principal sum of ______________ on December 15, 2007.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
Additional provisions of this Security are set forth on the other
side of this Security.
Dated: ________________
<PAGE> 152
3
RICHMONT MARKETING SPECIALISTS INC.,
by
---------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION,
as Trustee, certifies that
this is one of the Securities [Seal]
referred to in the Indenture,
by
------------------------------
Authorized Signatory
<PAGE> 153
4
[FORM OF REVERSE SIDE OF PRIVATE EXCHANGE SECURITY]
10 1/8% Senior Subordinated Note due 2007
1. Interest
RICHMONT MARKETING SPECIALISTS INC., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above. Capitalized
terms used but not defined herein shall have the meanings set forth in the
Indenture.
The Company will pay interest and liquidated damages, if any,
semiannually on June 15 and December 15 of each year. Interest on the Securities
will accrue from the most recent date to which interest has been paid on the
Initial Security for which this Private Exchange Security was issued or, if no
interest has been paid, from the Issue Date with respect to this Security.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay interest on overdue principal at the rate borne by
the Securities, and it shall pay interest on overdue installments of interest at
the same rate to the extent lawful.
The Company and the Guarantor Subsidiaries will use their best
efforts to have the Exchange Offer Registration Statement or, if applicable, the
Shelf Registration Statement (each, a "Registration Statement") declared
effective by the Commission as promptly as practicable after the filing thereof.
If (i) the Shelf Registration Statement or Exchange Offer Registration
Statement, as applicable under the Exchange and Registration Rights Agreement
dated the date hereof is not filed with the Commission within 16 months after
the Closing Date, (ii) the Exchange Offer Registration Statement or, as the case
may be, the Shelf Registration Statement, is not declared effective within 17
months after the Closing Date, (iii) the Exchange Offer is not consummated
within 18 months after the Closing Date, or (iv) the Shelf Registration
Statement if filed and declared effective within 17 months after the Issue Date
but shall thereafter cease to be effective (at any time that the Company is
obligated to maintain the effectiveness thereof) without being succeeded within
60 days by an additional Registration Statement filed and declared effective
(each such event referred to in clauses (i) through (iv), a "Registration
Default"), the Company will pay liquidated damages to each holder of Registrable
Securities, during the period of such Registration Default,
<PAGE> 154
5
in an amount equal to $0.192 per week per $1,000 principal amount of the
Securities constituting Registrable Securities held by such holder until the
applicable Registration Statement if filed or declared effective, the Exchange
Offer is consummated or the Shelf Registration Statement again becomes
effective, as the case may be. All accrued liquidated damages shall be paid to
holders in the same manner as interest payments on the Securities on semiannual
payment dates which correspond to interest payment dates for the Securities.
Following the cure of all Registration Defaults, the accrual of liquidated
damages will cease. The Trustee shall have no responsibility with respect to the
determination of the amount of any such liquidated damages. For purposes of the
foregoing, "Registrable Securities" means (i) each Initial Security until the
date on which such Initial Security has been exchanged for a freely transferable
Exchange Security in the Exchange Offer, (ii) each Initial Security or Private
Exchange Security until the date on which such Initial Security or Private
Exchange Security has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (iii) each
Initial Security or Private Exchange Security until the date on which such
Initial Security or Private Exchange Security is distributed to the public
pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule
144(k) under the Securities Act.
2. Method of Payment
The Company will pay interest (except defaulted interest) on the
Securities to the Persons who are registered holders of Securities at the close
of business on the June 1 or December 1 next preceding the interest payment date
even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. However, the Company may pay principal and interest by
check payable in such money or by wire transfer of federal funds.
3. Paying Agent and Registrar
Initially, TEXAS COMMERCE BANK NATIONAL ASSOCIATION (the "Trustee")
will act as Paying Agent and Registrar. The Company may appoint and change any
Paying
<PAGE> 155
6
Agent, Registrar or co-registrar. The Company or any domestically organized
Wholly Owned Subsidiary may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of
December 19, 1997 (the "Indenture"), among the Company, the Guarantor
Subsidiaries and the Trustee. The terms of the Securities include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date
of the Indenture (the "Act"). Terms defined in the Indenture and not defined
herein have the meanings ascribed thereto in the Indenture. The Securities are
subject to all such terms, and Securityholders are referred to the Indenture and
the Act for a statement of those terms.
The Securities are unsecured senior subordinated obligations of the
Company and are limited to $150,000,000 in aggregate principal amount
outstanding, of which $100,000,000 in aggregate principal amount will be
initially issued on the Closing Date. Subject to the conditions set forth in the
Indenture, the Company may issue up to an additional $50,000,000 aggregate
principal amount of Additional Securities. This Security is one of the Private
Exchange Securities referred to in the Indenture. The Securities include the
Initial Securities (consisting of the Original Securities and the Additional
Securities) and any Exchange Securities and Private Exchange Securities issued
in exchange for the Initial Securities pursuant to the Indenture. The Initial
Securities, the Exchange Securities and the Private Exchange Securities are
treated as a single class of securities under the Indenture. The Indenture
imposes certain limitations on the Incurrence of Indebtedness by the Company and
its Restricted Subsidiaries; the payment of dividends on, and redemption of, the
Capital Stock of the Company and its Restricted Subsidiaries and the redemption
of certain subordinated obligations of the Company and its Subsidiaries; other
payments by the Company and its Restricted Subsidiaries; Investments; sales and
transfers of assets and Capital Stock of the Restricted Subsidiaries; the
issuance or sale of Capital Stock of Restricted Subsidiaries; certain
transactions with Affiliates of the Company; the lines of business in which the
Company and its Restricted Subsidiaries may operate; Sale/Leaseback
Transactions; and consolidations, mergers and transfers of all or substantially
all of the Company's or a Guarantor Subsidiary's assets. In addition, the
Indenture
<PAGE> 156
7
prohibits certain restrictions on distributions from Restricted Subsidiaries.
To secure the due and punctual payment of the principal and
liquidated damages and interest, if any, on the Securities and all other amounts
payable by the Company under the Indenture and the Securities when and as the
same shall be due and payable, whether at maturity, by acceleration or
otherwise, according to the terms of the Securities and the Indenture, the
Guarantor Subsidiaries have unconditionally guaranteed the Obligations on a
senior subordinated basis pursuant to the terms of the Indenture.
5. Optional Redemption
Except as set forth in the next paragraph, the Securities may not be
redeemed prior to December 15, 2002. Thereafter, the Securities will be subject
to redemption at any time at the option of the Company, in whole or in part, at
the following redemption prices (expressed as percentages of principal amount),
plus accrued and unpaid interest, if any, to the applicable redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date) if redeemed during
the 12-month period beginning on or after December 15 of the years set forth
below:
<TABLE>
<CAPTION>
Redemption
Period Price
- ------ -----
<S> <C>
2002.............................................................. 105.063%
2003 .......................................................... 103.375%
2004.............................................................. 101.688%
2005 and thereafter............................................... 100.000%
</TABLE>
In addition, at any time and from time to time prior to December 15,
2000, the Company may redeem in the aggregate up to 35% of the original
aggregate principal amount of Securities with the proceeds of one or more Public
Equity Offerings by the Company following which there is a Public Market at a
redemption price of 110.125% of the principal amount thereof, plus the accrued
and unpaid interest, if any, to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date); provided, however, that at least 65% of the
original aggregate principal amount of Initial Securities remains outstanding
immediately after the occurrence of such redemption.
<PAGE> 157
8
6. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at its registered address all in accordance with the
Indenture. If less than all of the Securities are to be redeemed at any time,
the Trustee shall select the Securities to be redeemed pro rata, by lot or by a
method that complies with applicable legal and securities exchange requirements,
if any, and that the Trustee considers fair and appropriate and in accordance
with methods generally used at the time of selection by fiduciaries in similar
circumstances; provided that Securities in denominations larger than $1,000 may
be redeemed in part but only in whole multiples of $1,000. If money sufficient
to pay the redemption price of and accrued interest (if any) on all Securities
(or portions thereof) to be redeemed on the redemption date is deposited with
the Paying Agent on or before the redemption date and certain other conditions
are satisfied, on and after such date interest ceases to accrue on such
Securities (or such portions thereof) called for redemption.
7. Repurchase at the Option of the Holder
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions set forth in the Indenture, to cause the
Company to repurchase all or any part of the Securities of such Holder at a
purchase price equal to 101% of the principal amount of the Securities to be
repurchased plus accrued and unpaid interest, if any, to the date of repurchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date) as provided in, and
subject to the terms of, the Indenture.
8. Subordination
The Securities are subordinated to Senior Indebtedness as defined in
the Indenture. To the extent provided in the Indenture, Senior Indebtedness must
be paid before the Securities may be paid. The Company and each Guarantor
Subsidiary agrees, and each Securityholder by accepting a Security agrees, to
the subordination provisions contained in the Indenture and authorizes the
Trustee to give it effect and appoints the Trustee as attorney-in-fact for such
purpose.
<PAGE> 158
9
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Securities in accordance with the Indenture. Upon any transfer or
exchange, the Registrar may require a Holder, among other things, to furnish
appropriate endorsements or transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not register
the transfer of or exchange any Securities selected for redemption (except, in
the case of a Security to be redeemed in part, the portion of the Security not
to be redeemed) or to transfer or exchange any Securities for a period of 15
days prior to a selection of Securities to be redeemed.
10. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner
of it for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
12. Discharge and Defeasance
Subject to certain conditions set forth in the Indenture, the
Company at any time may terminate some or all of its obligations under the
Securities and the Indenture if the Company deposits with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.
13. Amendment; Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least
<PAGE> 159
10
a majority in principal amount outstanding of the Securities and (ii) any past
default or noncompliance with any provision of the Indenture (other than
payment of principal and interest or default in respect of a provision that
under Section 9.02 of the Indenture cannot be amended without the consent of
each Securityholder affected) may be waived with the consent of the Holders of a
majority in principal amount then outstanding of the Securities. Subject to
certain exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company, the Guarantor Subsidiaries and the Trustee may
amend the Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency, or to comply with Article V of the Indenture, or to provide for
uncertificated Securities in addition to or in place of certificated Securities
(provided that the uncertificated Securities are issued in registered form for
purposes of Section 163(f) of the Code, or in a manner such that the
uncertificated Securities are described in Section 163(f)(2)(B) of the Code), to
make any change in Article X or Article XII that would limit or terminate the
benefits available to any holder of Senior Indebtedness under Article X or
Article XII, to add additional Guarantees with respect to the Securities or to
secure the Securities, to make any change that would provide any additional
rights or benefits to the Holders of Securities or that does not adversely
affect the rights under this Indenture of any such Holder, to surrender rights
and powers conferred on the Company, to comply with requirements of the SEC in
order to effect or maintain the qualification of the Indenture under the TIA or
to provide for the issuance and authorization of the Exchange Securities or
Private Exchange Securities.
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest on the Securities (whether or not such payment is
prohibited by Article X); (ii) default in payment of principal on the Securities
at maturity, upon redemption pursuant to paragraph 5 of the Securities, upon
acceleration or otherwise, or failure by the Company to redeem or purchase
(whether or not such payment is prohibited by Article X) Securities when
required; (iii) failure by the Company to comply with other covenants and
agreements in the Indenture or the Securities, in certain cases subject to
notice and lapse of time; (iv) certain accelerations (including failure to pay
within any grace period after final maturity) of other Indebtedness of the
Company or any Restricted Subsidiary if the amount accelerated (or so unpaid)
exceeds $5,000,000 or its foreign currency equivalent; (v) certain
<PAGE> 160
11
events of bankruptcy, insolvency or reorganization with respect to the Company
and any Restricted Subsidiary which is a Significant Subsidiary; (vi) certain
judgments or decrees for the payment of money in excess of $5,000,000 or its
foreign currency equivalent against the Company or any Restricted Subsidiary
which is a Significant Subsidiary; and (vii) certain failures of a Subsidiary
Guarantee to remain in full force and effect and certain denials or
disaffirmations of obligations under the Indenture or a Subsidiary Guarantee by
a Subsidiary Guarantor. If an Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the Securities may
declare all the Securities to be due and payable immediately. Certain events of
bankruptcy or insolvency are Events of Default that will result in the
Securities being due and payable immediately.
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives indemnity or security
satisfactory to it. Subject to certain limitations, Holders of a majority in
principal amount of the Securities may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Securityholders notice of any
continuing Default (except a Default in payment of principal or interest) if it
determines that withholding notice is in the interest of the Holders.
15. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may other wise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
16. No Personal Liability of Directors, Officers, Employees and Stockholders
A director, officer, employee, stockholder or Affiliate of the
Company, as such, shall not have any liability for any obligations of the
Company under the Securities or this Indenture or for any claim based on, in
respect of, or by reason of such obligations or their creation. No director,
officer, employee, stockholder or Affiliate of any of the Guarantor
Subsidiaries, as such,
<PAGE> 161
12
will have any liability for any obligations of the Guarantor Subsidiaries under
the Security Guarantees, the Indenture or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder of Securities
and Security Guarantees by accepting a Security and a Security Guarantee waives
and releases all such liabilities. The waiver and release are part of the
consideration for issuance of the Securities and the Security Guarantees.
17. Governing Law
THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
18. Authentication
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
19. Abbreviations
Customary abbreviations may be used in the name of a Securityholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
20. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
<PAGE> 162
13
The Company will furnish to any Securityholder upon written request
and without charge to the Securityholder a copy of the Indenture which has in
it the text of this Security in larger type. Requests may be made to:
RICHMONT MARKETING SPECIALISTS INC.
2324 Gateway Drive
Irving, Texas 75063
Attention of Secretary
<PAGE> 163
14
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint ____________________________________ agent to transfer
this Security on the books of the Company. The agent may substitute another to
act for him.
Date: ________________ Your Signature: _____________________
Signature Guarantee:____________________________________________________________
(Signature must be guaranteed by a participant in a
recognized signature guarantee medallion program)
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
<PAGE> 164
15
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER RESTRICTED SECURITIES
Reference is hereby made to that certain Indenture dated December 19, 1997 (the
"Indenture") among Richmont Marketing Specialists Inc., as Issuer (the
"Company"), the Guarantor Subsidiaries (as defined therein) and Texas Commerce
Bank National Association, as trustee (the "Trustee"). Capitalized terms used
but not defined herein shall have the meanings set forth in the Indenture.
This certificate relates to $_________ principal amount of Securities held in
(check applicable space) ____ book-entry or _____ definitive form by the
undersigned.
The undersigned (check one box below):
|_| has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Security held by the Depository a
Security or Securities in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial
interest in such Global Security (or the portion thereof indicated above);
|_| has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the periods referred to in Rule
144(k) under the Securities Act, the undersigned confirms that such Securities
are being transferred in accordance with its terms:
CHECK ONE BOX BELOW:
(1) |_| to the Company; or
(2) |_| pursuant to an effective registration statement under
the Securities Act of 1933; or
(3) |_| inside the United States to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act
of 1933) that purchases for its own account or for the
account of a qualified institutional buyer to whom
notice is given that such transfer is being made
<PAGE> 165
16
in reliance on Rule 144A under the Securities Act, in
each case pursuant to and in compliance with Rule 144A
under the Securities Act of 1933; or
(4) |_| outside the United States in an offshore transaction
within the meaning of Regulation S under the Securities
Act in compliance with Rule 904 under the Securities Act
of 1933; or
(5) |_| to an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act
of 1933) that has furnished to the Trustee a signed
letter containing certain representations and agreements
(the form of which letter is attached to the Indenture
as Exhibit D and which may be obtained from the
Trustee); or
(6) |_| pursuant to another available exemption from
registration provided by Rule 144 under the Securities
Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to
register any of the Securities evidenced by this certificate in the
name of any person other than the registered holder thereof;
provided, however, that if box (4), (5) or (6) is checked, the
Trustee may require, prior to registering any such transfer of the
Securities, such legal opinions, certifications and other
information as the Company has reasonably requested to confirm that
such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration
<PAGE> 166
17
requirements of the Securities Act of 1933, such as the exemption
provided by Rule 144 under such Act.
________________________________
Signature
Signature Guarantee:____________________________________________________________
(Signature must be guaranteed by a participant in a
recognized signature guarantee medallion program)
<PAGE> 167
18
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933 ("Rule 144A"), and is aware that the sale to it is being made in reliance
on Rule 144A and acknowledges that it has received such information regarding
the Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated: ________________ _______________________________________
NOTICE: To be executed by an executive
officer
<PAGE> 168
19
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have
been made:
<TABLE>
<CAPTION>
Date of Amount of decrease Amount of increase Principal amount Signature of
Exchange in Principal in Principal of this Global authorized officer
Amount of this Amount of this Security following of Trustee or
Global Security Global Security such decrease or Securities
increase Custodian
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 169
20
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.06 or 4.08 of the Indenture, check the box:
|_| 4.06 Asset Sale |_| 4.08 Change of Control
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount:
$ ______________.
Date: __________________ Your Signature: ___________________________________
(Sign exactly as your name appears on the other
side of the Security)
______________________
Tax I.D. number
Signature Guarantee:____________________________________________________________
(Signature must be guaranteed by a participant in a
recognized signature guarantee medallion program)
<PAGE> 170
EXHIBIT D
[Form of Transferee Letter of Representation]
Richmont Marketing Specialists Inc.
c/o Texas Commerce Bank National
Association
2200 Ross Avenue, 5th Floor
Dallas, TX 75201
Dear Ladies and Gentlemen:
This certificate is delivered to request a transfer of $ principal
amount of the 10 1/8% Senior Subordinated Notes due 2007 (the "Notes") of
Richmont Marketing Specialists Inc. (the "Company").
Upon transfer, the Notes would be registered in the name of the new
beneficial owner as follows:
Name: ___________________________________
Address: ________________________________
Taxpayer ID Number: _____________________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the
"Securities Act")) purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount of the
Notes, and we are acquiring the Notes not with a view to, or for offer or sale
in connection with, any distribution in violation of the Securities Act. We have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes and we invest
in or purchase securities similar to the Notes in the normal course of our
business. We, and any accounts for which we are acting, are each able to bear
the economic risk of our or its investment.
2. We understand that the Notes have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted in
the following sentence. We agree on our own behalf and on behalf of any investor
account for which we are purchasing Notes to offer, sell or otherwise transfer
such Notes prior to the date that is two years after the later of the date of
original issue and the last date on which the Company or any
<PAGE> 171
2
affiliate of the Company was the owner of such Notes (or any predecessor
thereto) (the "Resale Restriction Termination Date") only (a) to the Company,
(b) pursuant to a registration statement which has been declared effective under
the Securities Act, (c) in a transaction complying with the requirements of Rule
144A under the Securities Act ("Rule 144A"), to a person we reasonably believe
is a qualified institutional buyer under Rule 144A (a "QIB") that purchases for
its own account or for the account of a QIB and to whom notice is given that the
transfer is being made in reliance on Rule 144A, (d) pursuant to offers and
sales that occur outside the United States within the meaning of Regulation S
under the Securities Act, (e) to an institutional "accredited investor" within
the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is
purchasing for its own account or for the account of such an institutional
"accredited investor," in each case in a minimum principal amount of Notes of
$250,000 or (f) pursuant to any other available exemption from the registration
requirements of the Securities Act, subject in each of the foregoing cases to
any requirement of law that the disposition of our property or the property of
such investor account or accounts be at all times within our or their control
and in compliance with any applicable state securities laws. The foregoing
restrictions on resales will not apply subsequent to the Resale Restriction
Termination Date. If any resale or other transfer of the Notes is proposed to be
made pursuant to clause (e) above prior to the Resale Restriction Termination
Date, the transferor shall deliver a letter from the transferee substantially in
the form of this letter to the Company and the Trustee, which shall provide,
among other things, that the transferee is an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act and that it is acquiring such Notes for investment purposes and
not for distribution in violation of the Securities Act. Each purchaser
acknowledges that the Company and the Trustee reserve the right prior to any
offer, sale or other transfer prior to the Resale Restriction Termination Date
of the Notes pursuant to clause (d), (e) or (f) above to require the delivery of
an opinion of counsel, certifications or other information satisfactory to the
Company and the Trustee.
TRANSFEREE:___________________
BY____________________________
<PAGE> 172
EXHIBIT E
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"),
dated as of [ ], among [NEW GUARANTOR SUBSIDIARY] (the "New
Guarantor Subsidiary"), a subsidiary of Richmont Marketing
Specialists Inc. (or its successor), a Delaware corporation
(the "Company"), THE COMPANY, the existing Guarantor
Subsidiaries (the "Existing Guarantor Subsidiaries") under the
indenture referred to below, and TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking association, as trustee under
the indenture referred to below (the "Trustee").
W I T N E S S E T H:
WHEREAS the Company and the Existing Guarantor Subsidiaries have
heretofore executed and delivered to the Trustee an indenture (the "Indenture"),
dated as of December 19, 1997, providing for the issuance of an aggregate
principal amount of up to $150,000,000 of 10 1/8% Senior Subordinated Notes due
2007 (the "Securities");
WHEREAS Section 4.11 of the Indenture provides that under certain
circumstances the Company is required to cause the New Guarantor Subsidiary to
execute and deliver to the Trustee a supplemental indenture pursuant to which
the New Guarantor Subsidiary shall unconditionally guarantee all of the
Company's obligations under the Securities and the Indenture pursuant to a
Subsidiary Guarantee on the terms and conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee, the
Company and the Existing Guarantor Subsidiaries are authorized to execute and
deliver this Supplemental Indenture;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Guarantor Subsidiary, the Company and the Existing Guarantor Subsidiaries and
the Trustee mutually covenant and agree for the equal and ratable benefit of the
holders of the Securities as follows:
1. Definitions. (a) Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
<PAGE> 173
2
(b) For all purposes of this Supplemental Indenture, except as
otherwise herein expressly provided or unless the context otherwise requires:
(i) the terms and expressions used herein shall have the same meanings as
corresponding terms and expressions used in the Indenture; and (ii) the words
"herein," "hereof" and "hereby" and other words of similar import used in this
Supplemental Indenture refer to this Supplemental Indenture as a whole and not
to any particular section hereof.
2. Agreement to Guarantee. The New Guarantor Subsidiary hereby
agrees, jointly and severally with all other Guarantor Subsidiaries, to
guarantee the Company's obligations under the Securities and the Indenture on
the terms and subject to the conditions set forth in Article XI and Article XII
of the Indenture and to be bound by all other applicable provisions of the
Indenture. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every holder of Securities
heretofore or hereafter authenticated and delivered shall be bound hereby.
3. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
4. Trustee Makes No Representation. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental Indenture.
5. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
<PAGE> 174
3
6. Effect of Headings. The Section headings herein are for
convenience only and shall not effect the construction thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
[NEW GUARANTOR SUBSIDIARY],
by
---------------------------------
Name:
Title:
RICHMONT MARKETING SPECIALISTS INC.,
by
---------------------------------
Name:
Title:
[EXISTING GUARANTOR SUBSIDIARY],
by
---------------------------------
Name:
Title:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, as Trustee
by
---------------------------------
Name:
Title:
<PAGE> 175
EXHIBIT F
[FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH TRANSFERS PURSUANT TO RULE 144A]
Texas Commerce Bank National
Association
2200 Ross Avenue, 5th floor
Dallas, TX 75201
Attention: Corporate Trust Administration
Re Richmont Marketing Specialists Inc. (the
"Company") 10 1/8% Senior Subordinated
Notes due 2007 (the "Securities").
Ladies and Gentlemen:
In connection with our proposed sale of $[ ] aggregate principal
amount of the Securities, we hereby certify that such transfer is being effected
pursuant to and in accordance with Rule 144A ("Rule 144A") under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, we hereby further certify that the Securities are being transferred
to a person that we reasonably believe is purchasing the Securities for its own
account, or for one or more accounts with respect to which such person exercises
sole investment discretion, and such person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A in a transaction
meeting the requirements of Rule 144A and such Securities are being transferred
in compliance with any applicable blue sky securities laws of any state of the
United States.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter
<PAGE> 176
2
or a copy hereof to any interested party in any administrative or legal
proceedings or official inquiry with respect to the matters covered hereby.
Very truly yours,
_________________________________
[Name of Transferor]
by: _____________________________
Authorized Signature
<PAGE> 177
EXHIBIT G
[FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH TRANSFERS
PURSUANT TO REGULATION S]
Texas Commerce Bank National
Association
2200 Ross Avenue, 5th Floor
Dallas, TX 75201
Attention: Corporate Trust Administration
Re Richmont Marketing Specialists Inc.
(the "Company") 10 1/8% Senior
Subordinated Notes due 2007 (the "Securities").
Ladies and Gentlemen:
In connection with our proposed sale of $[ ] aggregate principal
amount of the Securities, we confirm that such sale has been effected pursuant
to and in accordance with Regulation S under the United States Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in the
United States;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable
thereto, we confirm that such
<PAGE> 178
2
sale has been made in accordance with the applicable provisions of Rule
903(c)(3) or Rule 904(c)(1), as the case may be.
The Company and you are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
_________________________________
[Name of Transferor]
by: _____________________________
Authorized Signature
<PAGE> 1
EXHIBIT 4.3
RICHMONT MARKETING SPECIALISTS INC.
$100,000,000
10 1/8% Senior Subordinated Notes due 2007
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
December 19, 1997
CHASE SECURITIES INC.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
Richmont Marketing Specialists Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to you (the "Initial Purchaser"), upon
the terms and subject to the conditions set forth in a purchase agreement dated
December 16, 1997 (the "Purchase Agreement"), $100,000,000 aggregate principal
amount of its 10 1/8% Senior Subordinated Notes due 2007 (the "Securities") to
be guaranteed on a senior subordinated basis by certain of the Company's
subsidiaries (the "Guarantor Subsidiaries") listed on the signature pages
hereto. Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Purchase Agreement.
As an inducement to the Initial Purchaser to enter into the Purchase
Agreement and in satisfaction of a condition to your obligations thereunder, the
Company and the Guarantor Subsidiaries agree with you, for the benefit of the
holders (including the Initial Purchaser) of the Securities, the Exchange
Securities (as defined herein) and the Private Exchange Securities (as defined
herein) (collectively, the "Holders"), as follows:
1. Registered Exchange Offer. The Company shall (i) prepare and, not
later than 16 months following the date of original issuance of the Securities
(the "Issue Date"), file with the Commission a registration statement (the
"Exchange Offer Registration Statement") on an appropriate form under the
Securities Act with respect to a proposed offer to the Holders (the "Registered
Exchange Offer") to issue and deliver to such Holders, in exchange for the
Securities, a like aggregate principal amount of debt securities of the Company
(the "Exchange Securities") that are identical in all material respects to the
Securities, except for the transfer restrictions relating to the Securities,
(ii) use its reasonable best efforts to cause the Exchange Offer Registration
Statement to become effective under the Securities Act no later than 17 months
after the Issue Date and the Registered Exchange Offer to be consummated no
later than 18 months after the Issue Date, and (iii) keep the Exchange Offer
Registration Statement effective for not less than 30 days (or longer, if
required by applicable law) after the date that notice of the Registered
<PAGE> 2
2
Exchange Offer is mailed to the Holders (such period being called the "Exchange
Offer Registration Period"). The Exchange Securities will be issued under the
Indenture or an indenture (the "Exchange Securities Indenture") among the
Company, the Guarantor Subsidiaries and the Trustee or such other bank or trust
company reasonably satisfactory to you, as trustee (the "Exchange Securities
Trustee"), such indenture to be identical in all material respects to the
Indenture, except for the transfer restrictions relating to the Securities.
Upon the effectiveness of the Exchange Offer Registration Statement,
the Company shall promptly commence the Registered Exchange Offer, it being the
objective of such Registered Exchange Offer to enable each Holder electing to
exchange Securities for Exchange Securities (assuming that such Holder (a) is
not an affiliate of the Company or an Exchanging Dealer (as defined below) not
complying with the requirements of the next sentence, (b) is not an Initial
Purchaser holding Securities that have, or that are reasonably likely to have,
the status of an unsold allotment in an initial distribution, (c) acquires the
Exchange Securities in the ordinary course of such Holder's business and (d) has
no arrangements or understandings with any person to participate in the
distribution of the Securities or the Exchange Securities) and to trade such
Exchange Securities from and after their receipt without any limitations or
restrictions under the Securities Act and without material restrictions under
the securities laws of the several states of the United States. The Company, the
Initial Purchasers and each Exchanging Dealer acknowledge that, pursuant to
current interpretations by the Commission's staff of Section 5 of the Securities
Act, (i) each Holder that is a broker-dealer electing to exchange Securities,
acquired for its own account as a result of market making activities or other
trading activities, for Exchange Securities (an "Exchanging Dealer"), is
required to deliver a prospectus containing the information set forth in Annex A
hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures"
section and the "Purpose of the Exchange Offer" section and in Annex C hereto in
the "Plan of Distribution" section of such prospectus in connection with a sale
of any such Exchange Securities received by such Exchanging Dealer pursuant to
the Registered Exchange Offer and (ii) if any Initial Purchaser elects to sell
Exchange Securities acquired in exchange for Securities constituting any portion
of an unsold allotment, it is required to deliver a prospectus containing the
information required by Items 507 or 508 of Regulation S-K under the Securities
Act and the Exchange Act ("Regulation S-K"), as applicable, in connection with
such a sale.
If, prior to the consummation of the Registered Exchange Offer, any
Holder holds any Securities acquired by it that have, or that are reasonably
likely to be determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Registered
Exchange Offer, the Company and the Guarantors shall, upon the written request
of any such Holder, simultaneously with the delivery of the Exchange Securities
in the Registered Exchange Offer, issue and deliver to any such Holder, in
exchange for the Securities held by such Holder (the "Private Exchange"), a like
aggregate principal amount of debt securities of the Company (the "Private
Exchange Securities") that are identical in all material respects to the
Exchange Securities, except for the transfer restrictions relating to such
Private Exchange Securities. The Private Exchange Securities will be issued
under the same indenture as the Exchange Securities, and the Company shall use
its reasonable best efforts to cause the Private Exchange Securities to bear the
same CUSIP number as the Exchange Securities.
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
<PAGE> 3
3
(b) keep the Registered Exchange Offer open for not less than 30
days after the date that notice of the Registered Exchange Offer is mailed
to the Holders (or longer if required by applicable law);
(c) utilize the services of a Depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York City time, on the last business day on
which the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all laws applicable to the
Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange
Offer, and any Private Exchange, as the case may be, the Company shall:
(a) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange;
(b) deliver to the Trustee for cancelation all Securities so
accepted for exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as the
case may be, promptly to authenticate and deliver to each Holder of
Securities, Exchange Securities or Private Exchange Securities, as the
case may be, equal in principal amount to the Securities of such Holder so
accepted for exchange.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein in order to permit such prospectus to be used by all persons
subject to the prospectus delivery requirements of the Securities Act for such
period of time as such persons must comply with such requirements in order to
resell the Exchange Securities. The Company shall make available, for a period
of 180 days after the consummation of the Registered Exchange Offer, a copy of
the prospectus forming part of the Exchange Offer Registration Statement to any
broker-dealer for use in connection with any resale of any Exchange Securities.
The Indenture or the Exchange Securities Indenture, as the case may
be, shall provide that the Securities, the Exchange Securities and the Private
Exchange Securities shall vote and consent together on all matters as one class
and that none of the Securities, the Exchange Securities or the Private Exchange
Securities will have the right to vote or consent as a separate class on any
matter.
Interest on each Exchange Security and Private Exchange Security
issued pursuant to the Registered Exchange Offer and in the Private Exchange
will accrue from the last interest payment date on which interest was paid on
the Securities surrendered in exchange therefor or, if no interest has been paid
on the Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder (other
than an Exchanging Dealer) will have no arrangements or understanding with any
person to participate in the distribution of the Securities or the Exchange
<PAGE> 4
4
Securities within the meaning of the Securities Act and (iii) such Holder is not
an affiliate of the Company or, if it is such an affiliate, such Holder will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
Notwithstanding any other provisions hereof, the Company and the
Guarantor Subsidiaries will ensure that (i) any Exchange Offer Registration
Statement and any amendment thereto and any prospectus forming part thereof and
any supplement thereto complies in all material respects with the Securities Act
and the rules and regulations of the Commission thereunder, (ii) any Exchange
Offer Registration Statement and any amendment thereto does not, when it becomes
effective, 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 and (iii) any prospectus forming part of any Exchange
Offer Registration Statement, and any supplement to such prospectus, does not
include, as of the consummation of the Registered Exchange Offer, an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
2. Shelf Registration. If (i) because of any change in law or
applicable interpretations of the Commission's staff the Company determines that
it is not permitted to effect the Registered Exchange Offer as contemplated by
Section 1 hereof, or (ii) for any other reason the Registered Exchange Offer is
not consummated within 18 months after the Issue Date, or (iii) the Initial
Purchaser so requests with respect to Securities not eligible to be exchanged
for Exchange Securities in the Registered Exchange Offer and held by it
following the consummation of the Registered Exchange Offer, or (iv) any
applicable law or interpretations do not permit any Holder to participate in the
Registered Exchange Offer, or (v) any Holder that participates in the Registered
Exchange Offer does not receive freely transferable Exchange Securities in
exchange for tendered Securities (it being expressly understood that the
requirement that the Initial Purchaser deliver a prospectus in connection with
sales of Exchange Securities acquired in the Registered Exchange Offer in
exchange for Securities acquired as a result of market-making activities or
other trading activities shall not result in such Exchange Securities being
deemed not "freely tradeable" for the purposes of this Section 2), or (vi) the
Company so elects, then the following provisions shall apply:
(a) The Company shall use its reasonable best efforts to file as
promptly as practicable with the Commission, and thereafter shall use its
reasonable best efforts to cause to be declared effective, a shelf registration
statement on an appropriate form under the Securities Act relating to the offer
and sale of the Transfer Restricted Securities (as defined below) by the Holders
from time to time in accordance with the methods of distribution set forth in
such registration statement (hereafter, a "Shelf Registration Statement" and,
together with any Exchange Offer Registration Statement, a "Registration
Statement"); provided, however, that no Holder (other than the Initial
Purchaser) shall be entitled to have the Securities held by it covered by such
Shelf Registration Statement unless such Holder agrees in writing to be bound by
all the provisions of this Agreement applicable to such Holder.
(b) The Company shall use its reasonable best efforts to keep the
Shelf Registration Statement continuously effective in order to permit the
prospectus forming part thereof to be used by Holders for a period of two years
from the Issue Date or such shorter period that will terminate when all the
Securities and Exchange Securities covered by the Shelf Registration Statement
have been sold pursuant to the Shelf Registration Statement (in any such case,
such period being called the "Shelf Registration Period"). The Company shall be
deemed not to have used its reasonable best efforts to keep the Shelf
Registration Statement effective during the requisite period if it voluntarily
takes any action that would result in Holders of Securities or Exchange
Securities covered thereby not being able to offer and sell such Securities
<PAGE> 5
5
or Exchange Securities during that period, unless (i) such action is required by
applicable law or (ii) such action is taken by the Company in good faith and for
valid business reasons (not including avoidance of their obligations hereunder),
provided that the Company within 120 days thereafter complies with the
requirements of Section 4(j) hereof. Any such period during which the Company
fails to keep the registration statement effective and usable for offers and
sales of Securities, Private Exchange Securities and Exchange Securities is
referred to as a "Suspension Period." A Suspension Period shall commence on and
include the date that the Company gives notice that the Shelf Registration
Statement is no longer effective or the prospectus included therein is no longer
usable for offers and sales of Securities, Private Exchange Securities and
Exchange Securities and shall end on the date when each Holder of Securities,
Private Exchange Securities and Exchange Securities covered by such registration
statement either receives the copies of the supplemented or amended prospectus
contemplated by Section 4(j) hereof or is advised in writing by the Company that
use of the prospectus may be resumed. If one or more Suspension Periods occur,
the two-year time period referenced above shall be extended by the number of
days included in each such Suspension Period..
(c) Notwithstanding any other provisions hereof, the Company will
ensure that (i) any Shelf Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Shelf Registration Statement and any amendment
thereto (in either case, other than with respect to information included therein
in reliance upon or in conformity with written information furnished to the
Company by or on behalf of any Holder specifically for use therein (the
"Holders' Information")) does not, when it becomes effective, 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 and
(iii) any prospectus forming part of any Shelf Registration Statement, and any
supplement to such prospectus (in either case, other than with respect to
Holders' Information), does not include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
3. Liquidated Damages. (a) The parties hereto agree that the Holders
of Securities will suffer damages if the Company and the Guarantor Subsidiaries
fail to fulfill their obligations under Section 1 or Section 2, as applicable,
and that it would not be feasible to ascertain the extent of such damages.
Accordingly, if (i) the applicable Registration Statement is not filed with the
Commission on or prior to 16 months after the Issue Date, (ii) the Exchange
Offer Registration Statement or the Shelf Registration Statement, as the case
may be, is not declared effective within 17 months after the Issue Date (or in
the case of a Shelf Registration Statement required to be filed in response to a
change in law or the applicable interpretations of Commission's staff, if later,
within 45 days after publication of the change in law or interpretation), (iii)
the Registered Exchange Offer is not consummated on or prior to 18 months after
the Issue Date, or (iv) the Shelf Registration Statement is filed and declared
effective within 18 months after the Issue Date (or in the case of a Shelf
Registration Statement required to be filed in response to a change in law or
the applicable interpretations of Commission's staff, if later, within 45 days
after publication of the change in law or interpretation) but shall thereafter
cease to be effective (at any time that the Company is obligated to maintain the
effectiveness thereof) without being succeeded within 60 days by an additional
Registration Statement filed and declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), the Company and the
Guarantor Subsidiaries will be jointly and severally obligated to pay liquidated
damages to each holder of Transfer Restricted Securities, during the period of
one or more such Registration Defaults, in an amount equal to $ 0.192 per week
per $1,000 principal amount of the Securities constituting Transfer Restricted
Securities held by such Holder until (i) the applicable Registration Statement
is filed, (ii) the Exchange Offer Registration Statement is declared effective
and the Registered Exchange Offer is consummated, (iii) the Shelf Registration
Statement is
<PAGE> 6
6
declared effective or (iv) the Shelf Registration Statement again becomes
effective, as the case may be. Following the cure of all Registration Defaults,
the accrual of liquidated damages will cease. As used herein, the term "Transfer
Restricted Securities" means (i) each Security until the date on which such
Security has been exchanged for a freely transferable Exchange Security in the
Registered Exchange Offer, (ii) each Exchange Security following the exchange by
a broker-dealer in the Registered Exchange Offer of a Security for an Exchange
Security, until the date on which such Exchange Security is sold to a purchaser
who receives from such broker-dealer on or prior to the date of such sale a copy
of the prospectus contained in the Exchange Offer Registration Statement, (iii)
each Security or Private Exchange Security until the date on which it has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement or (iv) each Security or Private Exchange
Security until the date on which it has been distributed to the public pursuant
to Rule 144 under the Act. Notwithstanding anything to the contrary in this
Section 3(a), the Company and the Guarantor Subsidiaries shall not be required
to pay liquidated damages to the holder of Transfer Restricted Securities if
such holder failed to comply with its obligations to make the representations
set forth in the second to last paragraph of Section 1 or failed to provide the
information required to be provided by it, if any, pursuant to Section 4(n).
(b) The Company shall notify the Trustee and the Paying Agent under
the Indenture immediately upon the happening of each and every Registration
Default. The Company and the Guarantor Subsidiaries shall pay the liquidated
damages due on the Transfer Restricted Securities by depositing with the Paying
Agent (which may not be the Company for these purposes), in trust, for the
benefit of the holders thereof, prior to 10:00 a.m., New York City time, on the
next interest payment date specified by the Indenture and the Securities, sums
sufficient to pay the liquidated damages then due. The liquidated damages due
shall be payable on each interest payment date specified by the Indenture and
the Securities to the record holder entitled to receive the interest payment to
be made on such date. Each obligation to pay liquidated damages shall be deemed
to accrue from and including the date of the applicable Registration Default.
(c) The parties hereto agree that the liquidated damages provided
for in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by holders of Transfer
Restricted Securities by reason of the failure of (i) the Shelf Registration
Statement or the Exchange Offer Registration Statement to be filed, (ii) the
Shelf Registration Statement to remain effective or (iii) the Exchange Offer
Registration Statement to be declared effective and the Registered Exchange
Offer to be consummated, in each case to the extent required by this Agreement.
4. Registration Procedures. In connection with any Registration
Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to you, prior to the filing
thereof with the Commission, a copy of the Registration Statement and each
amendment thereof and each supplement, if any, to the prospectus included
therein and, in the event that the Initial Purchaser (with respect to any
portion of an unsold allotment from the original offering) is
participating in the Registered Exchange Offer or the Shelf Registration,
shall use its reasonable best efforts to reflect in each such document,
when so filed with the Commission, such comments as you reasonably may
propose; (ii) if applicable, include the information set forth in Annex A
hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures"
section and the "Purpose of the Exchange Offer" section and in Annex C
hereto in the "Plan of Distribution" section of the prospectus forming a
part of the Exchange Offer Registration Statement, and include the
information set forth in Annex D hereto in the Letter of Transmittal
delivered pursuant to the Registered Exchange
<PAGE> 7
7
Offer; and (iii) if requested by the Initial Purchaser, include the
information required by Items 507 or 508 of Regulation S-K, as applicable,
in the prospectus forming a part of the Exchange Offer Registration
Statement.
(b) The Company shall advise you, each Exchanging Dealer and the
Holders (if applicable) and, if requested by you or any such person,
confirm such advice in writing (which advice pursuant to clauses (ii)-(v)
hereof shall be accompanied by an instruction to suspend the use of the
prospectus until the requisite changes have been made):
(i) when any Registration Statement and any amendment thereto
has been filed with the Commission and when such Registration
Statement or any post-effective amendment thereto has become
effective;
(ii) of any request by the Commission for amendments or
supplements to any Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities,
the Exchange Securities or the Private Exchange Securities for sale
in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(v) of the happening of any event that requires the making of
any changes in any Registration Statement or the prospectus included
therein so that, as of such date, the statements therein are not
misleading and do not omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading.
(c) The Company will make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of any Registration
Statement at the earliest possible time.
(d) The Company will furnish to each holder of Transfer Restricted
Securities included within the coverage of any Shelf Registration
Statement, without charge upon request, at least one copy of such Shelf
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules and all exhibits (including those
incorporated by reference).
(e) The Company will, during the Shelf Registration Period, promptly
deliver to each holder of Transfer Restricted Securities included within
the coverage of any Shelf Registration Statement, without charge, as many
copies of the prospectus (including each preliminary prospectus) included
in such Shelf Registration Statement and any amendment or supplement
thereto as such Holder may reasonably request; and the Company consents to
the use of such prospectus or any amendment or supplement thereto by each
of the selling holders of Transfer Restricted Securities in connection
with the offer and sale of the Transfer Restricted Securities covered by
such prospectus or any amendment or supplement thereto.
<PAGE> 8
8
(f) The Company will furnish to each Exchanging Dealer or the
Initial Purchaser, as applicable, which so requests, without charge, at
least one copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules and, if the Exchanging Dealer or the Initial Purchaser, as
applicable, so requests in writing, all exhibits (including those
incorporated by reference).
(g) The Company will, during the Exchange Offer Registration Period
or the Shelf Registration Period, as applicable, promptly deliver to each
Initial Purchaser, each Exchanging Dealer and such other persons that are
required to deliver a prospectus following the Registered Exchange Offer,
as applicable, without charge, as many copies of the prospectus included
within the coverage of the Exchange Offer Registration Statement or the
Shelf Registration Statement and any amendment or supplement thereto as
such Initial Purchaser, Exchanging Dealer or other persons, as applicable,
may reasonably request; and the Company consents to the use of such
prospectus or any amendment or supplement thereto by any such Initial
Purchaser, Exchanging Dealer or other persons, as applicable, as
aforesaid.
(h) Prior to any public offering of Securities or Exchange
Securities pursuant to any Registration Statement, the Company will use
its reasonable best efforts to register or qualify, or cooperate with the
Holders of Securities, Exchange Securities or Private Exchange Securities
included therein and their respective counsel in connection with the
registration or qualification of, such Securities, Exchange Securities or
Private Exchange Securities for offer and sale under the securities or
blue sky laws of such jurisdictions as any such Holder reasonably requests
in writing and do any and all other acts or things necessary or advisable
to enable the offer and sale in such jurisdictions of the Securities,
Exchange Securities or Private Exchange Securities covered by such
Registration Statement; provided that the Company will not be required to
qualify generally to do business in any jurisdiction where it is not then
so qualified or to take any action which would subject it to general
service of process or to taxation in any such jurisdiction where it is not
then so subject.
(i) The Company will cooperate with the Holders of Securities,
Exchange Securities or Private Exchange Securities to facilitate the
timely preparation and delivery of certificates representing Securities,
Exchange Securities or Private Exchange Securities to be sold pursuant to
any Registration Statement free of any restrictive legends and in such
denominations and registered in such names as the Holders thereof may
request in writing prior to sales of Securities, Exchange Securities or
Private Exchange Securities pursuant to such Registration Statement.
(j) If (i) any event contemplated by paragraphs (b)(ii) through (v)
above occurs during the period for which the Company is required to
maintain an effective Registration Statement or (ii) any Suspension Period
remains in effect more than 120 days after the occurrence thereof, the
Company will promptly prepare and file with the Commission a
post-effective amendment to the Registration Statement or a supplement to
the related prospectus or file any other required document so that, as
thereafter delivered to purchasers of the Securities, Exchange Securities
or Private Exchange Securities from a Holder or an Exchanging Dealer, the
prospectus will not include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Securities,
Exchange Securities and
<PAGE> 9
9
the Private Exchange Securities, as the case may be, and provide the
applicable trustee with printed certificates for the Securities, the
Exchange Securities or the Private Exchange Securities, as the case may
be, in a form eligible for deposit with The Depository Trust Company.
(l) The Company will comply with all applicable rules and
regulations of the Commission and will make generally available to its
security holders as soon as practicable after the effective date of the
applicable Registration Statement an earning statement satisfying the
provisions of Section 11(a) of the Securities Act; provided that in no
event shall such earning statement be delivered later than 45 days after
the end of a 12-month period (or 90 days, if such period is a fiscal year)
beginning with the first month of the Company's first fiscal quarter
commencing after the effective date of the applicable Registration
Statement, which statement shall cover such 12-month period.
(m) The Company will cause the Indenture or the Exchange Securities
Indenture, as the case may be, to be qualified under the Trust Indenture
Act as required by applicable law in a timely manner and containing such
changes, if any, as shall be necessary for such qualification.
(n) The Company may require each holder of Transfer Restricted
Securities to be registered pursuant to any Shelf Registration Statement
to furnish to the Company such information (including supplements thereto)
concerning the Holder and the distribution of such Transfer Restricted
Securities as the Company may from time to time reasonably require for
inclusion in such Shelf Registration Statement, and the Company may
exclude from such registration the Transfer Restricted Securities of any
Holder that fails to furnish such information (including supplements
thereto) within a reasonable time after receiving such request.
(o) In the case of a Shelf Registration Statement, each holder of
Transfer Restricted Securities to be registered pursuant thereto agrees by
acquisition of such Transfer Restricted Securities that, upon receipt of
any notice from the Company pursuant to Section 4(b)(ii) through (v)
hereof, such holder will discontinue disposition of such Transfer
Restricted Securities until such holder's receipt of copies of the
supplemental or amended prospectus contemplated by Section 4(j) hereof or
until advised in writing (the "Advice") by the Company that the use of the
applicable prospectus may be resumed. If the Company shall give any notice
under Section 4(b)(ii) through (v) during the period that the Company is
required to maintain an effective Registration Statement (the
"Effectiveness Period"), such Effectiveness Period shall be extended by
the number of days during such period from and including the date of the
giving of such notice to and including the date when each seller of
Transfer Restricted Securities covered by such Registration Statement
shall have received (x) the copies of the supplemental or amended
prospectus contemplated by Section 4(j) (if an amended or supplemental
prospectus is required) or (y) the Advice (if no amended or supplemental
prospectus is required).
(p) In the case of a Shelf Registration Statement, the Company shall
enter into such customary agreements (including, if requested, an
underwriting agreement in customary form) and take all such other action,
if any, as Holders of a majority in aggregate principal amount of the
Securities, Exchange Securities and Private Exchange Securities being sold
or the managing underwriters (if any) shall reasonably request in order to
facilitate any disposition of Securities, Exchange Securities or Private
Exchange Securities pursuant to such Shelf Registration Statement.
<PAGE> 10
10
(q) In the case of a Shelf Registration Statement, the Company shall
(i) make reasonably available for inspection by a representative of, and
Special Counsel (as defined below) acting for, Holders of a majority in
aggregate principal amount of the Securities, Exchange Securities and
Private Exchange Securities being sold and any underwriter participating
in any disposition of Securities, Exchange Securities or Private Exchange
Securities pursuant to such Shelf Registration Statement, all relevant
financial and other records, pertinent corporate documents and properties
of the Company and its subsidiaries and (ii) use its reasonable best
efforts to have its officers, directors, employees, accountants and
counsel supply all relevant information reasonably requested by such
representative, Special Counsel or any such underwriter (an "Inspector")
in connection with such Shelf Registration Statement.
(r) In the case of a Shelf Registration Statement, the Company
shall, if requested by Holders of a majority in aggregate principal amount
of the Securities, Exchange Securities and Private Exchange Securities
being sold, their Special Counsel or the managing underwriters (if any) in
connection with such Shelf Registration Statement, use its reasonable best
efforts to cause (i) its counsel to deliver an opinion relating to the
Shelf Registration Statement and the Securities, Exchange Securities or
Private Exchange Securities, as applicable, in customary form, (ii) its
officers to execute and deliver all customary documents and certificates
requested by Holders of a majority in aggregate principal amount of the
Securities, Exchange Securities and Private Exchange Securities being
sold, their Special Counsel or the managing underwriters (if any) and
(iii) its independent public accountants to provide a comfort letter in
customary form, subject to receipt of appropriate documentation as
contemplated, and only if permitted, by Statement of Auditing Standards
No. 72.
5. Registration Expenses. The Company will bear all expenses
incurred in connection with the performance of its obligations under Sections 1,
2, 3 and 4 and the Company will reimburse the Initial Purchaser and the Holders
for the reasonable fees and disbursements of one firm of attorneys (in addition
to any local counsel) chosen by the Holders of a majority in aggregate principal
amount of the Securities, Exchange Securities and Private Exchange Securities to
be sold pursuant to such Registration Statement (the "Special Counsel") acting
for the Initial Purchaser or Holders in connection therewith.
6. Indemnification. (a) In the event of a Shelf Registration
Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by an Exchanging Dealer or the Initial Purchaser,
as applicable, the Company and the Guarantor Subsidiaries shall jointly and
severally indemnify and hold harmless each Holder (including, without
limitation, any such Initial Purchaser or Exchanging Dealer), its affiliates,
their respective officers, directors, employees, representatives and agents, and
each person, if any, who controls such Holder within the meaning of the
Securities Act or the Exchange Act (collectively referred to for purposes of
this Section 6 and Section 7 as a Holder) from and against any loss, claim,
damage or liability, joint or several, or any action in respect thereof
(including, without limitation, any loss, claim, damage, liability or action
relating to purchases and sales of Securities, Exchange Securities or Private
Exchange Securities), to which that Holder may become subject, whether commenced
or threatened, under the Securities Act, the Exchange Act, any other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
loss, claim, damage, liability or action arises out of, or is based upon, (i)
any untrue statement or alleged untrue statement of a material fact contained in
any such Registration Statement or any prospectus forming part thereof or in any
amendment or supplement thereto or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, and shall reimburse each Holder promptly
upon demand for any legal or other
<PAGE> 11
11
expenses reasonably incurred by that Holder in connection with investigating or
defending or preparing to defend against or appearing as a third party witness
in connection with any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such documents in
reliance upon and in conformity with any Holders' Information; and provided,
further, that with respect to any such untrue statement in or omission from any
related preliminary prospectus, the indemnity agreement contained in this
Section 6(a) shall not inure to the benefit of any Holder from whom the person
asserting any such loss, claim, damage, liability or action received Securities,
Exchange Securities or Private Exchange Securities to the extent that such loss,
claim, damage, liability or action of or with respect to such Holder results
from the fact that both (A) to the extent required by applicable law, a copy of
the final prospectus was not sent or given to such person at or prior to the
written confirmation of the sale of such Securities, Exchange Securities or
Private Exchange Securities to such person and (B) the untrue statement in or
omission from the related preliminary prospectus was corrected in the final
prospectus unless, in either case, such failure to deliver the final prospectus
was a result of non-compliance by the Company with Section 4(d), 4(e), 4(f) or
4(g).
(b) In the event of a Shelf Registration Statement, each Holder
shall indemnify and hold harmless the Company, its affiliates, their respective
officers, directors, employees, representatives and agents, and each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 6(b) and
Section 7 as the Company), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Company may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with any Holders' Information furnished to
the Company by such Holder, and shall reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that no such Holder
shall be liable for any indemnity claims hereunder in excess of the amount of
net proceeds received by such Holder from the sale of Securities, Exchange
Securities or Private Exchange Securities pursuant to such Shelf Registration
Statement.
(c) Promptly after receipt by an indemnified party under this
Section 6 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 pursuant to Section 6(a) or 6(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 6 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 6. 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
<PAGE> 12
12
with any other similarly notified indemnifying party, to assume the defense
thereof with counsel reasonably satisfactory to 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 this Section 6 for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than the reasonable costs of investigation; provided,
however, that an indemnified party shall have the right to employ its own
counsel in any such action, but the fees, expenses and other charges of such
counsel for the indemnified party will be at the expense of such indemnified
party unless (1) the employment of counsel by the indemnified party has been
authorized in writing by the indemnifying party, (2) the indemnified party has
reasonably concluded (based upon advice of counsel to the indemnified party)
that there may be legal defenses available to it or other indemnified parties
that are different from or in addition to those available to the indemnifying
party and which would be material to the defense of the indemnified party and
adverse to the indemnifying party, (3) a conflict or potential conflict exists
(based upon advice of counsel to the indemnified party) between the indemnified
party and the indemnifying party (in which case the indemnifying party will not
have the right to direct the defense of such action on behalf of the indemnified
party) or (4) the indemnifying party has not in fact employed counsel reasonably
satisfactory to the indemnified party to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or parties.
It is understood that the indemnifying party or parties shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees, disbursements and other charges of more than one
separate firm of attorneys (in addition to any local counsel) at any one time
for all such indemnified party or parties. Each indemnified party, as a
condition of the indemnity contained in Sections 6(a) and 6(b), shall use all
reasonable efforts to cooperate with the indemnifying party in the defense of
any such action or claim. No indemnifying party shall be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment for the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of the
indemnified party (which consent shall not be unreasonably withheld), effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
7. Contribution. If the indemnification provided for in Section 6 is
unavailable or insufficient to hold harmless an indemnified party under Section
6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, in such proportion as shall be appropriate to reflect the relative
fault of the indemnifying party on the one hand and the indemnified party on the
other with respect to the actions, statements or omissions that resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative fault of such indemnifying
party and indemnified party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact, has been taken or made by, or relates to information supplied by,
such indemnifying party or indemnified party, and the intent of the parties and
their relative knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The parties hereto agree that it
would not be just and equitable if contributions pursuant to this Section 7 were
to be determined by pro rata allocation or by any other method of allocation
that does not take into account the equitable
<PAGE> 13
13
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 7 shall be deemed to include, for
purposes of this Section 7, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending or
preparing to defend any such action or claim. Notwithstanding the provisions of
this Section 7, an indemnifying party that is a holder of Securities, Exchange
Securities or Private Exchange Securities shall not be required to contribute
any amount in excess of the amount by which the total price at which the
Securities, Exchange Securities or Private Exchange Securities sold by such
indemnifying party to any purchaser exceeds the amount of any damages which such
indemnifying party has otherwise paid or become liable to pay by reason of any
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. Rules 144 and 144A. The Company shall use its reasonable best
efforts to file the reports required to be filed by it under the Securities Act
and the Exchange Act in a timely manner and, if at any time the Company is not
required to file such reports, it will, upon the written request of any holder
of Transfer Restricted Securities, make publicly available other information so
long as necessary to permit sales of their securities pursuant to Rules 144 and
144A. The Company covenants that it will take such further action as any holder
of Transfer Restricted Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Transfer Restricted
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rules 144 and 144A (including, without limitation,
the requirements of Rule 144A(d)(4)). Upon the written request of any holder of
Transfer Restricted Securities, the Company shall deliver to such holder a
written statement as to whether it has complied with such requirements.
Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.
9. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration Statement are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the holders of
a majority in aggregate principal amount of such Transfer Restricted Securities
included in such offering, subject to the consent of the Company (which shall
not be unreasonably withheld or delayed), and such holders shall be responsible
for all underwriting commissions and discounts in connection therewith.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. Miscellaneous. (a) Amendments and Waivers. The provisions of
this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
Company has obtained the written consent of Holders of a majority in aggregate
principal amount of the Securities, the Exchange Securities and the Private
Exchange Securities, taken as a single class. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders whose Securities, Exchange
Securities or Private Exchange Securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of a majority in aggregate
<PAGE> 14
14
principal amount of the Securities, Exchange Securities and the Private Exchange
Securities being sold by such Holders pursuant to such Registration Statement.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier or air courier guaranteeing next-day delivery:
(1) if to a Holder, at the most current address given by such Holder
to the Company in accordance with the provisions of this Section 10(b),
which address initially is, with respect to each Holder, the address of
such Holder maintained by the Registrar under the Indenture, with a copy
in like manner to Chase Securities Inc.;
(2) if to you, initially at your address set forth in the Purchase
Agreement; and
(3) if to the Company, initially at the address of the Company set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; one business day
after being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) Successors And Assigns. This Agreement shall be binding upon the
Company, the Guarantor Subsidiaries and their respective successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopier) and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) Definition of Terms. For purposes of this Agreement, (a) the
term "business day" means any day on which the New York Stock Exchange, Inc. is
open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act and (c) except where otherwise expressly provided,
the term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
<PAGE> 15
15
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(h) Remedies. In the event of a breach by the Company or a Guarantor
Subsidiary, or by any Holder, of any of their obligations under this Agreement,
each Holder or the Company or a Guarantor Subsidiary, as the case may be, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages (other than the recovery of damages for a breach by the
Company of its obligations under Sections 1 or 2 hereof for which liquidated
damages have been paid pursuant to Section 3 hereof), will be entitled to
specific performance of its rights under this Agreement. The Company, the
Guarantor Subsidiaries and each Holder agree that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agree that, in the event
of any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
(i) No Inconsistent Agreements. The Company and the Guarantor
Subsidiaries represent, warrant and agree that (i) they have not entered into
and shall not, on or after the date of this Agreement, enter into any agreement
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof, (ii) they have not previously
entered into any agreement which remains in effect granting any registration
rights with respect to any of their debt securities to any person and (iii)
without limiting the generality of the foregoing, without the written consent of
the Holders of a majority in aggregate principal amount of the then outstanding
Transfer Restricted Securities, they shall not grant to any person the right to
request the Company to register any debt securities of the Company under the
Securities Act unless the rights so granted are not in conflict or inconsistent
with the provisions of this Agreement.
(j) No Piggyback on Registrations. Neither the Company nor any of
its security holders (other than the holders of Transfer Restricted Securities
in such capacity) shall have the right to include any securities of the Company
in any Shelf Registration or Registered Exchange Offer other than Transfer
Restricted Securities.
(k) Severability. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
<PAGE> 16
16
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Guarantor Subsidiaries and you.
Very truly yours,
RICHMONT MARKETING SPECIALISTS
INC.,
By /s/ Timothy M. Byrd
------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
MARKETING SPECIALISTS SALES
COMPANY,
By /s/ Timothy M. Byrd
------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
MSSC CAROLINA, INC.,
By /s/ Timothy M. Byrd
------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
FERRO & ASSOCIATES, INC.,
By /s/ Timothy M. Byrd
------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
BROMAR, INC.,
By /s/ Timothy M. Byrd
------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
<PAGE> 17
17
GENE SANFORD & ASSOCIATES, INC.,
By /s/ Timothy M. Byrd
------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
SERVICE ASSETS CORP.,
By /s/ Timothy M. Byrd
------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
BROKERAGE SERVICES, INC.,
By /s/ Timothy M. Byrd
------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
BATESTAS & CO.,
By /s/ Timothy M. Byrd
------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
TOWER MARKETING, INC.,
By /s/ Timothy M. Byrd
------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
T-BAR BROKERAGE,
By /s/ Timothy M. Byrd
------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
<PAGE> 18
18
T'NT NATIONAL CONVENIENCE STORE
BROKERS, INC.,
By /s/ Timothy M. Byrd
------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
ATLAS MARKETING COMPANY, INC.,
By /s/ Timothy M. Byrd
------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
CENTURY FOOD BROKERS OF HICKORY,
INC.,
By /s/ Timothy M. Byrd
------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
EAST COAST FOOD BROKERAGE, INC.,
By /s/ Timothy M. Byrd
------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
ULTIMATE FOOD SALES, INC.,
By /s/ Timothy M. Byrd
------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
CUMBERLAND FOOD BROKERS, INC.,
By /s/ Timothy M. Byrd
------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
MEATMASTER BROKERAGE, INC.,
By /s/ Timothy M. Byrd
------------------------------
Name: Timothy M. Byrd
Title: Chief Financial Officer
<PAGE> 19
19
Accepted:
CHASE SECURITIES INC.,
By: /s/ Joseph C. Purcell
---------------------
Authorized Signatory
Address for notices pursuant to Section 6(c):
1 Chase Plaza, 25th floor
New York, New York 10081
Attention: Legal Department
<PAGE> 20
ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Securities received in exchange for
Securities where such Securities were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
<PAGE> 21
ANNEX B
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
<PAGE> 22
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Securities
received in exchange for Securities where such Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 180 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until _______________,
199_, all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus.(1)
Neither the Company nor any of the Guarantor Subsidiaries receive
any proceeds from any sale of Exchange Securities by broker-dealers. Exchange
Securities received by broker-dealers for their own account pursuant to the
Registered Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Securities or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer or the purchasers of any such Exchange Securities. Any
broker-dealer that resells Exchange Securities that were received by it for its
own account pursuant to the Registered Exchange Offer and any broker or dealer
that participates in a distribution of such Exchange Securities may be deemed to
be an "underwriter" within the meaning of the Securities Act and any profit on
any such resale of Exchange Securities and any commission or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Registered Exchange Offer (including the expenses of one counsel
for the Holders of the Securities) other than commissions or concessions of any
broker-dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
- ----------
(1) In addition, the legend required by Item 502(e) of Regulation S-K
will appear on the back cover page of the Registered Exchange Offer
prospectus.
<PAGE> 23
ANNEX D
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS
OR SUPPLEMENTS THERETO.
Name:______________________________________________
Address:___________________________________________
___________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE> 1
EXHIBIT 10.1
AMENDED AND RESTATED
CREDIT AGREEMENT
among
RICHMONT MARKETING SPECIALISTS INC.
as Borrower,
THE CHASE MANHATTAN BANK,
as Agent,
and
the banks named herein
18 December 1997
[LOGO] CHASE
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE 1 - Definitions........................................................1
Section 1.1 Definitions..............................................1
Section 1.2 Other Definitional Provisions...........................18
Section 1.3 Accounting Terms and Determinations.....................18
Section 1.4 Time of Day.............................................19
ARTICLE 2 - Revolving Credit Facility.........................................19
Section 2.1 Commitments.............................................19
Section 2.2 Notes...................................................19
Section 2.3 Repayment of Loans......................................19
Section 2.4 Use of Proceeds.........................................19
Section 2.5 Commitment Fee..........................................19
Section 2.6 Termination or Reduction of Commitments.................20
Section 2.7 Letters of Credit.......................................20
(a) Commitment to Issue.....................................20
(b) Letter of Credit Request Procedure......................20
(c) Letter of Credit Fees...................................21
(d) Funding of Drawings.....................................21
(e) Reimbursements..........................................21
(f) Reimbursement Obligations Absolute......................22
(g) Issuer Responsibility...................................22
ARTICLE 3 - Interest and Fees.................................................23
Section 3.1 Interest Rate...........................................23
Section 3.2 Determinations of Margins and Fees......................23
(a) "Base Margin"...........................................23
(b) "Commitment Fee Rate"...................................23
(c) "Libor Rate Margin".....................................24
Section 3.3 Payment Dates...........................................25
Section 3.4 Default Interest........................................25
Section 3.5 Conversions and Continuations of Accounts...............25
Section 3.6 Computations............................................25
ARTICLE 4 - Administrative Matters............................................25
Section 4.1 Borrowing Procedure.....................................25
(a) Formal Borrowing Request................................25
(b) Automatic Borrowing.....................................26
Section 4.2 Minimum Amounts.........................................26
Section 4.3 Certain Notices.........................................26
Section 4.4 Prepayments.............................................27
(a) Mandatory...............................................27
(b) Control of Cash and Application to Obligations..........27
Section 4.5 Method of Payment.......................................29
i
<PAGE> 3
TABLE OF CONTENTS
(continued)
Page
----
Section 4.6 Weekly Settlement Among Banks; Pro Rata Treatment.......29
Section 4.7 Sharing of Payments.....................................30
Section 4.8 Non-Receipt of Funds by the Agent.......................31
Section 4.9 Withholding Taxes.......................................31
Section 4.10 Withholding Tax Exemption...............................32
Section 4.11 Participation and Settlement Obligations Absolute;
Failure to Fund Participation or Settlement.............32
ARTICLE 5 - Yield Protection and Illegality...................................33
Section 5.1 Additional Costs........................................33
Section 5.2 Limitation on Libor Accounts............................34
Section 5.3 Illegality..............................................35
Section 5.4 Treatment of Affected Loans.............................35
Section 5.5 Compensation............................................36
Section 5.6 Capital Adequacy........................................36
Section 5.7 Replacement of a Bank...................................37
ARTICLE 6 - Conditions Precedent..............................................37
Section 6.1 Initial Loan and Letter of Credit.......................37
(a) Resolutions; Authority..................................37
(b) Incumbency Certificate..................................38
(c) Organizational Documents................................38
(d) Bylaws..................................................38
(e) Governmental Certificates...............................38
(f) Notes...................................................38
(g) Acknowledgment..........................................38
(h) Collateral Documents and Collateral.....................38
(i) Termination of Liens; Subordinations....................39
(j) Insurance Policies......................................39
(k) Opinion of Counsel......................................39
(l) Attorneys' Fees and Expenses............................39
(m) Account Agreement.......................................39
(n) Closing Fee.............................................39
(o) Prior Agreement Outstandings............................39
(p) Transactions............................................39
(q) Transaction Documents...................................39
Section 6.2 All Loans and Letters of Credit.........................40
(a) No Default..............................................40
(b) Representations and Warranties..........................40
(c) Additional Documentation................................40
ARTICLE 7 - Representations and Warranties....................................40
ii
<PAGE> 4
TABLE OF CONTENTS
(continued)
Page
----
Section 7.1 Corporate Existence.....................................40
Section 7.2 Financial Statements....................................41
Section 7.3 Corporate Action; No Breach.............................41
Section 7.4 Operation of Business...................................41
Section 7.5 Litigation and Judgments................................41
Section 7.6 Rights in Properties; Liens.............................41
Section 7.7 Enforceability..........................................42
Section 7.8 Approvals...............................................42
Section 7.9 Debt....................................................42
Section 7.10 Taxes...................................................42
Section 7.11 Margin Securities.......................................42
Section 7.12 ERISA...................................................43
Section 7.13 Disclosure..............................................43
Section 7.14 Subsidiaries; Borrower Capitalization...................43
Section 7.15 Agreements..............................................43
Section 7.16 Compliance with Laws....................................44
Section 7.17 Investment Company Act..................................44
Section 7.18 Public Utility Holding Company Act......................44
Section 7.19 Environmental Matters...................................44
Section 7.20 Deposit and Brokerage Accounts..........................45
Section 7.21 Solvency................................................45
Section 7.22 Perishable Agricultural Commodities Act.................45
Section 7.23 Packers and Stockyards Act..............................45
Section 7.24 Common Enterprise. ....................................46
Section 7.25 Transaction Documents...................................46
ARTICLE 8 - Positive Covenants................................................46
Section 8.1 Reporting Requirements..................................46
(a) Annual Financial Statements.............................46
(b) Monthly Financial Statements............................46
(c) Quarterly Financial Statements..........................47
(d) Compliance Certificate..................................47
(e) Borrowing Base Report...................................47
(f) Receivable Reporting....................................47
(g) Projections.............................................47
(h) Management Letters......................................48
(i) Notice of Litigation....................................48
(j) Notice of Default.......................................48
(k) ERISA Reports...........................................48
(l) Notice of Material Adverse Effect.......................48
(m) Proxy Statements, Etc...................................48
(n) General Information.....................................49
iii
<PAGE> 5
TABLE OF CONTENTS
(continued)
Page
----
Section 8.2 Maintenance of Existence; Conduct of Business...........49
Section 8.3 Maintenance of Properties...............................49
Section 8.4 Taxes and Claims........................................49
Section 8.5 Insurance...............................................49
Section 8.6 Inspection Rights.......................................49
Section 8.7 Keeping Books and Records...............................50
Section 8.8 Compliance with Laws....................................50
Section 8.9 Compliance with Agreements..............................50
Section 8.10 Further Assurances and Collateral Matters...............50
(a) Further Assurance and Exceptions to Perfection..........50
(b) Subsidiary Creation or Acquisition......................51
Section 8.11 ERISA...................................................51
ARTICLE 9 - Negative Covenants................................................51
Section 9.1 Debt....................................................51
Section 9.2 Limitation on Liens and Restrictions on
Subsidiaries............................................53
Section 9.3 Mergers, Etc............................................55
Section 9.4 Restricted Junior Payments..............................57
Section 9.5 Investments.............................................58
Section 9.6 Limitation on Issuance of Capital Stock.................59
Section 9.7 Transactions With Affiliates............................60
Section 9.8 Disposition of Assets...................................60
Section 9.9 Sale and Leaseback......................................60
Section 9.10 Lines of Business.......................................61
Section 9.11 Prepayment of Debt......................................61
Section 9.12 Atlas Acquisition Documents; Purchase Agreements........61
Section 9.13 Modifications to Senior Subordinated Note
Documents...............................................61
Section 9.14 Designation of Senior Debt..............................61
ARTICLE 10 - Financial Covenants..............................................62
Section 10.1 Debt Service Ratio......................................62
Section 10.2 Interest Coverage.......................................62
Section 10.3 Capital Expenditure Limits..............................63
ARTICLE 11 - Default..........................................................63
Section 11.1 Events of Default.......................................63
Section 11.2 Remedies................................................66
(a) Acceleration............................................66
(b) Termination of Commitments..............................66
(c) Judgment................................................67
(d) Foreclosure.............................................67
(e) Rights..................................................67
iv
<PAGE> 6
TABLE OF CONTENTS
(continued)
Page
----
Section 11.3 Cash Collateral.........................................67
Section 11.4 Performance by the Agent................................67
Section 11.5 Setoff..................................................68
Section 11.6 Continuance of Default..................................68
ARTICLE 12 - The Agent........................................................68
Section 12.1 Appointment, Powers and Immunities......................68
Section 12.2 Rights of Agent as a Bank...............................69
Section 12.3 Defaults................................................69
Section 12.4 Indemnification.........................................69
Section 12.5 Independent Credit Decisions............................70
Section 12.6 Several Commitments.....................................70
Section 12.7 Successor Agent.........................................71
Section 12.8 Authorized Actions......................................71
Section 12.9 Administrative Fee. ...................................71
ARTICLE 13 - Miscellaneous....................................................71
Section 13.1 Expenses................................................71
Section 13.2 Indemnification.........................................72
Section 13.3 Limitation of Liability.................................73
Section 13.4 No Duty.................................................73
Section 13.5 No Fiduciary Relationship...............................73
Section 13.6 Equitable Relief........................................73
Section 13.7 No Waiver; Cumulative Remedies..........................73
Section 13.8 Successors and Assigns..................................74
Section 13.9 Survival................................................76
Section 13.10 Entire Agreement; Amendment and Restatement;
Waivers of Claims; Release of Additional Guaranty.......76
Section 13.11 Amendments..............................................77
Section 13.12 Maximum Interest Rate...................................77
Section 13.13 Notices.................................................78
Section 13.14 Governing Law, Etc......................................78
Section 13.15 Counterparts............................................78
Section 13.16 Severability............................................79
Section 13.17 Headings................................................79
Section 13.18 Non-Application of Chapter 346 of Texas Finance
Code....................................................79
Section 13.19 Construction............................................79
Section 13.20 Independence of Covenants...............................79
Section 13.21 WAIVER OF JURY TRIAL....................................79
Section 13.22 Confidentiality.........................................79
v
<PAGE> 7
INDEX TO EXHIBITS
Exhibit Description of Exhibit
------- ----------------------
"A" Note
"B" Compliance Certificate
"C" Borrowing Base Report
"D" Subsidiary Joinder Agreement
"E" Assignment and Acceptance
INDEX TO SCHEDULES
Schedule Description of Schedule
-------- -----------------------
1.1(a) Lockbox Agreements and Accounts
7.14 List of Subsidiaries; List of Borrower Shareholders
9.1 Debt
9.2 Existing Liens
9.5 Existing Investments
9.7 Permitted Affiliate Transactions
vi
<PAGE> 8
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT (the "Agreement"), dated as of
December 18, 1997, is among RICHMONT MARKETING SPECIALISTS INC., a corporation
duly organized and validly existing under the laws of the State of Delaware
("Borrower"), each of the banks or other lending institutions which is or which
may from time to time become a signatory hereto or any successor or assignee
thereof pursuant to Section 13.8 hereof (individually, a "Bank" and,
collectively, the "Banks"), and THE CHASE MANHATTAN BANK, individually as a Bank
and as agent for itself and the other Banks (in its capacity as agent, together
with its successors in such capacity, the "Agent").
R E C I T A L S:
Borrower and The Chase Manhattan Bank, as agent and individually as the
only bank, have previously entered into that certain Credit Agreement dated as
of October 14, 1997 (as the same has been amended, herein referred to as the
"Prior Agreement"). Borrower and The Chase Manhattan Bank now desire to enter
into this Agreement to amend and restate the Prior Agreement in its entirety.
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.1 Definitions. As used in this Agreement, the following terms
have the following meanings:
"Account" means either a Base Rate Account or a Libor Account.
"Additional Costs" has the meaning specified in Section 5.1 hereof.
"Adjusted Libor Rate" means, for any Libor Account for any Interest Period
therefor, the rate per annum determined by the Agent to be equal to the Libor
Rate for such Libor Account for such Interest Period divided by 1 minus the
Reserve Requirement for such Libor Account for such Interest Period.
"Adjustment Date" has the meaning specified in Section 3.2 hereof.
"Affiliate" means, as to any Person, any other Person (a) that directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, such Person; (b) that directly or indirectly
beneficially owns or holds ten percent (10%) or more of any
AMENDED AND RESTATED CREDIT AGREEMENT - Page 1
<PAGE> 9
class of voting stock of such Person; or (c) ten percent (10%) or more of the
voting stock of which is directly or indirectly beneficially owned or held by
the Person in question. The term "control" means the possession, directly or
indirectly, of the power to direct or cause direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise; provided, however, in no event shall the Agent or any
Bank be deemed an Affiliate of the Borrower or any Subsidiaries.
"Agent" has the meaning set forth in the introductory paragraph of this
Agreement.
"Agreement" has the meaning set forth in the introductory paragraph of
this Agreement.
"Applicable Lending Office" means for each Bank and each Type of Account,
the lending office of such Bank (or of an Affiliate of such Bank) designated for
such Account below its name on the signature pages hereof or such other office
of such Bank (or of an Affiliate of such Bank) as such Bank may from time to
time specify to the Borrower and the Agent as the office by which its Loans
subject to Accounts of such Type are to be made and maintained.
"Applicable Rate" has the meaning specified in Section 3.1 hereof.
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Bank and its assignee and accepted by the Agent pursuant to Section
13.8 hereof, in substantially the form of Exhibit "E" hereto.
"Atlas Acquisition" means the acquisition by MSSC Carolina, Inc. of all
the capital stock of Atlas Marketing Company, Inc., a North Carolina
corporation.
"Atlas Acquisition Documents" means the stock purchase agreements entered
into in connection with the Atlas Acquisition, all documentation executed
pursuant to the terms thereof and all other documentation executed and delivered
to consummate the Atlas Acquisition, as the same may be amended or otherwise
modified; excluding, however, the Loan Documents, Senior Subordinated Note
Documents and the other Transaction Documents.
"Atlas Companies" means Atlas Marketing Company, Inc. and the Subsidiaries
directly or indirectly owned by Atlas Marketing Company, Inc.
"Available Cash" has the meaning specified in Section 4.4 (b).
"Bank" has the meaning set forth in the introductory paragraph of this
Agreement.
"Base Margin" has the meaning specified in Section 3.2 hereof.
"Base Rate" means, for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate
(computed on the basis of the actual
AMENDED AND RESTATED CREDIT AGREEMENT - Page 2
<PAGE> 10
number of days elapsed over a year of 365 or 366 days, as the case may be) in
effect on such day, (b) the Federal Funds Effective Rate (computed on the basis
of the actual number of days elapsed over a 360-day year) in effect for such day
plus one half percent (1/2%), or (c) the Base CD Rate in effect for such day
plus one percent (1%). For purposes of this Agreement, any change in the Base
Rate due to a change in the Prime Rate, Federal Funds Effective Rate or the Base
CD Rate shall be effective on the effective date of such change in the Prime
Rate, Federal Funds Effective Rate or the Base CD Rate, respectively. If for any
reason the Agent shall have determined (which determination shall be conclusive
and binding, absent manifest error) that it is unable to ascertain the Federal
Funds Effective Rate or Base CD Rate, or both, for any reason, including the
inability or failure of the Agent to obtain sufficient quotations in accordance
with the terms hereof, the Base Rate shall be determined without regard to
clause (b) or (c), or both, as appropriate, until the circumstances giving rise
to such inability no longer exist. As used in this definition, the following
terms shall have the following meanings:
"Assessment Rate" shall mean the annual assessment rate (net of
refunds and rounded upwards, if necessary, to the next 1/16 of 1%)
estimated by the Agent (in good faith, but in no event in excess of
statutory or regulatory maximums) to be payable by the Agent to the
Federal Deposit Insurance Corporation (or any successor) for insurance by
such Corporation (or such successor) of time deposits made in Dollars at
the Agent's domestic offices during the current calendar year.
"Base CD Rate" shall mean the sum of (a) the product of (i) the
Three-Month Secondary CD Rate and (ii) Statutory Reserves and (b) the
Assessment Rate.
"Prime Rate" shall mean the rate of interest per annum publicly
announced from time to time by The Chase Manhattan Bank, or its successor
financial institution, at the Principal Office as it prime rate in effect
at such time. Without notice to the Borrower or any other Person, the
Prime Rate shall change automatically from time to time as and in the
amount by which said prime rate shall fluctuate, with each such change to
be effective as of the date of each change in such prime rate. THE PRIME
RATE IS A REFERENCE RATE AND DOES NOT NECESSARILY REPRESENT THE LOWEST OR
BEST RATE ACTUALLY CHARGED BY THE CHASE MANHATTAN BANK OR SUCH SUCCESSOR
FINANCIAL INSTITUTION TO ANY OF ITS CUSTOMERS. THE CHASE MANHATTAN BANK OR
SUCH SUCCESSOR FINANCIAL INSTITUTION MAY MAKE COMMERCIAL LOANS OR OTHER
LOANS AT RATES OF INTEREST AT, ABOVE AND BELOW THE PRIME RATE.
"Statutory Reserves" shall mean a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is
the number one minus the aggregate of the maximum reserve percentage
(including without limitation, any marginal, special, emergency or
supplemental reserves) expressed as a decimal, established by the Board of
Governors of the Federal Reserve System of the United States or any
banking authority to which The Chase Manhattan Bank is subject with
respect to the Base CD Rate
AMENDED AND RESTATED CREDIT AGREEMENT - Page 3
<PAGE> 11
for new negotiable non-personal time deposits in Dollars of over One
Hundred Thousand Dollars ($100,000) with maturities approximately equal to
three months. Statutory Reserves shall be adjusted automatically on and as
of the effective date of any change in any applicable reserve percentage.
"Three-Month Secondary CD Rate" shall mean, for any day, the
secondary market rate for three-month certificates of deposit reported as
being in effect on such day (or, if such day shall not be a Business Day,
the next preceding Business Day) by the Board of Governors of the Federal
Reserve System of the United States through the public information
telephone line of the Federal Reserve Bank of New York (which rate will,
under the current practices of such Board of Governors, be published in
Federal Reserve Statistical Release H.15(519) during the week following
such day), or, if such rate shall not be so reported on such day or such
next preceding Business Day, the average of the secondary market
quotations for three-month certificates of deposit of major money center
banks in New York City received at approximately 10:00 a.m. on such day
(or, if such day shall not be a Business Day, on the next preceding
Business Day) by the Agent from three New York City negotiable certificate
of deposit dealers of recognized standing selected by the Agent.
"Base Rate Account" means a portion of a Loan that bears interest at a
rate based upon the Base Rate.
"Borrower" has the meaning set forth in the introductory paragraph of this
Agreement.
"Borrower Security Agreement" means the security agreement between the
Borrower and Agent for the benefit of itself and the Banks, in substantially the
form of Exhibit "E" to the Prior Agreement, as the same may be amended or
otherwise modified.
"Borrowing Availability" means, at any date of determination, the amount
by which the lesser of the Commitments or the Borrowing Base exceed the
Outstanding Revolving Credit.
"Borrowing Base" means, at any time and calculated without duplication
based on the Borrowing Base Report most recently delivered at such time pursuant
to Section 8.1(e), an amount equal to the product of:
(a) the sum of (i) aggregate amount of Eligible Accounts minus (ii)
the aggregate amount of all of the Borrower's and the Subsidiaries' cash
collections on Receivables which have not been applied to the Receivables
as of the date of the preparation of the Borrowing Base Report; multiplied
by
(b) the applicable Advance Percent. The term "Advance Percent"
means:
AMENDED AND RESTATED CREDIT AGREEMENT - Page 4
<PAGE> 12
(i) with respect to the Eligible Accounts of any Atlas
Company, eighty percent (80%); and
(ii) with respect to the Eligible Accounts of Borrower and any
Granting Subsidiary other than an Atlas Company (the "Existing
Companies"), either
(x) fifty percent (50%) or
(y) eighty percent (80%) if, in the case of this clause (y)
only, Agent provides written notice to the Borrower that it
has determined (at the Borrower's request but in the Agent's
sole discretion) that the Agent is satisfied with the
Receivables systems of the Existing Companies and that the
average dilution percentage for all Receivables of the
Existing Companies is no greater than ten percent (10%) for a
ninety (90) day period prior to the delivery of such notice
and no Default exists as of the date of the delivery of such
notice; or
(iii) in the case of either clauses (i) or (ii) of this
definition, such other percent as the Agent may, at any time
hereafter, determine is necessary to protect its interests, such
determination to be made in the Agent's judgment, in good faith and
based on information which, in its judgment, supports such
determination.
Any change in the Advance Percent shall be effective on the date Borrower
receives Agent's written notice of such change.
"Borrowing Base Report" means a report in substantially the form of
Exhibit "C" hereto properly completed and executed by the chief executive
officer, treasurer or chief financial officer of the Borrower.
"Business Day" means (a) any day excluding Saturday, Sunday and any day
which either is a legal holiday under the laws of the States of New York or
Texas or is a day on which banking institutions located in any such States are
closed, and (b), with respect to all borrowings, payments, Conversions,
Continuations, Interest Periods, and notices in connection with Loans subject to
Libor Accounts, any day which is a Business Day described in clause (a) above
and which is also a day on which dealings in Dollar deposits are carried out in
the London interbank market.
"Calculated EBITDA" has the meaning specified in subsection 9.3 (b) (iii).
"Calculation Period" has the meaning specified in Section 3.2 hereof.
"Capital Expenditures" means, for any period, all expenditures of the
Borrower and the Subsidiaries which are classified as capital expenditures in
accordance with GAAP including all such expenditures associated with Capital
Lease Obligations.
AMENDED AND RESTATED CREDIT AGREEMENT - Page 5
<PAGE> 13
"Capital Lease Obligations" means, as to any Person, the obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property, which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP. For purposes of this Agreement, the amount of
such Capital Lease Obligations shall be the capitalized amount thereof,
determined in accordance with GAAP.
"Closing Date" means December 19, 1997.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated and rulings issued thereunder.
"Collateral" means the property in which Liens have been granted pursuant
to the Borrower Security Agreement and the Subsidiary Security Agreement,
whether such Liens are now existing or hereafter arise.
"Commitment" means, as to each Bank, the obligation of such Bank to make
advances of funds and purchase participation interests in (or with respect to
the Agent as a Bank, hold other interests in) Letters of Credit in an aggregate
principal amount at any one time outstanding up to but not exceeding the amount
set forth opposite the name of such Bank on the signature pages hereto under the
heading "Commitment" or, if applicable, in its most recent Assignment and
Acceptance. The Commitment of a Bank and the Commitments of all the Banks may be
reduced or terminated pursuant to Section 2.6 or Section 11.2 hereof. The
aggregate amount of the Commitments of all Banks is Twenty-Five Million Dollars
($25,000,000).
"Commitment Fee Rate" means the per annum rate determined in accordance
with Section 3.2 hereof.
"Commitment Percentage" means, as to any Bank, the percentage equivalent
of a fraction the numerator of which is the amount of such Bank's Commitment and
the denominator of which is the aggregate amount of the Commitments for all of
the Banks.
"Compliance Certificate" means a certificate in substantially the form of
Exhibit "B" hereto, properly completed and executed by the chief executive
officer, treasurer or chief financial officer of the Borrower.
"Concentration Account" shall mean a deposit account established at the
Agent by the Borrower and controlled by the Agent for the benefit of the Banks
in which all funds received through the Lockbox Accounts shall be deposited.
"Continue", "Continuation", and "Continued" shall refer to the
continuation pursuant to Section 3.5 or Article 5 hereof of a Libor Account as a
Libor Account from one Interest Period to the next Interest Period.
AMENDED AND RESTATED CREDIT AGREEMENT - Page 6
<PAGE> 14
"Convert", "Conversion", and "Converted" shall refer to a conversion
pursuant to Section 3.5 or Article 5 hereof of one Type of Account into the
other Type of Account.
"Debt" means as to any Person at any time (without duplication): (a) all
obligations of such Person for borrowed money, including, without limitation,
any notes payable to the seller in connection with any acquisition and the
Loans; (b) all obligations of such Person evidenced by bonds, notes, debentures,
or other similar instruments; (c) all obligations of such Person to pay the
deferred purchase price of property or services, except trade accounts payable
of such Person arising in the ordinary course of business that are not past due
by more than ninety (90) days or that are being contested in good faith by
appropriate proceedings diligently pursued and for which adequate reserves have
been established; (d) all Capital Lease Obligations of such Person; (e) all Debt
or other obligations of others Guaranteed by such Person; (f) all obligations
secured by a Lien existing on property owned by such Person, whether or not the
obligations secured thereby have been assumed by such Person or are non-recourse
to the credit of such Person; (g) all reimbursement obligations of such Person
(whether contingent or otherwise) in respect of letters of credit, bankers'
acceptances, surety or other bonds and similar instruments (including those
outstanding with respect to Letters of Credit); (h) all liabilities of such
Person in respect of unfunded vested benefits under any Plan; (i) all
liabilities of such Person under Hedging Agreements; and (j) all obligations of
such Person, contingent or otherwise, for the payment of money under any
noncompete, consulting or similar agreement entered into with the seller of a
Target or any other similar arrangements providing for the deferred payment of
the purchase price for a Permitted Acquisition or an acquisition consummated
prior to the date hereof.
"Default" means an Event of Default or the occurrence of an event or
condition which with notice or lapse of time or both would become an Event of
Default.
"Default Rate" means, in respect of any principal of any Loan, any
Reimbursement Obligation, or any other amount payable by the Borrower under any
Loan Document which is not paid when due (whether at stated maturity, by
acceleration, or otherwise), a rate per annum during the period commencing on
the due date until such amount is paid in full equal to the sum of two percent
(2%) plus the Applicable Rate for Base Rate Accounts under the Loans as in
effect from time to time (provided, that if such amount in default is principal
of a Loan subject to a Libor Account and the due date is a day other than the
last day of an Interest Period therefor, the "Default Rate" for such principal
shall be, for the period from and including the due date and to but excluding
the last day of the Interest Period therefor, two percent (2%) plus the interest
rate for such Loan for such Interest Period as provided in Section 3.1 hereof,
and, thereafter, the rate provided for above in this definition).
"Disbursement Accounts" means the controlled disbursement accounts of
Borrower which are designated by the Agent in writing as "Disbursement
Accounts".
"Dollars" and "$" mean lawful money of the United States of America.
AMENDED AND RESTATED CREDIT AGREEMENT - Page 7
<PAGE> 15
"EBITDA" means, for any period and any Person, the total of the following
each calculated without duplication for such Person on a consolidated basis for
such period: (a) Net Income; plus (b) any provision for (or less any benefit
from) income or franchise taxes included in determining Net Income; plus (c)
interest expense deducted in determining Net Income; plus (d) amortization and
depreciation expense deducted in determining Net Income; plus (e) other noncash
charges deducted in determining consolidated net income and not already deducted
in accordance with clauses (b) and (c) of the definition of Net Income.
"Eligible Account" means an account of the Borrower or a Granting
Subsidiary created from the performance of services by Borrower or the
applicable Granting Subsidiary in the ordinary course of business (herein a
"Receivable") which at all times comply with all of the following requirements:
(i) The Receivable and the transaction giving rise thereto, each
comply with all applicable laws, rules, and regulations, including,
without limitation, usury laws;
(ii) The Receivable has been billed and invoiced in a timely fashion
and in the normal course of business and has not been outstanding for more
than one hundred twenty (120) days past the original date of invoice;
(iii) The Receivable arises from an enforceable contract and the
Borrower or applicable Granting Subsidiary is not in default of the terms
thereof;
(iv) The services reflected on the applicable invoice have been
completely performed by the Borrower or the applicable Granting Subsidiary
and the applicable account debtor has not objected to such account
debtor's liability thereon;
(v) The Borrower or the applicable Granting Subsidiary has good and
indefeasible title to the Receivable and the Receivable is not subject to
any Lien except Liens in favor of the Agent;
(vi) The Receivable is subject to a first priority, perfected Lien
in favor of the Agent and is payable to a Lockbox Account covered by a
blocked account agreement satisfactory to Agent or is otherwise collected
in a manner contemplated by Section 4.4(b);
(vii) The account debtor or other obligor thereunder is not
insolvent or the subject of any bankruptcy or insolvency proceeding and
has not made an assignment for the benefit of creditors, suspended normal
business operations, dissolved, liquidated, terminated its existence,
ceased to pay its debts as they become due, or suffered a receiver or
trustee to be appointed for any of its assets or affairs;
(viii) The Receivable is not evidenced by chattel paper or an
instrument;
AMENDED AND RESTATED CREDIT AGREEMENT - Page 8
<PAGE> 16
(ix) The Borrower's or the applicable Granting Subsidiary's
performance of the contract to which the Receivable relates is not assured
by a performance, completion, or other bond;
(x) The Receivable is not owed by an Affiliate of the Borrower or
the applicable Granting Subsidiary or a director, officer, agent,
stockholder or employee of Borrower or the applicable Granting Subsidiary
or by Borrower to a Granting Subsidiary or by a Granting Subsidiary to
Borrower or by one Granting Subsidiary to another;
(xi) The Receivable is payable in Dollars by the account debtor or
other obligor thereunder;
(xii) The account debtor or other Person obligated on such
Receivable is domiciled in the United States of America or, if not so
domiciled, the Receivable is backed by a satisfactory letter of credit
that is issued or confirmed by a bank located in the United States of
America that is acceptable to the Agent;
(xiii) Not more than fifty percent (50%) of the aggregate amount of
the Receivables owed by the account debtor or other Person obligated
thereon and its Affiliates to the Borrower and the Granting Subsidiaries,
on an aggregate basis, are more than one hundred twenty (120) days past
due from the dates of their original invoices;
(xiv) The account debtor or other Person obligated thereon is not a
Government Authority unless the Federal Assignment of Claims Act of 1940,
as amended, or any similar state statute shall have been complied with to
the satisfaction of the Agent;
(xv) The Receivable has not been and is not required to be charged
or written off as uncollectible in accordance with GAAP;
(xvi) If the Receivable is owing by an account debtor for which the
Borrower or the applicable Granting Subsidiary must have filed a "Notice
of Business Activities Report" or similar report in a state or states
where failure to comply with such filing of notice precludes bringing suit
against the applicable account debtor, the Borrower or the applicable
Granting Subsidiary must have filed such requisite activities report or
other similar report and otherwise be in full compliance with such legal
requirement;
(xvii) The Receivable is not an Excluded Account. The term "Excluded
Account" means a Receivable that has been identified by the Agent (by a
notice to the Borrower) as being unacceptable for inclusion in the
Borrowing Base because the Agent has determined that the credit standing
of the applicable account debtor in relation to the amount of credit
extended has become unsatisfactory, the account debtor or other Person
obligated on such Receivable is not otherwise creditworthy or the Agent
might not otherwise be able to receive the full amount of the Receivable
within a reasonable period of time and at a
AMENDED AND RESTATED CREDIT AGREEMENT - Page 9
<PAGE> 17
reasonable cost of collection if it sought to realize on its security
interest therein, such determination to be made in the Agent's judgment,
in good faith and based on information which, in its judgment, supports
such determination.
The amount of the Eligible Accounts owed by an account debtor or other Person to
the Borrower or the applicable Granting Subsidiary shall be reduced by the
amount of all "contra accounts" and other obligations owed by the Borrower or
the applicable Granting Subsidiary to such account debtor or other Person;
provided however, no reduction of the amount of Eligible Accounts shall be made
with respect to any funds of an account debtor or other Person held as market
development funds by Borrower or a Granting Subsidiary in an account in which
only such market development funds are held. The amount of the Eligible Accounts
owed by an account debtor or other Person shall be reduced by the amount thereof
which is subject to any setoff, counterclaim, defense, dispute, recoupment,
chargeback or other adjustment. The portion of any Receivable constituting
retainage that has been withheld by the account debtor or other obligor shall
not constitute an Eligible Account. If the aggregate amount of the Receivables
due from a single account debtor or other Person obligated thereon exceeds an
aggregate amount equal to ten percent (10%) of the aggregate of all Receivables
at the time of determination, the amount of the excess shall be subtracted from
all Eligible Accounts unless such excess is backed by a letter of credit
acceptable to the Agent or secured by credit insurance which has been assigned
to the Agent and which is issued on terms acceptable to the Agent.
Notwithstanding anything to the contrary contained in this Agreement or any
other Loan Document, no Receivables of any Subsidiary who has been sold or
substantially all of whose assets have been sold after the Closing Date or of
any Subsidiary created or acquired after the Closing Date shall be included
within Eligible Accounts, unless and until the Agent shall have conducted a
field examination (at the Borrower's cost and expense) of such Subsidiary's
books, records and operations in order to reasonably satisfy the Agent that the
Receivables of such Subsidiary generally satisfy the above-described standards
of eligibility.
"Environmental Laws" means any and all federal, state, and local laws,
regulations, and requirements pertaining to health, safety, or the environment,
as such laws, regulations, and requirements may be amended or supplemented from
time to time.
"Environmental Liabilities" means, as to any Person, all liabilities,
obligations, responsibilities, Remedial Actions, losses, damages, punitive
damages, consequential damages, treble damages, costs, and expenses (including,
without limitation, all fees, disbursements and expenses of counsel, expert and
consulting fees and costs of investigation and feasibility studies), fines,
penalties, sanctions, and interest incurred as a result of any claim or demand,
by any Person, whether based in contract, tort, implied or express warranty,
strict liability, criminal or civil statute, including any Environmental Law,
permit, order or agreement with any Governmental Authority or other Person,
arising from environmental, health or safety conditions or the Release or
threatened Release of a Hazardous Material into the environment.
AMENDED AND RESTATED CREDIT AGREEMENT - Page 10
<PAGE> 18
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereunder.
"ERISA Affiliate" means any corporation or trade or business which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower or is under common control (within
the meaning of Section 414(c) of the Code) with the Borrower.
"Event of Default" has the meaning specified in Section 11.1 hereof.
