<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
SECURITY CAPITAL CORPORATION
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(Exact name of registrant as specified in its charter)
June 27, 1997
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Date of Report (Date of earliest event reported)
Delaware 1-7921 13-3003070
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(State or other juris- (Commission (I.R.S. Employer
diction of incorporation) File Number) Identification No.)
1111 North Loop West, Suite 400, Houston, Texas 77008
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(Address of principal executive offices) (Zip Code)
(713) 880-7100
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(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
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On June 27, 1997, Pumpkin Ltd. ("Pumpkin"), a Delaware corporation and a
subsidiary of Pumpkin Masters Holdings, Inc., a Delaware corporation
("Holdings"), and a subsidiary of Security Capital Corporation, a Delaware
corporation ("Security Capital"), acquired substantially all of the assets
and assumed certain liabilities of Pumpkin Ltd. d/b/a Pumpkin Masters, Inc.,
a Colorado corporation (the "Seller").
The assets purchased consisted of the assets used by the Seller in the
conduct of its businesses, including cash, accounts receivable, inventories,
prepaid expenses, furniture, fixtures, computer and intellectual property
rights and other intangibles. Prior to the acquisition, the Seller was
engaged in the business of manufacturing and distributing pumpkin and
watermelon carving kits (comprised primarily of tools and patterns) and
related accessories. The Seller had sales of approximately $7,000,000 for the
fiscal year ended January 31, 1997. Following the acquisition, Pumpkin will
carry on the business previously conducted by the Seller. The principal
executive office of Pumpkin is located at 427 East Bayaud Avenue, Denver,
Colorado 80206, and the telephone number of Pumpkin at that address is (303)
722-4442.
The consideration paid to the Seller and the transaction fees and
expenses incurred as of the closing date aggregated $7,871,136.43 and
consisted of the following:
Cash to Seller: $6,079,171.84 (including the
payoff of net
amounts due to an
affiliate of the
stockholder of
the Seller by the
Seller of
$503,500.84)
Transaction Fees and
Expenses: 651,125.50 (known as of the
closing date)
Assumption of Accounts
Payable and Accrued
Liabilities: 1,140,839.09
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TOTAL $7,871,136.43
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Of the cash paid to the Seller, $1,500,000 was provided by Security
Capital and the balance was borrowed pursuant to the Credit Agreement
described below.
The Seller also received stock of Holdings constituting 20% of the
outstanding Common Stock of Holdings. Seller, Holdings and Security Capital
also agreed to certain restrictions on transfers of shares of Holdings owned
by them, together with certain preemptive rights, puts and calls and "tag
along/drag along" rights.
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The Seller is also entitled to receive a payment of up to $2,000,000 (the
"Earnout Amount") if Pumpkin's average annual EBITDA (as defined in the Asset
Purchase Agreement, dated as of June 27, 1997, among the Seller, Pumpkin,
Holdings and Security Capital (the "Asset Purchase Agreement")) is in excess
of $1,500,000 during the four fiscal years following the closing. If earned,
the amount is first payable in June 2002, with the possibility of being
deferred until June 2004. In addition, the Seller will receive a payment of
at least $120,000 and up to $160,000 each fiscal year, payable quarterly,
until the Earnout Amount is either determined not to be earned or, if
determined to be earned, paid. The Earnout Amount is fully subordinate to
debt under the Credit Agreement and any loans by Security Capital to Pumpkin
described below.
In connection with the closing of the acquisition, NationsCredit
Commercial Corporation, as agent (the "Agent") for the lenders (collectively,
the "Lenders") named in the Credit Agreement, dated as of June 27, 1997 (the
"Credit Agreement"), among Pumpkin, Holdings and the Agent, provided various
credit facilities to Pumpkin to partially finance the acquisition, to provide
for seasonal working capital and letter of credit requirements and to pay
transaction expenses. The facilities consist of a revolving credit facility
of up to $3,500,000 and amortizing term debt of $5,000,000 maturing from four
to six years from the closing date. The facilities are secured by all of the
acquired assets as well as by a pledge to the Lenders of the capital stock of
Pumpkin owned by Holdings.
In connection with this financing, NationsCredit Commercial Corporation
was issued a Warrant exercisable for 10% of the Class B Common Stock, on a
fully diluted basis, of Pumpkin. The Class B Common Stock is non-voting and
convertible at any time into voting, Class A Common Stock of Pumpkin. The
Warrant and related Warrantholders Rights Agreement also provide for certain
restrictions on transfer, registration rights, "tag along/drag along" rights
and put and call rights.
In addition, Pumpkin and Holdings became parties to the Consolidated
Income Tax Sharing Agreement, dated May 17, 1996, among Security Capital,
P.D. Holdings, Inc., a Delaware corporation, and Possible Dreams, Ltd., a
Delaware corporation ("Possible Dreams"), whereby Pumpkin will calculate and
pay to Security Capital the amount of its income tax liability calculated as
if Pumpkin were not part of a consolidated group. Security Capital will pay
to the relevant tax authorities its tax liability, taking into account its
own tax position and the utilization of its tax loss carryforwards. The
excess of the payment made by Pumpkin to Security Capital over Security
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Capital's tax liability will accrue to the benefit of Security Capital,
subject to the rights of the Lenders described below.
Pursuant to a Security Capital Pledge and Guaranty Agreement between the
Agent and Security Capital, the Lenders required Security Capital to set
aside in a separate account such excess amounts paid by Pumpkin to Security
Capital during the first three years of the Consolidated Income Tax Sharing
Agreement and to pledge its rights in such account to the Lenders as
additional collateral for the loans to Pumpkin. Alternatively, Security
Capital may elect to loan such amounts to Pumpkin in order to permit Pumpkin
to make optional repayments on a portion of the term debt. All such loans
will bear interest at 10%, payable quarterly, with no principal being due
until repayment of all indebtedness under the Credit Agreement, and will be
fully subordinate to all indebtedness incurred under the Credit Agreement.
All of the key executives of the Seller have entered into employment and
non-competition agreements with Pumpkin. Gay Burke, who has become President
and Chief Executive Officer of Pumpkin, has signed a four-year employment
agreement. Kea Bardeen, who has become Vice President and Director of Product
Development of Pumpkin, has signed a three-year employment agreement. John
Bardeen, who has become Co-Chairman and Director of Promotions, has signed a
four-year employment agreement.
Ms. Burke has been granted an option to acquire 4% of the Class A Common
Stock of Pumpkin at an exercise price per share of $1,754.39. Ms. Burke,
Holdings and Pumpkin also entered into a Stockholders' Agreement providing
for certain restrictions on transfers of the shares of Pumpkin owned by them,
together with certain preemptive rights, puts and calls and "tag along/drag
along" rights with respect to the Class A Common Stock of Pumpkin.
In connection with the acquisition, Security Capital entered into a
Second Amendment to Advisory Services Agreement with Capital Partners, Inc.,
a Connecticut corporation ("Capital Partners"), pursuant to which Capital
Partners agreed to assist Security Capital in providing management advisory
services to Pumpkin in the areas of corporate development, strategic
planning, investment and financial matters and general business policies in
return for an increase in the annual advisory fee payable to Capital Partners
under the Advisory Services Agreement equal to the greater of $100,000 or 5%
of Pumpkin's annual EBITDA (as defined in the Asset Purchase Agreement). The
advisory fee payable to Capital Partners is subordinate to the rights of the
Lenders.
The descriptions of the foregoing agreements are qualified in their
entirety by reference to the copies of such
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<PAGE>
agreements included as exhibits to this Form 8-K and incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
Security Capital believes that it is impracticable to provide any of the
required financial statements at the time of filing of this Report on Form
8-K. The required financial statements will be filed as soon as practicable
and, in any event, not later than 60 days following the due date of this Form
8-K.
(b) Pro forma financial information.
Security Capital believes that it is impracticable to provide any of the
required pro forma financial information at the time of filing of this Report
on Form 8-K. The required pro forma financial information will be filed as
soon as practicable and, in any event, not later than 60 days following the
due date of this Form 8-K.
(c) Exhibits.
1. Asset Purchase Agreement, dated as of June 27, 1997, by and among
Pumpkin, Ltd. d/b/a Pumpkin Masters, Inc., a Colorado corporation (the
"Seller"), Pumpkin Ltd., a Delaware corporation ("Pumpkin"), Pumpkin Masters
Holdings, Inc., a Delaware corporation ("Holdings"), and Security Capital
Corporation, a Delaware corporation ("Security Capital").
2. Credit Agreement, dated as of June 27, 1997, among Pumpkin, Holdings,
the Lenders referred to therein and NationsCredit Commercial Corporation
("NationsCredit"), as Agent.
3. Warrant, dated June 27, 1997, from Pumpkin to NationsCredit.
4. Warrantholders Rights Agreement, dated as of June 27, 1997, among
Pumpkin, Holdings, Security Capital, Seller and NationsCredit.
5. Company Security Agreement, dated as of June 27, 1997, between Pumpkin
and NationsCredit, as Agent.
6. Holdings Pledge Agreement, dated as of June 27, 1997, between Holdings
and NationsCredit, as Agent.
7. Security Capital Pledge and Guarantee Agreement, dated as of June 27,
1997, between Security Capital and NationsCredit, as Agent.
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<PAGE>
8. Security Capital Subordination Agreement, dated as of June 27, 1997,
among Pumpkin, the Subordinated Obligations Holders (as defined therein) and
NationsCredit, as Agent.
9. Investors Subordination Agreement, dated as of June 27, 1997, among
Pumpkin, the Subordinated Obligations Holders (as defined therein) and
NationsCredit, as Agent.
10. Seller Subordination Agreement, dated as of June 27, 1997, among
Pumpkin, Holdings, the Subordinated Obligations Holders (as defined therein)
and NationsCredit, as Agent.
11. Stockholders' Agreement, dated as of June 27, 1997, among Pumpkin,
Holdings and Gay Burke.
12. Employment Agreement, dated June 27, 1997, by and between Pumpkin and
John Bardeen.
13. Employment Agreement, dated June 27, 1997, by and between Pumpkin and
Kea Bardeen.
14. Employment Agreement, dated June 27, 1997, by and between Pumpkin and
Gay Burke.
15. Stock Option Agreement, dated June 27, 1997, by and between Pumpkin
and Gay Burke.
16. Advisory Services Agreement, dated June 27, 1997, by and between
Pumpkin and Security Capital.
17. Second Amendment to Advisory Services Agreement, dated June 27, 1997,
by and between Security Capital and Capital Partners, Inc.
18. Joinder Agreement, dated June 27, 1997, among Pumpkin, Holdings and
Security Capital to Consolidated Income Tax Sharing Agreement, dated as of
May 17, 1996, among Possible Dreams, Ltd., P.D. Holdings, Inc. and Security
Capital.
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<PAGE>
SIGNATURE
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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.
SECURITY CAPITAL CORPORATION
(Registrant)
Dated: July 10, 1997 By: /s/ A. George Gebauer
--------------------------
A. George Gebauer
President
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Exhibit Index
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<TABLE>
<CAPTION>
SEQUENTIALLY
ITEM NUMBERED
NO. DESCRIPTION PAGE
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<S> <C>
1. Asset Purchase Agreement, dated as of June 27, 1997, by and among Pumpkin, Ltd. d/b/a Pumpkin Masters,
Inc., a Colorado corporation (the "Seller"), Pumpkin Ltd., a Delaware corporation ("Pumpkin"), Pumpkin
Masters Holdings, Inc., a Delaware corporation ("Holdings"), and Security Capital Corporation, a
Delaware corporation ("Security Capital").
2. Credit Agreement, dated as of June 27, 1997, among Pumpkin, Holdings, the Lenders referred to therein
and NationsCredit Commercial Corporation ("NationsCredit"), as Agent.
3. Warrant, dated June 27, 1997, from Pumpkin to NationsCredit.
4. Warrantholders Rights Agreement, dated as of June 27, 1997, among Pumpkin, Holdings, Security Capital,
Seller, and NationsCredit.
5. Company Security Agreement, dated as of June 27, 1997, between Pumpkin and NationsCredit, as Agent.
6. Holdings Pledge Agreement, dated as of June 27, 1997, between Holdings and NationsCredit, as Agent.
7. Security Capital Pledge and Guarantee Agreement, dated as of June 27, 1997, between Security Capital and
NationsCredit, as Agent.
8. Security Capital Subordination Agreement, dated as of June 27, 1997, among Pumpkin, the Subordinated
Obligations Holders (as defined therein) and NationsCredit, as Agent.
9. Investors Subordination Agreement, dated as of June 27, 1997, among Pumpkin, the Subordinated
Obligations Holders (as defined therein) and NationsCredit, as Agent.
</TABLE>
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<TABLE>
<CAPTION>
SEQUENTIALLY
ITEM NUMBERED
NO. DESCRIPTION PAGE
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<S> <C>
10. Seller Subordination Agreement, dated as of June 27, 1997, among Pumpkin, Holdings, the Subordinated
Obligations Holders (as defined therein) and NationsCredit, as Agent.
11. Stockholders' Agreement, dated as of June 27, 1997, among Pumpkin, Holdings and Gay Burke.
12. Employment Agreement, dated June 27, 1997, by and between Pumpkin and John Bardeen.
13. Employment Agreement, dated June 27, 1997, by and between Pumpkin and Kea Bardeen.
14. Employment Agreement, dated June 27, 1997, by and between Pumpkin and Gay Burke.
15. Stock Option Agreement, dated June 27, 1997, by and between Pumpkin and Gay Burke.
16. Advisory Services Agreement, dated June 27, 1997, by and between Pumpkin and Security Capital.
17. Second Amendment to Advisory Services Agreement, dated June 27, 1997, by and between Security Capital
and Capital Partners, Inc.
18. Joinder Agreement, dated June 27, 1997, among Pumpkin, Holdings and Security Capital to Consolidated
Income Tax Sharing Agreement, dated as of May 17, 1996, among Possible Dreams, Ltd., P.D. Holdings, Inc.
and Security Capital.
</TABLE>
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ASSET PURCHASE AGREEMENT
by and among
PUMPKIN LTD. d/b/a PUMPKIN MASTERS, INC.,
PUMPKIN LTD.,
PUMPKIN MASTERS HOLDINGS, INC.
and
SECURITY CAPITAL CORPORATION
Dated as of June 27, 1997
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<PAGE>
TABLE OF CONTENTS
Page
1. Definitions................................................ 1
2. Purchase and Sale of Assets................................ 11
2.1 Purchase and Sale.......................................... 11
2.2 Assumption of Liabilities.................................. 11
2.3 Retained Liabilities....................................... 11
3. Consideration for Transaction; Allocations................. 12
3.1 Cash Consideration......................................... 12
3.2 Additional Payment; Earnout Provisions..................... 12
3.3 Issuance of Stock to the Seller............................ 14
3.4 Assumption of Assumed Liabilities.......................... 18
3.5 Allocation of Purchase Price for Assets.................... 18
3.6 Employment Agreements...................................... 19
3.7 Lease of Premises.......................................... 19
3.8 Lease of Equipment......................................... 19
4. Representations and Warranties............................. 19
4.1 Representations and Warranties of the Seller............... 19
4.1.1 Ownership of the Seller's Stock........................... 19
4.1.2 Due Organization; Good Standing, Authority of the Seller.. 19
4.1.3 Authorization and Validity of Agreements.................. 20
4.1.4 Agreement Not in Conflict with Other Instruments; Required
Approvals Obtained........................................ 20
4.1.5 Conduct of Business in Compliance with Regulatory and
Contractual Requirements.................................. 20
4.1.6 Legal Proceedings..................................... 20
4.1.7 Financial Statements.................................. 21
4.1.8 Accounts Receivable................................... 21
4.1.9 Assets................................................ 21
4.1.10 Intellectual Property Rights.......................... 21
4.1.11 Inventory............................................. 22
4.1.12 Employment Matters.................................... 22
4.1.13 Absence of Certain Changes or Events.................. 23
4.1.14 Adverse Conditions.................................... 25
4.1.15 Acquisition for Investment............................ 25
4.1.16 Entire Business....................................... 26
4.1.17 Benefit Plans; ERISA.................................. 26
4.1.18 Real Property......................................... 27
4.1.19 Contracts............................................. 28
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4.1.20 Licenses.............................................. 29
4.1.21 Insurance............................................. 29
4.1.22 Affiliate Transactions................................ 29
4.1.23 Environmental Matters................................. 29
4.1.24 No Guarantees......................................... 30
4.1.25 Taxes................................................. 30
4.1.26 Brokers............................................... 31
4.1.27 Warranties............................................ 31
4.1.28 Investment Assets..................................... 32
4.1.29 Disclosure............................................ 32
4.2 Representations and Warranties of the Purchaser,
Holdings and SCC...................................... 32
4.2.1 Due Organization; Good Standing; Power................ 32
4.2.2 Authorization and Validity of Documents............... 33
4.2.3 Agreement Not in Conflict with Other Instruments;
Required Approvals Obtained........................... 33
4.2.4 Conduct of Business in Compliance with Regulatory and
Contractual Requirements.............................. 33
4.2.5 Legal Proceedings..................................... 33
4.2.6 Securities Registration............................... 34
4.2.7 Issuance of the Seller's Shares....................... 34
4.2.8 Tax Matters........................................... 34
4.2.9 Disclosure............................................ 35
5. Registration Rights........................................ 35
5.1 Definitions................................................ 35
5.2 Piggyback Registration Rights.............................. 35
5.3 Registration Procedures.................................... 36
5.4 Underwriting Agreement..................................... 36
5.5 Availability of Rule 144................................... 36
5.6 Information by Holder...................................... 37
6. Particular Covenants....................................... 37
6.1 The Seller's Affirmative Covenants......................... 37
6.2 The Purchaser's Affirmative Covenants...................... 39
6.3 Risk of Loss............................................... 39
6.4 Notification of Certain Matters............................ 40
6.5 Books and Records.......................................... 40
6.6 Use of Pumpkin Name........................................ 40
6.7 Audited Financial Statements............................... 40
6.8 Sale of Products........................................... 40
6.9 Product Liability Insurance................................ 41
6.10 Employment................................................. 41
7. Transfers of Restricted Securities......................... 42
7.1 Restrictions Generally; Securities Act..................... 42
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7.2 Legend..................................................... 42
7.3 Transfers by the Seller Stockholders and Additional
Stockholders............................................... 43
8. Corporate Governance....................................... 43
8.1 Board of Directors......................................... 43
8.2 Removal.................................................... 44
8.3 Vacancies.................................................. 44
9. Closing.................................................... 44
9.1 Time, Date and Place....................................... 44
9.2 The Seller's Conditions to Close........................... 45
9.3 The Purchaser's Conditions to Close........................ 45
9.4 Actions to Be Taken at the Closing......................... 47
10. Indemnification............................................ 48
10.1 Indemnification by the Seller.............................. 48
10.2 Limitations on the Seller's Indemnity...................... 48
10.3 Indemnification by the Purchaser, Holdings and SCC......... 48
10.4 Defense of Claims.......................................... 49
11. Expenses of Transactions................................... 50
12. Termination................................................ 50
13. Miscellaneous.............................................. 51
13.1 Survival of Representations and Warranties................. 51
13.2 Notices.................................................... 51
13.3 Entire Agreement........................................... 53
13.4 Assignability.............................................. 53
13.5 Binding Effect; Benefit.................................... 53
13.6 Severability............................................... 53
13.7 Amendment; Waiver.......................................... 53
13.8 Section Headings........................................... 53
13.9 Counterparts............................................... 53
13.10 Applicable Law: Jurisdiction and Venue................ 53
13.11 Remedies.............................................. 54
13.12 Further Assurances.................................... 54
13.13 Public Announcements.................................. 54
13.14 Limited Recourse...................................... 54
13.15 Bulk Sales Compliance................................. 55
SCHEDULES............................................................ 57
EXHIBIT LIST......................................................... 58
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") dated as of the __ day of
June 1997, by and among PUMPKIN LTD., d/b/a PUMPKIN MASTERS, INC., a Colorado
corporation (the "Seller"), and PUMPKIN LTD., a Delaware corporation (the
"Purchaser"), PUMPKIN MASTERS HOLDINGS, INC., a Delaware corporation
("Holdings"), and SECURITY CAPITAL CORPORATION, a Delaware corporation ("SCC").
Explanatory Statement
A. The Seller is a Colorado corporation that engages in the Seller's
Business of designing, marketing and distributing specialty products primarily
for the Halloween market.
B. Kea Bardeen (the "Shareholder") owns all of the outstanding shares of
the capital stock of the Seller, and is the sole director of the Seller.
C. The Seller desires to sell, assign, transfer and deliver to the
Purchaser, and the Purchaser desires to purchase from the Seller, all of the
assets of the Seller, except those specifically excluded herein, on the terms
and subject to the conditions described in this Agreement.
D. The Purchaser and the Seller desire to enter into certain agreements
providing for, among other things, the provision of certain services by Kea
Bardeen, John Bardeen and Gay Burke for the Purchaser, on the terms and subject
to the conditions hereinafter contained.
E. Following the transactions described in this Agreement, SCC will own at
least eighty percent (80%) of the capital stock of Holdings and Holdings will
own one hundred percent (100%) of the outstanding capital stock of the
Purchaser.
NOW THEREFORE, in consideration of the Explanatory Statement that shall be
deemed to be a substantive part of this Agreement and the mutual covenants,
promises, agreements, representations and warranties contained in this
Agreement, the parties hereto do hereby covenant, promise, agree, represent and
warrant as follows:
1. Definitions.
(a) The following definitions are used in this Agreement:
1.1 "Acquisition Lender" shall mean any holder of an Acquisition
Note.
1.2 "Acquisition Note" shall mean the promissory note, loan
agreement, security agreement and related documents, including, without
limitation, the Credit Agreement, executed and delivered to any Acquisition
Lender to provide a portion of the cash consideration described in
<PAGE>
Section 3.1 of this Agreement, and, any replacement or modified promissory
note executed and delivered to Refinance the original promissory note.
1.3 "Actions or Proceedings" means any and all actions, suits,
proceedings, arbitrations or Governmental investigations or audits.
1.4 "Additional Stockholders" means any and all Persons (other than
any Seller Stockholder or Purchaser Stockholder) (i) to whom any of the Seller
Stockholders or the Purchaser Stockholders Transfers Restricted Securities or
(ii) to whom the Purchaser issues Restricted Securities after the date hereof
other than pursuant to a public offering registered under the Securities Act, in
each case who has executed a Joinder Agreement, so long as any such Person shall
hold Restricted Securities.
1.5 "Affiliate" means, with respect to any Person, any other Person
that directly, or indirectly through one of more intermediaries, controls or is
controlled by or is under common control with such Person. For purposes of this
definition, control of a Person means the power, direct or indirect, to direct
or cause the direction of the management and policies of such Person whether by
Contract or otherwise and, in any event and without limitation of the previous
sentence, any Person owning 20% or more of the voting securities of a second
Person shall be deemed to control that second Person.
1.6 "Agreement" means this Agreement, the exhibits hereto, the
Schedules and the certificates delivered in connection herewith, as the same
shall be amended, modified or restated from time to time in accordance with the
terms thereof.
1.7 "Assets" shall include all of the assets used in the Seller's
Business, including, without limitation, the Seller's equipment (including,
without limitation, the items of equipment listed on Schedule 1.7A), furniture,
materials, supplies, fixed assets, motor vehicle, accounts receivable, inventory
(wherever located, and including, without limitation, that at the locations
specified in Schedule 1.7B), raw materials, work-in-progress, customer lists,
employment and personnel records, customer and vendor records, sales reports,
cost sheets, bills of material, technical information, engineering data,
production data, files, documents, Books and Records, prepaid assets, contracts
(including confidentiality and non-compete), Licenses, Intellectual Property,
goodwill, all rights and interests in and to the names "Pumpkin Ltd." and
"Pumpkin Masters, Inc.," cash (after deducting outstanding unpaid checks),
insurance proceeds or the right to receive proceeds (in each case net of any
applicable deductible) in respect of any casualty or other loss in respect of
the Seller's Business or any of the Assets from any third-party insurance policy
existing for the benefit of the Seller or the Assets and all rights, privileges,
claims, causes of action and options relating or pertaining to the Seller's
Business or the Assets. Assets shall not include the specific assets listed on
Schedule 1.7C, which are specifically excluded from the transactions described
in this Agreement.
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1.8 "Assumed Liabilities" means all debts, obligations, duties and
Liabilities of the Seller and the Seller's Business, as reflected on the
Seller's Financial Statement dated January 31, 1997 and any Liabilities of the
Seller's Business incurred since that date in the ordinary course of business,
consistent with the terms of Section 6.1 of this Agreement, and all contractual
obligations to which the Seller or the Seller's Business is bound and that are
listed in Schedule 1.8.
1.9 "Benefit Plan" means any Plan, existing at the Closing Date or
prior thereto, established or to which contributions have at any time been made
by the Seller, any ERISA Affiliate, or any predecessor of any of the foregoing
under which any employee or former employee of the Seller's Business, or any
beneficiary thereof, is covered, is eligible for coverage or has benefit rights.
1.10 "Books and Records" of any Person means all files, documents,
instruments, papers, books and records relating to the business, operations,
condition of (financial or other), results of operations and assets and
properties of such Person, including without limitation financial statements,
Tax Returns and related work papers and letters from accountants, budgets,
pricing guidelines, ledgers, journals, deeds, title policies, minute books,
stock certificates and books, stock transfer ledgers, Contracts, Licenses,
customer lists, computer files and programs, retrieval programs, operating data
and plans and environmental studies and plans (if any).
1.11 "Business Combination" means, with respect to any Person, (i) any
merger, consolidation or combination to which such Person is a party, (ii) any
sale, dividend, split or other disposition of capital stock or other equity
interests of such Person, (iii) any tender offer (including, without limitation,
a self tender), exchange offer, recapitalization, liquidation, dissolution or
similar transaction, (iv) any sale, dividend or other disposition of a
significant portion of the assets and properties of such Person, or (v) the
entering into of any agreement or understanding, or granting of any rights or
options, with respect to any of the foregoing.
1.12 "Business Day" means a day other than Saturday, Sunday or any day
on which banks located in the State of Colorado or Connecticut are authorized or
obligated by Law to close.
1.13 "Code" means the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
1.14 "Common Stock" means the Common Stock, par value $.01 per share,
of Holdings, any securities into which such Common Stock shall have been changed
or any securities resulting from any reclassification or recapitalization of
such Common Stock, and all other securities for any class or classes (however
designated) of Holdings the holders of which have the right, without limitation
as to amount, after payment on any securities entitled to a preference on
dividends or other distributions upon any dissolution, liquidation or
winding-up, either to all or to a share of the balance of payments upon such
dissolution, liquidation or winding-up.
1.15 "Contract" means any agreement, lease, sublease, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract (whether
written or oral).
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1.16 "Credit Agreement" means the Credit Agreement dated as of June
27, 1997 among the Purchaser, Holdings, the Lenders listed on the signature
pages thereof and NationsCredit Commercial Corporation, as Agent, as the same
may be amended, restated, modified, extended or supplemented from time to time
in accordance with its terms and any successor financial institution credit
agreement refinancing all or a portion of the Credit Agreement and designated by
the Purchaser as the "Credit Agreement" for purposes hereof.
1.17 "Earnout Conversion Price Per Share" means, with respect to the
price per share of Class A Common Stock, $8.75 per share, adjusted for (x)
issuances of Class A Common Stock sold at less than fair market value other than
pursuant to Options granted to management, (y) changes in the number of
outstanding shares of Class A Common Stock as a result of a subdivision (by any
stock split, stock dividend, recapitalization or otherwise) or combination (by
reverse stock split or otherwise) and (z) any reorganization, consolidation,
merger or sale of all or substantially all of SCC's assets for which holders of
Class A Common Stock are entitled to received stock, other securities or assets
with respect to or in exchange for Class A Common Stock
1.18 "EBITDA" means, for the appropriate period, the net income (or
loss) of the Purchaser for such period determined in accordance with GAAP,
consistently applied, plus the sum of (A) interest expense, (B) the Additional
Payment, (C) depreciation, (D) amortization of goodwill and the amortization
of the increase in the value of the Assets from the amount shown on the Seller's
Financial Statement dated January 31, 1997, (E) income taxes paid or accrued,
(F) increases in other expenses directly resulting from the transactions
contemplated by this Agreement, including amortization of original issue
discount and capitalized acquisition expenses and inventory write-up, (G) the
costs and expenses related to the transactions contemplated by this Agreement
(including the payment pursuant to Section 9.4.9) and other acquisitions
undertaken by the Purchaser, including, in each case, all legal, accounting,
consultant or other expenses, (H) payments made by the Purchaser to its direct
and indirect corporate stockholders pursuant to a tax sharing agreement dated
the date hereof, (I) costs related to or in connection with extraordinary
transactions relating from or on account of SCC or Capital Partners, Inc., a
Connecticut corporation ("CP Inc."), and (J) payments paid to CP Inc. pursuant
to the Management Agreement, dated the Closing Date, between the Purchaser and
CP Inc.; provided, however, in the event of a vote by the Board of Directors of
Holdings or the Purchaser, as the case may be, on any of the following
proposals, which proposal is not proposed by any Seller Director or Seller
Stockholders' designee on the Board of Directors of the Purchaser, as the case
may be: (i) a substantially material addition to the then-current product line
of the Purchaser, (ii) a substantially material deletion to the then-current
product line of the Purchaser, (iii) the acquisition of substantially all the
assets or one hundred percent of the voting securities of another Person,
whether by purchase, exchange, merger, consolidation or otherwise, or (iv) the
acquisition of products (not substantially similar to the products then
manufactured, sold or distributed by the Purchaser) of another Person to be
manufactured, sold or distributed by the Purchaser, in each case in which a
majority of the Seller Directors or a majority of the designees of the Seller
Stockholders on the Board of the Purchaser, as the case may be, does not vote
affirmatively, EBITDA shall be calculated to exclude, to the maximum extent
possible, the
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results, effect and/or impact of the transactions described in (i) - (iv)
(collectively, the "Seller Exclusions"). Unless otherwise stated herein,
EBITDA shall be calculated on the basis of the Purchaser's fiscal year,
provided, however, that with respect to the Purchaser's 1997 fiscal year,
EBITDA shall be calculated commencing February 1 and ending December 31 of
such year.
1.19 "Environment" means all air, surface water, groundwater or land,
including land surface or subsurface, including all fish, wildlife, biota and
all other natural resources.
1.20 "Environmental Claim" means any and all administrative or
judicial actions, suits, orders, claims, liens, notices, notices of violations,
investigations, complaints, requests for information, proceedings, or other
communications (written or oral), whether criminal or civil (collectively,
"Claims") pursuant to or relating to any applicable Environmental Law by any
person (including but not limited to any Governmental Authority, private person
and citizen's group) based upon, alleging, asserting or claiming any actual or
potential (i) violation of or liability under any Environmental Law, (ii)
violation of any Environmental Permit or (iii) liability for investigatory
costs, cleanup costs, removal costs, remedial costs, response costs, natural
resource damages, property damage, personal injury, fines or penalties arising
out of, based on, resulting from, or related to the presence, Release or
threatened Release into the Environment of any Hazardous Materials at any
location, including but not limited to, any off-Site location to which Hazardous
Materials or materials containing Hazardous Materials were sent for handling,
storage, treatment, or disposal.
1.21 "Environmental Law" means any and all federal, state, local,
provincial and foreign, civil and criminal laws, statutes, ordinances, orders,
codes, rules, regulations, Environmental Permits, policies, guidance documents,
judgments, decrees, injunctions or agreements with any Governmental Authority
relating to the protection of health and the Environment, worker health and
safety, and/or governing the handling, use, generation, treatment, storage,
transportation, disposal, manufacture, distribution, formulation, packaging,
labeling or Release of Hazardous Materials, whether now existing or subsequently
amended or enacted, including but not limited to: the Clean Air Act, 42 U.S.C.
Section 7401 et seq.; the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. Section 9601 et seq.; the Federal Water
Pollution Control Act, 33 U.S.C. Section 1251 et seq.; the Hazardous Material
Transportation Act, 49 U.S.C. Section 801 et seq.; the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. Section 136 et sea.; the Resource
Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. Section 6901 et seq.;
the Toxic Substance Control Act, 15 U.S.C. Section 2601 et seq.; the
Occupational Safety & Health Act of 1970, 29 U.S.C. Section 651 et. seq.; the
Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et. seq.; and the state
analogies thereto; and any common law doctrine, including but not limited to,
negligence, nuisance, trespass, personal injury, or property damage related to
or arising out of the presence, Release, or exposure to a Hazardous Material.
1.22 "Environmental Permit" means any and all federal, state, local,
provincial, or foreign permits, licenses, approvals, consents or authorizations
required by any Governmental Authority under or in connection with any
Environmental Law and includes any and all orders,
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consent orders or binding agreements issued or entered into by a Governmental
Authority under any applicable Environmental Law.
1.23 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
1.24 "ERISA Affiliate" means any Person who is, or at any time was, a
member of a controlled group (within the meaning of Section 412(n)(6) of the
Code) that includes, or at any time included, the Seller or any predecessor of
the Seller.
1.25 "GAAP" means generally accepted accounting principles,
consistently applied throughout the specified periods.
1.26 "Governmental Authority" means any court, tribunal, arbitrator,
authority, agency, commission, official or other instrumentality of the United
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision.
1.27 "Hazardous Material" means petroleum, petroleum hydrocarbons or
petroleum products, petroleum by-products, radioactive materials, asbestos or
asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea
formaldehyde, lead or lead-containing materials, polychlorinated biphenyls; and
any other chemicals, materials, substances or wastes in any amount or
concentration which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous materials," "hazardous wastes,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "regulated substances," solid wastes," or "contaminants" or
words or similar import, under any Environmental Law.
1.28 "Indebtedness" of any Person means all obligations of such Person
(a) for borrowed money, (b) evidenced by notes, bonds, debentures or similar
instruments, (c) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(d) under capital leases and (e) in the nature of guarantees of the obligations
described in clauses (a) through (d) above of any other Person.
1.29 "Intellectual Property" means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service mark rights, service names and service name rights, brand
names, inventions, processes, formulae, copyrights and copyright rights, trade
dress, business and product names, logos, slogans, trade secrets, patterns,
blueprints, drawings, literature, reports, catalogs, design rights, operating
manuals, industrial models, prototypes, designs, specifications, data
technology, methodologies, computer programs (including all source codes for
computer programs) confidential and proprietary information, whether or not
subject to statutory registration, and all related documentation, technical
information, manufacturing, engineering and technical drawings, know-how and all
pending applications for and registrations of patents, trademarks, service marks
and copyrights, and, with respect to each of the foregoing items, the goodwill
associated therewith, as applicable, and the right to sue for past infringement,
if any,
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in connection with any of the foregoing, and all documents, disks and other
media on which any of the foregoing is stored, owned by or licensed to the
Seller.
1.30 "Investment Assets" means all debentures, notes and other
evidences of Indebtedness, stocks, securities (including rights to purchase and
securities convertible into or exchangeable for other securities), interests in
joint ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by the Seller.
1.31 "Laws" means all laws, statutes, rules, regulations, ordinances
and other pronouncements having the effect of law of the United States, any
foreign country or any domestic or foreign state, county, city or other
political subdivision of any Governmental Authority.
1.32 "Liabilities" means all Indebtedness, obligations and other
liabilities (or contingencies that have not yet become liabilities) of a Person
(whether absolute, accrued, contingent, known or unknown, fixed or otherwise, or
whether due or to become due).
1.33 "Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental Authority.
1.34 "Liens" means all mortgages, pledges, assessments, security
interests, leases, liens, adverse claims, levies, charges or other encumbrances
of any kind and all conditional sale Contracts, title retention Contracts and
other Contracts to give any of the foregoing.
1.35 "Operative Agreements" means, collectively, this Agreement, the
Assignment and Assumptions (as defined in Section 2.1), the Employment
Agreements (as defined in Section 3.6), the Premises Lease Agreement (as defined
in Section 3.7), the Equipment Lease Agreement (as defined in Section 3.7) and
the Acquisition Note.
1.36 "Options" with respect to any Person means all securities,
rights, subscriptions, warrants, options, "phantom" stock rights and other
Contracts that give the right to (i) purchase or otherwise receive or be issued
any shares of capital stock of such Person or any security of any kind
convertible into or exchangeable or exercisable for any shares of capital stock
of such Person or (ii) receive any benefits or rights similar to any rights
enjoyed by or accruing to the holder of shares of capital stock of such Person,
including without limitation, any rights to participate in the equity, income or
election of directors or officers of such Person.
1.37 "Order" means any writ, judgment, decree, injunction or similar
order of any Governmental Authority (in each such case whether preliminary or
final).
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1.38 "Permitted Transferee" means:
(i) with respect to a natural person, the spouse or any lineal
descendant (including by adoption and stepchildren) of such
person, or any trust of which such person is the trustee
and which is established solely for the benefit of any of
the foregoing individuals and whose terms are not
inconsistent with the terms of this Agreement, or any
partnership, all of the general partner(s) and limited
partner(s) (if any) of which are one or more Persons
identified in this clause (i); and
(ii) with respect to the Seller, the Shareholder.
1.39 "Permitted Payment Transferee" means, with respect to the
Seller's rights to the Additional Payment and the Earnout Amount described in
Section 3.2, (i) the Seller may assign the right to receive the Additional
Payment to any Person at any time, (ii) the Seller may create a Lien on the
Earnout Amount at any time, (iii) the Seller may transfer and assign, effective
the Earnout Payment Date (as defined in Section 3.2.2), the right to receive the
Earnout Amount to any Person or (iv) the Seller may assign both the Additional
Payment and the Earnout Amount to the Shareholder at any time, and to a Person
other than the Shareholder at any time, but only with the prior written consent
of the Purchaser, which consent shall not be withheld unreasonably, and the
prior written consent of the Acquisition Lenders.
1.40 "Person" means any natural person, corporation, partnership,
proprietorship, other business organization, trust, union, association or
Governmental Authority.
1.41 "Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral, or whether for the benefit of
a single individual or more than one individual including, but not limited to,
any "employee benefit plan" within the meaning of Section 3(3) of ERISA.
1.42 "Purchaser Permitted Indebtedness" means Indebtedness of the
Purchaser created in accordance with Section 8.01(e) of the Credit Agreement.
1.43 "Purchaser Stockholders" means SCC and its Affiliates (other than
any Seller Stockholder) and Subsidiaries, as long as such Person shall hold
Restricted Securities.
1.44 "Purchaser's Business" shall mean the business operations
consisting of the Seller's Business and such additional business acquisitions
and operations as shall have been approved by the Purchaser's Board of
Directors.
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1.45 "Refinance" shall mean, in respect of any Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue Indebtedness in exchange or replacement for, such Indebtedness in whole
or in part. "Refinanced" and "Refinancing" shall have correlative meanings.
1.46 "Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing of a Hazardous Material into the Environment.
1.47 "Restricted Securities" means the Common Stock, and any
securities issued with respect thereto as a result of any stock dividend, stock
split, reclassification, recapitalization, reorganization, merger, consolidation
or similar event or upon the conversion, exchange or exercise thereof.
1.48 "Seasonal Line of Credit" shall mean the financing obtained to
fund the direct business operations and costs of production of inventory in the
ordinary course of the Purchaser's Business.
1.49 "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
1.50 "Seller Stockholders" means the Seller and its Permitted
Transferees, so long as such Person shall hold Restricted Securities.
1.51 "Seller's Business" shall mean the business operations of the
Seller as of the Closing Date, all of which are used in the business of
designing, marketing and distributing specialty products primarily for the
Halloween market.
1.52 "Seller's Financial Statements" shall mean the audited balance
sheets and statements of income, retained earnings and cash flows at and for the
three years ending on January 31, 1995, January 31, 1996, and January 31, 1997,
certified by the Seller's independent certified public accountants, whose
opinions with respect to such Financial Statements are included in such
Financial Statements.
1.53 "Seller Subordination Agreement" means the Seller Subordination
Agreement dated June 27, 1997 among NationsCredit Commercial Corporation, as
Agent, the Seller and the Purchaser, as the same may be amended, restated,
modified, extended or supplemented from time to time in accordance with its
terms.
1.54 "Senior Debt" shall mean any and all amounts payable under or in
respect of the Credit Agreement, the Seasonal Line of Credit, Purchaser
Permitted Indebtedness and any other Indebtedness approved in writing by the
Seller and any whole or partial increase, extension, renewal,
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refinancing or replacement thereof or of any subsequent Senior Debt,
including principal, premium (if any), interest (including interest accruing
on or after the filing of any petition in bankruptcy or for reorganization
relating to the Purchaser whether or not a claim for post-filing interest is
allowed in such proceeding), fees, charges, expenses, reimbursement
obligations, guarantees and all other amounts payable thereunder or in
respect thereof; provided, however, that any such refinancing or replacement
does not (i) result in an increase in the aggregate principal amount of
Indebtedness of the Purchaser outstanding plus all available, but unused,
Commitments under the Credit Agreement as of the date of such proposed
Refinancing (plus (x) the amount of any premium required to be paid under the
terms of the instrument governing such indebtedness and plus the amount of
reasonable expenses incurred by the Purchaser in connection with such
Refinancing, in the aggregate not in excess of $350,000, and (y) with respect
to Senior Indebtedness other than Purchaser Permitted Indebtedness, an
aggregate principal amount not to exceed $2,000,000; provided that if any
Senior Debt shall be incurred pursuant to this clause (y), the Company shall
comply with the provisions of Sections 8.04, 8.07 and 8.12 of the Credit
Agreement, unless the Seller Stockholders holding a majority of the shares of
Holdings held by all Seller Stockholders otherwise consent) or (ii) create
Indebtedness with a different maturity date than the final maturity of the
Indebtedness being Refinanced, except, that with respect to Indebtedness
under the Credit Agreement, the final maturity date may be extended up to the
seventh anniversary of the Closing Date hereunder.
1.55 "Site" means any of the real properties currently or previously
owned, leased or operated by the Seller relating to the Seller's Business, or
any predecessors of the Seller, or any entities previously owned by the Seller
relating to the Seller's Business, including all soil, subsoil, surface waters
and groundwater thereat.
1.56 "Stockholders" means the Seller Stockholders, the Purchaser
Stockholders and the Additional Stockholders.
1.57 "Subsidiary" means, with respect to any Person, any other Person
in which such Person, directly or indirectly through Subsidiaries or otherwise,
beneficially owns more than 50% of either the equity interests in, or the voting
control of, such other Person, whether or not existing on the date hereof.
1.58 "Tax" or "Taxes" means all federal, state, local or foreign net
or gross income, gross receipts, net proceeds, sales, use, ad valorem, value
added, franchise, bank shares, withholding, payroll, employment, excise,
property, alternative or add-on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatsoever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
1.59 "Taxing Authority" means any Governmental Authority, board,
bureau, body, department or authority of any United States federal, state or
local jurisdiction, or any foreign jurisdiction, having or purporting to
exercise jurisdiction with respect to any Tax.
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1.60 "Tax Returns" means any returns, reports or statements (including
any information returns) required to be filed for purposes of a particular Tax.
1.61 "Transfer" means, directly or indirectly, any sale, transfer,
assignment, grant of a participation in, gift, hypothecation, pledge or other
disposition of any securities or any interests therein or, as the context may
require, to sell, transfer, assign, grant a participation in, give as a gift,
hypothecate, pledge or otherwise dispose of any securities or any interests
therein.
(b) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender; (ii) words using the singular or
plural number also include the plural or singular number, respectively; (iii)
the terms "hereof", "herein", "hereby" and derivative or similar words refer to
this entire Agreement; and (iv) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement. All accounting terms used
herein and not expressly defined herein shall have the meanings given to them
under GAAP.
2. Purchase and Sale of Assets.
2.1 Purchase and Sale. On the terms and subject to the conditions
set forth in this Agreement, at the Closing on the Closing Date (as such terms
are defined in Section 7 hereof), the Seller shall sell, assign, transfer and
deliver to the Purchaser and the Purchaser shall purchase from the Seller all of
the right, title and interest of the Seller in and to the Assets, free and clear
of any Liens, except as stated on Schedule 4.1.9, by the execution and delivery
of the Assignment and Assumptions substantially in the form of Exhibits 2.1A,
2.1B, 2.1C, 2.1D and 2.1E (the "Assignment and Assumptions").
2.2 Assumption of Liabilities. Contemporaneous with the purchase of
the Assets, the Purchaser shall assume and agree to pay and perform the Assumed
Liabilities by the execution and delivery of the Assignment and Assumptions.
2.3 Retained Liabilities. Notwithstanding anything to the contrary
set forth in this Agreement, the Purchaser shall not assume any Liabilities of
the Seller (and the same shall not constitute Assumed Liabilities) whether or
not reflected or reserved for in the Seller's Financial Statements (i) which
arise out of or relate to any tort or breach of contract (including without
limitation, any breach of any Contract) which were not incurred in connection
with the Seller's Business, (ii) to any present or former employee, agent,
director, officer, stockholder, contractor or consultant arising prior to or as
a result of the Closing, or under any Benefit Plan or arrangement, including,
without limitation, any obligation to provide severance pay, (iii) arising under
or pursuant to any Environmental Law which exists or arises out of events
occurring or facts existing prior to the Closing, (iv) except as provided in
Section 11.1 of this Agreement, for Taxes of the Seller, any Affiliate of the
Seller, the Assets or the Seller's Business, or (v) relating to any defect in
construction or design of any product manufactured, designed, licensed or
distributed by the Seller that was shipped prior to the Closing. In addition,
except for the Assumed Liabilities, the Purchaser shall not assume by virtue of
this Agreement or the transactions contemplated hereby, and shall have no
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liability for, any Liabilities of the Seller (including, without limitation,
those related to the Seller's Business) of any kind, character or description
whatsoever, known or unknown, contingent or otherwise, asserted or unasserted,
including without limitation, those liabilities, whenever asserted, arising out
of events occurring or facts existing prior to the Closing (together, with the
Liabilities set forth in (i) through (v) above, the "Retained Liabilities").
The Seller shall discharge in a timely manner or shall make adequate provision
for all of the Retained Liabilities, provided that the Seller shall not be
required to pay or discharge any Retained Liability the payment for which is
provided for by an insurance policy or insurance policies (unless such insurer
shall refuse, consistent with the terms of the policy, payment of any claim) and
the Seller shall have the ability to contest, in good faith, any such claim of
liability asserted in respect thereof by any Person other than the Purchaser and
its Affiliates (other than the Shareholder).
3. Consideration for Transaction; Allocations.
3.1 Cash Consideration. In partial consideration for the
transactions described in this Agreement, at the Closing the Purchaser shall pay
the Seller $5,575,671.00 in cash or by certified funds or wire transfer.
3.2 Additional Payment; Earnout Provisions. In partial
consideration for the transactions described in this Agreement, the Purchaser
shall pay the Seller an additional amount in cash equal to the "Earnout Amount"
and the "Additional Payment" under the following terms and conditions:
3.2.1 The "Earnout Amount" shall be determined as follows: (i) if
the Purchaser's average annual EBITDA during the period from January 1, 1997 to
December 31, 2000 (the "Calculation Period") is $2,000,000.00 or more, the
Earnout Amount shall be $2,000,000.00, (ii) if the Purchaser's average annual
EBITDA during the Calculation Period is $1,500,000.00 or less, the Earnout
Amount shall be zero and (iii) if the Purchaser's average annual EBITDA during
the Calculation Period is less than $2,000,000.00, but greater than
$1,500,000.000, the Earnout Amount shall be proportionately adjusted in
accordance with the following formula: $2,000,000.00 times a fraction the
numerator of which is the Purchaser's average annual EBITDA during the
Calculation Period less $1,500,000.00 and the denominator of which is
$500,000.00. The Earnout Amount payable at the Earnout Payment Date (as defined
below) shall be subject, in all cases, to reduction (x) by the amount of the
Earnout Amount prepaid pursuant to Section 3.2.4 and (y) as provided in Sections
3.2.2 and 3.2.5.
3.2.2 The Earnout Amount shall be paid by the Purchaser in cash or
by certified funds or wire transfer to the Seller on the fifth anniversary of
the Closing Date (the "Earnout Payment Date"); provided, however, the Earnout
Payment Date may be extended by the Purchaser if either the Purchaser is in
default or the payment of the Earnout Amount (or portion thereof) would cause a
default under the terms of any Senior Debt, until such time as the Purchaser is
not in default or the payment of the Earnout Amount (or portion thereof) would
not cause a default under the terms of any Senior Debt, but in no case shall the
Earnout Payment Date be extended to a date later than the
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seventh anniversary of the Closing Date; provided, further, that in the event
that the first proviso of this Section 3.2.2 is not then in effect, if on or
after the end of the Calculation Period the Seller determines in good faith
that it is, or the Shareholder is, liable for additional federal, state or
local income taxes on the constructive receipt of any portion of the Earnout
Amount prior to the payment of that portion of the Earnout Amount, the
Purchaser shall pay to the Seller an amount of the unpaid Earnout Amount
equal to such additional tax liability at the time or times that such
additional tax liability is paid by the Seller or Shareholder to the relevant
Taxing Authorities.
3.2.3 The Purchaser shall make the Additional Payment described in
this Section 3.2.3 until the Earnout Amount has been paid in full or until the
Earnout Payment Date (as defined below), if the Earnout Amount is determined to
be zero pursuant to Section 3.2.1(ii) above. The "Additional Payment" shall be
an amount equal to (i) $2,000,000.00 times six percent (6%) per year for any
fiscal year of the Purchaser in which the Purchaser's annual EBITDA as of the
end of such fiscal year is less than $2,400,000.00; or (ii) an amount equal to
$2,000,000.00 times eight percent (8%) per year for any fiscal year of the
Purchaser in which the Purchaser's annual EBITDA as of the end of such fiscal
year is more than $2,400,000.00. The Additional Payment described in (i) of
this Section 3.2.1 shall be paid to the Seller in cash quarterly, commencing
September 1, 1997 and continuing on the first day of each quarter thereafter.
The Additional Payment described in (ii) of this Section 3.2.1, when applicable,
shall be paid in cash to the Seller, after deducting Additional Payments made to
the Seller during the preceding fiscal year, within thirty (30) Business Days
after receipt of the Purchaser's audited financial statements for such fiscal
year.
3.2.4 The Earnout Amount may be prepaid in whole or in part by SCC
or, subject to the terms and conditions of the Credit Agreement and any other
Senior Indebtedness, the Purchaser within fifteen (15) Business Days after
written notice to the Seller or the Seller's Permitted Payment Transferee from
SCC or the Purchaser in the event that the bid price for shares of Class A
Common Stock, par value $.01 per share, of SCC ("Class A Common Stock") traded
on any of the Pacific Stock Exchange, any other national securities exchange or
the Nasdaq Stock Market exceeds one hundred fifty percent (150%) of the Earnout
Conversion Price Per Share for twenty (20) consecutive trading days.
3.2.5 The Earnout Amount shall be reduced on a dollar for dollar
basis by the aggregate value of "PAAS" raw materials reflected on the
Purchaser's balance sheet as of the Closing Date (after giving effect to the
transactions contemplated by this Agreement) which are also reflected on the
Purchaser's balance sheet as of December 31, 2000.
3.2.6 The Purchaser shall not enter into a definitive agreement to
sell assets having a fair value greater than 80% of the fair value of all of its
assets (other than the sale of inventory in the ordinary course of business) and
SCC and Holdings or both shall not enter into a definitive agreement to sell
capital stock of the Purchaser representing 51% or more of the outstanding
voting securities of the Purchaser (each of the transactions being a
"Transaction") unless, simultaneously with, and as a condition precedent to the
closing of a Transaction (the "Sale Closing Date"), the Purchaser or SCC or
Holdings, as appropriate, shall receive proceeds from such Transaction in an
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aggregate amount as is necessary to extinguish, which proceeds shall also be
used to pay, in the following priority, all Indebtedness due and owing under the
Credit Agreement, all Permitted Purchaser Indebtedness and the Earnout Amount or
the Sale Earnout Amount, as applicable. Simultaneously with the closing of a
Transaction, the Purchaser or Holdings or SCC, as appropriate, shall pay in cash
or by certified funds or wire transfer to the Seller (i) if the Transaction
occurs after December 31, 2000, the Earnout Amount, if owed pursuant to Section
3.2.1 and (ii) if the Transaction occurs before December 31, 2000, an amount
(the "Sale Earnout Amount") calculated as follows: if the Purchaser's average
annual EBITDA during the period from January 1, 1997 through and including the
end of the Purchaser's fiscal year immediately preceding the Sale Closing Date
(the "Sale Calculation Period") is $1,500,000.00 or more, the Sale Earnout
Amount shall be $2,000,000.00, and if the Purchaser's average annual EBITDA
during the Sale Calculation Period is $1,500,000.00 or less, the Sale Earnout
Amount shall be zero. The Sale Earnout Amount and Earnout Amount payable shall
be subject, in all cases, to reduction (x) by the amount of the Earnout Amount
prepaid pursuant to Section 3.2.4 and (y) as provided in Sections 3.2.2 and
3.2.5. Upon payment by the Purchaser or Holdings or SCC, as applicable, to the
Seller of the Earnout Amount or Sale Earnout Amount due, all of the Seller's
rights and the Purchaser's obligations pursuant to this Section 3.2 shall be
terminated and be of no further force or effect. Notwithstanding the foregoing,
unless the holders of the Acquisition Notes shall so consent in writing, the
Seller shall not attempt to enforce or to collect any amounts due or commence
any legal proceedings to enforce or collect any amounts due from the Purchaser
pursuant to this Section 3.2.6.
3.2.7 So long as the Earnout Amount has not been fully paid or
otherwise extinguished, the Purchaser shall make no distributions of cash or
property to SCC or any parent or Affiliate of SCC on account of ownership or
management of the Purchaser, except that payments can be made for (i) the
reasonable value of services or goods furnished to the Purchaser in the ordinary
course of the Purchaser's Business, (ii) distributions in lieu of taxes,
(iii) management charges for supervisory and administrative services not in
excess of the greater of $100,000 or 5% of the Purchaser's EBITDA per each
fiscal year, (iv) principal and interest on subordinated loans made to the
Purchaser in accordance with the terms of the Credit Agreement and (v) an
investment banking fee of $120,000, payable at the Closing.
3.2.8 Notwithstanding anything to the contrary contained herein,
the Purchaser shall not be required, and the Seller shall have no right to
enforce its rights to payment of, any amounts due with respect to or on account
of the Earnout Amount and Sale Earnout Amount under this Section 3.3 except as
are permitted by the Credit Agreement and receipt of such payment shall be
subject to the limitations and restrictions imposed by the Credit Agreement and
the Seller Subordination Agreement.
3.3 Issuance of Stock to the Seller. In partial consideration for
the transactions described in this Agreement, and in reliance on the
representations, warranties and agreements of the Seller contained herein, and
upon the terms and subject to the conditions hereinafter set forth, at the
Closing Holdings shall issue and deliver to the Seller two hundred (200) shares
of Common Stock ( the "Seller's Shares") which, when issued, shall represent
twenty percent (20%) of all of the
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issued and outstanding capital stock of Holdings. The Purchaser, the Seller
and Holdings agree that the value of such shares upon issuance shall be
$1,875 per share.
3.3.1 Each of SCC and the Seller shall be entitled to purchase, at
the issuance price therefore, its proportionate share (on a fully diluted basis)
of any additional shares of capital stock of Holdings issued after the Closing
(a "New Stock Offer"). Holdings shall provide each of SCC and the Seller with a
notice of a New Stock Offer (the "Notice") setting forth (i) each of SCC's and
the Seller's pro rata portion of such new issuance, (ii) the cash consideration
to be paid for each share and (iii) all other material terms of such issuance.
Each of SCC and the Seller shall give a notice of acceptance to participate in
such New Stock Offer to Holdings not later than 20 days after its receipt of the
Notice (the last day of such 20-day period being referred to herein as the
"Acceptance Date"). Within 120 days following the Acceptance Date, Holdings (i)
shall issue, upon its receipt of the requisite consideration therefor, capital
stock to each of SCC and the Seller who timely accepted such New Stock Offer
upon the terms specified in such New Stock Offer and (ii) may issue capital
stock to any other Person or Persons in an amount not to exceed the aggregate
amount thereof offered pursuant to the New Stock Offer (less the aggregate
amount of shares of capital stock issued to SCC and the Seller pursuant to the
foregoing clause (i)) and for a price which equals or exceeds the price per
share specified in the New Stock Offer.
3.3.2 The Seller Stockholders shall have the right to elect to
sell all or a portion of the shares of Holdings owned by each to Holdings by
giving written notice (the "Put Notice") to Holdings specifying the number of
shares to be sold (the "Put Shares") upon the earlier of (i) the sixth
anniversary of the Closing Date; (ii) payment in full of the Acquisition Note;
or (iii) at any time after the Purchaser's annual EBITDA has averaged in excess
of $2,500,000.00 during each of four consecutive fiscal years, commencing after
December 31, 1996 and ending immediately preceding the date of the Put Notice.
3.3.3 Holdings shall have the right to elect to purchase all or a
portion of the shares of Holdings owned by the Seller Stockholders by giving
written notice (the "Call Notice") to the Seller Stockholders specifying the
number of shares to be purchased (the "Call Shares") upon the earlier of the
events described in Sections 3.3.2(i) and (ii).
3.3.4 Holdings shall purchase, within sixty (60) days after
receipt of the Put Notice or delivery of the Call Notice, as appropriate, the
Put Shares or Call Shares, as appropriate, by paying to the appropriate Seller
Stockholders the Fair Market Value of such Put Shares or Call Shares, as
appropriate, by delivery of:
(i) cash or by certified funds or wire transfer in an amount
equal to the Fair Market Value of the Put Shares or the Call Shares, as
appropriate; or
(ii) if Holdings, SCC and the appropriate Seller Stockholders
agree, such number of shares of Class A Common Stock equal to the Fair Market
Value of the Put Shares or the Call Shares, as appropriate, divided by the
greater of $10.00 per share or ninety percent (90%) of the
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average bid price of Class A Common Stock traded on any of the Pacific Stock
Exchange, any other national securities exchange or the Nasdaq Stock Market
for the twenty (20) consecutive trading days prior to the Put Notice or Call
Notice, as appropriate; or
(iii) if Holdings is prohibited by the terms of any
Indebtedness (other than any Indebtedness (except Purchaser Permitted
Indebtedness) between the Purchaser and any Affiliate thereof, unless also
otherwise prohibited by the terms of any Senior Debt) from paying cash for
all or part of the Put Shares or the Call Shares, as appropriate, Holdings
shall issue a promissory note or promissory notes with an aggregate principal
amount equal to the Fair Market Value of all or the part of the Put Shares or
the Call Shares, as appropriate, for which it is prohibited from paying cash
with interest at the annual rate of ten percent (10%) payable quarterly and
to be amortized and paid on the 95th day following the last day of each
fiscal year of the Purchaser from eighty percent (80%) of all cash from the
Purchaser's Business operations from the previous fiscal year, but in no
event in an amount in excess of 20% of Excess Cash Flow (as defined in the
Credit Agreement) after payment of only current liabilities and expenses and
the current payments due on Senior Debt (including mandatory incremental
payments out of Excess Cash Flow (as defined in the Credit Agreement)), the
Additional Payment and the Earnout Amount, until such notes and payments are
paid in full.
In each case against receipt of certificates evidencing the shares to be
purchased and such other documentation as Holdings shall reasonably request.
3.3.5 "Fair Market Value" shall be determined by a formula as
follows: (v) the product of (i) the average EBITDA of the Purchaser for the
period from January 1, 1997 to the end of the most recent fiscal year prior
to the date of the Put Notice or Call Notice, as appropriate, and (ii) five
(5) less (w) long-term Indebtedness (which shall include, without limitation,
Purchaser Permitted Indebtedness and (x) if the Earnout Amount has not yet
been determined pursuant to Section 3.2.1 or otherwise extinguished before
the date of the determination thereof, the maximum amount which could be
payable as the Earnout Amount, subject to reduction by the amount of the
Earnout Amount prepaid pursuant to Section 3.2.4 of the Asset Purchase
Agreement, and (y) if the Earnout Amount has been determined pursuant to
Section 3.2.1 of the Asset Purchase Agreement, the Earnout Amount so
determined, subject to reduction as provided in Sections 3.2.2 and 3.2.5 of
the Asset Purchase Agreement; and the average outstanding balance on the
Seasonal Line of Credit, calculated as of end of each month, for the two
fiscal years prior to the date of the Put Notice or Call Notice, as
appropriate, plus (x) current cash and cash equivalents on hand, divided by
(y) the total number of shares of common stock of the Purchaser times (z) a
fraction the numerator of which is the total number of shares of common stock
of the Purchaser owned by Holdings and the denominator of which is the total
number of shares of common stock of the Purchaser issued and outstanding
(with the number of shares in the case of (y) and (z) being determined on a
fully-diluted basis and as of the date fifteen days prior to the date of the
Put Notice or Call Notice, as appropriate).
3.3.6 Notwithstanding anything to the contrary contained herein,
the Purchaser shall not be required, and the Seller shall have no right to
enforce its rights to payment of, any amounts
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due with respect to or on account of Sections 3.3.2 through 3.3.5 except as
are permitted by the Credit Agreement and receipt of such payment shall be
subject to the limitations and restrictions imposed by the Credit Agreement
and the Seller Subordination Agreement.
3.3.7 In the event of the sale or transfer of shares of Holdings by
SCC or SCC's successors (collectively, the "Transferor") in interest to other
than an Affiliate thereof, (i) the Seller Stockholders shall be entitled to
include in such transaction a portion of the shares of Holdings owned by them
as is equal to the product of (x) the total number of shares owned by each of
them and (y) a fraction the numerator of which is the number of shares of
Holdings proposed to be sold or transferred by the Transferor and the
denominator of which is the total number of shares of Holdings outstanding on
a fully diluted basis (after giving effect to the issuance of shares pursuant
to any outstanding Options) and (ii) the Transferor shall be entitled to
demand that the Seller Stockholders include in such transaction a portion of
the shares of Holdings owned by them as is equal to the product of (x) the
total number of shares owned by each of them and (y) a fraction the numerator
of which is the number of shares of Holdings proposed to be sold or
transferred by the Transferor and the denominator of which is the total
number of shares of Holdings owned by the Transferor, in each case, upon the
same terms and conditions as those offered to the Transferor. The Transferor
shall give written notice of any proposal, including the number of shares to
be sold or transferred by the Transferor and the maximum number of shares
which shall or may, as the case may be, be included by the Seller
Stockholders (collectively, the "Transferred Shares"), for such a transaction
(the "Proposal") to the Seller Stockholders and the Seller Stockholders shall
have thirty (30) days within which to make an election (if other than upon
demand by the Transferor) to participate in such a transaction upon the terms
and conditions specified in this Section 3.3.6. If any Seller Stockholder
does not affirmatively elect to participate or declines the offer to
participate within such thirty-day period, it shall be deemed to have
declined to participate in such transaction.
The Transferor shall have one hundred twenty (120) days, commencing on
(i) the date notice of the Proposal is given, if the Transferor demands that the
Seller Stockholders' shares in Holdings be included, or (ii) the expiration of
the 30 day period during which the Seller Stockholder may elect to include
shares in such sale or transfer, if the Seller Stockholders may elect to include
such shares, in which to sell or otherwise dispose of, on behalf of itself and
the Seller Stockholders, as applicable, shares of Holdings up to the number of
Transferred Shares. If the Transferor has requested the Seller Stockholders to
include shares in such sale or transfer, such sale or transfer shall be
conditioned on Transferor selling or disposing of all of the Transferred Shares.
If the Seller Stockholders may elect to include shares in such sale or transfer,
and Transferred Shares are not sold, the Transferor, at its option, may elect to
sell on behalf of itself and the appropriate Seller Stockholders, such number of
shares as the purchaser will purchase, pro rata among the Transferor and the
appropriate Seller Stockholders, as nearly as practicable. The material terms
of any sale, including, without limitation, price and form of consideration,
shall be as set forth in the Proposal.
Promptly after the consummation of the sale or other disposition of
any of the Transferred Shares in accordance with this Section 3.3.6, the
Transferor shall notify the appropriate Seller Stockholders thereof, and the
Transferor shall cause the purchaser of the Transferred Shares to pay
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to the Transferor and each of the appropriate Seller Stockholders their
respective portions of the sales price of the Transferred Shares sold or
otherwise disposed of in accordance with this Section 3.3.6.
There shall be no liability on the part of the Transferor to any
Seller Stockholder in the event that the proposed sale pursuant to this
Section 3.3.6 is not consummated for whatever reason. Whether a sale of
Transferred Shares is effected pursuant to this Section 3.3.6 by the
Transferor is in the sole and absolute discretion of the Transferor.
3.3.8 Shares of capital stock of Holdings owned by the Seller
Stockholders may only be Transferred to a Permitted Transferee.
3.3.9 Whenever Holdings agrees to purchase or any Stockholder
agrees to sell shares of Common Stock of Holdings pursuant to this Agreement,
each Stockholder or the personal representative of any decedent Stockholder
shall do all things, including delivery of stock certificates and stock
powers, and execute and deliver all papers as may be reasonably necessary to
consummate such purchase.
3.3.10 If any Transfer is made or attempted contrary to the
provisions of this Agreement, Holdings shall have the option to purchase the
Common Stock so Transferred or attempted to be Transferred. Such option
shall be exercisable within one hundred eighty (180) days after Holdings
receives actual notice of such Transfer or attempted Transfer by giving
written notice to the owner thereof or his transferees either before or after
the Transfer.
3.4 Assumption of Assumed Liabilities. In partial consideration
for the transactions described in this Agreement, at the Closing the
Purchaser shall assume the Assumed Liabilities by the execution and delivery
of the Assignment and Assumptions.
3.5 Allocation of Purchase Price for Assets.
3.5.1 The purchase price for the Assets (including for this purpose
the Assumed Liabilities) shall be allocated among the Assets in accordance
with the allocation formula set forth in Schedule 3.5 attached hereto (the
"Allocation Statement") and shall be based on the Closing Date financial
statements. The Purchaser shall deliver a copy of the Allocation Statement
to the Seller reasonably promptly after its receipt thereof.
3.5.2 Each of the Seller and the Purchaser shall prepare and file
on a timely basis Internal Revenue Service Form 8594 setting forth an
allocation of the purchase price, pursuant to Section 1060 of the Code, in a
manner entirely consistent with the Allocation Statement, and shall act in
accordance with such Allocation Statement in the filing of all Tax Returns
and in the course of any Tax audit, Tax review or Tax litigation relating
thereto. Neither the Purchaser nor the Seller will assert that the allocation
set forth in the Allocation Statement was not separately bargained for at
arm's length and in good faith.
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3.5.3 Not later than 10 days prior to the filing of its respective
Form 8594 relating to this transaction, each party shall deliver to the other
party a copy of its Form 8594.
3.6 Employment Agreements. At the Closing, the Purchaser and
each of Kea Bardeen, John Bardeen and Gay Burke shall enter into employment
agreements substantially in the forms attached hereto as Exhibits 3.6A, 3.6B
and 3.6C, respectively (hereinafter collectively referred to as the
"Employment Agreements"), pursuant to which such persons shall agree to
render services to the Purchaser and shall agree not to compete with the
business of the Purchaser for the period stated in each respective Employment
Agreement.
3.7 Lease of Premises. At the Closing, the Purchaser shall enter
into a lease agreement with Bardeen Investment Properties, L.L.C. in the form
attached hereto as Exhibit 3.7 (the "Premises Lease Agreement").
3.8 Lease of Equipment. At the Closing, the Purchaser shall enter
into a lease agreement with Bardeen Educational Trust in the form attached
hereto as Exhibit 3.8 (the "Equipment Lease Agreement") for the lease of certain
equipment.
4. Representations and Warranties.
4.1 Representations and Warranties of the Seller. The Seller
represents and warrants to the Purchaser as of the date hereof, and shall
represent to the Purchaser as of the Closing on the Closing Date, that:
4.1.1 Ownership of the Seller's Stock. The Shareholder is the sole
record and beneficial owner, free and clear of all Liens, of 1,000 shares of
common stock (the "Stock"), constituting all of the outstanding shares of the
capital stock of the Seller, and is the only director of the Seller. The
Stock is duly authorized, validly issued and outstanding and fully paid and
nonassessable and the issuance thereof did not violate any preemptive rights.
None of the shares of capital stock of the Seller is subject to any Option or
other right to purchase. The Shareholder has the absolute and unconditional
right, power and authority to cause the Seller to sell, assign, transfer and
deliver the Assets to the Purchaser in accordance with the terms of this
Agreement and to consummate the transactions contemplated hereby.
4.1.2 Due Organization; Good Standing, Authority of the Seller. The
Seller is a corporation duly organized, validly existing and in good standing
under the laws of the State of Colorado. The Seller has full right, power
and authority to own, lease and operate the Assets and to carry on the
Seller's Business. The Seller is qualified to do business in each
jurisdiction listed in Schedule 4.1.2, being all the jurisdictions in which
the properties and assets owned by it or the nature of the Seller's Business
conducted by it make such qualification legally necessary. The Seller is not
in breach or violation of, and the execution, delivery and performance of
this Agreement will not
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result in a breach or violation of, any of the provisions of the Seller's
articles of incorporation (the "Articles") or bylaws (the "Bylaws").
4.1.3 Authorization and Validity of Agreements. The Seller has
full corporate right, power and authority to enter into this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated by this Agreement. The execution, delivery and performance of
this Agreement by the Seller and the performance by the Seller of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate and shareholder action. This Agreement has been duly
executed and delivered by the Seller and is the legal, valid and binding
obligation of the Seller enforceable against the Seller in accordance with
its terms.
4.1.4 Agreement Not in Conflict with Other Instruments; Required
Approvals Obtained. The execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not (a) violate or require any consent or approval of, or
filing under, (i) any Law or any Governmental Authority, or (ii) any
judgment, injunction, order, writ or decree of any court, arbitrator, or
Governmental Authority by which the Seller, any of the Assets or the
Shareholder are bound; (b) conflict with, require any consent, approval, or
filing under, result in the breach or termination of any provision of,
constitute a default under, accelerate the maturity of, or result in the
creation of any claim, security interest, Lien, charge, or encumbrance upon
any of the Assets pursuant to, (i) the Seller's Articles or Bylaws, (ii) any
Indebtedness, Contract, License or other instrument, document or agreement to
which the Seller or the Shareholder is a party or by which the Seller, any of
the Assets or the Shareholder is bound, or (iii) any judgment, injunction,
order, writ or decree of any court, arbitrator, or Governmental Authority by
which the Seller, any of the Assets or the Shareholder is bound. No consent,
approval or action of, filing with or notice to any Government or
Governmental Authority on the part of the Seller or the Shareholder is
required in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby.
4.1.5 Conduct of Business in Compliance with Regulatory and
Contractual Requirements. The Seller has conducted and is conducting the
Seller's Business in compliance, in all material respects, with all applicable
Laws. The Seller's Business and the use, operation and maintenance of the Assets
(i) are in compliance, in all material respects, with all Laws applicable with
respect thereto, and (ii) are in compliance, in all material respects, with all
restrictions, covenants, agreements, Contracts, commitments, terms of
Indebtedness to which the Seller is a party, understandings and arrangements
applicable with respect thereto.
4.1.6 Legal Proceedings. Except as listed on Schedule 4.1.6,
there is no order, action, suit, proceeding, claim or arbitration, or any
investigation by or before any person or entity, including, but not limited to,
any Governmental Authority, (i) pending, issued or outstanding with respect to,
or, to the knowledge of the Seller, threatened against or relating to the
Seller, the Seller's Business or any of the Assets, or (ii) challenging the
Seller's or the Shareholder's right to execute, deliver, perform under or
consummate the transactions contemplated by this Agreement or (iii)
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asserting any right with respect to any of transactions contemplated by this
Agreement or the Assets, and, in each such case, to the knowledge of the
Seller, there is no basis for any such action, suit, proceeding, claim,
arbitration or investigation.
4.1.7 Financial Statements. Attached hereto as Exhibit 4.1.7 are
copies of the Seller's Financial Statements at and for the years ended January
31, 1995, 1996 and 1997, copies of which have previously been provided by the
Seller to the Purchaser. The Seller's Financial Statements are in accordance
with the Books and Records of the Seller, are true, correct and complete and
accurately present the Seller's financial position as of the dates set forth
therein and the results of the Seller's operations for the periods indicated;
all such Seller's Financial Statements are in conformity with GAAP, as applied
on a consistent basis during each period and on a basis consistent with that of
prior periods. Except as reflected or reserved against in the Seller's
Financial Statement dated January 31, 1997, there will be no contingent
Liabilities against, relating to or affecting the Seller's Business or any of
the Assets which are required by GAAP (applied on a consistent basis with the
methods, principles, practices and policies used in preparing the Seller's
Financial Statements) to be reflected or reserved against in a balance sheet of
the Seller's Business as of that date.
4.1.8 Accounts Receivable. The accounts receivable, including
all accounts receivable reflected on the Seller's Financial Statements and all
accounts receivable arising after the date of the most recent Seller's Financial
Statements are bona fide accounts receivable, arising from bona fide
transactions in the ordinary course of the Seller's Business, and represent
accounts validly due for goods sold, and are collectible in full, net of
reserves. The accounts receivable and the reserves for doubtful accounts have
been accounted for and valued in accordance with GAAP on a basis consistent with
the Seller's past practices. The reserves accurately reflect all claims,
offsets and counterclaims asserted against the accounts receivable.
4.1.9 Assets. The Seller has sole and exclusive, good and
marketable title to all of the Assets free and clear of any and all pledges,
claims, threats, Liens, restrictions, agreements, leases, security interests,
charges and encumbrances, except as listed on Schedule 4.1.9. All Assets
constituting tangible personal property are in good working order and
condition, wear and tear excepted.
4.1.10 Intellectual Property Rights. Schedule 4.1.10 lists all
patent and patent rights, patent applications, trademarks and trademark
rights, trademark applications, trade names and trade name rights, licenses,
assignments, custom-developed software, copyrights and copyrights rights,
copyright applications and Licenses and assignments for published patterns
(collectively, the "Listed Intellectual Property") used in the conduct of the
Seller's Business, other than licenses or assignments relating to unpublished
patterns submitted to the Seller in its annual pumpkin design contest.
Except as disclosed in Schedule 4.1.10, (a) the Seller has all right, title
and interests in, or the exclusive right to use, the Intellectual Property,
(b) there are no restrictions on the direct or indirect transfer of the
Intellectual Property or any interest therein that would interfere with the
transfer of the Intellectual Property to the Purchaser, (c) to the extent
they are required to protect the
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Intellectual Property, all registrations, on behalf of the Seller with and
applications to Governmental Authorities in respect of such Intellectual
Property are valid and in full force and effect and all other actions
required by the Seller to maintain their validity or effectiveness, have been
taken up to the date of the Closing, (d) the Seller has paid all Taxes or
maintenance fees due and payable as of the Closing with respect to the
Intellectual Property, (e) with respect to the Listed Intellectual Property,
the Seller has delivered to the Purchaser, prior to the execution of this
Agreement, (i) samples of all of the Seller's current products which show the
use of the Listed Intellectual Property, (ii) copies of the listed patents,
patent applications, trademarks, trademark applications, copyright
registrations, published patterns and any assignment or licensing documents
related thereto, (iii) settlement documents from any litigation relating to
the Listed Intellectual Property, (iv) descriptions of the Seller's custom
software rights, and (v) any and all licensing documents related to the
foregoing, (f) the Seller has made available to the Purchaser, prior to the
execution of this Agreement, documentation with respect to any invention,
process, design, computer program or other know-how or trade secret included
in the Intellectual Property, which documentation with respect to any
material invention, process, design, computer program or other know-how or
trade secret is, to the knowledge of the Seller, accurate in all material
respects and reasonably sufficient in detail and content to identify and
explain such invention, process, design, computer program or other know-how
or trade secret, (g) the Seller has taken reasonable security measures to
protect the secrecy, confidentiality and value of its trade secrets, (h) the
Seller has not granted any license to use such Intellectual Property, (i) the
Seller is not, nor has received any notice that it is, in default under any
license to use any such Intellectual Property, and (j) the Seller has not
received notice that it is infringing any intellectual property of any other
Person in connection with the conduct of the Seller's Business, and no claim
is pending, or to the knowledge of the Seller, has been made that has not
been resolved, and (k) the Seller has not received notice that it is, and to
the knowledge of the Seller, it is not now and has not been infringing any
intellectual property rights of any other Person in connection with the
conduct of the Seller's Business.
4.1.11 Inventory. All of the inventory was valued in the
Seller's Financial Statements on the basis of accounting principles
historically utilized by the Seller and consistently applied. All items
included in the inventories are of a quality and quantity usable and salable
in the ordinary course of business, except for inventory listed on Schedule
4.1.11 and reserves for obsolete and slow-moving items as reflected on the
Seller's Financial Statements. All of the inventory is the property of the
Seller except for sales made in the ordinary course of the Seller's Business
since the date of the Seller's Financial Statements. No items included in
the inventories have been pledged as collateral or are held by the Seller on
consignment from others, except as listed on Schedule 4.1.11.
4.1.12 Employment Matters.
4.1.12.1 None of the Seller's employees are covered by a collective
bargaining agreement or are represented by a union or other labor organization,
and no petition for representation concerning any of the Seller's employees has
been filed with the National Labor Relations Board; the Seller is not aware of
any union or other labor organizational activity and has
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no reason to believe that any such activity is being contemplated. The Seller
has not engaged in any unfair labor practice.
4.1.12.2 The Seller is not in violation of applicable equal
employment opportunity wage and hour or any other Laws relating to
employment; there are no active, pending, or threatened administrative or
judicial proceedings under any Laws; there are no claims, charges, and
employment related suits or controversies which have occurred within the last
ten (10) years or are presently pending or threatened under any employment
related Laws; and the Seller is not subject to any judgments, decrees,
conciliation agreements and settlement agreements concerning employment
related matters.
4.1.12.3 Except for agreements with Gay Burke which will terminate
before or at the Closing of the transactions contemplated hereby, the Seller has
not entered into any employment agreements with any of its employees, and all
employees may be terminated at will; there is no contractual obligation or
special termination or severance arrangement in respect of any of the Seller's
employees; and there is no provision of any agreement or arrangement with any of
the Seller's employees, or any other legal or contractual requirement, which
would obligate the Seller to require the Purchaser of the Assets to employ any
of the Seller's employees.
4.1.12.4 The Seller has maintained in effect all insurance policies
and other employee benefits covering any employee claims incurred and will
maintain the same through the Closing Date.
4.1.12.5 Schedule 4.1.12.5 contains a list of the name of each
employee of the Seller, together with such person's position or function, annual
base salary or wages and any incentives or bonus arrangements with respect to
such person.
4.1.13 Absence of Certain Changes or Events. Since January 31,
1997, no event, circumstance or development has occurred or arisen which relates
to or could relate to or affects or could affect the business, operations or
conditions of the Assets, the Seller or the Seller's Business and which,
individually or taken together, could be reasonably expected to result in a
material adverse change in the Seller's Business or the Assets. Without
limiting the foregoing, since January 31, 1997, the Seller has not:
4.1.13.1 Incurred any Indebtedness, obligation, duty or liability
(contingent or otherwise) or acted as a guarantor or surety of any debt, except
normal trade or business obligations incurred in the ordinary course of the
Seller's Business.
4.1.13.2 Subjected to pledge, Lien, charge, claim, security interest,
agreement, deed of trust or encumbrance any of the Assets.
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4.1.13.3 Sold, assigned, transferred, leased, disposed of, or agreed
to sell, assign, transfer, lease, or dispose of, any of the Assets, except
inventory sold and accounts receivable assigned for collection in the ordinary
course of the Seller's Business.
4.1.13.4 Canceled, discharged (in full or in part) or compromised any
of the accounts receivable, debts due to or claims of the Seller, or waived or
released any of its rights against account debtors or other third parties,
except accounts receivable assigned for collection in the ordinary course of the
Seller's Business.
4.1.13.5 Made any single capital expenditure in excess of Ten
Thousand Dollars ($10,000.00) or entered into any contract, agreement,
arrangement, understanding or commitment therefor; or acquired or leased any
assets or property of any third person or party other than in the ordinary
course of the Seller's Business.
4.1.13.6 Suffered any casualty loss, destruction or damage, whether
or not such loss or damage is or was covered by insurance.
4.1.13.7 Suffered any adverse change in the Seller's operations,
earnings, assets, liabilities, or the Seller's Business (financial or
otherwise).
4.1.13.8 Changed (i) the nature or manner of operation of the
Seller's Business, (ii) any pricing, investment, accounting, financial
reporting, inventory, credit, allowance or Tax practice or policy of the Seller,
(iii) any method of calculating any bad debt, contingency or other reserve of
the Seller's Business or the Seller for accounting, financial reporting or Tax
purposes or (iv) the fiscal year of the Seller.
4.1.13.9 Other than in the ordinary course of the Seller's Business,
made any payment or entered into any transaction, Contract, agreement, lease,
arrangement, understanding or commitment.
4.1.13.10 Failed to pay any Indebtedness or other obligation,
including any taxes and other charges, when due.
4.1.13.11 Repurchased, redeemed or retired shares of its capital stock
or any debt securities (as defined in the Securities Act) ("Securities"), or
issued or sold any Securities or declared, set aside or paid any dividend or
other distribution in respect of any Securities or granted or agreed to grant
any Option, warrant or other right to subscribe for or to purchase any Security.
4.1.13.12 Dissolved, liquidated, or wound up or carried out any
partial liquidation, distribution or other transaction in the nature of a
partial liquidation or distribution; or effected any recapitalization or
reorganization.
4.1.13.13 Entered into any merger or share exchange with any other
person or entity.
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4.1.13.14 Organized any subsidiary or acquired, directly or
indirectly, any interest in any other person or entity.
4.1.13.15 Funded or advanced money, credit or property to or for the
benefit of any other person or entity.
4.1.13.16 (i) Increased the salary, wages or other compensation of any
officer, employee or consultant of the Seller whose annual salary is, or after
giving effect to such change would be, $40,000 or more; (ii) established or
modified any (A) targets, goals or similar provisions under any Benefit Plan, or
other employee compensation arrangement or (B) salary ranges, increase
guidelines or similar provisions in respect of any Benefit Plan, or other
employee compensation arrangement; or (iii) adopted, entered into, amended,
modified or terminated (partial or complete) any Benefit Plan.
4.1.13.17 Wrote-off or wrote down or determined to write-off or
write-down any of the Assets, except for the "PAAS" product line, and as
indicated in Schedule 4.1.13.17.
4.1.13.18 Entered into, amended, modified, terminated (partial or
complete) or granted a waiver under or gave any consent with respect to (i) any
Contract which is required (or had it been in effect on the date hereof would
have been required) to be disclosed in Schedule 4.1.19, (ii) any License held by
the Seller or (iii) any Intellectual Property.
4.1.13.19 Entered into any transaction with any stockholder, officer,
director, Affiliate or any Affiliate of any such stockholder, officer or
director.
4.1.13.20 Lost any major customer or had any material order canceled
or knows of any threatened cancellation of any material order.
4.1.13.21 Entered into an agreement to do or engage in any of the
foregoing, including without limitation with respect to any Business Combination
not otherwise restricted by the foregoing subsection.
4.1.13.22 Entered into any other transaction involving or development
affecting the Seller or the Seller's Business outside the ordinary course of
business.
4.1.14 Adverse Conditions. The Seller has no knowledge of any
past or present condition, state of facts or circumstance which has materially
affected or which might materially affect adversely the Seller's Business or
prevent the Purchaser from carrying on the Seller's Business.
4.1.15 Acquisition for Investment. The Common Stock is being, and
the Class A Common Stock issuable in connection with the purchase of the Put
Shares or the Call Shares, if any,
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will be, acquired by the Seller for its own account for the purpose of
investment and not with a view to the resale or distribution of all or any
part of such securities in violation of the Securities Act, it being
understood that the right to dispose of such securities shall be entirely
within the discretion of the Seller. The Seller represents and warrants that
it is an "accredited investor" as such term is defined in Rule 501 (a) of
Regulation D of the Act. The Seller understands that the securities to be
issued to it have not been registered under the Securities Act or any state
securities laws by reason of exemptions from the registration requirements of
the Securities Act and such state securities laws which depend upon, among
other things, the accuracy of the representations set forth in this Section
4.1.15. Such securities shall also be subject to the transfer restrictions
contained in this Agreement. The Seller understands that (i) the securities
to be issued to it hereunder must be held indefinitely, and the Seller must
continue to bear the economic risk of its investment in such securities,
until and unless the offer and sale of such securities are subsequently
registered under the Securities Act and all applicable state securities laws
or an exemption from such registration is available, (ii) there is no
established market for the securities and it is not anticipated that there
will be any such market for the securities in the foreseeable future and
(iii) any offer or sale without registration will require an exemption under
the Securities Act.
4.1.16 Entire Business. The sale and transfer of the Assets by
the Seller to the Purchaser pursuant to this Agreement will effectively convey
to the Purchaser, free and clear of all Liens, all the assets and properties
used to conduct the Seller's Business as currently conducted.
4.1.17 Benefit Plans; ERISA. All Benefit Plans are listed in
Schedule 4.1.17, and copies of all documentation relating to such Benefit Plans
have been delivered or made available to the Purchaser (including, to the extent
applicable, copies of written Benefit Plans, written descriptions of oral
Benefit Plans, summary plan descriptions, trust agreements, the three most
recent annual returns, employee communications, and Internal Revenue Service
determination letters). Except as disclosed in Schedule 4.1.17 and to the
extent the Seller's Benefit Plans are required by law to comply with the
following:
4.1.17.1 Each Benefit Plan, and the administration thereof, complies,
and has at all times complied, in all material respects with the requirements of
all applicable Laws, including ERISA and the Code, and each Benefit Plan
intended to qualify under section 401(a) of the Code has at all times since its
adoption been so qualified, and each trust which forms a part of any such plan
has at all times since its adoption been tax-exempt under section 501(a) of the
Code.
4.1.17.2 No Benefit Plan has incurred any "accumulated funding
deficiency" within the meaning of section 302 of ERISA or section 412 of the
Code.
4.1.17.3 No direct, contingent or secondary liability has been
incurred or is expected to be incurred by the Seller under Title IV of ERISA to
any party with respect to any Benefit Plan, or with respect to any other Plan
presently or heretofore maintained or contributed to by any ERISA Affiliate.
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4.1.17.4 The "amount of unfunded benefit liabilities" within the
meaning of section 4001(a)(18) of ERISA does not exceed zero with respect to any
Benefit Plan subject to Title IV of ERISA.
4.1.17.5 No "reportable event" (within the meaning of section 4043 of
ERISA) has occurred with respect to any Benefit Plan or any Plan maintained by
an ERISA Affiliate since the effective date of said section 4043.
4.1.17.6 No Benefit Plan is a multiemployer plan within the meaning
of section 3(37) of ERISA.
4.1.17.7 Neither the Seller nor any ERISA Affiliate has incurred any
liability for any tax imposed under sections 4971 through 4980B of the Code or
civil liability under section 502(i) or (l) of ERISA.
4.1.17.8 No benefit under any Benefit Plan, including, without
limitation, any severance or parachute payment plan or agreement, will be
established or become accelerated, vested or payable by reason of any
transaction contemplated under this Agreement.
4.1.17.9 No Tax has been incurred under section 511 of the Code with
respect to any Benefit Plan (or trust or other funding vehicle pursuant
thereto).
4.1.17.10 No Benefit Plan provides health or death benefit coverage
beyond the termination of an employee's employment, except as required by Part 6
of Subtitle B of Title I of ERISA or section 4980B of the Code or Laws requiring
continuation of benefits coverage following termination of employment.
4.1.17.11 No Actions or Proceedings (excluding claims for benefits
incurred in the ordinary course of plan activities) have been brought or, to the
knowledge of the Seller, threatened against or with respect to any Benefit Plan
and there are no facts or circumstances known to the Seller that could
reasonably be expected to give rise to any such suit, action or other
litigation.
4.1.17.12 All contributions to Benefit Plans that were required to be
made under such Benefit Plans have been made, and all benefits accrued under any
unfunded Benefit Plan have been paid, accrued or otherwise adequately reserved
in accordance with GAAP, all of which accruals under unfunded Benefit Plans are
as disclosed in Schedule 4.1.17, and the Seller has performed all material
obligations required to be performed under all Benefit Plans.
4.1.18 Real Property. Schedule 4.1.18 lists all real property
leased or subleased to or by the Seller and all premises used in the Seller's
Business under arrangements without leases. The Seller has delivered to the
Purchaser correct and complete copies of the leases and subleases listed in
Schedule 4.1.18.
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4.1.19 Contracts.
4.1.19.1 Schedule 4.1.19 (with subparagraph references corresponding
to those set forth below) contains a true and correct list of each of the
following Contracts or other arrangements (true and correct copies or, if no
such copies are available, reasonably complete and accurate written descriptions
of which, together with all amendments, modifications and supplements thereto
and all waivers of any terms thereof, have been delivered to the Purchaser prior
to the execution of this Agreement), with respect to the Seller's Business:
(i) (x) all Contracts (excluding Benefit Plans) involving,
individually, any payment obligation on the part of the Seller of an amount
exceeding $25,000 and providing for a commitment of employment or consultation
services for a specified or unspecified term to any employee; and (y) any
written or unwritten representations, commitments, promises, communications or
courses of conduct (excluding Benefit Plans or not embodied in a Contract)
involving an obligation relating to the Seller's Business or the Seller to make
payments in any year, other than salary or incentive compensation payments in
the ordinary course of business, to any employee exceeding $25,000;
(ii) all Contracts with any Person containing any provision or
covenant that directly or indirectly prohibits or limits (x) the ability of the
Seller to engage in any business activity the same as or similar to, or to
compete with any Person engaged in any business activity the same as or similar
to those of, the Seller's Business or (y) the ability of any Person to compete
with the Seller or to engage in any business activity the same as or similar to
those of the Seller's Business;
(iii) all partnership, joint venture, shareholders' or other
similar Contracts with any Person in connection with the Seller's Business;
(iv) all Contracts relating to (x) the future disposition or
acquisition of any Assets, other than dispositions or acquisitions in the
ordinary course of business and in accordance with the terms of this
Agreement, and (y) any Business Combination relating to the Assets or the
Seller;
(v) all Contracts relating to Indebtedness in excess of $25,000
or any guarantees of Indebtedness or other Liabilities of the Seller to any
third Person;
(vi) all other Contracts with respect to the Seller's Business or
the Assets that involve the payment or potential payment, pursuant to the terms
of any such Contract, of more than $15,000;
(vii) all collective bargaining or similar labor contracts;
(viii) all Contracts relating to Intellectual Property;
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(ix) a list of all principal current customers and suppliers; and
(x) all Contracts relating to tangible personal property of the
Seller or used in the Seller's Business.
4.1.19.2 Each Contract required to be disclosed in Schedule 4.1.19 is
in full force and effect and constitutes a legal, valid and binding agreement,
enforceable in accordance with its terms, of the Seller and, to the knowledge of
the Seller, each other party thereto, except, with respect to such other
parties, as such enforceability may be limited by general principles of equity,
bankruptcy, insolvency, moratorium and similar laws relating to creditors rights
generally; and neither the Seller, nor, to the knowledge of the Seller, any
other party to such Contract is, or has received notice that it is, in violation
or breach of or default under any such Contract (or with notice or lapse of time
or both, would be in violation or breach of or default under any such Contract).
4.1.20 Licenses. Schedule 4.1.20 contains a true and complete
list of all material Licenses (other than those referred to in Schedule 4.1.10)
currently used or held for use in the Seller's Business, setting forth the
function and the expiration and renewal date of each. Prior to the execution of
this Agreement, the Seller has delivered to the Purchaser true and complete
copies of all such Licenses. Except as disclosed in Schedule 4.1.20:
4.1.20.1 The Seller owns or validly holds all Licenses that are
material to the Seller's Business.
4.1.20.2 Each License is valid, binding and in full force and effect.
4.1.20.3 The Seller is not, and has not received any notice that it
is, in default (or with the giving of notice or lapse of time or both, would be
in default) under any License.
