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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(mark one)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended November 27, 1999
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
------------ ------------
Commission file number: 000-04892
CAL-MAINE FOODS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 64-0500378
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
3320 WOODROW WILSON AVENUE, JACKSON, MISSISSIPPI 39209
(Address of principal executive offices) (Zip Code)
(601) 948-6813
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Number of shares outstanding of each of the issuer's classes of common
stock (exclusive of treasury shares), as of December 25, 1999.
Common Stock, $0.01 par value 11,173,388 shares
Class A Common Stock, $0.01 par value 1,200,000 shares
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CAL-MAINE FOODS, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
PART I. FINANCIAL INFORMATION NUMBER
<S> <C> <C> <C>
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets -
November 27, 1999 and May 29, 1999 3
Condensed Consolidated Statements of Operations -
Three Months and Six Months Ended
November 27, 1999 and November 28, 1998 4
Condensed Consolidated Statements of Cash Flow -
Six Months Ended November 27, 1999 and
November 28, 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures of Market Risk 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CAL-MAINE FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
November 27, 1999 May 29, 1999
------------------------------------------
(unaudited) (Note 1)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,778 $ 36,198
Accounts receivable, net 22,245 14,617
Recoverable federal and state income taxes 3,858 -
Inventories 46,623 38,353
Prepaid expenses and other current assets 436 771
------------------------------------------
Total current assets 80,940 89,939
Notes receivable and investments 7,101 7,468
Goodwill 3,854 4,260
Other assets 3,175 2,104
Property, plant and equipment 226,837 184,354
Less accumulated depreciation (81,236) (74,443)
------------------------------------------
145,601 109,911
------------------------------------------
TOTAL ASSETS $ 240,671 $ 213,682
==========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 7,500 $ -
Accounts payable and accrued expenses 30,817 27,026
Current maturities of long-term debt 4,891 4,118
Current deferred income taxes 10,294 10,294
------------------------------------------
Total current liabilities 53,502 41,438
Long-term debt, less current maturities 104,463 79,886
Deferred expenses 1,489 1,489
Deferred income taxes 9,599 10,285
------------------------------------------
Total liabilities 169,053 133,098
Stockholders' equity:
Common stock $0.01 par value per share:
Authorized shares - 30,000,000
Issued and outstanding shares - 17,565,200 at November 27, 176 176
1999 and May 29, 1999
Class A common stock $0.01 par value: authorized, issued 12 12
and outstanding 1,200,000 shares
Paid-in capital 18,784 18,784
Retained earnings 63,126 71,525
Common stock in treasury - 6,371,312 shares at November (10,480) (9,913)
27, 1999 and 6,257,712 shares at May 29, 1999
------------------------------------------
Total stockholders' equity 71,618 80,584
------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 240,671 $ 213,682
==========================================
</TABLE>
See notes to condensed consolidated financial statements.
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CAL-MAINE FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
UNAUDITED
<TABLE>
<CAPTION>
13 Weeks Ended 26 Weeks Ended
November 27, 1999 November 28, 1998 November 27, 1999 November 28, 1998
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 71,054 $ 77,948 $ 130,109 $ 146,733
Cost of sales 64,387 60,645 121,709 123,349
--------------------------------------------------------------------------------
Gross profit 6,667 17,303 8,400 23,384
Selling, general and
administrative 9,612 9,286 18,708 18,221
--------------------------------------------------------------------------------
Operating income (loss) (2,945) 8,017 (10,308) 5,163
Other income (expense):
Interest expense, net (1,577) (875) (2,608) (1,492)
Other 245 (346) 134 (155)
--------------------------------------------------------------------------------
(1,332) (1,221) (2,474) (1,647)
--------------------------------------------------------------------------------
Income (loss) before income
taxes (4,277) 6,796 (12,782) 3,516
Income tax expense (benefit) (1,545) 2,542 (4,686) 1,349
--------------------------------------------------------------------------------
NET INCOME (LOSS) $ (2,732) $ 4,254 $ (8,096) $ 2,167
================================================================================
Net income (loss) per common
share:
Basic $ (.22) $ .32 $ (.65) $ .17
================================================================================
Diluted $ (.22) $ .32 $ (.65) $ .16
================================================================================
Weighted average shares
outstanding:
Basic 12,403 13,115 12,427 13,131
================================================================================
Diluted 12,403 13,252 12,427 13,284
================================================================================
</TABLE>
See notes to condensed consolidated financial statements.
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CAL-MAINE FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
26 Weeks Ended
November 27, 1999 November 28, 1998
-----------------------------------------
<S> <C> <C>
Cash flows provided by (used in) operating activities $ (9,095) $ 9,631
Cash flows from investing activities:
Purchases of property, plant and equipment (1,641) (2,251)
Construction of production facilities (9,462) (3,860)
Purchases of shell egg production and processing business (36,205) -
Payments received on notes receivable and from investments 1,186 339
Increase in note receivable, investments and other assets (787) (1,125)
Net proceeds from sale of property, plant and equipment 14 3,655
-----------------------------------------
Net cash used in investing activities (46,895) (3,242)
Cash flows from financing activities:
Notes payable to banks 7,500 -
Long-term borrowings 23,445 6,350
Principal payments on long-term debt and capital leases (2,505) (2,436)
Purchases of common stock for treasury (567) (302)
Payment of dividends (303) (273)
-----------------------------------------
Net cash provided by financing activities 27,570 3,339
-----------------------------------------
Increase (decrease) in cash and cash equivalents (28,420) 9,728
Cash and cash equivalents at beginning of period 36,198 41,126
-----------------------------------------
Cash and cash equivalents at end of period $ 7,778 $ 50,854
=========================================
</TABLE>
See notes to condensed consolidated financial statements.
5
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CAL-MAINE FOODS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(in thousands, except share amounts)
November 27, 1999
(unaudited)
1. Presentation of Interim Information
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of the management,
all adjustments (consisting of normal occurring accruals) considered necessary
for a fair presentation have been included. Operating results for the
three-month and six-month periods ended November 27, 1999 are not necessarily
indicative of the results that may be expected for the year ended June 3, 2000.
The balance sheet at May 28, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the consolidated financial
statements and footnotes thereto included in Cal-Maine Foods, Inc.'s annual
report on Form 10-K for the fiscal year ended May 28, 1999.
2. Inventories
Inventories consisted of the following:
<TABLE>
<CAPTION>
November 27, 1999 May 29, 1999
----------------------------------------
<S> <C> <C>
Flocks $29,263 $24,662
Eggs and egg products 3,418 2,471
Feed and supplies 10,558 7,847
Livestock 3,384 3,373
----------------------------------------
$46,623 $38,353
========================================
</TABLE>
3. Acquisition
In September 1999, Cal-Maine Foods, Inc. purchased substantially all
of the assets and assumed certain liabilities of Smith Farms, Inc.
and certain related companies ("Smith Farms") for cash of $36.2
million. The assets purchased were Smith Farms' egg production and
processing businesses in Texas and Arkansas, and included
approximately 3.9 million laying hens and growing pullets. The cash
purchase price of the acquisition was provided from current working
capital. The Company intends to obtain long-term financing on
certain of the Smith assets.
4. Long-Term Debt
In September 1999, the Company and one of its lenders agreed to
additional financing of $16.0 million, a commitment of an additional
$15.0 million over the next two years for construction purposes, and
revised terms for approximately $9.3 million in existing long-term
debt. The additional funding of $16.0 million will have an average
life of approximately 10.6 years and an interest rate of 8.26%. The
revised terms for the $9.3 million debt will go into effect in
December 2003 and include a 15-year amortization. The debt is
secured by certain assets located in Ohio, Kentucky, and Tennessee.
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ITEM 2. MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company is primarily engaged in the production, cleaning,
grading, packing, and sale of fresh shell eggs. The Company's fiscal year end is
the Saturday closest to May 31.
The Company's operations are fully integrated. It owns facilities to
hatch chicks, grow pullets, manufacture feed, and produce, process, and
distribute shell eggs. The Company currently is the largest producer and
distributor of fresh shell eggs in the United States. The shell egg segment
sales, including feed sales to outside egg producers, accounted for 98% of the
Company's net sales. The Company primarily markets its shell eggs in the
southwestern, southeastern, mid-western and mid-Atlantic regions of the United
States. Shell eggs are sold directly by the Company primarily to national and
regional supermarket chains.
The Company currently uses contract producers for approximately 23%
of its total egg production. Contract producers operate under agreements with
the Company for the use of their facilities in the production of shell eggs by
layers owned by the Company, which owns the eggs produced. Also, shell eggs are
purchased, as needed, from outside producers for resale by the Company.
The Company's operating income or loss is significantly affected by
wholesale shell egg market prices, which can fluctuate widely and are outside of
the Company's control. Retail sales of shell eggs are greatest during the fall
and winter months and lowest during the summer months. Prices for shell eggs
fluctuate in response to seasonal factors and an increase in egg demand during
the winter months.
The Company's cost of production is materially affected by feed
costs, which average about 60% of Cal-Maine's' total farm egg production cost.
Changes in feed costs result in changes in the Company's cost of goods sold. The
cost of feed ingredients is affected by a number of supply and demand factors
such as crop production and weather, and other factors, such as the level of
grain exports, over which the Company has little or no control.
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RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
items from the Company's Condensed Consolidated Statements of Operations
expressed as a percentage of net sales.
<TABLE>
<CAPTION>
Percentage of Net Sales
13 Weeks Ended 26 Weeks Ended
Nov. 27, 1999 Nov. 28, 1998 Nov. 27, 1999 Nov. 28, 1998
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 90.6 77.8 93.5 84.1
-----------------------------------------------------------------------------------------------
Gross profit 9.4 22.2 6.5 15.9
Selling, general &
administrative 13.5 11.9 14.4 12.4
-----------------------------------------------------------------------------------------------
Operating income (loss) (4.1) 10.3 (7.9) 3.5
Other expense (1.9) (1.6) (1.9) (1.1)
-----------------------------------------------------------------------------------------------
Income (loss) before taxes (6.0) 8.7 (9.8) 2.4
Income tax expense (benefit) (2.2) 3.3 (3.6) .9
-----------------------------------------------------------------------------------------------
Net income (loss) (3.8) % 5.4 % (6.2) % 1.5 %
===============================================================================================
</TABLE>
NET SALES
Net sales for the second quarter of fiscal 2000 were $71.1 million,
a decrease of $6.9 million, or 8.8% as compared to net sales for the second
quarter of fiscal 1999. Although the total dozens of eggs sold increased in the
current quarter, egg selling prices were down significantly as compared with
prices a year ago. Dozens sold for the current quarter were 131.8 million dozen,
an increase of 24.5 million dozen, or 22.8% as compared to the second quarter of
last year. The Smith Farms acquisition in September 1999 and the Hudson Brothers
acquisition in May 1999 accounted for 21% of total dozens produced in the
current quarter and, excluding outside egg purchases, most of the increase in
dozens sold. The Company's net average selling price per dozen for the fiscal
2000 second quarter was $.500, compared to $.660 for the second quarter of last
year, a decrease of 24.1%. The Company's net average selling price per dozen is
the average selling price for all sizes and grades of shell eggs, including
non-graded egg sales, breaking stock and undergrades. Although domestic demand
was good, increased egg supply and weak export demand caused egg prices to
decrease during the second quarter of this fiscal year. Feed sales to outside
producers also decreased for the current quarter as a result of lower cost of
feed ingredients which brought market prices for feed down.
Net sales for the twenty-six weeks ended November 27, 1999 were
$130.1 million, a decrease of $16.6 million, or 11.3 %, as compared to the same
period last fiscal year. As in the current quarter discussed above, an increase
in dozens sold was offset by a sharp decrease in egg selling prices. Dozens sold
for the current 26 week period were 241.1 million as compared to 213.6 million
for last fiscal year, an increase of 12.8%. The recent acquisitions accounted
for 15% of total dozens produced. For the current 26 week period, the Company's
net average selling price per dozen was $.498, compared to $.617 per dozen last
fiscal year, a decrease of $.119 per dozen, or 19.3%. As discussed above,
increased egg supply and weak export demand were the primary cause of reduced
egg market prices.
COST OF SALES
Total cost of sales for the second quarter ended November 27, 1999
was $64.4 million, an increase of $3.7 million, or 6.2%, as compared to the cost
of sales of $60.6 million for last year's second quarter. The increase is the
net result of an increase in total dozens sold and a decrease in feed cost per
dozen produced. As discussed above, dozens sold for the current quarter
increased 24.5 million dozens, or 22.8% above last year's second quarter. Of the
24.5 million dozens sold increase, 7.7 million dozens were purchased from
outside egg producers. However, during weak egg market conditions, such as in
the current fiscal year, the Company is able to purchase outside eggs at more
favorable net prices which mitigates the normally higher cost of purchasing eggs
from outside sources. Feed cost for the second quarter ended November 27, 1999
was $.179
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per dozen as compared to last fiscal years cost per dozen of $.189, a decrease
of 5.3%. Although total dozens sold increased and cost per dozen sold improved,
the sharp drop in egg selling prices resulted in a decrease in gross profit from
22.2% of net sales for the quarter ended November 28, 1998, to 9.4%.
For the twenty-six week period ended November 27, 1999, total cost
of sales was $121.7 million, a decrease of $1.6 million, or 1.3% as compared to
the cost of sales of $123.3 million for last year. The decrease is the result of
lower feed cost per dozen and an increase in dozens purchased from outside
producers. Feed cost for the current 26 weeks was $.179 per dozen, compared to
$.198 per dozen for last year, a decrease of $.019 per dozen, or 9.6%. Dozens
sold for the current 26 weeks are 27.5 million dozens higher than last year. Of
this increase, 11.7 million dozens were purchased from outside egg producers. As
discussed above, the Company was able to make these purchases at more favorable
net prices. These decreases in cost of sales were not enough to cover the drop
in egg selling prices, and the net result was a decrease in gross profit from
15.9% of net sales for last year to 6.5% for the current fiscal year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expense for the second quarter
ended November 27, 1999 was $9.6 million, an increase of $326,000 or 3.5%, as
compared to the $9.3 million for last fiscal year's second quarter. The increase
is the net result of an increase in selling, general and administrative expense
of $826,000 in the current quarter and a one-time charge of $500,000 incurred in
the second quarter of last fiscal year. The $500,000 charge last year was for
costs to phase out and prepare for disposition of a production and distribution
facility and a feed mill. The production facility has been phased out and
distribution was recently ceased. The feed mill was sold in the last fiscal
year. For the current fiscal second quarter, selling and administrative expenses
have increased $218,000 over last year and delivery expense has increased
$608,000 over last year. The acquisitions made during the current year and
increased dozens sold are the primary causes for the increased expense. On a
dozens sold basis, selling, general and administrative expense has decreased
almost $.01 per dozen for the current quarter. As a percent of net sales,
selling, general and administrative expense increased from 11.9% for fiscal 1999
to 13.5% for the current fiscal second quarter.
For the twenty-six weeks ended November 27, 1999, selling, general
and administrative expense was $18.7 million, an increase of $500,000, or 2.7%,
as compared to $18.2 million for the same period last fiscal year. The increase
is the net result of an increase of $1.0 million in selling, general and
administrative expense for the current fiscal year and the $500,000 one-time
charge discussed above. For the current fiscal year, selling and administrative
expenses have increased $200,000 over last year and delivery expense has
increased $800,000 over last year. On a dozens sold basis, selling, general and
administrative expense has decreased $.005 per dozen for the current fiscal
period. As a percent of net sales, selling, general and administrative expense
increased from 12.4% for last year to 14.4% for the current year.
OPERATING INCOME
As the result of the above, an operating loss of $2.9 million was
incurred for the second quarter ended November 27, 1999, as compared to an
operating income of $8.0 million for last fiscal year's comparable quarter. As a
percent of sales, the current fiscal 2000 quarter had a 4.1% operating loss,
compared to a 10.3% operating income for last year.
For the twenty-six weeks ended November 27, 1999, an operating loss
of $10.3 million was incurred, compared to a $5.2 million operating income for
last fiscal year. As a percent of net sales, the current fiscal period had a
7.9% operating loss, compared to a 3.5% operating income for last year.
OTHER EXPENSE
Other expense for the second quarter ended November 27, 1999 was $
1.3 million, an increase of $100,000, or 8%, as compared to the second quarter
last fiscal year. For the current quarter, net interest expense increased
$700,000 and other income increased $600,000 over last year. Net interest
expense increased as the result of increased long-term borrowing and a decrease
in interest income due to lower cash equivalent investments. Last year's second
quarter incurred $200,000 in uninsured losses and $400,000 losses on disposal of
fixed assets. As a percent of net sales, other expense was 1.9% for the current
fiscal second quarter, compared to 1.6% last year.
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For the twenty-six weeks ended November 27, 1999, other expense was
$2.5 million, an increase of $900,000, or 56.3%, as compared to an expense of
$1.6 million for last year. For the current period, net interest expense
increased $1.1 million and other income increased over $200,000. The increases
resulted from the same activities as mentioned above in the current quarter. As
a percent of net sales, other expense was 1.9% for the current fiscal period, as
compared to 1.1% for last year.
INCOME TAXES
As a result of the above, the Company's pre-tax loss was $4.3
million for the quarter ended November 27, 1999, compared to pre-tax income of
$6.8 million for last year's quarter. For the current quarter, an income tax
benefit of $1.5 million was recorded with an effective tax rate of 36.1%, as
compared to an income tax expense of $2.5 million with an effective rate of
37.4% for last year's comparable quarter.
For the twenty-six week period ended November 27, 1999, the
Company's pre-tax loss was $12.8 million, compared to pre-tax income of $3.5
million for last year. For the current twenty-six week period, an income tax
benefit of $4.7 million was recorded with an effective tax rate of 36.7%, as
compared to an income tax expense of $1.3 million with an effective rate of
38.4% for last years comparable period.
NET INCOME (LOSS)
Net loss for the second quarter ended November 27, 1999 was $2.7
million, or $.22 per basic share, compared to net income of $4.3 million, or
$.32 per basic share for last fiscal year's second quarter.
For the twenty-six week period ended November 27, 1999, net loss was
$8.1 million, or $.65 per basic share, compared to last fiscal year's net income
of $2.2 million, or $.17 per basic share for last years comparable
period.
CAPITAL RESOURCES AND LIQUIDITY
The Company's working capital at November 27, 1999 was $27.4
million, compared to $48.5 million at May 29, 1999. The Company's need for
working capital generally is highest in the first and last fiscal quarters
ending in August and May, respectively, when egg prices are normally at seasonal
lows. Seasonal borrowing needs frequently are higher during these periods than
during other fiscal periods. The Company had an unused $35 million line of
credit with three banks at November 27, 1999. The Company's long-term debt at
that date, including current maturities and capitalized lease obligations,
totaled $109.4 million.
Substantially all trade receivables collateralize the Company's line
of credit, and property, plant and equipment collateralize the Company's
long-term debt. The Company is required by certain provisions of these loan
agreements to (1) maintain minimum levels of working capital and net worth; (2)
limit dividends, capital expenditures, lease obligations and additional
long-term borrowings; and (3) maintain various current, cash-flow, and interest
coverage ratios, among other restrictions. The Company was in compliance with
these provisions at November 27, 1999. Under certain of the loan agreements, the
lenders have to option to require the prepayment of any outstanding borrowings
in the event of a change in the control of the Company.
For the twenty-six weeks ended November 27, 1999, $9.1 million in
net cash was used in operating activities. This compares to $9.6 million in net
cash that was provided by operating activities for the comparable period last
fiscal year. In the current twenty-six week period, $1.6 million was used for
purchases of property, plant and equipment, $9.5 million used for construction
projects, and $36.2 million used in acquisition of a shell egg operation.
Approximately $567,000 was used for purchase of common stock, and $303,000 was
used for payment of dividends on the common stock. A net of $787,000 was used in
investments and other assets. Of the investments, the Company, as a 50% member,
invested $1.0 million in the construction of a joint venture egg operation in
Utah, Delta Egg Farm, LLC. Payments of $1.2 million were received on
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notes receivable and investments. Additional cash of $7.5 million was received
from bank notes, additional long-term borrowings of $23.5 million were received,
and repayments of $23.5 million were made on long-term debt. The net result was
a decrease in cash of $28.4 million.
In September 1999, the Company and one of its lenders agreed to
additional financing of $16.0 million, a commitment of $15.0 million over the
next two years for construction purposes, and revised terms for approximately
$9.3 million in existing long-term debt. The additional $16.0 million will have
an average life of approximately 10.6 years and an interest rate of 8.26%. The
revised terms for the $9.3 million debt will go into effect in December 2003 and
include a 15-year amortization. The debt is secured by certain assets located in
Ohio, Kentucky, and Tennessee.
For the comparable period last fiscal year, $2.3 million was used
for purchases of property, plant, and equipment, and $3.9 million used in
construction projects. The Company invested $900,000 in the Delta Egg Farm joint
venture egg operations in Utah. Net cash of $3.9 million was received from sales
of property, plant, and equipment, and from notes receivable. Additional
long-term borrowings of $6.4 million were received and repayments of $2.4
million were made. Approximately $600,000 was used in payment of stock dividends
and purchases of treasury stock. The net result was an increase in cash of $9.7
million
At November 27, 1999, the Company had expended, since the start of
the project, approximately $11.5 million for construction of new shell egg
production, processing and feed mill facilities in Waelder, Texas. The estimated
cost of construction is approximately $18.7 million with anticipated borrowings
in fiscal 2000 of approximately $10.4 million from an insurance company.
The Company has $2.9 million of deferred tax liability due to a
subsidiary's change from a cash basis to an accrual basis taxpayer on May 29,
1988. The Taxpayer Relief Act of 1997 provides that the taxes on the cash basis
temporary differences as of that date are generally payable over 20 years
beginning in fiscal 1999, or in full in the first fiscal year in which there is
a change in ownership control. Payment of the $2.9 million deferred tax
liability will reduce the Company's cash, but would not impact the Company's
statement of operations or reduce stockholder's equity, as these taxes have been
accrued and are reflected on the Company's balance sheet.
Forward Looking Statements. The foregoing statements contain
forward-looking statements, which involve risks, and uncertainties and the
Company's actual experience may differ materially from that discussed above.
Factors that may cause such a difference include, but are not limited to, those
discussed in "Factors Affecting Future Performance" below, as well as future
events that have the effect of reducing the Company's available cash balances,
such as unanticipated operating losses or capital expenditures related to
possible future acquisitions. Readers are cautioned not to place undue reliance
on forward-looking statements, which reflect management's analysis only as the
date hereof. The Company assumes no obligation to update forward-looking
statements. See also the Company's reports to be filed from time to time with
the Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934.
Factors Affecting Future Performance. The Company's future operating
results may be affected by various trends and factors beyond the Company's
control. These include adverse changes in shell egg prices and in the grain
markets. Accordingly, past trends should not be used to anticipate future
results and trends. Further, the Company's prior performance should not be
presumed to be an accurate indication of future performance.
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
There have been no material changes in the market risk reported in
the Company's fiscal 1999 annual report on Form 10-K.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit
Number Exhibit
10.11 Secured note purchase agreement dated September 28, 1999
among Cal-Maine Foods Inc., Cal-Maine Partnership, LTD,
and John Hancock Mutual Life Insurance Company, and John
Hancock Variable Life Insurance Company (exhibits, annexes
and disclosure schedules omitted)
27 Financial data schedule
b. Reports on Form 8-K
On October 14, 1999, the Company filed a report on Form 8-K, dated September 30,
1999, concerning the purchase of the Smith Farms' egg production and processing
business located in Texas and Arkansas. Information was provided in response to
Item 2. Financial information called for by Item 7 was provided in an amended
Form 8-K/A filed on December 13, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CAL-MAINE FOODS, INC.
(Registrant)
Date: January 6, 2000 /s/ Bobby J.Raines
--------------------------------
Bobby J. Raines
Vice President/Treasurer
(Principal Financial Officer)
Date: January 6, 2000 /s/ Charles F. Collins
--------------------------------
Charles F. Collins
Vice President/Controller
(Principal Accounting Officer)
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EXHIBIT 10.11
================================================================================
CAL-MAINE FOODS, INC.