"Federal Funds Effective Rate" shall mean, for any day, a rate per annum
equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for the day of such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Fiscal Quarters" means the three (3)-month periods falling in each Fiscal
Year ending March 31, June 30, September 30, and December 31.
"Fiscal Year" means a twelve (12) month period ending December 31.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their respective successors and
which are applicable in the circumstances as of the date in question. Accounting
principles are applied on a "consistent basis" when the accounting principles
applied in a current period are comparable in all material respects to those
accounting principles applied in a preceding period.
"Governmental Authority" means any nation or government, any state or
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory, or administrative functions of or pertaining to
government.
"Granting Subsidiary" means any Subsidiary that has entered into the
Guaranty and the Subsidiary Security Agreement.
"Guarantee" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Debt or other obligation
of any other Person or indemnifying such other Person from a liability or other
obligation and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (a) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to
AMENDED AND RESTATED CREDIT AGREEMENT - Page 11
<PAGE> 19
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (b) entered into for the purpose
of assuring in any other manner the obligee of such Debt or other obligation of
the payment thereof or to protect the obligee against loss in respect thereof
(in whole or in part), provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Guaranty" means the guaranty of the Subsidiaries in favor of the Agent
and the Banks, in substantially the form of Exhibit "D" to the Prior Agreement,
as the same may be amended or otherwise modified from time to time.
"Hazardous Material" means any substance, product, waste, pollutant,
material, chemical, contaminant, constituent, or other material which is or
becomes listed, regulated, or addressed under any Environmental Law.
"Hedging Agreement" means any interest rate swap, interest rate caps,
interest rate collars or other similar agreements enabling a Person to fix or
limit its interest expense or pursuant to any foreign exchange, currency
hedging, commodity hedging or other agreement enabling a Person to limit the
market risk of holding currency or a commodity in either the cash or futures
markets.
"Indenture" means the Indenture dated December 19, 1997 among the
Borrower, the Subsidiaries and Texas Commerce Bank National Association, as
trustee, as the same exists on the Closing Date without giving effect to any
amendment or other modification thereto unless modified in accordance with
Section 9.13.
"Interest Coverage Ratio" means the ratio calculated in accordance with
Section 10.2 hereof.
"Interest Period" means with respect to any Libor Accounts, each period
commencing on the date such Account is established or Converted from a Base Rate
Account or the last day of the next preceding Interest Period with respect to
such Libor Account, and ending on the numerically corresponding day in the
first, second, third or sixth calendar month thereafter, as the Borrower may
select as provided in Section 3.5 or 4.1 hereof, except that each such Interest
Period which commences on the last Business Day of a calendar month (or on any
day for which there is no numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month. Notwithstanding the foregoing: (a) each Interest
Period which would otherwise end on a day which is not a Business Day shall end
on the next succeeding Business Day (or if such succeeding Business Day falls in
the next succeeding calendar month, on the next preceding Business Day); (b) any
Interest Period which would otherwise extend beyond the Termination Date shall
end on the Termination Date; (c) no more than five (5) Interest Periods shall be
in effect at the same time; and (d) no Interest Period for any Libor Account
shall have a duration of less than one (1) month and, if the Interest Period
would otherwise be a shorter period, the related Libor Account shall not be
available hereunder.
AMENDED AND RESTATED CREDIT AGREEMENT - Page 12
<PAGE> 20
"Letter of Credit Liabilities" means, at any time, the aggregate amount
available for drawing under all outstanding Letters of Credit and all
unreimbursed drawings under Letters of Credit.
"Letters of Credit" has the meaning specified in Section 2.7(a) hereof.
"Libor Account" means a portion of a Loan that bears interest at a rate
based upon the Adjusted Libor Rate.
"Libor Rate" means, for any Libor Account for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/16
of 1%) offered to the Agent at approximately 11:00 a.m. London time (or as soon
thereafter as practicable) two Business Days prior to the first day of such
Interest Period by leading banks in the London interbank market of Dollar
deposits in immediately available funds having a term comparable to such
Interest Period and in an amount comparable to the principal amount of the Libor
Account applicable to the Agent to which such Interest Period relates. If the
Agent is not participating in a Libor Account during any Interest Period
therefor (pursuant to Section 5.4 hereof or for any other reason), the Adjusted
Libor Rate for such Account for such Interest Period shall be determined by
reference to the amount of the Accounts which the Agent would have made had it
been participating in such Account.
"Libor Rate Margin" has the meaning specified in Section 3.2 hereof.
"Lien" means any lien, mortgage, security interest, tax lien, financing
statement, pledge, charge, hypothecation, assignment, preference, priority, or
other encumbrance of any kind or nature whatsoever (including, without
limitation, any conditional sale or title retention agreement), whether arising
by contract, operation of law, or otherwise.
"Loans" means, as to any Bank, the advances made by such Bank pursuant to
Section 2.1 hereof.
"Loan Documents" means this Agreement, the Notes, the Borrower Security
Agreement, the the Guaranty, the Subsidiary Security Agreement, and all other
promissory notes, security agreements, deeds of trust, assignments, guaranties,
letters of credit, and other instruments, agreements and other documentation
executed and delivered pursuant to or in connection with this Agreement, as such
instruments, agreements and other documentation may be amended or otherwise
modified.
"Lockbox Accounts" shall mean the lockbox accounts described on Schedule
1.1(a) attached hereto and any other accounts established pursuant to the
Lockbox Agreements in which all funds received pursuant to the Lockbox
Agreements shall be deposited.
AMENDED AND RESTATED CREDIT AGREEMENT - Page 13
<PAGE> 21
"Lockbox Agreements" shall mean the lockbox or other agreements described
on Schedule 1.1(a) attached hereto and any lockbox or other agreement entered
into by the Borrower or a Granting Subsidiary, with the Agent, any Bank or any
other depository institution acceptable to the Agent, pursuant to which a
lockbox and deposit account shall be established for the Borrower or a Granting
Subsidiary into which payments on the Borrower's or such Granting Subsidiary's
accounts or other Collateral shall be sent and deposited, each in form and
substance satisfactory to the Agent, as the same may be amended or otherwise
modified.
"Lockbox Date" has the meaning specified in Section 4.4 (b).
"Material Adverse Effect" means (a) a material adverse effect on the
business, condition (financial or otherwise), operations or properties of the
Borrower and the Subsidiaries taken as a whole; or (b) a material adverse effect
on the ability of the Borrower and the Obligated Parties, taken as a whole, to
perform the obligations arising under the Loan Documents; or (c) a material
adverse effect on the validity, perfection, or priority of the Agent's Lien on
the Collateral or the ability of the Agent to enforce the Agent's Lien on the
Collateral (other than from a circumstance arising as a result of the fault of
the Agent or the release of any such Lien in accordance with the Loan Documents)
or of the ability of the Agent or any Bank to enforce a material provision of
the Loan Documents (other than from a circumstance arising as a result of the
fault of the Agent or any Bank). In determining whether any individual event
could reasonably be expected to result in a Material Adverse Effect,
notwithstanding that such event does not itself have such effect, a Material
Adverse Effect shall be deemed to have occurred if the cumulative effect of such
event and all other then existing events could reasonably be expected to result
in a Material Adverse Effect.
"Maximum Rate" means, at any time and with respect to any Bank, the
maximum rate of nonusurious interest under applicable law that such Bank may
charge the Borrower. The Maximum Rate shall be calculated in a manner that takes
into account any and all fees, payments, and other charges contracted for,
charged or received in connection with the Loan Documents that constitute
interest under applicable law. Each change in any interest rate provided for
herein based upon the Maximum Rate resulting from a change in the Maximum Rate
shall take effect without notice to the Borrower at the time of such change in
the Maximum Rate. For purposes of determining the Maximum Rate under Texas law
if applicable, the applicable rate ceiling shall be the weekly ceiling described
in, and computed in accordance with, Article 5069, Vernon's Texas Civil
Statutes.
"Multiemployer Plan" means a multiemployer plan defined as such in Section
3(37) of ERISA to which contributions have been made by the Borrower or any
ERISA Affiliate and which is covered by Title IV of ERISA.
"Net Income" means, for any period and any Person, such Person's
consolidated net income (or loss), but excluding: (a) the income of any other
Person (other than its subsidiaries) in which such Person or any of it
subsidiaries has an ownership interest, unless received by such Person or its
subsidiary in a cash distribution; (b) any after-tax gains or losses
attributable to asset disposition;
AMENDED AND RESTATED CREDIT AGREEMENT - Page 14
<PAGE> 22
(c) to the extent not included in clauses (a) and (b) above, any after-tax
extraordinary, non-cash or nonrecurring gains or losses; and (d) non-cash or
nonrecurring charges due to changes in accounting principles required by GAAP.
"Notes" means the promissory notes provided for by Section 2.2 hereof and
all amendments or other modifications thereof.
"Obligated Party" means the Granting Subsidiaries or any other Person
(exclusive of the Borrower) who is or becomes party to any agreement that
guarantees or secures payment and performance of the Obligations or any part
thereof.
"Obligation" means all obligations, indebtedness, and liabilities of the
Borrower to the Agent and the Banks, or any of them, arising pursuant to any of
the Loan Documents, pursuant to any Hedging Agreement entered into with the
Borrower or any Subsidiary or pursuant to any deposit, lockbox, cash management
or similar agreement entered into with the Borrower or any Subsidiary, whether
now existing or hereafter arising, whether direct, indirect, related, unrelated,
fixed, contingent, liquidated, unliquidated, joint, several, or joint and
several, including, without limitation, the obligation of the Borrower to repay
the Loans, the Reimbursement Obligations, interest on the Loans and
Reimbursement Obligations, and all fees, costs, and expenses (including
attorneys' fees) provided for in the Loan Documents, such Hedging Agreements or
such deposit and similar agreements.
"Outstanding Revolving Credit" means, at any time of determination, the
sum of (a) the aggregate amount of Loans then outstanding; plus (b) the
aggregate amount of Letter of Credit Liabilities (or when calculated with
respect to a Bank, including the Agent as a Bank, such Bank's participation or
other interest in such Letter of Credit Liabilities).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"Permitted Acquisitions" shall mean acquisitions of all the shares or
other evidence of beneficial ownership of a Person or all or substantially all
of (a) such Person's assets or (b) the assets of a division or branch of such
Person, in all cases, in a transaction that satisfies all the applicable
criteria set out in subsection 9.3(b) hereof.
"Person" means any individual, corporation, business trust, association,
company, partnership, joint venture, Governmental Authority, or other entity.
"Plan" means any employee benefit plan established or maintained by the
Borrower or any ERISA Affiliate and which is covered by Title IV of ERISA.
"Principal Office" means the principal office of the Agent, located at 633
Third Avenue New York, New York 10017-6764.
AMENDED AND RESTATED CREDIT AGREEMENT - Page 15
<PAGE> 23
"Prior Agreement" has the meaning specified in the Recitals.
"Prohibited Transaction" means any transaction set forth in Section 406 or
407 of ERISA or Section 4975(c)(1) of the Code for which there does not exist a
statutory or administrative exemption.
"Purchase Agreement" means the documentation entered into by Borrower or a
Subsidiary which is intended to effect an acquisition of a Person or its assets.
"Purchase Price" means, as of any date of determination and with respect
to a proposed acquisition, the purchase price to be paid for the Target or its
assets, including all cash consideration paid (whether classified as purchase
price, noncompete or consulting payments or otherwise) and the Dollar value of
all other assets to be transferred by the purchaser in connection with such
acquisition to the seller (including any stock issued to the seller) all valued
in accordance with the applicable Purchase Agreement.
"Receivable" has the meaning specified in the definition of Eligible
Accounts.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as the same may be amended or supplemented from time to time.
"Regulatory Change" means, with respect to any Bank, any change after the
date of this Agreement in United States federal, state, or foreign laws or
regulations (including Regulation D) or the adoption or making after such date
of any interpretations, directives, or requests applying to a class of banks
including such Bank of or under any United States federal or state, or any
foreign, laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.
"Reimbursement Obligation" means the obligation of the Borrower to
reimburse the Agent for any demand for payment or drawing under a Letter of
Credit.
"Release" means, as to any Person, any release, spill, emission, leaking,
pumping, injection, deposit, disposal, disbursement, leaching, or migration of
Hazardous Materials into the indoor or outdoor environment or into or out of
property owned by such Person, including, without limitation, the movement of
Hazardous Materials through or in the air, soil, surface water, ground water, or
property in violation of Environmental Laws.
"Remedial Action" means all actions required to (a) cleanup, remove,
treat, or otherwise address Hazardous Materials in the indoor or outdoor
environment, (b) prevent the Release or threat of Release or minimize the
further Release of Hazardous Materials so that they do not migrate or endanger
or threaten to endanger public health or welfare or the indoor or outdoor
environment, or (c) perform pre-remedial studies and investigations and
post-remedial monitoring and care.
AMENDED AND RESTATED CREDIT AGREEMENT - Page 16
<PAGE> 24
"Required Banks" means Banks having (a) sixty-six and two-thirds percent
(66 2/3%) or more of the Commitments or (b) if all Commitments have terminated,
sixty-six and two-thirds percent (66 2/3%) or more of the outstanding principal
amount of the Loans and participations in the Letters of Credit.
"Reportable Event" means any of the events set forth in Section 4043 of
ERISA for which the 30-day notice requirement has not been waived by the PBGC.
"Reserve Requirement" means, for any Libor Account for any Interest Period
therefor, the aggregate of the maximum reserve percentage (including without
limitation, any marginal, special, emergency or supplemental reserves) expressed
as a decimal, established by the Board of Governors of the Federal Reserve
System of the United States and any other banking authority to which any Bank is
subject with respect to the Adjusted Libor Rate for Eurocurrency Liabilities (as
defined in Regulation D), including without limitation, those reserve
percentages imposed under Regulation D. Reserve Requirement shall be adjusted
automatically on and as of the effective date of any change in any applicable
reserve percentage. For purposes hereof, Libor Accounts shall be deemed to
constitute Eurocurrency Liabilities (as defined in Regulation D) and as such,
shall be deemed to be subject to such reserve requirements of Regulation D
without benefit of or credit for proration, exceptions or offsets which may be
available from time to time to any Bank under Regulation D. Without limiting the
effect of the foregoing, the Reserve Requirement shall reflect any other
reserves required to be maintained by such member banks by reason of any
Regulatory Change against any category of liabilities which includes deposits by
reference to which the Adjusted Libor Rate is to be determined or any category
of extensions of credit or other assets which include Libor Accounts.
"Senior Subordinated Note Documents" means the Indenture, the Senior
Subordinated Notes and all note purchase agreements, exchange and registration
agreements, guaranties and other documentation executed and delivered pursuant
to or in connection with the Senior Subordinated Notes as the same exists on the
Closing Date without giving effect to any amendment or other modification
thereto unless modified in accordance with Section 9.13; excluding, however, the
Loan Documents and the Atlas Acquisition Documents.
"Senior Subordinated Notes" means the senior subordinated notes due 2007
issued by Borrower pursuant to the Indenture in an aggregate original principal
amount equal to One Hundred Million Dollars ($100,000,000), including all such
notes issued on substantially the same terms in exchange for the notes issued on
the Closing Date pursuant to the exchange and registration provisions of the
Senior Subordinated Note Documents.
"Subsidiary" means any corporation (or other entity) of which at least a
majority of the outstanding shares of stock (or other ownership interests)
having by the terms thereof ordinary voting power to elect a majority of the
board of directors (or similar governing body) of such corporation (or other
entity) (irrespective of whether or not at the time stock (or other ownership
interests) of any other class or classes of such corporation (or other entity)
shall have or might have
AMENDED AND RESTATED CREDIT AGREEMENT - Page 17
<PAGE> 25
voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned or controlled by the Borrower or one or more of the
Subsidiaries or by the Borrower and one or more of the Subsidiaries.
"Subsidiary Joinder Agreement" means an agreement which has been or will
be executed by a Subsidiary adding it as a party to the Guaranty and the
Subsidiary Security Agreement, in substantially the form of Exhibit "D" hereto,
as the same may be amended or otherwise modified.
"Subsidiary Security Agreement" means the security agreement among the
Granting Subsidiaries and the Agent for the benefit of itself and the Banks, in
substantially the form of Exhibit "G" to the Prior Agreement, as the same may be
amended or otherwise modified.
"Target" means a Person who is to be acquired or whose assets are to be
acquired in a transaction permitted by Section 9.3(b) hereto.
"Target Operating Cash Flow" has the meaning specified in subsection 9.3
(b) (iv).
"Termination Date" means October 14, 2002 or such earlier date on which
the Commitments terminate as provided in this Agreement.
"Transactions" means the Atlas Acquisition and the issuance of the Senior
Subordinated Notes on the Closing Date.
"Transaction Documents" means the Atlas Acquisition Documents, the Loan
Documents, the Senior Subordinated Note Documents and, when entered into, each
Purchase Agreement.
"Type" means either type of Account (i.e., either a Base Rate Account or
Libor Account).
"UCC" means the Uniform Commercial Code as in effect in the State of New
York.
"Wholly-Owned Subsidiary" means any Subsidiary that (i) is owned one
hundred percent (100%) by Borrower and/or Marketing Specialists Sales Company,
(ii) is organized under the laws of a state within the United States of America,
and (iii) is a Granting Subsidiary.
Section 1.2 Other Definitional Provisions. All definitions contained in
this Agreement are equally applicable to the singular and plural forms of the
terms defined. The words "hereof", "herein", and "hereunder" and words of
similar import referring to this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. Unless otherwise
specified, all Article and Section references pertain to this Agreement. Terms
used herein that are defined in the UCC, unless otherwise defined herein, shall
have the meanings specified in the UCC.
Section 1.3 Accounting Terms and Determinations. Except as otherwise
expressly provided herein, all accounting terms used herein shall be
interpreted, and all financial statements
AMENDED AND RESTATED CREDIT AGREEMENT - Page 18
<PAGE> 26
and certificates and reports as to financial matters required to be delivered to
the Agent and the Banks hereunder shall be prepared, in accordance with GAAP, on
a basis consistent with those used in the preparation of the financial
statements referred to in Section 7.2 hereof. All calculations made for the
purposes of determining compliance with the provisions of this Agreement shall
be made by application of GAAP, on a basis consistent with those used in the
preparation of the financial statements referred to in Section 7.2 hereof. To
enable the ready and consistent determination of compliance by the Borrower with
its obligations under this Agreement, the Borrower will not change the manner in
which either the last day of its Fiscal Year or the last days of the first three
Fiscal Quarters of its Fiscal Years is calculated. In the event any changes in
accounting principles required by GAAP or recommended by Borrower's certified
public accountants and implemented by Borrower occur and such changes result in
a change in the method of the calculation of financial covenants, standards or
terms under this Agreement, then the Borrower, the Agent and the Banks agree to
enter into negotiations in order to amend such provisions of this Agreement so
as to equitably reflect such changes with the desired result that the criteria
for evaluating such covenants, standards or terms shall be the same after such
changes as if such changes had not been made. Until such time as such an
amendment shall have been executed and delivered by the Agent, the Borrower and
the Required Banks, all financial covenants, standards and terms in this
Agreement shall continue to be calculated or construed as if such changes had
not occurred.
Section 1.4 Time of Day. Unless otherwise indicated, all references in
this Agreement to times of day shall be references to New York, New York time.
ARTICLE 2
Revolving Credit Facility
Section 2.1 Commitments. Subject to the terms and conditions of this
Agreement, each Bank severally agrees to make advances to the Borrower from time
to time from and including the Closing Date to but excluding the Termination
Date in an aggregate principal amount at any time outstanding up to but not
exceeding the amount of such Bank's Commitment as then in effect; provided,
however, (a) the Outstanding Revolving Credit applicable to a Bank (except, with
respect to the Agent as a Bank, as may otherwise result from the operation of
Section 4.6) shall not at any time exceed such Bank's Commitment and (b) the
Outstanding Revolving Credit shall not at any time exceed the lesser of (i) the
aggregate Commitments or (ii) the Borrowing Base. Subject to the foregoing
limitations, and the other terms and provisions of this Agreement, the Borrower
may borrow, prepay, and reborrow hereunder the amount of the Commitments and may
establish Base Rate Accounts and Libor Accounts thereunder and, until the
Termination Date, the Borrower may Continue Libor Accounts established under the
Loans or Convert Accounts established under the Loans of one Type into Accounts
of the other Type. Accounts of each Type under the Loans made by each Bank shall
be established and maintained at such Bank's Applicable Lending Office for Loans
of such Type.
AMENDED AND RESTATED CREDIT AGREEMENT - Page 19
<PAGE> 27
Section 2.2 Notes. The Loans made by a Bank shall be evidenced by a single
promissory note of the Borrower in substantially the form of Exhibit "A" hereto,
payable to the order of such Bank in a principal amount equal to its Commitment
and otherwise duly completed.
Section 2.3 Repayment of Loans. The Borrower shall pay to the Agent, for
the account of the Banks, the outstanding principal amount of all of the Loans
on the Termination Date.
Section 2.4 Use of Proceeds. The proceeds of the Loans shall be used by
the Borrower to finance the Borrower's and the Granting Subsidiaries' working
capital and capital expenditure requirements in the ordinary course of business,
including, without limitation, the satisfaction of Reimbursement Obligations in
accordance with subsection 2.7(b) hereof, to finance Permitted Acquisitions and
for other general corporate purposes.
Section 2.5 Commitment Fee. The Borrower agrees to pay to the Agent for
the account of each Bank a commitment fee on the daily average unused amount of
such Bank's Commitment for the period from and including the Closing Date to and
including the Termination Date, at a rate equal to the Commitment Fee Rate as
determined in accordance with subsection 3.2(b) hereof. Accrued commitment fees
under this Section 2.5 and any unpaid commitment fees accrued under Section 2.5
of the Prior Agreement shall be payable in arrears on the last day of each month
beginning December 31, 1997 and on the Termination Date.
Section 2.6 Termination or Reduction of Commitments. The Borrower shall
have the right to terminate fully or to reduce in part the unused portion of the
Commitments at any time and from time to time, provided that: (a) the Borrower
shall give the Agent at least three (3) Business Days notice of each such
termination or reduction as provided in Section 4.3 hereof; and (b) each partial
reduction shall be in an aggregate amount at least equal to One Million Dollars
($1,000,000) or a greater multiple of One Hundred Thousand Dollars ($100,000).
The Commitments may not be reinstated after they have been terminated or
reduced.
Section 2.7 Letters of Credit.
(a) Commitment to Issue. The Borrower may utilize the Commitments by
requesting that the Agent issue, and the Agent, subject to the terms and
conditions of this Agreement, shall issue, letters of credit for
Borrower's or one of the Subsidiaries' account (such letters of credit
being hereinafter referred to as the "Letters of Credit"); provided,
however, (i) the aggregate amount of outstanding Letter of Credit
Liabilities shall not at any time exceed Five Million Dollars
($5,000,000); (ii) the Outstanding Revolving Credit shall not at any time
exceed the lesser of (A) the aggregate Commitments or (B) the Borrowing
Base; and (iii) the Outstanding Revolving Credit applicable to a Bank
shall not at any time exceed such Bank's Commitment (except with respect
to the Agent as a Bank, as may otherwise result from the operation of
Section 4.6). Upon the date of issue of a Letter of Credit, the Agent
shall be deemed, without further action by any party hereto, to have sold
to each other Bank, and each other Bank shall be deemed, without further
action by any
AMENDED AND RESTATED CREDIT AGREEMENT - Page 20
<PAGE> 28
party hereto, to have purchased from the Agent a participation to the
extent of such Bank's Commitment Percentage in such Letter of Credit and
the related Letter of Credit Liabilities.
(b) Letter of Credit Request Procedure. The Borrower shall give the
Agent at least three (3) Business Days irrevocable prior notice (effective
upon receipt) specifying the date of each Letter of Credit and the nature
of the transactions to be supported thereby. The Agent shall notify each
other Bank of the contents of the Letter of Credit and of such Bank's
Commitment Percentage of the amount of the proposed Letter of Credit in
accordance with Section 4.6. Each Letter of Credit shall have an
expiration date that does not extend beyond the earlier of (i) one (1)
year from the date of its issuance, provided that any Letter of Credit may
provide for the renewal of the expiration date thereof for additional
one-year periods (which shall in no event extend the expiration date
thereof beyond the date provided for in the next clause (ii)) or (ii) a
date which is thirty (30) days prior to the Termination Date. Each Letter
of Credit shall be payable in Dollars, must support a transaction entered
into in the ordinary course of the Borrower's business, must be
satisfactory in form and substance to the Agent, and shall be issued
pursuant to such documentation as the Agent may require, including,
without limitation, the Agent's standard form letter of credit request and
reimbursement agreement; provided, that, in the event of any conflict
between the terms of such agreement and the other Loan Documents, the
terms of the other Loan Documents shall control.
(c) Letter of Credit Fees. The Borrower will pay to the Agent for
the account of each Bank a letter of credit fee on such Bank's Commitment
Percentage of the amount available for drawings under each Letter of
Credit, such letter of credit fee (i) to be paid monthly in arrears on the
last day of each month following the date of the issuance of the Letter of
Credit and on last day of each month thereafter until the date of
expiration or termination thereof (each such date herein a "Payment Date")
and (ii) to be calculated for the period from and including one Payment
Date (or with respect to the first such payment, from and including the
date of issuance of the Letter of Credit) to and excluding the earlier of
the next Payment Date or the date of expiration or termination of the
Letter of Credit at a rate equal to the Libor Rate Margin per annum. After
receiving any payment of any letter of credit fees under this clause (c),
the Agent will promptly pay to each Bank the letter of credit fees then
due such Bank. With respect to each Letter of Credit, the Borrower will
also pay to the Agent for its account only and on the date of issuance of
such Letter of Credit, a fronting fee equal to Two Hundred Fifty Dollars
($250).
(d) Funding of Drawings. Upon receipt from the beneficiary of any
Letter of Credit of any demand for payment or other drawing under such
Letter of Credit, the Agent shall promptly notify the Borrower and, except
as may otherwise be required as a result of the operation of Section 4.6,
each Bank as to the amount to be paid as a result of such demand or
drawing and the respective payment date. Except as my otherwise be
required as a result of the operation of Section 4.6, not later than 11:00
a.m. on the applicable payment date, each Bank will make available to the
Agent, at the Principal Office, in
AMENDED AND RESTATED CREDIT AGREEMENT - Page 21
<PAGE> 29
immediately available funds, an amount equal to such Bank's Commitment
Percentage of the amount to be paid as a result of such demand or drawing
even if the conditions to a Loan under Article 6 hereof have not been
satisfied.
(e) Reimbursements. The Borrower shall be irrevocably and
unconditionally obligated to immediately reimburse the Agent for any
amounts paid by the Agent upon any demand for payment or drawing under any
Letter of Credit, without (except as specifically set forth in this clause
(e)) presentment, demand, protest, or other formalities of any kind. All
payments on the Reimbursement Obligations shall be made: (i) if no Default
has occurred or the Agent otherwise elects, by Loans in the amount of such
Reimbursement Obligations being made automatically as Base Rate Accounts
or (ii) if a Default has occurred and the Agent has not made the election
under clause (i), by Borrower to the Agent at the Principal Office for the
account of the Agent in Dollars and in immediately available funds,
without setoff, deduction or counterclaim not later than 3:00 pm. on the
date of the corresponding payment under the Letter of Credit; provided,
that in the case of this clause (ii) only, Agent has provided notice to
Borrower prior to 12:00 noon on such day that such payment is due. In the
event such notice is received after 12:00 noon on a Business Day, such
payment shall be due not later than 3:00 p.m. on the next succeeding
Business Day. The Agent will pay to each Bank such Bank's Commitment
Percentage of all amounts received from the Borrower for application in
payment, in whole or in part, to the Reimbursement Obligation in respect
of any Letter of Credit, but only to the extent such Bank has made payment
to the Agent in respect of such Letter of Credit pursuant to clause (d) of
this Section 2.7 and subject to the operation of Section 4.6.
(f) Reimbursement Obligations Absolute. The Reimbursement
Obligations of the Borrower under this Agreement shall be absolute,
unconditional, and irrevocable, and shall be performed strictly in
accordance with the terms of the Loan Documents under all circumstances
whatsoever and the Borrower hereby waives any defense to the payment of
the Reimbursement Obligations based on any circumstance whatsoever,
including without limitation, in either case, the following circumstances:
(i) any lack of validity or enforceability of any Letter of Credit or any
other Loan Document; (ii) any amendment or waiver of or any consent to
departure from any Loan Document; (iii) the existence of any claim,
set-off, counterclaim, defense or other rights which the Borrower, any
Obligated Party, or any other Person may have at any time against any
beneficiary of any Letter of Credit, the Agent, any Bank, or any other
Person, whether in connection with any Loan Document or any unrelated
transaction; (iv) any statement, draft, or other documentation presented
under any Letter of Credit proving to be forged, fraudulent, invalid, or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect whatsoever; (v) payment by the Agent under any
Letter of Credit against presentation of a draft or other document that
does not comply with the terms of such Letter of Credit; or (vi) any other
circumstance whatsoever, whether or not similar to any of the foregoing;
provided that Reimbursement Obligations with respect to a Letter of Credit
may be subject to avoidance by the Borrower if the Borrower proves in a
final nonappealable judgment that
AMENDED AND RESTATED CREDIT AGREEMENT - Page 22
<PAGE> 30
it was damaged and that such damage arose directly from the Agent's
willful misconduct or gross negligence in determining whether the
documentation presented under the Letter of Credit in question complied
with the terms thereof.
(g) Issuer Responsibility. The Borrower assumes all risks of the
acts or omissions of any beneficiary of any Letter of Credit with respect
to its use of such Letter of Credit. Neither the Agent, any Bank nor any
of their respective officers or directors shall have any responsibility or
liability to the Borrower or any other Person for: (a) the failure of any
draft to bear any reference or adequate reference to any Letter of Credit,
or the failure of any documents to accompany any draft at negotiation, or
the failure of any Person to surrender or to take up any Letter of Credit
or to send documents apart from drafts as required by the terms of any
Letter of Credit, or the failure of any Person to note the amount of any
instrument on any Letter of Credit, each of which requirements, if
contained in any Letter of Credit itself, it is agreed may be waived by
the Agent; (b) errors, omissions, interruptions, or delays in transmission
or delivery of any messages; (c) the validity, sufficiency, or genuineness
of any draft or other document, or any endorsement(s) thereon, even if any
such draft, document or endorsement should in fact prove to be in any and
all respects invalid, insufficient, fraudulent, or forged or any statement
therein is untrue or inaccurate in any respect; (d) the payment by the
Agent to the beneficiary of any Letter of Credit against presentation of
any draft or other document that does not comply with the terms of the
Letter of Credit; or (e) any other circumstance whatsoever in making or
failing to make any payment under a Letter of Credit. Notwithstanding the
forgoing, the Borrower shall have a claim against the Agent, and the Agent
shall be liable to the Borrower, to the extent of any direct, but not
indirect, consequential or punitive, damages suffered by the Borrower
which the Borrower proves in a final nonappealable judgment were caused by
(i) the Agent's willful misconduct or gross negligence in determining
whether documents presented under any Letter of Credit complied with the
terms thereof or (ii) the Agent's willful failure to pay under any Letter
of Credit after presentation to it of documentation strictly complying
with the terms and conditions of such Letter of Credit. The Agent may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
ARTICLE 3
Interest and Fees
Section 3.1 Interest Rate. The Borrower shall pay to the Agent for the
account of each Bank interest on the unpaid principal amount of each Loan made
by such Bank for the period commencing on the date of such Loan to but excluding
the date such Loan is due, at a fluctuating rate per annum equal to the
Applicable Rate. The term "Applicable Rate" means (i) during the period that
Loans or portions thereof are subject to a Base Rate Account, the Base Rate plus
the Base Margin and (ii) during the period that Loans or portions thereof are
subject to a Libor Account, the Adjusted Libor Rate plus the Libor Rate Margin.
AMENDED AND RESTATED CREDIT AGREEMENT - Page 23
<PAGE> 31
Section 3.2 Determinations of Margins and Fees. The margins identified in
Section 3.1 and the fees payable under Section 2.5 hereof shall be defined and
determined as follows:
(a) "Base Margin" shall mean (i) during the period commencing on the
Closing Date and ending on but not including the first Adjustment Date (as
defined below), one quarter of one percent (.25%) per annum and (ii)
during each period, from and including one Adjustment Date to but
excluding the next Adjustment Date (herein a "Calculation Period"), the
percent per annum set forth in the table below in this Section 3.2 under
the heading "Base Margin", and opposite the Interest Coverage Ratio
calculated for the completed four (4) Fiscal Quarters (or portion thereof
since the Closing Date) which immediately preceded the beginning of the
applicable Calculation Period.
(b) "Commitment Fee Rate" shall mean (i) during the period
commencing on the Closing Date and ending on but not including the first
Adjustment Date (as defined below), three eights of one percent (.375%)
per annum; and (ii) during each Calculation Period, the percent per annum
set forth in the table below in this Section 3.2 under the heading
"Commitment Fee" opposite the Interest Coverage Ratio calculated for the
completed four (4) Fiscal Quarters (or portion thereof since the Closing
Date) which immediately preceded the beginning of the applicable
Calculation Period.
(c) "Libor Rate Margin" shall mean (i) during the period commencing
on the Closing Date and ending on but not including the first Adjustment
Date (as defined below), two percent (2.00%) per annum, and (ii) during
each Calculation Period, the percent per annum set forth in the table
below in this Section 3.2 under the heading "LIBOR Rate Margin", and
opposite the Interest Coverage Ratio calculated for the completed four (4)
Fiscal Quarters (or portion thereof since the Closing Date) which
immediately preceded the beginning of the applicable Calculation Period.
The following is the table referred to in clauses (a), (b) and (c) of this
Section 3.2:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
Interest Base Margin Libor Commitment
Coverage Ratio Margin Fee
----------------------------------------------------------------------
<S> <C> <C> <C>
<=2.50:1 0.500% 2.25% 0.500%
----------------------------------------------------------------------
>2.50:1 <= 3.00:1 0.250% 2.00% 0.375%
----------------------------------------------------------------------
>3.00:1 <= 3.50:1 0.000% 1.75% 0.250%
----------------------------------------------------------------------
>3.50:1 <= 3.75:1 0.000% 1.50% 0.250%
----------------------------------------------------------------------
>3.75:1 <= 4.00:1 0.000% 1.25% 0.250%
----------------------------------------------------------------------
>4.00:1 0.000% 1.00% 0.250%
----------------------------------------------------------------------
</TABLE>
AMENDED AND RESTATED CREDIT AGREEMENT - Page 24
<PAGE> 32
Upon delivery of the Compliance Certificate pursuant to subsection 8.1(d)
hereof in connection with the financial statements of Borrower and the
Subsidiaries required to be delivered pursuant to subsection 8.1(c) hereof
commencing with such Compliance Certificate delivered at the end of the Fiscal
Quarter ending on March 31, 1998, the Base Margin, the Libor Rate Margin (for
Interest Periods commencing after the applicable Adjustment Date, as defined
below) and the Commitment Fee Rate shall automatically be adjusted in accordance
with the Interest Coverage Ratio set forth therein and the tables set forth
above, such automatic adjustment to take effect as of the first Business Day
after the receipt by the Agent of the related Compliance Certificate pursuant to
subsection 8.1(d) hereof. The term "Adjustment Date" shall mean each such
Business Day when such margins or fees change pursuant to the immediately prior
sentence or the next following sentence. If Borrower fails to deliver such
Compliance Certificate which so sets forth the Interest Coverage Ratio within
the period of time required by subsection 8.1(d) hereof or if any Event of
Default occurs and the Agent provides Borrower written notice: (i) the Base
Margin shall automatically be adjusted to one half percent (.50%) per annum;
(ii) the Libor Rate Margin (for Interest Periods commencing after the applicable
Adjustment Date) shall automatically be adjusted to two and one quarter percent
(2.25%) per annum; and (iii) the Commitment Fee Rate shall automatically be
adjusted to one-half percent (.50%), such automatic adjustments (a) to take
effect as of the first Business Day after the last day on which Borrower was
required to deliver the applicable Compliance Certificate in accordance with
subsection 8.1(d) hereof or in the case of an Event of Default, on the date the
written notice is given to Borrower and (b) to remain in effect until
subsequently adjusted in accordance herewith upon the delivery of such
Compliance Certificate or, in the case of an Event of Default, when such Event
of Default has been cured to the satisfaction of the Agent or waived by the
Required Banks.
Section 3.3 Payment Dates. Accrued interest on the Loans shall be due and
payable as follows: (i) on the last day of each month beginning December 31,
1997 and on the Termination Date; and (ii) in the case of Loans subject to Libor
Accounts and with respect to each such Account, in addition to the payments
required by clause (i) of this Section 3.3, on the last day of the Interest
Period with respect thereto.
Section 3.4 Default Interest. Notwithstanding the foregoing, the Borrower
will pay to the Agent for the account of each Bank interest at the applicable
Default Rate on any principal of any Loan made by such Bank, any Reimbursement
Obligation, and (to the fullest extent permitted by law) any other amount
payable by the Borrower under any Loan Document to or for the account of the
Agent or such Bank, that is not paid in full when due (whether at stated
maturity, by acceleration, or otherwise), for the period from and including the
due date thereof to but excluding the date the same is paid in full. Interest
payable at the Default Rate shall be payable from time to time on demand.
Section 3.5 Conversions and Continuations of Accounts. Subject to Section
4.2 hereof, the Borrower shall have the right from time to time to Convert all
or part of any Base Rate Account into a Libor Account or to Continue Libor
Accounts as Libor Accounts, provided that: (a) the Borrower shall give the Agent
notice of each such Conversion or Continuation as provided
AMENDED AND RESTATED CREDIT AGREEMENT - Page 25
<PAGE> 33
in Section 4.3 hereof; (b) a Libor Account may only be Converted on the last day
of the Interest Period therefore; and (c) except for Conversions into Base Rate
Accounts, no Conversions or Continuations shall be made while a Default has
occurred and is continuing.
Section 3.6 Computations. All interest and fees (including the Commitment
Fee) will be computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day) occurring in the period for
which payable, unless in the case of interest such calculation would result in a
usurious rate, in which case interest shall be calculated on the basis of a year
of 365 or 366 days, as the case may be.
ARTICLE 4
Administrative Matters
Section 4.1 Borrowing Procedure.
(a) Formal Borrowing Request. The Borrower shall give the Agent, and the
Agent will give the Banks, notice of each borrowing under the Commitments in
accordance with Section 4.3, but subject to Section 4.6 and subsections 2.7 (e)
and 4.1(b). Subject to the operation of Section 4.6, not later than 1:00 p.m. on
the date specified for each borrowing under the Commitment, each Bank will make
available the amount of the Loan to be made by it on such date to the Agent, at
the Principal Office, in immediately available funds, for the account of the
Borrower. The amounts received by the Agent shall, subject to the terms and
conditions of this Agreement, be made available to the Borrower at Borrower's
direction by transferring the same, in immediately available funds by wire
transfer, automated clearinghouse debit or interbank transfer, to (a) one of the
Disbursement Accounts as directed by the Borrower or (b) any of the other bank
accounts described on Schedule 1.1(a) hereto or hereafter established in
accordance with the restrictions set forth in the Borrower Security Agreement or
the Subsidiary Security Agreement or (c) a Person or Persons designated by the
Borrower in writing.
(b) Automatic Borrowing. No notice of a request for Loan in accordance
with subsection 4.1(a) or Section 4.3 hereof shall be required to be presented
by the Borrower to the Agent if no Default exists and a check, checks or other
debit shall be presented for payment against a Disbursement Account on a
Business Day when funds are not otherwise available therein to honor such
debits. In such event, the Agent shall, subject to Section 4.6 and provided no
Default exists, promptly advise the Banks of the amount of the Loans necessary
to be credited to such Disbursement Account on such day to permit such debits to
be honored. Except as otherwise provided in Section 4.6 hereof and subject in
all cases to Section 2.1, not later than 3:00 p.m. on such day each Bank will
make available the amount of the Loan to be made by it on such date to the
Agent, at the Principal Office, in immediately available funds, for the account
of the Borrower. The amounts so received by Agent, shall, subject to the terms
and conditions of this Agreement, be made available to the Borrower by crediting
the same to the applicable Disbursement Account. Loans made under this
subsection 4.1(b) shall be made as Base Rate Accounts.
AMENDED AND RESTATED CREDIT AGREEMENT - Page 26
<PAGE> 34
Section 4.2 Minimum Amounts. Except for prepayments pursuant to Article 5
hereof and Loans made pursuant to subsections 2.7 (e) and 4.1(b), each Base Rate
Account and each prepayment of principal of a Loan shall be in an amount at
least equal to One Dollar ($1.00). Except for Conversions pursuant to Article 5
hereof, each Libor Account shall be in a minimum principal amount of One Million
Dollars ($1,000,000) or any larger amount in increments of Five Hundred Thousand
Dollars ($500,000).
Section 4.3 Certain Notices. Notices by the Borrower to the Agent of
terminations or reductions of Commitments, of borrowings and prepayments of
Loans and of Conversion and Continuations of Accounts shall be irrevocable and
shall be effective only if received by the Agent not later than (a) 1:00 p.m. on
the Business Day of any repayment of Loans, (b) 12:00 noon on the Business Day
of the requested borrowing under the Loans subject to Base Rate Accounts, or (c)
1:00 p.m. on the Business Day prior to the date of the relevant termination,
reduction, borrowing, Conversion, Continuation or other prepayment specified
below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Notice Number of Business Days Prior
- -------------------------------------------------------------------------------------------
<S> <C>
Termination or reduction of Commitments 3
- -------------------------------------------------------------------------------------------
Prepayment or repayment of Loans subject to Base Rate
Accounts, or Conversions into Base Rate Accounts 1
- -------------------------------------------------------------------------------------------
Borrowing, prepayment or repayment of Loans subject to Libor
Accounts, Conversions into or Continuations as Libor Accounts 3
- -------------------------------------------------------------------------------------------
</TABLE>
Any notices of the type described in this Section 4.3 which are received by the
Agent after the applicable time set forth above on a Business Day shall be
deemed to be received and shall be effective on the next Business Day. Each such
notice of termination or reduction shall specify the amount of the Commitments
to be terminated or reduced. Each such notice of borrowing, Conversion,
Continuation, or prepayment shall specify (a) the Accounts to be Converted or
Continued; (b) the amount (subject to Section 4.2 hereof) to be borrowed,
Converted, Continued or prepaid; (c) in the case of a Conversion, the Type of
Account to result from such Conversion; (d) in the case of a borrowing, the Type
of Account or Accounts to be applicable to such borrowing and the amounts
thereof; (e) in the event a Libor Account is selected, the duration of the
Interest Period therefor; and (f) the date of borrowing, Conversion,
Continuation, or prepayment (which shall be a Business Day). Except as may
otherwise be provided by Section 4.6, the Agent shall notify the Banks of the
contents of each such notice on the date of its receipt of the same or, if
received on or after the applicable time set forth above on a Business Day, on
the next Business Day. In the event the Borrower fails to select the Type of
Account or the duration of any Interest Period for any Libor Account, within the
time period and otherwise as provided in this Section 4.3, such Account (if
outstanding as a Libor Account) will be automatically Converted into a Base Rate
Account on the last day of the preceding Interest Period for such Account or (if
outstanding as a Base Rate Account) will remain as, or (if not then outstanding)
will be made as, a Base Rate Account. The Borrower may not borrow any Loans
subject to a Libor Account, Convert any Base
AMENDED AND RESTATED CREDIT AGREEMENT - Page 27
<PAGE> 35
Rate Accounts into Libor Accounts, or Continue any Libor Account as a Libor
Account if the Applicable Rate for such Libor Accounts would exceed the Maximum
Rate or if a Default exists.
Section 4.4 Prepayments.
(a) Mandatory. If on any date the Outstanding Revolving Credit
exceeds the Borrowing Base, the Borrower shall, on or before 1:00 p.m. on
such date, prepay the outstanding Loans by the amount of the excess or if
no Loans are outstanding and the Outstanding Revolving Credit exceeds the
Borrowing Base, immediately pledge to the Agent cash or cash equivalents
in an amount equal to the excess as security for the Obligations.
(b) Control of Cash and Application to Obligations. Under the terms
of the Borrower Security Agreement and the Subsidiary Security Agreement,
Borrower and the Obligated Parties are required to instruct all customers
and other Persons making payment on Receivables and other Collateral to
make all payments thereon to a post office box or boxes established in
accordance with the Lockbox Agreements. Notwithstanding anything in the
Subsidiary Security Agreement to the contrary, if no Event of Default
exists no Atlas Company shall be required to instruct its customers and
other Persons making payment on Receivables and other Collateral to make
payments thereon to a post office box or boxes established in accordance
with a Lockbox Agreement until the date (the "Lockbox Date") which is
ninety (90) days after the date when the first Loan is made hereunder
after the Closing Date or, if earlier, the date when the first Letter of
Credit is issued after the Closing Date. On and at all times after the
Lockbox Date or the occurrence of an Event of Default, each Atlas Company
shall in accordance with the Subsidiary Security Agreement instruct all
customers and other Persons making payment on Receivables and other
Collateral to make all payments thereon to a post office box or boxes
established in accordance with the Lockbox Agreements. Prior to the
Lockbox Date or the occurrence of an Event of Default, each Atlas Company
shall causes all of the funds it receives as collection on its Receivables
or other Collateral to be deposited no less often than weekly into an
account of Atlas Marketing Company, Inc. which is governed by an agreement
of the type described in subsection 6.1 (m) and funds on deposit in such
account will be paid to the Agent on a daily basis by automated
clearinghouse debit for credit to the Concentration Account or by wire
transfer. The funds on deposit in the Lockbox Accounts are also required
under the terms of the Borrower Security Agreement and the Subsidiary
Security Agreement to be paid to the Agent on a daily basis by automated
clearinghouse debit for credit to the Concentration Account or by wire
transfer. The funds deposited into the Concentration Account (over which
Borrower shall have no control) or wire transferred to Agent from the
Lockbox Accounts or such account of Atlas Marketing Company, Inc. (the
"Available Cash") shall, be applied by the Agent for the benefit of the
Banks as follows:
(1) if no Event of Default exists, first, as a payment of the
outstanding principal amount of the Loans, second, as a payment of
accrued
AMENDED AND RESTATED CREDIT AGREEMENT - Page 28
<PAGE> 36
and unpaid interest on the Loans, and third, to the repayment of any
other Obligations which are due and outstanding in connection with
the Loans, and if after the foregoing applications, Available Cash
remains available to be disbursed, the Agent shall deposit such
remaining amount to one of Borrower's Disbursement Accounts or
transfer such funds as the Borrower shall otherwise direct; or
(2) if an Event of Default exists, the Available Cash shall be
applied by the Agent for the benefit of the Banks to the Obligations
in accordance with Section 4.5 hereof.
(c) Optional. Subject to Section 4.2 hereof and the provisions of
this clause (c), Borrower may, at any time and from time to time without
premium or penalty upon prior notice to the Agent as specified in Section
4.3 hereof, prepay or repay any Loan in full or in part. Loans subject to
a Libor Account may be prepaid or repaid only on the last day of the
Interest Period applicable thereto unless (i) the Borrower pays to the
Agent for the account of the applicable Banks any amounts due under
Section 5.5 hereof as a result of such prepayment or repayment or (ii)
after giving effect to such prepayment or repayment the aggregate
principal amount of the Libor Accounts applicable to the Loan being
prepaid or repaid having Interest Periods that end after such payment date
shall be equal to or less than the principal amount of such Loan after
such prepayment or repayment.
Section 4.5 Method of Payment. Except as otherwise expressly provided
herein, all payments of principal, interest, and other amounts to be made by the
Borrower or any Obligated Party under the Loan Documents shall be made to the
Agent at the Principal Office for the account of each Bank's Applicable Lending
Office in Dollars and in immediately available funds, without setoff, deduction,
or counterclaim, not later than 1:00 p.m. on the date on which such payment
shall become due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day). The Borrower and
each Obligated Party shall, at the time of making each such payment, specify to
the Agent the sums payable under the Loan Documents to which such payment is to
be applied (and in the event that the Borrower fails to so specify, or if an
Event of Default has occurred and is continuing, the Agent may hold such
payments as additional Collateral or apply such payment and any proceeds of any
Collateral to the Obligations in such order and manner as it may elect in its
sole discretion, subject to Section 4.6 hereof). Except as otherwise provided in
Section 4.6, each payment received by the Agent under any Loan Document for the
account of a Bank shall be paid to such Bank by 3:00 p.m. on the date the
payment is deemed made to the Agent in immediately available funds, for the
account of such Bank's Applicable Lending Office. Whenever any payment under any
Loan Document shall be stated to be due on a day that is not a Business Day,
such payment may be made on the next succeeding Business Day, and such extension
of time shall in such case be included in the computation of the payment of
interest and commitment fee, as the case may be.
AMENDED AND RESTATED CREDIT AGREEMENT - Page 29
<PAGE> 37
Section 4.6 Weekly Settlement Among Banks; Pro Rata Treatment.
Notwithstanding anything herein to the contrary, the arrangements between the
Agent and the Banks with respect to making and advancing the Loans and making
payments under Letters of Credit may, in the Agent's discretion, be handled on
the following basis: no less than once a week, the Agent will provide each Bank
on or before 11:00 a.m. on a Business Day with a statement showing, for the
period of time since the date of the most recent of such statements previously
provided, the aggregate principal amount of new Loans made to the Borrower by
the Agent as a Bank, the aggregate amount of drawings on Letters of Credit which
have not been reimbursed, the aggregate face amount of new Letters of Credit
issued for the account of the Borrower, the amount of remittances and payments
actually collected and applied by the Agent to reduce the outstanding principal
balance of the Loans and to reimburse Letter of Credit Liabilities during such
period and the outstanding principal balances of the Loans and the aggregate
Letter of Credit Liabilities outstanding at the end of such period. If as of the
date of the delivery of such statement, the Agent in its capacity as a Bank
holds an interest in the Loans and the unreimbursed Reimbursement Obligations
outstanding as of such statement date in excess of its pro rata share based on
its Commitment Percentage, each Bank shall be obligated to advance to the Agent
its pro-rata (based on such Bank's Commitment Percentage) or other share of such
excess so that after giving effect to all such advances, the Banks shall hold
the Loans and the unreimbursed Reimbursement Obligations outstanding as of such
statement date pro rata in accordance with their respective Commitment
Percentages. If as of the date of the delivery of such statement, the Agent in
its capacity as a Bank holds an interest in the Loans and the unreimbursed
Reimbursement Obligations outstanding as of such statement date in an amount
less than its pro rata share based on its Commitment Percentage, then the Agent
in its capacity as a Bank shall be obligated to advance to the other Banks such
amounts as will be necessary so that after giving effect thereto the Banks shall
hold the Loans and the unreimbursed Reimbursement Obligations outstanding as of
such statement date pro rata in accordance with their respective Commitment
Percentages. Advances made pursuant to this weekly settlement procedure by the
Agent or any Bank must be made on or before 3:00 p.m. on the date of the Bank's
receipt of such statement to the Agent at the Principal Office, in immediately
available funds. Until funded by the Banks in accordance with the forgoing, the
Agent as a Bank shall be entitled to any interest on amounts it advanced to or
on behalf of the Borrower as a result of the forgoing weekly settlement
procedures and interest and commitment fees shall be calculated and paid to give
effect to the actual amounts outstanding to each Bank. In between dates when the
statement by the Agent is delivered under this Section 4.6, repayments received
shall be applied to the Loans made by the Agent as a Bank. If as a result of the
foregoing such Loans are repaid in full, then to the extent any further amounts
are available for repayment on such day hereunder, Agent shall, on such day,
settle with the Banks in accordance with this Section 4.6. Except as a result of
the forgoing or to the extent otherwise provided herein: (a) each Loan shall be
made by the Banks, each payment of commitment fees under Section 2.5 and letter
of credit fees under subsection 2.7(c) hereof shall be made for the account of
the Banks, and each termination or reduction of the Commitments shall be applied
to the Commitments of the Banks, pro rata according to their respective
Commitment Percentages; (b) the making, Conversion, and Continuation of Accounts
of a particular Type (other than Conversions provided for by Section 5.4 hereof)
shall be made pro rata among the Banks holding Accounts of such Type according
to their respective Commitment Percentages; (c) each
AMENDED AND RESTATED CREDIT AGREEMENT - Page 30
<PAGE> 38
payment and prepayment of principal of or interest on Loans or Reimbursement
Obligations by the Borrower shall be made to the Agent for the account of the
Agent or the Banks holding such Loans or Reimbursement Obligations (or
participation interests therein) pro rata in accordance with the respective
unpaid principal amounts of such Loans or participation interests held by the
Agent or such Banks; provided that as long as no default in the payment of
interest exists, payments of interest made when the Banks are holding different
Types of Accounts applicable to the same Loan and result of the application of
Section 5.4, shall be made to the Banks in accordance with the amount of
interest actually owed to each; (d) proceeds of Collateral shall be shared by
the Agent and the Banks pro rata in accordance with the respective unpaid
principal amounts of and interest on the Obligations then due the Agent and the
Banks; and (e) the Banks (other than the Agent) shall purchase from the Agent
participations in the Letters of Credit to the extent of their respective
Commitment Percentages. If at any time payment, in whole or in part, of any
amount distributed by the Agent hereunder is rescinded or must otherwise be
restored or returned by Agent as a preference, fraudulent conveyance or
otherwise under any bankruptcy, insolvency or similar law, then each Person
receiving any portion of such amount agrees, upon demand, to return the portion
of such amount it has received to the Agent.
Section 4.7 Sharing of Payments. If a Bank shall obtain payment of any
principal of or interest on any of the Obligations due to such Bank hereunder
directly (and not through the Agent) through the exercise of any right of
set-off, banker's lien, counterclaim or similar right, or otherwise, it shall
promptly purchase from the other Banks participations in the Obligations held by
the other Banks in such amounts, and make such other adjustments from time to
time as shall be equitable to the end that all the Banks shall share the benefit
of such payment pro rata in accordance with the unpaid principal of and interest
on the Obligations then due to each of them. To such end, all of the Banks shall
make appropriate adjustments among themselves (by the resale of participations
sold or otherwise) if all or any portion of such excess payment is thereafter
rescinded or must otherwise be restored. The Borrower agrees, to the fullest
extent it may effectively do so under applicable law, that any Bank so
purchasing a participation in the Obligations held by the other Banks may
exercise all rights of set-off, banker's lien, counterclaim, or similar rights
with respect to such participation as fully as if such Bank were a direct holder
of Obligations in the amount of such participation. Nothing contained herein
shall require any Bank to exercise any such right or shall affect the right of
any Bank to exercise, and retain the benefits of exercising, any such right with
respect to any other indebtedness or obligation of the Borrower.
Section 4.8 Non-Receipt of Funds by the Agent. Unless the Agent shall have
been notified by a Bank or the Borrower (the "Payor") prior to the date on which
such Bank is to make payment to the Agent hereunder or the Borrower is to make a
payment to the Agent for the account of one or more of the Banks, as the case
may be (such payment being herein called the "Required Payment"), which notice
shall be effective upon receipt, that the Payor does not intend to make the
Required Payment to the Agent, the Agent may assume that the Required Payment
has been made and may, in reliance upon such assumption (but shall not be
required to), make the amount thereof available to the intended recipient on
such date and, if the Payor has not in fact made the Required Payment to the
Agent, (a) the recipient of such payment shall, on demand, pay
AMENDED AND RESTATED CREDIT AGREEMENT - Page 31
<PAGE> 39
to the Agent the amount made available to it together with interest thereon in
respect of the period commencing on the date such amount was so made available
by the Agent until the date the Agent recovers such amount at a rate per annum
equal to the Federal Funds Effective Rate for such period and (b) Agent shall be
entitled to offset against any and all sums to be paid to such recipient, the
amount calculated in accordance with the foregoing clause (a).
Section 4.9 Withholding Taxes. To the extent permitted by applicable law,
all payments by the Borrower of amounts payable under any Loan Document shall be
payable without deduction for or on account of any present or future taxes,
duties or other charges levied or imposed by the United States of America or by
the government of any jurisdiction outside the United States of America or by
any political subdivision or taxing authority of or in any of the foregoing
through withholding or deduction with respect to any such payments (but
excluding any tax imposed on or measured by the net income or profit of a Bank
pursuant to the laws of the jurisdiction in which it is organized or in which
the principal office or Applicable Lending Office of such Bank is located or any
subdivision thereof or therein). If any such taxes, duties or other charges are
so levied or imposed, the Borrower will make additional payments in such amounts
so that every net payment of amounts payable by it under any Loan Document,
after withholding or deduction for or on account of any such present or future
taxes, duties or other charges, will not be less than the amount provided for
herein or therein, provided that the Borrower may withhold to the extent
required by law and shall have no obligation to pay such additional amounts to
any Bank to the extent that such taxes, duties, or other charges are levied or
imposed by reason of the failure or inability of such Bank to comply with the
provisions of Section 4.10 hereof. The Borrower shall furnish promptly to the
Agent for distribution to each affected Bank, as the case may be, official
receipts evidencing any such withholding or reduction.
Section 4.10 Withholding Tax Exemption. Each Bank that is not incorporated
under the laws of the United States of America or a state thereof agrees that it
will deliver to the Borrower and the Agent two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224, certifying in either case
that such Bank is entitled to receive payments from the Borrower under any Loan
Document without deduction or withholding of any United States federal income
taxes. Each Bank which so delivers a Form 1001 or 4224 further undertakes to
deliver to Borrower and the Agent two (2) additional copies of such form (or a
successor form) on or before the date such form expires or becomes obsolete or
after the occurrence of any event requiring a change in the most recent form so
delivered by it, and such amendments thereto or extensions or renewals thereof
as may be reasonably requested by the Borrower or the Agent, in each case
certifying that such Bank is entitled to receive payments from the Borrower
under any Loan Document without deduction or withholding of any United States
federal income taxes, unless an event (including without limitation any change
in treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Bank from duly completing and delivering any such
form with respect to it and such Bank advises the Borrower and the Agent that it
is not capable of receiving such payments without any deduction or withholding
of United States federal income tax.
AMENDED AND RESTATED CREDIT AGREEMENT - Page 32
<PAGE> 40
Section 4.11 Participation and Settlement Obligations Absolute; Failure to
Fund Participation or Settlement. The obligations of a Bank to fund its
participation in the Letters of Credit in accordance with the terms hereof and
settle with the Agent in accordance with Section 4.6 shall be absolute,
unconditional and irrevocable and shall be performed strictly in accordance with
the terms of the Loan Documents under all circumstances whatsoever, including
without limitation, the following circumstances: (a) any lack of validity of any
Loan Document; (b) the occurrence of any Default; (c) the existence of any
claim, set-off, counterclaim, defenses or other rights which such Bank, the
Borrower, any Obligated Party, or any other Person may have; (d) the occurrence
of any event that has or could reasonably be expected to have a Material Adverse
Effect; (e) the failure of any condition to a Loan or the issuance of a Letter
of Credit under Article 6 hereof to be satisfied; (f) the fact that after giving
effect to the funding of the participation or settlement the Outstanding
Revolving Credit may exceed the Borrowing Base; or (g) any other circumstance
whatsoever, whether or not similar to any of the foregoing; provided that, the
obligations of a Bank to fund its participation in a Letter of Credit or fund a
settlement under Section 4.6 may be subject to avoidance by a Bank if such Bank
proves in a final nonappealable judgment that it was damaged and that such
damage arose directly from the Agent's willful misconduct or gross negligence in
determining whether (i) the conditions set forth in Article 6 hereof to the
issuance of the Letter of Credit or the making of the Loan in question were
satisfied at the time of such issuance or Loan or (ii) with respect to a Letter
of Credit, the documentation presented under the Letter of Credit in question
complied with the terms thereof. If a Bank fails to fund its participation in a
Letter of Credit or fund a settlement under Section 4.6 as required hereby, such
Bank shall, subject to the foregoing proviso, remain obligated to pay to the
Agent the amount it failed to fund on demand together with interest thereon in
respect of the period commencing on the date such amount should have been funded
until the date the amount was actually funded to the Agent at a rate per annum
equal to the Federal Funds Effective Rate for such period and the Agent shall be
entitled to offset against any and all sums to be paid to such Bank hereunder
the amount due the Agent under this sentence.
ARTICLE 5
Yield Protection and Illegality
Section 5.1 Additional Costs.
(a) The Borrower shall pay directly to each Bank from time to time
such amounts as such Bank may reasonably determine to be necessary to
compensate it for any costs incurred by such Bank which such Bank
determines are attributable to its making or maintaining of any Loans
subject to Libor Accounts or Letters of Credit hereunder or its obligation
to make any of such Loans hereunder or issue or participate in any Letter
of Credit, or any reduction in any amount receivable by such Bank
hereunder in respect of any such Loans or Letters of Credit or such
obligation (such increases in costs and reductions in amounts receivable
being herein called "Additional Costs"), resulting from any Regulatory
Change which:
AMENDED AND RESTATED CREDIT AGREEMENT - Page 33
<PAGE> 41
(i) changes the basis of taxation of any amounts payable to
such Bank under this Agreement or its Notes in respect of any of
such Loans (other than franchise taxes and taxes imposed on the
overall net income of such Bank or its Applicable Lending Office for
any of such Loans by the United States of America or the
jurisdiction in which such Bank has its Principal Office or such
Applicable Lending Office);
(ii) imposes or modifies any reserve, special deposit, minimum
capital, capital ratio, or similar requirement relating to any
extensions of credit or other assets of, or any deposits with or
other liabilities or commitments of, such Bank (including any of
such Loans or any deposits referred to in the definition of "Libor
Rate" in Section 1.1 hereof but excluding any Reserve Requirement
already taken into account in calculating the Adjusted Libor Rate);
or
(iii) imposes any other condition affecting this Agreement or
the Notes or any of such extensions of credit or liabilities or
commitments.
Each Bank will notify the Borrower (with a copy to the Agent) of any event
occurring after the date of this Agreement which will entitle such Bank to
compensation pursuant to this subsection 5.1(a) as promptly as practicable
after it obtains knowledge thereof and determines to request such
compensation, and will designate a different Applicable Lending Office for
the Loans affected by such event if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the sole
opinion of such Bank, violate any law, rule, or regulation or be in any
way disadvantageous to such Bank. Each Bank will furnish the Borrower with
a certificate setting forth the basis and the amount of each request of
such Bank for compensation under this subsection 5.1(a). If any Bank
requests compensation from the Borrower under this subsection 5.1(a), the
Borrower may, by notice to such Bank (with a copy to the Agent) suspend
the obligation of such Bank to issue or participate in Letters of Credit
or to make Loans subject to Libor Accounts or Continue Libor Accounts as
Libor Accounts or Convert Base Rate Accounts into Libor Accounts until the
Regulatory Change giving rise to such request ceases to be in effect (in
which case the provisions of Section 5.4 hereof shall be applicable with
respect to such Libor Accounts). A Bank may only request compensation
under this subsection 5.1(a) for Additional Costs which it incurred at any
time after the date six (6) months prior to the date the Bank requests
such compensation.
(b) Without limiting the effect of the foregoing provisions of this
Section 5.1, in the event that, by reason of any Regulatory Change, any
Bank either (i) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits or other
liabilities of such Bank which includes deposits by reference to which the
interest rate on the Loans subject to Libor Accounts is determined as
provided in this Agreement or a category of extensions of credit or other
assets of such Bank which includes Loans subject to Libor Accounts or (ii)
becomes subject to restrictions on the
AMENDED AND RESTATED CREDIT AGREEMENT - Page 34
<PAGE> 42
amount of such a category of liabilities or assets which it may hold,
then, if such Bank so elects by notice to the Borrower (with a copy to the
Agent), the obligation of such Bank to make Loans subject to Libor
Accounts or Continue Libor Accounts as Libor Accounts or Convert Base Rate
Accounts into Libor Accounts hereunder shall be suspended until the
Regulatory Change giving rise to such request ceases to be in effect (in
which case the provisions of Section 5.4 hereof shall be applicable).
(c) Determinations and allocations by any Bank for purposes of this
Section 5.1 of the effect of any Regulatory Change on its costs of
maintaining its obligation to make Loans or issue or participate in
Letters of Credit or of making or maintaining Loans or issuing or
participating in Letters of Credit or on amounts receivable by it in
respect of Loans or Letters of Credit, and of the additional amounts
required to compensate such Bank in respect of any Additional Costs,
shall, absent manifest error, constitute prima facie evidence of the
accuracy thereof, provided that such determinations and allocations are
made on a reasonable basis. Additionally, each Bank shall, upon request by
the Borrower, take requested measures to mitigate the Additional Costs
which the Borrower is required to pay to any Bank if such measures can, in
the sole and absolute opinion of such Bank be taken without such Bank
suffering any economic, legal, regulatory or other disadvantage (provided,
however, that no such Bank shall be required to designate a funding office
that is not located in the United States of America).
Section 5.2 Limitation on Libor Accounts. Anything herein to the contrary
notwithstanding, if with respect to any Libor Accounts under a Loan for any
Interest Period therefor:
(a) The Agent determines (which determination shall be conclusive)
that quotations of interest rates for the relevant deposits referred to in
the definition of "Libor Rate" in Section 1.1 hereof are not being
provided in the relative amounts or for the relative maturities for
purposes of determining the rate of interest for the Loans subject to such
Libor Accounts as provided in this Agreement; or
(b) Required Banks determine (which determination shall be
conclusive) and notify the Agent that the relevant rates of interest
referred to in the definition of "Adjusted Libor Rate" in Section 1.1
hereof on the basis of which the rate of interest for such Loans for such
Interest Period is to be determined do not accurately reflect the cost to
the Banks of making or maintaining such Loans for such Interest Period;
then the Agent shall give the Borrower prompt notice thereof specifying the
relevant Libor Account and the relevant amounts or periods, and so long as such
condition remains in effect, the Banks shall be under no obligation to make
additional Loans subject to a Libor Account or to Convert Base Rate Accounts
into Libor Accounts and the Borrower shall, on the last day(s) of the then
current Interest Period (s) for the outstanding Libor Accounts, either prepay
the Loans subject to such Libor Accounts or Convert such Libor Accounts into
Base Rate Accounts in accordance with
AMENDED AND RESTATED CREDIT AGREEMENT - Page 35
<PAGE> 43
the terms of this Agreement. Determinations made under this Section 5.2 shall be
made on a reasonable basis.
Section 5.3 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Bank or its Applicable
Lending Office to (a) honor its obligation to make Loans subject to a Libor
Account hereunder or (b) maintain Loans subject to a Libor Account hereunder,
then such Bank shall promptly notify the Borrower (with a copy to the Agent)
thereof and such Bank's obligation to make or maintain Loans subject to a Libor
Account and to Convert Base Rate Accounts into Libor Accounts hereunder shall be
suspended until such time as such Bank may again make and maintain Loans subject
to a Libor Account (in which case the provisions of Section 5.4 hereof shall be
applicable).
Section 5.4 Treatment of Affected Loans. If the Accounts applicable to a
Loan of any Bank (hereinafter called "Affected Accounts") are affected by
Section 5.1 or Section 5.3 hereof, the Bank's Affected Accounts shall be
automatically Converted into Base Rate Accounts on the last day(s) of the then
current Interest Period(s) (or, in the case of a Conversion required by
subsection 5.1(b) or Section 5.3 hereof, on such earlier date as such Bank may
specify to the Borrower with a copy to the Agent) and, unless and until such
Bank gives notice as provided below that the circumstances specified in Section
5.1 or 5.3 hereof which gave rise to such Conversion no longer exist: (a) to the
extent that such Bank's Affected Accounts have been so Converted, all payments
and prepayments of principal which would otherwise be applied to such Bank's
Affected Accounts shall be applied instead to its Base Rate Accounts; and (b)
all Accounts which would otherwise be established or Continued by such Bank as
Libor Accounts shall be made as or Converted into Base Rate Accounts and all
Accounts of such Bank which would otherwise be Converted into Libor Accounts
shall be Converted instead into (or shall remain as) Base Rate Accounts. If such
Bank gives notice to the Borrower (with a copy to the Agent) that the
circumstances specified in Section 5.1 or 5.3 hereof which gave rise to the
Conversion of such Bank's Affected Accounts pursuant to this Section 5.4 no
longer exist (which such Bank agrees to do promptly upon such circumstances
ceasing to exist) at a time when Libor Accounts are outstanding, such Bank's
Base Rate Accounts shall be automatically Converted, on the first day(s) of the
next succeeding Interest Period(s) for such outstanding Libor Accounts to the
extent necessary so that, after giving effect thereto, all Accounts held by the
Banks holding Libor Accounts and by such Bank are held pro rata (as to principal
amounts, Types, and Interest Periods) in accordance with their respective
Commitment Percentages.
Section 5.5 Compensation. The Borrower shall pay to the Agent for the
account of each Bank, upon the request of such Bank, such amount or amounts as
shall be sufficient (in the reasonable opinion of such Bank) to compensate it
for any loss, cost, or expense incurred by it as a result of:
(a) Any payment or prepayment of a Loan subject to a Libor Account
or Conversion of a Libor Account for any reason (including, without
limitation, the repayment of such a Loan held by the Agent as a Bank
resulting from the operation of Section 4.6 or
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the repayment of such a Loan resulting from the acceleration of the
outstanding Loans pursuant to subsection 11.2(a) hereof) on a date other
than the last day of an Interest Period for the applicable Libor Account;
or
(b) Any failure by the Borrower for any reason (including, without
limitation, the failure of any conditions precedent specified in Article 6
to be satisfied but excluding any failure by a Bank to honor its
obligations hereunder) to borrow or prepay a Loan subject to a Libor
Account, or Convert a Base Rate Account to a Libor Account on the date for
such borrowing, Conversion, or prepayment specified in the relevant notice
of borrowing, prepayment, or Conversion under this Agreement.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which otherwise would have accrued on the principal amount so paid or Converted
or not borrowed for the period from the date of such payment, Conversion, or
failure to borrow to the last day of the Interest Period for such Libor Account
(or, in the case of a failure to borrow, the Interest Period for such Libor
Account which would have commenced on the date specified for such borrowing) at
the applicable rate of interest for such Libor Account provided for herein over
(ii) the interest component of the amount such Bank would have bid in the London
interbank market for Dollar deposits of leading banks and amounts comparable to
such principal amount and with maturities comparable to such period.
Section 5.6 Capital Adequacy. If after the date hereof, any Bank shall
have determined that any Regulatory Change or any change in the compliance by
such Bank (or its parent) with any guideline, request, or directive regarding
capital adequacy (whether or not having the force of law) of any central bank or
other Governmental Authority has or would have the effect of reducing the rate
of return on such Bank's (or its parent's) capital as a consequence of its
obligations hereunder or the transactions contemplated hereby to a level below
that which such Bank (or its parent) could have achieved but for such Regulatory
Change or change in compliance by an amount deemed by such Bank to be material,
then from time to time, within ten (10) Business Days after demand by such Bank
(with a copy to the Agent), the Borrower shall pay to such Bank such additional
amount or amounts as will compensate such Bank (or its parent) for such
reduction. A certificate of such Bank claiming compensation under this Section
and setting forth the additional amount or amounts to be paid to it hereunder
shall constitute prima facie evidence of the accuracy thereof, provided that the
determination thereof is made on a reasonable basis. In determining such amount
or amounts, such Bank may use any reasonable averaging and attribution methods.
With respect to each demand by a Bank under this Section 5.6, no Bank shall have
the right to demand compensation for amounts attributable to any reduction in
such Bank's rate of return occurring at any time before the date which is six
(6) months prior to the date the Bank gives such demand for compensation to
Borrower.
Section 5.7 Replacement of a Bank. If (i) the obligation of a Bank (other
than the Agent as a Bank) to make or Continue Loans subject to Libor Accounts
has been suspended pursuant to Sections 5.2 or 5.3 or (ii) a Bank (other than
the Agent as a Bank) has demanded compensation
AMENDED AND RESTATED CREDIT AGREEMENT - Page 37
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under Sections 5.1 or 5.6, the Borrower shall have the right to require such
Bank to assign to a Person selected by the Borrower and reasonably satisfactory
to the Agent (which may be one or more of the Banks) the Notes and participation
interests in the Letter of Credit Liabilities held by such Bank pursuant to the
terms of an appropriately completed Assignment and Acceptance in accordance with
subsection 13.8(b); provided that, neither the Agent nor any Bank shall have any
obligation to Borrower to find any such Person and in order for Borrower to
replace a Bank, the Borrower must require such replacement within three (3)
months of the date such obligations of the Bank were suspended or the date the
Bank demanded such compensation. Each Bank (other than the Agent as a Bank)
agrees to its replacement at the option of the Borrower pursuant to this Section
5.7; provided that the Person selected by Borrower shall purchase such Bank's
interest in the Obligations of the Borrower to such Bank for immediately
available funds in an aggregate amount equal to the aggregate unpaid principal
thereof, all unpaid interest accrued thereon, all unpaid commitment and letter
of credit fees accrued for the account of such Bank, any breakage costs incurred
by the selling Bank because of the prepayment of any Libor Accounts, all other
fees (if any) applicable thereto and all other amounts (including any amounts
due under Sections 5.1 or 5.6) then owing to such Bank hereunder or under any
other Loan Document.
ARTICLE 6
Conditions Precedent
Section 6.1 Initial Loan and Letter of Credit. The effectiveness of this
Agreement and the obligation of each Bank to make its initial Loan and the
obligation of the Agent to issue the initial Letter of Credit hereunder are
subject to the condition precedent that the Agent shall have received on or
before December 31, 1997 and on or before the day of any such Loan or Letter of
Credit all of the following, each dated (unless otherwise indicated) the date
hereof, in form and substance satisfactory to the Agent:
(a) Resolutions; Authority. Resolutions of the Board of Directors of
the Borrower and each Obligated Party certified by its Secretary or an
Assistant Secretary which authorize its execution, delivery, and
performance of the Transaction Documents to which it is or is to be a
party.
(b) Incumbency Certificate. A certificate of incumbency certified by
the Secretary or an Assistant Secretary of the Borrower and each Obligated
Party certifying (i) the names of its officers (A) who are authorized to
sign the Transaction Documents to which it is or is to be a party
(including the certificates contemplated herein) together with specimen
signatures of each such officer and (B) who will, until replaced by other
officers duly authorized for that purpose, act as its representative for
the purposes of signing documentation and giving notices and other
communications in connection with this Agreement and the transactions
contemplated hereby or (ii), if applicable, that its officers authorized
to sign the Transaction Documents have not changed from those officers
reflected in the incumbency certification delivered under the Prior
Agreement.
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(c) Organizational Documents. The articles of incorporation of the
Borrower and each Obligated Party certified by the Secretary of State of
the state of its incorporation and dated a current date or, if applicable,
a certificate of its Secretary or an Assistant Secretary certifying that
its articles of incorporation have not been amended or otherwise modified
since the delivery thereof pursuant to the Prior Agreement.
(d) Bylaws. The bylaws of the Borrower and each Obligated Party
certified by its Secretary or an Assistant Secretary or, if applicable, a
certificate of its Secretary or an Assistant Secretary certifying that its
bylaws have not been amended or otherwise modified since the delivery
thereof pursuant to the Prior Agreement.
(e) Governmental Certificates. Certificates of the appropriate
government officials of the state of incorporation of the Borrower and
each Obligated Party as to its existence and, to the extent applicable,
good standing and certificates of the appropriate government officials of
each state in which each Atlas Company is required to qualify to do
business and where failure to so qualify could reasonably be expected to
have a Material Adverse Effect, as to such Person's qualification to do
business and good standing in such state, all dated a current date.
(f) Notes. The Notes executed by the Borrower.
(g) Acknowledgment. The acknowledgment to this Agreement executed by
each Obligated Party.
(h) Collateral Documents and Collateral. A Subsidiary Joinder
Agreement executed by each Atlas Company; certificates representing the
capital stock of each Atlas Company together with undated stock powers
duly executed in blank; UCC, tax and judgment Lien search reports listing
all documentation on file against each Atlas Company in each jurisdiction
in which each Atlas Company has its principal place of business; and
executed documentation as the Agent may deem necessary to perfect or
protect its Liens, including, without limitation (but subject to Section
8.10): (i) intellectual property assignments; (ii) financing statements
under the UCC and other applicable documentation under the laws of any
jurisdiction with respect to the perfection of Liens; (iii) a lien
subordination from the landlord of Atlas Marketing Company, Inc.'s
principal office location containing such access agreements and
subordinations as the Agent may require; and (iv) waivers, subordinations
or acknowledgments from all other third parties who have possession or
control of any Collateral.
(i) Termination of Liens; Subordinations. Duly executed UCC-3
termination statements, mortgage releases and such other documentation as
shall be necessary to terminate or release all Liens other than those
permitted by Section 9.2 hereof.
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(j) Insurance Policies. Certificates of insurance summarizing the
insurance policies of Borrower and the Subsidiaries required by this
Agreement and reflecting the Agent as additional insured under such
policies and as loss payee with respect to all policies covering
Collateral.
(k) Opinion of Counsel. A favorable opinion of legal counsel to the
Borrower and the Obligated Parties as to such matters as the Agent may
reasonably request.
(l) Attorneys' Fees and Expenses. Evidence that the costs and
expenses (including attorneys' fees) referred to in Section 13.1, to the
extent incurred and invoiced, shall have been paid in full by the
Borrower.
(m) Account Agreement. An agreement from the institution where Atlas
Marketing Company, Inc. maintains its concentration account in form and
substance satisfactory to the Agent, pursuant to which such institution
recognizes the Agent's Lien in such account and agrees to transfer the
collected balances therein (or a lesser amount acceptable to the Agent) to
the Concentration Account on a daily basis.
(n) Closing Fee. A closing fee in the amount of One Hundred Twelve
Thousand Five Hundred Dollars ($112,500).
(o) Prior Agreement Outstandings. All outstanding principal and
accrued and unpaid interest outstanding under the Prior Agreement.
(p) Transactions. Evidence that all other conditions precedent to
the Transactions have been satisfied, that the Transactions shall have
occurred on or prior to the Closing Date and that Borrower shall have
otherwise received the gross proceeds of the Senior Subordinated Notes in
an amount not less than One Hundred Million Dollars ($100,000,000).
(q) Transaction Documents. Executed copies of all other Transaction
Documents not specifically listed above. All certificates and opinions
delivered in connection with such documents shall be addressed to the
Agent and the Banks or accompanied by a written authorization from the
Person delivering such certificate or opinion stating that the Agent and
the Banks may rely on such document as though it were addressed to it.
Section 6.2 All Loans and Letters of Credit. The obligation of each Bank
to make any Loan (including the initial Loan) and the obligation of the Agent to
issue any Letter of Credit (including the initial Letter of Credit) are subject
to the following additional conditions precedent:
(a) No Default. No Default shall have occurred and be continuing, or
would result from such Loan or Letter of Credit;
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(b) Representations and Warranties. All of the representations and
warranties contained in Article 7 hereof and in the other Loan Documents
shall be true and correct on and as of the date of such Loan or Letter of
Credit with the same force and effect as if such representations and
warranties had been made on and as of such date except to the extent that
such representations and warranties relate specifically to another date;
and
(c) Additional Documentation. The Agent shall have received such
additional approvals, opinions, or documents as the Agent may reasonably
request.
Each notice of borrowing by the Borrower hereunder, each request for a borrowing
under subsections 2.7(e) and 4.1(b), and each request for the issuance of a
Letter of Credit, shall constitute a representation and warranty by the Borrower
that the conditions precedent set forth in subsections 6.2(a) and (b) hereof
have been satisfied (both as of the date of such notice and, unless the Borrower
otherwise notifies the Agent prior to the date of such borrowing or Letter of
Credit, as of the date of such borrowing or Letter of Credit).
ARTICLE 7
Representations and Warranties
To induce the Agent and the Banks to enter into this Agreement, the
Borrower represents and warrants to the Agent and the Banks that:
Section 7.1 Corporate Existence. The Borrower and each Subsidiary (a) is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation; (b) has all requisite power and
authority to own its assets and carry on its business as now being or as
proposed to be conducted; and (c) is qualified to do business in all
jurisdictions in which the nature of its business makes such qualification
necessary and where failure to so qualify would have a Material Adverse Effect.
Borrower and each Obligated Party has the power and authority to execute,
deliver, and perform their respective obligations under the Transaction
Documents to which it is or may become a party.
Section 7.2 Financial Statements. The Borrower has delivered to the Agent
and the Banks (i) audited consolidated financial statements of the Borrower and
the Subsidiaries for the Fiscal Year ended December 31, 1996 and (ii) unaudited
consolidated financial statements of the Borrower and the Subsidiaries for the
ten (10) month period ended October 31, 1997. Such financial statements have
been prepared in accordance with GAAP (subject in the case of the unaudited
financial statements to audit adjustments and the fact that such financial
statements do not contain footnotes), and present fairly, on a consolidated and
consolidating basis, the financial condition of the Borrower and the
Subsidiaries as of the respective dates indicated therein and the results of
operations for the respective periods indicated therein. Neither the Borrower
nor any of the Subsidiaries has any material contingent liabilities, liabilities
for taxes, unusual forward or long-term commitments, or unrealized or
anticipated losses from any unfavorable commitments
AMENDED AND RESTATED CREDIT AGREEMENT - Page 41
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except as referred to or reflected in such financial statements. There has been
no Material Adverse Effect since the effective date of the audited consolidated
financial statements of the Borrower and the Subsidiaries for the Fiscal Year
ended December 31, 1996.
Section 7.3 Corporate Action; No Breach. The execution, delivery, and
performance by the Borrower and each Obligated Party of the Transaction
Documents to which each is or may become a party and compliance with the terms
and provisions hereof and thereof have been duly authorized by all requisite
action on the part of the Borrower and each Obligated Party and do not and will
not (a) violate or conflict with, or result in a breach of, or require any
consent under (i) the articles of incorporation or bylaws of the Borrower or any
Obligated Party, (ii) any applicable law, rule, or regulation or any order,
writ, injunction, or decree of any Governmental Authority or arbitrator, or
(iii) any agreement or instrument to which the Borrower or any Obligated Party
is a party or by which any of them or any of their property is bound or subject,
or (b) constitute a material default under any such agreement or instrument, or
result in the creation or imposition of any Lien (except as provided herein or
Liens in favor of Agent) upon any of the revenues or assets of the Borrower or
any Obligated Party.
Section 7.4 Operation of Business. The Borrower and each of the
Subsidiaries possess all licenses, permits, franchises, patents, copyrights,
trademarks, and trade names, or rights thereto, necessary to conduct their
respective businesses substantially as now conducted and as presently proposed
to be conducted, and the Borrower and each of the Subsidiaries are not in
violation, in any material respect, of any valid rights of others with respect
to any of the foregoing.
Section 7.5 Litigation and Judgments. There is no action, suit,
investigation, or proceeding before or by any Governmental Authority or
arbitrator pending, or to the knowledge of the Borrower, threatened against or
affecting the Borrower or any Subsidiary that could reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect. There
are no outstanding judgments against the Borrower or any Subsidiary.
Section 7.6 Rights in Properties; Liens. The Borrower and each Subsidiary
have good title to or valid leasehold interests in their respective properties
and assets, real and personal, including the properties, assets, and leasehold
interests reflected in the financial statements described in Section 7.2 hereto,
and none of the properties, assets, or leasehold interests of the Borrower or
any Subsidiary is subject to any Lien, except as permitted by Section 9.2
hereto.
Section 7.7 Enforceability. The Transaction Documents to which the
Borrower or any Obligated Party is party, when delivered, shall constitute the
legal, valid, and binding obligations of the Borrower or the Obligated Party, as
applicable, enforceable against Borrower or the applicable Obligated Party in
accordance with their respective terms, except as limited by bankruptcy,
insolvency, or other laws of general application relating to the enforcement of
creditors' rights and general principles of equity.
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<PAGE> 50
Section 7.8 Approvals. No authorization, approval, or consent of, and no
filing or registration with, any Governmental Authority or third party is or
will be necessary for the execution, delivery, or performance by the Borrower or
any Obligated Party of the Transaction Documents to which each is or may become
a party or for the validity or enforceability thereof except for such
authorizations, approvals, consents, filings and registrations which have been
made or obtained.
Section 7.9 Debt. The Borrower and the Subsidiaries have no Debt, except
as permitted by Section 9.1 hereto. As of the Closing Date, the aggregate amount
of the Debt of the type described in items (a) and (j) of the definition of Debt
which is equal in right of payment to any unsecured portion of the Obligations
does not exceed a net present value of Eighty Million Dollars ($80,000,000).
None of the Debt of the type described in items (a) and (j) of the definition of
Debt is senior in right of payment to the Obligations nor is any such Debt
secured by any Lien (except as reflected on Schedule 9.2) or otherwise entitled
to any administrative or other priority in any liquidation or bankruptcy
proceedings of Borrower or any Subsidiary; provided that one hundred fifteen
(115) employees of Borrower or any Subsidiary who hold such Debt may be entitled
to the priority distribution under Section 507(a) (3) or 507 (a) (4) of the
United States Bankruptcy Code (11 U.S.C. ss. 507) to the extent, and only to the
extent as set forth in such Sections, as a result of their claims relating to
such Debt being characterized either as claims for wages, salaries or
contributions to employee benefit plans.
Section 7.10 Taxes. The Borrower and each Subsidiary have filed all
material tax returns (federal, state, and local) required to be filed, including
all income, franchise, employment, property, and sales tax returns, and have
paid all of their respective liabilities for taxes, assessments, governmental
charges, and other levies that are due and payable other than those being
contested in good faith by appropriate proceedings diligently pursued for which
adequate reserves have been established. Except as disclosed in writing to
Agent, the Borrower knows of no pending investigation of the Borrower or any
Subsidiary by any taxing authority or of any pending but unassessed tax
liability of the Borrower or any Subsidiary.
Section 7.11 Margin Securities. Neither the Borrower nor any Subsidiary is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations G, T, U, or X of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of any Loan will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying margin stock.
Section 7.12 ERISA. The Borrower and each Subsidiary are in compliance in
all material respects with all applicable provisions of ERISA. Neither a
Reportable Event nor a Prohibited Transaction has occurred and is continuing
with respect to any Plan. No notice of intent to terminate a Plan has been
filed, nor has any Plan been terminated. No circumstances exist which constitute
grounds entitling the PBGC to institute proceedings to terminate, or appoint a
trustee to administer, a Plan, nor has the PBGC instituted any such proceedings.
Neither the Borrower nor
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<PAGE> 51
any ERISA Affiliate has completely or partially withdrawn from a Multiemployer
Plan. The Borrower and each ERISA Affiliate have met their minimum funding
requirements under ERISA with respect to all of their Plans. The present value
of all vested benefits under each Plan do not exceed the fair market value of
all Plan assets allocable to such benefits, as determined on the most recent
valuation date of the Plan and in accordance with ERISA. Neither the Borrower
nor any ERISA Affiliate has incurred any liability to the PBGC under ERISA in an
amount that will have a Material Adverse Effect.
Section 7.13 Disclosure. All factual information furnished by or on behalf
of the Borrower in writing to the Agent or any Bank (including, without
limitation, all information contained in the Transaction Documents) for purposes
of or in connection with this Agreement, the other Transaction Documents or any
transaction contemplated herein or therein is, and all other such factual
information hereafter furnished by or on behalf of the Borrower to the Agent or
any Bank, will be true and accurate in all material respects taken as a whole on
the date as of which such information is dated or certified and not incomplete
by omitting to state any fact necessary to make such information not misleading
in any material respect at such time.
Section 7.14 Subsidiaries; Borrower Capitalization. As of the Closing
Date, the Borrower has no Subsidiaries other than those listed on Schedule 7.14
hereto. As of the Closing Date, Schedule 7.14 sets forth the jurisdiction of
incorporation or organization of each such Subsidiary, the percentage of the
Borrower's ownership of the outstanding voting stock (or other ownership
interests) of each such Subsidiary and the authorized, issued and outstanding
capital stock of each Subsidiary and Borrower. As of the Closing Date, Schedule
7.14 identifies all owners of record of the Borrower's capital stock. MS
Acquisition Limited is controlled by Richmont Capital Partners I, L.P. All of
the outstanding capital stock of the Borrower and each Subsidiary has been
validly issued, is fully paid, and is nonassessable. Except as permitted to be
issued or created pursuant to the terms hereof or as reflected on Schedule 7.14,
there are no outstanding subscriptions, options, warrants, calls, or rights
(including preemptive rights) to acquire, and no outstanding securities or
instruments convertible into, capital stock of the Borrower or any Subsidiary.
Section 7.15 Agreements. Neither the Borrower nor any Subsidiary is a
party to any indenture, loan, or credit agreement, or to any lease or other
agreement or instrument, or subject to any charter or corporate restriction that
could reasonably be expected to have a Material Adverse Effect. Neither the
Borrower nor any Subsidiary is in default in any respect in the performance,
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument to which it is a party other than
defaults which will not have a Material Adverse Effect.
Section 7.16 Compliance with Laws. Neither the Borrower nor any Subsidiary
is in violation of any law, rule, regulation, order, or decree of any
Governmental Authority or arbitrator other than violations which will not have a
Material Adverse Effect.
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Section 7.17 Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
Section 7.18 Public Utility Holding Company Act. Neither the Borrower nor
any Subsidiary is a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company" or a "public utility" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 7.19 Environmental Matters.
(a) The Borrower, each Subsidiary, and all of their respective
properties, assets, and operations are in compliance in all material
respects with all Environmental Laws. The Borrower is not aware of, nor
has the Borrower received notice of, any past, present, or future
conditions, events, activities, practices, or incidents which may
interfere with or prevent the material compliance or continued material
compliance of the Borrower and the Subsidiaries with all Environmental
Laws;
(b) The Borrower and each Subsidiary have obtained all permits,
licenses, and authorizations that are required under applicable
Environmental Laws the failure of which to obtain would result in a
Material Adverse Effect. All such permits are in good standing and the
Borrower and its Subsidiaries are in compliance in all material respects
with all of the terms and conditions of such permits;
(c) No Hazardous Materials exist on, about, or within or have been
used, generated, stored, transported, disposed of on, or Released from any
of the properties or assets of the Borrower or any Subsidiary except in
compliance in all material respects with Environmental Laws. The use which
the Borrower and the Subsidiaries make and intend to make of their
respective properties and assets will not result in the use, generation,
storage, transportation, accumulation, disposal, or Release of any
Hazardous Material on, in, or from any of their properties or assets
except in compliance in all material respects with Environmental Laws;
(d) Neither the Borrower nor any of the Subsidiaries nor any of
their respective currently or previously owned or leased properties or
operations is subject to any outstanding or, to the best of its knowledge,
threatened order from or agreement with any Governmental Authority or
subject to any judicial or administrative proceeding with respect to (i)
failure to comply with Environmental Laws, (ii) Remedial Action, or (iii)
any Environmental Liabilities arising from a Release or threatened
Release;
(e) There are no conditions or circumstances associated with the
currently or previously owned or leased properties or operations of the
Borrower or any of the Subsidiaries that could reasonably be expected to
give rise to any material Environmental Liabilities;
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(f) Neither the Borrower nor any of the Subsidiaries is a treatment,
storage, or disposal facility requiring a permit under the Resource
Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq., regulations
thereunder or any comparable provision of state law. The Borrower and the
Subsidiaries are in compliance with all applicable financial
responsibility requirements of all Environmental Laws in all material
respects;
(g) Neither the Borrower nor any of the Subsidiaries has filed or
failed to file any notice required under applicable Environmental Law
reporting a Release; and
(h) No Lien arising under any Environmental Law has attached to any
property or revenues of the Borrower or the Subsidiaries.
Section 7.20 Deposit and Brokerage Accounts. Schedule 1.1(a) sets forth as
of the Closing Date all lockbox agreements, deposit accounts and brokerage
accounts of the Borrower and the Subsidiaries.
Section 7.21 Solvency. As of and from and after the date of this Agreement
and after giving effect to the consummation of each Permitted Acquisition,
Borrower and each of the Subsidiaries individually and on a consolidated basis:
(a) owns and will own assets the fair saleable value of which are (i) greater
than the total amount of liabilities (including contingent liabilities) and (ii)
greater than the amount that will be required to pay the probable liabilities of
its then existing debts as they become absolute and matured considering all
financing alternatives and potential asset sales reasonably available to it; (b)
has capital that is not unreasonably small in relation to its business as
presently conducted or any contemplated or undertaken transaction; and (c) does
not intend to incur and does not believe that it will incur debts beyond its
ability to pay such debts as they become due.
Section 7.22 Perishable Agricultural Commodities Act. In the ordinary
course of its business, neither Borrower nor any Subsidiary purchases or sells
for its own account perishable agricultural commodities as that term is defined
in the Perishable Agricultural Commodities Act, as amended (7 U.S.C. ss. 499
e(c)) and the regulations promulgated thereunder nor does any such party
directly receive any proceeds from the sale of such commodities. As a result,
the statutory trust arising under such act for the benefit of unpaid cash
sellers does not attach to any property of the Borrower or any Subsidiary.
Section 7.23 Packers and Stockyards Act. In the ordinary course of its
business, neither Borrower nor any Subsidiary purchases, sells for its own
account or receives the proceeds from the sale of livestock as that term is
defined in the Packers and Stockyards Act, as amended (7 U.S.C. ss.ss. 181-229)
and the regulations thereunder. As a result, the statutory trust arising under
such act for the benefit of unpaid cash sellers does not attach to any property
of the Borrower or any Subsidiary.
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Section 7.24 Common Enterprise. Borrower and each Subsidiary is a member
of an affiliated group with each other such Person and the Borrower and the
Subsidiaries are collectively engaged in a common enterprise with one another.
Each of the Borrower and the Subsidiaries expects to derive substantial benefit
(and may reasonably be expected to derive substantial benefit), directly and
indirectly, from the Loans and Letters of Credit contemplated by this Agreement,
both in its separate capacity and as a member of such group.
Section 7.25 Transaction Documents. As of the Closing Date, Borrower has
delivered to Agent a complete and correct copy of the Transaction Documents, the
Transaction Documents are in full force and effect, have not been amended in any
material respect (except for such amendments disclosed to the Agent), no party
thereto has failed to perform any material obligation thereunder and no defenses
exist to the performance by the parties thereto of their obligations thereunder.
Each of the representations and warranties under the Transaction Documents are
true and correct in all material respects as of the date hereof and as of the
Closing Date.