4.1.21 Insurance. Schedule 4.1.21 lists the current insurance
policies of the Seller. Each such insurance policy is in full force and effect,
no premiums due thereunder have not been paid and the Seller has not received
any notice of cancellation or termination in respect of any such policy or is in
default thereunder. The Seller has not received notice that any insurer under
any insurance policy identified in Schedule 4.1.21 is denying liability with
respect to a claim thereunder or defending under a reservation of rights clause.
4.1.22 Affiliate Transactions. Schedule 4.1.22 describes all
Contracts or arrangements and Indebtedness between the Seller, on the one hand,
and any current or former officer, director, stockholder, employee or any
Affiliate thereof, on the other.
4.1.23 Environmental Matters. The Seller is in compliance with
all the material terms, conditions and provisions of all applicable (i)
Environmental Permits and (ii) Environmental Laws. Neither the Seller nor, to
the knowledge of the Seller, any prior owner or lessee of any Site, has handled
any Hazardous Material on any Site, except in compliance with applicable
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Environmental Laws. No Releases of a Hazardous Material have occurred at,
from, to, in, under or on any Site and there are no Hazardous Materials
present in, on, about, at, under or migrating to any Site that could give
rise to a material Environmental Claim against the Seller or the Purchaser.
There are not currently and, to the knowledge of the Seller, there were not
any formerly, underground storage tanks, active or abandoned, or asbestos
containing material present at any Site. The Seller has not transported or
arranged for the treatment, storage, handling, disposal or transportation of
any Hazardous Material to or any location (other than a Site) so as to give
rise to any liability or Environmental Claim against or affecting the
Seller's Business, any of the Assets or the Seller.
4.1.24 No Guarantees. None of the Liabilities of the Seller's
Business or of the Seller incurred in connection with the conduct of the
Seller's Business is guaranteed by or subject to a similar contingent obligation
of any other Person, nor has the Seller guaranteed or become subject to a
similar contingent obligation in respect of the Liabilities of any customer,
supplier or other Person to whom it sells goods or provides services in the
conduct of the Seller's Business or with whom it otherwise has significant
business relationships in the conduct of the Seller's Business.
4.1.25 Taxes.
4.1.25.1 Except as disclosed in Schedule 4.1.25, all Tax Returns
required to have been filed by or with respect to the Seller in respect of the
Seller's Business or the Assets have been duly filed, and each such Tax Return
correctly and completely reflects the Tax liability and all other information
required to be reported thereon. All Taxes due and payable by the Seller in
respect of the Seller's Business or the Assets, whether or not shown on any Tax
Return, have been timely paid.
4.1.25.2 The Seller, in respect of the Seller's Business or the
Assets, is not a party to any agreement extending the time within which to file
any Tax Return. No claim relating to the Seller in respect of the Seller's
Business or the Assets by any Taxing Authority in a jurisdiction in which the
Seller does not file Tax Returns is currently pending or, to the knowledge of
the Seller, threatened to the effect that the Seller is or may be subject to
taxation by that jurisdiction.
4.1.25.3 All monies required to be withheld by the Seller in respect
of the Seller's Business or the Assets and from employees, independent
contractors, creditors or other third parties for Taxes (including without
limitation for income, wages, Social Security or unemployment insurance Taxes or
any similar Tax under state, local or foreign law) have been collected or
withheld, and duly and timely paid to the appropriate Taxing Authority.
4.1.25.4 There is no pending dispute or claim concerning any Tax
liabilities of the Seller in respect of the Seller's Business or the Assets
either (i) claimed or raised by any Taxing Authority or (ii) otherwise known to
the Seller. Schedule 4.1.25 indicates those Tax Returns, if any, that have been
audited, and indicates those Tax Returns that currently are the subject of
audit. The Seller has delivered to the Purchaser complete and correct copies of
all federal, state, local and foreign income Tax Returns filed by, and all Tax
examination reports and statements of deficiencies assessed against or agreed to
by, the Seller since January 1, 1992.
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4.1.25.5 The Seller, in respect of the Seller's Business or the
Assets, has not waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to any Tax assessment or
deficiency.
4.1.25.6 Except as disclosed in Schedule 4.1.25, the Seller, in
respect of the Seller's Business or the Assets, has not received any written
ruling related to Taxes or entered into any written and legally binding
agreement with a Taxing Authority relating to Taxes.
4.1.25.7 The Seller does not have any liability for Taxes of any
Person (i) under Section 1.1502-6 of the Treasury regulations (or any similar
provision of state, local or foreign law), (ii) as a transferee or successor,
(iii) by Contract or (iv) otherwise.
4.1.25.8 None of the Assets constitutes tax-exempt bond financed
property or tax-exempt use property, within the meaning of Section 168 of the
Code.
4.1.25.9 The Seller, with respect to the Seller's Business or the
Assets, is not a "consenting corporation" within the meaning of Section
341(f)(1) of the Code, or comparable provisions of any state statutes, and
none of the Assets is subject to an election under Section 341(f) of the Code
or comparable provisions of any state statutes.
4.1.25.10 The Seller, with respect to the Seller's Business or the
Assets, has not participated in or cooperated with an international boycott
within the meaning of Section 999 of the Code.
4.1.26 Brokers. The Seller represents and warrants to the
Purchaser that the services of a broker, finder, agent or financial advisor,
other than J.D. Ford & Company Ltd. LLP, a Colorado corporation ("J.D.
Ford"), have not been used by it in connection with any of the transactions
contemplated by this Agreement and that no broker's, finder's or financial
advisor's fee will become payable by the Purchaser or the Purchaser's
Business by reason of acts or omissions of the Seller or the Shareholder as a
result of the execution of this Agreement or the consummation of the
transactions contemplated hereby, other than to J.D. Ford. The Seller will
hold harmless and indemnify the Purchaser and its Affiliates (other than the
Seller and the Shareholder) and the officers, directors, employees and
shareholders of the foregoing from and against any claim for broker's,
finder's or financial advisor's fees, including costs or expenses incurred in
connection with the defense of any suit claiming such fees, or in any other
manner pertaining to claims for such fees, which may become payable by reason
of the acts or omissions of the Seller or the Shareholder.
4.1.27 Warranties. Schedule 4.1.27 sets forth (i) copies of all
written warranties, guarantees and written warranty policies of the Seller in
respect of the Assets which are currently in effect or may hereinafter become
effective (the "Warranty Obligations"), and the duration of each such
Warranty Obligation, (ii) each of the Warranty Obligations which is subject
to any dispute or, to the knowledge of the Seller, threatened dispute and
(iii) the experience of the Seller during the
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past five years with respect to warranties, guarantees and warranty policies
of or relating to the Assets. Except as set forth in Schedule 4.1.27, there
have not been any material deviations from the Warranty Obligations, and
salesmen, employees and agents of the Seller are not authorized to undertake
obligations to any customer or other third parties in excess of such Warranty
Obligations. All products manufactured, designed, licensed, leased, rented
or sold by the Seller or any respective predecessor (i) are and were free
from defects in design, except as described in Schedule 4.1.27(a), (ii) to
the best of Seller's knowledge, are and were free from defects in
construction (except for such defects as are immaterial to each specific
product and immaterial in the aggregate, to the business and operations of
the Seller) and (iii) satisfy any and all contract or other specifications
related thereto, in each case, in all material respects.
4.1.28 Investment Assets. The Seller does not hold or own
(beneficially, constructively or otherwise) any Investment Assets other than
as reflected in the Seller's Financial Statements, and except for the right
to receive shares of stock in House of Fabrics, Inc. through its
reorganization plan.
4.1.29 Disclosure. All material facts regarding the Seller,
the Seller's Business and the Assets have been disclosed to the Purchaser in
or in connection with this Agreement. No representation or warranty
contained in this Agreement, and no statement contained in any Schedule or in
any certificate, list or other writing furnished to the Purchaser pursuant to
any provision of this Agreement (including without limitation the Seller's
Financial Statements), contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
herein or therein, in the light of the circumstances under which they were
made, not misleading.
4.2 Representations and Warranties of the Purchaser, Holdings and
SCC . Each of the Purchaser, Holdings and SCC, jointly and severally,
represents and warrants to the Seller as of the date hereof, and shall
represent to the Seller as of the Closing on the Closing Date, that:
4.2.1 Due Organization; Good Standing; Power. The Purchaser is
a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware. The Purchaser has full corporate right,
power and authority to enter into each of the Operative Documents and to
perform its obligations thereunder. Each of SCC and Holdings is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware. Each of SCC and Holdings has full right,
power and authority to enter into this Agreement and to perform its
obligations hereunder and, in the case of Holdings, to issue the Seller's
Shares as required hereunder. Each of the Purchaser, SCC and Holdings is
qualified to do business in each jurisdiction in which the properties and
assets owned by each of them or the nature of the business conducted by each
of them make such qualification legally necessary. None of the Purchaser, SCC
or Holdings is in breach or violation of, and the execution, delivery and
performance of this Agreement, and, in case of the Purchaser any of the other
Operative Documents, will not result in a breach or violation of, any of the
provisions of the Purchaser's, SCC's or Holding's respective articles of
incorporation (either "Purchaser's Articles," "SCC's Articles" or "Holdings'
Articles'" as the case may be) or bylaws (either "Purchaser's Bylaws," "SCC's
Bylaws" or "Holdings' Bylaws" as the case may be).
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4.2.2 Authorization and Validity of Documents. The execution,
delivery and performance by the Purchaser, SCC and Holdings of this Agreement
and by the Purchaser of the other Operative Documents and the transactions
contemplated hereby and thereby, have been duly and validly authorized by
each of the Purchaser, SCC and Holdings, as the case may be. This Agreement
has been duly and validly executed and delivered by Holdings, SCC and the
Purchaser and is a legal, valid and binding obligation of Holdings, SCC and
the Purchaser, respectively, and each of the other Operative Documents, when
executed and delivered, will be legal, valid and binding obligations of the
Purchaser, each enforceable against the Purchaser in accordance with their
respective terms.
4.2.3 Agreement Not in Conflict with Other Instruments; Required
Approvals Obtained. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated by this
Agreement and, in the case of the Purchaser, the execution, delivery and
performance of the other Operative Documents and the consummation of the
transactions contemplated thereby will not (a) violate or require any consent
or approval of, or filing under, (i) any Laws or any Governmental Authority
or (ii) any judgment, injunction, order, writ or decree of any court,
arbitrator, or Governmental Authority by which the Purchaser, SCC or Holdings
are bound; (b) conflict with, require any consent, approval, or filing under,
result in the breach or termination of any provision of, constitute a default
under, or result in the creation of any claim, security interest, Lien,
charge or encumbrance upon any of the Assets, except in favor of the
Acquisition Lender, pursuant to, (i) the Purchaser's Articles or Bylaws, (ii)
Holdings' Articles or Bylaws, (iii) SCC's Articles or Bylaws,(iv) any
Indebtedness, Contract, License or other instrument, document or agreement to
which the Purchaser, SCC or Holdings is a party or by which the Purchaser,
Holdings or SCC is bound or (v) any judgment, injunction, order, writ or
decree of any court, arbitrator, or Governmental Authority by which the
Purchaser, SCC or Holdings is bound. No consent, approval or action of,
filing with or notice to any Governmental Authority on the part of the
Purchaser, SCC or Holdings is required in connection with the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
4.2.4 Conduct of Business in Compliance with Regulatory and
Contractual Requirements. Each of the Purchaser, SCC and Holdings has
conducted and is conducting its respective business and activities in
compliance, in all material respects, with all applicable Laws. The
respective businesses of the Purchaser, SCC and Holdings (i) are in
compliance, in all material respects, with all laws of all Governments and
Governmental Agencies applicable with respect thereto, and (ii) are in
compliance, in all material respects, with all restrictions, covenants,
agreements, contracts, commitments, understandings and arrangements
applicable with respect thereto.
4.2.5 Legal Proceedings. There is no order, action, suit,
proceeding, claim or arbitration, or any investigation by or before any
person or entity, including, but not limited to, any Governmental Authority,
(i) pending, issued or outstanding to which the Purchaser, SCC or Holdings is
a party, or to the knowledge of the Purchaser, threatened against or relating
to the
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Purchaser, Holdings, SCC or the Purchaser's Business, or (ii) challenging the
Purchaser's, SCC's or Holdings' right to execute, deliver, perform under or
consummate the transactions contemplated by this Agreement or (iii) asserting
any right with respect to transactions contemplated by this Agreement or the
Assets, and, in each such case, to the knowledge of the Purchaser, there is
no basis for any such action, suit, proceeding, claim, arbitration or
investigation.
4.2.6 Securities Registration. Assuming the accuracy of the
Seller's representations and warranties contained herein, no registration
statement is required to be prepared and filed with respect to the Seller's
Shares to be issued and delivered pursuant to the transactions contemplated
by this Agreement. SCC has filed and will, until Holders no longer own any
Registrable Securities or until the resale provisions of Rule 144(k) (or any
successor provision) under the Securities Act are available to Holders
(whichever is earlier), use its best efforts to continue to file all reports
and documents required to be filed under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), necessary to maintain its registration as a
public company and to maintain its listing as a traded security on the
Pacific Stock Exchange, another national securities exchange or the Nasdaq
Stock Market. All documents filed under the Securities Act and the Exchange
Act when they were or are filed with the Securities and Exchange Commission
(the "Commission") and such state securities agencies as were or may be
required by regulation, rule or law, conformed or will conform in all
material respects to the applicable requirements of the Securities Act and
the Exchange Act and the applicable rules and regulations of the Commission
and applicable state securities administrators or administrations. Except
as provided in this Agreement and disclosed in the registration statements
and reports filed by SCC under the Securities Act and the Exchange Act, SCC
has not granted and is not presently subject to any contractual provisions
for demand or piggyback registration rights with respect to its Class A
Common Stock.
4.2.7 Issuance of the Seller's Shares. The Seller's Shares,
when issued and delivered pursuant to this Agreement, will have been duly
authorized, validly issued and outstanding and fully paid and nonassessable.
There are no shares of capital stock of Holdings entitled to a preference
over the Common Stock on dividends or other distributions or upon any
dissolution, liquidation or winding-up. Except with respect to the Class A
Preferred Stock of SCC, there are no shares of capital stock of SCC entitled
to a preference over the Class A Common Stock on dividends or other
distributions or upon any dissolution, liquidation or winding-up.
4.2.8 Tax Matters. Except as otherwise disclosed in periodic
reports filed under the Exchange Act as of the date of this Agreement, none
of the Purchaser, Holdings or SCC is a party to, and none of them is aware
of, any pending or threatened action, suit, proceeding, or assessment against
the Purchaser, Holdings or SCC, respectively, for the collection of any Taxes
by any Taxing Authority. Except for such matters (i) that are being disputed
with the relevant Taxing Authority, (ii) for which the Purchaser, Holdings or
SCC, as the case may be, made an adequate reserve in its financial statement
or (iii) that would not have any material adverse effect on the Purchaser,
Holdings and SCC taken as a whole, (x) each of the Purchaser, Holdings and
SCC has duly and timely filed with all appropriate Taxing Authorities all Tax
Returns required to be filed by it, (y) each of the Purchaser, Holdings and
SCC has paid all Taxes owed by it to all Taxing
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Authorities, and (z) all Taxes which the Purchaser, Holdings or SCC is
required by applicable Law to withhold or to collect have been duly withheld
and collected and have been paid over to the proper Taxing Authority or are
properly held by the Purchaser, Holdings or SCC, respectively, for such
payment. None of the Purchaser, Holdings or SCC has filed a consent pursuant
to Section 341(f) of the Code.
4.2.9 Disclosure. All material facts regarding the Purchaser,
Holdings, SCC, each of their respective Affiliates, and their respective
business condition have been disclosed to the Seller in or in connection with
this Agreement. No representation or warranty contained in this Agreement,
and no statement contained in any Schedule or in any certificate, list or
other writing furnished to the Seller pursuant to any provision of this
Agreement, contains any untrue statement of a material fact or omits to state
a material fact necessary in order to make the statements herein or therein,
in the light of the circumstances under which they were made, not misleading.
5. Registration Rights.
5.1 Definitions. As used in this Section 5:
5.1.1 The terms "register", "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and the declaration or
ordering of the effectiveness of such registration statement.
5.1.2 For the purposes hereof the term "Registrable Securities"
means shares of (i) Class A Common Stock issuable upon purchase of shares of
capital stock of Holdings pursuant to Section 3.3.4 (the "Securities), (ii)
stock issued in lieu of the Securities in any reorganization which has not
been sold to the public and (iii) stock issued in respect of the stock
referred in (i) and (ii) as a result of a stock split, stock distribution,
recapitalization or combination, which has not been sold to the public.
5.1.3 The terms "Holder" or "Holders" mean the Seller, its
Shareholder and the Seller's Permitted Transferees.
5.2 Piggyback Registration Rights. At any time following the
Closing Date, whenever SCC proposes to register any Class A Common Stock for
its own or others' account under the Securities Act for a public offering,
other than (i) any shelf registration of shares to be used as consideration
for acquisitions of additional businesses by SCC or any of its Affiliates or
Subsidiaries, (ii) registrations relating to employee benefit plans, (iii)
registrations made for others' account the terms of which preclude including
shares owned by holders other than SCC and (iv) registrations relating to
rights offerings made to the stockholders of SCC, SCC shall give each of the
Holders prompt written notice of its intent to do so. Upon the written
request of any of the Holders given within 10 days after receipt of such
notice, SCC shall cause to be included in such registration all of the
Registrable Securities which any such Holder requests, provided that SCC shall
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have the right to reduce the number of shares included in such registration,
pro rata among all persons (including SCC) proposing to have shares
registered, to the extent that inclusion of such shares would, in the opinion
of tax counsel to SCC or its independent auditors, jeopardize any tax free
status of the transactions contemplated thereby. In addition, if SCC is
advised in writing in good faith by any managing underwriter of an
underwritten offering of the securities being offered pursuant to any
registration statement under this Section 5.2 that the number of shares to be
sold by persons other than SCC is greater than the number of such shares
which can be offered without adversely affecting the offering, SCC may reduce
pro rata the number of shares offered for the accounts of such persons (based
upon the number of shares proposed to be sold by each such person) to a
number deemed satisfactory by such managing underwriter.
5.3 Registration Procedures. All expenses incurred in connection
with the registrations under this Article 5 (including all registration,
filing, qualification, legal, printer and accounting fees, but excluding
underwriting commissions and discounts), shall be borne by SCC. In
connection with registrations under Section 5.2, SCC shall (i) use its best
efforts to prepare and file with the Commission, as soon as reasonably
practicable, a registration statement with respect to the Class A Common
Stock and use its best efforts to cause such registration to promptly become
and remain effective for a period of at least 120 days (or such shorter
period during which holders shall have sold all Class A Common Stock which
they requested to be registered); (ii) use its best efforts to register and
qualify the Class A Common Stock covered by such registration statement under
applicable state securities laws as the holders shall reasonably request for
the distribution of the Class A Common Stock; and (iii) take such other
actions as are reasonable and necessary to comply with the requirements of
the Securities Act and the regulations thereunder.
5.4 Underwriting Agreement. In connection with each registration
pursuant to Section 5.2 covering an underwritten registered public offering,
SCC and each participating holder agree to enter into a written agreement
with the managing underwriters in such form and containing such provisions as
are customary in the securities business for such an arrangement between such
managing underwriters, companies of SCC's size and investment stature, and
the participating holders in such a registration, including with respect to
indemnification and contribution.
5.5 Availability of Rule 144. SCC shall not be obligated to
register shares of Class A Common Stock held by any Holder at any time when
the resale provisions of Rule 144(k) (or any successor provision) promulgated
under the Securities Act are available to such Holder for such shares. With a
view to making available to Holders of Registrable Securities the benefits of
certain rules and regulations of the Commission which may permit the sale of
the Registrable Securities to the public without registration, SCC agrees,
until Holders no longer own any Registrable Securities or until the resale
provisions of Rule 144(k) (or any successor provision) under the Securities
Act are available to Holders (whichever is earlier), to use its best efforts
to:
5.5.1 make available adequate current public information, as
those terms are understood and defined in Rule 144(c) under the Securities
Act; and
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5.5.2 so long as a Holder owns any Registrable Securities, to
furnish to each such holder forthwith upon such Holder's request a written
statement by SCC as to its compliance with the information requirements of
said Rule 144(c), a copy of the most recent annual or quarterly report of
SCC, and such other reports and documents so filed by SCC as each such Holder
may reasonably request in availing itself of any rule or regulation of the
Commission allowing such Holder to sell any such securities without
registration.
5.6 Information by Holder. The Holder of Registrable Securities
included in any registration pursuant to Section 5.2 shall promptly furnish
to SCC such information regarding such Holder as SCC may request in writing.
6. Particular Covenants.
6.1 The Seller's Affirmative Covenants. The Seller covenants,
promises and agrees that from the date hereof and until the Closing the
Seller shall:
6.1.1 Continue to operate the Seller's Business diligently; and
not take any action, omit to take any action, or engage in any transaction
other than acts or transactions in the ordinary course of the Seller's
Business and consistent with the terms of this Agreement.
6.1.2 Preserve the Assets and the Seller's Business (its
organization and reputation) and preserve the relationship of the Seller's
Business (including goodwill) with suppliers, customers and others.
6.1.3 Maintain the Assets in good working order and condition,
ordinary wear and tear excepted, and continue normal and usual maintenance
and repair of the Assets.
6.1.4 Cooperate with the Purchaser to achieve an orderly
transition of the Seller's Business to the Purchaser and an orderly transfer
of the Assets to the Purchaser.
6.1.5 Pay or provide for payment of all sales, use, personal
property, social security, withholding, payroll, unemployment compensation,
income and other taxes, assessments, fees and public charges due and payable
by the Seller in respect of the Seller's Business and the Assets through the
Closing Date and any portion thereof applicable to any period prior to the
Closing Date.
6.1.6 Maintain in effect all insurance policies and other
employee benefits covering any employee claims which may be incurred through
the Closing Date.
6.1.7 Fully perform and comply with all covenants, promises and
agreements hereunder which are required to be performed or complied with by
the Seller prior to or at the Closing, and exert its best efforts to
completely satisfy and fulfill all conditions precedent to the Purchaser's
obligations to close hereunder at the Closing on the Closing Date.
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6.1.8 Exert its best efforts to prevent the occurrence of any
event which could result in any of the Seller's representations and
warranties contained in this Agreement not being true and correct at or as of
the time immediately after the occurrence of such event.
6.1.9 Not apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of the
Seller or any of its property, make a general assignment for the benefit of
creditors, or file a petition for relief under Title 11 of the United States
Code or any similar federal or state statute.
6.1.10 Provide the Purchaser and its representatives with full
access during normal business hours to all of the Seller's properties, Assets
and records; provide the Purchaser and its representatives with such
financial and operating data and other information with respect to the
Seller's Business and Assets as the Purchaser shall from time to time
request; and permit the Purchaser and its representatives to consult with the
Seller's representatives, officers, employees and accountants up to the time
of Closing.
6.1.11 Take no action which is or would cause a violation of any
Laws, and promptly following receipt thereof, furnish the Purchaser with
copies of any notice received from any Governmental Authority or other Person
alleging any violation of Law.
6.1.12 Except to the extent required by applicable Law, (i) cause
the Books and Records relating to the Seller's Business and of the Seller to
be maintained in the usual, regular and ordinary manner and (ii) not permit
any material change in (x) any pricing, investment, accounting, financial
reporting, inventory, credit, allowance or Tax practice or policy with
respect to the Seller's Business or the Seller or (y) any method of
calculating any bad debt, contingency or other reserve of the Seller's
Business or the Seller for accounting, financial reporting or Tax purposes.
6.1.13 Not amend, modify or repeal any provision of its Articles
or By-Laws.
6.1.14 Not authorize, grant, issue, sell or otherwise dispose of
any Securities of the Seller, or modify or amend any right of any holder of
outstanding Securities.
6.1.15 Not declare, set aside or pay any dividend or other
distribution in respect of any of the Securities of the Seller or, directly
or indirectly, redeem, purchase or otherwise acquire any of the Securities of
the Seller.
6.1.16 Not enter into any merger or consolidation or any sale of
all or substantially all of the assets of the Seller or other Business
Combination.
6.1.17 Not convey, sell, transfer or otherwise dispose of any of
the Assets; provided, however, that the foregoing will not prohibit the sale
of inventory in the ordinary course of business and the disposition or use of
other Assets in the ordinary course of business;.
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6.1.18 Not pledge, mortgage or otherwise encumber any of the
Assets, other than Liens on items the purchase of which is permitted
hereunder.
6.1.19 Not incur, issue, assume or guaranty any Indebtedness;
6.1.20 Not enter into or terminate any Contract, or amend, waive
or terminate, any material provision of any Contract except in the ordinary
course of business;
6.1.21 Not adopt Benefit Plans for employees and/or officers, in
connection with the Seller's Business.
6.1.22 Not pay or obligate itself to pay any compensation,
commission or bonus to any director, officer, employee or independent
contractor as such, except for the regular compensation and commissions
payable to such director, officer, employee or independent contractor at the
rate in effect on the date of this Agreement.
6.1.23 Not enter into any Contract or amend or modify any
existing Contract with any current or former officer, director, stockholder,
Affiliate or of any officer, director, stockholder or Affiliate of the
foregoing.
6.1.24 Not enter into any agreement, arrangement, commitment or
understanding to do or engage in any of the foregoing.
6.2 The Purchaser's Affirmative Covenants. The Purchaser and SCC
covenant, promise and agree that prior to the Closing Date the Purchaser and
SCC shall:
6.2.1 Apply for and use their best efforts to obtain a financing
commitment and a loan from the Acquisition Lender.
6.2.2 Provide that the Purchaser's Articles or the Purchaser's
Bylaws, or both, and Holdings' Articles or Holdings' Bylaws, or both, specify
that the Board of Directors of each of the Purchaser and Holdings shall
consist of at least seven persons and no greater than eleven persons as
provided in Section 8.
6.3 Risk of Loss. All risk of loss or damage to or destruction of
the Assets, in whole or in part, shall be and remain with the Seller until
the Closing and all of the transactions contemplated hereby shall have been
consummated. The Seller shall, promptly following the Seller's execution
hereof, have all of the Seller's policies of insurance insuring the Assets
duly endorsed to protect the respective interests of the Seller and the
Purchaser (and, if requested by the Purchaser, the Acquisition Lender) under
this Agreement and shall deliver to the Purchaser a copy of such policy
endorsement.
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6.4 Notification of Certain Matters. Each party hereto shall give
prompt notice to the other parties hereto of (a) the discovery of any fact or
the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or
warranty contained herein to be untrue or inaccurate in any material respect
at or prior to the Closing and (b) any material failure of a party to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by such party hereunder. Each party shall use its best efforts to
cure before the Closing any such circumstance described in the notice given
pursuant to the preceding section. Each party shall use its best efforts to
cure, before the Closing, any such circumstance for which it is responsible
described in the notice given pursuant to the preceding sentence. The
delivery of any notice pursuant to this Section 6.4 shall not, without the
express written consent of the other parties, be deemed to (i) modify the
representations or warranties hereunder of the party delivering such notice,
(ii) modify the conditions set forth in this Agreement, or (iii) limit or
otherwise affect the remedies available hereunder to any party.
6.5 Books and Records. On the Closing Date, the Seller shall
deliver or make available to the Purchaser at the offices of the Seller all
of the Books and Records and such other Assets as are in the Seller's
possession at other locations, and if at any time after the Closing the
Seller discovers in its possession or under its control any other Books and
Records or other Assets, it will forthwith deliver such Books and Records and
other Assets to the Purchaser.
6.6 Use of Pumpkin Name. The Seller shall cause its name to be
changed and shall terminate its use of the name "Pumpkin Masters", effective
no later than the first Business Day after the Closing.
6.7 Audited Financial Statements. The Seller has delivered to the
Purchaser a balance sheet and related statement of income and cash flow
showing the financial condition of the Seller's Business as of the close of
the fiscal year ending January 31, 1997 (the "1997 Financial Statements"),
all audited by independent public accountants acceptable to the Purchaser and
accompanied by an opinion of such accountants (which shall not be qualified
in any material respect) to the effect that such 1997 Financial Statements
fairly present in all material respects the financial condition and results
of operations of the Seller's Business in accordance with GAAP consistently
applied.
6.8 Sale of Products. From the Closing Date up and until
September 30, 1997, the Purchaser shall undertake to sell, on behalf of the
Seller, items of "PAAS" finished goods and Garfield products (the
"Products"). The Purchaser shall provide to the Seller no later than January
1, 1998, a statement indicating all items of the Products sold by the
Purchaser during the period from the Closing Date through and including
September 30, 1997 and the net proceeds received by the Purchaser on account
thereof. The Seller shall have ten (10) days to review such calculations and
deliver to the Purchaser any objections thereto. If the Seller does not
deliver any such objections within such ten-day period, such statement shall
be conclusive and binding on the Purchaser and the Seller. If the Seller and
the Purchaser cannot, within fifteen (15) days following the Seller's
submission to the Purchaser of the Seller's objections, resolve such issues,
the parties shall submit
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the items remaining in dispute to a mutually-agreed upon arbitrator, together
with a written statement from each describing each disputed item. Such
arbitrator shall attempt to resolve the disputed item within thirty (30) days
after such submissions. Any such resolution shall be in writing and shall be
conclusive and binding between the parties. Within five (5) days after the
final calculations being deemed conclusive and binding among the parties, if
the Seller has no objections, or the delivery to the Purchaser and the Seller
of the arbitrator's resolution, if the Seller has objections which it duly
notifies the Purchaser of, the Purchaser shall pay to the Seller in cash, or
by certified funds or wire transfer an additional amount equal to the
aggregate amount of the net proceeds received by the Purchaser on account of
the sale of the Products. The fees and expenses of such arbitrator shall be
paid by the parties as the arbitrator shall direct.
No later than August 1, 1998, the Purchaser shall make available to the
Seller all remaining items of the Products in its possession. The Seller
shall have twenty (20) days to remove such items from the Purchaser's
premises or such other locations at which such items are stored, at the
Seller's sole cost and expense, and following such period, the Purchaser may
dispose of such items as it, in its sole discretion, shall determine is
proper.
6.9 Product Liability Insurance. From and after the Closing Date
and up until the second anniversary of the Closing Date, the Purchaser shall
maintain product liability insurance, at the same coverage levels and with
the same insurer, as does the Seller as of the Closing Date. The Purchaser
shall give the Seller notice of any modification to, proposed cancellation or
termination of such policy no later than ten (10) days after the Purchaser's
notice thereof.
6.10 Employment . For a period of at least four years following the
Closing, the Purchaser shall (subject to applicable Code requirements,
including nondiscrimination rules) provide employees of the Seller who,
immediately after the Closing, become employees of the Purchaser (the
"Transferred Employees") with employee benefits that are, in the aggregate,
substantially comparable to those provided to such Transferred Employees
prior to the Closing. To the extent that service is relevant for purposes of
eligibility, participation, vesting or benefit accrual under any plan of the
Purchaser providing such employee benefits, Transferred Employees shall be
credited for service accrued or deemed accrued with the Seller prior to the
Closing, provided, however, that such crediting of service does not result in
the duplication of benefits or any unintended windfall with respect to the
accrual of benefits. Amounts credited prior to the Closing under flexible
spending accounts and for purposes of determining health plan deductibles
shall be credited after the Closing. If requested by the Purchaser, the
Seller shall cooperate with the Purchaser in effecting an assignment to the
Purchaser of any policies of insurance for the provision of health or welfare
benefits to Transferred Employees, and administrative contracts relating
thereto, provided, that the assignment of any such policy shall not be
construed as an assumption by the Purchaser of any plan of the Seller, or any
liability thereunder if not otherwise payable pursuant to the terms of the
policy. Nothing in this Section 6.10 express or implied shall confer upon
any Transferred Employee or other employee or legal representative thereof
any rights or remedies, including any right to employment, continued
employment for any specified period, or compensation or benefits of any
nature or kind whatsoever under or by reason of this Agreement.
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7. Transfers of Restricted Securities.
7.1 Restrictions Generally; Securities Act.
(a) Each Stockholder will not, directly or indirectly,
Transfer any Restricted Securities except in accordance with the terms of
this Agreement. An attempt by any Stockholder to Transfer any Restricted
Securities not in accordance with the terms of this Agreement shall be null
and void and neither the issuer of such securities nor any transfer agent of
such securities shall give any effect to such attempted Transfer in its stock
records.
(b) Each Stockholder agrees that, in addition to the other
requirements imposed herein relating to Transfer, it will not Transfer any
Restricted Securities except pursuant to an effective registration statement
under the Securities Act, or upon receipt by the Purchaser of an opinion of
counsel to the Stockholder reasonably satisfactory to the Purchaser or, if
agreed by the Board of Directors of the Purchaser, counsel to the Purchaser,
to the effect that registration is not required because of the availability
of an exemption from registration under the Securities Act.
7.2 Legend.
(a) Each certificate representing Restricted Securities held
by any Stockholder shall be endorsed with the following legends and such
other legends as may be required by applicable state securities laws:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
RESTRICTIONS CONTAINED IN AN ASSET PURCHASE AGREEMENT, DATED JUNE 27, 1997,
AS SUCH AGREEMENT MAY BE AMENDED, MODIFIED OR RESTATED FROM TIME TO TIME IN
ACCORDANCE WITH THE TERMS THEREOF (A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE ISSUER HEREOF)."
"THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR TRANSFERRED WITHOUT THE
CONSENT OF PUMPKIN LTD., AND UNLESS IN COMPLIANCE WITH THE ACT AND APPLICABLE
STATE SECURITIES LAWS."
(b) Any certificate issued at any time in exchange or
substitution for any certificate bearing such legends (except a new certificate
issued upon the completion of a Transfer pursuant to a registered public
offering under the Securities Act and made in accordance with the Securities
Act) shall also bear such legends, unless in the opinion of counsel for the
Purchaser, the Restricted Securities represented thereby are no longer subject
to the provisions of this Agreement
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or the restrictions imposed under the Securities Act or state securities
laws, in this case the applicable legend (or legends) may be removed.
7.3 Transfers by the Seller Stockholders and Additional
Stockholders. Each Seller Stockholder and Additional Stockholder will not
Transfer any Restricted Securities, except to a Permitted Transferee who
shall have executed a Joinder Agreement and thereby become a party to this
Agreement for purposes of Sections 7 and 8 and, in the case of a Seller
Stockholder, Section 3.3 hereof.
8. Corporate Governance.
8.1 Board of Directors.
(a) From and after the date hereof, each Stockholder shall
vote or cause to be voted all shares of Common Stock, at any regular or
special meeting of stockholders called for the purpose of filling positions
on the Board of Directors of Holdings (the "Board"), or to execute a written
consent in lieu of such a meeting of stockholders for the purpose of filling
positions on the Board, and shall take all actions necessary, to ensure that
the Board consists of not less than seven (7) nor more than eleven (11)
members and to nominate and elect to the Board individuals as follows: (i)
three (3) individuals (the "Seller Directors"), to be designated by the
Seller Stockholders (as long as the Earnout Amount is unpaid or otherwise not
extinguished) and (ii) at least four (4) and no greater than eight (8)
individuals (the "Purchaser Directors") to be designed by the Purchaser
Stockholders; provided, however, that effective at the Closing, the Board
shall consist of (x) Kea Bardeen, John Bardeen and Gay Burke as the Seller
Directors and James Andersen, Brian Fitzgerald, Calvin Neider and Warren
Stanley as the Purchaser Directors and (y) the Stockholders shall cause the
election of such Seller Directors and the Purchaser Directors upon Closing of
the transactions contemplated hereunder.
(b) From and after the date hereof, in any and all elections
of directors of the Purchaser (whether at a meeting or by written consent in
lieu of a meeting), Holdings shall vote, or cause to be voted, all shares of
the Purchaser's common stock owned by Holdings or over which Holdings has
voting control, so as to fix the number of directors of the Purchaser at not
less than seven (7) nor more than eleven (11) individuals, and to nominate
and elect individuals as follows: (i) three (3) individuals to be designated
by the Seller Stockholders, so long as the Earnout Amount is unpaid or
otherwise not extinguished, and (ii) at least four (4) individuals and no
greater than eight (8) individuals to be designated by the Purchaser
Stockholders.
(c) If any time any person designated as (i) a Seller Director
or the Purchaser Director is not then serving as a director of Holdings or
(ii) a director of the Purchaser is not then serving as such, upon the
written request of the Seller Stockholders or the Purchaser Stockholders, the
Stockholders or Holdings, as appropriate, shall promptly take such action as
may be necessary to approve and appoint individuals designed by the Seller
Stockholders (in the case of any Seller Director or any Seller Stockholders'
designee as a director of the Purchaser) and the Purchaser
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Stockholder (in the case of any Purchaser Director or any Purchaser
Stockholders' designee as director of the Purchaser) to serve as directors of
Holdings or the Purchaser, as applicable, from and after the time of such
request and each Stockholder agrees to take such action as may be necessary
to effect the foregoing.
(d) If, prior to his or her election to the Board pursuant to
Section 8.1, any person shall be unable or unwilling to serve as a director
of Holdings or the Purchaser, the group of Stockholders who designated any
such person shall be entitled to designate a replacement.
8.2 Removal. If (i) the Seller Stockholders request that a Seller
Director elected as a director be removed (with or without cause); provided,
however, that the Seller Stockholders shall request that any Seller Director
be removed for cause if such Seller Director shall be terminated for cause
pursuant to his or her Employment Agreement with the Purchaser), by written
notice to the other Stockholders, or (ii) the Purchaser Stockholders request
that a Purchaser Director elected as a director be removed (with or without
cause), by written notice to the other Stockholders then in each such case,
such director shall be removed and each Stockholder shall vote all shares of
Common Stock and any other voting securities of Holdings over which such
Stockholder has voting control to effect such removal or to consent in
writing to effect such removal upon such request and Holdings shall vote all
shares of common stock of the Purchaser or consent in writing to effect the
removal of such individual from the Board of Directors of the Purchaser. No
director that is a Seller Director or Purchaser Director or a designee of
either the Seller Stockholders or the Purchaser Stockholders on the Board of
Directors of the Purchaser shall be removed without cause except as provided
in this Section 8.2.
8.3 Vacancies. In the event that a vacancy is created on the
Board or the Board of Directors of the Purchaser at any time by the death,
disability, retirement, resignation or removal (with or without cause as
provided in Section 8.2) of a director, each Stockholder shall vote all
shares of Common Stock owned by such Stockholder and other securities over
which such Stockholder has voting control and Holdings shall vote all shares
of common stock of the Purchaser owned by it for the individual designated to
fill such vacancy by whichever of the Seller Stockholders or the Purchaser
Stockholders, as the case may be, designated and/or approved (pursuant to
Section 8.1 hereof) the director whose death, disability, retirement,
resignation or removal (with or without case as provided in Section 8.2)
resulted in such vacancy on the Board in the manner set forth in Section 8.1
hereof; provided, however, that such other individual so designated may not
previously have been a director of Holdings or the Purchaser, as applicable,
who was removed for cause from the Board.
9. Closing.
9.1 Time, Date and Place. The closing of the transactions
contemplated by this Agreement (referred to throughout this Agreement as the
"Closing") shall take place at the law offices of Morgan Lewis & Bockius LLP,
101 Park Avenue, New York, New York, at 10:00 o'clock A.M., Eastern Daylight
Time, on June 27, 1997 or such later date as shall be required for the
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preparation of documents and shall be mutually agreed between the parties,
but in no event shall the Closing occur after June 30, 1997. The time, place
and date of the Closing are referred to throughout this Agreement as the
"Closing Date."
9.2 The Seller's Conditions to Close. The Seller's obligation to
close the transactions contemplated hereby at the Closing shall be subject to
the complete satisfaction and fulfillment of all of the following conditions
precedent, any or all of which may be waived in whole or in part by the
Seller:
9.2.1 All representations and warranties made by the Purchaser
and SCC in this Agreement shall be complete and accurate at and as of the
Closing on the Closing Date.
9.2.2 All covenants, promises and agreements made by the
Purchaser, Holdings and SCC in this Agreement and all other actions required
to be performed or complied with by the Purchaser, Holdings and SCC under
this Agreement prior to or at the Closing shall have been performed or
complied with by the Purchaser, Holdings and SCC, in all material respects.
9.2.3 The Purchaser shall have delivered to the Seller a
certificate, dated the Closing Date and executed by the President or any Vice
President of the Purchaser, substantially in the form and to the effect of
Exhibit 9.2.3A hereto, and a certificate, dated the Closing Date and executed
by the Secretary or Assistant Secretary of the Purchaser, substantially in
the form and to the effect of Exhibit 9.2.3B, respectively, hereto.
9.2.4 There shall not be in effect on the Closing Date any Order
or Law restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or any
of the Operative Agreements.
9.2.5 The Seller shall have received the opinion of Morgan,
Lewis & Bockius LLP, counsel to the Purchaser, dated the Closing Date,
substantially in the form and to the effect of Exhibit 9.2.5 hereto.
9.2.6 All Operative Agreements shall have been duly executed by
their respective parties other than the Seller and shall be in full force and
effect.
9.2.7 All proceedings to be taken on the part of the Purchaser
in connection with the transactions contemplated by this Agreement and the
Operative Documents and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Seller and the Seller's counsel,
and the Seller shall have received copies of all such documents and other
evidences as the Seller may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
9.3 The Purchaser's Conditions to Close. The Purchaser's
obligation to close the transactions contemplated hereby at the Closing shall
be subject to the complete satisfaction and
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<PAGE>
fulfillment of all of the following conditions precedent, any or all of which
may be waived in whole or in part by the Purchaser.
9.3.1 All representations and warranties made by the Seller in
this Agreement shall be complete and accurate at and as of the Closing on the
Closing Date.
9.3.2 All covenants, promises and agreements made by the Seller
in this Agreement and all other actions required to be performed or complied
with by the Seller under this Agreement prior to or at the Closing shall have
been performed or complied with by the Seller, in all material respects.
9.3.3 The Purchaser shall have satisfactorily completed due
diligence with respect to the Assets, Assumed Liabilities and the Seller's
Business.
9.3.4 There shall not have occurred any material adverse change
in the Seller's Business or in the Assets.
9.3.5 All necessary consents to the transfer of the Assets shall
have been obtained.
9.3.6 The Seller shall have delivered to the Purchaser a
certificate, dated the Closing Date and executed by the President or any Vice
President of the Seller, substantially in the form and to the effect of
Exhibit 9.3.6A hereto, and a certificate, dated the Closing Date and executed
by the Secretary or Assistant Secretary of such the Seller, substantially in
the form and to the effect of Exhibit 9.3.6B hereto.
9.3.7 There shall not be in effect on the Closing Date any Order
or Law restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or any
of the Operative Agreements or which could reasonably be expected to
otherwise result in a material diminution of the benefits of the transactions
contemplated by this Agreement or any of the Operative Agreements to the
Purchaser, and there shall not be pending or threatened on the Closing Date
any Action or Proceeding or any other action in, before or by any
Governmental Authority which could reasonably be expected to result in the
issuance of any such Order.
9.3.8 The Purchaser shall have received the opinion of the
counsel of the Seller, Moye, Giles, O'Keefe, Vermeire & Gorrell LLP and
Timothy J. Martin, dated the Closing Date, substantially in the form and to
the effect of Exhibit 9.3.8 hereto.
9.3.9 All Operative Agreements shall have been duly executed and
delivered by the respective parties thereto other than the Purchaser and
shall be in full force and effect.
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<PAGE>
9.3.10 Each of Gay Burke, John Bardeen and Kea Bardeen shall have
entered into their respective Employment Agreement with the Purchaser,
substantially in the form of Exhibits 3.6A, 3.6B, and 3.6C hereto.
9.3.11 The Purchaser shall have received the proceeds of the
Acquisition Note.
9.3.12 All proceedings to be taken on the part of the Seller in
connection with the transactions contemplated by this Agreement and the
Operative Agreements and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Purchaser and the Purchaser's
counsel, and the Purchaser shall have received copies of all such documents
and other evidences as the Purchaser may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
9.4 Actions to Be Taken at the Closing. At the Closing, the
following actions, among others, shall occur:
9.4.1 The Seller shall execute and deliver to the Purchaser the
Assignment and Assumptions pursuant to which the Seller shall sell, assign,
and transfer to the Purchaser the Assets and the Purchaser shall assume the
Assumed Liabilities.
9.4.2 The Seller shall deliver to the Purchaser the certificate
of title to the motor vehicle.
9.4.3 The Seller shall deliver to the Purchaser a certified
check or a bank cashier's check in the amount of the cash in the Seller's
bank account after deduction of all outstanding unpaid checks.
9.4.4 Kea Bardeen, John Bardeen, and Gay Burke and the Purchaser
shall execute and deliver the Employment Agreements substantially in the form
attached hereto as Exhibits 3.6A, 3.6B, and 3.6C.
9.4.5 The Purchaser and Bardeen Investment Properties, L.L.C.
will execute and deliver the Premises Lease Agreement.
9.4.6 The Purchaser and Bardeen Educational Trust will execute
and deliver the Equipment Lease Agreement.
9.4.7 The Purchaser shall deliver to the Seller a certified
check, bank cashier's or by wire transfer payable to the order of the Seller
in the amount of the cash consideration for the transactions as described in
Section 3.1.
9.4.8 The Purchaser shall deliver to the Seller the Seller's
Shares in accordance with Section 3.3.
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<PAGE>
9.4.9 CP Inc. shall receive from the Purchaser the investment
banking fee of $120,000 specified in Section 3.2.8.
9.4.10 The Seller, the Purchaser, Holdings and SCC shall execute
and deliver such other and further documents reasonably necessary to complete
the transactions described in this Agreement.
10. Indemnification.
10.1 Indemnification by the Seller. Subject to the provisions of
Section 10.2 of this Agreement, the Seller shall defend, indemnify and hold
harmless the Purchaser, its Affiliates (other than the Seller and the
Shareholder), and the Purchaser's and its Affiliates' respective officers,
directors, shareholders, agents, representatives and employees and their
respective heirs, personal and legal representatives, guardians, successors
and assigns, from and against any and all claims, threats, liabilities,
taxes, interest, fines, penalties, suits, actions, proceedings, demands,
damages, losses, costs and expenses (including attorneys' and experts' fees
and court costs) (collectively "Claims") of every kind and nature arising out
of, resulting from, or in connection with:
10.1.1 Any misrepresentation or breach of any representation or
warranty by the Seller contained in this Agreement.
10.1.2 Any nonperformance, failure to comply or breach by the
Seller of any covenant, promise or agreement of the Seller contained in this
Agreement.
10.1.3 The Retained Liabilities.
10.2 Limitations on the Seller's Indemnity. Notwithstanding the
provisions of Section 10.1, the Purchaser shall not seek indemnification from
the Seller (i) until the aggregate amount of all such Claims for which
indemnification may be made exceeds $125,000.00 and, (ii) thereafter,
provided that the aggregate amount of all current claims for which indemnity
is being sought is at least $10,000; and the Purchaser shall not seek
indemnification from the Seller for Claims in the aggregate in excess of the
amount of cash paid to the Seller under Section 3.1 of this Agreement.
10.3 Indemnification by the Purchaser, Holdings and SCC. The
Purchaser, Holdings and SCC, severally, shall defend, indemnify and hold
harmless the Seller and its Affiliates and the Seller's and its Affiliates'
respective directors, officers, shareholders, employees, agents and
representatives, and their respective heirs, personal and legal
representatives, guardians, successors and assigns, from and against any and
all claims, threats, liabilities, taxes, interest, fines, penalties, suits,
actions, proceedings, demands, damages, losses, costs and expenses (including
attorneys' and experts' fees and court costs) of every kind and nature
arising out of, resulting from, or in connection with:
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<PAGE>
10.3.1 Any misrepresentation or breach by the Purchaser, Holdings
or SCC of their respective representations or warranties contained in this
Agreement.
10.3.2 Any nonperformance, failure to comply or breach by the
Purchaser, Holdings or SCC of their respective covenants, promises or
agreements contained in this Agreement.
10.3.3 In the case of the Purchaser, (i) any of the Assumed
Liabilities or (ii) any debt, obligation, duty or liabilities resulting from
the Purchaser's Business or the Assets after the Closing Date, other than the
Retained Liabilities.
10.4 Defense of Claims. In the event of any claim, threat,
liability, tax, interest, fine, penalty, suit, action, proceeding, demand,
damage, loss, cost or expense with respect to which indemnity is or may be
sought hereunder (an "Indemnity Claim"), the indemnified party shall promptly
notify the indemnifying party of such Indemnity Claim, specifying in
reasonable detail the Indemnity Claim and the circumstances under which it
arose. The indemnifying party may elect to assume the defense of such
Indemnity Claim, at its expense, by written notice to the indemnified party
given within 10 days after the indemnifying party receives notice of the
Claim, and the indemnifying party shall promptly engage counsel reasonably
acceptable to the indemnified party to direct and conduct such defense;
provided, however, that the indemnified party shall have the right to engage
its own counsel, at its own expense, to participate in such defense. In the
event the indemnifying party does not so elect to assume the defense of such
Indemnity Claim in the manner specified above, or if, in the reasonable
opinion of counsel to the indemnified party, there are defenses available to
the indemnified party which are different from or additional to those
available to the indemnifying party or which give rise to a material conflict
between the defense of the indemnified party and of the indemnifying party,
then upon notice to the indemnifying party, the indemnified party may elect
to engage separate counsel to conduct its defense, at the expense of the
indemnifying party, and the indemnifying party shall not have the right to
direct or conduct such defense.
10.4.1 In the event the indemnifying party assumes the defense of
any Indemnity Claim, it may at any time notify the indemnified party of its
intention to settle, compromise or satisfy such Indemnity Claim and may make
such settlement, compromise or satisfaction (at its own expense) unless
within 20 days after the giving of such notice the indemnified party shall
give notice of its intention to assume the defense of the Indemnity Claim, in
which event the indemnifying party shall be relieved of its duty hereunder to
indemnify the indemnified party. Unless the indemnified party shall have
given the notice referred to in the preceding sentence, (i) the indemnified
party shall not consent to or make any settlement, compromise or satisfaction
with respect to the Indemnity Claim without the prior written consent of the
indemnifying party, which consent shall not be unreasonably withheld, and
(ii) any settlement, compromise or satisfaction made by the indemnifying
party with respect to such Indemnity Claim shall be deemed to have been
consented to by and shall be binding upon the indemnified party.
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<PAGE>
11. Expenses of Transactions.
11.1 All sales, transfer and use taxes incurred in connection with
the sale, assignment, transfer and delivery of the Assets shall be paid by
the Purchaser.
11.2 The Seller shall pay all fees and commissions due to J.D. Ford
& Company which acted as a financial advisor for this transaction.
11.3 If the Closing occurs, the Purchaser shall pay the Seller's
accounting fees relating to the audit of the Seller's books and records for
fiscal years ended January 31, 1995 and January 31, 1996.
11.4 If the Closing occurs, the Purchaser shall pay the Seller's
legal fees related to this transaction up to a maximum of $75,000.00, upon
delivery of evidence thereof, with such evidence being reasonably
satisfactory to the Purchaser.
11.5 Except as provided in Sections 11.3 and 11.4, the Seller will
pay its own legal, accounting and other professional consultant fees related
to this transaction.
11.6 The Purchaser shall pay its own legal, accounting, and other
professional consultant fees related to this transaction.
12. Termination.
12.1 This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written agreement of
the Seller and the Purchaser;
(b) at any time before the Closing, by the Purchaser if (i) it has
received notice of a breach by the Seller described in Section 6.4 and such
breach has not been cured or (ii) the satisfaction of any of its obligations
under this Agreement becomes impossible with the use of commercially
reasonable efforts, if the failure of such condition to be satisfied is not
caused by a breach hereof by it;
(c) at any time before the Closing, by the Seller if (i) it has
received notice of a breach by the Purchaser described in Section 6.4 and
such breach has not been cured or (ii) the satisfaction of any of its
obligations under this Agreement becomes impossible with the use of
commercially reasonable efforts, if the failure of such condition to be
satisfied is not caused by a breach hereof by it; or
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(d) at any time after June 30, 1997, by the Purchaser or the Seller
upon notification of the non-terminating party by the terminating party if the
Closing shall not have occurred on or before such date and such failure to
consummate is not caused by a breach of this Agreement by the terminating party
or the failure of a condition to be satisfied by the terminating party.
12.2 If this Agreement is validly terminated pursuant to Section 12.1,
this Agreement will forthwith become null and void, and there will be no
liability or obligation on the part of any party hereto (or any of its officers,
directors, employees, agents or Affiliates), except as provided in the next
succeeding sentence and except that the provisions in Sections 4.1.26, 11.2.,
11.5, 11.6, 13.10 and 13.13 will continue to apply following any such
termination. Notwithstanding any other provision in this Agreement to the
contrary upon termination of this Agreement pursuant to Section 12.1(b), the
Seller will remain liable to the Purchaser for any misrepresentation or breach
of warranty or nonfulfillment of or failure to perform any covenant or agreement
by the Seller existing at the time of such termination, and upon termination of
this Agreement pursuant to Section 12.1(c) the Purchaser will remain liable to
the Seller for any misrepresentation or breach of warranty or nonfulfillment of
or failure to perform any covenant or agreement by the Purchaser existing at the
time of such termination, and the Purchaser and the Seller may seek such
remedies, including damages and reasonable attorneys' and expert witness fees
and costs and expenses of litigation, against the other with respect to any such
breach as are provided in this Agreement or as are otherwise available at Law or
in equity.
13. Miscellaneous.
13.1 Survival of Representations and Warranties. All of the
representations and warranties of the parties contained in this Agreement (or in
any document delivered or to be delivered pursuant to this Agreement or at or in
connection with the Closing) shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
13.2 Notices. All notices, requests, demands, consents, and other
communications which are required or may be given under this Agreement shall be
in writing and shall be given either (a) by personal delivery against a
receipted copy, (b) by certified or registered United States mail, return
receipt requested, postage prepaid, (c) by facsimile transmission or (d) mailed
by overnight courier prepaid to the following addresses:
(i) If to the Seller, to:
Pumpkin Ltd. d/b/a Pumpkin Masters, Inc.
Post Office Box 61456
Denver, Colorado 80206
Attn: President
Facsimile No.: (303) 871-9477
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with a copy to:
John E. Moye, Esq.
Moye, Giles, O'Keefe, Vermeire & Gorrell LLP
1225 Seventeenth Street
Suite 2900
Denver, Colorado 80202-5529
Facsimile No.: (303) 292-4510
and to:
Joseph M. Durnford
J.D. Ford & Company Ltd. L.L.P.
650 South Cherry Street, Penthouse
Denver, Colorado 80222
Facsimile No.: (303) 822-2600
(ii) If to the Purchaser, Holdings or SCC, to:
Capital Partners, Inc.
One Pickwick Plaza, Suite 310
Greenwich, Connecticut 06830
Attn.: President
Facsimile No.: (203) 625-0423
with a copy to:
Christopher T. Jensen, Esq.
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Facsimile No.: (212) 309-6273
or to such other address of which written notice in accordance with this Section
13.2 shall have been provided by such party. All such notices, requests and
other communications will (a) if delivered personally to the address as provided
in this Section, be deemed given upon delivery, (b) if delivered by certified
mail in the manner described above to the address as provided in this Section,
be deemed given upon receipt, (c) if delivered by facsimile transmission to the
facsimile number as provided in this Section, be deemed given upon receipt and
(d) if delivered by overnight courier to the address provided in this Section,
be deemed given on the earlier of the first Business Day following the date sent
by such overnight courier, or upon receipt (in each case regardless of whether
such notice, request or other communication is received by any other person to
whom a copy of such notice is to be delivered pursuant to this Section).
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13.3 Entire Agreement. This Agreement (including the Schedules and
Exhibits hereto) and the Operative Agreements constitute the full, entire and
integrated agreement between the parties hereto with respect to the subject
matter hereof, and supersedes all prior negotiations, correspondence,
understandings and agreements among the parties hereto respecting the subject
matter hereof.
13.4 Assignability. This Agreement shall not be assignable (by
operation of Law or otherwise) by any party hereto without the prior written
consent of the other parties hereto, except the Purchaser may assign any or all
of its rights, interests and obligations hereunder to (i) subject to Section
3.2.6, any post-Closing purchaser of the Purchaser's Business or a substantial
part of the assets of the Purchaser or (ii) any financial institution providing
purchase money or other financing to the Purchaser from time to time as
collateral security for such financing.
13.5 Binding Effect; Benefit. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
personal and legal representatives, guardians, successors and permitted assigns.
Nothing in this Agreement, express or implied, is intended to confer upon any
other person any rights, remedies, obligations, or liabilities.
13.6 Severability. Any provision of this Agreement which is held by
a court of competent jurisdiction to be prohibited or unenforceable shall be
ineffective to the extent of such prohibition or unenforceability, without
invalidating or rendering unenforceable the remaining provisions of this
Agreement, and in lieu of such prohibited or unenforceable provision, there will
be added automatically as a part of this Agreement a legal, valid and
enforceable provision as similar in terms to such prohibited or unenforceable
provision as may be possible.
13.7 Amendment; Waiver. No provision of this Agreement may be
amended, waived or otherwise modified without the prior written consent of
all of the parties hereto. No action taken pursuant to this Agreement,
including any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representation, warranty, covenant or agreement herein contained. The waiver
by any party hereto of a breach of any provision or condition contained in
this Agreement shall not operate or be construed as a waiver of any
subsequent breach or of any other conditions hereof.
13.8 Section Headings. The section and other headings contained in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement.
13.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
13.10 Applicable Law: Jurisdiction and Venue. This Agreement
shall be governed by, construed, interpreted and enforced in accordance with the
laws of the State of Colorado, except to the extent that the General Corporation
Law of the State of Delaware applies as a result of
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Holdings, SCC or the Purchaser being incorporated in the State of Delaware,
in which case such General Corporation Law shall apply.
13.11 Remedies. The parties hereto acknowledge that in the event
of a breach of this Agreement, any claim for monetary damages hereunder may not
constitute an adequate remedy, and that it may therefore be necessary for the
protection of the parties and to carry out the terms of this Agreement to apply
for the specific performance of the provisions hereof. It is accordingly hereby
agreed by all parties that no objection to the form of the action or the relief
prayed for in any proceeding for specific performance of this Agreement shall be
raised by any party, in order that such relief may be expeditiously obtained by
an aggrieved party. All parties may proceed to protect and enforce their rights
hereunder by a suit in equity, transaction at law or other appropriate
proceeding, whether for specific performance or for an injunction against a
violation of the terms hereof or in aid of the exercise of any right, power or
remedy granted hereunder or by law, equity or statute or otherwise. No course of
dealing and no delay on the part of any party hereto in exercising any right,
power or remedy shall operate as a waiver thereof or otherwise prejudice its
rights, powers or remedies, and no right, power or remedy conferred hereby shall
be exclusive of any other right, power or remedy referred to herein or now or
hereafter available at law, in equity, by statute or otherwise.
13.12 Further Assurances. The Seller, the Purchaser, Holdings
and SCC each agree to execute and deliver, after the date hereof, without
additional consideration, such further assurances, instruments and documents,
and to take such further actions, as a party may reasonably request in order to
fulfill the intent of this Agreement and the transactions contemplated hereby.
13.13 Public Announcements. At all times at or before the
Closing, none of the parties hereto will issue or make any statements or
releases to the public with respect to this Agreement or the transactions
contemplated hereby without the consent of the other parties hereto, except for
such public disclosure as may be necessary not to be in violation of or default
under any applicable federal or state securities Law or any rule or regulation
of the Pacific Stock Exchange Inc. The Seller will also obtain SCC's prior
approval of any press release the Seller desires to issue following the Closing
announcing the consummation of the transactions contemplated by the Agreement.
13.14 Limited Recourse. Notwithstanding anything in this
Agreement to the contrary, (i) the obligations and liabilities of the parties
hereunder shall be without recourse to any stockholder (other than the
Shareholder) of such party or any of such stockholder's Affiliates, directors,
employees, officers or agents and shall be limited to the assets of such party
and (ii) the stockholders of the Purchaser (other than SCC) have made no (and
shall not be deemed to have made any) representations, warranties or covenants
(express or implied) under or in connection with this Agreement.
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13.15 Bulk Sales Compliance. The Seller shall indemnify and hold
harmless the Purchaser and its Affiliates from any failure to comply with
applicable Bulk Sales Laws and Orders (if any).
[Signature Page to Follow]
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement under seal, with the intention of making it a sealed instrument, on
the date first above written.
PUMPKIN LTD., d/b/a PUMPKIN MASTERS, INC.
By: /s/ Kea Bardeen
--------------------------------------
Name: Kea Bardeen
Title: President
PUMPKIN LTD.
By: /s/ Calvin Neider
--------------------------------------
Name: Calvin Neider
Title: Vice President
PUMPKIN MASTERS HOLDINGS, INC.
By: /s/ Calvin Neider
--------------------------------------
Name: Calvin Neider
Title: Vice President
SECURITY CAPITAL CORPORATION
By: /s/ A. George Gebauer
--------------------------------------
Name: A. George Gebauer
Title: President
<PAGE>
SCHEDULES
Schedule 1.7A Equipment
Schedule 1.7B Location of Inventory
Schedule 1.7C Excluded Assets
Schedule 1.8 Seller's Contractual Obligations
Schedule 3.5 Allocation Procedures
Schedule 4.1.2 Jurisdictions in which Qualified
Schedule 4.1.6 Legal Proceedings
Schedule 4.1.9 Permitted Liens
Schedule 4.1.10 Intellectual Property and Exceptions
Schedule 4.1.11 Pledged Inventory
Schedule 4.1.12.5 Seller's Employees
Schedule 4.1.17 Employee Benefit Plans
Schedule 4.1.18 Real Property Leases and Subleases
Schedule 4.1.19 Contracts
Schedule 4.1.20 Governmental Licenses
Schedule 4.1.21 Insurance Policies
Schedule 4.1.22 Affiliate Transactions
Schedule 4.1.25 Taxes
Schedule 4.1.27 Warranties
Schedule 4.1.27(a) Potential Design Defects
57
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EXHIBIT LIST
Exhibit 2.1 Assignment and Assumptions
2.1A Assignment and Assumption
2.1B Trademark Assignment and Assumption
2.1C Patent Assignment and Assumption
2.1D Copyright Assignment and Assumption
2.1E Kea Bardeen Patent Assignment and Assumption
Exhibit 3.6 Employment Agreements
3.6A Kea Bardeen
3.6B John Bardeen
3.6C Gay Burke
Exhibit 3.7 Premises Lease Agreement
Exhibit 3.8 Equipment Lease Agreement
Exhibit 4.1.7 Seller's Financial Statements
Exhibit 9.2.3 Purchaser's Certificates
9.2.3A Officer's
9.2.3B Secretary's
Exhibit 9.2.5 Opinion of Counsel to the Purchaser
Exhibit 9.3.6 Seller's Certificates
9.3.6A Officer's
9.3.6B Secretary's
Exhibit 9.3.8 Opinion of Counsels to the Seller
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CREDIT AGREEMENT
dated as of June 27, 1997
among
PUMPKIN LTD.,
PUMPKIN MASTERS HOLDINGS, INC.,
THE LENDERS referred to herein
and
NATIONSCREDIT COMMERCIAL CORPORATION,
as Agent
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
------
ARTICLE 1
DEFINITIONS
<S> <C>
SECTION 1.01. Certain Defined Terms................................... 1
SECTION 1.02. Accounting Terms and Determinations..................... 20
SECTION 1.03. Other Definitional Provisions........................... 21
ARTICLE 2
TRANCHE A LOANS
SECTION 2.01. Tranche A Loans......................................... 21
SECTION 2.02. Tranche A Notes......................................... 22
SECTION 2.03. Interest on the Tranche A Loans......................... 22
SECTION 2.04. Repayments and Prepayments of Tranche A Notes........... 22
ARTICLE 3
TRANCHE B LOANS AND WARRANTS
SECTION 3.01. Tranche B Loans......................................... 25
SECTION 3.02. Tranche B Notes......................................... 25
SECTION 3.03. Interest on the Tranche B Loans......................... 25
SECTION 3.04. Repayments and Prepayments of Tranche B Notes........... 25
SECTION 3.05. Warrants................................................ 28
ARTICLE 4
WORKING CAPITAL LOANS
SECTION 4.01. Working Capital Loans and Commitments................... 28
SECTION 4.02. Working Capital Notes................................... 28
SECTION 4.03. Interest on the Working Capital Loans................... 29
SECTION 4.04. Advance Working Capital Loans........................... 29
SECTION 4.05. Mandatory Repayments and Prepayments.................... 29
SECTION 4.06. Optional Prepayments.................................... 30
SECTION 4.07. Application of Payments................................. 30
SECTION 4.08. Letters of Credit....................................... 30
SECTION 4.09. Obligation to Make Working Capital Loans................ 34
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE 5
CONDITIONS
<S> <C>
SECTION 5.01. Conditions to Closing................................... 34
SECTION 5.02. Conditions to Each Loan................................. 38
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. Corporate Existence and Power........................... 39
SECTION 6.02. Corporate and Governmental Authorization; No
Contravention....................................................... 39
SECTION 6.03. Binding Effect; Liens of Security Documents............. 40
SECTION 6.04. Financial Information................................... 40
SECTION 6.05. Litigation.............................................. 42
SECTION 6.06. Ownership of Property; Liens............................ 42
SECTION 6.07. No Default.............................................. 42
SECTION 6.08. No Burdensome Restrictions.............................. 43
SECTION 6.09. Labor Matters........................................... 43
SECTION 6.10. Subsidiaries; Other Equity Investments.................. 43
SECTION 6.11. Investment Company Act.................................. 43
SECTION 6.12. Margin Regulations...................................... 44
SECTION 6.13. Taxes................................................... 44
SECTION 6.14. Compliance with ERISA................................... 44
SECTION 6.15. Brokers................................................. 45
SECTION 6.16. Related Transactions.................................... 45
SECTION 6.17. Employment, Shareholders and Subscription Agreements.... 45
SECTION 6.18. Full Disclosure......................................... 45
SECTION 6.19. Representations and Warranties Incorporated from Other
Operative Documents................................................. 45
SECTION 6.20. Private Offering........................................ 46
SECTION 6.21. Compliance with Environmental Requirements; No Hazardous
Materials........................................................... 46
SECTION 6.22. Initial Capitalization.................................. 48
SECTION 6.23. Real Property Interests................................. 48
ii
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE 7
AFFIRMATIVE COVENANTS
<S> <C>
SECTION 7.01. Financial Statements and Other Reports.................. 48
SECTION 7.02. Payment of Obligations.................................. 53
SECTION 7.03. Conduct of Business and Maintenance of Existence........ 53
SECTION 7.04. Maintenance of Property; Insurance...................... 53
SECTION 7.05. Compliance with Laws.................................... 55
SECTION 7.06. Inspection of Property, Books and Records............... 55
SECTION 7.07. Use of Proceeds......................................... 55
SECTION 7.08. Further Assurances...................................... 55
SECTION 7.09. Board Meetings.......................................... 56
SECTION 7.10. Lenders' Meetings....................................... 56
SECTION 7.11. Consummation of the Acquisition......................... 56
SECTION 7.12. Hazardous Materials; Remediation........................ 56
SECTION 7.13. Collateral Reports...................................... 57
SECTION 7.14. Collections; Right to Notify Account Debtors............ 57
SECTION 7.15. Enforcement of Covenant Not to Compete.................. 57
SECTION 7.16. Landlord and Warehouseman Waivers....................... 58
ARTICLE 8
NEGATIVE COVENANTS
SECTION 8.01. Debt.................................................... 58
SECTION 8.02. Negative Pledge......................................... 59
SECTION 8.03. Capital Stock........................................... 60
SECTION 8.04. Restricted Payments..................................... 60
SECTION 8.05. ERISA................................................... 62
SECTION 8.06. Consolidations, Mergers and Sales of Assets............. 62
SECTION 8.07. Purchase of Assets; Investments......................... 63
SECTION 8.08. Transactions with Affiliates............................ 63
SECTION 8.09. Amendments or Waivers................................... 63
SECTION 8.10. Fiscal Year............................................. 64
SECTION 8.11. Limitations on Activities by Holdings; Payments by
Holdings and the Company under the Tax Sharing Agreement............ 64
SECTION 8.12. Investor Fees........................................... 65
SECTION 8.13. Management Compensation................................. 65
SECTION 8.14. Lease Payments.......................................... 66
SECTION 8.15. Capital Expenditures.................................... 66
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
SECTION 8.16. Total Debt Coverage Ratio............................... 66
SECTION 8.17. Minimum EBITDA.......................................... 66
ARTICLE 9
EVENTS OF DEFAULT
SECTION 9.01. Events of Default....................................... 67
SECTION 9.02. Cash Collateral......................................... 70
ARTICLE 10
FEES, EXPENSES AND INDEMNITIES; GENERAL PROVISIONS RELATING
TO PAYMENTS
SECTION 10.01. Fees................................................... 71
SECTION 10.02. Computation of Interest and Fees....................... 71
SECTION 10.03. General Provisions Regarding Payments.................. 71
SECTION 10.04. Expenses............................................... 72
SECTION 10.05. Indemnity.............................................. 72
SECTION 10.06. Taxes.................................................. 73
SECTION 10.07. Funding Losses......................................... 74
SECTION 10.08. Maximum Interest....................................... 74
ARTICLE 11
THE AGENT
SECTION 11.01. Appointment and Authorization.......................... 75
SECTION 11.02. Agents and Affiliates.................................. 75
SECTION 11.03. Action by Agent........................................ 75
SECTION 11.04. Consultation with Experts.............................. 75
SECTION 11.05. Liability of Agent..................................... 76
SECTION 11.06. Indemnification........................................ 76
SECTION 11.07. Credit Decision........................................ 76
SECTION 11.08. Successor Agent........................................ 76
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Survival............................................... 77
SECTION 12.02. No Waivers............................................. 77
SECTION 12.03. Notices................................................ 77
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
SECTION 12.04. Severability........................................... 78
SECTION 12.05. Amendments and Waivers................................. 78
SECTION 12.06. Successors and Assigns; Registration................... 78
SECTION 12.07. Collateral............................................. 80
SECTION 12.08. Headings............................................... 80
SECTION 12.09. Governing Law; Submission to Jurisdiction.............. 81
SECTION 12.10. Notice of Breach by Agent or Lender.................... 81
SECTION 12.11. Waiver of Jury Trial................................... 82
SECTION 12.12. Counterparts; Integration.............................. 82
SECTION 12.13. Knowledge of Any Person................................ 82
</TABLE>
SCHEDULE 6.06 -- Patent, Trademark and Copyright Infringements
SCHEDULE 6.10 -- Joint Ventures
SCHEDULE 6.17 -- Employment, Shareholders' and Subscription Agreements
SCHEDULE 6.21 -- Environmental Matters
SCHEDULE 6.22 -- Initial Capitalization
SCHEDULE 6.23 -- Real Property Interests
SCHEDULE 7.04 -- Required Insurance
SCHEDULE 8.01 -- Outstanding Debt
EXHIBIT A -- Tranche A Note
EXHIBIT B -- Tranche B Note
EXHIBIT C -- Working Capital Note
EXHIBIT D -- Warrant
EXHIBIT E -- Company Security Agreement
EXHIBIT F -- Holdings Pledge Agreement
EXHIBIT G -- Security Capital Pledge and Guaranty Agreement
EXHIBIT H -- Borrowing Base Certificate
EXHIBIT I -- Opinion of counsel to the Company
EXHIBIT J -- Opinion of Davis Polk & Wardwell, Special Counsel to the Agent
EXHIBIT K -- Warrantholders Rights Agreement
EXHIBIT L -- Security Capital Note
EXHIBIT M -- Security Capital Subordination Agreement
EXHIBIT N -- Investors Subordination Agreement
EXHIBIT O -- Seller Earnout Subordination Agreement
v
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EXHIBIT P -- Opinion of Moye, Giles, O'Keefe, Vermeire & Gorrel LLP,
Colorado Counsel to the Company
vi
<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of June 27, 1997 among PUMPKIN LTD., PUMPKIN
MASTERS HOLDINGS, INC., the LENDERS listed on the signature pages hereof and
NATIONSCREDIT COMMERCIAL CORPORATION, as Agent.
The parties hereto agree as follows:
ARTICLE 1
Definitions
SECTION 1.01. Certain Defined Terms. The following terms have the
following meanings:
"Acquisition" means the transactions contemplated by the Acquisition
Documents to be consummated on or before the Closing Date.
"Acquisition Corp." means Pumpkin Ltd., a Delaware corporation.
"Acquisition Documents" means the Asset Purchase Agreement, including the
exhibits and schedules thereto, and all agreements, documents and instruments
executed and delivered pursuant thereto or in connection therewith.
"Affiliate" means (i) any Person that directly, or indirectly through
one or more intermediaries, controls the Company (a "Controlling Person") or
(ii) any Person (other than the Company or any of its Subsidiaries) which is
controlled by or is under common control with a Controlling Person or (iii)
the Seller. As used herein, the term "control" of a Person means the
possession, directly or indirectly, of the power to vote 10% or more of any
class of voting securities of such Person or to direct or cause the direction
of the management or policies of a Person, whether through the ownership of
voting securities, by contract or otherwise.
"Agent" means NationsCredit in its capacity as agent for the Lenders
hereunder, and its successors in such capacity.
"Applicable Premium Amount" has the meaning set forth in Section 2.04(c).
<PAGE>
"Asset Purchase Agreement" means the Asset Purchase Agreement dated as
of June 27, 1997 among the Seller, Security Capital, Holdings and Acquisition
Corp.
"Asset Sale" means any sale, lease or other disposition (including any
such transaction effected by way of merger or consolidation) by the Company
or any of its Subsidiaries of any asset, but excluding (i) dispositions of
inventory in the ordinary course of business, (ii) dispositions of obsolete,
worn-out or surplus equipment and (iii) dispositions of Temporary Cash
Investments and cash payments otherwise permitted under this Agreement;
provided that a disposition of assets not excluded by clauses (i), (ii) or
(iii) above during any Fiscal Year shall not constitute an Asset Sale unless
and until (and only to the extent that) the aggregate Net Cash Proceeds from
such disposition, when combined with the Net Cash Proceeds all other such
dispositions previously made during such Fiscal Year, exceeds $50,000.
"Bardeen Leases" means the Lease Agreement dated June 27, 1997, between
Bardeen Investment Properties, L.L.C., as lessor, and the Company, as lessee,
and the Equipment Lease Agreement dated June 27, 1997 between Bardeen
Educational Trust, as lessor, and the Company, as lessee.
"Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer
Plan and which is maintained or otherwise contributed to by the Company or
any of its Subsidiaries.
"Borrowing Base" means, on any date, a dollar amount equal to the sum of
(i) 85% of Eligible Receivables and (ii) during the months of June and July,
60% of Eligible Inventory and, during each other month, 50% of Eligible
Inventory, each determined as of such date.
"Borrowing Base Certificate" means a certificate, duly executed by the
chief financial officer or treasurer of the Company, appropriately completed
and substantially in the form of Exhibit H.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in Chicago or New York City are authorized by law to
close.
"Capital Lease" of any Person means any lease of any property (whether
real, personal or mixed) by such Person as lessee which would, in accordance
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with GAAP, be required to be accounted for as a capital lease on the balance
sheet of such Person.
"Capital Partners" means Capital Partners, Inc., a Connecticut
corporation, and its successors.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), as amended from
time to time, and regulations promulgated thereunder.
"Class" refers, with respect to Loans, to whether such Loans are Tranche
A Loans, Tranche B Loans or Working Capital Loans and, with respect to
Commitments, to whether such Commitments are Tranche A Commitments, Tranche B
Commitments or Working Capital Commitments.
"Closing Date" means June 27, 1997, or such other date as the parties
hereto agree to in writing, but in any event not later than July 31, 1997.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral" means all property mortgaged, pledged or otherwise
purported to be subjected to a Lien pursuant to the Security Documents.
"Commitment" means a Tranche A Commitment, Tranche B Commitment or
Working Capital Commitment, or any combination of the foregoing, as the
context may require.
"Company" means Acquisition Corp.; provided that, when used with
reference to periods prior to the Closing Date, "Company" means Pumpkin Ltd.
d/b/a Pumpkin Masters Inc., a Colorado corporation.
"Company Account" means the account specified on the signature pages
hereof into which all Loans to the Company shall be made available, or such
other account as the Company shall from time to time specify by notice to the
Lenders.
"Company Common Stock" means the Company Voting Common Stock or the
Company Non-Voting Common Stock, or both, as the context may require.
"Company Non-Voting Common Stock" means the Class B common stock of the
Company, $.01 par value per share.
3
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"Company Security Agreement" means the Company Security Agreement dated
as of the date hereof between the Company and the Agent, substantially in the
form of Exhibit E.
"Company Voting Common Stock" means the Class A common stock of the
Company, $.01 par value per share.
"Consolidated Capital Expenditures" means, for any period, the aggregate
amount of expenditures by the Company and its Consolidated Subsidiaries for
plant, property and equipment during such period (including any such
expenditure by way of acquisition of a Person or by way of assumption of
indebtedness or other obligations of a Person, to the extent reflected as
plant, property and equipment), but excluding any such expenditures made for
the replacement or restoration of assets to the extent financed by
condemnation awards or proceeds of insurance received with respect to the
loss or taking of or damage to the asset or assets being replaced or restored.
"Consolidated Free Cash Flow" means, for any period, EBITDA for such
period minus the following amounts:
(a) (i) all cash payments of income taxes by the Company and its
Consolidated Subsidiaries during such period and (ii) to the extent not
included in clause (i), the aggregate amount of Tax Sharing Payments
(excluding, to the extent included therein, the aggregate amount applied
pursuant to Section 8.11(b)(y)(A) or (B)) during such period;
(b) Consolidated Capital Expenditures for such period, to the
extent that such Consolidated Capital Expenditures are permitted by
Section 8.15 and are not financed during such period (and will not be
financed in any future period) with the proceeds of Debt of the Company
permitted by Section 8.01(c); and
(c) any net gain in respect of Asset Sales during such period.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Company
in its consolidated financial statements if such statements were prepared as
of such date.
"Consolidated Total Debt" means at any date the Debt of the Company and its
Consolidated Subsidiaries, determined on a consolidated basis at such date
4
<PAGE>
and without giving effect to any amount attributable to original issue discount
in connection with the issuance of the Warrants.
"Debt" of a Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all Capital Leases of such Person, (v) all
obligations of such Person to purchase securities (or other property) which
arise out of or in connection with the sale of the same or substantially
similar securities (or property) (other than the Warrants), (vi) all
non-contingent obligations of such Person to reimburse any bank or other
Person in respect of amounts paid under a letter of credit or similar
instrument, (vii) all equity securities of such Person (other than the
Warrants and the Management Options) subject to repurchase or redemption
otherwise than at the sole option of such Person, (viii) all Debt secured by
a Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person, and (ix) all Debt of others Guaranteed by such
Person.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"EBITDA" means, for any period, the consolidated net income of the
Company and its Consolidated Subsidiaries for such period, after all expenses
and other proper charges except depreciation, interest, amortization,
Additional Payments (as defined in the Asset Purchase Agreement), income
taxes and, to the extent not included in income taxes, Tax Sharing Payments
for such period, determined in accordance with GAAP plus or minus (i) all
intercompany items, (ii) all earnings attributable to equity interests in
Persons that are not Subsidiaries unless actually received by the Company or
a Consolidated Subsidiary, (iii) all income arising from the forgiveness,
adjustment, or negotiated settlement of any indebtedness, (iv) any
extraordinary items of income or expense, (v) any increase or decrease in
income arising from any change in the Company's method of accounting, subject
to Section 1.02, (vi) any fees paid pursuant to the Management Agreement and
(vii) any interest income, in each case for such period.
"Eligible Inventory" means, at any date of determination thereof, the
aggregate value (determined at the lower of cost or market on a basis
consistent with that used in the preparation of the financial statements
referred to in Section 6.04(a)) at such date of all Inventory owned by the
Company and located in any
5
<PAGE>
jurisdiction in the United States of America as to which appropriate UCC
financing statements have been filed naming the Company as "debtor" and the
Agent as "secured party", all net of any amounts payable by the Company in
respect of commissions, processing fees or other charges, excluding, however,
without duplication (i) any such Inventory which has been shipped to a
customer, even if on a consignment or "sale or return" basis and whether or
not such Inventory has been subsequently returned by such customer (other
than any such Inventory which has been returned by a customer and is in
saleable condition); (ii) any Inventory subject to a Lien (other than Liens
created pursuant to the Company Security Agreement), including a landlord's
or warehouseman's Lien, other than Liens created by operation of law in favor
of any supplier or processor of Inventory securing amounts owed in respect of
processing such Inventory by such supplier or processor, as the case may be;
(iii) any Inventory against which the Company has taken a reserve; (iv) any
Inventory not subject to a valid and perfected first-priority Lien in favor
of the Agent under the Company Security Agreement, subject to no prior or
equal Lien; (v) any Inventory which is in transit; (vi) any domestically
produced Inventory not produced in compliance with the applicable requirements
of the Fair Labor Standards Act; and (vii) any supply, scrap or obsolete
Inventory and any Inventory that is not reasonably marketable; provided that
Inventory that is otherwise excluded from the definition of "Eligible Inventory"
solely by virtue of clauses (ii), (iv) or (v) or because it is not at such time
located in any jurisdiction in the United States of America as to which
appropriate UCC financing statements have been filed and as to which the Agent
shall have a perfected security interest (including without limitation pursuant
to arrangements between the Agent and any relevant letter of credit bank in form
and substance satisfactory to the Agent in its sole discretion), shall be
included in any determination of Eligible Inventory, but only to the extent that
such Inventory consists of finished goods in transit or Inventory held by others
and the aggregate value thereof (determined as aforesaid) does not at any time
exceed $250,000.
"Eligible Receivables" means, at any date of determination thereof, the
aggregate amount of all Receivables at such date due to the Company other than
the following (determined without duplication):
(a) (i) any Receivable due from a Foreign Account Debtor at any time,
other than (I) any Receivable that is backed by a letter of credit issued by
a bank organized under the laws of the United States of America or a State
thereof having combined capital and surplus in excess of $250,000,000 and
having outstanding senior unsecured long-term debt securities rated A or
higher by Standard & Poor's Rating Group or A2 or higher by Moody's Investor
Service, Inc. (so long as such letter of credit has been delivered to the
Security Agent as additional collateral under the
6
<PAGE>
Security Documents) or (II) with respect to Receivables due from TESCO
(U.K.), Receivables in an aggregate amount not to exceed $60,000, and
(ii) any Receivable that is not denominated and payable in U.S. dollars;
(b) any Receivable that does not comply with all applicable legal
requirements, including, without limitation, all laws, rules, regulations
and orders of any governmental or judicial authority (including any
Receivable due from an account debtor located in the States of New Jersey
or Minnesota, unless the Company (at the time the Receivable was created
and at all times thereafter) (i) had filed and has maintained effective a
current notice of business activities report with the appropriate office or
agency of the State of New Jersey or Minnesota (but only if such notice of
business activities report is required to be filed or maintained under
applicable law in the States of New Jersey or Minnesota) or (ii) was and has
continued to be exempt from filing such report and has provided Agent with
satisfactory evidence thereof);
(c) any Receivable in respect of which there is any unresolved
dispute with the account debtor, but only to the extent of such dispute;
(d) any Receivable payable more than 210 days after the date of the
issuance of the original invoice therefor;
(e) any Receivable that remains unpaid for more than 60 days from the
original due date specified at the time of the original issuance of the
invoice therefor;
(f) any unbilled Receivable and any Receivable in respect of goods
not yet shipped;
(g) any Receivable arising outside the ordinary course of business of
the Company;
(h) any Receivable in respect of which there has been established a
contra account, or which is due from an account debtor to whom the Company
owes a trade payable, but only to the extent of such account or trade
payable;
(i) any Receivable that is not subject to a first priority
perfected Lien under the Company Security Agreement and any Receivable
evidenced by an "instrument" (as defined in the UCC) not in the possession
of the Agent;
7
<PAGE>
(j) any Receivable due from an account debtor (I) as to which
on such date Receivables representing more than 25% (or, in the case of a
Special Account Debtor, 50%) of aggregate amount of all Receivables of such
account debtor have remained unpaid for more than 60 days (or, in the case
of a Special Account Debtor, 180 days) from the original due date specified
at the time of the original issuance of the invoice therefor, (II) in respect
of which a credit loss has been recognized or reserved by the Company or any
of its Subsidiaries, (III) in respect of which the Agent shall have notified
the Company that such account debtor does not have a satisfactory credit
standing as determined in good faith by the Agent, (IV) that is a Subsidiary
or Affiliate of the Company, (V) that is the United States of America or any
department, agency or instrumentality thereof, unless the Company has
complied in all respects with the Federal Assignment of Claims Act of 1940,
or (VI) that is the subject of a case or proceeding of the type described in
clauses (g) and (h) of Section 9.01;
(k) any Receivable due at any time (i) from an account debtor that
the Company has not instructed such account debtor in the invoice therefor to
make payments in respect of such Receivable to the Lockbox Account (as
defined in the Company Security Agreement) if at such time such payments are
required to be made to the Lockbox Account pursuant to Section 5(B) of the
Company Security Agreement or (ii) from any account debtor that makes
payments in a form that cannot be accepted in the Lockbox Account if at such
time such payments are required to be made to the Lockbox Account pursuant
to Section 5(B) of the Company Security Agreement; and
(l) any Receivables due from an account debtor at any time, to the
extent that the aggregate outstanding amount of Receivables due from such
account debtor and its affiliates at such time exceeds 20% (or, in the case
of a Special Account Debtor during the months of November, December and
January, 49.9%) of the aggregate amount of all Receivables due to the Company
at such time, but only to the extent of such excess.
"Employment Contracts" means the employment contracts delivered by the
Company to NationsCredit on the Closing Date pursuant to Section 5.01(o).
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits, concessions,
grants, franchises, licenses, agreements and governmental restrictions,
whether now or hereafter in
8
<PAGE>
effect, relating to human health, the environment or to emissions, discharges
or releases of pollutants, contaminants, Hazardous Materials or wastes into
the environment, including ambient air, surface water, ground water or land,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
Hazardous Materials or wastes or the clean-up or other
remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor statute.
"ERISA Group" means the Company, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Company or any
Subsidiary, are treated as a single employer under Section 414 (b) or (c) of the
Code.
"Event of Default" has the meaning set forth in Section 9.01.
"Excess Amount" has the meaning set forth in Section 8.11(b)(y)(A).
"Excess Cash Flow" means, for any period, an amount equal to:
(a) EBITDA for such period, it being understood that any fees paid
pursuant to the Management Agreement with respect to such period have been
deducted from the determination of EBITDA for such period in accordance with
the definition of EBITDA set forth herein;
(b) minus the following amounts:
(i) (x) all cash payments of taxes by the Company and its
Consolidated Subsidiaries during such period and (y) to the extent
not included in clause (x), the aggregate amount of Tax Sharing
Payments during such period;
(ii) Consolidated Capital Expenditures for such period, to
the extent that such Consolidated Capital Expenditures are permitted
by Section 8.15 and are not financed during such period (and will not
be financed in any future period) with the proceeds of Debt of the
Company permitted by Section 8.01(c);
(iii) any net gain in respect of Asset Sales during such
period; and
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(iv) the sum for such period of (x) Total Debt Service
(exclusive of amortization of debt discount or premium) for such
period, (y) all optional payments of the Tranche A Notes and Tranche
B Notes during such period pursuant to Sections 2.04(c) and 3.04(c),
and (z) the aggregate amount of Restricted Payments made during such
period in accordance with clauses (i), (ii) or (iii) of the proviso
to Section 8.04(a); and
(c) plus (or minus) the following amounts:
(i) any net cash extraordinary gains (or extraordinary cash
losses) for such period of the Company and its Consolidated
Subsidiaries (except any such gains or losses in respect of Asset
Sales);
(ii) any decrease (or increase) in the Net Working Investment
at the last day of such period when compared with the Net Working
Investment at the day immediately preceding the first day of such
period (or, in the case of the period beginning on the Closing Date
and ending on December 31, 1997, when compared with the Net Working
Investment at December 31, 1996); and
(iii) any interest income of the Company and its Consolidated
Subsidiaries for such period.
"Financing Documents" means this Agreement, the Notes and the Security
Documents.
"Fiscal Year" means a fiscal year of the Company.
"Foreign Account Debtor" means an account debtor that is not both
domiciled in the United States of America or British Columbia, Canada and (if
not a natural person) organized under the laws of the United States of
America or any political subdivision thereof or British Columbia, Canada.
"GAAP" has the meaning set forth in Section 1.02.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or
other obligation of any other Person and, without limiting the generality of
the foregoing, any obligation, direct or indirect, contingent or otherwise,
of such
10
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Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for the purpose of
assuring in any other manner the obligee of such Debt or other obligation of
the payment thereof or to protect such obligee against loss in respect
thereof (in whole or in part), provided that the term Guarantee shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Hazardous Materials" means (i) any "hazardous substance" as defined in
CERCLA; (ii) asbestos; (iii) polychlorinated biphenyls; (iv) petroleum, its
derivatives, by-products and other hydrocarbons; and (v) any other toxic,
radioactive, caustic or otherwise hazardous substance regulated under
Environmental Laws.
"Hazardous Materials Contamination" means contamination (whether now
existing or hereafter occurring) (i) of the improvements, buildings,
facilities, personalty, soil, groundwater, air or other elements on or of any
property now or previously owned, leased or operated by the Company or any of
its Subsidiaries by Hazardous Materials, or any derivatives thereof, or (ii)
on or of any other property as a result of Hazardous Materials, or any
derivatives thereof, generated on, emanating from or disposed of in
connection with any property now or previously owned, leased or operated by
the Company or any of its Subsidiaries.
"Holdings" means Pumpkin Masters Holdings, Inc., a Delaware corporation,
and its successors.
"Holdings Common Stock" means the common stock, par value $.01 per
share, of Holdings.
"Holdings Documents" has the meaning set forth in Section 8.11.
"Holdings Pledge Agreement" means the Holdings Pledge Agreement dated as
of the date hereof between Holdings and the Agent, substantially in the form
of Exhibit F.
"Indemnitees" has the meaning set forth in Section 10.05.
"Insurance Account" has the meaning set forth in the Company Security
Agreement.
11
<PAGE>
"Inventory" means inventory (as defined in Article 9 of the UCC) to the
extent comprised of readily marketable materials of a type manufactured,
consumed or held for resale (including raw materials and work-in-process) by
the Company in the ordinary course of its business as presently conducted, or
as modified from time to time in a manner not prohibited by this Agreement.
"Investment" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, time deposit or otherwise.
"Investors" means Capital Partners and Security Capital.
"Investors Subordination Agreement" means the Subordination Agreement
dated as of the date hereof among the Company, Security Capital and the
Agent, substantially in the form of Exhibit N.
"Investors Subscription Agreement" means the Subscription Agreement
dated June 27, 1997 between Security Capital and Holdings.
"IPO" means the initial sale of shares of Common Stock by and for the
account of the Holdings pursuant to an underwritten public offering
registered under the Securities Act.
"LC Issuer" means a bank or trust company, as issuer of all Letters of
Credit outstanding hereunder at any time, who shall be mutually acceptable to
the Company and the Agent and whose identity shall have been notified to each
of the Lenders (i) in the case of the initial LC Issuer, prior to the
issuance of the first Letter of Credit after the date hereof or (ii) in the
case of any substitute for the initial LC Issuer, prior to the issuance of
the first Letter of Credit issued by such substitute LC Issuer and after the
date on which all Letters of Credit issued by the initial LC Issuer shall
have expired (or shall have been made subject to arrangements satisfactory to
the Required Lenders for the release of the Reimbursement Obligation of the
Lenders with respect thereto), it being understood that the LC Issuer shall
not be an affiliate of any Lender without the consent of such Lender. For
purposes of this definition, Norwest Bank Colorado, National Association
shall be deemed to be an "LC Issuer" acceptable to the Company and the Agent
and with respect to which notice has been duly given to each of the Lenders.
"Lender" means NationsCredit and each other Person that becomes a holder
of a Note pursuant to Section 12.06, and their respective successors, and
"Lenders" means all of the foregoing.
12
<PAGE>
"Letter of Credit" means a letter of credit issued pursuant to Section
4.08(a) for the account of the Company by the LC Issuer.