CAL-MAINE PARTNERSHIP, LTD.
SERIES A SECURED NOTES DUE DECEMBER 1, 2003
(Extendible to September 1, 2014)
PPN: 12803# AA 8
SERIES B SECURED NOTES DUE SEPTEMBER 1, 2014
PPN: 12803# AB 6
SERIES C SECURED NOTES DUE SEPTEMBER 1, 2014
PPN: [To Follow]
- --------------------------------------------------------------------------------
SECURED NOTE PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
Dated as of September 28, 1999
================================================================================
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Paragraph Page
- --------- ----
<S> <C> <C>
1. AUTHORIZATION; RANKING................................................................................1
1A. AUTHORIZATION OF ISSUE OF THE SECURED NOTES...............................................1
1B. RANKING...................................................................................1
1C. INTEREST ON THE SECURED NOTES.............................................................2
2. PURCHASE AND SALE OF THE SECURED NOTES; CLOSING.......................................................3
2A. PURCHASE AND SALE OF THE SECURED NOTES....................................................3
2B. INITIAL CLOSING...........................................................................3
2C. SECOND CLOSING............................................................................3
3. CONDITIONS OF INITIAL CLOSING.........................................................................4
3A. CHARTER AND PROCEEDINGS. ................................................................4
3B. OPINION OF BORROWERS' COUNSEL.............................................................5
3C. OPINION OF PURCHASERS' SPECIAL COUNSEL....................................................6
3D. REPRESENTATIONS AND WARRANTIES AND COMPLIANCE. ...........................................6
3E. PURCHASE PERMITTED BY APPLICABLE LAWS.....................................................6
3F. PRIVATE PLACEMENT NUMBERS.................................................................6
3G. SALE OF ALL SERIES A AND ALL SERIES B NOTES...............................................7
3H. CONSENT OF OTHER PERSONS..................................................................7
3I. APPOINTMENT OF AGENT FOR SERVICE OF PROCESS...............................................7
3J. PAYMENT OF SPECIAL COUNSEL FEES...........................................................7
3K. OTHER TRANSACTION DOCUMENTS...............................................................7
3L. ENVIRONMENTAL AND ZONING STATUS...........................................................8
3M. APPRAISALS................................................................................8
3N. SUBSIDIARY GUARANTIES.....................................................................8
4. CONDITIONS OF SECOND CLOSING..........................................................................8
4A. CHARTER AND PROCEEDINGS. ................................................................8
4B. OPINION OF BORROWERS' COUNSEL............................................................10
4C. OPINION OF PURCHASERS' SPECIAL COUNSEL...................................................10
4D. REPRESENTATIONS AND WARRANTIES AND COMPLIANCE. ..........................................10
4E. PURCHASE PERMITTED BY APPLICABLE LAWS....................................................10
4F. PRIVATE PLACEMENT NUMBER.................................................................10
4G. SALE OF ALL SERIES C NOTES...............................................................11
4H. PAYMENT OF SPECIAL COUNSEL FEES..........................................................11
4I. COMPLETION OF EXPANSION..................................................................11
4J. OTHER TRANSACTION DOCUMENTS..............................................................11
5. PREPAYMENT AND REPAYMENT.............................................................................11
5A. OPTIONAL PREPAYMENT OF SECURED NOTES AT ANY TIME.........................................11
5B. NOTICE OF OPTIONAL PREPAYMENT............................................................12
5C. SCHEDULED REPAYMENT OF SECURED NOTES; EXTENSION OF
SERIES A NOTES...........................................................................12
</TABLE>
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<TABLE>
<S> <C> <C> <C>
5D. PREPAYMENT OF SECURED NOTES UPON A CHANGE OF CONTROL.....................................13
5E. PAYMENTS PRO RATA; APPLICATION OF PAYMENTS...............................................14
5F. RETIREMENT OF SECURED NOTES..............................................................14
5G. MANNER OF PAYMENT. .....................................................................15
5H. TAXES....................................................................................15
5I. MAKE WHOLE AMOUNT........................................................................17
6. AFFIRMATIVE COVENANTS................................................................................17
6A. FINANCIAL AND OTHER REPORTING BY THE BORROWERS...........................................17
6B. INFORMATION REQUIRED BY RULE 144A........................................................20
6C. INSPECTION OF PROPERTY...................................................................21
6D. EXISTENCE, ETC...........................................................................21
6E. PAYMENT OF TAXES AND CLAIMS..............................................................21
6F. COMPLIANCE WITH LAWS, ETC................................................................22
6G. MAINTENANCE OF PROPERTIES AND LEASES.....................................................22
6H. INSURANCE................................................................................22
6I. USE OF PROCEEDS..........................................................................22
6J. ENVIRONMENTAL COMPLIANCE AND INDEMNIFICATION.............................................22
6K. MAINTENANCE OF BOOKS AND RECORDS.........................................................23
6L. SUBSIDIARY GUARANTIES....................................................................24
6M. YEAR 2000 COMPATIBILITY..................................................................24
6N. PAYMENT OF TRADE PAYABLES................................................................24
6O. ADDITIONAL AGREEMENTS....................................................................24
7. NEGATIVE COVENANTS...................................................................................25
7A. FINANCIAL COVENANTS.............................................................................25
7A(1). LIMITATION ON TOTAL FUNDED DEBT..................................................25
7A(2). CURRENT RATIO....................................................................25
7A(3). CONSOLIDATED NET WORTH...........................................................25
7A(4). INTEREST COVERAGE RATIO..........................................................25
7B. LIENS AND OTHER RESTRICTIONS.............................................................25
7B(1). LIENS............................................................................25
7B(2). SALES OF EQUITY INTERESTS BY SUBSIDIARIES........................................26
7B(3). MERGER AND SALE OF ASSETS........................................................27
7B(4). SUBSIDIARY DIVIDEND AND OTHER RESTRICTIONS.......................................27
7B(5). TRANSACTIONS WITH RELATED PARTIES................................................27
7B(6). .................................................................................27
7C. DEBT; GUARANTIES OF DEBT.................................................................28
7D. COMPLIANCE WITH ERISA....................................................................28
7E. LINE OF BUSINESS.........................................................................29
8. EVENTS OF DEFAULT........................................................................29
8A. EVENTS OF DEFAULT................................................................29
8B. ACCELERATION ON EVENT OF DEFAULT.................................................31
8C. RESCISSION OF ACCELERATION.......................................................32
8D. NOTICE OF ACCELERATION OR RESCISSION.............................................33
8E. OTHER REMEDIES, NO WAIVERS OR ELECTION OF REMEDIES...............................33
</TABLE>
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<TABLE>
<S> <C> <C>
9. REPRESENTATIONS AND WARRANTIES...........................................................33
9A. ORGANIZATION, ETC............................................................33
9B. EQUITY OWNERSHIP.............................................................34
9C. FINANCIAL STATEMENTS.........................................................34
9D. ACTIONS PENDING..............................................................35
9E. TITLE TO PROPERTIES..........................................................35
9F. AFFILIATES AND INVESTMENTS IN OTHERS.........................................35
9G. TAX RETURNS AND PAYMENTS.....................................................35
9H. CONFLICTING AGREEMENTS AND OTHER MATTERS.....................................36
9I. OFFERING OF SECURED NOTES....................................................36
9J. REGULATION U, ETC............................................................37
9K. ERISA........................................................................37
9L. GOVERNMENTAL AND OTHER CONSENTS..............................................38
9M. ENVIRONMENTAL MATTERS........................................................38
9N. LABOR RELATIONS..............................................................39
9O. FINANCIAL CONDITION..........................................................39
9P. DISCLOSURE...................................................................39
9Q. STATUS UNDER CERTAIN FEDERAL STATUTES........................................40
9R. EXISTING INDEBTEDNESS; FUTURE LIENS..........................................40
9S. COMPLIANCE WITH LAWS, ETC....................................................40
9T. BROKERS......................................................................40
10. REPRESENTATIONS OF THE PURCHASERS........................................................40
11. DEFINITIONS..............................................................................42
11A. PREPAYMENT AND MAKE WHOLE AMOUNT TERMS.......................................42
11B. OTHER TERMS..................................................................43
12. MISCELLANEOUS............................................................................56
12A. EXPENSES.....................................................................56
12B. CONSENT TO AMENDMENTS........................................................57
12C. PERSONS DEEMED OWNERS; PARTICIPATIONS........................................58
12D. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT....................................................................58
12E. SUCCESSORS AND ASSIGNS.......................................................58
12F. CONFIDENTIAL INFORMATION.....................................................58
12G. NOTICES......................................................................59
12H. DESCRIPTIVE HEADINGS.........................................................60
12I. SOLICITATION OF HOLDERS......................................................60
12J. REPRODUCTION OF DOCUMENTS....................................................60
12K. GOVERNING LAW................................................................61
12L. CONSENT TO JURISDICTION AND SERVICE..........................................61
12M. COUNTERPARTS.................................................................62
12N. REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT OF
SECURED NOTES................................................................62
12N(1). REGISTRATION.........................................62
12N(2). TRANSFER AND EXCHANGE................................63
</TABLE>
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<TABLE>
<S> <C> <C>
12N(3). REPLACEMENT..........................................63
12O. COMPLIANCE BY SUBSIDIARIES...................................................63
12P. SEVERABILITY.................................................................63
12Q. TERMINATION..................................................................64
12R. CONSTRUCTION.................................................................64
12S. JOINT AND SEVERAL LIABILITY..................................................63
</TABLE>
EXHIBITS, ANNEXES AND DISCLOSURE SCHEDULES
EXHIBITS
EXHIBIT A-1 - Form of Series A Senior Note
EXHIBIT A-2 - Form of Series B Senior Note
EXHIBIT A-3 - Form of Series C Senior Note
EXHIBIT B - Coverage of Opinion of Counsel to the Borrowers
EXHIBIT C - Form of Security Agreement
EXHIBIT D-1 - Form of Ohio Mortgage
EXHIBIT D-2 - Form of Kentucky Mortgage
EXHIBIT D-3 - Form of Tennessee Deed of Trust
EXHIBIT E - Form of Assignment of Leases and Rents
EXHIBIT F - Form of Collateral Agency Agreement
EXHIBIT G - Form of Indemnity
EXHIBIT H - Form of Subsidiary Guaranty
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ANNEXES
ANNEX 1 - Purchasers Schedule
ANNEX 2 - Wiring Instructions, Borrowers Address for Notices
DISCLOSURE SCHEDULES
SCHEDULE 2C - Description of Expansion of Kentucky
and Ohio Facilities
SCHEDULE 6I - Use of Proceeds
SCHEDULE 7B(1) - Existing Liens
SCHEDULE 9A - Organization; Foreign Qualifications; Etc.
SCHEDULE 9L - Governmental and Other Consents
SCHEDULE 9M - Environmental Matters
SCHEDULE 9R - Existing Debt
SCHEDULE 9S - Compliance with Laws
v
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SECURED NOTE PURCHASE AGREEMENT
SECURED NOTE PURCHASE AGREEMENT, dated as of September __, 1999,
between CAL-MAINE FOODS, INC., a Delaware corporation (together with its
successors and assigns, the "COMPANY"), and CAL-MAINE PARTNERSHIP, LTD., a Texas
limited partnership (together with its successors and assigns, the "PARTNERSHIP"
and with the Company, the "BORROWERS") and the institutional investors
identified on ANNEX 1 (whether one or more, the "PURCHASERS").
RECITAL
The Borrowers desire to sell to the Purchasers and the Purchasers
are willing to purchase upon and subject to the terms and conditions of this
Agreement, up to Forty Million One Hundred One Thousand Three Hundred
Thirty-Seven and 11/100 ($40,101,337.11) Dollars in aggregate original principal
amount of the Borrowers' Secured Notes on the terms and conditions of this
Agreement.
AGREEMENT
NOW, THEREFORE, it is agreed:
1. AUTHORIZATION; RANKING.
1A. AUTHORIZATION OF ISSUE OF THE SECURED NOTES. The Borrowers will
authorize, as joint and several co-makers, the issue and sale of their Series A
Senior Secured Notes in the aggregate principal amount of $9,101,337.11 (the
"SERIES A Notes"); their Series B Senior Secured Notes in the aggregate
principal amount of $16,000,000 (the "SERIES B NOTES"); and their Series C
Senior Secured Notes in the aggregate principal amount of up to $15,000,000 (the
"SERIES C NOTES"and collectively with the Series A Notes and the Series B Notes,
the "SECURED NOTES"), each to be dated the date of issue, and to be repaid and
to bear interest as provided herein. The Series A Notes shall be in the form of
EXHIBIT A-1, the Series B Notes shall be in the form of EXHIBIT A-2 and the
Series C Notes shall be in the form of EXHIBIT A-3.
Certain capitalized terms used in this Agreement are defined in
PARAGRAPH 11; references to a "SCHEDULE", "ANNEX" or an "EXHIBIT" are, unless
otherwise specified, to a Schedule, Annex or an Exhibit attached to this
Agreement.
1B. RANKING. The Secured Notes will constitute the direct senior
obligations of the Borrowers and will rank not less than pari passu in priority
of payment with each other and with all other outstanding Debt of the Borrowers,
present or future, except to the extent such other Debt is preferred as a result
of being secured (but only to the extent such security is not prohibited by
PARAGRAPH 7B(1) and then only to the extent of such security) or as a matter of
law.
1C. INTEREST ON THE SECURED NOTES. The Borrowers shall pay to the
Holders interest on the unpaid principal amount of the Secured Notes owing to
each Holder at the rates, time and manner set forth below.
(i) RATE OF INTEREST; POST-MATURITY INTEREST.
(a) Each Series A Note shall bear interest on the unpaid
principal amount thereof from the date issued through December
1, 2003 at the rate of 7.64% per annum and, if the maturity of
the Series A Notes is extended pursuant to PARAGRAPH 5C(i)(b),
then thereafter through maturity (whether by prepayment,
acceleration or otherwise) at such rate per annum as is then
offered by Purchasers to similarly rated and similarly situated
borrowers for secured notes with the same Average Remaining Life
as of December 1, 2003.
(b) Each Series B Note shall bear interest on the unpaid
principal amount thereof from the date issued through maturity
(whether by prepayment, acceleration or otherwise) at the rate
of 8.26% per annum.
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(c) Each Series C Note shall bear interest on the
unpaid principal amount thereof from the date issued
through maturity (whether by prepayment, acceleration or
otherwise), at the rate per annum, then offered by
Purchasers to similarly rated and similarly situated
borrowers for secured notes with the same Average
Remaining Life as of the date of issue.
(ii) POST-MATURITY INTEREST. Any principal payments on
the Secured Notes not paid when due and, to the extent permitted by
applicable law, any interest payment on the Secured Notes or Make
Whole Amount on the Secured Notes not paid when due, in each case
whether at stated maturity, by notice of pre-payment, by
acceleration or otherwise, shall thereafter bear interest payable
upon demand at a rate per annum (the "DEFAULT RATE") equal to the
lesser of:
(a) the highest rate allowed by applicable law; or
(b) the annual interest rate then applicable to
principal outstanding under such Secured Note and not
then overdue plus 2%.
(iii) COMPUTATION OF INTEREST. Interest on the Secured
Notes shall be computed on the basis of a 360-day year and twelve
30-day months. In computing interest on the Secured Notes, the date
of the issuance of the Secured Notes shall be included and the date
of payment shall be excluded.
(iv) DETERMINATION OF INTEREST RATE. For the purposes of
SUBPARAGRAPH (i) of this PARAGRAPH 1C, the determination of the rate
per annum offered by Purchasers to similarly rated borrowers for
secured notes shall be made by the Required Holders in good faith in
accordance with their customary internal procedures then in effect.
With respect to the Series A Notes, the Purchasers shall provide the
Borrowers with notice of the interest rate to be applicable to the
Series A Notes if the maturity of the Series A Notes is extended
pursuant to PARAGRAPH 5C(i)(a) not later than November 3, 2003. With
respect to any Series C Notes, the Purchasers shall provide the
Borrowers with notice of the interest rate to be applicable to such
Series C Notes not later than the fifth Business Day prior to the
Second Closing Date on which such Series C Notes are to be issued.
2. PURCHASE AND SALE OF THE SECURED NOTES; CLOSING.
2A. PURCHASE AND SALE OF THE SECURED NOTES. Subject to the terms and
conditions of this Agreement, the Borrowers shall sell to each Purchaser, and
each Purchaser shall purchase from the Borrowers, Secured Notes of the series
and in the principal amount specified below such Purchaser's name in ANNEX 1, at
a price equal to 100% of such principal amount registered in such Purchaser's
name or that of the Purchaser's nominee or nominees as specified in ANNEX 1.
Notwithstanding the foregoing, each Purchaser's obligations under this Agreement
are several and not joint obligations and no Purchaser shall have any obligation
or liability for the performance or non-performance by any other Purchaser of
such other Purchaser's obligations under this Agreement.
2B. INITIAL CLOSING. The purchase and sale of the Series A Notes and
the Series B Notes shall take place at the offices of Sullivan & Worcester LLP,
One Post Office Square, Boston, Massachusetts 02109, at a closing (the "INITIAL
CLOSING") to be held on September 28, 1999 or on such other Business Day as the
Purchasers and the Borrowers may agree (the "INITIAL CLOSING Date"). At the
Initial Closing the Borrowers will deliver to each Purchaser the Series A Notes
and the Series B Notes to be purchased by it as set forth in ANNEX 1, against
payment of the purchase price therefor, in the case of the Series A Notes, by
acceptance of prepayment, without premium, of the Company's 7.64% Secured Notes
due December 1, 2003 in the aggregate outstanding principal amount of
$9,101,337.11 (the "EXISTING NOTES") and in the case of the Series B Notes, by
transfer of immediately available funds to the Borrowers in accordance with the
wiring instructions set forth on ANNEX 2. If at the Initial Closing, the
Borrowers fail to tender any Secured Notes to any Purchaser as provided in this
PARAGRAPH 2B, or if any of the conditions specified in PARAGRAPH 3 shall not
have been fulfilled to a Purchaser's satisfaction, such
2
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Purchaser may, at its election, be relieved of all further obligations under
this Agreement, without thereby waiving any rights such Purchaser may have by
reason of such failure or non-fulfillment.
2C. SECOND CLOSING. The purchase and sale of the Series C Notes
shall take place at the offices of Sullivan & Worcester LLP, One Post Office
Square, Boston, Massachusetts 02109, at one or more closings (each, a "SECOND
CLOSING") to be held on the fifteenth Business Day following notice (each, a
"SECOND CLOSING NOTICE") from the Borrowers to the Purchasers, (each, a "SECOND
CLOSING DATE") but not later than the second anniversary of the Initial Closing
Date (the "SECOND CLOSING CUTOFF DATE"). A Second Closing Notice may not be
given later than 10 days prior to the Second Closing Cutoff Date and shall (a)
include a certification from a Senior Officer that the Company has completed one
or more phases of the expansion of the facilities described in SCHEDULE 2C and
specifying the cost of construction of such completed phase(s) and (b) set forth
the aggregate principal amount of Series C Notes to be purchased and sold at
such Second Closing, which shall be not less than $5,000,000 (or a larger
principal amount which is an integral multiple of $100,000) or exceed the cost
of construction of the phase of expansion then completed. At each Second Closing
the Borrowers will deliver to each Purchaser the Series C Notes then to be
purchased by it in the percentages indicated in ANNEX 1, against payment of the
purchase price therefor by transfer of immediately available funds to the
Borrowers in accordance with the wiring instructions set forth on ANNEX 2. If at
a Second Closing, the Borrowers fail to tender any Series C Notes to any
Purchaser as provided in this PARAGRAPH 2C, or if any of the conditions
specified in PARAGRAPH 4 shall not have been fulfilled to a Purchaser's
satisfaction, such Purchaser may, at its election, be relieved of all further
obligations under this Agreement, without thereby waiving any rights such
Purchaser may have by reason of such failure or non-fulfillment.
3. CONDITIONS OF INITIAL CLOSING. The Borrowers' obligation to sell the Series A
Notes and the Series B Notes is subject to the Purchasers having purchased all
the Series A Notes and all the Series B Notes at the Initial Closing. Each
Purchaser's obligation to purchase and pay for its Series A Notes and Series B
Notes is subject to the fulfillment to its satisfaction or its written waiver,
on or before the Initial Closing Date, of the following conditions:
3A. CHARTER AND PROCEEDINGS. On or before the Initial Closing Date,
the Charter and By-laws of the Company and the constituting documents of the
Partnership, the Transaction Documents and all documents incidental hereto and
thereto shall be reasonably satisfactory in form and substance to the
Purchasers, and the Purchasers shall have received the following items, each of
which shall be in form and substance reasonably satisfactory to the Purchasers
and, unless otherwise noted, dated the Initial Closing Date, and in sufficient
copies (except for the Series A Notes and the Series B Notes), for each
Purchaser:
(i) Certified copies of resolutions of the board of
directors of the Company (on its own behalf and as the general
partner of the Partnership) approving this Agreement, the Secured
Notes to be issued, and the other Transaction Documents, and of all
documents evidencing other necessary corporate action and
governmental and other third party approvals and consents, if any,
with respect to this Agreement, the Secured Notes to be issued, and
each other Transaction Document.
(ii) A copy of the Certificate of Organization of the
Company and each amendment thereto, certified (as of a date
reasonably near the date of the Initial Closing) by the Secretary of
State of Delaware as being a true and correct copy thereof and a
copy of the Certificate of Limited Partnership of the Partnership
and each amendment thereto, certified (as of a date reasonably near
the date of the Initial Closing) by the Secretary of State of Texas
as being a true and correct copy thereof.
(iii) A copy of a certificate of the Secretary of State
of Delaware, dated within 10 Business Days prior to the Initial
Closing Date certifying that the Company is in good standing under
the laws of State of Delaware and a copy of a certificate of the
Secretary of State of Texas, dated within 10 Business Days prior to
the Initial Closing Date certifying that the Partnership is in good
standing under the laws of State of Texas.
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(iv) A copy of a certificate of the Secretary of State
of each state listed on SCHEDULE 9A, dated reasonably near the
Initial Closing Date, stating that the Company and the Partnership
(to the extent applicable) are duly qualified and in good standing
in such state and have filed all annual reports required to be filed
to the date of such certificate.
(v) An Officers' Certificate attested to by the
secretary or an assistant secretary of the Company, (and the
statements made in such certificate shall be true on and as of the
Initial Closing Date) certifying on behalf of the Company,
individually and as general partner of the Partnership, as to (a)
the absence of any amendments to the Certificate of Organization of
the Company or Certificate of Limited Partnership of the Partnership
since the date of the Secretary of State certificates referred to in
CLAUSE (II) above, (b) a true and correct copy of the By-laws of the
Company and the Agreement of Limited Partnership of the Partnership,
each as in effect on the Initial Closing Date, (c) the absence of
any proceeding for the dissolution or liquidation of the Company or
the Partnership, (d) as to the matters set forth in PARAGRAPH 3D,
and (e) the absence of any event occurring and continuing, or
resulting from the Initial Closing, that constitutes a Default or an
Event of Default.
(vi) An Officers' Certificate attested to by the
secretary or an assistant secretary of the Company certifying the
names and true signatures of the officers of the Company authorized
to sign on behalf of the Company, in its own capacity and as general
partner of the Partnership this Agreement, the Secured Notes to be
issued at the Initial Closing, each other Transaction Document and
the other documents to be delivered hereunder and thereunder.
(vii) Originals of this Agreement and the Secured Notes
to be issued to each Purchaser at the Initial Closing executed by an
authorized officer of the Company.
(viii) An Officers' Certificate, in form and substance
reasonably satisfactory to the Purchasers, attesting to the Solvency
of the Company, the Partnership and the Consolidated Group
immediately before and immediately after giving effect to
consummation of the transactions contemplated by this Agreement.