ARTICLE 8
Positive Covenants
The Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Bank has any Commitment hereunder, the
Borrower will perform and observe the following positive covenants:
Section 8.1 Reporting Requirements. The Borrower will furnish to the Agent
and each Bank:
(a) Annual Financial Statements. As soon as available, and in any
event within one hundred twenty (120) days after the end of each Fiscal
Year of the Borrower, beginning with the Fiscal Year ending December 31,
1997, (i) a copy of the annual audit report of the Borrower and the
Subsidiaries for such Fiscal Year containing, on a consolidated basis,
balance sheets and statements of income, retained earnings, and cash flow
as at the end of such Fiscal Year and for the Fiscal Year then ended, in
each case setting forth in comparative form the figures for the preceding
Fiscal Year, all in reasonable detail and audited and certified on an
unqualified basis by independent certified public accountants of
recognized standing acceptable to the Agent, to the effect that such
report has been prepared in accordance with GAAP;
(b) Monthly Financial Statements. As soon as available, and in any
event within forty-five (45) days after the end of each month, a copy of
an unaudited financial report of the Borrower and the Subsidiaries as of
the end of such period and for the portion of the Fiscal Year then ended
containing, on a consolidated basis, balance sheets and statements of
income, retained earnings, and cash flow, all in reasonable detail
certified by the chief executive officer, treasurer or chief financial
officer of the Borrower to fairly present
AMENDED AND RESTATED CREDIT AGREEMENT - Page 47
<PAGE> 55
(subject to year-end audit adjustments) the financial condition and
results of operations of the Borrower and the Subsidiaries, on a
consolidated basis, at the date and for the periods indicated therein;
(c) Quarterly Financial Statements. As soon as available, and in any
event within forty-five (45) days after the end of each Fiscal Quarter, a
copy of an unaudited financial report of the Borrower and the Subsidiaries
as of the end of such period and for the portion of the Fiscal Year then
ended containing, on a consolidated and consolidating basis, balance
sheets and statements of income, retained earnings, and cash flow, in each
case setting forth in comparative form the figures for the corresponding
period of the preceding Fiscal Year, all in reasonable detail certified by
the chief executive officer, treasurer or chief financial officer of the
Borrower to have been prepared in accordance with GAAP (but excluding
footnotes) and to fairly present (subject to year-end audit adjustments)
the financial condition and results of operations of the Borrower and the
Subsidiaries, on a consolidated and consolidating basis, at the date and
for the periods indicated therein;
(d) Compliance Certificate. Within forty-five (45) days after the
end of each Fiscal Quarter of each Fiscal Year and accompanying the annual
financial statements delivered in accordance with Section 8.1(a), a
Compliance Certificate, together with the schedules thereto setting forth
the calculations supporting the computations therein;
(e) Borrowing Base Report. Within ten (10) Business Days of the last
day of each month or within ten (10) Business Days of any other date the
Agent may select in its discretion (based on a reasonable concern relating
to the amount or calculation of the Borrowing Base, the level of borrowing
hereunder or the financial condition of the Borrower or any Granting
Subsidiary) by written notice to the Borrower (each such day or date a
"Report Date"), a Borrowing Base Report together with the a Receivable
aging report, sales report summary, collections report and customer credit
report (reflecting all journal entries and adjustments) for the Borrower
and the Granting Subsidiaries as of the applicable Report Date;
(f) Receivable Reporting. If the Agent requests, the Borrower shall
furnish to the Agent on each Business Day, a Receivable aging report,
sales report summary, collections report and customer credit report
(reflecting all journal entries and adjustments) for the Borrower and the
Granting Subsidiaries as of the preceding Business Day prior to the date
of such reports (or the most recent preceding Business Day prior to the
date of the delivery of such reports for which Borrower is able to provide
such reports). For purposes of preparing the Receivables reports under
this clause (f), it shall be assumed that each Business Day ends at 2:00
p.m., with any other activity occurring on such Business Day after such
2:00 p.m. deadline to be deemed to have occurred on the next succeeding
Business Day;
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(g) Projections. As soon as available and in any event forty-five
(45) days after the beginning of each Fiscal Year of Borrower, Borrower
will deliver a forecasted consolidated balance sheet and statements of
income and cash flow of Borrower and the Subsidiaries on a Fiscal Quarter
by Fiscal Quarter basis, including the assumptions utilized in the
preparation of such projections (in narrative form) for the forthcoming
Fiscal Year and a proforma projection of the Borrower's compliance with
the financial covenants in this Agreement for the same period;
(h) Management Letters. Promptly upon receipt thereof, a copy of any
management letter or written report submitted to the Borrower or any
Subsidiary by independent certified public accountants with respect to the
business, condition (financial or otherwise), operations, prospects, or
properties of the Borrower or any Subsidiary;
(i) Notice of Litigation. Promptly after the commencement thereof,
notice of all actions, suits, and proceedings before any Governmental
Authority or arbitrator affecting the Borrower or any Subsidiary which, if
determined adversely to the Borrower or such Subsidiary, could reasonably
be expected to have a Material Adverse Effect;
(j) Notice of Default. As soon as possible and in any event within
five (5) Business Days after an officer of the Borrower has knowledge of
the occurrence of each Default, a written notice setting forth the details
of such Default and the action that the Borrower has taken and proposes to
take with respect thereto;
(k) ERISA Reports. If requested by the Agent, promptly after the
filing or receipt thereof, copies of all reports, including annual
reports, and notices which the Borrower or any Subsidiary files with or
receives from the PBGC or the U.S. Department of Labor under ERISA; and as
soon as possible and in any event within five (5) Business Days after the
Borrower or any Subsidiary knows or has reason to know that any Reportable
Event or Prohibited Transaction has occurred with respect to any Plan or
that the PBGC or the Borrower or any Subsidiary has instituted or will
institute proceedings under Title IV of ERISA to terminate any Plan, a
certificate of the chief financial officer of the Borrower setting forth
the details as to such Reportable Event or Prohibited Transaction or Plan
termination and the action that the Borrower proposes to take with respect
thereto;
(l) Notice of Material Adverse Effect. As soon as possible and in
any event within five (5) Business Days of the occurrence thereof, written
notice of any matter that could reasonably be expected to have a Material
Adverse Effect;
(m) Proxy Statements, Etc. As soon as available, one copy of each
financial statement, report, notice or proxy statement sent by the
Borrower or any Subsidiary to its stockholders generally and one copy of
each regular, periodic or special report, registration statement, or
prospectus filed by the Borrower or any Subsidiary with any securities
exchange or the Securities and Exchange Commission or any successor
agency; and
AMENDED AND RESTATED CREDIT AGREEMENT - Page 49
<PAGE> 57
(n) General Information. Promptly, such other information concerning
the Borrower or any Subsidiary as the Agent or any Bank may from time to
time reasonably request.
Section 8.2 Maintenance of Existence; Conduct of Business. Except as
otherwise permitted by Section 9.3, the Borrower will, and will cause each
Subsidiary to, preserve and maintain its corporate existence and all of its
leases, privileges, licenses, permits, franchises, qualifications, and rights
that are necessary or desirable in the ordinary conduct of its business. The
Borrower will, and will cause each Subsidiary to, conduct its business in an
orderly and efficient manner in accordance with good business practices.
Section 8.3 Maintenance of Properties. The Borrower will, and will cause
each Subsidiary to, maintain, keep, and preserve all of its material properties
necessary in the conduct of its business in good working order and condition
ordinary wear and tear excepted.
Section 8.4 Taxes and Claims. The Borrower will, and will cause each
Subsidiary to, pay or discharge at or before maturity or before becoming
delinquent (a) all taxes, levies, assessments, and governmental charges imposed
on it or its income or profits or any of its property, and (b) all lawful claims
for labor, material, and supplies, which, if unpaid, might become a Lien upon
any of its property; provided, however, that neither the Borrower nor any
Subsidiary shall be required to pay or discharge any tax, levy, assessment, or
governmental charge which is being contested in good faith by appropriate
proceedings diligently pursued, and for which adequate reserves have been
established in accordance with GAAP.
Section 8.5 Insurance. The Borrower will, and will cause each Subsidiary
to, maintain insurance with financially sound and reputable insurance companies
in such amounts and covering such risks as are usually carried by corporations
engaged in similar businesses and owning similar properties in the same general
areas in which the Borrower and the Subsidiaries operate, provided that in any
event the Borrower will maintain and cause each Subsidiary to maintain workmen's
compensation insurance, property insurance and comprehensive general liability
insurance reasonably satisfactory to the Agent. Each general liability insurance
policy shall name the Agent as additional insured, each insurance policy
covering Collateral shall name the Agent as loss payee and shall provide that
such policy will not be canceled or materially changed without thirty (30) days
prior written notice to the Agent.
Section 8.6 Inspection Rights; Receivable Verification. Borrower will, and
will cause each Subsidiary to, permit any authorized representative designated
by the Agent to (a) visit and inspect the Receivables records of the Borrower
and the Subsidiaries on the eleventh (11th) Business Day of each month, (b) make
extracts from such records and (c) discuss such records with the Borrower's and
the Subsidiaries' officers and employees. In addition, upon reasonable notice
(which may be telephonic notice), at any other reasonable time and as often as
the Agent may request, Borrower will, and will cause each Subsidiary to permit
any authorized representative designated by the Agent, together with any
authorized representatives of any Bank desiring to
AMENDED AND RESTATED CREDIT AGREEMENT - Page 50
<PAGE> 58
accompany the Agent, to (a) visit and inspect the properties and financial
records of the Borrower and the Subsidiaries (including those records relating
to the existence and condition of the Receivables), (b) make extracts from such
financial records, and (c) discuss the affairs, finances and condition of the
Borrower and the Subsidiaries with its officers and employees and the Borrower's
independent public accountants. The Agent agrees that it shall schedule any
meeting with any such independent public accountant through the Borrower and a
financial officer of the Borrower shall have the right to be present at any such
meeting. The Agent shall also have the right to verify with any and all
customers of the Borrower and any Obligated Party the existence and condition of
the Receivables, as often as the Agent may require, without prior notice to or
consent of the Borrower or any Obligated Party and whether or not a Default
exists.
Section 8.7 Keeping Books and Records. The Borrower will, and will cause
each Subsidiary to, maintain proper books of record and account in which full,
true, and correct entries in conformity with GAAP shall be made of all dealings
and transactions in relation to its business and activities.
Section 8.8 Compliance with Laws. The Borrower will, and will cause each
Subsidiary to, comply with all applicable laws (including, without limitation,
all Environmental Laws), rules, regulations, orders, and decrees of any
Governmental Authority or arbitrator other than for such noncompliance that will
not have a Material Adverse Effect.
Section 8.9 Compliance with Agreements. The Borrower will, and will cause
each Subsidiary to, comply in all material respects with all agreements,
contracts, and instruments binding on it or affecting its properties or
business.
Section 8.10 Further Assurances and Collateral Matters.
(a) Further Assurance and Exceptions to Perfection. The Borrower
will, and will cause each Subsidiary to, execute and deliver such further
documentation and take such further action as may be requested by the
Agent to carry out the provisions and purposes of the Loan Documents and
to create, preserve, protect and perfect the Liens of the Agent for the
benefit of itself and the Banks in the Collateral; provided that prior to
the occurrence of a Default, neither Borrower nor any Granting Subsidiary
shall be required to:
(i) except as delivered in connection with the Prior Agreement
and as required by Section 6.1(h), obtain any landlord or mortgagee
waivers or subordinations;
(ii) execute or have filed any UCC Financing Statement fixture
filings; and
(iii) deliver any certificates of title evidencing equipment
of Borrower or a Granting Subsidiary with Agent's Lien noted
thereon.
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If a Default occurs, then Borrower shall take such action as the Agent may
request to perfect and protect the Liens of the Agent in all the
Collateral, including any or all of the actions described in clauses (i)
through (iii) of this Section 8.10 (a).
(b) Subsidiary Creation or Acquisition. Upon the creation or
acquisition of any Subsidiary, the Borrower shall (i) cause such
Subsidiary to execute and deliver to Agent a Subsidiary Joinder Agreement
and such other documentation as the Agent may request to cause such
Subsidiary to evidence, perfect or otherwise implement the guaranty and
security for the repayment of the Obligations contemplated by the Guaranty
and the Subsidiary Security Agreement; (ii) if Borrower owns such
Subsidiary directly, execute and deliver to the Agent an amendment to the
Borrower Security Agreement describing as collateral thereunder the stock
of or other ownership interests in the new Subsidiary and the Borrower
shall deliver the certificates representing such stock or other interests
to the Agent together with undated stock or other powers duly executed in
blank and (iii) if the new Subsidiary is not directly owned by the
Borrower, cause the Subsidiary who owns the new Subsidiary directly to
pledge the stock of such new Subsidiary to the Agent pursuant to an
amendment to the Subsidiary Security Agreement describing as collateral
thereunder the stock of or other ownership interests in the new Subsidiary
and to deliver the certificates representing such stock or other interests
to the Agent together with undated stock or other powers duly executed in
blank.
Section 8.11 ERISA. The Borrower will, and will cause each Subsidiary to,
comply with all minimum funding requirements and all other requirements of
ERISA, if applicable, so as not to give rise to any liability which will have a
Material Adverse Effect.
ARTICLE 9
Negative Covenants
The Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Bank has any Commitment hereunder, the
Borrower will perform and observe the following negative covenants:
Section 9.1 Debt. The Borrower will not, and will not permit any
Subsidiary to, incur, create, assume, or permit to exist any Debt, except:
(a) Debt to the Banks pursuant to the Loan Documents;
(b) Debt described on Schedule 9.1 hereto and any extensions,
renewals or refinancings of such existing Debt so long as (i) the
principal amount of such Debt after such renewal, extension or refinancing
shall not exceed the principal amount of such Debt which was outstanding
immediately prior to such renewal, extension or refinancing, (ii) such
Debt shall not be secured by any assets other than assets securing such
Debt, if any, prior to
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such renewal, extension or refinancing; and (iii) to the extent any such
Debt is subordinated to the Obligations, such Debt must be subordinated to
the Obligations on substantially the same terms; provided however, that
any Debt described on Schedule 9.1 which is secured by a Lien on
Receivables must be repaid (and the Lien securing the payment thereof
released) on or before June 30, 1998;
(c) Debt of a Wholly-Owned Subsidiary to Borrower or another
Wholly-Owned Subsidiary and Debt of Borrower to any Wholly-Owned
Subsidiary; provided that (i) the obligations of each obligor of such Debt
shall be subordinated in right of payment to such obligor's obligations
under the Loan Documents from and after such time as any portion of such
obligations shall become due and payable (whether at stated maturity, by
acceleration or otherwise) and (ii) the proceeds of such Debt shall be
used to finance the working capital requirements of such Subsidiary, to
finance a Permitted Acquisition or for other general corporate purposes;
(d) Guaranties incurred in the ordinary course of business with
respect to surety and appeal bonds, performance and return-of-money bonds
and other similar obligations;
(e) unsecured Debt for borrowed money or for the deferred payment of
purchase price incurred, in each case, to finance a Permitted Acquisition;
provided that (i) in no event shall the aggregate amount of such Debt
outstanding under this clause (e) at any time exceed Twenty-Five Million
Dollars ($25,000,000) and (ii) on the date of its incurrence, such Debt
shall be permitted by the Indenture (with Borrower providing Agent
evidence thereof);
(f) Debt (including Capital Lease Obligations) secured by purchase
money Liens permitted by Section 9.2(g) incurred after the Closing Date;
provided that (i) in no event shall the aggregate amount of such Debt
outstanding under this clause (f) at any time exceed Seven Million Five
Hundred Thousand Dollars ($7,500,000) and (ii) on the date of its
incurrence, such Debt shall be permitted by the Indenture (with Borrower
providing Agent evidence thereof);
(g) Debt constituting obligations to reimburse worker's compensation
insurance companies for claims paid by such companies on Borrower's or a
Subsidiaries' behalf in accordance with the policies issued to Borrower
and the Subsidiaries;
(h) Debt of Borrower under Hedging Agreements;
(i) Guarantees by Borrower or any Subsidiary of (i) Debt of another
Subsidiary permitted hereby, (ii) Debt of Borrower permitted hereby or
(iii) operating leases of another Subsidiary or Borrower entered into in
the ordinary course of business;
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<PAGE> 61
(j) indemnifications entered into by Borrower or a Subsidiary in
connection with asset dispositions and acquisitions and in connection with
other transactions entered into in the ordinary course of business;
(k) Debt of any Person (or any of such Person's subsidiaries)
existing at the time such Person becomes a Subsidiary (or is merged into
or consolidated with the Borrower or any of the Subsidiaries), but only to
the extent that such Debt was not incurred in connection with, as a result
of or in contemplation of such Person becoming a Subsidiary (or being
merged into or consolidated with the Borrower or any Subsidiary);
provided, however, that (i) in no event shall the aggregate amount of such
Debt outstanding at any time exceed Five Hundred Thousand Dollars
($500,000); (ii) immediately after such acquired Person becomes a
Subsidiary (or is merged into or consolidated with the Borrower or any
Subsidiary), no Default has occurred and (iii) such Debt shall be
permitted by the Indenture (with Borrower providing Agent evidence
thereof);
(l) Debt evidenced by the Senior Subordinated Notes and any
refinancings or replacements of all or a portion of such Debt so long as
(i) the maturity of such refinancing or replacement Debt is after the
Termination Date, (ii) such refinancing or replacement Debt is
subordinated to the Obligations to the same or greater extent as the
Senior Subordinated Notes are so subordinated, (iii) the covenants
contained in any agreement evidencing such refinancing or replacement Debt
are not materially more onerous, taken as a whole, to the Borrower than
the covenants relating to the Senior Subordinated Notes, (iv) the
principal amount of such refinancing or replacement Debt shall not exceed
the principal amount of the Senior Subordinated Notes outstanding
immediately prior to such refinancing or replacement and (v) any such
refinancing or replacement Debt shall not be secured by any Liens; and
(m) Debt (the "Additional Debt"), in addition to the Debt described
in the forgoing clauses (a) through (l), which may be incurred if no
Default exists or would result therefrom; provided that (i) the aggregate
amount of the Additional Debt at any one time outstanding shall never
exceeding Two Million Dollars ($2,000,000) and (ii) on the date of its
incurrence, such Debt shall be permitted by the Indenture (with Borrower
providing Agent evidence thereof).
Section 9.2 Limitation on Liens and Restrictions on Subsidiaries. The
Borrower will not, and will not permit any Subsidiary to, incur, create, assume,
or permit to exist any Lien upon any of its property, whether now owned or
hereafter acquired, except the following, none of which shall encumber the
Collateral other than those Liens described in clauses (a), (b), (d), (e), (g),
(h) and (j):
(a) Liens disclosed on Schedule 9.2 hereto; provided that, all Liens
disclosed on Schedule 9.2 which encumber Receivables must be released on
or before June 30, 1998 and
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<PAGE> 62
any Liens reflected on Schedule 9.2 which are designated as to be released
at closing will not be permitted after the Closing Date;
(b) Liens in favor of the Agent for the benefit of itself and the
Banks pursuant to the Loan Documents;
(c) Encumbrances consisting of minor easements, zoning restrictions,
or other restrictions on the use of real property that do not
(individually or in the aggregate) materially affect the value of the
assets encumbered thereby or materially impair the ability of the Borrower
or the Subsidiaries to use such assets in their respective businesses, and
none of which is violated in any material respect by existing or proposed
structures or land use;
(d) Liens (other than Liens relating to Environmental Liabilities or
ERISA) for taxes, assessments, or other governmental charges that are not
delinquent or which are being contested in good faith and for which
adequate reserves have been established in accordance with GAAP;
(e) Liens of mechanics, materialmen, warehousemen, carriers,
landlords or other similar statutory Liens securing obligations that are
not yet due or are being contested in good faith by appropriate
proceedings diligently pursued and for which adequate reserves have been
established in accordance with GAAP and are incurred in the ordinary
course of business;
(f) Liens resulting from good faith deposits to secure payments of
workmen's compensation or other social security programs or to secure the
performance of tenders, statutory obligations, surety and appeal bonds,
bids, contracts (other than for payment of Debt);
(g) Liens for purchase money obligations (including the rights of
lessors under capitalized leases) provided that: (i) the purchase of the
asset subject to any such Lien is not otherwise prohibited by Section 10.4
hereto; (ii) the Debt secured by any such Lien is permitted under Section
9.1 hereto; (iii) any such Lien encumbers only the asset so purchased;
(iv) the amount of such Lien does not exceed One Hundred percent (100%) of
the purchase price of the asset so purchased; and (v) no Event of Default
exists at the time the asset is so purchased;
(h) Any attachment or judgment Lien not constituting an Event of
Default;
(i) Liens against equipment arising from precautionary UCC financing
statement filings regarding operating leases entered into by Borrower and
the Subsidiaries in the ordinary course of business; and
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<PAGE> 63
(j) Liens on fixed assets of a Person existing at the time such
Person becomes a Subsidiary (or such Person is merged into or consolidated
with the Borrower or any Subsidiary) in accordance with the provisions of
Section 9.3 hereof; provided, however, that such Liens (i) only secure the
Debt permitted by subsection 9.1(k) above, (ii) were in existence prior to
such acquired Person becoming a Subsidiary (or prior to the contemplation
of such merger or consolidation), (iii) do not cover any property other
than the property of such acquired Person which is subject to such Liens
prior to such acquired Person becoming a Subsidiary (or prior to the
contemplation of such merger or consolidation) and (iv) do not cover any
Receivables.
Neither Borrower nor any Subsidiary shall enter into or assume any agreement
(other than the Loan Documents and the Senior Subordinated Note Documents)
prohibiting the creation or assumption of any Lien upon its properties or
assets, whether now owned or hereafter acquired unless such agreement permits
the granting of Liens to secure the Obligations; provided that, in connection
with any Debt permitted to be incurred under Section 9.1 which is used to
finance the acquisition of an asset and any Lien securing the payment thereof
permitted by this Section 9.2, Borrower or the Subsidiary may agree that it will
not permit any other Liens to encumber the asset so acquired. Except as provided
herein, Borrower will not and will not permit any Subsidiaries directly or
indirectly to create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or restriction of any kind on the ability of any
Subsidiary to: (1) pay dividends or make any other distribution on any of such
Subsidiary's capital stock owned by Borrower or any Subsidiary; (2) subject to
subordination provisions, pay any Debt owed to Borrower or any Subsidiary; (3)
make loans or advances to Borrower or any Subsidiary; or (4) transfer any of its
property or assets to Borrower or any Subsidiary.
Section 9.3 Mergers, Etc. The Borrower will not, and will not permit any
Subsidiary to, become a party to a merger or consolidation, or purchase or
otherwise acquire all or a substantial part of the business or assets of any
Person or all or a substantial part of the assets of a division or branch of a
Person or any shares or other evidence of beneficial ownership of any Person, or
wind-up, dissolve, or liquidate itself; provided that, if no Default exists or
would result therefrom:
(a) Borrower and the Subsidiaries may enter into the transactions
permitted by Section 9.5;
(b) Borrower and any Wholly-Owned Subsidiary may acquire shares or
other evidence of beneficial ownership of any Person or all or a
substantial part of each such Person's assets or all or a substantial part
of the assets of a division or branch of each such Person, if:
(i) the Target is involved in the type of business activities
described in Section 9.10 and the proposed acquisition is supported
by the Target's Board of Directors;
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(ii) if the proposed acquisition is an acquisition of the
stock of a Target, the acquisition will be structured so that the
Target will become a Wholly-Owned Subsidiary. If the proposed
acquisition is an acquisition of assets, the acquisition will be
structured so that Borrower or a Wholly-Owned Subsidiary will
acquire all or substantially all of (1) the assets of the Target or
(2) the assets of a division or branch of the Target;
(iii) the Purchase Price for the proposed acquisition does not
exceed Forty Million Dollars ($40,000,000), the sum of the Purchase
Prices paid for all Permitted Acquisitions consummated since the
Closing Date (excluding the Purchase Price paid for the Atlas
Acquisition) plus, without duplication, the Purchase Price of the
proposed acquisition (excluding the Atlas Acquisition) does not
exceed Sixty-Five Million Dollars ($65,000,000) and the Purchase
Price to be paid to acquire the Target or its assets does not exceed
an amount equal to the product obtained by multiplying by five and
one-half (5.5) the Calculated EBITDA of the Target or, as
applicable, the Calculated EBITDA of the Target attributable to such
assets acquired, calculated for the most recently completed twelve
(12) month period prior to the closing of the proposed acquisition.
The term "Calculated EBITDA" means, for any period, the sum of the
following, each calculated without duplication for the Target or the
applicable assets for such period: (1) EBITDA of the Target or, as
applicable, the EBITDA of the Target attributable to the assets
acquired; plus (2) all of those verifiable (as determined by
Borrower and approved by the Agent) non-recurring expenses which
have been deducted in calculating the Net Income included in such
EBITDA for such period and which will be eliminated in the future
upon the consummation of the proposed acquisition by the Borrower;
minus (3) all income or gains which have been added in calculating
such Net Income for such period and which will, in the Borrower's
determination (as approved by the Agent), be eliminated in the
future upon the consummation of the proposed acquisition by the
Borrower;
(iv) Borrower provides evidence satisfactory to the Agent that
(A) the acquisition and all transactions contemplated thereby are
permitted by the Indenture; (B) the average daily balances of the
sum of Borrower's and the Subsidiaries' cash, cash equivalents and
Borrowing Availability for the thirty (30) day period prior to the
date of the delivery of the notice required by clause (v) below and
calculated as if the acquisition occurred on the first (1st) day of
such period, shall equal or exceed Fifteen Million Dollars
($15,000,000); and (C) Borrower shall be in compliance with the
ratio of Operating Cash Flow to Debt Service required by Section
10.1 for the four (4) Fiscal Quarter period then most recently
ending calculated on a proforma basis by including in Debt Service
for such period the amount of the amortization of any Debt assumed
or incurred in connection therewith for the next twelve (12) months
following the date of calculation and including in Operating Cash
Flow the sum of the following for the most recently completed twelve
(12) month period
AMENDED AND RESTATED CREDIT AGREEMENT - Page 57
<PAGE> 65
prior to the Closing of the proposed acquisition: (1) the Calculated
EBITDA of the Target or, as applicable, the assets acquired, minus
(2) any provision for (or plus any benefit from) income or franchise
taxes included in determining the Net Income included in such
Calculated EBITDA; minus (3) interest expense deducted in
determining such Net Income, minus (4) all expenditures of the
Target or applicable to the assets being acquired which are
classified as capital expenditures in accordance with GAAP during
the period for which such Net Income is calculated (the sum of the
forgoing clauses (1) through (4) calculated for any period, herein
the "Target Operating Cash Flow");
(v) Borrower shall have provided to the Agent and each Bank at
least seven (7) Business Days prior to the date that the proposed
acquisition is to be consummated (but no earlier than ten (10)
Business Days prior to such date) the following: (a) the name of the
Target; (b) a description of the nature of the Target's business;
and (c) a certificate of the chief financial officer, treasurer or
chief executive officer of the Borrower (1) certifying that no
Default exists or could reasonably be expected to occur as a result
of the proposed acquisition, and (2) demonstrating compliance with
the criteria set forth in clauses (iii) and (iv) of this subsection
9.3(b); and (d) any other information the Agent may reasonably
request; and
(vi) The obligations arising under subsection 8.10(b) shall be
fulfilled simultaneously with the closing of the acquisition in
question.
(c) Borrower may consummate the repurchases of stock, options and
warrants in accordance with subsection 9.4(iii) and (iv);
(d) any Subsidiary may merge or consolidate with Borrower (provided
Borrower is the surviving entity) or with any Wholly-Owned Subsidiary or,
in connection with a Permitted Acquisition, any other Person that, in each
case is or becomes, simultaneously with such transaction, a Wholly-Owned
Subsidiary;
(e) Borrower may merge or consolidate with another Person in
connection with a Permitted Acquisition if the Borrower is the surviving
entity; and
(f) a Subsidiary may wind-up, dissolve, or liquidate if all of its
assets have been transferred in accordance with the restrictions set forth
in Section 9.8.
Section 9.4 Restricted Junior Payments. Borrower will not and will not
permit any Subsidiary to directly or indirectly declare, order, pay, make or set
apart any sum for (a) any dividend or other distribution, direct or indirect, on
account of any shares of any class of stock of Borrower or any Subsidiary now or
hereafter outstanding; (b) any redemption, conversion, exchange, retirement,
sinking fund or similar payment, purchase or other acquisition for value,
AMENDED AND RESTATED CREDIT AGREEMENT - Page 58
<PAGE> 66
direct or indirect, of any shares of any class of stock of Borrower or any
Subsidiary now or hereafter outstanding; or (c) any payment made to retire, or
to obtain the surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of stock of Borrower or any Subsidiaries now or
hereafter outstanding except:
(i) Subsidiaries may make, declare and pay dividends and make other
distributions with respect to their capital stock to the extent necessary
to permit Borrower or the Subsidiary who is the direct parent of such
Subsidiary to pay the Obligations and to permit Borrower and such parent
to pay expenses (including general corporate expenses and management fees
payable to Richmont Capital Partners I, L.P. in an amount not to exceed
Five Hundred Thousand Dollars ($500,000) in any Fiscal Year) and taxes
incurred in the ordinary course of business;
(ii) Borrower and the Subsidiaries may declare and pay dividends on
its common stock payable solely in shares of common stock;
(iii) Borrower or a Subsidiary may repurchase its common stock or
any warrants or options to purchase its common stock from its and the
Subsidiaries' officers and employees who received such stock or options
from an employee stock option or ownership plan established by Borrower or
a Subsidiary (including repurchases arising as a result of the death,
disability or termination of any such officers and employees); provided
that (a) the aggregate amount paid for such repurchases in any Fiscal Year
does not exceed Two Million Five Hundred Thousand Dollars ($2,500,000),
(b) no Default exists or would result therefrom, (c) the average daily
balances of the sum of Borrower's and the Subsidiaries' cash, cash
equivalents and the Borrowing Availability for the thirty (30) day period
prior to the date of the repurchase and calculated as if the repurchase
had occurred on the first (1st) day of such period, shall equal or exceed
Ten Million Dollars ($10,000,000), (d) the repurchase is permitted by the
Indenture and (e) Borrower shall have provided Agent evidence of its
compliance with clauses (c) and (d) preceding on the date of the proposed
repurchase; and
(iv) Borrower may set apart and pay on or before March 31, 1999 an
aggregate amount not to exceed Ten Million Dollars ($10,000,000) for the
acquisition of its common stock (in addition to the amounts repurchased
pursuant to Subsection 9.4 (iii)) if (a) no Default exists or would result
therefrom, (b) such acquisition is permitted by the Indenture (with
Borrower providing Agent evidence thereof on or prior to the date of each
such acquisition under this clause (iv)) and (c) the average daily
balances of the sum of Borrower's and the Subsidiaries' cash, cash
equivalents and the Borrowing Availability for the thirty (30) day period
prior to the date of the acquisition and calculated as if the acquisition
had occurred on the first (1st) day of such period, shall equal or exceed
Fifteen Million Dollars ($15,000,000).
AMENDED AND RESTATED CREDIT AGREEMENT - Page 59
<PAGE> 67
Section 9.5 Investments. The Borrower will not, and will not permit any
Subsidiary to, make or permit to remain outstanding any advance, loan, extension
of credit, or capital contribution to or investment in any Person, or purchase
or own any stocks, bonds, notes, debentures, or other securities of any Person,
or be or become a joint venturer with or partner of any Person, except:
(a) Permitted Acquisitions;
(b) Borrower and the Subsidiaries may own stock of the Subsidiaries
existing on the Closing Date;
(c) Borrower and the Subsidiaries may make loans and entered into
Guarantees, in each case, as permitted by subsections 9.1(c) and 9.1(i);
(d) readily marketable direct obligations of the United States of
America or any agency thereof with maturities of one year or less from the
date of acquisition;
(e) fully insured certificates of deposit with maturities of one
year or less from the date of acquisition issued by any commercial bank
operating in the United States of America having capital and surplus in
excess of Fifty Million Dollars ($50,000,000);
(f) commercial paper, maturing not more than 90 days after the date
of acquisition, issued by a corporation (other than an Affiliate of the
Borrower) organized and in existence under the laws of the United States
of America or any foreign country recognized by the United States of
America with a rating at the time as of which any investment therein is
made of "P-1" (or higher) according to Moody's Investors Service, Inc. or
"A-1" (or higher) according to Standard and Poor's Rating Service or
securities with maturities of six months or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States of America, or by any political subdivision
or taxing authority thereof, and rated at least "A" by Standard and Poor's
Rating Service or "A" by Moody's Investors Service, Inc.;
(g) loans and advances to employees for business expenses incurred
in the ordinary course of business not to exceed Three Hundred Thousand
Dollars ($300,000) in the aggregate at any time outstanding;
(h) existing investments described on Schedule 9.5 hereto;
(i) if no Default exists, Borrower and the Subsidiaries may make
additional capital contributions to or investments in or purchase any
stocks, bonds, or other equity securities authorized to be issued under
Section 9.6 of a Wholly-Owned Subsidiary or a newly created Person
organized by Borrower or a Subsidiary that, immediately after such
investment or purchase, will be a Wholly-Owned Subsidiary if the
obligations under Section 8.10 shall be fulfilled, the aggregate amount of
such contributions and investments made
AMENDED AND RESTATED CREDIT AGREEMENT - Page 60
<PAGE> 68
under the permissions of this clause (i) do not exceed One Hundred
Thousand Dollars ($100,000) during the entire term of this Agreement and
such contributions and investments are permitted by the Indenture (with
Borrower providing Agent evidence thereof on or prior to the date of such
contribution or investment);
(j) Borrower and the Subsidiaries may acquire and own any notes,
stocks, bonds, or other equity securities of any Person received in
connection with (i) the sale of assets permitted by subsection 9.8 (e),
(ii) the bankruptcy or reorganization of suppliers and customers and (iii)
the settlement of delinquent obligations of, and disputes with, customers
and suppliers arising in the ordinary course of business;
(k) Borrower and the Subsidiaries may make extensions of trade
credit in the ordinary course of business;
(l) any advance, loan or extension of credit by Borrower or any
Subsidiary which may arise in connection with the performance under
Hedging Agreements; and
(m) the purchase of up to eight (8) shares of common capital stock
issued by Bradford & Company Food Brokers, Inc.; provided that the
aggregate amount paid for the purchase of all such stock shall not exceed
One Hundred Thousand Dollars ($100,000).
Section 9.6 Limitation on Issuance of Capital Stock. The Borrower will not
permit any Subsidiary to, at any time issue, sell, assign, or otherwise dispose
of (a) any of its capital stock, (b) any securities exchangeable for or
convertible into or carrying any rights to acquire any of its capital stock, or
(c) any option, warrant, or other right to acquire any of its capital stock,
except Subsidiaries may issue stock to Borrower or their immediate Parent if
such stock is pledged to the Agent under the terms of the Borrower Security
Agreement or, as applicable, the Subsidiary Security Agreement.
Section 9.7 Transactions With Affiliates. The Borrower will not, and will
not permit any Subsidiary to, enter into any transaction, including, without
limitation, the purchase, sale, or exchange of property or the rendering of any
service, with any Affiliate of the Borrower or such Subsidiary, except in the
ordinary course of and pursuant to the reasonable requirements of the Borrower's
or such Subsidiary's business and upon fair and reasonable terms no less
favorable to the Borrower or such Subsidiary than would be obtained in a
comparable arms-length transaction with a Person not an Affiliate of the
Borrower or such Subsidiary, except that (a) Borrower and the Subsidiaries may
enter into transactions with each other to the extent not otherwise prohibited
hereby, (b) Borrower and the Subsidiaries may enter into the transactions
described on Schedule 9.7, and (c) Borrower may pay management fees to Richmont
Capital Partners I, L.P. in an amount not to exceed Five Hundred Thousand
Dollars ($500,000) per Fiscal Year if (i) no Default exists or would result
therefrom, (ii) the average daily balances of the sum of Borrower's and the
Subsidiaries' cash, cash equivalents and the Borrowing Availability for the
thirty (30) day period prior to the payment of any portion of such fee and
calculated as if the actual amount of such fee so
AMENDED AND RESTATED CREDIT AGREEMENT - Page 61
<PAGE> 69
paid had been paid on the first (1st) day of such period, shall equal or exceed
One Dollars ($1.00), (iii) such fees are permitted to be paid under the
Indenture, and (iv) Borrower shall have provided Agent evidence of its
compliance with the preceding clauses (ii) and (iii) on the date of each such
payment.
Section 9.8 Disposition of Assets. The Borrower will not, and will not
permit any Subsidiary to, sell, lease, assign, transfer, or otherwise dispose of
any of its assets, except (a) dispositions of inventory in the ordinary course
of business; (b) dispositions of assets reasonably and in good faith determined
by Borrower or such Subsidiary to be obsolete or no longer necessary to its
business; (c) licenses, sublicenses, leases and subleases of intellectual
property, general intangibles, or other property (other than Receivables), in
each case in the ordinary course of business, that do not materially interfere
with the business of Borrower and the Subsidiaries; (d) the sale, lease or other
disposition of assets of a Subsidiary to Borrower or a Wholly-Owned Subsidiary;
and (e) the disposition of assets (other than Receivables), in addition to those
set forth in clauses (a) through (d) above if all the following conditions are
satisfied: (i) the aggregate sale price of the assets disposed of in any Fiscal
Year does not exceed Five Hundred Thousand Dollars ($500,000); (ii) no Default
exists or would result therefrom; and (iii) the consideration received is at
least equal to the fair market value of such assets and is not required to be
utilized to purchase the Senior Subordinated Notes in accordance with the
Indenture.
Section 9.9 Sale and Leaseback. The Borrower will not, and will not permit
any Subsidiary to, enter into any arrangement with any Person pursuant to which
it leases from such Person real or personal property that has been or is to be
sold or transferred, directly or indirectly, by it to such Person.
Section 9.10 Lines of Business. The Borrower will not, and will not permit
any Subsidiary to, engage in any line or lines of business activity other than
the businesses in which they are engaged on the date hereof and any business
related, ancillary or complementary to such businesses.
Section 9.11 Prepayment of Debt. Borrower will not, and will not permit
any Subsidiary to prepay, optionally redeem or repurchase any Debt other than
the Obligations; provided that (i) Borrower may prepay the Debt required to be
prepaid pursuant to Section 9.1(a) and (ii) Borrower may prepay up to an
aggregate amount of One Million Dollars ($1,000,000) of Debt during the term of
this Agreement( other than the Debt described in the foregoing clause (a)) if
(i) no Default exists or would result therefrom, (ii) the average daily balances
of the sum of Borrower's and the Subsidiaries' cash, cash equivalents and the
Borrowing Availability for the thirty (30) day period prior to the date of the
repayment and calculated as if the repayment had occurred on the first (1st) day
of such period, shall equal or exceed Two Million Dollars ($2,000,000) and (iii)
Borrower shall have provided Agent evidence of its compliance with clause (ii)
preceding on the date of the proposed repayment.
AMENDED AND RESTATED CREDIT AGREEMENT - Page 62
<PAGE> 70
Section 9.12 Atlas Acquisition Documents; Purchase Agreements. Borrower
will not, and will not permit any Subsidiary to: (a) amend or modify the terms
and conditions of the indemnities and licenses furnished pursuant to any of the
Atlas Acquisition Documents or any of the Purchase Agreements such that after
giving effect thereto such indemnities or licenses shall be materially less
favorable to the interests of Borrower or the Obligated Parties or the Banks in
any material respect or (b) otherwise amend or modify the other terms and
conditions of any of the Atlas Acquisition Documents or any of the Purchase
Agreements except to the extent that any such amendment or modification could
not reasonably be expected to have an adverse effect on the interests of the
Agent and the Banks in any material respect.
Section 9.13 Modifications to Senior Subordinated Note Documents. Borrower
will not and will not permit any Subsidiaries to change or amend the terms of
the Senior Subordinated Note Documents, if the effect of such amendment is to:
(a) increase the interest rate on the Senior Subordinated Notes; (b) shorten the
time of payments of principal or interest due under the Senior Subordinated Note
Documents; (c) change any event of default or any covenant to a materially more
onerous or restrictive provision; (d) change the subordination provisions
thereof (or the subordination terms of any guaranty thereof) in a manner adverse
to Agent or any Bank as senior creditors or the interests of the Banks under
this Agreement or any other Loan Document in any respect; or (e) change or amend
any other term of any Senior Subordinated Note Document in a manner materially
adverse to Agent or any Bank as senior creditors or the interests of the Banks
under this Agreement or any other Loan Document in any respect.
Section 9.14 Designation of Senior Debt. Borrower will not designate any
Debt as "Designated Senior Indebtedness" under the terms of the Indenture.
ARTICLE 10
Financial Covenants
The Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Bank has any Commitment hereunder, the
Borrower will perform and observe the following financial covenants:
Section 10.1 Debt Service Ratio. Borrower shall not permit the ratio of
the Operating Cash Flow to Debt Service calculated as of the last day of each
Fiscal Quarter during the periods set forth below to be less than the ratio set
forth below for such period:
<TABLE>
<CAPTION>
================================================================================
Period Amount
================================================================================
<S> <C>
Closing Date through March 31, 1998 1.10 to 1.00
- --------------------------------------------------------------------------------
April 1, 1998 through December 31, 1998 1.15 to 1.00
- --------------------------------------------------------------------------------
</TABLE>
AMENDED AND RESTATED CREDIT AGREEMENT - Page 63
<PAGE> 71
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
January 1, 1999 through Termination Date 1.25 to 1.00
================================================================================
</TABLE>
The phrase "Operating Cash Flow" means, as of any Fiscal Quarter end and for the
period of calculation then ending (the "Subject Period"), the total of the
following calculated without duplication: (A), on a pro forma basis, the Target
Operating Cash Flow for each Prior Target or, as applicable, the Target
Operating Cash Flow attributable to the assets acquired from such Prior Target,
for any portion of such Subject Period occurring prior to the date of the
acquisition of such Prior Target or the related assets plus (B) the total of the
following for Borrower and the Subsidiaries calculated on a consolidated basis
without duplication for the four (4) Fiscal Quarter period (or portion thereof
since the Closing Date) then ending: (a) Net Income; plus (b) amortization and
depreciation expense deducted in determining Net Income; minus (c) all Capital
Expenditures. The phrase "Debt Service" means, as of any Fiscal Quarter end, the
aggregate amount of the amortization on the Borrower's and the Subsidiaries'
Debt scheduled for: (a) if calculated as of December 31, 1997, the period from
December 31, 1997 through March 31, 1998; (b) if calculated as of March 31,
1998, the period from March 31, 1998 through September 30,1998; (c) if
calculated as of June 30, 1998, the period from June 30, 1998 through March 31,
1999; and (d) if calculated as of any other Fiscal Quarter end, the four (4)
Fiscal Quarter period following such Fiscal Quarter end.
Section 10.2 Interest Coverage. Borrower shall not permit the ratio of (a)
the sum of the EBITDA of Borrower minus Capital Expenditures to (b) cash
interest expense, both calculated for the four (4) Fiscal Quarter period (or
portion thereof since the Closing Date) ending on the last day of each Fiscal
Quarter to be less than (i) 1.50 to 1.00 as of each Fiscal Quarter end prior to
January 1, 2000; (ii) 1.75 to 1.00 as of each Fiscal Quarter end after January
1, 2000 but prior to January 1, 2001; and (iii) 2.00 to 1.00 as of each Fiscal
Quarter end thereafter.
Section 10.3 Capital Expenditure Limits. Borrower shall not, and shall not
permit any Subsidiary to, make or incur Capital Expenditures during each period
set forth in the table below in excess of an aggregate amount equal to the
applicable Capital Expenditure Limit for such period. The term "Capital
Expenditure Limit" means for each period set forth in the table below, the sum
of (a) the Dollar amount set forth in the table below opposite the applicable
period (such Dollar amount as set forth for each such period herein the "Yearly
Limit") plus (b) the lesser of (i) One Hundred percent (100%) of the Yearly
Limit from the immediately preceding period which was not expended by Borrower
and Subsidiaries for Capital Expenditures in such preceding period or (ii) Four
Million Dollars ($4,000,000) (the amount calculated for any period under this
clause (b), herein the "Carryover Amount"). Any Carryover Amount carried into
either the 1998 or 1999 Fiscal Years may only used for the contemplated upgrade
of Borrower's and the Subsidiaries' computer system. In calculating compliance
with this Section 10.3, (a) Capital Expenditures made in a period shall first be
debited against the Yearly Limit for such period then debited against the
Carryover Amount carried into such period, if any, from the preceding period
pursuant to this Section 10.3, and (b) the aggregate amount of all payments due
under a Capital Lease Obligation
AMENDED AND RESTATED CREDIT AGREEMENT - Page 64
<PAGE> 72
for the entire term thereof (excluding, however, the interest portion of
capitalized lease payments) shall be considered expended in full on the date
that the Capital Lease Obligation is entered into.
<TABLE>
<CAPTION>
===============================================================
Period Amount
===============================================================
<S> <C>
Closing Date through December 31, 1997 $ 1,000,000
---------------------------------------------------------------
January 1, 1998 through December 31, 1998 $ 7,500,000
---------------------------------------------------------------
January 1, 1999 through December 31, 1999 $ 7,500,000
---------------------------------------------------------------
Each Fiscal Year thereafter $ 5,000,000
===============================================================
</TABLE>
ARTICLE 11
Default
Section 11.1 Events of Default. Each of the following shall be deemed an
"Event of Default":
(a) The Borrower shall fail to pay (i) when due any principal,
Reimbursement Obligation, interest or fees payable under any Loan Document
or any part thereof; and (ii) within five (5) Business Days after the date
Borrower receives written notice of the failure to pay when due any other
Obligation or any part thereof.
(b) Any representation, warranty or certification made or deemed
made by the Borrower or any Obligated Party (or any of their respective
officers) in any Loan Document or in any certificate, report, notice, or
financial statement furnished at any time in connection with any Loan
Document shall be false, misleading, or erroneous in any material respect
when made or deemed to have been made.
(c) The Borrower shall fail to perform, observe, or comply with any
covenant, agreement, or term contained in Article 9 or Article 10 of this
Agreement or Article IV of the Borrower Security Agreement or of any
section of the Lockbox Agreements. Any Granting Subsidiary shall fail to
perform, observe or comply with any covenant, agreement or term contained
in Article IV of the Subsidiary Security Agreement or of any section of
the Lockbox Agreements.
(d) The Borrower shall fail to perform, observe or comply with any
covenant, agreement or term contained in clauses (a) through (f), (i), (j)
and (l) of Section 8.1 of this Agreement. The Borrower shall fail to
perform, observe or comply with any covenant, agreement or term contained
in clauses (g) (h), (k), (m) and (n) of Section 8.1 of this Agreement and
such failure shall continue for five (5) Business Days.
AMENDED AND RESTATED CREDIT AGREEMENT - Page 65
<PAGE> 73
(e) The Borrower or any Obligated Party shall fail to perform,
observe, or comply with any other covenant, agreement, or term contained
in any Loan Document (other than covenants to pay the Obligations, the
covenants described in subsections 11.1(c) and (d)) and such failure shall
continue for a period of ten (10) Business Days after the earlier of (i)
the date the Agent or any Bank provides Borrower with notice thereof or
(ii) the date the Borrower should have notified the Agent thereof in
accordance with subsection 8.1(j) hereof.
(f) The Borrower, any Subsidiary, or any Obligated Party shall (i)
apply for or consent to the appointment of, or the taking of possession
by, a receiver, custodian, trustee, examiner, liquidator or the like of
itself or of all or a substantial part of its property, (ii) make a
general assignment for the benefit of its creditors, (iii) commence a
voluntary case under the United States Bankruptcy Code (as now or
hereafter in effect, the "Bankruptcy Code"), (iv) institute any proceeding
or file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, liquidation, dissolution,
winding-up, or composition or readjustment of debts, (v) fail to
controvert in a timely and appropriate manner, or acquiesce in writing to,
any petition filed against it in an involuntary case under the Bankruptcy
Code, (vi) admit in writing its inability to, or be generally unable to
pay its debts as such debts become due, or (vii) take any corporate action
for the purpose of effecting any of the foregoing.
(g) A proceeding or case shall be commenced, without the
application, approval or consent of the Borrower, any Subsidiary, or any
Obligated Party, in any court of competent jurisdiction, seeking (i) its
reorganization, liquidation, dissolution, arrangement or winding-up, or
the composition or readjustment of its debts, (ii) the appointment of a
receiver, custodian, trustee, examiner, liquidator or the like of the
Borrower or such Subsidiary or Obligated Party or of all or any
substantial part of its property, or (iii) similar relief in respect of
the Borrower or such Subsidiary or Obligated Party under any law relating
to bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of
the foregoing shall be entered and continue unstayed and in effect, for a
period of sixty (60) or more days; or an order for relief against the
Borrower, any Subsidiary, or any Obligated Party shall be entered in an
involuntary case under the Bankruptcy Code.
(h) The Borrower, any Subsidiary, or any Obligated Party shall fail
to discharge within a period of thirty (30) days after the commencement
thereof any attachment, sequestration, forfeiture, or similar proceeding
or proceedings involving an aggregate amount in excess of Five Hundred
Thousand Dollars ($500,000) against any of its assets or properties.
(i) A final judgment or judgments for the payment of money in excess
of Five Hundred Thousand Dollars ($500,000) in the aggregate shall be
rendered by a court or
AMENDED AND RESTATED CREDIT AGREEMENT - Page 66
<PAGE> 74
courts against the Borrower, any Subsidiaries, or any Obligated Party and
the same shall not be discharged (or provision shall not be made for such
discharge), or a stay of execution thereof shall not be procured, within
thirty (30) days from the date of entry thereof and the Borrower or the
relevant Subsidiary or Obligated Party shall not, within said period of
thirty (30) days, or such longer period during which execution of the same
shall have been stayed, appeal therefrom and cause the execution thereof
to be stayed during such appeal.
(j) The Borrower, any Subsidiary, or any Obligated Party shall fail
to pay when due any principal of or interest on any Debt if the aggregate
principal amount of the affected Debt equals or exceeds Five Hundred
Thousand Dollars ($500,000) (other than the Obligations), or the maturity
of any such Debt shall have been accelerated, or any such Debt shall have
been required to be prepaid prior to the stated maturity thereof or any
event shall have occurred with respect to any such Debt that permits any
holder or holders of such Debt or any Person acting on behalf of such
holder or holders to accelerate the maturity thereof or require any such
prepayment. Without limiting the generality of the foregoing, the
occurrence of an event of default under the terms of the Senior
Subordinated Note Documents.
(k) This Agreement shall cease to be in full force and effect or
shall be declared null and void or the validity or enforceability thereof
shall be contested or challenged by the Borrower, any Subsidiary, any
Obligated Party or the Borrower or any Obligated Party shall deny that it
has any further liability or obligation under any of the Loan Documents,
or any lien or security interest created by the Loan Documents shall for
any reason (other than the negligence of the Agent or the release thereof
in accordance with the Loan Documents) cease to be a valid, first priority
(other than as a result of the Liens permitted to have priority under
Section 9.2) perfected (other than as may result because of the provisions
of Section 8.10) security interest in and lien upon any of the Collateral
purported to be covered thereby.
(l) Any of the following events shall occur or exist with respect to
the Borrower or any ERISA Affiliate: (i) any Prohibited Transaction
involving any Plan; (ii) any Reportable Event with respect to any Plan;
(iii) the filing under Section 4041 of ERISA of a notice of intent to
terminate any Plan or the termination of any Plan; (iv) any event or
circumstance that might constitute grounds entitling the PBGC to institute
proceedings under Section 4042 of ERISA for the termination of, or for the
appointment of a trustee to administer, any Plan, or the institution by
the PBGC of any such proceedings; or (v) complete or partial withdrawal
under Section 4201 or 4204 of ERISA from a Multiemployer Plan or the
reorganization, insolvency, or termination of any Multiemployer Plan; and
in each case above, such event or condition, together with all other
events or conditions, if any, have subjected or could in the reasonable
opinion of Required Banks subject the Borrower to any tax, penalty, or
other liability to a Plan, a Multiemployer Plan, the PBGC, or otherwise
(or any combination thereof) which in the aggregate exceed or could
reasonably be expected to exceed Five Hundred Thousand Dollars ($500,000).
AMENDED AND RESTATED CREDIT AGREEMENT - Page 67
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(m) Any Person or group (as defined in Section 13(d)(3) or 14(d)(2)
of the Exchange Act) other than one or more Richmont Affiliates shall
become the direct or indirect beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of more than 49% of the total voting power of all
classes of capital stock then outstanding of the Borrower entitled
(without regard to the occurrence of any contingency) to vote in elections
of directors of the Borrower. The term "Richmont Affiliate" means Richmont
Capital Partners I, L.P. or any other Person that directly or indirectly,
through one or more intermediaries, controls or is controlled by, or is
under common control with Richmont Capital Partners I, L.P. or Mary Kay
Inc.
(n) Either (1) one or more Richmont Affiliates (as defined in clause
(m) immediately above) cease to beneficially own and control, directly or
indirectly, at least fifty-one percent (51%) of the issued and outstanding
shares of capital stock of Borrower (determined on a fully diluted basis)
entitled (without regard to the occurrence of any contingency) to vote in
elections of directors of Borrower, or (2) one or more Richmont Affiliates
cease to have the power to elect a majority of the members of the board of
directors of Borrower.
(o) A change shall occur in the financial condition of the Borrower,
any of the Subsidiaries or in the value of the Collateral, which does, or
would reasonably be expected to, have a Material Adverse Effect.
Section 11.2 Remedies. If any Event of Default shall occur and be
continuing, the Agent may (and if directed by Required Banks, shall) do any one
or more of the following:
(a) Acceleration. By notice to the Borrower, declare all outstanding
principal of and accrued and unpaid interest on the Notes and all other
amounts payable by the Borrower under the Loan Documents immediately due
and payable, and the same shall thereupon become immediately due and
payable, without further notice, demand, presentment, notice of dishonor,
notice of acceleration, notice of intent to accelerate, protest, or other
formalities of any kind, all of which are hereby expressly waived by the
Borrower.
(b) Termination of Commitments. Terminate the Commitments,
including, without limitation, the obligation of the Agent to issue
Letters of Credit, without notice to the Borrower.
(c) Judgment. Reduce any claim to judgment.
(d) Foreclosure. Foreclose or otherwise enforce any Lien granted to
the Agent for the benefit of itself and the Banks to secure payment and
performance of the Obligations in accordance with the terms of the Loan
Documents.
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(e) Rights. Exercise any and all rights and remedies afforded by the
laws of the State of New York or any other jurisdiction, by any of the
Loan Documents, by equity, or otherwise.
Provided, however, that upon the occurrence of an Event of Default under
subsections 11.1(f) or (g) hereof, the Commitments of all of the Banks shall
automatically terminate (including, without limitation, the obligation of the
Agent to issue Letters of Credit), and the outstanding principal of and accrued
and unpaid interest on the Notes and all other amounts payable by the Borrower
under the Loan Documents shall thereupon become immediately due and payable
without notice, demand, presentment, notice of dishonor, notice of acceleration,
notice of intent to accelerate, protest, or other formalities of any kind, all
of which are hereby expressly waived by the Borrower.
Section 11.3 Cash Collateral. If an Event of Default shall have occurred
and be continuing the Borrower shall, if requested by the Agent or Required
Banks, pledge to the Agent as security for the Obligations an amount in
immediately available funds equal to the then outstanding Letter of Credit
Liabilities, such funds to be held in a cash collateral account at the Agent
without any right of withdrawal by the Borrower.
Section 11.4 Performance by the Agent. If the Borrower shall fail to
perform any covenant or agreement in accordance with the terms of the Loan
Documents, the Agent may, at the direction of Required Banks, perform or attempt
to perform such covenant or agreement on behalf of the Borrower. In such event,
the Borrower shall, at the request of the Agent, promptly pay any amount
expended by the Agent or the Banks in connection with such performance or
attempted performance to the Agent at the Principal Office, together with
interest thereon at the applicable Default Rate from and including the date of
such expenditure to but excluding the date such expenditure is paid in full.
Notwithstanding the foregoing, it is expressly agreed that neither the Agent nor
any Bank shall have any liability or responsibility for the performance of any
obligation of the Borrower under any Loan Document. Under the terms of certain
of the agreements entered into in accordance with subsection 6.1(o), Agent may
be obligated to pay certain amounts to the financial institutions party thereto
from time to time, including without limitations, fees owed to such financial
institutions arising from their lock box and other deposit account services and
amounts sufficient to reimburse such financial institutions for the amount of
any item deposited in the related account which is returned unpaid. In the event
Agent is required to pay any such amounts, Agent shall notify the Borrower and
the Borrower shall promptly pay any amount so expended by Agent to the Agent at
the Principal Office, together with interest at the Default Rate from and
including the date of such expenditure to but excluding the date that such
expenditure is paid in full and if the Borrower fails to make such payment,
Agent shall have the option of automatically making a Loan in the amount so
expended as a Base Rate Account.
Section 11.5 Setoff. If an Event of Default shall have occurred and be
continuing, each Bank is hereby authorized at any time and from time to time,
without notice to the Borrower (any such notice being hereby expressly waived by
the Borrower), to set off and apply any and all deposits (general, time, demand,
provisional or final) at any time held and other indebtedness at any
AMENDED AND RESTATED CREDIT AGREEMENT - Page 69
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time owing by such Bank to or for the credit or the account of the Borrower
against any and all of the obligations of the Borrower now or hereafter existing
under any Loan Document, irrespective of whether or not the Agent or such Bank
shall have made any demand under such Loan Documents and although such
obligations may be unmatured. Each Bank agrees promptly to notify the Borrower
(with a copy to the Agent) after any such setoff and application, provided that
the failure to give such notice shall not affect the validity of such setoff and
application. The rights and remedies of each Bank hereunder are in addition to
other rights and remedies (including, without limitation, other rights of
setoff) which such Bank may have.
Section 11.6 Continuance of Default. For purposes of all Loan Documents, a
Default shall be deemed to have continued and exist until the Agent shall have
actually received evidence satisfactory to the Agent that such Default shall
have been remedied.
ARTICLE 12
The Agent
Section 12.1 Appointment, Powers and Immunities. Each Bank hereby appoints
and authorizes The Chase Manhattan Bank to act as its agent hereunder and under
the other Loan Documents (and continues the agency created under the Prior
Agreement) with such powers as are specifically delegated to the Agent by the
terms of the Loan Documents, together with such other powers as are reasonably
incidental thereto. Neither the Agent nor any of its Affiliates, officers,
directors, employees, attorneys, or agents shall be liable for any action taken
or omitted to be taken by any of them hereunder or otherwise in connection with
any Transaction Document or any of the other Transaction Documents except for
its or their own gross negligence or willful misconduct. Without limiting the
generality of the preceding sentence, the Agent (i) may treat the payee of any
Note as the holder thereof until it receives written notice of the assignment or
transfer thereof signed by such payee and in form satisfactory to the Agent;
(ii) shall have no duties or responsibilities except those expressly set forth
in the Loan Documents, and shall not by reason of any Loan Document be a trustee
or fiduciary for any Bank; (iii) shall not be required to initiate any
litigation or collection proceedings under any Transaction Document except to
the extent requested by Required Banks; (iv) shall not be responsible to the
Banks for any recitals, statements, representations or warranties contained in
any Transaction Document, or any certificate or other documentation referred to
or provided for in, or received by any of them under, any Transaction Document,
or for the value, validity, effectiveness, enforceability, or sufficiency of any
Transaction Document or any other documentation referred to or provided for
therein or for any failure by any Person to perform any of its obligations
thereunder; (v) may consult with legal counsel (including counsel for the
Borrower), independent public accountants, and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants, or experts; and
(vi) shall incur no liability under or in respect of any Transaction Document by
acting upon any notice, consent, certificate, or other instrument or writing
believed by it to be genuine and signed or sent by the proper party or parties.
As to any matters not expressly provided for by any Loan Document, the Agent
shall in all cases be
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fully protected in acting, or in refraining from acting, hereunder in accordance
with instructions signed by Required Banks, and such instructions of Required
Banks and any action taken or failure to act pursuant thereto shall be binding
on all of the Banks; provided, however, that the Agent shall not be required to
take any action which exposes it to personal liability or which is contrary to
any Loan Document or applicable law.
Section 12.2 Rights of Agent as a Bank. With respect to its Commitment,
the Loans made by it and the Note issued to it, The Chase Manhattan Bank (and
any successor acting as Agent) in its capacity as a Bank hereunder shall have
the same rights and powers hereunder as any other Bank and may exercise the same
as though it were not acting as the Agent, and the term "Bank" or "Banks" shall,
unless the context otherwise indicates, include the Agent in its individual
capacity. The Agent and its Affiliates may (without having to account therefor
to any Bank) accept deposits from, lend money to, act as trustee under
indentures of, provide merchant banking services to, and generally engage in any
kind of banking, trust, or other business with the Borrower, any Subsidiaries,
any Obligated Party, and any other Person who may do business with or own
securities of the Borrower, any Subsidiary, or any Obligated Party, all as if it
were not acting as the Agent and without any duty to account therefor to the
Banks.
Section 12.3 Defaults. The Agent shall not be deemed to have knowledge or
notice of the occurrence of a Default (other than the non-payment of principal
of or interest on the Loans or of commitment fees) unless the Agent has received
notice from a Bank or the Borrower specifying such Default and stating that such
notice is a "Notice of Default." In the event that the Agent receives such a
notice of the occurrence of a Default, the Agent shall give prompt notice
thereof to the Banks (and shall give each Bank prompt notice of each such
non-payment). The Agent shall (subject to Section 12.1 hereof) take such action
with respect to such Default as shall be directed by Required Banks, provided
that unless and until the Agent shall have received such directions, the Agent
may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Default as it shall seem advisable and in the
best interest of the Banks.
Section 12.4 Indemnification. THE BANKS HEREBY AGREE TO INDEMNIFY THE
AGENT FROM AND HOLD THE AGENT HARMLESS AGAINST (TO THE EXTENT NOT REIMBURSED
UNDER SECTIONS 13.1 AND 13.2 HERETO, BUT WITHOUT LIMITING THE OBLIGATIONS OF THE
BORROWER UNDER SECTIONS 13.1 AND 13.2 HERETO), RATABLY IN ACCORDANCE WITH THEIR
RESPECTIVE COMMITMENT PERCENTAGES, ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS, COSTS, EXPENSES
(INCLUDING ATTORNEYS' FEES), AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER
WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THE AGENT IN ANY WAY
RELATING TO OR ARISING OUT OF ANY OF THE TRANSACTION DOCUMENTS OR ANY ACTION
TAKEN OR OMITTED TO BE TAKEN BY THE AGENT UNDER OR IN RESPECT OF ANY OF THE
TRANSACTION DOCUMENTS; PROVIDED, THAT NO BANK SHALL BE LIABLE FOR ANY PORTION OF
THE FOREGOING TO THE EXTENT CAUSED BY THE AGENT'S GROSS NEGLIGENCE
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OR WILLFUL MISCONDUCT. WITHOUT LIMITATION OF THE FOREGOING, IT IS THE EXPRESS
INTENTION OF THE BANKS THAT THE AGENT SHALL BE INDEMNIFIED HEREUNDER FROM AND
HELD HARMLESS AGAINST ALL OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS, COSTS, EXPENSES (INCLUDING
ATTORNEYS' FEES), AND DISBURSEMENTS OF ANY KIND OR NATURE DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF THE
AGENT. WITHOUT LIMITING ANY OTHER PROVISION OF THIS SECTION, EACH BANK AGREES TO
REIMBURSE THE AGENT PROMPTLY UPON DEMAND FOR ITS PRO RATA SHARE (CALCULATED ON
THE BASIS OF THE COMMITMENT PERCENTAGES) OF ANY AND ALL OUT-OF-POCKET EXPENSES
(INCLUDING ATTORNEYS' FEES) INCURRED BY THE AGENT IN CONNECTION WITH THE
PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT OR
ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR OTHERWISE) OF,
OR LEGAL ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THE TRANSACTION
DOCUMENTS, TO THE EXTENT THAT THE AGENT IS NOT REIMBURSED FOR SUCH EXPENSES BY
THE BORROWER.
Section 12.5 Independent Credit Decisions. Each Bank agrees that it has
independently and without reliance on the Agent or any other Bank, and based on
such documentation and information as it has deemed appropriate, made its own
credit analysis of the Borrower and decision to enter into any Loan Document and
that it will, independently and without reliance upon the Agent or any other
Bank, and based upon such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not
taking action under any Transaction Document. Except as otherwise specifically
set forth herein, the Agent shall not be required to keep itself informed as to
the performance or observance by the Borrower or any Obligated Party of any
Transaction Document or to inspect the properties or books of the Borrower or
any Obligated Party. Except for notices, reports and other documents and
information expressly required to be furnished to the Banks by the Agent
hereunder or under the other Transaction Documents, the Agent shall not have any
duty or responsibility to provide any Bank with any credit or other financial
information concerning the affairs, financial condition or business of the
Borrower or any Obligated Party (or any of their Affiliates) which may come into
the possession of the Agent or any of its Affiliates.
Section 12.6 Several Commitments. The Commitments and other obligations of
the Banks under any Loan Document are several. The default by any Bank in making
a Loan in accordance with its Commitment shall not relieve the other Banks of
their obligations under any Loan Document. In the event of any default by any
Bank in making any Loan, each nondefaulting bank shall be obligated to make its
Loan but shall not be obligated to advance the amount which the defaulting Bank
was required to advance hereunder. No Bank shall be responsible for any act or
omission of any other Bank.
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Section 12.7 Successor Agent. Subject to the appointment and acceptance of
a successor Agent as provided below, the Agent may resign at any time by giving
notice thereof to the Banks and the Borrower and the Agent may be removed at any
time by Required Banks if it has breached its obligations under the Loan
Documents. Upon any such resignation or removal, Required Banks will have the
right to appoint a successor Agent with the Borrower's consent, which shall not
be unreasonably withheld. If no successor Agent shall have been so appointed by
Required Banks and shall have accepted such appointment within thirty (30) days
after the retiring Agent's giving of notice of resignation or the Required
Banks' removal of the retiring Agent, then the retiring Agent may, on behalf of
the Banks, appoint a successor Agent approved by the Borrower, which approval
will not be unreasonably withheld, which shall be a commercial bank organized
under the laws of the United States of America or any State thereof and having
combined capital and surplus of at least One Hundred Million Dollars
($100,000,000). Upon the acceptance of its appointment as successor Agent, such
successor Agent shall thereupon succeed to and become vested with all rights,
powers, privileges, immunities, contractual obligation, and duties of the
resigning or removed Agent, including all obligations under any Letters of
Credit, and the resigning or removed Agent shall be discharged from its duties
and obligations under the Loan Documents, including, without limitation, its
obligations under all Letters of Credit. After any Agent's resignation or
removal as Agent, the provisions of this Article 12 shall continue in effect for
its benefit in respect of any actions taken or omitted to be taken by it while
it was the Agent.
Section 12.8 Authorized Actions. Agent is irrevocably authorized by the
Banks, without any further action by any Bank to (a) subordinate or release the
Liens granted to Agent to secure the Obligations with respect to any equipment
purchased after the Closing Date, to any purchase money Liens granted therein in
accordance with the permissions set out in Section 9.2 and (b) release the
Agent's Liens in Collateral (i) permitted to be sold or otherwise disposed of
hereunder and (ii) upon termination of the Commitments, collateralization of all
outstanding Letters of Credit, and payment and satisfaction of all other
non-contingent Obligations under the Loan Documents.
Section 12.9 Administrative Fee. The Borrower agrees to pay to the Agent
on the last day of each month beginning on December 31, 1997 and on the
Termination Date, an administrative fee equal to Two Thousand Dollars ($2,000).
ARTICLE 13
Miscellaneous
Section 13.1 Expenses. The Borrower hereby agrees to pay on demand: (a)
all costs and expenses of the Agent arising in connection with the preparation,
negotiation, execution, and delivery of the Transaction Documents, including,
without limitation, the fees and expenses of legal counsel for the Agent; (b)
all costs and expenses of the Agent arising in connection the preparation,
negotiation, execution and delivery of any and all amendments or other
modifications to the Transaction Documents, including, without limitation, the
fees and expenses of legal counsel for the Agent; (c) all fees, costs and
expenses of the Agent arising in connection with any Letter of Credit,
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including the Agent's customary fees for amendments, transfers and drawings on
Letters of Credit; (d) all costs and expenses of the Agent in connection with
any Default and the enforcement of any Transaction Document, including, without
limitation, the fees and expenses of legal counsel for the Agent; (e) all
reasonable fees, costs and expenses of any Bank (including legal fees and
expenses of counsel to any Bank) arising in connection with an Event of Default;
(f) all transfer, stamp, documentary, or other similar taxes, assessments, or
charges levied by any Governmental Authority in respect of any Transaction
Document; (e) all costs, expenses, assessments, and other charges incurred in
connection with any filing, registration, recording, or perfection of any
security interest or Lien contemplated by any Transaction Document; and (g) all
other costs and expenses incurred by the Agent in connection with any
Transaction Document, including, without limitation, all costs, expenses, and
other charges incurred in connection with any field examination, audit or
appraisal in respect of the Borrowing Base, the Collateral or the records of
Borrower and the Obligated Parties relating thereto.
Section 13.2 Indemnification. THE BORROWER SHALL INDEMNIFY THE AGENT AND
EACH BANK AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS,
EMPLOYEES, ATTORNEYS, AND AGENTS FROM, AND HOLD EACH OF THEM HARMLESS AGAINST,
ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS,
DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES) TO WHICH ANY OF
THEM MAY BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO (A)
ANY BREACH BY THE BORROWER OR ANY OBLIGATED PARTY OF ANY REPRESENTATION,
WARRANTY, COVENANT, OR OTHER AGREEMENT CONTAINED IN ANY OF THE TRANSACTION
DOCUMENTS, (B) THE PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL, REMOVAL, OR
CLEANUP OF ANY HAZARDOUS MATERIAL LOCATED ON, ABOUT, WITHIN, OR AFFECTING ANY OF
THE PROPERTIES OR ASSETS OF THE BORROWER OR ANY SUBSIDIARY, (C) THE USE OR
PROPOSED USE OF ANY LETTER OF CREDIT OR ANY PAYMENT OR FAILURE TO PAY WITH
RESPECT TO ANY LETTER OF CREDIT, (D) ANY AND ALL TAXES, LEVIES, DEDUCTIONS, AND
CHARGES IMPOSED ON THE AGENT OR ANY BANK IN RESPECT OF ANY LETTER OF CREDIT, OR
(E) ANY INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT
LIMITATION, ANY THREATENED INVESTIGATION, LITIGATION, OR OTHER PROCEEDING
RELATING TO ANY OF THE FOREGOING, THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY; PROVIDED THAT THE PERSON ENTITLED TO BE INDEMNIFIED UNDER
THIS SECTION SHALL NOT BE INDEMNIFIED FROM OR HELD HARMLESS AGAINST ANY LOSSES,
LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS OR
EXPENSES (INCLUDING ATTORNEYS' FEES) ARISING OUT OF OR RESULTING FROM ITS GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT LIMITING ANY PROVISION OF ANY LOAN
DOCUMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PERSON TO
BE INDEMNIFIED UNDER THIS SECTION SHALL BE INDEMNIFIED FROM AND HELD HARMLESS
AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES,
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PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING ATTORNEYS'
FEES) ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF
SUCH PERSON.
Section 13.3 Limitation of Liability. None of the Agent, any Bank, or any
Affiliate, officer, director, employee, attorney, or agent thereof shall have
any liability with respect to, and the Borrower and, by the execution of the
Loan Documents, to which it is a party each Obligated Party, hereby waives,
releases, and agrees not to sue any of them upon, any claim for any special,
indirect, incidental, consequential or punitive damages suffered or incurred by
the Borrower or any Obligated Party in connection with, arising out of, or in
any way related to any of the Transaction Documents, or any of the transactions
contemplated by any of the Transaction Documents.
Section 13.4 No Duty. Except as may otherwise be required by Section
13.22, all attorneys, accountants, appraisers, and other professional Persons
and consultants retained by the Agent or any Bank shall have the right to act
exclusively in the interest of the Agent and the Banks and shall have no duty of
disclosure, duty of loyalty, duty of care, or other duty or obligation of any
type or nature whatsoever to the Borrower, any Obligated Party, any of the
Borrower's shareholders or any other Person.
Section 13.5 No Fiduciary Relationship. The relationship between the
Borrower and the Obligated Parties on the one hand and the Agent and each Bank
on the other is solely that of debtor and creditor, and neither the Agent nor
any Bank has any fiduciary or other special relationship with the Borrower or
any Obligated Parties, and no term or condition of any of the Loan Documents
shall be construed so as to deem the relationship between the Borrower and the
Obligated Parties on the one hand and the Agent and each Bank on the other and
any Bank to be other than that of debtor and creditor.
Section 13.6 Equitable Relief. The Borrower recognizes that in the event
the Borrower or any Obligated Party fails to pay, perform, observe, or discharge
any or all of the obligations under the Loan Documents, any remedy at law may
prove to be inadequate relief to the Agent and the Banks. The Borrower therefore
agrees that the Agent and the Banks, if the Agent or the Required Banks so
request, shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages.
Section 13.7 No Waiver; Cumulative Remedies. No failure on the part of the
Agent or any Bank to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power, or privilege under any Transaction
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power, or privilege under any Transaction Document
preclude any other or further exercise thereof or the exercise of any other
right, power, or privilege. The rights and remedies provided for in the
Transaction Documents are cumulative and not exclusive of any rights and
remedies provided by law.
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Section 13.8 Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. The
Borrower may not assign or transfer any of its rights or obligations
hereunder without the prior written consent of the Agent and all of the
Banks. Any Bank may sell participations to one or more banks or other
institutions in or to all or a portion of its rights and obligations under
the Loan Documents (including, without limitation, all or a portion of its
Commitment, the Loans owing to it and the Letter of Credit Liabilities
which it has made or in which it has a participating interest); provided,
however, that (i) such Bank's obligations under the Loan Documents
(including, without limitation, its Commitments) shall remain unchanged,
(ii) such Bank shall remain solely responsible to the Borrower for the
performance of such obligations, (iii) such Bank shall remain the holder
of its Notes and owner of its participation or other interests in Letter
of Credit Liabilities for all purposes of any Loan Document, (iv) the
Borrower shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under the Loan
Documents, and (v) such Bank shall not sell a participation that conveys
to the participant the right to vote or give or withhold consents under
any Loan Document, other than the right to vote upon or consent to (1) any
increase of such Bank's Commitments, (2) any reduction of the principal
amount of, or interest to be paid on, the Loans or other Obligations of
such Bank, (3) any reduction of any commitment fee, letter of credit fee,
or other amount payable to such Bank under any Loan Document, or (4) any
postponement of any date for the payment of any amount payable in respect
of the Loans or other Obligations of such Bank.
(b) The Borrower and each of the Banks agree that any Bank (the
"Assigning Bank") may at any time assign to one or more commercial banks,
savings and loan association, savings bank, finance company, insurance
company, pension fund, mutual fund, or other financial institution
(whether a corporation, partnership, or other entity) (herein an "Eligible
Assignee") all, or a proportionate part of all, of its rights and
obligations under the Loan Documents (including, without limitation, its
Commitments and Loans and participation interests) (each an "Assignee");
provided, however, that (i) each such assignment shall be of a consistent,
and not a varying, percentage of all of the assigning Bank's rights and
obligations under the Loan Documents, (ii) except in the case of an
assignment of all of a Bank's rights and obligations under the Loan
Documents, the amount of the Commitment of the assigning Bank being
assigned pursuant to each assignment (determined as of the date of the
Assignment and Acceptance with respect to such assignment) shall in no
event be less than Five Million Dollars ($5,000,000), (iii) the parties to
each such assignment shall execute and deliver to the Agent for its
acceptance and recording in the Register (as defined below), an Assignment
and Acceptance, together with the Note subject to such assignment, and a
processing and recordation fee of Three Thousand Dollars ($3,000) payable
by the assignor or assignee (and not the Borrower); and (iv) the Borrower
and the Agent must consent to such assignment, which consent shall not be
unreasonably withheld, with such consents to be evidenced by the
Borrower's and the
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Agent's execution of the Assignment and Acceptance. Upon such execution,
delivery, acceptance, and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be
at least five (5) Business Days after the execution thereof, or, if so
specified in such Assignment and Acceptance, the date of acceptance
thereof by the Agent, (x) the assignee thereunder shall be a party hereto
as a "Bank" and, to the extent that rights and obligations hereunder have
been assigned to it pursuant to such Assignment and Acceptance, have the
rights and obligations of a Bank hereunder and under the Loan Documents
and (y) the Bank that is an assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Loan Documents (and, in the case of an Assignment
and Acceptance covering all or the remaining portion of a Bank's rights
and obligations under the Loan Documents, such Bank shall cease to be a
party thereto).
(c) The Agent shall maintain at its Principal Office a copy of each
Assignment and Acceptance delivered to and accepted by it and a register
for the recordation of the names and addresses of the Banks and the
Commitments of, and principal amount of the Loans owing to and Letter of
Credit Liabilities participated in by, each Bank from time to time (the
"Register"). The entries in the Register shall be conclusive and binding
for all purposes, absent manifest error, and the Borrower, the Agent, and
the Banks may treat each Person whose name is recorded in the Register as
a Bank hereunder for all purposes under the Loan Documents. The Register
shall be available for inspection by the Borrower or any Bank at any
reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
Assigning Bank and Assignee representing that it is an Eligible Assignee,
together with any Notes subject to such assignment, the Agent shall, if
such Assignment and Acceptance has been completed and is in substantially
the form of Exhibit "E" hereto, (i) accept such Assignment and Acceptance,
(ii) record the information contained therein in the Register, and (iii)
give prompt written notice thereof to the Borrower. Within five (5)
Business Days after its receipt of such notice the Borrower, at its
expense, shall execute and deliver to the Agent in exchange for the
surrendered Note new Notes to the order of such Eligible Assignee in an
amount equal to the Commitment assumed by it pursuant to such Assignment
and Acceptance and, if the assigning Bank has retained a Commitment, a
Note to the order of the assigning Bank in an amount equal to the
Commitment retained by it hereunder (each such promissory note shall
constitute a "Note" for purposes of the Loan Documents). Such new Notes
shall be in an aggregate principal amount of the surrendered Note, shall
be dated the effective date of such Assignment and Acceptance, and shall
otherwise be in substantially the form of Exhibit "A" hereto.
(e) Any Bank may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section, disclose
to the assignee or
AMENDED AND RESTATED CREDIT AGREEMENT - Page 77
<PAGE> 85
participant or proposed assignee or participant, any information relating
to the Borrower or any Subsidiary furnished to such Bank by or on behalf
of the Borrower or the Subsidiaries.
Section 13.9 Survival. All representations and warranties made in any Loan
Document or in any document, statement, or certificate furnished in connection
with any Loan Document shall survive the execution and delivery of the Loan
Documents and no investigation by the Agent or any Bank or any closing shall
affect the representations and warranties or the right of the Agent or any Bank
to rely upon them. Without prejudice to the survival of any other obligation of
the Borrower hereunder, the obligations of the Borrower under Article 5 hereof
and Sections 13.1 and 13.2 hereof shall survive repayment of the Notes and
termination of the Commitments and the Letters of Credit.
Section 13.10 Entire Agreement; Amendment and Restatement; Waivers of
Claims; Release of Additional Guaranty. THIS AGREEMENT, THE NOTES, AND THE OTHER
LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE
PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF (INCLUDING THE PRIOR AGREEMENT) AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. This Agreement amends and
restates in its entirety the Prior Agreement. The execution of this Agreement,
the Notes and the other Loan Documents executed in connection herewith does not
extinguish the commitment under or the indebtedness outstanding in connection
with the Prior Agreement nor does it constitute a novation with respect to such
commitment or such indebtedness. The Borrower, Agent and the Banks ratify and
confirm each of the Loan Documents entered into prior to the Closing Date (but
excluding the Prior Agreement and the Additional Guaranty, as defined therein),
and agree that such Loan Documents continue to be legal, valid, binding and
enforceable in accordance with their respective terms. Borrower represents and
warrants that as of the Closing Date there are no claims or offsets against or
defenses or counterclaims to its obligations under the Prior Agreement or any of
the other Loan Documents. TO INDUCE THE BANKS AND AGENT TO ENTER INTO THIS
AGREEMENT, BORROWER WAIVES ANY AND ALL SUCH CLAIMS, OFFSETS, DEFENSES OR
COUNTERCLAIMS, WHETHER KNOWN OR UNKNOWN, ARISING PRIOR TO THE CLOSING DATE AND
RELATING TO THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. Without limiting the generality of the foregoing and notwithstanding
any Loan Document to the contrary, Borrower, Agent and the Banks agree and
acknowledge that:
(i) the term "Credit Agreement" as used in each Loan Documents
means this Agreement;
(ii) the term "Guaranteed Indebtedness" as used in the
Guaranty includes the Obligations as defined herein; and
AMENDED AND RESTATED CREDIT AGREEMENT - Page 78
<PAGE> 86
(iii) the term "Obligations" as used in the Borrower Security
Agreement means the Obligations as defined herein.
Upon the effectiveness of this Agreement, the Agent and each Bank release
and discharge Ronald D. Pedersen and Richmont Capital Partners I, L.P. from all
their respective obligations and liabilities owed to the Agent and any Bank
under the terms of the Additional Guaranty (as defined in the Prior Agreement)
and the Additional Guaranty is terminated and is of no further force or effect.
Section 13.11 Amendments. No amendment or waiver of any provision of any
Loan Document to which the Borrower is a party, nor any consent to any departure
by the Borrower therefrom, shall in any event be effective unless the same shall
be agreed or consented to by Required Banks and the Borrower, and each such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, that no amendment, waiver, or
consent shall, unless in writing and signed by all of the Banks and the
Borrower, do any of the following: (a) increase Commitments of the Banks; (b)
reduce the principal of, or interest on, the Notes, the Reimbursement
Obligations, or any fees or other amounts payable hereunder; (c) postpone any
date fixed for any payment of principal of, or interest on, the Notes, the
Reimbursement Obligations, or any fees or other amounts payable hereunder; (d)
waive or amend any of the conditions specified in Article 6 hereof; (e) change
the percentage of the Commitments or of the aggregate unpaid principal amount of
the Notes or the Letter of Credit Liabilities or the number of Banks which shall
be required for the Banks or any of them to take any action under any Loan
Document; (f) change any provision contained in this Section 13.11; or (g)
release any Collateral (except as specifically permitted by Section 12.8 or
release the Borrower or any Obligated Party from liability. Notwithstanding
anything to the contrary contained in this Section, no amendment waiver, or
consent shall be made with respect to Sections 2.7 or Article 12 hereof without
the prior written consent of the Agent.
Section 13.12 Maximum Interest Rate.
(a) No interest rate specified in any Loan Document shall at any
time exceed the Maximum Rate. If at any time the interest rate (the
"Contract Rate") for any Obligation shall exceed the Maximum Rate, thereby
causing the interest accruing on such Obligation to be limited to the
Maximum Rate, then any subsequent reduction in the Contract Rate for such
Obligation shall not reduce the rate of interest on such Obligation below
the Maximum Rate until the aggregate amount of interest accrued on such
Obligation equals the aggregate amount of interest which would have
accrued on such Obligation if the Contract Rate for such Obligation had at
all times been in effect.
(b) No provision of any Loan Document shall require the payment or
the collection of interest in excess of the maximum amount permitted by
applicable law. If any excess of interest in such respect is hereby
provided for, or shall be adjudicated to be so provided, in any Loan
Document or otherwise in connection with this loan transaction, the
AMENDED AND RESTATED CREDIT AGREEMENT - Page 79
<PAGE> 87
provisions of this Section shall govern and prevail and neither the
Borrower nor the sureties, guarantors, successors, or assigns of the
Borrower shall be obligated to pay the excess amount of such interest or
any other excess sum paid for the use, forbearance, or detention of sums
loaned pursuant hereto. In the event any Bank ever receives, collects, or
applies as interest any such sum, such amount which would be in excess of
the maximum amount permitted by applicable law shall be applied as a
payment and reduction of the principal of the Obligations; and, if the
principal of the Obligations has been paid in full, any remaining excess
shall forthwith be paid to the Borrower. In determining whether or not the
interest paid or payable exceeds the Maximum Rate, the Borrower and each
Bank shall, to the extent permitted by applicable law, (a) characterize
any non-principal payment as an expense, fee, or premium rather than as
interest, (b) exclude voluntary prepayments and the effects thereof, and
(c) amortize, prorate, allocate, and spread in equal or unequal parts the
total amount of interest throughout the entire contemplated term of the
Obligations so that interest for the entire term does not exceed the
Maximum Rate.
Section 13.13 Notices. All notices and other communications provided for
in any Loan Document to which the Borrower or any Obligated Party is a party
shall be given or made in writing and telecopied, mailed by certified mail
return receipt requested, or delivered to the intended recipient at the "Address
for Notices" specified below its name on the signature pages hereof and, if to
an Obligated Party, at the address for notices for Borrower; or, as to any party
at such other address as shall be designated by such party in a notice to each
other party given in accordance with this Section. Except as otherwise provided
in any Loan Document, all such communications shall be deemed to have been duly
given when transmitted by telecopy, subject to telephone confirmation of
receipt, or when personally delivered or, in the case of a mailed notice, three
(3) Business Days after being duly deposited in the mails, in each case given or
addressed as aforesaid; provided, however, notices to the Agent pursuant to
Section 2.7 or 4.3 hereof shall not be effective until received by the Agent.
Section 13.14 Governing Law, Etc. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York and the
applicable laws of the United States of America. This Agreement shall be
performable for all purposes in New York City. Any action or proceeding against
the Borrower or any Obligated Party under or in connection with any of the Loan
Documents may be brought in any New York state or federal court in New York
City. The Borrower (and by its execution of the Loan Documents to which it is a
party, each Obligated Party) hereby irrevocably (a) submits to the nonexclusive
jurisdiction of such courts, and (b) waives any objection it may now or
hereafter have as to the venue of any such action or proceeding brought in any
such court or that any such court is an inconvenient forum. The Borrower (and by
its execution of the Loan Documents to which it is a party, each Obligated
Party) agrees that service of process upon it may be made by certified or
registered mail, return receipt requested, at its address specified or
determined in accordance with the provisions of Section 13.13. Nothing herein or
in any of the other Loan Documents shall affect the right of the Agent or any
Bank to serve process in any other manner permitted by law or shall limit the
right of the Agent or any Bank to bring any action or proceeding against the
Borrower, any Obligated Party or any of their respective
AMENDED AND RESTATED CREDIT AGREEMENT - Page 80
<PAGE> 88
property in courts in other jurisdictions. Any action or proceeding by the
Borrower or any Obligated Party against the Agent or any Bank shall be brought
only in a court located in New York City.
Section 13.15 Counterparts. This Agreement may be executed in one or more
counterparts and on telecopy counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same agreement.
Section 13.16 Severability. Any provision of any Loan Document held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of any Loan Document and the effect thereof shall be
confined to the provision held to be invalid or illegal.
Section 13.17 Headings. The headings, captions, and arrangements used in
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
Section 13.18 Non-Application of Chapter 346 of Texas Finance Code. The
provisions of Chapter 346 of the Texas Finance Code are specifically declared by
the parties hereto not to be applicable to any Loan Documents or to the
transactions contemplated thereby.
Section 13.19 Construction. The Borrower, each Obligated Party (by its
execution of the Loan Documents to which its is a party) the Agent and each Bank
acknowledges that each of them has had the benefit of legal counsel of its own
choice and has been afforded an opportunity to review the Loan Documents with
its legal counsel and that the Loan Documents shall be construed as if jointly
drafted by the parties thereto.
Section 13.20 Independence of Covenants. All covenants under the Loan
Documents shall be given independent effect so that if a particular action or
condition is not permitted by any of such covenants, the fact that it would be
permitted by an exception to, or be otherwise within the limitations of, another
covenant shall not avoid the occurrence of a Default if such action is taken or
such condition exists.
Section 13.21 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND EXPRESSLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
(WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO
ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE
ACTIONS OF THE AGENT OR ANY BANK IN THE NEGOTIATION, ADMINISTRATION, OR
ENFORCEMENT THEREOF.
Section 13.22 Confidentiality. Agent and each Bank (each a "Lending
Party") agrees to keep any Designated Information (as defined below) delivered
or made available by the Borrower
AMENDED AND RESTATED CREDIT AGREEMENT - Page 81
<PAGE> 89
to it confidential from anyone other than Persons employed or retained by such
Lending Party who are, or are expected to be, engaged in evaluating, approving,
structuring or administering the credit facility provided herein; provided that
nothing herein shall prevent any Lending Party from disclosing such Designated
Information (a) to any other Lending Party, (b) to any other Person who agrees
to be bound by provisions substantially similar to those contained in this
Section if reasonably incidental to the administration of the credit facility
provided herein, (c) upon the order of any court
AMENDED AND RESTATED CREDIT AGREEMENT - Page 82
<PAGE> 90
or administrative agency, (d) upon the request or demand of any regulatory
agency or authority, (e) which had been publicly disclosed other than as a
result of a disclosure by any Lending Party prohibited by this Agreement, (f) in
connection with any litigation to which such Lending Party or any of its
Affiliates may be a party to the extent such information is necessary in such
litigation, (g) to the extent necessary in connection with the exercise of any
remedy hereunder, (h) to such Lending Party's legal counsel and independent
auditors who are made aware of the provisions of this Section 13.22, (i) to any
Affiliate of such Lending Party solely in connection with this Agreement if such
party is made aware of the provisions of this Section 13.22; and (j) subject to
provisions substantially similar to those contained in this Section, to any
actual or proposed participant or assignee of any of its rights and obligations
under the Loan Documents in accordance with the terms hereof. The term
"Designated Information" means any information which has been designated by the
Borrower in writing as confidential.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
RICHMONT MARKETING SPECIALISTS INC.
By: /s/ William P. Murray
------------------------------
William P. Murray
Vice President
Address for Notices:
2324 Gateway Drive
Irving, Texas 75063
Fax No.: 972-756-5459
Telephone No.: 972-714-1254
Attention: William P. Murray
AMENDED AND RESTATED CREDIT AGREEMENT - Page 83
<PAGE> 91
Commitment: THE CHASE MANHATTAN BANK,
individually as a Bank and as the Agent
$25,000,000.00
By: /s/ Jeffery S. Ackerman
------------------------------
Jeffery S. Ackerman
Vice President
Address for Notices:
Asset Based Lending
633 Third Avenue, 7th Floor
New York, New York 10017-6764
Attention: Credit Deputy
Fax No.: 212-622-5271
Telephone No.: 212-622-5227
Lending Office for Base Rate
Accounts and Libor Accounts:
633 Third Avenue
New York, New York 10017-6764
AMENDED AND RESTATED CREDIT AGREEMENT - Page 84
<PAGE> 92
ACKNOWLEDGMENT
The undersigned hereby consents and agrees to this Agreement and hereby
ratifies and confirms each of the Loan Documents to which it is a party entered
into prior to the Closing Date, and agrees that such Loan Documents continue to
be legal, valid, binding and enforceable in accordance with their respective
terms. The undersigned represents and warrants that as of the Closing Date,
there are no claims or offsets against or defenses or counterclaims to its
obligations under any Loan Document. TO INDUCE THE BANKS AND AGENT TO ENTER INTO
THIS AGREEMENT, EACH OF THE UNDERSIGNED WAIVES ANY AND ALL CLAIMS, OFFSETS,
DEFENSES OR COUNTERCLAIMS, WHETHER KNOWN OR UNKNOWN, ARISING PRIOR TO THE
CLOSING DATE AND RELATING TO THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY. Without limiting the generality of the foregoing
and notwithstanding anything in any Loan Document to the contrary, the
undersigned agrees and acknowledges that (i) the term "Credit Agreement" as used
in each Loan Document to which it is a party means this Agreement; and (ii) the
term "Guaranteed Indebtedness" as used in its Guaranty includes the Obligations
as defined herein.
Witness due execution hereof by the undersigned as of the date first
written above.
MSSC CAROLINA, INC.
MARKETING SPECIALISTS SALES COMPANY
BROMAR, INC.
TOWER MARKETING, INC.
FERRO & ASSOCIATES, INC.
SERVICE ASSETS CORP.
BROKERAGE SERVICES, INC.
BATESTAS & CO.
GENE SANFORD & ASSOCIATES, INC.
T-BAR BROKERAGE, INC.
T'NT NATIONAL CONVENIENCE STORE BROKERS, INC.
By: /s/ William P. Murray
------------------------------
William P. Murray
Authorized Officer for all Debtors
AMENDED AND RESTATED CREDIT AGREEMENT - Page 85
<PAGE> 93
INDEX TO EXHIBITS
Exhibit Description of Exhibit
------- ----------------------
"A" Note
"B" Compliance Certificate
"C" Borrowing Base Report
"D" Subsidiary Joinder Agreement
"E" Assignment and Acceptance
INDEX TO SCHEDULES
Schedule Description of Schedule
-------- -----------------------
1.1(a) Lockbox Agreements and Accounts
7.14 List of Subsidiaries; List of Borrower Shareholders
9.1 Debt
9.2 Existing Liens
9.5 Existing Investments
9.7 Permitted Affiliate Transactions
AMENDED AND RESTATED CREDIT AGREEMENT - Page 86
<PAGE> 94
Schedule 1.1(a)
to
Richmond Marketing Specialists Inc.
Amended and Restated Credit Agreement
Lockbox Agreements and Accounts
A. Marketing Specialists Sales Company
<TABLE>
<CAPTION>
Agreement Name Date Other Parties Account
-------------- ---- ------------- -------
<C> <S> <C> <C> <C>
1. Lockbox Agreement 01/28/97 NationsBank 3 7507 9923 1
</TABLE>
B. Tower Marketing, Inc.
<TABLE>
<CAPTION>
Agreement Name Date Other Parties Account
-------------- ---- ------------- -------
<C> <S> <C> <C> <C>
1. Lockbox Processing 08/23/94 NationsBank 00316020378
Agreement
</TABLE>
C. Bromar, Inc.
<TABLE>
<CAPTION>
Agreement Name Date Other Parties Account
-------------- ---- ------------- -------
<C> <S> <C> <C> <C>
1. Lockbox Agreement 03/18/97 Regalus West LLC;
Wells Fargo Bank, N.A.
</TABLE>
D. T-Bar Brokerage, Inc.
<TABLE>
<CAPTION>
Agreement Name Date Other Parties Account
-------------- ---- ------------- -------
<C> <S> <C> <C> <C>
1. Lockbox Agreement 01/10/95 Texas Commerce Bank 00310027597
National Association
</TABLE>
Schedule 1.1(a), Solo Page
<PAGE> 95
Schedule 7.14
to
Richmond Marketing Specialists Inc.
Amended and Restated Credit Agreement
List of Subsidiaries; List of Borrower Shareholders
A. Richmont Marketing Specialists Inc.
1. Richmont Marketing Specialists Inc.
Principal Address: 2324 Gateway Drive, Irving, Texas 75063
Location of Books and Records: 2324 Gateway Drive, Irving, Texas 75063
Authorized Stock: 1,000,000
Issued and Outstanding Stock: 137,635, owned as follows:
<TABLE>
<CAPTION>
Stockholders Number of Shares
------------ ----------------
<S> <C>
Ronald D. Pedersen 25,842
Jeffrey A. Watt 16,826
Gary R. Guffey 6,193
Bruce A. Butler 6,193
MS Acquisition Limited 82,581
</TABLE>
Richmont Marketing Specialists Inc. and its stockholders are parties to a
Company and Stockholders Agreement dated as of October 7, 1997, which
imposes certain restrictions upon the sale or transfer of the capital
stock of Richmont Marketing Specialists Inc.
Ronald D. Pedersen, Jeffrey A. Watt, Bruce A. Butler and Gary R. Guffey
have entered into an Amended and Restated Warrant Agreement with William
B. Robinson dated as of October 7, 1997, pursuant to which Robinson may
purchase shares of Richmont Marketing Specialists Inc. from such
stockholders.
B. Wholly-owned Subsidiaries of Richmont Marketing Specialists Inc.
1. Marketing Specialists Sales Company
Principal Address: 2324 Gateway Drive, Irving, Texas 75063
Location of Books and Records: 2324 Gateway Drive, Irving, Texas 75063
Authorized Stock: 10,000,000
Issued and Outstanding Stock: 137,635
Schedule 7.14, Page 1 of 5
<PAGE> 96
Marketing Specialists Sales Company is not party to any agreement
providing for options, rights, rights of conversion, redemption, purchase
or repurchase, rights of first refusal and similar rights relating to its
Capital Stock except the following:
(a) Potential equitable claim arising from lien on 100 shares of stock
of Marketing Specialists Sales Company, a Florida corporation and
former subsidiary of Marketing Specialists Sales Company, a Texas
corporation ("MSSC"), which was merged into MSSC effective as of
December 31, 1997, which shares were evidenced, prior to such
merger, by Share Certificate No. 3 issued in the name of MSSC;
(b) A first lien security interest held by Vincent Clanton in 9,333
shares of common stock of MSSC issued and held in treasury and a
second lien security interest in 3,112 shares of common stock of
MSSC issued and held in treasury pursuant to a Pledge Agreement
dated June 15, 1995; and
(c) A first lien security interest held by George M. Murray in 3,112
shares of common stock of MSSC issued and held in treasury (being
the same 3,112 shares of treasury stock subject to a second lien
security interest in favor of Vincent Clanton pursuant to a Pledge
Agreement dated June 15, 1995) by virtue of a Collateral Assignment
Agreement dated September 27, 1994, referenced in that certain
Agreement dated June 15, 1995 between H. Vincent Clanton and
Marketing Specialists Sales Company.
2. MSSC Carolina, Inc.
Principal Address: 2324 Gateway Drive, Irving, Texas 75063
Location of Books and Records: 2324 Gateway Drive, Irving, Texas 75063
Authorized Stock: 1,000 shares of Common Stock, $0.01 par
value per share
Issued and Outstanding Stock: 1,000 shares of Common Stock
MSSC Carolina, Inc. is not party to any agreement providing for options,
rights, rights of conversion, redemption, purchase or repurchase, rights
of first refusal and similar rights relating to its Capital Stock.
C. Wholly-owned Subsidiaries of Marketing Specialists Sales Company
1. Bromar, Inc., a California corporation
Principal Address: 744 N. Eckhoff Street, Orange, CA 92868
Location of Books and Records: 2324 Gateway Drive, Irving, Texas 75063
Authorized Stock: 2,000,000 shares of Common Stock, no
par value
Issued and Outstanding Stock: 1,000 shares of Common Stock
Schedule 7.14, Page 2 of 5
<PAGE> 97
Bromar, Inc. is not party to any agreement providing for options, rights,
rights of conversion, redemption, purchase or repurchase, rights of first
refusal and similar rights relating to its Capital Stock.