"Letter of Credit Liabilities" means, at any time the sum, without
duplication, of (i) the aggregate amount available for drawing under all
Letters of Credit (without regard to whether any conditions to drawing
thereunder can then be met) plus (ii) the aggregate unpaid amount of all
Reimbursement Obligations in respect of previous drawings made under all
Letters of Credit.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement and
the other Financing Documents, the Company or any Subsidiary shall be deemed
to own subject to a Lien any asset which it has acquired or holds subject to
the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.
"Loans" means the Tranche A Loans, the Tranche B Loans and the Working
Capital Loans, or any combination of the foregoing, as the context may
require.
"Lockbox Account" has the meaning set forth in the Company Security
Agreement.
"Lockbox Agreement" has the meaning set forth in the Company Security
Agreement.
"Lockbox Bank" has the meaning set forth in the Company Security
Agreement.
"Major Casualty Proceeds" means (i) the aggregate insurance proceeds
received in connection with one or more related events by the Company or any
of its Subsidiaries under any Property Insurance Policy or (ii) any award or
other compensation with respect to any condemnation of property (or any
transfer or disposition of property in lieu of condemnation) received by the
Company or any of its Subsidiaries, if the amount of such aggregate insurance
proceeds or award or other compensation exceeds $1,000,000.
"Management Agreement" means the Management Advisory Services Agreement
dated as of the date hereof between Capital Partners, Inc. and the Company.
13
<PAGE>
"Management Options" means the options to purchase shares of the Class B
common stock of the Company representing in the aggregate not more than 5% of
the aggregate number of shares of Company Non-Voting Common Stock outstanding
(determined assuming the exercise of all options or warrants to purchase
Company Common Stock held by such Person and adjusted for stock splits,
combinations and similar events) granted pursuant to the terms of the Option
Agreement and any other agreement that may from time to time be entered into
between the Company and other senior members of management of the Company
with the prior written consent of the Required Lenders.
"Management Stockholders" means the Seller and its Permitted Transferees
(as defined in the Asset Purchase Agreement).
"Margin Stock" has the meaning assigned thereto in Regulation G, U or X
of the Federal Reserve Board, as the same may be amended, supplemented or
modified from time to time.
"Material Adverse Effect" means (i) a material adverse effect upon the
business, financial position, results of operations or condition (financial
or otherwise) of the Company and its Subsidiaries or (ii) a material adverse
effect on the rights and remedies of the Agent and the Lenders under this
Agreement and the Notes and the other Financing Documents.
"Material Plan" means at any time a Plan having Unfunded Liabilities.
"Measuring Period" means, with respect to the last day of any fiscal
quarter of the Company (i) if such last day falls on September 30, 1997, the
period from and including July 1, 1997 to and including September 30, 1997,
(ii) if such last day falls on December 31, 1997, the period from and
including July 1, 1997 to and including December 31, 1997, (iii) if such last
day falls on March 31, 1998, the period from and including July 1, 1997 to
and including March 31, 1998, and (iv) if such last day fall any time
thereafter, the period of four consecutive fiscal quarters of the Company
ended on such day.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group
during such five year period.
14
<PAGE>
"NationsCredit" means NationsCredit Commercial Corporation, a Delaware
corporation, and its successors.
"Net Cash Proceeds" means, with respect to any transaction, an amount
equal to the cash proceeds received by Holdings or any of its Subsidiaries
from or in respect of such transaction (including any cash proceeds received
as income or other proceeds of any non-cash proceeds of such transaction),
less (x) any expenses (including commissions) reasonably incurred by such
Person in respect of such transaction and (y) in the case of an Asset Sale,
the amount of any Debt secured by a Lien on the related asset and discharged
from the proceeds of such Asset Sale and any taxes paid or payable by such
Person (as estimated by the chief financial officer of the Company) in
respect of such Asset Sale.
"Net Working Investment" means, at any date, (i) the consolidated
current assets (excluding cash and cash equivalents) of the Company and its
Consolidated Subsidiaries minus (ii) the sum of (x) consolidated current
liabilities (excluding Debt) of the Company and its Consolidated Subsidiaries
plus (y) the current liabilities of any Person (other than the Company or a
Consolidated Subsidiary) which are Guaranteed by the Company or a
Consolidated Subsidiary, all determined as of such date.
"Notes" means the Tranche A Notes, the Tranche B Notes and the Working
Capital Notes, or any combination of the foregoing, as the context may
require.
"Notice of Borrowing" has the meaning set forth in Section 4.04.
"Officers' Certificate" means a certificate executed on behalf of a
Person by its chairman of the board (if an officer), chief executive officer
or president or one of its vice presidents and by its chief financial officer
or treasurer.
"Operative Documents" means the Financing Documents, the Acquisition
Documents, the Warrants, the Common Stockholders Agreement, the Investors
Subscription Agreement, the Management Agreement, the Security Capital Note,
the Security Capital Subordination Agreement, the Investors Subordination
Agreement, the Seller Earnout Subordination Agreement, the Employment
Contracts, the Warrantholders Rights Agreement, the Option Agreement, the
Bardeen Leases and the Tax Sharing Agreement.
"Option Agreement" means the Option Agreement dated June 27, 1997
between the Company, as optionor, and Gay Burke, as optionee.
15
<PAGE>
"Option Shares" means the shares of Company Common Stock issuable upon
the exercise of the Management Options.
"Payment Account" means, with respect to each Lender, the account
specified on the signature pages hereof into which all payments by or on
behalf of the Company to such Lender under the Financing Documents shall be
made, or such other account as such Lender shall from time to time specify by
notice to the Company.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Contest" means a contest maintained in good faith by
appropriate proceedings promptly instituted and diligently conducted and with
respect to which such reserve or other appropriate provision, if any, as
shall be required in conformity with GAAP shall have been made; provided that
compliance with the obligation that is the subject of such contest is
effectively stayed or permitted to be deferred during such challenge.
"Permitted Liens" means Liens permitted pursuant to Section 8.02.
"Person" means any natural person, corporation, limited partnership,
limited liability company, general partnership, joint stock company, joint
venture, association, company, trust, bank, trust company, land trust,
business trust or other organization, whether or not a legal entity, and any
government agency or political subdivision thereof.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code and either (i) is
maintained, or contributed to, by any member of the ERISA Group for employees
of any member of the ERISA Group or (ii) has at any time within the preceding
five years been maintained, or contributed to, by any Person which was at
such time a member of the ERISA Group for employees of any Person which was
at such time a member of the ERISA Group.
"Property Insurance Policy" means any insurance policy maintained by the
Company or any of its Subsidiaries covering losses with respect to tangible
real or personal property or improvements or losses from business
interruption.
"Quarterly Date" means the first Business Day of each July, October,
January and April occurring after the Closing Date.
16
<PAGE>
"Receivable" means, as at any date of determination thereof, the unpaid
portion of the obligation, as stated in the respective invoice, of a customer
of the Company in respect of Inventory or services rendered in the ordinary
course of business, which amount has been earned by performance under the
terms of the related contract and recognized as revenue on the books of the
Company, net of any credits, rebates or offsets owed to the customer and also
net of any commissions payable to Persons other than employees of the Company
or its Subsidiaries.
"Reimbursement Obligations" means at any date the obligations of the
Company then outstanding to reimburse the LC Issuer and/or the Lenders for
payments made by the LC Issuer under all Letters of Credit and/or the Lenders
under Section 4.08(b).
"Required Lenders" means at any time Lenders holding Notes evidencing at
least 51% of the aggregate unpaid principal amount of the Loans or, if no
Loans are outstanding, having at least 51% of the aggregate amount of the
Commitments or, if the Commitments shall have been terminated and the Notes
shall have been repaid in full, holding at least 51% of the Letter of Credit
Liabilities.
"Restricted Payment" means (i) any dividend or other distribution on any
shares of the Company's capital stock (except dividends payable solely in
shares of its capital stock of the same class) or (ii) any payment on account
of the purchase, redemption, retirement or acquisition of (a) any shares of
the Company's capital stock or (b) any option, warrant or other right to
acquire shares of the Company's capital stock, it being understood that any
payment made directly by the Company to Security Capital under the Tax
Sharing Agreement does not constitute a "Restricted Payment".
"Securities Act" means the Securities Act of 1933, as amended from time
to time, and the rules and regulations promulgated thereunder.
"Security Capital" means Security Capital Corporation, a Delaware
corporation, and its successors.
"Security Capital Note" means any Note issued by the Company to Security
Capital permitted pursuant to Section 8.01(e) in substantially the form of
Exhibit L.
17
<PAGE>
"Security Capital Pledge Agreement" means the Pledge and Guaranty
Agreement dated as of the date hereof between the Company and Security
Capital, substantially in the form of Exhibit G.
"Security Capital Subordination Agreement" means the Subordination
Agreement dated as of the date hereof among the Company, Security Capital and
the Agent, substantially in the form of Exhibit M.
"Security Documents" means the Company Security Agreement, the Security
Capital Pledge Agreement, the Holdings Pledge Agreement and any other
agreement pursuant to which Holdings, the Company or any of its or their
Subsidiaries or Affiliates provides a Lien on its assets in favor of the
Agent for the benefit of the Lenders, and all supplementary assignments,
security agreements, pledge agreements, acknowledgments or other documents
delivered or to be delivered pursuant to the terms hereof or of any other
Security Document.
"Seller" means Pumpkin Ltd. d/b/a Pumpkin Masters, Inc., a Colorado
company.
"Seller Earnout Subordination Agreement" means the Subordination
Agreement dated as of the date hereof among the Company and the Seller,
substantially in the form of Exhibit O.
"Special Account Debtor" means each of Wal-Mart Stores, Inc, K-Mart
Corporation and Target Northern.
"Subsidiary" means with respect to any Person any corporation or other
entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly owned by
such Person; provided that unless the context otherwise requires,
"Subsidiary" means a Subsidiary of the Company.
"Tax Sharing Agreement" means the Consolidated Income Tax Sharing
Agreement dated as of the Closing Date among Security Capital, the Company
and Holdings.
"Tax Sharing Payments" means, for any period, the aggregate amount of
cash payments made by Holdings and the Company to Security Capital pursuant
to the Tax Sharing Agreement for tax liabilities for such period.
18
<PAGE>
"Temporary Cash Investment" means any Investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) commercial paper
rated at least A-1 by Standard & Poor's Ratings Service and P-1 by Moody's
Investors Service, Inc., (iii) time deposits with, including certificates of
deposit issued by, any office located in the United States of any bank or
trust company which is organized under the laws of the United States or any
State thereof and has capital, surplus and undivided profits aggregating at
least $500,000,000 and which issues (or the parent of which issues)
certificates of deposit or commercial paper with a rating described in clause
(ii) above, or (iv) repurchase agreements with respect to securities
described in clause (i) above entered into with an office of a bank or trust
company meeting the criteria specified in clause (iii) above, provided in
each case that such Investment matures within one year from the date of
acquisition thereof by the Company or any of its Subsidiaries.
"Total Debt Service" means, for any period, the sum of (i) the aggregate
interest charges incurred by the Company and its Consolidated Subsidiaries
for such period, whether expensed or capitalized, including the portion of
any obligation under Capital Leases allocable to interest expense in
accordance with GAAP and the portion of any debt discount or premium (but not
expenses of issuance) that shall be amortized in such period and (ii) the
aggregate amount during such period of mandatory principal payments pursuant
to Sections 2.04(a) and 3.04(a) and all other scheduled principal payments on
all other Debt, including the portion of any payments under Capital Leases
that is allocable to principal.
"Tranche A Commitment" means, for NationsCredit as Lender, an amount
equal to $3,000,000.
"Tranche A Loan" has the meaning set forth in Section 2.01.
"Tranche A Note" has the meaning set forth in Section 2.02.
"Tranche B Commitment" means, for NationsCredit as Lender, an amount
equal to $2,000,000.
"Tranche B Loan" has the meaning set forth in Section 3.01.
"Tranche B Note" has the meaning set forth in Section 3.02.
"UCC" has the meaning set forth in the Company Security Agreement.
19
<PAGE>
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed
by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair
market value of all Plan assets allocable to such liabilities under Title IV
of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA
Group to the PBGC or any other Person under Title IV of ERISA.
"Warrantholders Rights Agreement" means the Warrantholders Rights
Agreement dated as of the date hereof among Holdings, the Company and the
warrantholders and stockholders referred to therein, substantially in the
form of Exhibit K.
"Warrant Shares" means the shares of Company Non-Voting Common Stock
issuable upon exercise of the Warrants.
"Warrants" has the meaning set forth in Section 3.05.
"Working Capital Borrowing" means the aggregation of Working Capital
Loans of the Lenders to be made to the Company pursuant to Section 4.01 on a
single date.
"Working Capital Commitment" means, (i) for NationsCredit as Lender,
initially $3,500,000, less any amount assigned to another Person that becomes
a Lender after the date hereof (a "Subsequent Lender") and (ii) for any
Subsequent Lender, the amount of Working Capital Commitment assigned to such
Lender.
"Working Capital Loans" has the meaning set forth in Section 4.01.
"Working Capital Note" has the meaning set forth in Section 4.02.
"Working Capital Outstandings" means at any time, as to any Lender, the
sum of the aggregate outstanding principal amount of such Lender's Working
Capital Loans and its pro rata share of the Letter of Credit Liabilities.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared in accordance
with generally accepted accounting principles as in effect from time to time
("GAAP"), applied
20
<PAGE>
on a basis consistent (except for changes concurred in by the Company's
independent public accountants) with the most recent audited consolidated
financial statements of the Company and its Consolidated Subsidiaries
delivered to the Lenders; provided that, if the Company notifies the Lenders
that the Company wishes to amend any covenant in Article 8 or the definition
of "Excess Cash Flow" or any related definition to eliminate the effect of
any change in GAAP on the operation of such covenant or the determination of
"Excess Cash Flow" (or if the Agent notifies the Company that the Required
Lenders wish to amend Article 8 or the definition of "Excess Cash Flow" or
any related definition for such purpose), then the Company's compliance with
such covenant or "Excess Cash Flow", as the case may be, shall be determined
on the basis of GAAP in effect immediately before the relevant change in GAAP
became effective, until either such notice is withdrawn or such covenant is
amended in a manner satisfactory to the Company and the Required Lenders.
SECTION 1.03. Other Definitional Provisions. References in this Agreement
to "Articles", "Sections", "Schedules" or "Exhibits" shall be to Articles,
Sections, Schedules or Exhibits of or to this Agreement unless otherwise
specifically provided. Any of the terms defined in Section 1.01 may, unless
the context otherwise requires, be used in the singular or plural depending
on the reference. "Include", "includes" and "including" shall be deemed to be
followed by "without limitation" whether or not they are in fact followed by
such words or words of like import. "Writing", "written" and comparable terms
refer to printing, typing and other means of reproducing words in a visible
form. References to any agreement or contract are to such agreement or
contract as amended, modified or supplemented from time to time in accordance
with the terms hereof and thereof. References to any Person include the
successors and assigns of such Person. References "from" or "through" any
date mean, unless otherwise specified, "from and including" or "through and
including", respectively.
ARTICLE 2
Tranche A Loans
SECTION 2.01. Tranche A LoansUpon the terms and subject to the
conditions set forth herein, NationsCredit agrees to make one senior floating
rate loan to the Company on the Closing Date pursuant to this Section 2.01 in
a principal amount equal to its Tranche A Commitment (such loan, or any
portion thereof assigned to any other Lender in accordance with Section
12.06, a "Tranche A Loan"). Tranche A Loans are not revolving in nature and
amounts of
21
<PAGE>
such Loans repaid or prepaid may not be reborrowed. The Tranche A
Commitment shall terminate at the close of business on the Closing Date.
SECTION 2.02. Tranche A Notes. Each Tranche A Loan shall be evidenced by a
Tranche A Note of the Company substantially in the form of Exhibit A (each
such note, a "Tranche A Note"), dated the Closing Date in a principal amount
equal to the initial principal amount of such Tranche A Loan, duly executed
and delivered by the Company and payable to the Lender of such Tranche A
Loan.
SECTION 2.03. Interest on the Tranche A Loans. Each Tranche A Loan shall
bear interest on its principal amount outstanding from the Closing Date at
the rate determined as set forth in the Tranche A Note in respect thereof.
Interest shall be payable monthly in arrears as set forth therein.
SECTION 2.04. Repayments and Prepayments of Tranche A Notes. (a)
Mandatory Scheduled Repayments. There shall become due and payable and the
Company shall repay an aggregate principal amount of the Tranche A Notes on
each Quarterly Date, commencing with the second Quarterly Date following the
Closing Date, equal to the applicable installment amount set forth below (or,
if less, the aggregate outstanding principal amount of the Tranche A Notes),
in each case together with accrued and unpaid interest on the principal
amount being repaid to and but excluding the date of payment:
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
Nos. 1-4 $150,000
Nos. 5-8 $175,000
Nos. 9-12 $200,000
Nos. 13-16 $225,000
</TABLE>
(b) Mandatory Incremental Prepayments.
(i) There shall become due and payable, and the Company shall prepay,
on the 90th day following the last day of each Fiscal Year beginning with
the Fiscal Year ending December 31, 1997, an aggregate principal amount of
the Tranche A Notes equal to 35%, in the case of the Fiscal Year ending
December 31, 1997, and 75%, in the case of any Fiscal Year thereafter, of
Excess Cash Flow (or, if less, the aggregate outstanding principal amount
of the Tranche A Notes) for such Fiscal Year (or, in the case of the
payment for the first such period, for the period beginning on the Closing
Date and ending on the last day of such Fiscal Year).
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<PAGE>
(ii) On the date on which the Company or any of its Subsidiaries
receives any payment which constitutes Major Casualty Proceeds, the amount
of such payment shall be applied to prepay outstanding Tranche A Loans in
an aggregate principal amount equal to the amount of such payment (or, if
less, the aggregate outstanding principal amount of the Tranche A Notes),
unless the Required Lenders shall otherwise direct (in which case the
amount of such payment shall be deposited into the Insurance Account to
be held and applied in accordance with Section 5 of the Company Security
Agreement).
(iii) Promptly upon receipt thereof by the Company or any Subsidiary,
100% of the Net Cash Proceeds received in respect of any Asset Sale shall
be applied to prepay outstanding Tranche A Loans in an aggregate principal
amount equal to the amount of such Net Cash Proceeds (or, if less, the
aggregate outstanding principal amount of the Tranche A Loans).
(iv) Promptly upon receipt thereof by Holdings or any of its
Subsidiaries, 100% of the Net Cash Proceeds from the issuance and sale of
common stock or other equity securities of Holdings or any of its
Subsidiaries after the Closing Date shall be applied to prepay outstanding
Tranche A Loans in an aggregate principal amount equal to the amount of
such Net Cash Proceeds (or, if less, the aggregate outstanding principal
amount of the Tranche A Loans).
(v) Any prepayment of the Tranche A Notes in whole under this
Section 2.04(b) shall be made together with accrued and unpaid interest on
the principal amount being prepaid to but excluding the date of payment.
(c) Optional Prepayments.
(i) From and after the first anniversary date of the Closing Date,
the Company may prepay the Tranche A Notes in whole or in part (in
principal amounts of $100,000 or in any integral multiple of $10,000 in
excess thereof) upon prior revocable written notice to the Lenders, by
paying an amount equal to the sum of the aggregate principal amount being
prepaid plus the Applicable Premium Amount on the date of payment together,
in the case of any prepayment of the remaining Tranche A Notes in whole,
with accrued and unpaid interest on the principal amount being prepaid to
but excluding the date of payment.
23
<PAGE>
"Applicable Premium Amount" means, at any date, (x) if such
prepayment is made with proceeds from the sale of 100% of the capital
stock of the Company, with proceeds from an IPO consisting of the sale
of substantially all of the outstanding capital stock of Holdings or
any of its Subsidiaries (after giving effect to such IPO) or with loan
proceeds received pursuant to any Security Capital Note, zero, and (y)
in the case of any other prepayment (a) an amount equal to 2% of the
aggregate principal amount being prepaid if such date is the first
anniversary of the Closing Date, (b) an amount equal to 2% of the
aggregate principal amount being prepaid minus the Reduction
Percentage at such date if such date occurs after the first
anniversary of the Closing Date but prior to the third anniversary of
the Closing Date and (c) zero if such date occurs on or after the
third anniversary of the Closing Date.
"Reduction Percentage" means, at any date, a percentage equal to
0.0833% multiplied by the number of times the 27th day of a month has
occurred during the period from and excluding the first anniversary of
the Closing Date to and including such date.
(ii) Notwithstanding the foregoing, the Company may not
prepay the Tranche A Notes in whole pursuant to this subsection (c)
with the proceeds of other Debt except Debt evidenced by the
Security Capital Notes unless simultaneously with such prepayment
(x) the Company (A) prepays any outstanding balance of the Tranche
B Notes, together with accrued interest thereon, in accordance with
Section 3.04(c) and (B) repays all Working Capital Loans and
terminates the Working Capital Commitments, (y) all Letters of
Credit are terminated with the consent of the respective
beneficiaries thereunder or cash collateral is deposited to cover
the undrawn balance of each Letter of Credit pursuant to
arrangements satisfactory to the Required Lenders and (z) the
Company redeems in cash, as provided in Section 5.2 of the
Warrants, the number of Warrants which any Lender holding such
Warrants requests the Company in writing to redeem.
(d) Application of Payments. Each repayment or prepayment of less than
all the outstanding aggregate principal amount of the Tranche A Notes shall
be applied pro rata to all the Tranche A Notes according to their respective
outstanding principal amounts. The principal amount of each payment pursuant
to Section 2.04(b) or 2.04(c) shall be applied to reduce ratably the
remaining payments required by Section 2.04(a). No payment pursuant to
Section 2.04(a)
24
<PAGE>
or 2.04(c) shall (except as reflected in any determination of Excess Cash
Flow) reduce the amount of any payment required by Section 2.04(b).
ARTICLE 3
TRANCHE B LOANS AND WARRANTS
Section 3.01. Tranche B Loans. Upon the terms and subject to the
conditions set forth herein, NationsCredit agrees to make one floating rate
loan to the Company on the Closing Date pursuant to this Section 3.01 in a
principal amount equal to its Tranche B Commitment (such loan, or any portion
thereof assigned to any other Lender in accordance with Section 12.06, a
"Tranche B Loan"). Tranche B Loans are not revolving in nature and amounts of
such Loans repaid or prepaid may not be reborrowed. The Tranche B Commitment
shall terminate at the close of business on the Closing Date.
Section 3.02. Tranche B Notes. Each Tranche B Loan shall be evidenced
by a Tranche B Note of the Company substantially in the form of Exhibit B
(each such note, a "Tranche B Note"), dated the Closing Date in a principal
amount equal to the initial principal amount of such Tranche B Loan, duly
executed and delivered by the Company and payable to the Lender of such
Tranche B Loan.
Section 3.03. Interest on the Tranche B Loans. Each Tranche B Loan
shall bear interest on its principal amount outstanding from the Closing Date
at the rate determined as set forth in the Tranche B Note in respect thereof.
Interest shall be payable monthly in arrears as set forth therein.
Section 3.04. Repayments and Prepayments of Tranche B Notes. (a)
Mandatory Scheduled Payments. There shall become due and payable and the
Company shall repay an aggregate principal amount of the Tranche B Notes on
each Quarterly Date, commencing with the earlier of (i) the second Quarterly
Date following the fourth anniversary date of the Closing Date and (ii) the
first Quarterly Date following the date on which the Tranche A Notes shall
have been repaid in their entirety, an aggregate principal amount of the
Tranche B Notes equal to the applicable installment amount set forth below
(or, if less, the aggregate outstanding principal amount of the Tranche B
Notes), in each case together with accrued and unpaid interest on the
principal amount being repaid to and but excluding the date of payment:
25
<PAGE>
Installment Principal Amount
------------ -----------------
Nos. 1-8 $250,000
(b) Mandatory Incremental Prepayments.
(i) There shall become due and payable, and the Company shall
prepay, on the 90th day following the last day of each Fiscal Year
beginning with the Fiscal Year ending December 31, 1997, an
aggregate principal amount of the Tranche B Notes equal to the
amount (if any) by which (x) 35%, in the case of the Fiscal Year
ending December 31, 1997, and 75%, in the case of any Fiscal Year
thereafter, of Excess Cash Flow for such Fiscal Year (or, in the
case of the payment for the first such period, for the period
beginning on the Closing Date and ending on the last day of such
Fiscal Year) exceeds (y) the amount (if any) applied to the
repayment of Tranche A Notes on such date in accordance with
Section 3.04(b)(i) (or, if less, the aggregate outstanding
principal amount of the Tranche B Notes).
(ii) On the date on which the Company or any of its
Subsidiaries receives any payment which constitutes Major Casualty
Proceeds, the amount of such payment shall be applied to prepay
outstanding Tranche B Loans in an aggregate principal amount equal
to the amount (if any) by which the amount of such payment exceeds
the amount (if any) of such payment applied to the repayment of
Tranche A Notes on such date in accordance with Section 3.04(b)(ii)
(or, if less, the aggregate outstanding principal amount of the
Tranche B Notes), unless the Required Lenders shall otherwise
direct (in which case the amount of such payment shall be deposited
into the Insurance Account to be held and applied in accordance
with Section 5 of the Company Security Agreement).
(iii) Promptly upon receipt thereof by the Company or any
Subsidiary, 100% of the Net Cash Proceeds received in respect of
any Asset Sale shall be applied to prepay outstanding Tranche B
Loans in an aggregate principal amount equal to the amount (if any)
by which the amount of such Net Cash Proceeds exceeds the amount
(if any) of such Net Cash Proceeds applied to prepay Tranche A
Loans in accordance with Section 3.04(b)(iii) (or, if less, the
aggregate outstanding principal amount of the Tranche B Loans).
(iv) Promptly upon receipt thereof by Holdings or any of its
Subsidiaries, 100% of the Net Cash Proceeds from the issuance and sale of
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common stock or other equity securities of Holdings or any of its
Subsidiaries after the Closing Date shall be applied to prepay
outstanding Tranche B Loans in an aggregate principal amount equal
to the amount (if any) by which the amount of such proceeds exceeds
the amount (if any) of such Net Cash Proceeds applied to prepay
Tranche A Loans in accordance with Section 3.04(b)(iv) (or, if
less, the aggregate outstanding principal amount of the Tranche B
Loans).
(v) Any prepayment of the Tranche B Notes in whole under this
Section 3.04(b) shall be made together with accrued and unpaid
interest on the principal amount being prepaid to but excluding the
date of payment.
(c) Optional Prepayments.
(i) From and after the date on which the Company has paid the
Tranche A Notes in full, the Company may prepay the Tranche B Notes
in whole or in part (in principal amounts of $100,000 or in any
integral multiple of $10,000 in excess thereof) upon prior
revocable written notice to the Lenders, by paying an amount equal
to the Applicable Premium Amount of the aggregate principal amount
being prepaid together, in the case of any prepayment of the
Tranche B Notes in whole, with accrued and unpaid interest on the
principal amount being prepaid to but excluding the date of payment.
(ii) Notwithstanding the foregoing, the Company may not prepay the
Tranche B Notes in whole pursuant to this Section 3.04(c) with the
proceeds of other Debt unless simultaneously with such prepayment
(x) the Company (A) prepays any outstanding balance of the Tranche
A Notes in accordance with Section 2.04(c) and (B) repays all
Working Capital Loans and terminates the Working Capital
Commitments, (y) all Letters of Credit are terminated with the
consent of the respective beneficiaries thereunder or cash
collateral is deposited to cover the undrawn balance of each Letter
of Credit pursuant to arrangements satisfactory to the Required
Lenders and (z) the Company redeems in cash, as provided in Section
5.2 of the Warrants, the number of Warrants which any Lender
holding such Warrants requests the Company, in writing, to redeem.
(d) Application of Payments. Each payment or prepayment of less than
all the outstanding aggregate principal amount of the Tranche B Notes shall
be applied pro rata to all the Tranche B Notes according to their respective
outstanding principal amounts. The principal amount of each payment pursuant
to Section 3.04(b) or 3.04(c) shall be applied to reduce ratably the remaining
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payments required by Section 3.04(a). No payment pursuant to Section 3.04(a)
or 3.04(c) shall (except as reflected in any determination of Excess Cash
Flow) reduce the amount of any payment required by Section 3.04(b).
Section 3.05. Warrants. On the Closing Date, the Company shall issue
to NationsCredit, in consideration for making the initial Tranche B Loan,
warrants exercisable for shares of Company Non-Voting Common Stock equivalent
to 10% of the Company Common Stock on a fully diluted basis (the "Warrants").
The Warrants shall be substantially in the form of Exhibit D hereto, and
shall be duly executed and registered in such name or names and in such
denominations as NationsCredit shall have notified the Company not less than
one Business Day before the Closing Date. The Company and NationsCredit agree
that, for Federal income tax purposes, (i) the initial Tranche B Loans and
the Warrants constitute an investment unit and (ii) the aggregate issue price
of the Tranche B Loans is $1,850,000 and the aggregate purchase price for the
Warrants is $150,000. None of the Company, Holdings nor any Lender shall
voluntarily take any action inconsistent with the agreement set forth in the
immediately preceding sentence.
ARTICLE 4
WORKING CAPITAL LOANS
Section 4.01. Working Capital Loans and Commitments. Upon the terms and
subject to the conditions set forth herein, each Lender severally and not
jointly agrees to make working capital loans ("Working Capital Loans") from
time to time to the Company in an aggregate principal amount at any time
outstanding not to exceed such Lender's Working Capital Commitment. Each
Working Capital Borrowing shall be in an aggregate amount of $50,000 or an
integral multiple of $10,000 in excess thereof. No more than three Working
Capital Borrowings shall be made within any week beginning on Monday of such
week and ending on the last Business Day of such week. Within the foregoing
limits, the Company may borrow under this Section 4.01, prepay or repay
Working Capital Loans as required under Section 4.05(b) or to the extent
permitted by Section 4.06, and reborrow pursuant to this Section 4.01.
Section 4.02. Working Capital Notes. The Working Capital Loans of each
Lender shall be evidenced by a single Working Capital Note, substantially in
the form of Exhibit C (each such note, a "Working Capital Note"), dated the
Closing Date in an aggregate principal amount equal to the amount of such
Lender's Working Capital Commitment, duly executed and delivered and payable
to such Lender. Each Lender shall record the date and amount of each Working
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Capital Loan made by it and the date and amount of each payment of principal
made by the Company with respect thereto, and prior to any transfer of its
Working Capital Note shall endorse on Schedule A thereto (or any continuation
thereof) forming a part thereof appropriate notations to evidence the
foregoing information with respect to each such Working Capital Loan then
outstanding; provided that the failure of any Lender to make any such
recordation or endorsement shall not affect the obligations of the Company
hereunder or under the Working Capital Notes. Each Lender is hereby
irrevocably authorized by the Company so to endorse its Working Capital Note
and to attach to and make a part of its Working Capital Note a continuation
of any such schedule as and when required.
Section 4.03. Interest on the Working Capital Loans. Interest on the
Working Capital Loans shall accrue on the aggregate unpaid principal amount
thereof at the rate determined as set forth in the Working Capital Note with
respect thereto. Interest shall be payable monthly in arrears as set forth
therein.
Section 4.04. Advance Working Capital Loans. (a) Except with respect
to any Working Capital Borrowing made on the Closing Date, the Company shall
give each Lender notice (a "Notice of Borrowing") not later than 2:00 P.M.
(New York City time) on the Business Day immediately preceding each Working
Capital Borrowing, signed by the chief financial officer or treasurer of the
Company, specifying the date (which shall be a Business Day) and aggregate
principal amount of such Working Capital Borrowing, and certifying as to the
satisfaction of the conditions set forth in Sections 5.02(b), 5.02(c) and
5.02(d).
(b) Not later than 1:00 P.M. (New York City time) on the date of each
borrowing specified in a Notice of Borrowing, each Lender shall make
available its ratable share of such Working Capital Borrowing, in Federal or
other immediately available funds, to the Company Account.
Section 4.05. Mandatory Repayments and Prepayments. (a) The Working
Capital Commitment of each Lender shall terminate at the opening of business
on the earlier of (i) July 1, 2003 and (ii) the date on which both the
Tranche A Notes and the Tranche B Notes shall have been paid in full (the
"Termination Date"), and there shall become due and the Company shall pay on
the Termination Date, the entire outstanding principal amount of each Working
Capital Loan, together with accrued and unpaid interest thereon to but
excluding the Termination Date.
(b) (i)If at any time the aggregate Working Capital Outstandings exceed
the Borrowing Base, then, on the next succeeding Business Day, the Company
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shall prepay Working Capital Loans or cash collateralize Letter of Credit
Liabilities, or both, in an aggregate amount equal to such excess.
(ii) In addition, the Company shall from time to time repay
or prepay Working Capital Loans so that for a period of 30
consecutive calendar days during the first quarter of each Fiscal
Year ended after December 31, 1997 no Working Capital Loans shall
be outstanding on each day during such period.
Section 4.06. Optional Prepayments. The Company may prepay the Working
Capital Loans in whole or in part (in minimum principal amounts of $100,000
or in any larger integral multiple of $10,000) upon at least one Business
Day's prior revocable written notice to the Lenders, in an amount equal to
100% of the principal amount being prepaid.
Section 4.07. Application of Payments. Each payment or prepayment of
less than all the outstanding aggregate principal amount of the Working
Capital Loans shall be applied pro rata to all the Working Capital Loans
according to their respective outstanding principal amounts.
Section 4.08. Letters of Credit. (a) Issuance of Letters of Credit;
Lender Reimbursement Agreement.
(i) Subject to the terms and conditions hereof and such additional
terms and conditions as the LC Issuer shall require, the LC Issuer
agrees to issue from time to time prior to the 30th day prior to
the Termination Date, letters of credit for the account of the
Company. No Letter of Credit issued hereunder shall have a term (i)
in excess of one year from the date of issuance thereof or (ii)
extending beyond the 10th day prior to the Termination Date.
(ii) Each Lender agrees for the benefit of the LC Issuer that
in the event that the Company fails to reimburse the LC Issuer on
the date of any drawing under any Letter of Credit for the full
amount of such drawing, each Lender shall be obligated to pay to
the LC Issuer, for value on the second Business Day following such
drawing to the relevant account notified by the LC Issuer to the
Lenders in the notice referred to in the following sentence, an
amount equal to its pro rata share (determined by reference to the
Working Capital Commitments of each of the Lenders) of such
unreimbursed amount. The LC Issuer shall notify each Lender of any
such unreimbursed amount (together with the account to which such
Lender's share in respect thereof is to be paid) not later than
11:00 A.M.
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(New York City time) on the Business Day immediately preceding the
date that payment by such Lender is due.
(iii) In consideration of the foregoing, the parties hereto
agree (and the LC Issuer by accepting the benefits conferred on it
hereby shall be deemed to have agreed) that upon the issuance of
any Letter of Credit, the LC Issuer shall be deemed, without
further action on the part of the LC Issuer or of any party hereto,
to have sold to each Lender and each Lender shall be deemed,
without further action by the LC Issuer or any party hereto, to
have purchased from the LC Issuer, a participation in such Letter
of Credit and the related Letter of Credit Liabilities, in the
amount required so that the participations of the Lenders therein
shall be in proportion to their respective Working Capital
Commitments.
(iv) The several obligations of the Lenders to the LC Issuer
under this Section 4.08(a) shall be absolute, irrevocable and
unconditional under any and all circumstances whatsoever and shall
not be affected by any circumstance, including, without limitation,
(1) any set-off, counterclaim, recoupment, defense or other right
which any such Lender or any other Person may have against the LC
Issuer or any other Person for any reason whatsoever; (2) the
occurrence or continuance of a Default or the termination of the
Working Capital Commitments; (3) any adverse change in the
condition (financial or otherwise) of the Company or any other
Person; (4) any breach of any Financing Document by any party
thereto; (5) the fact that any condition precedent to the issuance
of, or the making of any payment under, any Letter of Credit was
not in fact met; (6) any violation or asserted violation of law by
any Lender or any affiliate thereof; or (7) to the extent permitted
under applicable law, any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing. Each
payment by each Lender to the LC Issuer for its own account shall
be made without any offset, abatement, withholding or reduction
whatsoever.
(v) Each Lender acknowledges and agrees that the LC Issuer
will rely upon the provisions of this Section 4.08(a) in issuing
any Letter of Credit for the account of the Company.
(b) Reimbursement Obligations of the Company. The Company agrees, as a
separate obligation, independent from any obligation it may have to reimburse
the LC Issuer, that if at any time any Lender shall make a payment to the LC
Issuer pursuant to Section 4.08(a)(ii), the Company shall be irrevocably and
unconditionally obligated to reimburse such Lender within two Business
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Days after such payment is made by such for the amount of such payment in
like currency, without presentment, demand, protest or other formalities of
any kind. Each Lender shall give the Company prompt notice of any such
payment made by such Lender; provided that failure by any Lender to give any
such notice shall not affect the obligations of the Company pursuant to this
Section 4.08(b). All such amounts paid by such Lender shall bear interest,
payable on demand, (i) for each day from the day such payment is made to and
including the second Business Day thereafter, at the rate applicable to
Working Capital Loans for such day and (ii) thereafter, until the Company
reimburses such Lender therefor, at a rate per annum equal to the sum of 2%
plus the rate applicable to Working Capital Loans for such day.
(c) Reimbursement and Other Payments by the Company. The obligations of
the Company to reimburse each Lender pursuant to Section 4.08(b) shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement, under all circumstances
whatsoever, including, without limitation, the following circumstances:
(A) any lack of validity or enforceability of any Letter of
Credit or any related document;
(B) any amendment or waiver of or any consent to departure
from any Letter of Credit or any related document;
(C) the existence of any claim, set-off, defense or other
right which the Company may have at any time against the
beneficiary of any Letter of Credit (or any Person or entity for
whom such beneficiary may be acting), the Agent, the LC Issuer or
any Lender or any other Person or entity, whether in connection
with this Agreement, any other Financing Document or any unrelated
transaction;
(D) any statement or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue
or inaccurate in any respect whatsoever;
(E) payment by the LC Issuer under any Letter of Credit
against presentation of a draft or document which does not comply
with the terms of such Letter of Credit;
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(F) any affiliation between the LC Issuer and any Lender; or
(G) to the extent permitted under applicable law, any other
circumstance or happening whatsoever, whether or not similar to any
of the foregoing.
(d) Notice of Issuance. The Company shall give the Agent notice (the
"Notice of Issuance") at least two Business Days before the proposed date of
issuance of any Letter of Credit specifying the stated amount of such Letter
of Credit, the transactions to be supported thereby and any other terms
thereof, all consistent with and subject to this Section 4.08.
(e) Conditions to Issuance of Letters of Credit. The Company shall not
request or permit any Letter of Credit to be issued for its account unless
each of the following conditions shall have been satisfied, in addition to
the conditions set forth in Sections 5.01 and 5.02:
(i) each Lender shall have received the Notice of Issuance
with respect to such Letter of Credit in accordance with Section
4.08(d) and a Borrowing Base Certificate in accordance with Section
7.01(l);
(ii) immediately after giving effect to the issuance of such
Letter of Credit, (x) the Letter of Credit Liabilities shall not
exceed $250,000 and (y) the aggregate amount of the Working Capital
Outstandings for all Lenders does not exceed the lesser of (1) the
Borrowing Base and (2) the aggregate amount of the Working Capital
Commitments;
(iii) the fact that, immediately before and immediately after
the issuance of such Letter of Credit, no Default shall have
occurred and be continuing; and
(iv) the fact that the representations and warranties of the
Company or Holdings contained in the Financing Documents (other
than (x) the representations and warranties set forth in Section
6.19 with respect to any Letter of Credit issued after the Closing
Date and (y) any representation and warranty made as of a specific
date, which date has occurred prior to the date of issuance of such
Letter of Credit) shall be true in all material respects on and as
of the date of issuance of such Letter of Credit (or the fact that
the Required Lenders shall have waived such condition with respect
to all or any of such representations and warranties in accordance
with Section 12.05).
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The issuance of each Letter of Credit shall be deemed to be a
representation and warranty by the Company to the Lenders and the Agent as of
the date of such issuance as to the facts specified in clauses (ii), (iii)
and (iv) above.
Section 4.09. Obligation to Make Working Capital Loans. If any Lender
shall fail to perform its obligation to make a Working Capital Loan
hereunder, the amount of the Working Capital Commitment of such Lender shall
be assumed by the other Lenders ratably in proportion to their Working
Capital Commitments so that the aggregate amount of the Working Capital
Commitments to make any Working Capital Loans provided for herein shall not
be reduced and the Working Capital Commitment of each other Lender shall be
appropriately adjusted. No such assumption and adjustment shall relieve any
Lender from its Working Capital Commitment, and each such defaulting Lender
agrees to repay on demand the other Lenders that have assumed such Working
Capital Commitment any Working Capital Loans made by such other Lenders in
respect thereof, together with interest thereon from the date of such Loan to
but excluding the date of repayment at the rate applicable to such Working
Capital Loans plus 1%.
ARTICLE 5
CONDITIONS
Section 5.01. Conditions to Closing. The obligation of each Lender to
make Loans on the Closing Date shall be subject to the satisfaction of the
following conditions precedent:
(a) receipt by the Agent of counterparts hereof signed by each of the
parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex or other written confirmation from
such party of execution of a counterpart hereof by such party);
(b) receipt by NationsCredit of a duly executed Tranche A Note, Tranche
B Note and Working Capital Note for its account, each in the form provided
for herein, and of certificates representing the Warrants, all duly executed
and registered in such name or names and in such denominations as
NationsCredit shall have requested;
(c) receipt by the Agent of duly executed counterparts of each Security
Document required to be effective on the Closing Date, together with evidence
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satisfactory to it in its sole good faith discretion of the effectiveness of
the security contemplated thereby;
(d) receipt by NationsCredit of evidence satisfactory to it in its sole
good faith discretion of the satisfaction (without waiver) of all other
conditions to the closing of the Acquisition on the Closing Date, and that
all transactions contemplated by the Operative Documents to be consummated on
the closing date of the Acquisition will take place prior to or
simultaneously with the transactions hereunder contemplated to take place on
the Closing Date, and satisfaction of NationsCredit in its sole good faith
discretion with the terms and conditions of the Acquisition Documents;
(e) receipt by NationsCredit of (i) evidence satisfactory to it in its
sole good faith discretion of the effectiveness of all other Operative
Documents, each of which shall be in form and substance satisfactory to
NationsCredit in its sole good faith discretion, and (ii) each opinion
required to be delivered pursuant to the Acquisition Documents in connection
with the Acquisition, with a letter from each Person delivering any such
opinion authorizing reliance thereon by the Agent and the Lenders, all in
form and substance reasonably satisfactory to NationsCredit;
(f) receipt by NationsCredit of evidence satisfactory to it that
Holdings shall have issued shares of Holdings Common Stock to Security
Capital for aggregate cash proceeds of not less than $1,500,000 and
contributed all of such cash proceeds to the capital of the Company;
(g) receipt by the Agent of opinions of (i) Morgan, Lewis & Bockius LLP,
counsel for the Company and Holdings, substantially in the form of Exhibit I
and (ii) Moye, Giles, O'Keefe, Vermeire & Gorrel LLP, counsel for the Company
and Holdings with respect to Colorado law, substantially in the form of
Exhibit P (by its execution and delivery of this Agreement, each of the
Company and Holdings authorizes and directs such counsel to deliver such
opinions to the Agent);
(h) receipt by the Agent of an opinion of Davis Polk & Wardwell, special
counsel for the Agent, substantially in the form of Exhibit J, and covering
such additional matters relating to the transactions contemplated hereby as
NationsCredit may reasonably request;
(i) receipt by NationsCredit, including in its capacity as Agent, of all
fees and any other amounts due and payable hereunder (including fees and
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expenses payable pursuant to Section 10.04) of which the Company has received
notice;
(j) receipt by NationsCredit of the option agreement between the Company
and Gay Burke that is in form and substance satisfactory to NationsCredit;
(k) receipt by NationsCredit of any reasonable information it may
request concerning the financial condition, results of operations,
liabilities, (contingent and otherwise, including with respect to
environmental liabilities and employee and retiree benefits) and prospects
of, and the financial reporting and accounting systems and the management
information systems of, the Company and confirmation satisfactory to
NationsCredit, after consultation with management of the Company, Deloitte &
Touche, as independent public accountants for the Company and any independent
environmental consultant or independent account retained by NationsCredit, of
all such information; and satisfaction of NationsCredit in its sole good
faith discretion with all such information;
(l) satisfaction of NationsCredit in its sole good faith discretion as
to the absence of any material adverse change in any aspect of the business,
operations, properties, prospects or condition (financial or otherwise) of
the Company and its Subsidiaries, or any event or condition which is
reasonably likely to result in such a material adverse change;
(m) receipt by NationsCredit of a certificate signed by the chief
financial officer or treasurer of the Company to the effect that, both before
and immediately after the making of the Loans, the issuance of the Warrants
and the consummation of the Acquisition and the other transactions
contemplated hereunder to take place on the Closing Date, (i) no Default
shall have occurred and be continuing and (ii) the representations and
warranties of Acquisition Corp. made in the Operative Documents to which
Acquisition Corp. is a party are true in all material respects;
(n) receipt by NationsCredit of the certificate referred to in Section
7.04(b);
(o) receipt by NationsCredit of employment contracts between the Company
and each Management Stockholder that are in form and substance satisfactory
to NationsCredit in its sole good faith discretion, to include provisions
relating to cash and non-cash compensation, stock repurchase and non-compete;
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(p) receipt by NationsCredit of (i) the financial statements and pro
forma balance sheet referred to in Sections 6.04(a), 6.04(b) and 6.04(c),
(ii) a statement of sources and uses of funds covering all payments
reasonably expected to be made by the Company in connection with the
transactions contemplated by the Operative Documents to be consummated on the
Closing Date, including an itemized estimate of all fees, expenses and other
closing costs in an aggregate amount not to exceed the aggregate amount
provided for such fees, expenses and closing costs in the commitment letter
dated June 10, 1997 from NationsCredit to the Investors and (iii) payment
instructions with respect to each wire transfer to be made by the Agent,
Holdings or the Company on the Closing Date setting forth the amount of such
transfer, the purpose of such transfer, the name and number of the account to
which such transfer is to be made, the name and ABA number of the bank or
other financial institution where such account is located and the name and
telephone number of an individual that can be contacted to confirm receipt of
such transfer;
(q) receipt by the Agent of the written consent of the Seller to the
assignment by Acquisition Corp. of its rights and claims under the
Acquisition Documents to the Agent as collateral under the Security Documents;
(r) receipt by the Agent of evidence satisfactory to it that the
certificate of incorporation of the Company and Holdings shall each include
provisions substantially in the form of Exhibit P;
(s) receipt by the Agent of evidence satisfactory to it in its sole good
faith discretion that (i) all outstanding obligations of the Company under
the Revolving Credit Agreement dated as of April 19, 1996 by and among
Norwest Bank Colorado, National Association and the Seller and all
agreements, documents and instruments executed in writing in connection
therewith have been paid in full, all commitments thereunder have been
terminated and all Liens securing such obligations and all guarantees thereof
have been released and (ii) all outstanding obligations of the Company
pursuant to the promissory note payable to Bardeen Investment Funds, LLC
dated May 29, 1997 in the principal amount of $500,000 have been paid in full
and all Liens securing such obligations have been released; and
(t) receipt by the Agent, for each of Holdings, the Company and Security
Capital, of (i) a certified copy of the certificate of incorporation as in
effect on the Closing Date, (ii) a short-form good standing certificate,
(iii) a bring-down telegram, (iv) a certified copy of the by-laws as in
effect on the Closing Date, (v) a certified copy of the resolutions of the
board of directors authorizing the execution, delivery and performance of the
Financing Documents and the
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other Operative Documents and (vi) an incumbency certificate, all in form and
substance satisfactory to the Agent in its sole good faith discretion.
The documents referred to in this Section shall be delivered to the Agent no
later than the Closing Date. The certificates and opinions referred to in
this Section shall be dated the Closing Date.
Section 5.02. Conditions to Each Loan. The obligation of any Lender to
make a Loan on the occasion of any borrowing thereof (including on the
Closing Date) is subject to the satisfaction of the following additional
conditions:
(a) in the case of a Working Capital Borrowing, receipt by each Lender
of a Notice of Borrowing in accordance with Section 4.04 and a Borrowing Base
Certificate as of the close of business on the Business Day immediately
preceding the date of such borrowing and, in the case of the Borrowing Base
Certificate delivered in connection with the initial borrowing, on a pro
forma basis after giving effect to the Acquisition;
(b) the fact that, immediately after such borrowing, the aggregate
Working Capital Outstandings will not exceed the lesser of (i) the Borrowing
Base and (ii) the aggregate amount of the Working Capital Commitments (or, if
such borrowing is on the Closing Date, an amount not to exceed $500,000);
(c) the fact that, immediately before and after such borrowing, no
Default shall have occurred and be continuing; and
(d) the fact that the representations and warranties of the Company,
Holdings and Security Capital contained in the Financing Documents to which
each is a party (other than (x) the representations and warranties set forth
in Section 6.19, with respect to any Working Capital Borrowing made after the
Closing Date and (y) any representation and warranty made as of a specific
date, which date has occurred prior to the date of such Borrowing) shall be
true in all material respects on and as of the date of such borrowing (or the
fact that the Required Lenders shall have waived such condition with respect
to all or any of such representations and warranties in accordance with
Section 12.05).
Each borrowing hereunder shall be deemed to be a representation and
warranty by the Company on the date of such borrowing as to the facts
specified in Sections 5.02(b), 5.02(c) and 5.02(d).
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES
The Company and Holdings, jointly and severally, represent and warrant
(including, in the case of any such representation and warranty made or
deemed made before the consummation of the Acquisition, at the time such
representation and warranty is made or deemed made and immediately after
giving effect to the consummation of the Acquisition) that:
Section 6.01. Corporate Existence and Power. Each of the Company and
Holdings is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, and has all corporate
powers and all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted and as will be
conducted immediately after the Acquisition. The Company is qualified to do
business as a foreign corporation in each jurisdiction in which the Company
is required to be so qualified, except in those jurisdictions in which the
failure to so qualify would not reasonably be expected to have a Material
Adverse Effect and except for any qualification to do business as a foreign
corporation in Colorado, which qualification will be in full force and effect
at all times on and after the 30th day after the Closing Date.
Section 6.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by each of the Company
and Holdings of the Operative Documents to which it is a party are within the
Company's or Holdings' (as the case may be) corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official (other
than the filing of UCC-1 financing statements, all of which will be made on
or within three Business Days after the Closing Date and will be in full
force and effect at all times thereafter) and do not contravene, or
constitute a default under, any provision of applicable law or regulation or
of the certificate of incorporation or by-laws of the Company or any of its
Subsidiaries or Holdings or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Company or any of its
Subsidiaries or Holdings (except for such contraventions and defaults under
agreements, judgments, injunctions, orders, decrees or other instruments
binding upon the Company or any of its Subsidiaries or Holdings that in the
aggregate would not reasonably be expected to have a Material Adverse Effect)
or result in the creation or imposition of any Lien (other than the Liens
created by the Security Documents) on any asset of the Company or any of its
Subsidiaries or Holdings.
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Section 6.03. Binding Effect; Liens of Security Documents. (a) Each of
the Operative Documents to which the Company is a party (other than the
Warrants and the Notes) constitutes a valid and binding agreement of the
Company, and each of the Warrants and the Notes, when executed and delivered
in accordance with this Agreement, will constitute a valid and binding
obligation of the Company, in each case enforceable in accordance with its
respective terms subject, however, to general principles of equity and to
applicable bankruptcy, fraudulent transfer, insolvency, reorganization,
moratorium and other similar laws from time to time in effect and affecting
the enforcement of creditors' rights generally (regardless of whether such
enforcement is considered in a proceeding in equity or at law). The Company
has reserved and will keep available for issuance upon exercise of the
Warrants the total number of Warrant Shares deliverable upon exercise of all
Warrants from time to time outstanding. The issuance of the Warrant Shares
has been duly and validly authorized and, when issued and sold in accordance
with the Warrants, the Warrant Shares will be duly and validly issued, fully
paid and nonassessable and free of preemptive rights.
(b) Each of the Operative Documents to which Holdings is a party
constitutes a valid and binding agreement of Holdings, in each case
enforceable in accordance with its respective terms subject, however, to
general principles of equity and to applicable bankruptcy, fraudulent
transfer, insolvency, reorganization, moratorium and other similar laws from
time to time in effect and affecting the enforcement of creditors' rights
generally (regardless of whether such enforcement is considered in a
proceeding in equity or at law).
(c) The Security Documents create valid security interests in the
Collateral purported to be covered thereby, which security interests are and
will remain perfected security interests (subject to the filing of UCC
continuation statements), prior to all other Liens other than Permitted
Liens. Each of the representations and warranties made by the Company or
Holdings in the Security Documents to which each is a party is true and
correct in all material respects; provided that any representation and
warranty made as of a specific date shall be made by the Company pursuant to
this Section 6.03(c) only on such specific date.
Section 6.04. Financial Information. (a) The consolidated balance sheet
of the Seller and its Consolidated Subsidiaries as of January 31, 1997 and
the related consolidated statements of operations, stockholders' equity and
cash flows for the Fiscal Year then ended, reported on by Ehrardt, Keef,
Steiner & Hottman P.C., copies of which have been delivered to each of the
Lenders, fairly present in all material respects, in conformity with GAAP,
the consolidated financial position of the Company and its Consolidated
Subsidiaries as of such date and
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their consolidated results of operations, changes in stockholders' equity and
cash flows for such period.
(b) The unaudited consolidated balance sheet of the Seller and its
Consolidated Subsidiaries as of April 30, 1997 and the related unaudited
consolidated statements of operations and cash flows for the three months
then ended, copies of which have been delivered to each of the Lenders,
fairly present in all material respects, in conformity with GAAP applied on a
basis consistent with the financial statements referred to in Section
6.04(a), the consolidated financial position of the Company and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for the three months then ended (subject to normal
year-end adjustments and the absence of footnotes).
(c) The pro forma balance sheet of the Company as of April 30, 1997,
copies of which have been delivered to each of the Lenders, fairly presents,
in conformity with GAAP applied on a basis consistent with the financial
statements referred to in Section 6.04(a), the consolidated financial
position of the Company as of such date, adjusted to give effect (as if such
events had occurred on such date) to (i) the transactions contemplated by the
Acquisition Documents and the Investors Subscription Agreement,(ii) the
making of the Loans, the issuance by the Company of the Warrants and the
Management Options, and the issuance and sale by Holdings of shares of common
stock as described in Section 5.01(f),(iii) the application of the proceeds
therefrom as contemplated by the Acquisition Documents and the Financing
Documents and (iv)the payment of all legal, accounting and other fees related
thereto to the extent known at the time of the preparation of such balance
sheet. As of the date of such balance sheet and the date hereof, the Company
had and has no material liabilities, contingent or otherwise, including
liabilities for taxes, long-term leases or forward or long-term commitments,
which are not properly reflected on such balance sheet.
(d) The information contained in the most recently delivered Borrowing
Base Certificate is complete and correct and the amounts shown therein as
"Eligible Receivables" and "Eligible Inventory" have been determined as
provided in the Financing Documents.
(e) Since January 31, 1997, there has been no material adverse change in
the business, operations, properties, prospects or condition (financial or
otherwise) of the Company and its Consolidated Subsidiaries, taken as a whole.
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(f) Each of Acquisition Corp. and Holdings was organized to effect the
Acquisition, and except in connection therewith (and as contemplated by this
Agreement) has no significant assets or liabilities.
Section 6.05. Litigation. There is no action, suit or proceeding pending
against, or to the knowledge of the Company or Holdings threatened against or
affecting, the Company or any of its Subsidiaries or Holdings before any
court or arbitrator or any governmental body, agency or official in which
there is a reasonable possibility of an adverse decision which would
materially adversely affect the business, consolidated financial position or
consolidated results of operations of the Company and its Consolidated
Subsidiaries or which in any manner draws into question the validity of any
of the Operative Documents. To the knowledge of the Company, there is no
action, suit or proceeding pending against, or to the knowledge of the
Company or Holdings threatened against or affecting, any party to any of the
Operative Documents (other than the Company and Holdings) before any court or
arbitrator or any governmental body, agency or official which in any manner
draws into question the validity of any of the Operative Documents.
Section 6.06. Ownership of Property; Liens. On and as of the Closing
Date, after giving effect to the Acquisition, the Company is the lawful owner
of, has good and marketable title to and is in lawful possession of, or has
valid leasehold interests in, all properties and other assets (real or
personal, tangible, intangible or mixed) purported to be owned or leased (as
the case may be) by the Company on the balance sheet referred to in Section
6.04(c), and none of its properties and assets is subject to any Liens,
except Permitted Liens. The Company and its Subsidiaries conduct their
business without infringement or claim of infringement of any material
license, patent, trademark, trade name, service mark, copyright, trade secret
or other intellectual property right of others (except for such infringements
or claims of infringement that in the aggregate would not reasonably be
expected to have a Material Adverse Effect) and to the knowledge of the
Company, except as set forth on Schedule 6.06, there is no infringement or
claim of infringement by others of any material license, patent, trademark,
trade name, service mark, copyright, trade secret or other intellectual
property right of the Company or any of its Subsidiaries.
Section 6.07. No Default. No Default or Event of Default has occurred
and is continuing and neither the Company nor any of its Subsidiaries is in
default under or with respect to any material contract, agreement, lease or
other instrument to which it is a party or by which its property is bound or
affected (except for such defaults that in the aggregate would not reasonably
be expected to have a Material Adverse Effect).
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Section 6.08. No Burdensome Restrictions. No contract, lease, agreement
or other instrument to which the Company or any of its Subsidiaries is a
party or by which any of its property is bound or affected, no charge,
corporate restriction, judgment, decree or order and no provision of
applicable law or governmental regulation is reasonably likely to have a
Material Adverse Effect.
Section 6.09. Labor Matters. There are no strikes or other labor
disputes pending or, to the best knowledge of the Company, threatened,
against the Company or any of its Subsidiaries. Hours worked and payments
made to the employees of the Company and its Subsidiaries have not been in
violation of the Fair Labor Standards Act or, in any material respect, any
other applicable law dealing with such matters. All payments due from the
Company or any of its Subsidiaries, or for which any claim known to the
Company which is reasonably expected to be made against any of them, on
account of wages and employee and retiree health and welfare insurance and
other benefits have been paid or accrued as a liability as required under
GAAP on their books, as the case may be. The consummation of the transactions
contemplated by the Financing Documents and the other Operative Documents
will not give rise to a right of termination or right of renegotiation on the
part of any union under any collective bargaining agreement to which it is a
party or by which it is bound.
Section 6.10. Subsidiaries; Other Equity Investments. The Company has no
Subsidiaries on the date hereof and on the Closing Date. With respect to any
corporate or partnership Subsidiary formed after the Closing Date, each of
such additional corporate or partnership Subsidiaries will be at each time
that this representation is made or deemed to be made after the Closing Date,
a wholly-owned Subsidiary that is a corporation or partnership (as the case
may be) duly organized or formed, validly existing and in good standing under
the laws of its jurisdiction of incorporation or organization, and shall have
all corporate or partnership powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as
then conducted. None of Holdings, the Company or any of its Subsidiaries is
engaged in any joint venture or partnership with any other Person except as
listed on Schedule 6.10.
Section 6.11. Investment Company Act. Neither Holdings nor the Company
is an "investment company" as defined in the Investment Company Act of 1940,
as amended. The consummation of the transactions contemplated by the
Financing Documents do not and will not violate any provision of such Act or
any rule, regulation or order issued by the Securities and Exchange
Commission thereunder.
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Section 6.12. Investment Company Act. Neither Holdings nor the Company
is an "investment company" as defined in the Investment Company Act of 1940,
as amended. The consummation of the transactions contemplated by the
Financing Documents do not and will not violate any provision of such Act or
any rule, regulation or order issued by the Securities and Exchange
Commission thereunder. Margin RegulationsNone of the proceeds from the Loans
have been or will be used, directly or indirectly, for the purpose of
purchasing or carrying any Margin Stock, for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry
any Margin Stock or for any other purpose which might cause any of the loans
under this Agreement to be considered a "purpose credit" within the meaning
of Regulation G, U or X of the Board of Governors of the Federal Reserve
Board.
Section 6.13. Taxes. Holdings' federal tax identification number is
06-1487647 and the Company's federal tax identification number is 06-1487877.
All Federal, state and local tax returns, reports and statements required to
be filed by or on behalf of the Company and its Subsidiaries have been filed
with the appropriate governmental agencies in all jurisdictions in which such
returns, reports and statements are required to be filed, and all taxes
(including real property taxes) and other charges shown to be due and payable
have been timely paid prior to the date on which any fine, penalty, interest,
late charge or loss may be added thereto for nonpayment thereof. All state
and local sales and use taxes required to be paid by the Company or any of
its Subsidiaries have been paid. All Federal and state returns have been
filed by the Company and its Subsidiaries for all periods for which returns
were due with respect to employee income tax withholding, social security and
unemployment taxes, and the amounts shown thereon to be due and payable have
been paid in full or adequate provisions therefor have been made.
Section 6.14. Compliance with ERISA. To the knowledge of the Company,
each member of the ERISA Group has fulfilled its obligations under the
minimum funding standards of ERISA and the Code with respect to each Plan.
Each Plan and Benefit Arrangement is in compliance in all material respects
with the presently applicable provisions of ERISA and each Plan and Benefit
Arrangement meet in all material respects any applicable requirements for
favorable tax treatment under the Code in both form and operation. To the
knowledge of the Company, the Company has not (i) sought a waiver of the
minimum funding standard under Section 412 of the Code in respect of any
Plan, (ii) failed to make any contribution or payment to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement, or made any
amendment to any Plan or Benefit Arrangement, which has resulted or could
result in the imposition of a Lien or the posting of a bond or other security
under ERISA or the Code or (iii) incurred any liability under Title IV of
ERISA other than a liability to the PBGC for premiums under Section 4007 of
ERISA.
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Section 6.15. Brokers. Acquisition Corp. has and will have no obligation
to any Person in respect of any finder's or brokerage fees in connection
herewith or with the Acquisition.
Section 6.16. Related Transactions. The closing of the Acquisition will
occur simultaneously with the making of the initial Loans and purchase of the
Warrants hereunder and no party has waived, without the consent of the
Required Lenders, any condition precedent to their obligations to close as
set forth in the Acquisition Documents. True and complete copies of all of
the Acquisition Documents have been delivered or made available to the Agent,
together with a true and complete copy of each document to be delivered at
the closing of the Acquisition.
Section 6.17. Employment, Shareholders and Subscription Agreements.
Except for the Operative Documents and the other agreements described in
Schedule 6.17, true and complete copies of which have been delivered to the
Lenders, there are no (i) employment agreements covering the management of
the Company and its Subsidiaries, (ii) collective bargaining agreements or
other labor agreements covering any employees of the Company, (iii)
agreements for managerial, consulting or similar services to which the
Company is a party or by which it is bound or (iv) agreements regarding the
Company or Holdings, its assets or operations or any investment therein to
which any stockholder is a party or by which it is bound.
Section 6.18. Full Disclosure. None of the information (financial or
otherwise) furnished by or on behalf of Holdings or the Company to the Agent
or any Lender in connection with the consummation of the transactions
contemplated by any of the Operative Documents contains any untrue statement
of a material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading in the light of the
circumstances under which such statements were made. All financial
projections delivered to the Lenders have been prepared on the basis of the
assumptions stated therein. Such projections represent the Company's good
faith best estimate of the Company's future financial performance as of the
date of delivery of such financial projections and such assumptions are
believed in good faith by the Company to be reasonable in light of current
business conditions.
Section 6.19. Representations and Warranties Incorporated from Other
Operative Documents. As of the Closing Date, each of the representations and
warranties made by the Company in the Operative Documents to which it is a
party are true and correct in all material respects, and such representations
and
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warranties are hereby incorporated herein by reference with the same effect
as though set forth in their entirety herein, as qualified therein.
Section 6.20. Private Offering. Neither Holdings, the Company nor any
Person acting on its or their behalf has offered the Notes or Warrants or any
similar securities for sale to, or solicited any offer to buy any of the same
from, or otherwise approached or negotiated in respect thereof with, any
Person other than the Lenders and not more than five other institutional
investors. Neither Holdings, the Company nor any Person acting on its or
their behalf has taken, or will take, any action which would subject the
issuance or sale of the Notes or the Warrants or Warrant Shares to Section 5
of the Securities Act, other than as provided in the Warrants and the
Warrantholders Rights Agreement.
Section 6.21. Compliance with Environmental Requirements; No Hazardous
Materials. After giving effect to the Acquisition and except as provided on
Schedule 6.21:
(a) Other than in compliance with all applicable Environmental Laws, no
Hazardous Materials are located on any properties now or previously owned,
leased or operated by the Company or any of its Subsidiaries or have been
released into the environment, or deposited, discharged, placed or disposed
of at, on, under or, to the knowledge of the Company, near any of such
properties. No portion of any such property is being used, or has been used
at any previous time, for the disposal, storage, treatment, processing or
other handling of Hazardous Materials (other than processing, use, disposal,
storage, treatment or handling in compliance with all applicable
Environmental Laws), nor is any such property affected in any material
respect by any Hazardous Materials Contamination.
(b) No asbestos or asbestos-containing materials are present on any of
the properties now or previously owned, leased or operated by the Company or
any of its Subsidiaries.
(c) No polychlorinated biphenyls are located on or in any properties now
or previously owned, leased or operated by the Company or any of its
Subsidiaries, in the form of electrical transformers, fluorescent light
fixtures with ballasts, cooling oils or any other device or form other than
non-leaking polychlorinated biphenyls within a transformer, capacitor, or
other piece of equipment or a flourescent light fixture, the presence and
retention of which is permitted by and is maintained in compliance with all
Environmental Laws.
(d) No underground storage tanks are located on any properties now or to
the knowledge of the Company previously owned, leased or operated by the
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Company or any of its Subsidiaries, or were located on any such property and
subsequently removed or filled.
(e) No notice, notification, demand, request for information, complaint,
citation, summons, investigation, administrative order, consent order and
agreement, litigation or settlement with respect to Hazardous Materials or
Hazardous Materials Contamination is pending against the Company or any
Subsidiaries or, to the Company's knowledge, proposed, threatened or
anticipated with respect to or in connection with the operation of any
properties now or previously owned, leased or operated by the Company or any
of its Subsidiaries. All such properties and their existing and, to the
knowledge of the Company, prior uses comply and at all times have complied,
in all material respects, with any applicable governmental requirements
relating to Environmental Laws. There is no condition on any of such
properties which is in violation of any applicable governmental requirements
relating to Hazardous Materials, and neither the Company nor any of its
Subsidiaries has received any communication from or on behalf of any
governmental authority that any such condition exists. None of such
properties nor any property to which the Company has, directly or indirectly,
transported or arranged for the transportation of any material is listed or,
to the Company's knowledge, proposed for listing on the National Priorities
List promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or on
any similar federal, state or foreign list of sites requiring investigation
or cleanup, nor, to the knowledge of the Company, is any such property
anticipated or threatened to be placed on any such list.
(f) There has been no environmental investigation, study, audit, test,
review or other analysis conducted of which the Company has knowledge in
relation to the current or prior business of the Company or any property or
facility now or previously owned, leased or operated by the Company or any of
its Subsidiaries which has not been delivered to the Lenders at least five
days prior to the date hereof.
(g) For purposes of this Section 6.21, the terms "Company" and
"Subsidiary" shall include any business or business entity (including a
corporation) which is, in whole or in part, a predecessor of the Company or
any Subsidiary.
(h) For purposes of this Section 6.21, any representation or warranty
made with respect to properties not presently owned, leased or operated by
the Company or any of its Subsidiaries (other than the representations made
in the first and last sentences of clause (e) and in clause (f)) is made only
with respect to conditions existing, activities occurring or compliance with
governmental
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requirements, as the case may be, during the period of such ownership,
leasing or operation.
Section 6.22. Initial Capitalization. Set forth on Schedule 6.22 is a
schedule of the initial capitalization of the Company and of Holdings after
giving effect to the transactions contemplated to take place on the Closing
Date, the issuance of the Warrant Shares upon exercise of the Warrants and
the issuance of the Option Shares upon exercise of the Management Options,
specifying each class of interest held and the amount and holder thereof.
Section 6.23. Real Property Interests. Except for the ownership,
leasehold or other interests set forth in Schedule 6.23, the Company and its
Subsidiaries have, as of the Closing Date, no ownership, leasehold or other
interest in real property.
ARTICLE 7
AFFIRMATIVE COVENANTS
The Company (and in the cases of Sections 7.08, 7.09 and 7.11, Holdings)
agrees that, so long as any Lender has any Commitment hereunder or any amount
payable under any Note remains unpaid:
Section 7.01. Financial Statements and Other Reports. The Company will
maintain a system of accounting established and administered in accordance
with sound business practices to permit preparation of financial statements
in accordance with GAAP, and will deliver to each of the Lenders:
(a) as soon as practicable and in any event within 45 days after the end
of each month, a consolidated balance sheet of the Company and its
Consolidated Subsidiaries as at the end of such month and the related
consolidated statements of operations and cash flows for such month, and for
the portion of the Fiscal Year ended at the end of such month setting forth
in each case in comparative form, for any such financial statements for any
month ended on or after June 30, 1998, the figures for the corresponding
periods of the previous Fiscal Year and the figures for such month and for
such portion of the Fiscal Year ended at the end of such month set forth in
the annual operating and capital expenditure budgets and cash flow forecast
delivered pursuant to Section 7.01(k), all in reasonable detail and certified
by the chief financial officer of the Company as fairly presenting in all
material respects the financial condition and results of operations of the
Company and its Consolidated Subsidiaries and as having been prepared in
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accordance with GAAP applied on a basis consistent with the audited financial
statements of Holdings, subject to changes resulting from audit and normal
year-end adjustments and to the absence of footnotes;
(b) as soon as available and in any event within 90 days after the end
of each Fiscal Year, a consolidated balance sheet of the Company and its
Consolidated Subsidiaries as of the end of such Fiscal Year and the related
consolidated statements of operations, stockholders' equity and cash flows
for such Fiscal Year, setting forth in each case (except with respect to the
consolidated financial statements of Holdings as of and for the Fiscal Year
ending December 31, 1997) in comparative form the figures for the previous
Fiscal Year, such consolidated financial statements to be certified without
qualification by Deloitte & Touche, or other independent public accountants
of nationally recognized standing. In addition, each set of consolidated
financial statements delivered by the Company pursuant to this Section
7.01(b) with respect to any Fiscal Year (except with respect to the
consolidated financial statements of the Company as of and for the Fiscal
Year ending December 31, 1997) shall set forth in comparative form the
figures for such Fiscal Year set forth in the annual operating and capital
expenditure budgets and cash flow forecast delivered pursuant to Section
7.01(k), it being understood that the certification of such consolidated
financial statements by independent public accountants referred to in the
immediately preceding sentence shall in no event be required to be made with
respect to any such budgets and forecasts;
(c) (i) together with each delivery of financial statements pursuant to
(a) and (b) above, an Officers' Certificate of the Company stating that the
officers executing such certificate have reviewed the terms of this Agreement
and have made, or caused to be made under their supervision, a review in
reasonable detail of the transactions and condition of the Company during the
accounting period covered by such financial statements and that such review
has not disclosed the existence during or at the end of such accounting
period, and that such officers do not have knowledge of the existence as at
the date of such Officers' Certificate, of any Default, or, if any such
Default existed or exists, specifying the nature and period of existence
thereof and what action the Company has taken or is taking or proposes to
take with respect thereto; (ii) together with each delivery of financial
statements for each month and Fiscal Year, a compliance certificate of the
chief financial officer or treasurer of the Company (w) providing details of
all transactions between the Company and any Person referred to in Section
8.08, (x) demonstrating in reasonable detail compliance during and at the end
of such accounting period with the restrictions contained in Sections 8.13
through 8.17 and (y) if not specified in the financial statements delivered
pursuant to (a) or (b) above, as the case may be, specifying the aggregate
amount of interest paid or
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accrued and the aggregate amount of depreciation and amortization charged,
during such accounting period; and (iii) together with each delivery of
financial statements pursuant to (b) above, a statement setting forth in
reasonable detail the computation of Excess Cash Flow, if any, for such
Fiscal Year, certified by the chief financial officer of the Company as
having been prepared from such financial statements in accordance with this
Agreement;
(d) together with each delivery of financial statements pursuant to (b)
above, a written statement by the independent public accountants giving the
report thereon (i) stating that their audit examination has included a review
of the terms of this Agreement as it relates to accounting matters and (ii)
stating whether, in connection with their audit examination, any Default has
come to their attention, and if such a condition or event has come to their
attention, specifying the nature and period of existence thereof;
(e) promptly upon receipt thereof, copies of all reports submitted to
the Company or Holdings by independent public accountants in connection with
each annual, interim or special audit of the financial statements of the
Company or Holdings made by such accountants, including the comment letter,
if any, submitted by such accountants to management in connection with their
annual audit;
(f) promptly upon their becoming available, copies of (i) all financial
statements, reports, notices and proxy statements sent or made available
generally by the Company or Holdings to its security holders,(ii) all regular
and periodic reports and all registration statements and prospectuses filed by
the Company or Holdings with any securities exchange or with the Securities and
Exchange Commission or any governmental authority succeeding to any of its
functions and (iii) all press releases and other statements made available
generally by the Company or Holdings to the public concerning material
developments in the business of the Company or Holdings;
(g) promptly upon any officer of the Company obtaining knowledge (i) of
the existence of any Default, or becoming aware that the holder of any Debt
of the Company has given any notice or taken any other action with respect to
a claimed default thereunder, (ii) of any change in the Company's certified
accountant,(iii) that any Person has given any notice to the Company or taken
any other action with respect to a claimed default under any material
agreement or instrument (other than the Financing Documents) to which the
Company or any of its Subsidiaries is a party or by which any of their assets
are bound or (iv) of the institution of any litigation or arbitration
involving an alleged liability of the Company or any of its Subsidiaries
equal to or greater than $100,000 or any
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adverse determination in any litigation or arbitration involving a potential
liability of the Company or any of its Subsidiaries equal to or greater than
$100,000, an Officers' Certificate of the Company specifying the nature and
period of existence of any such condition or event, or specifying the notice
given or action taken by such holder or Person and the nature of such claimed
default (including any Default), event or condition, and what action the
Company has taken, is taking or proposes to take with respect thereto;
(h) if and when any member of the ERISA Group (i) gives or is required
to give notice to the PBGC of any "reportable event" (as defined in Section
4043 of ERISA) with respect to any Plan which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA with respect to any
Multiemployer Plan or notice that any Multiemployer Plan is in
reorganization, is insolvent or has been terminated, a copy of such notice;
(iii) receives notice from the PBGC under Title IV of ERISA of an intent to
terminate, impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of
such notice; (iv) applies for a waiver of the minimum funding standard under
Section 412 of the Code, a copy of such application; (v) gives notice of
intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such
notice and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such
notice; or (vii) fails to make any required payment or required contribution
to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement
within the period required by applicable law, including ERISA and the Code,
and by the terms of the Plan, Multiemployer Plan or Benefit Arrangement to
make such contribution or payment or makes any amendment to any Plan or
Benefit Arrangement which has resulted or could result in the imposition of a
Lien under Section 412(n) of the Code or the posting of a bond or other
security under Section 307 of ERISA, a certificate of the chief financial
officer or the chief accounting officer of the Company setting forth details
as to such occurrence and action, if any, which the Company or applicable
member of the ERISA Group is required or proposes to take;
(i) simultaneously with the financial statements referred to in (a)
above, operating plans and financial forecasts, including cash flow
projections covering proposed fundings, repayments, additional advances,
investments and other cash receipts and disbursements, as prepared from time
to time by the management of
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the Company for internal use (but only if any such plans and forecasts have
in fact been prepared by the management of the Company for internal use);
(j) upon the reasonable request of any Lender, copies of any reports or
notices related to taxes and any other material reports or notices received
by the Company from, or filed by the Company with, any Federal, state or
local governmental agency or body regulating the activities of the Company;
(k) within 30 days following the conclusion of each Fiscal Year, the
Company's annual operating and capital expenditure budgets and cash flow
forecast for the following Fiscal Year presented on a monthly basis, which
shall be in a format reasonably consistent with projections, budgets and
forecasts theretofore provided to the Lenders;
(l) on the date on which each Notice of Borrowing is delivered and on
the first Business Day of each week or, during any month in which no Working
Capital Loans shall be outstanding, the first Business Day of such month, a
Borrowing Base Certificate setting forth (i) Eligible Inventory as of the
close of business of the last day of the calendar month most recently ended
prior to the date on which such Borrowing Base Certificate is being delivered
and (ii) Eligible Receivables as of the close of business of the last day of
the calendar week most recently ended prior to the date on which such
Borrowing Base Certificate is being delivered;
(m) within two Business Days after any request therefor, such
information in such detail concerning the amount, composition and manner of
calculation of the Borrowing Base as any Lender may reasonably request;
(n) within ten days after the end of each month, a report, in form and
substance reasonably acceptable to the Required Lenders, as to all accounts
receivable of the Company outstanding as of the last day of such month (a
"Receivables Report"), which shall set forth in summary form an aging of such
receivables and which shall, if any Lender reasonably so requests, include a
detailed aged trial balance of all such receivables specifying the names,
addresses, face amount and dates of all invoices for each account debtor
obligated on a receivable so listed; upon the reasonable request of any
Lender and to the extent available, each Receivables Report shall be
accompanied by copies of customer statements, and all documents, including
repayment histories and present status reports, relating to the receivables
so scheduled and such other matters and information relating to the status of
any receivables as any Lender shall reasonably request;
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(o) together with the next delivery of a Receivables Report after the
Company becomes aware thereof, notice of any dispute between any account
debtor and the Company with respect to any amounts due and owing in excess of
$10,000 in the aggregate, with an explanation in reasonable detail of the
reason for the dispute, all claims related thereto and the amount in
controversy; and
(p) with reasonable promptness, such other information and data with
respect to the Company or any of its Subsidiaries or Holdings as from time to
time may be reasonably requested by any Lender.
Section 7.02. Payment of Obligations. The Company (i) will pay and
discharge, and will cause each of its Subsidiaries to pay and discharge, at
or before maturity, all of their respective material obligations and
liabilities, including tax liabilities, except where the same may be the
subject of a Permitted Contest, (ii) shall maintain, and cause each of its
Subsidiaries to maintain, in accordance with GAAP, appropriate reserves for
the accrual of any of the same and (iii) shall not breach or permit any of
its Subsidiaries to breach, in any material respect, or permit to exist any
material default under, the terms of any material lease, commitment,
contract, instrument or obligation to which it is a party, or by which its
properties or assets are bound, except where the same is the subject of a
Permitted Contest.
Section 7.03. Conduct of Business and Maintenance of Existence. The
Company will continue, and will cause each of its Subsidiaries to continue,
to engage in business of the same general type as now conducted by the
Company and its Subsidiaries, and except as permitted by or as a result of
any transaction permitted by Section 8.06 hereof, will preserve, renew and
keep in full force and effect, and will cause each Subsidiary to preserve,
renew and keep in full force and effect their respective partnership or
corporate existence and their respective rights, privileges and franchises
necessary or desirable in the normal conduct of business.
Section 7.04. Maintenance of Property; Insurance. (a)The Company will
keep, and will cause each of its Subsidiaries to keep, all property used and
necessary in its business in good working order and condition, ordinary wear
and tear excepted.
(b) The Company will maintain, and will cause each of its Subsidiaries
to maintain, (i) physical damage insurance on all real and personal property
on an all risks basis (including the perils of flood to the extent that any
buildings or
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personal property are located in a flood zone), covering the repair and
replacement cost of all such property and consequential loss coverage for
business interruption and extra expense, covering such risks, for amounts not
less than those, and with deductible amounts not greater than those, set forth
in Part I of Schedule 7.04, (ii) public liability insurance (including
products/completed operations liability coverage) covering such risks, for
amounts not less than those, and with deductible amounts not greater than those,
set forth in Part II of Schedule 7.04 and (iii) such other insurance coverage in
such amounts and with respect to such risks as the Required Lenders may
reasonably request. All such insurance shall be provided by insurers having an
A.M. Best policyholders rating of not less than B+ or such other insurers as the
Required Lenders may approve in writing. On or prior to the Closing Date, the
Company shall cause the Agent to be named as an additional insured and loss
payee on each insurance policy required to be maintained pursuant to this
Section 7.04(b). The Company will deliver to the Lenders (i) on the Closing
Date, a certificate from the Company's insurance broker dated such date showing
the amount of coverage as of such date, and certifying that, in the opinion of
such broker, such amounts are reasonable and customary for companies of
established repute engaged in the same or a similar business, that such policies
will include effective waivers (whether under the terms of any such policy or
otherwise) by the insurer of all claims for insurance premiums against all loss
payees and additional insureds and of all rights of subrogation against all loss
payees and additional insureds, and that if all or any part of such policy is
canceled, terminated or expires, the insurer will forthwith give notice thereof
to each additional insured and loss payee and that no cancellation, reduction in
amount or material change in coverage thereof shall be effective until at least
30 days after receipt by each additional insured and loss payee of written
notice thereof, (ii) upon the request of any Lender through the Agent from time
to time full information as to the insurance carried, (iii) within five days of
receipt of notice from any insurer, a copy of any notice of cancellation,
nonrenewal or material change in coverage from that existing on the date of this
Agreement and (iv) forthwith, notice of any cancellation or nonrenewal of
coverage by the Company. Any proceeds in excess of $100,000 from any Property
Insurance Policy which are payable to the insured in respect of any claim, or
any condemnation award or other compensation in respect of a condemnation (or
any transfer or disposition of property in lieu of condemnation) for which the
Company or any of its Subsidiaries receives a condemnation award or other
compensation in excess of $100,000, shall be paid to the Agent to be held,
applied or released for application in accordance with Section 5 of the Company
Security Agreement and each Property Insurance Policy shall provide that all
insurance proceeds in excess of $100,000 per claim which are payable to the
insured shall be payable to the Company and the Agent and, if an Event of
Default has occurred and is continuing, adjusted with the Agent. The Company
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hereby appoints the Agent as its attorney-in-fact to make, solely while an Event
of Default has occurred and is continuing, proof of loss, claim for insurance
and adjustments with insurers, and to execute or endorse all documents, checks
or drafts in connection with payments under Property Insurance Policies.
Section 7.05. Compliance with Laws. The Company will comply, and cause
each of its Subsidiaries to comply, in all material respects with all
applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including Environmental Laws and ERISA and the
rules and regulations thereunder).
Section 7.06. Inspection of Property, Books and Records. The Company
will keep, and will cause each of its Subsidiaries to keep, proper books of
record and account in which full, true and correct entries shall be made of
all dealings and transactions in relation to its business and activities; and
will permit, and will cause each of its Subsidiaries to permit,
representatives of any Lender at such Lender's expense to visit and inspect
any of their respective properties, to examine and make abstracts or copies
from any of their respective books and records, to conduct a collateral audit
and analysis of their respective inventories and accounts receivable and to
discuss their respective affairs, finances and accounts with their respective
executive officers and independent public accountants, all at such reasonable
times and as often as may reasonably be desired.
Section 7.07. Use of Proceeds. The Company will use the proceeds of
Loans borrowed on the Closing Date solely for payment of amounts due under
the Acquisition Documents (including the repayment of Debt thereunder) and
transaction fees incurred in connection with the Operative Documents. Working
Capital Loans borrowed after the Closing Date and the Letters of Credit shall
be used by the Company solely for working capital needs of the Company and
its Subsidiaries and the repayment of Tranche A Loans or Tranche B Loans
pursuant to Section 2.04(a) or Section 2.04(b). None of such proceeds will be
used in violation of any applicable law or regulation.
Section 7.08. Further Assurances. Each of Holdings and the Company will,
and the Company will cause each of its Subsidiaries to, at its own cost and
expense, cause to be promptly and duly taken, executed, acknowledged and
delivered all such further acts, documents and assurances (x) as may from
time to time be necessary or as the Required Lenders may from time to time
reasonably request in order to carry out the intent and purposes of the
Financing Documents and the transactions contemplated thereby, including all
such actions to establish, preserve, protect and perfect the estate, right,
title and interest of the Lenders to
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the Collateral (including Collateral acquired after the date hereof), including
first priority Liens thereon, subject only to Permitted Liens and (y) as the
Required Lenders may from time to time reasonably request, to establish,
preserve, protect and perfect first priority Liens in favor of the Lenders on
any and all assets of Holdings, the Company and its Subsidiaries, now owned or
hereafter acquired, that are not Collateral on the date hereof. The Company
shall promptly give notice to the Agent of the acquisition after the Closing
Date by the Company or any Subsidiary of any real property (including leaseholds
in respect of real property), trademark, copyright or patent.
Section 7.09. Board Meetings. The Company will notify the Lenders of all
meetings and actions by written consent of the board of directors of the
Company and each committee thereof at the same time and in the same manner as
notice of any meetings of such board or committee is required to be given to
its directors who do not waive such notice (or, if such action requires no
notice, then prior written notice thereof describing the matters upon which
action is to be taken). The Lenders shall have the right to send two
representatives selected by them to each such meeting, who shall be permitted
to attend such meeting and any adjournments thereof (other than any portion
of such meeting devoted to discussion of the Lenders solely in their
respective capacities as holders of the Notes or the Warrants).
Section 7.10. Lenders' Meetings. Upon the reasonable request of any
Lender, the Company will conduct a meeting of the Lenders to discuss any
fiscal quarter's results and the financial condition of the Company at which
shall be present the chief executive officer and the chief financial officer
of the Company and such other officers of the Company as the Company's chief
executive officer shall designate. Such meetings shall be held at the Company
and at a time convenient to the Lenders and to the Company. The costs and
expenses incurred by any Lender with respect to any such meeting shall be for
such Lender's own account.
Section 7.11. Consummation of the Acquisition. Each of the Company and
Holdings will cause the closing of the Acquisition to occur concurrently with
the making of the Loans on the Closing Date, and will not without the prior
written consent of the Required Lenders waive any condition to its
obligations to consummate the Acquisition.
Section 7.12. Hazardous Materials; Remediation. The Company will (i)
promptly give notice to the Lenders in writing of any complaint, order,
citation, notice or other written communication from any Person with respect
to, or if the Company becomes aware of, (x) the existence or alleged
existence of a material
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violation of any applicable Environmental Law or the incurrence of any
material liability, obligation, loss, damage, cost, expense, fine, penalty or
sanction or the requirement to commence any remedial action resulting from or
in connection with any air emission, water discharge, noise emission,
Hazardous Material or any other environmental, health or safety matter at,
upon, under or within any of the properties now or previously owned, leased
or operated by the Company or any of its Subsidiaries, or due to the
operations or activities of the Company, any Subsidiary or any other Person
on or in connection with any such property or any part thereof or (y) any
release on any of such properties of Hazardous Materials in a quantity that
is reportable under any applicable Environmental Law; and (ii) promptly
comply with any governmental requirements requiring the removal, treatment or
disposal of such Hazardous Materials or Hazardous Materials Contamination and
provide evidence reasonably satisfactory to the Required Lenders of such
compliance.
Section 7.13. Collateral Reports. The Company shall keep accurate and
complete records of its accounts receivable in at least so much detail as to
enable the Company to provide the Receivables Reports and other information
described in Section 7.01.
Section 7.14. Collections; Right to Notify Account Debtors. At any time
following the occurrence of an Event of Default and during the continuance
thereof, in addition to the Lenders' rights under the Security Documents, the
Company hereby authorizes the Agent, at any time, to (i) notify any or all
account debtors that the accounts receivable of the Company and its
Subsidiaries have been assigned to the Agent and that the Agent has a
security interest therein and (ii) direct such account debtors to make all
payments due from them to the Company upon such accounts receivable directly
to the Agent or to a lockbox designated by the Agent. The Agent shall
contemporaneously furnish the Company with a copy of any such notice sent.
Any such notice, in the Agent's sole discretion, may be sent on the Company's
stationery, in which event the Company shall, if requested by the Agent,
co-sign such notice with the Agent.
Section 7.15. Enforcement of Covenant Not to Compete. The Company shall
preserve, protect and defend, to the extent permitted by applicable law, all
of its rights, if any, with respect to any covenant not to compete contained
in any of the material contracts of the Company or contained in any
employment agreement with any employee whose annual salary and other
compensation payable by the Company and its Subsidiaries is $50,000 or more,
if the board of directors of the Company shall determine in its good faith
that such preservation, protection and defense is necessary or advisable.
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Section 7.16. Landlord and Warehouseman Waivers. The Company shall use
its best efforts (i) to deliver to the Agent waivers of contractual and
statutory landlord's, landlord's mortgagee's and warehouseman's Liens in form
and substance satisfactory to the Agent under each existing lease, warehouse
agreement or similar agreement to which the Company or any Subsidiary is a
party, (ii) to cause such waivers to be incorporated when the existing lease,
warehouse agreement or similar agreement is amended, renewed or extended and
(iii) to obtain waivers of both contractual and statutory landlord's,
landlord's mortgagee's and warehouseman's Liens in form and substance
reasonably satisfactory to the Agent in connection with each new lease,
warehouse agreement or similar agreement entered into by the Company or any
Subsidiary. Without limiting the obligations of the Company under this
Section 7.16, it is understood and agreed that unless otherwise agreed to in
writing by the Agent, any Inventory that is subject to a landlord's,
landlord's mortgagee's or warehouseman's Lien or any other Lien not created
by the Security Documents shall not be included in Eligible Inventory.
ARTICLE 8
Negative Covenants
The Company (and, in the case of Sections 8.03, 8.09 and 8.11, Holdings)
agrees that, so long as any Lender has any Commitment hereunder or any amount
payable under any Note remains unpaid:
Section 8.01. Debt. The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee or
otherwise become or remain directly or indirectly liable with respect to, any
Debt, except for:
(a) Debt of the Company outstanding on the date of this Agreement as set
forth in Schedule 8.01;
(b) Debt of the Company under the Financing Documents;
(c) Debt of the Company or any of its Subsidiaries incurred or assumed
for the purpose of financing all or any part of the cost of acquiring any
fixed asset (including through Capital Leases), in an aggregate principal
amount at any time outstanding not greater than $250,000;
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(d) Debt of the Company or any of its Subsidiaries to a wholly-owned
Subsidiary of the Company, or of any Subsidiary of the Company to the Company;
(e) Debt of the Company under the Security Capital Note to the extent
permitted by Section 8.11(b); provided that the aggregate amount of such Debt
shall not exceed the Excess Amount;
(f) Debt of the Company owed to the holders of Management Options or
their respective estates incurred for the purpose of making distributions
referred to in Section 8.04(a)(v) to purchase shares (or options to purchase
shares) of Company Common Stock held by such holders of Management Options or
their respective estates, in an aggregate outstanding principal amount not
greater than $300,000; provided that any such Debt shall be subordinated on
terms acceptable to the Required Lenders in their sole and reasonable
discretion;
(g) Debt of the Company owed to the Seller (as defined in the Asset
Purchase Agreement) pursuant to Sections 3.2.1 and 3.2.3 of the Asset
Purchase Agreement; provided that any such Debt shall be subordinated
pursuant to the terms of the Seller Earnout Subordination Agreement; and
(h) Debt of the Company not otherwise permitted by the foregoing clauses
of this Section 8.01 in an aggregate principal amount at any time outstanding
not greater than $50,000.
Section 8.02. Negative Pledge. Neither the Company nor any Subsidiary
will create, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired by it, except:
(a) any Lien on any asset securing Debt permitted under Section 8.01(c)
incurred or assumed for the purpose of financing all or any part of the cost
of acquiring such asset, provided that such Lien attaches to such asset
concurrently with or within 90 days after the acquisition thereof;
(b) Liens existing on the date of this Agreement securing Debt
outstanding on such date permitted by Section 8.01(a);
(c) Liens arising in the ordinary course of its business which (i) do
not secure Debt, (ii) do not secure any obligation in an amount exceeding
$25,000 and (iii) do not in the aggregate materially detract from the value
of its assets or materially impair the use thereof in the operation of its
business; and
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(d) Liens created by the Security Documents.