3B. OPINION OF BORROWERS' COUNSEL. The Purchasers shall have
received a favorable opinion, dated the Initial Closing Date and addressed to
them, from Young, Williams, Henderson & Fuselier, P.A., counsel to the Borrowers
and local counsel to the Purchasers in Tennessee, Ohio and Kentucky, covering
the matters set forth in EXHIBIT B and such other matters as any Purchaser or
Special Counsel may reasonably request and otherwise in form and substance
reasonably acceptable to the Purchasers. To the extent that the opinions
referred to in this PARAGRAPH 3B is rendered in reliance upon the opinion of any
other counsel, the Purchasers shall have received a copy of the opinion of such
other counsel, dated the Initial Closing Date and addressed to them, or a letter
from such other counsel, dated the Initial Closing Date and addressed to them,
authorizing them to rely on such other counsel's opinion. The opinions of
counsel to the Borrowers, local counsel and any such other counsel shall be in
form and substance reasonably satisfactory to the Purchasers and Special
Counsel.
3C. OPINION OF PURCHASERS' SPECIAL COUNSEL. The Purchasers shall
have received from Special Counsel an opinion satisfactory to them as to such
matters incident to the transactions contemplated by this Agreement as they may
reasonably request.
3D. REPRESENTATIONS AND WARRANTIES AND COMPLIANCE. The
representations and warranties contained in PARAGRAPH 9 shall be true on and as
of the Initial Closing Date after giving effect to the issue and sale of the
Secured Notes to be issued at the Initial Closing (and application of the
proceeds as contemplated by PARAGRAPH 6I); no Default or Event of Default shall
have occurred or be continuing; and the Borrowers shall have performed and
complied with all agreements and conditions contained in this Agreement required
to be performed or complied with by them at or prior to the Initial Closing. The
Borrowers and their Subsidiaries shall not have entered into any transaction
that would have been prohibited by PARAGRAPH 7B or 7C had this Agreement been in
effect since the date of the audited Financial Statements.
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3E. PURCHASE PERMITTED BY APPLICABLE LAWS. The offering, issuance,
purchase and sale of and payment for, the Series A Notes and the Series B Notes
on the Initial Closing Date on the terms and conditions of this Agreement
(including the use of the proceeds of such sale) shall be permitted by the laws
and regulations of each jurisdiction to which a Purchaser is subject, without
recourse to provisions (such as Section 1405(a)(8) of the New York Insurance
Law) permitting limited investments by life insurance Company without
restriction as to the character of the particular investment, shall not violate
any applicable law or governmental regulation (including, without limitation,
section 5 of the Securities Act or Regulation T, U or X of the Board of
Governors of the Federal Reserve System) and shall not subject any Purchaser to
any tax, penalty, liability or other condition adverse to it under or pursuant
to any applicable law or governmental regulation, and the Purchasers shall have
received such certificates or other evidence as to matters of fact as they may
reasonably request to enable them to determine whether such purchase is so
permitted.
3F. PRIVATE PLACEMENT NUMBERS. Private Placement Numbers shall have
been assigned to the Series A Notes and the Series B Notes by Standard & Poor's
CUSIP Service Bureau.
3G. SALE OF ALL SERIES A AND ALL SERIES B NOTES. The Borrowers shall
have sold to each other Purchaser, and each other Purchaser shall have
purchased, the Series A Notes and the Series B Notes to be purchased by it as
set forth in ANNEX 1.
3H. CONSENT OF OTHER PERSONS. The Borrowers shall have received all
authorizations, consents and approvals necessary in connection with the
transactions contemplated by this Agreement, including those identified in
SCHEDULE 9L, in form and substance satisfactory to the Purchasers.
3I. APPOINTMENT OF AGENT FOR SERVICE OF PROCESS. The Purchasers
shall have received written evidence satisfactory to them that CT Corporation
has been appointed by the Borrowers as their agent for service of process in the
Commonwealth of Massachusetts and that CT Corporation has agreed to provide the
Purchasers with not less than 30 days prior notice of any termination of such
appointment.
3J. PAYMENT OF SPECIAL COUNSEL FEES. Without limiting the provisions
of PARAGRAPH 12A, the Borrowers shall have paid the reasonable fees, charges and
disbursements of Special Counsel and Purchasers' local counsel (which may
include a reasonable reserve for anticipated fees and expenses) to the extent
reflected in a statement of Special Counsel and such local counsel rendered to
the Borrowers at or before the Initial Closing.
3K. OTHER TRANSACTION DOCUMENTS. The Borrowers shall have each (i)
executed and delivered (a) a Security Agreement in the form of EXHIBIT C (the
"SECURITY AGREEMENT"), Mortgages in the form of EXHIBIT D-1 on the real property
owned by such Borrower in Ohio and described therein, a Mortgage in the form of
EXHIBIT D-2 on the real property owned by such Borrower in Kentucky and
described therein and a Deed of Trust in the form of EXHIBIT D-3 on the real
property owned by such Borrower in Tennessee and described therein
(collectively, the "MORTGAGES"), and an Assignment of Leases and Rents in the
form of EXHIBIT E (the "ASSIGNMENT OF LEASES AND RENTS") to secure the Secured
Notes and the other obligations of the Borrowers under this Agreement and the
other Transaction Documents with a first priority Lien on the Collateral; (b)
the Collateral Agency Agreement in the form of EXHIBIT F (the "COLLATERAL AGENCY
AGREEMENT") and (c) an indemnification agreement in favor of the Purchasers,
with respect to environmental and similar matters affecting the Land in the form
of EXHIBIT G (the "INDEMNITY"); and (ii) executed and filed and/or recorded such
financing statements, mortgages or other instruments, and taken all such other
actions and delivered all such other instruments as are required to perfect
and/or maintain the priority of the security interests granted in the Security
Documents and (iii) delivered or caused to be delivered (a) title insurance
policies in standard ALTA form or such other standard forms prescribed for use
in the relevant state and from a title company as are reasonably satisfactory to
the Purchasers, ensuring that the Liens granted by the Mortgages on the Land in
favor of the Secured Notes as first priority Liens subject only to such
exceptions as are acceptable to the Purchasers in their sole discretion and (b)
certified copies of Requests for Information (Form UCC-11) or equivalent
reports, listing the financing statements referred to in CLAUSE (II) of this
PARAGRAPH 3K (the "FINANCING STATEMENTS") and all other effective financing
statements which name either Borrower (under its present name, any previous
names and any trade names) as debtor and which are filed in the jurisdictions in
which the Financing Statements have been filed or in which a financing statement
against
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such party would be required to be filed in order to be effective, together with
copies of such other financing statements (none of which shall cover the
Collateral purported to be covered by the Security Documents).
3L. ENVIRONMENTAL AND ZONING STATUS. The environmental and zoning
status of the Land shall be satisfactory in all respects to the Purchasers and
the Borrowers shall have provided to the Purchasers such reports, analyses and
opinions with respect thereto as the Purchasers shall reasonably request,
including, without limitation, opinions of counsel, Phase 1 Environmental Audits
and ALTA form surveys as of a date which is satisfactory to the Purchasers.
3M. APPRAISALS. Purchasers shall have received copies of the
appraisals of S.E. Waggoner, ARA and Robert D. Morrow, Jr. with respect to the
Collateral dated April 14, 1999 and reflecting an aggregate value of not less
than $35,951,000.
3N. SUBSIDIARY GUARANTIES. Each Subsidiary (other than the
Partnership) shall have executed a guaranty of the obligations of the Borrowers
hereunder and under the Secured Notes pursuant to a Guaranty in the form of
EXHIBIT H (such Guaranties, the "SUBSIDIARY GUARANTIES") accompanied by copies
of the organizational documents of such Subsidiary and corporate resolutions (or
equivalent) authorizing such Guaranty, in each case certified as true and
correct by an appropriate officer of such Subsidiary.
4. CONDITIONS OF SECOND CLOSING. The Borrowers' obligation to sell the Series C
Notes is subject to the Purchasers having purchased all the Series C Notes at
the Second Closing. Each Purchaser's obligation to purchase and pay for its
Series C Notes at any Second Closing is subject to the fulfillment to its
satisfaction or its written waiver, on or before the applicable Second Closing
Date, of the following conditions:
4A. CHARTER AND PROCEEDINGS. On or before the Second Closing Date
the Purchasers shall have received the following items, each of which shall be
in form and substance reasonably satisfactory to the Purchasers and, unless
otherwise noted, dated the Second Closing Date, and in sufficient copies (except
for the Secured Notes), for each Purchaser:
(i) A certificate of the Company's secretary stating
that the resolutions of the board of directors of the Company
certified pursuant to PARAGRAPH 3A(i) remain in full force and
effect without amendment or modification;
(ii) A copy of the Certificate of Organization of the
Company and each amendment thereto, certified (as of a date
reasonably near the date of the Second Closing) by the Secretary of
State of Delaware as being a true and correct copy thereof and
indicating that there have been no amendments thereto since the date
of the certified Certificate of Organization delivered pursuant to
PARAGRAPH 3A(ii) and a copy of the Certificate of Limited
Partnership of the Partnership and each amendment thereto, certified
(as of a date reasonably near the date of the Second Closing) by the
Secretary of State of Texas as being a true and correct copy thereof
and indicating that there have been no amendments thereto since the
date of the certified Certificates of Organization and Limited
Partnership delivered pursuant to PARAGRAPH 3A(ii).
(iii) A copy of a certificate of the Secretary of State
of Delaware, dated within 10 Business Days prior to the Second
Closing Date certifying that the Company is in good standing under
the laws of State of Delaware and a copy of a certificate of the
Secretary of State of Texas dated within 10 Business Days prior to
the Second Closing Date certifying that the Partnership is in good
standing under the laws of State of Texas.
(iv) A copy of a certificate of the Secretary of State
of each state listed on SCHEDULE 9A, dated reasonably near the
Second Closing Date, stating that the Company and the Partnership
(to the extent applicable) are duly qualified and in good standing
in such state and have filed all annual reports required to be filed
to the date of such certificate.
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<PAGE> 13
(v) An Officers' Certificate attested to by the
secretary or assistant secretary of the Company, (and the statements
made in such certificate shall be true on and as of the Second
Closing Date) certifying on behalf of the Company, individually and
as general partner of the Partnership, as to (a) the absence of any
amendments to the Certificate of Organization of the Company or the
Certificate of Limited Partnership since the date of the Secretary
of State's certificates referred to in CLAUSE (ii) above, (b) a true
and correct copy of the By-laws of the Company and the Agreement of
Limited Partnership of the Partnership each as in effect on the
Second Closing Date, (c) the absence of any proceeding for the
dissolution or liquidation of the Company or the Partnership, (d) as
to the matters set forth in PARAGRAPH 4D, and (e) the absence of any
event occurring and continuing, or resulting from the Second
Closing, that constitutes a Default or an Event of Default.
(vii) Originals of the Series C Notes to be issued to
each Purchaser at the Second Closing executed by an authorized
officer of the Company.
(viii) An Officers' Certificate attested to by the
secretary or an assistant secretary of the Company, in form and
substance reasonably satisfactory to the Purchasers, attesting to
the Solvency of the Company, the Partnership and the Consolidated
Group immediately before and immediately after giving effect to
consummation of the transactions contemplated by the Second Closing.
4B. OPINION OF BORROWERS' COUNSEL. The Purchasers shall have
received a favorable opinion, dated the Second Closing Date and addressed to
them, from Young, Williams, Henderson & Fuselier, P.A., counsel to the Borrowers
and local counsel to the Purchasers in Tennessee, Ohio and Kentucky, covering
the matters set forth in EXHIBIT 3B and such other matters as any Purchaser or
Special Counsel may reasonably request and otherwise in form and substance
reasonably acceptable to the Purchasers. To the extent that the opinions
referred to in this PARAGRAPH 4B is rendered in reliance upon the opinion of any
other counsel, the Purchasers shall have received a copy of the opinion of such
other counsel, dated the Second Closing Date and addressed to them, or a letter
from such other counsel, dated the Second Closing Date and addressed to them,
authorizing them to rely on such other counsel's opinion. The opinions of
counsel to the Borrowers, local counsel and any such other counsel shall be in
form and substance reasonably satisfactory to the Purchasers and Special
Counsel.
4C. OPINION OF PURCHASERS' SPECIAL COUNSEL. The Purchasers shall
have received from Special Counsel an opinion satisfactory to them as to such
matters incident to the transactions contemplated by this Agreement as they may
reasonably request.
4D. REPRESENTATIONS AND WARRANTIES AND COMPLIANCE. The
representations and warranties contained in PARAGRAPH 9 shall be true on and as
of the Second Closing Date after giving effect to the issue and sale of the
Series C Notes (and application of the proceeds as contemplated by PARAGRAPH
6I); no Default or Event of Default shall have occurred or be continuing; and
the Borrowers shall have performed and complied with all agreements and
conditions contained in the Transaction Documents required to be performed or
complied with by them at or prior to the Second Closing.
4E. PURCHASE PERMITTED BY APPLICABLE LAWS. The offering, issuance,
purchase and sale of and payment for, the Series C Notes on the Second Closing
Date on the terms and conditions of this Agreement (including the use of the
proceeds of such sale) shall be permitted by the laws and regulations of each
jurisdiction to which a Purchaser is subject, without recourse to provisions
(such as Section 1405(a)(8) of the New York Insurance Law) permitting limited
investments by life insurance Company without restriction as to the character of
the particular investment, shall not violate any applicable law or governmental
regulation (including, without limitation, section 5 of the Securities Act or
Regulation T, U or X of the Board of Governors of the Federal Reserve System)
and shall not subject any Purchaser to any tax, penalty, liability or other
condition adverse to it under or pursuant to any applicable law or governmental
regulation, and the Purchasers shall have received such certificates or other
evidence as to matters of fact as they may reasonably request to enable them to
determine whether such purchase is so permitted.
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<PAGE> 14
4F. PRIVATE PLACEMENT NUMBER. A private placement number shall have
been assigned to the Series C Notes by Standard & Poors CUSIP Service Bureau.
4G. SALE OF ALL SERIES C NOTES. The Borrowers shall have sold to
each other Purchaser, and each other Purchaser shall have purchased, the Series
C Notes to be purchased by it at the Second Closing as set forth in ANNEX 1.
4H. PAYMENT OF SPECIAL COUNSEL FEES. Without limiting the provisions
of PARAGRAPH 12A, the Borrowers shall have paid the reasonable fees, charges and
disbursements of Special Counsel and Purchasers' local counsel (which may
include a reasonable reserve for anticipated fees and expenses) to the extent
reflected in a statement of Special Counsel rendered to the Borrowers at or
before the Second Closing.
4I. COMPLETION OF EXPANSION. The Purchasers shall have received
evidence satisfactory to them as to the completion of, and the cost of the
completion of the phase(s) of, the expansion specified in the applicable Second
Closing Notice, which evidence may include, with limitation, certificates of
occupancy, architect/contractor certificates and copies of paid invoices.
4J. OTHER TRANSACTION DOCUMENTS. The Borrowers shall have each (i)
executed and delivered such amendments to the Security Documents as may be
necessary to secure the outstanding amounts under Series C Notes with a first
priority Lien on the Collateral pari passu with the other series of Secured
Notes; (ii) executed and filed and/or recorded such financing statements,
mortgages or other instruments, and taken all such other actions and delivered
all such other instruments as are required to perfect and/or maintain the
priority of the security interests granted in the Security Documents and (iii)
delivered or caused to be delivered (a) endorsements to the title insurance
policies and update of the surveys delivered at the Initial Closing, ensuring
the Liens granted under the Mortgages on the Land in favor of the Secured Notes
as first priority Liens subject only to such exceptions as were acceptable to
the Purchasers at the Initial Closing and (b) certified copies of Requests for
Information (Form UCC-11) or equivalent reports, listing the financing
statements referred to in CLAUSE (ii) of this PARAGRAPH 4I (the "SECOND CLOSING
FINANCING STATEMENTS") and all other effective financing statements which name
either Borrower (under its present name, any previous names and any trade names)
as debtor and which are filed in the jurisdictions in which the Financing
Statements and the Second Closing Financing Statements have been filed or in
which a financing statement against such party would be required to be filed in
order to be effective, together with copies of such other financing statements
(none of which shall cover the Collateral purported to be covered by the
Security Documents).
5. PREPAYMENT AND REPAYMENT. The Secured Notes may be prepaid only under the
circumstances set forth in PARAGRAPH 5A and shall be repaid in accordance with
PARAGRAPHS 5C, 5D and 5J upon any acceleration of final maturity as provided in
PARAGRAPH 8B.
5A. OPTIONAL PREPAYMENT OF SECURED NOTES AT ANY TIME. The Borrowers
may prepay the Secured Notes, in full, or in part in multiples of $1,000,000 on
any date. Prepayments of the principal of any Secured Notes shall be made
together with (a) interest accrued on the principal amount being prepaid to the
Settlement Date and (b) the Make Whole Amount.
5B. NOTICE OF OPTIONAL PREPAYMENT. The Borrowers shall give each
Holder irrevocable written notice of any prepayment to be made pursuant to
PARAGRAPH 5A at least 30 days and not more than 60 days prior to the Settlement
Date specifying:
(i) the series of Secured Note being prepaid;
(ii) the Settlement Date and the Called Principal of the
Secured Notes of such series held by each such Holder;
(iii) that such prepayment is to be made pursuant to
PARAGRAPH 5A; and
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<PAGE> 15
(iv) an estimate of the Make Whole Amount payable on the
Called Principal of such Holder's Secured Notes (calculated as if
the date of such notice were the date of prepayment), together with
the details of such computation.
Upon the giving of such notice, the Called Principal of Secured
Notes of the identified series, together with interest accrued thereon to the
Settlement Date and the Make Whole Amount shall become due and payable on the
Settlement Date. Not later than the close of business on the second Business Day
prior to the Settlement Date, the Borrowers shall deliver to each Holder an
Officers' Certificate setting forth in detail the calculations used in
determining whether a Make Whole Amount is payable on such prepayment and the
amount of such Make Whole Amount.
5C. SCHEDULED REPAYMENT OF SECURED NOTES; EXTENSION OF SERIES A
NOTES.
(i) (a) With respect to the Series A Notes, subject to PARAGRAPH 5E
below, the Borrowers shall (i) on October 1, 1999 repay $56,656.04 in aggregate
principal amount together with all then accrued interest on the Series A Notes;
(ii) on the first day of each month commencing November 1, 1999 through and
including December 1, 2003, pay equal installments of principal and interest in
the amount of $114,601.22 each and (ii) on December 1, 2003 shall, unless the
maturity of the Series A Notes is extended pursuant to CLAUSE (b) of this
PARAGRAPH 5C(i), repay in full all unpaid principal and accrued interest on the
Series A Notes.
(b) Provided no Default or Event of Default has occurred which
is then continuing, the Borrowers shall have the option, exercisable by notice
given to the Purchasers after November 3, 2003 but not later than the tenth
Business Day immediately prior to December 1, 2003, to extend the maturity of
all (and not less than all) of the Series A Notes to September 1, 2014. Notice
of extension by the Borrowers shall be irrevocable. If extended, the Series A
Notes shall bear interest from and after December 1, 2003 until maturity at the
rate of interest determined pursuant to PARAGRAPH 1C and on the first day of
each month, commencing January 1, 2004 through and including September 1, 2014,
the Borrowers shall pay equal installments of principal and interest in an
amount which would, based on the rate of interest set pursuant to PARAGRAPH 1C,
fully amortize the then outstanding principal of the Series A Notes as of
December 1, 2003 in 180 monthly installments. In any event, on September 1, 2014
the Borrowers shall repay in full all unpaid principal and accrued interest on
the Series A Notes.
(ii) With respect to the Series B Notes, subject to PARAGRAPH 5E
below, the Borrowers shall (a) on the first day of each month through and
including December 1, 2003, commencing with the first such date to follow the
Initial Closing Date, pay all then accrued interest on the Series B Notes and
(b) on the first day of each month commencing January 1, 2004, through and
including September 1, 2014, pay equal installments of principal and interest in
an amount which would, based on the rate of interest set forth in PARAGRAPH 1C,
fully amortize the then outstanding principal of the Series B Notes as of
December 1, 2003 in 180 monthly installments (which amount, if no prepayments of
the Series B Notes have then been made, would equal $155,315.55 in the aggregate
for all Series B Notes). In any event, on September 1, 2014 the Borrowers shall
repay in full all unpaid principal and accrued interest on the Series B Notes.
(iii) With respect to the Series C Notes, subject to PARAGRAPH 5E
below, the Borrowers shall (a) on the first day of each month through and
including December 1, 2003, commencing with the first such date to follow the
Second Closing Date, pay all then accrued interest on the Series C Notes and (b)
on the first day of each month commencing January 1, 2004, through and including
September 1, 2014, pay equal installments of principal and interest in an amount
which would, at the rate of interest set pursuant to PARAGRAPH 1C, fully
amortize the then outstanding principal of the Series C Notes as of December 1,
2003 in 180 monthly installments. In any event, on September 1, 2014 the
Borrowers shall repay in full all unpaid principal and accrued interest on the
Series C Notes.
5D. PREPAYMENT OF SECURED NOTES UPON A CHANGE OF CONTROL. The
Borrowers shall give written notice (a "CHANGE OF CONTROL NOTICE") to each
Holder not less than 30 nor more than 60 days prior to the occurrence of any
event which may reasonably be expected to result in a Change of Control, or if
the Borrowers have no knowledge that such an event is to occur until less than
30 days prior thereto, or until after the occurrence thereof, then as promptly
as practicable, but in no event more than 5 days after a Borrower first acquires
knowledge that such an event is definitely going to occur or has occurred.
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<PAGE> 16
The Change of Control Notice shall identify the event, the reason why such event
may result in or has resulted in a Change of Control and the Persons involved,
and shall include such financial and other information as is available to the
Borrowers or which may be obtained by the Borrowers with reasonable effort that
would be reasonably necessary for a Holder to make an informed decision as to
whether to elect to require prepayment of its Secured Notes under this PARAGRAPH
5D and shall set forth the proposed effective date for, or if the Change of
Control has occurred, the actual date, of such Change of Control. Any Holder, by
giving written notice to the Borrowers of such election (an "ELECTION NOTICE")
not later than 5 Business Days prior to the effective date of such Change of
Control, if the Change of Control Notice is given at least 30 days prior to such
effective date, and otherwise not later than 30 days after the Change of Control
Notice is given, shall have the option to require the Borrowers to prepay all of
its Secured Notes at 100% of the principal amount thereof plus interest accrued
thereon to the Settlement Date and the Make Whole Amount. Once given, any
Election Notice may be revoked, by notice, given at any time up to the last date
an Election Notice could have been given with respect to the Change of Control
Notice. If the proposed terms of a Change of Control change substantially, or if
any other event which may result in a Change of Control may or has occurred, the
Borrowers shall give each Holder a revised Change of Control Notice and each
Holder shall then have another opportunity to elect to require prepayment of its
Secured Notes under this PARAGRAPH 5D by delivering to the Borrowers a new
Election Notice or to revoke, by written notice to the Borrowers, any prior
Election Notice, not later than 30 days following the date such revised Change
of Control Notice is given. The prepayment of a Holder's Secured Notes pursuant
to this PARAGRAPH 5D shall occur on the later of (a) the effective date of such
Change of Control or (b) 5 Business Days following the date such Holder's
Election Notice is given. Notwithstanding the foregoing, no prepayment or early
redemption shall be required pursuant to this PARAGRAPH 5D unless a Change of
Control occurs or has occurred.
Not later than the close of business on the second Business Day
prior to the Settlement Date of a prepayment under this PARAGRAPH 5D, the
Borrowers shall deliver to the Holder of each Secured Note to be prepaid an
Officers' Certificate stating whether a Make Whole Amount is payable in
connection with such prepayment and setting forth in detail the calculations
used in making such determination.