2. Tower Marketing Inc., a Texas Corporation
Principal Address: 2324 Gateway Drive, Irving, Texas 75063
Location of Books and Records: same
Authorized Stock: 4,000,000 shares of Common Stock, $0.01
par value per share
1,000,000 shares of Preferred, $0.01
par value per share
Issued and Outstanding Stock: 1,000 shares of Common Stock
No shares of Preferred Stock
Tower Marketing, Inc. is not party to any agreement providing for options,
rights, rights of conversion, redemption, purchase or repurchase, rights
of first refusal and similar rights relating to its Capital Stock.
3. Ferro & Associates, Inc., a Louisiana corporation
Principal Address: 1101 Dealers Avenue, New Orleans,
Louisiana 70813
Location of Books and Records: 1101 Dealers Avenue, New Orleans,
Louisiana 70813
Authorized Stock: 8,000 shares of Class A Common, Voting
$7.50 par value
4,000 shares of Class B Common,
Nonvoting, $7.50 par value
Issued and Outstanding Stock: 8,000 Class A Common
2,472 Class B Common
D. Wholly-owned Subsidiaries of Bromar, Inc.
1. Service Assets Corp., a California corporation
Principal Address: 744 N. Eckhoff Street, Orange, CA 92868
Location of Books and Records: 2324 Gateway Drive, Irving, Texas 75063
Authorized Stock: 1,000,000 shares of Common Stock, $1.00
par value
Issued and Outstanding Stock: 500 shares of Common Stock
Service Assets Corp. is not party to any agreement providing for options,
rights, rights of conversion, redemption, purchase or repurchase, rights
of first refusal and similar rights relating to its capital stock.
Schedule 7.14, Page 3 of 5
<PAGE> 98
2. Brokerage Services, Inc., a California corporation
Principal Address: 1751 E. Garry Ave., Santa Ana,
California 92705
Location of Books and Records: 2324 Gateway Drive, Irving, Texas 75063
Authorized Stock: 1,000 shares of Common Stock, no par
value
Issued and Outstanding Stock: 100 shares of Common Stock
Brokerage Services, Inc. is not party to any agreement providing for
options, rights, rights of conversion, redemption, purchase or repurchase,
rights of first refusal and similar rights relating to its capital stock.
3. Batestas & Co., a Utah corporation
Principal Address: 1279 200 South, Suite C., West Valley
City, Utah 84119
Location of Books and Records: 2324 Gateway Drive, Irving, Texas 75063
Authorized Stock: 150,000 shares of Class A Common Stock,
$1.00 par value
50,000 shares of Class B Common Stock,
$1.00 par value
Issued and Outstanding Stock: 150,000 shares of Class A Common Stock
Batestas & Co. is not party to any agreement providing for options,
rights, rights of conversion, redemption, purchase or repurchase, rights
of first refusal and similar rights relating to its capital stock.
4. Gene Sanford & Associates, Inc., an Arizona corporation
Principal Address: 2801 S. 35th Street, Phoenix, Arizona
85034
Location of Books and Records: 2324 Gateway Drive, Irving, Texas 75063
Authorized Stock: 1,000,000 shares of Common Stock, $1.00
par value
Issued and Outstanding Stock: 50,500 shares of Common Stock
Gene Sanford & Associates, Inc. is not party to any agreement providing
for options, rights, rights of conversion, redemption, purchase or
repurchase, rights of first refusal and similar rights relating to its
capital stock.
E. Wholly-owned Subsidiaries of Tower Marketing, Inc.
1. T-Bar Brokerage, Inc., a Texas corporation
Principal Address: 2324 Gateway Drive, Irving, Texas 75063
Location of Books and Records: 2324 Gateway Drive, Irving, Texas 75063
Authorized Stock: 100,000 shares of Common Stock, no par
value
Schedule 7.14, Page 4 of 5
<PAGE> 99
Issued and Outstanding Stock: 4,161.5 shares of Common Stock
T-Bar Brokerage, Inc. is not party to any agreement providing for options,
rights, rights of conversion, redemption, purchase or repurchase, rights
of first refusal and similar rights relating to its capital stock except:
Potential equitable claim for lien on 17,587 shares of stock of
Metropolitan/Commercial, Inc., a Texas corporation and predecessor to
Metropolitan Marketing, Inc., a Texas corporation and former subsidiary of
Tower Marketing, Inc., which was merged into MSSC effective as of April
10, 1997, which shares were evidenced, prior to such merger, by Share
Certificate No. 6, referenced in Promissory Note dated March 1, 1998 in
the stated principal amount of $53,095.15 executed by
Metropolitan/Commercial, Inc. in favor of Bob Moses.
2. TNT National Convenience Store Brokers, Inc., a Texas corporation
Principal Address: 2324 Gateway Drive, Irving, Texas 75063
Location of Books and Records: same
Authorized Stock: 500,000 shares of Common Stock, $0.01
par value
Issued and Outstanding Stock: 10,000 shares of Common Stock
TNT National Convenience Store Brokers, Inc. is not party to any agreement
providing for options, rights, rights of conversion, redemption, purchase
or repurchase, rights of first refusal and similar rights relating to its
capital stock.
F. Wholly-owned Subsidiaries of MSSC Carolina, Inc.
1. Atlas Marketing Company
Principal Address: 2740 East Harris Blvd. Charlotte,
North Carolina 28213
Location of Books and Record: same
Authorized Stock: 10,000,00, $0.01 par value
Issued and Outstanding Stock: 2,039,266.54
G. Wholly-owned Subsidiaries of Atlas Marketing Company, Inc.
1. Century Food Brokers of Hickory, Inc.
Principal Address: 1056 3rd Avenue NW, Hickory
North Carolina 28601
Location of Books and Records: 2740 East Harris Blvd. Charlotte,
North Carolina 28213
Authorized Stock: 10,000,00, $0.01 par value
Schedule 7.14, Page 5 of 5
<PAGE> 100
Issued and Outstanding Stock: 200
Century Food Brokers of Hickory, Inc. is not party to any agreement
providing for options, rights, rights of conversion, redemption, purchase
or repurchase, rights of first refusal and similar rights relating to its
capital stock.
2. East Coast Food Brokerage, Inc.
Principal Address: 2033 Cross Beam Drive, Charlotte
North Carolina 28217
Location of Books and Records: 2740 East Harris Blvd.
Charlotte, North Carolina 28213
Authorized Stock: 5,000 shares of Common Stock, no par
value
Issued and Outstanding Stock: 1,000
East Coast Food Brokerage, Inc. is not party to any agreement providing
for options, rights, rights of conversion, redemption, purchase or
repurchase, rights of first refusal and similar rights relating to its
capital stock.
3. Ultimate Food Sales, Inc.
Principal Address: 427 W. State Street, Black Mountain
North Carolina 28711
Location of Books and Records: 2740 East Harris Blvd. Charlotte,
North Carolina 28213
Authorized Stock: 1,000 shares of Common Stock, $1.00 par
value
Issued and Outstanding Stock: 1,000 shares of common Stock
Ultimate Food Sales, Inc. is not part to any agreement providing for
options, rights, rights of conversion, redemption, purchase or repurchase,
rights of first refusal and similar rights relating to its capital stock.
4. Cumberland Food Brokers, Inc.
Principal Address: 2740 East Harris Blvd. Charlotte,
North Carolina 28213
Location of Books and Record: same
Authorized Stock: 100,000 shares of Common Stock, $1.00
par value
Issued and Outstanding Stock: 1,000 shares
Cumberland Food Brokers, Inc. is not party to any agreement providing for
options, rights, rights of conversion, redemption, purchase or repurchase,
rights of refusal and similar rights relating to its capital stock.
5. Meatmaster Brokerage, Inc.
Schedule 7.14, Page 6 of 5
<PAGE> 101
Principal Address: 11159 Airpark Road, Suite 4
Ashland, Virginia 23005
Location of Books and Records: 2740 East Harris Blvd.
Charlotte, North Carolina 28213
Authorized Stock: 4,000 shares, Class A $1.00 par value
common stock (voting) 1,000 shares,
Class B
$1.00 par value common stock
Issued and Outstanding Stock: 500 shares of Class A
Meatmaster Brokerage Inc. is not party to any agreement providing for
options, rights, rights of conversion, redemption, purchase or repurchase,
rights of first refusal and similar rights relating to its capital stock.
Schedule 7.14, Page 7 of 5
<PAGE> 102
Schedule 9.1
to
Richmond Marketing Specialists Inc.
Amended and Restated Credit Agreement
Debt
Schedule 9.1, Cover Page
<PAGE> 103
Schedule 9.2
to
Richmond Marketing Specialists Inc.
Amended and Restated Credit Agreement
Existing Liens
Schedule 9.2, Cover Page
<PAGE> 104
Schedule 9.5
to
Richmond Marketing Specialists Inc.
Amended and Restated Credit Agreement
Existing Investments
1. Texas Stadium Bonds
2. Personal Seat License in the football stadium under construction in
Nashville, Tennessee
3. Two shares of common stock of Bradford & Company Food Brokers, Inc.
4. 167 shares of common stock of Uncle B's Bakery, Inc.
5. 5,000 shares of common stock of Innova Pure Water, Inc.
6. 120 shares of common stock of Scott's Liquid Gold
7. Seats at Ericson Stadium
8. Twelve and one-half percent (12 1/2%) interest in Trusted Brands, Inc.
Schedule 9.5, Solo Page
<PAGE> 105
Schedule 9.7
to
Richmond Marketing Specialists Inc.
Amended and Restated Credit Agreement
Permitted Affiliate Transactions
1. Stockholders Agreement among the Borrower, MS Acquisition Limited, Ronald
Pedersen, Jeffrey Watt, Bruce Butler and Gary Guffey.
2. Lease Agreement with ABP Partner Ltd.
3. Payment of accrued but unpaid interest with respect to certain promissory
notes contributed to equity pursuant to the Additional Capital
Contribution Agreement, dated as of September 12, 1997, by and among
Ronald D. Pedersen, Jeffrey A. Watt, Bruce A. Butler, Gary R. Guffey, MS
Acquisition Limited and Marketing Specialists Sales Company.
Schedule 9.7, Solo Page
<PAGE> 1
EXHIBIT 10.2
FIRST AMENDMENT TO AMENDED
AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the
"Amendment"), dated as of June 30, 1998, is entered into by and among RICHMONT
MARKETING SPECIALISTS INC., a corporation duly organized and validly existing
under the laws of the State of Delaware ("Borrower"), each of the banks or other
lending institutions which are signatories hereto (each such bank or other
lending institution individually, a "Bank" and, collectively, the "Banks"), and
THE CHASE MANHATTAN BANK, individually as a Bank and as agent for itself and the
other Banks (in its capacity as agent, together with its successors in such
capacity, the "Agent").
RECITALS:
Borrower, Banks and Agent have entered into that certain Amended and
Restated Credit Agreement dated as of December 18, 1998 (as modified by two
letter agreements, one dated March 31, 1998 and the other dated July 17, 1998,
the "Agreement"). Borrower, Banks and Agent now desire to amend the Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree, effective as of the date hereof
(unless otherwise indicated), as follows:
ARTICLE 1
Definitions
Section 1.1 Definitions. Capitalized terms used in this Amendment, to the
extent not otherwise defined herein, shall have the same meanings as in the
Agreement, as amended hereby.
ARTICLE 2
Amendments
Section 2.1 Amendment to Section 1.1. Section 1.1 of the Agreement is
amended as follows:
(a) The phrase "eighty percent (80%)" set forth in Subsection (b)(i)
of the definition of the term "Borrowing Base" in Section 1.1 of the
Agreement is amended to read "fifty percent (50%)"; and
(b) The definition of the term "Closing Date" in Section 1.1 of the
Agreement is amended in its entirety to read as follows:
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 1
<PAGE> 2
"Closing Date" means December 19, 1997; provided that for
purposes of Section 10.1, the term Closing Date shall mean January
1, 1998 and for purposes of Section 7.14, the term Closing Date
shall mean July 31, 1998.
Section 2.2 Amendment to Section 3.2. The table set forth in Section 3.2
of the Agreement is amended in its entirety to read as follows:
<TABLE>
<CAPTION>
===================================================================
Interest Base Margin Libor Commitment
Coverage Ratio Margin Fee
===================================================================
<S> <C> <C> <C>
<1.50:1 0.750% 2.50% 0.5625%
-------------------------------------------------------------------
>=1.50:1 <= 2.50:1 0.500% 2.25% 0.500%
-------------------------------------------------------------------
>2.50:1 <= 3.00:1 0.250% 2.00% 0.375%
-------------------------------------------------------------------
>3.00:1 <= 3.50:1 0.000% 1.75% 0.250%
-------------------------------------------------------------------
>3.50:1 <= 3.75:1 0.000% 1.50% 0.250%
-------------------------------------------------------------------
>3.75:1 <= 4.00:1 0.000% 1.25% 0.250%
-------------------------------------------------------------------
>4.00:1 0.000% 1.00% 0.250%
===================================================================
</TABLE>
In addition, the phrases "one-half percent (.50%)"(with reference to the
Base Margin), "two and one-quarter percent (2.25%)"(with reference to the Libor
Rate Margin) and "one-half percent (.50%)"(with reference to the Commitment Fee
Rate) in the last sentence of Section 3.2 are amended to mean "three-quarters of
one percent (.75%)," "two and one-half percent (2.50%)" and .5625%,
respectively. For purposes of Section 3.2, July 31, 1998 shall be deemed an
"Adjustment Date" and as of July 31, 1998 the Base Margin shall be equal to
.75%, the Libor Rate Margin shall equal 2.50% and the Commitment Fee Rate shall
equal .5625%, all until subsequently adjusted in accordance with the applicable
definitions thereof for the Fiscal Quarter ending September 30, 1998.
Section 2.3 Amendment to Section 7.14. Section 7.14 of the Agreement is
amended to add the following thereto:
As of July 31, 1998, Schedule 7.14 identifies (a) the general and
limited partners of MS Acquisition Limited and Richmont Capital Partners
I, L.P. and the amount of each such partner's contributions to each such
partnership or each such partner's percentage ownership in each such
partnership, as applicable and (b) all owners of record of the voting
capital stock of MSSC Acquisition Corp.
Section 2.4 Amendment to Article 7. Article 7 of the Agreement is also
amended to add the following Section 7.26:
Section 7.26 Year 2000. No Default or Material Adverse Effect could
reasonably be expected to occur as a result of the failure of equipment
containing
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 2
<PAGE> 3
embedded microchips, computer hardware or computer software owned,
licensed or leased by the Borrower and its Subsidiaries to function in the
case of dates or time periods occurring after December 31, 1999 at least
as effectively as in the case of dates or time periods occurring prior to
January 1, 2000 (a "Year 2000 Problem"). The cost to the Borrower and the
Subsidiaries of preventing a Year 2000 Problem is not reasonably expected
to result in a Default or a Material Adverse Effect. The computer and
management information systems of the Borrower and the Subsidiaries with
any upgrading, replacement or reprogramming contemplated to occur prior to
December 31, 1999 are reasonably expected to be sufficient to permit the
Borrower to conduct its business without Material Adverse Effect.
Section 2.5 Amendment to Subsection 8.1(e). Subsection 8.1(e) of the
Agreement is amended to replace the phrase "ten (10) Business Days" in each such
place it appears with "eighteen (18) days."
Section 2.6 Amendment to Subsection 8.10(b). Subsection 8.10(b) of the
Agreement is amended to add the following sentence to the end thereof:
Notwithstanding any of the foregoing, if a Subsidiary is created or
acquired and has assets at the date of creation or acquisition totaling
less than One Million Dollars ($1,000,000) in book value (herein, each an
"Excluded Subsidiary"), then Borrower shall not be required to comply with
this clause (b); provided, however, in no event shall the aggregate book
value of the assets of all Excluded Subsidiaries exceed Three Million
Dollars ($3,000,000). If the book value of the assets of an Excluded
Subsidiary increases after its creation or acquisition to an amount equal
to or exceeding One Million Dollars ($1,000,000), Borrower will comply
with the first sentence of this Subsection 8.10(b) with respect to such
Subsidiary. If the book value of the assets of all Excluded Subsidiaries
exceed Three Million Dollars ($3,000,000), then Borrower will comply with
the first sentence of this Subsection 8.10(b) with respect to one or more
of such Excluded Subsidiaries so that the total book value of the assets
of all Excluded Subsidiaries is equal to or less than Three Million
Dollars ($3,000,000). If Borrower complies with the first sentence of this
Subsection 8.10(b) with respect to a Subsidiary, such Subsidiary shall no
longer be an Excluded Subsidiary.
Section 2.7 Amendment to Article 8. Article 8 is also amended by adding
the following Section 8.12:
8.12 Pledge of Deposit. Borrower shall deposit with Agent on or
before July 31, 1998 One Million Five Hundred Thousand Dollars
($1,500,000) in immediately available funds to be held in an interest
bearing account (the "Deposit") and the Borrower agrees that it shall not
withdraw the Deposit or any part thereof, except as provided below,
without the consent of the Agent, notwithstanding anything in the Borrower
Security Agreement to the contrary. Borrower confirms that the Deposit is
a "Deposit Account" and "Collateral" as both such terms are defined in,
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 3
<PAGE> 4
and is subject to the terms of, the Borrower Security Agreement. As long
as the Deposit is held by the Agent as Collateral, the term "Libor Rate
Margin" as used in and for purposes of Section 2.7(c) only shall be equal
to 1.00% per annum. Within five (5) days after the Borrower's request,
Agent agrees to release the Deposit as Collateral and allow the Borrower
to withdraw the Deposit or any part thereof at its discretion, if the
Borrower has delivered a Compliance Certificate pursuant to subsection 8.1
(d) that reflects that the ratio of the Operating Cash Flow to Debt
Service calculated as of the last day of the Fiscal Quarter for which such
Compliance Certificate is delivered is 1.0 to 1.0 or greater.
Section 2.8 Amendment to Subsection 9.1(b). Subsection 9.1(b) of the
Agreement is amended in its entirety to read as follows:
(b) Debt described on Schedule 9.1 hereto and any extensions,
renewals, restructures or refinancings of such existing Debt so long as
(i) the principal amount of such Debt after such renewal, extension,
restructure or refinancing shall not exceed the principal amount of such
Debt which was outstanding immediately prior to such renewal, extension,
restructure or refinancing; provided that Borrower may, in connection with
the restructure of the terms thereof, increase the amount of existing Debt
in each Fiscal Year by an aggregate amount that does not exceed Seven
Hundred Fifty Thousand Dollars ($750,000) in any Fiscal Year if, as of the
date of each increase, no Default exists or would result therefrom, (ii)
such Debt shall not be secured by any assets other than assets securing
such Debt, if any, prior to such renewal, extension or refinancing; and
(iii) to the extent any such Debt is subordinated to the Obligations, such
Debt must be subordinated to the Obligations on substantially the same
terms; provided, however, that any Debt described on Schedule 9.1 which is
secured by a Lien on Receivables must be repaid (and the Lien securing the
payment thereof released) on or before September 30, 1998;
Section 2.9 Amendment to Subsection 9.1(h). Subsection 9.1(h) of the
Agreement is amended in its entirety to read as follows:
(h) Debt of Borrower (i) under Hedging Agreements and (ii) incurred
to finance the acquisition of Borrower's common stock in a transaction
permitted by clauses (iii) or (iv) of Section 9.4, provided that all such
Debt shall at all times be unsecured;
Section 2.10 Amendment to Subsection 9.1(k). The amount "Five Hundred
Thousand Dollars ($500,000)" set out in clause (i) of Subsection 9.1(k) of the
Agreement is amended to read "Two Million Dollars ($2,000,000).
Section 2.11 Amendment to Subsection 9.2(a). Subsection 9.2(a) of the
Agreement is amended to replace the date "July 31, 1998" set out therein with
"September 30, 1998."
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 4
<PAGE> 5
Section 2.12 Amendment to Subsection 9.2(g). The reference to Section 10.4
in clause (g) of Section 9.2 is amended to mean Section 10.3.
Section 2.13 Amendment to Section 9.4. The date "March 31, 1999" in clause
(iv) of Section 9.4 is amended to mean "December 31, 2000" and the amount "Ten
Million Dollars ($10,000,000)" in clause (iv) of Section 9.4 is amended to mean
Twelve Million Dollars ($12,000,000).
Section 2.14 Amendment to Section 9.5. Clause (b) of Section 9.5 is
amended in its entirety to read as follows:
(b) Borrower and the Subsidiaries may own stock of the Subsidiaries
existing on the Closing Date and Borrower may repurchase it own stock in
accordance with the restrictions set forth in Section 9.4 (iii) and
Section 9.4 (iv);
Section 2.15 Amendment to Section 9.7. Clause (a) of Section 9.7 is
amended in its entirety to read as follows:
(a) Borrower and the Subsidiaries may enter into transactions with
each other to the extent not otherwise prohibited hereby and may enter
into transactions specifically permitted hereby, including without
limitation, the transactions permitted by Section 9.4 (iii), Section 9.4
(iv) and Section 9.11,
Section 2.16 Amendment to Section 9.8. Clause (e) of Section 9.8 of the
Agreement is amended in its entirety to read as follows:
(e) the disposition of assets (other than Receivables), in addition
to those set forth in clauses (a) through (d) above if all the following
conditions are satisfied: (i) the aggregate sale price of the assets
disposed of in the Fiscal Year ending December 31, 1998, does not exceed
Two Million Dollars ($2,000,000) and in any following Fiscal Year does not
exceed One Million Dollars ($1,000,000); (ii) no Default exists or would
result therefrom; (iii) the consideration received is at least equal to
the fair market value of such assets and is not required to be utilized to
purchase the Senior Subordinated Notes in accordance with the Indenture;
(iv) any and all proceeds arising as a result of the disposition of assets
(other than Receivables) made pursuant to this clause (e) of Section 9.8
must be payable directly to a Lockbox Account; and (v) the amount of the
Obligations which constitutes Senior Indebtedness under the Indenture
shall not be reduced as a result of Section 4.03 (b) (i) of the Indenture
unless the aggregate amount of the Commitments is reduced by an amount
equal to the amount by which such Senior Obligations have been reduced.
Borrower agrees to deliver to Agent, simultaneously with the Compliance
Certificate delivered pursuant to Section 8.1 (d) as of the end of each
Fiscal Quarter, a listing of all assets disposed of during such Fiscal
Quarter if the aggregate amount of the assets disposed of during such
Fiscal Quarter equaled or exceeded One Million Dollars ($1,000,000).
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 5
<PAGE> 6
Section 2.17 Amendment to Section 9.11. Section 9.11 of the Agreement is
amended in its entirety to read as follows:
Section 9.11 Prepayment of Debt. Borrower will not, and will not
permit any Subsidiary to prepay, optionally redeem or repurchase any Debt
other than the Obligations; provided that (a) Borrower may prepay the Debt
required to be prepaid pursuant to Section 9.1(a); (b) Borrower may prepay
up to an aggregate amount of Five Million Dollars ($5,000,000) of Debt
during the term of this Agreement (other than the Debt described in the
foregoing clause (a)) if (i) no Default exists or would result therefrom,
(ii) the average daily balances of the sum of Borrower's and the
Subsidiaries' cash, cash equivalents and the Borrowing Availability for
the thirty (30) day period prior to the date of the prepayment and
calculated as if the prepayment had occurred on the first (1st) day of
such period, shall equal or exceed Four Million Dollars ($4,000,000),
(iii) Borrower shall have provided Agent evidence of its compliance with
clause (ii) preceding on the date of the proposed prepayment; and (iv) the
amount of the Restructuring Prepayment Amount relating to such Debt, if
any, calculated in respect of such prepayment shall not exceed $750,000,
with the term "Restructuring Prepayment Amount" meaning, with respect to
any Debt outstanding at any time that has been restructured, as of the
date of determination, the excess of, if any, (a) the aggregate net
present value of each installment payable in respect of such Debt after it
has been restructured less the aggregate amount of payments, expenditures
and other associated costs which could reasonably be expected to have been
made or incurred (prior to giving effect to such restructuring) from and
after the date of such restructuring to the original final maturity of
such Debt (prior to giving effect to such restructuring) but will no
longer be required to be made or incurred as a result of such
restructuring, including, without limitation, employment and shareholder
compensation and benefits, over (b) the aggregate net present value of
each installment payable in respect of such Debt immediately before it has
been restructured; provided, that the net present value of any payment
hereunder shall be determined by the Borrower using a discount rate
determined by the Borrower to be reasonable at the date of such
determination.
Section 2.18 Amendment to Section 10.1. Section 10.1 of the Agreement is
amended in its entirety to read as follows:
Section 10.1 Debt Service Ratio. Borrower shall not permit the ratio
of the Operating Cash Flow to Debt Service calculated as of the last day
of each Fiscal Quarter during the periods set forth below to be less than
the ratio set forth below for such period:
<TABLE>
<CAPTION>
====================================================================
Period Amount
====================================================================
<S> <C>
July 1, 1998 through September 30, 1998 0.75 to 1.00
--------------------------------------------------------------------
October 1, 1998 through December 31, 1998 1.00 to 1.00
--------------------------------------------------------------------
January 1, 1999 through Termination Date 1.25 to 1.00
--------------------------------------------------------------------
</TABLE>
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 6
<PAGE> 7
The phrase "Operating Cash Flow" means, as of any Fiscal Quarter end and
for the four (4) Fiscal Quarter period (or portion thereof since July 1,
1998) then ending (the "Subject Period"), the total of the following
calculated without duplication: (A), on a pro forma basis, the Target
Operating Cash Flow for each Prior Target or, as applicable, the Target
Operating Cash Flow attributable to the assets acquired from such Prior
Target, for any portion of such Subject Period occurring prior to the date
of the acquisition of such Prior Target or the related assets plus (B) the
total of the following for Borrower and the Subsidiaries calculated on a
consolidated basis without duplication for the Subject Period: (a) Net
Income; plus (b) amortization and depreciation expense deducted in
determining Net Income; minus (c) the sum of (i) all Capital Expenditures
minus (ii) the Capital Expenditures made in the Subject Period in
connection with any of the following matters (the following matters,
herein the "Excluded Capital Expenditures"); provided that the aggregate
amount of Excluded Capital Expenditures subtracted pursuant to this clause
(ii) or subtracted pursuant to clause (ii)(B) of Section 10.2 shall never
exceed, in each case, an amount equal to Seven Million Six Hundred Fifty
Thousand Dollars ($7,650,000):
<TABLE>
<CAPTION>
=====================================================================
Excluded Capital Expenditures Amount
=====================================================================
<S> <C>
PeopleSoft $1,300,000
---------------------------------------------------------------------
PeopleSoft Installation Costs 1,900,000
---------------------------------------------------------------------
Required Computer Upgrades
(upgrade & install field computers) 1,600,000
---------------------------------------------------------------------
Imaging System 500,000
---------------------------------------------------------------------
Data Warehouse 250,000
---------------------------------------------------------------------
Communications (Local Area Network
& Wide Area Network, and Voice
upgrades) 650,000
---------------------------------------------------------------------
Required Software Upgrades
(compliance costs) 500,000
---------------------------------------------------------------------
Office Move 950,000
TOTAL $7,650,000
=====================================================================
</TABLE>
The phrase "Debt Service" means, as of any Fiscal Quarter end, the
aggregate amount of the amortization on the Borrower's and the
Subsidiaries' Debt scheduled for: (a) if calculated as of September 30,
1998, the period from September 30, 1998 through December 31, 1998; (b) if
calculated as of December 31, 1998, the period from December 31, 1998
through June 30, 1999; (c) if calculated as of March 31, 1999, the period
from March 31, 1999 through December 31, 1999; and (d) if calculated as of
any other Fiscal Quarter end, the four (4) Fiscal Quarter period following
such Fiscal Quarter end.
Section 2.19 Amendment to Section 10.2. Section 10.2 of the Agreement is
amended in its entirety to read as follows:
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 7
<PAGE> 8
Section 10.2 Interest Coverage. Borrower shall not permit the ratio
of (a) the sum of the (i) EBITDA of Borrower minus (ii) the sum of (A)
Capital Expenditures minus (B) Excluded Capital Expenditures (as defined
in Section 10.1) to (b) the sum of cash interest expense minus cash
interest income, all calculated for the four (4) Fiscal Quarter period (or
portion thereof since July 1, 1998) ending on the last day of each Fiscal
Quarter to be less than (i) 1.50 to 1.00 as of each Fiscal Quarter end
prior to January 1, 2000 after, but not including, the Fiscal Quarter
ending on June 30, 1998; (ii) 1.75 to 1.00 as of each Fiscal Quarter end
after January 1, 2000 but prior to January 1, 2001; and (iii) 2.00 to 1.00
as of each Fiscal Quarter end after January 1, 2001.
Section 2.20 Amendment to Section 10.3. The table in Section 10.3 of the
Credit Agreement is amended in its entirety to read as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
Period Amount
---------------------------------------------------------------------
<S> <C>
Closing Date through December 31, 1997 $1,000,000
---------------------------------------------------------------------
January 1, 1998 through December 31, 1998 $9,000,000
---------------------------------------------------------------------
January 1, 1999 through December 31, 1999 $6,000,000
---------------------------------------------------------------------
Each Fiscal Year thereafter $5,000,000
---------------------------------------------------------------------
</TABLE>
Section 2.21 Amendment to Section 11.1. Clause (n) of Section 11.1 of the
Agreement is deleted and clause (m) of Section 11.2 of the Agreement is amended
in its entirety to read as follows:
(m) A Change of Control shall occur. As used in this clause (m), the
following terms have the following meanings:
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or
other equivalents of or interests in (however designated) equity of
such Person, including any Preferred Stock, but excluding any debt
securities convertible into such equity.
"Change of Control" means the occurrence of any of the
following events:
(i) the Permitted Holders either (x) cease to be the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act), directly or indirectly, of at least 35% of
the aggregate of the total voting power of the Voting Stock of
the Borrower, whether as a result of issuance of securities of
the Borrower, any merger, consolidation, liquidation or
dissolution of the Borrower, any direct or indirect transfer
of securities by any Permitted Holder or otherwise, or (y) do
not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the
Board of Directors (for purposes of this clause (i), the
Permitted
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 8
<PAGE> 9
Holders shall be deemed to own beneficially any Voting Stock
of an entity (the "specified entity") held by any other entity
(the "parent entity") so long as the Permitted Holders
beneficially own (as so defined), directly or indirectly, in
the aggregate a majority of the voting power of the Voting
Stock of the parent entity);
(ii) (x) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than one or more
Permitted Holders, is or becomes the beneficial owner (as
defined in clause (i) above, except that such person shall be
deemed to have "beneficial ownership" of all shares that any
such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time),
directly or indirectly, of more than 35% of the total voting
power of the Voting Stock of the Borrower and (y) the
Permitted Holders "beneficially own" (as defined in clause (i)
above), directly or indirectly, in the aggregate a lesser
percentage of the total voting power of the Voting Stock of
the Borrower than such other Person and do not have the right
or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors
(for the purposes of this clause (ii), such other Person shall
be deemed to own beneficially any Voting Stock of a specified
corporation held by a parent corporation, if such other person
"beneficially owns" (as defined in this clause (ii)), directly
or indirectly, more than 35% of the voting power of the Voting
Stock of such parent corporation and the Permitted Holders
"beneficially own" (as defined in clause (i) above), directly
or indirectly, in the aggregate a lesser percentage of the
voting power of the Voting Stock of such parent corporation
and do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of
the board of directors of such parent corporation); or
(iii) during any period of two consecutive years,
individuals who at the beginning of such period constituted
the Board of Directors (together with any new directors whose
election by such Board of Directors or whose nomination for
election by the shareholders of the Borrower was approved by a
vote of a majority of the directors of the Borrower then still
in office who were either directors at the beginning of such
period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 9
<PAGE> 10
"Management Stockholders" means Ronald D. Pedersen, Gary R.
Guffey and Bruce A. Butler.
"Permitted Holders" means Richmont Enterprises LLC, a Delaware
limited liability company controlled by certain Affiliates of
Richmont Capital Partners I, L.P., a Delaware limited partnership,
JR Investment Corp., a Delaware corporation (including John P.
Rochon and the other current stockholders of JR Investment Corp.),
MS Acquisition Limited, a Delaware limited partnership, the
Management Stockholders and any of their respective Affiliates
(including any Person owned or controlled by any such Person, any
member of any such Person's family, any trust for the benefit of any
such Person (or a member of his family) or any Person owned or
controlled by any of the foregoing) and any Person acting in the
capacity of an underwriter in connection with a public or private
offering of the Borrower's Capital Stock.
"Preferred Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however
designated) which is preferred as to the payment of dividends, or as
to the distribution of assets upon any voluntary or involuntary
liquidation or dissolution of such corporation, over shares of
Capital Stock of any other class of such corporation.
"Voting Stock" of a Person means all classes of Capital Stock
of such Person then outstanding that normally entitle the holders of
such interests to participate in the management or to elect those
participating in the management of such Person.
Section 2.22 Amendment to Exhibit B. Exhibit B to the Credit Agreement is
amended in its entirety to read as set forth on Exhibit B hereto.
Section 2.23 Amendment to Schedules. Schedule 7.14 of the Credit Agreement
is amended in its entirety to read as set forth on Schedule 7.14 hereto.
Schedule 9.1 is amended to add the information set forth on Schedule 9.1 hereto.
ARTICLE 3
Reinstatement of Commitments, Ratifications, Representations and Warranties
Section 3.1 Reinstatements of Commitments. Pursuant to that certain Waiver
Letter (herein so called) dated as of March 31, 1998 among Borrower, the
Obligated Parties, Agent and the Banks, the Agent and the Banks waived the
Existing Defaults, as defined therein. As a condition to the waiver of the
Existing Defaults, the Borrower agreed not to request that the Banks make any
Loan or issue any Letter of Credit under the Agreement and notwithstanding
anything in the Agreement to the contrary, the Banks were not obligated to make
any such Loans or issue any Letters of Credit until Borrower, the Obligated
Parties, Agent and the Banks executed and
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 10
<PAGE> 11
delivered to Agent an effective agreement on the terms set forth in the
paragraph numbered 1. of the Waiver Letter. The Banks and the Agent agree that
notwithstanding anything in the Waiver Letter to the contrary, this Amendment
satisfies the requirements of the paragraph numbered 1. of the Waiver Letter and
effective as of July 31, 1998, the Borrower may request that the Banks make
Loans and issue Letters of Credit in accordance with the Agreement and the Banks
shall be obligated to make such Loans or issue such Letters of Credit subject to
the terms of, and otherwise in accordance with the Agreement.
Section 3.2 Ratifications. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Agreement and except as expressly modified and superseded by this
Amendment, the terms and provisions of the Agreement and the other Loan
Documents are ratified and confirmed and shall continue in full force and
effect. Borrowers, Agent and the Banks agree that the Agreement as amended
hereby and the other Loan Documents shall continue to be legal, valid, binding
and enforceable in accordance with their respective terms.
Section 3.3 Representations and Warranties. Borrower represents and
warrants that as of July 31, 1998 there are no claims or offsets against or
defenses or counterclaims to its obligations under any of the Loan Documents. TO
INDUCE THE BANKS AND AGENT TO ENTER INTO THIS AMENDMENT BORROWER WAIVES TO THE
EXTENT PERMITTED BY APPLICABLE LAW ANY AND ALL SUCH CLAIMS, OFFSETS, DEFENSES OR
COUNTERCLAIMS, WHETHER KNOWN OR UNKNOWN, ARISING PRIOR TO THE JULY 31, 1998 AND
RELATING TO THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. Borrower hereby represents and warrants to Agent and the Banks that (a)
the execution, delivery and performance of this Amendment have been authorized
by all requisite corporate action on the part of Borrower and each Obligated
Party and will not violate the articles of incorporation or bylaws of Borrower
or any Obligated Party, (b) after giving effect to this Amendment, the
representations and warranties contained in the Agreement, as amended hereby,
and any other Loan Document are true and correct on and as of the date hereof as
though made on and as of the date hereof except to the extent those
representations and warranties expressly relate solely to another date, (c)
after giving effect to this Amendment, no Default has occurred and is
continuing, (d) after giving effect to this Amendment, Borrower and each
Obligated Party is in full compliance with all covenants and agreements
contained in the Agreement, as amended hereby, and the other Loan Documents, and
(e) the Articles of Incorporation and Bylaws of Borrower have not been amended
or otherwise modified since December 18, 1997.
ARTICLE 4
Miscellaneous
Section 4.1 Survival of Representations and Warranties. All
representations and warranties made in this Amendment shall survive the
execution and delivery of this Amendment and the other Loan Documents, and no
investigation by Agent or any Bank or any closing shall affect the
representations and warranties or the right of Agent or any Bank to rely upon
them.
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 11
<PAGE> 12
Section 4.2 Reference to Agreement. Each of the Loan Documents, including
the Agreement and any and all other agreements, instruments or documents now or
hereafter executed and delivered pursuant to the terms hereof or pursuant to the
terms of the Agreement as amended hereby, are hereby amended so that any
reference in such Loan Documents to the Agreement shall mean a reference to the
Agreement as amended hereby.
Section 4.3 Expenses of Lender. As provided in the Agreement, Borrower
agrees to pay on demand all costs and expenses incurred by Agent and the Banks
in connection with the preparation, negotiation, and execution of this
Amendment, including without limitation the costs and fees of Agent's legal
counsel.
Section 4.4 Severability. Any provision of this Amendment held by a court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 4.5 Applicable Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York and the
applicable laws of the United States of America.
Section 4.6 Successors and Assigns. This Amendment is binding upon and
shall inure to the benefit of Agent, the Banks and Borrower and their respective
successors and assigns, except Borrower may not assign or transfer any of its
rights or obligations hereunder without the prior written consent of the Agent
and the Banks.
Section 4.7 Counterparts. This Amendment may be executed in one or more
counterparts and on telecopy counterparts, each of which when so executed shall
be deemed to be an original, but all of which when taken together shall
constitute one and the same agreement.
Section 4.8 Effect of Waiver. No consent or waiver, express or implied, by
Agent or the Banks to or for any breach of or deviation from any covenant,
condition or duty by Borrower or any Obligated Party shall be deemed a consent
or waiver to or of any other breach of the same or any other covenant, condition
or duty.
Section 4.9 Headings. The headings, captions, and arrangements used in
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
Section 4.10 ENTIRE AGREEMENT. THIS AMENDMENT EMBODIES THE FINAL, ENTIRE
AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THIS AMENDMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE
PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 12
<PAGE> 13
Executed as of the date first written above.
BORROWER:
RICHMONT MARKETING SPECIALISTS INC.
By: /s/ William P. Murray
------------------------------------
William P. Murray
Vice President
BANKS:
THE CHASE MANHATTAN BANK,
individually as a Bank and as the Agent
By: /s/ George Louis McKinley
------------------------------------
George Louis McKinley
Vice President
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 13
<PAGE> 14
Each Obligated Party hereby consents and agrees to this Amendment and
agrees that each Loan Document to which it is a party shall remain in full force
and effect and shall continue to be its legal, valid and binding obligation
enforceable against it in accordance with its terms. Each Obligated Party hereby
represents and warrants that as of July 31, 1998 there are no claims or offsets
against or defenses or counterclaims to its obligations under any of the Loan
Documents. TO INDUCE THE BANKS AND AGENT TO ENTER INTO THIS AMENDMENT EACH
OBLIGATED PARTY WAIVES ANY AND ALL SUCH CLAIMS, OFFSETS, DEFENSES OR
COUNTERCLAIMS, WHETHER KNOWN OR UNKNOWN, ARISING PRIOR TO THE JULY 31, 1998 AND
RELATING TO THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
MSSC CAROLINA, INC.
MARKETING SPECIALISTS SALES
COMPANY (individually and as successor
by merger to Ferro & Associates, Tower Marketing,
Inc., T-Bar Brokerage, Inc. and TNT
Convenience Stores, Inc.)
BROMAR, INC. (individually and as successor
in interest by merger to Gene Sanford & Associates, Inc.,
Batestas & Co. and Service Assets Corp.)
BROKERAGE SERVICES, INC.
CUMBERLAND FOOD BROKERS, INC.
CENTURY FOOD BROKERS OF HICKORY, INC.
ULTIMATE FOOD SALES, INC.
MEATMASTER BROKERAGE, INC.
EAST COAST FOOD BROKERAGE, INC.
ATLAS MARKETING COMPANY, INC.
By: /s/ William P. Murray
----------------------------
William P. Murray
Vice President and Treasurer
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 14
<PAGE> 15
Schedule 7.14
to
Richmont Marketing Specialists Inc.
Amended and Restated Credit Agreement
List of Subsidiaries; List of Shareholders
A. Richmont Marketing Specialists Inc.
1. Richmont Marketing Specialists Inc.
Principal Address: 2324 Gateway Drive, Irving, Texas
75063
Location of Books and Records: 2324 Gateway Drive, Irving, Texas
75063
Authorized Stock: 1,000,000
Issued and Outstanding Stock: 137,635, owned as follows:
<TABLE>
<CAPTION>
Stockholders Number of Shares
------------ ----------------
<S> <C>
Ronald D. Pedersen 25,842
Jeffrey A. Watt 16,826
Gary R. Guffey 6,193
Bruce A. Butler 6,193
MS Acquisition Limited 82,581
</TABLE>
Richmont Marketing Specialists Inc. and its stockholders are parties to a
Company and Stockholders Agreement dated as of October 7, 1997, which
imposes certain restrictions upon the sale or transfer of the capital
stock of Richmont Marketing Specialists Inc.
Ronald D. Pedersen, Jeffrey A. Watt, Bruce A. Butler and Gary R. Guffey
have entered into an Amended and Restated Warrant Agreement with William
B. Robinson dated as of October 7, 1997, pursuant to which Robinson may
purchase shares of Richmont Marketing Specialists Inc. from such
stockholders.
B. Wholly-owned Subsidiaries of Richmont Marketing Specialists Inc.
1. Marketing Specialists Sales Company
Principal Address: 2324 Gateway Drive, Irving, Texas
75063
Location of Books and Records: 2324 Gateway Drive, Irving, Texas
75063
Authorized Stock: 10,000,000
Issued and Outstanding Stock: 137,635
SCHEDULE 7.14 - Page 1 of 5
<PAGE> 16
Marketing Specialists Sales Company is not party to any agreement
providing for options, rights, rights of conversion, redemption,
purchase or repurchase, rights of first refusal and similar rights
relating to its Capital Stock except the following:
(a) Potential equitable claim arising from lien on 100 shares of
stock of Marketing Specialists Sales Company, a Florida
corporation and former subsidiary of Marketing Specialists
Sales Company, a Texas corporation ("MSSC"), which was merged
into MSSC effective as of December 31, 1997, which shares were
evidenced, prior to such merger, by Share Certificate No. 3
issued in the name of MSSC;
(b) A first lien security interest held by Vincent Clanton in
9,333 shares of common stock of MSSC issued and held in
treasury and a second lien security interest in 3,112 shares
of common stock of MSSC issued and held in treasury pursuant
to a Pledge Agreement dated June 15, 1995; and
(c) A first lien security interest held by George M. Murray in
3,112 shares of common stock of MSSC issued and held in
treasury (being the same 3,112 shares of treasury stock
subject to a second lien security interest in favor of Vincent
Clanton pursuant to a Pledge Agreement dated June 15, 1995) by
virtue of a Collateral Assignment Agreement dated September
27, 1994, referenced in that certain Agreement dated June 15,
1995 between H. Vincent Clanton and Marketing Specialists
Sales Company.
2. MSSC Carolina, Inc.
Principal Address: 2324 Gateway Drive, Irving, Texas
75063
Location of Books and Records: 2324 Gateway Drive, Irving, Texas
75063
Authorized Stock: 1,000 shares of Common Stock, $0.01
par value per share
Issued and Outstanding Stock: 1,000 shares of Common Stock
MSSC Carolina, Inc. is not party to any agreement providing for
options, rights, rights of conversion, redemption, purchase or
repurchase, rights of first refusal and similar rights relating to
its Capital Stock.
C. Wholly-owned Subsidiaries of Marketing Specialists Sales Company
1. Bromar, Inc., a California corporation
Principal Address: 744 N. Eckhoff Street, Orange, CA
92868
Location of Books and Records: 2324 Gateway Drive, Irving, Texas
75063
Authorized Stock: 2,000,000 shares of Common Stock, no
par value
Issued and Outstanding Stock: 1,000 shares of Common Stock
SCHEDULE 7.14 - Page 2 of 5
<PAGE> 17
Bromar, Inc. is not party to any agreement providing for options,
rights, rights of conversion, redemption, purchase or repurchase,
rights of first refusal and similar rights relating to its Capital
Stock.
D. Wholly-owned Subsidiaries of Bromar, Inc.
1. Brokerage Services, Inc., a California corporation
Principal Address: 1751 E. Garry Ave., Santa Ana,
California 92705
Location of Books and Records: 2324 Gateway Drive, Irving, Texas
75063
Authorized Stock: 1,000 shares of Common Stock, no par
value
Issued and Outstanding Stock: 100 shares of Common Stock
Brokerage Services, Inc. is not party to any agreement providing for
options, rights, rights of conversion, redemption, purchase or
repurchase, rights of first refusal and similar rights relating to
its capital stock.
E. Wholly-owned Subsidiaries of MSSC Carolina, Inc.
1. Atlas Marketing Company
Principal Address: 2740 East Harris Blvd.
Charlotte, North Carolina 28213
Location of Books and Record: same
Authorized Stock: 10,000,00, $0.01 par value
Issued and Outstanding Stock: 2,039,266.54
F. Wholly-owned Subsidiaries of Atlas Marketing Company, Inc.
1. Century Food Brokers of Hickory, Inc.
Principal Address: 1056 3rd Avenue NW, Hickory
North Carolina 28601
Location of Books and Records: 2740 East Harris Blvd.
Charlotte, North Carolina 28213
Authorized Stock: 10,000,00, $0.01 par value
Issued and Outstanding Stock: 200
Century Food Brokers of Hickory, Inc. is not party to any agreement
providing for options, rights, rights of conversion, redemption,
purchase or repurchase, rights of first refusal and similar rights
relating to its capital stock.
2. East Coast Food Brokerage, Inc.
Principal Address: 2033 Cross Beam Drive, Charlotte
North Carolina 28217
Location of Books and Records: 2740 East Harris Blvd.
Charlotte, North Carolina 28213
SCHEDULE 7.14 - Page 3 of 5
<PAGE> 18
Authorized Stock: 5,000 shares of Common Stock, no
par value
Issued and Outstanding Stock: 1,000
East Coast Food Brokerage, Inc. is not party to any agreement
providing for options, rights, rights of conversion, redemption,
purchase or repurchase, rights of first refusal and similar rights
relating to its capital stock.
3. Ultimate Food Sales, Inc.
Principal Address: 427 W. State Street, Black Mountain
North Carolina 28711
Location of Books and Records: 2740 East Harris Blvd.
Charlotte, North Carolina 28213
Authorized Stock: 1,000 shares of Common Stock, $1.00
par value
Issued and Outstanding Stock: 1,000 shares of common Stock
Ultimate Food Sales, Inc. is not part to any agreement providing for
options, rights, rights of conversion, redemption, purchase or
repurchase, rights of first refusal and similar rights relating to
its capital stock.
4. Cumberland Food Brokers, Inc.
Principal Address: 2740 East Harris Blvd.
Charlotte, North Carolina 28213
Location of Books and Record: same
Authorized Stock: 100,000 shares of Common Stock,
$1.00 par value
Issued and Outstanding Stock: 1,000 shares
Cumberland Food Brokers, Inc. is not party to any agreement
providing for options, rights, rights of conversion, redemption,
purchase or repurchase, rights of refusal and similar rights
relating to its capital stock.
5. Meatmaster Brokerage, Inc.
Principal Address: 11159 Airpark Road, Suite 4
Ashland, Virginia 23005
Location of Books and Records: 2740 East Harris Blvd.
Charlotte, North Carolina 28213
Authorized Stock: 4,000 shares, Class A $1.00 par
value common stock (voting) 1,000
shares, Class B $1.00 par value
common stock
Issued and Outstanding Stock: 500 shares of Class A
Meatmaster Brokerage Inc. is not party to any agreement providing
for options, rights, rights of conversion, redemption, purchase or
repurchase, rights of first refusal and similar rights relating to
its capital stock
SCHEDULE 7.14 - Page 4 of 5
<PAGE> 19
G. MS Acquisition Limited L.P. partnership interests:
<TABLE>
<CAPTION>
Partner Partnership Interest Partnership Interest
------- -------------------- --------------------
<S> <C> <C>
MSSC Acquisition Corporation general partner 1% general partner
Richmont Capital Partners I, L.P. limited partner 99% limited partner
</TABLE>
H. Richmont Capital Partners I, L.P. partnership capital contributions:
<TABLE>
<CAPTION>
Partnership Capital
Partner Partnership Interest Contributions
------- -------------------- -------------
<S> <C> <C>
JR Investment Corp. general and managing partner $10,000 as general and
managing partner
New Arrow Corp. general partner $100,000,000 as
general partner
Richard R. Rogers Class A limited partner $10,000 Class A limited
partner
$500 Class B limited
Tom Reynolds Class B limited partner partner
</TABLE>
I. MSSC Acquisition Corp. voting capital stock:
Owner of Record
---------------
Richmont Capital Partners I, L.P.
SCHEDULE 7.14 - Page 5 of 5
<PAGE> 20
Schedule 9.1
to
First Amendment
to
Amended and Restated
Credit Agreement
Debt
1. Deferred Compensation Plan dated December 31, 1990 between Adams,
Beckman, Pedersen, Inc. d/b/a ABP/Watt, Inc. and Robert W. Cowin payable
monthly, with a net present value of $127,444.92 (as 4/1/98).
2. Deferred Compensation Plan dated December 31, 1990 between Adams,
Beckman, Pedersen, Inc. d/b/a ABP/Watt, Inc. and Jerry Bonniol payable monthly,
with a net present value of $151,684.31 (as 4/1/98).
SCHEDULE 9.1 - Solo Page
<PAGE> 1
EXHIBIT 10.3
SECOND AMENDMENT TO AMENDED
AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the
"Amendment"), dated as of February 26, 1999, is entered into by and among
RICHMONT MARKETING SPECIALISTS INC., a corporation duly organized and validly
existing under the laws of the State of Delaware ("Borrower"), each of the banks
or other lending institutions which are signatories hereto (each such bank or
other lending institution individually, a "Bank" and, collectively, the
"Banks"), and THE CHASE MANHATTAN BANK, individually as a Bank and as agent for
itself and the other Banks (in its capacity as agent, together with its
successors in such capacity, the "Agent").
RECITALS:
Borrower, Banks and Agent have entered into that certain Amended and
Restated Credit Agreement dated as of December 18, 1997 (as modified by six
letter agreements, dated March 31, 1998, July 8, 1998, July 17, 1998, July 31,
1998, September 24, 1998, and September 30, 1998, respectively and as amended by
that certain First Amendment to Amended and Restated Credit Agreement dated as
of June 30, 1998, the "Agreement"). Borrower, Banks and Agent now desire to
further amend the Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree, effective as of the date hereof (unless
otherwise indicated), as follows:
ARTICLE 1
Definitions
Section 1.1 Definitions. Capitalized terms used in this Amendment, to the
extent not otherwise defined herein, shall have the same meanings as in the
Agreement, as amended hereby.
ARTICLE 2
Amendments
Section 2.1 Amendment to Subsection 9.5(g). Subsection 9.5(g) of the
Agreement is amended in its entirty to read as follows:
(g) loans and advances to employees for business expenses
incurred in the ordinary course of business not to exceed Five Hundred
Thousand Dollars ($500,000) in the aggregate at any time outstanding;
excluding from such aggregate limit any advances made to purchase a
primary residence of an employee in connection with the Borrower's or
a Subsdiary's relocation of such employee as
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 1
<PAGE> 2
long as such advances to purchase real estate are not outstanding for
more than sixty (60) days;
Section 2.2 Amendment to Section 9.3. Subclause (iv) of clause (b) of
Section 9.3 is amended in its entirety to read as follows:
(iv) Borrower provides evidence satisfactory to the Agent that (A) the
acquisition and all transactions contemplated thereby are permitted by the
Indenture; (B) the average daily balances of the sum of Borrower's and the
Subsidiaries' cash, cash equivalents and Borrowing Availability for the
thirty (30) day period prior to the date of the delivery of the notice
required by clause (v) below and calculated as if the acquisition occurred
on the first (1st) day of such period, shall equal or exceed Fifteen
Million Dollars ($15,000,000); and (C) Borrower shall be in compliance with
the ratio of Operating Cash Flow to Fixed Charges required by Section 10.1
for the four (4) Fiscal Quarter period then most recently ending (or the
portion thereof since October 1, 1998 and such period, herein the
"Calculation Period") calculated on a proforma basis by treating the Target
(or, as applicable, the portion of such Target's operations attributable to
the assets acquired) as a Subsidiary for the purposes of the definition of
Fixed Charges for the Calculation Period and including in Operating Cash
Flow the sum of the following for the Calculation Period: (1) the
Calculated EBITDA of the Target or, as applicable, the assets acquired,
minus (2) any provision for (or plus any benefit from) income or franchise
taxes included in determining the Net Income included in such Calculated
EBITDA; minus (3) interest expense deducted in determining such Net Income,
minus (4) all net expenditures of the Target or applicable to the assets
being acquired which are classified as capital expenditures in accordance
with GAAP (with the concept of net being defined as the sum of such capital
expenditures minus the proceeds from the sale of assets which are used to
make such capital expenditures) during the period for which such Net Income
is calculated (the sum of the forgoing clauses (1) through (4) calculated
for any period, herein the "Target Operating Cash Flow");
Section 2.3 Amendment to Section 10.1. Section 10.1 of the Agreement is
amended in its entirety to read as follows:
Section 10.1 Fixed Charge Coverage Ratio. Borrower shall not permit
the ratio of the Operating Cash Flow to Fixed Charges calculated as of the
last day of each Fiscal Quarter of the Borrower commencing with the Fiscal
Quarter ended December 31, 1998, during the periods set forth below to be
less than the ratio set forth below for the period during which such Fiscal
Quarter end occurs:
<TABLE>
<CAPTION>
================================================================
PERIOD RATIO
================================================================
<S> <C>
October 1, 1998 through March 31, 1999 0.80 to 1.00
----------------------------------------------------------------
April 1, 1999 through December 31, 1999 1.00 to 1.00
----------------------------------------------------------------
January 1, 2000 through Termination Date 1.25 to 1.00
----------------------------------------------------------------
</TABLE>
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 2
<PAGE> 3
The phrase "Operating Cash Flow" means, as of any Fiscal Quarter end, the
total of the following for the Borrower and the Subsidiaries calculated on
a consolidated basis without duplication for the four (4) Fiscal Quarter
period (or portion thereof since October 1, 1998) then ending (the "Subject
Period"): (a) EBITDA minus (b) the sum of (i) net Capital Expenditures
(defined as the sum of Capital Expenditures minus the proceeds from the
sale of assets which are used to make Capital Expenditures) minus (ii) the
Capital Expenditures made in the Subject Period in connection with any of
the following matters (the following matters, herein the "Excluded Capital
Expenditures"); provided that the aggregate amount of Excluded Capital
Expenditures subtracted pursuant to this clause (ii) or subtracted pursuant
to clause (ii)(B) of Section 10.2 shall never exceed, in each case, an
amount equal to Seven Million Six Hundred Fifty Thousand Dollars
($7,650,000):
<TABLE>
<CAPTION>
=========================================================
EXCLUDED CAPITAL EXPENDITURES AMOUNT
=========================================================
<S> <C>
PeopleSoft $1,300,000
---------------------------------------------------------
PeopleSoft Installation Costs 1,900,000
---------------------------------------------------------
Required Computer Upgrades
(upgrade & install field computers) 1,600,000
---------------------------------------------------------
Imaging System 500,000
---------------------------------------------------------
Data Warehouse 250,000
---------------------------------------------------------
Communications (Local Area Network
& Wide Area Network, and Voice
upgrades) 650,000
---------------------------------------------------------
Required Software Upgrades
(compliance costs) 500,000
---------------------------------------------------------
Office Move 950,000
=========================================================
TOTAL $7,650,000
=========================================================
</TABLE>
The phrase "Fixed Charges" means, as of any Fiscal Quarter end, the total
of the following for the Borrower and the Subsidiaries calculated on a
consolidated basis without duplication for the four (4) Fiscal Quarter
period (or portion thereof since October 1, 1998) then ending: (a) net cash
interest plus (b) principal amortization of Debt paid or payable
(excluding, to the extent included, nonpermanent principal repayments under
the Loans) plus (c) current taxes payable plus (d) dividends or other
distribution paid on account of any shares of any class of stock of
Borrower.
Section 2.4 Amendment to Section 10.2. Section 10.2 of the Agreement is
amended in its entirety to read as follows:
Section 10.2 Interest Coverage. Borrower shall not permit the ratio of
(a) the sum of Operating Cash Flow (as defined in Section 10.1) to (b) the
sum of cash interest expense minus cash interest income, all calculated for
the four (4) Fiscal Quarter period (or portion thereof since October 1,
1998) ending on the last day of
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 3
<PAGE> 4
each Fiscal Quarter to be less than (i) 1.50 to 1.00 as of each Fiscal
Quarter end prior to January 1, 2000; (ii) 1.75 to 1.00 as of each Fiscal
Quarter end after January 1, 2000 but prior to January 1, 2001; and (iii)
2.00 to 1.00 as of each Fiscal Quarter end after January 1, 2001.
Section 2.5 Amendment to Exhibit B. Exhibit B to the Agreement is amended
in its entirety to read as set forth on Exhibit B hereto.
ARTICLE 3
Conditions
Section 3.1 Conditions. The effectiveness of this Amendment is subject to
the satisfaction of the following conditions precedent:
(a) Agent shall have received all of the following, each in form and
substance satisfactory to the Agent:
(i) the certificates evidencing the stock of Meatmaster
Brokerage, Inc. together with blank stock powers duly executed;
(ii) duly executed UCC-3 Termination Statements from the
following secured parties:
(A) Smith Food Brokerage, Inc. relating to the financing
statements filed in the following jurisdictions under the
following file numbers: Virginia #1317359; City of Norfolk,
Virginia #94- 210; Hanover County, Virginia #142-94; and Virginia
#1317360;
(B) David Hollingsworth, Sr. relating to the financing
statements filed in the following jurisdictions under the
following file numbers: Virginia #3087213 and City of Salem, and
Virginia #94-77; and
(C) BankOne relating to the financing statements filed in
the following jurisdictions under the following file numbers:
Arizona #690610 and Arizona #708196:
(iii) the following corporate certifications:
(A) Certificate from the appropriate governmental official
as to Atlas Marketing Company, Inc.'s authority to do business
and good standing in Virginia;
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 4
<PAGE> 5
(B) Certificate from the appropriate governmental official
of Maryland as to Meatmaster Brokerage, Inc.'s authority to do
business and good standing and an amendment to Meatmaster
Brokerage, Inc.'s Articles of Incorporation to correct power of
the corporation;
(iv) An executed copy of a subordination of Landlord's Lien for
the Briargrove Place location;
(b) Evidence of the Borrower's Compliance with Sections 9.1(b)(iii)
and Section 9.2(a) of the Agreement;
(c) The representations and warranties contained herein and in all
other Loan Documents, as amended hereby, shall be true and correct in all
material respects as of the date hereof as if made on the date hereof,
except for such representations and warranties limited by their terms to a
specific date;
(d) No Default shall have occurred and be continuing;
(e) All proceedings taken in connection with the transactions
contemplated by this Amendment and all documentation and other legal
matters incident thereto shall be satisfactory to Agent and its legal
counsel, Jenkens & Gilchrist, a Professional Corporation; and
(f) Borrower shall have paid to Agent an amendment fee in the amount
of Seven Thousand Dollars ($7,000.00).
ARTICLE 4
Ratifications, Representations and Warranties
Section 4.1 Ratifications. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Agreement and except as expressly modified and superseded by this
Amendment, the terms and provisions of the Agreement and the other Loan
Documents are ratified and confirmed and shall continue in full force and
effect. Borrowers, Agent and the Banks agree that the Agreement as amended
hereby and the other Loan Documents shall continue to be legal, valid, binding
and enforceable in accordance with their respective terms.
Section 4.2 Representations and Warranties. Borrower represents and
warrants that as of the date hereof there are no claims or offsets against or
defenses or counterclaims to its obligations under any of the Loan Documents. TO
INDUCE THE BANKS AND AGENT TO ENTER INTO THIS AMENDMENT BORROWER WAIVES TO THE
EXTENT PERMITTED BY APPLICABLE LAW ANY AND ALL SUCH CLAIMS, OFFSETS, DEFENSES OR
COUNTERCLAIMS, WHETHER KNOWN OR UNKNOWN, ARISING PRIOR TO THE DATE HEREOF AND
RELATING TO THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. Borrower hereby represents
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 5
<PAGE> 6
and warrants to Agent and the Banks that (a) the execution, delivery and
performance of this Amendment have been authorized by all requisite corporate
action on the part of Borrower and each Obligated Party and will not violate the
articles of incorporation or bylaws of Borrower or any Obligated Party, (b)
after giving effect to this Amendment, the representations and warranties
contained in the Agreement, as amended hereby, and in any other Loan Document
are true and correct on and as of the date hereof as though made on and as of
the date hereof except to the extent those representations and warranties
expressly relate solely to another date, (c) after giving effect to this
Amendment, no Default has occurred and is continuing, (d) after giving effect to
this Amendment, Borrower and each Obligated Party is in full compliance with all
covenants and agreements contained in the Agreement, as amended hereby, and the
other Loan Documents, and (e) the Articles of Incorporation and Bylaws of
Borrower have not been amended or otherwise modified since December 18, 1997.
ARTICLE 5
Miscellaneous
Section 5.1 Survival of Representations and Warranties. All representations
and warranties made in this Amendment shall survive the execution and delivery
of this Amendment and the other Loan Documents, and no investigation by Agent or
any Bank or any closing shall affect the representations and warranties or the
right of Agent or any Bank to rely upon them.
Section 5.2 Reference to Agreement. Each of the Loan Documents, including
the Agreement and any and all other agreements, instruments or documents now or
hereafter executed and delivered pursuant to the terms hereof or pursuant to the
terms of the Agreement as amended hereby, are hereby amended so that any
reference in such Loan Documents to the Agreement shall mean a reference to the
Agreement as amended hereby.
Section 5.3 Expenses of Lender. As provided in the Agreement, Borrower
agrees to pay on demand all costs and expenses incurred by Agent and the Banks
in connection with the preparation, negotiation, and execution of this
Amendment, including without limitation the costs and fees of Agent's legal
counsel.
Section 5.4 Severability. Any provision of this Amendment held by a court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 5.5 Applicable Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York and the
applicable laws of the United States of America.
Section 5.6 Successors and Assigns. This Amendment is binding upon and
shall inure to the benefit of Agent, the Banks and Borrower and their respective
successors and assigns, except Borrower may not assign or transfer any of its
rights or obligations hereunder without the prior written consent of the Agent
and the Banks.
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 6
<PAGE> 7
Section 5.7 Counterparts. This Amendment may be executed in one or more
counterparts and on telecopy counterparts, each of which when so executed shall
be deemed to be an original, but all of which when taken together shall
constitute one and the same agreement.
Section 5.8 Effect of Waiver. No consent or waiver, express or implied, by
Agent or the Banks to or for any breach of or deviation from any covenant,
condition or duty by Borrower or any Obligated Party shall be deemed a consent
or waiver to or of any other breach of the same or any other covenant, condition
or duty.
Section 5.9 Headings. The headings, captions, and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
Section 5.10 ENTIRE AGREEMENT. THIS AMENDMENT EMBODIES THE FINAL, ENTIRE
AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THIS AMENDMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE
PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
Executed as of the date first written above.
BORROWER:
RICHMONT MARKETING SPECIALISTS INC.
By: /s/ CARRINE K. REILLY
-------------------------------------
Carrine K. Reilly
Treasurer
BANKS:
THE CHASE MANHATTAN BANK,
individually as a Bank and as the Agent
By: /s/ GEORGE LOUIS MCKINLEY
-------------------------------------
George Louis McKinley
Vice President
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 7
<PAGE> 8
Each Obligated Party hereby consents and agrees to this Amendment and
agrees that each Loan Document to which it is a party shall remain in full force
and effect and shall continue to be its legal, valid and binding obligation
enforceable against it in accordance with its terms. Each Obligated Party hereby
represents and warrants that as of the date of the Amendment there are no claims
or offsets against or defenses or counterclaims to its obligations under any of
the Loan Documents. TO INDUCE THE BANKS AND AGENT TO ENTER INTO THIS AMENDMENT
EACH OBLIGATED PARTY WAIVES ANY AND ALL SUCH CLAIMS, OFFSETS, DEFENSES OR
COUNTERCLAIMS, WHETHER KNOWN OR UNKNOWN, ARISING PRIOR TO THE DATE OF THE
AMENDMENT AND RELATING TO THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
MARKETING SPECIALISTS SALES
COMPANY (individually and as successor
by merger to Ferro & Associates, Tower Marketing,
Inc., T-Bar Brokerage, Inc. and TNT
Convenience Stores, Inc.)
BROMAR, INC. (individually and as successor
in interest by merger to Gene Sanford & Associates, Inc.,
Batestas & Co. and Service Assets Corp.)
BROKERAGE SERVICES, INC.
CUMBERLAND FOOD BROKERS, INC.
CENTURY FOOD BROKERS OF HICKORY, INC.
ULTIMATE FOOD SALES, INC.
MEATMASTER BROKERAGE, INC.
EAST COAST FOOD BROKERAGE, INC.
ATLAS MARKETING COMPANY, INC. (individually and as successor
by merger to MSSC Carolina, Inc.)
By: /s/ CARRINE K. REILLY
--------------------------------
Carrine K. Reilly
Treasurer
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 8
<PAGE> 1
EXHIBIT 10.4
EQUITY CONTRIBUTION AGREEMENT
This EQUITY CONTRIBUTION AGREEMENT (this "Agreement"), dated as of October
7, 1997, is by and among MS Acquisition Limited, a Texas limited partnership,
Ronald D. Pedersen, Jeffrey A. Watt, Bruce A. Butler and Gary R. Guffey (each, a
"Stockholder", and collectively, the "Stockholders"), Marketing Specialists
Sales Company, a Texas corporation ("MSSC"), and Richmont Marketing Specialists
Inc., a Delaware corporation ("Holding").
Introductory Statements
The Stockholders own all of the issued and outstanding shares of common
stock, par value $.01 per share, of MSSC (the "MSSC Common").
The Stockholders desire to exchange their shares of MSSC Common for a like
number of shares of common stock, par value $.01 per share, of Holding (the
"Holding Common"), and Holding desires to acquire all of the issued and
outstanding shares of MSSC Common from the Stockholders in exchange for the
issuance of a like number of shares of Holding Common, all pursuant to the terms
of this Agreement.
The Stockholders and Holding desire to enter into a new Company and
Stockholders Agreement in order to set forth certain material terms governing
their relationship as stockholders of Holding.
MS Acquisition Limited ("MS Acquisition") desires to continue to receive
the benefits of certain registration rights regarding its shares of MSSC Common
after the exchange for Holding Common and, therefore, MS Acquisition desires to
enter into a new Registration Rights Agreement providing for certain
registration rights in connection with its shares of Holding Common.
Accordingly, for and in consideration of the foregoing and the mutual
agreements, representations, warranties, covenants and conditions set forth in
this Agreement, and other good, valid and binding consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement,
intending to be legally bound, hereby agree as follows:
ARTICLE I
EQUITY CONTRIBUTION AGREEMENT
<PAGE> 2
EXCHANGE OF THE SHARES
1.1 Exchange. Upon the terms and subject to the conditions set forth in
this Agreement, Holding hereby agrees to issue to each Stockholder on the date
first set forth above, free and clear of all liens, security interests, pledges,
charges, claims, options, rights, demands and restrictions of every kind,
character and description whatsoever (collectively, "Encumbrances") imposed by
Holding the number of shares of Holding Common set forth opposite such
Stockholder's name on Schedule 1.1 hereto, and each Stockholder agrees to
assign, transfer and deliver to Holding on such date, the number of shares of
MSSC Common set forth opposite such Stockholder's name on Schedule 1.1 hereto.
1.2 Date and Place of Closing. Upon the terms set forth in this Agreement,
the exchange of shares of MSSC Common and Holding Common provided for herein
(the "Closing") shall be consummated at a closing to be held at the offices of
MSSC at 10:00 a.m., local time, on the date hereof (the "Closing Date").
1.3 Deliveries at Closing. Subject to the conditions set forth in this
Agreement, at Closing,
(a) Holding shall deliver to each Stockholder:
(i) a certificate, in the name of such Stockholder,
evidencing and representing the number of shares of
Holding Common set forth opposite such Stockholders'
name on Schedule 1.1 hereto; and
(ii) all other previously undelivered documents, instruments
and writings required to be delivered by Holding at or
prior to the Closing pursuant to this Agreement or
otherwise required in connection herewith.
(b) Each Stockholder shall deliver to Holding:
(i) a certificate evidencing and representing shares of MSSC
Common accompanied by a stock power duly executed, and
otherwise in form acceptable for transfer; and
(ii) all other previously undelivered documents, instruments
and writings required to be delivered by the
Stockholders at or prior to the Closing pursuant to this
Agreement or otherwise required in connection herewith.
1.4 Securities Laws Exemption. Each Stockholder acknowledges that as of
the Closing Date the Holding Common will not have been registered under the
Securities Act of 1933, as
EQUITY CONTRIBUTION AGREEMENT
<PAGE> 3
amended (the "Securities Act"), or any state securities or blue sky laws. Each
Stockholder represents that it is acquiring the Holding Common as principal for
its own account, for investment only, and not with a view to the resale or
distribution thereof except in accordance with applicable securities laws.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF HOLDING
Holding hereby represents and warrants to the Stockholders as follows:
2.1 Organization and Qualification. Holding is (i) a corporation validly
existing and in good standing under the laws of the State of Delaware, (ii) duly
qualified to do business as a foreign corporation and in good standing in each
jurisdiction in which the character of the properties and assets now owned or
leased by it or the nature of the business transacted by it requires it to be so
qualified. Holding has the corporate power and authority to carry on its
business as now being conducted.
2.2 Authority. Holding has all requisite power and authority (corporate
and otherwise) to enter into, execute and deliver this Agreement and perform its
obligations hereunder. This Agreement has been duly executed and delivered by
Holding and is a valid and binding obligation of Holding enforceable against
Holding in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, or other similar laws affecting creditors' rights generally or
general principals of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by Holding will not result in a violation or breach of or
constitute a default under any term or provision of its Certificate of
Incorporation or Bylaws.
2.3 Capitalization of Holding. Holding is authorized to issue 1,000,000
shares of Holding Common. Upon delivery to the Stockholders, all of the shares
of Holding Common will be validly issued, fully paid and nonassessable. The
Holding Common will be issued free and clear of any Encumbrance imposed by
Holding. Upon issuance hereunder, the shares of Holding Common to be issued to
the Stockholders will represent all of the issued and outstanding capital stock
of Holding. Except as set forth in the Stockholders Agreement (as defined
herein), there are no outstanding options, warrants or other rights to acquire
from Holding any shares of capital stock of Holding; furthermore, there are no
outstanding securities authorized, granted or issued by Holding that are
convertible into or exchangeable for shares of Holding's capital stock and there
are no phantom stock rights, stock appreciation rights or similar rights
regarding Holding's capital stock.
2.4 No Conflicts. The execution, delivery and performance of this
Agreement by Holding and consummation of the transactions contemplated hereby
will not:
EQUITY CONTRIBUTION AGREEMENT
<PAGE> 4
(a) result in the creation or imposition of any Encumbrance
imposed by Holding upon the Holding Common, with or without
the giving of notice and/or the passage of time, or
(b) violate, conflict with, effect acceleration of, or result in
termination, cancellation or modification of, or constitute a
default under (i) any contract, agreement or other instrument
to which Holding is a party or by which it or its assets is
bound or (ii) any note, bond, mortgage, indenture, deed of
trust, license, lease, contract, commitment, understanding,
arrangement, agreement or restriction of any kind or character
to which Holding is a party or by which Holding may be bound
or affected or to which any of its respective assets may be
subject, or
(c) violate any statute or law or any judgment, decree, order,
writ, injunction, regulation or rule of any court or local,
state or federal governmental or regulatory authority.
2.5 Consents and Approvals. Other than as may be required pursuant to the
terms of the Credit Agreement (the "Credit Agreement") dated as of February 12,
1997, as amended, between NationsBank of Texas, N.A. ("NationsBank") and MSSC,
Holding is not required to obtain, transfer or cause to be transferred any
consent, approval, license, permit or authorization, or make any declaration,
filing or registration with, any third party or any public body or authority in
connection with (a) the execution and delivery by Holding of this Agreement or
(b) the consummation of the transactions contemplated hereby.
2.6 No Commission. Holding has not employed any broker, agent or finder in
connection with any transaction contemplated by this Agreement. Holding hereby
indemnifies the Stockholders against any liability for a broker's commission,
finder's fee or any other fee of any description incurred by Holding with
respect to any transaction contemplated by this Agreement.
2.7 Accuracy of Disclosure. Holding has no knowledge of any information
contained in this Agreement that contains an untrue statement of material fact
or omits to state any material fact required to be stated in order to make the
statements made herein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Each Stockholder hereby represents and warrants to Holding as follows:
EQUITY CONTRIBUTION AGREEMENT
<PAGE> 5
3.1 Authority. The Stockholder has all requisite power and authority to
enter into, execute and deliver this Agreement and perform his or its
obligations hereunder. This Agreement has been duly executed and delivered by
such Stockholder and is a valid and binding obligation of such Stockholder
enforceable against such Stockholder in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium, or other similar laws affecting creditors'
rights generally or general principals of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). With respect
to MS Acquisition, MS Acquisition is a limited partnership duly organized and
validly existing under the laws of the State of Texas, and the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by its general partner.
3.2 Consents and Approvals. Other than as may be required pursuant to the
terms of the Credit Agreement, the Stockholder is not required to obtain,
transfer or cause to be transferred any consent, approval, license, permit or
authorization, or make any declaration, filing or registration with, any third
party or any public body or authority in connection with (a) the execution and
delivery by such Stockholder of this Agreement or (b) the consummation of the
transactions contemplated hereby.
3.3 Title and Encumbrances to MSSC Common. The Stockholder owns the number
of shares of MSSC Common set forth opposite such Stockholder's name on Schedule
1.1 hereto, beneficially and of record, free and clear of any Encumbrance except
for (i) Encumbrances imposed pursuant to the Credit Agreement, and (ii)
Encumbrances imposed pursuant to that certain Amended and Restated Company and
Shareholders Agreement among MS Acquisition, MSSC, and the Stockholders (which
agreement will be terminated upon the execution and delivery of the Stockholders
Agreement). Upon the consummation of the transactions contemplated by this
Agreement, Holding will acquire good, valid and marketable title to the shares
of MSSC Common held by the Stockholder, free and clear of any Encumbrances
imposed by MSSC. Except as set forth on Schedule 3.3, there are no outstanding
options, warrants or other rights to acquire any shares of the MSSC Common from
the Stockholders.
3.4 Capitalization of MSSC. MSSC is authorized to issue 10,000,000 shares
of MSSC Common. The total number of shares of MSSC Common issued and outstanding
is 137,635, and the total number of shares of common stock of MSSC issued and
held in treasury is 12,445 (the "MSSC Treasury Stock"). The MSSC Treasury Stock
is held by MSSC free and clear of any Encumbrance except for (i) a first lien
security interest held by Vincent Clanton in 9,333 shares of MSSC Treasury Stock
and a second lien security interest in 3,112 shares of MSSC Treasury Stock (the
shares subject to such second lien security interest being hereinafter referred
to as the "Murray Pledged Shares") pursuant to a Pledge Agreement dated June 15,
1995, (ii) a security interest in the Murray Pledged Shares by virtue of a
Collateral Assignment Agreement dated September 27, 1994 by Vincent Clanton in
favor of George Murray, (iii) a potential security interest held by Margaret A.
Mabry in 6,700 shares in Marketing Specialists Corporation, a Texas corporation,
which was merged into MSSC in 1990, the pledge creating such security interest
being referenced only in a Promissory Note dated
EQUITY CONTRIBUTION AGREEMENT
<PAGE> 6
__________, 1993, and (iv) a potential security interest held by Vincent G.
Santucci in 100 shares in Marketing Specialists Sales Company, a Florida
corporation, which was merged into MSSC in 1996.
3.5 Accredited Investor Status. Each Stockholder is an "Accredited
Investor", as such term is defined by Rule 501 under the Securities Act. The
Stockholder has such knowledge and experience in financial and business matters
that the Stockholder is capable of evaluating the merits and risks of this
transaction and of an investment in Holding.
3.6 Shares Not Registered, Indefinite Holding. The Stockholder has been
advised by Holding, and understands, that he or it must bear the economic risk
of an investment in the Holding Common for an indefinite period of time because
the Holding Common has not been registered under the Securities Act. Therefore,
the Holding Common must be held by such Stockholder unless the Holding Common is
subsequently registered under the Securities Act or an exemption from such
registration is available for the transfer of the Holding Common. Such
Stockholder is familiar with Rule 144 of the Securities Act and the restrictions
and requirements thereunder as they relate to a public resale.
3.7 Acquisition for Own Account. The Stockholder represents that the
Holding Common is being acquired solely for such Stockholder's own account for
investment and not with a view toward, or for resale in connection with, any
"distribution" (as that term is used in the Securities Act and the Rules and
Regulations thereunder) of all or any portion thereof.
3.8 Legend on Certificates. The Stockholder further understands that the
certificates evidencing the Holding Common shall bear, until such time as the
shares shall have been registered under the Securities Act or shall have been
transferred in accordance with such an opinion of counsel, the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF
1933, OR ANY APPLICABLE STATE SECURITIES LAWS, AND ANY SALE, TRANSFER,
PLEDGE OR OTHER TRANSFER OR DISPOSITION THEREOF MAY BE MADE ONLY (I) IN A
TRANSACTION REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR (II) IF AN EXEMPTION FROM REGISTRATION UNDER SAID ACT IS AVAILABLE
AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO SUCH EFFECT
REASONABLY SATISFACTORY TO IT. IN ADDITION, ANY SALE, ASSIGNMENT,
TRANSFER, PLEDGE OR OTHER TRANSFER OR DISPOSITION OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY AND SUBJECT TO THE TERMS
AND PROVISIONS OF A COMPANY AND STOCKHOLDERS AGREEMENT DATED AS OF OCTOBER
7, 1997, BY AND AMONG THE COMPANY AND CERTAIN STOCKHOLDERS THEREOF AND A
REGISTRATION RIGHTS AGREEMENT, DATED AS OF OCTOBER 7, 1997,
EQUITY CONTRIBUTION AGREEMENT
<PAGE> 7
BETWEEN THE COMPANY AND MS ACQUISITION LIMITED. AMONG OTHER THINGS, SUCH
COMPANY AND STOCKHOLDERS AGREEMENT INCLUDES A BINDING RIGHT OF FIRST
REFUSAL, VARIOUS RESTRICTIONS ON VOTING, TRANSFER AND CERTAIN OTHER
PROVISIONS INCLUDING, WITHOUT LIMITATION, SUBSTANTIAL ENCUMBRANCES AND
RESTRICTIONS ON ALIENABILITY OF SHARES. THE COMPANY WILL FURNISH A COPY OF
THE COMPANY AND STOCKHOLDERS AGREEMENT AND THE REGISTRATION RIGHTS
AGREEMENT TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE ON
REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED
OFFICE.
3.9 No Community Property Interest. None of the shares of Capital Stock to
be Transferred by Pedersen or Watt pursuant to any transaction contemplated
hereby are subject to any community property interest or other proprietary
interest to which any spouse, whether former or present, of either Pedersen or
Watt, is entitled.
ARTICLE IV
INDEMNIFICATION
4.1 Survival of Representations. Each representation and warranty made
hereunder shall survive any investigation made by or on behalf of any party
hereto and shall survive the Closing and the consummation of each and any
transaction in connection with this Agreement hereunder for the period of 18
months; provided, however, that the representations and warranties set forth in
Sections 3.1 and 3.3 shall survive indefinitely. The expiration of any survival
period shall not bar or otherwise affect the subsequent revival and survival of
the representations and warranties made pursuant to or in connection with this
Agreement in accordance with the immediately preceding sentence. Each covenant
and agreement shall survive any investigation made by or on behalf of any party
hereto and shall survive the Closing hereunder.
4.2 Holding's Indemnification Obligations. Subject to the terms and
conditions of this Article IV, Holding agrees to indemnify, defend and hold
harmless each Stockholder and their respective affiliates (the "Stockholders'
Group") from and against any and all demands, claims, actions or causes of
action, penalties, losses, damages, liabilities, costs or expenses including,
without limitation, interest, and reasonable attorneys' fees and expenses
(collectively "Damages") asserted against, resulting to, imposed upon or
incurred by the Stockholders' Group or any member thereof, whether directly by
such member or indirectly through his or its proportionate ownership of the
Company, by reason of or resulting from a breach or multiple breaches of any
representation, warranty or agreement made by Holding herein or any facts or
circumstances constituting such a breach (collectively, "Stockholders' Claims").
4.3 Stockholders' Indemnification Obligations. Subject to the terms and
conditions of this Article IV, each Stockholder agrees to severally, and not
jointly, indemnify, defend and hold harmless
EQUITY CONTRIBUTION AGREEMENT
<PAGE> 8
Holdings and its stockholders, directors, officers and affiliates (other than
such Stockholder) (the "Holdings Group") from and against any Damages, asserted
against, resulting to, imposed upon or incurred by the Holdings Group or any
member thereof, whether directly by such member or indirectly through its
proportionate ownership of Holding, by reason of or resulting from a breach or
multiple breaches of any representation, warranty or agreement of the
Stockholders contained in or made pursuant to this Agreement or any facts or
circumstances constituting such a breach (collectively, "Holdings Claims").
4.4 Conditions of Indemnification. Prior to any indemnification, the
obligations and liabilities of the Stockholders or Holding with respect to
Holdings Claims or Stockholders' Claims (collectively, "Claims") shall be
subject to the following terms and conditions:
(a) The party entitled to be indemnified (the "Indemnitee") will
be required to give the indemnifying party (the "Indemnitor")
written notice of any such Claim on or prior to the expiration
of the applicable period for which the applicable
representation or warranty is intended to survive as stated in
Section 4.1.
(b) Promptly after the assertion by any third party of any Claim
against any Indemnitee that, in the judgment of such
Indemnitee, may result in the incurrence by such Indemnitee of
Damages for which such Indemnitee would be entitled to
indemnification pursuant to this Agreement, such Indemnitee
shall deliver to the Indemnitor a written notice describing in
reasonable detail such Claim and such Indemnitor may
participate in and, at its option, assume the defense of the
Indemnitee against such Claim (including the employment of
counsel, who shall be reasonably satisfactory to such
Indemnitee, and the payment of expenses). Any Indemnitee shall
have the right to employ separate counsel in any such Claim
and to participate in the defense thereof, but the fees and
expenses of such counsel shall not be at the expense of the
Indemnitor unless (i) the Indemnitor shall have failed, within
a reasonable time after having been notified by the Indemnitee
of the existence of such Claim as provided in the preceding
sentence, to assume the defense of such Claim, (ii) the
employment of such counsel has been specifically authorized in
writing by the Indemnitor, or (iii) the named parties to any
such action (including any impleaded parties) include both
such Indemnitee and the Indemnitor and such Indemnitee shall
have been advised in writing by such counsel that there may be
conflicting interests between the Indemnitee and the
Indemnitor in the legal defense thereof. No Indemnitor shall
be liable to indemnify any Indemnitee for any compromise or
settlement of any such Claim effected without the consent of
the Indemnitor.
EQUITY CONTRIBUTION AGREEMENT
<PAGE> 9
ARTICLE V
COVENANTS OF THE PARTIES
5.1 Guaranty and Security Obligations. [Intentionally Omitted.]
5.2 Stockholders Agreement of Holding. The Stockholders and Holding hereby
agree to enter into a Company and Stockholders Agreement, substantially in the
form attached as Exhibit C hereto (the "Stockholders Agreement") at the Closing.
MSSC and the Stockholders hereby agree to terminate that certain Amended and
Restated Company and Stockholders Agreement, between the Stockholders and MSSC,
dated as of November 7, 1996 (the "Terminated Agreement"), at the Closing;
provided, however, that all indemnification obligations of the parties under the
Terminated Agreement regarding prior transactions shall survive such termination
for any remaining duration of the relevant indemnity period.
5.3 Registration Rights Agreement of Holding. MS Acquisition and Holding
hereby agree to enter into a Registration Rights Agreement, substantially in the
form attached as Exhibit D hereto (the "Registration Agreement") at the Closing.
MSSC and MS Acquisition hereby agree to terminate that certain Registration
Rights Agreement, between MSSC and MS Acquisition, dated as of April 2, 1996, at
the Closing.
ARTICLE VI
MISCELLANEOUS
6.1 Expenses, Taxes, Etc. Holding shall pay all fees, expenses and taxes
incurred by it, any of its affiliates and the Stockholders in connection with
the transactions contemplated by this Agreement.
6.2 Further Assurances.
(a) From time to time (including after the Closing Date), at the
Stockholders' request and without further consideration,
Holding shall execute and deliver to the Stockholders such
documents and take such other action as the Stockholders may
reasonably request in order to consummate or more effectively
evidence the transactions contemplated hereby.
(b) From time to time (including after the Closing Date), at
Holding's request and without further consideration, the
Stockholders shall execute and deliver such documents and take
such other action as Holding may reasonably request in order
to consummate or more effectively evidence the transactions
contemplated hereby.
EQUITY CONTRIBUTION AGREEMENT
<PAGE> 10
6.3 Successors and Assigns. No party shall have the right to assign all or
any part of its interest in this Agreement without the prior written consent of
the other parties, and any attempted transfer without such consent shall be null
and void. This Agreement shall be binding upon and shall inure to the benefit of
the parties and their respective successors and permitted assigns.
6.4 No Third-Party Benefit. Nothing in this Agreement shall be deemed to
create any right or obligation in any person or entity not a party hereto and
this Agreement shall not be construed in any respect to be a contract or
agreement in whole or in part for the benefit of or binding upon any person or
entity not a party hereto.
6.5 Entire Agreement; Amendment. This Agreement and the Schedules and
Exhibits hereto constitute the entire agreement among the parties hereto with
respect to the transactions contemplated herein and supersede all prior oral and
written agreements, memoranda, understandings and undertakings between the
parties hereto relating to the subject matter hereof. This Agreement may not be
modified, amended, altered or supplemented except by a written instrument
executed and delivered by each of the parties hereto.
6.6 Reformation and Severability. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under present or future laws
effective during the term hereof:
(a) in lieu of such illegal, invalid or unenforceable provision,
there shall be added automatically as a part of this Agreement
a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid
and enforceable; and
(b) the legality, validity and enforceability of the remaining
provisions hereof shall not in any way be affected or impaired
thereby.
6.7 Notices. All notices, claims, certificates, requests, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given if delivered personally, by facsimile transmission or mailed
(registered or certified mail, postage prepaid, return receipt requested) as
follows:
If to the Stockholders:
to the respective addresses set forth on Exhibit E.
EQUITY CONTRIBUTION AGREEMENT
<PAGE> 11
with a copy to:
Andrews & Kurth L.L.P.
1717 Main Street, Suite 3700
Dallas, Texas 75201
Attention: J. Gregory Holloway, Esq.
Facsimile: (214) 659-4401
If to Holding:
Richmont Marketing Specialists Inc.
2324 Gateway Drive
Irving, Texas 75063
Attention: Gary R. Guffey
Facsimile: (972) 550-1896
Richmont Capital Partners I, L.P.
4300 Westgrove Drive
Dallas, Texas 75248
Attention: Timothy M. Byrd
Facsimile: (972) 713-5052
with a copy to:
Andrews & Kurth L.L.P.
1717 Main Street, Suite 3700
Dallas, Texas 75201
Attention: J. Gregory Holloway, Esq.
Facsimile: (214) 659-4401
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Eileen Nugent Simon, Esq.
Facsimile: (212) 735-2000
or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above,
provided that notice of a change of address shall be deemed given only upon
receipt.
6.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO
ITS CONFLICTS OF LAW RULES.
6.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
The remainder of this page is intentionally left blank.
EQUITY CONTRIBUTION AGREEMENT
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
RICHMONT MARKETING SPECIALISTS INC.
By: /s/ Ronald D. Pedersen
-------------------------------
Name: Ronald D. Pedersen
----------------------------
Title: President and Chief
Executive Officer
----------------------------
MARKETING SPECIALISTS SALES COMPANY
By: /s/ Ronald D. Pedersen
-------------------------------
Name: Ronald D. Pedersen
----------------------------
Title: Chairman of the Board
----------------------------
MS ACQUISITION LIMITED
By: MSSC ACQUISITION CORPORATION,
its General Partner
By: /s/ Timothy M. Byrd
-------------------------------
Name: Timothy M. Byrd
----------------------------
Title: Vice President and
Chief Financial Officer
----------------------------
/s/ Ronald D. Pedersen
-----------------------------------
Ronald D. Pedersen
/s/ Jeffrey A. Watt
-----------------------------------
Jeffrey A. Watt
/s/ Bruce A. Butler
-----------------------------------
Bruce A. Butler
/s/ Gary R. Guffey
-----------------------------------
Gary R. Guffey
EQUITY CONTRIBUTION AGREEMENT
<PAGE> 13
The undersigned, spouse of Gary R. Guffey, a Stockholder (as defined in
the foregoing Agreement) executing the foregoing Agreement, hereunto subscribes
her name in evidence of her agreement and consents to the provisions regarding
the disposition of MSSC Common referred to in the foregoing Agreement, and to
all other provisions thereof.
Effective as of the day and year first above written.
/s/ P. Joann Guffey
-------------------
P. JOANN GUFFEY
EQUITY CONTRIBUTION AGREEMENT
<PAGE> 14
The undersigned, spouse of Bruce A. Butler, a Stockholder (as defined in
the foregoing Agreement) executing the foregoing Agreement, hereunto subscribes
her name in evidence of her agreement and consents to the provisions regarding
the disposition of MSSC Common referred to in the foregoing Agreement, and to
all other provisions thereof.
Effective as of the day and year first above written.
/s/ Victoria A. Butler
----------------------
VICTORIA A. BUTLER
EQUITY CONTRIBUTION AGREEMENT
<PAGE> 15
SCHEDULE 1.1
<TABLE>
<CAPTION>
Stockholders Number of Shares
------------ ----------------
<S> <C>
Ronald D. Pedersen 25,842
Jeffrey A. Watt 16,826
Gary R. Guffey 6,193
Bruce A. Butler 6,193
MS Acquisition Limited 82,581
</TABLE>
<PAGE> 16
SCHEDULE 3.3
Ronald D. Pedersen, Jeffrey A. Watt, Bruce A. Butler and Gary R. Guffey are as
of the date hereof entering into an Amended and Restated Warrant Agreement (the
"Warrant Agreement") with William B. Robinson ("Robinson"), whereby Robinson may
purchase shares of Holding from such Stockholders. Such Warrant Agreement
replaces a virtually identical warrant agreement regarding shares of MSSC
Common.
<PAGE> 1
EXHIBIT 10.5
COMPANY AND STOCKHOLDERS AGREEMENT
By and Among
MS ACQUISITION LIMITED,
a Texas Limited Partnership,
RICHMONT MARKETING SPECIALISTS INC.
a Delaware corporation,
RONALD D. PEDERSEN,
JEFFREY A. WATT,
BRUCE A. BUTLER,
AND
GARY R. GUFFEY
Dated as of October 7, 1997
<PAGE> 2
TABLE OF CONTENTS
1. Term ............................................................1
2. Transfer of Shares of Capital Stock..............................1
3. Legends; Opinion of Counsel .....................................5
4. Tag Along Rights.................................................5
5. Come Along Obligation............................................7
6. Put Right........................................................8
7. Additional Equity; Certain Other Matters........................10
8. Voting Agreement; Board Representation; Expenses................11
9. Certain Company Options to Repurchase...........................12
10. Representations and Warranties by Each Management Stockholder...12
11. Representations and Warranties of the Company and the
Management Stockholders.........................................14
12. Representations and Warranties of Majority Stockholder..........15
13. Survival of Representations and Warranties......................17
14. Indemnification.................................................17
15. Notices.........................................................20
16. Severability....................................................21
17. Complete Agreement..............................................21
18. Counterparts....................................................21
19. Arbitration and Choice of Law...................................21
20. Remedies........................................................22
<PAGE> 3
21. Successors and Assigns..........................................22
22. Amendments......................................................23
23. Termination of Restrictions.....................................23
<PAGE> 4
COMPANY AND STOCKHOLDERS AGREEMENT
This Company and Stockholders Agreement (this "Agreement"), dated as of
October 7, 1997, is by and among MS Acquisition Limited, a Texas limited
partnership (the "Majority Stockholder"), Richmont Marketing Specialists Inc., a
Delaware corporation (the "Company"), and the Stockholders of the Company listed
on Exhibit A attached hereto (collectively, the "Management Stockholders" and,
individually, a "Management Stockholder").
PRELIMINARY STATEMENTS
A. Each of the Management Stockholders and the Majority Stockholder owns
that number of the outstanding shares of common stock, $.01 par value per share
("Common Stock"), of the Company set forth beside its name on Exhibit B hereto.
B. The Management Stockholders and the Majority Stockholder desire to
enter into this Agreement to set forth certain material terms governing their
relationship as stockholders of the Company.
NOW, THEREFORE, in consideration of the premises and the respective mutual
agreements, covenants, representations and warranties herein contained, and for
other good, valid and binding consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
STATEMENT OF AGREEMENT
1. Term. This Agreement, and the rights and obligations of the parties
pursuant to the terms hereof, shall be binding upon the parties hereto for a
period extending from the date hereof through April 2, 2021, unless earlier
terminated in accordance with Section 23 hereof (the "Term"), provided, however,
that notwithstanding the foregoing, the agreement to vote shares of the
Company's capital stock (the "Capital Stock") pursuant to Section 8 hereof shall
be binding upon the parties hereto for a period extending from the date hereof
through April 2, 2006, unless earlier terminated in accordance with Section 23
hereof. Upon the expiration of the Term, this Agreement and the rights and
obligations of the parties hereunder shall terminate and have no force and
effect.
2. Transfer of Shares of Capital Stock.
(a) Restrictions on Transfer of Capital Stock by Management
Stockholders. Each of the Management Stockholders agrees that, except as
otherwise expressly provided below, without the prior written consent of the
Majority Stockholder (each of such consensual transactions being termed an
"Exempt Transfer"), he will not assign, sell, transfer, pledge or otherwise
dispose of or transfer ("Transfer") any shares of his Capital Stock or any
interest therein.
<PAGE> 5
(b) Permitted Transfers of Capital Stock by the Majority
Stockholder. Notwithstanding anything in this Agreement to the contrary, the
Majority Stockholder may Transfer all or part of the Capital Stock owned by the
Majority Stockholder or acquired by the Majority Stockholder pursuant to the
terms of this Agreement (the "Majority Stockholder Shares") to any of its
Affiliates (as defined below) without compliance with the terms hereof, or to
any Non-Affiliate (as defined below), provided that it shall have complied with
the provisions of Section 4 hereof to the extent applicable.
(c) Permitted Transfers of Capital Stock by Management Stockholders.
Notwithstanding anything in this Agreement to the contrary, each of the
Management Stockholders has the right to Transfer certain shares of his Capital
Stock to William B. Robinson ("Robinson") pursuant to that certain warrant (the
"Robinson Warrant") dated as of even date herewith; provided that (i) such
Transfer is consummated in accordance with the terms of the Robinson Warrant as
in effect on the date hereof and (ii) Robinson executes and delivers to the
Company an instrument in writing pursuant to which he agrees to be bound by all
of the restrictions and obligations (but none of the rights or benefits) set
forth herein as fully as if he were named as a Management Stockholder herein.
(d) Permitted Family Transfers.