Section 8.03. Capital Stock. Except for the Warrants, the Warrant
Shares, the Management Options and the Option Shares, neither the Company nor
any of its Subsidiaries shall issue any shares of capital stock except shares
of capital stock issued by any Subsidiary to the Company and shares of
capital stock of the Company issued to Holdings; provided that any shares
issued upon exercise of the Management Options shall be pledged to the Agent
and the holder of such shares shall execute all agreements and instruments
and take all other action necessary to create a first priority lien in favor
of the Agent for the benefit of the Lenders. As a condition to any
registration or transfer of shares issued pursuant to the exercise of the
Management Options, the Company shall cause such transferee to sign all
necessary agreements and instruments and take all other action necessary to
create a first priority lien on such transferred shares in favor of the Agent
for the benefit of the Lenders. Neither the Company nor Holdings shall issue
any capital stock that under its certificate of incorporation is entitled to
a preference over the Holdings Common Stock as to payment of dividends or
distributions.
Section 8.04. Restricted Payments. (a) The Company will not, and will
not permit any Subsidiary to, directly or indirectly, declare, order, pay,
make or set apart any sum for any Restricted Payment; provided that the
foregoing shall not restrict or prohibit the following:
(i) purchases or redemptions of Warrants under the terms thereof;
(ii) dividends or distributions to Holdings at such times and in
such amounts as are necessary to permit payments on Debt permitted pursuant
to Section 8.11(a)(i)(y) required, subject to the provisions of the Seller
Earnout Subordination Agreement, to be paid pursuant to Section 3.3.4(iii)
of the Asset Purchase Agreement; provided that the aggregate amount paid
pursuant to Section 3.3.4(iii) of the Asset Purchase Agreement shall not at
any time exceed the cumulative sum of 20% of Excess Cash Flow (if any) for
the period from the Closing Date through December 31, 1997 and for each
Fiscal Year thereafter ended prior to such time;
(iii) dividends or distributions to Holdings at such times and in
such amounts as are necessary to permit payment of taxes (other than taxes
for any period with respect to which the returns and obligations of
Holdings have been consolidated with the comparable returns and
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obligations of Security Capital for such period) and administrative
expenses payable by Holdings in compliance with Section 8.11;
(iv) dividends or distributions to Holdings at such times and in
such amounts as are necessary to enable Holdings to make cash payments to
Security Capital pursuant to the terms of the Tax Sharing Agreement to the
extent permitted by Section 8.11(b); provided that the aggregate amount of
such dividends or distributions made with respect to any period shall not
exceed the aggregate amount of Income Taxes (as defined in Section 8.11(b))
which would have been payable by Holdings with respect to such period but
for the fact that Income Taxes returns of Holdings for such period have
been consolidated with corresponding returns of Security Capital with
respect to such period;
(v) purchases of shares of (or options to purchase shares of)
Company Common Stock from employees of the Company holding shares of
Company Common Stock issued pursuant to Management Options, so long as,
(x) before and after giving effect to any such dividend or distribution
for such purpose, no Event of Default shall have occurred and be
continuing and (y) such purchases or payments after the date hereof do
not exceed in any one Fiscal Year $75,000 and do not exceed in the
aggregate $200,000; and
(vi) dividends or distributions to Holdings at such times and in
such amounts as are necessary to enable Holdings to make payments to the
Seller pursuant to the second proviso to Section 3.2.2 of the Purchase
Agreement to enable the Seller to pay its federal, state and local tax
liabilities then due in respect of the taxable income of the Seller
attributable solely to payments payable but not paid to the Seller pursuant
to the second proviso to Section 3.2.2 of the Asset Purchase Agreement (but
in no event at a higher rate than the amounts payable by the Seller
assuming the then-highest federal, state and local taxes applicable to the
Seller in the applicable jurisdiction).
(b) Without the prior written consent of the Required Lenders, neither the
Company nor any of its Subsidiaries will (i) consent to the transfer of the
Security Capital Note, (ii) pay, repay, prepay, redeem, purchase, acquire or
make any other payment in respect of the Security Capital Note, except as
specifically provided therein and expressly permitted thereby and by the terms
of the Security Capital Subordination Agreement, or (iii) make any payment in
respect of the Earnout Amount or the Additional Payment (each as defined in the
Asset
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Purchase Agreement), except as specifically provided for in the Asset
Purchase Agreement and by the terms of the Seller Earnout Subordination
Agreement.
Section 8.05. ERISA. The Company will not, and will not permit any of its
Subsidiaries to:
(a) engage in any transaction in connection with which the Company or any
of its Subsidiaries could be subject to any liability arising from either a
civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Code;
(b) terminate any Plan in a manner, or take any other action, which could
result in any liability;
(c) fail to make full payment when due of all amounts which, under the
provisions of any Plan, 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;
(d) permit the present value of all accrued benefits (whether or not
vested) under all Plans at the end of any Plan year to exceed the fair market
value of the assets of such Plans as determined by the Plans' actuaries in good
faith using reasonable actuarial assumptions and in a manner consistent with
Statement of Accounting Standards No. 35 by an amount in excess of $50,000; or
(e) fail to make any payments to any Multiemployer Plan that it may be
required to make under any agreement relating to such Multiemployer Plan or any
law pertaining thereto.
Section 8.06. Consolidations, Mergers and Sales of Assets. The Company
will not, and will not permit any of its Subsidiaries to, (i) consolidate or
merge with or into any other Person; provided that nothing in this Section
8.06 shall prohibit the merger of a Subsidiary into the Company or the merger
or consolidation of a Subsidiary into or with another Subsidiary or (ii)
sell, lease or otherwise transfer, directly or indirectly, any of its or
their assets, other than (w) sales of inventory in the ordinary course of
their respective businesses, (x) dispositions of Temporary Cash Investments,
(y) dispositions of fixed assets so long as the proceeds of any such
disposition are applied to purchase comparable assets and (z) dispositions
for cash and fair value of assets that the board of directors of the Company
determines in good faith are no longer used or useful in the business of the
Company and its Subsidiaries, provided that immediately after any such
disposition, the aggregate fair market value of all such assets disposed of
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pursuant to this clause (z) after the date hereof does not exceed $100,000
and the aggregate fair market value of all such assets during the Fiscal Year
in which such disposition is made does not exceed $50,000.
Section 8.07. Purchase of Assets; Investments. The Company will not, and
will not permit any Subsidiary to, acquire any assets other than in the
ordinary course of business. The Company will not, and will not permit any
Subsidiary to, make, acquire or own any Investment in any Person other than
(a) Temporary Cash Investments,(b) Investments in Subsidiaries; provided that
the aggregate amount of Investments in Subsidiaries (whether now existing or
hereafter created or acquired) made after the date hereof shall not exceed
$100,000,(c) Investments in Holdings as contemplated by Section 8.11(a)(i)
and (d) Investments in joint ventures; provided that the aggregate amount of
Investments in joint ventures made after the date hereof shall not exceed
$100,000. Without limiting the generality of the foregoing, the Company will
not, and will not permit any Subsidiary to,(i) acquire or create any
Subsidiary without the consent of the Required Lenders and arrangements
satisfactory to the Required Lenders for (x) a pledge of the stock of such
Subsidiary to the Agent for the benefit of the Lenders, (y) a guaranty by
such Subsidiary of the obligations of the Company hereunder and (z) a grant
of a Lien on all of the assets of such Subsidiary to the Agent for the
benefit of the Lenders to secure such guaranty or (ii) engage in any joint
venture or partnership with any other Person except as contemplated in clause
(d) above.
Section 8.08. Transactions with Affiliates. The Company will not, and
will not permit any Subsidiary to, directly or indirectly, enter into or
permit to exist any transaction (including the purchase, sale, lease or
exchange of any property or the rendering of any service) with any Affiliate
of the Company, any stockholder of Holdings or any affiliate of any such
stockholder on terms that are less favorable to the Company or such
Subsidiary, as the case may be, than those which might be obtained at the
time from a Person who is not an Affiliate of the Company, a stockholder of
Holdings or an affiliate of such stockholder, as the case may be; provided
that the Company shall be permitted to (i) make payments to Holdings to the
extent permitted by Section 8.04, (ii) make Investments in Holdings as
contemplated by Section 8.11(a)(i), (iii) pay fees to Investors and
compensation to Management Stockholders to the extent permitted by Sections
8.12 and 8.13, respectively, and (iv) make payments to the Management
Stockholders pursuant to the Bardeen Leases.
Section 8.09. Amendments or Waivers. Without the prior written consent
of the Required Lenders, neither Holdings nor the Company will, nor will
either of them permit any Subsidiary to, agree to any amendment to or waiver
of
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or in respect of the certificate of incorporation of Holdings or the Company
or any Operative Document.
Section 8.10. Fiscal Year. The Company shall not change its fiscal year
from a fiscal year ending on December 31.
Section 8.11. Limitations on Activities by Holdings; Payments by
Holdings and the Company under the Tax Sharing Agreement. (a) Holdings shall
not, directly or indirectly,(i) enter into or permit to exist any transaction
or agreement (including any agreement for incurrence or assumption of Debt,
any purchase, sale, lease or exchange of any property or the rendering of any
service), between itself and any other Person, other than (x) the Operative
Documents to which it is a party (the "Holdings Documents"), (y) the
incurrence of Debt to the Seller (as defined in the Asset Purchase Agreement)
evidenced by the promissory note described in Section 3.3.4(iii) of the Asset
Purchase Agreement that is in form and substance satisfactory to
NationsCredit or (z) the incurrence of Debt to the Company solely to the
extent that Holdings applies the proceeds of such Debt to finance the
payments referred to in Section 8.04(ii),(ii) engage in any business or
conduct any activity (including the making of any Investment or payment or
any distribution) or transfer any of its assets, other than the making of the
Investments in the Company contemplated in Schedule 6.22, the performance of
the Holdings Documents in accordance with the terms thereof and performance
of ministerial activities and payment of taxes and administrative fees
necessary for compliance with the next succeeding sentence and, subject to
Section 8.11(b), the making of any payments to Security Capital in order to
comply with the provisions of the Tax Sharing Agreement or (iii) consolidate
or merge with or into any other Person. Holdings shall preserve, renew and
keep in full force and effect its corporate existence and any rights,
privileges and franchises necessary or desirable in the conduct of its
business, and shall comply in all material respects with all material
applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities, provided that Holdings may terminate any such
right, privilege or franchise (other than its corporate existence) if its
board of directors in good faith determines that such termination is in the
best interests of Holdings and not materially disadvantageous to the Lenders.
(b) Neither Holdings nor the Company shall make any payments or any
distributions to any holders of Holdings Common Stock, as such, other than
payments permitted under subsection (a) above or payments to be made by
Holdings or the Company to Security Capital pursuant to the provisions of the
Tax Sharing Agreement with respect to any period so long as the returns and
obligations of Holdings or the Company, as the case may be, for such period
have been consolidated with the returns and obligations of Security Capital
for such
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period; (ii) provided that (x) the aggregate amount of cash payments made,
directly or indirectly, by Holdings or the Company to Security Capital with
respect to any period shall not exceed the aggregate amount of federal, state
and local income taxes ("Income Taxes") which would have been payable by
Holdings with respect to such period but for the fact that Income Taxes returns
of Holdings for such period have been consolidated with corresponding returns of
Security Capital with respect to such period and (y) solely with respect to cash
distributions and other payments made by Holdings or the Company with respect to
any period ending on or prior to December 31, 1999, Holdings or the Company, as
the case may be, shall (A) deposit the excess (the "Excess Amount") of (1) the
aggregate amount of such distributions and other payments over (2) the Permitted
Distribution Amount into the Cash Collateral Account (as defined in the Security
Capital Pledge Agreement) or (B) shall distribute or make payments to Security
Capital in an aggregate amount equal to the Excess Amount; provided that
Security Capital applies the proceeds of such distributions or payments to make
a loan to the Company in an amount equal to the Excess Amount, pursuant to the
terms of the Security Capital Note and the Security Capital Subordination
Agreement or (C) apply or deposit the Excess Amount in any combination permitted
by clauses (A) or (B) above. "Permitted Distribution Amount" means, with respect
to any period ending on or prior to December 31, 1999, an amount equal to the
aggregate amount of Income Taxes payable in cash by Security Capital with
respect to such period and properly allocable to net income generated by
Holdings and its Subsidiaries, such allocation to be determined by multiplying
the aggregate amount of Income Taxes payable in cash by Security Capital for
such period by a fraction (1) the numerator of which shall be the consolidated
taxable income of Holdings and its Subsidiaries for such period and (2) the
denominator of which shall be the consolidated taxable income of Security
Capital and its consolidated subsidiaries for such period (without taking into
account the application of any net operating loss carryforward in such period).
Section 8.12. Investor Fees. The Company shall not, and shall not permit
any Subsidiary to, directly or indirectly, pay or become obligated to pay any
fees or other amounts to or for the account of any Investor except (i) so
long as no Event of Default is then continuing or would result therefrom,
pursuant to the Management Agreement and subject to the terms of the
Investors Subordination Agreement, (ii) amounts payable to Capital Partners
for investment advisory services rendered in connection with the Closing in
an aggregate amount not to exceed $120,000, and (iii) distributions by the
Company permitted pursuant to Section 8.04(a)(iv).
Section 8.13. Management Compensation. The Company shall not, and shall
not permit any Subsidiary to, directly or indirectly, pay or become obligated
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to pay, any compensation for services in any form to or for the account of
any Management Stockholder, except as expressly provided in the Employment
Contracts.
Section 8.14. Lease Payments. The Company will not, and will not permit
any Subsidiary to, incur or assume (whether pursuant to a Guarantee or
otherwise) any liability for rental payments under a lease with a lease term
(as defined in Financial Accounting Standards Board Statement No. 13, as in
effect on the date hereof) of one year or more if, after giving effect
thereto, the aggregate amount of minimum lease payments that the Company and
its Consolidated Subsidiaries have so incurred or assumed will exceed, on a
consolidated basis, $75,000 for any calendar year under all such leases
(excluding Capital Leases).
Section 8.15. Capital Expenditures. The aggregate amount of Consolidated
Capital Expenditures for any Fiscal Year shall exceed $150,000.
Section 8.16. Total Debt Coverage Ratio. The Company shall not permit
the ratio on the last day of any fiscal quarter ending on or after June 30,
1998 of (i) Consolidated Free Cash Flow to (ii) Total Debt Service, in each
case for the Measuring Period ending at such day, to be less than 1.1 to 1.0.
Minimum EBITDAAs of the last day of each fiscal quarter set forth below,
EBITDA for the Measuring Period at such day shall not be less than the
corresponding amount set forth below opposite such period:
First Quarter Ended Amount
------------------- ------
September 30, 1997 $2,600,000
December 31, 1997 2,200,000
March 31, 1998 2,000,000
June 30, 1998 1,800,000
September 30, 1998 1,850,000
December 31, 1998 1,850,000
March 31, 1999 1,850,000
June 30, 1999 1,850,000
September 30, 1999 1,900,000
December 31, 1999 1,900,000
March 31, 2000 1,900,000
June 30, 2000 1,900,000
September 30, 2000 1,950,000
December 30, 2000 1,950,000
March 31, 2001 1,950,000
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June 30, 2001 1,950,000
The last day of each Fiscal
Quarter thereafter 2,000,000
ARTICLE 9
Events of Default
Section 9.01. Events of Default. If any one or more of the following
events (hereinafter called "Events of Default") shall occur and be continuing
for any reason whatsoever (whether voluntary or involuntary, by operation of
law or otherwise):
(a) the Company shall fail to pay when due any principal, or shall fail
to pay within five days after the due date thereof any interest, premium,
fees or other amount payable hereunder;
(b) the Company shall fail to observe or perform any covenant contained
in Article 8 hereof, or Section 5 or Sections 4(A), (E) or (I) of the Company
Security Agreement or Holdings shall fail to perform any covenant contained
in Section 3(B) of the Holdings Pledge Agreement or Security Capital shall
fail to perform any covenant contained in the Security Capital Pledge
Agreement;
(c) the Company or Holdings shall fail to observe or perform any
covenant or agreement required to be observed or performed by the Company or
Holdings, as the case may be, contained in the Financing Documents (other
than those covered by clause (a) or (b) above) for 30 days after notice
thereof has been given to the Company by the Agent;
(d) any representation, warranty, certification or statement made by the
Company, Holdings or Security Capital in any Financing Document or in any
certificate, financial statement or other document delivered pursuant to the
Financing Documents shall prove to have been incorrect in any respect (or in
any material respect if such representation, warranty, certification or
statement is not by its terms already qualified as to materiality) when made
(or deemed made);
(e) the Company or any of its Subsidiaries shall fail to make any
payment in respect of any Debt (other than the Notes) arising in one or more
related or unrelated transactions, in an aggregate principal amount exceeding
$50,000;
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(f) any event or condition shall occur which results in the acceleration
of the maturity of any Debt (other than the Notes) of the Company or any of
its Subsidiaries arising in one or more related or unrelated transactions, in
an aggregate principal amount exceeding $50,000, or enables (or, with the
giving of notice or lapse of time or both, would enable) the holder of such
Debt or any Person acting on such holder's behalf to accelerate the maturity
thereof;
(g) Holdings, the Company or any of its Subsidiaries shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or shall consent to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, or
shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced against
Holdings, the Company or any of its Subsidiaries seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief shall be entered
against Holdings, the Company or any of its Subsidiaries under the federal
bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an amount or
amounts aggregating in excess of $50,000 which it shall have become liable to
pay under Title IV of ERISA; or notice of intent to terminate a Material Plan
under Section 4014(c) of ERISA shall be filed under Title IV of ERISA by any
member of the ERISA Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to
terminate, to impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or to cause a trustee to be appointed to administer any
Material Plan; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any Material Plan must be
terminated; or there shall occur a complete or partial withdrawal from, or a
default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one
or more
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Multiemployer Plans which could cause one or more members of the ERISA
Group to incur a current payment obligation in excess of $50,000;
(j) a judgment or order not covered by insurance for the payment of
money in excess of $50,000 shall be rendered against Holdings, the Company or
any of its Subsidiaries and such judgment or order shall continue unsatisfied
and unstayed for a period of 30 days;
(k) except as the result of any transfer made by Capital Partners to any
of its affiliates, Capital Partners shall cease to be the record and
beneficial owner of at least 50% of the capital stock of Security Capital
owned by Capital Partners on the Closing Date; or Capital Partners shall
cease at any time to have the ability to elect a majority of the board of
directors of Security Capital (either through the ownership of voting stock,
by contract or otherwise); or, except as the result of any transfer made
pursuant to the Holdings Pledge Agreement or as a result of the exercise of
any Warrants or Management Options, Holdings shall cease to be the record and
beneficial owner of 100% of the issued and outstanding capital stock of the
Company; or, exclusive of shares of Holdings Common Stock issued in an IPO by
Holdings, shares of Holdings Common Stock shall be held by any Person other
than the Investors, the Management Stockholders or Permitted Transferees (as
defined in the Asset Purchase Agreement) of the Management Stockholders; or
Gay Burke shall cease to be chief executive officer of the Company and a
successor shall not have been appointed by the Company and approved by the
Required Lenders within 180 days thereafter; or except as the result of
repurchases or redemptions referred to in Section 8.04(a)(ii), each
Management Stockholder and his Permitted Transferees (as defined in the Asset
Purchase Agreement) shall cease to own beneficially in the aggregate at least
the number of shares (determined assuming the exercise of all options or
warrants to purchase Common Stock held by such Person and adjusted for stock
splits, combinations and similar events) of Common Stock owned by such
Management Stockholder and the members of his immediate family on the Closing
Date (determined as aforesaid);
(l) the auditor's report or reports on the audited statements delivered
pursuant to Section 7.01 shall include any material qualification (including
with respect to the scope of audit) or exception;
(m) the Lien created by any of the Security Documents shall at any time
fail to constitute a valid and perfected Lien on all of the Collateral
purported to be secured thereby, subject to no prior or equal Lien except
Permitted Liens, or Holdings or the Company or any of its Subsidiaries shall
so assert in writing;
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(n) the Company shall be prohibited or otherwise materially restrained from
conducting substantially the business theretofore conducted by it by virtue of
any determination, ruling, decision, decree or order of any court or regulatory
authority of competent jurisdiction and such determination, ruling, decision,
decree or order remains unstayed and in effect for any period of 10 days beyond
any period for which any business interruption insurance policy of the Company
shall provide full coverage to the Company of any losses and lost profits; or
(o) any of the Operative Documents shall for any reason fail to
constitute the valid and binding agreement of any party thereto, or the
Company shall so assert in writing;
then, and in every such event and at any time thereafter during the
continuance of such event, the Agent shall if requested by the Required
Lenders, (i) by notice to the Company terminate the Commitments and they
shall thereupon terminate and/or (ii) by notice to the Company declare the
Notes (together with accrued and unpaid interest thereon) to be, and the
Notes shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Company; provided that in the case of any of the Events
of Default specified in Section 9.01(g) or 9.01(h) above with respect to the
Company, without any notice to the Company or any other act by the Agent or
the Lenders, the Commitments shall thereupon terminate and all of the Notes
(together with accrued and unpaid interest thereon) shall become immediately
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Company.
Section 9.02. Cash Collateral. If any Event of Default specified in
Sections 9.01(g) or 9.01(h) with respect to the Company shall occur or the
Loans shall have otherwise been accelerated pursuant to Section 9.01, then
without any request or the taking of any other action by the Agent or any of
the Lenders, the Company shall be obligated forthwith to deposit in the LC
Collateral Account (as defined in the Company Security Agreement) an amount
in immediately available funds equal to the then aggregate amount available
for drawings (regardless of whether any conditions to any such drawing can
then be met) under all Letters of Credit at the time outstanding.
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ARTICLE 10
Fees, Expenses and Indemnities; General Provisions Relating to
Payments
Section 10.01. Fees. (a) Participation Fees. On the Closing Date, the
Company shall pay to each Lender a fee in an amount equal to 1.5% of the sum
of such Lender's Tranche A Commitment, Tranche B Commitment and Working
Capital Commitment.
(b) Unused Commitment Fee. During the period from the Closing Date
through the date on which Working Capital Commitments are terminated, the
Company shall pay to each Lender a fee at the rate of 1/2 of 1% per annum on
the daily average amount by which the amount of such Lender's Working Capital
Commitment exceeds such Lender's Working Capital Outstandings. Accrued fees
under this Section shall be payable quarterly in arrears on each Quarterly
Date prior to the date on which the Working Capital Commitments are
terminated and on the date of such termination.
(c) Letter of Credit Fee. The Company agrees to pay to the Agent
exclusively for the benefit of the Lenders, ratably in proportion to their
respective Working Capital Commitments, a letter of credit fee with respect
to each Letter of Credit, computed for each day from and including the date
of issuance of such Letter of Credit to but excluding the last day a drawing
is available under such Letter of Credit, at a rate of 1.5% per annum on the
aggregate amount available for drawing under such Letter of Credit from time
to time (whether or not any conditions to drawing can then be met). Such fee
shall be payable in arrears on each Quarterly Date prior to the date on which
the Working Capital Commitments are terminated and on the Termination Date.
Section 10.02. Computation of Interest and Fees. Commitment fees
pursuant to Section 10.01(b) and all interest hereunder and under the Notes
shall be calculated on the basis of a 360-day year for the actual number of
days elapsed.
Section 10.03. General Provisions Regarding Payments. All payments
(including prepayments) to be made by the Company under any Financing
Document, including payments of principal of and premium and interest on the
Notes, fees, expenses and indemnities, shall be made without set-off or
counterclaim and in immediately available funds. If any payment hereunder
becomes due and payable on a day other than a Business Day, such payment
shall be extended to the next succeeding Business Day and, with respect to
payments of principal, interest thereon shall be payable at the then
applicable rate during such extension. The Company shall make all payments in
immediately available funds
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to each Lender's Payment Account before 2:00 P.M. (New York City time) on the
date when due. Each payment (including prepayments) by the Company on account
of principal of and interest on any Loans shall be made pro rata according to
the respective outstanding principal amounts of such Class of Loans held by
each Lender. All amounts payable by the Company hereunder or under any other
Financing Document not paid when due (other than payments of principal and
interest on the Notes, which shall bear interest as set forth therein) shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to 5% plus the rate announced by NationsBank, N.A. from time to time as
its prime rate (calculated on the basis of a 360-day year for the actual
number of days elapsed).
Section 10.04. Expenses. Whether or not the transactions contemplated
hereby shall be consummated, the Company agrees to pay on demand (i) all
costs and expenses of preparation of this Agreement, the other Financing
Documents and the Warrants and of the Company's performance of and compliance
with all agreements and conditions contained herein and therein, (ii)the
reasonable fees, expenses and disbursements of counsel (including the
reasonable allocation of the compensation, costs and expenses of in-house
counsel, based upon time spent) to, and independent appraisers and
consultants retained by, the Lenders in connection with the negotiation,
preparation, execution and administration of this Agreement, the other
Financing Documents and the Warrants and any amendments hereto or thereto and
waivers hereof and thereof,(iii) all costs and expenses of creating,
perfecting and maintaining Liens pursuant to the Financing Documents,
including filing and recording fees and expenses, the costs of any bonds
required to be posted in respect of future filing and recording fees and
expenses, title investigations and reasonable fees and expenses of such local
counsel as the Agent shall request,(iv) the fees, expenses and disbursements
(in an aggregate amount in any calendar year of not more than $5,000) of
independent accountants or other experts retained by the Agent in connection
with not more than one accounting and collateral audit or review of the
Company and its affairs during each calendar year and (v)if an Event of
Default occurs, all out-of-pocket expenses incurred by the Agent and each
Lender, including fees and disbursements of counsel (including the reasonable
allocation of the compensation, costs and expenses of in-house counsel, based
upon time spent), in connection with such Event of Default and collection,
bankruptcy, insolvency and other enforcement proceedings resulting therefrom.
Section 10.05. Indemnity. Whether or not the transactions contemplated
hereby shall be consummated, the Company agrees to indemnify, pay and hold
harmless the Agent and each Lender and any subsequent holder of any of the
Notes, Warrants, Warrant Shares and Letter of Credit Liabilities and the
officers,
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directors, employees and agents of the Agent, each Lender and such holders
(collectively called the "Indemnitees") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including the reasonable fees and disbursements of counsel for
such Indemnitee) in connection with any investigative, administrative or
judicial proceeding, whether or not such Indemnitee shall be designated a
party thereto and including any such proceeding initiated by or on behalf of
an Obligor, and the reasonable expenses of investigation by engineers,
environmental consultants and similar technical personnel and any commission,
fee or compensation claimed by any broker (other than any broker retained by
NationsCredit) asserting any right to payment for the transactions
contemplated hereby, which may be imposed on, incurred by or asserted against
such Indemnitee as a result of or in connection with the transactions
contemplated hereby or by the other Operative Documents (including (i)(A)as a
direct or indirect result of the presence on or under, or escape, seepage,
leakage, spillage, discharge, emission or release from, any property now or
previously owned, leased or operated by the Company or any of its
Subsidiaries of any Hazardous Materials or any Hazardous Materials
Contamination,(B) arising out of or relating to the offsite disposal of any
materials generated or present on any such property or (C) arising out of or
resulting from the environmental condition of any such property or the
applicability of any governmental requirements relating to Hazardous
Materials, whether or not occasioned wholly or in part by any condition,
accident or event caused by any act or omission of the Company or any of its
Subsidiaries, and (ii) proposed and actual extensions of credit under this
Agreement) and the use or intended use of the proceeds of the Notes and
Warrants, except that the Company shall have no obligation hereunder to an
Indemnitee with respect to any liability resulting from the gross negligence
or wilful misconduct of such Indemnitee. To the extent that the undertaking
set forth in the immediately preceding sentence may be unenforceable, the
Company shall contribute the maximum portion which it is permitted to pay and
satisfy under applicable law to the payment and satisfaction of all such
indemnified liabilities incurred by the Indemnitees or any of them. Without
limiting the generality of any provision of this Section, to the fullest
extent permitted by law, the Company hereby waives all rights for
contribution or any other rights of recovery with respect to liabilities,
losses, damages, costs and expenses arising under or relating to
Environmental Laws that it might have by statute or otherwise against any
Indemnitee, except that the Company shall have no obligation under this
sentence to an Indemnitee with respect to any liability resulting from the
gross negligence or wilful misconduct of such Indemnitee.
Section 10.06. Taxes. The Company agrees to pay all governmental
assessments, charges or taxes (except income or other similar taxes imposed
on
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any Lender or any holder of a Note), including any interest or penalties
thereon, at any time payable or ruled to be payable in respect of the
existence, execution or delivery of this Agreement, the other Financing
Documents or the Warrants, or the issuance of the Notes, Warrants, Warrant
Shares or any Letter of Credit, and to indemnify and hold each Lender and
each and every holder of the Notes, Warrants, Warrant Shares and Letter of
Credit Liabilities harmless against liability in connection with any such
assessments, charges or taxes.
Section 10.07. Funding Losses. If the Company fails to borrow any
Working Capital Loans after notice has been given to any Lender in accordance
with Section 4.04 or make any payment when due (including pursuant to a
notice of optional prepayment), the Company shall reimburse each Lender
within 15 days after demand for any resulting loss or expense incurred by it
(or by an existing or prospective participant in the related Loan), including
any loss incurred in obtaining, liquidating or employing deposits from third
parties, but excluding loss of margin for the period after any such payment
or failure to borrow; provided that such Lender shall have delivered to the
Company a certificate as to the amount of such loss or expense, which
certificate shall be conclusive in the absence of manifest error.
Section 10.08. Maximum Interest. (a) In no event shall the interest
charged with respect to the Notes or any other obligations of the Company
under the Financing Documents exceed the maximum amount permitted under the
laws of the State of New York or of any other applicable jurisdiction.
(b) Notwithstanding anything to the contrary herein or elsewhere, if at
any time the rate of interest charged or payable for the account of any
Lender hereunder or under any Note or other Financing Document (the "Stated
Rate") would exceed the highest rate of interest permitted under any
applicable law to be charged by such Lender (the "Maximum Lawful Rate"), then
for so long as the Maximum Lawful Rate would be so exceeded, the rate of
interest payable for the account of such Lender shall be equal to the Maximum
Lawful Rate; provided, that if at any time thereafter the Stated Rate is less
than the Maximum Lawful Rate, the Company shall, to the extent permitted by
law, continue to pay interest for the account of such Lender at the Maximum
Lawful Rate until such time as the total interest received by such Lender is
equal to the total interest which such Lender would have received had the
Stated Rate been (but for the operation of this provision) the interest rate
payable. Thereafter, the interest rate payable for the account of such Lender
shall be the Stated Rate unless and until the Stated Rate again would exceed
the Maximum Lawful Rate, in which event this provision shall again apply.
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(c) In no event shall the total interest received by any Lender exceed
the amount which such Lender could lawfully have received had the interest
been calculated for the full term hereof at the Maximum Lawful Rate with
respect to such Lender.
(d) In computing interest payable with reference to the Maximum Lawful
Rate applicable to any Lender, such interest shall be calculated at a daily
rate equal to the Maximum Lawful Rate divided by the number of days in the
year in which such calculation is made.
(e) If any Lender has received interest hereunder in excess of the
Maximum Lawful Rate with respect to such Lender, such excess amount shall be
applied to the reduction of the principal balance of its Loans or to other
amounts (other than interest) payable hereunder, and if no such principal or
other amounts are then outstanding, such excess or part thereof remaining
shall be paid to the Company.
ARTICLE 11
The Agent
Section 11.01. Appointment and Authorization. Each Lender irrevocably
appoints and authorizes the Agent to enter into each of the Security
Documents on its behalf and to take such action as agent on its behalf and to
exercise such powers under the Financing Documents as are delegated to the
Agent by the terms thereof, together with all such powers as are reasonably
incidental thereto.
Section 11.02. Agents and Affiliates. NationsCredit shall have the same
rights and powers under the Financing Documents as any other Lender and may
exercise or refrain from exercising the same as though it were not the Agent,
and NationsCredit and its affiliates may lend money to and generally engage
in any kind of business with the Company or any Subsidiary or affiliate of
the Company as if it were not the Agent hereunder.
Section 11.03. Action by Agent. The obligations of the Agent hereunder
are only those expressly set forth herein and under the other Financing
Documents. Without limiting the generality of the foregoing, the Agent shall
not be required to take any action with respect to any Default, except as
expressly provided in Article 9.
Section 11.04. Consultation with Experts. The Agent may consult with
legal counsel (who may be counsel for the Company), independent public
accountants and other experts selected by it and shall not be liable for any
action
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taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
Section 11.05. Liability of Agent. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken
or not taken by it in connection with the Financing Documents (i) with the
consent or at the request of the Required Lenders or (ii) in the absence of
its own gross negligence or willful misconduct. Neither the Agent nor any of
its directors, officers, agents or employees shall be responsible for or have
any duty to ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with any Financing Document or any
borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of the Company; (iii) the satisfaction of any
condition specified in Article 5, except receipt of items required to be
delivered to the Agent; or (iv) the validity, effectiveness, sufficiency or
genuineness of any Financing Document or any other instrument or writing
furnished in connection therewith. The Agent shall not incur any liability by
acting in reliance upon any notice, consent, certificate, statement, or other
writing (which may be a bank wire, telex, facsimile transmission or similar
writing) believed by it to be genuine or to be signed by the proper party or
parties.
Section 11.06. Indemnification. Each Lender shall, ratably in accordance
with its Working Capital Commitment (whether or not the Working Capital
Commitments have been terminated), indemnify the Agent (to the extent not
reimbursed by the Company) against any cost, expense (including counsel fees
and disbursements), claim, demand, action, loss or liability (except such as
result from the Agent's gross negligence or willful misconduct) that the
Agent may suffer or incur in connection with the Financing Documents or any
action taken or omitted by the Agent hereunder or thereunder.
Section 11.07. Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement. Each
Lender also acknowledges that it will, independently and without reliance
upon the Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking any action under the Financing
Documents.
Section 11.08. Successor Agent. The Agent may resign at any time by
giving written notice thereof to the Lenders and the Company. Upon any such
resignation, the Required Lenders shall have the right to appoint a successor
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Agent. If no successor Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment, within 30 days after the
retiring Agent gives notice of resignation, then the retiring Agent may, on
behalf of the Lenders, appoint a successor Agent, which shall be an
institution organized or licensed under the laws of the United States of
America or of any State thereof. Upon the acceptance of its appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article 11 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent.
ARTICLE 12
Miscellaneous
Section 12.01. Survival. All agreements, representations and warranties
made herein shall survive the execution and delivery of this Agreement and
the other Operative Documents and the execution, sale and delivery of the
Notes, Warrants and Warrant Shares. The indemnities and agreements set forth
in Articles 10 and 11 shall survive the payment of the Notes, the exercise,
redemption or expiration of the Warrants and the termination of this
Agreement.
Section 12.02. No Waivers. No failure or delay by the Agent or any
Lender in exercising any right, power or privilege under any Financing
Document shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
herein and therein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
Section 12.03. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including prepaid overnight
courier, telex, facsimile transmission or similar writing) and shall be given
to such party at its address or telecopy or telex number set forth on the
signature pages hereof (or, in the case of any such Lender who becomes a
Lender after the date hereof, in a notice delivered to the Company and the
Agent by the assignee Lender forthwith upon such assignment) or at such other
address or telecopy or telex number as such party may hereafter specify for
the purpose by notice to the Agent and the Company. Each such notice, request
or other communication shall be effective (i) if given by telex or telecopy,
when such telex or telecopy is transmitted to the telex or telecopy number
specified in this Section and the appropriate answerback
77
<PAGE>
is received (in the case of telex) or telephonic confirmation of receipt
thereof is obtained (in the case of telecopy) or (ii) if given by mail,
prepaid overnight courier or any other means, when received at the address
specified in this Section or when delivery at such address is refused.
Section 12.04. Severability. In case any provision of or obligation
under this Agreement or the Notes or any other Financing Document shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
Section 12.05. Amendments and Waivers. Any provision of this Agreement
or the Notes may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by Holdings, the Company and the Required
Lenders (and, if the rights or duties of the Agent are affected thereby, by
the Agent); provided that no such amendment or waiver shall, unless signed by
all the Lenders, (i) increase or decrease any Commitment of any Lender
(except for a ratable decrease in the Commitments of all Lenders) or subject
any Lender to any additional obligation, (ii) reduce the principal of or rate
of interest on any Loan or fees hereunder, (iii) postpone the date fixed for
any payment of principal of any Loan pursuant to Section 2.04(a), 3.04(a) or
4.05, or of interest on any Loan or any fees hereunder or for any termination
of any Commitment or (iv) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes which shall be required for
the Lenders or any of them to take any action under this Section or any other
provision of this Agreement.
Section 12.06. Successors and Assigns; Registration. (a) The provisions
of this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns (including any
transferee of any Note or Warrant), except that neither Holdings nor the
Company may assign or otherwise transfer any of its rights under this
Agreement without the prior written consent of all Lenders.
(b) The terms and provisions of this Agreement shall inure to the
benefit of any transferee or assignee of any Note or Warrant and, in the
event of such transfer or assignment, the rights and privileges herein
conferred upon the assigning Lender shall automatically extend to and be
vested in such transferee or assignee, all subject to the terms and
conditions hereof. Any assignment shall be for an equal percentage of each
Class of such assignor Lender's Loans and its Working Capital Commitment, and
any such assignee Lender shall, upon its registration in the Note Register
referred to below, become a "Lender" for all
78
<PAGE>
purposes hereunder. Upon any such assignment, the assignor Lender shall be
released from its Working Capital Commitment to the extent assigned to and
assumed by the assignee Lender.
(c) Upon any assignment of any Note(s), the assigning Lender shall
surrender its Note(s) to the Company for exchange or registration of
transfer, and the Company will promptly execute and deliver in exchange
therefor a new Note or Note(s) of the same tenor and registered in the name
of the assignor Lender (if less than all of such Lender's Notes are assigned)
and the name of the assignee Lender.
(d) The Company shall maintain a register (the "Note Register") of the
Lenders and all assignee Lenders that are the holders of all the Notes issued
pursuant to this Agreement. The Company will allow any Lender to inspect and
copy such list at the Company's principal place of business during normal
business hours. Prior to the due presentment for registration of transfer of
any Note, the Company may deem and treat the Person in whose name a Note is
registered as the absolute owner of such Note for the purpose of receiving
payment of principal of and premium and interest on such Note and for all
other purposes whatsoever, and the Company shall not be affected by notice to
the contrary.
(e) Each Lender (including any assignee Lender at the time of such
assignment) represents that it (i) is acquiring its Notes solely for
investment purposes and not with a view toward, or for sale in connection
with, any distribution thereof, (ii) has received and reviewed such
information as it deems necessary to evaluate the merits and risks of its
investment in the Notes, (iii) is an "accredited investor" within the meaning
of Rule 501(a) under the Securities Act and (iv) has such knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of its investment in the Notes, including a complete
loss of its investment.
(f) Each Lender understands that the Notes are being offered only in a
transaction not involving any public offering within the meaning of the
Securities Act, and that, if in the future such Lender decides to resell,
pledge or otherwise transfer any of the Notes, such Notes may be resold,
pledged or transferred only (i) to the Company, (ii) to a person who such
Lender reasonably believes is a qualified institutional buyer that purchases
for its own account or for the account of a qualified institutional buyer to
whom notice is given that such resale, pledge or transfer is being made in
reliance on Rule 144A under the Securities Act or (iii) pursuant to an
exemption from registration under the Securities Act.
79
<PAGE>
(g) Each Lender understands that the Notes will, unless otherwise agreed
by the Company and the holder thereof, bear a legend to the following effect:
THIS SECURITY IS NOT BEING REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE ISSUER THAT
THIS SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1) TO THE COMPANY, (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT.
(h) If any Note becomes mutilated and is surrendered by the Lender with
respect thereto to the Company, or if any Lender claims that any of its Notes
has been lost, destroyed or wrongfully taken, the Company shall execute and
deliver to such Lender a replacement Note, upon the affidavit of such Lender
attesting to such loss, destruction or wrongful taking with respect to such
Note and such lost, destroyed, mutilated, surrendered or wrongfully taken
Note shall be deemed to be canceled for all purposes hereof. Such affidavit
shall be accepted as satisfactory evidence of the loss, wrongful taking or
destruction thereof and no surety or bond shall be required as a condition of
the execution and delivery of a replacement Note. Any costs and expenses of
the Company in replacing any such Note shall be for the account of such
Lender.
Section 12.07. Collateral. Each of the Lenders represents to the Agent
and each of the other Lenders that it in good faith is not relying upon any
Margin Stock as collateral in the extension or maintenance of the credit
provided for in this Agreement.
Section 12.08. Headings. Headings and captions used in the Financing
Documents (including the Exhibits and Schedules hereto and thereto) are
included herein and therein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
80
<PAGE>
Section 12.09. Governing Law; Submission to Jurisdiction. THIS AGREEMENT
AND EACH NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK. EACH OF THE COMPANY AND HOLDINGS HEREBY SUBMITS TO
THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW
YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE COMPANY
AND HOLDINGS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
EACH OF THE PARTIES HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE
MANNER PROVIDED FOR NOTICES IN SECTION 12.03. NOTHING IN THIS AGREEMENT WILL
AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW.
Section 12.10. Notice of Breach by Agent or Lender. Each of the Company
and Holdings agrees to give the Agent and the Lenders notice of any action or
inaction by the Agent or any Lender or any agent or attorney of the Agent or
any Lender in connection with this Agreement or any other Financing Document
or the obligations of the Company or Holdings under this Agreement or any
other Financing Document that may be actionable against the Agent or any
Lender or any agent or attorney of the Agent or any Lender or a defense to
payment of any obligations of the Company or Holdings under this Agreement or
any other Financing Document for any reason, including commission of a tort
or violation of any contractual duty or duty implied by law. Each of the
Company and Holdings agrees, to the fullest extent that it may lawfully do
so, that unless such notice is given promptly (and in any event within thirty
(30) days after the Company or Holdings has knowledge, or with the exercise
of reasonable diligence could have had knowledge, of any such action or
inaction), the Company and Holdings shall not assert, and the Company and
Holdings shall be deemed to have waived, any claim or defense arising
therefrom to the extent that the Agent or any Lender could have mitigated
such claim or defense after receipt of such notice.
81
<PAGE>
Section 12.11. Waiver of Jury Trial. EACH OF THE COMPANY, HOLDINGS, THE
AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE FINANCING
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY AND TO THE FULLEST EXTENT
PERMITTED BY LAW WAIVES ANY RIGHTS THAT IT MAY HAVE TO CLAIM OR RECEIVE
CONSEQUENTIAL OR SPECIAL DAMAGES IN CONNECTION WITH ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY.
Section 12.12. Counterparts; Integration. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement, the other Financing Documents, the Warrantholders
Rights Agreement and the Warrants constitute the entire agreement and
understanding among the parties hereto and supersede any and all prior
agreements and understandings, oral or written, relating to the subject
matter hereof.
Section 12.13. Knowledge of Any Person. As used herein, "knowledge"
means, with respect to any Person, any fact, circumstance or situation of
which such Person has actual knowledge or any fact, circumstance or situation
of which such Person would have had knowledge upon due inquiry but without
expenditure of funds for special studies and the like. The knowledge of the
Company or Holdings shall be limited to the knowledge of the directors and
Chairman, President and Chief Executive Officer of the Company or Holdings,
as the case may be.
82
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
PUMPKIN, LTD.
By: /s/ Calvin Neider
-----------------------------
Title: Vice President
Address: One Pickwick Plaza
Suite 310
Greenwich, CT 06830
Telecopy number: 203-625-0770
Company Account Designation:
ABA No.:
Account No.:
Account Name:
Reference:
PUMPKIN MASTERS HOLDINGS, INC.
By: /s/ Calvin Neider
-----------------------------
Title: Vice President
Address: One Pickwick Plaza
Suite 310
Greenwich, CT 06830
Telecopy number: 203-625-0770
83
<PAGE>
NATIONSCREDIT COMMERCIAL
CORPORATION, as Lender and
Agent
By /s/ Edward M. Alt
-----------------------------
Title: Authorized Signatory
One Canterbury Green
P.O. Box 120013
Stamford, CT 06912-0013
Telecopy: 203-352-4171
Payment Account Designation:
First Chicago National Bank
Chicago, Illinois
BA No.: 071000013
Account No.: 52-56933
Account Name: NationsCredit
Commercial Corporation
<PAGE>
SCHEDULE 6.17
EMPLOYMENT AGREEMENTS
<PAGE>
SCHEDULE 6.21
ENVIRONMENTAL MATTERS
<PAGE>
SCHEDULE 6.22
INITIAL CAPITALIZATION
PART 1: EQUITY
Initial Capital
Contribution or
Name Equity Classification Consideration
- --------------- ----------------------------------- ----------------------------
PART 2: DEBT (OTHER THAN THE LANS)
Description and Principal
Name Obligor Amount of Debt
- --------------- ----------------------------------- ----------------------------
<PAGE>
SCHEDULE 6.23
REAL PROPERTY INTERESTS
<PAGE>
SCHEDULE 7.04
REQUIRED INSURANCE
<PAGE>
SCHEDULE 8.01
DEBT OUTSTANDING AFTER GIVING EFFECT
TO THE TRANSACTIONS ON THE CLOSING DATE
(Other than Debt owed to NationsCredit)
NONE
<PAGE>
EXHIBIT A
THIS SECURITY IS NOT BEING REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE ISSUER THAT
THIS SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1) TO THE COMPANY, (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT.
PUMPKIN LTD.
TRANCHE A NOTE
$ __________ ___, 199_
PUMPKIN LTD., a Delaware corporation (together with its successors, the
"Company"), for value received, promises to pay [NAME OF LENDER] (the "Lender"),
or registered assigns, an aggregate principal amount of Three Million Dollars
($3,000,000), by paying on each of the dates set forth in Schedule A attached
hereto (or, if any such day is not a Business Day, on the next succeeding
Business Day) (each, an "Amortization Date"), the aggregate principal amount set
forth opposite such Amortization Date on such Schedule A, together with accrued
and unpaid interest thereon to but excluding the date of payment, and to pay,
monthly in arrears with respect to each calendar month on the first Business Day
of the next succeeding calendar month, commencing with [July], 1997, interest
(computed on the basis of the actual number of days elapsed over a year of 360
days) on the aggregate unpaid principal amount hereof from time to time at a
rate equal to the sum of 4.5% per annum plus the Commercial Paper Rate (as
hereinafter defined) and to pay on demand interest at a rate equal to the sum of
6.5% per annum plus the Commercial Paper Rate (in each case subject to Section
10.08 of the Credit Agreement referred to below) on any overdue principal,
<PAGE>
premium and interest from the due date thereof to the date of actual payment
(after as well as before judgment and during any bankruptcy proceeding). Changes
in the rate of interest applicable hereto shall occur as of the opening of
business on any day on which the Commercial Paper Rate changes.
"Commercial Paper Rate" means for any day in any calendar month, the
rate of interest equivalent to the money market yield for the Interest
Determination Date falling in such month on the 30-day Commercial Paper Rate
for dealer-placed commercial paper of issuers whose corporate bonds are rated
"AA" or its equivalent by a nationally recognized rating agency, as such rate
is made available on a discount basis or otherwise by the Federal Reserve
Bank of New York and published weekly by the Board of Governors of the
Federal Reserve System in its H.15 report, or any successor publication
published by the Board of Governors of the Federal Reserve System or, if such
rate for such date is not yet published in such statistical release, the rate
for that date will be the rate set forth in the weekly statistical release
designated as such, or any successor publication, published by the Board of
Governors of the Federal Reserve System. "Interest Determination Date" means
June __, 1997 and the first Business Day of each calendar month thereafter.
This Note is one of the Tranche A Notes referred to in the Credit Agreement
dated as of June __, 1997 (as amended from time to time, the "Credit Agreement")
among the Company, Holdings, the lenders referred to therein and NationsCredit
Commercial Corporation, as Agent. The Credit Agreement and the Security
Documents referred to therein contain additional rights of the holder of, and
the security for, this Note. Capitalized terms used but not defined herein have
the meanings assigned thereto in the Credit Agreement.
If an Event of Default shall occur and be continuing, the unpaid balance
of the principal of this Note together with all accrued but unpaid interest
hereon may become or be declared forthwith due and payable in the manner and
with the effect provided in the Credit Agreement.
This Note also may and must be prepaid as provided in the Credit Agreement,
together with any premiums set forth therein, under the circumstances therein
described.
Payments of principal hereof and interest and premium hereon shall be
made in lawful money of the United States of America.
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York in all respects, including all matters of
2
<PAGE>
construction, validity and performance, without regard to the choice of law
provisions thereof.
3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
as of the day and year first above written.
PUMPKIN LTD.
By:
---------------------------------
Name: Calvin Neider
Title: Vice President
4
<PAGE>
SCHEDULE A
TO TRANCHE A NOTE
Amortization Schedule
Payment Due Date Principal Amount
----------------------- -----------------------
The first Business
Day of each of the
following months:
<PAGE>
EXHIBIT B
THIS SECURITY IS NOT BEING REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE ISSUER THAT
THIS SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1) TO THE COMPANY, (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT.
PUMPKIN LTD.
TRANCHE B NOTE
$ ____________ ___, 199_
PUMPKIN LTD., a Delaware corporation (together with its successors, the
"Company"), for value received, promises to pay [NAME OF LENDER] (the "Lender"),
or registered assigns, an aggregate principal amount of
____________________ Dollars ($__________), by paying on each July 1, October 1,
January 1 and April 1, commencing with the earlier of (i) the second such date
following June __, 2002 and (ii) the first such date following the date on which
the Tranche A Notes (as defined in the Credit Agreement referred to below) shall
have been repaid in their entirety (or if any such day is not a Business Day, on
the next succeeding Business Day) (each, an "Amortization Date"), the aggregate
principal amount of Two Hundred Thousand Dollars ($200,000), together with
accrued and unpaid interest thereon to but excluding the date of payment, and to
pay, monthly in arrears with respect to each calendar month on the first
Business Day of the next succeeding calendar month, commencing with [July] 1997,
interest (computed on the basis of the actual number of days elapsed over a year
of 360 days) on the aggregate unpaid principal amount hereof from time to time
at a rate equal to the sum of 6.5% per annum plus the Commercial Paper Rate (as
hereinafter defined) and to pay on demand interest at a rate equal to the sum of
8.5% per annum plus the Commercial Paper Rate (in each case subject to Section
10.08 of the Credit Agreement referred to below) on any overdue principal,
premium and interest from the due date thereof to the date of actual payment
(after as well as before judgment and during any bankruptcy
<PAGE>
proceeding). Changes in the rate of interest applicable hereto shall occur as
of the opening of business or any day on which the Commercial Paper Rate
changes.
"Commercial Paper Rate" means for any day in any calendar month, the
rate of interest equivalent to the money market yield for the Interest
Determination Date falling in such month on the 30-day Commercial Paper Rate
for dealer-placed commercial paper of issuers whose corporate bonds are rated
"AA" or its equivalent by a nationally recognized rating agency, as such rate
is made available on a discount basis or otherwise by the Federal Reserve
Bank of New York and published weekly by the Board of Governors of the
Federal Reserve System in its H.15 report, or any successor publication
published by the Board of Governors of the Federal Reserve System or, if such
rate for such date is not yet published in such statistical release, the rate
for that date will be the rate set forth in the weekly statistical release
designated as such, or any successor publication, published by the Board of
Governors of the Federal Reserve System. "Interest Determination Date" means
June __, 1997 and the first Business Day of each calendar month thereafter.
This Note is one of the Tranche B Notes refrered to in the Credit
Agreement dated as of June __, 1997 (as amended from time to time, the
"Credit Agreement") among the Company, Holdings, the lenders referred to
therein and NationsCredit Commercial Corporation, as Agent. The Credit
Agreement and the Security Documents referred to therein contain additional
rights of the holder of, and the security for, this Note. Capitalized terms
used but not defined herein have the meanings assigned thereto in the Credit
Agreement.
If an Event of Default shall occur and be continuing, the unpaid balance
of the principal of this Note together with all accrued but unpaid interest
hereon may become or be declared forthwith due and payable in the manner and
with the effect provided in the Credit Agreement.
This Note also may and must be prepaid as provided in the Credit
Agreement, together with any premiums set forth therein, under the
circumstances therein described.
Payments of principal hereof and interest and premium hereon shall be
made in lawful money of the United States of America.
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York in all respects, including all matters of
construction, validity and performance, without regard to the choice of law
provisions thereof.
2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
as of the day and year first above written.
PUMPKIN LTD.
By:
--------------------------------
Name: Calvin Nieder
Title: Vice President
3
<PAGE>
EXHIBIT C
THIS SECURITY IS NOT BEING REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE ISSUER THAT
THIS SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1) TO THE COMPANY, (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT.
PUMPKIN LTD.
WORKING CAPITAL NOTE
$ __________ __, 199_
PUMPKIN LTD., a Delaware corporation (together with its successors, the
"Company"), for value received, promises to pay [NAME OF LENDER] (the "Lender"),
or registered assigns, the principal amount of Two Hundred Fifty
Thousand Dollars ($250,000) or the aggregate outstanding principal amount of the
Working Capital Loans made by the Lender, whichever is less, on the Working
Capital Termination Date (as herein defined), and to pay, monthly in arrears
with respect to each calendar month on the first Business Day of the next
succeeding calendar month, commencing with [July], 1997, until the Working
Capital Termination Date and on the Working Capital Termination Date, interest
(computed on the basis of the actual number of days elapsed over a year of 360
days) on the aggregate unpaid principal amount hereof on each day from time to
time at a rate equal to the sum of 4.25% per annum plus the Commercial Paper
Rate (as hereinafter defined) and to pay on demand interest at a rate equal to
the sum of 6.25% per annum plus the Commercial Paper Rate (in each case subject
to Section 10.08 of the Credit Agreement referred to below) on any overdue
principal and interest from the due date thereof to the date of actual payment
(after as well as before judgment and during any bankruptcy proceeding). Changes
in the rate of interest applicable hereto shall occur as of the opening of
business on any day on which the Commercial Paper Rate changes.
<PAGE>
"Working Capital Termination Date" means the earlier of July 1, 2003 and
the date on which all of the Tranche A Notes and the Tranche B Notes shall
have been paid in full in accordance with their terms.
"Commercial Paper Rate" means for any day in any calendar month, the
rate of interest equivalent to the money market yield for the Interest
Determination Date falling in such month on the 30-day Commercial Paper Rate
for dealer-placed commercial paper of issuers whose corporate bonds are rated
"AA" or its equivalent by a nationally recognized rating agency, as such rate
is made available on a discount basis or otherwise by the Federal Reserve
Bank of New York and published weekly by the Board of Governors of the
Federal Reserve System in its H.15 report, or any successor publication
published by the Board of Governors of the Federal Reserve System or, if such
rate for such date is not yet published in such statistical release, the rate
for that date will be the rate set forth in the weekly statistical release
designated as such, or any successor publication, published by the Board of
Governors of the Federal Reserve System. "Interest Determination Date" means
June __, 1997 and the first Business Day of each calendar month thereafter.
This Note is one of the Working Capital Notes referred to in the Credit
Agreement dated as of June __, 1997 (as amended from time to time, the
"Credit Agreement") among the Company, Holdings, the lenders referred to
therein and NationsCredit Commercial Corporation, as Agent. The Credit
Agreement and the Security Documents referred to therein contain additional
rights of the holder of, and the security for, this Note. Capitalized terms
used but not defined herein have the meanings assigned thereto in the Credit
Agreement.
If an Event of Default shall occur and be continuing, the unpaid balance
of the principal of this Note together with all accrued but unpaid interest
hereon may become or be declared forthwith due and payable in the manner and
with the effect provided in the Credit Agreement.
This Note also may and must be prepaid as provided in the Credit
Agreement, together with any premiums set forth therein, under the
circumstances therein described.
Payments of principal hereof and interest hereon shall be made in lawful
money of the United States of America.
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York in all respects, including all matters of
2
<PAGE>
construction, validity and performance, without regard to the choice of law
provisions thereof.
3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
as of the day and year first above written.
PUMPKIN LTD.
By:
---------------------------------
Name: Calvin Nieder
Title: Vice President
4
<PAGE>
SCHEDULE A TO WORKING CAPITAL NOTE
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Principal Amount of Notation
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<PAGE>
Exhibit 99.3
THIS WARRANT AND THE SHARES OF NON-VOTING COMMON STOCK PURCHASABLE HEREUNDER
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD
OR OFFERED FOR SALE UNLESS REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
THIS WARRANT AND THE SHARES OF NON-VOTING COMMON STOCK PURCHASABLE HEREUNDER
ARE SUBJECT TO AND HAVE THE BENEFIT OF A WARRANTHOLDERS RIGHTS AGREEMENT
DATED AS OF JUNE 27, 1997 AMONG PUMPKIN LTD., PUMPKIN MASTERS HOLDINGS, INC.
AND THE STOCKHOLDERS AND WARRANTHOLDERS LISTED ON THE SIGNATURE PAGES
THEREOF, A COPY OF WHICH IS ON FILE WITH PUMPKIN LTD.
Dated: June 27, 1997
WARRANT
To Purchase 100 Shares of Non-Voting Common Stock of
PUMPKIN LTD.
Expiring June 27, 2007
THIS IS TO CERTIFY THAT, for value received, NATIONSCREDIT COMMERCIAL
CORPORATION or registered assigns ("Holder") is entitled to purchase from
PUMPKIN LTD., a Delaware corporation (the "Company"), at any time or from
time to time after 9:00 a.m., New York City time, on the date hereof and
prior to 5:00 p.m., New York City time, on the earlier of June 27, 2007 and
the Business Day preceding the date of redemption of this Warrant, at the
place where the Warrant Agency is located, at the Exercise Price, the number
of shares of Class B Common Stock, par value $0.01 per share (the "Non-Voting
Common Stock") of the Company shown above, all subject to adjustment and upon
the terms and conditions hereinafter provided, and is entitled also to
exercise the other appurtenant rights, powers and privileges hereinafter
described.
This Warrant is one of one or more warrants (the "Warrants") of the same
form and having the same terms as this Warrant, entitling the holders
initially to purchase up to an aggregate of 100 shares of Non-Voting Common
Stock. The Warrants have been issued pursuant to the Credit Agreement dated
as of June 27, 1997 (as amended from time to time, the "Credit Agreement")
among the
<PAGE>
Company, Pumpkin Masters Holdings, Inc., a Delaware
corporation ("Holdings"), the Lenders listed on the signature pages thereof
and NationsCredit Commercial Corporation ("NationsCredit"), as Agent, and the
Holder is entitled to certain benefits as set forth therein and to certain
benefits described in the Warrantholders Rights Agreement. The Company shall
keep a copy of the Credit Agreement and the Warrantholders Rights Agreement,
and any amendments thereto, at the Warrant Agency and shall furnish, without
charge, copies thereof to the Holder upon request.
Certain terms used in this Warrant are defined in Article 6.
ARTICLE 1
Exercise of Warrants
SECTION 1.01. Method of Exercise. To exercise this Warrant in whole or
in part, the Holder shall deliver on any Business Day to the Company, at the
Warrant Agency, (a) this Warrant, (b) a written notice of such Holder's
election to exercise this Warrant, which notice shall specify the number of
shares of Non-Voting Common Stock to be purchased (which shall be a whole
number of shares if for less than all the shares then issuable hereunder),
the denominations of the share certificate or certificates desired and the
name or names in which such certificates are to be registered, and (c)
payment of the Exercise Price with respect to such shares. Such payment may
be made, at the option of the Holder, to be specified in such notice, either
(a) by cash, certified or bank cashier's check or wire transfer in an amount
equal to the product of (i) the Exercise Price times (ii) the number of
Warrant Shares as to which this Warrant is being exercised or (b) by
receiving from the Company the number of Warrant Shares equal to (i) the
number of Warrant Shares as to which this Warrant is being exercised minus
(ii) the number of Warrant Shares having a value, based on the Closing Price
on the trading day immediately prior to the date of such exercise, equal to
the product of (x) the Exercise Price times (y) the number of Warrant Shares
as to which this Warrant is being exercised; provided that the Holder may
make payment as set forth in clause (b) only if at the time this Warrant is
being exercised the Common Stock is listed or admitted for trading on a
national securities exchange or is traded in the over-the-counter market.
The Company shall, as promptly as practicable and in any event within seven
days after receipt of such documents and payment, execute and deliver or cause
to be executed and delivered, in accordance with such notice, a certificate or
certificates representing the aggregate number of shares of Non-Voting Common
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<PAGE>
Stock specified in said notice together with cash in lieu of any fractions of
a share as provided in Section 1.3. The share certificate or certificates so
delivered shall be in such denominations as may be specified in such notice,
and shall be issued in the name of the Holder or such other name or names as
shall be designated in such notice. This Warrant shall be deemed to have been
exercised and such certificate or certificates shall be deemed to have been
issued, and such Holder or any other Person so designated to be named therein
shall be deemed for all purposes to have become a holder of record of shares,
as of the date the aforementioned notice and payment is received by the
Company. If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of such certificate or certificates, deliver
to the Holder a new Warrant evidencing the rights to purchase the remaining
shares of Non-Voting Common Stock called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant, or, at
the request of the Holder, appropriate notation may be made on this Warrant
which shall then be returned to the Holder. The Company shall pay all
expenses, taxes and other charges payable in connection with the preparation,
issuance and delivery of share certificates and new Warrants, except that, if
share certificates or new Warrants shall be registered in a name or names
other than the name of the Holder, funds sufficient to pay all transfer taxes
payable as a result of such transfer shall be paid by the Holder at the time
of delivery of the aforementioned notice of exercise or promptly upon receipt
of a written request of the Company for payment.
SECTION 1.02. Shares to Be Fully Paid and Nonassessable. All shares of
Non-Voting Common Stock issued upon the exercise of this Warrant and all
shares of Voting Common Stock issued upon the conversion of such Non-Voting
Common Stock shall be validly issued, fully paid and nonassessable and, if
such class of Common Stock is then listed on any national securities exchange
(as defined in the Exchange Act) or quoted on NASDAQ, shall be duly listed or
quoted thereon, as the case may be.
SECTION 1.03. No Fractional Shares Required to Be Issued. The Company
shall not be required to issue fractions of shares of Non-Voting Common Stock
upon exercise of this Warrant. If any fraction of a share would, but for this
SECTION, be issuable upon final exercise of this Warrant, in lieu of such
fractional share the Company shall pay to the Holder, in cash, an amount
equal to the same fraction of the Fair Market Value of the Company per share
of outstanding Common Stock on the Business Day immediately prior to the date
of such exercise.
SECTION 1.04. Share Legend. Each certificate for shares of Non-Voting
Common Stock issued upon exercise of this Warrant, unless at the time of
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<PAGE>
exercise such shares are registered under the Securities Act, shall bear the
following legend:
"This security has not been registered under the Securities Act of
1933 and may not be sold or offered for sale unless registered under said
Act and any applicable state securities laws or unless an exemption from
such registration is available. This security is also subject to and has
the benefit of a Warrantholders Rights Agreement dated as of June 27, 1997
among Pumpkin Ltd., Pumpkin Masters Holdings, Inc. and the Stockholders and
Warrantholders listed on the signature pages thereof, copies of which are
on file with Pumpkin Ltd."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon
completion of a public offering pursuant to a registration statement under
the Securities Act) shall also bear such legend unless, in the opinion of
counsel selected by the holder of such certificate (who may be an employee of
such holder) and reasonably acceptable to the Company, the securities
represented thereby need no longer be subject to restrictions on resale under
the Securities Act.
SECTION 1.05. Reservation. The Company has duly reserved and will keep
available for issuance upon exercise of the Warrants the total number of
Warrant Shares deliverable from time to time upon exercise of all Warrants
from time to time outstanding and the total number of shares of Voting Common
Stock deliverable upon conversion of such Warrant Shares to Voting Common
Stock. The Company will not change the Non-Voting Common Stock from par value
$0.01 per share to any higher par value which exceeds the Exercise Price then
in effect, and will reduce the par value of the Non-Voting Common Stock upon
any event described in Article 4 that provides for an increase in the number
of shares of Non-Voting Common Stock subject to purchase upon exercise of
this Warrant, in inverse proportion to and effective at the same time as such
number of shares is increased, but only to the extent that such increase in
the number of shares, together with all other such increases after the date
hereof, causes the aggregate Exercise Price of all Warrants (without giving
effect to any exercise or redemption thereof) to be greater than $1,000.
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<PAGE>
ARTICLE 2
Warrant Agency; Transfer; Exchange and Replacement of Warrants
SECTION 2.01. Warrant Agency. As long as any of the Warrants remain
outstanding, the Company shall perform the obligations of and be the warrant
agency with respect to the Warrants (the "Warrant Agency") at its address set
forth in the Credit Agreement or at such other address as the Company shall
specify by notice to all Warrantholders.
SECTION 2.02. Ownership of Warrant. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner
hereof (notwithstanding any notations of ownership or writing hereon made by
any person other than the Company) for all purposes and shall not be affected
by any notice to the contrary, until due presentment of this Warrant for
registration of transfer as provided in this Article 2.
SECTION 2.03. Transfer of Warrant. The Company agrees to maintain at the
Warrant Agency books for the registration of transfers of the Warrants, and
transfer of this Warrant and all rights hereunder shall be registered, in
whole or in part, on such books, upon surrender of this Warrant at the
Warrant Agency, together with a written assignment of this Warrant duly
executed by the Holder or its duly authorized agent or attorney, with (if the
Holder is a natural person) signatures guaranteed by a bank or trust company
or a broker or dealer registered with the NASD, and funds sufficient to pay
any transfer taxes payable upon such transfer. Upon surrender and, if
required, such payment, the Company shall execute and deliver a new Warrant
or Warrants in the name of the assignee or assignees and in the denominations
specified in the instrument of assignment (which shall be whole numbers of
shares only) and shall issue to the assignor a new Warrant evidencing the
portion of this Warrant not so assigned, and this Warrant shall promptly be
canceled.
SECTION 2.04. Division or Combination of Warrants. This Warrant may be
divided or combined with other Warrants upon presentment hereof and of any
Warrant or Warrants with which this Warrant is to be combined at the Warrant
Agency, together with a written notice specifying the names and denominations
(which shall be whole numbers of shares only) in which the new Warrant or
Warrants are to be issued, signed by the holders hereof and thereof or their
respective duly authorized agents or attorneys. Subject to compliance with
Section 2.03 as to any transfer or assignment which may be involved in the
division or combination, the Company shall execute and deliver a new Warrant
or Warrants
5
<PAGE>
in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
SECTION 2.05. Loss, Theft, Destruction of Warrant Certificates. Upon
receipt of evidence satisfactory to the Company of the ownership of and the
loss, theft, destruction or mutilation of any Warrant and, in the case of any
such loss, theft or destruction, upon receipt of indemnity or security
satisfactory to the Company (it being understood and agreed that if the
holder of such Warrant is NationsCredit, then a written agreement of
indemnity given by NationsCredit alone shall be satisfactory to the Company
and no further security shall be required) or, in the case of any such
mutilation, upon surrender and cancellation of such Warrant, the Company will
make and deliver, in lieu of such lost, stolen, destroyed or mutilated
Warrant, a new Warrant of like tenor and representing the right to purchase
the same aggregate number of shares of Non-Voting Common Stock.
SECTION 2.06. Expenses of Delivery of Warrants. The Company shall pay
all expenses, taxes (other than transfer taxes) and other charges payable in
connection with the preparation, issuance and delivery of Warrants hereunder.
ARTICLE 3
Certain Rights
SECTION 3.01. Rights and Obligations under the Warrantholders Rights
Agreement. This Warrant is entitled to the benefits and subject to the terms
of the Warrantholders Rights Agreement dated as of June 27, 1997 among the
Company, Holdings and the Stockholders and Warrantholders listed on the
signature pages thereof (as amended from time to time, the "Warrantholders
Rights Agreement"). The Company shall keep or cause to be kept a copy of the
Warrantholders Rights Agreement, and any amendments thereto, at the Warrant
Agency and shall furnish, without charge, copies thereof to the Holder upon
request.
SECTION 3.02. Determination of Fair Market Value. Subject to Section
3.03 hereof, each determination of Fair Market Value hereunder shall be made
in good faith by the Company. Upon each determination of Fair Market Value by
the Company hereunder, the Company shall promptly give notice thereof to all
Warrantholders, setting forth in reasonable detail the calculation of such
Fair Market Value and the method and basis of determination thereof (the
"Company Determination").
6
<PAGE>
SECTION 3.03. Contest and Appraisal Rights. (a) If the holders of
Warrants entitling such holders to purchase a majority of the Non-Voting
Common Stock subject to purchase upon exercise of Warrants at the time
outstanding (exclusive of Warrants then owned by the Company or any
Subsidiary (as defined in the Credit Agreement) or Affiliate (as defined in
the Credit Agreement) thereof (the "Required Interest") shall disagree with
the Company Determination and shall by notice to the Company given within 30
days after the Company's notice of the Company Determination (an "Appraisal
Notice") elect to dispute the Company Determination, such dispute shall be
resolved as set forth in subsection (b) of this Section.
(b) The Company shall within 30 days after receipt of an Appraisal
Notice pursuant to subsection (a) of this Section engage an investment bank
or other qualified appraisal firm reasonably acceptable to the Required
Interest (the "Appraiser") to make an independent determination of Fair
Market Value (the "Appraiser Determination"). The Appraiser Determination
shall be final and binding on the Company and all Warrantholders. If the
Company Determination and the Appraiser Determination differ by an amount of
10% or less of the Company Determination, then the costs of conducting the
appraisal shall be borne equally by the Company and the Warrantholders; if
the Company Determination is greater than the Appraiser Determination by more
than 10% of the Company Determination, then the costs of conducting the
appraisal shall be borne entirely by the Warrantholders; and if the Appraiser
Determination is greater than the Company Determination by more than 10% of
the Company Determination, then the costs of conducting the appraisal shall
be borne entirely by the Company; provided that in each case costs separately
incurred by the Company and any Warrantholders shall be separately borne by
them.
SECTION 3.04. Board Meetings. The Company shall give to the
Warrantholders notice of all meetings and actions by written consent of its
board of directors, at the same time and in the same manner as notice of any
meetings of such board is required to be given to directors who do not waive
such notice (or, if such meeting requires no notice, then 10 days written
notice thereof describing the matters upon which action is to be taken).
Warrantholders shall have the right to send, at their expense, two
representatives selected by them to each such meeting, who shall be permitted
to attend such meeting and any adjournments thereof (other than any portion
of such meeting devoted to discussion of the Warrantholders solely in their
respective capacities as holders of the Warrants).
SECTION 3.05. Financial Statements and Other Information. The Company
will, and will cause its Subsidiaries to, maintain a system of accounting
established and administered in accordance with sound business practices to
7
<PAGE>
permit preparation of financial statements in accordance with generally
accepted accounting principles ("GAAP"), and will deliver to each of the
Warrantholders:
(i) as soon as practicable and in any event within 30 days after the
end of each month, a consolidated balance sheet of the Company and its
Consolidated Subsidiaries as at the end of such month and the related
consolidated statements of operations and cash flows for such month, and
for the portion of the Fiscal Year ended at the end of such month setting
forth in each case in comparative form, for any such financial statements
for any month ended on or after June 30, 1998, the figures for the
corresponding periods of the previous Fiscal Year, all in reasonable
detail and certified by the chief financial officer of the Company as
fairly presenting in all material respects the financial condition and
results of operations of the Company and its Consolidated Subsidiaries
and as having been prepared in accordance with GAAP applied on a basis
consistent with the audited financial statements of the Company, subject
to changes resulting from audit and normal year-end adjustments and to
the absence of footnotes;
(ii) as soon as available and in any event within 90 days after
the end of each Fiscal Year, a consolidated balance sheet of the Company
and its Consolidated Subsidiaries as of the end of such Fiscal Year
and the related consolidated statements of operations, stockholders'
equity and cash flows for such Fiscal Year, setting forth in each case
(except with respect to the consolidated financial statements of the
Company as of and for the Fiscal Year ending December 31, 1997) in
comparative form the figures for the previous Fiscal Year, such
consolidated financial statements to be certified without qualification
by Deloitte & Touche, or other independent public accountants of
nationally recognized standing;
(iii) promptly following the filing thereof with the Secretary of
State of the State of Delaware, a copy of each amendment to, or
restatement of, the Certificate of Incorporation of the Company, and
promptly following the adoption thereof by the Company, a copy of each
amendment to, or restatement of, the By-laws of the Company;
(iv) as promptly as practicable following each meeting of the board
of directors of the Company, a copy of the minutes of such meeting, and
promptly following the execution by all of the directors on the board of
directors of the Company, a copy of each unanimous written consent of
directors in lieu of a meeting of the board of directors of the Company,
in
8
<PAGE>
each case, including all exhibits and attachments, if any, to such
minutes or unanimous written consents; and
(v) with reasonable promptness, such other information and data
with respect to the Company or any of its Subsidiaries as from time to
time may be reasonably requested by any Warrantholder.
ARTICLE 4
Antidilution Provisions
SECTION 4.01. Adjustment Generally. The Exercise Price and the number of
shares of Non-Voting Common Stock (or other securities or property) issuable
upon exercise of this Warrant shall be subject to adjustment from time to
time upon the occurrence of certain events as provided in this Article 4;
provided that notwithstanding anything to the contrary contained herein, the
Exercise Price shall not be less than the par value of the Non-Voting Common
Stock, as such par value is reduced from time to time in accordance with
Section 1.05.
SECTION 4.02. Common Stock Reorganization. If the Company shall
subdivide its outstanding shares of Common Stock (or any class thereof) into
a greater number of shares or consolidate its outstanding shares of Common
Stock (or any class thereof) into a smaller number of shares (any such event
being called a "Common Stock Reorganization"), then (a) the Exercise Price
shall be adjusted, effective immediately after the effective date of such
Common Stock Reorganization, to a price determined by multiplying the
Exercise Price in effect immediately prior to such effective date by a
fraction, the numerator of which shall be the number of shares of Common
Stock outstanding on such effective date before giving effect to such Common
Stock Reorganization and the denominator of which shall be the number of
shares of Common Stock outstanding after giving effect to such Common Stock
Reorganization, and (b) the number of shares of Non-Voting Common Stock
subject to purchase upon exercise of this Warrant shall be adjusted,
effective at such time, to a number determined by multiplying the number of
shares of Non-Voting Common Stock subject to purchase immediately before such
Common Stock Reorganization by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding after giving effect to such
Common Stock Reorganization and the denominator of which shall be the number
of shares of Common Stock outstanding immediately before such Common Stock
Reorganization.
9
<PAGE>
SECTION 4.03. Common Stock Distribution. (a) If the Company shall issue,
sell or otherwise distribute any shares of Common Stock, other than pursuant
to a Common Stock Reorganization (which is governed by Section 4.02 hereof)
(any such event, including any event described in paragraphs (b) and (c)
below, being herein called a "Common Stock Distribution"), for a
consideration per share less than the Exercise Price then in effect or less
than the Fair Market Value of the Company per share of outstanding Common
Stock on a Fully Diluted Basis on the date of such Common Stock Distribution
(before giving effect to such Common Stock Distribution), then, effective
upon such Common Stock Distribution, the Exercise Price shall be reduced, if
such consideration per share shall be less then the Exercise Price then in
effect but not less than such Fair Market Value per share, to the lower of
the prices (calculated to the nearest one-thousandth of one cent) determined
as provided in clauses (i) and (ii) below or, if such consideration per share
shall be less than such Fair Market Value per share, to the lowest of the
prices (calculated to the nearest one-thousandth of one cent) determined as
provided in clauses (i), (ii) and (iii) below:
(i) if the Company shall receive any consideration for the Common
Stock issued, sold or distributed in such Common Stock Distribution,
the consideration per share of Common Stock received by the Company upon
such issue, sale or distribution;
(ii) by dividing (A) an amount equal to the sum of (1) the number
of shares of Common Stock outstanding immediately prior to such Common
Stock Distribution multiplied by the then existing Exercise Price, plus
(2) the consideration, if any, received by the Company upon such Common
Stock Distribution by (B) the total number of shares of Common Stock
outstanding immediately after such Common Stock Distribution; and
(iii) by multiplying the Exercise Price in effect immediately prior
to such Common Stock Distribution by a fraction, the numerator of which
shall be the sum of (A) the number of shares of Common Stock outstanding
immediately prior to such Common Stock Distribution multiplied by such
Fair Market Value per share on the date of such Common Stock
Distribution, plus (B) the consideration, if any, received by the Company
upon such Common Stock Distribution, and the denominator of which shall
be the product of (1) the total number of shares of Common Stock
outstanding immediately after such Common Stock Distribution multiplied
by (2) such Fair Market Value per share on the date of such Common Stock
Distribution.
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<PAGE>
If any Common Stock Distribution shall require an adjustment to the
Exercise Price pursuant to the foregoing provisions of this paragraph (a),
including by operation of paragraph (b) or (c) below, then, effective at the
time such adjustment is made, the number of shares of Non-Voting Common Stock
subject to purchase upon exercise of this Warrant shall be increased to a
number determined by multiplying the number of shares of Non-Voting Common
Stock subject to purchase immediately before such Common Stock Distribution
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately after giving effect to such Common Stock
Distribution and the denominator of which shall be the sum of the number of
shares outstanding immediately before giving effect to such Common Stock
Distribution (both calculated on a Fully Diluted Basis) plus the number of
shares of Common Stock which the aggregate consideration received by the
Company with respect to such Common Stock Distribution would purchase at the
Fair Market Value of the Company per share of outstanding Common Stock on a
Fully Diluted Basis on the date of such Common Stock Distribution (before
giving effect to such Common Stock Distribution). In computing adjustments
under this paragraph, fractional interests in Common Stock shall be taken
into account to the nearest one-thousandth of a share.
The provisions of this paragraph (a), including by operation of
paragraph (b) or (c) below, shall not operate to increase the Exercise Price
or reduce the number of shares of Non-Voting Common Stock subject to purchase
upon exercise of this Warrant.
(b) If the Company shall issue, sell, distribute or otherwise grant in
any manner (including by assumption) any rights to subscribe for or to
purchase, or any warrants or options for the purchase of Common Stock or any
stock or securities convertible into or exchangeable for Common Stock (such
rights, warrants or options being herein called "Options" and such
convertible or exchangeable stock or securities being herein called
"Convertible Securities"), whether or not such Options or the rights to
convert or exchange any such Convertible Securities in respect of such
Options are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities in respect of such Options
(determined by dividing (i) the aggregate amount, if any, received or
receivable by the Company as consideration for the granting of such Options,
plus the minimum aggregate amount of additional consideration payable to the
Company upon the exercise of all such Options, plus, in the case of Options
to acquire Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issuance or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the total
maximum
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number of shares of Common Stock issuable upon the exercise of such Options
or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than the Exercise
Price then in effect or less than the Fair Market Value of the Company per
share of outstanding Common Stock on a Fully Diluted Basis on the date of
granting such Options (before giving effect to such grant), then, for
purposes of paragraph (a) above, the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities issuable
upon the exercise of such Options shall be deemed to have been issued as of
the date of granting of such Options and thereafter shall be deemed to be
outstanding and the Company shall be deemed to have received as consideration
of such price per share, determined as provided above, therefor. Except as
otherwise provided in paragraph (d) below, no additional adjustment of the
Exercise Price shall be made upon the actual exercise of such Options or upon
conversion or exchange of such Convertible Securities.
(c) If the Company shall issue, sell or otherwise distribute (including
by assumption) any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the price per
share for which Common Stock is issuable upon such conversion or exchange
(determined by dividing (i) the aggregate amount received or receivable by
the Company as consideration for the issuance, sale or distribution of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock issuable
upon the conversion or exchange of all such Convertible Securities) shall be
less than the Exercise Price then in effect or less than the Fair Market
Value of the Company per share of outstanding Common Stock on a Fully Diluted
Basis on the date of such issuance, sale or distribution (before giving
effect to such issuance, sale or distribution), then, for purposes of
paragraph (a) above, the total maximum number of shares of Common Stock
issuable upon conversion or exchange of all such Convertible Securities shall
be deemed to have been issued as of the date of the issuance, sale or
distribution of such Convertible Securities and thereafter shall be deemed to
be outstanding and the Company shall be deemed to have received as
consideration such price per share, determined as provided above, therefor.
Except as otherwise provided in paragraph (d) below, no additional adjustment
of the Exercise Price shall be made upon the actual conversion or exchange of
such Convertible Securities.
(d) If (i) the purchase price provided for in any Option referred to in
paragraph (b) above or the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in paragraph
(b)
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or (c) above or the rate at which any Convertible Securities referred to in
paragraph (b) or (c) above are convertible into or exchangeable for Common
Stock shall change at any time (other than under or by reason of provisions
designed to protect against dilution upon an event which results in a related
adjustment pursuant to this Article 4), or (ii) any of such Options or
Convertible Securities shall have terminated, lapsed or expired, the Exercise
Price then in effect shall forthwith be readjusted (effective only with
respect to any exercise of this Warrant after such readjustment) to the
Exercise Price which would then be in effect had the adjustment made upon the
issuance, sale, distribution or grant of such Options or Convertible
Securities been made based upon such changed purchase price, additional
consideration or conversion rate, as the case may be (in the case of any
event referred to in clause (i) of this paragraph (d)) or had such adjustment
not been made (in the case of any event referred to in clause (ii) of this
paragraph (d)).
(e) If the Company shall pay a dividend or make any other distribution
upon any capital stock of the Company payable in Common Stock, Options or
Convertible Securities, then, for purposes of paragraph (a) above, such
Common Stock, Options or Convertible Securities shall be deemed to have been
issued or sold without consideration.
(f) If any shares of Common Stock, Options or Convertible Securities
shall be issued, sold or distributed for cash, the consideration received
therefor shall be deemed to be the amount received by the Company therefor,
after deduction therefrom of any expenses incurred in connection therewith.
If any shares of Common Stock, Options or Convertible Securities shall be
issued sold or distributed for a consideration other than cash, the amount of
the consideration other than cash received by the Company shall be deemed to
be the Fair Market Value of such consideration, after deduction of any
expenses incurred in connection therewith. If any shares of Common Stock,
Options or Convertible Securities shall be issued in connection with any
merger in which the Company is the surviving corporation, the amount of
consideration therefor shall be deemed to be the Fair Market Value of such
portion of the assets and business of the non-surviving corporation as shall
be attributable to such Common Stock, Options or Convertible Securities, as
the case may be. If any Options shall be issued in connection with the
issuance and sale of other securities of the Company, together comprising one
integral transaction in which no specific consideration is allocated to such
Options by the parties thereto, such Options shall be deemed to have been
issued without consideration.
SECTION 4.04. Special Dividends. If the Company shall issue or
distribute to any holder or holders of shares of Common Stock evidences of
indebtedness,
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any other securities of the Company or any cash, property or other assets
(excluding a Common Stock Reorganization or a Common Stock Distribution),
whether or not accompanied by a purchase, redemption or other acquisition of
shares of Common Stock (any such nonexcluded event being herein called a
"Special Dividend"), (a) the Exercise Price shall be decreased, effective
immediately after the effective date of such Special Dividend, to a price
determined by multiplying the Exercise Price then in effect by a fraction,
the numerator of which shall be the Fair Market Value of the Company per
share of outstanding Common Stock as of such effective date less any cash and
the then Fair Market Value of any evidences of indebtedness, securities or
property or other assets issued or distributed in such Special Dividend with
respect to one share of Common Stock, and the denominator of which shall be
such Fair Market Value per share and (b) the number of shares of Non-Voting
Common Stock subject to purchase upon exercise of this Warrant shall be
increased to a number determined by multiplying the number of shares of
Non-Voting Common Stock subject to purchase immediately before such Special
Dividend by a fraction, the numerator of which shall be the Exercise Price in
effect immediately before such Special Dividend and the denominator of which
shall be the Exercise Price in effect immediately after such Special
Dividend. No adjustment pursuant to this Section 4.04 shall be made with
respect to the declaration or payment of any Restricted Payment (as defined
in the Credit Agreement) by the Company in accordance with Section 8.04(a) of
the Credit Agreement. A reclassification of Common Stock (other than a change
in par value, or from par value to no par value or from no par value to par
value) into shares of Common Stock and shares of any other class of stock
shall be deemed a distribution by the Company to the holders of such Common
Stock of such shares of such other class of stock and, if the outstanding
shares of Common Stock shall be changed into a larger or smaller number of
shares of Common Stock as part of such reclassification, a Common Stock
Reorganization.
SECTION 4.05. Capital Reorganizations. If there shall be any
consolidation or merger to which the Company is a party, other than a
consolidation or a merger of which the Company is the continuing corporation
and which does not result in any reclassification of, or change (other than a
Common Stock Reorganization) in, outstanding shares of Common Stock, or any
sale or conveyance of the property of the Company as an entirety or
substantially as an entirety, or any recapitalization of the Company (any
such event being called a "Capital Reorganization"), then, effective upon the
effective date of such Capital Reorganization, the Holder shall no longer
have the right to purchase Non-Voting Common Stock, but shall have instead
the right to purchase, upon exercise of this Warrant, the kind and amount of
shares of stock and other securities and property (including cash) which the
Holder would have owned or
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have been entitled to receive pursuant to such Capital Reorganization if this
Warrant had been exercised immediately prior to the effective date of such
Capital Reorganization. As a condition to effecting any Capital
Reorganization, the Company or the successor or surviving corporation, as the
case may be, shall (a) execute and deliver to each Warrantholder and to the
Warrant Agency an agreement as to the Warrantholders' rights in accordance
with this Section 4.05, providing, to the extent of any right to purchase
equity securities hereunder, for subsequent adjustments as nearly equivalent
as may be practicable to the adjustments provided for in this Article 4 and
(b) provide each Regulation Y Holder with an opinion of counsel reasonably
satisfactory to such Regulation Y Holder and such other assurances as any
Regulation Y Holder may reasonably request to the effect that the ownership
and exercise by any Regulation Y Holder of this Warrant after giving effect
to such Capital Reorganization shall not be prohibited by the BHC Act or the
regulations thereunder. The provisions of this Section 4.05 shall similarly
apply to successive Capital Reorganizations.
SECTION 4.06. Adjustment Rules. Any adjustments pursuant to this Article
4 shall be made successively whenever an event referred to herein shall
occur, except that, notwithstanding any other provision of this Article 4, no
adjustment shall be made to the number of shares of Non-Voting Common Stock
to be delivered to each Holder (or to the Exercise Price) if such adjustment
represents less than 1% of the number of shares previously required to be so
delivered, but any lesser adjustment shall be carried forward and shall be
made at the time and together with the next subsequent adjustment which
together with any adjustments so carried forward shall amount to 1% or more
of the number of shares to be so delivered. No adjustment shall be made
pursuant to this Article 4 in respect of the issuance from time to time of
shares of Common Stock upon the exercise of any of the Warrants. If the
Company shall take a record of the holders of its Common Stock for any
purpose referred to in this Article 4, then (i) such record date shall be
deemed to be the date of the issuance, sale, distribution or grant in
question and (ii) if the Company shall legally abandon such action prior to
effecting such action, no adjustment shall be made pursuant to this Article 4
in respect of such action.
SECTION 4.07. Proceedings Prior to Any Action Requiring Adjustment. As a
condition precedent to the taking of any action which would require an
adjustment pursuant to this Article 4, the Company shall take any action
which may be necessary, including obtaining regulatory approvals or
exemptions, in order that (a) the Company may thereafter validly and legally
issue as fully paid and nonassessable all shares of Non-Voting Common Stock
which the holders of Warrants are entitled to receive upon exercise thereof
and (b) the ownership and
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exercise of any Warrant by any Regulation Y Holder shall not be prohibited by
the BHC Act or the regulations thereunder.
SECTION 4.08. Notice of Adjustment. Not less than 10 nor more than 30
days prior to the record date or effective date, as the case may be, of any
action which requires or could reasonably be expected to require an
adjustment or readjustment pursuant to this Article 4, the Company shall give
notice to each Warrantholder of such event, describing such event in
reasonable detail and specifying the record date or effective date, as the
case may be, and, if determinable, the required adjustment and the
computation thereof. If the required adjustment is not determinable at the
time of such notice, the Company shall give notice to each Warrantholder of
such adjustment and computation promptly after such adjustment becomes
determinable.
ARTICLE 5
Purchase, Redemption and Cancellation of Warrants
SECTION 5.01. Purchase of Warrants by the Company. The Company shall
have the right or obligation to purchase or otherwise acquire Warrants at
such times, in such manner and for such consideration as set forth below.
SECTION 5.02. Mandatory Redemption of Warrants. (a) The Holder may (x) at
any time and from time to time on or after the earlier of (i) the fifth
anniversary of the Closing Date (as defined in the Credit Agreement) and (ii)
repayment in full of all principal of and premium and interest on the Notes
(as defined in the Credit Agreement) and the termination of the Commitments
under the Credit Agreement and (y) on or within 30 days after the date on
which the Company shall have delivered a Refinancing Notice (any such
redemption pursuant to this clause (y), a "Refinancing Redemption"), demand a
determination of the Redemption Price (a "Determination Notice") for purposes
of this Section 5.02. Within 30 days (or, in the case of a Refinancing
Redemption, 5 days) after the receipt of any Determination Notice from the
Holder, the Company shall give to the Holder notice of the Redemption Price,
including a reasonably detailed description of the method of calculation
thereof, determined as of the day of the Determination Notice. At any time
within 30 days (or, in the case of a Refinancing Redemption, 15 days) after
receipt of notice of the Redemption Price the Holder may demand redemption of
this Warrant, in whole or in part, at the Redemption Price by notice to the
Company, payable on the thirtieth Business Day after receipt of notice of
such demand (or, in the case of a Refinancing Redemption, on the closing date
of such refinancing) (any such date,
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the "Redemption Due Date") in immediately available funds to the Holder upon
surrender of this Warrant at the Warrant Agency or, if requested by the
Holder, by wire transfer to any account in New York City specified by notice
to the Company. Thereupon, the right to purchase shares of Non-Voting Common
Stock theretofore represented by this Warrant as to which the Holder has
demanded (and the Company may effect) redemption shall terminate, and this
Warrant shall represent the right of the Holder to receive the full
Redemption Price from the Company in accordance with this Section 5.02(a).
The Holder's right to demand redemption of this Warrant pursuant to this
Section 5.02(a) shall be referred to hereinafter as the Holder's "Mandatory
Redemption Right".
(b) In addition, on or within 30 days after the date on which the
Company shall have delivered a Trigger Notice with respect to a Holdings
Trigger Event described in clauses (i), (ii) or (iii) of the definition
thereof, by notice to the Company the Holder may demand redemption of this
Warrant, in whole or in part, at the Trigger Redemption Price, payable on the
day of the consummation of the Holdings Trigger Event with respect to which
the Trigger Notice has been delivered in immediately available funds to the
Holder upon surrender of this Warrant at the Warrant Agency or, if requested
by the Holder, by wire transfer to any account in New York City specified by
notice to the Company. Thereupon, the right to purchase shares of Non-Voting
Common Stock theretofore represented by this Warrant as to which the Holder
has demanded (and the Company may effect) redemption shall terminate, and
this Warrant shall represent the right of the Holder to receive the Trigger
Redemption Price from the Company in accordance with this Section 5.02(b).
The occurrence of a Holdings Trigger Event described in clause (iv) of the
definition thereof shall not give the Holder any rights under this Section
5.02(b).
SECTION 5.03. Optional Redemption. (a) At any time and from time to time
prior to the completion of a Qualified IPO but after the fifth anniversary of
the Closing Date (as defined in the Credit Agreement), the Company shall have
the right to redeem all, but not less than all, of the outstanding Warrants
at the Optional Redemption Price, determined as of the day preceding the
notice of redemption. Irrevocable notice of such right of redemption shall be
given by the Company to all Warrantholders not more than 30 days nor less
than 15 days prior to the date scheduled for redemption, stating the date and
price, including a reasonably detailed description of the method of
calculation thereof, of redemption. Warrantholders may exercise Warrants
until 5:00 p.m., New York City time, on the Business Day preceding the date
of redemption set forth in a valid notice of redemption, at which time the
right to purchase shares of Non-Voting Common Stock theretofore represented
by this Warrant shall terminate, and this Warrant shall represent the right
of the Holder to receive the Optional
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Redemption Price from the Company in immediately available funds upon
surrender of this Warrant at the Warrant Agency. If the Optional Redemption
Price shall be disputed pursuant to Section 3.03, the Company shall pay to
the affected Warrantholders on the redemption date the Optional Redemption
Price initially determined by it and shall thereafter make supplemental
payment of any increase (and the affected Warrantholder shall remit to the
Company any decrease) in the Optional Redemption Price upon resolution of
such dispute.