If the Borrowers fail to give a Change of Control Notice and a
Change of Control occurs, or fails to give a proper Change of Control Notice as
to a Change of Control which has occurred, any Holder may, at any time after the
occurrence of such Change of Control, without waiver of any right on the part of
the Holder to accelerate its Secured Notes pursuant to PARAGRAPH 8B, require the
Borrowers, on demand pursuant to this PARAGRAPH 5D, to prepay all of such
Holder's Secured Notes at 100% of the principal amount thereof plus accrued
interest to the Settlement Date and the Make Whole Amount.
5E. PAYMENTS PRO RATA; APPLICATION OF PAYMENTS. Upon any partial
prepayment of the Secured Notes pursuant to PARAGRAPH 5A and any scheduled
repayment of the Secured Notes pursuant to PARAGRAPH 5C, such payments shall be
applied first to accrued interest on the series of Secured Notes to which such
payment applies and then to repayment of principal of such series. The accrued
interest paid and the principal amount so prepaid or repaid plus the Make Whole
Amount shall be allocated among the Holders in proportion to respective
outstanding principal amounts of the series of Secured Notes held by them to
which such prepayment or scheduled repayment applies. All partial prepayments of
principal made to the Holders in respect of the Secured Notes shall be applied
to the obligations of the Borrowers to make the scheduled payments required by
PARAGRAPH 5C in inverse order of maturity.
5F. RETIREMENT OF SECURED NOTES. The Borrowers shall not, and shall
not permit any of their Affiliates to, prepay or otherwise retire any Secured
Notes in whole or in part, prior to its stated maturity (other than by
prepayment pursuant to PARAGRAPH 5A or 5D, scheduled repayment pursuant to
PARAGRAPH 5C or upon acceleration of final maturity pursuant to PARAGRAPH 8B),
or purchase or otherwise acquire, directly or indirectly, any Secured Notes held
by any Holder unless the Borrowers or such Affiliate shall have offered to
prepay or otherwise retire, purchase, redeem or otherwise acquire, as the case
may be, the same proportion of the aggregate outstanding principal amount of
Secured Notes of the same series held by each other Holder at the time
outstanding upon the same terms and conditions. Any such offer shall provide
each Holder with sufficient information to enable it to make an informed
decision with respect to such offer, and shall remain open for at least 10
Business Days. If the Required Holders accept such offer, the Borrowers shall
promptly notify the remaining Holders of such fact and the expiration date for
the acceptance by Holders of such offer shall be extended by the number of days
necessary to give each
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<PAGE> 17
such Holder at least 10 Business Days from its receipt of such notice to accept
such offer. No Secured Notes so prepaid or otherwise retired or purchased or
otherwise acquired by either Borrower or any of their Affiliates shall
thereafter be reissued or deemed to be outstanding for any purpose under this
Agreement.
5G. MANNER OF PAYMENT.
(i) MANNER OF PAYMENT. The Borrowers shall pay all
amounts payable with respect to each Secured Note (without any
presentment of such Secured Note, unless such payment is the final
payment thereon, in which case the original of the Secured Note
shall be delivered to the Borrowers), and without any notation of
such payment being made thereon, by crediting, by federal funds bank
wire transfer, the account of the Holder thereof in any bank in the
United States of America as may be designated in writing by such
Holder, or in such other manner or to such other address in the
United States of America as may be reasonably designated in writing
by such Holder. Absent subsequent notice from a Purchaser, ANNEX 1
shall be deemed to constitute designation by the Purchasers to the
Borrowers with respect to payments to be made to the Purchasers on
their Secured Notes. In the absence of a written designation by a
Holder, all amounts payable with respect to each Secured Note held
by such Holder shall be paid by check mailed and addressed to the
applicable Holder at such Holder's Home Office. All payments of
principal and interest and fees hereunder and under the Secured
Notes by the Borrowers shall be made without defense, set-off or
counterclaim.
(ii) PAYMENTS DUE ON HOLIDAYS. If any payment due on, or
with respect to, any Secured Note shall fall due on a day other than
a Business Day, then such payment shall be made on the first
Business Day following the day on which such payment was due;
provided that if all or any portion of such payment shall consist of
a payment of interest, for purposes of calculating such interest,
such payment shall be deemed to have been originally due on such
first following Business Day, such interest shall accrue and be
payable to (but not including) the actual date of payment, and the
amount of the next succeeding interest payment shall be adjusted
accordingly.
(iii) PAYMENTS, WHEN RECEIVED. Any payment to be made to
the Holders hereunder or under the Secured Notes shall be deemed to
have been made on the Business Day such payment actually becomes
available at such Holder's bank prior to the close of business of
such bank, provided that interest for one (1) day at the non-default
interest rate of the Secured Notes shall be due on the amount of any
such payment that actually becomes available to such Holder at such
Holder's bank after 1:00 pm (local time of such bank).
5H. TAXES.
(i) Any and all payments by the Borrowers hereunder or
under the Secured Notes shall be made free and clear of and without
deduction for any and all present or future Taxes and all
liabilities with respect thereto, excluding, (A) in the case of each
Holder, net income taxes that are imposed by the United States and
net income taxes (or franchise taxes imposed in lieu thereof) that
are imposed on such Holder by the state or foreign jurisdiction
under the laws of which such Holder is organized or any political
subdivision thereof, (B) in the case of each Holder, net income
taxes (or franchise taxes imposed in lieu thereof) that are imposed
on such Holder by the state or foreign jurisdiction of such Holder's
applicable Home Office or any political subdivision thereof and (C)
in the case of any Holder that becomes a party after the Initial
Closing Date, any taxes imposed by the United States solely by
reason of the organization or incorporation of such Holder outside
the United States (all such Taxes and liabilities other than those
excluded in clauses (A), (B) and (C) being referred to as "COVERED
TAXES"). If a Borrower shall be required by law to deduct any
Covered Taxes from or in respect of any sum payable hereunder or
under any Secured Note to any Holder, (i) the sum payable shall be
increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums
payable under this PARAGRAPH 5H) such Holder receives an amount
equal to the sum it would have received had no such deductions been
made, (ii) the Borrowers shall make such deductions and (iii) the
Borrowers shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable
law.
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<PAGE> 18
(ii) In addition, the Borrowers shall pay any present or
future stamp, documentary, excise, property or similar Taxes that
arise from or in connection with or as a result of the issuance of
the Secured Notes, any payment made hereunder or in respect of the
Secured Notes or the execution, delivery or registration of,
performing under, or otherwise with respect to, this Agreement or
the Secured Notes, or any modification, waiver or amendment of this
Agreement, the Secured Notes or any other Transaction Document
("OTHER TAXES").
(iii) The Borrowers shall indemnify each Holder for the
full amount of Taxes and Other Taxes, and for the full amount of
Covered Taxes imposed by any jurisdiction on amounts payable under
this PARAGRAPH 5H, imposed on or paid by such Holder and any
liability (including penalties, additions to tax, interest and
expenses) arising therefrom or with respect thereto, whether or not
such Covered Taxes were correctly or legally imposed. This
indemnification shall be made within thirty (30) days from the date
such Holder makes written demand on the Borrowers specifying in
reasonable detail the basis therefor.
(iv) Within thirty (30) days after the date of any
payment of Covered Taxes or Other Taxes, the Borrowers shall furnish
to the subject Holder a copy of the original receipt, certified as
true and correct by a Senior Officer. If the Borrowers determine
that no Covered Taxes or Other Taxes are payable in respect thereof,
the Borrowers shall furnish, or shall cause such payor to furnish,
to the Holders an opinion of counsel or other reasonably
satisfactory evidence stating that such payment is exempt from
Covered Taxes or Other Taxes.
5I. MAKE WHOLE AMOUNT. The Borrowers acknowledge that the Make Whole
Amount due at any optional or required prepayment of its Secured Notes
(including any prepayment required pursuant to any provision of this PARAGRAPH 5
or upon acceleration of final maturity under PARAGRAPH 8B) has been negotiated
with the Purchasers to provide a bargained for rate of return on the Purchasers'
investment in the Secured Notes and is not a penalty.
6. AFFIRMATIVE COVENANTS.
6A. FINANCIAL AND OTHER REPORTING BY THE BORROWERS. The Borrowers
will deliver to each Holder:
(i) as soon as practicable, and in any event not more
than 45 days after the end of each Fiscal Quarter (except the last
fiscal quarter of each Fiscal Year), the unaudited consolidated (and
consolidating) balance sheet of the Consolidated Group as at the end
of such quarterly period and the related unaudited consolidated (and
consolidating) statements of income and retained earnings and of
cash flows of the Consolidated Group for such quarterly period and
for the Fiscal Year to date, setting forth, in each case in
comparative form, figures for the corresponding period(s) in the
preceding Fiscal Year, all in reasonable detail and in accordance
with GAAP, and certified by the chief accounting officer or chief
financial officer of the Company as fairly presenting the financial
condition of the Consolidated Group as at the dates indicated and
the results of its operations and cash flows, in each case for the
periods indicated, in conformity with GAAP (except as disclosed in
such certificate) with any changes in accounting policies discussed
in reasonable detail, subject to changes resulting from year-end
adjustments not material in scope or amount; provided that delivery
within the time period specified above of copies of the Company's
Quarterly Report on Form 10-Q prepared in compliance with the
requirements therefor and filed with the SEC shall be deemed to
satisfy the requirements of this PARAGRAPH 6A(i);
(ii) as soon as practicable, and in any event not more
than 90 days, after the end of each Fiscal Year, the consolidated
(and consolidating) balance sheet of the Consolidated Group as of
the end of such year and the related consolidated (and
consolidating) statements of income and retained earnings and of
cash flows of the Consolidated Group for such year, and setting
forth in each case in comparative form, corresponding figures for
the preceding Fiscal Year, all in reasonable detail and in
accordance with GAAP, and accompanied by an opinion thereon of the
Approved Auditor, which opinion shall be without limitation as to
the scope of the audit and shall state that such financial
statements present fairly in all material respects, the consolidated
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<PAGE> 19
financial condition of the Consolidated Group as at the dates
indicated and the results of their consolidated operations and cash
flows for the periods indicated in conformity with GAAP (except as
otherwise specified in such report) and that the audit by such
accountants in connection with such financial statements has been
made in accordance with generally accepted auditing standards and
provides a reasonable basis for such opinion; provided that the
delivery within the time period specified above of the Company's
Annual Report on Form 10-K for such fiscal year (together with the
Company's annual report to shareholders, if any, prepared pursuant
to Rule 14a-3 under the Exchange Act) prepared in accordance with
the requirements therefor and filed with the SEC shall be deemed to
satisfy the requirements of this PARAGRAPH 6A(ii);
(iii) together with each delivery of financial
statements of the Consolidated Group pursuant to SUBPARAGRAPHS (i)
and (ii) of this PARAGRAPH 6A, a certificate of the chief financial
officer of the Company (a) stating that he/she has reviewed the
terms of the Transaction Documents and has made, or caused to be
made under his/her supervision, a review in reasonable detail of the
transactions and condition of the Consolidated Group during the
fiscal period covered by such financial statements and that such
review has not disclosed the existence during or at the end of such
fiscal period, of any Default or Event of Default or, if any such
Default or Event of Default existed or exists, specifying the nature
and period of existence thereof and what action the Borrowers have
taken or are taking or propose to take with respect thereto; (b)
demonstrating (if applicable, with computations in reasonable
detail) compliance by the Borrowers with the provisions of PARAGRAPH
7A; and (c) analyzing the principal changes in the results of
operations of the Consolidated Group for such Fiscal Year or Fiscal
Quarter from the results of operations of the Consolidated Group for
the immediately preceding Fiscal Year or Fiscal Quarter;
(iv) together with each delivery of financial statements
pursuant to SUBPARAGRAPH (ii) of this PARAGRAPH 5A, a certificate by
the Approved Auditor stating (a) that their audit examination has
included a review of the terms of the Transaction Documents as they
relate to accounting matters and that such review is sufficient to
enable them to make the statement referred to in CLAUSE (c) of this
SUBPARAGRAPH (iv), (b) whether, in the course of their audit
examination, there has been disclosed the existence during the
Fiscal Year covered by such financial statements (and whether they
have knowledge of the existence as of the date of such accountants'
certificate) of any condition or event which constitutes a Default
or Event of Default under PARAGRAPH 7A and if during their audit
examination there has been disclosed (or if they have knowledge of)
such a condition or event, specifying the nature and period of
existence thereof (it being understood, however, that such
accountants shall not be liable to any Person by reason of their
failure to obtain knowledge of any Default or Event of Default which
would not be obtained in the course of an audit conducted in
accordance with generally accepted auditing standards), and (c) that
based on their annual examination nothing came to their attention
which causes them to believe that the information contained in the
certificate of the chief financial officer of the Company delivered
therewith pursuant to SUBPARAGRAPH (iii) of this PARAGRAPH 6A is not
correct or that the matters set forth in such certificate are not
stated in accordance with the terms of this Agreement;
(v) promptly after receipt thereof by a Borrower, copies
of all management letters, if any, submitted to such Borrower by
independent public accountants in connection with each annual,
interim or special audit of the books of the Consolidated Group;
(vi) promptly after any Senior Officer obtains actual
knowledge (a) of any Default or Event of Default, (b) that any
Holder has given notice to a Borrower or taken any other action with
respect to a claimed Default or Event of Default under this
Agreement, or (c) that any Person has given any notice to a Borrower
or any Subsidiary or taken any other action with respect to a
claimed default or event or condition of the type referred to in
SUBPARAGRAPH (ii) of PARAGRAPH 8A, an Officers' Certificate
specifying the nature and period of existence of any such Default or
Event of Default, or specifying the notice given or action taken by
such Holder or Person and the nature of such claimed Default, Event
of Default, event or condition, and what action the Borrowers have
taken, are taking or propose to take with respect thereto;
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<PAGE> 20
(vii) promptly, and in any event within 5 days after any
Senior Officer obtains knowledge of any of the following, a written
notice setting forth the nature thereof and the action, if any, that
the Borrowers or any ERISA Affiliate proposes to take with respect
thereto:
(a) with respect to any Plan, any
"reportable event" (as defined in section 4043(b) of
ERISA) for which notice thereof has not been waived
pursuant to regulations of the DOL or "prohibited
transaction" (as such term is defined in section 406 of
ERISA or section 4975 of the IRC) in connection with any
Plan or any trust created thereunder; or
(b) the taking by the PBGC of steps to
institute, or the threatening by the PBGC of the
institution of, proceedings under section 4042 of ERISA
for the termination of, or the appointment of a trustee
to administer, any Plan, and any distress termination
notice delivered to the PBGC under section 4041 of ERISA
in respect of any Plan, and any determination of the
PBGC in respect thereof;
(c) the placement of any Multiemployer Plan
in reorganization status under Title IV of ERISA, any
Multiemployer Plan becoming "insolvent" (as such term is
defined in section 4245 of ERISA) under Title IV of
ERISA, or the whole or partial withdrawal of a Borrower
or any ERISA Affiliate from any Multiemployer Plan and
the withdrawal liability incurred in connection
therewith; or
(d) any event, transaction or condition that
could reasonably be expected to result in the incurrence
of any liability by a Borrower or any ERISA Affiliate,
or the imposition of any Lien on any of the rights,
properties or assets of a Borrower or any ERISA
Affiliate, pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to
employee benefit plans, if such liability or Lien, taken
together with any other such liabilities or Liens then
existing, could reasonably be expected to have a
Material Adverse Effect;
(viii (a) promptly after transmission thereof, copies of
all financial statements, proxy statements, notices and reports as
the Company shall send or make available to its stockholders or
debtholders and copies of all registration statements (with
exhibits), prospectuses and all periodic reports which it files with
the SEC or any stock exchange and of all press releases and other
statements made available generally by the Company to the public
concerning material developments and (b) promptly after receipt
thereof, copies of any reports, statements and notices the Company
may receive in accordance with Section 13(d) or 14(d) of the
Exchange Act or the rules and regulations of any stock exchange;
(ix promptly after transmission thereof, copies of all
such financial statements, notices, certificates and reports as a
Borrower shall send to any other lender or group of lenders in
connection with, and after the occurrence of, any event or condition
which results in, or which, with notice or the passage of time,
could result in, the occurrence of any event or condition of the
type referred to in SUBPARAGRAPH (ii) of PARAGRAPH 8A with respect
to the Debt owed to such lender or group of lenders or;
(ix) promptly after the commencement of any action or
proceeding relating to a Borrower or any Subsidiary in any court or
before any Governmental Authority or arbitration board or tribunal
as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, could reasonably be
expected to have a Material Adverse Effect, a notice specifying the
nature and period of existence thereof and what action the Borrowers
have taken, are taking or propose to take with respect thereto; and
(x) with reasonable promptness, such other information
and data with respect to the Borrowers or the Consolidated Group or
relating to the ability of the Borrowers or any Subsidiary to
perform their obligations under the Transaction Documents as may
from time to time be reasonably requested by any Holder.
6B. INFORMATION REQUIRED BY RULE 144A. The Borrowers will, upon the
request of any Holder, provide to such Holder, and any Qualified Institutional
Buyer designated by such Holder, such
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<PAGE> 21
financial and other information as such Holder may reasonably determine to be
necessary in order to permit compliance with the information requirements of
Rule 144A in connection with a resale or proposed resale of any Secured Note.
6C. INSPECTION OF PROPERTY. Each Borrower will permit the
representatives of any Holder to visit and inspect any of its properties or any
of its Subsidiaries, to examine all their respective books of account, records,
reports and other papers, to make copies and extracts therefrom, and to discuss
their respective affairs, finances and accounts with their respective officers,
employees and independent public accountants (and by this provision each
Borrower authorizes said accountants to discuss the finances and affairs of such
Borrower and its Subsidiaries) all at such reasonable times and as often as may
be reasonably requested in advance. At all times during which there exists a
Default or Event of Default, any reasonable out-of-pocket expenses incurred by
the Holders in connection with this PARAGRAPH 6C shall be paid in accordance
with PARAGRAPH 12A.
6D. EXISTENCE, ETC. Except as otherwise specifically permitted by
this Agreement, each Borrower will, and will cause each Subsidiary to, at all
times preserve and keep in full force and effect its existence as a corporation,
and rights and franchises material to its business, and qualify and maintain its
qualification to do business and good standing in any jurisdiction where the
failure to do so individually or in the aggregate would have a Material Adverse
Effect.
6E. PAYMENT OF TAXES AND CLAIMS.
(i Each Borrower will, and will cause each Subsidiary
to, file all Tax returns required to be filed in any jurisdiction
and pay all Taxes shown to be due and payable on such returns and
all other Taxes imposed upon it or any of the Consolidated Group's
properties or assets or in respect of any of the Consolidated
Group's franchises, business, income, sales and services, or profits
when the same become due and payable, but in any event before any
penalty or interest accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which have
or might become a Lien upon any of its properties or assets,
provided, that no such Tax or claim need be paid if (a) it is being
actively contested in good faith by appropriate proceedings and if
reasonable reserves or other appropriate provision, if any, as shall
be required by GAAP shall have been made therefor, and (b) the
failure to pay such Tax or claim is not expected, if such contest
were adversely determined, to have a Material Adverse Effect.
(ii Neither Borrower will consent to or permit the
filing of or be a party to any consolidated income tax return on its
behalf or on behalf of any of its Subsidiaries with any Person
(other than a consolidated return that includes solely the Borrowers
and their Subsidiaries).
6F. COMPLIANCE WITH LAWS, ETC. Each Borrower will, and will cause
each Subsidiary to, comply with all applicable laws, rules, regulations and
orders of any Governmental Authority to which it is subject, and obtain and
maintain in effect all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of its properties or to
the conduct of its businesses, in each case to the extent necessary to
reasonably ensure that non-compliance with such laws, ordinances or governmental
rules or regulations or failures to obtain or maintain in effect such licenses,
permits, franchises and other governmental authorizations in the aggregate do
not, and could not reasonably be expected to, have a Material Adverse Effect.
6G. MAINTENANCE OF PROPERTIES AND LEASES. Each Borrower will, and
will cause each Subsidiary to, maintain, in good repair and working order and
condition (other than ordinary wear and tear and obsolescence excepted) all
properties used in the Consolidated Group's business (except to the extent the
failure to so maintain, repair and keep in good working order does not, and is
not expected to, have a Material Adverse Effect), and from time to time make or
cause to be made all appropriate repairs, renewals, replacements, additions and
improvements thereof as needed and comply in all material respects with the
provisions of all leases or licenses under which it leases or licenses any such
properties.
6H. INSURANCE. Each Borrower will, and will cause each Subsidiary
to, maintain, with financially sound and reputable insurers, insurance with
respect to its properties and business of such
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<PAGE> 22
types and in such forms and amounts (including deductibles, co-insurance and
self-insurance if adequate reserves are maintained with respect thereto) and
against such risks as is reasonable and prudent in the circumstances and as are
customarily insured against by Persons of established reputation engaged in the
same or similar business and similarly situated and shall, in any event,
maintain the insurance required by the Security Documents.
6I. USE OF PROCEEDS. Each Borrower will use the proceeds it receives
from the sale of the Secured Notes only as set forth on SCHEDULE 6I and for
working capital, and not for any purpose which would violate any applicable law
or governmental regulation or which is otherwise prohibited under PARAGRAPH 9J.
6J. ENVIRONMENTAL COMPLIANCE AND INDEMNIFICATION. Each Borrower
will, and will cause each Subsidiary to, (a) obtain and maintain all permits,
licenses, and other authorizations that are required of it under all
Environmental Laws other than those which the failure to obtain or maintain
individually or in the aggregate do not, and could not reasonably be expected to
have, a Material Adverse Effect, and (b) comply with all terms and conditions of
all such permits, licenses, and authorizations and with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules, and timetables contained in all Environmental Laws or in any
regulation, ordinance or code applicable to it any, plan, order, decree,
judgment, injunction, notice, or demand letter issued, entered, promulgated, or
approved thereunder directly applicable to it, except to the extent of
noncompliance which, in the aggregate, does not, and could not reasonably be
expected to, have a Material Adverse Effect, and (c) operate all property owned
or leased by it such that no claims or obligations, including clean-up
obligations, which in the aggregate, have, or could reasonably be expected to
have, a Material Adverse Effect, shall arise under any Environmental Law, and if
any claim is made against it or any such obligation shall arise under any
Environmental Law, it shall at its own cost and expense, timely satisfy such
claim or obligation, provided no such claim or obligation need be satisfied for
so long as (1) it is being actively contested in good faith by appropriate
proceedings and (2) such reserves or other appropriate provision, if any, as
shall be required by GAAP shall have been made therefor.
6K. MAINTENANCE OF BOOKS AND RECORDS. Each Borrower will, and will
cause each Subsidiary to: (i) keep proper records and books of account with
respect to its business activities in which proper entries are made in the
ordinary course of all dealings or transactions of or in relation to its
business and affairs; (ii) set up on its books adequate reserves with respect to
all Taxes, assessments, charges, levies and claims; and (iii) set up on its
books reserves against doubtful accounts receivable, advances and all other
proper reserves (including reserves for depreciation, obsolescence or
amortization of its property). All determinations pursuant to this PARAGRAPH 6K
shall be made in accordance with, or as required by, GAAP in order to fairly
reflect all of the Consolidated Group's financial transactions. Notwithstanding
the foregoing, the Borrowers and their Subsidiaries may make adjustments and
changes in the manner in which their books and records are kept, provided, that:
(a all such adjustments and changes shall be required
or permitted by GAAP, but need not conform with the
prior accounting practice of such Borrower or such
Subsidiary or its predecessor;
(b each Holder shall be given written notice of all
such changes or adjustments together with the
financial statements required by SUBPARAGRAPH 6A(i)
for the Fiscal Quarter in which such change
occurred, and together with the financial
statements required by SUBPARAGRAPH 6A(ii), a
year-end listing and description of all such
changes and adjustments and the effect thereof by
the chief financial officer of the Company;
(c the financial covenants and ratios set forth in
PARAGRAPH 7A shall continue to be calculated
without regard to such adjustments or changes
unless and until the Required Holders have
consented thereto; and
(d the Company may not change its Fiscal Year unless
and until the Required Holders have consented
thereto.