(i) Notwithstanding anything in this Agreement to the
contrary, but subject to the terms of Section 2(d)(iii) below, each of the
Management Stockholders, any permitted individual transferee of the Majority
Stockholder and Robinson (collectively, the "Family Transferors") shall have the
right to Transfer any or all of their respective shares of Capital Stock at any
time during the term hereof to (i) each of such Family Transferor's spouse or
(ii) any of each of such Family Transferor's direct lineal descendants
(collectively, "Lineal Descendants"), or (iii) any partnership or trust, (x) the
general partner or trustee, as the case may be, of which is the Family
Transferor making the Transfer and (y) each partner or beneficiary of which, as
the case may be, is the spouse or a Lineal Descendant of the Family Transferor
making the Transfer.
(ii) Any Transfer pursuant to Section 2(d)(i) above or Section
2(d)(iii) below shall be deemed to have been made in accordance with the terms
thereof (1) only if the transferee of such Transfer executes and delivers an
instrument in writing pursuant to which all of the obligations and restrictions
set forth herein (including, without limitation, all restrictions on Transfer)
shall apply to such transferee, and, (2) (subject to the terms of Section
2(d)(iii) below), only so long as the Family Transferor making such Transfer
retains voting control of the shares of Capital Stock being transferred pursuant
thereunder pursuant to a voting trust agreement, or pursuant to such Management
Stockholder's capacity as trustee or general partner of the trust or
partnership, as the case may be.
(iii) In addition to, and not in limitation of, the right of
Ronald D. Pedersen ("Pedersen") to transfer his shares of Capital Stock pursuant
to Section 2(d)(i) above, and notwithstanding anything in this Section 2(d) to
the contrary, Pedersen shall have the right to (1) Transfer at any time during
the term hereof to any Lineal Descendants or any partnership or trust
<PAGE> 6
each partner or beneficiary of which, as the case may be, is the spouse or a
Lineal Descendant of the Family Transferor making the Transfer (such partnership
or trust hereinafter referred to as a "Family Entity"), up to 2,841 shares of
Capital Stock, including any voting rights relating thereto and (2) Transfer to
any Lineal Descendants or Family Entity any or all of his shares of Capital
Stock so long as the Majority Stockholder or Pedersen retains voting control of
the shares being Transferred.
(e) First Refusal Rights.
(i) Majority Stockholder's Right of First Refusal. In the
event, at any time after the date of this Agreement, any Management Stockholder
or his transferee desires to Transfer any of his shares of Capital Stock, such
party shall first offer such shares of such Capital Stock for sale to the
Majority Stockholder, at the same price and upon the same terms (or terms as
similar as reasonably possible) upon which he is proposing to dispose of such
Capital Stock, pursuant to a written notification setting forth all material
terms of the proposed transaction (the "Right of First Refusal Notice"), a copy
of which shall, to the extent reasonably practicable, be simultaneously
delivered to the Company and each of the other Management Stockholders. If the
Majority Stockholder desires to exercise such right of first refusal with
respect to all, but not less than all, of the offered shares, the Majority
Stockholder shall notify the Management Stockholder or his transferee in writing
within thirty (30) days after receipt of the Right of First Refusal Notice. In
the event the Majority Stockholder does not exercise its right of first refusal,
such Management Stockholder or transferee shall then offer such shares to the
Company as provided in Section 2(e)(ii) below. In the event the Company does not
exercise its right of first refusal, such Management Stockholder or transferee
shall then offer such shares to each of the other Management Stockholders as
provided in Section 2(e)(iii) below. If neither the Majority Stockholder, nor
the Company, nor any other Management Stockholder exercises its right of first
refusal, the Management Stockholder or transferee desiring to Transfer shares of
Capital Stock shall have thirty (30) days following the expiration of each of
the Majority Stockholder Right of First Refusal Period (as defined below), the
Company Right of First Refusal Period (as defined below), and the Management
Stockholders' Right of First Refusal Period (as defined below) within which to
dispose of such shares to the transferee named in the Right of First Refusal
Notice, provided that such Transfer be on the same terms offered to the Majority
Stockholder and the Company.
(ii) Company's Right of First Refusal. If the Majority
Stockholder does not exercise its right of first refusal described in Section
2(e)(i) with respect to all, but not less than all, of the offered shares within
the first thirty (30) day period described above (the "Majority Stockholder
Right of First Refusal Period"), the Management Stockholder or his transferee
shall then offer such shares of Capital Stock for sale to the Company, at the
same price and upon the same terms (or terms as similar as reasonably possible)
upon which he is proposing to dispose of such Capital Stock, pursuant to a Right
of First Refusal Notice. If the Company desires to exercise such right of first
refusal with respect to all, but not less than all, of the offered shares, it
shall notify the Management Stockholder or his transferee in writing within
fifteen (15) days after receipt from the offering Management Stockholder that
the Majority Stockholder had declined its right of first refusal hereunder.
<PAGE> 7
(iii) Management Stockholders' Right of First Refusal. If the
Company does not exercise its right of first refusal described in Section
2(e)(ii) with respect to all, but not less than all, of the offered shares
within the fifteen (15) day period described in the immediately preceding
paragraph (the "Company Right of First Refusal Period"), the Management
Stockholder or his transferee shall then offer such shares of Capital Stock for
sale to each of the other Management Stockholders, at the same price and upon
the same terms (or terms as similar as reasonably possible) upon which he is
proposing to dispose of such Capital Stock, pursuant to a Right of First Refusal
Notice. If any Management Stockholder desires to exercise such right of first
refusal with respect to all, but not less than all, of the offered shares, he
shall notify the Management Stockholder or his transferee in writing within
fifteen (15) days after receipt from the offering Management Stockholder that
the Company had declined his right of first refusal hereunder. In the event more
than one (1) Management Stockholder notifies the Management Stockholder or his
transferee desiring to Transfer that he desires to exercise its right of first
refusal described in this Section 2(e)(iii) with respect to all, but not less
than all, of the offered shares (each such Management Stockholder desiring to
exercise his right of first refusal pursuant hereto hereinafter referred to as
an "Exercising Management Stockholder") within the fifteen (15) day period
described in the immediately preceding sentence (the "Management Stockholders'
Right of First Refusal Period"), then each such Exercising Management
Stockholder who so notifies the Management Stockholder or his transferee shall
purchase a pro rata portion of the offered shares based on such Exercising
Management Stockholder's proportionate ownership of the aggregate number of
shares of Capital Stock then held by all of the Exercising Management
Stockholders.
(iv) Valuation of Non-Cash Consideration. In the event the
consideration for the Capital Stock as disclosed in the Right of First Refusal
Notice is other than cash, a promissory note or a combination thereof, the price
for such Capital Stock shall be the value of that consideration as agreed to by
the Management Stockholder on the one hand and Majority Stockholder, the
Company, or the Exercising Management Stockholders, as the case may be, on the
other hand, or, if no agreement can be reached as to the valuation of such
consideration, the fair market value of such consideration as determined by two
appraisers (one appointed by the Management Stockholder and one appointed by the
Majority Stockholder or the Company, as the case may be). In the event the two
appraisers are unable to agree on a fair market value within 20 days after they
are appointed and further negotiations, in the opinion of either of the
appraisers, would not result in an agreement, the fair market value of the
consideration shall be the average of the appraised values of the two
appraisers; provided, however, that if the appraised values of the two
appraisers differ by more than ten percent (10%) of the higher of the two
appraised values, the two respective appointed appraisers shall select a third
appraiser who shall independently, within 20 days after his appointment, make a
determination of the value of the consideration, and the average of the
appraised values of the three appraisers shall be the purchase price and shall
be binding on the parties hereto. The Majority Stockholder, the Company or the
Exercising Management Stockholders, as the case may be, and the Management
Stockholder whose Capital Stock is subject to the Right of First Refusal Notice,
shall each bear the cost of their respective appraisers and shall share the cost
equally of the third appraiser, if any. Notwithstanding anything herein to the
contrary, if an appraisal is used to determine the value of the consideration
pursuant to this Section 2(e)(iv), the time periods provided for in
<PAGE> 8
Sections 2(e)(i), (2(e)(ii) and 2(e)(iii) shall be tolled from the time of the
initial appointment of the two appraisers until a final appraised value is
determined pursuant to this Section 2(e)(iv).
3. Legends; Opinion of Counsel.
(a) The certificates representing the Capital Stock will bear the
following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF
1933, OR ANY APPLICABLE STATE SECURITIES LAWS, AND ANY SALE, TRANSFER,
PLEDGE OR OTHER TRANSFER OR DISPOSITION THEREOF MAY BE MADE ONLY (I) IN A
TRANSACTION REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR (II) IF AN EXEMPTION FROM REGISTRATION UNDER SAID ACT IS AVAILABLE
AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO SUCH EFFECT
REASONABLY SATISFACTORY TO IT. IN ADDITION, ANY SALE, ASSIGNMENT,
TRANSFER, PLEDGE OR OTHER TRANSFER OR DISPOSITION OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY AND SUBJECT TO THE TERMS
AND PROVISIONS OF A COMPANY AND STOCKHOLDERS AGREEMENT DATED AS OF OCTOBER
7, 1997, BY AND AMONG THE COMPANY AND CERTAIN STOCKHOLDERS THEREOF AND A
REGISTRATION RIGHTS AGREEMENT, DATED AS OF OCTOBER 7, 1997, BETWEEN THE
COMPANY AND MS ACQUISITION LIMITED. AMONG OTHER THINGS, SUCH COMPANY AND
STOCKHOLDERS AGREEMENT INCLUDES A BINDING RIGHT OF FIRST REFUSAL, VARIOUS
RESTRICTIONS ON VOTING, TRANSFER AND CERTAIN OTHER PROVISIONS INCLUDING,
WITHOUT LIMITATION, SUBSTANTIAL ENCUMBRANCES AND RESTRICTIONS ON
ALIENABILITY OF SHARES. THE COMPANY WILL FURNISH A COPY OF THE COMPANY AND
STOCKHOLDERS AGREEMENT AND THE REGISTRATION RIGHTS AGREEMENT TO THE RECORD
HOLDER OF THIS CERTIFICATE WITHOUT CHARGE ON REQUEST TO THE COMPANY AT ITS
PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE.
(b) No holder of Capital Stock may Transfer any Capital Stock
(except pursuant to an effective registration statement under the Securities Act
of 1933) without first delivering to the Company an opinion of counsel
reasonably acceptable in form and substance to the Company and its counsel that
registration under the Securities Act of 1933 is not required in connection with
such Transfer.
<PAGE> 9
4. Tag Along Rights.
(a) Subject to the provisions of Section 4(g) hereof, the Majority
Stockholder shall not, except as set forth below, in any twelve (12) month
period, directly or indirectly Transfer, in a single transaction or series of
related transactions, to any party that is not an Affiliate of the Majority
Stockholder ("Non-Affiliate") or group of Non-Affiliates (the "Tag Along
Transferee"), the Majority Stockholder Shares representing, on a fully diluted
basis, more than 5% of the Majority Stockholder Shares, unless the terms and
conditions of such Transfer shall include on a pro-rata basis an offer to the
Management Stockholders at the same price and on the same terms (or terms as
similar as reasonably possible) as the offer made to the Majority Stockholder by
the Tag Along Transferee (the "Tag Along Right"). For purposes of this
Agreement, "Affiliate" shall mean, with respect to any party, any other party
which, directly or indirectly, controls, is controlled by, or is under common
control with, such party. For purposes of this definition of "Affiliate",
"control" shall mean the power, direct or indirect, (i) to vote or direct the
voting power of at least ten percent (10%) or more of the outstanding shares of
voting securities of a party, or (ii) to direct or cause the direction of the
management and policies of a party, by ownership of voting securities, general
partnership interest or otherwise.
(b) The each Management Stockholder shall be entitled to sell to the
Tag Along Transferee the number of shares of Capital Stock held by such
Management Stockholder equaling the number derived as follows:
(X) x (A)
---
B
where X equals the number of shares of Capital Stock then owned by such
Management Stockholder, A equals the total number of Majority Stockholder Shares
to be transferred to the Tag Along Transferee and B equals the total number of
Majority Stockholder Shares.
(c) The Majority Stockholder shall notify each Management
Stockholder in writing promptly upon receipt of any proposed transfer of the
Majority Stockholder Shares which is subject to the Tag Along Right. Such notice
(the "Initial Tag Along Notice") shall set forth: (i) the name and address of
the Tag Along Transferee, the number of shares of Capital Stock proposed to be
transferred thereto, (ii) the date on which such transfer is proposed to be
effected, (iii) the proposed amount and form of consideration and terms and
conditions of payment offered by such Tag Along Transferee (the "Tag Along
Terms") and (iv) that such Tag Along Transferee has been informed of the Tag
Along Right.
(d) The Tag Along Right may be exercised by a Management Stockholder
by delivery of a written notice to the Majority Stockholder (the "Tag Along
Acceptance Notice") within 30 days following the receipt of the Initial Tag
Along Notice from the Majority Stockholder. The Tag Along Acceptance Notice
shall state the number of shares of Capital Stock that the Management
Stockholder wishes to transfer to the Tag Along Transferee.
<PAGE> 10
(e) Upon delivery of a Tag Along Acceptance Notice, each such
Management Stockholder shall be obligated to sell to the Tag Along Transferee on
the Tag Along Terms the number of shares of Capital Stock set forth in the Tag
Along Acceptance Notice; provided, however, that neither the Majority
Stockholder nor any of the Management Stockholders shall consummate the sale of
any shares of Capital Stock offered by it if the Tag Along Transferee does not
purchase all of the shares from the Majority Stockholder and the Management
Stockholders that the Majority Stockholder and the Management Stockholders are
entitled and desire to sell to the Tag Along Transferee pursuant to the terms
hereof. After expiration of the 30-day period referred to above without
acceptance by a Management Stockholder, if the provisions of this Section 4
shall have been complied with in all respects, the Majority Stockholder shall
have the right for a 90-day period to transfer such the Majority Stockholder
Shares to the Tag Along Transferee on the Tag Along Terms without further notice
to the Management Stockholders.
(f) At the closing of the transfer to any Tag Along Transferee, the
Tag Along Transferee shall remit to the Management Stockholders the
consideration for the total sales price of the Capital Stock of the Management
Stockholders sold pursuant hereto, against delivery by the Management
Stockholders of certificates for such Capital Stock, duly endorsed or with duly
executed stock powers, and the Management Stockholders shall comply with any and
all other applicable conditions to closing.
(g) Notwithstanding the other restrictions of this Section 4, the
Majority Stockholder may, at any time, Transfer (in one or more Transfers,
including, without limitation, Transfers to Non-Affiliates permitted by Section
4(a) hereof that are not subject to the Tag Along Right) up to an aggregate of
50% of the Majority Stockholder Shares to a Non-Affiliate without such Transfer
being subject to the Tag Along Right; provided, that the voting rights regarding
all such Majority Stockholder Shares so Transferred shall be granted by the
transferee to John Rochon pursuant to an irrevocable voting agreement with a
term of at least ten years; provided, further, that a copy of such voting
agreement shall be provided to the Company and the Management Stockholders prior
to the Transfer.
5. Come Along Obligation.
(a) Subject to the terms of this Section 5, if, pursuant to a bona
fide offer made by a Non-Affiliate, the Majority Stockholder desires to sell all
of its shares of Capital Stock and rights to acquire shares of Capital Stock,
each of the Management Stockholders shall be obligated to sell all, but not less
than all, of his shares of Capital Stock and rights to acquire shares of Capital
Stock to such purchaser (the "Come Along Transferee") on the terms and
conditions approved by the Majority Stockholder with respect to its own shares
of Capital Stock (the "Come Along Obligation"). The Company and each of the
Management Stockholders will take all necessary actions, and actions reasonably
deemed desirable by the Majority Stockholder, in connection with the
consummation of the sale to the Come Along Transferee of the remaining issued
and outstanding Capital Stock held by each such Management Stockholder.
<PAGE> 11
(b) The Majority Stockholder shall notify each Management
Stockholder in writing of any proposed transfer of shares which is subject to
the Come Along Obligation. Such notice (the "Come Along Notice") shall set
forth: (i) the date on which such transfer is proposed to be effected, and (ii)
the proposed amount and form of consideration and terms and conditions of
payment offered by such Come Along Transferee (the "Come Along Terms").
(c) Upon delivery of the Come Along Notice (provided that the
closing shall occur no earlier than 30 days thereafter), each Management
Stockholder shall be obligated to sell to the Come Along Transferee on the Come
Along Terms all of the shares of Capital Stock then owned, held or otherwise
controlled by such Management Stockholder and all rights to acquire shares of
Capital Stock.
(d) At the closing of the transfer of Capital Stock to any Come
Along Transferee, the Come Along Transferee shall remit to the Management
Stockholders the consideration for the total sales price of the Capital Stock of
the Management Stockholders and the rights to acquire Capital Stock sold
pursuant to the Come Along Obligation set forth herein, against delivery by the
Management Stockholders of certificates for such Capital Stock and certificates
evidencing such rights to acquire stock, all duly endorsed or with duly executed
powers, and the Management Stockholders shall comply with any and all other
applicable conditions to closing; provided however, that in no case shall the
Management Stockholders' indemnification obligations exceed their respective pro
rata amount of the applicable sales price.
6. Put Right.
(a) Put Mechanics.
(i) Subject to the provisions of Section 6(a)(ii) below, at
any time during the first fifteen (15) days of each fiscal quarter of the
Company occurring after December 31, 2000, but prior to December 31, 2003 (each
such fifteen (15) day period hereinafter referred to as a "Put Window"), each
Management Stockholder who at such time is not an employee of the Company or
Marketing Specialists Sales Company ("MSSC") (a "Put Stockholder") shall have
the option to sell to the Company, and thereupon the Company shall have the
obligation to purchase, all of the shares, of the Capital Stock which such
Management Stockholder then owns ("Remaining Shares") at the price described
below (such option to sell and reciprocal obligation to purchase are hereinafter
referred to as the "Put," and each Put Stockholder who elects to exercise the
Put is hereinafter referred to as a "Put Optionee").
(ii) Notwithstanding the above, at any time during which
shares of Capital Stock are traded on a national exchange (including, without
limitation, NASDAQ) and the Remaining Shares in question may be sold in such
public market, then such Put Stockholder shall no longer have the right to
exercise the Put with respect to such Remaining Shares.
(iii) To exercise the Put, the Put Optionee shall deliver
during a Put Window a written notice (the "Put Notice") to the Company notifying
the Company of his desire to
<PAGE> 12
exercise the Put. The closing (the "Put Closing") for the purchase by the
Company of such Put Optionee's Remaining Shares shall occur at the Company's
principal office, or at such other place as shall be mutually agreeable to the
Put Optionee and the Company, on the seventy-fifth day after the end of the
immediately preceding Put Window (such date of closing hereinafter referred to
as the "Put Closing Date"). At the Put Closing, the Put Optionee shall deliver a
duly and validly executed certificate making, for the benefit of the Company,
customary representations and warranties, including but not limited to
representations as to good title, no encumbrances, no conflicts, authority and
capacity, and no consents or commissions.
(b) Calculation of Put Price. The price per share to be paid to the
Put Optionee at the Put Closing (the "Put Price") shall be the product of:
consolidated earnings (excluding extraordinary, non-recurring or discretionary
expenses, as determined in the good faith determination of the Board of
Directors of the Company) before interest, taxes, depreciation and amortization
calculated in accordance with GAAP consistently applied ("EBITDA") of the
Company for the four (4) fiscal quarters immediately preceding the Put Notice
times a multiple which, in light of generally recognized, then prevailing market
and industry conditions, fairly reflects the value of the Company, minus the
present value of the Company's funded debt, on a consolidated basis, at the date
of calculation divided by the number of then issued and outstanding shares of
Capital Stock. In calculating EBITDA, the EBITDA of the Company shall be deemed
to include the full year EBITDA of any entity acquired by the Company or its
subsidiaries during such four (4) fiscal quarters. In the event that the Company
and the Put Optionee cannot agree as to the calculation of the Put Price within
sixty (60) days after the giving of the Put Notice, then the matter shall be
referred to Price Waterhouse L.L.P. (Dallas Office) ("PW") who shall calculate
the Put Price. In the event the Put Optionee or the Company disagrees with the
Put Price calculated by PW, then the matter shall be referred to Ernst & Young,
L.L.P. ("E&Y") who shall calculate the Put Price. If the calculations rendered
by PW and E&Y differ by no more than ten percent (10%), the Put Price shall be
the average of the two such calculations. If the calculations differ by more
than ten percent (10%), PW and E&Y shall immediately, but in no event more than
five (5) days following delivery of E&Y's calculations, jointly appoint a third
accounting firm (the "Third Appraiser"). The Third Appraiser shall, within ten
(10) days of its appointment, render its calculation of the Put Price, and the
average of the calculations of the Put Price of PW, E&Y and the Third Appraiser
shall be the Put Price and shall be final and binding upon the Company and the
Put Optionee. The Company shall bear the cost of PW, the Put Optionee shall bear
the cost of E&Y, and the Company and the Put Optionee shall each pay one-half of
the cost of the Third Appraiser. To the extent not already reflected in the pro
forma component of EBITDA as calculated pursuant to the foregoing provisions of
this Section 6(b), in the event of any reorganization, recapitalization, split,
merger, stock split, stock dividend, combination or exchange of shares, issuance
of other securities in exchange for Capital Stock or any other change in the
outstanding securities of the Company that results in a change in the number or
the kind of shares of Capital Stock or securities convertible into Capital
Stock, the amount to be paid per share by the Company shall be adjusted so that
the total amount of consideration to be paid by the Company to each Put
Optionee, upon exercise of the Put, is identical to the consideration that would
have been paid if such event had not occurred.
<PAGE> 13
(c) Payment of Put Price. To the extent that the Company has
available cash therefor as determined in good faith by the Board of Directors of
the Company, taking into account such factors as limitations imposed by
applicable law, the amount of cash revenues then required for the Company's
operations and acquisition strategy and such other factors as the Board, in its
sole and exclusive judgment, deems appropriate ("Available Cash"), it shall pay
the Put Price in cash. In the event the Put Price exceeds Available Cash, the
Company shall pay such excess in the form of a promissory note, which promissory
note (i) shall have substantially the terms described on Exhibit C hereto and
(ii) shall be secured by a pledge of that portion of the Remaining Shares not
purchased for cash. Available Cash, if any, shall be allocated to each Put
Optionee who exercises during a given Put Window on a pro-rata basis.
(d) Put Closing. On the Put Closing Date, the Company shall pay to
the Put Optionee an amount equal to the Put Price multiplied by the number of
Remaining Shares for which the Put is exercised. Simultaneously, the Put
Optionee shall deliver to the Company certificates representing such Remaining
Shares, together with duly executed stock powers endorsed to the Company or such
other assignments or instruments of conveyance and transfer, in form and
substance satisfactory to the Company and its counsel, as shall be effective to
vest in the Company all right, title and interest in and to such Remaining
Shares.
(e) Death or Disability. Notwithstanding the terms of this Section
6, in the event of any Management Stockholder's Disability (as defined below) or
death, then upon such Disability or death and thereafter during the term hereof,
the legal guardian or representative of such Management Stockholder shall have
the right to exercise the Put with respect to the shares of Capital Stock then
beneficially owned by such Management Stockholder in accordance with the above
terms of this Section 6; provided, however, that for purposes of this Section
6(e), the Put Window shall be deemed the first fifteen (15) days of the second
full fiscal quarter of the Company occurring after the Disability or death, as
the case may be. "Disability", (i) with respect to any Management Stockholder
who was employed by the Company or MSSC immediately prior to such event, shall
have been deemed to occur at such time as the Executive becomes subject to
Disability under that certain Employment Agreement (the "Employment Agreement")
dated as of April 2, 1996 by and between such Management Stockholder and MSSC
and (ii) with respect to any Management Stockholder who was not employed by the
Company or MSSC immediately prior to such event, shall have been deemed to occur
when such Management Stockholder becomes physically or mentally disabled to such
an extent that, in the opinion of a physician employed by the Company or MSSC or
the Management Stockholder, (x) he is no longer able to perform significant
decision-making duties, (y) such disability cannot be reasonably accommodated
and (z) such disability is reasonably expected to continue for more than six
additional months; provided, that in the case of any Disability under clause
(ii) above, the Company or MSSC or the Management Stockholder may contest any
decision made by a physician employed by the other party by employing its or his
own physician for such purpose; provided, further, that in the event the two
physicians so retained disagree, such physicians shall jointly nominate a third
physician for the purpose of rendering an opinion with respect to such
Disability, which opinion shall be binding upon the parties hereto.
<PAGE> 14
7. Additional Equity; Certain Other Matters.
(a) Additional Equity. Within 30 days of the date of the good faith
determination (taking into account the availability of bank and other debt
financing and availability of equity financing from sources other than the
Majority Stockholder and its Affiliates) of the Board of Directors of the
Company that the Company requires additional equity capital, the Majority
Stockholder shall have the right to purchase additional shares ("Additional
Shares") of Common Stock from the Company at the Additional Equity Price (as
defined below) by delivering the amount of such Additional Equity Price to the
Company on the applicable purchase date by wire transfer in immediately
available funds to an account designated in writing by the Company at least two
business days prior to such purchase date. Each amount so invested by the
Majority Stockholder (unless agreed otherwise by the Majority Stockholder and at
least two of the Management Stockholders) shall be invested in increments of
$1,000,000. The "Additional Equity Price" shall be equal to $1,000,000 for the
number of shares of Common Stock required to increase the Majority Stockholder's
proportionate ownership of the Capital Stock outstanding on the date of purchase
by one percent. (For example, (i) if the Majority Stockholder owns, in
aggregate, 65% of the total number of shares of the then outstanding Capital
Stock and invests an additional $1,000,000 in newly issued shares of Common
Stock under the terms of this Section 7(e), the Company shall issue to the
Majority Stockholder that number of shares of Common Stock required to increase
the Majority Stockholder's proportionate ownership of the Capital Stock to 66%
of the total number of shares of the Capital Stock outstanding immediately
following such purchase and (ii) if the Majority Stockholder owns, in aggregate,
65% of the total number of shares of the then outstanding Capital Stock and
invests an additional $3,000,000 in newly issued shares of Common Stock under
the terms of this Section 7(e), the Company shall issue to the Majority
Stockholder that number of shares of Common Stock required to increase the
Majority Stockholder's proportionate ownership of the Capital Stock to 68% of
the total number of shares of the Capital Stock outstanding immediately
following such purchase.)
(b) Successors and Assigns. The provisions of this Section 7 shall
be enforceable against the respective successors and assigns of the parties
hereto and against the spouses of the Management Stockholders, who shall execute
a Consent set forth after the signature page of this Agreement.
(c) HSR Clearance. If the Majority Stockholder or the Company or any
Management Stockholder is required to file Hart-Scott-Rodino Notification and
Report Forms under the Hart Scott Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act") with respect to the sale or purchase of any Capital
Stock by any party pursuant to Section 6 or Section 7, as the case may be, of
this Agreement such party shall promptly make such filings and the time periods
provided in Section 6 or Section 7, as the case may be, shall be extended until
the second business day after the Majority Stockholder, the Company and/or the
Management Stockholders, as applicable, receives written notice from the Federal
Trade Commission or the Department of Justice that the applicable waiting period
under the HSR Act has expired or been terminated (or until the expiration of
such waiting period if no such written notice is received).
<PAGE> 15
8. Voting Agreement; Board Representation; Expenses.
(a) The Board of Directors of the Company (the "Board") shall be
composed of seven members, three of whom (Pedersen, Bruce Butler and Gary
Guffey) have been nominated by Pedersen and four of whom (John Rochon, Nick
Bouras, Tim Byrd and Tom Reynolds) have been nominated by the Majority
Stockholder.
(b) If any of the nominated directors ceases to be a director for
any reason, including death, resignation, removal or otherwise, the party who
originally nominated such director shall have the right to nominate another
person to serve as a director, subject to the same approval requirements as set
forth in (a) above, and the parties hereto shall take all actions necessary to
have such nominee elected as a director.
9. Certain Company Options to Repurchase.
(a) Repurchase Upon Termination for Cause. In the event (i) any
Management Stockholder's employment with the Company or MSSC is terminated for
Cause (as defined in the applicable Employment Agreement ) then the Company
shall have the irrevocable and exclusive option, but not the obligation, to
purchase all or any portion of such Management Stockholder's shares at a price
equal to the Put Price described in Section 6(b) above, except that the multiple
to be applied to the Company's EBITDA shall be conclusively deemed to be: (1)
5.5 if the relevant event occurs before March 31, 1998; and (2) 5.25 if the
relevant event occurs after March 31, 1998 (the "Repurchase Price"). As soon as
reasonably practicable after the applicable Termination Date (as defined in the
Employment Agreement) but in no event later than ninety (90) days after such
Termination Date, the Company shall deliver to such Management Stockholder
written notice (the "Termination Repurchase Notice") setting forth all of the
material terms relating to the repurchase of the shares of Capital Stock under
this Section 9(a).
(b) Repurchase Upon Divorce, Bankruptcy, Disability or Death. In the
event of the Disability of any Management Stockholder or the transfer of any
Management Stockholder's shares of Capital Stock to a third party (the
"Automatic Transferee") by operation of law pursuant to or otherwise in
connection with any Management Stockholder's divorce, bankruptcy, or death, then
the Company shall have the irrevocable and exclusive option, but not the
obligation, to purchase all or any portion of the shares of Capital Stock then
held by such Management Stockholder (in the case of such Management
Stockholder's Disability) or held by such Automatic Transferee at a price equal
to the applicable Repurchase Price. As soon as reasonably practicable after the
date of the event described in the first sentence of this Section 9(b), but in
no event later than ninety (90) days after such date, the Company shall deliver
to such Management Stockholder (or legal representative thereof) or Automatic
Transferee (or legal representative thereof), as applicable, written notice (the
"Automatic Repurchase Notice") setting forth all of the material terms relating
to the repurchase of the shares of Capital Stock under this Section 9(b).
(c) Repurchase Closing. The closing (the "Repurchase Closing") for
the repurchase by the Company of shares of Capital Stock pursuant to Section
9(a) or Section 9(b) above
<PAGE> 16
shall occur at the Company's principal office thirty (30) days after delivery of
the Termination Repurchase Notice or Automatic Repurchase Notice, as the case
may be. At the Repurchase Closing, the Management Stockholder (or legal
representative thereof) or the Automatic Transferee (or legal representative
thereof), as the case may be, shall deliver a duly and validly executed
certificate making, for the benefit of the Company, customary representations
and warranties.
10. Representations and Warranties by Each Management Stockholder. Each
Management Stockholder, with respect only to himself and not with respect to any
other Management Stockholder (and in the case of any representation or warranty
set forth below relating solely to Pedersen and Watt, only Pedersen and Watt
severally), hereby covenants with, represents and warrants to the Majority
Stockholder that the following shall be true, correct and complete on the date
hereof and as of the date of the Put Closing, the closing of any other
transactions pursuant to which such Management Stockholder Transfers any shares
of Capital Stock to the Majority Stockholder or the Company and the closing of
any transactions pursuant to the Tag Along Right or the Come Along Obligation:
(a) Shares Subject to Transfer. Any Remaining Shares, Put Option
Shares or other shares Transferred by any Management Stockholder pursuant to
this Agreement (including, without limitation, shares Transferred in connection
with the Tag Along Right or Come Along Obligation) will, as of the consummation
of such Transfer, be owned of record and beneficially by such Management
Stockholder, free and clear of any Encumbrance, except for any restrictions on
Transfer imposed hereunder or under applicable state and federal securities
laws. Except as provided for herein, there are no Encumbrances whatsoever, fixed
or contingent, that directly or indirectly, (i) provide for the Transfer of any
of the shares of Capital Stock held by such Management Stockholder to be
Transferred pursuant to the Tag Along Right, Come Along Obligation, Put Option,
any interest therein or any rights with respect thereto, or relate to the
voting, disposition, exercise, conversion or control of such shares, or (ii)
obligate such Management Stockholder to grant, offer or enter into any of the
foregoing.
(b) No Conflicts. The execution and delivery of this Agreement by
such Management Stockholder, the consummation of the transactions contemplated
hereby (including, without limitation, the consummation of any transactions
pursuant to the Tag Along Right or the Come Along Obligation) by such Management
Stockholder and the exercise of the Put by such Management Stockholder pursuant
to the provisions of Section 6 hereof will not conflict with or violate any
agreement, law, rule, regulation, ordinance, order, writ, injunction, judgment
or decree applicable to or binding on such Management Stockholder.
(c) Authority. Such Management Stockholder has all requisite right,
power and authority and has full legal capacity and is competent to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by such
Management Stockholder and constitutes a legal, valid and binding obligation of
such Management Stockholder, enforceable against him in accordance with its
terms, except to the extent that such enforceability may be limited by
bankruptcy, insolvency, reorganization or other
<PAGE> 17
laws and judicial decisions of general application relating to or affecting the
enforcement of creditors' rights generally or by general equitable principles.
(d) No Consents or Approvals. Such Management Stockholder is not
required to submit any notice, report or other filing with any governmental or
regulatory authority or instrumentality, and no waiver, consent, approval or
authorization of any governmental or regulatory authority or any other person is
required to be obtained or made by such Management Stockholder, in connection
with the execution, delivery or performance of this Agreement and the
consummation of the transactions contemplated hereby.
(e) No Community Property Interest. None of the shares of Capital
Stock to be Transferred by Pedersen or Watt pursuant to any transaction
contemplated hereby are subject to any community property interest or other
proprietary interest to which any spouse, whether former or present, of either
Pedersen or Watt, is entitled.
11. Representations and Warranties of the Company and the Management
Stockholders.
The Company and the Management Stockholders, to the extent any such party
is party to a transaction contemplated hereby, hereby jointly and severally
represent and warrant to the Majority Stockholder that the following shall be
true, correct and complete on the date hereof and as of the date of the Put
Closing, the closing of any other transactions pursuant to which such Management
Stockholder Transfers any shares of Capital Stock to the Majority Stockholder or
the Company and the closing of any transactions pursuant to the Tag Along Right
or the Come Along Obligation:
(a) Organization and Good Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to own, lease and
operate the properties used in its business and to carry on its business as now
being conducted. The Company is duly qualified to do business and in good
standing as a foreign corporation in the states and jurisdictions where
qualification as a foreign corporation is required.
(b) Shares Subject to Transfer. Any shares Transferred by the
Company pursuant to this Agreement will, as of the consummation of such
Transfer, be newly issued or owned of record and beneficially by the Company,
free and clear of any Encumbrance (as defined below) (including any restrictions
relating to treasury stock), except for any restrictions on Transfer imposed
hereunder or under applicable state and federal securities laws. Except as
provided for herein, there are no Encumbrances whatsoever, fixed or contingent,
that directly or indirectly, (i) provide for the Transfer of any of the
Additional Shares, any interest therein or any rights with respect thereto, or
relate to the voting, disposition, exercise, conversion or control of such
shares, or (ii) obligate the Company to grant, offer or enter into any of the
foregoing. Except as provided for herein and except for any restrictions on
transfer under applicable state and federal securities laws, upon any closing of
the purchase by the Majority Stockholder of Additional Shares, the Majority
Stockholder will acquire valid and indefeasible title to the Additional Shares,
respectively, free and clear of any Encumbrance. "Encumbrance" means any
security interest, pledge, option, lien, claim, commitment, proxy, equity,
<PAGE> 18
right, restriction on transfer or encumbrance of any nature whatsoever, except
for such restrictions as may be imposed by NationsBank of Texas, N.A., under and
in connection with that certain Credit Agreement dated as of February 12, 1997
between NationsBank of Texas, N.A. and MSSC.
(c) Authority, Approvals and Consents. The Company has the corporate
power and authority to enter into this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
and approved by the Board of Directors of the Company, and no other corporate
proceedings on the part of the Company are necessary to authorize and approve
this Agreement and the transactions contemplated hereby. This Agreement has been
duly executed and delivered by, and constitutes a legal, valid and binding
obligation of, the Company, enforceable against the Company in accordance with
its terms, except to the extent that such enforceability may be limited by
bankruptcy, insolvency, reorganization or other laws and judicial decisions of
general application relating to or affecting the enforcement of creditors'
rights generally or by general equitable principles. The execution, delivery and
performance of this Agreement by the Company and the Management Stockholders and
the consummation of the transactions contemplated hereby do not and will not:
(i) contravene any provisions of the Certificate of
Incorporation or Bylaws of the Company;
(ii) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result in
the modification or cancellation of, or give rise to any right of termination or
acceleration in respect of, any material agreement of the Company or its
subsidiaries (a "Company Agreement") or require any consent or waiver of any
party to any Company Agreement;
(iii) result in the creation of any Encumbrance upon, or any
person obtaining any right to acquire, any properties, assets or rights of the
Company (other than the rights of the Majority Stockholder, the Management
Stockholders and the Company set forth herein);
(iv) violate or conflict with any laws, ordinances, codes,
rules, regulations, standards, judgments and other requirements of all
governmental, administrative or judicial entities applicable to the Company or
any of its businesses or properties; or
(v) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority.
(d) Disclosure. Neither the Company nor any Management Stockholder
has knowledge of any information contained in this Agreement that contains any
untrue statement of material fact or omits to state any material fact required
to be stated in order to make the statements made herein not misleading.
<PAGE> 19
(e) No Commission. The Company has not employed any broker, agent or
finder in connection with any transaction contemplated by this Agreement. The
Company hereby indemnifies the Majority Stockholder against any liability for a
broker's commission, finder's fee or any other fee of any description incurred
by the Company with respect to any transaction contemplated by this Agreement.
12. Representations and Warranties of the Majority Stockholder. The
Majority Stockholder, to the extent it is a party to a transaction contemplated
hereby, represents and warrants to each of the Management Stockholders and to
the Company that the following shall be true, correct and complete on the date
hereof and as of the date of the Put Closing, the closing of the purchase by
Majority Stockholder of the Additional Shares, or closing of any other
transactions pursuant to which the Majority Stockholder Transfers, or receives
the Transfer of, any shares of Capital Stock (including, without limitation, the
closing of any transactions pursuant to the Tag Along Right or the Come Along
Obligation):
(a) Organization of the Majority Stockholder. The Majority
Stockholder is a limited partnership duly organized under the laws of the State
of Texas and is validly existing under the laws of the State of Texas.
(b) Organization of General Partner. MSSC Acquisition Corporation
("Acquisition Corporation") is a corporation duly incorporated under the laws of
the State of Delaware and is validly existing and in good standing under the
laws of the State of Delaware. Acquisition Corporation is duly qualified to do
business in Texas.
(c) Authority. Acquisition Corporation, as general partner of the
Majority Stockholder, has full corporate power and authority on behalf of the
Majority Stockholder to execute and deliver this Agreement and to cause the
Majority Stockholder to perform its obligations hereunder. The Majority
Stockholder has all requisite power and authority to execute and deliver this
Agreement and to carry out its obligations hereunder. The execution, delivery
and performance by the Majority Stockholder of this Agreement have been duly
authorized by all necessary partnership action of the Majority Stockholder, and
by all corporate action of Acquisition Corporation on behalf of the Majority
Stockholder. This Agreement has been duly executed and delivered by Acquisition
Corporation on behalf of the Majority Stockholder to the Management Stockholders
and the Company, and constitutes a valid, binding and enforceable obligation of
the Majority Stockholder, enforceable against it in accordance with its terms,
except to the extent the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or other laws and judicial decisions of general
application relating to or affecting the enforcement of creditors' rights
generally or by general equitable principles.
<PAGE> 20
(d) No Conflict; No Consents or Approvals.
(i) The execution, delivery and performance of this Agreement
by the Majority Stockholder and the grant and exercise of the Put and the
purchase of the Additional Shares pursuant to the provisions of Section 6 and
Section 7 hereof will not (i) conflict with, violate or result in a breach of
any provision of the Limited Partnership Agreement of the Majority Stockholder
or of the corporate charter or bylaws of Acquisition Corporation, (ii) conflict
with or violate any law, rule, regulation, ordinance, order, writ, injunction,
judgment or decree applicable to the Majority Stockholder or Acquisition
Corporation, or by which any of their respective properties or assets are bound
or (iii) conflict with, or result in any breach of or constitute a violation or
default of (or which upon notice or lapse of time or both would result in such a
conflict, breach, violation or default) under any material note, bond,
indenture, mortgage, agreement, contract or other instrument to which the
Majority Stockholder is a party or by which the Majority Stockholder or any of
its properties or assets are bound. No waiver, approval, authorization, order,
license, permit, franchise or consent of or registration, declaration,
qualification or filing with any governmental agency or authority is required to
be obtained by the Majority Stockholder in connection with the execution,
delivery and performance of this Agreement.
(ii) No waiver, approval, authorization, order, license,
permit, franchise or consent of or registration, declaration, qualification,
notice to or filing with any governmental, administrative or judicial agency or
authority is required to be obtained by the Majority Stockholder in connection
with the execution, delivery and performance of this Agreement.
13. Survival of Representations and Warranties. All representations and
warranties made pursuant to or in connection with this Agreement shall survive
for eighteen (18) months after the closing of each and any transaction
consummated in connection with this Agreement; provided, however, that (a) the
representations and warranties set forth in Sections 10(a), 10(c) and 11(b)
shall survive indefinitely. The expiration of any survival period shall not bar
or otherwise affect the subsequent revival and survival of the representations
and warranties made pursuant to or in connection with this Agreement in
accordance with the immediately preceding sentence.
14. Indemnification.
(a) Indemnification by Management Stockholders. Subject to the terms
of this Section 14, each Management Stockholder shall severally, and not
jointly, indemnify and hold harmless the Majority Stockholder, its officers,
directors, employees and controlling persons (hereinafter collectively referred
to as the "Majority Stockholder Group") from any liability, damage, loss,
penalty, cost or expense incurred by any member of the Majority Stockholder
Group, whether incurred directly by such member or indirectly through its
proportionate ownership of the Company (including, without limitation,
reasonable attorneys fees and costs of investigating and defending against
lawsuits, complaints, actions or other pending or threatened litigation) after
receiving full credit for the amount of any payments actually received as a
result of insurance coverage (being hereafter referred to in this Section 14 as
"Majority Stockholder Costs") arising from or attributable to any breach or
multiple breaches of any representation, warranty or agreement made by such
<PAGE> 21
Management Stockholder herein; provided, however, that the obligation of each
such Management Stockholder to indemnify the Majority Stockholder Group for such
Majority Stockholder Costs shall be effective only if, and only to the extent
that, the aggregate amount of such Majority Stockholder Costs exceeds the amount
set forth in the first column beside such Management Stockholder's name on
Exhibit D hereto (such amount being termed the "Management Stockholder's Basket
Amount"), and then only to the extent such amount exceeds such Management
Stockholder's Basket Amount.
(b) Indemnification by the Company. Subject to the terms of this
Section 14, the Company shall indemnify and hold harmless the Majority
Stockholder Group from any Majority Stockholder Costs arising from or
attributable to any breach or multiple breaches of any representation, warranty
or agreement made by the Company herein; provided, however, that the obligation
of the Company to indemnify the Majority Stockholder Group for such Majority
Stockholder Costs shall be effective only if, and only to the extent that, the
aggregate amount of such Majority Stockholder Costs exceeds two hundred fifty
thousand dollars ($250,000) (such $250,000 being termed the "Company's Basket
Amount") and then only to the extent such amount exceeds the Company's Basket
Amount.
(c) Management Stockholder's Limitation on Liability.
Notwithstanding any other provision in this Agreement, (i) the obligation of
each Management Stockholder to indemnify the Majority Stockholder Group pursuant
to Section 14(a) against any Majority Stockholder Costs sustained by reason of
any claim made under Section 14(a) shall be limited to claims as to which
Majority Stockholder has given to such Management Stockholder written notice
thereof on or prior to the expiration of the applicable period for which the
applicable representation or warranty is intended to survive as stated in
Section 13, and (ii) in no event shall the aggregate Majority Stockholder Costs
for which any Management Stockholder is deemed liable pursuant to the indemnity
provisions contained in Section 14(a) exceed the amount set forth in the second
column beside such Management Stockholder's name on Exhibit D hereto.
(d) Company's Limitation on Liability. Notwithstanding any other
provision in this Agreement, (i) the obligation of the Company to indemnify the
Majority Stockholder Group pursuant to Section 14(b) against any Majority
Stockholder Costs sustained by reason of any claim made under Section 14(b)
shall be limited to claims as to which the Majority Stockholder has given to the
Company written notice thereof on or prior to the expiration of the applicable
period for which the applicable representation or warranty is intended to
survive as stated in Section 13, and (ii) in no event shall the aggregate
Majority Stockholder Costs for which the Company is deemed liable pursuant to
the indemnity provisions contained in Section 14(b) exceed eight million five
hundred thousand dollars ($8,500,000); provided, however, that in the event any
breach giving rise to the Company's obligation to indemnify the Majority
Stockholder Group occurs or is deemed to occur upon or after the purchase by
Majority Stockholder of the Additional Shares, the aggregate Majority
Stockholder Costs for which the Company is liable pursuant to the indemnity
provisions contained in Section 14(b) shall be limited to eight million five
hundred thousand dollars plus the purchase price for such shares.
<PAGE> 22
(e) Indemnification by the Majority Stockholder. The Majority
Stockholder shall indemnify and hold harmless each of the Management
Stockholders and the Company and its officers, directors, employees and
controlling persons from any liability, damage, loss, penalty, cost or expense
incurred by the Management Stockholders or the Company (including, without
limitation, reasonable attorneys' fees and costs of investigating and defending
against lawsuits, complaints, actions or other pending or threatened litigation)
after receiving full credit for the amount of any payments actually received as
a result of insurance coverage (being hereafter referred to in this Section 15
as "Seller Costs" and, together with Majority Stockholder Costs, "Costs")
arising from or attributable to any breach or multiple breaches of any
representation, warranty or agreement made by the Majority Stockholder herein;
provided, however, that the obligation of the Majority Stockholder to indemnify
the Management Stockholders or the Company for such Seller Costs shall be
effective only if, and only to the extent that, the aggregate value of such
Seller Costs exceeds two hundred fifty thousand dollars ($250,000) and then only
with respect to such excess amount.
(f) The Majority Stockholder's Limitation on Liability.
Notwithstanding any other provision in this Agreement, (i) the obligation of the
Majority Stockholder to indemnify the Management Stockholders or the Company
pursuant to Section 14(e) against any Seller Costs sustained by reason of any
claim made under Section 14(e) shall be limited to claims as to which any
Management Stockholder or the Company, as the case may be, has given to the
Majority Stockholder written notice thereof on or prior to the expiration of the
applicable period for which the applicable representation or warranty is
intended to survive as stated in Section 13, and (ii) in no event shall the
aggregate Seller Costs for which the Majority Stockholder is deemed liable
pursuant to the indemnity provisions contained in Section 14(e) exceed eight
million five hundred thousand dollars ($8,500,000); provided, however, that in
the event any breach giving rise to the Majority Stockholder's obligation to
indemnify the Company or any of the Management Stockholders occurs or is deemed
to occur upon or after the purchase by the Majority Stockholder of the
Additional Shares, the aggregate Seller Costs for which the Majority Stockholder
is liable pursuant to the indemnity provisions contained in Section 14(e) shall
be limited to eight million five hundred thousand dollars plus the purchase
price for such shares.
(g) Priority of Indemnification. The Majority Stockholder Group
shall seek to recover on any claim for indemnification hereunder (except for any
claim for indemnification hereunder against a Management Stockholder arising
from or attributable to the breach by such Management Stockholder of his
representations and warranties in Section 10 hereof) in the following priority:
first, from the Company, and second, only in the event, and only to the extent,
that the Company is unable to satisfy a valid claim for indemnification
hereunder within a reasonable time, from the Management Stockholders. To the
extent that the Company, prior to satisfying a valid claim for indemnification
hereunder, has utilized all or part of the Company's Basket Amount, each
Management Stockholder's Basket Amount shall be reduced in proportion to the
percentage of the Company's Basket Amount so utilized. Any payment by the
Company on a valid claim for indemnification hereunder shall take into account
that the Majority Stockholder owns a portion of the equity of the Company and
such payment shall, therefore, be increased in accordance with the following
formula:
<PAGE> 23
Company Payment = Claim Amount/ (1 - Majority Stockholder's Equity
Percentage)
where "Company Payment" means the amount payable by the Company on a valid claim
for indemnification hereunder, "Claim Amount" means the amount due on a valid
claim for indemnification hereunder, after application of the Company Basket,
and "Majority Stockholder's Equity Percentage" means the percentage interest of
the Majority Stockholder in the equity capital of the Company on a fully diluted
basis expressed as a decimal.
(h) Notwithstanding any provision herein, in the Stock Purchase
Agreement dated as of April 2, 1996 among MSSC, the Majority Stockholder and the
Management Stockholders (the "Stock Purchase Agreement") or in the
indemnification provisions that survive the termination of the Amended and
Restated Company and Shareholders Agreement dated as of November 7, 1996 among
MSSC, the Majority Stockholder and the Management Stockholders (the "Former
Shareholders Agreement"), in the event a valid claim is subject to
indemnification under both this Section 14 and the indemnity provisions set
forth in the Stock Purchase Agreement or the Former Shareholders Agreement (the
"Other Indemnity Provisions"), the party entitled to such indemnification may
elect to make such claim under this Section 14 or under one (but not both) of
the Other Indemnity Provisions, but shall not be entitled to make any such claim
under both this Section 14 and either of the Other Indemnity Provisions.
(i) Procedures for Third-Party Claims. Promptly after the assertion
by any third party of any claim against any party entitled to be indemnified
under this Section 14 (the "Indemnitee") that, in the judgment of such
Indemnitee, may result in the incurrence by such Indemnitee of Costs for which
such Indemnitee would be entitled to indemnification pursuant to this Agreement,
such Indemnitee shall deliver to the other party hereto (the "Indemnitor") a
written notice describing in reasonable detail such claim and such Indemnitor
may participate in and, at its option, assume the defense of the Indemnitee
against such claim (including the employment of counsel, who shall be reasonably
satisfactory to such Indemnitee, and the payment of expenses). Any Indemnitee
shall have the right to employ separate counsel in any such action or claim and
to participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the Indemnitor unless (i) the Indemnitor shall
have failed, within a reasonable time after having been notified by the
Indemnitee of the existence of such claim as provided in the preceding sentence,
to assume the defense of such claim, (ii) the employment of such counsel has
been specifically authorized in writing by the Indemnitor, or (iii) the named
parties to any such action (including any impleaded parties) include both such
Indemnitee and the Indemnitor and such Indemnitee shall have been advised in
writing by such counsel that there may be conflicting interests between the
Indemnitee and the Indemnitor in the legal defense thereof. No Indemnitor shall
be liable to indemnify any Indemnitee for any compromise or settlement of any
such action or claim effected without the consent of the Indemnitor.
15. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
mailed by certified mail (return receipt requested) or sent by recognized
overnight delivery service or facsimile transmission to the parties at the
following addresses or at such other addresses as shall be specified by like
notice:
(a) if to the Majority Stockholder:
<PAGE> 24
MS Acquisition Limited
16251 Dallas Parkway
Dallas, Texas 75248
Attention: Sharon Drobeck
Facsimile: (972) 687-1662
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Eileen Nugent Simon, Esq.
Facsimile: (212) 735-2000
(b) if to the Company:
Richmont Marketing Specialists Inc.
2324 Gateway Drive
Irving, Texas 75015
Attention: Gary R. Guffey
and Timothy M. Byrd
Facsimile: (972) 550-1896
with a copy to:
Andrews & Kurth L.L.P.
1717 Main Street, Suite 3700
Dallas, Texas 75201
Attention: J. Gregory Holloway, Esq.
Facsimile: (214) 659-4401
(c) if to a Management Stockholder, to his address or facsimile
number listed on Exhibit A:
with a copy to:
Andrews & Kurth L.L.P.
1717 Main Street, Suite 3700
Dallas, Texas 75201
Attention: J. Gregory Holloway, Esq.
Facsimile: (214) 659-4401
Notice so given shall, in the case of notice so given by mail, be deemed to be
given and received on the fourth calendar day after posting, in the case of
notice so given by recognized overnight delivery service, on the date of actual
delivery and, in the case of notice so given by facsimile transmission or
personal delivery, on the date of actual transmission or, as the case may be,
personal delivery.
<PAGE> 25
16. Severability. If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable under any applicable law, then such
contravention or invalidity shall not invalidate the entire Agreement. Such
provision shall be deemed to be modified to the extent necessary to render it
legal, valid and enforceable, and if no such modification shall render it legal,
valid and enforceable, then this Agreement shall be construed as if not
containing the provision held to be invalid, and the rights and obligations of
the parties hereto shall be construed and enforced accordingly.
17. Complete Agreement. This Agreement and the Exhibits hereto embody the
complete agreement and understanding among the parties regarding the subject
matter hereof and supersede and preempt any prior understandings, agreements or
representations by or among the parties, written or oral, which may have related
to the subject matter hereof in any way.
18. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
19. Arbitration and Choice of Law. The parties hereto shall in good faith
negotiate to resolve amicably any dispute, controversy or claim (collectively,
"Controversy") arising out of, relating to, or in connection with, this
Agreement. In the event such Controversy is not resolved amicably within sixty
(60) days from the date that notice is delivered in respect of such Controversy,
such Controversy shall be settled by arbitration to the exclusion of all other
procedures. The parties hereto agree that any such Controversy shall be
submitted to three arbitrators selected from the panels of arbitrators of the
American Arbitration Association ("AAA") and shall be governed by the Commercial
Arbitration Rules of the AAA, as amended and in effect on the date a demand for
arbitration is filed with the AAA. Any demand for arbitration shall specify a
dollar amount of damages sought. The arbitrators shall be governed by and shall
apply the substantive law of the State of Texas (without giving effect to the
rules of conflict of laws thereof) in making their award and their ruling shall
be binding and conclusive upon the parties hereto. Any arbitration shall occur
in the city of Dallas, Texas and judgment upon the award rendered may be entered
in any court of competent jurisdiction. Notwithstanding the foregoing, the
parties will obtain the agreement of arbitrators to the following: (i) the
arbitrators shall provide a written ruling, stating in separate sections the
findings of fact and conclusions of law on which their ruling is based; and (ii)
their ruling shall be due no later than ninety (90) days after their final
hearing and within nine (9) months after commencement of the arbitration.
20. Remedies. The parties acknowledge and agree that the breach of the
provisions of this Agreement by any of the Management Stockholders or the
Majority Stockholder could not be adequately compensated with monetary damages,
and the parties hereto agree, accordingly, that injunctive relief and specific
performance shall be appropriate remedies to enforce the provisions of this
Agreement and waive any claim or defense that there is an adequate remedy at law
for such breach; provided, however, that nothing herein shall limit the remedies
available and all remedies herein are in addition to any remedies available at
law or otherwise.
21. Successors and Assigns. The provisions of this Agreement, including
without limitation all of the restrictions of, and rights relating to, Transfers
of shares of Capital Stock, shall
<PAGE> 26
be enforceable against the respective successors and assigns of the parties
hereto and against the spouses of the Management Stockholders (and any such
spouse who holds a community property interest in shares of Capital Stock shall
execute a consent set forth after the signature page of this Agreement), except
to the extent that such enforceability may be limited by bankruptcy, insolvency,
reorganization or other laws and judicial decisions of general application
relating to or affecting the enforcement of creditors' rights generally or by
general equitable principles. This Agreement may not be assigned by a party
without the prior written consent of the other parties hereto; provided, that
the benefits and obligations under this Agreement may be assigned to an
Affiliate of the Majority Stockholder if the Majority Stockholder guarantees the
performance of the assignee, and such Affiliate confirms in writing to the
Management Stockholders that such Affiliate assumes all obligations of the
Majority Stockholder hereunder and makes all the covenants of the Majority
Stockholder contained in this Agreement. Subject to the preceding sentence, all
the terms and provisions of this Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective permitted successors and
assigns of the parties hereto. This Agreement shall not run to the benefit of or
be enforceable by any person other than a party to this Agreement and, subject
to the second sentence of this Section 21, its successors and assigns. Nothing
in this Section 21 shall impose any restriction on the ability of the Majority
Stockholder to assign its shares of Capital Stock free of the benefits of this
Agreement provided that no such assignment will relieve the Majority Stockholder
of any of its obligations under this Agreement.
22. Amendments. This Agreement may be amended only by a written agreement
signed by the party against whom enforcement is sought.
23. Termination of Restrictions. This Agreement shall terminate on the
earliest to occur of (i) the effective date of an initial public offering of the
Company's Capital Stock, (ii) the date the Company is merged or consolidated
with or into a new surviving company and the holders of the Company's voting
securities (on a fully-diluted basis) immediately prior to the merger or
consolidation own less than a majority of the ordinary voting power to elect
directors of the new surviving company (on a fully-diluted basis) immediately
subsequent to the merger or consolidation, (iii) the date of a sale of all, or
substantially all, of the Company's assets or capital stock in any transaction
or series of related transactions, (iv) the mutual consent of the parties or
(iv) the last day of the Term.
Signature Page Follows
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
RICHMONT MARKETING SPECIALISTS INC.
By: /s/ Gary R. Guffey
-------------------------------------
Name: Gary R. Guffey
Title: Vice President
MS ACQUISITION LIMITED
By: MSSC ACQUISITION CORPORATION,
its General Partner
By: /s/ Timothy M. Byrd
-------------------------------------
Name: Timothy M. Byrd
Title: Vice President and Chief
Financial Officer
/s/ Ronald D. Pedersen
-----------------------------------------
Ronald D. Pedersen
/s/ Jeffrey A. Watt
-----------------------------------------
Jeffrey A. Watt
/s/ Bruce A. Butler
-----------------------------------------
Bruce A. Butler
/s/ Gary R. Guffey
-----------------------------------------
Gary R. Guffey
<PAGE> 28
The undersigned, spouse of Gary R. Guffey, a Management Stockholder (as
defined in the foregoing Agreement) executing the foregoing Agreement, hereunto
subscribes her name in evidence of her agreement and consents to the provisions
regarding the disposition of the Capital Stock of Richmont Marketing Specialists
Inc. referred to in the foregoing Agreement, and to all other provisions
thereof.
Effective as of the day and year first above written.
/s/ P. Joann Guffey
-----------------------------------------
P. JOANN GUFFEY
<PAGE> 29
The undersigned, spouse of Bruce A. Butler, a Management Stockholder (as
defined in the foregoing Company and Stockholders Agreement) executing the
foregoing Agreement, hereunto subscribes her name in evidence of her agreement
and consents to the provisions regarding the disposition of the Capital Stock of
Richmont Marketing Specialists Inc. referred to in the foregoing Agreement, and
to all other provisions thereof.
Effective as of the day and year first above written.
/s/ Victoria A. Butler
-----------------------------------------
VICTORIA A. BUTLER
<PAGE> 30
EXHIBIT A
Names and Addresses of
Management Stockholders
Ronald D. Pedersen
10245 Strait Lane
Dallas, Texas 75229
Jeffrey A. Watt
6006 Kettering Court
Dallas, Texas 75248
Gary R. Guffey
17 Overhill Drive
Trophy Club, Texas 76262
Bruce A. Butler
633 Barington Place
Matthews, North Carolina 28105
EXHIBIT A- Solo Page
<PAGE> 31
EXHIBIT B
<TABLE>
<CAPTION>
Name and Address of Number of Shares of
Stockholders Common Stock
------------ ------------
<S> <C>
Ronald D. Pedersen 25,842
Jeffrey A. Watt 16,826
Gary R. Guffey 6,193
Bruce A. Butler 6,193
MS Acquisition Limited 82,581
-------
TOTAL 137,635
</TABLE>
EXHIBIT B- Solo Page
<PAGE> 32
EXHIBIT C
Terms Relating to Put Option Promissory Note
1. Maturity Date: Three (3) years from the date of issue;
2. Interest Rate: (a) Escalating rate as follows:
(i) at all times during the period commencing on
the date of issue of the Promissory Note to
and including the last day of the fourth
full fiscal quarter after the issuance of
the Promissory Note (the "First Period") the
interest rate shall be equal to the Prime
Rate (as defined below) per annum;
(ii) at all times during the period commencing
after the First Period to and including the
last day of the eighth full fiscal quarter
after the issuance of the Promissory Note
(the "Second Period"), the interest rate
shall be equal to the Prime Rate (as defined
below) plus 200 basis points per annum; and
(iii) at all times during the period commencing on
the Second Period to and including maturity,
the interest rate shall be equal to the
Prime Rate (as defined below) plus 250 basis
points per annum.
"Prime Rate" shall mean a fluctuating interest
rate per annum as in effect from time to time,
which interest rate per annum shall at all times
be equal to the rate of interest announced
publicly, from time to time (whether or not
charged in each instance) by The Chase Manhattan
Bank ("Bank"), in New York, New York, as bank's
base rate or general reference rate. Should Bank,
during the time during which the Promissory Note
is outstanding, abolish or abandon the practice of
announcing or publishing a Prime Rate, then the
Prime Rate used during the remaining term of the
Promissory Note shall be that interest rate or
other general reference rate then in effect at
Bank, which, from time to time, in the reasonable
judgement of the Company, most effectively
approximates the initial definition of the "Prime
Rate."
(b) Interest shall be payable quarterly.
3. Amortization: Principal shall be amortized quarterly.
-1-
<PAGE> 33
4. Subordination The Promissory Note shall be subordinated to all
other funded debt of the Company.
-2-
<PAGE> 34
EXHIBIT D
MANAGEMENT STOCKHOLDERS' BASKET AMOUNTS
AND INDEMNIFICATION LIMITS
<TABLE>
<CAPTION>
Name Basket Amount Indemnification Limit
- ---- ------------- ---------------------
<S> <C> <C>
Ronald D. Pedersen $128,893 $ 5,413,522
Jeffrey A. Watt 83,899 3,523,778
Gary R. Guffey 18,604 781,350
Bruce A. Butler 18,604 781,350
---------- -------------
TOTAL $250,000 $10,500,000
</TABLE>
EXHIBIT D - Solo Page
<PAGE> 1
EXHIBIT 10.6
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is dated as of October 7, 1997, and is by and between
Richmont Marketing Specialists Inc., a Delaware corporation (the "Company"), and
MS Acquisition Limited, a Texas limited partnership (the "Majority
Stockholder").
INTRODUCTORY STATEMENT
This Agreement is being made in connection with the Equity Contribution
Agreement dated as of even date herewith (the "Equity Contribution Agreement"),
by and among the Company, the Majority Stockholder, Ronald D. Pedersen, Jeffrey
A. Watt, Bruce Butler and Gary R. Guffey and provides certain registration
rights to the Majority Stockholder regarding the shares of Common Stock, par
value $.01, of the Company (the "Common Stock"), upon the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good, valid and binding consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
STATEMENT OF AGREEMENT
I. DEFINITIONS
Unless the context otherwise requires, the terms defined in this Article I
shall have the meanings herein specified for all purposes of this Agreement. All
other capitalized terms shall have the meanings assigned to them in the various
other provisions of this Agreement.
"Affiliate" shall mean, as to any Person, any other Person which,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person. For purposes of this definition of "Affiliate," "control" of
a Person shall mean the power, direct or indirect, (i) to vote or direct the
voting power of at least ten percent (10%) or more of the outstanding shares of
voting securities of a Person, or (ii) to direct or cause the direction of the
management and policies of a Person by ownership of voting securities, general
partnership interests, or otherwise.
"Agreement" shall mean this Agreement, including all schedules and
exhibits hereto, as the Agreement may be from time to time amended, modified or
supplemented.
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act or the
Exchange Act.
<PAGE> 2
"Exchange Act" shall mean the Securities Exchange Act of 1934 or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Holder" of any security shall mean the record owner of such
security.
"Holder of Registrable Securities" shall mean the Person at the time
of such determination, who owns Registrable Securities or a transferee of such
Registrable Securities who is entitled to registration rights hereunder in
accordance with the provisions of Section 2.7.
"Person" shall include all natural persons, corporations, business
trusts, associations, companies, partnerships, joint ventures and other entities
and governments and agencies and political subdivisions.
"Registrable Securities" shall mean the shares of Common Stock
transferred or to be transferred to the Majority Stockholder pursuant to the
Equity Contribution Agreement and any shares of Common Stock issued with respect
to such Common Stock by way of a stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization.
For the purposes of this Agreement, Registrable Securities will
cease to be Registrable Securities when (i) a registration statement relating to
such securities has been declared effective and such securities have been
disposed of pursuant to such effective registration statement, (ii) such
securities are distributed to the public pursuant to Rule 144 (or any similar
provision then in force) under the Securities Act, (iii) they have been
transferred other than as permitted under Section 2.7 hereof, or (iv) three
years shall have passed after the date that the registration statement
contemplated by Section 2.1 hereof is declared effective.
"Securities Act" shall mean the Securities Act of 1933 or any
similar successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.
II. REGISTRATION RIGHTS
2.1 Demand Registration.
(a) Request for Registration. At any time after December 31, 2000, a
Holder of Registrable Securities may request one registration under and in
accordance with the provisions of the Securities Act of all or part of its
Registrable Securities ("Demand Registration"). The Demand Registration may be
an underwritten offering or an offering which is not underwritten, as determined
in the sole discretion of the Majority Stockholder.
<PAGE> 3
(b) Priority on Demand Registration. The Company will not include in
the Demand Registration any securities which are not Registrable Securities
without the written consent of the Majority Stockholder. In the event such
registration is underwritten, if the managing underwriter advises the Company in
writing that in its opinion the number of Registrable Securities and other
securities requested to be included exceeds the number which can be sold in an
underwritten public offering, the Company will include in such registration: (i)
first, the number of Registrable Securities requested to be included which in
the opinion of such underwriters can be sold; (ii) second, any securities
requested to be included by and for the account of the Company if consented to
by the Majority Stockholder as provided in the preceding sentence; and (iii)
third, any other securities requested to be included by persons to whom the
Company has granted registration rights in accordance with this Agreement, pro
rata based on the number of shares owned by the holders of such other
securities.
(c) Restrictions on Demand Registration.
(i) The Majority Stockholder agrees that the Company shall not
be required to effect any registration statement during any period of time when,
but only so long as, the Company is in possession of material non-public
information which, in the exercise of its reasonable judgment, the Company deems
advisable not to disclose in a registration statement, which material
information may relate, including, without limitation, to a financing project or
a pending acquisition, merger or other material corporate reorganization to
which the Company is or is expected to be a party; provided, however, that the
Company shall advise the Majority Stockholder in writing as soon as any such
delay is no longer applicable, and in no event will any such delay be exercised
by the Company more than once in any 12-month period and, provided, further,
that such delay shall not exceed 30 days. If there occurs any such delay, the
Majority Stockholder shall be entitled to withdraw its Demand Registration, and
such Demand Registration shall not count as a Demand Registration.
(ii) Except as provided below in this Section 2.1(c)(ii), a
registration will not count as a Demand Registration until it has become
effective with the Commission. A registration shall also not count as a Demand
Registration if the Company takes any action in violation of this Agreement or
fails to take any action contemplated by this Agreement, and as a result thereof
a registration statement is no longer effective for the period of time required
hereby or if less, the time required to sell such Registrable Securities
included in such registration statement.
If the Majority Stockholder makes a request for a Demand
Registration and thereafter withdraws or revokes such request prior to the
registration statement being declared effective, at the option of the Majority
Stockholder, either the withdrawn or revoked request shall count as the Demand
Registration or the Majority Stockholder shall pay all of the Registration
Expenses (as defined in Section 2.10, which exclude, without limitation, any and
all internal expenses of the Company) incurred by the Company to the date of the
withdrawal or revocation. Notwithstanding the foregoing, if the Company
exercises any delay provided for in Section 2.1(c)(i) or takes any action in
violation of this Agreement or fails to take any action contemplated by this
Agreement, which
<PAGE> 4
adversely affects the Majority Stockholder's request for the Demand
Registration, and as a result thereof the Majority Stockholder withdraws or
revokes its request for Demand Registration, then such request shall not count
as the Demand Registration, and the Majority Stockholder shall not be obligated
to pay any Registration Expenses in connection with such request for a Demand
Registration.
(d) Expenses of Registration. The Company shall be responsible for
the payment of all Registration Expenses (as defined in Section 2.10) incurred
in connection with the Demand Registration or any Incidental Registrations (as
defined in Section 2.2). In the event other Persons to whom the Company has
granted registration rights also sell securities pursuant to subparagraphs (b)
and (c) above or Section 2.2 below, the Registration Expenses of the Demand
Registration or Incidental Registrations, as the case may be, may be allocated
among such other Persons, excluding the Majority Stockholder.
(e) Selection of Underwriters. The investment banker(s) and
manager(s), if any, who shall administer the offerings made pursuant to the
Demand Registration shall be selected by the Majority Stockholder, subject to
the prior written approval by the Company, which shall not be unreasonably
withheld.
2.2 Incidental Registration.
(a) Right to Include Registrable Securities. If the Company at any
time proposes to register any of its securities under the Securities Act,
whether or not for sale for its own account other than pursuant to a
registration statement on Form S-4 or S-8 or under a dividend reinvestment
program or stockholder investment program pursuant to a registration statement
on Form S-3, it will each such time, at least 30 days prior to filing the
registration statement, give written notice to the Majority Stockholder of its
intention to do so. Upon the written request of the Majority Stockholder made
within 15 days after the receipt of any such notice (which request shall specify
the Registrable Securities intended to be disposed of by the Majority
Stockholder), the Company will, in accordance with the limitations below, use
best efforts to include in the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the Majority Stockholder, to the extent requisite to permit the disposition of
the Registrable Securities so to be registered ("Incidental Registration"),
provided that if, at any time after giving written notice of its intention to
register any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company determines,
based on advice of counsel and/or its financial advisors, that registration of
the Company's securities would be imprudent at such time, the Company may, at
its election, give written notice of such determination to the Majority
Stockholder and thereupon, (i) in the case of a determination not to register,
shall be relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay all
Registration Expenses in accordance with Section 2.1(d) hereof), without
prejudice, however, to the rights of the Majority Stockholder to request that
such registration be effected as a registration under Section 2.1 hereof, and
(ii) in the case of a determination to delay registering, shall be permitted to
delay registering any Registrable Securities being registered pursuant to this
Section 2.2(a), for the same period as the delay in registering such other
securities. No registration
<PAGE> 5
effected under this Section 2.2 shall relieve or otherwise affect the Company's
obligation to effect a registration upon the Majority Stockholder's request
pursuant to Section 2.1 hereof.
(b) Priority in Incidental Registrations. In the event any
Incidental Registration is underwritten, if the managing underwriter advises the
Company in writing that in its opinion the number of Registrable Securities and
other securities requested to be included exceeds the number which can be sold
in an underwritten public offering, the Company will include in such
registration: (i) first, on a pro rata basis the number of Registrable
Securities requested to be included which in the opinion of such underwriters
can be sold and any securities requested to be included by and for the account
of the Company; and (ii) second, any other securities requested to be included
by persons to whom the Company has granted registration rights in accordance
with this Agreement, pro rata based on the number of shares owned by the holders
of such other securities.
2.3 Registration Procedures. If and whenever the Company is required to
use its best efforts to effect the registration of any Registrable Securities
under the Securities Act as provided in Section 2.1 or Section 2.2 hereof, the
Company will, subject to the limitations provided herein, as expeditiously as
possible:
(a) prepare (and, as soon thereafter as practicable, file with the
Commission) the requisite registration statement to effect such registration and
thereafter use its best efforts to cause such registration statement to become
effective; provided that, to the extent that a request for registration is made
within 30 days before the end of the Company's fiscal year, the Company may,
after consultations with the Majority Stockholder conducted in good faith, delay
such filing until the earlier of (a) 90 days after the end of the Company's
fiscal year or (b) the completion of the annual audit of the Company's financial
statements by its independent public accountants;
(b) prepare and file with the Commission 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 and to comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement
until such time as all of such securities have been disposed of in accordance
with the intended methods of disposition by the seller or sellers thereof set
forth in such registration statement; provided, however, that the Company shall
not in any event be required to keep the registration statement effective for a
period of more than 180 days after such registration statement becomes
effective;
(c) furnish to each seller of Registrable Securities covered by such
registration statement such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus contained in
such registration statement (including each preliminary prospectus and any
summary prospectus) and such other documents as such seller may reasonably
requested;
(d) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as each seller
thereof shall reasonably request, to keep such registration or qualification
<PAGE> 6
in effect for so long as such registration statement remains in effect
(provided, however, that the Company shall not in any event be required to keep
such registration or qualification in effect for a period of more than 180 days
after such registration or qualification becomes effective), and take any other
action which may be reasonably necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of the securities owned by such
seller, except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this Section 2.3(d) be
obligated to be so qualified;
(e) furnish to each seller of Registrable Securities a copy, or,
upon request, a signed counterpart, addressed to such seller (and the
underwriters, if any) of
(i) an opinion of counsel for the Company, dated the effective
date of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of the
closing under the underwriting agreement), and
(ii) in the event the registration to be effected is
underwritten or constitutes the Demand Registration, a "comfort"
letter, dated the effective date of such registration statement
(and, if such registration includes an underwritten public offering,
dated the date of the closing under the underwriting agreement),
signed by the independent public accountants who have audited the
Company's financial statements included in such registration
statement, covering substantially the same matters with respect to
such registration statement (and the prospectus included therein)
and, in the case of the accountants' letter, with respect to events
subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in
accountants' letters delivered to the underwriters in underwritten
public offerings of securities;
(f) notify each seller of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and at the request of any such seller,
prepare and furnish to such seller a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include 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 in the light of the circumstances under which they were made; and
(g) use its best efforts to list all Registrable Securities covered
by such registration statement on any securities exchange on which any shares of
the Common Stock is then listed.
<PAGE> 7
It shall be a condition precedent to the obligations of the Company
to take any action with respect to registering a Holder's Registrable Securities
pursuant to this Article II that such Holder of Registrable Securities as to
which any registration is being effected furnish in writing to the Company such
information regarding such seller, the Registrable Securities and other
securities of the Company held by such seller, and the distribution of such
securities and such other information as the Company may from time to time
reasonably request in writing.
Each Holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 2.3(f), such Holder will
forthwith discontinue such Holder's disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable Securities.
2.4 Holdback Agreements. (a) Each Holder of Registrable Securities agrees
not to effect any public sale or public distribution of equity securities of the
Company, or any securities convertible into or exchangeable or exercisable for
such securities, during the seven days prior to and the 90 days after the
effective date of an underwritten Demand Registration or Incidental Registration
in which Registrable Securities are included (except as part of such
underwritten registration), unless the underwriters managing the registered
public offering otherwise agree.
(b) The Company agrees not to effect any public sale or public
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and the 90 days after the effective date of any underwritten Demand Registration
or Incidental Registration or during the 30-day period beginning on the
effective date of any non-underwritten Demand Registration or Incidental
Registration (except as part of such underwritten registration or pursuant to
registrations on Forms S-4, S-8 or any successor forms), unless the
underwriters, managing the registered public offering otherwise agree (or, with
respect to a non-underwritten offering, unless the Holder of Registrable
Securities otherwise agrees) or unless all of the Registrable Securities
registered under the registration statement for the Demand Registration or
Incidental Registration, as the case may be, have been sold.
2.5 Indemnification.
(a) Indemnification by the Company. In the event any Registrable
Securities are included in a registration statement under this Article II, to
the extent permitted by law, the Company shall, and hereby does, indemnify and
hold harmless the seller of any Registrable Securities covered by such
registration statement, its directors and officers, and each other Person, if
any, who controls such seller or any such underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such seller or any such director or officer or controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to
<PAGE> 8
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Company will reimburse such
seller and each such director, officer and controlling person for any legal or
any other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, liability, action or proceeding; provided
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability (or action or proceeding in respect thereof)
or expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such seller expressly for use in the preparation
thereof, and provided further that the Company shall not be liable to any
Person, in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
such Person's failure to send or give a copy of the final prospectus, as the
same may be then supplemented or amended, to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in such final prospectus.
Such indemnify shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director, officer
or controlling person and shall survive the transfer of such securities by such
seller.
(b) Indemnification by the Holders of Registrable Securities. The
Company may require, as a condition to including any Registrable Securities in
any registration statement filed pursuant to Section 2.1 and Section 2.2, that
the Company shall have received an undertaking reasonably satisfactory to it
from the prospective seller of such securities, to indemnify and hold harmless
(in the same manner and to the same extent as set forth in Section 2.5(a)) each
underwriter, each Person who controls such underwriter within the meaning of the
Securities Act, the Company, each director of the Company, each officer of the
Company and each other Person, if any, who controls the Company within the
meaning of the Securities Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such seller
expressly for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided that such prospective seller shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or any other Person, if any, who controls such underwriter within the meaning of
the Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of such Person's failure to send or give a copy of the final prospectus, as
the same may be then supplemented or amended, to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in such final prospectus.
Such indemnify shall remain in full force and effect, regardless of any
investigation made by or on behalf of any underwriter, the Company or any such
director, officer or controlling Person and shall survive the transfer of such
securities by such seller.
<PAGE> 9
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding paragraphs of this Section 2.5, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding paragraphs of this Section 2.5, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) Indemnification Payments. The indemnification required by this
Section 2.5 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this
Section 2.5 from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the 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 or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including any untrue
statement of material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such indemnifying
party or indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such action. The
amount paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include, subject
to the limitations set forth in Section 2.5(c), any legal or other fees or
expenses reasonably incurred by such party in connection with any investigation
or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 2.5(e) 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
<PAGE> 10
paragraph. 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.
If indemnification is available under this Section 2.5, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided herein without regard to the relative fault of said indemnifying party
or indemnified party or any other equitable consideration provided for in this
Section 2.5(e).
2.6 Forms. All references in this Agreement to particular forms of
registration statements are intended to include, and shall be deemed to include,
references to all successor forms which are intended to replace, or to apply to
similar transactions as, the forms herein referenced.
2.7 Transfer of Registrable Securities. The Company and the Majority
Stockholder agree that the Majority Stockholder may transfer all or a portion of
the Registrable Securities to other parties prior to exercising its Demand
Registration or Incidental Registrations with respect to such securities as
provided herein, without the prior written consent of the Company if the
transferee is an Affiliate of the Majority Stockholder. The registration rights
granted to the Majority Stockholder under this Article II also may be
transferred without the prior written consent of the Company only in the event
that the transferee of such rights if an Affiliate of the Majority Stockholder.
In all other cases, any transfer of Registrable Securities or registration
rights granted hereunder shall require the prior written consent of the Company.
As a condition to the Majority Stockholder's transfer of its registration rights
hereunder, all transferees of such registration rights shall agree, as Holder of
Registrable Securities, to be subject to and bound by the provisions of this
Agreement.
2.8 Rule 144. At any time after the Company is subject to the reporting
requirements of the Exchange Act, the Company covenants that it will take such
action, including, but not limited to, the filing of reports required to be
filed by it under the Securities Act and the Exchange Act, as any Holder of
Registrable Securities may reasonable request, all to the extent required from
time to time to enable such Holder of Registrable Securities to sell Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144 under the Securities Act, as such Rule
may be in writing, or any similar successor rule or regulation.
2.9 "Most Favored Nations" Election. In the event that after the date of
this Agreement, but prior to its termination, the Company enters into an
agreement with any Holder of shares of its Common Stock whereby such Holder is
granted registration rights with respect to such shares (a "Subsequent
Agreement"), then the Company agrees to: (i) provide each Holder of Registrable
Securities a copy of such agreement promptly after its execution and (ii) offer
each such Holder of Registrable Securities an opportunity to elect to enter into
an agreement with the Company whereby such Holder of Registrable Securities, in
lieu of its rights hereunder, shall be entitled to the registration rights
equivalent to those described in the Subsequent Agreement. A Holder of
Registrable Securities shall have 20 days after the date on which notice of such
event is deemed to have been given by the Company pursuant to the provisions of
Section 3.2 of this Agreement, to notify the Company in writing of its election
to terminate its rights under this Agreement and, in lieu
<PAGE> 11
thereof, to enter into a new agreement containing registration rights equivalent
to those contained in the Subsequent Agreement. Such new agreement shall be
executed promptly after receipt of such notice by the Company.
2.10 Registration Expenses.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including, without limitation, all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, listing fees, printing expenses, messenger and delivery expenses, and fees
and disbursements of counsel for the Company and all reasonable fees and
disbursements of counsel for the participating Holders of Registrable
Securities, and all independent certified public accountants, underwriters
(excluding discounts and commissions), and other persons retained by the
Company, including, without limitation, the underwriters retained for an
underwritten Demand Registration or Incidental Registration (all such expenses
being herein referred to as "Registration Expenses"), will be borne by the
Company.
(b) With respect to underwriters' discounts and commissions, will be
borne by all sellers of securities included in such registration in proportion
to the aggregate selling price of the securities to be so registered.
III. MISCELLANEOUS
3.1 Waivers and Amendments. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given
unless the Company has obtained the written consent of Holders of at least a
majority of the Registrable Securities then outstanding affected by such
amendment, modification, supplement, waiver or departure.
3.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
mailed by certified mail (return receipt requested) or sent by overnight
delivery service, cable, telegram, facsimile transmission or telex to the
parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice:
(a) if to the Majority Stockholder:
MS Acquisition Limited
16251 Dallas Parkway
Dallas, Texas 75248
Attention: Sharon Drobeck
Facsimile: (972) 687-1662
<PAGE> 12
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Eileen Nugent Simon, Esq.
Facsimile: (212) 735-2000
(b) if to the Company:
Richmont Marketing Specialists Inc.
2324 Gateway Drive
Irving, Texas 75015
Attention: Gary R. Guffey
Facsimile: (972) 550-1896
with a copy to:
Andrews & Kurth L.L.P.
1717 Main Street, Suite 3700
Dallas, Texas 75201
Attention: J. Gregory Holloway, Esq.
Facsimile: (214) 659-4401
(c) if to Holders of Registrable Securities other than the Majority
Stockholder, at their respective last address provided to the Company.
Notice so given shall, in the case of notice so given by mail, be deemed to be
given and received on the fourth calendar day after posting, in the case of
notice so given by overnight delivery service, on the date of actual delivery
and, in the case of notice so given by cable, telegram, facsimile transmissions,
telex or personal delivery, on the date of actual transmission or, as the case
may be, personal delivery.
3.3 Severability. If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable under any applicable law, then such
contravention or invalidity shall not invalidate the entire Agreement. Such
provision shall be deemed to be modified to the extent necessary to render it
legal, valid and enforceable, and if no such modification shall render it legal,
valid and enforceable, then this Agreement shall be construed as if not
containing the provision held to be invalid, and the rights and obligations of
the parties shall be construed and enforced accordingly.
<PAGE> 13
3.4 Headings. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
3.5 Choice of Law. Arbitration and Choice of Law. The parties hereto shall
in good faith negotiate to resolve amicably any dispute, controversy or claim
(collectively, "Controversy") arising out of, relating to, or in connection
with, this Agreement. In the event such Controversy is not resolved amicably
within sixty (60) days from the date that notice is delivered in respect of such
Controversy, such Controversy shall be settled by arbitration to the exclusion
of all other procedures. The parties hereto agree that any such Controversy
shall be submitted to three arbitrators selected from the panels of arbitrators
of the American Arbitration Association ("AAA") and shall be governed by the
Commercial Arbitration Rules of the AAA, as amended and in effect on the date a
demand for arbitration is filed with the AAA. Any demand for arbitration shall
specify a dollar amount of damages sought. The arbitrators shall be governed by
and shall apply the substantive law of the State of Texas (without giving effect
to the rules of conflict of laws thereof) in making their award and their ruling
shall be binding and conclusive upon the parties hereto. any arbitration shall
occur in the city of Dallas, Texas and judgment upon the award rendered may be
entered in any court of competent jurisdiction. Notwithstanding the foregoing,
the parties will obtain the agreement of arbitrators to the following: (i) the
arbitrators shall provide a written ruling, stating in separate sections the
findings of fact and conclusions of law on which their ruling is based; and (ii)
their ruling shall be due no later than ninety (90) days after their final
hearing and within nine (9) months after commencement of the arbitration.
3.6 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together, and shall
constitute one and the same instrument.
3.7 Termination. This Agreement shall terminate at such time as no
Registrable Securities are outstanding.
3.8 Complete Agreement. This Agreement, those documents expressly referred
to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
REGISTRATION RIGHTS AGREEMENT
SIGNATURE PAGES FOLLOW
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
MS ACQUISITION LIMITED
By: MSSC ACQUISITION
CORPORATION, its general partner
By: /s/ Timothy M. Byrd
--------------------------------
Name: Timothy M. Byrd
Title: Vice President and Chief
Financial Officer
RICHMONT MARKETING SPECIALISTS
INC.
By: /s/ Timothy M. Byrd
-------------------------------------
Name: Timothy M. Byrd
Title: Vice President
<PAGE> 1
EXHIBIT 10.7
AMENDED AND RESTATED WARRANT AGREEMENT
This AMENDED AND RESTATED WARRANT AGREEMENT (this "Agreement") dated as of
October 7, 1997, is by and between (i) Ronald D. Pedersen, Jeffrey A. Watt,
Bruce A. Butler, and Gary R. Guffey (collectively, the "Stockholders"), each a
stockholder of RICHMONT MARKETING SPECIALISTS INC., a Delaware corporation (the
"Company"), and (ii) William B. Robinson, as the Warrant Holder (the "Holder").
The Company is a party to this Agreement for the limited purposes set forth
herein.
WHEREAS, the Stockholders and Marketing Specialists Sales Company, a Texas
corporation ("MSSC"), previously entered into that certain Warrant Agreement
dated as of April 2, 1996, as amended by that certain Amendment No. 1 to Warrant
Agreement dated as of November 7, 1996 (as amended, the "MSSC Warrant
Agreement"), pursuant to which the Stockholders issued and delivered to Holder a
warrant certificate (the "MSSC Warrant Certificate") evidencing warrants to
purchase up to 4,090 shares of the common stock, par value $.01 per share, of
MSSC (the "MSSC Common") from the Stockholders on the terms and conditions set
forth in the MSSC Warrant Agreement; and
WHEREAS, pursuant to the terms of that certain Equity Contribution
Agreement of even date herewith (the "Contribution Agreement"), among the
Company, MSSC, the Stockholders and MS Acquisition Limited, a Texas limited
partnership and majority stockholder of MSSC ("Acquisition"), the Stockholders
and Acquisition agreed to exchange their shares of MSSC Common for a like number
of shares of common stock, par value $.01 per share, of the Company (the "Common
Stock"); and
WHEREAS, the Stockholders and the Holder desire to amend and restate the
MSSC Warrant Agreement in its entirety to provide for the issuance and delivery
of a warrant certificate (the "Warrant Certificate") evidencing warrants (the
"Warrants") to purchase up to 4,090 shares of the Company's Common Stock from
the Stockholders, on the pro rata basis set forth on Exhibit A hereto, pursuant
to the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and provisions
of the Warrants and the Warrant Certificate and the respective rights and
obligations thereunder of the Stockholders and the Holder, the parties hereto
agree as follows:
SECTION 1. Definitions. As used herein, the following terms shall have the
following meanings, unless the context shall otherwise require:
(a) "Business Day" shall mean a day which is not a Saturday, Sunday
or a day on which banking institutions are legally authorized to close in
Dallas, Texas.
<PAGE> 2
(b) "Company and Stockholders Agreement" shall mean that certain
Company and Stockholders Agreement of even date herewith, by and among
Acquisition, the Company and each of the Stockholders, attached hereto as
Exhibit B.
(c) "Corporate Office" shall mean the office of the Company (or its
successor), which office is located as of the date hereof at 2324 Gateway Drive,
Irving, Texas 75063.
(d) "Effective Date" shall mean the date first set forth above.
(e) "Exercise Date" shall mean, as to any Warrant, the date on which
the Warrant is duly exercised pursuant to Section 4.
(f) "Exercise Period" shall mean the time period commencing on the
date hereof and ending on May 31, 2002 at 5:00 p.m. Dallas time (or if such date
falls on a day that is not a Business Day, then the next succeeding Business
Day).
(g) "Exercise Price" shall mean $399.62.
(h) "Person" shall mean any individual or any corporation,
partnership (general or limited), joint stock company, business trust, limited
liability company or any other type of entity, organization or association.
(i) "Securities Act" shall mean the Securities Act of 1933, as
amended.
Capitalized terms used herein, but not otherwise defined in this
Section 1, shall have the meanings ascribed to them throughout this Agreement.
SECTION 2. Warrants and Issuance of Warrant Certificate.
(a) Each Warrant shall entitle the Holder to purchase from the
Stockholders one share of Common Stock in accordance with the terms hereof and
subject to adjustment as provided herein.
(b) Simultaneously with his execution and delivery of this
Agreement, the Holder shall surrender the MSSC Warrant Certificate to the
Stockholders for cancellation, and the Warrant Certificate representing 4,090
Warrants shall be executed by each of the Stockholders and delivered to the
Holder.
SECTION 3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificate shall be substantially in the form
annexed hereto as Exhibit C (the provisions of which are hereby incorporated
herein) and may have such letters, numbers or other marks of identification or
designation and such legends, summaries or endorsements printed, lithographed or
engraved thereon as the Stockholders may deem appropriate and as are not
<PAGE> 3
inconsistent with the provisions of this Agreement, or as may be required to
comply with any law or with any rule or regulation made pursuant thereto.
Warrants shall be numbered serially with the prefix W.
(b) The Warrant Certificate shall be executed by each Stockholder.
SECTION 4. Exercise.
(a) Each Warrant shall entitle the Holder, subject to the provisions
of this Agreement, to purchase one share of Common Stock (subject to adjustment
pursuant to Section 7 below) at the Exercise Price if the Warrant is exercised
during the Exercise Period. After the lapse of the Exercise Period, the Warrants
shall no longer be exercisable.
(b) The Holder may exercise all or any whole portion of such
Warrants during the Exercise Period by:
i. presenting and surrendering to the Stockholders the Warrant
Certificate representing all or any whole portion of the
Warrants desired to be exercised;
ii. duly executing and delivering the subscription form on the
reverse side of the Warrant Certificate (the "Subscription
Form"), indicating the number of Warrants being exercised and
the number of shares of Common Stock being purchased upon
exercise; and
iii. paying in full the Exercise Price for each Warrant being
exercised by wire transfer in immediately available funds to
each Stockholder in accordance with his pro rata percentage as
set forth on Exhibit A.
A Warrant will be deemed to have been exercised on the date that the
Stockholders receive the Warrant Certificate, Subscription Form and payment in
full (in the manner set forth above) of the Exercise Price of the Warrants being
exercised.
(c) Within three business days after a Warrant has been duly
exercised by the Holder, the Stockholders shall transfer their respective shares
of Common Stock, or other property as provided for herein, to the Holder (on the
pro rata basis set forth on Exhibit A hereto, rounded to the nearest whole
share), and the Company shall issue a certificate to the Holder (and reissue new
certificates to each Stockholder, after deducting the proportionate number of
shares transferred by such Stockholder following exercise of the Warrants) for
the total number of shares of Common Stock for which the Warrants were duly
exercised, and the Holder shall be deemed to be the holder of record of such
shares of Common Stock on the Exercise Date, notwithstanding that the stock
transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
the Holder.
<PAGE> 4
(d) If less than all of the Warrants represented by a Warrant
Certificate are exercised, the Stockholders shall issue a new Warrant
Certificate for the remaining number of Warrants.
(e) In the event that any Stockholder holds Common Stock that has
been registered for public sale by such Stockholder under the Securities Act,
the Holder shall be entitled (upon exercise of the Warrants under the terms
hereof and without acceleration of the Exercise Period) to receive from such
Stockholder the number of shares of Common Stock provided for hereunder, split
between registered and non-registered shares of Common Stock in proportion to
the number of such registered and non-registered shares of Common Stock held by
such Stockholder; provided, that the number of shares of registered Common Stock
to be delivered shall be rounded down to the nearest whole share. In the event
that the Holder exercises less than all of the Warrants, the Holder may
designate in a transmittal letter all or any whole portion of Warrants being
exercised hereunder as pertaining first to registered shares to which Holder is
otherwise entitled pursuant to this subsection; provided, that such designation
and the resulting exercise shall directly reduce the number of registered shares
available through future exercise of Warrants. (For example, if 20% of the
shares held by a Stockholder have been registered for public sale by such
Stockholder under the Securities Act, then 20% of the shares deliverable by such
Stockholder upon exercise of all of the Warrants (rounded down to the nearest
whole share) shall be such registered shares. Notwithstanding the foregoing, the
Holder shall be entitled, in such case, to receive only registered shares (if he
so designates) upon the exercise of up to 20% of the Warrants; if the Holder
were to exercise 20% of the Warrants and designate that such exercise be in
exchange for registered shares, then all future exercises of Warrants would
entitle the Holder to receive only unregistered shares, unless additional shares
are registered for public sale by such Stockholder.)
(f) Notwithstanding anything to the contrary in this Agreement, the
Stockholders may sell all or any of the shares of Common Stock owned by them at
any time, provided that the proceeds of such sales are made available to the
Holder in accordance with the following provisions. If a Stockholder sells a
portion of his shares of Common Stock after the date hereof, the Holder shall be
entitled (upon exercise of the Warrants under the terms hereof and without
acceleration of the Exercise Period) to receive from such Stockholder shares of
Common Stock as otherwise provided hereunder and Stockholder's Per Share
Proceeds, split in proportion to the number of shares of Common Stock held by
such Stockholder following such sale and the number of shares of Common Stock
sold by such Stockholder with respect to such sale and additional sales
occurring after the date hereof; provided, that the number of shares of Common
Stock to be delivered shall be rounded up to the nearest whole share and the
Stockholder's Per Share Proceeds to be delivered shall reflect (to the extent
reasonably practicable) the mix of Stockholder's Per Share Proceeds received by
such Stockholder in connection with all sales occurring after the date hereof.
In the event that the Holder exercises less than all of the Warrants, the Holder
may designate in a transmittal letter all or any whole portion of Warrants being
exercised hereunder as pertaining first to Stockholder's Per Share Proceeds to
which Holder is otherwise entitled pursuant to this subsection; provided, that
such designation and the resulting exercise shall directly reduce the amount of
Stockholder's Per Share Proceeds available through future exercise of Warrants.
The "Stockholder's Per Share Proceeds" means the total tangible consideration
(i.e., cash, securities and/or other property) received by such
<PAGE> 5
Stockholder as proceeds from a sale of Common Stock after the date hereof
(without reduction for any encumbrance or lien on such shares), divided by the
total number of shares of Common Stock so sold. (For example, if 20% of the
shares held by a Stockholder are sold after the date hereof, then 20% of the
consideration deliverable by such Stockholder upon exercise of all the Warrants
shall be Stockholder's Per Share Proceeds. Notwithstanding the foregoing, Holder
shall be entitled, in such case, to receive only Stockholder's Per Share
Proceeds (if he so designates) upon the exercise up to of 20% of the Warrants;
if Holder were to exercise 20% of the Warrants and designate that such exercise
be in exchange for Stockholder's Per Share Proceeds, then all future exercises
of Warrants would entitle the Holder to receive only shares of Common Stock,
unless such Stockholder sells further shares of Common Stock.)
SECTION 5. Registration
(a) The Company shall register all transactions in connection with
this Warrant Agreement in its books and records.
(b) With respect to the Warrant Certificate being presented for
registration or exercise, the Subscription Form shall be duly endorsed, or be
accompanied by a written instrument or instruments, in a form satisfactory to
the Stockholders, duly executed by the Holder or his attorney-in-fact duly
authorized in writing.
SECTION 6. Loss or Mutilation. Upon receipt by the Stockholders of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of the Warrant Certificate and (in case of such loss, theft or
destruction) of indemnity reasonably satisfactory to the Stockholders, and (in
the case of mutilation) upon surrender and cancellation of the mutilated Warrant
Certificate, each of the Stockholders shall execute and deliver to the Holder a
new Warrant Certificate of like tenor representing an equal aggregate number of
Warrants. In such case, the Holder shall pay all reasonable expenses associated
with the issuance of a new Warrant Certificate.
SECTION 7. Adjustments to Shares of Common Stock Purchasable. The number
of shares of Common Stock purchasable upon exercise of a Warrant shall be
subject to adjustment from time to time upon the happening of certain events as
provided in this Section 7.
7.1 Mechanical Adjustments.
(a) If at any time prior to the termination of this Agreement
pursuant to Section 18 the Company shall (i) pay a dividend or make a
distribution on the Common Stock in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares, or (iii)
combine its outstanding shares of Common Stock into a smaller number of shares,
then immediately after the occurrence of such event the number of shares of
Common Stock for which a Warrant is exercisable shall be adjusted to equal the
number of shares of Common Stock which a record holder of the same number of
shares of Common Stock for which a Warrant is exercisable immediately prior to
the occurrence of such event would own or be entitled to receive after the
happening of such event.