(b) In addition, on or within 30 days after the date on which the
Company shall have delivered a Trigger Notice with respect to a Redemption
Transfer, the Company shall have the right to redeem all, but not less than
all, of the outstanding Warrants at the Trigger Redemption Price with respect
to such Holdings Trigger Event. Irrevocable notice of such right of
redemption shall be given by the Company to all Warrantholders not more than
30 days nor less than 15 days prior to the date scheduled for redemption,
stating the date of such redemption, which shall be the date of consummation
of the Redemption Transfer; provided that such notice of redemption may
provide that the obligations of the Company to redeem the Warrants shall be
conditioned upon the consummation of the Redemption Transfer. Warrantholders
may exercise Warrants until 5:00 p.m., New York City time, on the Business
Day preceding the date of redemption set forth in a valid notice of
redemption, at which time the right to purchase shares of Non-Voting Common
Stock theretofore represented by this Warrant shall terminate, and this
Warrant shall represent the right of the Holder to receive the Trigger
Redemption Price from the Company in immediately available funds upon
surrender of this Warrant at the Warrant Agency.
SECTION 5.04. Cancellation of Warrants. All Warrants purchased, redeemed
or otherwise acquired by the Company shall thereupon be canceled and retired.
The Warrant Agency shall cancel any Warrant surrendered for exercise or
registration of transfer or exchange and deliver such canceled Warrants to
the Company.
SECTION 5.05. Notice of Refinancing and Holdings Trigger Events. The
Company shall give notice to each of the Warrantholders of (i) any intent by
the Company or the Company to refinance in their entirety the Notes (as
defined in the Credit Agreement) not less than 60 days prior to the proposed
closing date of such refinancing, setting forth such proposed closing date
and notifying each Warrantholder of its rights under Section 5.02(a) (such
notice, the "Refinancing Notice") and (ii) the proposed occurrence of any
Holdings Trigger Event not less than 60 days prior to the proposed date of
occurrence of such Holdings Trigger Event, setting forth the date of such
proposed event and, if such Holdings Trigger
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event is an event described in clauses (i), (ii) or (iii) of the definition
thereof, notifying each Warrantholder of its rights under Section 5.02(b)
(such notice, the "Trigger Notice").
ARTICLE 6
Definitions
The following terms, as used in this Warrant, have the following
meanings:
"Adjusted EBITDA" means, for any period, EBITDA for such period
plus, to the extent deducted in determining such EBITDA, any fees paid
pursuant to the Management Agreement with respect to such period.
"Appraisal Notice" has the meaning set forth in Section 3.03(a).
"Appraiser" has the meaning set forth in Section 3.03(b).
"Appraiser Determination" has the meaning set forth in Section 3.03(b).
"Asset Purchase Agreement" has the meaning set forth in the Credit
Agreement.
"BHC Act" means the Bank Holding Company Act of 1956, as amended.
"Business Day" means any day excluding Saturday, Sunday and any day on
which banking institutions located in New York are authorized by law or other
governmental action to be closed, unless there shall have been an offering of
Common Stock registered under the Securities Act, in which case "Business
Day" means (a) if Common Stock is listed or admitted to trading on a national
securities exchange, a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open
for business or (b) if Common Stock is not so listed or admitted to trading,
a day on which the New York Stock Exchange is open for business.
"Capital Reorganization" has the meaning set forth in Section 4.05.
"Closing Price" on any day with respect to shares of common stock of any
Person means (a) if such common stock is listed or admitted for trading on a
national securities exchange, the reported last sales price regular way or,
if no
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such reported sale occurs on such day, the average of the closing bid and
asked prices regular way on such day, in each case as officially quoted or
reported on the principal national securities exchange on which such common
stock is listed or admitted to trading, or (b) if such common stock is not
listed or admitted to trading on any national securities exchange, the
average of the closing bid and asked prices in the over-the-counter market on
such day as reported by NASDAQ, the National Quotation Bureau, Inc. or any
nationally recognized comparable system or, if not so reported, as reported
by any New York Stock Exchange member firm selected by such Person for such
purpose.
"Common Stock" means the Voting Common Stock or the Non-Voting Common
Stock, or both, as the context may require.
"Common Stock Distribution" has the meaning set forth in Section 4.03(a).
"Common Stock Reorganization" has the meaning set forth in Section 4.02.
"Company" has the meaning set forth in the first paragraph of this
Warrant.
"Company Determination" has the meaning set forth in Section 3.02.
"Consolidated Total Debt" has the meaning specified in the Credit
Agreement.
"Convertible Securities" has the meaning set forth in Section 4.03(b).
"Credit Agreement" has the meaning set forth in the second paragraph of
this Warrant.
"Determination Notice" has the meaning set forth in Section 5.02(a).
"EBITDA" has the meaning specified in the Credit Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any successor Federal statute, and the rules and regulations of the
Securities and Exchange Commission (or its successor) thereunder, all as the
same shall be in effect at the time.
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"Exercise Price" means $.01 per share of the Non-Voting Common Stock,
subject to adjustment pursuant to Article 4.
"Fair Market Value" of any Person as at any date of determination shall be
the greatest of (i) the Fair Market Value at such date of such Person and its
Subsidiaries as a going concern, (ii) the liquidation value at such date of such
Person and its Subsidiaries, (iii) the consolidated net worth (or stockholders
equity) of such Person and its Subsidiaries as shown on its latest available
consolidated balance sheet of such Person and (iv) the result of (A) Adjusted
EBITDA for the twelve consecutive months most recently ended prior to such date
multiplied by 4 plus (B) cash and cash equivalents at such date minus (C)
Consolidated Total Debt at such date; provided that, for purposes of determining
"Fair Market Value" of the Company at any date, "Consolidated Total Debt" at
such date shall include (i) the average of the aggregate principal amount of the
Working Capital Loans outstanding on the last day of each month during the
twelve consecutive month period ended on or most recently prior to such date and
(ii) (x) if the Earnout Amount (as defined in the Asset Purchase Agreement) has
not yet been determined pursuant to Section 3.2.1 of the Asset Purchase
Agreement or otherwise extinguished before the date of the determination
thereof, the maximum amount which could be payable as the Earnout Amount and (y)
if the Earnout Amount has been determined pursuant to Section 3.2.1 of the Asset
Purchase Agreement, the Earnout Amount so determined, as reduced pursuant to
Sections 3.2.4 and 3.2.5 of the Asset Purchase Agreement. Notwithstanding the
foregoing, if, at any date of determination of the Fair Market Value of any
Person, the common stock of such Person shall then be publicly traded, the Fair
Market Value of such Person on such date for purposes of the foregoing clause
(i) shall be the Market Price on such date multiplied by the number of shares of
common stock of such Person outstanding at such date. Determination of the Fair
Market Value of any Person per share of common stock of such Person shall be
made without giving effect to any discount for (i) minority interest, (ii) any
lack of liquidity of such common stock due to the fact that there may be no
public market for such common stock, or (iii) the voting status of any class of
such common stock and, without limiting the generality of the foregoing, the
Fair Market Value per share of Common Stock shall be made without giving effect
for any lack of liquidity of such Common Stock or for the fact that, other than
Holdings, there are no holders of Common Stock.
"Fiscal Year" has the meaning set forth in the Credit Agreement.
"Fully Diluted Basis" means, with respect to any determination or
calculation, that such determination or calculation is performed on a fully
diluted
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basis determined in accordance with generally accepted accounting principles
as in effect from time to time.
"Holder" has the meaning set forth in the first paragraph of this
Warrant.
"Holdings" has the meaning set forth in the second paragraph of this
Warrant.
"Holdings Common Stock" means the common stock, par value $0.01 per
share, of Holdings.
"Holdings Qualified IPO" means any sale of shares of Holdings Common
Stock by and for the account of Holdings pursuant to an underwritten initial
public offering registered under the Securities Act; provided that the
proceeds to Holdings (net of underwriters' discount, fees and other expenses
incurred by Holdings in connection therewith) from such sale of shares
exceeds $10,000,000.
"Holdings Trigger Event" means (i) a Holdings Qualified IPO at any time
prior to a Qualified IPO, (ii) any proposed transfer by Security Capital (as
defined in the Warrantholders Rights Agreement) or any Management Stockholder
(as defined in the Warrantholders Rights Agreement) or any of their
respective Affiliates (as defined in the Warrantholders Rights Agreement) of
its shares of Holdings Common Stock or any portion thereof to any Person
which requires delivery of a Transfer Notice (as defined in Section 2.04 of
the Warrantholders Rights Agreement) or (iv) a Redemption Transfer (as
defined in Section 2.05(b)(i) of the Warrantholders Rights Agreement).
"Mandatory Redemption Right" has the meaning set forth in Section 5.2(a).
"Market Price" as at any date of determination means the average of the
daily Closing Prices of a share of Common Stock for the shorter of (i) the 20
consecutive Business Days ending on the most recent Business Day prior to the
Time of Determination and (ii) the period commencing on the date next
succeeding the first public announcement of the issuance, sale, distribution,
grant or exercise in question through such most recent Business Day prior to
the Time of Determination. "Time of Determination" means the time and date of
the earliest of (x) the determination of the stockholders entitled to receive
such issuance, sale, distribution or grant, (y) the determination of the
Holders or the Company to exercise their respective rights set forth in
Sections 5.02(a) or 5.03 hereof and (z) the commencement of "ex-dividend"
trading in respect thereof.
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"NASD" means The National Association of Securities Dealers, Inc.
"NASDAQ" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"NationsCredit" has the meaning set forth in the second paragraph of this
Warrant.
"Non-Voting Common Stock" has the meaning set forth in the first paragraph
of this Warrant, subject to change pursuant to Article 4.
"Optional Redemption Price" means, as of any date of determination, a price
for each share of Non-Voting Common Stock issuable upon exercise of the Warrants
equal to 110% of the Redemption Price, determined as of such date.
"Options" has the meaning set forth in Section 4.03(b).
"Person" means any natural person, corporation, limited partnership,
limited liability company, general partnership, joint stock company, joint
venture, association, company, trust, bank, trust company, land trust,
business trust or other organization, whether or not a legal entity, and any
government agency or political subdivision thereof.
"Qualified IPO" means any sale of shares of Common Stock by and for the
account of the Company pursuant to an underwritten initial public offering
registered under the Securities Act; provided that the proceeds to the
Company (net of underwriters' discount, fees and other expenses incurred by
the Company in connection therewith) from such sale of shares exceeds
$10,000,000.
"Redemption Due Date" has the meaning set forth in Section 5.02(a)
hereof.
"Redemption Price" means, as of any date of determination, a price
for each share of Non-Voting Common Stock issuable upon exercise of the
Warrants equal to the excess of (a)(i) the Fair Market Value of the Company
plus the aggregate Exercise Price of all Warrants either being redeemed or
then outstanding and not being redeemed divided by (ii) the number of shares
of Common Stock outstanding on a Fully Diluted Basis over (b) the Exercise
Price then in effect.
"Redemption Transfer" has the meaning set forth in the
Warrantholders Rights Agreement.
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"Refinancing Notice" has the meaning set forth in Section 5.05 hereof.
"Regulation Y Holder" means the Holder or a holder of Warrant Shares, if
such Holder or holder of Warrant Shares has identified itself to the Company
as a bank holding company within the meaning of the BHC Act or a subsidiary
thereof subject to Regulation Y under the BHC Act. The Company acknowledges
that NationsCredit has identified itself to the Company as a "Regulation Y
Holder".
"Required Interest" has the meaning set forth in Section 3.03(a).
"Securities Act" means the Securities Act of 1933, as amended, and rules
and regulations of the Securities and Exchange Commission thereunder.
"Special Dividend" has the meaning set forth in Section 4.04.
"Subsidiary" of any Person means any corporation, partnership, limited
liability company, joint venture, association or other business entity of
which more than 50% of the total voting power of shares of stock or other
interests therein entitled to vote in the election of members of the board of
directors, partnership committee, board of managers or trustees or other
managerial body thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of such
Person or a combination thereof. Unless otherwise specified, "Subsidiary"
means a Subsidiary of the Company and "Subsidiaries" means all Subsidiaries
of the Company.
"Trigger Redemption Price" means, as of any date of determination, an
amount equal to (i) the Trigger Fair Market Value Per Share times (ii) the
product of (A) a fraction, the numerator of which shall be the number of
shares of Common Stock for which this Warrant is exercisable at such date
(after giving effect to any adjustments pursuant to Article 4) or, if such
determination is being made with respect to any redemption of the Warrants in
part, the number of shares with respect to which this Warrant is being
redeemed and the denominator of which shall be the number of shares of Common
Stock outstanding at such time (calculated on a Fully Diluted Basis) times
(B) the number of shares of Holdings Common Stock outstanding at such date
(calculated on a Fully Diluted Basis).
"Trigger Fair Market Value Per Share" means (i) in the case of any
Holdings Trigger Event described in clause (i) or (ii) or (iv) of the
definition thereof, the highest consideration per share (if any) received by
Holdings or any stockholder of Holdings from the sale, exchange, transfer or
other disposition by it of Holdings Common Stock in connection with such
Holdings Trigger Event and (ii) in the case of any Holdings Trigger Event
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described in clause (iii) of the definition thereof, the highest
consideration per share of Holdings Common Stock that would be received by
any stockholder of Holdings upon the disposition of all or substantially all
of the Holdings Common Stock or the assets of Holdings (determined by
reference to all of the consideration received by the stockholders of
Holdings (as stockholders) for that portion actually disposed of in
connection with such Holdings Trigger Event, or which would be received if
all of the consideration received by Holdings in connection with such
Holdings Trigger Event were distributed to the stockholders of Holdings), in
each case net of underwriting commissions and other costs and expenses
incurred in connection with any such Holdings Trigger Event and, if such
Holdings Trigger Event constitutes a sale or other transfer of assets, any
taxes payable with respect to such sale.
"Trigger Notice" has the meaning set forth in Section 5.05.
"Voting Common Stock" means the Class A common stock, par value $0.01
per share, of the Company.
"Warrant Agency" has the meaning set forth in Section 2.01.
"Warrant Shares" means the shares of Non-Voting Common Stock issuable
upon the exercise of the Warrants.
"Warrantholder" means a holder of a Warrant.
"Warrantholders Rights Agreement" has the meaning set forth in Section
3.01.
"Warrants" has the meaning set forth in the second paragraph of this
Warrant.
All references herein to "days" shall mean calendar days unless
otherwise specified.
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ARTICLE 7
Miscellaneous
SECTION 7.01. Notices. Notices and other communications provided for
herein shall be in writing and may be given by mail, courier, confirmed telex
or facsimile transmission and shall, unless otherwise expressly required, be
deemed given when received or, if mailed, four Business Days after being
deposited in the United States mail with postage prepaid and properly
addressed. In the case of the Holder, such notices and communications shall
be addressed to its address as shown on the books maintained by the Warrant
Agency, unless the Holder shall notify the Warrant Agency that notices and
communications should be sent to a different address (or telex or facsimile
number), in which case such notices and communications shall be sent to the
address (or telex or facsimile number) specified by the Holder.
SECTION 7.02. Waivers, Amendments. No failure or delay of the Holder
in exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No notice or demand on the Company in any case shall entitle
the Company to any other or future notice or demand in similar or other
circumstances. The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be amended, modified or waived with (and only
with) the written consent of the Company and the holders of Warrants
entitling such holders to purchase a majority of the Non-Voting Common Stock
subject to purchase upon exercise of such Warrants at the time outstanding
(exclusive of Warrants then owned by the Company or any Subsidiary or
Affiliate (as defined in the Credit Agreement) thereof); provided, however,
that no such amendment, modification or waiver shall, without the written
consent of the holders of all Warrants at the time outstanding, (a) change
the number of shares of Non-Voting Common Stock subject to purchase upon
exercise of this Warrant, the Exercise Price or provisions for payment
thereof or (b) amend, modify or waive the provisions of this Section or
Article 3 or 4 or Section 1.05, 5.02, 5.03 or 5.05. The provisions of the
Credit Agreement and the Warrantholders Rights Agreement may be amended,
modified or waived only in accordance with the respective provisions thereof.
Any such amendment, modification or waiver effected pursuant to and in
accordance with the provisions of this Section or the applicable provisions
of the Credit Agreement or the Warrantholders Rights Agreement shall be
binding upon the holders of all Warrants and Warrant Shares, upon each future
holder thereof
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and upon the Company. In the event of any such amendment, modification or
waiver the Company shall give prompt notice thereof to all holders of
Warrants and Warrant Shares and, if appropriate, notation thereof shall be
made on all Warrants thereafter surrendered for registration of transfer or
exchange.
SECTION 7.03. GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW).
SECTION 7.04. Transfer; Covenants to Bind Successor and Assigns. All
covenants, stipulations, promises and agreements in this Warrant contained by
or on behalf of the Company or the Holder shall bind its successors and
assigns, whether so expressed or not. This Warrant shall be transferable and
assignable by the Holder hereof in whole or from time to time in part to any
other Person in accordance with Section 2.03 hereof and the provisions of
this Warrant shall be binding upon and inure to the benefit of the Holder
hereof and its successors and assigns.
SECTION 7.05. Severability. In case any one or more of the provisions
contained in this Warrant shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 7.06. Section Headings. The section headings used herein are
for convenience of reference only, are not part of this Warrant and are not
to affect the construction of or be taken into consideration in interpreting
this Warrant.
SECTION 7.07. Tax Basis. The Company and the Holder agree pursuant to
Proposed Treasury Regulation Section 1.1273-2 that, for Federal income tax
purposes, the aggregate issue price of the Tranche B Loans (as defined in the
Credit Agreement) and the aggregate purchase price for the Warrants are those
set forth in Section 3.05 of the Credit Agreement. Neither the Company nor
the Holder hereof shall voluntarily take any action inconsistent with the
agreement set forth in this Section 7.07.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
in its corporate name by one of its officers thereunto duly authorized, and
its corporate seal to be hereunto affixed, attested by its Secretary or an
Assistant Secretary, all as of the day and year first above written.
PUMPKIN LTD.
By: /s/ Calvin Neider
-----------------------------------
Title: Vice President
[Corporate Seal]
Attest:
_______________________
Name:
Title:
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Exhibit 99.4
WARRANTHOLDERS RIGHTS AGREEMENT
WARRANTHOLDERS RIGHTS AGREEMENT dated as of June 27, 1997 among Pumpkin
Ltd., a Delaware corporation (together with its successors, "the Company"),
Pumpkin Masters Holdings, Inc., a Delaware corporation (together with its
successors, "Holdings"), Security Capital Corporation (together with its
successors, "Security Capital"), Pumpkin Ltd. d/b/a Pumpkin Masters, Inc.
(the "Management Stockholder"), and NationsCredit Commercial Corporation
("NationsCredit") (Holdings together with any other holder of Conversion
Shares (as defined herein) and such other stockholders of the Company as may,
from time to time, become parties to this Agreement in accordance with the
provisions hereof, the "Company Stockholders"; NationsCredit and such other
warrantholders as may, from time to time, become parties to this Agreement in
accordance with the provisions hereof, the "Warrantholders"; and Security
Capital together with the Management Stockholder any such other stockholders
of Holdings as may, from time to time, become parties to this Agreement in
accordance with the provisions hereof, the "Holdings Stockholders").
WHEREAS on the date hereof, Holdings purchased from the Company and is
the beneficial owner of 855 shares of Company Common Stock (as defined
herein), and NationsCredit purchased and is the beneficial owner of the
Warrants (as defined herein) to purchase 100 shares of Company Non-Voting
Common Stock (as defined herein); and
WHEREAS the Company and each Company Stockholder (other than the holders
of the Conversion Shares) wish to provide to the Warrantholders and the
holders of the Conversion Shares the rights described herein;
NOW THEREFORE the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions. Unless otherwise defined herein, the
following terms used in this Agreement shall have the meanings specified
below.
"Affiliate" means, with respect to any Person, any of (i) a director or
executive officer of such Person, (ii) a spouse, parent, sibling or descendant
of such Person (or a spouse, parent, sibling or descendant of any director or
executive officer
<PAGE>
of such Person) and (iii) any other Person that, directly or indirectly,
controls, or is controlled by or is under common control with such Person.
For the purpose of this definition, "control" (including the terms
"controlling", "controlled by" and "under common control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities or by contract or
agency or otherwise.
"Asset Purchase Agreement" means the Asset Purchase Agreement, dated as
of June 27, 1997, among the Management Stockholder, the Company, Holdings and
Security Capital.
"BHC Act" means the Bank Holding Company Act of 1956, as amended.
"Commission" means the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
"Company Common Stock" means the Company Voting Common Stock or the
Company Non-Voting Common Stock, or both, as the context may require.
"Company Initial Public Offering" means the registration of an
underwritten offering of shares of Company Common Stock under the Securities
Act which becomes effective (other than by a registration on Form S-4, S-8,
S-14 or S-15 or any successor or similar forms).
"Company Non-Voting Common Stock" means the Class B common stock, par
value $0.01 per share, of the Company.
"Company Stockholders" has the meaning set forth in the introductory
paragraph.
"Company Voting Common Stock" means the Class A common stock, par value
$0.01 per share, of the Company.
"Conversion Shares" means (i) any shares of Company Non-Voting Common
Stock or other securities of the Company issued upon the exercise of any
Warrants and (ii) any securities issued with respect to any of such shares or
other securities referred to in clause (i) upon the conversion thereof into
other securities (including Company Voting Common Stock) or by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise;
provided that any of such
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securities shall cease to be Conversion Shares when
such securities shall have (x) been disposed of pursuant to a Public Sale or
(y) ceased to be outstanding.
"Credit Agreement" means the Credit Agreement dated as of June 27, 1997
among the Company, Holdings, the lenders named therein and NationsCredit, as
Agent, as amended from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, or any
successor Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934 shall include a
reference to the comparable section, if any, of any such successor Federal
statute.
"NationsCredit" has the meaning set forth in the introductory paragraph.
"Holdings Common Stock" means the common stock, par value $0.01 per
share, of Holdings.
"Holdings Initial Public Offering" means the registration of an
underwritten offering of shares of Holdings Common Stock under the Securities
Act which becomes effective (other than by a registration on Form S-4, S-8,
S-14 or S-15 or any successor or similar forms).
"Holdings Stockholder" has the meaning set forth in the introductory
paragraph.
"Initiating Holders" has the meaning set forth in Section 3.01 hereof.
"Management Stockholders" has the meaning set forth in the introductory
paragraph.
"Other Shares" has the meaning set forth in Section 3.01.
"Person" means a corporation, an association, a partnership, a limited
liability company, an organization, a business, an individual, a government
or a subdivision thereof or a governmental agency.
"Public Sale" means any sale of securities of the Company or Holdings (as
applicable) to the public pursuant to an offering registered under the
Securities Act or to the public through a broker, dealer or market maker
pursuant to the provisions of Rule 144 (or any successor provision then in
effect) adopted under the Securities Act.
3
<PAGE>
"Registrable Securities" means any Conversion Shares until the date (if
any) on which such Conversion Shares shall have been transferred or exchanged
and new certificates for them not bearing a legend restricting further
transfer shall have been delivered by the Company and subsequent disposition
of them shall not require registration or qualification of them under the
Securities Act or any similar state law then in force.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Sections 3.1 through 3.5 hereof, including
(i) all registration, filing and NASD fees, (ii) all fees and expenses of
complying with securities or blue sky laws, (iii) all word processing,
duplicating and printing expenses, (iv) all messenger and delivery expenses,
(v) the fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any special audits
or "cold comfort" letters required by or incident to such performance and
compliance, (vi) the fees and disbursements of any one counsel retained by
the holder or holders of more than 50% of the Registrable Securities being
registered (or, in the case of any registration effected pursuant to Section
3.01, as the Initiating Holders shall have selected to represent all holders
of the Registrable Securities being registered), (vii) premiums and other
costs of policies of insurance (if any) against liabilities arising out of
the public offering of the Registrable Securities being registered if the
Company desires such insurance and (viii) any fees and disbursements of
underwriters customarily paid by issuers of securities, but not including
underwriting discounts and commissions and transfer taxes, if any, provided
that, in any case where Registration Expenses are not to be borne by the
Company, such expenses shall not include (i) salaries of the Company's
personnel or general overhead expenses of the Company,(ii) auditing fees,
(iii) premiums or other expenses relating to liability insurance required by
underwriters of the Company or (iv) other expenses for the preparation of
financial statements or other data, to the extent that any of the foregoing
either is normally prepared by the Company in the ordinary course of its
business or would have been incurred by the Company had no public offering
taken place.
"Regulation Y Holder" means any Warrant Securityholder that has
identified itself to the Company as a bank holding company within the meaning
of the BHC Act, or a subsidiary thereof subject to Regulation Y under the BHC
Act. The Company acknowledges that NationsCredit has identified itself to the
Company as a "Regulation Y Holder".
"Regulatory Change" means, with respect to any Regulation Y Holder, (i) any
change on or after the date hereof in United States federal or state or foreign
laws or regulations (including the BHC Act and Regulation Y thereunder); (ii)
the adoption on or after the date hereof of any interpretation or ruling
applying to a class
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<PAGE>
of Persons including such Regulation Y Holder under any United States federal
or state or foreign laws or regulations by any court or governmental or
regulatory authority charged with the interpretation or administration
thereof; or (iii) the modification on or after the date hereof of any
agreement or commitment known to the Company of any such governmental or
regulatory authority that is applicable to or binding upon such Regulation Y
Holder.
"Restricted Securities" means the Warrants, the Conversion Shares and any
securities obtained upon exchange for or upon conversion or transfer of or as
a distribution on Warrants, the Conversion Shares or any such securities;
provided that particular securities shall cease to be Restricted Securities
when such securities shall have (x) been disposed of pursuant to a Public
Sale, (y) been otherwise transferred or exchanged and new certificates for
them not bearing a legend restricting further transfer shall have been
delivered by the Company, and subsequent disposition of them shall not
require registration or qualification of them under the Securities Act or any
similar state law then in force or (z) ceased to be outstanding. Whenever
any particular securities cease to be Restricted Securities, the holder
thereof shall be entitled to receive from the issuer thereof or its transfer
agent, without expense (other than transfer taxes, if any), new securities of
like tenor not bearing a legend of the character set forth in Section 2.02.
"Securities Act" means the Securities Act of 1933, or any similar Federal
statute, and the rules and regulations of the Commission thereunder, all as
the same shall be in effect at the time. Reference to a particular section
of the Securities Act of 1933 shall include a reference to the comparable
section, if any, of any such similar Federal statute.
"Security Capital" has the meaning set forth in the introductory
paragraph.
"Warrant Securityholder" means at any time any Warrantholder or any
holder of Conversion Shares.
"Warrantholders" has the meaning set forth in the introductory paragraph
(and for purposes of Section 2.08 shall include any Person that held Warrants
that were redeemed pursuant to Section 5.03 of the Warrants).
"Warrants" means the Warrant or Warrants originally issued to
NationsCredit, as such Warrants may be transferred or otherwise assigned, but
only to the extent not theretofore exercised, redeemed or expired in
accordance with their respective terms.
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<PAGE>
All references herein to "days" shall mean calendar days unless otherwise
specified.
ARTICLE II
TRANSFER OF SHARES;
PAYMENTS TO WARRANT SECURITYHOLDERS
SECTION 2.01 General. (a) Except as otherwise provided in this
Agreement, any other applicable agreement or by law, each Company Stockholder
may transfer its shares of Company Common Stock at any time to any Person.
(b) Except as otherwise provided in this Agreement, any other applicable
agreement or by law, each Holdings Stockholder may transfer its shares of
Holdings Common Stock at any time to any Person.
SECTION 2.02 Restrictions on Transfer; Legend on Certificates. (a)
Except as otherwise provided in this Agreement, Restricted Securities shall
not be transferable except (i) pursuant to an effective registration
statement under the Securities Act, (ii) pursuant to Rule 144 or 144A (or any
successor provisions) under the Securities Act or (iii) pursuant to a
transaction that is otherwise exempt from the registration requirements of
the Securities Act.
(b) Unless otherwise expressly provided herein, each certificate for
Restricted Securities and each certificate issued in exchange for or upon
transfer of any thereof shall be stamped or otherwise imprinted with a legend
in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OFFERED FOR SALE
UNLESS REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS
OR UNLESS IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER
THEREOF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO AND HAVE THE BENEFIT OF
A WARRANTHOLDERS RIGHTS AGREEMENT DATED AS OF JUNE 27, 1997 AMONG PUMPKIN
LTD., PUMPKIN MASTERS HOLDINGS, INC. AND THE STOCKHOLDERS AND
WARRANTHOLDERS PARTIES THERETO, COPIES OF WHICH ARE ON FILE WITH PUMPKIN
LTD."
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<PAGE>
(c) Any other provision of this Agreement to the contrary
notwithstanding, no transfer of any Restricted Securities other than pursuant
to a Public Sale may be made to any Person unless such Person shall have
agreed in writing that such Person, as a holder of Restricted Securities, and
the Restricted Securities it acquires shall be bound by and be entitled to
the benefits of all the provisions of this Agreement applicable to such
Restricted Securities (and upon such agreement such Person shall be bound by
this Agreement and shall be entitled to such benefits). Any purported
transfer of Restricted Securities without compliance with the applicable
provisions of this Agreement shall be void and of no effect, and the
purported transferee shall have no rights as a Warrantholder or Company
Stockholder or under this Agreement. In the event of such non-complying
transfer, the Company shall not transfer any such Restricted Securities on
its books or recognize the purported transferee as a shareholder or
warrantholder, as the case may be, for any purpose, unless and until all
applicable provisions of this Agreement have been complied with.
SECTION 2.03 Permitted Transfers. The restrictions on transfer provided
in Section 2.02(a) shall not be applicable to (i) any transfer in compliance
with federal and all applicable state securities laws to an Affiliate of the
holder of Restricted Securities, from an Affiliate of such holder to such
holder or between Affiliates of such holder (provided that if any such
Affiliate to whom shares of Restricted Securities have been transferred by a
holder thereof ceases to be an Affiliate of such holder of Restricted
Securities, such Restricted Securities shall immediately be transferred back
to the transferor thereof) or, (ii) any transfer upon the death of any holder
of Restricted Securities to such holder's executors, administrators or
testamentary trustees, (iii) any transfer to a trust the beneficiaries of
which include only the holder of such Restricted Securities or such holder's
spouse, parents, siblings or descendants ( any transferee referred to in (i),
(ii) or (iii) above being referred to herein as a "Permitted Transferee");
provided that no such transfer shall be made to any Permitted Transferee
unless such Permitted Transferee shall have agreed in writing that such
Permitted Transferee, as a Company Stockholder or Warrantholder (as the case
may be), and the shares of Company Common Stock or Warrants it acquires shall
be bound by and be entitled to the benefits of all the provisions of this
Agreement applicable to Company Common Stock or Warrants (as the case may
be), and upon such agreement such Permitted Transferee shall be entitled to
such benefits.
SECTION 2.04 Tag-Along Rights. (a) If Holdings or any Company
Stockholder (any such Person for purposes of this Section 2.04(a), the
"Transferor") wishes to transfer its shares of Company Common Stock or any
portion thereof to any Person (the "Transferee"), the Transferor shall first
give to the Company and each Warrant Securityholder (pursuant to a list
provided by the Company) a written notice (a "Transfer Notice"), executed by
it and the Transferee and containing (i)
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<PAGE>
the number of shares of Company Common Stock that the Transferee proposes to
acquire from the Transferor, (ii) the name and address of the Transferee,
(iii) the proposed purchase price, terms of payment and other material terms
and conditions of such proposed transfer, (iv) an estimate, in the
Transferor's reasonable judgment, of the fair market value of any non-cash
consideration offered by the Transferee and (v) an offer by the Transferee or
Transferor to purchase, upon the purchase by the Transferee of any shares of
Company Common Stock owned by the Transferor and for the same per share
consideration, that number of Conversion Shares (or if such number is not an
integral number, the next integral number which is greater than such number)
of each Warrant Securityholder which shall be the product of (x) the
aggregate number of Conversion Shares either then owned, or issuable upon
exercise of Warrants then owned, by such Warrant Securityholder and (y) a
fraction, the numerator of which shall be the number of shares of Company
Common Stock indicated in the Transfer Notice as subject to purchase by the
Transferee from the Transferor and the denominator of which shall be the sum
of (A) the total number of shares of Company Common Stock then owned by the
Transferor plus (B) the total number of Conversion Shares either then owned,
or issuable upon exercise of Warrants then owned, by each Warrant
Securityholder. Each Warrant Securityholder shall have the right, for a
period of 20 days after the Transfer Notice is given, to accept such offer in
whole or in part, exercisable by delivering a written notice to the
Transferor and the Company within such 20-day period, stating therein the
number of shares of Company Common Stock (which may be the number of shares
set forth in the offer by the Transferor or Transferee, as the case may be,
or a portion thereof) to be sold by such Warrant Securityholder to the
Transferor or Transferee, as the case may be. Prior to the earlier of (x) the
end of such 20-day period or (y) the acceptance or rejection by each Warrant
Securityholder of the Transferee's or Transferor's offer, as the case may be,
the Transferor will not complete any sale of shares of Company Common Stock
to the Transferee. Thereafter, for a period of 60 days after the prohibition
under the preceding sentence shall have terminated, the Transferor may sell
to the Transferee for the consideration stated and on the terms set forth in
the Transfer Notice up to the number of shares of Company Common Stock stated
in the Transfer Notice as subject to purchase by the Transferee, provided
that the Transferor or Transferee, as the case may be, shall simultaneously
purchase the number of shares of Company Common Stock as calculated above
from those Warrant Securityholders who have accepted the Transferor's or
Transferee's offer, as the case may be. The provisions of this Section
2.04(a) shall not apply to transfers between the Transferor and any of its
Affiliates or between Affiliates of the Transferor.
(b) If Security Capital or any Management Stockholder (any such Person
for purposes of this Section 2.04(b), the "Transferor") wishes to transfer
its shares of Holdings Common Stock or any portion thereof to any Person (the
"Transferee"), the Transferor shall first give to Holdings and each Warrant
Securityholder (pursuant
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<PAGE>
to a list provided by the Company) a written notice (a "Transfer Notice"),
executed by it and containing (i) the number of shares of Holdings Common
Stock that the Transferee proposes to acquire from the Transferor, (ii) the
name and address of the Transferee, (iii) the proposed purchase price, terms
of payment and other material terms and conditions of such proposed transfer
and (iv) an estimate, in the Transferor's reasonable judgment, of the fair
market value of any non-cash consideration offered by the Transferee. Each
Warrant Securityholder shall have the right, in accordance with the terms of
the Warrants, to require the Company to redeem the Warrants held by such
Warrant Securityholder and the Transferor shall not consummate the transfer
set forth in the Transfer Notice unless, contemporaneously with the
consummation of such transfer, the Company shall effect such redemption. The
provisions of this Section 2.04(b) shall not apply to transfers between the
Transferor and any of its Affiliates or between Affiliates of the Transferor.
SECTION 2.05 Drag-Along Rights. (a) If at any time prior to a Company
Initial Public Offering, Holdings or any Company Stockholder (any such Person
for purposes of this Section 2.05(a), the "Transferor") wishes to transfer
all of the shares of Company Common Stock owned by it (provided that such
shares of Company Common Stock constitute more than 50% of all shares of
Company Common Stock on a Fully Diluted Basis (as defined in the Warrants) at
such time) in a bona fide sale to any Person (the "Proposed Transferee")
pursuant to which the consideration to be paid by the Proposed Transferee
consists solely of cash and freely tradeable securities with an active public
market and the Transferor will not receive, in connection with the
transactions contemplated at the time of such transfer, any other securities
or options to acquire securities of the Company, then the Transferor shall
have the right (the "Drag-Along Right") to require each Warrant
Securityholder to sell to the Proposed Transferee for the same per share
consideration received by the Transferor all of the Conversion Shares and
Warrants (calculated, in the case of any Warrants, on the number of
Conversion Shares for which such Warrant is exercisable at such time) held by
such Warrant Securityholder. To exercise the Drag-Along Right, the Transferor
shall first give to the Company and each Warrant Securityholder (pursuant to
a list provided by the Company) a written notice (a "Drag-Along Notice")
executed by the Transferor and the Proposed Transferee and containing (a) the
number of shares of Company Common Stock that the Proposed Transferee
proposes to acquire from the Transferor and its Permitted Transferee, and
certifying that such shares constitute all of the shares of Company Common
Stock owned by the Transferor and its Permitted Transferees and more than 50%
of the shares of Company Common Stock on a Fully Diluted Basis at such time,
(b) the name and address of the Proposed Transferee and (c) the proposed
purchase price, terms of payment and other material terms and conditions of
the Proposed Transferee's offer, (d) a statement by the Proposed Transferee
that the Proposed
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Transferee (i) has been informed of the Drag-Along Right provided for in this
Section 2.05(a) and (ii) has agreed to purchase the Conversion Shares and
Warrants in accordance with the terms of this Section 2.05(a) and (e) the
aggregate number of Conversion Shares or Warrants owned by each Warrant
Securityholder with respect to which the Transferor wishes to exercise its
Drag-Along Right pursuant to this Section 2.05(a). Each Warrant
Securityholder shall thereafter be obligated to sell to the Proposed
Transferee the Warrants and Conversion Shares subject to such Drag-Along
Notice, provided that the sale to the Proposed Transferee is consummated
within 60 days of delivery of the Drag-Along Notice. If the sale is not
consummated within such 60-day period, then each affected Warrant
Securityholder may sell, but shall no longer be obligated to sell, such
Warrant Securityholder's Warrants or Conversion Shares pursuant to such
Drag-Along Notice. The provisions of this Section 2.05(a) shall not apply to
transfers between the Transferor and any of its Affiliates or between any of
its Affiliates.
(b) (i) If at any time prior to a Holdings Initial Public Offering,
Security Capital or any other Holdings Stockholder (any such Person for
purposes of this Section 2.05(b), the "Transferor") wishes to transfer all of
the shares of Holdings Common Stock owned by it (provided that such shares of
Holdings Common Stock constitute more than 50% of all shares of Holdings
Common Stock on a Fully Diluted Basis (as defined in the Warrants) at such
time in a bona fide sale to any Person (the "Proposed Transferee") pursuant
to which the consideration to be paid by the Proposed Transferee consists
solely of cash and freely tradeable securities with an active public market
and the Transferor will not receive, in connection with the transactions
contemplated at the time of such transfer, any other securities or options to
acquire securities of Holdings (any such proposed transfer, a "Redemption
Transfer"), then the Transferor shall have the right to require the Company
to redeem all, but not less than all, of the Warrants outstanding at such
time in accordance with the terms thereof and all Conversion Shares
outstanding on such date. The provisions of this Section 2.05(b) shall not
apply to transfers between the Transferor and any of its Affiliates or
between any of its Affiliates.
(ii) In addition, on or within 30 days after the date on which the
Company shall have delivered a Trigger Notice (as defined in the Warrants)
with respect to a Redemption Transfer, the Company shall have the right to
redeem all, but not less than all, of the outstanding Conversion Shares at
the Trigger Redemption Price (as defined in the Warrants; provided that,
for purposes of this clause (ii), the numerator in the number set forth in
clause (A) of such definition shall be the number of Conversion Shares)
with respect to such Redemption Transfer. Irrevocable notice of such right
of redemption shall be given by the Company to all Warrant Securityholders
not more than 30 days nor less than 15 days prior to the date scheduled for
redemption,
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stating the date of such redemption, which shall be the date of
consummation of the Redemption Transfer with respect to which a Trigger
Notice has been delivered; provided that such notice of redemption may
provide that the obligations of the Company to redeem all outstanding
Conversion Shares shall be conditioned upon the consummation of the
Redemption Transfer. On the date scheduled for redemption, the Company
shall pay to each Warrant Securityholder the Trigger Redemption Price in
immediately available funds upon surrender of the certificates representing
all outstanding Conversion Shares held by such Warrant Securityholder on
such date.
SECTION 2.06. Asset Purchase Agreement. In addition to any other
restrictions on transfer provided for herein, the transfer of shares of
Holdings Common Stock owned by the Management Stockholders and Security
Capital shall be subject to the terms and provisions of the Asset Purchase
Agreement.
SECTION 2.07. Restrictions on Transfer by Regulation Y Holders. (a) No
Regulation Y Holder may transfer any Warrant or any Conversion Shares;
provided that such Regulation Y Holder may transfer such Warrant or
Conversion Shares: (i) to the public in an offering registered under the
Securities Act or (ii) in a transaction pursuant to Rule 144 or Rule 144A (or
any successor provisions) under the Securities Act or similarly exempt from
the registration requirements of the Securities Act in which no single
purchaser receives an interest (treating any such Warrant as exercised and
any Company Non-Voting Common Stock as converted to Company Voting Common
Stock) equivalent to more than two percent of the outstanding Company Voting
Common Stock or (iii) in a single transaction to a third party who acquires
at least a majority of the Company Voting Common Stock without regard to the
transfer of such Warrant or Conversion Shares. In the event of a Regulatory
Change, the effect of which is to permit such Regulation Y Holder to transfer
such Warrant or Conversion Shares in any other manner, the foregoing proviso
shall be deemed modified to permit a transfer of such Warrant or Conversion
Shares in such other manner.
(b) Nothing in Sections 2.04, 2.05 or 2.06 of this Agreement shall
require any Regulation Y Holder to make a transfer of Warrants or Conversion
Shares in a manner not permitted by Section 2.07(a) (an "Impermissible
Transfer"). If Sections 2.04, 2.05 or 2.06 of this Agreement would otherwise
require any Regulation Y Holder to make an Impermissible Transfer as a
condition precedent to making a transfer of Warrants or Conversion Shares in
a manner permitted by Section 2.07(a) (a "Permissible Transfer"), then such
Regulation Y Holder shall not be required to make such Impermissible Transfer
as a condition precedent to making such Permissible Transfer.
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SECTION 2.08 Adjustment Event Fee. If (a) any Adjustment Event shall
occur within 365 days after the Optional Redemption Date and (b) the
Consideration Per Share for such Adjustment Event is greater than the
Redemption Price Per Share then, immediately upon the occurrence of such
Adjustment Event, the Company shall pay to each Warrant Securityholder an
amount equal to (1) if the Consideration Per Share with respect to such
Adjustment Event has been determined with reference to Company Common Stock,
the product of (x) the number of shares of Company Common Stock represented
by the Warrants of such Warrant Securityholder that were redeemed and (y) the
difference between the Consideration Per Share for such Adjustment Event and
the Redemption Price Per Share paid to such Warrant Securityholder and (2) if
the Consideration Per Share with respect to such Adjustment Event has been
determined with reference to Holdings Common Stock, (x) the product of (A) a
fraction, the numerator of which shall be the number of shares of Company
Common Stock represented by the Warrants of such Warrant Securityholder that
were redeemed and the denominator of which shall be the number of shares of
Company Common Stock outstanding at such time (calculated on a Fully Diluted
Basis) times (B) the number of shares of Holdings Common Stock outstanding at
such date (calculated on a Fully Diluted Basis) times (y) the difference
between the Consideration Per Share for such Adjustment Event and the
Redemption Price Per Share paid to such Warrant Securityholder.
"Adjustment Event" means: (a) the completion of a Company Initial
Public Offering or a Holdings Initial Public Offering; or
(b) 25% or more of the:
(i) (x) Holdings Common Stock on a Fully Diluted Basis (as defined in
the Warrants) on an aggregate basis is sold, exchanged, transferred or
otherwise disposed of by Holdings or any stockholder of Holdings (as part
of a single sale or a series of related sales) or (y) Company Common Stock
on a Fully Diluted Basis (as defined in the Warrants) on an aggregate basis
is sold, exchanged, transferred or otherwise disposed of by the Company or
any stockholder of the Company (as part of a single sale or a series of
related sales); or
(ii) (x) Company Common Stock issued and outstanding on the Optional
Redemption Date is sold, exchanged, transferred or otherwise disposed of by
Holdings (as part of a single sale or a series of sales) or (y) Holdings
Common Stock issued and outstanding on the Optional Redemption Date is
sold, exchanged, transferred or otherwise disposed of by stockholders of
Holdings (as part of a single sale or a series of sales; or
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(c) all or substantially all of the assets of the Company and its
Subsidiaries or Holdings and its Subsidiaries are, directly or indirectly,
sold, exchanged, leased, transferred or otherwise disposed of as an entirety
or substantially as an entirety (in one transaction or a series of
transactions) to any Person or related group of Persons; or
(d) the stockholders or directors of Holdings or the Company consummate
a definitive agreement or plan for any merger, consolidation,
recapitalization, reorganization, restructuring or other business combination
of Holdings or the Company and, after giving effect to such transaction, the
stockholders of Holdings on the Optional Redemption Date (after giving effect
to the redemption of the Warrants which has occurred on such Date) will no
longer hold, directly or indirectly, securities representing in the aggregate:
(i) a percentage of the total voting power entitled to vote in the
election of directors, managers or trustees of the corporation surviving or
resulting from such transaction greater than 75% of the percentage of such
total voting power with respect to Holdings represented by the Holdings
Common Stock held by such stockholders on the Optional Redemption Date
(after giving effect to the redemption of the Warrants which has occurred
on such Date); and
(ii) the securities entitled to receive a percentage of the dividends
paid by such surviving or resulting corporation greater than 75% of the
percentage of the dividends paid by Holdings that the Holdings Common Stock
held by such stockholders on the Optional Redemption Date was entitled to
receive (after giving effect to the redemption of the Warrants which has
occurred on such Date); and
(iii) a percentage of the stockholders' equity of such surviving or
resulting corporation greater than 75% of the percentage of the
stockholder's equity of Holdings represented by the Holdings Common Stock
held by such stockholders on the Optional Redemption Date (after giving
effect to the redemption of the Warrants which has occurred on such Date);
or
(e) the stockholders or directors of Holdings or the Company
consummate a definitive agreement or plan for the liquidation or
dissolution of Holdings or the Company.
"Consideration Per Share" means: (i) in the case of any Adjustment Event
described in clause (a) or (b)(i) of the definition of Adjustment Event, the
highest consideration per share (if any) received by Holdings or any
stockholder of Holdings
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or the Company or any stockholder of the Company, as the case may be, from
the sale, exchange, transfer or other disposition by it of Holdings Common
Stock or Company Common Stock, as the case may be, in connection with such
Adjustment Event; and
(ii) in the case of any other Adjustment Event, the highest
consideration per share of Company Common Stock or Holdings Common Stock,
as the case may be, that would be received by any stockholder of Holdings
upon the disposition of all or substantially all of the Company Common
Stock or Holdings Common Stock, as the case may be, or of the assets of
Holdings or the Company (determined by reference to all of the
consideration received by the stockholders of Holdings or the Company, as
the case may be, (as stockholders) for that portion actually disposed of in
connection with such Adjustment Event, or which would be received if all of
the consideration received by Holdings and the Company in connection with
such Adjustment Event were distributed to the stockholders of Holdings or
the Company, as the case may be), in each case net of underwriting
commissions and other costs and expenses incurred in connection with any
such Adjustment Event.
"Optional Redemption Date" means the date of any redemption of the
Warrants pursuant to Section 5.03 of the Warrants.
"Redemption Price Per Share" means the Optional Redemption Price (as
defined in the Warrants) which was paid to the Warrant Securityholders
pursuant to Section 5.03 of the Warrants (determined on a per share basis by
reference to the number of shares of Company Common Stock represented by the
Warrants that were redeemed) plus interest thereon from the Optional
Redemption Date to the date of the relevant Adjustment Event referred to in
clause (a) of Section 2.08 at a rate per annum announced by NationsBank of
North Carolina, N.A. from time to time as its prime rate (calculated on the
basis of a 360-day year for the actual number of days elapsed).
SECTION 2.09 No Inconsistent Agreements. Neither the Company nor
Holdings has entered into or will enter into any registration rights
agreement or similar arrangements the performance by the Company or Holdings,
as the case may be, of the terms of which would in any manner conflict with,
restrict or be inconsistent with the performance by the Company or Holdings,
as the case may be, of its obligations under this Agreement.
SECTION 2.10 Holdings Guaranty. (a) Holdings hereby unconditionally
guarantees the full and punctual payments of all amounts payable by the Company
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to any Warrant Securityholder pursuant to Section 5.02(b) of the Warrants. Upon
failure by the Company to pay punctually any such amount, Holdings shall
forthwith on demand pay the amount not so paid at the place and in the manner
specified in the Warrants.
(b) The obligations of Holdings hereunder are unconditional and absolute
and, without limiting the generality of the foregoing, shall not be released,
discharged or otherwise affected by:
(i) any extension, renewal, settlement, compromise, waiver or release
in respect of any obligation of the Company or Holdings under any Operative
Document, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to any Operative
Document;
(iii) any release, non-perfection or invalidity of any direct or
indirect security for any obligation of the Company or Holdings under any
Operative Document;
(iv) any change in the corporate existence, structure or ownership of
the Company or Holdings or any insolvency, bankruptcy, reorganization or
other similar proceeding affecting the Company or Holdings or any of their
respective assets or any resulting release or discharge of any obligation
of the Company or Holdings contained in any Operative Document;
(v) the existence of any claim, set-off or other rights which
holdings may have at any time against the Company, the Agent, any Lender or
any other Person, whether in connection herewith or any unrelated
transactions, provided that nothing herein shall prevent the assertion of
any such claim by separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against the
Company or Holdings for any reason of any Operative Document, or any
provision of applicable law or regulation purporting to prohibit the
payment by the Company or Holdings of the principal of or interest on any
Note or any reimbursement obligation or any other amount payable by the
Company under any Operative Document; or
(vii) any other act or omission to act or delay of any kind by the
Company, Holdings, the Agent, any Lender or any other Person or any other
circumstance whatsoever which might, but for the provisions of this
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paragraph, constitute a legal or equitable discharge of Holdings'
obligations hereunder.
(c) Holdings irrevocably waives acceptance hereof, presentment, demand,
protest and any notice not provided for herein or in the Warrants, as well as
any requirement that at any time any action be taken by any Person against
the Company or any other Person.
(d) Holdings's obligations under this Section 2.10 shall remain in full
force and effect until all Warrants have expired, been exercised in full or
redeemed in accordance with their terms. If at any time any payment of any
amount payable by the Company under Section 5.02 of any Warrant is rescinded
or must be otherwise restored or returned upon the insolvency or receivership
of the Company or otherwise, Holding's obligations hereunder with respect to
such payment shall be reinstated as though such payment had been due but not
made at such time.
(e) Upon making any payment with respect to the Company hereunder,
Holdings shall be subrogated to the rights of the payee against the Company
with respect to such payment; provided that Holdings shall not enforce any
payment by way of subrogation until all amounts of principal of and interest
on the Loans and all other amounts payable by the Company under the Credit
Agreement and any other Financing Documents have been paid in full and the
Commitments of each Lender have been terminated and all Letters of Credit
shall have expired or shall have been canceled.
ARTICLE III
REGISTRATION RIGHTS
SECTION 3.01 Registration on Request. (a) At any time or from time to
time beginning 180 days after the date of consummation of a Company Initial
Public Offering (or after such shorter period as the underwriter or
underwriters, if any, distributing Common Stock in such Initial Public Offering
may permit), upon the written request of the holder or holders of a majority of
all outstanding Conversion Shares and Warrants (such majority determined, for
purposes of this Section 3.01, by calculating the number of Conversion Shares
for which such Warrants are then exercisable) (the "Initiating Holders"),
requesting that the Company effect the registration under the Securities Act of
all or part of such Initiating Holders' Registrable Securities and specifying
the intended method of disposition thereof, the ompany will promptly give
written notice of such requested registration to all holders
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of Warrants and Registrable Securities, and thereupon the Company will use
its best efforts to effect the registration under the Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating Holders for disposition in
accordance with the intended method of disposition stated in such request;
(ii) all other Registrable Securities the holders of which shall have
made a written request to the Company for registration thereof within 30
days after the giving of such written notice by the Company (which request
shall specify the intended method of disposition of such Registrable
Securities); and
(iii) all shares of Company Common Stock which the Company may elect
to register in connection with the offering of Registrable Securities
pursuant to this Section 3.01, whether for its own account or for the
account of a holder of Company Common Stock,
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities and the
additional shares of Company Common Stock, if any, to be so registered,
provided that the Warrant Securityholders as a class shall be entitled to not
more than two registrations upon request pursuant to this Section 3.01.
(b) Registrations under this Section 3.01 shall be on such appropriate
registration form of the Commission (i) as shall be selected by the Company
and (ii) as shall permit the disposition of such Registrable Securities in
accordance with the intended method or methods of disposition specified in
their request for such registration. The Company agrees to include in any
such registration statement all information which is required under the
Securities Act to effect any such registration.
(c) The Company will pay all Registration Expenses in connection with
the one registration which may be requested pursuant to this Section 3.01,
provided that, in addition, the Company shall pay all Registration Expenses
in connection with any registration upon request pursuant to which less than
50% of the Registrable Shares requested to be registered by such Initiating
Holders are registered, but no such registration shall be counted as a
requested registration for purposes of this Section 3.01. The underwriting
discounts and commissions and transfer taxes, if any, allocable to the
Registrable Securities requested to be registered by the Initiating Holders
in connection with each registration requested under this Section 3.01 shall
be paid for by the Initiating Holders requesting such registration.
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(d) A registration requested pursuant to this Section 3.01 shall not be
deemed to have been effected (i) unless a registration statement with respect
thereto has become effective; provided that a registration which does not
become effective after the Company has filed a registration statement with
respect thereto solely by reason of the refusal to proceed by the Initiating
Holders (other than a refusal to proceed based upon the advice of counsel
relating to a matter with respect to the Company) shall be deemed to have
been effected by the Company at the request of the Initiating Holders and
shall be counted as a requested registration for purposes of this Section
3.01 unless the Initiating Holders shall have elected to pay all Registration
Expenses in connection with such registration, (ii) if, after it has become
effective, such registration is interfered with by any stop order, injunction
or other order or requirement of the Commission or other governmental agency
or court for any reason, other than by reason of some act or omission by any
Warrantholder or Warrant Securityholder, or (iii) the conditions to closing
specified in the purchase agreement or underwriting agreement entered into in
connection with such registration are not satisfied, other than by reason of
some act or omission by any Warrantholder or Warrant Securityholder.
(e) If a requested registration pursuant to this Section 3.01 involves
an underwritten offering, the underwriter or underwriters thereof shall be
selected by the Company subject to the reasonable consent of the holders of
at least a majority (by a number of shares) of the Registrable Securities as
to which registration has been requested.
(f) If a requested registration pursuant to this Section 3.01 involves
an underwritten offering, and the managing underwriter shall advise the
Company (with a copy of any such notice to each holder of Registrable
Securities requesting registration) that, in its opinion, the number of
securities requested to be included in such registration (including
securities proposed to be sold for the account of the Company) exceeds the
number which can be sold in such offering within a price range acceptable to
the Initiating Holders, the Company will include in such registration, to the
extent of the number which the Company is so advised can be sold in such
offering, (i) first, Registrable Securities requested to be included in such
registration by the holder or holders of Registrable Securities, pro rata
among such holders requesting such registration on the basis of the number of
such securities requested to be included by such holders, (ii) second, all
shares proposed to be included by the Company in such registration and (iii)
third, all shares other than Registrable Shares (any such shares with respect
to any registration, "Other Shares") requested to be included in such
registration by the holder or holders thereof.
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(g) The Company may, upon written notice (a "Black-Out Notice") to each
Initiating Holder requesting a demand registration pursuant to Section 3.01
hereof, require such Initiating Holder to withdraw such demand registration
for a period of not more than 180 days upon the good faith determination by
the Company that such postponement is necessary (i) to avoid disclosure of
material non-public information or (ii) as a result of a pending material
financing or acquisition transaction. Upon receipt of a Black-Out Notice,
the registration requested pursuant to Section 3.01 hereof shall be deemed to
be rescinded and retracted and shall not be counted as a demand registration
for any purpose. The Company may not deliver more than one Black-Out Notice
in any twelve-month period.
SECTION 3.02 Incidental Registration. (a) If the Company at any time
proposes to register any of its securities under the Securities Act (other
than (x) by a registration on Form S-4 or S-8 or S-14 or S-15 or any
successor or similar forms or (y) pursuant to Section 3.01) whether for its
own account or for the account of the holder or holders of any Other Shares,
it will each such time give prompt written notice to all Warrant
Securityholders of its intention to do so and of such holders' rights under
this Section 3.02. Upon the written request of any such holder made within
10 days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such holder and the
intended method of disposition thereof), the Company will use its best
efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the holders thereof, to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the Registrable
Securities so to be registered, by inclusion of such Registrable Securities
in the registration statement which covers the securities which the Company
proposes to register; provided that if, at any time after giving written
notice of its intention to register any securities and prior to the effective
date of the registration statement filed in connection with such
registration, the Company shall determine for any reason either not to
register or to delay registration of such securities, the Company may, at its
election, give written notice of such determination to each holder of
Registrable Securities and, thereupon, (i) in the case of a determination not
to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation
to pay the Registration Expenses in connection therewith), without prejudice,
however, to the then existing rights (if any) of any Warrant Securityholder
or Warrant Securityholders entitled to do so to request that such
registration be effected as a registration under Section 3.01, and (ii) in
the case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such other securities. No registration effected under this
Section 3.02 shall relieve the Company of its obligation to effect any
registration upon request under Section 3.01, nor shall any such registration
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hereunder be deemed to have been effected pursuant to Section 3.01. The
Company will pay all Registration Expenses in connection with each
registration of Registrable Securities pursuant to this Section 3.02.
(b) If the Company at any time proposes to register any of its
securities under the Securities Act as contemplated by Section 3.02 and such
securities are to be distributed by or through one or more underwriters, the
Company will, if requested by any holder of Registrable Securities as
provided in this Section 3.02, use its best efforts to arrange for such
underwriters to include all the Registrable Securities to be offered and sold
by such holder among the securities to be distributed by such underwriters,
provided that if the managing underwriter of such underwritten offering shall
inform the Company and holders of the Registrable Securities requesting such
registration and all other holders of any other shares of Company Common
Stock which shall have exercised, in respect of such underwritten offering,
registration rights comparable to the rights under this Section 3.02 by
letter of its belief that inclusion in such distribution of all or a
specified number of such securities proposed to be distributed by such
underwriters would interfere with the successful marketing of the securities
being distributed by such underwriters (such letter to state the approximate
number of such Registrable Securities and such Other Shares proposed so to be
registered which may be distributed without such effect), then the Company
may, upon written notice to all holders of such Registrable Securities and
holders of such Other Shares, reduce pro rata (if and to be extent stated by
such managing underwriter to be necessary to eliminate such effect) the
number of such Registrable Securities and Other Shares the registration of
which shall have been requested by each holder thereof so that the resultant
aggregate number of such Registrable Securities and Other Shares (if any) so
included in such registration, together with the number of securities to be
included in such registration for the account of the Company, shall be equal
to the number of shares stated in such managing underwriter's letter.
SECTION 3.03 Registration Procedures. (a) If and whenever the Company
is required to effect the registration of any Registrable Securities under
the Securities Act as provided in Sections 3.01 and 3.02, the Company shall,
as expeditiously as possible under the then existing facts and circumstances:
(i) prepare and file with the Commission the requisite registration
statement to effect such registration (including such audited financial
statements as may be required by the Securities Act) and thereafter use
its best efforts to cause such registration statement to become and
remain effective for the periods contemplated in Section 3.03(ii);
provided further that the Company may discontinue any registration of its
securities which are not Registrable Securities being registered pursuant
to Section 3.01 at any
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time prior to the effective date of the registration statement relating
thereto; provided further that before filing such registration statement
or any amendments thereto, the Company will furnish to the counsel
selected by the holders of Registrable Securities which are to be
included in such registration copies of all such documents proposed to be
filed;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
registration statement until the earlier of (x) in the case of a
registration pursuant to Section 3.01, the expiration of 120 days after
such registration statement becomes effective, or (y) in the case of a
registration pursuant to Section 3.02, the expiration of 90 days after
such registration statement becomes effective.
(iii) furnish to each seller of Registrable Securities covered by
such registration statement and each underwriter, if any, of the
securities being sold by such seller such number of conformed copies of
such registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of
the prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity
with the requirements of the Securities Act, and such other documents, as
such seller and underwriter, if any, may reasonably request in order to
facilitate the public sale or other disposition of the Registrable
Securities owned by such seller;
(iv) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement
under blue sky or similar laws of such jurisdictions as any seller
thereof and any underwriter of the securities being sold by such seller
shall reasonably request, to keep such registrations or qualifications in
effect for so long as such registration statement remains in effect, and
take any other action which may be reasonably necessary or advisable to
enable such seller and underwriter to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that the
Company shall not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction wherein it
would not but for the requirements of this subdivision (iv) be obligated
to be so qualified, to subject itself to taxation in any such
jurisdiction or to consent to general service of process in any such
jurisdiction;
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(v) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof to consummate the disposition of
such Registrable Securities;
(vi) furnish to each seller of Registrable Securities a signed
counterpart, addressed to such seller and the underwriters, if any, of
(x) an opinion of counsel for the Company, dated the effective
date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date
of the closing under the underwriting agreement), reasonably
satisfactory in form and substance to such seller, and
(y) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the closing
under the underwriting agreement), signed by the independent public
accountants who have certified the Company's financial statements
included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of
such financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to the
underwriters in underwritten public offerings of securities;
(vii) notify the holders of Registrable Securities and the managing
underwriter or underwriters, if any, promptly and confirm such advice in
writing promptly thereafter:
(A) when the registration statement, the prospectus or any
prospectus supplement related thereto or post-effective amendment to
the registration statement has been filed, and, with respect to the
registration statement or any post-effective amendment thereto, when
the same has become effective;
(B) of any request by the Commission for amendments or
supplements to the registration statement or the prospectus or for
additional information;
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(C) of the issuance by the Commission of any stop order
suspending the effectiveness of the registration or the initiation
of any proceedings by any Person for that purpose; and
(D) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any Registrable
Securities for sale under the securities or blue sky laws of any
jurisdiction or the initiation or threat of any proceeding for such
purpose;
(viii) notify each seller of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon the Company's
discovery that, or upon the happening of any event as a result of which,
the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and at the request of any such seller promptly prepare and
furnish to such seller and each underwriter, if any, a reasonable number
of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing;
(ix) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the registration statement at the
earliest possible moment;
(x) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months, but not more
than eighteen months, beginning with the first full calendar month after
the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities
Act;
(xi) make available for inspection by a representative of the
holders of Registrable Securities participating in the offering, any
underwriter participating in any disposition pursuant to the registration
and any attorney or accountant retained by such selling holders or
underwriter (each, an
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"Inspector"), all financial and other records, pertinent corporate
documents and properties of the Company (the "Records"), and cause the
Company's officers, directors and employees to supply all information
reasonably requested by any such Inspector in connection with such
registration; provided that the Company shall not be required to comply
with this subdivision (xi) if there is a reasonable likelihood, in the
judgment of the Company, that such delivery could result in the loss of
any attorney-client privilege related thereto; and provided further that
Records which the Company determines, in good faith, to be confidential
and which it notifies the Inspectors are confidential shall not be
disclosed by the Inspectors (other than to any holder of Registrable
Securities participating in the offering) unless (x) such Records have
become generally available to the public or (y) the disclosure of such
Records may be necessary or appropriate (A) to comply with any law, rule,
regulation or order applicable to any such Inspectors or holder of
Registrable Securities, (B) in response to any subpoena or other legal
process or (C) in connection with any litigation to which such Inspectors
or any holder of Registrable Securities is a party (provided that the
Company is provided with reasonable notice of such proposed disclosure
and a reasonable opportunity to seek a protective order or other
appropriate remedy with respect to such Records);
(xii) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
Registration Statement;
(xiii) use its best efforts to list all Registrable Securities
covered by such registration statement on any securities exchange on
which any of the Company Common Stock is then listed; and
(xiv) use its best efforts to provide a CUSIP number for the
Registrable Securities, not later than the effective date of the
registration.
The Company may require that each seller of Registrable Securities as to
which any registration is being effected to furnish the Company such
information regarding such seller and the distribution of such securities as
the Company may from time to time reasonably request in writing for purposes
of preparing the relevant registration statement and amendments and
supplements thereto.
(b) Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of
the occurrence of any event of the kind described in subdivision (viii) of
Section 3.03(a), such holder will forthwith discontinue such holder's
disposition of Registrable
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Securities pursuant to the registration statement relating to such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (viii) of
Section 3.03(a). In the event the Company shall give any such notice, the
periods specified in subdivision (ii) of Section 3.03(a) shall be extended by
the length of the period from and including the date when each seller of any
Registrable Securities covered by such registration statement shall have
received such notice to the date on which each such seller has received the
copies of the supplemented or amended prospectus contemplated by subdivision
(viii) of Section 3.03(a).
(c) If any such registration or comparable statement refers to any
holder of Registrable Securities by name or otherwise as the holder of any
securities of the Company, then such holder shall have the right to require,
in the event that such reference to such holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force,
the deletion of the reference to such holder.
SECTION 3.04 Underwritten Offerings. (a) If requested by the
underwriters for any underwritten offering by holders of Registrable
Securities pursuant to a registration requested under Section 3.01, the
Company and each such holder of Registrable Securities will enter into an
underwriting agreement with such underwriters for such offering, such
agreement to be customary and otherwise satisfactory in substance and form to
the Company, each such holder and the underwriters, and to contain such
representations and warranties by the Company and such holder and such other
terms as are generally prevailing in agreements of such type, including,
without limitation, indemnities to the effect and to the extent provided in
Section 3.05. The holders of the Registrable Securities will cooperate with
the Company in the negotiation of the underwriting agreement.
(b) Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities not to sell, make any short sale of, loan, grant any
option for the purchase of, effect any public sale or distribution of or
otherwise dispose of any equity securities of the Company, during the ten
days prior to and the 120 days after any underwritten registration pursuant
to Section 3.01 or 3.02 has become effective, except as part of such
underwritten registration, whether or not such holder participates in such
registration, and except as otherwise permitted by the managing underwriter
of such underwriting (if any). Each holder of Registrable Securities agrees
that the Company may instruct its transfer agent to place stop transfer
notations in its records to enforce this Section 3.04(b).
(c) The Company agrees (x) not to sell, make any short sale of, loan,
grant any option for the purchase of, effect any public sale or distribution of
or otherwise
25
<PAGE>
dispose of its equity securities or securities convertible into or
exchangeable or exercisable for any of such securities during the ten days
prior to and the 120 days after any registration pursuant to Section 3.01 or
3.02 has become effective, except (i) as part of such registration, (ii)
pursuant to registrations on Form S-4, S-8, S-14 or S-15 or any successor or
similar forms thereto or (iii) as otherwise permitted by the managing
underwriter of such offering (if any), and (y) to use all commercially
reasonable efforts to cause each holder of its equity securities or any
securities convertible into or exchangeable or exercisable for any of such
securities, in each case purchased from the Company at any time after the
date of this Agreement (other than in a public offering) to agree not to
sell, make any short sale of, loan, grant any option for the purchase of,
effect any public sale or distribution of or otherwise dispose of such
securities during such period except as part of such underwritten
registration.
(d) No Person may participate in any underwritten offering hereunder
unless such Person (i) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved, subject to the terms and
conditions hereof, by the Person or a majority of the Persons entitled to
approve such arrangements and (ii) completes and executes all agreements,
questionnaires, indemnities and other documents (other than powers of
attorney) required under the terms of such underwriting arrangements.
SECTION 3.05 Indemnification. (a) The Company agrees to indemnify and
hold harmless each holder of Registrable Securities whose Registrable
Securities are covered by any registration statement, its directors and
officers and each other Person, if any, who controls such holder within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which any such indemnified party may become
subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
and the Company will reimburse each such indemnified party for any legal or
any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made
26
<PAGE>
in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and
in conformity with written information furnished to the Company by or on
behalf of (x) such holder or (y) any underwriter specifically for use in the
preparation thereof. In addition, the Company shall indemnify any
underwriter of such offering and each other Person, if any, who controls any
such underwriter within the meaning of the Securities Act in substantially
the same manner and to substantially the same extent as the indemnity herein
provided to each Indemnified Party. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
holder or any such director, officer, underwriter or controlling person and
shall survive the transfer of such securities by such holder.
(b) Each prospective seller of Registrable Securities hereunder shall
indemnify and hold harmless (in the same manner and to the same extent as set
forth in subdivision (a) of this Section 3.05) the Company, each director of
the Company, each officer of the Company and each other person, if any, who
controls the Company within the meaning of the Securities Act, with respect
to any statement or alleged statement in or omission or alleged omission from
such registration statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereof,
if such statement or alleged statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by or on behalf of such seller specifically for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement. Any such indemnity
shall remain in full force and effect, regardless of any investigation made
by or on behalf of the Company or any such director, officer or controlling
person and shall survive the transfer of such securities by such seller. The
amount payable by any prospective seller of Registrable Securities with
respect to the indemnification set forth in this subsection (b) in connection
with any offering of securities shall not exceed the amount of net proceeds
received by such prospective seller pursuant to such offering.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim referred to in the
preceding subdivisions of this Section 3.05, such indemnified party will, if
a claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action; provided
that the failure of any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 3.05, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless counsel
to such indemnified party has advised it that in such counsel's reasonable
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<PAGE>
judgment a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, the indemnifying party shall be
entitled to participate in and to assume the defense thereof, jointly with
any other indemnifying party similarly notified, to the extent that the
indemnifying party may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any
legal or other expenses subsequently incurred by the latter in connection
with the defense thereof. No indemnifying party shall, without the consent
of the indemnified party, consent to entry of any judgment or enter into any
settlement of any such action which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of
a release from all liability in respect to such claim or litigation. No
indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
(d) If the indemnification provided for in the preceding subdivisions of
this Section 3.05 is unavailable to an indemnified party in respect of any
expense, loss, claim, damage or liability referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such expense, loss, claim, damage or liability (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the holder or underwriter, as the case may be, on
the other from the distribution of the Registrable Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company on the one hand and of the holder or underwriter, as the case may be,
on the other in connection with the statements or omissions which resulted in
such expense, loss, damage or liability, as well as any other relevant
equitable considerations. The relative benefits received by the Company on
the one hand and the holder or underwriter, as the case may be, on the other
in connection with the distribution of the Registrable Securities shall be
deemed to be in the same proportion as the total net proceeds received by the
Company from the initial sale of the Registrable Securities by the Company to
the purchaser bear to the gain realized by the selling holder or the
underwriting discounts and commissions received by the underwriter, as the
case may be. The relative fault of the Company on the one hand and of the
holder or underwriter, as the case may be, on the other shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission to state a material fact relates to
information supplied by the Company, by the holder or by the underwriter and
parties' relative intent, knowledge, access to information and
28
<PAGE>
opportunity to correct or prevent such statement or omission; provided that
the foregoing contribution agreement shall not inure to the benefit of any
indemnified party if indemnification would be unavailable to such indemnified
party by reason of the proviso contained in the first sentence of subdivision
(a) of this Section 3.05, and in no event shall the obligation of any
indemnifying party to contribute under this subdivision (d) exceed the amount
that such indemnifying party would have been obligated to pay by way of
indemnification if the indemnification provided for under subdivisions (a) or
(b) of this Section 3.05 had been available under the circumstances.
The Company and the holders of Registrable Securities agree that it would
not be just and equitable if contribution pursuant to this subdivision (d)
were determined by pro rata allocation (even if the holders and any
underwriters were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph and
subdivision (c) of this Section 3.05. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and liabilities
referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (d), no holder of
Registrable Securities or underwriter shall be required to contribute any
amount in excess of the amount by which (i) in the case of any such holder,
the net proceeds received by such holder from the sale of Registrable
Securities or (ii) in the case of an underwriter, the total price at which
the Registrable Securities purchased by it and distributed to the public were
offered to the public exceeds, in any such case, the amount of any damages
that such holder or underwriter has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
SECTION 3.06 Rule 144; Rule 144A. (a) If the Company shall have filed
a registration statement pursuant to Section 12 of the Exchange Act or a
registration statement pursuant to the Securities Act, the Company will file
the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the Commission
thereunder and will take such further action as any holder of Registrable
Securities may reasonably request, all to the extent required from time to
time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
29
<PAGE>
provided by (a) Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any holder of Registrable
Securities the Company will deliver to such holder a written statement as to
whether it has complied with such requirements.
(b) The Company represents and warrants that as of the date hereof, the
Company Common Stock is not, and is not part of a class of securities that
is, listed on a national securities exchange registered under Section 6 of
the Exchange Act or quoted in an automated inter-dealer quotation system.
For so long as any shares of Registrable Securities are restricted securities
within the meaning of Rule 144(a)(3) under the Securities Act, the Company
covenants and agrees that it shall, during any period in which it is not
subject to Section 13 or 15(d) of the Exchange Act, make available to any
holder of Registrable Securities in connection with the sale of such holder's
Registrable Securities and any prospective purchaser of Registrable
Securities from such, in each case upon request, the information specified
in, and meeting the requirements of, Rule 144A(d)(4) under the Securities Act
relating to the Company, respectively.
ARTICLE IV
MISCELLANEOUS
SECTION 4.01 Notices. All notices and other communications provided for
hereunder shall be dated and in writing and shall be deemed to have been
given (i) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified in this Section and telephonic confirmation of
receipt thereof is obtained or (ii) if given by mail, prepaid overnight
courier or any other means, when received at the address specified in this
Section or when delivery at such address is refused. Such notices shall be
addressed to the appropriate party to the attention of the person who
executed this Agreement at the address or telecopy number set forth under
such party's signature below (or to the attention of such other person or to
such other address or telecopy number as such party shall have furnished to
each other party in accordance with this Section 4.01).
SECTION 4.02 Binding Nature of Agreement. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto or their successors in interest, except as expressly otherwise
provided herein.
30
<PAGE>
SECTION 4.03 Descriptive Headings. The descriptive headings of the
several sections and paragraphs of this Agreement are inserted for reference
only and shall not limit or otherwise affect the meaning hereof.
SECTION 4.04 Specific Performance. Without limiting the rights of each
party hereto to pursue all other legal and equitable rights available to such
party for the other parties' failure to perform their obligations under this
Agreement, the parties hereto acknowledge and agree that the remedy at law
for any failure to perform their obligations hereunder would be inadequate
and that each of them, respectively, shall be entitled to specific
performance, injunctive relief or other equitable remedies in the event of
any such failure.
SECTION 4.05 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW
YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE PARTIES
HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH SUCH PARTY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE
VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY
SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. EACH OF THE PARTIES HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS
IN THE MANNER PROVIDED FOR NOTICES IN SECTION 4.1. NOTHING IN THIS AGREEMENT
WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW.
SECTION 4.06 Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, each of which shall be deemed
an original, but all such counterparts shall together constitute one and the
same instrument.
SECTION 4.07 Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances,
is held
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invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any
way impaired thereby, it being intended that all of the rights and privileges
of the parties hereto shall be enforceable to the fullest extent permitted by
law.
SECTION 4.08 Entire Agreement. This Agreement is intended by the
parties hereto as a final and complete expression of their agreement and
understanding in respect to the subject matter contained herein. This
Agreement supersedes all prior agreement and understandings, written or oral,
between the parties with respect to such subject matter.
SECTION 4.09 Amendment and Waiver. Any provision of this Agreement may
be amended if, but only if, such amendment is in writing and is signed by
Holdings, the Holdings Stockholders, the Company, the Company Stockholders
and Warrantholders owning, or having Warrants exercisable for, at least a
majority of shares of Common Stock either then outstanding or issuable upon
the exercise of all outstanding Warrants, provided that no such amendment may
adversely affect the rights of any Warrant Securityholder unless signed by
such Warrant Securityholder. Any provision may be waived if, but only if,
such waiver is in writing and is signed by the party or parties waiving such
provision and for whose benefit such provision is intended.
SECTION 4.10 No Third Party Beneficiaries. Nothing in this Agreement
shall convey any rights upon any person or entity which is not a party or an
assignee of a party to this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the date first above written.
PUMPKIN LTD.
By /s/ Calvin Neider
--------------------------------
Title: Vice President
Address: One Pickwick Plaza
Suite 310
Greenwich, CT 06830
Telefax: 203-625-0770
PUMPKIN MASTERS HOLDINGS, INC.
By /s/ Calvin Neider
--------------------------------
Title: Vice President
Address: One Pickwick Plaza
Suite 310
Greenwich, CT 06830
Telefax: 203-625-0770
SECURITY CAPITAL CORPORATION
By /s/ A. George Gebauer
--------------------------------
Title: President
Address: c/o Capital Partners
One Pickwick Plaza
Suite 310
Greenwich, CT 06830
Telefax: 203-625-0770
33
<PAGE>
NATIONSCREDIT COMMERCIAL
CORPORATION, as Agent
By /s/ Edward M. Alt
--------------------------------
Title: Authorized Signatory
One Canterbury Green
Stamford, CT 06912-0013
Telefax: 203-352-4171
34
<PAGE>
PUMPKIN LTD. D/B/A
PUMPKIN MASTERS, INC.
By /s/ Gay Burke
--------------------------------
Title: Vice President
Address: Box 61456, Denver CO 80206
Telefax: (303) 871-9477
35
<PAGE>
Exhibit 99.5
COMPANY SECURITY AGREEMENT
AGREEMENT dated as of June 27, 1997 between Pumpkin Ltd., a Delaware
corporation (together with its successors, the "Company"), and NationsCredit
Commercial Corporation, as Agent for the Lenders referred to below.
W I T N E S S E T H :
WHEREAS the Company, Pumpkin Masters Holdings, Inc., certain lenders and
NationsCredit Commercial Corporation, as agent for such lenders, are parties to
a Credit Agreement of even date herewith (as the same may be amended from time
to time, the "Credit Agreement"); and
WHEREAS in order to induce such lenders and NationsCredit Commercial
Corporation, as agent for such lenders to enter into the Credit Agreement, the
Company has agreed to grant a continuing security interest in and to the
Collateral (as hereafter defined) to secure its obligations under the Financing
Documents referred to in the Credit Agreement;
NOW THEREFORE in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. Definitions
<PAGE>
Terms defined in the Credit Agreement and not otherwise defined herein
have, as used herein, the respective meanings provided for therein. The
following additional terms, as used herein, have the following respective
meanings:
"Accounts" means all "accounts" (as defined in the UCC) now owned or
hereafter acquired by the Company, and shall also mean and include all accounts
receivable, contract rights, book debts, notes, drafts and other obligations or
indebtedness owing to the Company arising from the sale, lease or exchange of
goods or other property by it and/or the performance of services by it
(including any such obligation which might be characterized as an account,
contract right or general intangible under the Uniform Commercial Code in effect
in any jurisdiction) and all of the Company's rights in, to and under all
purchase orders for goods, services or other property, and all of the Company's
rights to any goods, services or other property represented by any of the
foregoing (including returned or repossessed goods and unpaid sellers' rights of
rescission, replevin, reclamation and rights to stoppage in transit) and all
monies due to or to become due to the Company under all contracts for the sale,
lease or exchange of goods or other property and/or the performance of services
by it (whether or not yet earned by performance on the part of the Company), in
each case whether now in existence or hereafter arising or acquired including,
without limitation, the right to receive the proceeds of said purchase orders
and contracts and all collateral security and guarantees of any kind given by
any Person with respect to any of the foregoing.
"Collateral" has the meaning set forth in Section 3.
"Collateral Accounts" means the Lockbox Account and the Insurance Account.
"Copyrights" means all of the following: (i) all copyrights under the laws
of the United States or any other country (whether or not the underlying works
of authorship have been published), all registrations and recordings thereof,
all intellectual property rights to works of authorship (whether or not
published), ad all applications for copyrights under the laws of the United
States or any other country, including, without limitation, registrations,
recordings and applications in the United States Copyright Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof, including, without limitation,
those described in Schedule 1 to Exhibit E hereto, (ii) all reissues, renewals
or extensions thereof, (iii) all claims for, and rights to sue for, past or
future infringements of any of the foregoing, and (iv) all income, royalties,
damages and payments now or hereafter due or payable with respect to
2
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any of the foregoing, including, without limitigation, damages and payments
for AST or future infringements thereof.
"Copyright License"means any written agreement now or hereafter in
existence granting to the Company the right to use any Copyright.
"Copyright Security Agreement" means a Copyright Security Agreement
executed and delivered by a Grantor in favor of the Agent, for the benefit of
the Secured Parties, substantially in the form of Exhibit E hereto, as the same
may be amended from time to time.
"Documents" means all "documents" (as defined in the UCC) or other receipts
covering, evidencing or representing goods, now owned or hereafter acquired by
the Company.
"Equipment" means all "equipment" (as defined in the UCC) now owned or
hereafter acquired by the Company, including without limitation all motor
vehicles, trucks, trailers, railcars and barges.
"General Intangibles" means all "general intangibles" (as defined in the
UCC) now owned or hereafter acquired by the Company, including (i) all
obligations or indebtedness owing to the Company (other than Accounts) from
whatever source arising, (ii) all Patents, Patent Licenses, Trademarks,
Trademark Licenses, Copyrights, Copyright Licenses rights in intellectual
property, goodwill, trade names, service marks, trade secrets, permits and
licenses, (iii) all rights or claims in respect of refunds for taxes paid and
(iv) all rights in respect of any pension plan or similar arrangement maintained
for employees of any member of the ERISA Group.
"Instruments" means all "instruments", "chattel paper" or "letters of
credit" (each as defined in the UCC), including those evidencing, representing,
arising from or existing in respect of, relating to, securing or otherwise
supporting the payment of, any of the Accounts, including (but not limited to)
promissory notes, drafts, bills of exchange and trade acceptances, now owned or
hereafter acquired by the Company.
"Insurance Account" has the meaning set forth in Section 5(C).
"Insurance Proceeds" has the meaning set forth in Section 5(C).
"Inventory" means all "inventory" (as defined in the UCC), now owned or
hereafter acquired by the Company, wherever located, and shall also mean and
3
<PAGE>
include all raw materials and other materials and supplies, work-in-process
and finished goods and any products made or processed therefrom and all
substances, if any, commingled therewith or added thereto.
"Liquid Investments" has the meaning set forth in Section 5(E).
"Lockbox Account" has the meaning set forth in Section 5(A).
"Lockbox Agreement" has the meaning set forth in Section 5(A).
"Lockbox Bank" has the meaning set forth in Section 5(A).
"Patent License" means any agreement now or hereafter in existence granting
to the Company, or pursuant to which the Company has granted to any other
Person, any right with respect to any Patent or any invention now or hereafter
in existence, whether patentable or not, whether a patent or application for
patent is in existence on such invention or not, and whether a patent or
application for patent on such invention may come into existence.
"Patents" means all the following: (i) all letters patent and design
letters patent of the United States or any other country and all applications
for letters patent and design letters patent of the United States or any other
country, including, without limitation, applications in the United States Patent
and Trademark Office or in any similar office or agency of the United States,
any State thereof or any other country or any political subdivision thereof,
(ii) all reissues, divisions, continuations, continuations-in-part, renewals and
extensions thereof, (iii) all claims for, and rights to sue for, past or future
infringements of any of the foregoing and (iv) all income, royalties, damages
and payments now or hereafter due or payable with respect to any of the
foregoing, including, without limitation, damages and payments for past or
future infringements thereof.
"Patent Security Agreement" means the Patent Security Agreement executed
and delivered by the Company in favor of the Agent, for the benefit of the
Secured Parties, substantially in the form of Exhibit C hereto, as the may be
amended from time to time.
"Perfection Certificate" means a certificate substantially in the form of
Exhibit A, completed and supplemented with the schedules and attachments
contemplated thereby to the satisfaction of the Agent, and duly executed by the
chief executive officer and the chief legal officer of the Company.
4
<PAGE>
"Permitted Liens" means the Security Interests and the Liens on the
Collateral permitted to be created, to be assumed or to exist pursuant to
Section 8.02 of the Credit Agreement.
"Proceeds" means all proceeds of, and all other profits, products, rents or
receipts, in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or other realization upon,
collateral, including all claims of the Company against third parties for loss
of, damage to or destruction of, or for proceeds payable under, or unearned
premiums with respect to, policies of insurance in respect of, any collateral,
and any condemnation or requisition payments with respect to any collateral, in
each case whether now existing or hereafter arising.
"Secured Obligations" means the obligations secured under this Agreement
which include (a) all principal of and interest (including any interest which
accrues after the commencement of any case, proceeding or other action relating
to the bankruptcy, insolvency or reorganization of the Company, whether or not
allowed or allowable as a claim in any such proceeding) on any loan under, or
any note issued pursuant to, the Credit Agreement, (b) all reimbursement
obligations of the Company with respect to any letter of credit issued pursuant
to the Credit Agreement and any interest thereon (including any interest which
accrues after the commencement of any case, proceeding or other action relating
to the bankruptcy, insolvency or reorganization of the Company whether or not
allowed or allowable as a claim in any such proceeding), (c) all other amounts
payable by the Company hereunder or under any other Financing Document, (d) all
other obligations of the Company hereunder and the other Financing Documents and
(e) any amendments, restatements, renewals, extensions or modifications of any
of the foregoing.
"Secured Parties" means the Agent and the Lenders.
"Security Interests" means the security interests in the Collateral granted
hereunder securing the Secured Obligations.
"Trademarks" means all of the following: (i) all trademarks, trade names,
corporate names, company names, business names, trade styles, service marks,
logos, brand names, trade dress, prints and labels on which any of the foregoing
have appeared or appear, package and other designs, and any other source or
business identifiers, designs and general intangibles of like nature, now
existing or hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, including registrations,
recordings and applications in the United States Patent and Trademark Office or
in any similar
5
<PAGE>
office or agency of the United States, any State thereof or any
other country or any political subdivision thereof, including those described in
the Perfection Certificate, (ii) the goodwill of the business symbolized thereby
or associated with each of them, (iii) all reissues, extensions and renewals
thereof, (iv) all claims for, and rights to sue for, past or future
infringements of any of the foregoing and (v) all income, royalties, damages and
payments now or hereafter due or payable with respect to any the foregoing,
including, without limitation, damages and payments for past or future
infringements thereof.
"Trademark License" means any written agreement now or hereafter in
existence granting to the Company any right to use any Trademark.
"Trademark Security Agreement" means the Trademark Security Agreement
executed and delivered by the Company in favor of the Agent, for the benefit of
the Secured Parties, substantially in the form of Exhibit D hereto, as the same
may be amended from time to time.
"UCC" means the Uniform Commercial Code as in effect on the date hereof in
the State of New York; provided that if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of the
Security Interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than New York, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
non-perfection.
SECTION 2. Representations and Warranties
The Company represents and warrants as follows:
(A) The Company has good and marketable title to all of the Collateral
(except any Collateral (other than Accounts and Inventory) leased by the Company
as lessee), free and clear of any Liens other than the Permitted Liens. The
Company has taken all actions necessary under the UCC to perfect its interest in
any Accounts purchased or otherwise acquired by it, as against its assignors and
creditors of its assignors.
(B) The Company has not performed any acts which might prevent the Agent
from enforcing any of the terms of this Agreement or which would limit the Agent
in any such enforcement. Other than financing statements or other similar or
equivalent documents or instruments with respect to the Security Interests and
Permitted Liens, no financing statement, mortgage, security
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agreement or similar or equivalent document or instrument covering all or any
part of the Collateral is on file or of record in any jurisdiction in which
such filing or recording would be effective to perfect a Lien on such
Collateral. No Collateral is in the possession of any Person (other than the
Company) asserting any claim thereto or security interest therein, except
that the Agent or its designee may have possession of Collateral as
contemplated hereby.
(C) The information set forth in the Perfection Certificate delivered to
the Agent prior to the Closing Date is correct and complete after giving effect
to the consummation of the Acquisition. Not later than 30 days following the
Closing Date, the Company shall furnish to the Agent file search reports from
each UCC filing office set forth in Schedule 7 to the Perfection Certificate
confirming the filing information set forth in such Schedule.
(D) The Security Interests in the Collateral in which a security interest
can be created under the UCC constitute valid security interests under the UCC
securing the Secured Obligations. When UCC financing statements in the form
specified in Exhibit A shall have been filed in the offices specified in the
Perfection Certificate, the Security Interests shall constitute perfected
security interests in the Collateral (except Inventory in transit) to the extent
that a security interest therein may be perfected by filing pursuant to the UCC,
prior to all other Liens and rights of others therein except for the Permitted
Liens. When in addition the Patent Security Agreement, the Trademark Security
Agreement and Copyright Security Agreement have been recorded with the United
States Patent and Trademark Office or United States Copyright Office, as the
case may be and UCC financing statements in the form specified in Exhibit A
shall have been filed with offices specified in the Perfection Certificate with
respect to the Patents listed in Schedule I to such Patent Security Agreement,
the Trademarks listed in Schedule 1 to such Trademark Security Agreement, and
the Copyright listed in Schedule I to such Copyright Security Agreement the
Security Interests shall constitute perfected Security Interests in all right,
title and interest of the Company in such Patents and Trademarks therein
described, prior to all other Liens and rights of others therein except
Permitted Liens.
(E) The Inventory and Equipment are insured in accordance with the
requirements of the Credit Agreement.
(F) All Inventory has or will have been produced in compliance with the
applicable requirements of the Fair Labor Standards Act, as amended.
SECTION 3. The Security Interests
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(A) In order to secure the full and punctual payment and performance of the
Secured Obligations in accordance with the terms thereof, the Company hereby
grants to the Agent for the ratable benefit of the Secured Parties a continuing
security interest in and to all of the following property of the Company,
whether now owned or existing or hereafter acquired or arising and regardless of
where located (all being collectively referred to as the "Collateral"):
(1) Accounts;
(2) Inventory;
(3) General Intangibles;
(4) Documents;
(5) Instruments;
(6) Equipment;
(7) The Lockbox Account and the Insurance Account, all cash deposited in
either of the foregoing from time to time, the Liquid Investments made pursuant
to Section 5(E) and other monies and property of any kind of the Company in the
possession or under the control of the Agent;
(8) All books and records (including customer lists, credit files, computer
programs, printouts and other computer materials and records) of the Company
pertaining to any of the Collateral; and
(9) All Proceeds of all or any of the Collateral described in Clauses 1
through 8 hereof.
(B) The Security Interests are granted as security only and shall not
subject any Secured Party to, or transfer or in any way affect or modify, any
obligation or liability of the Company with respect to any of the Collateral or
any transaction in connection therewith.
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SECTION 4. Further Assurances; Covenants
(A) The Company will not change its name, identity or corporate structure
in any manner unless it shall have given the Agent prior notice thereof and
delivered an opinion of counsel with respect thereto in accordance with Section
4(M). The Company will not change (i) the location of its chief executive office
or chief place of business or (ii) the locations where it keeps or holds any
Collateral or any records relating thereto from the applicable location
described in the Perfection Certificate unless it shall have given the Agent
prior notice thereof and delivered an opinion of counsel with respect thereto in
accordance with Section 4(M).
(B) The Company will, from time to time, at its expense, execute, deliver,
file and record any statement, assignment, instrument, document, agreement or
other paper and take any other action (including, without limitation, any
filings of financing or continuation statements under the UCC and the
registration in the United States Patent and Trademark Office or United States
Copyright Office, as the case may be, of any unregistered Patent, Trademark or
Copyright that is material to the business of the Company, now owned or later
acquired by the Company) that from time to time may be necessary or desirable,
or that the Agent may request, in order to create, preserve or perfect the
Security Interests or to enable the Secured Parties to obtain the full benefits
of this Agreement, or to enable the Agent to exercise and enforce any of its
rights, powers and remedies hereunder with respect to any of the Collateral. To
the extent permitted by applicable law, the Company hereby authorizes the Agent,
and appoints the Agent as its true and lawful attorney (with full power of
substitution, in the name of the Company, the Secured Parties or otherwise, for
the sole use and benefit of the Secured Parties), to execute and file financing
statements or continuation statements without the Company's signature appearing
thereon. The Company agrees that a carbon, photographic, photostatic or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement. The Company shall pay the costs of, or incidental to, any
recording or filing of any financing or continuation statements concerning the
Collateral.