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6L. SUBSIDIARY GUARANTIES. Each Borrower will cause each Subsidiary
hereafter existing to guaranty the obligations of the Borrowers hereunder and
under the Secured Notes by executing and delivering to each Holder
contemporaneously with the organization or acquisition of such Subsidiary, a
Subsidiary Guaranty accompanied by copies of the organizational documents of
such Subsidiary and corporate resolutions (or equivalent) authorizing such
transaction, in each case certified as true and correct by an appropriate
officer of such Subsidiary and such opinions of counsel with respect thereto as
the Required Holders reasonably request.
6M. YEAR 2000 COMPATIBILITY. Each Borrower will, and will cause each
Subsidiary to, take all action necessary to assure that its computer-based
systems, hardware and software are able to operate and effectively receive,
transmit, process, store, retrieve or retransmit data including dates on and
after January 1, 2000 without any Material Adverse Effect, and, at the request
of the Required Holders, the Borrowers shall provide evidence to the
satisfaction of the Required Holders of such year 2000 compatibility not later
than September 30, 1999.
6N. PAYMENT OF TRADE PAYABLES. Each Borrower will, and will cause
each Subsidiary to, pay all Trade Payables in accordance with industry practice,
but not later than 90 days after their due dates; provided no such Trade Payable
need be paid so long as (a) it is being actively contested in good faith by
appropriate proceedings and if reasonable reserves or other appropriate
provision, if any, as shall be required by GAAP shall have been made therefor,
and (b) the failure to pay such Trade Payable does not have a Material Adverse
Effect or result in a Lien on any of the Collateral.
6O. ADDITIONAL AGREEMENTS. Each Borrower will, and will cause each
Subsidiary to, do all such acts, and will execute and deliver to the Holders all
such security agreements, pledges, mortgages, financing statements,
certificates, and other instruments and will obtain all such governmental
authorizations and other consents and approvals and will do or cause to be done
all such other things as is required to confirm, perfect, or secure the priority
of, the interest of the Holders in the Collateral or as the Holders may
reasonably request from time to time in order to give full force and effect to
the Security Documents and to secure the Holders' rights thereunder. The
Borrowers also agree to provide the Holders, at the time of acquisition, with a
mortgage on any real property acquired by the Borrowers or any of their
Subsidiaries after the Initial Closing Date, substantially on the same terms and
conditions as the Mortgages entered into by the Borrowers on the Initial Closing
Date, subject only to Liens permitted pursuant to PARAGRAPH 7B(1)(i).
7. NEGATIVE COVENANTS.
7A. FINANCIAL COVENANTS. For as long as any of the Secured Notes are
outstanding, the Borrowers will not:
7A(1). LIMITATION ON TOTAL FUNDED DEBT. Permit, as of
the last day of any Fiscal Quarter, Consolidated Funded Debt to exceed 60% of
Consolidated Capitalization.
7A(2). CURRENT RATIO. Permit, as of the last day of any
Fiscal Quarter, the ratio of Consolidated Current Assets to Consolidated Current
Liabilities to be less than 1.25 to 1.00.
7A(3). CONSOLIDATED NET WORTH. Permit, as of the last
day of any Fiscal Quarter, Consolidated Net Worth to be less than the sum of
$60,000,000 plus, (i) if a positive number, 40% of Consolidated Net Income for
Fiscal Year 2000 and each Fiscal Year thereafter and (ii) 100% of any Equity
Sale Proceeds.
7A(4). INTEREST COVERAGE RATIO. Permit, as of the last
day of any Fiscal Quarter, a ratio of (i) Average EBIT to (ii) Consolidated
Interest Expense (to the extent paid in cash during such period) for such period
to be less than 2.00 to 1.00.
7B. LIENS AND OTHER RESTRICTIONS.
7B(1). LIENS. The Borrowers will not, and will not
permit any Subsidiary to create, assume or suffer to exist any Lien on its
properties or assets, whether now owned or hereafter acquired,
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<PAGE> 24
or upon any income or profits therefrom or proceeds of dispositions thereof, or
transfer any property for the purpose of subjecting the same to the payment of
obligations in priority to the payment of its general creditors except for:
(i Liens on property not constituting the Collateral
securing Debt otherwise permitted under PARAGRAPH 7C;
(ii Liens existing as of the date of this Agreement and
described on SCHEDULE 7B(1);
(iii Liens, and other charges incidental to the conduct
of their business, or the ownership of their property (including
charges for Taxes or otherwise arising by operation of law,
mechanics', carriers', workers', repairmen's, warehousers' or other
similar Liens), which are not incurred in connection with the
borrowing of money or the securing of Debt, provided that, in each
case, the obligation secured is not overdue or is being contested in
good faith by appropriate actions or procedures promptly instituted
and diligently conducted and such reserves as shall be required by
GAAP shall have been made therefor and such Liens and charges in the
aggregate do not have a Material Adverse Effect;
(iv Liens arising as a result of any judicial
proceedings with respect to which the Borrowers shall then in good
faith be actively prosecuting appeal or other appropriate
proceedings for review and Liens arising from judgments or decrees
not constituting a Default or Event of Default unless, in either
case, such Lien remains undischarged, unstayed pending appeal,
unbonded or undismissed for a period of 60 consecutive days and
provided, in either case, such reserves as shall be required by GAAP
shall have been made therefor and such Liens in the aggregate do not
have a Material Adverse Effect;
(v deposits or pledges to secure worker's compensation,
unemployment insurance, old age benefits or other social security
obligations or retirement benefits;
(vi Liens arising out of deposits in connection with, or
given to secure the performance of, bids, tenders, trade contracts
not for the payment of money, or leases, or to secure statutory
obligations or surety or appeal bonds, performance bonds or other
pledges or deposits for purposes of like nature in the ordinary
course of business;
(vii survey exceptions or encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and
other similar purposes, or zoning or other restrictions as to the
use of real properties, which are necessary for the conduct of its
activities or which customarily exist on properties of Persons
engaged in similar activities and similarly situated and which do
not in the aggregate have a Material Adverse Effect or materially
interfere with the use of such real properties in the operation of
the business of the Consolidated Group in the ordinary course; and
(viii) Liens on the Collateral created pursuant to the
Security Documents.
7B(2). SALES OF EQUITY INTERESTS BY SUBSIDIARIES.
(i) The Borrowers will not permit any Subsidiary to,
issue, sell or otherwise dispose of, or part with control of, any of
such Subsidiary's own Equity Interest (other than directors'
qualifying shares) either directly or indirectly by the issuance of
rights, options for securities convertible into or exchangeable for
Equity Interests other than, in the case of a Subsidiary, to a
Borrower or a Wholly-Owned Subsidiary of the Company.
(ii) The Borrowers will not, and will not permit any
Subsidiary to, sell, transfer or otherwise dispose of any
outstanding Equity Interest of another Subsidiary other than to a
Borrower or a Wholly-Owned Subsidiary of the Company.
7B(3). MERGER AND SALE OF ASSETS. The Borrowers will
not, and will not permit any Subsidiary to merge or consolidate with any other
Person or sell, lease or transfer or otherwise dispose of its respective assets
to any Person or Persons, except that:
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(i any Subsidiary may merge or consolidate with or sell,
lease, transfer or otherwise dispose of all or any of its assets to
the Company or a Wholly-Owned Subsidiary of the Company provided,
that (a) the Company or such Wholly-Owned Subsidiary shall be the
continuing or surviving corporation and (b) any acquiring or
surviving Wholly-Owned Subsidiary is a corporation or another legal
entity organized under the laws of, and having its principal place
of business in, a state of the United States of America or the
District of Columbia; and
(ii the Borrowers and their Subsidiaries may sell
inventory and surplus or obsolete equipment in the ordinary course
of business.
7B(4). SUBSIDIARY DIVIDEND AND OTHER RESTRICTIONS. Other
than this Agreement, the Borrowers will not, and will not permit any Subsidiary
to, enter into, or be otherwise subject to, any contract or agreement (including
its charter) which limits the amount of, or otherwise imposes restrictions on
the payment of, dividends by, or distributions on any securities of, any
Subsidiary to a Borrower.
7B(5). TRANSACTIONS WITH RELATED PARTIES. The Borrowers
will not, and will not permit any Subsidiary to, directly or indirectly, engage
in any transaction or group of transactions (including, without limitation, the
purchase, sale or exchange of assets or the payment of salary, bonuses and other
compensation for services rendered) with any Related Party, except in the
ordinary course of business pursuant to the reasonable requirements of its
business and upon commercially reasonable terms which are no less favorable to
it than those which might be obtained at arm's length with a Person not a
Related Party.
7B(6). RESTRICTED PAYMENTS AND RESTRICTED Investment.
Neither the Borrowers nor any Subsidiary shall make, declare or incur any
liability to make any Restricted Payments or any Restricted Investment after the
Initial Closing Date unless (i) no Event of Default or Default exists
immediately before or immediately after making or declaring such Restricted
Payment or Restricted Investment or could otherwise be reasonably expected to
result therefrom and (ii) on a pro forma basis the Borrowers would be in
compliance with their financial covenants set forth in PARAGRAPH 7A.
For the purpose of this PARAGRAPH 7B(6), the value of a Restricted
Investment which constitutes a liability (contingent or otherwise) shall be the
maximum amount of such liability and any Restricted Payment or Restricted
Investment made in property other than cash shall be valued at the fair market
value thereof at the time of making such Restricted Payment or Restricted
Investment as determined in good faith by the Company's Board of Directors.
7C. DEBT; GUARANTIES OF DEBT.
(i) The Borrowers will not, and will not permit any
Subsidiary to, create, incur or assume any Debt after the Initial
Closing Date or issue any Equity Interest convertible or
exchangeable into Debt of a Borrower or any Subsidiary unless (a) no
Default or Event of Default has then occurred which is then
continuing, (b) no Default or Event of Default would reasonably be
anticipated to result therefrom, and (c) on a pro forma basis, after
giving effect to the incurrence of such Debt, the Borrowers would be
in compliance with their financial covenants set forth in PARAGRAPH
7A.
(ii) The Partnership will not, and the Borrowers will
not permit any other Subsidiary to, issue any Preferred Stock.
7D. COMPLIANCE WITH ERISA. The Borrowers will not, and will not
permit any ERISA Affiliate to:
(i engage in any transaction in connection with which
the Borrowers or any ERISA Affiliate could be subject to either a
civil penalty assessed pursuant to section 502(i) of ERISA or a tax
imposed by section 4975 of the Code, terminate or withdraw from any
Plan (other than a Multiemployer Plan) in a manner, or take any
other action with respect to any such Plan (including, without
limitation, a substantial cessation of business operations or an
amendment of a Plan within the meaning of section 4041(e) of ERISA),
which could reasonably be expected to
19
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result in any liability to the PBGC, to a Plan, to a Plan
participant, to the Department of Labor or to a trustee appointed
under section 4042(b) or (c) of ERISA, incur any liability to the
PBGC or a Plan on account of a withdrawal from or a termination of a
Plan under section 4063 or 4064 of ERISA, incur any liability for
post-retirement benefits under any and all welfare benefit plans (as
defined in section 3(1) of ERISA), fail to make full payment when
due of all amounts which, under the provisions of any Plan or
applicable law, it is required to pay as contributions thereto, or
permit to exist any accumulated funding deficiency, whether or not
waived, with respect to any Plan (other than a Multiemployer Plan)
other than such penalties, taxes, liabilities, failures or
deficiencies which individually and in the aggregate do not, and are
not reasonably expected to have in the future, a Material Adverse
Effect;
(ii at any time permit the termination of any defined
benefit pension plan intended to be qualified under section 401(a)
and section 501(a) of the Code unless such plan is funded so that
the value of all benefit liabilities upon the termination date does
not exceed the then current value of all assets in such plan by an
amount the payment of which would have a Material Adverse Effect; or
(iii at any time permit the aggregate complete or
partial withdrawal liability under Title IV of ERISA with respect to
Multiemployer Plans incurred by the Consolidated Group and any ERISA
Affiliate, or the aggregate liability under Title IV of ERISA
incurred by the Consolidated Group and any ERISA Affiliate, to
exceed an amount the payment of which would have a Material Adverse
Effect.
For the purposes of CLAUSE (iii) of this PARAGRAPH 7D, the amount of the
withdrawal liability of the Consolidated Group and ERISA Affiliates at any date
shall be the aggregate present value of the amounts claimed to have been
incurred less any portion thereof as to which the Borrowers reasonably believe,
after appropriate consideration of possible adjustments arising under subtitle E
of Title IV of ERISA, that neither the Borrowers nor any ERISA Affiliate will
have any liability, provided, that the Borrowers shall promptly obtain written
advice from independent actuarial consultants supporting such determination. The
Borrowers will (x) once in each calendar year, beginning in 2000, request and
obtain a current statement of withdrawal liability from each Multiemployer Plan
to which either of them or any ERISA Affiliate is or has been obligated to
contribute and (y) transmit a copy of such statement to each Holder, within 15
days after the Borrowers receive the same. As used in this PARAGRAPH 7D, the
term "accumulated funding deficiency" has the meaning specified in section 302
of ERISA and section 412 of the Code, the terms "present value" and "current
value" have the meanings specified in section 3 of ERISA, the term "benefit
liabilities" has the meaning specified in section 4001(a)(16) of ERISA and the
term "amount of unfunded liabilities" has the meaning specified in section
4001(18) of ERISA.
7E. LINE OF BUSINESS. The Borrowers will not, and will not permit
any Subsidiary to, engage in any business other than egg production and
distribution, commercial dairy operations and feed sales.
8. EVENTS OF DEFAULT.
8A. EVENTS OF DEFAULT. If any of the following events shall occur or
conditions shall exist and be continuing for any reason whatsoever, and whether
such occurrence or condition shall be voluntary or involuntary or come about or
be effected by operation of law or otherwise, such occurrence or condition and
continuance shall constitute an "EVENT OF DEFAULT":
(i the Borrowers default in the payment of principal,
interest or Make Whole Amount on any of the Secured Notes, whether
by the terms thereof or otherwise as provided by the terms of this
Agreement after the same shall become due and payable; or
(ii the Borrowers or any Subsidiary (a) defaults
(whether as primary obligor or guarantor or surety) in any payment
of principal of, premium, if any, or interest on any Debt, the
outstanding principal amount of which exceeds $1,000,000 in the
aggregate, beyond any period of grace provided with respect thereto,
or (b) fails to perform or observe any other agreement, term or
condition contained in any agreement under which such Debt is
created (or if any other event thereunder or under any such
agreement shall occur and be continuing) and the effect of such
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<PAGE> 27
default or other event is to cause such Debt to become, or to cause
or permit the holder or holders of such Debt (or a trustee on behalf
of such holder or holders) to declare such Debt to be, due and
payable or required to be redeemed or repurchased prior to any
stated maturity or regularly scheduled dates of payment, or (c) as a
consequence of the occurrence or continuation of any event or
condition (other than the passage of time or the right of the holder
of Debt to convert such Debt into equity interests), a Borrower or
any Subsidiary has become obligated to purchase or repay or redeem
an aggregate outstanding principal amount of $1,000,000 or more of
Debt before its regular maturity or before its regularly scheduled
dates of payment or redemption;
(iii any representation or warranty made by a Borrower
or any Subsidiary in any Transaction Document or in any writing
furnished pursuant to a Transaction Document shall be false,
incorrect or misleading in any material respect; or
(iv a Borrower or any Subsidiary fails to perform or
observe or comply with any covenant contained in PARAGRAPH 6D, 6I,
7A, 7B or 7C; or
(v (a) any Subsidiary Guaranty or any Security Document
shall cease to be in full force and effect or shall be declared by a
court or other Governmental Authority of competent jurisdiction to
be void, voidable or unenforceable against such Subsidiary or (b)
the validity or enforceability of any Subsidiary Guaranty against
such Subsidiary shall be contested by such Subsidiary, a Borrower or
any Related Party, or (c) any Subsidiary, a Borrower or any Related
Party shall deny that such Subsidiary has any further liability or
obligation under its Subsidiary Guaranty; or
(vi a Borrower or any Subsidiary fails to perform or
observe or comply with any other agreement, term or condition of any
of the Transaction Documents and such failure shall not be remedied
within 30 days of such failure; or
(vii a Borrower voluntarily or involuntarily
suspends or discontinues operation or liquidates all or
substantially all of its assets; or
(viii a Borrower or any Subsidiary is generally not
paying its debts as such debts become due or admits in writing that
it is not able to pay its debts as such debts become due or
otherwise becomes insolvent; or files, or consents by answer or
otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy,
for liquidation or to take advantage of any bankruptcy or insolvency
law of any jurisdiction; or makes an assignment for the benefit of
its creditors; or consents to the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect
to it or with respect to any substantial part of its property; or
takes corporate action for the purpose of any of the foregoing; or
(ix a petition for relief or reorganization or
arrangement or any other petition in bankruptcy, for liquidation,
dissolution or winding up of a Borrower or any Subsidiary or for the
appointment of a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial
part of its property to take advantage of any bankruptcy or
insolvency law of any jurisdiction is filed against a Borrower or
any Subsidiary without its consent or other acquiescence and such
petition is not dismissed within 60 days or any holder of a Lien on
all or substantially all of the assets of a Borrower or any
Subsidiary take any action to foreclose on such Lien and such action
remains unstayed and in effect for 60 days; or
(x a Governmental Authority enters an order appointing a
custodian, receiver, trustee or other officer with similar powers
with respect to a Borrower or any Subsidiary or with respect to any
substantial part of its property, or constituting an order for
relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage
of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of a Borrower or any
Subsidiary without its consent and such order remains unstayed and
in effect for 60 days; or
(xi a final judgment or judgments for the payment of
money aggregating in excess of $1,000,000 (net of insurance) is
rendered against Company or any Subsidiary and within 45 days
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<PAGE> 28
of the entry thereof such judgment or judgments are not bonded or
discharged or execution thereof stayed pending appeal, or within 45
days after the expiration of any such stay, such judgment or
judgments are not discharged; or
(xiii) a Borrower or any Subsidiary is enjoined,
prevented or otherwise prohibited from conducting its business by
any order, decree, rule or regulation of any Governmental Authority.
8B. ACCELERATION ON EVENT OF DEFAULT.
(i AUTOMATIC. If any Event of Default specified in
CLAUSES (vii), (ix) or (x) of PARAGRAPH 8A shall exist, all of the
Secured Notes at the time outstanding shall automatically become
immediately due and payable together with interest accrued thereon
and the Make Whole Amount without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived.
(ii BY ACTION OF HOLDERS. Subject to PARAGRAPH 8C, if
any Event of Default other than those specified in CLAUSES (vii),
(ix) or (x) of PARAGRAPH 8A shall exist, the Required Holders may
exercise any right, power or remedy permitted to such Holder or
Holders by law, and shall have, in particular, without limiting the
generality of the foregoing, the right, upon written notice to the
Borrowers to declare the entire principal of, and all interest
accrued and Make Whole Amount on, all the Secured Notes then
outstanding to be immediately due and payable, without any
presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived.
(iii ACCELERATION ON PAYMENT DEFAULT. During the
existence of an Event of Default described in CLAUSE (i) of
PARAGRAPH 8A and irrespective of whether the Secured Notes then
outstanding shall have become due and payable pursuant to CLAUSE (i)
of this PARAGRAPH 8B, any Holder who or which shall have not
consented to any waiver with respect to such Event of Default may,
at its option, by notice in writing to the Borrowers, declare the
Secured Notes then held by such Holder to be, and such Secured Notes
shall thereupon become, forthwith due and payable together with all
interest accrued thereon and the Make Whole Amount thereon, without
any presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived.
8C. RESCISSION OF ACCELERATION. At any time after any Secured Note
shall have been declared immediately due and payable pursuant to CLAUSE (ii) or
(iii) of PARAGRAPH 8B, the Holders of at least two-thirds of the principal
amount of such series of Secured Notes at the time outstanding may, by written
notice to the Borrowers, rescind and annul any such declaration with respect to
such series of Secured Notes if (i) the Borrowers shall have paid all interest,
principal and Make Whole Amount payable with respect to any such Secured Note
which have become due otherwise than by reason of such declaration, including
any interest on any such overdue interest, principal and Make Whole Amount, at
the amount specified therein or otherwise in this Agreement, (ii) the Borrowers
shall not have paid any amounts which have become due solely by reason of such
declaration, (iii) all Events of Default and Defaults, other than non-payment of
amounts which have become due solely by reason of such declaration, shall have
been cured or waived pursuant to PARAGRAPH 12B, and (iv) no judgment or decree
shall have been entered for the payment of any amounts due pursuant to the
Transaction Documents solely by reason of such declaration. Any such action by
the Holders of at least two-thirds of the principal amount of such series of
Secured Notes at the time outstanding shall be binding on all Holders of such
series of Secured Notes. No such rescission or annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right arising
therefrom.
8D. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Secured Note
shall be declared immediately due and payable pursuant to CLAUSE (ii) or (iii)
of PARAGRAPH 8B, or any such declaration shall be rescinded and annulled
pursuant to PARAGRAPH 8C, the Borrowers shall forthwith give written notice
thereof to each other Holder at the time outstanding, provided, the failure to
give such notice shall not affect the validity of any such declaration, recision
or annulment.
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<PAGE> 29
8E. OTHER REMEDIES, NO WAIVERS OR ELECTION OF REMEDIES. If any one
or more Events of Default shall occur and be continuing, irrespective of whether
any Secured Notes have become or have been declared immediately due and payable,
any Holder may proceed to protect and enforce its rights under the Transaction
Documents by exercising such remedies as are available to such Holder in respect
thereof under applicable law, either by suit in equity or by action at law or by
any other appropriate proceeding, whether for specific performance of any
covenant or other agreement contained in any Transaction Document or in aid of
the exercise of any power granted in a Transaction Document, in such order as
the Holder may determine in its sole discretion; provided, however, that the
maturity of a Holder's Secured Notes may be accelerated only in accordance with
PARAGRAPH 8B. No remedy conferred in a Transaction Document upon any Holder is
intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy conferred
herein or now or hereafter existing at law or in equity or by statute or
otherwise. No course of dealing or failure or delay by any Holder in exercising
any right, power or remedy under a Transaction Document or any other document
executed in connection therewith shall operate as a waiver thereof or otherwise
prejudice such Holder's rights, powers or remedies, nor shall any single or
partial exercise of any such right or remedy preclude any other right or remedy
hereunder or thereunder.
9. REPRESENTATIONS AND WARRANTIES. The Borrowers represent and
warrant that:
9A. ORGANIZATION, ETC.
(i) Each of the Borrowers and their Subsidiaries is duly
organized, validly existing and in good standing under the laws of
the State of its organization and is qualified and in good standing
in each jurisdiction in which it is required to be qualified to do
business (other than those jurisdictions in which the failure to be
so qualified, individually and in aggregate, could not reasonably be
expected to have a Material Adverse Effect) and has all requisite
power and authority to own, operate and lease its property and to
carry on its business as now being conducted and which it proposes
to conduct. Each of the Borrowers and their Subsidiaries has all
requisite power and authority to execute, deliver and perform each
Transaction Document to which it is a party and to issue and sell
the Secured Notes. SCHEDULE 9A identifies the Borrowers' and each
Subsidiary's correct legal name, the jurisdiction of organization,
the jurisdictions in which qualified to do business and its
officers, directors, general partners and/or managers, as
applicable.
(ii) Each Transaction Document has been duly authorized
by all necessary action on the part of the Borrowers and each
Subsidiary a party thereto and has been (or will have been as of the
Initial Closing Date) duly executed and delivered by authorized
officers of the Borrowers and each such Subsidiary and constitutes
(or will constitute upon execution thereof) the legal, valid and
binding obligations of the Borrowers and each such Subsidiary,
enforceable against the Borrowers and such Subsidiary in accordance
with its terms, except as affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally and
general equitable principles (whether considered in a proceeding in
equity or at law).
9B. EQUITY OWNERSHIP.