<PAGE> 6
(b) In the event of a (i) recapitalization or reclassification of
shares of Common Stock (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination of the Common Stock), (ii) consolidation or merger of the Company
with or into another person or any merger of another person into the Company
(other than a merger that does not result in a reclassification, conversion,
exchange or cancellation of Common Stock), (iii) sale or transfer of all or
substantially all of the assets of the Company (other than a sale-leaseback,
farm-out, collateral assignment, mortgage or other similar financing
transaction), or (iv) compulsory share exchange, pursuant to any of which
holders of Common Stock shall be entitled to receive other securities, cash or
other property, then there shall be no adjustment in the Exercise Price but
appropriate provision shall be made so that the Holder shall have the right
thereafter, upon exercise of the Warrant, to receive the kind and amount of the
securities, cash or other property that are received by the Stockholders, per
share of Common Stock, upon such recapitalization, reclassification,
consolidation, merger, sale, transfer, or share exchange with respect to the
number of shares of Common Stock issuable upon exercise of the Warrant
immediately prior to such recapitalization, reclassification, consolidation,
merger, sale, transfer or share exchange.
7.2 Notices of Adjustment and Other Actions. Whenever the number of
shares of Common Stock is adjusted as herein provided, the Stockholders shall
promptly mail or cause to be mailed to the Holder a notice setting forth the
adjusted number of shares purchasable upon the exercise of this Warrant, setting
forth in reasonable detail the facts requiring such adjustment and the
calculation on which adjustment is based, which notice shall be conclusive
evidence of the correctness of such adjustment. The Stockholders shall give the
Holder notice by mail as soon as practicable upon the commitment by the Company
or any Stockholder to any action with respect to the Company's Common Stock that
would give rise to the operation of Section 4(e) or Section 4(f) hereof, or that
is described in Section 7.1(b) hereof.
7.3 No Adjustment for Cash Dividends. No adjustment in respect of
any cash dividends shall be made during the term of this Agreement or upon the
exercise of the Warrants.
7.4 Form of Warrants After Adjustment. The form of the Warrants need
not be changed because of any adjustments in the number or kind of the shares of
Common Stock, and Warrants theretofore or thereafter issued may continue to
express the same number and kind of shares as are stated in this Warrant
Agreement.
SECTION 8. Transfer. The Holder may transfer the Warrants solely in
accordance with the terms and conditions of Section 2(d) of the Company and
Stockholders Agreement as if Holder were a Management Stockholder thereunder.
Any other transfer shall be null and void.
SECTION 9. Obligations. The Holder, upon the exercise of any or all of the
Warrants in accordance with Section 4 hereof, shall become immediately subject
to all of the restrictions and obligations of a Management Stockholder under the
terms of the Company and Stockholders Agreement as it may be amended from time
to time (including, without limitation, the obligations of
<PAGE> 7
a Management Stockholder under Sections 2(a), 2(e), 5, 7, 8, 9, 10 and 14),
without receiving the benefit of the rights of a Management Stockholder under
Sections 2(a), 4, 6 or 7 thereof, and the Holder agrees to execute a signature
page to the Company and Stockholders Agreement as soon as practicable after
exercising any Warrant. Notwithstanding the foregoing or any other provision in
this Agreement or the Company and Stockholders Agreement seemingly to the
contrary, (i) as among Holder and the Management Stockholders, any
indemnification obligations of Holder pursuant to Section 14 of the Company and
Stockholders Agreement shall be several, and not joint and several, and (ii) in
the event that the Warrants being exercised hereunder are designated by Holder
as pertaining only to Stockholder's Per Share Proceeds to which the Holder is
then entitled pursuant to Section 4(f) hereof, then Holder shall not be subject
to the restrictions and obligations of a Management Stockholder under the terms
of the Company and Stockholders Agreement and shall not be required to execute a
signature page to the Company and Stockholders Agreement with respect to such
Warrants.
SECTION 10. Holder Not Deemed Stockholder. The Holder shall not be
entitled to vote or to receive dividends or be deemed the holder of Common Stock
that may at any time be issuable upon exercise of such Warrants for any purpose
whatsoever, nor shall anything contained herein be construed to confer upon the
Holder any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issue or reclassification of stock, change
of par value or change of stock to no par value, consolidation, merger or
conveyance or otherwise), or to receive notice of meetings, or to receive
dividends or subscription rights.
SECTION 11. Rights of Action. All rights of action with respect to this
Agreement are vested in the Holder, who may, in his own behalf and for his own
benefit, enforce against the Stockholders his right to exercise the Warrants for
the purchase of shares of Common Stock in the manner provided in the Warrant
Certificate and this Agreement.
SECTION 12. Cancellation of Warrant Certificates. If the Stockholders or
the Company shall purchase or acquire any Warrant or Warrants, the Warrant
Certificate or Warrant Certificates evidencing the same shall thereupon be
delivered to the Stockholders or the Company, as the case may be, and canceled
and retired.
SECTION 13. Representations and Warranties.
13.1. Sophisticated Investor. Holder represents and warrants that he
is a sophisticated investor and has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of its
investment in the Warrants and the underlying Common Stock. Holder has had the
opportunity to obtain from the Company and the Stockholders any and all
information, to the extent possessed by the Company and the Stockholders or
obtainable with reasonable effort by the Company and the Stockholders, necessary
to evaluate the merits and risks of an investment in the Warrants and the
underlying Common Stock and has concluded, based
<PAGE> 8
on such information and other information previously known to Holder, to invest
in the Warrants and the underlying Common Stock pursuant to the terms of this
Warrant Agreement.
13.2. Absence of Market. Holder acknowledges that the Warrants and
the underlying Common Stock lack liquidity as compared with other securities
investments since there is not, and there is not expected to be in the
foreseeable future, any market for the Warrants or the underlying Common Stock.
Holder acknowledges that he must bear the economic risk of his investment in the
Warrants and the Common Stock (if the Warrant is duly exercised) for an
indefinite period of time since neither have been registered under the
Securities Act and therefore cannot be sold unless they are subsequently
registered or an exemption from registration is available.
13.3. Investment Purposes. Holder hereby represents and warrants
that he is acquiring the Warrant and the underlying Common Stock for investment
purposes only, for his own account, and not as nominee or agent for any other
person or entity, and not with a view to, or for resale in connection with, any
distribution thereof within the meaning of the Securities Act. Holder has no
agreement or other arrangement with any person or entity to sell, transfer or
pledge any part of the underlying Common Stock once the Warrant is duly
exercised and has no plans to enter into any such agreement or arrangement
(except as permitted by Section 8).
13.4. Restricted Security. Holder acknowledges that the Stockholders
are transferring the Warrants to Holder without registration under the
Securities Act and that the underlying Common Stock is not registered under the
Securities Act. Holder further acknowledges that representatives of the Company
and the Stockholders have advised Holder that no state or federal agency or
instrumentality has made any finding or determination as to the investment in
the Warrants or the underlying Common Stock, nor has any state or federal agency
or instrumentality made any recommendation with respect to any purchase or
investment in the Warrants or the underlying Common Stock.
13.5. Capitalization. The Stockholders represent and warrant that
the authorized capital stock of the Company consists of 1,000,000 shares of
Common Stock, of which, as of the Effective Date, 137,635 shares are issued and
outstanding.
13.6. Ownership of Common Stock. Each Stockholder hereby severally
(and not jointly) represents and warrants that, on the date hereof, he owns of
record and beneficially the number of shares set forth opposite such
Stockholder's name on Exhibit A hereto.
13.7 Authority. Each of the parties hereby severally (and not
jointly) represents and warrants that, on the date hereof, he or it has all
requisite right, power and authority (corporate authority in the case of the
Company) and has full legal capacity and is competent to execute, deliver and
perform this Agreement and to consummate the transactions contemplated hereby.
<PAGE> 9
SECTION 14. Amendment and Restatement; Entire Agreement; Sole Warrant
Agreement; Modification of Agreement. This Agreement constitutes an amendment
and restatement in its entirety of the MSSC Warrant Agreement, and, upon
execution and delivery of this Agreement by the parties hereto, the MSSC Warrant
Agreement shall terminate and the parties thereto shall cease to have any rights
and obligations thereunder. This Agreement and the Warrant Certificate embody
the complete agreement and understanding among the parties regarding the subject
matter hereof and supersede and preempt any prior understandings, agreements or
representations regarding the subject matter hereof among the parties including,
without limitation, the MSSC Warrant Agreement and the MSSC Warrant Certificate.
Upon execution and delivery of this Agreement and the Warrant Certificate, this
Agreement and the Warrant Certificate shall constitute the sole Warrant
Agreement and Warrant Certificate, respectively, among the parties hereto. This
Agreement shall not be modified, supplemented, altered or amended in any respect
except with the consent in writing of each of the Stockholders, the Company and
the Holder.
SECTION 15. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class mail, postage prepaid as follows:
if to the Holder:
William B. Robinson
Corporate Finance Advisers, Inc.
235 Pine Street, 10th Floor
San Francisco, California 94104
and a copy to: Morea & Schwartz, P.C.
120 Broadway
New York, New York 10271-1096
Attention: Douglas M. Morea, Esq.
if to the Stockholders
or the Company:
Richmont Marketing Specialists Inc.
2324 Gateway Drive
Irving, Texas 75015
Attention: Gary R. Guffey
and a copy to: Andrews & Kurth L.L.P.
1717 Main Street
Suite 3700
Dallas, Texas 75201
Attention: J. Gregory Holloway, Esq.
<PAGE> 10
SECTION 16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
TEXAS, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF LAWS.
SECTION 17. Binding Effect. This Warrant Agreement shall be binding upon
and inure to the benefit of the Holder (including respective successors and
assigns of the Holder as permitted by Section 8) and the Stockholders (including
respective successors and assigns of the Stockholders). Nothing in this Warrant
Agreement is intended or shall be construed to confer upon any other person any
right, remedy or claim, in equity or at law, or to impose upon any other person
any duty, liability or obligation.
SECTION 18. Termination. This Warrant Agreement shall terminate at the
earlier of (i) the date on which all Warrants have been exercised, or (ii) the
lapse of the Exercise Period.
SECTION 19. Counterparts. This Warrant Agreement may be executed in
several counterparts, which taken together shall constitute a single document.
[Signature page follows.]
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be duly executed as of the date first above written.
RICHMONT MARKETING SPECIALISTS INC.
/s/ Ronald D. Pedersen
- -------------------------------------
Ronald D. Pedersen,
President and Chief Executive Officer
THE HOLDER
/s/ William B. Robinson /s/ Cheryl A. Robinson
- ------------------------------------- -------------------------------------
William B. Robinson Cheryl A. Robinson
THE STOCKHOLDERS
/s/ Ronald D. Pedersen
- -------------------------------------
Ronald D. Pedersen
/s/ Jeffrey A. Watt
- -------------------------------------
Jeffrey A. Watt
/s/ Bruce A. Butler /s/ Victoria A. Butler
- ------------------------------------- -------------------------------------
Bruce A. Butler Victoria A. Butler
/s/ Gary R. Guffey /s/ P. JoAnn Guffey
- ------------------------------------- -------------------------------------
Gary R. Guffey P. JoAnn Guffey
<PAGE> 12
EXHIBIT A
<TABLE>
<CAPTION>
Management Stockholder Shares Subject to Warrants Pro Rata Percentage Purchase Price
- ---------------------- -------------------------- ------------------- --------------
<S> <C> <C> <C>
Ronald D. Pedersen 1,920 47% $ 767,270.40
Jeffrey A. Watt 1,250 31% $ 499,525.00
Bruce A. Butler 460 11% $ 183,825.20
Gary R. Guffey 460 11% $ 183,825.20
----------------------------------------------------------------
Totals 4,090 100% $1,634,445.80
</TABLE>
<PAGE> 13
EXHIBIT C
[FORM OF FACE OF WARRANT CERTIFICATE]
No. W-1 4,090 Warrants
RICHMONT MARKETING SPECIALISTS INC.
WARRANT CERTIFICATE
This Warrant Certificate certifies that FOR VALUE RECEIVED William B.
Robinson (the "Holder") is the holder of the number of Richmont Marketing
Specialists Inc. (the "Company") warrants ("Warrants") specified above. Each
Warrant entitles the Holder, but only subject to the terms and conditions set
forth herein and in the Warrant Agreement referred to below, to purchase from
Ronald D. Pedersen, Jeffrey A. Watt, Bruce A. Butler or Gary R. Guffey
(collectively, the "Stockholders") one share of Common Stock, par value $0.01
per share (the "Common Stock") of the Company during the Exercise Period (as
defined herein), upon the presentation and surrender of this Warrant Certificate
with the Subscription Form on the reverse hereof duly executed, at the Corporate
Office of the Company, or such other address as the Company may specify in
writing to the Holder, accompanied by payment of $399.62 per Warrant (the
"Exercise Price") in lawful money of the United States of America by wire
transfer in immediately available funds to each of the Stockholders in
accordance with their pro rata share. Each Warrant shall be exercisable at the
Exercise Price during the Exercise Period. After the lapse of the Exercise
Period, the Warrants shall no longer be exercisable.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Amended and Restated Warrant Agreement by and between the
Stockholders and the Holder (and for the limited purposes set forth therein, the
Company) dated October 7, 1997 (the "Warrant Agreement").
The term "Exercise Period" shall mean the time period commencing on the
date hereof and ending on May 31, 2002 at 5:00 p.m. Dallas time (or if such date
falls on a day that is not a Business Day, then the next succeeding Business
Day).
Capitalized terms used herein, but not otherwise defined, shall have the
meanings ascribed to them in the Warrant Agreement.
<PAGE> 14
In the event of certain contingencies provided in the Warrant Agreement,
the number of shares of Common Stock subject to purchase upon the exercise of
each Warrant represented hereby is subject to modification or adjustment.
In the case of the exercise of less than all of the Warrants represented
hereby, this Warrant Certificate shall be canceled and a new Warrant Certificate
of like tenor shall be delivered by the Stockholders to the Holder for the
balance of such Warrants.
Prior to the exercise of any Warrant represented hereby, the Holder shall
not be entitled to any rights of a stockholder of the Company, including,
without limitation, the right to vote or to receive dividends or other
distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS.
This Warrant Certificate is not valid unless signed by each of the
Stockholders (and, in certain indicated cases, their spouses).
[Signature page follows.]
<PAGE> 15
IN WITNESS WHEREOF, the Stockholders have caused this Warrant Certificate
to be duly executed.
Dated: October 7, 1997
THE HOLDER SPOUSE
- ------------------------------ ------------------------------
William B. Robinson Cheryl A. Robinson
THE STOCKHOLDERS
- ------------------------------
Ronald D. Pedersen
- ------------------------------
Jeffrey A. Watt
- ------------------------------ -------------------------------
Bruce A. Butler Victoria A. Butler
- ------------------------------ --------------------------------
Gary R. Guffey P. JoAnn Guffey
<PAGE> 16
[FORM OF REVERSE OF WARRANT CERTIFICATE]
SUBSCRIPTION FORM
To Be Executed by the Holder
in Order to Exercise Warrants
The Undersigned Holder hereby irrevocably elects to exercise a total of
_____________ Warrants represented by this Warrant Certificate, and to purchase
the securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities be transferred in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
_______________________________________
_______________________________________
_______________________________________
_______________________________________
[please print or type name and address]
and be delivered to
_______________________________________
_______________________________________
_______________________________________
_______________________________________
[please print or type name and address]
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be issued in the name of, and delivered to, the Holder at the address
stated below.
Dated: _______________ _________________________________________
_________________________________________
_________________________________________
Address
_________________________________________
Taxpayer Identification Number
_________________________________________
Signature Guaranteed
<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made as of April 2, 1996,
between Marketing Specialists Sales Company, a Texas corporation (the
"Company"), and Ronald D. Pedersen (the "Executive").
PRELIMINARY STATEMENTS
On and subject to the terms and conditions herein provided, the Company
desires to retain the services of the Executive in the capacities and with the
responsibilities and the titles set forth herein in order to ensure the
attention and dedication to the Company of the Executive as a member of the
Company's management, all of which the Company's Board of Directors (the
"Board") believes will be in the best interests of the Company and its
stockholders. The Executive desires to commit himself to so serve the Company.
In order to effect the foregoing, the Company and the Executive wish to enter
into an employment agreement on the terms and conditions set forth herein.
Accordingly, in consideration of these preliminary statements and the respective
covenants and agreements of the parties herein contained, and for other good,
valid and binding consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree as
follows:
STATEMENT OF AGREEMENT
1. Employment. The Company hereby agrees to employ the Executive, and the
Executive hereby accepts such employment on the terms and conditions set forth
herein.
2. Term. The employment of the Executive by the Company as provided in
Section 1 shall commence on the date hereof and end on the fifth anniversary
hereof (the "Expiration Date"); provided, however, that upon the Expiration Date
and upon each subsequent anniversary hereof, the Expiration Date shall be
automatically extended for one (1) year unless and until the Board delivers
notice to the Executive that his employment with the Company shall not be
extended, which notice shall be delivered at least one (1) year one plus one
hundred twenty (120) days prior to the then current Expiration Date.
3. Positions and Duties. The Executive shall initially be employed as
Chairman of the Board and Chief Executive Officer and shall thereafter be
employed
<PAGE> 2
in such executive capacity or capacities as determined by the Board; provided,
however, that during the Executive's employment with the Company during the term
of this Agreement, the Executive's duties shall be commensurate with those per-
formed by a senior executive of the Company. The Executive shall be stationed in
Dallas, Texas, or such other location that, during the term of this Agreement,
may be designated by the Company and approved by the Executive. The Executive
shall report and be responsible to the Board. The Executive shall devote
substantially all his working time and efforts to the business and affairs of
the Company and shall, subject to the supervision and control of the Board and
the provisions of the Company's charter and bylaws, manage, supervise and
control such business, and shall faithfully perform his duties on behalf of the
Company.
4. Compensation and Related Matters.
(a) Salary.
(i) During the term of this Agreement, the Company shall pay
to the Executive an annual base salary (the "Base Salary") of three hundred
seventy-two thousand dollars ($372,000), such Base Salary to be paid in
accordance with the Company's normal payroll procedures. The Base Salary shall
be reviewed annually by the Compensation Committee of the Board (which shall
consist of John Rochon and Ronald D. Pedersen) and may, at any time after the
first anniversary hereof, be increased or, subject to the terms of Section
4(a)(ii) below, decreased, by the Compensation Committee, in its sole and
exclusive discretion. Notwithstanding the immediately preceding sentence, the
Base Salary shall be increased by the Compensation Committee if, and only if,
business conditions of the Company and the industry in which the Company
operates warrant such increase.
(ii) Prior to the commencement of each fiscal year, the Board
shall adopt a budget (the "Annual Budget") for the operation of the Company for
such fiscal year, which budget shall, among other things, establish a target
EBITDA (as defined in that certain Company and Shareholders Agreement (the
"Shareholders Agreement") dated as of April 2, 1996, by and among the Company,
the Executive, MS Acquisition Limited and the other parties thereto, but
excluding the effects of any acquisitions, unless provided otherwise by the
Board (the "Target EBITDA")). Notwithstanding anything herein to the contrary,
the Base Salary shall not be decreased unless (1) the Company's actual financial
performance during such fiscal year (as such performance is reflected in audited
financial statements prepared by the Company's independent auditor) is less than
the Target EBITDA for such
2
<PAGE> 3
fiscal year, and (2) a majority of the members of the Board approves such
decrease. Any decrease in Base Salary shall remain in effect until the
Compensation Committee, in its sole and exclusive discretion, decides to
increase or, subject to this Section 4(a)(ii) (including, without limitation,
the terms of the immediately preceding sentence), decrease such Base Salary. In
no event shall any decrease be applied (x) retroactively to any date prior to
the earlier of the date on which the Compensation Committee declares a decrease
in Base Salary or the Board approves such decrease or (y) on a date earlier than
as of the end of such fiscal year in which the Company's actual financial
performance is less than the Target EBITDA.
(b) Bonus. At the discretion of the Compensation Committee, the
Executive shall be eligible to receive a bonus (the "Bonus"). The amount and
timing of any such Bonus shall be determined by the Compensation Committee in
its sole and exclusive discretion. In connection with the Compensation
Committee's determination of the Bonus, if any, to which the Executive shall be
entitled, the Compensation Committee shall review the Executive's performance
with respect to items (I) through (V) listed on Exhibit A attached hereto and
shall consider such other factors as it, in its sole and exclusive judgment,
shall deem appropriate. The Compensation Committee's determination of the Bonus,
if any, to be paid to the Executive shall be made promptly after completion of
the Company's annual audit, and any Bonus payable pursuant to such determination
shall be paid to the Executive promptly thereafter. The Executive acknowledges
that the determination and payment of any Bonus is a privilege, and not an
absolute right, granted hereunder.
(c) Expenses. During the term of the Executive's employment
hereunder, the Company shall pay or reimburse the Executive for all reasonable
expenses incurred by the Executive in performing his obligations under this
Agreement. Payments or reimbursements of all expenses hereunder will be made
promptly following submission of documentation provided in accordance with the
standard policies and procedures established by the Company.
(d) Other Benefits.
(i) Employee Benefit Plans. During the term of the Executive's
employment hereunder, the Company shall maintain in full force and effect, and
the Executive shall be entitled to continue to participate in, all of the
employee benefit plans and arrangements in effect on the date hereof in which
the executive officers of the Company generally are entitled to participate.
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<PAGE> 4
(ii) Automobile. During the term of the Executive's employment
hereunder, the Company shall provide the Executive with an automobile selected
in accordance with guidelines as determined by the Compensation Committee in its
sole and exclusive discretion.
(iii) Lifetime Right to Insurance After Certain Termination
Events. Except in cases where the Executive's employment has been terminated for
Cause or by death, the Executive shall have the right to continue the health
care benefits afforded him hereunder (once his right to have the Company pay for
such benefits terminates hereunder) by paying to the Company the amounts
attributable from time to time for such benefits.
Any payments or benefits payable to the Executive hereunder in respect of
any fiscal year during which the Executive is employed by the Company for less
than the entire such year shall be treated as provided in the documents
governing such plan or arrangement.
5. Termination. The Executive's employment hereunder may be terminated
without any breach of this Agreement under the following circumstances:
(a) Death. The Executive's employment hereunder shall terminate upon
his death.
(b) Disability. If, as a result of the Executive's Disability (as
defined below), the Executive shall be unable to perform his obligations under
this Agreement, the Company may terminate the Executive's employment hereunder.
"Disability", with respect to the Executive, shall have been deemed to occur at
such time as the Executive becomes physically or mentally disabled to such an
extent that (i) he has not been able to perform the significant duties of his
employment for at least six (6) months on a continuous basis, (ii) such
disability cannot be reasonably accommodated, and (iii) in the judgement of a
physician retain by the Board, such disability is reasonably expected to
continue for more than six (6) additional months. In the event the Executive
disagrees with the opinion of the physician retained by the Board, the Executive
shall have the right to seek a second opinion from another physician retained by
the Executive. In the event the two physicians so retained disagree, such
physicians shall jointly nominate a third physician for the purpose of rendering
an opinion with respect to whether the Executive is unable to perform his
obligations under this Agreement, which opinion shall be binding upon the
parties hereto.
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<PAGE> 5
(c) Cause. The Company may terminate the Executive's employment
hereunder for Cause. For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon the determination
by the Board, in its sole and exclusive judgment, that any of the following
shall have occurred: (i) the failure by the Executive to perform his duties
hereunder (other than any such failure resulting from the Executive's
Disability), which failure is determined by the Board to be injurious to a
reasonable degree or reasonably likely to be injurious to a reasonable degree to
the business, operations or interests of the Company, (ii) the gross negligence
or willful misconduct (including, but not limited to, an act of moral turpitude)
by the Executive which is injurious to a reasonable degree to the Company
(including, but not limited to, conduct prohibited by Section 7), or (iii)
conviction of a felony, or conduct which, in the reasonable judgement of the
Board, would constitute a felony under the federal laws of the United States of
America or under the laws of any State thereof.
(d) Termination Without Cause. The Company may at any time during
the term hereof terminate the Executive's employment hereunder without Cause in
which event the Executive shall be entitled to receive the compensation
described in Section 6(d) below.
(e) Notice of Termination. Any termination of the Executive's
employment by the Company (other than termination pursuant to Section 5(a)
hereof) shall be communicated by written Notice of Termination to the Executive.
For purposes of this Agreement, a "Notice of Termination" shall mean a written
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall, except in the case of termination pursuant to Section
5(d) hereof, set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated.
(f) "Date of Termination" shall mean (i) if the Executive's
employment is terminated by his death, the date of his death, (ii) if the
Executive's employment is terminated pursuant to Section 5(b) hereof (relating
to Disability), thirty (30) days after Notice of Termination is delivered
(provided that the Executive shall not have returned to the performance of his
duties on a full-time basis during such thirty (30)-day period), (iii) if the
Executive's employment is terminated pursuant to Section 5(c) hereof (relating
to Cause), the date specified in the Notice of Termination (which specified date
shall under no circumstances be earlier than the date that Notice of Termination
is delivered), or (iv) if the Executive's employment is
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<PAGE> 6
terminated pursuant to Section 5(d) hereof (relating to termination without
Cause), the date specified in the Notice of Termination, which shall not be a
date earlier than the date the Notice of Termination is delivered.
6. Compensation Upon Termination or During Disability.
(a) During any period that the Executive fails to perform his duties
hereunder as a result of Disability, the Executive shall continue to receive his
salary at the rate then in effect for a period of 120 days after the applicable
Date of Termination.
(b) If the Executive's employment is terminated by his death, the
Executive shall continue to receive his salary at the rate then in effect for a
period of 120 days after the applicable Date of Termination.
(c) If the Executive's employment shall be terminated for Cause, the
Executive shall continue to receive his salary at the rate then in effect until
the Date of Termination.
(d) If the Executive's employment shall be terminated without Cause,
the Executive shall continue to be entitled to receive the compensation and
benefits provided for in Section 4 through the Expiration Date; and the benefits
specified in Section 4(d)(iii) above for the period of time set forth therein.
Subject to Section 6(e) below, upon such termination without Cause, the
Executive shall be entitled only to such amounts and shall not be entitled to
any other payments.
(e) The Deferred Compensation Plan, amended as of November 20, 1995
(the "Deferred Compensation Plan") shall remain in full force and effect in
accordance with the terms thereof notwithstanding any termination of Executive's
employment hereunder.
7. Noncompetition; Nondisclosure. (a) (i) Until the Expiration Date
(disregarding any effect thereupon arising out of termination for Cause), and
(ii) during a period of one (1) year following the Expiration Date (disregarding
any effect thereupon arising out of termination for Cause, the "Post Employment
Period"), the Executive agrees that he will not engage in any Competitive
Activity (as defined herein) in the United States of America or its territories
or possessions (the "USA") or outside of the USA reasonably likely to have a
detrimental effect upon the Company's operations; provided, however, that if the
Executive is termi-
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<PAGE> 7
nated for Cause, then the Post Employment Period shall constitute a period of
two (2) years following the Expiration Date. For purposes of this Section 7,
"Competitive Activity" shall mean any activity, without the written consent of
the Board, consisting of:
(1) The Executive's direct or indirect participation (for his own
account or jointly with others) in the management of, or as an employee of,
representative or other agent of, or advisor or consultant to, any other
business operation if such operation (a "Competitive Operation") is then in any
way competing with a principal business operation of the Company;
(2) The Executive's ownership of more than five percent (5%) of the
capital stock of any business entity which is a Competitive Operation; or
(3) The Executive loaning funds for the purpose of establishing or
operating any Competitive Operation, or otherwise giving advice to any
Competitive Operation, or lending or allowing his name or reputation to be used
by any Competitive Operation or otherwise allowing his skill, knowledge or
experience to be so used.
(b) If any court having jurisdiction over the subject matter hereof
shall hold that the period, scope or geographic area of the restrictions set
forth in Section 7(a) hereof is unreasonable or otherwise unenforceable, the
parties hereto agree that the maximum period, scope or geographic area deemed
reasonable by such court shall be substituted for the period, scope or
geographic area described herein. Subject to Section 7(e) hereof, as
consideration for the Executive's satisfaction of the obligations set forth in
Section 7(a) hereof, upon the termination of the Executive's employment with the
Company, the Company shall pay Executive one month's severance pay at the rate
of the Executive's salary then in effect.
(c) The Executive agrees not to use or disclose, either while in the
Company's employ or at any time thereafter, to any person not employed on a
full-time basis by the Company or its affiliates, or not engaged to render
services to the Company or its affiliates, except with the prior written consent
of an officer authorized to act in the matter by the Board, any trade secrets
or other confidential information obtained by him while in the employ of the
Company, provided, however, that this provision shall not preclude the Executive
from the use or disclosure of information known generally to the public or of
information not considered confidential by persons engaged in the business
conducted by the Company or from
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<PAGE> 8
disclosure required by law or court order. The agreement made in this Section 7
shall be in addition to, and not in limitation or derogation of, any obligations
otherwise imposed by law or by separate agreement upon the Executive in respect
of confidential information of the Company.
(d) The parties hereto agree that the precise amount of damages
incurred by the Company in connection with any breach by the Executive of the
obligations set forth in Section 7(a) or Section 7(c) hereof would be difficult,
if not impossible, to calculate with any reasonable certainty. Therefore, the
parties hereto agree to the imposition of liquidated damages for such breach in
accordance with the following formula: for each loss by the Company of an
account between the Company and any of its principals that was in effect
immediately prior to any breach by the Executive of the obligations set forth in
Section 7(a) or Section 7(c) which loss was proximately caused by such breach by
the Executive, the Company shall be entitled to an amount of liquidated damages
equal to the gross brokerage paid to the Company under such lost account for the
twelve (12) month period immediately preceding such breach. The Parties hereto
agree that claim for, or an award of, liquidated damages pursuant to the terms
hereof shall in no way prejudice the Company's right to seek, or otherwise
constitute a waiver of, any equitable relief (including but not limited to
injunctive relief) otherwise available to the Company.
(e) In the event the Executive fails to comply with the obligations
set forth in Section 7(a) or Section 7(c) of this Agreement, in addition to any
remedy available to the Company under the terms hereof in connection with any
such breach, the Company shall have the right to terminate any severance
benefits to which the Executive would otherwise have been entitled to under the
terms of this Agreement.
8. Successors; Binding Agreement. The Company agrees to use commercially
reasonable efforts to require any successor to all or substantially all of the
Company's business and/or assets to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. For purposes of
this Section 8, "all or substantially all of the Company's business or assets"
shall include, but not be limited to, fifty-one percent (51%) or more of the
capital stock of the Company. This Agreement and all rights of the Executive
hereunder shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. Except as expressly set forth in this
Section 8, this Agreement shall not otherwise be assignable by either party
hereto.
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<PAGE> 9
9. Notices. For the purposes of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and be
deemed to have been duly given when delivered or (unless otherwise specified)
mailed by United States certified mail, return receipt requested, postage
prepaid, addressed a follows:
If to the Executive: Ronald D. Pedersen
10245 Strait Lane
Dallas, Texas 75229
If to the Company: Marketing Specialists Sales Company
2324 Gateway Drive
Irving, Texas 75063
Attn: Ronald D. Pedersen and
John Rochon
With copies to each of: Andrews & Kurth L.L.P.
1601 Elm Street
Suite 4400
Dallas, Texas 75201
Attn: J. Gregory Holloway, Esq.
and
Akin, Gump, Strauss, Hauer & Feld, L.L.P
1700 Pacific Avenue, Suite 4100
Dallas, Texas 75201-4618
Attn: Gary M. Lawrence, P.C.;
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
10. Modification and Amendments. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modifica-
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<PAGE> 10
tion or discharge is agreed to in writing and signed by the Executive and such
other officer as may be specifically designated by the Board.
11. No Waiver. No waiver by either party hereto at any time of any breach
by the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
12. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Texas without regard to its conflicts of law principles.
13. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
14. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement, or otherwise in connection with the Executive's
termination of employment with the Company or its subsidiaries, shall be settled
exclusively by arbitration, conducted before a panel of three arbitrators in
Dallas, Texas (or, if different, the office of the American Arbitration
Association nearest the Executive's principal location), in accordance with the
commercial arbitration rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that the Company shall be entitled to seek a
restraining order or injunction in any court of competent jurisdiction to
prevent any continuation of any violation of the provisions of Section 7 hereof,
and the Executive hereby consents that such restraining order or injunction may
be granted without the necessity of the Company's posting any bond. The expense
of such arbitration shall be borne equally by the Company and the Executive.
15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
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16. Entire Agreement. This Agreement, the Deferred Compensation Plan, and
the Shareholders Agreement, set forth the entire agreement of the parties hereto
in respect of any subject matter contained herein and supersedes all prior
severance or other agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agreement
of the parties hereto in respect of the subject matter contained herein is
hereby terminated and cancelled.
17. Scope of Covenant. The Executive recognizes the broad scope of the
covenants and other provisions of Section 7 hereof, but expressly agrees that
such scope is reasonable in light of the nature of the Company's business. If
any court or tribunal of competent jurisdiction shall refuse to enforce any or
all of such covenants because they are more extensive (whether as to time,
geographic area, scope of business or otherwise) than it is deemed reasonable,
it is expressly understood and agreed between the parties hereto that such
covenants shall not be void, but that for the purpose of such proceedings and in
such jurisdictions the restrictions contained herein shall be deemed to be
reduced to the extent necessary to permit enforcement of the covenants.
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Signature Page Follows
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<PAGE> 13
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
MARKETING SPECIALISTS SALES COMPANY
By: /s/ Ronald D. Pederson
-------------------------------
Name: Ronald D. Pederson
-----------------------------
Title: Chief Executive Officer
----------------------------
EXECUTIVE
/s/ Ronald D. Pederson
-----------------------------------
Ronald D. Pedersen
<PAGE> 14
EXHIBIT "A"
o SALES
o MARKETING
o MERCHANDISING SERVICES
================================================================================
I. Contribute toward delivering the budgeted $6,150,000 corporate profit
excluding Tennessee and other acquisitions. This objective represents 50%
of your incentive.
II. Work closely with the Chairman to successfully negotiate and execute
acquisitions, mergers, contracts, and strategic alliances. This objective
represents 10% of your incentive.
III. Manage Corporate relationship with financial institutions, legal council,
pension administrators, insurance vendors, real estate agents, etc. This
objective represents 15% of your incentive.
IV. Provide leadership and be a financial resource to company managers. Ensure
accountability of company benefits and financial systems. Build the finest
financial department in our industry. This objective represents 15% of
your incentive.
V. Work closely with the Chairman and Vice Chairman to achieve 1998 Corporate
Strategic Initiatives and be a contributing member of the company
executive committee. This objective represents 10% of your incentive.
<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AND COMPENSATION AGREEMENT
This Employment Compensation Agreement by and between Bruce Butler,
hereinafter called Employee and Marketing Specialists Sales Company, a Texas
corporation, hereinafter called MSSC, effective as of date of the signing of
this contract and superseding any previous employment contract between the
Employee and MSSC or any subsidiary of MSSC is as follows:
RECITALS
WHEREAS, MSSC and Employee are in mutual agreement that in order to
promote the stability of the MSSC and provide security of employment to
Employee, it is in the best interest of the Parties to enter into this long term
employment agreement;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties agree as follows:
1. EMPLOYMENT TERMS:
MSSC agrees to employ Employee and Employee agrees to continue his
employment with MSSC until the sixty-second (62nd) birthday of Employee, subject
to the terms and conditions of this contract as set forth herein, unless sooner
terminated pursuant to Paragraph 4 of this contract.
<PAGE> 2
2. DUTIES:
During the period of his employment hereunder except for illness,
reasonable vacation periods and reasonable leaves of absence, Employee shall
devote all of his business efforts, time, attention and skill to the faithful
performance of his assigned duties and such other assignments that the officers
and/or Board of Directors may direct him to perform. Employee shall report
directly to the Board of Directors of MSSC.
3. COMPENSATION AND REIMBURSEMENT OF EXPENSES:
(a) Salary: For services to be rendered by Employee under the terms
of this agreement, MSSC shall pay as compensation, a base salary in an amount of
$20,000 per month. It is understood and agreed that this salary shall be
considered as compensation for the work performed or effort expended in
connection with business duties assigned by the Board of Directors of MSSC. It
is agreed that this salary will be reviewed annually and may be increased by the
Board of Directors as business conditions of MSSC and the industry dictate but
decreased only by mutual agreement.
(b) Automobile: Employee shall be provided a company automobile or
automobile allowance.
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<PAGE> 3
(c) Reimbursement of Expenses: MSSC shall pay or reimburse Employee
for all reasonable and other expenses incurred by Employee in performing his
obligations under this agreement.
(d) Such other benefits that are afforded other general employees of
the Corporation.
(e) Annual Bonus based on performance as determined by the Board of
Directors.
(f) Deferred Compensation as set forth in a separate agreement
between MSSC and Employee.
4. TERMINATION:
All or part of this contract may be terminated under the following
conditions:
(a) Termination for Cause By Written Notice From MSSC to Employee:
Termination for cause shall be either (i) an act or omission that violates
established Company policy; (ii) Employee pleads or is found guilty of violation
of State or Federal felony law; (iii) Employee fails to perform his duties
hereunder for a continuous period of thirty (30) days and fails to resume such
duties within ten (10) days after written notice from MSSC following such thirty
(30) day period; (iv) Employee engages in insubordination, disloyalty,
dishonesty or other unprofessional conduct. In the event of termination for
cause, MSSC shall continue to pay Em-
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<PAGE> 4
ployee his salary at the same rate payable at the time of termination for a
period of two (2) years after termination.
(b) Death or disability of Employee: In the event that Employees
dies or becomes disabled or is prevented from performing under this contract due
to health reasons, then at that event, MSSC's obligation to pay the salary in
3(a) above shall continue for 120 days after the determination date of death or
disability as set forth below and Employee's right to said salary shall be
thereafter terminated. For the purpose of this agreement, Employee shall be
deemed to be disabled at such time as in the judgment of a Doctor retained by
the Board of Directors, become totally and permanently physically or mentally
disabled to such an extent that he cannot perform the significant duties of his
employment on a full time basis and such disability is expected to continue
beyond a one year period of time. In the event that Employee disagrees with the
opinion of the doctor retained by the Board of Directors, Employee shall have
the right to seek a second opinion from a doctor Employee retains. In the event
that the two doctors disagree, they will choose a third doctor for his/her
opinion and both parties will abide by the majority opinion of the three
doctors. Termination of Employee's employment with the Corporation by reason of
disability shall be effective on the date the Corporation gives notice of such
fact to the Employee, which shall not be later than the one year period set
forth above.
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<PAGE> 5
(c) Employee terminates the Agreement on thirty (30) days prior
written notice to the Board of Directors.
5. POST TERMINATION OBLIGATIONS:
(a) Employee shall not either during the term of employment of this
Agreement or at any time thereafter, to the detriment of MSSC, knowingly use,
disclose or reveal to any unauthorized person, any trade secrets or other
confidential information relating to the MSSC, its subsidiaries or affiliates,
or to any of the businesses operated by them, including without limitation, any
customers lists, and Employee confirms that such information constitutes the
exclusive property of the MSSC.
(b) Employee shall not, for a period of two years immediately
following termination of his employment, without the written consent of MSSC,
directly or indirectly, either as a principal, agent or employee or on his own
account or jointly with others as a director, officer, employee or consultant,
representative or as a stockholder owning more than 5% percent of the stock of
any corporation or as a member of any general or limited partnership, engaged in
any business which will in any way compete with the business of this MSSC in the
food brokerage business; nor during such period lend his credit or money for the
purpose of establishing or operating any such business, or otherwise give advice
or assistance to any third party, firm, association or corporation engaging in
such business, nor lend or allow his
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<PAGE> 6
name or reputation to be used in any such business or otherwise allow his skill,
knowledge or experience to be so used; provided, however, that none of the
foregoing limitations shall apply to any activities of the Employee in
connection with any such business if such business is not in the States of
Texas, Georgia, Arkansas, Louisiana, Tennessee and Florida and other State or
other geographic areas where MSSC has been doing business during the last 12
months preceding termination and in which the employee's competition would be
detrimental to MSSC. If, at the time of enforcement of any of the provisions of
this Agreement, a court shall hold that the period, scope or geographical area
of the restrictions stated herein are unreasonable under the circumstances then
existing, the parties agree that the maximum period, scope or area reasonable
under such circumstances in the judgment of the court having jurisdiction in the
dispute shall be substituted for the period, scope or area stated herein, with
respect to the enforcement of such provisions then at issue. As partial
consideration for this noncompetition provision, MSSC agrees to pay Employee
upon termination, one (1) month's severance pay at a rate of Employee's then
current salary, regardless if termination is voluntary or involuntary.
(c) Notwithstanding that MSSC does not have an adequate remedy at
law for a breach of the agreement not to compete as set forth above and without
waiving any right to an injunction that MSSC may have in addition to any damage
claim, the parties hereto stipulate and agree that in the event of breach of
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<PAGE> 7
said noncompetition agreement by Employee, MSSC will suffer damages during the
period of time in which the Employee competes as set forth in (b) above or
attempts to compete with the MSSC as set forth in (b) above. Furthermore, the
parties stipulate and agree that the precise amount of damages incurred by MSSC
in such circumstances would be difficult, if not impossible, to calculate and,
therefore, the parties hereby stipulate and agree to the imposition of
liquidated damages for such breach in an amount equal to as follows: for each
principal account actually lost by MSSC as a proximate result of Employee's
default hereunder, the amount of such liquidated damages to be equivalent to the
gross brokerage paid by such lost account to MSSC for the twelve month period
immediately preceding such default.
In addition to any other remedies as set out herein for breach of this
contract by Employee, payments of severance benefits under the terms of this
Agreement may be terminated by MSSC, if Employee fails to comply with the
conditions set forth in paragraph (a) or (b) immediately above.
6. GOVERNING LAW:
The parties hereto agree that it is their intention and covenant
that this agreement and performance hereunder and all suits and special
proceedings hereunder be construed in accordance with and under and pursuant to
the laws of the State of Texas and that in any action, special proceeding or
other proceeding that may be brought arising out of or in connection with or by
reason of this agreement, the laws
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<PAGE> 8
of the State of Texas shall be applicable and shall govern to the exclusion of
the law of any other forum, without regard to the jurisdiction in which any
action or special proceeding may be instituted. Subject to the right of either
party to obtain injunctive relief to prevent a breach of this Agreement, all
disputes arising under this Agreement shall be resolved by binding arbitration
in Dallas, Texas in accordance with the Commercial Arbitration Rules of the
American Arbitration Association.
7. SUCCESSORS AND ASSIGNS:
In the event that 51% or more of the Company or its assets are sold,
transferred or merged (including an asset purchase) to any other party, Company
shall cause as part of the transaction, the acquiring person or entity to
expressly assume Company's obligation hereunder.
Signed this 28th day of September, 1995.
EMPLOYEE Marketing Specialists Sales
Company
/s/ Bruce A. Butler BY: /s/ Ronald D. Pederson
- -------------------------------- ----------------------------------------
Chairman of the Board
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<PAGE> 1
EXHIBIT 10.10
EMPLOYMENT CONTRACT
THIS EMPLOYMENT CONTRACT (the "Contract") is effective as of the
date on which Bromar Inc., a California Corporation, merges with any affiliate
of Marketing Specialists Sales Company (the "Effective Date"), and is entered
into by and between BROMAR INC. ("Bromar"), and JEFFREY B. HILL, an individual
("Executive").
R E C I T A L S
A. Bromar employs Executive as an at-will executive employee, and
Executive currently serves as President of Bromar.
B. Bromar and Executive desire to amend the terms of their currently
existing employment relationship in order to provide additional benefits to each
of them and in recognition of the valuable services Executive has rendered
Bromar.
C. Executive is willing and able to render the services herein
provided for, and is willing to refrain from activities unfairly competitive
with the business of Bromar on the terms set forth herein.
NOW THEREFORE, Executive and Bromar mutually agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Contract, capitalized terms shall have the
meanings stated below.
1.1 Board means the Board of Directors of Bromar.
1.2 Cause means Executive's (i) willful refusal to perform the
lawful duties of his office after reasonable written notice from the Board and
opportunity to remedy such refusal; (ii) commission of any willful misconduct
or
<PAGE> 2
grossly negligent act which has a significant adverse financial impact upon
Bromar; (iii) conviction of a felony; (iv) material breach of this Contract
which is not remedied within thirty (30) days after written notice from the
Board specifying such breach in reasonable detail; or (v) self-dealing to
Bromar's detriment.
1.3 Change of Control means a change of ownership or control of
Bromar which would be required to be reported pursuant to Item 6(e) of Schedule
14A of Rule 14 of the Exchange Act if Bromar were registered under the Exchange
Act, including (without limitation) the occurrence of any of the following
events:
(i) the acquisition by any Person (or any group of related
Persons acting in concert) of beneficial ownership (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of Bromar
securities representing twenty percent (20%) or more of the total combined
voting power of Bromar's then outstanding securities; or
(ii) a merger or consolidation in which securities
representing twenty percent (20%) or more of the total combined voting
power of Bromar's then outstanding securities are transferred to a Person
or Persons different from the Persons holding those securities immediately
prior to such merger or consolidation; or
(iii) the sale of all or substantially all of Bromar's assets
in complete liquidation or dissolution of Bromar.
1.4 Compete means either directly or indirectly to own, initiate,
manage, operate, join, control, advise, consult with or participate in the
ownership (other than ownership of less than five percent (5%) of the
outstanding equity or capital or profit interests in any entity), operation,
management or control of any business substantially similar to any line of
business owned or operated by Bromar.
1.5 Confidential Information means any non-public proprietary or
confidential information of Bromar or its parent or subsidiary companies,
including (without limitation) trade secrets; information concerning customers
or principals (such as their buying or selling preferences or special needs),
customer lists, records or research, proposals, reports, methods, techniques,
financial information and other data, and other non-public information regarding
Bromar and its parent or subsidiary
2
<PAGE> 3
companies or the existing and planned businesses, properties or affairs of
Bromar and its parent or subsidiary companies.
1.6 Constructive Termination means the occurrence of any of the
following events which result in Executive's subsequent resignation from
employment with Bromar within the succeeding six (6) months:
(i) Bromar's material breach of this Contract which is not
remedied within thirty (30) days after written notice from Executive
specifying such breach in reasonable detail; or
(ii) the assignment to Executive of any duties of materially
lesser status, dignity and character than his duties on the Effective
Date.
1.7 Contract Benefits means the following benefits which may become
payable to Executive in accordance with the applicable provision of ARTICLE IV:
(i) a special salary continuation benefit in a dollar amount
equal to the highest Salary level in effect for Executive at any time
during the Employment Period. This amount shall be designated the Salary
Contract Benefit and shall be paid at the time or times specified in the
applicable provisions of ARTICLE IV. The total amount of Salary Contract
Benefit payable shall be two full years' Salary.
(ii) provision of benefits to Executive or his Beneficiary
equivalent to each of the employee benefits described in paragraph 2.2.4
and 2.2.5, on the terms therein stated. These clause (ii) benefits shall
be designated the Employee Continuation Benefits and shall be provided for
a two (2)-year period measured from the date of the Contract Payout Event.
(iii) continuation of Bromar's obligations to provide
Executive or his Beneficiary with the benefits described in paragraph
2.2.6, but only to the extent those benefits are available under the plans
then in effect. Bromar shall not, for example, be required to continue
paying any car allowance to Executive following any Con-
3
<PAGE> 4
tract Payout Event, since that program is available only to employees
using their cars for Bromar business. Any clause (iii) benefits shall be
provided until the second anniversary of the date of the Contract Payout
Event.
(iv) provision to Executive of a mutually acceptable letter of
reference.
(v) provision to Executive of outplacement services, at a cost
to Bromar not to exceed fifteen percent of Executive's annual Salary.
1.8 Contract Payout Event means any termination of employment which,
pursuant to ARTICLE FOUR, triggers Executive's right to begin receiving some or
all of the Contract Benefits.
1.9 Employment Period means the period commencing on the Effective
Date and continuing through September 30, 1999. On October 1, 1998 and on each
October 1 thereafter, the Employment Period shall automatically be extended for
two years, unless either party notifies the other in writing of his or its
intention not to extend the Employment Period at least sixty (60) days before
the next expiration date. The Employment Period may, however, be earlier
terminated by Bromar or Executive in accordance with ARTICLE IV.
1.10 Exchange Act means the Securities Exchange Act of 1934, as
amended.
1.11 Fiscal Year means Bromar's annual accounting period for
financial accounting and reporting purposes. As of the Effective Date, such
period begins on January 1 each year and ends on the next following December 31.
1.12 Permanent Disability means any mental or physical illness,
disease or condition which in the opinion of a physician skilled in the
specialty does or will result in Executive's inability to perform the essential
functions of his job for a period of six (6) consecutive months or more.
1.13 Person means any individual corporation, partnership, business
trust, joint venture, association, joint stock company, trust, unincorporated
organization or government or agency or political subdivision thereof.
4
<PAGE> 5
1.14 Prior Contracts means all prior employment agreements between
Executive and Bromar, whether express or implied, oral or written. Furthermore,
if and when this Contract becomes effective, then the October 17, 1996
employment contract between Bromar and Executive will also be deemed a Prior
Contract which is superseded by this Contract, regardless of whether that Prior
Contract was executed before or after this Contract.
1.15 Salary means the annual rate of base salary in effect for
Executive for each Fiscal Year within the Employment Period. Such Salary shall
be at the annual rate of Three Hundred Thousand Dollars ($300,000.00), subject
to adjustment from time to time pursuant to Section 2.2.2. While bonuses or
other employment benefits or remuneration may also be paid or payable by Bromar
to Executive during the term of this Contract, such amounts are excluded from
this definition of Salary.
ARTICLE II
DUTIES AND BENEFITS DURING EMPLOYMENT PERIOD
2.1 Duties. During the Employment Period, Executive shall serve as
the President of Bromar or other capacity designated by the Chief Executive
Officer or the Board, serving at the pleasure of the Chief Executive Officer and
the Board until the termination of his employment as provided in ARTICLE IV. If
and when Bromar merges with any affiliate of Marketing Specialists Sales Company
("MSSC"), Executive shall promptly be appointed to its Executive Committee and
its Board of Directors. Consistent with those positions, Executive shall devote
his full productive time, energies and abilities to Bromar's business, subject
always to the authority of the Chief Executive Officer and the Board, and shall
comply with published Bromar employee policies.
2.2 Compensation and Benefits. The following compensation and
benefits shall be payable to Executive for his service during the Employment
Period:
2.2.1 Salary. Bromar shall pay Executive his Salary in
bi-weekly installments in accordance with Bromar's general practice and subject
to legally required withholdings.
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<PAGE> 6
2.2.2 Salary Review. The Salary payable to Executive for each
Fiscal Year commencing after December 31, 1996 shall be subject to annual review
by the Board. The Salary level in effect for Executive for each Fiscal Year
during the Employment Period shall not be less than the greater of (i) Three
Hundred Thousand Dollars ($300,000.00) or (ii) the Salary level most recently
determined by the Board pursuant to this Section 2.2.2. Executive understands
that the requirement of annual review by the Board shall not be construed in any
manner as an express or implied agreement by Bromar to raise his Salary.
2.2.3 Expense Reimbursement. Bromar shall promptly reimburse
Executive, upon his submission to Bromar of adequate documentation, for all
reasonable out-of-pocket business expenses, subject to Executive's compliance
with Bromar's then-current expense reimbursement policies. If Bromar merges with
any MSSC affiliate, MSSC shall continue to reimburse Executive for his
reasonable commuting expenses to and from Seattle and Newport Beach, shall
continue to pay the rent on Executive's Newport Beach apartment, and shall
continue to pay him a living allowance of Five Hundred Dollars ($500.00) per
month, until and unless MSSC and Executive mutually agree to modify or eliminate
one or more of those benefits.
2.2.4 Group Insurance. Bromar shall provide group life and
long term disability insurance to Executive and group medical, dental and
hospital insurance to Executive and his eligible dependents, in each instance in
the amount and on the terms made available to other senior executives of Bromar.
2.2.5 Profit Sharing Plan. Executive shall be a participant in
all Bromar 401(k), profit sharing, and retirement plans, to the extent allowed
by law and by the terms of those plans.
2.2.6 Other Benefits. By mutual agreement with Bromar,
Executive may participate in additional employment benefits made available by
Bromar; provided, however, that this Contract itself shall neither prevent nor
compel such participation.
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<PAGE> 7
ARTICLE III
COVENANTS AND CONSULTING CONTRACT
3.1 Covenants. Executive shall be subject to the following covenants
and obligations:
3.1.1 Nondisclosure. While employed by Bromar, Executive has
had and will have access to Confidential Information relating to Bromar's
present and anticipated business operations. Executive shall at no time either
during or after his employment by Bromar disclose, communicate or use any
Confidential Information which Executive learns as a result of his employment
by Bromar, except to the extent required by his performance of duties for
Bromar, unless he obtains Bromar's prior written consent to do so.
3.1.2 Return of Company Property. Upon the termination of
Executive's employment for any reason, Executive shall promptly relinquish and
return to Bromar all Bromar property, including but not limited to automobiles,
credit cards, computers, facsimile and telephone equipment, Confidential
Information, and all files, correspondence, memoranda, diaries and other
records, minutes, notes, manuals, papers and other documents and data, however
prepared or memorialized, and all copies thereof, belonging to or relating to
the business of Bromar, that are in Executive's custody or control whether or
not they contain Confidential Information.
3.1.3 Noncompetition Covenant. While employed by Bromar,
Executive shall not Compete or plan or prepare to Compete with Bromar. To the
extent obligated pursuant to the provisions of ARTICLE IV, Executive shall not
Compete with any Bromar line of business, for the interval following the
termination of his employment in which he continues to receive any Salary
Contract Benefit in any county in the United States, and in any territory or
possession of the United States. If ARTICLE IV requires Executive to honor this
noncompetition covenant following termination of his employment, then the
consideration for Executive's performance of this covenant shall consist of all
the payments and other benefits which this Contract requires Bromar to provide
to Executive following his employment termination. Accordingly, if either
(a) Executive breaches this noncompetition covenant, or if
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<PAGE> 8
(b) Executive challenges this covenant's validity, and a court
or arbitrator enters a final order or judgment that this covenant is not
enforceable,
then Bromar shall have no obligation to continue providing any such payments and
benefits to Executive or his Beneficiary, and shall be entitled to recover the
value of all payments and benefits previously provided to Executive for the
interval following the date on which Executive engaged in conduct which had the
intent or effect of Competing with Bromar.
3.1.4 Nonsolicitation Covenant. For a period of two (2) years
following the termination of Executive's employment with Bromar for any reason,
Executive shall not, directly or indirectly, solicit the services of any Bromar
employee or otherwise induce or attempt to induce Bromar employees to leave
their employment with Bromar.
3.1.5 Scope and Duration; Severability. Bromar and Executive
understand and agree that the scope and duration of the covenants contained in
this Section 3.1 are reasonable both in time and geographical area and are
fairly necessary to protect the business of Bromar. Such covenants shall survive
the termination of Executive's employment, except that the Section 3.1.3
noncompetition covenant shall remain in effect following such termination of
employment only to the extent required by the provisions of ARTICLE IV. It is
further agreed that such covenants shall be regarded as divisible and shall be
operative as to time and geographical area to the extent that they may be made
so and, if any part of such covenants is declared invalid or unenforceable, the
validity and enforceability of the remainder shall not be affected.
3.1.6 Injunction. Executive understands and agrees that, due
to the highly competitive nature of the food brokerage industry, the breach of
any covenants set out in Section 3.1 will cause irreparable injury to Bromar for
which it will have no adequate monetary or other remedy at law. Therefore,
Bromar shall be entitled, in addition to such other remedies as it may have
hereunder, to a temporary restraining order and to preliminary and permanent
injunctive relief for any breach or threatened breach of the covenants without
proof of actual damages that have been or may be caused hereby. In addition,
Bromar shall have available all remedies provided under state and federal
statutes, rules and regulations as well as any and all other remedies as may
otherwise be contractually or equitably available.
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<PAGE> 9
3.1.7 Assignment. Except as otherwise provided to the contrary
in ARTICLE IV, Executive agrees that the covenants contained in this Section 3.1
shall inure to the benefit of any successor or assign of Bromar, with the same
force and effect as if such covenant had been made by Executive with such
successor or assign.
3.2 Consulting Contract. To the extent required to do so by
applicable provisions of ARTICLE IV, Executive hereby agrees to make himself
available to perform, for the interval following the termination of his
employment in which Executive continues to receive the Salary Contract Benefit,
such consulting and advisory services for Bromar with respect to matters
relevant to the food brokerage industry as may from time to time be reasonably
requested by the Board. However, Executive shall not be required to render more
than eight (8) hours of consulting services per month, and Bromar shall
reasonably accommodate Executive's scheduling needs. Bromar shall not compensate
Executive for the first eight hours of such consulting services in any single
month if Executive is also receiving the Salary Contract Benefit pursuant to
ARTICLE IV. Bromar shall compensate Executive at the rate of One Hundred Dollars
($100.00) per hour (i) if Executive is not also receiving the Salary Contract
Benefit, or (ii) if Executive spends more than eight hours in any single month
performing such consulting services. Bromar shall reimburse Executive for his
verified, reasonable expenses incurred in performing those services.
ARTICLE IV
PAYOUT OF CONTRACT BENEFITS
4.1 Termination of Employment. Executive's employment may be
terminated at any time by either Executive or Bromar, for the reasons and with
the consequences set out below. In the event of such termination, Executive may
become entitled to payment of the Contract Benefits in accordance with the
provisions of this ARTICLE IV. In any event, the provisions of ARTICLE II shall
cease to have any force or effect upon the termination of Executive's
employment, and the compensation and benefit provisions of this ARTICLE IV
shall supersede and replace the provisions of ARTICLE II.
4.2 Death. If Executive dies, his employment shall terminate on the
date of his death.
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<PAGE> 10
4.2.1 Contract Benefits. In such event, Bromar shall (i) pay
Executive's estate the Salary to the date of Executive's death, within thirty
(30) days, and (ii) continue to have the obligations described in Sections 2.2.4
and 2.2.5, to the extent those benefits are available under those plans then in
effect.
4.3 Permanent Disability. Either Bromar or Executive may terminate
Executive's employment, upon thirty (30) days prior notice, by reason of his
Permanent Disability.
4.3.1 Covenants. Following such termination of employment
Executive shall remain subject to the covenants and obligations set forth in
Sections 3.1 (other than Section 3.1.3) and 3.2.
4.3.2 Contract Benefits. Executive shall be entitled to
receive payment of ninety days' Salary, less applicable withholding, in a lump
sum within sixty (60) days after the termination date of Executive's employment
under this Section 4.3. In addition, Executive shall be entitled to receive the
Contract Benefits described in Sections 1.7(ii) through 1.7(iv) on the terms
stated in those provisions, in consideration for Executive's covenants in
Sections 3.1.
4.4 Termination by Bromar for Cause. Bromar may terminate
Executive's employment for Cause.
4.4.1 No Contract Benefits. Following the termination of
Executive's employment for Cause, Executive shall not perform any of the
services described in Section 2.1, nor shall he have the right to receive any
Contract Benefits, but he and his eligible dependents shall be entitled, at
their sole cost, to receive continued health care coverage to which they may be
entitled by law ("COBRA Coverage").
4.4.2 Covenants. Following such termination for Cause,
Executive shall comply with all his covenants and obligations under Sections 3.1
and 3.2, unless within ten (10) days following the termination of his employment
Bromar notifies him in writing, as provided in Section 5.4, of its election to
waive its right to enforce Section 3.1.3. Unless Bromar so waives Executive's
compliance with Section 3.1.3, Bromar shall, as consideration for Executive's
Section 3.1.3 covenant, compensate Executive by paying the Salary in equal
bi-weekly installments (beginning on his termination date) for the interval
specified in Section 1.7(i).
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<PAGE> 11
4.5 Termination by Executive Without Cause. Executive may terminate
his employment at any time without cause, i.e., for grounds other than those
described in paragraphs 4.2, 4.3, 4.4, 4.6, and 4.7.
4.5.1 No Contract Benefits. Following Executive's termination
of employment under this Section 4.5, Executive shall not perform any of the
services described in Section 2.1, nor shall he receive any Contract Benefits,
but he and his eligible dependents shall be entitled, at their sole cost, to
COBRA Coverage.
4.5.2 Covenants. Following such termination of employment
without cause, Executive shall comply with all his covenants and obligations
under Sections 3.1 and 3.2, unless within ten (10) days following the
termination of his employment Bromar notifies him in writing, as provided in
Section 5.4, of its election to waive its right to enforce Section 3.1.3. Unless
Bromar so waives Executive's compliance with Section 3.1.3, Bromar shall, as
consideration for Executive's Section 3.1.3 covenant, compensate Executive by
paying the Salary in equal bi-weekly installments (beginning on his termination
date) for the interval specified in Section 1.7(i).
4.6 Change of Control. Executive may terminate his employment in
connection with a Change of Control, provided such termination is, pursuant to
written notice delivered to Bromar, effected at least six (6) months but no more
than one (1) year after such Change of Control.
4.6.1 Covenants. Following such termination of employment,
Executive shall comply with all his covenants and obligations under Sections 3.1
and 3.2.
4.6.2 Contract Benefits. Executive shall be entitled to all of
the Contract Benefits, with the Salary Contract Benefit to be paid in a lump sum
within sixty (60) days after the termination date of Executive's employment.
4.7 Constructive Termination. Executive may terminate his employment
within six (6) months after any event qualifying as a Constructive Termination
under Section 1.6.
4.7.1 Covenants. Following such termination of employment,
Executive shall not perform any further services for Bromar and shall have no
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<PAGE> 12
obligation to perform his covenants under Section 3.1.3 or his consulting
agreement under Section 3.2.
4.7.2 Contract Benefits. Upon Executive's termination of
employment under this Section 4.7, Executive shall become entitled to all of the
Contract Benefits, as a severance benefit and in lieu of any other severance
program which Bromar observes at that time, with the Salary Contract Benefit to
be paid in a lump sum within sixty (60) days after his termination date.
4.8 Termination by Bromar Without Cause. Bromar may terminate
Executive's employment at any time for reasons other than those described in
Sections 4.2, 4.3 and 4.4.
4.8.1 Contract Benefits. Upon such termination of employment,
Executive shall become entitled to all of the Contract Benefits, with the Salary
Contract Benefit to be paid in a lump sum within sixty (60) days after his
termination date, as a severance benefit and in lieu of any other severance
program which Bromar observes at that time.
4.8.2 Covenants. Following the termination of Executive's
employment pursuant to this Section 4.8, Executive shall not perform any further
services for Bromar and shall have no obligation to perform his covenants under
Section 3.1.3 or his consulting agreement under Section 3.2.
4.9 Withholding. All payments made to Executive or his Beneficiary
pursuant to the provisions of this ARTICLE IV shall be subject to withholding by
Bromar of such amounts for income and other payroll taxes and deductions as
Bromar may reasonably determine should be withheld pursuant to applicable laws
and regulations.
ARTICLE V
MISCELLANEOUS PROVISIONS
5.1 Entire Contract. This Contract contains the entire agreement and
understanding between Executive and Bromar regarding the terms and conditions of
his employment with Bromar and the benefits to which he may become entitled upon
the termination of such employment, and supersedes and replaces all
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<PAGE> 13
Prior Contracts as well as any other negotiations, understandings and
representations regarding the terms and conditions of his employment or
termination benefits. This Contract may not be modified except by a writing
executed by both Executive and Bromar.
5.2 Assignment by Bromar. This Contract shall be binding upon and
shall inure to the benefit of any successors or assigns of Bromar. As used in
this Contract, the term "successor" includes any Person into which Bromar is
merged.
5.3 Arbitration. Any controversy, question or dispute arising out of
or relating to the construction, application or enforcement of this Contract or
arising out of Executive's employment by Bromar shall be settled by binding
arbitration, unless then-current controlling law prevents enforcement of an
agreement to arbitrate that particular dispute. The parties may agree to use any
arbitrator or ADR entity, but if they fail so to agree within fifteen (15) days
after one party first notifies the other of his or its intent to arbitrate, then
the arbitration shall proceed before the American Arbitration Association. The
venue of the arbitration shall be the city where Executive was employed by
Bromar at the time his employment terminated. Among the disputes which are to be
settled by arbitration are any claims by Executive that the termination of his
employment (a) breached any express or implied contract of employment or
covenant of good faith and fair dealing, or (b) resulted from discrimination
prohibited by state, federal or local law based on his age, race, national
origin, gender, disability, sexual preference, or religion. It is the intention
of both parties that Executive's sole remedy for termination of his employment
shall be Bromar's payments of the amounts and provision of the benefits due to
Executive pursuant to the applicable provision of ARTICLE IV, except to the
extent that controlling law requires the arbitrator to award some additional
remedy to a prevailing plaintiff other than back pay and benefits. The parties
hereby waive any statutory right to recover attorney's fees in any arbitration
proceeding in which this Contract is at issue, and adopt instead the attorney's
fee provisions of Section 5.8 of this Contract.
5.3.1 Appointment of Arbitrator. Within thirty (30) days after
the delivery of written notice of any such dispute from one party to the other,
Bromar and Executive shall agree on the identity of the arbitrator. If they fail
to do so, then the American Arbitration Association shall appoint the
arbitrator.
5.3.2 Finality. The determination of the arbitrator shall be
final and conclusive on Executive and Bromar.
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<PAGE> 14
5.3.3 Procedure; Forum: Waiver of Jury Trial. The arbitration
shall be conducted in accordance with the then-current Model Employment
Arbitration Procedures of the American Arbitration Association. Executive and
Bromar each hereby waive any right to trial by jury of any such dispute.
Notwithstanding the foregoing provisions, however, nothing in this Contract
shall limit or waive Bromar's rights under Section 3.1.6 to obtain injunctive
relief in any court of competent jurisdiction.
5.3.4 Discovery. The parties shall be entitled to avail them
selves only of such discovery procedures as the arbitrator permits.
5.4 Notices. Any notice provided for by this Contract and any other
notice, demand, designation or communication which either party may wish to send
to the other ("Notices') shall be in writing and shall be deemed to have been
properly given if served by (i) personal delivery, (ii) registered or certified
mail, return receipt requested in a sealed envelope, postage and other charges
prepaid, or (iii) telegram, telecopy, telex, facsimile or other similar form of
transmission followed by delivery pursuant to clause (i) or (ii), in each case
addressed to the party for which such notice is intended as follows:
If to Bromar: Chairman of the Board
Bromar Inc.
15 Corporate Plaza
Newport Beach, CA 92660
FAX: (714) 640-5813
If to Executive: Jeffrey B. Hill
1456 - 185th Avenue NE
Bellevue, WA 98008
FAX: (___)_______
5.4.1 Change of Address. Any address or name specified in this
Section 5.4 may be changed by a Notice given by the addressee to the other party
in accordance with this Section 5.4.
5.4.2 Effective Date of Notice. All Notices shall be given and
effective as of the date of personal delivery thereof or the date of receipt set
forth on the return receipt. The inability to deliver because of a changed
address of which no Notice' was given or rejection or other refusal to accept
any Notice shall be deemed
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<PAGE> 15
to be the receipt of the Notice as of the date of such inability to deliver or
rejection or refusal to accept.
5.5 Indemnification of Executive. Bromar shall hold harmless, defend
and indemnify Executive to the maximum extent permitted by Section 317 of the
California Corporations Code and by Bromar's by-laws, both during and after
Executive's employment by Bromar, for so long as Executive shall be subject to
any possible claim or threatened, pending or completed action, suit or
proceeding, whether civil, criminal, or investigative, by reason of the fact
that Executive was an officer or employee of Bromar. After notice from Bromar to
Executive of Bromar's election to assume the defense of any action, Bromar will
not be liable to Executive under this Contract for any legal or other expenses
subsequently incurred by Executive in connection with the defense thereof other
than as provided below. Executive may employ his own counsel at Bromar's expense
only if (i) employment of counsel by Executive has been authorized by Bromar,
(ii) Executive shall have reasonably concluded that there may be a conflict of
interest between Bromar and Executive in the conduct of the defense of such
action, or (iii) Bromar shall not in fact have employed counsel to assume the
defense of such action. Bromar shall not be liable to indemnify Executive under
this Contract for any amounts paid in settlement of any action or claim effected
without its written consent. Bromar shall not settle any action or claim in any
manner which would impose any penalty or limitation on Executive without
Executive's written consent. Neither party will unreasonably withhold consent to
any proposed settlement.
5.6 Governing Law; Jurisdiction. This Contract shall be construed in
accordance with and governed by the laws of the state in which Executive was
most recently employed by Bromar, without reference to its choice of law rules.
5.7 Severability. In the event any provision or provisions of this
Contract is or are held invalid, the remaining provisions of this Contract shall
not be affected thereby. In the event that any provision is held to be overly
broad as written, such provision shall be deemed amended to narrow its
application to the extent necessary to make the provision enforceable according
to applicable law and the intentions of the parties hereunder.
5.8 Attorney's Fees and Expenses. If any arbitration proceeding is
commenced following Executive's termination of employment, the prevailing party
shall be entitled to recover its reasonable attorney's fees, costs and all other
expenses incurred in connection with the arbitration.
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IN WITNESS WHEREOF, this Employment Contract has been executed and
delivered by the parties as of the 18th day of October, 1996.
/s/ Jeffrey B. Hill
-----------------------------------------------
Executive
BROMAR INC.
By: /s/
-------------------------------------------
Its: Vice President and Chief Financial Officer
<PAGE> 1
EXHIBIT 10.11
OFFICE LEASE
BETWEEN
BSDAL I LIMITED PARTNERSHIP, A GEORGIA LIMITED PARTNERSHIP,
LANDLORD
AND
MARKETING SPECIALISTS SALES COMPANY, A TEXAS CORPORATION,
TENANT
April 27, 1998
<PAGE> 2
LEASE SUMMARY
DATE: APRIL 27, 1998
LANDLORD: BSDAL I LIMITED PARTNERSHIP, a Georgia limited partnership
TENANT: MARKETING SPECIALISTS SALES COMPANY, a Texas corporation
SUITE NUMBER: 200
LEASED PREMISES
AND FLOOR(S): 32,756 square feet of Rentable Area located on the 2nd floor
<TABLE>
<CAPTION>
AREA OF THE LEASED PREMISES: FLOOR(S) USABLE AREA RENTABLE AREA
<S> <C> <C> <C>
2nd 29,778 32,756
TOTAL 2ND 29,778 32,756
</TABLE>
RENTABLE AREA OF THE BUILDING: 124,358 square feet of Rentable Area
TENANT'S SHARE: 26.34%
LEASE TERM: Five (5) Years
COMMENCEMENT DATE: October 1, 1998
EXPIRATION DATE: September 30, 2003
BASE RENT:
<TABLE>
<CAPTION>
Portion Annual Base Annual Base Monthly Base
of Lease Term Rental/RSF Rental Rental
<S> <C> <C> <C>
Months 1-60: $22.00 $720,632.00 $60,052.67
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C>
ROOF RENT
[EXHIBIT E, PARAGRAPH 7]: $150.00/month
SECURITY DEPOSIT: $0
TENANT'S BROKER AND THE STAUBACH COMPANY
ADDRESS FOR Southwest Corporate Services
NOTICES: 6750 LBJ Freeway, Suite 110
Dallas, Texas 75240
TENANT'S ADDRESS FOR Prior to Commencement Date:
NOTICES: MARKETING SPECIALISTS SALES COMPANY
16251 Dallas Parkway
Dallas, Texas 75248
Attn: Mr. Brad Moore
with a copy to: RICHMONT
16251 Dallas Parkway
Dallas, Texas 75248
Attn: Alan W. Tompkins, Esq., Associate General Counsel
Commencement Date and thereafter:
MARKETING SPECIALISTS SALES COMPANY
16251 Dallas Parkway
Dallas, Texas 75248
Attn: Mr. Brad Moore
with a copy to: RICHMONT
16251 Dallas Parkway
Dallas, Texas 75248
Attn: Alan W. Tompkins, Esq., Associate General Counsel
LANDLORD'S ADDRESS FOR BSDAL I LIMITED PARTNERSHIP
NOTICES: 50 Glenlake Parkway, Suite 520
Atlanta, Georgia 30328
Attn: Mr. Jimmy Barry
with a copy to: Parker, Hudson, Rainer & Dobbs LLP
285 Peachtree Center Avenue
1500 Marquis Two Office Tower
Atlanta, Georgia 30303
Attn: Kenneth H. Kraft, Esq.
PARKING SPACES: Four (4) spaces for each 1,000 square feet of Usable Area of the Leased Premises
LANDLORD'S ALLOWANCE: $20.00 per square foot of Rentable Area of Leased Premises, for total Landlord's
[EXHIBIT D] Allowance of $655,120.
</TABLE>
- ii -
<PAGE> 4
LEASE INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I. LEASED PREMISES....................................................................................- 1 -
1.1 LEASE OF LEASED PREMISES....................................................................- 1 -
1.2 PREPARATION OF LEASED PREMISES..............................................................- 2 -
ARTICLE II. TERM AND RENT ..................................................................................- 3 -
2.1 TERM........................................................................................- 3 -
2.2 BASE RENT...................................................................................- 5 -
2.3 ADDITIONAL RENT.............................................................................- 6 -
ARTICLE III. SECURITY DEPOSIT ...............................................................................- 9 -
ARTICLE IV. USE AND ACCEPTANCE ..............................................................................- 9 -
4.1 USE.........................................................................................- 9 -
4.2 ADA........................................................................................- 10 -
4.3 ACCEPTANCE.................................................................................- 11 -
ARTICLE V. OPERATIONS: UTILITIES: SERVICES ...............................................................- 12 -
5.1 OPERATION..................................................................................- 12 -
5.2 HOURS OF OPERATION.........................................................................- 12 -
5.3 UTILITIES AND SERVICES.....................................................................- 12 -
5.4 INTERRUPTION OF SERVICES...................................................................- 14 -
5.5 METERING ELECTRICITY.......................................................................- 14 -
ARTICLE VI. REPAIRS AND MAINTENANCE ........................................................................- 15 -
6.1 LANDLORD'S OBLIGATIONS.....................................................................- 15 -
6.2 TENANT'S OBLIGATIONS.......................................................................- 15 -
ARTICLE VII. ALTERATIONS: TENANT'S PROPERTY ...............................................................- 16 -
7.1 ALTERATIONS BY TENANT......................................................................- 16 -
7.2 CONTRACTORS' INSURANCE REQUIREMENTS........................................................- 16 -
7.3 TENANT'S PROPERTY..........................................................................- 16 -
ARTICLE VIII. HAZARDOUS MATERIALS ..........................................................................- 17 -
8.1 TENANT'S OBLIGATIONS AND LIABILITIES.......................................................- 17 -
8.2 DEFINITION.................................................................................- 17 -
8.3 INSPECTION.................................................................................- 17 -
8.4 DEFAULT....................................................................................- 18 -
8.5 LANDLORD WARRANTY..........................................................................- 18 -
ARTICLE IX. ASSIGNMENT AND SUBLETTING.......................................................................- 18 -
ARTICLE X. CASUALTY OR EMINENT DOMAIN ....................................................................- 20 -
10.1 DAMAGE TO PROPERTY.........................................................................- 20 -
10.2 RENT ABATEMENT.............................................................................- 21 -
10.3 EMINENT DOMAIN.............................................................................- 21 -
ARTICLE XI. INDEMNIFICATION AND INSURANCE...................................................................- 22 -
11.1 INDEMNIFICATION............................................................................- 22 -
11.2 TENANT'S INSURANCE.........................................................................- 23 -
11.3 SURVIVAL OF INDEMNITIES....................................................................- 23 -
11.4 LANDLORD'S INSURANCE.......................................................................- 23 -
ARTICLE XII. RIGHT OF ENTRY ................................................................................- 23 -
ARTICLE XIII. PROPERTY LEFT ON THE LEASED PREMISES .........................................................- 24 -
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C>
ARTICLE XIV. SIGNS AND ADVERTISEMENTS ......................................................................- 24 -
ARTICLE XV. NOTICES ........................................................................................- 24 -
ARTICLE XVI. MECHANIC'S LIENS...............................................................................- 25 -
ARTICLE XVII. SUBORDINATION; ATTORNMENT; NONDISTURBANCE ....................................................- 25 -
17.1 SUBORDINATION..............................................................................- 25 -
17.2 ATTORNMENT.................................................................................- 26 -
17.3 CONFIRMING AGREEMENT.......................................................................- 26 -
17.4 NONDISTURBANCE.............................................................................- 26 -
ARTICLE XVIII. COMPLIANCE WITH LAW AND RULES AND REGULATIONS ...............................................- 26 -
ARTICLE XIX. LANDLORD'S LIEN ...............................................................................- 27 -
ARTICLE XX. ESTOPPEL CERTIFICATE ...........................................................................- 27 -
ARTICLE XXI. HOLDING OVER ..................................................................................- 28 -
ARTICLE XXII. TENANT'S STATUS ..............................................................................- 28 -
22.1 POWER AND AUTHORITY........................................................................- 28 -
22.2 AUTHORIZATION..............................................................................- 28 -
ARTICLE XXIII. DEFAULTS AND REMEDIES .......................................................................- 29 -
23.1 DEFAULT BY TENANT..........................................................................- 29 -
23.2 LANDLORD REMEDIES..........................................................................- 29 -
23.3 REMEDIES CUMULATIVE........................................................................- 31 -
23.4 MISCELLANEOUS..............................................................................- 31 -
23.5 ATTORNEY'S FEES............................................................................- 32 -
23.6 LANDLORD'S DEFAULT.........................................................................- 32 -
23.7 TENANT'S REMEDIES..........................................................................- 32 -
ARTICLE XXIV. MISCELLANEOUS ................................................................................- 33 -
24.1 NO PARTNERSHIP.............................................................................- 33 -
24.2 NO REPRESENTATIONS BY LANDLORD.............................................................- 33 -
24.3 ABANDONMENT................................................................................- 33 -
24.4 SEVERABILITY OF PROVISIONS.................................................................- 33 -
24.5 INTERIOR CONSTRUCTION......................................................................- 34 -
24.6 RELOCATION OF LEASED PREMISES..............................................................- 34 -
24.7 BENEFITS AND BURDENS.......................................................................- 34 -
24.8 WAIVER OF SUBROGATION. ...................................................................- 34 -
24.9 LANDLORD'S LIABILITY.......................................................................- 34 -
24.10 BROKERAGE..................................................................................- 35 -
24.11 RECORDING..................................................................................- 35 -
24.12 GOVERNMENTAL SURCHARGE.....................................................................- 35 -
24.13 SPECIAL PROVISIONS.........................................................................- 35 -
24.14 ENTIRE AGREEMENT...........................................................................- 35 -
24.15 FORCE MAJEURE..............................................................................- 35 -
24.16 QUIET ENJOYMENT............................................................................- 35 -
24.17 CHOICE OF LAW..............................................................................- 36 -
24.18 CONSENT....................................................................................- 36 -
24.19 RIGHT OF OFFSET............................................................................- 36 -
24.20 PRIME RATE.................................................................................- 37 -
24.21 EXHIBITS...................................................................................- 37 -
24.22 TIME OF ESSENCE............................................................................- 37 -
</TABLE>
- ii -
<PAGE> 6
EXHIBITS
A - LEGAL DESCRIPTION
B - FLOOR PLAN OF LEASED PREMISES
C - RULES AND REGULATIONS
D - TENANT IMPROVEMENT AGREEMENT
D-1 BASE BUILDING CONDITION
D-2 SCHEDULE FOR PLANNING, PRICING AND CONSTRUCTION OF
TENANT IMPROVEMENTS
D-3 SUPPLEMENT TO BASE BUILDING CONDITION
D-4 LIST OF APPROVED GENERAL CONTRACTORS AND SPECIALTY
TRADE SUBCONTRACTORS
E - ADDITIONAL PROVISIONS
E-1 FIRST REFUSAL AREA
E-2 RESERVED PARKING SPACES
E-3 LETTER OF CREDIT AMORTIZATION SCHEDULE
E-4 APPROVED LETTER OF CREDIT FORM
F - BOMA STANDARDS (1989 VERSION)
G - COMMENCEMENT DATE AGREEMENT
H - OPERATING EXPENSE EXCLUSIONS
I - PLAT FOR SIGN LOCATION
J - SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
K - LIST OF MORTGAGES
L - JANITORIAL SPECIFICATIONS
- iii -
<PAGE> 7
OFFICE LEASE
THIS LEASE, is made and entered into on this 27 day of April,
1998, between BSDAL I LIMITED PARTNERSHIP, a Georgia limited partnership
("Landlord"), and MARKETING SPECIALISTS SALES COMPANY ("Tenant"), a Texas
corporation.
ARTICLE I. LEASED PREMISES
1.1 LEASE OF LEASED PREMISES.
(a) Landlord, in consideration of the rents and of the terms
and conditions hereinafter contained, does hereby lease to Tenant, and
Tenant does hereby rent from Landlord, subject to the provisions of
Paragraphs 1.1(c), 1.2 and Exhibit D hereto, the entire second (2nd)
floor (the "Leased Premises") of the building known as the 17855
Briargrove Place ("Building"). The Leased Premises are projected to
have approximately 32,756 square feet of Rentable Area (as hereinafter
defined), with the exact Rentable Area of the Leased Premises to be
determined in accordance with Paragraph 1.1(b). The Building which is
situated at the northwest corner of Briargrove Lane and the North
Dallas Tollway, Dallas, Texas, on the land described on Exhibit A
hereto ("Property"), and the floor plan of the Leased Premises is
attached as Exhibit B hereto.
(b) After Landlord and Tenant have approved the "Drawings and
Specifications" for the Leased Premises as provided in Exhibit D
hereto, Landlord shall cause its architect to measure the "Usable Area"
of the Leased Premises and the Building in accordance with the Standard
Method for Measuring Floor Area in Office Buildings, American National
Standard ANSI Z65.1-1980 (Reaffirmed 1989), approved by the American
National Standards Institute, Inc. on June 21, 1989, published by the
Building Owners and Managers Association, and attached as Exhibit F
hereto. Tenant shall have ten (10) days after receipt of such
certification to confirm the calculations of Landlord's architect and
to notify Landlord of any objection thereto; if Tenant fails to notify
Landlord of any such objections within such ten (10) day period, then
the certification of Landlord's architect shall be deemed confirmed by
Tenant and binding on both parties hereto. If Landlord and Tenant are
unable to agree upon the Usable Area of the Leased Premises or any
other portion of the Building, either party may submit the subject
matter of their dispute to binding arbitration by the American
Arbitration Association office in Dallas, Texas in accordance with the
rules thereof. The "Rentable Area" of the Leased Premises, for all
purposes of this Lease, shall be the sum of (i) the Usable Area of the
portion of the Leased Premises, if any, located on any floor of the
Building leased entirely by Tenant multiplied by 1.10, plus (ii) the
Usable Area of the portion of the Leased Premises, if any, located on
any floor not leased entirely by Tenant multiplied by 1.15. After
Landlord's architect certifies its calculation of the Usable Area of
the Leased Premises and Tenant has confirmed, or is deemed to have
confirmed, such calculations, all calculations set forth in the Lease
based on the area of the Leased Premises, including, without
limitation,
<PAGE> 8
Base Rent, Tenant's Share and Landlord's Allowance for Tenant
Improvement Costs, shall be adjusted based on the Usable Area certified
by Landlord's architect and the Rentable Area determined as provided
above.
(c) Landlord warrants and represents (subject to the
exclusions set forth in Section 2.08 of Exhibit D respecting Drawings
and Specifications) that the Building, all systems therein, all Common
Areas (as defined in Paragraph 2.3(b)(iii)) located on the Property,
and the Tenant Improvements (as hereinafter defined in Paragraph 2.1)
to the Leased Premises to be constructed and installed pursuant to the
provisions of the Tenant Improvement Agreement attached as Exhibit D
hereto and Tenant's use thereof for general office purposes shall be in
compliance in all material respects with all applicable governmental
codes and regulations, all zoning and other land use matters, all
building codes (including, without limitation, Title III of the
American with Disabilities of Act of 1990 and the Texas Architectural
Barriers Act) as in effect on the Fixturing Date and all Building
systems and equipment and the Tenant Improvements will be in first
class condition and good operating order consistent with Class "A"
office buildings (constructed since 1992) within the North Dallas
Tollway/LBJ Freeway corridor in Dallas, Texas, on the Commencement
Date. The warranties and representations of Landlord set forth in this
Paragraph 1.1(c) shall expire and be of no further force or effect as
of the first (1st) anniversary of the date of Substantial Completion
(as defined in Exhibit D) of the Tenant Improvements.
1.2 PREPARATION OF LEASED PREMISES.
(a) Landlord shall construct or install in the Leased Premises
the Tenant Improvements, as defined in and to be constructed or
installed pursuant to the provisions of the Tenant Improvement
Agreement which is attached hereto as Exhibit D. Landlord and Tenant
agree to comply with all of the terms and provisions of the Tenant
Improvement Agreement, including, without limitation, the obligation to
pay, as additional rental, all amounts due Landlord under Paragraph 3
thereof according to the payment procedures contained therein.
(b) If Tenant causes the improvements to the Leased Premises
to exceed in value the value of the Base Building Condition plus
Landlord's Allowance for Tenant Improvement Costs (as such terms are
defined in the Tenant Improvement Agreement), and if the installation
or construction of such improvements causes an increase in the ad
valorem taxes on the Building, then Tenant shall pay from time to time,
as additional rental, any such increase in ad valorem taxes on demand
of Landlord, provided, however, that Tenant shall have no liability
hereunder for any such increase in ad valorem taxes unless the Tenant
Improvement Costs exceed $30.00 per square foot of Rentable Area of the
Leased Premises.
- 2 -
<PAGE> 9
ARTICLE II. TERM AND RENT
2.1 TERM.
(a) This Lease Agreement shall continue in full force for a
period beginning on the Commencement Date (as hereinafter defined) and
ending on the date (the "Expiration Date") that is five (5) years after
the Commencement Date ("Term"). The Commencement Date is defined as
12:01 a.m. on the date that is one hundred twenty (120) days (the
"Move-in Period") after the earlier to occur of (i) the date upon which
the improvements to be constructed by Landlord in the Leased Premises
pursuant to the Tenant Improvement Agreement attached hereto as Exhibit
D hereto (the "Tenant Improvements") are "Substantially Complete" (as
that term is defined in Exhibit D), or (ii) the date the Tenant
Improvements would have been Substantially Complete but for delays
caused by Tenant (such as, by way of illustration and not limitation,
selection of long lead-time items, delays in approving drawings and
specifications and construction budgets, failure to cooperate with the
contractors completing the Tenant Improvements and failure to complete
installation of cabling and other fixtures and equipment); provided,
however, that no Tenant delays will be deemed to have occurred unless
and until Tenant has received notice of such delay from Landlord and
Tenant has failed to correct such delay within the following time
periods after receipt of such notice:
with respect to design-related delays (such as selection of
long lead-time items): three (3) business days;
with respect to failure to meet scheduled deadlines: no notice
or cure for Tenant; and
with respect to field problems or other delays: one (1)
business day;
and further provided that such occurrence actually causes a delay in
Landlord's completion of the Tenant Improvements as evidenced by a
change order issued to Landlord's Contractor extending the contract
completion date for the Tenant Improvements, except, however, if
Landlord delays certain work in order to accommodate completion of
Tenant's Work (such as by way of illustration and not limitation,
deferring installation of ceiling tiles to facilitate any work Tenant
desires to perform in the plenum area), delay in completing such work
shall be deemed a delay caused by Tenant. Such earlier date determined
pursuant to clauses (i) and (ii) of the immediately preceding sentence
is herein referred to as the "Fixturing Date." Tenant Improvements to
the Leased Premises shall be deemed "Substantially Complete" when
Landlord has obtained a temporary or permanent Certificate of Occupancy
for the Leased Premises or other document sufficient for Tenant's legal
occupancy of the Leased Premises and Tenant's Architect (as defined in
Exhibit D) has issued a Certificate of Substantial Completion (as
defined in Exhibit D). Notwithstanding the immediately preceding
sentence, if Landlord believes that the Tenant Improvements were
"Substantially Complete" prior to
- 3 -
<PAGE> 10
the date so certified by Tenant Architect's in its Certificate of
Substantial Completion, Landlord may submit the issue of when the
Tenant Improvements were "Substantially Complete" to binding
arbitration by the American Arbitration Association office in Dallas,
Texas in accordance with the rules thereof. Tenant's certification of
the date of "Substantial Completion" shall be given no greater weight
than other evidence presented in such arbitration proceeding. Such
arbitration must select as the date of Substantial Completion either
the date asserted by Landlord or the date stated in Tenant's
Architect's Certificate of Substantial Completion. Pending the outcome
of any such arbitration, the obligations of Tenant shall be determined
on an interim basis using the date that is most closely in the middle
between Landlord's date and Tenant's Architect's date (if two dates are
most closely in the middle, then the parties shall use the later of
those two dates), and all obligations of Tenant hereunder shall be
adjusted between Landlord and Tenant within fifteen (15) days after the
decision of the arbitration panel is delivered to Landlord and Tenant.
Furthermore, in no event shall the Tenant Improvements be deemed
"Substantially Complete" as of a date later than the date that is
thirty (30) days prior to the first day on which Tenant opens the
Leased Premises for the conduct of business to the public for the first
time. Landlord and Tenant agree, upon request by the other, to execute
and deliver a Commencement Date Agreement stating the actual date on
which the term commences in the form attached hereto as Exhibit G.
(b) Notwithstanding the provisions of Paragraph 2.1(a), if,
for any reason, Landlord cannot deliver possession of the Leased
Premises to Tenant on the Fixturing Date, Landlord shall not be subject
to any liability, nor shall such failure affect the validity of this
Lease or the obligations of Tenant hereunder except as otherwise
provided herein. If Landlord is unable to deliver possession of the
Leased Premises by the Fixturing Date for any reason other than delay
caused by Tenant (including changes in the Drawings and
Specifications), the Fixturing Date, the Commencement Date and the
Expiration Date shall each be postponed by the number of days delivery
of possession of the Leased Premises is so delayed. The remedies
provided herein shall be Tenant's only remedy for Landlord's failure to
deliver possession of the Leased Premises; provided, however, that
Tenant shall receive two (2) days of free rent for each day after June
15, 1998 (as such date may be postponed due to delays caused by Tenant
and Force Majeure) that Substantial Completion of the Tenant
Improvements has not occurred; and provided further that the Move-in
Period shall be extended by one (1) day for each day that Tenant is
delayed in installing its cabling (beyond June 1, 1998) or its
furniture, fixtures or equipment (beyond June 15, 1998) because of a
delay caused by Landlord or Force Majeure occurring during the Move-In
Period. No Landlord delay shall be deemed to have occurred, however,
unless and until Landlord has received notice of such delay from Tenant
and Landlord has failed to correct such delay within the same
applicable period after receipt of such notice as provided for Tenant
in Paragraph 2.1(a) above. Except as aforesaid, no delay of possession
shall operate to relieve Tenant of Tenant's obligations to Landlord
(including the payment of rent and other amounts) as provided in this
Lease. Notwithstanding the foregoing, if the Fixturing Date has not
occurred on or before September 1, 1998 (which deadline shall be
deferred one (1) day for each day of delay caused by Tenant or Force
Majeure), Landlord shall pay to Tenant as liquidated damages and not as
penalty the sum of Twenty Five Thousand and No/100 Dollars
- 4 -
<PAGE> 11
($25,000.00) for each month or part thereof beyond August 1, 1998 (or
such later date to account for delays caused by Tenant or Force
Majeure, as aforesaid) that the Fixturing Date is delayed. Said amounts
shall be paid to Tenant within thirty (30) days after written demand
therefor, or, at Tenant's option, Tenant may offset such liquidated
damages from the Base Rent (as defined below) and/or Additional Rent
(as defined below) due hereunder until same has been paid in full. If
the Fixturing Date has not occurred on or before December 1, 1998
(which deadline shall be deferred one (1) day for each day of delay
caused by Tenant or Force Majeure), Tenant, at its option at any time
thereafter but prior to the Fixturing Date, may terminate this Lease by
notice to Landlord and both parties shall thereupon be released from
all obligations under this Lease.
(c) From and after June 1, 1998 (subject to Force Majeure and
delays caused by Tenant), Tenant shall have the right to enter the
Leased Premises concurrently with Landlord's completion of the Tenant
Improvements for the purpose of installing cabling and other related
above-ceiling work in the Leased Premises. All provisions of this Lease
shall apply to Tenant's use and occupancy of the Leased Premises from
and after the time when Tenant makes its entry; provided, however, that
such occupancy shall be free of Base Rent and other charges hereunder
until the Commencement Date. Notwithstanding the foregoing, if Tenant
enters the Leased Premises prior to the Fixturing Date, Tenant shall
not perform any work if, in Landlord's reasonable judgment, the
performance of such work would interfere with or result in a delay in
the Substantial Completion of the Tenant Improvements. From and after
the Fixturing Date, Tenant shall have the right to occupy the Leased
Premises to install furniture, fixtures and equipment, and thereafter
to conduct business from the Leased Premises. Such period from the
Fixturing Date to the Commencement Date shall be free of Base Rent or
Additional Rent, but shall otherwise be subject to and in accordance
with all of the terms and conditions of this Lease.
2.2 BASE RENT. For the use and occupancy of the Leased Premises, Tenant
shall pay rent to Landlord starting on the Commencement Date of the Lease Term
at an annual rate of Twenty-Two and No/100 Dollars ($22.00) per square foot of
Rentable Area (the "Base Rent") of the Leased Premises, payable in twelve (12)
equal monthly installments, in advance, on the Commencement Date and the first
day of each month thereafter during the Term hereof; provided, however, that
Base Rent for any partial calendar month during the Term shall be prorated on a
per diem basis. Base Rent and all other sums, whether designated Additional Rent
or otherwise, payable to Landlord under this Lease shall be payable in U.S.
Dollars at the office of Landlord, or at such other place or places as Landlord
may designate in writing. All rent payable under this Lease shall be paid by
Tenant without notice or demand, both of which are expressly waived by Tenant.
Rent and other monies due Landlord under this Lease not paid when due shall bear
interest at the "Prime Rate" (as defined in Paragraph 24.20) plus two percent
(2%) per annum (but not in excess of the maximum lawful rate) from the date the
same is due until paid. Base Rent payable under this Lease shall be paid in
advance by Tenant in monthly installments as set forth above without demand,
offset or deduction, except as otherwise expressly provided in this Lease.
- 5 -
<PAGE> 12
2.3 ADDITIONAL RENT
(a) It is understood that the Base Rent set forth in Paragraph
2.2 of the Lease was negotiated in anticipation that the operating
expenses (including taxes but excluding electricity, which shall be
separately charged to Tenant as provided in Paragraph 2.3(c) below)
attributable to the Leased Premises would not exceed $6.17 per square
foot of Rentable Area of Leased Premises (the "Operating Expense Base")
during any calendar year of the Term. In order that the rent payable
throughout the term of this Lease shall reflect any increase in such
costs, Tenant agrees to pay to Landlord, as "Additional Rent," "Tenants
Share" (as hereinafter defined) respecting increases in Operating
Expenses and "Tenant's pro rata share" (as hereinafter defined) of
electricity costs as provided in Paragraph 2.3(c) below.
(b) Definitions
(i) "Tenant's Share" shall mean the amount of
Tenant's pro rata share of the increase in Operating Expenses
over the Operating Expense Base during each calendar year
(calculated on a square foot of Rentable Area basis annualized
to ninety-five percent (95%) occupancy of the total Rentable
Area of the Building as provided in clause (ii) below).
"Tenant's pro rata share," for purposes of this Lease, shall
be equal to the proportion which the Rentable Area of the
Leased Premises bears to the greater of (i) the actual area
under lease in the Building or (ii) ninety-five percent (95%)
of the total Rentable Area of the Building. Tenant's Share
shall be paid as Additional Rent as provided in this Paragraph
2.3.