(C) If any Collateral is at any time in the possession or control of any
warehouseman, bailee or any of the Company's agents or processors, the Company
shall notify such warehouseman, bailee, agent or processor of the Security
Interests created hereby and to hold all such Collateral for the Agent's account
subject to the Agent's instructions.
(D) The Company shall keep full and accurate books and records relating to
the Collateral, and stamp or otherwise mark such books and records in such
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manner as the Required Lenders may reasonably require in order to reflect the
Security Interests.
(E) The Company will immediately deliver and pledge each Instrument to the
Agent, appropriately endorsed to the Agent, provided that so long as no Event of
Default shall have occurred and be continuing, the Company may retain for
collection in the ordinary course any Instruments (other than checks and drafts
constituting payments in respect of Accounts, as to which the provisions of
Section 5(B) shall apply) received by it in the ordinary course of business and
the Agent shall, promptly upon request of the Company, make appropriate
arrangements for making any other Instrument pledged by the Company available to
it for purposes of presentation, collection or renewal (any such arrangement to
be effected, to the extent deemed appropriate to the Agent, against trust
receipt or like document).
(F) The Company shall use its best efforts to cause to be collected from
its account debtors, as and when due, any and all amounts owing under or on
account of each Account (including Accounts which are delinquent, such Accounts
to be collected in accordance with lawful collection procedures) and shall apply
forthwith upon receipt thereof all such amounts as are so collected to the
outstanding balance of such Account. Subject to the rights of the Secured
Parties hereunder upon the occurrence and during the continuance of an Event of
Default, the Company may allow in the ordinary course of business as adjustments
to amounts owing under its Accounts (i) an extension or renewal of the time or
times of payment, or settlement for less than the total unpaid balance, which
the Company finds appropriate in accordance with sound business judgment unless
such extension, renewal or settlement results in causing such Account to not be
an Eligible Receivable and thereby causes the aggregate unpaid balance of
Working Capital Borrowings to exceed the Borrowing Base and (ii) a refund or
credit due as a result of returned or damaged merchandise or as a discount for
prompt payment, all in accordance with the Company's ordinary course of business
consistent with its historical collection practices. The costs and expenses
(including attorney's fees) of collection, whether incurred by the Company or
the Agent, shall be borne by the Company.
(G) Upon the occurrence and during the continuance of any Event of Default,
upon request of the Required Lenders through the Agent, the Company will
promptly notify (and the Company hereby authorizes the Agent so to notify) each
account debtor in respect of any Account or Instrument that such Collateral has
been assigned to the Agent hereunder, and that any payments due or to become due
in respect of such Collateral are to be made directly to the Agent or its
designee.
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(H) Upon the occurrence and during the continuance of any Event of Default,
the Company shall deliver to the Agent any and all certificates of title,
applications for title or similar evidence of ownership of the Equipment owned
at such time by the Company and shall cause the Agent to be named as lienholder
on any such certificate of title or other evidence of ownership. The Company
shall not permit any such items to become a fixture to real estate (unless the
Agent has a first priority Lien thereon pursuant to the Mortgage) or an
accession to other personal property.
(I) Without the prior written consent of the Required Lenders, the Company
will not sell, lease, exchange, assign or otherwise dispose of, or grant any
option with respect to, any Collateral except, subject to the rights of the
Secured Parties hereunder if an Event of Default shall have occurred and be
continuing, as permitted under the Credit Agreement including Section 8.06,
whereupon, in the case of such a sale or exchange, the Security Interests
created hereby in such item (but not in any Proceeds arising from such sale or
exchange) shall cease immediately without any further action on the part of the
Agent.
(J) The Company will, promptly upon request, provide to the Agent all
information and evidence it may reasonably request concerning the Collateral to
enable the Agent to enforce the provisions of this Agreement.
(K) From time to time upon request by the Agent, the Company shall, at its
cost and expense, cause to be delivered to the Secured Parties an opinion of
counsel satisfactory to the Agent as to such matters relating to the
transactions contemplated hereby as the Required Lenders may reasonably request.
(L) The Company shall promptly notify the Agent if it knows that any
application or registration relating to any Patent, Trademark, or Copyright may
become abandoned or canceled or of any adverse determination or development
(including the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office or the United States
Copyright Office, as the case may be, or any court) regarding the Company's
ownership of any Patent, Trademark or Copyright, its right to register the same,
or to keep and maintain the same. In the event that any right to any Patent,
Patent License, Trademark, Trademark License Copyright or Copyright License is
infringed, misappropriated or diluted by a third party, the Company shall notify
the Agent promptly after it learns thereof and shall, unless the Company shall
reasonably determine that any such action would be of negligible economic value,
take such action as the Company shall reasonably deem appropriate under the
circumstances to protect such Patent, Patent License, Trademark, Trademark
License Copyright or Copyright License. In no event shall the Company, either
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itself or through any agent, employee or licensee, file an application for
the registration of any material Patent, Trademark or Copyright with the
United States Patent and Trademark Office or the United States Copyright
Office, as the case may be, or with any similar office or agency in any other
country or any political subdivision thereof, unless it promptly executes,
delivers and files any and all agreements, instruments, documents and papers,
if any, the Agent may request to evidence the Security Interest in such
Patent, Trademark or Copyright and the goodwill and general intangibles of
the Company relating thereto or represented thereby. The Company hereby
appoints the Agent as its true and lawful attorney (with full power of
substitution, in the name of the Company, the Secured Parties or otherwise,
for the sole use and benefit of the Secured Parties) to execute, deliver and
file all such writings for the foregoing purposes upon failure by the Company
to promptly execute, deliver or file any such writings or otherwise fail to
comply with any provision of this paragraph; (L) such power, being coupled
with an interest, shall be irrevocable until the Secured Obligations are paid
in full.
(M) Not more than six months nor less than 30 days prior to the date on
which the Company proposes to take any such action contemplated by Section 4(A),
the Company shall have given notice to the Agent of such proposed action, and,
at the Company's cost and expense, caused to be delivered to the Secured Parties
with such notice, an opinion of counsel, satisfactory to the Agent,
substantially in the form of Exhibit B, to the effect that all financing
statements and amendments or supplements thereto, continuation statements and
other documents required to be recorded or filed in order to perfect and protect
the Security Interests for a period (and after giving effect to the proposed
action that is the subject of such notice), specified in such opinion,
continuing until a date not earlier than eighteen months from the date of such
opinion, against all creditors of and purchasers from the Company have been
filed in each filing office necessary for such purpose and that all filing fees
and taxes, if any, payable in connection with such filings have been paid in
full.
(N) On or prior to the Closing Date, the Company will cause the Agent to be
named as an insured party and loss payee on each insurance policy covering risks
relating to any of its Inventory and Equipment. The Company will deliver to the
Agent, upon the request of the Agent, the insurance policies for such insurance.
Each such insurance policy shall include effective waivers by the insurer of all
claims for insurance premiums against any Secured Party, provided that all
insurance proceeds in excess of $500,000 per claim shall be adjusted with and
payable to the Agent and provide that no cancellation or termination thereof
shall be effective until at least 30 days after receipt by the Agent of written
notice thereof. The Company hereby appoints the Agent as its attorney-in-fact to
make proof of loss, claim for insurance and adjustments with insurers, and to
execute or
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endorse all documents, checks or drafts in connection with payments made as a
result of any such insurance policies.
SECTION 5. Lockbox Account and Insurance Account
(A) Within 30 days of the Closing Date, the Agent and the Company shall
establish, pursuant to a lockbox agreement in form and substance reasonably
satisfactory to the Agent (the "Lockbox Agreement"), a bank account (the
"Lockbox Account") with [Name of Lockbox Bank] (the "Lockbox Bank"), in the name
["Pumpkin Ltd."] -- NationsCredit Commercial Corporation, as Agent", and under
the exclusive control of the Agent, into which there shall be deposited from
time to time the cash proceeds of the Collateral required to be delivered to the
Agent pursuant to subsection (B) of this Section 5 or any other provision of
this Agreement. Any income received with respect to the balance from time to
time standing to the credit of the Lockbox Account, including any interest or
capital gains on Liquid Investments, shall remain, or be deposited, in the
Lockbox Account. All right, title and interest in and to the cash amounts on
deposit from time to time in the Lockbox Account together with any Liquid
Investments from time to time made pursuant to subsection (E) of this Section
shall vest in the Agent, shall constitute part of the Collateral hereunder and
shall not constitute payment of the Secured Obligations until applied thereto as
hereinafter provided.
(B) Upon the occurrence and during the continuance of an Event of Default,
the Company shall instruct all account debtors and other Persons obligated in
respect of all Accounts to make all payments in respect of the Accounts and
shall use its best efforts to cause such account debtors and other Persons to
remit all such payments directly to the Lockbox Account (if paid by wire
transfer) or to a post office box that is subject to the Lockbox Agreement, for
deposit into the Lockbox Account. In addition to the foregoing, the Company
agrees that if the proceeds of any Collateral hereunder (including the payments
made in respect of Accounts) shall be received by it, the Company, subject to
subsection (C) of this Section, shall as promptly as possible deposit such
proceeds into the Lockbox Account. Until so deposited, all such proceeds shall
be held in trust by the Company for and as the property of the Secured Parties
and shall not be commingled with any other funds or property of the Company. The
balance from time to time standing to the credit of the Lockbox Account shall,
except upon the occurrence and continuation of an Event of Default, be
distributed to the Company in accordance with the provisions of the Lockbox
Agreement. If immediately available cash on deposit in the Lockbox Account is
not sufficient to make any distribution to the Company referred to in the
previous sentence of this Section 5(B), the Agent shall cause to be liquidated
as promptly as practicable
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Liquid Investments in the Lockbox Account designated by the Company as
required to obtain sufficient cash to make such distribution and,
notwithstanding any other provision of this Section 5, such distribution
shall not be made until such liquidation has taken place. Upon the occurrence
and continuation of an Event of Default, the Agent shall, if so instructed by
the Required Lenders, apply or cause to be applied (subject to collection)
any or all of the balance from time to time standing to the credit of the
Lockbox Account in the manner specified in Section 9.
(C) Promptly upon and at all times after the receipt of any cash proceeds
of insurance policies, awards of condemnation or other compensation required to
be paid to the Agent pursuant to Section 7.04(b) or 7.04(c) of the Credit
Agreement (the "Insurance Proceeds"), the Company shall establish and shall
thereafter maintain an additional cash collateral account (the "Insurance
Account") at the offices of the Lockbox Bank or such other bank as the Company
and the Agent may agree (the "Insurance Account Bank"), in the name and under
the control of the Agent. Forthwith upon such establishment, the Company shall
notify the Agent of the location, account name and account number of such
account. The Company hereby agrees to cause any Insurance Proceeds received from
time to time after the establishment of the Insurance Account to be deposited
therein as set forth in this paragraph. Any income received with respect to the
balance from time to time standing to the credit of the Insurance Account,
including any interest or capital gains on Liquid Investments, shall remain, or
be deposited, in the Insurance Account. All right, title and interest in and to
the cash amounts on deposit from time to time in the Insurance Account together
with any Liquid Investments from time to time made pursuant to subsection (E) of
this Section shall vest in the Agent, shall constitute part of the Collateral
hereunder and shall not constitute payment of the Secured Obligations until
applied thereto as hereinafter provided. The Agent shall apply to repayment of
the Tranche A Loans and Tranche B Loans, respectively, those amounts on deposit
in the Insurance Account which are required to be applied to the repayment of
the Tranche A Loans in accordance with Section 2.04(b)(ii) of the Credit
Agreement or to repayment of the Tranche B Loans in accordance with Section
3.04(b)(ii) of the Credit Agreement.
(D) The balance from time to time standing to the credit of the Insurance
Account (to the extent not applied pursuant to the last sentence of Section
5(C)) shall be subject to withdrawal only upon the instructions of the Agent.
Except upon the occurrence and continuation of an Event of Default, the Agent
agrees to give instructions to distribute such amounts to the Company at such
times and in such amounts (other than amounts attributable to proceeds deposited
in the Insurance Account pursuant to Section 7.04(c) of the Credit Agreement) as
the
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Company shall request for the purpose of repairing, reconstructing or
replacing the property or for the purpose of reimbursing expenses in respect
of which such Insurance Proceeds were received. Any such request shall be
accompanied by a certificate of the chief financial officer or treasurer of
the Company setting forth in detail reasonably satisfactory to the Required
Lenders the repair, reconstruction or replacement for which such funds will
be expended. If immediately available cash on deposit in the Insurance
Account is not sufficient to make any distribution to the Company referred to
in the previous sentence of this Section 5(D), the Agent shall cause to be
liquidated as promptly as practicable such Liquid Investments in the
Insurance Account designated by the Company as required to obtain sufficient
cash to make such distribution and, notwithstanding any other provision of
this Section 5, such distribution shall not be made until such liquidation
has taken place. Upon the occurrence and continuation of an Event of Default,
the Agent shall, if so instructed by the Required Lenders, apply or cause to
be applied (subject to collection) any or all of the balance from time to
time standing to the credit of the Insurance Account in the manner specified
in Section 9.
(E) Amounts on deposit in the Lockbox Account and the Insurance Account
shall be invested and re-invested from time to time in such Liquid Investments
as the Company shall determine, which Liquid Investments shall be held in the
name and be under the control of the Agent; provided that, if an Event of
Default has occurred and is continuing, the Agent shall, if instructed by the
Required Lenders, cause such Liquid Investments to be liquidated and apply or
cause to be applied the proceeds thereof to the payment of the Secured
Obligations in the manner specified in Section 9. For this purpose, "Liquid
Investments" means Temporary Cash Investments; provided that (i) each Liquid
Investment shall mature within 30 days after it is acquired by the Agent and
(ii) in order to provide the Agent, for the benefit of the Secured Parties, with
a perfected security interest therein, each Liquid Investment shall be either:
(i) evidenced by negotiable certificates or instruments, or
if non-negotiable then issued in the name of the Agent, which
(together with any appropriate instruments of transfer) are
delivered to, and held by, the Agent or an agent thereof (which
shall not be the Company or any of its Affiliates) in the State
of New York; or
(ii) in book-entry form and issued by the United States and
subject to pledge under applicable state law and Treasury
regulations and as to which (in the opinion of counsel to the
Agent) appropriate
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measures shall have been taken for perfection of the Security
Interests.
SECTION 6. General Authority
The Company hereby irrevocably appoints the Agent its true and lawful
attorney, with full power of substitution, in the name of the Company, the
Secured Parties or otherwise, for the sole use and benefit of the Secured
Parties, but at the Company's expense, to the extent permitted by law to
exercise, at any time and from time to time while an Event of Default has
occurred and is continuing, all or any of the following powers with respect to
all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due thereon or by virtue
thereof,
(ii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with
the same or the proceeds or avails thereof, including without
limitation for the implementation of any lease, assignment,
license, sublicense, grant of option, sale or other deposition
of any Patent or Trademark or any action related thereto, as
fully and effectually as if the Agent were the absolute owner
thereof, and
(iv) to extend the time of payment of any or all thereof and to
make any allowance and other adjustments with reference thereto;
provided that the Agent shall give the Company not less than ten days' prior
written notice of the time and place of any sale or other intended disposition
of any of the Collateral, except any Collateral which is perishable or threatens
to decline speedily in value or is of a type customarily sold on a recognized
market. The Company agrees that such notice constitutes "reasonable
notification" within the meaning of Section 9-504(3) of the UCC.
SECTION 7. Remedies upon Event of Default
(A) If any Event of Default has occurred and is continuing, the Agent may
exercise on behalf of the Secured Parties all rights of a secured party under
the UCC (whether or not in effect in the jurisdiction where such rights are
exercised) and, in addition, the Agent may, without being required to give any
notice, except
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as herein provided or as may be required by mandatory provisions of law, (i)
withdraw all cash and Liquid Investments in the Collateral Accounts and apply
such cash and Liquid Investments and other cash, if any, then held by it as
Collateral as specified in Section 9 and (ii) if there shall be no such cash
or Liquid Investments or if such cash and Liquid Investments shall be
insufficient to pay all the Secured Obligations in full, sell the Collateral
or any part thereof at public or private sale, for cash, upon credit or for
future delivery, and at such price or prices as the Agent may deem
satisfactory. The Agent or any other Secured Party may be the purchaser of
any or all of the Collateral so sold at any public sale (or, if the
Collateral is of a type customarily sold in a recognized market or is of a
type which is the subject of widely distributed standard price quotations, at
any private sale). The Company will execute and deliver such documents and
take such other action as the Agent deems necessary or advisable in order
that any such sale may be made in compliance with law. Upon any such sale the
Agent shall have the right to deliver, assign and transfer to the purchaser
thereof the Collateral so sold. Each purchaser at any such sale shall hold
the Collateral so sold to it absolutely and free from any claim or right of
whatsoever kind, including any equity or right of redemption of the Company
which may be waived, and the Company, to the extent permitted by law, hereby
specifically waives all rights of redemption, stay or appraisal which it has
or may have under any law now existing or hereafter adopted. The notice (if
any) of such sale required by Section 6 shall (1) in case of a public sale,
state the time and place fixed for such sale, and (2) in the case of a
private sale, state the day after which such sale may be consummated. Any
such public sale shall be held at such time or times within ordinary business
hours and at such place or places as the Agent may fix in the notice of such
sale. At any such sale the Collateral may be sold in one lot as an entirety
or in separate parcels, as the Agent may determine. The Agent shall not be
obligated to make any such sale pursuant to any such notice. The Agent may,
without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be made at any time or place to
which the same may be so adjourned. In case of any sale of all or any part of
the Collateral on credit or for future delivery, the Collateral so sold may
be retained by the Agent until the selling price is paid by the purchaser
thereof, but the Agent shall not incur any liability in case of the failure
of such purchaser to take up and pay for the Collateral so sold and, in case
of any such failure, such Collateral may again be sold upon like notice. The
Agent, instead of exercising the power of sale herein conferred upon it, may
proceed by a suit or suits at law or in equity to foreclose the Security
Interests and sell the Collateral, or any portion thereof, under a judgment
or decree of a court or courts of competent jurisdiction.
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(B) For the purpose of enforcing any and all rights and remedies under this
Agreement the Agent may (i) require the Company to, and the Company agrees that
it will, at its expense and upon the request of the Agent, forthwith assemble
all or any part of the Collateral as directed by the Agent and make it available
at a place designated by the Agent which is, in its opinion, reasonably
convenient to the Agent and the Company, whether at the premises of the Company
or otherwise, (ii) to the extent permitted by applicable law, enter, with or
without process of law and without breach of the peace, any premise where any of
the Collateral is or may be located, and without charge or liability to it seize
and remove such Collateral from such premises, (iii) have access to and use the
Company's books and records relating to the Collateral and (iv) prior to the
disposition of the Collateral, store or transfer it without charge in or by
means of any storage or transportation facility owned or leased by the Company,
process, repair or recondition it or otherwise prepare it for disposition in any
manner and to the extent the Agent deems appropriate and, in connection with
such preparation and disposition, use without charge any trademark, trade name,
copyright, patent or technical process used by the Company.
(C) Without limiting the generality of the foregoing, if any Event of
Default has occurred and is continuing,
(i) the Agent may license, or sublicense, whether general,
special or otherwise, and whether on an exclusive or non-exclusive
basis, any Patents or Trademarks included in the Collateral
throughout the world for such term or terms, on such conditions
and in such manner as the Agent shall in its sole discretion
determine;
(ii) the Agent may (without assuming any obligations or
liability thereunder), at any time and from time to time, enforce
(and shall have the exclusive right to enforce) against any
licensor, licensee or sublicensee all rights and remedies of the
Company in, to and under any Patent Licenses or Trademark Licenses
and take or refrain from taking any action under any thereof, and
the Company hereby releases the Agent and each of the other Secured
Parties from, and agrees to hold the Agent and each of the other
Secured Parties free and harmless from and against any claims
arising out of, any lawful action so taken or omitted to be taken
with respect thereto, except any such claim to the extent that it
arises solely as the result of the gross negligence or willful
misconduct of any Secured Party; and
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(iii) upon request by the Agent, the Company will execute
and deliver to the Agent a further power of attorney, in form and
substance satisfactory to the Agent, for the implementation of any
lease, assignment, license, sublicense, grant of option, sale or
other disposition of a Patent, Patent License, Trademark or
Trademark License. In the event of any such disposition pursuant
to this Section, the Company shall supply its know-how and
expertise relating to the manufacture and sale of the products
bearing Trademarks or the products or services made or rendered in
connection with Patents, and its customer lists and other records
relating to such Patents or Trademarks and to the distribution of
said products, to the Agent.
SECTION 8. Limitation on Duty of Agent in Respect of Collateral
Beyond the exercise of reasonable care in the custody thereof, the Agent
shall have no duty as to any Collateral in its possession or control or in the
possession or control of any agent or bailee or any income thereon or as to the
preservation of rights against prior parties or any other rights pertaining
thereto. The Agent shall be deemed to have exercised reasonable care in the
custody of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which it accords its own property, and
shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the act or
omission of any warehouseman, carrier, forwarding agency, consignee or other
agent or bailee selected by the Agent in good faith.
SECTION 9. Application of Proceeds
Upon the occurrence and during the continuance of an Event of Default, the
proceeds of any sale of, or other realization upon, all or any part of the
Collateral and any cash held in the Collateral Accounts shall be applied by the
Agent in the following order of priorities:
first, to payment of the expenses of such sale or other
realization, including reasonable compensation to agents and
counsel for the Agent, and all expenses, liabilities and advances
incurred or made by the Agent in connection therewith, and any
other unreimbursed expenses for which the Agent or any other
Secured Party is to be reimbursed pursuant to Section 10.04 of
the
19
<PAGE>
Credit Agreement or Section 12 hereof and unpaid fees owing to
the Agent under the Credit Agreement;
second, to the ratable payment of unpaid principal of the
Secured Obligations;
third, to the ratable payment of accrued but unpaid interest
on the Secured Obligations in accordance with the provisions of
the Credit Agreement;
fourth, to the ratable payment of all other Secured
Obligations, until all Secured Obligations shall have been paid
in full; and
finally, to payment to the Company or its successors or
assigns, or as a court of competent jurisdiction may direct, of
any surplus then remaining from such proceeds.
The Agent may make distributions hereunder in cash or in kind or, on a
ratable basis, in any combination thereof.
SECTION 10. Concerning the Agent
The provisions of Section 10.05 and Article XI of the Credit Agreement
shall inure to the benefit of the Agent in respect of this Agreement and shall
be binding upon the parties to the Credit Agreement in such respect. In
furtherance and not in derogation of the rights, privileges and immunities of
the Agent therein set forth:
(A) The Agent is authorized to take all such action as is provided to be
taken by it as Agent hereunder and all other action reasonably incidental
thereto. As to any matters not expressly provided for herein (including the
timing and methods of realization upon the Collateral) the Agent shall act or
refrain from acting in accordance with written instructions from the Required
Lenders or, in the absence of such instructions, in accordance with its
discretion.
(B) The Agent shall not be responsible for the existence, genuineness or
value of any of the Collateral or for the validity, perfection, priority or
enforceability of the Security Interests in any of the Collateral, whether
impaired by operation of law or by reason of any action or omission to act on
its part hereunder. The Agent shall have no duty to ascertain or inquire as to
the
20
<PAGE>
performance or observance of any of the terms of this Agreement by the
Company.
SECTION 11. Appointment of Co-Agents
At any time or times, in order to comply with any legal requirement in any
jurisdiction, the Agent may appoint another bank or trust company or one or more
other persons, either to act as co-agent or co-agents, jointly with the Agent,
or to act as separate agent or agents on behalf of the Secured Parties with such
power and authority as may be necessary for the effectual operation of the
provisions hereof and may be specified in the instrument of appointment (which
may, in the discretion of the Agent, include provisions for the protection of
such co-agent or separate agent similar to the provisions of Section 10).
SECTION 12. Expenses
In the event that the Company fails to comply with the provisions of the
Credit Agreement or this Agreement, such that the value of any Collateral or the
validity, perfection, rank or value of any Security Interest is thereby
diminished or potentially diminished or put at risk, the Agent if requested by
the Required Lenders may, but shall not be required to, effect such compliance
on behalf of the Company, and the Company shall reimburse the Agent for the
costs thereof on demand. All insurance expenses and all expenses of protecting,
storing, warehousing, appraising, insuring, handling, maintaining, and shipping
the Collateral, any and all excise, property, sales, and use taxes imposed by
any state, federal, or local authority on any of the Collateral, or in respect
of periodic appraisals and inspections of the Collateral to the extent the same
may be requested by the Required Lenders from time to time, or in respect of the
sale or other disposition thereof shall be borne and paid by the Company; and if
the Company fails to promptly pay any portion thereof when due, the Agent or any
other Secured Party may, at its option, but shall not be required to, pay the
same and charge the Company's account therefor, and the Company agrees to
reimburse the Agent or such other Secured Party therefor on demand. All sums so
paid or incurred by the Agent or any other Secured Party for any of the
foregoing and any and all other sums for which the Company may become liable
hereunder and all costs and expenses (including attorneys' fees, legal expenses
and court costs (including the reasonable allocation of the compensation, costs
and expenses of in-house counsel, based upon time spent)) reasonably incurred by
the Agent or any other Secured Party in enforcing or protecting the Security
Interests or any of their rights or remedies under this Agreement, shall,
together with interest thereon until paid at an annual rate equal to 5% plus the
rate announced from time to time
21
<PAGE>
by NationsBank, N.A. as its prime rate, be additional Secured Obligations
hereunder.
SECTION 13. Termination of Security Interests; Release of Collateral
Upon the repayment in full of all Secured Obligations, the termination or
cancellation of all outstanding Letters of Credit and the termination of the
Commitments under the Credit Agreement, the Security Interests shall terminate
and all rights to the Collateral shall revert to the Company. At any time and
from time to time prior to such termination of the Security Interests, the Agent
may release any of the Collateral with the prior written consent of the Required
Lenders. Upon any such termination of the Security Interests or release of
Collateral, the Agent will, at the expense of the Company, execute and deliver
to the Company such documents as the Company shall reasonably request to
evidence the termination of the Security Interests or the release of such
Collateral, as the case may be.
SECTION 14. Notices
All notices, communications and distributions hereunder shall be given in
accordance with Section 12.03 of the Credit Agreement.
SECTION 15. Waivers, Non-Exclusive Remedies
No failure on the part of the Agent to exercise, and no delay in exercising
and no course of dealing with respect to, any right under this Agreement shall
operate as a waiver thereof; nor shall any single or partial exercise by the
Agent or any Secured Party of any right under the Credit Agreement, any of the
other Financing Documents or this Agreement preclude any other or further
exercise thereof or the exercise of any other right. The rights in this
Agreement, the Credit Agreement and the other Financing Documents are cumulative
and are not exclusive of any other remedies provided by law.
SECTION 16. Successors and Assigns
This Agreement is for the benefit of the Agent and the Secured Parties and
their successors and assigns, and in the event of an assignment of all or any of
the Secured Obligations, the rights hereunder, to the extent applicable to the
indebtedness so assigned, may be transferred with such indebtedness. This
Agreement shall be binding on the Company and its successors and assigns.
22
<PAGE>
SECTION 17. Changes in Writing
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only in writing signed by the Company and
the Agent with the consent of the Required Lenders.
SECTION 18. NEW YORK LAW
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO PRINCIPLES OR CONFLICTS OF
LAW), EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO
THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF ANY JURISDICTION OTHER THAN NEW
YORK ARE GOVERNED BY THE LAWS OF SUCH JURISDICTION.
SECTION 19. Severability
If any provision hereof is invalid or unenforceable in any jurisdiction,
then, to the fullest extent permitted by law, (i) the other provisions hereof
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in favor of the Agent and the other Secured Parties in order
to carry out the intentions of the parties hereto as nearly as may be possible;
and (ii) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.
SECTION 20. Counterparts
This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.
23
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
PUMPKIN LTD.
By /s/ Calvin Neider
------------------------------------------------------
Title: Vice President
NATIONSCREDIT COMMERCIAL
CORPORATION, AS AGENT
By /s/ Edward M. Alt
------------------------------------------------------
Title: Authorized Signatory
<PAGE>
EXHIBIT A
PERFECTION CERTIFICATE
The undersigned, [Chief executive officer] and [Chief legal officer], of
Pumpkin Ltd., a Delaware corporation (the "Company"), hereby certify with
reference to the Security Agreement dated as of June __, 1997 between the
Company and NationsCredit Commercial Corporation, as Agent (terms defined
therein being used herein as therein defined), to the Agent and each Lender as
follows:
1. Names. (a) The exact corporate name of the Company, after giving effect
to the consummation of the Merger, as it appears in its certificate of
incorporation is as follows:
Pumpkin Ltd.
dba Pumpkin Masters, Inc.
(b) Set forth below is each other corporate name the Company has had since
its organization, together with the date of the relevant change:
Pumpkin Ltd. (Colo. corp.) adopted dba in 1993
(c) The Company has not changed its identity or corporate structure in any
way within the past five years except for the Merger.
(d) The following is a list of all other names (including trade names or
similar appellations) used by the Company or any of its divisions or other
business units at any time during the past five years:
Pumpkin Masters, Inc.
1
<PAGE>
Pumpkin Masters Inc.
2. Current Locations. (a) The chief executive office of the Company is
located at the following address:
Mailing Address County State
(mailing) Box 61456 Denver Colorado 80206
(street) 427 East Bayaud Ave. Denver Colorado 80209
(b) The following are all the locations where the Company maintains any
books or records relating to any Accounts:
Mailing
Address County State
423, 427, 431, 437 E. Bayaud Denver Colorado 80209
(c) The following are all the places of business of the Company not
identified above:
Mailing
Name Address County State
None
(d) The following are all the locations where the Company maintains any
Inventory not identified above:
Mailing
Name Address County State
Schedule 1 attached
(e) The following are the names and addresses of all Persons other than the
Company which have possession of any of the Company's Inventory:
2
<PAGE>
Mailing
Name Address County State
Schedule 1 attached
3. Prior Locations. (a) Set forth below is the information required by
subparagraphs (a), (b) and (c) of paragraph 2 with respect to each location or
place of business maintained by the Company at any time during the past five
years:
No additional
(b) Set forth below is the information required by subparagraphs (d) and
(e) of paragraph 2 with respect to each location or bailee where or with whom
Inventory has been lodged at any time during the past four months:
Hillyard Industries
310 North 4th Street
St. Joseph, MO
4. Unusual Transactions. All Accounts have been originated by the Company
and all Inventory and Equipment has been acquired by the Company in the ordinary
course of its business.
5. File Search Reports. Attached hereto as Schedule 5(A) is a true copy of
a file search report from the Uniform Commercial Code filing officer in each
jurisdiction identified in paragraph 2 or 3 above with respect to each name set
forth in paragraph 1 above. Attached hereto as Schedule 5(B) is a true copy of
each financing statement or other filing identified in such file search reports.
6. UCC Filings. A duly signed financing statement on Form UCC-1 in
substantially the form of Schedule 6(A) hereto has been duly filed in the
Uniform Commercial Code filing office in each jurisdiction identified in
paragraph 2 hereof. Attached hereto as Schedule 6(B) is a true copy of each such
filing duly acknowledged by the filing officer.
7. Schedule of Filings. Attached hereto as Schedule 7 is a schedule setting
forth filing information with respect to the filings described in paragraph 6
above.
8. Filing Fees. All filing fees and taxes payable in connection with the
filings described in paragraph 6 above have been paid.
3
<PAGE>
9. Patents, Trademarks, Copyrights. All patents, trademarks and copyrights
owned by the Company as of the date hereof and all patent licenses, trademark
licenses and copyright licenses to which the Company is a party as of the date
hereof are listed on Schedule 9 hereto.
4
<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hands this ____ day of
________, 1997.
____________________________
Title:
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NAME INVENTORY EQUIPMENT
- -------------------------------------------------- --------------- --------------------------------------------------
<S> <C> <C>
Pumpkin Masters, Inc. X Office equipment
427 E. Bayaud Avenue
Denver, CO 80209
(Denver County)
Kelly's Crafts, Inc. X
4350 Wade Mill Road
Fairfield, OH 45014
(Butler County)
Mid America Frame, Inc. X Machinery
900 N. County Road "Y"
Plattsburg, MO 64477-9538
(Clinton County)
Sterling Graphics, Inc. X
49 Sherwood Terrace Lake
Bluff, IL 60044
T-Plas Tech Corporation X Molds
2700 S. Raritan Englewood,
CO 80110
(Denver County)
Vanguard Packaging X
8690 NE Underground Dr.
Kansas City, MO 64161-9776
(Clay County)
Hillyard Industries X
310 North 4th Street St.
Joseph, MO
(Buchanon County)
Condit Exhibits X
500 W. Tennessee Ave.
Denver, CO 80223
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME INVENTORY EQUIPMENT
- -------------------------------------------------- --------------- --------------------------------------------------
<S> <C> <C>
Transparent Containers X
625 Thomas
Bensenville, IL 60106
Stadler Mold X
10577 W. Centennial Rd.
Littleton, CO 80127
(Arapahoe County)
Wennlly Enterprises X
11f., No. 121 Sec. 2
Cheinkuo North Rd.
Taipei, Taiwan R.O.C.
Logan School for Creative Learning X
1836 Logan Street
Denver, CO 61461
</TABLE>
2
<PAGE>
SCHEDULE 6(A)
DESCRIPTION OF COLLATERAL
All accounts, chattel paper, contract rights, general intangibles,
inventory, equipment and documents, now owned or hereafter acquired, wherever
located, and all proceeds thereof.
1
<PAGE>
SCHEDULE 7
SCHEDULE OF FILINGS
<TABLE>
<CAPTION>
DEBTOR FILING OFFICER FILE NUMBER DATE OF FILING*
- -------------------- ------------------- ------------------- --------------------
<S> <C> <C> <C>
</TABLE>
1
<PAGE>
- ------------------------
* Indicate lapse date, if other than fifth anniversary.
2
<PAGE>
SCHEDULE 9
PATENTS
TRADEMARK REGISTRATIONS
COPYRIGHTS
3
<PAGE>
EXHIBIT B
OPINION OF
COUNSEL FOR THE COMPANY
* * * *
1. The Security Agreement creates a valid security interest, for the benefit
of the Secured Parties, in all the Company's right, title and interest in all
Collateral to the extent the UCC is applicable thereto (the "Security
Interest").
2. UCC financing statements and amendments thereto (collectively, the
"Financing Statements") have been filed in the filing offices listed in Schedule
1 attached hereto (the "Filing Jurisdictions"), which are all of the offices in
which filings are required to perfect the Security Interest, to the extent the
Security Interest may be perfected by filing under the UCC, and no further
filing or recording of any document or instrument or other action will be
required so to perfect the Security Interest, except that (i) continuation
statements with respect to each Financing Statement must be filed within the
respective time periods set forth on Schedule 1 attached hereto; (ii) additional
filings may be necessary if the Company changes its name, identity or corporate
structure or the jurisdiction in which its places of business, its chief
executive office or the Collateral are located; and (iii) we express no opinion
on the perfection of, or need for further filing or recording to perfect, the
Security Interest in goods now or hereafter located in any jurisdiction other
than the Filing Jurisdictions.
3. There Are
(i) no UCC financing statements which name the Company as debtor or
seller and cover any of the Collateral, other than the Financing
Statements, other financing statements naming the Agent as the secured party
of record [and the financing statements with respect to Permitted Liens
annexed as Schedule 2 hereto, listed in the available records in the UCC
filing offices of the Filing Jurisdictions; and
(ii) no notices of the filing of any federal tax lien (filed
pursuant to Section 6323 of the Internal Revenue Code) or any lien of the
Pension Benefit Guaranty Corporation (filed pursuant to Section 4068 of
ERISA) covering any of the Collateral listed in the available records in the
[UCC filing office in state of Company's chief executive office], which is
the only office having files which must be searched in order to fully
determine the existence of notices of the filing of federal tax liens
(filed pursuant to Section 6323 of the Internal Revenue Code) and liens of
the Pension Benefit Guaranty Corporation (filed pursuant to Section 4068
of ERISA) on the Collateral.
1
<PAGE>
4. The Security Interest secures the payment of (i) all future Loans made
by the Lenders to the Company, whether or not at the time such Loans are made
an Event of Default or other event not within the control of the Lenders has
relieved or may relieve the Lenders from their obligations to make such
Loans, and (ii) all reimbursement obligations of the Company with respect to
any Letters of Credit issued by the Lenders, and is perfected to the extent
set forth in paragraph 2 above with respect to such future Loans. Subject to
[list any qualifications], insofar as the priority thereof is governed by the
UCC, the Security Interest has the same priority with respect to such future
Loans as it does with respect to Loans made on the date hereof, except that
_______________________(1)
- ------------------------
(1) To be conformed to opinion delivered at closing.
2
<PAGE>
EXHIBIT C
PATENT SECURITY AGREEMENT
(PATENTS, PATENT APPLICATIONS AND PATENT LICENSES)
WHEREAS, Pumpkin Ltd. (together with its successors, the "Grantor"), Pumpkin
Masters Holdings, Inc., certain lenders and NationsCredit Commercial
Corporation, as agent for such lenders, are parties to a Credit Agreement of
even date herewith (as the same may be amended and in effect from time to time,
the "Credit Agreement");
WHEREAS, pursuant to the terms of the Company Security Agreement dated as of
June , 1997 (as said Agreement may be amended and in effect from time to
time, the "Company Security Agreement") between the Grantor and NationsCredit
Commercial Corporation, as agent for the secured parties referred to therein (in
such capacity, together with its successors in such capacity, the "Grantee"),
Grantor has granted to Grantee for the ratable benefit of such secured parties a
security interest in substantially all the assets of the Grantor;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor does hereby grant to
Grantee (and confirm the grant pursuant to the Company Security Agreement to the
Grantee of) a continuing security interest in all of Grantor's right, title and
interest in, to and under the following (all of the following items or types of
property being herein collectively referred to as the "Patent Collateral"),
whether presently existing or hereafter arising or acquired:
(i) each Patent and Patent application, including each Patent and Patent
application referred to in Schedule 1 annexed hereto;
(ii) each Patent License, including each Patent License listed on
Schedule 1 annexed hereto; and
(iii) all products and proceeds of the foregoing, including any claim by
Grantor against third parties for past, present or future infringement of
any Patent, including any Patent referred to in Schedule 1 annexed hereto,
and any Patent licensed under any Patent License, including any Patent
License listed on Schedule 1 annexed hereto.
This security interest is granted in conjunction with the security interests
granted to the Grantee pursuant to the Security Agreement. Grantor does hereby
further acknowledge and affirm that the rights and remedies of Grantee with
respect to the security interest in the Patent Collateral made and granted
hereby are more fully set forth in the Company
<PAGE>
Security Agreement, the terms and provisions of which are incorporated by
reference herein as if fully set forth herein.
2
<PAGE>
IN WITNESS WHEREOF, Grantor has caused this Patent Security Agreement to be
duly executed by its officer thereunto duly authorized as of the [ ] day
of [ ] 1997.
PUMPKIN LTD.
By:_________________________________
Title: Vice President
Acknowledged:
NATIONSCREDIT COMMERCIAL CORPORATION
as Agent
By
Name:
Title:
3
<PAGE>
STATE OF NEW YORK )
) : ss.:
COUNTY OF NEW YORK )
On the [ ] day of [ ] , 1997 before me personally came , to me
personally known and known to me to be the person described in and who
executed the foregoing instrument as Chairman of Pumpkin Ltd., who being by
me duly sworn, did depose and say that he is the Chairman of Pumpkin Ltd.,
the corporation described in and which executed the foregoing instrument;
that the said instrument was signed on behalf of Pumpkin Ltd. by order of its
Board of Directors; that he signed his name thereto by like order; and that
he acknowledged said instrument to be the free act and deed of said
corporation.
Notary Public _______________________________________
Notary Public, State of New York
[Seal]
My commission expires:
[______________________]
4
<PAGE>
SCHEDULE 1
TO
PATENT SECURITY AGREEMENT
U.S. PATENTS
<TABLE>
<CAPTION>
NUMBER DATE ISSUE TITLE PATENT HOLDER
- ----------------------- ---------- ------------- -----------------
<S> <C> <C> <C>
[--------] [-------] [---------] [------------]
</TABLE>
PATENT LICENSES
<TABLE>
<CAPTION>
LICENSOR LICENSEE NUMBER(S) DATE
- ----------------------- ------------ ------------ ------------
<S> <C> <C> <C>
[------] [--------] [-------] [--------]
</TABLE>
<PAGE>
EXHIBIT D
[FORM OF TRADEMARK SECURITY AGREEMENT]
TRADEMARK SECURITY AGREEMENT
(TRADEMARKS, TRADEMARK REGISTRATIONS, TRADEMARK
APPLICATIONS AND TRADEMARK LICENSES)
WHEREAS, Pumpkin Ltd., a Delaware corporation (herein referred to as
"Grantor"), owns the Trademark and Trademark registration listed on Schedule
1 annexed hereto; WHEREAS, the Grantor, Pumpkin Masters Holdings, Inc.,
certain lenders and NationsCredit Commercial Corporation, as agent for such
lenders, are parties to a Credit Agreement of even date herewith (as the same
may be amended and in effect from time to time among said parties and such
lenders (the "Lenders") as may from time to time be party thereto, the
"Credit Agreement");
WHEREAS, pursuant to the terms of the Company Security Agreement dated as of
June , 1997 (as said Agreement may be amended and in effect from time to
time, the "Company Security Agreement") between Grantor and NationsCredit
Commercial Corporation, as agent for the secured parties referred to therein
(in such capacity, together with its successors in such capacity pursuant to
the terms of the Company Security Agreement, the "Grantee"), Grantor has
granted to Grantee for the ratable benefit of such secured parties, a
security interest in substantially all the assets of the Grantor including
all right, title and interest of Grantor in, to and under all Grantor's
Trademarks (as defined in the Company Security Agreement), Trademark
registrations, together with any reissues, extensions or renewals thereof,
Trademark applications and Trademark Licenses (as defined in the Company
Security Agreement), whether presently existing or hereafter arising or
acquired, together with the goodwill of the business symbolized by the
Trademarks and the applications therefor and the registrations thereof, and
all products and proceeds thereof, including any and all causes of action
which may exist by reason of infringement or dilution thereof or injury to
the associated goodwill, to secure the payment of all amounts owing by the
Grantor under the Credit Agreement and the other Financing Documents and the
Warrants referred to therein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor does hereby grant to
Grantee a continuing security interest in all of Grantor's right, title and
interest in, to and under the following (all of the following items or types
of property being herein collectively referred to as the "Trademark
Collateral"), whether presently existing or hereafter arising or acquired:
2
<PAGE>
(i) each Trademark, Trademark registration and Trademark application, and
all of the goodwill of the business connected with the use of, and
symbolized by, each Trademark, Trademark registration and Trademark
application, including each Trademark, Trademark registration, and/or
Trademark application referred to in Schedule 1 annexed hereto;
(ii) each Trademark License and all of the goodwill of the business
connected with the use of, and symbolized by, each Trademark licensed; and
(iii) all products and proceeds of the foregoing, including any claim by
Grantor against third parties for past, present or future infringement or
dilution of any Trademark or Trademark registration, and any Trademark
licensed under any Trademark License, or for injury to the goodwill
associated with any Trademark, Trademark registration or Trademark licensed
under any Trademark License.
This security interest is granted in conjunction with the security interests
granted to the Grantee pursuant to the Security Agreement. Grantor does
hereby further acknowledge and affirm that the rights and remedies of Grantee
with respect to the security interest in the Trademark Collateral made and
granted hereby are more fully set forth in the Security Agreement, the terms
and provisions of which are incorporated by reference herein as if fully set
forth herein.
Upon the repayment in full of all Secured Obligations (as defined in the
Credit Agreement), the termination or cancellation of all outstanding Letters
of Credit and the termination of the Commitments under the Credit Agreement,
this security interest shall terminate and all rights to the Trademark
Collateral shall revert to the Company and the Trademark Collateral shall
thereupon be released. Upon such termination of this security interest
Grantee will, at the expense of Grantor, execute and deliver to the Grantee
such documents as Grantee shall reasonably request to evidence the
termination of this security interest or the release of such Trademark
Collateral, as the case may be.
3
<PAGE>
IN WITNESS WHEREOF, Grantor has caused this Trademark Security Agreement to
be duly executed by its officer thereunto duly authorized as of the th day
of , 1997.
PUMPKIN LTD.
By:__________________________
Title: Vice President
Acknowledged:
NATIONSCREDIT COMMERCIAL CORPORATION
as Agent
By:__________________________
Name:
Title: Authorized Signatory
4
<PAGE>
STATE OF NEW YORK )
) : ss.:
COUNTY OF NEW YORK )
On the [ ] day of [ ], 1997 before me personally came , to
me personally known and known to me to be the person described in and who
executed the foregoing instrument as Chairman of Pumpkin Ltd., who being by
me duly sworn, did depose and say that he is the Chairman of Pumpkin Ltd.,
the corporation described in and which executed the foregoing instrument;
that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that the said instrument was signed and
sealed on behalf of said corporation by order of its Board of Directors; that
he signed his name thereto by like order; and that he acknowledged said
instrument to be the free act and deed of said corporation.
Notary Public _________________________________________
Notary Public, State of New York
[Seal]
My commission expires:
[_____________________]
5
<PAGE>
SCHEDULE 1
TO TRADEMARK
SECURITY AGREEMENT
TRADEMARK REGISTRATIONS
<TABLE>
<CAPTION>
TRADEMARK COUNTRY REGISTRATION NO.
- ------------------------------ --------------- -----------------------
<S> <C> <C>
</TABLE>
6
<PAGE>
Exhibit 99.6
HOLDINGS PLEDGE AGREEMENT
AGREEMENT dated as of June 27, 1997 among PUMPKIN MASTERS HOLDINGS, INC.,
a Delaware corporation (with its successors, "Holdings") and NationsCredit
Commercial Corporation, as Agent.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Holdings is the sole stockholder of Pumpkin Ltd., a Delaware
corporation (the "Company"); and
WHEREAS, the Company, Holdings, certain Lenders and NationsCredit
Commercial Corporation, as agent for such Lenders are parties to a Credit
Agreement of even date herewith (as the same may be amended from time to
time, the "Credit Agreement"); and
WHEREAS, in order to induce said Lenders and the Agent to enter into the
Credit Agreement, Holdings has agreed to grant a continuing security interest
in and to the Collateral (as hereafter defined) to secure obligations of the
Company under the Credit Agreement and the Notes issued pursuant thereto and
the other Financing Documents;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions.
Terms defined in the Credit Agreement and not otherwise defined herein
have, as used herein, the respective meanings provided for therein. The
following additional terms, as used herein, have the following respective
meanings:
"Collateral" has the meaning assigned to such term in Section 3(A).
"Company Shares" means all of the shares of capital stock of the Company
issued and outstanding on the date hereof consisting of 855 shares of common
stock, par value $0.01 per share.
"Pledged Stock" means the Company Shares and any other capital stock
required to be pledged to the Agent pursuant to Section 3(B).
<PAGE>
"Secured Obligations" means the obligations secured under this Agreement
including (i) all principal of and interest (including any interest which
accrues after the commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of the Company or
Holdings, whether or not allowed or allowable as a claim in any such
proceeding) on any loan under, or any note issued pursuant to, the Credit
Agreement, (ii) all reimbursement obligations of the Company with respect to
any letter of credit issued pursuant to the Credit Agreement and all interest
thereon (including any interest which accrues after the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of the Company or Holdings, whether or not allowed or
allowable as a claim in any such proceeding), (iii) all other amounts payable
by the Company or Holdings under any Financing Document and (iv) any
amendments, restatements, renewals, extensions or modifications of any of the
foregoing.
"Secured Parties" means the Lenders and the Agent.
"Security Interests" means the security interests in the Collateral
granted hereunder securing the Secured Obligations.
Unless otherwise defined herein, or unless the context otherwise
requires, all terms used herein which are defined in the New York Uniform
Commercial Code as in effect on the date hereof shall have the meanings
therein stated.
SECTION 2. Representations and Warranties.
Holdings represents and warrants as follows:
(A) Title to Pledged Stock. Holdings owns all of the Pledged Stock, free
and clear of any Liens other than the Security Interests. All of the Pledged
Stock has been duly authorized and validly issued, and is fully paid and
non-assessable, and is subject to no options to purchase or similar rights of
any Person. Holdings is not and will not become a party to or otherwise bound
by any agreement, other than this Agreement and the Warrantholders Rights
Agreement, which restricts in any manner the rights of any present or future
holder of any of the Pledged Stock with respect thereto.
(B) Validity, Perfection and Priority of Security Interests. Upon the
delivery of the certificates representing the Pledged Stock to the Agent in
accordance with Section 4 hereof, the Agent will have valid and perfected
security interests in the Pledged Stock subject to no prior Lien. No
registration, recordation or filing with any governmental body, agency or
official is required in
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connection with the execution or delivery of this Agreement or is necessary
for the validity or enforceability hereof or for the perfection or
enforcement of the Security Interests in the Pledged Stock. Neither Holdings
nor the Company has performed or will perform any acts which might prevent
the Agent from enforcing any of the terms and conditions of this Agreement or
which would limit the Agent in any such enforcement.
(C) UCC Filing Locations. The chief executive office of Holdings is
located at its address set forth on the signature pages of the Credit
Agreement. Under the Uniform Commercial Code as in effect in the State in
which such office is located, no local filing is required to perfect a
security interest in collateral consisting of general intangibles.
SECTION 3. The Security Interests.
In order to secure the full and punctual payment of the Secured
Obligations in accordance with the terms thereof, and to secure the
performance of all the obligations of Holdings hereunder:
(A) Holdings hereby assigns and pledges to and with the Agent for the
benefit of the Secured Parties and grants to the Agent for the benefit of the
Secured Parties a security interest in the Pledged Stock, and all of its
rights and privileges with respect to the Pledged Stock, and all income and
profits thereon, and all interest, dividends (except for any such dividends
paid by the Company to Holdings to the extent necessary to permit Holdings to
make payments to Security Capital pursuant to the terms of the Tax Sharing
Agreement ("Tax Sharing Dividends") (including without limitation any portion
of such Tax Sharing Dividends required to be deposited by Holdings into the
Cash Collateral Account (as defined in the Security Capital Pledge Agreement)
pursuant to Section 8.11(b)(y) of the Credit Agreement))) and other payments
and distributions with respect thereto, and all proceeds of the foregoing
(the "Collateral"). Contemporaneously with the execution and delivery hereof,
Holdings is delivering the certificates representing the Company Stock in
pledge hereunder.
(B) In the event that the Company at any time issues any additional or
substitute shares of capital stock of any class (other than any such shares
issued pursuant to the Warrants or the Warrantholders Rights Agreement),
Holdings will, or will cause any Person to whom such additional or substitute
shares are issued to, immediately pledge and deposit with the Agent
certificates representing all such shares as additional security for the
Secured Obligations. All such shares constitute Pledged Stock and are subject
to all provisions of this Agreement.
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(C) The Security Interests are granted as security only and shall not
subject any Secured Party to, or transfer or in any way affect or modify, any
obligation or liability of Holdings or the Company with respect to any of the
Collateral or any transaction in connection therewith.
SECTION 4. Delivery of Pledged Stock.
All certificates representing Pledged Stock delivered to the Agent by
Holdings pursuant hereto shall be in suitable form for transfer by delivery,
or shall be accompanied by duly executed instruments of transfer or
assignment in blank, with signatures appropriately guaranteed, and
accompanied by any required transfer tax stamps, all in form and substance
satisfactory to the Agent.
SECTION 5. Filing; Further Assurances.
(A) Holdings agrees that it will, at its expense and in such manner and
form as the Agent may reasonably require, execute, deliver, file and record
any financing statement, specific assignment or other paper and take any
other action that may be necessary or desirable, or that the Agent may
request, in order to create, preserve or perfect any Security Interest or to
enable the Agent to exercise and enforce its rights hereunder with respect to
any of the Collateral. To the extent permitted by applicable law, Holdings
hereby authorizes the Agent to execute and file, in the name of Holdings or
otherwise, Uniform Commercial Code financing statements (which may be carbon,
photographic, photostatic or other reproductions of this Agreement or of a
financing statement relating to this Agreement) which the Agent in its sole
discretion may deem necessary or appropriate to further perfect the Security
Interests.
(B) Holdings agrees that it will not change (i) its name, identity or
corporate structure in any manner or (ii) the location of its chief executive
office unless it shall have given the Agent not less than 30 days' prior
notice thereof.
SECTION 6. Record Ownership of Pledged Stock.
Upon the occurrence and during the continuation of an Event of Default,
the Agent may, in its sole and reasonable discretion, cause any or all of the
Pledged Stock to be transferred of record into the name of the Agent or its
nominee. Holdings will promptly give to the Agent copies of any notices or
other communications received by it with respect to Pledged Stock registered
in the name of Holdings and the Agent will promptly give to Holdings copies
of any notices and communications received by the Agent with respect to
Pledged Stock registered in the name of the Agent or its nominee.
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SECTION 7. Right to Receive Distributions on Collateral.
The Agent shall have the right to receive and, upon the occurrence and
during the continuance of any Event of Default, to retain as Collateral
hereunder all dividends (except for any Tax Sharing Dividends), interest and
other payments and distributions made upon or with respect to the Collateral
and Holdings shall take all such action as the Agent may deem necessary or
appropriate to give effect to such right. All such dividends, interest and
other payments and distributions which are received by Holdings shall be
received in trust for the benefit of the Agent and the Secured Parties and,
if the Agent so directs upon the occurrence and during the continuance of an
Event of Default, shall be segregated from other funds of Holdings and shall,
forthwith upon demand by the Agent during the continuance of an Event of
Default, be paid over to the Agent as Collateral in the same form as received
(with any necessary endorsement). After all Events of Defaults that shall
have occurred have been cured, the Agent's right to retain dividends,
interest and other payments and distributions under this Section 7 shall
cease and the Agent shall pay over to Holdings any such Collateral retained
by the Agent during the continuance of an Event of Default.
SECTION 8. Right to Vote Pledged Stock.
Unless an Event of Default shall have occurred and be continuing,
Holdings shall have the right, from time to time, to vote and to give
consents, ratifications and waivers with respect to the Pledged Stock, and
the Agent shall, upon receiving a written request from Holdings accompanied
by a certificate signed by its principal financial officer stating that no
Event of Default has occurred and is continuing, deliver to Holdings or as
specified in such request such proxies, powers of attorney, consents,
ratifications and waivers in respect of any of the Pledged Stock which is
registered in the name of the Agent or its nominee as shall be specified in
such request and be in form and substance satisfactory to the Agent.
If an Event of Default shall have occurred and be continuing, the Agent
shall have the right to the extent permitted by law and Holdings shall take
all such action as may be necessary or appropriate to give effect to such
right, to vote and to give consents, ratifications and waivers, and take any
other action with respect to any or all of the Pledged Stock with the same
force and effect as if the Agent were the absolute and sole owner thereof.
SECTION 9. General Authority.
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Holdings hereby irrevocably appoints the Agent its true and lawful
attorney, with full power of substitution, in the name of Holdings, the
Agent, the Secured Parties or otherwise, for the sole use and benefit of the
Agent and Secured Parties, but at the expense of Holdings, to the extent
permitted by law to exercise, at any time and from time to time while an
Event of Default has occurred and is continuing, all or any of the following
powers with respect to all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance for any and
all monies due or to become due upon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any action or
proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with the same or
the proceeds or avails thereof, as fully and effectually as if the Agent
were the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof and to make any
allowance and other adjustments with reference thereto;
provided that the Agent shall give Holdings not less than ten days' prior
written notice of the time and place of any sale or other intended
disposition of any of the Collateral except any Collateral which is
perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market. The Agent and Holdings agree that
such notice constitutes "reasonable notification" within the meaning of
Section 9-504(3) of the Uniform Commercial Code.
SECTION 10. Remedies upon Event of Default.
If any Event of Default shall have occurred and be continuing, the Agent
may exercise on behalf of the Secured Parties all the rights of a secured
party under the Uniform Commercial Code (whether or not in effect in the
jurisdiction where such rights are exercised) and, in addition, the Agent
may, without being required to give any notice, except as herein provided or
as may be required by mandatory provisions of law, (i) apply the cash, if
any, then held by it as Collateral as specified in Section 13 and (ii) if
there shall be no such cash or if such cash shall be insufficient to pay all
the Secured Obligations in full, sell the Collateral or any part thereof at
public or private sale or at any broker's board or on any securities
exchange, for cash, upon credit or for future delivery, and at such price or
prices as the Agent may deem satisfactory. Any Secured Party may
6
<PAGE>
be the purchaser of any or all of the Collateral so sold at any public sale
(or, if the Collateral is of a type customarily sold in a recognized market
or is of a type which is the subject of widely distributed standard price
quotations, at any private sale). The Agent is authorized, in connection with
any such sale, if it deems it advisable so to do, (i) to restrict the
prospective bidders on or purchasers of any of the Pledged Stock to a limited
number of sophisticated investors who will represent and agree that they are
purchasing for their own account for investment and not with a view to the
distribution or sale of any of such Pledged Stock, (ii) to cause to be placed
on certificates for any or all of the Pledged Stock or on any other
securities pledged hereunder a legend to the effect that such security has
not been registered under the Securities Act of 1933 and may not be disposed
of in violation of the provision of said Act, and (iii) to impose such other
limitations or conditions in connection with any such sale as the Agent deems
necessary or advisable in order to comply with said Act or any other law.
Holdings covenants and agrees that it will execute and deliver such documents
and take such other action as the Agent deems necessary or advisable in order
that any such sale may be made in compliance with law. Upon any such sale the
Agent shall have the right to deliver, assign and transfer to the purchaser
thereof the Collateral so sold. Each purchaser at any such sale shall hold
the Collateral so sold absolutely and free from any claim or right of
whatsoever kind, including any equity or right of redemption of Holdings
which may be waived, and Holdings, to the extent permitted by law, hereby
specifically waives all rights of redemption, stay or appraisal which it has
or may have under any law now existing or hereafter adopted. The notice (if
any) of such sale required by Section 9 shall (1) in case of a public sale,
state the time and place fixed for such sale, (2) in case of sale at a
broker's board or on a securities exchange, state the board or exchange at
which such sale is to be made and the day on which the Collateral, or the
portion thereof so being sold, will first be offered for sale at such board
or exchange, and (3) in the case of a private sale, state the day after which
such sale may be consummated. Any such public sale shall be held at such time
or times within ordinary business hours and at such place or places as the
Agent may fix in the notice of such sale. At any such sale the Collateral may
be sold in one lot as an entirety or in separate parcels, as the Agent may
determine. The Agent shall not be obligated to make any such sale pursuant to
any such notice. The Agent may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be
made at any time or place to which the same may be so adjourned. In case of
any sale of all or any part of the Collateral on credit or for future
delivery, the Collateral so sold may be retained by the Agent until the
selling price is paid by the purchaser thereof, but the Agent shall not incur
any liability in case of the failure of such purchaser to take up and pay for
the Collateral so sold and, in case of any such failure, such Collateral may
again
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be sold upon like notice. The Agent, instead of exercising the power of sale
herein conferred upon it, may proceed by a suit or suits at law or in equity
to foreclose the Security Interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
SECTION 11. Expenses.
Holdings agrees that it will forthwith upon demand pay to the Agent:
(i) the amount of any taxes which the Agent may have been required to pay
by reason of the Security Interests or to free any of the Collateral from
any Lien thereon, and
(ii) the amount of any and all reasonable out-of-pocket expenses,
including the fees and disbursements of counsel and of any other experts,
which the Agent may incur in connection with (w) the administration or
enforcement of this Agreement, including such expenses as are incurred to
preserve the value of the Collateral and the validity, perfection, rank
and value of any Security Interest, (x) the collection, sale or other
disposition of any of the Collateral, (y) the exercise by the Agent of
any of the rights conferred upon it hereunder or (z) any Default or Event
of Default.
Any such amount not paid on demand shall bear interest (computed on the
basis of the number of days elapsed over a year of 360 days) at a rate per
annum equal to 5% plus the rate announced from time to time by NationsBank,
N.A. as its prime rate.
SECTION 12. Limitation on Duty of Agent in Respect of Collateral.
Beyond the exercise of reasonable care in the custody thereof, the Agent
shall have no duty as to any Collateral in its possession or control or in
the possession or control of any agent or bailee or any income thereon or as
to the preservation of rights against prior parties or any other rights
pertaining thereto. The Agent shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession if
the Collateral is accorded treatment substantially equal to that which it
accords its own property, and shall not be liable or responsible for any loss
or damage to any of the Collateral, or for any diminution in the value
thereof, by reason of the act or omission of any agent or bailee selected by
the Agent in good faith.
SECTION 13. Application of Proceeds.
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Upon the occurrence and during the continuance of an Event of Default,
the proceeds of any sale of, or other realization upon, all or any part of
the Collateral and any cash held shall be applied by the Agent in the
following order of priorities:
first, to payment of the expenses of such sale or other realization,
including reasonable compensation to agents and counsel for the Agent,
and all expenses, liabilities and advances incurred or made by the Agent
in connection therewith, and any other unreimbursed expenses for which
the Agent or any Secured Party is to be reimbursed pursuant to Section
10.04 of the Credit Agreement or Section 11 hereof and unpaid fees owing
to the Agent under the Credit Agreement;
second, to the ratable payment of unpaid principal of the Secured
Obligations;
third, to the ratable payment of accrued but unpaid interest on the
Secured Obligations in accordance with the provisions of the Credit
Agreement;
fourth, to the ratable payment of all other Secured Obligations, until
all Secured Obligations shall have been paid in full; and
finally, to payment to Holdings or its successors or assigns, or as a
court of competent jurisdiction may direct, of any surplus then remaining
from such proceeds.
SECTION 14. Concerning the Agent.
The provisions of Article XI of the Credit Agreement shall inure to the
benefit of the Agent in respect of this Agreement and shall be binding upon
the parties to the Credit Agreement in such respect. In furtherance and not
in derogation of the rights, privileges and immunities of the Agent therein
set forth:
(A) The Agent is authorized to take all such action as is provided to be
taken by it as Agent hereunder and all other action reasonably incidental
thereto. As to any matters not expressly provided for herein (including,
without limitation, the timing and methods of realization upon the
Collateral) the Agent shall act or refrain from acting in accordance with
written instructions from the Required Lenders or, in the absence of such
instructions, in accordance with its discretion.
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(B) The Agent shall not be responsible for the existence, genuineness or
value of any of the Collateral or for the validity, perfection, priority or
enforceability of the Security Interests in any of the Collateral, whether
impaired by operation of law or by reason of any action or omission to act on
its part hereunder. The Agent shall have no duty to ascertain or inquire as
to the performance or observance of any of the terms of this Agreement by
Holdings.
SECTION 15. Appointment of Co-Agents.
At any time or times, in order to comply with any legal requirement in
any jurisdiction, the Agent may appoint another bank or trust company or one
or more other persons, either to act as co-agent or co-agents, jointly with
the Agent, or to act as separate agent or agents on behalf of the Secured
Parties with such power and authority as may be necessary for the effectual
operation of the provisions hereof and may be specified in the instrument of
appointment (which may, in the discretion of the Agent, include provisions
for the protection of such co-agent or separate agent similar to the
provisions of Section 14).
SECTION 16. Termination of Security Interests; Release of Collateral.
Upon the repayment in full of all Secured Obligations, the termination or
cancellation of all outstanding Letters of Credit and the termination of the
Commitments under the Credit Agreement, the Security Interests shall
terminate and all rights to the Collateral shall revert to Holdings. At any
time and from time to time prior to such termination of the Security
Interests, the Agent may release any of the Collateral with the prior written
consent of the Lenders. Upon any such termination of the Security Interests
or release of Collateral, the Agent will, at the expense of Holdings, execute
and deliver to Holdings such documents as Holdings shall reasonably request
to evidence the termination of the Security Interests or the release of such
Collateral, as the case may be.
SECTION 17. Notices.
All notices, communications and distributions hereunder shall be given in
accordance with Section 12.03 of the Credit Agreement.
SECTION 18. Waivers, Non-Exclusive Remedies.
No failure on the part of the Agent to exercise, and no delay in
exercising and no course of dealing with respect to, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise by the Agent of any right under the Credit Agreement, any other
Financing Document or this
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Agreement preclude any other or further exercise thereof or the exercise of
any other right. The rights in this Agreement, the other Security Documents
and the Credit Agreement are cumulative and are not exclusive of any other
remedies provided by law.
SECTION 19. Successors and Assigns.
This Agreement is for the benefit of the Agent and the other Secured
Parties and their successors and assigns, and in the event of an assignment
of all or any of the Secured Obligations, the rights hereunder, to the extent
applicable to the indebtedness so assigned, may be transferred with such
indebtedness. This Agreement shall be binding on Holdings and its successors
and assigns. SECTION 20. Obligations Unconditional; Discharge of Obligations,
etc.
(a) The obligations of Holdings hereunder are unconditional and absolute
and, without limiting the generality of the foregoing, shall not be released,
discharged or otherwise affected by:
(i) any extension, renewal, settlement, compromise, waiver or release in
respect of any obligation of the Company under any Operative Document, by
operation of law or otherwise;
(ii) any modification or amendment of or supplement to any Operative
Document;
(iii) any release, non-perfection or invalidity of any direct or indirect
security for any obligation of the Company under any Operative Document;
(iv) any change in the corporate existence, structure or ownership of the
Company or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting the Company or any of its assets or any resulting
release or discharge of any obligation of the Company contained in any
Operative Document;
(v) the existence of any claim, set-off or other rights which Holdings
may have at any time against the Company, the Agent, any Lender or any
other Person, whether in connection herewith or any unrelated
transactions, provided that nothing herein shall prevent the assertion
of any such claim by separate suit or compulsory counterclaim;
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(vi) any invalidity or unenforceability relating to or against the
Company for any reason of any Operative Document, or any provision of
applicable law or regulation purporting to prohibit the payment by the
Company of the principal of or interest on any Note or any other amount
payable by the Company under any Operative Document; or
(vii) any other act or omission to act or delay of any kind by the
Company, the Agent, any Lender or any other Person or any other
circumstance whatsoever which might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of Holdings'
obligations hereunder.
(b) Holdings' obligations hereunder shall remain in full force and effect
until the Commitments and all outstanding Letters of Credit under the Credit
Agreement shall have terminated and the principal of and interest on the
Notes and all other amounts payable by the Company under the Credit Agreement
shall have been paid in full. If at any time any payment of the principal of
or interest on any Note or any other amount payable by the Company under the
Credit Agreement is rescinded or must be otherwise restored or returned upon
the insolvency, bankruptcy or reorganization of the Company or otherwise,
Holdings' obligations hereunder with respect to such payment shall be
reinstated as though such payment had been due but not made at such time.
(c) Holdings irrevocably waives acceptance hereof, presentment, demand,
protest and any notice not provided for herein, as well as any requirement
that at any time any action be taken by any corporation or Person against the
Company or any other corporation or Person.
(d) Holdings hereby waives any right or claim of exoneration,
reimbursement, subrogation, contribution or indemnity and any other similar
right or claim arising out of any performance of its obligations hereunder.
(e) If acceleration of the time for payment of any amount payable by the
Company under the Credit Agreement or any Note is stayed upon the insolvency,
bankruptcy or reorganization of the Company, the obligations of Holdings
hereunder with respect to all such amounts otherwise subject to acceleration
will nonetheless be performed forthwith on demand by the Agent (at the
request of the Required Lenders).
SECTION 21. Changes in Writing.
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Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only in writing signed by Holdings and
the Agent with the consent of the Required Lenders (or in the case of Section
16, all of the Lenders).
SECTION 22. NEW YORK LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW), EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT
TO THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF ANY JURISDICTION OTHER
THAN NEW YORK ARE GOVERNED BY THE LAWS OF SUCH JURISDICTION.
SECTION 23. Severability.
If any provision hereof is invalid or unenforceable in any jurisdiction,
then, to the fullest extent permitted by law, (i) the other provisions hereof
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in favor of the Agent and the Secured Parties in order to
carry out the intentions of the parties hereto as nearly as may be possible;
and (ii) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
SECTION 24. Counterparts.
This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
PUMPKIN MASTERS HOLDINGS, INC.
By /s/ Calvin Neider
-------------------------------
Title: Vice President
NATIONSCREDIT COMMERCIAL
CORPORATION, AS AGENT
By /s/ Edward M. Alt
-------------------------------
Title: Authorized Signatory
<PAGE>
Exhibit 99.7
SECURITY CAPITAL PLEDGE AND GUARANTY AGREEMENT
AGREEMENT dated as of June 27, 1997 between Security Capital
Corporation, a Delaware corporation ("Security Capital") and NationsCredit
Commercial Corporation, as Agent for the Lenders referred to below.
W I T N E S S E T H :
WHEREAS Pumpkin Ltd., a Delaware corporation (the "Company"), Pumpkin
Masters Holdings, Inc., a Delaware corporation ("Holdings"), certain lenders
and NationsCredit Commercial Corporation, as agent for such lenders, are
parties to a Credit Agreement of even date herewith (as the same may be
amended from time to time, the "Credit Agreement"); and
WHEREAS in order to induce such lenders and NationsCredit Commercial
Corporation, as agent for such lenders to enter into the Credit Agreement,
Security Capital has agreed to enter into a limited guaranty of the
obligations of the Company under the Financing Documents referred to in the
Credit Agreement and to grant a continuing security interest in and to the
Collateral (as hereafter defined) to secure such guaranty;
NOW THEREFORE in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions
Terms defined in the Credit Agreement and not otherwise defined herein
have, as used herein, the respective meanings provided for therein. The
following additional terms, as used herein, have the following respective
meanings:
"Cash Collateral Account" has the meaning set forth in Section 5(A).
"Collateral" has the meaning set forth in Section 4.
<PAGE>
"Guaranteed Obligations" means all amounts payable by the Company under
the Credit Agreement and any other Financing Document including without
limitation (i) all principal of and interest (including any interest which
accrues after the commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of the Company or
Holdings, whether or not allowed or allowable as a claim in any such
proceeding) on any loan under, or any note issued pursuant to, the Credit
Agreement, (ii) all reimbursement obligations of the Company with respect to
any letter of credit issued pursuant to the Credit Agreement and any interest
thereon (including any interest which accrues after the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of the Company or Holdings, whether or not allowed or
allowable as a claim in any such proceeding), (iii) all other amounts payable
by the Company under any Financing Document and (iv) any amendments,
restatements, renewals, extensions or modifications of any of the foregoing;
provided that notwithstanding anything set forth in this Agreement to the
contrary, for purposes of this Agreement, the term "Guaranteed Obligations"
shall mean, at any time, an amount not to exceed, and Security Capital's
obligations with respect to all or part of the Guaranteed Obligations shall
not exceed at any time, the aggregate amount on deposit in the Cash
Collateral Account at such time (or, if greater, the aggregate amount
required to have been deposited by Holdings and the Company in the Cash
Collateral Account from and including the Closing Date to and including such
date pursuant to Section 8.11(b)(y) of the Credit Agreement).
"Secured Obligations" means the Guaranteed Obligations.
"Secured Parties" means the Agent and the Lenders.
"Security Interests" means the security interests in the Collateral
granted hereunder securing the Secured Obligations.
"UCC" means the Uniform Commercial Code as in effect on the date hereof
in the State of New York; provided that if by reason of mandatory provisions
of law, the perfection or the effect of perfection or non-perfection of the
Security Interest in any Collateral is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than New York, "UCC" means the
Uniform Commercial Code as in effect in such other jurisdiction for purposes
of the provisions hereof relating to such perfection or effect of perfection
or non-perfection.
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SECTION 2. Guaranty
(A) Security Capital hereby unconditionally guarantees the full and
punctual payment (whether at stated maturity, upon acceleration or otherwise)
of the Guaranteed Obligations. Upon failure by the Company to pay punctually
any Guaranteed Obligations, Security Capital shall forthwith on demand pay
the amount not so paid at the place and in the manner specified in the Credit
Agreement.
(B) The obligations of Security Capital hereunder are unconditional and
absolute and, without limiting the generality of the foregoing, shall not be
released, discharged or otherwise affected by:
(i) any extension, renewal, settlement, compromise, waiver or release in
respect of any obligation of the Company or Holdings under any Operative
Document, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to any Operative
Document;
(iii) any release, non-perfection or invalidity of any direct or indirect
security for any obligation of the Company or Holdings under any
Operative Document;
(iv) any change in the corporate existence, structure or ownership of the
Company or Holdings or any insolvency, bankruptcy, reorganization or
other similar proceeding affecting the Company or Holdings or any of
their respective assets or any resulting release or discharge of any
obligation of the Company or Holdings contained in any Operative Document;
(v) the existence of any claim, set-off or other rights which Security
Capital may have at any time against the Company, Holdings, the Agent,
any Lender or any other Person, whether in connection herewith or any
unrelated transactions, provided that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against the
Company or Holdings for any reason of any Operative Document,
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or any provision of applicable law or regulation purporting to prohibit
the payment by the Company or Holdings of the principal of or interest on
any Note or any reimbursement obligation or any other amount payable by
the Company under any Operative Document; or
(vii) any other act or omission to act or delay of any kind by the
Company, Holdings, the Agent, any Lender or any other Person or any other
circumstance whatsoever which might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of Holdings'
obligations hereunder.
(C) Security Capital irrevocably waives acceptance hereof, presentment,
demand, protest and any notice not provided for herein, as well as any
requirement that at any time any action be taken by any Person against the
Company or any other Person.
(D) If acceleration of the time for payment of any amount payable by the
Company under the Financing Documents or any Note is stayed upon the
insolvency, bankruptcy or reorganization of the Company, the obligations of
Security Capital hereunder with respect to all such amounts otherwise subject
to acceleration will nonetheless be performed forthwith on demand by the
Agent (at the request of the Required Lenders).
(E) Security Capital's obligations under this Section 2 shall remain in
full force and effect until the date on which all Secured Obligations shall
have been repaid in full, all Commitments under the Credit Agreement shall
have been terminated and all outstanding Letters of Credit shall have been
terminated or canceled. If at any time any payment of any amount payable by
the Company under the Credit Agreement or any other Financing Document is
rescinded or must be otherwise restored or returned upon the insolvency or
receivership of the Company or otherwise, Security Capital's obligations
hereunder with respect to such payment shall be reinstated as though such
payment had been due but not made at such time.
(F) Upon making any payment with respect to the Company hereunder,
Security Capital shall be subrogated to the rights of the payee against the
Company with respect to such payment; provided that Security Capital shall
not enforce any payment by way of subrogation until all amounts of principal
of and interest on the Loans and all other amounts payable by the Company
under the Credit Agreement and any other Financing Documents have been paid
in full and
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the Commitments of each Lender have been terminated and all Letters of Credit
shall have expired or shall have been canceled.
SECTION 3. Representations and Warranties.
Security Capital represents and warrants as follows:
(A) Security Capital is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware, and
has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as
now conducted.
(B) The execution, delivery and performance by Security Capital of this
Agreement are within Security Capital's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable
law or regulation or of the certificate of incorporation or by-laws of
Security Capital or of any material agreement, judgment, injunction, order,
decree or other instrument binding upon Security Capital.
(C) This Agreement constitutes a valid and binding agreement of Security
Capital, enforceable in accordance with its terms subject, however, to
general principles of equity and to applicable bankruptcy, fraudulent
transfer, insolvency, reorganization, moratorium and other similar laws from
time to time in effect and affecting the enforcement of creditors' rights
generally (regardless of whether such enforcement is considered in a
proceeding in equity or at law).
(D) Security Capital has not performed any acts which might prevent the
Agent from enforcing any of the terms of this Agreement or which would limit
the Agent in any such enforcement.
(E) The Security Interests constitute valid security interests under the
UCC securing the Secured Obligations, to the extent the UCC is applicable
thereto.
SECTION 4. The Security Interests
(A) In order to secure the full and punctual payment and performance of
the Secured Obligations in accordance with the terms thereof, and to secure
the performance of all the obligations of Security Capital hereunder,
Security Capital hereby grants to the Agent for the ratable benefit of the
Secured Parties a continuing security interest in and to all of the following
property of Security
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Capital, whether now owned or existing or hereafter acquired or arising and
regardless of where located (all being collectively referred to as the
"Collateral"):
(1) The Cash Collateral Account, all cash deposited therein from
time to time and the Liquid Investments made pursuant to Section 5(C); and
(2) All Proceeds of all or any of the Collateral described in clause
1 hereof.
(B) The Security Interests are granted as security only and shall not
subject any Secured Party to, or transfer or in any way affect or modify, any
obligation or liability of Security Capital with respect to any of the
Collateral or any transaction in connection therewith.
SECTION 5. Cash Collateral Account
(A) On and after the Closing Date, all cash distributions required to
be deposited by Holdings and the Company pursuant to Section 8.11(b)(y)(A) of
the Credit Agreement shall be delivered to and held by the Agent to be
invested by the Agent in a money market fund (the "Cash Collateral Account")
established by a sponsor selected by the Agent, which such fund shall be
under the exclusive control of the Agent, and which fund shall invest solely
in Temporary Cash Investments; provided that, if an Event of Default has
occurred and is continuing, the Agent shall, if instructed by the Required
Lenders, cause such Temporary Investments to be liquidated and apply or cause
to be applied the proceeds thereof to the payment of the Secured Obligations
in the manner specified in Section 9. Such funds may be commingled with
other funds held by the Agent for investment in such fund, but a separate
accounting shall be maintained by the Agent therefor. Any income received
with respect to the balance from time to time standing to the credit of the
Cash Collateral Account, including any interest or capital gains on Temporary
Cash Investments, shall remain, or be deposited, in the Cash Collateral
Account. All right, title and interest in and to the cash amounts on deposit
from time to time in the Cash Collateral Account together with any Liquid
Investments from time to time made pursuant to subsection (C) of this Section
shall vest in the Agent, shall constitute part of the Collateral hereunder
and shall not constitute payment of the Secured Obligations until applied
thereto as hereinafter provided.
(B) Security Capital shall cause Holdings and the Company to deposit (or
remit if paid by wire transfer) into the Cash Collateral Account all amounts
required to be deposited by Holdings and the Company therein pursuant to
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Section 8.11(b)(y) of the Credit Agreement. In addition to the foregoing,
Security Capital agrees that if any such amounts shall be received by it,
Security Capital shall as promptly as possible deposit such proceeds into the
Cash Collateral Account. Until so deposited, all such amounts shall be held
in trust by Security Capital for and as the property of the Secured Parties
and shall not be commingled with any other funds or property of Security
Capital. Upon the occurrence and continuation of an Event of Default, the
Agent shall, if so instructed by the Required Lenders, apply or cause to be
applied (subject to collection) any or all of the balance from time to time
standing to the credit of the Cash Collateral Account in the manner specified
in Section 9.
SECTION 6. General Authority
Security Capital hereby irrevocably appoints the Agent its true and
lawful attorney, with full power of substitution, in the name of Security
Capital, the Secured Parties or otherwise, for the sole use and benefit of
the Secured Parties, but at the Security Capital's expense, to the extent
permitted by law to exercise, at any time and from time to time while an
Event of Default has occurred and is continuing, the power to sell, transfer,
assign or otherwise deal in the Collateral or with the same or the proceeds
or avails thereof, as fully and effectually as if the Agent were the absolute
owner thereof; provided that the Agent shall give Security Capital not less
than ten days' prior written notice of any intended disposition of any of the
Collateral. Security Capital agrees that such notice constitutes "reasonable
notification" within the meaning of Section 9-504(3) of the UCC.
SECTION 7. Remedies upon Event of Default
If any Event of Default has occurred and is continuing, the Agent may
exercise on behalf of the Secured Parties all rights of a secured party under
the UCC (whether or not in effect in the jurisdiction where such rights are
exercised) and, in addition, the Agent may, without being required to give
any notice, except as herein provided or as may be required by mandatory
provisions of law, withdraw all cash and Liquid Investments in the Cash
Collateral Account and apply such cash and Liquid Investments and other cash,
if any, then held by it as Collateral as specified in Section 9.
SECTION 8. Limitation on Duty of Agent in Respect of Collateral
Beyond the exercise of reasonable care in the custody thereof, the Agent
shall have no duty as to any Collateral in its possession or control or in
the possession or control of any agent or bailee or any income thereon or as
to the
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preservation of rights against prior parties or any other rights pertaining
thereto. The Agent shall be deemed to have exercised reasonable care in the
custody of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which it accords its own property, and
shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the act
or omission of any warehouseman, carrier, forwarding agency, consignee or
other agent or bailee selected by the Agent in good faith.
SECTION 9. Application of Proceeds.
Upon the occurrence and during the continuance of an Event of Default,
any cash held in the Cash Collateral Account and all proceeds thereon shall
be applied by the Agent in the following order of priorities:
first, to payment of reasonable compensation to agents and counsel
for the Agent, and all expenses, liabilities and advances incurred or
made by the Agent in connection with any disposition of the Collateral,
and any other unreimbursed expenses for which the Agent or any other
Secured Party is to be reimbursed pursuant to Section 10.04 of the Credit
Agreement or Section 11 hereof and unpaid fees owing to the Agent under
the Credit Agreement;
second, to the ratable payment of unpaid principal of the Secured
Obligations;
third, to the ratable payment of accrued but unpaid interest on the
Secured Obligations in accordance with the provisions of the Credit
Agreement;
fourth, to the ratable payment of all other Secured Obligations,
until all Secured Obligations shall have been paid in full; and
finally, to payment to Security Capital or its successors or assigns,
or as a court of competent jurisdiction may direct, of any surplus then
remaining from such proceeds.
The Agent may make distributions hereunder in cash or in kind or, on a
ratable basis, in any combination thereof.
SECTION 10. Concerning the Agent
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The provisions of Article XI of the Credit Agreement shall inure to the
benefit of the Agent in respect of this Agreement and shall be binding upon
the parties to the Credit Agreement and the parties hereto in such respect.
In furtherance and not in derogation of the rights, privileges and immunities
of the Agent therein set forth:
(A) The Agent is authorized to take all such action as is provided to be
taken by it as Agent hereunder and all other action reasonably incidental
thereto. As to any matters not expressly provided for herein (including the
timing and methods of realization upon the Collateral) the Agent shall act or
refrain from acting in accordance with written instructions from the Required
Lenders or, in the absence of such instructions, in accordance with its
discretion.
(B) The Agent shall not be responsible for the existence, genuineness or
value of any of the Collateral or for the validity, perfection, priority or
enforceability of the Security Interests in any of the Collateral, whether
impaired by operation of law or by reason of any action or omission to act on
its part hereunder. The Agent shall have no duty to ascertain or inquire as
to the performance or observance of any of the terms of this Agreement by
Security Capital.
SECTION 11. Expenses
In the event that Security Capital fails to comply with the provisions
of this Agreement, such that the value of any Collateral or the validity,
perfection, rank or value of any Security Interest is thereby diminished or
potentially diminished or put at risk, the Agent if requested by the Required
Lenders may, but shall not be required to, effect such compliance on behalf
of Security Capital, and Security Capital shall reimburse the Agent for the
reasonable costs thereof on demand. All reasonable expenses of protecting and
maintaining the Collateral, any and all income taxes imposed by any state,
federal, or local authority on any of the Collateral, or in respect of the
disposition thereof shall be borne and paid by Security Capital; and if
Security Capital fails to promptly pay any portion thereof when due, the
Agent or any other Secured Party may, at its option, but shall not be
required to, pay the same and charge Security Capital's account therefor, and
Security Capital agrees to reimburse the Agent or such other Secured Party
therefor on demand. All sums so paid or incurred by the Agent or any other
Secured Party for any of the foregoing and any and all other sums for which
Security Capital may become liable hereunder and all costs and expenses
(including attorneys' fees, legal expenses and court costs (including the
reasonable allocation of the compensation, costs and expenses of in-house
counsel, based upon time spent)) reasonably incurred by the Agent or any other
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Secured Party in enforcing or protecting the Security Interests or any of
their rights or remedies under this Agreement, shall, together with interest
thereon until paid at an annual rate equal to 5% plus the rate announced from
time to time by NationsBank, N.A. as its prime rate, be additional Secured
Obligations hereunder.
SECTION 12. Termination of Security Interests; Release of Collateral.
Upon the repayment in full of all Secured Obligations and the
termination of the Commitments under the Credit Agreement, the Security
Interests shall terminate and all rights to the Collateral shall revert to
Security Capital. At any time and from time to time prior to such termination
of the Security Interests, the Agent may release any of the Collateral with
the prior written consent of the Required Lenders. Upon any such termination
of the Security Interests or release of Collateral, the Agent will, at the
expense of Security Capital, execute and deliver to Security Capital such
documents as Security Capital shall reasonably request to evidence the
termination of the Security Interests or the release of such Collateral, as
the case may be.
SECTION 13. Notices
All notices, communications and distributions hereunder shall be given
in accordance with Section 12.03 of the Credit Agreement and, with resepct to
Security Capital, at its address set forth on the signature pages hereof.
SECTION 14. Waivers, Non-Exclusive Remedies
No failure on the part of the Agent to exercise, and no delay in
exercising and no course of dealing with respect to, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise by the Agent or any Secured Party of any right under the Credit
Agreement, any of the other Financing Documents or this Agreement preclude
any other or further exercise thereof or the exercise of any other right. The
rights in this Agreement, the Credit Agreement and the other Financing
Documents are cumulative and are not exclusive of any other remedies provided
by law.
SECTION 15. Successors and Assigns
This Agreement is for the benefit of the Agent and the Secured Parties
and their successors and assigns, and in the event of an assignment of all or
any of the Secured Obligations, the rights hereunder, to the extent
applicable to the
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indebtedness so assigned, may be transferred with such indebtedness. This
Agreement shall be binding on Security Capital and its successors and assigns.
SECTION 16. Changes in Writing
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only in writing signed by Security
Capital and the Agent with the consent of the Required Lenders.
SECTION 17. NEW YORK LAW
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO PRINCIPLES OR CONFLICTS
OF LAW), EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF LAW AND
EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF ANY JURISDICTION
OTHER THAN NEW YORK ARE GOVERNED BY THE LAWS OF SUCH JURISDICTION.
SECTION 18. Severability
If any provision hereof is invalid or unenforceable in any jurisdiction,
then, to the fullest extent permitted by law, (i) the other provisions hereof
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in favor of the Agent and the other Secured Parties in
order to carry out the intentions of the parties hereto as nearly as may be
possible; and (ii) the invalidity or unenforceability of any provision hereof
in any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
SECTION 19. Counterparts
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
SECTION 20. Additional Covenants.
(A) Security Capital will cause Holdings and each of its Subsidiaries
(including without limitation the Company) to have a separate board of
directors
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at all times. At no time will the board of directors of Holdings or any of
its Subsidiaries have less than two directors who are not serving at such
time on the board of directors of Security Capital or of any Subsidiary of
Security Capital (other than Holdings or any of its Subsidiaries). Security
Capital will cause Holdings and each of its Subsidiaries to, (i) hold all
regular meetings necessary to authorize corporate action, (ii) act in its own
corporate name and through its own authorized officers and agents, (iii)
manage its own liabilities, (iv) prepare and maintain its own separate, full
and complete books, records and financial statements and (v) not permit any
of its money or other assets to be commingled with any of the money or other
assets of any other Person. In addition, Security Capital (i) will have
separate banking relationships from those of Holdings or the Company, (ii)
will have separate employees from those of Holdings or the Company and (iii)
will take all such other steps as the Required Lenders may reasonably request
to assure the legal recognition of its corporate separateness from any of
Holdings or the Company.
(B) Security Capital will not declare, order, pay, make or set aside any
dividends or distributions to any of its shareholders with respect to any
cash or property received by Security Capital from Holdings or any of its
Subsidiaries.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
SECURITY CAPITAL CORPORATION
By /s/ Brian Fitzgerald
-------------------------
Title: Chairman
NATIONSCREDIT COMMERCIAL
CORPORATION, AS AGENT
By /s/ Edward M. Alt
-------------------------
Title: Authorized Signatory
<PAGE>
Exhibit 99.8
INVESTORS SUBORDINATION AGREEMENT
SUBORDINATION AGREEMENT dated as of June 27, 1997 among Pumpkin Ltd., a
Delaware corporation (the "Company"), the Subordinated Obligations Holders
(as defined below) and NationsCredit Commercial Corporation, as Agent (the
"Agent") for the Lenders referred to below.
W I T N E S S E T H:
WHEREAS, the Company, Pumpkin Masters Holdings, Inc., the Lenders party
thereto (the "Lenders") and the Agent are parties to the Credit Agreement (as
defined below); and
WHEREAS, in order to induce the Lenders to enter into such Credit
Agreement, the Company and the Subordinated Obligations Holders have agreed
to enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings
provided for therein. The following additional terms, as used herein, have
the following respective meanings:
"Credit Agreement" means the Credit Agreement dated as of June 27, 1997,
among the Company, Pumpkin Masters Holdings, Inc., the Lenders and the Agent,
as the same may be amended from time to time.
"Management Agreement" means the Management Advisory Services Agreement
dated as of the date hereof between Security Capital and the Company.
"Senior Commitments" means, without duplication, all commitments to
extend credit (including without limitation any commitments to issue any
letters of credit) and all instruments pursuant to which commitments or
instruments Senior Debt may be incurred (including without limitation any
letters of credit).
"Senior Debt" means all amounts payable with respect to the Credit
Agreement, which include (a) all principal of and interest (including any
interest
<PAGE>
which accrues after the commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of the Company or
any of its Subsidiaries or Affiliates, whether or not allowed or allowable as
a claim in any such proceeding) on any loan under, or any note issued
pursuant to, the Credit Agreement, (b) all reimbursement obligations of the
Company with respect to any letter of credit issued pursuant to the Credit
Agreement (including any interest which accrues after the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of the Company or any of its Subsidiaries or Affiliates,
whether or not allowed or allowable as a claim in any such proceeding), (c)
all other amounts payable by the Company or any of its Subsidiaries
thereunder or under any other Financing Document and (d) any amendments,
restatements, renewals, extensions or modifications of any of the foregoing.
"Subordinated Obligations" means (a) all amounts payable by the Company
pursuant to the Management Agreement (including any interest which accrues
after the commencement of any case, proceeding or other action relating to
the bankruptcy, insolvency or reorganization of the Company, whether or not
allowed or allowable as a claim in any such proceeding) and any other amounts
payable with respect thereto and (b) any amendments, restatements, renewals,
extensions or modifications of any of the foregoing.
"Subordinated Obligations Holder" means any holder from time to time of
Subordinated Obligations.
SECTION 2. Covenants of Subordinated Obligations Holders. (a)
Each Subordinated Obligations Holder acknowledges and agrees that (i) the
Credit Agreement restricts the ability of the Company and its Subsidiaries to
make payments in respect of Subordinated Obligations and (ii) should any
Subordinated Obligations Holder collect or receive, directly or indirectly,
any payment of any kind or character, whether in cash or property in respect
of any Subordinated Obligations (and whether by way of payment of principal
or interest, redemption, purchase, other acquisition, dividend, distribution,
guarantee, grant of a security interest, realization of security or the
proceeds thereof, set-off, exercise of contractual or statutory rights or
otherwise), (x) at a time when such payment is prohibited by the terms of the
Credit Agreement, (y) through exercise of remedies permitted under Section
2(c) at any time while any Senior Debt or any Senior Commitment is
outstanding or (z) in the event of any insolvency or bankruptcy proceeding or
any receivership, liquidation, reorganization or other similar proceeding in
connection therewith, relative to the Company or to any of its creditors, in
their capacity as creditors of the Company, or to substantially all of its
property, and in the event of any proceedings for voluntary liquidation,
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dissolution or other winding up of the Company, whether or not involving
insolvency or bankruptcy, such Subordinated Obligations Holder will forthwith
deliver the same to the Agent for the equal and ratable benefit of the
holders of Senior Debt in precisely the form received (except for the
endorsement or the assignment of or by such Subordinated Obligations Holder
where necessary) for application to payment of all Senior Debt in full, after
giving effect to any concurrent payment or distribution to the holders of
Senior Debt and, until so delivered, the same shall be held in trust by such
Subordinated Obligations Holder as the property of the holders of Senior Debt.