(i) The authorized Equity Interests of the Borrowers are
as described on SCHEDULE 9B. All of the outstanding Equity Interests
of the Company are validly issued, fully paid, having the
designations, rights and preferences set forth in the Certificate of
Organization and existing under the Delaware General Corporation
Law. SCHEDULE 9B sets forth the amount and type of Equity Interests
of the Company owned by Fred Adams, his spouse, issue (whether by
blood, adoption or marriage) and their spouses, all of which are
owned of record and beneficially, as indicated free and clear of any
Lien of any kind except as disclosed on SCHEDULE 9B. As of the
Initial Closing Date, the Equity Interest of the Company owned by
Fred Adams and his spouse represents 72.3% of the voting power
represented by the outstanding Voting Stock of the Company and 49.9%
of the Capital Stock of the Company on a fully diluted basis.
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<PAGE> 30
(ii) As of the initial Closing Date, the Borrowers have
no Subsidiaries other than those listed on SCHEDULE 9A. Each such
Subsidiary (including the Partnership) is a Wholly-Owned Subsidiary
and all Equity Interests of such Subsidiary are owned free and clear
of any Lien of any kind.
(iii) Except as set forth in SCHEDULE 9B, neither
Borrower nor any Subsidiary has any outstanding rights, options,
warrants or other agreements which would require it to issue any
additional shares of its capital stock or other Equity Interests
after the initial Closing Date.
9C. FINANCIAL STATEMENTS. The Borrowers have furnished the
Purchasers with the audited financial balance sheets of the Consolidated Group
dated as of May 29, 1999 and the related statements of operations, cash flows
and stockholders' equity for the 12 months ended on such date (the "FINANCIAL
Statements"). The Financial Statements fairly present in all material respects
the financial condition of the Consolidated Group and the results of is
operations and cash flows for the respective periods specified thereby. The
Financial Statements have been prepared in accordance with GAAP, consistently
applied throughout the periods involved except as set forth in the notes
thereto. Since May 29, 1999, there have been no developments or changes which
have had or are reasonably expected to have a Material Adverse Effect.
9D. ACTIONS PENDING. There are no actions, suits, investigations or
proceedings pending, or to the knowledge of the Borrowers threatened, against
either Borrower or any Subsidiary, or any of its properties or rights, by or
before any court, arbitrator or administrative body or other Governmental
Authority other than those which in the aggregate do not and could not
reasonably be expected to have a Material Adverse Effect.
9E. TITLE TO PROPERTIES.
(i) A Borrower has good and marketable title to the Land
and to all of the properties described in the appraisals delivered
pursuant to PARAGRAPH 3M subject to no Lien of any kind except Liens
permitted by PARAGRAPH 7B(1).
(ii) The Borrowers and each Subsidiary enjoy peaceful
and undisturbed possession under all leases necessary in any
material respect for the conduct of its businesses and all such
leases are valid and subsisting and are in full force and effect;
(iii) The Borrowers and each Subsidiary own or have the
right to use (under agreements or licenses which are in full force
and effect) all Intellectual Property necessary for it to conduct
its business as currently conducted, without any known conflict with
the rights of others. None of their products infringes in any
material respect upon any Intellectual Property owned by any other
Person; and
(iv) To the knowledge of the Borrowers, there is no
violation by any Person of any right of either Borrower or any
Subsidiary with respect to any Intellectual Property owned or used
by a Borrower or any Subsidiary.
9F. AFFILIATES AND INVESTMENTS IN OTHERS. Except for their
Subsidiaries, the Borrowers have no Investments in any Person other than
Permitted Investments.
9G. TAX RETURNS AND PAYMENTS. The Borrowers and each Subsidiary have
filed all Federal, State, local and foreign income tax returns, franchise tax
returns, real and personal property tax returns and other tax returns required
by law to be filed by or on its behalf, or with respect to its properties or
assets, and all Taxes, assessments and other governmental charges imposed upon a
Borrower or any Subsidiary or any of its properties, assets, income or
franchises which are due and payable have been paid, other than those presently
payable without penalty or interest, those presently being actively contested in
good faith and for which such reserves or other appropriate provisions, if any,
as may be required by GAAP have been made and those, the non-payment or
non-filing of which, in the aggregate, do not, and could not reasonably be
expected to, have a Material Adverse Effect. The charges, accruals and reserves
on the books of the Borrowers and each Subsidiary in respect of any Taxes for
all fiscal periods are adequate and the Borrowers know of no unpaid assessment
for additional Taxes for any
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<PAGE> 31
period or any basis for any such assessment that in the aggregate could
reasonably be expected to have a Material Adverse Effect. No charges or Taxes
will be imposed by any Governmental Authority on the Borrowers or any Subsidiary
on the execution or delivery of the Transaction Documents and the issue and sale
of the Secured Notes.
9H. CONFLICTING AGREEMENTS AND OTHER MATTERS.
(i Neither Borrower nor any Subsidiary is in violation
of any term of its organizational documents, or in violation or
breach of any term of any agreement (including any agreement with
members), instrument, order, judgment, decree, statute, law, rule or
regulation (including any Environmental Law) to which it is a party
or to which it is subject other than defaults or violations, which
in the aggregate, do not have and could not reasonably be expected
to have, a Material Adverse Effect.
(ii The execution and delivery of the Transaction
Documents and the offering, issuance and sale of the Secured Notes
and fulfillment of and compliance with the terms and provisions of
the Transaction Documents do not and will not conflict with the
provisions of, or constitute a default under, or result in any
violation of, or result in the creation of any Lien upon any of the
properties or assets of either Borrower or any Subsidiary pursuant
to its organizational documents, any award of any arbitrator or any
agreement (including any agreement with stockholders or other equity
holders), instrument, order, judgment, decree, statute, law, rule or
regulation to which it is subject.
9I. OFFERING OF SECURED NOTES. Neither the Borrowers nor any agent
acting on their behalf has, directly or indirectly, offered the Secured Notes
for sale to, or solicited any offers to buy any of the Secured Notes from, or
otherwise approached or negotiated with respect thereto with, any Person other
than the Purchasers, each of which has been offered the Secured Notes at a
private sale for investment. Neither the Borrowers nor any agent acting on their
behalf has taken or will take any action which would subject the issuance or
sale of the Secured Notes to the provisions of Section 5 of the Securities Act
or to the registration provisions of any securities or Blue Sky law of any
applicable jurisdiction. As of the Initial Closing Date, the Secured Notes will
not be of the same class as securities of the Company listed on a national
securities exchange registered under Section 6 of the Exchange Act or quoted in
a U.S. automated inter-dealer quotation system, within the meaning of Rule 144A.
9J. REGULATION U, ETC. The Borrowers do not own or have any present
intention of acquiring any "margin stock" as defined in Regulation U (12 CFR
Part 221) of the Board of Governors of the Federal Reserve System ("MARGIN
STOCK"). None of the proceeds of the sale of the Secured Notes will be used,
directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any margin stock or for the purpose of
maintaining, reducing or retiring any indebtedness which was originally incurred
to purchase or carry any stock that is currently a margin stock or for any other
purpose which might constitute this transaction a "purpose credit" within the
meaning of such Regulation U. Neither the Borrowers nor any agent acting on
their behalf has taken or will take any action which might cause this Agreement
or the Secured Notes to violate Regulation T, Regulation U, Regulation X or any
other regulation of the Board of Governors of the Federal Reserve System or to
violate the Exchange Act, in each case as in effect now or hereafter in effect.
9K. ERISA.
(i) The Borrowers and each ERISA Affiliate have operated
and administered each Plan in compliance with all applicable laws
except for such instances of noncompliance as have not resulted in
and are not expected to result in a Material Adverse Effect. Neither
the Borrowers nor any ERISA Affiliate has incurred any liability
pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans (as
defined in section 3 of ERISA), and no event, transaction or
condition has occurred or exists that could reasonably be expected
to result in the incurrence of any such liability by the Borrowers
or any ERISA Affiliate, or in the imposition of any Lien on any of
the rights, properties or assets of the Borrowers or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to
such penalty or excise tax
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<PAGE> 32
provisions or to section 401(a)(29) or 412 of the Code, other than
such liabilities or Liens that in the aggregate could not reasonably
be expected to have a Material Adverse Effect.
(ii) The present value of the aggregate benefit
liabilities under each of the Plans that is subject to Title IV of
ERISA (other than Multiemployer Plans), determined as of the end of
such Plan's most recently ended plan year on the basis of the
actuarial assumptions specified for funding purposes in such Plan's
most recent actuarial valuation report, did not exceed the aggregate
current value of the assets of such Plan allocable to such benefit
liabilities. The term "benefit liabilities" has the meaning
specified in section 4001 of ERISA and the terms "current value" and
"present value" have the meaning specified in section 3 of ERISA.
(iii) The Borrowers and their ERISA Affiliates have not
incurred withdrawal liabilities (and are not subject to contingent
withdrawal liabilities) under section 4201 or 4204 of ERISA in
respect of Multiemployer Plans that in the aggregate could
reasonably be expected to have a Material Adverse Effect.
(iv) The expected postretirement benefit obligation
(determined as of the last day of the Company's most recently ended
Fiscal Year in accordance with Financial Accounting Standards Board
Statement No. 106, without regard to liabilities attributable to
continuation coverage mandated by section 4980B of the Code) of the
Borrowers could not reasonably be expected to have a Material
Adverse Effect.
(v) The execution and delivery of the Transaction
Documents, the issuance and sale of the Secured Notes and the
consummation of the transactions contemplated by the Transaction
Documents will not involve a transaction which is subject to the
prohibitions of section 406 of ERISA or in connection with which a
Tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the
Code. The representation in the preceding sentence is made in
reliance upon and subject to the accuracy of the Purchasers'
representations in PARAGRAPH 10(ii) as to the source of the funds to
be used to pay the purchase price of the Secured Notes.
9L. GOVERNMENTAL AND OTHER CONSENTS. Except as set forth in SCHEDULE
9L, neither the nature of the Borrowers or any Subsidiary, nor any of their
businesses or properties, nor any relationship between the Borrowers or any
Subsidiary and any other Person, nor any circumstance in connection with the
execution and delivery of any Transaction Document or the offering, issuance,
sale or delivery of the Secured Notes is such as to require any authorization,
consent, approval, exemption or any action by or notice to or filing with any
Governmental Authority or any other Person in connection with the execution and
delivery of the Transaction Documents or the offering, issuance, sale or
delivery of the Secured Notes or fulfillment of or compliance with the terms and
provisions of the Transaction Documents, other than such items, the failure to
obtain which would not have a Material Adverse Effect and other than the filing
of the Financing Statements and the Second Closing Financing Statements.
9M. ENVIRONMENTAL MATTERS. Except as set for on SCHEDULE 9M,
(i) Neither the Borrowers nor any Subsidiary has
received any notice of any claim, and no proceeding has been
instituted raising any claim, against it, any of the Land or any of
its other real properties or other assets now or formerly owned,
leased or operated by them, alleging any damage to the environment
or violation of any Environmental Laws, except those that, in the
aggregate, do not, and could not reasonably be expected to, result
in a Material Adverse Effect.
(ii) There are no facts which would give rise to any
claim, public or private, of violation of Environmental Laws or
damage to the environment emanating from, occurring on or in any way
related to real properties or other assets now or formerly owned,
leased or operated by them or their use, except those that, in the
aggregate do not, and could not reasonably be expected to, result in
a Material Adverse Effect.
(iii) Neither the Borrowers nor any Subsidiary has
stored, and to its knowledge, no other Person has stored, any
Hazardous Materials on the Land or any real properties now or
formerly owned, leased or operated by any of them (at the time of
such ownership, lease or operation) or disposed of or released any
Hazardous Materials in violation of any Environmental Laws, except
26
<PAGE> 33
such that, in the aggregate do not and could not reasonably be
expected to result in a Material Adverse Effect.
(iv) All buildings on all real properties now owned,
leased or operated by the Borrowers and their Subsidiaries are in
compliance with applicable Environmental Laws, except where failures
to comply in the aggregate do not, and could not reasonably be
expected to, result in a Material Adverse Effect.
(v) The Borrowers and their Subsidiaries have obtained
all permits, licenses and other authorizations and has made all
filings, registrations and other submittals which are required of
them under all Environmental Laws (except to the extent such
failures to have any such permits, licenses or authorizations or to
have made any such filings, registrations or submittals in the
aggregate do not, and could not reasonably be expected to, result in
a Material Adverse Effect) and the Borrowers and each of their
Subsidiaries is in compliance with all Environmental Laws and with
the terms and conditions of all such permits, licenses,
authorizations, filings, registrations and submittals or in
compliance with all applicable orders, decrees, judgments and
injunctions, issued, entered, promulgated or approved under any
Environmental Law (except to the extent failures in the aggregate do
not, and could not reasonably be expected to, result in a Material
Adverse Effect).
9N. LABOR RELATIONS. There is not now pending, or to the knowledge
of the Borrowers, threatened, any strike, work stoppage, work slow down, or
material grievance or other material dispute between a Borrower or any
Subsidiary and any bargaining unit or significant number of its respective
employees. To the knowledge of the Borrowers, there is no existing or imminent
labor disturbance by the employees of any of the principal suppliers,
contractors or customers that in the aggregate have had, or could reasonably be
expected to have, a Material Adverse Effect.
9O. FINANCIAL CONDITION. After giving effect to the transactions
contemplated hereby each Borrower and its Subsidiaries, individually and taken
as a whole, will be Solvent.
9P. DISCLOSURE. The Transaction Documents, Financial Statements and
any other document, certificate or statement furnished to the Purchasers by or
on behalf of the Borrowers in connection herewith do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained herein and therein, in light of the
circumstances under which they were made, not misleading. There is no fact with
respect to its business or that of its Subsidiaries which could reasonably be
expected to have a Material Adverse Effect and which has not been described in
this Agreement or otherwise disclosed in writing to the Purchasers by the
Borrowers.
9Q. STATUS UNDER CERTAIN FEDERAL STATUTES. Neither Borrower is
subject to regulation under the Investment Company Act of 1940, as amended, or
the Public Utility Holding Company Act of 1935, as amended. Neither the sale of
the Secured Notes hereunder nor the use of the proceeds thereof will violate the
Trading with the Enemy Act, as amended, or any of the foreign assets control
regulations of the United States Treasury Department (31 CAR, Subtitle B,
Chapter V, as amended) or any enabling legislation or executive order relating
thereto.
9R. EXISTING INDEBTEDNESS; FUTURE LIENS. SCHEDULE 9R lists all Debt
(other than the Existing Notes) of the Borrowers and each Subsidiary as of the
Initial Closing Date. Neither the Borrowers nor any Subsidiary is in default and
no waiver of default is currently in effect, in the payment of any principal or
interest on any such Debt and no event or condition exists with respect to any
Debt that would permit (or that with notice or the lapse of time, or both, would
permit) one or more Persons to cause such Debt to become due and payable before
its stated maturity or before its regularly scheduled dates of payment.
9S. COMPLIANCE WITH LAWS, ETC. Except as set forth on SCHEDULE 9S,
each of the Borrowers and their Subsidiaries is in compliance with the
requirements of all applicable laws, rules, regulations and orders of any
Governmental Authority (including, without limitation, the Occupational Safety
and Health Act of 1970, as amended, ERISA and any Environmental Laws), and has
in effect all licenses, certificates, permits, franchises and other governmental
authorizations necessary to the
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ownership of its properties or to the conduct of its businesses, in each case to
the extent necessary to reasonably ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to have in effect
such licenses, permits, franchises and other governmental authorizations do not,
and could not reasonably be expected to, in the aggregate, have a Material
Adverse Effect.
9T. BROKERS. No broker, finder or other Person performing a similar
function has represented the Borrowers or has acted on behalf of the Borrowers
in connection with the transactions contemplated hereby.
10. REPRESENTATIONS OF THE PURCHASERS. Each Purchaser represents
that:
(i) It is an Institutional Investor and is purchasing
its Secured Notes for its own account or for one or more separate accounts
maintained by it or for the account of one or more pension or trust funds, in
each case for investment and not with a view to the distribution thereof or with
any present intention of distributing or selling any of its Secured Notes,
provided that the disposition of such Purchaser's property shall at all times be
within its control, subject to compliance with applicable law. Each Company
acknowledges that a Purchaser's sale of all or a portion of its Secured Notes to
one or more Qualified Institutional Buyers in compliance with Rule 144A would
not be a breach of this representation.
(ii) With respect to each source of funds to be used by
it to pay the purchase price of its Secured Notes (respectively, the "SOURCE"),
at least one of the following statements is accurate as of the Initial Closing
Date:
(a) the Source is an "insurance company
general account" within the meaning of DOL Prohibited Transaction
Exemption ("PTE") 95-60 (issued July 12, 1995) and there is no
"employee benefit plan" (within the meaning of section 3(3) of ERISA
or section 4975(e)(1) of the Code and treating as a single plan all
plans maintained by the same employer or employee organization) with
respect to which the amount of the general account reserves and
liabilities for all contracts held by or on behalf of such plan
exceed 10% of the total reserves and liabilities of such general
account (exclusive of separate account liabilities) plus surplus, as
set forth in the NAIA Annual Statement filed with the state of
domicile of the Purchaser and, as a result, the purchase is within
the terms of such exemption;
(b) the Source is either (i) an insurance
company pooled separate account and the purchase is exempt in
accordance with PTE 90-1 (issued January 29, 1990), or (ii) a bank
collective investment fund, within the meaning of PTE 91-38 (issued
July 21, 1991) and, except as such Purchaser has disclosed to the
Borrowers in writing pursuant to this CLAUSE (b), no employee
benefit plan or group of plans maintained by the same employer or
employee organization beneficially owns more than 10% of all assets
allocated to such pooled separate account or collective investment
fund and, as a result, the purchase is within the terms of one of
such exemptions; or
(c) the Source constitutes assets of an
"investment fund" (within the meaning of Part V of the QPAM
Exemption) managed by a "qualified professional asset manager" or
"QPAM" (within the meaning of Part V of the QPAM Exemption), no
employee benefit plan's assets that are included in such investment
fund, when combined with the assets of all other employee benefit
plans established or maintained by the same employer or by an
affiliate (within the meaning of section V(c)(1) of the QPAM
Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets managed
by such QPAM, the conditions of Part I(c) and (g) of the QPAM
Exemption are satisfied, neither the QPAM nor a person controlling
or controlled by the QPAM (applying the definition of "control" in
section V(e) of the QPAM Exemption) owns a 5% or more interest in a
Borrower and (i) the identity of such QPAM and (ii) if applicable,
the names of all employee benefit plans whose assets are included in
such investment fund have been disclosed to the Borrowers in writing
pursuant to this clause (c); or
(d) the Source is a "governmental plan" as
defined in Title I, section 3(32) of ERISA; or
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(e) the Source is one or more plans or a
separate account or trust fund comprised of one or more plans each
of which has been identified to the Borrowers in writing pursuant to
this CLAUSE (e); or
(f) the Source does not include assets of
any employee benefit plan, other than a plan exempt from the
coverage of ERISA.
As used in this PARAGRAPH 10, the terms "employee benefit plan", "governmental
plan", "party in interest" and "separate account" shall have the respective
meanings assigned to such terms in section 3 of ERISA.
11. DEFINITIONS. For the purposes of this Agreement, the following
terms shall have the respective meanings specified with respect thereto:
11A. PREPAYMENT AND MAKE WHOLE AMOUNT TERMS.
"APPLICABLE SPREAD" means with respect to the Secured Notes, in
connection with any prepayment upon acceleration of the Secured Notes, 50 basis
points.
"AVERAGE REMAINING LIFE" means the number of years (calculated to
the nearest one-twelfth year) obtained by dividing (a) the sum of the products
obtained by multiplying (i) the principal component of each Remaining Scheduled
Payment with respect to such Called Principal by (ii) the number of years
(calculated to the nearest one-twelfth year) that will elapse between the
Settlement Date with respect to such Called Principal and the scheduled due date
of such Remaining Scheduled Payment by (b) the Called Principal.
"CALLED PRINCIPAL" means, as the context requires, with respect to
any Secured Note the principal of such Secured Note which is to be prepaid
pursuant to PARAGRAPH 5A or 5D or is declared to be immediately due and payable
pursuant to PARAGRAPH 8B.
"DISCOUNTED VALUE" means, with respect to the Called Principal of
any Secured Note, the amount obtained by discounting all Remaining Scheduled
Payments from their respective scheduled due dates, in accordance with accepted
financial practice and at a discount factor (applied on a semi-annual basis)
equal to the Discount Rate with respect to such Called Principal.
"DISCOUNT RATE" means, with respect to the Called Principal of any
Secured Note, the yield to maturity of the Called Principal implied by (a) (i)
the yield reported as of 10:00 A.M. (New York City time) on the date which is
two Business Days prior to the Settlement Date with respect to such Called
Principal, on the display designated as "Page 5" on the Telerate Service (or
such other display as may replace Page 5 of the Telerate Service) for actively
traded U.S. Treasury securities having a maturity equal to the Average Remaining
Life of such Called Principal as of such Settlement Date, or (ii) if such yields
shall not be reported as of such time or the yields reported as of such time
shall not be ascertainable, the Treasury Constant Maturity Series Yields
reported for the latest day for which such yields shall have been so reported as
of the Business Day next preceding the Settlement Date with respect to such
Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury securities
having a constant maturity equal to the Average Remaining Life of such Called
Principal as of such Settlement Date, plus, in either case, the Applicable
Spread. Such implied yield shall be determined, if necessary, by (x) converting
U.S. Treasury securities quotations to bond-equivalent yields in accordance with
accepted financial practice and (y) interpolating linearly between (1) the
actively traded U.S. Treasury security with the duration closest to and greater
than the Average Remaining Life and (2) the actively traded U.S. Treasury
security with the duration closest to and less than the Average Remaining Life.
"MAKE WHOLE AMOUNT" means as to any Secured Note, the amount equal
to the excess, if any, of (x) the Discounted Value over (y) the sum of (i) such
Called Principal plus (ii) interest accrued and unpaid thereon, as of and due on
the Settlement Date with respect to such Called Principal.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the Called
Principal of any Secured Note, all payments of such Called Principal and
interest that would be due or dividends that would accrue
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thereon, as the case may be, after the Settlement Date with respect to such
Called Principal, if no payment of Called Principal were made prior to its
scheduled due date, provided, that if such Settlement Date is not a date on
which interest payments are scheduled to be made, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of interest
accrued or dividend accrued to such Settlement Date and required to be paid on
such Settlement Date.
"SETTLEMENT DATE" means, with respect to any Secured Note, the date
on which such Secured Note is to be prepaid pursuant to PARAGRAPH 5A or
PARAGRAPH 5D or is declared to be immediately due and payable pursuant to
PARAGRAPH 8B.
11B. OTHER TERMS.
"AFFILIATE" means, at any time and as to a Borrower, any other
Person directly or indirectly (i) controlling, controlled by, or under common
control with, such Borrower or (ii) beneficially owning or holding 10% or more
of the Equity Interest of such Borrower, as well as, in the case of an
individual which is an Affiliate, such individual's spouse, issue, parents,
siblings and issue of siblings (in each case by blood, adoption or marriage). A
Person shall be deemed to control another Person if such Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
"AGREEMENT" means this Note Purchase Agreement as it may from time
to time be amended in accordance with PARAGRAPH 12B.
"APPROVED AUDITOR" means Deloitte & Touche, Arthur Andersen LLP,
Ernest & Young LLP, KPMG Peat Marwick or PricewaterhouseCoopers or such other
firm of certified public accountants of national reputation reasonably
acceptable to the Required Holders.
"ASSIGNMENT OF LEASES AND RENTS" has the meaning specified
in PARAGRAPH 3K.
"AVERAGE EBIT" means as of any fiscal quarter end, the average EBIT
for the twelve most recently ended fiscal quarters.
"BORROWERS" has the meaning specified in the first
paragraph of this Agreement.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a
day on which the Federal Reserve is required or authorized to be closed.
"CAPITAL STOCK" means any class of preferred, common or other
capital stock, share capital or similar equity interest of a Person including,
without limitation, any partnership interest in any partnership or limited
partnership and any membership interest in any limited liability company.