(ii) Operating Expenses shall be computed based on
expenses incurred or paid on behalf of Landlord and determined
in accordance with generally accepted accounting principles
which shall be consistently applied. Subject to the
limitations hereinafter set forth respecting the matters
described in Exhibit H hereto, "Operating Expenses" shall mean
all expenses, costs and disbursements of every kind which
Landlord shall pay in connection with the operation of the
Building, including but not limited to gas, oil, steam,
chilled water, coal or any other energy sources utilized for
the operational use and maintenance of the Building (but
expressly excluding electricity), outside services including
window cleaning, carpet cleaning, drapery or venetian blind
cleaning, security, rental of equipment, personal property
repairs, maintenance of the Building, equipment, supplies,
materials, administrative expenses, legal and professional
fees, insurance, real estate taxes, property taxes, special
assessments, janitorial including salaries and wages and all
other Tenant benefits and reasonable management fees.
Operating Expenses shall include the cost, as reasonably
amortized by Landlord with interest at the rate of ten percent
(10%) per annum of the unamortized amount, of any capital
improvement made after the completion of the initial
construction of the Building which reduce other operating
expenses, provided that the amount of such cost included in
Operating Expenses in any given calendar year shall not exceed
the amount by which Operating Expenses
- 6 -
<PAGE> 13
were reduced in such calendar year as a result of such
expenditure. Operating Expenses shall not include the items
set forth in the list of Operating Expense exclusions attached
hereto as Exhibit H. If the average occupancy level of the
Building was less than ninety-five (95%) percent of the total
Rentable Area of the Building during a calendar year, the
actual Operating Expenses, for that calendar year shall be
adjusted to equal Landlord's reasonable estimate of Operating
Expenses had ninety-five (95%) percent of the total Rentable
Area of the Building been occupied.
(iii) The "Common Areas" are those areas which are
furnished and may be furnished from time to time in and on the
Building for the general common and non-exclusive use of
Tenant, their officers, agents, employees, customers, invitees
and licensees, including, without limitation, delivery
passages, pedestrian sidewalks and malls, passenger and
service elevators, escalators, hallways, stairways, fire
exits, comfort stations and lobby areas. The Building and its
structural components (including doors and windows) shall be
deemed part of the Common Areas notwithstanding that all parts
or components thereof may not be capable of common and
non-exclusive use.
If Landlord makes any capital improvement during the term of
this Lease in order to comply with safety and/or any other requirements
of any federal, state or local law or governmental regulation, then the
Tenant's proportionate share of the reasonable annual amortization of
the cost of such improvement and the interest necessary to amortize
such costs shall be deemed an Operating Expense in each of the calendar
years during which such amortization occurs, and Tenant shall be
responsible for Tenant's pro rata share of any such charges; provided,
however, that Tenant shall not have any obligation if such capital
improvement is made necessary by any non-compliance by Landlord with
any such law or regulation as in effect on the Fixturing Date.
(c) Electricity - In addition to Tenant's Share respecting
increases in Operating Expenses, Tenant shall pay to Landlord, as a
part of the Additional Rent hereunder, Tenant's pro rata share of the
entire cost to Landlord of electricity provided to the Building.
(d) Payment of Additional Rent - Landlord shall make a
reasonable estimate of the Additional Rent payable by Tenant for the
upcoming year, and Tenant shall pay to Landlord the Additional Rent, as
so estimated, without demand, deduction or set-off, in 12 equal monthly
installments during each year, each such installment being due with
installments of Base Rent.
(e) Adjustment of Additional Rent - If the Additional Rent
paid by Tenant with respect to a calendar year, based upon Landlord's
estimate, differs from the actual amount of Additional Rent due and
payable for such year, as reflected in an operating statement for such
year prepared by Landlord and delivered to Tenant, the difference shall
be payable by Landlord or Tenant, as the case may be, in a lump sum on
the first day of the second month
- 7 -
<PAGE> 14
following the month in which Landlord renders its operating statement
to Tenant. Failure to give Tenant an actual operating statement shall
not constitute a waiver by Landlord of its right to require an increase
in Additional Rent.
(f) Verification of Operating Statement - Upon request by
Tenant, and at Tenant's cost and expense, Landlord shall furnish Tenant
such information as may be necessary for Tenant to verify Operating
Expenses and shall cooperate in good faith with Tenant in verifying the
operating statement. Within ninety (90) days after Tenant receives the
operating statement, Tenant may contest the statement by written notice
to Landlord, which notice shall specify the particular areas of
Operating Expenses that Tenant desires to contest; provided, however,
that no such contest shall entitle Tenant to withhold or delay amounts
due to Landlord as set forth in the operating statement. If no such
contest is made by written notice to Landlord delivered within such
90-day period, such statement shall be binding upon Tenant in all
respects. If Tenant timely contests such statement, Tenant shall have
the right to inspect and examine, at reasonable times during normal
business hours, Landlord's books of account and records pertaining to
the Operating Expenses of the Building for the calendar year in
question, all at Tenant's sole cost and expense. Such inspection shall
be conducted by an independent certified public accountant or by
Tenant's accounting department, and in no event shall the inspector be
compensated on a contingent fee basis. Such inspection shall be
conducted in Landlord's office, at Tenant's expense, and shall be
completed, with written notice to Landlord of the results thereof, by
no later than forty-five (45) days after the date of Tenant's notice of
contest delivered to Landlord pursuant to the foregoing provisions of
this Paragraph 2.3(f); any matters not specifically disputed in the
written notice filed with Landlord after such audit has been completed
shall be final and binding upon Tenant in all respects. Landlord may
have an agent or employee present during such inspection and audit. If
the contest ultimately results in Landlord and Tenant agreeing that
Tenant has overpaid Landlord for its share of Operating Expenses, such
overpayment shall be refunded by Landlord to Tenant within thirty (30)
days after the date such contest is so resolved.
(g) Operating Expenses Cap - Notwithstanding anything in this
Paragraph 2.3 to the contrary, Tenant's Share of increases in
"controllable" Operating Expenses (as that term is hereinafter defined)
in any calendar year during the Term shall not exceed the amount by
which (x) such "controllable" Operating Expenses attributable to the
Leased Premises for the immediately preceding calendar year (grossed up
as provided in Paragraph 2.3(b)(ii) and in Paragraph 2.3(j), if not a
full calendar year, but in no event less than $3.37 per square foot of
Rentable Area of the Leased Premises) multiplied by 105% exceeds (y)
$3.37 per square foot of Rentable Area of the Leased Premises. For the
purposes of this Paragraph 2.3(g), "controllable" Operating Expenses
are defined to be all Operating Expenses other than those expenses the
increase in which is beyond the reasonable control of Landlord. Without
limiting the foregoing, (i) examples of increases in Operating Expenses
that are beyond the reasonable control of Landlord include all
increases in utility costs, insurance costs and property taxes, and
(ii) examples of increases in Operating Expenses that are
"controllable" include (A) all property management fees (which
themselves shall be subject to a limitation as provided in
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Exhibit H hereto) and expenses, (B) security, maintenance and
engineering costs, (C) legal, accounting, audit and related
professional expenses, and (D) landscaping, janitorial, trash removal
and related expenses; provided, however, that to the extent the
foregoing expenses include labor costs that are directly affected by
changes in the federal minimum wage law, increases in such labor costs
that result from increases in the federal minimum wage shall not be
deemed "controllable" costs. Landlord and Tenant further acknowledge
and agree that the additional rent payable under Paragraph 2.3(c) above
for electricity costs shall not be subject to any limitation under this
Paragraph 2.3(g).
(h) Additional Rent -All costs and expenses which Tenant
assumes and agrees to pay Landlord pursuant to this Lease shall be
deemed Additional Rent, and, in the event of non-payment thereof,
Landlord shall have all rights and remedies provided for in the case of
non-payment of Base Rent.
(i) Operating Expense Differential - If the Operating Expenses
attributable to the total Leased Premises in any calendar year of the
Term are less than the Operating Expense Base ("Operating Expense
Differential"), then the Operating Expense Differential for such
calendar year shall be credited against the next payment or payments of
rent or Additional Rent becoming due under this Lease until such credit
is exhausted.
(j) Partial Year - If the Lease Term commences on a day other
than January 1 of a calendar year or expires on a day other than
December 31 of a calendar year, the Operating Expenses for any such
partial year shall be "grossed up" to the amount that Operating
Expenses would have been for the entire calendar year, and the amount
of Additional Rent payable pursuant to this Paragraph 2.3, and the
amount of any Operating Expense Differential payable to Tenant pursuant
to Paragraph 2.3(i), shall be the product of multiplying the Additional
Rent (or Operating Expense Differential) which otherwise would have
been payable for the full calendar year by a fraction, the numerator of
which is the actual number of days of the calendar year in question
included within the Lease Term, and the denominator of which is 365.
(k) Survival - The expiration or termination of this Lease
shall not affect the obligations of Landlord and Tenant pursuant to
this Paragraph 2.3 to be performed subsequent to such expiration or
termination.
ARTICLE III. SECURITY DEPOSIT
[INTENTIONALLY DELETED]
ARTICLE IV. USE AND ACCEPTANCE
4.1 USE. Tenant shall use the Leased Premises for general office
purposes, and for no other purpose without the prior written consent of
Landlord. Tenant will not use or occupy the
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Leased Premises for any unlawful purpose, and will comply with all present and
future laws, ordinances, regulations, and orders of the United States of
America, the state in which the Leased Premises are located, and all other
governmental units or agencies having jurisdiction over the property and the
Leased Premises. Tenant agrees to conduct its business in a reputable manner.
Tenant shall not cause, maintain or permit any storage outside of the Leased
Premises other than in storage areas, if any, leased by Landlord to Tenant for
such purposes (without Landlord having any obligation to do so), shall not
commit or suffer any waste upon the Leased Premises, or any nuisance or other
act or thing which may disturb the quiet enjoyment of any other tenant in the
Building. No use shall be made or permitted to be made of the Leased Premises,
nor acts done, which will increase the existing rate of insurance upon the
Building or cause the cancellation of any insurance policy covering the
Building, or any part thereof. Tenant shall not sell, or permit to be kept or
used, in or about the Leased Premises, any article which may be prohibited by
the standard form of fire insurance policy. Tenant shall, at its sole cost and
expense, comply with any and all requirements, pertaining to the Leased
Premises, of any insurance organization or company, necessary for the
maintenance or reasonable fire and public liability insurance covering the
Leased Premises, Building and appurtenances. Tenant agrees to pay to Landlord,
as Additional Rent, any increase in premiums on policies which may be carried by
Landlord covering damages to the Building and/or other improvement within the
Leased Premises and loss of rent caused by fire and the perils normally included
in extended coverage above the rates for the least hazardous type of occupancy
of the Leased Premises for office operations, in addition to the payment
required of Tenant pursuant to this Lease. Notwithstanding anything to the
contrary in this Lease, and so long as Tenant's use of the Leased Premises is
for general office purposes, Tenant shall have no liability for any such
increase in premiums on said policies carried by Landlord. For avoidance of
doubt, Landlord shall review the final drawings and specifications prepared by
Tenant's Architect (as hereinafter defined in Exhibit D) during the time period
for such review set forth in the schedule attached as Exhibit D-2 to Exhibit D.
If Landlord fails to object within said review period, such failure to object
shall be conclusive evidence that Tenant's general office use of the Leased
Premises (if not modified during the Lease Term) will not cause any such
increase in premiums for said policies and Tenant shall have no liability
hereunder with respect to such general office use (if not modified as
aforesaid).
4.2 ADA. In connection with completion of the Tenant Improvements and
thereafter, so long as this Lease continues in effect, Landlord will comply with
Landlord's ADA Compliance Obligations and Tenant will comply with Tenant's ADA
Compliance Obligations. For purposes of the foregoing, the following terms shall
have the following meanings:
(a) "ADA Requirements" shall mean the requirements of Title
III of the Americans with Disabilities Act of 1990 (the "Act"), the
Texas Architectural Barriers Act (the "Texas Act") and all rules and
regulations promulgated with respect thereto, as such Act, Texas Act
and rules and regulations exist on the date of this Lease, and as the
same may be amended thereafter from time to time.
(b) "Landlord's ADA Compliance Obligations" shall mean all
required compliance with ADA Requirements with respect to the Building
shell, access to the Building, all
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Building systems (including, without limitation, mechanical,
electrical, plumbing, and elevator systems) all structural components
of the Building, all Common Areas, and any other portions of the
Building not located within the Leased Premises or the premises of any
other tenant, other than such compliance made necessary by changes in
use of or modifications to the Leased Premises by Tenant.
(c) "Tenant's ADA Compliance Obligations" shall mean,
collectively (i) all required compliance with ADA Requirements with
respect to tenant improvements located in the Leased Premises; plus
(ii) all required compliance with ADA Requirements with respect to any
other portion of the Building or Common Areas to the extent such
compliance is made necessary solely by changes in use of or
modifications to the Leased Premises by Tenant; provided, however, that
Tenant shall not be obligated for compliance with ADA Requirements
respecting the Building or Common Areas outside the Leased Premises
resulting from modifications to the Leased Premises by Tenant unless
Landlord informs Tenant of such compliance obligation at the time
Landlord approves the plans for such modifications.
For purposes of this Paragraph 4.2, any Building-standard bathrooms located on a
floor wholly occupied by Tenant, which, if located on a multi-tenant floor would
be available for use by all tenants of the Building, shall be deemed Common
Areas for purposes of this Paragraph 4.2 unless the design, lay-out or fixturing
of such bathrooms has been modified by Tenant, in which event such bathrooms
shall be deemed part of the Leased Premises for purposes of this Paragraph 4.2.
4.3 ACCEPTANCE. The taking of possession of the Leased Premises by
Tenant on the Fixturing Date shall be conclusive evidence that Tenant accepts
the Leased Premises "as-is," and the Leased Premises were in good and
satisfactory condition and suitable for the use intended by Tenant at the time
such possession was taken, subject to:
(a) the provisions of the Certificate of Substantial
Completion and the "Punch List" as prepared by Tenant's Architect (as
hereinafter defined in Exhibit D);
(b) all of Landlord's warranties and obligations with respect
to the Building and the Leased Premises as set forth elsewhere in this
Lease and the Exhibits hereto (including those warranties set forth in
Paragraph 1.1(c) and Section 2.08 of Exhibit D to this Lease); and
(c) any latent defects (i.e., defects not reasonably
detectable by the inspection of the Leased Premises contemplated by
Section 2.07 of Exhibit D to this Lease) in either the Base Building
Condition or the Leased Premises not otherwise identified at the time
of such possession, but, with respect to the Leased Premises only (and
not the Base Building Condition), those defects must be identified in
writing to Landlord not less than two (2) weeks prior to the first
(1st) anniversary of the date of Substantial Completion of the Tenant
Improvements.
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ARTICLE V. OPERATIONS: UTILITIES: SERVICES
5.1 OPERATION. Landlord shall operate the Building in accordance with
standards customarily followed in the operation of comparable commercial office
buildings in the Dallas, Texas area.
5.2 HOURS OF OPERATION. The Building will be open from 7:30 a.m. to
6:00 p.m., Monday through Friday, and from 8:00 a.m. to 1:00 p.m. on Saturday,
holidays excepted ("Business Hours"). The Building will be closed on Sundays and
on the following holidays: New Year's Day, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, Christmas Day and other days as are locally observed by
landlords in comparable commercial office buildings in the Dallas, Texas area.
Tenant shall have access to the Leased Premises 24 hours per day every day of
the week.
5.3 UTILITIES AND SERVICES. Landlord shall provide Tenant with the
following utilities and services:
(a) Central heat and air-conditioning, in season, during
Business Hours at such temperatures and in such amounts as may be
required to reasonably heat or cool the Leased Premises at expected
occupant densities for a Class "A" office environment under normal
outside weather conditions (for the time of year), subject to and in
accordance with the "HVAC Design Criteria" specified in Exhibit D-3 to
Exhibit D hereto. Landlord reserves the right to prohibit the use of
machines and equipment that would cause Tenant's use of the Leased
Premises to exceed the HVAC Design Criteria, unless and until
arrangements are made by Tenant, acceptable to Landlord, to obtain and
install in the Leased Premises at Tenant's cost supplementary
air-conditioning equipment, and the cost of operation and maintenance
of such equipment shall be paid by Tenant on the Base Rent payment
dates at Landlord's cost therefor (without profit mark-up by Landlord).
For avoidance of doubt, Landlord shall review the final drawings and
specifications prepared by Tenant's Architect (as hereinafter defined
in Exhibit D) during the time period for such review set forth in the
schedule attached as Exhibit D-2 to Exhibit D, and shall also review
such equipment specifications as provided to Landlord prior to such
review period. If Landlord fails to object within said review period to
the use of the equipment specified by Tenant in such specifications,
such failure to object shall constitute Landlord's agreement that, as
long as the Tenant Improvements are completed in accordance with the
reviewed plans and specifications, and are not modified, Landlord will
not require supplemental HVAC service to be installed and operated at
Tenant's expense solely by reason of the installation and use by Tenant
of such equipment of the types and in the quantities so specified,
unless such supplemental HVAC service is desired by Tenant. Landlord
and Tenant acknowledge that Tenant may not provide to Landlord
specifications or quantities as to every piece of equipment that Tenant
intends to use in the Leased Premises and that Landlord's consulting
engineer may make reasonable assumptions respecting equipment for which
no specifications or quantities are provided. The protections afforded
Tenant by, and the limitations of
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<PAGE> 19
Landlord's rights set forth in, the preceding provisions of this
paragraph are conditioned upon, limited by and subject to the accuracy
of such reasonable assumptions, and Landlord will not be bound to the
extent such reasonable assumptions are not correct. Should Tenant
desire either heating or air-conditioning at times other than Business
Hours, Landlord shall furnish such services as requested by Tenant upon
not less than six (6) hours notice from Tenant, which charges Tenant
shall promptly pay upon invoice from Landlord. Payments for such
additional services shall be deemed additional rental due from Tenant.
Landlord and Tenant agree that the rate to be charged to Tenant during
the first twelve (12) months of the Lease Term for heating, air
conditioning and ventilating service during hours other than Business
Hours shall be Thirty and No/100 Dollars ($30.00) per hour per floor.
Any increase in such charge thereafter shall include only actual
increases in the cost to Landlord of providing such after-hours service
(without profit markup by Landlord).
(b) Hot and cold water to serve the Leased Premises as
required for lavatory and drinking purposes and such other uses as are
permitted pursuant to this Lease.
(c) Janitorial services five (5) nights per week (as
determined by Landlord), excluding holidays, in accordance with the
janitorial specifications attached as Exhibit L hereto.
(d) Electricity to the Leased Premises sufficient to meet the
"Electrical Design Criteria" as defined in Exhibit D-3 to Exhibit D
attached hereto.
(e) Standard passenger and freight elevator service, if
applicable, when the Building is open, and at least one passenger
elevator when the Building is closed.
(f) Security for the Building, which shall consist of (i) a
card-key access system limiting access to the Building during other
than Business Hours and (ii) a roving night guard who cruises the
Building and parking areas between the hours of 4:00 p.m. and 11:59
p.m., Monday through Friday, and 8:00 a.m. and 1:00 p.m. on Saturday.
(g) Building standard routine maintenance of all common and
service areas of the Building and of the elevators, mechanical,
electrical (including replacement of Building standard fluorescent and
incandescent bulbs in the Common Areas of the Building and throughout
the Leased Premises), plumbing, and other standard component systems
and equipment of the Building.
Landlord shall not be obligated to furnish services or utilities, other than
those specified in this Paragraph 5.3. If Landlord elects to furnish services or
utilities requested by Tenant in addition to those specified in this Paragraph
5.3, Tenant shall pay to Landlord a charge therefor as hereinafter provided
within ten (10) days after receipt of Landlord's invoices therefor. If Tenant
shall fail to make any such payment, Landlord may, upon written notice to Tenant
as provided in Paragraph 23.1 of this Lease, and in addition to Landlord's other
remedies under this Lease, discontinue any or all
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of the additional services. Except as otherwise expressly provided in this
Lease, all additional utilities and services shall be provided at a rate equal
to Landlord's cost in providing such utilities and services (without profit
markup by Landlord).
5.4 INTERRUPTION OF SERVICES. Landlord shall not be in default under
this Lease and shall not be liable to Tenant for failure to provide services
pursuant to this Article if failure to provide the services is caused by factors
outside of Landlord's reasonable control. Notwithstanding the foregoing or
anything to the contrary in this Lease, in the event of an interruption for any
reason other than Force Majeure or act or omission by Tenant or its agents,
employees or contractors in the aforementioned central heat and air
conditioning, plumbing, or electrical services serving the Leased Premises which
renders the Leased Premises or any part thereof not reasonably usable by Tenant
(and such part of the Leased Premises is in fact not used by Tenant solely by
reason of such interruption, except for such limited use as Tenant may require
on an emergency basis) in the ordinary conduct of its business for any period in
excess of five (5) consecutive business days after Landlord has received written
notice from Tenant as provided in Paragraph 23.1 of this Lease of such
interruption, Base Rent and Additional Rent shall be abated proportionately
thereafter until such time as Landlord restores such interrupted utilities and
services or otherwise provides substantially the same service by temporary or
alternative means (such temporary or alternative service reasonably allowing
Tenant to use the Leased Premises for general office purposes in a manner
consistent with such use under circumstances in which such temporary or
alternative means are not required). If such interruption of the utilities and
services renders the entire Leased Premises not reasonably usable (and the
Leased Premises are in fact not used by Tenant solely by reason of such
interruption, except for such limited use as Tenant may require on an emergency
basis) for a continuous period in excess of forty-five (45) consecutive business
days, or for ninety (90) or more business days (whether or not consecutive) in
any twelve (12) month period, in each case following such written notice to
Landlord of each occurrence of such interruption, then, in addition to any
rental abatement, Tenant shall be entitled to terminate this Lease by giving
Landlord twenty-four (24) hours written notification, to be given during such
period of interruption, and Tenant shall have no further obligation or liability
to Landlord under this Lease (other than amounts outstanding under this Lease
that existed prior to the interruption of such utilities and services).
5.5 METERING ELECTRICITY. If Landlord shall determine that Tenant's
proposed or actual consumption of electricity is in excess of what the standard
consumption would be for general office use during Business Hours, then Landlord
may either charge Tenant directly for such excess services or require Tenant to
enter into a contract for electrical service to the Leased Premises directly
with the provider of electrical service to the Building. Tenant shall pay the
entire cost and expense of installing and maintaining meters, panels, wiring and
other items required to accommodate excess services to Tenant. For avoidance of
doubt and notwithstanding the foregoing, Landlord shall review the Drawings and
Specifications prepared by Tenant's Architect and any equipment specifications
and quantities provided by Tenant to Landlord five (5) days after Tenant
furnishes same to Landlord (per the schedule in Exhibit D-2 to Exhibit D) to
determine if Tenant's estimated consumption of electricity during Business Hours
with respect to the quantities of equipment so disclosed to Landlord will exceed
the "Electrical Design Criteria" (as specified in Exhibit D-3 to
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Exhibit D) and shall advise Tenant of its findings. If Landlord's review
determines that Tenant's estimated consumption of electricity will not exceed
the Electrical Design Criteria, such determination shall be conclusive evidence
that Tenant's actual consumption of electricity will not require supplemental
metering, and Landlord shall have no right (i) to charge Tenant directly for
such excess services with respect to the use of such equipment in such
quantities during Business Hours, (ii) to require Tenant to enter into a
contract for electrical service with respect to such equipment use, or (iii) to
require Tenant to pay for separate metering with respect to such equipment use.
If Landlord's review determines that Tenant's estimated consumption of
electricity will exceed the Electrical Design Criteria, Tenant shall have the
option of revising its Drawings and Specifications and its equipment
specifications and quantities to reduce its estimated consumption of
electricity. Landlord shall not charge Tenant for consumption of electricity
that is separately metered pursuant to this paragraph in an amount greater than
Landlord's average cost at the Building for electrical consumption during the
period for which such charge is assessed (without profit mark-up by Landlord),
which charges Tenant will promptly pay upon invoice from Landlord. If Tenant
disputes Landlord's requirement for any supplemental metering of electricity,
then either party may submit the subject matter of such dispute to binding
arbitration by the American Arbitration Association office in Dallas, Texas, in
accordance with the Construction Industry Rules thereof.
ARTICLE VI. REPAIRS AND MAINTENANCE
6.1 LANDLORD'S OBLIGATIONS. Landlord shall keep and maintain in good
repair and working order and make all repairs to and perform necessary
maintenance upon the structural components and elements, and electrical,
plumbing and mechanical systems (including such electrical, plumbing and
mechanical systems installed within the Leased Premises as part of the Base
Building Systems and Tenant Improvements pursuant to Exhibit D-1 and, in part,
Exhibit D-3 of Exhibit D, but not including supplemental HVAC equipment or
systems installed solely pursuant to Section 5.3(a) or as desired by Tenant) of
the Building and all parts and appurtenances, which are required in the normal
maintenance and operation of the Building consistent with the standards of a
Class "A" office building in the North Dallas Tollway/LBJ Freeway corridor in
Dallas, Texas. The cost and expense of any maintenance or repair to the Building
or such systems necessary due to the acts or omissions of Tenant or Tenant's
agents, employees, contractors, invitees, licenses or assignees, shall be
reimbursed by Tenant to Landlord upon demand as Additional Rent.
6.2 TENANT'S OBLIGATIONS. Tenant, at its sole cost and expense, shall
keep and maintain in good repair and working order and make all repairs to and
perform necessary maintenance within and upon the Leased Premises, including
Tenant's improvements, and all parts and appurtenances thereof (except for the
aforementioned electrical, plumbing and mechanical systems installed by Landlord
or Landlord's Contractor within the Leased Premises as part of the Base Building
Systems and Tenant Improvements pursuant to Exhibit D-1 and, in part, Exhibit
D-3 of Exhibit D, but Tenant shall be responsible for maintaining at its expense
any supplemental HVAC equipment or systems installed solely pursuant to Section
5.3(a) or as desired by Tenant), which are required in the normal maintenance
and operation of the Leased Premises.
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ARTICLE VII. ALTERATIONS: TENANT'S PROPERTY
7.1 ALTERATIONS BY TENANT. Tenant shall not, without Landlord's
approval, make any alterations, additions or improvements in or on the Leased
Premises. All alterations, additions or improvements to the Leased Premises made
by Tenant shall become the property of Landlord at the expiration of the term of
this Lease. Landlord reserves the right to require Tenant to remove any
alteration, improvement or addition made to the Leased Premises by Tenant, and
to repair and restore the Leased Premises to a condition substantially
equivalent to the condition of the Leased Premises prior to any such alteration,
addition or improvement, provided, however, that the foregoing shall not apply
to the Tenant Improvements installed by Landlord pursuant to Exhibit D, unless
Landlord expressly discloses to Tenant in writing at the time of the approval
thereof that such removal shall be required, or to any other alterations,
additions or improvements made with Landlord's approval, unless Landlord
expressly discloses to Tenant in writing at the time of the approval thereof
that such removal shall be required. Landlord agrees that it will not require
such removal unless the alteration, addition or improvement shall make the cost
of renovating the Leased Premises for office use following the expiration or
termination of this Lease materially more expensive than if such alteration,
addition or improvement had not been made. By way of illustration and not
limitation, the installation of raised flooring for a computer room,
interconnecting stairwell, additional toilet rooms, health club or any other
item that is required to be removed by an express provision of this Lease would
constitute alterations, additions or improvements that would make the cost of
renovating the Leased Premises following expiration or termination of this Lease
materially more expensive, but partitioning, special entry lobby features such
as a plaster or sheetrock ceiling (provided ceiling height is maintained at nine
(9) feet), special lighting or special partition finishes or surfaces (such as
glass block) would not.
7.2 CONTRACTORS' INSURANCE REQUIREMENTS. In the event Landlord gives
its approval to Tenant pursuant to Paragraph 7.1, Tenant shall require any third
party vendor or contractor performing work on the Leased Premises to carry and
maintain at no expense to Landlord: (a) Commercial General Liability Insurance
with a combined single limit of $1,000,000 bodily injury and property damage per
occurrence; (b) Auto Liability insurance with a combined single limit of
$1,000,000; and (c) Workers' Compensation insurance in accordance with
applicable state law and Employer's Liability insurance with limits of not less
than $100,000/$100,000/$500,000. Tenant shall obtain a Certificate of Insurance
prior to commencement of work and Landlord and Tenant are to be additional
insureds as respects the liability coverages.
7.3 TENANT'S PROPERTY. Tenant, at its expense and at any time and from
time to time, may install in and remove from the Leased Premises its trade
fixtures, equipment, removable walls and wall systems, furniture and
furnishings, provided such installation or removal is accomplished without
damage to the Leased Premises or the Building and the installation does not
interfere with the other tenants and their guests use of the Building. On or
prior to the termination date, Tenant shall remove all of Tenant's property from
the Leased Premises and repair any damage to the Leased Premises caused by such
removal. All property of Tenant remaining on the Leased Premises after the
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expiration of the term of this Lease shall be deemed to have been abandoned and
may be removed by Landlord, and Tenant shall reimburse Landlord for the cost of
such removal.
ARTICLE VIII. HAZARDOUS MATERIALS
8.1 TENANT'S OBLIGATIONS AND LIABILITIES. Tenant shall not cause or
permit any Hazardous Material to be brought upon, kept or used in or about the
Building or the Property by Tenant, its agents, employees, contractors, or
invitees (except for such minimal quantities as are normal and reasonable for a
general office occupancy, provided the use, storage and disposition thereof
shall at all times be in strict compliance with the requirements of applicable
laws, ordinances, codes, rules and regulations). If Tenant breaches the
foregoing covenant, Tenant shall indemnify, defend and hold Landlord harmless
from any and all claims, judgments, damages, penalties, fines, costs or
liabilities (including, without limitation, diminution in value of the Building
or the Property, damages for the loss or restriction on use of rentable or
usable space or of any amenity of the Building or the Property, damages arising
from any adverse impact on marketing of space, and sums paid in settlement of
claims, attorneys' fees, consultant fees and expert fees) which arise during or
after the Lease Term as a result of such contamination. This indemnification of
Landlord by Tenant, includes, without limitation, costs incurred in connection
with any investigations of site conditions or any clean-up, remedial, removal or
restoration work required by any federal, state or local governmental agency or
political subdivision because of Hazardous Material present in the soil or
ground water on or under the Property. Without limiting the foregoing, if the
presence of Hazardous Material in the Building or on the Property caused by
Tenant results in any contamination of the Building or the Property, Tenant
shall promptly take all actions at its sole expense as are necessary to return
the Building and the Property to the conditions existing prior to the
introduction of any such Hazardous Material in the Building or the Property,
provided that Landlord's approval of such actions shall first be obtained, which
approval shall not be unreasonably withheld so long as such actions would not
potentially have any material adverse long-term or short-term effect on the
Building or the Property. The foregoing indemnity shall survive the expiration
or earlier termination of this Lease.
8.2 DEFINITION. As used herein, the term "Hazardous Material" means any
hazardous or toxic substance, material or waste, including, but not limited to
those substances, materials and wastes listed in the United States Department of
Transportation Hazardous Materials Table (49 CFR 172.101) or by the
Environmental Protection Agency as hazardous substances (40 CFR Part 261) and
amendments thereto, or such substances, materials and wastes that are or become
regulated under any applicable local, state or federal law.
8.3 INSPECTION. Landlord and its agents shall have the right, but not
the duty, to inspect the Leased Premises at any time to determine whether Tenant
is complying with the terms of this Lease. If Tenant is not in compliance with
this Lease, Landlord shall have the right to immediately enter upon the Leased
Premises to remedy any contamination caused by Tenant's failure to comply,
notwithstanding any other provisions of this Lease. Landlord shall use its best
efforts to minimize interference with Tenant's business but shall not be liable
for interference caused thereby.
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8.4 DEFAULT. Any default under this Article VIII shall be a material
default enabling Landlord to exercise any of the remedies set forth in this
Lease, notwithstanding the notice and cure provision of Paragraph 23.1 (which
shall not be applicable hereto); provided, however, that Landlord shall first
have notified Tenant in writing of Tenant's default under any provision of this
Article VIII and Tenant shall have failed to cure such default within twenty
(20) days after receipt thereof from Landlord (unless, (x) with respect to such
default which cannot in the exercise of reasonable diligence be cured within
twenty (20) days, Tenant, in good faith, after receiving such notice, shall have
commenced and thereafter diligently performed all action necessary to cure such
default or (y) with respect to such default that results in an emergency
condition, Tenant fails to remove such emergency condition immediately).
8.5 LANDLORD WARRANTY. Landlord represents and warrants as of the
Fixturing Date that, (i) to the best of its knowledge and belief, based in part
on that certain report, dated May 22, 1997, prepared by ATC Associates, inc.,
there are no Hazardous Materials located on or under the Property, the Building
or the Leased Premises; and (ii) Landlord has not received notice from any
governmental agency, entity, or other person regarding violations with respect
to any Hazardous Materials or laws or regulations regulating Hazardous
Materials. Landlord shall indemnify Tenant against all reasonable costs actually
incurred by Tenant to comply with applicable laws and regulations relating to
Hazardous Materials, to the extent any Hazardous Materials are located in, on or
under the Property, the Building or the Leased Premises as a result of
Landlord's actions prior to the Fixturing Date or to the extent Landlord causes
or permits Hazardous Materials to be brought on or into the Property, the
Building or the Leased Premises during the Lease Term by persons other than
Tenant, or its agents, employees, contractors, subtenants, invitees or
licensees.
ARTICLE IX. ASSIGNMENT AND SUBLETTING
Tenant shall not assign, transfer or encumber this Lease or any part
hereof and shall not sublet, grant licenses or concessions, nor allow any other
occupant to come in, with or under Tenant, nor shall Tenant permit this Lease or
the leasehold estate hereby created to become vested in or owned by any other
person, firm or corporation by operation of law or otherwise without the prior
written consent of Landlord, which consent shall not be unreasonably withheld,
conditioned or delayed. For purposes of this Article IX, Landlord shall be
deemed to have been reasonable in withholding its consent to a proposed
assignment or sublease if Landlord bases its withholding of consent on such
factors (by way of illustration and not limitation) as the identity and business
reputation of the proposed assignee or subtenant, the relationship of the
proposed assignee or subtenant to the tenant mix in the Building, the type or
nature of the proposed assignee's or subtenant's business, the creditworthiness
of the proposed assignee or subtenant, written objection by another tenant of
the Building to such assignment or subletting, and any agreement or leasing
restrictions with existing tenants or other third parties that prohibit Landlord
from leasing to the proposed assignee or subtenant. If Tenant is a corporation
or limited liability company, then any type of transfer or assignment, whether
by merger, consolidation, liquidation, or otherwise, or any change in the
ownership or power to vote a majority of Tenant's outstanding voting stock shall
constitute a prohibited assignment for the purposes of this Article IX.
Acceptance of rent by Landlord from
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anyone other than Tenant shall not be construed as a waiver by Landlord of the
actions prohibited by this Article IX, nor as a release of Tenant from any
obligation or liability under this Lease. In the event Landlord consents to an
assignment or sublet by Tenant, Tenant shall not be relieved from its
obligations under this Lease.
In lieu of giving any consent to a sublet or an assignment of all the
Leased Premises, Landlord may, at Landlord's option, elect to terminate this
Lease. In the case of a proposed subletting of a portion of the Leased Premises,
Landlord may, at Landlord's option, elect to terminate the Lease with respect to
that portion of the Leased Premises being proposed for subletting. The effective
date of any such termination shall be thirty (30) days after the proposed
effective date of any proposed assignment or subletting. In the event Landlord
within one (1) year of such termination enters into a lease for the portion of
the Leased Premises for which the Lease has been so terminated with the person
or entity to whom Tenant has proposed to assign this Lease or sublease the
subject portion of the Leased Premises, then Landlord shall pay to Tenant fifty
percent (50%) of any subrentals or assignment fees or other rentals attributable
to the terminated portion of the Term in excess of the rental provided in this
Lease with respect to the subject portion of the Leased Premises for such
terminated portion of the Term, after deduction therefrom of Landlord's
out-of-pocket costs of such reletting attributable to such terminated portion of
the Term, including, without limitation, reasonable brokerage commissions and
fees, attorneys' fees, and tenant improvement costs.
The option to consent or not consent to a proposed assignment or
sublease or to terminate this Lease, or this Lease with respect to the subject
space, as the case may be, shall be exercisable by Landlord in writing within a
period of fifteen (15) days after Landlord's receipt of Tenant's written request
for such consent, together with a copy of the proposed sublease or assignment
and such other information as Landlord may reasonably require to evaluate
Tenant's request. Failure to elect to consent, not consent or terminate within
such fifteen (15) day period shall entitle Tenant to send Landlord a notice
advising Landlord that, if Landlord does not elect to consent, not consent or
terminate within three (3) business days after Landlord's receipt of such second
notice, such failure shall be deemed Landlord's consent to the proposed
assignment or sublease.
Fifty percent (50%) of any proceeds in excess of Base Rent and Tenant's
Additional Rent which is received by Tenant pursuant to an assignment of
subletting consented to by Landlord, less reasonable brokerage commissions
actually paid by Tenant, and less other reasonable costs incurred by Tenant in
connection with making the space available for lease, shall be remitted to
Landlord as extra rent within 10 days of receipt by Tenant. For purposes of this
paragraph, all money or value in whatever form received by Tenant from or on
account of any person or entity as consideration for an assignment or subletting
shall be deemed to be proceeds received by Tenant pursuant to an assignment or
subletting.
Notwithstanding anything to the contrary in this Article IX, Tenant
shall have the right to assign this Lease or sublet the Leased Premises without
notice (except as hereinafter provided) to or consent by Landlord to any firm,
person, corporation, partnership, limited liability company, trust or other
entity which controls, is controlled by, or is under common control with Tenant,
Richmont
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Marketing Specialists, Inc., or Richmont Corporation (a "Tenant Affiliate"), or
into which or with which Tenant shall merge or consolidate, or which acquires
all or substantially all of the stock or assets of Tenant, provided (i) the
assignee or transferee's verifiable tangible net worth after any such merger,
consolidation, or asset acquisition shall not be less than Tenant's verifiable
tangible net worth immediately prior to such transaction, (ii) such Tenant
Affiliate or other permitted assignee or transferee must conduct a business in
the Leased Premises consistent with the character of the Building, and (iii)
Tenant gives Landlord written notice of such assignment or subletting not later
than thirty (30) days after the effective date thereof. The terms "control,"
"controlling," and "controlled by," as used in the immediately preceding
sentence, means possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of any firm, person,
corporation, partnership, limited liability, trust or other entity (whether
through the ownership of voting securities, by contract or otherwise). No such
subletting or assignment shall relieve Tenant of its primary liability under
this Lease.
ARTICLE X. CASUALTY OR EMINENT DOMAIN
10.1 DAMAGE TO PROPERTY. If the Leased Premises are made substantially
untenantable by fire or other casualty, Landlord shall engage a registered
architect to provide to both Landlord and Tenant within forty-five (45) days of
the casualty date an estimate of the time needed to restore the Leased Premises
to tenantability, and Landlord shall provide to Tenant such estimate and all
other relevant information in Landlord's possession within five (5) days after
Landlord's receipt thereof. If the time needed to restore the Leased Premises
(including the Tenant Improvements as originally constructed pursuant to Exhibit
D) to tenantability exceeds one hundred fifty (150) days, or if the restoration
would commence during the last twelve (12) months of the Lease Term, then either
Tenant or Landlord may elect to terminate this Lease as of the date of such fire
or other casualty by delivery of notice of termination to the other party within
twenty (20) days after Tenant's receipt of the architect's estimate.
If the Leased Premises are damaged by fire or other casualty but are
not made substantially untenantable, then Landlord shall proceed with reasonable
diligence to repair and restore the Leased Premises (including the Tenant
Improvements as originally constructed pursuant to Exhibit D), other than
leasehold improvements paid for by Tenant, unless such damage occurs during the
last six (6) months of the Lease Term, in which event Landlord or Tenant shall
have the right to terminate this Lease as of the date of such fire or other
casualty by delivery of written notice of termination to the other party within
thirty (30) days after said casualty date.
Notwithstanding anything herein to the contrary, in the event the
holder of any indebtedness secured by a mortgage or deed to secure debt covering
the Leased Premises or Building requires that any insurance proceeds in excess
of $500,000.00 be paid to it, then Landlord shall have the right to terminate
this Lease by delivering written notice of termination to Tenant within thirty
(30) days after such requirement is made by any such holder, whereupon the Lease
shall end on the date of such damage as if the date of such damage were the date
originally fixed in this Lease for the expiration
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of the Term. Notwithstanding the foregoing, Landlord shall not terminate this
Lease unless Landlord also terminates the leases of all Building tenants in
effect at such time, including the lease of Hartford Fire Insurance Company, if
such lease is then in effect.
10.2 RENT ABATEMENT. Commencing with the date of such casualty, the
Base Rent and Additional Rent provided for herein shall abate pro rata to the
extent that, and for so long as, any portion of the Leased Premises are not
reasonably usable by Tenant in the ordinary conduct of its business; provided,
however, that if the casualty if due primarily to the act or neglect of Tenant,
its employees, agents or contractors, such abatement shall be limited to the
amount of rent insurance proceeds available to Landlord on account of abated
rent for the Leased Premises.
10.3 EMINENT DOMAIN. In the event the whole or any substantial part of
the Building or the Leased Premises shall be taken or condemned by any competent
authority for any public or quasi-public use or purpose, this Lease shall
terminate as of the date of the taking of possession by the condemning
authority, and rent shall be apportioned as of said date. In the event less than
a substantial part of the Building or the Leased Premises shall be taken or
condemned for any public or quasi-public use or purpose so as to render the
Leased Premises or any part thereof not reasonably usable by Tenant in the
ordinary conduct of its business, or if any adjacent property or street shall be
condemned or improved in such manner as to require the use of any part of the
Leased Premises or the Building, then at the election of Landlord expressed by
delivery of written notice to Tenant within ninety (90) days after said date of
taking, condemnation or improvement, this Lease shall terminate as of said date
without any payment to Tenant therefor. All income, rent, awards or interest
derived from any such taking or condemnation shall belong to and be the property
of Landlord, and Tenant hereby assigns Tenant's interest, if any, in such award
to Landlord.
Notwithstanding the foregoing, Tenant shall have all rights permitted
under the laws of the State of Texas to appear, claim and prove in proceedings
relative to such taking (i) the value of any fixtures, furnishings, and other
personal property which are taken but which under the terms of this Lease Tenant
is permitted to remove at the end of the Lease Term, (ii) the unamortized cost
(such costs having been amortized on a straight line basis over the lease term
excluding any renewal term) of Tenant's Improvements which are taken that Tenant
is not permitted to remove at the end of the Lease Term and which were installed
solely at Tenant's expense (i.e., not paid for by Landlord or purchased with
Landlord's Allowance for Tenant Improvement Costs), and (iii) relocation and
moving expenses, but not the value of Tenant's leasehold estate created by this
Lease; provided, however, that no such claim will be permitted to the extent it
diminishes the award Landlord receives from the condemning authority. If this
Lease is terminated in accordance with this Paragraph 10.3, the Base Rent and
the Additional Rent shall be apportioned on a per diem basis and shall be
payable through the effective date of the termination.
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ARTICLE XI. INDEMNIFICATION AND INSURANCE
11.1 INDEMNIFICATION. Except as otherwise expressly provided in this
Lease, Landlord shall not in any event be responsible for loss of property from
or for damage to person or property occurring in or about the Leased Premises,
however caused, including but not limited to any damage from steam, gas,
electricity, water, plumbing, rain, snow, leakage, breakage or overflow, whether
originating in the Leased Premises, premises of other tenants, or any part of
the Building whatsoever.
Tenant agrees to indemnify and hold harmless Landlord from and against
all claims of whatever nature arising from any accident, injury or damage to
person or property during the Term of this Lease in or about the Leased Premises
or arising from any accident, injury or damage to personal property occurring
outside the Leased Premises but within the Building or the Property, where such
accident, injury or damage results or is claimed to have resulted from an act,
omission or negligence on the part of Tenant, or on the part of any of its
licensees, agents, invitees, servants or employees. This indemnity agreement
shall include indemnity against all costs, claims, expenses, penalties, liens
and liabilities including attorney's fees incurred in or in connection with any
such claims or proceedings brought thereon and the defense thereof.
Notwithstanding anything in this Paragraph 11.1 to the contrary, Tenant shall
have no obligation to indemnify and hold Landlord harmless from and defend
Landlord against any claim or liability for any injury or death to any person or
damage to any property arising from (i) any acts of gross negligence or
intentional tort committed by Landlord or its agents, employees or contractors;
or (ii) any acts of negligence committed by Landlord or its agents, employees or
contractors, but only to the extent such acts of negligence have been found to
be the acts of Landlord or its agents, employees or contractors and to be the
primary cause of the damage or injury that is the subject of the claim and such
finding is entered as a final, nonappealable judgment against Landlord.
Landlord agrees to indemnify and hold harmless Tenant from and against
all claims of whatever nature arising from any accident, injury or damage to
person or property occurring outside the Leased Premises but within the Building
or the Property where such accident, injury or damage results or is claimed to
have resulted from an act, omission or negligence on the part of Landlord, or on
the part of any agent, employee or contractor of Landlord. This Indemnity
Agreement shall include indemnity against all costs, claims, expenses,
penalties, liens and liabilities including attorneys' fees incurred in or in
connection with any such claims or proceedings brought thereon and the defense
thereof. Notwithstanding anything in this Paragraph 11.1 to the contrary,
Landlord shall have no obligation to indemnify and hold Tenant harmless from and
defend Tenant against any claim or liability for any injury or death to any
person or damage to any property arising from (i) any acts of gross negligence
or intentional tort committed by Tenant or its agents, employees or contractors;
or (ii) any acts of negligence committed by Tenant or its agents, employees or
contractors but only to the extent such acts of negligence have been found to be
the acts of Tenant or its agents, employees or contractors and to be the primary
cause of the damage or injury that is the subject of the claim and such finding
is entered as a final, nonappealable judgment against Tenant.
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11.2 TENANT'S INSURANCE. Tenant will maintain Commercial General
Liability insurance with respect to the Leased Premises naming Landlord as
additional insured, with a combined single limit of $2,000,000 bodily injury and
property damage per occurrence and $2,000,000 aggregate limit applicable to this
location, and Auto Liability insurance with a combined single limit of
$2,000,000. This insurance coverage shall extend to any liability of Tenant
arising out of the indemnities provided for in this Lease. Landlord and
Landlord's mortgagee, if any, shall be named as an additional insured and the
insurance shall be primary to any insurance maintained by Landlord, without
contribution; provided, however, that Tenant shall have no obligation to name
Landlord's mortgagee, if any, as an additional insured unless Landlord requests
such in writing. Tenant shall deliver to Landlord a Certificate of Insurance at
least seven (7) days prior to the commencement of the term of this Lease and a
renewal certificate at least seven (7) days prior to the expiration of the
Certificate it renews. Said Certificate must provide thirty (30) days prior
notice to Landlord in the event of material change or cancellation. Tenant also
agrees to maintain broad form Commercial Property insurance coverage under ISO
form CP1030 or like coverage under a non-ISO form covering all Tenant's personal
property, improvements and betterments to their full replacement value and
Worker's Compensation insurance in accordance with applicable state law and
Employer's Liability insurance with limits of not less than
$100,000/$100,000/$500,000. Tenant agrees that if its use and occupancy of the
Leased Premises cause the property insurer to raise premiums as a result of such
use or occupancy, then Tenant will directly reimburse Landlord for the cost of
such increased premium. Tenant agrees to comply with all reasonable
recommendations from any insurer of the property that result as a direct result
of Tenant's use of the Leased Premises.
11.3 SURVIVAL OF INDEMNITIES. Each indemnity agreement and hold
harmless agreement contained herein shall survive the expiration or termination
of this Lease.
11.4 LANDLORD'S INSURANCE. Landlord shall at all times during the Lease
Term carry the casualty insurance required by the deed of trust or mortgage, if
any, covering the Property, including the Building, and all improvements
constructed therein or elsewhere on the Property (which casualty insurance as of
the effective date of this Lease is builder's risk insurance in an amount at
least equal to the replacement cost of the Building, but not less than the
balance that is owed under the mortgage). Landlord shall at all times during the
term of this Lease maintain commercial general liability insurance as required
by said deed of trust or mortgage, if any. Said casualty and commercial general
liability insurance shall be maintained at the expense of Landlord (subject to
Paragraph 2.3) with an insurance company(ies) licensed to do business in Texas,
which insurer shall be financially sound.
ARTICLE XII. RIGHT OF ENTRY
Landlord reserves the right to use the Building and every part thereof,
and Tenant shall permit access to the Leased Premises to Landlord, Landlord's
property manager or Landlord's agents or attorneys at all reasonable times and
upon reasonable advance notice to Tenant (except in emergencies) for inspection
and cleaning and from time to time to repair as provided in Paragraph 6.1,
maintain, alter, improve and remodel the Building and each part thereof; Tenant
shall not be
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entitled to any compensation, damages or abatement or reduction in rent on
account of any such repairs, maintenance, alterations, improvements or
remodeling. Landlord reserves the right at any time and from time to time to
enter and be upon the Leased Premises for the purpose of examining same.
Landlord shall have the right, at reasonable hours, and upon six (6) hours
advance notice to Tenant, to enter upon the Leased Premises or exhibit the same
to prospective tenants, lenders or insurers. Landlord will cooperate with Tenant
so that any entry into the Leased Premises by Landlord permitted under this
Article XII will not unreasonably interfere with the conduct of Tenant's
business in the Leased Premises, and Tenant will cooperate with Landlord to
accommodate Landlord's need to make repairs, maintenance, alterations,
improvements or remodeling in a timely and cost effective manner. Landlord shall
take commercially reasonable precautions to mitigate the disruption of Tenant's
operations in the Leased Premises resulting from any entry permitted under this
Article XII during Business Hours.
ARTICLE XIII. PROPERTY LEFT ON THE LEASED PREMISES
Upon the expiration of this Lease or if the Leased Premises should be
vacated at any time, or abandoned by Tenant, or this Lease should terminate for
any cause, and at the time of such termination, vacation, abandonment Tenant or
Tenant's agents, or any other person should leave any property of any kind or
character on or in the Leased Premises, the property shall be deemed abandoned.
Landlord, Landlord's property manager or Landlord's agents or attorneys shall
have the right and authority, without notice to Tenant, Tenant's agents, or
anyone else, to remove and destroy or to sell or authorize disposal of such
property, or any part thereof, without being in any way liable to Tenant for the
abandoned property. The abandoned property shall belong to Landlord as
compensation for the removal and disposition of said property.
ARTICLE XIV. SIGNS AND ADVERTISEMENTS
Except as otherwise provided in this Lease or the Exhibits thereto, no
exterior signs, advertisements, posters on windows, decorations or other
fixtures shall be erected by Tenant without the prior written consent of
Landlord. Tenant, at its sole cost and expense, shall be entitled (subject to
Landlord's review and approval) to install appropriate signage, including
Tenants' corporate name and logo, in the elevator lobbies and on entrance doors
to the Leased Premises on all floors occupied entirely by Tenant. Landlord
reserves the right to review and approve the location, color, size,
configuration, materials, workmanship and design of such signage. Upon the
expiration or earlier termination of this Lease, Tenant shall remove all such
signage and shall repair any damage to the Building caused by the installation
or removal of such signage.
ARTICLE XV. NOTICES
Any notice, demand, request, consent, approval or communication under
this Lease shall be in writing and shall be deemed to have been duly given and
received at the time and on the date when personally delivered, or 1 day after
being delivered to a nationally recognized commercial carrier service for
next-day delivery or 3 days after deposit in the United States mail, certified
or registered
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mail with a return receipt requested, with all postage prepaid, addressed to
Landlord or Tenant (as the case may be) at their respective addresses set forth
in the Lease Summary.
ARTICLE XVI. MECHANIC'S LIENS
Tenant and any vendor, contractor or subcontractor performing work on
behalf of Tenant shall keep the Building, the Property, the Leased Premises and
the improvements at all times during the Term of this Lease, free of mechanic's
and materialmen's liens and other liens of like nature. Tenant at all times
shall fully protect and indemnify Landlord against all such liens or claims and
against all attorneys fees and other costs and expenses growing out of or
incurred by reason or on account of any such liens or claims. Should Tenant fail
fully to discharge any such lien or claim, Landlord, in its sole discretion, may
pay the same or any part thereof, and Landlord shall be the sole judge of the
validity of said lien or claim. All amounts so paid by Landlord, together with
interest thereon at the "Prime Rate" (as defined in Paragraph 24.20) plus two
percent (2%) per annum (but not in excess of the maximum lawful rate) from the
time of payment by Landlord until repayment by Tenant, shall be paid by Tenant
upon demand, and if not so paid, shall continue to bear interest at the
aforesaid rate, payable monthly as Additional Rent. Notwithstanding the
foregoing, Tenant shall not have any liability for nor shall Tenant indemnify
Landlord against any such mechanic's or materialmen's liens and other liens of
like nature placed on the Leased Premises, the Property or the Building by
Landlord's Contractor (as hereinafter defined in Exhibit D), or any of
Landlord's Contractor's subcontractors, suppliers, or materialmen, or other
contractors employed by Landlord, arising out of or related in any way to the
Tenant Improvements constructed under Landlord's supervision pursuant to Exhibit
D, to the extent the cost of such Tenant Improvements is to be paid with the
proceeds of Landlord's Allowance for Tenant Improvement Costs (as defined in
Exhibit D). Nothing in the immediately preceding sentence shall relieve Tenant
of any obligation under this Article XVI or elsewhere in this Lease for liens
arising due to Tenant's failure timely to pay Tenant's Costs (as defined in
Exhibit D) as provided in Exhibit D.
ARTICLE XVII. SUBORDINATION; ATTORNMENT; NONDISTURBANCE
17.1 SUBORDINATION. Landlord may, from time to time, grant first lien
deeds of trust, security deeds, mortgages or other first lien security interests
covering its estate in the Building (each a "Mortgage"). Tenant agrees that this
Lease shall be subject and subordinate to each Mortgage, including any
modifications, extensions or renewals thereof and advances thereunder from time
to time in effect. Tenant shall, upon request, from time to time execute and
deliver to Landlord or the holder of any Mortgage any instrument requested by
Landlord or the holder of such Mortgage to evidence the subordination of this
Lease to any such Mortgage, provided, however, that such future lender,
mortgagee, or ground lessor provides to Tenant a commercially reasonable
subordination, non-disturbance, and attornment agreement (Tenant hereby
accepting for such purpose an agreement in the form attached as Exhibit J
hereto). Landlord warrants and represents to Tenant that all existing mortgagees
and ground lessors having an interest in the Building or the Property are
identified on Exhibit K attached hereto.
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<PAGE> 32
17.2 ATTORNMENT. Tenant agrees to recognize and attorn to any party
succeeding to the interest of Landlord as a result of the enforcement of any
Mortgage (including the transferee as the result of a foreclosure or deed in
lieu of foreclosure), and to be bound to such party under all the terms,
covenants and conditions of this Lease for the balance of the Term, including
any extended term, with the same force and effect as if such party were the
original Landlord under this Lease.
17.3 CONFIRMING AGREEMENT. Upon the request of Landlord, Tenant agrees
to execute a subordination and attornment agreement incorporating the provisions
set forth above and otherwise in form reasonably acceptable to Landlord.
Tenant's agreement to subordinate this Lease to any ground lessor or mortgagee
and/or attorn to any party succeeding to the interest of Landlord as provided in
Paragraphs 17.1 and 17.2 above is expressly contingent upon Landlord obtaining
from any such party a commercially reasonable subordination, non-disturbance and
attornment agreement (Tenant hereby accepting for such purpose an agreement in
the form of Exhibit J hereto).
17.4 NONDISTURBANCE. Landlord shall cause any lessor under a future
ground lease or the holder of any present or future Mortgage encumbering the
Building, the Property or both to provide Tenant with an agreement in recordable
form stating that such lessor or holder, as the case may be, will not disturb
Tenant's occupancy of the Leased Premises in the event of a foreclosure of such
Mortgage or a termination of such ground lease, provided there is not a breach
or default by Tenant under this Lease which is not cured within any applicable
cure period. Such agreement must expressly recognize Tenant's right of offset
contained in Paragraph 24.19 of this Lease, recognize Landlord's obligation for
payment of brokerage fees as provided in Paragraph 24.10, and assume Landlord's
obligation to provide Landlord's Allowance for Tenant Improvement Costs due to
Tenant, as provided in Exhibit D. Tenant hereby accepts an agreement in the form
of Exhibit J attached hereto as fully satisfying the requirements of this
Paragraph 17.4.
ARTICLE XVIII. COMPLIANCE WITH LAW
AND RULES AND REGULATIONS
18.1 Tenant, at Tenant's expense, shall comply with all laws, rules,
orders, ordinances, directions, regulations and requirements of federal, state,
county and municipal authorities pertaining to Tenant's use of the Leased
Premises and with the recorded covenants, conditions and restrictions (provided,
however, that Landlord provides a written copy of said covenants, conditions,
and restrictions to Tenant within thirty (30) days after the date of this
Lease), regardless of when they became effective, including, without limitation,
all applicable federal, state and local laws, regulations or ordinance
pertaining to air and water quality, Hazardous Materials (as hereinafter
defined), waste disposal, air emissions and other environmental matters, all
zoning and other land use matters, and utility availability, and any direction
of any public officer or officers, pursuant to law, which shall impose any duty
upon Landlord or Tenant with respect to the use or occupation of the Leased
Premises.
18.2 The rules and regulations attached as Exhibit C ("Rules and
Regulations") are Landlord's Rules and Regulations for the Building. Tenant
shall faithfully observe and comply with
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such Rules and Regulations and such reasonable changes therein (whether by
modification, elimination, addition or waiver) as Landlord may hereafter make
and communicate in writing to Tenant, which shall be necessary or desirable for
the reputation, safety, care or appearance of the Building and the Property or
the preservation of good order therein or the operation or maintenance of the
Building and the Property or the equipment thereof or the comfort of tenants or
others in the Building and the Property. In the event of a conflict between the
provisions of this Lease, the provisions of this Lease shall control.
ARTICLE XIX. LANDLORD'S LIEN
Notwithstanding any of Landlord's statutory or common law
rights, the parties agree that any Landlord's lien and/or security interest in
Tenant's property specifically excludes Tenant's business records. Further,
Landlord agrees to subordinate any liens and/or security interests (including,
but not limited to, the statutory landlord's lien) to any lien securing
financing of Tenant's personal property located in the Leased Premises.
ARTICLE XX. ESTOPPEL CERTIFICATE
Tenant shall from time to time, upon not less than ten (10) days prior
written notice by Landlord, to execute, acknowledge and deliver to Landlord a
statement in writing:
(a) Stating that this Lease is unmodified and in full force
and effect (or if there have been modifications, that the Lease is in
full force and effect as modified and stating the modifications).
(b) Stating the dates to which the rent and other charges
hereunder have been paid by Tenant.
(c) Stating whether or not to the best knowledge of Tenant,
Landlord is not in default in the performance of any covenant,
agreement or condition contained in this Lease, and if so, specifying
any such default of which Tenant may have knowledge.
(d) Stating the address to which notices to Tenant should be
sent pursuant to Article XV of this Lease.
(e) Stating such other matters as Landlord may reasonably
require.
Any such statement delivered pursuant hereto may be relied upon by any
owner of the Building and/or the Leased Premises, any prospective purchaser of
the Building and/or Leased Premises, any mortgagees or prospective mortgagee of
the Building and/or Leased Premises, any prospective assignee of any such
mortgagee, or any prospective purchaser of the Property.
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ARTICLE XXI. HOLDING OVER
Provided Tenant gives Landlord not less than six (6) months advance
notice thereof, Tenant shall be permitted to retain possession of the Leased
Premises after the expiration of the Term of this Lease without any modification
of this Lease or other written agreement between the parties for a period not to
exceed two (2) months after the Expiration Date. Such occupancy shall be
pursuant to all of the terms and conditions of this Lease, except that Tenant
shall pay Base Rent during such period in an amount equal to one hundred
twenty-five percent (125%) of the Base Rent in effect immediately prior to the
expiration of the Term, and except that, after the expiration of such two (2)
month period, the foregoing provisions of this Article XXI shall no longer be
effective. After the expiration of such two (2) month period, Tenant shall
instead be permitted to retain possession of the Leased Premises for an
additional period not to exceed twelve (12) months, under the same terms and
conditions as the initial two (2) month holdover, except that Tenant shall be a
month-to-month tenant (i.e., either Landlord or Tenant may terminate such
tenancy upon not less than thirty (30) days advance written notice), and Tenant
shall pay Base Rent in an amount equal to one hundred seventy-five percent
(175%) of the Base Rent in effect immediately prior to the expiration of the
Term. After the expiration of such twelve (12) month period or earlier
termination of such month-to-month tenancy by Landlord or Tenant, or at any
other time after the expiration or termination of this Lease during which Tenant
remains in occupancy of the Leased Premises without the express right to do so
under this Article XXI, Tenant shall be a tenant-at-sufferance, and (i) until
Tenant relinquishes possession of the Leased Premises, Tenant shall pay rent in
an amount equal to two hundred percent (200%) of the Base Rent in effect
immediately prior to the expiration of the Term, and (ii) Tenant shall pay to
Landlord all direct and consequential damages sustained by reason of Tenant's
retention of possession for lost rentals, leasing fees, advertising costs,
marketing costs, holdover or alternative space rents, tenant finish expense and
relocation costs. There shall be no renewal of this Lease by operation of law.
ARTICLE XXII. TENANT'S STATUS
Tenant represents and warrants to Landlord that:
22.1 POWER AND AUTHORITY. Tenant has the right, power and authority to
execute and deliver this Lease and to perform the provisions hereof and is, to
the extent required, qualified to transact business and in good standing under
the laws of the State of Texas.
22.2 AUTHORIZATION. The execution of this Lease by Tenant, or by the
persons or other entities executing this Lease on behalf of Tenant, and the
performance by Tenant of Tenant's obligations under this Lease in accordance
with the provisions hereof have been, to the extent required, duly authorized by
all necessary action of Tenant.
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ARTICLE XXIII. DEFAULTS AND REMEDIES
23.1 DEFAULT BY TENANT. Tenant shall be in default under this Lease if:
(a) Tenant shall fail to pay when due any Base Rent,
Additional Rent or other payment to be made by Tenant under this Lease
and the failure continues for a period of ten (10) days after notice
from Landlord (provided that Landlord shall only be obligated to give
Tenant notice of any rent default twice in any twelve (12) month
period, and thereafter Tenant shall be deemed in default within ten
(10) days after failure to make such payment without requirement of
notice from Landlord);
(b) Tenant violates or breaches, or fails to fully and
completely observe, keep, satisfy, perform and comply with, any
agreement, term, covenant, condition, requirement, restriction or
provision of this Lease and the violation or breach continues for a
period of twenty (20) days after written notice from Landlord (if the
matter in question is not reasonably susceptible of cure by Tenant
within the twenty-day period, then Tenant shall have such additional
time as may reasonably be necessary, but no more than an additional
seventy (70) days, within which to effect curative action provided that
Tenant institutes the curative action within the twenty-day period and
prosecutes the same diligently to completion);
(c) Tenant becomes insolvent, or makes an assignment for the
benefit of creditors; or any action is brought by Tenant seeking its
dissolution or liquidation of its assets or seeking the appointment of
a trustee, interim trustee, receiver or other custodian for any of its
property.
(d) Tenant commences a voluntary proceeding under the Federal
Bankruptcy Code, or any reorganization or arrangement proceeding is
instituted by Tenant for the settlement, readjustment, composition or
extension of any of its debts upon any terms; or any action or petition
is otherwise brought by Tenant seeking similar relief or alleging that
it is insolvent or unable to pay its debts as they mature; or if any
action is brought against Tenant seeking its dissolution or
liquidations of any of its assets, or seeking the appointment of a
trustee, interim trustee, receiver or other custodian for any of its
property, and any such action is consented to or acquiesced in by
Tenant or is not dismissed within 3 months after the date upon which it
was instituted.
23.2 LANDLORD REMEDIES. Upon the occurrence of a default by Tenant, as
described in Paragraph 23.1 above or elsewhere in this Lease, Landlord shall
have the option to do and perform any one or more of the following, in addition
to, and not in limitation of, any other remedy or right permitted or available
at law or in equity or by this Lease:
(a) Terminate Tenant's right to possession of the Leased
Premises, in which case Tenant shall immediately surrender possession
of the Leased Premises to Landlord. In such event, Landlord shall be
entitled to recover from Tenant all damages incurred by Landlord by
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reason of Tenant's default, including (i) the worth at the time of the
court award of the unpaid Base Rent, Additional Rent and other charges
and additional rentals which had been earned at the time of the
termination; (ii) the worth at the time of the court award of the
amount by which the unpaid Base Rent, Additional Rent and other charges
and additional rentals which would have been earned after termination
until the time of the award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided; (iii) the worth at
the time of the court award of the amount by which the unpaid Base
Rent, Additional Rent and other charges and additional rentals which
would have been paid for the balance of the term after the time of
award exceeds the amount of such rental loss that Tenant proves could
have been reasonably avoided; and (iv) such other amounts as are
necessary to compensate Landlord for the detriment caused by Tenant's
failure to perform its obligations under the Lease, including, but not
limited to, the cost of recovering possession of the Leased Premises,
expenses of reletting, including necessary renovation or alteration of
the Leased Premises, Landlord's reasonable attorneys' fees incurred in
connection therewith, and any real estate commission paid or payable.
As used in subparagraphs (i) and (ii) above, the "worth at the time of
the court award" is computed by allowing interest at the "Prime Rate"
(as defined in Section 24.20) plus two percent (2%) per annum, but not
exceeding the maximum lawful rate. As used in subparagraph (iii) above,
the "worth at the time of the court award" is computed by discounting
such amount at the discount rate of the Federal Reserve Bank situated
nearest to the location of the Building at the time of award plus two
percent (2%).
(b) Maintain Tenant's right to possession, in which case this
Lease shall continue in effect whether or not Tenant shall have
abandoned the Leased Premises. In such event, Landlord shall be
entitled to enforce all of Landlord's rights and remedies under this
Lease, including the right to recover the rent as it becomes due
hereunder.
(c) Terminate this Lease. No such termination of this Lease
shall affect Landlord's rights to collect Base Rent, Additional Rent or
other amounts and additional rentals due for the period prior to
termination. In the event of any termination of this Lease, in addition
to any other remedies set forth above, Landlord shall have the right to
recover from Tenant upon such termination damages in an amount
determined as provided in Paragraph 23.2(a) above.
(d) Pursue any other remedy now or hereafter available to
Landlord under the laws or judicial decisions of the State of Texas.
Landlord's exercise of any right or remedy shall not prevent it from
exercising any other right or remedy. No action taken by or on behalf
of Landlord under this section shall be construed to be an acceptance
of a surrender of this Lease.
(e) For avoidance of doubt, and notwithstanding anything to
the contrary herein, Tenant's liability in connection with any
reletting of the Leased Premises upon the default by Tenant shall not
be increased as a result of reletting costs appropriately allocated and
attributed to any part of a lease term under such reletting that
extends beyond the term of this Lease, as extended (assuming this Lease
were not terminated prior to its scheduled expiration
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date, as extended) (the "Tail Period"). By way of example, Tenant shall
have no liability for any of the following costs to the extent
appropriately allocated and attributed to any such Tail Period: (i)
brokerage fees associated with reletting of the Leased Premises, (ii)
costs of renovation or alterations in the Leased Premises, or (iii) of
Landlord's attorneys' fees.
(f) For avoidance of doubt, Landlord has a duty to mitigate
damages under this Lease when Tenant is in default and either (i)
Tenant has abandoned the Leased Premises, (ii) Tenant has vacated the
Leased Premises or (iii) Tenant's right to possession of the Leased
Premises has been terminated by Landlord in accordance with this Lease.
Landlord and Tenant acknowledge and agree that Landlord shall have
taken "objectively reasonable efforts" to mitigate damages if Landlord
has done the following:
(A) Place the Leased Premises in Landlord's inventory
of available space within forty-five (45) days after Tenant no
longer occupies the Leased Premises following such default
(and the expiration of the applicable notice and cure
periods);
(B) Market Landlord's available inventory (including,
without limitation, the Leased Premises) to area brokers
within forty-five (45) days after Tenant no longer occupies
the Leased Premises following such default (and the expiration
of the applicable notice and cure periods), provided, however,
that Landlord shall be under no obligation to give the Leased
Premises preferential marketing over other available inventory
in the Building;
(C) After (A) and (B) above have been complied with,
advertise the space for lease in a suitable trade journal or
newspaper at least once per month (it being agreed that an
advertisement respecting the availability of space generally
in the Building, without specific reference to the Leased
Premises, will satisfy this requirement); and
(D) After (A) and (B) above have been complied with,
show the space to prospective tenants who request to see it.
23.3 REMEDIES CUMULATIVE. The foregoing remedies are cumulative of, and
in addition to, and not restrictive or in lieu of, the other remedies provided
for herein or allowed by law or in equity, and may be exercised separately or
concurrently, or in any combination, and pursuit of any one or more of such
remedies shall not constitute an election of remedies which shall exclude any
other remedy available to Landlord.
23.4 MISCELLANEOUS. No agreement to accept a surrender of the Leased
Premises and no act or omission by Landlord or Landlord's agents during the Term
shall constitute an acceptance or surrender of the Leased Premises or a
termination of this Lease unless made in writing and signed by Landlord. No
re-entry or taking possession of the Leased Premises by Landlord shall
constitute an election by Landlord to terminate this Lease unless a written
notice of such intention is given to
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Tenant. Landlord's forbearance in pursuing or exercising one or more of its
remedies shall not be deemed or construed to constitute a waiver of any default
or any remedy, and no waiver by Landlord of any right or remedy on one occasion
shall be construed as a waiver of that right or remedy on any subsequent
occasion or as a waiver of any right or remedy then or thereafter existing. No
failure of Landlord to pursue or exercise any of its rights or remedies or to
insist upon strict compliance by Tenant with any term or provision of this
Lease, and no custom or practice at variance with the terms of this Lease, shall
constitute a waiver by Landlord of the right to demand strict compliance with
the terms and provisions of this Lease.
23.5 ATTORNEY'S FEES. In the event of any legal action or proceeding
brought by either party against the other arising out of this Lease, or breach
thereof, the prevailing party shall be entitled to recover reasonable attorneys'
fees and costs incurred in such action (including, without limitation, all costs
of appeal) and such amount shall be included in any judgment rendered in such
proceeding.
23.6 LANDLORD'S DEFAULT. Landlord shall be in default under this Lease
if Landlord breaches any warranty, or any covenant, duty, or obligation required
to be performed by Landlord under this Lease, and the breach continues for a
period of twenty (20) days after notice from Tenant (if the matter in question
is not reasonably susceptible of cure by Landlord within the twenty-day period,
then Landlord shall have such additional time as may reasonably be necessary,
but no more than an additional seventy (70) days, within which to effect
curative action provided that Landlord institutes the curative action within the
twenty-day period and prosecutes the same diligently to completion).
23.7 TENANT'S REMEDIES. Upon the occurrence of a default by Landlord,
as described in Paragraph 23.6 above or elsewhere in this Lease, and provided
such default results in an unsafe condition in the Leased Premises or the
Building posing an imminent threat of, or which in fact causes material harm to,
Tenant, Tenant's leasehold interest in and current and continued use and
occupancy of the Leased Premises, or Tenant's employees or property, Tenant
shall have the option, in addition to, and not in limitation of, any other
remedy or right permitted or available at law or in equity or by this Lease to
cure such default on behalf and at the reasonable expense of Landlord and do all
reasonably necessary work and make all reasonably necessary payments in
connection therewith; provided that Tenant shall not exercise such right to cure
until Tenant has provided Landlord, and any mortgagee described in Article XVII
above, ten (10) business days' written notice of Tenant's intent to cure such
performance or breach, together with a written estimate prepared by an
independent architect, engineer or contractor (or other similar professional) of
the cost of the appropriate curative action. If Landlord or its mortgagee
commences curative action within such ten (10) business day period, Tenant shall
not take any action so long as Landlord or its mortgagee is diligently
prosecuting such action to completion. Landlord shall reimburse Tenant for all
reasonable sums expended by Tenant in effecting such cure, including attorneys'
fees and expenses, but in no event greater than the estimate submitted by Tenant
to Landlord as provided above, within thirty (30) days of Tenant's written
demand to Landlord for payment (such demand accompanied by supporting invoices
and other documentation evidencing payment of such costs by Tenant), together
with interest
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thereon from the date until the date paid at the Prime Rate. In no event shall
any mortgagee of Landlord have any obligation to cure any default of Landlord,
except as may otherwise be expressly provided in any agreement between Tenant
and such mortgagee pursuant to Article XVII hereof.
ARTICLE XXIV. MISCELLANEOUS
24.1 NO PARTNERSHIP. Nothing contained in this Lease shall be deemed or
construed to create a partnership or joint venture of or between Landlord and
Tenant, or to create any other relationship between the parties hereto other
than that of Landlord and Tenant.
24.2 NO REPRESENTATIONS BY LANDLORD. Neither Landlord, Landlord's
property manager, nor any agent or employee of Landlord has made any
representations or promises with respect to Leased Premises, Building or the
Property except as set forth in this Lease, and no rights, privileges, easements
or licenses are acquired by Tenant except as herein expressly set forth.
24.3 ABANDONMENT. If Tenant shall abandon, vacate, or surrender the
Leased Premises or be dispossessed by process of law, then Landlord may, at its
option (without obligation), either (i) terminate this Lease and cause
possession of the Leased Premises to be returned to Landlord upon demand, or
(ii) terminate this Lease from time to time as to a portion or portions of the
Leased Premises and cause possession of such portion or portions of the Leased
Premises to be returned to Landlord upon demand, without terminating the Lease
as to the balance of the Leased Premises; in the event Landlord terminates this
Lease with respect to a portion of the Leased Premises in accordance with the
foregoing, Landlord shall be responsible for the construction of the demising
wall separating such space from the remainder of the Leased Premises, and
following any termination of this Lease as to a portion or portions of the
Leased Premises, Tenant shall have no further obligation to pay Base Rent or
future Additional Rent (other than Additional Rent attributable to any period
prior to such termination) with respect to such portion or portions of the
Leased Premises, but Tenant shall continue to be liable for all of its
obligations under this Lease with respect to such portion or portions of the
Leased Premises accruing prior to such termination and with respect to all
obligations under this Lease relating to those portions of the Leased Premises
for which this Lease has not been terminated. Landlord's remedies as set forth
in this Paragraph 24.3 shall be Landlord's sole and exclusive remedies at law or
in equity in the event that Tenant abandons, vacates or surrenders the Leased
Premises or is dispossessed by process of law and is not in default under this
Lease.
24.4 SEVERABILITY OF PROVISIONS. If any clause or provision of this
Lease shall be determined to be illegal, invalid or unenforceable under the
present or future laws effective during the term hereof, then and in that event
it is the intention of the parties that the remainder of this Lease shall not be
affected by the invalid clause and shall be enforceable to the fullest extent of
the law, and it is also the intention of the parties to this Lease that in place
of any such clause or provision that is illegal, invalid, or unenforceable there
be added as a part of his Lease a clause or provision as similar in terms to
such illegal, invalid or unenforceable clause or provision as may be possible
and be legal, valid and enforceable.
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24.5 INTERIOR CONSTRUCTION. The construction of Tenant's space,
including any Tenant finish or improvements, shall be completed pursuant to
Exhibit D attached hereto.
24.6 RELOCATION OF LEASED PREMISES. [Intentionally Deleted.]
24.7 BENEFITS AND BURDENS. The provisions of this Lease shall be
binding upon, and shall inure to the benefit of, the parties hereto and each of
their respective representatives, permitted successors and permitted assigns.
Landlord shall have the right, at any time and from time to time, to freely and
fully assign all or any part of its interest under this Lease for any purpose
whatsoever.
24.8 WAIVER OF SUBROGATION. NOTWITHSTANDING ANYTHING CONTAINED IN THIS
LEASE TO THE CONTRARY, LANDLORD AND TENANT HEREBY WAIVE AND RELEASE THEIR
RESPECTIVE RIGHTS OF RECOVERY TO AND SUBROGATION AGAINST THE OTHER FOR ANY
DIRECT OR CONSEQUENTIAL DAMAGE DUE TO ANY INJURY OR LOSS TO THE BUILDING, THE
LEASED PREMISES, OR ANY IMPROVEMENTS (INCLUDING THE TENANT IMPROVEMENTS)
THERETO, OR ANY PERSONAL PROPERTY OF SUCH PARTY THEREIN OR UNDER THE OTHER'S
CONTROL DUE TO FIRE OR OTHER CASUALTY (INCLUDING LIABILITY FOR LOSS OF RENT)
COVERED UNDER A POLICY OR POLICIES OF INSURANCE MAINTAINED BY THE DAMAGED PARTY
(OR WOULD BE COVERED, IF MAINTAINED, BY POLICIES WHICH ARE REQUIRED HEREUNDER OR
WHICH WOULD BE REQUIRED BUT FOR ANY SPECIFIC PROVISIONS FOR SELF-INSURANCE OR
FOR A DEDUCTIBLE), WHETHER OR NOT SUCH DAMAGE IS ATTRIBUTABLE TO THE NEGLIGENCE,
GROSS NEGLIGENCE, OR ACT OF EITHER PARTY OR ITS RESPECTIVE EMPLOYEES, AGENTS,
CONTRACTORS, INVITEES OR LICENSEES. EACH PARTY HERETO AGREES TO ADVISE ITS
INSURERS OF THE FOREGOING WAIVERS, TO HAVE SAID INSURANCE POLICIES PROPERLY
ENDORSED, IF NECESSARY, TO PREVENT INVALIDATION OF SAID INSURANCE COVERAGE BY
REASON OF SUCH WAIVERS, AND TO PROVIDE A COPY OF SUCH WAIVERS TO THE OTHER
PARTY.
24.9 LANDLORD'S LIABILITY. The obligations of Landlord under this Lease
do not constitute personal obligations of Landlord or the individual partners,
joint venturers, directors, officers, members, shareholders or beneficial owners
of Landlord, and Tenant shall look solely to Landlord's equity in the Leased
Premises and to no other assets of Landlord for satisfaction of any liability in
respect to this Lease. Tenant will not seek recourse against Landlord or such
individual entities or such other assets for such satisfaction. As used in this
Lease, the term "Landlord" means only the current owner or owners of the fee
title to the Leased Premises or the leasehold estate under a ground lease of the
Leased Premises at the time in question. Any Landlord who transfers its title or
interest is relieved of all liability with respect to the obligations of
Landlord under this Lease to be performed on or after the date of transfer.
24.10 BROKERAGE. This Lease has been negotiated through the agency of,
and Tenant warrants and represents to Landlord that no other broker was involved
with the leasing of the Leased Premises or the negotiation of this Lease, or is
entitled to any commission, except for, Tenant's Broker (as identified in the
Basic Lease Information). Landlord shall compensate Tenant's Broker for its
services in connection herewith pursuant to a separate commission agreement
between Landlord and Tenant's Broker. Tenant agrees to indemnify and hold
Landlord harmless against any other
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claims (including court costs and attorneys' fees) for commissions by any broker
other than Tenant's Broker.
24.11 RECORDING. Tenant shall not record this Lease without Landlord's
prior written consent, and such recordation shall, at the option of Landlord,
constitute a non-curable default of Tenant hereunder. Tenant shall upon request
of Landlord execute, acknowledge and deliver to Landlord a short-form memorandum
of this Lease for recording purposes.
24.12 GOVERNMENTAL SURCHARGE. Tenant agrees to pay as Additional Rent
upon demand, Tenant's Share of any parking charges, regulatory fees, utility
surcharges, or any other costs levied, assessed or imposed by, or at the
direction of, or resulting from statutes or regulations, or interpretations
thereof, promulgated by any federal, state, municipal or local government
authority in connection with the use or occupancy of the Leased Premises or the
parking facilities serving the Leased Premises.
24.13 SPECIAL PROVISIONS. Special provisions of this Lease are attached
hereto as Exhibit E and by this reference made a part thereof.
24.14 ENTIRE AGREEMENT. It is understood that there are no oral
agreements between the parties hereto affecting this Lease, and this Lease
supersedes and cancels any and all previous negotiations, arrangements,
brochures, agreements and understandings, if any, between the parties hereto or
displayed by Landlord to Tenant with respect to the subject matter thereof, and
none thereof shall be used to interpret or construe this Lease.
24.15 FORCE MAJEURE. Whenever a period of time is herein prescribed for
action to be taken by Landlord or Tenant, the party taking the action shall not
be liable or responsible for, and there shall be excluded from the computation
for any such period of time, any delays due to strikes, riots, acts of God,
shortages of labor or materials, war, governmental laws, regulations or
restrictions or any other causes of any kind whatsoever which are beyond the
reasonable control of such party; provided, however, in no event shall the
foregoing apply to the financial obligations of either Landlord or Tenant to the
other under this Lease, including Tenant's obligation to pay Base Rent,
Additional Rent or any other amount payable to Landlord hereunder.
24.16 QUIET ENJOYMENT. Landlord covenants and agrees that so long as
Tenant has committed no default under this Lease, Tenant's peaceful and quiet
possession of the Leased Premises during the Lease Term shall not be disturbed
by Landlord or by anyone claiming through or under Landlord, subject to the
terms of this Lease and to any mortgages, ground or underlying leases,
agreements and encumbrances to which this Lease is or may be subordinated.
24.17 CHOICE OF LAW.
(a) The laws of the State of Texas shall govern the validity,
performance and enforcement of this Lease, without regard to the
principles of conflicts of laws. Each party
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submits to the jurisdiction of any court of the State of Texas sitting
in Dallas County, Texas, or any United States federal court sitting in
Dallas County, Texas, for the purposes of any legal proceeding arising
out of this Lease, or the breach thereof, and agrees that service of
any process, summons, notice, or document by United States certified
mail or other available means of delivery to the address set forth
herein will be effective service of process for any legal proceeding
brought against such party in any such court. Each party waives any
objection to venue of any legal proceeding arising out of this Lease,
or the breach thereof, or any transaction contemplated hereby, which is
brought in the courts of the State of Texas sitting in Dallas County,
Texas, and waives and agrees not to plead or claim in any such court
that any such legal proceeding brought in any such court has been
brought in an inconvenient forum.
(b) Except as hereinafter provided, the parties hereto agree
to negotiate in good faith in an effort to resolve any dispute related
to or arising out of this Lease or the breach thereof that may arise
between the parties. If such dispute cannot be resolved by negotiation,
the parties agree to submit the dispute to mediation before resorting
to litigation. If the need for mediation arises, a mutually acceptable
mediator shall be chosen by the parties to the dispute who shall share
the cost of mediation services equally. Notwithstanding the foregoing,
the provisions of this Paragraph 24.17(b) shall not apply to disputes
relating to nonpayment of Base Rent or Additional Rent.
24.18 CONSENT. Except as otherwise expressly provided in this Lease,
any and all consents or approvals required to be obtained from either Tenant or
Landlord under this Lease shall not be unreasonably withheld, conditioned or
delayed.
24.19 RIGHT OF OFFSET. If all or any portion of Landlord's Allowance
for Tenant Improvement Costs due to Tenant remains unpaid after Tenant becomes
entitled to the payment thereof, or if any commission due Tenant's Broker is not
paid as and when due pursuant to the separate commission agreement between
Landlord and Tenant's Broker, then Tenant shall be entitled to offset the unpaid
and due amounts, together with interest thereon at the Prime Rate (as defined in
Paragraph 24.20) plus two percent (2%) per annum, but not exceeding the maximum
lawful rate, against Base Rent and Additional Rent becoming due under this
Lease. Notwithstanding the foregoing, Tenant shall not be entitled to offset any
amounts due Tenant's Broker unless and until Tenant has (i) given Landlord
notice of such payment obligation and not less than fifteen (15) days thereafter
to make the delinquent payment, (ii) paid the amount due to Tenant's Broker, and
(iii) provided Landlord with notice of such payment.
24.20 PRIME RATE. The term "Prime Rate" shall mean the rate of interest
announced from time to time by Citibank, N.A., or its direct or remote
successor, as its prime rate of interest. An increase or decrease in the Prime
Rate shall result in a corresponding increase or decrease in the rate of
interest being charged hereunder and shall take effect on the day the increase
or decrease in the Prime Rate is made effective. If Citibank, N.A., or its
direct or remote successor, shall abandon or abolish the practice of publishing
the Prime Rate, or should the same become unascertainable,
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Landlord shall designate a comparable reference rate which shall then be deemed
to be the Prime Rate under this Lease.
24.21 EXHIBITS. The Lease and the exhibits and addendum, if any,
specified in this Lease are attached to this Lease and by this reference made a
part hereof.
24.22 TIME OF ESSENCE. Subject to the provisions of Paragraph 24.15,
time is of the essence of this Lease.
[SIGNATURES BEGIN ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, these presents have been executed on the respective
dates indicated below, effective, however, as of this day and year first above
written.
LANDLORD:
BSDAL I LIMITED PARTNERSHIP, a
Georgia limited partnership
By: Barry & Company, Inc., a Georgia
corporation, its sole general partner
By: /s/ HAROLD V. BARRY
---------------------------------
Harold V. Barry, President
Date: April 27, 1998
TENANT:
MARKETING SPECIALISTS SALES
COMPANY
By: /s/ TIMOTHY M. BYRD
----------------------------------------
Title: Chief Financial Officer
Date: April 27, 1998
[SIGNATURE PAGE TO OFFICE LEASE]
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EXHIBIT 10.12
FIRST AMENDMENT TO OFFICE LEASE
THIS FIRST AMENDMENT TO OFFICE LEASE (hereinafter referred to as this
"First Amendment") is entered into this 26th day of June, 1998, by and between
BSDAL I LIMITED PARTNERSHIP, a Georgia limited partnership (hereinafter referred
to as "Landlord"), and MARKETING SPECIALISTS SALES COMPANY, a Texas corporation
(hereinafter referred to as "Tenant").
W I T N E S S E T H:
WHEREAS, Landlord and Tenant entered into that certain Office Lease,
dated April 27, 1998 (hereinafter referred to as the "Lease"), pursuant to which
Tenant leased certain premises containing 32,756 square feet of Rentable Area
known as Suite 200 on the 2nd floor of the building presently known as "17855
Briargrove Place" situated at the northwest corner of Briargrove Lane and the
North Dallas Tollway, Dallas, Texas (hereinafter referred to as the "Building"),
which premises are more particularly described in the Lease (hereinafter
referred to as the "Original Premises"); and
WHEREAS, the parties desire to amend the Lease to expand the Leased
Premises pursuant to Special Stipulation No. 2 of the Lease and to provide for
such other related matters as are hereinafter set forth;
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant
hereby agree to amend the Lease as follows:
1. Defined Terms. Capitalized terms used herein, unless otherwise
defined herein, shall have the same meanings as given such terms in the Lease.
2. Leased Premises Expansion. Effective on the Commencement Date, the
Leased Premises shall be deemed expanded to include that certain additional
space, comprising 14,589 square feet of Rentable Area and 12,686 square feet of
Usable Area (determined in accordance with Paragraph 1.1(b) of the Lease),
located on the first (1st) floor of the Building and being more particularly
shown on Exhibit A-1, attached hereto and incorporated herein by this reference
(hereinafter referred to as the "First Amendment Expansion Area"). On and after
the Commencement Date, the total Leased Premises shall comprise 47,345 square
feet of Rentable Area and 42,464 square feet of Usable Area (determined in
accordance with Paragraph 1.1(b) of the Lease) and shall include both the
Original Premises and the First Amendment Expansion Area. The First Amendment
Expansion Area shall be leased by Tenant subject to and in accordance with all
of the terms and
<PAGE> 2
conditions of the Lease, as modified hereby, but subject to the provisions of
subparagraphs d.(ii) and (iii) of Special Stipulation No. 2 of Exhibit E to the
Lease.
3. Base Rent. From and after the Commencement Date, Base Rent for the
entire Leased Premises during the Term shall be EIGHTY-SIX THOUSAND SEVEN
HUNDRED NINETY-NINE and 17/100 DOLLARS ($86,799.17) per month, ONE MILLION
FORTY-ONE THOUSAND FIVE HUNDRED NINETY and No/00 DOLLARS ($1,041,590.00.00) per
year, payable in accordance with Paragraph 2.2 of the Lease.
4. Rental Adjustment. Tenant's Share, as defined in the Lease Summary,
shall be amended to provide that Tenant's Share from and after the Commencement
Date shall be thirty-eight and 07/100ths percent (38.07%).
5. Landlord's Allowance. Landlord's Allowance for Tenant Improvement
Costs shall be amended to provide that the total amount of such Landlord's
Allowance shall not exceed NINE HUNDRED FORTY-SIX THOUSAND NINE HUNDRED and
No/100 DOLLARS ($946,900.00).
6. Letter of Credit. Special Stipulation No. 9 of Exhibit E to the
Lease is hereby amended by deleting from the 5th and 6th lines of subparagraph
a. thereof the words, numbers and symbols "EIGHT HUNDRED THIRTY-ONE THOUSAND AND
00/100 DOLLARS ($831,000.00)", and by inserting, in lieu thereof, the words,
numbers and symbols "ONE MILLION TWO HUNDRED ONE THOUSAND ONE HUNDRED FOURTEEN
and No/100 DOLLARS ($1,201,114.00)".
Special Stipulation No. 9 of Exhibit E to the Lease is hereby further
amended by deleting from the 4th and 19th lines of subparagraph i. thereof the
numbers and symbols "$831,000.00", and by inserting, in lieu thereof, the
numbers and symbols "$1,201,114.00".
Special Stipulation No. 9 of Exhibit E to the Lease is hereby further
amended by deleting from the 8th line of subparagraph i. thereof the numbers and
symbols "$17,510.37", and by inserting, in lieu thereof, the numbers and symbols
"$25,520.12".
The Lease is hereby further amended by deleting Exhibit E-3 thereto and
by inserting in replacement thereof the amortization schedule attached as
Exhibit E-3 hereto, and incorporated herein by this reference.
7. Delivery of Original Premises. Landlord and Tenant hereby
acknowledge the continuing effectiveness of the provisions of subparagraphs
d.(ii) and (iii) of Special Stipulation No.
2 of Exhibit E to the Lease.
8. Lease Summary. As a result of the expansion of the Leased Premises
and the adjustment in Base Rental, Tenant's Share and Landlord's Allowance for
the Tenant Improvement
- 2 -
<PAGE> 3
Costs, the Lease Summary, as originally attached to the Lease, is hereby deleted
and Exhibit B-1 attached hereto is hereby inserted in lieu thereof.
9. Brokerage. This Lease has been negotiated through the agency of, and
Tenant warrants and represents to Landlord that no other broker was involved
with the leasing of the Leased Premises or the negotiation of this Lease, or is
entitled to any commission, except for, Tenant's Broker (as identified in the
Lease Summary). Landlord shall compensate Tenant's Broker for its services in
connection herewith pursuant to a separate commission agreement between Landlord
and Tenant's Broker. Tenant agrees to indemnify and hold Landlord harmless
against any other claims (including court costs and attorneys' fees) for
commissions by any broker other than Tenant's Broker.
10. No Further Amendment; Ratification. Except as expressly amended
herein, all terms and conditions of the Lease remain unamended in full force and
effect and are hereby ratified and confirmed by Landlord and Tenant. In the
event of any conflict between the terms and conditions of the Lease and the
terms and conditions of this First Amendment, the terms and conditions of this
First Amendment shall control.
IN WITNESS WHEREOF, the parties have executed this First Amendment with
intent to be bound hereby on the date and year first above set forth.
LANDLORD:
BSDAL I LIMITED PARTNERSHIP, a Georgia
limited partnership
By: BARRY & COMPANY, INC., a Georgia
corporation, its sole general partner
By: /s/ HAROLD V. BARRY
----------------------------------
Harold V. Barry
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
- 3 -
<PAGE> 4
TENANT:
MARKETING SPECIALISTS SALES
COMPANY, a Texas corporation
By: /s/ M. BRIAN HEALY
-----------------------------------
Title: Executive Vice President
Chief Financial Officer
Date:
[CORPORATE SEAL]
[CONSENT ON FOLLOWING PAGE]
- 4 -
<PAGE> 5
CONSENT
The undersigned hereby acknowledges and consents to the within and
foregoing First Amendment to Office Lease.
GUARANTY FEDERAL BANK, F.S.B., a federal
savings bank
By: /s/ TOM ETHREDGE
----------------------------
Name: Tom Ethredge
Title: Vice President
- 5 -
<PAGE> 6
EXHIBIT B-1
LEASE SUMMARY
<TABLE>
<S> <C>
LEASE DATE: April 27 1998 (amended June __, 1998)
LANDLORD: BSDAL I LIMITED PARTNERSHIP, a Georgia limited partnership
TENANT: MARKETING SPECIALISTS SALES COMPANY, a Texas corporation
SUITE NUMBER: 200
LEASED PREMISES AND
FLOOR(S): 47,345 square feet of Rentable Area located on the 1st and 2nd floors
</TABLE>
<TABLE>
<CAPTION>
AREA OF THE LEASED PREMISES: FLOOR(S) USABLE AREA RENTABLE AREA
<S> <C> <C> <C>
1st 12,686 14,589
2nd 29,778 32,756
TOTAL 42,464 47,345
====== ======
</TABLE>
RENTABLE AREA OF THE BUILDING: 124,358 square feet of Rentable Area
TENANT'S SHARE: 38.07%
LEASE TERM: Five (5) Years
COMMENCEMENT DATE: October 1, 1998
EXPIRATION DATE: September 30, 2003
BASE RENT:
<TABLE>
<CAPTION>
Portion Annual Base Annual Base Monthly Base
of Lease Term Rental/RSF Rental Rental
<S> <C> <C> <C>
Months 1-60: $22.00 $1,041,590.00 $86,799.17
</TABLE>
B-1
<PAGE> 7
<TABLE>
<S> <C>
ROOF RENT
[EXHIBIT E, PARAGRAPH 7]: $150.00/month
SECURITY DEPOSIT: $0
TENANT'S BROKER AND THE STAUBACH COMPANY
ADDRESS FOR Southwest Corporate Services
NOTICES: 6750 LBJ Freeway, Suite 110
Dallas, Texas 75240
TENANT'S ADDRESS FOR Prior to Commencement Date:
NOTICES: MARKETING SPECIALISTS SALES COMPANY
16251 Dallas Parkway
Dallas, Texas 75248
Attn: Mr. Brad Moore
with a copy to: RICHMONT
16251 Dallas Parkway
Dallas, Texas 75248
Attn: Alan W. Tompkins, Esq., Associate General Counsel
Commencement Date and thereafter:
MARKETING SPECIALISTS SALES COMPANY
16251 Dallas Parkway
Dallas, Texas 75248
Attn: Mr. Brad Moore
with a copy to: RICHMONT
16251 Dallas Parkway
Dallas, Texas 75248
Attn: Alan W. Tompkins, Esq., Associate General Counsel
LANDLORD'S ADDRESS FOR BSDAL I LIMITED PARTNERSHIP
NOTICES: 50 Glenlake Parkway, Suite 520
Atlanta, Georgia 30328
Attn: Mr. Jimmy Barry
with a copy to: Parker, Hudson, Rainer & Dobbs LLP
285 Peachtree Center Avenue
1500 Marquis Two Office Tower
Atlanta, Georgia 30303
Attn: Kenneth H. Kraft, Esq.
PARKING SPACES: Four (4) spaces for each 1,000 square feet of Usable Area of the Leased Premises
LANDLORD'S ALLOWANCE: $20.00 per square foot of Rentable Area of Leased Premises, for total Landlord's
[EXHIBIT D] Allowance of $946,900.00.
</TABLE>
B-2
<PAGE> 1
EXHIBIT 10.13
SECOND AMENDMENT TO OFFICE LEASE
THIS SECOND AMENDMENT TO OFFICE LEASE (hereinafter referred to as this
"Second Amendment") is entered into this 24th day of July, 1998, by and between
BSDAL I LIMITED PARTNERSHIP, a Georgia limited partnership (hereinafter referred
to as "Landlord"), and MARKETING SPECIALISTS SALES COMPANY, a Texas corporation
(hereinafter referred to as "Tenant").