(b) Unless and until all Senior Debt shall have been paid in full and all
Senior Commitments shall have terminated or been canceled, neither the
Company nor any of its Subsidiaries or Affiliates shall make, and no
Subordinated Obligations Holder shall demand, accept or receive, or shall
attempt to collect or commence any legal proceedings to collect, any direct
or indirect payment (in cash or property or by setoff, exercise of
contractual or statutory rights or otherwise) of or on account of any amount
payable on or with respect to any Subordinated Obligations (including any
payment in respect of redemption or purchase or other acquisition), except
(x) as expressly permitted under clause (i) of Section 8.12 of the Credit
Agreement and (y) as expressly permitted under Section 2(c).
(c) Unless and until all Senior Debt shall have been paid in full and all
Senior Commitments shall have terminated or been canceled, no Subordinated
Obligations Holder will commence or maintain any action, suit or any other
legal or equitable proceeding against the Company or any of its Subsidiaries
or Affiliates, or join with any creditor in any such proceeding; provided
that nothing in this Section 2(c) will preclude any Subordinated Obligations
Holder (i) from commencing at any time any action, suit or any other legal or
equitable proceeding to enforce any remedies to which such Subordinated
Obligations Holder is entitled under the instrument governing the
Subordinated Obligations held by such Subordinated Obligations Holder if at
such time the holders of Senior Debt have commenced an action, suit or
proceeding to enforce substantially similar remedies or (ii) from joining
with any creditor in any such proceeding, under any insolvency, bankruptcy,
receivership, liquidation, reorganization or other similar proceeding if the
holders of Senior Debt have joined in any such proceeding.
(d) Each Subordinated Obligations Holder hereby waives any and all notice
in respect of the Credit Agreement and agrees and consents that without
notice to or assent by such Subordinated Obligations Holder:
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(i) the obligations and liabilities of the Company or any other
party or parties to the Credit Agreement (or any promissory note,
security document or guaranty evidencing or securing the same) may,
from time to time, in whole or in part, be renewed, extended, modified,
amended, restated, accelerated, compromised, supplemented, terminated,
sold, exchanged, waived or released;
(ii) the Agent and the Lenders may exchange, release or surrender any
collateral to the Company or any other Person, waive, release or
subordinate any security interest, obtain a guaranty of any Person or a
security interest in or mortgage or other encumbrance on any additional
property as collateral for any obligations of the Company in its sole
discretion may elect;
(iii) the Agent and the Lenders may apply payments by the Company or
any other Person to such portion of the Secured Obligations (as defined
in the Security Agreements) as they in their sole discretion may elect;
(iv) any Lender may provide additional financing or otherwise extend
credit to the Company;
(v) the Agent and the Lenders may exercise or refrain from exercising
any right, remedy or power granted by or in connection with the Credit
Agreement, any other Financing Documents or any other agreements relating
thereto; and
(vi) any Lender or the Agent may surrender or release, from time to
time, in whole or in part, any balance or balances of funds with the
Agent or any Lender at any time standing to the credit of the Company;
all as the Agent or the Lenders may deem advisable and all without impairing,
abridging, diminishing, releasing or affecting the obligations of the Company
and the Subordinated Obligations Holders hereunder.
(e) Each Subordinated Obligations Holder agrees that it will not contest
the validity, perfection, priority or enforceability of any lien or security
interest granted to secure any Senior Debt or of any guaranty securing Senior
Debt.
SECTION 3. Dissolution, Liquidation or Reorganization of the Company. (a)
In the event of any insolvency or bankruptcy proceedings, and any
receivership, liquidation, reorganization or other similar proceedings in
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connection therewith, relative to the Company or to any of its creditors, in
their capacity as creditors of the Company, or to substantially all of its
property, and in the event of any proceedings for voluntary liquidation,
dissolution or other winding up of the Company, whether or not involving
insolvency or bankruptcy, then:
(i) the holders of the Senior Debt shall first be entitled to receive
payment in full in cash of the principal thereof, premium, if any,
interest and all other amounts payable thereon (accruing before and after
the commencement of the proceedings) before any Subordinated Obligations
Holder is entitled to receive any payment on account or in respect of
Subordinated Obligations; and
(ii) any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities to which any
Subordinated Obligations Holder would be entitled, but for the provisions
of this Section 3, shall be paid or distributed by the liquidating
trustee or agent or other Person making such payment or distribution,
whether a trustee in bankruptcy, a receiver or liquidating trustee or
other trustee or agent, directly to the Agent and any other
representative on behalf of the holders of Senior Debt to the extent
necessary to make payment in full of all amounts of Senior Debt remaining
unpaid, after giving effect to any concurrent payment or distribution to
the holders of the Senior Debt.
(b) The Subordinated Obligations Holders shall not be subrogated to the
rights of the holders of the Senior Debt to receive payments or distributions
of assets of the Company until all Senior Debt shall have been paid in full
and all Senior Commitments shall have terminated or been canceled; and, for
the purposes of such subrogation, no payments or distributions to the holders
of the Senior Debt of any cash, property or securities to which any
Subordinated Obligations Holder would be entitled except for these provisions
shall, as between the Company, its creditors other than the holders of the
Senior Debt, and such Subordinated Obligations Holder, be deemed to be a
payment by the Company to or on account of the Senior Debt. The provisions of
Sections 2 and 3 of this Agreement are and are intended solely for the
purpose of defining the relative rights of holders of Subordinated
Obligations, on the one hand, and the holders of the Senior Debt, on the
other hand.
(c) Upon payment in full of all Senior Debt and the termination or
cancellation of all Senior Commitments, the Subordinated Obligations Holders
5
<PAGE>
shall be subrogated (equally and ratably with the holders of all subordinated
indebtedness of the Company, which, by its terms, is not superior in right of
payment to the Subordinated Obligations, and ranks on a parity with the
Subordinated Obligations) to the rights of the holders of Senior Debt to
receive payments or distributions of cash, property or securities of the
Company applicable to the Senior Debt until all amounts owing on the
Subordinated Obligations shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of the Subordinated
Obligations of cash, property, securities or other assets by virtue of the
subrogation herein provided which otherwise would have been made to the
holders of the Senior Debt shall, as between the Company, its creditors other
than the holders of Senior Debt and the holders of the Subordinated
Obligations, be deemed to be a payment to or on account of the Subordinated
Obligations. The Subordinated Obligations Holders agree that, in the event
that all or any part of any payment made on account of the Senior Debt is
recovered from the holders of Senior Debt as a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law,
any payment or distribution received by the Subordinated Obligations Holders
on account of the Subordinated Obligations at any time after the date of the
payment so recovered, whether pursuant to the right of subrogation provided
for in this Section 3(c) or otherwise, shall be deemed to have been received
by such holders of Subordinated Obligations in trust as the property of the
holders of the Senior Debt and such holders shall forthwith deliver the same
to the Agent for the equal and ratable benefit of the holders of the Senior
Debt for application to payment of all Senior Debt in full.
(d) Each Subordinated Obligations Holder agrees that, if an order for
relief under the Bankruptcy Code is entered for or against the Company, it
will not oppose any motion of the Company for an order under the Bankruptcy
Code authorizing the Company: (i) to obtain new credit from and incur
additional indebtedness to the holders of Senior Debt (which indebtedness,
inclusive of all interest and other charges which may accrue in respect
thereof, is sometimes hereinafter referred to as the "Post-Petition
Indebtedness") with such indebtedness to have priority over any or all
administrative expenses of the kind specified in Section 503(b) or 507(b) of
the Bankruptcy Code in accordance with Section 364(c)(1) of the Bankruptcy
Code; (ii) to secure repayment of the Post-Petition Indebtedness by granting
the holders of Senior Debt liens on and security interests in the assets of
the Company that are created or acquired after the commencement of any such
case under the Bankruptcy Code, which shall be senior and prior to any and
all other liens, security interests and other claims (the "Post-Petition
Collateral"), and (iii) to secure repayment of amounts then owing to the
holders of Designated Debt under the Credit Agreement or the other Financing
Documents by granting to the holders of Senior Debt a security interest
6
<PAGE>
in the Post-Petition Collateral. In the event that the holders of Senior Debt
commence an adversary proceeding for relief from the automatic stay under
Section 362 of the Bankruptcy Code, each Subordinated Obligations Holder
agrees that it will not oppose such proceeding.
SECTION 4. Representations and Warranties. Each Subordinated Obligations
Holder represents and warrants that:
(a) The execution, delivery and performance by him of this Agreement
require no action by or in respect of, or filing with, any governmental body,
agency or official and do not contravene, or constitute a default under, any
provision of applicable law or regulation or of any agreement, judgment,
injunction, order, decree or other instrument binding upon him.
(b) This Agreement constitutes a valid and binding agreement of such
Subordinated Obligations Holder.
SECTION 5. Other Agreements. (a) Each Subordinated Obligations Holder
acknowledges and agrees that the Credit Agreement restricts the Company and
any of its Subsidiaries from agreeing to any amendment or waiver of any of
the terms and conditions of the Operative Documents unless it obtains the
prior written consent of the Required Lenders.
(b) Each Subordinated Obligations Holder acknowledges and agrees that
the holders of Senior Debt have relied upon and will continue to rely upon
the covenants of the Company and the Subordinated Obligations Holders
contained herein in entering into the Credit Agreement and in extending
credit to the Company pursuant thereto.
SECTION 6. Binding Effect; Restrictions on Transfer. The covenants of the
Subordinated Obligations Holders contained herein shall be binding upon any
Subordinated Obligations Holder and upon their respective heirs, legal
representatives, successors and assigns. Each Subordinated Obligations Holder
agrees that it will not assign, pledge or otherwise transfer, for security
purposes or otherwise, any interest in the Subordinated Obligations held by
him.
SECTION 7. No Partnership. Nothing contained in this Agreement, and no
action taken by the holders of Senior Debt (or any of them) pursuant hereto,
is intended to constitute or shall be deemed to constitute the holders of
Senior Debt a partnership, association, joint venture or other entity.
7
<PAGE>
SECTION 8. Notices. Unless otherwise specified herein, all notices,
requests and other communications to any party hereunder shall be in writing
(including telex, facsimile copy or similar writing) and shall be given to
such party at its address or facsimile number set forth on the signature
pages hereof or such other address or telex or facsimile number as such party
may hereafter specify for the purpose by notice to the other parties hereto.
SECTION 9. Amendments and Waivers. Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed by the Company and each Subordinated Obligations Holder whose rights
or duties are affected thereby and each holder of Senior Debt whose rights or
duties are affected thereby.
SECTION 10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. EACH PARTY
HERETO HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY
UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK
FOR PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT THAT MAY BE BROUGHT OR INSTITUTED AGAINST IT.
SECTION 11. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, and all of which taken
together shall constitute a single agreement, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or have caused this
Agreement to be duly executed as of the date hereof by their respective
officers thereunto duly authorized.
NATIONSCREDIT COMMERCIAL
CORPORATION, as Agent
By: /s/ Edward M. Alt
-----------------------
Title: Authorized Signatory
Address: One CanterburyGreen
P.O. Box 120013
Stamford, CT 06912-0013
Telecopy: 203-352-4171
PUMPKIN LTD.
By: /s/ Calvin Neider
---------------------------
Title: Vice President
Address: c/o Capital Partners
One Pickwick Plaza
Suite 310
Greenwich, CT 06830
Telecopy: 203-625-0423
SECURITY CAPITAL CORPORATION
By: /s/ A. George Gerbauer
------------------------------
Title: President
Address: c/o Capital Partners
One Pickwick Plaza
Suite 310
Greenwich, CT 06830
Telecopy: 203-625-0423
9
<PAGE>
Exhibit 99.9
SECURITY CAPITAL SUBORDINATION AGREEMENT
SUBORDINATION AGREEMENT dated as of June 27, 1997 among Pumpkin Ltd., a
Delaware corporation (the "Company"), the Subordinated Obligations Holders
(as defined below) and NationsCredit Commercial Corporation, as Agent (the
"Agent") for the Lenders referred to below.
W I T N E S S E T H:
WHEREAS, the Company, Pumpkin Masters Holdings, Inc., the Lenders party
thereto (the "Lenders") and the Agent are parties to the Credit Agreement (as
defined below); and
WHEREAS, in order to induce the Lenders to enter into such Credit
Agreement, the Company and the Subordinated Obligations Holders have agreed
to enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings
provided for therein. The following additional terms, as used herein, have
the following respective meanings:
"Credit Agreement" means the Credit Agreement dated as of June 27, 1997,
among the Company, Pumpkin Masters Holdings, Inc., the Lenders and the Agent,
as the same may be amended from time to time.
"Management Agreement" means the Management Advisory Services Agreement
dated as of the date hereof between Security Capital and the Company.
"Senior Commitments" means, without duplication, all commitments to
extend credit (including without limitation any commitments to issue any
letters of credit) and all instruments pursuant to which commitments or
instruments Senior Debt may be incurred (including without limitation any
letters of credit).
"Senior Debt" means all amounts payable with respect to the Credit
Agreement, which include (a) all principal of and interest (including any
interest
<PAGE>
which accrues after the commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of the Company or
any of its Subsidiaries or Affiliates, whether or not allowed or allowable as
a claim in any such proceeding) on any loan under, or any note issued
pursuant to, the Credit Agreement, (b) all reimbursement obligations of the
Company with respect to any letter of credit issued pursuant to the Credit
Agreement (including any interest which accrues after the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of the Company or any of its Subsidiaries or Affiliates,
whether or not allowed or allowable as a claim in any such proceeding), (c)
all other amounts payable by the Company or any of its Subsidiaries
thereunder or under any other Financing Document and (d) any amendments,
restatements, renewals, extensions or modifications of any of the foregoing.
"Subordinated Obligations" means (a) all amounts payable by the Company
pursuant to Security Capital Note (including any interest which accrues after
the commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Company, whether or not
allowed or allowable as a claim in any such proceeding) and any other amounts
payable with respect thereto and (b) any amendments, restatements, renewals,
extensions or modifications of any of the foregoing.
"Subordinated Obligations Holder" means any holder from time to time of
Subordinated Obligations.
SECTION 2. Covenants of Subordinated Obligations Holders. (a) Each
Subordinated Obligations Holder acknowledges and agrees that (i) the Credit
Agreement restricts the ability of the Company and its Subsidiaries to make
payments in respect of Subordinated Obligations and (ii) should any
Subordinated Obligations Holder collect or receive, directly or indirectly,
any payment of any kind or character, whether in cash or property in respect
of any Subordinated Obligations (and whether by way of payment of principal
or interest, redemption, purchase, other acquisition, dividend, distribution,
guarantee, grant of a security interest, realization of security or the
proceeds thereof, set-off, exercise of contractual or statutory rights or
otherwise), (x) at a time when such payment is prohibited by the terms of the
Credit Agreement, (y) through exercise of remedies permitted under Section
2(c) at any time while any Senior Debt or any Senior Commitment is
outstanding or (z) in the event of any insolvency or bankruptcy proceeding or
any receivership, liquidation, reorganization or other similar proceeding in
connection therewith, relative to the Company or to any of its creditors, in
their capacity as creditors of the Company, or to substantially all of its
property, and in the event of any proceedings for voluntary liquidation,
2
<PAGE>
dissolution or other winding up of the Company, whether or not involving
insolvency or bankruptcy, such Subordinated Obligations Holder will forthwith
deliver the same to the Agent for the equal and ratable benefit of the
holders of Senior Debt in precisely the form received (except for the
endorsement or the assignment of or by such Subordinated Obligations Holder
where necessary) for application to payment of all Senior Debt in full, after
giving effect to any concurrent payment or distribution to the holders of
Senior Debt and, until so delivered, the same shall be held in trust by such
Subordinated Obligations Holder as the property of the holders of Senior Debt.
(b) Unless and until all Senior Debt shall have been paid in full and
all Senior Commitments shall have terminated or been canceled, neither the
Company nor any of its Subsidiaries or Affiliates shall make, and no
Subordinated Obligations Holder shall demand, accept or receive, or shall
attempt to collect or commence any legal proceedings to collect, any direct
or indirect payment (in cash or property or by setoff, exercise of
contractual or statutory rights or otherwise) of or on account of any amount
payable on or with respect to any Subordinated Obligations (including any
payment in respect of redemption or purchase or other acquisition), except
(x) as expressly permitted under clause (i) of Section 8.04(b) of the Credit
Agreement and (y) as expressly permitted under Section 2(c).
(c) Unless and until all Senior Debt shall have been paid in full and
all Senior Commitments shall have terminated or been canceled, no
Subordinated Obligations Holder will commence or maintain any action, suit or
any other legal or equitable proceeding against the Company or any of its
Subsidiaries or Affiliates, or join with any creditor in any such proceeding;
provided that nothing in this Section 2(c) will preclude any Subordinated
Obligations Holder (i) from commencing at any time any action, suit or any
other legal or equitable proceeding to enforce any remedies to which such
Subordinated Obligations Holder is entitled under the instrument governing
the Subordinated Obligations held by such Subordinated Obligations Holder if
at such time the holders of Senior Debt have commenced an action, suit or
proceeding to enforce substantially similar remedies or (ii) from joining
with any creditor in any such proceeding, under any insolvency, bankruptcy,
receivership, liquidation, reorganization or other similar proceeding if the
holders of Senior Debt have joined in any such proceeding.
(d) Each Subordinated Obligations Holder hereby waives any and all
notice in respect of the Credit Agreement and agrees and consents that
without notice to or assent by such Subordinated Obligations Holder:
3
<PAGE>
(i) the obligations and liabilities of the Company or any other party or
parties to the Credit Agreement (or any promissory note, security document or
guaranty evidencing or securing the same) may, from time to time, in whole or
in part, be renewed, extended, modified, amended, restated, accelerated,
compromised, supplemented, terminated, sold, exchanged, waived or released;
(ii) the Agent and the Lenders may exchange, release or surrender any
collateral to the Company or any other Person, waive, release or subordinate
any security interest, obtain a guaranty of any Person or a security interest
in or mortgage or other encumbrance on any additional property as collateral
for any obligations of the Company in its sole discretion may elect;
(iii) the Agent and the Lenders may apply payments by the Company or any
other Person to such portion of the Secured Obligations (as defined in the
Security Agreements) as they in their sole discretion may elect;
(iv) any Lender may provide additional financing or otherwise extend
credit to the Company;
(v) the Agent and the Lenders may exercise or refrain from exercising
any right, remedy or power granted by or in connection with the Credit
Agreement, any other Financing Documents or any other agreements relating
thereto; and
(vi) any Lender or the Agent may surrender or release, from time to time,
in whole or in part, any balance or balances of funds with the Agent or any
Lender at any time standing to the credit of the Company;
all as the Agent or the Lenders may deem advisable and all without impairing,
abridging, diminishing, releasing or affecting the obligations of the Company
and the Subordinated Obligations Holders hereunder.
(e) Each Subordinated Obligations Holder agrees that it will not contest
the validity, perfection, priority or enforceability of any lien or security
interest granted to secure any Senior Debt or of any guaranty securing Senior
Debt.
SECTION 3. Dissolution, Liquidation or Reorganization of the Company.
(a) In the event of any insolvency or bankruptcy proceedings, and any
receivership, liquidation, reorganization or other similar proceedings in
4
<PAGE>
connection therewith, relative to the Company or to any of its creditors, in
their capacity as creditors of the Company, or to substantially all of its
property, and in the event of any proceedings for voluntary liquidation,
dissolution or other winding up of the Company, whether or not involving
insolvency or bankruptcy, then:
(i) the holders of the Senior Debt shall first be entitled to receive
payment in full in cash of the principal thereof, premium, if any, interest
and all other amounts payable thereon (accruing before and after the
commencement of the proceedings) before any Subordinated Obligations Holder
is entitled to receive any payment on account or in respect of Subordinated
Obligations; and
(ii) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities to which any
Subordinated Obligations Holder would be entitled, but for the provisions
of this Section 3, shall be paid or distributed by the liquidating trustee
or agent or other Person making such payment or distribution, whether a
trustee in bankruptcy, a receiver or liquidating trustee or other trustee
or agent, directly to the Agent and any other representative on behalf of
the holders of Senior Debt to the extent necessary to make payment in full
of all amounts of Senior Debt remaining unpaid, after giving effect to any
concurrent payment or distribution to the holders of the Senior Debt.
(b) The Subordinated Obligations Holders shall not be subrogated to the
rights of the holders of the Senior Debt to receive payments or distributions
of assets of the Company until all Senior Debt shall have been paid in full
and all Senior Commitments shall have terminated or been canceled; and, for
the purposes of such subrogation, no payments or distributions to the holders
of the Senior Debt of any cash, property or securities to which any
Subordinated Obligations Holder would be entitled except for these provisions
shall, as between the Company, its creditors other than the holders of the
Senior Debt, and such Subordinated Obligations Holder, be deemed to be a
payment by the Company to or on account of the Senior Debt. The provisions of
Sections 2 and 3 of this Agreement are and are intended solely for the
purpose of defining the relative rights of holders of Subordinated
Obligations, on the one hand, and the holders of the Senior Debt, on the
other hand.
(c) Upon payment in full of all Senior Debt and the termination or
cancellation of all Senior Commitments, the Subordinated Obligations Holders
5
<PAGE>
shall be subrogated (equally and ratably with the holders of all subordinated
indebtedness of the Company, which, by its terms, is not superior in right of
payment to the Subordinated Obligations, and ranks on a parity with the
Subordinated Obligations) to the rights of the holders of Senior Debt to
receive payments or distributions of cash, property or securities of the
Company applicable to the Senior Debt until all amounts owing on the
Subordinated Obligations shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of the Subordinated
Obligations of cash, property, securities or other assets by virtue of the
subrogation herein provided which otherwise would have been made to the
holders of the Senior Debt shall, as between the Company, its creditors other
than the holders of Senior Debt and the holders of the Subordinated
Obligations, be deemed to be a payment to or on account of the Subordinated
Obligations. The Subordinated Obligations Holders agree that, in the event
that all or any part of any payment made on account of the Senior Debt is
recovered from the holders of Senior Debt as a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law,
any payment or distribution received by the Subordinated Obligations Holders
on account of the Subordinated Obligations at any time after the date of the
payment so recovered, whether pursuant to the right of subrogation provided
for in this Section 3(c) or otherwise, shall be deemed to have been received
by such holders of Subordinated Obligations in trust as the property of the
holders of the Senior Debt and such holders shall forthwith deliver the same
to the Agent for the equal and ratable benefit of the holders of the Senior
Debt for application to payment of all Senior Debt in full.
(d) Each Subordinated Obligations Holder agrees that, if an order for
relief under the Bankruptcy Code is entered for or against the Company, it
will not oppose any motion of the Company for an order under the Bankruptcy
Code authorizing the Company: (i) to obtain new credit from and incur
additional indebtedness to the holders of Senior Debt (which indebtedness,
inclusive of all interest and other charges which may accrue in respect
thereof, is sometimes hereinafter referred to as the "Post-Petition
Indebtedness") with such indebtedness to have priority over any or all
administrative expenses of the kind specified in Section 503(b) or 507(b) of
the Bankruptcy Code in accordance with Section 364(c)(1) of the Bankruptcy
Code; (ii) to secure repayment of the Post-Petition Indebtedness by granting
the holders of Senior Debt liens on and security interests in the assets of
the Company that are created or acquired after the commencement of any such
case under the Bankruptcy Code, which shall be senior and prior to any and
all other liens, security interests and other claims (the "Post-Petition
Collateral"), and (iii) to secure repayment of amounts then owing to the
holders of Designated Debt under the Credit Agreement or the other Financing
Documents by granting to the holders of Senior Debt a security interest
6
<PAGE>
in the Post-Petition Collateral. In the event that the holders of Senior Debt
commence an adversary proceeding for relief from the automatic stay under
Section 362 of the Bankruptcy Code, each Subordinated Obligations Holder
agrees that it will not oppose such proceeding.
SECTION 4. Representations and Warranties. Each Subordinated Obligations
Holder represents and warrants that:
(a) The execution, delivery and performance by him of this Agreement
require no action by or in respect of, or filing with, any governmental body,
agency or official and do not contravene, or constitute a default under, any
provision of applicable law or regulation or of any agreement, judgment,
injunction, order, decree or other instrument binding upon him.
(b) This Agreement constitutes a valid and binding agreement of such
Subordinated Obligations Holder.
SECTION 5. Other Agreements. (a) Each Subordinated Obligations Holder
acknowledges and agrees that the Credit Agreement restricts the Company and
any of its Subsidiaries from agreeing to any amendment or waiver of any of
the terms and conditions of the Operative Documents unless it obtains the
prior written consent of the Required Lenders.
(b) Each Subordinated Obligations Holder acknowledges and agrees that
the holders of Senior Debt have relied upon and will continue to rely upon
the covenants of the Company and the Subordinated Obligations Holders
contained herein in entering into the Credit Agreement and in extending
credit to the Company pursuant thereto.
SECTION 6. Binding Effect; Restrictions on Transfer. The covenants of
the Subordinated Obligations Holders contained herein shall be binding upon
any Subordinated Obligations Holder and upon their respective heirs, legal
representatives, successors and assigns. Each Subordinated Obligations Holder
agrees that it will not assign, pledge or otherwise transfer, for security
purposes or otherwise, any interest in the Subordinated Obligations held by
him.
SECTION 7. No Partnership. Nothing contained in this Agreement, and no
action taken by the holders of Senior Debt (or any of them) pursuant hereto,
is intended to constitute or shall be deemed to constitute the holders of
Senior Debt a partnership, association, joint venture or other entity.
7
<PAGE>
SECTION 8. Notices. Unless otherwise specified herein, all notices,
requests and other communications to any party hereunder shall be in writing
(including telex, facsimile copy or similar writing) and shall be given to
such party at its address or facsimile number set forth on the signature
pages hereof or such other address or telex or facsimile number as such party
may hereafter specify for the purpose by notice to the other parties hereto.
SECTION 9. Amendments and Waivers. Any provision of this Agreement may
be amended or waived if, and only if, such amendment or waiver is in writing
and signed by the Company and each Subordinated Obligations Holder whose
rights or duties are affected thereby and each holder of Senior Debt whose
rights or duties are affected thereby.
SECTION 10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. EACH PARTY
HERETO HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY
UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK
FOR PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT THAT MAY BE BROUGHT OR INSTITUTED AGAINST IT.
SECTION 11. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, and all of which taken
together shall constitute a single agreement, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or have caused this
Agreement to be duly executed as of the date hereof by their respective
officers thereunto duly authorized.
NATIONSCREDIT COMMERCIAL
CORPORATION, as Agent
By: /s/ Edward M. Alt
------------------------
Title: Authorized Signatory
Address: One CanterburyGreen
P.O. Box 120013
Stamford, CT 06912-0013
Telecopy: 203-352-4171
PUMPKIN LTD.
By: /s/ Calvin Neider
------------------------
Title: Vice President
Address: c/o Capital Partners
One Pickwick Plaza
Suite 310
Greenwich, CT 06830
Telecopy: 203-625-0423
SECURITY CAPITAL CORPORATION
By: /s/ A. George Gebauer
----------------------------
Title: President
Address: c/o Capital Partners
One Pickwick Plaza
Suite 310
Greenwich, CT 06830
Telecopy: 203-625-0423
9
<PAGE>
Ex 99.10
SELLER SUBORDINATION AGREEMENT
SUBORDINATION AGREEMENT dated as of June 27, 1997 among Pumpkin Ltd.,
a Delaware corporation (together with its successors, the "Company"), Pumpkin
Masters Holdings, Inc. ("Holdings"), the Subordinated Obligations Holders (as
defined below), and NationsCredit Commercial Corporation, as Agent (the "Agent")
for the Lenders referred to below.
W I T N E S S E T H:
WHEREAS, the Company, Holdings, the Lenders party thereto (the
"Lenders") and the Agent are parties to the Credit Agreement (as defined below);
and
WHEREAS, in order to induce the Lenders to enter into such Credit
Agreement, the Company, Holdings and the Subordinated Obligations Holders have
agreed to enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. Terms defined in the Credit Agreement and
not otherwise defined herein have, as used herein, the respective meanings
provided for therein. The following additional terms, as used herein, have the
following respective meanings:
"Credit Agreement" means the Credit Agreement dated as of June 27,
1997, among the Company, Holdings, the Lenders and the Agent, as the same may be
amended from time to time.
"Seller Obligations" means the obligations, if any, owing by the
Company or Holdings to Pumpkin, Ltd., a Colorado corporation, and Holdings
pursuant to Sections 3.2 and 3.3 of the Asset Purchase Agreement.
"Senior Commitments" means, without duplication, all commitments to
extend credit (including without limitation any commitments to issue any letters
of credit) and all instruments pursuant to
<PAGE>
which commitments or instruments Senior Debt may be incurred (including
without limitation any letters of credit).
"Senior Debt" means all amounts payable with respect to the Credit
Agreement and the Seasonal Line of Credit (as defined in the Asset Purchase
Agreement) and any whole or partial increase, extension, renewal, refinancing or
replacement thereof or of any subsequent Senior Debt, including principal,
premium (if any), interest (including interest accruing on or after the filing
of any petition in bankruptcy or for reorganization relating to the Company or
Holdings whether or not a claim for post-filing interest is allowed or allowable
in such proceeding), fees, charges, expenses, reimbursement obligations,
guarantees and all other amounts payable thereunder or in respect thereof;
provided, however, that any such refinancing or replacement shall not be Senior
Debt to the extent such refinancing or replacement (i) results in an increase in
the aggregate principal amount of Debt of the Company outstanding plus all
available, but unused, Commitments under the Credit Agreement as of the date of
such proposed refinancing or replacement (plus (x) the amount of any premium
required to be paid under the terms of the instrument governing such Debt and
plus the amount of reasonable expenses incurred by the Company in connection
with such refinancing or replacement, in the aggregate not in excess of
$350,000, and (y) an aggregate principal amount not to exceed $2,000,000) or
(ii) creates Debt with a different maturity date than the final maturity of the
Senior Debt being refinanced or replaced, except with respect to Senior Debt
under the Credit Agreement, the final maturity date may be extended up to the
seventh anniversary of the Closing Date.
"Subordinated Obligations" means (a) all principal of, and interest on
the Seller Obligations (including any interest which accrues after the
commencement of any case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Company, Holdings or any of their respective
Subsidiaries or Affiliates, whether or not allowed or allowable as a claim in
any such proceeding) and any other amounts payable with respect thereto and
(b) any amendments, restatements, renewals, extensions or modifications of any
of the foregoing.
"Subordinated Obligations Holder" means any holder from time to time
of Subordinated Obligations.
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SECTION 2. Covenants of Subordinated Obligations Holders. (a) Each
Subordinated Obligations Holder acknowledges and agrees that (i) the Credit
Agreement restricts the ability of the Company, Holdings and their respective
Subsidiaries to make payments in respect of Subordinated Obligations and
(ii) should any Subordinated Obligations Holder collect or receive, directly or
indirectly, any payment of any kind or character, whether in cash or property in
respect of any Subordinated Obligations (and whether by way of payment of
principal or interest, redemption, purchase, other acquisition, dividend,
distribution, guarantee, grant of a security interest, realization of security
or the proceeds thereof, set-off, exercise of contractual or statutory rights or
otherwise), (x) at a time when such payment is prohibited by the terms of this
Agreement, (y) through exercise of remedies permitted under Section 2(c) at any
time while any Senior Debt or any Senior Commitment is outstanding (except for
payments received pursuant to the exercise of remedies permitted under clause
(iii) of Section 2(c) so long as, at the time such payment is received, no Event
of Default (as defined in the Credit Agreement as in existence of the date
hereof) or (z) in the event of any insolvency or bankruptcy proceeding or any
receivership, liquidation, reorganization or other similar proceeding in
connection therewith, relative to the Company or Holdings or to any of their
respective creditors, in their capacity as creditors of the Company or Holdings,
as the case may be, or to substantially all of its property, and in the event of
any proceedings for voluntary liquidation, dissolution or other winding up of
the Company or Holdings, whether or not involving insolvency or bankruptcy, such
Subordinated Obligations Holder will forthwith deliver the same to the Agent for
the equal and ratable benefit of the holders of Senior Debt in precisely the
form received (except for the endorsement or the assignment of or by such
Subordinated Obligations Holder where necessary) for application to payment of
all Senior Debt in full, after giving effect to any concurrent payment or
distribution to the holders of Senior Debt and, until so delivered, the same
shall be held in trust by such Subordinated Obligations Holder as the property
of the holders of Senior Debt.
(b) Unless and until all Senior Debt shall have been paid in full and
all Senior Commitments shall have terminated or been canceled, neither the
Company, Holdings nor any of their respective Subsidiaries or Affiliates shall
make, and no Subordinated Obligations
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Holder shall demand, accept or receive, or shall attempt to collect or
commence any legal proceedings to collect, any direct or indirect payment (in
cash or property or by setoff, exercise of contractual or statutory rights or
otherwise) of or on account of any amount payable on or with respect to any
Subordinated Obligations (including any payment in respect of redemption or
purchase or other acquisition), except (i) the Company may make regularly
scheduled payments of Additional Payments (as defined in the Asset Purchase
Agreement) on the Seller Obligations so long as, immediately before and after
giving effect to any such payment, no Event of Default (as defined in the
Credit Agreement) has occurred and is continuing, (ii) the Company may make a
payment of the aggregate outstanding principal amount of the Seller
Obligations on June 27, 2002, so long as, immediately before and after giving
effect to such payment, no Event of Default (as defined in the Credit
Agreement) has occurred and is continuing, (iii) Holdings may make payments
pursuant to 3.3.4(iii) of the Asset Purchase Agreement, so long as,
immediately before and after giving effect to such payment, no Event of
Default (as defined in the Credit Agreement) has occurred and is continuing,
(iv) Holdings may make payments pursuant to the second proviso to Section
3.2.2 of the Asset Purchase Agreement, so long as, immediately before and
after giving effect to such payment, no Event of Default (as defined in the
Credit Agreement) has occurred and is continuing and (v) as expressly
permitted under Section 2(c).
(c) Unless and until all Senior Debt shall have been paid in full and
all Senior Commitments shall have terminated or been canceled, no Subordinated
Obligations Holder will commence or maintain any action, suit or any other legal
or equitable proceeding against the Company, Holdings or any of their respective
Subsidiaries or Affiliates, or join with any creditor in any such proceeding;
provided that nothing in this Section 2(c) will preclude any Subordinated
Obligations Holder (i) from commencing at any time any action, suit or any other
legal or equitable proceeding to enforce any remedies to which such Subordinated
Obligations Holder is entitled under the instrument governing the Subordinated
Obligations held by such Subordinated Obligations Holder if at such time the
holders of Senior Debt have commenced an action, suit or proceeding to enforce
substantially similar remedies or (ii) from joining with any creditor in any
such proceeding, under any insolvency, bankruptcy,
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receivership, liquidation, reorganization or other similar proceeding if the
holders of Senior Debt have joined in any such proceeding or (iii) from
commencing at any time any action, suit or other proceeding to enforce any
payment of Additional Payments if such payment is permitted under clause (i)
of Section 2(b).
(d) Each Subordinated Obligations Holder hereby waives any and all
notice in respect of the Credit Agreement and agrees and consents that without
notice to or assent by such Subordinated Obligations Holder:
(i) the obligations and liabilities of the Company, Holdings or
any other party or parties to the Credit Agreement (or any promissory
note, security document or guaranty evidencing or securing the same)
may, from time to time, in whole or in part, be renewed, extended,
modified, amended, restated, accelerated, compromised, supplemented,
terminated, sold, exchanged, waived or released;
(ii) the Agent and the Lenders may exchange, release or surrender any
collateral to the Company or any other Person, waive, release or
subordinate any security interest, obtain a guaranty of any Person or a
security interest in or mortgage or other encumbrance on any additional
property as collateral for any obligations of the Company or Holdings in
its sole discretion may elect;
(iii) the Agent and the Lenders may apply payments by the Company or
Holdings or any other Person to such portion of the Secured Obligations (as
defined in the Security Agreements) as they in their sole discretion may
elect;
(iv) any Lender may provide additional financing or otherwise extend
credit to the Company or Holdings;
(v) the Agent and the Lenders may exercise or refrain from
exercising any right, remedy or power granted by or in connection with
the Credit Agreement, any other Financing Documents or any other
agreements relating thereto; and
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(vi) any Lender or the Agent may surrender or release, from time
to time, in whole or in part, any balance or balances of funds with
the Agent or any Lender at any time standing to the credit of the
Company or Holdings;
all as the Agent or the Lenders may deem advisable and all without impairing,
abridging, diminishing, releasing or affecting the obligations of the Company,
Holdings and the Subordinated Obligations Holders hereunder.
(e) Each Subordinated Obligations Holder agrees that it will not
contest the validity, perfection, priority or enforceability of any lien or
security interest granted to secure any Senior Debt or of any guaranty securing
Senior Debt.
SECTION 3. Dissolution, Liquidation or Reorganization of the Company.
(a) In the event of any insolvency or bankruptcy proceedings, and any
receivership, liquidation, reorganization or other similar proceedings in
connection therewith, relative to the Company, to Holdings or to any of their
respective creditors, in their capacity as creditors of the Company or Holdings,
or to substantially all of its property, and in the event of any proceedings for
voluntary liquidation, dissolution or other winding up of the Company, whether
or not involving insolvency or bankruptcy, then:
(i) the holders of the Senior Debt shall first be entitled to receive
payment in full in cash of the principal thereof, premium, if any, interest and
all other amounts payable thereon (accruing before and after the commencement of
the proceedings) before any Subordinated Obligations Holder is entitled to
receive any payment on account or in respect of Subordinated Obligations; and
(ii) any payment or distribution of assets of the Company or Holdings
of any kind or character, whether in cash, property or securities to which any
Subordinated Obligations Holder would be entitled, but for the provisions of
this Section 3, shall be paid or distributed by the liquidating trustee or agent
or other Person making such payment or distribution, whether a trustee in
bankruptcy, a receiver or liquidating trustee or other trustee or agent,
directly to the Agent and any other representative on behalf of
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the holders of Senior Debt to the extent necessary to make payment in full of
all amounts of Senior Debt remaining unpaid, after giving effect to any
concurrent payment or distribution to the holders of the Senior Debt.
(b) The Subordinated Obligations Holders shall not be subrogated to
the rights of the holders of the Senior Debt to receive payments or
distributions of assets of the Company or Holdings until all Senior Debt shall
have been paid in full and all Senior Commitments shall have terminated or been
canceled; and, for the purposes of such subrogation, no payments or
distributions to the holders of the Senior Debt of any cash, property or
securities to which any Subordinated Obligations Holder would be entitled except
for these provisions shall, as between the Company or Holdings, as the case may
be, its creditors other than the holders of the Senior Debt, and such
Subordinated Obligations Holder, be deemed to be a payment by the Company or
Holdings, as the case may be, to or on account of the Senior Debt. The
provisions of Sections 2 and 3 of this Agreement are and are intended solely for
the purpose of defining the relative rights of holders of Subordinated
Obligations, on the one hand, and the holders of the Senior Debt, on the other
hand.
(c) Upon payment in full of all Senior Debt and the termination or
cancellation of all Senior Commitments, the Subordinated Obligations Holders
shall be subrogated (equally and ratably with the holders of all subordinated
indebtedness of the Company and Holdings, which, by its terms, is not superior
in right of payment to the Subordinated Obligations, and ranks on a parity with
the Subordinated Obligations) to the rights of the holders of Senior Debt to
receive payments or distributions of cash, property or securities of the Company
or Holdings applicable to the Senior Debt until all amounts owing on the
Subordinated Obligations shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of the Subordinated
Obligations of cash, property, securities or other assets by virtue of the
subrogation herein provided which otherwise would have been made to the holders
of the Senior Debt shall, as between the Company or Holdings, as the case may
be, its creditors other than the holders of Senior Debt and the holders of the
Subordinated Obligations, be deemed to be a payment to or on account of the
Subordinated Obligations. The Subordinated Obligations Holders agree that, in
the event that all or any part of any
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<PAGE>
payment made on account of the Senior Debt is recovered from the holders of
Senior Debt as a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law, any payment or distribution received
by the Subordinated Obligations Holders on account of the Subordinated
Obligations at any time after the date of the payment so recovered, whether
pursuant to the right of subrogation provided for in this Section 3(c) or
otherwise, shall be deemed to have been received by such holders of
Subordinated Obligations in trust as the property of the holders of the
Senior Debt and such holders shall forthwith deliver the same to the Agent
for the equal and ratable benefit of the holders of the Senior Debt for
application to payment of all Senior Debt in full.
(d) Each Subordinated Obligations Holder agrees that, if an order for
relief under the Bankruptcy Code is entered for or against the Company or
Holdings, it will not oppose any motion of the Company or Holdings for an order
under the Bankruptcy Code authorizing the Company or Holdings, as the case may
be: (i) to obtain new credit from and incur additional indebtedness to the
holders of Senior Debt (which indebtedness, inclusive of all interest and other
charges which may accrue in respect thereof, is sometimes hereinafter referred
to as the "Post-Petition Indebtedness") with such indebtedness to have priority
over any or all administrative expenses of the kind specified in Section 503(b)
or 507(b) of the Bankruptcy Code in accordance with Section 364(c)(1) of the
Bankruptcy Code; (ii) to secure repayment of the Post-Petition Indebtedness by
granting the holders of Senior Debt liens on and security interests in the
assets of the Company or Holdings that are created or acquired after the
commencement of any such case under the Bankruptcy Code, which shall be senior
and prior to any and all other liens, security interests and other claims (the
"Post-Petition Collateral"), and (iii) to secure repayment of amounts then owing
to the holders of Senior Debt under the Credit Agreement or the other Financing
Documents by granting to the holders of Senior Debt a security interest in the
Post-Petition Collateral. In the event that the holders of Senior Debt commence
an adversary proceeding for relief from the automatic stay under Section 362 of
the Bankruptcy Code, each Subordinated Obligations Holder agrees that it will
not oppose such proceeding.
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SECTION 4. Representations and Warranties. Each Subordinated
Obligations Holder represents and warrants that:
(a) The execution, delivery and performance by him of this Agreement
require no action by or in respect of, or filing with, any governmental body,
agency or official and do not contravene, or constitute a default under, any
provision of applicable law or regulation or of any agreement, judgment,
injunction, order, decree or other instrument binding upon him.
(b) This Agreement constitutes a valid and binding agreement of such
Subordinated Obligations Holder.
SECTION 5. Other Agreements. (a) Each Subordinated Obligations Holder
acknowledges and agrees that the Credit Agreement restricts the Company,
Holdings and any of their respective Subsidiaries from agreeing to any amendment
or waiver of any of the terms and conditions of the Operative Documents unless
it obtains the prior written consent of the Required Lenders.
(b) Each Subordinated Obligations Holder acknowledges and agrees that
the holders of Senior Debt have relied upon and will continue to rely upon the
covenants of the Company, Holdings and the Subordinated Obligations Holders
contained herein in entering into the Credit Agreement and in extending credit
to the Company and Holdings pursuant thereto.
SECTION 6. Binding Effect; Restrictions on Transfer. The covenants
of the Subordinated Obligations Holders contained herein shall be binding upon
any Subordinated Obligations Holder and upon their respective heirs, legal
representatives, successors and assigns. Each Subordinated Obligations Holder
agrees that it will not assign, pledge or otherwise transfer, for security
purposes or otherwise, any interest in the Subordinated Obligations held by him;
provided that the Seller may distribute the Seller Obligations held by the
Seller to its shareholders in connection with a liquidation of the assets of the
Seller so long as, prior to the consummation of such distribution, such
shareholders agree to be bound by the terms of this Agreement.
SECTION 7. No Partnership. Nothing contained in this Agreement, and
no action taken by the
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holders of Senior Debt (or any of them) pursuant hereto, is intended to
constitute or shall be deemed to constitute the holders of Senior Debt a
partnership, association, joint venture or other entity.
SECTION 8. Notices. Unless otherwise specified herein, all notices,
requests and other communications to any party hereunder shall be in writing
(including telex, facsimile copy or similar writing) and shall be given to such
party at its address or facsimile number set forth on the signature pages hereof
or such other address or telex or facsimile number as such party may hereafter
specify for the purpose by notice to the other parties hereto.
SECTION 9. Amendments and Waivers. Any provision of this Agreement
may be amended or waived if, and only if, such amendment or waiver is in writing
and signed by the Company, Holdings and each Subordinated Obligations Holder
whose rights or duties are affected thereby and each holder of Senior Debt whose
rights or duties are affected thereby.
SECTION 10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. EACH PARTY
HERETO HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY
UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK
FOR PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT THAT MAY BE BROUGHT OR INSTITUTED AGAINST IT.
Section 11. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, and all of which taken
together shall constitute a single agreement, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed or have caused this
Agreement to be duly executed as of the date hereof by their respective officers
thereunto duly authorized.
NATIONSCREDIT COMMERCIAL
CORPORATION, as Agent
By: /s/ Edward M. Alt _________
---------------------------------
Title: Authorized Signatory
Address: One Canterbury
Green
P.O. Box 120013
Stamford, CT
06912-0013
Telecopy: 203-352-4171
PUMPKIN LTD.
a Delaware corporation
By: /s/ Calvin Neider
-------------------------------
Title: Vice President
Address: One Pickwick Plaza
Suite 310
Greenwich, CT 06830
Telecopy: 203-625-0423
PUMPKIN LTD.
a Colorado corporation
By: /s/ Kea Bardeen
------------------------------
Title: President
Address:
Telecopy:
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PUMPKIN MASTERS HOLDINGS, INC.
By: /s/ Calvin Neider
-------------------------------
Title: Vice President
Address: One Pickwick Plaza
Suite 310
Greenwich, CT 06830
Telecopy: 203-625-0423
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Exhibit 99.11
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT (this "Agreement") dated as of June 27, 1997, by
and among Pumpkin Ltd., a Delaware corporation (the "Company"), Pumpkin
Masters Holdings, Inc., a Delaware corporation ("Holdings"), and each of the
individuals whose name appears on the signature pages hereto (individually, a
"Management Stockholder"). Capitalized terms are used as defined in Article
I hereto.
RECITALS
WHEREAS, Pumpkin Ltd. d/b/a Pumpkin Masters, Inc., a Colorado
corporation ("Pumpkin"), the Company, Holdings and Security Capital
Corporation, a Delaware corporation ("SCC"), have entered into an Asset
Purchase Agreement dated as of June 27, 1997 (as the same may be amended,
supplemented or modified from time to time, the "Asset Purchase Agreement"),
pursuant to which the Company is acquiring the Seller's Business (as defined
in the Asset Purchase Agreement);
WHEREAS, in connection with the consummation of the transactions
contemplated by the Asset Purchase Agreement, the Company will issue shares
of its capital stock to Holdings, Options to a Management Stockholder and to
NationsCredit Commercial Corporation, a Delaware corporation, all as set
forth in Annex I hereto; and
WHEREAS, each of the Stockholders and the Company desire to enter
into this Agreement to regulate certain aspects of their relationship and to
provide for, among other things, restrictions on the transfer or other
disposition of securities of the Company.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 Defined Terms.
--------------
(a) The following defined terms, when used in this Agreement, have the
respective meanings set forth below (such definitions to be equally
applicable to both singular and plural forms of the terms defined):
"Additional Stockholders" means any Person (other than any
Management Stockholder or Holdings Stockholder) (i) to whom any of the
Holdings Stockholders or the Stockholder Transfers Restricted Securities or
(ii) to whom the Company issues Restricted Securities after the date hereof
other than pursuant to a public offering registered under the Securities Act,
in each case who has executed a Joinder Agreement, so long as any such Person
shall hold Restricted Securities.
<PAGE>
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one of more intermediaries, controls or is
controlled by or is under common control with such Person. For purposes of
this definition, control of a Person means the power, direct or indirect, to
direct or cause the direction of the management and policies of such Person
whether by Contract or otherwise and, in any event and without limitation of
the previous sentence, any Person owning 20% or more of the voting securities
of a second Person shall be deemed to control that second Person.
"Agreement" means this Agreement and the exhibits hereto, as the
same shall be amended, modified or restated from time to time in accordance
with the terms hereof.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of Colorado or Connecticut are authorized or
obligated by law to close.
"Cause" means (i) the willful failure of a Management Stockholder to
follow the directions of the Company which might result in or does result in
an adverse material effect on the business, property or operations of the
Company (other than any such failure resulting from his or her incapacity due
to physical or mental illness or disability), after written notice of such
failure from the Board of Directors and a 10-day opportunity to cure, (ii)
any act of fraud or dishonesty, misappropriation or embezzlement, wilful
misconduct or gross negligence in connection with the performance of the a
Management Stockholder's duties under an employment agreement between the
Company and such Management Stockholder, (iii) a breach by the Management
Stockholder of any material contractual or material legal duty to the Company
(including, but not limited to, the unauthorized disclosure of Trade Secrets
or other Confidential Information, non-compliance with the written policies,
guidelines and procedures of the Company), after written notice thereof from
the Board of Directors and a 30-day opportunity to cure in the event that
such breach was not wilful, (iv) the conviction of the Management Stockholder
of the commission of a crime or offense involving moral turpitude (including
pleading guilty or no contest to such a crime or offense or a lesser charge
which results from plea bargaining) which results in the imprisonment of the
Management Stockholder, whether or not committed in connection with the
business of the Company or (v) breach by the Management Stockholder of the
provisions of this Agreement or any other agreement relating to the
Management Stockholder's acquisition of an equity interest in the Company
(including Options) to which the Management Stockholder may become a party on
or after the date hereof.
"EBITDA cause" means (i) the failure of the Company to achieve
annual EBITDA (as defined in the Asset Purchase Agreement), without giving
effect to the Seller Exclusions, of at least One Million Dollars
($1,000,000.00) in any one fiscal year or (ii) the failure of the Company to
achieve average annual EBITDA (as defined in the Asset Purchase Agreement),
without giving effect to the Seller Exclusions, of at least One Million Five
Hundred Thousand Dollars ($1,500,000.00) in any two consecutive fiscal years.
"Good Reason" means (i) the Company changes a Management
Stockholder's status,
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title or position or the nature or the scope of a Management Stockholder's
authorities, duties or responsibilities as originally contemplated by this
Agreement and such change represents a material reduction in such status,
title, position, authority, duty or responsibility conferred hereunder, (ii)
the Company changes its principal location of business or a Management
Stockholder's place of employment, without a Management Stockholder's
consent, from the Denver, Colorado area, (iii) a sale of stock or series of
related sales or a merger, consolidation or similar corporate reorganization
of the Company, and as a result of which Holdings, the sole stockholder of
the Company, shall own, directly or indirectly, less than 51% of the
outstanding voting securities of the Company, (iv) a sale of stock or series
of related sales or a merger, consolidation or similar corporation
reorganization of Holdings, and as a result of which SCC and its Affiliates
shall own, directly or indirectly, less than 51% of the outstanding voting
securities of Holdings or (v) a material breach by the Company of any
material provision of an employment agreement between it and a Management
Stockholder, after written notice of such breach by a Management Stockholder
and a 10-day opportunity to cure.
"Common Stock" means the Class A Common Stock, par value $.01 per
share, and the Class B Common Stock, par value $.01 per share, of the
Company, any securities into which such Common Stock shall have been changed
or any securities resulting from any reclassification or recapitalization of
such Common Stock, and all other securities for any class or classes (however
designated) of the Company the holders of which have the right, without
limitation as to amount, after payment on any securities entitled to a
preference on dividends or other distributions upon any dissolution,
liquidation or winding-up, either to all or to a share of the balance of
payments upon such dissolution, liquidation or winding-up.
"Fair Market Value" means the total value of the consideration which
would be received upon the sale of shares of Common Stock between a willing
buyer and the holder of such shares as a willing seller with the former under
no compulsion to buy and the latter under no compulsion to sell, all parties
having reasonable knowledge of all relevant facts, calculated without
discount for illiquidity or minority interest and without premium for control
and, in the case of any sale occurring as a result of any Management
Stockholder's death, without discount for the effects of his or her death, as
determined in good faith by the Board of Directors of the Company or
Holdings, as appropriate.
"Holdings Stockholders" means Security Capital Corporation, a
Delaware corporation ("SCC"), and its Affiliates and Subsidiaries, as long as
such Person shall hold Restricted Securities.
"Management Stockholders" means Gay Burke and any other member of
management of the Company to whom the Company issues Restricted Securities or
Options to purchase Restricted Securities, in each case, so long as such
Person shall hold Restricted Securities.
"Options" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares
of capital stock of such Person or any security of any kind convertible into
or exchangeable or exercisable for any shares of capital stock of such Person
or (ii) receive any
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benefits or rights similar to any rights enjoyed by or accruing to the holder
of shares of capital stock of such Person, including without limitation any
rights to participate in the equity, income or election of directors or
officers of such Person.
"Permitted Transferee" means with respect to a natural person, the
spouse or any lineal descendant (including by adoption and stepchildren) of
such person, or any trust of which such person is the trustee and which is
established solely for the benefit of any of the foregoing individuals and
whose terms are not inconsistent with the terms of this Agreement, or any
partnership, all of the general partner(s) and limited partner(s) (if any) of
which are one or more Persons identified in this definition.
"Person" means any natural person, corporation, partnership,
proprietorship, other business organization, trust, union, association or
Governmental Authority.
"Prime" means the interest rate designated by Nations Bank as being
its prime rate of interest from time to time.
"Restricted Securities" means the Common Stock, and any securities
issued with respect thereto as a result of any stock dividend, stock split,
reclassification, recapitalization, reorganization, merger, consolidation or
similar event or upon the conversion, exchange or exercise thereof.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Stockholders" means the Holdings Stockholders, the Management
Stockholders and the Additional Stockholders.
"Subsidiary" means, with respect to any Person, any other Person in
which such Person, directly or indirectly through Subsidiaries or otherwise,
beneficially owns more than 50% of either the equity interests in, or the
voting control of, such other Person, whether or not existing on the date
hereof.
"Subordinated Promissory Note" means a subordinated promissory note
of the Company which (i) shall be payable in equal annual installments,
commencing one year after the issuance thereof and with a final maturity date
on the seventh anniversary of the date hereof (provided, however, that if the
Company's lenders permit, such final date thereof shall be such earlier date
such Lenders shall specify, (ii) shall bear interest at a rate per annum
equal to Prime, but in no event shall such annual rate exceed twelve percent
(12%) per annum or be less than eight percent (8%) per annum and in each
case, such interest shall be payable monthly in arrears so long as permitted
by the Company's lenders; (iii) shall be subordinated to the Company's
indebtedness for borrowed money; (iv) shall be prepayable at any time without
premium or penalty; and (v) shall include restrictive covenants identical to
those set forth in the promissory notes issued to the Credit
4
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Agreement.
"Trade Secrets or other Confidential Information" means, by way of
example and without limitation, matters of a technical nature, such as
scientific, trade and engineering secrets, "know-how", formulas, secret
processes, drawings, patterns (whether or not published), works of
authorship, machines, inventions, computer programs (including documentation
of such programs), services, materials, unfiled trademark applications,
copyright applications, patent applications, new product plans, other plans,
technical information, technical improvements, manufacturing techniques,
specifications, manufacturing and test data, progress reports and research
projects, and matters of a business nature, such as business plans,
prospects, financial information, proprietary information about costs,
profits, markets, sales, lists of customers and suppliers of the Company and
its direct or indirect subsidiaries, procurement and promotional information,
credit and financial data concerning customers or suppliers of the Company
and its direct or indirect subsidiaries, information relating to the
management, operation and planning of the Company and its direct and indirect
subsidiaries, and other information of a similar nature to the extent not
available to the public, and plans for future development.
"Transfer" means, directly or indirectly, any sale, transfer,
assignment, grant of a participation in, gift, hypothecation, pledge or other
disposition of any securities or any interests therein or, as the context may
require, to sell, transfer, assign, grant a participation in, give as a gift,
hypothecate, pledge or otherwise dispose of any securities or any interests
therein.
(b) Unless the context of this Agreement otherwise requires, (i) words
of any gender include each other gender; (ii) words using the singular or
plural number also include the plural or singular number, respectively; (iii)
the terms "hereof", "herein", "hereby" and derivative or similar words refer
to this entire Agreement; and (iv) the terms "Article" or "Section" refer to
the specified Article or Section of this Agreement.
(c) All terms not otherwise expressly defined herein shall have the
meanings ascribed to them in the Asset Purchase Agreement.
ARTICLE II
RIGHTS OFFERING
2.1 Rights Offering.
----------------
Each of the Holdings Stockholders and the Management Stockholders and
their respective Permitted Transferees shall be entitled to purchase, at the
issuance price therefore, its proportionate share (on a fully diluted basis)
of any additional shares of capital stock of the Company (other than shares
issued pursuant to Options issued to management employees of the Company and
pursuant to an Option issued to NationsCredit Commercial Corporation, dated
the date hereof) issued after the Closing ("New Stock Offer"). The Company
shall provide each of the Holdings Stockholders
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and the Management Stockholders and their respective Permitted Transferees
with a notice of the New Stock Offer (the "Notice") setting forth (i) each of
the Holdings Stockholders' and the Management Stockholders' and that of each
of their Permitted Transferees pro rata portion of such new issuance, (ii)
the cash consideration to be paid for each share and (iii) all other material
terms of such issuance. Each of the Holdings Stockholders and the Management
Stockholders and their respective Permitted Transferees shall give a notice
of acceptance to participate in such New Stock Offer to Holdings not later
than 20 days after its receipt of the Notice (the last day of such 20-day
period being referred to herein as the "Acceptance Date"). Within 120 days
following the Acceptance Date, the Company (i) shall issue, upon its receipt
of the requisite consideration therefor, capital stock to each of the
Holdings Stockholders and the Management Stockholders and their respective
Permitted Transferees who timely accepted such New Stock Offer upon the terms
specified in such New Stock Offer and (ii) may issue capital stock to any
other Person or Persons in an amount not to exceed the aggregate amount
thereof offered pursuant to the New Stock Offer (less the aggregate amount of
shares of capital stock issued to the Holdings Stockholders or the Management
Stockholders or their respective Permitted Transferees pursuant to the
foregoing clause (i)) and for a price which equals or exceeds the price per
share specified in the New Stock Offer.
ARTICLE III
PUT AND CALL UPON THE OCCURRENCE OF SPECIFIED EVENTS
3.1 Put.
----
The Management Stockholders and their respective Permitted Transferees
shall have the right to elect to sell all or a portion of the Restricted
Securities owned by each to the Company by giving written notice (the "Put
Notice") to the Company specifying the number of shares to be sold (the "Put
Shares") upon the earlier of (i) the sixth anniversary of the Closing Date;
(ii) payment in full of the Acquisition Note; or (iii) at any time after the
Company's annual EBITDA has averaged in excess of $2,500,000.00 during each
of four consecutive fiscal years, commencing after December 31, 1996 and
ending immediately preceding the date of the Put Notice.
3.2 Call.
----
The Company shall have the right to elect to purchase all or a portion of
the Restricted Securities owned by the Management Stockholders and their
respective Permitted Transferees by giving written notice (the "Call Notice")
to each of the Management Stockholders and their respective Permitted
Transferees specifying the number of shares to be purchased (the "Call
Shares") upon the earlier of the events described in Sections 3.1(i) and (ii).
3.3 Purchase.
--------
(a) The Company shall purchase, within sixty (60) days after receipt of
the Put Notice or delivery of the Call Notice, as appropriate, the Put Shares
or Call Shares, as appropriate, by paying to the appropriate Management
Stockholders and their respective Permitted Transferees the Put/Call
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Fair Market Value of such Put Shares or Call Shares, as appropriate, by
delivery of:
(i) cash or by certified funds or wire transfer in an amount equal to
the Put/Call Fair Market Value of the Put Shares or the Call Shares, as
appropriate; or
(ii) if the Company, SCC and the appropriate Management Stockholders and
their respective Permitted Transferees agree, such number of shares of Class
A Common Stock, par value $.01 per share, of SCC (the "Class A Common Stock")
equal to the Fair Market Value of the Put Shares or the Call Shares, as
appropriate, divided by the greater of $10.00 per share or ninety percent
(90%) of the average bid price of Class A Common Stock traded on any of the
Pacific Stock Exchange, any other national securities exchange or the Nasdaq
Stock Market for the twenty (20) consecutive trading days prior to the Put
Notice or Call Notice, as appropriate; or
(iii) if the Company is prohibited by the terms of any Indebtedness
from paying cash for all or part of the Put Shares or the Call Shares, as
appropriate, the Company shall issue a Subordinated Promissory Note with an
aggregate principal amount equal to the Fair Market Value of all or the part
of the Put Shares or the Call Shares, as appropriate, for which it is
prohibited from paying cash.
In each case against receipt of certificates evidencing the shares to be
purchased and such other documentation as the Company shall reasonably
request.
(b) "Put/Call Fair Market Value" shall be determined by a formula as
follows: (v) the product of (i) the average annual EBITDA of the Company for
the period from January 1, 1997 to the end of the most recent fiscal year
prior to the date of the Put Notice or Call Notice, as appropriate, and (ii)
five (5) less (w) long-term Indebtedness (which shall include, without
limitation, Purchaser Permitted Indebtedness) and (x) if the Earnout Amount
has not yet been determined pursuant to Section 3.2.1 of the Asset Purchase
Agreement or otherwise extinguished before the date of the determination
thereof, the maximum amount which could be payable as the Earnout Amount,
subject to reduction by the amount of the Earnout Amount prepaid pursuant to
Section 3.2.4 of the Asset Purchase Agreement and (y) if the Earnout Amount
has been determined pursuant to Section 3.2.1 of the Asset Purchase
Agreement, the Earnout Amount so determined, subject to reduction as provided
in Sections 3.2.2 and 3.2.5 of the Asset Purchase Agreement and the average
outstanding balance on the Seasonal Line of Credit, calculated as of end of
each month, for the two fiscal years prior to the date of the Put Notice or
Call Notice, as appropriate, plus (x) current cash and cash equivalents on
hand, divided by (y) the total number of shares of Common Stock issued and
outstanding determined on a fully-diluted basis and as of the date fifteen
days prior to the
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date of the Put Notice or Call Notice, as appropriate.
(c) Notwithstanding anything to the contrary herein, the exercise of
rights to purchase or the requirement of the Company to purchase shares of
Common Stock pursuant to this Section 3 shall be subject to limitations, if
any, imposed upon the Company under applicable law or by any agreements with
the Company's lenders then in effect, including, without limitation,
restrictions on the ability of the Company to pay the cash portion of any put
or call and on the ability to pay principal or interest under the
Subordinated Promissory Note.
ARTICLE IV
CALL UPON TERMINATION OF EMPLOYMENT (OTHER THAN DEATH)
4.1 Call.
-----
(a) If a Management Stockholder ceases to be employed by the Company for
any reason, other than the death of such Management Stockholder, then, at any
time within the one-year period immediately following the date of the
occurrence of any such cessation of employment, the Company may, at its sole
option, purchase from such Management Stockholder and any Permitted
Transferees of such Management Stockholder, all of the Common Stock owned by
such Management Stockholder and Permitted Transferees of such Management
Stockholder and any rights to shares of Common Stock issuable upon exercise
of Options, if any, in which such Management Stockholder had a vested
interest as of the date of the occurrence of such event (collectively,
"Vested Options"), and such Management Stockholder and any Permitted
Transferees of such Management Stockholder shall, upon the exercise of such
call option, sell all of such Common Stock and any Vested Options to the
Company (the "Management Call Option"). The Management Call Option shall be
exercised by delivery of written notice to such Management Stockholder and
any Permitted Transferees of such Management Stockholder within the one year
period after the occurrence of such cessation of employment (a "Management
Call Notice"), specifying a date not less than sixty (60) and not more than
ninety (90) days after the date of such Management Call Notice on which date
the Company will purchase the Common Stock and any Vested Options of such
Management Stockholder and any Permitted Transferees of such Management
Stockholder.
(b) If, pursuant to Section 4.1(a), the Company elects to purchase
Common Stock and any Vested Options of a Management Stockholder and his or
her Permitted Transferees pursuant to a Management Call Option, then
(i) in the case of a cessation of employment of such Management
Stockholder occurring prior to the third anniversary of the date hereof for
any reason, other than the death of such Management Stockholder, the purchase
price per share of such Common Stock shall be equal to the original cost
therefor paid by such
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Management Stockholder upon issuance thereof, and there shall be no
consideration required to be paid for the cancellation of any Option;
(ii) in the case of a cessation of employment of such Management
Stockholder occurring on or after the third anniversary of the date hereof,
by reason of the voluntary cessation by such Management Stockholder of his or
her duties and responsibilities as an employee without Good Reason, the
purchase price per share of such Common Stock shall be equal to the original
cost therefor paid by such Management Stockholder upon issuance thereof, and
there shall be no consideration required to be paid for the cancellation of
any Option;
(iii) in the case of a cessation of employment of such Management
Stockholder occurring on or after the third anniversary of the date hereof by
reason of a termination by the Company with Cause or for EBITDA cause, the
purchase price per share of any Common Stock acquired by such Management
Stockholder pursuant to an Option shall be equal to the original cost
therefor paid by such Management Stockholder upon issuance thereof, and there
shall be no consideration required to be paid for the cancellation of any
Option; and
(iv) in the case of a cessation of employment of such Management
Stockholder occurring on or after the third anniversary of the date hereof by
reason of a termination by the Company without Cause or the voluntary
cessation by such Management Stockholder of his or her duties and
responsibilities as an employee for Good Reason, the purchase price per share
of such Common Stock shall be equal to the Fair Market Value thereof, and the
purchase price for each Vested Option, if any, shall be equal to the Fair
Market Value of each share of Common Stock issuable thereunder net of the
applicable exercise price,
in each case as determined as at the date of the Management Call Notice (the
"Management Call Price").
(c) At the closing of the purchase of such shares of Common Stock and
any Vested Options owned by such Management Stockholder and any Permitted
Transferees of such Management Stockholder pursuant to the exercise of a
Management Call Option, the Company shall pay in cash or by certified or bank
cashier's check, the maximum amount of the Management Call Price then
permitted to be paid in cash by the Company's lenders, with the balance, if
any, payable by delivery of a Subordinated Promissory Note.
(d) Notwithstanding anything to the contrary herein, the exercise of
rights to purchase or the requirement of the Company to purchase shares of
Common Stock and any Options pursuant to this Section 4 shall be subject to
limitations, if any, imposed upon the Company under applicable law or by any
agreements with the Company's lenders then in effect, including, without
limitation, restrictions on the ability of the Company to pay the
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<PAGE>
cash portion of any put or call and on the ability to pay principal or
interest under the Subordinated Promissory Note.
ARTICLE V
PUT AND CALL IN THE EVENT OF DEATH
5.1 Put.
----
(a) In the event of the death of a Management Stockholder, then at any
time within the one-year period immediately following the date such death
occurred, the estate of such Management Stockholder and any Permitted
Transferees of any such Management Stockholder may, at their option, sell to
the Company, and require the Company to purchase, all of the Common Stock and
any Options owned by the estate of such Management Stockholder and any
Permitted Transferees of such Management Stockholder, at a price per share
equal to the Fair Market Value of such share of Common Stock and at a
purchase price for each Option, if any, equal to the Fair Market Value of
each share of Common Stock issuable thereunder net of the applicable exercise
price, all as determined as of the date of such death.
(b) The put option of the estate of such Management Stockholder and any
Permitted Transferees of such Management Stockholder pursuant to Section
5.1(a) above shall be exercised by delivery of written notice to the Company,
within such applicable one year period, specifying a date not less than sixty
(60) and no more than ninety (90) days after the date of such notice on which
date the Company shall be required to close the required purchase of such
Common Stock and any Options owned by the estate of such Management
Stockholder and his or her Permitted Transferees.
5.2 Call.
-----
(a) In the event of the death of a Management Stockholder, then at any
time within the one-year period immediately following the date such death
occurred, the Company may, at its sole option, purchase all of the Common
Stock and any Options owned by the estate of such Management Stockholder and
any Permitted Transferees of such Management Stockholder, and the estate of
such Management Stockholder and any Permitted Transferees of such Management
Stockholder shall, upon the exercise of such call option, sell to the Company
all of such Company Stock and any such Options, at a price per share equal to
the Fair Market Value of such share of Common Stock and at a purchase price
for each Option, if any, equal to the Fair Market Value of each share of
Common Stock issuable thereunder net of the applicable exercise price, all as
determined as at the date of such death.
(b) The call option of the Company pursuant to Section 5.2(a) above
shall be exercised by delivery of written notice to the estate of such
Management Stockholder and
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<PAGE>
any Permitted Transferees of such Management Stockholder, within such
applicable one year period, specifying a date not less than sixty (60) and no
more than ninety (90) days after the date of such notice on which date the
estate of such Management Stockholder and any Permitted Transferees of such
Management Stockholder shall be required to sell to the Company the Common
Stock and any Options owned by the estate of such Management Stockholder and
his or her Permitted Transferees.
5.3 Purchases.
----------
(a) At the closing of the purchase of shares of Common Stock and any
Options owned by the estate of a Management Stockholder and his or her
Permitted Transferees pursuant to the exercise of a put or call option under
Section 5.1(a) or 5.2(a) hereof, the Company shall pay in cash or by
certified or bank cashier's check, the maximum amount of such purchase price
then permitted to be paid in cash by the Company's lenders, with the balance
payable by delivery of a Subordinated Promissory Notes.
(b) The closing of any purchase and sale of Common Stock and any Options
pursuant to this Section 5 shall be held at the principal place of business
of the Company on the date specified in the applicable put or call notice.
At the closing, the Company shall deliver the purchase consideration against
delivery by the estate of such Management Stockholder and his or her
Permitted Transferees of certificate(s) representing the purchased shares of
Common Stock with stock power(s) duly endorsed for the transfer thereof and
appropriate instruments terminating all rights existing under any purchased
Options.
(c) Notwithstanding anything to the contrary herein, the exercise of
rights to purchase or the requirement of the Company to purchase shares of
Common Stock and any Options pursuant to this Section 5 shall be subject to
limitations, if any, imposed upon the Company under applicable law or by any
agreements with the Company's lenders then in effect, including, without
limitation, restrictions on the ability of the Company to pay the cash
portion of any put or call and on the ability to pay principal or interest
under the Subordinated Promissory Note.
ARTICLE VI
RIGHTS AND OBLIGATION OF INCLUSION
6.1 Right and Obligation of Inclusion Upon Sale of Transfer or Company Shares.
--------------------------------------------------------------------------
(a) In the event of the sale or transfer of shares of Restricted
Securities by a Holdings Stockholder (collectively, the "Transferor") to other
than an Affiliate thereof, (i) the Management Stockholders and their respective
Permitted Transferees shall be entitled to include in such transaction a portion
of the shares of Restricted Securities owned by them as is equal to the product
of (v) the total number of shares owned by each of them and (x) a
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<PAGE>
fraction the numerator of which is the number of shares of Restricted
Securities outstanding on a fully diluted basis (after giving effect to the
issuance of shares pursuant to all outstanding Options) and (ii) the
Transferor shall be entitled to demand that the Management Stockholders and
their respective Permitted Transferees include in such transaction a portion
of the shares of Restricted Securities owned by them as is equal to the
product of (y) the total number of shares owned by each of them and (z) a
fraction the numerator of which is the number of shares of Restricted
Securities proposed to be sold or transferred by the Transferor and the
denominator of which is the total number of shares of Restricted Securities
owned by the Transferor, in each case, upon the same terms and conditions as
those offered to the Transferor. The Transferor shall give written notice of
any proposal, including the number of shares to be sold or transferred by the
Transferor and the maximum number of shares which shall or may, as the case
may be, be included by the Management Stockholders and their respective
Permitted Transferees (collectively, the "Transferred Shares"), for such a
transaction (the "Proposal") to the Management Stockholders and their
respective Permitted Transferees and the Management Stockholders and their
respective Permitted Transferees shall have thirty (30) days within which to
make an election (if other than upon demand by the Transferor) to participate
in such a transaction upon the terms and conditions specified in this Section
6.1. If any Management Stockholder or its respective Permitted Transferees
does not affirmatively elect to participate or declines the offer to
participate within such thirty-day period, it shall be deemed to have
declined to participate in such transaction.
(b) The Transferor shall have one hundred twenty (120) days, commencing
on (i) the date notice of the Proposal is given, if the Transferor demands
that the Management Stockholders' shares of Restricted Securities or those of
their respective Permitted Transferees' be included, or (ii) the expiration
of the 30 day period during which the Management Stockholders and their
respective Permitted Transferees may elect to include shares in such sale or
transfer, if the Management Stockholders or their respective Permitted
Transferees may elect to include such shares, in which to sell or otherwise
dispose of, on behalf of itself and the Management Stockholders and their
respective Permitted Transferees, as applicable, shares of Restricted
Securities up to the number of Transferred Shares. If the Transferor has
requested the Management Stockholders or their respective Permitted
Transferees to include shares in such sale or transfer, such sale or transfer
shall be conditioned on the Transferor selling or disposing of all of the
Transferred Shares. If the Management Stockholders or their respective
Permitted Transferees may elect to include shares in such sale or transfer,
and Transferred Shares are not sold, the Transferor, at its option, may elect
to sell on behalf of itself and the appropriate Management Stockholders and
their respective Permitted Transferees, such number of shares as the
purchaser will purchase, pro rata among the Transferor and the appropriate
Management Stockholders and their respective Permitted Transferees, as nearly
as practicable. The material terms of any sale, including, without
limitation, price and form of consideration, shall be as set forth in the
Proposal.
(c) Promptly after the consummation of the sale or other disposition of
any of the
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Transferred Shares in accordance with this Section 6.1, the Transferor shall
notify the appropriate Management Stockholders and their respective Permitted
Transferees thereof, and the Transferor shall cause the purchaser of the
Transferred Shares to pay to the Transferor and each of the appropriate
Management Stockholders and their respective Permitted Transferees their
respective portions of the sales price of the Transferred Shares sold or
otherwise disposed of in accordance with this Section 6.1.
(d) There shall be no liability on the part of the Transferor to any
Management Stockholder or any of their Permitted Transferees in the event
that the proposed sale pursuant to this Section 6.1 is not consummated for
whatever reason. Whether a sale of Transferred Shares is effected pursuant
to this Section 6.1 by the Transferor is in the sole and absolute discretion
of the Transferor.
6.2 Right of Inclusion Upon Sale or Transfer of Holdings Shares.
------------------------------------------------------------
(a) In the event of the sale or transfer of shares of common stock of
Holdings by the Transferor to other than an Affiliate thereof, the Management
Stockholders and their respective Permitted Transferees shall be entitled or,
upon demand of the Transferor, shall exchange with Holdings a portion of the
shares of Restricted Securities owned by each of them as is equal to the
product of (x) the total number of shares owned by each of them and (y) a
fraction the numerator of which is the number of shares of Holdings proposed
to be sold or transferred by the Transferor and the denominator of which is
the total number of shares of Holdings owned by the Transferor. The
Transferor shall give written notice of any proposal, including the number of
shares of Holdings to be sold or transferred by the Transferor and the
maximum number of shares of Holdings into which such Management Stockholders
and their respective Permitted Transferees shall or may, as the case may be,
exchange their shares of Restricted Securities (collectively, the "Exchanged
Shares"), for such a transaction (the "Exchange Proposal") to the Management
Stockholders and their respective Permitted Transferees and the Management
Stockholders and their respective Permitted Transferees shall have thirty
(30) days within which to make an election (if other than upon demand by the
Transferor) to participate in such a transaction upon the terms and
conditions specified in this Section 6.2. If any Management Stockholder or
its respective Permitted Transferees does not affirmatively elect to
participate or declines the offer to participate within such thirty-day
period, it shall be deemed to have declined to participate in such
transaction.
(b) The Transferor shall have one hundred twenty (120) days, commencing
on (i) the date notice of the Exchange Proposal is given, if the Transferor
demands that the Management Stockholders' shares of Restricted Securities or
those of their respective Permitted Transferees be exchanged, or (ii) the
expiration of the 30 day period during which the Management Stockholders and
their respective Permitted Transferees may elect to exchange shares in such
sale or transfer, if the Management Stockholders or their respective
Permitted Transferees may elect to exchange such shares, in which to sell or
otherwise
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dispose of, on behalf of itself and the Management Stockholders and their
respective Permitted Transferees, as applicable, shares of Holdings up to the
number of Exchanged Shares. If the Transferor has requested the Management
Stockholders or their respective Permitted Transferees to include exchange in
such sale or transfer, such sale or transfer shall be conditioned on the
Transferor selling or disposing of all of the Exchanged Shares. If the
Management Stockholders or their respective Permitted Transferees may elect
to exchange shares in such sale or transfer, and Exchanged Shares are not
sold, the Transferor, at its option, may elect to sell on behalf of itself
and the appropriate Management Stockholders and their respective Permitted
Transferees, such number of shares as the purchaser will purchase, pro rata
among the Transferor and the appropriate Management Stockholders and their
respective Permitted Transferees, as nearly as practicable. The material
terms of any sale, including, without limitation, price and form of
consideration, shall be as set forth in the Exchange Proposal.
(c) Simultaneously with the consummation of the sale or other
disposition of any of the Exchanged Shares owned by the Transferor in
accordance with this Section 6.2, shares of Restricted Securities owned by
the Management Stockholders or their respective Permitted Transferees
included in the Exchanged Shares shall be deemed to be exchanged for and
converted into shares of Common Stock of Holdings at such exchange rate,
based on the relative Fair Market Value of a Share of Common Stock of
Holdings and the relative Fair Market Value of a Share of Common Stock of the
Company, as determined, in each case, in good faith by the Board of Directors
of Holdings. Promptly after the consummation of the sale or other
disposition of any of the Exchanged Shares in accordance with this Section
6.2, the Transferor shall notify the appropriate Management Stockholders
thereof, and the Transferor shall cause the purchaser of the Exchanged
Shares to pay to the Transferor and each of the appropriate Management
Stockholders and their respective Permitted Transferees their respective
portions of the sales price of the Exchanged Shares sold or otherwise
disposed of in accordance with this Section 6.2.
(d) There shall be no liability on the part of the Transferor to any
Management Stockholder or any of its Permitted Transferees in the event that
the proposed sale pursuant to this Section 6.1 is not consummated for
whatever reason. Whether a sale of Transferred Shares is effected pursuant
to this Section 6.1 by the Transferor is in the sole and absolute discretion
of the Transferor.
ARTICLE VII
RESTRICTIONS ON TRANSFER
7.1 Restrictions Generally; Securities Act.
---------------------------------------
(a) Each Stockholder will not, directly or indirectly, Transfer any
Restricted Securities except in accordance with the terms of this Agreement.
Shares of Restricted
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Securities owned by the Management Stockholders may only be Transferred to a
Permitted Transferee, who shall have executed a Joinder Agreement and thereby
became a party to this Agreement. An attempt by any Stockholder to Transfer
any Restricted Securities not in accordance with the terms of this Agreement
shall be null and void and neither the issuer of such securities nor any
transfer agent of such securities shall give any effect to such attempted
Transfer in its stock records. Notwithstanding any other provision of this
Agreement, except as expressly permitted or required by Section 5 hereof, no
Management Stockholder shall Transfer any Options nor any interest therein to
any Person without the prior written consent of the Board of Directors of the
Company.
(b) Each Stockholder agrees that, in addition to the other requirements
imposed herein relating to Transfer, it will not Transfer any Restricted
Securities except pursuant to an effective registration statement under the
Securities Act, or upon receipt by the Company of an opinion of counsel to
the Stockholder reasonably satisfactory to the Company or, if agreed by the
Board of Directors of the Company, counsel to the Company, to the effect that
registration is not required because of the availability of an exempting from
registration under the Securities Act.
7.2 Legend.
-------
(a) Each certificate representing Restricted Securities held by any
Stockholder shall be endorsed with the following legends and such other
legends as may be required by applicable state securities laws:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
RESTRICTIONS CONTAINED IN A STOCKHOLDERS' AGREEMENT, DATED JUNE 27,
1997, AS SUCH AGREEMENT MAY BE AMENDED, MODIFIED OR RESTATED FROM TIME
TO TIME IN ACCORDANCE WITH THE TERMS THEREOF (A COPY OF WHICH IS ON FILE
WITH THE SECRETARY OF THE ISSUER HEREOF)."
"THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR TRANSFERRED WITHOUT THE CONSENT OF
THE COMPANY, AND UNLESS IN COMPLIANCE WITH THE ACT AND APPLICABLE STATE
SECURITIES LAWS.
(c) Any certificate issued at any time in exchange or substitution for
any certificate bearing such legends (except a new certificate issued upon
the completion of a Transfer pursuant to a registered public offering under
the Securities Act and made in accordance with the Securities Act) shall also
bear such legends, unless in the opinion of counsel for the Company, the
Restricted Securities represented thereby are no longer subject to the
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<PAGE>
provisions of this Agreement or the restrictions imposed under the Securities
Act or state securities laws, in this case the applicable legend (or legends)
may be removed.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
8.1 Representations and Warranties of the Management Stockholders.
--------------------------------------------------------------
Each Management Stockholder represents and warrants that:
(a) each is able to perform its duties and responsibilities contemplated
by this Agreement; and
(b) there are no restrictions, covenants, agreements or limitations of
any kind on its right or ability to enter into and fully perform the terms of
this Agreement.
8.2 Representations and Warranties of Holdings.
------------------------------------------
Holdings represents and warrants that:
(a) Holdings is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Holdings has the
requisite power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery by Holdings of this
Agreement, the performance by Holdings of its obligations hereunder and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by Holdings. This Agreement has been duly and validly
executed and delivered by Holdings and constitutes a legal, valid and binding
obligation of Holdings, enforceable against Holdings in accordance with its
terms.
(b) The execution, delivery and performance of this Agreement by
Holdings, and the consummation by Holdings of the transactions contemplated
hereby and thereby, will not conflict with, or constitute a default under,
any agreement, indenture or instrument to which Holdings is a party, or
result in a violation of Holdings' constituent documents or any order,
judgment or decree of any court or governmental authority having jurisdiction
over Holdings or any of its properties, and no consent, authorization or
order of, or filing or registration with, any court or governmental authority
is required by Holdings for the execution, delivery and performance of this
Agreement.
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ARTICLE IX
MISCELLANEOUS
9.1 Notices.
--------
All notices, requests, demands, consents, and other communications which
are required or may be given under this Agreement shall be in writing and
shall be given either (a) by personal delivery against a receipted copy, (b)
by certified or registered United States mail, return receipt requested,
postage prepaid, (c) by facsimile transmission or (d) mailed by overnight
courier prepaid to the following addresses:
(i) If to the Company, to:
Pumpkin Ltd.
427 East Bayaud Avenue
Denver, Colorado 80206
Attn: President
Facsimile No.: (303) 871-9477
with a copy to:
Capital Partners, Inc.
One Pickwick Plaza
Suite 310
Greenwich, CT 06830
Attention: Calvin Neider
with a copy to:
Morgan Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Attention: Christopher T. Jensen, Esq.
(ii) If to Holdings, to:
Capital Partners, Inc.
One Pickwick Plaza, Suite 310
Greenwich, Connecticut 06830
Attn.: President
Facsimile No.: (203) 625-0423
with a copy to:
17
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Christopher T. Jensen, Esq.
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Facsimile No.: (212) 309-6273
(iii) If to a Management Stockholder, to such address as is listed
under his or her name on the signature page hereto:
or to such other address of which written notice in accordance with this
Section 9.1 shall have been provided by such party. All such notices,
requests and other communications will (a) if delivered personally to the
address as provided in this Section, be deemed given upon delivery, (b) if
delivered by certified mail in the manner described above to the address as
provided in this Section, be deemed given upon receipt, (c) if delivered by
facsimile transmission to the facsimile number as provided in this Section,
be deemed given upon receipt and (d) if delivered by overnight courier to the
address provided in this Section, be deemed given on the earlier of the first
Business Day following the date sent by such overnight courier, or upon
receipt (in each case regardless of whether such notice, request or other
communication is received by any other person to whom a copy of such notice
is to be delivered pursuant to this Section).
9.2 Entire Agreement.
-----------------
This Agreement constitutes the full, entire and integrated agreement
between the parties hereto with respect to the subject matter hereof, and
supersedes all prior negotiations, correspondence, understandings and
agreements among the parties hereto respecting the subject matter hereof.
9.3 Assignability.
--------------
This Agreement shall not be assignable (by operation of Law or otherwise)
by any party hereto without the prior written consent of the other parties
hereto.
9.4 Binding Effect; Benefit.
------------------------
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, personal and legal
representatives, guardians, successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any other person
any rights, remedies, obligations, or liabilities.
9.5 Severability.
-------------
Any provision of this Agreement which is held by a court of competent
jurisdiction
18
<PAGE>
to be prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability, without invalidating or rendering
unenforceable the remaining provisions of this Agreement, and in lieu of such
prohibited or unenforceable provision, there will be added automatically as a
part of this Agreement a legal, valid and enforceable provision as similar in
terms to such prohibited or unenforceable provision as may be possible.
9.6 Amendment; Waiver.
------------------
No provision of this Agreement may be amended, waived or otherwise
modified without the prior written consent of all of the parties hereto. No
action taken pursuant to this Agreement, including any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representation, warranty, covenant
or agreement herein contained. The waiver by any party hereto of a breach of
any provision or condition contained in this Agreement shall not operate or
be construed as a waiver of any subsequent breach or of any other conditions
hereof.
9.7 Section Headings.
-----------------
The section and other headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
9.8 Counterparts.
-------------
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument.
9.9 Applicable Law: Jurisdiction and Venue.
---------------------------------------
This Agreement shall be governed by, construed, interpreted and enforced
in accordance with the laws of the State of Colorado, except to the extent
that the General Corporation Law of the State of Delaware applies as a result
of the Company being incorporated in the State of Delaware, in which case
such General Corporation Law shall apply.
9.10 Remedies.
---------
The parties hereto acknowledge that in the event of a breach of this
Agreement, any claim for monetary damages hereunder may not constitute an
adequate remedy, and that it may therefore be necessary for the protection of
the parties and to carry out the terms of this Agreement to apply for the
specific performance of the provisions hereof. It is accordingly hereby
agreed by all parties that no objection to the form of the action or the
relief prayed for in any proceeding for specific performance of this
Agreement shall be raised by any
19
<PAGE>
party, in order that such relief may be expeditiously obtained by an
aggrieved party. All parties may proceed to protect and enforce their rights
hereunder by a suit in equity, transaction at law or other appropriate
proceeding, whether for specific performance or for an injunction against a
violation of the terms hereof or in aid of the exercise of any right, power
or remedy granted hereunder or by law, equity or statute or otherwise. No
course of dealing and no delay on the part of any party hereto in exercising
any right, power or remedy shall operate as a waiver thereof or otherwise
prejudice its rights, powers or remedies, and no right, power or remedy
conferred hereby shall be exclusive of any other right, power or remedy
referred to herein or now or hereafter available at law, in equity, by
statute or otherwise.
9.11 Further Assurances.
-------------------
The Company and each Stockholder, agree to execute and deliver, after the
date hereof, without additional consideration, such further assurances,
instruments and documents, and to take such further actions, as a party may
reasonably request in order to fulfill the intent of this Agreement and the
transactions contemplated hereby.
[signature page to follow]
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement under seal, with the intention of making it a sealed
instrument, on the date first above written.
PUMPKIN LTD.
By: /s/ Calvin Neider
-----------------------
Name: Calvin Neider
Title: Vice President
PUMPKIN MASTERS HOLDINGS, INC.
By: /s/ Calvin Neider
------------------------
Name: Calvin Neider
Title: Vice President
MANAGEMENT STOCKHOLDERS
/s/ Gay Burke
---------------------------
Gay Burke
P.O. Box 61456
Denver, CO 80206
21
<PAGE>
Exhibit 99.12
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated June 27, 1997 (this "Agreement"), by and
between Pumpkin Ltd., a Delaware corporation (the "Company"), and John Bardeen
(the "Executive").
WHEREAS, pursuant to an Agreement dated June 27, 1997 (the "Asset
Purchase Agreement") among Pumpkin Ltd. d/b/a Pumpkin Masters, Inc., a
Colorado company ("Pumpkin"), the Company, Pumpkin Masters Holdings, Inc., a
Delaware corporation, and Security Capital Corporation, a Delaware
corporation, the Company has agreed to acquire substantially all the assets
and business of Pumpkin; and
WHEREAS, the Company desires to employ the Executive as Co-Chairman
and Director of Promotions, and the Executive desires to be retained in such
capacities on the terms and conditions set forth herein, effective upon the
closing of the transactions contemplated by the Asset Purchase Agreement, it
being understood that if no such closing shall occur, this Agreement shall have
no force and effect.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements made herein, the Company and the Executive agree as follows:
1. Prior Agreements. The Executive hereby releases the Company
and its affiliates from all payments and other obligations under all agreements,
plans or arrangements covering the Executive which are in effect prior to the
Commencement Date (as hereinafter defined) and which are not to be assumed by
the Company pursuant to the Asset Purchase Agreement, if any.
2. Employment; Duties. (a) The Company shall employ the Executive
as Co-Chairman and Director of Promotions for the "Employment Period" as defined
in Section 3. The Executive shall also have the title of Founder. The
Executive, in his capacity as Co-Chairman and Director of Promotions, shall have
such duties, responsibilities and authority normally incident to such office,
subject to the provisions of the Bylaws of the Company. Subject to the
foregoing, the precise duties, responsibilities and authority of the Executive
may be expanded, limited or modified, from time to time, at the discretion of
the Company. During the Employment Period, the Executive shall render his
business services solely in the performance of his duties hereunder. The
Executive, during the term of his employment hereunder, shall devote such
portion of his working time as is necessary to perform his duties hereunder and,
during his performance of such duties, shall devote his full attention,
knowledge and experience to such duties and give his best effort, skill and
abilities, exclusively to promote the business and interests of the Company.
The Executive may not serve as
<PAGE>
an officer or director of, make investments in, or otherwise participate in,
any other entity without the prior written consent of the Board of Directors;
provided, that the foregoing shall not be deemed to prohibit the Executive
from acquiring, directly or indirectly, solely as an investment, not more
than one percent (1%) of any class of securities of or of the aggregate
principal outstanding indebtedness of any entity that is registered under
Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended,
including the regulations issued thereunder; provided further, that such
investment would not prevent, directly or indirectly, the transaction of
business by the Company with any state, district, territory or possession of
the United States of America or any foreign country or any governmental
subdivision, agency or instrumentality thereof by virtue of any statute, law,
regulation or administrative practice; and provided further, that so long as
it does not interfere with the Executive's employment, the Executive may (i)
with the prior written consent of the Board of Directors, (which consent will
not be unreasonably withheld), serve as a director in a noncompeting company,
(ii) serve as an officer, director or otherwise participate in purely
educational, welfare, social, religious and civic organizations, and (iii)
manage personal and family investments.
(b) The Executive shall be employed at Denver, Colorado or such other
place as the Company and Executive shall mutually agree.
3. Employment Period. This Agreement shall have a term of four
years, commencing as of the date of the closing of the transactions contemplated
by the Acquisition Agreement, as reference in the recitals above (the
"Commencement Date") and ending on the fourth anniversary of the Commencement
Date (the "Initial Period"), unless sooner terminated in accordance with the
provisions of Section 8 or Section 9. The term of this Agreement, as in effect
from time to time, is referred to herein as the "Employment Period".
4. Compensation and Benefits.
(a) Base Compensation. The Executive shall be paid an aggregate
base salary (the "Base Salary") of $100,000 per annum, less statutory deductions
and withholdings. The Base Salary shall be payable in a manner consistent with
the normal payroll practices of the Company in effect from time to time. The
Board of Directors of the Company, in its sole discretion, or at the
recommendation of the Compensation Committee, may increase (but not decrease)
the Base Salary, at any time.
(b) Benefits. The Executive shall be entitled to participate,
to the extent eligible, in the employee benefit and group insurance programs
provided by the Company for its officers and employees generally and in
accordance with the terms of the applicable plan documents as they may be
revised from time to time. The Company shall reimburse the Executive on a
regular basis for all reasonable expenses incurred by the Executive in the
performance of his duties hereunder in furtherance of the business of the
Company during the Employment Period. The Executive shall provide the Company
an itemized account to substantiate all such expenditures.