"CAPITALIZED LEASE" means any lease of property (whether real,
personal or mixed), as to which the lessee is required, in accordance with GAAP,
to record such lease as the acquisition of an asset and the incurrence of a
liability.
"CAPITALIZED LEASE OBLIGATION" means any rental obligation under a
Capitalized Lease, taken at the amount thereof that is accounted for as
indebtedness (net of Interest Expense) in accordance with GAAP.
"CASH EQUIVALENTS" means (i) securities issued or directly and fully
and unconditionally guaranteed or insured by the United States of America, or
securities of any agency thereof which are backed by the full faith and credit
of the United States of America, and in either case maturing within one year
from the date of acquisition; (ii) demand deposits in banks in the ordinary
course of business (not for investment purposes); (iii) time deposits or
certificates of deposit denominated in United States dollars maturing within one
year from the date of acquisition issued by commercial banks which are members
of the Federal Reserve System and chartered under the laws of the United States
of America or any state or the District of Columbia, whose short-term securities
are rated at least A-2 (or then existing equivalent) by Standard & Poor's
Corporation and at least P-2 (or then existing equivalent) by Moody's Investors
Service,
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Inc. and having capital and surplus in excess of $100,000,000; (iv) tax exempt
auction rate securities and municipal preferred stock, in each case with a reset
of not more than 35 days and rated at least AA (or then existing equivalent) by
Standard & Poor's Corporation; and (v) prime commercial paper maturing no more
than 270 days from the date of acquisition, having as at any date a rating of at
least A-1 (or the existing equivalent) from Standard & Poor's Corporation or at
least P-1 (or then existing equivalent) from Moody's Investors Service, Inc. and
issued by a corporation organized in any state of the United States of America
or the District of Columbia.
"CHANGE OF CONTROL" means (i) Fred Adams, together with his spouse,
issue (whether by blood, adoption or marriage) and spouses of issue, ceasing to
own, as a group, with the power to vote, Voting Stock with at least 51% of the
votes represented by the outstanding Voting Stock of the Company or (ii) the
Partnership ceasing to be a Wholly-Owned Subsidiary of the Company.
"CHANGE OF CONTROL NOTICE" has the meaning specified in PARAGRAPH
4D.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time and the rules and regulations promulgated thereunder as from time to
time in effect.
"COLLATERAL" means all right, title and interest of the Borrowers in
and to the personal and real property described in the Security Agreements.
"COLLATERAL AGENCY AGREEMENT" has the meaning specified in PARAGRAPH
3K.
"COMMON STOCK" means the Company's Common Stock, par value $.01 per
share and the Company's Class A Common Stock, par value $.01 per share, and also
shall include any other stock of the Company of, which is not preferred as to
dividends or assets over any other class of any other stock of the Company.
"COMPANY" has the meaning specified in the first paragraph of this
Agreement.
"CONFIDENTIAL INFORMATION" has the meaning specified in PARAGRAPH
12F.
"CONSOLIDATED GROUP" means, without duplication, the Company and
each of its Subsidiaries and if the context so requires, the Company and its
Subsidiaries, taken as a whole.
"CONSOLIDATED CURRENT ASSETS" means, as of any date the amount of
which is to be determined, the aggregate amount of assets of the Consolidated
Group which normally will be converted into cash within one year, as determined
on a consolidated basis in accordance with GAAP.
"CONSOLIDATED CURRENT LIABILITIES" means as of any date the amount
of which is to be determined, the aggregate amount of debt and other liabilities
of the Consolidated Group which must be paid or satisfied within one year
(whether or not such Debt originally matured, or is then outstanding for, more
than one year from the date of the incurrence of such Debt), determined on a
consolidated basis in accordance with GAAP (but excluding currently deferred
income taxes and including Debt outstanding under revolving credit agreements or
other similar agreements providing for borrowings which are payable on demand or
within one year notwithstanding such agreements being in effect for over one
year from the date of origination thereof or being extendible or renewable to a
time more than one year after such date of origination).
"CONSOLIDATED DEBT" means as of any date the amount of which is to
be determined, all Debt of the Consolidated Group determined on a consolidated
basis in accordance with GAAP.
"CONSOLIDATED FUNDED DEBT" means as of any date the amount of which
is to be determined, all Funded Debt of the Consolidated Group determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means as of any date the amount of
which is to be determined, all Interest Expense of the Consolidated Group
determined on a consolidated basis in accordance with GAAP.
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"CONSOLIDATED NET INCOME" means as of any date the amount of which
is to be determined, the Net Income of the Consolidated Group for such period
determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET WORTH" means, as of any date the amount of which
is to be determined, the total stockholders' equity (exclusive of Redeemable
Preferred Stock and minority interests) of the Consolidated Group determined on
a consolidated basis in accordance with GAAP.
"CONSOLIDATED CAPITALIZATION" means as of any date as of which the
amount thereof is to be determined, Consolidated Net Worth plus Consolidated
Funded Debt.
"COVERED TAXES" has the meaning specified in PARAGRAPH 5H.
"DEBT" means, as applied to any Person without duplication,
obligations of such Person:
(i) for borrowed money,
(ii) evidenced by bonds, debentures, notes or other
similar instruments,
(iii) for deferred purchase price of property or
services other than Trade Payables arising in the ordinary course of
business but including all liabilities created or arising under any
conditional sale or other title retention agreement with respect to
any such property,
(iv) for Capitalized Lease Obligations,
(v) to reimburse any other Person in respect of amounts
paid under letters of credit, bankers acceptances or similar
instruments serving a similar function issued or accepted by banks
and other financial institutions for the account of such Person
(whether or not representing obligations for borrowed money), other
than undraw trade letters of credit in the ordinary course of
business,
(vi) net liabilities in respect of Hedging Obligations
other than commodity hedging agreements entered into in the ordinary
course of the Company's business (and not on a speculative basis),
related to any raw material used by or finished product produced by
the Company and settled on a daily basis pursuant to the rules of
the Chicago Board of Trade,
(vii) for or with respect to obligations secured by (or
for which the holder of such obligation has an existing right,
contingent or otherwise, to be secured by) a Lien on any asset of
such Person, whether or not such obligation is assumed by such
Person, the amount of such obligation being deemed to be the lesser
of the fair market value of such asset or the amount of the
obligation so secured, and
(x) under Guaranties.
"DEFAULT" means any occurrence or condition which with the giving of
notice or the passage of time, or both, and remaining uncured after the
expiration of any applicable grace period would be an Event of Default.
"DEFAULT RATE" has the meaning specified in SUBPARAGRAPH 1C(ii).
"DOL" means the United States Department of Labor and any successor
agency.
"EBIT" means, for any period, Consolidated Net Income for such
period for the Company plus (but only to the extent Consolidated Net Income has
been reduced by such amounts) Interest Expense for such period and the amount of
any provision for Taxes (including deferred Taxes) for such period made in
accordance with GAAP.
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"ELECTION NOTICE" has the meaning specified in PARAGRAPH 4D.
"ENVIRONMENTAL LAWS" means any and all Federal, state and local
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.
"EQUITY INTEREST" means, in any Person, any and all shares,
interests, participations, rights or other equivalents (however designated) of
any Capital Stock or other ownership of any profit interest, and any and all
warrants, rights, options, obligations or other equity securities of or in such
Person, and rights to acquire any of the foregoing, including, without
limitation, partnership interests and joint venture (whether general or limited)
and any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
such partnership or joint venture, but excluding Debt for borrowed money other
than Debt that is convertible into, or exchangeable for, any of the foregoing
equity interests.
"EQUITY SALE" means any issuance, sale, give away, conveyance,
transfer or other disposition of any Equity Interests by the Company to any
Person including, without limitation, any public offering.
"EQUITY SALE PROCEEDS" means (i) the aggregate cash proceeds payable
to the Company in connection with any Equity Sale after deduction of all
reasonable, customary and documented costs and expenses of such Equity Sale and
(ii) the amount of any Subordinated Debt (whether principal, interest or
otherwise) converted or exchanged to Equity Interests of the Company.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the rules and regulations promulgated
thereunder, as from time to time, in effect.
"ERISA AFFILIATE", for Plan purposes, means, with respect to any
Person, any trade or business, whether or not incorporated, which, is treated as
a single employer together with such Person under section 414 of the Code.
"EVENT OF DEFAULT" has the meaning specified in PARAGRAPH 8A.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time and the rules and regulations promulgated thereunder, as from
time to time in effect.
"EXISTING NOTES" has the meaning specified in PARAGRAPH 2B.
"EXPENSES" has the meaning specified in PARAGRAPH 12A.
"FINANCING STATEMENTS" has the meaning specified in PARAGRAPH 3K.
"FISCAL QUARTERS" means the fiscal quarters of the Company ending on
the last days of February, May, August and November of each year.
"FISCAL YEAR" means the fiscal year of the Company ending on the
Saturday closest to May 31 of each year.
"FUNDED DEBT" means, as applied to any Person, all Debt of such
Person which (i) matures more than one year from the incurrence thereof or which
is renewable or extendable beyond one year from such date at the option of such
Person; or (ii) is then outstanding beyond one year from the date of its
creation or incurrence but excluding (a) any such Debt which as of the date of
determination is then required by the terms of such Debt to be paid or satisfied
within one year and (b) Advances outstanding under the Revolving Credit
Agreement; provided the aggregate amount of such outstanding Advances does not
exceed the lesser of (x) the Borrower Base, (y) the Revolving Credit Commitment
and (z) $35,000,000. The terms "Advances", "Borrowing Base" and "Revolving
Credit Commitment" are used in this definition with the meanings given therefor
in the Revolving Credit Agreement.
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"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States.
"GOVERNMENTAL AUTHORITY" means (a) the governments of (i) the United
States of America and its states and political subdivisions, and (ii) any other
jurisdiction in which a Borrower or any Subsidiary conducts all or any part of
its business, or which asserts jurisdiction over any properties of a Borrower or
any Subsidiary, and (b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such government
or jurisdiction.
"GUARANTY", as applied to any Person, means any direct or indirect
liability, contingent or otherwise, of such Person with respect to any Debt of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed (otherwise than for collection or deposit in the
ordinary course of business) or discounted or sold with recourse by such Person,
or in respect of which such Person is otherwise directly or indirectly liable,
including, without limitation, any such obligation in effect guaranteed by such
Person through any agreement (contingent or otherwise) to purchase, repurchase
or otherwise acquire such obligation or any security therefor, or to advance to
or provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise),
or to maintain the working capital, equity capital, net worth, solvency or any
balance sheet or other financial condition of the obligor of such obligation, or
to make payment for any securities, products, materials or supplies or for any
transportation or services without regard to the non-delivery or nonfurnishing
thereof, or that any agreements relating thereto will be complied with, or that
the holders of such obligation will be protected against loss in respect
thereof. The amount of any Guaranty shall be deemed to be equal to the lower of
(a) the amount of the obligation guaranteed and (b) the maximum amount for which
such Person may be contingently liable pursuant to the terms of the instrument
evidencing such Guaranty, unless such guaranteed obligation and the amount for
which such Person may be liable are not stated or determinable, in which case
the amount of such Guaranty shall be the maximum reasonably anticipated
liability for which such Person is contingently liable in respect thereof as
determined by the related Company in good faith (but in any event not less than
the amount which is, or would otherwise be required, in accordance with GAAP, to
be reflected in such Person's balance sheet or the notes thereto) as the amount
of such obligation. A Person shall have "GUARANTEED" an obligation if such
Person has entered into a Guaranty of such obligation.
"HAZARDOUS MATERIALS", at any time, shall mean any substance: (a)
the presence of which at such time requires notification, investigation,
monitoring or remediation under any Environmental Law; (b) which at such time is
defined as a "hazardous waste", "hazardous material", "hazardous substance",
"toxic substance", "pollutant" or "contaminant" under any Environmental Law,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) and any
applicable local statutes and the regulations promulgated thereunder; or (c)
without limitation, which contains gasoline, diesel fuel or other petroleum
products, asbestos or polychlorinated biphenyls.
"HEDGING OBLIGATIONS" means, with respect to any Person, the
obligations of such Person under any one or more of the following agreements
entered into by such Person with one or more financial institutions: interest
rate protection agreements, interest rate swaps and/or other types of interest
rate hedging agreements obligating such Person to make payments, whether
periodically or upon the happening of a contingency except that, if any
agreement relating to such obligations of such Person provides for the netting
of amounts payable by and to such Person thereunder or if any such agreement
provides for the simultaneous payment of amounts by and to such Person, then in
each such case, the amount of a Person's Hedging Obligations thereunder shall be
the net amount thereof. The aggregate net Hedging Obligations of a Person at any
time shall be the aggregate amount thereof assuming all such Hedging Obligations
had been terminated by such Person as of the end of its then most recently ended
fiscal quarter; provided if such net aggregate obligation shall be an amount
owing to such Person, then the amount shall be deemed to be Zero ($0) Dollars.
"HOLDER" means any Person at the time shown as the holder of a
Secured Note on the registers referred to in PARAGRAPH 12N.
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"HOME OFFICE" means, with respect to any Holder, the office of such
Holder specified as its Home Office on ANNEX 1-A, or such other office of such
Holder as such Holder may from time to time specify to the Borrowers.
"INDEMNITY" has the meaning specified in PARAGRAPH 3K.
"INITIAL CLOSING" and "INITIAL CLOSING DATE" have the meanings
specified in PARAGRAPH 2B.
"INTEREST EXPENSE" means, for any period, the aggregate interest
charges (including without limitation that portion of any obligation under
Capitalized Leases allocable to interest expense) on any Debt for such period
(without regard to any limitation on the payment thereof) as determined in
accordance with GAAP.
"INTELLECTUAL PROPERTY" means all patents, copyrights, trademarks,
trade names, service marks or other intellectual or industrial property rights.
"INSTITUTIONAL INVESTOR" means any bank, savings institution, trust
company, insurance company, investment company, pension or profit sharing trust
or other financial institution or institutional buyer and any "Accredited
Investor" within the meaning of Rule 501(a)(1) of the Securities Act, in each
case, regardless of legal form.
"INVESTMENT" means as to any Person (the "Investor"), (i) any loan
or advance or extension of credit by the Investor to or for the benefit of
another Person; (ii) the incurrence, assumption or guarantee by the Investor of,
or grant of credit support by the Investor for, any financial obligation of
another Person to the extent such financial obligation does not otherwise
constitute Debt of the Investor; or (iii) the ownership, purchase or acquisition
or other investment by the Investor in any stock, obligations or securities of,
or any other Equity Interest in (including without limitation any Equity
Interest in any partnership, association, joint venture or other organization,
whether or not a legal entity) or all or substantially all of the assets of any
other Person, or (iv) any capital contribution by the Investor to any other
Person.
"KNOWLEDGE OF THE BORROWERS" and phrases of similar import mean the
actual knowledge of any Senior Officer.
"LAND" has the meaning specified in each Mortgage.
"LIEN" means any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute, court decision or contract, and
including, without limitation, any mortgage, pledge, security interest, lease,
encumbrance, lien, purchase option, call or right, or charge of any kind
(including any agreement to give or permit any of the foregoing), any
conditional sale or other title retention agreement, any Capitalized Lease, and
the filing of, or agreement to give or permit the filing on its behalf, of any
financing statement under the Uniform Commercial Code or personal property
security legislation of any jurisdiction.
"MATERIAL ADVERSE EFFECT" means, (i) any material adverse effect on
a Borrower's business, assets, liabilities, financial condition or results of
operations, (ii) any material adverse effect on the Consolidated Group's
business, assets, liabilities, financial condition or results of operations on,
where appropriate, a consolidated basis in accordance with GAAP, (iii) any
adverse effect, WHETHER OR NOT MATERIAL, on the binding nature, validity or
enforceability of any Transaction Document or the obligation of a Borrower or
any Subsidiary a party thereto and (iv) any material adverse effect on the
ability of a Borrower and its Subsidiaries taken as a whole to perform their
obligations under any Transaction Document.
"MORTGAGES" has the meaning specified in PARAGRAPH 3K.
"MULTIEMPLOYER PLAN" means any plan which is a "multiemployer plan"
as such term is defined in section 4001(a)(3) of ERISA.
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"NET INCOME" means for any period for which the amount thereof is to
be determined, the net income (or loss) of a Person for such period determined
in accordance with GAAP; provided, that there shall be excluded from net income
any gain or loss of an extraordinary nature for such period.
"OFFICERS' CERTIFICATE" means a certificate signed in the name of
the Company in its own capacity and as general partner of the Partnership, if
applicable, by any two Senior Officers.
"OTHER TAXES" has the meaning specified in PARAGRAPH 5H.
"PBGC" means the Pension Benefit Guaranty Corporation or any other
Governmental Authority succeeding to any of its functions.
"RESTRICTED INVESTMENTS" means any Investment other than a Permitted
Investment.
"PERMITTED INVESTMENT" means any of the following:
(i) Cash Equivalents;
(ii) Investments in existence on the Initial Closing Date and set
forth on SCHEDULE 7B;
(iii) endorsement of negotiable instruments for collection and
ownership of accounts receivable acquired in the ordinary course of business;
and
(iv) Investments in the ordinary course of business in the Company
or any Subsidiary of the Company (including the Partnership) existing as of the
Initial Closing Date.
"PERSON" means and includes an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust and any other form
of business organization (whether or not a legal entity), or any Governmental
Authorities.
"PLAN" means an "employee pension benefit plan" (as defined in
Section 3 of ERISA) which is or within the preceding five years has been
established or maintained, or to which contributions are or have been made, by a
Borrower or any ERISA Affiliate, or for which the Consolidated Group or any
ERISA Affiliate may have any liability.
"PREFERRED STOCK" means as to any Person, any Redeemable Preferred
Stock and any other class or series of capital stock of such Person that has a
priority as to the payment of any dividends or distributions over the holders of
the most junior class of capital stock of such Person.
"PTE" has the meaning specified in PARAGRAPH 10(ii)(a).
"PURCHASER" and "PURCHASERS" have the meaning specified in the first
paragraph of this Agreement.
"QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14
issued by the DOL.
"QUALIFIED INSTITUTIONAL BUYER" means a qualified institutional
buyer, as defined in Rule 144A.
"REDEEMABLE PREFERRED STOCK" means any class or series of capital
stock which has fixed payment or redemption obligations due and payable prior to
the final scheduled due date for the repayment of principal of any of the
Secured Notes or is redeemable at the option of the holder, unless such fixed
payment obligations or repurchase obligations on exercise of such redemption
option can be satisfied, at the election of the issuer, through the issuance of
shares of its common stock.
"RELATED PARTY" means, as to a Borrower, such Borrower's Affiliates,
holders of its Equity Interests, its Senior Officers and directors but excluding
the Company or any Wholly-Owned Subsidiary of the Company.
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"REQUIRED HOLDERS" means the Holder or Holders of at least 51% of
the aggregate principal amount of the Secured Notes at the time outstanding.
"RESTRICTED PAYMENTS" means and includes, with respect to
the Company:
(i) any dividend or other distribution, direct or
indirect, on account of any shares of any Equity Interest of the
Company (including any obligations incurred in connection with the
issuance or sale thereof), now or hereafter outstanding, except a
dividend payable solely in shares of Common Stock of the Company; or
(ii) any dividend or other distribution, direct or
indirect, on account of any shares of any Equity Interest of any
Subsidiary (including the Partnership), now or hereafter
outstanding, except:
(a) a dividend payable solely in shares of
common stock of such Subsidiary; or
(b) to the extent that such dividend or
distribution is payable solely to the Company or a
Wholly-Owned Subsidiary;
(iii) any payment, whether in respect of principal,
premium, interest, fees, expenses or otherwise, in respect of, or
any redemption, retirement, purchase or other acquisition, direct or
indirect, of, any Debt that is by its terms subordinated in right of
payment to the Debt represented by the Secured Notes.
(iv) any redemption, retirement, purchase or other
acquisition, direct or indirect, of any shares of Equity Interest of
the Company now or hereafter outstanding, other than the exercise or
conversion thereof for and into Common Stock of the Company; and
(v) any redemption, retirement, purchase or other
acquisition, direct or indirect, of any shares of Equity Interest of
any Subsidiary (including the Partnership) now or hereafter
outstanding, except to the extent that such redemption, retirement,
purchase or other acquisition is made from, and the payment in
respect of such redemption, retirement, purchase or other
acquisition is paid solely to the Company or a Wholly-Owned
Subsidiary of the Company.
"REVOLVING CREDIT AGREEMENT" means the Amended and Restated
Revolving Credit Agreement dated as of May 29, 1990 by and among the Company,
Cooperative Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New
York Branch ("Rabobank") and Barclays Bank PLC (New York), as amended through
the Twelfth Amendment to Loan Documents dated as of October 15, 1998 and
hereafter amended from time to time.
"RULE 144A" means Rule 144A promulgated under the Securities Act and
including any successor rule thereto, as such rule may be amended from time to
time.
"SEC" means the United States Securities and Exchange Commission, or
any Governmental Authority succeeding to the functions of such Commission in the
administration of the Securities Act and/or the Exchange Act.
"SECOND CLOSING" and "SECOND CLOSING DATE" have the meanings
specified in PARAGRAPH 2C.
"SECOND CLOSING CUTOFF DATE" has the meaning specified in PARAGRAPH
2C.
"SECOND CLOSING FINANCING STATEMENTS" has the meaning specified in
PARAGRAPH 4I.
"SECOND CLOSING NOTICE" has the meaning specified in PARAGRAPH 2C.
"SECURED NOTES" has the meaning specified in PARAGRAPH 1A.
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"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time, and the rules and regulations promulgated thereunder, as from time
to time in effect.
"SECURITY AGREEMENT" has the meaning specified in PARAGRAPH 3K.
"SECURITY DOCUMENTS" means the Security Agreement, the Mortgages,
the Assignment of Leases and Rents, the Financing Statements and any other
document delivered pursuant to PARAGRAPH 5P.
"SECURED NOTES" has the meaning specified in PARAGRAPH 1A.
"SENIOR OFFICER" means the chairman of the board of managers, the
president, chief executive officer, chief financial officer, treasurer, or
principal accounting officer.
"SERIES A NOTES" has the meaning specified in PARAGRAPH 1A.
"SERIES B NOTES" has the meaning specified in PARAGRAPH 1A.
"SERIES C NOTES" has the meaning specified in PARAGRAPH 1A.
"SOLVENT" and "SOLVENCY" means with respect to any Person (i) the
fair value of the property of such Person exceeds its total liabilities
(including, without limitation, contingent liabilities), (ii) the present fair
saleable value of the assets of such Person is not less than the amount that
will be required to pay its probable liability on its debts as they become
absolute and matured, (iii) such Person does not intend to, and does not believe
that it will, incur debts or liabilities beyond its ability to pay as such debts
and liabilities mature and (iv) such Person is not engaged, and is not about to
engage, in business or a transaction for which its property would constitute an
unreasonably small capital.
"SPECIAL COUNSEL" means the law firm of Sullivan & Worcester LLP or
such other firm of legal counsel as the Purchasers may from time to time
designate as their Special Counsel for the purposes of this Agreement or any
matters related hereto.
"SUBORDINATED DEBT" means any Debt which by the express terms of the
instruments creating or evidencing such Debt, or by the terms of a separate
instrument entered into by the holder of such Debt for the benefit of the
Holders if such instrument is in form and substance satisfactory to the Required
Holders, and is accompanied by an opinion of counsel in form and substance
satisfactory to the Required Holders, regarding the enforceability of such
instrument, is subordinate and subject in right of payment to the prior payment
in full of all principal of, Make Whole Amount, and interest on the Secured
Notes and the payment and performance by the Borrowers of their obligations
under this Agreement.
"SUBSIDIARY" means (i) a corporation of which such Person owns,
directly or indirectly, more than fifty percent (50%) (by number of votes) of
the Voting Stock, or (ii) any other Person of which such Person owns, directly
or indirectly, more than fifty percent (50%) of the rights to profits and losses
of such other Person. Unless the context otherwise clearly requires, any
reference to a "Subsidiary" is a reference to a Subsidiary of the Company.