W I T N E S S E T H:
WHEREAS, Landlord and Tenant entered into that certain Office Lease,
dated April 27, 1998 (hereinafter referred to as the "Office Lease"), as amended
by that certain First Amendment to Office Lease, dated June 26, 1998
(hereinafter referred to as the "First Amendment"; the Office Lease and First
Amendment are hereinafter referred to collectively as the "Lease"), pursuant to
which Tenant leased certain premises containing 47,345 square feet of Rentable
Area known as Suite 200 on the 1st and 2nd floors of the building presently
known as "17855 Briargrove Place" situated at the northwest corner of Briargrove
Lane and the North Dallas Tollway, Dallas, Texas (hereinafter referred to as the
"Building"), which premises are more particularly described in the Lease
(hereinafter referred to as the "Original Premises"); and
WHEREAS, the parties desire to amend the Lease to expand the Leased
Premises pursuant to Special Stipulation No. 3 of the Lease and to provide for
such other related matters as are hereinafter set forth;
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant
hereby agree to amend the Lease as follows:
1. Defined Terms. Capitalized terms used herein, unless otherwise
defined herein, shall have the same meanings as given such terms in the Lease.
2. Leased Premises Expansion. Effective on the Commencement Date, the
Leased Premises shall be deemed expanded to include that certain additional
space, comprising 8,924 square feet of Rentable Area and 7,760 square feet of
Usable Area (determined in accordance with Paragraph 1.1(b) of the Lease),
located on the third (3rd) floor of the Building and being more particularly
shown on Exhibit A-2, attached hereto and incorporated herein by this reference
(hereinafter referred to as the "Second Amendment Expansion Area"). On and after
the Commencement Date, the total Leased Premises shall comprise 56,269 square
feet of Rentable Area and 50,224 square feet of Usable Area (determined in
accordance with Paragraph 1.1(b) of the Lease)
<PAGE> 2
and shall include both the Original Premises and the Second Amendment Expansion
Area. The Second Amendment Expansion Area shall be leased by Tenant subject to
and in accordance with all of the terms and conditions of the Lease, as modified
hereby, but subject to the provisions of subparagraphs d.(ii) and (iii) of
Special Stipulation No. 3 of Exhibit E to the Lease.
3. Base Rent. From and after the Commencement Date, Base Rent for the
entire Leased Premises during the Term shall be ONE HUNDRED THREE THOUSAND ONE
HUNDRED FIFTY-NINE and 83/100 DOLLARS ($103,159.83) per month, ONE MILLION TWO
HUNDRED THIRTY-SEVEN THOUSAND NINE HUNDRED EIGHTEEN and NO/00 DOLLARS
($1,237,918.00) per year, payable in accordance with Paragraph 2.2 of the Lease.
4. Rental Adjustment. Tenant's Share, as defined in the Lease Summary,
shall be amended to provide that Tenant's Share from and after the Commencement
Date shall be FORTY-FIVE and 25/100ths percent (45.25%).
5. Landlord's Allowance. Landlord's Allowance for Tenant Improvement
Costs shall be amended to provide that the total amount of such Landlord's
Allowance shall not exceed ONE MILLION ONE HUNDRED TWENTY-FIVE THOUSAND THREE
HUNDRED EIGHTY and NO/100 DOLLARS ($1,125,380.00).
6. Letter of Credit. Special Stipulation No. 9 of Exhibit E to the
Office Lease, as amended by the First Amendment, is hereby amended by deleting
from the 5th and 6th lines of subparagraph a. thereof the words, numbers and
symbols "ONE MILLION TWO HUNDRED ONE THOUSAND ONE HUNDRED FOURTEEN and NO/100
DOLLARS ($1,201,114.00)" and by inserting, in lieu thereof, the words, numbers
and symbols "ONE MILLION FOUR HUNDRED TWENTY-SEVEN THOUSAND FIVE HUNDRED
FORTY-FOUR AND NO/100 DOLLARS ($1,427,544.00)."
Special Stipulation No. 9 of Exhibit E to the Office Lease, as amended
by the First Amendment, is hereby further amended by deleting from the 4th and
19th lines of subparagraph i. thereof the numbers and symbols "$1,201,114.00",
and by inserting, in lieu thereof, the numbers and symbols "$1,427,544.00."
Special Stipulation No. 9 of Exhibit E to the Office Lease, as amended
by the First Amendment, is hereby further amended by deleting from the 8th line
of subparagraph i. thereof the numbers and symbols "$25,520.12," and by
inserting, in lieu thereof, the numbers and symbols "$30,080.43."
The Lease is hereby further amended by deleting Exhibit E-3 thereto and
by inserting in replacement thereof the amortization schedule attached as
Exhibit E-3 hereto, and incorporated herein by this reference.
- 2 -
<PAGE> 3
7. Delivery of Original Premises. Landlord and Tenant hereby
acknowledge the continuing effectiveness of the provisions of subparagraphs
d.(ii) and (iii) of Special Stipulation No.
3 of Exhibit E to the Lease.
8. Parking Rights. In addition to Tenant's parking rights set forth in
Additional Provision No. 6 of Exhibit E to the Office Lease, Landlord shall
provide to Tenant during the term of the Lease four (4) reserved, contiguous
parking spaces for Tenant's use located in the parking area for the Building as
shown on Exhibit C-2 hereto. Such spaces shall be designated with appropriate
signage (designed, fabricated, erected and maintained at Tenant's expense)
consistent with Landlord's signage for the Building as "Reserved for the
Exclusive Use of [Name of Tenant]." Landlord shall not have any obligation to
enforce the reservation of such reserved parking spaces. The reserved parking
areas shall be taken from, and not in addition to, the unreserved parking spaces
otherwise required to be provided by Landlord to Tenant pursuant to Additional
Provision No. 6 of the Office Lease. In the event Tenant is in default with
respect to any of its rental obligations under the Lease (which default remains
uncured after the expiration of all applicable notice and cure periods expressly
provided with respect to such default under this Lease), Landlord may revoke
Tenants' rights to any or all such reserved or unreserved parking spaces
provided pursuant to Additional Provision No. 6 of the Office Lease. Said
parking spaces and Tenants' rights thereto, shall not be assignable or
transferrable by Tenant, other than in connection with a permitted assignment of
this Lease.
9. Stove and Exhaust Chase. Notwithstanding the provisions of Paragraph
28 of Exhibit C to the Lease, Tenant shall be permitted to cook in space located
within the Leased Premises subject to Tenant's compliance, at Tenant's expense,
with (i) all applicable laws, ordinances, codes, rules, regulations and other
governmental requirements, (ii) requirements of the Board of Fire Underwriters,
(iii) requirements of Landlord's insurer and (iv) the requirements of this
Lease. Tenant shall be solely responsible for venting all cooking exhaust from
the Leased Premises in order to prevent cooking odors from emanating from the
Leased Premises to other portions of the Building. Landlord agrees that it will
provide, at Tenant's expense, an exhaust chase and venting equipment for
Tenant's cooking and exhaust requirements for the purpose of transporting
Tenant's cooking exhaust to the outside air in accordance with the requirements
of this Lease. Landlord shall provide to Tenant the plans and specifications for
the proposed exhaust chase and venting equipment, and Tenant shall be
responsible for satisfying itself that such chase and venting equipment shall be
sufficient for Tenant's purposes and for purposes of satisfying the requirements
of this Lease. In no event shall Landlord's preparation or approval of such
plans and specifications, or work pursuant thereto, relieve Tenant of its
obligations under this paragraph. If Tenant is not satisfied that such chase and
venting equipment shall be sufficient for Tenant's purposes and for purposes of
satisfying the requirements of this Lease, Tenant may propose modifications to
the chase and venting equipment by written notice to Landlord. Upon receipt of
such notice of modification from Tenant, Landlord shall make such adjustments to
the plans and specifications as may be acceptable to Landlord. After
installation of the chase and venting equipment, Tenant shall be responsible, at
its sole expense, for the cleaning, maintenance and repair thereof.
Notwithstanding the foregoing, if Tenant's cooking or any activities related
thereto (i) cause the Building to be in non-compliance with any laws,
ordinances, codes, rules, regulations and other governmental requirements, or
requirements of the Landlord's insurer or the Board of Fire
- 3 -
<PAGE> 4
Underwriters, (ii) disturb any other tenant's use or occupancy of its premises
or the common areas of the Building, or (iii) cause an increase in any insurance
premiums or make such insurance unavailable to Landlord, then Tenant shall
immediately cease and desist from such cooking or any activity related thereto
within the Leased Premises until further notice from Landlord. Tenant hereby
acknowledges and agrees that the provisions of Section 11.1 of the Lease apply,
without limitation, to Tenant's cooking in the Leased Premises and any other
activity related thereto.
10. Lease Summary. As a result of the expansion of the Leased Premises
and the adjustment in Base Rental, Tenant's Share and Landlord's Allowance for
the Tenant Improvement Costs, the Lease Summary, as originally attached to the
Lease, as amended by the First Amendment, is hereby deleted and Exhibit B-2
attached hereto is hereby inserted in lieu thereof.
11. Brokerage. This Lease has been negotiated through the agency of,
and Tenant warrants and represents to Landlord that no other broker was involved
with the leasing of the Second Amendment Expansion Area or the negotiation of
this Second Amendment acting on Tenant's behalf or at its direct or indirect
request, or is entitled to any commission, except for, Tenant's Broker (as
identified in the Lease Summary). Landlord shall compensate Tenant's Broker for
its services in connection herewith pursuant to a separate commission agreement
between Landlord and Tenant's Broker. Tenant agrees to indemnify and hold
Landlord harmless against any other claims (including court costs and attorneys'
fees) for commissions by any broker other than Tenant's Broker. Landlord
warrants and represents to Tenant that no broker was involved with the leasing
of the Second Amendment Expansion Area or the negotiation of this Second
Amendment acting on Landlord's behalf or at its direct or indirect request.
Landlord agrees to indemnify and hold Tenant harmless against any other claims
(including court costs and attorneys' fees) for commissions by any broker other
than Tenant's Broker.
12. No Further Amendment; Ratification. Except as expressly amended
herein, all terms and conditions of the Lease remain unamended in full force and
effect and are hereby ratified and confirmed by Landlord and Tenant. In the
event of any conflict between the terms and conditions of the Lease and the
terms and conditions of this Second Amendment, the terms and conditions of this
Second Amendment shall control.
- 4 -
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Second Amendment
with intent to be bound hereby on the date and year first above set forth.
LANDLORD:
BSDAL I LIMITED PARTNERSHIP, a Georgia
limited partnership
By: BARRY & COMPANY, INC., a Georgia
corporation, its sole general partner
By: /s/ CHRISTIAN B. SCHOEN
----------------------------
Christian B. Schoen
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
- 5 -
<PAGE> 6
TENANT:
MARKETING SPECIALISTS SALES
COMPANY, a Texas corporation
By: /s/ M. BRIAN HEALY
-------------------------
M. Brian Healy
Title: Chief Financial Officer
Date: July 24, 1998
[CONSENT ON FOLLOWING PAGE]
- 6 -
<PAGE> 7
CONSENT
The undersigned hereby acknowledges and consents to the within and
foregoing Second Amendment to Office Lease.
GUARANTY FEDERAL BANK, F.S.B., a federal
savings bank
By: /s/ TOM ETHREDGE
---------------------
Name: Tom Ethredge
Title: Vice President
- 7 -
<PAGE> 8
EXHIBIT B-2
LEASE SUMMARY
<TABLE>
<S> <C>
LEASE DATE: April 27, 1998 (First Amendment, _________, 1998; Second Amendment, _________, 1998)
LANDLORD: BSDAL I LIMITED PARTNERSHIP, a Georgia limited partnership
TENANT: MARKETING SPECIALISTS SALES COMPANY, a Texas corporation
SUITE NUMBER: 200
LEASED PREMISES AND
FLOOR(S): 56,269 square feet of Rentable Area located on the 1st, 2nd and 3rd floors
</TABLE>
<TABLE>
<CAPTION>
AREA OF THE LEASED PREMISES: FLOOR(S) USABLE AREA RENTABLE AREA
<S> <C> <C> <C>
1st 12,686 14,589
2nd 29,778 32,756
3rd 7,760 8,924
TOTAL 50,224 56,269
====== ======
</TABLE>
RENTABLE AREA OF THE BUILDING: 124,358 square feet of Rentable Area
TENANT'S SHARE: 45.25%
LEASE TERM: Five (5) Years
COMMENCEMENT DATE: October 1, 1998
EXPIRATION DATE: September 30, 2003
BASE RENT:
<TABLE>
<CAPTION>
Portion Annual Base Annual Base Monthly Base
of Lease Term Rental/RSF Rental Rental
<S> <C> <C> <C>
Months 1-60: $22.00 $1,237,918.00 $103,159.83
</TABLE>
B-1
<PAGE> 9
<TABLE>
<S> <C>
ROOF RENT
[EXHIBIT E, PARAGRAPH 7]: $150.00/month
SECURITY DEPOSIT: $0
TENANT'S BROKER AND THE STAUBACH COMPANY
ADDRESS FOR Southwest Corporate Services
NOTICES: 6750 LBJ Freeway, Suite 110
Dallas, Texas 75240
TENANT'S ADDRESS FOR Prior to Commencement Date:
NOTICES: MARKETING SPECIALISTS SALES COMPANY
16251 Dallas Parkway
Dallas, Texas 75248
Attn: Mr. Brad Moore
with a copy to: RICHMONT
16251 Dallas Parkway
Dallas, Texas 75248
Attn: Alan W. Tompkins, Esq., Associate General Counsel
Commencement Date and thereafter:
MARKETING SPECIALISTS SALES COMPANY
16251 Dallas Parkway
Dallas, Texas 75248
Attn: Mr. Brad Moore
with a copy to: RICHMONT
16251 Dallas Parkway
Dallas, Texas 75248
Attn: Alan W. Tompkins, Esq., Associate General Counsel
LANDLORD'S ADDRESS FOR BSDAL I LIMITED PARTNERSHIP
NOTICES: 50 Glenlake Parkway, Suite 520
Atlanta, Georgia 30328
Attn: Mr. Jimmy Barry
with a copy to: Parker, Hudson, Rainer & Dobbs LLP
285 Peachtree Center Avenue
1500 Marquis Two Office Tower
Atlanta, Georgia 30303
Attn: Kenneth H. Kraft, Esq.
PARKING SPACES: Four (4) spaces for each 1,000 square feet of Usable Area of the Leased Premises
LANDLORD'S ALLOWANCE: $20.00 per square foot of Rentable Area of Leased Premises, for total Landlord's
[EXHIBIT D] Allowance of $1,125,380.00.
</TABLE>
B-2
<PAGE> 1
EXHIBIT 10.14
RICHMONT MARKETING SPECIALISTS INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
PURPOSE................................................................................................... 4
DEFINITIONS
Section 1.1 Appraisal Value....................................................... 5
Section 1.2 Affiliate............................................................. 5
Section 1.3 Award................................................................. 6
Section 1.4 Award Agreement....................................................... 6
Section 1.5 Board................................................................. 6
Section 1.6 Capital Stock......................................................... 6
Section 1.7 Cause................................................................. 6
Section 1.8 Change of Control..................................................... 6
Section 1.9 Committee............................................................. 7
Section 1.10 Common Stock.......................................................... 7
Section 1.11 Company............................................................... 7
Section 1.12 Complete Disability................................................... 7
Section 1.13 Effective Date........................................................ 8
Section 1.14 Eligible Employee..................................................... 8
Section 1.15 Exercise Period....................................................... 8
Section 1.16 Exercise Price........................................................ 8
Section 1.17 Final Payment Date.................................................... 9
Section 1.18 Good Reason........................................................... 9
Section 1.19 Grant Date............................................................ 9
Section 1.20 Interest Rate......................................................... 9
Section 1.21 Interim Payment Date.................................................. 9
Section 1.22 Maximum Amount........................................................ 10
Section 1.23 MSSC.................................................................. 10
Section 1.24 Participant........................................................... 10
Section 1.25 Payment............................................................... 10
Section 1.26 Payment Date.......................................................... 11
Section 1.27 Person................................................................ 11
Section 1.28 Plan.................................................................. 11
Section 1.29 Quarterly Payment Date................................................ 11
Section 1.30 Retirement............................................................ 11
Section 1.31 SMART................................................................. 11
Section 1.32 Subsequent SMART...................................................... 11
Section 1.33 Subsidiary............................................................ 12
Section 1.34 Valuation Date........................................................ 12
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
PARTICIPATION AND AWARDS
Section 2.1 Awards of Initial SMARTs.............................................. 13
Section 2.2 Termination of Employment............................................. 13
SMARTS AVAILABLE UNDER PLAN
Section 3.1 Maximum Number of SMARTs Available for Insurance...................... 13
Section 3.2 Forfeited SMARTs...................................................... 13
TERMS AND CONDITIONS OF SMARTS
Section 4.1 General............................................................... 14
Section 4.2 Request to Exercise................................................... 14
Section 4.3 Maximum Amount........................................................ 15
Section 4.4 Allocation of Maximum Amount.......................................... 16
Section 4.5 Amount of Payment..................................................... 17
Section 4.6 Form and Time of Payments............................................. 18
TERMINATION OF EMPLOYMENT
Section 5.1(a) SMARTs Deferred Compensation Agreement................................ 19
Section 5.1(b) Payment Commencement Date............................................. 20
Section 5.1(c) Conditions of Forfeiture of Subsequent SMARTs......................... 21
Section 5.2 Retirement............................................................ 21
Section 5.3 Termination Without Cause............................................. 21
Section 5.4 Termination With Good Reason.......................................... 22
Section 5.5 Death or Complete Disability.......................................... 22
Section 5.6 Voluntary Termination................................................. 22
Section 5.7 Termination of Employment With Cause.................................. 23
PARTICIPATON OF SUBSIDIARIES AND AFFILIATES
Section 6 ...................................................................... 23
DILUTION ADJUSTMENTS
Section 7 ...................................................................... 24
</TABLE>
-2-
<PAGE> 3
<TABLE>
<S> <C> <C>
ADMINISTRATION
Section 8.1 Committee............................................................. 24
Section 8.2 Committee Powers...................................................... 24
Section 8.3 Committee Determinations Final........................................ 25
DESIGNATION OF BENEFICIARY; ASSIGNMENT
Section 9.1 Designation of Beneficiary............................................ 26
Section 9.2 Assignment............................................................ 26
MISCELLANEOUS PROVISIONS
Section 10.1 Limitations of Liability.............................................. 27
Section 10.2 Nonassignability...................................................... 27
Section 10.3 Unfunded Arrangement.................................................. 27
Section 10.4 Governing Law......................................................... 28
Section 10.5 Acceptance............................................................ 28
Section 10.6 Withholding........................................................... 28
Section 10.7 Interpretation........................................................ 28
Section 10.8 Amendment............................................................. 28
Section 10.9 Termination........................................................... 28
Section 10.10 Effective Date........................................................ 29
</TABLE>
-3-
<PAGE> 4
RICHMONT MARKETING SPECIALISTS INC.
INCENTIVE PLAN
PURPOSE OF PLAN
The purpose of the Richmont Marketing Specialists Inc. Incentive Plan
(the "Plan") is to advance the interests of Richmont Marketing Specialists Inc.
(the "Company"), it subsidiaries, including Marketing Specialists Sales Company
("MSSC"), and its stockholders through the grant to certain eligible officers
and employees of Senior Management Appreciation Rights ("SMARTs") or any other
equity-based incentive awards which the Company deems appropriate from time to
time, which will allow such officers and employees to participate in the future
appreciation of Company equity.
-4-
<PAGE> 5
SECTION 1
DEFINITIONS
As used herein, unless otherwise required by the context, the following
terms shall have these meanings:
1.1 "APPRAISAL VALUE" shall mean the value of a share of Common Stock
(defined below) on the applicable Valuation Date, as determined by an
independent appraiser selected by the Company, provided that such appraisal (a)
shall take into account the rights to exercise SMARTs and other similar
provisions contained in this Plan and the Award Agreements and (b) shall not
take into account the effects, financial or otherwise, on such value of any
acquisition of, by merger, consolidation, purchase or otherwise, or any
investment by the Company, MSSC, or any other Subsidiaries or Affiliates in, the
assets, capital stock or business of any corporation, person, partnership or
other entity or group, or any division thereof, engaged in a business other than
food brokerage and related services ("Acquired Assets"), including without
limitation (i) the revenues, costs and profits or losses theretofore
attributable to the operation of such Acquired Assets and (ii) the costs to the
Company, MSSC, or any other Subsidiaries or Affiliates, of acquiring such
Acquired Assets, including the principal of and interest on any debt incurred to
finance such acquisition and other costs, fees and expenses associated with such
acquisition.
1.2 "AFFILIATE" of any specified Person shall mean (i) any other
Person, directly or indirectly, controlling or controlled by or under direct or
indirect common control with such specified Person and (ii) any Person deemed to
be an Affiliate by the Committee (defined below). For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
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<PAGE> 6
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
1.3 "AWARD" shall mean the grant of SMARTs to a Participant as
evidenced by an Award Agreement entered into with such Participant.
1.4 "AWARD AGREEMENT" shall mean the written agreement between the
Company and a Participant evidencing the grant of an Award and setting forth the
terms and conditions thereof. It shall be the Company's sole responsibility to
provide each Participant with an Award Agreement in such form as the Committee,
in its sole discretion, may adopt from time to time.
1.5 "BOARD" shall mean the Board of Directors of the Company.
1.6 "CAPITAL STOCK" shall mean any and all shares, interests,
participations or other equivalents (however designated) of stock of the
Company.
1.7 "CAUSE" shall mean (i) a Participant's willful failure to
substantially perform his or her assigned duties with the Company, a Subsidiary
or an Affiliate, other than any such failure resulting from his or her
incapacity due to physical or mental illness or Complete Disability; (ii) a
Participant's willfully engaging in any serious misconduct which, in the good
faith opinion of the Committee, is substantially injurious (monetarily or
otherwise) to the Company, a Subsidiary or an Affiliate; or (iii) a
Participant's willful performance of any act or acts of dishonesty resulting or
intended to result, directly or indirectly, in significant gain or personal
enrichment at the expense of the Company, a Subsidiary or an Affiliate.
1.8 "CHANGE OF CONTROL" shall be deemed to occur if (A) the 10 1/8%
Senior Subordinated Notes due 2007 shall have been paid in full and (B) one of
the following events shall have occurred: (i) the shareholders, officers,
directors and employees of the Company and its Subsidiaries and their heirs,
beneficiaries, donees, devisees and legatees, and their respective
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Affiliates, cease to beneficially own, directly or indirectly, in the aggregate
Capital Stock representing at least fifty percent (50%) of the voting power of
all Capital Stock of the Company (excluding for this purpose securities which
have voting rights by reason of the happening of any contingency); (ii) the
Company ceases to own, directly or indirectly, a majority of the outstanding
capital stock of MSSC, or ceases to own a majority of the outstanding voting
securities of MSSC (in either case other than as a result of a merger or
consolidation of the Company with MSSC), in each case pursuant to a voluntary
sale or a voluntary disposition for value (other than a grant of or sale or
disposition upon the exercise or foreclosure of any mortgage, pledge, security
interest, conditional sale, lien, charge or encumbrance; or (iii) a sale of MSSC
or its business or assets substantially as an entirety (excluding in any event
sales in the ordinary course of business and sales of real property, including
buildings and other improvements on such real property, together with any and
all fixtures, easements, appurtenances, rights and privileges related thereto).
1.9 "COMMITTEE" shall mean a committee appointed from time to time by
the Board to administer the Plan in accordance with Section 8 hereof, which
committee shall consist of at least two (2) members of the Board.
1.10 "COMMON STOCK" shall mean the common stock of the Company, par
value $.01 per share.
1.11 "COMPANY" shall mean Richmont Marketing Specialists Inc., a
Delaware corporation.
1.12 "COMPLETE DISABILITY" shall mean the inability of a Participant to
perform substantially all of his or her work duties by reason of a physical or
mental disability or infirmity (i) for a continuous period of six (6) months or
(ii) at such earlier time as either such Participant
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submits satisfactory medical evidence, or the Company sends written notice to
such Participant stating that it has determined that he or she has a physical or
mental disability or infirmity which will likely prevent him or her from
returning to the performance of his or her work duties for six (6) months or
longer.
1.13 "EFFECTIVE DATE" shall mean the date specified in Section 10.10.
1.14 "ELIGIBLE EMPLOYEE" shall mean an officer or employee of the
Company, MSSC or any other Subsidiary or Affiliate.
1.15 "EXERCISE PERIOD" shall mean the thirty (30) day period which is
designated by the Committee to be the period during which Participants may
submit a Request pursuant to Section 4.2(b) in (i) each of years 2003 through
2007, with respect to each Award of Initial SMARTs and (ii) such years as are
designated by the Committee, at the time of grant of an Award of Subsequent
SMARTs, provided that each Exercise Period shall commence as soon as practicable
after the date the Appraisal Value as of December 31 of the preceding year has
been determined.
1.16 "EXERCISE PRICE" shall mean the Exercise Price per SMART under an
Award and shall be equal to:
(a) in the case of an Award of Initial SMARTs, the Exercise Price
per share of Common Stock shall be Five Hundred Eighteen Dollars ($518.00) per
share; and
(b) in the case of an Award of Subsequent SMARTs, the Appraisal
Value of a share of Common Stock on the Valuation Date immediately preceding the
Grant Date of the Award or such other price as is determined by the Committee,
in its sole discretion, at the time of grant of an Award.
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1.17 "FINAL PAYMENT DATE" shall mean (i) the Payment Date in the year
2007, with respect to any Award of Initial SMARTs and (ii) the Payment Date in
such year as is specified by the Committee in its sole discretion at the time of
grant of any Award of Subsequent SMARTs.
1.18 "GOOD REASON" shall mean (i) a substantial reduction in a
Participant's duties and responsibilities; (ii) the assignment to a
Participant's duties and responsibilities materially inconsistent with such
Participant's position and status; or (iii) a reduction by the Company, a
Subsidiary or an Affiliate in a Participant's annual base salary as in effect on
the Effective Date or as the same may be increased from time to time except for
across-the-board salary reductions similarly affecting employees having
seniority, duties and responsibilities comparable to those of such Participant.
1.19 "GRANT DATE" shall mean the date as of which an Award of SMARTs is
granted to a Participant or Eligible Employee.
1.20 "INTEREST RATE" shall mean a rate of interest or discount rate, as
applicable, equal to:
(a) in the case of an Award of Initial SMARTs, the interest rate
for the ten (10) year United States Treasury Bonds plus one hundred (100) basis
points which shall be calculated by the Company at the beginning of each
calendar year; and
(b) in the case of an Award of Subsequent SMARTs, the rate
specified by the Committee, in its sole discretion, at the time of grant of such
Award.
1.21 "INTERIM PAYMENT DATE" shall mean any Payment Date prior to the
Final Payment Date with respect to an Award.
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<PAGE> 10
1.22 "MAXIMUM AMOUNT" shall mean, as of any Payment Date, the maximum
amount determined by the Board, in its sole discretion, to be available pursuant
to Section 4.3 for Payments with respect to SMARTs permitted to be exercised
pursuant to Section 4.4, after taking into account (i) any amount which the
Board may determine shall be allocated to payments due in respect of any SMARTs
Deferred Compensation Agreements (as defined in Section 5.1 hereof) entered into
with any former Participants, (ii) the limitations upon Payments and the
transactions and payments described in clauses (A), (B) and (C) below, in each
case as set forth in the Indenture by and between the Company and Texas Commerce
Bank National Association, as Trustee, dated December 19, 1997, pursuant to
which the Company issued its 10 1/8% Senior Subordinated Notes due 2007, as the
same may be amended, modified, renewed, extended, increased, refinanced,
replaced, refunded or restated from time to time (collectively, the "Senior
Notes"), and any existing or future instruments or agreements of the Company or
MSSC from time to time in effect, restricting or otherwise governing: (A) the
repurchase or retirement of shares of the Company's capital stock, options to
acquire such shares or stock appreciation rights (including the SMARTs) or
similar equity-like instruments; (B) the declaration or payment of dividends in
respect of shares of MSSC's capital stock; or (C) the making of any
distribution, loan, advance or other payment by MSSC to the Company or by the
Company to a Participant or former Participant; or (iii) any applicable laws.
1.23 "MSSC" shall mean Marketing Specialists Sales Company, a Texas
corporation.
1.24 "PARTICIPANT" shall mean those Eligible Employees and Participants
selected by the Committee to receive Awards of Initial and/or Subsequent SMARTs.
1.25 "PAYMENT" shall mean a payment under Section 4.5 upon the exercise
of any SMARTs pursuant to Section 4.4.
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<PAGE> 11
1.26 "PAYMENT DATE" shall mean the date in each of the years specified
in Section 1.15 which is thirty (30) days after the last day of the Exercise
Period for such year (or if such date is not a business day, the next succeeding
business day).
1.27 "PERSON" shall mean any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
1.28 "PLAN" shall mean the Richmont Marketing Specialists Inc.
Incentive Plan as set forth herein, and as it may be amended from time to time.
1.29 "QUARTERLY PAYMENT DATE" shall mean each March 31, June 30,
September 30, and December 31.
1.30 "RETIREMENT" shall mean the termination of an individual's
employment (i) in accordance with the applicable retirement policy of the
Company, MSSC or any other Subsidiary or Affiliate or (ii) upon completion of
that number of years of service with the Company, MSSC or any other Subsidiary
which together with such individual's age equals a total of at least
seventy-five (75).
1.31 "SMART" shall mean an Initial SMART, a Subsequent SMART, or either
or both of them.
1.32 "SUBSEQUENT SMART" shall mean a Senior Management Appreciation
Right awarded to a Participant after January 1, 1998 which shall entitle such
Participant to the rights described in Sections 4 and 5 hereof.
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<PAGE> 12
1.33 "SUBSIDIARY" shall mean any corporation or partnership, including
MSSC, fifty percent (50%) or more of the voting stock or interest of which is
owned directly or indirectly by the Company.
1.34 "VALUATION DATE" shall mean December 31st of each year.
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SECTION 2
PARTICIPATION AND AWARDS
2.1 Awards of Initial SMARTs. Subject to Section 2.2 and Section 6
hereof, the Committee shall have the full and final authority to select those
Eligible Employees who shall become Participants in the Plan and those
Participants who shall be granted additional Awards and to determine the number
of Subsequent SMARTs to be granted to such Participants.
2.2 Termination of Employment. An individual shall cease to be a
Participant in the Plan as provided under Section 5 on the date he or she is no
longer employed by and no longer an officer of the Company, MSSC or any other
Subsidiary or Affiliate. Upon such termination of employment, the individual's
rights with respect to any Award of SMARTs previously granted to him or her
shall be governed exclusively by the SMARTs Deferred Compensation Agreement (as
defined in Section 5 hereof) entered into upon the cancellation of such Award
(and all SMARTs covered by such Award.).
SECTION 3
SMARTs AVAILABLE UNDER PLAN
3.1 Maximum Number of SMARTs Available for Issuance. Subject to
adjustment pursuant to Section 7 hereof, the maximum number of shares of Initial
SMARTs that may be granted pursuant to the Plan is Twenty Thousand Five Hundred
Sixty Six (20,566) and the maximum number of Subsequent SMARTs that may be
granted pursuant to the Plan shall be determined from time to time in the sole
discretion of the Committee.
3.2 Forfeited SMARTs. Any SMARTs forfeited under the terms of this Plan
may again be the subject of Awards hereunder.
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SECTION 4
TERMS AND CONDITIONS OF SMARTs
4.1 General. The Committee may grant Awards of SMARTs to Eligible
Employees in accordance with the Plan, the terms and conditions of which shall
be set forth in an Award Agreement. A bookkeeping account shall be established
for each Participant which shall be credited with the number and type of SMARTs
awarded to such Participant and shall reflect the amount of Payments made to
such Participant pursuant to the exercise of such SMARTs. Following each Payment
Date, the number of SMARTs credited to a Participant's account shall be reduced
by the number of SMARTs permitted to be exercised pursuant to Section 4.4 in
respect of which a Payment, determined in accordance with Section 4.5, was made.
Upon the Payment provided for herein on (i) the Final Payment Date or (ii) the
occurrence of a Change of Control with respect to an Award or, if earlier, upon
a Participant's termination of employment as provided in Section 5 hereof, the
number of SMARTs credited to such Participant's account in respect of such Award
shall be reduced to zero (0).
4.2 Request to Exercise. (a) Subject to the limitations set forth in
Sections 4.3, 4.4 and 5, (i) Awards of Initial SMARTs shall become exercisable
with respect to twenty percent (20%) of the Initial SMARTs originally granted
pursuant to such Award on January 1, 2003 or during the Exercise Period,
whichever is later. An additional twenty percent (20%) of the Initial SMARTs
originally granted pursuant to such Award shall be exercisable on January 1 or
during the Exercise Period, whichever is later, of each of the years 2004, 2005,
2006 and 2007 and (ii) Awards of Subsequent SMARTs shall become exercisable
during the Exercise Periods in the years designated by the Committee, in its
sole discretion, on the Grant Date of such Award.
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<PAGE> 15
Notwithstanding the foregoing, Awards shall become fully exercisable as to all
outstanding SMARTs thereunder upon the occurrence of a Change of Control. Once
exercisable, SMARTs shall remain exercisable (unless sooner exercised or
cancelled) until the Payment Date for (i) the year 2007, in the case of Initial
SMARTs and (ii) the year specified by the Committee at the time of grant of an
Award, in the case of Subsequent SMARTs.
(b) During each Exercise Period but subject to the last sentence
of this paragraph (b), a Participant shall be entitled to submit a written
application (a "Request") to the Company requesting that he or she be permitted
to exercise any number of Initial SMARTs ("Requested Initial SMARTs") and
Subsequent SMARTS ("Requested Subsequent SMARTs") (the Requested Initial SMARTs
and the Requested Subsequent SMARTs shall be referred to hereinafter
collectively as the "Requested SMARTs") which are then exercisable pursuant to
paragraph (a) hereof. Each Request shall be submitted with respect to a
particular Participant's SMARTs in the order in which such SMARTs first became
exercisable pursuant to paragraph (a) above.
(c) Notwithstanding the foregoing, SMARTs shall be permitted to be
exercised only in accordance with the provisions of Section 4.4
4.3 Maximum Amount. With respect to each Payment Date, the Board shall
determine, in its sole discretion in accordance with Section 1.22, the Maximum
Amount which will be available for payment with respect to the exercise of
SMARTs pursuant to Section 4.4. Subject to paragraphs (c) and (d) of Section
4.4, no Payments with respect to the exercise of SMARTs shall be made in excess
of the Maximum Amount on any Payment Date.
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<PAGE> 16
4.3 Allocation of Maximum Amount.
(a) Full Exercise. If the Company determines that the sum of the
Payments which would be required under Section 4.5 upon the exercise of all
Requested SMARTs is less than or equal to the Maximum Amount, the Company shall
permit Participants to exercise all validly Requested SMARTs.
(b) Proration. If the Company determines that the sum of the
Payments which would be required under Section 4.5 upon the exercise of all
Requested SMARTs would exceed the Maximum Amount, the Company shall allocated
the Maximum Amount of Payments as described in Section 4.6 (a) in respect of
validly Requested SMARTs as follows:
(i) First, the Maximum Amount shall be allocated to permit
the exercise of Requested Initial SMARTs in the order in which such Requested
Initial SMARTs initially became exercisable such that (A) no Requested Initial
SMARTs which initially became exercisable in a given year will be permitted to
be exercised prior to the exercise of all Requested Initial SMARTs which
initially became exercisable in any earlier years and (B) after applying the
priorities set forth in clause (A) hereof, if the Payments which would be
required pursuant to Section 4.5 upon the exercise of all Requested Initial
SMARTs which initially became exercisable in a single year would cause such
Payments to exceed the Maximum Amount (after taking into account all Payments
which would be required pursuant to Section 4.5 upon the exercise of all
Requested Initial SMARTs which initially became exercisable in any earlier
years), the portion of the Maximum Amount remaining shall be prorated among the
Participants in accordance with the number of Requested Initial SMARTs (which
initially became exercisable in such year) held by such Participants (and no
Requested Initial SMARTs which initially became exercisable in any later years
will be permitted to be exercised);
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<PAGE> 17
(ii) Second, if all Requested Initial SMARTs are permitted to
be exercised pursuant to subparagraph (i) hereof, the excess of the Maximum
Amount over the sum of all Payments with respect to the exercise of such
Requested Initial SMARTs shall be allocated so as to permit the exercise of
Requested Initial SMARTs in the order in which such Requested Initial SMARTs
initially became exercisable in the manner set forth in clauses (A) and (B) of
subparagraph (i) above; and
(iii) Notwithstanding the foregoing, the Company shall not
permit the exercise of any fractional Requested SMARTs and no Payment will be
made with respect to any such fractional Requested SMARTs pursuant to Section
4.5.
(c) Remaining Requested SMARTs. On any Interim Payment Date,
Requested SMARTs with respect to which no allocation of the Maximum Amount is
made pursuant to the foregoing paragraph (b) will not be permitted to be
exercised but may again be the subject of a Request during any future Exercise
Period. Any Requested SMARTs which are not permitted to be exercised in
accordance with the foregoing paragraph (b) on the Final Payment Date with
respect to such Requested SMARTs shall be deemed to be exercised for the Payment
described in Section 4.6(b) in an amount determined under Section 4.5.
(d) Change of Control. Notwithstanding the provisions of Sections
4.2, 4.3 and 4.4, each Participant shall be deemed to have exercised all of his
or her outstanding SMARTs immediately upon the occurrence of a Change of Control
for the Payment described in Section 4.6(c) in an amount determined under
Section 4.5.
4.5 Amount of Payment. Upon the exercise of an Award with respect to
any SMARTs in accordance with Section 4.4, the Participant shall receive a
Payment in an amount equal to the product of (i) the excess of the Appraisal
Value of a share of Common Stock on the
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Valuation Date immediately preceding the date of such exercise over the Exercise
Price per SMART under such Award multiplied by (ii) the total number of SMARTs
permitted to be exercised pursuant to Section 4.4.
4.6 Form and Time of Payments.
(a) General. Subject to paragraph (c) hereof, all Payments with
respect to all Requested SMARTs permitted to be exercised pursuant to paragraph
(a) or (b) of Section 4.4 shall be made in a lump sum cash payment on the
applicable Payment Date.
(b) Final Payment. Subject to paragraph (c) hereof, all Payments
with respect to Requested SMARTs deemed to be exercised pursuant to the last
sentence of paragraph (c) of Section 4.4 shall be made on the applicable Payment
Date in the form of a deferred compensation agreement providing for equal annual
cash installments over a period of five (5) years, where the present value of
such payments using the Interest Rate applicable to the Award, is equal to the
amount determined under Section 4.5 hereof.
(c) Change of Control. Upon the occurrence of a Change of Control,
all Payments with respect to any SMARTs deemed to be exercised pursuant to
paragraph (d) of Section 4.4 and any SMARTs permitted to be exercised pursuant
to paragraphs (a) and (b) of Section 4.4 or deemed to be exercised pursuant to
paragraph (c) of Section 4.4 for which the Payment has not yet been made, shall
become immediately due and payable in cash and, until paid, shall accrue
interest at the Interest Rate applicable to such Award.
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SECTION 5
TERMINATION OF EMPLOYMENT
5.1 (a) SMARTs Deferred Compensation Agreement. An individual shall
cease to be a Participant in the Plan on the date he or she ceases to be
employed by and is no longer an officer of the Company, MSSC or any Subsidiary
or Affiliate and all Awards previously granted to such former Participant and,
except as provided in paragraph 5.1(c), all SMARTs covered by such Awards shall
be immediately cancelled in exchange for payment of the value of such SMARTs
pursuant to a deferred compensation agreement ("SMARTs Deferred Compensation
Agreement"), in such form as the Committee, in its sole discretion, may
determine from time to time, which form shall contain the priorities as to
payment of amounts due and payable under all SMARTs Deferred Compensation
Agreements entered into by the Company. If a Participant's employment and
service as an officer is terminated (i) by reason of his or her death, his or
her payment shall be in the form of a SMARTs Deferred Compensation Agreement
Series A; (ii) by reason of his or her Complete Disability, his or her payment
shall be in the form of a SMARTs Deferred Compensation Agreement Series B; (iii)
by reason of his or her Retirement, his or her payment shall be in the form of a
SMARTs Deferred Compensation Agreement Series C; or (iv) for any other reason,
his or her payment shall be in the form of a SMARTs Deferred Compensation
Agreement Series D. Subject to the limitations set forth therein, each SMARTs
Deferred Compensation Agreement shall provide, with respect to each of the
Participant's outstanding Awards, for equal quarterly payments ("Quarterly
Payments") to the former Participant on each Quarterly Payment Date for ten (10)
years following the Payment Commencement Date (as defined in paragraph (b)
below), where the present value of such payments using the Interest Rate
applicable to such Award, shall be equal to the amount (the
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"Present Value Amount") determined with respect to such Award in accordance with
Sections 5.2 through 5.7 under the circumstances described therein.
(b) Payment Commencement Date. Subject to the limitations set
forth in the Termination Agreement, Quarterly Payments to a former Participant
or his or her beneficiary shall commence to be paid on the Quarterly Payment
Date (the "Payment Commencement Date") next following (i) the date the Appraisal
Value as of the Valuation Date immediately following such termination of
employment is determined (the "Succeeding Determination Date"), if such
termination was under the circumstances described in Sections 5.2, 5.6 or 5.7,
or (ii) the later of (A) the date the Appraisal Value as of the Valuation Date
immediately preceding such Participant's termination of employment is determined
(the "Preceding Determination Date") and (B) the date of such Participant's
termination of employment is determined (the "Preceding Determination Date") and
(B) the date of such Participant's termination of employment, if such
termination was under the circumstances described in Sections 5.3, 5.4 or 5.5.
Quarterly Payments made pursuant to clause (ii) above shall be based, until the
first Quarterly Payment Date (the "Adjustment Payment Date") after the
Succeeding Determination Date, upon an amount (the "Temporary Amount")
calculated in accordance with the provisions of Section 5.3, Section 5.4 or
Section 5.5; provided, however, that in determining the amount of such Quarterly
Payments, the Appraisal Value as of the Valuation Date immediately preceding
such Participant's termination of employment shall be used. The Quarterly
Payment made on the Adjustment Payment Date shall equal the Quarterly Payment as
calculated using the Present Value Amount (i) increased by an amount equal to
the sum of the excess (including interest on the amount of such excess at the
applicable Interest Rate) of each Quarterly Payment which would have been made
(had all previous Quarterly Payments been based upon the Present Value
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Amount)over each Quarterly Payment which was made (based upon the Temporary
Amount) on each preceding Quarterly Payment Date or (ii) decreased by an amount
equal to the sum of the excess (including interest on the amount of such excess
at the applicable Interest Rate) of each preceding Quarterly Payment which was
made (based on the Temporary Amount) over each Quarterly Payment which would
have been made (had all previous Quarterly Payments been based upon the Present
Value Amount). If the amount determined under clause (ii) of the preceding
sentence exceeds the amount of the Quarterly Payment (based on the Present Value
Amount) to be made on the Adjustment Payment Date, the Quarterly Payment on the
Quarterly Payment Date next following the Adjustment Payment Date (and to the
extent necessary any succeeding Quarterly Payment Dates) shall be decreased in
the manner described in such clause (ii). Following the Adjustment Payment Date
(and any succeeding Quarterly Payment Dates described in the preceding
sentence), each Quarterly Payment shall be based on the Present Value Amount.
5.1(c) Conditions of Forfeiture of Subsequent SMARTs. With respect to
an Award of Subsequent SMARTs, any and all conditions of forfeiture of
Subsequent SMARTs shall be determined by the Committee, in its sole discretion,
at the time of the grant of the Award.
5.2 Retirement. If a Participant's employment and service as an officer
terminates by reason of his or her Retirement, the Present Value Amount shall be
equal to the product of (i) the excess of the Appraisal Value on the Valuation
Date immediately following such termination of employment over the Exercise
Price per SMART under the Award multiplied by (ii) the number of SMARTs covered
by such Award which were not previously exercised.
5.3 Termination Without Cause. If a Participant's employment and
service as an officer is involuntarily terminated at any time without Cause, the
Present Value Amount shall be
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determined in accordance with the provisions of Section 5.2, except utilizing
(a) if such termination of employment occurs on or prior to June 30 in any year,
the lesser of the Appraisal Value as of the Valuation Date immediately preceding
such termination and the Appraisal Value as of the Valuation Date immediately
following such termination and (b) if such termination of employment occurs on
or after July 1 in any year, the Appraisal Value as of the Valuation Date
immediately following such termination.
5.4 Termination With Good Reason. In the event a Participant terminates
his or her employment and service as an officer with Good Reason, the Present
Value Amount shall be determined in accordance with Section 5.2, except that (a)
if such termination of employment occurs on or prior to June 30 in any year, the
Appraisal Value as of the Valuation Date immediately preceding such termination
shall be utilized and (b) if such termination of employment occurs on or after
July 1 in any year, the Appraisal Value as of the Valuation Date immediately
following such termination shall be utilized.
5.5 Death or Complete Disability. If a Participant's employment and
service as an officer is terminated by reason of his or her death or Complete
Disability, the Present Value Amount shall be determined in accordance with
Section 5.2, except that the Participant or his or her beneficiary shall be
permitted to elect, within sixty (60) days following such termination of
employment, whether to utilize the Appraisal Value as of the Valuation Date
immediately preceding or immediately following such termination.
5.6 Voluntary Termination. If a Participant voluntarily terminates his
or her employment and services as an officer without Good Reason at any time,
the Present Value Amount shall be equal to the product of (i) the amount
determined in accordance with Section 5.2 and (ii) in the case of an Award of
Subsequent SMARTs, the percentages specified by the
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Committee, in its sole discretion, at the time of grant of such Award, and in
the case of an Award of Initial SMARTs, the percentages determined in accordance
with the following schedule:
<TABLE>
<CAPTION>
Year of Termination Percentage
- ------------------- ----------
<S> <C>
1998 0%
1999 0%
2000 0%
2001 0%
2002 0%
2003 or after 100%
</TABLE>
5.7 Termination of Employment With Cause. If a Participant's employment
and service as an officer is terminated with Cause at any time, the Present
Value Amount shall be equal to the product of (a) thirty-three and one-third
percent (33 1/3%) multiplied by (b) the excess of the Appraisal Value as of (i)
the Valuation Date immediately preceding such termination of employment, if such
termination occurs on or prior to June 30 in any year or (ii) the Valuation Date
immediately following such termination of employment, if such termination occurs
on or after July 1 in any year, over the Exercise Price per Initial SMART under
such Award multiplied by (c) the number of Initial SMARTs covered by such Award
which were not previously exercised.
SECTION 6
PARTICIPATION OF SUBSIDIARIES AND AFFILIATES
If the Company elects to have a Subsidiary or Affiliate participate in
the Plan and its participation shall have been approved by the Board, the
officers or employees of such Subsidiary or Affiliate shall become Eligible
Employees.
Employment and service with any Subsidiary or Affiliate shall be
treated as employment and service with the Company for all purposes of the Plan.
-23-
<PAGE> 24
SECTION 7
DILUTION ADJUSTMENTS
In the event of any increase, reduction, change or exchange of shares
of Common Stock for a different number or kind of shares or other securities of
the Company, by reason of a reclassification, stock split, stock dividend,
reverse stock split, recapitalization, merger, consolidation, reorganization,
reincorporation, acquisition of property or stock, separation or liquidation,
issuance of warrants or rights, combination, exchange or repurchase of shares,
change in the corporate structure of the Company, or otherwise, the Board or the
Committee shall determine the appropriate adjustments, if any, to the number of
SMARTs available for grant or subject to any outstanding Award, and any formula
or measure (including but not limited to the applicable Exercise Price) which is
relevant under any provision of the Plan or any such Award. Any such adjustment
shall be made by the Board or the Committee in order to preserve, but not
decrease or increase, the benefits of Participants under the Plan, and shall be
conclusive and binding for all purposes of the Plan.
SECTION 8
ADMINISTRATION
8.1 Committee. Except as otherwise provided herein, the Plan shall be
administered by the Committee in accordance with the provisions of the Plan. A
majority of the Committee may authorize any action and may authorize any one or
more of its members or any officer of the Company to execute and deliver
documents on its behalf.
8.2 Committee Powers. Subject to the express terms and conditions set
forth in the Plan, the Committee shall have all the powers vested in it by the
provisions of the Plan, including
-24-
<PAGE> 25
the exclusive authority to determine those Participants and Eligible Employees
to whom Awards shall be granted, the number and type of SMARTs to be granted
pursuant to such Awards, to prescribe the terms and conditions (which need not
be identical) of each Award, and to prescribe the form of any agreements,
including but not limited to, any Award Agreement and any SMARTs Deferred
Compensation Agreement, to be entered into with any Participant and, subject to
section 8.3 below, whether a Participant's employment has been terminated by the
Company with or without Cause or by such Participant with our without Good
Reason. In addition, the Committee shall have the exclusive authority to
construe and interpret the Plan and any Awards granted thereunder, to establish,
amend and revoke rules and regulations and to make any other determinations for
the administration of the Plan, including, but not limited to, correcting any
defect or supplying any omission, or reconciling any inconsistency in the Plan
or any Award, in the manner and to the extent it shall deem necessary or
advisable to make the Plan fully effective and to promote the best interests of
the Company with respect thereto; provided, however, that no such action by the
Committee shall deprive Participants of their rights with respect to any Awards
theretofore granted without their consent. No member of the Committee or the
Board shall be personally liable for any action (or inaction), or any
determination or interpretation made by him or her or any other member of the
Committee or the Board in connection with the Plan or any Awards, except for his
or her own willful misconduct or as expressly provided by statute.
8.3 Committee Determinations Final. Any and all decisions and
determinations by the Committee or the Board in the exercise of its power shall
be final and binding upon the Company, MSSC and any other Subsidiary or
Affiliate, each Participant, each beneficiary designated pursuant to Section 9.1
and each trust (and the beneficiaries thereof) to which a
-25-
<PAGE> 26
Participant's rights and interest under the Plan have been assigned pursuant to
Section 9.2; provided, however, that in the event of a disagreement between the
Committee and a Participant whose employment has terminated, as to whether his
or her termination of employment is with or without Cause or Good Reason, at the
option of such Participant, he or she shall not be deemed to have been
terminated with Cause or to have terminated his or her employment without Good
Reason, unless and until he or she shall have had the opportunity to appear
before the Board (together with his or her counsel) and to present evidence in
his or her favor.
SECTION 9
DESIGNATION OF BENEFICIARY; ASSIGNMENT
9.1 Designation of Beneficiary. A Participant may designate a person or
persons to receive any benefits to which he or she would be entitled under
Section 5 in respect of an Award in the event of his or her death. Such
designation shall be made on a form to be provided by the Committee. A
Participant may revoke or change his or her designation from time to time in the
same manner. If no designated beneficiary is living on the date on which any
amount becomes payable, or, if a Participant fails effectively to designate a
beneficiary, the term "beneficiary" as used in the Plan shall mean a
Participant's estate.
9.2 Assignment. A Participant shall be permitted, subject to the
consent of that Committee, to assign all of his or her rights and interest in
any Award of SMARTs to a revocable trust, the beneficiaries of which are his or
her spouse and/or any of his or her direct lineal descendants; provided,
however, that such trust agrees to be subject to and comply with all of the
provisions of this Plan, any Award Agreement and any SMARTs Deferred
Compensation Agreement issued pursuant to this Plan.
-26-
<PAGE> 27
SECTION 10
MISCELLANEOUS PROVISIONS
10.1 Limitation of Liability. Nothing in the Plan shall be construed to
give any individual any right to be granted an Award other than at the sole
discretion of the Committee or to limit in any way the right of the Company to
terminate the employment of any individual at any time.
10.2 Nonassignability. Except as provided in Section 9 hereof, a
Participant's rights and interest under the Plan or any Award Agreement may not
be assigned or transferred in whole or in part, either directly or by operation
of law or otherwise, including but not by way of limitation, execution, levy,
garnishment, attachment, pledge, bankruptcy or in any other manner and no such
right or interest of any Participant in the Plan or under any Award Agreement
shall be subject to any obligation or liability of such Participant.
10.3 Unfunded Arrangement. The benefits to be paid pursuant to the Plan
are unfunded and unsecured and shall be payable from the general assets of the
Company, and the Participants shall have no interest in the assets of the
Company or in any account maintained by the Company for its own convenience by
virtue of the Plan. No fund or other assets will ever be set aside or segregated
for the benefit of any Participant. The Plan merely grants the Participant a
contractual right to receive future payments. If any funds are set aside by the
Company for its convenience for purposes of payment of benefits hereunder, such
funds shall be solely the property of the Company and, notwithstanding such
setting aside, shall remain subject to the claims of the Company's general
creditors.
-27-
<PAGE> 28
10.4 Governing Law. The Plan, each Award Agreement and the rights of
all individuals claiming benefits hereunder shall be governed by and construed
in accordance with the laws of the State of Texas without giving effect to the
choice of law principles thereof.
10.5 Acceptance. By accepting any Award or other benefit under the
Plan, each Participant and each person claiming under or through him or her
shall be conclusively deemed to have indicated his or her acceptance and
ratification of, and consent to, any action taken under the Plan by the Company,
the Board or the Committee.
10.6 Withholding. The Company shall have the right to deduct from the
amount of any payment due under the Plan, an amount equal to the federal, state
and local income taxes and other amounts required to be withheld with respect
thereto.
10.7 Interpretation. The masculine pronoun means the feminine and the
singular means the plural, wherever appropriate.
10.8 Amendment. The Plan may be amended at any time and from time to
time by the Board; provided, however, that no such amendment shall deprive
Participants of their rights with respect to any Awards theretofore granted
without their consent.
10.9 Termination. The Board may in its discretion terminate this Plan
at any time; provided, however, that the administration of the Plan shall
thereafter continue in connection with outstanding Awards; and, provided,
further, that, subject to the limitations set forth in Sections 4.3 and 4.4
hereof, the Board shall have the exclusive authority to determine, in its sole
discretion, that all Payments to Participants in respect of any outstanding
Awards shall be accelerated and paid to Participants in a lump sum cash payment
as soon as practicable following the termination of the Plan, as if the
effective date of such termination were deemed to be the Final Payment Date with
respect to each outstanding Award.
-28-
<PAGE> 29
10.10 Effective Date. The Effective Date of the Plan shall be January
1, 1998. Awards may be granted at any time on or after the Effective Date.
-29-
<PAGE> 1
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
For the purposes of this calculation, "earnings" consist of income (loss) before
income taxes (benefit) and fixed charges. "Fixed charges" consist of interest
expense, amortization of deferred financing fees and the component of rental
expense believed by management to be representative of the interest factor
thereon (deemed to be one-third of rental expense). Earnings were insufficient
to cover fixed charges by $32.4 million, $8.6 million, $3.7 million, $2.1
million and $1.0 million for the years ended December 31, 1998, 1997, 1996,
1995, and 1994, respectively.
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of RMSI
<TABLE>
<CAPTION>
Company Jurisdiction of Organization
------- ----------------------------
<S> <C>
Marketing Specialists Sales Company Texas
Bromar, Inc. California
Brokerage Services, Inc. California
Atlas Marketing Company, Inc. North Carolina
Century Food Brokers of Hickory, Inc. North Carolina
East Coast Food Brokerage, Inc. North Carolina
Ultimate Food Sales, Inc. North Carolina
Cumberland Food Brokers, Inc. North Carolina
Meatmaster Brokerage, Inc. North Carolina
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated February 26, 1999 for Richmont Marketing
Specialists Inc.; March 25, 1998 for Atlas Marketing Company, Inc.; and March 7,
1997 for Bromar Inc. and Subsidiaries, in the Registration Statement (Form S-4
No. 333- ) and related Prospectus of Richmont Marketing Specialists
Inc. for the registration of $100,000,000 10 1/8% Senior Subordinated Notes Due
2007.
/s/ ERNST & YOUNG LLP
Dallas, Texas
March 10, 1999
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT
OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2)_____.
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
ORGANIZED UNDER THE LAWS OF 74-0800980
THE UNITED STATES OF AMERICA (I.R.S. employer
(State of incorporation identification no.)
if not a National Bank)
712 MAIN STREET 77002
HOUSTON, TEXAS (Zip Code)
(Address of principal executive offices)
LEE BOOCKER
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
712 MAIN STREET, 26TH FLOOR
HOUSTON, TEXAS 77002
(713) 216-2448
(Name, address and telephone
number of agent for service)
RICHMONT MARKETING SPECIALISTS INC.
(Exact name of obligor as specified in its charter)
DELAWARE 75-2728359
(State or other jurisdictions of (I.R.S. employer
incorporation or organization) identification nos.)
17855 N. DALLAS PARKWAY, SUITE 200 75287
DALLAS, TEXAS (Zip Code)
(Address of obligor's principal executive offices)
$100,000,000 SENIOR SUBORDINATED NOTES DUE 2007
(Title of the indenture securities)
<PAGE> 2
<TABLE>
<S> <C>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which it is subject.
Name Address
Comptroller of the Currency Washington, D.C.
Board of Governors of the Federal Reserve System Washington, D.C.
Federal Deposit Insurance Corporation Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes, the trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the Trustee, describe each
such affiliation. (See note on Page 3)
The obligor is not an affiliate of the trustee.
ITEM 16. LIST OF EXHIBITS
List below all exhibits filed as part of this statement of
eligibility:
Exhibit 1. A copy of the Articles of Association of the Trustee as now in effect.
Exhibit 2. A copy of the certificate of authority of the Trustee to commence business.
Exhibit 3. A copy of the authorization of the Trustee to exercise corporate trust powers.
Exhibit 4. A copy of the existing bylaws of the Trustee.
Exhibit 5. Not Applicable.
Exhibit 6. The consents of the United States
institutional trustees required by Section
321(b) of the Trust Indenture Act of 1939.
Exhibit 7. A copy of the latest report of condition
of the Trustee published pursuant to law or
the requirements of its supervising or
examining authority.
Exhibit 8. Not Applicable.
Exhibit 9. Not Applicable.
</TABLE>
2
<PAGE> 3
NOTE REGARDING INCORPORATED EXHIBIT
Effective January 20, 1998, the name of the Trustee was changed from Texas
Commerce Bank National Association to Chase Bank of Texas, National Association.
The exhibits incorporated herein by reference, except for Exhibit 7, were filed
under the former name of the Trustee.
Exhibit 1. Incorporated by reference to exhibit
bearing the same designation and previously
filed with the Securities and Exchange
Commission as exhibit to the Form S-3 File
No. 33-56195.
Exhibit 2. Incorporated by reference to exhibit
bearing the same designation and previously
filed with the Securities and Exchange
Commission as exhibit to the Form S-3 File
No. 33-42814.
Exhibit 3. Incorporated by reference to exhibit
bearing the same designation and previously
filed with the Securities and Exchange
Commission as exhibit to the Form S-11 File
No. 33-25132.
Exhibit 4. Incorporated by reference to exhibit
bearing the same designation and previously
filed with the Securities and Exchange
Commission as exhibit to the Form S-3 file
No. 33-65055.
Exhibit 6. Incorporated herewith.
Exhibit 7. Incorporated by reference to exhibit
bearing the same designation and previously
filed with the Securities and Exchange
Commission as exhibit to the Form S-3 File
No. 333-63747.
NOTE: The answer to Item 2 is based in part on information provided or
confirmed by the obligor. The accuracy and completeness of such
information is hereby disclaimed by the Trustee.
3
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, Chase Bank of Texas, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of Dallas,
and State of Texas, on the 5th day of March 1999.
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
By: /s/ Michael A. Scrivner
------------------------------------------
Name: Michael A. Scrivner
Title: Vice President
4
<PAGE> 5
EXHIBIT 6
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
The undersigned is trustee under an indenture between Richmont
Marketing Specialist Inc., a Delaware corporation (the "Company") and Chase Bank
of Texas, National Association (formerly known as Texas Commerce Bank National
Association), as Trustee, entered into in connection with the issuance of the
Company's Senior Subordinated Notes.
In accordance with Section 321(b) of the Trust Indenture Act of 1939,
the undersigned hereby consents that reports of examinations of the undersigned,
made by Federal or State authorities authorized to make such examinations, may
be furnished by such authorities to the Securities and Exchange Commission upon
its request therefor.
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
By: /s/ Michael A. Scrivner
-----------------------------------------
Name: Michael A. Scrivner
Title: Vice President
Date: March 5, 1999
5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RICHMONT MARKETING SPECIALIST, INC. AT DECEMBER 31, 1998
AND 1997 AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997 DEC-31-1996
<PERIOD-END> DEC-31-1998 DEC-31-1997 DEC-31-1996
<CASH> 26,633,832 41,394,614 0
<SECURITIES> 0 0 0
<RECEIVABLES> 32,620,231 29,354,598 0
<ALLOWANCES> (4,325,079) (3,161,148) 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 57,938,872 70,358,315 0
<PP&E> 38,549,416 33,412,848 0
<DEPRECIATION> (15,530,327) (11,244,481) 0
<TOTAL-ASSETS> 174,762,022 211,529,501 0
<CURRENT-LIABILITIES> 25,066,982 24,870,596 0
<BONDS> 161,796,202 167,179,374 0
0 0 0
0 0 0
<COMMON> 1,975 1,975 0
<OTHER-SE> (1,505,367) (1,505,367) 0
<TOTAL-LIABILITY-AND-EQUITY> 174,762,022 211,529,501 0
<SALES> 0 0 0
<TOTAL-REVENUES> 218,294,383 155,932,228 73,447,480
<CGS> 0 0 0
<TOTAL-COSTS> (235,051,825) (159,955,590) (74,969,546)
<OTHER-EXPENSES> 1,835,829 876,201 508,518
<LOSS-PROVISION> 11,404,800 6,271,190 2,569,294
<INTEREST-EXPENSE> (17,488,710) (5,408,717) (2,670,656)
<INCOME-PRETAX> (32,410,323) (8,595,878) (3,684,204)
<INCOME-TAX> (73,656) (1,168,861) (551,638)
<INCOME-CONTINUING> (32,336,667) (7,427,017) (3,132,566)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (32,366,667) (7,427,017) (3,132,566)
<EPS-PRIMARY> (234.95) (53.96) (34.80)
<EPS-DILUTED> 0 0 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
RICHMONT MARKETING SPECIALISTS INC.
Offer for all Outstanding
10 1/8% Series A Senior Subordinated Notes due 2007
in Exchange for
10 1/8% Series B Senior Subordinated Notes due 2007
which Have Been Registered Under
the Securities Act of 1933, As Amended,
Pursuant to the Prospectus, dated __________, 1999
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME,
ON __________, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS
MAY BE WITHDRAWN PRIOR TO 5:00 P.M, NEW YORK CITY TIME, ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
Delivery To: Chase Bank of Texas, National Association, Exchange Agent
By Mail, By Hand or Overnight Courier:
Chase Bank of Texas, National Association
2200 Ross Avenue, 5th Floor
Dallas, TX
Attention: ____________
By Facsimile Transmission:
(for Eligible Institutions Only)
[________________]
Confirm by Telephone:
[________________]
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE,
OR TRANSMISSION OF THIS INSTRUMENT VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE,
WILL NOT CONSTITUTE A VALID DELIVERY OF THIS LETTER OF TRANSMITTAL.
The undersigned acknowledges that he or she has received and reviewed the
Prospectus, dated ____, 1999 (the "Prospectus"), of Richmont Marketing
Specialists Inc., a Delaware corporation (the "Issuer") and this Letter of
Transmittal (the "Letter of Transmittal" or the "Letter"), which together
constitute the Issuer's offer (the "Exchange Offer") to exchange an aggregate
principal amount at maturity of up to $100,000,000 of the Issuer's 10 1/8%
Series B Senior Subordinated Notes due 2007 which have been registered under the
Securities Act of 1933, as amended (the "New Notes"), for a like principal
amount, in the aggregate, of the Issuer's issued and outstanding 10 1/8% Series
A Senior Subordinated Notes due 2007 (the "Old Notes") from the registered
holders thereof.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. The New Notes will bear interest from the most recent date to which
interest has been paid. Accordingly, registered holders of New Notes on the
relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid. Old Notes accepted for exchange
will cease to accrue interest from and after the date of consummation of the
Exchange Offer. Holders of Old Notes whose Old Notes are accepted for exchange
will not receive any payment in respect of accrued interest on such Old Notes
otherwise payable on any interest payment date the record date for which occurs
on or after consummation of the Exchange Offer.
This Letter is to be completed by a Holder of Old Notes either if
certificates for such Old Notes are to be forwarded herewith or if a tender is
to be made by book-entry transfer to the account maintained by Chase Bank of
Texas, National Association, as Exchange Agent for the Exchange Offer (the
"Exchange Agent"), at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in "The Exchange
Offer--Book-Entry Transfers" section of the Prospectus and an Agent's Message is
not delivered. Tenders by book-entry transfer may also be made by delivering an
Agent's Message in lieu of this Letter. The term "Agent's Message" means a
message, transmitted by
<PAGE> 2
the Book-Entry Transfer Facility to and received by the Exchange Agent and
forming a part of a Book- Entry Confirmation (as defined below), which states
that the Book-Entry Transfer Facility has received an express acknowledgment
from the tendering participant, which acknowledgment states that such
participant has received and agrees to be bound by this Letter and that the
Issuers may enforce this Letter against such participant. Holders of Old Notes
whose certificates are not immediately available, or who are unable to deliver
their certificates or confirmation of the book-entry tender of their Old Notes
into the Exchange Agent's account at the Book-Entry Transfer Facility (a
"Book-Entry Confirmation") and all other documents required by this Letter to
the Exchange Agent on or prior to the Expiration Date, must tender their Old
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures" section of the Prospectus. See
Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Exchange Agent.
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
List below the Old Notes to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and principal amount of
Old Notes should be listed on a separate signed schedule affixed hereto.
<TABLE>
- -----------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES 1 2 3
- -----------------------------------------------------------------------------------------------------
Aggregate
Principal Principal
Name(s) and Address(es) of Registered Holder(s) Certificate Amount of Amount
(Please fill in, if blank) Number(s)* Old Note(s) Tendered**
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
-------------------------------------------
-------------------------------------------
-------------------------------------------
Total
- -----------------------------------------------------------------------------------------------------
* Need not be completed if Old Notes are being tendered by book-entry transfer.
** Unless otherwise indicated in this column, a Holder will be deemed to have tendered ALL of the
Old Notes represented by the Old Notes indicated in column 2. See Instruction 2. Old Notes
tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple
thereof. See Instruction 1.
- -----------------------------------------------------------------------------------------------------
</TABLE>
|_| CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ____________________________________________
Account Number ____________________ Transaction Code Number______________
By crediting the Old Notes to the Exchange Agent's account at the
Book-Entry Transfer Facility's Automated Tender Offer Program ("ATOP") and by
complying with applicable ATOP procedures with respect to the Exchange Offer,
including transmitting to the Exchange Agent a computer-generated Agent's
Message in which the Holder of the Old Notes acknowledges and agrees to be bound
by the terms of, and makes the representations and warranties contained in, the
Letter, the participant in the Book- Entry Transfer Facility confirms on behalf
of itself and the beneficial owners of such Old Notes all provisions of this
Letter (including all representations and warranties) applicable to it and such
beneficial owner as fully as if it had completed the information required herein
and executed and transmitted this Letter to the Exchange Agent.
|_| CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO
A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE
AGENT AND COMPLETE THE FOLLOWING:
2
<PAGE> 3
Name(s) of Registered Holder(s) _________________________________________
Window Ticket Number (if any) ___________________________________________
Date of Execution of Notice of Guaranteed Delivery ______________________
Name of Institution Which Guaranteed Delivery ___________________________
If Delivered by Book-Entry Transfer, Complete the Following:
Account Number __________________________________________________________
Transaction Code Number _________________________________________________
Name of Tendering Institution ___________________________________________
|_| CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS
OR SUPPLEMENTS THERETO.
Name: __________________________________________________________________________
Address: ___________________________________________________________________
_______________________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of New
Notes. If the undersigned is a broker-dealer that will receive New Notes for its
own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act of
1933, as amended, in connection with any resale of such New Notes; however, by
so acknowledging and by delivering such a prospectus the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act of 1933, as amended. If the undersigned is a broker-dealer that will receive
New Notes, it represents that the Old Notes to be exchanged for the New Notes
were acquired as a result of market-making activities or other trading
activities.
3
<PAGE> 4
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Issuer the aggregate principal amount of Old
Notes indicated above. Subject to, and effective upon, the acceptance for
exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns
and transfers to, or upon the order of, the Issuer all right, title and interest
in and to such Old Notes as are being tendered hereby.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the undersigned's true and lawful agent and attorney-in-fact with
respect to such tendered Old Notes, with full power of substitution, among other
things, to cause the Old Notes to be assigned, transferred and exchanged. The
undersigned hereby represents and warrants that the undersigned has full power
and authority to tender, sell, assign and transfer the Old Notes, and to acquire
New Notes issuable upon the exchange of such tendered Old Notes, and that, when
the same are accepted for exchange, the Issuer will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim when the same are accepted
by the Issuer. The undersigned hereby further represents that any New Notes
acquired in exchange for Old Notes tendered hereby will have been acquired in
the ordinary course of business of the person receiving such New Notes, whether
or not such person is the undersigned, that neither the Holder of such Old Notes
nor such other person has any arrangement or understanding with any person to
participate in the distribution of such New Notes and that neither the Holder of
such Old Notes nor any such other person is an "affiliate," as defined in Rule
405 under the Securities Act of 1933, as amended (the "Securities Act"), of the
Issuer.
The undersigned acknowledges that this Exchange Offer is being made in
reliance on interpretations by the staff of the Securities and Exchange
Commission (the "SEC"), as set forth in no-action letters issued to third
parties, that the New Notes issued pursuant to the Exchange Offer in exchange
for the Old Notes may be offered for resale, resold and otherwise transferred by
Holders or other persons receiving the New Notes thereof (other than any such
Holder or other person that is an "affiliate" of the Issuer within the meaning
of Rule 405 under the Securities Act), without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of business of the person receiving
such New Notes, whether or not such person is the Holder, and neither the Holder
nor such other person has any arrangement or understanding with any person to
participate in the distribution of such New Notes. However, the SEC has not
considered the Exchange Offer in the context of a no-action letter and there can
be no assurance that the staff of the SEC would make a similar determination
with respect to the Exchange Offer as in other circumstances. If the undersigned
is not a broker-dealer, the undersigned represents that it is not engaged in,
and does not intend to engage in, a distribution of New Notes and has no
arrangement or understanding to participate in a distribution of New Notes. If
any Holder is an affiliate of the Issuer, is engaged in or intends to engage in
or has any arrangement or understanding with respect to the distribution of the
New Notes to be acquired pursuant to the Exchange Offer, such Holder (i) could
not rely on the applicable interpretations of the staff of the SEC and (ii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. If the undersigned is
a broker-dealer that will receive New Notes for its own account in exchange for
Old Notes, it represents that the Old Notes to be exchanged for the New Notes
were acquired by it as a result of market-making activities or other trading
activities and acknowledges that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes; however, by so
4
<PAGE> 5
acknowledging and by delivering a prospectus meeting the requirements of the
Securities Act, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Issuer to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer--Withdrawal Rights" section
of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not exchanged)
in the name of the undersigned or, in the case of a book-entry delivery of Old
Notes, please credit the account indicated above maintained at the Book-Entry
Transfer Facility. Similarly, unless otherwise indicated under the box entitled
"Special Delivery Instructions" below, please send the New Notes (and, if
applicable, substitute certificates representing Old Notes for any Old Notes not
exchanged) to the undersigned at the address shown above in the box entitled
"Description of Old Notes."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED
THE OLD NOTES AS SET FORTH IN SUCH BOX ABOVE.
- --------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 3 and 4)
- --------------------------------------------------------------------------------
To be completed ONLY if certificates for Old Notes not exchanged and/or
New Notes are to be issued in the name of someone other than the person or
persons whose signature(s) appear(s) on this Letter above, or if Old Notes
delivered by book-entry transfer which are not accepted for exchange are to be
returned by credit to an account maintained at the Book-Entry Transfer Facility
other than the account indicated above.
Issue: New Notes and/or Old Notes to:
Name(s) ........................................................................
(Please Type or Print)
................................................................................
(Please Type or Print)
Address ........................................................................
................................................................................
(Zip Code)
(Complete Substitute Form W-9)
|_| Credit unexchanged Old Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility account set forth below.
------------------------------------------------------------------------------
(Book-Entry Transfer Facility
Account Number, if applicable)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4)
To be completed ONLY if certificates for Old Notes not exchanged and/or
New Notes are to be sent to someone other than the person or persons whose
signature(s) appear(s) on this Letter above or to such person or persons at an
address other than shown in the box entitled "Description of Old Notes" on this
Letter above.
Mail: New Notes and/or Old Notes to:
Name(s).........................................................................
(Please Type or Print)
................................................................................
(Please Type or Print)
Address ........................................................................
................................................................................
(Zip Code)
- --------------------------------------------------------------------------------
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU
THEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY
CONFIRMATION AND ALL
5
<PAGE> 6
OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED
BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION
DATE.
6
<PAGE> 7
- --------------------------------------------------------------------------------
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(Complete Accompanying Substitute Form W-9 on reverse side)
Dated:............................................ ....................., 1999
x .............................................. ....................., 1999
x .............................................. ....................., 1999
Signature(s) of Owner Date
Area Code and Telephone Number................................
This Letter must be signed by the registered Holder(s) as the name(s)
appear(s) on the certificate(s) for the Old Notes hereby tendered or on a
security position, on listing or by any person(s) authorized to become
registered Holder(s) by endorse ments and documents transmitted herewith. If
signature is by a trustee, executor, administrator, guardian, officer or other
person acting in a fiduciary or representa tive capacity, please set forth full
title. See Instruction 3.
Name(s):............................................................
....................................................................
(Please Type or Print)
Capacity:...........................................................
Address:............................................................
....................................................................
(Including Zip Code)
SIGNATURE GUARANTEE
(If required by Instruction 3)
Signature(s) Guaranteed by
an Eligible Institution: ...........................................
(Authorized Signature)
....................................................................
(Title)
....................................................................
(Name and Firm)
Dated: ..................................................., 1999
- --------------------------------------------------------------------------------
7
<PAGE> 8
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer for the
10 1/8% Series A Senior Subordinated Notes due 2007
of Richmont Marketing Specialists Inc.. in Exchange for the
10 1/8% Series B Senior Subordinated Notes due 2007, which Have Been
Registered Under the Securities Act of 1933, As Amended
1. Delivery of this Letter and Notes; Guaranteed Delivery Procedures.
This letter is to be completed by Holders of Old Notes either if
certificates are to be forwarded herewith or if tenders are to be made pursuant
to the procedures for delivery by book-entry transfer set forth in "The Exchange
Offer--Book-Entry Transfers" section of the Prospectus and an Agent's Message is
not delivered. Tenders by book-entry transfer may also be made by delivering an
Agent's Message in lieu of this Letter. The term "Agent's Message" means a
message, transmitted by the Book-Entry Transfer Facility to and received by the
Exchange Agent and forming a part of a Book-Entry Confirmation, which states
that the Book-Entry Transfer Facility has received an express acknowledgment
from the tendering participant, which acknowledgment states that such
participant has received and agrees to be bound by the Letter of Transmittal and
that the Issuer may enforce the Letter of Transmittal against such participant.
Certificates for all physically tendered Old Notes, or Book-Entry Confirmation,
as the case may be, as well as a properly completed and duly executed Letter (or
manually signed facsimile hereof or Agent's Message in lieu thereof) and any
other documents required by this Letter, must be received by the Exchange Agent
at the address set forth herein on or prior to the Expiration Date, or the
tendering Holder must comply with the guaranteed delivery procedures set forth
below. Old Notes tendered hereby must be in denominations of principal amount of
$1,000 and any integral multiple thereof.
Holders whose certificates for Old Notes are not immediately available or
who cannot deliver their certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Old Notes
pursuant to the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to
such procedures, (i) such tender must be made through an Eligible Institution,
(ii) prior to 5:00 p.m., New York City time, on the Expiration Date, the
Exchange Agent must receive from such Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery, substantially in the form
provided by the Issuer (by telegram, telex, facsimile transmission, mail or hand
delivery), setting forth the name and address of the Holder of Old Notes and the
amount of Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that within five New York Stock Exchange ("NYSE") trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Old Notes, in proper form for transfer,
or a Book-Entry Confirmation, as the case may be, together with a properly
completed and duly executed Letter (or facsimile thereof or Agent's Message in
lieu thereof) with any required signature guarantees and any other documents
required by this Letter will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, together with a properly completed and duly executed Letter (or
facsimile thereof or Agent's Message in lieu thereof) with any required
signature guarantees and all other documents required by this Letter, are
received by the Exchange Agent within five NYSE trading days after the
Expiration Date. An "Eligible Institution" is a firm which is a financial
institution (including most banks, savings and loan associations and
8
<PAGE> 9
brokerage houses) that is a participant in the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Program or
the Stock Exchanges Medallion Program.
The method of delivery of this Letter, the Old Notes and all other
required documents is at the election and risk of the tendering Holders, but the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. If Old Notes are sent by mail, it is suggested that the mailing
be registered mail, properly insured, with return receipt requested, made
sufficiently in advance of the Expiration Date to permit delivery to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. Partial Tenders (not applicable to Holders who tender by book-entry
transfer).
If less than all of the Old Notes evidenced by a submitted certificate are
to be tendered, the tendering Holder(s) should fill in the aggregate principal
amount of Old Notes to be tendered in the box above entitled "Description of Old
Notes--Principal Amount Tendered." A reissued certificate representing the
balance of nontendered Old Notes will be sent to such tendering Holder, unless
otherwise provided in the appropriate box on this Letter, promptly after the
Expiration Date. All of the Old Notes delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated.
3. Signatures on this Letter; Bond Powers and Endorsements; Guarantee of
Signatures.
If this Letter is signed by the Holder of the Old Notes tendered hereby,
the signature must correspond exactly with the name as written on the face of
the certificates or on the Book-Entry Transfer Facility's security position
listing as the Holder of such Old Notes without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint owners,
all of such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
When this Letter is signed by the registered Holder or Holders of the Old
Notes specified herein and tendered hereby, no endorsements of certificates or
written instrument or instruments of transfer or exchange are required. If,
however, the Old Notes are registered in the name of a person other than a
signer of the Letter, the Old Notes surrendered for exchange must be endorsed
by, or be accompanied by a written instrument or instruments of transfer or
exchange, in satisfactory form as determined by the Issuer in its sole
discretion, duly executed by the registered national securities exchange with
the signature thereon guaranteed by an Eligible Institution.
If this Letter is signed by a person or persons other than the registered
Holder or Holders of Old Notes, such Old Notes must be endorsed or accompanied
by powers of attorney, in either case signed exactly as the name or names of the
registered Holder or Holders that appear on the Old Notes.
If this Letter or any Old Notes or powers of attorneys are signed by
trustees, executors, administra tors, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative
9
<PAGE> 10
capacity, such persons should so indicate when signing, and, unless waived by
the Issuer, proper evidence satisfactory to the Issuer of their authority to so
act must be submitted with the Letter.
Endorsements on certificates for Old Notes or signatures on powers of
attorneys required by this Instruction 3 must be guaranteed by an Eligible
Institution.
Signatures on this Letter need not be guaranteed by an Eligible
Institution, provided the Old Notes are tendered: (i) by a registered Holder of
Old Notes (which term, for purposes of the Exchange Offer, includes any
participant in the Book-Entry Transfer Facility system whose name appears on a
security position listing as the Holder of such Old Notes) who has not completed
the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on this Letter, or (ii) for the account of an Eligible
Institution.
4. Special Issuance and Delivery Instructions
Tendering Holders of Old Notes should indicate in the applicable box the
name and address to which New Notes issued pursuant to the Exchange Offer and or
substitute certificates evidencing Old Notes not exchanged are to be issued or
sent, if different from the name or address of the person signing this Letter.
In the case of issuance in a different name, the employer identification or
social security number of the person named must also be indicated. Holders
tendering Old Notes by book-entry transfer may request that Old Notes not
exchanged be credited to such account maintained at the Book-Entry Transfer
Facility as such Holder may designate hereon. If no such instructions are given,
such Old Notes not exchanged will be returned to the name and address of the
person signing this Letter.
5. Taxpayer Identification Number.
Federal income tax law generally requires that a tendering Holder whose
Old Notes are accepted for exchange must provide the Issuer (as payor) with such
Holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9
below, which in the case of a tendering Holder who is an individual, is his or
her social security number. If the Issuer is not provided with the current TIN
or an adequate basis for an exemption, such tendering Holder may be subject to a
$50 penalty imposed by the Internal Revenue Service. In addition, delivery to
such tendering Holder of New Notes may be subject to backup withholding in an
amount equal to 31% of all reportable payments made after the exchange. If
withholding results in an overpayment of taxes, a refund may be obtained.
Exempt Holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed Guidelines of Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for
additional instructions.
To prevent backup withholding, each tendering Holder of Old Notes must
provide its correct TIN by completing the Substitute Form W-9 set forth below,
certifying that the TIN provided is correct (or that such Holder is awaiting a
TIN) and that (i) the Holder is exempt from backup withholding, or (ii) the
Holder has not been notified by the Internal Revenue Service that such Holder is
subject to backup withholding as a result of a failure to report all interest or
dividends or (iii) the Internal Revenue Service has notified the Holder that
such Holder is no longer subject to backup withholding. If the tendering Holder
of Old Notes is a nonresident alien or foreign entity not subject to backup
withholding, such Holder must give the Exchange Agent a completed Form W-8,
Certificate of Foreign Status. These forms
10
<PAGE> 11
may be obtained from the Exchange Agent. If the Old Notes are in more than one
name or are not in the name of the actual owner, such Holder should consult the
W-9 Guidelines for information on which TIN to report. If such Holder does not
have a TIN, such Holder should consult the W-9 Guidelines for instructions on
applying for a TIN, check the box in Part 2 of the Substitute Form W-9 and write
"applied for" in lieu of its TIN. Note: Checking this box and writing "applied
for" on the form means that such Holder has already applied for a TIN or that
such Holder intends to apply for one in the near future. If such Holder does not
provide its TIN to the Exchange Agent within 60 days, backup withholding will
begin and continue until such Holder furnishes its TIN to the Exchange Agent.
The information requested above should be directed to the Exchange Agent
at the following address:
Delivery To: Chase Bank of Texas, National Association, Exchange Agent
By mail, By Hand and Overnight Courier:
Chase Bank of Texas, National Association
2200 Ross Avenue, 5th Floor
Dallas, TX 75201
Attention: __________
By Facsimile
(for Eligible Institutions Only):
[__________]
Confirm by Telephone:
[__________]
6. Transfer Taxes.
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith. If, however, New Notes are to be
delivered to, or are to be issued in the name of, any person other than the
registered Holder of the Old Notes tendered, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes in connection with the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered Holder or any other persons) will be payable by the tendering Holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with this Letter, the amount of such transfer taxes will be billed
directly to such tendering Holder.
Except as provided in this Instruction 6, it will not be necessary for transfer
tax stamps to be affixed to the Old Notes specified in this Letter.
7. Waiver of Conditions.
The Issuer reserves the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to any particular Old Note
either before or after the Expiration Date (including the right to waive the
ineligibility of any Holder who seeks to tender Old Notes in the Exchange Offer)
11
<PAGE> 12
8. No Conditional Tenders.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders of Old Notes, by execution of this Letter or an
Agent's Message in lieu thereof, shall waive any right to receive notice of the
acceptance of their Old Notes for exchange.
Neither the Issuer, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of Old
Notes nor shall any of them.
9. Mutilated, Lost, Stolen or Destroyed Old Notes.
Any Holder whose Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
10. Withdrawal Rights
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at the address set forth above prior to 5:00
p.m., New York City time, on the Expiration Date. Any such notice of withdrawal
must: (i) specify the name of the person having tendered the Old Notes to be
withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn
(including the principal amount of such Old Notes), and (iii) (where
certificates for Old Notes have been transmitted) specify the name in which such
Old Notes are registered, if different from that of the Depositor. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then prior to the release of such certificates the Depositor
must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such Holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer set forth
in "The Exchange Offer--Book-Entry Transfers" section of the Prospectus, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Old Notes and
otherwise comply with the procedures of such facility. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Issuer, whose determination shall be final and binding on
all parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer and no New Notes will
be issued with respect thereto unless the Old Notes so withdrawn are validly
retendered. Any Old Notes that have been tendered for exchange but which are not
exchanged for any reason will be returned to the Holder thereof without cost to
such Holder (or, in the case of Old Notes tendered by book-entry transfer into
the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures set forth in "The Exchange Offer--Book-Entry
Transfers" section of the Prospectus, such Old Notes will be credited to an
account maintained with the Book-Entry Transfer Facility for the Old Notes) as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following the
procedures described above at any time on or prior to 5:00 p.m., New York City
time, on the Expiration Date.
12
<PAGE> 13
11. Requests for Assistance or Additional Copies.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, and requests for Notices of
Guaranteed Delivery and other related documents may be directed to the Exchange
Agent, at the address and telephone number indicated above.
13
<PAGE> 14
TO BE COMPLETED BY ALL TENDERING HOLDERS
(See Instruction 5)
PAYOR'S NAME: TEXAS COMMERCE BANK NATIONAL ASSOCIATION
<TABLE>
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Part 1--PLEASE PROVIDE YOUR
TIN IN THE BOX AT RIGHT TIN:
AND CERTIFY BY SIGNING ______________________________
SUBSTITUTE AND DATING BELOW. Social Security Number or
Employer Identification Number
----------------------------------------------------------------
Form W-9 Part 2--TIN Applied For |_|
Department of the Payor's Request For Taxpayer Identification Number ("TIN") and
Treasury Internal Revenue Certification
Service CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I
CERTIFY THAT:
Payor's Request for
Taxpayer (1) the number shown on this form is my correct Taxpayer
Identification Num- Identification Number (or I am waiting for a number to be
ber issued to me).
("TIN") and
Certification (2) I am not subject to backup withholding either because:
(a) I am exempt from backup withholding, or (b) I have not
been notified by the Internal Revenue Service (the "IRS")
that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to backup
withholding, and
(3) any other information provided on this form is true and
correct.
SIGNATURE ...............................................
DATE ..........................
- ---------------------------------------------------------------------------------------------
You must cross out item (2) of the above certification if you have been notified by the IRS
that you are subject to backup withholding because of underreporting of interest or dividends
on your tax return and you have not been notified by the IRS that you are no longer subject
to backup withholding.
- ---------------------------------------------------------------------------------------------
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9
14
<PAGE> 15
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of the exchange, 31 percent
of all reportable payments made to me thereafter will be withheld until I
provide a number.
________________________________ _____________________________________
Signature Date
- --------------------------------------------------------------------------------
15
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY FOR
RICHMONT MARKETING SPECIALISTS INC.
This form or one substantially equivalent hereto must be used to accept
the Exchange Offer of Richmont Marketing Specialists Inc. (the "Issuer) made
pursuant to the Prospectus, dated _____, 1999 (the "Prospectus"), if
certificates for the outstanding 10 1/8% Series A Senior Subordinated Notes due
2007 of the Issuer (the "Old Notes") are not immediately available or if the
procedure for book-entry transfer cannot be completed on a timely basis or time
will not permit all required documents to reach Chase Bank of Texas, National
Association, as exchange agent (the "Exchange Agent") prior to 5:00 p.m., New
York City time, on the Expiration Date of the Exchange Offer. Such form may be
delivered or transmitted by facsimile transmission, mail or hand delivery to the
Exchange Agent as set forth below. Capitalized terms not defined herein are
defined in the Prospectus.
Delivery To: The Chase Bank of Texas, National Association, Exchange Agent
By Mail or Hand Delivery or Overnight Courier:
The Chase Bank of Texas, National Association
2200 Ross Avenue, 5th Floor
Dallas, Texas 75201
Attention: __________
By Facsimile Transmission:
(for Eligible Institutions Only)
[________________]
Confirm by Telephone:
[__________]
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE,
OR TRANSMISSION OF THIS INSTRUMENT VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE,
WILL NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus, the undersigned
hereby tenders to the Issuer the principal amount of Old Notes set forth below
pursuant to the guaranteed delivery procedure described in "The Exchange
Offer--Guaranteed Delivery Procedures" section of the Prospectus.
<PAGE> 2
Principal Amount of Old Notes
Tendered:*
$____________________________________
Certificate Nos. (if available):
Total Principal Amount Represented by
Old Notes Certificate(s):
$____________________________________
If Old Notes will be delivered by book-entry
transfer to The Depository Trust Company,
provide account number.
Account Number_______________________
- --------------------------------------------------------------------------------
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
X______________________________ ___________
X______________________________ ___________
Signature(s) of Owner(s) Date
or Authorized Signatory
Area Code and Telephone Number:_________________________
Must be signed by the Holder(s) of Old Notes as their name(s) appear(s) on
certificates for Old Notes or on a security position listing, or by person(s)
authorized to become registered Holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below.
Please print name(s) and address(es)
Name(s): ___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
Capacity: ___________________________________________________________________
Address(es): ___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
- ----------
*Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
<PAGE> 3
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, an Eligible Institution (including most banks, savings
and loan associations and brokerage houses) that is a participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchanges Medallion Program), hereby
guarantees that the certificates for all physically tendered Old Notes, in
proper form for transfer, or a Book-Entry Confirmation, as the case may be,
together with a properly completed and duly executed Letter of Transmittal (or
facsimile thereof or Agent's Message in lieu thereof) with any required
signature guarantees and any other documents required by the Letter of
Transmittal, will be received by the Exchange Agent at the address set forth
above, within five New York Stock Exchange trading days after the date of
execution of the Notice of Guaranteed Delivery.
______________________________________ ________________________________________
Name of Firm Authorized Signature
______________________________________ ________________________________________
Address Title
______________________________________ Name:___________________________________
Zip Code (Please Type or Print)
Area Code and Tel. No.________________ Dated:________________________________
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR
OLD NOTES SHOULD BE SENT ONLY WITH A COPY OF YOUR PREVIOUSLY EXECUTED
LETTER OF TRANSMITTAL.
<PAGE> 1
EXHIBIT 99.3
RICHMONT MARKETING SPECIALISTS INC.
Offer for all Outstanding
10 1/8% Series A Senior Subordinated Notes due 2007
in Exchange for
10 1/8% Series B Senior Subordinated Notes due 2007,
which Have Been Registered Under
the Securities Act of 1933,
As Amended
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Richmont Marketing Specialists Inc. (the "Issuer") is offering, upon and
subject to the terms and conditions set forth in the prospectus dated , 1999
(the "Prospectus"), and the enclosed letter of transmittal (the "Letter of
Transmittal"), to exchange (the "Exchange Offer") their 10 1/8% Series B Senior
Subordinated Notes due 2005, which have been registered under the Securities Act
of 1933, as amended, for their outstanding 10 1/8% Series A Senior Subordinated
Notes due 2005 (the "Old Notes"). The Exchange Offer is being made in order to
satisfy certain obligations of the Issuer contained in the exchange and
registration rights agreement in respect of the Old Notes, dated December 19,
1997, by and among the Issuer and the initial purchasers referred to therein.
We are requesting that you contact your clients for whom you hold Old
Notes regarding the Exchange Offer. For your information and for forwarding to
your clients for whom you hold Old Notes registered in your name or in the name
of your nominee, or who hold Old Notes registered in their own names, we are
enclosing the following documents:
1. Prospectus dated , 1999;
2. The Letter of Transmittal for your use and for the information of your
clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange Offer
if certificates for Old Notes are not immediately available or time will not
permit all required documents to reach the Exchange Agent prior to the
Expiration Date (as defined below) or if the procedure for book-entry transfer
cannot be completed on a timely basis;
<PAGE> 2
4. A form of letter which may be sent to your clients for whose account
you hold Old Notes registered in your name or the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelopes addressed to The Bank of New York, the Exchange Agent
for the Exchange Offer.
Your prompt action is requested. The Exchange Offer will expire at 5:00
p.m., New York City time, on __, 1999, unless extended by the Issuer
(the "Expiration Date"). Old Notes tendered pursuant to the Exchange Offer may
be withdrawn at any time before the Expiration Date.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof or Agent's Message in lieu
thereof), with any required signature guarantees and any other required
documents, should be sent to the Exchange Agent and certificates representing
the Old Notes, or a timely confirmation of a book-entry transfer of such Old
Notes, should be delivered to the Exchange Agent, all in accordance with the
instructions set forth in the Letter of Transmittal and the Prospectus.
If a registered holder of Old Notes desires to tender, but such Old Notes
are not immediately available, or time will not permit such holder's Old Notes
or other required documents to reach the Exchange Agent before the Expiration
Date, or the procedure for book-entry transfer cannot be completed on a timely
basis, a tender may be effected by following the guaranteed delivery procedures
described in the Prospectus under "The Exchange Offer--Guaranteed Delivery
Procedures."
The Issuer will, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding the Prospectus and the related documents to the
beneficial owners of Old Notes held by them as nominee or in a fiduciary
capacity. The Issuer will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Holders will not be obligated
to pay or cause to be paid all stock transfer taxes applicable to the exchange
of Old Notes pursuant to the Exchange Offer.
Any inquiries you may have with respect to the Exchange Offer, or requests
for additional copies of the enclosed materials, should be directed to Texas
Commerce Bank National
2
<PAGE> 3
Association, the Exchange Agent for the Exchange Offer, at its address and
telephone number set forth on the front of the Letter of Transmittal.
Very truly yours,
Richmont Marketing Specialists Inc.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE ISSUER OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF
THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
3
<PAGE> 1
EXHIBIT 99.4
RICHMONT MARKETING SPECIALISTS INC.
Offer for all Outstanding
10 1/8% Series A Senior Subordinated Notes due 2007
in Exchange for
10 1/8% Series B Senior Subordinated Notes due 2007,
which Have Been Registered Under
the Securities Act of 1933,
As Amended
To Our Clients:
Enclosed for your consideration is a prospectus dated , 1999 (the
"Prospectus"), and the related letter of transmittal (the "Letter of
Transmittal"), relating to the offer (the "Exchange Offer") of Richmont
Marketing Specialists Inc. (the "Issuer") to exchange their 10 1/8% Series B
Senior Subordinated Notes due 2007, which have been registered under the
Securities Act of 1933, as amended, for their outstanding 10 1/8% Series A
Senior Subordinated Notes due 2007 (the "Old Notes"), upon the terms and subject
to the conditions described in the Prospectus and the Letter of Transmittal. The
Exchange Offer is being made in order to satisfy certain obligations of the
Issuer contained in the exchange and registration rights agreement in respect of
the Old Notes, dated December 19, 1997, by and among the Issuer and the initial
purchasers referred to therein.
This material is being forwarded to you as the beneficial owner of the Old
Notes held by us for your account but not registered in your name. A tender of
such Old Notes may only be made by us as the holder of record and pursuant to
your instructions.
Accordingly, we request instructions as to whether you wish us to tender
on your behalf the Old Notes held by us for your account, pursuant to the terms
and conditions set forth in the enclosed Prospectus and Letter of Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1999, unless extended by the Issuer. Any Old Notes
tendered pursuant to the Exchange Offer may be withdrawn at any time before the
Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Old Notes.
2. The Exchange Offer is subject to certain conditions set forth in the
Prospectus in the section captioned "The Exchange Offer--Certain Conditions to
the Exchange Offer."
<PAGE> 2
3. Any transfer taxes incident to the transfer of Old Notes from the
Holder to the Issuer will be paid by the Issuer.
4. The Exchange Offer expires at 5:00 p.m., New York City time, on
, 1999, unless extended by the Issuer.
If you wish to have us tender your Old Notes, please so instruct us by
completing, executing and returning to us the instruction form on the back of
this letter. The Letter of Transmittal is furnished to you for information only
and may not be used directly by you to tender Old Notes.
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by Richmont
Marketing Specialists Inc with respect to their Old Notes.
This will instruct you to tender the Old Notes held by you for the account
of the undersigned, upon and subject to the terms and conditions set forth in
the Prospectus and the related Letter of Transmittal.
Please tender the Old Notes held by you for my account as indicated below:
Aggregate Principal Amount of Old Notes
---------------------------------------
10 1/8% Series A Senior Subordinated _______________________________________
Notes due 2007
|_| Please do not tender any Old Notes
held by you for my account. _______________________________________
Dated: __________, 1999 _______________________________________
Signature(s)
_______________________________________
_______________________________________
Please print name(s) here
_______________________________________
_______________________________________
_______________________________________
Address(es)
_______________________________________
Area Code and Telephone Number
_______________________________________
Tax Identification or Social Security
No(s).
None of the Old Notes held by us for your account will be tendered unless
we receive written instructions from you to do so. Unless a specific contrary
instruction is given in the space provided, your signature(s) hereon shall
constitute an instruction to us to tender all the Old Notes held by us for your
account.