2
<PAGE>
5. Trade Secrets. The Executive acknowledges that it is in the
legitimate business interest of the Company to prohibit his disclosure or use of
Trade Secrets and Confidential Information relating to the Company and its
direct or indirect subsidiaries for any purpose other than in connection with
his performance of his duties to the Company, and to prohibit any potential
appropriation of such Trade Secrets and Confidential Information by the
Executive. The Executive therefore agrees that all Trade Secrets and
Confidential Information relating to the Company and its direct or indirect
subsidiaries heretofore or in the future obtained by the Executive shall be
considered confidential and the proprietary information of the Company and its
direct or indirect subsidiaries. During the Employment Period the Executive
shall not use or disclose, or permit or authorize any other person or entity to
use or disclose, any Trade Secrets or other Confidential Information, other than
as necessary to further the business objectives of the Company in accordance
with the terms of his employment hereunder. The term "Trade Secrets or other
Confidential Information" includes, by way of example and without limitation,
matters of a technical nature, such as scientific, trade and engineering
secrets, "know-how", formulas, secret processes, drawings, patterns (whether or
not published), works of authorship, machines, inventions, computer programs
(including documentation of such programs), services, materials, unfiled
trademark applications, copyright applications, patent applications, new product
plans, other plans, technical information, technical improvements, manufacturing
techniques, specifications, manufacturing and test data, progress reports and
research projects, and matters of a business nature, such as business plans,
prospects, financial information, proprietary information about costs, profits,
markets, sales, lists of customers and suppliers of the Company and its direct
or indirect subsidiaries, procurement and promotional information, credit and
financial data concerning customers or suppliers of the Company and its direct
or indirect subsidiaries, information relating to the management, operation and
planning of the Company and its direct and indirect subsidiaries, and other
information of a similar nature to the extent not available to the public, and
plans for future development. After termination of the Executive's employment
with the Company for any reason, the Executive shall not use or disclose Trade
Secrets or other Confidential Information.
6. Return of Documents and Property. Upon the termination of the
Executive's employment with the Company, or at any time upon the request of the
Company, the Executive (or his heirs or personal representatives) shall deliver
to the Company (a) all documents and materials (including, without limitation,
computer files) containing Trade Secrets or other Confidential Information
relating to the business and affairs of the Company and its direct and indirect
subsidiaries, and (b) all documents, materials and other property (including,
without limitation, computer files) belonging to the Company or its direct or
indirect subsidiaries, which in either case are in the possession or under the
control of the Executive (or his heirs or personal representatives).
7. Discoveries and Work. All Discoveries and Works made or
conceived by the Executive during his employment by the Company, whether during
the Employment Period or at any time prior thereto, jointly or with others, that
relate to the then-current present or anticipated activities of the Company or
its direct or indirect subsidiaries, or are used or usable by the Company or its
direct or indirect subsidiaries shall be owned by the Company or its direct or
indirect subsidiaries. The term "Discoveries and Works" includes, by way of
example but without limitation,
3
<PAGE>
Trade Secrets and other Confidential Information, patents and patent
applications, trademarks and trademark registrations and applications,
service marks and service mark registrations and applications, trade names,
copyrights and copyright registrations and applications and patterns (whether
or not published). The Executive shall (a) promptly notify, make full
disclosure to, and execute and deliver any documents requested by, the
Company, as the case may be, to evidence or better assure title to
Discoveries and Works in the Company or its direct or indirect subsidiaries,
as so requested, (b) renounce any and all claims, including but not limited
to claims of ownership and royalty, with respect to all Discoveries and Works
and all other property owned or licensed by the Company or its direct or
indirect subsidiaries, (c) assist the Company or its direct or indirect
subsidiaries in obtaining or maintaining for itself at its own expense United
States and foreign patents, copyrights, trademarks, trade secret protection
or other protection of any and all Discoveries and Works, and (d) promptly
execute, whether during his employment with the Company or thereafter, all
applications or other endorsements necessary or appropriate to maintain
patents and other rights for the Company or its direct or indirect
subsidiaries and to protect the title of the Company or its direct or
indirect subsidiaries thereto, including but not limited to assignments of
such patents and other rights. Any Discoveries and Works which, within two
years after the termination of the Executive's employment with the Company,
are made, disclosed, reduced to a tangible or written form or description, or
are reduced to practice by the Executive and which pertain to the business
carried on or products or services being sold or developed by the Company or
its direct or indirect subsidiaries at the time of such termination shall, as
between the Executive and, the Company, be presumed to have been made during
the Executive's employment by the Company. The Executive acknowledges that
all Discoveries and Works shall be deemed "works made for hire" under the
Copyright Act of 1976, as amended, 17 U.S.C. Section 101.
8. Termination.
(a) The Company or the Executive may terminate this Agreement,
with or without cause or for "EBITDA cause", with or without prior notice.
Except as provided in Sections 8(b) and 18, in the event the Company or the
Executive terminates this Agreement, the Executive's rights and the obligations
of the Company hereunder shall cease as of the effective date of the
termination, including, without limitation, the right to receive the Base
Salary, and all other compensation or benefits provided for in this Agreement.
(b) In the event the Company terminates this Agreement without
"cause" or for "EBITDA cause" or in the event that the Executive terminates
this Agreement upon notice for "Good Reason", and for so long as the
Executive continues to observe and perform the covenants contained in
Sections 5, 6, 7, 11, 12 and 13 of this Agreement, the Executive shall be
entitled to continue to receive payments of his Base Salary, subject to
applicable statutory deductions and withholdings and payable at such times
and in such amounts as if this Agreement were not terminated, and to the
continued provision of benefits referred to in Section 4(c), for the one year
period following such termination. All other compensation and benefits
provided for in Section 4 of this Agreement shall cease upon such
termination.
4
<PAGE>
For purposes of this Agreement, "cause" shall mean (i) the willful
failure of the Executive to follow the directions of the Company (other than any
such failure resulting from his incapacity due to physical or mental illness or
disability which is subject to the provisions of Section 9), after written
notice of such failure from the Board of Directors and a 10-day opportunity to
cure, (ii) any act of fraud or dishonesty, misappropriation or embezzlement,
wilful misconduct or gross negligence in connection with the performance of the
Executive's duties hereunder, (iii) a breach by the Executive of any material
provision hereof or of any material contractual or material legal duty to the
Company (including, but not limited to, the unauthorized disclosure of Trade
Secrets or other Confidential Information, non-compliance with the written
policies, guidelines and procedures of the Company), after written notice
thereof from the Board of Directors and a 30-day opportunity to cure in the
event that such breach was not wilful, (iv) the conviction of the Executive of
the commission of a crime or offense involving moral turpitude (including
pleading guilty or no contest to such a crime or offense or a lesser charge
which results from plea bargaining) which results in the imprisonment of the
Executive, whether or not committed in connection with the business of the
Company, (v) breach by the Executive of the provisions of any stockholders
agreement or other agreement relating to the Executive's acquisition of an
equity interest in the Company to which the Executive may become a party on or
after the date hereof.
For purposes of this Agreement, "EBITDA cause" shall mean (i) the
failure of the Company to achieve EBITDA (as defined in the Asset Purchase
Agreement) of at least One Million Dollars ($1,000,000.00) in any one fiscal
year or (ii) the failure of the Company to achieve average EBITDA (as defined in
the Asset Purchase Agreement) of at least One Million Five Hundred Thousand
Dollars ($1,500,000.00) in any two consecutive fiscal years.
For purposes of this Agreement, "Good Reason" shall mean (i) the
Company changes the Executive's status, title or position as an officer of the
Company and such change represents a material reduction in such status, title or
position conferred hereunder, and/or (ii) the Company changes its principal
location of business or Executive's place of employment, without Executive's
consent, from the Denver, Colorado area. If the Executive terminates this
Agreement for "Good Reason", his notice thereof shall include the specific
section of this Agreement which was relied upon and the reason that the Company
act has given rise to his termination for Good Reason.
(c) In the event the Company terminates this Agreement for cause
or the Executive terminates this Agreement (other than for Good Reason), the
Executive's rights hereunder shall cease as of the effective date of the
termination, including, without limitation, the right to receive the Base
Salary, and all other compensation or benefits provided for in this Agreement.
5
<PAGE>
9. Disability; Death.
(a) If, prior to the expiration of the Employment Period or the
termination of this Agreement, the Executive shall be unable to perform his
duties by reason of mental or physical disability for at least one-hundred
eighty (180) consecutive days or any one-hundred eighty (180) days (whether or
not consecutive) in any three-hundred sixty (360) consecutive day period, the
Company shall have the right to terminate this Agreement and the remainder of
the Employment Period by giving written notice to the Executive to that effect.
Immediately upon the giving of such notice, the Employment Period shall
terminate.
(b) Upon termination of this Agreement pursuant to Section 9(a),
the Executive shall be entitled to continue to receive payments of his Base
Salary, subject to applicable statutory deductions and withholdings and payable
at such times and in such amounts as if this Agreement were not terminated, for
the six-month period following such termination; provided, however, that any
such payments shall be offset by the amount of all proceeds of disability
insurance maintained for the Executive as an employee benefit from the Company
paid to the Executive. In the event of a dispute as to whether the Executive is
disabled within the meaning of Section 9(a), either party may from time to time
request a medical examination of the Executive by a doctor appointed by the
Chief of Staff of a hospital selected by mutual agreement of the parties, or as
the parties may otherwise agree, and the written medical opinion of such doctor
shall be conclusive and binding upon the parties as to whether the Executive has
become disabled and the date when such disability arose. The cost of any such
medical examination shall be borne by the Company. If, prior to the expiration
of the Employment Period or the termination of this Agreement, the Executive
shall die, the Employment Period shall terminate without further notice. The
Executive's estate shall be entitled to continue to receive payments of his Base
Salary, subject to applicable statutory deductions and withholdings and payable
at such times and in such amounts as if this Agreement were not terminated, for
the six-month period following such termination; provided, however, that any
such payments shall be offset by the amount of all proceeds of life insurance
maintained for the Executive as an employee benefit from the Company paid to the
Executive's estate.
10. No Conflicts. The Executive represents to the Company that the
execution, delivery and performance by the Executive of this Agreement do not
conflict with or result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default under any contract, agreement
or understanding, whether oral or written, to which the Executive is a party or
of which the Executive is or should be aware.
11. Non-Competition. From and after the Commencement Date, the
Executive will not, except pursuant to the terms hereof, directly or indirectly,
own, manage, operate, join, finance, control or participate in the ownership,
management, operation or control of, or be employed or engaged by or be
otherwise connected in any manner with, any business under a name similar to the
name of any of the Company or any direct or indirect subsidiary thereof. Prior
to the termination of the Executive's employment hereunder and for a period
after any such termination or expiration of this Agreement equal to the greater
of (i) twelve (12) months and (ii) the balance of the
6
<PAGE>
then existing Employment Period (as if this Agreement were not terminated),
the Executive will not (except as an officer, director, employee, agent or
consultant of the Company) directly or indirectly, own, manage, operate,
join, or have a financial interest in, control or participate in the
ownership, management, operation or control of, or be employed as an
employee, agent or consultant, or in any other individual or representative
capacity whatsoever, or use or permit his name to be used in connection with,
or be otherwise connected in any manner with (i) any business or enterprise
engaged (wherever located) in the design, development, manufacture,
distribution or sale of any products, or the provision of any services, which
the Company or its direct or indirect subsidiaries were designing,
developing, manufacturing, distributing, selling or providing at any time up
to an including the date of termination of this Agreement or (ii) any
business which is similar to or competitive with the business carried on or
planned by the Company or its direct or indirect subsidiaries at any time
during the period of the Executive's employment by the Company, whether
during or prior to the Employment Period, unless the Executive shall have
obtained the prior written consent of the Board of Directors, provided that
the foregoing restriction shall not be construed to prohibit the ownership by
the Executive of not more than one percent (1%) of any class of securities of
or of the aggregate principal outstanding indebtedness of any corporation
which is engaged in any of the foregoing businesses, that is registered
pursuant to the Securities Exchange Act of 1934, which securities are
publicly owned and regularly traded on any national exchange or in the
over-the-counter market, provided further, that such ownership represents a
passive investment and that neither the Executive nor any group of persons
including the Executive in any way, either directly or indirectly, manages or
exercises control of any such corporation, guarantees any of its financial
obligations, otherwise takes part in its business other than exercising his
rights as a shareholder, or seeks to do any of the foregoing.
12. Non-Solicitation. Prior to the termination of the Executive's
employment hereunder and for a period after any such termination or expiration
of this Agreement equal to the greater of (i) twelve (12) months and (ii) the
balance of the then existing Employment Period (as if this Agreement were not
terminated), the Executive agrees, directly or indirectly, whether for his own
account or for the account of any other individual or entity, not to solicit,
divert, appropriate, accept or canvas the trade, business or patronage of, or
sell any products or services which are the same as or similar to those
designed, developed, manufactured, distributed or sold by the Company or its
direct or indirect subsidiaries to, any individuals or entities that were either
customers of the Company or any of its direct or indirect subsidiaries during
the time the Executive was employed by the Company, whether during or prior to
the Employment Period, or prospective customers with respect to whom a sales
effort, presentation or proposal was made by the Company or any of its direct or
indirect subsidiaries during the twelve months preceding the date of termination
or expiration, as the case may be. The Executive further agrees that prior to
the termination of the Executive's employment hereunder and for a period of two
years thereafter, he shall not, directly or indirectly, (i) solicit, induce,
enter into any agreement with, or attempt to influence any individual who is
then currently or was an employee or consultant of the Company or any of its
direct or indirect subsidiaries at any time during the time the Executive was
employed by the Company, whether during or prior to the Employment Period, to
terminate his or her employment relationship with the Company or any of its
direct or indirect subsidiaries or to become employed by the
7
<PAGE>
Executive or any individual or entity by which Executive is employed or (ii)
interfere in any other way with the employment, or other relationship, of any
employee or consultant of the Company or any of its direct or indirect
subsidiaries.
13. Enforcement. (a) The Executive agrees that the remedies at law
for any breach or threat of breach by him of any of the provisions of Sections
5, 6, 7, 11 and 12 hereof will be inadequate, and that, in addition to any other
remedy to which the Company may be entitled at law or in equity, the Company
shall be entitled to a temporary or permanent injunction or injunctions or
temporary restraining order or orders to prevent breaches of the provisions of
Sections 5, 6, 7, 11 and 12 hereof and to enforce specifically the terms and
provisions thereof, in each case without the need to post any security or bond.
Nothing herein contained shall be construed as prohibiting the Company from
pursuing, in addition, any other remedies available to the Company for such
breach or threatened breach. A waiver by the Company of any breach of any
provision hereof shall not operate or be construed as a waiver of a breach of
any other provision of this Agreement or of any subsequent breach by the
Executive.
(b) It is expressly understood and agreed that although the Company
and the Executive consider the restrictions contained in Sections 5, 6, 7, 11
and 12 hereof to be reasonable for the purpose of preserving the goodwill,
proprietary rights and going concern value of the Company, if a final judicial
determination is made by a court having jurisdiction that the time or territory
or any other restriction contained in such Sections 5, 6, 7, 11 and 12 is an
unenforceable restriction on the Executive's activities, the provisions of such
Sections 5, 6, 7, 11 and 12 shall not be rendered void but shall be deemed
amended to apply as to such maximum time and territory and to such other extent
as such court may judicially determine or indicate to be reasonable.
Alternatively, if the court referred to above finds that any restriction
contained in Sections 5, 6, 7, 11 or 12 or any remedy provided herein is
unenforceable, and such restriction or remedy cannot be amended so as to make it
enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained therein or the availability of any other remedy.
The provisions of Sections 5, 6, 7, 11 and 12 shall in no respect limit or
otherwise affect the Executive's obligations under other agreements with the
Company.
14. Assignment. The rights and obligations of the parties under this
Agreement shall not be assignable by either the Company or the Executive,
provided that this Agreement is assignable by the Company to any affiliate of
the Company, to any successor in interest to any business of the Company, or to
a purchaser of all or substantially all of the assets of any business of the
Company.
15. Notices. Any notice required or permitted under this Agreement
shall be deemed to have been effectively made or given if in writing and
personally delivered, mailed properly addressed in a sealed envelope, postage
prepaid by certified or registered mail, delivered by a reputable overnight
delivery service or sent by facsimile. Unless otherwise changed by notice,
notice shall be properly addressed to the Executive if addressed to:
8
<PAGE>
John Bardeen
201 South Franklin Street
Denver, CO 80209
with a copy to:
Moye, Giles, O'Keefe, Vermeire & Gorrell LLP
1225 Seventeenth Street #2900
Denver, CO 80202
Attention: John E. Moye, Esq.
and properly addressed to the Company if addressed to:
Pumpkin Ltd.
427 East Bayaud
Denver, CO 80209
Attention: President and Chief Executive Officer
with a copy to:
Capital Partners, Inc.
One Pickwick Plaza
Suite 310
Greenwich, CT 06830
Attention: Calvin Neider
With a copy to:
Morgan Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Attention: Christopher T. Jensen, Esq.
16. Severability. Wherever there is any conflict between any
provision of this Agreement and any statute, law, regulation or judicial
precedent, the latter shall prevail, but in such event the provisions of this
Agreement thus affected shall be curtailed and limited only to the extent
necessary to bring them within the requirements of the law. In the event that
any provision of this Agreement shall be held by a court of proper jurisdiction
to be indefinite, invalid, void or voidable or otherwise unenforceable, the
balance of the Agreement shall continue in full force and effect
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unless such construction would clearly be contrary to the intentions of the
parties or would result in an unconscionable injustice.
17. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
18. Effect of Termination. Notwithstanding anything to the contrary
contained herein, if this Agreement or the Executive's employment is validly
terminated pursuant to Section 8 or Section 9 or expires by its terms, the
provisions of Sections 5, 6, 7, 11, 12, 13, 14, 16 and 19 shall continue in full
force and effect.
19. Miscellaneous; Choice of Law. This Agreement constitutes the
entire agreement, and supersedes all prior agreements, of the parties hereto
relating to the subject matter hereof, and there are no written or oral terms or
representations made by either party other than those contained herein. This
Agreement shall be governed by and construed in accordance with the domestic
laws of the State of Colorado, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of Colorado or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Colorado, except to the extent that the General
Corporation Law of the State of Delaware (the "GCL") applies as a result of the
Company being incorporated in the State of Delaware, in which case such GCL
shall apply.
[Signature Page to Follow]
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IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as of the day and year first above written.
PUMPKIN LTD.
By: /s/ Calvin Neider
---------------------------------
Name: Calvin Neider
Title: Vice President
/s/ John Bardeen
---------------------------------
John Bardeen
<PAGE>
Exhibit 99.13
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated June 27, 1997 (this "Agreement"), by and
between Pumpkin Ltd., a Delaware corporation (the "Company"), and Kea Bardeen
(the "Executive").
WHEREAS, pursuant to an Agreement dated June 27, 1997 (the "Asset
Purchase Agreement") among Pumpkin Ltd. d/b/a Pumpkin Masters, Inc., a Colorado
company ("Pumpkin"), the Company, Pumpkin Masters Holdings, Inc., a Delaware
corporation, and Security Capital Corporation, a Delaware corporation, the
Company has agreed to acquire substantially all the assets and business of
Pumpkin; and
WHEREAS, the Company desires to employ the Executive as Director of
Product Development, and the Executive desires to be retained in such capacities
on the terms and conditions set forth herein, effective upon the closing of the
transactions contemplated by the Asset Purchase Agreement, it being understood
that if no such closing shall occur, this Agreement shall have no force and
effect.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements made herein, the Company and the Executive agree as follows:
1. Prior Agreements. The Executive hereby releases the Company
and its affiliates from all payments and other obligations under all agreements,
plans or arrangements covering the Executive which are in effect prior to the
Commencement Date (as hereinafter defined) and which are not to be assumed by
the Company pursuant to the Asset Purchase Agreement, if any.
2. Employment; Duties. (a) The Company shall employ the Executive
as Director of Product Development for the "Employment Period" as defined in
Section 3. The Executive, in her capacity as Director of Product Development,
shall have such duties, responsibilities and authority normally incident to such
office, subject to the provisions of the Bylaws of the Company. Subject to the
foregoing, the precise duties, responsibilities and authority of the Executive
may be expanded, limited or modified, from time to time, at the discretion of
the Company. During the Employment Period, the Executive shall render her
business services solely in the performance of her duties hereunder. The
Executive, during the term of her employment hereunder, shall devote her full
working time, attention, knowledge and experience and give her best effort,
skill and abilities, exclusively to promote the business and interests of the
Company. The Executive may not serve as an officer or director of, make
investments in, or otherwise participate in, any other entity without the prior
written consent of the Board of Directors; provided, that the
<PAGE>
foregoing shall not be deemed to prohibit the Executive from acquiring,
directly or indirectly, solely as an investment, not more than one percent
(1%) of any class of securities of or of the aggregate principal outstanding
indebtedness of any entity that is registered under Section 12(b) or 12(g) of
the Securities Exchange Act of 1934, as amended, including the regulations
issued thereunder; provided further, that such investment would not prevent,
directly or indirectly, the transaction of business by the Company with any
state, district, territory or possession of the United States of America or
any foreign country or any governmental subdivision, agency or
instrumentality thereof by virtue of any statute, law, regulation or
administrative practice; and provided further, that so long as it does not
interfere with the Executive's employment, the Executive may (i) with the
prior written consent of the Board of Directors, (which consent will not be
unreasonably withheld), serve as a director in a noncompeting company, (ii)
serve as an officer, director or otherwise participate in purely educational,
welfare, social, religious and civic organizations, and (iii) manage personal
and family investments.
(b) The Executive shall be employed at Denver, Colorado or such other
place as the Company and Executive shall mutually agree.
(c) It is the expectation of the Company and the Executive that the
Executive will work full time (40 hours per week, at a minimum) during the
months of September and October of each calendar year, and will work half
time (20 hours per week, at a minimum) during the months November through May
of each calendar year, in each case during the term of this Agreement. The
Executive shall not be required to perform any services for the Company
hereunder during the months of June, July and August of each calendar year,
but will be available during such months to assist the Company, at the
request and direction of the Board of Directors, for additional compensation
at the rate of $100.00 per hour. With the consent of the Company, the
Executive may reduce her working time during the period from September 1998
through May 1999, upon such terms and conditions as the Company and the
Executive shall mutually agree.
3. Employment Period. This Agreement shall have a term of three
years, commencing as of the date of the closing of the transactions contemplated
by the Acquisition Agreement, as reference in the recitals above (the
"Commencement Date") and ending on the fourth anniversary of the Commencement
Date (the "Initial Period"), unless sooner terminated in accordance with the
provisions of Section 8 or Section 9. The term of this Agreement, as in effect
from time to time, is referred to herein as the "Employment Period."
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4. Compensation and Benefits.
(a) Base Compensation. The Executive shall be paid an aggregate
base salary (the "Base Salary") of $100,000 per annum, less statutory deductions
and withholdings. The Base Salary shall be payable in a manner consistent with
the normal payroll practices of the Company in effect from time to time. The
Board of Directors of the Company, in its sole discretion, or at the
recommendation of the Compensation Committee, may increase (but not decrease)
the Base Salary, at any time.
(b) Benefits. The Executive shall be entitled to participate,
to the extent eligible, in the employee benefit and group insurance programs
provided by the Company for its officers and employees generally and in
accordance with the terms of the applicable plan documents as they may be
revised from time to time. The Company shall reimburse the Executive on a
regular basis for all reasonable expenses incurred by the Executive in the
performance of her duties hereunder in furtherance of the business of the
Company during the Employment Period. The Executive shall provide the Company
an itemized account to substantiate all such expenditures. The Executive shall
be entitled to primary use of the vehicle, a 1993 Chrysler Town and Country
Minivan (Vehicle Identification No. 1C4GH54R4PX529529), currently owned by the
Company until the earlier of the termination of the Employment Period or
December 31, 1998 (the "Car Use Term"). Until the termination of the Car Use
Term, the Company shall maintain, at the current level, the insurance and pay
all costs and expenses with respect to the registration and normal and routine
repairs on such vehicle. At the termination of the Car Use Term, the Executive
may elect to purchase, for cash, the vehicle from the Company for its fair
market value or, if the Executive does not so elect to purchase the vehicle, the
Company may use, sell, transfer or otherwise dispose of such vehicle as it, in
its sole discretion, shall determine.
5. Trade Secrets. The Executive acknowledges that it is in the
legitimate business interest of the Company to prohibit her disclosure or use of
Trade Secrets and Confidential Information relating to the Company and its
direct or indirect subsidiaries for any purpose other than in connection with
her performance of her duties to the Company, and to prohibit any potential
appropriation of such Trade Secrets and Confidential Information by the
Executive. The Executive therefore agrees that all Trade Secrets and
Confidential Information relating to the Company and its direct or indirect
subsidiaries heretofore or in the future obtained by the Executive shall be
considered confidential and the proprietary information of the Company and its
direct or indirect subsidiaries. During the Employment Period the Executive
shall not use or disclose, or permit or authorize any other person or entity to
use or disclose, any Trade Secrets or other Confidential Information, other than
as necessary to further the business objectives of the Company in accordance
with the terms of her employment hereunder. The term "Trade Secrets or other
Confidential Information" includes, by way of example and without limitation,
matters of a technical nature, such as scientific, trade and engineering
secrets, "know-how", formulas, secret processes, drawings, patterns (whether or
not published), works of authorship, machines, inventions, computer programs
(including documentation of such programs), services, materials, unfiled
trademark applications, copyright applications, patent applications, new product
plans, other plans, technical information,
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technical improvements, manufacturing techniques, specifications,
manufacturing and test data, progress reports and research projects, and
matters of a business nature, such as business plans, prospects, financial
information, proprietary information about costs, profits, markets, sales,
lists of customers and suppliers of the Company and its direct or indirect
subsidiaries, procurement and promotional information, credit and financial
data concerning customers or suppliers of the Company and its direct or
indirect subsidiaries, information relating to the management, operation and
planning of the Company and its direct and indirect subsidiaries, and other
information of a similar nature to the extent not available to the public,
and plans for future development. After termination of the Executive's
employment with the Company for any reason, the Executive shall not use or
disclose Trade Secrets or other Confidential Information.
6. Return of Documents and Property. Upon the termination of the
Executive's employment with the Company, or at any time upon the request of the
Company, the Executive (or her heirs or personal representatives) shall deliver
to the Company (a) all documents and materials (including, without limitation,
computer files) containing Trade Secrets or other Confidential Information
relating to the business and affairs of the Company and its direct and indirect
subsidiaries, and (b) all documents, materials and other property (including,
without limitation, computer files) belonging to the Company or its direct or
indirect subsidiaries, which in either case are in the possession or under the
control of the Executive (or her heirs or personal representatives); provided,
however, that the Executive shall not be required to return to the Company the
property designated on Schedule 1.7 of the Asset Purchase Agreement to be
retained by her.
7. Discoveries and Work. (a) Except as specifically set forth in
this Section 7, all Discoveries and Works made or conceived by the Executive
during her employment by the Company, whether during the Employment Period or at
any time prior thereto, jointly or with others, that relate to the then-current
present or anticipated activities of the Company or its direct or indirect
subsidiaries, or are used or usable by the Company or its direct or indirect
subsidiaries in connection with such activities shall be owned by the Company or
its direct or indirect subsidiaries, as appropriate. The term "Discoveries and
Works" includes, by way of example but without limitation, Trade Secrets and
other Confidential Information, patents and patent applications, trademarks and
trademark registrations and applications, service marks and service mark
registrations and applications, trade names, copyrights and copyright
registrations and applications and patterns (whether or not published). The
Executive shall (i) promptly notify, make full disclosure to, and execute and
deliver any documents requested by, the Company, as the case may be, to evidence
or better assure title to Discoveries and Works in the Company or its direct or
indirect subsidiaries, as so requested, (ii) renounce any and all claims,
including but not limited to claims of ownership and royalty, with respect to
all Discoveries and Works and all other property owned or licensed by the
Company or its direct or indirect subsidiaries, (iii) assist the Company or its
direct or indirect subsidiaries in obtaining or maintaining for itself at its
own expense United States and foreign patents, copyrights, trademarks, trade
secret protection or other protection of any and all Discoveries and Works, and
(iv) promptly execute, whether during her employment with the Company or
thereafter, all applications or other endorsements necessary or appropriate to
maintain patents and other rights for the Company or its direct or indirect
subsidiaries and to protect the title of the
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Company or its direct or indirect subsidiaries thereto, including but not
limited to assignments of such patents and other rights. Subject to the
limitations set forth in this Section 7, any Discoveries and Works which,
within two years after the termination of the Executive's employment with the
Company, are made, disclosed, reduced to a tangible or written form or
description, or are reduced to practice by the Executive and which pertain to
the business carried on or products or services being sold or developed by
the Company or its direct or indirect subsidiaries at the time of such
termination shall, as between the Executive and, the Company, be presumed to
have been made during the Executive's employment by the Company. The
Executive acknowledges that all Discoveries and Works shall be deemed "works
made for hire" under the Copyright Act of 1976, as amended, 17 U.S.C. Section
101.
(b) Notwithstanding the foregoing, the Company and the Executive
agree as follows:
(i) The Executive may develop the sole toy product (the "Toy")
described in a letter, dated June 27, 1997, from the Executive to the
Company (the "Letter). The Letter shall be kept, sealed, at the
offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New
York. The Executive represents and warrants to the Company that the
Toy does not relate in any manner to the now-current present or
anticipated activities of the Company and does not and will not, use,
reflect or in any manner incorporate or in any manner (in form, style
or otherwise) appear in any way similar to any image or pattern
currently or previously used or, to the best knowledge of the
Executive, curently usable by the Company.
When the Executive has an acceptable (as determined in her sole
discretion) prototype of the Toy, she shall deliver such prototype and
the Letter to the Company. The Company shall review the Letter and the
prototype and shall determine, in its sole reasonable discretion, if
they are substantially similar. If they are, the Toy shall be
excluded from the Discoveries and Works subject to this Section 7.
(ii) The Executive may develop, produce and/or distribute kitchen
products for or in connection with Chef-on-the-Go that do not relate
in any manner to the then-current present or anticipated activities of
the Company or its direct or indirect subsidiaries, and do not use,
reflect or in any manner incorporate or in any manner (in form, style
or otherwise) appear in any way similar to any image or pattern then
used or usable by the Company or its direct or indirect subsidiaries.
(iii) The Executive may write, sell or produce books or
stories and retain the copyright to those works so long as they do not
directly relate to the activities of the Company. If, during the term
of this Agreement the Executive writes books or stories which relate
to the activities of the Company and/or may be effectively combined
with the images owned by the Company, the Executive agrees to present
them to the Company. If the Company wishes to publish such works, the
Executive will retain the copyright but will give the Company an
assignable, royalty-free
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license-to-use for a period of five years, or two years after the
termination of this Employment Agreement, whichever is longer. If,
t that time, the Company is still publishing the work, the Executive
agrees to negotiate a reasonable royalty based on market rates. The
Executive further agrees to assist in obtaining copyright registration
for the works so that the Company and/or the Executive can protect
such work from infringement. If the Company chooses not to publish
the work offered to it, the Company agrees to reasonably consider
whether publication of the work directly competes with the Company
or could in some way adversely affect its revenues and if ti does not,
will agree to allow the Executive to seek other means of publication,
should the Executive so desire. Two years after the termination of
this Employment Agreement, the Company will not retain any rights of
approval.
8. Termination.
(a) The Company or the Executive may terminate this Agreement,
with or without cause or for "EBITDA cause", with or without prior notice.
Except as provided in Sections 8(b) and 18, in the event the Company or the
Executive terminates this Agreement, the Executive's rights and the obligations
of the Company hereunder shall cease as of the effective date of the
termination, including, without limitation, the right to receive the Base
Salary, and all other compensation or benefits provided for in this Agreement.
(b) In the event the Company terminates this Agreement without
"cause" or for "EBITDA cause" or in the event that the Executive terminates
this Agreement upon notice for "Good Reason", and for so long as the
Executive continues to observe and perform the covenants contained in
Sections 5, 6, 7, 11, 12 and 13 of this Agreement, the Executive shall be
entitled to continue to receive payments of her Base Salary, subject to
applicable statutory deductions and withholdings and payable at such times
and in such amounts as if this Agreement were not terminated, and to the
continued provision of benefits referred to in Section 4(c), for the one year
period following such termination. All other compensation and benefits
provided for in Section 4 of this Agreement shall cease upon such
termination.
For purposes of this Agreement, "cause" shall mean (i) the willful
failure of the Executive to follow the directions of the Company (other than any
such failure resulting from her incapacity due to physical or mental illness or
disability which is subject to the provisions of Section 9), after written
notice of such failure from the Board of Directors and a 10-day opportunity to
cure, (ii) any act of fraud or dishonesty, misappropriation or embezzlement,
wilful misconduct or gross negligence in connection with the performance of the
Executive's duties hereunder, (iii) a breach by the Executive of any material
provision hereof or of any material contractual or material legal duty to the
Company (including, but not limited to, the unauthorized disclosure of Trade
Secrets or other Confidential Information, non-compliance with the written
policies, guidelines and procedures of the Company), after written notice
thereof from the Board of Directors and a 30-day opportunity to cure in the
event that such breach was not wilful, (iv) the conviction of the Executive of
the commission of a crime or offense involving moral turpitude (including
pleading guilty or no contest
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to such a crime or offense or a lesser charge which results from plea
bargaining) which results in the imprisonment of the Executive, whether or
not committed in connection with the business of the Company, (v) breach by
the Executive of the provisions of any stockholders agreement or other
agreement relating to the Executive's acquisition of an equity interest in
the Company to which the Executive may become a party on or after the date
hereof.
For purposes of this Agreement, "EBITDA cause" shall mean (i) the
failure of the Company to achieve EBITDA (as defined in the Asset Purchase
Agreement) of at least One Million Dollars ($1,000,000.00) in any one fiscal
year or (ii) the failure of the Company to achieve average EBITDA (as defined in
the Asset Purchase Agreement) of at least One Million Five Hundred Thousand
Dollars ($1,500,000.00) in any two consecutive fiscal years.
For purposes of this Agreement, "Good Reason" shall mean (i) the
Company changes the Executive's status, title or position as an officer of the
Company and such change represents a material reduction in such status, title or
position conferred hereunder, and/or (ii) the Company changes its principal
location of business or Employee's place of employment, without Employee's
consent, from the Denver, Colorado area. If the Executive terminates this
Agreement for "Good Reason", her notice thereof shall include the specific
section of this Agreement which was relied upon and the reason that the Company
act has given rise to her termination for Good Reason.
(c) In the event the Company terminates this Agreement for cause
or the Executive terminates this Agreement (other than for Good Reason), the
Executive's rights hereunder shall cease as of the effective date of the
termination, including, without limitation, the right to receive the Base
Salary, and all other compensation or benefits provided for in this Agreement.
9. Disability; Death.
(a) If, prior to the expiration of the Employment Period or the
termination of this Agreement, the Executive shall be unable to perform her
duties by reason of mental or physical disability for at least one-hundred
eighty (180) consecutive days or any one-hundred eighty (180) days (whether or
not consecutive) in any three-hundred sixty (360) consecutive day period, the
Company shall have the right to terminate this Agreement and the remainder of
the Employment Period by giving written notice to the Executive to that effect.
Immediately upon the giving of such notice, the Employment Period shall
terminate.
(b) Upon termination of this Agreement pursuant to Section 9(a),
the Executive shall be entitled to continue to receive payments of her Base
Salary, subject to applicable statutory deductions and withholdings and payable
at such times and in such amounts as if this Agreement were not terminated, for
the six-month period following such termination; provided, however, that any
such payments shall be offset by the amount of all proceeds of disability
insurance maintained for the Executive as an employee benefit from the Company
paid to the Executive. In the event of a dispute as to whether the Executive is
disabled within the meaning of Section 9(a), either party may from time to time
request a medical examination of the Executive by a doctor
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appointed by the Chief of Staff of a hospital selected by mutual agreement of
the parties, or as the parties may otherwise agree, and the written medical
opinion of such doctor shall be conclusive and binding upon the parties as to
whether the Executive has become disabled and the date when such disability
arose. The cost of any such medical examination shall be borne by the
Company. If, prior to the expiration of the Employment Period or the
termination of this Agreement, the Executive shall die, the Employment Period
shall terminate without further notice. The Executive's estate shall be
entitled to continue to receive payments of her Base Salary, subject to
applicable statutory deductions and withholdings and payable at such times
and in such amounts as if this Agreement were not terminated, for the
six-month period following such termination; provided, however, that any such
payments shall be offset by the amount of all proceeds of life insurance
maintained for the Executive as an employee benefit from the Company paid to
the Executive's estate.
10. No Conflicts. The Executive represents to the Company that the
execution, delivery and performance by the Executive of this Agreement do not
conflict with or result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default under any contract, agreement
or understanding, whether oral or written, to which the Executive is a party or
of which the Executive is or should be aware.
11. Non-Competition. From and after the Commencement Date, the
Executive will not, except pursuant to the terms hereof, directly or indirectly,
own, manage, operate, join, finance, control or participate in the ownership,
management, operation or control of, or be employed or engaged by or be
otherwise connected in any manner with, any business under a name similar to the
name of any of the Company or any direct or indirect subsidiary thereof. Prior
to the termination of the Executive's employment hereunder and for a period
after any such termination or expiration of this Agreement equal to the greater
of (i) twelve (12) months and (ii) the balance of the then existing Employment
Period (as if this Agreement were not terminated), the Executive will not
(except as an officer, director, employee, agent or consultant of the Company)
directly or indirectly, own, manage, operate, join, or have a financial interest
in, control or participate in the ownership, management, operation or control
of, or be employed as an employee, agent or consultant, or in any other
individual or representative capacity whatsoever, or use or permit her name to
be used in connection with, or be otherwise connected in any manner with (i) any
business or enterprise engaged (wherever located) in the design, development,
manufacture, distribution or sale of any products, or the provision of any
services, which the Company or its direct or indirect subsidiaries were
designing, developing, manufacturing, distributing, selling or providing at any
time up to an including the date of termination of this Agreement or (ii) any
business which is similar to or competitive with the business carried on or
planned by the Company or its direct or indirect subsidiaries at any time during
the period of the Executive's employment by the Company, whether during or prior
to the Employment Period, unless the Executive shall have obtained the prior
written consent of the Board of Directors, provided that the foregoing
restriction shall not be construed to prohibit the ownership by the Executive of
not more than one percent (1%) of any class of securities of or of the aggregate
principal outstanding indebtedness of any corporation which is engaged in any of
the foregoing businesses, that is registered pursuant to the Securities Exchange
Act of 1934, which securities are publicly owned and regularly traded on any
national exchange or in the over-the-
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counter market, provided further, that such ownership represents a passive
investment and that neither the Executive nor any group of persons including
the Executive in any way, either directly or indirectly, manages or exercises
control of any such corporation, guarantees any of its financial obligations,
otherwise takes part in its business other than exercising her rights as a
shareholder, or seeks to do any of the foregoing.
12. Non-Solicitation. Prior to the termination of the Executive's
employment hereunder and for a period after any such termination or expiration
of this Agreement equal to the greater of (i) twelve (12) months and (ii) the
balance of the then existing Employment Period (as if this Agreement were not
terminated), the Executive agrees, directly or indirectly, whether for her own
account or for the account of any other individual or entity, not to solicit,
divert, appropriate, accept or canvas the trade, business or patronage of, or
sell any products or services which are the same as or similar to those
designed, developed, manufactured, distributed or sold by the Company or its
direct or indirect subsidiaries to, any individuals or entities that were either
customers of the Company or any of its direct or indirect subsidiaries during
the time the Executive was employed by the Company, whether during or prior to
the Employment Period, or prospective customers with respect to whom a sales
effort, presentation or proposal was made by the Company or any of its direct or
indirect subsidiaries during the twelve months preceding the date of termination
or expiration, as the case may be. The Executive further agrees that prior to
the termination of the Executive's employment hereunder and for a period of two
years thereafter, she shall not, directly or indirectly, (i) solicit, induce,
enter into any agreement with, or attempt to influence any individual who is
then currently or was an employee or consultant of the Company or any of its
direct or indirect subsidiaries at any time during the time the Executive was
employed by the Company, whether during or prior to the Employment Period, to
terminate his or her employment relationship with the Company or any of its
direct or indirect subsidiaries or to become employed by the Executive or any
individual or entity by which Executive is employed or (ii) interfere in any
other way with the employment, or other relationship, of any employee or
consultant of the Company or any of its direct or indirect subsidiaries.
13. Enforcement. (a) The Executive agrees that the remedies at law
for any breach or threat of breach by her of any of the provisions of Sections
5, 6, 7, 11 and 12 hereof will be inadequate, and that, in addition to any other
remedy to which the Company may be entitled at law or in equity, the Company
shall be entitled to a temporary or permanent injunction or injunctions or
temporary restraining order or orders to prevent breaches of the provisions of
Sections 5, 6, 7, 11 and 12 hereof and to enforce specifically the terms and
provisions thereof, in each case without the need to post any security or bond.
Nothing herein contained shall be construed as prohibiting the Company from
pursuing, in addition, any other remedies available to the Company for such
breach or threatened breach. A waiver by the Company of any breach of any
provision hereof shall not operate or be construed as a waiver of a breach of
any other provision of this Agreement or of any subsequent breach by the
Executive.
(b) It is expressly understood and agreed that although the Company
and the Executive consider the restrictions contained in Sections 5, 6, 7, 11
and 12 hereof to be reasonable
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for the purpose of preserving the goodwill, proprietary rights and going
concern value of the Company, if a final judicial determination is made by a
court having jurisdiction that the time or territory or any other restriction
contained in such Sections 5, 6, 7, 11 and 12 is an unenforceable restriction
on the Executive's activities, the provisions of such Sections 5, 6, 7, 11
and 12 shall not be rendered void but shall be deemed amended to apply as to
such maximum time and territory and to such other extent as such court may
judicially determine or indicate to be reasonable. Alternatively, if the
court referred to above finds that any restriction contained in Sections 5,
6, 7, 11 or 12 or any remedy provided herein is unenforceable, and such
restriction or remedy cannot be amended so as to make it enforceable, such
finding shall not affect the enforceability of any of the other restrictions
contained therein or the availability of any other remedy. The provisions of
Sections 5, 6, 7, 11 and 12 shall in no respect limit or otherwise affect the
Executive's obligations under other agreements with the Company.
14. Assignment. The rights and obligations of the parties under this
Agreement shall not be assignable by either the Company or the Executive,
provided that this Agreement is assignable by the Company to any affiliate of
the Company, to any successor in interest to any business of the Company, or to
a purchaser of all or substantially all of the assets of any business of the
Company.
15. Notices. Any notice required or permitted under this Agreement
shall be deemed to have been effectively made or given if in writing and
personally delivered, mailed properly addressed in a sealed envelope, postage
prepaid by certified or registered mail, delivered by a reputable overnight
delivery service or sent by facsimile. Unless otherwise changed by notice,
notice shall be properly addressed to the Executive if addressed to:
Kea Bardeen
201 South Franklin Street
Denver, CO 80209
with a copy to:
Moye, Giles, O'Keefe, Vermeire & Gorrell LLP
1225 Seventeenth Street # 2900
Denver, CO 80202
Attention: John E. Moye, Esq.
and properly addressed to the Company if addressed to:
Pumpkin Ltd.
427 East Bayaud
Denver, CO 80209
Attention: President and Chief Executive Officer
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with a copy to:
Capital Partners, Inc.
One Pickwick Plaza
Suite 310
Greenwich, CT 06830
Attention: Calvin Neider
with a copy to:
Morgan Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Attention: Christopher T. Jensen, Esq.
16. Severability. Wherever there is any conflict between any
provision of this Agreement and any statute, law, regulation or judicial
precedent, the latter shall prevail, but in such event the provisions of this
Agreement thus affected shall be curtailed and limited only to the extent
necessary to bring them within the requirements of the law. In the event that
any provision of this Agreement shall be held by a court of proper jurisdiction
to be indefinite, invalid, void or voidable or otherwise unenforceable, the
balance of the Agreement shall continue in full force and effect unless such
construction would clearly be contrary to the intentions of the parties or would
result in an unconscionable injustice.
17. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
18. Effect of Termination. Notwithstanding anything to the contrary
contained herein, if this Agreement or the Executive's employment is validly
terminated pursuant to Section 8 or Section 9 or expires by its terms, the
provisions of Sections 5, 6, 7, 11, 12, 13, 14, 16 and 19 shall continue in full
force and effect.
19. Miscellaneous; Choice of Law. This Agreement constitutes the
entire agreement, and supersedes all prior agreements, of the parties hereto
relating to the subject matter hereof, and there are no written or oral terms or
representations made by either party other than those contained herein. This
Agreement shall be governed by and construed in accordance with the domestic
laws of the State of Colorado, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of Colorado or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Colorado, except to the extent that the General
Corporation Law of the State of Delaware (the "GCL") applies as a result of the
Company being incorporated in the State of Delaware, in which case such GCL
shall apply.
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IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as of the day and year first above written.
PUMPKIN LTD.
By: /s/ Calvin Neider
---------------------------------
Name: Calvin Neider
Title: Vice President
/s/ Kea Bardeen
---------------------------------
Kea Bardeen
<PAGE>
Exhibit 99.14
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated June 27, 1997 (this "Agreement"), by and
between Pumpkin Ltd., a Delaware corporation (the "Company"), and Gay Burke
(the "Executive").
WHEREAS, pursuant to an Agreement dated June 27, 1997 (the "Asset
Purchase Agreement") among Pumpkin, Ltd. d/b/a Pumpkin Masters, Inc., a
Colorado company ("Pumpkin"), the Company, Pumpkin Masters Holdings, Inc., a
Delaware corporation ("Holdings"), and Security Capital Corporation, a
Delaware corporation ("SCC"), the Company has agreed to acquire substantially
all the assets and business of Pumpkin; and
WHEREAS, the Company desires to employ the Executive as President
and Chief Executive Officer, and the Executive desires to be retained in such
capacities on the terms and conditions set forth herein, effective upon the
closing of the transactions contemplated by the Asset Purchase Agreement, it
being understood that if no such closing shall occur, this Agreement shall
have no force and effect.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements made herein, the Company and the Executive agree as follows:
1. Prior Agreements. The Executive hereby releases the Company
and its affiliates from all payments and other obligations under all
agreements, plans or arrangements covering the Executive which are in effect
prior to the Commencement Date (as hereinafter defined) and which are not to
be assumed by the Company pursuant to the Asset Purchase Agreement, if any.
2. Employment; Duties. (a) The Company shall employ the Executive
as President and Chief Executive Officer of the Company for the "Employment
Period" as defined in Section 3. The Executive, in her capacity as President
and Chief Executive Officer of the Company, shall have such duties,
responsibilities and authority normally incident to such offices and as
described in the Bylaws of the Company. Subject to the foregoing, the
precise duties, responsibilities and authority of the Executive may be
expanded or modified, from time to time, at the discretion of the Company.
Except as provided below, during the Employment Period, the Executive shall
render her business services solely in the performance of her duties
hereunder and shall devote her full working time, attention, knowledge and
experience and give her best effort, skill and abilities, exclusively to
promote the business and interests of the Company. The Executive may not
serve as an officer or director of, make investments in, or otherwise
participate in, any other entity without the prior written consent of the
Board of Directors provided: (i) that the foregoing shall not be deemed to
prohibit the Executive from acquiring, directly or indirectly, solely as an
<PAGE>
investment, not more than one percent (1%) of any class of securities of or
of the aggregate principal outstanding indebtedness of any entity that is
registered under Section 12(b) or 12(g) of the Securities Exchange Act of
1934, as amended, including the regulations issued thereunder; provided
further, that such investment would not prevent, directly or indirectly, the
transaction of business by the Company with any state, district, territory or
possession of the United States of America or any foreign country or any
governmental subdivision, agency or instrumentality thereof by virtue of any
statute, law, regulation or administrative practice and (ii) so long as it
does not interfere with the Executive's employment, the Executive may (x)
with the prior written consent of the Board of Directors (which consent will
not be unreasonably withheld), serve as a director in a noncompeting company,
(y) serve as an officer, director or otherwise participate in purely
educational, welfare, social, religious and civic organizations, and (z)
manage personal and family investments.
(b) The Executive shall be employed at Denver, Colorado or such other
place as the Company and Executive shall mutually agree.
3. Employment Period. This Agreement shall have a term of four
years, commencing as of the date of the closing of the transactions contemplated
by the Asset Purchase Agreement, as reference in the recitals above (the
"Commencement Date") and ending on the fourth anniversary of the Commencement
Date, unless sooner terminated in accordance with the provisions of Section 8 or
Section 9.
4. Compensation and Benefits.
(a) Base Compensation. The Executive shall be paid an aggregate
base salary (the "Base Salary") of $150,000 per annum, less statutory deductions
and withholdings. The Base Salary shall be payable in a manner consistent with
the normal payroll practices of the Company in effect from time to time. If,
at the completion of any fiscal year of the Company that ends during the
Employment Period, the Company has substantially achieved the performance goals
specified for such fiscal year in the business plan approved by the Board of
Directors, the Base Salary shall be increased by 10%, effective July 1 of the
immediately following fiscal year. As so increased, the aggregate base salary
amount shall be deemed the Base Salary amount for purposes of this Agreement.
(b) Annual Bonus. In addition to the Base Salary, including any
increase pursuant to the provisions of Section 4(a), the Executive shall be
entitled to receive an annual bonus for each fiscal year of the Company that
ends during the Employment Period in an amount calculated as follows: (i) if the
Company's total EBITDA for such fiscal year is equal to or less than
$1,500,000.00, zero, (ii) if the Company's total EBITDA for such fiscal year is
greater than $1,500,000.00 and equal to or less than $1,800,000.00, an amount
equal to 1.5% of the Company's total EBITDA for such fiscal year and (iii) if
the Company's total EBITDA for such fiscal year is greater than $1,800,000.00,
(x) an amount equal to 1.5% of the portion of the Company's total EBITDA for
such fiscal year up to $1,800,000.00, plus (y) an amount equal to 2.5% of the
portion of the Company's total EBITDA for such fiscal year in excess of
$1,800,000.00 and equal to or less
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<PAGE>
than $2,300,000.00 plus (z) an amount equal to 4% of the portion of the
Company's total EBITDA for such fiscal year in excess of $2,300,000.00. For
purposes of the foregoing, "EBITDA" shall have the meaning ascribed to it in
the Asset Purchase Agreement, without giving effect to the Seller Exclusions
(as such term is defined in the Asset Purchase Agreement). The bonus
contemplated by this Section 4(b), if earned, shall be paid to the Executive
within thirty (30) days immediately following the release of the Company's
audited financial statements for the fiscal year upon which the bonus is
based.
(c) Benefits. The Executive shall be entitled to participate,
to the extent eligible, in the employee benefit and group insurance programs
provided by the Company for its officers and employees generally and in
accordance with the terms of the applicable plan documents as they may be
revised from time to time. The Company shall reimburse the Executive on a
regular basis for all reasonable expenses incurred by the Executive in the
performance of her duties hereunder in furtherance of the business of the
Company during the Employment Period. The Executive shall provide the Company
an itemized account to substantiate all such expenditures.
5. Trade Secrets. The Executive acknowledges that it is in the
legitimate business interest of the Company to prohibit her disclosure or use of
Trade Secrets and Confidential Information relating to the Company and its
direct or indirect subsidiaries for any purpose other than in connection with
her performance of her duties to the Company, and to prohibit any potential
appropriation of such Trade Secrets and Confidential Information by the
Executive. The Executive therefore agrees that all Trade Secrets and
Confidential Information relating to the Company and its direct or indirect
subsidiaries heretofore or in the future obtained by the Executive shall be
considered confidential and the proprietary information of the Company and its
direct or indirect subsidiaries. During the Employment Period the Executive
shall not use or disclose, or knowingly or intentionally permit or authorize any
other person or entity to use or disclose, any Trade Secrets or other
Confidential Information, other than as necessary to further the business
objectives of the Company in accordance with the terms of her employment
hereunder. The term "Trade Secrets or other Confidential Information" includes,
by way of example and without limitation, matters of a technical nature, such as
scientific, trade and engineering secrets, "know-how", formulas, secret
processes, drawings, patterns (whether or not published), works of authorship,
machines, inventions, computer programs (including documentation of such
programs), services, materials, unfiled trademark applications, copyright
applications, patent applications, new product plans, other plans, technical
information, technical improvements, manufacturing techniques, specifications,
manufacturing and test data, progress reports and research projects, and matters
of a business nature, such as business plans, prospects, financial information,
proprietary information about costs, profits, markets, sales, lists of customers
and suppliers of the Company and its direct or indirect subsidiaries,
procurement and promotional information, credit and financial data concerning
customers or suppliers of the Company and its direct or indirect subsidiaries,
information relating to the management, operation and planning of the Company
and its direct and indirect subsidiaries, and other information of a similar
nature to the extent not available to the public, and plans for future
development. After termination of the Executive's employment with the Company
for any reason, the Executive shall not use or disclose Trade Secrets or other
Confidential Information.
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<PAGE>
6. Return of Documents and Property. Upon the termination of the
Executive's employment with the Company, or at any time upon the request of the
Company, the Executive (or her heirs or personal representatives) shall deliver
to the Company (a) all documents and materials (including, without limitation,
computer files) containing Trade Secrets or other Confidential Information
relating to the business and affairs of the Company and its direct and indirect
subsidiaries, and (b) all documents, materials and other property (including,
without limitation, computer files) belonging to the Company or its direct or
indirect subsidiaries, which in either case are in the possession or under the
control of the Executive (or her heirs or personal representatives).
7. Discoveries and Work. All Discoveries and Works made or
conceived by the Executive during her employment by the Company, whether during
the Employment Period or at any time prior thereto, jointly or with others, that
relate to the then-current present or anticipated activities of the Company or
its direct subsidiaries, or are used or usable by the Company or its direct
subsidiaries shall be owned by the Company or its direct subsidiaries. The term
"Discoveries and Works" includes, by way of example but without limitation,
Trade Secrets and other Confidential Information, patents and patent
applications, trademarks and trademark registrations and applications, service
marks and service mark registrations and applications, trade names, copyrights
and copyright registrations and applications and patterns (whether or not
published). The Executive shall (a) promptly notify, make full disclosure to,
and execute and deliver any documents requested by, the Company, as the case may
be, to evidence or better assure title to Discoveries and Works in the Company
or its direct subsidiaries, as so requested, (b) renounce any and all claims,
including but not limited to claims of ownership and royalty, with respect to
all Discoveries and Works and all other property owned or licensed by the
Company or its direct subsidiaries, (c) assist the Company or its direct
subsidiaries in obtaining or maintaining for itself at its own expense United
States and foreign patents, copyrights, trademarks, trade secret protection or
other protection of any and all Discoveries and Works, and (d) promptly execute,
whether during her employment with the Company or thereafter, all applications
or other endorsements necessary or appropriate to maintain patents and other
rights for the Company or its direct subsidiaries and to protect the title of
the Company or its direct subsidiaries thereto, including but not limited to
assignments of such patents and other rights. Any Discoveries and Works which,
within two years after the termination of the Executive's employment with the
Company, are made, disclosed, reduced to a tangible or written form or
description, or are reduced to practice by the Executive and which pertain to
the business carried on or products or services being sold or developed by the
Company or its direct subsidiaries at the time of such termination shall, as
between the Executive and, the Company, be presumed to have been made during the
Executive's employment by the Company. The Executive acknowledges that all
Discoveries and Works shall be deemed "works made for hire" under the Copyright
Act of 1976, as amended, 17 U.S.C. Section 101.
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<PAGE>
8. Termination.
(a) The Company or the Executive may terminate this Agreement,
with or without cause or for "EBITDA cause", with or without prior notice.
Except as provided in Sections 8(b) and 18, in the event the Company or the
Executive terminates this Agreement, the Executive's rights and the obligations
of the Company hereunder shall cease as of the effective date of the
termination, including, without limitation, the right to receive the Base
Salary, any annual bonus and all other compensation or benefits provided for in
this Agreement.
(b) In the event the Company terminates this Agreement without
"cause" or for "EBITDA cause" or in the event that the Executive terminates this
Agreement upon notice for "Good Reason", and for so long as the Executive
continues to observe and perform the covenants contained in Sections 5, 6, 7,
11, 12, and 13 of this Agreement, the Executive shall be entitled to continue to
receive payments of her Base Salary, subject to applicable statutory deductions
and withholdings and payable at such times and in such amounts as if this
Agreement were not terminated, and to the continued provision of benefits
referred to in Section 4(c), for the one year period following such termination.
All other compensation and benefits provided for in Section 4 of this Agreement
shall cease upon such termination; provided that, if the termination of this
Agreement occurs between August 1 and December 31 of any fiscal year, and the
Executive would have been entitled or would have become entitled to a bonus,
calculated in accordance with Section 4(b), for or in connection with the fiscal
year in which such termination occurred, upon such fiscal year's completion, the
Executive shall be entitled to receive from the Company an amount equal to 80%
of such bonus, payable as specified in Section 4(b). The following example
illustrates the application of the proviso in the preceding sentence: if a
termination of this Agreement were to occur on September 30 of 1999 and at the
end of 1999 the Company's total EBITDA for 1999 is determined to be $2,000,000,
the Executive would receive in 2000 a bonus of $25,600 in connection with her
employment during 1999 based on the following calculation ($1,800,000 x 1.5% =
$27,000) + ($200,000 x 2.5% = $5,000) = $32,000; and $32,000 x 80% = $25,600.
For purposes of this Agreement, "cause" shall mean (i) the willful
failure of the Executive to follow the directions of the Company which might
result in or does result in an adverse material effect on the business, property
or operations of the Company (other than any such failure resulting from her
incapacity due to physical or mental illness or disability which is subject to
the provisions of Section 9), after written notice of such failure from the
Board of Directors and a 10-day opportunity to cure, (ii) any act of fraud or
dishonesty, misappropriation or embezzlement, wilful misconduct or gross
negligence in connection with the performance of the Executive's duties
hereunder, (iii) a breach by the Executive of any material provision hereof or
of any material contractual or material legal duty to the Company (including,
but not limited to, the unauthorized disclosure of Trade Secrets or other
Confidential Information, non-compliance with the written policies, guidelines
and procedures of the Company), after written notice thereof from the Board of
Directors and a 30-day opportunity to cure in the event that such breach was not
wilful, (iv) the conviction of the Executive of the commission of a crime or
offense involving moral turpitude (including pleading guilty or no contest to
such a crime or offense or a lesser charge which results
5
<PAGE>
from plea bargaining) which results in the imprisonment of the Executive,
whether or not committed in connection with the business of the Company or
(v) breach by the Executive of the provisions of any stockholders agreement
or other agreement relating to the Executive's acquisition of an equity
interest in the Company to which the Executive may become a party on or after
the date hereof.
For purposes of this Agreement, "EBITDA cause" shall mean (i) the
failure of the Company to achieve annual EBITDA (as defined in the Asset
Purchase Agreement), without giving effect to the Seller Exclusions, of at least
One Million Dollars ($1,000,000.00) in any one fiscal year or (ii) the failure
of the Company to achieve average annual EBITDA (as defined in the Asset
Purchase Agreement), without giving effect to the Seller Exclusions, of at least
One Million Five Hundred Thousand Dollars ($1,500,000.00) in any two consecutive
fiscal years.
For purposes of this Agreement, "Good Reason" shall mean (i) the
Company changes the Executive's status, title or position or the nature or the
scope of the Executive's authorities, duties or responsibilities as originally
contemplated by this Agreement and such change represents a material reduction
in such status, title, position, authority, duty or responsibility conferred
hereunder, (ii) the Company changes its principal location of business or the
Executive's place of employment, without the Executive's consent, from the
Denver, Colorado area, (iii) a sale of stock or series of related sales or a
merger, consolidation or similar corporate reorganization of the Company, and as
a result of which Holdings, the sole stockholder of the Company, shall own,
directly or indirectly, less than 51% of the outstanding voting securities of
the Company, (iv) a sale of stock or series of related sales or a merger,
consolidation or similar corporation reorganization of Holdings, and as a result
of which SCC and its Affiliates shall own, directly or indirectly, less than 51%
of the outstanding voting securities of Holdings, (v) the sale of assets of the
Company having fair value greater than 80% of the fair value of all assets of
the Company pursuant to any single sale or series of related sales (other than
the sale of inventory in the ordinary course of business or (vi) a material
breach by the Company of any material provision hereof, after written notice of
such breach by the Executive and a 10-day opportunity to cure. If the Executive
terminates this Agreement for "Good Reason", her notice thereof shall include
the specific section of this Agreement which was relied upon and the reason that
the Company act has given rise to her termination for Good Reason.
(c) In the event the Company terminates this Agreement for cause
or the Executive terminates this Agreement (other than for Good Reason), the
Executive's rights hereunder shall cease as of the effective date of the
termination, including, without limitation, the right to receive the Base
Salary, any annual bonus and all other compensation or benefits provided for in
this Agreement.
9. Disability; Death.
(a) If, prior to the expiration of the Employment Period or the
termination of this Agreement, the Executive shall be unable to perform her
duties by reason of mental or physical disability for at least one-hundred
eighty (180) consecutive days or any one-hundred eighty (180) days (whether or
not consecutive) in any three-hundred sixty (360) consecutive day period,
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<PAGE>
the Company shall have the right to terminate this Agreement and the
remainder of the Employment Period by giving written notice to the Executive
to that effect. Immediately upon the giving of such notice, the Employment
Period shall terminate.
(b) Upon termination of this Agreement pursuant to Section 9(a),
the Executive shall be entitled to continue to receive payments of her Base
Salary, subject to applicable statutory deductions and withholdings and payable
at such times and in such amounts as if this Agreement were not terminated, for
the six-month period following such termination; provided, however, that any
such payments shall be offset by the amount of all proceeds of disability
insurance maintained for the Executive as an employee benefit from the Company
paid to the Executive. In the event of a dispute as to whether the Executive is
disabled within the meaning of Section 9(a), either party may from time to time
request a medical examination of the Executive by a doctor appointed by the
Chief of Staff of a hospital selected by mutual agreement of the parties, or as
the parties may otherwise agree, and the written medical opinion of such doctor
shall be conclusive and binding upon the parties as to whether the Executive has
become disabled and the date when such disability arose. The cost of any such
medical examination shall be borne by the Company. If, prior to the expiration
of the Employment Period or the termination of this Agreement, the Executive
shall die, the Employment Period shall terminate without further notice. The
Executive's estate shall be entitled to continue to receive payments of her Base
Salary, subject to applicable statutory deductions and withholdings and payable
at such times and in such amounts as if this Agreement were not terminated, for
the six-month period following such termination; provided, however, that any
such payments shall be offset by the amount of all proceeds of life insurance
maintained for the Executive as an employee benefit from the Company paid to the
Executive's estate.
10. No Conflicts. The Executive represents to the Company that the
execution, delivery and performance by the Executive of this Agreement do not
conflict with or result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default under any contract, agreement
or understanding, whether oral or written, to which the Executive is a party or
of which the Executive is or should be aware.
11. Non-Competition. From and after the Commencement Date, the
Executive will not, except pursuant to the terms hereof, directly or indirectly,
own, manage, operate, join, finance, control or participate in the ownership,
management, operation or control of, or be employed or engaged by or be
otherwise connected in any manner with, any business under a name similar to the
name of any of the Company or any direct or indirect subsidiary thereof. Prior
to the termination of the Executive's employment hereunder and for a period
after any such termination or expiration of this Agreement equal to the greater
of (i) twelve (12) months and (ii) the balance of the then existing Employment
Period (as if this Agreement were not terminated), the Executive will not
(except as an officer, director, employee, agent or consultant of the Company)
directly or indirectly, own, manage, operate, join, or have a financial interest
in, control or participate in the ownership, management, operation or control
of, or be employed as an employee, agent or consultant, or in any other
individual or representative capacity whatsoever, or use or permit her name to
be used in connection with, or be otherwise connected in any manner with (i) any
business or enterprise
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engaged (wherever located) in the design, development, manufacture,
distribution or sale of any products, or the provision of any services, which
the Company or its direct subsidiaries were designing, developing,
manufacturing, distributing, selling or providing at any time up to an
including the date of termination of this Agreement or (ii) any business
which is similar to or competitive with the business carried on or planned by
the Company or its direct subsidiaries at any time during the period of the
Executive's employment by the Company, whether during or prior to the
Employment Period, unless the Executive shall have obtained the prior written
consent of the Board of Directors, provided that the foregoing restriction
shall not be construed to prohibit the ownership by the Executive of not more
than one percent (1%) of any class of securities of or of the aggregate
principal outstanding indebtedness of any corporation which is engaged in any
of the foregoing businesses, that is registered pursuant to the Securities
Exchange Act of 1934, which securities are publicly owned and regularly
traded on any national exchange or in the over-the-counter market, provided
further, that such ownership represents a passive investment and that neither
the Executive nor any group of persons including the Executive in any way,
either directly or indirectly, manages or exercises control of any such
corporation, guarantees any of its financial obligations, otherwise takes
part in its business other than exercising her rights as a shareholder, or
seeks to do any of the foregoing.
12. Non-Solicitation. Prior to the termination of the Executive's
employment hereunder and for a period after any such termination or expiration
of this Agreement equal to the greater of (i) twelve (12) months and (ii) the
balance of the then existing Employment Period (as if this Agreement were not
terminated), the Executive agrees, directly or indirectly, whether for her own
account or for the account of any other individual or entity, not to solicit,
divert, appropriate, accept or canvas the trade, business or patronage of, or
sell any products or services which are the same as or similar to those
designed, developed, manufactured, distributed or sold by the Company or its
direct subsidiaries to, any individuals or entities that were either customers
of the Company or any of its direct subsidiaries during the time the Executive
was employed by the Company, whether during or prior to the Employment Period,
or prospective customers with respect to whom a sales effort, presentation or
proposal was made by the Company or any of its direct subsidiaries during the
twelve months preceding the date of termination or expiration, as the case may
be. The Executive further agrees that prior to the termination of the
Executive's employment hereunder and for a period of two years thereafter, she
shall not, directly or indirectly, (i) solicit, induce, enter into any agreement
with, or attempt to influence any individual who at the time of any such
solicitation is an employee or consultant of the Company or any of its direct
subsidiaries to terminate his or her employment relationship with the Company or
any of its direct subsidiaries or to become employed by the Executive or any
individual or entity by which Executive is employed.
13. Enforcement. (a) The Executive agrees that the remedies at law
for any breach or threat of breach by her of any of the provisions of Sections
5, 6, 7, 11, 12 and 13 hereof will be inadequate, and that, in addition to any
other remedy to which the Company may be entitled at law or in equity, the
Company shall be entitled to a temporary or permanent injunction or injunctions
or temporary restraining order or orders to prevent breaches of the provisions
of Sections 5, 6, 7, 11, 12 and 13 hereof and to enforce specifically the terms
and provisions thereof, in each case
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<PAGE>
without the need to post any security or bond. Nothing herein contained
shall be construed as prohibiting the Company from pursuing, in addition, any
other remedies available to the Company for such breach or threatened breach.
A waiver by the Company of any breach of any provision hereof shall not
operate or be construed as a waiver of a breach of any other provision of
this Agreement or of any subsequent breach by the Executive.
(b) It is expressly understood and agreed that although the Company
and the Executive consider the restrictions contained in Sections 5, 6, 7, 11
and 12 hereof to be reasonable for the purpose of preserving the goodwill,
proprietary rights and going concern value of the Company, if a final judicial
determination is made by a court having jurisdiction that the time or territory
or any other restriction contained in such Sections 5, 6, 7, 11 and 12 is an
unenforceable restriction on the Executive's activities, the provisions of such
Sections 5, 6, 7, 11 and 12 shall not be rendered void but shall be deemed
amended to apply as to such maximum time and territory and to such other extent
as such court may judicially determine or indicate to be reasonable.
Alternatively, if the court referred to above finds that any restriction
contained in Sections 5, 6, 7, 11 or 12 or any remedy provided herein is
unenforceable, and such restriction or remedy cannot be amended so as to make it
enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained therein or the availability of any other remedy.
The provisions of Sections 5, 6, 7, 11 and 12 shall in no respect limit or
otherwise affect the Executive's obligations under other agreements with the
Company.
14. Assignment. The rights and obligations of the parties under this
Agreement shall not be assignable by either the Company or the Executive,
provided, however, subject to Section 8 hereof, that this Agreement is
assignable by the Company to any affiliate of the Company, to any successor in
interest to any business of the Company, or to a purchaser of all or
substantially all of the assets of any business of the Company.
15. Notices. Any notice required or permitted under this Agreement
shall be deemed to have been effectively made or given if in writing and
personally delivered, mailed properly addressed in a sealed envelope, postage
prepaid by certified or registered mail, delivered by a reputable overnight
delivery service or sent by facsimile. Unless otherwise changed by notice,
notice shall be properly addressed to the Executive if addressed to:
Gay Burke
P.O. Box 61456
Denver, CO 80206
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with a copy to:
Pendleton, Friedberg, Wilson & Hennessey, P.C.
303 E. 17th Avenue #1000
Denver, CO 80203
Attention: Richard F. Hennessey, Esq.
and properly addressed to the Company if addressed to:
Pumpkin Ltd.
427 East Bayaud
Denver, CO 80209
Attention: Chairmen of the Board
with a copy to:
Capital Partners, Inc.
One Pickwick Plaza
Suite 310
Greenwich, CT 06830
Attention: Calvin Neider
with a copy to:
Morgan Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Attention: Christopher T. Jensen, Esq.
16. Severability. Wherever there is any conflict between any
provision of this Agreement and any statute, law, regulation or judicial
precedent, the latter shall prevail, but in such event the provisions of this
Agreement thus affected shall be curtailed and limited only to the extent
necessary to bring them within the requirements of the law. In the event that
any provision of this Agreement shall be held by a court of proper jurisdiction
to be indefinite, invalid, void or voidable or otherwise unenforceable, the
balance of the Agreement shall continue in full force and effect unless such
construction would clearly be contrary to the intentions of the parties or would
result in an unconscionable injustice.
17. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
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18. Effect of Termination. Notwithstanding anything to the contrary
contained herein, if this Agreement or the Executive's employment is validly
terminated pursuant to Section 8 or Section 9 or expires by its terms, the
provisions of Sections 5, 6, 7, 11, 12, 13, 14, 16 and 19 shall continue in full
force and effect.
19. Miscellaneous; Choice of Law and Enforcement. This Agreement,
together with the Stock Option Agreement and the Stockholders' Agreement of the
Company, each dated the date hereof, constitute the entire agreement, and
supersedes all prior agreements, of the parties hereto relating to the subject
matter hereof, and there are no written or oral terms or representations made by
either party other than those contained herein. This Agreement shall be
governed by and construed in accordance with the domestic laws of the State of
Colorado, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Colorado or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Colorado, except to the extent that the General Corporation Law of the
State of Delaware (the "GCL") applies as a result of the Company being
incorporated in the State of Delaware, in which case such GCL shall apply. Any
action to enforce the terms of this Agreement shall be brought in the Colorado
District Court in Denver, Colorado and, in any such action, the presiding party
shall be entitled to recover its costs and expenses, including without
limitation, its reasonable attorneys' fees and related costs or expenses.
20. Indemnification. The Company shall indemnify and hold the
Executive harmless from and against any and all claims, actions, causes of
action, liabilities, damages, costs and expenses, including the Executive's
reasonable attorneys' fees in connection with any litigation or threatened
litigation against the Executive in connection with Executive's duties as an
employee of Company under this Agreement; provided the Executive has acted in a
manner consistent with the applicable standard of conduct set forth in the GCL,
Section 145 (or any successor Section thereto).
[Signature Page to Follow]
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IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as of the day and year first above written.
PUMPKIN LTD.
By: /s/ Calvin Neider
-----------------------
Name:
Title:
/s/ Gay Burke
--------------------------
Gay Burke
12
<PAGE>
Exhibit 99.15
PUMPKIN LTD.
STOCK OPTION AGREEMENT
AGREEMENT made and entered into as of the 27 day of June, 1997, by and
between PUMPKIN LTD., a Delaware corporation with its principal office at 427
East Bayaud, Denver, Colorado (the "Company"), and GAY BURKE, having an address
at P.O. Box 61456, Denver, CO 80206 (the "Optionee").
RECITALS:
WHEREAS, it is the policy of the Company to grant options to purchase
common stock of the Company to certain valuable employees of the Company in
order to give such employees a proprietary interest in the Company's success and
to insure their continuation as employees of the Company; and
WHEREAS, Optionee renders important services to the Company, and the
Company desires to grant a stock option to Optionee pursuant to the terms
hereof.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
herein contained, the parties hereto agree as follows:
1. Grant of Option. The Company hereby grants to Optionee, subject to
the terms and conditions herein set forth, the right and option to purchase from
the Company all or any part of an aggregate of thirty-six (36) shares of the
Company's Class A Common Stock, par value $.01 per share (the "Stock"), at a
purchase price of $1,754.39 per share, such option to be exercisable and
exercised as hereinafter provided. The date of grant of this option is June 27,
1997 (the "Option Date"). The Company and the Optionee each acknowledge that
the purchase price for each share of Stock subject to this option is the fair
market value of such share as of the Option Date as determined by the Company's
Board of Directors. The Stock may be treasury shares or authorized but unissued
shares of the Company's common stock.
2. Term of Option. This option shall expire in its entirety on the tenth
anniversary of the Option Date, unless sooner terminated as hereinafter
provided.
3. Exercise of Option. Written notice of the exercise of this option or
any part hereof specifying the number of shares as to which this option is being
exercised shall be given to the Company at its principal office prior to the
expiration date specified in paragraph 2.
<PAGE>
Notation of any partial exercise shall be made by the Company on Schedule "A"
hereto. This option may not be exercised for any fractional shares.
4. Payment of Purchase Price Upon Exercise. At the time of exercise, the
aggregate purchase price of the shares as to which this option is being
exercised shall be paid to the Company in cash in an amount equal to such
aggregate purchase price.
5. Investment Representation. This option is granted on the condition
that the purchase of Stock hereunder shall be for investment purposes and not
with a view to resale or distribution, except that such condition shall be
inoperative if an offering of Stock subject to this option is registered under
the Securities Act of 1933, as amended, or if in the opinion of counsel for the
Company such Stock may be resold without registration. At the time of the
exercise of all or any part of this option, the Company may require Optionee to
execute such further agreements as the Company may require to implement the
foregoing condition and to acknowledge Optionee's familiarity with restrictions
on the resale of the shares under applicable securities laws.
6. Information. The Company will furnish, upon request of Optionee,
copies of the Certificate of Incorporation of the Company, as amended, and
By-laws of the Company, as amended, and such reasonably available financial and
other information concerning the Company and its business as may be reasonably
requested by Optionee in connection with the exercise of this option.
7. Nontransferability. This option shall not be transferable by Optionee
and this option shall be exercisable during the lifetime of Optionee by Optionee
only.
8. No Rights as Stockholder. Optionee shall have no rights as a
stockholder with respect to any shares of Stock subject to this option prior to
the date of issuance to Optionee of a certificate or certificates for such
shares.
9. Compliance with Laws and Regulations. This option and the obligation
of the Company to sell and deliver shares hereunder and the obligations of
Optionee hereunder in respect of such shares shall be subject to all applicable
federal, state and foreign laws, rules and regulations and to such approvals by
any government or regulatory agency as may be required. This option may not be
exercised if its exercise, or the receipt of shares of Stock pursuant thereto,
would be contrary to applicable law.
10. Stock Dividends; Stock Splits; Stock Combinations; Recapitalization.
Appropriate adjustment shall be made by the Board of Directors of the Company or
any duly authorized committee thereof appointed to administer stock option plans
of the Company (the "Committee") in the maximum number of shares of Class A
Common Stock subject to this option and in the number, kind and purchase price
for shares covered by this option, to the extent then outstanding, to give
effect to any stock dividends, stock splits, stock combinations or
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<PAGE>
exchanges, recapitalizations and other similar changes in the Company's Class
B Common Stock after the Option Date. Any such adjustment may be made in
such manner as the Committee may deem equitable to prevent substantial
dilution or enlargement of the rights granted to Optionee hereunder in
relation to the other stockholders of the Company, and any such adjustment
shall be final and binding on Optionee.
11. Merger; Sale of Assets; Dissolution.
(a) In the event of any change in the Company's Class A Common Stock
resulting from a merger, recapitalization or similar reorganization as to which
the Company is the surviving corporation, and no Change in Control (as defined
below) shall have occurred as a result thereof, the number and kind of shares
then subject to this option and the price per share thereof shall be
appropriately adjusted in such manner as the Committee may deem equitable to
prevent substantial dilution or enlargement of the rights available or granted
to Optionee hereunder in relation to the other stockholders of the Company, and
any such adjustment shall be final and binding on Optionee.
(b) Except in the event of a public offering of shares of the
Company's Common Stock pursuant to a registration statement filed by the Company
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended (a "Public Offering"), or as otherwise determined by the Committee, in
the event of a dissolution or liquidation of the Company, or in the event of a
sale of stock of the Company or a merger, recapitalization or similar
reorganization by or into the Company or a sale of all or substantially all of
the assets of the Company, and in any such event a Change in Control (as defined
below) shall have occurred as a result thereof, then this option, to the extent
then outstanding, shall immediately terminate and be of no further force or
effect, unless any surviving entity agrees to assume the rights and obligations
hereunder; provided, however, that no such termination shall be effective unless
Optionee shall have been provided with at least 30 days prior notice of such
dissolution, liquidation, sale of stock, merger, recapitalization,
reorganization or sale.
(c) For purposes hereof, "Change in Control" shall mean (x) a sale of
stock (other than pursuant to a Public Offering), reorganization,
recapitalization or merger of the Company as a result of which the individuals
and entities who were the respective beneficial owners of the then outstanding
shares of common stock of the Company and of any other then outstanding voting
securities of the Company entitled to vote generally in the election of
directors, immediately prior to such sale of stock, reorganization,
recapitalization or merger, do not, immediately following such sale of stock,
recapitalization, reorganization or merger, beneficially own in the aggregate,
directly or indirectly, more than 50% of the then outstanding shares of common
stock and of any other then outstanding voting securities entitled to vote
generally in the election of directors of the corporation resulting from such
sale of stock, reorganization, recapitalization or merger, or (y) the sale or
other disposition of all or substantially all of the assets of the Company to a
person or entity the voting securities of which immediately following such sale
are held by individuals or entities in such proportion so as to
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<PAGE>
effect a change in the beneficial ownership of voting rights of the Company
to the extent contemplated by the change in control described in clause (x)
above.
12. Termination of Entire Option. In the event that (i) Optionee commits,
or causes or permits to occur, any of the acts set forth in subparagraph 12(a)
hereof, whether or not then employed by the Company, or (ii) ceases to be
employed by the Company at any time prior to the third anniversary of the Option
Date for any reason, other than the death of Optionee, or (iii) ceases to be
employed by the Company at any time after the third anniversary of the Option
Date by reason of the voluntary cessation of her duties and responsibility as an
employee without "Good Reason", or (iv) ceases to be employed by the Company at
any time after the third anniversary of the Option Date by reason of a
termination by the Company with "Cause" (as hereinafter defined), this option
shall terminate and be cancelled in full in accordance with the following
provisions:
(a) if, at any time while all or any part of this option is
outstanding, Optionee breaches any of the terms and conditions of Sections 11 or
12 of her Employment Agreement, this option shall immediately terminate and be
cancelled in full, without any action on the part of the Company or any
consideration payable by the Company in respect thereof, effective as of the
date Optionee first commits or causes or permits to occur any of the acts
prohibited by such Sections;
(b) if Optionee's employment with the Company shall have ceased at
any time prior to the third anniversary of the Option Date for any reason, other
than the death of Optionee, this option shall immediately terminate and be
cancelled in full, without any action on the part of the Company or any
consideration payable by the Company in respect thereof, effective as of the
date of such termination;
(c) if Optionee's employment with the Company shall have ceased at
any time on or after the third anniversary of the Option Date by reason of the
voluntary cessation of her duties and responsibilities as an employee without
Good Reason, this option shall immediately terminate and be cancelled in full,
without any action on the part of the Company or any consideration payable by
the Company in respect thereof, effective as of the date of such termination;
(d) if Optionee's employment with the Company shall have ceased at
any time on or after the third anniversary of the Option Date by reason of
termination by the Company with Cause or for EBITDA cause, this option shall
immediately terminate and be cancelled in full, without any action on the part
of the Company or any consideration payable by the Company in respect thereof,
effective as of the date of such termination.
13. Miscellaneous. Nothing herein contained shall impose any obligation
on the Company or Optionee with respect to Optionee's continued employment by
the Company. Nothing herein contained shall impose any obligation upon Optionee
to exercise this option. The
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<PAGE>
option granted hereunder is not an incentive stock option under Section 422A
of the Internal Revenue Code of 1986, as amended, and the Company makes no
representation as to the tax treatment of Optionee upon receipt or exercise
of this option or sale or other disposition of the shares covered by this
option.
14. Governing Law. This Agreement shall be subject to and construed in
accordance with the laws of the State of Delaware without resort to its conflict
of laws rules.
15. Definitions. Terms not otherwise defined herein shall have the
meanings ascribed to them in the Employment Agreement, dated June 27, 1997, by
and between the Company and Optionee.
[Signature Page to Follow]
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<PAGE>
IN WITNESS WHEREOF, the Company and Optionee have executed this Stock
Option Agreement in duplicate as of the Option Date, as specified above.
WITNESS: PUMPKIN LTD.
/s/ Jean A. Sampson By: /s/ Calvin Neider
- --------------------------------- ---------------------------------
Print Name: Jean A. Sampson Name: Calvin Neider
Title: Vice President
WITNESS: OPTIONEE:
/s Joseph M. Durnford /s/ Gay Burke
- --------------------------------- ------------------------------------
Print Name: Joseph M. Durnford Gay Burke
6
<PAGE>
Exhibit 99.16
MANAGEMENT ADVISORY SERVICES AGREEMENT
AGREEMENT dated as of June 27, 1997 between PUMPKIN LTD., a
Delaware corporation ("Pumpkin"), and SECURITY CAPITAL
CORPORATION, a Delaware corporation ("Security Capital").
W I T N E S S E T H:
WHEREAS, Security Capital desires to provide or cause to be
provided management advisory services to Pumpkin in the areas of
corporate development, strategic planning, investment and
financial matters and general business policies, and Pumpkin
desires to obtain such services.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements hereinafter set forth, the
parties hereto agree, intending to be legally bound, as follows:
1. Management Advisory Services. Security Capital shall
during the term of this Agreement provide or cause to be provided
such management advisory services to Pumpkin in the areas of
corporate development, strategic planning, investment and
financial matters and general business policies as Pumpkin shall
from time to time reasonably request.
2. Management Advisory Services Fee. (a) Subject to
paragraph (b) below, Pumpkin shall during the term of this
Agreement pay to Security Capital an annual management advisory
services fee (the "Fee") equal to the greater of $100,000 (the
"Minimum Fee") or 5% of Pumpkin's annual EBITDA (as defined in
the Asset Purchase Agreement, dated as of June 27, 1997, by and
among Pumpkin Ltd. d/b/a Pumpkin Masters, Inc., Pumpkin,
Pumpkin Masters Holdings, Inc. and Security Capital) (the
"Maximum Fee") for the services described in Section 1.
(b) The Minimum Fee shall be payable quarterly in advance
on the 26th day of each January, April, July and October of each
year during the term hereof. The difference between the Maximum
Fee and the Minimum Fee, if positive, for any year during the
term hereof shall be payable on the 26th day of the July
immediately following the year for which the Maximum Fee has last
been determined. Payment of the Fee will be deferred during any
period in which an Event of Default under the Credit Agreement,
dated the date hereof, between NationsCredit Commercial
Corporation, Holdings and Pumpkin , as amended from time to time
(the "Credit Agreement"), has occurred and is continuing,
provided that amounts so deferred will accrue and become due and
payable upon the termination or waiver of such Event of Default
to the extent that such payment will not cause a further Event of
Default thereunder. For purposes hereof,
<PAGE>
"Event of Default" shall have the same meaning as ascribed to such
term in the Credit Agreement.
(c) The Fee shall be exclusive of out-of-pocket costs.
3. Costs. Pumpkin shall reimburse Security Capital for
all reasonable out-of-pocket costs incurred by or on behalf of
Security Capital in connection with the services described in
Section 1. For purposes of this Agreement, an acquisition,
divestiture, public offering of securities or any other
extraordinary transaction of any type will not be deemed to be a
matter for which management advisory services have been bargained
for hereunder and, therefore, all out-of-pocket costs incurred in
connection with any such transaction will not be subject to such
limitation. Security Capital shall furnish such evidence that
such costs were incurred as Pumpkin may from time to time
reasonably request.
4. Access. Pumpkin will provide to Security Capital and
its representatives reasonable access during normal business
hours, upon reasonable notice and in such manner as will not
unreasonably interfere with the conduct of the business of
Pumpkin, to the books, records, tax returns and other information
with respect to the business of Pumpkin as Security Capital or
such representatives consider necessary or appropriate for the
purpose of furnishing advisory services as provided in Section 1.
5. Term. The term of this Agreement shall commence as of
the date hereof and shall terminate on June 26, 2007 or such
later date as may be approved by Security Capital and Pumpkin.
6. Amendment and Modification. Subject to applicable law,
this Agreement may be amended, modified or supplemented only by a
written agreement of Security Capital and Pumpkin.
7. Headings. The Section headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
8. Execution in Counterparts. This Agreement may be
executed in counterparts, each of which shall be an original, but
all of which together shall constitute one instrument.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of Connecticut
applicable to agreements made and to be performed in Connecticut
without regard to such State's conflicts of laws principals and
shall be construed without regard to any presumption or other
rule requiring the construction of an agreement against the party
causing it to be drafted.
[Signature Page to Follow]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
PUMPKIN LTD.
By: /s/ Brian D. Fitzgerald
-------------------------------
Name: Brian D. Fitzgerald
Title: Vice President
SECURITY CAPITAL CORPORATION
By: /s A. George Gebauer
-------------------------------
Name: A. George Gebauer
Title: President
-3-
<PAGE>
Exhibit 99.17
SECOND AMENDMENT TO ADVISORY SERVICES AGREEMENT
This SECOND AMENDMENT TO ADVISORY SERVICES AGREEMENT, dated
as of June 30, 1997 by and between SECURITY CAPITAL CORPORATION,
a Delaware corporation ("Security Capital"), and CAPITAL
PARTNERS, INC., a Connecticut corporation ("Capital Partners").
WITNESSETH
WHEREAS, Capital Partners and Security Capital entered into
a certain Advisory Services Agreement dated as of January 26,
1990 (the "Original Agreement"), pursuant to which Capital
Partners agreed to provide advisory and other services to
Security Capital and its subsidiaries in the areas of
investments, general administration, corporate development,
strategic planning, stockholder relations, financial matters and
general business policy; and
WHEREAS, Capital Partners presented to Security Capital a
potential acquisition of substantially all of the assets and
operations of Pumpkin Ltd. d/b/a Pumpkin Masters, Inc., a
Colorado corporation (the "Seller"), engaged in the business of
manufacturing and distributing pumpkin and watermelon carving
kits and accessories; and
WHEREAS, Security Capital formed an indirect subsidiary,
Pumpkin Ltd., a Delaware corporation ("Pumpkin"), to acquire such
assets and operations of the Seller and to own and operate the
business so acquired; and
WHEREAS, the purchase of such assets and operations of the
Seller by Pumpkin has been consummated as of the date hereof and,
concurrently therewith, Pumpkin and Security Capital entered into
a Management Advisory Services Agreement pursuant to which
Security Capital will provide or will cause to be provided to
Pumpkin management advisory services in the areas of corporate
development, strategic planning, investment and financial matters
and general business policies; and
WHEREAS, Security Capital intends to request the assistance
of Capital Partners in providing such management advisory
services to Pumpkin from time to time and, in connection
therewith, Capital Partners and Security Capital desire to amend
their Original Agreement to assure Capital Partners of adequate
compensation in respect of such additional services.
NOW THEREFORE, in consideration of the premises and for good
and valuable other consideration, receipt of which is hereby
acknowledged, the parties hereto agree, intending to be legally
bound, as follows:
1. Section 2 of the Original Agreement is hereby amended to
increase the "Fee" payable thereunder by amending the first
paragraph of said Section 2 to read in its entirety as
follows:
<PAGE>
"Security Capital shall, during the term of this Agreement, pay
to Capital Partners as annual advisory fee (the "Fee") in an
initial amount of $325,000 plus an amount equal to the greater of
$100,000 (the "Minimum") or 5% of the annual EBITDA of Pumpkin
Ltd., a Delaware corporation and indirect subsidiary of Security
Capital (as defined in the Asset Purchase Agreement, dated as of
June 30, 1997, among the Seller, Pumpkin, Pumpkin Masters
Holdings, Inc., a Delaware corporation, and Security Capital)
(the "Maximum"), for the services described in Section 1. A
portion of the Fee, in the amount of $106,250, shall be payable
quarterly in advance on the 26th day of each January, April, July
and October of each year during the term hereof. The difference
between the Maximum and the Minimum, if positive, for any year
during the term hereof shall be payable on the 26th day
immediately following the year for which the Maximum has last
been determined."
2. The parties hereto recognize that the scope of operations of
Security Capital and, in particular, changes in the scope of
such operations resulting from the acquisition of assets and
operations of the Seller made indirectly by Security
Capital, warrant an adjustment to the "Fee" payable under
the Original Agreement.
3. Security Capital hereby represents that, in accordance with
Section 7 of the Original Agreement, for purposes of this
Second Amendment, Security Capital has acted through its
independent directors.
4. Each of Capital Partners and Security Capital hereby
ratifies and confirms the Original Agreement in all
respects, except as amended hereby.
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set their hands
as of the day and year first above written.
SECURITY CAPITAL CORPORATION
By: /s/ A. George Gebauer
-----------------------------
Name: A. George Gebauer
Title: President
CAPITAL PARTNERS, INC.
By: /s/ Brian D. Fitzgerald
------------------------------
Name: Brian D. Fitzgerald
Title: President
<PAGE>
Exhibit 99.18
JOINDER AGREEMENT
-----------------
Agreement dated as June 27, 1997 between Security Capital Corporation,
a Delaware corporation ("SCC"), Pumpkin Masters Holdings, Inc., a Delaware
corporation ("Holdings"), and Pumpkin Ltd., a Delaware corporation ("Pumpkin").
WHEREAS, as of the date of this Agreement, SCC directly owns 80% of
the outstanding shares of stock of Holdings, and Holdings directly owns more
than 80% of the outstanding shares of stock of Pumpkin, and
WHEREAS, each directly or indirectly owned subsidiary of SCC that is
or that becomes eligible as an "includible corporation" to join in the
consolidated federal income tax return of SCC under Section 1501 of the Internal
Revenue Code of 1986 (the "Code"), as amended, by virtue of being a member of an
"affiliated group" (the "Group") of which SCC is the "common parent," as those
terms are defined in Section 1504 of the Code, consents or may consent to the
filing of such a return, and
WHEREAS, SCC is a party to a Consolidated Income Tax Sharing Agreement
dated May 17, 1996 (the "Tax Sharing Agreement") between SCC and P.H. Holdings,
Inc., a Delaware corporation, and Possible Dreams Ltd., a Delaware corporation,
which provides for the proper allocation of federal income tax liability of such
parties, all of which are members of the Group, among themselves; and
WHEREAS, the Tax Sharing Agreement provides that, upon the joint
consent of SCC and any corporation that becomes a directly or indirectly owned
subsidiary of the Company, such corporation may become a party to the Tax
Sharing Agreement;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:
1. Joinder. SCC consents to each of Holdings and Pumpkin being
bound by and becoming a party to, and each of Holdings and Pumpkin agrees to be
bound by and become a party to, the terms and principles of the Tax Sharing
Agreement, and each party to this Agreement shall use its best efforts to
effectuate such intention.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
SECURITY CAPITAL CORPORATION
By: /s/ A. George Gebauer
------------------------------
Name: A. George Gebauer
Title: President
PUMPKIN MASTERS HOLDINGS, INC.
By: /s/ Calvin Neider
------------------------------
Name: Calvin Neider
Title: Vice President
PUMPKIN LTD.
By: /s/ Calvin Neider
------------------------------
Name: Calvin Neider
Title: Vice President
2