"SUBSIDIARY GUARANTIES" has the meaning specified in PARAGRAPH 3N.
"TAXES" means any and all present or future taxes, assessments,
stamps, duties, fees, levies, imposts, deductions, withholdings or other
governmental charges of any nature whatsoever and any liabilities with respect
thereto, including any surcharge, penalties, additions to tax, fines or interest
thereon, now or hereafter imposed, levied, collected, withheld or assessed by
any government or taxing authority of any country or political subdivision of
any country, or any international taxing authority.
"TRADE PAYABLES" means amounts payable to suppliers of goods and
services in the ordinary course of a Person's business.
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"TRANSACTION DOCUMENTS" means this Agreement, the Secured Notes, the
Security Documents, the Collateral Agency Agreement and the Subsidiary
Guaranties.
"TRANSFEREE" means any direct or indirect transferee of all or any
part of a Secured Note.
"VOTING STOCK" means any securities of any class of a Person whose
holders are entitled under ordinary circumstances to vote for the election of
directors of such Person (or Persons performing similar functions) (irrespective
of whether at the time securities of any other class or classes shall have or
might have voting power by reason of the happening of any contingency).
"WHOLLY-OWNED SUBSIDIARY" means, at any time, any Subsidiary of
which 100% of the Equity Interests (except directors' qualifying shares) and
100% of the Voting Stock (except directors' qualifying shares) are owned by the
Company and the Company's other Wholly-Owned Subsidiaries at such time.
12. MISCELLANEOUS.
12A. EXPENSES. Whether or not the transactions provided for hereby
shall be consummated, the Borrowers agree to pay on demand and upon receipt of
an invoice therefor, and save each Purchaser and its Transferees harmless
against liability for the payment of, all out-of-pocket expenses arising in
connection with such transactions and in connection with any subsequent
modification of, or consent under, the Transaction Documents, whether or not
such transactions are consummated or modification shall be effected or consent
granted ("EXPENSES"), including (i) the reasonable fees and expenses of Special
Counsel and its agents and of any other special or local counsel or other
special advisers engaged by the Purchasers in connection with the transactions
contemplated by this Agreement and the Amendment, (ii) the costs of obtaining
the private placement numbers from Standard & Poor's Ratings Group for the
Secured Notes and (iii) the costs and expenses, including reasonable attorneys'
fees and the fees of any other special or financial advisers, incurred in
evaluating, monitoring or enforcing any rights under the Transaction Documents
(including, without limitation, any costs, expenses or fees incurred in
connection with perfecting or maintaining perfection of any Lien hereafter
existing in favor of the Purchasers or any of their Transferees as security for
the obligations of the Borrowers or any Subsidiary under the Transaction
Documents or maintaining or protecting the collateral which is the subject of
such Lien) or in responding to any subpoena or other legal process issued in
connection with the Transaction Documents or the transactions provided for
hereby or thereby or by reason of a Purchaser or any Transferee having acquired
any of its Secured Notes (other than those issued solely as a result of (a) such
Purchaser or Transferee being engaged in business in a regulated industry or (b)
such Purchaser's or Transferee's actions or omissions in connection with a
transfer of a Security), including without limitation costs and expenses
incurred in connection with any bankruptcy or insolvency of a Borrower or any
Subsidiary or in connection with any workout or restructuring of any of the
transactions contemplated by the Transaction Documents. The obligations of the
Borrowers under this PARAGRAPH 12A and the obligations of the Borrowers under
PARAGRAPH 5H and SUBPARAGRAPH 6J(ii) shall survive the transfer of any of its
Secured Notes or any interest therein by a Purchaser or any Transferee and the
payment of any Secured Notes.
12B. CONSENT TO AMENDMENTS.
(i) No Transaction Document may be amended, and the
Borrowers may not take any action herein prohibited, or omit to
perform any act herein required to be performed by it, without the
written consent of the Required Holders, except that:
(a) no decrease in the interest rate of, or
Make Whole Amount payable on, the Secured Notes or
change to the mandatory repayment of the Secured Notes
as provided in PARAGRAPH 5C;
(b) no amendment or waiver of the provisions
of PARAGRAPH 8B or PARAGRAPH 8C, or amendment or waiver
of any defined term to the extent used therein; and
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<PAGE> 46
(c) no amendment or waiver of the definition
of "REQUIRED HOLDERS" or other amendment of the
percentage of Secured Notes required to be held by
Holders consenting to any action under this Agreement;
may be made or granted without the written consent of all Holders.
(ii) Any Holder may specify that any such written
consent executed by it shall be effective only with respect to a
portion of the Secured Notes held by it (in which case it shall
specify, by dollar amount, the aggregate principal amount of Secured
Notes with respect to which such consent shall be effective) and in
the event of any such specifications, such Holder shall be deemed to
have executed such written consent only with respect to the portion
of Secured Notes so specified.
(iii) Each Holder at the time or thereafter shall be
bound by any amendment or waiver authorized by the Required Holders
in accordance with this PARAGRAPH 12B whether or not its Secured
Notes are marked to reflect such amendment or waiver. No such
amendment or waiver will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly
amended or waived or impair any right consequent thereon.
(iv) No course of dealing between the Borrowers or any
Subsidiary and any Holder nor any delay in exercising any rights
under any Transaction Document shall operate as a waiver of any
rights of any Holder.
(v) Any amendment or waiver made pursuant to this
PARAGRAPH 12B by a Holder that has transferred or has agreed to
transfer its Secured Notes to the Borrowers, any Subsidiary or any
Affiliate and has provided or has agreed to provide such amendment
or waiver as a condition to such transfer shall be void and of no
force and effect except solely as to such Holder, and any amendments
effected or waivers granted that would not have been or would not be
so effected or granted but for such amendment or waiver (and the
amendments or waivers of all other Holders that were acquired under
the same or similar conditions) shall be void and of no force and
effect, retroactive to the date such amendment or waiver initially
took or takes effect, except solely as to such Holder.
12C. PERSONS DEEMED OWNERS; PARTICIPATIONS. The Borrowers may treat
the Person at the time shown on the register referenced in PARAGRAPH 12N in
whose name any Secured Notes, is issued as the owner and holder of such Secured
Notes for the purpose of receiving payment on or in respect of such Secured
Notes and for all other purposes whatsoever, and the Borrowers shall not be
affected by notice to the contrary. Subject to the preceding sentence, a Holder
may from time to time grant participations in all or any part of its Secured
Notes to any Person on such terms and conditions as may be determined by such
Holder in its sole and absolute discretion, subject to its compliance with
applicable law.
12D. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained in any Transaction Document or made
in any other writing by or on behalf of a Borrower in connection herewith shall
survive the execution and delivery of such Transaction Document or other
writing, the transfer by a Purchaser of any Secured Notes or portion thereof or
interest therein and the payment of any Secured Notes and may be relied upon by
any Transferee, regardless of any investigation made at any time by or on behalf
of the Purchasers or any Transferee. All representations and warranties
contained in any certificate or other instrument delivered by or on behalf of a
Borrower pursuant to any Transaction Document shall be deemed representations
and warranties of the Borrowers under this Agreement and not of the individuals
executing such certificates or other instruments on behalf of a Borrower.
Subject to the preceding sentence, the Transaction Documents embody the entire
agreement and understanding between the Purchasers and the Borrowers and
supersede all prior agreements and understandings relating to the subject matter
hereof and thereof.
12E. SUCCESSORS AND ASSIGNS. All covenants and other agreements in
this Agreement contained by or on behalf of any of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns of such party
(including, without limitation, any Transferee) whether so expressed or not;
provided the Borrowers may not delegate the performance of any of their
obligations hereunder.
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12F. CONFIDENTIAL INFORMATION. For the purposes of this paragraph,
"CONFIDENTIAL INFORMATION" means information delivered to a Purchaser by or on
behalf of the Borrowers in connection with the transactions contemplated by or
otherwise pursuant to this Agreement, whether in the past, present or future,
that is proprietary in nature and that was clearly marked or labeled or
otherwise adequately identified when received by the Purchaser as being
confidential information of the Borrowers, provided that such term does not
include information that (a) was publicly known or otherwise known to the
Purchaser prior to the time of such disclosure or (b) subsequently becomes
publicly known through no act or omission by the Purchaser or (c) otherwise
becomes known to the Purchasers other than through disclosure by a Borrower or
any of their Subsidiaries. Each Purchaser will maintain the confidentiality of
such Confidential Information in accordance with the procedures adopted by it in
good faith to protect confidential information of third parties delivered to it.
Notwithstanding the foregoing, a Purchaser may deliver copies of any
Confidential Information to (i) such Purchaser's and its Subsidiaries'
directors, officers, employees, and to its agents and professional consultants,
(ii) any other Purchaser, (iii) any Person, to whom such Purchaser offers to
sell any of its Secured Notes or any part thereof or to whom such Purchaser
sells or offers to sell a participation in all or any part of its Secured Notes,
provided said Persons agree to be bound by the terms hereof regarding
Confidential Information, (iv) any federal or state regulatory authority having
jurisdiction over such Purchaser and which requires such disclosure, (v) any
Person from which a Purchaser offers to purchase any security of a Company or a
Subsidiary, (vi) the National Association of Insurance Commissioners or any
rating agency which generally requires access to information about a Purchaser's
investment portfolio or any similar organization, (vii) Standard & Poor's
Ratings Group (in connection with obtaining a private placement number for the
Secured Notes) or (viii) any other Person to which such delivery or disclosure
may be necessary or appropriate (a) in compliance with any law, rule, regulation
or order applicable to such Purchaser, (b) in response to any subpoena or other
legal process; or (c) at any time after the acceleration of such Purchaser's
Secured Notes upon the occurrence of Event of Default (if such acceleration has
not then been rescinded in accordance with PARAGRAPH 8C) to the extent that such
Purchaser determines disclosure is necessary or appropriate in the enforcement
of or for the protection of its rights and remedies under the Transaction
Documents. Each Holder, by its acceptance of its Secured Notes, will be deemed
to have agreed to be bound by and to be entitled to the benefits of this
PARAGRAPH 12F as though it were a party to this Agreement.
12G. NOTICES.
(i) All notices and other written communications
provided for hereunder shall be given in writing and delivered in
person or sent by recognized overnight delivery service (with
charges prepaid) or by facsimile transmission, if the original of
such facsimile transmission is sent on the same day by a recognized
overnight delivery service (with charges prepaid); and
(a) if to a Purchaser or its nominee,
addressed to such Person at the address or fax number
specified for such communications to such Purchaser in
ANNEX 1-A, or at such other address or fax number as
such Person shall have specified to the Borrowers in
writing,
(b) if to any other Holder, addressed to
such other Holder at such address or fax number as is
specified for such Holder in the Note register
referenced in PARAGRAPH 12N, and
(c) if to a Borrower, or any Guarantor at
the address or fax number specified in ANNEX 2 or at
such other address or fax number as the Company shall
have specified to each Holder in writing given in
accordance with this PARAGRAPH 12G.
(ii) Any communication addressed and delivered as herein
provided shall be deemed to be received when actually delivered to
the address of the addressee (whether or not delivery is accepted)
or received by the telecopy machine of the recipient. Any
communication not so addressed and delivered shall be ineffective.
(iii) Notwithstanding the foregoing provisions of this
PARAGRAPH 12G, service of process in any suit, action or proceeding
arising out of or relating to this Agreement or any
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document, agreement or transaction contemplated hereby, or any
action or proceeding to execute or otherwise enforce any judgment in
respect of any breach hereunder or under any document or agreement
contemplated hereby, shall be delivered in the manner provided in
PARAGRAPH 12L.
12H. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
12I. SOLICITATION OF HOLDERS. The Borrowers will provide each Holder
with sufficient information, sufficiently far in advance of the date a decision
is required, to enable such Holder to make an informed and considered decision
with respect to any proposed amendment, waiver or consent requested under any
Transaction Document. The Borrowers will deliver executed or true and correct
copies of each such amendment, waiver or consent effected to each Holder
promptly following the date on which it is executed and delivered by, or
receives the consent or approval of, the Required Holders. Neither the Borrowers
nor any Person acting on their behalf will directly or indirectly, pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee, expense (other than such Holder's Expenses) or otherwise, to any
Holder for or in connection with any consent by such Holder in its capacity as a
Holder to any waiver or amendment of any of the terms of the Transaction
Documents unless such remuneration is concurrently paid, on the same terms,
ratably to all Holders whether or not such Holder consented to the waiver or
amendment.
12J. REPRODUCTION OF DOCUMENTS. Any Transaction Document and all
related documents, including (a) consents, waivers and modifications which may
subsequently be executed, (b) documents received by the Purchasers on the
purchase of the Secured Notes (except the Secured Notes) and (c) financial
statements, certificates and other information previously or subsequently
furnished to the Purchasers, may be reproduced by the Purchasers by any
photographic, photostatic, microfilm, micro-card, miniature photographic or
other similar process and the Purchasers may destroy any original document so
reproduced. Each Company agrees and stipulates that any such reproduction shall,
to the extent permitted by applicable law, be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not the reproduction was made by a
Purchaser in the regular course of business, and to the extent not prohibited by
applicable law, that any enlargement, facsimile or further reproduction of the
reproduction shall likewise be admissible in evidence.
12K. GOVERNING LAW. THIS AGREEMENT IS TO BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS
OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT GIVING EFFECT TO ANY LAWS OR RULES
RELATING TO CONFLICTS OF LAWS THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF
ANY JURISDICTION OTHER THAN THE COMMONWEALTH OF MASSACHUSETTS).
12L. CONSENT TO JURISDICTION AND SERVICE. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH BORROWER HEREBY ABSOLUTELY AND IRREVOCABLY CONSENTS AND
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF
MASSACHUSETTS AND OF ANY FEDERAL COURT LOCATED IN SAID JURISDICTION IN
CONNECTION WITH ANY ACTIONS OR PROCEEDINGS BROUGHT AGAINST IT BY ANY HOLDER
ARISING OUT OF OR RELATING TO ANY OF THE TRANSACTION DOCUMENTS AND HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING
MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. EACH BORROWER HEREBY WAIVES AND
AGREES NOT TO ASSERT IN ANY SUCH ACTION OR PROCEEDING, IN EACH CASE, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (A) IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, (B) IT IS IMMUNE FROM
ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO
JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT
TO IT OR ITS PROPERTY, (C) ANY SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, OR (D) SUCH TRANSACTION DOCUMENT MAY NOT BE ENFORCED IN OR
BY ANY SUCH COURT. IN ANY SUCH ACTION OR PROCEEDING, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, EACH BORROWER HEREBY ABSOLUTELY AND IRREVOCABLY
WAIVES TRIAL BY JURY AND PERSONAL IN HAND SERVICE OF ANY SUMMONS, COMPLAINT,
DECLARATION OR OTHER PROCESS AND HEREBY ABSOLUTELY AND
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IRREVOCABLY AGREES THAT THE SERVICE MAY BE MADE BY CERTIFIED OR REGISTERED MAIL,
RETURN RECEIPT REQUESTED, DIRECTED TO IT AT ITS ADDRESS SET FORTH IN OR
FURNISHED PURSUANT TO THE PROVISIONS OF THIS AGREEMENT, OR BY ANY OTHER MANNER
PROVIDED BY LAW. EACH BORROWER HEREBY IRREVOCABLY APPOINTS AND AGREES TO
MAINTAIN THE APPOINTMENT OF CT CORPORATION SYSTEM WITH OFFICES AS OF THE DATE OF
THIS AGREEMENT AT 2 OLIVER STREET, BOSTON, MASSACHUSETTS 02109 (PROVIDED IF CT
CORPORATION SYSTEM IS NO LONGER ABLE TO ACT AS SUCH AN AGENT, THEN OF ANOTHER
CORPORATE AGENT OF NATIONAL STANDING WITH OFFICES WITHIN THE COMMONWEALTH OF
MASSACHUSETTS IF SUCH BORROWER SHALL HAVE GIVEN EACH HOLDER PRIOR WRITTEN NOTICE
OF THE NAME AND ADDRESS OF SUCH NEW CORPORATE AGENT), AS ITS AGENT TO RECEIVE
FOR AND ON ITS BEHALF, SERVICES OF PROCESS IN THE COMMONWEALTH OF MASSACHUSETTS
AND THE FEDERAL COURTS LOCATED THEREIN IN ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THE TRANSACTION DOCUMENTS AND EACH BORROWER AGREES THAT SUCH SERVICE
SHALL BE DEEMED COMPLETED UPON THE DATE 10 DAYS AFTER DELIVERY TO SUCH AGENT
WHETHER OR NOT SUCH AGENT GIVES NOTICE THEREOF TO SUCH BORROWER. ANYTHING
HEREINBEFORE TO THE CONTRARY NOTWITHSTANDING, ANY HOLDER MAY SUE EITHER BORROWER
IN ANY OTHER APPROPRIATE JURISDICTION AND ANY PARTY MAY SUE ANY OTHER PARTY ON A
JUDGMENT RENDERED BY ANY COURT PURSUANT TO THE PROVISIONS OF THE FIRST SENTENCE
OF THIS PARAGRAPH 12L IN THE COURTS OF ANY COUNTRY, STATE OF THE UNITED STATES
OR PLACE WHERE SUCH OTHER PARTY OR ANY OF ITS PROPERTY OR ASSETS MAY BE FOUND OR
IN ANY OTHER APPROPRIATE JURISDICTION.
12M. COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, and it
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.
12N. REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT OF SECURED
NOTES.
12N(1). REGISTRATION. The Secured Notes are to be issued and are
transferable in whole or in part as registered securities without coupons in
denominations of at least $1,000,000 in the case of the Secured Notes, except as
may be necessary to reflect any principal amount less than $1,000,000, and may
be exchanged for one or more Secured Notes of any authorized denomination and
like Series and aggregate outstanding principal amount. The Borrowers shall keep
at the principal executive office of the Company a register for each series of
Secured Notes in which the Company shall record the registrations of the Secured
Notes of such series and the names and addresses of the Holders from time to
time and all transfers thereof. The Borrowers shall provide any Holder who is a
Purchaser or an Institutional Investor or who otherwise holds not less than 10%
of the aggregate principal amount of any series of the Secured Notes then
outstanding, promptly upon request, a complete and correct copy of the names and
addresses of the then Holders of such series.
12N(2). TRANSFER AND EXCHANGE. Upon surrender of a Secured Note to
the Company for registration of transfer or exchange endorsed or accompanied by
a written instrument of transfer duly executed by the registered Holder or its
attorney duly authorized in writing and accompanied by the address for notices,
the Borrowers shall at their expense (except as provided below), execute and
deliver one or more replacement Secured Notes of like tenor and series and of a
like aggregate amount, registered in the name of such Transferee or Transferees.
Each new Secured Note will bear interest from the date to which interest shall
have been paid on the surrendered Security or the date of surrender if no
interest shall have been paid thereon. The Borrowers may require payment of a
sum sufficient to cover any stamp tax or governmental charge imposed in respect
of any such transfer. If a transfer of a Secured Note is not made pursuant to an
effective registration statement under the Securities Act, the Borrowers may
require the transferor to deliver, prior to such transfer, an opinion of
counsel, which may be counsel to such transferor, reasonably satisfactory to the
Borrowers, that such Secured Note may be sold without registration under the
Act.
12N(3). REPLACEMENT. Upon receipt of written notice from a Holder of
the loss, theft, destruction or mutilation of a Secured Note and, in the case of
any such loss, theft or destruction, upon receipt of an indemnification
agreement of such Holder (and, in the case of a Holder which is not a Qualified
43
<PAGE> 50
Institutional Buyer, with such security as may be reasonably requested by the
Borrowers) satisfactory to the Borrowers, or in the case of any such mutilation
upon surrender and cancellation of such Secured Note, the Borrowers will make
and deliver a new Secured Note, at their expense, of like tenor and series, in
lieu of the lost, stolen, destroyed or mutilated Secured Note, and each new
Secured Note will bear interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Secured Note or if no interest
has been paid thereon, the date of issue of such lost, stolen, destroyed or
mutilated Secured Note.
12O. COMPLIANCE BY SUBSIDIARIES. The Borrowers, as the holders of
the Equity Interests of their Subsidiaries, shall cause such meetings to be
held, votes to be cast, resolutions to be passed, by-laws to be made and
confirmed, documents to be executed and all other things and acts to be done to
ensure that, at all times, the provisions of this Agreement relating to the
Borrowers and such Subsidiaries, respectively, are complied with.
12P. SEVERABILITY. If any provision of this Agreement shall be held
or deemed to be, or shall in fact be, invalid, inoperative, illegal or
unenforceable as applied to any particular case in any jurisdiction because of
the conflict of such provision with any constitution or statute or rule of
public policy or for any other reason, such circumstance shall not have the
effect of rendering the provision or provisions in question invalid,
inoperative, illegal or unenforceable in any other jurisdiction or in any other
case or circumstance or of rendering any other provision or provisions herein
contained invalid, inoperative, illegal or unenforceable to the extent that such
other provisions are not themselves actually in conflict with such constitution,
statute or rule of public policy, but this Agreement shall be reformed and
construed in any such jurisdiction or case as if such invalid, inoperative,
illegal or unenforceable provision had never been contained herein and such
provision reformed so that it would be valid, operative and enforceable to the
maximum extent permitted in such jurisdiction or in such case.
12Q. TERMINATION. This Agreement and the rights of the Holders and
the obligations of the Borrowers hereunder shall not terminate until each of the
Secured Notes, including all principal, interest, including interest on overdue
interest and Make Whole Amount has been indefeasibly paid in full and all
Expenses and all other amounts owed to any Purchaser or any Holder pursuant to
the terms of any Transaction Document has been indefeasibly paid in full.
12R. CONSTRUCTION. Each covenant contained herein shall be construed
(absent express provision to the contrary) as being independent of each other
covenant contained herein, so that compliance with any one covenant shall not
(absent such an express contrary provision) be deemed to excuse compliance with
any other covenant. Where any provision herein refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly by such
Person.
12S. JOINT AND SEVERAL LIABILITY. Each and every representation,
warranty, covenant and agreement made in this Agreement or any other Transaction
Document in favor of the Purchasers or any Holder by the Borrowers is the joint
and several obligation of the Borrowers whether or not so expressed, and the
obligations of the Borrowers shall not be subject to any counterclaim, setoff,
recoupment or defense based upon any claim a Borrower may have against the other
Borrower, any Purchaser or any Holder.
SIGNATURES FOLLOW ON NEXT PAGE
44
<PAGE> 51
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered by one of its duly authorized officers.
BORROWERS: CAL-MAINE FOODS, INC.
By:
-----------------------------------
Name:
Title:
CAL-MAINE PARTNERSHIP, LTD.
By: CAL-MAINE FOODS, INC.
(its General Partner)
By:
-----------------------------------
Name:
Title:
PURCHASERS: JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By:
-----------------------------------
Name:
Title:
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY
By:
-----------------------------------
Name:
Title:
45
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CAL-MAINE
FOODS, INC.'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED IN
THE FORM 10-Q FOR THE QUARTER ENDED NOVEMBER 27, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-03-2000
<PERIOD-END> NOV-27-1999
<CASH> 7,778
<SECURITIES> 0
<RECEIVABLES> 22,245
<ALLOWANCES> 0
<INVENTORY> 46,623
<CURRENT-ASSETS> 80,940
<PP&E> 226,837
<DEPRECIATION> 81,236
<TOTAL-ASSETS> 240,671
<CURRENT-LIABILITIES> 53,502
<BONDS> 0
0
0
<COMMON> 188
<OTHER-SE> 71,430
<TOTAL-LIABILITY-AND-EQUITY> 240,671
<SALES> 130,109
<TOTAL-REVENUES> 130,109
<CGS> 121,709
<TOTAL-COSTS> 121,709
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,608
<INCOME-PRETAX> (12,782)
<INCOME-TAX> (4,686)
<INCOME-CONTINUING> (8,096)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,096)
<EPS-BASIC> (.65)
<EPS-DILUTED> (.65)
</TABLE>
